SECP asked to fine-tune Companies Act

Updated May 19 2020

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Some of the major issues addressed by the SECP through the ordinance include introduction of definition of start-ups. — Reuters/File
Some of the major issues addressed by the SECP through the ordinance include introduction of definition of start-ups. — Reuters/File

LAHORE: The Compa­nies (Amendment) Ordina­nce, 2020 has significantly eased the corporate regulatory environment in line with regional practices, but the Security and Exchange Commission of Pakistan (SECP) still needs to further improve the law.

The Overseas Investors Chamber of Commerce and Industry (OICCI) on Monday said the ordinance addresses a number regulatory issues contained in the Companies Act 2017, making the regulatory environment in the country more predictable, consistent and transparent.

“Foreign investors have always supported efforts to improve and ease the business regulatory environment for greater Ease of Doing Business (EoDB),” OICCI Chief Executive M Abdul Aleem said while commenting on the changes in the Act.

He urged the SECP to also address other challenges like reference to ‘lineal ascendants and descendants’ from the ambit of related parties facing the investors to attract sizable foreign direct investment (FDI) in the post Covid-19 global investment environment.

Some of the major issues addressed by the SECP through the ordinance include introduction of definition of start-ups as companies in existence for less than 10 years with annual turnover not exceeding Rs500 million. The ordinance allows all companies to buy back their own shares and offer stock options to their employees.

The amendments extend the ineligibility criteria to become a director by including a person involved in the business of brokerage securities/futures market or a spouse of such person or a sponsor, director or officer of such brokerage house. A person entering ‘plea bargain’ under the National Accountability Bureau law has however been left out of the ineligibility criteria.

The ordinance allows a non-listed company to buy back its shares, does away with the requirement for foreign nationals to hold national tax number, deletes the clause where a director could be disqualified for a period up to five years if the affairs of the company have purportedly been conducted in a manner which has deprived the shareholders a reasonable return.

Published in Dawn, May 19th, 2020