Disinvestment proceeds: SBP further streamlines process of remittance

KARACHI: In order to further streamline the process of remittance of disinvestment proceeds, the State Bank of Pakistan (SBP) has decided to further delegate the authority to designated Authorized Dealers of resident companies for remittance of disinvestment proceeds to non-resident investors.

As per instructions contained in Para 7(vii), Chapter 20 of Foreign Exchange Manual in terms of which designated Authorized Dealer is allowed for remittance of disinvestment proceeds not exceeding the market value (in case of listed securities)/break-up value (in case of unlisted securities) favoring the non-residents. Accordingly, the Para of Chapter-20 has been amended by the State Bank to further streamline the process of remittance of disinvestment proceeds.

As per amendment, the companies issuing transfer of shares in favour of non-residents on repatriation basis, may export the share certificates through the designated Authorized Dealer to the shareholders. The designated Authorized Dealer will also allow remittances in respect of dividend, net of applicable taxes, as permitted under Chapter 14 and disinvestment proceeds, less brokerage/commission and taxes.

For disinvestment proceeds not exceeding the market value (in case of listed securities)/break-up value (in case of unlisted securities), the designated Authorized Dealer will allow the remittance on submission of required details and Authorized Dealer will also ensure due diligence of the transaction/buyer from AML/CFT perspective.

Attested copy of executed Share Purchase Agreement (enforceable at law) between resident buyer and non-resident seller, showing rupee value of shares purchased and attested copy of latest audited financials of the company whose shares were being sold will also be required.

In addition duly filled/ signed M-Form for the rupee value of the remittance in favor of non-resident and an undertaking from the buyer will submit that the transaction is not between related parties.

For disinvestment proceeds exceeding the market value (in case of listed securities)/break-up value (in case of unlisted securities), the designated Authorized Dealer shall allow the remittance after satisfying itself about the genuineness of the transaction by reviewing the some additional documents including detailed justifications/rationale/basis of setting the transaction price per share, from the buyer, in original.

In case the total remittance of disinvestment proceeds exceeds US Dollar 50 million (or equivalent in other currencies) during a span of six months, the applicant, in addition to required information and documents, will also submit an independent review of the buyer's valuation, from QCR rated practicing chartered accountant as per the latest generally accepted valuation techniques for a particular type of industry in which resident company is operating.

As per amended para, the review report should at least provide view on the appropriateness of the basis and methodology used in the valuation and transaction due diligence. Further, the review report should also include local and global comparable transactions and trading multiples of comparable publicly traded companies and key valuation metric(s) comparisons, if available.

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