#10496 - Aim - Equity Finance

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

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

4. 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!)

  • Information required by Schedule 2 paragraphs (c)-(k); (k) imposes a more general duty of disclosure

Continuing obligations

1. General disclosure

• Issuer has an obligation under AIM Rule 11 to notify market without delay of any new developments which are not public knowledge concerning changes in:

  • Financial condition

  • Sphere of activity

  • Performance of its business

  • Expectation of its performance

2. Specific disclosure

• AIM Rule 17 sets out the specific disclosure requirements which must be notified.

3. Directors’ dealings

• AIM Rules does not require AIM companies to comply with the Model Code, but AIM Rule 21 requires companies to ensure that directors, their family and applicable employees do not deal in any of their securities during a close period.

• A close period is defined as:

  • The period of 2 months prior to the publication of the company’s annual results; and

  • Two months preceding the publication of its half-yearly report; or

  • One month preceding the publication of its quarterly results; and

  • Any other period when the company is in possession of unpublished price sensitive information.

4. Significant shareholders

• AIM companies are subject to DTR 5, which sets out the disclosure requirements for the notification of the acquisition or disposal of major shareholdings.

• In addition, AIM Rule 17 requires that an RIS must be notified without delay of any deals by directors and any relevant changes to any significant shareholders.

  • Significant shareholders includes any person with a holding of 3% or more of any class of the company’s shares

5. Financial reporting

• A half-yearly report must be published in respect of the 6-month period from the end of the financial period for which financial information has been disclosed in the company’s admission document and at least every 6 months thereafter.

• The report must be published no later than three months after the end of the relevant period (AIM Rule 18).

6. Substantial transactions

• Under AIM Rule 12, any company which agrees to buy or sell an asset either directly or through a subsidiary must disclose details to an RIS if it is substantial.

  • A transaction is substantial if it exceeds 10% of any of the class tests set out in Schedule 3 to the AIM Rules.

  • This excludes transactions of a ‘revenue nature in the ordinary course of business’.

7. Related party transactions

• Under AIM Rule 13, where an AIM company enters into any transactions with a related party that exceeds 5% under...