CSE proposes relaxed public holding rule to revive equity listings via Introduction

The Colombo Stock Exchange (CSE) has proposed easing its Minimum Public Holding (MPH) requirement at the point of listing to reverse a sharp decline in equity listings via Introduction, a method that has seen just seven issuances since 2013, with the last in 2020.

The Exchange noted that the inability of applicant companies to meet the MPH threshold under current listing rules, particularly at the initial stage, has deterred issuers and limited market vibrancy. 

“Various stakeholders have expressed their concerns on the prevailing regulatory framework, which imposes restrictions on companies seeking listings via Introduction, especially with regard to the MPH requirement, thereby preventing them from venturing to list on the CSE,” the CSE said.

In an effort to iron out issues, the CSE has proposed a ‘Phased-Out Compliance’ model that would allow companies listing on the Main Board or Diri Savi Board via Introduction to defer meeting the MPH requirement for up to 18 months post-listing. 

Firms would be required to meet 50 percent of the requirement within six months, and full compliance by month eighteen. Failure to comply will result in monetary penalties, and companies unable to meet the requirement within 24 months will be moved to the Second Board.

The proposal includes several key relaxations. Non-public shareholders who held shares for at least 18 months prior to the Initial Listing Application (ILA) may sell shares immediately upon listing to support MPH compliance, but must retain at least 30 percent of their holdings until the company is compliant or for 24 months, whichever is sooner. Additionally, the CSE plans to waive the lock-in period for these shareholders and exempt applicant entities from the rule that limits the three largest public shareholders to holding no more than 50 percent of public shares at listing.

According to the capital market operator, the proposed model is designed to encourage a broader pool of companies to access the capital market, improve market liquidity and competitiveness, and uphold regulatory oversight. The CSE believes the staggered approach will lower barriers to entry while ensuring companies adhere to public holding norms within a reasonable timeframe.

The CSE has invited written public comments on the proposed amendments by 21 June 2025, addressed to its Chief Regulatory Officer.