Final AIM rule changes published

On 08 March 2018, the London Stock Exchange (Exchange) published final rule changes (in AIM Notice 50) which:

• require nominated advisers to submit an early notification form about an applicant’s appropriateness for admission
• provide guidance to nominated advisers on appropriateness considerations, and
• require AIM companies to comply or explain against a recognised corporate governance code.

These rule changes are in response to its feedback statement and further consultation on rule changes in AIM Notice 49. (See Proposed AIM rule changes: feedback and further consultation.)

The rule changes take effect on 30 March 2018 other than the new corporate governance requirements which take effect from 28 September 2018 to provide AIM companies and nominated advisers with adequate time to prepare for the change.

All new applicants to AIM from 30 March 2018 have to state which corporate governance code they intend to follow but will have until 28 September 2018 to fully comply with the new requirements in AIM Rule 26.

The amended rules (clean and mark ups) and new template form can be found on the Exchange’s website.

Final changes to AIM Rulebooks

The changes to the AIM Rulebooks are set out below.

Early notification process

Nominated advisers are required to enter into confidential discussions with the Exchange in relation to all applications at an earlier stage in the process (and before submission of any Schedule One information) when they have to provide certain key information about the company and its proposed admission to AIM. The exact timing of this initial communication will be at the nominated adviser’s discretion. (AIM Rule 2)

The information has to be provided in a new template form and has to include: details of the business and corporate structure, any other market or trading platform on which the applicant has admitted or sought admission to trading of its securities; its advisers; any qualification or modification to the applicant’s last audited financial statements; its investing policy (if an investment company); securities to be admitted; fundraising, anticipated shares not in public hands; directors and applicable employees; significant shareholders, any matter pertaining to the good repute of a director, proposed director, key manager, senior employee, consultant and substantial shareholder (each a “Relevant Individual”),  any other matters concerning the appropriateness of the applicant which may have the potential to be detrimental to the orderly operation, the reputation and/or integrity of AIM.

The Exchange has confirmed in its feedback statement that:

• consideration of the information provided during the early notification process will be run in a similar manner to the current Schedule One form, which nominated advisers will be familiar with, and
• where information is not yet available, a nominated adviser may state this in the early notification template and update the Exchange when the information becomes available. In which case, the Exchange would expect the nominated adviser to consider when is the most appropriate time to make the early notification, taking into account whether sufficient information can be provided to allow for a meaningful discussion.

Please also see Guidance on use of Rule 9 powers below.

Guidance on use of Rule 9 powers

The assessment of appropriateness of an AIM company is firstly the obligation of the nominated adviser under the AIM Rules for Nominated Advisers. However, under AIM Rule 9, the Exchange retains ultimate discretion to refuse or impose conditions on an admission should issues identified during the admission process remain unaddressed. While this discretion is rarely used, the Exchange has:

• made amendments to AIM Rule 9 to emphasise the Exchange’s discretion to refuse admission, and
• included in the AIM Rules for Nominated Advisers, a non-exhaustive list of matters that could affect appropriateness.

As regards appropriateness, the factors included in the Guidance to Admission Responsibilities for nominated advisers are: questions as to the good character, skills, experience or previous history of a director, key manager, senior executive, consultant or major shareholder; unclear rationale for admission; formal criticism of the applicant and/or any of its directors by legal, regulatory or governmental bodies; denial of admission to trading on another exchange or platform; a vague or ill-defined business model or business operations; concerns regarding a company’s corporate structure or business model being appropriate for a public market; and if the applicant holds a derivative or economic interest in a material part of its assets or business operations through a risky contractual arrangement with the owner of the assets or operations rather than by owning them itself or through a subsidiary.

Either alone or together these factors could make an applicant inappropriate for admission.

Corporate governance code

AIM companies will have to disclose on their website details of a recognised corporate governance code that the board has decided to apply, how the company complies with the code and, where it departs from the code, an explanation of the reasons for that departure.

This information has to be reviewed annually and the website has to include the date on which it was last reviewed.

Recognised corporate governance code is not defined and should be whichever code is most appropriate for the company, which could be one in its home jurisdiction.

Board composition

The Exchange has not introduced mandatory board composition requirements but noted (in AIM Notice 49) that it normally expects a board to include a chairperson, finance director and non-executive directors.