Drekkar Kingsway Ltd says it is no longer a risk as a going concern

November 4, 2020 (MLN): The Board of Directors of Drekkar Kingsway Limited, in an announcement made via PSX on Wednesday, has stated that the company has rectified its past defaults and is no longer a risk as a going concern as confirmed by the external auditors, and the business of the Company is not suspended

‘It is submitted that the external auditors of Drekkar Kingsway Limited had, on the basis of past accumulated losses of the Company as reported in its Annual Reports for the years 2015-16 and 2016-17, indeed rendered an observation that there was significant uncertainty as to the ability of the Company to continue its operations as a going concern in the foreseeable future. As discussed specifically below, the Company's external auditors have, in the most recent Annual Reports of the Company for the period ending on June 30, 2020, removed this observation.

‘Nevertheless, based on the above Annual Reports of the Company for the years 2015-16 and 2016-17, the Securities and Exchange Commission of Pakistan issued a Show Cause Notice to the Company dated October 3, 2018, wherein it was alleged that the Company was liable to be wound up having allegedly suspended its business for a whole year. The Company replied to the said Show Cause Notice through its legal counsels on November 26, 2018, wherein it was clarified that steps were being taken by the Company's management to change the structure and principle line of the Company's business in a bid to bring it back to profitability.

‘The principal line of business of the Company was in fact successfully changed in the year 2019 vide an amendment to the Memorandum of Association, which was approved by the Commission, and thereafter the Company started generating revenues from its new line of business i.e. consultancy business. The  Company generated revenues equal to  PKR 1,255,000 during the Financial Year 2018-19 and PKR 2,571,125 during the Financial Year 2019-20.

‘Despite the above, the Commission, acting through the Executive Director has erroneously passed an order on October 9, 2019, in pursuance of the earlier show-cause notice authorizing the Additional Registrar, CRO, Islamabad to present a petition for the winding-up of the company solely on the ground as specified under Section  301(m) of the Companies i.e. "if a listed company suspends its business for a whole year”.

‘It is submitted that the position adopted by the Commission by way of the order dated October 9, 2019, and the tiling of a petition for the winding-up of the Company is completely erroneous and unsustainable in terms of the fact that the Company is, in fact, operational and generating revenues. This fact is evident in the Annual Reports of the Company for the Financial Years 2018-19 and 2019-20, which demonstrate that the Company is, in fact generating revenues, Moreover, the external auditors of the Company hale removed their previous adverse observation that there was significant uncertainty as to the ability of the Company to continue its operations as a going concern.

‘Accordingly, it can in no way be considered that the Company has suspended its operations and hence the ground taken by the Commission for filing of the above-mentioned winding up petition is not applicable in the given circumstances. The Company intends to vigorously contest the above-mentioned winding-up proceedings and has reasonable expectations that the said petition will be dismissed by the Islamabad High Court or withdrawn by the Commission itself in the given circumstances.

‘It is submitted that the Company has rectified its past defaults and is no longer a risk as a going concern as confirmed by the Company's external auditors, and the business of the Company is not suspended. Based on the foregoing, it is clear that the Company is no longer susceptible to the circumstances that previously warranted the placement of the Company on the Defaulter's Counter, or for the suspension of trading of the Company's shares. Accordingly, you are called upon to immediately withdraw the impugned Letter and Notice and refrain from taking any adverse action against the Company, or the trading of the Company's shares’, the notification said.

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