Food for thought: AIM Company censured and fined for non-compliance with AIM Rules

​An overview of the public censure and fine of £450,000 of Real Good Food plc for breaches of AIM Rules 10, 13, 17, 19, 21 and 31.

On 30 May 2019, the London Stock Exchange published a Disciplinary Notice about the public censure and fine of £450,000 of Real Good Food plc (Company) for breaches of AIM Rules 10, 13, 17, 19, 21 and 31. (The fine was discounted to £300,000 for early settlement.)

Details of the public censure have been published for the purpose of educating the market on the expected standards of conduct for AIM companies under the AIM Rules for Companies (AIM Rules). The Notice states that the new Board fully co-operated in the investigation but, had it not, the fine for the breaches would have been substantially higher.

The Notice also states that “robust procedures and controls, overseen by independent non-executive directors who can hold management to account, are essential to ensure corporate integrity, considered judgement and accountability. It is therefore incumbent on AIM companies to ensure that appropriate corporate governance and financial controls are properly embedded in culture and effective in practice. Failure to do so gives rise to the inherent risk of breaches of the Company’s AIM Rules obligations."

Our view

According to the Notice, while some Board members were not aware of this, others had concerns about a trading update of 2017 EBITDA of between £5m and £5.4m but did not raise these concerns with the nominated adviser. The Company later had to update its 2017 EBITDA expectations to approximately £2.0m, instead of £5 to £5.4m, and its 2018 EBITDA was £2.3m lower than expected. This and the Notice generally reinforces the need for formality and rigour in approving announcements and the importance of directors speaking up to each other and to the nominated adviser.


The Company was publicly censured and fined because it breached:

AIM Rule 10: for failure to take reasonable care about the information contained in its trading update on 29 June 2017 and consequently had notified: (1) misleading information concerning its expected 2017 EBITDA; and (2) misleading and/or incomplete information regarding the progress of the Company’s expansion plan and expected contribution to its 2018 budget. The numbers had not factored in concerns about ongoing legal claims or funding and operational delays with the Company’s expansion plans.

AIM Rule 13: as it failed to notify, without delay, consultancy payments made to the former chairman of the Board, over and above normal remuneration, for the financial years ended 31 March 2015 and 2016 inclusive. These payments involved a related party transaction which should have been disclosed when the transactions (in this case on an aggregated basis) exceeded the 5% threshold under the class tests in Schedule Three to the AIM Rules.

Also, the directors who were independent of the transaction did not, in consultation with the nominated adviser, consider whether the consultancy payments were fair and reasonable insofar as the Company’s shareholders were concerned.

AIM Rule 19: as it failed to disclose in its audited accounts certain related party transactions and fees of £56,000 paid as remuneration for one non-executive director. The related party transactions were consultancy fees paid to a non-executive director for three consecutive years, and those paid to the former Chairman, which exceeded 0.25% under the AIM Rules class tests and a loan of £39,000 to the former Chairman which also exceeded the 0.25% threshold.

AIM Rules 10, 17 and 21: for the former Chairman’s dealing in the Company’s securities during a close period (as then called). This was a breach of AIM Rule 21 which required the Company to ensure that its directors did not deal during a close period; a breach of AIM Rule 17 as it failed to notify, without delay, the dealing, when it had all relevant information to make that notification; and a breach of AIM Rule 10 when the notification was made as it contained an incorrect transaction date which gave a misleading impression that the dealing did not take place during a close period.

AIM Rule 31: for failures in the Company’s procedures and controls to comply with the AIM Rules; failure to ensure that each of its directors accepted responsibility, collectively and individually, for AIM Rules compliance; and failure to provide timely or accurate information to the nominated adviser and/or seek AIM Rules advice and guidance whenever appropriate.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.