President Dr Arif Alvi has approved amendments to the Companies Act, 2017, in order to provide an enabling regulatory framework to facilitate startups in the country, a press release by the Securities and Exchange Commission of Pakistan (SECP) said on Monday.
According to the statement, these amendments were proposed by the SECP to help "promote and nurture startups" while also attracting local and international innovators.
The Companies Act, 2017 was reviewed by the SECP in consultation with various external and internal stakeholders.
"On the basis of the feedback received during the consultation process, various amendments were proposed by the regulator to promote ease of doing business, encourage startups, improve protection of minority shareholders and remove some anomalies noted in the provisions of the Act," the statement read.
It added that the amendments have been promulgated through the Companies (Amendment) Ordinance, 2020 promulgated on April 30.
Under the new rules, employee stock options and buyback of shares has been allowed for all companies; earlier this was allowed for public and listed companies only.
"These amendments will help address the employee retention and reward issues faced by startups. They will also facilitate startups in case the founding member needs to exit the company," the statement said.
Further, requirements relating to "payment of subscription money within 30 days of incorporation by subscriber and filing of auditor certificate has been done away [with] to facilitate small companies".
Now, a listed company may hold an extraordinary general meeting at a shorter notice with the commission's approval, the press release said, adding that all companies will be required to file annual returns with the registrar.
"The chief executive officer shall now be appointed by the board of directors in all companies."
Meanwhile, the procedure for handling unclaimed dividends has been revised; now unpaid dividend accounts shall be maintained by companies and any markup accrued on such an account shall be used by companies for corporate social responsibility initiatives.
Amendments have been introduced to lower the threshold for proposing member resolutions (from 10 per cent to 5pc), mandatory disclosure of company’s director’s remuneration and enhanced protection for minority shareholders in transactions involving conflict of interest of a company’s directors.
"In view of complex valuations, legal entitlement of properties and requirements of other regulatory compliances the authority to approve the scheme of arrangements by member or creditors has been granted to high courts.
"Earlier, the scheme of arrangements for small sized companies and companies wholly owned by the government were approved by the commission while the scheme of arrangement of medium sized, large sized and public interest companies were approved by the court," the statement said.
A new provision has also been inserted to enable a review or revision of any order passed by the registrar, the SECP or any officer of the commission to improve the efficiency of the adjudication process.
"Provisions relating to the mandatory requirement for common seal, real estate companies and inactive companies have also been omitted," it added.
The amendments, in addition to improving ease of doing business, will also positively impact the country's position in global rankings, the statement concluded.