The Government of Pakistan has unveiled an ambitious plan to modernize the Companies Act 2017 and reform key regulatory policies—steps that are expected to save the national economy approximately Rs250.54 billion ($895 million) annually.
According to a recent briefing during a sub-committee meeting chaired by Haroon Akhtar Khan, Special Assistant to the Prime Minister on Industries and Production, the bulk of these savings—Rs176.96 billion ($632.2 million)—will come through streamlining and modernizing the law itself. An additional Rs73.58 billion ($262.8 million) is projected from changes to regulatory frameworks.
Why Reform Was Needed
Pakistan’s corporate landscape has long struggled under outdated and overly complex regulatory structures. The Companies Act 2017, while designed to promote corporate governance, has inadvertently created barriers to entry and growth—especially for unlisted companies.
At present, Pakistan has only 523 listed companies, a shockingly low number for a population of over 240 million—equating to merely two companies per million people. These numbers indicate severe bottlenecks in business formalization and scaling.
The sub-committee noted that excessive regulatory control, lack of innovation in financing models, and rigid compliance requirements were stifling entrepreneurial growth and discouraging foreign and local investment alike.
Key Areas of Reform
1. Simplifying Company Registration
One major focus is the simplification of the registration process for unlisted companies, particularly for startups and SMEs. Reducing bureaucratic delays will improve the ease of doing business and encourage more entrepreneurs to formalize operations.
Pakistan Urges Central Bank to Cut Interest Rate as Inflation Dips Below 4.5%
2. Cutting Down Special Resolutions
Pakistan currently mandates 23 types of special resolutions—in contrast, Canada requires only 9, and Delaware (USA) requires 6. These special resolutions create unnecessary regulatory hurdles and costs.
The Board of Investment (BoI) has recommended:
-
Eliminating 7 special resolutions entirely
-
Simplifying 10 to offer more decision-making flexibility to company boards
-
Retaining only 6 that protect minority shareholder rights in line with global standards
3. Revising Ownership Thresholds
Currently, a private limited company must have between 2 and 50 members. Exceeding this number requires conversion into a public limited company—an often impractical leap for growing businesses. The BoI suggests:
-
Removing arbitrary thresholds
-
Eliminating separate classification for single-member companies
-
Allowing flexible ownership for both public and private entities
Encouraging Innovation in Finance
The reforms aim to enable modern financing models such as:
-
Peer-to-peer lending
-
Venture capital
-
Crowdfunding
-
Joint ventures
These options are currently restricted or discouraged under the existing legal framework.
Streamlining Governance
Corporate governance for unlisted companies will now be encouraged through internal mechanisms like:
-
Shareholder agreements
-
Corporate bylaws
-
Contract law
This approach reduces reliance on rigid legal compliance for day-to-day decision-making.
Expected Benefits
Modernizing the Companies Act will:
-
Promote a pro-business environment
-
Improve ease of doing business rankings
-
Enhance investor confidence
-
Empower SECP to focus more on listed companies and high-risk sectors
-
Drive faster growth of corporate entities, especially in the SME sector
The SECP also aims to strengthen enforcement for listed companies and educate stakeholders on good governance practices.
Final Thoughts
Pakistan’s move to revise its core corporate legislation is both timely and necessary. The rigid, one-size-fits-all regulatory environment has long hindered business expansion. Through thoughtful modernisation of the Companies Act 2017 and smart regulatory reform, the government is paving the way for a more dynamic, competitive, and business-friendly economy.
As these changes roll out, they are expected to not only save billions but also enable a broader range of businesses—particularly startups and SMEs—to thrive.
For Further Details: SECP’s official Companies Act