New law passed, gives Ugandan bourse nod to go public

Saturday August 20 2016

Trading at the Uganda Securities Exchange.  PHOTO | FILE

The Uganda Securities Exchange can now alter its legal status from a private company limited by guarantee to a public company limited by shares. PHOTO | FILE NATION MEDIA GROUP

By JAMES ANYANZWA

Uganda has passed new regulations to allow the public to own shares in the Uganda Securities Exchange. The move is part of a regional initiative aimed at promoting the unification of the East African stock exchanges.

Uganda will join Kenya and Tanzania among member states of the East African Community that have already opened up the ownership of their exchanges to the public.

The new regulations are with the government printer awaiting publication and gazettement.

“With the amended CMA Act, once the regulations are formally published in the Gazette, they become law,” said the communication and public relations manager at Capital Markets Authority Uganda, Charles Nsamba.

“Once that happens, which should be very soon, the exchange can proceed to register a company limited by shares as per the Companies Act 2012, and then notify the CMA of the changes they will be making thereafter especially on governance matters.” 

The revised CMA Act was assented to two months ago.

The integration of the East African capital markets is expected to provide for free movement of capital in the region.

USE was founded in 1997 and opened to trading in 1998. The exchange, which is owned by eight brokers, has 16 listed companies. Last year, the USE introduced its electronic trading platform, reducing the settlement period from five days to three days.

According to the capital markets regulator, the new law paves the way for the USE to alter its legal status from a private company limited by guarantee to a public company limited by shares.

In May this year, the Dar es Salaam Stock Exchange sold part of its shares to the public, allowing individual and institutional investors including stockbrokers to purchase up to 20 per cent shareholding in the 20-year-old bourse.

The share offer and the eventual self-listing of the shares on the exchange marked the end of the demutualisation process.

In the process, 20 institutions that previously acted as guarantors with an undertaking to contribute money in the event the bourse was wound up, agreed to be allotted one share each to enable re-registration and a change of name of the exchange from the Dar es Salaam Stock Exchange Ltd to the Dar es Salaam Stock Exchange Public Ltd Company.

These institutions included eight of the current 11 stockbrokerage firms trading on the DSE.

DSE offered 15 million new shares to the public, accounting for 30 per cent of the company’s 50 million ordinary shares.

On its part, the Nairobi Securities Exchange (NSE) completed its demutualisation process in 2014, which also included a change of name, change of its legal status, an initial public offering and eventual self-listing.

However, unlike with the DSE, 21 stockbrokers on the NSE allotted themselves 100 shares each representing a 4.76 per cent shareholding in the bourse, resulting in a combined shareholding of 99.96 per cent.

After the re-registration of NSE as a company limited by shares, the stockbrokers agreed to offload to the National Treasury and Capital Markets Authority’s Investor Compensation Fund a shareholding of five per cent each. The stockbrokers then sold off 66 million shares to the public in 2014, reducing their combined stake to around 56 per cent.

These trading participants were given a three-year window to reduce their shareholding in the bourse to below 40 per cent.

So far only the NSE, DSE and Johannesburg Stock Exchange have separated their ownership from the trading rights of the members.

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