From the outset, the current PTI-led government has been very vocal regarding fight against corruption. The Prime Minister Imran Khan, in his inaugural address, stated that ― “Our state institutions will be so strong that they will stop corruption. Accountability will start with me, then my ministers, and then it will go from there”. In fact, the Pakistan Tehreek-i-Insaf had contested the General Elections 2018 on the premise of fighting corruption and ensuring transparency and accountability across state institutions.
However, many of the policies of the government stand contrary to its public declarations about fighting corruption in Pakistan. One such example is the recent passage of amendments in Companies Act 2017 enacted through Companies (Amendment) Ordinance 2020 and promulgated on April 30, 2020. Through a Presidential Ordinance, in total 10 sections including 172, 182, 186, 187, 244, 245, 282, 452, 456, 459 and 461 were purportedly amended. Transparency International Pakistan observed that the modifications in the said provisions is against the norms of business in commercial/corporate activities in Pakistan and may provide undue benefit to the wrongdoers.
TI Pakistan actively took up this issue with the federal government and wrote to the Prime Minister of Pakistan, the National Accountability Bureau (NAB), and the Supreme Court of Pakistan to highlight its concerns and suggest areas for improvement. As a result of TI Pakistan’s consistent advocacy, the federal government reviewed these amendments in light of TI Pakistan objections, and on 9 July, 2020 amended the Companies Act 2017, withdrawing several amendments inserted in the ordinance on April 30, 2020. These included clauses related to disqualification of persons who enter into plea bargain with the National Accountability Bureau (NAB). In total, the government has withdrawn six amendments to Companies Act 2017 including Section 172(m), Section 181, Section 186 and 187, sections 279 to 282, Section 452 and amendment to 461.
Section 172(m) that relates to disqualification of a person to hold the office of a director of a company is restored in Companies Act. This section was deleted from the Act through Companies Amendment Ordinance 2020 paving the way for persons who have been convicted under the National Accountability Ordinance (NAO 1999), to be appointed as Director.
Section 181 that related to protection to independent and non-executive directors has also been restored through the Second amendment Ordinance. This Section was introduced in 2017 to protect independent and non-executive directors from acts, omissions and commission which occurred without their knowledge or consent.
The change in the Section 452, Companies’ Global Register of Beneficial Ownership has also been reverted. The SECP through earlier amendment had made Section 452 less stringent as the requirement for company’s directors, shareholders, or officers to report their shareholdings or any other interest in a foreign company was reduced to only those who may have shareholding of 10 percent or more in a foreign company or body corporate. TI Pakistan had objected that this will allow Benami account holders to run companies in Pakistan and may encourage Money laundering.
While the government has withdrawn six amendments to Companies Act 2017, it is important that remaining of the ten sections included in the amendment of April 30th should be amended to their original provisions under the Companies Act 2017 as they stand contrary to the rule of law in Pakistan.
For more than a decade, TI Pakistan has been striving for a rule of law and corruption free Pakistan. It is important to emphasis that having strong laws is the first step towards ensuring transparency and accountability in Pakistan.