SECP Introduces Amendments to Companies (Further Issue of Shares) Regulations 2020

The Securities and Exchange Commission of Pakistan (SECP) has announced a series of amendments to the Companies (Further Issue of Shares) Regulations, 2020, after extensive consultations with stakeholders and the public.

The SECP revealed Thursday the adoption of revised regulations aimed at simplifying the process of right issuance, bolstering disclosures in offer documents, and adjusting post-issuance share sale restrictions.

Among the key changes, the process of right issuance has been streamlined, with uniform disclosure and reporting standards now applicable to all right issues, regardless of size. Issuers are now required to solicit feedback from both the Pakistan Stock Exchange (PSX) and SECP on draft offer documents.

In a bid to provide investors with vital information, amendments have been made to enhance disclosures in the right issue offer documents, shedding light on the issuer’s profile, specific risk factors, and their potential impact on company operations and performance.

A significant modification includes the requirement for directors and substantial shareholders to subscribe to the right issue or arrange for the subscription of their entitled shares, a process that has been streamlined. Dissenting directors or substantial shareholders are no longer obliged to submit an undertaking; instead, their share entitlement can be underwritten alongside the portion offered to the general public.

Addressing challenges in the further issue of shares by means other than a right offer, where issuance is contingent upon a future event, specific exceptions have been introduced to facilitate the share issuance process. Clear explanations of future contingent events that would attract such exceptions have been outlined in the regulations to minimize discretionary interpretation.

Furthermore, restrictions on the sale of shares post-issuance have been revised, extending the holding period to two years for sponsors and associated entities, while reducing it to six months for other parties.

Following these amendments, the Companies (Further Issue of Shares) Regulations, 2020 will exclusively apply to listed companies. Separate regulations notified in February 2024 address further share issuance by unlisted public and private limited companies.

The SECP emphasized that these amendments mark a significant step towards strengthening capital markets and protecting investor interests. By enhancing transparency and accountability, the SECP aims to foster investor confidence and stimulate sustainable growth.