Transfer in the name of president: Reconcile DISCOs’ shares held in Wapda’s name, MoF tells PD

ISLAMABAD: The Ministry of Finance has directed Power Division to reconcile total number of DISCOs’ shares held in the name of Wapda before transfer in the name of President of Pakistan, in addition to ensuring prioritization of accurate valuations, clean and transparent latest financial statements in the next phase, well informed sources told Business Recorder.

The Federal Cabinet is yet to endorse the decision of Economic Coordination Committee (ECC), regarding transfer of shares of three Discos in the name of President of Pakistan and transfer of shares of seven Discos to Wapda.

Sharing the details, sources said, when DISCOs Supplementary Business Transfer Agreements (SBTAs) were signed between Wapda and DISCOs (except HESCO and SEPCO) they were to be followed by the process of transferring the shares in name of the President of Pakistan after approval of the government of Pakistan.

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So far, only IESCO, LESCO and MEPCO have partly completed the process by ‘issuing shares’ to Wapda but the next step of ‘transfer of shares’ in the name of the President of Pakistan was not undertaken, whereas other DISCOs including FESCO and GEPCO have not been able to take any step. Besides being a mandatory requirement of SECP, it is also a condition precedent of privatization that shares of these DISCOs should be transferred in the name of the President of Pakistan.

According to sources, views and comments were solicited on the proposal from Securities and Exchange Commission of Pakistan (SECP), Wapda and Finance Division.

The SECP in its comments advised the Ministry to follow section 74 of the Companies Act, 2017 and filling in form-3 in terms of regulation 41 of the Companies regulation, 2024. They also advised that the transfer of shares must align with the agreements executed between Wapda and DISCOs and suggested also that the shares be in book entry form in terms of section 72 of the Companies Act, 2017. Wapda in its comments proposed changes in the initial draft summary sent to it which has been incorporated. The Finance Division has also endorsed the summary.

The Power Division, in its summary submitted the following proposals: (i) allow WAPDA to transfer shares of IESCO, LESCO and MEPCO in the name of the President of Pakistan, so that Wapda and these DISCOs may update and clear their books; and (ii) allow DISCOS namely GEPCO, FESCO, QESCO, PESCO, TESCO, HESCO and SEPCO to issue shares to Wapda after completion of the process under Supplementary Business Transfer Agreement (SRTA) enabling Wapda and these DISCOS to update and clear their books

The SECP maintains that procedure for transfer of shares must comply with relevant provisions of the Companies Act, 2017. Specifically, Section 74 of the Act outlines the procedural requirements for transferring shares of a company along with Form 3 to be filed with the Commission in term of Regulation 41 of the Companies Regulation 2024.

On review of the Supplementary Business Transfer Agreements with various DISCOs, no specific clause is found mandating the transfer of shares to the President. Therefore, this aspect should be reconsidered. Moreover, transfer of shares must align with the agreements executed between WAPDA (Water and Power Development Authority) and the DISCOs. If there is any proposed change to the arrangement for share transfer, it must be formalized through an addendum or amendment to the agreements. Adherence to contractual terms is emphasized.

The SECP further stated that as per its record, in case of HESCO, SEPCO, GEPCO, FESCO and QEPCO, the President holds 98.4%, 98.7%, 99.60%, 100% and 98.60% respectively. Hence, this fact may be considered accordingly.

“It is imperative to note that companies may consider to have shares in book entry form in terms of section 72 of the Companies Act, 2017,” the sources quoted the SECP as suggesting in its comments.

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