The London Stock Exchange’s (LSE) discussion paper is intended to generate debate and ideas about the future development and evolution of AIM in order to maintain its status as a leading growth market. It contains suggestions for areas where potentially deregulatory changes could be made to the AIM rules. Some of these flow from the substantial changes made by the Financial Conduct Authority (FCA) to the UK Listing Rules in July 2024, which have led to a narrowing of the regulatory differentiation between AIM and the LSE’s main market (and, in certain areas, resulted in the Listing Rules becoming less onerous than the AIM rules). However, the paper is broader in scope than this, and a wide range of other changes are also under consideration.
Market framework
The LSE requests feedback on the overall market framework and the positioning of AIM and its brand generally, and whether there are features of other funding platforms or growth markets it should adopt. It also seeks views on the effectiveness of recent UK government initiatives to encourage investment in equities by pension funds, the importance of fiscal incentives such as EIS, VCT, ISA inclusion and Business Relief for investors in qualifying AIM companies, and whether there are additional initiatives it should consider to enhance liquidity in AIM-traded securities.
Regulatory design of AIM
The LSE seeks views on whether aspects of the admission process and ongoing rules could be streamlined to reduce unnecessary duplication, friction and costs. These include the costs for different elements of the admission process and post-admission, the reports produced for the admission process and the role of the nominated adviser more generally. In relation to ongoing obligations, the LSE asks whether AIM Rule 11 (the general disclosure obligation) should be removed, on the basis that it duplicates UK Market Abuse Regulation obligations. It also welcomes views on whether the current choice of corporate governance codes meets the needs of all AIM companies, or if AIM should also offer a simplified list of corporate governance requirements.
Development of the AIM rules
With a view to reducing the costs and compliance burden for companies, the LSE seeks feedback on the following specific aspects of the AIM rules.
- AIM admission documents. The LSE asks whether some admission document content is not required by investors, or whether companies should have the option instead to publish a simplified document (accompanied by clear risk warnings), and/or to incorporate content by reference.
- Working capital statements. The LSE is considering allowing a company to publish a qualified working capital statement (consistent with the FCA’s recent changes to the Listing Rules), or a ‘no reason to believe’-type statement, in line with the current requirement for companies seeking admission via the AIM Designated Market route. However, it is open to going further than this, including not requiring a working capital statement at all for certain companies (for example, where a company’s accounts have three years of ‘clean’ audit reports (with no emphasis of matter) and were prepared on a going concern basis).
- Reverse takeovers. The LSE suggests that, for certain reverse takeovers, the obligation on a company to publish a new admission document and/or obtain a shareholder vote could be replaced with a requirement to publish a more detailed announcement (for example, an acquisition where there is no fundamental change of business).
- Accepted accounting standards. The LSE asks whether other local accounting standards should be allowed for AIM companies, in addition to IFRS and the limited range of other GAAPs currently permitted by the rules.
- Admission requirements for second lines of securities. The LSE considers that the disclosures required from companies seeking to admit a second class of securities to AIM could be focused on the rights attached to the new class, rather than requiring publication of a full admission document.
- AIM Designated Market route. The LSE seeks views on whether the fast-track process for companies already admitted to certain other markets could be streamlined further by reducing the work required of nominated advisers.
- Dual class share structures. The LSE considers that it should permit AIM companies to have dual class share structures, including weighted voting rights, in line with the FCA’s recent changes to the UK Listing Rules.
- Related party transactions (RPTs). Where there are other safeguards for an RPT, such as a shareholder vote, the LSE suggests the current rules on RPTs could be relaxed. It also questions whether the RPT rules should be disapplied for certain aspects of director remuneration, for example, where a company is seeking to attract skilled non-executive directors by offering them payment in equity.
- Application of class tests to transactions. Following the FCA’s recent changes to the UK Listing Rules, the LSE seeks views on whether it should raise the class test threshold for a substantial transaction (where enhanced disclosure obligations apply) from the current 10% to 25%. The LSE is also considering removing the profits test from the class tests (other than for RPTs). Additionally, it welcomes views on whether it should introduce a pro-rated gross capital calculation where an AIM company is only acquiring a minority stake.
These changes, if taken forward, could lead to a significant degree of deregulation for AIM companies. While this is unlikely to satisfy all market participants, some change is clearly desirable (and inevitable) if AIM is to continue to provide growth companies with a real alternative to the LSE’s main market. However, the proposals are still at the discussion stage, and there is now an opportunity to provide the LSE with feedback on its specific proposals, as well as broader feedback on the market and its rules. The LSE requests responses by 16 June 2025, after which it will consider the feedback and engage with the market.
Client Alert 2025-105
