Tag: SECP

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has proposed amendments to introduce concept of Special Purpose Acquisition Company (SPAC).

A statement issued on Thursday stated that to introduce the SPAC, the SECP has proposed amendments to the Public Offering Regulations, 2017 to solicit public comments.

SPAC is a new concept for Pakistan’s capital market and is prevailing in many jurisdictions, including USA, Canada, Malaysia etc. Under the SPAC structure, a company comprises of group of persons/professionals raise funds from the general public and those funds are utilized for the purpose of merger or acquisition transaction within a permitted time frame.

A SPAC’s life begins with its initial formation (in the form of a company), followed by its IPO, its search for a target, a shareholder approval for merger/acquisition and finally, the close of an acquisition or else return of the SPAC’s proceeds back to its investors.

Under proposed regulatory framework, SPAC shall be a company or body corporate registered with the SECP, which shall be formed by a group of persons meeting the fit and proper criteria.

Paid up-capital requirement for SPAC shall be Rs1 million and it shall raise at least Rs200 million through public offering.

The Acquisition/merger has to be completed within permitted timeframe of two years. At least 90 percent of the funds raised shall be kept in escrow account managed by a custodian.

The proceeds in the escrow account may be invested in permitted investments. Each merger or acquisition transaction shall be approved by the shareholders by way of special resolution.

Upon merger, the merged entity shall be automatically listed and in case of acquisition the SPAC shall list the acquired entity. Shareholder/(s) disapproving the merger or acquisitions are entitled for refund of their money out of Escrow account as per specified procedure.

The aforesaid mentioned amendments are expected to provide a more conducive regulatory environment for capital formation in the economy through primary market.

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:

https://dps.psx.com.pk/trading-panel

ISLAMABAD: Securities and Exchange Commission (SECP) on Tuesday issued a notification to revise previous SRO regarding list of persons to whom any instrument in the nature of ‘redeemable capital’ may be issued by a company.

The SECP notified the following persons to whom any instrument in the nature of “redeemable capital” may be issued by a company, subject to the terms and conditions as provided under section 66 of the Act, namely:-

(i) mutual funds, Voluntary Pension Schemes and Private fund being managed by NBFC;

(ii) insurer registered under the Insurance Ordinance, 2000 (XXXIX of 2000);

(iii) a Securities Broker;

(iv) a Fund and Trust as defined in the Employees Contributory Funds (Investment in Listed Securities) Regulations, 2018;

(v) a company and body corporate as defined in the Companies Act, 2017(XlX of 2017);

(vi) all individual investors including accredited individual investors, in case of Government Debt Securities, and debt securities whose debt servicing is guaranteed by the Government;

(vii) accredited individual investors, in case of corporate debt instruments: Provided that the company shall ensure the following:

(a) instrument is not placed to more than fifty (50) accredited individual investors;

(b) information memorandum contains all applicable information/disclosures as prescribed under the Public Offering regulations, 2017; and

(c) instrument is not sold to non-accredited investors in secondary market.

Explanation: – for the purposes of this notification the expressions, –

(a) “accredited individual investor” means an individual investor registered with National Clearing Company of Pakistan Limited and having net assets of Rs. 5 million or more; and

(b) “Government Debt Securities” means a debt security such as Treasury Bill (T-Bill), Pakistan Investment Bond (PIB), Government of Pakistan (GoP) Ijarah Sukuk and any other debt instrument issued by the Federal Government, Provisional Government, Local Government/Authority, and any other statutory body.

ISLAMABAD: The total number of registered companies with Securities and Exchange Commission of Pakistan (SECP) has reached to 139,620, a press release said on Friday.

Out of the total registered companies, 118,280 companies are active, which accounts for 85 percent of total companies which are filling their annual returns, it added.

The SECP said that the reforms introduced by the commission for ease of doing business and digitalization are resulting in continued growth of entrepreneurship in the country.

In the first three quarters of FY 2020-21, SECP has incorporated 19,251 companies, representing an annual growth of 39 percent, compared to the same period last year. The SECP registered 14,493 companies in FY 2018-2019 and 16,945 companies in FY 2019-2020.

In March 2021, despite the challenges of Covid-19, the SECP has witnessed 72 percent growth in registration of new companies by registering 2,513 new companies, compared to same month last year. This is the highest number of companies ever registered in a single month. Around 99 percent companies were registered online and 25  percent of applicants completed the incorporated process the same day. This month, 260 foreign users were also registered from overseas.

Around 65 percent companies were registered as private limited companies, while around 31  percent were registered as single member companies and the remaining 5 percent were public unlisted companies, not for profit associations, trade organizations, foreign companies and limited liability partnerships. The construction & real estate sector took the lead with the incorporation of 414, trading with 393, IT with 311, services with 247, and food and beverages with 110.

Foreign investment has been reported in 43 new companies. These companies have foreign investors from Afghanistan, Australia, China, Germany, Hungary, Iran, Korea South, Mauritius, Norway, Philippines, South Africa, Spain, Sweden, Thailand, Turkey, the UAE, UK and the US.

The highest numbers of companies, i.e. 850 were registered in Islamabad, followed by 751 and 385 companies registered in Lahore and Karachi respectively. The CROs in Peshawar, Multan, Faisalabad, Gilgit-Baltistan, Quetta and Sukkur registered 176, 170, 104, 43, 22 and 12 companies respectively.

ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) on Wednesday said that private companies especially startups are allowed to offer ownership right to their employees as non-monetary compensation for their intellectual services and promotion of their business.

Employee Stock Option Plan (ESOP) is a popular method of attracting, motivating, and retaining employees. Stock Option Plans permit employees to share in the company’s success without requiring a startup business to spend precious cash, the SECP said.

As a step forward to facilitate corporate sector, the SECP hereby clarifies that private companies especially startups can offer ownership rights to their employees as a non-monetary compensation for their intellectual services and promotion of their business.

A private company may offer shares to its existing shareholders in accordance section 83(1)(a) of the Companies Act, 2017, and if the whole or any part of the shares offered is declined or is not subscribed, such shares can be offered to its employees under pre-determined contractual arrangements.

Option for employees to own a company they work for proves to be a highly motivating factor to increase productivity and efficacy which startups immensely require at their initial stages of business commencement. The trend of offering shares to employees is globally more prevalent in startups who might not be able to afford hefty compensation packages for their employees.

Therefore, in order to accelerate business growth in Pakistan, the SECP encourages private companies and startups to avail the opportunity of offering Stock Option Plan which gives them the flexibility to award stock options to employees to buy stock in the company when they exercise the option.

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SEC) on Tuesday advised the general public to verify legitimacy of entities before investing their hard-earned money and savings.

The regulator in a statement said that in order to promote protection of investors and the public interest, it regularly issues warnings and alerts, guiding the general public to refrain from investing in fraudulent investment schemes that promise hefty profits and unrealistic returns.

As clearly covered in Section 84 of the Companies Act, 2017, inviting and accepting deposits from the public is a prohibited activity, and can only be offered by specialized companies duly authorized by the SECP or SBP.

In view of various complaints and queries received by the SECP concerning an entity “All Pakistan Projects”, it has emerged that the entity is offering lucrative investment packages through its website (https://allpakistanprojects.com/).

The general public is being informed that “All Pakistan Projects” is not registered with the SECP. However, it has been noted that few individuals, whose names are appearing on the website of the entity, are directors/members in the following registered companies.

APP Projects and Real Estate (Private) Limited,

AITS Traders (SMC-Private) Limited,

APP Restaurants & Cafe (Private) Limited,

APP Riders (Private) Limited;

APP Shopping Mall (Private) Limited.

As previously clarified, mere registration of a company with the SECP does not necessary mean that these companies can invite or accept deposits from the public.

In view of above, the general public is advised in their own interest, to refrain from investing their hard-earned savings in unauthorized schemes and verify the legitimacy of any investment scheme before investing. List of other entities/companies involved in similar unauthorized schemes is available on SECP’s website at the following link: https://www.secp.gov.pk/document/list-of-companies-indulged-in-unauthorized-activities/?wpdmdl=41058&refresh=5ff2b4f5a82801609741557

Complaints or evidences against companies involved in unauthorized activities and illegal deposit taking can be sent at email ID [email protected]

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has reported a significant increase in company registrations, bringing the total to 137,054 by the end of February 2021, according to a recent statement.

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ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Tuesday proposed to reduce time limit to three days for making payment of cash dividends.

The SECP issued SRO 229(I)/2021 dated February 18, 2021 to introduce draft amendment in the Companies (Distribution of Dividends) Regulations, 2017.

According to the draft an amendment has been proposed to Regulation 3 of the Companies (Distribution of Dividends) Regulations, 2017. Following amendment has been proposed as:

“Period for making payment of dividends: Subjection to Section 243 of the Act, the chief executive officer of every company is responsible to make the payment of cash dividend, within a period of three working days from the date of its approval by the:

(i) shareholders in general meeting, in case of final dividend; and

(ii) board, in case of interim dividend.”

At present the chief executive officer of every company is responsible to make the payment of cash dividend within a period of fifteen working days from the date of its declaration.

The SECP invited comments from stakeholders on the draft amendment to be submitted within 14 days of the date of the SRO.