Nepal’s capital market is not just expanding, it’s thriving, inspiring confidence among investors and entrepreneurs as it attracts thousands of new participants each year. With the IPO (Initial Public Offering) culture gaining strength and NEPSE surpassing new milestones in daily turnover, investors and entrepreneurs need to understand listing requirements to navigate this growth confidently.
Despite the Securities Act of 2063 clearly defining public issuance and regulatory oversight, many are still confused about the detailed listing requirements and procedures. Clarifying these rules helps policymakers and industry stakeholders feel more confident in guiding and supporting market compliance.
Why Must Companies List on NEPSE?
Listing on NEPSE is not just a formality, it is a strategic move that empowers companies. It transforms a private business, owned and operated by a small group of individuals, into a publicly traded company, owned by a large number of shareholders and whose shares can be bought and sold freely on the stock exchange, fostering a sense of growth and opportunity.
This brings in liquidity, transparency, and most importantly, investor protection.
However, some entrepreneurs and companies face challenges such as compliance costs or limited awareness.
Addressing these common misconceptions can reassure potential investors, policymakers, and entrepreneurs that their investment decisions are sound.
In Nepal, listing is not a choice for companies that have issued securities to the public. It’s a legal requirement.
Once a public company invites public investment through a prospectus, it becomes mandatory for the company to list on NEPSE.
The Legal Framework of Securities Issuance and Listing
The Securities Act of 2063 serves as a foundational legal framework for the public issuance and trading of securities in Nepal.
This legislation is designed to foster transparency in the financial markets and safeguard investors’ interests.
It establishes a comprehensive set of requirements and regulations that govern the behaviour of entities engaged in the securities market, including detailed procedures for the issuance of shares and bonds, disclosure obligations, and mechanisms for addressing investor grievances.
By promoting fair practices and protecting against fraudulent activities, the Act aims to build investor confidence and contribute to the overall stability and growth of Nepal’s financial system.
A company must first obtain approval from the Securities Board of Nepal (SEBON) before issuing securities to the public.
This is accomplished by submitting a prospectus that details the company’s financial situation and operations.
Once the securities are successfully issued, it is essential for the company to promptly list them on the Nepal Stock Exchange (NEPSE).
This process not only facilitates the integration of the securities into a regulated market but also provides a platform for investors to buy and sell them.
By listing on NEPSE, the company ensures its securities are accessible to a broader range of investors, fostering transparency and liquidity in trading.
The Act establishes a framework for continuous disclosure and compliance reporting to enhance investor protection.
It mandates that companies provide regular financial updates, including quarterly earnings reports and significant changes in operations or management.
This requirement is crucial for ensuring transparency and accountability, as it enables investors to make informed decisions based on the latest financial information.
By holding companies accountable for their disclosures, the Act fosters trust in the financial markets and helps to prevent misleading practices that could jeopardise investor interests.
Which Companies Must List on NEPSE?
The following is a simplified yet detailed overview of the Securities Act of 2063 and the listing bylaws of the Nepal Stock Exchange (NEPSE), emphasising their authority and relevance.
The list aims to clearly explain the regulatory framework governing securities and stock market operations in Nepal, helping the audience feel more confident in their understanding.
Companies Issuing IPOs
Any company offering an Initial Public Offering (IPO) must be listed on NEPSE. This includes hydropower companies, microfinance institutions, banks, insurance companies, hotels, manufacturing firms, and large-scale corporations going public.
Companies Issuing Public Debentures or Bonds
Companies that issue corporate debentures, bonds, preference shares, or convertible securities meant for public investment are mandated to list these financial instruments on the prestigious Nepal Stock Exchange (NEPSE) for trading.
This crucial step not only enhances liquidity, allowing investors to navigate their options more easily, but also fosters transparency and trust in the marketplace.
By making these securities accessible on NEPSE, companies unlock a world of opportunity for investors, empowering them to buy and sell with confidence while contributing to a vibrant and dynamic capital market. This is where innovation and investment converge, creating a thriving ecosystem for all.
Public Companies with Large Shareholders
In an intriguing aspect of financial regulation, companies that have attracted more than 1,000 shareholders are required to list on the Nepal Stock Exchange (NEPSE).
This requirement remains in force even if these companies have not yet issued an initial public offering (IPO).
By enforcing this rule, authorities aim to foster transparency and protect investors’ interests, ensuring that all shareholders have access to vital information and can participate in the market. This unique stipulation plays a crucial role in maintaining trust and integrity in the financial landscape.
Government-Owned Entities Selling Public Shares
When the government decides to divest its shares in companies, such as Nepal Telecom Company (NTC), Nabil Bank, or Citizen Investment Trust (CIT), it is required to list these companies on the Nepal Stock Exchange (NEPSE).
This process not only facilitates market trading but also allows private investors to participate in the ownership of these significant entities, enhancing transparency and potentially boosting market activity.
SMEs Issuing Shares Under SME Regulations
To raise public funds, small and medium-sized enterprises (SMEs) must be listed on the SME Platform of the Nepal Stock Exchange (NEPSE).
This requirement includes small hydropower companies and private firms with capital under 1 billion Nepalese Rupees.
Listing on this platform enables these SMEs to reach a broader range of investors, facilitating growth and expansion.
Special Investment Entities (New Amendment)
Who Is Not Required to List at NEPSE?
Not all companies are required to list on the stock exchange. Private companies, family-owned businesses, NGOs, cooperatives, and government entities that have not offered shares to the public are not obligated to undergo the listing process.
Additionally, companies that raise funds privately without a public invitation are exempt from the mandatory listing rules of NEPSE.
However, this exemption applies only as long as the company remains private. The moment it issues securities to the general public, it enters SEBON’s regulatory domain and must comply with listing obligations.
What Happens If a Company Does Not List After IPO?
Failing to list on NEPSE after an IPO is a serious legal violation under the Securities Act, 2063. Companies are required to list their securities for transparency and investor protection.
Current Problems in Nepal’s Listing System
Despite a solid regulatory framework, Nepal’s securities listing system faces significant challenges that hinder its effectiveness. Operational inefficiencies, regulatory ambiguities, and barriers to market access create a daunting environment for both domestic and foreign investors.
The complex listing process, combined with a lack of transparency, discourages many promising companies from entering the market, ultimately stifling growth and innovation in the nation’s financial landscape. Reform is essential to unlock this potential and drive economic progress.
Delays in Listing
Many companies take months to list their securities after IPO allotment, reducing market liquidity and negatively impacting share valuation.
Hydropower and Microfinance Listing Delays
Some hydropower and microfinance companies are facing delays in submitting operational data, which is causing compliance issues and delaying their listing on NEPSE.
SME Listing Challenges
The SME platform remains underutilised due to high compliance costs, limited awareness, and reluctance to disclose financial information, thereby preventing small companies from listing.
Weak Enforcement
While SEBON does impose penalties, enforcement of listing requirements is slow, allowing delays and compliance issues to persist without immediate consequences.
Public Confusion About Listing Requirements
Many businesses remain unaware that issuing securities to the public automatically requires listing on NEPSE, leading to non-compliance and disputes with investors.
Benefits of Listing at NEPSE for Companies
Listing offers numerous advantages. It provides companies with access to a larger pool of investors, enabling them to raise funds more efficiently.
Listed companies gain public trust by regularly publishing financial statements and maintaining corporate governance standards.
Shareholders enjoy liquidity, as they can easily trade shares at market value. Market-driven valuations often increase the company’s overall worth.
Moreover, regulatory compliance encourages stable, long-term professional growth.
Conclusion
The Securities Act, 2063, clearly outlines that companies issuing securities to the public must list those securities on NEPSE.
Listing is not just a legal mandate, but a strategic move that promotes transparency, liquidity, investor confidence, and long-term financial growth.
As the capital market of Nepal continues to expand, proper listing practices will support stability and strengthen the overall investment environment.
If you are a business planning to issue shares, ensure you understand SEBON guidelines and NEPSE listing requirements from the beginning.
If you are an investor, always verify whether a company is properly listed before investing.
