Revising the AIM rules: Eligibility criteria and corporate governance proposals may be dropped
Admission eligibility criteria – no minimum free float requirement
The proposal that a minimum free float requirement be a key consideration of whether a new applicant is appropriate for admittance will not now be taken forward. This was announced by the London Stock Exchange on 11 December 2017 in its AIM Notice 49, which contained feedback on consultation on a number of proposed changes to AIM Rules (which had been announced in Notice 46). Although retaining sufficient free-float was seen to be fundamental to the trading and liquidity of securities for traded companies, the LSE decided that this was a more meaningful standard to apply to companies once listed, and noted respondents to the consultation raised concerns that setting percentage or numerical thresholds might hinder growth in the market.
The LSE will also not proceed with a further eligibility criterion which proposed to introduce a minimum capital raising threshold, which had been mooted in the belief that such a threshold would necessitate external investor participation, and therefore ensure a company’s valuation on admission.
Response to this additional criterion was negative, with concerns raised that such a threshold would exclude companies which would otherwise be appropriate for, and would benefit from, admission.
In addition, the proposal to mandate the specific board composition of AIM companies has also been dropped. Notice 46 suggested AIM companies should have a specific number of non-executive directors, independent of the AIM Company, as a preventative measure against company failure.
Despite this, the consultation in Notice 49 does note the importance of having a chairperson, finance director and non-executive directors on the board of an AIM company. Additionally, the LSE is proposing to change AIM Rule 26 so that AIM companies will be required to either state their recognised industry code within their existing website disclosures or provide an explanatory statement against their chosen code.
What happens next?
The LSE is asking for further responses on the changes proposed in Notice 49 and will publish the final results in early 2018.
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