AIM’s thirtieth anniversary in June 2025 should have been a moment of celebration – instead, it was a moment of existential crisis. From its peak of approximately 1,700 companies in 2007, the market was home to fewer than 700 companies, with the effect of the global financial crisis (when 66 companies left the market due to financial difficulties) compounded by years of increasing regulatory complexity and the recent headwinds caused by Brexit and macro-economic issues. The introduction of revised listing rules in July 2024, which resulted in the AIM Rules being comparatively more burdensome in certain key areas, was seen by many as the nail in coffin for AIM. The market was no longer the innovative market tailored to meet the needs of growth companies which had been its hallmark when it was launched in 1995.
Against this backdrop, AIM launched a far-reaching consultation on its future, which came to an end just as the champagne corks were popping for the market’s anniversary celebration. The initial feedback and proposals have just been published. The document rightly emphasises AIM’s distinct role as a risk-tolerant, founder-friendly venue that bridges private markets and the Main Market. Its package of immediate measures – implemented via derogations and guidance pending formal rule changes which will take several months to implement – should be warmly welcomed. They will cut time and costs, streamline M&A and admissions, and better calibrate governance for growth companies. However, the more fundamental changes that are required to truly rejuvenate the market sit outside of AIM’s gift. Improvements in capital flows, tax incentives, and audit and regulatory proportionality are dependent on the support of the government and other regulators. Speed is of the essence if AIM is to regain its position as the growth market of choice for young, entrepreneurial companies.
What AIM has got right
AIM has sensibly prioritised changes that will have an immediate effect and has chosen to implement these changes by way of derogation of the current rules rather than making companies wait until the rule book has been rewritten.
The ability to treat acquisitions as substantial transactions rather than reverse takeovers if there is no fundamental change of business should materially increase execution speed and reduce costs, particularly as this will avoid a readmission process. A more pragmatic stance on suspensions in reverse takeovers, where appropriate disclosure substitutes for an admission document, likewise addresses a well-known issue.
On admissions, permitting derogations to use UK GAAP (FRS 102) for historical financials will save time and money as it will obviate the need for accounts to be restated in IFRS. Similarly, the ability to incorporate historic financial information by reference will be more cost effective without reducing the level of information available to investors (and, perhaps more important, it will level the playing field with applicants to the Main Market who have long had this ability under the Prospectus Regulation Rules). Streamlining the Designated Market fast-track admission procedure should help AIM reposition itself for international issuers who might otherwise default to local or U.S. growth markets.
The entrepreneurial spirit of AIM has been reignited with the acceptance of dual-class share structures on a basis equivalent to the Main Market, which should attract more founder-led businesses without denying investors the clarity of full disclosure. Removing the requirement for nominated advisers to give a “fair and reasonable” opinion on director remuneration where contractual protections are in place strikes a better balance between regulatory oversight and practical corporate finance advice. Most important, the commitment to recalibrate the nominated adviser role away from process-heavy compliance and towards higher-value corporate finance advice is long overdue and will hopefully see more firms willing to act as nomads.
Finally, piloting trading halts for secondary fundraisings and digitising the admission document are the kinds of innovations that made AIM successful in the first place, and, more important, they align with what growth investors say they want to see.
Where momentum might be lost
For AIM to regain ground as the default UK market for growth companies, three structural issues need to be addressed, none of which are within the control of the market itself.
First, improvements in capital flows. Institutional allocations to smaller quoted companies have been falling for years, compounded by liquidity concerns in the wake of the Woodford collapse and by pension fund governance that favours scale and perceived liquidity. While initiatives such as the Mansion House Accord, which brought together 17 of the largest pension funds and set out their commitment to invest at least 10% of their main funds in private markets (including AIM) by 2030, should be welcomed, the early signs are that this has stimulated investment in limited areas and that AIM has not so far been a principal beneficiary. Broadening the remit of the British Business Bank to invest in AIM companies would also provide a much needed boost, but initiatives such as this require policy changes and will only work if policies are then put into practice by investors.
Second, tax certainty. The availability of risk capital incentives has underpinned AIM since its inception. However, the recent changes to Business Property Relief for AIM has introduced uncertainty at precisely the wrong time, undermining a long-standing channel of retail capital and complicating founder succession planning. Even though the availability of EIS and VCT relief has been extended to 2035 and the recent budget relaxed the investment restrictions for EIS and VCT funds, the reduction of income tax relief for investors into VCT funds from up to 30% to up to 20% may mean that less VCT money is available in the future. The government does at least appear to recognise that the stamp duty exemption for AIM shares is of vital importance to investors, and this has not been removed in spite of rumours to the contrary since the current government came to power.
Third, audit proportionality and reporting burden. The feedback highlights a misalignment between the legal scope of Public Interest Entity requirements and the approach of many audit practices, which treat all AIM companies as PIEs, thereby bringing them within the scope of the FRC’s Annual Quality Review and driving up audit fees. Conversely, it is believed that only around 85 AIM companies are within the direct scope of the AQR framework. Until the FRC clarifies AQR scope and provides guidance on audits for smaller and less complex entities, audit costs will continue to be a disincentive for many companies which might otherwise seek admission to AIM. Similarly, the growing requirements in terms of sustainability reporting, while laudable from an environmental perspective, can be a deterrent, and the benefit of any extension of the current regime to small and medium-sized AIM companies should be carefully weighed against its deterrent effect.
Do the measures go far enough?
AIM has probably gone as far as it plausibly can within its remit, and it has picked the right priorities. The immediate measures will streamline acquisitions and admissions and will go some way to lighten the regulatory burden. If swiftly translated into formal rule changes, they should make a visible difference in 2026 admissions and secondary activity.
On their own, however, they are unlikely to reverse the structural headwinds that have affected AIM in recent years. The next phase must synchronise market design with policy: channel more institutional capital into AIM companies, maintain tax certainty for risk capital, and rightsize assurance and reporting obligations for smaller public companies. AIM has put forward a credible blueprint – the test now is whether other policymakers can move with the speed and clarity that growth companies demand.
Client Alert 2025-293
