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Business Recorder
2 days ago
- Business
- Business Recorder
P2P, Crowd Lending framework: SECP proposes major amendments to potential
ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has proposed major amendments to the potential of Peer-to-Peer (P2P) and Crowd Lending framework in Pakistan. The SECP has invited feedback on a comprehensive Consultation Paper on the Challenges and Potential of Peer-to-Peer (P2P) and Crowd Lending in Pakistan. The paper also included proposed amendments to the Non-Banking Finance Companies & Notified Entities Regulations, 2008, aimed at expanding access to alternative finance. The rapid evolution of financial technologies and the growing demand for inclusive and innovative financing solutions has led SECP to conduct an in-depth review of the existing P2P lending framework. The paper presents a comparative analysis of international regulatory models and best practices to inform policy development. The review identifies several structural and regulatory challenges currently constraining the growth of P2P and crowd lending platforms in Pakistan. These challenges include the absence of securitized lending mechanisms, restrictions on eligible participants, limited options for credit risk diversification, and operational difficulties related to escrow account management. To address these challenges, the SECP proposes a series of amendments to the P2P lending framework. These proposed changes include increasing loan ticket sizes and exposure limits, strengthening governance requirements for NBFCs operating as P2P service providers, ensuring the financial sustainability of P2P platforms, introducing a trust account structure for fund management, enhancing risk disclosures, and introducing IT and cybersecurity standards for platforms. The SECP has invited comments and suggestions from all stakeholders, including P2P platforms, fintech innovators, financial institutions, investors, and the general public. Stakeholder feedback will play a critical role in shaping a forward-looking, risk-sensitive, and enabling regulatory environment for P2P lending in Pakistan. In addition, the SECP also proposed amendments to revise the definitions of SME/MSME and micro-enterprises, enhance credit bureau reporting requirements for lending NBFCs, amend the Code of Corporate Governance applicable to lending NBFCs, and relax the Fit and Proper Criteria for Fintech Startups in the lending space. The Consultation Paper and draft notification of the proposed amendments are available on the SECP website. Comments may be submitted by June 20, 2025, via email to [email protected]. Copyright Business Recorder, 2025
Business Recorder
4 days ago
- Business
- Business Recorder
Corporate board elections
Introduction: A reform that misses the mark In July 2023, the Securities and Exchange Commission of Pakistan (SECP) amended the Code of Corporate Governance through S.R.O. 906(I)/2023, introducing a new regulation (7A) that mandates separate, category-wise voting for director elections in listed companies. Ostensibly designed to streamline compliance with board diversity requirements—such as the presence of female and independent directors—this amendment has produced the opposite of good governance. Rather than fostering inclusion or transparency, these reforms have imposed severe procedural limitations on minority shareholders, undermining the time-tested cumulative voting method enshrined in the Companies Act, 2017. As a result, the amended framework risks institutionalizing majority dominance and relegating shareholder democracy to a symbolic formality. The case in point: an unwinnable election In 2024, a minority shareholder controlling 12.51 percent equity in a listed company prepared to contest upcoming board elections under Section 159(3) of the Companies Act. With seven board seats available and the company's free float limited to 25%, the shareholder aimed to secure one board seat —an achievable strategy under the earlier cumulative voting framework that allowed aggregation of votes to elect at least one director. However, the company's new voting process, aligned with Regulation 7A, subdivided the election into three separate categories: female, independent, and other directors. Critically, it rigidly allocated voting rights to each category based on the number of seats designated for that group. For the 'Other Directors' category — where the minority nominee had filed — this meant that a candidate needed at least 20.10 percent of the total votes to win a single seat. In a company where the controlling shareholders held over 75% of the voting power, the outcome was a foregone conclusion. Even with controlling 12.51% equity, the minority shareholder found the contest practically unwinnable. Facing a futile effort, the nominee withdrew his candidacy. The company subsequently announced that all remaining candidates stood unopposed — rendering the election process an administrative formality. The problem: a procedural lockout This episode is not an isolated event, but a clear illustration of the deeper structural flaws introduced by the 2023 reforms: — Voting power is fragmented: By dividing voting into fixed categories, Regulation 7A prevents shareholders from strategically allocating their full voting strength—effectively neutralizing minority influence. — Cumulative voting is undermined: While the Companies Act guarantees cumulative voting to empower minority blocs, the new mechanism bypasses this intent by introducing category-based segmentation, which is arguably inconsistent with Sections 159 and 166 of the Act. — Uncontested elections are now the norm: The separation of ballots makes it easier for controlling shareholders to fill reserved seats (e.g., for female or independent directors) without competition, thereby complying with the letter of the law while violating its spirit. — Independence is compromised: Directors elected with majority backing, regardless of being labeled 'independent,' are unlikely to offer meaningful dissent or oversight — defeating the very purpose of their designation. Global best practices: where Pakistan falls short Across jurisdictions, mechanisms like cumulative voting or slate-based minority representation are considered essential tools for equitable corporate governance. For example: — The OECD Principles of Corporate Governance recognize cumulative voting as a legitimate and effective way to ensure minority shareholders have a voice in the boardroom. — Italy and the UK have adopted dual-voting or slate-voting structures that guarantee at least one board seat to the non-controlling shareholders. — Saudi Arabia and China require cumulative voting in listed companies to prevent entrenchment of control. Pakistan's shift to a segmented voting framework moves away from these norms, replacing proportional representation with category-specific majoritarianism. In practical terms, this means the controlling shareholders not only dominate the board but now do so with the veneer of compliance and procedural legitimacy. Recommendations: restoring balance and credibility To preserve the integrity of corporate governance in Pakistan and re-empower minority shareholders, the following reforms should be considered: Restore cumulative voting across a unified slate: Reinstate the cumulative voting method as originally provided in the Companies Act, allowing shareholders to allocate votes freely among all candidates. Introduce reserved minority representation: Mandate at least one board seat to be filled exclusively through votes cast by non-controlling shareholders, ensuring true minority representation. Enhance transparency through vote disclosure: Require companies to disclose, in advance, the vote thresholds typically needed to win a seat under the new system. This would help shareholders make informed decisions and organize support. Strengthen oversight and post-election review: SECP should introduce a mandatory review of election results, including unopposed outcomes, to assess whether procedural reforms are delivering on their governance objectives. Conclusion: a call to rebalance power The intention behind SECP's 2023 amendment may have been noble—ensuring compliance with board diversity mandates. But in its current form, Regulation 7A disables one of the few levers minority shareholders have to assert their rights. The cumulative result is a system where even a shareholder with controlling 12.51% equity cannot credibly contest an election, and where the majority's grip on governance is quietly tightened. Pakistan must not let formalism replace fairness. Regulatory reform must advance both diversity and equity. Otherwise, shareholder participation risks becoming an illusion—legally permitted, procedurally blocked, and practically futile. It is time to revisit these reforms—not to abandon them—but to realign them with the foundational principles of transparency, inclusivity, and balance that underpin good governance worldwide. Copyright Business Recorder, 2025
Straits Times
29-05-2025
- Business
- Straits Times
Industry code to be reviewed to enhance corporate governance, boost S'pore equities market
The review will be undertaken by the Corporate Governance Advisory Committee, which was set up by MAS in 2019. PHOTO: ST FILE SINGAPORE - The Code of Corporate Governance will be reviewed to enhance corporate governance practices and disclosures among listed companies in Singapore, said the Monetary Authority of Singapore (MAS) on May 29. The review will be undertaken by the Corporate Governance Advisory Committee, which was set up by MAS in 2019 as a permanent, industry-led body to advocate for good corporate governance practices among listed companies in Singapore. The review complements the ongoing work of the Equities Market Review Group, which was launched in 2024 to boost Singapore's equities market, MAS said, without stating the timeline for the completion of the review. Mr Bob Tan, chairman of the advisory committee, said: 'The committee will be reviewing the Corporate Governance Code for its continuing relevance and ensuring that its disclosure requirements are meaningful to both existing shareholders and potential investors of large cap and small and medium-sized (SME) listed companies. 'The objective is to make our listed companies more transparent and attractive in the capital market without unduly over-burdening them with inconsequential reporting guidance or requirements.' The review will be undertaken by two sub-committees. The first sub-committee, to be led by Mr Robert Yap, executive chairman of Swan & Maclaren Group, will consider measures to help the code be implemented more meaningfully. The measures include providing additional guidance and practical examples on implementing the code provisions, in a manner that is suited to companies' operating contexts, such as their size and industry, MAS said. The second sub-committee, to be led by Ms Stefanie Yuen-Thio, joint managing partner of TSMP Law Corporation, will consider new code provisions or guidance on corporate culture, board effectiveness, and risk management in emerging areas, such as artificial intelligence. 'These enhancements aim to strengthen boards' capacities to steer companies through today's rapidly evolving landscape, while continuing to uphold long-term shareholder value,' MAS said of the areas that the second sub-committee will be looking into. MAS deputy managing director of financial supervision Ho Hern Shin said in the statement that upholding high standards of corporate governance is key for maintaining investor confidence. She said: 'Alongside the proposals of the Equities Market Review, companies must continue to maintain strong governance practices and make meaningful disclosures that keep stakeholders appropriately informed.' She added that the committee members' diverse expertise plays a vital role in strengthening the corporate governance framework, and that she looks forward to its recommendations. Alongside some members of the committee, industry practitioners with expertise in the priority areas of the review have also been invited to join the sub-committees. The code was last majorly reviewed in 2018. Since then, the advisory committee has recommended progressive enhancements to the corporate governance framework, particularly in the areas of director independence and remuneration disclosures. But the committee does not carry regulatory or enforcement powers, nor does it provide opinions on ongoing cases and investigations. The current 14-member committee serves a term from 2025 to 2028. Sue-Ann Tan is a business correspondent at The Straits Times covering capital markets and sustainable finance. Join ST's Telegram channel and get the latest breaking news delivered to you.
Business Times
22-04-2025
- Business
- Business Times
Applying blanket standard narrows pool of director candidates: Keppel DC Reit manager
We refer to the BT article 'Keppel DC Reit lead independent director Kenny Kwan fails to get re-elected at AGM', published on Apr 18, 2025. Kenny Kwan received 49.93 per cent of the votes, just 0.07 per cent short of the 50 per cent majority required for his re-endorsement. We understand that an important reason for this outcome is the recommendation by a proxy adviser made prior to the annual general meeting relating to Kwan's re-endorsement, based on their classification of Kwan as a non-independent director. This stems from Keppel DC Reit's disclosure that A&O Shearman, the law firm where Kwan is a partner, is one of the law firms providing legal services to Keppel. The board holds the view that Kwan can be regarded as an independent director because he does not hold a substantial partnership interest in A&O Shearman; A&O Shearman has not been engaged by Keppel DC Reit or the manager to provide any legal services since Kwan joined as a partner; and Kwan is not employed by Keppel or any of its entities. In addition, Kwan's relationship with Keppel has been fully disclosed in Keppel DC Reit's annual report, in line with best practices for corporate governance and transparency. Keppel DC Reit adheres to the framework set out in the Code of Corporate Governance as well as the Securities and Futures (Licensing and Conduct of Business) Regulations when evaluating independence. The rationale and consideration of the board for determining Kwan's independence is set forth in detail in the annual report. While Keppel DC Reit respects the outcome of the vote, we believe it is important to evaluate independence in context, especially within the framework of Singapore's regulatory guidelines. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up In a market where major law firms naturally serve large companies, such as Keppel, applying a blanket standard could significantly narrow the pool of qualified candidates. Such an approach may unintentionally limit board diversity and expertise, particularly among professionals with highly relevant skill sets. Kwan brought to the board of Keppel DC Reit two decades of legal and capital markets experience, with deep expertise in real estate investment structures, cross-border transactions and regulatory compliance. His expertise was extremely valuable to Keppel DC Reit in navigating complex transactions, enhancing compliance and strengthening investor protection. Kwan's insights contributed greatly to board deliberations, and to ensuring that management decisions are both commercially sound and legally robust. We also wish to highlight that Kwan's election resolutions in 2019 and 2022 were passed even though the underlying circumstances were materially unchanged. On behalf of the board and management of Keppel DC Reit, I would like to extend our appreciation to Kwan for his strategic guidance and invaluable contributions to Keppel DC Reit as lead independent director and chairman of the nominating and remuneration committee. The board and management remain committed to upholding high standards of corporate governance and transparency, as well as delivering strong returns to unitholders. Christina Tan, chairman of Keppel DC Reit Management, manager of Keppel DC Reit
Express Tribune
29-03-2025
- Business
- Express Tribune
SECP introduces regulatory reforms
Listen to article The Securities and Exchange Commission of Pakistan (SECP) has made amendments to the Listed Companies (Code of Corporate Governance) Regulations, 2019 and the Companies (Postal Ballot) Regulations, 2018. The amendments have been made pursuant to SECP's commitment to safeguarding shareholders' rights, enhancing corporate governance practices, and upholding market integrity, said a press release issued on Friday. Under these reforms, the category-wise voting scheme has been omitted to support minority shareholders' representation on boards. Furthermore, the scrutiniser's role has been enhanced for bringing transparency in the process of accepting or rejecting nominations for the election of directors and proxies. Reforms were also incorporated to enhance corporate governance by including provisions for mandatory attendance of directors in general meetings and encouraging independent evaluation of board performance by an external body.
