On 30 March 2018 new versions of the AIM Rules for Companies (AIM Rules) and AIM Rules for Nominated Advisers (Nomad Rules) came into force. The following changes are included:
- Schedule Three to the AIM Rules for Nominated Advisers will contain a non-exhaustive list of matters that could affect an applicant’s appropriateness for AIM (AIM Rule 9).
- AIM companies must provide details on their website of the ‘recognised corporate governance code’ that the company has decided to apply. They will also have to state how the company complies with that code and where it departs from it including an explanation of the reasons for doing so. The information should be reviewed annually and the date it was last reviewed should be included (AIM Rule 26).
Factors impacting applicant appropriateness
Where the circumstances of the applicant could affect its appropriateness for AIM, under Rule 9 Nomads will now be expected to have early discussions with LSE ahead of the application submission. They will need to consider a non-exhaustive list of factors which, among others, includes:
- questions as to good character, skills, experience or previous history of a director, key manager or major shareholder;
- if the rationale for seeking admission is unclear;
- formal criticism of the applicant or any of its directors by a regulator, government or other bodies;
- if the applicant has a vague or ill-defined business model or its business operations.
These factors either on their own or when combined with others may impact an applicant’s admission to AIM.
The implications of Rule 26
Changes to AIM Rule 26 are likely to represent a significant shift for AIM companies. Until now, such disclosure has been voluntary and whilst there is purposefully no prescribed list of recognised codes, AIM companies are likely to adopt the recently released QCA Corporate Governance Code or the UK Corporate Governance Code.
Adopting a recognised corporate governance code could have significant implications in relation to the approach to executive remuneration, including the design of remuneration policies and remuneration disclosures. For example, AIM companies’ remuneration policies must be consistent with the principles set out in the chosen corporate governance code including (but not limited to) quantum, performance conditions and external factors such as wider employee pay. Required disclosures in the Directors’ Remuneration Report for AIM companies are likely to expand to include, for example:
- a detailed overview of the remuneration policy;
- details of remuneration outcomes during the year;
- details of historic pay versus performance.
There’s also an expectation that both the remuneration policy and the remuneration report will be discussed with shareholders at an early stage, and preferably be subject to a shareholder vote.
The changes to Rule 9 came into effect on 30 March 2018 and the implementation of the new corporate governance requirements in Rule 26 will apply from 28 September 2018.
What directors should consider
Companies quoted on AIM, or even those considering to be admitted to AIM, should review the list of matters and reflect on the potential impact they may have.
The change to AIM Rule 26 should be perceived as an opportunity for directors to redraft, reconsider and improve their financial position and prospects procedures memorandum, and general corporate governance policies.