Non-listed companies: SECP approves principles of corporate governance

Aim is to make business environment trustworthy and transparent

KARACHI: The Securities and Exchange Commission of Pakistan (SECP) on Monday said it had approved “Principles of Corporate Governance for Non-listed Companies” to make business environment trustworthy, transparent and accountable.

The principles will change the governance paradigm for the non-listed companies by enabling the corporate sector to adopt best international practices, says a press release.

“These are voluntary guidelines that will set out the corporate governance landscape for over 60,000 non-listed companies operating in Pakistan by providing a toolkit to improve their internal and external governance structures,” the SECP said.

“The principles are aimed at achieving excellence in corporate governance by promoting an enabling framework for non-listed companies to make them more ethical and sustainable. The implementation of principles is part of the landmark project of the SECP for corporate sector development and growth in order to meet its policy objectives.”

The International Finance Corporation (IFC), a pioneer in the implementation of global corporate governance projects, is collaborating with the SECP in formulating the best draft of principles.

The IFC has provided its feedback about the draft proposed by the SECP. The IFC and Centre for International Private Enterprise (CIPE) have conducted a peer review of such guidelines in other international jurisdictions and by holding roundtable conferences in order to seek feedback from market participants.

The roundtables were held in Karachi, Lahore and Islamabad, which were attended by experts in the areas of accounting, finance, audit, law, corporate governance strategy and academia.

The principles have two parts. In the first part, the principles are applicable to all non-listed companies except for small-sized companies, whereas in the second part the principles are applicable to public interest and large-sized companies.

However, these are not applicable to the public sector companies that are governed under the Public Sector Companies (Corporate Governance) Rules, 2013.

Part 1 provides broad guidelines pertaining to constitutive documents, board of directors and their meetings, remuneration for board members, internal control mechanism, training of board and general meetings.

Part 2, on the other hand, contains sophisticated corporate governance measures that are relevant to public interest and large-sized companies. These may be considered by the companies that are preparing themselves for future public listings.

Published in The Express Tribune, August 23^rd, 2016.

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