Alternative Investment Market (AIM)

How long will it take for the shares to be admitted to trading on AIM?

· The actual flotation process will generally take three to four months from instruction of advisers to admission. However, in practice, the interval between the decision of the board to seek admission to AIM and admission itself is often a great deal longer than this, since thought must be given to matters such as group structure, corporate governance and financial controls and the putting in place of appropriate share-based incentive schemes for the employees of the company. Assuming that these matters are satisfactorily dealt with, the timetable for the flotation itself will vary depending upon matters such as whether any new or existing shares are to be offered in connection with the flotation, the offering structure (placing, public offer or both), whether the offer is to be underwritten, whether the offer is to be extended to international investors and the extent of any pre-impact capital reorganisation which is required.

· The timetable for the flotation will generally be longer if a prospectus (as opposed to an admission document) is required. This is largely because the prospectus must be vetted and approved by the FSA prior to it being published.

· A key factor is how much work auditors are required to carry out in order to prepare a long-form report and a short form report and to undertake a working capital review in support of the mandatory statement in the prospectus/admission document regarding the adequacy of working capital for the company’s current requirements.

· Any tax clearances which may be required for any pre-impact reorganisations or any Inland Revenue approval of share-based incentive schemes may also affect the timetable.

What other advisers will I need to appoint and how much will the transaction cost?

· Nominated Adviser – The NOMAD plays a key role in bringing the company to AIM and in guiding and advising it on both admission itself and its ongoing obligations after admission. It is the company’s key point of contact with the Exchange and most of its roles and responsibilities are set out in AIM rules. An AIM company must retain the services of a NOMAD at all times. The reason for this is that AIM companies are perceived as being less experienced than Main Market companies and, therefore, are more likely to need advice and expertise. If a company terminates the service of its NOMAD it must notify the market immediately, whereupon the company’s shares will be suspended and the company will have one month to appoint a new NOMAD. Failure to appoint a new NOMAD within one month will result in cancellation of AIM company’s shares.

· Reporting Accountants – They are distinct from the company’s auditors and their principal function is to review the company’s financial results and reporting processes and report to the NOMAD on any areas of concern, primarily by way of a long-form report which will also include a detailed review of the business and assets of the company.

· Solicitors to the company – They will advise on the legal aspects of preparing the company for admission to AIM including any pre-impact capital reorganisation, the re-registration of the company as a plc, the amendment to or replacement of the company’s constitutional documents, the putting in place of any proposed share-based incentive schemes, the terms of directors’ service agreements, the duties and responsibilities of the directors and general compliance issues, the terms of any placing and/or underwriting agreement and the preparation of verification notes and ancillary documents. Additionally, the company’s solicitors will undertake a legal review covering agreed matters such as regulatory compliance, the terms of the company’s principal agreements, any litigation, employment contracts and such other matters as may be required by the NOMAD for the purposes of satisfying itself of the appropriateness of the company for admission to AIM.

· Financial PR Consultants – They will be engaged to generate positive press interest and publicity and monitor the content and wording of any public statements.

· Nominated Broker – The broker “warms up” the market for the issue of the company’s shares and is ultimately responsible for selling those shares to the chosen market, which will generally comprise institutional investors. After the flotation the broker will work with the company to seek to ensure there is a proper market in the company’s shares. An AIM company must retain the services of a nominated broker at all times.

The usual cost for engaging the above advisers on a flotation, is, in aggregate, £500,000-£900,000. As a rough guide, a company can expect to pay 10 per cent, of any money raised in fees.

The typical cost for appointing a NOMAD to advise on admission to AIM is usually calculated as a percentage of any new money raised, typically between 3 and 5 per cent, of the value of the issue, depending on the nature of the obligations assumed by the NOMAD (and inclusive of sub-underwriting commissions). Additionally, a corporate finance fee is generally charged. This may be in the region of £75,000 to £300,000. Approximately £25,000 to £35,000 is charged on an annual basis for a NOMAD’s continued services.

“Joining AIM. A field guide for applicants to AIM,

a market of the London Stock Exchange”.

Published in association with the London Stock Exchange