New rules to help SMEs raise capital

New rules to help SMEs raise capital

The Securities and Exchange Commission is in the process of issuing regulations to facilitate capital market funding access for small and medium-sized enterprises (SMEs), aiming to initially allow SME share offerings and convertible debentures without document submission.

The move will reduce unnecessary procedures and costs, and SMEs will be able to offer these securities to institutional investors, venture capitalists or joint venture corporations, as well as directors and employees of these entities, with an unlimited amount for the offering value.

But SMEs must provide summarised information to explain the nature of their business, risks and other important details, including restrictions and securities trading.

The SEC is conducting a public hearing on the new regulations.

The move is part of the government's 20-year national strategy to develop the capability of SMEs, with an objective of increasing GDP contribution by SMEs to 60% by 2037.

One of the main obstacles for SMEs to access capital market funds is how regulations complicate the fundraising process, according to the SEC.

Based on data gathered by the SEC, SMEs grew over the past few years with aggregated GDP of SMEs expanding by an average of 4.2% per year.

In 2018, the combined business value of Thai SMEs was over 7 trillion baht, accounting for 43% of the country's GDP and reflecting the importance of these enterprises in terms of national development.

SMEs employ 13.95 million employees in various business segments in Thailand, making up 85% of the country's total workforce, the SEC said.

For the second phase, SMEs classified as medium-sized enterprises, defined as those with revenue of 100 million-500 million baht or enterprises providing services or trade with revenue of 51 million-300 million baht will be allowed to sell securities under the same conditions as in the first phase.

Although securities offerings can be made to other investors besides institutional investors, venture capitalists or private equity funds, these SMEs must sell shares and convertible debentures to no more than 10 persons combined, with the total investment sum capped at 20 million baht.

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