Following the publication of AIM Notice 43, the proposed changes set out in AIM Notice 42 to the AIM Rules and consequential changes to the AIM Note for Investing Companies take effect from 1 January 2016.

Rule 8 – Investing companies

Investing companies listing on AIM are now required to raise a minimum of £6 million in cash via an equity fundraising on, or immediately before admission.  Previously the minimum amount was £3 million.

Fundamental changes of business – introduction of an "AIM Rule 15 cash shell"

AIM Rule 15 (Fundamental changes of business) has also been amended to the effect that an AIM company disposing of substantially all of its trading business, activities or assets will become what is now termed an "AIM Rule 15 cash shell" instead of being treated automatically as an investing company. 

The company will then, instead of 12 months, have a reduced period of 6 months to complete a reverse takeover transaction under AIM Rule 14. If the company fails to complete a reverse takeover within the required time limit its listing will be suspended and cancelled 6 months later under AIM Rule 41. 

If the company elects to become an investing company it will now be required to obtain shareholder consent, publish an admission document and comply with the other requirements set out in AIM Rule 14 (reverse takeovers). With regards to satisfying the admission criteria for investing companies under AIM Rule 8, the AIM Note for Investing Companies has been updated to clarify that the proceeds of the disposal of an AIM company's business, activities or assets will normally count towards the £6 million minimum fundraising requirement.

Where the AIM Company has no intention of looking for a reverse takeover transaction or becoming an investing company, it should seek to cancel its listing. The company would need to obtain shareholder consent to the delisting at the same time as it seeks consent to the disposal transaction.

Transitional rules

The old regime will continue to apply for AIM companies which became investing companies prior to 1 January 2016. Those companies must either implement their investing policies or complete a reverse takeover transaction within 12 months of becoming investing companies under the old AIM Rule 15.

Impact of the amendments to the AIM Rules

The requirement for investing companies to raise a minimum of £6 million is likely to result in fewer investing companies listing on AIM.  The amendments to the rules however are designed to improve the quality of AIM companies by ensuring they have sufficient cash to make meaningful investments and attract institutional investors, thus ensuring an extra level of scrutiny over the investment policy.

The amendments to AIM Rule 15 seek to weed out cash shells which remain on the market with limited cash balances for too long after a disposal and inhibit the functioning of a fair and orderly market in the company’s securities.