SECP proposes disclosure-based regime for right shares – Newspaper

ISLAMABAD: To improve and ensure transparency in the capital formation process, the Securities and Exchange Commission (SECP) of Pakistan has recommended amendments to the Companies (Issuing Additional Shares) Regulation 2020.

Regulators proposed new modes and mechanisms through their conceptual documents, suggesting companies adopt an enhanced public-based scheme for issuance of rights shares by publicly traded companies to raise capital.

The framework focuses on providing investors with sufficient information to make informed decisions and strengthen investor protection.

The loopholes in the current law identified by the SECP are that the size of the right issues is unusually high by up to 1,000%, along with insufficient minimum and incomplete risk disclosures to enable investors to make informed decisions.

Limit issuance to 50% of paid-in capital

It does not allow cancellation, withdrawal, change or postponement of correct issues once announced outside of the current regime.

However, if the issuance is not subscribed, the underwriter does not subscribe for the unsubscribed portion, and the board fails to allocate the shares, no remedies are available in the regulatory framework and are clearly open for an unlimited period of time.

Therefore, in order to enhance transparency and symmetric dissemination of information, it is proposed in the amendment that the correct issuance amount of a listed company is less than Rs 500 million or 50 times the paid-in capital of a listed issuer, whichever is lower.

For a correct issuance where a listed company exceeds Rs 500 million or 50% of the paid-in capital of a listed issuer, whichever is less, the requirements are stringent and broad.

Proposed open-based frameworks include: After soliciting public comments from apex and frontline regulators, incorporating them, and publishing a final proposal document, we complete the correct issuance.

Regardless of the size of the issue, there are additional requirements regardless of the size of the issue, such as the concept of “Minimum Subscription Level” (MLS).

Posted at Serb on May 3, 2022