Law: Companies Ordinance, 1984

Section: 231,263,265

Law: Constitution of Pakistan, 1973

Section: 185(3)

Companies Ordinance (XLVII of 1984) [since repealed]--- ----Ss. 231, 263 265---Security and Exchange Commission of Pakistan (SECP)---Inspection of books of account by registrar, etc.---Investigation of affairs of company on application by members or report by registrar---Scope, nature and distinction between the SECPs power of inspection under Section 231 and the power of investigation under sections 263 and 265 of the Companies Ordinance, 1984 stated. Section 231 of the Companies Ordinance, 1984 (the Ordinance) empowers the Security and Exchange Commission of Pakistan (SECP), as a regulator, to inspect the books of account and related books and papers of a company. So, inspection is limited to books of account and related papers and books, and it does not include other record of the company which is unrelated to the accounts of the company. The exercise of this power is administrative in nature, essentially to ensure compliance with the regulatory requirements pertaining to the books of account. Books of account are the journals and ledgers which contain financial information related to the business and include books such as purchase books, cash books, sales books, debit ledger and credit ledger amongst others. There is also a corresponding obligation on the directors, officers and employees of the company to provide all books of account and papers and to give all assistance in connection with the inspection. An inspection under section 231 of the Ordinance is, therefore, restricted in its scope and requires every director, officer or employee of the company to produce the books of account and is not an open ended inspection. Further the officer who conducts the inspection must make a report to the SECP on the inspection. This goes to the scope of inspections which is to ensure regulatory compliances and to ensure that the books of account are duly maintained as required under the law. While, there exists an obligation to record reasons in writing for the exercise of power under section 231 of the Ordinance, there is no requirement under the Ordinance for the issuance of a show cause notice stating the reasons for the inspection, for which a reply is required…

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