News that any AIM company secretary should be firmly aware of is the recent release by the London Stock Exchange (LSE) of a notice, to Nominated Advisers and all AIM companies, that it is consulting on proposed alterations to the AIM Rules for Companies. Such changes will apply to both investing companies and AIM companies undertaking a fundamental change of business, with the AIM Note for Investing Companies also being modified as a result.

The proposed amendments to the AIM Rules for Companies include the admission criteria for investing companies. The current rules dictate that applicants seeking admission as an investing company must have equity fundraising to raise £3 million in cash on, or immediately before admission. This fundraising requirement has been in place since 2005, and set at a level that necessitated external, often institutional participation, thereby ensuring more scrutiny of the investment policy, the applicant directors’ experience and the company’s valuation at admission.

However, the Exchange expressed its view that “given the passage of time”, it was now the right time for that funding threshold to be increased to £6 million. The present rules also deem an AIM company that becomes a cash shell after a significant disposal to be an investing company. Shareholder approval for the disposal and its proposed investing policy must be obtained by the AIM company, and it then has 12 months to either implement the investing policy or make an acquisition or acquisitions that constitute a reverse takeover according to rule 14.

An AIM company’s failure to take either action within the prescribed period results in the suspension of trading in its AIM securities. This rule enables AIM companies, where appropriate, to continue accessing the market’s benefits after a fundamental disposal. However, at present, following such a disposal some companies are left on the market with cash balances that are insufficient to enable meaningful investment(s) or facilitate the functioning of a fair and orderly market in the securities of the company.

This is why the Exchange has instead proposed that AIM companies that become a cash shell after a significant disposal will no longer be automatically classified as an investing company, instead being regarded as an AIM Rule 15 cash shell. Within six months of acquiring this status, the company will be required to undertake an acquisition or acquisitions constituting a reverse takeover under rule 14. Should the AIM Rule 15 cash shell not have completed such a reverse takeover within that six month period, trading in the AIM company’s securities would be suspended.

The Exchange added that where there was np appetite on the part of the AIM company to undertake a reverse takeover, “we would expect it to get shareholder approval to cancel its admission to AIM in accordance with rule 41, and consider how best to return any remaining funds to shareholders.”

With the consultation having closed on 12th November, there will doubtless be interest from many AIM company secretaries in its results, which the Exchange said would be confirmed “as soon as reasonably practical following the end of the consultation period.”