ISLAMABAD, April 16: The enactment of law to allow take-over of listed companies by new management was further delayed after a high level 2-day meeting held at the Ministry of Finance here Tuesday decided to subject it to further consultation, Dawn has learnt from a reliable source.

The meeting was attended, among others, by the Federal Minister for Commerce, Abdul Razak Dawood, Law Minister Dr Khalid Ranjha and Secretary General, Finance, Moeen Afzal, Chairman, Securities & Exchange Commission, Mr Khalid A. Mirza and Chairman, National Investment Trust (NIT), Mr Tariq Iqbal.

The draft law, it will be recalled, was finally approved by the Federal Cabinet in mid-2001. Before it could be sent to the President for its enactment as law, the Ministry of Commerce raised an objection, contending that it had not been consulted on the draft law.

The capital market experts have urged the government for many years to provide the necessary legal and administrative framework without delay in view of the problems existing in the capital market with serious implications for fresh investment.

These problems are characterised by the situation where a large number of companies have been in a state of virtual dormancy because of multifarious financial and managerial difficulties, creating uncertainties for the development of economy.

There is, at the same time, no dearth of companies that may consider themselves capable of putting such businesses back on the rails by injecting fresh financial and managerial resources into these.

This is normal practice in most of the developed countries with vibrant capital markets but the very concept of takeover even in such circumstances is new to Pakistan, remarked a capital market expert.

The matter was agitated forcefully when President General Pervez Musharraf visited the Karachi Stock Exchange more than two years ago. He had directed the SECP to finalize the draft law in this connection at the earliest. The law was accordingly submitted to the government in March 2000.

Before its presentation to the cabinet, elaborate consultations were held not only within all the relevant ministries including the Commerce Ministry but also the private sector including the Chambers of Commerce & Industry, the Overseas Chambers of Commerce and the Stock Exchanges.

Following his objection after its passage by the Cabinet, it was decided that a meeting would be held at the Finance Ministry to let the Commerce Minister express his views. Several months lapsed before the two Ministers and other highly functionaries could spare time for getting together.

At the two-day meeting which concluded today, according to the reliable source, the Commerce Minister gave a list of some of the leading industrialists who, he desired, should also be consulted regarding the legal and technical implications of the proposed law. The task of showing the bill to those individuals was entrusted to the NIT Chairman who, as Commissioner of the SECP, was closely associated with the entire process of its formulation and drafting.

According to the source, the bill after such consultation would be ready for presentation to the President for his signatures.

Approached by this Correspondent about salient features of the law, the SECP Chairman said it was a simple, plane law with three principal elements that are common to similar legislation in other countries of the world. It, for example, would ensure fair treatment and a level playing field to all the shareholders, besides providing equal access to all in a timely manner.

On the operational side, the bill, when enacted, would lay down a disciplined, orderly process for substantial acquisition of control.

When asked to compare it with the laws of other countries from the point of view of its effective implementation, Mr Mirza said two elements of significant import to such a law could not, however, be included in the draft law. These were:

(a) Mandatory offer to all shareholders after a control of certain percentage of shares in a company. Under this provision, anyone who acquires, say, 30 per cent shares (as in UK) of a company is required under law to offer to purchase the remaining shares at the maximum price which he himself paid to acquire his position; and

(b) Mandatory sale: Once someone controls most of the shares, say 95% or 99%, in a company, the holders of residual shares are required to sell these to him.

When asked to the possibility of enforcement these provisions also in Pakistan, the SECP chief said he would like to go ahead with the existing bill for the time being. Further changes might be made as more experience was gained.