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SECP notifies rules for rehabilitation of sick companies

November 2, 2019
SECP notifies rules for rehabilitation of sick companies

The Securities and Exchange Commission of Pakistan has notified the Corporate Restructuring Companies Rules, 2019.

The enactment of rules provide institutional arrangements and legal processes for the revival and rehabilitation of potentially viable companies.

The rules were notified under Section 15 of the Corporate Restructuring Companies Act, 2016. Earlier, the Act was passed by the Parliament to provide for the establishment, licensing and regulation of corporate restructuring companies and the manner in which they carry on business.

According to a statement issued by the SECP, the new law is perceived as a revolutionary step in acquisition, management, restructuring and resolution of non-performing assets of financial institutions, besides restructuring, reorganisation, revival and liquidation of financially distressed companies and their businesses.

Generally, corporate restructuring happens when a corporate entity is experiencing significant problems and is in financial jeopardy.

The provisions of Section 4 of the Act provide that no corporate restructuring company shall be incorporated or carry on business unless it holds a license from the commission and register as a public limited company.

The new law will enable the financial institutions to transfer its non-performing assets to a corporate restructuring company along with all titles, rights, privileges and remedies available.

Globally, the process of corporate restructuring is considered instrumental to eliminate a financial crisis.

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