SECP Clarifies Reporting Requirements for Shareholding Changes

SECP Clarifies Reporting Requirements for Shareholding Changes

Islamabad, March 25, 2024 – The Securities and Exchange Commission of Pakistan (SECP) has issued a crucial clarification concerning the reporting procedures for changes in shareholding among non-listed companies.

In a circular released on Monday, the SECP shed light on the provisions outlined in sections 465(4) and 510 of the Companies Act 2017, specifically addressing the filing of returns with the registrar in the event of alterations in shareholding.

According to the stipulations of section 465 of the Companies Act, 2017, it is obligatory for companies, excluding those listed, to notify any changes exceeding 25% in their shareholding, membership, or voting rights using Form-3.

The recently issued Circular No. 9/2024 aims to clarify that companies falling outside the listed category can also submit Form-3 to the registrar for any changes of twenty-five percent or less in their shareholding, membership, or voting rights. This circular was prompted by the recognition of practical hurdles encountered in reporting shareholding transfers and is geared towards maintaining updated records of companies’ shareholding.

This clarification is poised to incentivize companies to promptly report any changes of 25% or less in shareholding, membership, or voting rights to the Registrar. Moreover, since the information and returns of companies maintained by the Registrar are public documents accessible for inspection, and certified copies may be obtained by any interested party, the availability of updated shareholding information will enhance transparency for stakeholders and interested parties alike.

The SECP’s clarification is a significant step towards streamlining reporting mechanisms and ensuring transparency within the corporate sector. By extending the reporting requirement to cover changes below the 25% threshold, the SECP aims to foster a more comprehensive and accurate understanding of shareholding dynamics within non-listed companies.

This move is expected to have far-reaching implications, not only in terms of regulatory compliance but also in bolstering investor confidence and promoting a culture of accountability and transparency within Pakistan’s corporate landscape.

Commenting on the issuance of the clarification, a spokesperson for the SECP emphasized the commission’s commitment to upholding the highest standards of corporate governance and regulatory oversight. They reiterated the SECP’s dedication to facilitating a conducive environment for business growth while safeguarding the interests of investors and stakeholders.

In light of this development, industry experts anticipate an increase in compliance rates among non-listed companies, as well as greater scrutiny and understanding of shareholding patterns among investors and regulatory authorities.

The SECP’s proactive approach in addressing regulatory ambiguities and enhancing reporting mechanisms reflects its responsiveness to the evolving needs of the corporate sector. Moving forward, stakeholders are encouraged to familiarize themselves with the updated reporting requirements and ensure compliance to promote transparency and accountability in corporate governance practices.