News

April 2009

Corporate Governance: NAPF Voting Guidelines for Listed and Aim Companies

The National Association of Pension Funds (“NAPF”) has recently published updated guidelines to assist its members when considering how to vote at the general meetings of listed and AIM companies.

The updated guidelines include:

• Increasing the threshold for resolutions to dis-apply section 89 of the Companies Act 1985 from 5% to 10% of issued share capital of AIM companies. The threshold for listed companies remains at 5%.

This is a welcome recognition that a more flexible regime is appropriate for AIM companies and we anticipate that many AIM companies will wish to comply with the recommendations at their next AGM, although some AIM companies still choose not to comply with NAPF guidelines.

• A fee cap for non-audit work done by auditors in any year equal to the amount of the annual audit fee. The guidelines also recommend that the Company’s policy on non-audit work carried out by auditors should form part of the audit committee’s report to shareholders.

This recommendation affects both AIM and listed companies and should lead to greater audit committee scrutiny of non-audit services.

• Any request for a material increase in borrowing powers (for example, 30% or more), should be accompanied by a detailed explanation of why it is required and of the Company’s policy on managing debt. Removing borrowing limits completely is not acceptable in all but the most exceptional circumstances.

This is clearly a reaction to the fact that many listed and AIM companies incurred hefty borrowings before the credit crunch and are struggling in today’s climate to refinance those borrowings on acceptable terms.

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

For further information please contact: