According to sources, under the proposed Modarba Bill 2017, the federal government shall have the powers to notify NAB or FIA or any other agency to take cognizance of misuse of word modaraba; notify any court other than Session Court for criminal offences and make Rules for the purposes of this Act.
The significant changes/new concepts proposed in the Modaraba Bill, 2017 included new Definitions of financial statements [section.2(1)(vii)] - in line with new Company Law, promoter [s.2(1)(xv)] - in line with new Company Law, shariah advisor [s.2(1)(xix)] and Shariah Board [s.2(1)(xx)].
The proposed Modaraba Bill, 2017 has vested powers of the Registrar to the Commission, vested some of the powers of the Federal Government to the concerned Minister-in-charge, [grant exemptions (s.52), removal of difficulty (s.62)].
Under the proposed Modaraba Bill, 2017, the SECP has introduced new provision to curb the misuse of word "modaraba"; prohibition on any entity or person on use of word "modaraba" as a part of its name or prohibition on inviting or collecting deposit or raise funds from general public by use of the word "modaraba or musharakah", contravention shall be a criminal offence - punishment up to seven years and fine up to Rs 100 million and additional fine for the substantial loss caused to any person, up to Rs 100 million or twice the amount of loss whichever is higher.
Under the proposed Bill, the cognizance to be taken by NAB or FIA or any other agency notified by FG as an investigation and prosecution agency. The commission shall also have power to refer the matter to the notified agency. Requirement of NOC for incorporation of modaraba management company (MMC"), performance based remuneration (share of profit) of MMC and introduction of the concept of unlisted Modaraba under the proposed Bill.
The new Bill has introduced an enabling provision for prescribing Shariah compliance and Shariah audit requirements and replaced the existing Religious Board with Shari''ah Board which will be constituted by the Commission. The new law has ensured mandatory appointment of a Shari''ah Advisor by a Modaraba. It has empowered certificate holders and introduced the concept of AGM of certificate holders like in the company.
As per proposed law ie Modaraba Bill, 2017, the auditor to be appointed by the certificate holders like in the company and there would be certificate holders'' right to apply for the change of MMC (s.30) - % to be specified. Moreover, Certificate holders'' right to apply for the change of CEO/Director and certificate holders'' right to apply for the appointment of administrator.
It has introduced the concept of voluntary winding up of a Modaraba by the certificate holders in the manner provided under the Company Law. It has placed a bar on MMC to undertake any other business without the approval of the Commission.
The proposed Modaraba Bill, 2017 has introduced the concept of Fit and Proper Criteria for CEO, directors and key executives, bar on shareholders of MMC on obtaining facility/loan from the Modaraba or use its assets as security and power of the Commission to specify limits of holding of Modaraba Certificates by MMC and holding period and concept of voluntary de-registration of MMC.
Under the proposed law, there would be mandatory requirement to use model financing agreements approved by Shariah Board; voluntary change of MMC; filing of Financial statements before AGM in line with the company law; de-regulation and powers of the Registrar to approve the appointment of auditor given to the certificate holders.
The new law has empowered the SECP for enforcement action by the Commission including powers to monitor the business activities; powers to call for information, powers of Commission to monitor the business activities of a modaraba through onsite and offsite inspection and to issue necessary direction. All the powers to carry out inspection, enquiry and conduct investigation under SECP Act, shall apply including the powers of IO and powers to remove the chief executive, director or key executives and bar on winding up petition by MMC - only with the approval of the Commission and additional grounds to initiate winding up of a Modaraba by Court.
For Merger of a Modaraba, under the proposed law there would be NOC from the Commission to ensure merger in a Shariah compliant entity, destruction of documents required in inspection or investigation and provision for resolution of disputes through mediation (s.41) - in line with the company law.
There is rationalization of penalties under proposed law ie maximum amount increased from Rs 100,000 to Rs 100 million for individuals and Rs 200 million for MMC. There is also a provision and the penalties for false statement, falsification, forgery, fraud and deception as provided under the company law made applicable, sources added.
Copyright Business Recorder, 2017