Legal adviser hiring act compliance hits 85pc: SECP

ISLAMABAD: The Securities and Exchange Commission of Pakistan’s (SECP) on Friday said compliance with the provisions of the "Companies (Appointment of Legal Advisers) Act, 1974" has increased to 85 percent from 63 percent in 2017.

The regulator said the Act required the companies having paid-up share capital greater than Rs7.5 million to appoint at least one legal adviser on retainer ship to advise such companies regarding performance of its functions and discharge of its duties in accordance with the law.

Sub-rule (1) of rule 4 of the Companies (Appointment of Legal Advisers) Rules, 1975, stipulates that every company shall, within 15 days of appointment of a legal adviser by it, furnish in duplicate to the registrar of the region in which its registered office is situated, the name (names of the partners in case of a firm), address and remuneration of the legal adviser. Accordingly, section 7 of the Act has empowered SECP to impose penalty for contravention of the provisions of the Act or Rules and regulations made there under.

In 2017, the commission said 63 percent of the companies were compliant and 37 percent were non-compliant with regards to appointment of legal advisers. “The SECP took various initiatives to strengthen the compliant corporate culture, ensuring that the companies are in a better position to manage their affairs in accordance with the law,” the corporate watchdog said.

It added that such effective initiatives included conduction of seminars through company registration offices (CROs) in collaboration with Institute of Chartered Accountants of Pakistan, Institute of Cost and Management Accountants of Pakistan, and the federation of chambers of commerce and industries for educating their members for appointment of legal advisers.

“Frequent meetings with bar councils, tax bar associations of all major cities within the territorial jurisdiction of CROs were held. In addition, regular consultative sessions with corporate consultants, accentuating their role in ensuring corporate compliance with the Act were organised,” the notification said.

It added that in this regard a vigorous adjudication drive was also launched by serving demand notices upon non-compliant companies, telling them to appoint legal advisors within the stipulated time.

“Subsequently, show cause notices were issued, and finally, proceedings by initiating penal action against non-compliant companies were concluded,” the SECP said.

Consequently, the regulator said, the corporate compliance rose to 82 percent in November 2017 and further improved to 85 percent as of June 30, 2018.

“In furtherance to this, numerous steps have been taken and a mechanism has been devised to identify the defunct and non-operational companies from the remaining 15 percent non-compliant companies,” the regulator said adding additionally,

the powers for adjudication had recently been delegated to the relevant CROs to ensure improved corporate compliance.