ISLAMABAD: Foreign investors would not be required to obtain prior security clearance from the interior ministry, as Securities and Exchange Commission of Pakistan (SECP) would issue provisional certifications to foreign directors or companies till the time such a clearance is received.

The interior ministry has relaxed the conditions on the recommendations of SECP. Security clearance now no longer remains a prerequisite for registration of companies having foreign investment and directors.

According to the new policy, the SECP would issue certificate of registration to foreign investors that will be subject to clearance from the ministry.

Similarly, the SECP would also approve appointments of foreign directors on boards of companies.

The appointments would also be subject to provision of security clearance certificate from the ministry.

Besides, there would be no bar on non-resident Pakistanis to work on the boards of directors of local and foreign companies in Pakistan.

As per the agreement between SECP and the interior ministry, it has been decided that the Commission reserves the right to cancel registration of a foreign company or appointment of a foreigner director in case the ministry of interior does not issue security clearance for the director or company concerned after its registration.

However, it would be mandatory for foreigners to file all relevant documents necessary for security clearance along with an undertaking that in case of refusal of security clearance by the ministry, the already recorded returns shall be de-registered forthwith and the directors shall be replaced.

“Delay in security clearance was considered a major discouraging factor for foreign investment and also led to many complaints,” said an SECP official, adding that the decision would not only increase foreign direct investment (FDI) in Pakistan but also increase trust level of foreigners in the country.

Under the current regime, foreign investors are required to obtain security clearance from the interior ministry before starting their businesses in Pakistan, but the process takes a long time because verification process is done by ISI and IB.

On its part the interior ministry has been assured by the SECP that it would be the responsibility of their local partners if any unwanted action / activity was conducted by the foreign investors which would be against the local laws.

It has also been decided that the SECP — in consultation with other stakeholders — shall finalise a list of countries whose nationals should be considered for exemption from the requirement of security clearance.

The nationals of these countries would be exempted from security clearance requirement which at the moment applies to all foreigners serving as directors of companies operating in Pakistan.

The SECP, considering the problems faced by foreigners and its negative impact on investment in Pakistan, raised the issue with the ministry.

The interior ministry and the SECP have also agreed that a committee with representatives from the Ministry of Interior, SECP, BoI, companies and corporate lawyers should prepare a revised pro forma / questionnaire that does not seek “irrelevant information,” such as number of their siblings or property they own.

This pro forma should then be placed on the website where it would be easily accessible to all.

The pro forma would also include a declaration from foreign visitors that he/she is not involved in money laundering and other illegal criminal activities.

Once the required information about a foreign investor is obtained, the obtained security clearance would be valid for five years.

It has also been decided that the data management for security clearances for foreign directors will be moved to NADRA as it is better equipped to deal with such issues and one section in the Interior ministry would coordinate with NADRA to deal with the visa issues of these directors.