The Pakistan Stock Exchange (PSX) has offered a revival opportunity for Listed Shell Companies (LSCs) through reverse merger transactions with Operating Unlisted Companies (OUCs).
According to PSX Regulation 5.22, this provision allows LSCs to revive their business operations by opting for a reverse merger with an OUC, the main bourse informed investors on Wednesday.
PSX Regulations 5.1.1(c) and (e) define an LSC and OUC, respectively, as follows: A Listed Shell Company (LSC) is a listed company classified by the Exchange with reasons recorded in writing, as a Listed Shell Company for the purpose of Reverse Merger on the basis of erosion of its equity, no or nominal business operations in its principal line of business as per Memorandum of Association or no or nominal assets. An Operating Unlisted Company (OUC) is an unlisted company currently in operation in its principal line of business for at least the preceding two financial years and which intends to merge with a Listed Shell Company.
The notice said LSCs can benefit themselves in various ways through the Reverse Merger regulations of PSX. The first freedom of LSC is that LSC can retain its listing status and resume business operations without injecting further capital into the company.
Further, Reverse Merger transactions would help in regaining shareholders’ confidence as the revival option would pave the way for distressed companies to shift to normal course of PSX, including the restoration of trading in their shares.
PSX said it wants to streamline the process of Reverse Merger and for the smooth implementation of the same, PSX is inviting all potential LSCs to voluntarily express their interest as a target company for a reverse merger and communicate the same to PSX.
After receiving the interest from LSCs, PSX will evaluate the cases for qualification under PSX Regulation 5.22. Subsequent to the evaluation of the cases under the specified criterion, PSX shall publish the list of potential LSCs on its website to facilitate LSCs for their revival operations and for OUCs who plan to list their company through Reverse Merger.
The list would also serve as a starting point for Consultants to use to identify target companies for facilitating the execution of the Reverse Merger transactions.
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