ISLAMABAD: The government has promulgated a presidential ordinance to implement a new legal and regulatory regime for the corporate sector, backtracking from its earlier announcement that it would enforce the new law with parliament’s consent.
“The president of Pakistan is pleased to promulgate the Companies Ordinance, 2016, on November 11 in order to replace the Companies Ordinance, 1984,” the finance ministry announced on Saturday.
It did not explain why the new regime had been enforced through an ordinance even though Finance Minister Ishaq Dar himself assured at an October 31 news conference that the Companies Bill, 2016 would be tabled in parliament. Securities and Exchange Commission of Pakistan (SECP) Chairman Zafar Hijazi too earlier this month said that a bill would be tabled in parliament before the year’s end.
The practice of enforcing new laws through presidential orders is generally looked down upon. Ideally, a presidential ordinance is issued in times of urgency, particularly when the National Assembly or Senate is not in session. However, parliament is set to meet on November 18.
“The Companies Ordinance, 2016, has been promulgated, after extensive consultations with all stakeholders, in order to encourage and facilitate best international corporate practices in Pakistan,” the finance ministry handout quoted Dar as saying.
The current companies law was approved 32 years ago and, according to SECP, had outlived its life.
Under the 2016 ordinance, SECP will maintain a ‘Companies’ Global Register of Beneficial Ownership’, which will have 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 foreign companies operating in Pakistan to provide complete information of its directors, officers and/or beneficial owners.
In order to ensure adequate measures against fraud, money-laundering and terror-financing, the new ordinance empowers SECP to investigate and conduct joint investigations. Furthermore, provisions requiring officers of a company to take adequate measures to curb such violations have also been included.
The government has made it binding for foreign companies working in Pakistan to disclose names of their beneficial owners aimed at ensuring transparency in the ownership structures of the firms.
The Companies Ordinance, 2016, contains provisions for simplifying 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, the finance ministry said. It includes special provisions to facilitate small and medium enterprises as well.
The new 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 in the board, as well as provisions for manner of selection and maintenance of data bank of independent directors. It aims to address the issues relating to protection of interest of minority shareholders and creditors.
The Companies Ordinance, 2016 also includes provisions for registration of valuers, dispute resolution mechanism through a mediation and conciliation panel, passing of members’ resolution through circulation, as well as simplified provisions for expeditious mergers and acquisitions.
In addition to that, it emphasises maximum disclosures by Pakistanis to the local regulatory authorities in respect of investment in foreign companies and provides facilitation and regulation of public sector enterprises.
Dar said there was a strong need to revamp Companies Ordinance, 1984, in order to provide an improved competitive legal framework for Pakistan’s corporate sector. He said that, during various stakeholder consultations, market experts and the business community had expressed unanimous support for enacting Companies Ordinance, 2016, at the earliest, as it would help address longstanding demands of the business community.