The Pakistan Tehreek-e-Insaf (PTI) government has finally withdrawn controversial amendments that had quietly been introduced in the companies law to allow corrupt people being appointed on the boards and also facilitated to keep offshore assets hidden.
On July 7th, President Arif Alvi promulgated the Companies (Second Amendment) Ordinance 2020 – second in as many months – to reverse controversial amendments that the Securities and Exchange Commission of Pakistan (SECP) got inserted in the first ordinance, and the federal cabinet could not pick them. The first ordinance was issued on May 4 with effect from April 30, 2020.
The Express Tribune had reported on May 13 that the PTI government allowed people convicted in the National Accountability Bureau (NAB) cases to be appointed on the boards of the companies. After The Express Tribune report, the matter came to the notice of Prime Minister Imran Khan.
Through the second ordinance, the government has introduced 14 amendments. However, two sections contradict each other and raise questions whether the actions taken in between two ordinances have any legal cover.
“It shall come into force at once and shall be deemed to have come to in to force on the 30th April 2020”, according to Section 1 (2) of the second ordinance. However, the section 14 validates all actions taken from April 30th to July 7th.
“All actions taken, approval granted or notification issued on or after the 30th April 2020 under the Companies Act, 2017, shall be deemed to have been validly, taken, granted or issued”, reads section 14 of second ordinance.
The Express Tribune contacted the SECP on Thursday, requesting it to disclose whether any corrupt person appointed on any company in the past over two months or companies did not disclose their offshore assets.
“Refer to Section 1 (2) of the Companies (Second Amendment) Ordinance” was the terse response given by the SECP. “No comments” said the SECP when it was asked to defend its May 14th position when it called The Express Tribune’s report false. But the second ordinance has validated The Express Tribune report.
The PTI government did not restore the 2% quota of disabled persons in the companies, which it had abolished in May. The last PML-N government had enacted the Companies Act, 2017 by repealing the Companies Ordinance, 1984.
The PTI government, through the second ordinance, once again barred the people who entered into plea bargain with the NAB to be appointed on companies’ boards. In the 2017 Act, Section 172 had been inserted to lay out disqualification conditions against a person from holding the office of a director of a company for a period of up to five years, beginning from the date of order.
The Sub-section M of the Section 172 stated, “The person has entered into a plea bargain arrangement with NAB or any other regulatory body”, which the PTI government deleted in May but now has restored it.
Under Section 452, the government has once again made it binding for the companies and its office-bearers to disclose their offshore substantial shareholdings while reversing the previous controversial decision.
Under the Companies Act 2017, it was legally binding for people who have substantial shares in local companies or officers of local companies to disclose their stakes in offshore companies. However, the government promulgated a presidential ordinance on May 4 to make the disclosure condition less stringent.
It has reintroduced amendments to Section 452 of the Companies Act 2017. Once again if a person has even one share in an offshore company and he is also a shareholder in a Pakistani company, he would disclose it. In May, the government had allowed that if foreign shareholding is less than 10% then it was not mandatory to disclose.
The government has also restored Section 186 of the 2017 Act, which will give the government powers to appoint first chief executive officer of a public sector company.
In May the government had also deleted Section 181, which it has now restored. The Section 181 of the 2017 Act had placed certain obligations on independent and non-executive directors of the companies.
The government has also restored the SECP’s powers to wind up a company where a compromise is reached between creditors and debtors. It has also been given powers to enforce a compromise by taking back these powers from the courts.
A major amendment in May, which had threatened the single largest privatisation transaction, has also been reversed. By again amending Section 282, the government has empowered the SECP to take a decision about merger or demerger of the companies by withdrawing the court’s powers.
The government wants to sell two power plants either to one or more than one investors, depending upon the bids it receives during the auction process.
The Haveli Bahadur Shah and Baloki power plants are owned by the National Power Parks Management Company Limited (NPPMCL). In case the government receives two separate bids, it will have to break the company into two and after last week’s ordinance, only the court can complete the demerger process.
The government has also restored Section 461 that deals with “security clearance of shareholders and directors.
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