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The Nairobi Securities Exchange finally launched the Growth Enterprise Market Segment (GEMS) on the bourse, aimed at helping small and medium enterprises raise money from the stock market. The primary requirements for a company to qualify to list on the GEMS are:

        1. Public company registered under the Companies Act;
        2. Minimum fully paid up capital of 10 million;
        3. At least 100,000 shares in issue;
        4. Free transferability of shares;
        5. Adequate working capital and solvency;
        6. Operation for at least one year;
        7. No profitability record required;
        8. 5 directors, 1/3 non-executive;
        9. Directors with no bankruptcy, fraud, criminal offence or financial misconduct proceedings for 2 years;
        10. Competent board and senior management – at least 1 year experience in the business;
        11. 1/3 board must have completed Directors Induction Program and the rest within 6 months of listing;
        12. All issued shares to be immobilized;
        13. 15% of the shares must be available for trading & held by at least 25 independent shareholders within 3 months of listing;
        14. Controlling shareholders lock in for 24 months;
        15. Nominal Advisor appointed by written contract.

These requirements make it considerably easier for business to list on the market than before, particularly the 1 year minimum operation threshold and lack of a profitability requirement. Also the minimum threshold of 1 year for senior management experience means that it will be possible for entrepreneurs in their early 20’s to qualify for listing on the NSE.

This a great move by the NSE. It provides a quick and viable exit plan for early stage investors, and will be a catalyst for greater local capital input into early stage business financing.

On the flip-side, the very lenient listing terms transfer a large portion of the risk to the buyers. Once a company meets the minimum eligibility requirements, it is upon the buyers to do their own due diligence. A well-aimed publicity campaign coupled with the prestige of an NSE listing could see billions of shillings go into companies with little substance, as the case with the tech boom in the US in the 90s.