ISLAMABAD – President Mamnoon Hussain yesterday promulgated Companies Ordinance, 2016, that would empower Securities and Exchange Commission of Pakistan (SECP) to ensure adequate measures against fraud, money laundering and terror financing.
“In order to ensure adequate measures against fraud, money laundering and terror financing, the Companies Ordinance, 2016, empowers the SECP to investigate and also conduct a joint investigation. Furthermore, provisions requiring officers of a company to take adequate measures to curb such violations have also been included,” according to the content of the ordinance.
The government has issued the ordinance instead of introducing a bill in parliament. Finance Minister Ishaq Dar a couple of weeks back told the media that the government would present the draft Companies Bill, 2016, in the parliament for legislation. The ordinance would replace the Companies Ordinance, 1984.
Dar said that the ordinance has been promulgated after extensive consultations with all stakeholders in order to encourage and facilitate best international corporate practices in Pakistan.
The ordinance would authorise the government to ask foreign companies in Pakistan and locals that have invested abroad to know their investment and beneficiaries in the wake of Panama Papers leaks.
Under the new ordinance, the SECP will maintain a Companies’ Global Register of Beneficial Ownership, which will have a complete record of the beneficial ownership of the substantial shareholders and officers in local and foreign companies doing business in Pakistan. Moreover, it will be binding on the foreign company operating in Pakistan to provide complete information of its directors, officers and/or beneficial owners.
The ordinance contains provisions to simplify the procedure for incorporation of companies, enabling maximum use of technology, conversion of physical shares into book-entry form in unlisted companies, and encouraging paperless environment at all levels. In order to ensure maximum participation of members in the decision-making process of the company, the ordinance encourages the use of modern electronic means of communication.
It also includes special provisions to facilitate small and medium enterprises. The ordinance also includes provisions for Shariah certifications of companies and requirements for real estate companies for providing enhanced protection to the investor.
Furthermore, it provides protection to independent and non-executive directors to encourage inclusion on the board, as well as provisions for the manner of selection and maintenance of data bank of independent directors. It aims to address the issues relating to the protection of the interest of minority shareholders and creditors.
The ordinance also introduces other reforms such as relaxations for free-zone companies, registration of agricultural promotion companies for the development of agriculture sector and the establishment of investor education and awareness fund. It includes provisions for registration of valuators dispute resolution mechanism through mediation and conciliation panel, passing of members’ resolution through circulation, as well as simplified provisions for expeditious mergers and acquisitions. In addition, it emphasises maximum disclosures by Pakistanis to the local regulatory authorities in respect of investment in foreign companies. It also provides facilitation and regulation of public sector enterprises.
The finance minister said the new ordinance has been promulgated to provide relief and incentives to the corporate sector, especially small and medium-sized companies, in order to give immediate impetus to the economy and stimulate economic growth. He said there was a strong need to revamp the 32-year-old Companies Ordinance to provide an improved competitive legal framework for the corporate sector in Pakistan.
He said that during various stakeholder consultations, market experts and the business community had expressed unanimous support for enacting the Companies Ordinance, 2016, at the earliest.
The finance minister said the new law will reduce the cost of incorporating and doing business, which will enable Pakistan’s corporate sector to be competitive in the international markets. He welcomed the various reforms under the Companies Ordinance, 2016, including use of modern communication technology and simplified regulatory procedures. He said new measures such as the companies’ global register of beneficial ownership will curb corruption, help address challenges related to offshore investments and ensure transparency in governance. http://nation.com.pk/national/13-Nov-2016/ord-issued-to-check-money-laundering-terror-financing
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