ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has achieved another milestone in ease of doing business as its recommendations to amend the 43-year-old Companies (Appointment of Legal Advisors) Act, 1974, has been approved by the Parliament.
The Companies (Appointment of Legal Advisors) Act 1974 was promulgated in 1974, which earlier required the companies having paid-up capital of 0.5 million and above, to appoint a legal advisor to advise such companies in the performance of their functions and the discharge of its duties in accordance with the law. It was considered that the requirements of the legal advisor for the small companies was a major hurdle in their corporatisation, as it increased the cost of doing business due to hiring of legal advisor to fulfil this mandatory requirement.
Now, the Companies (Appointment of Legal Advisers) (Amendment) Act, 2017, has been promulgated and the threshold of paid-up capital for companies to appoint their legal advisor has been increased to companies having more than 7.5 million paid-up capital. Previously, there were almost 40,000 companies, which were required to appoint legal advisor, and now after the amendment, approximately 10,200 companies are required to appoint legal advisor and around 30,000 companies have been relieved from this regulatory burden through this initiative. The amendments to the Companies (Appointment of Legal Advisors) Act, 1974, are aimed at saving the small-sized companies from financial burden of appointing legal advisors. As part of facilitation reforms, this is another facilitative step by the SECP to provide simple and encouraging regulatory environment for companies having small capital base.
Previously the penalty for contravention of the Companies (Appointment of Legal Advisors) Act, 1974, was imprisonment. Now, the SECP has been empowered to impose penalty for contravention of the provisions of the law, instead of the courts, which has reduced the workload of the courts.