Modality on promoters' share conversion tabled at SEBON

A proposal to convert promoters' shares into public shares through the secondary market has been tabled at the Security Board of Nepal (SEBON). The Security Registration and Issue Regulation 2009 states that promoters' shares can be converted into public shares through the process of offer documents like during an initial public offering (IPO). An official at SEBON confirmed that such a proposal had been submitted two weeks ago but that no decision had been made. SEBON chairman Surbir Poudel refused to confirm that such a proposal had been received. He said that SEBON was unlikely to decide presently when the market was in continuous decline. Rumors that 19 percent of the promoters' shares of financial institutions could be converted into public shares have contributed greatly to bringing down the stock market.

The Nepal Stock Exchange (NEPSE) index plunged to 630.11 points on Tuesday. Nepal Rastra Bank's (NRB) decision to allow financial institutions to maintain their promoters' shares at 51 percent from the existing 70 percent set off a trend of converting promoters' shares into public shares. Banks have been demanding that their promoters' shares be allowed to be made public through the secondary market besides the primary market. But SEBON has been allowing companies to go through the existing provisions in the Security Registration and Issue Regulation for conversion as there is no legal provision guiding SEBON for such conversion.

However, financial institutions that had converted their shares before the regulation was introduced last February have complained that they should not have been barred from purchasing and selling converted public shares. Bankers said that the promoters' shares of some banks including Development Credit Bank Limited (DCBL) had already been converted into public shares before the new regulation was introduced. "SEBON has stopped us from trading converted public shares in the secondary market until it takes another decision regarding the matter," said Sudhir Khatri, president and chief executive officer of DCBL. "We have become victims of SEBON's indecision now," he added. According to SEBON, no financial institution has ever applied to SEBON to convert promoters' shares into public shares as per SEBON regulations. SEBON chairman Poudel said that its regulation was guided by bringing transparency in the conversion process so that the general public could also purchase the shares.
Source:Kantipur