The integrity of a capital market rests primarily upon a single, immutable question: Who owns the company? For decades, the answer was found in the statutory Register of Members maintained with the company.
With the advent of the Central Depository Act 1997 (CDC Act), that answer moved – for public companies – to an electronic book-entry system maintained by the Central Depository Company of Pakistan Limited (CDC).
However, in the judgement issued recently in Abdul Razzaq v. Registrar of Companies, etc., the Supreme Court of Pakistan has carved a wedge between these two records. In doing so, it has established a precedent that allows two different registers to lawfully reflect different owners for the exact same shares. The decision in Abdul Razzaq, therefore, can have far-reaching implications across the capital market, as a discrepancy between the two registers creates a chaotic and uncertain situation as to who the actual shareholders of a company are.
The separation of Registers
At the heart of the judgement is the Supreme Court’s interpretation of Section 11 of the CDC Act. The Supreme Court held that while the Central Depository Register (CDR) is protected by a “no reversal” clause – meaning a court cannot order the CDC to rectify its electronic records in cases of fraud or lack of consent – no such bar exists for the company’s internal Register of Members.
The judgement states:
“Turning back to Section 11, a closer examination reveals that its scope is narrowly confined to the correction or rectification of the central depository register (CDR). This provision explicitly excludes rectification of the company’s own register of members, which remains governed separately.”
This distinction is technically grounded in the text of the statutes, but it creates a dangerous commercial reality. If a court orders a company to rectify its internal register (under Section 126 of the Companies Act, 2017), but is barred by Section 11 of the CDC Act from ordering the CDC to reflect that change, we arrive at a deadlock. The company’s books will say “Person A” is the owner, while the electronic system used for trading and clearing will say that the owner is “Person B”.
What is a Register?
To understand the implications, we must look at what a “Register” represents. The Supreme Court in its judgement highlights that the register of members maintained by the company is the official evidence of existing shareholders and “prima facie evidence” of legal title.
The CDC Act and CDC were designed to modernize this very system by introducing an electronic book entry platform that records securities, transfers, and title electronically. Under this system, physical scrips are replaced by electronic book-entries, and the maintenance of register minimizes risks such as loss, forgery, and damage. Transfers can be executed instantaneously within the system, and it creates certainty of ownership which in turn supports the integrity of the capital market and its trades.
The judgement in Abdul Razzaq acknowledges the nature as well as the benefits of the CDR. However, by allowing the physical/statutory register held by the company to be rectified while freezing the electronic one, the effect of the judgement is that the very finality and certainty that the CDC and CDR provide will be undermined, as there is potential for different shareholding register with CDC as opposed to the one held by the company. And, ultimately, both have adequate legal sanction, so there remains no clarity on which takes precedence.
This conflict is exacerbated by the fact that the Securities and Exchange Commission of Pakistan (SECP) has now mandated book-entry form for shares for all companies. When every share must eventually exist in the CDR, having a separate legal regime for the internal company register is potentially a recipe for endless litigation.
The damages trap
Under the CDC Act, the remedy that is available to shareholders that are victims of fraud or otherwise have their shares misappropriated is monetary damages, and they have no right to recover title to their shares as rectification is barred. However, under the regime of the Companies Act, 2017, those shareholders can claim rectification of the company’s register of members. The Supreme Court held that there is no conflict between these provisions, holding that:
“We are not persuaded to adopt the notion of implied repeal and instead prefer a harmonious interpretation that enables both statutes – the CDA and the Companies Act, 2017 – to function within their respective domains…”
By holding that there is no conflict, now the commercial reality is that the company register can be rectified while the CDC register cannot. Therefore, the effect of the judgement is to create a scenario where a person might be a shareholder on paper at the company’s head office, but is legally blocked from ever selling those shares or receiving dividends through the electronic system of CDC.
A precedent beyond limitation
While much of the judgement is dedicated to the law of limitations, the most lasting impact may be this structural decoupling of corporate records. The Court spent considerable time establishing that Article 181 (the three-year limit) does not apply to rectification petitions because they are equitable statutory mechanisms intended to protect proprietary rights.
However, while removing time limits that would prejudice those whose shares have been misappropriated, the judgement will have long-lasting implications of a different kind. If the Court assists victims of fraud by rectifying a company register ten years after a fraud, but the CDC register cannot be rectified and hence those shares could be onward transferred several times, the integrity of the register is wholly lost and there will be no clarity or certainty as to who the true shareholders of the company are.
Implications for the capital market
The Supreme Court’s judgement in Abdul Razzaq was to ensure that proprietary rights are protected regardless of the lapse of time. However, by creating a distinction between the register of members under the Companies Act with the Central Depository Register maintained by CDC, there is room for uncertainty as to ownership and title of shares in the capital markets.
The SECP has mandated that all companies move to book-entry form, to create a single, unified source of truth for shareholding. The Honourable Supreme Court’s judgement effectively tells the market that there are two registers and two truths, and hence the two registers may contain different details of different shareholders, and leaves room for courts to be burdened to determine who the actual shareholders of a company are.
Copyright Business Recorder, 2026