Amendment in companies law: PM misled by Cabinet aides?

Prime Minister Imran Khan is said to have been again misled by his cabinet aides, now through "controversial" amendments in the Companies Act, 2017 as many disturbing revelations were made in the federal cabinet on May 19, 2020, well-informed sources told Business Recorder.
The new controversy emerged at a time when the government is under pressure due to the recently-released Sugar Commission report, as the media and opposition are criticizing the Commission for not interviewing the Prime Minister as the Chairman of the Cabinet and Minister in-Charge Commerce and Industries.
The sources said the Prime Minister who has barred cabinet members from commenting on cabinet decisions in the media and directed them to follow press releases of cabinet decisions, while drawing attention to the criticism in the media on certain amendments in the Companies Act, 2017 recently carried out through an Ordinance, expressed concern as to how these could escape the scrutiny of various fora.
"The amendment in section 172, which allowed a person who had entered into plea bargain with NAB to become a director of the company, was against the ethos of transparency and accountability. Similarly, amendment in section 186/187 stripped government of its powers to appoint CEO of a public sector company even if it was a majority shareholder which was quite illogical," the sources quoted the Prime Minister as saying in the Cabinet's meeting.
The Cabinet was apprised that the amendment in Section 452, exempting the disclosure of less than 10% shares in a foreign company, was also against the principle of transparency. It was emphasized that the primary objective of these amendments was to complement the efforts towards Ease of Doing Business but apparently many other amendments have been made under this pretext.
According to sources, it was brought to the notice of the meeting that out of 121 amendments only 17 related to Ease of Doing Business. It was also disclosed that Board of Investment (BoI) which deals with the subject of Ease of Doing Business argued that it sponsored only 14 amendments. It was noted that undue haste precluded any legitimate scrutiny due to the paucity of time which resulted in making these objectionable amendments.
The Cabinet was also informed that on April 27, 2020 the Cabinet Committee for Disposal of Legislative Cases (CCLC) headed by Minister on Law and Justice approved the amendments which were ratified by the Cabinet on April 28, and on April 29, it was submitted to the President. The amendments came into effect on April 30, 2020.
The sources said, recently, the Minister for Science and Technology, Fawad Chaudhry and Minister for Human Right Dr. Shireen Mazari were also made members of the CCLC.
Adviser to Finance and Revenue, Dr. Abdul Hafeez Shaikh explained that although these amendments were ostensibly inappropriate but the experts who drafted these amendments had some logic and reasoning, and they could be invited to explain. The explanation of Dr. Shaikh indicates that many amendments were proposed by SECP which fall under the domain of Finance Ministry. The Cabinet members were of the view that even with some plausible explanation, the optics of such amendments was not propitious. The consensus was that recent amendments in the Companies Act 2017, must be reviewed and the controversial changes must be undone.
After a detailed discussion, the cabinet decided that recent contentious amendments in Companies Act, 2017 should be reviewed and the controversial changes introduced in the Act be undone by adopting the specified procedure.
On May 4, 2020, SECP issued a press release saying that these amendments were planned by the SECP to support "promote and nurture startups" while also attracting local and international innovators.
The Companies Act, 2017 was reviewed by the SECP in consultation with different external and internal stakeholders.
The statement further said, "On the basis of the suggestion received during the consultation process, various amendments were proposed by the regulator to promote ease of doing business, encourage startups, improve protection of minority shareholders and remove some anomalies noted in the provisions of the Act."
The amendments have been promulgated through the Companies (Amendment) Ordinance, 2020 promulgated on April 30, it added.
According to the new rules, employee stock options and buyback of shares has been permitted for all companies; earlier this was allowed for public and listed companies only.
The statement said: "These amendments will support address the employee retention and reward problem faced by startups. They will also facilitate startups in case the founding member needs to exit the company."
SECP further stated that now a listed company may hold an extraordinary general meeting at a shorter notice with the commission's approval, adding that all companies will be needed to file annual returns with the registrar. "The chief executive officer shall now be appointed by the board of directors in all companies," according to SECP.
Meanwhile, the procedure for handling unclaimed dividends has been revised; now unpaid dividend accounts shall be maintained by companies and any markup accrued on such an account shall be used by companies for corporate social responsibility initiatives.
Amendments have been introduced to lower the threshold of proposing member resolutions (from 10 per cent to 5pc), mandatory disclosure of company's director's remuneration and enhanced protection for minority shareholders in transactions involving conflict of interest of a company's directors.
"In view of complex valuations, legal entitlement of properties and requirements of other regulatory compliances the authority to approve the scheme of arrangements by member or creditors has been granted to high courts", the press release added.
"Earlier, the scheme of arrangements for small sized companies and companies wholly owned by the government were approved by the commission while the scheme for arrangement of medium sized, large sized and public interest companies were approved by the court," the statement said.