SBP makes remitting disinvestment proceeds easier to help attract FDI

KARACHI: The State Bank of Pakistan (SBP) has announced a new and more "transparent mechanism, with complete delegation to banks", to help make remitting disinvestment proceeds convenient in a bid to attract foreign direct investment (FDI), it said in a press release.

The new method differs from the prior one in that it does not require companies' designated banks to seek approval from the SBP before remitting the disinvestment proceeds "above market value for listed securities, and above breakup value for unlisted securities".

"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 central bank underlined, saying the new method "also incorporates feedback received from investors and other stakeholders".

In its post on Twitter, the SBP added that the transparent mechanism would "also facilitate the local companies, in particular the start-ups, to attract foreign investment".

Documents required under new process

Listing the documents required to go ahead with the new procedure, the central bank said a "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" in case the disinvestment proceeds do not exceed the market or break-up value.

If, however, the disinvestment proceeds exceed the market or break-up value, the additional documents required to go ahead with the new procedure "include a detailed valuation/ transaction due diligence by the buyer showing basis, methodology and key valuation metrics used for valuation".

Similarly, if the total remittance of disinvestment proceeds exceeds $50 million during a six-month period, "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", the central bank highlighted.