AIM Companies – LSE Discussion Paper on AIM Rules

July 20, 2017

The London Stock Exchange (“LSE”) has recently published a discussion paper inviting feedback from market participants on proposed changes to the AIM Rules for Companies (“AIM Rules”) and the AIM Rules for Nominated Advisers (“Nomad Rules”); being the rules applicable to the AIM market of the LSE.  Among other matters, these proposals relate to:

  • The role of Nominated Advisers (“Nomads”) to consult with the LSE on admission criteria early in the admission process.
  • The eligibility criteria that should be considered for determining the appropriateness of a company for admission, including free float and minimum fundraising.
  • Appropriate corporate governance requirements for AIM companies.
  • Standards of conduct and the LSE’s enforcement of the AIM Rules.

Role of the Nomad

Early notifications – Currently, Nomads are required to have an early discussion of issues with the LSE where the proposed admission of a particular company raises potential concerns, as set out in existing AIM guidance. The LSE is proposing to extend and codify this practice to all proposed admissions. The discussion paper identifies a list of key information that would need to be provided by the Nomad. However, the LSE makes clear that this process would not diminish a Nomad’s overall obligations to the LSE to be satisfied about a company’s appropriateness or to update the LSE about any new information or any change of circumstances that arise during the admission process.

Rule 9 Powers – To ensure consistency of approach from Nomads and to provide further certainty about the LSE’s expectations as to what factors and considerations Nomads should take into account, the LSE proposes to include in the Nomad Rules a non-exhaustive list of factors as guidance to Nomads about the types of issues that may give rise to concern. These factors include concerns as to the good character, skills, experience or previous history of a director, key manager, senior executive, consultant or shareholder, formal criticism of the company seeking admission and/or any of its directors by other regulators, governments, courts, law enforcement or exchange bodies, and corporate structure or business models that give rise to concerns regarding appropriateness for a public market.

Eligibility Criteria

Free Float – Noting that the current AIM Rules do not require a specific numerical or percentage threshold for free float, the LSE has asked for comment as to whether a minimum free float (“shares in public hands”) requirement should be introduced. If a specific free float is introduced, the LSE has asked what types of shareholders should be considered as shares in public hands.

Minimum Fundraising – The LSE has asked whether a new minimum fundraising threshold should be set for new applicants to AIM, similar to the minimum fundraising threshold that now applies to investment companies. The LSE has proposed a range between £2 million and £6 million, although subject to certain limited exceptions such as when a company is already admitted to another market and has a track record as a public company.

Corporate Governance

Composition of boards – Currently, the AIM Rules do not mandate specific composition requirements for the board of directors, such as requiring an AIM company to have a specific number of non-executive directors or that they be independent. The LSE asks whether its current corporate governance standards, including disclosure under AIM Rule 26, are effective.

Disclosure – The LSE asks whether AIM companies should be required to report annually (comply or explain) against a governance code, such as the Quoted Companies Alliance Corporate Governance Code for Small and Mid-Size Quoted Companies or the UK Corporate Governance Code.

Breach of AIM Rulebooks

The LSE asks whether it would be appropriate to introduce automatic fines for non-compliance with the AIM Rules, such as late filings of accounts and disclosure of regulatory information on an AIM company’s website.

Next Steps

Responses to the discussion paper are requested by 8 September 2017. Thereafter, the LSE will consider the feedback received and evaluate whether any changes to the AIM Rules or the Nomad Rules should be drafted for consultation. Please view the dummy-pdf_2

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