AIM Notice 38 – consultation on proposed changes to the AIM Rules for Companies and the AIM Rules for Nominated Advisers

Market reCap February 2014 edition 

• Primary Market Bulletin No.7
• Sponsor competence review under Listing Rules
• New controls on controlling shareholders
• AIM Notice 38
• Takeover Panel Practice Statement No 27
• ESMA statement
• Success fees
• Service of English legal proceedings on overseas directors

On 27 January 2014, the London Stock Exchange published AIM notice 38.  The notice consults on a number of proposed changes to the AIM Rules for Companies and the AIM Rules for Nominated Advisers.

Proposed changes to the AIM Rules for Companies

The majority of the proposed changes are of a minor or clarificatory nature or confirm already existing practice.  Changes which are being proposed include:

• Additional wording in rule 3 (admission document) clarifying that an applicant should take reasonable care to ensure the information contained in the admission document is, to the best of its knowledge and belief, in accordance with the facts and contains no omission likely to affect the import of such information.
• Additional wording in rule 11 (general disclosure of price sensitive information), which now refers to a "significant" movement in the price of the AIM securities and clarifies that the bullet point list is a non-exhaustive list of matters to which the information may relate.
• Amendments to rule 18 (half-yearly reports), whereby the requirement to contain comparative figures for the corresponding period in the preceding financial year is stated not to apply to balance sheets, which may contain comparative figures from the last balance sheet notified.
• Additional information which is required to be put on an AIM company's website under rule 26, including: the date on which details relating to the AIM securities and significant shareholders was last updated; annual accounts for the last three years or since admission (whichever is the lesser); details of the corporate governance code which has been adopted (if any), including details of compliance with such code; and whether the company is subject to the UK Takeover Code or other similar legislation or code in its country of incorporation or operation, or any other similar provisions it has voluntarily adopted.
• An entirely new rule 43 (jurisdiction), which states "When an AIM company ceases to have a class of securities admitted to trading on AIM, the Exchange retains jurisdiction over the company for the purpose of investigating and taking disciplinary action in relation to breaches or suspected breaches of these rules at a time when a company was an applicant or had a class of securities admitted to trading on AIM".
• Some changes to Schedule Three (class tests) which, inter alia, clarify the treatment of losses when applying the class tests.
• Amendments to the guidance notes, which include guidance previously issued in editions of "Inside AIM", including a new note entitled "Eligibility for AIM" which states: "An AIM company or applicant must be appropriate for AIM's regulatory framework.  An AIM company or applicant should usually be a similar structure to a UK plc, and where it is an investment company, must be a closed end fund and not require a restricted investor base.  It should be straightforward and not complex in terms of its structure and securities and should issue primarily ordinary shares (or equivalent)."

Proposed changes to the AIM Rules for Nominated Advisers

The proposed changes to the AIM Rules for Nominated Advisers include:

• Clarification of rule 2 (eligibility) such that it now states that the Exchange will take into account the overall experience of the Qualified Executives both on an individual basis and as a team.
• Amendments to the definition of "Qualified Executive" in rule 4 (qualified executives), which is now expanded to state that:
  • existing Qualified Executives will remain eligible if they have acted in a lead corporate finance capacity on three relevant transactions in the previous five years; and
  • those with over five years' continuous experience as a Qualified Executive who are actively involved in a corporate finance advisory role remain eligible to act as a Qualified Executive if they have acted in a lead corporate finance role on one relevant transaction in the previous five years.
• An amendment to rule 4 to state that if someone ceases to be an employee of a nomad or the firm ceases to be a nomad, such person will also cease to be a Qualified Executive and will be required to apply again should he or she wish to do so in respect of another nomad or nomad applicant.
• An amendment to rule 5 (relevant transactions) to clarify that both a proposed Qualified Executive and an existing Qualified Executive may cite the same relevant transaction if they have each been involved to an appropriate extent.
• Amendments to rule 11 (continuing eligibility) (proposed to be amended to "continuing eligibility and notification requirements"), which include additional requirements on a nomad to notify the Exchange of matters which may affect it continuing to be a nomad, for example a change of control.  This reflects guidance already issued in Inside AIM 5.  The amendments go on to state that where a change of control has occurred, a new application for nomad status will be required.
• Likewise, rule 30 (moratorium on acting for further AIM companies) has also been amended such that the Exchange may prevent the nomad from taking on any additional clients where there is a possible change of control of the nomad or there has been a change in its financial position or operating position that may affect its ability to act as a nomad.

Responses requested by 3 March 2014

The London Stock Exchange has requested responses to the proposed changes by 3 March 2014.  It is currently proposed that new rules resulting from the consultation will come into effect during 2014.

To read the consultation and the proposed changes in full, please click here.

In the meantime, if you have any thoughts on the proposed changes which you would like us to pass on to the Exchange, please do let us know.

Edward Westhead is an Associate in the Corporate Group of Field Fisher Waterhouse LLP in London.