ISLAMABAD: The proposed Modaraba Companies & Modaraba (Floatation and Control) (Amendment) Bill, 2020 would regulate the business of Modarabas and Modaraba companies to provide protection to the investors, Modaraba certificate holders and general public.
Sources told Business Recorder here on Sunday that the existing Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 (“the Ordinance”) was promulgated by the federal government in 1980. Since its inception, no substantial changes have so far been introduced except inclusion of some administrative powers for the Commission and the Registrar Modaraba in the year 2012.
The proposed Bill aims to amend more than 40 years old Ordinance, in order to accomplish the beneficial regulation of Islamic financial services within the remit of the Securities and Exchange Commission of Pakistan (SECP), encourage and promote Islamic financial institutions in the country and to reduce the regulatory burden on the regulated.
The Bill focuses on the growth of the modaraba sector through introduction of various reforms such as the concept of establishment of unlisted modaraba, empowerment of the certificate holders through introduction of the concept of annual general meeting to ensure maximum participation of certificate holders in decision making process of a modaraba and
providing enabling environment for ease of doing business.
Under the proposed amendments, the rationalization of penalties has been done for this sector. The maximum amount of penalty has been increased from Rs.100,000 to Rs100 million for individuals and Rs.200 million for Modaraba company. The Bill has also imposed restriction on merger of a Modaraba into another Modaraba without the approval of the SECP’s Registrar.
The enabling provision has been introduced in the law for approving the voluntary change of management of a modaraba company; bar on winding up of a modaraba company if it is managing a Modaraba till transfer or winding up of the Modaraba managed by it and enabling provisions for voluntary winding up of Modaraba managed by it with the approval of the certificate holders.
The revised law will also facilitate the growth of economy in general and the Islamic financial sector in particular by providing simplified procedures for ease of starting and doing business, enhanced protection of investors and would augment corporatization in the country.
The proposed Bill further seeks to mitigate the reputational and operational risks and enhance the image and operational framework of modarabas as an Islamic financial institution of the country. The Bill aims to enhance SECP oversight and
bring operational flexibilities for the Modaraba sector.
In order to give immediate impetus to the Islamic financial industry and to stimulate economic , there is an emergent need to promulgate the proposed Modaraba Companies and Modaraba (Floatation and Control) (Amendment) Bill, 2020 to provide incentives to entrepreneur and prospective investors to invest and carry out their businesses under the umbrella of regulated structure of modaraba to earn halal profits on their investments, they added.
Copyright Business Recorder, 2021
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