Law: Companies Ordinance, 1984

Section: 476

Companies Ordinance (XLVII of 1984)--Ss. 492 & 476---Companies (Issue of Capital) Rules, 1996, R.5---Non-disclosure of contingent liabilities and misstatement in projected financial statements---Imposition of penalty---Company did not disclose contingent liabilities relating to its Bank liabilities in its annual audited accounts for the relevant year---Directors of the company also misstated in projected financial statements submitted to the Commission in connection with right issue announced in 2007 regarding injection of fund by way of Director's loan---However the Director's loan as disclosed in projected financial statements was never injected---Justification given by the company for non-disclosure of contingent liabilities in the documents of the company, was not acceptable at all---Directors having admitted non-disclosure and had assured to make required disclosure in future, that issue did not require further deliberation---Submissions made by Directors and their Authorized Representatives regarding the issue of misstated projected financial statements, were not very convincing---Projected financial statements submitted by the company were based on injection of funds through equity and Director's loan---No other sources of financing were envisaged for operation of the company during the projected period---Directors failed to provide the planned funds to the company and the company could not pay its long term liabilities and also failed to achieve projected results---Said circumstances had shown that the projected financial statements of the company submitted to the Commission in the year 2007 were misstated to present an optimistic picture of company's affairs---Default under S.492 of the Companies Ordinance, 1984, though was established, however considering the fact that the company had disclosed contingent liabilities in half yearly accounts for period ended December 11, 2009, taking lenient view, instead of imposing maximum penalty of Rs.500,000 on each Director, token penalty of Rs.200,000 was imposed on Chief Executive of the company only. ORDER TAHIR MAHMOOD, EXECUTIVE DIRECTOR (ENFORCEMENT).---This order shall dispose of the show cause…

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