Offering Equity to Prospective Investors in an NBFC in Pakistan

Introduction

Non-Banking Finance Companies (NBFCs) play a growing role in Pakistan’s financial system by offering services such as leasing, investment finance, housing finance, asset management, discounting, and venture capital.

With increasing interest from entrepreneurs and financial institutions, a common question arises:

Can an NBFC offer equity to prospective investors in Pakistan?

The short answer is Yes – but only under the strict legal framework of the Securities and Exchange Commission of Pakistan (SECP) and the Companies Act, 2017.

Legal Framework Governing NBFCs

NBFCs are regulated by:

• Companies Act, 2017

• Non-Banking Finance Companies and Notified Entities Regulations, 2008

• Circulars, Directives & Guidelines issued by SECP

• Foreign Exchange Regulations of the State Bank of Pakistan (SBP) (for foreign investors)

This framework ensures NBFCs maintain transparency, financial soundness, and investor protection.

Can an NBFC Issue Equity?

Yes. Since NBFCs are companies (usually public limited), they can issue equity shares to raise capital.

However, unlike ordinary private companies, NBFCs require SECP approval because they deal with public and investor funds.

Equity can be raised through:

• Private Placement of Shares (Section 83, Companies Act, 2017)

• Rights Issue to existing shareholders (Section 83 & 84)

• Public Offering (if listed) under SECP’s Public Offering Regulations

Key Regulatory Conditions

Before offering equity, NBFCs must comply with:

a) SECP Approval for Shareholding Changes

• Any transfer or issuance of 10% or more shares requires SECP’s prior approval.

• Investors must meet SECP’s Fit & Proper Criteria (financial strength, integrity, and reputation).

b) Capital Adequacy Requirements

NBFCs must maintain minimum equity depending on their activities:

c) Foreign Investors

• Require SBP approval for foreign remittances.

• May also need reporting to the Board of Investment (BOI).

d) Corporate Approvals

• Board resolution for equity issuance

• Shareholder approval through Extraordinary General Meeting (EGM)

Modes of Offering Equity

1. Private Placement

   • Shares issued to selected investors (strategic or institutional).

   • File Return of Allotment (Form 3) with SECP.

2. Rights Issue

   • Additional shares offered to existing shareholders on a pro-rata basis.

3. Public Offering

   • If listed, shares can be issued to the public under SECP’s Public Offering Regulations.

Restrictions to Keep in Mind

• Equity cannot be issued to bypass SECP’s oversight.

• SECP may reject investors not meeting Fit & Proper Criteria.

• Any change in management control requires SECP’s detailed scrutiny.

Step-by-Step Roadmap to Offer Equity in an NBFC

1. Board Approval – Pass a resolution for new equity.

2. Shareholder Approval – Obtain EGM approval.

3. Application to SECP – Submit details of investors, source of funds, and business plan.

4. SECP Review – SECP checks NBFC Regulations & Fit & Proper Criteria.

5. Approval & Issuance – After approval, allot shares.

6. Post-Issuance Filings – File Form 3 (Return of Allotment) with SECP.

7. SBP Approval (if foreign) – Obtain clearance for foreign investment inflow.

Why Offer Equity in an NBFC?

 Meet SECP’s equity requirements
Strengthen financial base for expansion
Attract strategic investors and partners
Increase credibility with regulators and banks

Final Word

Yes, NBFCs in Pakistan can offer equity to new investors, but only through SECP-supervised procedures. The process requires:

• Corporate approvals (board + shareholders)

• SECP clearance

• Compliance with minimum equity rules

• SBP approval (for foreign investment)

 For NBFCs seeking to raise equity, professional legal guidance is essential to ensure compliance and avoid delays.

How Legal Synergy Can Help

At Legal Synergy, we provide full assistance in:

• NBFC Licensing & Compliance with SECP

• Drafting board & shareholder resolutions

• Preparing SECP applications for equity issuance

• Advising on foreign investment approvals from SBP

• Structuring private placements and public offerings

📱 WhatsApp: +92 334 9555252
🌐 www.legalsynergy.pk
📧 Email: info@legalsynergy.pk