The principal function of the capital market in Rwanda is to offer a fair, orderly and efficient market for trading of securities issued by issuers both in the primary and secondary markets for the purpose of listing on the OTC (over the counter) market.

The Listing Rules of CMAC (Capital Market Advisory Council) outline the requirements which have to be met by issuers before their securities can be granted a listing on the official securities market.

The listing rules provide the minimum requirements for listing, application procedures, fees payable, contents of the disclosure documents published by the issuer and continuing obligations which an issuer must comply with once a listing has been granted. The rules also describe the powers of CMAC to enforce the Listing Rules.

The Rwanda OTC market Listing Rules reflect acceptable international best practice and standards that aim to uphold the confidence of all participants in the capital market by achieving an appropriate balance between accessing the issuers to the capital market at the earliest opportunity and simultaneously providing investors with certain safeguards.

The safeguards for investors are accommodated through the provision of sufficient and timely information for the purpose of enabling investors to make informed decisions on the value and merits of the listed securities. The directors of a company whose securities are listed are required to act in the best interest of the securities holders.

That is, shareholders if the securities are shares, or bondholders if it is a debt security. The directors of the company are required to submit a Directors’ Declaration committing themselves in persons to the full disclosure of the information contained in the offer documents.

To raise capital in the Rwanda capital market, the first thing an issuer has to do is to determine the amount of funds they require and state the purpose for the funding. This therefore implies that the issuer must have a business plan for the project for which the issuer is planning to finance using the funds being raised.

It then follows that the issuer is expected to assess their internal capacity to manage the work or the project at hand. The next step is to embark on the process of raising the funds.

Having determined how much capital the issuer is seeking to raise from the public, the issuer or the company is required to appoint an advisor to guide them in the process of accessing capital.

The process of raising funds through the capital market is outlined in the listing rules of the Rwanda OTC market under CMAC.

It is a requirement that every issuer must be sponsored by a participant of the capital market who a member of the Rwanda OTC market.

The key responsibility of the sponsor is to ensure that the issuer receives a fair and impartial guidance and advice on the application of the Listing rules.

Except for the Government Treasury Bonds and other Government securities, the sponsor who is appointed by the issuer is required to give an undertaking to CMAC in writing that all the listing rules will be followed during the life of the listing of the issuer on the Rwanda OTC market.

With the guidance of the advisor or the sponsor the issuer will then be require to check that they meet the minimum requirements for accessing the capital market. The company must be legally incorporated or registered.

This will require the production of a certificate of incorporation and memorandum and articles of association of the company. Where the company is raising capital by issue of shares to the public, the company must be a public company.

If it is registered as a private company, it must convert into a public company. The conversion from private to public is done through the Registrar of companies.  In addition, if the company has any restrictions in the transfer of its shares from one shareholder to another, then the restriction must be removed.

The removal of transfer restrictions is required in order to make the shares of the company freely transferable during secondary market transactions after the company is listed on the Rwanda OTC market.

The requirement that an issuer must be a public company and their shares freely transferable does not apply to issuers of debt or bonds. Corporate bond issuers, that is, bonds issued by companies or corporations to the public, can either be private companies or public companies.

It is important to distinguish between listing shares and listing bonds. When a company issues shares to the public and gets a listing on the capital market, we say the company is listed. But when a company issues a bond to the public and lists the bond, it is only that bond that is listed but not the company. 

In terms of capital, companies willing to access funding publicly are required to have a minimum authorized, issued and paid up capital of 500 million Rwanda Francs. This is the amount of cash put into the capital of the company by the owners.

In terms of assets, issuers must have net assets with a minimum value of one billion Rwanda Francs. Finally, the minimum amount of capital that a company can raise through the Rwanda OTC market is 500 million Rwanda Francs.

Contact: rmathu@cmac.org.rw

(Source: CMAC Rwanda OTC Market Blue Print).