Companies Bill 2016: Foreign firms may be bound to disclose beneficial owners

SECP chief voices hope bill will be tabled in parliament for approval by year-end

ISLAMABAD: The government is going to make it binding for foreign companies working in Pakistan to disclose names of their beneficial owners aimed at ensuring transparency in the ownership structure of the firms, said the chief of the corporate sector regulator on Thursday.

“The government has proposed in the Companies Bill 2016 that foreign companies will have to disclose the names of beneficial owners having substantial shareholding,” said Zafarul Haq Hijazi, Chairman of the Securities and Exchange Commission of Pakistan (SECP).

He was speaking at a press conference to brief media on salient features of the Companies Bill that the federal cabinet approved a day ago.



At present, about 950 foreign companies are working in Pakistan, which are 3.4% of the total registered companies that are regularly filing income tax returns. There are about 73,000 registered companies, but most of them do not file their returns.

Hijazi voiced hope that the bill would be tabled in parliament for approval before year-end, terming it a milestone in the country’s corporate history.

The current companies law had been approved 32 years ago, which Hijazi said had outlived its life.

The development comes as regulatory bodies are tightening their laws and regulations to ensure transparency following the Panama Papers leaks.

The government decided to bring Panama-related changes in the Companies Bill after April this year when papers of Mossack Fonseca - the Panama law firm - disclosed the names of Pakistanis holding offshore companies.

Hijazi said once the Companies Act was enacted, the domestic companies would also be required to maintain the record of foreign investment in the shape of Companies Global Register of Beneficial Ownership.

Under this provision, every shareholder, director and officer of these companies has to report the beneficial ownership or any other interest outside Pakistan. The companies will also be required to report foreign equity investments to the SECP.



According to another important proposal, the directors and officeholders of companies will have to voluntarily disclose money laundering, if they come across such incidences during the conduct of business.

Hijazi said if the officeholders chose not to disclose such transactions, the SECP would have powers to initiate criminal proceedings against them.

To a question, he said the SECP could not take any action on its own and it shared details of the people whose names surfaced in the Panama Papers with the Federal Board of Revenue (FBR) and the State Bank of Pakistan.

Of the 444 people named in the Panama Papers, 150 were directors in 600 Pakistani companies, according to the SECP. Under the existing law, they were not bound to disclose their foreign assets, said Hijazi. Of these, the FBR had served notices on 336 people by the end of October, according to the FBR’s reply in the Supreme Court.

However, one-third did not respond to the notices while 34 sought adjournments, 21 admitted having companies and five said they were non-resident Pakistanis.

The SECP has also proposed lessening the regulatory burden on the companies while facilitating them in filing returns online.

Hijazi said the proposed law would ensure documentation of the economy and minimise the regulator’s interference in trivial matters.

The SECP has taken a step forward by developing an online filing system for Form 4. Under the Securities Act 2015, every listed company is required to submit to the SECP details of the securities beneficially held by its directors, executive officers and substantial shareholders.

Form 4 has been uploaded on the e-Services portal of the SECP and listed companies can now file the form online at a reduced cost of Rs3,000 as opposed to Rs5,000 for physical filing.

“It will provide a hassle-free filing opportunity to the listed companies in addition to saving cost,” said the regulator.

Published in The Express Tribune, November 4^th, 2016.

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