Law: Companies Ordinance, 1984

Section: 208

Companies Ordinance (XLVII of 1984)--Ss. 208 & 476---Investment in associated companies without obtaining a special resolution and without charging interest--Imposition of penalty---Examination of annual accounts of the company for the relevant year had revealed that huge amount was outstanding against advances extended by the company to its associated undertakings---Said advances were extended without obtaining the authority of a special resolution in terms of S.208 of the Companies Ordinance, 1984 and no interest/mark¬up was being charged on said amount---Directors of the company had failed to comply with provisions of S.208 of the Companies Ordinance, 1984 in respect of advances extended by the company to its associated companies---Said advances were not normal trade credit---Due to the interest/mark-up free nature of those unauthorized advances, huge loss had been caused to the company---Intent and purpose of S,208 of the Companies Ordinance, 1984 was to protect company against diversion of a company's funds, to pass an undue benefit to associated companies or undertakings of a company at the cost of the shareholders of such company---Due to that reason authority of special resolution of shareholders of a company was mandated by the law for making any investments, loans, advances etc. to associated companies or undertakings---Any leniency while deciding the cases involving such instances would defeat the whole purpose of a legislation---Circumstances of the case warranted no sympathy for the Directors of the company who had ruthlessly allowed misuse of company's funds for the benefit of associated companies causing huge loss to the company and its shareholders---Provisions of S.208 of the Companies Ordinance, 1984 having been violated, Directors of the company were liable for the penalties as prescribed by subsection (3) of S.208 of Ordinance---Fine of Rs.3,500,000 in. aggregate on Chief Executive and five Directors of the company, was imposed for contravening the provisions of subsection (1) .of S.208 of the Companies Ordinance, 1984, accordingly. ORDER TAHIR MAHMOOD, EXECUTIVE DIRECTOR (ENFORCEMENT).---This order shall dispose of the proceedings…

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