Demutualization on Nairobi Stock Exchange

Demutualization of the Nairobi Stock Exchange is the process by which the member/broker-held exchange will change its legal existence from a mutually-held organization to a competitive joint-stock company whereby its shares will trade publicly meaning that you and me may own a piece of the 5th largest stock exchange in Africa (by market cap). Currently, the Nairobi stock exchange exists as a company limited by guarantee but after demutualization, it will be a company limited by shares.
The Demutualization Process
a) Bring together the assets & liabilities of the current NSE to the Demutualised NSE
b) A valuation of the exchange based on the assets and liabilities above
c) A review of the share structure – the proposed authorized and paid-up capital of the Exchange with the number of shares to be issued
d) Make amendments to the Memorandum and Articles
e) Allocate value of the demutualised NSE with the Government of Kenya and the CMA Investor Compensation Fund being not less than 20% of the total shareholding
f) Obtain creditors and other stakeholders green light
g) Construct and conceptualize a feasible corporate governance structure
h) Structure a sound financial management policy especially dividend payouts
i) Start an employee policies and benefits schemes
j) Change the trading rules and other rules to be in line with the new corporate structure of demutualised Nairobi Stock Exchange
Benefits of a Demutualised Nairobi Stock Exchange
1. Improved governance of the NSE to increase investor confidence
2. A competitive stock market will be more efficient in running their business since the management of the NSE will have a duty to maximize the shareholder value e.g. by using state of the art trading technologies.
3. With the Government of Kenya and the CMA Investor Compensation Fund being not less than 20% of the total shareholding, there is now a way to compensate investors who have lost money due to rogue stock brokerage or any other misdemeanor in the system.