Non-Compliance of CCG

[Sh.Mohsin]

What would be the consequences if a listed Company is not complying the requirements of Code of Corporate Governance (CCG)???

[Sh.Mohsin]

No one knows about this....................?????

[awaisaftab]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Sh.Mohsin</i>
<br />What would be the consequences if a listed Company is not complying the requirements of Code of Corporate Governance (CCG)???
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Dear Mohsin
I think you want to know about the penalties and fines which will be imposed to penalize the listed companies which do not follow any rule or provision of code of corporate governance.

First one should be clear that Law is different thing and the regulations issued by regulators (FBR, SECP, OGRA, NEPRA) are other thing. According to constitution (The difference between law and constitution should also remain in mind) of Pakistan Parliament is sole legislation authority. The only restriction that the constitution of Islamic Republic of Pakistan puts on the legislation authority and power of parliament is that "Parliament cannot make a law against the Injunction of Holy Quran and Sunah of Hazrat Muhammad (SAW)".
In many cases, relating to tax and corporate matters, superior judiciary (Provincial High Courts and Supreme Court) has given verdicts that the notices and S.R.O's are not binding on the citizens and businesses.
The Code of Corporate Governance is not a law rather CCG was issued by S.E.C.P to bring good corporate governance in the corporate sector of the country.Anyone can only be penalized by law, made by parliment of Pakistan, no regulator has right to penalize anyone.

When the Code of Corporate Governance enforced it contained a clause under which all companies (whether listed or otherwise) was liable to change their external auditors after every five years. At that time around 80% listed companies were the client of a big four audit firm. After some time this C.A firm was losing clientage. So a case was filed by this audit firm in the supreme court or high court against S.E.C.P on the ground that the parliament has only the right of legislation and companies ordinance (law) does not put such restriction on the appointment of external auditor (in my personal opinion the audit firm was right). I don’t want to go in the details of said case. Anyhow , at the end S.E.C.P amended CCG and following clause was indulged.
“All listed companies other than those in the financial sector shall, at a minimum, rotate the engagement partner after every five years”

So summing up the regulators cannot make laws. A person or legal entity can only be penalized by the law. Furthermore many codes of C.C.G are not mendatory.

However the C.C.G lays down the following provisions regarding compliance with code of corporate governance.


(xlv) All listed companies shall publish and circulate a statement along with their annual reports to set out the status of their compliance with the best practices of corporate governance set out
above.

(xlvi) All listed companies shall ensure that the statement of compliance with the best practices of corporate governance is reviewed and certified by statutory auditors, where such compliance
can be objectively verified, before publication by listed companies.

(xlvii) Where the Securities and Exchange Commission of Pakistan is satisfied that it is not practicable to comply with any of the best practices of corporate governance in a particular case, the Commission may, for reasons to be recorded, relax the same subject to such conditions as it may deem fit.

Regards,

Awais Aftab

[awaisaftab]

The above is my opinion on the basis of various legislations. According to SECP Since the Code of Corporate Governance has been incorporated in the listing regulations of the stock exchanges, a listed company may be suspended or delisted in case of non-compliance with the various requirements of the Code.

See the link

http//www.secp.gov.pk/divisions/Portal_CS/PDF/faqs.pdf

[Sh.Mohsin]

Thanks for reply... I have also got it from other source.

[Abuzar Qazi]

Awais Sb

Are the SRO's not approved by the parliament.......?

[awaisaftab]

No,SRO's are not approved by parliment. But what is your question?

[ciapk]

CCG review report will be Qualified by the auditors of the Company and stock exchange may delist the company on such basis.

[awaisaftab]

Yes it is another result of non compliance with CCG.

[awaisaftab]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Abuzar Qazi</i>
<br />Awais Sb

Are the SRO's not approved by the parliament.......?

<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Mr. Qazi

Anyother query from your side.

[Abuzar Qazi]

Sir..I have heard that any amendment in any law such as Companies Ordinance etc takes place through SRO's? So don't they need to be approved by parliament in order to become a part of the law?

[awaisaftab]

Under Various provisions of CO,1984 and ITO,2001 Federal Govt. has empowered to make rules relating to corporate and tax matters as well as the regulators (FBR & CBR) have also some rights to form rules/regulation and issue orders (for reference see section 246 and 506 of CO,1984). Any amendment in law can only be made by Parliment as per constitution. Any amendment in law may be notified by a regulator through SRO but it does not mean that the amendment is made itself by SRO.

[Abuzar Qazi]

Thanks... awais sahab It was really informative and corrective one

Hope to get further assistance in other aspects of this subject