The Securities and Exchange Commission of Pakistan (SECP) is consulting on a corporate governance code for the country's listed companies which have been issued as draft regulations under the recently passed Companies Act 2017.

The SECP said the Listed Companies (Code of Corporate Governance) 2017 draft regulations are aimed at strengthening governance structures, bring consistency in the corporate practices and promote transparency through enhanced disclosure requirements. The regulator provided 14 days from the release of the regulations at the end of August for public comments.

The code amends the existing code of corporate governance code released in 2012. Changes include reducing the number of permissible directorship in listed companies of a director from seven to five. The regulations also mandate that company boards are made up of at least two or one-third of directors that are independent. The SECP said that these independent directors will be required to file a declaration of independence with the company.

The Companies Act introduced the requirement that there needed to be at least one female director on the board and this has been included in the regulations. When announcing the policy in July the SECP said the proportion of female directors would rise from 6.4% to at least 14.3%.

In addition, the regulations introduce quorum requirements for board meetings, mandatory attendance of directors in general meetings, and the requirement of a formal and effective mechanism for annual evaluation of company board and committee performance.

The SECP said that in 2016, the Pakistan Institute of Corporate Governance (PICG) formed a task force to review the 2012 corporate governance code to ensure it still met the best practices followed worldwide. The task force members, led by Mr Ebrahim Sidat, comprised of representative of the SECP, PICG, Central Depository Company, PSX, corporate practitioners and industry representatives and finalised a draft recommendation for revision of the code.

However, as the Companies Act provided for a framework of corporate governance, the SECP said the recommendations of the task force were incorporated in the form of the draft
regulations. The SECP said these regulations retained the best corporate principles as endorsed by the task force. The SECP said it believes that the regulations will strengthen governance practices, provide enhanced information to markets participants and therefore will better protect all investors, particularly minority shareholders.