Small-cap firms to get a new platform to raise funds

Bangladesh Securities and Exchange Commission is set to introduce separate trading platforms on the twin bourses to facilitate fund-raising by small-cap companies.

Companies with minimum paid-up capital of Tk 5 crore will be eligible to raise funds by using the platform, to be called “small capital platform”.

But they will have to raise at least Tk 5 crore from “qualified investors” through listing on the platform, and the post-issue paid-up capital would not cross Tk 30 crore.

Qualified investors mean the institutional ones and high net-worth individuals with adequate knowledge on investment.

The Central Depository Bangladesh Ltd will create separate beneficiary owner's accounts for the qualified investors.

General investors will not be allowed to take part in the trading of small-cap companies after their listing on the new platform.

The stockmarket regulator came up with the decisions at a meeting on Tuesday in an effort to facilitate the growth of small-cap companies that have potential but do not have enough funds.

Also, small-cap companies cannot use the initial public offering method to raise funds, as the existing rules allow a company with minimum paid-up capital of Tk 30 crore to go for IPO.

According to the new decisions, shares of the small-cap companies will have to be in electronic or dematerialised form. Trading, clearing, settlement and trading cycle will be like the main market of the bourses.

Trading will take place through existing stockbrokers. Listing fee and other charges will be fixed later.

No small-cap company can be listed on the separate platform directly, and there will be a lock-in period for shareholders.

The issuer company will appoint a market maker at least for three years to maintain liquidity in the market during the trading of shares, and the stock exchanges will organise awareness programmes on the new mechanism.

A market maker is a dealer in securities or other assets who undertakes to buy or sell at specified prices at all times.

The regulator will formulate rules for the small capital platform soon.