Shell companies' owners: Draft Cos Bill to allow SECP to seek details

Securities and Exchange Commission of Pakistan (SECP) Chairman Zafar Hijazi Thursday said the draft Companies Bill 2016 would allow SECP to seek details of beneficial owners of foreign companies including offshore companies incorporated in Pakistan.
Sharing some of the new provisions of draft Companies Bill 2016, Hijazi told media that the Bill would allow SECP to check details of owners and investors not only a local company but also in any foreign or offshore company registered in Pakistan.
Chairman SECP along with Tahir Mahmood, Commissioner Companies Law Division and Bushra Aslam, Executive Director SECP said that the current law does not allow the regulator to inquire about the owners of a foreign company in the country.
Presently, if a Pakistani established an offshore company and starts registration in Pakistan through a 'Principal' who could be a local or a foreigner but the SECP cannot ask the details of investors in that company, SECP officials said.
Under the draft Companies Bill, the local companies have to provide details of all investors, having more than ten percent shares in the company, while the details of investors in a foreign company can be obtained anytime by SECP.
He said that the present laws do not require any disclosures with regard to foreign investments made by the directors in their personal capacity, therefore, SECP has suggested special provisions in the Draft Companies Bill, 2016, pertaining to maintenance of record of foreign investment in shape of Companies' Global Register of Beneficial Ownership. Under this provision every shareholders, directors and officers of the companies have to report their beneficial ownership or any other interest outside Pakistan. The companies shall also be required to report their foreign equity investment to SECP.
In order to ensure corporate transparency and facilitate meaningful due diligence, SECP proposes to maintain a Companies' Global Register of officers and beneficial owners of the companies having beneficial ownership in local or foreign companies. The information will be reported by the company to the registrar along with the annual return of the company; however for the first time such information will be reported through a special return on a prescribed form within a stipulated time frame.
Chairman SECP further stated that the draft Companies Bill 2016 has introduced the concept of 'dormant company' for those undertakings which intended to temporarily stop their business for some time period and resume their activities at a later stage.
Zafar Hijazi said that we have brought the concept of dormant company in the new law. For example, if any registered company intended not to work for three years period, he would be temporarily suspended. It is a new concept in Pakistan to allow exiting companies to be declared as 'dormant' on temporary basis.
The SECP has also introduced the concept of agricultural promotion company to provide impetus and support to the rural economy and induce increase in agricultural produce in the country. Once the new law has been enforced, we will approach the provincial governments in this regard.
He said that a government fund would be formed from un-claimed dividends of companies. The SECP will request the government that a certain portion of the income arising from fund would be used for awareness campaigns and investor education etc. According to the SECP's estimates, un-claimed dividends totalled at around Rs 8-10 billion.
The SECP will also introduce another provision of mediator panel of renowned professionals to resolve disputes between the commission and the companies. The findings of the mediator panel would be implemented by the SECP to resolve disputes of companies.
The new law will empower the Commission to revoke the license of NGOs and to monitor their activities properly.
The new law also seeks to empower the SECP to approve the amalgamation of companies as well as the compromises, arrangements and reconstruction etc and enable the SECP to apply to the Court seeking disqualification of the Chief Executive or director of a company from holding such office for a period of five to fifteen years depending on the nature of offence.