de-mutualization of the namibian stock exchange

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LEGAL NOTICE NO.

THE CAPITAL MARK ETS ACT

(Cap. 485A)

IN EXERCISE of the powers conferred by the section 11 (3) (f), 12 and 20 of theCapital Markets Act, the Capital Markets Authority makes the following Regulations

THECAPITAL MARKETS (DEMUTUALIZATION OF THE NAIROBI STOCK

EXCHANGE L IMITED) REGULATIONS, 2011

Citation. 1.These Regulations may be cited as the Capital Markets(Demutualization of the Nairobi Stock Exchange) Regulations,2011.

Cap. 485A.

Cap. 486.

supra

Cap 486

2. In these Regulations, unless the context otherwise requires

Act includes a reference to the Capital Markets Act,Regulations and guidelines made thereunder;

Authority has the meaning assigned to it under the Act;

company limited by guarantee has the meaning assigned toit under the Companies Act;

company limited by shares has the meaning assigned to itunder the Companies Act;

Demutualization means the separation of the ownership ofthe Exchange from the right to trade on such Exchange including theintroduction of independent and transparent governance structuresand includes all related processes to achieve this objective;

Demutualization application means the application madeunder Regulation 4;

Demutualized exchange means the Exchange followingthe completion of demutualization;

Exchange means the Nairobi Stock Exchange Limitedregistered under the Companies Act a company limited byguarantee;

member means a person who is recognized as a member of


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Cap 486

the Exchange in accordance with its constitutive documents andrules;

re-registration means the process prescribed under Section18 of the Companies Act for a company already registered as a

limited company to re-registerunder that Act;

rights means all rights, powers, privileges and immunities,whether present or future, actual or contingent or prospective, andwhether enforceable in Kenya or elsewhere;

Transitional board of directors means the board of thedemutualized exchange pending the appointment of a board inaccordance with these Regulations.

Demutualization. 3. The Exchange shall not undergo a process of

demutualization unless it has obtained a written approval of theAuthority.

Application forDemutualization.

LN. No. 125 of2002.

4. (1) The Exchange shall make an application to the Authorityfor approval to operate as a demutualized entity.

(2) An application under paragraph (1) shall be in accordancewith Regulation 3 of the Capital Markets (LicensingRequirements)(General) Regulations 2002 and shall be accompaniedby the following additional documents -

(a)a valuation report of the Exchange;

(b)the proposed authorized and paid-up share capitalof the demutualized exchange with the number ofshares to be issued;

(c)the names of members of the Exchange proposedto be the initial shareholders of the demutualizedexchange and the number of shares to be allottedto each shareholder;

(d)the number of shares to be allotted to and helddirectly or indirectly by the Government ofKenya and the Investor Compensation Fund inthe public interest being not less than twenty percent of the total shareholding thereof;

(e)the number of shares calculated undersubparagraph (c) that would otherwise have been


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allocated to members of the Exchange that havenot restored normal operations after havingrecourse to the Investor Compensation Fund orbeing subjected to Statutory Management by theAuthority and the identification of the entity to

whom the same shall be allocated;

(f) the proposed memorandum and articles ofassociation of the demutualized exchange incompliance with these Regulations;

(g)the names of the Transitional Board of directorsand the timeline proposed for the appointment ofthe board of the demutualized exchange inaccordance with these Regulations;

(h)the proposed names of directors of thedemutualized exchange to be appointed at thefirst General Meeting;

(i) the proposed plan for the independentmanagement of the commercial and regulatoryfunctions of the demutualized exchange andtimelines for implementation of necessarystructures to ensure the functional and physicalseparation of commercial and regulatoryfunctions;

(j) a detailed five year business development planfor the demutualized exchange together with thecapital expenditure estimates and the sources offinance for the five year period;

(k)the manner in which the rights and liabilities ofthe existing members will be treated in thedemutualization;

(l) the procedure for the allocation of shares to theshareholders identified under subparagraphs (c),(d) and (e);

(m)a directors declaration in respect of the mattersset out under Regulation 8;

(n)the proposed timelines for the completion of


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operational manuals to guide the self-regulatoryfunctions of the demutualized exchange detailingthe scope of regulatory functions to be performedby the demutualized exchange;

(o)the proposed rules of the demutualized exchange;and

(p)the last audited financial statements of theExchange.

(3) The Authority may, in writing, require the Exchange toprovide any other information which the Authority may require.

Procedure byAuthority uponreceiving

application

5. (1) The Authority may, if it considers necessary, in theinterest of the capital markets, direct appropriate amendments to be

made to any submissions made under Regulation 4.

(2) The Authority shall, if the Exchange fails, within aspecified time, to comply with-

(a) any or all the requirements underRegulation 4; or

(b)any direction to amend suchsubmission,;

subject to giving the Exchange an opportunity to be heard, undertakeor decide, as the case may be, the manner of compliance or effectingany amendment to any of the requirements listed in Regulation 4and communicate the same to the Exchange.

(3) The Authority shall, within thirty days of receipt of allthe information submitted by the Exchange under Regulation 4,subject to any amendments directed under subparagraph (1) above,approve the demutualization application and identify any conditionsrelating to or in connection with any of the requirements underRegulation 4.

Resolutions ofthe demutualizedexchange.

Cap. 486.

6. The Exchange shall, within thirty days of approval underRegulation 5 (3), or such period as the Authority may approve inwriting, ensure that-

(a) the Exchange is re-registered as a company limited byshares under Section 18 of the Companies Act; and


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(b) it adopts the following resolutions in addition to any otherresolutions as may be required under paragraph 5(3)-

(i) adopt in a meeting of itsmembers, by a special

resolution, the approvedmemorandum and articles ofassociation;

(ii) adopt the proposed allotmentof shares to the membersapproved to be the initialshareholders in the approvednumbers of the demutualizedexchange;

(iii)

adopt and appoint the directorsapproved under paragraph5(3) as the board of thedemutualized exchange;

(iv) adopt the approved paid upshare capital; and

(v) such other resolution as maybe required.

Alteration ofmemorandumand articles ofassociation andchanges inDirector

7. The demutualized exchange shall not amend itsmemorandum and articles of association or change its directorswithout the prior written approval of the Authority.

Conditions onDemutualization

8. The Exchange shall, as a condition of seeking an approvalfor demutualization, undertake that any proposed corporaterestructuring for purposes of demutualization shall not-

(a)render defective or affect any legal,disciplinary or other proceedings that couldhave been continued or commenced by oragainst it prior to the demutualizationnotwithstanding any change in its name orstatus in consequence of its restructuring;

(b)affect any instruction, order, approval,notification, direction, act, requirement,


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condition, consent, guideline, circular,undertaking, declaration, indemnity, waiver,exemption, restriction or decision, or otherdocument however called, made, given ordone by the Exchange prior to its

restructuring, under, in accordance with orby virtue of the provisions any applicablewritten law, and such instruction, order,approval, notification, direction, act,requirement, condition, consent, guideline,circular, undertaking, declaration,indemnity, waiver, exemption, restrictionsor decision, or other document applies untilit is amended, repealed or until it expires;

(c) affect any instruction, order, approval,notification, direction, act, requirement,condition, consent, guideline, circular,undertaking, declaration, indemnity, waiver,exemption, restriction or decision, or otherdocument howsoever called, made, given ordone by the Authority to or against theExchange prior to its restructuring, under, inaccordance with or by virtue of theprovisions in the securities laws, theregulations or any applicable written law,and such instruction, order, approval,notification, direction, act, requirement,condition, consent, guideline, circular,undertaking, declaration, indemnity, waiver,exemption, restrictions or decision or otherdocument, shall remain valid, binding andhave effect in relation to the persons towhom such instruction, order, approval,notification, direction, act or decision, orother document applies until it is amendedrepealed or until it expires;

(d)affect any right, privilege, obligation orliability acquired or accrued under theprovisions of the securities laws, theregulations or any applicable written lawprior to the restructuring date and shall notaffect any legal, disciplinary or otherproceedings, remedy, investigation orinquiry may be instituted; continued or


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enforced after its demutualization;

(e)affect any action that has been or may begiven by the Exchange for any breach of itsrules before such restructuring; and

(f) affect any rights and obligations ofExchange or render defective any legalproceedings by or against the Exchange.

Demutualization 9. The Exchange shall stand demutualized upon the expiry of theterm specified in the approval of the Authority in accordance withRegulation 5(3) and subject to the fulfillment of any conditionsattaching thereto.

Reduction inshareholdings

Implementationof Self-Regulatoryfunctions

Winding up

10. The members of the Exchange shall reduce their cumulative

shareholding in the demutualized exchange to less than forty percentin less than three years from the date of demutualization or suchearlier date as the Authority may approve;

11.The demutualized exchange shall, within one year of the re-registration, implement the plan submitted under Regulation 4(2)(i).

12. The demutualized exchange shall not commence anyproceedings for winding up following its demutualization, whethervoluntary or otherwise, without the prior written approval of theAuthority.

Made on.,2011

KUNGU GATABAKI, STELLA KIL ONZO,

CHAIRMAN, CHIEF EXECUTIVE,

CAPITAL MARKETS AUTHORITY. CAPITAL MARKETS AUTHORITY.

de-mutualization of the namibian stock exchange

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