REFORMS IN COMPANY REGISTRATION AND COMPLIANCE 1 By Nazir Ahmed Shaheen, Executive Director (Corporatization and Compliance Department )

The Companies Ordinance, 1984 (the Ordinance) is the main statute for governing the companies and Securities and Exchange Commission of Pakistan (“SECP”) is the apex regulatory authority of Corporate sector and Capital market. 2 Introduction

Objectives Healthy growth of corporate enterprises Protection of investors and creditors Promotion of investment Development of economy 3

Relevant Legal Framework 4  Companies Ordinance, 1984  Companies (General Provisions and Forms) Rules, 1985  The Companies (Issue of Capital) Rules, 1996  Companies (Registration Offices) Regulation, 2003  Single Member Companies Rules, 2003  The Group Companies Registration Regulations, 2008

Corporate Portfolio 5 Type of Companies Total companies as on Public listed610 Public unlisted2,235 Private55,494 SMCs1,392 Companies limited by guarantee74 Not-for-profit associations u/s Trade Organizations222 Foreign companies803 Unlimited companies3 Total Companies61,357

Companies registered in past Years 6

 Distinct legal entity  Limited liability that protect personal assets  Easy transferability of ownership  Perpetual succession  Better management and improved governance  Agency Relationship  Defined Legal Framework  Ability of pooling of funds  Enhanced credibility  Better access to capital markets  A part of documented and regulated sector  Contribution to development of the country, Poverty alleviation and increase in GDP  Tax Incentives (25% corporate tax rate for small companies) Benefits of Corporatization

To achieve reliability in the eyes of regulator and stakeholders To improve transparency in the affairs of companies that encourage fair business practices in the corporate sector. To ensure that actions by companies are in accordance with the company law. To safeguard the interests of shareholders, other stakeholders and general public. To adopt proactive approach in overall regulation of affairs of companies. To create and develop a corporate culture in the country. Benefits of Corporate Compliance

Key Reforms 9

eServices 10 SECP achieved an important milestone in 2008 by launching eServices. eServices provides online: availability of name. incorporation of companies. filing of statutory returns processing of various applications. Easy, cost effective, much faster, secure and efficient medium of interaction with the corporate sector. Almost 60% of the new companies register online, 22 % of returns filed online, showing increasing adaptability towards eServices.

Once Online Forever Online Approach 11  SECP has implemented “Once Online Forever Online” whereby online filing of subsequent statutory returns has been made mandatory for companies to be incorporated through eServices from May 16,  This step has been taken to fully harness the real benefits of online filing facility and to invoke the true spirit of eServices regime.

Enhanced Use of Technology 12  An efficient automated environment has been created.  All the physical record of companies has been scanned and archived.  Fees for online services set half as compared to manual submission.  Automatic verification of e-Challans has been enabled for payment of fee to SECP resulting in more efficient services to our clients.

Enhanced Use of Technology 13  Electronic inspection of corporate records kept by registrar made available to general public at CROs.  Automatic assigning in eServices has been enabled to improve efficiency.  Help lines established for eServices and focal persons designated.

Fast Track Registration Services (FTRS) 14  SECP recently launched FTRS for the processing of incorporation of a company, availability of name, change of name and charge registration, modification and satisfaction cases.  FTRS ensures swift disposal i.e., on the same day and within four hours.  SECP has set up an example, at par with the international jurisdictions e.g., U.K., by providing same day fast track company incorporation facility at the CROs.  This service is available for both online and offline cases.  This initiative is expected to promote corporatization and encourage compliance.

Public Facilitation Reforms 15 Public awareness events such as seminars and workshops held in various cities to create awareness on eServices, corporatization and compliance. Regular meetings with corporate consultants. Shifting and renovation in the CROs Faisalabad and Peshawar. Guidance to the public at Facilitation Counters at CROs.

 Preferential tax treatments to small companies on the SECP recommendations (25% compared to 35% for other companies)  Stamp duty on memorandum and articles of association abolished by all provincial governments on the SECP recommendation  Company name search facility, incorporation fee calculator, guide booklets, Standardized Model Memorandum of Association for various sectors, online feedback survey on the SECP website.  Facilitation counters at the Bahawalpur and Rahim Yar Khan Chambers of Commerce and Industry. 16 Public Facilitation Reforms

ISO Certification of CROs 17 Obtained ISO 9001:2008 for Company Registration Offices (CROs) Karachi, Lahore and Islamabad. Standardized documentation. Implemented procedures in line with ISO standards. Quality assurance.

Recent Developments of Legal Framework 18 Amendments in the Companies (Registration Offices) Regulations, Issuance of Special Cost Accounting Records Orders for Fertilizer Industry and Draft Orders for Power Generation and Synthetic Rayon. Amendments in the formats of Statement in Lieu of Prospectus (Parts II and III of Second Schedule). Draft Public Sector Companies (Corporate Governance) Regulations. Enhancing disclosures under Group Companies Registration Regulations, 2008.

Efforts to Ensure Compliance 19 Activation drive, show cause proceedings initiated against approx companies, while process of striking off almost 4800 companies is in process. Launched media campaigns (compliance, schemes, illegal business activities, FTRS). Facilitation in filing of statutory returns. Schedule of filing of statutory returns and Filing of Statutory Returns Guide on website. Launched Companies Regularization Scheme (“CRS”) and Companies Easy Exit Scheme (“CEES”) from time and again.

20 Future Plans

Enhanced Use of Technology 21 Module for license applications under section 42 for associations not for profit. Module for Voluntary Winding up. Direct payment from the depositors’ MCB accounts to the SECP account in case of fee for online applications. Online payment system. Mandatory online filing in a phased manner. Introduce e-intermediaries.

Public Facilitation 22 Abolition of Stamp duty in I.C.T. Taking initiative in establishing one stop shop. Celebration of Corporate Week.

Development of Legal Framework 23 Draft Associations Not-for- Profit (Licensing and Corporate Governance) Regulations. Company Law Review Commission.

24 Thank you