Under the proposed provision, the creation, issuance, transfer or exchange of a security or the making or delivery of an instrument of transfer under a confirmed plan, shall not be taxed under any law. Secondly, an amount, which is written off under a confirmed plan, shall not be taxable under any law, which provides for such amount being treated as a taxable gain to the debtor. As a result of special tax provisions (section 61), the proposed CRA has given exemption to taxable gains arising to any debtor, sources said.
Under the proposed law, the Chairman of the Securities and Exchange Commission of Pakistan (SECP) and the Governor of the State Bank of Pakistan (SBP) would appoint members of the Technical Assistance Committee. The court shall refer all plans and may either on its own motion or on the request of an interested party refer any question to the Technical Assistance Committee for submitting report on determination of liability of secured creditors and other issues specified in the relevant provision.
The proposed CRA has also defined the voluntary and involuntary cases. A voluntary case is initiated when a debtor files a petition before the court seeking an order of relief against itself. An involuntary case may only be commenced against a debtor by one or more entities by filing a petition seeking an order of relief before the court as per conditions specified in this provision.
The proposed law has also issued procedure on the dismissal of a case and power and duties of an administrator. According to proposed section 18 (mediation), the mediator shall assist all interested parties in trying to reach consensus on a plan of rehabilitation which meets the requirements of this Act. He would also perform other functions as mentioned in the proposed CRA.
Under section 62 of the proposed CRA, there shall be establish a Board to be known as the Corporate Rehabilitation Board. The Board shall be a body corporate with perpetual succession and a common seal and may sue or be sued in its own name and subject to and for the purposes of this Act, may enter into contracts and may acquire, purchase, take, hold and enjoy moveable and immovable property of every description and may convey, assign, surrender, yield up, charge, demise, reassign, transfer or otherwise dispose of or deal with any moveable and immovable property or any interest vested in it, upon which terms and conditions as it deems fit.
Meanwhile, a press release of the SECP issued on Tuesday stated: The members of the 'Committee to review Corporate Rehabilitation Act (CRA)' along with its Chairman Salman Ali Shaikh met Mr Shaukat Tarin, Federal Minister for Finance on Monday at Ministry of Finance Islamabad, to present him the draft CRA. Salman Ali Shaikh, Chairman SECP as Chairman of the Committee presented the draft law to the Federal Minister on behalf of the committee members.
The initial draft of CRA was prepared back in 2004, after considering a number of corporate rehabilitation models world-wide and was ratified by the Banking Law Review Commission. Salman Ali Shaikh, Chairman SECP extensively worked on the initial draft Act along with a senior lawyer Mr Feisal Naqvi and thereafter the draft proposed law was presented to the Government of Pakistan some five years ago.
On January 31, 2009 the Ministry of Finance constituted a committee, headed by Salman Ali Shaikh, Chairman SECP, to review and finalise the pending draft CRA. The Committee had been mandated to update and modify the draft law (CRA) in the light of developments that have taken place in the last half decade.
In the meeting held on 16 November 2009 at the Ministry of Finance, Shaukat Tarin commended the committee members for their support in the review of draft Corporate Rehabilitation Act. On the occasion, Salman Ali Shaikh informed that several meetings of the review committee were held for removal of economic and legal impediments. During these meetings the representatives of the affected industries and sector specialists were also invited to share their views on the draft CRA and to discuss the issues pertaining to rehabilitation and insolvency of the distress industries.
Further, to cover a wider universe of stakeholders, copies of the draft law were sent to more than 80 individuals for their views and suggestion on the draft CRA. Separate meetings were also held with Pakistan Banks Association to take them on board. While reviewing the draft act the committee considered the current international best practices and models in insolvency systems and risk management.
It is expected that the proposed law will modernise the current insolvency regime with striking a balance between creditor rights and the needs of debtors by providing workable options other than liquidation.
THE MEMBERS: The members of the committee include: Salman Ali Shaikh, Chairman SECP as Chairman of the Committee; Sultan Mazhar Sher, Director (Law) as secretary to the Committee, Mr Anwar Saifullah, co-chairman Saif Group; SECP; Raja Akhlaq Hussain, Additional Draftsman, Law & Justice Division; Muneeb Zia, Legal Expert, Finance Division; Inayat Hussain, Executive Director, State Bank of Pakistan (SBP); Feisal Naqvi, Advocate; Tariq Mehmood, Chairman All Pakistan Textile Mills Association (Aptma); Zubyr Soomro, Ex-MD & Pakistan Country Officer, Citibank Pakistan; Sikandar Mustafa Khan, Chairman, Millat Group of Companies; Tasleemuddin A Batlay, Director, Colgate Palmolive Pakistan Limited; Ali Munir, Senior Executive Vice President MCB Bank (Representative of Pakistan Bank's Association); R A Chughtai, President SME Bank and Shabbar Zaidi, Senior Partner A F Ferguson & Co. Mehmood Mandviwala assisted as the legal counsel to the Pakistan Banks Association, the SECP added.