March 31: The Securities Board of Nepal (SEBON) has prepared regulations for the operation of the Small and Medium Enterprise (SME) platform. The board released the draft of the Regulation on Share Issuance and Transactions of Small and Medium Organizations, 2079, on Thursday.

The board said that it prepared the regulation by using the authority given by section 116 of the Securities Act, 2063, with the approval of the Government of Nepal. According to the regulations, the paid-up capital of the small and medium-scale organization registering through the SME platform should not exceed Rs 250 million. However, it is mentioned that the board can modify the limit of paid-up capital, considering the presence of small and medium-sized organizations and the market conditions.

The board has made arrangements for small and medium-sized organizations to issue shares in a manner that they should not be less than 30 per cent and not more than 49 per cent of the issued capital. Such companies have to fulfil various conditions for the public issue of securities.

According to the provision in the regulation, small and medium-sized organization that issues shares to the general public must complete one financial year of conducting business as a public company.

However, in the case of a company that has been registered as a private limited company in the past and has completed at least two financial years of operations and converted into a public limited company, it is not necessary to complete one financial year as a public limited company.

According to the existing law, the public issuance of securities can be made only when the audit and general meeting have been completed and the amount of the securities accepted by the founders has been fully paid. According to this regulation, it will not be mandatory for organized organizations that issue securities to have a credit rating.

Organizations must obtain approval from SEBON for the public issuance of securities. Share investors must apply a minimum of 250 shares for the purchase of securities issued by small and medium-sized organizations.

Such companies can issue securities to the public even at a premium. To issue an IPO at a premium, organizations must have been in net profit for the last three years, have net worth per share greater than paid-up capital, have decided to issue securities at a premium price in the general meeting of the organization, and have received at least an average or higher credit rating grade.

The premium price can be set up to twice the net worth per share based on the latest audited financial statements.