KARACHI (October 18 2003): The Securities and Exchange Commission of Pakistan (SECP) has amended the companies rules governing deposits aimed to safeguard the interest of the general public against the risk of depositing money with the companies.
A press release of the commission said the rules (Invitation and Acceptance of Deposit) Rules, 1987 (Deposit Rules) were amended.
Deposit-taking, being the normal and exclusive business of banking companies, is not to be undertaken by other companies unless the deposit rules framed under Section 88 of the Companies Ordinance are duly observed.
According to the amendments, any amount collected through a 'scheme' advertised in the media or otherwise by companies, particularly the real estate companies and automobile companies as an advance against the promise to supply the property or commodity at some future date would be treated as 'deposit'.
The term 'scheme' has also been explained in the amendments, which elaborates that any marketing campaign launched by a company, directly or indirectly, for inviting the general public to apply for the purchase of property or commodity or any other product against payment in advance would be treated as a 'scheme'.
Any amount collected as aforesaid would fall within the ambit of regulatory control of the SECP if:
(a) The property or commodity is not in possession of the company at the time when the notice, circular, advertisement or communication is issued; or
(b) It offers for sale a product for which the company does not have adequate production facility; or
(c) It contains a promise for a gift or reward or some unusual incentive so as to prompt an early booking.
Some exemption has, however, been allowed for launching a 'scheme' to such a company as was notified by the SECP to be exempted, in consultation with the concerned trade organisation duly licensed and registered under the relevant law.
The deposit taking in violation of the companies ordinance and the deposit rules is punishable, and every officer of the company which is in default is liable to be punished with imprisonment for a term, which may extend to two years and also liable to fine.
Section 88 of the companies ordinance and the deposit rules made thereunder make it clear that the jurisdiction of the SECP encompasses the companies registered under the companies ordinance and does not extend to individuals, co-operative societies or enterprises other than the companies.
The amendments have been made keeping in view, particularly, the real estate and automobile companies which promise to supply a property at some future date but the supply is not assured.