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Alternative Investment Market (AIM)

Overview

The Alternative Investment Market (AIM) (link to London Stock Exchange website) is the London Stock Exchange’s (LSE’s) international market for smaller growing companies. By contrast to the main market for listed companies, companies admitted to trading on AIM are regulated by the LSE rather than the UKLA. Many of the matters which would be dealt with by the UKLA for a listed company are instead dealt with by the company’s Nominated Adviser (Nomad) who is responsible for confirming to the LSE that certain rules have been complied with.

The financial reporting rules for AIM companies are set out in the AIM Rules for Companies (link to London Stock Exchange website). 

Annual reporting

AIM Rule 19 requires that audited accounts are prepared within six months of the year end. For companies incorporated in the EEA consolidated accounts must be prepared under IFRS as adopted by the EU and company only accounts under either IFRS as adopted by the EU or national GAAP.  Non-EEA companies admitted to trading on AIM must be prepared in accordance with IFRS, US GAAP, Canadian GAAP, Australian IFRS or Japanese GAAP.

Rule 19 also includes requirements for:

  • disclosure of certain related party transactions (which will almost certainly already be required by IAS 24 or similar requirements in other GAAPs); and disclosure of the remuneration earned by each director including (a) emoluments and compensation, including any cash or non-cash benefits received; (b) share options and other long term incentive plan details, including information on all      outstanding options and/or awards; and (c) the value of any contributions paid by the AIM company to a pension scheme. 

Corporate governance

The AIM Rules require AIM companies to report on their application of a recognised corporate governance code with effect from 28th September 2018.  Companies need to provide the following details on their website:

  • details of a recognised corporate governance code that the board of directors of the AIM company has decided to apply;
  • how the AIM company complies with that code; and
  • where it departs from its chosen corporate governance code an explanation of the reasons for doing so.

This information should be reviewed annually and the website should include the date on which this information was last reviewed.

The LSE has indicated that the UK Corporate Governance Code represents best practice for AIM companies and many larger AIM companies follow it; another popular Code for AIM companies is the Quoted Company Alliance’s Corporate Governance Code for Small and Mid-Size Quoted Companies. 

Half-yearly reports

AIM Rule 18 requires that AIM companies prepare half-yearly reports within three months of the period end. The information contained in a half-yearly report must include at least a balance sheet, an income statement, a cash flow statement and must contain comparative figures for each of these. For the income statement and cash flow statement these comparatives are required to be for the corresponding period in the preceding financial year, while for the balance sheet they must be either as at the corresponding date in the preceding financial year or as at the last balance sheet date notified. Additionally the half-yearly report must be presented and prepared in a form consistent with that which will be adopted in the AIM company’s annual accounts having regard to the accounting standards applicable to such annual accounts. 

Reporting of price sensitive information

AIM Rule 11 requires notification without delay of any new developments which are not public knowledge which, if made public, would cause a significant movement in its share price.  The Guidance Notes in part 2 of the AIM Rules make clear that this means information a reasonable investor would be likely to use as part of an investment decision.  There is an exemption set out in the guidance relating to transactions which are in the course of negotiation where disclosure might prejudice those negotiations, provided that those who are aware of the information (e.g. the other party to a negotiation and professional advisers) keep that information confidential and do not trade in the company’s shares.  The Guidance Notes for Rule 11 also allow companies not to notify information about impending developments in certain circumstances, provided that  this information is kept confidential.  Companies choosing not to make such information public must have effective procedures and controls in place to ensure confidentiality and minimise the risks of a leak. 

Company Information

AIM Rule 26 requires AIM companies to bring key company information together in one place on the company’s website.  The information includes:

  • A description of its business and, where it is an investing company, its investing policy and details of any investment manager and/or key personnel.
  • Its country of incorporation and main country of operation.
  • Its current constitutional documents (e.g. its articles of association).
  • Three years (or, if shorter, the period since admission to AIM) of annual reports must be kept on the website; previously only the most recent set had to be kept available.
  • Information about the number of securities in issue, treasury shares, and significant shareholdings, updated at least every six months.  This disclosure must explicitly give the date on which it was last updated.
  • Disclosure whether the AIM company is subject to the UK City Code on Takeovers and Mergers (the Takeover Code), or any other such legislation or code in its country of incorporation or operation, or any other similar provisions it has voluntarily adopted.
  • Information on corporate governance as noted above.

Applicability of UKLA rules

AIM companies are not listed, and are hence not subject to the Listing Rules. They are also not generally subject to the Disclosure and Transparency Rules, with the exception of DTR 5 (link to FCA handbook) (major shareholding and vote holder notifications) which applies directly to UK incorporated AIM companies and indirectly to non-UK companies via AIM Rule 17.

The UKLA Prospectus Rules do not apply unless a company makes a public offering of securities. This means that many AIM companies who are first admitted to AIM by means of a placing of shares will instead prepare an AIM Admission Document. The AIM Rules for an Admission Document cross refer to some, but not all, of the requirements of the EU Prospectus Directive, and are therefore sometimes known as ‘PD Lite’. 

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.