Requirement to Submit Accounts to SECP and Appointment of Auditor
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Every company is required to keep books of account – be it private, public, listed, not for profit or even single member.
Books of account means record of every single financial transaction that a company makes. For example, books of account includes vouchers (supported by bills & invoices), cash book, journal and ledgers. End product of these books of account is financial statements or accounts, which are normally prepared annually.
Companies Act, 2017 requires every company to prepare financial statements. This requirement gives rise to three basic questions, which I have answered in this post.
- Is every company required to appoint auditor?
- Who can be appointed as auditor?
- Which companies are required to submit their annual accounts to SECP?
I have answered all these questions, one by one.
Requirement to appoint auditor: If paid up or issued share capital of a private company is equal to or less than Rs. 1 million, the private company is not required to appoint auditor. All other companies including not for profits are required to appoint auditor. Please note that this option is only available to private companies with certain amount of paid up share capital. (Source: Section 223)
Who can be auditor? For some companies it is mandatory to appoint a chartered accountant (having valid practice certificate) as auditor. These companies include listed companies, public companies, not for profit companies and two types of private companies. First type is a private company which is subsidiary of a public company. The other type is a private company having paid up share capital of Rs. 3 million or more. (Source: Section 247)
For other companies – private companies having paid up share capital of less than Rs. 3 million, the auditor can be a chartered accountant or a cost and management accountant (having valid certificate of practice). Please note that, again, this option is only available to private companies with certain amount of paid up share capital. (Source: Section 247)
Requirement to submit annual accounts to SECP: All companies – be it listed company, public company, private company, not for profit company or a single member company, are required to submit their audited or un-audited accounts to SECP, with one exception. There is one category of companies which is not required to submit their annual accounts to SECP. This exception is only available to a private company, which is not subsidiary of a public company, whose paid up share capital is more than Rs. 1 million and equal to or less than Rs. 10 million. (Source: Sections 233 and 234)
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If a company is registered (with SECP as a PVT Ltd) 16 months ago (2022) but still not operational, does the submission of audited financial binding still implies if paid up is above Rs. 10 mn
Yes
Appreciate your efforts in explaining this in detail. Can you please respond my below query;
A Pvt. Ltd. Company has a Authorized capital of Rs.1 Million and Rs.500K, in previous returns they’ve appointed an auditor. For filing this year return, can they just remove the auditor and leave that space vacant or now since they previously had auditor so they need to re-appoint auditor?
Will appreciate your help in this regards.
Thanks,
If paid up capital is Rs.500,000 and the auditor has not been appointed for current year, you can attach the management accounts without any audit report.
Sir,
Our company is Limited unlisted with paid up capital of Rs. 500,000/- and our holding Company is also a Limited Unlisted Company.
What are our requirements regarding filing of accounts wit SECP.
We have file accounts with SEPC or not.?
Either we have to appoint auditors.?
Account must be Audited or simple signed by the CEO and one Director.
Your early reply will help me a lot to resolve the issue.
As your company is public unlisted (I understand it is not a priviate limited company), its accounts shall be audited. Financial statements shall be approved by the BOD and signed on behalf of the board by CEO and at least one director. Yes, the financial statements shall be forwarded to the Registrar SECP.
Can a Chinese subsidiary company based in Pakistan hold its Extraordinary General Meeting (EOGM) in China?
Yes, unless the Articles of Association provide otherwise.
My company’s authorized capital is Rs. 100,000 and paid up capital is Rs.50,000. Am I required to submit annual un-audited accounts to the registrar.
My company’s authorized capital is Rs. 100,000 and paid up capital is Rs.50,000. Am I required to submit annual un-audited accounts to the registrar.
It is not required.
If an organisation is registered as a Trust under the Trust Act, is it required to be audited? If yes, is the auditor required to be Chartered Accountant?
There is no such requirement in the Trust Act. However, it the Trust Deed or Rules require such audit, it will be mandatory. The qualification of the audit should also be mentioned in the Trust Deed/Rules.
If a company paid up capital is 300Rs but its transactions are in millions because it is running through sponsors loan(loan from directors Rs. 30 Million) which is also included in the equity. It also pays tax in lacs . Will there be any problem if we do not audit its financial statements or do not appoint auditor? Kindly guide me on this!
If a private limited company’s paid-up capital is Rs.300, it is not required to appoint an auditor, irrespective of revenue or amount of directors’ loan.
How to submit director report to SECP which (FORM)
The contents of the directors’ report are given in section 227 of the Companies Act, 2017.
SMC having paid up capital 20,000 PKR is it mandatory to submit unaudited accounts to SECP. as I receive a notice to submit financial statements?
No, it is not mandatory.
What should I do with the notice ignore or reply with a suitable answer?
Notice should be replied.
Is everyone foreign company needs to submit its audited financial accounte before SECP
By foreign company, I understand a company incorporated or formed outside Pakistan which has established a place of business in Pakistan.
Yes, such foreign companies are required to get their accounts audited and submit those audited accounts to SECP.
Hello, what is the reference for the fact that private companies with a paid up capital of less than Rs. 1 million do not require to appoint an auditor? I cannot find it in the Companies Act 2017. Thanks.
Section 223(5): The financial statement shall be audited by the auditor of the company, in the manner hereinafter provided, and the auditor’s report shall be attached thereto:
Provided that nothing in this sub-section shall apply to a private company having the paid up capital not exceeding one million rupees or such higher amount of paid up capital as may be notified by the Commission.
does a limted company having paidup capital of Rs.1000 only and authorised capital of rs.20 million needs to submit financials to secp
No. There is no such requirement.
Whether Single Member Companies having paidup capital of less than Rs. 1 million are required to submit accounts to SECP?
No. The requirement to submit accounts to SECP is more than Rs. 10 million paid up capital.
Thanks for the response. I would appreiciate your furhter advising where is the exemption is provided in the Companies Act, 2017 to single member companies to appoint auditors?
There is no exemption to SMCs. The exemption is only for private companies (including SMCs) having paid up capital up to Rs. 1 million. You can refer section 223(5) of the Companies Act, 2017.
I would appreicate your advising about the exemption to single member companies in the Companies Ac,t 2017 to appoint auditors.
Neither private company having equal to/less than Rs 1 million is required to appoint auditor nor to submit accounts to SECP & same ‘ll be in case of capital above 1 m & upto 10 million (except auditor appointment).
Dear Sir,
We require your opinion . I am working in a private Company having Paid up capital of 3 million. Is the company required to publish and audit the half yearly accounts as we have duly submitted the annual accounts.
Dear Faisal,
Thank you for reading the article.
Your company’s paid-up capital is more than Rs. 1 million but less than Rs. 10 million; therefore, financial statements of your company must be audited each year. However, the audited financial statements are not required to be submitted to SECP.
As it is a private limited company, preparation/audit of half year accounts is not mandatory.
what is requirement (amount of Share Capital ?) to compulsory appointment of QCR rated company?
All Large Sized Companies are required to appoint QCR-Rated Chartered Accountant firms as their external auditors. Large Sized Company (LSC) is a company, which based upon previous year’s audited financial statements, has:
(a) paid-up capital of Rs. 200 million or more; or
(b) turnover of Rs. 1 billion or more; or
(c) employees 750 or more (i.e. average employees calculated on monthly basis).
If any of the above criteria is met, the company becomes LSC.
Who can perform the audit of Trusts and NGOs?
It depends upon the legal status of the NGO. If it is a company under section 42 of the Companies Act, 2017, a chartered accountant firm can be its auditor. If it is a society or a trust, the qualification of auditor, whatever it may be, will be mentioned in its constitution or bye-laws.
paid up capital 1M to 10M vali companies ke sath directors report or pattern of shareholding lagani zaroori he ?
Directors’ report is mandatory for all companies, except for a private company that meets two conditions:
1) The private company is not subsidiary of a public company; and
2) The paid-up capital of the private company is equal to or less than Rs. 3 million.
If a private limited company meets above two conditions, it is not required to submit directors’ report. So, you must check these conditions for applicability of directors’ report.
Pattern of shareholding is only mandatory for (1) a public company, and (2) a private limited company that is subsidiary of a public company. Other private companies, irrespective of paid-up capital, are not required to submit pattern of shareholding along with the directors’ report.
A PVT Company incorporated in 2019 having year-end is 31st Dec. and holds its AGM on 28th Oct 2020 within the provision of 16 months. First appointed auditors are automatically retired, now what will be tenure for the appointed of subsequent auditors (can we appoint for next 2 years)..thanks
Auditor is appointed from appointment in one AGM till the conclusion of next AGM. In case of first AGM on 28th Oct 2020, the next AGM is due to be held within 120 days of close of FY 2020 (December 31, 2020). Say the next AGM is held on April 30, 2021, the tenure of second auditor would be from Oct 28, 2020 till April 30, 2021. Auditor cannot be appointed in AGM for next two years.
Any idea if a company has exact amount of 1m issued capital
Requirement to appoint auditor is for companies having more than 1 million paid-up capital. If it is 1 million or less, auditor appointment is not required.
beside paid capital of less than Rs One million, there is no other conditions like turn over ( Sales) for appointment of Auditors for the Private company.
There is only one condition of paid up capital.
Dear, we have received the notice from SECP for submitting the Audited account.
our Company Paid up capital is 7.5 million, Can i given the reply against letter that our company is not fall in this criteria, kindly share the reference clause of the Companies Act, 2017.
Criteria of Rs. 10 million paid-up capital to forward copy of audited financial statements to the Registrar is mentioned in Section 233(3). I haven’t seen the notice, but yes, reference of law can be given.
So per my understanding, Pvt companies who have paid-up share capital exceeding 1 million but equal to or less than 10 million are not required to submit their accounts to SECP but are still required to appoint an auditor.
And therefore any Company which has a paid up capital of less than 1 million is required to submit unaudited accounts to SECP but companies who have paid up capital of more than 1 million (not exceeding 10 million) are not required to submit accounts to SECP.
Am i correct and if yes Is there any logic behind this? Are accounts audited only for laying before AGM?
Yes. It is correct. There isn’t any logic behind this. This is what law is all about. I think it was just a mistake in drafting the law. Before Companies Act, 2017, companies having paid up capital of less than Rs. 7.5 million, audited or unaudited, were not required to submit accounts to SECP.
Statutory audit of financial statements is required to be completed before AGM. And audited accounts are placed before members in AGM for adoption. If audit is not concluded due to some reason, companies have to apply to SECP to allow for extension in AGM date.