The committee to review the Corporate Rehabilitation Act (CRA) has rejected the proposal to initially introduce the concept of the Resolution Trust Corporation (RTC) before enforcement of the proposed CRA-2009.
The decision has been taken in the meeting of the committee to review the CRA here on Tuesday under the chairmanship of acting Chairman of Securities and Exchange Commission of Pakistan (SECP) Salman Ali Shaikh.
The committee was constituted by the Ministry of Finance to review and finalise the draft Corporate Rehabilitation Act. The meeting discussed the issue to introduce RTC now and CRA at a later stage. The Resolution Trust Corporation, an entity to be formed preferably in the government sector, to intervene and act as Corporate Restructuring Company (CRC).
The objectives of the RTC are to facilitate the process and intervene in funding problems. This option was rejected by the committee members. After detailed deliberations, it was decided that draft Corporate Rehabilitation Act could be implemented at a much faster pace, since the law had already been drafted and had been with the government for the last five years. The legal representatives on the committee were of the view that the law on CRA, after necessary amendments, likely to be ready in 8-12 weeks.
However, the meeting decided to introduce the RTC as a chapter in the CRA. This option was accepted by the committee members after detailed discussion. It was decided that a separate chapter would be added to the draft CRA to cover all aspects relating to RTC, with a definite sunset clause of 2-3 years instead of acting as a "perpetual body."
It was also decided during the meeting that the acting Chairman of the SECP, along with representatives of Ministry of Finance, would make a presentation to the Advisor to the Prime Minister on Finance on the above matter. The IFCs expert on global distressed assets will be visiting Pakistan shortly and will be meeting the acting Chairman of SECP as well as the Governor of State Bank of Pakistan (SBP).
Apart from the committee members, the meeting was also attended by a leading Karachi-based chartered accountant, Syed Muhammad Shabbar Zaidi, senior partner of A. F. Ferguson & Co; Tariq Sayeed Saigol from Kohinoor Maple Leaf Group, representing cement sector; Maqsood Basra from Atlas Honda Limited, representing automobile sector; Tariq Nazeer from Fabman Engineering (Pvt) Ltd, representing Paapam; Farhan Fasihuddin from IFC and Arif Saeed, Chairman of Lahore Stock Exchange.
During the meeting, presentations were made by the sector specialists, covering cement sector and automobile sector. A detailed presentation was also made by Shabbar Zaidi, covering the role of Resolution Trust Corporation (RTC), an entity for assets and businesses in distress.
Meanwhile, sources said that the meeting also discussed the financial restructuring and rehabilitation plan of companies going through restructuring under the proposed CRA. The financial restructuring plan and its implementation under the proposed CRA came under discussion.
It was further discussed that there is a need for corporate law mechanism for restructuring of companies in financial difficulties without going through winding up procedures. This new law enables implementation of any "Restructuring plan" for a company, including whole or part of the disposal of assets or properties binding on all the relevant parties viz debtor company; creditors, including banks etc; and shareholders/employees.
From economic aspect, this may assist in undergoing a "restructuring plan" of a company in financial difficulties without disturbing the business and operations. From the lenders viewpoint, the new law provides an opportunity to realise the debts in commercially viable manner without going into the recovery proceeding in the ordinary course of law. This law will also facilitate the transfer of assets to the proposed Corporate Restructuring Company, sources added.