Unlisted companies in Pakistan undertaking a buy-back of their own shares must culminate the process with the mandatory filing of Form 27. This crucial statutory return serves as the final declaration to the Securities and Exchange Commission of Pakistan (SECP), confirming the company’s adherence to the Companies Act, 2017, and all associated regulations governing the share buy-back.

Legal Foundation of Form 27

Form 27 derives its legal mandate from:

• Section 88(8) of the Companies Act, 2017: This section outlines the general framework for a company’s power to buy back its own shares.
• Regulation 6(2)(e) of the Companies (Further Issue of Shares) Regulations, 2020: This regulation specifically details the filing requirement of Form 27 upon the completion of a buy-back.

The filing of Form 27 signifies the official conclusion of the buy-back process in the eyes of the SECP.

When is Form 27 Due?

An unlisted company must file Form 27 within seven (7) days of the completion of the share buy-back. This strict deadline ensures timely reporting of changes to the company’s capital structure.

Essential Information Contained in Form 27

Form 27 requires a comprehensive disclosure of the buy-back transaction, typically including:

• Company Identification: Full name and incorporation details of the unlisted company.
• Authorization Details: Date of the Board Resolution that approved the buy-back.
• Shares Acquired: Number and class of shares (e.g., ordinary, preference) that were bought back.
• Financials of Buy-Back: Face value per share and the specific buy-back price per share.
• Total Outlay: The aggregate amount spent by the company on the buy-back.
• Mode of Acquisition: The method used for the buy-back (e.g., proportionate basis from existing shareholders, tender offer, odd-lot buy-back).
• Execution Dates: The specific date(s) on which the shares were actually bought back.
• Funding Source: The source of funds utilized for the buy-back (e.g., free reserves, securities premium account).
• Compliance Declaration: A formal declaration by the company that the buy-back was conducted in full compliance with the provisions of the Companies Act, 2017, and relevant regulations.
• Extinguishment Certificate: If applicable, a certificate confirming the extinguishment (cancellation) of the shares bought back, ensuring they are no longer part of the company’s issued share capital.

Mandatory Supporting Documents

To substantiate the information provided in Form 27, the following certified copies of documents must be attached:

• Board Resolution: A certified copy of the Board Resolution approving the buy-back of shares.
• Directors’ Declaration: A formal declaration signed by the directors of the company.
• Proof of Extinguishment: Evidence that the bought-back shares have been duly extinguished or canceled.
• Auditor’s Certificate: A certificate from the company’s auditor confirming compliance with the prescribed financial requirements for the buy-back.
• Other Documents: Any additional documents that the SECP may specifically require.

The Electronic Filing Process

Form 27 must be filed exclusively through the SECP’s eServices portal, underscoring the SECP’s move towards digital governance. The general steps involve:

1. Login: Access the SECP eServices portal using designated company credentials.
2. Select Filing Option: Navigate to the statutory return filing section.
3. Choose Form: Select “Form 27 – Final Return for Buy-Back of Shares.”
4. Data Entry: Accurately fill in all the required details as prompted by the online form.
5. Attach Documents: Upload the necessary supporting documents in the prescribed format.
6. Fee Payment: Pay the applicable prescribed fee, if any, electronically.
7. Submission: Electronically submit the completed form and attachments.

Prescribed Fees for Form 27

The filing fee for Form 27 is determined by the company’s authorized capital and is outlined in Schedule II of the Companies (Registration Offices) Regulations, 2018. While specific fees can vary and should always be confirmed on the official SECP fee schedule, a common example includes:

• Rs. 500 for companies with an authorized capital of up to Rs. 100,000.
• Fees incrementally increase for companies with larger authorized capital bases.

Consequences of Non-Compliance

Failing to file Form 27 within the stipulated seven-day timeframe can lead to severe repercussions for the unlisted company, including:

• Penalties: Imposition of financial penalties as prescribed under the Companies Act, 2017.
• Regulatory Scrutiny: Increased scrutiny and potential investigations from the SECP.
• Future Restrictions: Possible rejection of future applications for share issuance or other corporate actions by the SECP.

Why is Form 27 Indispensable?

Form 27 plays a pivotal role in corporate governance and transparency for unlisted companies:

• Legal Compliance: It serves as definitive proof of legal compliance after the completion of the share buy-back.
• Official Record: It establishes a final and accurate record of the buy-back with the SECP, contributing to the central corporate registry.
• Capital Structure Accuracy: It ensures that the company’s official capital structure accurately reflects the changes brought about by the buy-back.
• Stakeholder Protection: By providing transparent information, it helps protect the interests of remaining shareholders and creditors.

Frequently Asked Questions about Form 27

Q1: Is Form 27 required for listed companies? A: No, Form 27 is specifically designed for and applicable only to unlisted companies in Pakistan. Listed companies have different reporting requirements for share buy-backs.

Q2: Is physical submission of Form 27 allowed? A: No, the SECP mandates that Form 27, like most statutory filings, must be submitted exclusively through its eServices portal.

Q3: Can Form 27 be revised after submission? A: Revisions to a submitted Form 27 are generally allowed only under limited, specific conditions and require prior approval from the SECP.

Q4: Can a company buy back shares using borrowed funds? A: No, the Companies Act, 2017, explicitly prohibits companies from utilizing borrowed funds for the purpose of buying back their own shares. This is a crucial safeguard for financial stability.