Regulator refers alleged diversion of Rs2.87bn rights issue proceeds and other financial discrepancies to FIA for investigation
KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has referred alleged serious financial irregularities involving listed company Unity Foods Limited to the Federal Investigation Agency (FIA), resulting in the registration of a criminal case against former management and other accused persons.
The development follows an inspection and subsequent investigation by the SECP into alleged misuse of shareholders’ and company funds, falsification of accounts and other financial irregularities.
Unity Foods is listed on the Pakistan Stock Exchange (PSX) and has raised funds from public shareholders, making the case significant from an investor-protection perspective.
Rs3.75bn rights issue under scrutiny
According to the SECP reference, Unity Foods raised Rs3.75 billion through a rights issue in 2019 to finance expansion and diversification, including the acquisition of assets, expansion of its refinery at Port Qasim and establishment of an oil terminal.
The SECP’s examination found that approximately Rs2.87 billion of the rights issue proceeds were allegedly diverted from their stated purposes, with the company unable to provide evidence regarding their utilisation.
The investigation also identified several other transactions that the regulator considered to require further scrutiny.
These included alleged payments totalling Rs5.318 billion from company funds to the mother of the former chief executive officer, purportedly under the guise of loan receipts and repayments.
According to the regulator, appropriate banking instruments and board approvals for these transactions were not produced.
Another Rs2.6 billion was allegedly advanced through a subsidiary to two undisclosed parties. The probe also identified other related-party exposures and transactions.
Questions raised over subsidiaries, inventory and funds
The SECP investigation also raised questions regarding the disposal of Unity Foods’ subsidiaries and the alleged use of company funds, inventory and other resources for the benefit of entities connected with the accused.
The FIA will investigate the alleged beneficiaries, movement of funds and the roles of directors, officers and other individuals involved in the transactions.
A significant part of the case concerns the reliability of Unity Foods’ financial reporting.
Material referred by the SECP indicated an alleged Rs44.7 billion discrepancy between the company’s published financial statements and its internal SAP records.
The case also involves an alleged Rs5.2 billion difference between inventory recorded in SAP and physical stock.
In addition, the investigation identified around Rs5 billion in aged receivables for which corresponding evidence of delivery of goods was allegedly unavailable, along with other accounting inconsistencies.
FIA registers criminal case
The SECP initiated proceedings under the Companies Act, 2017 following its inspection. However, as some of the matters identified potentially constituted criminal offences falling outside the Commission’s regulatory jurisdiction, the regulator referred the case to the FIA under Section 41-B of the SECP Act, 1997.
Based on the SECP’s reference and available material, the FIA’s Corporate Crime Circle Karachi registered an FIR on August 29, 2026.
The FIR was registered under Sections 406, 420, 477-A, 109 and 34 of the Pakistan Penal Code against former management and other accused persons.
The FIA investigation will determine the criminal liability of the accused and examine the possible involvement of directors, officers, beneficiaries and connected parties.
SECP stresses investor protection
The case highlights the importance of regulatory oversight of listed companies, particularly where funds have been raised from public shareholders.
The SECP said its intervention is aimed at ensuring that funds raised from investors are used for their disclosed purposes and that financial statements provide an accurate and transparent picture of a company’s affairs.
SECP Chairman Dr Kabir Ahmed Sidhu said the Commission would continue to take firm regulatory action to protect investors and maintain confidence in Pakistan’s capital market.
“Protection of minority shareholders is a fundamental responsibility of SECP. Funds raised from investors must be used for their disclosed purposes, and shareholders have a right to accurate and transparent financial information,” he said.
Sidhu added that the SECP would continue strengthening oversight of listed companies and take appropriate action wherever shareholders’ interests are put at risk.
The allegations against Unity Foods and the individuals named in the case remain subject to investigation and determination in accordance with the law. The registration of an FIR does not, by itself, establish criminal liability.