Capital Markets Authority (Offer of Securities) Regulations

These Regulations shall apply to conventional offer of securities or securities issued in compliance with Sharia'h principles.

The provisions of the Act and these Regulations shall apply to securities offered to the public in compliance with Sharia'h principles where applicable with the necessary modifications.

The Authority shall be responsible - (a) to approve prospectuses and other offering documents under which securities are offered to the public; and

Where the offering, issuance and listing of securities is a requirement of any law, the entity that has been registered under that particular law or an associated entity shall be the entity to offer, issue and list securities in Uganda.

Where the issuer is a regulated entity, the entity shall be required to provide a "No objection letter'' from the sector regulator before seeking to issue any securities or financial instruments or guaranteeing their issue and the Issuer shall satisfy the Authority that by so doing they shall not be in breach of any law, regulation or guidelines in force.

An approved securities exchange may approve the listing of a security on any market segment upon being satisfied that-

The condition under sub-regulation (1), shall not apply where the Securities Exchange has waived the requirement for an issuer to list with the minimum float.

A person proposing to offer its securities to the public shall appoint a transaction adviser approved by the Authority.

A transaction adviser appointed under sub-regulation (1) shall, be domiciled in Uganda and be responsible for all the interactions with the Authority and shall ensure that the offer of securities is made in accordance with the Act and these Regulations.

The Authority may require the applicant to furnish such further documents and information as the Authority may direct.

The Authority may, after consultation with a person who intends to issue a prospectus, direct that the prospectus be amended within thirty working days from the date of the directive and give a copy of the amended prospectus to the Authority.

A prospectus shall not be published without compliance with any amendment directed by the Authority under subregulation (2), unless the Authority has withdrawn the direction.

An issuer may submit to the Authority for approval a prospectus in hard copy or electronic form.

The issuer shall obtain written approval from the Authority before publication of the prospectus and shall deliver a copy of the approval to the Registrar of companies for registration.

The prospectus shall be available to the public in any of the following ways-

The procedure and process of acquisition and payment for the securities shall be disclosed in the prospectus.

Where securities are offered through an electronic form, the results of the offer including the allocation process shall be posted on the issuer's website, which shall disclose the broad classification of the allottees into individuals, local institutional investors and foreign investors.

An application for approval of a prospectus shall include a declaration by the directors, stating that they have taken all reasonable care to ensure that to the best of their knowledge, information and belief- (a) all information required to be included in the prospectus under these Regulations is included; and

The directors shall also state that they accept responsibility for the information contained in the prospectus.

Where applicable allotment of securities offered to the public shall be made based on the allotment policy disclosed in the prospectus unless the results of the allotment make such policy impractical and in such a case, an amendment of the allotment policy shall be made with the approval of the Authority.

Subject to sub-regulation (1), where the Authority has approved an amendment, the issuer shall announce the approval within twenty-four hours of the grant of approval.

A person shall not publish the results of the allotment of the public offer without notifying the Authority of the results at least twenty-four hours prior to the date on which the allotment results are to be released to the public.

An Issuer may use book building process or fixed price methodology for pricing and valuation of securities that the Issuer intends to offer to the public.

Where an issuer offers securities to the public or a section of the public and uses a book building process to determine the price for the offer of securities, the Issuer shall comply with the Capital Markets Authority (Book Building) Regulations, 2016.

Where an issuer uses fixed price methodology for pricing and valuation of securities offered to the public, the Issuer shall provide information on the valuation models used and assumptions made in the determination of the price in the prospectus.

An advertisement or abridged prospectus announcing a public offer or listing of securities for which a prospectus or a listing statement is required under these Regulations shall not be issued to the public unless it states that a prospectus is published and gives an address in Uganda from which it can be obtained.

The advertisements or abridged prospectus shall be submitted to the Authority within forty-eight hours prior to publication and the Authority may require amendments as it may consider necessary.

The information concerning an offer to the public or the admission to trading shall be disclosed in an oral or written form, even if not for advertising purposes and shall be consistent with the information contained in the prospectus.

An application form for subscription of the securities offered in a prospectus shall state, in a conspicuous position, where the prospectus may be obtained.

An issuer shall publish an abridged prospectus in at least two daily newspapers of national circulation or on the company's website and the prospectus shall disclose basic information on the issuer that includes-

Where a director named in a prospectus as a director or as having agreed to become a director either immediately or after an interval of time fails to comply with any of the provisions of these

Where a director is cautioned in accordance with subregulation (6) and continues to breach any of the provisions of these Regulations, he or she shall be summoned to appear before the Authority and shall provide a written and oral explanation for his or her conduct.

Where the Authority is satisfied that the commissions or omissions of the director referred to in sub-regulation (7), are in breach of these Regulations, the director shall be liable to pay a fine of one hundred currency points and in case if a countenance default a fine of one hundred currency points for every day of default.

A prospectus submitted to the Authority for approval shall be accompanied by proof of payment of the fees prescribed in Schedule VII of these Regulations.

The fees paid to the Authority shall not be refundable in case the- (a) Authority does not approve the prospectus;

Where a prospectus or information memorandum approved relates to the issuing of additional securities the issuer shall pay additional approval fees prescribed in Schedule VII to the Authority. Short form prospectus

A shelf prospectus shall be effective for a period of two years from the date of its issue and shall be subject to renewal upon change in information contained in the shelf prospectus as may be approved by the Authority.

The information in the shelf prospectus shall be updated prior to the issuance of any securities.

The shelf prospectus shall be updated by the filing of a supplementary prospectus to the shelf prospectus with the Authority, which shall include an information statement and any other relevant information.

Notwithstanding the provisions of regulation 24, the shelf prospectus shall indicate that it is a shelf prospectus and that it shall expire two years from the date of approval by the Authority.

An application for approval of a direct listing shall be by way of a formal letter accompanied by- (a) an Information Memorandum; (b) a letter of no objection from the applicant's primary regulator where the applicant is listed in a jurisdiction other than Uganda; and

The Authority may require an applicant to furnish such further information or documentation, as the Authority may deem fit and necessary for purposes of the application.

The applicant shall prove that as at the date of the submitting the application and for a period of at least two years prior to the date of the application, none of the directors of the applicant have-

The applicant shall have at least one hundred shareholders by the time of application for direct listing.

An information memorandum submitted to the Authority for approval of a direct listing shall contain the information specified in Schedule III of these Regulations.

An information memorandum shall include a declaration by the directors, stating that they have taken all reasonable care to ensure that to the best of their knowledge, information and belief that- (a) the information required to be included in the information memorandum under these Regulations or by an amendment or directive made or issued by the Authority has been so included; and

The Authority may on the application by the applicant, in its discretion, waive, modify or dispense with any criteria specified in Schedule III of these Regulations.

An information memorandum shall not be published or distributed without compliance with any amendments, directions made or issued by the Authority.

The issuer shall furnish to the Authority, as soon as possible any information that affects its credit worthiness.

During the period the commercial paper remains outstanding the issuer shall submit to the Authority half-yearly unaudited financial statements and annual audited financial statements.

During the period the commercial paper remains outstanding, the issuer shall as soon as possible, publish on its website, the accounts required to be submitted to the Authority under subregulation (2).

The Authority may require an issuer of commercial paper offered to the public to obtain a guarantee.

The Authority may require the issuer to obtain an assurance as regards the competency of the guarantor as it shall deem necessary.

For purposes of this part, an offer of securities shall be regarded as private placement and shall be deemed not to be an offer to the public if the offer is made under the conditions provided in sections 104 (2) and 105 of the Act.

The offerer shall file a private placement memorandum disclosing the information required in section 105 (2) of the Act to the Authority specifying-

The disclosures included in the private placement memorandum shall vary as may be directed by the Authority depending on which exemption from approval is being sought, the target investors and the complexity of the terms of the offering.

Subject to section 102 of the Act, this Part of the Regulations shall apply to- (a) offers and issues of bonds offered in Uganda by companies incorporated in Uganda under the Companies Act as a public company and authorised to offer securities in Uganda;

An Issuer satisfying the requirements prescribed in Schedule VI of these Regulations shall qualify to issue a bond.

Subject to subregulation (4), an institution licenced by the Central Bank or any other regulatory body shall before making an application to the Authority for approval to issue a bond to which these Regulations apply or guarantee issuance of a bond, satisfy the Authority that they are authorised by law or guidelines issued by Central Bank or the relevant regulatory body to issue or guarantee issuance of bonds.

An application for approval of the issue of a bond by a Local Government or State owned enterprises shall be lodged with all the necessary approvals and consents by policy or law in force.

Applications for issues of a bond by a Local Government shall comply with the Local Government Act, and any other relevant law.

Insurance companies licensed by the Insurance Regulatory Authority shall satisfy the Authority that issuing or guaranteeing the issue of financial instruments does not contravene any law, regulation or guidelines issued by the Insurance Regulatory Authority.

An offer of bonds shall fall into any of the following categories- (a) restricted issues; (b) private placements issues; or (c) general public issues.

Subject to subregulation (1) an issue made under any of the clarifications referred to in subregulation (1), may be converted to another classification to permit issues to be made to a wider group of investors by completing- (a) the additional requirements applicable to that class; (b) revising offering documentation; and (c) obtaining the prior approval of any regulatory body or party and the Authority.

The Authority may prescribe different categories of bonds and prescribe additional disclosure requirements applicable to the category of the bond where applicable.

For avoidance of doubt sub regulation (1) applies to a bond issued in accordance with shariah principles

Where the Authority is satisfied that ,-

Any person dissatisfied with the decision of the Authority may appeal to the Tribunal.

A person intending to lodge an appeal with the Tribunal shall notify the Authority within seven days of receipt of the decision of the Authority and the Authority shall refer the matter to the Tribunal.

The following information relating to directors should be disclosed- (a) The full name, age (or date of birth) home or business address, nationality and function in the company/entity.

Whether any director, executive officer, person nominated to become a director or executive officer is or has been involved in any of the following events- (a) that person or any partnership in which he or she was a partner or any company of which he or she was an executive officer is or has been the subject of a filing of a petition under any bankruptcy law;

The purpose is to provide information regarding the major shareholders and others that may control or have an influence on the company. It also provides information regarding transactions the company has entered into with persons affiliated with the company and whether the terms of such transactions are fair to the company.

The following information shall be provided regarding the issuer's major security holders, which means security holders that are beneficial owners of at least three per centum or more of each class of the issuer's voting securities:

Information shall be provided as to the portion of each class of securities held in Uganda and the number of security holders in Uganda-

Full information of any material inter-company finance.

Where a statement or report attributed to a person as an expert is included in the prospectus, a statement that it is included, in the form and context in which it is included, with the written the form and context in which it is included, with the written consent of that person, who has authorised the contents of that part of the Information Memorandum, and has not withdrawn his consent.

If any of the named experts employed on a contingent basis, owns an amount of securities in the issuer or its subsidiaries which is material to that person, or has a material, direct or indirect economic interest in the issuer or that depends on the success of the listing, provide a brief description of the nature and terms of such contingency or interest.

Provide a copy of the share register to the Authority.

Specify which financial statements must be included in the document, as well as the periods to be covered, the age of the financial statements and other information of a financial nature. The accounting and auditing principles that will be accepted for use in preparation and audit of the financial statements will be determined in accordance with financial statements prepared and audited in accordance with the accounting and auditing standards adopted by the Institute of Certified Public Accountants of Uganda.

Consolidated statements and other financial information.

Significant changes in accounting policies and estimates.

The capital of issuer to state- (a) the authorized share capital, the amount issued, the amount paid-up and the description and nominal value of the shares;

The purpose is to provide the management's explanation of factors that have affected the company's financial condition and results of operations for the historical periods covered by the financial statements, and management's assessment of factors and trends which are expected to have a material effect on the company's financial condition and results of operations in future periods. (2) Operating results

Liquidity and capital resources (4) Research and development, patents and licences, etc. (5) Trends.

A brief history of the initial organization of the business, including the form and name under which the initial organisation took place the nature and results of any bankruptcy, receivership or similar proceedings with respect to the issuer. (2) The nature and results of any other material reclassification, mergers and acquisitions consolidation of the issuer or any of its significant subsidiaries.

The acquisition or disposition of any material amount of assets otherwise than in the ordinary course of business and any material changes in the mode of conducting the business;

A summary of the material provisions of the articles of association with respect to annual general meetings of shareholders, voting rights of shareholders, the election and removal of directors and the rights of directors to vote on proposals in which they have a personal interest;

A legal due diligence report including, but not limited to, the following- (a) whether all licences and consents required to perform the business or proposed business of the issuer have been duly obtained; (b) the legal opinion provided by a competent law firm;

List of documents available for inspection, where they can be viewed from, and at what time

The following information on where to find information on the land and fixed assets of issuer and subsidiaries should be disclosed - (a) the validity of ownership of land, plant and equipment and other important and relevant assets of the issuer;

A statement showing the financial performance of the issuer and its subsidiaries during the preceding two financial years shall accompany a prospectus submitted to the Authority.

The directors of the issuer shall include a statement analyzing the financial statements included in the prospectus, that serves to explain the present and prospective financial conditions of the issuer (3) The issuer shall also provide the following items to the authority- (a) a copy of its memorandum and articles of association;

Name and details of incorporation of the issuer.

If material, state whether the articles or other establishing documents of the issuer have been amended and describe the substance of the material amendments.

Intercorporate Relationships - Describe, by way of a diagram or otherwise, the intercorporate relationships among the issuer and the issuer's subsidiaries as of the most recent financial year end of the issuer. (4) General Development of the Business of the issuer.

Describe the general development of the business of the issuer over its last two financial years. Include only major events or conditions that have influenced the general development of the issuer's business. If the business consists of the production or distribution of more than one product or the rendering of more than one kind of service, describe the principal products or services. Also, discuss changes in the issuer's business that are expected to occur during the current financial year of the issuer. (6) Trends - Discuss any trend, commitment, event or uncertainty that is both presently known to management and reasonably expected to have a material effect on the issuer's business, financial condition or results of operations, providing forwardlooking information based on the issuer's expectations any significant acquisition completed by the issuer during its most recently completed financial year. (7) Operations.

Describe the business of the issuer with reference to the reportable operating and the issuer's business in general. Include the following for each reportable operating segment of the issuer.

The extent to which the business of the segment is cyclical or seasonal.

A description of any aspect of the issuer's business that may be affected in the current financial year by renegotiation or termination of contracts or sub-contracts and the likely effect.

The number of employees, as at the most recent financial year end or as an average over the year, whichever is more relevant.

Any risks associated with the operations of the issuer.

Disclose the nature and results of any bankruptcy, receivership or similar proceedings against the issuer or any of its subsidiaries, or any voluntary bankruptcy, receivership or similar proceedings by the issuer or any of its subsidiaries, within the three most recently completed financial years or the current financial year.

Disclose the nature and results of any material reorganization of the issuer or any of its subsidiaries within the three most recently completed financial years or the current financial year.

Name, Residential address, Occupation - List the name and residence of each director and senior manager of the issuer and indicate their respective positions and offices held with the issuer and their respective principal occupations within the five preceding years. Identification documents such as a passport or national identification document should be submitted to the Authority and recent passport photographs. (2) State the period or periods during which each director has served as a director and when his or her term of office will expire.

State the number and percentage of securities of each class of voting securities of the issuer or any of its subsidiaries beneficially owned, directly or indirectly, by all directors and senior officers of the issuer.

State whether any director has been subject to Bankruptcy proceedings.

An applicant for the approval of a direct listing shall meet the following criteria- (a) a company limited by shares and registered as a public company under the companies law of its primary jurisdiction; or

The applicant's shares must be freely transferable and not subject to any restrictions on marketability of pre-emption rights.

The applicant must have published audited financial statements complying with International Financial Reporting Standards for an accounting period of at least two years ending on a date not longer than three months prior to the proposed direct listing.

If more than three months have elapsed since the end of the applicant's last accounting period for which financial statements have been prepared, the applicant must prepare unaudited interim financial statements from the end of the last accounting period.

The period covered by the unaudited interim financial statements should not exceed six months.

The applicant must have prepared audited financial statements for the latest accounting period on a going concern basis and the accompanying audit report must not contain any emphasis of matter or qualifications.

At the date of the application, the applicant shall not be in breach of any loan covenants (if it has any).

As at the date of the application and for a period of at least two years prior to the date of the application, none of the directors of the applicant should have-

The applicant must have declared profits after tax attributable to shareholders in at least three of the last five completed accounting periods prior to the proposed date of the direct listing.

The applicant must not be insolvent or under insolvency proceedings.

The proposed listing price and the basis of determining the price.

The name, registered office and, if different, head office of the issuer. If the issuer has changed its name within the last five years, the old name must be printed in bold type under the new name.

The country of incorporation of the issuer.

The date of incorporation and the length of life of the issuer, except where indefinite.

The legislation under which the issuer operates and the legal form which it has adopted under that legislation.

A description of the issuer's principal objects with reference to its constitution documents.

The place and date of registration of the issuer and its registration number.

A statement that for a period of not more than fourteen days before the date of listing and until fourteen days after the date of listing, at a named place as the Authority may agree, the following documents (or copies thereof), where applicable, could be inspected-

An Information Memorandum must include details of the modalities and procedures of existing or proposed trading and settlement of the applicant's shares in the Ugandan market.

Information relating to directors and senior management specified in schedule 1, part 1, paragraph 1.

Capital of the applicant specified in schedule 1, part 2, paragraph 11.

Major shareholders and related party specified in schedule 1, part 1, paragraph 6.

An Information Memorandum must include a statement of the tax payable on income from the transfer of shares, both in the primary jurisdiction and in Uganda, including whether the applicant assumes the responsibility for withholding of tax at source.

Use of net proceeds of the issue including transient use of the proceeds.

The issuer's application shall be endorsed with the following declaration under the signature of two directors or one director and the secretary: "We hereby declare that all information stated in this application and the statements contained in the report are correct, and neither the board of directors' minutes, audit reports or any other internal documents contain information which could distort the interpretation of the report".

Restricted Issues are not transferable in the first 12 months of issue and the offering document and the bond must include this restriction.

After the initial 12 months Restricted Issues are only transferable to a person who would have qualified as an initial investor.

Restrictions on transfer must be disclosed on the bond and in the offering document and: (a) An acquiring investor shall be required to provide a certificate of its qualification as an investor to the transferor and the issuer and any trustee and if requested shall provide a copy to Authority; and

Rating of the bond is optional, there is no requirement for Restricted Issues to be rated.

Regulation of use of intermediaries in conjunction with a Restricted issue.

Companies Act and Capital Markets Authority Act provisions apply.

No period of profitable trading or compliance with ratios will be required, The Authority's review of these financial statements will be to ensure inclusion and compliance with the disclosure requirements but will not constitute a merit-review.

All Private Placement Issues of bonds must be rated by a credit rating agency approved or licensed by the Authority if bonds are to be offered or issued to or transferable to an investor that is a bank a pension fund, an insurance company or another regulated financial institution.

Where bonds are required to be rated then the issuer will be required to covenant to continue to have the bond rated while any monies are outstanding on the bonds and to provide to the rating agency the information required for it to undertake ratings.

The restriction on transfer shall not apply where the transfer is as a consequence of insolvency or where the bank, pension fund, insurance company or other regulated financial institution is exercising its rights under a mortgage, charge or similar security.

The note Trustee shall be licensed or approved by the Authority under legislation administered by the Authority.

The Trust Deed shall meet the requirements set out in these Regulations.

The continuous reporting provisions of the Companies Act and the Capital Markets Authority Act and these Regulations which impose obligations on reporting to shareholders apply to require reporting to bondholders and are extended to include any matter which impacts on or has the potential to impact on the credit or ability to meet scheduled payments by an Issuer or the ability or potential ability of a guarantor to meet its obligations if called.

The reporting will be required to the same parties to whom reporting is required, above, by the ongoing reporting provisions in these regulations.

The bond and the related offering documentation shall clearly state the classification of the bond.

In the absence of a classification being stated on the bond and in the offering documentation the bond shall be assumed to be classified as a General Public Issue and required to comply with the provisions of these Regulations and the law applying to General Public Offers and issuers shall be liable as if an offer to the public as a General Public Issue.

The listing exchange may impose trading reporting.

The Issuer of a General Public Offer is required to prepare a Prospectus and to comply with the provisions of the Companies Act and Capital Markets Authority Act and these Regulations.

The Prospectus shall include an Application Form for the issue of bonds.

Applications can only be accepted if a completed Application Form attached to the Prospectus is received.

Issuers and other parties named in the Prospectus e.g. transaction advisors, lawyers, accountants and auditors are required to undertake reasonable due diligence in relation to information contained on the Prospectus and to include a statement that this has been undertaken.

All General Public Issues of bonds shall be rated by a credit rating agency, approved or licensed by the Authority under legislation administered by the Authority, prior to the Authority approving the issue.

The issuer will be required to covenant to continue to have the bond rated while any monies are outstanding on the bonds and to provide to the rating agency the information required for it to undertake ratings.

The Secured or unsecured and debt securities shall be disclosed.

The restrictions under the existing the Companies Act and The Capital Markets Authority Act to the use of the term debenture unless obligations are secured should be noted and complied with.

The bonds shall be classified as debentures and debt securities.

The Secured or unsecured and debt securities shall comply with the existing debenture and debt securities provisions of Companies Act and Capital Markets Authority Act.

The note Trustee shall be licensed or approved by the Authority under legislation administered by the Authority.

The Authority shall give a no objection to the security Trustee appointed by the issuer.

During the period the bond remains outstanding the issuer shall submit to the Registrar of Companies, the Authority, trustee and to bondholders half yearly unaudited financial statements and annual audited financial statements within 3 months of the end of the financial year.

If the issue is guaranteed, then the unaudited and audited financial statements must also be provided by the guarantor.