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Constitution of board for PSM subsidiary proposed

ISLAMABAD: Ministry of Industries and Production (MoI&P) has proposed constitution of a seven-member board for a...
30 Mar, 2021

ISLAMABAD: Ministry of Industries and Production (MoI&P) has proposed constitution of a seven-member board for a new subsidiary of Pakistan Steel Mills (PSM) to be headed by Chairman PSM Board to proceed ahead with the privatisation of PSM, sources close to Minister for Industries told Business Recorder. Pakistan Steel Mills (PSM) has been non-operational since 2015 and it paints a picture of a destroyed entity. The management has already retrenched over 6,000 employees whereas letters of dismissal for the remaining employees are ready to be issued anytime soon.

M/s Joseph Lobo (Pvt), who was appointed as valuator of PSM’s assets (1267 acre land+ plant), calculated a value of over Rs 500 billion. However, neither Privatisation Ministry nor Industries Ministry seems ready to accept this value. The valuator has been requested to review the determined value of assets as the pre-selected Chinese bidder is unlikely to accept it.

The MoI&P contends that in order to revive PSM, the Federal Government has decided to appoint a Financial Advisor (FA) under the supervision of the Privatization Commission (PC). As a result of lengthy consultative process and deliberations, FA proposed a transaction structure model suggesting transferring of identified core operating assets into wholly-owned subsidiary of PSMC through Scheme of Arrangement (as provided in the Companies Act, 2017).

In order to formalize the proposal, PC moved a summary to the Federal Cabinet for the approval of proposed transaction structure. Cabinet Committee on Privatization (CCoP) has approved the creation of a new subsidiary as part of transaction model in which assets of PSM shall be transferred. The decision has also been ratified by the Federal Cabinet.
In view of the current scenario, the following actions are to be completed in accordance with section 16 of Companies Act, 2017 read with regulation 5 of Companies (incorporation) Regulations, 2017 in order to obtain certificate of incorporation of the proposed new subsidiary from Securities and Exchange Commission of Pakistan (SECP): (i) the name of the proposed new subsidiary shall be Pakistan Steel Mill Subsidiary (Pvt.) Ltd with 100% government ownership; (ii) the name of the proposed company shall be notified as wholly-owned by the Federal Government in the official Gazette for availing of the exemption from paying fee to SECP as provided in Schedule 7 (1) (III ) and ;(iii) Formulation of Articles of Memorandum and Memorandum of Association.

The following directors have proposed to be on the Board of Directors in accordance with section 165 of Companies Act, 2017 ;(i) Amir Mumtaz-Independent Director, Chairman PSM Board; (ii) Additional Secretary (MoI&P)- ex-officio; (iii) Joint Secretary ( Large Enterprises Development) MoI&P-ex-officio; (iv) Secretary Finance or his nominee not below the rank of the Joint Secretary or BPS-20( ex-officio); (v) Secretary Privatisation or his nominee not below the rank of Joint Secretary or BPS-20 (ex-officio); (vi) Secretary, Board of Investment(BoI) or his nominee not below the rank of Joint Secretary or BPS-20 (ex-officio ; and ( vii) Chief Executive Officer (CEO), PSM( executive director).

In terms of directions circulated by Cabinet on March 16, 2018, a separate summary was issued for the approval of Prime Minister for the nominations of Directors to the Board of new subsidiary of PSMC. The Prime Minister has desired to seek relaxation of Rule 3(2) of Public Sector (Corporate Governance) Rules-2013 (nomination of at least one-third of its total members as independent directors) from the Federal Cabinet. The Federal Government is empowered to make amendments in the Rules through S.R.O. 715(1)/2019 of July 01, 2019. Accordingly, the Federal Government has been requested to accord approval to the relaxation of the Rule 3(2) of Public Sector (Corporate Governance) Rules-2013.

Copyright Business Recorder, 2021

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