According to the PBC, the section 456 (2)(a) of the Companies Act 2017 deals with the real estate companies to seek permission from SECP before public announcement of projects.
Pakistan Business Council observed that the said provision requires companies to obtain approval from the Commission in addition to the already existing requirements from the regulatory authorities that oversee property developments. The approval of the Commission to carry on real estate projects when approval/NOC is already mandated from provincial authorities such as the Sindh Building Control Authority is an unnecessary duplication which should be avoided.
It is also not equitable to require incorporated real estate companies to seek this permission when those operating in the real estate sector through partnerships. This is another example of discriminating against the corporate sector, the PBC maintained. The SECP agreed to withdraw this section and stated that they planned on recommending a Real Estate Regulatory Authority instead, which would oversee such matters, sources added.
The section 55 of the Companies Act 2017 deals with the powers of SECP to search or seize records and freeze bank accounts without seeking a magistrate''s order.
The PBC observed that the registrar, inspector or investigation officer can now enter and search the place to freeze, seize or take possession of the document, object, article, material, thing, account books, movable or immovable property after taking permission from anyone of the commissioners without warrant. The PBC believes that such action should only be allowed after obtaining permission of a magistrate of first class or a court; otherwise, this power could be misused.
The SECP desires to retain this power but make it subject to approval of all commissioners instead of a single commissioner. This should reduce the risk of victimisation, sources added. The section 279 of the Companies Act is related to the power of court given to the Commission. The PBC said that all the powers and jurisdiction over compromises, arrangements and reconstruction, including over the schemes of arrangements, have been taken over from the respective high courts and given to the Commission.
It has been an established principle that this power was exercised by the courts not only for the reasons of establishing a just and independent jurisdiction over the schemes but also due to practicality, as it is the courts which have powers over all other laws (federal and provincial) to settle the matters related to schemes and issuing orders for its execution.
Instead of easing up the process, this jurisdiction transfer shall only make it more difficult for the execution of the schemes, with every scheme invariably expected to land in courts anyway. In light of the above, PBC believes that this jurisdiction should remain with judicial courts which are independent of the regulator. Further, invariably schemes of arrangements require reduction of share capital for which the jurisdiction still rests with the court.
The outcome of discussions with the SECP revealed that the SECP had intended to make this provision only for small company mergers. Inadvertently the wording failed to reflect this. In the revised section any stakeholder (even a small company) would be able to opt to have such maters adjudicated by a court. They referred to SRO 840(I)/2017 already issued under which powers in respect of public interest companies, large-sized companies and medium-sized companies classified under the Third Schedule would rest with the Company Bench of the high court having jurisdiction.