Guide to AIM and Standard Listing

Corporate Finance PREC ISE . PROVEN. PERFORMANCE .

Introduction

This guide provides an overview for companies which may be considering a fl otation on AIM or the Standard segment of the Main Market by considering some of the key differences between the two. At Moore Stephens, our experienced professionals provide hands-on support to management and fi nancial advisers throughout the IPO process.

We have signifi cant experience of these markets and the services we provide include:• acting as reporting accountants;• providing introductory services to the capital market adviser community;• providing advice on the preparation for fl otation; • ongoing audit and taxation services.

We support clients through the various phases of fl otation, advising companies from across the globe in the IPO process, not only for UK capital markets but on international markets.

London Stock Exchange

The London Stock Exchange (LSE) is one of the world’s major international markets. The choice of market for the IPO is extremely important and it may impact on its commercial success. Companies should consider the pros and cons of each market and how they meet their overall needs.

In the UK, the two principal markets are both operated by the LSE. These are:

The Main Market operates ‘Premium’ and ‘Standard’ listing regimes for both UK and overseas companies. Companies listing on the Main Market have to satisfy certain regulatory criteria. In particular, the Standard Listing requires compliance with European Union minimum standards.

AIM is the LSE’s market for smaller and growing companies. The market has a simplifi ed regulatory environment which has been specifi cally designed for the needs of small and emerging companies. It is not subject to the requirements of the EU Prospectus Directive and does not involve an application to the Offi cial List.

Main Market

AIM

Key factors

Factors to consider when looking at prospective markets include:

The rules of the market will determine the regulatory framework within which the company will operate.

Standard Listing (shares and depositary receipts)A Standard Listing enables a company to list its securities on the Main Market, however it must comply with the minimum requirements of the Prospectus Directive. A Standard Listing covers issuance of shares, global depositary receipts (GDRs), debt and securitised derivatives.

Standard Listing and AIM admission comparison

The Standard Listing option could be of interest to issuers who do not receive sufficient benefit from a Premium Listing (in terms of increased profile or a more liquid market in their shares) to justify the expense of maintaining it.

New applicants for a Standard Listing will have to publish a prospectus, therefore the same level of preparatory work will be required for a Standard Listing compared to a Premium Listing. On the other hand, a prospectus may not be necessary for admission to AIM but would require to prepare an admission document in accordance with the AIM Rules.

However, the AIM Rules for companies impose greater regulation on issuers, including the requirement to have a nominated adviser (Nomad) and certain continuing obligations such as the requirements to notify or obtain shareholder consent to certain types of transactions. The Standard Listing option will therefore be less onerous in terms of continuing obligations than an AIM quotation.

The size of the company.The profile, geographic location and industry sector of the company and its business.

The type of investors to which it intends to gain access.

The entry and continuing regulatory and legal requirements applicable to each market and jurisdiction.

The table below summarises the key differences on eligibility criteria for admission between Standard Listing and AIM:

Standard Listing(Shares)

Standard Listing(GDRs)

AIM (Shares)

Eligibility criteria for admission To the official list of the UKLA

To AIM

IncorporationIssuer must be duly incorporated and operating in conformity with its constitution.

Yes Yes Yes

Admission to trading:Securities to be listed must be admitted to trading on LSE.

Yes Yes Yes. Securities will be admitted to trading on AIM.

TransferabilitySecurities must be fully paid, free from liens and freely transferable.

Yes Yes Except where (i) any jurisdiction, statute or regulation restricts transferability or (ii) the issuer is seeking to limit the number of shareholders domiciled in a particular country to ensure it does not become subject to regulation.

Market capitalisationSecurities to be listed must have an expected aggregate market value of at least £700,000.

Yes, but in practice, size is market driven

No, but in practice, size is market driven.

Free float Minimum number of shares in public hands.

25% 25% No minimum requirement, except for investing companies which must raise at least £6 million in cash. Nomad must confirm that issuer is suitable for admission.

Trading recordAt least a certain percentage of the issuer’s business must be supported by a historic earning record for a specified period prior to listing.

No No No. If the issuer’s main business has not been independent and revenue earning for at least two years, all related parties and employees holding at least 0.5% of the listed shares must be locked in for a period of one year from admission.

Key criteria for admission

Standard Listing(Shares)

Standard Listing(GDRs)

AIM (Shares)

Eligibility criteria for admission To the offi cial list of the UKLA

To AIM

Control of assetsIssuer is required to control majority of assets for the three year period.

No No No

Accounting StandardsEU IFRS or other approved GAAPs for non-EEA issuers.

Minimum. Last two years fi nancial information must be restated on the basis to be applied in the issuer’s next annual accounts.

For non-EEA issuers, must prepare and present the fi nancial information in accordance with either:• IAS;• US GAAP;• Canadian GAAP;• Australian IFRS;• Japanese GAAP.

Sponsor/NomadIssuer is required to appoint a sponsor or Nomad in connection with an application for admission of securities, which requires the publication of a prospectus or admission document.

No No Yes. Issuer must appoint a Nomad.

Prospectus/admission document Prospectus vetted and approved by the UKLA.

Not vetted by the Exchange. The FCA will only vet an AIM admission document if it is also a prospectus under the Prospectus Directive.

Our credentials

Recent transactions where we have acted as reporting accountants and advisors include:

Jiasen International

HoldingsK&C Reit

GrandGroup

Investment

Technology & media

ManufacturingReal estate & leisure

Financial services & insurance

Global Invacom

Key criteria for admission

What are the common obligations for Standard Listing and AIM companies?Companies considering listing in London should be aware of a number of obligations which are common to both a Standard Listing and AIM listing:

Standard Listing(Shares)

Standard Listing(GDRs)

AIM (Shares)

Continuing obligations for a listed company

SponsorIssuer must appoint a sponsor or Nomad or obtain a sponsor or Nomad’s guidance in certain circumstances.

No. Issuer need only appoint a sponsor in connection with an application to transfer to a ‘Premium’ Listing.

No Yes. Issuer must retain a Nomad at all times to advise and guide it on its obligations under the AIM rules.

Corporate governanceIssuer must state in its annual financial report whether it has complied with the UK corporate governance code and, if not, provide an explanation of such non-compliance.

No, but issuer must include a corporate governance statement in its directors’ report which identifies the corporate governance code to which it is subject, and must explain why it departs from such corporate governance code.

No specific requirements, however investors expect compliance with the corporate governance guidelines for smaller quoted companies.

Significant transactionsShareholder consent to significant transactions.

Not required Not required Yes – required in relation to reverse takeovers or a disposal resulting in a fundamental change in the business.

Related party transactions An issuer entering into a related party transaction must (i) provide a notification of the transaction, (ii) send a circular to its shareholders, and (iii) obtain shareholder approval.

No restriction No restriction A fair and reasonable confirmation is required where class test percentage is more than 5%.

Annual information update:Issuer must annually file with the UKLA and make available to the public a document that contains all information published or made available to the public over the previous 12 months in compliance with its obligations under EU and national laws and rules.

Yes Yes No, but all notifications made by the issuer in the previous 12 months must be freely available on its website.

Common obligations

Standard Listing(Shares)

Standard Listing(GDRs)

AIM (Shares)

Continuing obligations for a listed company

Annual financial reportMust be published within a specified period following the end of each financial period.

Yes – 4 months

Yes – 4 months

Yes – 6 months

Half-yearly financial reportMust be published within a specified period following the end of the period to which the report relates. Accounting standard used must be consistent with that used for the annual financial report.

Yes – 2 months

No – half-year financial reports not required, but generally issued.

Yes – 3 months

Interim management statementsInterim management statements must be published during the first and second six month periods of the financial year.

Yes No No

Financial due diligence work streams

Depends on the requirements of underwriters.

Normally required by the Nomad:• long form due diligence report;• financial position and prospect

procedures board memorandum;• working capital report.

Tax treatment of investment EIS and VCT relief not available.

EIS and VCT relief available (if certain criteria met).

Smaller companies may prefer to list on AIM to avoid seeking shareholder approval for transactions. The tax breaks for all AIM company’s investors may also increase investor appetite for an AIM company’s shares. The likely market capitalisation and investor appetite are often the deciding factors, particularly given the greater cost of obtaining a Main Market listing.

Listing and admission to trading on the Standard Listing segment of the Main Market is an efficient way for companies to access capital to fund their growth, whilst benefiting from enhanced profile and liquidity within a well governed and regulated market structure.

Common obligations

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Contact informationIf you would like further information on any item within this brochure please contact us.

Moore Stephens LLP, 150 Aldersgate Street, London EC1A 4ABT +44 (0)20 7334 9191www.moorestephens.co.uk

We believe the information contained herein to be correct at the time of going to press, but we cannot accept any responsibility for any loss occasioned to any person as a result of action or refraining from action as a result of any item herein. Printed and published by © Moore Stephens LLP, a member firm of Moore Stephens International Limited, a worldwide network of independent firms. Moore Stephens LLP is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Authorised and regulated by the Financial Conduct Authority for investment business. DPS30935 March 2016

Phil CowanPartner – Head of Corporate FinanceD +44 (0)20 7651 1807M +44 (0)7887 626237phil.cowan@moorestephens.com

Marty LauPartner – London capital marketsT +44 (0)20 7334 9191M +44 (0)7899 070609 (UK)M +852 6301 8067 (HK)marty.lau@moorestephens.com