An AIM company has been fined almost £500,000 after failing to notify price sensitive information to the market despite the information arising as part of confidential negotiations.
Disclosure of price sensitive information
Under the AIM Rules, an AIM company must notify, without delay, any new developments which are not public knowledge which, if made public, would be likely to lead to a significant movement in the company’s share price – known as ‘price sensitive information’. Notification can be delayed if the company is in negotiations, provided the information is kept confidential.
Bushveld Minerals Limited is a mining enterprise that was admitted to AIM in March 2012. Four years later, it was negotiating the acquisition of a vanadium mine which, once completed, would be a reverse takeover under the AIM Rules. To facilitate the transaction, the company entered into an exclusivity agreement which required it to pay a fee. The fee would be held subject to an undertaking that it would be released once certain conditions had been met by the other party to the reverse takeover.
The company’s nominated adviser (or ‘nomad’) advised that paying the fee was a new development requiring a without delay disclosure under the AIM Rules. This disclosure, which would also have led to the disclosure of the reverse takeover transaction, would have resulted in the company’s shares being suspended under the AIM Rules. But the company did not want its shares to be suspended until later in the transaction process. It believed that this would hinder its ability to raise funds for the purposes of the transaction.
The company did not agree with its nomad and asked its lawyers for advice. Unhelpfully, this advice conflicted with that of the nomad.
Obligation to disclose
The fee was paid, and the undertaking given, in April 2016. This gave rise to a without delay notification obligation as the information was no longer confidential and the company could not rely on the exception in the AIM Rules. But the company didn’t tell its nomad, despite the fact that during the period when the nomad was providing its advice, the company should have known that the nomad was operating under an assumption that the undertaking had not been given and so the obligation to disclose had not arisen.
The issue only came to light when the company discussed developments in its fundraising activities with its nomad. On 22 April 2016, details of the fee were disclosed to the London Stock Exchange and the company’s shares were suspended.
The company acknowledged that it had made an error of judgment by not taking its nomad’s advice into account and by not informing it of the fee giving rise to a disclosure obligation.
Breaches of the AIM Rules
The London Stock Exchange found that, by failing to comply with its obligation to notify information without delay when the fee was paid, the company had breached the AIM Rules. The Company failed to disclose the information despite the advice received from its nomad.
An AIM listed company can delay disclosure of information relating to matters subject to negotiations which are kept confidential. But the payment of the fee, and giving the related undertaking, created an obligation to disclose the new development.
The AIM Rules also require a company to provide its nomad with any information the nomad reasonably requests or requires in order for it to carry out its responsibilities. By failing to provide its nomad with the information relating to the fee, the company had breached this requirement. In the circumstances, the company should have known that this was information the nomad would reasonably require to fulfil its responsibilities owed to the London Stock Exchange.
The company was fined £490,000, discounted from £700,000 for early settlement, for these breaches of the AIM Rules. The company has since strengthened its corporate governance measures to address similar matters going forward and the London Stock Exchange hopes that the making details of these particular breaches public will encourage other companies to get internal processes in order to ensure they comply with the AIM Rules.
This blog post was written by Elliot Gibson. For further information, please contact:
Sophie Brookes, partner, Corporate team
T: 0161 836 7823