SECP, SBP team up: Panel of insolvency experts to help revive distressed companies

The Securities and Exchange Commission of Pakistan (SECP) in consultation with the State Bank of Pakistan (SBP) will appoint panel of insolvency experts for revival and rehabilitation of distressed companies. The SECP has issued Corporate Rehabil-itation Regulations, 2019 here on Friday. Sources referring to the law said that the court may, on a petition made by the qualifying creditors and after notice and a hearing, appoint an insolvency expert as administrator of the debtor as any time before confirmation of a plan of rehabilitation.
According to the SECP, a list of professionals included in the Panel of Insolvency Experts, including particulars, shall be displayed on the website of the Commission. The remuneration of an insolvency expert shall be determined by the debtor where a petition for an order of mediation is filed by the debtor and the creditor with mutual consent where petition for an order of mediation is filed by the qualifying creditor.
Provided that in case of disagreement between debtor and the qualifying creditor, remuneration of insolvency expert shall be determined by the court. The court may award such fees and expenses to an administrator as may be recommended by the qualifying creditor (s) filing petition under section 20 of the Act.
Under the code of conduct for the insolvency experts, an insolvency expert shall not, directly or indirectly, influence the administration committee(s) of creditors or debtors or other stakeholders so as to make any undue or unlawful gains for himself or his related parties, or cause any undue preference for any other persons for undue or unlawful gains and shall not adopt any illegal or improper means to achieve any mala fide objectives.
An insolvency expert must ensure complete independence in his professional relationships while performing his/her duties and responsibilities. An insolvency expert must avoid conflict of interest and act with objectivity in his professional dealings. He/she must act without any prejudice, coercion, or influence of any party, whether directly associated to the insolvency proceedings or not.
An insolvency expert shall not take up an assignment under the Act if he, any of his relatives, any of the partners or directors of his firm/company of which he is a partner or director, or the firm/company of which he is a partner or director is not independent and there is any direct or indirect conflict of interest.
An insolvency expert shall make a declaration of existence of any pecuniary or personal relationship with any of the stakeholders or parties having interest in the rehabilitation process, to the person filing the petition for rehabilitation, administration committee(s), and the Court, code of conduct added.
An expert said that Corporate Rehabilitation Act would ensure rehabilitation and reorganisation of distressed corporate entities. The existing institutional arrangements and legal process for revival and rehabilitation or distressed companies are both inadequate and time consuming. Efforts in the past have been made largely on creditor friendly recovery laws which resulted in an imbalance of legal remedies for rehabilitation of debtors. Therefore, a comprehensive legal framework is now urgently needed to rehabilitate the distressed companies and businesses in the country.
The Corporate Rehabilitation Act provides a mechanism for rehabilitation of the distressed companies which is need of the hour for sustainable growth of corporate sector. The law will put the economy on fast track and result in reduction of number of non-performing loans.
The law provides an equal opportunity to the companies and its creditors to come up for the rehabilitation proceedings of the companies before the high court(s), and it requires submission of rehabilitation plans before the high court.