Shaping the Future of AIM Insights from the London Stock Exchange Discussion Paper

The London Stock Exchange has published AIM Notice 59 in which it has announced a discussion paper titled "Shaping the Future of AIM" which seeks views on the continued development of AIM, including potential changes to the AIM Rules for Companies.

The AIM market operated and regulated by the London Stock Exchange (LSE) has long been a cornerstone for growth companies seeking to raise capital and expand their horizons. AIM continues to be a crucial part of LSE’s market offerings for both UK and international companies, and it is widely regarded as the most successful growth market globally, setting the standard for growth markets worldwide.

On 7 April 2025, the LSE published AIM Notice 59 in which it announced a discussion paper titled "Shaping the Future of AIM" (Discussion Paper - Shaping the Future of AIM) which seeks views on the continued development of AIM and proposes strategic enhancements, including potential changes to the AIM Rules for Companies (AIM Rules), to ensure its continued success.

Areas of development of the AIM Rules

• The discussion paper emphasizes the need to evolve the AIM Rules to address unnecessary friction and costs while maintaining key aspects that are vital for investor confidence. The LSE is keen to challenge the status quo and explore different approaches to refine the regulatory framework. The discussion paper invites market participants to share their feedback on the following key areas of development of the AIM Rules:
• AIM admission documents: The paper acknowledges the rising costs associated with producing an AIM admission document and notes that this can be a barrier to joining AIM. To address this challenge, the paper seeks views on the content of AIM admission documents, in particular on areas that are valued by investors and those which should be modified or eliminated to streamline the preparation of AIM admission documents. Additionally, the paper seeks views on the appropriateness of a simplified AIM admission document, the incorporation of certain documents by reference (such as the Articles of Association and the Historical Financial Information), and any further changes that could make the AIM admission document more efficient.
• Working capital statements: Under the AIM Rules, an applicant's AIM admission document must include a working capital statement. Working capital statements are crucial for demonstrating a company's ability to meet its financial obligations over the next 12 months following the admission. These statements provide investors with confidence in the company's financial stability, but the paper recognises that preparing these statements can be complex and costly. The paper notes the changes made by the Financial Conduct Authority  to the requirements for working capital statements for Main Market companies which mean companies seeking admission to the Main Market will no longer need to provide a working capital statement that positively affirms their working capital position for the 12 months following admission. The LSE recognises that AIM could replicate the Main Market regime, but the paper explores alternative approaches to reduce the cost and time burden of preparing working capital reports to support a working capital statement. One suggestion is to require a working capital statement similar to the AIM Designated Market (ADM) route, where directors confirm they have "no reason to believe" the working capital will be insufficient for 12 months post-admission. This approach could lower costs while providing adequate disclosure to investors. The paper also considers scenarios where a working capital statement might not be necessary, such as for:
  • companies with consecutive years of 'clean' audit reports prepared on a going concern basis;
  • investing companies with a minimum £6 million cash fundraise and disclosed investment strategy; and
  • research and development, mining, and oil and gas exploration companies with inherent funding requirements.

The LSE invites views on these alternative approaches, noting that investors should be able to assess the risk profile of companies without a working capital statement based on clear health warnings.

• Reverse takeovers: A reverse takeover involves an AIM company accruing a target which is larger than itself. Typically, this is used as a means for a target to obtain the AIM company’s listing via the acquisition and results in a fundamental change to the AIM company’s business. The paper highlights the need to ensure that reverse takeovers are conducted transparently and that investors are adequately informed about the transaction but notes that reverse takeovers can be complex and may involve significant costs and regulatory hurdles. Under the AIM Rules, a reverse takeover requires shareholder approval, and the combined group must apply for admission to AIM (which involves the production of an AIM admission document) and is treated as a new applicant. Given the costs associated with producing an AIM admission document, the LSE is seeking feedback on whether an AIM admission document is necessary in all circumstances and whether alternative forms of disclosure might be more appropriate. In the paper the LSE suggests that in certain situations, such as when a company acquires a larger company without a fundamental change in business, AIM companies could disclose information required by Schedule Four of the AIM Rules (which, amongst other things, includes matters such as a description of the assets, profits (or losses) attributable to those assets, details of the consideration and the effect of the transaction on the company) instead of producing a full AIM admission document. This approach aims to provide relevant information to investors while reducing costs for companies. The paper asks respondents if they agree with dispensing the AIM admission document in these circumstances and instead requiring Schedule Four disclosures. It also seeks views on any additional disclosures that might be appropriate (in addition to those set out in Schedule Four), the necessity of a shareholder vote on the acquisition of a larger company (when there is no fundamental change in business), and relevant thresholds or factors for determining a fundamental change in business.
• Accepted accounting standards: AIM companies currently have the flexibility to choose between International Accounting Standards (IAS) (for companies incorporated in the UK or an EEA country) or local accounting standards being either IAS, US Generally Accepted Accounting Principles (GAAP), Canadian GAAP, Australian International Financial Reporting Standards (as issued by the Australian Accounting Standards Board) or Japanese GAAP (for overseas companies). This flexibility allows companies to select the accounting framework that best suits their business needs and reporting requirements, but the LSE believes there is an opportunity to introduce greater flexibility to recognise a wider set of local accounting standards than those permitted under AIM Rules. The LSE is seeking feedback on whether allowing all local accounting standards, including those not currently prescribed in the AIM Rules, is appropriate. Alternatively, respondents are asked to consider if the list of permitted accounting standards should be based on equivalency to IAS. If the latter approach is preferred, the paper requests details on acceptable local accounting standards and opinions on whether comparing local standards to IAS would create costs that outweigh the benefits of flexibility.
• Admission requirements for second lines of securities: The paper notes the requirement for an AIM company seeking to admit a second line of securities to produce an AIM admission document and highlights that the information regarding the business of the AIM company will already be in the market by virtue of the company’s ongoing compliance with its disclosure obligations under the AIM Rules for example and, where the second line of security is equity, information regarding share rights will be provided to the company’s shareholders pursuant to the company's statutory obligations. The paper acknowledges the cost and administrative burden of complying with this requirement and the LSE is seeking views on whether respondents agree that an AIM admission document should not be required for the admission of second lines of security to trading on AIM and asks whether there are any further regulatory changes that the LSE should consider to make it easier for AIM companies to admit to trading on AIM second lines of securities.
• ADM route: The ADM route is designed to simplify the admission process for companies already listed on other recognized markets by not requiring the publication of an AIM admission document. This approach aims to reduce duplication and streamline the transition to AIM, making it more efficient and cost-effective, however, the LSE acknowledges that the nomad's work for such companies is often equivalent to that undertaken for a standard AIM admission. The LSE is asking for details of the ways in which the work of a nomad for an admission via the ADM route could be streamlined, and further ways in which the ADM route could be developed.
• Dual-class share structures: Dual-class share structures involve issuing different classes of shares with varying voting rights. This allows company founders and management to retain control while raising capital from public investors and the LSE believes that the admission to AIM of dual-class shares is appropriate given the need for many founders of growth companies to retain control of a company. Given the dual-class share structure is permitted on the Main Market, the LSE is seeking feedback on whether AIM should permit dual-class share structures and, if so, under what conditions.
• Related party transactions: Related party transactions involve dealings between a company and its related parties, such as directors, major shareholders, or their family members. Proper regulation and disclosure of related party transactions are crucial to ensure transparency and protect minority shareholders. The paper notes that AIM Rule 13 requires companies to issue a notification for transactions with related parties which exceed 5% in the class tests. However, the LSE believes that these protections may be unnecessary in certain situations where other safeguards exist, such as employee share schemes or long-term incentive schemes which are approved by shareholders or where the granting of an indemnity to a director is permitted under the Companies Act 2006. The LSE is seeking feedback on whether approved employee share schemes or long-term incentive schemes and the granting of a permitted indemnity to a director should be excluded from AIM Rule 13 and invites views on potential other similar circumstances where existing shareholder safeguards are already in place that exemptions to AIM Rule 13 could be introduced. The LSE is also seeking feedback on whether director's remuneration should be excluded from AIM Rule 13 and instead managed through corporate governance arrangements. The LSE also seeks opinions on whether non-executive directors should build equity ownership and if companies can pay them in equity. 
• Application of class tests: Class tests are used to assess the size and significance of transactions undertaken by AIM companies and help ensure that significant transactions are appropriately disclosed and that shareholders are adequately informed. The LSE is seeking views on how to refine the class test framework and believes there is an opportunity to update the class tests in relation to:
  • substantial transaction disclosure threshold - for the Main Market, this threshold is 25% and the LSE considers that growth companies should not be subject to a greater disclosure burden than is required for Main Market companies. The LSE is seeking views as to whether a 25% threshold (rather than the current 10% threshold) would be appropriate for AIM companies;
  • profits test – this test, which is one of the metrics used to classify the size of a transaction, often produces negative results or requires adjustments. The LSE questions its relevance and seeks views on whether it should be retained. If retained, "extraordinary items" will be updated to "exceptional items" to align with current accounting standards; and 
  • gross capital test – this test can exceed 100% when an investing company acquires a minority stake, necessitating derogations. The LSE proposes a pro-rated gross capital calculation to reflect the acquisition of a minority stake and seeks feedback on this approach. 

The LSE is also seeking suggestions for other changes to the class tests that could improve their effectiveness and reduce burdens on companies. 

Concluding remarks

The implementation of the new UK Listing Rules in July 2024 has resulted in the AIM Rules being out of step and comparatively more burdensome in certain key areas, prompting many to question why any company contemplating an IPO would choose AIM rather than the Main Market (assuming they can achieve the minimum £30 million market cap required for the Main Market). It is therefore encouraging to note that urgently needed revisions to the AIM Rules are now under consideration.

By focusing on what changes could be made to the AIM Rules to reduce the costs of admission and the ongoing regulatory burden for issuers, whilst ensuring that investors still have adequate protections will be a difficult balance to strike, but a fundamentally important exercise if LSE is to ensure that AIM remains a dynamic and attractive platform for growth companies and investors alike.

The LSE has asked for responses to the discussion paper to be sent to AIM Regulation at [email protected] on or before 16 June 2025, after which it will consider the feedback received. Any proposed changes to the AIM Rules will be put forward for market consultation.