LiVE Exchange: Stock Market for SMEs and Startups

On 14 September 2021, the Stock Exchange of Thailand (“SET”) and the Securities and Exchange Commission (“SEC”), together with more than 25 organisation partners, organised an event called "LiVE Demo Day: The New Road to Capital Market", to officially launch the "LiVE Exchange"; which is a new trading board especially for SMEs and startups.In such regard, the SEC has stipulated the preliminary conditions for companies wishing to raise funds via this platform, as follows:

• The SME or startup (the “Company”) wishing to raise funds via this platform must be a public company that entirely operates its own business, and not an investment company which operates by investing in other entities.
• The Company must not be involved in illegal businesses.
• The Company’s directors and executives must not be blacklisted, nor have any criminal record.
• The Company must have a fundraising value of at least Baht 10 million and must be able to raise at least 80 percent of the initial funding value.
• After the Company has offered its shares to investors, the Company must be listed on the LiVE Exchange.

In addition, the SET will regulate the business in terms of the readiness of the Company, which consists of the following:

• (1) The Company’s readiness regarding knowledge and understanding of capital market regulations: the Company must first pass a training course that will help prepare it as a fundraiser to enter into the capital market before raising funds on LiVE Exchange.
• (2) The Company’s readiness: the business income will be one of the criteria to determine the readiness of the Company. For the fundraising of an SME, in case the Company operates in the service sector, a minimum income of Baht 50 million is required; if it operates in the manufacturing sector, the Company must have a minimum income of Baht 100 million. However, for a startup, due to its volatile income, the SET will stipulate other criteria for consideration, e.g. in the case where a startups has already received investment by Private Equity or Venture Capital, the Company will be able to raise funds through the platform without being considered under the aforementioned criteria.

Hence, for the ease of SMEs and startups to raise funds through the platform, the SEC has given a dispensation that each Company does not need to apply for permission from the SEC. Furthermore, a financial advisor (FA) is also not needed. However, the Company must disclose the essential information to investors for consideration on the investment, which consists of four important parts, i.e. (1) nature of the business; (2) business risks;  (3) financial position statement; and (4) details of the executives. In addition, the SET has developed an operating system to facilitate the Company's fundraising and the investor’s investment, including:

• (1) Development of digital process systems to support fundraising, offering and registration that can all be executed through digital channels.
• (2) Due to the fact that the Company’s information is the significant part to investors for making a decision on the investment, the SET has therefore developed a filing system allowing the investors to view details of the Company more easily, e.g. audited balance and financial statement and the Company’s news.
• (3) Development of a Crowd Opinion system, which is a two-way communication between investors and the Company to be a channel for investors to inquire the SMEs and startups which the investors intend to invest in.

As for investors, initially, the SEC is allowing three types of investors, who have the requisite knowledge and understanding in the capital market to invest in the LiVE Exchange, and who are able to take risks in investing in SMEs and startups, as follows:

• Professional investors such as financial institutions, private equity or venture capital, and angel investors.
• Qualified or affluent investors; a group of investors who have the requisite knowledge and expertise in investing, and possess a certain level of assets which the SEC deems appropriate to invest in the LiVE Exchange.
• A group of people who are familiar with the business, such as executives, directors and employees.

In terms of investment methods, investors are able to trade either through brokers or internet trading, the same as the SET and the Market for Alternative Investment (the “MAI”). However, trading on the LiVE Exchange can only be transacted one round per day, thus causing a trading liquidity that may not be as high as the SET and the MAI.

Therefore, investing through the LiVE Exchange is an interesting opportunity for investors to invest in the Company, which tends to grow rapidly, and own such business from the beginning. However, there are challenging factors for SMEs and startups regarding their performance; the investors must take careful consideration of these factors. 

Hence, the SEC expects to issue all relevant regulations within 2021 or by no later than early 2022, along with fostering and strengthening knowledge and understanding among entrepreneurs and related parties, so they can adequately prepare for a new form of fundraising and listing on the trading board specifically for SMEs and startups board called "LiVE Exchange", which has been established by the SET.

This is intended merely to provide a regulatory overview and not to be comprehensive, nor to provide legal advice. Should you have any questions on this or on other areas of law, please do not hesitate to contact:

Nuttaros Tangprasitti
Partner

Krid Pongprapaphan
Associate

Authors