NAIROBI STOCK EXCHANGE   A Presentation to  University Students    2005
TABLE OF CONTENTS <ul><li>What is a Stock Exchange </li></ul><ul><li>What are share and bonds </li></ul><ul><li>Capital Ma...
What is a Stock Exchange? Role and Functions. What we deal with.
What is a stock exchange? <ul><li>A Stock Exchange is a market where:- </li></ul><ul><ul><ul><ul><li>Institutional and ret...
<ul><li>Stock Exchanges Promote a culture of thrift, or savings. </li></ul><ul><li>Stock Exchanges: </li></ul><ul><ul><li>...
Other indirect functions performed by stock exchanges, include: <ul><li>Growth of related financial services sector e.g. i...
What are shares and bonds <ul><li>A share is a unit of ownership </li></ul><ul><li>A bond is a loan between a borrower and...
Capital Markets Structure
<ul><li>Regulatory Bodies </li></ul><ul><li>The Capital Markets Authority (CMA) </li></ul><ul><li>The Nairobi Stock Exchan...
Regulations <ul><li>CMA (Takeovers and Mergers), Regulations, 2002; </li></ul><ul><li>Collective Investment Schemes, Regul...
LISTING IN NSE Why list? <ul><li>Institutions list Securities primarily: </li></ul><ul><li>To  unlock value . Sponsors, Pr...
MAJOR BENEFITS OF LISTING <ul><li>Funds   for expansion and growth without the interest burden. </li></ul><ul><li>Provides...
The NSE Market Segments
The Market Segments <ul><li>The Main Board </li></ul><ul><li>The Main Investment Market Segment (MIMS); </li></ul><ul><li>...
METHODS OF LISTING <ul><li>Securities may be brought to listing by way of: </li></ul><ul><li>Initial public offering  (IPO...
Eligibility Criteria for Listing
Eligibility Requirements for Public Offering of Shares and Listing Immediately before the IPO should not be less than Ksh....
Eligibility Requirements for Public Offering of Shares and Listing Must have engaged in the same business for a min. of 2 ...
Eligibility Requirements for Public Offering of Shares and Listing <ul><li>Following the IPO at least 20% of the shares mu...
Eligibility Requirements for Public Offering of FIS and Listing on the FISMS Min. authorized issued and fully paid up shar...
Eligibility Requirements for Public Offering of FIS and Listing on the FISMS <ul><li>The issuer other than GoK issuing T-B...
Eligibility Requirements for Public Offering of FIS and Listing on FISMS <ul><li>If the issuer is a bank or insurance comp...
Eligibility Requirements for Public Offering of FIS and Listing on FISMS When the issuer does not satisfy the requirements...
Eligibility Requirements for Public Offering of FIS and Listing on FISMS To maintain a listing, the minimum size of the FI...
The Continuing Listing Obligations
<ul><li>Incorporation :  The company must be incorporated  or registered under the Companies Act. </li></ul><ul><li>Financ...
<ul><li>Competence and suitability of directors and management :  The issuer must not be in breach of any of its loan cove...
RESPONSIBILITIES OF A LISTED INSTITUTION <ul><li>Once on the Official List, the institution has a number of responsibiliti...
<ul><li>Competence and suitability of directors and management :   </li></ul><ul><li>Suitable senior management with relev...
<ul><li>Transferability of Securities :  Securities must be freely transferable and not subject to any restriction on mark...
<ul><li>Solvency and adequacy of working capital :  Should not be insolvent. </li></ul><ul><li>Certificate of Comfort:  If...
Disclosure of Periodic Financial Information <ul><li>Dividends and interest </li></ul><ul><li>Such payments on issued secu...
Disclosure of Periodic Financial Information <ul><li>Interim and Preliminary Reports </li></ul><ul><li>An Issuer shall pub...
Disclosure of Periodic Financial Information <ul><li>Annual Financial Statements </li></ul><ul><li>Every Issuer of securit...
Communication with Shareholders <ul><li>Convening Meetings </li></ul><ul><li>Shareholder meetings shall be convened at lea...
Communication with Shareholders <ul><li>Convening Meetings </li></ul><ul><li>If a circular is issued to the holders of any...
Audit Committee and Corporate Governance <ul><li>Every issuer shall establish an Audit Committee and comply with guideline...
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NAIROBI STOCK EXCHANGE NAIROBI STOCK EXCHANGE

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  • VISION To be Africa’s leading Stock Exchange by 2010. MISSION To be the most efficient and cost effective market for issuing and trading securities in Africa We measure our Mission through the following parameters: Market liquidity (turnover as a percentage of market capitalisation); Contribution to national/regional economy (market capitalisation as a percentage of GDP); Capital raised through the NSE (percentage of total capital raised in East and Central Africa).
  • The very fact that institutions exist where savers can safely invest their money and in addition earn a return, is an incentive to people to consume less and save more. It should be appreciated that in as much as an economy can have savings, the lack of established mechanisms for channeling those savings into activities that create wealth would lead to misallocation or waste of those savings. Therefore, even if a culture of saving were to be encouraged, the lack of developed financial markets may lead to economic stagnation. The fact that capital is scarce means systems have to be developed where capital goes to the most deserving user. An efficient stock market sector will have the expertise, the institutions and the means to prioritize access to capital by competing users so that an economy manages to realize maximum output at least cost. Financial markets encourage the separation of owners of capital, on the one hand, from managers of capital, on the other.
  • The Capital Markets Authority (CMA) The CMA is established under the Minister of Finance, and charged with the responsibility of administering the Capital Markets Authority Act as it was known then (now the Capital Market Act), and thereby regulating Kenya’s capital markets. The CMA is the licensing and regulatory authority for the Nairobi Stock Exchange. All the rules and procedures for the operations of the Nairobi Stock Exchange must be approved by the Authority to give them legal effect.   The Nairobi Stock Exchange (NSE) The NSE regulates its members who are licensed to trade in securities listed on the stock exchange. There are currently 13 active stockbrokers – Ashbhu Securities, Crossfield Securities, Discount Securities, Faida Securities, Francis Drummond and Co., Francis Thuo and Partners, Kestrel Capital (EA), Ngenye Kariuki and Co., Nyaga Stockbrokers, Reliable Securities, Solid Investment Securities, Standard Stocks and Suntra Stocks; and 4 investment banks – African Alliance, Apex Africa, CFC Financial Services, Dyer and Blair. They are governed mainly by the NSE’s Membership Rules, Trading Rules, Delivery and Settlement Rules, and Listing Rules.   The companies listed on the official list of the NSE undertake to abide by the rules and regulations of the NSE. These are mainly the Listing Rules which contain the continuing listing obligations to which they are required to adhere.
  • The Capital Markets Authority (CMA) The CMA is established under the Minister of Finance, and charged with the responsibility of administering the Capital Markets Authority Act as it was known then (now the Capital Market Act), and thereby regulating Kenya’s capital markets. The CMA is the licensing and regulatory authority for the Nairobi Stock Exchange. All the rules and procedures for the operations of the Nairobi Stock Exchange must be approved by the Authority to give them legal effect.   The Nairobi Stock Exchange (NSE) The NSE regulates its members who are licensed to trade in securities listed on the stock exchange. There are currently 13 active stockbrokers – Ashbhu Securities, Crossfield Securities, Discount Securities, Faida Securities, Francis Drummond and Co., Francis Thuo and Partners, Kestrel Capital (EA), Ngenye Kariuki and Co., Nyaga Stockbrokers, Reliable Securities, Solid Investment Securities, Standard Stocks and Suntra Stocks; and 4 investment banks – African Alliance, Apex Africa, CFC Financial Services, Dyer and Blair. They are governed mainly by the NSE’s Membership Rules, Trading Rules, Delivery and Settlement Rules, and Listing Rules.   The companies listed on the official list of the NSE undertake to abide by the rules and regulations of the NSE. These are mainly the Listing Rules which contain the continuing listing obligations to which they are required to adhere.
  • Banks lend at about 20.0% to indigenous firms. Corporate bonds are at coupon rates of 1.0 – 2.0% above the 91 day treasury bill rate.
  • The Official List of the NSE is structured in three market segments. Main Investments Market Segment (MIMS), To be listed on the MIMS, a company must have a minimum share capital of Kshs. 50 million, and net assets of Kshs. 100 million. Alternative Investment Market Segment (AIMS). For the AIMS the minimum requirements are a share capital of Kshs. 10 million and net assets of Kshs. 20 million. Fixed Income Securities Market Segment (FISMS). FISMS is where debt securities such as preference shares, government bonds and corporate bonds are listed.
  • Share Capital for AIMS The issuer shall have a minimum authorized issued and fully paid up share capital of Kshs. 20 million save for issuers whose securities are listed in this market segment and who do not at the time these Regulations come into effect, meet the required minimum share capital, such issuers shall have a transition period of 3 years within which to attain the required minimum share capital ensuring a minimum authorized issued and fully paid up share capital of Kshs. 10 million during the transition period.
  • MIMS Share ownership Structure For already listed issuers, there is a transition period of 3 years within which to attain the required minimum of 25% of the issued shares to be held by the public ensuring a minimum of 20% of the issued share capital to be held by the public during the transition period. AIMS Share ownership Structure The issuer must ensure that the existing shareholders, associated persons or such other group of controlling shareholders who have influence over management shall give an undertaking to the Authority not to sell their shareholding before the expiry of a period of twenty four months following listing and such undertaking shall be disclosed in the prospectus.
  • Availability and reliability of financial records: In the case of issuers whose securities are listed at a securities exchange in Kenya but where not more than six months have elapsed since the end of the financial year, un-audited financial statements covering the period preceding the six months must be included in or appended to the prospectus. The financial soundness of the issuer shall not be in any doubt and the issuer must have prepared financial statements for the latest accounting period on a going concern basis and the audit report must not contain any emphasis of matter or qualification in this regard. At the date of the application, the issuer must not be in breach of any of its loan covenants particularly in regard to the maximum debt capacity.
  • The Guarantor The exception is where the guarantor is an offshore bank or insurance company not subject to regulation of the CBK or Commissioner of Insurance. The guarantor shall provide the CMA with a financial capability statement duly certified by its auditors.
  • Guarantee Requirements The guarantor may only be a bank or an insurance company or any other institution with necessary financial capacity acceptable to the Authority and a copy of the guarantee document shall be subject to approval of and be submitted to the Authority with the information memorandum. Debt Ratios The funds from operations to total debt for the 3 trading periods preceding the issue shall be maintained at a weighted average of 40% or more. The conditions as provided must be maintained as long as the FIS remain outstanding.
  • Guarantee Requirements The guarantor may only be a bank or an insurance company or any other institution with necessary financial capacity acceptable to the Authority and a copy of the guarantee document shall be subject to approval of and be submitted to the Authority with the information memorandum. Debt Ratios The funds from operations to total debt for the 3 trading periods preceding the issue shall be maintained at a weighted average of 40% or more. The conditions as provided must be maintained as long as the FIS remain outstanding.
  • Incorporation Status: The issuer to be listed shall be a public company limited by shares and registered under the Companies Act (Cap 486). Free transferability of Shares: Shares to be listed shall be freely transferable and not subject to any restrictions on marketability or any pre-emptive rights. Availability and reliability of financial records: Where not more than 9 months have elapsed since the end of the financial year for which the last published annual accounts relate, issuers whose securities are not listed shall prepare an interim audited financial statement covering at least the first 6 months following the end of that financial year which must be included in or appended to the prospectus, or time the issue to coincide with the next audited annual accounts. Where not more than 9 months have elapsed since the end of the financial year, issuers whose securities are already listed shall prepare un-audited financial statements covering the period preceding the 6 months which must be included in or appended to the prospectus or time the issue to coincide with the next audited annual accounts. The financial soundness of the issuer shall not be in any doubt and the issuer must have prepared financial statements for the latest accounting period on a going concern basis and the audit report must not contain any emphasis of matter or qualification in this regard.
  • Competence and suitability of directors and management:    At the date of the application, the issuer must not be in breach of any of its loan covenants particularly in regard to the maximum debt capacity. As at the date of the application and for a period of at least two years prior to the date of the application, no director of the issuer shall have -   any petition under bankruptcy laws pending or threatened against the director (for individuals), or any winding-up petition pending or threatened against it (for corporate bodies); any criminal proceedings in which the director was convicted of fraud or any criminal offence, nor be named the subject of pending criminal proceeding, or any other offence or action either within or outside Kenya; or been the subject of any ruling of a court of competent jurisdiction or any governmental body, that permanently or temporarily prohibits such director from acting as an investment adviser or as a director or employee of a stockbroker, dealer, or any financial service institution or engaging in any type of business practice or activity.
  • Disclosure: There must be timely and adequate public disclosure of material developments. Particular emphasis is placed on developments that are price sensitive . Corporate Governance: Listed institutions set the standards. Continuing listing obligations merely set the minimum standards. Listed institutions must aim for best practice , particularly with regard to disclosure and governance. Investor Relations: Good relations with the investing public and particularly shareholders is central to the performance of a share. Management must be prepared to commit resources to foster good investor relations if the business is to gain maximum benefit from its status as a listed institution.
  • Competence and suitability of directors and management:    The issuer must have suitable senior management with relevant experience for at least 1 year prior to the listing, none of whom shall have committed any serious offence that may be considered inappropriate for the management of a listed company. The issuer shall ensure continued retention of suitably qualified management during listing and no change of management for a period of twelve months following the listing other than for reason of a serious offence that may be considered to affect the integrity or be inappropriate for management of a listed company. The issuer must have at least a third of the Board as non-executive directors.  
  • A proxy form shall be sent with the notice convening a meeting of holders of listed securities to each person entitled to vote at the meeting, and shall comply with the other requirements set out in the articles of association. If a circular is issued to the holders of any particular class of security, the Issuer shall issue a copy or summary of that circular to the holders of all other listed securities.
  • NAIROBI STOCK EXCHANGE NAIROBI STOCK EXCHANGE

    1. 1. NAIROBI STOCK EXCHANGE A Presentation to University Students 2005
    2. 2. TABLE OF CONTENTS <ul><li>What is a Stock Exchange </li></ul><ul><li>What are share and bonds </li></ul><ul><li>Capital Markets Structure </li></ul><ul><li>The NSE Market Segments </li></ul><ul><li>Listing in NSE </li></ul><ul><li>Eligibility Criteria for Listing </li></ul><ul><li>The Continuous Listing Obligations </li></ul>
    3. 3. What is a Stock Exchange? Role and Functions. What we deal with.
    4. 4. What is a stock exchange? <ul><li>A Stock Exchange is a market where:- </li></ul><ul><ul><ul><ul><li>Institutional and retail investors can buy and sell securities. The price of these securities varies according to supply and demand. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Through which companies, multilaterals, parastatals, SPV’s, government and local authorities can raise funds for expansion and development by issuing equity and debt securities to the public. </li></ul></ul></ul></ul>
    5. 5. <ul><li>Stock Exchanges Promote a culture of thrift, or savings. </li></ul><ul><li>Stock Exchanges: </li></ul><ul><ul><li>Ensure the investment is liquid; </li></ul></ul><ul><ul><li>Facilitate transfer of savings to investment in the most productive sectors; </li></ul></ul><ul><ul><li>Promote higher standards of accounting, resource management and transparency in the management of business. </li></ul></ul>Roles and Functions of The Nairobi Stock Exchange
    6. 6. Other indirect functions performed by stock exchanges, include: <ul><li>Growth of related financial services sector e.g. insurance, pension and provident fund schemes which nurture the spirit of savings . </li></ul><ul><li>Improvement of access to finance for new and smaller companies - The Alternative Investments Market Segment (AIMS). This can also be realized through Venture Capital institutions which are fast becoming key players in financing small businesses. </li></ul><ul><li>Encouragement of public floatation of private companies increasing the supply of assets available for long-term investment . </li></ul>
    7. 7. What are shares and bonds <ul><li>A share is a unit of ownership </li></ul><ul><li>A bond is a loan between a borrower and lender at a promise to pay interest. </li></ul>
    8. 8. Capital Markets Structure
    9. 9. <ul><li>Regulatory Bodies </li></ul><ul><li>The Capital Markets Authority (CMA) </li></ul><ul><li>The Nairobi Stock Exchange (NSE) </li></ul><ul><li>Regulations </li></ul><ul><li>CMA (Securities), (Public Offers, Listing and Disclosure) Regulations, 2002; </li></ul><ul><li>NSE Listing Manual, 2002; </li></ul><ul><li>NSE Membership Rules, Trading Rules, Delivery and Settlement Rules; </li></ul><ul><li>Corporate Governance Guidelines, 2002. </li></ul>
    10. 10. Regulations <ul><li>CMA (Takeovers and Mergers), Regulations, 2002; </li></ul><ul><li>Collective Investment Schemes, Regulations 2001; </li></ul><ul><li>Central Depository Act 2000; </li></ul><ul><li>CMA Foreign Investor Regulations, 2002; </li></ul><ul><li>Rating Agency Guidelines, 2001 </li></ul>
    11. 11. LISTING IN NSE Why list? <ul><li>Institutions list Securities primarily: </li></ul><ul><li>To unlock value . Sponsors, Promoters and Venture Capitalists use the capital markets to exit their investments or share risk. </li></ul><ul><li>To raise funds for expansion and growth without the interest burden of funds borrowed from lending institutions. </li></ul><ul><li>To improve the liquidity of their securities. </li></ul><ul><li>To increase public awareness about the institution and its products. </li></ul>
    12. 12. MAJOR BENEFITS OF LISTING <ul><li>Funds for expansion and growth without the interest burden. </li></ul><ul><li>Provides a market for securities . </li></ul><ul><li>Greater liquidity of securities. </li></ul><ul><li>Improves perception of an institution’s financial stability and transparency. </li></ul><ul><li>Objective valuation of securities by market forces. </li></ul><ul><li>Greater efficiency due to more rigorous disclosure requirements. </li></ul><ul><li>Greater public profile and awareness of the institution and its products. </li></ul>
    13. 13. The NSE Market Segments
    14. 14. The Market Segments <ul><li>The Main Board </li></ul><ul><li>The Main Investment Market Segment (MIMS); </li></ul><ul><li>The Alternative Investment Market Segment (AIMS); </li></ul><ul><li>The Fixed Income Securities Market Segment (FISMS); </li></ul><ul><li>Futures and Options (FOMS)- to be implemented </li></ul><ul><li>Soon to be introduced (Distinct from the Main Board): </li></ul><ul><li>Over the Counter (OTC) Market Segment </li></ul>
    15. 15. METHODS OF LISTING <ul><li>Securities may be brought to listing by way of: </li></ul><ul><li>Initial public offering (IPO): where the public at large is invited to subscribe. </li></ul><ul><li>Introduction : to provide a market for existing shareholders. </li></ul><ul><li>Private placement : shares are placed for sale to already identified investors. </li></ul>
    16. 16. Eligibility Criteria for Listing
    17. 17. Eligibility Requirements for Public Offering of Shares and Listing Immediately before the IPO should not be less than Ksh. 20.0 million. Immediately before the IPO should not be less than Ksh. 100.0 million. Size: Net Assets Min. authorized issued and fully paid up share capital of Ksh. 20.0 million. Min. authorized issued and fully paid up share capital of Ksh. 50.0 million. Size: Share Capital Criteria for AIMS Criteria for MIMS Requirement Part B Part A
    18. 18. Eligibility Requirements for Public Offering of Shares and Listing Must have engaged in the same business for a min. of 2 years, 1 of which should reflect a profit with good growth potential. +ve profits after tax attributable to shareholders in at least 3 of the last 5 completed accounting periods prior to listing. Track Record, profitability and future prospects Criteria for AIMS Criteria for MIMS Requirement Part B Part A
    19. 19. Eligibility Requirements for Public Offering of Shares and Listing <ul><li>Following the IPO at least 20% of the shares must be held by not less than 100 shareholders excluding employees/family members of the controlling shareholders. </li></ul><ul><li>No investor shall hold more than 3% of the 20% shareholding. </li></ul>Following the IPO at least 25% of the shares must be held by not less than 1000 shareholders excluding employees. Share ownership Structure Criteria for AIMS Criteria for MIMS Requirement Part B Part A
    20. 20. Eligibility Requirements for Public Offering of FIS and Listing on the FISMS Min. authorized issued and fully paid up share capital of Ksh. 50.0 million, and net assets of Ksh. 100 million Immediately before the IPO. Size: Share Capital All fixed income securities (FIS) except for commercial papers shall be listed, freely transferable and not subject to any restrictions on marketability or pre-emptive rights. Listing and transferability of securities <ul><li>A public company registered under the Companies Act (Cap 486) or any other body corporate established or incorporated in Kenya under the provision of any written law. </li></ul><ul><li>Issuers of commercial paper may be private companies. </li></ul>Incorporation with limited liability Requirement
    21. 21. Eligibility Requirements for Public Offering of FIS and Listing on the FISMS <ul><li>The issuer other than GoK issuing T-Bonds or other Government securities, must have published audited financial statements complying with IAS for an accounting period ending on a date not more than 3 months prior to the proposed date of the offer. </li></ul><ul><li>Where not more than 9 months have elapsed since the end of the financial year to which the last published annual accounts relate, the issuer shall prepare an interim audited financial statement covering at least the first 6 months following the end of that financial year. </li></ul>Availability and reliability of financial records Requirement
    22. 22. Eligibility Requirements for Public Offering of FIS and Listing on FISMS <ul><li>If the issuer is a bank or insurance company, the issuer must obtain a certificate of no objection from the relevant regulator. </li></ul><ul><li>Where there is a guarantor and in the event that the guarantor is a bank or insurance company licensed to operate in Kenya, the consent of the CBK or the Commissioner of Insurance as the case may be, will be required. </li></ul>Certificate of Comfort Requirement
    23. 23. Eligibility Requirements for Public Offering of FIS and Listing on FISMS When the issuer does not satisfy the requirements it may seek a credit enhancement to have the securities it seeks to issue guaranteed, or where the issuer is not willing to be subjected to disclosure, Guarantee Requirements +ve profits after tax attributable to shareholders in at least 2 of the last 5 financial periods prior to listing. Track Record, profitability and future prospects Total indebtedness, including the new issue of FIS shall not exceed 400% of the company’s net worth (or gearing ratio of 4:1) as the latest balance sheet. Debt Ratios Requirement
    24. 24. Eligibility Requirements for Public Offering of FIS and Listing on FISMS To maintain a listing, the minimum size of the FIS listed shall be Ksh. 50,000,000, except in the case of redemption. Minimum size for listing <ul><li>The minimum size of issue shall be Ksh. 50 million. </li></ul><ul><li>The minimum lot size shall be: </li></ul><ul><li>Ksh. 100,000 for corporate bonds and preference shares or higher amount as maybe required by the Authority; and </li></ul><ul><li>Ksh. 1,000,000 for commercial paper. </li></ul>Size of the Issue Every issuer of debt shall apply for renewal at least 3 months before the expiry of the approved period of 12 months from the date of approval. Renewal Date Requirement
    25. 25. The Continuing Listing Obligations
    26. 26. <ul><li>Incorporation : The company must be incorporated or registered under the Companies Act. </li></ul><ul><li>Financial records : shall have published audited financial statements complying with IAS for an accounting period ending on a date not more than 3 months prior to the proposed date of the offer for issuers whose securities are not listed and 6 months for issuers whose securities are listed. </li></ul>General Eligibility Requirements for Public Offering of Shares and Listing
    27. 27. <ul><li>Competence and suitability of directors and management : The issuer must not be in breach of any of its loan covenants – the maximum debt capacity. </li></ul><ul><li>As at the date of application and for a period of 2 years prior, no director shall have:- </li></ul><ul><ul><li>Any petition under bankruptcy laws (individuals), winding up petition (corporates); </li></ul></ul><ul><ul><li>Any criminal proceedings, nor be subject to any pending criminal proceedings, or any offence or such action within or outside Kenya; </li></ul></ul><ul><ul><li>Subject to any ruling of a competent court/Government body that prohibits temporarily or otherwise from engaging in any type of business practise or activity </li></ul></ul>General Eligibility Requirements for Public Offering of Shares and Listing
    28. 28. RESPONSIBILITIES OF A LISTED INSTITUTION <ul><li>Once on the Official List, the institution has a number of responsibilities which can broadly be classified into: </li></ul><ul><li>Disclosure; </li></ul><ul><li>Corporate governance; </li></ul><ul><li>Investor relations. </li></ul>
    29. 29. <ul><li>Competence and suitability of directors and management : </li></ul><ul><li>Suitable senior management with relevant experience for at least 1 year prior to listing. </li></ul><ul><li>No change of management for a period of 12 months following the listing other than for reason of a serious offence that may be considered to affect the integrity or be inappropriate for management of a listed company. </li></ul><ul><li>At least a third of the Board as non executive directors. </li></ul>General Eligibility Requirements for Public Offering of Shares and Listing
    30. 30. <ul><li>Transferability of Securities : Securities must be freely transferable and not subject to any restriction on marketability or pre-emption rights. </li></ul><ul><li>Undertaking: The Company must undertake to comply with the rules of the market </li></ul><ul><li>Voting Shares : Only one class of voting shares which are the shares listed on the Exchange. </li></ul><ul><li>Approval : All Companies seeking listing shall have their information memoranda or prospectuses approved by the Capital Markets Authority. </li></ul><ul><li>Shares : Only fully paid shares are listed at the Exchange. </li></ul><ul><li>Dividend Policy : Clear future dividend policy. </li></ul>General Eligibility Requirements for Public Offering of Shares and Listing
    31. 31. <ul><li>Solvency and adequacy of working capital : Should not be insolvent. </li></ul><ul><li>Certificate of Comfort: If the issuer is listed in a securities exchange outside Kenya or is licensed to operate as a bank or an insurance company the issuer must obtain a letter of no objection from the relevant regulator. </li></ul>General Eligibility Requirements for Public Offering of Shares and Listing
    32. 32. Disclosure of Periodic Financial Information <ul><li>Dividends and interest </li></ul><ul><li>Such payments on issued securities should be notified to the securities exchange, the Authority and the securities holders immediately upon declaration by means of a press announcement. </li></ul><ul><li>The declaration shall be at least 14 days prior to the closing date of the register and shall contain the following minimum information: </li></ul><ul><ul><li>the closing date for determination of entitlements; </li></ul></ul><ul><ul><li>the date on which the dividend or interest will be paid; and </li></ul></ul><ul><ul><li>the cash amount that will be paid for the dividend or interest. </li></ul></ul>
    33. 33. Disclosure of Periodic Financial Information <ul><li>Interim and Preliminary Reports </li></ul><ul><li>An Issuer shall publish an interim report within 2 months of the end of the interim period in the financial year and shall notify the Securities Exchange and the Authority. Where an Issuer has subsidiaries, the said report shall be based on the group accounts. </li></ul>
    34. 34. Disclosure of Periodic Financial Information <ul><li>Annual Financial Statements </li></ul><ul><li>Every Issuer of securities to the public shall prepare an annual report containing audited annual financial statements within 4 months of the close of its financial year. A complete set of financial statements includes: </li></ul><ul><ul><li>Balance sheet; </li></ul></ul><ul><ul><li>Income statement; </li></ul></ul><ul><ul><li>A statement showing either all changes in equity; or changes in equity other than those arising from capital transactions with owners and distributions to owners; </li></ul></ul><ul><ul><li>Cash flow statements; and </li></ul></ul><ul><ul><li>Accounting policies and explanatory notes. </li></ul></ul>
    35. 35. Communication with Shareholders <ul><li>Convening Meetings </li></ul><ul><li>Shareholder meetings shall be convened at least 21 clear days before such meeting is held. Notices shall specify the place , date , hour and agenda of the meeting. </li></ul><ul><li>the issuer will ensure that all the necessary facilities and information are available to enable holders of its securities to exercise their rights. In particular it shall: </li></ul><ul><ul><li>inform securities holders, meetings which they are entitled to attend; </li></ul></ul><ul><ul><li>Where applicable, enable them to exercise their voting rights; and </li></ul></ul><ul><ul><li>publish notices or distribute circulars giving information on: </li></ul></ul><ul><ul><ul><li>the allocation and payment of dividends and interest; </li></ul></ul></ul><ul><ul><ul><li>the issue of new securities, including arrangements for the allotment, subscription, renunciation, conversion or exchange of the securities; and </li></ul></ul></ul><ul><ul><ul><li>redemption or repayment of the securities. </li></ul></ul></ul>
    36. 36. Communication with Shareholders <ul><li>Convening Meetings </li></ul><ul><li>If a circular is issued to the holders of any particular class of security, the issuer shall issue a copy or summary of the same to the holders of all other listed securities. </li></ul><ul><li>the issuer shall forward to the Securities Exchange and the Authority copies of: </li></ul><ul><ul><li>all circulars, notices, reports, announcements or other documents at the same time as they are issued; and </li></ul></ul><ul><ul><li>all resolutions passed by the Issuer other than resolutions concerning ordinary business at an AGM without delay after the relevant general meeting. </li></ul></ul>
    37. 37. Audit Committee and Corporate Governance <ul><li>Every issuer shall establish an Audit Committee and comply with guidelines on corporate governance issued by the Authority. </li></ul><ul><li>There should also be public disclosure in respect of any management or business agreements entered into between the Issuer and its local or foreign associated and related companies, which may result in a conflict-of-interest situation. </li></ul>

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