SECP to Introduce Concept of SPA Company

ISLAMABAD: In light of its vision to provide a viable and sustainable eco-system for capital formation, the Securities and Exchange Commission of Pakistan (SECP) is exploring the concept of special purpose acquisition company (SPACs).

To introduce the SPAC, the SECP has proposed amendments to the Public Offering Regulations, 2017 to solicit public comments. The draft amendments are available at https://www.secp.gov.pk/laws/draft-for-discussion/draft-rules-regulations/

SPACs, a new concept for Pakistan’s capital market, are prevailing in many jurisdictions, including the USA, Canada, Malaysia, etc. Under the SPAC structure, a company comprises a group of persons/professionals who raise funds from the general public. These funds will be available for merger or acquisition transactions within a permitted time frame.

A SPAC’s life begins with its initial formation (in the form of a company), followed by its IPO, its search for a target, shareholder approval for merger/acquisition, and finally, the close of an acquisition or else return of the SPAC’s proceeds back to its investors.

Under the proposed regulatory framework, SPAC shall be a company or body corporate,  a group of persons will form meeting the fit and proper criteria. Paid up-capital requirement for SPAC shall be Rs 1 Million and it shall raise at least Rs200 million through a public offering. SECP will give two years time to complete the Acquisition/merger. The shareholders will keep at least 90% of the funds in an escrow account the custodian will manage.

The proceeds in the escrow account may be invested in permitted investments. The shareholders will approve each merger or acquisition transaction by way of special resolution.

Upon merger, the SECP will atomically list a merged entity and in case of acquisition, the SPAC shall list the acquired entity. Shareholder/(s) disapproving the merger or acquisition will be eligible to a refund of their money out of the Escrow account as per the specified procedure.

The aforesaid mentioned amendments are likely to provide a more conducive regulatory environment for capital formation in the economy through the primary market.