Pakistan

4 Chapter Corporate Law

    • INTRODUCTION

      Pakistan ranks 138th out of all countries in the ease of doing business ranking by World Bank. Nonetheless, according to Pakistani officials, Pakistan is well placed to achieve rapid investment-led economic growth. 
       
      With 200 million people and 60 million middle-class consumers, Pakistan is a rapidly growing emerging market and has a large trainable workforce, then also a rising domestic consumption, 
      Its infrastructure requirements give Pakistan considerable need for capital investment.
       
      There is said to be minimal restrictions on foreign ownership and lower corporate tax rates and tax incentives. 
       
      There are opportunities in undervalued assets and companies, privatisation initiatives, infrastructure-related investment projects and export potential. 
       
      Consumer goods production is also a potentially large-growth sector that is being held back. The cause of it may be due to the issues in local financing for small and medium enterprises. 
       
      Food processing is said to be an underutilised investment sector. Financing and latest technologies is said to be a major obstacle.
       
      Pakistan’s agricultural production has the potential to expand. The highest growth can come from providing adequate credit, technologies and insurance coverage to small- and medium-sized farming.
       
      Housing needs are huge with the middle- and low-income housing market being potentially much larger pending a widely available mortgage finance system.
       
      Health and Education is also lucrative higher income markets and space to expand with innovations for the lower-income groups, especially partnership with the government and not-for-profits. has also proved profitable for perceptive investors and operators. 
      The IT sector has developed, with the country having vast untapped talent.
       
      Nonetheless, tax revenues need to be doubled from the present 9pc of GDP. Endemic corruption needs to be eliminated.
       
      Being a “frontier” market it’s less developed, less liquid, and less stable than even the emerging markets. Nonetheless, the country can “graduate” to such status as Qatar and the United Arab Emirates did last year. This is where Brazil and China were in the 1990s.
       
      The labor force is young, has a large population, though the economy is small, the stock market capitalized at $46 billion. Stocks tend to move independently with the US market in frontier markets.  The country has a number of projects with China. Some sources say that the security situation in the country is unstable.
       
      According to the World Bank, Pakistan has important strategic endowments and development potential. The country is located at the crossroads of South Asia, Central Asia, China and the Middle East and is thus at the fulcrum of a regional market with a vast population, large and diverse resources, and untapped potential for trade.
       
      Helped by cheap international oil prices and steady implementation of its reforms program, economic conditions have improved. The improved economic growth prospects has led rating agencies (Moody’s, S&P) to improve their outlook for Pakistan over the past year. Growth is slowly recovering supported by a favorable slump in international oil prices and fast-growing remittances, with GDP growth accelerating to 4.2 percent in FY15 and expected to pick-up to 4.5 percent in FY16.
       
      Economic growth is showing signs of sustained recovery aided by falling commodity and fuel prices, increased energy availability and improved security conditions. Preliminary data for the first half of FY2016 show industrial growth accelerating on the back of higher activity in large-scale manufacturing and construction, the latter being driven primarily by initiation of China Pakistan Economic Corridor (CPEC) infrastructure and energy projects.The improved industrial performance is expected to compensate, to some extent, the weather setbacks observed in the agriculture sector. Moreover, services sector is expected to also grow led by the financial sector, substantial automobile retail sales, increased port activity, and higher telecom profits; although wholesale and retail trade is yet to improve.
       
      Despite some gains Pakistan’s low human development indicators undermine its labor force productivity and economic growth. Pakistan ranks 147 out of 188 countries in the 2015 Human Development Index (HDI) Access to education remains low and completion rate for primary education is among the lowest in the world. 
       
      Health outcomes have improved but at a slow pace The 2011 National Nutrition Survey estimated that the rates of child stunting have not changed since 1965 with 45% of children being stunted, 16% of Pakistani children under 5 suffer from acute malnutrition.
       
      According to official statistics, Pakistan has made substantial progress in reducing poverty. The Government of Pakistan has recently adopted a revised poverty line. Using the revised poverty line, the headcount poverty rate has declined from 64.3 percent in FY01/02 to 29.5 percent in FY13/14.  
       
      However, the drivers of this process are not well understood. Large remittances, concentrated among relatively poor households, are a vital source, but growing ‘hidden’ urbanization and a burgeoning informal sector could be equally important.

    • BUSINESS ENTITIES

      A. Company limited by shares
      B. Company limited by guarantee
      C. Unlimited company
      D. Private Limited Liability Company
      E. Private Limited Company
      F.  Public Company
      G. Listed Company
      H. Unlisted Company
      I.   Joint Stock Company
      J.  Representative Office (Liaison Office)
      K. Branch Office

    • BUSINESS LAWS

      ■ Companies Ordinance of 1984
      Is an ordinance to consolidate and amend the law relating to companies and certain other associations for the purpose of healthy growth of the corporate enterprises, protection of investors and creditors, promotion of investment and development of economy and matters arising out of or connected therewith. The ordinance is for whole Pakistan.
       
      A company is a corporation. In the eye of law, it is a person which is different from its members. As company is person in the eye of law, it can own property. It can have rights and it can also be subject to the liabilities. A company is not agent of its members. The company cannot sue the members in case of liabilities and members of the company cannot sue it to enforce rights.
       
      1.    Relevant statute:
      · PRIVATE COMPANY -Private company has following restriction while these restrictions does not apply to other companies.
      (1) It cannot have members more than 50 excluding those are the employees of the company
      (2) It cannot invite the general public to subscribe the share of the company
      (3) It restricts freely transfer of share
       
      PUBLIC COMPANY - Companies Ordinance define the public company as a company that is not a private company. It means every company that is registered in Pakistan either it is a private company or a public company.
      The Ordinance also provides legal protection and regulates the business community of Pakistan, with the SECP keeping a close check on financial and corporate entities to insure stakeholder’s interest.
      (6) The purchase of shares shall be made within a period as specified in the regulations.
      (7) The proposal of the board of directors to purchase shares shall, on conclusion of the board's meeting be communicated to the Commission and to the stock exchange on which shares of the company are listed.
      (8) The purchase of shares shall always be made in cash and shall be out of the distributable profits or reserves specifically maintained for the purpose.
      (9) The purchase of shares shall be made either through a tender offer or through stock exchange as prescribed by regulations.
      (10) The company may dispose of the treasury shares as prescribed by regulations.
      (l l) Where a purchase of shares has been made under this section, the company shall maintain a register of shares so purchased and enter therein the following particulars, namely:- number of shares purchased; consideration paid for the shares purchased; mode of the purchase; the date of cancellation or re-issuance of such shares; number of bonus shares issued in respect of treasury shares; and number and amount of treasury shares redeemed, if redeemable.
      (12) Whosoever contravenes any provision of this section or any regulations made thereunder which may be specified by notification in the official gazette in this behalf shall be punishable with a fine which may extend to thirty million rupees and shall also be individually and severally liable for any or all losses or damages arising out of such contravention. "
       
      ■Partnership Act of 1932
      THE NATURE OF PARTNERSHIP
      4. Definition of "partnership", "partner", "firm" and "firm name".— “Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are called individually "partners" and collectively "a firm" and the name under which their business is carried on is called the "firm name". 5. Partnership not created by status.— The relation of partnership arises from contract and not from status; And in particular the members of a Hindu undivided family carrying on a family business as such, or a Burmese Buddhist husband and wife carrying on business as such are not partners in such business. 6. Mode of determining existence of partnership.— In determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties as shown by all relevant facts taken together. Explanation 1.- The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property does not of itself make such persons partners. Explanation 2.- The receipt by a person of a share of the profits of a business or of a payment contingent upon the earning of profits or varying with the profits earned by a business, does not of itself make him a partner with the persons carrying on the business; And in particular, the receipt of such share of payment - (a) by a lender of money to persons engaged or about to engage in any business, (b) by a servant or agent as remuneration, (c) by the widow or child of a deceased partner as annuity, or (d) by a previous owner or part owner of the business, as consideration for the sale of the goodwill or share thereof, does not of itself make the receiver a partner with the persons carrying on the business. 6A. Act not apply to certain relationships.— Nothing contained in this act shall apply to a relationship created by any agreement between Banking company and a person or group of persons providing for sharing of profits and losses arising from or relating to the provision by the Banking company of finance to such person or group of persons. Explanation.- for the purpose of this section, “Banking Company” and finance “shall have the same meanings as in the Banking tribunals ordinance, 1981. 7. Partnership at will.— Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership the partnership is "partnership at will". 8. Particular partnership.— A person may become a partner with another person in particular adventures or undertakings. 
       
       
       
      RELATIONS OF PARTNERS TO ONE ANOTHER
      9 General duties of partners.— Partners are bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the firm to any partner or his legal representative. 10. Duty to indemnify for loss caused by fraud.— Every partner shall indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm. 11. Determination of rights and duties of partners by contract between the partners.— (1) Subject to the provisions of this Act, the mutual rights and duties of the partners of a firm may be determined by contract between the partners, and such contract may be expressed or may be implied by a course of dealing.
       
      The property of the firm.— Subject to contract between the partners, the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm, or acquired by purchase or otherwise, by, or for the firm or for the purposes and in the course of the business of the firm, and includes also the goodwill of the business.

      Application of the property of the firm.— Subject to contract between the partners the property of the firm shall be held and used by the partners exclusively for the purposes of the business. 16. Personal Personal profits earned by partners. — Subject to contract between the partners- (a) if a partner derives any profit for himself from any transaction of the firm, or from the use of the property or business connection of the firm or the firm name he shall account for that profit and pay it to the firm; (b) if a partner carries on any business of the same nature as and competing with that of the firm, he shall account for and pay to the firm all profits made by him in that business.
       
      RELATIONS OF PARTNERS TO THIRD PARTIES
      18. Partner to be agent of the firm.— Subject to the provisions of this Act a partner is the agent of the firm for the purposes of the business of the firm. 19. Implied authority of partner as agent of the firm.— (1) Subject to the provisions of section 22,³ the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm
       
      CHAPTER V INCOMING AND OUTGOING PARTNERS
      31. Introduction of a partner.— (1) Subject to contract between the partners and to the provisions of section 30, no person shall be introduced as a partner into a firm without the consent of all the existing partners. (2) Subject to the provisions of section 30, a person who is introduced as a partner into a firm does not thereby become liable for any act of the firm done before he became a partner. 32. Retirement of a partner.—
       
      CHAPTER VI DISSOLUTION OF A FIRM 39. Dissolution of a firm.— The dissolution of partnership between all the partners of a firm is called the "dissolution of the firm". 40. Dissolution by agreement.— A firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners. 41. Compulsory dissolution.— A firm is dissolved - (a) by the adjudication of all the partners or of all the partners but one as insolvent or (b) by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the partners to carry it on in partnership: Provided that, where more than one separate adventure or undertaking is carried on by the firm, the illegality of one or more shall not of itself cause the dissolution of the firm in respect of its lawful adventures and undertakings. 42. Dissolution on the happening of certain contingencies.— Subject to contract between the partners a firm is dissolved- (a) if constituted for a fixed term, by the expiry of that term; (b) if constituted to carry out one or more adventures or undertakings, by the completion thereof; (c) by the death of a partner; and (d) by the adjudication of a partner as an insolvent. 43. Dissolution by notice of partnership-at-will.— (1) Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. (2) The firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice. 44. Dissolution by the Court.— At the suit of a partner, the Court may dissolve a firm
       
      CHAPTER VII REGISTRATION OF FIRMS 56. Power to exempt from application of this Chapter.— The [Provincial Government of any Province may, by notification in the [official Gazette], direct that the provisions of this Chapter shall not apply to [that Province] or to any part thereof specified in the notification. 57. Appointment of Registrars.— (1) The [Provincial Government] may appoint Registrars of Firms for the purposes of this Act, and may define the areas within which they shall exercise their powers and perform their duties. (2) Every Registrar shall be deemed to be a public servant within the meaning of section 21 of the Pakistan Penal code. 58. Application for Registration.
       
       
      “Corporate governance deals with the rights and corporate governance deals with the rights and responsibilities of a company’s management, its board, shareholders and various stakeholders.”
       
      FC "Corporate governance governance is the system by which companies companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders' role in governance is to appoint the directors and the auditors and to satisfy themselves that an app p ro priate governance structure is in place.
       
      Govern 1.To rule by right of authority 2. To direct, guide, control, influence…….. Governance -The exercise of direction, authority and control
       
      Manage 1. To conduct (the day -to -day) business 2. To bring about or succeed in accomplishing a task 3. To administer r and supervise (the functions of management) Management 1. The organizing and controlling of the affairs of a business or a particular sector of a business 2. The act of conducting business; bringing about or succeeding in accomplishing a task.
       
       
       
       
       
       
       
       
       
       
       
       
      E.     subsection (1),‑
       
      (a) after clause (6), the following new clause shall be inserted, namely:‑
      "(6A) "Commission" means the Securities and Exchange Commission of Pakistan established under section 3 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997);" and
      (b) for clause (15A) the following shall be substituted, namely:‑
      "(15A) "financial institution" includes,‑
      (a) a company or an institution whether established under any special enactment and operating within or outside Pakistan which transacts the business of banking or any associated or ancillary business through its branches;


       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      (b) a modaraba, leasing company, investment bank, venture capital company, financing company, housing finance company, a non­-banking finance company: and
      (c) such other institution or companies authorised by law to undertake any similar business, as the Federal Government may, by notification in the official Gazette, specify for the purpose;"
      2.
      15.
      In subsection (1), for the words "seven" and "two" the words "three" and "one", shall, respectively, be substituted.
      3.
      19.
      In subsection (1), for clause (c) the following shall be substituted, namely:‑
      "(c) signed by each subscriber, who shall add his present name in full, his occupation and father's name or, in the case of a married woman or widow, her husband's or deceased husband's name in full, his nationality and his usual residential address and such other particulars as may be prescribed, in the presence of a witness who shall attest the signature and shall likewise add his particulars; and"
      4.
      27.
      For clause (c) the following shall be substituted, namely:­
      "(c) signed by each subscriber, who shall add his present name in full, his occupation and father's name or, in the case of a married woman or widow, her husband's or deceased husband's name in full, his nationality and his usual residential address and such other particulars as may be prescribed, if the presence of a witness who shall attest the signature and shall likewise add his particulars; and"
      5.
      47.
      (a) In the marginal heading for the word "seven" the word "three" shall be substituted;
      (b) after the word "company" occurring for the second time, the words "other than a single member company" shall be inserted; and
      (c) for the word "seven" occurring twice, the word "three" shall be substituted.
      6.
      73.
      In subsection (1),‑
      (a) in clause (a), for the commas and words ", the name, father's name or in the case of a married woman, her husband's or deceased husband's name, address and occupation" the words "and such particulars as may be prescribed" shall be substituted; and
      (b) in clause (c), in sub‑clause (i), for the words and commas "the name, father's name and in the case of a married woman, her husband's or deceased husband's name, address and occupation" the words "such particulars as may be prescribed" shall be substituted.
      7.
      78.
      In subsection (2), for the words "two" and "fifty", the words "twenty" and "one thousand" shall, respectively, be substituted.
      8.
      After section 78, amended as aforesaid, the following new section shall be inserted, namely:‑­


       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      "78‑A. Appeal against refusal for registration of transfer.‑‑‑(1) The transferor or transferee, or the person who gave intimation of the transmission by operation of law, as the case may be, may appeal to the commission against any refusal of the company to register the transfer or transmission, or against any failure on its part, within the period referred to in subsection (1) of section 78 either to register the transfer or transmission or to send notice of its refusal to register the same.
      (2) An appeal to the commission under subsection (1) may be preferred‑‑
      (a) In case the appeal is against the refusal to register a transfer or transmission, within two months of the receipt by him of the notice of refusal; and
      (b) In case the appeal is against the failure referred to in subsection (1) within two months from the expiry of the period referred to in subsection (1) of section 78.
      (3) The commission shall, after causing reasonable notice to be given to the company and also to, the transferor and the transferee or, as the case may require, to the person giving intimation of the transmission by operation of law and the previous owner, if any, and giving them a reasonable opportunity to make their representation, may, by an order in writing, direct either that the transfer or transmission shall be registered by the company or that it need not be registered by it and in the former case, the company shall give effect to the decision within fifteen days of the receipt of the order.
      (4) Before making an order under subsection (3) on an appeal against any refusal of the company to register any transfer or transmission the commission may require the company to disclose to it the reasons for such refusal.
      (5) The Commission may, in. its aforesaid order, give such incidental and consequential directions as to the payment of costs or otherwise as it deems fit.
      (6) If default is made in giving effect to the order of the commission within the period specified in ,subsection (3), every director and officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees, for every day after the first during which the default continues."

      SCHEDULE (9-23)
      9.
      84.
      In subsection (1), in the proviso, in clause (b), the commas and words", not exceeding ten percent., or a higher rate fixed by the Authority," shall be omitted.
      10.
      131.
      (a) In subsection (1), for the word "Court", occurring twice, the word "Commission" shall be substituted;


       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      (b) in subsection (2), for the word "Court" the word "Commission" shall be substituted; and
      (c) in subsection (3), for the word "Court" the word "Commission" shall be substituted.
      11.
      157.
      After subsection (12), the following new subsection shall be added, namely:­
      (13) The provisions of this section shall not apply to a public company which converts itself from a private company after one year of incorporation."
      12.
      158.
      In subsection (1),‑
      (i) for the word "six", the word "four" shall be substituted; and
      (ii) in the proviso, for the word "ninety" the word "sixty" shall be substituted; and
      (b) in subsection (4),‑
      (i) in clause (a), for the words "ten" and "twenty" the words "twenty" and "fifty" shall, respectively, be substituted; and
      (ii) in clause (b), for the words "five" and "two" the words "ten" and "five" shall, respectively, be substituted
      13.
      160.
      (a) In subsection (2),‑
      (i) in clause (a),‑
      (a) after the word "public", the word "listed " shall be inserted;
      (b) for the word "three" the word "ten" shall be substituted; and
      (c) the word "and", at the end, shall be omitted;
      (ii) in clause (b),‑
      (a) for the words "a private" the words "any other" shall be substituted ; and
      (b) for the full stop, at the end the semicolon and word "; and" shall be substituted and thereafter the following new clause shall be added, namely:‑
      "(c) in the case of a single member company, jingle member present in person or by proxy"; and
      (b) in subsection (8),‑ ‑
      (i) in clause (a), for the word "twenty" the word "fifty" shall be substituted; and
      (ii) in clause (b), for the word "five" the word "tin" shall be substituted.


       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      After section 160 amended as aforesaid, the following new section shall be inserted, namely:­
      "160‑A. Circumstances in which proceeding of a general meeting may be declared invalid.‑‑‑The Court may, on a petition by members having not less than ten percent. of the voting power in the company that the proceedings of a general meeting be declared invalid by reason of any material defect or omission in the notice or irregularity in the proceedings of the meeting which prevented members from using effectively their rights, declare such proceedings or part thereof invalid and direct holding of a fresh general meeting:
      Provided that the petition shall be made within thirty days of the impugned meeting."
      15.
      161.
      Subsection (8) shall be omitted.
      16.
      170.
      (a) In the marginal heading, for the word "registrar" the word "Commission" shall be substituted:
      (b) in subsection (1),‑
      (i) for the word "registrar", occurring thrice, the word "Commission" shall be substituted; and
      (ii) for the word "his" the word "its" shall be substituted; and
      (c) in subsection (2), for the word "registrar" the word "Commission" shall be substituted.
      17.
      171.
      (a) In the marginal heading, for the word "registrar" the word "Commission" shall be substituted; and
      (b) for the word "registrar" the word "Commission" shall be substituted.
      18.
      173.
      In subsection (1), after the word and full stop "books" at the end, the following shall be inserted, namely:‑
      "A copy of the minutes of meeting of the Board of Directors shall be furnished to every director within fourteen days of the date of meeting."
      19.
      174.
      For section 174 the following shall be substituted, namely:‑
      "174. Minimum number of directors of a company.‑‑‑(1) Notwithstanding anything contained in any other law for the time being in force,‑
      (a) every single member company shall have at least one director;
      (b) every other private company shall have not less than two directors; and
      (c) every public company other than a listed company shall have not less than .three directors,
      appointed and elected in the manner provided in this Ordinance.
      (2) Every listed company shall have not less than seven directors to be elected in a general meeting in the manner provided in this Ordinance."
       
       
       
       
       
       
      20.
      178.
      After subsection (5), the following new subsection shall be added, namely:­
      "(6) The directors of a company not having share capital shall be elected by members of the company in general meeting in the manner as provided in articles of association of the company.".
      21.
      181.
      In the proviso; for the words "in favour of such a resolution is not less than" the words "against it is equal to or exceeds" shall be substituted.
      22.
      183.
      In clause (a),‑
      (i) the words "by the Pakistan Industrial Credit and Investment Corporation Limited or" shall be omitted; and
      (ii) the words "the said Corporation or" shall be omitted.
      23.
      184.
      (a) For subsection (1) the following shall, be substituted, namely:­

      SCHEDULE (23-36)
       
       
       
       
       
       
       
       
       
       
      23.
      184.
      (a) For subsection (1) the following shall, be substituted, namely:­
      "(1) No person shall be appointed or nominated as a director or chief executive of a company or represent as holding such office, nor shall any person describe or name any other person as a director or proposed director or chief executive or proposed chief executive of any company, unless such person or such other person has given his consent in writing for such appointment or nomination; and
      (b) For subsection (2) the following shall be substituted, namely:­
      "(2) Within fourteen days from the date of appointment or nomination, as the case may be, the company shall file with the registrar a list of persons who have consented to act as director or chief executive of the company alongwith their consent to do so in the prescribed form."
      24.
      187.
      In clause (h), for the full stop, at the end, a semicolon shall be substituted and thereafter the following new clauses, shall be added, namely:­
      "(i) has been declared by a Court of competent jurisdiction as defaulter in repayment of loan to a financial institution, exceeding such amount as may be notified by the Commission from time to time; and
      (j) is member of a Stock Exchange engaged in the business of brokerage, or is a spouse of such member:
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      Provided that clauses (i) and (j) shall be applicable only in case of a listed company."
      25.
      193.
      In subsection (2), for the words "twice in a year" the words "once in each quarter of a year" shall be substituted.
      26.
      195.
      In subsection (6), after the word "sum", the words "with mark‑up not less than the borrowing cost of the lending company" shall be inserted.
      27.
      196.
      (a) In subsection (2),‑
      (i) in clause (i) the word "and", at the end, shall be deleted;
      (ii) in clause (j),
      (a) the words "exceeding two thousand rupees" shall be omitted; and
      (b) for the words "of the value exceeding one hundred thousand rupees" the words "in accordance with the limits as prescribed by the Commission from time to time" shall be substituted; and
      (c) in the proviso, for the full stop at the end, a semi‑colon shall be substituted; and
      (iii) after clause (j), amended as aforesaid, the following new clauses shall be added, namely:‑
      "(k) to undertake obligations under leasing contracts exceeding one million rupees:
      (l) to declare interim dividend; and
      (m) having regard to such amount as may be determined to be material (as construed in the Generally Accepted Accounting Principles) by the Board,
      (i) to write off bad debts, advances and receivables;
      (ii) to write off inventories and other assets of the company; and
      (iii) to determine the terms of and the circumstances in which a law suit may be compromised and a claim or right in favour of a company may be released, extinguished or relinquished", and
      (b) in subsection. (4), for the word "five" the words "one hundred" shall be substituted.
      28.
      After section 204, the following new section shall be inserted, namely:­
      "204‑A. Certain companies to have secretaries.‑‑‑A listed company shall have a whole time secretary and a single member company shall have a secretary possessing such qualifications as may be prescribed."
      29.
      205.
      In subsection (1),‑
      (i) for the words, comma, colon and dash "the following particulars, that is to say:‑ " the words and full stop "such particulars as may be prescribed," shall be substituted; and
      (ii) clauses (a), (b) and (c) shall be omitted.
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      30.
      208.
      For section 208, the following shall be substituted, namely:‑
      "208. Investments in associated Companies and undertakings.‑‑‑ (1) A company shall not make any investment in any of its associated companies or associated undertaking except under the authority of a special resolution which shall indicate the nature, period and amount of investment and terms and conditions attached thereto:
      Provided that the return on investment in the form of loan shall not be less than the borrowing cost of investing company.
      Explanation.‑‑‑The expression 'investment' shall include loans, advances, equity, by whatever name called, or any amount which is not in the nature of normal trade credit.
      (2) No change in the nature of an investment or the terms and conditions attached thereto shall be made except under the authority of a special resolution.
      (3) If default is made in complying with the requirements of this section, every director of a company who is knowingly and wilfully in default shall be liable to fine Which may extend to one million rupees and in addition, the directors shall jointly and severally reimburse to the company any loss sustained by the company in consequence of an investment which was made without complying with the requirements of this section.
      (4) This section shall not apply to‑
      (a) a banking company;
      (b) any other financial institution approved by the Commission;
      (c) a private company which is not subsidiary of a public company; and
      (d) a company whose principal business is the acquisition of shares, stock, debentures or other securities.".
      31.
      224.
      In subsection (2),‑
      (a) for the words "Federal Government" the word "Commission" shall be substituted; and
      for the words "registrar or the Authority" the word "Commission" shall be substituted.
      32.
      230.
      In subsection (7),‑
      (i) in clause (a) for the words "ten", "twenty" and "two" the words "twenty", "fifty" and "five" shall, respectively, be substituted; and
      (ii) in clause (b) for the word "five" the word "ten" shall be substituted.
      33.
      233.
      (a) In subsection (1),‑
      (i) for the word "six" the word "four" shall be substituted, and
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      (ii) in the proviso, for the words "Authority" and "three" the words "Commission" and "two" shall, respectively, be substituted.
      34.
      234.
      (a) In subsection (2), in clause (i), after the words "listed company", the words "and a private and non‑listed public company which is subsidiary of a listed company" shall be inserted;
      (b) in subsection (3),‑
      (i) the comma and words ",in the case of a listed company" shall be omitted;
      (ii) in clause (i), for the word and semi‑colon "Authority:" the words and semi‑colon "Commission; and" shall be substituted;
      (iii) for clause (ii) the following shall be substituted, namely:‑
      "(ii) in case of a listed company,‑
      (a) a statement of changes in equity and cash flow statement shall form part of the balance-­sheet and profit and loss account; and
      (b) accounting policies shall be stated and, where there is any change in such policies, the auditor shall report whether he agrees with the change."; and
      (c) clause (iii) shall be omitted.
      35.
      235.
      (a) In subsection (2) in the proviso, for the full stop, at the end, a colon shall be substituted and thereafter the following proviso shall be added, namely:‑
      "Provided further that incremental depreciation arising out of revaluation of fixed assets may be charged to surplus on revaluation of fixed assets account.";
      (b) for subsection (4) the following shall be substituted, namely:‑
      "(4) After revaluation as aforesaid, depreciation on the assets so revalued shall be provided with reference to the value assigned to such assets before revaluation and surplus on revaluation may be amortized according to life of the assets."
      36.
      236.
      (a) In subsection (4),‑
      (i) in clause (a), for‑ the words "ten", "twenty" and "two" the words "twenty", "fifty" and "five" shall, respectively, be substituted; and
      (ii) in clause (b), for the word "five" the word "ten" shall be substituted; and
      (b) after subsection (4), the following new subsection shall be added, namely:‑
      "(5) The directors of a holding company required to prepare consolidated financial statements under section 237 shall make out and attach to consolidated financial statements, a report with respect to the state of group's affairs and all provisions of subsections (2), (3) and (4) shall apply to such report as if for the word "company" appearing in these subsections the word "holding company" were substituted."
      SCHEDULE (37-46)
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      37.
      237.
      For section 237 the following shall be substituted, namely:­
      "237. Consolidated financial statements. (1) There shall be attached to the financial statements of a holding company having a subsidiary or subsidiaries, at the end of the financial year at which the holding company's financial statements are made out, consolidated financial statements of the group presented as those of a single enterprise and such consolidated financial statements shall comply with the disclosure requirement of the Fourth Schedule and International Accounting Standards notified under subsection (3) of section 234.
      (2) Where the financial year of a subsidiary precedes the day on which the holding company's financial year ends by more than three months, such subsidiary shall make an interim closing on the day on which the holding company's financial year ends, and prepare financial statements for consolidation purposes.
      (3) Every auditor of a holding company appointed under section 252 shall also report on consolidated financial statements and exercise all such powers and duties as are vested in him under section‑ 255.
      (4) All interim financial statements of a subsidiary as required under subsection (3) shall be reviewed by the auditors of that subsidiary appointed under section 252 who shall report on such financial statements in the prescribed form.
      (5) There shall be disclosed in the consolidated financial statements,‑
      (a) any qualifications contained in the auditors' reports on the accounts of subsidiary or subsidiaries for the financial year ending with or during the financial year of the holding company; and
      (b) any note or saving contained in such accounts to call attention to a matter which, apart from the note or saving, would properly have been referred to in such a qualification, in so far the matter which is the subject of the qualification or note is not covered by the holding company's own accounts and is material from the point of view of its members.
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      (6) Every consolidated financial statement shall be signed by the same persons by whom the individual balance sheet and the profit and loss account or income and expenditure account of the holding company are required to be signed under section 241.
      (7) All provisions of sections 233, 242, 243, 244 and 245 shall apply to a holding company required to prepare consolidated financial statements under this section as if for the word "company" appearing in these sections, the words "holding company" were substituted.
      (8) The Commission may, on an application or with the consent of the directors of holding company, direct that in relation to any subsidiary, the provisions of this section shall not apply to such extent only as may be specified in the direction.
      (9) If a holding company fails to comply with any requirement of this section, every officer of the holding company shall be punishable with fine which may extend to fifty thousand rupees in respect of each offence unless he shows that he took all reasonable steps for securing compliance by the holding company of such requirements and that the non‑compliance or default on his part was not wilful and intentional."
      38.
      In subsection (1), for the words "five" and "three" the words "three" and "two" shall, respectively, be substituted.
      39.
      245.
      (a) In the marginal heading, for the words "Half‑yearly" the word "Quarterly" shall be substituted; and
      (b) in subsection (1),‑
      (i) in clause (a), for the words "two months", "first half and "half‑year" the words "one m month", "first, second and third quarter" and "quarter" shall, respectively, be substituted; and
      (ii) in clause (b), for the words "half‑yearly" the word "quarterly" shall be substituted.
      40.
      252.
      (a) In subsection (1), for the full stop, at the end, a colon shall be substituted and thereafter the following proviso shall be added, namely:­
      "Provided that an, auditor or auditors appointed in a general meeting may be removed before conclusion of the next annual general meeting through a special resolution.";
      (b) in subsection (3), in the proviso, in clause (b), for the full stop, at the end, a colon shall be substituted and thereafter the following new proviso shall be added, namely:­
      "Provided further that the auditors appointed in annual general meeting shall not be removed during their tenure except through a special resolution."; and
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      (c) in subsection (6), for the word "Authority" the words and comma "or where auditors are removed by the company, the Commission" shall be substituted.
      41.
      254.
      In subsection (3),‑
      (i) in clause (d), the word "and" shall be omitted;
      (ii) in clause (e), for the full stop at the end, the semi‑colon and word "; and" shall be substituted; and
      (iii) after clause (e), amended as aforesaid, the following new clause shall be added, namely:‑
      "(f) a person or his spouse or minor children, or in case of a firm, all partners of such firm who holds any shares of an audit client or any of its associated companies:
      Provided that if such a person holds shares prior to his appointment as auditor, whether as an individual or a partner in a firm the fact shall be disclosed on his appointment as auditor and such person shall disinvest such shares within ninety days of such appointment."
      42.
      259.
      For the words "two thousand rupees" the words "fifty thousand rupees and in the case of continuing default to a further fine which may extend to two thousand rupees for every day after the first during which the default continues" shall be substituted.
      43.
      260.
      (a) In subsection (1), for the word "two" the words "one hundred" shall be substituted; and
      (b) in subsection (2), for words "six months" and "two" the words "one year" and "one hundred" shall, respectively, be substituted.
      44.
      305.
      (a) In clause (g), the word "or", at the end, shall be omitted;
      (b) in clause (h), for the full stop, at the end, the semi‑colon and word "; or" shall be substituted; and
      (c) after clause (h) amended as aforesaid, the following new clause shall be added, namely:­
      "(i) if the company ceases to have a member."
      45.
      321.
      In subsection (2), for the full stop, at the end, a colon shall be substituted and thereafter the following proviso shall be added, namely:­
      "Provided that no person shall be appointed as liquidator of more than three companies at one point of time."
      46.
      323.
      After subsection (4), the following new subsection shall be added, namely:­
      "(5) No remuneration shall be payable to an official liquidator who fails to complete the winding‑up proceedings within the prescribed period.".
      SCHEDULE (47-57)
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      47.
      364.
      After subsection (7), the following new subsection shall be added, namely;­
      "(8) No remuneration shall be payable to a liquidator who fails to complete the winding up proceedings within the prescribed period."
      48.
      470.
      (a) In subsection (1), the words "or such smaller fees" shaft be omitted; and
      (b) in subsection (2), for the words "Federal Government" the word "Commission" shall be substituted.
      49.
      474.
      In subsection (1) in clause (a), after the word "the", the words "Commission or the" shall be inserted.
      50.
      476.
      For subsection (1) the following shall be substituted, namely:­
      "(1) Where a fine (other than a fine in addition to, or in lieu of, imprisonment) is provided for any offence, contravention of, or default
      in complying with, any of the provisions of this Ordinance or a directive of the Commission or the registrar or other authority empowered to issue a directive under any provision of this Ordinance, it shall be adjudged and imposed:‑
      (a) where the maximum initial fine provided is less than ten thousand rupees, whether or not there is fine for continuing default, by the officer who is in charge of the registration office in which the company is registered:
      Provided that the Commission and the Registrar shall have concurrent jurisdiction under this clause;
      (b) where the maximum fine provided is ten thousand rupees or more but less than one hundred thousand rupees, or whether or not there is fine for continuing default, or where only fine for continuing default is provided, by the Registrar;
      Provided that the Commission shall have concurrent jurisdiction under this clause; and
      (c) where the maximum fine provided is one hundred thousand rupees or more and whether or not there is fine for continuing default, by the Commission or an officer to whom the Commission has delegated its powers and functions in this behalf'.
       
       
       
       
       
      51.
      484.
      In subsection (1), for the full stop, at the end, a colon shall be substituted and thereafter the following proviso shall be inserted, namely:­
      "Provided that revision application shall be made to an Appellate Bench of the Commission comprising of not less than two Commissioners and if any Commissioner who is included in the Appellate Bench has participated or been concerned in the decision being appealed against, the Chairman shall nominate another Commissioner to sit in the bench to hear that appeal.".
      52.
      492.
      For section 492 the following shall be substituted, namely:‑
      "492. Penalty for false state­ment.‑‑‑Whoever in any return, report, certificate, balance sheet, profit and loss account, income and expenditure account, prospectus, offer of shares, books of accounts, application, information or explanation required by or for the purposes of any of the provisions of this Ordinance or pursuant to an order or direction given under this Ordinance makes a statement which is false or incorrect in any material particular, or omits any material fact knowing it to be material, shall be punishable with fine not exceeding one hundred thousand rupees."
      53.
      495.
      In subsection (1), for the words "five" and "one hundred" the words "fifty" and "two thousand" shall, respectively, be substituted.
      54.
      497.
      For the words "five" and "one" the words "fifty" and "five" shall, respectively, be substituted.
      55.
      498.
      For the words "one" and "fifty" the words "fifty" and "five hundred" shall, respectively, be substituted.
      56.
      506.
      In subsection (2), for the words "two" and "one" the words "fifty" and "five" shall, respectively, be substituted.
      57.
      For the word "Authority", whenever occurring, the word "Commission" shall be substituted.
       
      The rules require the companies to follow prescribed discipline/criteria while raising money through Initial Public Offering (IPO) or by way of right issue or through issue of shares against consideration otherwise than in cash.
      The proposed amendments and the draft revised amended rules has also been posted at the Commission's website.
      The rules framed under Section 506 of the Ordinance were basically aimed at regulating the process of offer of shares to the general public and the existing shareholders of the companies listed on the stock exchanges and issue of shares for consideration otherwise than in cash by all companies.
      Some of the requirements of the existing rules are stringent and hinder raising of capital by the companies from the capital market.
      Sometimes these requirements are difficult to comply with and therefore, the companies are compelled to approach the SECP to seek different relaxations.
      With the introduction of the Book Building Process, certain clauses of the existing rules particularly those that are applicable to issue/offer of shares on premium, become irrelevant/redundant as under the book-building mechanism the price of the share offered is determined by the market forces.
      Under the review, the requirement of the existing rules for project appraisal from a financial institution having no interest in the project is being omitted. This will help in reducing the cost of the issue.
      The revised rules shall ensure appropriate free float in case of offer for sale of shares by a person under Rule 9.
      The amended CI Rules are more comprehensive, explanatory and flexible and easier to comply with, while the Rule 10 empower SECP to relax any requirements of the rules is also being omitted.
       
      The Securities and Exchange Commission of Pakistan (SECP), to minimize the growing incidents of the corporate disputes between the shareholders and the management or within the management, has proposed amendments to the Companies (General Provisions & Forms) Rules, 1985. The proposed amendments have been notified in the official gazette for soliciting of public opinion. The proposed amendments prescribe detailed procedure for transfer of shareholding in a private company. The shareholders of a private company shall have pre-emptive right to buy shares offered by any other shareholder. Moreover, in case of all private and public unlisted companies the amendments also prescribe the returns for notifying transfer of shares to the registrar within 15 days from such transfer. Regarding further allotments of shares, the proposed amendments bind the company to send offer for new shares to the existing members at least 15 days before the last date of the acceptance of offer. The payment of the shares so accepted by the member shall only be made through normal banking channel. In case of removal of directors under section 181 of the Companies Ordinance, the proposed amendments prescribe certain documents to be annexed with the prescribed form-29 to be filed with the registrar for notification of such removal. The proposed amendments notification has been uploaded at the official website of the SECP for seeking public opinion.
      The proposed amendments prescribe detailed procedure for transfer of shareholding in a private company. The shareholders of a private company will have pre-emptive right to buy shares offered by any other shareholder.
      Moreover, in the case of all private and public unlisted companies, the amendments also prescribe the returns for notifying transfer of shares to the registrar within 15 days from such transfer, it said.
      Regarding further allotments of shares, the proposed amendments bind the company to send an offer for new shares to the existing members at least 15 days before the last date of the acceptance of offer.
      The payment of the shares so accepted by the member will only be made through normal banking channel.
      In the case of removal of directors under Section 181 of the Companies Ordinance, the proposed amendments prescribe certain documents to be annexed with the prescribed Form-29 to be filed with the registrar for notification of such removal.
      The proposed amendments notification has been uploaded at the official website of the SECP for seeking public opinion.
       
      The new law will replace the 1969 Securities and Exchange Ordinance.
      This comprehensive and modern law is aimed at removing the deficiencies of the earlier law and covering developments in the securities market over time. It will improve integrity, credibility and efficiency of the market by establishing and enforcing principles, which ensure fairness and promote investor confidence.
      With the promulgation of the Securities Act 2015, it is expected that the securities market operations will become more streamlined and efficient and the goals of investor protection and market development will be achieved.
       
       
      ISLAMABAD: (APP) The Senate Thursday passed the Financial Institutions (Recovery of Finances) (Amendment) Bill, 2016 paving way to facilitate recovery process of bank loans.
      Minister for Law and Justices Zahid Hamid on behalf of Minister for
      Finance and Revenue Mohammad Ishaq Dar moved the bill to amend the Financial Institutions (Recovery of Finances) Ordinance, 2001 in the House.
      The Statement of Objects and Reasons of the bill says the Financial
      Institution (Recovery of Finance) Ordinance (FIRO) was promulgated in 2001, primarily to deal with the recovery process of the bank loans and loan defaults. However, the Supreme Court declared section 15 of the ordinance as ultravires to the Constitution on December 10, 2013.
      The State Bank of Pakistan (SBP) initiated the process of consultation among the relevant stakeholders to frame the amendments in the FIRO. In light of the judgment of the Apex Court and requirement of the Financial Institution the Financial Institutions (Recovery of Finances) (Amendment) Bill, 2016 has been drafted.
      The proposed amendments are meant to facilitate recovery process of bank loans so that loan defaults and incidence of written off loans could be minimized. The pecuniary limit of High Court cases is proposed to be enhanced to Rs 100 million to reduce the burden of cases on superior courts.
      The loan availed from Pakistani banks in other countries would also fall under Recovery Ordinance. The wilful default would be an offence under the ordinance.
      The loans written off for reasons other than merit, would be open to trial at any stage without application of any limitation, knowingly submission of false information in the court would render the parties ineligible to defend the case and frivolous filing would be discourage with fines.
      The smooth recovery process would result in growth of healthy credit culture in the country, reduce risks of default and writing off of loans and would also create additional funds for lending to new segments of borrowers. The measures taken together would stabilize the financial system and contribute to sustainable economic growth in the country.
        Special Economic Zone Act 2012
       
      As proposed amendments in the Articles 3(n), 16(2) and 37(a) of Special Economic Zone Act, 2012 with insertion of a new clause. The existing provisions and proposed amendments in these Articles are as follows; SEZ means a geographically defined and delimited area which has been notified and approved by the BoI. The SEZs shall be deemed to be outside the customs territory of Pakistan only for the purpose of this Act. This wording will be replaced with SEZ means a geographically defined and delimited area which has been notified and approved by the BoI; (ii) the wording of article 16(2)(a) i.e. SEZ shall have a minimum size of at least 50 acres will be deleted;(iii) Article 36(a) will be replaced as "exemption from all customs duties and taxes for all capital equipment imported into Pakistan for the development, operation and maintenance of a SEZ subject to verification by the FBR under the rules made by the BoI and ;(iv) Article 37(a) will be replaced with the wording "one time exemption from customs duties and taxes on import of capital equipment into the SEZ for installation in that zone enterprise subject to verification and approval of the FBR under the rules made by the BoI.

    • REGULATORY BODY/BODIES AND AFFILIATED INSTITUTIONS

      ■ Securities and Exchange Commission Pakistan (SECP)
       
      The Securities and Exchange Commission of Pakistan is a regulator established with the objective of developing a modern and efficient corporate sector, insurance, NBFCs and capital markets
       
      The Securities and Exchange Commission of Pakistan (SECP) was set up in pursuance of the Securities and Exchange Commission of Pakistan Act, 1997 and became operational on January 1, 1999.  It has investigative and enforcement powers.
       
      The current mandate of the SECP includes the following
       
      Regulation of corporate sector and capital market
      Supervision and regulation of insurance companies
      Supervision and regulation non-banking finance companies and private pensions schemes
      Oversight of various external service providers to the corporate and financial sectors, including chartered accountants, credit rating agencies, corporate secretaries, brokers, surveyors etc.
       
      The Securities and Exchange Commission of Pakistan (SECP) is the financial regulatory agency in Pakistan whose objective is to develop a modern and efficient corporate sector and a capital market based on sound regulatory principles, in order to encourage investment and foster economic growth and prosperity in Pakistan
       
      The Securities and Exchange Commission of Pakistan (SECP) is the successor of the erstwhile Corporate Law Authority (CLA), which was an attached department of the Ministry of Finance. The process of restructuring the CLA was initiated in 1997 under the Capital Market Development Plan of the Asian Development Bank (ADB). A Securities and Exchange Commission of Pakistan Act was passed by the Parliament and promulgated in December 1997. In pursuance of this Act, the SECP, having autonomous status, became operational on January 1 1999. [2] The Act gave the organization the administrative authority and financial independence to carry out the reform program of Pakistan’s capital market.
      The scope of the authority of the SECP has been extensively widened since its creation. The insurance sector, non-banking financial companies, and pension funds have been added to the purview of the Commission. Now the SECP's mandate includes investment financial services, leasing companies, housing finance services, venture capital investment, discounting services, investment advisory services, real estate investment trust[3] and asset management services, etc. The SECP also regulates various external service providers that are linked to the corporate sector, like chartered accountants, rating agencies, corporate secretaries and others.
      The SECP is a collegiate body with collective responsibility. Operational and executive authority of the SECP is vested in the Chairman who is the SECP's Chief Executive Officer (CEO). He is assisted by four (4) Commissioners, particularly to oversee the working of various operational units as may be determined by him.
      The SECP is divided into the following five divisions:
      ·         Company Law Division
      ·         Securities Market Division
      ·         Specialized Companies Division
      ·         Insurance Division
      ·         Law Division
       
      The SECP's head office is located in the NIC Building on Jinnah Avenue in the Blue Area of Islamabad, Pakistan's capital. It also has regional offices called Company Registration Offices (CROs) in Karachi, Lahore, Multan, Peshawar, Sukkur, Faisalabad and Quetta.
       
      ■National Institutional Facilitation Technologies (NIFT) 
      NIFT- National Institutional Facilitation Technologies (Pvt.) Limited: NIFT is a joint venture between a consortium of six major banks and private sector. It is responsible for the establishment and management of automated clearinghouse facilities in Pakistan. NIFT is proactively involved in the modernization of payment systems in Pakistan. NIFTeTRUST, a division of NIFT, is a Certificate Authority in Pakistan and is an affiliate of VERISIGN INC. USA. NIFTeTRUST has set up the processing centre confirming to ANSI x9.79 & ISO 17799 standards to provide Public Key Infrastructure (PKI) for secured operation of e-banking, e-business, e-commerce and e-government in Pakistan.
       
      Mission
      We will draw our potential from the respect we have earned as Trusted Third Party Processor and become a distinctive organization known for innovative use of technology to continually improve products and services for the benefit of our customers and their customers and keep them abreast with times to compete in the global society.
       
      Vision
       
      We focus on our customers as active component in our growth process. We continue to offer services that expand their access to excellent and affordable technologies. Our qualified and experienced workforce must work closely with our customers to continually enhance their confidence and trust in us.
       
      ■Federal Board of Revenue (FBR)
       
       
      The Central Board of Revenue (CBR) was created on April 01, 1924 through enactment of the Central Board of Revenue Act, 1924. In 1944, a full-fledged Revenue Division was created under the Ministry of Finance. After independence, this arrangement continued up to 31st August 1960 when on the recommendations of the Administrative Re-organization Committee, FBR was made an attached department of the Ministry of Finance. In 1974, further changes were made to streamline the organization and its functions. Consequently, the post of Chairman FBR was created with the status of ex-officio Additional Secretary and Secretary Finance was relieved of his duties as ex-officio Chairman of the FBR.

      In order to remove impediments in the exercise of administrative powers of a Secretary to the Government and effective formulation and implementation of fiscal policy measures, the status of FBR as a Revenue Division was restored under the Ministry of Finance on October 22, 1991. However, the Revenue Division was abolished in January 1995, and FBR reverted back to the pre-1991 position. The Revenue Division continues to exist since from December 01, 1998.

      By the enactment of FBR Act 2007 in July 2007 the Central Board of Revenue has now become Federal Board of Revenue.
      Its Vision is to be   a modern, progressive, effective, autonomous and credible organization for optimizing revenue by providing quality service and promoting compliance with tax and related laws
      Its mission is to enhance the capability of the tax system to collect due taxes through application of modern techniques, providing taxpayer assistance and by creating a motivated, satisfied, dedicated and professional workforce
       
      The Federal Board of Revenue (more commonly known by its initials as FBR) is a semi-autonomous federal agency of Pakistan that is responsible for enforcing fiscal laws and collecting revenue for the government of Pakistan.[1] FBR has the responsibility for (i) formulation and administration of fiscal policies, (ii) levy and collection of federal duties, taxes and other levies, and (iii) quasi-judicial function of deciding Customs & taxation cases and appeals. FBR is perhaps the largest federal department in Pakistan. FBR primarily operates through its main collection arms comprising Customs collectorates, Regional Tax Offices (RTOs) and Large Taxpayer Units (LTUs) across the country. FBR has two major wings: the Inland Revenue & Customs. The Inland Revenue Service (formerly known as Income Tax Department) administers domestic taxation including Sales Tax, Income Tax and Federal Excise Duties. The Pakistan Customs Service administers import duties and other taxes collected at import stage, as well regulates international trade with regard to prohibitions & restrictions imposed by the government. For the purpose of collection of revenue and pursuing tax evaders, FBR's powers & functions also include but are not limited to: carrying out inquiries and audits/investigations into the tax affairs, commanding arrests, attachment as well as public auction of movable and immovable assets of a non-compliant. Nisar Muhammad is the current chairman of FBR, since October 2015. He took over from Tariq Bajwa, who served as Chairman for a little over two years. Nisar had earlier served under Bajwa in the capacity of Member Customs, where he rose in esteem by consistently exceeding his targets.
      The Central Board of Revenue (CBR) was created on April 1, 1924 through enactment of the Central Board of Revenue Act, 1924. In 1944, a full-fledged Revenue Division was created under the Ministry of Finance. After independence, this arrangement continued up to 31 August 1960 when on the recommendations of the Administrative Re-organization Committee, CBR was made an attached department of the Ministry of Finance. In 1974, further changes were made to streamline the organization and its functions. Consequently, the post of Chairman CBR was created with the status of ex officio Additional Secretary and Secretary Finance was relieved of his duties as ex officio Chairman of the CBR.

           In order to remove impediments in the exercise of administrative powers of a       Secretary to the Government and effective formulation and implementation of fiscal policy measures, the status of CBR as a Revenue Division was restored under the Ministry of Finance on October 22, 1991. However, the Revenue Division was abolished in January 1995, and CBR reverted to the pre-1991 position. The Revenue Division continued to exist since from December 1, 1998; however, owing to the recent controversy which arose when the federal government appointed the new CBR Chairman of the seventh common, bypassing several senior-most officials in the Customs & Federal Excise department, Prime Minister of Pakistan gave an additional charge of Revenue Division, Government of Pakistan to the then Secretary Finance and now the chairman of the agency Salman Siddiq, Government of Pakistan, thereby violating Federal Board of Revenue Act, 2007 as the senior officials in the then Customs & Excise Group now Pakistan Customs Service (PCS) refused reporting to a junior officer.
       
      By the enactment of FBR Act 2007 in July 2007 the Central Board of Revenue has now become Federal Board of Revenue. The status of FBR as Revenue Division has again been restored.
       
      ■Department of the District
      The Districts of Pakistan (Urdu: اِضلاعِ پاكِستان‎), are the third order administrative divisions of Pakistan. Districts are the third order of administrative divisions, below provinces and "divisions". Although the "divisions" were abolished due to the reforms of August 2000, Punjab province restored them back in 2008 followed by Balochistan in 2009, Sindh in 2011 and Khyber Pakhtunkhwa in 2013.  Nevertheless, the 149 districts still form the top tier of a three-tier system of local government with the two lower tiers composed of approximately 596 tehsils (included the Kashmir region) and more than 6,000 union councils.
      Prior to 2001, there were 106 districts but with the reorganisation, these were reduced to 102 by the merger of the five districts of Karachi Central, Karachi East, Karachi South, Karachi West and Malir to form Karachi District. The five districts had formed the division of Karachi which was abolished. The number of districts rose to 106 again in December 2004, when four new districts were created in the province of Sindh of which one (Umerkot) had existed until 2000 and three districts (Kashmore, Qambar and Jamshoro) were newly created. The new districts were carved out of Mirpur Khas, Jacobabad, Larkana and Dadu Districts respectively.
      In May 2005, the Punjab provincial government created a new district by raising the status of Nankana Sahib from a tehsil of Sheikhupura District to a district in its own right. On 11 July 2011, the Sindh Government restored again the districts of Karachi South, Karachi East, Malir, Karachi West and Karachi Central, then later in 2013, the district of Korangi was carved out of Karachi East District.
      In Azad Kashmir, the second tier of government is formed by three administrative divisions with a third tier of ten districts. In Gilgit–Baltistan, there are nine districts divided between the two regions of Gilgit and Baltistan; Baltistan being a part of Ladakh under Pakistani control, the other part being under Indian control.
      Chagai is the largest district of Pakistan by area while Lahore District is the largest by population with total population of 6,318,745 by 1998 census. Quetta is the largest district of Balochistan by population with total population of 744,802 by 1998 census. Bahawalpur is the largest district of Punjab by area. Chitral is the largest by area and Peshawar is the largest by population from Khyber Pakhtunkhwa. Sindh's largest district by area is Thatta and by population it is one of the Karachi districts since combined population of six Karachi districts is over 13 million by 1998 census making average population of these six districts over 2 million each. South Waziristan Agency and Bajaur Agency are the largest from FATA by area and population respectively while Neelum and Kotli are Azad Kashmir's largest in the same order. Gilgit is the largest by area and population both for Gilgit-Baltistan.
       
      ■ Muslim Commercial Bank (MCB)
      MCB Bank Limited, is one of the oldest and leading banks in Pakistan. It was incorporated on July 9 in 1947. MCB Bank was nationalized along with other private banks in 1974 as part of Government of Pakistan's economic reform movement and was later privatized in 1991. The Bank has journeyed a remarkable tenure of more than half a century of competitively edged and well positioned heights of success by deploying quality banking, heads on technological developments, professionally leading management and prudent and ethical work methodologies.
      MCB Bank in one of the largest foreign banks in Sri Lanka; the first bank in Pakistan to launch Global Depository Receipts (GDR) in 2006 and has strategic foreign partnership with Maybank of Malaysia which holds 20% shares in MCB Bank through its wholly owned subsidiary Maybank International Trust (Labuan) Berhad since 2008.
      The Bank is versed as one of the oldest and most responsible Banks in Pakistan and has played pivotal role in representing the country on global platforms while being one of the few institutions that are recognized and traded in the international market.
      MCB Bank is actively involved in various CSR activities as well and constantly strives to contribute towards the country’s betterment. It has played a key role in enhancing the role and value of service and technology in the banking industry through its customer centric objectives. The Bank has also been acknowledged though prestigious recognition and awards by Euromoney, World Finance, MMT, Asia Money, SAFA (SAARC), The Asset Triple A, Finance Asia, NFEH, CFA, Pakistan Centre of Philanthropy and The Asian Banker.
      The Bank currently carries entity risk rating of AAA (long term) and A1+ (short term) which is the highest category rating by Pakistan Credit Rating Agency (PACRA).
      It aims to be an innovative and efficient financial solution to create and nurture long-term relationships with our customers. In doing so, we ensure that our shareholders can invest with confidence in us.
      MCB Bank Limited (formerly Muslim Commercial Bank) previously named as a (Manjoo Co-operative Bank) was incorporated by the Adamjee Group on July 9, 1947, under the Indian Companies Act, VII of 1913 as a limited company. The bank was established to provide banking facilities to the business community of South Asia. The bank was nationalized in 1974 during the government of Zulfikar Ali Bhutto. This was the first bank to be privatized in 1991 and the bank was purchased by a consortium of Pakistani corporate groups led by Nishat Group. As of June 2008, the Nishat Group owns a majority stake in the bank. The president of the bank is Imran Maqbool.
      The group has a presence in business sectors of the country such as banking, textile, cement and insurance.
      Mian Muhammad Mansha is the Chairman of the group (and also MCB).
       
      MCB is Pakistan’s second largest bank by assets having an asset base of US$7 billion as at quarter 1, 2012, and the largest by market capitalization having a market capitalization recorded at $1.2 billion at year end 2011, which was comparatively lower than $1.8 billion the year before, mainly on account of lower market value.
      The bank has a customer base of approximately 4 million and a nationwide distribution network of 1,190 branches, including 22 Islamic banking branches (December 31, 2011) within Pakistan and eight branches outside the country (December 31, 2011 including the Karachi Export Processing Zone Branch), and over 650 ATMs in 110 cities, in a market with a population of over 190 million.
      In 2011, MCB reported a profit after tax of PKR 19.4 billion (approximately $205 million) and generated a return on average equity of 26.23% and a return on assets of 3.18% (2010: 3.13%) The bank’s asset quality is strong, with a gross NPL ratio of 8.64%.
      MCB has 1165 branches (December 31, 2011), including local branches, and business establishments in SriLanka and Bahrain, including newly established Rep. Office in Dubai, UAE. The bank has also formed a private company in Hong Kong (fully owned subsidiary of MCB) in partnership with Standard Chartered Bank, handling trade transactions of select countries in the Asia-Pacific region. To further strengthen its financial services base, MCB incorporated an asset management company in 2005 known as MCB Asset Management Company. MCB has also incorporated a leasing company in Azerbaijan in 2009.
      Fully owned subsidiaries of MCB are:
      · Muslim Commercial Financial Services (Private) Limited,
      · MNET Services (Private) Limited,
      · MCB Trade Services Limited,
      · MCB Asset Management Company Limited,
      · MCB leasing (Closed Joint Stock Company).
       
      The bank has also established an Islamic Banking unit to offer Shariah compliant products and services, with dedicated Islamic banking branches in six cities.
      The Wholesale Banking Group caters to local and multinational companies.
      The Retail Banking Group focuses on trading and middle market segment primarily for building risk assets and trade related business. MCB caters to the financing of foreign and local trade, funds transfer and other seasonal requirements. The Bank has renovated a large number of branches and staff has been trained for meeting the requirements of SMEs and other retail customers.
      An SME Financing Division has been set up to provide customized financing solutions. The group also focuses on the development of consumer asset products. MCB has a significant share of consumer financing business with its House and Car Financing schemes. The running financing facility against the mortgage of property is also expected to go a long way in increasing the quality consumer credit portfolio of the bank.
      Other areas such as Bancassurance set newer records as well by crossing the Rupees 1 billion benchmark in 2011. Islamic Banking outperformed in terms of improved profitability and volumes with introduction of additional 11 products and expansion with 8 new branches in 2011 and Privilege Banking, an elite setup, is a benchmark in the industry. They have nine branches across major cities.

    • MINIMUM REQUIREMENTS

      Pakistan ranks relatively well in starting a business— both globally and regionally. Reforms in the early part of the decade cut start-up time by half. Start-up now takes 24 days, 8 days less than the South Asian average (32 days) and less than Bhutan (62 days), Sri Lanka (50 days), Bangladesh (37 days) and India (35 days). The cost is 21% of income per capita, well below the South Asian average of 47%, and compares favorably to all regional averages apart from those of the OECD (5%) and Europe and Central Asia (14%). Like all South Asian countries except for the Maldives, Pakistan does not impose a minimum capital requirement. Start-up in Pakistan still requires a high number of procedures (11)—more than in 116 other countries, including Bangladesh (8), Nepal (7) and Sri Lanka (8) (figure 2.14). In the region, only India requires an equally high number (11). Pakistan’s procedures are cumbersome, require considerable documentation and involve 6 different agencies—the registrar of companies at the Securities and Exchange Commission, the Central Board of Revenue, the local tax authority, the Employees Social Security Institution, the Employees Old Age Benefits Institution, and the Inspector in the Department of Labor of the provincial government—and a visit to a specifically designated bank.
       
      1
      Reserve a company name online via the Securities and Exchange Commission of Pakistan (SECP) E-services website
      Agency: Securities and Exchange Commission of Pakistan (SECP)
      The entrepreneur can check the availability of the desired company name via the website of the Securities and Exchange Commission of Pakistan (SECP). 
      To reserve a company name, the applicant proposes one or more names in order of preference, and submits the application form to SECP either online or in person. The official confirmation (or rejection) of the chosen name and its availability is received by email or via courier upon payment of the name reservation fee of PKR 200 (online name reservation) or PKR 500 (offline name reservation) at the SECP-designated bank. The approved name is reserved for 90 days, during which the company must be incorporated.

      SECP recently introduced the Fast Track Registration Services (FTRS), processing the company name reservation applications within 4 hours of submission for an expedited fee of PKR 500 online and PKR 1,000 in person payable in addition to the normal fees.
      1 day
      no charge
      2
      Pay the name reservation and company incorporation fees at the MCB Bank
      Agency: Bank (MCB)
      The company must pay the name reservation and incorporation fees at the designated MCB Bank (formerly Muslim Commercial Bank) or at the United Bank Limited. The form indicating the amount due is obtained from SECP either online (downloaded) or on-site, or from the bank. 

      The SECP launched online payment facility for its stakeholders in April 2014, therefore, online filing and payment is now possible for SECP’s online filers, without visiting the Bank or the SECP offices.
      1 day
      included in procedure 1 (name reservation fees) and procedure 3 (registration fees)
      3
      Obtain a digital signature from the National Institutional Facilitation Technologies (NIFT) system of SECP
      Agency: National Institutional Facilitation Technologies
      The digital signature is obtained from the National Institutional Facilitation Technologies (NIFT) through e-Services or at the SECP offices. To apply, the company must submit the Digital Signature Certificate Request Form, along with scanned copies of the Directors’ identity cards, the Name Availability Certificate and the proof of payment. For obtaining the Digital Signature within 1-2 hours under the Fast Track Registration Service (FTRS), an additional urgent fee of PKR 300 would apply.
      1 day
      PKR 837 (certificate charges) + PKR 163 (sales tax at 19.5%) + PKR 500 (validation charges) for each shareholder
      4
      Complete online registration on the Securities & Exchange Commission of Pakistan (SECP) e-portal
      Agency: Securities and Exchange Commission of Pakistan (SECP)
      Registration can either be completed online or in person at SECP. The following documents are required for submission: 
      a. Form 1: Declaration of compliance
      b. Form 21: Identification of the location of the office
      c. Form 29: Particulars of directors, secretary, chief accountant, auditors, and others 
      d. One copy of the Memorandum and Articles of Associations with the signature of each member (in presence of a witness)

      According to the 6th Schedule of Fee effective October 2010, the fees for incorporation of a company depends on the authorized capital as: 
      - Online submission: PKR 2,500 for registration of a company whose nominal share capital does not exceed PKR 100,000 and an additional fee of PKR 500 for every PKR 100,000 of nominal share capital or part thereof, up to PKR 10,000,000. The online filing fee is PKR 600 per document.
      - Physical submission: PKR 5,000 for registration of a company whose nominal share capital does not exceed PKR 100,000 and an additional fee of PKR 1,000 for every PKR 100,000 of nominal share capital or part thereof, up to PKR 10,000,000. The filing fee is PKR 1,500 per document.

      A confirmation of the online or physical submission is received instantly, and the actual certificate a few days later via email or courier. The entrepreneur can register with any Company Registration Office, irrespective of the jurisdiction. All regional SECP offices are computerized. In February 2012, SECP launched the Fast Track Registration Services (FTRS), under which the incorporation of a company can take place within 4 hours for an expedited fee of PKR 20,000 for on-site incorporation and PKR 10,000 for online incorporation payable in addition to the normal fees above. To register a company online, the entrepreneur must first obtain a digital signature through the National Institutional Facilitation Technologies (NIFT) system. If the application is received with less than four hours remaining in the working day, the same shall be disposed of in the next working day. 
      2 days
      PKR 8,500 registration fee + PKR +1,600 filing fees of Form 1, Form 21, Form 29, and Copy of the memorandum and articles of association
      5
      Open a bank account for tax registration
      Agency: Bank
      A bank account number in the name of the company is needed in order to register for taxes. A copy of the registration certificate is needed in order to open a bank account.
      1 day
      No charge
      6
      Apply for a national tax number (NTN) and register for income tax
      Agency: Tax facilitation center of the Regional Tax Office (RTO) of the Federal Board of Revenue (FBR) in Karachi
      To apply, the company must submit a simple one page form called the NTN Form as well as a proof of registration, the Memorandum and Articles of Association, bank account number, copies of the national identity cards of its directors, and an attestation of the registered business address at the nearest tax facilitation counter of the Regional Tax Office in Pakistan. 
      All applications are forwarded to the Central Registration Office (CRO) in Islamabad that allocates a uniform NTN number to each company. The center processes the application and issues the NTN at no charge. The certificate is then sent to the registered address of the applicant. The company can track the application online or through the RTO helpline. If undelivered, the NTN certification can be collected from the specified office at the Central Board of Revenue. Recently, the Federal Board of Revenue launched electronic services enabling online applications for NTN numbers to be made through its website: www.fbr.gov.pk
      2 days
      no charge
      7
      Apply for a Sales Tax Number (STN) at the tax facilitation center of the Regional Tax Office (RTO) of the Federal Board of Revenue (FBR) in Karachi
      Agency: Tax facilitation center of the Regional Tax Office (RTO) of the Federal Board of Revenue (FBR) in Karachi
      According to the Sections 14, 15 and 16 of the Sales Tax Act 1990 and Sales Tax Rules 2006, the company must register for sales tax by submitting the application Form STR-1 at any tax facilitation counter at the nearest Regional Tax Office (RTO). The local RTO forwards all applications to the Central Registration Office. After verification, the CRO issues a Registration Certificate bearing the registration number and mails the same to the registered company, on a prescribed From STR-5. 
      The Sales Tax General Order No. 4/2007 introduced electronic filing of the sales tax returns; and as of July 1st 2008, electronic filing was made mandatory for all categories of taxpayers.
      1 day
      no charge
      8
      Register for Professional Tax with the Excise & Taxation Department of the District
      Agency: Excise & Taxation Department of the District
      Following the Devolution Plan 2001, professional tax is enforced at the district level by the Excise and Taxation Department of the relevant provincial district. The tax is levied upon businesses, professionals, trades, callings or companies employing such professionals. The responsible district Excise and Taxation Officer (ET officer) is empowered to enroll in survey register every person who carries on any such business or profession and thereafter, give notice to such enrolled person. In case of a new business, the company is required to make a request to the ET officer to get enrolled by submitting a simple assessment form. The ET officer issues a registration number that acts as the reference number for the registered company and is noted down on every Bank Challan when assessments are paid into the Bank.
      7 days (simultaneous with the previous procedure)
      no charge
      9
      Register with the Sindh Employees Social Security Institution (SESSI)
      Agency: Sindh Employees Social Security Institution (SESSI)
      Registration with the Sindh Employees Social Security Institution is governed at the provincial level by an independent institution called the Sindh ESSI. 
      7 days (simultaneous with the previous procedure)
      no charge
      10
      Register with Employees Old-Age Benefits Institution (EOBI)
      Agency: Employees Old-Age Benefits Institution (EOBI)
      According to the Amendment in EOBI Act 1976 effective as of July 2008, every industry or a commercial establishment with 5 or more employees must register with the federal Employees Old Age Benefits Institution. Under the Employees Old Age Benefit Scheme, insured persons are entitled to pension upon retirement, invalidity in the case of a disability, old-age grant in the case of a retiring elder lacking the minimum threshold for pension, and survivor’s pension. A contribution of 5% of minimum wage must be paid by the employer and 1% of minimum wage must be paid by the employee. 

      An employer shall before expiration of thirty days from the day on which the Act becomes applicable to the industry or establishment in respect of which he/she is the employer, communicate to the Institution the name and particulars of the industry or establishment in Form PR-01 and of every insured person employed therein in Form PE-01 and, in the case of Form PE-01, give the receipt appended to the Form to the insured persons. An insured person may also communicate his/her name and other particulars to the Institution in Form PE-02.
      Upon receipt of the requisite particulars in Forms PR-01 and PE-01 from an employer, the Institution shall register the name of the industry or establishment in respect of which he/she is the employer and of the insured person and issue to the employer a Certificate of Registration in Form PI-02 and to each insured person a Registration Card in Form PI-03.
      The institution may send the Registration Card in Form PI-03 to the employer for delivery to the insured person to whom it relates.
      The minimum Pension has been increased from PKR 3000 per month to PKR 3600 per month.
      1 week (simultaneous with the previous procedure)
      no charge
      11
      Register under the West Pakistan Shops and Establishment Ordinance 1969 with the Labor Department of the District
      Agency: Labour Department of the District
      Pakistan Shops and Establishment Ordinance 1969 requires every establishment other than a one man shop to be registered with the Deputy Chief Inspector of the Labor Department in each district. This is to safeguard the labor standards of the workers. 
      To register, the employer must submit the application Form A accompanied by a bank challan. The application for a new establishment shall be made within 2 months of setting up the establishment. The registration fees have been changed to the following pursuant to the Punjab Shops and Establishments (Amendment) Act 2014 (II of 2014): 

      Rs. 200 in the case of an establishment employing 1 to 5 workers.
      Rs. 300 in the case of an establishment employing 6 to 10 workers.
      Rs. 500 in the case of an establishment employing 11 to 20 workers.
      Rs. 1000 in the case of an establishment employing more than 20 workers. 
       
      Once the payment is settled, the Deputy Chief Inspection lists the establishment in the Register of Establishments maintained in Form B and issues a registration certificate in Form C. The registration certificate shall be prominently displayed by the employer at the establishment, and shall be renewed after every two years upon payment of fees. 
      7 days (simultaneous with the previous procedure)
      PKR 1,000
      12
      Register the appointed CEO with the SECP
      Agency: SECP
      Pursuant to the Companies Ordinance 1984, articles 198 - 205, a CEO is to be appointed within 15 days of the company's incorporation. The company needs to register said CEO within 14 days of the decision.
      Half a day (online procedure)
      PKR 400 for the cost of form 29

       

    • FOREIGN INVESTMENTS

      ■FDI in Figures
      In 2015, as in 2014, FDI reached just under USD 1 billion, with the energy, oil and gas sectors remaining the primary recipient of FDI in Pakistan. FDI flows halved in 2014-2015 compared to the previous fiscal year. FDI flux remain modest and have declined due to multiple factors: lack of security, political instability, the poor condition of the country's infrastructure, the non-respect of intellectual property rights, the arbitrary administration of laws and regulations and the administrative resistance (federal and provincial) to opening up the country's economy.

      The potential attractiveness of Pakistan for investment is lower than India, its neighbour, but equal to Sri-Lanka and Bangladesh. However, its performance in terms of actual reception of FDI is poor, and this situation is unlikely to improve, because the country has a rather negative image on the international level, since it is considered a rear base of Islamist terrorism. Since 2011, Pakistan's relationship with its foreign partners has worsened, which bodes poorly for the possible growth of FDI.

      Despite this, many cooperation and equipment agreements have been signed recently with China, especially in the energy and defence sectors.
       
      ■ Why You Should Choose to Invest in Pakistan
      Strong Points
      With a population of almost 176 million inhabitants and significant natural wealth, Pakistan has a potentially big market. The poverty level has decreased by 10%, leading to higher purchasing power. The positive GDP growth rate over the past few years resulted in the development of the country’s industrial and service sectors. Islamabad has steadily raised development spending in recent years, including a 50% budget allocation for development. The FDI attraction policy led by the government (privatizations, equal treatment between foreigner and local investors, tax incentives, etc.), and the efforts made in terms of economic reform are the pillars of Pakistani development
      Weak Points
      There are significant security threats, to foreign interests in Pakistan (especially from the USA and Western countries), from terrorist organizations like al-Qaida, Taliban, and even from domestic terrorist organizations.
       A high degree of corruption exists in the country, especially in the areas of government procurement, international contracts, and the taxation system. Pakistan is not a signatory to the OECD Convention on Combating Bribery.
      Other weak points are poor infrastructures, lack of procedural transparency, political pressures, and FDI restrictions in some strategic sectors.
      Government Measures to Motivate or Restrict FDI
      The Pakistani government is carrying out an active foreign investment promotion policy, and has taken a number of economic liberalization measures to make the country more attractive. Pakistan offers a number of tax incentives for the establishment of industrial units in certain specific sectors: energy, ports, highways, electronics and software.
       The Government has also set up special export oriented zones called export-processing zones (EPZs), in order to encourage foreign investments. Some of the incentives offered to EPZ investors include exemptions from all federal, provincial and municipal taxes for export-destined production, exemptions from all taxes and duties on equipment, machinery and materials, and access to Export Processing Zone Authority "one window” services.
      The government also offers incentives to Export-Oriented Units, which are stand-alone industrial units allowed to operate anywhere in the country but have to export 100% of their production.
      However, the government has set ceilings for certain strategic sectors, for example agriculture and certain social sectors. In addition, foreign investment into some sectors is forbidden because of national security reasons.

      For more details, you can consult the       BOI Pakistan's website (Council for investment) and the Privatization Commission of the Ministry of Finance and Economic Affairs.
       
      ■Procedures Relative to Foreign Investment
      Freedom of Establishment
      Assured.
      However both foreign and domestic investors are restricted to establish and own business enterprises in the following five industrial sectors which are of national importance: arms and ammunitions, high explosives, currency/minting operations, non-industrial alcohol, and radioactive substances.
      Acquisition of Holdings
      A majority holding interest in the capital of a local company is legal in Pakistan except in certain sectors where investments are subject to limitations.
      Obligation to Declare
      Foreign investment in an existing Pakistani company essentially follows the same regulations as that for new ventures. Any purchase of shares by a foreign investor would require such investment to be registered with the State Bank of Pakistan so as to enable the entitlement of foreign investment similar to that of a new venture.
      There are no minimum or maximum limits imposed on the age of individual investor ownership in a public limited company. However, in accordance with the Companies (Issue of Capital) Rules 1996, the sponsors shall at all times retain 25% of the capital of the company.
      Competent Organisation For the Declaration
      Requests For Specific Authorisations
      Acquisition of more than 10% stake in an insurance company should get prior approval from the SECP.
      Similarly, in case of transfer of 5% or more shares of any bank or financial institution by foreign investors, the permission of the State Bank of Pakistan is required.
      Find out more about Investment Service Providers in Pakistan on GlobalTrade.net, the Directory for International Trade Service Providers.
      Special Economic Zone Act 2012
      The act will help to attract the investment and promote better infrastructure which in turn provide a platform to help grow the economy, create social cohesion, enhance the environment and deliver better public services.
       
      Incentives and Protections
      The developer of a particular SEZ as well as all Zone Enterprises shall be entitled to the following benefits:
      ·One time exemption from all customs duties and taxes for all capital goods imported into Pakistan for the development, operation and maintenance of a SEZ entity, subject to verification and approval from the Board of Investment.
      ·Exemption from all taxes on income generated from the development and operation of the SEZ for a period of ten years, starting from the date of signing of the development agreement.
      ·With the objective of promoting hi-tech industries or particular regions, additional benefits can be extended to a particular category of SEZs, Zone Enterprise, regions or sectors.
      ·These benefits will not be withdrawn prematurely, and any change therein shall be to the advantage of the developer of the SEZ, or the enterprise.
      SPECIAL ECONOMIC ZONES
      Special Economic Zone (SEZ) is a blanket term for various types of specialized zones with specific types of enterprises operating in a well-defined geographic area where certain economic activities are promoted by a set of policy measures that are not generally applicable to the rest of the country. Successful SEZs offer immediate access to high-quality infrastructure, uninterruptible power supply, clearly titled land, public facilities, and support services .In addition, streamlined regulatory enforcement, simpler business and establishment rules, expedited customs administration, and other special administrative and approval procedures are also offered in such zones.
      Special Economic Zone Framework in Pakistan
      The SEZ Act was promulgated on September 13, 2012 and later this year the SEZ Rules were notified. The law provides SEZs to be set up by the Federal or Provincial Governments themselves or in collaboration with the private sector under different modes of public-private partnership or exclusively through the private sector.
      The fiscal benefits under the SEZ law include a one-time exemption from custom duties and taxes for all capital goods imported into Pakistan for the development, operations and maintenance of a SEZ (both for the developer as well as for the zone enterprise) and exemption from all taxes on income for a period of ten years. The provincial SEZ authorities, set up under the law, are required to move the applications received from developers to the Federal Board of Investment which is to act as the secretariat to the Board of Approvals and the Approval committee.
      The Board of Approvals (BOA), the highest approving forum is headed by the Prime Minister with membership from Economic Ministries, Provincial Governments, Public and Private Sectors. Approvals Committee is headed by the Chairman BOI and membership from Economic Ministries, Provincial Governments, Public and Private Sectors and SEZ Authorities (at provincial level including Gilgit- Baltistan) work under the leadership of the Chief Ministers.
      The first application of Khairpur Special Economic Zone was in principle approved by the Approval Committee of Special Economic Zones in its first meeting held on February 11, 2014. Khairpur Special Economic Zone is being developed in Khairpur District as a future hub of agro-processing and other related industries, KSEZ is located on 140 acres land in the proximity of date growing areas, ideal for setting up date processing and packaging plant for exporting different varieties of date to get high price for this value added product in the international markets. This special zone will have state-of-the-art infrastructure, efficient design, easy access to labor and training facilities and quality logistic services. The zone will provide inherent benefits of essential supporting amenities to small, medium, and large enterprises to grow and flourish in a global market place.
      The Provincial Governments have received many applications for various potential zones in their respective provinces and are in the process of preparing documents to further process the applications. They are also engaged with potential local and foreign investors to finalize arrangements for infrastructure development of the areas identified for Zones.
       
      ■CREATIVE ZONE
      Is a service designed for entrepreneurs, consultants and business start-ups who wish to incorporate a UAE Free Zone company with minimum investment and flexibility, without compromising on quality and prestige.
      With CREATIVE ZONE you are able to enjoy all the benefits of a UAE Free Zone Company without the usual costs and constraints, along with a wide range of support services that will not only enable your company to have the best possible start but also ensure continued support as you grow.
      Establishing a company in this Free Zone with us has the following benefits:
      §  Cost - Low Startup Costs.
      §  Trade License Released within 1 day - Your trade license can be released within 1 working day of visiting Ajman
      §  Over 60’s are able to obtain visas - Company owners over the age of 60 can qualify for UAE residence visas.
      §  Fewer Nationality issues - thanks to Ajman Immigration’s visa pre-approval process, nationalities that may have faced issues in other emirates are able to submit an application for visa pre-approval without incurring the costs of the company setup or having to cancel their current visa.
       
      Ajman Free Zone introduced its services, special advantages and investment opportunities provided to institutions, companies, and individuals to a large number of officials and businessmen in the Pakistani city of Karachi. The promotional trip aimed at creating business opportunities and activities for investors in Pakistan who are interested in investment opportunities available in Ajman. These promotional presentations are in line with Ajman’s Free Zone promotional strategic plan which aims to increase investment in the UAE in general, and Ajman in particular through offering special investor advantages and investment opportunities.
       
      ■KARACHI: Ajman Free Zone Authority (AFZA) has opened its first office in Pakistan as it seeks to expand its global footprint.
      The new office established in Karachi is in line with Ajman Free Zone’s global expansion plan after opening offices in India, Dubai and Manchester, said AFZA’s General Manager Mahmoud Khalil Al Hashimi during a ceremony held on Tuesday.
      Emirates Express will work as the sole authorised representative of AFZA in Pakistan and it will assist businessmen with all the legal formalities required to set up and register a new company in the zone.
      He informed that there are over 14,000 registered companies in Ajman Free Zone and a large number of Pakistani companies are also operating in Ajman — one of the seven emirates of the UAE.
      One of the most prominent yet generally lesser known legal regimes or policy initiatives for benefit of business and investment attraction in recent time in Pakistan has been the introduction of special economic zones (SEZs) regime through the Special Economic Zones Act, 2012 (“SEZ Act”). The enactment was introduced at a time when the country desperately needed to provide incentives for, or, to attract not just foreign direct investment but also retain the domestic entrepreneurs from fleeing abroad, owing to amongst others, unfavourable business climate in general, law and order situation, energy crisis and lesser fiscal incentives.
      Under the SEZ Act, SEZ has a specific statutory definition however, the term as no universally agreed definition and includes/or is an umbrella term for; export processing zones (EPZ) including traditional and hybrid EPZs, free trade zones, commercial free zones, enterprise zones, free zones etc. Generally SEZs are demarcated areas of a country whereupon business, trade and laws differ, in favour of the enterprises operating therein.
      Astonishingly, according to a study by World Bank (2008) there are approximately 3000 SEZs in 138 countries accounting for 68 million direct jobs and over $500 billion direct trade related value added within zones. SEZs have been there since centuries but the earliest modern day models include Gibraltar (1704), Singapore (1819), Hong Kong (China; 1848), Hamburg (1888), and Copenhagen (1891).
      Before we actually analyse the topic i.e. amendment to the SEZs Act, 2012 (“SEZ Act”) in Pakistan, let us comprehend the broader scenario. The SEZ Act essentially provides certain income tax and customs tax exemption for developers of SEZs and the enterprises established therein, however, further benefits can also be allowed on case to case basis. At the time of enactment of SEZ Act the only other similar available legal framework in Pakistan was the Exports Processing Zones (EPZs) regulated by the EPZ Authority functioning under Export Processing Zones Ordinance, 1980 (EPZ Act). The EPZ Act was essentially designed and limited to increase and improve the exports of the country and enhancing the volume of exports by creating an enabling environment for investors, as it provided certain fiscal incentives the “industrial undertakings” in such EPZs. As per the said law, such industrial undertakings ostensibly can only sell their goods up to 20% to the domestic market. Hence, Pakistan’s investment regime did not provide diverse framework or incentives for domestic or foreign investors as compared with other jurisdictions like China, India, Eastern European countries, Central Asian and Middle Eastern African countries.
      Speaking of China and India, amongst others, SEZs may arguably be the most prominent feature in their industrial growth in the recent history which may be substantiated by the following few facts. In China, SEZs at national level accounted for about 22% of national GDP, 46% of FDI, and 60% of exports and generated in excess of 30 million jobs (Douglas Zhihua Zeng, Trade and Competitiveness Global Practice, World Bank- 2015). In India, up until the year 2000, India did not have SEZs and instead had a number of EPZs (like Pakistan in 80s), which, although similar in structure to the modern SEZs, failed to attract many firms/businesses. India then introduced SEZ, similar to that of China, in 2000 and within 10 years of the enactment of Indian SEZ Act in 2005, India had 200 operational SEZs and over 560 approved for operation with a total investment in the SEZs amounting to whooping Rs 373,445 crores and providing jobs to over 1.5 million people (Source: Ministry of Commerce & Industry, India). Having said all that, SEZs are not always successful and analysis of studies show a mixed record. There are many examples of investments in zone infrastructure resulting in “white elephants,” or zones that largely have resulted in an industry taking advantage of tax breaks without producing substantial employment or export earnings, thus, success of SEZs is dependent on number of factors and has no hard and fast rules.
      This leads to the core of this discussion; that amongst other factors of success of SEZs, which includes the applicable investment incentives, location, infrastructure in place and government commitment, etc, it is most imperative that there be in place an immaculate legislative, policy and regulatory framework. According to a report of Asian Development Bank (2015) “governance issues” are often behind SEZ’s failure. It also critically points out that “a well-developed and comprehensive legal framework with stable, transparent and unambiguous rules is a critical foundation for any successful SEZ program. While this may not be sufficient for the success of SEZs, the absence of good laws and regulations almost inevitably leads to failure in the zone programme as well as in ensuring broader nation-wide impact of SEZs”.
      One of the reasons that Pakistan already lags behind as preferred business destinations in the world is the complex and archaic business legal regime which discourages entry and doing business in Pakistan when compared to the successful competitors.
      Passing the SEZ Act was indeed a positive initiative; however, the legislation had, effectively, contradictory provision resulting in massive confusion within the stakeholders. The SEZ Rules 2013 were passed by the Board of Approvals (BOA) in 2013, however, the same are certainly not comprehensive enough to provide efficient framework leading to smooth establishment and operations of SEZs and the enterprises therein. It is worthwhile noting that it took about two years since passing of SEZ Act that first SEZ application (Khairpur SEZ) was approved, that too was a principle approval. Also to be noted is the fact that Khairpur SEZ was an existing industrial zone established by Sindh Government and merely applied for conversion / status of SEZ, as allowed under Section 15 of SEZ Act. While till June 2016 only three existing SEZs located in Sindh were approved, whereas it was only in June 2016 when three existing SEZs of Punjab and one from KPK were approved by the Approvals Committee.
      Amongst others, a prime reason why no SEZ application was received from private investor, or even other provincial industrial estates, was the lacunas in SEZ Act itself (inter alia the definition of “SEZ” under the SEZ Act). The original Section 2(n) of the SEZ Act is stated as follows “special economic zone or SEZ means a geographically defined and delimited area notified and approved by the BOA. The SEZs shall be deemed to be outside the customs territory of Pakistan only for purposes of this Act”. Similarly Section 33 (Extraterritoriality of SEZ) inter alia provided that any transport of goods or provisions of services from customs territory of Pakistan into extraterritorial zone (SEZ) shall be considered as an export from Pakistan and any goods from extraterritorial zone (SEZ) into customs territory of Pakistan of goods brought into Pakistan.
      The consequence of the above referred provisions when read in tandem is that an SEZ would be nothing more than an EPZ, in fact provide lesser advantage to the zone enterprises, which itself proved to be an unsuccessful model. However, it was at the initiation of Punjab Board of Investment & Trade (PBIT), Government of Punjab’s investment promotion agency, the discrepancies were highlighted to the Federal Board of Investment (which under the SEZ Act is the Secretariat of BOA and Approvals Committee). The matter was deliberated in detail by all federal and provincial governments and the private sector stakeholders and it was result of the said consultation eventually SEZ (Amendment) Ordinance, 2015 was promulgated wherein the definition of SEZ was amended as follows “special economic zone or SEZ means a geographically defined and delimited area notified and approved by the BOA.” while Section 33 was omitted. Furthermore, amendments were made in Section 36 (Benefits for Developers) and Section 37 (Benefits for Zone Enterprises) whereby exemption from income tax was reduced from ten years to five years and broader exemption on customs duties on import was curtailed. In order to make the amendments permanent, the Government introduced the SEZ amendment bill which has already been passed by the National Assembly on 19th May, 2016.
      The amendments in SEZ Act though appear to have curtailed the fiscal incentives which as compared to the original law, however; on the contrary it has actually made the SEZ Act / legal regime functional by removing the basic glitches and differentiating it from EPZ regime. Having said the same, the SEZ Act and Rules still may require some improvements if analysed from the perspective of international best practices and compared with successful jurisdictions. A number of key subordinate legislation and policies under the SEZ Act are yet missing.
      To state a few such pertinent rules/regulations may include but not limited to regulations for approval of zone applications by BOA, regulations for approval of development agreements by BOA, zone regulations for approval of existing zones, zone approval criteria for SEZs compatible with Pakistan’s obligations under multilateral and bilateral trade agreements.
      From the analysis it may be summarised that consequential of government’s step of amending the SEZ Act we should expect a thrust in development of SEZs in Pakistan by not only public but private sector developers as well owing addressing basic glitches in the SEZ Act which also depicts government’s intention for promotion thereof. The amendments may also be very relevant vis-a-vis the China Pakistan Economic Corridor (CPEC) under the umbrella whereof numerous SEZs are envisioned, 26 to be precise, as per a Planning Commission’s report.
      However, the rapid investment in development and smooth operations of such SEZs, and expected consequential boost in foreign and domestic investment, is much dependent on enforcing complete and refined SEZ framework by the government as identified/proposed above.
      Gwadar Port Civic Center

      The Ministry of Ports and Shipping and Gwadar Port Authority initiated the Project of building a modern Civic Centre Building in the heart of the Gwadar City to set a model for the upcoming buildings in the future and to develop the underprivileged area of Gwadar in particular and Balochistan in general. 
      The Civic Center is offering comfortable and state of the art office accommodations, shops as well as residential flats to cater for administrative and residential needs of various organizations & Private persons.
      A lease agreement is being processed to hand over 2,281 acres of land to the China Overseas Port Holding Company for the establishment of a ‘free trade zone’ in Gwadar.
      According to a senior official of the ministry of ports and shipping, the lease agreement is currently being reviewed by the law division. After the government’s formal approval, the land will be leased out to the Chinese company for 40 years. The ministry has paid over Rs6.69bn to acquire the land through the deputy commissioner of Gwadar.
      The free trade zone is seen indispensable for the success of the Gwadar port, as they are an integral part of all modern ports. The zone is expected to ensure optimal use of the deep sea port. In Gwadar port’s master plan, prepared by foreign consultants, the mouza Dor Gatti area had been earmarked for the free trade zone.
      A free trade zone is a designated area that eliminates traditional trade barriers such as tariffs, and minimises bureaucratic regulations. Its goal is to enhance global market presence by attracting new businesses and foreign investment.
      The Chinese company has been incorporated as the ‘Gwadar Free Zone Company’. It will finance infrastructure development of the zone area, with the exception of access roads, which will be financed by the Gwadar Port Authority. The company will bring local and foreign investment to establish the manufacturing assembly and processing plants.
      The zone will be located immediately west and adjacent to the planned container terminal. Out of 2,281 acres, 654 acres are naval and coast-guard land, for which the owners will compensate with 1,000 acres under a deal approved by the Senate Standing Committee on Ports and Shipping.
      In the customs-free zone, all imports would be subject to the applicable duties and charges if and when they are taken out of the free zone, except for the purpose of export. The area will be used exclusively for port-related business and industry.
      A 20-year tax holiday will apply to businesses in the free trade zone. Under the agreement, 15pc of gross revenue from the free zone will be paid to the Gwadar Port Authority by the Chinese company. It is expected that the development of the zone will help create job opportunities, and lead to transfer of technology and business activities.
      Plans are also afoot to link the Gwadar deep sea port with the hinterland through rail to fully realise the port’s potential.
      The chief engineer of Pakistan Railways who is dealing with the project, Basharat Waheed, said out of the total cost of around Rs1.3bn for the 285 acres of land, Pakistan Railways has paid Rs450m for the acquisition of the land required by it through the Board of Revenue of Balochistan’s secretary. The remaining amount of Rs700m is expected to be approved by the Central Development Working Party of the planning commission at its next meeting.
      Initially, Pakistan Railways had planned to acquire 373 acres of land, but due to the escalation in the market price in the wake of the port’s construction, the area was reduced to 285 acres.
      The land will be used for the construction of a railway container yard, station and other operational facilities and a 30-metre-wide corridor to the deep sea port on one end, and a point outside Gwadar’s limits, at a distance of 25km on the Gwadar-Turbat-Hushab-Besima-Mastung rail link on the other side.
      The proposed container yard will have the capacity to handle about 500 railway freight wagons, including marshalling of freight trains. The laying of a double-track from the container yard to the deep sea port has also been proposed.
      Karachi Export Processing Zone or KEPZ, is located adjacent to the Landhi Industrial Area in Karachi, Sindh, Pakistan. KEPZ is located within a distance of 18 km from the Quaid-e-Azam International Airport, 20 km from Port Qasim and 35 km from Karachi Seaport. The Zone is linked with the National Highway network.
      SLAMABAD: In order to encourage foreign investment in Pakistan, the federal government has decided to provide facilities like Panama and Virgin Islands to foreign investors in Pakistan. According to documents available with Daily Times that government is going to introduce the companies' bill 2016 in parliament soon according to which incumbent government will provide incentives of tax free zones to the companies who invest in Export Processing Zones(EPZs).
      The government will allow them to make offshore companies in Export Processing Zones and these EPZs will be limited to the western routs of China Pakistan Economic Corridor (CPEC)." According to the proposed bill, the government will offer the tax holidays and companies will be exempted from calling of annual general meeting. Moreover, the companies established as FZCs would be exempted from filing of annual returns unless there was a change in membership or directorship, audit requirements, filing of financial statements, maintenance of registered office subject to providing correspondence address and conversion of shares into book-entry form.
      Furthermore, Free Zone Company shall only be formed as a private limited company, whose name shall signify FZC at the end of its name". Security Exchange Commission of Pakistan (SECP) has introduced a concept of "Free Zone Company" after evaluating the benefits and recognition given under the Export Processing Zones Authority Ordinance (IV of 1980).
      The information of such companies as well as the companies in EPZs shall not be publicly available with the exception of tax authorities or order of the court or if any information or record is requirement to be provided under any international obligation or commitment to which the government is subjected. It is worth mentioning here that government is trying its best to enhance foreign investment in country, despite the trend going in the other direction. The federal government had failed to achieve the FDI target in fiscal year 2015-16.
      According to economic experts, offshore companies are not legitimate whenever the owner of the company evades the tax in its country. FBR had already started its work to identify owners of offshore companies in Pakistan. In this regard, the Parliamentary Secretary for Finance Rana Muhammad Afzal Khan informed the National Assembly that the Federal Board of Revenue (FBR) has identified 440 persons linked with different offshore companies and it was obtaining information and documentary evidence about the investment or income of the offshore companies of Pakistani residents.
       
       

    • REFERENCE LIST

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      http://www.dawn.com/news/1216725
      http://www.dawn.com/news/1216725