In a recent development in the investigation and potential resolution of a myriad of issues surrounding the Pakistan Engineering Company Limited (PECO), the Securities and Exchange Commission of Pakistan (SECP) has issued a show-cause notice to the company.
The show-cause notice comes as a result of numerous complaints that the SECP has received from shareholders, directors, and concerned ministries about the violation of business rules and malpractices by some officials of PECO.
A notification was submitted to the Pakistan Stock Exchange (PSX) by the PECO today (April 2), informing it of the issuance of the show-cause notice by the SECP.
The order will dispose of the proceedings initiated against the PECO through show cause notice dated 25 June 2020.
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The brief facts of the case show that the notice was issued based on the complaints to the SECP that the PECO had not held it’s Annual General Meeting (AGM), had not filed its accounts and that the company’s CEO, Mairaj Anees Arif, had continued to serve in the position despite his removal by the Board of Directors on 14 December 2018 and the fact that his term had ended on 16 March 2019.
The show-cause notice also mentions that the PECO had failed to file its quarterly financial statements since the quarter ending September 2019. It had also not held the AGM since it was due in 2019, or the regular quarterly board meetings.
The SECP’s notice also mentioned that these complaints have also come from two of the PECO’s directors and that the half-yearly financial statements submitted to the SECP were also unaudited.
Furthermore, the directors had complained to the SECP that the employees and suppliers of the company have not been paid, and its tax returns have not been filed. while the overdue liabilities of the National Bank of Pakistan (NBP) are also unpaid, which led the NBP to report the PECO as a defaulter.
The SECP also said in the notice that PECO’s directors have filed complaints about additional issues, including the leasing out of the PECO to a third party without the approval of its Board of Directors and shareholders. No accounts are being maintained and the Managing Director (MD) is still illegally performing all its bank transactions without following policies and procedures.
The leasing issue of the company has also been taken up by the Ministry of Industries and Production that informed the SECP in a letter on 17 June 2020 of the illegal leasing out by the MD and the CEO to Tahir Bashir Khan who is allegedly the MD’s friend.
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The SECP said that the company had submitted a reply to it regarding these allegations, which it stated were “neither cogent nor backed by any evidence”. The SECP obtained a legal opinion from the Ministry of Law and Justice on the matter and initiated the investigation.
The show-cause notice mentions that one of the directors, namely Arif Habib, has repeatedly requested the concerned Federal Secretary and minister to intervene and resolve the issues of the PECO.
The SECP also concluded in the notice that the affairs of the company are not being managed in accordance with sound business principles or prudent commercial practices. The financial position of the company is endangering the solvency of the company, and the members of the company have not been given the information with respect to the company affairs that they might reasonably expect.
As a result of these revelations, the SECP has appointed three of its officers to investigate the affairs of the PECO. It added that it is the duty of all those involved with the company to provide complete assistance to the three officials nominated by the SECP, and failure to do so will make the officers, employees, and agents of the company liable to be punished.
