KATHMANDU: The Securities Board of Nepal (SEBON) has established new eligibility criteria for companies planning to issue an initial public offering (IPO) through the draft Guidelines on General Eligibility for Public Issuance, 2083.

Once implemented, the guidelines will allow eligible companies to issue IPOs at any time, moving away from the previous practice where approvals were subject to the discretion of the board’s leadership.

Under the new standards, companies must demonstrate high levels of corporate governance and transparency. Active participation of the board of directors, audit committee, and risk management committee is mandatory, and key personnel must pass fit and proper tests.

Financial stability is a core requirement; companies must publish audited financial statements for the last three fiscal years. The board stipulates that a company’s net worth must not fall below its face value, and the debt-to-equity ratio must be balanced. Furthermore, companies must prove their business maturity. SEBON will assess business continuity, infrastructure, and technology, with stricter criteria applied to specialized industries.

To ensure investor transparency, companies are required to disclose their business prospects, challenges, and future plans via their websites before issuing an IPO. The board may bar companies from entering the market if they mislead investors or withhold critical information.

To ensure the proper utilization of funds, companies must have a clear expenditure plan approved by their general meeting. They are required to maintain a separate bank account for IPO proceeds and submit quarterly and annual progress reports to the board. SEBON will adopt a risk-based regulatory approach, applying specific standards tailored to the nature of each industry and its market impact.