AIM Update: New ‘Inside AIM’ Guidance

Free Float

There is no free float requirement for companies being admitted to AIM.  However, AIM considers that a Nominated Adviser’s review of a company’s free float is an important qualitative assessment to be undertaken in considering a company’s appropriateness for AIM.  In particular they view a company’s free float as having a significant impact on the ability of a company to attract investors and the functioning of the secondary market.

AIM has set out the key areas that a Nominated Adviser should review and discuss with AIM when an application is made for a new listing:

1. Consider how the securities are likely to trade once admitted to AIM, and the spread and nature of the shareholders comprising the free float.  Nominated Advisers should also discuss the likely trading with the company’s broker(s) and potential market makers.

2. If an applicant fails to raise initial target funds, the nominated adviser should properly explore this matter, as this may be indicative of more fundamental issues surrounding the company’s appropriateness for AIM.

3. If the applicant has limited free float this should give rise to questions about the rationale for admission to AIM.

4. If there is a concentration of shareholders, the Nominated Adviser should consider any free float issues that this may have, and also consider issues of undue influence, control and ongoing corporate governance arrangements.  Whilst there is no firm requirement for a relationship agreement, in our experience these are common where there are a limited number of controlling shareholders.

Systems, Procedures and Controls

AIM Rule 31 requires AIM companies to have sufficient systems, procedures and controls to enable a company to comply with the AIM Rules for Companies.  AIM has clarified that the Nominated Adviser should check a company’s systems, procedures and controls (as set out in a company’s financial policies and procedures documentation) in a “meaningful way”.  This means that they are required not only to carry out a review of the documentation but also to assess whether the policies “are capable of working in practice, taking into account the nominated adviser’s knowledge of the company and management”.  These policies should be in place at the time of Admission.

As AIM approaches its 20th anniversary, it has been tightening up on the criteria for companies admitting to AIM.  Whilst there do not appear to be any plans to bring a major overhaul to the AIM Rules, AIM are carrying out detailed assessments of new applicants.  It is unlikely that AIM are going to become prescriptive, for example demanding relationship agreements where there are concentrations of shareholders (as is required for premium main market companies), but the new guidance provides them with a platform to ask the Nominated Adviser why they have not insisted on a relationship agreement.  As we discussed at our recent Nomad Conference on Corporate Governance, AIM is increasingly taking an active role on the appropriateness of companies as the market continues to mature and scrutiny of capital markets increases.