A. Introduction
1. The Securities and Exchange Commission of Pakistan (“the SECP”) regulates the corporate sector in Pakistan in exercise of its powers under the Securities and Exchange Commission of Pakistan Act, 1997 and the Companies Ordinance, 1984 (“the Companies Ordinance”).
2. The Companies Ordinance was promulgated in 1984 with the objective of achieving healthy growth of corporate enterprises, providing protection to investors and creditors, promoting investment and the development of the economy.
3. In the twenty one years since the law came into force, the Pakistani economy, particularly the corporate sector, has witnessed considerable growth and expansion. Two significant developments in this regard are the inclusion of the non-banking finance companies within the regulatory framework of the Companies Ordinance and the introduction of single member companies. The Companies Ordinance has been amended from time to time to cater to the needs of an ever expanding sector.
4. There is however, an urgent need to carry out a holistic examination of the Companies Ordinance in order to assess the relevance of its objectives in the current economic scenario; the adequacy of its provisions, not only for the achievement of its avowed objectives, but for the creation and maintenance of a liberal, deregulated and efficient corporate sector; its capacity to allow for balanced growth of corporate enterprises and the extent of its harmonization with international best practices. In the event that the Companies Ordinance is found lacking in any of these crucial areas, and the gap cannot be plugged by suggesting amendments, there may be a need to redraft the law.
5. To undertake this essential exercise, the SECP hereby establishes the Corporate Laws Review Commission (“CLRC”) under the able leadership and guidance of Chief Justice of Pakistan (Retd.) Ajmal Mian and comprising, inter alia, eminent members of the legal and business community, listed in Schedule A hereto, to examine, assess and redraft the Companies Ordinance in accordance with these terms of reference.
B. Objectives of the CLRC
6.The objectives of the CLRC are to:
(a) Assess the adequacy of the Companies Ordinance vis a vis its stated objectives and for the development and maintenance of a liberal, deregulated, efficient and cost effective corporate sector.
(b) Examine the objectives, the structure and content of the Companies Ordinance to prepare a conceptual framework for revisions to or redrafting the Companies Ordinance.
(c) Draft the amendments to the Companies Ordinance or redraft the law, as may be necessary.
(d) Review the structure and contents of amendments or the redrafted law.
(e) Ensure that the amendments or the drafted law is in line with governmental policies; creates an enabling regulatory framework for enhanced corporatization, the balanced growth of the corporate sector and strikes an appropriate balance between indigenous conditions and international best practices.
C. Scope of Work
7. The CLRC shall undertake all work necessary to achieve the aforesaid objectives, including, but not limited to:
(a) Examining the Companies Ordinance to assess its adequacy vis a vis its objectives and for the enhanced corporatization, good corporate governance, transparent and efficient financial reporting and the balanced growth of the corporate sector;
(b) Recommending necessary measures, e.g. amendments to the Companies Ordinance or redrafting the law, for the creation of a modern, efficient, liberal and flexible enabling regulatory framework for nurturing balanced corporate growth in Pakistan;
(c) Providing a detailed conceptual framework for the proposed amendments or the redrafting of the law;
(d) Ensuring that the provisions of the Companies Ordinance are consistent with other laws in Pakistan;
(e) Ensuring that the amendments or the redrafted law strikes an appropriate balance between governmental policies and national factors on the one hand and harmonization with emerging market norms and international best practices on the other.
D. Execution of the Work
8. The CLRC is an independent body of experts and shall conduct its affairs in accordance with the procedures agreed upon by the members.
9. In seeking to attain the objectives stated herein, the CLRC shall carry out the work as detailed in Part C above, as well as any additional work it deems necessary to achieve these objectives.
9. The CLRC may co-opt such members or form such sub committees as it may deem necessary in order to meet its objectives.
E. Deliverables
10. The CLRC shall prepare the following deliverables:
(a) A concept paper for the development and regulation of the corporate sector.
(b) An interim progress report along with a preliminary draft of the amendments or the redrafted law, as the case may be.
(c) A draft bill containing the text of the amendments (as well as a version of the Ordinance, with the amended portions inserted) or the redrafted law as the case may be.
(d) A statement providing the objects of and reasons for the amendments or the redrafted law, including detailed rationale and justification for the amendments or redrafted law.
(e) A brief report indicating the areas in which regulations are required to be drafted and the likely scope of such regulations.
F. Estimated Schedule and Milestones
11. The deliverables shall be produced over a period of 7 months ending on 30th June 2006, in accordance with a time schedule to prepared by the CLRC substantially in line with Schedule B hereto.
G. Support
12. The SECP will provide all necessary logistical support to the members of the CLRC including but not limited to travel to and accommodation in the place where the meeting of the CLRC is to be held, meeting rooms, office space, secretarial support and related facilities, engagement of consultants, advisers and experts.
