SC closes the limitation door on share-register fraud

A five-member bench of the Supreme Court of Pakistan has now settled one of the most consequential questions in Pakistani company law: Can the passage of time insulate a fraudulent entry in a company’s register of members? The answer, delivered in Abdul Razzaq v. v. Registrar of Companies, Securities and Exchange Commission of Pakistan Associated House, Lahore & others C. A 125/2025 on 22. 04. 2026, is an emphatic ‘No’. In doing so, the Court has affirmed the reasoning first laid down in the Naila Naeem Younus v. Indus Services Limited (2022 SCMR 1171) where a shareholder has been deprived of shares through fraud, a petition for rectification of the register under Section 126 of the Companies Act, 2017 is not barred by limitation. For boards, sponsors and company secretaries, this is not an academic development. The register of members is the constitutive record of corporate ownership. Under the Companies Act, 2017, a person holds legal title to shares only if their name appears in it, and its entries stand as prima facie evidence of membership. It is the register that determines who receives notice of and votes at general meetings, who is paid declared dividends, who participates in rights and bonus issues, and — in closely held companies — who controls the enterprise itself. Its maintenance is a strict statutory obligation, its inspection a statutory right, and tampering with it a criminal offence punishable under Section 127 with imprisonment of up to three years and a fine of up to one million rupees. The five-member bench put the point in institutional terms: the register determines the company’s legal status, governance rights and control, making its accuracy vital to public interests — and Section 126 exists to preserve its integrity as an authoritative document, not a mere record of private agreements. A fraudulent entry in the register is not a paperwork irregularity; it is the theft of the company, effected through the company’s own records. The question of whether such an entry becomes unchallengeable after three years was therefore never a technical dispute about the Limitation Act. It was a question about whether Pakistani law and by extension – Pakistani courts – would allow corporate control acquired by fraud to ripen into ownership. The doctrinal architecture affirmed by the Supreme Court rests on three propositions: First, the Companies Act, 2017 is a special, self-contained statute: where the legislature intended a limitation period for company proceedings, it prescribed one, and its omission of any period for rectification under Section 126 was deliberate, not accidental. Second, under the Companies (Court) Rules, proceedings for rectification are brought by petition — and a petition is neither a suit, an appeal, nor an “application” within the meaning of Section 29(2) of the Limitation Act, 1908, so the residual limitation regime is never attracted. Third, and most importantly, rectification is not merely a private remedy. The Court’s jurisdiction under Section 126 exists to preserve the accuracy and integrity of the register on which legal ownership, governance rights and corporate control all depend, and it carries with it the power under Section 126(4) to refer fraudulent conduct for prosecution under Section 127. To impose a limitation threshold on that jurisdiction would be to reward concealment — because share fraud, by its nature, is designed to remain hidden until the wrongdoer’s position appears unassailable. The larger bench’s pronouncement also resolves a genuine conflict of authority. In Bentonite Pakistan Limited v. Bankers Equity Limited (2023 SCMR 1353), a three-member bench had taken the view that Article 181 of the Limitation Act applies to applications under the Companies Act — a position in visible tension with Naila Naeem, and one that left High Courts navigating between two lines of Supreme Court authority. The five-member bench left Bentonite’s merits untouched but declined, “with all due deference, ” to subscribe to its observations on the Limitation Act, holding that they had resulted from improper assistance. That uncertainty is now over: the register can be corrected whenever the fraud is found. It is worth pausing on who the victims of share-register fraud in Pakistan actually are. In a corporate landscape dominated by family-owned companies, the paradigm case is not a stranger forging a transfer deed. It is a shareholder within the family — disproportionately a woman — whose inheritance or shareholding is quietly transferred out, “managed” on her behalf, or diluted through instruments she never executed. Discovery often comes years later: on a parent’s death, on a falling-out, on the first attempt to exercise rights attached to shares she believed she held. Under a limitation-bound regime, that discovery would arrive too late by design. The Naila Naeem itself was such a case: a woman fraudulently deprived of her shareholding, whose remedy would have been extinguished at the threshold had limitation applied. The protective significance of the ruling grows as women’s participation in corporate ownership grows. When the SECP moved in 2017 to mandate female board representation, the proportion of women directors on listed boards stood at just 6. 4 per cent, and 69 of the KSE-100 companies had no woman director at all. The trajectory since has been steep: the proportion of listed companies with women directors rose from 31 per cent in 2017 to 58 per cent by 2019, the number of chairwomen rose from 24 to 33 in the same period, and by 2024 the SECP reported that 92 per cent of all listed companies had women on the board. The regulator’s own data links this to performance: in 2019, companies with women directors reported a return on equity of 14. 83 per cent against 9. 4 per cent for those without. Meanwhile, the stock market investor base itself is expanding at record pace — crossing 583, 000 accounts this month after 48 per cent growth in a single year. More women hold shares, sit on boards and chair companies than at any point in Pakistan’s corporate history. A legal regime in which their shareholding could be extinguished by three years of successful concealment would have made that progress contingent on vigilance the law itself discouraged. For corporate leadership, the governance consequences deserve equal attention. If rectification proceedings for fraud never become time-barred, then exposure arising from a defective register never expires either. Boards and company secretaries should treat this as a standing diligence obligation: transfer instruments must be verified and preserved; the register may lawfully be altered only through the statutory channels — registration of a duly stamped and executed instrument of transfer under Section 74 of the Companies Act, 2017, with the board’s power to refuse confined by Sections 75 and 76 and, where entries are to be cancelled or reversed, the sanction of the Court. Acquirers conducting due diligence on any Pakistani target — listed or private — must now price in the possibility that a historic, fraudulent chain of title in the shares can be reopened without any limitation defence. The comfort formerly drawn from the age of an entry is gone. The only reliable protection is a clean register, cleanly maintained. There is, finally, a constitutional dimension that should not be lost in the company-law detail. Shares are property. Articles 23 and 24 of the Constitution protect the right to acquire, hold and dispose of property and prohibit its deprivation save in accordance with law. A reading of the Limitation Act that allowed fraud to mature into title would have sat uneasily with those guarantees, and with the settled maxim that fraud vitiates the most solemn of proceedings. The Supreme Court’s larger bench has aligned Pakistan’s company law with its constitutional commitments: ownership recorded in a company’s register is protected by law, and no one who obtained it by deceit or by fraud may shelter behind the calendar. Copyright Business Recorder, 2026

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