Law:

Section:

Companies Ordinance (XLVII of 1984)--- ----Ss. 160(8), 196(3) & 231--- S.R.O. No. 1227/2005, dated 12-12-2005---Securities and Exchange Commission of Pakistan Act (XLII of 1997), S.33---Sale/disposal of assets of company beyond authorization granted by the shareholders---Effect---Company sought shareholders' authorization for sale/disposal of surplus and obsolete/idle assets in the Annual General Meeting held under S.196(3) of the Companies Ordinance, 1984---Details of assets disposed off had shown that the company had sold the entire plant and machinery, which was beyond the authorization of sale of assets granted by the shareholders in Annual General Meeting---Company also disposed of assets after the lapse of authorization given by shareholders in violation of direction of S.R.O. No. 1227/2015, dated 12-12-2005---Show-cause notice was issued to the Chief Executive and Directors of the company for prima facie contravention of the provisions of S. 196 of the Companies Ordinance, 1984 as no valid authorization was on record from shareholders of the sale of aforesaid assets forming a sizeable part of undertaking---Book value of the assets to be sold for which approval was taken in Annual General Meeting was Rs.9.87 million, which was far lower than the book value of the assets, actually sold i.e. Rs.23.72 million---Threshold fixed by the shareholders for the assets to be sold had been breached by the Directors of the company---Provisions of S.196(3) of the Companies Ordinance, 1984 having been violated, fine of Rs.50,000 was imposed on each Director and aggregate fine of Rs.350,000 was imposed on seven directors---Counsel for directors of the company, having admitted the default, requested for a lenient view of the matter---Amount of penalty was reduced from Rs.50000 to Rs.25,000 per Director, with the aggregate from 350,000 to Rs.175,000---Furthermore Directors were warned to ensure strict compliance of the law, in future. THIS ORDER PASSED BY: TAHIR MAHMOOD, COMMISSIONER (CCD-CLD):---.--- This Order is passed in the matter of Appeal No. 24 of 2017 filed under section 33 of the Securities and Exchange Commission of Pakistan (Commission) Act, 1997 (SECP Act)…

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