A new chapter for AIM: What the rule changes mean for your business

For AIM-quoted companies and those considering an admission, the changes are designed to reduce friction, improve access to capital and make the market more competitive, while maintaining appropriate investor protection.

Working Capital: A More Flexible Approach

The traditional requirement for a directors’ working capital statement confirming that available working capital was sufficient for at least twelve months from admission has been replaced with a more flexible description of financial resources.

Under the new rules, companies must provide information on their material capital resources, material financial commitments, obligations and liabilities, the proposed use of proceeds and the directors’ reasonable opinion on the need to raise additional finance over the next twelve months.

Higher Thresholds for Substantial Transactions

One of the headline changes is the increase in the substantial transaction threshold from 25% in the class tests, rather than the previous 10%. In practice, this means that companies may pursue larger acquisitions and disposals without triggering the mandatory notification and disclosure requirements that previously applied to transactions between 10% and 25%.

The change gives boards greater operational flexibility to execute their growth strategies without the need for an AIM Rule 12 announcement for transactions that fall below the new threshold, subject to any other applicable disclosure obligations, including under the UK Market Abuse Regulation.

The rules also retain important protections for larger transactions. In particular, where a transaction exceeds 100% in any of the class tests, the company should consider carefully whether shareholder approval is required and consult its Nomad and the London Stock Exchange where appropriate.

The revised rules also change the definition of a reverse takeover. A transaction exceeding 100% in a class test does not, by itself, constitute a reverse takeover. The transaction must also result in a fundamental change in the business, board or voting control of the AIM company (or, in the case of an investing company, represent a material departure from its investing policy).

A Streamlined Admission Process

The rules introduce an Express Applicant route for qualifying companies whose securities have been traded on an Express Market for at least three years.

An Express Market is any regularly operating open market for the trading of equity securities that is regulated by, or operated under the oversight of, a regulatory body or entity which is a member of the International Organisation of Securities Commissions (IOSCO). The route therefore recognises companies that have already been subject to public-market scrutiny and ongoing disclosure obligations in an IOSCO jurisdiction.

The route is subject to specific eligibility criteria, including a minimum proposed market capitalisation of £20 million, no fundamental change in the applicant’s business and/or board during the preceding 12 months, and relevant admission and disclosure documentation having been published in English.

Qualifying express applicants need only provide a draft Schedule One Announcement at least three business days before the expected date of admission, rather than the 20 business days required under the standard process.

In certain circumstances, an express applicant will also not need to produce a full admission document. This applies where its securities are already admitted to an Express Market which is also a specified market and the AIM securities are of the same class.

Where the Express Market does not fall within the FCA’s definition of a “specified market” in the Market Conduct Sourcebook and the FCA Handbook Glossary, or where the securities to be admitted to AIM are not of the same class as those already trading on the Express Market, the applicant must produce a simplified admission document. The FCA maintains a list of third-country markets considered equivalent to a UK regulated market under article 2a of the UK European Market Infrastructure Regulation (UK EMIR), which is relevant to assessing the applicable market framework.

That simplified admission document is deliberately limited: it need contain only the information required under Regulation 23 of the Public Offers and Admissions to Trading Regulations 2024 and the AIM “buyer beware” wording. This avoids requiring the full set of disclosures otherwise associated with an AIM admission document while preserving the core information required for investors.

For qualifying companies, the changes should make the process of moving to AIM faster and potentially less costly.

Capital Access Window

A notable innovation is the Capital Access Window, a new mechanism allowing an AIM company to request a temporary suspension of trading while it conducts a fundraise or negotiates a corporate transaction involving the issue of AIM securities.

The mechanism is intended to give companies a practical way to manage sensitive fundraising or transaction negotiations without continuing to trade in circumstances where the outcome of those negotiations may be uncertain.

Corporate Governance: Greater Flexibility

The previous requirement to adopt and report against a recognised corporate governance code on a “comply or explain” basis has been removed.

Instead, AIM companies must now disclose details of their approach to corporate governance, including how they address five key areas:

• Board composition: the name of its directors and brief biographical details of each, and details of those who are independent;
• The role, responsibilities and functions of each director for the delivery of the company’s strategy, commercial objectives and the effective management of its risks;
• Remuneration and performance: details of the structure of executive and non-executive director remuneration and how this is aligned with individual and company performance and how it is assessed;
• Risk and controls framework: details of corporate governance committees and their role and responsibilities; and
• Investor relations: the company’s approach to shareholder engagement.

Companies retain the flexibility to reference a recognised corporate governance code where appropriate. The QCA Corporate Governance Code is likely to remain widely used by AIM companies, particularly smaller and mid-sized businesses.

Ongoing Developments: A Clearer Disclosure Framework

A new rule 11 requires companies to maintain systems, procedures, resources and controls to monitor and identify changes or developments which may reasonably be expected to have a material impact on their business, financial condition, trading position or prospects.

Companies must also keep their Nomad informed of such developments on a timely basis and seek and have due regard to the Nomad’s view as to whether developments are likely to have a market impact.

Importantly, the company’s obligations under the UK Market Abuse Regulation remain separate. The Nomad’s view is not determinative, but companies are required to take that view into account when considering their disclosure obligations under MAR.

The new framework therefore places greater emphasis on the Nomad’s role in providing specialist public-market advice while preserving the company’s responsibility for complying with its own legal and regulatory disclosure obligations.

Lock-in Exemptions: A Pragmatic Update

The rules continue to provide for a twelve-month lock-in in relation to certain related parties and applicable employees of new businesses admitted to AIM, subject to specified exemptions.

The new rules clarify a number of important circumstances in which a substantial shareholder will not be subject to the lock-in requirement. These include where the shareholder:

• is an authorised person;
• is an investing company or listed investment company whose investing policy is externally managed on a fully discretionary basis by an authorised person;
• is a company with securities quoted on the London Stock Exchange’s markets; or
• became a substantial shareholder at admission or at a price which was more widely available, for example by participating in an arm’s-length offer to the public or at a price equating to the company’s market price at admission where the shareholder will not benefit from an uplift.

The rules also expressly permit certain disposals during the lock-in period, including:

• transfers between spouses or into a pension plan;
• intra-group transfers; and
• disposals in circumstances of financial hardship.

These clarifications should provide greater certainty for companies and pre-IPO investors and may reduce the risk of lock-in arrangements becoming an obstacle to attracting certain cornerstone investors.

Accounting Flexibility

AIM companies incorporated in the UK or the EEA may now prepare their annual accounts in accordance with either International Accounting Standards or applicable local GAAP.

For a UK-incorporated AIM company, applicable local GAAP includes UK GAAP (FRS 102).

For some smaller companies, this provides an opportunity to consider whether UK GAAP may be a more proportionate and cost-effective reporting framework than International Accounting Standards, subject to the company’s particular circumstances and the requirements of its auditors and other stakeholders.

What Should You Do Now?

For existing AIM companies, now is the time to:

1. Review your governance disclosures — update your website content to reflect the new Rule 26 requirements and explain how your governance arrangements address the five specified areas.
2. Reassess your transaction pipeline — the higher substantial transaction threshold may mean that some transactions previously requiring an AIM Rule 12 announcement no longer do so. However, consider the aggregation rules, the 100% threshold, MAR and any other applicable disclosure obligations.
3. Consider the Capital Access Window — if you are planning a fundraise or a corporate transaction involving the issue of AIM securities, discuss with your Nomad whether a temporary suspension under the new mechanism could support the process.
4. Review lock-in arrangements — if you are planning a fundraise or IPO, consider whether the clarified exemptions could assist in structuring cornerstone investor participation.
5. Discuss accounting standards with your auditors — if International Accounting Standards have been a significant cost or resource burden, the option to adopt FRS 102 may offer potential savings for eligible UK-incorporated companies.

For companies considering an AIM admission, the new rules provide a number of potentially attractive features, including a streamlined admission route for qualifying Express Applicants, greater flexibility around certain transactions and a more proportionate approach to governance and financial reporting.

The reforms do not, however, represent a wholesale reduction in regulation. Companies will continue to be subject to AIM’s ongoing obligations as well as applicable requirements under MAR, company law and other regulatory regimes.

This article is for general information only and does not constitute legal advice. Please contact Chris Simmons, Giedre Doig, Jeff Elway or Nick Williams if you would like to discuss how the new AIM Rules affect your business.