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ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) will introduce concept of 'direct listing' of companies, whereby shares of a company will be listed on the Pakistan Stock Exchange (PSX) without going through the process of public offering and without mandatory appointment of intermediaries.

According to the concept paper of the SECP, the commission has drafted regulatory framework for "direct listing."

The "direct listing" is an alternative way of listing of companies.

The said concept does not involve public offering and new share issuance, therefore SECP's approval is not required, however, PSX approval is required in relation to listing of shares.

The SECP stated that the objective is to facilitate listing of companies, especially State-Owned Enterprises (SOEs), and to promote culture of good governance among corporate sector.

The eligibility criteria for direct listing of companies revealed that a company meeting following criteria shall be eligible to get its shares listed at Exchange through direct listing method: First, the public limited company having a minimum paid up capital of Rs200 million. Second, annual accounts for the last two preceding years audited by a QCR rated audit firm.

Third, no qualified opinion on the going concern assumption is issued by auditor in latest audited accounts.

Fourth, the audited accounts are not be older than 12 months.

A company can opt any of the referred category for direct listing of its shares at exchange.

(i) Direct listing involving accredited investors: It involves selling of shares by existing shareholders of the Company to accredited investors. Only accredited investors can invest in shares of companies (Accredited investors include Institutional Investors and Individual investors registered with NCPPL having net assets of Rs5 million or more and understands the risk of investing in companies listed through direct listing mode).

The minimum number of shareholders excluding sponsor/director/affiliate shareholders must be 10, the SECP said.

(ii) Direct listing involving existing shareholders: It involves selling of shares by existing shareholders among themselves.

Only existing shareholders can sell or buy shares.

No minimum number of non-sponsor shareholders.

(iii) Direct listing involving specific category of Investors: It involves selling of shares by existing shareholders to a specific category of Investors specified by the company at the time of direct listing.

Only specify category of investors can sell or buy shares.

The post listing compliance revealed that there would be a lock in period requirement on sponsors of the Company: Sponsors to hold not less than 51 percent of paid-up capital from the date of direct listing till the listing of company on main board through normal channel.

The compliance with listed companies' code of corporate governance is mandatory, the SECP added.

Copyright Business Recorder, 2021

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