AMC sets tough rules for small companies issuing bonds

Capital markets

AMC sets tough rules for small companies issuing bonds


Luke Ombara, director of regulation, policy and strategy at the Autorité des marchés financiers (CMA). PICTURES | NJAU SALATON | NMG

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Summary

  • The Capital Markets Authority (CMA) has imposed tough conditions on small businesses seeking to raise less than a quarter of a billion shillings in Kenya’s capital market.
  • The regulator’s proposed rule will allow small businesses that do not meet these conditions to issue debt securities in the capital market if they can provide guarantees from a bank or insurance company.

The Capital Markets Authority (CMA) has imposed tough conditions on small businesses seeking to raise less than a quarter of a billion shillings in Kenya’s capital market.

Small businesses will have to be in business for two years, have a minimum issued share capital of 10 million shillings and can only borrow four times the level of funds from their shareholders.

SMEs wishing to list debt securities must also provide approvals from the regulator of their sector, audited financial reports and must have both executive directors, non-executive directors and independent directors with intact backgrounds.

The regulator’s proposed rulemaking will, however, allow smaller companies that cannot meet these conditions to issue debt securities in the capital market if they can provide guarantees from a bank or insurance company.

“Where the issuer fails to meet any of the requirements of this appendix, it may obtain credit enhancement to secure the securities it seeks to issue,” says the draft offer registration and disclosure rule. public.

The CMA is setting up the new fixed income market segment for SMEs – SME FISMS for the listing of debt securities between 20 and 250 million shillings.

Cheaper option

Issuers will be allowed to raise funds in note sizes above Sh10,000 deposited in an independent bank.

The regulator is trying to create an alternative for small businesses to access cash from banks which costs more than raising money from the public.

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