SECP Proposes Changes to Bring Transparency in Capital Formation

The Securities and Exchange Commission of Pakistan (SECP), in a bid to improve and ensure transparency in the process of capital formation has recommended a revamp of Companies (Further Issue of Shares) Regulations 2020. A concept paper, suggesting new modes and mechanics through which companies can raise capital, has been placed on SECP’s website for public comments. The concept paper, in accordance with international best practices, has proposed to adopt an enhanced disclosure-based regime for the issuance of the right shares by listed companies. In this regime, the focus is increased to providing sufficient information to investors, enabling them to make informed decisions, and increasing investor protection. The proposed disclosure-based regiment will include, the preparation of offering documents with enhanced disclosures, seeking public comments of the apex and front-line regulator, and publishing the final offering document after incorporating the same, leading to the completion of the right issue. In many countries like Malaysia, Thailand, Singapore, and India, a disclosure-based regime is now considered at the core of any capital raising activity by listed companies. The paper also includes a few considerations with regard to the issuance of shares by listed companies by way of other than rights including Employee Stock Option Schemes (ESOS).