New agency to guide struggling NSE firms

Securities trader Mbuthia Irungu at Nairobi Securities Exchange (NSE) trading floor at the Exchange building in Nairobi on August 26, 2020. PHOTO | SALATON NJAU | NMG

The newly formed Kenya Development Corporation (KDC) has signed a deal with the Capital Markets Authority (CMA) to offer advisory services to listed companies facing turbulent times.

The state agency said yesterday that the memorandum of understanding with regulator will see it take part in helping struggling firms at the bourse recover their footing.

KDC created out of a merger between Industrial and Commercial Development Corporation (ICDC), Tourism Finance Corporation and Industrial Development Bank (IDB) is shaping its mandate of providing long-term financing and other financial, investment and business advisory services.

The firm will help the regulator address the problems of companies with perpetual working capital challenges that has affected the attractiveness of the bourse.

“We will collaborate to promote the commercialisation of SME ideas developed to product prototype through the CMA Regulatory Sandbox. Business advisory services will also be offered to struggling but potentially profitable businesses including distressed issuers of securities to the public,” KDC director general Christopher Huka said.

The regulator has been facing the problem of how to revive failing market players and put on hold plans to put listed companies on a recovery board pending delisting over balance sheet deterioration due to the Covid-19 pandemic.

CMA chief executive Wyckliffe Shamiah said the board has approved the criteria of listing companies in the recovery board and all other procedures but the regulator has been reluctant to begin implementing the programme on consideration that many companies were hit during the pandemic.

Initially, the regulator wanted struggling firms placed under the recovery board and given three years to get compliant if they become insolvent as the market seeks to end a run of failed firms at the NSE.

Within the three years, the firms will be put under a microscope and report on a quarterly basis to the NSE and CMA or get delisted if they fail this prescribed regimen.

Firms that breach listing rules have to come up with a plan within six months or get ejected.

Later CMA reviewed the eligibility criteria for companies that are technically insolvent, under receivership and statutory administrations, companies facing corporate governance and management issues and high-risk companies.

Firms with working capital challenges, which are considered ‘short term’ have been granted a helping hand under the reviewed eligibility criteria as they will not be put on a recovery board.

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