ISLAMABAD (February 16 2010): The Securities and Exchange Commission of Pakistan (SECP) is likely to give powers of adjudication to its Enforcement Department to act against public unlisted and private companies, which failed in filing their annual audited accounts with the registrars of the commission.
Sources told reporters on Monday that the proposal would further strengthen the working of SECP and improve enforcement in the field formations. Particularly, it would substantially improve compliance level of public unlisted and private companies to timely file their annual audited accounts.
These companies would try to ensure compliance with the laid down rules of the commission. The Enforcement Department of the SECP would monitor and examine the companies' accounts. Details revealed that section 242 of the Companies Ordinance, 1984 provides private companies having paid up capital of Rs 7.5 million and above shall be required to file their annual audited accounts with the Registrar of Companies.
There are nearly 8700 public unlisted and private companies which fall within this category and inspite of the statutory requirement, 75% of such companies have failed to file their annual accounts with the SECP registrar. Besides, due to capacity constraints SECP Registration Department failed in taking any action against the defaulters.
Sources said that the current procedure adopted by the Enforcement Department of the SECP for examination of the accounts of the public unlisted and private companies does not facilitate and support the effective and smooth functioning of the monitoring-and-enforcing mechanism for addressing the potentially alarming areas as the powers to take penal action on the violation of the statutory requirements still rests with the Registration Department and concerned Company Registration Offices.
The preparation of explanatory communications for the Registration Department for conducting any enforcement action arising out of the specialised examination done by the Enforcement Department is a duplication of efforts placing additional burden on already scare resources.
The frequent inter-departmental correspondence includes full background of any enforcement action proposed to be conducted which includes the examination check list, the case scenario reflecting the violation of relevant sections, the company arguments and the basis of applicability of relevant enforcement provisions.
Keeping in view the aforementioned position and in order to achieve the purpose of the exercise of regulation of public unlisted and private companies, the SECP has recommended that specific powers to adjudicate the cases of the companies be delegated to the Enforcement Department.
Similarly it was also proposed that related powers of the Commission under the Companies Ordinance, 1984 be delegated to the officers of the Enforcement Department. Furthermore, additional charge of a post of Registrar be assigned to Director (Enforcement) enabling him to exercise the powers of Registrar under section 242 of the Companies Ordinance in the cases of said companies.
Sources said that the SECP has considered the proposal in light of the justification provided by the Enforcement Department and it was resolved that specific powers of the Commission under the Companies Ordinance, 1984 to adjudicate the cases of companies registered in terms of the provisions of section 42, public unlisted and private companies having paid up capital of Rs 200 million and above should be delegated to the officers of the Enforcement Department.
The Enforcement Department would revise the draft notification in light of the aforementioned direction/ approval of the Commission, get the notification vetted from the Law Division and to arrange its publication in the official Gazette, sources added.