List your company on a Stock Exchange

The London Alternative Investment Market (AIM)

AIM is part of the London Stock Exchange and offers all the benefits of a public stock market quotation to companies which do not meet, or do not feel yet ready to meet, the requirements for a listing on the main market. Since its launch in 1995 AIM has attracted well over 2,000 companies, many of them from outside the United Kingdom.

Why list on a Stock Exchange?

Listing on an Exchange is often looked upon as a way of raising funds for further growth but this is only one of many reasons for doing so. Some of those reasons might be:

• To raise capital for further growth, both at the time of listing and in the future
• To create a market for the Company's shares and give the shareholders a value for their investment
• To encourage employee commitment by making share incentive schemes more attractive
• To increase the company's ability to make acquisitions using its own shares
• To increase the public profile
• To enhance the Company's status with customers and suppliers

Why London and why AIM?

The London Stock Exchange is one of the world's leading equity markets and through the Exchange companies can access London's substantial and diverse investor base which represents the largest pool of capital available anywhere.

Some of the other reasons for a listing on AIM.

• Accessibility. Unlike most other markets AIM does not stipulate any minimum requirements in relation to the company size, track record or number of shares to be in public hands.
• Entry criteria are tailored to smaller or younger companies. No trading record is required.
• Streamlined regulatory regime. A prospective company is required to appoint a nominated advisor ("Nomad") from the Exchange's approved register. It is the role of the Nomad to ensure that the company is suitable for AIM and ready to be listed on a public market. This flexible approach ensures appropriate quality control whilst making AIM as open as possible to a range of growing companies.
• Easier acquisition rules, facilitating growth through acquisition.
• Unquoted status for tax purposes which may be an advantage for some companies.

Some matters to take into account

Before a company decides whether to join AIM it should consider carefully the consequences of joining a public market, for example,

• Directors and employees alike must be prepared to accept the disciplines inherent in having shares traded publicly, and in having outside shareholders whose interests must be taken into account
• Flotation brings exposure to market conditions. The share price may be affected by factors outside the company's control, including market sentiment, economic conditions or developments in the same sector.
• The Board must be prepared for greater exposure and openness both in terms of the company's finances and business strategy and in having to make prompt announcements about new developments, positive or negative.

The first steps

A company planning to join AIM will first need to appoint advisors to assist it during the listing process and to ensure it remains compliant with the ongoing requirements.

• The Nominated Adviser (Nomad). The Nomad will judge whether the company is appropriate for the market, explain the AIM rules to the directors and ensure that they are aware of their responsibilities and obligations. The company must continue to have a Nomad, even after the listing and should it cease to do so, trading in its shares will be suspended.
• The Broker is a securities house which is a member of the London Stock Exchange. The Nomad may be the broker. The broker will play an important role in bringing together buyers and sellers of the Company's shares and in making a success of the flotation and the after market trading.
• The Legal Adviser will oversee issues such as due diligence on behalf of the Nomad, changes to the Directors' contracts and verification of the statements in the admission document. It will provide ongoing advice to the board on its legal obligations.
• The Reporting Accountants will conduct an independent review of the Company's financial record and assist with the preparation of the financial information to be published.
• The Company may also choose to appoint public relations advisers and, depending on the needs of the business, specialist advisers such as property surveyors, actuaries and insurance brokers.

Joining AIM

A company wishing to list on AIM must, irrespective of its country of incorporation, if it is making a public offer of shares, comply with the European Prospectus Directive (PD). The regulatory status of AIM is however such that AIM companies are generally only affected by the Directive if they are making a public offer, rights issue or paper takeover which triggers the Directive and is above the exemption limit.

There are certain other requirements to provide additional information to the market, protect investors and ensure there is orderly trading in the company's shares. There are other disclosure requirements which continue after the listing.

A company applying to list on AIM must:

• Appoint an approved nominated adviser
• Appoint a nominated broker
• Have no restrictions on the free transferability of its shares
• Be registered as a Public Limited Company (plc) or equivalent and be legally incorporated under the laws of its country of origin.
• Prepare an admission document. This document contains all the relevant information investors might need on the company and its activities, including financial information, together with details of all directors. This document is made available to all prospective investors. The Exchange also requires information on such matters as major shareholders, the past records of all directors and working capital.
• Pay the current admission fee.

Companies already listed on other markets

A company which has already had its shares traded on another designated market for at least 18 months may list on AIM without having to publish an admission document, thereby making the process easier and more cost effective. The designated markets include the Australian Stock Exchange, Deutsche Borse, Johannesburg Stock Exchange, Nasdaq, New York Stock Exchange and the Toronto Stock Exchange.

Life as a member of AIM

Once a company is listed on AIM it becomes subject to new disciplines including,

• It must communicate with the market on a continuing basis, to ensure that the market is aware of its financial position and prospects.
• It must advise the market immediately of any developments which could have an impact on the share price
• Its published accounts must conform to international accounting standards, UK GAAP or US GAAP and they must be published within the required deadlines
• Directors and employees must comply with restrictions on their freedom to trade in the company's shares whilst in the possession of unpublished information

Tax benefits of AIM investment

There are various tax reliefs available to investors in AIM listed companies. The tax advantages relate to investments in qualifying unquoted companies. Companies traded on AIM (and a number of other markets) are regarded by the United Kingdom Tax Authorities as unquoted for this purpose. The reliefs available and the qualifying criteria change form time to time and a prospective investor should take professional advice.

For individual investors

Capital gains tax
• Business asset taper relief. The relief reduces a chargeable gain assessable to CGT in relation to the period for which the asset is held and the scales of relief depend on whether the investment is a "business" or "non-business" asset.
• Gift relief. If shares in an AIM listed company are gifted, payment of the tax on any deemed capital gain can be deferred until there is a subsequent arm's length disposal by the transferee
  
  
The Enterprise Investment Scheme (EIS)
• The EIS can benefit individuals who subscribe for new ordinary shares in AIM companies which qualify as trading companies. There is an initial income tax relief, exemption from capital gains tax on disposal and relief on losses. Conditions apply.
  
  
Inheritance tax
• Investments in qualifying AIM trading companies can attract 100% relief from inheritance tax if held for at least two years.
  
  
Relief for losses
• It may be possible to relieve the loss against capital gains of the current or subsequent years or against income of the current or previous year
  
  
Venture Capital Trusts (VCTs)
• A VCT is a listed company similar to an Investment Trust. Investors in VCTs gain access to a professionally managed portfolio of unquoted companies, which can include shares in qualifying AIM listed companies. Investors in VCTs are entitled to (conditions apply):
• Tax relief on the amount invested
• Exemption from tax on dividends
• Exemption from capital gains tax on the disposal of shares in the VCT

For Corporate Investors

Corporate Venturing Scheme (CVS)
• The CVS is a tax incentive scheme introduced to encourage companies to invest in smaller high risk trading companies. It is similar to the EIS. The scheme provides corporation tax relief on the investment, deferral of capital gains tax on disinvestment if the gain, or part of it is reinvested into another investment under the CVS, and relief against income for capital losses. Conditions apply.
  

AIM tax benefits for investors in non-U-K companies

A quotation on AIM can enable U.K tax paying investors to take advantage of U.K tax reliefs on investment in unquoted non-U.K companies. AIM listed companies are treated as unquoted for this purpose. Relief may not be available if the company is also quoted on another recognised Stock Exchange.

The tax benefits fall under the following headings:

Capital Gains Tax Business Asset Taper Relief.
• Providing the conditions are met, only 25% of the gain on disposal is assessed to capital gains tax. The residence or place of incorporation of the company is not relevant for this purpose. The company must be a trading company or the holding company of a trading group.
  

Enterprise Investment Scheme (EIS)
• The benefits of this scheme are described above. To qualify the company must be a trading company. Most trades are included. Activities which do not qualify include property development or letting, dealing in land, banking, insurance and other financial activities, legal or accountancy services farming, hotel managing or operating and licensing.
  

Venture Capital Trusts (VCTs)
• VCTs and the benefits they provide are described above. The qualifying activities are as for Enterprise Investment Schemes.
  

Inheritance Tax
• Business Property Relief.
  Investments in qualifying AIM listed trading companies can attract 100% relief from inheritance tax if the investment is held for at least two years. The business must not be wholly or mainly that of dealing in securities, dealing in land or buildings or making or holding investments. The residence or place of incorporation of the company is not relevant for this relief to be available.
  

Individuals domiciled outside the United Kingdom

Companies incorporated outside the United Kingdom and keeping their share registers outside the United Kingdom
• Qualifying investors will not be liable for inheritance tax in respect of investments in AIM listed companies meeting the above criteria and may be entitled to capital gains tax reliefs
  

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