23 January 2013

Kenya: Small Companies Get NSE Listing Greenlight

SMALL companies with a paid up share capital of Sh10 million can now raise additional capital through the Nairobi Securities Exchange, provided they have been in operation for at least one year.

A special segment allowing small and medium enterprises to access the securities exchange to expand their business and raise their profile has formally been launched at the NSE.

The section will be called the Growth Enterprise Market Segment (GEMS) and unlocks the market for firms that were previously locked from the main investment market segment which requires companies to have a paid up share capital of Sh50 million and the alternative market segment where the minimum share capital is Sh20 million. The paid up share capital represent the amount of a company's capital that has been funded by shareholders.

"We believe that GEMS provides an opportunity for firms participating in Kenya's natural resources and mining sector to raise capital and also comply with with the 35 per cent local equity component," said NSE chairman Eddy Njoroge yesterday. "These firms require huge flows of capital to finance their capital intensive operations."

Small companies wishing to list must be companies registered under the Companies Act but not necessarily incorporated in Kenya. This means such an enterprise can be a branch of a company registered anywhere in East Africa and beyond.

The requirements to access the NSE have further been simplified by the fact that those SMEs seeking to list do not have to have made a profit in their time of operation. They have to however provide audited accounts for the one year operation prior to the listing.

These companies must also have a competent board and senior management with at least one year experience in the business. In addition, such firms must have not less than five directors, a third of whom should be non-executive. The directors must be persons with no bankrupcy, fraud, criminal offence or financial misconduct proceedings for two years.

It is also a requirement that within three months of listing, at least 15 per cent of the shares must be available for trading and held by not less than 25 shareholders excluding employees of the issuer or family members of the controlling shareholder.

Controlling shareholders will be locked for a period of two years from selling their shares. Such companies must have at least 100,000 shares in issue and adequate working capital and solvency.

According to the Economic Survey 2010, SMEs account for about 80 per cent of the country's total employment outside small-scale agriculture and contribute about 40 per cent of GDP.

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