1) Is a merger control regulation in force?

Yes. The primary antitrust legislation in Pakistan is the Competition Act 2010 (“Act”).

2) Which authorities enforce the merger control regulation?

The main merger control authority is the Competition Commission of Pakistan (“CCP”), established under the Act to evaluate and approve mergers/transactions/acquisitions which meet prescribed thresholds. Please also note responses in topic 6.

3) Relevant regulations and guidelines with links:

4) Does general competition regulation apply to mergers or ancillary restrictions?

The Act and its rules/regulations contain provisions which deal with, inter alia, mergers, prohibited agreements, deceptive marketing practises and abuse of dominance. These provisions would apply to the conduct of entities involved in a merger (whether notifiable or not).

Restrictions on competition that are ancillary to the merger may be subject to separate scrutiny under the Act and the CCP can require modifications/adjustments to any such clauses and also impose conditions.

5) May an authority order a split-up of a business irrespective of a merger?

Yes, the CCP may, in the case of:

1. abuse of dominant position: require the undertaking concerned to take such actions specified by the CCP as may be necessary to restore competition.
2. prohibited agreements: annul the agreement or require the undertaking concerned to amend the agreement or related practice
3. a merger: set forth the conditions to which the merger is subject (including partial divestment)

6) Other authorities that also require merger filing or may prohibit transaction
(Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)

The Securities and Exchange Commission of Pakistan (“SECP”) regulates certain mergers (including amalgamations involving a Pakistani company as the transferee) which may require SECP or court approval.

There are also industry-specific regulators. For example, telecom companies will also require the approval of the Pakistan Tele­communication Authority for a change in control or substantial shareholding, or for the transfer of a licence. Similarly, approvals may be required for banking, insurance, oil marketing, power com­panies, etc, under their respective regulatory framework.

Foreign investment control

Key Regulatory Framework

Foreign Investments

Through its general permissions, the State Bank of Pakistan (“SBP”) has allowed a non-residents to acquire shares in Pakistani companies subject to compliance with certain foreign exchange requirements for such acquisition. Such non-residents may include a for­eign national, company or firm (including a part­nership) or trust or mutual fund or private fund incorporated, registered and functioning outside Pakistan, but excluding entities owned or con­trolled by a foreign government.

Industries and thresholds

All sectors of the economy in Pakistan are open to foreign investment, except arms and ammuni­tions, consumable alcohol, currency and mint, high explosives, radioactive substances, and security printing (which require government permission). There are no minimum invest­ment requirements – 100% foreign ownership is allowed in the manufacturing and non-manufacturing sector. However, some sectors, such as aviation and media, have upper limits.

Notifications

There is no "pre-clearance" filing for FDI in most sectors. Instead, the process is one of registration and reporting.

Companies will report the transfer/issuance of shares or the merger/scheme of arrangement to SECP. Foreign shareholders/directors are required to submit an undertak­ing confirming that their position is subject to security clearance by the Ministry of the Interior. In the case of refusal of security clear­ance, which is very rare (and may be challenged before the courts in certain circumstances), the foreign shareholder is required to transfer the acquired shares, and the director/chief execu­tive is required to resign from office.

Acquisition of shares has to be reported to SBP for the registration of the shares as “repatriable” (which allows dividends and disinvestment proceeds to be converted into foreign currency and remitted out of Pakistan).

There may also be industry-specific reporting requirements. For listed companies, reporting to the SECP and the Stock Exchange is required.

Relevant authorities

Board of Investment is responsible for investment promotion, policies and work visa facilitation.

SECP regulates company incorporation, share issuance and transfers, mergers, and reporting.

SBP regulates the flow of foreign exchange and repatriations.

The Special Investment Facilitation Council has been established to take all necessary measures in order to establish, facilitate, encourage, and promote opportunities for investment and business in Pakistan.

7) Are any parts of the territory exempted or covered by particular regulation?

No.

8) Is merger filing mandatory or voluntary?

Merger filing is mandatory where the thresholds are met, and the parties are required to seek clearance prior to consummation of the merger. 

9) Is there a general definition of transactions subject to merger control?

In terms of the Act, a filing is required for mergers that affect competition by creating or strengthening a dominant position in the relevant market. The Act further provides that notwithstanding anything to the contrary, a filing is required if thresholds prescribed by the CCP are met.

A merger under the Act means “the merger, acquisition, amalgamation, combination or joining of two or more undertakings or part thereof into an existing undertaking or to form a new undertaking”. The merger regulations note that without prejudice to the aforesaid definition, a merger is to be deemed to have occurred where:

1. two or more undertakings, previously independent of one another, merge to form a new undertaking and cease to exist as separate legal entities; or
2. one undertaking is absorbed by another with the latter retaining its legal entity and former ceasing to exist; or one or more undertakings which acquire direct or indirect control of the whole or part of one or more other undertakings; or
3. the result of an acquisition by one undertaking (the first undertaking) of the assets or shares (including goodwill), or a substantial part of the assets or shares, of another undertaking (the second undertaking) is to place the first undertaking in a position to replace or substantially replace the second undertaking in the business or, as appropriate, the part concerned of the business in which that undertaking was engaged immediately before the acquisition; or
4. a collaborative arrangement by which two or more undertakings devote their resources to pursue a common objective; provided that such arrangement must be: subject to joint control, to perform the functions independently; and on a lasting basis.

10) Is "change of control" of a business required?

A change of control is not necessary for a merger filing. 

11) How is “control” defined?

The merger regulations define control in relation to an undertaking as being “regarded as existing if, by reason of securities (being not less than 10% of their market value), contracts or any other means, or any combination of securities, contracts or other means, influence is capable of being exercised with regard to the activities of the undertaking and, in particular, by

1. ownership of, or the right to use all or part of, the assets of an undertaking; or
2. rights or contracts which enable decisive influence to be exercised with regard to the composition, voting or decisions of the organs of an undertaking.

For the purpose of determining “control” through “securities”, such securities mean shares in the share capital of an undertaking carrying voting rights and includes any other security which entitles the holder thereof to obtain or exercise voting rights. Such securities also include all depository receipts carrying entitlement to the holder to exercise voting rights in the related undertaking.”

12) Acquisition of a minority interest

An acquisition of minority interest can trigger a merger filing if the prescribed thresholds are met. 

13) Joint ventures/joint control – which transactions constitute mergers?

The definition of a merger under the Act includes a “combination or joining of two or more undertakings or part thereof into an existing undertaking or to form a new undertaking”. 

Under the merger regulations, a merger is deemed to have occurred where a collaborative arrangement by which two or more undertakings devote their resources to pursue a common objective; provided that such arrangement must be:

1. subject to joint control
2. to perform the functions independently; and
3. on a lasting basis

A merger by way of joint venture / joint control requires pre-merger approval from the CCP if the prescribed thresholds are met. 

14) Which thresholds decide whether a merger notification must be filed?
(Unless explicitly stated otherwise, the thresholds described under one threshold category are not cumulative with those described under another category. Thus for instance if there is a market share threshold and a turnover threshold, it is sufficient to meet one of these, unless stated otherwise.)

a) Turnover thresholds

b) Market share thresholds

c) Value of transaction thresholds

d) Assets requirements

e) Other

15) Special thresholds for particular businesses

16) Rules on calculation and geographical allocation of turnover

17) Special rules on calculation of turnover for particular businesses

18) Series of transactions that must be treated as one transaction

19) Temporary change of control

20) Special industries, owners or types of transactions

21) Transactions involving only foreign businesses (foreign-to-foreign)

22) No overlap of activities of the parties

23) Other exemptions from notification duty even if thresholds ARE met?

24) May a merging party file voluntarily even if the thresholds are not exceeded?

25) May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?

26) Referral within the jurisdiction

27) Referral from another jurisdiction

28) Referral to another jurisdiction

29) May the merging parties request or oppose a referral decision?

30) Stage of transaction when notification must be filed

31) Pre-notification consultations

32) Special rules on timing of notification in case of public takeover bids and acquisitions on stock exchanges

33) Forms available for completing a notification

34) Languages that may be applied in notifications and communication

35) Documents that must be supplied with notification

36) Filing fees

37) Is implementation of the merger before approval prohibited?

38) May the parties get permission to implement before approval?

39) Due diligence and other preparatory steps

40) Veto rights before closing and "Ordinary course of business" clauses

41) Implementation outside the jurisdiction before approval – "Carve out"

42) Consequences of implementing without approval/permission

43) Phases and deadlines

44) Tests or criteria applied when a merger is assessed

45) May any non-competition issues be considered?

46) Special tests or criteria applicable for joint ventures

47) Decisions and remedies/commitments available

48) How and when will details about the merger be published?

49) Access to the file for the merging parties and third parties

The merging parties:

Third parties:

50) Who can appeal and what may be appealed?