Senate approves amendments in the Companies Ordinance, 1984

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The Senate has approved the Companies Ordinance (Amendment) Bill, 1998. The
reasons for introducing the Amendment Bill and expected impact of the amendments are
briefly narrated below:-

(i) Under the existing provisions of section 14 of the Ordinance, no association or
partnership firm consisting of more than 20 persons may function unless it is registered as
a company. With a view to removing the practical difficulty being faced by the firms of
accountants or other professions, where practice in the form of a company with limited
liability is not permitted, such firms have been provided exemption from the above
mentioned requirements.

(ii) Presently, companies making public offering of shares have to publish full text of
prospectus in newspapers which causes huge burden on the investment of the
shareholders and funds of the companies. With a view to curtailing the publication cost,
publication of an abridged form of prospectus to be prescribed by the Commission shall
be allowed. However, full text of the prospectus shall be available at the Registered
Office of the company, stock exchanges and bankers to the issue.

(iii) Under the existing provisions of section 236 of the Ordinance, the directors of a
company have to make out and attach to every balance sheet of the company, a report,
called, “Directors’ report”. With a view to making the Directors’ report more meaningful,
following additional information shall be provided in the report for the information of the
shareholders:
(a) Earning per share;
(b) reasons for incurring loss and a reasonable indication of future prospects of profit, if
any; and
(c) information about defaults in payment of debts, if any, and reasons thereof.

(iv) Under section 245 of the Ordinance, all the listed companies are required to file
copies of half yearly accounts with the Commission within two months of close of the
first half of their year of accounts, failing which the directors are liable to imprisonment
for a period of one year. The punishment in the form of imprisonment for a default in
filing the half yearly accounts has been considered too harsh. Therefore, through
amendment in the said section a penalty of rupees five thousand and a fine of one
hundred rupees for every day during which the default continues has been provided.

(v) Under the existing law no qualification is prescribed for auditors of a private company
irrespective of its size. Amendment is being made in section 254 of the Ordinance to the
effect that the accounts of a private company having paid up capital of Rupees three
million or more shall be required to be got audited by a qualified Chartered Accountant.

The bill would now be moved in the National Assembly for approval after which it would
stand enforced.

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