SECP introduces new definition of ‘startup’ in amended Companies Act

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ISLAMABAD: The recent amendments to the Companies Amendment Bill, 2021 will significantly promote start-ups, business innovation and entrepreneurship, besides improving general business climate in the country.

Adding significant amendments include addition of a new definition for “startup company”, removal of the requirements of filing unaudited financial statements for private companies, removal of common seal, besides elimination of requirement of filing the subscription form to provide ease of doing business, the Securities and Exchange Commission of Pakistan (SECP) said in a statement.

The newly introduced definition refers to a startup, as a company incorporated within 10 years, with annual turnover of up to Rs500 million in any financial year, and working towards the innovation, development or improvement of products or processes with a high potential of employment generation or wealth creation.

The inclusion of the definition will allow special privileges to startup companies to attract investment, acquire credit and innovative business products. Moreover, new clauses have been added to allow private companies to issue shares to new investors against properties and to their employees under employee’s stock option schemes. Private companies have also been allowed to buy-back their shares.

Other important amendments include empowering minority shareholders holding five percent shares to give notice for calling a members’ meeting. This has revised downward from ten percent, to protect the rights of minority shareholders.

Furthermore, the board resolution through circulation was earlier required to be signed by all directors, and now it can be deemed passed if approved by a majority of directors. To promote gender equality, requirements to mention husband’s name for registration of a company have been abolished bringing company registration requirements at par for men and women.

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