In a bid to attract higher foreign direct investment (FDI) in the country, the State Bank of Pakistan (SBP) on Tuesday announced a new and more “transparent mechanism, with complete delegation to banks”, to help make remitting disinvestment proceeds convenient.
In a press release, it said the new method differs from the prior one in that it does not require companies designated banks to seek approval from the SBP before remitting the disinvestment proceeds above market value for listed securities, and above breakup value for unlisted securities.
As per the previous mechanism, a designated bank required prior approval of the central bank for remittance of disinvestment proceeds above market value, for listed securities and, above breakup value, for unlisted securities.
Under the new mechanism, the bank designated by the company has been delegated the authority to remit the entire disinvestment proceeds to non-resident shareholders, upon submission of required documents, by following a convenient mechanism without referring the case to SBP.
SBP announced this through their twitter page
Documents required under new process
According to SBP, following documents will be required under new procedure
Copy of Share Purchase Agreement, broker’s memo in case of quoted shares/break-up value certificate of a QCR rated practicing Chartered Accountant in case of unlisted shares, latest audited financials of the company, signed M-Form and an undertaking from the buyer that in case the transaction is between related parties.
If, however, the disinvestment proceeds exceed the market or break-up value, the additional documents required to go ahead with the new procedure “include a detailed valuation/ transaction due diligence by the buyer showing basis, methodology and key valuation metrics used for valuation”.
Similarly, if the total remittance of disinvestment proceeds exceeds $50 million during a six-month period, “the applicant shall also submit an independent review of the buyer’s valuation, from QCR rated practicing chartered accountant, that shall be assessed by the designated bank without needing to send to the SBP”, the central bank highlighted.