Moving to the Main Market from AIM – key considerations for issuers

The ESCC category is a single category for UK listings of equity shares in commercial companies and replaced the previous standard listing and premium listing categories on the Main Market. There are a number of reasons why an issuer might wish to move from AIM to the ESCC.

Rules and eligibility criteria for the ESCC category

If an AIM-listed issuer wants to apply for its shares to be listed on the ESCC category, it must comply with the eligibility requirements set out in UKLR 5. These requirements are less onerous than they were for a premium listing, but more onerous than for the previous standard listing. The ESCC criteria include:

• Shares in public hands (free float): A minimum of 10% of the issuer's shares must be held in public hands at all times.
• Market capitalisation: The issuer's shares must have a minimum expected aggregate market value of £30 million.
• Controlling shareholder: Where the issuer has a controlling shareholder (being any person who exercises or controls 30% or more of the voting rights, either on their own or together with any person with whom they are acting in concert), it must demonstrate that it is still is able to carry on its main business activity independently from such controlling shareholder at all times.

Many of the previous eligibility criteria for a premium listing have not been retained in the new UKLR requirements for an ESCC category listing. These include requirements for historical financial information, a minimum three-year track record, or a working capital statement. The FCA says that this is to encourage a more diverse range of issuers to list and to do so at an earlier stage, and to allow investors greater flexibility to make choices.

Key continuing obligations for the ESCC category

There are multiple ongoing considerations for an AIM-listed issuer which is applying to list on the ESCC category, including:

• Appointing a sponsor: The FCA considers that a sponsor's appointment on an IPO is a cost effective and proportionate way for it to be comfortable that an issuer has met the relevant listing and prospectus requirements and has established procedures to be able to comply with its ongoing listing obligations. Post-admission, the role of a sponsor is reduced compared with the previous premium listing regime, but one will be required for: a reverse takeover circular; further issues where a prospectus is being produced; a fair and reasonable opinion on a related party transaction; or where the issuer seeks guidance, modification or a waiver of FCA rules.
• Governance: The issuer must apply the UK Corporate Governance Code (the "UKCG Code") (instead of the QCA Corporate Governance Code, which it will likely have applied whilst traded on AIM) and include a statement in its annual financial report regarding how it has applied the principles set out in the UKCG Code.
• Significant transactions and related party transactions: For such transactions, there is no longer a requirement for a listed issuer to obtain shareholder approval or to publish a circular. The new disclosure-based regime is less onerous, but issuers should note that more detailed announcements are required.

Reasons to transfer to the ESCC category from AIM

It is a widely held view that the Main Market is for companies that are more established and have a higher market capitalisation than those on AIM. An AIM-quoted issuer might wish to transition to an ESCC category listing to:

• Widen its investor pool: Certain investors may be unable or unwilling to invest in an AIM-quoted issuer, and the issuer's profile will be raised through increased analyst coverage.
• Improve publicity and liquidity: An ESCC category listing is required for an issuer to have the opportunity to be included in the FTSE indices. This could also increase liquidity in the issuer's shares, through passive investment via FTSE tracker funds.
• Improve market confidence: Due to the more stringent regulatory and governance requirements of the Main Market compared with AIM (albeit more relaxed to the requirements which applied to the previous Premium Segment), investors are likely to have more confidence in the performance of the issuer.

For an AIM-listed issuer to transfer to the ESCC category, it will need to:

• Cancel its AIM admission: The issuer must announce its intention to cancel its AIM listing, give the LSE at least 20 business days' notice of its proposed cancellation date and (unless waived by the LSE, in light of the issuer's existing AIM listing) receive the approval of at least 75% of its voting shareholders.
• Apply for admission to the ESCC category: The issuer must apply to the FCA for the admission of its shares to trading. This process will include the approval of a prospectus by the FCA, and the directors must confirm that the issuer has taken reasonable steps to establish adequate procedures, systems and controls to enable it to comply with its obligations under the UKLR. Unfortunately there is no "fast track" procedure which AIM companies can avail themselves of to transfer to the ESCC category.