Repositioning AIM for the future: key changes

Our recent update on the London Stock Exchange's Feedback Statement: Shaping the Future of AIM flagged that the overall objective of the proposed changes is to take AIM back to its original purpose of being a growth market. The emphasis is firmly on founder-led/entrepreneurial companies and the LSE intends to “develop AIM so that it remains the global destination for innovative, diverse and growing businesses.” 

What's changed?

This update sets out the regulatory changes which the LSE has described as being effective immediately (even though the underlying AIM Rules for Companies will need to be redrafted to reflect these changes). 

The LSE's fast-track approach is based on derogation requests (although those will still be considered on a case-by-basis). Its existing guidance will also change to reflect feedback. Nominated advisers are encouraged to contact AIM Regulation for clarification as necessary.

The changes taking effect immediately are as follows:

• Dual class share structures: The LSE has confirmed that dual class share structures meeting the current Main Market requirements will be acceptable for prospective AIM companies.
• Rule 13 and director remuneration: If a nominated adviser is satisfied that the contractual terms for remuneration (that is not part of the standard remuneration package) provide reasonable commercial protections for the company, such as good leaver/bad leaver terms, the nominated adviser does not need to provide a “fair and reasonable” view.
• More flexible approach to reverse takeovers: If a significant acquisition does not result in a fundamental change of business, AIM Regulation may determine that the transaction is a substantial transaction rather than a reverse takeover. In those circumstances, no AIM Admission document will be required, but AIM Regulation may still require a shareholder vote.
• Reverse takeovers involving quoted companies: If a transaction is a reverse takeover and both parties are publicly traded companies, AIM Regulation will consider whether alternative disclosure can be included in an Admission Document instead of the full Schedule Two requirements.
• Suspension of trading following notification of reverse takeover: AIM Regulation will consider requests from nominated advisers not to impose a suspension where it can be demonstrated that, in the absence of an Admission Document, appropriate alternative disclosure can be made. Currently, if a reverse takeover has been announced or leaked, an Admission Document must be published in respect of the enlarged AIM entity in order to avoid suspension of the company’s shares.
• Admission Documents and HFI: AIM Regulation will consider derogation requests for historical financial information to be incorporated by reference provided that information is readily available to investors and will remain so on an ongoing basis.
• Admission Documents: use of UK GAAP: Nominated advisers can request derogations to enable the use of UK GAAP (FRS 102).
• Admission Documents: local accounting standards: AIM Regulation will consider the use of other local accounting standards (beyond those listed in AIM Rule 19) on a case-by-case basis where equivalency to IFRS can be explained.
• Admission of second lines of securities (for example, preference shares, warrants or loan notes) to trading on AIM: AIM Regulation will now consider derogation requests to dispense with the publication of an Admission Document for the admission to trading of a second line of securities.
• International Companies: AIM Regulation encourages nominated advisers who are working on any prospective AIM Designated Market route admissions to contact them for support in streamlining the work they undertake to ensure this provides a genuine fast-track route to market.

What other changes will the LSE introduce when the AIM Rules for Companies are redrafted?

The key change flagged in the Feedback Statement is that the threshold for AIM Rule 12 (Significant transactions) will be increased from 10% to 25%. There may be some other changes depending on how practice around derogations evolves following publication of the Feedback Statement.

What about the future direction of travel for AIM?

The LSE will be looking at:

• resetting the nominated adviser role with a focus on corporate finance advice.
• redesigning the AIM Admission Document.
• the requirement for a working capital statement in an AIM Admission Document.
• innovation in the trading of AIM Securities.
• supporting secondary fundraising by introducing trading halts.

The LSE will continue its engagement with the FCA, the FRC, the QCA and government across a wide range of topics including access to capital, audit fees and tax incentives.

Has anything happened to AIM Rule 11 (General disclosure of price sensitive information)? 

No. AIM Rule 11 has been retained alongside UK MAR although the LSE commented in its Feedback Statement that: “Respondents noted that UK MAR is the general standard for UK markets and that having two similar disclosure regimes - AIM Rule 11 and UK MAR - was duplicative.”  

Simplifying the PSI regime for AIM Companies would be welcomed by many, so hopefully the LSE will be able to make progress on this point. 

What about corporate governance?

No changes have been introduced or proposed in the Feedback Statement. Instead, the LSE will continue its “engagement with the QCA to consider whether the current approach to corporate governance for AIM is achieving the correct balance in supporting investors understanding of a company’s arrangements but without requiring a company to overly focus on ‘compliance for the sake of compliance’ with a particular code.”

Further information

If you would like to discuss any of these changes and the likely impact on AIM Companies and companies considering admission to AIM, please contact AJ Venter (Partner, Corporate and M&A), Guy Francis (Director, Corporate and M&A), Charlotte Hamilton (Senior Associate, Corporate and M&A) or Nick Graves (Head of the Corporate and M&A team).

London Stock Exchange: For AIM to serve its purpose, it requires recognition that the regulatory environment needed to support innovative and growing global companies has a different risk profile than our other markets. We will be considering how to reset investors’ understanding of the buyer beware model inherent in market.