SECP amends regulations to help start-ups, small firms

Published November 24, 2021
Logo of the Securities and Exchange Commission of Pakistan. — Photo courtesy SECP website
Logo of the Securities and Exchange Commission of Pakistan. — Photo courtesy SECP website

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has amended its regulations to facilitate the corporate sector, particularly start-ups and small companies, in raising equity through conventional modes.

The amendments have been introduced in the Companies (Further Issue of Shares) Regulations, 2020, to address the issue of raising equity, and the key changes include permission to convert one class of shares into another class, issuance of shares with differential rights without approval of the SECP, and specification of mechanism for valuation of non-cash assets.

As per the law, companies can have more than one kind of shares conferring varying rights of dividend, voting and participation depending upon the needs of its capital providers.

After the amendments the requirement of prior approval of SECP has now been abolished, and the corporate sector regulator has said that such a measure will considerably help reduce administrative burden and contribute towards growth of fast-paced corporate world by removing a layer of regulatory approval.

Another amendment is to permit conversion of one class or kind of shares into another class or kind that includes conversion of the ordinary shares into preference shares.

Currently, the regulations only allow conversion of preference shares into ordinary shares while no mechanism is provided for other classes of shares.

The change aims to facilitate companies in maintaining an optimal capital structure considering their own financial needs and demands of their shareholders.

Besides, a complete mechanism for valuation of immovable property, intangible assets or services has been introduced.

Now, the consulting engineers registered with the Pakistan Engineering Council and QCR rated chartered accountant firms will be eligible to conduct valuation for the purposes of the Act.

These amendments have been introduced in consideration of numerous queries and suggestions received from small companies and start-ups, and are at par with the international jurisdictions.

Published in Dawn, November 24th, 2021

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