AIM De-Lists Three Dozen 'Cash Shells'

by Jason Gorringe, Tax-News.com, London

10 April 2006

Shares in 38 companies listed on London's Alternative Investment Market (AIM) were suspended last week, after the companies in question failed to meet a deadline to invest money raised since flotation.

The so-called 'cash shells' all missed a twelve month deadline which passed on April 1 for completing at least one deal, and were unable to convince stock market authorities that they had made major progress with their investment strategies.

The London Stock Exchange's junior bourse, a breeding ground for start-up ventures, witnessed a flurry of activity in recent weeks as 15 companies managed to pull off an acquisition before the deadline expired.

According to Richard Webster-Smith of the LSE, the move was motivated by a desire to protect the "integrity and reputation" of the AIM.

Mr Webster-Smith was quoted by The Herald as suggesting that some of the smaller cash shells were "potentially much more open to abuse in relation to price manipulation".

Under old rules, cash shells could raise as little as GPB100,000, but the exchange has since raised the minimum threshold to GBP3 million.

He also stated that these cash shells could be used as vehicles for tax avoidance.

"There are some useful capital gains and other tax breaks that are there to help small, growing companies attract equity finance, and we would not want to see these jeopardised," he noted.

The 38 companies whose shares have been de-listed now have six months in which to convince the exchange authorities about their validity by making an acquisition and publishing a prospectus, before they can have their shares re-listed on the AIM.

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