ISLAMABAD: Pakistan now has the legal power to obtain complete information of foreign and offshore companies operating in the county, including those with investments in various concerns and details of their boards of directors, under the new Companies Law 2016.

The new Companies Law, which replaces the Companies Ordinance 1984, was promulgated late Friday evening by President Mamnoon Hussain as an ordinance. The government possibly adopted this short route to fulfil certain international obligations for the country to upgrade its corporate laws.

Under the new law, the Securities and Exchange Commission of Pakistan (SECP) will have the power to obtain complete information on the directors, officers and beneficial owners of foreign and offshore companies operating in Pakistan.

The old law granted sovereignty to foreign companies not to disclose the details of their directors and beneficial owners and their other investments, either inside Pakistan or abroad.

New companies ordinance imposes stricter conditions on local, foreign firms in Pakistan

“Previously, if a Pakistani established an offshore company and registered that company in Pakistan through a ‘principal’ who could be a local or a foreigner, the SECP could not ask them for details of all investors in that company,” Tahir Mahmood, Commissioner of the SECP’s Companies Law Division, told Dawn.

Under the new law, SECP will maintain a ‘Global Register of Beneficial Ownership’ for companies, which will have to share complete records of the beneficial ownership of all substantial shareholders and officers in local and foreign companies doing business in Pakistan.

Meanwhile, Finance Minister Ishaq Dar said in a statement that measures in the new law would help curb corruption, address challenges related to offshore investments and ensure transparency in governance.

The minister said that the new law would provide relief and incentives to the corporate sector, especially small- and medium-sized companies.

The minister said the new law would also reduce the cost of incorporating and doing business, which would enable Pakistan’s corporate sector to be become competitive on the international market.

Similarly, the Companies Law 2016 sets stringent disclosure rules, even for non-listed local companies, and makes it mandatory for them to provide details of all investors having more than 10pc shares in the company, to the SECP.

“An investor with at least 10pc investment in any Pakistani company will have to inform us about all their investments, both in Pakistan and abroad,” the SECP commissioner said.

The new law has also streamlined the regulatory functions for state-owned companies and the criteria for independent directors of public sector enterprises (PSEs) has been redefined. PSEs can be rehabilitated under provisions of the new law.

The law also empowers the SECP to investigate and conduct joint investigation over provisions related to measures against fraud, money laundering and terrorist financing.

It includes special provisions to facilitate small and medium enterprises, Sharia certifications for companies and requirements for real estate companies for providing enhanced protection to the investor.

The Companies Ordinance 2016 also introduces other reforms, such as relaxations for free-zone companies, registration of agricultural promotion companies for the development of the agriculture sector and the establishment of an Investor Education and Awareness Fund.

The new law contains provisions for simplifying the procedure for incorporation of companies with the utilisation of technology, conversion of physical shares into book-entry form in unlisted companies, and encouraging paperless environment at all levels.

Published in Dawn, November 13th, 2016