KATHMANDU: In a landmark move to encourage foreign investment from the Nepali diaspora, the Government of Nepal has introduced the Securities Issuance and Allotment Guidelines (Eighth Amendment). This initiative is designed to bring non-resident Nepali (NRN) investment into the country’s capital markets by facilitating their participation in joint investment companies.
The Securities Board of Nepal (SEBON) issued the updated guidelines under the authority of Section 118 of the Securities Act, 2063 (2007 AD). The directive, formally named the Securities Issuance and Allotment (Eighth Amendment) Guidelines, 2081 (2024 AD), is expected to create new opportunities for NRNs to actively invest in Nepal’s securities market.
Key Features of the Guidelines
1. Investment Provisions for NRNs
The guidelines allow non-resident Nepalis to invest in joint investment companies established in partnership with the Government of Nepal. These companies can issue shares to NRNs, with the guidelines specifying that NRNs can hold between 10% and 49% of the company’s issued capital, as per Rule 9 of the regulations.
2. Exclusive Ownership for NRNs
Shares issued under this provision will be exclusively available for non-resident Nepalis, ensuring a targeted approach to attract investments from the diaspora.
3. Mandatory SEBON Approval
Joint investment companies must secure approval from SEBON before issuing shares. This ensures transparency and adherence to regulatory standards.
4. Registration Requirements
To register as a joint investment company and issue shares, the following documents must be submitted to SEBON:
–Company registration certificate.
-Updated memorandum and articles of association.
-Audited financial statements and annual reports for the latest fiscal year.
-Board decision authorizing the share issuance.
-Foreign investment approval certificate.
5. Issuance and Application Period
The guidelines stipulate that the share issuance period will initially last four days. If the shares are not fully subscribed within this period, the application window can be extended to a maximum of 15 days.
6. Public Issuance Notice
Companies issuing shares must publish a notice that includes details such as the dematerialization process, the number of shares, and the total investment amount required.
Boosting Capital Market Participation
SEBON spokesperson Navaraj Adhikari highlighted the significance of the amendment, stating, “This directive targets non-resident Nepalis, enabling them to invest in Nepal through joint investment companies in partnership with the government. By issuing shares exclusively for NRNs, we aim to attract their investment into the capital market and strengthen financial participation from the diaspora.”
The guidelines aim to address the longstanding challenge of underutilized NRN investments, channeling them into productive sectors. This is expected to stimulate economic growth, increase liquidity in the securities market, and reduce dependency on traditional sources of foreign aid and remittances.
Enhancing Economic Prospects
The move is part of Nepal’s broader strategy to diversify its economic base by engaging its global diaspora in sustainable development. By providing NRNs with secure and regulated opportunities to invest in Nepal, the government hopes to:
-Enhance capital inflow to fund critical infrastructure and development projects.
-Strengthen Nepal’s capital markets by increasing participation.
-Foster trust and collaboration between the government and the Nepali diaspora.
Challenges and Outlook
While the guidelines offer significant potential, their success depends on effective implementation and the ability to address challenges such as:
Ensuring political and economic stability.
Streamlining the process for obtaining regulatory approvals.
Building trust among NRNs regarding the transparency and profitability of their investments.
The newly introduced provisions signify Nepal’s commitment to integrating its global community into national development efforts. If effectively executed, this initiative could be a game-changer for Nepal’s financial sector, providing a stable platform for NRN investors while propelling the nation toward economic growth and sustainability.