Cos facing winding-up proceedings: SECP bars AMCs from making investment

ISLAMABAD: The Securities and Exchange Commission Pakistan (SECP) has barred the Asset Management Companies (AMCs) from making investment in any company against which winding-up proceedings have been initiated. In this connection, the SECP has issued a circular number 28 of 2021.

The Circular 13 of 2017 dated April 28, 2017 has been repealed. The SECP has issued new criteria to be followed by the AMCs, while making investment in listed equity securities.

According to the circular number 28 of 2021 issued here on Saturday by the SECP, an AMC shall ensure that the Investment of the Collective Investment Schemes (CIS) in equity securities of the following companies shall not exceed 10 percent of their overall equity portfolio of CIS on monthly average basis: (i) Company is not traded on regular trading counter of the Pakistan Stock Exchange; (ii) the minimum free float of the company is less than 15 percent of total outstanding shares. Provided that this clause shall not be applicable on equity securities, which are part of KSE-30 index or KMI 30 Index at the time of investment.

However, in case an equity security is subsequently excluded from KSE-30 index or KMI-30 index, the AMC shall rebalance its portfolio and ensure compliance within six months of such index recomposition.

(iii) The securities of the company are traded less than 50 percent of the total nailing days during the last six months or from the date of listing as the use may be; and (iv) Company's paid up capital is fully eroded owing to accumulated losses as per the annual audited accounts of half yearly limited sloped reviewed accounts, whichever Is latest.

The AMCs shall not invest in any company against which winding-up proceedings have been initiated and/or a qualified opinion on the going concern assumption has been issued by its statutory auditor.

For the purpose of this circular, following events shall be considered as winding-up events: (I). A show cause notice for winding up has been issued to the company by the Commission. (II) Winding-up petition is filed by creditors with a claim equivalent to at least 10 percent of the equity of the company as per latest accounts. (iii) winding-up petition is filed by the shareholders who own at least 10% of the company's paid-up capital. (iv) Voluntary winding-up proceedings have commenced through passing of special resolution.

This criterion is applicable on all Collective Investment Schemes (CIS), which are authorised to invest in equity securities as per their constitutive documents with immediate effect AMCs shall rebalance their CIS investments in equity securities to ensure compliance with this criterion within 90 days of the issuance of this circular, the SECP maintained.

Copyright Business Recorder, 2021