ISLAMABAD – The Securities and Exchange Commission of Pakistan (SECP) withthe approval of the federal government has notified the CorporateRestructuring Companies Rules, 2019.
The enactment of Rules provided institutional arrangements and legalprocesses for the revival and rehabilitation of potentially viablecompanies, said a press release issued on Saturday.
The Rules were notified in terms of section 15 of the CorporateRestructuring Companies Act, 2016.Earlier the Act was passed by the Parliament to provide for theestablishment, licensing and regulation of corporate restructuringcompanies and the manner in which they carry on business.
The new law as introduced is perceived as a revolutionary step inacquisition, management, restructuring and resolution of non-performingassets of financial institutions besides restructuring reorganization,revival and liquidation of financially distressed companies and theirbusinesses.Generally, corporate restructuring happens when a corporate entity isexperiencing significant problems and is in financial jeopardy.
The provisions of section 4 of the Act provides that no corporaterestructuring company shall be incorporated or carry on business unless itholds a licence from the Commission and register as a public limitedcompany.
The corporate restructuring companies shall be responsible to acquire andto manage and restructure or dispose of distressed companies, theirbusinesses and properties.
The restructuring companies shall also support and raise finances forrehabilitation, restructuring, reorganization or liquidation of distressedcompanies businesses and their properties.
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The new law will enable the financial institutions to transfer itsnon-performing assets to a corporate restructuring company along with alltitles, rights, privileges and remedies available and attached to suchassets for its proper management.
Globally, the process of corporate restructuring is considered instrumentalto eliminate the financial crisis and enhance the corporation performance.Usually, the corporations facing the financial crunches hires a financialand legal expert for advisory and assistance.
In the modern era, the management of the distressed corporations in orderto improve its performance and to focus on its core strategy, dispose ofnon-performing assets and businesses which do not align with its corestrategy.
The Corporate Restructuring Companies Law is seen by many as instrumentalin turnaround of the sick industry in Pakistan.
