AIM: Clarification on “Close Period” Rule

In its latest newsletter AIM Regulation gave its guidance on what is considered to be a “close period”.

Directors and certain employees of companies admitted to trading on AIM are prevented by AIM Rule 21 from dealing in any of the company’s AIM Securities during a close period.

“Close period” is generally the period of two months prior to publication of the company’s annual results.

AIM Regulation has commented that directors’ dealings are sometimes taking place ahead of the publication of annual accounts, with the practice of some companies following the assumption that the two month close period ends on the publication of preliminary results. However, not all preliminary results contain the key information that would be submitted in the annual accounts.

AIM Regulation has confirmed that a close period is interpreted as being the two months preceding the publication of annual accounts in accordance with Rule 19, namely when the annual audited accounts are published and sent to shareholders without delay. Alternatively, under Rule 26, if a company follows the electronic communication provisions and publishes its annual accounts on its website then, provided this fact and the key information relating to those accounts have been notified to the market, a Nomad can consider the close period to be ended.

Dealings before then, including after publication of the preliminary results, will only be permitted if a company’s Nomad obtains a derogation from AIM Regulation. In the case of preliminary results being published, although the AIM rules do not require particular information to be contained in the preliminary results, it is expected that a derogation will only be granted where the preliminary results contain all the information necessary to enable investors to form a full understanding of the company’s financial position, including its assets and liabilities.

This raises the question whether the two month close period can commence prior to the publication of preliminary results. On a simple reading of the AIM Rules, the close period only begins two months prior to the publication of the annual results and not the preliminary results. AIM Regulation will be keeping the operation of the close period rule under review and it is expected that further guidance will be issued on the matter to deal with other queries.

As a caution, companies should check any share option plans granted. If options can be exercised within a defined period following publication of preliminary results, the company needs to be satisfied that the exercise period does not overlap with a close period as publication of preliminary results may not end the close period.

Bulletins are for general guidance only. Legal advice should be sought before taking action in relation to specific matters. Where reference is made to Court decisions facts referred to are those reported as found by the Court. Please note that past bulletins included in the Archive have not been updated by any subsequent changes in statute or case law.