Monday, August 13, 2007

Going Public on AIM

When going public on AIM there are various advisors that you need to retain to help with the process.

Nominated Advisor

Under the AIM Rules, an AIM company must appoint and retain a Nominated Adviser (or “Nomad”) at all times. The Nominated Adviser is responsible for confirming to the London Stock Exchange (“LSE”) that the Company is suitable for AIM. This is an important role as the LSE does not itself examine whether an individual company is suitable for AIM, and, instead, it delegates the task to the Nominated Adviser, which becomes the Company’s point of contact with the LSE. After Admission, the Nomad will have an ongoing role to help and guide the Company on the application of the AIM Rules.


The Company must also appoint and retain a Broker. This may be the same firm as the Nominated Adviser. The Broker is responsible for managing dealings in the Company’s ordinary shares.


Together with the Nominated Adviser, the Company’s solicitors will assist the Board of Directors to ensure that the Company is ready to join AIM. For example, the solicitors will consider the corporate structure of the Company and its subsidiaries and whether it requires any form of group reorganisation. They will also undertake due diligence and provide a report, on Admission, to the Company and the Nominated Adviser,which (along with the Reporting Accountant’s long-form report and/or working capital report) will assist the Nominated Adviser in enabling it to recommend the Company to the LSE.

They will also be involved in the verification process and assisting the Nomad in drafting the Admission Document, and other ancillary documentation.(b) the Nominated Adviser will also appoint another firm of solicitors to review the Admission documentation on its behalf and draft the placing agreement.

Reporting Accountants

The Company’s accountants (or a firm of chartered accountants nominated by them) will undertake thefinancial due diligence, and will assist the Directors in their working capital review.

Other Advisers

In preparation for Admission, the Company will also appoint a registrar, PR consultants and, if necessary, printers.

Our Role

Our Company acts as a buffer between all these advisors. We can select a Nominated Advisor and others if required.

We liaise with these advisors on your behalf, negotiating fees and general management of the whole process.


There must be no restrictions on the transferability of the Company’s ordinary shares, and, as part of due diligence (see below), the company’s solicitors will review the Company’s constitutional documents (e.g. its articles of association) to ensure that its ordinary shares are freely transferable with effect fromAdmission and eligible for electronic settlement.

The Nominated Adviser and the Company will consider the composition of the Company’s board of Directors, especially the number of non-executive directors. As the Company is being admitted to AIM, it is not required to comply with the Combined Code on the Principles of Good Governance and Code of Best Practice (the “Combined Code”). However, it is recommended that, as a matter of good practice, AIM companies should follow the same core recommendations relating to corporate governance.

Among other things, the Combined Code requires the board of Directors to establish committees of non-executive directors to deal with audit matters, executive remuneration and nominations to the board, and the Company should therefore seek to ensure that there is a sufficient number of non-executive Directorsto meet these requirements.

The Directors’ service agreements should be in writing and their key terms will be disclosed in theAdmission Document. As a result, it is normal for all Directors’ service agreements to be reviewed during the preparation for Admission.

Finally, the Company’s advisers will be carrying out due diligence, which is basically an information gathering exercise but is also intended to expose any commercial messes or skeletons in the cupboard which would have an impact on the pricing of the Company’s shares. The results of the due diligence will allow the Company’s advisers to prepare a high quality Admission Docuement for the purposes of marketing as well as ensuring compliance with the AIM Rules and minimising any liability for the Directors in relation to its content.

Firstly, on the legal side, the Company’s solicitors will carry out anextensive investigation of the Company’s business, including its ownership of its assets and property(including intellectual property), its employment and pension policies, the validity of its ordinary shares, any material contracts and any current or threatened litigation. Secondly, if required, the Reporting Accountants will look at the Company’s financial affairs with a view to preparing, if required, a long-formreport. The long-form report generally describes the history of the business over the last three years and specifies any areas of concern for the Nomad.


The Company must provide the LSE, at least 10 business days before the expected date of Admission, with a“Ten Day Announcement”. The announcement will include details such as the name of the Company, its registered office, country of incorporation, the number and nature of its ordinary shares, whether it will be seeking to raise capital on Admission; the names and functions of its Directors; its substantial shareholders (i.e. those holding 3% or more of its ordinary shares) and the name and address of its Nominated Adviser.

At least three business days prior to the expected date of Admission, the Company must provide the LSE with a completed AIM application form, the first year’s AIM fee and a declaration from its Nominated Adviser confirmingthe Company’s suitability for AIM.

It is at this time that the Company will also submit an electronic copy of the Admission Document to the LSE. As part of the Admission process, the Company and the Nominated Adviser will also enter into a NominatedAdviser Agreement. This will provide for the Nomad’s terms of engagement, its continuing duties to the Company under the AIM Rules, and its fees. Finally, the Company and the Broker will enter into a placing agreement, which will deal with the Placing and howit will be conducted. The Company and (to some extent) its Directors will be expected to provide warranties.


Verification Notes

Verification is the process of checking all the statements of fact or opinion in the Admission Document to ensure that the document is true, accurate and not misleading. Verification is largely undertaken for theprotection of the Directors who will ultimately assume legal responsibility for the document. In the UnitedKingdom, verification generally involves a line by line analysis of the Admission Document with full verification notes, containing questions produced by the Company’s solicitors covering every line of the document together with answers received from various personnel in the Company.

Representatives of the management team of the Company will have a significant role in working with the Company’s solicitors on the verification of the document, and a point of contact within the Company should be nominated at the outset.

Directors’ Power of Attorney

Once the Admission process is nearing completion, the timeline may mean that there can be no delay caused by the absence of a Director. It is therefore usual for each Director to execute a power ofattorney authorising one of his fellow directors to sign, on his behalf, any document required under the Admission process (including the Admission Document).

Responsibility Letters

While the Directors will sign the Verification Notes, it is also usual for the Directors to sign a letter acknowledging their responsibility for the Admission Document, and any other document, advertisementor announcement published in connection with the Admission.

Memoranda on Directors’ Responsibilities

The Company’s solicitors will provide two memoranda: the first covering the Directors’ responsibilities in relation to the Admission Document (including civil and criminal liability); and a second covering the continuing obligations and responsibilities of the Directors under the AIM Rules, following the Admission of the Company.

Lock-in Undertakings

If it is decided that the Company has had, as its main activity, a business which has not beenindependent and earning revenue for at least 2 years, all “related parties and applicable employees” willbe asked to enter into written undertakings agreeing not to dispose of their shares for a period of at leastone year from the date of Admission. A related party, for these purposes, will include a director of the Company’s group or a substantial shareholder (holding 10% or more of the shares). Even for companies which have been revenue earning for 2 years or more, it is common for the Nomad to seek lock-ins toprovide comfort to new investors or the market as a whole, that the key drivers behind the Company demonstrate their commitment to the Company.

Long Form Articles of Association

Finally, it is usual for the Company to adopt a new set of long form articles of association suitable for a public listed company.


Under the AIM Rules, the Company must produce an Admission Document which, subject to specified exceptions, contains information equivalent to that which would be required by the Prospectus Rules published bythe Financial Services Authority from time to time (the “Prospectus Rules”). The Admission Document must contain all such information as “the Company reasonably considers necessary to enable investors to form a full understanding of:-

(a) the assets and liabilities, financial position, profits and losses and prospects of the issuer of thesecurities for which admission is being sought;

(b) the rights attaching to the securities; and

(c) any other matter contained in the Admission Document.” (e.g. material contracts/related party transactions)

There will be a responsibility statement on the front cover of the document to the effect that: “to the best of theknowledge and belief of the directors (who have taken all reasonable care to ensure that such is the case) the information contained in the Admission Document is in accordance with the facts and does not omit anything likely to affect the import of such information.”

The above information has been taken, in part, from Charles Russell .

Charles Russell is one of the leading legal advisors to both companies listing on AIM and brokers/NOMADs in relation to AIM transactions.

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