The Securities and Exchange Commission of Pakistan (SECP) has unveiled a set of detailed guidelines for the liquidation process of trusts managed by corporate restructuring companies.
Issued on Saturday, these guidelines mandate that any decision to liquidate a trust must be communicated to the Corporate Restructuring Board within seven working days.
Failure to adhere to this timeline could lead to the SECP initiating proceedings against the corporate restructuring company involved.
Under the new SECP framework, the liquidation of a trust can occur under several circumstances, with the prerequisite that a three-fourth majority of the trust’s beneficiaries approve the action.
Such circumstances include the fulfillment of the trust’s initial objectives, such as the acquisition, disposal, resolution, or settlement of non-performing assets, and the subsequent distribution of net proceeds as outlined in the trust’s constitutive documents.
Additionally, the liquidation process may be triggered if the corporate restructuring company faces liquidation, bankruptcy, has a liquidator appointed over its assets, loses its license, or is found without a valid license.
The guidelines also cover situations where the trust is deemed commercially unviable or its objectives unattainable, as well as any other events deemed by the corporate restructuring company as necessitating liquidation.
Upon deciding to liquidate a trust, the corporate restructuring company is required to present relevant information regarding the realization of the trust’s property to its board of directors.
A liquidator will then be appointed to oversee the liquidation process, after which a comprehensive report on the proceedings will be presented to the board of directors by the corporate restructuring company.
The SECP has emphasized that throughout the liquidation process, both the corporate restructuring company and the appointed liquidator must comply with the applicable provisions of prevailing provincial trust laws, ensuring a structured and lawful approach to the dissolution of trusts.
