On 20 March 2020, the London Stock Exchange (LSE) published an Inside AIM newsletter setting out temporary measures that would be implemented by the AIM Regulation team to support AIM companies and nominated advisers in addressing the challenges arising from the COVID-19 pandemic.
Until further notice, AIM Regulation will be applying discretion to the application of some of the AIM Rules for Companies (AIM Rules) and the AIM Rules for Nominated Advisers (Nomad Rules), as discussed below.
Disclosures to the market and temporary suspension of trading
AIM companies are required, pursuant to Rule 11 of the AIM Rules, (in addition to, and separately from, their disclosure obligations under the Market Abuse Regulation), to issue without delay a notification of any new developments which are not public knowledge, but which if made public would be likely to lead to a significant movement in the price of its securities. Changes to the company’s financial condition or its current or expected business performance would accordingly need to be disclosed to the market promptly.
Ongoing Responsibility 1 of the Nomad Rules requires nominated advisers to maintain regular contact with an AIM company for which it acts, so that it can ensure the nominated adviser is kept abreast of developments in respect of the business of the company and to ensure that the company and its directors continue to understand their obligations under the AIM Rules.
The LSE accordingly stresses that timely and accurate disclosure is a key requirement under the AIM Rules and all AIM companies should continue to meet their disclosure obligations without delay. Further, it is noted that it is important that nominated advisers have a sound understanding of how their AIM companies are planning and responding to the events as they unfold, so that companies are able to make disclosures in accordance with their obligations under the AIM Rules.
The LSE recognises that an AIM company may face material new developments as a consequence of the restrictions and challenges caused by COVID-19. Where an AIM company requires more time to make a fully compliant notification, the nominated adviser should approach AIM Regulation to discuss whether a temporary suspension is required. Such a request would need to fully explain why the suspension is appropriate and any decision to suspend would be at the discretion of AIM Regulation. If granted, such a temporary suspension would be for a limited period to enable the AIM company to make a fully compliant notification.
Suspended AIM companies – extension of time for restoration or cancellation
Rule 40 of the AIM Rules provides that the LSE may suspend the trading of AIM securities in certain circumstances (including the protection of investors) in order to ensure the maintenance of orderly markets. Once the circumstances that led to the suspension are resolved or clarified sufficiently for the company to be able to make a notification to the market, which should be made without delay, the company’s securities can be restored to trading.
Pursuant to AIM Rule 41, where an AIM company has been suspended for more than six months, the company’s securities will be cancelled. The LSE recognises that, given the logistical challenges during this period, further time might be required to resolve the reason for suspension and indicates that it will be using discretion to extend the period to 12 months for any AIM company that has been suspended between 30 September 2019 and 1 July 2020. Nominated advisers should contact AIM Regulation if any AIM company needs this additional time to resolve the suspension of its securities and request restoration to trading.
For the avoidance of doubt, any AIM company whose securities are suspended from trading must continue to comply with the AIM Rules for the duration of the suspension.
Nominated advisers’ engagement responsibilities
When taking on a new client, a nominated adviser is required, as part of its obligation to assess the appropriateness of a company and its securities for AIM under Admission Responsibility 1 of the Nomad Rules, to carry out a site visit to the AIM company’s material place(s) of operations and meet the directors and key managers. This requirement is now temporarily suspended where travel restrictions and social distancing measures make it difficult to meet these obligations, provided that a nominated adviser uses alternative measures that are reasonably available (such as virtual meetings). Once any applicable restrictions have been lifted, nominated advisers will be expected to carry out the site visit in order to fulfil their obligations under the AIM Rules.
It is recognised that in the current circumstances, nominated advisers are likely to be carrying out telephone or virtual meetings with directors instead of physical meetings for the purposes of providing directors’ AIM Rules education, both pre-admission and on an ongoing basis.
Publication of annual accounts
On 26 March 2020 the LSE published a further Inside AIM newsletter, setting out temporary changes relating to an AIM company’s obligation to publish annual audited accounts in accordance with the AIM Rules.
Under AIM Rule 19, an AIM company has six months after the end of its financial year to publish its annual audited accounts. This reporting requirement is consistent with the legal filing deadline for UK incorporated public companies under the Companies Act 2006.
Noting the joint initiative of BEIS and Companies House to allow UK companies to apply to Companies House for a three month extension of the legal filing deadline, as from 26 March 2020, AIM companies are also able to apply to AIM Regulation for a three month extension to the reporting deadline for the publication of their annual audited accounts pursuant to AIM Rule 19.
The extension is available for AIM companies with financial year ends between 30 September 2019 to 30 June 2020.
The request for extension must be made to AIM Regulation by the nominated adviser, prior to the AIM company’s current AIM Rules reporting deadline.
Continuing review of AIM Rules
AIM Regulation will continue to keep the situation under review, including the potential impact on financial reporting and the requirements for reporting of half yearly reports under AIM Rule 18, and will provide further guidance as necessary.