SECP Fixes Maximum Seats for Female Directors in Board Elections

The female candidates cannot contest for election in both categories of independent and female directors in the companies. According to the details (category-wise voting for the election of directors) issued by the Securities and Exchange Commission of Pakistan (SECP) on Friday, the female candidate cannot contest for election in both categories if she also meets the criteria of independence. It is at the discretion of the female candidate to select which category she wishes to contest for election and has to inform the company while sending the nomination papers. The composition of the Board of Directors with proper apportionment between executive, non-executive, independent, and female directors is of great importance to ensure the requisite level of diversity on the board and to optimize governance. The quality of the governance system of a company is also linked directly with the competence, independence, and individual commitment of the directors. SECP said that any member who seeks to contest for election in the category of independent director or female director is required to file a notice of his/ her intention with the company and select any one category in which he/she intends to contest for the election of director. The notice is required to be filed not later than fourteen days before the date of the meeting at which the elections are to be held. However, a female director on the board who also meets the criteria of Independent Director and the Company has performed due diligence as per section 166 of the Act, can fulfill the requirements of both the female and independent director at the same time. SECP has introduced the concept of category-wise voting for the election of directors by way of amendments made mainly in the CCG Regulations through SRO 906(I)/2023 and consequential amendments made in the Companies (Postal Ballot) Regulations, 2018 (the “PB Regulations”) through SRO 905(I)/2023 which were notified on July 7, 2023. Under the aforesaid amendments, a three-tier voting structure is specified and voting is to be done in three categories, i.e. female, independent, and other director categories. To avoid legal complications, the maximum number of seats in the female category is fixed as one, and for independent directors two or one-third of the Board (whichever is higher). However, there will be no restriction on the total number of female or independent directors that can be elected to the board of a company in all categories combined. The member at his/her discretion may cast their votes for any candidate in each category of directors contesting the election. For voting in categories, the division of votes available to each member shall be on a category-wise basis in proportion to the number of seats of directors under such category. The number of votes for each category shall be counted separately after the completion of the voting process.