ISLAMABAD: Securities and Exchange Commission (SECP) on Wednesday notified guidelines for issuance of convertible debt securities in Pakistan through both private placement and public offering mode.
The SECP issued the following guidelines:
Steps involved in Private Placement:
i. Requisite approval under section 83 of the Companies Act, 2017 for further issue of share capital in relation to Issuance of CDS. (Since conversion of CDS into shares would enhance the share capital of the Company, therefore approval of section 83 (1) b is required, whereby a public Limited company can enhance share capital by the way of other than right offer through special resolution and Commission’s approval.
ii. Structuring of CDS as per the Structuring of Debt Securities Regulations, 2020. As per the said Regulations, the Issuer can issue the CDS either through execution of Issuance agreement or Trust Deed. Provisions relating to Trust Deed and Issuance agreement are specified at regulation 11 and 15 of the Structuring of Debt Securities Regulations, 2020, respectively.
iii. Appointment of Investment agent or Debt Securities Trustee depending upon the structure opted by the Issuer. (Investment agent is required in case of Issuance agreement and Debt Securities Trustee in case of Trust structure.)
Entity holding a valid Consultant to the Issue license can act as Investment Agent, list of licensed Consultant to the Issue and Debt Securities Trustee is available at SECP’s website and can be accessed through:
https://www.secp.gov.pk/data-and-statistics/capital-markets/
iv. Drafting of Information memorandum by the Issuer for private placement. (Content of Information memorandum is prescribed in the Private Placement Rules, 2017)
v. After complying with aforesaid requirements, Issuer can directly place convertible debt securities to the eligible investors as per Private Placement Rules, 2017. Only eligible investors can invest in privately placed convertible debt securities. (Eligible investors are specified by Commission vide SRO dated April 19, 2021 under section 66 of the Companies Act, 2017).
vi. No regulatory approval is required for placement of CDS. (Since, the issue is privately placed and general public is not involved, therefore PSX and SECP approval is not required)
vii. After placement, Issuer can list the CDS at Pakistan Stock Exchange as per Chapter 5C of the PSX Rule Book. (Listing requirements are specified in Chapter 5C).
viii. Subsequent to listing, only eligible investors notified by the Commission can invest in these securities in secondary debt market.
ix. Secondary market trading of privately placed listed debt securities is visible at BNB trading board of PSX and can be accessed through:
https://dps.psx.com.pk/trading-panel
Steps involved in Public Offering:
i. Appointment of Consultant to the Issue (CTI), Underwriter(s) and Shareregsitar by the Issuer as per Public Offering Regulations, 2017.
List of licensed Consultant to the Issue, Underwriters and Share Registrars is available at SECP’s website and can be accessed through:
https://www.secp.gov.pk/data-and-statistics/capital-markets/
(Role of Consultant to the Issue is to (i) draft listing application, prospectus and related documents; (ii) seek approval of PSX and SECP on the behalf of the Issuer; (iii) ensure publication of prospectus in accordance with relevant law; (iv)conduct roadshows to sell the issue; (v) guide issuer throughout the public offering process etc.
(Role of Underwriter: Underwriter provides commitment to subscribe the unsubscribed portion of the issue. Underwriting helps the Issuer to get desired amount of the funds required for the implementation of the Project, which the Issuer would not be able to get in case of undersubscription of securities. Moreover, underwriting provide confidence to the investors that an independent third party has conducted proper due- diligence of the issue including the price before underwriting the issue.)
ii. Structuring of CDS as per the Structuring of Debt Securities Regulations, 2020. As per the said Regulations, the Issuer can issue the CDS either through execution of Issuance agreement or Trust Deed. Provisions relating to Trust Deed and Issuance agreement are specified at regulation 11 and 15 of the Structuring of Debt Securities Regulations, 2020, respectively.
iii. Appointment of Investment agent or Debt Securities Trustee depending upon the structure opted by the Issuer. (Investment agent is required in case of Issuance agreement and Debt Securities Trustee in case of Trust structure.)
Entity holding a valid Consultant to the Issue license can act as Investment Agent, list of licensed Consultant to the Issue and Debt Securities Trustee is available at SECP’s website and can be accessed through:
https://www.secp.gov.pk/data-and-statistics/capital-markets/
iv. Preparation of Prospectus and listing documents by the CTI. (Content of Prospectus is prescribed in First Schedule of the Public Offering Regulations, 2017)
v. Submission of listing documents along with the prospectus to the PSX for approval. (Listing documents are specified at Annexure -I of Chapter 5B of the PSX rule book) PSX rule book can be accessed through:
https://www.psx.com.pk/psx/themes/psx/uploads/PSX_Rulebook_%28updated_on_March_31%2C_2021%29.pdf
vi. Approval under section 83 of the Companies Act, 2017 for further issue of share capital. Since Conversion of CDS into shares would enhance the share capital of the Company, therefore approval of section 83 (1) b is required, whereby a public Limited company can enhance share capital by the way of other than right offer through special resolution and Commission’s approval. (It is advisable to obtain approval(s) after structuring of the CDS, however approval can be obtained before placement)
vii. Placement of prospectus by PSX on its website for seeking public comments. (seven working days)
viii. Pursuant to PSX approval, submission of prospectus to the Commission for approval under section 87 (2) read with section 88(1) of the Securities Act, 2015.
ix. Subsequent to Commission approval, seeking dates from PSX for publication of prospectus and public subscription. (To save cost, abridged version of prospectus can be published)
x. Prospectus has to be published in at least one English Newspaper and Urdu version of the prospectus in at least one Urdu Newspaper.
xi. Prospectus has to be published not less than seven days and not more than thirty days before the commencement of the subscription period.
xii. Publication of prospectus after obtaining dates from PSX.
xiii. Placement of CDS to the general public during the public subscription period.
xiv. Listing of CDS at Pakistan Stock Exchange as per Chapter 5B of the PSX Rule book (Listing requirements are specified in Chapter 5B).
xv. Subsequent to listing, general public including both institutional and individual investors can invest in these securities in secondary debt market.
xvi. Secondary market trading of publicly listed debt securities is visible at BNB trading board of PSX and can be accessed through:
