BAKU, Azerbaijan, Nov. 28
By Fakhri Vakilov-Trend:
Uzbekistan’s Agency for Development of Capital Market submitted a draft law to Uzbekistan’s Parliament for lifting restrictive rules for issuing corporate bonds and allowing them to be issued by limited liability companies (LLC), Trend reports citing the Agency’s press service.
Currently, corporate bonds can only be issued by joint stock companies and commercial banks. Moreover, the requirements for the issuer of the bonds make this instrument an unattractive source of financing even for many joint-stock companies.
Despite the fact that corporate bonds are a convenient alternative to bank financing, such norms significantly reduce the list of organizations that can turn to this tool.
This circumstance, in turn, causes a sharp reduction in the number and volume of corporate bonds outstanding in recent years. In particular, in the period of 2010-2018, the number of corporate bonds in circulation decreased from 41 to 17 units, and their volume fell from $53.9 million to $20.8 million, which is only 0.2 percent of the amount of issued shares.
The country currently has more than 148,000 enterprises in the form of a limited liability company operating in various sectors of the economy. All these enterprises, often more attractive for investment than joint-stock companies, have no alternative to financing a bank loan, and corporate bonds can be such an alternative, read the message.
In this regard, the Agency for the Development of the Capital Market has developed a draft law, which proposes to allow the issuance of bonds to limited liability companies with the extension to them of requirements for external audit, financial reporting, disclosure of information and other requirements that are required from joint stock companies.
In addition, the Agency proposes to abolish the rate for issuing corporate bonds within the amount of the company's own capital, the requirement for collateral for the issue of corporate bonds, as well as soften the requirements for three-year positive financial reporting and rating.
The submitted law also proposes to assign the authority to establish conditions and determine the requirements for issuing corporate bonds to the authorized state body for regulating the securities market (Agency for the Development of the Capital Market) in order to facilitate quick and flexible reflection of current trends and introduction of changes and additions to the issuance procedure bonds taking into account the interests of all participants in the securities market, in particular investors.
The adoption of this law will serve to further improve the country's business climate, to broadly and actively attract free funds of the population and investors to Uzbekistan’s economy, thereby reducing the dependence of real sector enterprises on bank lending (the load on the banking sector will decrease) and state guarantees, as well as a drastic reduction in state participation in economics, said the Agency.
Furthermore, the adoption of this bill will serve to improve Uzbekistan’s rating in the Doing Business report of the World Bank.
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