SECP Eases Rights Issue Rules to Help Listed Companies Raise Capital

The Securities and Exchange Commission of Pakistan (SECP) has notified amendments to the Companies (Further Issue of Shares) Regulations, 2020, to facilitate capital raising by listed companies while maintaining adequate disclosure requirements for investors.

The amendments address a key challenge faced by listed companies in raising additional capital from existing shareholders through rights issues.

Under the previous framework, listed companies were prohibited from announcing a rights issue if the company, its sponsors, promoters, substantial shareholders, or directors had any overdue amounts or defaults reflected in their Credit Information Bureau (CIB) reports. This restriction limited the ability of financially stressed but otherwise viable companies to raise capital, even where existing shareholders were willing to support revival, restructuring, or the continuation of operations.

Under the amended framework, the requirement for a clean CIB report will not apply where the relevant persons obtain a No Objection Certificate (NOC) from the concerned financial institution(s) in respect of the proposed rights issue. To ensure transparency and protect investors’ interests, companies availing this relaxation will be required to make comprehensive disclosures in the rights offer document. These disclosures must include details of any defaults or overdue amounts, ongoing recovery proceedings, and the status of debt restructuring, if any.

The revised regulations seek to strike a balance between facilitating corporate rehabilitation and enabling investors to make informed investment decisions.

The amendments were notified following a consultative process in which the SECP sought feedback from a wide range of market stakeholders, including listed companies, issue consultants, professional bodies, industry associations, law firms, and capital market institutions.

The changes are expected to enhance market confidence, improve access to capital for listed companies, and strengthen transparency in the rights issue framework.