10. GENERAL MEETINGS A. Statutory Meeting The repealed law required public companies to hold this meeting between the fourth and sixth month of being entitled to commence business. The Act now requires it to be held within 180 days of being entitled to commence business or nine months of incorporation, whichever is earlier.
There is no need to hold this meeting if first AGM of the Company is held before the time to hold statutory meeting lapses.
B. Extraordinary General Meeting
Under the Companies Ordinance, 1984, a company could hold its extraordinary general meeting with a shorter notice period, where directors make a request to the Registrar. The Act has denied listed companies from having a reduced notice period. Non-listed companies can still do so and that too without going to the Registrar, provided all members entitled to attend agree to it.
C. Annual General Meeting
i) SMCs now Exempt
Single member companies are not anymore required to hold annual general meeting. Recording of decisions in the minutes book, signed by sole member or director, would suffice.
ii) Timing of holding AGM
-- Time to hold First AGM has been reduced. It is now 16 months from the date of incorporation instead of 18 months; extendable by 30 days.
-- The maximum period of four months for holding AGM, from the financial year end, has been substituted with "one hundred and twenty days". As result the maximum due dates for holding of AGM for companies with different year ends shall be as follows:
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Year End Due Date of AGM
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30th June 27th October
31st March 29th July
30th September 28th January
31st December 30th April
(except in leap year)/
29th April (in leap year)
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-- The requirement to manage time lag between two AGMs, ie, 15 months has been done away with.
D. Notice of Meeting and Participation by Members
i) Notice to Directors
The Act explicitly requires circulation of notice to directors to ensure its circulation to those who are not members of the Company.
ii) Publication of Notice in National Dailies
With consolidation of stock exchanges, notice will now be published in English and Urdu languages in daily newspapers of respective languages, having nationwide circulations.
iii) Town hosting AGM
Listed companies can hold their general meeting in the town, nearest to one hosting the registered office.
iv) Participation through video link
The option to attend and vote in general meetings through video-link and postal ballots has now been made part of the Act and permitted to all companies. A listed company has to provide facility of video link, if members residing in a particular city, having not less 10% of the paid up capital, demand for it. The provision of such facility is required to be disclosed in the notice of meeting.
v) Poll and Secret Ballot
The provision related to demand for poll by members has been amended to have a single criteria only; minimum 10% of shareholding. Secret ballot can also be conducted on the desire of chairman or on demand of member, representing 1/10th of voting power.
vi) Proxies
While calculating 48 hour time for lodgement of proxies, any part of the day (hours) falling in a non-working day will be excluded.
E. Resolution of Members
i) Members Resolution by Circulation
In an un-listed company, members can now pass a resolution without calling a meeting ie by circulation, to the exclusion of matters which are domain of the AGM.
ii) Preservation of Record
Records of members'' resolutions and minutes of general meetings are now required to be preserved both physically and in electronic form, respectively for 20 years and permanently.
11. REPORTING, CORPORATE REGISTERS AND ANNUAL RETURN
A. Register of Directors and Officers
i) Statutory Reporting
The statutory return for reporting appointment of directors and other officers or any change therein has been extended from 14 days to 15 days of appointment or change as the case may be.
ii) Rectification of Register
Similar to provisions applicable to Register of Members, the Court has been vested with the power to make rectification in the Register of Directors if name of any person is fraudulently or without sufficient cause entered or omitted from register of directors.
iii) Inspection of Register
A register of director and other officers continue to be open for inspection by any member or any other person. However, a person seeking to inspect the register must make a request to the company communicating name, address, authorized person in case of a company and purpose for which the information is to be used.
B. Register of Members
i) Period of closure reduced
The company''s power to close Register of Members in a whole year has been reduced to 30 days from the earlier 45 days. The Commission has the power to grant extension for a further period of 15 days.
ii) Certified Copies
The time to issue certified copies of the register has been reduced from 10 days to 7 days, exclusive of the days on which the transfer book of the company is closed. Members are required to disclose the purpose of seeking information.
C. Mortgage and Charges
The time period for the registration, modification and satisfaction of mortgage or charges has been increased from 21 days to 30 days.
D. Annual Return of the Company
i) Listed Companies also have 30 days
The time for filing of annual return by listed companies has been reduced from 45 days to 30 days, thus bringing them at par with unlisted companies. However, the Registrar remains empowered to give them an extension up to 15 days.
ii) Companies with unchanged particulars
There is no need to file the Annual Return by any type of company if the particulars remain unchanged since the last return filed. This fact, however, has to be communicated by companies to the Registrar in the manner specified.
Single member companies and private companies with capital up to three million are exempt from this communication.
E. Supply of Information in Electronic Form
The information, notices and accounts or any other document to be provided by the Company to its members may be provided electronically after a notified date. For the purpose, email addresses provided by the members shall be used. Members will bear the cost where they require supply of physical documents.
12. DIVIDENDS
A. Payment of Dividend
- Dividend in kind can be distributed only in the form of shares of a listed company.
- The provision relating to payment of cash dividend through cheque or warrant has been made part of the Act.
- Listed company will have to pay its cash dividend through electronic mode, directly into bank account of the shareholder.
- A company will be able to withhold dividends of members who have failed to provide complete information to the company.
B. Unclaimed Dividend & Shares will now vest with the Government
- Dividend and share certificates, unpaid and unclaimed for three years, shall vest with the Federal Government, after giving a 90 days'' notice to the shareholders.
- The unpaid or unclaimed dividend shall be deposited into a special account opened by the Federal Government while shares or other instruments will be delivered to the Commission who may sell them and deposit the proceeds to credit of the special account.
- Owners to the aforesaid shares or dividend may file a claim with the Commission within 10 years from the date of any amount is credited in this respect to Federal Government''s account.
- All companies will file with the Commission a return within 30 days of the close of the financial year disclosing unclaimed shares and dividends, as appearing in its books.
13. RELATED PARTY TRANSACTIONS (RPTs)
A. Business Transactions
Provisions relating to related party transaction have been made part of the Act. As compared to the requirement of the Code of Corporate Governance, the provisions of Act in relation to RPTs are applicable on every company.
i) Approval by Board or Shareholders
Companies can enter into contracts or arrangements with related parties as per policies approved by the board, subject to conditions specified by the Commission. Any contracts or arrangements wherein majority of directors are interested shall be approved by a special resolution of members.
ii) Board''s authority in case of violation
The board may annul any contract or arrangement entered into by a director or employee with a Related Party, without consent of board or shareholders. The interested or concerned director will have to indemnify the company for any loss it incurs.
iii) Reporting and Record keeping
The details of all contracts or arrangements entered into with RPTs are required to be disclosed in the board''s report to the shareholders. The justification of entering into such arrangements shall also be included in the report. Furthermore, the records related to RPTs shall be maintained by the Company in accordance with the requirements specified by the Commission.
iv) Transaction with Directors
The Act instructs all companies to carry out asset purchase or sale transactions with its directors against cash consideration only. Unless there is prior approval of members for non-cash basis, duly supported by a valuation of the consideration.
B. Employees'' Retirement Funds
In addition to Provident Fund, the Commission has jurisdiction over all types of employees'' contributory funds, be it pension or any other contributory retirement fund. Accordingly, investments made by such funds shall also be governed under this Act.
C. Investments in Associated Companies and Undertakings
Certain conditions prescribed through the Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2012 have been brought in. The following major changes have been made.
i) Common Independent Directorship
The definition of "associated companies" and "associated undertakings" have been modified to exclude association on the basis of common directorship of a person appointed as an "independent director".
ii) Benchmark Rate of Return
Commission can now fix a benchmark rate and investment should yield higher of this rate or the borrowing cost of the Company. The return has to be recovered on a regular basis in accordance with the terms of the agreement, failing which the directors shall be personally liable to make the payment.
iii) Financial Health of the Company
In case of loan investment, the directors of the investing company shall certify that the investment is being made after due diligence and the borrowing company is financially healthy to repay the loan as per agreed terms.
14. COMPROMISES AND ARRANGEMENTS
A. Commission''s Power to sanction Compromises and Arrangements
Rather than High court, it is now the Commission which has the power to sanction scheme of arrangements and reconstructions between a company and its creditors or any class of them or between the company, its members or any class of them or reconstruction or amalgamation of companies or any division of a company.
The concerned Minister-in-Charge of the Federal Government has been granted authority to notify such companies or class of companies or having such capital where the powers of the Commission shall be exercisable by the Court.
B. Amalgamation of Wholly Owned Subsidiaries in Holding Company
No approval of the Commission or the Court is required for amalgamation of wholly owned subsidiaries and sub-subsidiaries into their parent and ultimate parent company respectively. Similarly, two or more wholly owned subsidiaries of a single parent company can amalgamate with each other as a single company. The authority has been vested with the respective board of directors.
C. Easy Exit of Defunct Companies
The regime is already in place under repealed Ordinance through regulations. The provisions have been included in the Act for easy exit of a company which has ceased to operate and has no assets and liabilities.
15. PREVENTION OF OPPRESSION AND MISMANAGEMENT
A. Application to Court
The required shareholding or interest for filing application to the Court against oppression and mismanagement, respectively by the members or creditors has been reduced from 20% to 10%.
B. Additional Grounds for Winding Up by Court
Several amendments have been incorporated in the provisions related to winding up of companies. The most significant one is the introduction of following additional grounds for winding up by Court:
- if the company has made a default in filing with the registrar its financial statements or annual returns, for immediately preceding two consecutive financial years
- is conducting its business in a manner oppressive to the minority members or persons concerned with the formation or promotion of the company
- if the sole business of the company is the licenced activity and it ceases to operate, consequent upon revocation of the license granted by the Commission or any other licensing authority
- if a license granted under section 42 to a company has been revoked or such a company has failed to comply with any of the provisions of section 43.
- if a listed company suspends its business for a whole year
C. Public Sector Entities
The Minister in charge of the Federal Government can declare a public sector company in financial and operational problems as sick company to facilitate its rehabilitation, reconstruction and reorganization. It has been expressly provided that provisions for rehabilitation of sick public sector companies, are not in derogation of any other law regarding rehabilitation of any entity.
16. KEY ADMINISTRATIVE CHANGES
A. Jurisdictions and Powers
i) Jurisdiction of High Courts
The High Court of the province, hosting the registered office, shall have exclusive jurisdiction under the Act with respect to the company. Each High Court shall have a Company Bench constituted on a permanent basis. A Registrar of Company Bench shall also be designated.
Procedures to be followed by the Court have been laid down in detail. The salient ones being:
-- time period to decide the petition has been extended from the existing 90 to 120 days from the date of presentation of the case.
-- provisions of the Qanun-e-Shahadat 1984 and the Code of Civil Procedure, 1908 shall not apply to the proceedings, except to such extent as the Court may determine in its discretion.
-- appeal against judgment of the High Court may be filed in the Supreme Court within 60 days of the order.
ii) Powers and Functions of SECP
- It has been clarified that powers and functions of the Commission, as provided under the Act, are in addition to the powers and functions it has been granted under the Securities and Exchange Act, 1997.
- Under the repealed Ordinance the Federal Government and the Commission were empowered to make references to the Court. Such powers of Federal Government have now been vested in the hands of the Minister-in-charge.
iii) Power of the Registrar to Call for Information or Explanation
In the repealed Ordinance, no time was specified to comply with the notice of the registrar calling for any information or explanation. To ensure timely compliance, the Act has specified a time period of 30 days for the purpose.
iv) Seizure of Documents by Registrar, Inspector or Investigation Officer
- If a registrar has reasons to believe that certain documentary evidence relating to the company or its officers can be useful in proceedings or investigation, he may, with prior permission of the Commission, enter such premises to seize or take possession of such evidence. In the past, the power to permit such an action was reserved with the Magistrate or the Court.
- Moreover, the Commission now has the authority to pass an order for freezing accounts, securities and other movable property where it has reason to suspect proceeds of crime and other offence under the Act or any administered legislation.
v) Serious Fraud Investigation and Relevant Powers of the Commission
- The Commission has been authorized to investigate serious offences relating to a company including cases involving a false statement, material falsifications in books of accounts, forgery and deception. The Commission may also request the Federal Government to form a joint investigation team to be headed by a senior officer of the Commission where the matter under investigation substantiates to be of public importance.
B. Filings with the Registrar and Registration Office
i) Service and Authentication of Documents
- Courier service and electronic means have been added for service of documents to the Commission, Registrar, Company or Members.
- The process of authentication of documents, whereby any document requiring authentication may be signed by an officer or a representative, authorized by the Board of Directors (already implemented by the SECP through a notification) has now been adopted through the Act as well.
ii) Acceptance of Documents presented after prescribed time
Filing of statutory returns and other documents with registrar by the companies, except public interest companies, after the prescribed period may be accepted on payment of additional fee. The schedule for payment of additional fee, together with associated timelines have been revised as follows and made part of the Act. Previously additional filing was prescribed through rules.
-- within 90 days, a fee equivalent to two times;
-- within 180 days, a fee equivalent to three times;
-- within 01 year, a fee equivalent to four times;
-- within 02 years, a fee equivalent to five times;
- No proceedings shall be initiated against the company or any of its officers on account of delay in filing made within the period specified above.
iii) Electronic Filing of Documents
- The drive to avail electronic platform has been prioritized by SECP for quite some time now. Enabling provisions have been added in the Act, for filing of statutory returns, applications and other documents to SECP electronically.
- For electronic filing the documents are required to be authenticated, as required under the Electronic Transactions Ordinance, 2002.
- The Commission has been given authority to notify a cut-of date making electronic filing mandatory for all companies.
iv) Rectification of Data
- To facilitate Companies, the registrar may record rectification of records by allowing filing of revised document and obtaining necessary evidence.
- A Company may be ordered by the Commission to submit a special return for rectifying its record maintained at SECP. The return so specified shall be signed by all the directors who will be responsible for the loss caused for providing incorrect information in the return.
v) Destruction of Physical Record by Commission
The record of the company, maintained by the registrar and the Commission under this Act or the company law, shall be converted into electronic form and physical record shall be destroyed after a specified time. The record converted into electronic form shall be admissible as evidence in all legal proceedings.
C. Penalties & Fines
- A standard scale has been provided with penalties ranging from Level 1 to Level 3, each with its upper threshold of pecuniary fine. Most sections of the Act attracting penalty states the level in which the default falls.
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The Standard Scale consists of
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Level Limit of Per day penalty
Penalty during which the
default continues
UPTO UPTO
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1 Rs 25,000/- Rs 500/-
2 Rs 500,000/- Rs 1,000/-
3 Rs 100 million Rs 500,000/-
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- Besides there are specific penalties and/or punishment, as the case may be, for certain defaults including false statement, falsification, forgery, fraud and deception, wrongful withholding of property and non-compliance of directives etc.
- Where the Act does not specify penalties, contravention with the relevant provision will attract a penalty of level 3 on the standard scale. Previously, the upper limit was set at Rs 1 million and Rs 100,000/- for each day the default continued.
- Offences of provisions of the Act punishable with imprisonment shall be taken up by sessions court or court notified under Section 37 of the Securities & Exchange Commission of Pakistan Act, 1997.
(Concluded)
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