Law: Companies Ordinance, 1984

Section: 160,208,476,506

Companies Ordinance (XLVII of 1984)--Ss. 160, 208, 476 & 506---Purchasing shares of associated company in contravention of provisions of law---Imposition of penalty---Examination of the annual audited accounts of the company for the relevant year had revealed that Company had purchased 15,193 shares of associated company without approval of shareholders---Company also advanced an amount of Rs.209 million to said associated company against issue of right shares subsequent approval of which was obtained from the shareholders---Said advance was made in contravention of S.208 of the Companies Ordinance, 1984. which required that the investment in associated company should be made under authority of a special resolution, but no copy of said special resolution was filed---Contention that purchase of shares of associated company in small numbers would not attract provisions of S.208 of the Companies Ordinance, 1984, was not cogent---Law did not 'allow any such exception---Investment in associates, irrespective of the amount of investment could be made, but it should be made with the approval of the shareholders under S.208 of the Companies Ordinance, 1984--Provision of Ss.208, 160 & 506 of the Companies Ordinance, 1984 had been violated in the case; however, considering the amount of equity investment and the fact that shares against the advance had already been issued, taking a lenient view, instead of imposing maximum penalty under S.208 of the Companies Ordinance, 1984, a fine of Rs. 20,000 on each Director and Chief Executive of the company was imposed and to recover interest on advance of Rs.209 million at the rate not less than the weighted average cost of the company. Gharibwal Cement's case SECP 2003 CLD 131 rel. ORDER TAHIR MAHMOOD, EXECUTIVE DIRECTOR (ENFORCEMENT).---This order shall dispose of the proceedings initiated through Show-Cause Notice No. EMD/233/368/2002-3506-12 dated April 2, 2008 against the Directors of Bestway Cement Limited (BCL) under the provisions of sections 208, 160 and 506 of the Companies Ordinance, 1984 (Ordinance). 2. Brief facts of the case are that examination of the annual audited accounts of BCL for the year ended June…

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