Dominion Stock Fund

Facts that lead to the order

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Registered in Oct 1994 as Investment Company under Investment Companies and Investment Adviser Rules(1971) After Promulgation of Non-Banking Finance Companies Rules(2003), SECP started regulating investment companies SECP had found the company to be prejudice to the interest of shareholders and issued Show Cause Notice (SCN) against the company dated June 21, 2005 SCN pointed out that company had failed to:
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obtain registration under rule 38 of NBFC Rules Hold AGM for years 2003 & 2004 (section 158) Annual Accounts for year 2003 &2004 (Section 233) Prepare and circulate quarterly accounts since 2003 (Section 245) Custodian

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I.

Financial Position of the company had been deteriorating

II. III.

Paid Up capital 50 million Accumulated losses Rs. 34.97 Million Companys Equity Rs. 17.4 million which is way below the minimum requirement (Rs. 100 Million)

SCN dated June 21 2005 was disposed by order dated October 18 2006 passed by Director NBFCD which concluded the following points
a) b) c)
i. ii.

Failure to appoint Investment Advisor (rule 39 NBFC rules) and a custodian (rule 40(1) NBFC Rules) Failure to register Investment Company under rule 38 of NBFC Rules Failure to hold AGM and circulate periodic accounts
No AGM and circulation o accounts for year 2003,2004,2005 and 2006 (Section 158, 233) No circulation of Quarterly accounts since 2003

y Failure to meet minimum equity requirements i. Companys Equity Rs. 17.4 million which is way below the minimum requirement (Rs. 100 Million) ii. Present management took control of the company in 2003 but failed to redress the financial situation iii. It tried to merge the company with Investec Mutual Funds but failed to do so due o suspension of brokerage functions of investec y

Financial Position
i. ii.

Accumulated losses Rs. 34.97 Million Net Asset Value per Certificate Rs. 1.96 which is far below the par value of Rs. 10 For Last five years the company had only distributed 2% dividend amounting Rs. 1 Million Share Holders funds eroded by Rs. 32. 6 Million which is 65% of paid up capital

Dividend Disribution
i. ii.

y NBFC concluded that i. Company affairs were not managed prudently ii. Appointed Asim Shahid Rehman Chartered Accountants to investigate into company affairs under Section 265 of the ordinance iii. Objective of the investigation was to determine true and fair financial position of the company

Investigators could not investigate because the company had challenged the order in Appellate Bench of the Commission on November 07, 2006 y On July 20, 2009 Appellate Bench allowed the investigations with some modifications
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y Investigation concluded i. Registered Office of the company was closed by FIA ii. Main Sponsor of the company is in FIAs Custody iii. Affairs of the company were severely mismanaged and financial position was as such as to endanger its solvency

y In view of above facts, SECP issued SCN on February 04, 2010 under

section 309
SCN was returned undelivered ii. SCN was then Published in 2 English and 2 Urdu news papers on April 30 2010 iii. Fourteen days time to respond to SCN ending on MAY 14, 2010
i.

Aforementioned time line had passed and there was no response from the company or the persons responsible for its affairs.

Decision
y Company had violated Rules 38,39 & 40(1) of NBFC rules, 2003 as well

as provisions ofmsection 158,233, and 245 of the ordinance y Asif Jalal Bhatti, Executive director Specialized Companies Division ordered Joint registrar to present a petition for winding up in Sindh High Court