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Iton: Stock Exchange ready for SMEs
Though little known, the junior stock exchange or third tier of the local stock market where small and medium-sized enterprises (SMEs) can raise capital on the stock exchange tax break already exists, said Wainwright Iton, general manager and chief executive officer of the T&T Stock Exchange.
“There is a third tier market. What we have to do now is populate it. The critical adjustment necessary was the amendment to the Corporation Tax Act that passes the tax incentive,” Iton told the Guardian last week following a breakfast seminar at the T&T Chamber’s Westmoorings offices.
He said the amendment has since been passed and SMEs can now pay only ten per cent corporate tax instead of the customary 25 per cent if they go public with 30 per cent of their share capital on the open stock exchange. Asked who are the prospective companies to be listed on the Junior Stock Exchange and when, Iton said while he could not name any: “We have about four or five preliminary discussions going, but the big issue is making sure the governance infrastructure is what it’s supposed to be.”
He said in order to seek capital on the free market and benefit from the unprecedented tax incentive, SMEs will have to file quarterly reports, be able to produce financial statements on notice as short as five days and elect a board that includes two independent, non-executive members, among other requirements. “So the family-owned companies would have to put a board in place, and get ready to make the disclosures that are requisite,” Iton said.
“I’m hoping that we could have something happening in early 2013 for the latest,” he said, quickly adding, “a listing before the end of the year would be more than welcome.” “Once we get companies on the board listed,” the investor in T&T’s SMEs would have “to go to his broker and place an order to buy the shares of these SMEs just like he’d buy the shares of the ANSA McALs and the Neal and Massys. Nothing is different in the actual process or the market conduct.”
Though it exists, the junior market is also not taken into account in the new Draft Securities Bill being circulated by the T&T Securities Exchange Commission, Iton said. “There is a little bit of an accommodation that we need,” he said. “I think there may be flexibility, but it’s not explicitly accounted for in the bill.”
Speaking on the benefits of listing for SMEs, Ernst & Young Partner Maria Daniel said family-owned businesses, which the chamber was told comprise the bulk of T&T’s SMEs, will enjoy clear lines being drawn between shareholders and family members who are employees of the once family-owned business.
Saying SMEs stand to raise millions in capital through the Junior Stock Exchange as was done in Jamaica, Daniel used an example showing many family-owned companies are missing out on “monetising their value” by not going public. Ivan Berry, chief executive officer of C2W Music Ltd of Jamaica, who raised US$1.5 million on the Jamaican Stock Exchange in an Initial Public Offering that was five per cent oversubscribed, urged Caribbean businesses to look to the capital markets for funding and expansion.
Invited to the seminar to relate his experience, Berry said since going public, he has not lost control of the company, as many family businesses fear, and successfully engaged the public and his customers in his company brand.
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