Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: whether alternative investment market ("AIM") of London Stock Exchange ("LSE") is a prescribed stock exchange
Position: no
Reasons: documentation provided indicated that AIM is a market for unlisted securities and that shares sold on AIM are not considered listed since the shares do not go through the 2-stage admission process required for listing on the LSE.
XXXXXXXXXX 2001-009663
D. Yuen
June 24, 2002
Dear XXXXXXXXXX:
Re: Alternative Investment Market ("AIM")
of the London Stock Exchange ("LSE")
We are writing in response to your letter of August 13, 2001 wherein you requested our views on whether the AIM of the LSE is a prescribed stock exchange described in section 3201 of the Income Tax Regulations. You have provided us with information regarding the AIM which was taken from the website of the LSE. Unless otherwise stated all references to a statute herein are to the Income Tax Act (Canada), R.S.C. 1985 (5th Supp.), c. 1, as amended, (the "Act").
From the information provided we have noted the following:
1. The LSE provides a choice of markets: either the main market or the AIM, to which companies may join.
2. The LSE regulates capital raising, assessing the applications of companies, monitoring listed and AIM companies' ongoing compliance with the rules, and dealing with any rule breaches. This comment shows that the LSE considers there to be two types of companies (that is, listed and AIM companies).
3. There is a two-stage admission process for companies that list on the main market of the LSE. A company's securities need to be admitted to the Official List by the UK Listing Authority (the "UKLA"), a division of the Financial Services Authority, and also admitted to trading by the LSE. Once both processes are complete, the securities are officially listed on the main market of the LSE.
In parallel to the UKLA's listing process, the LSE has its own set of Admission and Disclosure Standards. The Standards contain admission requirements and ongoing disclosure requirements to be observed by companies seeking admission, or already admitted, to trading on the market for listed securities. They do not apply to companies seeking to be admitted to the AIM, the market for unlisted securities.
4. The AIM is open to companies from all sectors and from all over the world. Whatever the company's country of origin, the application process remains the same, the main requirement being that the company must be appropriate for the market. This judgment is made by the company's nominated advisor which is a firm of experienced corporate finance professionals approved by the LSE.
Each company applying to the AIM must:
? appoint a nominated advisor.
? appoint a broker.
? have no restrictions on the free transferability of shares.
? prepare an admission document. This must include all relevant information on the company and its activities - including financial information and any projections, together with details of all directors. This is made available to all prospective investors.
? pay a flat annual fee.
5. The main differences in the admission criteria for the LSE main market and the AIM are:
Main Market
? minimum 25% of the shares in public hands.
? normally 3 year trading record required.
? prior shareholder approval for substantial acquisitions and disposals.
? pre-vetting of admission documents by the UKLA.
? sponsors needed for certain transactions.
? minimum market capitalization.
AIM
? no minimum shares to be in public hands.
? no trading record requirement.
? no prior shareholder approval for transactions.
? admission documents not vetted by UKLA.
? no minimum market capitalization.
The admission requirements for shares trading on the AIM are completely different from those for the main market of the LSE. Investors buying and selling shares on the main market of the LSE are protected by the rigorous set of admission requirements that corporations applying for a listing must satisfy. Many of those requirements need not be met in order to have shares traded on the AIM. Accordingly, it is our view that shares trading on the AIM would not be shares listed on a prescribed stock exchange for the purposes of the Act.
These comments are provided in accordance with the guidelines set out in paragraph 22 of Information Circular IC 70-6R5 dated May 17, 2002 issued by the Canada Customs and Revenue Agency (the CCRA) and are not considered binding on the CCRA.
Yours truly,
for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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