Kenya is planning a special trading platform to help failing firms get back on their feet

The board will help avert a crisis of confidence in the capital markets in the event that the firms are delisted.

The Capital Markets Authority said that financially distressed firms will be rehabilitated in the Recovery Board on condition that they furnish the agency with a turnaround plan.

Failure by the rehabilitated firms to recover within this period will eventually lead to delisting from the exchange as the last resort.

“The Authority is working with the Treasury and the NSE to establish a new Recovery Board to which any company not meeting minimum listing criteria will be automatically moved to raise investor awareness of their area of non-compliance and also to fix a firm timeline within which they must remedy the non-compliance or be automatically delisted,” CMA chief executive Paul Muthaura told The EastAfrican.

The proposed board, the first of its kind in East Africa, will have distinct rules and regulations including eligibility criteria, continuing reporting requirements, and periodic submissions to the regulator.

Liquidity

Investors trading in firms that have been pushed into the Recovery Board will be advised to trade with caution.

Globally, Hong Kong and India have introduced similar arrangements to ensure key investor protection measures are maintained.

Kenya has 67 listed firms, of which three (Marshall East Africa Ltd, Hutchings Biemer and A. Baumann) have been delisted while Atlas Africa Industries Ltd has been suspended from trading.

If successful, the board will attract a number of NSE firms that are currently facing liquidity and corporate governance challenges.

Kenya has 67 listed firms, of which three (Marshall East Africa Ltd, Hutchings Biemer and A. Baumann) have been delisted while Atlas Africa Industries Ltd has been suspended from trading.

The country's stockmarket is on the downward trend which saw 12 firms issue a profit warning in 2017 compared with 11 in 2016.

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