[Gazette of Pakistan, Extraordinary, Part-II, 6th February, 2013]

S. R. O. 71(I)/2013.—In exercise of the powers conferred by sub-section (1) of Section 506-A of the Companies Ordinance, 1984 (XLVII of 1984), read with clause (a) of sub-section (4) of Section 20 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997), the following draft Regulations are hereby published for the information of all the persons likely to be affected thereby and notice is hereby given that objections or suggestions, if any, received from any person in respect of the said draft within a fourteen days from the date of its publication in the official Gazette, will be taken into consideration.




1.  Short title and commencement.—(1) These Regulations shall be called the Issue of Commercial Papers Regulations, 2013.

(2)     They shall come into force at once.

(3)     They shall apply to all issues of commercial papers by any company and other body corporate.

2.  Definitions.—(1) In these Regulations unless there is anything repugnant in the subject or context,–

(a)     “Banking Company” shall have the same meaning as assigned to it in the Banking Companies Ordinance, 1962 (LVII of 1962);

(b)     “Commercial Paper” means an unsecured promissory note with a maturity period as provided in these Regulations;

(c)     “Commission” means the Securities and Exchange Commission of Pakistan established under Section 3 of the Securities and Exchange Commission of Pakistan Act (XLII of 1997);

(d)     “Company” shall have the same meaning as assigned to it in the Companies Ordinance, 1984 (XLVII of 1984);

(e)     “Credit Rating Company” means a Credit Rating Company registered with the Commission under the Credit Rating Companies Rules, 1995;

(f)      “DFI” means a development financial institution as notified by the State Bank of Pakistan from time to time;

(g)     “Financial Institution” means a financial institution as defined in the Financial Institutions (Recovery of Finances) Ordinance, 2001 and the Companies Ordinance, 1984 (XLVII of 1984);

(h)     “Investment Finance Company” shall have the same meaning as assigned to it under the Non-Banking Finance Companies and Notified Entities Regulations, 2008;

(i)      “Issuer” includes a company or body corporate that intends to raise short-term finance by issuing commercial paper.

(j)      “Issuing and Paying Agent” means a Scheduled Bank, an Investment Finance Company or a DFI appointed under these Regulations as an Issuing and Paying Agent and having a minimum Credit Rating grade of “A-” (medium to long term) and “A2” (short term) obtained from any Credit Rating Company;

(k)     “Ordinance” means the Companies Ordinance, 1984 (XLVII of 1984);

(l)      “Qualified Institutional Buyer” means the persons mentioned in Section 120 of the Ordinance and notified there under from time to time as persons to whom redeemable capital can be issued;

(m)    “Registered Corporate Broker” means a company registered with the Commission under the Brokers and Agents Registration Rules, 2001;

(n)     “Regulations” mean the Issue of Commercial Paper Regulations, 2013;

(o)     “Scheduled Bank” means a scheduled bank as defined in the State Bank of Pakistan Act, 1956 (XXXII of 1952);

(p)     “Shelf Registration” means the process through which an issuer raises the total amount of an issue of a Commercial Paper in tranches over a maximum period of one year; and

(q)     “Working Capital Limit” means the aggregate fund-based limits including those by way of purchase/discount of bills sanctioned by one or more financial institutions to a company for meeting its working capital requirements, and also includes any working capital term finance limits.

(2)     All words and expressions used but not defined in these Regulations shall have the same meanings as assigned to them in the Ordinance, the Securities and Exchange Ordinance, 1969 (XVII of 1969) and the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997).


3.  Conditions for issue of Commercial Paper.—Any company or body corporate can issue Commercial Paper if it fulfills the following conditions, namely:—

(a)     it is authorized by its Articles of Association or other constitutive document to issue Commercial Papers;

(b)     its equity is not less than Rs. 25 million as per the latest audited balance sheet;

(c)     it has obtained the entity credit rating from a Credit Rating Company and such rating is not less than “A-” (medium to long-term) and “A2” (short-term) and more than twelve months old; and

(d)     it has no overdue loans or defaults in the report obtained from the Credit Information Bureau of the State Bank of Pakistan and the said report is not more than two months old.

Explanation:—For the purpose of clause (b) the term “equity” includes paid up share capital, reserves, sub-ordinated loans and unappropriated profits (minus accumulated losses) excluding deferred tax reserves, surplus on revaluation of fixed assets account as described in Section 235 of the Ordinance and redeemable preference shares.

4.       Period of Commercial Paper.—(1) The Commercial Paper shall be issued for maturities between minimum of 30 days and maximum of one year and the date of maturity shall be reckoned from the first day of subscription:

Provided that maturity date of Commercial Paper shall not go beyond the date up to which the credit rating of the issuer is valid.

(2)  Where the maturity date happens to be a holiday, the issuer shall make payment on the immediate following working day.

5.       Size and Denomination of Commercial Paper.—(1) Size of an issue of Commercial Paper shall not be less than Rs. 10 million and denomination of a Commercial Paper shall be its face value.

(2)  Where Commercial Paper is issued through private placement it can be issued in denomination of Rs. 100,000 or in multiples thereof and where Commercial Paper is issued to general public it can be issued in denomination of Rs. 25,000 or multiples thereof.

6.       Ceiling on amount of issue of Commercial Paper.—The aggregate amount of a Commercial Paper raised by an issuer shall be within such limits as may be approved by its Board of Directors in accordance with the prudential regulations of the State Bank of Pakistan or the quantum indicated by the Credit Rating Company concerned, whichever is lower.

7.       Mode of issue and discount rate.—The Commercial Paper shall be in the form of a promissory note which may be issued in physical and/or scrip less form at such discount to face value as may be determined by the issuer keeping in view the prevailing interest rates such as interest rate on Treasury Bills (T Bills) and the Karachi Inter Banks Offer Rate (KIBOR) etc. and its credit rating.

8.       Issue expenses.—The issuer shall bear all the expenses relating to the issue of the Commercial Paper including the fees payable to the Issuing and Paying Agent and the Credit Rating Company concerned, and the stamp duty payable to the concerned Provincial Government under the Stamp Act, 1899 (Act II of 1899) at the rates prescribed by them and any other relevant charges connected with such issue.

9.       Investors in Commercial Paper.—Commercial Paper may be issued by way of public offer and/or through private placement to Qualified Institutional Buyers. In case of public offer approval of the Commission shall be sought under Section 57 of the Ordinance.

10.     Procedure for issue of Commercial Paper.—(1) Every issuer shall appoint an Issuing and Paying Agent through an agreement in writing and the agreement executed shall contain all the basic terms and conditions and role & responsibilities of both the parties to the agreement.

(2)     The Issuing and Paying Agent appointed under sub-regulation (1) shall not be associated company or associated undertaking of the issuer.

(3)     Where the issue of Commercial Paper is through private placement it shall be completed within a period of two weeks from the date on which the issuer opens the issue for subscription and any unsold portion of the issue after two weeks of its opening for subscription shall not be issued.

(4)     Where the issue of Commercial Paper is through public offer it should be completed within the time period as specified in the Ordinance.

(5)     Where the issue of Commercial Paper is through private placement, the initial subscribers of Commercial Paper shall pay through the Issuing and Paying Agent the discounted value of the Commercial Paper by means of crossed cheque or any other mode acceptable to the Issuing and Paying Agent, to the account of the issuer.

(6)     The issuer shall intimate in writing to all initial subscribers and all financial institutions, who have provided working capital limits to it, about the amount and tenure of the issue of Commercial Paper and copies of such intimation shall also be provided to the Issuing and Paying Agent.

(7)     An issue of Commercial Paper may be underwritten if so desired by the issuer and in case thereof,—

(a)     the number of underwriters should not be less than two; and

(b)     the underwriters should not be associated companies or associated undertakings of the issuer.

11.     Issue of Commercial Paper under Shelf Registration.—Where the issue of Commercial Paper is under Shelf Registration following conditions shall be fulfilled, namely,—

(a)     Issuing and Paying Agent for all the tranches shall remain the same;

(b)     complete plan for issue of Commercial Paper in tranches under the shelf registration (the Shelf Registration Plan) shall be dissimulated to the propsective investors through the websites of Issuing and Paying Agent and the issuer;

(c)     change, if any, in the Shelf Registration Plan subsequent to its initial dissimination shall be dissiminated in the same manner as provided in clause (b);

(d)     Issuing and Paying Agent, before the issue of first tranche, shall provide copy of the agreement executed with the issuer containing the term sheet and complete Shelf Registration Plan to the Commission; and

(e)     Issuing and Paying Agent shall confirm in writing to the Commission before the launch of each tranche that the issuer fulfills all the conditions as mentioned in Regulations 3 of the Regulations.



12.     The duties and responsibilities of issuer, Issuing and Paying Agents and Credit Rating Company are set out as follow,—

(1)  Issuer.—The issuer shall ensure that,—

(a)     the Regulations and procedures laid down for the issuance of Commercial Paper are strictly adhered to;

(b)     Issuing and Paying Agent is provided copies of all the investor agreements i.e. the agreements executed with the initial subscribers and the said agreements contain salient features and other terms and conditions of the issue including the following,—

(i)      covenants of the issue of Commercial Paper;

          (ii)     non-availability of any recourse to the initial subscribers on the issuer and Issuing and Paying Agent and to the subsequent purchasers on the sellers in the secondary market;

          (iii)    non-availability of any guarantee by any bank or other financial institution;

          (iv)    default history of the issuer; and

(v)     detailed provisions on rollover, if any.

(c)     the copies of the un-executed/draft investor agreements are placed on its website and on the website of Issuing and Paying Agent for information of the investors;

(d)     within five days of the close of subscription list, report to Issuing and Paying Agent and the Commission the following information, namely,–

(i)      province and place of issue;

(ii)     amount and rate of stamp duty paid; and

(iii)    term sheet containing salient features of the issue.

(e)     revise its credit rating on annual basis and ensure its dissemination to the market through the Credit Rating Company concerned;

(f)      the Commercial Paper shall be redeemed through Issuing and Paying Agent; and

(g)     roll over, if any, shall be made through Issuing and Paying Agent.

(2)  Issuing and Paying Agent.—The issuing and Paying Agent shall,—

(a)     enter into an agreement in writing with the issuer to act as Issuing and Paying Agent for the issue of the Commercial Paper;

(b)     ensure that the issuer has the minimum credit rating as specified in Regulation 3 above;

(c)     ensure that the quantum of amount proposed to be raised through issuance of the Commercial Paper is within the limit as prescribed in Regulations 5 above;

(d)     ensure that the issuer has met all the requirements as prescribed in these Regulations before the issuance of Commercial Paper;

(e)     verify all the documents submitted by the issuer i.e. copy of Board’s resolution, signatures of authorized executants (if Commercial Paper is in physical form) etc. and have in custody certified copies of the original document and issue a certificate that documents are in order;

(f)      deliver or credit, on the issue date, the Commercial Paper to investors against proof of payment and at maturity having received funds from the issuer, it will effect repayment on receipt of the Commercial Paper back from the investors;

(g)     make it clear to the initial subscribers in the investor agreement/offering document that investors investment is subject to credit and other risks inherent in such instruments and payment will be made to them only if the issuer has made the funds available to Issuing and Paying Agent;

(h)     inform the initial subscribers that in case of any default by the issuer, it will not be in a position to seek recovery from the issuer or initiate any action against the issuer either on its own or on behalf of the investors;

(i)      in case of any default by the issuer, be responsible for the prompt notification of such default to the holders of the Commercial Paper and the Commission within five (5) working days of occurrence of such default;

Explanation:—For the purpose of these Regulations the term “default” shall include partial payment of redemption amount;

(j)      in case of partial payment by the issuer, distribute the received funds, among all the holders of the Commercial Paper, on pro-rata basis and while doing so it shall take all necessary measures to safeguard its position against any adverse consequences including incorporation of this provision in the agreement executed between the issuer and the IP A;

(k)     submit a report on the issue to the Commission within fifteen days from the last date for closing of the subscription of the Commercial Paper and the report shall contain all the material facts and figures relating to the issue including those as required under these Regulations to be reported to the Commission; and

(l)      where issue of Commercial Papers is in scrip less form, obtain from the concerned depository company list of Commercial Paper holders on monthly basis.

(3)  Credit Rating Company.—The Credit Rating Company which conduct credit rating of the issuer shall, at the time of rating, clearly indicate,—

(a)     the circumstances where the rating shall be due for review;

(b)     circumstances of roll over of Commercial Paper at maturity;

(c)     circumstances of issue of subsequent tranche (s), fresh issue of securities by the issuer and any other activity undertaken by the issuer which may adversely affect the credit rating of the issuer.



13.     Payment of Commercial Paper.—On maturity of Commercial Paper, the holder shall present the Commercial Paper or the instrument evidencing deposit of the Commercial Paper in depository account for payment to the Issuing and Paying Agent who, having received funds from the issuer, shall effect repayment through crossed cheques.

14.     Periodic Reports.—Issuing and Paying Agent shall submit a report to the Commission on the redemption of Commercial Paper within ten (10) working days of the date of its maturity and the report must be signed by any officer authorized by Issuing and Paying Agent.

15.     Transfer of Commercial Paper.—(1) Commercial paper issued in physical form shall be transferable by endorsement and delivery.

(2)  The issuer at its absolute discretion may decline to accept any purchase or transfer of the Commercial Paper, provided that where a duly completed transfer memo which records such transfer is submitted to the issuer, the issuer will record such transfer in its books.

(3)  Commercial paper issued in demat form shall be transferable according to the clearing and settlement systems developed for transfer of securities in such form under the stock exchanges and National Clearing Company of Pakistan Limited’s Regulations.

16.     Issue of Duplicate Commercial Paper.—(1) A duplicate of Commercial Paper issued pursuant to these Regulations shall be issued by the issuer within (forty-five days) from the date of application or before maturity, whichever is earlier if the original:

(a)     is proved to have been lost or destroyed, or

(b)     having been defaced or mutilated or torn is surrendered to the issuer.

(2)  The issuer shall, after making such inquiry as to the loss, destruction, defacement or mutilation of the original, as it may deem fit to make, subject to such indemnity and/or such other requirements as the issuer may deem fit, issue the duplicate and the cost involved in issue of duplicate will be payable by the holder of the Commercial Paper.

17.     Roll Over and Early Redemption Options.—(1) Commercial Paper may be rolled over at maturity for a maximum period of one year subject to the following conditions, namely,—

(i)      the circumstances where a Commercial Paper can be rolled over and full modus operandi for such roll over are provided in the investors’ agreement, the offering document and on the back side of the Commercial Paper, where applicable;

(ii)     the option of role over is agreed in writing between the issuer and the Issuing and Paying Agent;

(iii)    written consent of the holders of the Commercial Paper is obtained; and

(iv)    the issuer fulfills all the requirements of Regulation 3 at the time of roll over.

(2)     The issuer may redeem a Commercial Paper before maturity under a call option and an investor may ask the issuer for early redemption under a put option subject to the condition that such options are provided in the investors’ agreement, the offering document and on the back side of the Commercial Paper, where applicable.

18.     Default Mechanism.—In case of default, the Issuing and Paying Agent shall send complete report on the default to the Commission within seven days of the occurrence of default on Commercial Paper.

19.     Penalty.—Any contravention of these Regulations shall be punishable with a fine which may extend to five hundred thousand rupees and, where the contravention is a continuing one, with further fine which may extend to ten thousand rupees for every day after the first during which such contravention continues.

20.     Relaxation of the Regulations.—Where the Commission is satisfied that it is not practicable to comply with any requirement of these Regulations in a particular case or class of cases, the Commission may, for reason to be recorded in writing, relax such requirement subject to such conditions as it may deem fit.

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