Islamabad, Oct 23: A person cannot serve as an independent director of a listed business if they directly or indirectly own more than one percent of the voting rights in that firm.
To propose changes to the Listed Companies (Code of Corporate Governance) Regulations, 2019, the Securities and Exchange Commission of Pakistan (SECP) released S.R.O.1639(I)/2024 on Wednesday.
The notification states that unless there are exceptional circumstances, which should be communicated in writing to the company secretary or board chairman beforehand, it will be mandatory for the chief executive officer and the directors of a company, who together make up one-third of the board size or four, whichever is larger, to attend the company’s general meeting or meetings, both ordinary and extraordinary.
According to SECP, the Board chairman is urged to take the required actions to record the full general meeting or meetings on audio and video. These recordings will be preserved and made accessible to the Commission and PSX as needed.
Under the latest regulations, the SECP restricts shareholders with over 1% voting rights from exercising disproportionate control over key decisions within a company. This restriction is seen as a proactive measure to curb the dominance of larger investors, who may attempt to steer corporate decisions in their favor at the expense of the broader shareholder base.
By limiting their voting power, the SECP aims to level the playing field and ensure that all shareholders have a voice in shaping the future direction of the company.
The introduction of this policy reflects SECP’s commitment to promoting transparency and corporate accountability. Companies are required to implement these new voting restrictions in their Articles of Association and abide by the regulations set forth by the commission.
This includes ensuring that shareholders with over 1% voting rights do not hold excessive control over critical decisions such as mergers, acquisitions, or board appointments.
