SECP revises Companies (Further Issue of Shares) Regulations, 2020

ISLAMABAD: The revised Companies (Further Issue of Shares) Regulations, 2020 would facilitate capital formation and simultaneously promote protection of the rights of minority shareholders.

The consultation paper of the Securities and Exchange Commission of Pakistan (SECP) has been issued for the purpose of eliciting public comments on the draft amendments proposed in the Companies (Further Issue of Shares) Regulations, 2020 (the Regulations).

The SECP previously notified amendments to the Regulations vide SRO 1754 (I)/2022 dated September 16, 2022 for aligning the same with global best practices through introduction of enhanced risk disclosure requirements and increased transparency measures.

Companies (Further Issue of Shares) Regulations, 2020: SECP notifies draft amendments

Major amendments entailed adoption of a disclosure-based regime in preparation of offering document for issuance of right shares, standardisation of different compliance requirements based on the size of right issue, provision of exit opportunity to dissenting shareholders, imposition of lock-in clause on the sponsors, standard lock-in clause for persons other than sponsors in further issue other than right, reporting of proceeds utilization by the statutory auditors and optional concepts of Minimum Level of Subscription (MLS) and ‘Applications Supported by Blocked Amounts’ (ASBA).

For further issue of shares other than right, minimum contents of valuation report were introduced along with various procedural formalities to be complied by the companies.

A standardised version of the various conditions previously imposed by the Commission on companies, sponsors and incoming shareholders while processing applications for further issuance of shares by way of other than right offer, were also incorporated in the Regulations.

Subsequent to the aforesaid notification, the SECP has been evaluating impact of the amendments in light of views/feedback received from stakeholders, key learnings from applications received pursuant to the amended regulations and the evolving trends and practices regarding further issuance of capital in other jurisdictions.

Copyright Business Recorder, 2023