KARACHI
The Securities and Exchange Commission of Pakistan (SECP) has notified the draft associations with charitable and not for profit objects (Licensing and Corporate Governance) Regulations, 2017, to obtain public opinion. The draft regulations have been placed on the SECP’s website.
The draft regulations specify procedure for grant of licenses to charitable and non-profit associations, incorporation of association as a public limited company, conditions applicable to such companies, fit and proper criteria for the promoters, members, directors and chief executive officers, provision for revocation of license and subsequent transfer of assets to another company licensed under section 42 of the Companies Act, 2017, responsibilities, powers and functions of the board of directors, corporate and financial reporting framework and monthly reporting requirements.
The associations may apply for grant of license for the promotion of a single or multiple objects. The SECP may grant the license if the promoters, proposed directors and chief executive officers are compliant with the fit and proper criteria. Within 30 days of getting the license, the association shall apply for its incorporation as a company.
The draft regulations require that the company licensed under section 42 of the Act shall utilize all its money, property, donations or income or any part thereof solely for promoting its objects. The limit of liability for each of its members shall not be less than Rs 100,000. The income and any profits of the company shall be used solely to promote the objects of the company and no portion of it shall be distributed among the members of the company or their family members.
The regulations also require that the Board shall carry out its fiduciary duties with a sense of objective judgment and independence in the best interests of the company and ensure that a system of sound internal control is implemented within the company. The company shall also maintain a functional and updated website.
All the existing companies licensed under section 42 of the company law are required to comply with all the requirements within six months of notification of the regulations. The regulations have been notified with the objective of streamlining the licensing procedure and improving governance structure of such companies.
