Law: Companies Ordinance, 1984

Section: 224

Companies Ordinance (XLVII of 1984)--S. 224---Trading by directors, officers and principal shareholders---Interpretation, object and scope of application of S.224, Companies Ordinance, 1984---To adopt a literal interpretation of S.224 would render the section unconstitutional, and in order to protect the section and bring the same within the framework of constitutionally prescribed parameters, the interpretation of words should be determined in terms of legislative intent---Word 'vest' occurring in S.224 of the Companies Ordinance, 1984---Meaning---Word 'vest' per se does not confer an absolute title on Securities and Exchange Commission of Pakistan---Gains will remain under all circumstances the property of the company and Securities and Exchange Commission of Pakistan has no right or entitlement thereto---Principles. Section 224, Companies Ordinance, 1984 applies to certain specified categories of persons, namely, a director, chief executive, managing agent, chief accountant, secretary or auditor of a listed company or a person who, is directly or indirectly, the beneficial owner of not less than 10% of the shares of a listed company. The section is triggered off by the sale or purchase of any shares of the company in question within a period of less than 6 months by a designated person (the "shareholder"), and, in the event of such a sale or purchase taking place, the shareholder is obligated to tender the amount of gain, if any, made by him to the company under intimation to the Registrar and the Securities and Exchange Commission of Pakistan. In the event of a failure to discharge the aforementioned legal obligation taking place, or, even if tie company in question fails to recover the amount of the gain within the specified periods, the gain is to vest in the SECP and the failure to deposit such gain with it may lead to action for recovery as arrears of land revenue. The Explanation to the section extends the beneficial ownership of shares to the shareholder, or his spouse or any of his dependent lineal ascendants or descendants of any partnership firm or private company in which he has an interest. A proviso to subsection (1) excludes the application…

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