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Recent years have seen a steady stream of companies moving from the Official List to AIM. Why are they doing it and what steps do they need to follow?

There are several advantages in making the move:

• Many smaller companies receive little or no institutional investor interest. A move to AIM – where they become a bigger fish in the pond - can reinvigorate a company’s relationship with the institutional market.
• Acquisitions and disposals, related party transactions and secondary fundraisings are all easier to undertake on AIM because an AIM company can do “more” before it needs shareholder consent.
• AIM is less prescriptive than the Official List. For example, AIM companies typically adopt the QCA corporate governance guidelines that are less exacting than the Combined Code.
• AIM securities are ‘unquoted’ for tax purposes so new shares can be issued under the Enterprise Investment Scheme and to Venture Capital Trusts. In addition existing shareholders may be able to shelter AIM securities from inheritance tax if they are ‘business property’. Generally, capital gains treatment on disposing of AIM securities is more advantageous than on disposing of Official List securities.

So long as the company has been on the Official List for at least 18 months the move is relatively straightforward. The first step is to appoint a nomad and a broker. There is no need to produce a circular setting out the reasons for the move or an admission document. Crucially shareholder approval to the change in status is not required.

But there are certain regulatory obligations on a company moving to AIM. The key one is that an applicant must provide certain prescribed information to the Stock Exchange at least 20 business days before the expected date of admission to AIM. This includes:

• Confirmation that it has adhered to any legal and regulatory requirements involved in trading on the Official List or details of where there has been any breach
• A Website address where any documents or announcements (including annual accounts) which it has made public over the last two years are available
• Details of its strategy following admission
• Description of any significant change in its financial or trading position since its last audited accounts
• A statement that its directors have no reason to believe that the working capital available will be insufficient for at least 12 months following admission
• Information equivalent to that required for an admission document which is not currently public

Then at least three business days before the expected date of admission an applicant must submit an AIM application form together with the nomad’s declaration. Admission becomes effective when the Stock Exchange issues a dealing notice to that effect.

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