The Securities and Exchange Commission of Pakistan (SECP) has registered 327 new limited liability companies during April 2013 raising the corporate
portfolio to 62,203 companies.
The SECP in its continued efforts to promote corporatization in the country is holding seminars with all stakeholders, conducting awareness campaigns, and extending facilities. Out of the 327 new companies registered during April 2013, around 92% companies registered as private limited companies, 5% companies registered as single-member companies, while the remaining 3% registered as public limited companies.
A number of foreign investors showed interest in investing in Pakistan as confirmed by investment in 12 new companies involved in diverse business areas.
The Sectors include, trading, telecommunications, power generation, lodging, tourism, fuel and energy, import/export, automobiles and IT sectors. These companies have foreign investors from Canada, China, Panama, South Korea, the United States, the UAE and Ukraine. The interest of foreign investors is also a reflection of the SECP’s facilitation regime for foreign investors including, fast track provisional registration of companies having foreign directorship.
Overall, the services sector has taken the lead in new registrations with 50 new companies, followed by tourism with 45 companies, trading with 38, I.T. with 30, and the remainder in broadcast media, construction, communications, food and beverages, finance and banking.
Out of the 327 companies registered, 103 companies were registered at the Company Registration Office (CRO) in Lahore, while the CROs in Islamabad and Karachi registered 94, and 74 companies respectively.
During April 2013, returns for increase in the authorized capital of 84 companies were accepted, resulting in total authorized capital increment of Rs. 32.11 billion. In addition, 96 companies filed returns for increase in their paid-up capital with the total increase amounting to Rs 904 Crore.
Considering the need for Islamic Financial Institutions (IFIs) and Islamic Capital markets (ICMs) to innovate and operate within the purview of Shariah principles and to ensure that aforesaid organizations’ business dealings are in line with Islamic principles, the Securities and Exchange Commission of Pakistan deemed it necessary to have a central advisory body to guide their transactions in accordance with the principles of Shariah.
Accordingly, the Commission has given its formal assent on the formation of Shariah Advisory Board (the SAB of SECP) pursuant to Section 9 of the Securities and Exchange Commission of Pakistan Act 1997 (XLII of 1997).
The (9) members of, “the SAB of the SECP” shall include prominent Shariah Ulemas, a jurist, an accountant and representatives of the Commission. Each member of the SAB shall be a qualified individual with in-depth knowledge and experience of Islamic accounting, finance, economics and Shariah law.
Apart from acting as a reference body and advisor to the Securities and Exchange Commission of Pakistan (SECP) on Shariah matters, “the SAB of the SECP” shall be entrusted with the ascertainment of Islamic law for the purpose of development and promotion of Islamic Financial Institutions (IFI) which includes Islamic Mutual Funds, Islamic Pension Funds, Takaful Operators and other financial institutions which are based on Shariah principles and are supervised and regulated by the SECP.
Some of the key functions to be performed by SAB of the SECP are to validate the products of IFIs and to ensure their compatibility with the Shariah principles; recommend guidelines on the criteria for investment by Islamic Capital Institutions; advise on reporting & auditing standards; undertake educational activities for understanding of Shariah principles; and the introduction and implementation of new models and products based on international research.
It is envisaged that the SAB shall play a crucial role in bringing an effective and efficient Shariah Governance System, thereby enhancing the credibility of IFIs and ICMs which will ultimately contribute to the achievement of the SECP’s fundamental objective i.e. protection of the investors/policyholders’ interests.
The SAB of SECP shall also endeavor to foster the growth and development of Islamic Financial Market and provide guidelines for devising new products and services.
The Securities and Exchange Commission of Pakistan (SECP), Thursday, invited public opinion on Draft Companies (Distribution of Specie Dividend) regulations, 2013 (the “draft Regulations”).
Companies (Distribution of Specie Dividend) Regulations, 2013 is meant to ensure protection of investors, provide enhanced transparency, and to facilitate companies.
SECP stated that ‘Specie dividend’ is a form of dividend where shares of another company whether listed or unlisted, which are held as investment by the issuing company, are distributed among the entitled shareholders of the issuing company. Distribution of shares of another company as dividend is an acceptable practice in the market which is considered beneficial to both the issuing company and its shareholders.
Best Practices Around the Globe
These draft Regulations have been developed after detailed study of practices in various international jurisdictions. They broadly cover the eligibility conditions for declaration of specie dividend, the requirement to provide an independent valuation report for the securities to be distributed in case the company is unlisted, conditions for distribution of specie dividend, and the requirement to provide a detailed information memorandum to shareholders for the securities to be distributed.
Articles of Association Must Allow for Such Distribution
SECP made few suggestion as follows:
1. In order to ensure maximum investor protection and transparency it has been made a requirement that a company’s Articles of Association should explicitly permit the distribution of specie dividend and the company obtains the shareholders’ approval before any such distribution. Further, any company may distribute specie dividend only once in two years.
2. Where securities of an unlisted company are distributed as specie dividend, listing of such securities shall be mandatory within a period of 90 days from the date of declaration, and for such purpose a no objection certificate shall be obtained from the relevant stock exchange(s) prior to declaration.
3. In case such securities cannot be listed, the issuing company shall encash these securities at the option of the shareholders.
4. It is expected that promulgation of these draft Regulations would facilitate companies to distribute securities of other companies as specie dividend subject to disclosure requirements and sufficient conditions for ensuring protection of investors.
5. Further, while considering that many companies in Pakistan are closely held, the distribution of securities as specie dividend in a protected environment will help in broadening the investor base and depth of the market.
As part of its mandate to monitor listed and unlisted companies to safeguard investor interest, the Enforcement Department of the Securities and Exchange Commission of Pakistan (SECP) has initiated one hundred and twenty- two
(122) show-cause proceedings against chief executives, directors, and auditors of listed and unlisted companies, that failed to comply with the applicable provisions of the laws.
Enforcement actions for breaches of statutory requirements related to: issuance of auditors’ reports, takeover regulations, holding of annual general meeting, inter-corporate financing, issuance of capital, misstatement of facts, employees’ provident funds, consolidation of financial statements, circulation of financial statements, disclosure of directors’ interests, and cost audit rules.
Penal proceedings against directors of listed company concluded on account of material misstatements whereby the directors siphoned off the tax refunds disguising them as proceeds from the false sale of its subsidiary.
In addition to the proceedings noted above, the Department has concluded seventy nine (79) proceedings against directors and auditors of companies either by penalizing and/or by warning the identified defaulters. In addition, the Department has also initiated inspections of the affairs of four companies while an investigation has been initiated into the matters of a private limited company.
The Department addressing the grievances of investors successfully resolved nineteen complaints. These complaints were mainly pertaining to non-issuance of shares, non-verification of transfer deeds, and non-payment of dividends.
Four companies have been directed to hold their overdue annual general meetings within a specified time. To facilitate companies in preparation of their consolidated financial statements, six companies have been granted exemption from the requirements of consolidation of their annual financial statements.
The Federal Government has appointed Mr Tahir Mahmood as acting chairman of Securities and Exchange Commission of Pakistan (SECP). The Finance Division on Friday has issued notification in this regard.
Tahir Mahmood, currently Commissioner Company Law Division SECP, represents the category of Commissioners who are being appointed from within the SECP under section 5 of SECP Act, 1997.
He is a regular employee of the SECP and joined the service through Federal Public Service Commission (FPSC) as Grade 18 officer in former Corporate Law Authority (CLA) in 1989. He is a chartered accountant and carries a rich experience of over 25 years with CLA and the SECP.
He is Fellow Member of ICMAP & ICSP and also has degree in Law. He possesses extensive experience in company law administration, takeover laws, corporate restructuring, mergers, corporate finance, judicial order writing etc. He has in his credit about four hundred judicial orders passed by him in his capacity as adjudicating officer and member of appellate bench while working as Executive Director/Commissioner SECP.
Significant number of such orders are published in CLD and referred by legal community in corporate cases. He is also member of Company Law Review Commission headed by Chief Justice of Pakistan (Retd.) Mr. Ajmal Mian.
He has worked on drafting of various laws during his tenure with SECP. His expertise in corporate laws especially company law and takeovers laws are largely acknowledged by legal fertility. He is member of various professional forums including National Council of ICMAP, SAFA etc.
The Securities and Exchange Commission of Pakistan (SECP) organized a meeting with key stakeholders to take forth the corporate social responsibility agenda; the meeting was held in the SECP head office in Islamabad.
In his opening remarks, Mr. Tahir Mahmood, Chairman SECP stressed the need for a national agenda on corporate responsibility and social investment and that the SECP would encourage a national multi-stakeholder effort to boost competitiveness through ethical conduct.
Faud Hashmi, CEO, Pakistan Institute of Corporate Governance, volunteered to take the lead in partnership with Responsible Business Institute (RBI) for creating awareness regarding CSR concept in Pakistan. The other participants expressed their agreement to the proposal. The participants were also of the view that the framework for CSR reporting and standards for assurance shall be developed by ICAP.
Besides Tahir Mahmood and Zafar Abdullah, eminent professionals present in the meeting included Dr. Ishrat Hussain, Dean & Director of Institute of Business Administration(IBA), Karachi; Ms. Ambreen Waheed, Founder and Director of Responsible Business Initiative (RBI); Mr. Ahmed Saeed, President of Institute of Chartered Accountants of Pakistan(ICAP); Mr. Faud Hashmi, CEO of Pakistan Institute of Corporate Governance;, Mr. Qazi Qazi Azmat Isa, CEO of Pakistan Poverty Alleviation Fund; and Mr. Kamran Y. Mirza, CEO of Pakistan Business Council.
he participants stressed that the concept and understanding of CSR is still in its infancy in Pakistan. While companies are endeavoring to incorporate meaningful social responsibility initiatives in their business practices, there is a need to create awareness about the benefits of Corporate Social Responsibility. Strategy for creating awareness will include seminars and campaign drives using media and other channels of communication.
Further, it was suggested that owing to CSR being a voluntary activity in nature, consultative and corroborative approach shall be fruitful in promoting our agenda.
The Securities and Exchange Commission of Pakistan (SECP) has issued draft principles of corporate governance for non-listed companies for stakeholders’ comments.
The set of thirteen principles aim to promote transparent and accountable governance practices in non-listed entities. The recommended governance rules for non-listed companies in line with best international practices and was formulated while keeping in view the domestic corporate environment.
Its’ worth mentioning here that SECP had introduced the Code of Corporate Governance (CCG) for listed companies in March this year.
The SECP believes that virtuous corporate governance in non-listed companies will yield higher investments and capital formation from local and foreign investors, and reduce economic vulnerability to financial crisis.
Moreover, improved corporate governance practices may also assist non listed companies (NLCs), looking to be listed on stock exchanges, in their smooth transition to be a listed company.
Companies following good corporate governance principles may benefit from higher valuations, improved profitability, and may gain broader access to external financing than their poorly-governed peers. Empirical evidence have been gathered in the form of numerous research reports to support the idea that there is a correlation between adopting the basic principles of corporate governance, namely fairness, transparency, accountability, responsibility, organization’s performance and competitiveness.
Non-Listed Companies constitute the bulk of businesses in Pakistan; over 60,000 NLCs are registered with the SECP compared to only 604 companies listed on the country’s stock exchanges.
Recognizing the significance of NLCs to the national economy, Principles of Corporate Governance have been formulated to extract the potential of improved corporate governance practices in non-listed segment of the national economy.
The principles of good governance are presented on the basis of a dynamic phased approach, which takes into account the degree of openness, size, complexity and level of maturity of individual companies. NLCs can extract from this stepwise approach useful guidelines to promote their sustainability, to bring external parties to their boards, to attract funds, and to solve issues between shareholders.
SECP strives to provide a regulatory environment, which is conducive for development and promotion of a robust corporate sector and ensures promulgation of balanced regulations. These Principles are a set of guidelines from the SECP and will only be applicable on a voluntary basis.
The Securities and Exchange Commission of Pakistan (SECP) has initiated an inquiry into the affairs of registered companies that were accused for defrauding the general public by offering them investment opportunities in illegal schemes.
The SECP has taken the action on various complaints received against these companies for illegal deposit taking in the name of Modarabas. The articles of association of these corporate entities were not allowed them to deal in the modarba products.
These registered companies are M/s Spadix Group of Companies (Pvt) Ltd, M/s Pak Tea Company (Pvt) Ltd and M/s Spadix Pharmaceuticals (Pvt) Ltd of Spadix Group.
The SECP has recently received a letter from the State Bank of Pakistan (SBP), wherein it was reported that associated companies of M/s Spadix Group were involved in illegal deposit from general public in the name of Modarba.
The SBP mentioned the following names in its letter;
1. Spadix Pharmaceutical Company
2. Goodman Pharmaceutical Company
3. Sanitory Works (Fayyazi Gujranwala Industries (Pvt) Ltd)
4. Cable Works (Fayyazi Gujranwala Industries (Pvt) Ltd)
5. AL-Hassan Autos (Pvt) Ltd
6. Marble Export
The Competition Commission of Pakistan (CCP) jolted the fertilizer sector when they imposed a penalty of Rs 864 Crore (largest in Pakistan) on leading fertilizer manufacturing companies – Engro Fertilizer Limited (EFL) and Fauji Fertilizer Company Limited (FFC) – for abuse of their dominant position through unreasonable price increase.
2 Years Old Case finally Witnessed an End
The Commission took notice on its own of a price increase carried out by all the urea manufacturers in Pakistan in December 2010 that continued through 2011.
The Commission constituted an Enquiry Committee to identify whether the subject price increases amounted to a contravention of the provisions of the Competition Act, 2010. In this regard the Enquiry Report concluded on 25th June 2012, carried out an analysis of factors such as gas curtailment, input costs, profit margins, subsidies, government policies etc. to reach at the conclusion that the undertakings found to be individually as well as collectively dominant, abused this position in carrying out unreasonable increase in prices in violation of Clause (a), Subsection (3) of Section 3 of the Act.
All urea manufacturers were issued show cause notices (SCN) for individual and collective abuse of dominant position.
The Bench comprising the Chairperson Ms Rahat Kaunain Hassan and senior member Abdul Ghaffar, in its order, observed that in determining whether the undertakings were individually dominant in the urea market (the “relevant market”) particularly with respect to the aspect of unreasonable price increase, it was necessary to go one step ahead of establishing that the market was captive and determine on a case by case basis whether each undertaking had the market power to effect, influence or initiate a price change in the market.
Engro Fertilizer Started All This
In this regard ‘Engro Fertilizers’ had itself demonstrated by being the price initiator, that it was in fact dominant in the relevant market. With respect to Fauji Fertilizer Company – it was thus found by the bench that having a much greater market share in the relevant market in terms of production and satisfying the test for market power provided for under Section 2(1)(e) of the Act, it was the only other undertaking in the relevant market with the ability to initiate price changes in the relevant market other than Engro Fertlizers.
All the other undertakings were found by the bench to be lacking in the ability of being the agents of unreasonable price increases in the relevant market and were therefore not found to be individually dominant.
The bench took into consideration numerous factors including local concerns such as the nature of urea as an essential commodity, its importance to the farmer and agricultural growth and the Government Of Pakistan based subsidy provided to the undertakings and then employed numerous comparators (involving a comparison of profitability with jurisdictions of similar nature) in the light of the test laid out in the other developed jurisdictions.
Unusual Profits of Fauji and Engro
Fauji Fertilizer Company was found to have more than doubled its profits from around Rs 1,100 Crore in 2010 to Rs 2,250 Crore in 2011. Its ROE after tax of 97.5% was way above the ROE after tax enjoyed by undertakings in agro based economies similar to Pakistan in all aspect of the Urea business (ROE after tax in India having an upper ceiling of 12%).
In respect of Engro Fertilizer the bench observed in the light of a case of excessive pricing in Turkey that plummeting profits or even a loss registered by an undertaking doesn’t imply that it cannot abuse its dominant position.
The Bench looked at the increase in gross profits as they neutralized the effect of its debt obligation that was peculiar to it not just in terms of the fact that it carried out the investment but also in terms of the arrangement it agreed upon with the lender/financers to pay it back.
Based on its findings and taking into account all relevant factors, including the product involved, its significance for the economy and the quantum of subsidy availed by the Fauji Fertilizerand Engro Fertilizers which amounted to Rs 1100 Crore and Rs 450 Crore respectively for the year 2011 only, the Bench imposed a maximum penalty provided for under the Act on both EFL and FFC i.e. 10% of their individual turnover (translating to sums of Rs 3.14b for Engro Fertilizer and Rs 550 Crore for Fauji Fertilizer) for each abusing its dominant position in violation of the Act.
CCP Recommends ‘Cost Audit’ to SECP
Furthermore the bench deemed it critical to advise Securities and Exchange Commission of Pakistan (SECP) that forensic cost audits pertaining to all the undertakings must be carried out by independent auditors in the interest of transparency and the information so obtained shared with the relevant departments of the provincial and Federal Governments along with the Commission.
Lastly the bench was of the considered view that a mechanism needs to be evolved by the Government of Pakistan so that the subsidy (if any) should be directed at the farmer who is the ultimate beneficiary of subsidy as per the objective of fertilizer policy 2001 to ensure availability of Urea at an affordable price.
The tussle between the Lahore Development Authority and Bahria Town, a Property giant in Pakistan, has now entered into courtrooms.
Lahore High Court directed the Lahore Development Authority (LDA) director general to resolve in six weeks the issue regarding legality of the Bahria Town new phase and alleged ‘defamation campaign’ by the Authority against the housing society of Bahria Town.
The court issued the order while disposing of a petition moved by Amjad Nawaz Bhatti and others through Advocate Dr Basit. The counsel submitted that the petitioners were owners of plots in Sector-D and E of Bahria Town, Lahore, which were also known as Orchard Phase-II.
He pointed out that the respondents, including the LDA, had initiated a massive defamation campaign through electronic and print media requesting people to abstain from buying plots in sectors D, E and F of Bahria Town Lahore for being developed without approval of a competent authority.
He argued that the LDA had no authority to take such an action as scheme did not require NoC (Not-Objection Certificate) from the LDA.
The petitioners also take shots on Punjab government had formed a criminal conspiracy to damage reputation of Bahria Town. Malik Riaz Hussain, founder of Bahria Town, also alleged Pubjab government in conspiring against him. Malik Riaz also accused them to conspire against an investment of $45 Billion just to defame his company.
A law officer representing the LDA told the court that the authority was simply following its rules in informing the public to avoid purchasing plots in illegal, unapproved housing schemes.
Justice Ijazul Ahsan heard arguments from both sides and referred the petition to the LDA director general.
The part ‘Bilawal House Lahore’ played
DAWN quoted a PPP leader who said that this defamation campaign was conspired by Mian Nawaz Sharif after the completion of the Bilawal House and with the news that President Zardari will stay there,
“We are surprised why the LDA didn’t take action against Bahria Town in the past. Why they are taking such an action now,” PPP leader Shaukat Basra said while talking to the newspaper.
Is it all a Game?
But there are others who believe that this is all just a game between LDA and Bahria Town.
Hussain Kaisran, a blogger on property, believes that it is some kind of a game between LDA and Bahria Town Lahore. According to his analysis – practically this could not effect plots or plots holder. It can only little bit affect to new comers or price of plots.
Page 1 of 712345...»Last »