6- Companies Ordinance 2016:

This is a primary Law for business which will be run under corporate sector, it repealed the
existing Company Ordinance, 1984.

6.1- Company incorporation

Principal line of business is the main theme of a business which is mentioned in the
memorandum of association and through which a company generates its revenue. As per new
company law, there is a 30 days’ time limit for payment of initial subscription money and a
negative list is also included. Furthermore, the concept of layers of companies has also been
clarified in new ordinance.

6.2- Use of technology

Modern IT techniques have been introduced i.e. e-mail, e-voting, etc.

6.3- Jurisdiction of court under the ordinance:

The high Court has determined 120 days limit to dispose of the case and it can also impose fine
to parties in case of delay. Further, the registrar of the company has all administrative powers
and power of civil court under the code of civil procedure, 1908. The court can also call the
relevant parties, if needed so. However, the Qanun-e-Shahdat 1984 has no jurisdiction on
company’s law.

6.4- Investigation and power of the commission:

The commission has the power to withhold the documents and to hold investigation in critical
fraud cases. It can also summon concerned minister in such cases.

6.5- Issues of shares

Employee stock option scheme now includes the shares of holding and subsidiary company. The
government has the power of converting its loan given to a public interest. Issuance of shares at
discounted rate now needs no approval of commission.

6.6- Transfer/ transmission of shares

Shares will be sold to existing members first, in private companies. After the death of a member,
shares will be transferred to a designated person. Personal appearances of transferor and
transferee are now mandatory for registration of transfer of shares.

6.7- Directors and the board

Voting power is decreased by declare the elections of directors null and commission is given
power to remove a director for five years. The method of selecting a director has also been
envisaged. Disciplinary action can also be taken against a director on act of commission and
omission. New relaxation is also the part of law enabling the directors to give loan. The directors
meetings have been redesigned by alerting the proceedings. The duties of directors have been
enhanced.

6.8- Related part transactions:

The transactions done with related party must be in accordance to the policies laid down by
commission

6.9- Unclaimed shares, dividends etc:

Unclaimed shares or modarba will be deposited to state bank after giving two notices to federal
government. Establishment of Investor of Education and Awareness fund has also been set up.

6.10- Dividend:

A particular dividend of a listed company is introduced. The mode of payment of the dividend is
also mentioned

6.11- Jurisdiction over schemes of arrangements:

The power of court have been curtailed and given to commission. However, some powers
relating to schemes of arrangements are still with the court. Board of directors have vested with
the power to amalgamation with other companies

6.12- New concepts:

Only a registered valuer can done the valuation process. Now a listed company can acquire the
status of an inactive company through application to registrar. Easy exit to defunct companies
have also been introduced. Commission can also declare a company Shariah compliant. Any
company formed to do business in free zone will be exempted from certain restrictions as
mentioned in the ordinance. Only a company having a real estate business line can indulge in
such business. A new concept of agricultural promotion company has been put forward. Every
officer has been entrusted a duty to put his efforts to stop fraud, money laundering and terrorist
financing. In case of failure, the officer will be penalized. The commission has the power to have
security clearance of shareholders. All offenses of punishment are included in the realm of
commission. A shareholder of a company who has 10% or more shares in any foreign company
will disclose the information of his beneficial ownership to the commission.

6.13- Financial statements:

The 2016 ordinance, financial statements have to make within 16 days of incorporation of the
company. A company less than one million rupees will not be banned to submit consolidated
financial statements. In the case of listed companies, CFO will also sign the financial statements.
Third schedule is about the classification of the companies. There have been some changes made
in financial reporting framework like enhanced details of business, shareholders information, and
legal procedures etc. Now companies having 10 million rupees paid up capital are bound to file
financial statements. There is no need to add directors note for a private company with a capital
of three million rupees. However, a listed company must prepare its chairman's review report as
per 2016 ordinance. The commission will now direct the companies to prepare a statement of
compliance.

Audit of financial statements: companies with one million paid up capital are free from audit
compulsion. Companies having three million and above paid up capital will have an auditor to
audit its financial statement the new ordinance has added some clauses regarding the
disqualification of auditor e.g. a person indebted to company, convicted person etc. Now
companies have three months to appoint an auditor and board of directors will make its
appointment. The auditor will submit its consent to the company. The fee of auditor will be fixed
by the company or the commission. Now as per new section included, the auditor has the right to
information. Audit report has been modified and now more detailed by including the opinion.
Now the audit report have to be signed by the partnership firm if the auditor was a firm.

6.14- Rehabilitation of sick public sector companies:

The provision regarding the rehabilitation are related to public sector companies in new
ordinance Prevention of oppression and mismanagement

The registrar, if deems fit can file application to the court on the appeal of members or creditors
who have not less than 20% stake in the company, if their rights are endangered. Same is the
case with appointing an administration in above mentioned circumstances.

6.15- Repeals, savings and other matters:

The 1984 ordinance is repealed except part. A new section entailing the information of validation
of laws is also created in new ordinance.

7-Loopholes in the Law:

There are some challenges which Pakistan has to face when it comes to create ease in doing the
business, Law and regulatory framework has certain loopholes which affect the business
activities, because of which foreign investment and FDI is affected because if an investor is
getting no profit then it’s a No Go. Exporters and investors find it difficult to make money in
Pakistan. In 2017, Pakistan’s global ranking has declined in Ease of Doing Business i.e. 141 out
of 190 countries.

7.1- Loopholes in Banking law: Banking law is also not exhaustive, if a company takes loan
from a bank, they have to put guarantees with the bank for example that if they fail to return back
the loan within the due time then by which ways they will indemnify the bank. Banking loan also
involves a number of technicalities which takes a lot of time. There are some loopholes in the
banking Law

1. Time taking/consuming process; not speedy, courts take time to complete the procedures.

2. The law is not extended.

3. When guarantees are involved in a case,both parties try their maximum to consume maximum
time.

7.2- Heavy taxes: Tax evasion and impartial tax collection has devastated Pakistan’s economy,
tax collection departments are incompetent untimely imposition of tax has implied slower
economy growth. People are releasing their investments due to taxes diminished foreign
investment. Companies also attempt to avoid paying taxes through ingenious usage of legal
loopholes or adopting corrupt tax evasion practices. For example issuing fake receipts to
customers or fiddling with sales ledgers and in the end customers end up with paying high
prices. Moreover, business activities are somehow taken back because heavy taxes indicate low
profits. Tax is a Burden unless the business is set up as a sole proprietorship or a partnership
business and the income is less than 40000, then no income tax applies. But if the business is a
private limited company then it's has to pay income tax regardless of the profit it makes. By law,
companies are required to file every financial statement to Federal Board of Revenue, which is
another burden.

7.3- Bidding in Pakistan as a foreign company

People have different arguments about the identifying of Miss procurement at its roots during a
bidding process , every year they got different complains that they treated unfairly by the local
states departments in Pakistan when bidding in local contracts and the law covered in this
ordinance is PPRA ordinance 2002 and public procurements rules 2004 and if their relevant
provincial rules miss procurement proven in court cannot not only have a biding cancelled also a
round of re bidding and a proper inquiry launched upon a government department that’s why
they always advice foreign companies to engage a lawyer from a point to fill a tender documents
n do not leave the process to local agents because they make a tender system complex then there
implications of their actions don’t have long term profit of the company as well as corporate
survival in Pakistan.

Section 2 PPRA ORIDINANCE 2002: It relates to the understanding of the issue and subject
matter of instant petition

7.4- Token money trap a caution for overseas Pakistanis

People in overseas have different complaints that once they sell their property or buy a property
in Pakistan they are approach by the property agents and they manipulate the sale price. They
make a sizeable profit and not declared to the owner.There are different ethical and financial
issues like when a person selling a property, dealer ask for double agreements for the purchaser
of lesser amount for the tax authorities. Hence for overseas Pakistanis have to stick on the one
property dealer on whom they have trust and by which they can do business in Pakistan. And if
both parties play fairly there will be mutual profits and overall satisfaction.

7.5- Loopholes in transfer of property

As we know that purchase of property has never been seen seamless and risk free land records
system is primitive and their existing loopholes and pitfalls that leads innocent buyers to fraud
and trickery therefore people check carefully the title of property before any transaction takes
place or any contact is signed transfer of property act 1882 provides guidelines to buyers n
sellers about the transactions. And on the other side registration act 1908 was originally
formulated to confirm the registration of the real estate.

7.6- Complex Corporate Law.

Companies Ordinance 1984 is a set of complex law, each of them require lengthy paper work
and consumes time for documentation. Every company is required to file their financial
statements, name of the directors and the name of the company and has to mention details of
their annual meeting to Security Exchange Commission of Pakistan. The law involves certain
technicalities which are quite time taking.While getting registered with Security and exchange
Commission of Pakistan, a company has to follow certain procedures for instance it has to file a
suit in the high court according to the pecuniary jurisdiction of the company. These complex
laws result in the foreign investment being invested in some other country as well as it creates
barriers for new entrants of Pakistan.