Listed Companies (Substantial Acquisition of Voting Shares and Take-overs)
29th October, 2002
An ordinance to provide for substantial
acquisition of voting shares and take-overs of listed companies
- No. 2(1)/2002-Pub.- The Following Ordinance promulgated by the President is hereby published for general information:-
WHEREAS it is expedient to provide for a fair and equal treatment to all the investors as well as a transparent and efficient system for substantial acquisition of voting shares and take-overs of listed companies and matters ancillary thereto or connected therewith;
AND WHEREAS the President is satisfied that circumstances exist which render it necessary to take immediate action;
NOW, THEREFORE, in pursuance of the Proclamation of Emergency of the fourteenth day of October, 1999, and Provisional Constitution Order No. 1 of 1999, read with the Provisional Constitution (Amendment) Order No. 9 of 1999, and in exercise of all powers enabling him in that behalf, the President of the Islamic Republic of Pakistan is pleased to make and promulgate the following Ordinance: —
- Short title, extent and commencement. — (1) This Ordinance may be called the Listed Companies (Substantial Acquisition of Voting Shares and Take-overs) Ordinance, 2002.
(2) It extends to the whole of Pakistan.
(3) It shall come into force at once.
- Definitions. — (1) In this Ordinance, unless there is anything repugnant in the subject or context,–
(a) “acquirer” means any person who, directly or indirectly, acquires or has proceeded to acquire voting shares in the target company, or acquires or has proceeded to acquire control of the target company, either by himself or through any person acting in concert;
(b) “Commission” means the Securities and Exchange Commission of Pakistan established under the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997);
(c) “control” includes the right to appoint majority of directors or to control management or policy decisions, exercisable by a person individually or through any person acting in concert, directly or indirectly, whether by virtue of his shareholding, management right, shareholders agreement, voting agreement or otherwise;
(d) “financial institution” means an institution, other than a banking company as defined in the Banking Companies Ordinance, 1962 (LVII of 1962), notified as such by the Commission either specifically or generally and shall include such other institutions or companies notified by the Federal Government as financial institutions;
(e) “listed company” means a company or a body corporate whose voting shares are listed on a stock exchange;
(f) “manager to the offer” means a manager appointed under section 7;
(g) “offer period” means the period from the date of public announcement of public offer to the date of closure of public offer or earlier withdrawal thereof;
(h) “person acting in concert” means a person who co‑operates with the acquirer to acquire voting shares or control of the target company;
(i) “prescribed” means prescribed by rules made under this Ordinance;
(j) “promoters” means persons who are in control of a company or named in any offer document and includes—
(a) any relative of a promoter; and
(b) in case of a company or body corporate,—
(i) a subsidiary or holding company of such company or body;
(ii) any company in which the promoter holds ten per cent or more of the equity capital or which holds ten per cent or more of the equity capital; or
(iii) any company or body corporate wherein a group of individuals or companies or bodies corporate or combinations thereof holds twenty per cent or more of the capital in the target company and also holds twenty per cent or more of the capital of the promoter; and
(c) in case of an individual, —
(i) any company in which ten per cent or more of the share capital is held by the promoter or a relative of the promoter or a firm or Hindu undivided family in which the promoter or his relative is a partner or co‑partner or a combination thereof; or
(ii) any company in which a company specified in paragraph (i) holds ten per cent or more of the share capital;
(k) “public announcement” means public announcement of offer or intention to be made under section 5, section 6 or section 8, as the case may be, and includes any announcement of any competitive bid for acquisition of voting shares of a target company;
(l) “public offer” means the public offer for acquisition of voting shares of a target company and includes any competitive bid or bids made for this purpose;
(m) “relative” means spouse, lineal ascendants and descendents;
(n) “voting shares” mean the shares in the share capital of a listed company having voting rights; and
(o) “target company” means a listed company whose voting shares or control are directly or indirectly acquired or intended to be acquired.
(2) All other expressions used but not defined herein shall have the same meanings as are assigned to them in the Securities and Exchange Ordinance, 1969 (XVII of 1969), or the Companies Ordinance, 1984 (XLVII of 1984).
- Ordinance not to apply to certain transactions. — Nothing contained in this Ordinance shall apply to—
(a) allotment of voting shares in pursuance of a pre‑public issue or public issue;
(b) allotment of voting shares pursuant to a right issue;
(c) allotment of voting shares to the underwriters pursuant to any underwriting agreement;
(d) acquisition of voting shares in the ordinary course of business by banks and financial institutions as enforcement of security;
(e) acquisition of voting shares by succession or inheritance;
(f) transfer of voting shares from financial institutions, including their subsidiaries, to co‑promoters of the company pursuant to an agreement between such financial institution and such co‑promoters provided proper disclosure has been made in the prospectus at the time of issue;
(g) a scheme of arrangement or reconstruction including amalgamation or merger or de‑merger under any law for the time being in force;
(h) acquisition of voting shares in companies whose voting shares are not listed on any stock exchange;
(i) exercise of option by a bank or a financial institution in pursuance of a conversion option;
(j) sale of shares in consequence of privatization of a unit or its management rights within the meaning of Privatization Commission Ordinance, 2000 (LII of 2000);
(k) sale of shares in consequence of any on-going negotiations on the commencement of this Ordinance provided that the negotiations are finalized and agreement reached within 30 days of such commencement ; and
(l) existing shares held by a person on the date of commencement of this Ordinance.
DISCLOSURE OF SHAREHOLDING IN A LISTED COMPANY
- Acquisition of more than ten per cent voting shares of a company. — (1) Any acquirer who acquires voting shares, which (taken together with voting shares, if any, held by the acquirer) would entitle the acquirer to more than ten per cent voting shares in a listed company, shall disclose the aggregate of his shareholding in that company to the said company and to the stock exchange on which the voting shares of the said company are listed as provided in sub-section (2).
(2) The disclosure mentioned in sub‑section (1), shall be made within two working days of,—
(a) the receipt of intimation of allotment of voting shares; or
(b) the acquisition of voting shares, as the case may be.
Explanation. — For the purposes of this section expression “acquisition” shall include purchases confirmed by the member of a stock exchange in accordance with sub-rule (4) of rule 4 of the Securities and Exchange Rules, 1971.
(3) Any acquirer may acquire additional voting shares in any period of twelve months after acquisition of voting shares pursuant to sub-section (1) without making disclosure as required by sub-section (1) in case the total acquisition does not exceed an aggregate of twenty five per cent.
SUBSTANTIAL ACQUISITION OF VOTING SHARES AND ACQUISITION OF CONTROL OF A LISTED COMPANY
- Additional acquisition of voting shares. — (1) No person shall, directly or indirectly, acquire—
- a) voting shares, which (taken together with voting shares, if any, held by such person) would entitle such person to more than twenty five per cent voting shares in a listed company; or
- b) control of a listed company,
unless such person makes a public announcement of offer to acquire voting shares or control of such company in accordance with this Ordinance.
(2) Before making announcement under sub‑section (1), such person shall make disclosure in the manner specified in section 4.
- Consolidation of holdings. — (1) No acquirer, who has acquired more than twenty-five per cent but less than fifty-one per cent of the voting shares or control of a listed company, shall acquire additional voting shares or control unless such acquirer makes a public announcement of offer to acquire voting shares or control in accordance with this Ordinance:
Provided that such acquirer shall not be required to make a fresh public announcement of offer within a period of twelve months from the date of the previous announcement.
(2) No acquirer shall acquire voting shares in excess of the quantity specified in the invitation of offer made by such acquirer and all additional or incremental acquisition beyond the preceding offer shall be valid only through further offer.
(3) Nothing in this section apply to a person who has already acquired fifty-one percent or more of the voting share or control in consequence of making a public announcement of the offer.
- Appointment of manager to the offer. — (1) Before making any public announcement the acquirer shall appoint a bank, or financial institution, or a member of a stock exchange who is not an associate, or group, of the acquirer or the target company, as a manager to the offer.
(2) The manager to the offer shall be deemed to be the agent of the acquirer.
- Timing of the public announcement. — (1) Before acquisition of voting shares beyond the threshold specified in section 5 or section 6, the acquirer shall, after giving notice to the Commission as required by sub-section (3) of section 9, make a public announcement of such an intention forthwith.
(2) In case of an acquirer acquiring Global Depository Receipts or American Depository Receipts which, when taken together with the voting shares, if any, already held by the acquirer, would entitle the acquirer to voting shares, exceeding the percentage specified in section 5 or section 6, the public announcement referred to in sub‑section (1) shall be made not later than two working days before he acquires voting shares on such securities upon conversion or exercise of option as the case may be.
- Public announcement. — (1) The public announcement shall be published at least in one issue each of a daily newspaper in English language and a daily newspaper in Urdu language having circulation in the province or provinces in which the stock exchange, on which the target company is listed, is situated.
(2) The public announcement shall contain such information as may be prescribed.
(3) A copy of the public announcement shall be submitted to the Commission through the manager to the offer at least two working days before its issuance.
(4) Simultaneous with the submission of the public announcement to the Commission, the public announcement shall also be sent to all the stock exchanges on which the voting shares of the target company are listed for being notified on the notice board and on the automated information system thereof, and to the target company at its registered office for being placed before the board of directors of such company.
(5) A public offer under this Ordinance shall be deemed to have been made on the date on which the public announcement is made in any of the newspapers as required by sub‑section (1).
- Contents of public offer, mode of payment and minimum offer price. — The contents of the public offer, its submission to the Commission, the date to be specified for the public announcement, mode of payment and minimum offer price, shall be in such form and manner as may be prescribed.
- Public announcement and offer letter etc. not to contain misleading material.— The public announcement, any other advertisement, circular, brochure, publicity material or offer letter issued in respect of, or in relation to, the acquisition of voting shares shall not contain any misleading information.
- Number of voting shares to be acquired. — (1) A public offer shall be made by the acquirer for such percentage as the acquirer may decide.
(2) Where the number of voting shares offered for sale by the shareholders are more than the voting shares offered to be acquired by the acquirer, the acquirer shall, in consultation with the manager to the offer, accept the public offer or offers received from the shareholders on a proportional basis:
Provided that acquisition of voting shares from a shareholder shall not be less than the minimum marketable lot or the entire holding if it is less than the marketable lot.
- General obligations of the acquirer. — (1) Within two working days of the public announcement, the acquirer shall send a copy of the proposed offer letter to the target company at its registered office address and all the stock exchanges, where the voting shares of the company are listed, and the Commission.
(2) The acquirer shall ensure that the offer letter is sent to all the shareholders of the target company whose names appear on the register of members of the company as on the date specified in the public announcement:
Provided that where the public announcement is made pursuant to an agreement to acquire voting shares or control of the target company, the offer letter shall be sent to the shareholders other than the parties to the agreement.
(3) A copy of offer letter shall be sent to—
(a) the custodians of Global Depository Receipts or American Depository Receipts to enable such persons to participate in the open offer, if they are entitled to do so; and
(b) the convertible security holders, where the period of conversion falls within the offer period.
(4) The date of acceptance of a public offer shall be not later than the sixtieth day from the date of public announcement.
(5) In case the acquirer is a company, the public announcement, brochure, circular, offer letter or any other advertisement or publicity material issued to shareholders in connection with a public offer shall state that the directors accept the responsibility for the information contained in such documents:
Provided that if any of the directors desires to exempt himself from responsibility for the information in such documents, such director shall issue a statement to that effect together with reasons thereof.
(6) Where a public offer is made conditional upon minimum level of acceptance, the acquirer may accept the acceptances even if such acceptances, put together, do not reach the minimum level so offered:
Provided that the acquirer may reject all such acceptances if the same do not reach a level indicated in the public offer.
(7) Persons, other than the acquirer, representing or having interest in the target company or an insider or a beneficial owner of more than ten per cent of the voting shares during the last twelve months, shall stand excluded and shall not participate in any matters concerning or relating to a public offer including any preparatory steps leading to the offer.
(8) On or before the date of issue of public announcement, the acquirer shall create a security as provided in this Ordinance.
(9) The acquirer shall ensure that firm financial arrangements for fulfilment of the obligations under the public offer and suitable disclosures in this regard have been made in the public announcement.
(10) The acquirer shall, within a period of thirty days from the date of the closure of public offer, complete all procedures relating to the public offer including payment of consideration to the shareholders who have accepted the public offer and for the purpose open a special account as provided in sub-section (1) of section 20:
Provided that where the acquirer is unable to make the payment to the shareholders who have accepted the public offer before the said period of thirty days due to non‑receipt of requisite statutory approvals, the Commission may, if satisfied that non‑receipt of requisite statutory approvals was not due to any wilful default, neglect or failure of the acquirer to diligently pursue the applications for such approvals, grant extension of time for a period not exceeding thirty days in aggregate.
(11) In the event of withdrawal of public offer, a person shall not make any offer for acquisition of voting shares of the target company for a period of twelve months from the date of public announcement of withdrawal of public offer.
(12) In the event of non‑fulfilment of obligations under Chapter III or Chapter IV of this Ordinance, a person shall not make any offer for acquisition of voting shares of any listed company for a period of twelve months from the date of closure of public offer.
(13) Where the acquirer has not either in the public announcement or in the offer letter, stated his intention to dispose of the undertaking or a sizeable part thereof, of the target company except in the ordinary course of business of the target company, the acquirer, where he has acquired control of the target company, shall be debarred from disposing of the undertaking or a sizeable part thereof, of the target company for a period of two years from the date of acquisition of the control.
- General Obligations of the Board of Directors of the target company. — (1) The board of directors of the target company, during the offer period, shall not—
(a) sell, transfer, or otherwise dispose of or enter into an agreement for sale, transfer, or for disposal of the undertaking or a sizeable part thereof, not being sale or disposal of assets in the ordinary course of business of the company or its subsidiaries;
(b) encumber any asset of the company or its subsidiary;