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The process of incorporating the Zimbabwe Stock Exchange into a private limited company is in progress following the repeal of the Act, which recognised the exchange as a statutory body.The registration of the ZSE into a company completes the first stage of the demutualisation process.

According to the gazetted amendments, Section 121 of the Securities Act (Chapter 24:25) is repealed with effect from a date to be fixed by the President by notice in a Statutory Instrument. This enabled the ZSE to change the legal status from a mutual association into a company limited by shares.

Atherstone & Cook is handling the registration process. The company certificates will be signed by the Ministry of Finance and the stockbrokers under a 32-68 Shareholding Structure. There are about 45 stockbrokers who will all get an equal shareholding in the allocated 68 percent.

Corporatisation of the exchange will result in the separation of trading rights, ownership and management (independent board and executive management).  After the registration of the company, the new shareholders will have to convene a meeting to appoint a board.

This will improve governance as it will give the shareholders power to choose who best represents their interest in how the stock exchange can be managed.

New mandates will be given to management and even though there is a possibility that the current or part of the leadership might not make it in the new dispensation, the structure allows the board to have clear authority and to improve authority. At the moment, the exchange is being run by an interim board, whose terms have already expired.

The corporatisation will also enable ZSE to register as a stock exchange with the Securities and Exchange Commission.

Under the process, stockbrokers will hold 34 percent of the exchange post demutualisation from the current 68 percent while government will hold 16 percent from the pre-demutualisation stake of 32 percent. The stockbrokers’ shareholding will be split equally among the holders of proprietary rights.

The remaining 50 percent will be open to private investors where 20 percent will go for a private placement to raise $2 million and 30 percent will be floated through an IPO for members of the public to raise $3 million. This will bring the total capital for the ZSE to $10 million after an initial valuation of $5 million.

Overall, Finance Minister Patrick Chinamasa said demutualisation will enhance operational efficiency.

“It will also remove barriers to entry for new market participants and hopefully will boost investor participation through the running of the exchange as well as improving access to resources for capital investments and growth.”

The ZSE is also planning to move from central Harare to the northern suburbs in April to a self-owned property. The exchange has also floated a tender for the upgrade of its current Electronic Price Display board. The board is expected to interface with the Automated Trading System. — Wires.