SEBON Seeks Feedbacks From The Government On The Proposed Rule Regarding Secondary Market Trading By SME Companies

The proposal of the Securities Issuance and Trading Regulations of Small and medium-sized enterprises (SMEs) has been created and released by the Securities Board of Nepal (SEBON).

SEBON has determined to classify companies with paid-up capital of less than Rs. 25 crores as SME companies. In the IPO offered by such businesses, a minimum of 250 shares may be applied for and the shares will typically have a nominal value of 100 rupees.

SME businesses can now access the secondary market, but first, they must issue an initial public offering (IPO) with no less than 30% and no more than 49% of their authorized capital. As a way to raise money, they can also issue rights.

The Board has also provided for the public issues of securities at a premium. The financial statements indicate that the issue price may be set at a maximum of twice the net worth per share. Additionally, such companies must have earned an average or higher credit report. Through TMS, stock trading of such companies will be conducted. If a listed corporate entity so chooses, it may also freely delist securities.

A company's common shares cannot be transferred for five years. The regulations stipulate that securities organized organizations cannot sell shares before a time of five years have passed since the date of the initial public offering for the general public.

For a very long time, the board had wanted to run a distinct SME platform for trading shares of small and medium-sized businesses. The board also gave NEPSE the go-ahead to make the necessary preparations. However, following NEPSE's statement that the SME platform cannot be used without a clear legal foundation, it will be incorporated into the rules by enacting legal changes. In order to transact business, SEBON has created a separate SME platform index and placed low capital companies on it. 

Inquiries and recommendations regarding the aforementioned draft have been made to SEBON by the relevant organizations, who have been asked to respond within 15 days of the draft's release. A pdf of the draft is attached below.

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