UK: Consultation On Proposed Changes To The AIM Rules

On 15 October 2015, the London Stock Exchange published a consultation paper proposing certain changes to the AIM Rules for Companies relating to the admission criteria for investing companies and the rules governing fundamental changes of business.

Admission criteria for investing companies

Under the current AIM Rule 8, a company applying for admission as an investing company must raise a minimum of £3 million in cash via an equity fundraising on, or immediately before, admission. The LSE is now proposing to raise this fundraising threshold to £6 million.

Fundamental changes of business – introduction of an AIM Rule 15 cash shell

Currently, under AIM Rule 15, where an AIM company becomes a cash shell following a fundamental disposal, it is automatically deemed to be an investing company and then has 12 months to either make an acquisition or acquisitions which constitute a reverse takeover or implement the investing policy previously approved by its shareholders at general meeting.

However, in its consultation paper the LSE expressed the concern that, "following such a fundamental disposal, some companies remain on market with limited cash balances which may not be sufficient to enable meaningful investment(s) or facilitate the functioning of a fair and orderly market in the company's securities."

Going forward, the LSE therefore proposes that an AIM company that becomes a cash shell following a fundamental disposal constitutes an AIM Rule 15 cash shell rather than be automatically classified as an investing company. The AIM Rule 15 cash shell then has six months to undertake an acquisition or acquisitions which constitute a reverse takeover, otherwise trading in its securities would be suspended. If such a company wants to become an investing company pursuant to AIM Rule 8 (note the proposed change to Rule 8 above) it will be required to publish an admission document and comply with the other provisions of AIM Rule 14.

The consultation closes on 12 November 2015.

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