SMEs listing on the Trinidad and Tobago Stock Exchange

According to the Trinidad and Tobago Chamber of Industry and Commerce (TTCIC) and the Central Statistical Office (CSO), based on available data as at 2011, there are approximately 20,000 to 25,000 small and medium enterprises (SMEs) in Trinidad and Tobago, representing roughly 85 per cent of all registered businesses locally. Consequently, the SME sector’s role in the economic activity contributing more than 30 per cent to the country’s gross domestic product (GDP) cannot be overlooked.

Its importance was further illustrated with the implementation of the SME Stimulus Loan Facility programme by the Government of up to$300 million to assist SMEs impacted by the Covid-19 pandemic.

The TTSE SME Market

Aligned with the Trinidad and Tobago Stock Exchange’s (TTSE) vision to further develop the local stock market, the SME market – a layer on the TTSE, was introduced in 2012 via a junior stock market attached to an existing stock exchange. With the creation of this third tier, small and medium-sized companies were afforded the opportunity to raise capital on the domestic stock market.

To be eligible to list on the SME market of the TTSE, the company must be incorporated with limited liability in Trinidad and Tobago or in any other Caricom country.

Prior to listing on the TTSE SME Market, the company must satisfy several criteria and the approval is solely at the discretion of the TTSE. Some of the factors that the TTSE considers prior to approving the listing of a security are the nature of the business, its financial performance, regulatory history, past governance activities, historical records and its growth prospects.

Since 2012, two companies have listed on the SME market - CinemaONE Ltd (CINE1) and Endeavour Holdings Ltd (EHL). CINE1 was listed on the 21st November 2018 at a price of $10 and EHL was listed on the 12th December 2019 at a price of $12.50.

Additional incentive

for SME’s to list

To further encourage SME’s to access equity financing and view listing on the TTSE as a viable option, the Minister of Finance in the 2020/2021 national budget announced a notable change in the corporation tax incentive.

Currently, SMEs listed on the TTSE benefit from a corporation tax rate of ten per cent for a five-year period, applicable admission fee exemptions as well as reduced listing fees.

The proposed change, which will be effective January 1 2021, will double the tax incentive period from five years to ten years. For the first five years, SME’s will enjoy a full tax holiday – which is a temporary reduction or elimination of a tax, compared to the current reduced corporation tax rate of ten per cent. In the remaining five-year period, the company will receive a 50 per cent tax holiday.

Benefits of

listing on the TTSE SME market

The prevailing economic challenges due to the pandemic have brought many uncertainties which may impact the availability of credit to small and medium companies.

Based on research by the CSO, approximately 11 per cent of SME start-up funding comes from the banks, the remaining derived from personal and family savings.

Listing on the stock exchange creates an avenue for smaller organisations to have access to the capital that is needed, especially against the backdrop of such financial and economic challenges.

The proceeds from the Initial Public Offering (IPO) can be used to pay down debt and release funds for reinvestment.

The prolonged tax savings may allow companies of a smaller scale in terms of sales and capital, the time to grow into larger organisations, increasing the likelihood of more solid cash flows and longevity.

The monies that would usually be channelled into paying taxes should now be reallocated into productive areas in the business which will engender the business’ growth.

Listed companies have benefited in a plethora of ways including expansion in sales and profits, the creation of new products and entrance into new markets, debt reduction and raising the company’s business profile.

The proposed amendment to the Corporation Tax Act for SMEs is welcoming news for the small and medium-sized business community and should be viewed as an opportunity to accelerate entrepreneurial ambitions and objectives.

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