The government is likely to de-list Investment Corporation of Pakistan (ICP) from the privatisation programme, and transfer it to the State Bank of Pakistan (SBP) for carrying out transaction.
Sources in the Privatisation Commission (PC) told Business Recorder on Tuesday that there were complexities of issues in the transaction, and the matter has been referred to the Cabinet Committee on Privatisation (CCoP) for de-listing ICP from the privatisation list.
They said that CCoP in its meeting in October 2004 had decided to approve sale of 51 percent shares, with management control, of ICP.
In the light of CCoP's decision, a draft transaction structure was developed keeping in view legal constraints specific to ICP being an entity created under its own Act.
The CCoP had decided that the ICP Ordinance would be considered as contractual arrangement that would specify for ICP to be reorganised or restructured as an NBFC under the NBFC Rules 2003.
The 'shell ICP', with no assets or liabilities, would upon the successful transfer of assets and liabilities to the new NBFC be wound up in terms of Section 34 of the ICP Ordinance with the Finance Division issuing an ICP winding up notification.
The above structure was submitted to Law Ministry on June 11, 2005, which recommended that the transaction be undertaken under the existing ICP legislation, with appropriate modifications being incorporated.
Subsequently, in the light of the route recommended by the Law Ministry, being potentially both lengthy and time consuming, an alternative transaction structure was proposed and approved by PC Board in its meeting on August 31,2005, with following broad details:
i) ICP's Board of Directors (BoD) may create a wholly owned subsidiary NBFC under the NBFC Rules 2003.
ii) The BoD may then authorise the transfer of all the assets and liabilities of ICP to the ICP subsidiary.
iii) ICP after the transfer of the assets shall have on its balance sheet a holding of shares in the subsidiary equivalent to the net assets (assets less liabilities) transferred at par value.
iii) ICP shall transfer to the ICP Subsidiary some of its staff to manage its affairs until privatisation. It shall, however, require a CEO and a company secretary. The shares of the ICP subsidiary will be privatised by sale of 100 percent of its equity. The proceeds from the sale of the ICP subsidiary will leave the ICP balance sheet with only one asset ie cash.
iv) ICP shall then be wound up in terms of section 34 of the ICP Ordinance by issuing a notification of winding up of ICP. The said notification will be issued by the Finance Division and the total cash proceeds shall then be distributed amongst shareholders of ICP.
Sources said that an inter-ministerial meeting on November 28 discussed in detail the transaction structure communicated in Law Division's opinion on the proposed ICP transaction structure presented in inter-ministerial meeting and based on the creation of a subsidiary of ICP.
The opinion stated that "the purpose sought to be achieved through the transaction structure proposed does not appear to be in accord with the provisions of the Investment Corporation of Pakistan Ordinance, 1966".
In the light of the above decision, PC decided to pursue the route of amending the requisite ICP Ordinance and then take the transaction to the market despite being both complex and time consuming.
Subsequently, a delegation of Privatisation Commission met with SBP Governor on May 13, at Karachi, and discussed legal complexities pertaining to ICP transaction that generated delays.
In the meeting, SBP indicated that Finance Ministry had desired that ICP be transferred to SBP to quickly liquidate or merge ICP Shell Company into any other financial institution.
On May 23, SBP wrote a letter, setting out the fundamental requirement for their undertaking the ICP transaction, which is to exclude ICP from the privatisation programme of the PC with the SBP being mandated to carry out the transaction.
However, the SBP sought support from the PC and Finance Division to implement the final transaction structure, sources said. Now the PC is of the view that in the light of the legal complexities generated by the ICP transaction, the transaction be excluded from the privatisation programme and the SBP be mandated to carry out the transaction, sources added.
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