Temporary Coronavirus Measures for AIM companies and Nomads

Correct as of 10 am 23 March 2020. This article is not being maintained.

We previously published a Law-Now highlighting some of the potential consequences of the spread of Coronavirus for UK public companies. Since then the pandemic has continued to disrupt global markets, and governments around the world are implementing increasingly rigorous travel restrictions and domestic lock-down measures.

To help ease the strain the London Stock Exchange (the “Exchange”) has issued guidance for the AIM community, detailing some temporary emergency measures to relax the application of some of the AIM Rules for Companies (the “AIM Rules”) and the AIM Rules for Nominated Advisers (the “Nomad Rules”), and has confirmed that those measures will be applied, on a discretionary basis, by AIM Regulation until further notice.

Disclosure obligations – temporary suspension of trading

AIM companies are required, pursuant to Rule 11 of the AIM Rules, (in addition to, and separately from, their disclosure obligations under the Market Abuse Regulation), to issue without delay a notification of any new developments in respect of the company which are not public knowledge, but which if made public would likely lead to a significant movement in the price of its securities. Changes to the company’s financial condition or its current or expected business performance would fall within the parameters of this requirement.

Ongoing Responsibility 1 of the Nomad Rules require Nomads to maintain regular contact with an AIM company for which it acts, so that it can ensure the Nomad is kept abreast of developments in respect of the business of the company and to ensure that the company and its directors continue to understand their obligations under the AIM Rules. This is of critical importance under current conditions as many companies will be affected by and will likely need to respond to the indirect impacts of the Coronavirus pandemic on their business.

AIM companies must ensure that they continue to comply with their key disclosure obligations in a timely and accurate manner. However, given the frequency with which new developments have arisen, not least because of the almost daily changes to the nature and extent of travel and other restrictions and the consequential associated challenges faced by companies in the UK as a result of the continuing worsening of the pandemic, Nomads may consult with AIM Regulation on whether a temporary suspension of an AIM company is required to allow them more time than would be necessary under ordinary circumstances to make a fully compliant notification. Nomads and AIM companies should ensure that they are prepared to fully explain why a suspension for the company in question would be appropriate in those circumstances and, if appropriate, AIM Regulation will apply its discretion to temporarily suspend dealings in the company’s shares for a limited time to allow the company to make a fully compliant notification.

Suspended securities – extension of time for restoration or cancellation

Rule 40 of the AIM Rules provides that the Exchange may suspend the trading of AIM securities in certain circumstances, including where a company is late in publishing its half-yearly report or annual accounts, in order to ensure the maintenance of orderly markets. Once the circumstances that led to the suspension are resolved or clarified sufficiently for the company to be able to make a notification to the market, which should be made without delay, the company’s securities can be restored to trading. However, pursuant to Rule 41, where securities have been suspended from trading for six months, the Exchange will cancel their admission to trading.

Taking into account the fact that companies will face logistical and other challenges while the current circumstances subsist, Rule 41 will be relaxed, at the discretion of AIM Regulation, so that any AIM company whose securities have been suspended between 30 September 2019 and 1 July 2020 may have a further six months to resolve the reason for the suspension before the admission to trading of those securities is cancelled.

Nomads should contact AIM Regulation if any AIM company needs this additional time to resolve the suspension of its securities and request restoration to trading.

For the avoidance of doubt, any AIM company whose securities are suspended from trading must continue to comply with the AIM Rules for the duration of the suspension.

Nomads’ responsibilities – due diligence and education

Admission Responsibility 1 of the Nomad Rules requires a Nomad to assess the appropriateness of a potential AIM applicant and its securities for the AIM market by obtaining a sound understanding of that applicant and its business. The guidance sets out a set of criteria and activity that the Nomad would typically be required to consider or undertake in discharging this responsibility, one being to undertake a visit to the applicant’s material sites of operation, meeting directors and key managers and potentially other relevant material stakeholders such as key shareholders.

Given the current climate of increasingly limited travel restrictions as well as the need to practice social distancing on the grounds of public health, the requirement for a physical site visit will be relaxed on a temporary basis on the following conditions:

• Nomads must ensure that they carry out equivalent diligence checks by meeting with the directors of the applicant company using any alternative means available such as virtual meetings; and
• Nomads will be expected to undertake the site visits for those applicants once the relevant travel or distancing restrictions are lifted, whenever that may be.

Nomads must also carry out an educational function, both prior to Admission and on an ongoing basis, to ensure that the company for which they are responsible and its directors understand: (1) their obligations under the AIM Rules; (2) when to seek advice from or consult the Nomad; and (3) the need for, and provision of, sufficient systems, procedures and controls for the company to comply with its AIM Rules obligations. Those conversations should continue to be held, albeit at a distance on the phone or via virtual meetings, rather than by way of physical meetings.

Practically speaking, as these relaxation measures will rely heavily on both Nomads and companies being able to reliably access alternative methods of communication, it may be a good time for Nomads and companies to consider how such virtual conversations will take place, the frequency of check-ins and potential back-up plans in case of potential delays or disruptions to technology-enabled services that may result, for example, from the dramatic increase in the use of such services by people working from home.

Further Guidance

The Exchange has confirmed that it will continue to monitor the situation and provide further guidance as and when necessary. Further guidance in respect of the potential impact of the pandemic on financial reporting obligations would be particularly welcome, as many companies face uncertainty over whether the publication of their annual or half yearly accounts will be delayed, especially in light of the FRC’s recently updated guidance which notes that the current circumstances “should not undermine the delivery of high-quality audits”, and that “additional time may be required to complete audits and it is important that this is taken, even at the risk of delaying company reporting”.

If you would like to discuss any of the above, please contact James Parkes, Alasdair Steele or your regular CMS contact.