Why do companies issue shares? Why list on the Barbados Stock Exchange?
Companies generally issue and list shares on an exchange to raise capital. Companies raise capital to:
- Perform Research and Development
- Expand Plant and Equipment
- Retire existing debt
- Diversify Operations
The following are some of the key benefits of raising capital on the BSE:
- An increase in company prestige
- Future financing is made easier
- Shares are more easily marketable
- Tax incentives accrue to listings (e.g. securities traded on the BSE are exempt from Property Transfer Tax and Stamp Duty).
How do companies issue securities?
Special rules apply and specific information about the company and its securities is requested in order to adequately inform and protect the prospective investor. In most cases a document called a “Prospectus” is required in which the company must provide comprehensive information and details. The company must ensure that the prospectus complies with the Companies Act and the Securities Act Cap 318A. No binding transactions can be made until the prospectus is reviewed and approved by the BSE. The Exchange does not, however, guarantee completeness or accuracy of the prospectus and it is up to the investors and their advisors to weigh the risk of investment in relation to the calculated return.
Companies applying for listing on the BSE should meet the following basic criteria:
- The company must be registered with the Registrar of Companies
- It must be a profit-making enterprise, with minimum net assets of BDS$1 million dollars
- It must demonstrate adequate working capital
- Show evidence of competent management
- Have a positive earnings profile over the preceding three years
Which criteria do companies have to meet to list on the Barbados Stock Exchange?
The application process for listing on the Barbados Stock Exchange depends entirely on the market of suitability for your business. While companies listing on the Main Market need not be accompanied by ancillary support, listings on both the Innovation & Growth Market and the International Securities Market must be introduced and sponsored by a Member of the Exchange and Listing Sponsor respectively.
With three markets to choose from, each with their own distinct listing requirements, applications to list may not be uniform.
- For Innovation & Growth Market Requirements, click here.
- For Main Market Requirements, click here.
- For International Securities Market Requirements, click here.
All companies seeking a listing on any market of the BSE are subject to the BSE Corporate Governance Recommendations.
Which documents does the Barbados Stock Exchange require?
Consult our Procedures page for a detailed outline of the documents required for membership, listing, trading, and/or clearing and settlement.
What are the fees charged by the Barbados Stock Exchange?
The Barbados Stock Exchange’s fee structure is cost-effective and highly competitive with the individual needs of its markets. Refer to the Exchange Fees page for more details.
Can investors purchase securities directly through the Exchange?
Securities cannot be bought or sold directly through the Exchange. The Barbados Stock Exchange Inc. operates a secondary market to facilitate the efficient and transparent trading of shares of companies publicly listed on its Board. To purchase or sell shares in any of these listed companies you must contact a Registered Broker.
Contact details for individual Brokers can be found HERE.
Pros & Cons of Investing in Listed Securities
There are several benefits associated with investing in listed securities. These include, but are not limited to:
— Dividends and interest
— Capital Appreciation
- Tax Incentives
— No Capital Gains Tax
— No Property Transfer Tax and Stamp Duty for stock rated on the BSE
There are also risks attached to Investing:
- a company may have an unprofitable year and not declare a dividend; or
- the market price of the securities can decline.
What are “Dealers/Brokers?”
To buy or sell most securities, a prospective investor should contact a firm or person registered with the BSE as a Registered Broker.
In Barbados, most Dealer Members – with active brokers – hail from the Commercial Banks, their respective Trust Companies and also Financial Services Companies. These brokers are essentially sales persons who buy and sell securities.
For investor protection, the BSE has outlined clear requirements for Members – and their personnel – who engage in securities trading. Investors nonetheless should be mindful of the reputation and integrity of dealers and investment advisors, particularly with regards to services provided, fees charged and track record. To confirm broker authenticity, investors should always check for evidence of broker registration with the BSE.
How is Clearing and Settlement done?
At the conclusion of every trade day, each brokerage firm will be emailed a transaction summary showing the transactions completed for that day. The Transaction Report will show a net-to-pay or net-to-receive position. This will let the brokerage know what is required of them for settlement. Settlement is facilitated using the REAL TIME GROSS SETTLEMENT SYSTEM of the Central Bank. Each brokerage firm has a bank account with the system and on days when they are in a net-to-pay position the firm funds this account with the Central Bank. The BCSDI also has an account with the system and makes payments to the accounts of those individuals who are net-to-receive so that they can pay their clients.
How do I get information about my investment?
After a public listing, companies must meet a set of ongoing requirements that are communicated – for public record – by the Exchange.
Shareholders – by virtue of owning voting class stock/shares in a Public Company – are entitled to receive regular information on company management, performance and developments. Further, they are entitled to vote at shareholders’ meetings of the company of their investment.
As part of its mandate to promote an efficient and transparent market, the BSE publishes key information about its Listed Companies in its daily Trading Report.
What is the Regulatory Framework?
The Barbados Stock Exchange Inc. (BSE) and its wholly owned subsidiary, the Barbados Central Securities Depository (BCSDI) are designated as Self Regulatory Organizations (SROs) under the Securities Act 2001-13 but are regulated in turn as well by the Financial Services Commission (FSC). These organizations work in tandem to promote an efficient marketplace for the trading of stocks and bonds in Barbados. The following pieces of legislation are used to govern the activities of all Market Actors – SROs, Listed Companies, Registered Brokers and Shareholders:
- Financial Services Commission Act 2010-21
- Securities Act Cap 318A
- Companies Act Cap 308
- Mutual Funds Act Cap 320B
- Money Laundering and Financing of Terrorism (Prevention and Control) Act Cap129, 2011-23**
What is “Insider Trading?”
Directors, officers, employees and other persons having close business relationships with the company, may sometimes, by virtue of their positions, have access to confidential information that has not yet been revealed to the shareholders and the public. It is against the law for an officer or director to use such information before it has been communicated to the public. Additionally, the disclosure of non-public information to persons not authorized to have the information (known as “tipping”) is prohibited. Please see the BSE Insider Trading Guidelines for more information.
What are the implications for Foreign Portfolio Investment?
Non-nationals – and Barbadians residing permanently abroad – must obtain Exchange Control approval to trade securities. Caricom residents are treated as nationals. Property Transfer Tax and Stamp Duty are waived if securities are traded on the Exchange. It is recommended that inflows of foreign currency for investment be registered through the Central Bank of Barbados in order to facilitate the easy repatriation of dividends and capital. Please be advised, however, that there are fees attached to Exchange Control approval.
Barbados is a quality destination that is trusted and well-regulated, following international best practice in capital market regulation.
For more information on why companies and investors alike choose Barbados, kindly refer to the Why Barbados page for details.
** Amendment to the Act (HERE).