ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Wednesday issued a circular allowing private companies to raise capital by receiving immovable property, intangible assets and services from investors.
With this move, the regulator aims to support entrepreneurship and improve business climate for small businesses in the country, particularly startups and potential investors.
The SECP also clarified that private companies can raise funds from investors other than their existing shareholders to finance their working capital requirements, potential products and services linked with technological advancements and their growth. This will expand access-to-finance net and the overall outreach for startups by enabling them to attract investment from a wider group of investors and in the form of assets, instead of only in cash. The move will also substantially benefit the association of persons or partnerships forming a company to transfer their assets to a company and raise equity.
The circular has been issued to bring in the desired clarity with regard to Section 83 of the Companies Act, 2017, allowing all public and private companies to issue shares by way of right either for cash or a consideration otherwise than in cash, subject to compliance with Section 70 of the Act, and enabling private companies to raise equity from outside their existing members.
This step has been taken in light of the needs of the startups and emerging global trends, whereby jurisdictions such as New Zealand and Malaysia that have top DB rankings and have already implemented such reforms.
Published in Dawn, April 1st, 2021