of Foreign Securities.
of Pakistani Securities.
of Securities to Non-Residents.
for issue of Shares.
of Securities and NIT Units
to Persons Resident outside Pakistan on non-repatriation
basis and its transfer on the same basis.
Trading of Quoted Shares by Non-Residents.
Trading of Federal Investment Bonds, Treasury
Bills, Registered Corporate Debt Instruments and WAPDA’s
Registered Bonds listed with Stock Exchanges in the Secondary
Instructions regarding shares transferred under Central Depository
System (CDS) of Central Depository Companies.
by branches of Foreign Banks and Foreign Controlled Investment
and Transfer of Foreign Exchange Bearer Certificates/U. S.
Dollar Bearer Certificates/Five Years Foreign Currency Bearer
Certificates/Special U.S. Dollar Bonds.
between Registers etc.
Abroad by Residents.
of Foreign Securities.
of shares, term certificates and Modaraba certificates by
2 of the Act defines "security" as shares, stocks, bonds,
debentures, debenture stock and Government securities as defined
in the Securities Act, 1920, deposit receipts in respect of deposit
of securities and units or sub-units of unit trusts but does not
include bills of exchange or promissory notes other than Government
promissory notes. A "foreign security" is defined as
a security issued elsewhere than in Pakistan and any security
the principal of or interest on which is payable in any foreign
currency or elsewhere than in Pakistan. For the purpose of Section
13 of the Act, the term "security" also includes coupons
or warrants representing dividends or interest and life or endowment
the purposes of Section 13 of the Act, the term "a person
resident outside Pakistan" covers a foreign national including
a foreign national of Indo-Pakistan origin as also a Pakistani
holding dual nationality for the time being resident in Pakistan
and a company registered in Pakistan which is controlled directly
or indirectly by a person resident outside Pakistan. In this connection
a reference is also invited to para 2 of Chapter-XIX.
Import of Securities.
There are no restrictions under the Act on import into Pakistan
of any securities whether Pakistani or foreign.
Export of Foreign Securities.
Pakistan national resident in Pakistan who is, or becomes owner
of foreign securities is permitted to hold or retain such securities
provided he has acquired them in a manner not involving a breach
or violation of the Foreign Exchange regulations. In terms of
clause (a) of sub-section 1 of Section 13 of the Act, the taking
or sending of any securities to any place outside Pakistan except
with the general or special permission of the State Bank, is prohibited.
Persons in Pakistan who are holders of foreign securities and
who wish to send such securities to banks, brokers or agents abroad
for purpose of sale, transfer, etc., should apply to the State
Bank through an Authorised Dealer for necessary export licence.
for export of such securities will be granted provided the securities
are sent through an Authorised Dealer who should give an undertaking
that the securities will be received back in Pakistan within a
specified period or in the case of sale, the sale proceeds in
foreign currency will be repatriated to Pakistan. State Bank may
also consider applications for exchange of foreign shares and/or
securities held by residents of Pakistan with Pakistan shares
and/or securities held by residents abroad. Applications for this
purpose should be made to the State Bank through an Authorised
Dealer or stock and share broker.
Export of Pakistani Securities.
nationals as also "persons resident outside Pakistan"
holding Pakistani securities desirous of sending or taking out
the Pakistani securities not covered under the succeeding paragraphs 6 & 7 are required to obtain
prior permission of the State Bank. Application for the purpose
should be made to the State Bank through an Authorised Dealer.
Transfer of Securities to Non-Residents.
terms of clause (b) of sub-section 1 of Section 13 of the Act,
transfer of any security or creation or transfer of any interest
in a security to, or in favour of "a person resident outside
Pakistan" is prohibited except with the general or special
permission of the State Bank. The above prohibition applies to
transfer of (i) all Pakistani securities (i.e. securities expressed
to be payable in Pakistan currency or registered in Pakistan)
whether held by persons resident in or outside Pakistan and (ii)
all foreign securities held by Pakistan nationals. Pledging or
hypothecation of securities to or in favour of non-residents e.g.,
as collateral or security for credit facilities abroad, (see
Chapter XIX) or utilizing them for forming trusts or
settlements of which a non-resident is the beneficiary is also
prohibited under Section 13 of the Act. In the case of securities
registered in Pakistan, the companies concerned must obtain permission
of the State Bank before registering its transfer in the name
of "persons resident outside Pakistan". In terms of
Section 13 of the Act, Authorised Dealers are required to obtain
permission of the State Bank before purchasing shares or securities
registered in Pakistan on behalf of "persons resident outside
State Bank has granted general exemption from the provision of
section 13(1) of the Act in connection with the issue, transfer
and export of securities on repatriation basis as mentioned in
sub para (B) to those non residents who are covered by sub para
issue price or purchase price as applicable, is paid in foreign
exchange through normal banking channel by remittance from abroad
or out of foreign currency account maintained by the subscriber/purchaser
in Pakistan, except in case of issue of bonus shares and transfer
of shares as stated in sub-paragraph
purchase price (whether negotiated privately or otherwise) is
not less than the price quoted on the stock exchanges of the country,
in the case of listed securities, and the break up value of shares,
as certified by a practicing Chartered Accountant, in the case
of unlisted securities.
A Pakistan national resident outside Pakistan.
(II) A person who holds dual nationality including Pakistan
nationality, whether living in or outside Pakistan.
(III) A foreign national,
whether living in or outside Pakistan.
A firm (including a partnership) or trust or mutual fund
registered and functioning outside Pakistan, excluding entities
owned or controlled by a foreign government.
(B) The above exemption applies in the following cases:
Issue of shares including Modaraba Certificates/Trust and
Fund Units out of new public offers, irrespective of the nature
of business of the company.
Transfer of shares quoted on Stock Exchanges of the country,
irrespective of the nature of business of the company.
placement of new/initial shares with foreign investors by a public
or private limited company, which is,
manufacturing company (for this purpose, power generation companies/energy
related infrastructure companies, producers of computer software
and companies established
to set up software technology parks
i.e. technology centres for developing computer Software
packages/programs are treated as manufacturing concerns).
in those activities in
Service, Infrastructure, Social and Agriculture etc. Sectors
which are open to foreign investors as per prevalent Investment
Policy of the Government provided the conditions prescribed therein
have been fulfilled and ‘Entitlement Certificate’
certifying the value of foreign investment obtained from the State
Bank of Pakistan.
Transfer of shares of
companies covered by sub para (III).
Transfer of Pakistani securities held by a “ person
resident outside Pakistan” on repatriable basis to other
eligible ‘persons resident outside Pakistan’ on the
same basis against payment outside Pakistan,
provided a certificate to this effect is given by the transferee
to the company concerned.
Issue of rights shares and bonus shares in all those cases
where shares are held on repatriable basis by
‘persons resident outside Pakistan’ in accordance with
the general or special permission of the State Bank.
Issue of Government
securities to persons mentioned in sub-para
of rupee denominated corporate debt instruments viz. Participation
Term Certificates/Term Finance Certificates etc. and Registered
WAPDA Bonds as permitted under the relevant SRO governing issue
and sale of such bonds.
Issue of NIT Units to persons mentioned in sub para (A)
(I, II & III).
(C) Companies issuing shares to a ‘person resident
outside Pakistan/registering transfer of shares in favour of such
persons, in accordance with the exemptions provided in sub paragraphs
(A) and (B) and the buyers and the sellers of the shares
so issued or transferred
are exempted from the operation of restrictions contained
in Section 18(1) of the Foreign Exchange Regulation Act, 1947.
7. Procedure for issue
Companies issuing shares out of new public offers on repatriable
basis, as permitted under sub para
(B) (I) of preceding paragraph 6, may open foreign currency
collection accounts with banks abroad or in Pakistan for receiving
the subscription in foreign currency. They may also allow refunds
from these accounts to unsuccessful applicants. The amount subscribed
by the successful applicants should be repatriated to Pakistan
and foreign currency accounts closed within a week of allotment
of shares. Proceeds Realisation Certificate in evidence of subscription
money having been repatriated to Pakistan shall be obtained by
the company from the concerned Authorised Dealer
for submission in original to the designated Authorised
Dealer with the form prescribed
at Appendix V- 90.
In the case of remittance
of subscription money directly to Pakistan and its
payment to the company’s rupee account, shares may
be issued for the rupee equivalent
paid by the concerned Authorised Dealer as shown in the
Proceeds Realisation Certificate (s).
In case shares are to be issued to non-resident sponsors against
the value of plant and machinery supplied by them, an application
should be submitted to the area office of the Exchange Policy
Department for issue of an Exchange Entitlement Certificate along
with the relative import documents viz. original invoices, original
bills of entry, copies of bills of lading or airway bills and
import permit/import authorisation from Export Promotion Bureau,
if applicable. The Exchange Entitlement Certificate will be issued
by the State Bank at the average of selected Authorised Dealers’
buying and selling rates on the dates of filing of bills of entry
with the Customs. Once
the Exchange Entitlement Certificate has been issued by the State
Bank, the company may issue the shares upto the value mentioned
in the Certificate to the non-resident sponsors.
In case the non-resident sponsors want to pay their contribution
to the equity in foreign currency and such payments are
retained in a foreign currency account opened with an Authorised Dealer in Pakistan, in terms of paragraph
8 (ii) of Chapter VI of this Manual,
the Authorised Dealer concerned will issue a Certificate
showing date-wise deposit of equity in the account and its buying
exchange rate for the respective currency prevailing on the date
on which the amount is credited to the company’s foreign
currency account. The company may issue shares after receipt of
money in its account for the equivalent Rupee amount at the exchange
rate shown in the Certificate.
At the request of the company, the State Bank shall
authorise an Authorised Dealer for the purpose of remittance
of dividend to non-resident shareholders as per procedure outlined
in para 14, Chapter XIV of the Manual.
The shares issued/transferred to
non resident shareholders shall be intimated by the company
to the designated Authorised Dealer within 30 days of issue/transfer
on the form prescribed in App.V- 90 or App.V- 91, as the case
may be, alongwith the following
documents and other legal documents viz. Memorandum and Articles
of Association, Certificate of Incorporation/Registration etc.,
if not already submitted :-
In case of issue of ordinary shares out of public offers under
paragraph 6 (B) (I) Bank’s Proceeds Realisation Certificate
(PRCs) in original with copy of the consent/permission of the
Securities & Exchange Commission of Pakistan (SECP).
In case of issue of ordinary shares through private placement
against equity repatriated
to Pakistan under paragraph
6 (B)(III)(a) PRCs in original.
In case of issuance of shares of companies other than manufacturing
under paragraph 6
(B) (III) (b) Entitlment Certificate obtained from the State Bank
of Pakistan (Investment Division, Exchange Policy Department)
Central Directorate, Karachi by submitting the following through
a nominated Authorised Dealer:-
Encashment Certificate (EC) and/or Proceeds Realisation
Certificate (PRC) from an Authorised Dealer in original showing
the amount of foreign currency received and its Rupee equivalent
paid to the company. Where the whole or part of the foreign equity
is retained in Special Foreign Currency Account the 'Entitlement
Certificate' will be issued after the foreign equity contribution
has been credited to the foreign currency account of the company.
Memorandum & Articles of Association and Certificate
An attested copy of Board of Investment's Registration
Letter, if applicable, alongwith
confirmation of the company that all required formalities/approvals
have since been completed/obtained.
Particulars of sponsor shareholders with name, address,
nationality, proposed number and face value of shares to be issued.
In case of issue of rights shares under paragraph 6 (B) (VI) PRCs
in original with copy of Board’s Resolution.
In case of issue of bonus shares under
paragraph 6 (B) (VI) App. V- 91, a copy of Board’s
Resolution, Auditor’s certificate to the effect that issuance of
bonus shares is in accordance with the existing applicable laws
and the audited accounts for the respective year.
In case of issue of ordinary shares against equity contributed
in the shape of plant and machinery under paragraph 7 (iii) Exchange
Entitlement Certificate issued by the State Bank in original.
In case of issue of ordinary shares under paragraph 7 (iv) against
equity deposited in a foreign currency account for import of plant
& machinery, Account holding bank’s certificate in original.
In case of transfer of listed shares under paragraph 6 (B) (II) Stock Broker’s Memo and PRCs in respect of the cost of
shares and transfer stamp money,
both in original. Where the sale of shares is negotiated
privately, documents establishing the deal and the price of the
share on Stock Exchange on the date of deal, should be furnished.
In case of transfer of shares of un-listed companies under paragraph
6 (B) (IV) Auditor’s
certificate for break-up value in original, a copy of the
audited accounts of the respective year, documentary evidence
of the agreed sale price and original PRCs in respect of cost
of shares and transfer stamp money.
) In case of transfer of shares from one non-resident to another
non-resident against payment outside Pakistan under paragraph
6 (B) (V), certificate from the
transferee and PRCs for transfer stamp
duty both in original.
In case of issue of Government Securities, issue/transfer of debt
instruments and issue of NIT Units under
paragraph 6 (B) (VII), (VIII) and (IX), PRCs in original
with copies of related documents.
(vii) Subject to
observance of the procedure outlined above, the companies issuing/registering
transfer of shares in favour of non residents on repatriation
basis, may export the share certificates through the designated
Authorised Dealer to the shareholders. The designated Authorised
Dealer shall also allow remittances in respect of the following:-
Dividend, net of applicable taxes, as permitted under Chapter
Disinvestment proceeds not exceeding the market value (in
case of listed securities)/break up value (in case of unlisted
securities) less brokerage/commission on submission of:
and address of the non-resident share holder.
and address of the company whose shares were sold by the non-resident
beneficiary, indicating whether it is a listed or unlisted/private
limited company and is covered under para 6 ibid. ( This requirement
may be waived by the Authorised Dealer in case of quoted shares).
Name, address and residential status of the buyer of the
shares in question.
of broker’s memo in case of quoted shares/break up value
certificate of a practicing Chartered Accountant in case of unlisted
The designated Authorised Dealer shall maintain complete record
of the shares held by non
residents including proof of original
investment in foreign exchange and other documents detailed
above and shall produce the same for audit by the Inspection Team
of the State Bank.
No record shall be destroyed unless the same has been audited
by the State Bank’s inspectors.
8. Issue of Securities and NIT Units to
Persons Resident outside Pakistan on non-repatriation basis and
its transfer on the same basis.
It is permissible to issue Pakistani Securities of all types including
NIT Units but excluding shares of companies not quoted on stock
exchange, in favour of persons resident outside Pakistan, on non-
repatriation basis, if payment is made either in foreign exchange
or in Pakistan rupees provided the securities are registered at
the Pakistan address of the purchaser and a clear undertaking
is furnished by him that no repatriation of capital and profits/dividends
accruing thereon will be claimed at any stage.
Such securities may also be transferred to a person, whether resident
in or outside Pakistan, on the same basis, provided the securities
are registered at the Pakistan address of the purchaser and a
clear undertaking is given by him that no repatriation of capital
and profit/dividend accruing thereon will be claimed at any stage.
iii) A person resident outside Pakistan holding shares on non-
repatriation basis may also be issued bonus/right shares as per
his entitlement, on the basis of non-repatriation of capital and
Trading of Quoted Shares by Non-Residents.
Non-residents are allowed
to trade freely in the shares quoted on the Stock Exchanges in
Pakistan. For this purpose the non-residents will be required
to open "Special
Convertible Rupee Account" with any Authorised Dealer in
Pakistan. Such accounts can be fed by remittances from abroad
or by transfer from a foreign currency account maintained by the
non-resident investor in Pakistan. The balance available therein
can be used for purchase of any share quoted on the Stock Exchange.
Payment for such purchases may be debited to the account on production
of stock broker's memo showing sale of shares to the account holder
proceeds may be credited
provided evidence of the sale price in the shape of stock broker's
memo is produced. The fund available in such special accounts
can be transferred outside Pakistan or credited to a foreign currency
account maintained in Pakistan at any time without prior approval
of the State Bank. These accounts can also be credited with dividend
income. Transfers from one such account to another may also be
made in case of transfer of shares between the two account-holders.
The commission earned by the international brokers from
their overseas clients and credited net of taxes to the broker’s
SCRA account may be remitted by the Authorised Dealers provided
the funds so credited have emanated from inward remittances or
paid out of SCRA
of the investor.
Authorised Dealers will be required to submit to the Director,
Statistics Department, State Bank of Pakistan, Central Directorate,
Karachi a statement in the prescribed proforma (Appendix V- 92)
on weekly basis showing the position in respect of SCRA accounts
as on each Saturday. The statement should reach the State Bank
within two working days from the close of the week to which it
Trading of Federal Investment Bonds, Pakistan Investment
Bonds, Treasury Bills, Registered Corporate Debt Instruments and
WAPDA’s Registered Bonds listed with Stock Exchange in the
are allowed to trade freely in Federal Investment Bonds (FIBs),
Pakistan Investment Bonds (PIBs), Treasury Bills (TBs), Registered
corporate debt instruments and WAPDA’s Registered Bonds
listed with stock exchanges if the relevant S.R.Os permit non-residents
to hold the bonds in the secondary market, through Special Convertible
Rupee Accounts subject to the instructions applicable to these
accounts as contained in the preceding sub-paragraph (a).
10. Special Instructions regarding shares transferred
under Central Depository System (CDS) of Central Depository Companies.
account or sub-account will be opened & maintained at CDC
for each non-resident investor eligible for investment in registered
shares/securities quoted at stock exchange in Pakistan.
must be ensured that all transactions at CDS i.e., deposit into
or withdrawal from the account/sub-account of a non-resident is
supported by actual movement of funds. In other words, there should
not be any netting/adjustments and payment/receipt in respect
of each purchase/sale should be settled independent of other transactions
of the non-resident. In case the investment by the non-resident
is made/routed through his Special Convertible Rupee Account (SCRA)
maintained with an Authorised Dealer in Pakistan, the SCRA should
never show an overdrawn position.
Initial transfer in the name of CDC.
approving the initial/first-time transfer of shares/securities
purchased/held by non-residents, in the name of CDC for deposit
into CDS, the company concerned will ensure that the shares are
already registered in its record on repatriation basis in the
name of the non-resident concerned. If the shares are not already
so registered, the company will obtain requisite documents issued
in the name of investor concerned, i.e., broker’s memo,
proceeds realisation certificates (PRCs) for cost of shares purchased
and transfer stamp duty, or where the shares have been purchased
from another non-resident shareholder against payment outside
Pakistan, the transferee’s certificate alongwith PRC for
transfer stamp duty.
Subsequent transactions i.e., deposit/withdrawal at CDS.
Where investments are made through GDRs, the Authorised
Dealer concerned will continue to ensure that complete/proper
record of all transactions is kept at their end and the prescribed
statements of SCRAs are
furnished to the State Bank as usual, as at present documents
involving such investment would not be required to be submitted
to the company at any stage.
In case of investments not involving SCRA, the original
documents as listed at (ii)
above will be submitted as usual to the respective company by
the ‘Participant’ concerned alongwith a certificate
that the shares are in the name of CDS and have since been deposited
into/withdrawn from the respective non-resident’s account
at CDS. The company after making necessary entry in its record
to update CDC’s non-resident holding, will furnish the same
to the designated Authorised Dealer. The Authorised Dealer will
keep these documents in its record for onward submission to State
Bank in the prescribed manner alongwith returns pertaining to
dividend/bonus or right issue and will as usual make the remittance
of disinvestment proceeds of such shares subject to the prescribed
Dividend Payment/allotment of bonus or right shares.
will issue to the respective company a list of beneficial non-resident
shareholders certifying their individual holding as on Ex-date
in the form appearing at Appendix V-93. Before issue of
dividend warrant or allotment of bonus/right shares, the company
will verify the holding of non-residents not involving SCRAs from
its record including those as mentioned in sub-para (iii) (b) and for the non-residents investing
through SCRAs, it will obtain an undertaking-cum-certificate from
the Authorised Dealer concerned on the form appearing at Appendix
V-94, and on the basis of this undertaking-cum certificate it
will certify Appendix V-50 & V-90 and V-91 for such shares.
The aforesaid list provided by CDS will invariably be attached
by the company to the aforesaid returns.
11. Investment by branches of Foreign Banks and Foreign Controlled
of foreign banks in Pakistan and foreign controlled investment
banks incorporated in Pakistan are permitted to invest in Pak.
Rupee denominated registered listed corporate debt instruments
issued in Pakistan, provided such investment is made through initial
public offerings and secondary market purchases, and further provided
that investment in those debt instruments which are convertible
into shares does not exceed 30% of the paid-up capital of the
issuing company or 30% of the paid-up capital and reserves of
the investing institution, which ever is less. The profit/interest
accruing on such investment will be treated as their income for
the purpose of profit/dividend remittance.
12. Export and Transfer of Foreign Exchange Bearer Certificates/U.S.
Dollar Bearer Certificates/Five Years Foreign Currency Bearer
Certificates/Special U.S. Dollar Bonds.
Bank of Pakistan vide its Notification
No.F.E. 1/92-SB dated the
30th July, 1992
(App. III-10) has granted general permission
for doing various acts referred to in Section 13 of the Foreign
Exchange Regulation Act, 1947 in relation to Foreign Exchange
Bearer Certificates issued under the Foreign Exchange Bearer Certificates
Rules 1985, U. S. Dollar Bearer Certificates issued under the
U. S. Dollar Bearer Certificates Rules 1991 and Five Years
Foreign Currency Bearer Certificates issued under Five Years Foreign
Currency Bearer Certificates Rules 1992. . The Bank has also allowed
vide FE Circular No 42 of 1998 read with FE Circular No 44 of
1998 the export of Special U. S. Dollar Bonds issued to the non-residents.
Transfers between Registers etc.
(c) and (d) of sub-section (1) of Section 13 of the Act prohibit,
respectively, transfers of securities from registers in Pakistan
to registers outside Pakistan and the issuing, whether in Pakistan
or elsewhere, of securities which are registered or to be registered
in Pakistan, to "persons resident outside Pakistan"
except with the general or special permission of the State Bank.
Investment Abroad by Residents.
of Pakistan including firms and companies incorporated in Pakistan
were allowed vide FE Circular No. 66 of 1993, to make investment
in companies incorporated abroad on repatriable basis through
Foreign Exchange Bearer Certificates (FEBCs) subject to the conditions
laid down in the circular. Permission for investment in joint
ventures other than incorporated companies abroad was also accorded
vide FE Circular No. 11 of 1995 against FEBCs. These facilities
stand suspended with effect from 29th May 1998 as encashment
of FEBCs in foreign currency was stopped. Prior approval of the
State Bank is now required for investment abroad by residents.
Applications in this connection should be submitted on the prescribed
form (App. V- 95) along with the documents mentioned therein to
the Investment Division, Karachi through an Authorised Dealer.
15. Registeration of Foreign
Section 19(I) of the Act, the Federal Government have issued Notification
No.I(1)-2-FE/56 dated the 1st August, 1956, (Appendix
II-7) requiring all persons resident in Pakistan who are or become
the owners of any security in respect of which the principal,
interest or dividends is or are payable in the currency of any
foreign country or in respect of which the owner has the option
to acquire the payment of principal, interest or dividends in
such currencies, to make a return to the State Bank within one
month of their acquiring the securities, giving particulars in
respect of the said securities. The specimen of the form in which
these particulars are required to be furnished in duplicate is
given at Appendix
V-96. Such a return is not required to be made in respect
of the securities mentioned in paragraph 12 ibid. Foreign nationals
residing in Pakistan are not required to submit the above returns.
16. Under-writing of shares, term certificates and Modaraba
certificates by foreign banks.
of shares, participation term certificates etc., by foreign banks’
branches in Pakistan eventually involves holding of those shares/securities
which are not taken up by the general public, and as such attracts
the provisions of Section 13(1) of the Foreign Exchange Regulation
Act, 1947. Foreign banks’ branches in Pakistan have general
permission to under-write the issue of shares to the extent of
30% of the public offering or 30% of its own paid-up capital and
reserves, whichever is less. They are also permitted to under-write
public issues of participation term certificates, term finance
certificates and modaraba certificates, provided that where the
terms and conditions of issue of such securities grant an option
to the holders to convert the securities into ordinary shares,
the restrictions of 30% as mentioned above would apply.