DSE took the decision to sell its 25 percent shares to the Chinese consortium of SSE and SZSE as part of its
demutualization scheme.
But a source at SECP who then aware of the developments noted as per the law the board would be reconstituted on the conclusion of
demutualization process.
Terming the
demutualization, integration and prioritization of stock exchanges as a landmark achievement, the Adviser said that the reforms carried out during the last four years had paid huge dividends.
The
demutualization of stock exchanges is a recent new phenomenon in the economic world with a history of approximately 20 years, meaning that till the early 1990s most of world stock exchanges were non-profit, mutual organizations with monopoly power, owned by their members.Their most important characteristic is a very strong and close identity between the owners of the stock exchange and its clients, final consumers of its trading services, because usually, the owners are at the same time its clients, sharing the profits of the company in accordance with the level of their participation in the ownership.
We achieved the broad-based support required to secure approval for
demutualization from the Exchange's members and successfully progressed the Demutualisation Bill through the first and second reading and public hearing stages of the lawmaking process.'
Two decades after a wave of
demutualization swept North America, regulation is still catching up to enable property/casualty writers to convert from shareholder-owned entities to public companies.
The Stock Exchanges (Corporatization,
Demutualization and Integration) Act, 2012 (known as "
Demutualization Act") was promulgated by the Government.
It is worth mentioning here that prior to
demutualization, memberships at the stock exchanges were in limited supply as memberships apart from trading rights also carried ownership claim on the assets of the exchange.
It may be added here that in the last one year, a number of laws such as the Securities Act, 2015, the Companies (Amendment) Act, 2015, the Stock Exchanges (Corporatization,
Demutualization and Integration) (Amendment) Act, 2015, and the Futures Market Act (FMA), 2016, have been promulgated, which can certainly be termed SECP major successes.
After
demutualization, the Dorrances no longer held any mutual membership rights in the companies but retained their contractual interests under the insurance policies and continued to pay the same premiums.
Another category of organizational change is the conversion of co-ops to investor-owned businesses, a process often called "a
demutualization."