Trading suspensions are put in place to protect investors by pausing activity until serious questions about the company have been addressed. In this article, discover the reasons why shares are most often suspended, what to expect during suspension, as well as how AIM suspensions differ from the Main Market.
What are some of the reasons behind shares being suspended?
Broadly speaking, companies have their shares suspended either because of breaking the rules of listing on the market, or pending an announcement clarifying the company’s financial position.
In terms of breaking the rules of listing, trading is suspended to allow the company to formally address these matters of concern to the satisfaction of regulators, thereby protecting current and potential investors.
When it comes to the AIM Market, as well as failing to submit half-year reports and annual accounts on time, other common causes for shares being suspended include:
- The AIM company ceasing to have a nominated adviser. If within one month of this suspension, the company has failed to appointment a replacement, then the AIM securities will be cancelled (Rule 1).
- The AIM company announcing that a reverse takeover transaction has been agreed or is being contemplated. In this instance, shares will remain suspended until the company has published its admission document in respect of the enlarged group or the proposed negotiations are terminated (Rule 14).
- The AIM company putting in place changes that can be judged a fundamental change of business. Under such circumstances, the company must work alongside their adviser to re-prepare their AIM admission document and go through the processes required for re-admission to trading of its shares (Rule 15).
The ruling that envelopes any decision to suspend shares is Rule 40 and what is referred to as maintenance of an orderly market. Under this ruling, the Exchange may suspend the trading of AIM securities where:
- Trading in those securities is not being conducted in an orderly manner
- It considers that an AIM company has failed to comply with the rules
- The protection of investors so requires
- The integrity and reputation of the market has been or may be impaired by dealings in those securities
Here is the full list of AIM Rules for companies.
What happens to your shares when the company has been suspended?
In such circumstances, you remain a shareholder with all of the rights of a shareholder under company law, but you will be unable to execute or place any trades for the securities of the company in question.
Nevertheless, the suspended company must still comply with all listing rules applicable to it. This means that shareholders should continue to receive announcements on developments that require announcement under these rules, so you shouldn’t be left completely in the dark. In addition, once the circumstances leading to the suspension have been resolved or clarified sufficiently, then a notification to the market is immediately required.
Finally, when it comes to AIM, should the securities of any company be suspended for six months, the securities will be be cancelled from trading unless an extension has been granted.