A Guide to Floating on AIM

AIM has emerged as one of the world’s most successful growth markets since its inception in 1995.

It has grown rapidly in terms of the number and diversity of companies admitted to the market, as well as the number and diversity of institutional and retail investors involved. Its success is based on a streamlined regulatory environment. AIM has been created specifically for the needs of small and emerging businesses.

Regulatory Environment

AIM companies are governed by the AIM Rules for Companies (AIM Rules), which outline the requirements and guidance for companies listed on AIM or seeking to be listed on AIM. The admission document requirements are based on the FCA Prospectus Rules, with a few (optional) exceptions. Admission documents relating to a public offer in the UK must adhere to the FCA’s Prospectus Rules and must be approved by the FCA.

The decision to Float

Once you have taken the decision to float you will need to critically appraise your existing business and equity story, to understand its attractiveness to the market and identify the extent to which it will meet the AIM admission requirements. These requirements may be analysed into the following areas:

• General Suitability and initial considerations
• Eligibility for admission
• Continuing obligations and reporting requirements

General suitability and initial considerations

A successful flotation requires careful planning and preparation.

The following are the most important suitability issues to consider:

• Preparation of a well-constructed, attractive equity story
• Establishing an experienced board of directors and management team
• Corporate governance implications
• Suitability of existing capital and organisation structure
• Appropriateness of the financial track record
• Quality of management information and financial reporting procedures
• Tax strategy and planning
• Legal housekeeping
• Board remuneration, management and employee incentives
• External communications and investor relations, including preparation of a company website

Key differences between AIM and the Main Market

AIM

1. No minimum number of shares to be in public hands
2. No trading record requirement (minimum three years if available)
3. Prior shareholder approval required only for reverse takeovers and fundamental disposals
4. Admission documents not pre-vetted by the Exchange. The FCA will vet an AIM admission document where it is also a Prospectus under the Prospectus Directive
5. Nominated adviser and broker required at all times
6. No minimum market capitalisation
7. Compliance with a recognised corporate governance code or explain why not

Main Market

1. Minimum 25% shares in public hands
2. Normally three-year trading record required
3. Prior shareholder approval required for significant transactions, including significant acquisitions, disposals and related party transactions
4. Prospectus pre-vetted and
5. Approved by the UKLA
6. Sponsors needed for new applicants and significant transactions
7. Minimum market capitalisation of £700,000
8. Compliance with UK Corporate Governance Code or explain why not.

Eligibility for admission

A company must meet the eligibility requirements as set out in the AIM Rules for Companies. The main requirements are set out below:

Main eligibility requirements:

• Selection and retention of a designated adviser and broker.
• Production of an admission document
• Financial information is being prepared for inclusion in the admission document.
• Three years of audited financial information (if available)
• If the financial information is more than nine months old, unaudited interim financial information with comparatives is required
• At a minimum, the last two years of the financial information must be restated onto the basis to be applied in the issuers next annual accounts, being IFRS (or equivalent standards for non-EEA companies)
• Sufficient working capital for at least 12 months from the date of admission
• Adequate financial reporting procedures
• Profit forecast, if appropriate

Role of the nominated adviser

The initial role of the nominated adviser is to ensure that the company is suitable for trading on AIM and to advise on, as well as to ensure that the AIM Rules for Companies are followed upon admission. The nominated adviser may be the same entity as the company’s broker (who encourages trading of the company’s shares in the market), so their selection must be carefully considered.

The nominated adviser must conduct extensive due diligence, advise the company on its primary or secondary market disclosure requirements, be available to advise and guide AIM Companies for which it acts at all times, and liaise with the Exchange and the company’s other advisers, as required by the AIM Rules for Nominated Advisers.

Financial reporting and ongoing obligations

Nominated adviser and broker-At all times, an Exchange-approved nominated adviser and broker must be retained.

Price sensitive information-New developments which, if made public, would result in a substantial movement in the share price must be notified without delay

Annual report and accounts-The annual accounts must be signed and published within six months of the year end

Half-yearly reports (unaudited)- Half-yearly reports must be published within three months of the period end and contain primary statements with comparatives, as a minimum

Significant transactions-Reverse takeovers, defined as acquisitions of more than 100 percent of any of the class tests, necessitate re-admission to AIM, which includes the publication of an admission document and shareholder approval.

• Disposals in excess of 75 percent in any of the AIM Rules’ class tests in a twelve-month period necessitate the publication of a circular and shareholder approval.
• An announcement is required for significant transactions that exceed 10% of any of the class tests and occur outside of the ordinary course of business. For related party transactions that exceed 5% of any of the class tests, an announcement is required.

Further equity issues – An admission document will only be required where a prospectus is required under the Prospectus Rules, a new class of securities is to be admitted or the transaction qualifies as a reverse takeover

Lock-in arrangements-Certain related parties and employees must not dispose of their shares for one year after admission if a company’s main activity is a business that has not been independent and revenue earning for at least two years.

Website-A website showing information on the business and all information made available to shareholders over the past 12 months must be maintained

Corporate Governance-Details of a recognised corporate governance code that the AIM company’s directors have decided to apply, how the AIM company applies that code, and an explanation of why it deviates from its chosen corporate governance code. The data will be updated annually, and the date it was last reviewed will be posted on the company’s website.

Considerations for non-EEA* issuers

Financial information-Financial information may be presented in accordance with IFRS, US GAAP, Australian IFRS, Japanese GAAP, Canadian GAAP

AIM Designated Market Route–

• A streamlined process for admission to AIM
• Must have been quoted on an AIM Designated Market for at least 18 months**(See the London Stock Exchange Website for a list of Designated Markets)
• Required to publish a detailed pre-admission announcement (an admission document is not required)

Taxation considerations

Individual and corporate investors can take advantage of tax breaks that make investing in AIM companies more appealing. Among the tax breaks available are those relating to:

• The Enterprise Investment Scheme
• Inheritance Tax
• Venture Capital Trust
• Reliefs for losses
• Capital Gains Tax
• Gift Relief
• Stamp Duty exemption

The place of incorporation or other residence status of the company raising funds, as well as the actual activities of the AIM company, its size, and the capital being raised, may be relevant factors in the investor’s entitlement to tax relief.

Individuals can also invest in AIM companies using their stocks and shares Individual Savings Accounts (ISAs).

Additional rules for mining, oil and gas companies

• A recent competent person’s report on all material assets and liabilities should be included in the admission document
• A qualified person independent of the company, its directors, management and advisers, with at least five years’ relevant sector experience should review and sign off on each resource or drilling update notified to the market

AIM indices

Trading on AIM is supported through the AIM Index series which includes the:

FTSE AIM 50 UK Index (UK domiciled only)

FTSE AIM 100 Index (UK and International)

FTSE AIM All share Index (UK and International)

FTSE AIM All Share Supresector Index (UK and International)

Each index has specific eligibility criteria relating to general liquidity and free float requirements.

Additional rules for investing companies

Investing companies may float on AIM subject to the following additional rules:

• Minimum of £6 million in cash to be raised on or immediately before admission
• Details of the investing strategy must be published in the admission document
• Shareholders are required to approve the investing strategy on an annual basis until the company is no longer considered an investing company
• Companies that become investing companies through divestment must make an acquisition within twelve months of the divestment date.
• An acquisition which departs substantially from the stated investing strategy must be treated as a reverse takeover.

How we can help you

Whatever market you list on, executing a successful IPO is typically the culmination of a complex process. Accounting, broker selection, reporting, financial systems, governance, media, investor relations, and pricing and allocation are all part of the strategy. To treasury and financial risk management, legal, tax, human resources, and technology – every piece of the puzzle must be in place and connected before moving forward.

Regardless of the market or stock exchange, proper planning and preparation are essential for a successful IPO. Our professionals are here to assist you and make the task at hand as simple as possible for you.