Amendments in Corporate Laws

7/31/2019 Amendments in Corporate Laws

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Amendments in Corporate Laws

SRO 865(I)/200006th December,

2000

Company Listed On A Stock Exchange In Pakistan Shall, WhileIssuing Notice For Its General Meeting .

SRO 839(I)/2000

16th November, 2000

Amendments Shall Be Made In The Companies (Buy-Back Of

Shares) Rules, 1999.

SRO 830(I)/200016th November, 2000

Amendments Shall Be Made In The Companies (Buy-Back OfShares) Rules, 1999.

October 23rd, 2000Draft Chemical Fertilizer Industry (Cost Accounting Records) Order,

2000.

SRO 756(I)/2000

19th October, 2000Fees To Be Paid To The Registrar And The Commission.

October 18th, 2000Draft Pharmaceutical Industry (Cost Accounting Records) Order,2000.

October 13th, 2000Draft Listed Companies (Prohibition Of Insiders Trading)Regulations, 2000.

SRO 663(I)/200025th September, 2000

Leasing Companies (Establishment And Regulation)Rules, 2000.

September 08th, 2000Further To Amend The Securities And Exchange Ordinance, 1969.

Securities & Exchange (Amendment) Ordinance, 2000

August 28th, 2000 Insurance Ordinance 2000.

SRO 599(I)/2000

28th August, 2000

The Companies, Share Capital (Variation In Rights And Privileges)

Rules, 2000.

SRO 594(I)/2000

25th August, 2000The Companies Ordinance, 1984 , Auditors Report To The Members.

Augusrt 01, 2000Draft Venture Capital Companies and Venture Capital Funds Rules,

2000.

July 01st, 2000Draft Securities and Exchange Commission of Pakistan (Conduct ofBusiness) Rules, 2000.
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April 27th, 2000 Amendments in the Asset Management Companies Rules, 1995.

April 20th, 2000 Prudential Regulations For Modarabas.

April 08th, 2000Listed Companies (Substantial Acquisition of Shares and Takeovers)

Regulations, 2000.

February 18th, 2000 Draft Leasing Comapanies (Establishment and Regulation) Rules.

December 14th, 1999 The Companies (Asset Backed Securitization) Rules, 1999.

December 14th, 1999 The Companies (BUY-BACK OF SHARES) Rules, 1999.

August 03th, 1999 The Companies (Rehabilitation of Sick Industrial Units) Rules, 1999.

July 30th, 1999Proposed draft the Companies (BUY-BACK OF SHARES) Rules,

1999.

June 30th, 1999 Amendments in Companies Ordinance, 1984.

June 29th, 1999 Companies (Asset Backed Securitization) Rules.

June 26th, 1999 Proposed Draft of the Companies (Rehabilitation of Sick IndustrialUnits) Rules, 1999.

June 14th, 1999Amendment of the Ordinance XLVII of 1984, Ordinance XXXI of

1980, & Act of XLII of 1997.

January 14th, 1999Amendment in the investment companies and investment advisers

rules, 1971.

December 26th, 1998 Securities and Exchange Commission of Pakistan Act, 1997.

1998 The Companies (Audit of Cost Accounts) Rules, 1998.

1998 Central Depositories (Amendment) Act, 1998.

1997 Central Depositories (Amendment) Act, 1997.

1997 Central Depositories Act, 1997.

1996The Employees Provident Fund (Investment In Listed Securities)

Rules, 1996.

1996The Leasing Companies (Establishment and Regulation) Rules,1996.

Mar 14, 2002 SEC Finalizes Recommendations for Amendments in Companies

Ordinance, 1984The Securities and Exchange Commission of Pakistan (SEC) has finalized itsrecommendations for

amending the Companies Ordinance 1984, with a view to update the law and to remove the

practicaldifficulties experienced in its enforcement. The SEC has sent draft of the amending

Ordinance to the

Ministry of Finance for obtaining approval of the Cabinet before its implementation.
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The SEC has undertaken a comprehensive review of the Companies Ordinance, 1984,

which was long over

due as it was found deficient in many respects to meet the current problems in the corporatesector in the

changed scenario. For this purpose, the SEC appointed a committee in January 2001, which

reviewed the1984 Ordinance thoroughly. The committee made an objective study of the said law and

submitted its

report wherein a number of amendments in the Ordinance, were recommended.The proposed amendments were widely circulated, inviting suggestions from professional

accounting

bodies, trade organizations, stock exchanges and legal experts. The proposals were also

placed on theCommissions website and released to the press. A roundtable conference of the corporate

experts,

professionals, businessmen and representatives of stock exchanges and trade organizations

was also held inLahore for seeking their point of view about the proposed amendments. The comments

received from theprofessional bodies, legal experts and other relevant quarters were considered and

appropriate changes

were made in the draft law.The suggested amendments mainly relate to introduction of the concept of single members

of private

companies and reduced number of directors of public companies, providing right of appeal

against refusalof transfer of shares by the directors, empowering the SEC to rectify the register of

mortgage to be

maintained by the registrar and companies, reduction in period to present annual auditedaccounts in annual

general meetings of companies, providing copies of minutes of meetings to the directors,

appointment ofqualified company secretary by listed companies, streamlining and simplifying the

provisions relating to

investment in associated companies, quorum of listed companies, winding up of the

companies, removal ofauditors, preparation of accounts of subsidiaries of listed companies and consolidation of

accounts to bring

it in conformity with International Accounting Standards. The amendments would help insmooth working

of the Commission, development of corporate sector, stabilizing the stock market,

protection of interest ofinvestors and removing certain abnormalities.

Main features of the draft Companies (Amendment) Ordinance are:

(i) Formation of single member company:


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Presently for the formation of a private company at least two members are needed. There is

a proposal to

introduce the new concept of single member company (SMC) in Pakistan. The mainrationale behind the

establishment of SMC is to encourage the use of the corporate structure by small

businesses and soleproprietorships. The privileges of limited liability and independent legal status would, no

doubt, afford

better protection of the interests of such businesses and provide incentive to incorporate.(Section 15)

(ii) Reduction in minimum number of members and directors of unlisted public companies:

The minimum number of seven persons to form a public company is proposed to be

reduced to three,keeping in view the practical difficulties being faced by promoters to associate a large

number of persons at

the stage of formation of a company. However, listed companies shall be required to have

at least sevendirectors. (Section 15/174)

(iii) Appeal against refusal of transfer of shares by the directors:The existing provisions of the Ordinance do not provide any relief to the shareholders if the

transfer is

refused by the directors without valid grounds. Therefore, right of appeal to heCommission against such

refusal has been provided. (Section 78-A)

(iv) Rectification of Registrar of Mortgage:

Considering practical difficulties in getting extension from the High Court, powers to grantextension have

been entrusted to the Commission. (Section 131)

(v) Reduction in period to present annual audited accounts in annual general meetings:In order to keep informed the shareholders at the earliest about the affairs of companies,

amendments have

been proposed to hold annual general meetings for consideration and approval of auditedaccounts within a

period of four months instead of six months of close of accounts. Moreover, extension

period has been

curtailed from three to two months. (Sections 158/233)(vi) Quorum of listed companies:

To provide for larger representation, quorum of general meeting of a public listed company

is beingincreased from three members to ten members present in person representing not less than

25% of total

voting power either of their own account or as proxies. (Section 160)Providing copies of minutes of meetings of the Board of Directors:

The amendment is proposed with a view to furnish the directors with the minutes of the

proceedings of the

meeting. (Section 173)


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Appointment of company secretary:

To improve the efficiency in the management of listed companies, appointment of whole

time secretarypossessing qualification to be prescribed by the Commission would be mandatory. (Section

204-A)

Investment in associated companies:Existing provisions are changed to streamline, simplify and clear ambiguity. Discretionary

powers of the

Commission to grant relaxation in certain cases have also been done away with. (Section208)

Removal of auditors:

Since the law did not provide for removal of auditors appointed in the annual general

meetings ofcompanies, change is suggested to remove the auditors through a special resolution.

However, when

auditors are removed by the companies, the Commission shall appoint a person as auditor

to fill thevacancy. (Section 252)

Amendments in the Companies Ordinance, 1984 (Pakistan)Whereas it is expedient further to amend the Companies Ordinance, 1984 (XLVII of

1984), for the purposes hereinafter appearing; It is hereby enacted as follows:-

1. Short title and commencement.-

i. This Act may be called the Companies (Amendment) Act, 1999.ii. It shall come into force at once.

2. Amendment of section 14, Ordinance XLVII of 1984.- In the Companies

Ordinance, 1984 (XLVII of 1984) hereinafter referred to as the said Ordinance,in section 14, in sub-section (3), in clause (c), for the full stop at the end a

semi colon and the word "or" shall be substituted and thereafter the following

new clause shall be added, namely:- "(d) a partnership formed to carry onpractice as lawyers, accountants or any other profession where practice as a

limited liability company is not permitted under the relevant laws or

regulations for such practice".

3. Amendment of section 53, Ordinance XLVII of 1984.- In the saidOrdinance, in section 53, after sub-section (1) the following new sub-section

shall be inserted, namely:- "(1A) A sufficient number of copies of the

prospectus issued under sub-section (1) shall be made available at theregistered office of the company, with the stock exchange at which the

company is listed or proposes to be listed and with the bankers to the issue,

and the prospectus in its full text or in such abridged form as may beprescribed, shall be published at least in one Urdu and one English daily

newspaper".

4. Amendment of section 236, Ordinance XLVII of 1984.- In the said

Ordinance, in section 236, in sub-section (2)


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i. in clause (d), the word "and" at the end, shall be omitted; and

ii. in clause (e), for the full stop at the end, a semi colon shall be

Substituted and thereafter the following new clauses shall be added,Namely:-

iii. state the earning per share;

iv. give reasons for incurring loss and a reasonable indication of futureProspects of profit, if any;

v. contain information about defaults in payment of debts, if any, and

reasons thereof:5. Amendment of section 245, Ordinance XLVII of 1984.- In the said

Ordinance, in section 245,-

1. in sub-section (1), in clause

2. For the word "five", the word "three" shall be substituted; and (b) forSub-section (1), the following shall be substituted, namely:-

3. If a company fails to comply with any of the requirements of this

Section, every director, including chief executive and chief accountant

of the company who has knowingly by his act or omission been thecause of such default shall be liable to a fine of not exceeding one lac

rupees and to a further fine of one thousand rupees for every dayduring which the default continues.".

6. Amendment of section 254, Ordinance XLVII of 1984.- In the said

Ordinance, for sub-section0. the following shall be substituted, namely:- "(1) A person shall not be

qualified for appointment as an auditor,-

1. in the case of a public company or a private company which is

subsidiary of a public company unless he is a Chartered Accountantwithin the meaning of the Chartered Accountants Ordinance, 1961 (X

of 1961); and

2. in the case of a private company having paid up capital of three millionrupees or more unless he is a Chartered Accountant within the meaning

of the Chartered Accountants Ordinance, 1961 (X of 1961)." http://www.secp.gov.pk

Press ReleaseISLAMABAD: The National Assembly has passed the Finance Act, 2007 (the Act) on 23 rd

of June. The Act has amended various laws including the Companies Ordinance, 1984, (the

Ordinance) being administered by Securities and Exchange Commission of Pakistan

(SECP). Following are some of the major amendments made in the Ordinance.Amendments in the definition of document and Register

The Ordinance provides for maintaining proper record in the form of books of accounts of

all the transactions carried by the companies. In order to facilitate the companies inmaintaining data in electronic form, the Act has amended various provisions of the

Ordinance that deal with maintenance of record. For the said purposes, the definition of the

term Book and paper has been enlarged to include documents on computer network,floppy, diskette, magnetic cartridge tape, CD-Rom or any other computer readable media.

Likewise, a new definition of Register has been inserted by the Act in Section 2, Sub-

section (1) Clause (30B), enabling the maintenance of register of members/ debenture


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holders on computer network, floppy, diskette, magnetic cartridge tape, CD-Rom or any

other computer readable media.

Alteration of Memorandum of AssociationThe Act has omitted Sub-section (2) of Section 24 of the Ordinance that required filing of

certified copy of the Order confirming alteration in the Memorandum and Articles of

Association with the registrar concerned, in order to facilitate the companies. In a likemanner Section 30 sub-section 1 required a Company to inter-alia state in the

Memorandum of Association, the Province or the part of Pakistan not forming part of a

Province, as the case may be, where the registered office of the company is to be situated.The Act has omitted the condition. In future SECP plans to have central data system

throughout Pakistan and such change has been made as a step towards unification of data.

Certain relaxation in prohibition of purchase or grant of financial assistance by a company

for purchase of its holding companys sharesPreviously, under Section 95 companies were totally prohibited from purchasing the shares

of their holding companies. The Act has amended the section to enable a subsidiary to act

as a trustee of the holding company provided the holding company is not beneficially

interested under the Trust. The Act has also permitted a subsidiary to deal in shares of itsholding company listed at the stock exchanges in the ordinary course of bonafide business

of brokerage of shares. However, such subsidiary shall not be entitled to exercise the votingrights attached to such shares.

Time limit reduced for holding Annual General Meeting and Annual accounts and balance

sheetThe Act has reduced the period of holding of AGM of all companies from four months to

three months following the closure of its financial year. The reduction in the time limit for

holding of AGM has been done to satisfy the reportedly long-standing demand of

shareholders of companies to have quick oversight of financial data of the companies. TheAct made a consequential amendment in Sub-section (1) of Section-233 of the


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Ordinance thereby reducing the time for preparation and presentation of annual account

from four months to three months. Consequential amendments have also been madewherein the period for granting extension of time by SECP or the Registrar of Companies

for holding of AGM has been reduced from sixty days to thirty days.

Fresh election of directors in the event of substantial acquisitionThe Act has inserted a new section that entitles the acquirer of 12.5% or more voting shares

in a listed company to apply to SECP for requiring the company to hold fresh election of

directors in the forthcoming annual general meeting of the Company. The said option offresh election has been given as 12.5% voting shares are considered as substantial

ownership in the stocks of the company that can affect the interests of the shareholders.

However, the Act has put a restriction on the person on whose request election of Directors

is to be held in as much that he/she can not sell or dispose of the shares for at least one yearfrom the date of election of Directors of the company concerned.

Certain companies to have Secretaries and Independent Share Registrars

Section 204A has been amended whereby all listed companies are obliged to appoint an

independent share registrar of the company possessing such qualifications and performingsuch functions as may be specified by SECP. The purpose of the amendment is that the

secretarial task of handling transfer of shares and its record be undertaken by independentshare transfer agents/share registrars in order to avoid disputes and conflicts.

Investments in associated companies and undertakings made subject to further regulatory

interventionSection 208 deals with investments in associated companies and undertakings. Previously

under sub-section (4) banking companies, private limited companies, financial institutions

and the companies whose principal business was acquisition of shares were exempt from

the scope of this provision. This provision has been deleted by the Act, and instead SECPhas been given power to give exemptions from the application of the prohibition imposed

by said section. Further to this power SECP has issued a SRO on 13th of August 2007

notifying the classes of companies exempted. The said SRO has also been placed on theweb-site of SECP for the information of the stakeholders. In order to deter alleged

malpractices and conflict of interest in inter-group dealings penalty has been increased in

Sub-section (3) by raising the fine from one million to ten million for default incompliance.

New provisions introduced for special audit

A new Section 234A has been inserted with the objective to enable SECP to order a special

audit of the company on an application made by members holding not less then 20% votingrights in a company or by the SECP on its own motion. Moreover, if special audit has been

ordered on application of members, then fifty percent expenses of the audit shall be borne

by the members and fifty percent shall be borne by the company.


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Copy of balance-sheet to be forwarded to the Registrar by certain private limited

companies as wellPreviously, all private limited companies were exempt from filing a copy of their financial

statements with the Registrar of Companies. By virtue of the said amendment this

exemption is now available only to private limited companies which have a paid-up capitalof less than 7.5 million rupees. This has been done in order to enhance financial reporting

by private companies having a high capital base.

Certain restrictions on declaration of dividendThe Act has imposed certain restrictions on declaration of dividend by inserting a new

proviso in Section 248. By virtue of the amendment, unrealized gain on investment

property shall not be available to be utilized, directly or indirectly, by way of dividend or

bonus. This has been done to stem the trend whereby the companies were declaringdividend on the basis of re-valuation of properties and without actually realizing the gains.

Certain payables not to be construed as auditors debts to render him ineligible for

appointment

The Act has inserted a new Sub-section (3A) in Section 254 to provide relaxation in thecriteria of disqualification of auditors stipulated in Sub-section (3). Now an auditor shall

not be deemed to be indebted to the company if he (a) owes a sum of money not exceedingfive hundred thousand to a credit card issued; or (b) owes a sum to a utility company in

form of unpaid dues for a period not exceeding ninety days.

Provisions relating to establishment and regulation of Non-Banking Finance CompaniesIn addition to the above the Act has rectified, rationalized, clarified and enlarged the scope

of existing Part VIIIA in respect of establishment and regulation of Non-Banking Finance

Companies and related entities. The Act, while recognizing the growing needs of financial

sector, has introduced a new term notified entities. By virtue of new insertion FederalGovernment shall have the power to notify an entity to carry on certain class of business

that is not covered in existing provisions of the sub-section (a) of Section 282.A.

Previously, SECP did not have the power to make regulations, the Act has given specificpowers to SECP to issue regulations for regulating NBFCs and notified entities. Moreover,

SECP has been given the powers to issue such directives, circulars, codes, notifications and

guidelines as are necessary to carry out the purposes of regulating Part VIII of CompaniesOrdinance.

Moreover, SECP has been given power to impose maximum fine of fifty million in case of

violation of any provision of the Part VIIIA of Companies Ordinance that was not in

existence previously.The Act has also empowered SECP for the rehabilitation of NBFCs and notified entities

that are facing financial or operational problems. By virtue of this insertion SECP can


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approve rehabilitation plan for the revival of NBFCs and notified entities and any

violation with respect to the implementation of the plan approved by SECP is subject toimposition of maximum fine of ten million. The Act has inserted certain uniform

terminologies to harmonize Section 282A to 282N of the Companies Ordinance.

Notice of resolution to wind up voluntarilyThe Act has omitted the requirement of publication in the official gazette notice of

resolution to wind-up voluntarily from Sub-section (1) of Section 361, in order to facilitate

and provide for lesser requirements for the companies which intend to close theirbusinesses voluntarily.

Maximum limit of fines increased

The Act has also raised maximum limit of fine that can be imposed under various

provisions so that the companies may be obliged to the compliance of the provisions of theOrdinance. By virtue of increase in fine, compliance ratio is expected to be increased.

Power to make regulations and to issue directives, circulars, guidelines etc. by the SECP

The Act has inserted two new sections 506-A and 506-B enabling the SECP to issue

regulations, directives, prudential requirements, codes, guidelines, circulars or notificationsfor carrying out the purposes of the Ordinance and in addition to existing rules.

(This Press Release is meant for information to the stakeholders and general public)

Amendments in Corporate Laws

Documents

Transcript of Amendments in Corporate Laws