The Securities and Exchange Commission (SEC) of Sri Lanka has approved amendments to the listing rules of the Colombo Stock Exchange (CSE) to offer greater flexibility concerning the minimum public holding (MPH) requirement for companies listing through the introduction method. This initiative aims to enhance share liquidity in the market as part of the SEC’s 12 key strategic initiatives.
The SEC emphasized that these amendments represent a collaborative effort between the SEC and CSE, highlighting their commitment to addressing evolving market needs while ensuring market integrity, transparency, and investor protection.
Under the new amendments, companies seeking to list via introduction on the Main Board or Diri Savi Board are not required to meet the minimum public holding at the time of the initial listing application. Instead, these entities must adhere to a phased compliance framework, achieving 50% compliance with the MPH requirement within 12 months and full compliance within 18 months from the date of listing.
The amendments also permit non-public shareholders, who have held their shares for at least 18 months before the initial listing application, to divest up to 2% of their shares each month during the first six months following the listing. This divestment is contingent upon a lock-in requirement, which mandates that 30% of their shareholdings remain locked until either the MPH compliance is met or 18 months from the listing date, whichever comes first.
Previously, non-public shareholders were prohibited from divesting their stakes within the first six months of listing. The new rules require entities to provide clear disclosures in their introductory documents, confirming their obligation to meet non-public shareholder requirements within the specified timelines.
The SEC has also introduced enforcement actions to be implemented if the minimum public holding requirement is not met. The revised framework is anticipated to encourage more companies to consider listing through introduction, thereby enhancing market participation, improving liquidity, and contributing to the overall development of Sri Lanka’s capital market.
The SEC noted that issuers, investors, and market intermediaries are expected to benefit from a more supportive yet well-regulated listing environment.
In 2025, Sri Lanka’s main index, the All Share Price Index (ASPI), experienced a 41.7% year-on-year increase, supported by lower interest rates maintained by the Central Bank. A lack of share volumes has been a significant challenge for investors trading shares in Sri Lanka.
(Colombo/January 02/2025)
