Companies Ordinance Research Articles

Derivative Action- An Impartial Right given to Minority Shareholders under Pakistan’s Legislation

Derivative Action- An Impartial Right given to Minority Shareholders under Pakistan’s Legislation

The Law of Insider Trading in Pakistan: Focusing Associated Person & Connected Person

The legal mechanism that has been adopted for insider trading in Pakistan focuses on the associated and connected person includes Securities and Exchange Ordinance 1969 and Companies Ordinance 1984. The paper discusses the key issues regarding the associated and connected person and legal regime regarding the effectiveness of insider trading in Pakistan. This paper examines the existing laws in Pakistan, which specifically focus upon market-oriented regulations and economic development. The focus of this paper is to highlight the legal framework and connectivity between associated and connected persons affiliated with insider trading and other prohibitions which are provided in the SECP regularities of Pakistan.To tackle the misleading information and devaluation of market prices through insider trading is also part of this paper, along with some basic information like defrauding the market and, consequently, the shareholder sat large will also be discussed in this paper.

The extra-territorial application of corporate governance standards in China

ABSTRACT In this article, we describe theoretical application of extra-territoriality to corporate governance related law in Hong Kong. We describe why and how such extra-territoriality (following the lead of the United States) could encourage Mainland firms to adopt corporate governance practices more in line with the OECD Guidelines (and even implement them). Changes to the Companies Ordinance and the Hong Kong Stock Exchange’s Listing Rules can, in theory, provide for such extra-territorial reach. The results of such an experiment would help us understand the role an international financial centre can play in creating value across borders, as well as make Hong Kong’s rules and markets more relevant in/to Mainland China.

Status and Analysis of Formal and Actual Human Resource Management, Financial and Policy Autonomy of State-Owned Enterprises in Pakistan

This paper studies the formal and actual human resource management (HRM) autonomy, financial autonomy and policy autonomy of the state owned enterprises (SOEs) of Pakistan and points out the differences that exist between them. It also identifies behind the lack of autonomy of SOEs and proposes multiple recommendations though which this gap can be bridged. Both quantitative and qualitative data was collected to carry out this study. Quantitative data was collected from 40 randomly selected SOEs using a close-ended questionnaire while 20 semi-structured interviews were carried out to collect qualitative data. Descriptive statistics was used to see the number of SOEs having different levels of HRM autonomy, financial autonomy and policy autonomy. It was found that a very less number of SOEs were completely autonomous in different aspects of HRM, financial management, policy formulation and its implementation. Excessive political intervention, dependence on government for resources, lack of power of Security and Exchange Commission of Pakistan (SECP) and poor performance of SOEs along with numerous other reasons were identified as causes behind this lack of autonomy. Multiple recommendations have also been proposed to overcome this issue. Keywords: Autonomy, State Owned Enterprises, Human Resource Management Autonomy, Financial Autonomy, Policy Autonomy, Task Autonomy, Securities and Exchange Commission of Pakistan, Companies Ordinance 1984, Public Sector Companies (Corporate Governance) Rules 2013. DOI : 10.7176/PPAR/10-1-01 Publication date: January 31 st 2020

Disclosure of beneficial ownership of companies in Hong Kong

In early 2017, the Financial Services and the Treasury Bureau of Hong Kong conducted a consultation and proposed to put in place a regime under its Companies Ordinance to enhance the transparency of beneficial ownership of companies by requiring them to publish the names of their ultimate owners on company registers in an effort to meet prevailing international standards to combat money laundering and terrorist financing. The consultation conclusion was published in April 2017 which stated that based on the overall support for the proposed legislation, it seeks to introduce such regime by late 2017. This article is written against such background and highlights the rationales for Hong Kong in introducing such a law. In doing so, the article will make reference to the United Kingdom and Singapore which have also recently implemented a similar regime under their company law.

Charge-backs in Hong Kong: Conceptual, Legal, and Policy Issues

This paper considers the conceptual, legal and policy issues relating to charge-backs over cash deposit in England and Hong Kong. I argue, first, the rejection of the conceptual impossibility doctrine in relation to the taking of charge-backs accords with sound policy rationales as well as business practice. Second, despite lenders being able to take charge-backs, the traditional triple cocktail structure, consisting of a flawed asset provision, a right of contractual set-off, and charge-back, adopted by lenders when it was not certain whether charge-backs were valid, still has its modern value. Third, I analyse from the lenders’ perspective the differences between taking mortgage-backs and charge-backs, and argue the former provide lenders with a number of benefits. Lastly, I re-examine the normative goals of registration of security interests, and applying the theory in the context of charge-backs, I argue why charge-backs should not be exempted from the statutory registration regime under the Companies Ordinance (Cap. 622).

The Case for the Extra-Territorial Application of Corporate Governance Standards in China

What rule might an international financial centre like Hong Kong play in incentivizing corporate governance reform in China? Or any foreign jurisdiction? In this article, we describe theoretical application of extra-territoriality to corporate governance related law in Hong Kong. We describe why and how such extra-territoriality (following the US’s lead) could encourage Mainland firms to adopt better corporate governance practices (and even implement them). Changes to the Companies Ordinance and the Hong Kong Stock Exchange’s Listing Rules can, in theory, provide for such extra-territorial reach. The results of such an experiment would help us understand the role an international financial centre can play in creating value across borders, as well as make Hong Kong’s rules and markets more relevant in/to the Mainland.

Limited Liability Partnership in Pakistan: An Overview

Unlike the rest of the world, Limited Liability Partnership (LLP) is a comparatively newer business vehicle for Pakistanis. On August 8th, 2014 Securities and Exchange Commission of Pakistan (SECP) issued a press release to introduce this new concept. The reason for introduction of this business structure was to fill the gap between business firms such as sole proprietorships and partnerships, which are most of the times unregistered and limited liability companies that are governed by the Companies Ordinance, 1984. This research paper aims to define the basic concept of LLP from the Pakistan’s perspective with respect to its advantages and nature.

Whether the idea of Single Member Company (SMC), is a device to exploit and to avoid the corporate liability by the Capitalist? A critical Analysis of Section 160 of (Pakistan) Companies Ordinance, 1984

The concept of Single Member Company (the “SMC”) was introduced in Company law of Pakistan in 2002. However, besides having created anomalies within the existing legislation that have already been analyzed by different academics, there remains potential for abuse of the concept of separate legal entity and/or the doctrine of limited liability at the hand of the single member of the SMC. In this view of matter, this article proposes to review the Section 160 of Companies Ordinance, 1984 to argue that there is no provision in the law in Pakistan to effectively place a mechanism of checks and balances so as to reduce the risk of escaping the corporate liability by the SMC in Pakistan. In the same context, this article also dilates upon the inadequacies of SMC legislation in relation to the concept of social, economic and environmental responsibilities of corporate entities.

Codification of Directorss Duty of Care and Skill in Hong Kong: A Welcome Clarification of the Law

After almost two decades of consultation, the newly enacted Companies Ordinance (Cap 622) of Hong Kong eventually came into full force in March 2014. One of the major reforms made to the new legislation is the codification of the duty of care, skill and diligence for directors under section 465 which is based on section 174 of the UK Companies Act 2006. This article examines the reasons for this development in Hong Kong by drawing reference to the UK for adopting a dual objective/subjective standard in regulating directors’ duty. It argues that such an approach is beneficial to Hong Kong as it clarifies the law and enhances corporate governance.

Disclosure of Directors' Personal Information in Hong Kong

Following the lead of the UK and Australia, Hong Kong recently proposed the tightening up of access by the public to directors' residential addresses and identity card or passport numbers during its reform of the Companies Ordinance, but encountered strong opposition from the media and various professional bodies, leading to the government's decision to shelve the proposal. This paper highlights the lessons that the Hong Kong government should learn from this failure to transplant a corporate law reform, which overlooked the differences in the unique local situations.

When is the Board Accountable for Delegation and Reliance? A Case Study of the MTR Corporation

On 15 April 2014, the MTR Corporation Limited (‘MTR’) unexpectedly announced a two-year delay in its Express Rail Link project leading Professor Anthony Cheung, the Secretary for Transport and Housing as well as a non-executive director of the MTR, to express that he was ‘totally caught by surprise’. This article addresses two important and related issues that are raised in the context of company law, namely, the extent to which directors in Hong Kong can delegate their responsibilities and the extent to which they may place reliance upon third parties. This is especially significant following the enactment of the new Companies Ordinance on 3 March 2014 that codified the standard of care expected of directors, which benchmark some of the members of the board of MTR might have breached.

Corporate Governance and The New Companies Ordinance in Hong Kong

The new Companies Ordinance of 2012 has been enacted in Hong Kong pursuant to the Companies Ordinance Rewrite project (the Rewrite). One of the stated aims of the Rewrite is to enhance corporate governance. This article examines some of the reform initiatives implemented in the new Ordinance in the area of corporate governance, including the new statutory duty of care of directors, provisions on fair dealing by directors, and members’ remedies.

Sponsors' prospectus liability in initial public offerings in Hong Kong

This article critically analyses the current and controversial issue of whether sponsors in Hong Kong should be subject to civil and criminal liability for misstatements in an IPO prospectus under the Companies Ordinance. It argues that the existing legal regime provides insufficient deterrence and advances policy justifications for imposing liability. It then examines the principal objections against the imposition of liability — negligible deterrence and over-deterrence — and finds them unpersuasive. It also specifically addresses the concerns arising from making sponsors criminally liable.

The statutory unfair prejudice remedy for minority shareholder protection in Pakistan

Purpose – The unfair prejudice remedy as contained in s.290 of the Companies Ordinance 1984 entitles a member with a shareholding of twenty percent or more to petition to the court for suitable and appropriate court orders in circumstances where the member has been unfairly prejudiced. The major difficulties and complexities emerging from the examination of s.290 relates to (but not limited to) locus standi, high cost of litigation due to the length and complexity of the unfair prejudice litigations, lacunas in share valuation, cumbersome court procedures, low quality of pleadings, unethical conduct of lawyers, etc. The purpose of this paper is to shed light on these topical questions. It is contended that the legislature and the courts will have a strong role to play in providing clarity and certainty to the law.Design/methodology/approach – The first part provides a brief overview of the statutory unfair prejudice remedy contained in s.290. The second part discusses the concept of unfair prejudice in th...

Legislative Transplant of Single Member Company in Islamic Republic of Pakistan: Anomalies in the Companies Ordinance, 1984

The myth of the new idea of single member company (SMC) is to give a boost to the economy of sole proprietor form of business organization by extending the privileges available to other corporate personalities.1 Yet, the intricacies of this emerging concept are much different from the well-developed juristic philosophy of multimember corporations. In this context, this article attempts to prove that the manner of legislative transplant of this idea in the existing Company Law of Pakistan has resulted in conceptual fault lines leading to multiple anomalies in the corporate legal system. In the end, it concludes that a suitable, separate and handy legislative enactment is a must to broacher this new idea in the legal and commercial fraternity to let the country bear more fruits; or in alternative, if the primary law is suitably amended to bring the same legislatively coherent.

Towards An Effective Scheme-Based Corporate Rescue System for Hong Kong

Scheme of Arrangement (SOA) was dismissed as a viable restructuring device in the corporate rescue debate towards the end of the last century. This paper demonstrates that SOA can be used effectively to perform corporate rescue functions. This conclusion is based on an assessment of the efficacy of the SOA-based rescue system developed by the Hong Kong courts since the mid-late1990s. The paper points out, however, that the effectiveness of this scheme-based restructuring system can be greatly improved by linking a court-controlled moratorium to the SOA provision in Hong Kong's Companies Ordinance.

Lectures on Company Law Delivered to Ph.D Classes

This paper contains the lectures delivered to the Ph.D Class in Corporate law at the University level. The object was to fresh the whole concept of company law made clear and to encourage the students to conduct further research themselves by going through the books, the journals, the articles, the thesis already written. They may also take help from the Internet and when they come in the class room they may themselves be able to discuss the topic or subject at issue. Company Law may be defined as a branch of law governing the companies. It is a law relating to companies formed under an Act or Ordinance, relating to regulation of the working and conduct of companies. Company law is a body of statutes and case law.Company law means the rule of conduct in respect of founding, promoting, making, getting registered, subscribing, holding, inviting investment, investing, crediting, meeting, resolving, running the affairs of a company and in case it is not possible to go on further to end it by an order of liquidation by a court or outside court. From beginning till end the objective is to do business in a useful manner as an association of those who are contributors in joint stock. The relationship is therefore fiduciary and commercial. A law made by a competent legislature or law-maker by whatever name it is called (i.e. an Act or an Ordinance) is a statute. There may be a single statute covering more than one subject or there may be more than one statute on the subject for any reason or wisdom. Those may have many names but the soul of them is the same. This differentiates between a law and the law. The plural of both is laws.Thus the Companies Ordinance, 1984 is a law. But there are other statutes which deal with the corporate affairs. Each one of them is a law. The soul or common wisdom lying in them is the law corporate.

Review of the Hong Kong Companies Ordinance

Although nineteenth century English companies law proved remarkably serviceable to the British empire, like all good things, it ultimately neared the end of its useful life and underwent a major rethinking earlier this decade, culminating in the Companies Act of 2006. Elsewhere though, throughout what had been the old empire, commercial expediency had already forced reconsideration of English companies law concepts, most notably in Canada, New Zealand, Australia and Hong Kong. This report is the starting point for the ongoing renewal of companies law in Hong Kong, and itself provided the catalyst for the recent reforms of U.K. companies law. The report has also served as a companies law primer for transitional economies such as Vietnam. The executive summary, which is also available in Chinese, outlines the structure and issues associated with a modern corporate law.

An International Survey of Companies Law in the Commonwealth, North America, Asia and Europe

This Survey originated as a background paper, A Comparative Survey of Companies Law in Selected Jurisdictions (January 1996), prepared for the Financial Services Branch of the Hong Kong Government as part of a Review of the Hong Kong Companies Ordinance. The Comparative Survey looked at the state of companies and corporate legislation in the United Kingdom, several Commonwealth jurisdictions (including South Africa), the United States, the European Union, France, Germany, Singapore, the People's Republic of China and Bermuda. As disparate an assortment as this may seem, the companies legislation in these various jurisdictions shared sources and influences. This Survey is an updated version of the original Comparative Survey and was prepared at the request of The Company Law Review of the Department of Trade and Industry, London, U.K. The Company Law Review was launched in March 1998 as a fundamental review of the framework of core company law in the U.K. and resulted in the Companies Act 2006 (UK).