Regulation for Issuance of Capital Market Debt Securities

Citation
Regulation 15 of 2013
Date
2 September 2013
Language
English
Type
Legislation
Rwanda

Regulation for Issuance of Capital Market Debt Securities

Regulation 15 of 2013

Pursuant to the Law No 11/2011 of 18/05/2011 establishing the Capital Market Authority, especially in its articles 3 & 4;Pursuant to the law No 01/2011 of 10/02/2011 regulating the Capital market, especially in its article 74,Pursuant to the law No 40/2011 of 20/09/2011 regulating the Collective Investment Schemes especially in its article 64;The Capital Market Authority hereinafter referred to as the “AUTHORITY”, decrees:

Chapter One
General provisions

Article 1 – Purpose

The purpose of these Regulations is to regulate the public offer of Capital Market Debt Securities in Rwanda.

Article 2 – Definitions

“Authority” means the Capital Market Authority;“Act” means the law No 01/2011 of 10/02/2011 regulating the Capital market in Rwanda;“Debt Securities” A debt Security is a contractual or written assurance to repay a debt. This includes the Government Treasury Bonds, the Municipal Bonds, The Corporate Bonds, the Infrastructure bonds and other related securities approved by the Authority.“Issuer” in relation to these regulations, means the person by whom Debt securities have been issued or are to be issued and shall include a company, the Government of Rwanda or other legal entity that offers debt securities to the public or a section thereof in Rwanda, where it is intended that such securities shall be listed on an approved securities exchange in Rwanda or elsewhere;“listing” means admission of a debt securities to the official list of a securities exchange, and the terms “list” and “listed” shall be construed accordingly;“Prospectus” means a notice, circular, advertisement or request issued in paper, electronic or other form inviting applications or offers from the public to subscribe for or purchase, or offering to the public for subscription or purchase, of a debt security.“A recognized stock exchange” means a stock exchange approved under Capital Market laws.“Offer” The sale of debt securities by any legal entity provided for in this regulation to the public in order to raise funds for business expansion and investment.

Article 3 – Scope of the regulations

These Regulations shall apply to all public offers of debt instruments in Rwanda where the issuer intends to seek listing on an approved securities exchange in Rwanda.

Chapter II
Qualifications for issuance of debt instruments

Article 4 – Incorporation

The issuer must be:(1)(a)Duly incorporated or otherwise established in accordance with the laws of Rwanda or any other recognizable law;(b)Registered under the Company’s Act;(2)A government borrowing authority;(3)A public authority;(4)A person approved by the Authority.

Article 5 – Profitability and track record

A new applicant must have an adequate track record. An adequate track record will normally be at least three financial years and the company must have declared positive profits after tax attributable to shareholders in at least the last two financial periods preceding the application of the issue, or as shall be determined by the Authority.The Authority will also take into account the track record of previous corporate structures of applicants that differed from the applicant's current structure for the purposes of determining adequate track record. This may include, for example, partnerships, proprietary companies, mutual and de-mutualized structures or other structures as determined by the Authority. The Authority may also accept a shorter period, than three financial years, if the public offering is fully underwritten on a firm basis by an underwriter approved by the Authority at least to the extent of the minimum amount required to be raised by the issue.In the case of a new applicant, the latest financial period for which audited accounts have been prepared must not have ended more than six (6) months before the date of the disclosure document.

Article 6 – Free transferability

The debt securities for which public offer is sought must be fully negotiable and freely transferable except:(a)Any statutory restrictions on transfers;(b)Any restrictions on transfers which the Authority in its absolute discretion agrees to impose on the securities of mutual organizations.

Article 7 – Minimum number of debt holders

There must be an open market in the instruments for which offer is sought. This means that there must at all times be at least seven (7) holders of the securities who are not a director or substantial shareholder of the issuer or a director of a substantial shareholder of the issuer or an associate of any of them.

Article 8 – Minimum capital and assets

If the issuer is a company and its shares are not listed on the Stock Exchange in Rwanda market, the issuer must have minimum authorized issued and fully paid up share capital of Rwf 500 million and net assets of Rwf 1 (one) billion before the public offering of the instruments, and the nominal amount of each class of debt securities for which listing is sought must be at least Rwfs.1000, 000 or such other amount as the Authority may from time to time determine. Further issues of debt securities which are uniform in all respects with debt securities of a class already listed are not subject to these limits.The minimum size of a bond issue shall be (Rwf 500 Million).

Article 9 – Additional qualifications

The qualifications outlined in the previous articles are not exhaustive and an applicant must satisfy any additional requirements and supply such further documents and information that the Authority may require in any particular case.

Chapter III
Application procedures and requirements

Article 10 – Application procedures

Each application for Public offer of debt securities shall consist of the following:(i)A formal letter of application signed by a duly authorized officer of the applicant and the sponsor and which complies with the requirements set out in this regulation;(ii)The various supporting documents specified in this regulation;(iii)A valid and up to date prospectus document;(iv)The appropriate fees as described in the capital market fees regulation;The Authority may allow an issuer to provide an information memorandum instead of a prospectus document but only if:(i)The applicant satisfies the Authority that:a)It has not raised any capital in the previous 3 months and does not expect it will raise capital in the next 3 months;b)The spread of its securities complies with this regulation.

Article 11 – Supporting documents

In support of its application, the issuer must lodge the following documents with the Authority:1)A certified copy of its certificate of incorporation or equivalent document, if not incorporated in Rwanda a certified copy of its certificate of registration under the relevant Act;2)A certified copy of the constitutional documents and all amendments made since the incorporation;3)The audited annual report and accounts for each of the three (3) completed financial years of the issuer or group immediately preceding the issue of the disclosure document or since incorporation, if shorter;4)A certified copy of all the resolution(s) authorizing the issue of such and allotment of such securities, including the making of the application and the signing of the issuer’s undertaking and approving and authorizing the issue of the disclosure document or information memorandum;5)An issuer’s undertaking in the form set out in Annex 1, duly signed for and on behalf of the applicant;6)In the case of a new applicant, a declaration and undertaking signed by each director and proposed director of the issuer, in the form set out in Annex 2;7)A person’s declaration in the form set out in Annex 3;8)An undertaking from the proposed nominated adviser in the form required by the Authority;9)A copy of any temporary document of title and any definitive document of title in respect of the securities to be listed;10)A certified copy of every letter, report, statement of adjustments, valuation, contract, resolution and other documents referred to in the prospectus document;11)A copy of licenses where one is required by the company’s act;12)A copy of the trust deed or other document securing or constituting the Debt securities;13)Provisions to make available the final shareholder list;14)Declaration of all associates of the applicant, the applicant's directors and the applicant's officers;15)Submission to the Authority on securities whose transfer is to be restricted;16)Signed copies of any restriction agreement;17)Such other documentation as may be required by the Authority.

Article 12 – Prospectus document

The prospectus document must be lodged with the Authority.Any prospectus document issued by an issuer must carry on the first page of the document (excluding any cover), in a prominent position and in bold type, the following disclaimer:‘’The Authority or the Rwanda Stock Exchange (RSE) takes no responsibility for the contents of this document, makes no representations as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon any part of the contents of this document.”“Application has been/will be made for listing of the Company’s debt securities offered by this prospectus document to the Authority and to the Rwanda Stock Exchange (RSE). The fact that the Rwanda Stock Exchange (RSE), may list the securities of the Company on the RSE OTC market is not to be taken in any way as an indication of the merits of the Company or the listed securities”.

Article 13 – Distributions

If the method of listing involves a distribution of securities, then, the issuer must furnish the Exchange with an electronic copy of a letter confirming that the distribution has been successful and the required minimum percentage is in public hands and, if requested by the securities exchange, a list containing the name and address and number of securities received by each person under the distribution.

Article 14 – Application to issue a public debt security

An application to issue and list a public debt shall consist of a formal letter of application together with a draft prospectus/information disclosure document. The document in draft may be incorporated in reference to the following disclosure guidelines and format.1.Generala.Name of applicant and date and place of incorporation;b.If not incorporated in Rwanda, the date on which applicant was registered;c.The address of the registered office and the address of each office where the share register is kept;d.A formal request for the approval of the offer of the securities to be listed with the specification of the nominal amount of the securities;e.The proposed method of issuing and listing the securities and details of allotment criteria if known and distribution;f.The net assets of the issuer;g.An estimate of the net proceeds of the issue and the intended use of the proceeds;h.The name of any other stock exchange where the securities of the issuer are already listed and or traded.2.Share capital and ownershipi.A tabular list of:a)The title and designation of each class of share;b)The number of shares issued;c)The voting rights attached to each share;d)The amount of issued and fully paid-up shares;e)The shareholdings of the directors and employees of the issuer;f)The names all shareholders of the issuer who own 5% or more of the shares of the issuer and their respective issuers;g)A list of the top 10 shareholders of the issuer including the dates the shares were allotted to them, the consideration they provided and the number of shares that they held.3.History and nature of businessProvide short introductory paragraph describing the general nature of the business and products of the applicant. A brief history of the issuer from inception to the date of application. A description of the business undertaken by the issuer and its subsidiaries or associated companies, including principal products manufactured, traded or services rendered or investments held, principal markets for the products and raw materials, method of marketing, annual turnover for the preceding three financial years and for the current financial year to the latest date available.4.Financial informationAudited annual and consolidated accounts prepared on the basis of true and fair view of the assets and liabilities and the financial position and profit and losses must be disclosed in the prospectus/information memorandum.5.Summary of earningsA summary of turnover, earnings, on a consolidated basis if the applicant has subsidiaries, for the last three (3) financial years showing sales, earnings before charges for depreciation, interest and tax (if any), the amount of each of those charges, net income before extraordinary items, extraordinary items, net income and earnings per share.6.Tabulation of balance sheetA tabulation of its balance sheet for each of the three (3) financial years (consolidated if the applicant has subsidiaries) or from the date of incorporation, if shorter. The tabulation should include a calculation of the net asset value per security for each of the last three (3) financial years.7.Tabulation of cash flowsA tabulation showing changes in the financial position of the group over each of the last three financial years in the form of a cash flow statement.8.Financial ratiosAn accountant’s report shall disclose a pro-forma balance sheet, profit and loss account and a cash projection for the next 12 months after the issue and the following financial ratios for the last three years:a.earnings before interest and taxes interest cover;b.percentage of funds from operations to total debt;c.percentage of free cash flow to total debt;d.total free cash flow to short-term debt obligations;e.net profit margin;f.long term debt to capital employed;g.total debt to equity.9.Associated companies or subsidiariesA tabular list of all subsidiaries and associated companies indicating:(i)name of each company;(ii)a brief statement of the nature of its business and relationship to the operations of the entire enterprise;(iii)Categories of authorized, issued and paid up share capital, par value and the amount of owned by the issuer in the subsidiary or associate.10.PropertiesBrief description of the nature of properties of the applicant and its subsidiaries or associated companies outlining the following:(i)Location;(ii)land area;(iii)number of buildings;(iv)aggregate floor area of buildings;(v)whether property is owned or leased, and if leased, rental amounts for each of the three (3) preceding financial years and the average term of years.11.LitigationParticulars of any litigation or legal claims of material importance made against the applicant or its associated companies in the last five (5) years or which is outstanding or threatened against any member of the group, or an appropriate negative statement.12.Management(i)Provide the full name, residential address and description (qualifications or area of expertise or responsibility) of every director or proposed director and any person who performs an important administrative, management or supervisory function and particulars of the principal functions performed by each of them within the group;(ii)The nature of any family relationship between the persons mentioned above;(iii)A brief account of the business experience of each of these persons during the last five years;(iv)Indicate any other directorships held by each director or proposed director in any publicly listed or traded companies;(v)State if any director or proposed director has, in any jurisdiction, been convicted in any criminal proceeding or has had a bankruptcy petition filed against him or any partnership in which he was a partner or anybody corporate of which he was a director or has been sanctioned or otherwise disciplined by any self-regulatory securities association of which he is or has been a member or any securities supervisory or regulatory body or any such event is pending.13.Sponsors, Advisers, bankers, etc(i)Names and addresses of the issuer’s sponsor, financial advisers, principal bankers, nominated adviser, share registrar/transfer agent and legal advisers;(ii)Name, address and professional qualification of the issuer’s auditors.14.Statement of non-complianceA statement of any of the Rules which cannot be met by the applicant and detailed arguments to support any request for a waiver or modification of the normal requirements.15.DeclarationA declaration that to the best of the issuer’s knowledge, information and belief:(1)save as specified in the application letter, all the qualifications for issuance set out in this regulation, in so far as applicable and required to be met and fulfilled prior to application, have been met or fulfilled in relation to the issuer and the securities of the issuer the subject of the application;(2)that all information required to be included in the prospectus/information memorandum document pursuant to this regulation (on confirmation of allotment, distribution and minimum holding by the public and information on shareholders) will be included;(3)that there are no other facts bearing on the issuer’s application for issuance which, in the issuer’s opinion should be disclosed to investors.

Article 15 – Repealing inconsistent provisions

All prior regulatory provisions contrary to these regulations are hereby repealed.

Article 16 – Commencement

This regulation shall come into force on the date of its publication in the Official Gazette of the Republic of Rwanda.

Annex I

Director's declaration and undertaking

Declaration

1)Indicate:a)Surname and any former names;b)First name(s) and any former first name(s);c)Date of birth;d)Residential address;e)Nationality and former nationality if any;f)Professional qualifications if any.2)State your other director or alternate directorships and disclose the names of those companies or corporations and the date you were appointed director plus the nature of their business.3)State whether you have ever been adjudged bankrupt in any jurisdiction? If so, state the court that declared you bankrupt and, if discharged, the date and conditions on which you were granted your discharge.4)Give particulars of any unsatisfied outstanding judgments against you, if any.5)Has any corporation been put into compulsory liquidation where or had an administrator or receiver appointed during the period when you were one of its directors? Has any partnership been put into compulsory liquidation or been sequestrated during the period when you were (or within the preceding 12 months had been) one of its partners? If so, in each case state the name, nature of business, date of commencement of winding up, administration or receivership and the amount involved together with an indication of the outcome or current position.6)Have you at any time or has a corporation of which you were a Director, shadow Director or alternate Director at the time of an offence, been convicted in any jurisdiction of any criminal offence or an offence under the legislation relating to companies. All such convictions must be disclosed even though they may now be “spent convictions”. If so state the court by which you were or corporation was convicted, the date of the conviction and full particulars of the offence and the penalty imposed.7)Have you ever been disqualified by a court from acting as a Director of a corporation, or from acting in the management or conduct of the affairs of any corporations? If so, give full details.8)Have you, in any jurisdiction, been refused admission to or renewal of membership of any professional body, trade society, institution or association, or stock exchange or been censured or disciplined or had membership withdrawn by any such body to which you belong or belonged or have you held a practicing certificate subject to conditions? If so, give full details.I ______________________________ Director of ____________________________ (“the issuer”) ______________ declare that to the best of my knowledge and belief (having taken all reasonable care to ensure that such is the case) the answers to all the above questions are true and I hereby give my authority (save where expressly provided otherwise) to CMA to disclose any of the foregoing particulars given by me to the sponsor of any corporation of which I am director and /or such bodies as the RSE may, in its absolute discretion think fit.

Undertaking

I hereby undertake that in the exercise of my powers and duties as such a director, I shall:a.Comply to the best of my ability with the laws and regulations of CMA from time to time in force and disclose to the Issuer all information which the issuer needs in order to comply with its obligations to disclose directors’ share of interests;b.Use my best endeavors to ensure that the issuer complies with laws and regulations of capital market from time to time in force.
Dated this __________________ ay of __________________Signature: ____________________Name: ____________________

Annex II - Issuer's undertaking

Form of Issuer’s undertaking that is required to be entered into by an Issuer in support of an application for an issuance of debt securities.TO: Capital Market AuthorityPO Box ____________________KigaliFROM: (Issuer)In consideration of the CMA granting our approval to issue and listing on the capital markets;1.We acknowledge that our securities shall remain listed only at the pleasure of Rwanda Stock Exchange, and that we undertake and agree to comply with the Listing Rules in force from time to time as issued by the capital markets and in particular undertake and agree to comply with the continuing obligations as set out in the laws and regulations of the capital market.2.Warrant to CMA that the issue of the debt securities complies with the law applicable to the issue, and was not for an illegal purpose and that there is no reason why the securities should not be granted approval.3.We acknowledge that CMA is relying on the documents and information required by the laws and regulations to be supplied together with this undertaking. We warrant that these documents and information are true and complete.4.We indemnify and will continue to indemnify CMA to fullest extent permitted by law in respect of any claim, action or any expense arising from, or connected, with any breach of our warranty set out in 2 and 3 above.5.We acknowledge that any document given to CMA becomes the property of the CMA and that CMA may deal with it as it wishes, including dissemination of the document to the public.Dated this __________________ day of __________________Executed by: (Issuer)(execution must be under issuer's seal)

Annex III - Sponsor's declaration

TO: Capital Market AuthotrityPO Box __________________KigaliDear Sir,We, ______________________________ being Sponsor to ______________________________ {Name of issuer}Hereby declare that:1.Offers for subscription and offers for saleTo the best of our knowledge and belief, at the time trading commences on the Exchange at least the number of debt holders as specified in this regulation of the debt securities will be in the hands of the public.2.PlacingTo the best of our knowledge and belief, the securities have been placed as follows:No. of places ______________________________ No. of debt securities placed ______________________________[Use separate sheet if necessary];3.General(1)To the best of our knowledge and belief, having made due and careful enquiry of the issuer and its advisers, the issuer has satisfied all relevant conditions for issuance of debt securities and other relevant requirements.(2)To the best of our knowledge and belief, having made due and careful enquiry of the issuer and its advisers:(i)All the documents required for issuance to be included in the application for approval of issuance have been supplied to the Authority;(ii)All other relevant requirements for issuance of debt securities have been complied with;(iii)There are no matters other than those disclosed in the prospectus/information memorandum document or otherwise in writing to the CMA which should be taken into account by the Authority in considering the suitability for approval of the issuance of debt securities for which application is being made;(3)the directors of the issuer:(i)have had explained to them by us or other appropriate professional advisers the nature of their responsibilities and obligations as directors of a listed corporation under the laws and regulations of capital market; and(ii)in particular, understand what is required of them to enable holders of the issuer’s debt securities and the public to appraise the position of the issuer and avoid the creation of a false market in its securities once they are listed;(4)we have obtained written confirmation from the issuer that the working capital available to the issuer is sufficient for its present requirements and we are satisfied that the confirmation has been given after due and careful enquiry by the issuer and that the persons or institutions providing finance have stated in writing that the relevant financing facilities exist; and(5)We are satisfied that any profit forecast or estimate in the prospectus/information memorandum document has been made after due and careful enquiry by the issuer.4.Acknowledgement of CMA’s disciplinary power(1)We acknowledge that if CMA considers that we have been in breach of our responsibilities under the issuance process or this declaration, then CMA may censure us and/or refuse to allow us to sponsor further issues by removing our firm from the list of approved sponsors and that CMA may publicize the fact that it has done so and the reasons for its actions.(2)We acknowledge that where CMA considers it appropriate we will be subject to the disciplinary provisions set out in capital market laws and regulations.Yours faithfully,Signed __________________Name __________________For and on behalf of (sponsor's name)
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History of this document

02 September 2013 this version
Commenced
05 August 2013
Assented to