Irshad Salim (BE2C2 Report) — Pakistan Senate’s house panel on Wednesday proposed an amendment to the Companies Bill which will make it binding on Pakistani migrants and immigrants (non-residents and dual-nationals) to disclose their monetary interests abroad.
Non-resident Pakistanis – those who live abroad for more than six months in a year (mostly in GCC countries), and dual nationals (mostly living in US, UK, Canada and EU) will now fall under the definition of Pakistanis for the purpose of this business and financial-related amendment suggested by the select panel, said Securities and Exchange Commission of Pakistan (SECP) Chairman Zafar Hijazi after the meeting of the Senate Standing Committee on Finance.
Those non-resident Pakistanis doing business in GCC countries as foreign-owned sole-proprietorship (self-employed) firms, or as limited liability company members and operating singly or as joint venture members either individually or as a business entity, are expected to fall within the ambit of the amendment.
Mostly salaried, these overseas Pakistanis’ (10m approximately) remittances are crucial for the country’s balance of trade payments and government spending. It has also become more significant over the last few years in the face of sluggish export trends. These individuals may not however fall under the category, unless some of them are also doing business or have invested their earnings in businesses, real estates, etc, said one analyst. “We’ve to wait and see until the amendment is approved,” he added.
Though the National Assembly has already passed the bill, it will now again go back to the lower house of parliament for final voting due to changes proposed by the Senate panel.
Once passed by the National Assembly, the amended law may eventually force influential people to disclose their offshore beneficial ownership and all forms of assets. It may also enable return of capital which were invested abroad by some of them for various reasons.
The Committee amended Clause 452 of the under discussion Companies Bill 2017 that deals with companies’ global register of beneficial ownerships.
Beneficial ownership means ownership of securities beneficially owned, held or controlled by any officer or substantial shareholder directly or indirectly either by him or her, the wife or husband, the minor son or daughter, etc.
“All Pakistanis should be covered under the new companies’ regime, as some in the past have managed to remain non-resident Pakistanis,” said Standing Committee Chairman Senator Saleem Mandviwalla.
Last fiscal year (July 2015-June 2016), Pakistan government received almost $20 billion from their nationals living abroad – with highest amount from the Saudi Kingdom where more than 2.m million Pakistanis live.
These Pakistani individuals working overseas may not need financial disclosure statements, however, those individuals operating as sole foreign owners of businesses or in partnerships, may have to make the disclosure, according to some analysts.
According to an estimate, the net worth of investments and their earnings abroad, including liquid and fixed assets held in offshore companies (tax havens) as well as stranded assets in banks and foreign entities, by Pakistanis, could be anywhere in the range of $80 billion and $160 billion — if an end-to-end paper trial is documented, but it will take years to do so, a view generally held by some analysts.
The Overseas Investors Chambers of Commerce and Industry had proposed to exclude non-resident Pakistanis from the ambit of the law but both the SECP and the Senate panel overruled the suggestion. The OICCI also wanted exclusion of company officers from the requirement of reporting substantial ownerships, if they come to know about this during course of their work.
The SECP endorsed the committee’s proposal as it will ensure that the government back the new amendment at the time of final voting in the National Assembly.
The SECP said it will share such information of beneficial ownership with the Federal Bureau of Revenue (FBR) and any other agency, including the courts as and when required — a standard operating procedure practiced worldwide.
The new amendment is in line with best international practices. The G20 Summit in Brisbane had adopted new high-level Principles on Beneficial Ownership and Transparency.
The amendment states: “Every substantial shareholder or officer of a company incorporated under this act, who is citizen of Pakistan within the meaning of the Citizenship Act, 1951, having shareholding in a foreign company or body corporate shall report to the company his shareholding or any other interest as may be notified by the commission.” These people will have to disclose their interests on a specified form within 30 days of holding such position or interest.