Pakistan’s Securities and Exchange Commission (SECP) has proposed that all current bearer or bearer share warrants, if any, be either registered or cancelled in the specified manner and time limit.
The Pakistan Mutual Assessment Report released by the Asia Pacific Group on Money Laundering in October 2019 also highlighted some shortcomings in the regulatory system regarding the abuse of bearer shares and bearer share warrants etc.
The SECP said that an explicit prohibition is given by the proposed alteration. Bearer securities are vulnerable to misuse as they can effectively obscure the ownership of a corporate entity and thus provide maximum transparency and make these corporate vehicles more prone to illegal use, including money laundering.
Here are the proposed amendments in the Companies Act:
1- Notwithstanding anything contained in the National Investment (Unit) Trust Ordinance, 1965 (VII of 1965) or any other law for the time being in force, no company shall allot, issue, sell, transfer or assign any bearer shares, bearer share warrants or any other equity or debt security of a bearer nature, by whatever name called, and any allotment, issue, sale, transfer, assignment or other disposition of any such bearer shares or bearer share warrants or any other equity or debt security of a bearer nature, shall be void.
2- All existing bearer shares or bearer share warrants, if any, shall either be registered or cancelled, in such manner and within such period, as may be specified.
3- No civil proceedings shall be instituted or maintainable in any court in respect of bearer share, share warrant or any other equity or debt security of a bearer nature, by whatever name called, allotted, issued, sold, transferred, assigned or disposed of by a company.
4- Any contravention or default in complying with the requirements of this section shall be an offence liable in case of- (a) a director or officer of the company or any other person, to a fine which may extend to one million rupees; and (b) the company, to a fine which may extend to 10 million rupees.