The Securities and Exchange Commission (SEC) of Thailand is currently in the process of issuing regulations to facilitate capital market funding access for SMEs, aiming to initially allow SME share offerings and convertible debentures without document submission.
This move seeks to reduce many unnecessary procedures and costs, and SMEs will be able to offer these securities to institutional investors, venture capitalists, or joint venture corporations, as well as directors and employees of these entities, with an unlimited amount for the offering value.
However, SMEs can’t just sit back and benefit from all these new regulations being put in place. They will have to provide summarised information to explain the nature of their business, risks, and other important details; including restrictions and securities trading.
This consideration of new regulations is part of the government’s 20-year national strategy to develop the capability of SMEs, with an objective of increasing GDP contributions by SMEs to 60 percent by 2037.
According to the SEC, one of the main obstacles that many SMEs face when trying to gain access to capital market funds is how current regulations complicate the fundraising process.
Based on data gathered by the SEC, SMEs grew over the past few years with aggregated GDP of SMEs expanding by an average of 4.2 percent per year. In 2018 alone, the combined business value of Thai SMEs was over 7 trillion baht (US$ 231.2 billion), accounting for approximately 43 percent of the country’s total GDP and reflecting the importance of these enterprises’ in terms of national development.
Throughout the various business segments in Thailand, SMEs employ approximately 13.95 million employees. This constitutes up to 85 percent of the nation’s total workforce. As such, SMEs are essentially indispensable to the country as a whole.
For the second phase, SMEs classified as medium-sized enterprises, defined as those with revenue of 100 million – 500 million baht (US$3.3 million – 16.5 million) or enterprises providing services or trade with revenue of 51 million – 300 (US$1.7 million – 9.9 million) million baht will be allowed to sell securities under the same conditions as in the first phase.
Although securities offerings can be made to other investors besides institutional investors, venture capitalists, or private equity funds, these SMEs must sell shares and convertible debentures to no more than 10 people combined, with total investment sum capped at 20 million baht (US$660.7 million).