New provision in Companies bill applicable only to SECP registered real estate companies


The Securities and Exchange Commission of Pakistan (SECP) has clarified that a new provision proposed in the Companies Bill, 2017, presently in the National Assembly of Pakistan for an approval, shall only apply to companies registered with the commission and carrying out the business of real estate development.

It is already abundantly clear that other business structures such as sole proprietorship or partnership do not fall within the SECP’s jurisdiction. Furthermore, the intent of the said provision is limited to the extent of protection of advances and deposits collected by such companies against future development of real estate in the form of plots or houses.

The relevant land and building control authorities shall continue to regulate the business of such companies as is being presently regulated. The provision will provide certain safeguards to ensure that deposit/advances collected by such companies from their customer are exclusively used for the purpose of development and construction of the relevant project and to avoid misuse of such funds towards other activities and thereby exposing the risk of default/delay in delivery.

Similarly, the SECP will ensure that relevant formalities, which mainly include approvals from land and building control authorities, are obtained by such real estate companies before publication of advertisement soliciting deposits from prospective buyers of their projects.

Nevertheless, the applicability of this section will come into effect from a future date to be notified by the federal government later on. Therefore, after promulgation of the new Companies Bill, 2017, this provision shall not come into force unless notified as above.