On October 15, 2015 the London Stock Exchange (LSE) published a consultation on proposed changes to the AIM Rules for Companies (the AIM Rules) which apply to investing companies and to AIM companies that undertake a fundamental change of business, together with consequential changes required to the AIM Note for Investing Companies.
Amendments to the AIM Rules are as follows:
- Rule 8 – admission criteria for investing companies: Currently an applicant seeking admission as an investing company must raise £3 million in cash via an equity fundraising on, or immediately before, admission. The fundraising requirement was introduced in 2005 and was set at such a level to necessitate external, often institutional participation, ensuring an extra level of scrutiny over the investment policy, the experience of the applicant’s directors and the company’s valuation on admission. The LSE considers it appropriate, given the passage of time, to increase that fundraising threshold to £6 million.
- Rule 15 - fundamental change of business: Currently an AIM company which becomes a cash shell following a fundamental disposal is deemed to be an investing company under Rule 15. Following such a disposal, some companies remain on market with limited cash balances which may not be sufficient to enable meaningful investments or facilitate the functioning of a fair and orderly market in the company’s securities. Accordingly, the LSE proposes that an AIM company that becomes a cash shell following a fundamental disposal will no longer automatically be classified as an investing company but will instead be regarded as an AIM Rule 15 cash shell. Within six months of becoming an AIM Rule 15 cash shell, the company must undertake an acquisition or acquisitions which constitute a reverse takeover under Rule 14. For the purposes of this rule only, becoming an investing company pursuant to Rule 8 will be treated as a reverse takeover and the provisions of Rule 14 will apply, including the requirement to publish an admission document. If an AIM Rule 15 cash shell has not completed a reverse takeover within six months, trading in the AIM company’s securities would be suspended. Where an AIM company did not wish to undertake a reverse takeover, the LSE expects it to get shareholder approval to cancel its admission to AIM in accordance with Rule 41, and consider how best to return any remaining funds to shareholders.
The AIM Note for Investing Companies is being updated to incorporate these amendments and, as such, provides that the LSE expects the condition of admission to raise a minimum of £6 million in cash via an equity fundraising on, or immediately before, admission, referred to in Rule 8 to usually be satisfied by an independent fundraising and not be funds raised from related parties, unless the related party is a substantial shareholder only and an authorised person. Cash funds resulting from a fundamental disposal under Rule 15 will usually be considered independent for these purposes.
The LSE has requested responses on this consultation to be sent by November 12, 2015.
(LSE, Consultation on proposed changes to AIM Rules for Companies, 15.10.15)
(LSE, AIM Note for Investing Companies (Extract) - Consultation mark up, 15.10.15)