Companies Act, 2017, Limited Liability Partnership Act, 2017: Amendments to be approved by cabinet today
ISLAMABAD: The federal cabinet, which is scheduled to meet on Tuesday (today) will approve amendments in Companies Act, 2017 and Limited Liability Partnership Act, 2017 aimed at meeting requirements of Financial Action Task Force (FATF).
According to official sources, Securities and Exchange Commission of Pakistan (SECP) has proposed amendments in the Companies Act, 2017 and Limited Liability Partnership Act, 2017 to address gaps identified by Asia Pacific Group on Money Laundering against FATA recommendation No 24, relating to transparency of legal persons.
The draft proposed amendments are approved by the SECP Policy Board and they have also been shared with foreign consultants by the SECP, to further synchronize the proposed amendments in line with FATA suggestions.
The proposed amendments in both Acts have been vetted by Ministry of Law and Justice and proposed changes have been incorporated.
The new proposed provision will be called 60 A- prohibition on issuance of bearer shares or bearer share warrants etc: (1) notwithstanding that anything contained in the National Investment (Unit) Trust Ordinance, 1965 or any other law, no company shall allot, issue, sell, transfer of assign any bearer shares, bearer share warrants or any equity or debt security or a bearer nature, by whatever name called, and any allotment, issue, sale, transfer, assignment or other disposition or any bearer shares or bearer share warrants or any other equity or debt security of a bearer nature, shall be void. For the purpose of this section, the term bearer shares or bearer share warrants means a negotiable instrument that accords ownership or control in a company to the person who possess such instrument and includes any other equity or debt security of bearer nature.
These amendments are being introduced in order to prevent the misuse of companies from money laundering or terrorist financing abuses in line with the recommendations issued by the Financial Action Task Force (FATF). Recommendation 24(transparency) and beneficial ownership of legal persons) is the relevant standard for the purpose. The proposed section 60 A is meant to comply with this recommendation. Pakistan's Mutual Evaluation report issued in October 2019 by the Asia Pacific Group on Money Laundering also highlighted certain deficiencies in the regulatory framework relating to the misuse of bearer shares and bearer share warrants etc. An explicit prohibition is accordingly, being provided through the proposed amendment. Bearer securities are vulnerable to misuse because they can effectively obscure the ownership of a corporate entity, thereby providing maximum anonymity and making such corporate vehicles more susceptible to misuse for illicit purposes, including money laundering.
(2) All existing bearer sales or bearer share warrants, if any, shall be registered or cancelled, in such manner and period, as may be specified.
(3) No civil proceedings shall be instituted or maintainable in any court in respect of bearer share, share warrant or any other equity or debt security or a bearer nature, by whatever name called, allotted, issued, sold, transferred, assigned or disposed of any by a company.
(4) In case of any violation of the provisions of this section, the company and every director and officer of the company shall be liable to a fine which may extend to one million rupees,
Amendment of section 122, Act XIC of 2017- in the said Act 122, sub-section (3) shall be omitted.
Insertion of new section after section 123, Act XIX of 2017- In the said Act, after section 123, the following section 123A shall be inserted, namely:- 123A. Information and Maintenance of Record of Ultimate Beneficial Owner:-(1) A company shall maintain information of its ultimate beneficial owners in such form and manner, within such period, and obtain such declaration from its members as may be specified.
Any person who fails to comply with any provision of this section shall be liable to a fine that may extend to Rs 1 million and the company shall also withhold payment of dividend till complete information of documents as specified are provided to the company.
The SECP may give such exemption from the requirements of this section to a company or classes or companies by notification.
Amendments of Section 413, Act XIX of 2017- In the said Act, in section 413 (a) in sub-section (2) for the phrases "three years", the phrase "such period as may be specified" shall be omitted; (b) for sub-section (3), the following shall be substituted, namely:- the Commission may by regulations, prevent the destruction of the books and papers of a company which has been wound up.
The Cabinet will also approve a Bill further to amend the Limited Liability Partnership Act, 2017 which shall be called the Limited Liability Partnership (Amendment) Act, 2020. It shall come into force at once.
The amendment in section 8 of the Act will be done in the following manner - in sub-section (2) (i), for the full stop at the end,, a , colon shall be substituted and thereafter the following proviso and explanation shall be inserted, namely "provided that a limited liability partnership shall obtain, maintain and timely update particulars of ultimate beneficial owners including a change therein, of any person who is a partner in limited liability partnership in such form, manner and submit such declaration to the registrar as may be specified ;(ii) after sub-section(2), amended as aforesaid, the following new sub-section 3 shall be inserted, namely " (3) any person who fails to comply with any provision of this section shall be liable to a fine which may extend to one million rupees,".
Ministry of Finance and Revenue has endorsed the proposed amendments in Companies Act, 2017 and Limited Liability Partnership Act, 2017. Ministry of Finance has already submitted summary for Cabinet Committee for Legislative Cases (CCLC) on same title on May 4, 2020, the CCLC is not complete at present, the proposed amendments have therefore directly been placed before the Cabinet for approval, in terms of Rules 16 of Rules Business.