Securities and Exchange Commission of Pakistan relaxes investment rules for associated companies

Karachi: The Securities and Exchange Commission of Pakistan has relaxed the requirements of investments in associated companies in order to facilitate inter-corporate financing for private and investment companies.

According to Alfalah Securities Limited, SECP has amended the section 208 of the 1984 Companies Ordinance in which the provisions for investments in associated companies of private entities has been abolished. SECP has also exempted the requirements of Section 208 on investment companies whose core business is to make investments. SECP has abolished to seek shareholders approval before making routine deposits with associated financial institutions duly licensed by the SBP, a NBFC licensed by the SECP and Modaraba Management Company. However, the rate of return on deposits would be ensured by these companies not to be less than the prevailing market rate on similar deposits or the borrowing cost of the company. Section 208 stated that the companies under a special resolution had to charge a return on investment in the form of a loan, not less than its borrowing cost, however, the SECP has exempted the passing of special resolution for all companies and has left the charging of interest on to the company’s discretion.

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