The Securities and Exchange Commission of Pakistan (SECP) will continue to assess each scheme of arrangement on its merits according to the specific nature of the transaction, the industry and the potential impact in each case.
The SECP on Thursday issued guidelines pursuant to section 510 of the Companies Act, 2017. They outline the procedures governing compromises, arrangements and reconstruction between a company and its creditors or any class of them, or between the company and its members or any class of them.
Such compromises and arrangements are generally termed as mergers and amalgamations and are regulated under the provisions of the Act. A merger is a combination of two or more existing companies which merge their identities to form a different company which can either be one of the existing companies or a separate new entity altogether.
The beginning of a merger/de-merger/reconstruction (i.e. “scheme of arrangement”) may take place through common agreements between the transferor company and the transferee company but the mere agreement does not provide a legal cover to the transaction unless it carries the sanction of the relevant company court or the Securities and Exchange Commission of Pakistan (the “Commission”), as the case may be. To obtain such sanction, the procedure laid down under the Act shall be followed.
The Commission will continue to assess each scheme of arrangement on its merits according to the specific nature of the transaction, the industry and the potential impact in each case. The general principles set out in these guidelines provide a framework within which such schemes may be reviewed.
It should be noted that these guidelines are not applicable to the mergers and acquisitions of banking companies, which are governed under the Banking Companies Ordinance 1962, under which the State Bank of Pakistan regulates shares acquisitions of banking companies.
These guidelines may not cover every issue or circumstance which may arise in the review of a scheme of arrangement. The transactions may involve different situations and analysis of particular issues may be tailored to the specific circumstances of a scheme. Therefore, these guidelines are to be applied flexibly.
Nevertheless, these guidelines aim to provide an enhanced level of understanding to the parties to a scheme of the arrangement, including their advisers, the business community and the general public.
Source: Pro Pakistani