New Regulation Update by the Securities and Exchange Commission of Pakistan (SECP)

The Securities and Exchange Commission of Pakistan (SECP) has issued a pivotal update to the financial and corporate governance landscape for newly incorporated companies under the Companies Act, 2017 (XIX of 2017). With an aim to streamline financial transactions and enhance transparency in the corporate sector, the SECP introduces significant mandates regarding the payment of subscription money by subscribers and the issuance of share certificates.

Key Highlights of the Update:

1. Subscription Payment Timeline and Mode:The SECP mandates that all subscription payments promised by subscribers in the Memorandum & Articles of Association must be made in cash through banking channels. This step must be completed promptly post-incorporation, within a strict timeframe of 30 days.
2. Issuance of Share Certificates:Upon full receipt of the subscription money from each subscriber, companies are required to initiate the issuance of share certificates. These can be in physical form or as book entries through a central depository, adhering strictly to the relevant laws in force.
3. Reporting Non-receipt of Subscription Money:In instances where companies face obstacles in receiving the subscription money within the prescribed timeline, they must report these issues to the registrar within 30 days of incorporation. Subsequently, they must follow the directives issued by the Registrar under the Companies Act, 2017, to resolve the situation.

Implications for Corporate Entities: This notification marks a significant move towards ensuring financial discipline and legal compliance from the outset of a company's incorporation. It underscores the SECP’s commitment to reinforcing the foundations of corporate governance and accountability within Pakistan’s corporate sector.

Companies are advised to align their incorporation and post-incorporation processes with these new requirements to ensure seamless compliance. This initiative is expected to foster a more transparent, accountable, and efficient corporate environment in Pakistan.

For detailed guidance and compliance assistance, companies are encouraged to consult with legal and financial experts to navigate these updates effectively.