The Securities and Exchange Commission of Pakistan (SECP) has decided to revise the solvency and financial soundness requirements for the beneficial owners, promoters, directors, and Chief Executive Officers (CEOs) of charitable organizations and Not-for-Profit Object (NPOs) associations.
It issued an S. R. 0. 371 (1)/2020 in Islamabad on Wednesday.
According to the SECP, the draft amendments to the Associations with Charitable and NPOs Regulations, 2018 have been proposed to be made by the SECP itself.
A not-for-profit association (also called an ‘NGO’ or an ‘NPO’) may be registered as a company under the provisions of the Companies Ordinance, 1984. In general terms, a not-for-profit association (company) applies its profits or income in promoting its charitable/useful objects, and prohibits the payment of any profits, incomes, dividends, or proceeds to its members.
Before it registers as a company with the SECP, such an association is required to obtain a license under Section 42 of the Ordinance read with Rule 6 of the Companies (General Provisions and Forms) Rules, 1985 (the ‘Rules’) and the relevant Circulars issued from time to time.
These regulations are applicable to companies licensed under Section 42 of the company law but not to trade organizations licensed under the Trade Organizations Act, 2013.
It added that under the proposed solvency and financial soundness requirements for the NPOs/NGOs, the SECP prescribed that a person must fulfill the requirement in order to act as promoter, director, or CEO of the company, that there is no instance of overdue or past due payment to a financial institution of an amount exceeding Rs. 200,000 appearing in the latest Consumer Credit Information Report (CClR) of (a) such person; and (b) the companies, firms, sole proprietorship, etc. where such person is a beneficial owner, promotor, partner, or proprietor, provided that this clause will not be applicable to a person who holds qualification shares.
Presently, solvency and the financial soundness requirement revealed that a person must fulfill the requirement in order to act as promoter, director, or CEO of the company, that there is no instance of overdue or past due payment to a financial institution irrespective of the amount appearing in the latest Consumer Credit Information Report (CCIR) of the person and of the companies, firms, sole proprietorship etc. where the person is a CEO (other than nominee director), owner or partner, etc.
Under the Associations with Charitable and Not for Profit Objects Regulations, 2018, each of the promoters, directors, CEO, and members of an association will meet the fit and proper criteria as provided in these regulations.
Provided that the SECP will assess the fitness and propriety of the promoters, directors, and CEO, the company will assess the fitness and propriety of its members.
Provided further that the fit and proper criteria will remain applicable at all times, and in case of any non-compliance at any point of time, the company will be responsible for the replacement of the referred persons for which the necessary approval of the SECP be obtained.