Today, AIM announced changes to the AIM Rules for Companies and the AIM Rules for Nominated Advisers. This follows a consultation paper released at the end of January.
For companies, the changes are relatively minor but there are some clarifications and practical consequences that directors of AIM-listed companies should understand. These are summarised in the first section below.
For Nominated Advisers, the amendments are more important as they amend and clarify a number of points around the eligibility of Nomads on an ongoing basis. These changes are summarised in the second section below.
The updates rules can be viewed via the following links:
- Changes to the AIM Rules for Companies: http:// www.londonstockexchange.com/companies-and-advisors/aim/advisers/ aim-notices/aimrulescompaniesmarkup.pdf
- Changes to the AIM Rules for Nominated Advisers: http:// www.londonstockexchange.com/companies-and-advisors/aim/advisers/ aim-notices/aimrulesnomadsmarkup.pdf
Save where specified below, these changes are effective immediately.
Changes to the AIM Rules for Companies
The main changes for AIM-listed companies to note are as follows.
- Board participation in fundraisings (Rule 21) – the rules now clarify that a director or applicable employee (i.e. an employee who, because of his or her role, is likely to be in possession of unpublished price-sensitive information) will not be subject to the restrictions on dealing insofar as he or she participates in a fundraising where the company is only in a close period due to the fact of the fundraising itself (i.e. the fundraising constitutes the only unpublished price-sensitive information), provided that the director or applicable employee is participating on the same terms as the other investors. This removes an area of uncertainty where typically companies had to apply for a derogation, which was usually granted, to enable such participation. It should be noted that a derogation will still be required in circumstances beyond those specifically allowed by the amended rules – for example where the company is in a close period in connection with a transaction which is inextricably linked to the fundraising, such as an acquisition for which the fundraising is being undertaken. In that situation, as before, a derogation is likely to be granted where details of the acquisition are published concurrently with announcement of the fundraising.
- Disclosure standards (Rule 11) – the changes clarify that an AIM company must issue notification without delay of any new developments which are not public knowledge which, if made public, would be likely to lead to a significant movement in the price of its shares. The change of language brings the AIM disclosure standard into line with the terminology used in the Financial Services and Markets Act 2000. Updated guidance confirms that in considering what information is likely to lead to a significant price movement a “reasonable investor” test is used – i.e. is the information such that a reasonable investor would be likely to use it as part of the basis of their investment decisions? Companies are expected to keep confidential impending developments, including non-binding agreements and matters in the course of negotiation, and must ensure that they have in place effective procedures and controls to ensure the confidentiality of unpublished price sensitive information to prevent the risk of a leak.
- Disclosure of corporate governance standards (Rule 26)– the new rules require that details of the corporate governance code that the company applies must be disclosed on the company’s website or, if no code has been adopted, this must be stated, together with an explanation of what corporate governance arrangements the company does have. The website must also confirm whether the company is subject to the City Code on Takeovers and Mergers or any similar legislation or voluntarily adopted provisions. Websites must be updated to reflect these new requirements by 11 August 2014. With regards to the application of the City Code on Takeovers and Mergers see the following Memery Bank update.
- Suspension (Rule 40) – as a general principle the Exchange doesn’t like suspending companies, and interruptions to trading should be kept to a minimum. The basic rules on suspension remain unaffected, but the updated guidance notes provide that a company should request suspension where it is required to make an announcement but, despite its reasonable endeavours, is unable to – for example, because it doesn’t have sufficient information to make a full announcement that is not misleading.
- Jurisdiction of the Exchange (Rule 43) – the Exchange will continue to have jurisdiction over companies that have ceased to be listed on AIM for the purpose of investigating and taking disciplinary action in relation to breaches or suspected breaches of the AIM Rules when they were listed. Importantly for Nomads, AIM have clarified that ordinarily they would not expect Nomads to continue to be a point of liaison with a delisted company during any such investigation.
Changes to the AIM Rules for Nominated Advisers
- Eligibility of Nomads and QEs (Rules 1 -5) – The requirements for continuing eligibility now reduce as QEs become more senior. Previously a QE must have acted in a corporate finance advisory role for at least the last three years and acted in a lead corporate finance role on at least three relevant transactions during those three years (broadly, a transaction involving an admission document, prospectus or a takeover). Two alternative qualifications have now been added for existing QEs – a QE who was approved as a QE in the last five years and has been a QE on a continuous basis within that period will satisfy the test if they have acted in a lead corporate finance role on at least three relevant transactions within the last five years; or a QE who has been approved as a QE for five or more years on a continuous basis will satisfy the test if they have acted in a lead corporate finance role on at least one relevant transaction in the last five years and can demonstrate to the satisfaction of the Exchange that they are involved in an active capacity in the provision of corporate finance advisory work and in relation to AIM in particular. AIM have clarified that periods of maternity, paternity or garden leave will not normally prejudice a QE’s having acted “on a continuous basis”, and other periods of extended leave will be considered on a case-by-case basis. More than one QE can cite the same relevant transaction if they have both been involved to an appropriate extent.
- Continuing Eligibility and Change of Control (Rules 11 and 30) – upon a change of control of a Nomad a new application for Nomad status will be required – in particular, the new controller of the Nomad will have to satisfy the Exchange that it can satisfy the eligibility requirements in its own right. Nomads must disclose to AIM any potential changes to the structuring or organisation of the directors, partners or employees which impacts the provision of nominated adviser services, and must also disclose any change of control which is reasonably likely. AIM have resisted defining “change of control” and the disclosure requirements are broad. Accordingly, Nomads are advised to take a conservative approach on this rule and liaise with AIM in advance as necessary. It should also be noted that if there is a “reasonable likelihood” of a change of control of the Nomad, or there has been a change in its financial or operating position that may affect its ability to act as a nominated adviser, AIM can prevent the Nomad from acting for any additional companies until the situation is resolved.