The Securities and Exchange Commission of Pakistan (SECP) has found that no direct investment has been made by the companies registered in Pakistan in the offshore companies listed in Panama Papers. According to the SECP''s brief received by the National Assembly Standing Committee on Finance on Panama Papers, new provisions in the Companies Bill 2016 shall be highly effective in curbing the investments in offshore companies for tax evasions, money laundering, and hiding of assets in future.
It has been revealed that no direct investment had been made in off-shore companies by the companies registered in Pakistan relating to identified individuals as per the financial statements available at SECP. The available record reflects, prima facie, the investments as mentioned in the Panama Papers were made by the persons in their individual capacity and same has not been routed through any company''s accounts.
SECP has shared the details of the identified individuals and their directorship in Pakistani Companies with FBR or any necessary action on their part. It has however been noted that certain companies have made foreign exchange transactions for investments/borrowings in other jurisdictions. An analysis of financial statements of public listed companies revealed that all such companies have complied with the requirements of the Companies Ordinance, 1984 while making these investments. It has also been observed that majority of the companies are better performing companies and are paying good returns to their shareholders. SECP has however shared the information with the State Bank of Pakistan (SBP) along with relevant details for observing compliance of the applicable laws administered by SBP.
Further, scrutiny of the offshore companies, with regard to foreign portfolio investment in the companies listed on Pakistan Stock Exchange Limited, was carried out. It was observed that an offshore company, whose name is appearing in the Panama Papers, has made an investment worth Rs 933.270 million in two Pakistani companies. This offshore company owns 37% shareholding of a company engaged in paint business and 52% in another paint company. It was also noted that one of the directors of a paint company is also appearing as owner of offshore company in the Panama Papers. The Commission has taken up the matter with these companies in order to obtain details of such investment.
At the outset it may be noted the Companies Ordinance, 1984 does not restrict the companies from making investments in foreign jurisdictions. However, an investing Company has to comply with the relevant provisions of the Ordinance at the time of making such investments which inter alia includes approval from the board of directors and approval from shareholders only in case of associated companies. Hence, there is no other bar or restrictions on making foreign investment as per laws administered by SECP, it said.
Ministry of Finance advised SECP to determine in respect of all those companies registered with SECP and their directors whose interests in off-shore companies have been made public by the Panama Leaks along with violations of Companies Ordinance, 1984 or any rules/regulations of SECP and if so to proceed against such persons under the relevant laws immediately.
The Commission constituted a committee comprising of three senior level Officers, which started its probe as per given directions. The Committee initiated the process of identification of persons given in the Panama Papers (ICIJ website). During the process, it was observed that full/correct names of individuals were not mentioned on ICIJ website, no details regarding parentage and Computerised National Identity Card (CNIC) numbers were available. Hence, identification process was very difficult.
Despite the aforesaid impediments, the identified persons were searched in the available record of SECP. The Committee identified that a total of 444 persons whose names were appearing either on lCIJ website or given in a newspaper are related to Pakistan. These persons are officers or owners of 280 offshore companies mentioned in the Panama Papers. Out of the referred 444 persons, 155 individuals were found to be directors on Companies 111 Pakistan. The said referred 155 persons are directors in 600 number of Companies registered in Pakistan. The breakup of these companies revealed that 34 are Public Listed Companies, 61 Public Unlisted Companies and 29 Not-for-profit companies registered under sections 42 & 43 of the Companies Ordinance, 1984.
It is important to note that in India, Capital Market Regulator ie SEBI is not involved in the Probe of Panama Papers leaks. India has formed a multi-agency group comprising of Central Board of Direct Taxes, Reserve Bank of India, Financial Intelligence Unit and Foreign Tax & Tax Research, the brief said. The present laws do not require any disclosures with regard to the foreign investments made by the directors in their personal capacity, therefore, SECP has suggested special provisions in the Draft Companies Bill, 2016 pertaining to maintenance of record of foreign investment in shape of Companies'' Global Register of Beneficial Ownership. Under this provision every shareholders, directors and officers of the companies have to report their beneficial ownership or any other interest outside Pakistan. The companies shall also be required to report their foreign equity investment to SECP.
The provision is reproduced here under:
452. Companies'' Global Register of Beneficial Ownership.- (1) Every substantial shareholder or officer of a company incorporated under this Act, having ten percent or more shares in a foreign company or body corporate shall report to the company regarding his beneficial ownership or any other percentage or interest as may be notified by the Commission, on a specified form within thirty days of holding such position or interest.
(2) The company shall submit all the aforesaid information received by it during the year to the registrar along with the annual return.
(3) Any investment in securities or other interest as may be notified in sub-section (1) by a company incorporated under this Act, in a foreign company or body corporate shall also be reported to the registrar along with the annual return.
(4) All the above information shall be reported to the registrar through a special return on a specified form within sixty days from the commencement of this Act and thereafter in accordance with the sub-section (2).
(5) A person guilty of an offence under this section shall be liable to a fine of level 3 on the standard scale.
(6) The Commission shall keep record of the information in a Companies'' Global Register of Beneficial Ownership. Prevention of offences relating to money laundering. Under this provision every officer of a company shall endeavour to prevent the money laundering with respect to affairs of the company and shall take adequate measures for the purpose. The provision is reproduced here under:
453. Prevention of offences relating to fraud, money laundering and terrorist financing.- (1) Every officer of a company shall endeavour to prevent the commission of any fraud, offences of money laundering including predicated offences as provided in the Anti Money Laundering Act, 20 I0 (VII of 20 I 0) with respect to affairs of the company and shall take adequate measures for the purpose.
(2) Whosoever fails to comply with the provisions of this section shall be liable to punishment of imprisonment for a term which may extend to three years and with a fine which may extend to one hundred million rupees: Provided that where any such officer has taken all reasonable measures available under the applicable laws within his capacity to prevent commission of such offence, shall not be liable under this section.
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