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Monday June 3rd, 2024

Sri Lanka relaxes listing rules to allow start-ups to raise capital

ECONOMYNEXT – Sri Lanka’s Securities and Exchange Commission said it had approved changing listing rules to allow start ups and small firms to raise capital and also make it easier to tap in to a mult-currency board.

Moving away from profit requirement, Sri Lanka would allow firms with revenues and strong cashflows to be considered for listing.

“These eligibility criteria will facilitate companies who do not have a large asset base but have substantial revenue and cash flows (such as companies in the IT sector) to consider the capital market for their funding requirements,” the SEC said.

Tech start ups are risky and usually get first round funding from private equity.

More flexibility would also be given for approved entities to choose the launch date.

The key changes and policy approvals are given below:

The SEC granted approval in terms of Section 24 of the SEC Act No.36 of 1987 (as amended) to the following:

I. Listing of Shares and Debentures

a. At present, the eligibility requirements for obtaining a listing are based on stated capital, net profit and positive net assets. The SEC approved the expansion of the current eligibility criteria by allowing applicant entities to satisfy any one of the following tests:

• Method I: Profit and Net Assets test
• Method II: Revenue and market capitalization test
• Method III: Positive operating Cash Flow and Market capitalization test

These eligibility criteria will facilitate companies who do not have a large asset base but have substantial revenue and cash flows (such as companies in the IT sector) to consider the capital market for their funding requirements.

b. Provide flexibility to the issuer to decide on the allotment basis when the value of an Initial Public Offering (IPO) is more than Rs. 3 Billion subject to CSE agreeing to the proposed allotment basis.

c. Reduce the timeframe for an applicant entity to refund payments due on fully/partly rejected IPO applications and credit investors’ Central Depository System (CDS) accounts with the securities allotted to improve efficiency.

d. Extend the timeframe to open the Subscription List for an IPO from existing requirement to allow the applicant to select the most opportune time to proceed

II. Introduced new Listing Rules on amalgamation to improve regulatory efficiency.

The SEC granted approval to the following initiatives in principle.

• Policy revision to consider removal or relaxation of the present Listing Rule, which imposes a restriction on total value of other class of shares that can be issued to accommodate the interest of certain investors who prefer other class of shares outside ordinary voting shares.

• Extend the Multi Currency Board (MCB) facilities to local companies intending to list Debt in foreign MCB to allow more avenues to raise capital via CSE.

• Other requirements applicable to overseas companies to be listed on the MCB specifically applicable to selected overseas jurisdictions.

• Extend timelines in relation to Enforcement Rules on the Empower Board and permit companies affiliated to external audit firms of the applicant entity to act as sponsors subject to meeting criteria.

Comments (2)

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  1. Ajith Fernando says:

    Extremely positive approach by the SEC. While these changes itself may not lead to significant improvement, the thinking and approach of the SEC is very proactive and highly appreciated.

  2. Ziyam Abdeen says:

    Can’t this be apply to all the exisiting companies ( Startups and now grown) ?

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Your email address will not be published. Required fields are marked *

  1. Ajith Fernando says:

    Extremely positive approach by the SEC. While these changes itself may not lead to significant improvement, the thinking and approach of the SEC is very proactive and highly appreciated.

  2. Ziyam Abdeen says:

    Can’t this be apply to all the exisiting companies ( Startups and now grown) ?

Water levels rising in Sri Lanka Kalu, Nilwala river basins: Irrigation Department

Sri Lanka Navy assisting in rescue operations (Pic courtesy SL Navy)

ECONOMYNEXT – Sri Lanka’s Irrigation Department has issued warnings that water levels in the Kalu and Nilwala river basins are rising and major flooding is possible due to the continuous rain. People living in close proximity are advised to take precautions.

“There is a high possibility of slowly increasing prevailing flood lowline areas of Kiriella, Millaniya, Ingiriya, Horana, Dodangoda, Bulathsinhala, Palinda Nuwara and Madurawala D/S divisions of Ratnapura and Kalutara Districts, up to next 48 hours,” it said issuing a warning.

“In addition, flood situation prevailing at upstream lowline areas of Ratnapura district will further be prevailing with a slight decrease.

“The residents and vehicle drivers running through those area are requested to pay high attention in this regard.

“Disaster Management Authorities are requested to take adequate precautions in this regard.”

The island is in the midst of south western monsoon.

DMC reported that 11,864 people belonging to 3,727 families have been affected due to the weather in Rathnapura, Kegalle, Kilinochchi, Jaffna, Mullaitivu, Kalutara, Gampaha, Colombo, Galle, Matara, Hambantota, Puttalam, Kurunegala, Kandy, Nuwara Eliya, Anuradhapura, Polonnaruwa, Badulla, Moneragala, and Trincomalee districts.

Meanwhile, the Meteorology Department stated that showers are expected on most parts of the island today.(Colombo/June3/2024)

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UNP gen secy defends call for postponing Sri Lanka poll, claims opposition silent

The UNP party headquarters in Pitakotte/EconomyNext

ECONOMYNEXT — United National Party (UNP) General Secretary Palitha Range Bandara has defended his call for postponing Sri Lanka’s presidential election by two years, claiming that his proposal was not undemocratic nor unconstitutional.

Speaking to reporters at the UNP headquarters Monday June 03 morning, Bandara also claimed that neither opposition leader Sajith Premadasa nor National People’s Power (NPP) leader Anura Kumara Dissanayake have spoken against his proposal.

“I have made no statement that’s undemocratic. My statement was in line with provisions of the constitution,” the former UNP parliamentarian said.

He quoted Section 86 of Chapter XIII of the constitution which says: “The President may, subject to the provisions of Article 85, submit to the People by Referendum any matter which in the opinion of the President is of national importance.”

Sections 87.1, 87.2 also elaborates on the matter and describes the parliament’s role, said Bandara.

“I spoke of a referendum and parliament’s duty. Neither of this is antidemocratic or unconstitutional. As per the constitution, priority should be given to ensuring people’s right to life,” he said.

“Some parties may be against what I proposed. They may criticse me. But what I ask them is to come to one position as political parties and make a statement on whether they’re ready to continue the ongoing economic programme,” he added.

Bandara claimed that, though thee has been much criticism of his proposal for a postponement of the presidential election, President Wickremesinghe’s rivals Premadasa and Dissanayake have yet to remark on the matter.

“I suggested that [Premadasa] make this proposal in parliament and for [Dissanayake] to second it. But I don’t see that either Premadasa nor Dissanayake is opposed to it. To date, I have not seen nor heard either of them utter a word against this. I believe they have no objection to my proposal which was made for the betterment of the country,” he said. (Colombo/Jun03/2024)

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300 of 100,000 trees in Colombo considered high risk: state minister

ECONOMYNEXT – Trees in Sri Lanka’s capital Colombo are being monitored by the municipal council, Army and Civil Defense Force as the severe weather conditions continue, State Minister for Defense Premitha Bandara Tennakoon said.

“Within the Colombo Municipal Council city limits, there are 100,000 trees. Of these, around 300 are considered high risk,” Tennakoon told reporters at a media conference to raise awareness about the current disaster management situation.

Not all trees required to be cut down he said. “We can trim some of the branches and retain them.”

The problem was that buildings in the vicinity of the tree had cut branches on one side, causing it to become unbalanced, the minister said.

New laws would be brought in so provincial/municipal institutions could strengthen enforcement of building codes.

“We don’t have a single institution that can issue a warning about a tree. Not one to tell us what trees can or cannot be planted near a road.

“Trees should be suitable for the area. Some trees have roots that spread and damage roads, buildings. When the roots can’t go deep, they tend to topple over.

“Now Environment Day is coming up, and anyone can go plant a tree by the road. We have to take a decision about this. We have to enforce laws strongly in future.” (Colombo/June3/2024)

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