The Monopoly Control Authority (MCA) has directed a private limited company, having assets of over Rs 4 billion, for conversion into public limited company under the provision of Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance 1970 (MRTPO).
This is for the first time that the MCA has used these powers to direct a company involved in "undue concentration of economic power" to change its status. Under the Ordinance, if a private limited company has assets over and above Rs 4 billion, it has to be converted into a public limited company.
According to an MCA announcement on Monday, the MCA, on September 5, under the chairmanship of Khalid a Mirza, heard International Brands (Pvt) Limited (IBL) in the matter of undue concentration of economic power. Member (L&A) was also present. Chief of Investigation and Registrar assisted the Authority.
The total value of the assets of the undertaking, as in its annual audited accounts for the year ended June 30, 2006, was Rs 4.3 billion, and this situation prima facie constituted under concentration of economic power under Section 4(a)(i) of the Ordinance and the undertaking is required to convert itself into a public limited company.
In response to the show-cause notice under Section 11 of the Ordinance, the undertaking submitted its response, and it was afforded an opportunity of being heard on September 5, 2007 at Islamabad.
Abdul Rehman Memon and S.M. Nasir Raza, Directors, and Mehmood A Razzak, Partner of Mahmood Idress Qamar and Company, chartered accountants, appeared before the Authority on behalf of the undertaking. They admitted that their original submissions were erroneous since they had not adverted to the Supreme Court''s ruling in Sanaullah Woolen Mills Ltd and Another vs MCA in the matter.
They agreed that under the provisions of Section 4(a)(i) of the MRTPO, 1970, the undertaking is required to be converted into a public limited company, and requested for grant of time up to December 31, 2007, but were not able to provide any cogent reason for this. The Authority also pointed a wholly irrelevant portion in the undertaking''s reply to the show-cause notice.
After considering the matter, the Authority decided to give the undertaking time until October 15 this year to convert into a public company. Accordingly, the MCA passed the order in this regard.
It is important to mention that the existing law has specified certain circumstances leading to ''undue concentration of economic power'' under the MRTPO.
It would cover an undertaking where the total value of assets is not less than Rs 4 billion or other amount as the Authority may prescribe and which is not owned by a public company, or is owned by a public company in which any individual holds or controls shares carrying not less than 50 per cent of the voting power in the undertaking.
''Undue concentration of economic power'' would also constitute if there are any dealings between associated undertakings which have or are likely to have the effect of unfairly benefiting the owners or shareholders of one such undertaking to the prejudice of the owners or shareholders of any other of its associated undertakings, the law says.