3 - Alternatives to the MAIN Market

Question 1

What are the main advantages of the AIM admission process?

Answer 1

• Faster / less expensive because there are lower admission fees
• Rules are less restrictive because MM has to comply with listing / prospectus / DT rules
• AIM companies do not have to comply with all continuing obligations in the LRs/ DTRs
• AIM - no minimum market capitalisation requirement
• MM needs 25% in public hands
• AIM tax advantages for investors is unquoted
• AIM - can avoid the prospectus requriement because it is not a regulated market

Question 2

What are the main disadvantages of the Main Market?

Answer 2

• Requires corporate governance code to comply with
• MM continuing obligations (LR) are more onerous compared to the AIM rules
• MM requires a 3 year trading history - LR 6.1.3 (tab) - no trading record is required for AIM companies
• MM needs appointment of a sponsor under Chapter 8 LR for the purposes of the admission process and then in relation to certain transactions after listing - LR 8.2

Question 3

What are the disadvantages of the AIM market?

Answer 3

• Riskier

- Might have more cautious investors

Question 4

What are the advantages of the MM over aim re liquidity?

Answer 4

• MM is more liquid
• Wider pool of investors
• Access to capital through a greater demand for shares, and an easier exit route

Question 5

What are the advantages of MM re profile?

Answer 5

• MM gives a greater profile
• AIM companies generally have lower public profile
• MM = potential to become household names, and analysts and financial journalists are more interested in companies on the MM - but can also be a disadvantage for MM in difficult times

Question 6

What are the rules of AIM re the production documents and compliance of rules?

Answer 6

• Have to comply with continuing obligations of AIM rules, but usually are less onerous
• Will need to produce AIM admission documents
• Does not require pre-vetting by FCA / LSE is not prospectus

Question 7

Explain the disadvantage of AIM re the requirements of Nominated Advisers and Nominated brokers?

Answer 7

• More onerous requirements regarding the nominated advisers and nominated brokers
• Compared to the gentler LR for Sponsor
• For AIM, Nomad is required to confirm to LSE that the directors understand their obligations and responsibilities
• For AIM - Nominated broker acts as market maker
• AIM Rule 7 - and lock in requirement for new businesses
  • Related parties and applicable employees have to dispose of any interests of its AIM securities for a period of 12 months after admission
  • Ask about this

Question 8

What are other factors to consider when tossing up between AIM and MAIN?

Answer 8

• Location of competitors, e.g. mainstream food and drinks companies would be on the AIM

Question 9

What are the characteristics of a standard listing?

Answer 9

• Less regulation
• Cheaper
• Avoid cost of sponsor
• There are fewer continuing obligations

Question 10

What are the characteristics of a premium listing?

Answer 10

• Best price
• Liquidity
• Profile
• In FTSE indices, institutional investors have to invest, so less risky

Question 11

What will be used if the prospectus test fails?

Answer 11

• AIM admission document is used rather than a prospectus
• Test 1 - placing - fails
• Test 2 - not a regulated market as it is AIM - fails
• No prospectus is needed
• Under s 85 FSMA, AR 3

Question 12

What are the contents requirements for an AIM admission document and where are they found?

TAB THESE IN ONE COLOUR

Answer 12

• Specific content requirement
• AIM Rule 3: Schedule 2
• Annexes 1/2/3 - PR Appendix 3
• General content requirement
• Schedule 2 paragraph (k)
• Schedule 2 paragraph (c) to (j)

Question 13

Who decides whether a company is suitable applicant for admission to AIM?

Answer 13

• NOMAD
• Risk factors required in AIM admission document
• Appendix 3 Annex 1 Para 4 of PR

Question 14

What will be contained in the AIM admission document?

Answer 14

• Contain shareholdings of significant shareholders post admission
• 3%+ is very large - have to make constant disclosures
• Want 25% for negative control
• Definition of control for a listed company is 30% - mandatory offer

Question 15

Who does the responsibility for the AIM admission document lie with?

Answer 15

• The client
• Company and directors
• Need a paragraph from Schedule 2 paragraph (e) that states “AIM is a market designed primarily for….”

Question 16

What are the 3 key characteristics for AIM?

Answer 16

• Regulated by the LSE
• Is a recognised investment exchange
• Prescribed market

Question 17

What is the AIM NOT?

Answer 17

• Regulated market

- For listed companies that are on the MM?

Question 18

Which documents need to be prepared for a company seeking admission to AIM?

Answer 18

1. admission document or prospectus
2. Pre-admission announcement
3. Application form

Question 19

Who issues the dealing notice?

Answer 19

• Issued by the LSE

Question 20

Who is able to invest in AIM?

Answer 20

• Major institutions
• Sophisticated investors
• Specialist funds
• Retail investors

Question 21

What are the potential tax benefits of investing in AIM companies?

Answer 21

• CGT relief
• IHT relief
• Entrepreneurs relief
• There are generally no tax free dividends received from AIM companies

Question 22

What should the AIM company shareholder release whenever a document is sent by an AIM company to its shareholders?

Answer 22

• AIM company should release the AIM Rule 20 announcement (tab this up)
• To the market via RIS
• At the same time