CDSC Proposes Separate ISINs for Promoter and Public Shares in Merged Companies

CDS and Clearing Limited (CDSC) has proposed a regulatory change to allow separate International Securities Identification Numbers (ISINs) for promoter and public shares in companies formed through mergers. The proposal has been submitted to the Securities Board of Nepal (SEBON) as part of a draft of the Dematerialization Operating Directive 2082.

The draft guideline suggests that even after a merger, ISINs should be allocated based on the type of securities, grouping similar securities under a single ISIN and distinguishing different types with separate codes. ISINs, which are 12-digit alphanumeric codes, are used globally to uniquely identify financial instruments such as stocks and bonds.

While separate ISINs for promoter and public shares are already standard in the banking and insurance sectors, other sectors such as hydropower have typically been assigned a single ISIN. The proposal to extend dual ISINs to all sectors has sparked opposition, particularly from Independent Power Producers' Association Nepal (IPPAN).

IPPAN warned that implementing dual ISINs for hydropower companies could negatively affect private sector investment, non-resident Nepali (NRN) participation, and foreign direct investment (FDI) in the energy sector. The association stated that such a policy shift could undermine investor confidence and market fluidity.

The controversy intensified following SEBON’s recent directive to CDSC to assign a single ISIN to shares of Emerging Nepal Limited, after shareholders were reportedly unable to trade promoter shares even after the lock-in period had ended due to the existence of two ISINs.

Despite this, CDSC has stood by its proposal to assign separate ISINs in all cases where a company’s articles of association or bylaws distinguish between promoter and public share groups. The draft also introduces flexibility, allowing for ISIN merging if legal review deems separate ISINs unnecessary, or splitting of an existing ISIN if required under applicable law.

The draft directive has prompted SEBON to form a dedicated committee to study the implications before granting approval. A senior SEBON official stated that the goal is to ensure that any final decision is legally sound, transparent, and in the best interest of retail investors.

The proposal was formally submitted by CDSC on July 28. If enacted, it would mark a significant shift in Nepal’s capital market operations, especially for sectors beyond banking and insurance.