This content is from: Local Insights

Colombia: SMEs in the Alternative Market

Luis Gabriel MorcilloMaria Camila Ordoñez
To facilitate access of small and medium-sized enterprises (SMEs) to local capital markets, the Colombian Ministry of Finance enacted Decree 1019 of 2014 to alleviate registration burdens in the Colombian alternative equity and fixed income market (Alternative Market, or Segundo Mercado). This reform will allow smaller companies and not recurrent issuers to finance their operations through capital markets. This will offer attractive returns, as are usual from these type of issuers, to institutional investors (those authorised to invest in the Segundo Mercado).

Through the reform, when the Superintendence of Finance has validated the registry requirements, its supervision powers are transferred to the issuer, its directors and to all its financial and legal advisors, in a such a way that all involved advisors will be liable for the entirety and completeness of the information disclosed in the offering documents. With this new procedure, registration periods are considerably reduced and it is in the best interest of SMEs to set up a diligent offering process and sufficient documentation to obtain an automatic registry before the National Registry of Securities and Issuers (RNVE) within a few days of filing to launch the offering.

Additionally, offering procedures through the Alternative Market have been simplified. It is now voluntary to register in the Colombian Stock Exchange, and discretionary to present a credit risk rating for the issuer or the securities. As for offering documents, these have been simplified and the minimum requirements are reduced to the general information of the issuer, differentiating the content of the filed prospectus from the offering memorandum that is used in the roadshow and whereby all financial terms and conditions of the offering are agreed with investors.

The amendments introduced by Decree 1019 have brought Colombian regulations closer to international standards regarding similar alternative markets in the UK, Spain, Brazil and Peru. A reform will undoubtedly open up a wide range of promissory companies for local and international investors, which before were not prepared to enter into the complex initial public offering scenario of the public offering markets.

Luis Gabriel Morcillo and Maria Camila Ordoñez

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