The Securities and Exchange Commission of Pakistan (SECP) has proposed to form a trust under the Corporate Restructuring Company (CRC) for acquiring non-performing assets of a sick company from financial institutions.
The SECP issued the “Corporate Restructuring Company (Amendment) Act 2021” on Friday. According to the amendment, a CRC may constitute one or more trusts for acquiring non-performing assets from financial institutions.
It is proposed in the amendments that the financial institution may appoint a CRC as its agent for the recovery of its nonperforming assets. However, there shall be no transfer of any non-performing assets to the CRC.
The proposed amendments say that the financial institutions may exchange information related to an obligor on a confidential basis with the Corporate Restructuring Company. No suit or other legal proceedings shall lie against any financial institution or its officers for anything done in good faith for any damage caused or likely to be caused by anything done or intended to be done as aforesaid.
The Act also proposes that a CRC, holding at least two-thirds in value of the principal amount payable to the secured financial institutions, may present a scheme to the Corporate Restructuring Board.
For determining the requisite majority of secured financial institutions, the CRC shall send a notice to the secured financial institutions. The secured financial institutions shall be required to answer within 14 calendar days by an affidavit.
They will inform by affidavit about the principal amount owed and outstanding from the obligor together with the nature and extending of their security interests, based on which the executant of the affidavit is authorized to execute and bind the concerned financial institution.
“If the affidavit provided by any person is false or incorrect, the commission, in consultation with the CRC Board, may impose a penalty on such a person of an amount not exceeding Rs. 50 million and such penalty shall be in addition to and without prejudice to any other remedy available to any party that may have been affected by a false affidavit or due to the failure to provide the affidavit”, the Act has proposed.
The Corporate Restructuring Board will decide on the proposal after the proper procedure.
Any person aggrieved by the order, may, within thirty days of the date of such order, file a petition for leave to appeal in the high court having jurisdiction. When a scheme is presented to the Corporate Restructuring Board, no suit or order legal proceedings shall be proceeded with or commenced against the obligor until the scheme is sanctioned by the Corporate Restructuring Board and has attained finality.
Notwithstanding anything contained in any other law, no civil court or other courts shall hear jurisdiction to entertain any suit or proceeding in respect of any matter which the high court is empowered to determine.
The high court shall constitute one or more special benches consisting of one or more judges to adjudicate the cases under this Act.
The special benches shall decide the cases in accordance with the procedure prescribed through rules. If any, within ninety days from the date of institution of the case.
Notwithstanding anything contained in any other law, all transfer of non-performing assets undertaken, orders made, proceedings taken, rules, regulation, circulars, notification and other legal instruments made at any time until the enactment of the Corporate Restructuring Companies (Amendment) Act, 2021 are declared and affirmed to have been and shall be deemed to have always been, validly undertaken, made, decided, taken or done and shall not be called in question in any count on any ground whatsoever.
