Temporary listing provision on cards
Nepal Stock Exchange (Nepse) proposed temporary listing of companies before a permanent listing.
According to a draft Listing Bylaws, Nepse can allow companies to be listed for the maximum period of two years, if they fulfil listing criterion.
The companies can list their stakes without going public for two year, proposed the draft bylaw that will replace the existing ‘Securities Listing Bylaw 2053’.
The new provision might attract real sector companies to the secondary market, it said, adding that companies interested to list their shares, however, will have to submit detailed time-bound plan to hand over the shares to public through initial public offering (IPO) or other ways.
The proposed bylaw has also categorised listed shares into permanent and temporary securities.
The permanent securities include ordinary shares, irredeemable preferential shares and bonds, while the temporary listing includes mutual fund, redeemable preferential shares, bonds, preferential shares to be converted to ordinary ones, right shares advice slips, unitary saving scheme, and securities to be converted into ordinary shares.
Likewise, the proposed bylaw is also expected to improve corporate governance of the listed companies as it has focused on maintaining strong discipline, particularly in the flow of information to the public investors.
The proposed regulation also empowers Nepse to delist securities of companies failing to provide sensitive information that affects price of its shares, providing wrong information, changing decision frequently, and failing to abide by the directives of Nepse.
Nepse to create G and Z-Category of stakes
The Nepse is also seeking to reclassify the listed companies into four categories instead of current elite ’A’ class and general class. The new listing provision will help investors better evaluate the listed stocks while purchasing, it said, proposing to introduce ‘G’ and ‘Z’ categories. Currently, listed companies are classified as class ‘A’ representing blue chip stocks, while rest of the companies fall under general class, irrespective of their performance. But the proposed bylaw, Nepse will include only those companies that are generating continuous profit and had been distributing dividend higher than 20 per cent for last five fiscal years. Those companies with paid-up capital higher than Rs 20 million and 1,000 plus shareholders are eligible to be considered for blue chip stock.
Likewise, the ‘B’ class will comprise of companies that are doing well enough but slow on dividend distribution. They should have been paying up to 10 per cent dividend – in cash and stock – for last five years to be eligible for class B. The Class ‘Z’ will include the companies, which are doing poorly both in terms of financials and corporate governance and keep getting into trouble with regulatory requirements. The defunct companies since last two fiscal years will fall in the group of class Z. But the companies in the class Z could be delisted by Nepse, after their inability to explanation for demotion into class ‘Z’ class within three months.
The general category – class G – will include newly listed companies, according to the draft.
Currently, there are 130 companies under class A considered blue chip shares, according to classification regulation of Nepse’s Bylaw 1996. According to the current classification, more than half of the listed 238 companies have first rate stocks. According to the current regulation, a listed company should have been net profit from last three years, its net worth should exceed face value, and must have minimum of Rs 2 million paid-up capital and be prompt with submitting annual reports.