SECP Introduces Robust Fit-and-Proper Criteria for Corporate Restructuring Firms

In a bid to fortify the risk mitigation framework and elevate transparency within the approval process, the Securities and Exchange Commission of Pakistan (SECP) has unveiled a comprehensive fit-and-proper criteria framework for crucial stakeholders within corporate restructuring companies (CRCs). This strategic move aims to ensure the integrity and competence of key executives, such as promoters, major shareholders, board members, directors, and CEOs.

The recently published Circular, accessible on SECP's official website, delineates the parameters for evaluating an individual's fitness and propriety. These factors encompass integrity, track record, financial soundness, competence and capability, and the potential for conflicts of interest with the CRC's business operations.

Crucially, compliance with these stringent criteria is deemed perpetual, placing an ongoing responsibility on CRCs to ensure adherence at all times. Additionally, CRCs are mandated to actively monitor any changes in the status of their CEOs and directors.

In the event of a change that leads to non-compliance with the Fit and Proper Criteria, the CRC's board is required to promptly suspend the individual's functions, notify the SECP, and initiate the process of replacing them with a qualified candidate.

This groundbreaking circular is poised to streamline the licensing process for CRCs, fostering heightened trust and reliability within the sector. The initiative is expected to contribute to a more robust and accountable corporate restructuring landscape.

As a supplementary measure, the Circular includes annexures providing guidance on the information that promoters, major shareholders (excluding a body corporate), proposed directors, and proposed chief executive officers of CRCs are required to furnish.