The parliament on Wednesday approved three important bills, pertaining to the Securities Exchange Commission of Pakistan (SECP) bills, including a bill aimed to promote startups.

According to details, the parliament in its joint sitting, approved the Companies Amendment Bill, 2021; Secure Transactions Act (Amendment); and, Corporate Restructuring Companies Amendment.

The Companies Amendment Bill 2021 was proposed by SECP primarily to promote startups, business innovation, and entrepreneurship, and to improve the general business climate, and to promote ease of doing business.

A new definition was proposed in the Companies Act’s definition clause and in the Third Schedule to allow special privileges to be granted to startup companies engaged in technology-enabled products and services and are estimated to be the backbone of the economy going forward.

As per the definition given in the bill, a “startup company” means a company that is in existence for not more than 10 years from the date of its incorporation or such other period or periods as may be specified, and has a turnover for any of the financial years since incorporation that is not greater than five hundred million rupees or such other amount or amounts as may be specified.

The definition also describes a startup as the one working toward the innovation, development, or improvement of products or processes or services and as a scalable business model with a high potential of employment generation or wealth creation or for such other purposes as may be specified; or such other companies or classes of companies as may be notified by the Commission provided that a company formed by the splitting up or reconstruction of an existing company shall not be considered as a startup company.

Moreover, as per the bill, private companies have been allowed to issue shares other than right and other than cash. All the companies have been allowed to issue employees stock option schemes and buy back their shares. Earlier it was restricted to public and public-listed companies respectively.

In addition, private companies with Paid-up Capital up to Rs. 1 million are exempted from filing unaudited financial statements. To meet benchmarks of the World Bank’s Ease of Doing Business Report, the requirement of a company’s common seal is proposed to be abolished.

Also, to protect minority shareholders’ rights, the discovery of any documents from the defendant during court proceedings is allowed; the threshold for member resolution was proposed to be reduced from 10 percent to 5 percent, alongside disclosure of individual directors’ remuneration.

Courts may declare those contracts null and void which are prejudicial to the interest of members or have conflicts of interest on the part of any director or board. Other important amendments include board resolution through circulation that is required to be signed by all directors.

The bill abolishes the additional requirements to mention a husband’s name by a married woman or widow for registration of a company in order to meet benchmarks of the World Bank’s Women, Business and Law report.

Besides, the bill stresses the need to simplify the requirement to deposit subscription money in a bank account within 30 days of incorporation and report the same to the registrar along with the certificate from practicing CA or CMA verifying receipt of money.

Source: Pro Pakistani