Williams suggests 100% hike in junior market capital requirement
Published:Sunday | January 22, 2012 | 12:00 AM
Investment banker Chris Williams is proposing that the minimum capital that can be raised through the junior stock market be doubled to J$100,000, and that the additional resources be used by entry-level companies to strengthen their boards and reporting systems.
These and other governance issues, he said, represent one of the greatest risks for investors buying shares in the formerly private companies with weak or opaque systems.
"I would like to see the Jamaica Stock Exchange be the vehicle to drive that process, except that instead of the minimum $50,000, that be increased to say $100,000 because that capital can't get a good team in place or give the secretarial support needed to establish committees, strong boards and reporting functions as necessary," said Williams last Wednesday night at the monthly meeting of the Global Association of Risk Professionals in New Kingston.
The junior market which was launched in April 2009 allows small and medium companies to raise equity capital of J$50,000 to J$500,000.
With the incentive of a 10-year tax waiver as incentive, 12 companies have already listed and have been snapped up by investors.
Challenging
Williams, the president and CEO of Proven Investments Limited, said the lack of proper governance structures can deter investment in companies or pose challenges for investors.
"Most of the privately held companies that we have seen and bought into, the delay in the acquisition process has been huge governance exposure," he said.
"When you dig into the Companies Act and the filings that you think are there, they have not done them. When you dig into the structure of the organisation in terms of board, committee and separation of duties, all those things taken for granted, nothing is in place. You will see something like board meeting last held 2009, minutes not as tight as you would require and resolutions have not signed, these are important and can challenge your acquisition."