‘Small and Medium Enterprises’ to Trade in Separate Platform: SEBON
January 17, 2025 | Investopaper
Securities Board of Nepal (SEBON) has introduced new regulations allowing companies with paid-up capital of up to Rs. 25 crores to trade shares on a separate platform in the secondary market.
This initiative, part of the “Securities Issuance and Trading Regulations for Small and Medium Enterprises” implemented on Magh 3, 2081 BS (January 16, 2025), aims to facilitate share transactions for smaller companies that previously faced challenges in accessing the stock market.
The board has directed the Nepal Stock Exchange (NEPSE) and CDS and Clearing Ltd. to prepare for this new trading system. Under the new rules, small companies must obtain approval from the Securities Board before listing on NEPSE. This approval will enable them to trade shares through a dedicated system, which is expected to enhance liquidity and investment opportunities for smaller enterprises.
The guidelines encourage small and medium enterprises (SMEs) to issue shares after completing one full financial year of operations. These companies can issue an Initial Public Offering (IPO) of shares amounting to 30 percent or more but not exceeding 49 percent of their total capital.
Importantly, after an IPO, their paid-up capital must remain at or below Rs. 25 crores.Additionally, the regulations stipulate that company founders must retain between 51 percent to 70 percent ownership while allowing the remaining shares to be offered to the public. Companies wishing to issue shares must have completed at least one year of operation as a public entity, with audited financial statements available for review.
This regulatory change is expected to create a more organized trading environment for smaller firms by establishing a distinct trading platform within NEPSE. Experts believe this could mitigate the impact of small company valuations on the overall market, thereby providing a safer investment environment for both investors and startups seeking capital.
