SBP Introduces a Mechanism for Remitting Disinvestment Proceeds

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.

SBP also announced this through their Twitter page, saying that this move will facilitate local companies in attracting foreign investment.

1/3 #SBP introduces a transparent mechanism, with complete delegation to banks, for remitting disinvestment proceeds to facilitate foreign direct investment. For details: https://t.co/7Z3BSpttHz

— SBP (@StateBank_Pak) October 27, 2020

As per the previous mechanism, a designated bank required prior approval of the central bank for remittance of disinvestment proceeds above market value, for listed securities and, above breakup value, for unlisted securities.

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 that do not exceed the market value or the break-up value, the required documents would include copy of Share Purchase Agreement, broker’s memo in case of quoted shares or a break-up value certificate of a Quality Control Review (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 or the break-up value, the additional required documents would include a detailed valuation of the 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 $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, which shall be assessed by the designated bank without needing to send to the SBP.

This initiative of the SBP will increase investors’ confidence and would facilitate the local companies, in particular, the start-ups to attract more foreign investment for their businesses.