In 2018 the Bulgarian Stock Exchange (BSE) was granted approval by the Financial Supervision Commission (FSC) to create the new Small and Medium Enterprises (SME) Growth Market BEAM (Bulgarian Enterprise Accelerator Market), under the provisions of the Markets in Financial Instruments Directive 2014/65/EU (MiFID II). The new segment of the BSE aims to promote the development of small and medium-sized companies, which have a key role in the economic growth of the country.
The BEAM Market is a special market that enables national and foreign small and medium-sized enterprises – registered as joint-stock companies having non-materialized shares – to raise funds under softer terms compared to those on the regulated market. At the same time, such businesses are enjoying similar advantages as those of public companies. A company is considered an SME before being admitted to trading if, according to its latest annual financial statements, it meets two of the following criteria: less than 250 employees, net annual turnover does not exceed EUR 50 million, or total book value of the assets does not exceed EUR 43 million.
The BEAM Market could be the first step on the road to becoming a listed company on the regulated market. It is attractive for ambitious and innovative companies with existing business and growth potential, which need additional financing to develop their activity and achieve greater publicity for their products and services. At the same time, the BEAM Market is an excellent alternative funding opportunity for start-ups with innovative ideas and promising business plans, as it ultimately reduces the dependence on bank funding, which is an important advantage at the early stages of the development of a company. Companies listed on the BSE Main Market cannot be traded on the BEAM Market, however, there is no such limitation for companies listed on stock exchanges in the EU Member States.
The BEAM Market provides companies with a number of advantages in the admission to trading process as well as in their further life as listed companies when compared to the requirements for companies listed on the regulated market. Companies may raise funds of up to EUR 3 million through an initial public offering or further increase their funds by up to EUR 3 million, once already listed on the BEAM Market, without the need for a prospectus approved by the FSC. Furthermore, if the company aims at a capital increase of more than EUR 3 million, only a simplified prospectus approved by the FSC is necessary. The requirements of public reporting are limited to only the publishing of the annual and semi-annual financial reports. Moreover, in the interest of management optimization and efficiency, the management bodies of the companies listed on the BEAM are allowed to carry out fixed asset transactions above certain values specified in the Public Offering of Securities Act (POSA) and transactions through which receivables or liabilities above a certain value specified in the POSA arise, without prior approval by the general meeting of shareholders.
In addition, there are also a number of advantages provided to the shareholders, such as exemption from the regulated market requirements of: (a) disclosure of their shareholdings after exceeding a certain threshold and/or acquisitions of a certain percentage of the companies’ voting shares; and (b) placing tender offers for buying the shares of the minority shareholders after acquiring a certain percentage of the company’s voting shares and exceeding a certain threshold. Companies listed on the BEAM Market have access to a wide range of individual and institutional investors and can benefit from the possibility to list on the Main Market of the BSE under preferential terms.
The BEAM project is a step ahead in the development of the capital market in Bulgaria, making it more accessible for smaller businesses. Currently, four companies are listed on the BEAM Market, however, it is expected that soon many more companies, having growth potential, will take advantage of the facilitated access to diversified sources of financing and the cheaper and simpler access to the public market, thus attracting a broader investor base and expanding their businesses. Tax relief for capital gains made on the BEAM Market by legal entities and individuals – for the period between January 1, 2021, and December 31, 2025 – is also envisaged as an incentive to the investors. Hopefully, as its name suggests, the BEAM will shine a light on small and developing businesses and their investors, providing interesting opportunities for growth to both sides.
By Dimitrinka Metodieva, Senior Partner, and Kostadinka Deleva, Partner, Gugushev & Partners
This Article was originally published in Issue 8.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
