The Securities and Exchange Commission of Pakistan (SECP) has said that the holding of the annual general meeting (AGM) is a very important statutory event and provides an opportunity to the shareholders including those in minority, to participate in discussion and voting on agenda items of the AGM.
This has been stated by the commission while disposing of proceedings initiated against the directors including chief executive (respondents) of plastic company.
The SECP has analysed the facts of the case, relevant provisions of the Companies Ordinance, and submissions made by the respondents. The aforesaid provisions of the law are clear and explicit. A company is required to hold its AGM within four months from the close of its financial year. Holding of the AGM is a very important statutory event and provides an opportunity to the shareholders including those in minority, to participate in discussion and voting on agenda items of the AGM that include consideration and approval of a company''s financial statements. The financial statements not only show the financial position and performance of a company but also show the results of management''s stewardship of resources entrusted to it. In order to ensure minority participation and transparency, all the companies must meticulously follow the procedure prescribed by the Ordinance for holding an AGM. In addition to their responsibility of overseeing and managing affairs of the Company, directors also have fiduciary duties towards the Company and its shareholders. They are, therefore, liable to a higher level of accountability which requires them to be vigilant and perform their duties with care and prudence. It is directors'' responsibility to oversee the functioning of the company, to keep it appropriately staffed and organised to ensure due compliance of law. Directors of a listed company while filing their consents to act as directors, inter alia, give an undertaking that they are aware of their duties under the Ordinance and that they have read the relevant provisions contained therein.
It is mandatory for the directors of a listed company to have knowledge of provisions of the applicable laws and in terms of the Ordinance the directors are primarily responsible for holding the AGM. In this context, the respondents cannot absolve themselves of their statutory duties regarding holding of AGMs and preparing and filing of annual and quarterly accounts. The respondents have yet again cited somewhat similar reasons ie the security situation of Uthal, Balochistan and financial constraints due to shut down of operations, for delays in holding the AGM and other statutory compliances. However, the registered office of the Company is situated in Karachi, where the Company can keep all its records and, therefore, the security situation in Uthal, Balochistan should not be a detriment to hold the AGM in Karachi.