Listing on the Cambodian Stock Exchange (Apr, 2024)

– Capital for Expansion

One of the primary reasons a company may want to sell shares to the public is to raise capital for expansion. In Cambodia, foreigners and Cambodians can purchase shares via the CSX, thereby allowing greater access to potential funds than if shares could be held by Cambodians alone. A profitable company should have a ‘formula for success’ but may require a significant amount of capital to expand this formula to address different markets. Raising capital via a share sale will allow the company to grow faster through expansion. This can enable the company to become more competitive via strategic investments, and thereby more profitable.

Publicly listing could also allow founders to “cash out” by selling shares to the public. The founders will be able to realize some profit after their work in building the company, and selling shares imposes no capital expenditure paid to the providers of capital (unlike a bond or loan).

– Tax Incentives

Companies that list shares on the CSX may not only raise capital but could also increase equity value via tax incentives. Tax incentives include a 50% reduction of the annual income tax liability for the first three years, or for any period approved by the MEF, and pre-listing tax liability waivers.

Furthermore, listing shares on the CSX will make other forms of fund-raising easier and should enhance the public profile and reputation of the company amongst the Cambodian public.

Furthermore, listing shares on the CSX will make other forms of fund-raising easier and should enhance the public profile and reputation of the company amongst the Cambodian public.

– Listing Eligibility Review from CSX

As a first step in the listing process, an applicant will need to assemble an IPO team consisting of at least an underwriter, lawyer, and accountant to prepare the complex documentation and undertake the necessary risk required to list. As an early step in the process, the team will help to prepare the application required for a listing eligibility review by the CSX. The review is to be completed no longer than one (01) month from the date of receiving the complete application. According to the Prakas on Listing Rules of the Cambodia Security Exchange (2020), the following information is required to complete the listing review:

1. General Information
2. Listing Applicant’s representative information;
3. Shareholder information;
4. Financial information of listing Applicant;
5. Business information of listing Applicant;
6. The plan of IPO proceeds usage; and
7. Any other relevant information.

In addition to this initial review by the CSX, according to the Prakas on Public Offering of Equity Securities (2015), the following will be required by the SERC to further the listing process.

– Financial Statements

The company needs historical financial statements and/or consolidated historical financial statements within the latest two (02) financial years which are audited in accordance with the laws and regulations in force in the Kingdom of Cambodia prior to the date of filing the application for eligible companies to list on “the Main Board,” the group of well-established companies with listings on the CSX.

The following are the main thresholds required to list equity on the Main Board*:

– Growth Board

The vast majority of Cambodian enterprises are SMEs and many require growth capital. While we often associate a stock market listing with a very large company, in a very practical move, the CSX allows relatively small enterprises to raise capital from the public through listing on the “growth board.” The growth board has significantly lower thresholds for listing in terms of shareholder equity, net profit, minority shareholder, and audited financial reports which allow many more companies to qualify for a potential listing.

The following are the main thresholds required to list equity on the Growth Board*:

1. General information relating to the public offering (name of the issuer, amount and type of equity securities being issued, offering price, aggregate amount, name and address of underwriter, opening and closing date of subscription, registration date of the disclosure document, liability for information submitted);
2. Risk factors (financial risks, economic risks, operational risks, other risks);
3. Use of proceeds;
4. Investment project;
5. Description of business;
6. Operating and financial review and prospects (operating result, liquidity and funding source, research and development, trend and profit and cash flow forecast);
7. Description of property, plant, and equipment;
8. Asset valuation or/and revaluation;
9. Directors, senior officers and shareholders;
10. Involvement of directors, senior officers and shareholders in certain legal proceedings;
11. Certain relationships related parties transaction;
12. Director and senior officer compensation;
13. Options granted to directors, senior officers and employees;
14. Transaction with directors and shareholders;
15. Net assets per share and earnings per share;
16. Ownership of the issuer’s equity securities;
17. Factors determining the offering price;
18. Rights of holders of equity securities being offered;
19. Historical financial information and/or consolidated historical financial information

In addition to the above, according to the Anukret on the Implementation of the Law on Issuance and Trading of Non-Government Securities (2009) a number of relevant documents shall be attached to the disclosure document including:

1. All contracts used as reference in the disclosure document;
2. Expert’s report used as reference in the disclosure document; and
3. Other documents determined by the SERC.

4. Approval and Registration of the Disclosure Document

Following submission of the required documents, the SERC may either refuse or grant in-principle approval within 2 (two) months.

If approved in-principle, the company may then proceed to prepare a Term of Offer including the securities pricing for approval by the CSX and SERC, and finally receive approval and registration of the disclosure document of the issuer by the SERC. Shares should be listed on the CSX within 6 (six) months of the approval of the disclosure document.

5. Book Building and Subscription

After the approval and registration of the disclosure document, shares will be sold through book building and later through public subscription conducted via an underwriting firm or firms licensed by SERC. By law, 20% of the total offering is reserved for Cambodian citizens while 80% of remaining offering amount is open to investors who are Cambodian or non-Cambodians, unless the Director General of the SERC intervenes.

During the book building process the underwriter attempts to sell shares to institutional investors to help determine market pricing prior to selling shares to the public via subscription. At the end of the subscription period, in the event that some equity securities remain unsubscribed, the underwriter of the issuer shall subscribe to those remaining securities or those as stated in the underwriting agreement and pay fully the issuer in cash or with other financial instruments within 30 days of the closing date of the subscription application.

1. Disclosure documents registered with SERC;
2. Documents proving the securities subscription settlement;
3. Copy of the contract with the Securities Transfer Agent;
4. Copy of the contract with the Securities Paying Agent;
5. Securities allotment report; and
6. Letter confirming securities deposited at the Operator of Securities Depository.

In addition to this initial review by the CSX, according to the Prakas on Public Offering of Equity Securities (2015), the following will be required by the SERC to further the listing process.