AIM-ING FOR LONDON?

What can AIM do for international companies?

An AIM quotation for an international company can allow access to a deeper pool of investors and can be a simpler and less costly means of achieving liquidity for its securities (as compared to a Main Market listing). Investors in such companies can benefit through participation in high growth companies and by being eligible for certain tax benefits.

Out of the 3,132 flotations on AIM since its launch, 525 have been international companies.

What types of issues arise in relation to international companies?

If a foreign company holds assets based in a non-familiar jurisdiction, marketing the shares in that company might be made easier if the group structure is changed slightly. This is usually done by a new holding company being placed above the foreign company by means of a 'share swap'. The new holding company will typically also be incorporated in an offshore jurisdiction (such as the Cayman Islands, British Virgin Islands or Channel Islands to take advantage of these jurisdictions' tax regimes). If the holding company is incorporated outside the UK, it will need to make arrangements for depositary interests in its shares to be traded in CREST (only UK securities and depositary interests representing the underlying foreign securities can be electronically settled in CREST). If the company is looking to raise money in conjunction with its admission to AIM, it will usually seek to offer its shares to a select number of investors by way of a private placement.

A review of the international company's applicable local laws will be set out in the company's AIM admission document. Company law in that jurisdiction may well be quite different from English company law. It is these differences that our multi-jurisdictional lawyers are well versed in elucidating in order to highlight any risks to investors whilst ensuring that certain AIM fundamentals are met e.g. freely transferable shares. Often the legal and financial due diligence review of an international company will take longer than the equivalent review of a UK company, so this needs to be factored into the transaction timetable.

Although international companies are subject to the law of their incorporation, their articles of association are usually tailored so that they contain certain important provisions of English law. This provides the necessary comfort to investors in relation to, for example, free transferability of shares (which is also an AIM Rule requirement), pre-emption rights and voting rights. Since the City Code will not apply to a company which is not incorporated or managed in the UK it is common to include provisions to incorporate elements of the City Code which would apply in the event of a takeover offer being made for the company. Experience has shown that investors prefer one share class capital structure with adequate protection against dilution.

UK and European investors will normally expect an international company to have at least one UK/Channel Islands based non-executive director on the board. Such a director will usually have extensive public company experience and will provide support and guidance to the foreign directors on the UK legal and regulatory regime.

Foreign companies which have been quoted on a designated international market (e.g. Australian Stock Exchange, Nasdaq, New York Stock Exchange and Toronto Stock Exchange) for at least 18 months may be eligible to use AIM's 'fast track' procedure to admission. Under the 'fast track' procedure a quoted company is not required to produce an admission document. However, if the company intends to make a public offering of securities, a prospectus may be required under the Prospectus Rules.

What about post-IPO?

Implementing (and continued implementation of) corporate governance practices similar to those adopted by UK public companies and stringent compliance with the AIM Rules for Companies and the Disclosure and Transparency Rules should generate ongoing investor confidence and interest. The company's lawyers and nominated adviser will support the company during and after the IPO in order to achieve this.