The Unilever Pakistan's decision to delist itself from the stock exchanges in Pakistan has raised alarms among those foreign investors who had invested millions of dollars in the country's capital market. Talking to Business Recorder via telephone, Girish, a representative of Acacia Partners of the New York-based Sequoia Mutual Fund, said the foreign investors are being forced to offload their holdings in Unilever Pakistan at Rs 15000 per share.
"Our firm had invested for a long period in different bluechips in the Pakistani capital market rather than making one time gain of 5 to 10 percent," he said. Expressing his concern over determination of the share price, he said the Securities and Exchange Commission of Pakistan (SECP) should have no powers to decide the price of minority shares rather it should be decided by the buyer and the seller. All over the world, only those companies are allowed to opt delisting who have at least 90 to 95 percent majority shares whereas in Pakistan this ratio is just 75 percent.
It may be noted that in Pakistan only 75 percent of all votes at an AGM are required to pass a delisting resolution. In such a scenario, where the controlling shareholder owns more than 75 percent of the company's shares, minority interests are clearly disadvantaged as their objections carry no weight. Girish stressed the need for improving laws and regulations relating to delisting to bring the Pakistani bourses at par with rest of the world failing which foreign investors would be constrained to look towards India where regulatory affairs are investment friendly.
He further said that forced offloading of shares is neither a good practice nor in the interest of Pakistan. "We exist in Pakistani market for decades and not for a year or two" he maintained. Would Unilever do this to its own shareholders in the Netherlands? he questioned. It is sad to note that Pakistan does not have any platform for dialogue and co-operation on minority shareholder's issues, denying stakeholders a unique opportunity to address some of the key issues that challenge minority shareholders, he mentioned.
This is the reason minority shareholders are not aware of their rights in Pakistan. Only Companies Ordinance 1984 is in place but it does not help the investors. In this view, it requires to do a lot to improve the regulations to safeguard the interest of minority shareholders, he added.
Girish stressed the need for a body to monitor delisting phenomenon in the state as one is present in Malaysia known as Minority Shareholder Watchdog Group (MSWG) or Badan Pengawas Pemegang Saham Minorities Berhad. It was set up in 2000 in Malaysia as a government initiative to be part of a broader capital market framework and help minority shareholders. It is an important channel for market discipline, encouraging good governance among public listed companies with the objective of raising shareholder value over time.
Similarly, in the United Kingdom, there is an organisation called the International Shareholder Services (ISS) which is a leading provider of corporate governance solutions to the global financial community and its services include objective governance research and analysis, end-to-end proxy voting and distribution solutions. In Pakistan, SECP should also develop such regulatory bodies which would attract foreign investors while local minority shareholders will also benefit. If such steps are taken in Pakistan, it would help a lot to build foreign investors' confidence in the Pakistan capital market, he added.