Karachi bourse set to introduce new regulations

By Kazim Alam, The Express Tribune

KARACHI: The Karachi Stock Exchange (KSE) is all set to introduce new regulations regarding voluntary delisting of companies from the exchange, which will ensure that minority shareholders have a greater say in the case of a share buyback.

The decision to review the voluntary delisting regulations comes after global consumer goods company Unilever recently opted to delist its Pakistan subsidiary from the KSE through a security buyback at the rate of Rs15,000 per share.

“Even before Unilever Pakistan expressed its intention to delist itself, we had already set up a technical committee to review listing regulations,” KSE Managing Director Nadeem Naqvi told The Express Tribune in a recent interview.

Under the current voluntary delisting regulations, the delisting company is required to call a general meeting of its shareholders and pass a special resolution approved by not less than three-fourth, or 75%, of its stakeholders, resolving that the company’s shares be delisted from the bourse.

According to Naqvi, proposed regulations stipulate that sponsors of up to 90% stakes – as opposed to the earlier requirement of 75% – must be in favour of delisting from the exchange. Moreover, a delisting bid will fall apart under the new rules even if one-third of the minority stakeholders express their dissent. It should be noted that under the existing regulations, minority shareholders with up to a 25% stake in a company have no power to derail a voluntary delisting effort by the sponsors of 75% stakes.

The KSE management appears to have hastened its efforts to frame the new voluntary delisting regulations in the wake of a strong opposition that minority shareholders of Unilever Pakistan showed while the company was being delisted.

In an email to The Express Tribune on April 2, Girish Bhakoo of New York-based hedge fund Acacia Partners had expressed serious concerns over delisting rules under which minority shareholders have effectively no power to confront majority shareholders should the latter decide unilaterally to delist their company.

“I think if the delisting rules are not changed, then we would not want to invest as much in Pakistan. We are hopeful, though, that regulators will see the light and evolve the rules to protect minority shareholders’ property rights,” Bhakoo stated, adding that Pakistani stock market will be better off eventually if the rules are fixed in time.

Naqvi says the proposal about the new regulations has already been approved by the regulatory affairs committee, which is the main body that determine KSE’s policies in the post-demutualisation setting. “Now the proposal is going to go to the board of directors of the exchange. After that, it will go to the Securities and Exchange Commission of Pakistan for final approval,” Naqvi said.

In the most recent meeting of the KSE board held last week, the board did not take up this issue due to shortage of time, Naqvi said. However, he added that the final decision is likely in the upcoming meeting.

Published in The Express Tribune, May 7, 2013.

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