ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) initiated 62 show-cause proceedings due to non-compliance with several legal requirements.
The SECP while enforcing compliance of corporate and allied laws initiated 62 show-cause proceedings due to non-compliance with legal requirements regarding auditors' reports, directors' powers, delayed/non-filling of cost audit reports, investment in associated companies, misstatement of facts, takeover regulations, disclosure of directors' interests, circulation of financial statements, employees' provident funds, and security deposits.
During September and October, the Enforcement Department concluded 30 proceedings against the companies and chief executives, directors and auditors of the companies, said a SECP statement issued here.
In one such instance, the detailed examination of financial statements of a listed company led the SECP to track and unveil material concessions extended by another listed company to its associates, in total ignorance of its shareholders.
The lender company had already extended a loan of Rs50 million to its associate, which was further rescheduled for another three years, without obtaining the required approval from the shareholders.
The lending company also did not record this material information in its financial statements, to avoid surveillance of the SECP and general shareholders, which surfaced from the record of the borrowing company. The company admitted the default and deposited the fine imposed.
In another case, the change in cost formula of inventory valuation was accounted for as `change in accounting estimate' instead of as a `change in accounting policy' in accordance with the requirements of IFRS/IAS.
Since the change of cost formula represents a change in measurement basis therefore it should have been accounted for retrospectively as nothing to the contrary is mentioned in IAS.
The SECP's point of view was duly endorsed by the ICAP on the issue. Moreover, in case of another company the deferred tax has not properly been accounted for as per IAS-12, `income taxes'.
The company recorded the deferred tax asset without probable sufficient taxable profits in future, which is in contradiction to the requirements of IAS- 12.
The department while facilitating the companies allowed one listed company to issue shares by way of right while another company was allowed to issue shares by way of otherwise than right.
The department also accorded approvals and relaxation from certain provisions of laws and the rules.
These approvals pertains to Companies (Issue of Capital) Rules, 1996, appointment of cost auditors under the Companies (Audit of Cost Accounts) Rules, 1998, Listed Companies (Substantial Acquisition of Voting Shares and Take-overs) Regulations, 2008, Group Companies Registration Regulations, 2008, filing of consolidated financial statements, printing of number of computerized national identity card (CNIC) on dividend warrants, extension in holding of annual general meetings and change in AGMs' venue.
In addition, 45 investor complaints pertaining to non-issuance of shares, non-verification of transfer deeds and non-payment of dividends were resolved.
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