The London Stock Exchange’s Discussion Paper on the Future of AIM
On 7 April 2025, the London Stock Exchange (LSE) published a “Discussion Paper: Shaping the Future of AIM.” The paper looks at the future of the Alternative Investment Market (AIM) and its role as a “Crown Jewel” of London’s capital markets, seeking to address potential concerns, as well as the need to seek increased liquidity and market growth.
The LSE has stated that it is committed to ensuring that companies can start, grow, scale and stay in the United Kingdom by accessing capital and liquidity throughout their growth journey. AIM is a key component of this market offering and remains, so far as the LSE is concerned, “the most successful growth market in the world, seen by many as the benchmark for growth markets globally”. The overarching goal of the paper is to improve AIM by increasing liquidity and capital flows and ensuring an attractive and competitive regulatory framework. Section 2 of the discussion paper sets out various questions and seeks feedback on the function and framework of AIM while section 3 of the discussion paper proposes specific changes to the AIM Rules which aim to simplify the listing procedure (including the AIM admission document, working capital and accounting requirements) and the continuing obligations (including as regards related party and other significant transactions) applicable to AIM companies.
The proposals should be seen in the context of a wider discussion on the development of AIM and the UK capital markets more broadly, and follows on from the overhaul of the UK Listing Rules last year (see our previous Alert). Private companies looking to list on AIM and private capital investors seeking to exit via a public offering should all welcome such proposals.
Challenges Confronting London’s AIM
Mirroring the rest of the UK equity capital markets (albeit to a lesser extent),1 AIM has been under increasing pressure over the last few years. This has been due to a number of factors including companies opting for alternative markets on the basis of perceived better growth opportunities and less stringent regulatory constraints. Whilst the AIM rules have remained broadly unchanged, the LSE has recognised that market practice has continued to evolve for companies, investors and intermediaries, resulting in increased due diligence and regulatory requirements (as compared to other markets), a higher administrative burden for issuers and an increasing overall cost of being admitted to AIM. This has been further compounded by declining capital and liquidity available to issuers. At its high-water mark, in 2007, 1,700 companies were listed on AIM. By January 2025, this figure stood at 680.
AIM has also faced increased external competition from other markets (including US markets), particularly for technology and growth-focused companies. The combination of deeper capital pools and perceived higher valuations in the United States have persuaded more companies to list in the US rather than on AIM.
Furthermore, many companies, particularly smaller ones, perceive the corporate governance requirements and the costs associated with being listed on AIM as excessive. Data from the British Business Bank suggests it costs at least £500,000 to list on AIM and over £100,000 annually to maintain the listing. This financial and administrative burden can deter potential initial public offerings (IPOs), especially when private equity funding is available, apparently without such disadvantages. Some companies have specifically cited the regulatory burden and ongoing administrative costs as reasons for delisting.
Specific Proposals in Respect of the AIM Rules
In order to address these concerns, and to increase capital and liquidity as well as to streamline the AIM regulatory framework, the LSE has set out the proposals which are summarised in the table below, in each case, along with purported rationale.
Conclusion and Next Steps
In light of the July 2024 changes to the UK Listing Rules, the LSE sees these proposals regarding AIM as a natural and necessary next step in the evolution of AIM and UK capital markets. Whilst changes are needed to improve capital access and liquidity (as noted by the LSE), updating the regulatory requirements so they are in step with the Main Market is also of key importance to companies and private capital investors. The LSE is seeking feedback on the proposals by 16 June 2025, following which, the LSE will consider the feedback and any proposed changes to the AIM Rules will be subject to market consultation in due course.
The LSE’s Proposals in Respect of the AIM Rules
|
Area of Concern |
Proposal |
Rationale |
|
AIM admission document |
First proposal involved offering an alternative simplified admission document with fewer repeated disclosures, while indicating a high-risk label for investors. This would streamline the process and accommodate for high-risk appetite. The alternative document would allow incorporating public information by reference instead of replicating it in the admission document. |
The initiative is designed to reduce the cost of producing admission documents or replicating public information. |
|
Working capital statement |
The LSE has proposed a number of options with regard to working capital statements: – Replicate the Financial Conduct Authority’s (FCA) regime for the Main Market – companies applying to AIM will not need a “clean working capital statement”. – An alternative proposal is for directors to confirm their belief that the working capital statement is sufficient for present purposes, thus shifting focus on director responsibility. – Finally, the LSE suggested to dispense with the working capital statement in certain circumstances where the risk of running out of funds upon joining AIM is low. Examples include mining companies, where funding is inherent to the nature of the business, or where the company’s financial statements have been historically prepared on a going concern basis, which reduces the risk of insolvency. |
The rationale is to streamline the process by reducing the burden of producing working capital statements or providing alternative guarantees, especially when the risk is perceived to be low. |
|
Reverse takeovers documentation |
During a reverse takeover, a company could produce alternative disclosure in cases where the risk to investors is low, such as where the company acquires a target in the same line of business. In such cases, the admission document could be replaced by disclosure of the information prescribed by Schedule Four of AIM, namely, descriptions of assets, and related profits and losses, particulars of the transaction, and the effect on the company. |
This proposal would aim to reduce the time and cost in effecting reverse takeovers, especially where the risk is perceived to be low to investors, and there is no fundamental change in business. |
|
Accounting standards |
The proposal aims to accommodate a wider set of local accounting standards besides the conventional standards enumerated in AIM Rule 19, such as International Accounting Standards, or accepted accounting standards of Australia, Canada, Japan and the United States. |
This proposal aims to attract international companies to AIM as the cost and time to convert from foreign accounting standards would be removed. |
|
Second line of securities |
The LSE propose to remove the requirement to produce an admission document if a company aims to produce a second line of securities. Instead, the company could provide the required information about the rights of a second line of securities, which could already be provided in either a market notification or a shareholder circular. |
This would aim to encourage more admissions of a second line of securities by reducing the administrative cost of replicating information already available to the market. |
|
AIM Designated Market Route2 (ADM Route) |
The LSE propose to amend the ADM Route, specifically looking at the role of the nominated adviser (nomad). The aim would be to rely more on existing public market disclosures, to expand the list of eligible markets, and to revise the market capitalisation and admission period requirements. |
Streamlining the nomad’s input will make it more cost-efficient to utilise the ADM Route. |
|
Dual-Class Share Structure |
This proposal would allow companies with dual class share structures to be admitted to AIM, thus mirroring the flexibility permitted on the Main Market. |
The proposal aims to enable founder-led companies to access funds via AIM without sacrificing control of the company. |
|
Related Party Transactions |
The proposal aims to amend the scope of AIM Rule 13—rule on notifying the market about any related party transactions—in light of existing protections present elsewhere. This could arise, for instance, where shareholders approved an employee share scheme, or a director’s indemnity – the process of approval would have the necessary protections for the shareholders. |
The rationale here is to remove the need to produce notifications under AIM Rule 13 where the risk to the shareholders is low due to shareholder protections present elsewhere. |
|
Directors’ remuneration |
The proposal is to allow directors’ remuneration to be regulated primarily by a company’s chosen corporate governance code rather than automatically qualifying as a related party transaction. Instead, notification requirements would be limited only to certain circumstances, such as where the remuneration is a bonus not contingent on the company’s performance. |
Reducing the oversight on the already-reviewed remuneration policies would encourage companies to attract highly skilled talent, while also ensuring that limited oversight remains in exceptional circumstances. |
|
Class tests |
LSE’s general proposal involves reducing the threshold for disclosure to 25% (from 10%) in line with the Main Market’s policy, so to avoid burdening companies with additional costs and disclosure requirements. Other proposals include: (a) removing the Profits test. Instead, the Profits test should be limited only to related party transactions; and (b) a pro-rated Gross capital calculation for investing companies acquiring minority stakes. |
The proposals aim to update the class test requirements to better align with the changes brought into the Main Market. |
1 In the past five years, AIM has raised over £39 billion of long-term capital for companies, over 53% of all capital raised on European growth markets.
2 The route was designed to allow companies to trade on comparable markets without going through the process of the admission document.
