ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has enhanced the disclosure requirements for companies, offering right shares and as per new disclosure policy, the companies would have to provide detailed and all-encompassing disclosures to their prospective investors.
The new robust disclosure requirement has replaced S.R.O. issued on the subject in 1986 aimed at enabling the prospective investors to make well-thought-out and informed decisions, says a statement issued by the Commission hereon Tuesday.
The new circular empowers investors to make a risk assessment and undertake a benefit analysis based on true certified information provided by company.
Under the 1984 Companies Ordinance, companies are empowered to enhance their capital by offering right shares to all their members in proportion to their existing shareholding.
The right offer letters are traded on the stock exchanges and are renounceable therefore the right share can be subscribed by other investors as well.
The newly prescribed disclosure and certifications requirements, as incorporated in the revised circular, are in line with the best international practices wherein renounceable right is categorized as public offers thereby requiring detailed disclosure synonymous to a prospectus.
The superseded circular required very brief information and failed to provide a complete picture of company, its directors/management, the details, benefits and utilization of proceeds of proposed right issue and risks associated with the company.
The revised circular has thus addressed these deficiencies by incorporating additional disclosure requirements.
The companies offering right shares are required to provide detailed information about the company, profile of its management, financial highlights and capital raised during previous three years.
Moreover, the companies shall disclose the basis of determination of price of right issue, purpose of the right issue, financial projections for next five years reflecting the financial effects arising from right issue.
The company shall also disclose the risks associated with the proposed right issue regarding any underlying project, material contingencies and effects of under subscription.
Also particularly for subscribers, the revised circular requires disclosure of the eligibility criteria to avail the right offer, bankers to the offer, date and mode of acceptance of offer.
A company offering right shares to its members shall send information as prescribed by the revised circular duly accompanied by extract of resolution passing the right issue and certificate of chief executive and CFO that the circular constitutes full and true disclosure of all material facts relating to the right issue and commitment that the Company will provide copies of financial statements on demand.
The board of directors of the company is empowered to issue right shares.
The revised circular therefore aims at strengthening disclosure requirements for companies thereby giving full information to members regarding the proposed right issue.
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