The Securities and Exchange Commission of Pakistan (SECP) has issued a consultation paper eliciting public input on a proposed policy framework for the issuance of ordinary shares with varied rights and privileges by companies.
The initiative is aimed at enhancing corporate governance, protecting shareholder interests and fostering a transparent capital market by establishing clear regulatory guidelines for companies issuing shares with differential rights, including variations in voting power, dividend entitlements and liquidation preferences, according to a statement issued by the SECP. The consultation paper outlines key regulatory and compliance considerations, addressing governance challenges such as control concentration, shareholder activism and equitable decision-making. It also emphasises the importance of market transparency and fair price discovery to ensure that investors holding shares with varied rights have clear valuation mechanisms and viable exit options.
According to the SECP, a comparative analysis of international best practices has been conducted to assess global regulatory approaches and develop a framework suited to Pakistan's financial ecosystem.
In the consultation paper, it has highlighted potential risks associated with differential share structures, including governance imbalances and reduced minority shareholder influence, and is proposing reasonable limits to maintain fairness and uphold investor confidence.
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