The Securities and Exchange Commission of Pakistan (SECP) has observed that a chairman of the Board of Directors of an insurance company remained absent from five consecutive meetings of the Board of Directors without any leave in writing by the other Directors is violation of section 188 of the Companies Ordinance, 1984.
It is learnt on Saturday that the SECP has issued an order against a chairman of the insurance company. Under the order, the SECP has declared that any chairman of the company ceased to be the director of the company since he absented himself from three consecutive meetings of the Board of Directors or from all the meetings of the Board of Directors for a continuous period of three months, whichever was longer.
According to the SECP order, the Chairman of the company has been absent from five consecutive meetings of the Board of Directors without proper leave of absence in the written form and duly recorded in the minutes of the meetings of the Directors, and as per the provisions of Section 188(I)(b) of the Ordinance, he cannot be the Director since he had absented himself from the three consecutive meetings of the Directors and that too without grant any leave of absence by the other Directors who have been present in those meetings in which Aziz was absent. Moreover, chairman of the company has, very boldly, shown himself to be the Chairman of the Company and that too during the pendency of the instant proceedings.
The relevant provisions of Section 188 of the Ordinance provide that:
"Vacation of office by the directors. - (1) A director shall ipso facto cease to hold office if-
(b) He absents himself from three consecutive meetings of the directors or from all the meetings of the directors for a continuous period of three months, whichever is the longer, without leave of absence from the directors, section added.
It was observed that Chairman of the Board of Directors of the Company remained absent from Five consecutive meetings of the Board of Directors without any leave in writing by the other Directors. Accordingly, in the light of the provisions of Section 188(1) (b) of the Ordinance, Chairman ceased to be the Director of the Company since he absented himself from three consecutive meetings of the Board of Directors or from all the meetings of the Board of Directors for a continuous period of three months, whichever was longer.
It has been noted that he (chairman of the company) has shown/described himself to be the Director of the Company in the Accounts and before the Securities and Exchange Commission of Pakistan, (the Commission) and so the Commission may take action as provided under Section 189 of the Ordinance, for not attending the five consecutive meetings of the Board of Directors during the year 2012, as aforesaid.
Accordingly, the Show Cause Notice was issued on June 19, 2014 under Section 188(1) (b) read with Section 189 of Ordinance to chairman of the company, calling upon him to show cause as to why the penalty, as provided under Section 189 of the Ordinance, should not be imposed upon him for not complying with provisions of Section 188(1)(b) of the Ordinance and also describing himself as the Director of the Company in the Accounts and before the Commission.
As the Directors are supposed to be well-aware of their legal obligations in connection with the statutory requirement, therefore, it could be legitimately inferred that company's chairman has not been the Director of the Company on absenting himself from the three consecutive meetings of the Board of Directors in the light of the provisions of Section 188(l)(b) of the Ordinance, and that he cannot purport himself to be the Director of the Company thereafter.
In exercise of the power conferred on SECP under Section 189 of the Ordinance, instead of imposing the penalty, take a lenient view, and thus, condone company's chairman due to the following reasons:
Firstly, he has not attended the meetings of the Directors of the Company as he was outside Pakistan due to certain medical reasons, which, on his part, was disclosed to the other Directors of the Company;
Secondly, he has attended the meetings of the Directors of the Company upon his arrival from abroad, evidence of which was provided to the Commission during the course of hearing;
Thirdly, he has assured to ensure compliance in future.
However, he is hereby issued a stern warning that in case of similar non-compliance in future a stronger action shall be taken, the SECP added.
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