The Securities and Exchange Commission of Pakistan (SECP) has tightened procedures for the listed companies, which intended to buy back their own shares.
In this regard, the commission issued a notification here on Tuesday to amend the Listed Companies (Buy-Back of Shares) Regulations, 2019.
According to the amended regulations, the purchasing company shall not be on the default counter and has not defaulted on any debt instrument supported by the auditors’ certificate. The regulations also state that a company shall be eligible for purchase if it fulfills the following conditions
- It is listed on the securities exchange for a period of not less than three years.
- It is compliant with the minimum capital or equity requirements or minimum free float requirement of the securities exchange, as set out in listing regulations or licensing requirements, if any, after the purchase.
- It has obtained approval from its members for purchase through a special resolution.
The SECP has also revised the procedure for the purchase of the buy-back of the shares.
According to revised procedures, the general meeting in which the special resolution is to be passed shall be held no later than 45 of the date of the meeting of the board of directors in which the purchase is recommended. Earlier, the period was 30 days under the previous regulations. Alongside this, the purchasing company shall also make a public announcement as per Schedule II within two working days of passing the special resolution.
The SECP has also amended the procedure for the purchase through a securities exchange. The purchase shall be made through securities exchange subject to the following procedure
- The purchasing company shall open an Investor Account Service (IAS) at the Central Depository Company (CDC) for the purpose of the purchase and shall intimate all related details to CDC.
- The authorized officer shall open a subaccount of the purchasing company with any licensed brokerage house which can only be utilized for the purchase of shares during the purchase period.
- The purchasing company shall ensure that sufficient funds are available for settlement in the designated clearing bank account of the company and the purchasing company shall intimate to the securities exchange, the number of shares purchased, along with the purchase price on a daily basis for public dissemination.
- The shares purchased on daily basis shall be placed in the blocked IAS account of the purchasing company maintained with CDC and CDC shall ensure that the shares shall remain in the blocked account until the company decides to sell the treasury shares or cancel the shares in accordance with these regulations.
- The purchase period for purchase through securities exchange shall start not later than seven days from the date of public announcement and shall close within 180 days from the date of passing of special resolution wherein members have given approval of the Purchase or till such date that the purchase is completed, whichever is earlier, the amended regulations added.
