New companies with just a year of operation can now enter the stock market and raise funds by selling shares. The Corporate Regulatory Authority announced this reduction in Operational Track Record requirements earlier this month. Previously, companies needed to be in the business for at least two years before offering shares to the public.
If a company wishes to raise funds, it can do so by listing on the stock exchange market and making an Initial Public Offering, IPO. IPO refers to the process where a company sells its shares to the public for the first time.
With companies needing to be in business for at least two years to offer shares in the past, the Corporate Regulatory Authority said it restricted emerging companies with strong growth potential from accessing public capital.
Now, with the reduced requirement of just one year, new businesses can have easier access to funds.
“The reform of the Initial Public Offering regulations serves three government objectives: making the capital market more vibrant, providing cheaper access to finance for companies, and offering alternative investment avenues to the public, thus encouraging investment habits,” said Karma Yeshi, the Chief Registrar of Companies at the Corporate Regulatory Authority.
In addition to the change, the authority has made other regulatory reforms in the capital market.
Companies with ongoing projects can make Initial Public Offerings. However, the companies’ promoters or founders should have already invested their money to fund 75 per cent of the project. Moreover, they should have at least 75 per cent of the project developed with purchased land, and procured plants and machinery.
The companies using natural resources can also offer their shares but they must ensure environmental conservation and sustainable development.
Karma Yeshi said, “By liberalising the criteria, we support start-ups with strong business ideas but limited ability to commercialise or scale up without funds. The need for collateral from financial institutions is a huge barrier for start-ups, so IPOs offer an alternative financing model.”
He says as more companies access public funding, entrepreneurship will grow, leading to job creation and economic growth.
The change aims to provide start-ups and young companies with better access to public funding and attract investors.
Kinley Bidha
Edited by Sangay Chezom
