The Appellant Bench of the Securities and Exchange Commission of Pakistan (SECP) has conveyed to the public sector companies that the PSCs (legal entities) must comply with all the requirements of the SECP governing laws regardless any public sector company become a dormant entity or an inactive company.
Through an order, the SECP Appellant Bench has further declared that the justification has been given by a public sector petroleum company that it has no management or board and has become inactive. This would not allow public sector company to violate Public Sector Companies (Corporate Governance) Rules 2013 (Rules).
An SECP Appellant Bench headed by SECP Chairman Farrukh H Sabzwari has upheld the decision of the SECP Commissioner (Corporatization and Compliance Department) of imposing fine on the public sector company. The SECP Appellant Bench further directed the public sector company to comply with the laid down laws. The Appellant (company) argued that it has become inactive, therefore, the SECP Impugned Order should be set aside.
The Commissioner (Corporatization and Compliance Department) i.e. Respondent has argued that the company has violated mandatory requirements of rule 24 of the Rules by not filing SOCs for the years ended 2014 and 2015 and the default continues to date. "The Bench is of the view that as long as the Appellant company continues to be a legal entity, it must comply with all the requirements of the law regardless of whether it has become a dormant entity," the SECP Bench observed.
The brief facts of the case are that the appellant, being a public sector company, was required in terms of rule 24(1) & (2) of the Public Sector Companies (Corporate Governance) Rules 2013 (Rules) read with section 506(2) of the Companies Ordinance, 1984 (Companies Ordinance) to publish, circulate and file with the Commission, a Statement of Compliance (SOC) and review report from the auditor for the years ended 30/06/14 and 30/06/15 which the Appellant failed to file. The company preferred the appeal on the grounds that non-compliance in question was not deliberate but on account of the fact that the Appellant has no management or board and has become inactive.
The Appellant further argued that the accounts had previously been filed but since the board and management do not conduct meetings, no further compliances could be made. Furthermore, the Appellant argued that the affairs of the appellant has been taken over by the Ministry of Petroleum.
The company further argued that in view of the very restricted and insignificant role of the company, the delay did not prejudice any member of the public and is not in consonance with past practice of the company, therefore, imposing a fine on its Chief Executive as would be imposed on a habitual defaulter is not warranted.
The SECP rebutted the arguments on the grounds that the Appellant company has violated the mandatory requirements of rule 24 of the Rules by not filing to date the SOCs for years ended 2014 and 2015 and is, therefore, liable to imposition of penalty under 25 of the Rules. The SECP further argued that the requirement to file SOC is a standalone mandatory requirement under the law separate from filing of annual audited accounts and the Appellant had not filed any application for exemption from the applicability of the Rules.
The SECP Bench concluded that the Bench has heard the parties i.e. the Appellant and the Respondent. The Appellant argued that the Appellant has become inactive, therefore, the Impugned Order should be set aside. The SECP has argued that the company has violated mandatory requirements of rule 24 of the Rules by not filing SOCs for the years ended 2014 and 2015 and the default continues to date.
"We are of the view that as long as the Appellant continues to be a legal entity, it must comply with all the requirements of the law regardless of whether it has become a dormant entity. In view of the foregoing, the Impugned Order is upheld, SECP bench added.
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