RECORDER REPORT

ISLAMABAD: The Companies Ordinance, 2016 categorically gives power to the federal government to appoint and remove chief executives of public sector companies and the same was applicable previously as per relevant rules made under the repealed Companies Ordinance, 1984.

Chairman Securities and Exchange Commission of Pakistan (SECP) Zafar Hijazi informed media here on Friday that the right of appointment and removal of chief executive of public sector companies vests with the government as per the repealed Companies Ordinance, 1984 and Public Sector Companies (Corporate Governance) Rules, 2013 (the Rules).

He said that the right to appoint or remove directors/CEO in public sector companies where the majority shareholders as well as voting power is held by the government, has always been with the government by virtue of section 183 of the repealed Ordinance of 1984 and the same position has been retained except a minor correction to remove the ambiguity/clarification created by virtue of PSC Rule, which is a subordinate legislation.

Under section 187 of the repealed Companies Ordinance, 1984, the directors nominated by the federal government need not be member of the company (qualification share) so this makes it abundantly clear that said directors are simply agents of the government (principal). Once any such director, if also holding the position of chief executive, is removed by the government under section 183 of the repealed Companies Ordinance, 1984, he/she shall also cease to hold that position. In the 2016 Ordinance only the clarity has been given to the legal provision already in place.

A comparison of the repealed ordinance and new ordinance 2016 revealed that the SECP has not made any change regarding appointment and removal of chief executives of public sector companies. It is evident that previously the Rules made under the Companies Ordinance, 1984 and now the Companies Ordinance, 2016 categorically give power to the federal government to appoint and remove chief executive of a company and there is no change in the scheme of law, he added.

Referring to foreign jurisdictions, the SECP chairman said that the right to appoint chief executive of public sector companies is being exercised by the governments in many countries.

He said that the definition of the public sector companies has been duly given in the Companies Ordinance 2016 as the same has been used in different provisions.

He also referred to the section 186 of the Companies Ordinance 2016 that the government shall have the power to nominate and appoint chief executive of a public sector company in such manner as may be specified. A chief executive nominated shall hold office during the pleasure of the government, he said while quoting the sub-sections 4 and 5 of section 186 of the Companies Ordinance 2016.

To a query, he added that the SECP will also make new public sector rules.