For listed firms that wanted to buy back their own shares, the Securities and Exchange Commission of Pakistan (SECP) has tightened requirements.
In this respect, the commission announced a change to the 2019 Listed Companies (Buy-Back of Shares) Regulations on Tuesday.
The acquiring business must not be listed on the default counter. It cannot be deemed to have defaulted on any debt instrument that is backed by the auditors’ certificate. Additionally, according to the rules, a business can be purchased if it meets the criteria listed below.
- For a minimum of three years, it has been listed on the securities exchange.
- It complies with any post-purchase listing restrictions or licensing requirements. If any, as well as the minimum capital, equity, or free float criteria established by the securities exchange.
- Through a special resolution, it has received support from its members for the acquisition.
The SECP has also changed the way shares are bought back when they are sold.
Revisions to the rules provide that the special resolution must be approved at the general meeting. No later than 45 days after the board meeting when the acquisition is suggested. The earlier standards set the time limit at 30 days within two working days of the special resolution’s passage. The acquiring business must additionally publish an announcement in accordance with Schedule II.
The process for buying stocks through the exchange has also been modified by the SECP. The following process must be followed when making the purchase through a securities exchange.
- For the purpose of the acquisition, the acquiring firm must create an Investor Account Service (IAS) at the Central Depository Company (CDC). And inform the CDC of all pertinent information.
- An account for the acquiring firm that may only be used to buy shares during the purchase period must be opened by the authorized officer with any authorized brokerage house.
- The purchasing company must make sure that there are enough funds in the company’s designated clearing bank account for settlement. And for the purpose of public disclosure, the purchasing company must daily inform the securities exchange of the number of shares and the purchase price it has acquired.
- The shares acquired on a daily basis must be deposited in the purchasing company’s blocked IAS account with CDC. And CDC must make sure that the shares stay there until the company decides to sell its treasury shares or cancel them in accordance with the rules.
- The purchase period for purchases made through securities exchanges must begin no later than seven days after the date of public disclosure. And must end no later than 180 days after the date that a special resolution authorising the purchase was passed. Or until the purchase is complete, whichever comes first.
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