Updated AIM Rules Published

The London Stock Exchange has today published the latest version of the AIM Rules for Companies, which take effect from 1 June 2009. The new AIM Rules for Companies incorporate three sets of changes to the rules which have recently been announced by the London Stock Exchange.

New Rules for Investment Companies

The previous rules that deal with investment companies were originally aimed at the large number of cash shells that were joining the market intending to acquire a business and become trading companies. Since then a large number of investment funds have joined the market and they too fall within the definition of investment companies. The old rules did not address these companies and in the absence of any specific AIM Rules, companies and their advisers looked to the Listing Rules for guidance on the level of information and regulation for this type of fund.

The London Stock Exchange is now catching up with market practice and adopting a new Note for Investment Companies, which is loosely based on the provisions of Chapter 15 of the Listing Rules.

Investment companies need to state their investment policy on admission, which must be sufficiently precise and detailed so that it is clear, specific and definitive. Companies will need shareholders’ approval to depart from or change their investment policy and if not implemented with 18 months from admission, it must be approved annually. Admission documents for investment companies will have to disclose the information set out in Annex XV of the Prospectus Rules, which reflects current best market practice.

The new Note explains that these companies should have simple share structures, comprising predominantly one class of ordinary shares; more complex fund structures are being encouraged to join the Main Market or the new Specialist Fund Market.

The Note states that the investment manager should be independent of the board and the nomad and will be treated as a director for the purpose of some of the AIM Rules, for example those dealing with lock-ins, related party transactions and the obligation to disclose dealings in the company’s shares. The board and the investment manager must also have relevant expertise in respect of the investing policy.

The AIM Rules for Companies have also been amended to clarify that this Note, together with the existing Note for Mining, Oil and Gas Companies now form part of the AIM Rules for Companies, rather than being simple guidance.

Disclosure of Significant Shareholdings

The new AIM Rules for Companies incorporate new definitions which reflect the amendments to the Disclosure and Transparency Rules (DTRs), which also come into force on 1 June 2009. The DTRs apply to UK Companies on AIM, which must also comply with AIM Rule 17 regarding the disclosure of significant shareholdings. Non-UK Companies are required to use reasonable endeavours to comply with AIM Rule 17, even though their local law may not contain the same obligation on shareholders to notify the Company of significant shareholdings. The changes to the DTRs mean that holdings of long positions in Contracts for Differences or other similar financial instruments should now be aggregated with other holdings when determining whether a significant shareholding threshold has been reached and needs to be disclosed. These changes are now reflected in the revised AIM Rule 17.

Rights Issue Subscription Periods

In February the Exchange announced that minor changes were being made to the AIM Rules for Companies to reduce the minimum subscription period for rights issues to 10 business days, to reflect the changes to the Listing Rules announced by the FSA.

If you would like to know more about any of the topics outlined above, contact Andrew Chadwick, Partner.