One such measure was the announcement of the Securities and Exchange Commission of Pakistan (SECP) on 10th March, 2004, to re-launch the Companies Easy Exit Scheme (CEES), purportedly for providing another opportunity to dormant companies to get themselves de-registered.
The decision, according to the SECP, had been taken in view of the feedback received from the corporate sector on its initial launching in 2002.
The scheme shall now remain operative up to the end of June, 2004 and may be availed of by dormant private limited companies, non-listed public companies and companies limited by guarantee, which have no business operations, assets or liabilities.
The procedure for utilising the facility has been spelt out in detail by the SECP. It requires that an application should be supported by a resolution passed by the Board of Directors or shareholders of the company and an affidavit administered before the Oath Commissioner confirming the position stated therein.
It would also affirm that the company has no liabilities outstanding in relation to any loans obtained from banks or other financial institutions, taxes, utility charges or any obligations towards government departments or private parties.
The declaration shall be furnished by a director, preferably chief executive of the company.
The company shall also produce a certificate from a practising Chartered Accountant, which shall confirm the position of its liabilities, if any.
After completing all formalities, the Regional Registrar shall initially publish the notices in the official gazette inviting objections on the application and for public information.
Although private sector companies, non-listed public companies and companies limited by guarantee fulfilling certain conditions, could benefit from the scheme re-launched by the SECP, the intended objective, in our view, could have been achieved through other innovative ways which would have been more suitable to the situation prevailing in Pakistan.
The developed countries devise and emphasise exit strategies for business and industry partly because there is no shortage of entrepreneurial skills and their productive capacities are already at an advanced stage of development.
A vacuum created in certain sectors could easily and promptly be filled through restructuring or induction of fresh blood.
Objective conditions in Pakistan, as is well known, are entirely different. Investment is low and there is lack of dynamism in the private sector.
It would have been far better, therefore, if the SECP had devised an alternative plan to serve the same purpose by maintaining a separate register for dormant companies and offer them, if they so desired, to enlist themselves therein so that they could activate their business and rejoin the mainstream at some future date without any fuss. The SECP, if it so wanted, could make such a provision even now.
We are suggesting this course for certain valid reasons. Obviously, if the companies meet the conditions as laid down by the SECP under CEES, they are posing no risks or problems to the system or other entities engaged in some economic activity.
As such, their existence or complete withdrawal from the system would hardly make any difference.
On the other hand, separate registration could bring a great relief to the companies which are now dormant for some reasons but would need to re-enter the field in future.
These companies would not be required once again to undergo tough procedures like sales tax registration and other formalities such as licences, peculiar to the nature of their business as prescribed by the government, which could be very cumbersome, costly and time consuming in Pakistan.
Because of lengthy procedures and corrupt practices, many investors and businessmen are already looking for greener pastures elsewhere and they need to be encouraged and facilitated at all costs and fortunately the suggested alternative involves no costs.
It needs to be reiterated that exit and re-entry into business by companies and individuals is a normal practice the world over and should not be a matter of great concern if these companies do not indulge in unhealthy practices and cause no great harm to the system.
It may also be pointed out that possibility of trade and business fluctuations is greater in a country like Pakistan which is predominantly agricultural and where government policies change so often.
It would be useful to provide maximum incentives to dormant companies to enable them to re-enter the field and serve the country.
It also needs to be noted that the main features of CEES were already incorporated in the Companies Ordinance, 1984 under the section on "removal of defunct companies from register" except that under the previous regulations the registrar had to initiate the proceedings for de-registration and it was left to his discretion.
The purpose of launching and re-launching of CEES is difficult to comprehend if it was not meant to be a big improvement over the old arrangement for the benefit of business and industry.