The London based Alternative Investment Market ("AIM") has helped many growing small medium enterprises ("SMEs") gain access to financing required for expansion. Apart from opening the company to public trading and thus providing a new capital market after having exhausted other avenues (i.e. private equity, trade sale or debt financing), the Alternative Investment Market also provides other benefits as well.
Firstly there are fewer regulatory requirements than listing on other exchanges. There is a lot more red tape associated with other exchanges which the Alternative Investment Market just simply doesn't require. There are also no restrictions on market capitalisation, and financial reporting is more flexible. There are no liquid assets tests and extensive trading history is not required.
AIM often seems to attract a specific type of investor - a visionary - who wants to help companies develop. It is often the case that Alternative Investment Market investors assist in more ways than just financing the company; they are willing to provide their expertise and networks to their investment.
The companies are also entitled to deal with experts who can help them navigate the exchange and help make the right decisions for the company. This service cannot be found to the same extent in other exchanges.
For investors, there are also many benefits to investing in an AIM listed company, the main ones being:
- Business property relief - there is 100% Inheritance Tax relief to those who quality (investment must be held for two years) under Business Property Relief.
- Relief for losses - if the investment fails or is disposed at a loss, based on the taxpayers tax rate, losses can be relieved against gains in the year of loss or subsequent year or against income in the year of the loss or prior year.
- EIS benefits - Enterprise Investment Scheme ("EIS") listed companies provide 30% initial income tax relief on investment, exemption from Capital Gains Tax on disposal, and loss relief. There is also Capital Gains Tax deferral by reinvestment. The relief is limited to income tax relief for the year.
- VCT benefits - for Venture Capital Trust ("VCT") listed investments there is an exemption from tax on dividends and Capital Gains Tax on disposal, and there is 30% Income Tax relief on amount invested.
- 0% Stamp Duty - from 28 April 2014, certain companies that fall under the "growth market" category are exempt from Stamp Duty and Stamp Duty Reserve Tax ("SDRT"). (Recognised growth markets are defined as markets where a majority of companies on the market have a market capitalisation of less than £170 million or the admission rules require companies to demonstrate at least 20% compounded annual growth over the last three financial years of submissions).
- ISAs - in 2013, AIM listed companies were allowed to be included in Individual Savings Accounts ("ISAs"), thereby encouraging longer term investment by providing shelter from Inheritance Tax, Income Tax and Capital Gains Tax.
- Entrepreneurs relief - investors owning at least 5% of a company for over one year may be eligible to reduce their Capital Gains Tax to 10%.
Based on these benefits to companies and the attractive tax offerings to investors, it is no wonder that the Alternative Investment Market is one of the world's most successful and popular exchanges. And the phenomenal growth experienced in the first half of 2014 compared to the prior year shows that confidence in it is ever increasing.