ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has notified the Listed Companies (Code of Corporate Governance) Regulations 2017, replacing the Code of Corporate Governance 2012.
The Listed Companies Regulations 2017, which would come into effect from January 1, 2018, have been issued under the PSX listing regulations and are aimed at aligning corporate governance practices with international standards.
The regulations will also strengthen governance structures, bring consistency in the corporate practices and promote transparency through enhanced disclosure requirements. Furthermore, the role and responsibilities of directors have been made clear and enhanced, independent decision-making is encouraged, gender diversity is supported and mechanism for transparency and accountability is strengthened.
New regulations to take effect from next year
The draft regulations was placed at the SECP’s website in August to obtain public opinion and in view of request from stakeholders, the deadline of providing comments was extended by a month and a consultative session with stakeholders was held in October to deliberate on the stakeholders’ views.
A key demand presented to the SECP was to decrease the limit of directorship for a person from seven to five listed companies, which means that one person can be the director of five listed companies only.
SECP officials said the regulations aim at strengthening the presence and role of independent directors. The board of directors is mandated to have at least two or one third of number of directors, whichever is higher, as independent directors.
The independent directors shall be required to file a declaration confirming that a statutory criterion for independence has been duly complied.
The provision pertaining to directors’ training programmes has been revised under the new regulations so that data bank of trained individuals is strengthened.
The requirement of minimum number of directors obtaining training has been accelerated to be 100 per cent by 2021. The regulations have also added stringent quorum requirements for board meetings in case of conflict of interest.
In addition to mandatory training of one female executive each year from 2019, companies are mandated that at least one senior executive undergoes directors training programme after 2021.
The regulations also strengthen gender balance on the boards, and to encourage inclusion of competent female directorship, companies are required to train at least one female executive under the directors’ training programme.
In order to promote accountability, formal and effective mechanism for annual evaluation of the board’s own performance and of its committees is mandatory.
Published in Dawn, November 23rd, 2017