SECP tells cos to appoint legal adviser on retainership

The Securities and Exchange Commission of Pakistan (SECP) has directed companies to appoint at least one legal adviser on retainership to advice such company regarding performance of its functions and the discharge of its duties in accordance with the law. In this regard, the SECP issued an order to dispose of proceedings initiated against a company and its chief executive for default made in compliance with requirements of sub-section (1) of section 3 of Companies (Appointment of Legal Advisers) Act, 1974 (Act).
The brief facts leading to the show cause notice are that the company was required in terms of sub-section (1) of section 3 of the Act to appoint at least one legal adviser on retainership to advise such company in the performance of its functions and the discharge of its duties in accordance with the law. The sub-rule (1) of rule 4 of the Companies (Appointment of Legal Advisers) Rules, 1975 (Rules) provides that every company shall within fifteen days of appointment of a legal adviser by it furnish in duplicate to the registrar of the region in which its registered office is situated, the name, names of the partners in case of a firm, address and remuneration of the legal adviser. However, from the perusal of record, it has been observed that the company has failed to do so for which a show cause notice dated July 27, 2017 (SCN) was issued calling upon the company and its chief executive to explain in writing and to appear in person or through authorized representative for hearing on August 21, 2017 to clarify the position.
In response to the above SCN, neither anyone appeared on the date of hearing nor was any written explanation received to the Commission. Subsequently, the record of the company had been perused and found that the company had filed application on August 21, 2017 under the Companies (Easy Exit) Regulations, 2014 with Company Registration Office, Karachi.
The SECP has gone through the relevant provisions of the Act and other record of the Company, and observed that sub-section (1) of section 3 of the Act requires the company to appoint at least one legal adviser on retainership to advise such company in the performance of its functions and the discharge of its duties in accordance with law. Further, sub-rule (1) of rule 4 of the rules requires that every company shall, within fifteen days of the appointment of a legal adviser by it, furnish in duplicate to the registrar of the region in which its registered office is situated the name (names of the partners in case of a firm), address and remuneration of the legal adviser.
Based on the above, it is apparent that the company and its chief executive have violated the mandatory requirements of the Act by not appointing its legal advisor. However, keeping in view of the fact that the company filed application under the Companies (Easy Exit) Regulations, 2014 with the registrar concerned on August 21, 2017, the SECP, therefore, takes a lenient view and does not impose any fine on the Company an its chief executive, the SECP added.