The Securities and Exchange Commission of Pakistan (SECP) has laid down new responsibilities of the board of directors of the listed companies and their chief executive officers/chief financial officers and revised election/nomination procedure of directors and composition of the board. The SECP has issued SRO 1163 (I)/2019 to notify Listed Companies (Code of Corporate Governance) Regulations, 2019.
The SECP has repealed Listed Companies (Code of Corporate Governance) Regulations, 2017. The commission has made it mandatory that each listed company shall have at least two or one-third members of the Board, whichever is higher, as independent directors. These Regulations shall apply to the listed companies based on "comply or explain approach" except the requirements for which it is explicitly stated as "mandatory" and it shall be the responsibility of the board of directors (the "Board") to use this approach wisely and of investors to assess differing company approaches thoughtfully.
The Board is responsible for adoption of corporate governance practices by the company and monitoring effectiveness of such practices and the members of the Board shall ensure high ethical standards in performing their responsibilities. The Board shall comprise members having appropriate mix of core competencies, diversity, requisite skills, knowledge and experience, and fulfils any other criteria as deem relevant in the context of the company's operations.
The Board is responsible for the governance of risk and for determining the company's level of risk tolerance by establishing risk management policies and for this purpose the Board is encouraged to undertake at least annually, an overall review of business risks to ensure that the management maintains a sound system of risk identification, risk management and related systemic and internal controls to safeguard assets, resources, reputation and interest of the company and shareholders.
Under the regulations, it is mandatory that no person shall be elected or nominated or hold office as a director of a listed company including as an alternate director of more than seven listed companies simultaneously. Provided that the said limit on directorship shall be effective when the Board shall be reconstituted not later than expiry of its current term.
The Board shall comprise members having appropriate mix of core competencies, diversity, requisite skills, knowledge and experience and fulfill any other criteria as deem relevant in the context of the company's operations, the SECP said. It is mandatory that each listed company shall have at least two or one-third members of the Board, whichever is higher, as independent directors.
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