CRA adopts four existing and five new regulations to boost corporate governance and investor confidence
Thukten Zangpo
As part of regulatory reforms for companies and the primary capital market, the Corporate Regulatory Authority (CRA) revised four existing regulations and adopted five new regulations.
According to a press release from the Ministry of Industry, Commerce, and Employment, these reforms are designed to streamline corporate governance practices, improve risk management mechanisms, and provide companies with easier access to alternative financing avenues.
One of the key changes is the amendment to the Regulations for Initial Public Offering of Shares 2024, which now reduces the required operational trace record for companies seeking to go for initial public offering (IPO) from two years to just one.
In IPO, a company offers its shares to the public for the first time, allowing it to raise capital from a wide range of investors.
This change allows businesses with projects under development to opt for IPO, provided they meet specific conditions such as land acquisition and the procurement of essential equipment. Promoters must fully pay for shares and complete 75 percent of project construction, verified by relevant authorities.
This approach, according to the ministry, mitigates risks, encourages responsible development, and promotes investor confidence by ensuring the issuer is financially and operationally prepared for the public offering.
The new regulations also pave the way for broader public participation in natural resource companies through IPOs, aligning Bhutan’s environmental conservation goals with its development agenda, and safeguarding natural resources for equitable use by future generations.
Amendments to the Regulations for Public Issue of Corporate Bonds 2022 (revised in 2024) introduce sovereign guarantees as an alternative to bond guarantees. This flexibility supports initiatives like green bonds for hydropower and other eco-friendly projects.
There is also a new clause on penalties and offences, ensures asset liquidation for bond redemption failures, coupled with a ban on future issuances, reinforces accountability, and safeguards investor interests.
In addition, the CRA overhauled its Regulations for Accounting and Auditing of Companies 2024 to ensure that financial statements are prepared and audited with integrity to enhance corporate transparency and boost investor confidence.
The Regulations for Corporate Governance and Corporate Social Responsibility 2024 was revised to define the role of independent directors as professional services to ensure professional standards and ethical practices by Company Independent Directors.
The CRA also adopted five new regulations aimed at improving corporate governance and market integrity.
The new 2024 Regulations of Winding Up of Companies prioritises stakeholder protection by ensuring the equitable distribution of assets and compliance with legal obligations.
The new 2024 Regulations for Amalgamation of Companies establishes a robust framework for company mergers and acquisitions, safeguarding stakeholder interests (shareholders, creditors, employees) while encouraging business rehabilitation and aligning with international best practices.
The new Regulations for Company Secretaries and Filing Agents 2024 defines clear roles, qualifications, and responsibilities, promoting higher corporate governance standards.
The Regulations on Buy-Back of Shares 2024 provide legal guidance and a framework for companies to repurchase their shares in the company and as a mechanism to restructure and rationalise their capital fund based on business needs.
This regulation will benefit companies by offering flexibility in capital fund management while protecting shareholder interests and fostering confidence in the securities market. In addition, it also ensures fair procedures for distribution of surplus funds of companies among its shareholders, with transparent decision making by the shareholders.
The new Regulations for Investor Protection Fund 2024 will safeguard the interests of investors by providing a financial safety net in cases of fraud, default, or market failures.
This enhances investor confidence, promotes fair market practices, and supports the growth of a resilient and trustworthy capital market in Bhutan. It will also ensure that the funds remaining unclaimed with listed companies are managed by credible institutions like the Royal Securities Exchange of Bhutan Limited, and ensure disbursement to the rightful investors.