New companies law to be introduced next financial year

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The extensive review of the new companies law by the professional and business circles has delayed its introduction and implementation from the current financial year to the next financial year, an official source said.

The Securities and Exchange Commission of Pakistan (SECP) has decided to introduce a new companies law, incorporating significant changes in the existing one, to make it relevant to the current economic environment.

The need to upgrade the law was felt to be essential as the current companies ordinance was promulgated in 1984, but after 2005 two significant developments have taken place, the growth of non-banking finance companies and the introduction of single member companies.

SECP has also merged its approved draft Limited Liability Partnership Bill, 2015 in the new companies law, as it was considered more prudent to make it part of the new law. The source said that the new proposed law will provide for a new form of business structure to fill the gap between business firms such as sole proprietorships, and partnerships.

It will provide a platform to small and medium enterprises to increase their global competitiveness and enable professional firms like those of chartered accountants and legal practitioners to convert their firms into the newly introduced form of business.

New changes include maximum use of technology by the companies and stakeholders in all areas, particularly the service of notices to the members and reporting compliance of the statutory requirements of the commission and the registrar of companies, attending the meeting through video link and voting through electronic means.

Allowing the appointment of additional directors during mid-term, conversion of directors’ loan into equity, conversion of other loans and the redeemable securities into shares and E-filing through authorised agents to facilitate the process are some of the other features of the new law.

Protecting the interest of shareholders in matters relating to allotment of shares by prescribing the timeframe for acceptance of offer, putting responsibility on the company to ensure delivery of the circular to the entitled members, filing a certificate from a chartered accountant with the return of allotment confirming the receipt of money and issuance of certificates and fair distribution of the value of property while allotting shares other than cash are also part of the new law.