ISLAMABAD: The Federal Cabinet is to relax applicability of Public Sector Companies Corporate Governance (PSCG) Rules, 2013 in respect to subsidiaries of Pakistan National Shipping Companies (PNSC), official sources told Business Recorder.
Sharing the details, sources said, ECC took the following decision on September 30, 2021 on a summary submitted on September 30, 2021: (i) relaxation to PNSC’s 19 subsidiary Companies from the applicability of the Public Sector Companies (Corporate Governance Rules), 2013 and decided to grant exemption to 19 subsidiary companies of PNSC from the requirement of sub rule (3) of rule-24 of Public Sector Companies (Corporate Governance) Rules as advised by the SECP/ Finance Division, till June 2021 and ;(ii) ECC also directed MoMA/ PNSC to seek legal opinion from a law firm of international repute on the issue of grant of exceptions to subsidiary companies of PNSC vis-à-vis prevailing international and local relevant laws with an angle to avoid possibility of international litigation. A report in this regard shall be submitted to the ECC within a period of six months.” The ECC decision was also ratified by the Cabinet Division on September 14, 2021.
In compliance of the ECC/Cabinet Division’ decision, Khuram Rashid (Barrister-at-law), lead Counsel of M/s. K-Legal Law Firm (KL) was engaged to seek legal opinion in the matter.
Barrister Khuram Rashid is one of the leading counsels of Securities and Exchange Commission of Pakistan (SECP) with 22 years of standing, with extensive litigation experience at High Court, District Courts, Labour Courts, Services Tribunal and Barking Courts.
PNSC has also obtained opinion regarding international litigation related to PNSC vessels from M/s. Stephen Harwood Middle East LLP, on September 05, 2018, which alludes to the possibility of PNSC’s vessels being involved in international litigation on maintaining proper separation of existence, although that advice dealt primarily with the separation of chartering and ship management functions from PNSC’s operations and forming separate companies to handle those two jobs.
However, the conclusion of the opinion is as follows: “The nature of the services being provided by the PNSC to the state, couples with (a) the specific statutory scheme under which PNSC operate (as set out in the 1979 Ordinance) and (b) the unique rationale behind setting up single ship subsidiaries, means that most if not all of the provisions of the Rules are not only unsuitable for the subsidiaries but also likely to add unnecessary costs, bring inefficiency, erode confidentiality of business and be in conflict setting up strategies at subsidiary level with certain provisions of 1979 Ordinance; hence, depleting the overall objectivity. For these reasons, PNSC’s subsidiaries’ case for exemption under Rule 24(3) is not only strong but logical. In the absence of such an exemption, PNSC may have to consider if it would even be able to discharge its statutory duties with the subsidiaries potentially tugging in opposite direction.”
MoMA has reiterated that since the PNSC subsidiary companies were formed with the objective to limit liability of PNSC for each ship rather than to form independent companies with diverse operations, PNSC applied to SECP for exemption from the application of PSCCG 2013 for each of its subsidiary companies. The request of PNSC was considered by SECP and exemption was duly granted by SECP two times for a period of three years each (from FY 2014 to 2016, and from FY 2017 to 2019) through its letters. The exemptions were granted by SECP in view of the powers available to it under Rule 24(3) of PSCCG 2013.
After expiry of latest exemption on June 30, 2019, PNSC again applied to SECP for seeking further relaxation from the applicability of PSCCG 2013 for its subsidiary companies. However, in view of the changes made in PSCCG 2013 via SRO 715()/2019, the Federal Government (Federal Cabinet) is now the competent forum to grant relaxation.
The Ministry of Maritime Affairs, has requested that in exercise of power delegated to the Federal Government under Rule 24(3) of PSCCG 2013, the Federal Government may relax the application of Public Sector Companies (Corporate Governance Rules), 2013 in respect of PNSC subsidiaries.
Copyright Business Recorder, 2021
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