By Sadia Javed, Corporate Lawyer – SJ Law Experts
Corporate governance is the backbone of a transparent, accountable, and sustainable business environment. In Pakistan, the Securities and Exchange Commission of Pakistan (SECP) leads this mission setting standards and enforcing compliance across corporate sectors. Below, I unpack SECP’s evolving role, the regulatory frameworks it enforces, recent reforms, and how private and listed companies can align with best practices.
1. What is Corporate Governance?
Corporate governance refers to the systems, processes, and principles that guide a company’s internal affairs and dealings with external stakeholders. It defines the rights and responsibilities of directors, management, shareholders, and other relevant parties. Its key benefits include:
- Ensuring transparency and accountability
- Reducing fraud and mismanagement
- Improving investor confidence
- Enhancing access to capital
A robust governance structure is essential for long-term success and credibility—whether a company is listed, public, or privately held.
2. SECP’s Mandate in Corporate Governance
The SECP oversees corporate conduct under the Companies Act, 2017, and regulates listed entities, public sector companies, insurers, NBFCs, and unlisted firms. It focuses on:
- Issuance and enforcement of Codes of Corporate Governance
- Promoting accountability through audit and risk oversight
- Structuring board responsibilities and composition
- Enhancing risk management and internal control
- Enforcing compliance and penalizing non-compliance (Its strategic vision is to “develop into an efficient and dynamic regulatory body that fosters principles of good governance…” .
3. SECP’s Governance Frameworks
a) Listed Companies Code
The flagship Listed Companies (Code of Corporate Governance) Regulations, 2019, revised July 2023, apply to all listed companies and cover:
- Governance structure
- Board composition and independence
- Audit and risk committees
- Transparency and disclosures
- Shareholder relations and AGMs
The SECP continues issuing amendments (e.g., anti-harassment, sustainability, DE&I) to strengthen its regulatory scope (secp.gov.pk, journals.library.wustl.edu, linkedin.com, secp.gov.pk).
b) Public Sector Companies
SECP has enforced compliance rules since 2013 to standardize governance practices within government-owned enterprises (.
c) Insurance Companies
A tailored governance code introduced in 2016, with staggered amendments, ensures sound regulation in the insurance sector (secp.gov.pk).
d) Guidelines for Non-listed Companies
Voluntary governance guidelines are available for private and SME firms seeking to voluntarily align with global governance norms
4. Recent Reforms in 2024–2025
SECP’s reforms reflect evolving expectations for governance across sectors. Key changes include:
Key Reforms by SECP
- Anti-Harassment and DE&I (June 2024):
Mandatory anti-harassment policies and sustainability oversight. Boards must appoint committees to address workplace harassment and sustainability risks (linkedin.com).
- Voting and Board Meeting Reforms (Mar 2025):
Removal of category-wise voting, tighter scrutiny for director elections, mandatory director attendance at AGMs, and emphasis on independent board evaluation .
These reforms reinforce fairness, reporting accuracy, and board accountability—especially for listed firms.
5. SECP’s Enforcement Role
Regulations are only as strong as their enforcement. SECP’s tools include:
- Inspections and Compliance Inquiries
Under Companies Act, 2017.
- Show-Cause Notices & Penalties
For violations of governance or disclosure rules.
- Orders and Director Bans
In cases of non-compliance or misconduct.
- Publicizing Enforcement
Publishing orders (e.g., against Gammon Pakistan, United Brands) fosters market discipline .
This ensures a transparent environment where stakeholders can assess reputational risks.
6. Why SECP Governance Rules Matter
Adhering to SECP’s governance framework brings concrete benefits:
- Investor Trust: Clear structure and transparency attract local/international capital.
- Risk Control: Oversight through independent directors and audit committees prevent irregularities.
- Legal Safety: Compliance reduces risk of fines, sanctions, or legal suits.
- Reputation: Governance excellence enhances brand credibility.
- Board Diversity: Policies on sustainability and inclusion encourage progressive corporate culture.
7. Best Practices for Companies
To align with SECP guidelines, companies should pursue:
Board & Committee Structure: Ensure board has a mix of independent, non-executive, and industry-savvy directors. Prioritize audit, risk, and remuneration committees.
Policies & Codes: Document policies on code of conduct, anti-harassment, DE&I, and whistleblowing. Implement grievance redress channels.
AGMs and Voting: Ensure timely AGMs, participation from prohibited categories, transparent voting, with director attendance mandatory.
Disclosures & Reporting: Submit annual/quarterly financial statements, governance reports, and sustainability disclosures where applicable.
Shareholder Engagement: Provide fair and equal rights (no category-based election), publish board performance reviews, and enable minority shareholder protections (urcapk.com, linkedin.com).
Internal Control & Audit: Legal counsel involvement in audit committees, and secretarial compliance certification improve oversight (journals.library.wustl.edu).
Enforcement Readiness: Conduct compliance audits, train management, and hire legal advisors to monitor emerging SECP changes.
8. Role of Corporate Lawyer in SECP Governance
As a corporate lawyer, you offer strategic counsel:
- Compliance audits against SECP codes.
- Design and review governance policies (code of conduct, DE&I).
- Implement structure: board charters and committees.
- Prepare disclosures: board performance, sustainability, financials.
- Represent clients in hearings, inquiries, penalties, appeals.
- Train staff and board on evolving governance norms.
9. Challenges & Opportunities Ahead
Ongoing Enforcement: Ensuring smaller companies comply without burdening them is vital.
Sustainability Reporting: Beyond anti-harassment, SECP may soon mandate environmental and social disclosures for listed companies.
Stakeholder Engagement: Strengthening minority rights via grievance mechanisms and whistleblower support (journals.library.wustl.edu).
Balancing Governance Layers: Avoid over-structuring (multiple sub-committees) that add costs without value .
SECP’s evolving corporate governance framework is reshaping Pakistan’s business landscape with stronger regulations, enhanced enforcement, and a growing focus on inclusivity and sustainability. Private and listed companies are urged to proactively build their governance infrastructure—not just comply, but lead.
As a corporate lawyer, guiding clients toward best governance practices enhances their market value, protects reputations, and ensures regulatory safety.
Take the Next Step
- Conduct a governance health check of your company
- Design board and policy frameworks for compliance
- Provide training and legal support to leadership teams
- Stay updated on SECP reforms and enforcement notices
Need assistance aligning your company with SECP’s corporate governance standards? SJ Law Experts’ Corporate Team is ready to assist—from governance design to legal representation in SECP proceedings.
Office Location & Contact Information
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Office No. 1, First Floor, Al Anayat Mall, Above Faysal Bank, G-11 Markaz, Islamabad
📞 0335-411-2288
📧 SJLawExperts@gmail.com
