SECP could shut rogue charity companies

Government has proposed a legal regime for issuing licences to not-for-profit organisations in the Companies Bill 2017


Shahbaz Rana April 08, 2017
PHOTO: ONLINE

ISLAMABAD: The government is likely to get legal powers next month to revoke licences of charitable and not-for-profit organisations working against the country’s national interests, sovereignty and public order.

The federal government has proposed a stringent legal regime for issuing licences to charitable and not-for-profit organisations in the Companies Bill 2017, which is currently under scrutiny of the Senate Standing Committee on Finance.

It has also added new sections in the bill to invoke the licences of these companies, if they work against the country’s national interests.

The scope of Section 42, which deals with such organisations, has been expanded while learning from the experience of the US security company, Blackwater, said an official of the Securities and Exchange Commission of Pakistan in a meeting of the Senate Standing Committee on Finance.

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The committee cleared 80 sections out of the total 516 sections of the Companies Bill during its Friday’s sitting, including Section 42.

The National Assembly has already approved the bill in February. Senator Saleem Mandviwalla, the Chairman of the Senate Standing Committee on Finance, hoped the upper house of parliament would also approve the bill this month.

The Companies Bill 2017 aims at replacing the Companies Ordinance-1984 in order to consolidate and amend the law, besides encouraging and promoting corporatisation in the country based on best international practices.

The bill provides adequate measures against fraud, money laundering and terrorist financing.

According to a new section, companies’ activities shall not be at any time “against the laws, public order, security, sovereignty and national interests of Pakistan”.

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The SECP officials said intelligence agencies of the country helped improve the legal regime following the activities of Blackwater.

DynCorp and Blackwater (Xe), private security companies of the US, were issued hundreds of visas during the PPP regime. These companies were allegedly involved in spying activities inside the country. Raymond Davis who killed two Pakistanis in broad daylight in Lahore in 2011 was a former US soldier and working as a CIA agent in a private US firm in Pakistan.

A new Section 42(5) has been inserted in the bill that gives vast powers to the SECP to revoke licences of the companies working against the interests of Pakistan in any manner.

The PML-N government also made changes in the regulatory regime of the foreign companies working in Pakistan in the social and economic sectors. It placed the administrative affairs of these companies under the Ministry of Interior by withdrawing these powers from the Economic Affairs Division.

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Real Estate compromise

The standing committee objected to the government’s proposal to defer the enforcement of Section 456 that deals with real estate companies.

According to the proposal, even after the approval of the Companies Bill from parliament, Section 456 will not come into force.

The enforcement of Section 456 has been deferred on the request of the real estate sector, Tariq Bajwa, Secretary Finance, informed the standing committee.

The SECP Commissioner Company Law Division, Tahir Mahmood, said the decision to defer this clause was taken on the insistence of the Karachi-based Association of Builders and Developers.

The SECP had proposed that a company cannot engage in the business of a real estate project unless its principle line of business is development of real estate projects.

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Currently, many big companies have gone into real estate business to earn windfall economic gains. Some are engaged in the real estate sector to evade taxes and park undeclared money.

According to the SECP’s proposal, a real estate company shall not announce any real estate project unless it has obtained the approval of the SECP. The proposed law also bars companies from taking advances or deposit in any form whatsoever against any booking to sell the land and apartments.

Tahir Mehmmod said the need to enforce a new regime for real estate might not arise if the provinces decided to set up their own real estate authorities.

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