Disclosure of confidential information: Independent directors of companies barred

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has barred the independent directors of companies from disclosing confidential information including commercial secrets, technologies, advertising and sales promotion plans.

The SECP Tuesday issued two set of guidelines to facilitate and standardize the role of officers of listed companies and use of technology during general meetings. These guidelines will address impediments faced by listed companies, their shareholders and stakeholders.

The independent directors of the companies are authorized to recommend to their Board, the appointment and removal of the senior management and other employees.

An Independent Director has the following responsibilities towards the Stakeholders:

SECP strikes down 3,000 inactive cos

(i); When dealing with third parties, an Independent Director shall be loyal to the company and its shareholders and protect their interests. An Independent Director shall not maintain any relations with third parties, including the company’s competitors and affiliated parties, if such relations are known to cause direct or indirect damage to the image, business or legitimate interests of the company and its shareholders, regardless of whether such relations benefit the Independent Director or his/her affiliated parties.

(ii); An Independent Director shall divulge only accurate information that may be disclosed under applicable laws and shall not disclose confidential information, including commercial secrets, technologies, advertising and sales promotion plans which may harm the company’s business unless such disclosure is expressly approved by the Board of Directors or is required by law. (iii); An Independent director should be cognizant of the Company’s environment and social impact and actively guide the management towards discharging its environmental and social responsibilities.

The independent directors shall play a vital role in formulating the criteria for determining qualifications, positive attributes to help identifying persons who are qualified to be appointed in senior managements in accordance with the criteria so laid down, SECP said.

In order to elect mandatory independent directors and female directors on the board, companies are encouraged to adopt sequential voting in election of directors i.e. separate calculation of shareholders vote for each category of directors (e.g. independent, female, and others).

The independent director of a listed company is elected in the same manner as other directors are elected in terms of section 159 of the Act and the statement of material facts annexed to the notice of the general meeting called for the purpose shall indicate the justification for choosing the appointee for appointment as independent director.

In order to elect mandatory independent directors and female directors on the board, companies are encouraged to adopt sequential voting in election of directors i.e. separate calculation of shareholders vote for each category of directors (e.g. independent, female, and others).

Guidelines issued on the role of officers of listed companies regarding general meetings provide Chairman of Board, Company Secretary, Chief Executive Officer and Share Registrar a comprehensive set of instructions that entails their role, responsibilities and conduct during general meetings. The Guide has been prepared in light of applicable requirements of existing laws and regulations with few changes proposed in existing regulations. Guidelines also contain a checklist that has consolidated all the requirements laid down in applicable laws and regulations with respect to responsibilities of officers that need to be signed by concerned officers so as to ensure timely discharge of responsibilities by them.

As part of inclusion of technology in day to day businesses, Guidelines suggesting enhanced use of technology during general meetings, outline the procedure of conducting general meetings through electronic means, manner of participation and E-voting by shareholders, procedure for voting through ballot papers and timing & manner of announcement of result of Poll electronically etc.

These Guidelines have been issued in consideration of multiple queries and problems faced by the corporate sector and are suggestive in nature. Companies are encouraged to consult this document while performing their responsibilities during general meetings, SECP added.

Copyright Business Recorder, 2022