Companies Ordinance, 2016 – The progression of the companies law from 1984 to 2016

The Government has, in November 2016, promulgated the Companies Ordinance, 2016 replacing the Companies Ordinance, 1984. After various seminars, conferences, expert groups, discussions and debates, the Companies Ordinance, 2016 (the “2016 Ordinance”) was drafted, debated and promulgated. The new law encourages a movement towards simplifying certain procedures, enabling greater use of technology, and encouraging a paperless record keeping environment.

The constitution for companies and the backbone legislation for the economy has experienced a cardinal shift. The salient changes to the legislation are provided below and will be revised accordingly; the history of the law and the analysis and discussion on the projected effect will follow in a subsequent post.

  1. Classification of Companies as provided by Section 224 and the Third Schedule of the 2016 Ordinance.

The Third Schedule provides for Public Interest Companies and Large Sized Companies (“PILSCs”), Medium Sized Companies (“MSCs”); and Small Sized Companies (“SSCs”). Small Sized Companies, for example, shall include private companies having (1) paid up capital up to Rs. 10 million; (2) turnover not exceeding Rs. 100 million; or (3) employees not more than 250.

The classification of a company shall be based on the previous year’s audited financial statements and can be changed if it does not fall under the previous criteria for two consecutive years.

Special provisions are provided to facilitate small and medium companies.

The 2016 Ordinance also provides for relaxations for Free-Zone Companies (Section 454) and the establishment of an Investor Education and Awareness Fund (Section 245). The 2016 Ordinance further provides for companies that are “Inactive Companies” to seek such status from the registrar to avail limited procedural and accounting requirements (Section 424).

Moreover, the 2016 Ordinance provides for streamlining lengthy processes by introducing an efficient dispute resolution mechanism through the Mediation and Conciliation Panel (Section 276), passing of members’ resolution by circulation and simplified provisions for Mergers and Acquisitions.

  1. Memorandum of Association

The 2016 Ordinance requires that companies engage in such business that is the “principal line of business” (Section 26) to reduce the issues related to the doctrine of ultra vires whereby the company undertakes acts that are beyond its scope of work or powers. The principal line of business shall be mentioned in the memorandum of association or notified to the registrar.

  1. Conversion of Shares into Electronic Format.

Electronic or “demat” form is the concept of dematerialization in finance and financial law and refers to the substitution of paper-form securities by book-entry securities. This is a form of an indirect holding system which is used as an intermediary, such as a broker or a central securities depository and holds the records of the ownership of the shares in an electronic format. The Central Depository System in Pakistan, established under the Central Depositories Act, 1997 has a similar system of electronic filing, record and transfer for and of securities.

  1. Special provisions for Independent and Non-Executive Directors (Section 166).

The 2016 Ordinance provides for the inclusion of independent directors and non-executive directors on the Board including provisions for the manner of selection and maintenance of the data bank of such directors.

  1. Increased provisions for Disclosure of Directors, and Beneficial Owners and Increased Transparency by local and foreign companies.

The 2016 Ordinance provides for increased disclosure by companies to the regulatory. It further provides for the companies to maintain a Companies’ Global Register of Beneficial Ownership (Section 452) for every substantial shareholder or officer of a company incorporated under the 2016 Ordinance, having ten percent (10%) or more shares in a foreign company or body corporate.

There is increased regulatory control vis-à-vis fraud, terrorist or corrupt financing, and money laundering.

  1. Certificate of Shariah Compliance.

Section 451 enables companies to seek for a Shariah compliance certificate from the Securities and Exchange Commission of Pakistan. No company shall be permitted to be called “Shariah compliant” unless it is conducting business according to the principles of Shariah and has been so certified by the Commission.

  1. Agriculture Promotion Companies (Section 457).

The 2016 Ordinance enables the registration of agriculture promotion companies for the development and enabling of the agriculture sector.

  1. Table of Fees, amended, to be Paid to the Registrar.

The Seventh Schedule updates the Table of Fees to be paid to the Registrar (Section 462 and 469).

Protection of Women Against Violence – New bill passed by the Punjab Assembly

On 25 February 2016, the Provincial Assembly of Punjab passed the Punjab Protection of Women Against Violence Bill, 2015 (the “Protection Bill”).

Q. What is it?

The Protection Bill aims to make a “special provision for the protection of women”, “to protect women against violence including domestic violence, to establish a protection system for effective service delivery to women victims and to create an enabling environment to encourage and facilitate women freely to play their desired role in the society, and to provide for ancillary matters”.

Q. What is domestic violence?

Section 2 (h) defines “domestic violence” as:

the violence committed by the defendant with whom the aggrieved is living or has lived in a house when they are related to each other by consanguinity, marriage or adoption;

Section 2 (r) defines “violence” as:

any offence committed against a woman including abetment of an offence, domestic violence, emotional, psychological and verbal abuse, economic abuse, stalking or a cybercrime;

Q. What are the other key definitions of the Protection Bill?

The following definitions, in Section 2, are key:

(a) “aggrieved person” means a woman who has been subjected to violence by a defendant;

(e) “dependent child” means a child who is below the age of twelve years of age and includes any adopted, step or foster child;

(j) “house” includes a place where the aggrieved person lives in a domestic relationship irrespective of right to ownership or possession of the aggrieved person, defendant or joint family;

Q. What are the plans for implementation?

For implementation, Section 3 provides that the Government shall, amongst others:

(a) institute (establish) a universal toll free dial-in-number for the aggrieved persons;

(b) establish Protection Centres and shelter homes under a phased programme;

(c) appoint necessary staff at a Protection Centre for mediation and reconciliation between the parties, rescue, medical examination, medical and psychological treatment and legal help of the aggrieved persons and proper investigation of offences committed against aggrieved persons;

(d) raise awareness about the issues involving women and the requirements of protection and relief of the aggrieved persons.

Q. What steps should be taken to seek protection and what happens then?

1. The aggrieved person, or any other person authorized by the aggrieved, or a Women Protection Officer, appointed under Section 14 of the Protection Bill, may submit a complaint for obtaining a protection, residence or monetary order for the aggrieved.

2. The relevant court shall be (1) where the aggrieved resides or carries on business; (2) where the defendant resides and carries on business; (3) where the aggrieved and the defendant last resided together.

3. The court shall then start proceedings not more than seven (7) days of the date of receipt of the complaint by the court.

4. The defendant shall be notified to show cause (appear in court) within seven (7) days. If a defendant fails to respond within the specific time, the court shall, subject to another notice to the defendant, assume that the defendant has no plausible defense and proceed to pass such order as the court deems fit.

Q. How will the court protect the victim.

1. Protective Order: If the court is satisfied that any violence has been committed, or is likely to be committed, the court may pass a protection order in favour of the aggrieved person and direct the defendant to, inter alia, not communicate with the victim, stay away from the victim, stay at a particular distance from the victim, wear an ankle or wrist GPS tracker to track the movement of the defendant at all hours, surrender any weapons, refrain from entering the place of employment of the victim, refrain from causing or aiding or abetting any act of violence; and/or refrain from committing such acts as may be specified in the protection order.

2. Residence Order: In the event of domestic violence, the court may pass a residence order directing that, inter alia, the victim shall not be evicted from the house, the victim has the right to stay in the house, the defendant shall not sell or transfer the house to any person other than the victim, the victim may be relocated to a shelter home (established under Section 13 of the Protection Bill), and/or the victim be relocated to some alternative accommodation.

3. Monetary Order: The court may also pass a monetary order ordering the defendant to pay monetary relief to meet the expenses incurred and losses suffered by the defendant which may include, inter alia, loss of earning, medical expense, damages for destruction of property, and/or maintenance of the victim and her dependent children.

Q. Where does the aggrieved person go during proceedings?

Under Section 5 of the Protection Bill, the victim shall not be evicted from the house without her consent.

Q. What are some of the shortfalls of the Protection Bill?

Some shortfalls are:

  1. The offender, it appears, can only be a person who is known to the victim by consanguinity, marriage, or adoption and does not cover such relations that the victim may have to face on a day to day but do not fall within this category, such as relatives-in-law.
  2. The legislation only provides for domestic violence against women; whereas, men may also be victims of domestic violence.
  3. The stringent timelines in the Protection Bill places a heavy burden on the courts without any mechanism of assistance to the courts.
  4. The requirement to consistently monitor protection officers to ensure that such officers do not add to the distress and instead handle issues with care, empathy, and efficiency.
  5. Regular training to the toll-free number representatives to ensure that they are able to provide advice in a quick and efficient manner, respect anonymity, and are available round the clock.
  6. The legislation does not cover dowry and the culpability of giving or receiving the same. The analogous legislation in India, Protection of Women from Domestic Violence Act, 2005, criminalized the offence of giving and receiving dowry.
  7. The need for mechanisms to ensure that this legislation is not misused, for example, verbal abuse is a wide term to report violence. Such mechanisms, though, should not be at the cost of restricting, reserving or downplaying genuine cases of violence against women and should not give too much discretion to the reporting officers.
  8. Custody of children should have been included in the legislation to ensure that the victim is not deprived of full right to her children.
  9. The legislation appears to have the limited scope of civil instead of (the more preferable) criminal law. Criminal sanctions (arrest and imprisonment) require a further offense by the accused respondent (such as violating a protection order issued under this law). This may, however, be a deliberate factor of the legislators to ensure quick and flexible relief for the victim.

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Myra Khan is a Barrister-at-Law from the Honourable Society of Lincoln’s Inn and (ex) Vice Chairperson Women Rights Committee of the Lahore High Court Bar Association. She is currently practicing law in Lahore, Pakistan.

Any queries may be directed to lawyereadia@gmail.com