By Omer Bilal ISLAMABAD, Feb. 07 (INP-WealthPK): Pakistan’s corporate sector, capital markets, and small companies, especially start-ups, always faced hurdles in raising their equity and initial capital due to cumbersome conventional methods and tough rules and regulations. The capital market had long demanded that changes should be made to the relevant regulations to allow companies to convert one class of shares into another class and issue shares with differential rights. They also called for putting in place a specific mechanism for valuation of non-cash assets without the approval of the regulator. As per the existing laws, companies can have more than one kind of shares, which confers varying rights of dividend, voting and participation depending upon the needs of their capital providers. Presently, the regulations only allow conversion of preference shares into ordinary shares while there is no mechanism for other classes of shares. Keeping in view these challenges, amendments have been introduced in related regulations, abolishing the prior approval of the regulator regarding conversion of shares. The initiative will considerably help reduce administrative bottlenecks and will contribute towards fast-paced growth of the corporate sector by removing a layer of regulatory approval. The new regulations guarantee conversion of ordinary shares into preference shares, and one class or kind of shares into another. The changes aim to help companies maintain an optimal capital structure considering their own financial needs and demands of their shareholders. According to the amended regulations, “notwithstanding the requirements of sub-regulation, a company may convert its ordinary shares into preference shares or convert its shares (of a particular kind) from one class to another, on the basis of a special resolution: Provided that the rights of holders of such converted shares are provided for in the articles of association of a company: Provided further that a share that is not a redeemable preference share when issued cannot afterwards be converted into redeemable preference share.” Generally, the preference shares mean the shares that must have assured preferential dividend and not have voting rights. The preferential dividend may consist of a specified amount payable to preference shareholders before anything is paid to ordinary shareholders, or the amount payable as preferential dividend may be calculated at a fixed rate/percentage. Before a company winds up, it has to pay dividend to the shareholders with preferential rights in the firm before the ordinary shareholders. Preference shares may include cumulative preference shares, non-cumulative preference shares, participatory preference shares, convertible preference shares, redeemable preference shares, irredeemable preference shares, stepped preference shares and zero-dividend preference shares. Moreover, the new regulations, which have been introduced in consultation with the stakeholders, and keeping in view the international jurisdictions, provide a complete mechanism for valuation of immovable property, intangible assets or services. Now, the consultant engineers registered with the Pakistan Engineering Council and QCR-rated chartered accountant firms will be eligible to conduct valuation of the assets under the proposed regulations. All such valuers shall continue to be regulated, administered and monitored by the entities in which they are originally registered.