17.

Rule Book of PSX and Issue of Share Capital Page 359

Rule Book of Pakistan Stock Exchange – Chapter 5

Listing of Companies & Securities

 No dealing in the securities of Co shall be allowed on the SE either on ready quotations

board or future counter unless the Co and the securities have been listed and permission
for such dealing has been granted in accordance with listing regulations.
 The Board/Listing Committee shall review and approve the prospectus & listing
application within 45 days of application or filing of additional information.
 Decision of Board/Listing Committee is subject to two-third majority of the members
present at such meeting of the committee or the Board.
 Decision shall be made after examining the proposed issue including eligibility
requirements and suitability of the issuer or the security for listing considering the interest
of the general public and its benefits to the capital market.

Suitability includes assessing various risks involved such as sector risk, operational risk, legal risk, etc.,
track record of the sponsors, quality and capability of the management, past financial performance of
the issuer, future strategies of the issuer, dividend pay-out history of the group’s listed companies, if any,
financial projections, financial viability, dividend policy, etc. among other things, sufficiency of public
interest in the company or the securities.

 The exchange may ask for any additional information from the issuer and the Consultant to
the Issue including financial projections, future strategies of the issuer, experts report, etc.
 In case of refusal by the listing committee, the applicant company may file and appeal
before the board.
 In case of refusal, refusal and reason thereof will be communicated to applicant and SECP
within two weeks of the decision.
 Decision of refusal shall be made after providing opportunity of making a representation.

Listing Committee”, committee comprising of at least seven members including at least three
external members for review and approval of the prospectus and the listing application;

 Quorum of Listing Committee will be four members comprising at least two external
members.
 The Exchange shall maintain a panel of the external experts representing each sector of the
economy. At least two experts shall be retained on the panel from each sector.
 The Exchange, before appointing any external expert on the Listing Committee for a
specific issue, shall obtain declaration on conflict of interest from such expert.
17. Rule Book of PSX and Issue of Share Capital Page 360

Listing application of following companies shall not be entertained:

 Whose promoters/sponsors/controlling directors are also promoters/ sponsors/

controlling directors in other Listed Companies, which are in the Defaulters Segment.
 A wholly owned subsidiary or associated company of a Listed Company appearing in the
Defaulters’ Segment.
 If any overdue/past due payment, of any amount, is appearing in overdue column of latest
CIB report of
- Company,
- Its CE, directors, sponsors/promoters, substantial shareholders, associated & group
companies and undertakings and
- the companies, firms, sole proprietorships, etc. where the CE, directors, sponsors/
promoters and substantial shareholders are interested as CE, director (other than
nominee director), owner or partner, etc.
however, this condition shall not apply where:
- Amount overdue is under litigation and the same is also appearing as amount under
litigation in CIB report, or
- No overdue payment appears in overdue column in a subsequent latest CIB Report.

These conditions shall not apply to nominee directors of Government and Financial Institutions.

Other Conditions

 The loan amounting to Rs.500,000 or more written-off by a financial institution during last
five years be shall disclosed in the prospectus.
 No person shall be allowed to act as sponsor/ director, if such person has remained
sponsor/ director of a company which was non-compliant and delisted.
 The company shall submit a list of its promoters/sponsors/controlling directors containing
details of their existing as well as past directorships.

Listing Process

 Application for listing shall be made on Form-I with prescribed documents (Appendix-I)
 Copy of the complete application shall also be submitted to SECP.
 Exchange has an option to visit the applicant’s head office, factory, plant, and/or premises.
 Exchange shall place draft prospectus on its website for a period of 7 working days and
shall notify same, for seeking public comments. Exchange shall ensure that all comments
received on draft prospectus are incorporated and suitably addressed to its satisfaction.
 Exchange shall submit application to Listing Committee for its consideration and approval.
 If Additional information is not submitted, the Exchange may defer or decline to consider
and application will stand disposed-off as refused. However, Applicant may move a fresh
application after six months from date of refusal unless Exchange otherwise decides.
 Applicant shall furnish full & authentic information.
17. Rule Book of PSX and Issue of Share Capital Page 361

Undertaking

The company or authorized representative shall undertake that:

 Securities shall be quoted at the discretion of SE
 SE shall have right to suspend or remove any security without notice. Furthermore Co
cannot bind SE to remove its securities.
 provision of listing regulations shall supersede AOA that are not in conformity.
 None of the directors, sponsors and substantial shareholders of the applicant company has
been the sponsor or substantial shareholder in any company, which:
- is in the Defaulters’ Segment; or
- was delisted by the Exchange due to its non-compliance; or
- whose TRE Certificate has been cancelled or forfeited
 None of the Sponsors, substantial shareholders, directors or management, as well as the
company itself or its associated company/entity have been found guilty of being engaged in
any fraudulent activity.
 The company has made full disclosure regarding any/or all cases in relation to involvement
of the person named above in any alleged fraudulent activity which is pending before any
court of law, regulatory body, investigation agency in or outside of the country;
 SE can delist Co/security on non compliance.

Offer of Capital by Companies / Modarabas to the Public

For Companies already listed

At least 100 million (excluding premium and pre IPO placements)

For Companies Proposed to be listed

Post issue Capital upto 500 Million: At least 25% of post issue Capital
Post issue Capital is more than 500 Million: Higher of
- 12.5% of post issue Capital (N-1)
- 125,000,000

Note (N-1):
Company will be required to subsequently enhance quantum of public shareholding to 25%
within next 4 years through:
 Issuance of shares to public through prospectus; or
 Offer for sale of shares held by the promoters to public through prospectus; or
 Sale of shares held by the promoters through the secondary market; or
 Sale of shares to employees under the Employees Stock Option Schemes; or
 Any other method as may be allowed by the Exchange with the approval of SECP.
17. Rule Book of PSX and Issue of Share Capital Page 362

In case of Modaraba applying for listing

 30% of the capital of the Modaraba shall be subscribed by Modaraba Co, sponsors, friends,
relatives and associates.
 Balance 70% shall be offer to the public as per Modaraba Rules.

General rules

 Allocation of Capital to overseas Pakistanis Shall not exceed 20% of Public Offer
(Rule may be relaxed in case of under subscription in the quota for resident Pakistanis)
 The amount should be subscribed through proper banking channel.
 In case of under subscription in either of the categories i.e., the quota allocated to resident
or non-resident Pakistanis, the unsubscribed portion will be allocated to the applicants of
other category.
 Allocation of Capital to employees Shall not exceed 5% of Public Offer
 In case where the shares are issued/offered through Book Building, it shall comply with the
requirements of the Public Offering Regulations 2016.
 The shares shall be allotted or allocated to any persons including sponsors or employees in
the manner and with such terms and conditions as prescribed under the Public Offering
Regulations, 2016.

Prospectus, Allotment, Issue and Transfer of Shares

 No Co will be listed unless it is public Co and has a minimum capital of Rs. 200 Million.
 Co registered in AJK or in the Northern areas of Pakistan shall be eligible for listing and will
be treated at par with the Co registered in Pakistan.
 No Co shall be listed unless the public issue has been subscribed by not less than 500
applicants.
 Co may make public offer of security to be the eligible security in CDS.
 The application for shares shall be accepted only through Bankers to the Issue named as
such in the prospectus.
 The directors shall not participate in the public subscription.
 Prospectus or offer for sale shall be submitted to and cleared by the Exchange before an
application for its approval is made to SECP.
 Exchange may require additional information, data, certification or requirement to be
included in the prospectus or the offer for sale.
 The prospectus shall conform to and be in accordance with the Securities Act, 2015 and
any other law
 Company shall, where required, submit, progress report on implementation of the project,
with breakup of the proceeds utilized, on quarterly basis till commencement of commercial
production or operation of the project, to the securities exchange for public dissemination.
 The application money shall be refunded, within 15 days, if the company is not listed at the
Exchange or the listing is refused.
17. Rule Book of PSX and Issue of Share Capital Page 363

 If application for listing is refused by Exchange, Company shall forthwith pay without
surcharge all moneys received from applicants
 In case of delay any such director shall be liable to repay that money with surcharge
@1.5% for every month or part thereof from the expiration of the 15th day.
 Co shall inform the SE about the subscription receipt within 3 working days of the closing
of the subscription list.
 The Co shall take decision about the acceptance of applications within 10 days of the
closure of the subscription list.
- The Co shall refund application money to the unsuccessful applicants within 10 days
of above decision. [ from 15th day onwards charges @ 1.5% per month.]
- In case of over subscription the Co shall immediately file ballot register of successful
applicants with the SE.
- The Co shall dispatch share certificates to successful applicants in marketable lot
within 10 days of closing of subscription lists under intimation to Exchange
- If security is eligible security the CDC procedure will be followed.
 Co shall consolidate / split, as may be required by security holder in writing, certificates
into marketable lots within 7 days of application.
 Co shall verify signature of the share holder within 48 hours of the receipt of application.
 Company shall complete shares transfer and have ready for delivery the share certificates
lodged for registration of transfer within 45 days of such application
 No listed Company shall exercise any lien on fully paid shares/securities and nor shall
there be any restriction on transfer of fully paid shares/securities.
 Prospectus / offer for sale with performa application shall be published at least in 1 English
and Urdu newspaper of Karachi, Lahore & Islamabad between 7 & 30 days of opening of
subscription lists.
 Company or Offeror shall, within 30 days of closing of subscription list, pay brokerage to
TRE Certificate Holders at not more 1% of value of shares actually sold through them.
 The Co shall give minimum of 14 days notice to the SE prior to the closure of share transfer
book for any purpose.
- Co shall issue transfer receipts immediately after receiving shares for transfer
- Co shall not charge any transfer fee.
- Duration for one time closure [7 days but not exceeding 15 days]
- Duration for total closure closures in year [Not exceeding 45 days]

Disclosures to be made in all the prospectuses/offer for sale

 Audited accounts to be incorporated in the Prospectus / Offer for sale document which
shall not be older than 6 months from the date of publication of the same.
 Break-up value of shares as per latest audited account supported by auditors certificate.
 In the financial plan, amount of interest/mark-up/financial charges during pre-production
period shall be shown separately.
 Brief write-up of each director and CEO with academic qualification & relevant experience.
 Detail of project, if any, like status of civil work, break up of plant and machinery, its cost,
made, supplier, status i.e. new or used, ordered, shipped, reached at site, installed, etc.
17. Rule Book of PSX and Issue of Share Capital Page 364

Dividend & Entitlement

 Co shall inform SE regarding decision of directors relating to announcement of dividend,

bonus issue, right issue, and other entitlement atleast 14 days before the book closure.
 Interim dividend warrant shall be dispatch within 30 days from the date of commencement
of book closure.
 Final dividend warrants shall be dispatch to the shareholder within 30 days from the date
of AGM at which it has approved.
- Dividend warrants are dispatched through registered post.
 The Co shall inform the SE as soon as dividend warrants are posted to the share holders.
 All dividend warrants, in addition to the registered office of the Co shall be encashable at
Karachi, Lahore, Hyderabad, Sakkhar, Quetta, Multan, Faisalabad, Islamabad, Rawalpindi
and Peshawar for the period of 3 months from the date of issue.
 Every Co shall send to the SE such number of copies as may be prescribed of annual report
and interim report as soon as these are send to the share holders.
 Company shall send to Exchange copies of all notices as well as resolutions prior to their
publication and dispatch to shareholders and also file certified copies such resolutions

Annual General Meeting

 Co shall hold its AGM within 4 months of close of its financial year.
 The Modaraba shall hold its ARM (Annual Review Meeting) within 4 months of close of its
financial year.
 The period holding of AGM may be extended with SE approval.
(SECP shall give permission within 48 hours of receipt of application)
- SE shall give that approval on production of similar approval from SECP.
- Fee : 1st 15 days = Rs 250 per day Next 15 days = Rs 500 per day
- Failure to seek extension from Exchange; Liable to penalty at 2 times the above rates
 The Co shall obtain prior approval from the SE in respect of time and date of AGM.
 Co shall furnish copies of minutes of AGM and every EOGM to the SE within 60 days of the
meetings.
 Co shall furnish a complete list of its shareholders as at 31st December each year, within 30
days.
 Intimate “Free Float” securities as on March 31st, June 30th, Sep 30th and Dec 31st.
(Within 15 days of close of each quarter).
 Ensure that requisite input into the CDC free-float functionality is entered in a timely
manner. A company and its issuer who fails to communicate correct details of Free-Float
shall be liable to a penalty of Rs. 5,000/- per day from date of first communication of such
details till correct details are communicated.
 Submit directly to the Exchange along with the annual audited accounts, an annual Free-
Float certificate duly verified by the auditor, in the specified format.
The CDC shall notify to the Exchange late/non-submission of quarterly Free-Float information by
any listed company
17. Rule Book of PSX and Issue of Share Capital Page 365

Disclosure of material information to the Exchange

 Whenever listed Company becomes aware or is made aware of any rumor or report
containing material information that is likely to affect market price of its listed Securities or
trading volume, including that of being broadcasted/presented through electronic media,
Company should clarify/confirm/deny rumor or false information and set forth the facts
sufficient to clarify the same in writing to Exchange, within 1 day of such publication etc
 Where Exchange enquires from Issuer concerning unusual movements in price or trading
volume etc, Issuer shall respond promptly by giving sufficient information
 Where any director, CEO or executive or their spouses sell, buy or take any beneficial
position in shares of the listed company
- He/She shall immediately notify in writing to Secretary.
- Also deliver a written record of price, no of shares, form of share certificates (physical
or in CDS), and nature of transaction to the Secretary within 2 days of effecting the
transaction.
- Secretary shall immediately forward same to SE.
 Where Exchange receives any information from an acquirer under section 110 of the
Securities Act 2015 (i.e. acquisition of 10% shares of listed company) , it shall immediately
disseminate the same to all concerned

Listing of Subsidiary Co

 A listed Co distributing shares of its unlisted subsidiary Co in the form of dividend, right
issue etc (in kind) shall get such Co listed on the SE within 120 days of approval of such
distribution in general meeting of holding company.
 Co shall immediately notify to the SE regarding any change in the BOD.
 Listed Co shall obtain prior approval of the SE for any amendment in the Memorandum and
Articles of Association.
 Intimate SE regarding issue of Participation Term Certificate
 In case of failure of such subsidiary company to apply for listing or refusal by the Exchange
for such listing on account of insufficient public interest, or for any other reason, the
company distributing specie dividend shall encash the shares of the subsidiary company at
the option of the recipients at a price not less than the current break-up value, or face
value, whichever is higher, within 30 days from the expiry of 120 days or from the date of
refusal of listing whichever is earlier, failure in which behalf shall be default in which event
the trading in the shares of the listed company be suspended by the Board or the company
de-listed.
 Every listed company and issuer of listed security shall notify to Exchange at least 1 week
in advance the date, time and place of its board meeting specially called for consideration
of its quarterly and annual accounts or for declaration of any entitlement
17. Rule Book of PSX and Issue of Share Capital Page 366

Increase in capital

 Every listed Co shall advice the SE regarding all decisions taken by the BOD for changes in
capital through issuance of right & bonus shares immediately.
 Co shall issue right letters in marketable lots within 30 days from the date of reopening of
share transfer register.
 Co shall issue bonus shares within 30 days of date of reopening of share transfer register

Quality of Audits
 All listed companies shall facilitate QCR of the audit working papers of practicing CAs,
carried out by ICAP and shall authorize their auditors to make available the details to the
QCR Committee of ICAP.
 Listed company shall not appoint or retain any auditor, who has been found guilty of
professional misconduct, by SECP or by a Court of Law, for a period of 5 years unless lesser
period is determined by SECP
 If any partner(s) of a firm has been held guilty of professional misconduct, firm shall only
be appointed if a written confirmation is given to all stock exchanges, SECP and ICAP that
such partner shall not be engaged in audit of any listed company for the specified period.
An auditor shall be guilty of “professional misconduct” if he:-
 Fails to report a material misstatement or fact known to him and non-disclosure of which may
render financial statements misleading or disclosure of which is necessary in professional capacity;
 Fails to obtain sufficient information to warrant the expression of an opinion or his exceptions are
sufficiently material to negate expression of an opinion;
 Makes a statement which is misleading, or deceptive;
 incites any one to commit a criminal offence, or helps or encourages anyone in planning or
execution of a criminal offence which is committed;
 agrees with anyone to prevent or obstruct the course of justice by concealing, destroying or
fabricating evidence by a misleading statement which he knows to be untrue;
 deceives any person, either by making a statement, which he knows to be false, or by suppressing
matters relevant to a proper appreciation of its significance;
 expresses his opinion on financial statements of any business or enterprise in which he, his firm or a
partner in his firm has substantial interest.
 is penalized under any of the provisions of the Companies Act 2017 in relation to his function as an
auditor of a listed company; and
 is guilty of any other act which is determined as professional misconduct by the Commission in
relation to his function as an auditor of a listed company.

 No Listed company shall, appoint or retain any person as auditor who is engaged by the
company to provide prohibited services.
 Listed company shall also not appoint or retain any auditor, if a person associated with the
auditor (partner, colleague director or holder of 20% shares in a company etc) has been, at
any time during preceding 1 year engaged as a consultant or advisor or to provide any
prohibited services
17. Rule Book of PSX and Issue of Share Capital Page 367

Prohibited Services
1. Preparing financial statements, accounting records and accounting services;
2. Financial information system design & implementation, significant to overall financial statements;
3. Appraisal or valuation services for material items of financial statements;
4. Acting as Appointed Actuary within meaning of the term defined by the Insurance Ordinance, 2000;
5. Actuarial advice and reviews in respect of provisioning and loss assessments for an insurance entity;
6. Internal audit services related to internal accounting controls, financial systems /statements;
7. Human resource services relating to:-
 Executive recruitment;
 Work performed (including secondments) where management decision will be made on
behalf of a listed audit client;
8. Legal Services;
9. Management functions or decisions;
10. Corporate finance services, advice or assistance which may involve independence threats such as
promoting, dealing in or underwriting of shares of audit clients.
11. Any exercise or assignment for estimation of financial effect of a transaction or event where an
auditor provides litigation support services.
12. Share Registration Services (Transfer Agents) and;
13. Any other service(s) which the Council with the prior approval of the SECP, may determine to be a
“prohibited service”.

SECP may, in its sole discretion and to the extent deemed fit exempt one or more services from
the restriction aforesaid. ICAP also may, with the prior written approval of the Commission,
and to the extent deemed fit and proper, exempt one or more services from this restriction.

POWER TO OBTAIN DOCUMENTS:

The Exchange may, by issuing a notice in writing, require a Listed Company/management

company, trustee, or its directors, officers, employees or advisers to produce any
documents/information (whether in documentary or electronic form) for investigating into a
matter of possible breach of any relevant provision of PSX Regulations.
17. Rule Book of PSX and Issue of Share Capital Page 368

De-listing, Suspension and defaulter counter

Listed company may be placed in Defaulters’ Segment, suspended and/ or de-listed for
following reasons and in manner provided below:
Placed on
Enter into
Nature of Default Defaulter Delist on
Suspension
Segment
 Co has not started operations within 90 days from
date of commence of operations as disclosed in
prospectus.
 Co has suspended commercial production/ If the co failed to
business operations for a continuous period of On the date rectify the If Co still not
one year; of offense. problem. SE rectify the
 Co has failed to pay; shall suspend problem.
o Annual listing fees for a period of 2 years; or Co shall be immediately.
o Penalty imposed under these Regulations; or given 90 SE shall
o Any other dues payable to SE days to Co shall be given issue order
 Failed to comply with requirements of these rectify the another 90 days of
Regulations. problem. to rectify the compulsory
Consequences; problem. buy-back to
 Transaction of any shares held by co or its be made
directors etc. will be freeze. Within 90
 Co shall be required to give public notice days.
If for one financial year; If the failure or
 Co has failed to hold AGM, qualified opinion
 Statutory auditor has given qualified opinion on continues for Within 90
going concern assumption. or another year. SE days of
On the date completion
 Co has failed to submit Annual Audited accounts. shall suspended
of offense. of buy back
co. immediately.
Consequences; or expiry of
Co shall rectify
 Transaction of any shares held by co or its time after
the problem
directors etc. will be freeze. providing
within 90 days.
 Co. has failed to join CDS after its security has Immediately on opportunity
On date of of being
been declared eligible security. the date of
such heard
 CDS eligibility has been suspended or revoked. placement on
failure
 License of the listed co (regulated securities defaulter seg..
suspension
activities) has been cancelled or revoked. Co shall rectify
or
the problem
revocation
within 90 days.
Listed Co enters in winding-up commenced by; On date SE After 15 days of Date of
 SECP; A show cause notice for winding up has receive placement on appointment
been issued info of defaulter of official
 Creditors having claim equal to at least 10% of winding up segment. liquidator
equity. proceeding after
 Shareholders having at least 10 % of shares. providing
Members voluntary winding-up proceedings have Immediately opportunity
commenced. of being
heard.
17. Rule Book of PSX and Issue of Share Capital Page 369

Effects of suspension of trading in the shares of a company suspended

 Transfer in physical shares of such company shall be restricted except Share Registrar/
Transfer Agent/ company has received transfer request from a shareholder prior to
suspension; or shares have been purchased prior to suspension and shareholder provides
proper instrument of transfer
 It shall be mandatory upon Co to ensure that no transfers in physical shares take place
during the period of suspension.
 Co shall provide SE a copy of its Share Transfer Register, as of the day prior to the day of
suspension and details of allowed transfers within 48 hours of transfers
 In case of a Co has more than one ground for placement on Defaulters’ Segment, SE shall
follow the ground that leads to earlier suspension or delisting.
 Delisted co shall not be restored until it removes the causes of de-listing and receives the
assent of the Board for the restoration.
 The co shall be delisted after providing an opportunity of being heard.

Voluntary De-Listing

 A Co intending to seek voluntary de-listing shall after special resolution in general meeting
intimate to the SE immediately regarding
- Intention of the majority shareholders/sponsors to purchase all the shares from other
shareholders with the purpose to de-list the Co.
- Reasons of voluntary de-listing
- Minimum price at which the shares are proposed to be purchased.
 if decision made during trading hours, the intimation must be made during trading hours
 if decision made after trading hours, the intimation must be made before the opening of
trading of the Exchange on the next working day.

 The minimum purchase price proposed by the sponsors will be the highest of benchmark
price based upon any of the following:
- Current market price
- Average market price (Annual Average)
- Maximum price at which the sponsors had purchased shares from market during 12
months
- Intrinsic value per share
[Breakup value = Net Assets / Number of shares ]
* Valued by professional valuers approved by Pakistan Bankers Association
* Valuation should not be older than 6 months
- Earning multiplier approach (for profitable companies)
[Fair value = Estimated Earning x Price Earning Ratio]
*Price Earning Ratio = Market Price per share / EPS
*Estimated Earning = Higher of latest EPS or Weighted Average EPS of last 3 years.
(Weights of 45%, 35%, 20% assigned to previous 3 years respectively)
17. Rule Book of PSX and Issue of Share Capital Page 370

 Now SE shall determine the minimum percentage of shares to be purchased by the

sponsors to qualify for de-listing.
- In case of disagreement of the sponsors on minimum percentage of shares to be
purchased. The sponsors shall file an appeal with the SECP within 10 days of the
decision of the SE.
- The decision of the SECP shall be final and binding.
 The sponsors cannot withdraw their offer to purchase their shares if such proposal has
been approved by the Co in a general meting by not less than 3/4th majorities through a
special resolution.
 The SE may for any reasons refuse to accept the proposal of the Co.
 Copy of the special resolution passed by the Co for voluntary de-listing send to SE
immediately along with complete list of the shareholders.
 Together with the application of de-listing the Co shall submit an undertaking from a
purchase agent (who may be commercial bank, investment bank or a member of SE.)
 The offer to purchase at the relevant price from the other shareholders shall remain open
atleast for a period of 60 days. The application for voluntary de-listing shall be
accompanied with the consent of purchase agent.
 The Co after passing special resolution shall convey to all the shareholders the decision of
the majority shareholders through a register post along with copy of special resolution. A
notice in this regard shall also be published in two widely circulated news papers including
one in Karachi.
 On completion of purchase, the Co shall submit the following information.
- Total no. of shares issued (with %)
- Shares owned by majority shareholders before the offer (with %)
- Shares purchased under the offer (with %)
- Total shares currently owned by the majority shareholders (with %)
- Shares still outstanding with minority shareholders (with %)
- Amount of Bank Guarantee required (approved by Exchange/SECP)
 The sponsors shall continue to remain obliged to purchase the shares still outstanding with
the minority from them at relevant price for a period of 12 months from the expiry of initial
pay back period.
 The Co once de-listed under listing regulation shall not be allowed to re-listing for a period
of 5 years.

Purchase agent
 Together with application for de-Iisting, company must submit an undertaking from a
Purchase Agent (a commercial bank, or an investment bank or a Broker) on behalf of
majority security holders which will constitute an irrevocable open offer to purchase.
 Offer to remain valid at least 60 days or as may be fixed by Exchange from date of
commencement of purchase.
 Upon approval of minimum purchase price in the general meeting, Company shall submit
the bank guarantee of Purchase Agent in an amount and such format as is demanded by the
Exchange to secure its obligation.
17. Rule Book of PSX and Issue of Share Capital Page 371

 Bank guarantee shall remain valid for a period not less than 15 days from the expiry date of
the initial buy back period or when all outstanding shares have been purchased by the
majority shareholders, whichever is earlier.
 If a Broker of the Exchange is appointed as Purchase Agent and the total purchase amount
does not exceed Rs. 2.5 million, the requirement of Bank Guarantee can be replaced with
the undertaking of such Broker on the prescribed format.
 In case of appointment of purchase agent other than a Broker of the Exchange, all trades
shall be routed through a Broker of the Exchange.
 All the trades during the initial 60 days will be conducted on KATS only irrespective of
marketable lot. The purchase agent will be required to maintain a live bid in the System at
the minimum purchase price approved by the Exchange. The purchase price shall be based
on market forces, subject to minimum purchase price determined by the Exchange.

Time frame for completion for requirements:

 Company shall immediately intimate the decision of its Board of Directors to de-Iist the
securities, including a copy of the relevant resolution passed in this regard
- If decision is made during trading hours or before the beginning of trading, then
intimation to the Exchange must be made during trading hours
- If the decision is made after trading hours then the intimation must be made to the
Exchange before the opening of trading on next business day
 Within 1 week of intimation, company will furnish its sponsors’/majority shareholders
undertaking to purchase the securities.
- Exchange shall be empowered to ask for any additional information or details
- Same shall be provided by company within 15 days of such request
 Board on its own or on basis of recommendations of Special Committee will determine /
approve the purchase price. The decision of the Board will be communicated to the
sponsors/company and shall also be notified and announced immediately.
 Any member of Board and/or Special Committee holding 2% or more shares of this
company will not participate in the deliberations during the process
 Sponsors/majority shareholders will be required to convey their acceptance/refusal to the
purchase price approved by Board within 7 days of conveying of the relevant decision
 Appeal can be made to SECP on determination of purchase price (within 10 days)
 Once purchase price has been finalized, company will be required to do following:
- Obtain approval of proposal of voluntary de-Iisting in the general meeting within 30
days of the acceptance of sponsors.
- After approval of general meeting, the requirements under Voluntary De-listing
Regulations shall be completed within 7 days to commence the purchase of shares.
- Sponsors will purchase the securities for a period of 60-days.
- Upon expiry of purchase period, company will submit the relevant documents /
information to the Exchange within a period of 21 days.
- After receipt of required documents/information and compliance of the relevant
requirements as stipulated by the Exchange, the securities of the company shall stand
de-listed after a period of 30 days.
17. Rule Book of PSX and Issue of Share Capital Page 372

Reverse Merger

Reverse Merger mean a merger transaction where an Operating Unlisted Company becomes a Listed
Company by merging with and into a Listed Shell Company;
Operating Unlisted Company means an unlisted company currently in operation;
Listed Shell Company mean any Listed Company, classified by SE as a Listed Shell Company on the basis
of erosion of its equity, no or nominal business operations in its principal line of business or no or
nominal assets.
Surviving Company mean the Listed Company survived pursuant to scheme of arrangement of an
Operating Unlisted Company with a Listed Shell Company approved by the relevant competent authority;

Request to be considered as Listed Shall Company

In order to be considered as a Listed Shall Company and identify the provisions relating to a
proposal of merger, every Listed Company shall;
 Communicate SE the approval of its board to consider the proposal of merger received
from Operating Unlisted Company.
 Submit to SE the confirmation received from Operating Unlisted Company that it has
received the approval by board of directors to initiate merger negotiation.

The Exchange may require the Listed Company to provide any additional information as
deemed appropriate, for determining the proposed transaction as a Reverse Merger.
The Exchange shall communicate in writing, within 15 days from the date of receipt of such
intimation, if the proposed transaction is a Reverse Merger or otherwise.

Requirements for reverse merger

In case the Exchange confirms that the proposed transaction is a Reverse Merger, the Listed
Shell Company shall;
 Ensure compliance with all applicable requirements.
 Submit to the Exchange the information / documents as stated in appendix II of Chapter 5
of Rule Book of PSX.
 Submit an undertaking that proposed Surviving Company shall fulfill following conditions:
- The minimum paid-up capital shall not be less than Rs. 200 million,
- The minimum Free Float shall not be less than
o 25% of the issued share capital and
o 5 million Free Float shares within one year from date of approval of scheme
- The Promoters/ Sponsors/ Controlling Directors / Majority Shareholders are / were
not also the Promoters/ Sponsors/ Controlling Directors / Majority Shareholders in a:
o Listed Company, which is in the Defaulters’ Segment; or
o Listed Company, which was delisted within the past five years; or
17. Rule Book of PSX and Issue of Share Capital Page 373

o Corporate Brokerage House whose TRE Certificate has been cancelled/

forfeited, or declared defaulter by the Exchange or any other stock exchange
of Pakistan that existed prior to January 11, 2016 or the NCCPL, due to
noncompliance of any applicable rules, regulations, notices, procedures,
guidelines etc. but shall not include any TRE Certificate surrendered
voluntarily to the Exchange, if such TRE Certificate Holder does not have any
pending investor claims.
- It is not an associated company or a wholly owned subsidiary of any other Listed
Company, which is in the Defaulters’ Segment or trading in its shares is suspended
due to violation/non-compliance of laws.
- There are no overdue loan/payments to any financial institution against the
CEO/Promoters/ Sponsors/ Directors/ Major Shareholders of the Surviving Company
either in their individual capacity or as CEO, Director, Partner or Owner in any
Company / Firm / Sole Proprietorship;
- There are no overdue loan/payments to any financial institution against the
Operating Unlisted Company, its associated / group companies and undertakings;
- None of its Sponsors, Major Shareholders, Directors and Management, Associated
Company/Entity has been declared involved in any fraudulent activity by the SECP,
SBP or any other investigation agency or court of law;
- None of the Sponsors, Major Shareholders, Directors and Management, Associated
Company/Entity of the Listed Shell Company has been declared involved in any
fraudulent activity by the Commission, SBP or any other investigation agency or court
of law;
- The shares of sponsors shall be inducted into CDS in freeze status for a period of not
less than three years and the sponsors shall not be allowed to sell their shares during
this period;
- It shall ensure compliance with all requirements of the PSX Regulations.

Other Requirements

 The Listed Shell Company shall obtain confirmation from the Exchange that it has
complied with the requirements of before seeking the shareholders' approval for a
scheme of Reverse Merger.
 If a Listed Shell Company enters into a scheme of Reverse Merger without complying with
any requirement(s), the Exchange shall place the Surviving Company in the Defaulters’
Segment and/or initiate any other actions including suspension of trading in its shares or
delisting as determined by the Exchange.
 Where the Exchange is satisfied that it is not practicable to comply with any requirement
it may, for reasons to be recorded, relax such requirement.

Tutor’s Note: Unit 5.18 of Rule book of Pakistan Stock exchange Limited dealing with the
listing and other fee etc not covered in these notes