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Mergers and Acquisitions in Pakistan
About
Mergers and Acquisitions in Pakistan
Mergers and acquisitions (M&A) combine two business entities into one. A merger occurs when the two businesses form a new, third entity. In an acquisition, one company purchases and absorbs the other into its operations. Following are the most important laws and regulation that govern mergers and acquisitions in Pakistan 1. The Competition Act, 2010 2. The Competition (Merger Control) Regulation, 2007 3. Listed Companies (Substantial Acquisition of Voting Shares and Take Overs) Ordinance, 2002. 4. Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2008. 5. Companies Act, 2017.
The Competition Act, 2010 & The Competition (Merger Control) Regulation, 2007
The Competition Act, 2010 provides that where an undertaking intends to acquire shares or assets of another undertaking; or two or more undertakings intend to merge the whole or part of the business of one undertaking and meet the premerger thresholds prescribed in the Competition (Merger Control) Regulation, 2007 the concerned undertaking must seek a clearance from the Competition Commission.
Government Regulators and Agencies involved in Mergers and Acquisition.
1. The Competition Commission of Pakistan; 2. The Securities and Exchange Commission of Pakistan 3. State Bank of Pakistan.
Listed Companies (Substantial Acquisition of Voting Shares and Take Overs) Ordinance, 2002 and Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2008.
The Listed Companies (Substantial Acquisition of Voting Shares and Take Overs) Ordinance, 2002 (“Takeover Ordinance”) and the Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2008 (the “Takeover Regulations”) contain detailed provisions in relation to acquisition of shares of listed companies. Where an acquirer intends to acquire more than 25 percent of the voting shares or control of the listed undertaking the acquirer is compulsorily required by the Takeover Ordinance to make a public announcement of offer to acquire at least 50% of the remaining voting shares of the company to be acquired. A few types of transactions are exempt from making public offer e.g., acquisition of shares through a scheme of financial institution does not require the acquirer to make a public offer.
Companies Act, 2017
The Companies Act, 2017 deals with the schemes of arrangements for mergers or demergers. The relevant sections are 279 to 285 of the Companies Act, 2017. These provisions inter.alia allow one or more companies to enter into compromise agreements/arrangements with its members or creditors in respect of a merger or demerger of the concerned companies. The scheme of arrangement lays out the particulars including issues of assets/property, liabilities and debts of the companies, share swaps ratios etc. the continuation of any legal proceedings and dissolution without winding up of one or more of the concerned entities. The compromise or arrangement shall be sanctioned by the Securities and Exchange Commission of Pakistan. The commission is also empowered under the Companies Act, 2017 to enforce compromises and arrangements. Section 183(3) of the Companies Act, 2017 provides that the board of a company shall not, except with the consent of the shareholders in a general meeting, either specifically or by way of an authorization, sell, lease or otherwise dispose of the undertakings or a sizeable part thereof (unless the main business of the company comprises of such selling or leasing).
