ISLAMABAD: The federal government is likely to amend Banking Companies Ordinance, 1962, aimed at allowing voting rights to shareholders of banks as this clause is inconsistent with best practices, well-informed sources told Business Recorder.
This was revealed during a recent meeting of the federal cabinet when a proposal of the Finance Ministry titled, “exemption of Section 14 (1) (IV) of Banking Companies Ordinance (BCO), 1962: Shabir Ahmed Randeree (JSBL)” came under debate.
The Finance Division informed that the Section 4C (h) of the State Bank of Pakistan (SBP) Act, 1956, mandated the SBP to license, regulate, and supervise scheduled banks and financial institutions that were under the domain of the Bank; and that the SBP had informed that Shabir Ahmed Randeree, a sponsoring shareholder of JS Bank Limited (JSBL), held 7.06 percent shareholding, whereas, Section 14 of BCO, 1962, imposed a limit.
Tax on windfall income: Banking companies
According to Section 14 of BCO 1962, Regulation of paid-up capital, subscribed capital and authorised capital, and voting rights of share-holders.-(1) No banking company incorporated in Pakistan shall carry on business in Pakistan unless it satisfies the following conditions, namely:- (iv) that the voting rights of any one shareholder, except those of the Federal Government or a Provincial Government do not exceed five per cent of the total voting rights of all the shareholders.
The Finance Division further apprised that the federal government had the authority to grant an exemption from this limitation under Section 93 of the BCO,
1962, as follows: Power to exempt in certain cases;- The Federal Government may, on the recommendation of the State Bank, declare, by notification in the official Gazette, that any or all of the provisions of this Ordinance shall not apply to any banking company or to any class of banking companies either generally or for such period as may be specified.
The Finance Division further stated that given this position, the SBP had recommended that the federal government may allow an exemption in the case of Shabir Ahmed Randeree from the application of the provision of Section 14 (1) (iv) of BCO, 1962, to enable him to exercise his voting rights corresponding to his shareholding in JSBL, in accordance with Section 93 of the Ordinance ibid.
During discussion in the federal cabinet, one of its members observed that the limiting section of the BCO, 1962 needed to be amended if it was not consistent with best practices, necessitating an exemption from the federal government each time.
However, the Finance Division clarified that the requisite amendment in the law to address this issue was in progress.
The Finance Division requested the Cabinet to exempt Shabir Ahmed Randeree from application of Section 14(1) (IV) of BCO, 1962 (related to exercise of voting rights in JSBL) in exercise of the powers vested in it under Section 93 of BCO, 1962, thereby, enabling him to exercise voting rights corresponding to his shareholding in JSBL, as proposed in the summary.
After discussion, the Cabinet approved the Finance Division’s summary titled, “exemption of Section 14(1) (IV) of Banking Companies Ordinance (BCO), 1962: Shabir Ahmed Randeree (JSBL)” of December 29, 2023.
Copyright Business Recorder, 2024