Enquiry:

In paragraph 2 (a) of the third Schedule of the Companies Act, 2017, three conditions for a company to be classified as large sized company are given and after first two conditions word ‘or’ has been used, which clearly indicates that if anyone of the three conditions applies, the company will be large sized company. In paragraphs No. 3(a), 3(b) and 4 the words ‘or’ or ‘and’ have not been used, which creates a confusion that all or anyone of the given conditions are to be applied for a company to be a medium-sized company or small-sized company. SRO 929(1)2015 appropriately used these words for the classification of companies, but third schedule creates confusion. Please clarify.

 

Opinion:

The Board would like to highlight that under the Companies Act, 2017 the classification criterion has been re-defined/ revised, compared to the repealed Companies Ordinance, 1984 (through SECP SRO 929 of 2015).

We note that the wording “or” is inadvertently missing from the classification criteria for the medium-sized, private company under clause 3 (b). Further, the applicable accounting framework has erroneously been stated as Revised AFRS for SSEs whereas it should be International Financial Reporting Standards for SMEs.

The absence of wording “and” in the classification criteria for the small-sized company in clause 4 of Third Schedule is not relevant as all conditions are to be fulfilled for classification as a small-sized company. If anyone of the condition is not fulfilled the company will be classified as a medium-sized company.

 (October 02, 2017)