KEY POINTS
- Pakistan’s securities regulator wants to ease stock market access for partnerships
- Businesses converting into companies could use their earlier operating history to qualify for public offering
- The move is aimed at widening the country’s issuer base and deepening capital markets
ISLAMABAD: Pakistan’s corporate regulator has proposed changes to securities rules that would make it easier for partnership-based businesses to raise money from public investors.
Providing private businesses with the opportunity to go public through the stock market is a move aimed at broadening the country’s relatively narrow capital market.
The Securities and Exchange Commission of Pakistan, the country’s top capital markets regulator, said on Wednesday it had proposed amendments to the Public Offering Regulations, 2017.
The amendment would allow businesses that previously operated as Associations of Persons, partnerships or Limited Liability Partnerships to use their historical operating record when seeking a stock market listing after converting into a publicly listed company.
Under Pakistan’s existing framework, a company must show a profitable operating record for at least the previous two financial years before making a public offer of securities.
The proposed changes would allow an eligible business to count financial and operational performance from the period before incorporation, when it was still operating as a partnership-style entity, provided it meets specified conditions.
The proposal is intended to lower entry barriers for established businesses.
The business may have a credible commercial history, but is currently shut out of the public equity market because of its initial structure.
To protect investors, the regulator said the financial statements of such entities would have to meet the accounting and disclosure standards that apply to companies.
Those statements would also need to be audited by an audit firm with an approved quality review rating, a requirement intended to preserve transparency and reporting credibility.
The initiative also reflects a broader push to deepen Pakistan’s financial markets and reduce reliance on bank financing as the main source of business capital.
The draft amendments have been placed on the regulator’s website for public consultation, with the SECP inviting comments from market participants, stakeholders and the wider public before finalising the rules.
