The Ministry of Finance is working on amendments to the State-Owned Entities (SOEs) Act 2023 to align it with international law and prevent local firms from signing agreements involving international arbitration.Â
Since the promulgation of the SOE Act 2023, various agencies, ministries, and SOEs have faced issues interpreting and implementing the law. The Finance Ministry’s Corporate Finance (CF) Wing has received several proposals for amendments to bring more clarity and ease of implementation.
As per a news report, one key issue under consideration is the prohibition on federal SOEs designating foreign forums for arbitration, even for disputes with other federal or provincial SOEs. The proposed amendment states that SOEs should not enter into agreements specifying foreign forums for dispute resolution, except with prior federal approval for dealings with foreign governments or entities.
The Finance Ministry also noted the need to refine several definitions and sections of the Act for better clarity and consistency with other laws, such as the Companies Act.
Other proposed changes include:
Section 10(3): Removing the requirement for notifying procedures by the Board Nomination Committee (BNC) to reduce administrative burdens.
Section 12: Reviewing the inclusion of the CEO on the Board of a Company to maintain the separation of board and management.
Section 13(2): Revising stringent criteria for the disqualification and removal of independent directors.
Section 17(2): Omitting references to the Global Standards of Procurement and Supply, as they are competency frameworks rather than procurement standards.
The amendments also address synchronization between the Act and the SOE Policy, particularly regarding the roles of the BNC and SECP in applying the Fit and Proper criteria for board appointments.
Additionally, the logic behind the inclusion of specific entities in Schedule 1, and the synchronization of the roles of the Privatisation Commission with the provisions of the PC Ordinance 2000, are to be reviewed.
The first phase of these amendments focuses on five ministries, with reports due by August 2 and August 12, 2024.Â
The committee is also reviewing the performance of SOEs, identifying 84 entities, with 55 under review, and determining which are essential, strategic, or slated for privatisation. The Finance Ministry is expected to present a detailed update in the next cabinet meeting.
