London Stock Exchange publishes discussion paper on the future of AIM

The London Stock Exchange (the LSE) has published a “Discussion Paper: Shaping the Future of AIM”. In its first paper on this subject since July 2017, the LSE aims to address the future development of the Alternative Investment Market (AIM) given its “vital role” in both the UK economy and UK capital markets.

AIM has been a key feature of the UK capital markets for 30 years, and it has enabled growing companies to obtain capital and liquidity, while giving investors the opportunity to invest in a broad range of smaller companies. Despite recent challenges, including Brexit, the Covid-19 pandemic and significant reform to the UK Listing Rules, the LSE notes that AIM has been resilient and continues to be the most active growth market in Europe. The LSE has calculated that in the past 5 years, 53% of all capital raised on European growth markets has been on AIM and states that in 2023 AIM companies (including their supply chains) contributed approximately £68bn Gross Value Added to UK GDP.

Recognising recent market conditions have been challenging, the paper proposes various changes with the stated aim of enhancing capital access and liquidity, reduce costs, and streamline processes. Section 2 of the paper requests feedback on the functioning and overall market framework of AIM and Section 3 proposes specific changes to the AIM Rules. Both sections contain sets of questions, answers to which will assist AIM with evolving in a way which supports the growth and resilience of small companies and maintains the UK's status as a global financial centre. 

The paper is to form part of a wider debate on the future development of AIM and stakeholders are invited to provide feedback on the proposals. Responses are requested by 16 June 2025.

Driving Growth and Regulatory Design 

Section 2 outlines the LSE’s commitment to enhancing the AIM market by increasing capital flow, improving liquidity, and ensuring a competitive regulatory framework. 

Driving Growth

The LSE’s “top priority” is to increase the flow of capital into AIM and ensure that this capital comes from a diverse range of sources to maximise liquidity. 

Recent initiatives, such as the Mansion House Compact and the Government's Pensions Investment Review, are expected to unlock significant new capital for AIM companies. The paper also highlights the importance of fiscal incentives, including EIS, VCT, ISA inclusion, and Business Relief, in encouraging investment on the AIM market. 

The paper considers liquidity in the secondary market to be a “vital factor” in the availability and cost of capital for issuers. In order to stimulate liquidity, the LSE has removed fees for retail investors to access real-time market data (the first major primary exchange to do so) and successfully campaigned for AIM shares to be eligible for ISAs and the abolition of stamp duty on the trading of AIM securities. 

Likewise, the LSE expects that the new Public Offers and Admission to Trading Regulations (POATR) will further enhance liquidity by making it easier for AIM companies to include individual investors in capital raising transactions - and consequently increase the diversity of their shareholder register. See our recent update on the UK’s new Public Offers and Admission to Trading regime.

Regulatory Design

The LSE considers the AIM regulatory model, which includes the expertise of a nominated adviser and a principles-based rulebook, to be central to AIM's success. The paper seeks feedback on how to evolve the nominated adviser role to reduce costs and streamline processes. It also proposes changes to the AIM Rules to reflect the evolution of the broader regulatory environment and reduce barriers while maintaining market transparency and integrity. 

Changes to the rulebook

• The new FCA rules pursuant to the POATR (expected to be published in the summer) will allow AIM companies to enable retail participation for fundraising at admission and on market.
• These reforms will also mean that AIM companies can benefit from the regulated market liability regime for forward-looking statements, encouraging greater disclosure about future prospects. 

The nominated advisor

• The nominated adviser supports companies with advice and guidance, aligning the needs of key stakeholders and providing flexibility to founders, management, and boards. This framework ensures that companies can focus on their growth while investors receive the necessary disclosures to evaluate risks and opportunities.
• The LSE is considering evolving the nominated adviser role to reduce costs and streamline processes. This includes addressing duplicative work between the nominated adviser, lawyers, and reporting accountants with the aim of ensuring that the costs associated with AIM admission and ongoing compliance are proportionate and add value for companies and investors. 

Corporate governance 

• AIM’s principles-based approach to corporate governance allows companies to adopt measures tailored to their size and stage of development.
• Recognising that a 'one size fits all' model is not appropriate, the LSE is seeking feedback on whether the current choice of corporate governance codes meets the needs of all AIM companies and whether a simplified approach could be beneficial.

Development of the AIM Rules

Section 3 sets out proposed changes to the AIM Rules aimed at reducing costs and administrative burdens for companies while maintaining investor confidence. The proposals include the below.

• Admission documents: Several changes to the content and format of AIM admission documents. It suggests offering a simplified admission document option and allowing incorporation by reference for certain information.
• Working capital statements: Alternative approaches to working capital disclosure, including statements in line with the AIM Designated Market (ADM) route and circumstances where no working capital statement would be required.
• Reverse takeovers: Changes to the reverse takeover rules to reduce costs and streamline processes. The paper suggests allowing AIM companies to disclose information required by Schedule 4 to the AIM Rules instead of producing an admission document in certain circumstances (in particular where there is no fundamental change of business, even if the AIM company is making an acquisition that is larger than itself).
• Accounting standards: Introducing greater flexibility in accepted accounting standards from a broader list of jurisdictions to attract international growth companies to AIM.
• Admission requirements for second lines of securities: Removing the requirement for an admission document for second lines of securities, proposing that the necessary disclosure of rights can be provided through market notifications.
• AIM Designated Market (ADM) route: Streamlining the nominated adviser's work for companies using the ADM route by relying more on existing public market disclosures, expanding the list of eligible markets, and revising the market capitalisation and admission period requirements.
• Dual-class share structures: The admission of dual-class shares on AIM, aligning with the founder-led nature of growth companies.
• Related party transactions: Changes to AIM Rule 13 to reflect existing shareholder safeguards and reduce the burden on companies who are required to consult with their nominated adviser and give a fair and reasonable statement. For example, it suggests exemptions for transactions related to employee share schemes and directors' indemnities.
• Class tests: Updating the class tests used to classify transactions and providing greater clarity in their application. It suggests changing the threshold for substantial transactions to 25% and removing the Profits test for AIM transactions (other than related party transactions). It also proposes a pro-rated Gross Capital calculation for investing companies acquiring minority stakes.

The FCA introduced deregulatory changes to the Listing Rules for Main Market issuers in July 2024. Since that time, a question on the mind of many practitioners has been: What happens to AIM? In that context, the discussion paper is a welcome start to answering it. Although the changes are not as drastic as those introduced for the Main Market last summer (not least because the AIM Rules have always been intentionally light touch) what is proposed seems sensible, and will represent a point of difference from the FCA’s Listing Rules. But the real question for the general health of the public markets is investor appetite – and for the time being this remains thin. However, when new AIM Rules are combined with the other reforms across the public markets, including the so-called Edinburgh Reforms, there will have been a comprehensive suite of changes to the supply side of the UK public markets. The regulators will certainly have done their part to help nurture that investor demand.