Listing With Ease: The Benefits Of Listing On The JSE’S Junior Market

The Junior Market is open for business giving potential small and medium sized listed companies the ability to choose equity over debt and investors the opportunity to invest in production rather than paper. The Jamaica Stock Exchange Group understands that it is through the small businesses that Jamaica’s economy will continue to grow and to reap the prosperity that Jamaicans seek.

The Junior Market makes specific provisions for companies by way of corporate tax concessions, reduced listing fees and many special arrangements which have been ironed out by other players in the market such as accountants, brokers and attorneys.

The tax incentive was designed to encourage the growth of the small to medium enterprises (SME) as well as to ensure that there is good governance for those who enjoyed the benefit and to directly encourage investors towards equity capital. It was the only incentive with a ‘claw-back’ for non-performance.

The Corporate Tax for Small and Medium sized Companies listing on the market came into effect in April 2009 with conditions as follows:

(1) The benefit is conditional on the company offering it shares via Initial Public Offering to investors and there has to be at least 100 persons other that the original subscribers investing in the market.

(2) The stated capital of the company should not be less than $50 million or more than $500m and the amount raised in the market cannot be less than $50 million with 20% of the company in the hands of new shareholders.

(3) The company must be at all times compliant with the rules of the Exchange and if not or they are delisted, any tax benefit that they enjoy would have to be repaid.

(4) They should not be a subsidiary of a main market company.

(5) They are required to be listed for 15 years with the corporate tax benefit available for 10 years; five years where the company paid no corporate tax and the next five years when it paid 50% of the prevailing rate.

Advantages of listing on the Junior Market

While the initial and compelling benefit was the tax concession, as companies listed they realized that the advantages were many. These included the: 1) Reduction in their listing fees.

2) Mentorship which was a requirement and which assisted them with good corporate governance.

Advantages of current financials for better decision-making.

4) Ability to cash out some of the capital in the business and go into new ventures.

5) Ability to use the market for succession planning. 6) Recognition that comes with being a listed company.

7) Ability to negotiate more favourable rates with their bankers.

Through these special initiatives and programmes which resulted in the raising of equity capital, SMES have been provided with the window needed to capitalize their businesses, reinject profits into their business, strengthen their base and improve their ability to negotiate better rates and be more competitive.

Specifically, companies have used the injection of equity capital to do a myriad of activities including:

(a) Expanding networks island wide;

(b) Retiring debts and reducing interest payment; (c) Buying warehouse space and reducing overhead;

(d) Invest in bulk inventory thereby reducing unit price;

(e) Backward and forward integration; and

(f) Diversified into other areas of business

The Junior Market’s Journey

In previous years, the Jamaica Stock Exchange itself, was faced with negative listings on the main market, as more companies were delisting than new companies who were choosing to make the effort to list. The number of companies listed on the Main Market ranged from 45 to 54 during each of the first four decades of the JSE.