SECP unveils amendments to boost efficiency in corporate restructuring

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP), operating under the federal government’s guidance, has communicated crucial amendments to the Corporate Restructuring Companies Rules, 2019, as disclosed in a recent press release.

These modifications align with the recent enactment of the Corporate Restructuring Companies Act, 2021, and are strategically designed to create a favourable environment for corporate restructuring companies (CRCs).

Specialising in acquiring nonperforming assets (NPAs) from distressed financial institutions, CRCs leverage their expertise to efficiently manage and recover these assets.

This sector plays a pivotal role in minimising stressed assets within the banking industry through market-led solutions, consequently alleviating balance sheet burdens and enhancing overall economic stability.

The amended rules underwent careful consultation with key stakeholders, including the State Bank of Pakistan, the International Finance Corporation, and the general public.

Key highlights of the amendments encompass the establishment of trusts, detailed procedures for trust liquidation by CRCs, and provisions related to the Corporate Restructuring Board (CRB).

These provisions cover the CRB’s composition, processing, and approval of CRCs’ presented schemes, appointment protocols, governance, code of conduct, functions, and budgetary allocations for operational efficiency.

A noteworthy aspect of the amendments is the focus on trust liquidation, enabling CRCs to acquire NPAs from financial institutions efficiently.

By segregating risks and rewards, the amendments facilitate funding for such acquisitions, ensuring appropriate compensation for investors while offering substantial returns.

Concurrently, the CRB amendments aim to streamline the regulatory approval process for the scheme for arrangement.

In essence, these notified amendments are poised to significantly enhance the rehabilitation process for distressed entities.

They provide greater opportunities for companies to restructure and restore profitability, ultimately contributing to enhanced economic stability.

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