Introduction
In Pakistan, the classification of a company as part of the Public Sector by the Securities and Exchange Commission of Pakistan (SECP) carries significant legal, operational, and governance implications. This classification, typically published in the Security Papers and official SECP notices, can subject a company to enhanced disclosure, audit, and regulatory compliance requirements under the Companies Act, 2017 and the Public Sector Companies (Corporate Governance) Rules, 2013.
However, in some cases, a company may believe that this classification is incorrect, either due to shareholding structure, misinterpretation of government control, or lack of controlling influence. This article explains the procedure, legal grounds, and strategic considerations for contesting a public sector classification assigned by SECP.
What Is a Public Sector Company (PSC)?
Under Rule 2(g) of the Public Sector Companies (Corporate Governance) Rules, 2013, a company is classified as a Public Sector Company (PSC) if:
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The government (federal, provincial, or local) or any body controlled by the government holds direct or indirect ownership of 50% or more shares, or
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The government exercises control over the company, even without majority shareholding
Control includes the ability to:
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Appoint or remove the majority of directors
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Influence board or shareholder decisions
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Control the company’s financial or operational policies
Implications of Being Classified as a Public Sector Company
| Compliance Area | Additional Requirements as PSC |
|---|---|
| Corporate Governance | Must follow PSC Rules, 2013, in addition to Companies Act |
| Board Composition | Minimum number of independent directors |
| Audit and Reporting | Enhanced disclosure requirements to SECP and public |
| Performance Evaluation | Mandatory board evaluation and internal performance audits |
| CEO and CFO Appointment | Subject to fit and proper criteria under PSC rules |
| Public Procurement & HR | Subject to government procurement and HR frameworks (in some cases) |
Grounds for Contesting PSC Classification
A company may challenge SECP’s classification on the following grounds:
✅ No Government Ownership or Control: The state or public entity holds less than 50% ownership, and does not control board decisions
✅ Investment Held in Fiduciary Capacity: If shares are held by public sector pension funds or investment companies without voting rights or control
✅ Private Shareholding with Public Clients: Mere business with public sector entities does not make the company public sector
✅ Incorrect Attribution of Ownership Chains: When indirect government links are misconstrued as control
Procedure to Contest Public Sector Classification
Step 1: Internal Assessment
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Review SECP notification or Security Papers publication
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Examine shareholding structure, Articles of Association, and board control
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Obtain a legal opinion or consult corporate counsel
Step 2: Prepare a Representation
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Draft a formal letter addressed to the SECP’s Specialized Companies Division
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Include:
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Legal and factual basis of the challenge
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Shareholding breakdown
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Organizational chart
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Any relevant financial statements, MoUs, or board resolutions
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Step 3: Submit Representation to SECP
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File via courier and optionally via email to the SECP’s official contact
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Ensure submission on company letterhead with board authorization
Step 4: SECP Review and Hearing (if applicable)
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SECP may request further clarifications
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You may be invited to present your case in writing or in person
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Legal counsel or company secretary should attend if required
Step 5: Final Decision
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SECP may:
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Revoke the classification
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Uphold the classification with reasoning
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Request restructuring or clarification for future reclassification
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Legal Support and Appeals
If the company is not satisfied with SECP’s response, it may:
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File an appeal before the Appellate Bench of SECP under Section 33 of the SECP Act, 1997
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Seek a constitutional remedy (writ petition) in the High Court, subject to legal advice
Best Practices
✅ Maintain clear documentation of shareholding and control
✅ Avoid appointing directors from government entities without due diligence
✅ Structure corporate governance in line with private sector best practices
✅ Engage legal advisors for all communications with SECP
✅ Monitor Security Papers and SECP circulars regularly for any misclassification
Conclusion
Being classified as a Public Sector Company has broad implications for compliance and governance. If such classification is not factually or legally justified, companies have the right to contest it through a structured and evidence-backed process with SECP. By proactively managing their shareholding disclosures and corporate structure, companies can ensure accurate classification and avoid unnecessary regulatory burdens.
Need help contesting a Public Sector Classification or filing with SECP?
At Sterling Consultancy, we provide expert support in:
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Drafting representations and legal memos
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Engaging with SECP and preparing appeals
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Shareholding and control analysis
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Full compliance advisory under SECP rules
