The Securities and Exchange Commission of Pakistan (SECP) has officially announced a series of amendments to the Companies (Further Issue of Shares) Regulations, 2020. These changes are designed to strengthen the regulatory framework for listed companies when they issue shares with different rights and privileges.
Core Amendments to Protect Minority Shareholders
The primary objective of these regulatory changes is to protect the interests of minority shareholders and promote stronger corporate governance, transparency, and fair price discovery in the market. The key amendments introduced by the SECP include several crucial provisions.
Ordinary shares with voting rights must now receive the same percentage or ratio of dividend per share. This ensures equitable economic benefits for all voting shareholders.
A fundamental change is the enforcement of the 'one share, one vote' principle. The total voting power of all ordinary shares cannot be less than 75% of the total voting power of all shares issued by a company.
To prevent excessive control, the amendments state that shares with varied voting rights can carry a maximum of only 5 voting rights per share. Furthermore, all ordinary shares with varied rights must be issued as listed securities, ensuring they are traded on the open market.
Goals and Stakeholder Consultation Process
The SECP outlined that these amendments aim to align economic benefits with voting power, preserve the fundamental value of ordinary shares, minimize conflicts of interest, and prevent the undue concentration of control within companies. The overall goal is to foster equitable and transparent governance.
These finalized rules are the result of an extensive consultation process. The SECP engaged with key stakeholders including the Pakistan Stock Exchange (PSX), Central Depository Company (CDC), National Clearing Company of Pakistan Limited (NCCPL), listed companies, consultants, professional associations, and law firms.
The commission carefully reviewed and analyzed all feedback received to identify key insights, which directly informed the final version of the amended regulations.
SECP Engages Intermediaries on New Framework
In a related development focused on market participants, the SECP recently held a consultative session with Registered Intermediaries (RIs) in Karachi. The session sought feedback on a proposed new Framework for Registered Intermediaries.
The proposed framework introduces mandatory training requirements to enhance compliance standards and build the procedural capacity of RIs. Concurrently, it suggests removing periodic renewal requirements, replacing them with a structured system of continuous learning and evaluation.
These measures are intended to improve the overall effectiveness of intermediaries, promote higher service delivery standards, and strengthen corporate compliance across the board.
During the session, participants were also informed about expanded access to the SECP's Financial Institutions Portal. This portal allows for instant and cost-effective digital verification of company profiles and key corporate records, supporting the SECP's broader digitalization and ease-of-doing-business agenda.
The SECP has reaffirmed its commitment to ongoing stakeholder engagement and implementing regulatory reforms that support a robust, transparent, and well-governed corporate and financial sector in Pakistan.
