When the London Stock Exchange created the AIM Market in 1995 its goal was to create a market place appropriate to younger companies. Thus a more flexible and practical approach to regulation, in comparison to the Main Market, was needed.
It also recognised that in order to be able to provide this facility at a cost which was acceptable to the companies it wanted to attract, it would not be able to provide the same team of regulators which monitor the companies on the Main Market. Therefore regulation of AIM Companies was outsourced to a new type of adviser: the NOMAD.
The importance of the NOMAD role is demonstrated by the fact that an AIM company must have a one at all times, as without one they would effectively be unregulated.
The primary function of the NOMAD is to decide whether a company is suitable for AIM, both at the Introduction or IPO and on an ongoing basis. The NOMAD owes a duty of care to the London Stock Exchange to ensure that the company does not impact adversely on the reputation and integrity of the AIM Market and the London Stock Exchange.
The NOMAD will also project manage the flotation process. It is their job to bring together all the various advisers, set a timetable and allocate responsibilities.
They will advise and guide the company at every stage of the process, and will ensure that the directors fully understand the obligations and responsibilities that come with being on the board of a company listed on the AIM market. They will co-ordinate and assist in the drafting of the Admission Document.
After the company has been admitted to trading it must continue to comply with the AIM Rules. The NOMAD will ensure that the company has sufficient systems and procedures in place to allow this happen.
They will provide advice and guidance on how and when to announce company news to the market, and also on the appropriate level of corporate governance.
The NOMAD will also advise on issues arising out of The City Code on Takeovers and Mergers.
Role of the Broker
The primary role of the Broker is to manage dealings in the AIM company’s shares. Thus he will help the company tap into the pool of investors who have an appetite for AIM companies thus providing the opportunity to raise finance for further development both at the time of flotation and subsequently thorough secondary fundraisings.
Through their list of both private and institutional contacts they will attract further investors to the company, improving liquidity, visibility and marketability.
Role of the Reporting Accountant
In the first instance, the role of the Reporting Accountant is to review and report on the historical and forecast information that is presented in the Admission Document.
They must report that in their opinion the historical information and forecasts present a true and fair picture of the company at the time of admission. In some cases where a private company has not been subject to a full audit, the Reporting Accountants will provide this service.
Their role is in fact far more expansive than this. They will provide expert advice on a wide variety of issues including corporate structure, financing structure, tax planning, and employee share schemes.
Role of the Corporate Lawyer
In any AIM transaction, be it a flotation or secondary fundraising, two firms of lawyers will be retained; the first will advise the company, and the second will advise the NOMAD and Broker. There may also be a need to retain a firm of lawyers if the company is resident overseas, to aid with the due diligence process.
The lawyers to the company are responsible for compiling the legal due diligence which is essentially an in depth study into the company, including information on its business and activities, structure, assets, employees, contracts, risk factors, and intellectual property.
This will take the form of a report to the NOMAD, who will use the report to identify any issues that need to be resolved prior to the flotation, and it may form the basis for part of the Admission Document.
They will also draft the “Additional Information” section of the Admission Document in addition to scrutinising the document as a whole. An important part of this process is verification, whereby the lawyers compile documents so that statements made in the Admission Document can be independently verified as based on fact.
The lawyers to the NOMAD are responsible for drafting the letters of engagement and formal contractual documentation between the company and the NOMAD, as well as reviewing the Admission Document and supporting information, together with any other investment communications issued by the NOMAD.
Role of the Financial PR Company
The PR company will ensure that the company’s strategy, business model, directors and vision are presented to the investment community in the best possible way. They will advise the company and coach the directors on how best to present the company when out on the road trying to secure funding.
On an ongoing basis they will use their contacts in the media to ensure that the company has maximum visibility. This will include helping to draft and release RNS news announcements to the market.
