September 21, 2022: The Securities & Exchange Commission of Pakistan (SECP) has revamped the Companies (Further Issue of Shares) Regulations, 2020 (Regulations) for listed companies through introducing amendments vide notification dated September 21, 2022.
Examination of the historical cases of right issues by listed companies indicated that risk disclosures were minimal and provided limited information to the investors even in cases of large issues. Therefore, after studying practices in several jurisdictions, analysing global trends and thorough deliberations with the industry participants, SECP has introduced certain amendments in the capital issue regime to bring it in line with global practices.
The major amendment is adoption of disclosure-based regime that envisages preparation of offering document containing enhanced disclosures, seeking public comments (optional), comments of the Apex and Front-line regulators and publishing final offering document after incorporating the comments.
Other amendments include provision of Exit Opportunity to the shareholders, imposition of lock-in clause on the sponsors, reporting of proceeds utilization by the statutory auditors, optional concept of Minimum Level of Subscription (MLS) and ‘Applications Supported by Blocked Amounts’ (ASBA) and placing restrictions on underwriters that fail to meet their obligations.
For other than right issues, minimum contents of valuation reports and procedural requirements to be complied by the companies have been specified. For Employee Stock Option Schemes (ESOS), companies can now announce such schemes without seeking SECP’s approval and ensure compliance at their own end.
All the above amendments will allow the investors to make informed decisions and thus increase transparency and build investor confidence.