ISLAMABAD: The government has withdrawn half-a-dozen contentious amendments to the Companies Act 2017 which were introduced through Companies (Amendment) Ordinance 2020, and promulgated on April 30, 2020.
In this regard, an Ordinance (Ordinance No X of 2020) was issued here on Tuesday. The PTI-led government has recently promulgated Companies (Amendments) Ordinance 2020 that altered over 121 provisions of Companies Act 2017 apparently to provide ease of doing business, promote startups and facilitate access to finance to small and medium enterprises, with an aim to meet World Bank’s ease of doing business indicators.
But after criticism, the government has now to take back these amendments and reversed through Companies (Second Amendment) Ordinance 2020 including Section 172(m), Section 181, Section 186 and 187, sections 279 to 282, Section 452 and amendment to 461.
Section 172(m) that relates to disqualification of a person to hold the office of a director of a company is restored in Companies Act. This section was deleted from the Act through Companies Amendment Ordinance 2020. Section 172(m) was included in the Companies Act in 2017 to enable the Commission to pass disqualification order for maximum period of up to five years against the person from holding office of director in a company who has entered into plea bargain arrangement with the NAB.
Section 181 that related to protection to independent and non-executive directors was also restored through the Second amendment Ordinance. This Section was introduced in 2017 to protect independent and non-executive directors from acts, omissions and commission which occurred without their knowledge or consent. The SECP had recommended to remove this section on the grounds that all the directors making decision should be treated equally.
The change in the Section 452, Companies’ Global Register of Beneficial Ownership was also reverted. The SECP through earlier amendment had made Section 452 less stringent as the requirement for company’s directors, shareholders, or officers to report their shareholdings or any other interest in a foreign company was reduced to only those who may have shareholding of 10 percent or more in a foreign company or body corporate. The amendment to Section 186 of the Act had reduced the powers of the federal government to appoint first chief executive officer of a public sector company that was also reverted.
In the first amendment ordinance, the SECP powers in sections 279 to 282 to approve compromises, reconstruction and amalgamation of companies has been given to court of law. Now, these powers are given back to SECP.
The SECP Board has recommended giing these powers to court on the assumption that the Commission has no capacity to exercise the said powers in view of complex valuations, legal entitlement of properties, equitable decision making keeping in view rights and obligations of multiple parties and requirements of other regulatory compliances in such cases.
These amendments that were reverted were recommended by the then SECP Policy Board Chairman Khalid Mirza. It is pertinent to mention here that the federal government removed Khalid Mirza from the chairmanship of SECP Policy Board in August 2019, but Mirza secured a stay order from the Islamabad High Court against the decision of federal government. Mirza later resigned from the chairmanship in May 2020.
The prime minister has taken notice of the issue and had asked his Adviser Dr Ishrat Hussain to look into the issue and present him a report. Dr Ishrat examined the whole process of introducing amendments and presented a report in meeting of federal cabinet.
According to Dr Ishrat’s report, the SECP led the amendment’s process with an objective to provide ease of doing business and meet World Bank’s indicators for Doing Business Index. Dr Ishrat suggested the government to withdraw above mentioned amendments. These three amendments were inserted in Companies Ordinance on the recommendations of the SECP Policy Board, which was then headed by Dr Khalid Mirza. According to sources, the prime minister has shown displeasure that how these amendments escape the through security process.