UK Capital Markets: London Stock Exchange launches market discussion on the future of AIM

In its Discussion Paper, the LSE asserts the importance of AIM’s role in the UK’s economy, supporting growing companies since its launch 30 years ago, whilst remaining the most active European growth market in recent years. However, recognising that recent challenging conditions have had a disproportionate impact on smaller companies seeking capital, and following substantial reforms to UK capital markets regulation, the LSE is now seeking input on AIM’s future function and position within the UK’s capital markets offering. In particular, the Discussion Paper solicits feedback on: (i) AIM’s market and regulatory framework; and (ii) the development of the AIM Rules. Comments are requested by 16 June 2025.

Market framework – driving growth and liquidity 

Increasing the flow of capital into AIM is cited as the LSE’s top priority, with fiscal incentives (such as EIS, VCT and ISA inclusion, and Business Relief for investors) noted as vital in encouraging investment in AIM securities. Liquidity is highlighted as equally important; playing a critical role in governing the cost and availability of capital in the secondary market. Indeed, the LSE believes that the new Public Offers and Admission to Trading Regulations (POATRs) will help stimulate liquidity by making it easier for AIM companies to include retail investors in capital raisings, increasing the diversity of their shareholder registers. 

Views are sought on the existing fiscal incentives’ effect on AIM investments, together with other wider workstreams (such as the Mansion House Compact and the Pensions Investment Review (see our article here)) and whether any additional changes should be made to further develop AIM’s growth and liquidity. More generally, feedback is sought on the positioning and marketing of AIM (including its brand) to ensure that it retains a central role in the domestic and international “wider funding continuum”. 

AIM’s regulatory model 

The LSE is seeking views on fundamental aspects of the AIM regulatory model. 

• The role of the nominated adviser (Nomad): Noting the model as central to AIM’s distinctive regulatory framework, the LSE welcomes feedback on the Nomad role including whether it remains valuable for companies and investors and if so, how it should evolve going forward. 
• AIM Rule 11 - price sensitive information: AIM issuers must comply with their disclosure obligations in respect of ‘price-sensitive information’ under AIM Rule 11, in addition to their disclosure obligations under Article 17 of the UK Market Abuse Regulation (UK MAR) for any ‘inside information’. AIM Regulation has clarified previously that issuers must consider both sets of disclosure obligations separately. However, the LSE now seeks feedback on whether the AIM Rule 11 obligation creates an unnecessary and duplicative burden for AIM issuers. If disclosure under UK MAR is considered to be sufficient, views are sought on the Nomad’s role (if any) in supporting the company with this disclosure. 
• Corporate governance: The LSE seeks views on the current choice of corporate governance codes available and whether they meet the needs of all AIM companies. Additionally, the LSE asks whether a simplified list of requirements for corporate governance should be offered as an additional choice for issuers and if so, invites suggestions for its form and content. 

AIM Rules – specific changes 

Additionally, the LSE seeks engagement on how it can update the AIM Rules to reduce unnecessary friction and costs to ensure that AIM continues to provide a flexible and proportionate regulatory regime. Notably, it invites feedback on the following key changes. 

Admissions 

• Admission documents: Comments are sought on the current content requirements and whether a simplified admission document should also be offered as an alternative, with clear ‘health warnings’ on the increased level of investment risk. Additionally, views are welcomed on whether certain publicly available information (such as a company’s historical financial information, articles of association and the Competent Person’s Report) may be able to be incorporated by reference. 
• Working capital requirement: The LSE is considering replicating the new Listing Rules which no longer require that listing applicants provide a ‘clean’ working capital statement for 12 months post admission. Alternatively, the LSE might consider taking the approach under the current AIM Designated Market (ADM) route where directors of the applicant are required to confirm that they have “no reason to believe” that the working capital available will be insufficient for at least twelve months from the admission date. Feedback is also sought on providing for specific circumstances where no working capital statement would be required, such as where a company’s financial statements for a number of consecutive years include ‘clean’ audit reports and were prepared on a going concern basis. 
• Second lines of securities: Removing the requirement to produce an admission document for second lines of securities is proposed, on the basis that the relevant information should be disclosed in accordance with the company’s compliance with the AIM Rules, UK MAR and its company law obligations. 
• Dual class share structures: In a bid to attract founders of growth companies, AIM is considering permitting the admission of dual class share structures, replicating the same structures permitted on the Main Market. Views are sought on whether AIM should replicate the Main Market regime or whether any specific changes should be considered for AIM companies. 

Transactions

• Reverse takeovers: For reverse takeovers undertaken by an AIM issuer which do not result in a ‘fundamental change’ in its business, the LSE is inviting views on whether the requirements to produce an admission document and to seek shareholder approval should be removed. Instead, the LSE asks whether specific disclosures on the transaction would be more appropriate and whether there are any factors to be considered when determining whether an acquisition gives rise to a fundamental change of business. 
• Related party transactions: The LSE is considering whether there are areas which do not require the protections provided by AIM Rule 13 in respect of related party transactions, such as for employee share schemes or a long term incentive schemes approved by shareholders or for routine directors’ indemnities permitted under the Companies Act 2006. Additionally, the LSE questions whether directors’ remuneration should be determined by the company’s relevant corporate governance arrangements, rather than being within the scope of AIM Rule 13; noting that this would provide growth companies with greater freedom to offer equity to attract highly skilled non-executive directors to the board. 
• Application of class tests: Views are sought on the current class tests, including whether the profits test remains relevant for AIM transactions and whether the threshold for a substantial transaction should be increased from 10% to 25%, particularly given the recent changes to the Listing Rules where the corresponding disclosure obligation for a significant transaction is set at 25%. 

Encouraging international investment 

• Accepted accounting standards: In order to attract more international growth companies to AIM and reduce any conversion costs to IAS for prospective applicants, the LSE is asking whether companies should be permitted to use any local accounting standards or whether permitted standards should be limited to a prescribed list in the AIM Rules based on their equivalency to IAS. 
• ADM route: The ADM route was introduced to allow companies trading on other comparable markets to fast-track their admission to AIM, based on their existing home jurisdiction disclosures. However, market practice has developed such that the Nomad’s work is similar to the level undertaken for a standard AIM admission. Consequently, the LSE invites thoughts on the areas of Nomad’s work which could be streamlined. Additionally, the LSE requests feedback on other ways that the ADM route could be developed including views on extending the existing list of eligible markets; the application of the market capitalisation £20m test; and the 18 month time period that an applicant must be admitted to an ADM. 

A valuable opportunity for market participants 

The significant reforms to the UK’s Listing Regime, which took effect last July 2024, adopted a more flexible and disclosure-based approach to regulation, following a similar approach taken by AIM since its launch 30 years ago. AIM’s proportionate and principles-based regime has led many companies to seek admission and raise capital on its market. The proposals in the Discussion Paper aim to reinforce and enhance this model amid increasingly turbulent market conditions and an evolving regulatory landscape. The LSE is inviting feedback on a wide range of issues from broader fiscal and economic factors impacting AIM investment, to the more specific areas of friction for existing and new issuers in the short term. Consequently, market participants have a valuable opportunity to share their perspectives freely in transforming the future of AIM regulation in a dynamic period for the UK’s capital markets. 

If you have any questions on the Discussion Paper or relating to the UK’s equity capital markets, please contact your usual contact at Hogan Lovells or one of the noted contacts. 

Authored by Daniel Simons, Alex Parkhouse, and Danette Antao.