The Securities and Exchange Commission of Pakistan (SEC) has introduced significant amendments to the Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2017, aimed at ensuring equity and protecting the interests of minority shareholders in both acquiring and target companies.
In a technical release disclosed by the former Chairman of the Federal Board of Revenue (FBR), Shabbar Zaidi, the acquisition of control over a listed company by another entity holds paramount importance in corporate regulations. These regulations in Pakistan are governed by the Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2017.
Zaidi highlighted that substantial amendments have been made to these regulations by the Securities and Exchange Commission of Pakistan in January 2024.
Technical Release 2/2024, focusing on the significant amendment in Takeover Law, underlines two critical aspects: the determination of the minimum offer price and the mode of payment. These regulations have been substantially revised to align with best practices, with Zaidi emphasizing the requirement of a minimum price to be paid under the public offer.
In the amended regulations, the concept of frequently traded shares has been retained, albeit with modifications to its definition. The objective behind this amendment is to ensure that minority shareholders receive fair compensation for their shares. Notably, the requirement for net asset value determination by a Chartered Accountant firm, based on audited financial data not older than six months from the date of the public announcement of the offer, has been dispensed with in the case of frequently traded shares.
Zaidi elucidated that this implies the minimum price for frequently traded shares now considers two criteria: the price prevailing in the stock exchange and the price paid by the acquirer.
The amendments signify a significant step towards enhancing transparency and protecting the rights of minority shareholders in the corporate landscape, fostering a more equitable environment for investors in Pakistan’s capital markets.