PSX opens window for listed shell companies' revival through reverse mergers

June 26, 2024 (MLN): Pakistan Stock Exchange (PSX) regulation relating to Reverse Merger transactions provides all Listed Shell Companies (LSC) an opportunity to revive their business operations by opting for a reverse merger with an Operating Unlisted Company (OUC).

“Listed Shell Company”, shall mean any Listed Company, classified by the Exchange with reasons to be recorded in writing, as a Listed Shell Company for the purposes of Reverse Merger on the basis of erosion of its equity, no or nominal business operations in its principal line of business as per Memorandum of Association or no or nominal assets.

“Operating Unlisted Company”, shall mean an unlisted company currently in operation in its principal line of business for at least the preceding two financial years and which intends to merge with a Listed Shell Company.

LSCs can benefit themselves in various ways through the Reverse Merger regulations of PSX.

The first and foremost is that LSC can retain its listing status and resume business operations without injecting further capital in the company.

Furthermore, a Reverse Merger transaction would help in regaining shareholders’ confidence as the revival option would pave way for distressed company to shift to the normal counter of PSX, including restoration of trading in their shares.

PSX aims to streamline the process of Reverse Merger and for smooth implementation of the same, PSX is inviting all potential LSCs to voluntarily express their interest as a target company for reverse merger and communicate the same to PSX.

After receiving the interest from LSCs, PSX shall be evaluating the cases for qualification.

Subsequent to the evaluation of the cases under the specific criterion, PSX shall publish the list of potential LSCs on its website to facilitate LSCs for their revival process and for OUCs who plan to list their company through Reverse Merger.

The list would also serve as a starting point for Consultants to the Issue to identify target companies for facilitating the execution of the Reverse Merger transactions.

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