LSE issues revised AIM Rules

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AIM Notice 50 was issued by the London Stock Exchange (LSE) on 8 March 2018 confirming changes to the AIM Rules for Companies and AIM Rules for Nominated Advisers. The changes to the AIM Rules for Companies cover formalising the early notification process, the requirement for AIM companies to report against a recognised corporate governance code and clarifying Rule 9. In relation to the AIM Rules for Nominated Advisors, the amendments relate to the guidance on admission responsibilities.

Early notification

AIM Rule 2 will be amended to introduce a formal requirement for a nominated adviser (Nomad) to notify the LSE of key information about an applicant AIM company at an earlier stage in the AIM admission process than is currently the case. The exact timing of the notification is left up to the individual Nomad but it should be prior to the submission of the Schedule One form. A template ‘early notification form’ is available on the LSE’s website. An early discussion with the LSE is already a requirement for Nomads where an admission raises potential issues and this change to Rule 2 now extends the practice of early discussions to all proposed AIM admissions.

The main types of information that should be notified are similar to those currently set out in the Schedule One form. They include details of the applicant’s business and corporate structure, its country of incorporation, the proposed board of directors, any proposed fundraising, significant shareholders pre-admission and as expected post-admission, the amount of shares in public hands and any issues that may give the LSE cause to question whether the admission may be detrimental to the reputation or integrity of AIM.

Corporate governance

All AIM companies will be required to report against a recognised corporate governance code chosen by the board of directors. AIM companies currently have the choice of either noting on their website which corporate governance code they follow, or stating they do not follow a code and setting out their own arrangements. The change means the second option is no longer allowed.

An AIM company will need to disclose on its website how it complies with its chosen corporate governance code or, where it departs from its chosen corporate governance code, explain the reasons for doing so. This information should be reviewed annually and the website should include the date it was last reviewed (Rule 26).

The LSE is not prescribing a list of recognised corporate governance codes as it believes that it is preferable for AIM companies to have a range of options to suit their specific stage of development, sector and size. Examples of existing codes are the Quoted Companies Alliance (QCA) Corporate Governance Code and the UK Corporate Governance Code issued by the Financial Reporting Council.

In practice, most small and mid-size companies find the UK Corporate Governance Code unsuitable for their size and circumstances and are more likely to select the QCA Corporate Governance Code. To that end, the QCA has announced that in April 2018 it will release a new and updated version of its Corporate Governance Code. The revised code will cover (a) what is good corporate governance?; (b) the 10 corporate governance principles to follow; and (c) step-by-step guidance on how to effectively apply the principles within a company.

These changes to the AIM Rules will be implemented from 28 September 2018 although from 30 March 2018 all new applicants to AIM will need to state which corporate governance code they intend to follow but have until 28 September 2018 to fully comply with the new requirements under Rule 26.

Clarification of Rule 9

Rule 9 of the AIM Rules for Companies has been amended to clarify that the LSE has the power either to refuse a company’s admission to AIM where matters are brought to its attention which could affect an applicant’s appropriateness for AIM or to impose additional special conditions on the company.

AIM Rules for Nominated Advisers

AIM Notice 50 also states that the AIM Rules for Nominated Advisers have been amended to include guidance for Nomads on matters the LSE consider relevant to the appropriateness of a new applicant to AIM. A non-exhaustive list of examples will be set out in Schedule 3 to the AIM Rules for Nominated Advisers and these include:

  • questions as to good character, skills, experience or previous history of a director, key manager or major shareholder;
  • the rationale for seeking admission to AIM;
  • any formal criticism of the AIM applicant or any directors by, for example, other regulators;
  • if the AIM applicant company has been denied admission to trading on another venue;
  • if the AIM applicant company has a vague or ill-defined business model;
  • corporate structures that may give rise to concerns, such as legality of business operations or the AIM applicant company has not yet secured key licences or government consents; and
  • the applicant holds a material part of its assets or business through risky contractual arrangements.

WM Comment

The new version of the AIM Rules will come into force on 30 March 2018, although the requirement to comply with the amended corporate governance code disclosure will take effect from 28 September 2018, to allow companies adequate time to prepare for this change. These deadlines are not far away so action should be taken now to ensure that you are ready for the changes.