- The Capital Markets Authority has approved the establishment of a dedicated recovery board for troubled companies listed on the Nairobi Securities Exchange
- Investors engaging in transactions involving firms listed on the recovery board are advised to exercise caution due to the inherent risks
- Kenya Airways and Mumias Sugar Company are among the companies that will be transferred to the recovery board for a duration of two years
Elijah Ntongai, a journalist at TUKO.co.ke, has more than three years of financial, business, and technology research expertise, providing insights into Kenyan and global trends.
Nairobi – The Capital Markets Authority (CMA) has given the green light to establish a recovery board for troubled companies listed on the Nairobi Securities Exchange (NSE).
Source: UGC
The introduction of the recovery board is seen as a proactive measure to safeguard investor interests and revitalise their confidence in the Nairobi bourse.
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Under the newly approved framework, troubled firms will be transferred to the special board for two years, during which they will receive targeted support to improve their financial standing and operational performance.
“An issuer that fails to meet the requirements (listing and corporate governance requirements) within twenty-four months after the date on which it was placed on the recovery list, the securities exchange may delist the issuer; or suspend trading of the listed securities of the issuer with a view to delisting the issuer” reads the new rules.
Which companies will be moved to the recovery board?
According to African Markets, troubled companies face many challenges, including depleted shareholder funds, losses, lack of sales, and financial reporting gaps.
These companies on NSE include:
- TransCentury
- Kenya Airways
- Mumias Sugar Company
- Uchumi Supermarkets
Investors engaging in transactions involving firms listed on the recovery board are advised to exercise caution due to the inherent risks associated with troubled companies.
As per the CMA, companies listed on the recovery board must promptly notify the public about their inclusion in the recovery list via their official website and through publication in a widely circulated daily newspaper.
In 2019, the CMA suspended the implementation of the recovery board amid disagreements with the NSE regarding its potential impact on the market.
While the CMA perceived the establishment of the recovery board as a vital safeguard for unsuspecting investors purchasing shares of struggling companies, the NSE regarded it as an act of stigmatisation and condemnation against listed firms.
NSE to receive competition from EABX in bonds market
In other related news, the Capital Markets Authority (CMA) of Kenya granted the East African Bond Exchange (EABX) a license for OTC trading, setting the stage for competition with NSE.
OTC trading is often used for securities that are not listed on a formal exchange or for large block trades that may not be efficiently executed on the open market.
This move is driven by the Treasury with a focus on revitalising the Kenya Bond OTC Markets initiative to increase the market depth and liquidity of government bonds.
Source: TUKO.co.ke
