The Uganda Securities Exchange (USE) has received a formal approval from the Capital Markets Authority (CMA) to operate a demutualised stock exchange.
This means that USE will become a company limited by shares with a change in its governance and managerial structure. Previously, USE has been a mutual company limited by guarantee.
Address the press at USE offices in Nakawa in Kampala, Paul Bwiso, the USE Chief Executive Officer said that this development is in accordance with the requirements of the Capital Markets Authority [Amendment] Act 2016 and the Capital Markets Authority [Establishment of Stock Exchange] Amendment Regulations 2016.
Demutualisation means that the ownership of the Exchange has been separated from the trading rights of its members [the stock brokers].
Bwiso revealed that this will allow for an independent, transparent and flexible governance structure that fosters decisive action in response to all the changes in the exchange’s operating business environment.
He added that the efforts to demutualise the Exchange have been underway since 2007.
“The approval of the demutualisation marks a great milestone for the USE and the Uganda capital markets as a whole,” Bwiso said.
“It means growth for the exchange and ability to attract strategic investors to the sector which places us in a better position to facilitate the growth of business and the Ugandan economy as a whole,” he added.
This move brings the local exchange at par with the regional stock markets that already demutualised.
In Kenya, the Nairobi Securities Exchange demutualised in September 2011. The Dar es Salaam Stock Exchange demutualised in June 2015 while the Rwanda Stock Exchange was demutualised from the start as it was registered as a company limited by shares in October 2005 before being officially launched in January 2011.
“As a demutualised entity that is profit-seeking, the USE will capitalize on new income opportunities by being innovative and creative while diversifying away from traditional stocks and bonds into derivatives and EFT’s,” Bwiso added.
The company will have Shs1bn authorized share capital. Businessman Charles Mbire is the Chairman of the company.
Bwiso said that the approval also paves way for the planned self-listing of the USE through an Initial Public Offer (IPO) that is hopped to happen in the next few years.
Robert Baldwin, the Chief Executive Officer at Crested Capital and represented Mbire said Ugandans should embrace buying shares in successful listed companies so that they can have a share of the profits made.
USE has in the past few years been posting profits. In 2016, USE made a net profit of Shs276m, down from Shs300m in 2015. In 2014, it made a net profit of Shs1.7bn.
David Ogong, Director Market Supervision at CMA said USE is expected to fully demutualise in 2018. He added that demutualisation is expected to improve the stock exchange’s governance and deepen the capital markets.
Bwiso said that going forward; the trading participants (stock brokers) will be required to reduce their shareholding to no more than 40% within the next three years while no single member will be allowed to hold more than 10% of the issued shares at the exchange.