THE COMPANIES ORDINANCE, 1984

Section 2(5) – “Book and Paper”

The terms “book and paper”, “book or paper” or “books of account” have been proposed to be amended to include in their definitions: accounts, deeds, vouchers, writings and documents, maintained on paper or computer network, floppy, diskette, magnetic cartridge tape, CD-Rom or any other computer readable media.

Section 2(30B) – “Register”

A new term “register” is proposed to be defined to mean the register of members of a company and include the register of debenture-holders or holders of other securities maintained on paper or computer readable media.

Section 24(2) – Procedures on Confirmation of Alteration in MOA

Currently, where the alteration in memorandum involves a transfer of the registered office from one province to another, or from the Islamabad Capital Territory to Province or vice versa, a certified true copy of the order confirming such alteration is required to be filed by the company with the registrar in each of such provinces or the Islamabad Capital territory.  Such filing is proposed to be done away with.

Section 30(1) – Registration of Memorandum and Articles, etc.

The memorandum and articles may be filed with any registrar, after the proposed amendment, not specifically with the registrar where the registered office of the company is stated by the memorandum to be situated.

Section 95(1) – Prohibition of Purchase or Grant of Financial Assistance by a Company for Purchase of its own or Holding Company’s Shares

The proposed amendment seeks to allow a subsidiary company to deal in shares of its holding company in the following circumstances:

1. the subsidiary will act as a trustee (unless the holding company is interested under trust);
2. the subsidiary shall deal in shares of its holding company in the ordinary course of its business as a brokerage house subject to condition that the subsidiary will not exercise the voting rights attached to such holding.

Section 158 – Annual General Meeting

The proposed amendments seek to reduce (1) the period to hold an AGM from four months from closure of the financial year to three months; (2) the maximum extension allowable in holding the AGM from 60 days to 30 days. The consequent amendment has also been proposed in Section 233 regarding the period to which financial statements of a company must be made up.

Section 178A - Fresh Election of Directors on Request of Substantial Acquirer.-

After the proposed insertion of this new section, any person holding 12.5% or more of the share in his own name may apply to SECP for requiring the company to hold fresh election of directors in forth coming AGM of the company.  The Commission may, if it will deem it appropriate in the interest of the company, its minority shareholders or the capital market in generally, direct the company for such fresh elections.  The person requesting the fresh election would not be able to sell / dispose his shares with in one year from the date of fresh election of the directors.

Section 183(b) – Certain Provisions not to Apply to Directors representing Special Interests

After the proposed amendment, the commission would also be able to nominate directors on the BOD of a company.

Section 204A – Certain Companies to have Secretaries

The proposed amendments seeks to make mandatory for a listed company to appoint an independent share registrar possessing such qualifications and performing such functions as may be specified by the Commission.

Section 208 – Investment in Associated Companies and Undertakings

It is proposed to give the Commission powers to notify class of companies or undertakings to which the restriction of making investment in its associates under the power of a special resolution would not be applicable.  It is also proposed that such relaxation would be governed by regulations, specifying conditions and restriction on the nature, period, etc., notified by the Commission in this behalf.  The maximum financial penalty for violating the restriction is also proposed to be enhanced to Rs. 10 million from Rs. 1 million.

Section 234A - Special audit

The amendment proposes to authorize the Commission to order a special audit of a company and appoint an auditor to carry out the scrutiny, either on its own motion or on the application of a member holding at least 20% of the share capital of the company.  The commission would be able to pass interim or final orders during or at the end of the special audit, as the case may be.  The cost of audit will be recoverable from the company, but if the audit was conducted on an application of a member, 50% of the cost would be borne by the member who would be liable to pay such cost in advance.

Section 242 – Copy of the Balance sheet to be Forwarded to the Registrar

The proposed amendment seeks to require a private company with a paid up capital equal to or in excess of Rs. 7.5 million to submit its financial statements to registrar within 30 days of the AGM.

Section 246 – Power of Authority to Require Submission of Additional Statements of Accounts and Reports

The Commission has the power to call upon any company to prepare and send such periodical statement of accounts, information or other reports in such form and manner and within such time, as may be specified by it in the order.  The proposed amendment seeks to make it mandatory that such information be audited by an auditor.

It also proposes to enhance the maximum fine for violating the order of commission under this section from Rs. 1,000 per day of default to Rs. 1 million and a further fine extending to Rs. 10,000 per day of default.

Section 248 – Certain Restrictions on declaration of Dividends

The amendment proposes to limit the amount of dividend to maximum of realized gains and no dividend out of unrealized gains on investment property would be payable after the proposed amendment.

Section 254 – Qualification and disqualification of Auditors

A person would not be deemed to be indebted to a company and consequently disqualified to act as an auditor if he owes:
            (i) a sum of money not exceeding Rs. 500,000 to a credit card issuer; or
(ii) a sum to a utility company in the form of unpaid dues for a period not exceeding 90 days.

Section 255(5) – Power and Duties of Auditors

The power of the Federal Government to ask some additional matters in the auditors’ report, in the case of companies generally or any class of companies would be vested in Commission after the proposed amendment.

Section 267 – Power of the Inspectors to carry investigation into the affairs of the Associated Companies

After the proposed amendment, the commission would be able to allow permission to an inspector of SECP to investigate the affairs of a company without issuing a show-cause to the company concerned.

Section 282A – Application

The provision applicable to NBFC would, after the amendment, be also applicable to notified entities which would include trust and any other entity or person.

Section 282B – Power to make Rules

The proposed amendment seeks to empower SECP to make regulations for the establishment of NBFCs and notified entities and their business and activities. The Commission would also be able to issue directives, circulars, codes, notifications and guidelines for the purposes of regulation of NBFCs.

Section 282C – Incorporation of NBFC

NBFCs carrying on the business would be required to comply with minimum equity requirements which may be notified by the Commission instead of minimum paid-up capital requirement.

Section 282CA - Registration of Notified Entities.-

This new section seeks to govern the registration of notified entities to which Law relating to NBFC will apply.  Every notified entity would be required to register with SECP within six months of their notification as such entities.

Section 282J - Penalties

Penalty for failure, refusal to comply with or contravention of provisions relating to NBFCs would be enhanced from Rs. 5 million to Rs. 50 million.

Section 282N - Rehabilitation of NBFCs and Notified Entities.

The proposed new section seeks to allow SECP the powers, in respect of rehabilitation of NBFCs and notified entities, similar to the Federal Government available to the Government under Section 296 of the Ordinance in the case of other companies.

Section 361(1) - Notice of Resolution to wind up Voluntarily

Notice of resolution to voluntarily wind up a company would not be required to be published in the Official Gazette after the proposed amendment.

Section 466 (1) – Registration Offices

A company would not be required, after the amendment, to declare that the office in the province, where by the memorandum it is to be established, has been so established.

Section 492 – Penalty for False Statement

Penalty for making a false statement on any document to be issued under the Ordinance is proposed to be enhanced to Rs. 500,00 from Rs 100,000.

Section 496 – Penalty for Carrying on Ultra Vires Business

Maximum financial penalty for carrying on an ultra vires business is proposed to be enhanced to Rs. 500,000.

Section 497 – Penalty for improper use of word “Limited”

Maximum financial penalty for improper use of word “Limited” is proposed to be enhanced to Rs. 500,000 and in case of continuing offence the amount of penalty is proposed to be increased from Rs. 500 to Rs. 10,000 per day.
 
Section 498 – Penalty Where no Specific Penalty Provided Else where

Maximum financial penalty where no specific penalty is provided elsewhere in the Ordinance is proposed to be enhanced from Rs. 50,000to Rs. 1,000,000 in case of any contravention or failure to comply with any provision of the Ordinance and in case of continuing offence the amount of penalty is proposed to be increased from Rs. 500 to Rs. 100,000 per day.

Section 506 – Power of Federal Government to Make Rules

Maximum financial penalty in case of any contravention or failure to comply with any Rules made by the Federal Government is proposed to be enhanced to Rs. 500,000 and in case of continuing offence the amount of penalty has been increased from Rs. 500 to Rs. 10,000 per day.

Section 506A (new) - Power to Make Regulations

It is proposed to empower the Commission to make Rules and regulations by notification in the official Gazette to carry out the purposes of the Ordinance.

Section 506B (new) - Power to Issue Directives, Circulars, Guidelines, etc.-

It is proposed to empower the Commission to issue directives and guidelines, etc. which are necessary to carry out the purposes of the Ordinance.