The New AIM Rules: Key Changes & Practical Considerations For AIM Company Boards

Following a comprehensive consultation earlier this year the AIM Rules have been adapted and further developed, helping to ensure that they continue to meet the needs of those who use them. Essentially, the new AIM Rules “… are designed to reinforce the market’s focus on growth for companies, founders and investors”. It is worth noting that following the June consultation draft proposal, many of the proposals appear to have been retained in full, while others have been materially refined, clarified, strengthened or expanded.

In summary, the AIM rules have made changes both to when companies are joining AIM and when they are already on AIM. When joining AIM, areas covered include simplifying the admissions document, allowing differing accounting standards to be used, and providing a genuine fast track process for international public companies that are joining AIM from other markets. For existing AIM companies, the AIM Rules have introduced voluntary disclosure provisions, removed the ‘comply-or-explain’ model, and have been enhanced to enable fundraisings and facilitate acquisitions.

In this article we have set out several of the key changes which existing AIM companies will find of interest, and at the end, a summary of those changes which prospective applicants may find useful.

For Company Secretaries and Boards of existing AIM companies:

1. One of the biggest changes from current AIM practice remains the Rule 26 Governance disclosures and the move away from a formal "comply or explain" model, thereby allowing a more flexible approach. The revised framework places greater emphasis on disclosure against key governance themes such as Board composition, risk management and internal controls, and stakeholder engagement. If a company is already compliant with, for example, the QCA Corporate Governance Code, the practical impact is likely to be limited. Whilst the changes give companies greater flexibility in how governance information is presented, the underlying expectation remains that governance arrangements are robust, transparent and capable of withstanding shareholder scrutiny.
   

   Actions / implications to consider:

   • Review the existing Rule 26 webpage against the revised Rule 26 requirements
   • Identify any prescribed disclosures that are no longer required
   • Decide whether to retain some of those disclosures voluntarily because they remain useful to investors
   • Refresh governance narratives and signposting where appropriate
2. The revised AIM Rules introduce specific guidance on Director Remuneration under Rule 13. Remuneration falling outside a director's existing contractual arrangements or shareholder-approved remuneration framework is treated as "non-standard remuneration" and therefore constitutes a related party transaction. Where the Nomad is satisfied that the arrangement contains appropriate commercial protections and the relevant terms are disclosed, a fair and reasonable opinion is not required. However, where there is uncertainty as to whether sufficient protections exist, AIM companies are expected to consider seeking shareholder approval. The changes are therefore likely to increase scrutiny of bespoke or exceptional director remuneration arrangements and reinforce the need for early engagement with the Company's Nomad.
   

   Actions / implications to consider:

   • Review proposed remuneration arrangements to identify any elements that fall outside directors' existing contractual arrangements or previously shareholder-approved remuneration frameworks, as these are likely to constitute non-standard remuneration under Rule 13
   • Engage with the Company's Nomad at an early stage when considering bespoke incentive awards, recruitment packages, retention arrangements or severance terms to determine whether the arrangement contains sufficient commercial protections and the applicable Rule 13 requirements
3. The most practical new compliance requirement for Boards is likely to be Rule 11, Ongoing Developments (formerly ‘General disclosure of price sensitive information’) which formalises expectations around Nomad engagement regarding market-sensitive developments. Historically, Rule 11 focused on the disclosure of price-sensitive information. The revised framework places greater emphasis on the processes by which AIM companies monitor their business, identify potentially significant developments and engage with their Nomad regarding market disclosure considerations. An interesting change to note is where the guidance expressly states that if a Nomad believes information would have market impact, but the company disagrees and does not disclose, the LSE must nevertheless be informed.
   

   Actions / implications to consider:

   The Board should satisfy itself that the Company maintains
   • effective escalation procedures
   • appropriate disclosure controls
   • clear reporting lines for potentially market-sensitive developments
   • robust UK MAR compliance procedures
4. Throughout the Rules we see a strengthening of the Nomad role and an increased reliance on Nomad judgement. Whilst Rule 11 formally embeds the Nomad in disclosure decision-making, Rule 31, AIM company and Directors’ responsibility for compliance, increases companies’ obligations to provide information to their Nomad, Rules 1 to 5 retain the Nomad as a key part of the admission process.
   

   Actions / implications to consider:

   The Directors should continue to ensure
   • regular engagement with the Nomad
   • potentially significant developments are escalated to the Nomad promptly
   • that the Nomad is consulted at an early stage regarding material corporate actions and disclosure considerations

5. The largest transactional change remains the increase of the substantial transaction threshold from 10% to 25% and removal of the 100% reverse takeover class-test trigger, as seen in Rule 12, Substantial transactions and Rule 14, Reverse takeovers. Aspects of the class test regime have also been simplified. The revised rules significantly alter the treatment of acquisitions and larger corporate transactions.
   

   Actions / implications to consider:

   The changes should provide companies with greater strategic flexibility when considering acquisitions and disposals. Transactions which may previously have been subject to reverse takeover treatment may now be capable of proceeding under a less onerous regulatory framework, resulting in reduced execution risk, cost and timetable implications.

6. Rule 22, Provision and disclosure of information has been significantly enhanced to provide greater clarity regarding the LSE's ability to request information from AIM companies and applicants. Whilst the LSE has always had the power to require information, the revised rule now expressly requires AIM companies to provide requested information without delay and confirms that all information supplied must be complete, accurate and not misleading. The rule also places greater emphasis on communication with the LSE through the company's Nomad and introduces an express obligation to notify the LSE where a company considers there may be legal or regulatory restrictions on disclosure.
   

   Actions / implications to consider:

   AIM companies should ensure that procedures exist for responding to LSE requests promptly and that information provided is appropriately verified. Companies should also consult their Nomad early on where disclosure restrictions or regulatory issues may arise.

7. A governance enhancement seen under Voluntary Information is the introduction of Proxy Adviser Engagement. AIM companies may now voluntarily disclose details of their engagement with Proxy Advisers, with the AIM Rules providing useful suggestions as to the details that they may wish to consider including. Hopefully many Boards will welcome this as it allows them to demonstrate additional proactivity in key stakeholder engagement and allow greater transparency for shareholders by enabling them to understand the context behind certain Board decisions. Also under this section is Third Party Commentary which expressly permits companies to publish responses to third-party commentary, criticism or speculation should they choose to.

For prospective applicants, the most notable changes are:

• Schedule Two: removal of the traditional working capital statement requirement and revised admission document disclosures. It is important to remember, that although the working capital statement requirement has been removed, applicants must still provide investors with comprehensive information regarding the company's financial resources and funding strategy.
• Rule 4 /Rule 4 Guidance Notes: Applicants may incorporate certain publicly available information by reference rather than reproducing it in full within the admission document, hopefully resulting in shorter, more streamlined admission documents and a reduction in preparation costs.
• Rule 19 / Rule 19 Guidance Notes: UK-incorporated companies may use UK GAAP (FRS 102) rather than IFRS.
• Rules 2 and 3: introduction of new admission routes for Express Applicants and Main Market applicants with the intention of providing a faster and potentially less burdensome route to AIM for certain established issuers and overseas companies.
• Part Two Guidance Notes: Companies may now admit shares with enhanced voting rights, subject to specific safeguards and restrictions. This will be attractive to founder-led growth companies wishing to retain strategic control following admission.
• Rule 26: Removal of the formal requirement to adopt a recognised governance code on a "comply or explain" basis. Applicants must instead disclose information across prescribed governance categories.