Following on from last year’s discussion paper and the subsequent consultation on changes to the AIM Rules, the details of which were discussed in our November 2017 Public Company Update, the Exchange has proceeded to make a number of amendments to the AIM Rules for Companies and the AIM Rules for Nominated Advisers, the details of which are set out in AIM Notice 50.
Formalisation of the early notification process
With effect from 30 March 2018, Nomads are now required to enter into confidential discussions with the Exchange early in the listing process in order to highlight atypical features or potential issues that may be of concern to the Exchange in connection with a potential AIM applicant.
The revised AIM Rules for Nominated Advisers at Schedule Three sets out a non-exhaustive list of matters entitled “Guidance to Admission Responsibilities” any of which could potentially mean that an applicant’s appropriateness for AIM is questionable. These matters include where there are questions as to the character, skills or experience of directors, where there are unusual corporate structures or the company owns assets via contractual arrangements rather than directly and the general appropriateness of the applicant for the public markets in the UK.
The early notification form asks basic questions which align to those Admission Responsibilities – so covers the applicant’s corporate structure, details of advisers to the transaction, qualifications to last audited accounts, target fund raise, anticipated free-float, details of all directors, applicable employees and significant shareholders, and a catch-all question as to whether there are “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 Nomad community’s general view, which we share, is that formalising the early notification process is a good move as it will help identify any potential red flags at an early stage thereby giving a better level of deal certainty. It is certainly preferable that queries the Exchange has arising from the form are known earlier on in the transaction so they can be dealt with or cleared in good time rather than nearer to Admission.
With effect from 28 September 2018 it will be mandatory for AIM companies to adopt a corporate governance code and to explain how they comply (or where they do not do so, to explain why) against a recognised corporate governance code. This will replace the current regime which simply requires consideration of corporate governance as part of the appropriateness review and then disclosure of an issuer’s corporate governance regime.
AIM Rule 26 has accordingly been amended to require AIM companies’ websites to contain details of the governance code that the board has decided to apply, how the AIM company complies with that code, and where it departs from its chosen corporate governance code an explanation of the reasons for doing so. This information is required to be reviewed annually and the disclosure on the website must include the date on which this information was last reviewed.
New applicants to AIM from 30 March 2018 are required to state on their website which code they intend to follow but will otherwise have until 28 September 2018 to comply.
There is no list of “recognised corporate governance codes” but in reality for most issuers, perhaps with the exception of those which are incorporated and have a primary listing in jurisdictions other than the UK, the choice will be between the UK Corporate Governance Code published by the Financial Reporting Council and the QCA Corporate Governance Code published by the Quoted Companies Alliance. In fact AIM Notice 50 highlights both of those codes as examples.