The Securities and Exchange Commission of Pakistan (SECP) has introduced concept of "Start Up companies" to promote startup of new business relating innovation and technology through recently promulgated Companies (Amendment) Ordinance, 2020.
A new definition of "Startup company" has been inserted in the Companies Act, 2017, through the amendments introduced under the Companies (Amendment) Ordinance, 2020.
Senior SECP officials told Business Recorder here on Friday that the SECP has introduced major amendments to the Companies Act to provide an enabling regulatory framework to facilitate startups in Pakistan.
Under the SECP's plan for facilitation of startups, with the objective to promote growth in the startups sector of Pakistan, it is necessary to make relevant changes in company law to facilitate the incorporation process for the startups and provide a conducive regulatory environment.
According to the SECP, "Startup company" means a company that is in existence for not more than 10 years from the date of its incorporation or such other period or periods as may be specified, and has a turnover for any of the financial years since incorporation that is not greater than Rs500 million or such other amount or amounts as may be specified.
"Startup company" means a company that is working towards the innovation, development or improvement of products or processes or services or is a scalable business model with a high potential of employment generation or wealth creation or for such other purposes as may be specified; or such other companies or classes of companies as may be notified by the commission.
Provided that a company formed by the splitting up or re-construction of an existing company shall not be considered as a startup company, the SECP added.
President Arif Alvi, through Companies (Amendment) Ordinance, 2020
has approved certain amendments to Companies Act, 2017.
These amendments, proposed by the SECP mainly related to "Protecting Minority Investors and promoting Ease of Doing Business (EODB). It also included introduction of concept of "Start Up companies" to promote startup of new business relating innovation and technology.
Under the Companies Act 2017, the Commission may implement measures for providing greater ease of doing business, improving regulatory quality and efficiency and facilitating innovation and the use of technology in conducting business by the corporate sector, including but not limited to formalizing existing practices through regulations and implementing other measures for attaining international standards of regulatory quality and efficiency for greater ease of doing business and specifying modes and procedures for enabling greater ease of entry into and exit from the market to startup companies.
The SECP may specify exemptions and incentives under the prevailing laws with the object of fostering innovation, promoting startups and entrepreneurship ecosystem in line with international best practices.