PSX revamps regulations for defaulters’ segment, suspension, and delisting

The Pakistan Stock Exchange Limited (PSX) has announced significant amendments to its regulations regarding the Defaulters’ Segment, suspension of trading, and delisting of listed companies. 

These changes aim to enhance transparency and protect the rights and interests of minority shareholders.

According to PSX Notice No. PSX/N-98 dated January 30, 2023, the proposed amendments were open for public comments. After detailed consultation and with the approval of the Securities and Exchange Commission of Pakistan (SECP), PSX has finalized these amendments.

Key Amendments Include:

(A) Restructuring of Defaulters’ Segment:

The existing Defaulters’ Segment has been divided into two new segments:

1. Non-Compliant Segment

2. Winding-up Segment

(B) Removal of Certain Events Leading to Placement in Defaulters’ Segment:

Several events previously leading to placement in the Defaulters’ Segment have been removed, including:

• Non-commencement of commercial production/business operations within 90 days as disclosed in the Prospectus.

• Suspension of Central Depository System (CDS) eligibility by CDC.

• Issuance of a qualified opinion on the going concern assumption by the statutory auditor.

• Issuance of Show Cause Notice by SECP for winding-up proceedings.

(C) Events Leading to Placement in Non-Compliant Segment:

A company may be placed in the Non-Compliant Segment for:

• Suspension of commercial production/business operations for a continuous period of one year.

• Failure to hold its Annual General Meeting (AGM) or Annual Review Meeting (ARM) as per the law.

• Failure to submit annual audited financial statements for the preceding financial year.

• Failure to pay annual listing fees for two years or other dues to PSX.

• Failure to join CDS after the security is declared CDS eligible.

• Revocation of CDS eligibility by the CDC.

• Issuance of a disclaimer or adverse opinion in the audit report by the statutory auditor.

• Cancellation or revocation of a license by the SECP or licensing authority.

• Failure to comply with any provision of Chapter 5 of PSX Regulations.

(D) Events Leading to Placement in Winding-up Segment:

A company may be placed in the Winding-up Segment upon:

• Passing of order by SECP to file a winding-up petition in court.

• Filing of a winding-up petition by the SECP, creditors, or shareholders in the Court.

• Commencement of voluntary winding-up proceedings through a special resolution.

(E) Introduction of Risk Warning Alert:

PSX will attach a ‘Risk Warning Alert’ to a Listed Company in certain events, indicating potential suspension or delisting, such as:

• Failure to hold AGM/ARM even after 6 months on the Non-Compliant Segment.

• Failure to submit annual audited financial statements after 6 months on the Non-Compliant Segment.

• Failure to pay annual listing fees or other dues to PSX.

• Failure to join CDS after eligibility.

• Failure to comply with PSX Regulations.

• Passing of Order by SECP for winding-up petition in Court.

(F) Events Leading to Suspension of Trading:

The list of events leading to the suspension of trading has been reduced to:

• Failure to hold AGM/ARM for two consecutive years.

• Failure to submit annual audited financial statements for two consecutive years.

• Failure to join CDS.

• Revocation of CDS eligibility by CDC.

(G) Delisting of a Listed Company:

PSX will initiate delisting upon the appointment of a Liquidator by the Court or upon shareholder resolution, following the submission of relevant documents. In other cases of regulatory non-compliance, PSX will forward cases to SECP for winding-up proceedings under the Companies Act, 2017.

The updated PSX Regulations, incorporating all approved amendments, are available in the Legal Framework section of the PSX website.