The Securities and Exchange Commission of Pakistan (SECP) has announced significant amendments to the Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2017, through a notification dated January 24, 2024.
These amendments, introduced after extensive consultation with stakeholders and the general public, are designed to align with international best practices in corporate governance.
Under the amended regulations, it is now mandatory for an Acquirer of a company to make a Public Offer to the Minority Shareholders of the Target Company, ensuring they have a fair opportunity to exit the company if they wish to do so.
Previously, an Acquirer had the option to offer either cash or securities as payment to Minority Shareholders who accepted the Public Offer. However, concerns arose that inferior securities might be offered, undermining the purpose of providing a fair exit opportunity.
To address this risk, the amended Regulations stipulate that securities offered as payment must be of equivalent value to cash. However, the final decision to accept cash or securities lies with the Minority Shareholders of the Target Company.
This amendment aims to prevent Acquirers from offering subpar securities and depriving Minority Shareholders of a fair exit opportunity.
Furthermore, the amended Regulations introduce various methods for determining the Offer Price, with the highest price derived from these methods becoming the final Offer Price.
One notable change is the exclusion of Net Asset Value as a pricing method for frequently traded companies. This adjustment acknowledges that market price is often a more accurate measure of value for such companies, encouraging takeovers and preventing undervaluation.
Additionally, the amended Regulations feature enhanced definitions of key terms for clarity and consistency, ultimately aiming to safeguard the interests of both Acquirers and Minority Shareholders of Target Companies.
These amendments represent a significant step towards enhancing transparency, fairness, and investor protection in Pakistan’s corporate sector.
