The Capital MarketsAuthority (CMA) said it will be establishing a recovery body that will ensure the tumbling firms in Kenya remain in business.
“In order to enhance investor protection, authority and the Nairobi Securities Exchange are jointly proposing the establishment of a recovery board at the exchange on which securities of an issuer who is technically insolvent, non-compliant with any other listing obligation or whose operations are being conducted in a manner that is prejudicial to the interest of investors or market integrity can be temporarily listed,” CMA said.
The move is expected to give time for the companies to improve their financial books and stand back on their feet.
The measure comes in after CMA once had delisted listed companies following liquidity challenges which made them trade bellow the bar hence reduced investors
“This will allow companies to develop and implement recovery plans and ensure full compliance with the requisite listing obligations,” CMA said.
The recovery board will be set up after the authority said delisting due would create a confidence crisis in the capital markets and send the wrong signals to potential investors.
The recovery board will be expected to improve investor confidence and increase trading share value.
Some of the companies that have been targeted before include; Uchumi Supermarkets, Mumias Sugar Company, Kenya Power, National Bank and TransCentury due to declining financial performance, corporate governance issues and the rapid decline of their share prices.
Last year, Athi River Mining Cement was suspended from NSE after a high debt running into Sh14.4 billion and being placed under administration.
National Bank of Kenya (NBK) would be saved from the platform as it will be delisted after the takeover by Kenya Commercial Bank (KCB).
Poor performance of some of the listed firms has seen the Exchange lose post an 81.9 per cent drop in its half-year profit through a trickle effect also in the wake of a challenging business environment that saw investors lose Sh90 billion.
The setting up will involve amendments to the Equities Listing and Trading Rules to facilitate the implementation of the same, CMA said.