The Securities and Exchange Commission: For your Convenience

by Wasim Abid & Rahman Ali Khan, Partners at Abid & Khan Law


The Securities and Exchange Commission of Pakistan (the SECP) is a regulatory body constituted and established under the SECP Act, 1997. As per the SECP Act, the objective of establishing the SECP was the provision of beneficial regulation of capital markets and the superintendence and control of corporate entities. The SECP also administers a number of statutes, including laws pertaining to companies in Pakistan. On their official website, the SECP claims to be developing “…a modern and efficient corporate sector…”, amongst other objectives.

In Pakistan, any individual aspiring to engage in any business activity has three options: (1) a sole proprietorship; (2) a partnership firm; and (3) a company (single member, private limited or public limited). The role of the SECP is limited to the regulation and monitoring of companies. To this end, the SECP has created a Company Registration Office (CRO); the purpose of which is to facilitate the public in the incorporation of companies and the keeping of record pertaining to incorporated companies. There are nine CROs in Pakistan, spread across the country, each with its own jurisdiction. In order to incorporate a new company with any CRO, the SECP provides two options: (1) physical registration system; and (2) online registration system.

In theory, the SECP has a very good system. If it is run properly, it has the potential to be of wonderful service to the public. However, in reality, a well run and efficient system cannot be further from the truth as the system is a complete and utter shambles from start to finish.


Physical Registration

Applying to the CRO for the registration of a company through the physical registration system, although still in effect and perhaps more popular than the online registration system, is the old way of doing things. The SECP claims to be able to issue an incorporation certificate for a company within four hours of receipt of a registration application; provided you submit complete documents and use the Memorandum of Association and the Articles of Association as provided for on the SECP website.

In theory, the issuance of an incorporation certificate following four hours of submission of the registration application is as good as it gets, with a turnover time which similar regulatory entities in comparative jurisdictions will struggle to match. In practice, it is anything but. The complete requirements for the registration of a company with the CRO are nowhere to be found; snippets can be found on the SECP website and from there, you are expected to piece together the rest of the puzzle. There are certain requirements that you will find out about after you have submitted the registration application. Forget about delivery in four hours, you will be lucky to get somewhere in four days.

Once you have prepared the necessary registration forms, the next step is to download the Memorandum and Articles of Association for your type of proposed company from the official website of the SECP. All that is required from your end is to insert your own details where spaces have been provided. However, filling out the forms provided by the SECP will take longer than anticipated; the formatting is all over the place. Filling in one column or table will result in a lopsided document which no one can then decipher. Writing in your details is also not an option; these details have to be typed in. So in addition to filling out the forms, you are expected to spend a considerable amount of time on ensuring that the formatting of the forms provided by the SECP stays intact. Quite often there will be different fonts, different modes of formatting and tables that are incorrectly spaced.

The first objection you will receive from the CRO will be on the Memorandum and Articles of Association that you have submitted with your registration application. Now bear in mind, these will be the same Memorandum and Articles of Association that you would have copied from the SECP website, but due to the fact that these will never be updated online, the CRO will mark its own changes within two to three working days and request you to incorporate these changes before resubmitting your registration application. There is very clearly something wrong here. It cannot be too hard to regularly update the specimen Memorandum and Articles of Association provided on the SECP website. Surely there is no shortage of staff, nor is this a particularly time-consuming process. It is certainly not asking too much to ensure that the specimens provided – that you want people to use – are not the same ones that will be later objected upon by the CRO (without fail). Simply update the specimen Memorandum and Articles of Association regularly on the SECP website and this will no longer be an issue. Imagine how much time, money, resources and paper is used because of this simple failing. As stated earlier, forget receipt of an incorporation certificate in four hours; receiving it in four days is an achievement.

During the company registration process, the requisite registration and filing fees are required to be paid into a bank, the receipt for which will then be submitted along with the registration application. To calculate your registration and filing fee based on the share capital of your proposed company, a very handy tool is provided on the SECP website which carries out the calculation for you. It is a great little tool. Unfortunately, the calculation you rely on from the SECP website will be rejected by the CRO. The money you have paid is effectively gone. You will only be entitled to receive half of a certain element of what you had paid; and that, too, after the filling out and submission of more forms and further delay. After going back again and paying the requisite registration and filing fees (as specified by the CRO), you are praying the ordeal is over. Please note that this will probably be the fifth or sixth day following the initial submission of your registration application, and by the time you reach this stage, we are well beyond the four hour territory here.

Once resubmitted with the proper registration and filing fees paid, and with the Memorandum and Articles of Association tailored to the CRO’s desire (and mood), your registration application is complete and ready to be processed for the issuance of an incorporation certificate; except for one final issue. The CRO will require you to bind all documents of the registration application prior to this final submission. There are no instructions for you to do this anywhere; on the SECP website or anywhere else. Why was this not a requirement the first time you submitted the registration application, you wonder? Why was this not made an objection when the Memorandum and Articles of Association were required to be amended? You have every right to feel aggrieved at this point. But the best part is, whether or not you bind the documents of the registration application is also completely dependent on the mood and the nature of the officer of the CRO you are lucky enough to be dealing with. Beg, and this arbitrary requirement might be waived. Beg poorly, and you will be on your way to a stationery shop for binding.

On a serious note, there is absolutely no consistency in what the CRO will require you to do. It will be different every time; and the result is dependent entirely upon your behaviour. Boasting about a great system is all well and good, but the placement of discretion in the hands of people, who feel like they have no obligation to the general public, is a definite misstep by the SECP. It is not hard to provide complete requirements for the registration of a company; online on the SECP website and physically at all CROs. It is also not very difficult to ensure that the specimen Memorandum and Articles of Association provided online are updated regularly. Likewise, it cannot be too much of a hassle to ensure that the registration and filing fee calculator on the SECP website is accurate. Alas, one can but hope.


Online Registration

The SECP has also designed an online registration and filing system called “EServices”, which is billed to be modern and state-of-the-art. As with the physical registration system, this system also promises the issuance of an incorporation certificate within four hours of the submission of a registration application. I know what you’re thinking: a state-of-the-art system and delivery in four hours – sounds too good to be true. Let me be the first one to tell you that nothing can be further from the truth. It is an absolute car crash of a system with even worse support, technical or otherwise.

The first shock you will receive will be the requirement to run EServices on Internet Explorer. It will not work on any other browser. Once you have sourced a computer from the 1980s to begin your application process, the system will go down. You will then not be able to open EServices for a few days to initiate your application process. Upon complaint, you will be casually informed by the SECP that the EServices system is indeed down. They will not provide you with a date on which it can be expected to work again, but they will provide you with a very handy suggestion: keep reloading the EServices page all day, every day, until it works (it won’t).

On the Eservices system, you are provided guides which only contain basic details. The guides are amazingly styled in Comic Sans – the most ‘professional’ of all fonts. As if this is not embarrassing enough, the credit list for a basic instruction document will put any Hollywood movie’s credit roll to shame. With just a basic guide, you are expected to know everything else. Using the EServices has to be one of the worst online experiences anyone has ever encountered. It is truly beyond compare. There are certain places in the EServices system where you are provided with “Help” signs. Clicking on any of these “Help” signs will display the sagest advice to you on every occasion – please fill in the forms. The EServices system provides no flexibility, the server will always be down (even in the middle of your application process) and as a result, something that should take a few minutes ends up taking weeks.

Even if you do somehow manage to have your company incorporated after a month (considerably more than the billed four hours, you are not home and dry. Every filing will be an issue. The system will randomly go down for two weeks or more. If you require company documents urgently, forget about it. The SECP does not allow for a system where you can receive documents physically in case the online system, EServices, is down. Although, in our experience, there has been one exception which was the result of incessant begging. Even more absurd is the lack of choice to switch over to a physical system once you have signed up for the online system. The SECP does not allow you to do that, regardless of the circumstances. There is no justification for such a restrictive system.


Support from the SECP

Naturally, if you are encountering problems with any facet of the CRO or the SECP, the SECP is kind enough to provide you with a helpline (with which it also bids you good luck). The SECP Helpline is like a unicorn; people have heard of it, they have written about it – some have even claimed to use it, but you are yet to see evidence of this. It takes a ridiculous amount of time to get through to someone on the SECP Helpline – an hour minimum on hold on average. Once you do get through, you are directed to someone who never picks up their phone – so you have to go through the hour long process again.

Even worse is the behaviour of the general staff and the officers at the CROs. They treat the general public with disdain. The following events are based on our personal experiences and do not contain an inkling of exaggeration. We went to submit the necessary filings for a company at the CRO counter in Islamabad only to have the file thrown back across the counter with this solitary word of feedback: “Letter”, before moving on to the next person in line. No explanation. No indication as to what type of letter. You are expected to figure it out yourself.

Another time, we had to wait ten minutes at the front of the line because someone from the backroom staff appeared at the counter with samosas. The counter staff casually swivelled their chairs around and proceeded to ignore us for ten minutes while samosas and tea were had and conversation was made. Please note that this was not a scheduled break. They did not even have the decency to tell us they were going on a break. We asked them what was going on and we were ushered to wait dismissively, as if we had interrupted a meeting of the United Nations Security Council.

We must not forget that establishments like the CRO are for the benefit of the general public. We cannot allow the staff at these institutions to treat us with disdain. Going to the CRO to have something done is like asking for a favour. The CRO staff will act as if it is doing you a massive favour. This is their job requirement. Our taxes pay their salaries. Their duty is to the general public, not the other way around. A lot of people never say anything in return to the officers of the CRO due to their interests that vest in this institution. This may be a contributory factor, but the CRO should not be in a position to cause loss to you should you not submit to their whim. It is a completely broken system, the staff is rude and unhelpful, the restrictions are unfathomable and the general incompetence displayed boggles the mind. It makes a mockery of the claims of a modern and efficient system and all the other buzzwords that the SECP repeatedly roll out frequently.

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