Global register of beneficial ownership: Foreign firms proposed to be excluded from provisions

Securities and Exchange Commission of Pakistan (SECP) Chairman Zafar Hijazi Tuesday said that foreign companies have been proposed to be excluded from the provisions of the global register of beneficial ownership under draft Companies Bill, 2016.
Addressing a press conference at the SECP headquarters, Zafar Hijazi said that section 452 (Companies Bill 2016), a provision relating to global register of beneficial ownership is being revised so that this section is applicable only to the Pakistani nationals. Further amendment has been made to criminalise the failure by any person in providing requisite information to the registrar concerned.
Moreover, such information will be shared with the Federal Board of Revenue (FBR) and any other agency, authority or court. It is also proposed to include reporting of any interest other than investment in securities or interest in a foreign company by a company, to the registrar concerned along with the annual return of the company.
Previously, the said section caters for disclosure by directors' and officers' beneficial ownerships in other companies including foreign companies.
At the same time, section 439, a provision relating to information on beneficial owners of foreign companies is also being revised. Such information will only be required to be provided by the foreign company to the Commission, if required. Any other information required in connection with any inspection, inquiry or investigation may also be demanded. Moreover, a penalty of level 3 has been proposed to be imposed on default.
He said when the Companies Ordinance, 2016 was applicable, notices were sent to registered companies seeking details of beneficial ownership of directors. However, later the law was disapproved by the Senate and the exercise was stopped.
The foreign companies have taken the plea that it is not feasible for them to comply with the documentation requirements in line with the provision of global register of beneficial ownership.
He pointed out that under the original concept of beneficial ownership in the repealed Companies Ordinance 2016, the SECP was empowered to seek details of beneficial ownership of directors having 10 per cent or more shares in a foreign company. Some companies attempted to keep the percentage below 10 per cent to avoid application of this provision. Now, it has been proposed that irrespective of the percentage of shares, the condition of beneficial ownership of directors would be applicable.
In the previous draft all the Pakistanis possessing more than ten percent shares in any foreign or offshore company had to disclose all the details of his investments, but the final draft has abolished this ceiling of ten percent and all the foreign investments including those in off-shore companies have to be disclosed.
While, the clause related to disclosure of investments has been abolished for the foreigner investing in Pakistan. The requirement to have NTN has been relaxed for establishing small companies and specialised companies such as the agro based companies etc. The new draft of the Companies Bill 2016 has also allowed the real estate builders to withdraw amount from the separate account established for the project, however the builders will have to maintain international auditing standards.
Under the previous draft the real estate builders could only withdraw expenditures incurred from the dedicated account of the project, but now the builder could withdraw more than the expenditure incurred.
However, the Chairman SECP added that there was a need to regulate and streamline the real estate sector, which is not only an essential segment of the national economy but was also prime area for the manipulators and the fraudulent who capitalise on the lifesavings of the people. Among the major changes made in the Companies Bill, 2016 is the strict criteria against foreign holdings by any Pakistani citizen.
The chairman SECP informed that the Sub-Committee of the National Assembly Standing Committee on Finance has cleared the Companies Bill with amendments. There are a total of 516 sections in the Bill; 60 new sections have been introduced in the Bill while 306 amendments have been made in the existing sections and there is no change in 150 sections.
He talked about the deliberations on the Companies Bill, 2016 in the Sub-Committee of the Standing Committee of the National Assembly on Finance, Revenue, Economic Affairs, Statistics and Privatisation. Many amendments to the Companies Bill were introduced and cleared by the sub-committee. Now, the Bill along with amendments will be sent to the National Assembly to complete the needed legislative process, he added.
He said that the comments/ letters were received from public/ media and they raised concern on 60 sections of the Companies Bill, 2016. Amendments in 41 sections have been made based on feedback, which has also been concurred by the Sub-Committee of Standing Committee of the National Assembly on Finance, Revenue, Economic Affairs, Statistics & Privatisation. Five meetings of the sub-committee were held on 5th, 10th, 11th, 17th & 18th January, 2017.
Following changes have been agreed upon to the Companies Bill, 2016 pursuant to the deliberations made during the meetings of the Sub-Committee of Standing Committee of the National Assembly on Finance.
Referring to the changes in the draft Companies Bill, he said that section 461, a provision relating to security clearance of shareholders, directors and office-bearers of companies is being restricted to companies notified by the federal government.
Talking about section 153, he said that the power to grant exemption has been proposed to be given to the Commission from the requirement for a director to hold NTN as per the provisions of Income Tax Ordinance, 2001.
As far as section 456 is concerned, the real estate companies soliciting advances shall be required to recognise their income in accordance with IFRS. Further, the escrow account to be maintained for the real estate project shall not be subject to any attachment except for the purpose of the project, Hijazi added.
Following changes have been agreed to the Companies Bill, 2016 pursuant to the deliberations made during the meetings of the Sub-Committee of Standing Committee of the National Assembly on Finance:
Section 244 has been amended to include provision for utilisation of funds to address any systemic risk in the capital market.
Section 76 has been amended to cater for transfer of share agreement entered before enactment of Companies Bill, 2016.
Section 301 has been amended to include that in case a company does not commence its business within a year from its incorporation, or suspends its business for a whole year, it can be wound up.
Section 451 has been amended to give an entire framework for Shariah Complaint Companies.
Section 455: - enhanced scope to register all intermediaries providing services to companies to ensure quality of service.
Section 178(5): - Physical records of resolutions and meetings of board to be maintained for 10 years instead of 20 years.
Section 155: - Number of directorships has been amended to make it in line with code of corporate governance rules.
Section 158: - Retirement of first directors has been amended to cater for subsequent appointments.
Section 172: - extended to have powers to decided disqualification matter directors of all directors.
Section 192: - Chairman of the Board to report on the performance of the Board and not the Company.
Section 2:- Definition - of officer, prescribed, registrar, rules, financial institution has been changed.