Corporate experts and financial professionals have expressed surprise at the bold changes made by the Securities and Exchange Commission of Pakistan (SECP) in the Companies Act, 2017, enabling a board of companies to appoint Chief Executive Officers (CEOs) of Public Sector Companies (PSCs), withdrawal of government's powers to nominate the CEOs of such PSCs, and abolition of filing requirement for private companies of paid-up capital of up to Rs10 million.
One of the prominent capital market professionals, Aftab Ahmad Chaudhry told Business Recorder that the changes made in the Companies Act, 2017, is the step taken in the right direction.
With many desirable changes in the Companies Act, the SECP has made a significant progress towards being a proactive and forward looking regulator, just like many South East Asian countries.
He referred to the amendments made to Section 233 of the Companies Act to eliminate filing requirement for private companies paid up capital of up to Rs10 million, and amendments to Sections 186 and 187 of the Act to enable a board of the company to appoint CEO of the PSCs.
Through amendments made in the Companies Act, the government powers to nominate chief executive of a public sector company in such manner as may be specified, has been withdrawn. Last week, the president of Pakistan had signed an ordinance for brining many changes in the Companies Act, 2017.
These changes mainly pertain to ease of doing business (EODB) and for reducing the compliance and paperwork burden on the companies.
Aftab especially declared the sandbox and start up-related changes as revolutionary, which would unleash the creative and innovational environment in the country.
While appreciating these changes, he, however, stated that the SECP should not make the related regulations to operate like a licensing regime.
He said that globally the financial sector innovations were taking place in four key areas-digital currencies, payment and settlement systems, digitalization of assets and crowd-funding/micro-lending arrangements.
He said that all ideas proposed to the SECP should be allowed, and the commission should confine itself to the supervision and enforcement from the perspective of risk to the consumers.
He said that the aforesaid suggestions were only from the perspective of application of the regulations.
Aftab also stated that he was surprised to read about two strange changes, which may need reconsideration when the ordinance would be taken up by the Parliament.
He said that one of the changes pertained to the qualification of a director, whereby it appears that those individuals having entered into a plea bargain with the NAB, seem to have been allowed to sit on the Companies Board.
Similarly, he said that the power of approving the amalgamation and merger of the companies is seemingly vested back to the courts.
He said that both of the above changes appear to have slipped through some top-level review at the commission.
He said that he was aware that as a matter of practice, the SECP did not even entertain the question of someone being a shareholder in a company when such a person had entered into a plea bargain.
Therefore, he said that the related change would need to be reviewed sooner rather than later. Similarly, he said that the SECP should have the powers to approve mergers as this would bring efficiency and speed to the process. Aftab added that in the near future changes in the Securities and Futures Act could also be expected, which would bring further ease in the burden of compliance.
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