SEBON Sets New Eligibility Criteria for Companies Seeking IPO Approval

The Securities Board of Nepal (SEBON) has determined eligibility criteria for companies seeking to issue IPOs through the draft Public Offering General Eligibility Guidelines, 2083. The guidelines are currently in draft form and will come into effect after implementation. Once implemented, eligible companies that meet the prescribed requirements will have a defined framework for accessing the IPO market, rather than relying primarily on discretionary approval. Under the proposed guidelines, companies will need to demonstrate strong corporate governance and transparency. Active participation of the board of directors, audit committee, and risk management committee will be required, while directors and chief executives will have to meet fit-and-proper requirements. Companies will also need a strong financial foundation. They must publish audited financial statements for the previous three fiscal years, maintain net assets at least equal to the face value of shares, and maintain a balanced debt-to-equity position. SEBON will also assess a company's business readiness and continuity before allowing an IPO. Companies in infrastructure, technology, and other specialized sectors may face additional requirements based on their nature and risk profile. The proposed framework further emphasizes investor access to information. Companies will have to disclose their business prospects, challenges, future plans, risks, and basis for potential returns through their websites. Firms found withholding material information or misleading investors could face restrictions on accessing the capital market. For IPO fund utilization, companies will need a clear plan outlining how the proceeds will be spent, with the plan approved by the general meeting. A separate bank account will be required for IPO proceeds, along with quarterly and annual progress reporting to SEBON. The draft guidelines also introduce a sectoral risk-based approach, meaning SEBON may apply additional criteria depending on the nature of the industry and its potential impact on the market.