1st National SME Conference

Presentation by; Shahbaz Sarwar

Joint Registrar, SECP

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SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

Securi(es&ExchangeCommissionofPakistan(SECP)istheapex regulatory body in the country to regulate thecorporate sector and the capital market with the aim toensure transparencyandefficiency in the func(oningof itsfinancialmarkets.TheSECPbecameopera(onalinJanuary1999andhascomea long way since then. It was ini(ally concerned with theregula(on of corporate sector and capital market. Over(me, itsmandatehasexpandedto includesupervisionandregula(on of insurance companies, non-banking financecompaniesandprivatepensions.Oneof themain func(onof SECP is to incorporate companies under the CompaniesOrdinance,1984.

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VISION, MISSION AND STRATEGY Vision The development of modern and efficient corporate sector and capital market, based on sound regulatory principles, that provide impetus for high economic growth and foster social harmony in the Country.

Mission To develop a fair, efficient and transparent regulatory framework, based on international legal standards and best practices, for the protection of investors and mitigation of systemic risk aimed at fostering growth of a robust corporate sector and broad based capital market in Pakistan.

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VISION, MISSION AND STRATEGY

Strategy To develop an efficient and dynamic regulatory body that: }  fosters principles of good governance in the corporate sector, } ensures proper risk management procedures in the capital market, and } protects investors through responsive policy measures and effective enforcement practices.

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FUNCTION OF SECP Ø Administration of company law. Ø  Incorporation of new companies and their

Regulation. Ø Regulation of securities market and related

institutions Ø Regulation of insurance sector and administration

of insurance law. Ø Regulation of non banking finance companies

such as leasing companies, mutual funds, investment banks etc.

Ø Regulation of pension funds and administration of voluntary pension system rules.

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Corporate Portfolio

Type of Companies Total companies as

on April 30, 2011

Total companies as on

April 30, 2016 Public listed 558 560

Public Unlisted 2,085 2,371

Private 43,967 64,902

SMCs 1,048 2,401

Not-for-profit associations u/s 42 469 730

Trade Organizations 223 256

Foreign companies 748 919

Total Companies 49,098 72,139

727/05/16 Year-wise Corporate Growth

Type of Companies

2012-13 2013-14 2014-15 2015-16 (10 Months)

Public Unlisted 48 67 68 55

Private 3,615 4,186 4,518 4,497

SMCs 200 247 310 333

Not-for-profit associations u/s 42

48 48 60 54

Trade Organizations 03 12 09 03

Foreign companies 35 22 41 42

Total Companies 3,949 4,582 5,006 4,984

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Strategies to accelerate Corporate Growth

Ø  Abolishment of Stamp Duty Ø  Establishment of a Separate ‘Incorporation

Cell/ One Window operation Ø  Reduction of Registration Fee Ø  Awareness through seminars in co-ordination

with Chambers/Tax Bar Associations /Professional bodies

Ø  Meetings with Consultants/Company Secretaries

Ø  Impact of corporate performance monthly report being issued by SECP.

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}  On pursuance of the Commission, Stamp duty on registration of Memorandum and Articles of Association has been abolished by all the provinces and Islamabad Capital Territory.

}  In order to provide prompt services and to dispose of all matters regarding new incorporations, a separate “incorporation cell” has been set up in big CROs. It resulted in synchronization of policies and avoided undue objections. Fast Track Registration Services (FTRS) has also been introduced, wherein a company can be incorporated within four hours’ time.

}  Initial incorporation fees were reduced to encourage

corporatization. The Sixth Schedule to the Ordinance, containing the table of fees paid to the SECP was amended to give relief to the promoters and other stakeholders utilizing the eService.

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Strategies to accelerate Corporate Growth

Ø  The Companies (Registration Offices) Regulations, 2003 and Companies (General Provisions and Forms) Rules, 1985 have been amended to ensure effective and smooth functioning of CROs, under the online submission environment and to include the functioning of CROs beyond their territorial jurisdictions.

Ø  Awareness seminars and workshops on benefits of corporatization, eService, and corporate compliance are being conducted in collaboration with the Chambers and professional bodies all around the Country.

Ø  Meetings with corporate consul tants and Companies representatives of prominent/ large Companies are also held at CROs. Practical demonstration of eServices is made before them to discuss the issues/ problems faced by them. These meetings remained quite interactive.

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FACILITATION MEASURES

Ø E-enablement Measures

Ø Investor Facilitation Measures

Ø Legislative Measures

Ø Proposed measures to facilitate corporate sector/SMEs

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E-enablementMeasures

Ø Launch of eServices to enable online incorporation and post-incorporation services delivery.

Ø Virtual one-stop shop portal has been established for integrated registration with FBR and EOBI. This would also combine three internal processes of SECP, including name reservation, company registration and issuance of certified true copies.

Ø Introduction of a simple one-page JSP form to capture information at company incorporation stage electronically.

Ø Facility for online payment of fee through credit cards and online fund transfer at MCB and UBL

Ø Enabling electronic inspection of corporate records (inter-CRO)

Ø Setting up of help-line/service desk for the users of eServices

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InvestorFacilita?onMeasures

Ø  Name search facility available through Commission’s website Ø  Model Memorandum and Article of Associations of more than 80 major

business sectors placed on website, including one-pager MOA for designated sectors

Ø  Guide Series on incorporation and post-incorporation requirements issued in different languages

Ø  Introduction of Fast Track Registration Services (FTRS) for completion of various services offered by the Commission, including name reservation and company registration, within a minimum of four working hours.

Ø  Opening of facilitation centres in Sialkot and Abbottabad (Sarmayakari Markaz)

Ø  Establishment of physical one-stop shops by Finance Division, Government of Pakistan at Lahore & Islamabad Chambers

Ø  Issuance of a tri-fold incorporation brochure highlighting benefits of corporatization and the steps involved in company registration and ancillary activities

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Legisla?veMeasures

Ø The draft Companies Bill, 2016. Ø Amendments in the Single Member Companies Rules,

2003. Ø Concept paper on Limited Liability Partnership (LLP). Ø Issuance of Companies Easy Exit Regulations. Ø Setting time limits on regulator’s case handling through

Companies Registration Office Regulations, 2003 as amended from time to time.

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ProposedmeasurestofacilitateCorporateSector

Ø To propose a more liberal and conducive framework for the corporate sector, especially for SMEs, through the on-going company law review exercise, including further exemptions/relaxations for small sized companies

Ø To provide a set of certified true copies of company formation documents to promoters free of cost

Ø To explore the Idea of Low-Fee (Sasti) Company, which will further cut down the cost of business start-up

Ø To expand the outreach of SECP through establishment of a Company Registration Office at Gilgit Baltistan

Ø To introduce a Limited Liability Partnership business vehicle to attract practitioners & SMEs in the documented sector

1627/05/16 MeasuresIntroducedtoPromoteSmallandMid-sizedNBFCsPromo?onofsmallandmid-sizednondeposittakingNBFCs

Concept of small andmid-sized non-deposit taking lending NBFCs hasbeen introduced by significantly reducing equity requirements toencourage small and mid-sized lending NBFCs. Moreover, variousexemp(onsfromcompliancewithregulatoryframeworkhavealsobeenproposedforthesmallandmediumscaleNBFCs.

Floata?onandManagementofModarabas

Therearenorestric(onsforthesmallentrepreneurstoenterinSMEsectorthroughfloata(onandmanagementofModarabas.UndertheModarabalaw,acompanywiththepaidupcapitalofRs.2.5milliononlycanundertakethebusinessoffloata(onandmanagementofModarabas.

ReducedcapitalandfundsizerequirementsforREITs.

Forsuppor(ngSMEsector,thepaidupcapitalrequirementforREITmanagementcompanyhasbeenreducedfromRs.200milliontoRs.50millionandthefundsizeforREITSchemehasbeenbroughtdownfromRs.2billiontothelis(ngrequirementoftherelevantstockexchange.

PrivateEquityandVentureCapitalFunds

Tosupportsmallinvestorswhoaredesiroustoenterinthebusinessofprivateequityandventurecapital,anewsetofdraZPrivateFundRegula(onshasbeenintroducedwhereinsomeofthestringentrequirementshaveeitherbeenra(onalizedorremoved.

Presentation Name/ Company Name:

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In year 2015, SECP in consultation with Pakistan Stock Exchange has prepared a regulatory framework called the “REGULATIONS GOVERNING LISTING AND TRADING OF EQUITY SECURITIES OF SMALL AND MEDIUM ENTERPRISES (SMEs)

Salient features of theses are as under;

} Eligibility Criteria: An SME may apply for listing provided it is authorized by its Memorandum and Articles of Association to do so and shall offer shares only to Qualified Institutional Buyers (QIBs) and High Net-Worth Individuals (HNWIs). SME must be a public company, registered under the Companies Ordinance, 1984, having a post issue paid up capital of not less than Rs.25 million and not more than Rs.200 million.

Development of SMEs

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(b) Other Conditions: }  minimum offer size is 20% of the post issue paid-up capital of SME; }  offer of securities through circulation of Information Memorandum; }  appointment of Market Advisor; }  appointment of Market Maker for quoting two way quotes of SME; }  the number of initial subscribers is not less than five (05); }  the bid size for each initial subscriber is not less than rupees one

million; }  the minimum order size for trading in equity securities of SME is

Rs.100,000; }  prohibition on short and blank sales; }  continuous reporting and disclosure requirements; and }  its sponsors shall hold not less than 25% of the post issue paid up

capital of SME for a lock-in period of not less than 3 years.

Development of SMEs

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THANK YOU