Law: Companies Ordinance, 1984

Section: 224

(a) Companies Ordinance (XLVII of 1984)--Ss. 224 & 485---Securities and Exchange Commission of Pakistan Act (XLII of 1997), S. 34---Object and scope of S.224. Companies Ordinance, 1984---Word "vest" occurring in S.224 of the Ordinance---Connotation---Trading activity of sale and purchase of the issuer's shares by the beneficial owner and the issuer---Appeal to High Court---Securities Exchange Commission of Pakistan in the present case, accused the beneficial owner of indulging trading activity of sale and purchase of the issuer's shares within a period of 6 months resulting in a gain and also accused the beneficial owner of violating the terms of S.224(2), Companies Ordinance, 1984 but not tendering the gain so received to the issuer---Issuer too was accused by the Commission of failing to make a demand in terms of S.224(2) of the Ordinance---Securities and Exchange Commission of Pakistan, therefore contended that the accruing gain now vested with the Commission and demanded the same-Validity-Provisions of S.224(2). Companies Ordinance, 1984 had burdened both the beneficial owner and the issuer with a responsibility, in case of failure to act, both were deprived of the gain which then vested with the Commission---Principles and procedure elaborated. The rationale behind the enactment of section 224, Companies Ordinance, 1984 is to discourage trading between a "beneficial owner" and an "issuer", both having fiduciary relationship of such a kind where exploitation and wrongful gains were possible. The purpose of law was to deprive a "beneficial owner" of the gains which according to the intention of law were to be returned to the issuer. In case the gain through trading activity rather than serious investment is not remitted to the issuer within a period of 6 months from the date of the earning of the profit and there being no demand trade by the issuer, this amount vests with the S.E.C.T. The beneficial owner has to tender the amount within 6 months' period provided from the date of the accrual or upon the demand being made by the issuer, in which case the "beneficial owner" has to remit the gain within 60 days of the making of the demand whichever is later.…

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