SEBON Tightens IPO Rules, Proposes Strict Provisions in New Directive Draft
The Nepal Securities Board (SEBON) is set to tighten rules for initial public offerings (IPOs) by organized institutions. The draft of the General Eligibility for Public Offering Directive, 2083, proposes strict criteria including per-share net worth, minimum net assets, financially sustainable capital structure, and tax compliance.
Kathmandu. The Nepal Securities Board (SEBON) is set to tighten rules for initial public offerings (IPOs) by organized institutions.
The Board is tightening provisions related to IPOs of organized institutions in the draft of the General Eligibility for Public Offering Directive, 2083. The draft proposes that the per-share net worth of an organized institution must not be less than its paid-up value in order to launch an IPO.
Similarly, for IPOs, the Securities Board may determine standards for minimum net assets for various industries or sectors. The draft also proposes that the Board may examine matters such as stability of operating income, operating cash flow, ratio of extraordinary or one-time income, impact of transactions with related parties, and the status of receipts and payments.
If income or profit is found to be artificially inflated, the draft proposes granting the Securities Board the authority to conduct necessary investigations.
The draft directive proposes that the capital structure of an organized institution seeking to launch an IPO must be financially sustainable and balanced. The institution must have assessed its debt liabilities, debt repayment capacity, and financial risks.
Likewise, the directive proposes that the Securities Board may determine standards regarding debt-equity ratio, interest payment capacity, and other financial indicators according to the sectoral nature of the organized institution seeking to launch an IPO.
The organized institution must have fulfilled taxes and other financial obligations as per prevailing laws. If there is any disputed amount in taxes and other obligations, the draft proposes that the amount must be provisioned in the financial statements of the organized institution as per prevailing accounting standards.
In case it is proven that tax evasion or intentional harm to revenue has occurred and the amount has not been deposited in the revenue account, the draft directive proposes that the Securities Board may refuse to grant approval for the public offering.