ISLAMABAD, Oct 24: The Securities and Exchange Commission of Pakistan (SECP) on Wednesday proposed amendments in the Companies Ordinance 1984 to ensure further transparency and good governance in the interest of all shareholders, privatization, and for capital market expansion.

The SECP chairman, Khalid Mirza, released draft amendments in the Companies Ordinance 1984 at a press conference, and said that it was prepared on the recommendations of a committee represented by professional bodies, stock exchanges, investor associations and chambers of commerce and industries.

Mr Mirza said that stakeholders were required to file their comments and objections within 15 days so that these could be discussed at various forum before formal promulgation. The draft would also be available on SECP’s website for public comments and scrutiny.

Saying that amended ordinance would have positive impact on the developments of corporate sector, the SECP chief said that draft suggested amendments in about 90 sections.

Under section 158/233 of the companies ordinance, amendments have been proposed to hold the annual general meeting within four months of close of accounts of companies instead of earlier period of 6 months that is extendible for anther three months.

To facilitate investment and privatization, the proposed amendment in section 208 relating to investment in associated companies, seeks removal of maximum limit of 30 per cent of the paid-up capital plus free reserves of the investing company. The draft has done away with the role of regulator to grant waiver to certain companies.

The draft has introduced a new concept of single member company through amendment in section 15 to admit the individual businessmen in the corporate sector, which would make an individual trader or manufacturer to form a company having its own separate entity and limited liability.

The proposed amendment in section 15/174, would enable the promoters to establish public companies with a minimum number of three members or directors instead of the condition of minimum seven directors under the existing law.

Considering that extraordinary delays were caused mostly by the liquidators in finalizing the winding up, the proposed amendments in section 321, 323 and 364 seek that no individual would be assigned the liquidation of more than three companies at a time, and their remuneration would be stopped on the expiry of prescribed period.

Under section 78-A the companies are obliged to register transfer of shares within 45 days after the application for registration of transfer of shares. However, the directors can refuse transfer of share within 30 days on some valid grounds. The amendment would provide a right of appeal before the commission against refusal or delay.

Under section 131, in case of delay in filing of documents with the registrar for the registration, modifications and satisfaction of a mortgage or charge created by companies in favour of banks and financial institutions, the extension in time is required to be obtained from the high court. In order to facilitate the companies and banks for earlier registration of the mortgages or charges the powers of granting extension are proposed to be vested in the commission.

Suitable amendments have also been made in section 173 making mandatory provision of a copy of minutes of the board of directors meeting to every director within 14 days of the date of meeting.

Under section 182, creditors and persons having special interest can nominate directors on the board of directors of companies but no limit for such nominations has been suggested restricting this right to only one director.

Appointment of whole time qualified company secretary by a listed company is being made mandatory for efficient corporate compliance. Qualifications proposed for the company secretary are to be a member of institute of chartered accountants or cost and management accounts or corporate secretaries or persons having degrees of law or master degrees of business administration or commerce. A single member company is also being made liable to appoint a secretary.

Removal of auditors has remained disputed and question has always been raised whether auditors can be removed or not. Now the provisions for removal of auditors are being provided through which a company may remove its auditors through special resolution. However, appointment of auditors in place of removed auditors will be made with the approval of the commission.

Quorum of a general meeting of a public listed company is being increased from three members to ten members present in person representing not less than 25 per cent of total voting power either or their own account or as proxies.

In view of importance of the subsidiary companies of the listed companies and public interest, the private and non-listed public companies, which are subsidiaries of listed companies, are also being made liable to prepare their accounts in accordance with requirement of fourth schedule.

Presently companies ordinance 1984 provides that holding company shall annex accounts of its subsidiaries with its accounts and no provision exists about consolidation of accounts of holding and subsidiary companies. However, IAS 27 provides for consolidation of such accounts. An amendment is being proposed for preparation of consolidated financial statements for holding and subsidiary companies.