CSE, SEC invite family businesses to list on the stock market

The Colombo Stock Exchange (CSE) in association with the Securities and Exchange Commission of Sri Lanka (SEC) recently engaged the family business community in Sri Lanka through the inaugural Issuer Forum for 2021 hosted on the theme ‘Founder to Family - Leveraging Going Public’, at the Shangri-La Hotel Colombo.

The event was organised to highlight how a family business can take advantage of going public while ensuring the family retains control and continues to guide the vision of the business and to address the misconceptions regarding listing which deter businesses from exploring an Initial Public Offering, the CSE said in a media release.

SEC Chairman Viraj Dayaratne said: “One of our objectives is to increase liquidity of the market. There are many misconceptions in the market. One is that the listing process is cumbersome, that it takes time and also that it can be very expensive. But it is not cumbersome or expensive as many would perceive. It is one of the best options to raise capital. And that is why we want businesses to come to the capital market and make use of the opportunities. The Government has created a healthy environment. The last budget proposal has given many tax incentives which are open until the end of the year. So it is the best time to come and list your company.”

Speaking during the event, CSE Chairman Dumith Fernando noted: “It’s an interesting juncture in our equity markets and in our capital markets with an environment that has become much more conducive to more companies accessing capital markets. We thought now is the right time to start speaking to companies, especially family-owned businesses about the types of benefits, the types of processes and the types of multigenerational value that you could get from being listed on the stock exchange. With family businesses, one of the most important things that listing can do for you is strengthening your governance and creating a legacy where your company can withstand various issues that might come as a private company.”

The Forum drew an encouraging response from the family business community and was attended by over 70 representatives of prominent family businesses in Sri Lanka.

Deshan Pushparajah Managing Director, Global Markets and Investment Banking at CAL added his insight on taking family businesses public stating “When you think of it as a family business, it is important to take a view from a strategic perspective which is right for the family. In that perspective, the critical thing to think about is the longevity of the business. Only 3 to 4 per cent of family businesses make it beyond the 3^rd generation. So when you approach a listing what should be considered is that what is right to ensure the continuation of the business. One of the biggest objections to listing is losing control. In essence control is being able to direct the future of the company and that could be achieved in many different forms such as having a private trust, multiple classes of shares, brand ownership and other options.”

Dr. Naveen Gunawardane. Managing Director at Lynear Wealth shared his insight on creating a governance structure for family matters prior to an IPO and aspects of family wealth management. He said when managing wealth, “we see a lot of people making the mistake of taking a piece meal approach. So the key thing to think about here is that you need to institutionalize a process in which you actually make your investments and manage your wealth. Ultimately a business needs to place a governance structure in place. And with such a structure your investment portfolio starts to diversify with time, which in parallel provides you with better risk management. Ninety percent of family wealth is lost by the 3^rd generation and an IPO is a fantastic way for you to ensure longevity of your family business.”