Transferring From AIM To Main Market – The Company Secretary’s Role In Moving Up

Transitioning from AIM to Main Market can be one of the key milestones for any organisation. It signals maturity and growth and increases an organisation’s visibility within the financial and investor landscape. With over 200 household names such as fashion retailer ASOS plc and online food delivery marketplace Just Eat plc making the move in the past 10 years, the Main Market offers several benefits for companies looking to enhance their profile and increase investor confidence. As a Main Market participant, the company’s shares can be included in various indices which is likely to mean access to a wider investor base.

But, as company secretary, what are your main considerations and how can you support your Board with the transition?

Despite the advantages that the Main Market may bring, there are practical governance considerations that companies must consider for a smooth changeover - from changes in regulatory compliance, guidance, and company law to potentially appointing different advisers. There is no fast-track procedure for transfer – the AIM listing has to be cancelled and a whole new application process to the Main Market undertaken including a prospectus. The company secretary’s role in providing and verifying information for the prospectus should not be underestimated! Three years’ financial information will be required, and the Board may need to be strengthened in terms of independent directors. There will be a new regulator in town – the Financial Conduct Authority (“FCA”) in addition to the London Stock Exchange. Navigating the complexity of this transition is demanding and requires precise planning.

So let’s set out some of the key governance areas that should be considered on a transfer from AIM to the Main Market.

The QCA Corporate Governance Code vs. The UK Corporate Governance Code

The QCA Corporate Governance Code (QCA Code) and The UK Corporate Governance Code (UK Governance Code) are frameworks designed to promote good standards of corporate governance. The QCA Code is primarily tailored to suit the needs of small and mid-sized companies and is the corporate governance framework applied by the majority of AIM companies. Although the UK Governance Code can also accommodate AIM Companies and many do follow it in order to aspire to a high standard of governance, it applies to all companies with a premium listing on the Main Market and a governance statement is required by the Listing Rules to explain how the company has complied or explain where it has not and why. 

For a company looking to upscale from AIM to Main Market, the contrast in frameworks could possibly mean the adoption of a new code and its associated guidelines as part of the move. There will also be enhanced disclosure requirements in the company’s Annual Report.

Although companies can adopt both codes on a ‘comply or explain’ basis, the emphasis on how they justify their compliance varies. The QCA Code is based on a set of 10 principles, with a focus on underlying good corporate governance practices rather than specifying certain rules or provisions. However, the UK Governance Code follows a principles and provisions approach, combining overarching themes with definitive provisions that companies are expected to comply with or explain deviations. In addition, as a premium listed company, additional regulations require your auditor to review certain disclosures relating to provisions of the UK Governance Code including the statement regarding the directors’ responsibility for preparing the report and accounts, the statement regarding the Board’s robust assessment of the principal risks and the description of the company’s audit committee and how it discharges its responsibilities.

Overall, while both codes share common objectives, they are tailored to suit the needs of companies within their specified markets with some accepted overlap for those larger AIM companies are those aspiring to transfer to the Main Market.

Nomad vs. Sponsor

As an AIM company, you will already have appointed advisers to provide advice during the process of flotation and while you remain on AIM. One such adviser is the Nominated Adviser (“Nomad”). As well as assisting your company through the admission process and assessing your company’s appropriateness for seeking admission, the Nomad will continue to provide advice and guidance on all aspects of the AIM Rules, and they also have certain responsibilities to ensure that the Directors are aware of their continuing responsibilities and obligations on an ongoing basis.

A transfer to the Main Market will mean that a Nomad is no longer a requirement. If you transfer to the Premium Listing on the Main Market, in a similar vein to the Nomad, you must appoint and use a sponsor to guide you through the application and admission process and a sponsor must be appointed when a company undertakes certain transactions and on certain other occasions. As with the Nomad, the sponsor will provide advice and guidance on all aspects of the FCA’s legal requirements including the Listing Rules. The sponsor also has obligations to the FCA to provide certain assurances.

Aim Rules vs. Listing Rules

Whilst both AIM and Main Market companies follow distinct guidelines that govern their practices, the application of such rules varies significantly between the two markets.

Main Market companies are subject to the Listing Rules. These regulations extensively cover various aspects of corporate governance, financial reporting, and disclosure requirements. Alternatively, AIM companies are subject to AIM Rules, which are usually less prescriptive, but still require the disclosure of certain information.

Compliance with the Listing Rules is monitored closely, with procedures such as penalties, sanctions and even delisting in the most severe cases being enforced to ensure businesses adhere to their obligations. Although compliance with AIM Rules is overseen by the regulation team at the London Stock Exchange, enforcement techniques are usually less stringent.

It is important to bear in mind that many of the Main Market continuing obligations under the Listing Rules are more onerous than those of AIM. There are some important areas that require shareholder approval including certain categories of related party transactions. There are also additional requirements for premium listed companies that wish to make a substantial acquisition or disposal where the entity that is being acquired or disposed of constitutes more than 25% of an entity’s gross assets, profits or gross capital, or the consideration exceeds 25% of the entity’s market capitalisation. Shareholder approval will be required, and the circular must contain certain financial information on the company which can be burdensome especially for high growth companies.

There are some practical administrative differences to be aware of such as website disclosure obligations and the need for Main Market companies to upload documents to the National Storage Mechanism as well as publish an RNS announcement.

A move to the Main Market will require a company to make public a half-yearly financial report within three months of the end of period end as well as the full year report. This is not a specific requirement for AIM companies. We have included a useful table to highlight some of the differences.

Listing Rules Reform

The FCA has been consulting on a proposed change to a simplified listing regime with a single listing category (rather than premium and standard), with streamlined eligibility and ongoing requirements, aimed at encouraging a greater range of companies to list in the UK and a move to a disclosure-based regime which will mean fewer transactions require shareholder approval. These changes will start being introduced in the summer of 2024 and will mean there will be less of a gap between continuing obligations for AIM and Main Market companies.

Main Market vs AIM