The Securities and Exchange Commission of Pakistan (SECP), to ensure protection of investors, provide enhanced transparency, and to facilitate companies, has framed the Draft Companies (Distribution of Specie Dividend) Regulations, 2013 (the "draft Regulations").
Draft Regulations have been published in the official Gazette of Pakistan and are also available on the official discussion forum of the SECP. Public comments can be submitted online on http://forum.secp.gov.pk/forum.php, latest by May 23. Specie dividend is a form of dividend where shares of another company whether listed or unlisted, which are held as investment by the issuing company, are distributed among the entitled shareholders of the issuing company. Distribution of shares of another company as dividend is an acceptable practice in the market which is considered beneficial to both the issuing company and its shareholders.
These draft Regulations have been developed after detailed study of practices in various international jurisdictions. They broadly cover the eligibility conditions for declaration of specie dividend, the requirement to provide an independent valuation report for the securities to be distributed in case the company is unlisted, conditions for distribution of specie dividend, and the requirement to provide a detailed information memorandum to shareholders for the securities to be distributed.
In order to ensure maximum investor protection and transparency, it has been made a requirement that a company's Articles of Association should explicitly permit the distribution of specie dividend and the company obtains the shareholders' approval before any such distribution. Further, any company may distribute specie dividend only once in two years. Where securities of an unlisted company are distributed as specie dividend, listing of such securities shall be mandatory within a period of 90 days from the date of declaration, and for such purpose a 'No objection certificate' shall be obtained from the relevant stock exchange(s) prior to declaration. In case such securities cannot be listed, the issuing company shall encash these securities at the option of the shareholders.-PR