SEBON Amends IPO Regulations: Key Changes Unveiled

The Securities Board of Nepal (SEBON) has made significant revisions to its IPO regulations through the seventh amendment to the Securities Registration and Issuance Regulations. These changes, approved by the Government of Nepal on Bhadra 6, will come into effect from Bhadra 6.

Notable Amendments

1. Introduction of Green Bonds: Companies are now permitted to issue green bonds, with funds raised earmarked for sustainable development projects and initiatives addressing climate change. Foreign investors are also eligible to invest in these bonds.

2. IPO Restriction: Companies with a business operation period of less than 10 years are no longer eligible to apply for IPO issuance, primarily targeting hydropower companies.

3. Private to Public Transition: Companies that were previously registered as private entities, completed two financial years of operations, converted to public status, and have an approved audit report from the latest fiscal year's general meeting are eligible for IPO issuance.

4. Audit and Going Concern Requirement: IPO applicants must complete audits and general meetings in accordance with prevailing laws. The audit report should confirm that the organization is viable as a "going concern" in the future.

5. IPO Premium for High Capital Companies: Companies with a paid-up capital of 1 billion or more and two consecutive years of net profit are permitted to issue IPOs at a premium. In addition, the amended provision states that the companies below 1 billion of paid up capital should have 3 consecutive years in profit.

6. Premium Price Calculation: Premium prices will be calculated differently for companies with paid-up capital exceeding 1 billion and those with less. Detailed methodologies based on audit reports and international practices are specified for both categories.

7. Underwriter Verification: The premium price must be verified and submitted by the underwriter.

8. General Meeting Approval: The premium price must also be approved by the general meeting of the company.

9. Securities Ownership Period: Securities owned by private equity, venture capital, hedge funds, or similar entities can only be sold to the general public one year after share allotment.

10. Investment in Infrastructure Projects: An investment company established jointly by the Government of Nepal and non-resident Nepalis can invest in infrastructure-related projects for non-resident Nepalis with foreign citizenship or permanent residence permits, subject to Nepal Rastra Bank approval and foreign currency payments. Separate guidelines will be issued for transactions related to these securities.

11. Online Submission: IPO-related documents and details can now be submitted to SEBON through online channels.

12. Revised Definition of Paid-Up Capital: The paid-up capital is now defined as "the amount paid according to the shares agreed to be received by the shareholders of the company."

These amendments bring substantial changes to IPO issuance regulations in Nepal, aiming to promote responsible investment and enhance market transparency. Companies and investors are advised to adhere to the updated guidelines as they come into effect.