Overview of Regulation “the Unlisted Companies (Buy-Back of Shares) Regulations, 2022.pdf

COMMENTARY ON THE UNLISTED COMPANIES (BUY-BACK OF SHARES) REGULATIONS, 2022
1 | P a g e
Draft Regulation “the Unlisted Companies (Buy-Back of Shares) Regulations, 2022” has been promulgated vide S.R.O. S.R.O. 2066 (I)/2022 by the commission under powers
conferred under sub-section (1) of section 512 read with section 88 of the Companies Act, 2017 (XIX of 2017)
Definition: buyback/ repurchase shares are observed where a company buys its own outstanding shares to reduce the number of shares available as paid up capital; therein the regulation the
purchase of shares is defined as:
“Purchase" means buy-back of its own shares by a purchasing company under section 88 of the Act and these regulations.
Where the Section 88
“Power of a company to purchase its own shares.—(1) Notwithstanding anything contained in this Act or any other law, for the time being in force, or the memorandum and articles, a
company may, subject to the provisions of this section and the regulations specified in this behalf, purchase its own shares.
Gist of New Regulation:
Earlier only Listed Companies can buy back its shares under the regulation “the Listed Companies (Buy-Back of Shares) Regulations, 2019” now from after publication of this regulation the public
unlisted companies and private companies may also buy back its shares.
This draft regulation has been prepared for the public unlisted companies and private companies, where the specific expression/sentences/word which relates to listed companies are omitted,
some of the content has been adopted from the Companies (Further Issue of Shares) Regulations, 2020 and other necessary amendments are made.
Buyback shares shall be complied with the section 72 i.e conversion of the physical shares into book entry form and the shares are required to enlist in the CDC. [share shall also be duly complied
with stamp duty act before submitting in the CDC]
Comparison between the listed and unlisted companies Regulations and its review
the Listed Companies (Buy-Back of Shares)
Regulations, 2019
the Unlisted Companies (Buy-Back of Shares)
Regulations, 2022
Difference Recommendations/explanations
CHAPTER II
ELIGIBILITY FOR PURCHASE
3. Eligibility Requirements for the
Purchase.- (1) A company shall be eligible
to purchase if it fulfils the following
conditions, namely:-.
3. Eligibility Requirements for the Purchase. -(1) A
public unlisted or a private company, fulfills the
following conditions: -
Listed Companies /Private and Public
unlisted
Amendment in the articles are required for
adoption of buy back shares – explanation
No Comments

2 | P a g e
(a) it is listed on the securities exchange
for a period of not less than three
years;
(b) it is compliant with the minimum
capital or equity requirements licensing
requirements , if any, after the purchase;
(c) it has obtained approval of its
members for purchase through special
resolution;
(d) board has undertaken that
the funds specified for the purchase by
the board of directors of the purchasing
company are available with the
company; and
after the purchase, the purchasing
company is capable of meeting its
obligations on time during the period up
to the end of the immediately succeeding
twelve months;
(a) It has distributable profits or reserves for the
purpose of purchase of its own shares;
Provided that if the purchasing company is
engaged in any business activity which is subject to
license or approval under any law, it has obtained
permission from the relevant department or the
authority in respect of the purchase;
(b) the purchase is authorized by its articles of
association;
(c) it has obtained approval of its members for
purchase through special resolution;
(d) the purchase is recommended by the board
through resolution and the board of directors
has undertaken through a resolution that the
funds specified for the purchase are available
with the purchasing company and after the
purchase, the purchasing company is capable
of meeting all its financial obligations on time
during the period up to the end of the
immediately succeeding twelve months;
In listed companies it shall be listed in
exchange for more than 3 years,
however, in unlisted and Private
companies as the shares are not enlist on
exchange, therefore, these companies
shall be adequate reserved/profit to
purchase its own shares
In the proviso of unlisted/private
companies; those companies where
licensing is required shall obtain
permission for the buy-back.
Article of Association (AOA) shall contain
the clause which allows company to buy-
back its shares
Same
Under listed Companies undertaking is
required, however, under
unlisted/private companies a resolution
will be required
An insertion of the clause is required in AOA
of private company, in absence of the clause
of buy back - explanations
No Comments
No Comments

3 | P a g e
(e) [the purchasing company shall not be
on the default counter and has not
defaulted on any debt instrument
supported by auditors’ certificate;]
(f) board of directors of a purchasing
company shall not propose or
recommend a purchase in any of the
following namely:-
(i) winding up proceedings has
commenced;
(ii) a scheme of arrangement,
compromise, reconstruction, merger
or de-merger is approved by the
board of directors unless the
Purchase is a part of such
arrangement, compromise,
reconstruction, merger or de-
merger;
(iii) a public offer for acquisition of
shares of the purchasing company
under the Securities Act has been
announced; and
(e) the secured creditors of the company have no
objection to the proposed purchase of shares
by the purchasing company;
(f) the board of directors of a purchasing
company shall not propose or recommend a
purchase in any of the following circumstances
namely: -
(i) its winding up proceedings have commenced;
(ii) a scheme of arrangement, compromise,
reconstruction, merger or demerger is
approved by the board of directors unless the
purchase is a part of such arrangement,
compromise, reconstruction, merger or
demerger; and
(iii) it is not compliant with the provisions of the
Act, rules and regulations framed thereunder
Under listed Companies auditor
certificate is required; however under
the unlisted/private companies NOC
from the creditor
The word circumstances is only addition
No change
No change
Under listed Companies is shall be
complied with Securities Act, however,
as is inapplicable on unlisted/private
companies, therefore, it shall comply the
companies Act, 2017 and it regulations
Nil
No Comments
No Comments
No Comments
No Comments
No Comments

4 | P a g e
(g) before the expiry of six months from
the date of an earlier general meeting in
which the purchase was disapproved by
the members.
No Comments
4. Procedure for Purchase.- (1) The
general meeting in which the special
resolution is to be passed shall be held
not later than [forty-five] days of the date
of the meeting of the board of directors
in which the purchase is recommended.
(2) The purchasing company shall make a
public announcement [as per Schedule II]
within two working days of passing of the
special resolution.
(3) The board of directors of purchasing
company shall, before making the public
announcement, authorize an officer of
the company to act as manager to the
offer who shall ensure compliance with
the legal requirements pertaining to
purchase of shares.
4. Procedure for Purchase-(1) The board of directors
of the purchasing company shall recommend and
approve the purchase of shares specifying the number
of shares proposed to be purchased, purpose of the
purchase, purchase price, period within which the
purchase shall be made, source of funds, justification
for the purchase and effect on the financial position of
the company.
(2) The general meeting in which the special resolution
is to be passed shall be held not later than forty-five
days of the date of the meeting of the board of
directors in which the purchase is approved.
(3) The notice of the general meeting shall be
accompanied by the statement
specifying at least such information as contained in
sub-regulation (1) alongwith a declaration as per
format appended with the annexure to these
regulations, signed by at least two directors, one of
whom may be chief executive, on behalf of the board
of directors, to the effect that the board has made full
enquiry into the affairs of the company and have
concluded that the company is capable of meeting its
liabilities and will not be rendered insolvent for twelve
months from the date of declaration adopted by the
Sub clause (1) is replaced to (2).
Sub clause (2) is replaced to (1).
Under listed Companies the an officer is
required to be authorized to ensure
compliance, however, in the listed
companies the requirement of two
directors to signed the statement is
essential replicated from further
issuance of shares with an additional
obligation for forecasting of one year
with remark that company will not be
insolvent.
(No Comments
No Comments
The companies who have proceed for buy
back its shares could not go for liquidation or
for an easy exit – explanation

5 | P a g e
(4) [ omitted ]
(5) The authorized officer shall, within
fifteen days of the closing of the purchase
period, submit a final report on the
purchase to the Commission and the
securities exchange on the format
specified in Schedule IV;
board.
(4) Within three days of passing of the special
resolution, the purchasing company shall dispatch the
offer letter to all the existing members of the company
signed by at least two directors, limiting a time not
exceeding fifteen days from the date of the offer,
through registered mail or courier or electronic mode
of communication:
Provided that if the offer is not accepted within the
specified time period, the offer shall be deemed to be
declined.
(5) The offer for purchase of shares made to members
of the purchasing company shall be in proportion to
the existing shares already held by them.
Provided that if all the members entitled to attend and
vote at any meeting convened to approve purchase of
shares so agree, a resolution may be proposed and
passed unanimously for purchase of shares on non-
proportionate basis.
(6) The members shall submit acceptance or decline
letter as the case may be, to the purchasing company
and in case of acceptance, shall also surrender physical
share certificates and/or authorization for shares held
in book entry form subject to the procedure specified
under the relevant law, rules or regulations, within
fifteen days of the date of offer
Under listed Companies the prior sub
clause were omitted vide S.R.O
1725(I)/2022 dated September 06, 2022
will not intimate to the members
separately as they have already informed
through public notice.
In continuation of above and replication
the further issuance of share regulations
In Sub Clause 5 under listed Companies
regulations 15 days’ time is given to close
the offer and a report is required to be
submit the commission, however, in
public companies the time frame is same
but the companies also required to
surrender physical share certificates or
where the shares are shares in book
entry shall adopt relevant process of
surrender the e-shares
No Comments
No Comments
No Comments

6 | P a g e
5. [omitted]
6. Purchase [procedure] through securities
exchange.-
.
7. Purchase Period.- (1) [omitted]
8. Purchase Price.- (1) [omitted]
9. Maximum holding of Treasury Shares.-
5. Cancellation of the Purchased Shares and
Procedure. - All shares that have been purchased shall
be deemed to be cancelled immediately after
completion of the purchase, however following
procedure shall be followed by the purchasing
company:
(a) Where the shares purchased are in physical form,
these shall be marked as cancelled within seven days
of the completion of purchase;
(b) Where the shares purchased are in book entry
form, it shall follow the procedure prescribed by the
relevant depository for cancellation of such shares.
No clause as it in applicable of unlisted/private
companies
companies
companies
companies
No Comments
No Comments
No Comments
No Comments
No Comments

7 | P a g e
CHAPTER III
OBLIGATIONS AND RESTRICTIONS
10. Obligations of the Purchasing company.-
The purchasing company shall-
(a) communicate to the Commission and the
securities exchange simultaneously, the
decision of the board of directors regarding
recommendation of the purchase on the day
the decision is made;
(b) make public announcement on the
format specified in Schedule II and publish it
in at least two daily newspapers, one each in
Urdu and English languages having
nationwide circulation at least seven days
before the commencement of the purchase
period;
(c) [omitted]
6. Obligations of the Purchasing Company. - The
purchasing company shall: -
(a) send the notice of general meeting along with the
relevant information and documents to all the
members of the company;
(b) dispatch letter of offer as referred to in regulation
4 to the members;
(c) make payment for purchase of shares in cash
through banking channel which shall be out of the
distributable profits or reserves specifically maintained
for the purpose;
Under listed Companies regulation they
are obligated to communicate the
decision of the board on the
recommendation of the Buyback of
shares, however, in the unlisted/private
companies a notice of the general
meeting shall be sent to all members.
Under listed Companies regulation
public announcement in the specific
format in Schedule II of the listed
companies regulation is required publish
in English and Urdu newspaper,
however, the in unlisted/private
companies only required to dispatch
notice to the exiting members.
omitted vide S.R.O. 1725(I)/2022 dated
September 06, 2022 where deposit are
required to be made the designated
bank account one day before the
settlement date. In the unlisted or
private company’s timeframe is not
No Comments
No Comments
Only such fund can be utilized to the buyback
shares from the profit which are specifically
maintained for the purpose of buyback –
explanation

8 | P a g e
(d) cancel the shares within ten days of the
closing of the purchase period where the
purchase is made for the purpose of
cancellation[: Provided that for cancellation
of shares, the purchasing company has to
follows the filing requirements of the Act, the
Companies (General Provisions and Forms)
Regulations, 2018 and the procedure
prescribed by CDC
(e) submit to the Commission, the securities
exchange and CDC, a copy of the special
resolution authorizing the purchasing
company to purchase on next working day of
the general meeting in which it is passed and
such resolution shall specify the indicative
number and percentage of shares to be
purchased, mode of the purchase, allocated
funds and the purchase period;
(f) submit to the Commission and the
securities exchange, the published copies of
the public announcement within two days of
its publication;
(d) mark physical shares as cancelled and ensure that
for shares in book entry form prescribed procedure for
cancellation is duly followed;
(e) file with the registrar the relevant special resolution
within fifteen days of the date of the special resolution;
(f) file with the registrar relevant statutory return
within fifteen days of the cancellation of shares;
defined, however, the quality of the fund
has been defined.
within 15 days from the close of the
purchase period cancellation of the
shares shall be proceed in accordance
with the procedure the Companies
(General Provisions and Forms)
Regulations, 2018 and prescribed by
CDC, However, now in the
unlisted/private companies the share are
required to complied with section 72 of
the Act and share shall be converted into
book entry form as per CDC procedure
Under listed Companies regulation a
copy of the special regulation authorizing
the company shall be submit to the
commission and CDC with details as
mentioned in the clause, however, in
unlisted/private companies shall file the
special resolution with the registrar at
relevant Company registration Office
(CRO)
Under listed Companies regulation the
copy of the public announcement shall
be furnished with the commission, in
unlisted companies and private
companies shall filed return in the
specified format as per Annexure-A.
Conversion of the physical shares into book
entry form is required as per section 72 and
prescribe procedure of CDC – explanation
No Comments
No Comments

9 | P a g e
(g) intimate to the Commission and the
securities exchange on the day of the closing
of the purchase period, the number of shares
purchased, and advertise the same within
two days of the closure of purchase period in
same newspapers in which the public
announcement was published;
(h) disclose in its annual report, detail of the
shares purchased and detail of the treasury
shares disposed of and such disclosures shall
contain at least the number of shares
purchased or sold and the price of the
purchase or sale; and
(i) file with the registrar concerned within
thirty days of the closing of the purchase
period the following documents-
(i) copy of the board of directors
resolution regarding the
purchase;
(ii) (ii) copy of the special resolution
authorizing the purchase;
(iii) copy of the notice of the general
meeting in which the special
resolution was passed; and
(iv) copy of the public
announcement;
(j) [[omitted]
(k) [omitted]
(g) file with the Registrar, Final Return on the format as
per Annexure-A to these regulations along with
statement of compliance by all the directors including
chief executive as per Annexure-A1 within fifteen days
of the completion of the process of purchase.
No clause as it inapplicable of unlisted/private
companies
companies
companies
companies
intimation of
N/A
N/A
N/A
N/A
No Comments
No Comments
No Comments
No Comments

10 | P a g e
(l) [omitted]]
11. Restriction on the purchasing company.-
The purchasing company shall not-
12. General Restrictions.-
companies
companies
companies
N/A
N/A
N/A
No Comments
No Comments
No Comments
CHAPTER IV
MISCELLANEOUS
13. Disposal of the Treasury Shares and
procedure.-
14. Power to give directions:- Where the
Commission is satisfied, on its own motion or
on the basis of any information received by
it, that it is necessary and expedient so to do-
(a) in the interest of the shareholders of the
purchasing company;
(b) in the interest of investors or the market
generally; or
(c) to prevent the abuse of law or the
process laid down in these regulations; it
may issue directions to the purchasing
company, any of its directors, officers, or
companies
8. Power to give directions: - Without prejudice to the
provisions of section 466 of the Act, where the
Commission is satisfied, on its own motion or on the
basis of any information received by it, that it is
necessary and expedient –
(a) in the interest of the shareholders of the purchasing
company; or
(b) in the interest of investors; or
(c) to prevent the abuse of law or the process laid
down in these regulations;
N/A
Same, however, reference of the section
466 is given
Same
Under listed Companies regulation the
word or the market referred to Stock
market, however, as unlisted/private
companies has nothing to do with the
stock market, therefore, it is not referred
Same
Same
There are no Treasury shares in the unlisted
companies, therefore, this section has not
been taken
No Comments
No Comments
No Comments
No Comments
No Comments

11 | P a g e
any other person; including but not
limited to-
(i) stopping the purchasing
company at any stage from
making the purchase or sale, as
applicable
(ii) to do or desist from doing such
acts as the Commission may
determine; and
(iii) carry out such steps as are
necessary to rectify the situation.
N/A
It may issue directions to the purchasing company, any
of its directors, officers, or any other person; including
but not limited to-
(i) stopping the purchasing company at any stage from
making the purchase or sale, as applicable;
(ii) do or desist from doing such acts as the Commission
may determine; and
(iii) carry out such steps as are necessary to rectify the
situation.
9. Penalty for contravention of Regulations: Whoever
fails or refused to comply with, orcontravenes any
requirements of the regulationsshall be punishable
with penalty as provided under sub-section (2) of
section 512 of the Act.
Same
Same
Same
Reference of penalty is given in the
clause
No Comments
No Comments
No Comments
No Comments

12 | P a g e
Thanking you,
Commentary by Syed Muhammad Humza Hussain having more than 8 years of experience; dealing in top rated companies/Group of Pakistan amongst them 7 are listed Companies, Currently
Working as Assistant Manager Tax and Corporate in Mazars Pakistan.
Experienced consultant with a demonstrated history of working in corporate consultancy, Tax and administration. Skilled in handling all secretarial matters of Companies. Finalist of Masters of
Business Administration (M.B.A.) in business administration and management in finance from Iqra University;
Contact:
Mobile: +92 (0)335 2651436
sm_humza@outlook.com
My profile on LinkedIn
https://www.linkedin.com/in/humza/

Overview of Regulation “the Unlisted Companies (Buy-Back of Shares) Regulations, 2022.pdf

Recommended

Recommended

More Related Content

Similar to Overview of Regulation “the Unlisted Companies (Buy-Back of Shares) Regulations, 2022.pdf

Similar to Overview of Regulation “the Unlisted Companies (Buy-Back of Shares) Regulations, 2022.pdf (20)

More from Syed Muhammad Humza Hussain

More from Syed Muhammad Humza Hussain (15)

Recently uploaded

Recently uploaded (20)

Overview of Regulation “the Unlisted Companies (Buy-Back of Shares) Regulations, 2022.pdf