In a major policy shift to encourage listing of companies, the Securities & Exchange Commission of Pakistan (SECP) Policy Board has directed the SECP to allow loss-making companies to get enlisted with the stock exchange.
Chairman Securities and Exchange Policy Board Prof Khalid Mirza told Business Recorder here on Saturday that the SECP does not encourage listing of loss-making companies at the stock exchange. This is a wrong policy which is discouraging listing of companies. Whether a company is making profit or loss, it should make complete and accurate disclosure. Disclosure-based listing should be allowed even if a company is making loss, he said.
For listing of companies, "there should be disclosure-based regulations and not market-based regulations," Khalid Mirza said.
"We should not discourage loss-making companies from getting enlisting with the stock exchange," he maintained.
Mirza explained that there are many companies which take 10-15 years before making progress like dot.com companies. If a company is making loss but making complete disclosure, it must be encouraged listing, he said.
This change in policy would encourage listing of companies and the Securities & Exchange Commission of Pakistan (SECP) Policy Board has issued policy directive to the SECP in this regard. The current anomalous situation whereby pre-IPO holdings of shares are not deemed to be "securities" with adverse tax implications and non-acceptability as collateral would be a significant negative for new listings on the stock market. This needs to be rectified in the upcoming Finance Act 2019.