Stock Exchange (Corporatisation, Demutualization and Integration) Act, 2012

The Stock Exchanges (Corporatisation, Demutualization and Integration) Act, 2012 restructured Pakistan's stock exchanges from member-owned companies limited by guarantee into ordinary public companies limited by shares, and separated exchange ownership from the right to trade on the exchange. "Corporatisation" (Section 2) means converting the exchange's legal form; "demutualization" means splitting the majority ownership of the exchange away from the trading rights that used to come bundled with membership.

Section 3 required each stock exchange to ratify, within 30 days, the demutualization committee that would run this transition, with power to approve a valuation of the exchange, negotiate selling up to 40% of its shares to strategic investors or financial institutions, and set the offer price for shares sold to the public. Section 4 required each exchange to submit to the Securities and Exchange Commission of Pakistan (the "Commission") an independent valuation and a revaluation of its assets and liabilities as of 30 June 2008 (or another date set by the Commission), prepared by approved investment banks and chartered accountants, along with a proposed capital structure of ten-rupee shares.

Chapter III (Sections 8-16) covers the demutualization itself: shares placed in a "blocked account," rules for the exchange's board and director elections after demutualization, further divestment and issuance of shares, sale of shares to strategic investors and financial institutions, the Commission's power to require further divestment, and listing and trading rights for the resulting shares. Chapter IV (Sections 17-18) allows two or more stock exchanges to merge ("integration") either directly or with the Commission's approval of a formal scheme of integration.

Section 19 gives the Commission power to penalise violations — the extract shows penalties of up to one million rupees payable by a TRE certificate holder or committee member found guilty of an offence under the Act, recoverable as arrears of land revenue, and the Commission can suspend or cancel a TRE (trading right entitlement) certificate for wilful non-compliance. Section 20 restricts amendments to an exchange's constitutional documents and further share issues without Commission approval; Section 21 requires Commission approval before a stock exchange can start winding-up proceedings, though the Commission can also step in to rehabilitate a financially troubled exchange. Section 25 makes the Act override any conflicting law.