Rights of minority shareholders: SECP may harmonise takeover regulations and law

The Securities and Exchange Commission of Pakistan (SECP) is likely to harmonise the 'Takeover regulations' and the 'Takeover Law' to create a balance between the rights of the minority shareholders and investors. It is learnt that the SECP has suggested that the valuer of the property would also be held responsible in the event of litigation or an inquiry against the acquirer.
The proposed amendment would also remove the procedural issues between the 'Takeover regulations' and the 'Takeover Law'. Sources said that the proposed amendments in the Takeover Regulations have been finalised by the SECP, which are expected to be placed before the stakeholders in Karachi next month. They said that the Takeover Regulations would be amended by the SECP in consultation with the stakeholders and the SECP would move a summary to the Ministry of Finance for amendments in Takeover Law. The Takeover Law was introduced in the country in 2002, which offered little consideration to the minority shareholders at the time the listed company was acquired by an investor. The amendments were made in the law in 2008 which were too harsh for the investors and as a result the change of hands at the listed companies has not been up to the mark.
The likely amendments include changes in the offer size - the current law binds the acquirer to purchase up to 50 percent of the shares held by the individuals under the public offering. Other amendment related to the offer price and the pricing mechanism to determine the value of share held by the minority shareholders. The share value of underperforming companies is usually very low which gives negligible benefit of buyback to the minority shareholder.
These issues are expected to be discussed thoroughly at the roundtable in Karachi next week, while other key amendment includes easing the procedures to change the Manager to the offer if required by the acquirer so that the transaction can be made more transparent. The SECP has proposed measures to streamline the issue of chain acquisition- that is non-existent in the country.
Chain acquisition is the takeover of a listed company indirectly, which would be a subsidiary of a non-listed company acquired by an investor. Another amendment is fixing responsibilities of a Valuer as under the current laws the valuers are not covered for penalties or held accountable if the value of fixed assets including the infrastructure is determined at a lower than market rate. It has been proposed that a certificate has to be submitted by the acquirer and the valuaer jointly stating that the value of acquired asset are correct as per market norms.