The Companies Act, 2017
President Mamnoon Hussain has finally signed the Companies Act, 2017 that replaces the Companies Ordinance, 1984. This law is being appreciated by all relevant circles and is said to facilitate the growth of the economy and the corporate sector. This law is also being rejoiced for being “one of the most significant legal reforms in the country” and “bringing the company law at par with global standards.”[i] The law is said to be a well debated, comprehensive and exhaustive piece of legislation which has taken “over twelve years” to formulate [ii].
The need for an entirely new law arose because of the massive changes in the way businesses are conducted today than they were some 30 years ago. Our financial markets have become much more mature, even though the debt market is yet to make a footing, with the stock market capitalization reaching Rs 10 trillion [iii] as compared to only Rs 2 trillion in 2008 [iv], and the KSE index rising from a mere 538.89 in the year 1990 to 52,876 in the year 2017 [v]. Moreover, the changing corporate environment can also be witnessed from the efforts of developing a futures market in Pakistan with the passage of Futures Market Act 2016. Also, the global use of information technology, opening new doors of opportunities, along with new sophisticated ways of corruption and money laundering might be another reason to revamp corporate law. The final nail in the coffin for the Companies Ordinance might be the corruption scandals and Panamagate engulfing big national and international names, exposing the shortfalls of the existing corporate law structure.
The Preamble of the Act states that the objectives of this law are, among others, “facilitating corporatization”, “promoting development of corporate sector” and “encouraging use of technology and electronic means in conduct of business and regulation thereof”. The Act has 515 sections divided into 13 parts and has 8 schedules.
Along with other changes, the use of technology, being one of the objectives of the law, has been allowed and encouraged. Technology can now be used for service of documents, e-voting and postal balloting, delivery of notices through electronic mail, etc. Some changings in the procedure of compliance, the mode of audits, the issue of shares, and amending the Articles and Memorandum of Association have also been made. A thorough examination of the existing and previous law is required to make the differences more clear. At this stage, we hope that all optimism emanating from the passage of this law is materialised in the near future.
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