On 1 June 2009, the London Stock Exchange (the Exchange) published a new version of the AIM Rules for Companies (the AIM Rules), which incorporated the changes relating to investing companies referred to in AIM Notice 33, as well as:  

  • the new AIM Note for Investing Companies; and
  • a revised AIM Note for Mining and Oil and Gas Companies.  

These Rule changes (together with both AIM Notes referred to above) took effect on 1 June, subject to some transitional provisions for existing investing companies.  

The AIM Rules also:  

  • reflect the changes to the regime relating to rights issue subscription periods which came into force on 10 February 2009 in accordance with AIM Notice 31; and
  • include, with slight amendment, the changes to the regime relating to significant shareholder notifications set out in AIM Notice 32. These changes also took effect on 1 June 2009, subject to some transitional arrangements.  

How are investing companies affected?  

The AIM Rules outline various changes and clarifications to the previous regime for both the admission of investing companies to AIM and their continuing obligations once on the market.  

The changes have been made by way of amendment to the AIM Rules and also through the issue of a new AIM Note for Investing Companies. The amendments to the AIM Rules make it clear that this new Note, and other Notes published by the Exchange, form part of the AIM Rules themselves and will no longer operate merely as guidance, thereby strengthening the hand of the regulator.  

The new regime seeks to ensure that AIM is not used as a market for complex funds, which are considered to be more appropriate for the Main Market of the Exchange or the Specialist Fund Market.

What are the principal changes and clarifications relating to investing companies?

They include the following: see table

Do existing investing companies have to do anything?  

As mentioned, the changes to the AIM Rules have immediate effect, subject to some transitional provisions for existing investing companies.  

Investing companies already admitted to AIM are expected to update their existing investing strategy so that it meets the new investing policy requirements as soon as practically possible and in any event within 6 months of 1 June 2009. Shareholder approval will not be required for non-material changes to the investing policy arising solely from these rule changes, unless the revisions are considered to materially change the overall objective and risk profile of the existing strategy. The revised policy should be announced when finalised and published in the company’s next annual accounts and on its website.  

To the extent an AIM company does not comply with the independence requirements for its investment manager, this should be announced within 3 months. In addition, the information required by paragraph 4.2 of the Note (further disclosures on admission) should be announced within 3 months, if this has not previously been done.

What has happened to the regime for mining, oil and gas companies?

The Guidance on Mining, Oil and Gas Companies (first published in March 2006) is renamed the Note for Mining and Oil and Gas Companies and, like the new AIM Note for Investing Companies, forms part of the AIM Rules, with similar implications for monitoring and enforcement.  

What are the changes to the regime on the disclosure of significant shareholdings?  

To recap: since 20 January 2007, AIM companies incorporated under the Companies Act or which are incorporated and have their principal place of business in the United Kingdom (DTR Companies) have been subject to Chapter 5 of the Financial Services Authority’s Disclosure and Transparency Rules (DTR5).  

DTR5 requires disclosure where a person has direct or indirect control of voting rights above a threshold of 3% including where a person is entitled to acquire voting rights as a result of holding certain financial instruments.  

All categories of AIM company must comply with AIM Rule 17 which, among other things, requires the disclosure of significant shareholdings. As mentioned, DTR Companies are also required to comply with the provisions of DTR 5.  

The guidance note to AIM Rule 17 (updated in February 2007) contains the disclosure obligations for those companies incorporated in a jurisdiction which does not have a similar shareholder disclosure regime to the DTRs ( Non-DTR Companies). The guidance note:  

  • requires Non-DTR Companies to use all reasonable endeavours to comply with AIM Rule 17; and
  • recommends that Non-DTR Companies should include provision in their constitutional documents to require significant shareholders to notify them of relevant changes.  

DTR5 did not require disclosure of cash settled derivatives such as contracts for difference (CfDs). However, as from 1 June 2009, DTR5 has been amended so that holdings of long positions in CfDs or other similar financial instruments should, subject to certain exemptions, be aggregated with other share positions when determining whether a significant shareholding disclosure threshold has been exceeded.  

What is the impact of the amendments to DTR 5 on the AIM Rules?  

In response to the changes to DTR5, the AIM Rule definition of “holding” has been amended to the same effect. This will bring the AIM Rules into line with DTR5 so that DTR Companies will continue to meet the requirements of AIM Rule 17. The amendment to the AIM Rule definition of “holding” will also have an impact on Non-DTR Companies given that they must use all reasonable endeavors to comply with AIM Rule 17. Accordingly, for example, where such a company is informed of any relevant change to a significant shareholding resulting from a CfD or other financial instrument position it should announce this without delay.  

What are the new definitions in the AIM Rules?  

The new definitions are as follows:  

  • “Financial instrument” means any financial instrument requiring disclosure in accordance with DTR 5.3.1, with the addition that, for the purposes of this definition, all AIM companies shall be treated as if they are DTR companies regardless of their country of incorporation.
  • “Holding” – the previous definition remains with the following wording added: “In addition, when determining whether a person is a significant shareholder, a holding also includes a position in a financial instrument”.  
  • “Significant shareholder” means any person with a holding of 3% or more in any class of AIM security (excluding treasury shares).

How are significant shareholdings through long CfD positions to be calculated?  

AIM Notice 32 advises that a shareholding represented by a holding of a long position in a CfD, or other similar financial product, should be calculated on the following basis:  

DTR Companies: shareholders may calculate their holdings on a nominal or delta-adjusted basis until 31 December 2009, after which time only delta-adjusted assessment will be permitted.  

Non-DTR Companies: Non-DTR Companies should encourage the disclosure of shareholdings to them on the same basis as DTR Companies to ensure consistent market notification of these positions. Therefore, disclosure on a nominal or delta-adjusted basis is acceptable until 31 December 2009, after which time shareholders should be encouraged to disclose their holdings on a delta-adjusted basis. However, disclosure on this basis will not be mandatory.  

Are any transitional provisions applicable to the new regime on disclosure of significant shareholdings?  

Yes: as mentioned, the guidance to AIM Rule 17 recommends that Non-DTR Companies should include provisions in their constitutional documents to require significant shareholders to notify them of relevant changes.  

The revisions to the definition of holding may mean that such constitutional documents need amendment. The Exchange expects a Non-DTR Company to make any necessary amendments at the company’s next annual general meeting (“AGM”), unless this meeting is within the next six months, in which case the amendments should be made by, or at, the following AGM.