On 15 October 2015, the London Stock Exchange ("LSE") released a consultation on the following proposed changes to the AIM Rules for Companies ("AIM Rules") (see AIM Notice 42):
1. Admission criteria for investing companies (Rule 8 of the AIM Rules ("Rule 8"))
A company seeking to be admitted as an investing company will have to raise £6m in cash from an equity fundraise, as opposed to the current requirement to raise £3m.
2. Fundamental disposal/change of business (Rules 14 ("Rule 14") and 15 ("Rule 15") of the AIM Rules)
Under the current Rule 15, a company divesting itself of all or substantially all of its trading business, activities or assets (requiring shareholder approval of the disposal and the company's new investing policy) ("Fundamental Disposal") has 12 months to either implement its investing policy or make an acquisition or acquisitions constituting a reverse takeover ("reverse") under Rule 14.
The LSE is proposing that, following a Fundamental Disposal, an AIM company will no longer be automatically deemed to be an investing company under Rule 15.
Instead, such a company will be regarded as an "AIM Rule 15 cash shell" and have 6 months to reverse or, at the end of that period, be suspended.
For the purpose of an AIM Rule 15 cash shell only, a qualifying reverse will also occur where the company becomes an investing company by raising sufficient funds in accordance with the proposed revision to Rule 8 with the provisions of Rule 14 also applying, including the need to publish an admission document.
The LSE also proposes to revise the Note for Investing Companies ("Note") so that, where the LSE would expect the requirement to raise £6m under Rule 8 to be usually satisfied by an independent fundraising, the Note will state that cash funds resulting from a Fundamental Disposal will also usually be considered to be independent for such purposes.
AIM investing companies existing or admitted prior to the proposed new rules becoming effective, will not be treated as AIM Rule 15 cash shells by virtue of the proposals and will still fall under the ambit of the current Rule 15 (AIM Rules, May 2014).
Responses to the consultation should be sent to the LSE on or before 12 November 2015.