The Ministry of Finance (MoF) has submitted a draft regulations on SME securities trading — Securities Issuance and Transactions of Small and Medium Enterprises Regulation, 2081 to the Cabinet for approval.
Proposed by the Securities Board of Nepal (SEBON), the draft submitted to the MoF 18 months ago includes plans to operate a separate platform to facilitate the trading of shares for Small and Medium-sized Enterprises (SMEs). Proposed reforms in the regulations are expected to open new financing avenues for Nepal’s SMEs, boosting their capacity to raise funds through the capital market.
Companies operating as a public entity for at least one year and with paid-up capital up to NRs 250 million will be eligible to be listed on the platform. They can issue Initial Public Offerings (IPOs) between 30% to 49% of their issued capital and can even at premium prices.The existing rules allow IPOs between 10% and 39%.
No rating is required for companies on SMEs platforms, mentions the draft regulation, but SEBON may ask for one if it considers necessary.
The founders of companies listed on the SME platform will have to stay in a 5-year lock-in period as per the proposed regulation. Whereas, private equity firms, venture capitalists, hedge funds registered with SEBON or and internationally can sell their shares at the secondary market after a year from the day of IPOs issued.
Currently, all the listed company shares are traded through a single index on Nepal Stock Exchange (NEPSE).
