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LPC Law Notes Equity Finance Notes

Aim Notes

Updated Aim Notes

Equity Finance Notes

Equity Finance

Approximately 50 pages

A collection of the best LPC Equity Finance notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor". In short these are what we believe to be the strongest set of Equity Finance notes available in the UK this year. This collection of notes is fully updated ...

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The following is a more accessible plain text extract of the PDF sample above, taken from our Equity Finance Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

AIM

  • AIM is an Exchange Regulated market (it is on a Recognised Investment Exchange), and is a prescribed market, but is not a regulated market (for the purposes of s.85 FSMA).

AIM vs Main Market

AIM Main Market
Advantages

  • No minimum market capitalization (although not really that important)

  • Less onerous disclosure requirements (only need to comply with DTR 5)

  • Assuming Admission Document is used, PRs will not apply (and more likely to fall within exemption to produce a prospectus)

  • LRs will not apply; AIM Rules are more succinct and cost of compliance is significantly lower!

  • Slight time-saving (3-4 months as opposed to 6 months)

  • Nomad in charge of process as opposed to getting approval from FCA – Nomad must be satisfied that the company is suitable for AIM, but Nomad has much more interest in guiding company through process! 1

  • QCA Guidelines in place of Corporate Governance Code – similar principles, although simpler, but more importantly no ‘comply or explain’ rule! Burden of constant justification goes away.

  • No SH approval needed for ‘class’ transactions (called ‘substantial transactions’ in AIM Rule 12) – just need to disclose!

  • Tax benefits for investors of AIM companies (because they are ‘unquoted’ for the tax act, and more likely to be able to claim ER)

  • Bigger pool of investors to raise capital from; certain investors will only invest in listed companies. Retail investors as well.

  • Liquidity of shares; share price will go up

  • Easier for subsequent share issues as well as shareholders to exit

  • Public profile
Disadvantages

  • Although do not need three years trading history, need lock-ins for a year if less than 2 years trading history (AIM Rule 7)…

  • Costs of retaining Nomad (AIM Rule 1) and Nominated Broker (AIM Rule 35) throughout the life of the AIM company…

  • Shares are less liquid; if you have to hire a broker throughout the life of the company to ensure a market it does imply that shares are less liquid.

  • Requirement for 25% of shares to be in public hands (LR 6.1.19R)

  • Need three years of trading history (LR 6.1.3R) – not suitable for new company

  • Loss of control; institutional shareholders will have rules that it may require company to comply with

  • More scrutiny and regulation in the form of LR, PR, DTR

  • Can be costly and distracting - especially in this case, since it is fairly new business

  • SH approval needed for ‘class transactions’ – expensive, time-consuming, uncertain

  • Need a sponsor for flotation, subsequent share issues, and anything else in Chapter 9 of the LR…

Advisers on an admission to AIM

1. Nomad (required by AIM Rule 1)

  • The Nomad decides whether a company is appropriate for AIM. If a company ceases to have a Nomad, trading in its shares will be suspended until a new Nomad is appointed.

  • Similar to a ‘sponsor’ for a Main Market candidate, except Nomad provides guidance throughout the life of the admission on AIM, not just at flotation

2. Nominated Broker (required by AIM Rule 35)

  • The primary purpose of the Broker is to guarantee a market in the company’s securities. This is a safeguard needed due to the reduced liquidity on AIM compared to the Main Market

  • Broker is responsible for fundraising on flotation as well as ensuring a market after the flotation

Eligibility for admission

  • Re-register as public company, if necessary (s.90 CA 2006)

  • Make appropriate arrangements for shares to be settled electronically (AIM Rule 36)

  • Ensure that its shares are freely transferable (AIM Rule 32)

  • Nomad must ensure that company has management and financial controls and reporting systems sufficient to enable it to discharge its obligations under AIM Rule 31

  • Lock-ins for related parties and applicable employees under AIM Rule 7 (if company has not been independent and revenue earning for at least 2 years)

However, there are no minimum requirements for market cap, share price, or share in public hands, and no trading record is required.

Admission procedure

  1. Due diligence (conducted by Nomad)

  2. Pre-admission announcement (at least ten business days before expected admission – AIM Rule 2)

  3. Submit application documents to LSE (at least 3 business days before expected admission – AIM Rule 5) and post placing letters

  • Completed application form

  • Electronic copy of admission document

  • Nomad’s declaration

  • Relevant fee

  1. Admission (LSE will issue dealing notice stating that admission is effective – AIM Rule 6)

Admission document

  • As AIM is a prescribed but not regulated market, a flotation on AIM will not fall within the ambit of s.85(2), and will usually be structured to avoid the requirement under s.85(1). An admission document is required under AIM Rule 3, but does not need to meet the more onerous requirements of the PRs.

  • Required contents of an admission document set out at Schedule 2 of the AIM Rules:

    • Annex I, II and III (as set out in Appendix 3 of the PRs)

    • Carve-outs for non-mandatory information (Annex II not required if admission document is not a prospectus!)

    • ...

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