The Securities and Exchange Commission of Pakistan (SECP) observed that Section 204-A of the Companies Ordinance is made mandatory for all the listed companies to appoint their independent share registrars. This has been stated by Director Enforcement SECP while pleading its case before the Appellate Bench-IV of the SECP in an appeal filed by a company regarding prima facie contravention of the provisions of section 204-A (2) of the Ordinance.
The Director Enforcement SECP reiterated the arguments stated in the Impugned Order and prayed to dismiss the appeal of the company. The Respondent (Director Enforcement SECP) rebutted the grounds of appeal because the directors of the Company were given the opportunity of hearing and they were advised in the notice to inform this Commission in writing within 14 days of receipt of the notice if they wish to be heard in person or through an authorised representative but they did not opt for it.
Section 204-A of the Ordinance is mandatory and has to be met by all the listed companies. Non-compliance of this provision of the Ordinance only because of Company''s week financial position cannot be justified because the provisions of the aforesaid section are clear and explicit, SECP said.
The Appellants were in contravention of section 204-A of the Ordinance at the time of issuing the Order. The Commission directed the management of the Company to comply with the mandatory provisions of the Ordinance within 30 days of the issue of the Order.
It was evident that the company has not been complying with the provisions of the Ordinance since July 2007. More significantly, company has admitted in clear terms while giving consent to act as director that they are aware of their fiduciary duties.
The SECP Appellate Bench-IV heard the parties i.e. Appellant and Respondent at length and perused the relevant record with the able assistance of the parties. The company filed the appeal, inter alia, on the ground that they were not afforded opportunity of hearing by the Director Enforcement. Therefore, keeping in view the contention of the company and the record, without going into the merits of the case we are of the view that the Appellants should have been given an express opportunity of hearing rather to give an option in the SCN dated 05/05/10. Therefore, in the interest of justice and equity, the Impugned Order is set aside and the case is remanded to the Director Enforcement SECP with the direction to provide an opportunity of hearing in the instant matter within 30 days of this order and thereafter decide the case afresh in the light of record and submissions of the Appellants during the hearing.
Background of the case revealed that the Chief Executive of the company submitted that the Company shares are processed through Central Depository System (CDS) and almost ninety percent shares have been transferred on CDS. Further, the shares of the Company are not in active trade on Stock Exchange. He further submitted that the Company is not in operations for last several years and it caused serious financial constraints therefore extra cost for appointment of the Registrar cannot be afforded, however the Company is negotiating with Commissions approved Registrars to become the Registrar of the Company.
The Director Enforcement SECP being dissatisfied with the response of the Appellants passed the Impugned Order and imposed a penalty of Rs l5000 on the Appellants. The company, being aggrieved by the Impugned Order preferred an appeal before the Appellate Bench and requested to set aside the Impugned Order being unlawful, unwarranted and unjust.