Listing a company in the Nairobi Stock Exchange (NSE) can be an
excellent way for companies to raise capital, increase their visibility, and
gain access to a wider pool of investors. However, the process of listing on
the NSE can be complex and time-consuming, requiring careful preparation, due
diligence, and compliance with regulatory requirements. In this article, we
will discuss the process of listing a company in the Nairobi Stock Exchange and
the requirements that need to be fulfilled.
Step 1: Eligibility requirements
Before a company can apply to list on the NSE, it must meet
certain eligibility requirements. These requirements include:
1.
Profitability - A
company must have a positive operating profit in the two most recent years
preceding the application.
2.
Size - The company must
have a minimum of 100 shareholders with no single shareholder holding more than
75% of the company's issued share capital.
3.
Share capital - The
minimum issued and paid-up share capital for a company to list on the NSE is
KES 50 million ($500,000).
4.
Corporate governance -
The company must comply with the corporate governance code of the Capital
Markets Authority (CMA) and the NSE.
5.
Audit and accounting
standards - The company must comply with the International Financial Reporting
Standards (IFRS) and have audited financial statements for the past three
years.
6.
Public float - The
company must have a minimum of 20% of its issued share capital held by the
public.
7.
Track record - The
company must have a minimum operating history of three years.
Step 2: Choosing a sponsoring stockbroker
Once a company has determined that it meets the eligibility
requirements for listing on the NSE, it must choose a sponsoring stockbroker.
The sponsoring stockbroker is responsible for guiding the company through the
listing process and ensuring that the company complies with all of the
requirements of the NSE and the CMA.
The sponsoring stockbroker must be a member of the NSE and have a
valid license from the CMA. The stockbroker will help the company prepare the necessary
documentation, including the prospectus and the application for listing, and
will act as an intermediary between the company and the NSE.
Step 3: Preparation of the prospectus
The prospectus is a legal document that provides potential
investors with detailed information about the company and the securities being
offered. The prospectus must comply with the regulations of the CMA and the NSE
and must be approved by both organizations before the securities can be listed.
The prospectus should include information about the company's
history, business model, financial performance, and management team. It should
also provide a detailed description of the securities being offered, including
their terms, conditions, and risks.
The prospectus must be prepared in accordance with the
International Accounting Standards (IAS) and must be audited by an independent
auditor who is registered with the CMA.
Step 4: Appointment of a reporting accountant
A reporting accountant is an independent auditor who is responsible
for reviewing the company's financial statements and providing an opinion on
their accuracy and completeness. The reporting accountant must be registered
with the CMA and must have experience in auditing companies that are listed on
the NSE.
The reporting accountant will review the company's financial
statements for the past three years and will provide an opinion on whether they
comply with the IFRS and whether they are a true and fair representation of the
company's financial position. The reporting accountant will also provide a
comfort letter to the NSE, confirming that the company's financial statements
comply with the relevant regulations.
Step 5: Submission of the application for listing
Once the prospectus has been prepared and approved by the CMA and
the NSE, and the reporting accountant has provided a comfort letter, the
company can submit its application for listing
