SECP Issues Show-Cause Notices to 41 State-Owned Enterprises for Compliance Failures Under the Companies Act 2017

On 17 March 2026, the Securities and Exchange Commission of Pakistan (SECP) issued a total of 66 show-cause notices to 41 state-owned enterprises (SOEs) for a range of corporate compliance failures. The enforcement action targets companies that have not filed annual audited accounts, have not submitted their annual returns, or have failed to hold annual general meetings as required under the Companies Act 2017. This is one of the most significant regulatory actions the SECP has taken against the public sector in recent memory, and it carries important implications for corporate governance across Pakistan.

The Scale of Non-Compliance

The SECP's findings reveal a pattern of persistent non-compliance among government-controlled companies. According to the regulator, 33 SOEs have not filed their annual audited accounts, 26 companies have not submitted their annual returns, and 7 have failed to hold their annual general meetings (AGMs). Several entities appear on more than one list, hence the total of 66 notices issued to 41 separate companies.

Among the entities that received notices are Pakistan Steel Mills Corporation Limited, Pakistan Television Corporation Limited, Pakistan Tourism Development Corporation Limited, Utility Stores Corporation of Pakistan, and National Engineering Services Pakistan. These are not minor or dormant companies. They are significant institutions with thousands of employees, large balance sheets, and direct public interest obligations. Their failure to comply with basic statutory requirements is a matter of serious concern.

Legal Obligations Under the Companies Act 2017

The Companies Act 2017 imposes clear and well-established obligations on all companies registered with the SECP, including those owned or controlled by the federal or provincial governments. Section 233 requires every company to prepare annual financial statements within the prescribed time, have them audited, and present them before its members at an annual general meeting. Section 130 mandates the filing of annual returns with the registrar, containing details of the company's share structure, directors, and registered office. Section 132 requires every company to hold an AGM in each calendar year, with no more than fifteen months between two consecutive meetings.

These are not obscure or technical requirements. They form the backbone of corporate transparency. Financial statements show whether a company is solvent, whether it is spending public funds responsibly, and whether its management is operating within the bounds of law. Annual returns update the public register and ensure that stakeholders, regulators, and creditors have access to current information. AGMs provide shareholders, including the government itself in the case of SOEs, with a formal mechanism to question directors and approve accounts.

The penalties for non-compliance are set out in the relevant sections and in the broader penalty framework of the Act. A company that fails to hold an AGM may face a fine of up to Rs. 25,000 for each day the default continues. Officers in default, including directors and the chief executive, can also be held personally liable.

Corporate Governance Gaps in SOEs

The compliance failures extend beyond financial reporting. The SECP noted that 48 state-owned enterprises currently have no female representation on their boards. This is a violation of the SECP's corporate governance framework, which requires the appointment of at least one woman director. The requirement has been in place for listed companies for several years and has progressively been extended to other classes of companies, including public sector entities.

The absence of female directors on nearly 50 SOE boards is not merely a governance formality. Research consistently shows that board diversity correlates with better oversight, improved risk management, and more balanced decision-making. The SECP's enforcement action sends a signal that gender diversity requirements will be taken seriously, even in government-controlled companies.

Additionally, the SECP found that four SOEs are currently operating without an appointed chief executive officer. Under Section 187 of the Companies Act, a company must have a CEO who is responsible for the day-to-day management of its affairs. Operating without one raises questions about accountability, authority, and operational integrity.

What Happens Next: The Adjudication Process

The show-cause notices require the affected SOEs to appear before the SECP and explain why they have failed to comply. If the responses are unsatisfactory, the SECP has the authority to impose financial penalties, issue directions for compliance, and, in extreme cases, refer matters for criminal prosecution. The SECP has stated that it will conclude proceedings and issue penalty orders after adjudication. It has also announced that the names of non-compliant SOEs will be published on the Commission's website.

There is also an institutional dimension to this enforcement push. The SECP has announced the establishment of a dedicated wing at its head office specifically tasked with overseeing the compliance and monitoring of state-owned enterprises. This suggests that the current action is not a one-off exercise but the beginning of a more sustained regulatory approach. The orders issued by the SECP will also be shared with the relevant accounting officers and with the Central Monitoring Unit at the Finance Division, ensuring that the government itself is kept informed of compliance lapses within its own companies.

Broader Implications for Corporate Governance in Pakistan

For decades, state-owned enterprises in Pakistan have operated with limited accountability. Many have accumulated losses running into billions of rupees, and their boards have often functioned as political appointments rather than as effective governance bodies. The SECP's current enforcement action is part of a broader government reform agenda aimed at restructuring and privatising SOEs, improving their governance, and reducing the fiscal burden they place on the national exchequer.

The message for all companies registered in Pakistan, public or private, is straightforward: the SECP is tightening enforcement and the days of treating annual filings as optional formalities are over. Companies that fail to file audited accounts, hold AGMs, or submit annual returns face real penalties. Directors who allow their companies to remain in default may find themselves personally liable.

For private sector companies, this action serves as a reminder to review their own compliance status. If the SECP is willing to take action against entities like Pakistan Steel Mills and PTV, it will not hesitate to enforce the same requirements against private companies of all sizes.

Practical Steps for Companies

Any company registered with the SECP should ensure that its annual audited accounts are prepared and filed within the statutory timeframe. The annual return must be filed within 30 days of the AGM, and the AGM itself must be held within the time limits prescribed by Section 132. Companies should also ensure that their boards are properly constituted, with at least one female director where required, and that a duly appointed CEO is in place.

For companies that have fallen behind on their filings, the best course of action is to regularise their position promptly. The SECP's online filing portal (eServices) allows for the submission of overdue returns and accounts, and companies may wish to engage professional advisors to assist with the preparation of outstanding financial statements. Waiting for a show-cause notice is not a sound strategy.

If you need assistance with SECP compliance, annual filings, or corporate governance matters, contact LexForm for a confidential consultation.