Pending proceedings: repealed Companies Ordinance still applicable: SECP

The Securities and Exchange Commission of Pakistan (SECP) has legally interpreted that the Companies Ordinance 1984 has been repealed while promulgating Companies Act 2017, but pending proceedings against brokerage houses/corporate sector would be concluded as provided in the Companies Ordinance 1984.
According to an order issued by the SECP against the chief executive of a brokerage house engaged in business of brokerage and holder Trading Right Entitlement Certificate ("TREC"), the SECP clarified provisions of the Companies Ordinance 1984 which are still applicable.
Through this order the SECP has compared provisions of the repealed Companies Ordinance 1984 with Companies Act, 2017. The SECP observed that it is important to highlight here that the Ordinance 1984 has been repealed while promulgating Companies Act, 2017 ("Act"). However, provisions of Section 509(1)(f) of the Companies Act clearly provides that the pending proceedings should be concluded as provided in the Ordinance:
Repeal and savings: The Companies Ordinance, 1984, hereinafter called as repealed Ordinance, shall stand repealed, except Part VIIIA consisting of sections 282A to 282N, from the date of coming into force of this Act and the provisions of the said Part VIIIA along with all related or connected provisions of the repealed Ordinance shall be applicable mutatis mutandis to non-banking finance companies in a manner as if the repealed ordinance has not been repealed:
Provided that repeal of the said Ordinance shall not affect any inspection, investigation, prosecution, legal proceeding or remedy in respect of any obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such inspection, investigation, prosecution, legal proceedings or remedy may be made, continued or enforced and any such penalty, forfeiture or punishment may be imposed, as if this Act has not been passed.
The SECP has analyzed the facts of the case, relevant provisions of the Ordinance, arguments put forth in writing and during hearing and observed that a person who engages in brokerage business and at the same time active engages as a director on the board of listed company increase the risk of market abuse.
The provisions of Section 189 were introduced in the Ordinance to address this inherit risk. The respondent is director in the Company and at the same time actively involved in brokerage business as being chief executive of a brokerage house.
The argument that the respondent was unaware of prohibition contained under Section 187(i) is not cogent as ignorance of law excuses no one. The Section 187 of the Ordinance bars ineligible persons to become director and clause J of Section 187 specifically bars a person who is engaged in business of brokerage or is a spouse of such person or is a sponsor, director or office of a corporate brokerage house to become director of a listed company.
For the foregoing reasons, the SECP is of the opinion that the provision of Section 187 of the Ordinance has been violated by the respondent. Therefore, in exercise of the powers conferred by Section 189 of the Ordinance, the SECP hereby imposes a fine of Rs 300,000 on respondent for contravening the provisions of Section 187 of the Ordinance.
The Section 187 of the Ordinance 1984 provides that no person shall be appointed as a director of a company if he is engaged in the business of brokerage, or is a spouse of such person or is a sponsor, director or officer of a corporate brokerage house.
The respondent was not qualified to act as director of the company as he is director in a brokerage house, prima facie, contravened the provision of Section 189 of the Ordinance. Therefore, SCN was issued to the respondents under the provisions of Section 189 of the Ordinance. In view of foregoing and deference to the regulatory role of the SECP, the respondent has tendered resignation from the post of the director of the company with immediate effect. Further the respondent renders unconditional apology for the unintentional and inadvertent violation of Section 187(j) of the Ordinance and requested for lenient view.