In March, the London Stock Exchange cracked down on AIM’s mining and oil & gas sectors by issuing new guidance in a bid to tighten up the process of coming to the AIM market. The new guidance now clarifies when resource companies must provide an expert’s report on their reserves and resources (known as a Competent Persons’ Report) in the admission document, what the report should contain and to what standard it should be produced. In addition it explains the reporting standards required following admission whenever the company updates the market (see the article by Alexander Keepin in the June issue of IM).
Charles Bond, corporate partner at leading law firm Cobbetts LLP, says: “It is no secret that there has been a sense of unease amongst investors, advisers and the wider public markets community, that the flexible approach to regulation which has been so attractive to companies wanting to come to AIM, could also lead to a major upset. Lack of full technical disclosure by these companies has been a real concern, especially when compared to other regimes.”
“However, the general consensus amongst the AIM community is that the new guidance has provided more confidence in the market and is a positive sign of things to come, indeed setting a standard for the main market.”
Bond continues: “Although some commentators may say that the guidance is only that and does not go far enough to bring AIM into line with other markets, it does provide the advantage of retaining the markets’ appeal of flexibility whilst maintaining credibility. Both of these factors are particularly important in attracting international companies, particularly as the sector for markets and exchanges enters into an era of consolidation.”
With so many rules and regulations to consider, Bond offers some advice to resource companies looking to be admitted: “With many resource companies already on the market, investors are now beginning to look for companies with international assets that are going into production rather than merely exploration. In addition, companies coming to London must make sure that their corporate governance is in order, including having the right mixture of non-executives and executives on the board and being able to demonstrate clear internal reporting and control procedures. ”
Advisers play a fundamental part in the whole process and finding the right one for your business can also be difficult: “Nomads are essential in navigating the whole process but with some 80 to choose from, it can be tricky to find one that best suits your needs. Choose one that you have a good relationship with, who represents investors relevant to your sector and who has a good reputation. Other advisers needed are reporting accountants, a broker (normally covered by the Nomad), a PR adviser, and of course, a UK legal adviser.”
