Govt introduces reforms to promote Modaraba business




The government is introducing several reforms to further promote Modaraba business in Pakistan.

According to an official brief of the Securities and Exchange Commission of Pakistan (SECP) on the bill titled ‘The Modaraba Companies and Modaraba Floatation and Control (Amendment) Bill’, a copy of which is available with WealthPK, the proposed bill aims to amend 40-year-old Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 to encourage the Modaraba sector in the country.

The bill is currently under review by the Standing Committee of the National Assembly on Finance, which will thoroughly deliberate the bill in its upcoming meetings and then clear it for further process.

The brief says that the bill focuses on the growth of the Modaraba sector through various amendments to several broad categories including ease of starting and conducting the business of Modaraba, enhanced requirements to increase transparency, and increased protection to the certificate holders. It says that several measures are being introduced to ensure ease of doing the business.

Under the bill, application fee for registration of a new Modaraba management company and establishment of a new Modaraba has been reduced from Rs250,000 to Rs100,000, and from 10% to 0.25% of the nominal amount, respectively. The brief says that the share of profit of a Modaraba company is being enhanced and linked with the performance of the company i.e., return on average equity.

Currently, it is up to 10% of the net annual profit of the Modaraba. The brief further highlights that the concept of unlisted Modaraba is being introduced to enable investors to establish new Modarabas without the requirement of listing with the SECP. —INP


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