Securities and Exchange Commission of Pakistan (SECP) has approved amendments in “Issue of Capital Rules” (CI) rules 1996 for efficient raise of funds against issue of shares. The CI rules were promulgated in 1996 to regulate issue of share capital by companies and requires companies to follow a set criterion while raising funds through initial public offerings (IPOs), right and bonus issues. The CI rules prescribe the procedure for issue of shares against consideration otherwise than in cash and disinvestment of shares by certain persons to the public.
KEY AMENDMENTS
The key amendments to the revised draft CI rules include introduction of one uniform criterion for loan-based projects and equity-based projects, removal of restriction on the sponsors of companies to retain at least 25 percent of the capital at all times as now sponsors would be required to retain at least 25 percent of the capital for a period of just three financial years. Removal of the requirement of project appraisal from a financial institution, verification of the installation and shipment of the last consignment of the plant and machinery is no longer required to be verified by the stock exchange as now the issuing company shall obtain a report verifying the implementation status of the project from a valuer and exemption from certain requirements for charging premium in case the issue/offer of shares is made through book building process.
MAIN OBJECTIVE
The main objective of the amendments to the CI rules is to streamline the process of issuing capital. While administering the CI rules, it was observed that certain clauses were unclear and created hurdles for issuers and offerers who often approached the SECP to seek clarifications or relaxations.
It was also important to make changes in the CI rules because under the book building process the offer price of shares is decided by market forces through open bidding. The proposed amendments would streamline the book building process of companies for issue of shares. Federal government would approve the amendments in the CI rules after seeking feedback from key stakeholders, during a period of two to three weeks.
SECP registered 3,400 companies during financial year 2010-2011: The Securities and Exchange Commission of Pakistan (SECP) registered 3,400 companies during the financial year 2010-2011, as compared to 3,041 companies registered during last year. This number depicts an increase of 12 per cent. The total corporate portfolio, as on June 30, 2011, has reached 59,451 companies, which was close to touching 60,000 – an all time high. The companies registered during the year comprise of 3,056 private companies, 213 single member companies, 31 public unlisted companies, 39 foreign companies, 53 not-for-profit associations, 4 companies limited by guarantee and 4 trade organizations. The highest number of company incorporation took place in the trading sector comprising of 508 companies, followed by 495 in services, 217 in tourism, 209 in information technology, 204 in construction, 148 in communication, 122 in textile, 113 in transport, 96 each in education, and food and beverages, 92 in corporate agricultural farming and 86 in the engineering sector.
The total authorised capital and paid up capital of the companies registered during the financial year 2010-11, amounted to Rs44.38 billion and Rs19.80 billion, respectively. During the financial year, 757 companies increased their authorised capital with the aggregate authorised capital increment being at Rs288.93 billion while 1,045 companies raised their paid up capital with the total paid up capital increment being at Rs178.68 billion. The increasing trend in the registration of companies was due to the SECP’s registration facilitation mechanism and “eServices” that facilitated the company registration process. Almost 50 per cent of new registration was now through online services showing the increasing adaptability by the general public towards eServices.
