This is a summary of recent changes to the listing categories of the Kazakhstan Stock Exchange.  It is intended to be a helpful guide but is not comprehensive and should not substituted for legal advice.

Effective from 1 January 2015, the National Bank of Kazakhstan (“NBK”), Kazakhstan’s financial regulator, amended the Requirements for Issuers and Their Securities Admitted to Circulation on a Stock Exchange as well as to Certain Categories of the Stock Exchange’s List (the “NBK Requirements”).  Consequently, the Kazakhstan Stock Exchange (“KASE”), the only Kazakhstan stock exchange, amended its Listing Rules (the “KASE Listing Rules”).  The amendments, generally, simplified the listing categories and made them more market-oriented.  The amendments also simplified the requirements for securities, especially debt securities, issued by quasi-sovereign issuers.

For easy reading, this note does not discuss those listing requirements for shares and bonds that remain unchanged.

Shares. First Category

As amended, the shares sector of the KASE official list consists of only two categories – first category and second category (compared to three categories in the past).

The first category is intended for truly public companies while the second category covers the rest.  Under the NBK Requirements, for shares to be in the first category the issuer must:

  • be in existence for not less than three years. A shorter term may be established by the KASE Listing Rules for certain quasi-sovereign entities;
  • provide (i) audited financial statements for three years (prepared in accordance with IFRS or US GAAP) and, if the audited annual financial statements are more than six months old, (ii) interim financial statements (which must either be audited or reviewed by auditors).  For quasi-sovereigns, for which a shorter period of existence may be established as mentioned above, the financial statements should be provided for the period of their existence; and
  • have a corporate governance code and the issuer’s constitutive documents or prospectus must not restrict or adversely affect transfer of the shares.

The requirements above repeat, in part, the criteria from the previous version of the NBK Requirements. The remaining criteria, as to own capital of the issuer, profit and free float were moved from the NBK Requirements to the KASE Listing Rules and have been substantially modified.  Now the KASE Listing Rules set out the following requirements for shares (and, where relevant, for the issuer of such shares) in the first category, in addition to those established in the NBK Requirements:

  • prior to listing in the first category, the issuer/selling shareholder must have already completed an IPO, have not less than 200 shareholders and secure a market-maker for the shares; and
  • own capital ("OC"), IPO proceeds in total (the “IPO Proceeds”) and, for issuers that are Kazakhstan residents, IPO proceeds on the territory of Kazakhstan (the “KZ Proceeds”), profitability and free float must comply with one of the following three criteria:
  1. OC should not be less than either: (a) the charter capital or (b) KZT15 billion (around US$80 million), the IPO Proceeds should not be less than KZT 7 billion (around US$37.8 million), the KZ Proceeds should not be less than KZT 3.5 billion (around US$18.9 million), the issuer should be profitable for either of the last two years and the free float should not be less than 5%; or
  2. OC should not be less than either: (a) the charter capital or (b) KZT10 billion (around US$54 million), the IPO Proceeds should not be less than KZT 4.5 billion (around US$24.3 million), the KZ Proceeds should not be less than KZT 2.25 billion (around US$12.2 million), the issuer should be profitable for the last two years and the free float should not be less than 15%; or
  3. OC should not be less than either: (a) the charter capital or (b) KZT5 billion (around US$27 million), the IPO Proceeds should not be less than KZT 2.5 billion (around US$13.5 million), the KZ Proceeds should not be less than KZT 1.25 billion (around US$6.8 million), the issuer should be profitable for the last three years and the free float should not be less than 25%.

It is unclear what is the basis for establishing the OC and IPO Proceeds numbers above.  It appears that the companies with shares currently listed in the first category on the KASE have OC numbers and, where applicable, IPO numbers well above those set out in criteria 1 above.  It may be that the KASE Listing Rules established the above mentioned criteria in anticipation of an influx of mid-sized companies to the KASE.

Shares. Second Category

Under the NBK Requirements, for shares to be listed in the second category the issuer must:

  • provide either audited financial statements (prepared in accordance with IFRS or US GAAP) for one complete year or, if the issuer exists for less than a year, then for the period of existence, or, in certain cases, interim financial statements (which must either be audited or reviewed by auditors) that are not older than six months; and
  • have a corporate governance code and the issuer’s constitutive documents or prospectus must not restrict or adversely affect transfer of the shares.

The KASE Listing Rules set out no additional requirements listing in the second category.

Note that listing of shares in the second category is sufficient for the purposes of complying with Article 22-1 of the Securities Market Law, which requires that when placing shares abroad (including in the form of GDRs) shares of an issuer that is a Kazakhstan resident must be listed on the KASE and, at least 20% of all shares offered must be offered and, if there is demand, placed on the KASE.

Bonds

The bond sector of the KASE official list now consists of three categories – debt securities of subjects of the quasi-sovereign sector (please see the definition below), other debt securities and a buffer category (for issuers in default).  Three notable changes are as follows:

  1. a new category for quasi-sovereign bonds is established;
  2. the requirement for the bonds to have a rating has been abolished; and
  3. a market-maker for the bonds will only be necessary if there are 10 or more bondholders.  Before, a market-maker was required except where one person owned all the securities of one issue.

Subjects of the quasi-sovereign sector under the NBK Requirements means companies where the state, the NBK, a national holding, national management holding or national company directly or indirectly has the controlling stake.  Note that requirements for quasi-sovereign bonds are much lighter than those for other debt securities.  For example, there is no requirement for the term of existence of the issuer, the issuer does not need to provide to the KASE its financial statements to obtain the listing, and the issuers that are joint stock companies do not need to have a corporate governance code.  On-going disclosure requirements for quasi-sovereign bonds are also lighter than those for other bonds.

This new category makes it possible for quasi-sovereigns to use a newly created SPV not having any financial statements as an issuer of bonds.  The KASE Listing Rules already contain one instance where SPV issuers are not subject to the full listing requirements but this only applies to the structure where a shareholder of an SPV issuer guarantees the SPV’s obligations under the bonds – in such case the listing requirements apply to the guarantor instead of the issuer.

Except for the rating and market-maker requirements mentioned above, and the requirement to provide audited financial statements for one year rather than for two years, the requirements for the ‘other debt securities’ sector are essentially similar to those for ‘debt securities with rating (highest category)’ category that existed before the amendments.