Corporate governance for non-listed companies: SECP holds roundtable on principles

In collaboration with International Finance Corporation (IFC) and Centre for International Private Enterprise (CIPE), the Securities and Exchange Commission of Pakistan (SECP) conducted roundtable on Thursday to create awareness on principles of corporate governance for non-listed companies. The roundtable was conducted to create awareness and to seek feedback from market participants about proposed principles of corporate governance for non-listed companies pursuant to cooperation agreement between the SECP, IFC and CIPE. The participants also discussed the draft Companies Bill 2016.
Distinguished guests, including Mujahid Eshai, FCA, former President, Institute of Chartered Accountants of Pakistan, Mohammad Naeem, Director, Pakistan Stock Exchange, and representatives of industry, accounting and trade bodies and academia attended the roundtable. The representatives of Lahore, Sialkot and Faisalabad Chambers of Commerce also attended it on special invitations.
Tahir Mahmood, Commissioner (Company Law Division) of the SECP, in his welcome address highlighted the importance of public consultation and appreciated large participation from the corporate sector, accounting and legal professional bodies, chambers and from non-profit organisations for showing interest in the process. Sharing his experience from the stakeholders conference, which was conducted in Karachi last month, he explained at length as to how proposed principles will improve corporate governance regime for non-listed companies.
He also highlighted the importance of self-regulatory organizations and informed the participants that principles were voluntary in order to encourage market participants for better adoption. While introducing the principles, he said that it was as a landmark progress for improvement of corporate governance regime for non-listed companies in Pakistan. He elaborated that 13 principles had been introduced wherein phase one contained seven principles and phase two contained six principles. Phase one principles are generally applicable to all non-listed companies except small-sized companies whereas phase two principles are applicable to large-sized companies.
He requested the participants to share their views about proposed Companies Bill as in his view stakeholders' feedback was backbone for legislative development. Mohsin Chaudhary from IFC, highlighted international practices and benefits reaped through following corporate governance principles.
While briefing the participants on the proposed Companies Bill 2016, Jawed Hussain, Executive Director of SECP, said that the new company law would result in growth of the corporate sector and provide for cost-effective measures with respect to starting a business and doing a business as a company.
The draft Bill provides for facilitative measures to the corporate sector in general and addresses unattended concerns not present in the Companies Ordinance, 1984. He also gave a presentation on the significant provisions to be introduced in the draft Bill and explained the impact and utility of such provisions. The roundtable concluded with agreement to strengthen corporate governance regime for non-listed companies and recommendations on following priorities:
(a) Non-listed companies shall be encouraged to improve governance regime by taking benefits of international best practices.
(b) Directors shall ensure that board meetings be held on a regular basis.
(c) In order to measure performance of board of directors, committees constituted by boards shall work to establish criteria for self-evaluation based on nature of industry and corporate history.
(d) Financial reporting regime of non-listed companies shall be improved and effective resolution of issues be provided in directors' reports.
(e) Internal control mechanisms for appropriate risk oversight shall be developed by the boards of directors in order to secure business operations of the companies.
(f) Compliance reports with applicable Principles of Corporate Governance for Non-listed Companies shall be annexed with the annual financial reports of non-listed companies.
Recognising the fact that more than 60,000 non-listed companies in Pakistan, the SECP feels that there is a dire need to improve corporate governance of these companies. Consequently, it has introduced principles of corporate governance for these companies. The IFC, an arm of World Bank group, is considered a pioneer in development of corporate governance practices across the globe. It is expected that collaboration of SECP and IFC shall transform corporate governance regime for non-listed companies in Pakistan.-PR