KATHMANDU: The Securities Board of Nepal (SEBON) has introduced a new directive titled the ‘Directive on Mergers/Acquisitions of Securities Business Operators, 2025’, which aims to regulate and streamline the process of mergers and acquisitions within the securities business sector.
This directive was issued following the board’s 814th meeting on March 26, and comes under the authority of Section 118 of the Securities Act, 2006.
The SEBON currently oversees 90 stock brokers and 2 stock dealers, and the new directive provides a clear framework for these operators to merge, acquire, or be acquired by others. The directive’s goal is to enhance market efficiency, promote healthy competition, and ensure better regulation within the securities market.
The directive primarily addresses businesses looking to merge or acquire other entities within the securities market. Any securities business seeking a merger or acquisition must apply to the board for in-principle consent.
To make the process smoother, the directive specifies the format for applications and the documents that need to be submitted. These include a decision from both the board of directors and general meetings, a preliminary agreement, a work plan outlining timelines, and the latest audit reports as well as details on employee management.
Upon receiving an application, the board will review the proposal and, if deemed appropriate, grant in-principle consent within 15 days. Following this, the businesses involved must evaluate their assets, liabilities, and business transactions for the most recent period.
The evaluation will follow a prescribed methodology, considering 75% of adjusted net assets, 15% of present value of future cash flows, and 10 percent from another international valuation method. Furthermore, the directive allows the swap ratio—the exchange rate for shares during the merger—to be adjusted by 10 percent depending on the agreed price.
Once an agreement is reached between the merging or acquiring entities, several key aspects need to be settled, including the office to be established after the merger, the asset valuation method, and the new capital structure of the combined entity. Additionally, the board of directors and employee management structures must be outlined.
After finalizing these details, the businesses must submit an application for final approval to the board within 15 days of the general meeting’s decision. Along with the application, businesses must submit documents covering 11 specific subjects relating to the merger or acquisition. If the board grants final approval, the merger or acquisition must be completed within six months. To ensure a smooth process, the directive allows for the suspension of transactions during this period.
Once the merger or acquisition is finalized, the newly formed entity will have the option to open branch offices, and one of the main offices from the merging companies may be converted into a branch office.
Overall, the introduction of the ‘Directive on Mergers/Acquisitions of Securities Business Operators, 2025’ is seen as a positive step toward enhancing the regulatory framework in Nepal’s securities market.
By offering clear guidelines and a structured process for mergers and acquisitions, the directive is expected to improve market efficiency and transparency, ultimately contributing to a more competitive and regulated securities business environment in Nepal.
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