Minority shareholders’ rights: SECP introduces massive changes in ‘Takeover Regulations’

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) is introducing massive changes in the Takeover Regulations for protection of rights of the minority shareholders of the target company.

According to the SECP’s document on Takeover Regulations, the commission notified certain amendments to the Takeover Regulations vide SRO 1828 (I)/2022 for making them more consistent with the Securities Act and to align the regulations with international standards and best practices.

Since aforesaid notification of the amendments, the SECP has been evaluating impact of the proposed changes in context of possible improvements to the overall takeover regime. The instant draft amendments are being deliberated for bringing further clarity in the Takeover Regulations and introducing further measures for protection of rights of the minority shareholders of the target company.

The major areas of proposed amendments included insertion of following new definitions to enable consistent interpretation of these terms throughout the Takeover Regulations:

(i) “average daily traded volume”; (ii) “frequently traded shares” and (iii) “weighted average share price”.

The option is being inserted for consideration to the shareholders of the target company to be paid either wholly in cash; or if consideration is being offered in the form of securities, the same shall be accompanied with a wholly cash alternative.

To ensure that shareholders of the target company are only given highly liquid securities, the types of securities to be offered as consideration is proposed to be restricted to shares of listed companies, listed debt instruments and government securities with remaining maturity of maximum 364 days.

The mechanism for valuation of securities to be offered as consideration is being improved and criteria for shares of listed companies forming part of such consideration is proposed to been enhanced.

Shares of listed company may be valued at the weighted average share price during 180 days preceding date of public announcement of public offer. For government securities the value is proposed to be calculated on the basis of applicable PKRV rates at the end of the day preceding the date of public announcement of public offer.

It is being ensured that only highly liquid securities are acceptable as security to be furnished to manager to the offer by the acquirer for performance of obligations under the public offer.

After the proposed changes, the Takeover Regulations would allow cash, bank guarantee, government securities with sufficient maturity, MTS eligible securities or a combination of all these options to be furnished as security by acquirer, the SECP added.

Copyright Business Recorder, 2023