SBP Introduces New Mechanism To Remit Out Disinvestment Proceeds

BUSINESS DESK: The State Bank of Pakistan (SBP) has introduced a new mechanism to enable companies in Pakistan to conveniently remit out disinvestment proceeds to their foreign shareholders.

The goal of this initiative is to make Pakistan a more attractive place for investment by increasing investors’ confidence and support ease of doing business. The new mechanism also incorporates feedback received from investors and other stakeholders.

As per the previous mechanism, a designated bank required prior approval of the State Bank for
remittance of disinvestment proceeds above market value, for listed securities and, above breakup value,
for unlisted securities. This requirement presented numerous constraints for investors.

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. The number of
required documents would be in accordance with the size of the transaction.

For disinvestment proceeds not exceeding the market value / break-up value, the required
documents would include 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, the same has been
concluded at an arms-length basis.

For disinvestment proceeds exceeding the market value / break-up value, the additional required
documents would include a detailed valuation/ transaction due diligence by the buyer showing
basis, methodology and key valuation metrics used for valuation.

In case the total remittance of disinvestment proceeds exceeds US Dollar 50 million (or equivalent in other currencies) during a span of six months, 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.

This initiative of State Bank will increase the investors’ confidence and would facilitate the local
companies in particular the start-ups to attract more foreign investment for their businesses. The
circular issued to banks announcing these measures can be accessed at the following link:

https://www.sbp.org.pk/epd/2020/FEC5.htm