The Securities and Exchange Commission of Pakistan (SECP) has revised conditions for public offer of securities by the issuers. The SECP has issued draft amendments to the Public Offering Regulations, 2017, on Saturday. The SECP has also offered an exit opportunity in case of change in principal purpose of issue as disclosed in prospectus. According to the revised regulations, the issuer shall have been in operations for at least three financial years. In case of non-compliance with the requirement of operational track record of three financial years, the issuer shall offer the shares through fixed price method only.
"Issuer" in relation to securities, means any person including a company, a Special Purpose Vehicle and a body corporate which has issued or proposes to issue a security and includes an offeror. Moreover, the issuer has profitable track record for at least two preceding financial years from its core business activities. Provided that in case of non-compliance with profitability criteria, the sponsors of the issuer shall retain at least 51% of the post issue paid-up capital till the company reports net profit after tax for two consecutive financial years including profit from its core business activities.
Provided further that the issuer shall offer the shares through fixed price method only; submit a time-bound concrete business plan to turnaround the company into a profitable venture and disclose the following on the cover page of the prospectus in bold language: "This is a loss-making company. The risks associated with loss-making companies are comparatively much higher than profitable companies. The prospective investor should, therefore, be aware of the risk of investing in such companies and should make the decision to invest only after careful due diligence. It is advisable to consult any independent investment advisor before making any investment."
The issuer shall disclose the following on the cover page of the prospectus in bold language: "It is a green field project. The risks associated with the green field project are much higher than a project that has commenced commercial production/operations. The prospective investor should, therefore, be aware of the risk of investing in such projects and should make the decision to invest only after careful due diligence. It is advisable to consult any independent investment advisor before making any investment."
The issuer shall not, at any time change the principal purpose of the issue as disclosed in the prospectus. In exceptional circumstances, the issuer may change the principal purpose of the issue subject to passing of special resolution and offering an exit opportunity to dissenting shareholders who have not agreed to the change in principal purpose of the issue as disclosed in the prospectus. Offering an exit opportunity shall also be mandatory where the principal purpose of issue was undertaken and thereafter funds were diverted to other purposes, which resulted in non-completion of principal purpose of issue in a timely manner as disclosed in the prospectus, added the SECP.
The mechanism for an exit offer opportunity shall be as follows:
EOGM notice in respect of any change in the principal purpose of the issue as disclosed in the prospectus shall be given along with draft special resolution as required under the provisions of Companies Act, 2017;
subject to approval of special resolution as defined in the Companies Act, 2017, the shareholders who have dissented against the special resolution and conveyed their dissent to the company secretary under intimation to Pakistan Stock Exchange, shall be provided an opportunity to exit by offering a price per share, by the sponsors of the issuer that shall not be less than the offer price at which the shares were subscribed through IPO. The exit offer shall be executed by the sponsors within a period of thirty days from the date of passing of special resolution.
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