Cognizant of the importance of "Ease of Doing Business': the government of Pakistan prepared a National Doing Business Reform Strategy in 2016 to improve the investment climate and to create conducive business environment. It is being implemented both at national and provincial levels. The Securities and Exchange Commission of Pakistan (SECP) is the lead agency for business registration. In pursuance of the above-mentioned strategy, the SECP taken a host of reform measures, which have resulted in a robust corporate growth in the country, leading to formalization of the business sector and documentation of economy.
The landmark reform in this regard is the passage of Companies Bill, 2017, by parliament, which is aimed at ease of starting and doing businesses by simplifying registration and post-incorporation compliance. After the promulgation of the law, the procedure for company incorporation and alteration of memorandum of association will be simplified. The single member and private limited companies with a paid-up capital up to Rs 1 million would not be required to conduct audit of financial statements, filing of annual returns, appointment of company secretary.
The concept of inactive company has been introduced, which will provide flexibility to owners to keep the company alive with no compliance requirements during the inactive period. The concept of decision by circular resolution has been introduced for ease of operation of companies. Alternative dispute resolution mechanism has been provided in the law, assisting companies to use these forums without paying hefty legal fees in lesser time. Amalgamations and mergers have been made easier by allowing the amalgamation of wholly owned subsidiaries in holding company without the SECP's formal approval.
Companies will be able to appoint an additional director in midterm in case of change in ownership structure. The filing of returns by companies has been relaxed and acceptance of documents after prescribed period is allowed. Further, the concept of companies with specified business activities has been introduced ie Shariah Complaint Company, Free Zone Company, Agriculture Promotion Company. All companies will be able to utilize technology and conduct meeting through video conference, file electronic documents and maintain books of accounts and statutory records in electronic form.
In addition to the amendments for ease of doing business being introduced through the Companies Bill, 2017, the SECP has revamped operations at its three major company registration offices (CROs) located in Islamabad, Lahore and Karachi to further promote corporatization in the country. Incorporation and Facilitation Desks have been established at these CROs, which ensure incorporation of companies on same day under the Swift Incorporation Scheme.
There has been drastic reduction in the fee for the incorporation of company and filing of returns. The SECP has introduced business-friendly measure through provision of free of cost certified true copies of company formation documents. These copies are normally required to open a company's bank account a prerequisite for business start-up and for obtaining registration with other authorities.
The cumbersome procedure of obtaining digital signatures has been simplified and the cost has been decreased to Rs 100 instead of Rs 1,500 per user which is not payable at the time of registration.
The SECP has also expanded its outreach by establishing a CROs in Gilgit Baltistan, which has facilitated the business activities in the region. Furthermore, a memorandum of understanding has already been signed for establishing a facilitation centre in Gwadar. A CRO at Sialkot would also be established.
The Companies (Appointment of Legal Advisers) (Amendment) Act, 2017, has been promulgated and the threshold of the paid-up capital for companies to have a legal adviser has been increased from over Rs 500,000 to over Rs 7.5 million. Consequently, around 30,000 companies have been relieved from this regulatory burden.
The Virtual One Stop Shop (VOSS) comprising of the SECP, FBR and EBI has been revamped and during March-Apr 2017, 446 companies were allotted NTN through VOSS. The SECP has signed MOU with Punjab Information Technology Board to provide one stop solution for business registration. In addition, it is in the process of revamping its online system, eServices, for company registration and post-incorporation requirements. The revamped system will be user friendly and will encourage users to utilize online incorporation, reducing turnaround time for company registration.
The Limited Liability Partnership Act, 2017, has been enacted on 3rd May, 2017. The introduction of LLP as a new business vehicle will act as a step towards documentation of economy, contributing to conversion of informal, undocumented sector into a formal and regulated regime. In order to facilitate corporatization, the eServices is being revamped so that a user-friendly system is available 24/7 to all stakeholders.
Based on the reform measures in the last couple of years, the country's ranking in the doing business indicator has improved. In the recently released World Bank Doing Business Report, 2017, Pakistan has been named as one of top ten countries classified as most improved economies in 2015-16. Overall doing-business ranking has improved by four points from 148 to 144, and Distance to Frontier score has improved by 2.29% points. In the starting-a-business indicator, Pakistan has a ranking of 141 and stands favourably against India, which has been ranked at 155. As a result of reform measure taken during the year 2015-16, the total number of days to start a business has decreased by one from 19 in 2016 to 18 in 2017, and the total cost as percentage of per capita income has decreased from 13.9% to 12.4%.
The writer/s Executive Director at The Securities and Exchange Commission of Pakistan.