This update will be relevant to companies whose securities are admitted to AIM and is also for the attention of Nominated Advisers (Nomads).

Summary

The London Stock Exchange has launched a consultation on tightening the rules relating to fundamental disposals. It proposes that – within 6 months of making a fundamental disposal – a company must make a reverse takeover or become an investing company. Where a company wishes to become an investing company it must publish an AIM Admission Document and also satisfy the minimum cash requirement. If it neither makes a reverse nor becomes an investing company in this time, its shares will be suspended.

If adopted, these rules should encourage companies to consider more carefully whether they wish to remain listed after making a fundamental disposal. This will be most relevant for companies that are left with limited cash balances following the disposal – given the costs involved in the re-admission process.

The Exchange is also consulting on a proposed increase in the minimum sum which must be raised by an investing company from £3 million to £6 million.

Rule 15 (Fundamental changes of business)

It is proposed that:

  • an AIM company that makes a fundamental disposal will be regarded as an AIM Rule 15 cash shell (as opposed to being automatically classified as an investing company);
  • within 6 months of becoming an AIM Rule 15 cash shell, the AIM company must make an acquisition or acquisitions which constitute a reverse takeover. For the purposes of the new Rule 15 only, becoming an investing company pursuant to Rule 8 will be treated as a reverse takeover and the relevant provisions apply (including publication of an admission document and satisfying the minimum cash requirement of £6 million, although this cash requirement could be satisfied from the proceeds of the disposal rather than a fresh capital raising);
  • if, within 6 months, an AIM Rule 15 cash shell has not completed a reverse takeover, the Exchange will suspend trading. If the company’s shares are suspended for 6 months then AIM will cancel its admission under Rule 41; and
  • where an AIM Rule 15 cash shell does not intend to undertake a reverse takeover, it should seek to cancel its admission, most likely by proposing a delisting resolution at the same time as seeking shareholder approval for the disposal.

Rule 8 (Investing companies)

It is proposed to increase to the fundraising threshold which investing companies must raise from £3 million to £6 million. A corresponding change is being proposed to note 5.2 of the AIM Note for Investing Companies. These changes are designed to encourage external, often institutional, participation in fundraising.

General

The proposed amendments are not intended to take effect retrospectively – and will not apply to companies that make a fundamental disposal prior to the new rules being adopted.

The consultation closes on 12 November 2015 and the Exchange will confirm the results as soon as reasonably practicable after that.