When Directors Are Personally Liable Under Pakistan's Act

Incorporating a company does not put distance between a director and an offence committed under the Virtual Assets Act 2026. Section 55 of the Act lets a director, manager, secretary or similar officer be deemed to have committed an offence personally, where the company’s offence happened with their consent, their connivance, or their neglect. Of the three, neglect is the one that catches people who did nothing wrong on purpose.

This matters for every Key Individual at a licensed virtual asset business, not only the ones with day-to-day operational control. The section does not require a director to have known about the offence — it is enough that they should have supervised against it and did not.

What does section 55 of the Act say?

Section 55 provides that where an offence under the Act is committed by a body corporate with the consent, connivance or neglect of any director, manager, secretary or similar officer, that person is deemed to have committed the offence themselves. The full text is one sentence:

“Where an offence under this Act is committed by a body corporate with the consent, connivance or neglect of any director, manager, secretary or similar officer, such Person shall be deemed to have committed the offence.”

This is a piercing provision. It does not create a separate offence with its own elements — it deems the individual to have committed the same offence the company committed, provided one of the three states of mind or conduct (consent, connivance, or neglect) is established against them. The consequence is that the individual faces the same penalty regime under section 54 as the company would, calculated by reference to their own personal conduct rather than the company’s financial results.

What is the difference between consent, connivance and neglect?

The Act does not itself define these three terms, so their ordinary meaning governs. They describe three progressively less active states of involvement.

Test	What it requires	Example
Consent	The director actively agreed to the conduct, with knowledge of what it involved	Approving a decision to launch an unlicensed service, knowing it lacked a licence
Connivance	The director knew what was happening and turned a blind eye, without formally agreeing	Being aware of a compliance failure and choosing not to intervene
Neglect	The director failed to exercise the oversight expected of the role, without necessarily knowing about the specific conduct	Failing to put in place, or failing to monitor, the controls that would have caught the offence

Consent and connivance both require some degree of knowledge — the director either agreed to the conduct or was aware of it and chose not to act. Neglect requires neither. A director who genuinely did not know an offence was occurring can still fall within section 55 if their failure to supervise, to ask the right questions, or to maintain adequate oversight allowed the offence to happen. This is a materially wider net than a knowledge-based test alone would create, and it is the reason section 55 deserves attention from every director, not only the ones closest to a given transaction.

Who does section 55 apply to?

The section names four categories of officer: director, manager, secretary, or “similar officer”. The Act does not further define “similar officer” within section 55 itself, but the Act’s own definition of Key Individual at section 3(1)(xv) gives a useful cross-reference for the kind of role likely to be caught — it lists directors (executive or non-executive), the Managing Director, the Chief Financial Officer, the Chief Operating Officer, the head of internal audit, the head of compliance, the money-laundering reporting officer, the head of risk management, the head of information security, and any other position the Authority declares to be a Key Individual.

Section 55 is not formally limited to Key Individuals as defined in section 3(1)(xv) — it applies more broadly to “any director, manager, secretary or similar officer” of the body corporate that committed the offence. But in practice, the individuals with the seniority and oversight responsibility to plausibly be found to have consented, connived, or neglected are the same people the Act elsewhere identifies as Key Individuals subject to fit and proper standards.

Does this connect to the fit and proper regime?

Yes, directly. Under section 20(1), the Authority determines whether a Controller, Sponsor, Chief Executive Officer and Director is fit and proper according to criteria it prescribes by Regulations. Under section 20(4), fit-and-proper criteria are continuing in nature, and any person subject to them must notify the Authority of any matter that may affect their fitness and propriety.

A section 55 finding — or even an investigation that could lead to one — is exactly the kind of matter section 20(4) contemplates. A director found to have consented to, connived in, or neglected against an offence is not only exposed to the criminal or administrative penalty attaching to the underlying offence; the finding itself calls their ongoing fitness and propriety into question, which can affect their ability to continue holding office at a licensee or take up a similar role elsewhere in the sector.

What penalty does a director face under section 55?

Section 55 does not set its own penalty — it deems the individual to have committed the underlying offence, which means the penalty is whatever section 54 attaches to that offence. If the company’s offence was wilfully providing an unlicensed virtual asset service under section 54(1), a director found liable under section 55 for that offence faces the same exposure a natural person would under that subsection — imprisonment up to five years, a fine up to fifty million Rupees, or both. If the underlying offence was market manipulation or insider trading under section 52, the director faces the natural-person penalty at section 54(3)(a) — up to three years, up to twenty-five million Rupees, or both — not the turnover-linked corporate fine at 54(3)(b), which applies to legal persons.

This is an important distinction: section 55 pulls the individual into the same offence, but the applicable penalty bracket is the natural-person bracket under section 54, not the legal-person bracket, because the individual is a natural person even though the underlying offence was committed by the body corporate.

How does this interact with the criminal process?

Sections 56 to 58 set the procedural chain for any offence under the Act, including one attributed to an individual through section 55. Only an authorised officer of the Authority may investigate, under section 56. A warrant for search and seizure must come from a court of competent jurisdiction, under section 57(1). No court may take cognizance of an offence except on a written report by an authorised officer, under section 57(4). Prosecution is conducted by a special public prosecutor appointed by the Federal Government, under section 58(1), and the Federal Government may designate Special Courts to hear these matters, under section 54(8). A director facing a section 55 finding goes through the same criminal process as the company itself would.

What does this mean for how a board should operate?

The practical takeaway is that documentation of oversight is the primary defence against a neglect finding, because neglect does not require proof of knowledge — it requires proof of inadequate supervision. Board minutes that show compliance matters were actually raised, discussed and actioned; escalation lines from compliance and risk functions to the board that are demonstrably used, not just written down in a policy; and a genuine allocation of responsibility among directors rather than a nominal one, all go directly to whether neglect can be established.

This links to governance structure decisions made at incorporation. Under section 20(6), every licensee must maintain a registered office in Pakistan and ensure at least one Key Individual ordinarily resident in Pakistan holds operational and decision-making authority. That individual, and the board around them, carries the practical weight of section 55 — and it is a stronger position to design board oversight and reporting lines deliberately at corporate setup stage than to reconstruct a defence to a neglect allegation after the fact.

About this analysis

This analysis was prepared by the CoinConnect research desk from the Virtual Assets Act 2026 as passed by the National Assembly — principally sections 3(1)(xv), 20, 52, 54, 55, 56, 57 and 58 — read as published. Where the Act does not define a term used in section 55, that is stated in the text above.

Regulatory positions change and specific requirements should be verified against the current position published by the relevant authority before you act on them. This is information and analysis, not legal advice, and it does not create an advisory relationship. Take professional advice on your own circumstances.