SECP concludes consultation over Companies Bill 2016

Once finalised, it will result in investor facilitation, greater transparency

KARACHI:

The Securities and Exchange Commission of Pakistan (SECP) has concluded extensive consultations with all stakeholders to obtain their feedback on the proposed draft of the Companies Bill 2016.

“The draft companies’ bill, once finalised, will result in investor facilitation, clarity in the role of various stakeholders and greater transparency,” a statement released on Saturday said.

A number of new laws - such as the Securities Act 2015, Companies (Amendment) Act 2015, Stock Exchanges (Corporatisation, Demutualisation and Integration) (Amendment) Act 2015, and Futures Market Act (FMA) 2016 - have been promulgated in the last one year. In addition, the National Assembly passed the Corporate Restructuring Companies Bill (CRCB) 2016 on March 17.

The Securities Act came into effect in May 2015. Besides addressing various shortcomings of the Securities and Exchange Ordinance 1969, the new law incorporates the International Organisation of Securities Commissions (IOSCO) benchmarks. It contains provisions for promoting public confidence in the market, including full disclosure at the time of the initial offering, continuous disclosure requirements and a comprehensive compliance regime. It also contains provisions for curbing activities, like market abuse and insider trading.

The Companies (Amendment) Act 2015 seeks to provide for the listed companies to purchase their shares from the market and to either cancel the repurchased shares or retain them as treasury shares.

Listed companies, which believe their shares are undervalued on the stock market, may buy back/repurchase their shares that can improve the earnings per share and bring stability in the market price of such shares.

Similarly, the Stock Exchanges (Corporatisation, Demutualisation and Integration) (Amendment) Act 2015 aims at extending the moratorium period provided in the Stock Exchanges (Corporatisation, Demutualisation and Integration) Act 2012, as the due date had already elapsed. The Stock Exchanges (Corporatisation, Demutualisation and Integration) Act 2012 provided a framework that allows the segregation of ownership and trading rights to enable demutualisation and integration of the stock exchanges. Its promulgation enabled the integration of Karachi, Lahore and Islamabad stock exchanges into the Pakistan Stock Exchange.

As for the CRCB, it has been drafted as a first step towards the establishment, licensing and regulation of corporate restructuring companies and the manner in which they can conduct their businesses. This bill seeks to declare the corporate restructuring as a new form of business under which companies can be formed in Pakistan for the purpose of making the financially distressed companies operationally viable.

The Futures Market Act is aimed at regulating the futures market and protecting investors who trade in the commodities.

At present, the futures market is being regulated under the Securities and Exchange Ordinance (SEO) 1969. The SECP believed that the law was fundamentally incomplete, lacked a proper and logical structure, and suffered from numerous inconsistencies and gaps.

Published in The Express Tribune, March 20^th, 2016.

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