KARACHI: The State Bank of Pakistan (SBP) has granted general permission to Real Estate Investment Trust (REIT) Management Companies (RMCs) for issuance of units through private placements and transfer in favor of non-residents.
As per existing provisions, non-residents were allowed to invest in REIT Schemes listed at Stock Exchange and through new public offers. However, now the SBP has decided to amend some paras of Chapter 20 of Foreign Exchange Manual to provide more investment avenues to foreign investors.
In order to further facilitate foreign investment in REIT Schemes, in addition to the existing provisions, SBP has decided to allow general permission to REIT Management Companies to issue their units through private placements and transfer such units, in favor of non-residents.
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Accordingly, the existing para 6 (A)(IV), 6(B)(IIIA), 6(B)(IV), 6(B)(VI), 7(i) , 7(iia), 7(vi)(a), 7(vi)(d), 7(vi)(h), 7(vi)(i) and 7(vii)(C) of Chapter 20 of Foreign Exchange Manual, have been replaced.
As per Para 6(A)(IV), a company or firm (including a partnership) or trust or mutual fund or private fund or real estate investment trust (REIT) fund incorporated, registered and functioning outside Pakistan, excluding entities owned or controlled by a foreign government.
New para 6(B)(IIIA) allows private placement for issuance of new units of private funds established and operated by Private Fund Management Company licensed by SECP to provide private equity, venture capital fund management services; and REIT Funds established and operated by REIT Management Company licensed by SECP. The Para 6(B)(IV) allows the transfer of shares/units of companies/funds covered by sub para (III), (IIIA) and (IIIB) of Chapter 20 of Foreign Exchange Manual, under offer for sale or any other arrangement.
According to 6(B)(VI) issue of rights shares and bonus shares and issuance of additional units as right or bonus and/or reinvestment of dividends in all those cases where shares/units are held on repatriable basis by ‘persons resident outside Pakistan’ in accordance with the general or special permission of the State Bank.
Amended Para 7(i) allows the REIT companies for opening of foreign currency collection accounts with banks abroad or in Pakistan for receiving the subscription in foreign currency
Companies issuing shares or REIT Funds issuing units, out of new public offers, on repatriable basis, as permitted under sub para (B) (I) of preceding paragraph 6, may open foreign currency collection accounts with banks abroad or in Pakistan for receiving the subscription in foreign currency and they may also allow refunds from these accounts to unsuccessful applicants.
The amount subscribed by the successful applicants should be repatriated to Pakistan and foreign currency accounts closed within a week of allotment of shares/units. Proceeds Realization Certificate in evidence of subscription money having been repatriated to Pakistan shall be obtained by the company from the concerned Authorized Dealer for submission in original to the designated Authorized Dealer with the form prescribed by the SBP.
According to Para 7(iia), in the case of remittance of subscription money directly to Pakistan and its payment to the fund’s rupee account (opened in the name of trustee), private funds/REIT funds may issue units, in terms of paragraph 6(B)(IIIA), for the rupee equivalent paid by the concerned Authorized Dealer as shown in the Proceeds Realization Certificate (s).
The amended Para 7(vi)(a) said that in case of issue of ordinary shares including Modaraba Certificates/Trust and Fund Units out of public offers under paragraph 6 (B) (I) Bank’s Proceeds Realization Certificate (PRCs) in original with copy of the consent/permission of the Securities & Exchange Commission of Pakistan (SECP).
The Para 7(vi)(d) mentioned that in case of issue of rights shares or units of REIT funds through right under paragraph 6 (B) (VI) PRCs in original with copy of Board’s Resolution. As per Para 7(vi)(h), in case of transfer of listed shares and units of funds under paragraph 6 (B) (II) Stock Broker’s Memo and PRCs in respect of the cost of shares/units and transfer stamp money, both in original. Where the sale of shares/units is negotiated privately, documents establishing the deal and the price of the share/unit on Stock Exchange on the date of deal, should be furnished.
According to Para 7(vi)(i), in case of transfer of shares/units of unlisted companies/funds under paragraph 6 (B) (IV) Auditor’s certificate for break-up value or net asset value in original, a copy of the audited accounts of the respective year, documentary evidence of the agreed sale price and original PRCs in respect of cost of shares/units and transfer stamp money (if applicable).
Copyright Business Recorder, 2023