SEC mulling strategic changes for VC and UT listings
The Securities and Exchange Commission (SEC) is considering new rules to facilitate venture capital business, while amending the Unit Trust Code in the existing Act, to enable Unit Trust (UT) listings.
SEC Chairman Harendra Dissabandara told The Sunday Times Business on Friday that the regulator is very positive in enabling start-ups and venture capital funds to raise capital through the stock market. “Already, companies with accounts of two years can list on the Colombo Stock Exchange (CSE) through an introduction. They can also list on the Empower Board, where the entry criteria are more relaxed. In terms of financing venture capital funds, we plan to bring in a new Act, to enable them to get into the CSE,” he said. He said the technical issues in the existing Act, in terms of UT code, will be addressed to facilitate their listing. He also commended the Ministry of Digital Economy for its efforts to attract start-ups and venture capital funds to the CSE.
Officials also said that discussions are ongoing with the Ministry of Digital Economy and the SEC to bring temporary legislation under the SEC Act to stop cascading taxation effects in the venture capital funds.
A Rs. 50 million fund and a tax pass-through structure, avoiding double taxation for venture capital funds, will be set up within three months, officials said.
Information Communication Technology Agency, Chairman and Presidential Adviser on Digital Economy, Dr. Hans Wijayasuriya, at a panel discussion on Thursday at Disrupt Asia conference noted that, institutions such as the Central Bank, the Board of Investment, along with the Ministry of Finance, will be enabling foreign direct investment which are coming into selected high potential start-ups, to be redeployed in subsidiaries of those entities overseas.
This, he said, will enable Sri Lankan start-ups to grow very rapidly, scale into multinational start-ups with headquarters and an Intellectual Property (IP) located in Sri Lanka.
“When we are willing to recognise IP revenues and exit events and monetise them to recognise them in the country as opposed to recognising only the service component, we will see this take off.”
Central Bank Governor, Dr. Nandalal Weerasinghe, announced that the Central Bank is progressively easing capital controls that were implemented during the crisis. This relaxation is being applied across the entire economy, with particular emphasis on supporting start-ups in technology and other key growth sectors such as construction and tourism. He highlighted the Central Bank’s commitment to facilitating outward investment in qualified ventures, allowing them to expand internationally while maintaining their base in Sri Lanka.
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