Senior officials of the Securities and Exchange Commission of Pakistan (SECP) informed the committee here on Wednesday that the SECP has taken a major step for ease of doing business of the corporate sector by proposing that companies having paid up capital of 7.5 million and above shall be required to appoint Legal Advisors.
They said that the present provisions of the law are unique in Pakistan. The commission has proposed amendments to the Legal Advisors Act back in 2002 with the aim to save the small size companies from financial burden. It has been proposed that the companies having paid up capital of more than Rs 7.5 million will be required to appoint legal advisors.
At present, the companies registered with the SECP stood at 71,705. The impact of the proposed amendments on companies revealed that where paid up capital is greater than or equal to Rs 500,000, 36,680 companies would be covered under the said threshold. Where paid up capital is greater than or equal to 7500,000, companies covered would stand at 10,795. Therefore, the total number of companies which will be required to appoint legal advisors will be reduced from 36,680 to 10,795 as a result of new amendment.
The SECP has filed around 2,000 criminal petitions against companies in courts, which had violated the said law by not appointing legal advisors. The proposed law would also benefit the companies against whom criminal petitions have been filed, they said.
The SECP officials said that the process of taking cognisance as prescribed in the existing law is very lengthy, time consuming and expensive as the commission has to file prosecution against the companies which do not appoint legal advisors. The number of default cases is in thousands and the present process is creating difficulties for the commission in enforcement of law. Therefore, in order to keep the law updated with the present day requirements and conditions and corporate business operation, the amendments have been proposed by the SECP to achieve the desired objectives.
The SECP has also proposed that an advocate of the High Court be eligible to be appointed as legal advisor. It has been proposed to empower the commission to impose penalty for contravention of the provisions of the Act. The commission has also proposed to empower the SECP to impose penalty for contravention of the provisions of the Act. It has been proposed that if a person submits false statement in any return, prosecution will be filed against that person before the court.
Officials said that the Ministry of Law had also proposed certain amendments in the Legal Advisors Act by introducing a separate/independent Bill in 2008. The Bill introduced by MOL primarily focused on increase of retainer fee from Rs 1200 to Rs 5000. They said that Companies (Appointment of Legal Advisors) Act, 1974 was promulgated in year 1974 which require certain class of companies to appoint legal advisor to advise the company on legal issues. The law was last amended in year 1994 ie twenty two years ago and required a comprehensive review of the provisions contained therein. Therefore, in order to keep the law updated with present day requirements and conditions and corporate business operation, the amendments are being made in pursuance of the following objectives:
Safeguarding the small size companies from financial burden of appointing legal advisor(s) by proposing appropriate amendments in the Legal Advisors Act as any adverse action/ prosecution against the small corporate entities/companies should be discouraging and may ultimately hamper the growth of the corporate sector. Therefore, it has been proposed that the companies having paid up capital of 7.5 million and above shall be required to appoint Legal Advisor;
The present law requires that an advocate can be appointed as legal advisor. As the appointment as a legal advisor requires experience therefore, it has been proposed that an advocate of the High Court be eligible to be appointed as legal advisor. The retainer which is to be paid to legal advisor, at present, is Rs 1200 per mensum which has been proposed to be increased to Rs 5000 per mensum in line with the amendment as proposed by Ministry of Law.
The process of taking cognisance as prescribed in the existing law is very lengthy, time consuming and expensive as the Commission has to file prosecution against the companies who do not appoint legal advisor. The number of default cases is in thousands and the present process is creating difficulties for the Commission in enforcement of the law, officials maintained.
Therefore, it has been proposed to empower the Commission to impose penalty for contravention of the provisions of the Act. Further, it has been proposed that if a person submits false statement in any return, prosecution will be filed against that person before the court.
At present, 204 cases have been filed under Section 7 of the Legal Advisor Act in different jurisdictions across the country, while cases against 1221 non-complaint companies are in the process of filing. Total non-compliant companies are around 5,000/.
In addition, various cases have been filed in courts of laws alleging that the Commission is not taking action against the companies who do not appoint legal advisors. An amendment to this effect has been proposed where under the courts will be able to dispose of the cases in accordance with the amended provision, the SECP added.