The Securities and Exchange Commission of Pakistan (SECP) has issued detailed guidelines on issuing shares at discount for listed and non-listed companies to facilitate and speed up the process.
According to a statement of SECP, under section 84 of the Companies Ordinance, 1984, all companies, whether listed on a stock exchange or non-listed, are required to obtain approval of the SECP before they issue shares at a discount.
It had been observed that the companies applying for approval of the Commission in most cases did not provide adequate information required for taking decision on the application, and this resulted in delay in approval of the proposal. In order to enable the Commission to take a quick decision on such applications based on objective analysis of each such request, the Commission has issued detailed 'Guidelines on issue of shares at a discount' and these have been place on the website.
This information is designed to establish that injection of fresh capital at a discount will enable the company to increase its profits and amortise the discount.
All material facts arising out of the issue are brought before the shareholders while seeking their approval to issue shares at discount. It is not used as a device to increase the voting percentage of the directors. Preferential allotment through these shares is not used by insiders as a means to obtain quick gains through divestments.
In some cases, the issue of shares at a discount is proposed by such companies where they are required to increase the capital to meet the requirements of minimum paid up capital or equity.
Since such proposals militate with the concept of raising the level of capital, requests to issue shares at a discount to meet such statutory requirements shall not be permissible.
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