Shaping the future of AIM: LSE releases discussion paper on changes to the AIM Rulebooks

Market framework

Driving growth

A key priority for the LSE is to increase the flow of capital into AIM and for AIM to help ensure that there is a fully connected funding continuum in the UK, enabling companies to "start, grow, scale and stay in the UK".

The LSE is asking for feedback on whether the current initiatives (such as the Mansion House Compact) are effective in increasing investments into AIM companies and if any changes to the current initiatives and incentives should be made or whether any new initiatives should be introduced to further drive growth.

The regulatory design of AIM

The LSE views the nominated adviser's role as central to the success of AIM. However, the market practice of the nominated adviser's role has developed and the LSE is therefore seeking views on whether there are areas of duplication between the nominated adviser, the lawyers and the accountants, including in relation to the disclosure obligations under AIM Rule 11.

Developments of the AIM Rules

AIM admission documents

Under AIM Rule 3, an admission document must be produced for an applicant to be admitted to AIM. Considering the increased costs associated with the production of the admission document and also the replication of information that is in the public domain, the LSE is requesting feedback as to whether an alternative simplified admission document, which will be accompanied by clear labelling to signpost any increased level of risk, should be introduced.

Working capital statements

Under the current AIM Rules, the admission document is required to include a working capital statement. However companies applying for admission to the Main Market no longer need to provide 'clean' working capital statements (see our commentary on the 2024 changes to the Listing Rules here). Similarly, applicants utilising the AIM Designated Market route (the "ADM") can confirm that they have no reason to believe that available working capital will be insufficient for the twelve months from the date of admission.

The LSE is requesting views as to whether for a standard AIM admission, an approach like the new Main Market requirement, the ADM route or an alternative approach to the working capital statement requirement should be adopted.

Reverse takeovers

Under AIM Rule 14, a reverse takeover requires approval from the shareholders and the preparation of a new admission document. However, considering the costs associated with the preparation of an admission document, the LSE is proposing to dispense with the requirement to produce an admission document for reverse takeovers. Instead, the LSE proposes that in situations where a company is acquiring another company that is larger than itself, but which does not result in a fundamental change of business, the AIM Rules Schedule Four disclosures should be adopted.

Accounting standards

AIM Rule 19 currently requires listed entities to prepare their accounts in accordance with UK or EU IFRS or, where an issuer is incorporated outside of the UK or the EU, in accordance with a limited list of alternative local accounting standards (i.e. US GAAP, Canadian GAAP, Australian IFRS or Japanese GAAP). The LSE is seeking submission on whether this list should be extended to recognise a wider set of local accounting standards to reduce issuer cost and complexity.

ADM route

Designed to be a fast track-and less onerous route to AIM for already listed entities, the LSE recognises that, in practice, the burden on the Nomad for these types of listing is comparable to a standard listing. The LSE is seeking submissions on ways to streamline the Nomad's work, as well as extended the list of eligible markets, change the minimum market capitalisation amount (currently £20 million) and length of time an issuer must be listed elsewhere to be eligible for the ADM route (current 18 months).

Dual class share structures

In keeping with changes made to the Listing Rules last year (which are discussed here), the LSE is seeking submissions as to whether to permit AIM companies to have dual-class shares (or weighted voting structures), which could allow founders and early investors greater control over AIM listed entities.

Class tests

The LSE views the class tests as a useful metric but is seeking submissions on key ways in which these may be updated. A key point here is the threshold which would trigger disclosure of a substantial transaction, which is currently 10% in any of the class tests – comparatively lower than the 25% for the Main Market. The LSE considers AIM companies should not be subject to a greater disclosure burden than their Main Market counterparts. The LSE is also seeking submission on whether the profits test remains relevant or should be removed, as well as whether tweaks to the gross capital test are required, particularly for investing companies.

Next steps

Responses to the discussion paper can be provided until 16 June 2025. The LSE will then review any responses and feedback provided. Proposed changes to the AIM Rulebooks will then be put forward for market consultation.

In the meantime, if you have any questions about the Discussion Paper, please feel free to get in touch with a member of our team.