The Securities and Exchange Commission of Pakistan (SECP) announced on Monday that its newly issued guidelines for mergers and amalgamations of companies would not be applicable to banking companies governed under the Banking Companies Ordinance 1962.
Under the recent guidelines, it was clarified that the rules would not extend to mergers and acquisitions of banking companies, which fall under the jurisdiction of the State Bank of Pakistan, regulating shares acquisitions of banking companies.
Formulated in accordance with section 510 of the Companies Act, 2017 (Act), the SECP guidelines outline the procedures governing compromises, arrangements, and reconstructions between a company and its creditors or members. Such arrangements, commonly referred to as mergers and amalgamations, are regulated under the provisions of the Act.
A merger involves the combination of two or more existing companies, resulting in the formation of a different entity. This new entity can either be one of the existing companies or an entirely separate new organization.
The initiation of a merger, de-merger, or reconstruction, known as a “scheme of arrangement,” necessitates the approval of the relevant company court or the Securities and Exchange Commission of Pakistan. The prescribed procedure under the Act must be followed to obtain such approval.
The Commission, while evaluating each scheme of arrangement, will continue to assess the transaction’s merits based on its specific nature, industry, and potential impact. The guidelines provided by SECP offer a comprehensive framework for the review of such schemes, aiming to ensure an enhanced level of understanding for the concerned parties, including their advisers, the business community, and the general public.
Despite the comprehensive coverage, SECP emphasized the flexibility of the guidelines, recognizing that various situations and issues may arise during the review of a scheme of arrangement, which may require tailored analyses based on specific circumstances.