SECP won't allow firms' takeover if law violated

ISLAMABAD (September 03 2007): The Securities and Exchange Commission (SECP) will not allow takeover of companies in violation of proposed takeover draft law, which has been sent to different stakeholders for their comments. “No person shall make or pursue a takeover offer except under and in accordance with the regulations made by the Commission,” said the draft takeover law, a copy of which was made available.

The Commission would also be able to investigate the conduct of security brokers, security advisors, officers of the acquirer and the target company and all other parties concerned to the offer.

It said, all the shares, or all the shares of any class or classes, in a listed company (“the target company”) other than shares which at the date of the offer are already held by the acquirer or his nominees, being an offer on terms which are the same in relation to all the shares to which the offer relates or, where those shares include shares of different classes, in relation to all the shares of each class; or such shares in the target company which results in the acquirer acquiring effective control of the target company.

For the purposes of subsection (1), “acquiring effective control” means the acquiring of shares in a target company which (together with shares, if any, already held by the acquirer or by any other company that is deemed by virtue of section 110 to be related to the acquirer) carry the right to exercise, or control the exercise of, not less than 25% of the rights attached to the voting shares of the target company.

When companies deemed to be related where a company is the holding company of another company; subsidiary of another company; or a subsidiary of the holding company of another company that first-mentioned company and that other company shall for the purposes of this part be deemed to be related to each other.

The draft further suggested that the Commission shall make regulations with respect to the making and conduct of takeover offers and matters incidental and connected therewith.

Without prejudice to the generality of subsection (1), the Commission may make regulations for or with respect to the form, manner, timing and submission of offers; announcements; independent advice to shareholders; the obligations of directors; the standard of care and responsibility; the timing and content of documents; the offer timetable; asset valuations and offer pricing; restrictions on trading before and during the offer; security to ensure completion of a takeover offer; mandatory offers, offer size and acquisition; squeeze outs; competitive bids; conditional offers; investigation of the conduct of securities brokers, securities advisers, officers of the acquirer and the target company and all other parties to the offer and directions by the Commission to any of the parties to the offer where the Commission considers it appropriate in the interests of fairness or equality of treatment.

The Commission would exempt from any of the requirements of this Act, or of any regulation made by the Commission under this Act, where the Commission considers it appropriate in the circumstances of a particular case;” creation of offences and imposition of penalties and any other matter that the Commission considers necessary to ensure the proper conduct of take-overs,” the draft further suggested.

The provisions of this part applies to financial instruments traded by listed companies and publicly tradable companies, and insiders described in Section 115.

Regarding removal of difficulties, the Commission proposed that if any difficulty arises in giving effect to any of the provisions of this Act, the federal government may make such orders as may be necessary for the purpose of removing the difficulty.

For settlement of civil liabilities the Commission may, reach a settlement agreement with any person, subject to an investigation, on the payment of such settlement amount and such terms and conditions as may be acceptable to the Commission.

With the application of revised provisions the Securities and Exchange Ordinance, 1969 and Listed Companies (Substantial Acquisition of Voting Shares and Take-overs) Ordinance, 2002 would be repealed. 166. Savings and transitional provisions.

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