At the end of last week the LSE published a notice announcing changes to the AIM Rules for Companies and the AIM Rules for Nominated Advisers, most of which will take effect on 30 March 2018. This follows the LSE's discussion paper last summer 2017 and the subsequent consultation in December 2017.
The rules will be amended mainly as proposed in the consultation paper and the key changes are:
- more disclosure of corporate governance arrangements;
- an early notification process for nominated advisers; and
- guidance for nominated advisers on assessing applicants' appropriateness for discussion.
Corporate governance disclosure
Rule 26 (company information on the website) will be amended to require increased disclosure in relation to corporate governance. This change will not take effect until 28 September 2018, to allow companies adequate time to prepare. Rule 26 will be amended to:
- remove the option for an AIM company to state that it has not adopted a corporate governance code; and
- require the company to comply or explain against its chosen code.
The AIM company's website should include the date on which its adherence to the chosen code was last reviewed. From 30 March 2018, new applicants will have to state which code they will apply but will have until 28 September to comply with the rest of the revised rule.
The LSE is maintaining flexibility for companies on the chosen code, so it will remain the case that some AIM companies choose to comply with the UK Corporate Governance Code, whilst others opt for the QCA Corporate Governance Code, both of which will be updated this year.
In the draft rules set out in the consultation, there appeared to be a requirement that the status of corporate governance compliance be continually updated on the company's website. This seemed to us to place a more onerous burden on AIM companies than on Main Market companies. In response to our and other respondents’ objections, the LSE has clarified that this is an annual, rather than an ongoing, requirement and that in most cases this review will take place at the same time as an AIM company prepares its annual report and accounts.
Early notification process for admissions
The new rules will require an early notification process, which will precede the Schedule One submission, and a template is available for nominated advisers to use. The LSE has clarified that:
- the submission of an early notification form does not replace a nominated adviser's obligations to the LSE concerning an applicant's appropriateness (see below); and
- the early notification process will run in a similar way to the current Schedule One form. In circumstances where information is not yet available, a nominated adviser may state this in the template and update the LSE in due course.
Guidance on considering appropriateness
The revised rules also include guidance for nomads on considering the appropriateness of AIM applicants. They will set out a non-exhaustive list of factors which a nomad could consider in its assessment of appropriateness - these include:
- questions as to the character, skills or previous history of a director, key manager, senior executive, consultant or major shareholder;
- formal criticism of the company or its directors by other regulatory, governments or law enforcement body;
- concerns regarding the corporate structure or business model; and
- the presence of a derivative or economic interest in a material part of the company's assets or business operations via a "risky contractual arrangement". For further details please contact Richard Spedding, Adrian West or your usual Travers Smith contact.