Module E

Corporate Laws Made Easy
Volume - II
Advanced areas of Companies Ordinance Rules Other Laws

Atif Abidi

Corporate Laws Made Easy


The Examinations of ICAP are a demanding test of student’s ability to master the wide range of knowledge and skills required of the modern professionals. Subject of “Corporate Laws” is one of the efforts made by ICAP in this context for enhancing student’s knowledge about detailed overview of corporate and other laws & rules prevailing in Pakistan. The best and most recommended source for this subject are the Bare Laws such as “Companies Ordinance 1984, Miscellaneous Rules, Regulations, Codes and Sundry Laws”. The basic problems faced by the students in this subject is the selection of source as the bare laws are sometimes too difficult to understand or too lengthy to digest & revise at final prep for the ICAP Exam. For these reasons there arise needs to have some comprehensive and easy notes for this subject. For this purpose these notes are being prepared using different sources but importantly emphasizing on the original sources. Following sources are being used in compiling these notes Companies Ordinance 1984 (Volume 1) Other Rules, Laws & Regulations ATFL (Vol 1 & 2) Notes made by Sir Muammad Asif (SKANS) Notes made by self Notes of Sir Kashif Adeel Now Volume 1 and Volume 2 of these notes contains all course contents of Corporate Laws.

How To use: It is strongly recommended that first of all you should thoroughly read from the original ordinances, rules etc. Then you may develop your own notes / short points to have the course contents in your grip and also its good for revision purposes. You may either consult these notes as guideline for preparation of your own notes or you may select these notes for your revision, It’s totally upto you. Syllabus outline by ICAP is the most important thing to ensure completeness which unfortunately is being ignored by most of the students, hence loosing the grip on the complete course. Therefore the syllabus outline is provided in these notes as table of contents and all topics are cross referred with that outline. I have tried to ensure completeness in these notes and where not completed, have referred towards the best sources available for that data. However human error is expected so if you find anything missing or some spell / logical mistakes in these notes please mail me about such errors by referring to page no. at my mail id ““. In most cases fines & penalties are not incorporated in these notes I am especially thankful to my friends for effective coordination in making of these notes Hope these notes could serve you.

May ALLAH bless all of you with success in every exam of both lives. Please also pray for me Thanks Syed Atif Hassan Abidi Oct 23, 2012 For notes & other study material for module E visit

Corporate Laws Made Easy

ICAP Syllabus Outline

ICAP Syllabus Outline MODULE E PAPER E 16: CORPORATE LAWS (100 marks) INTRODUCTION The syllabus aims to provide the knowledge and understanding of corporate and other relevant laws, rules and regulations and to familiarize with the secretarial practices including the knowledge of handling various matters usually expected to be performed by the secretary of a corporate entity. Case studies / scenario based questions in addition to descriptive Questions will be set in the examination. The examinees are expected to possess detailed knowledge of the Companies Ordinance 1984 over and above what they have learnt at the Intermediate stage. Topics examined at the Intermediate stage may or may not be directly re-examined here, however, examinees would need to utilize knowledge and skills learnt earlier. The knowledge required for Companies Rules would also be comprehensive but for other Laws and regulations only general knowledge would suffice.

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INDICATIVE GRID SYLLABUS CONTENT AREA WEIGHTAGE 1. Practical aspects in respect of areas of the Companies Ordinance, 1984 covered at Module D examination in Company Law paper. 2. Companies Ordinance, 1984 from section 261 onwards. Second schedule 3. Various Rules under the Companies Ordinance 4. Secretarial Practices 5. Other laws and regulations TOTAL Note: The weightages given above are for guidance purposes only and deviations in setting of papers may be expected.

40 30 15 15 100


1. Areas of the Companies Ordinance, 1984 covered at Module D Examination in Company Law Paper. In the Corporate Laws paper at Final level, students are to have a more in-depth knowledge and understanding of those parts of the Companies Ordinance, 1984 which were covered in the Company Law paper at Module D, however, the emphasis of testing at the Final Examination level would be application of those provisions from a practical viewpoint. Testing would focus on the level of understanding of those provisions and their application. 2. Other specialized areas of the Companies Ordinance, 1984. a. Part VIII Investigation and related matters. b. Part VIII A Non Banking Finance Companies (NBFC) Provisions as to Establishment and Regulation of NBFC c. Part IX Arbitration, arrangements and reconstruction.

(N-1) iv

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offences etc. 1996 and Stock Exchange Rules. e. Part XI Winding-up i) Modes of winding-up.. . f. brokerage. e. Various Rules under the Companies Ordinance a. offer for sale and convertible securities. 339 to 341 and 346 to 350). Companies (Appointment of Legal Advisors) Rules. (Section 494 and 496) Second Schedule . students are only required to be familiar with the contents of statement of affairs to be made to official liquidator and report by official liquidator. and discount and premium on shares.Official liquidators (section 321 to 331.Regulation 25 . premium on shares. application 7 12 14 20 26 09 10 11 11 28 36 38 39 40 41 45 48 47 (N-2) iv . Medium and Short Term Financing Facilities) 4. knowledge of the contents of the Forms is not expected. etc. 1975.Salient features of disclosure requirements for prospectus or statement in lieu of prospectus and understanding of the reports and certificates to be included in the prospectus. b.Corporate Laws Made Easy ICAP Syllabus Outline d. Capital Issues – The rules for issue of capital by companies. . stock exchange listing rules. d. Companies' Share Capital (Variation in Rights and Privileges) Rules.Commencement of winding-up by the Court (Section 311). issue of shares for consideration other than cash and related aspects. and provisions relating to contributories (sections 297 and 306) ii) Winding-up by court. Part XV Registration offices and fees (section 468 and 469) i. provisions relating to the following: . 336 and 337.Petition for winding-up (section 309 and 310).Supplementary provisions as to winding-up (Section 421. 2003 (1 – 10) Non-Banking Finance Companies and Notified Entities Regulations. Part XIII Winding-up of unregistered companies g. Explanatory provisions only of Companies Rules 1985. Secretarial practices Floatation of shares and securities including prospectus. . Part X Prevention of oppression and mismanagement. Part XVI General – legal proceedings. c. 2008 . 422 and 431 to 434) f. 1999. covered by the Companies (Issue of Capital) Rules. Non-Banking Finance Companies (Establishment and Regulations) Rules.Enforcement of court orders (section 355 to 357) * For section 328 and 329. Part XIV Companies established outside Pakistan (Section 450 to 462) h. Companies (Buy-back of Shares) Rules. 2000.Status of companies being wound-up (section 402) .Schedule IX (Fit and Proper Criteria) . underwriting. . iii) Voluntary winding-up (Sections 358 to 401) iv) Provisions applicable to every mode of winding-up .Schedule X (Long.Cases in which companies may be wound-up by the court (section 305 and 306). 3.Proof and ranking of claims (Section 403 to 407) . 333 and 334.

Corporate Laws Made Easy ICAP Syllabus Outline and allotment of shares.Effect of the Central Depository on provisions of the Companies Ordinance. mainly sections 34 to 38 of the Banking Companies Ordinance. issue. b) Meetings of shareholders and directors and all proceedings thereto. ii) Chapter XX – Securities Knowledge and application of provisions relating to rules and regulations governing acquisition and holding of foreign securities. 1981 .33. Other laws and regulations a) Foreign Exchange Regulations – Foreign Exchange Manual 8th Edition i) Chapter XIX Loans. d) The Central Depositories Act. proxies. transfer and export of Pakistani securities to non-residents. registration of transfers.Definitions (Section 2) . c) Functions and responsibilities of the Securities and Exchange Commission of Pakistan under the SECP Act (Act No.1.7 to 13. maintenance of statutory books and registers under the Companies Ordinance. quorum.16 to 20-B. foreign currency loans (repatriable and nonrepatriable basis) by Pakistani firms and companies functioning in Pakistan. poll.41 and 42) Modaraba Companies and Modaraba rules. 50 54 87 85 Laws governing certain specialized institutions c) Banking Companies Ordinance. 1984. trading of quoted shares by non-residents. and . voting. investigation and dividend. maintenance of register of members. procedure for issue of shares to non-residents. general exemption from the restriction on transfer and issue of Pakistani securities to non-residents. provisions for general permission for lending to foreign controlled companies for working capital. Code of Corporate Governance and Transfer Pricing. Provisions relating to the following: . issue of bonus and right shares and effect on the rights of members. a) Filing requirements. payment of dividend. Part B: Foreign private loans Private foreign currency loans.37. overdrafts and guarantees Part A: Rupee loans Foreign exchange regulations relating to definition of foreign controlled companies. local borrowings by foreign controlled companies for capital expenditure. 1962 – Sections pertaining to audit and accounts. 1980. agenda.9 and 11 including annexures) .First Schedule (Form no. 1997 and Central Depository Companies (Establishment and Regulation) Rules 1996 – Understanding of provisions relating to . XLII of 1997). and special instructions regarding shares transferred under the Central Depository System – CDS of the Central Depository Company. 1984 relating to interalia. public issue of shares.Third Schedule .Fourth Schedule (salient features of matter to be specified in prospectus and reports to be set out 63 64 65 66 .Central Depository System. 1962. issue of share certificates and bonus and right shares and transfer and transmission of shares of companies.Provisions applicable to Modaraba (Section 7 to 23.Registration of Modaraba Companies (Section 4 to 6) . e) Modaraba Companies and Modarabas (Floatation and Control) Ordinance. 5. repatriable foreign currency loans by foreign controlled companies for meeting working capital requirements. sending of notices to members. including notices.23 and 25 to 28 . resolutions and minutes. b) Stock Exchange Listing Rules and Guidelines – especially those relating to secretarial matters.Rules 2 to 4.

(Vol 1) Format of Notice.V). 51 and 52 and the Securities and Exchange Commission (Insurance) Rules 2002 including regulations and Format accounts. 1984 covered at Module D Exam in Company Law Paper. Note: Where specific reference to an Act. Portion of Syllabus Outline 1. Special Resolution etc ICAP Past Papers N-3. 2008 j) Rules and regulations framed by the Federal Government from time to time. In these notes Sir Kashif Adeel have covered Competition Ordinance along with Merger Control & Leniency Regulations incorporated as & where necessary. Following sources are very helpful for preparation of this portion Corporate Laws made easy . 100% covered in these notes) . 2. Secretarial Practices This portion involves Practical application of Management & Administration portion of Module D course. MOA.Corporate Laws Made Easy ICAP Syllabus Outline therein) f) The Insurance Ordinance. and Listed Companies (Substantial Acquisition of voting shares and Takeovers) Regulations . Competition Ordinance 2007 (Chapter I. COMPETITION ( Leniency) REGULATIONS 2007 71 72 74 (N-3) iv i) Listed Companies (Substantial Acquisition of Voting Shares and Takeover) ordinance. g) The Securities and Exchange Ordinance 1969 and the Securities and Exchange Rules.e. 3.Ordinance 261 onward 3.IV.Module D 2. Areas of the Companies Ordinance. clauses etc of Companies Ordinance cross linked with Rules and SECP circulars N-2. nearly up to 95% covered 100% Completeness from original sources Completed to the extent of notes (except Code of Corp Governance i. Ordinance. as may be specifically notified by the Institute of Chartered Accountants of Pakistan for inclusion in the syllabus.Other Laws Completeness (Tried to be) ensured in these notes 100% Completeness as per Companies Ordinance 1984 Maximum as near to original. 2000 – provisions relating to statutory and special audits and maintenance of accounts. We are really thankful to him for such a nice contribution. Regulations. AOA. Proxy Form. Competition Ordinance This portion has been taken from Notes of Sir Kashif Adeel available at www.II. COMPETITION ( MERGER CONTROL) REGULATIONS 2007 Excluding The SCHEDULE. Guidelines or SRO gazette notification is given it is to be assumed that it covers any subsequent amendments that may be made therein from time to time. 81 Users of these notes are requested to consult Volume 1 for the updated notes for this area. Broad understanding of the Code of Corporate Governance for listed and unlisted insurance companies. 1971 – provisions pertaining to issuance of shares and securities to the general public (mainly section 9 ) and Insider Trading. mainly sections 45 to 49.financedoctors. sub-sections. Notes: N-1. 2002. h) 1. Those notes contain all sections.Volume 1 (Cross Linked Circulars) Chapters of Meetings & Administration in ATFL..Rules 5.

Issuing commissions for examination of witness. Application must be supported by Evidence showing good reason for investigation. − Order of court − Resolution of company in general meeting. Any body corporate which is or was managed by a Chief Executive who is or was also Chief Executive of the company. with directions of SECP Members at their request [who applied for investigation] Court [if applied by court] SECP may forward a copy. Compelling discovery & production of books and papers. Business is not managed on sound principles/prudent practices. Shares are allotted for inadequate consideration. Members are deprived of reasonable return. on request of and on payment of prescribed fee to: Members/ Body corporate/ Persons interested in affairs of Company Persons whose interest as creditor appears to be affected SECP may send copy to registrar which such directions as think fit. th − Application of persons comprising 1/10 in number of the persons entered in register of members [Co not having Share Capital] − Application of Registrar if he called for information or explanation and it was not given or was unsatisfactory. . Financial position is indicating insolvency. SECP may require any security for cost of investigation. − Discretion of SECP. Commission shall give a show cause notice to company. Members or any other person or Oppressive to members or purpose is fraudulent/ unlawful. Managing agent or an associate of Chief executive or managing agent. Power of Inspector Inspector to be Court for following purposes: Enforcing attendance of persons and examining them. SECP may get report/any part published itself or may direct Company to do so. Copy of report shall be admissible in any legal proceedings as evidence of opinion of inspector. Subsidiary of holding or Holding of subsidiary. Misfeasance or Misconduct. Inspector’s Report Inspector may (or on direction of SECP shall) make interim reports and on conclusion of investigation shall make final report to SECP Such report shall be typed or printed as SECP may direct SECP shall forward a copy of inspector’s report to: Registered office of the Co. he can also investigate (after approval of Commission) the affairs of: Any body corporate which is (or at any relevant date has been) company’s associated company as Subsidiary. Any person who is Chief executive. If Inspector thinks necessary. if there are circumstances suggesting that: Business is conducted to defraud Creditors.Corporate Laws Made Easy ~1~ Specialised areas of Companies Ordinance 1984 Investigation and Related matters (SEC 263 to 282) Investigation of affairs of company: SECP may appoint inspectors to investigate and report on affairs of company on: th − Application of Members or Shareholders having 1/10 voting securities. Members are not given reasonable information. Person in management are guilty of Breach of Trust. Holding.

Remove any Director. Direct Directors to carry out changes in management and in accounting policies.. breach of trust. No compensation payable on modification or annulment of contracts 4. it may impose following restrictions Transfer of shares void Not be issued No voting rights No further shares issue in right of those shares No payment from Company to anyone for sum due No change in directors. Managing agent or other officer. for finding out relevant facts about any shares. Direct any existing contract. Proceedings for recovery of damages & property SECP can proceed for recovery of Damages [in case of fraud. CE. which is to the detriment of the Co. Managing agent unless by operation of law. No compensation for loss of office If Directors removed [casual vacancy filled in accordance with the provisions of AOA] If CE removed [Directors shall elect another person as CE] If all directors including CE removed [General Meeting for election of directors be called] Directors etc. to be annulled or modified. so removed will be ineligible for such post for 5 years or such lesser period as directed by the Court 2. Imposition of restriction on shares & debentures and prohibition on transfer: If SECP think fit. 3. Direct company to call a meeting of members to take remedial actions on specified matters. misconduct] Property [which has been misapplied or wrongfully retained] Expenses of Investigation: Firstly paid by Commission and subsequently reimbursed from Persons convicted of prosecution or persons who have applied for investigation. Chief Executive. Enquiries and investigation against Company shall not be effected by Resolution passed by Company for winding up Petition submitted by court for winding up Civil/Criminal proceedings initiated against Company/Officers .Corporate Laws Made Easy ~2~ Specialised areas of Companies Ordinance 1984 Court Orders If reasons proved after investigation Commission may apply to Court and Court may: 1.

All the directors. director. SECP may register the NE on terms and conditions as SECP may deem fit Every NE which is in existence before the commencement of this provision shall within a period of 6 months apply in writing to the SECP for registration Section 282-(D) [Power to issue Directions] The SECP may issue directions (that NBFC/NE bound to follow) from time to time where it is satisfied to do so in the public interest to prevent the affaires of NBFC being conducted in a manner detrimental to the interest of shareholders or the persons having interest in the NBFC to secure proper management of NBFC by rectifying situations Section 282-(E) [Powers to remove] Where SECP satisfied that Association of any chairman. which includes companies licensed by SECP to carry out any one or more of the following forms of the business: a) Investment Finance Services b) Leasing c) Housing Finance Service d) Venture Capital Investment e) Discounting Services f) Investment Advisory Services g) Asset Management Services h) Such other companies as the Federal Government may notify for this purpose. at time of representation on opportunity of being heard. An NBFC. 2. it may supersede the BOD for such period as it may specify Section 282-(H) [Special Audit] SECP shall monitor the general financial conditions of NBFC/NE and may order for special audit to carry out detail scrutiny of affairs of NBFC/NE. its shareholders or the person interested. Where delay in opinion of SECP be detrimental to shareholder’s interest.Corporate Laws Made Easy ~3~ Specialised areas of Companies Ordinance 1984 NON BANKING FINANCE COMPANIES (sec 282 A – N) Section 282-(A) [Application of this Part] 1. The inquiry officer may call any information inspect and cease books of account and documents of NBFC. Notified Entities (NE) which include such other company or class of companies or corporate body or trust or any other entity or person as the Federal Government may. Section 282-(C) [Incorporation of NBFC] 1) NBFC shall not be incorporated without prior approval by the SECP. direct such person not to hold such office or be concerned with management of NBFC/NE Vacancy filled by person appointed by SECP till election in general/Board meeting Person so removed shall not take part in management for term not exceeding 3 years Section 282-(F) [Power to supersede BOD] Where the SECP satisfied that Association of BOD of NBFC/NE is detrimental to interest of NBFC/NE. managers. NBFC/NE may be directed to do/ abstain certain acts Section 282-(I) [Inquiry by Commission] SECP may call an inquiry or inspection by persons appointed by it. 2) NBFC shall not carry on any business unless it holds a license from SECP for that business. 3) Existing companies in any one or more forms of businesses mentioned in 282A shall before expiry of 6 months from coming into force of this clause and every other company before commencing so shall apply in writing to the SECP for grant of a license 4) NBFC shall not commence business unless has minimum prescribed capital for each form of business. chief executive or any other officer of the NBFC/NE is detrimental to interest of NBFC/NE. On receipt of special audit orders. by notification in the official Gazette specify for the purpose Section 282-(B) [Powers to make rules] Federal Government & SECP may make rules for establishment and regulation of NBFCs & NEs. officers and related . the SECP by make an order remove such person from their office after giving an opportunity of being heard. Section 282-(CA) [Registration of Notified Entities (NE)] NEs shall not operate without prior registration with the SECP. SECP may.

refusal to comply with provisions] Fine not more than 50.000) .000 to NBFC/NE or officers including auditors All directors/managers/officers liable unless proved not being part of guilty Cancellation of license (all/any form of business) after giving opportunity of being heard. contravention or default in complying with. SECP may in writing disqualify him for any office in NBFC or any Company for such period as may be specified Section 282-(K) [Penalty for making false statements] Penalty for making false statement or using position for getting benefit for himself/relative. it shall be submitted to the SECP for sanction. Once the scheme for amalgamation is approved by the requisite majority of shareholders. Section 282-(M) [Punishment or adjudication of fine or penalty] Where a penalty or fine is provided for any offence. The property and liability of the amalgamated NBFC shall be transferred to and vest in resulting/surviving entity. the same shall be adjudged and imposed by the SECP. the SECP may. every director. who shall on receipt of sanction order strike off the name NBFC which has been amalgamated and it will cease to function. or implementing rehabilitation plan approved by SECP Fine not exceeding 10 million rupees (Per day Rs 10. On cancellation of license functions of NBFC/NE shall cease & SECP may move court for winding up.Corporate Laws Made Easy ~4~ Specialised areas of Companies Ordinance 1984 persons shall furnish necessary information to the inquiry officer. be punishable with imprisonment for term which may extend to 7 years & fine not exceeding 1 million and shall be ordered by the Court to pay the fine within a time fixed by Court (or in default to suffer further imprisonment 5 years) Section 282-(L) [Procedure for amalgamation of NBFC] NBFCs may be amalgamated with each other provided a scheme containing the terms of such amalgamation has been placed in draft before shareholders of each NBFC separately and it is approved by a resolution passed by a majority of 2/3. transacts business specified in 282-A .) No Court shall take cognizance of any offence punishable u/s 282 K except on complaint in writing made by an officer of SECP generally or specially authorized in writing in this behalf by the SECP and no Court other than the High Court shall try such offence. Provided that fine or penalty shall only be imposed after giving an opportunity to show cause and if he so requests. or both If officer/director/CE of NBFC/NE controlled/owned by Federal/Provincial Govt. Remaining/surviving entity shall transmit a copy of the sanctioning order of the SECP to the registrar concerned. Notice of general meeting be given to each shareholder & also be published at least once a week for 3 consecutive weeks in not less than 2 newspapers of localities of registered offices of NBFCs (1 shall be in understandable language of that locality/localities). extends loan to anyone on verbal instructions (not in writing) of holder of public office without drawing attention of his senior/BOD shall be liable for imprisonment that may extend to 1 year or fine or both. or any NBFC/NE whose registration has been cancelled.000 or Imprisonment not exceeding 3 years. Section 282-(J) [Penalty for failure. Section 282-(N) [Rehabilitation of NBFCs and NEs] SECP shall have the same powers as are exercisable by the Federal Government u/s 296 for rehabilitation of a NBFC/NE which is facing financial or operational problems. After the scheme being sanctioned by SECP It shall become binding on the concerned NBFC and all their shareholders. manager & other officer and every member of association or body of individuals.000.000) If officers/auditor fails to deposit penalty up to 6 months. any provision of Section 282. If NBFC/NE continues after suspension every responsible directors /managers /officers liable for Fine = 50 million (Per day fine = 200. Its CE. Any share holder who has voted against the scheme and descend from the scheme of amalgamation shall be entitled to claim from NBFC in respect the shares held by him and the decision of SECP on the value of shares shall be final for all purposes. after giving him an opportunity of being heard personally (or through such person as may be prescribed in this behalf. in addition to other actions taken against him in accordance with law If any company not being NBFC/NE. Fine not exceeding 100. in addition to powers u/s 296 Make application to the Court u/s 412 or 413 and u/s 408 & 409 and provisions of these sections shall apply mutatis mutandis in all respects Failure to give effect. Where SECP declares a NBFC/NE as sick.

If court is satisfied that Compromise/Arrangement cannot work satisfactory. Managing agent. Arrangement involves reorganization of capital by consolidation or division of shares of different class.Corporate Laws Made Easy ~5~ Specialised areas of Companies Ordinance 1984 Arbitration. order a meeting of creditors or members to be conducted. Effect of Compromise/Arrangement on these interests so far as different from like interests of other persons. every notice shall accompany a statement showing: Terms of compromise/arrangement explaining its effect. Court shall. If a majority in number representing 3/4 in value of creditors or members approves it. Arrangements and Reconstruction (SEC 283 to 289) Compromise is an agreement terminating disputes between parties. if compromise affects rights of Debenture holders.) as Directors or Members or Creditors. Material interest of Directors (including C.E. on application. Trustee for debenture holders shall give to Company Notice of such matters related to himself necessary for compromise or arrangement Such further info as requested by Company Provision for facilitating Reconstruction and Amalgamation: If an application of Compromise/Arrangement proposes a Reconstruction/Amalgamation. Every director. it shall either Accompany such statement or Mention the place where statement could be obtained by Creditors/Members free of charge. Court shall make an order sanctioning Compromise/Arrangement provided Court is satisfied that all material facts have been disclosed Company would file Copy of order to Registrar within 30 days Copy of order shall be annexed to every MOA and AOA issued after it. Court may make provisions relating to all or any of following matters: . Court may at any time • • Stay commencement of any suit/ proceedings against the Company Give such directions or make such modification as think fit by it. Power of companies to refer matters to Arbitration: Company may refer matter to arbitration by: By Written agreement According to Arbitration Act 1940 On existing or future difference between itself and other company or person Parties to arbitration may delegate to arbitrator powers to settle any term or determine any matter capable of being lawfully settled. Information as to compromise or arrangement with Creditors/Members: Where a meeting of Creditors/Members is called. Power to make compromise or arrangements with Creditors/Members: When Compromise or Arrangement is proposed between Company and Creditors or Members: 1. it will be binding on all Creditors/Members 3. CE. If a notice is given by advertisement. th 2. Same information required for Trustees of any deed securing issue of debentures. it may (self or on application by registrar/interested person) make an order of winding up.

And th th The holders. Other matters. if the order contains so. Provisions regarding any person dissenting from scheme or contract. properties and liabilities. executed on behalf of shareholders by any person appointed by trustee e. If court thinks fit. The allotment/appropriation of any shares/debentures or other interest by the transferee company. as given in scheme for transfer of shares. 3. Remaining shareholders may within 90 days of notice require Transferee Company to acquire their shares. Order of rejection is to be filed by Transferee Company to Transferor Company b. If court rejects application a. Power and Duty to acquire shares of members dissenting from scheme or contract: If a scheme of transfer of shares is approved by 9/10 shareholders (holders of shares whose transfer is involved. without winding up. When Transferee Company becomes holder of 9/10 shares in cumulative: It will give notice to remaining shareholders. shall be 3/4 in majority having 9/10 remaining shares. other than shares already held by transferee Company at date of offer) within 120 days of offer from Transferee Company: Transferee company may give notice to dissenting members within 60 days of its intention to acquire their shares and Company will be bound then to acquire shares on same terms and conditions. Continuation by or against the transferee company of any legal proceedings. Provisions relating to offer or circular containing offer Each such offer or recommendation by directors of transferor to accept shall Contain such info as may be prescribed Contain statement by transferee company ensuring that steps taken for availability of cash Presented to registrar for registration o Registrar may refuse to register if info not provided Appeal against orders of registrar can be filed to SECP th th th . all properties and liabilities stand transferred and removed from charge. Dissolution. of the transferor company. Within 30 days (of notice or order whichever is later) c. Transferee Co shall Register Transferor Company as holder of those shares Within 30 days of registration inform dissenting share holders of the fact & receipt of amount payable to them Where Transferee Company already holds more than 1/10 shares. 6. who approve the scheme. Price payable (kept in a separate account in a Schedule bank) will be handed over to transferor company d. Dissenting shareholders may apply to court within 30 days of notice. it may direct otherwise. above provisions would not apply unless: Every holder of Transferor Company is offered the same terms. 4. 5. Transfer to the transferee company of whole or part of undertaking. 2.Corporate Laws Made Easy ~6~ Specialised areas of Companies Ordinance 1984 1. Certified copy is filed with registrar within 30 days. After the order of transfer. of approving shareholders. Instrument of transfer also filed to transferor Company.

Misfeasance or Misconduct. Regulating Company’s affairs in future 2. If purchase by co. 3. if affairs conducted/will be conducted in an Unlawful. Industrial project or unit to be set up or belonging to company is not completed. Managing Agent or Other officer on terms and conditions as may in the opinion of court are just & equitable. Market value or net worth of share has fallen below 75% of Par value. commenced or smoothly operated such that: i. Industrial unit owned by company is not in operation for 2 years. Member(s) having 20% or more Issued share capital or 2. fraudulent. Oppressive or Prejudicial manner Order of Court: If Court is of the opinion. Accumulated losses exceed 60% of paid up capital. SECP may appoint an Administrator within 60 days of receipt of representation to manage the affairs of company on specified terms Administrator may be appointed from Panel maintained by SECP Other person by giving notice to SBP if that person is not on panel . reduction accordingly of company’s capital. Court may decide any other matter including change in management. 2. Court may set aside any transfer/delivery of goods.5:1 5. Court may on application of any party to the proceedings make interim orders [Any claim for damages against co would be inadmissible. Power of Court: 1. ii. Creditors having interest equivalent to 20% or more Paid up capital or 3. 6. on any such petition that Co affairs conducted in a manner aforesaid To wind up Co would unfairly prejudice Co/members Court may order: 1. 3. Registrar.] M anagem ent by A dm d m inistrator Representation to the SECP If any time creditors having interest of amount not less than 60% of paid up capital represents to SECP that: 1. Ultravires MOA. Affairs are conducted in Unlawful. No adequate dividend for consecutive 3 years 4. Current ration fallen beyond 0. Debt/Equity ration has fallen beyond 9:1. which is deemed in his solvency to be a fraudulent preference. and prejudicial manner. Mismanagement and Rehabilitation (SEC 290 to 296) Prevention of O ppression Who can apply: 1. iii. 4. 2. Where any order makes any alteration in company’s MOA/AOA It is as valid as if duly made by Special Resolution of co Copy of order to be filed with Registrar within 14 days. Purchase of shares of any members of Co or by other member of the co or by co itself. payment execution or other transaction within 3 months before application. Company’s members/creditors/directors/person connected with management of company is guilty of Breach of Trust. Oppressive. Members are deprived of reasonable return.Corporate Laws Made Easy ~7~ Specialised areas of Companies Ordinance 1984 Oppression. Court may terminate or modify any agreement between co and any Director including Chief Executive.

Copy of plan sent to registrar by Federal Govt. or any person authorized by Federal Govt. AOA. rescheduling and conversion into share capital carrying special rights. for approval. AOA & Companies Ordinance 1984.Corporate Laws Made Easy ~8~ Specialised areas of Companies Ordinance 1984 Provisions relating to Administrator Receive such remuneration as SECP may determine On appointment management of company’s affairs vest in him shall exercise all powers of director/management Director/management shall cease He can cancel any purchase/sale agency contracts which is patently to benefit any director or person related with management He is not liable to compensate or pay damages for Loss of office Termination of contract After purpose of appointment fulfills. After declaration as such. Provisions apply to Industrial unit owing by company facing financial/operational problems. committee or person authorized by Federal Govt. may draw a Rehabilitation Plan which may include any or all of the following provisions a) b) c) d) e) f) g) Reconstruction. shall supervise Rehabilitation Plan. Federal Govt. modification & cancellation of existing contracts Without any compensation. Alteration of share capital and variation of rights Alteration of loan structure. R ehabilitation ehabili tation of sick units by F ederal G ovt. Compromise or Amalgamation. Issue further share capital including shares containing special rights Removal and appointment of Directors including CE or other officer Amendments. . Any person aggrieved by orders of SECP or Administrator (termination of contract) may appeal to Federal Govt. Plan shall be submitted to Federal Govt. declared sick by Federal Govt. No suit can be filed against Administrator for acts done in good faith in pursuance of these rules. authority. CO 1984. SECP may issue such directions to Administrator as it deems desirable and he may apply to SECP any time for instructions about different matters. SECP may permit the company to appoint directors and Administrator shall cease to hold office. it will be published in Official Gazette. After approval. h) Alteration of MOA. any institution.. within 60 days of order. Any order or decision of SECP under this section shall be final and shall not be called in question in any court Provisions of this section shall apply notwithstanding anything contained in MOA. Acquisition/transfer of shares of sponsors/persons managing affairs of company. for registration and it should be kept with other documents of the Company Provisions shall apply notwithstanding anything contained in MOA. AOA or change in Accounting Policies.

If the company is dissolved. or ceased to carry on business or is carrying on business to wind up affairs. Circumstances of winding up are: a. bring or defend in his official name any suit/proceedings . deemed to be registered office of company.Ord1984. A creditor whose Rs. 25. Miscellaneous Provisions Companies established outside Pakistan would be wound up as an unregistered company Provisions of this ordinance with respect to staying and restraining suits and legal proceedings between petition for winding up and order for winding up shall extend to suits & proceedings against any contributory No suit/proceedings can be continued/started against unregistered company being wound up against any contributory of company Except by leave of court Court & Official liquidator may exercise any powers on unregistered company being wound up as it is a company registered under Company’s Ordinance 1984 If unregistered company has no power to suit/to be sued in a common name Court may order all properties. 4. Not includes A Railway company incorporated by UK or Pakistani Law A company registered under any previous Companies Act or under Co. rights & obligations to be vest in Official liquidator Official liquidator may. b.Corporate Laws Made Easy ~9~ Specialised areas of Companies Ordinance 1984 Winding up of unregistered Companies (SEC 443 to 449) What is Unregistered Company Includes any Partnership.] For determining Court having jurisdiction Company shall be deemed to be registered in Province where its Principal Place of Business is situated. Provisions of winding up No unregistered company shall be wound up voluntary or subject to supervision of court [Only By Court. If company is unable to pay debt. 2. If it is proved to the satisfaction of Court Court shall take into account Prospective and Contingent Liabilities Contributories: All those liable to contribute for payment of liability. If Court thinks it just and equitable. expense of winding up and adjustment of rights among themselves. 3. after giving indemnity as directed by court. A suit has been instituted against any member for any sum due from the company/member on behalf of company and a notice is served to company and company neither pays nor secures within 15 days. If he dies/gets solvent. Principal place of business where proceedings are started. serves his notice and company within 30 days neither pays nor secures nor compound for satisfaction of creditor. Company when deemed unable to pay debt: 1. his heirs/assignees shall be contributories. Execution issued on a decree obtained in favor of creditor and it returned unsatisfied in whole or in part. c. Association or Company consisting of more than 7 members.000 or more is due. interests.

Provisions of Companies Ordinance 1984 relating to name.former. designation & addresses] Complete particulars of Persons authorized to receive notices etc. [Obligation of Company to deliver documents shall also cease] Restriction of going house to house for sale of securities (except offices) . outside every office in English/Urdu Mention liability. if limited. set-off. List of Pakistani members and Debenture holders. within 30 days of change Documents to be given every year: 1. In prospectus.husband). of copies. Where Company intends to cease having place in Pakistan it shall 30 days before ceasing to have place of business Intimate to Registrar. b) By leaving or posting to place of business where i. Publish notice of such intention at least in 2 newspapers. inviting share or debenture. not less than 3. country of incorporation.Corporate Laws Made Easy ~ 10 ~ Specialised areas of Companies Ordinance 1984 Companies established outside Pakistan (sec 450 to 462) Documents to be delivered to Registrar Every foreign Company incorporated outside Pakistan having a Place of business in Pakistan within 30 days of Establishment or Change of place in Pakistan shall deliver following documents to registrar: Certified copy of charter. State the name of Co. Authorized person is dead. claim. Within earlier of 45 days of date of submission to the public authority of country of incorporation. where any change in above info / docs.father. 2. of audited B/S and P&L with such particulars as are required to be filed by a company registered in Pakistan. Also state above particulars on every document. Address of authorized person not provided ii. Prescribed no. advertisement & outside every place of business in English. For issue of Prospectus authorization of Federal Govt.former). statue. Miscellaneous provisions: If Co fails to comply requirements It shall have no effect on validity of any contract. or Within 6 months of the date up to which accounts are prepared Certain obligation of Foreign Companies: Maintain at Principal Officer a register of Pakistani members and debenture holders which shall be open to inspection. Return containing particulars of change. Return showing complete particulars of Principal Officer in Pakistan. Urdu and vernacular language. Full address of office in Pakistan. ceased to reside at provided address or refused to accept the documents on Company’s behalf. deemed to be Principal Office in Pakistan. [Name (sur. chief executive and secretaries with detailed particulars. state country of incorporation. on each prospectus. Service of document on company Deemed to be sufficiently served a) By giving to person authorized in this behalf. together with his consent. dealing or transaction entered into by the Company and liability to be sued Company can not bring any suit. nationality(present. counter claim unless all requirements met. power of registrar for investigation/inspection shall apply to this Company. is must. MOA & AOA or other instrument defining constitution in English/Urdu(or translation in English/Urdu) Full address of Registered Office or Principal Office in the country of incorporation List of directors.

if found by court after full enquiry into circumstances of transactions. jointly and severally with his co-directors. prefer an appeal to Registrar. had knowledge that the consideration so received by the company was inadequate. . any document required or authorized by or under this Ordinance to be filed or registered with the registrarcontains any matter contrary to law. is not complete owing to any defect. 496) Liability of directors for allotment of shares for inadequate Consideration ( SEC 494) Any director. creditor or member of a company may apply to the Court for a declaration that any shares of the company specified in the application have been allotted for inadequate consideration. or 3. General Proceedings. by the registrar An order of the SECP shall be final and shall not be called in question before any Court Acceptance of documents presented after prescribed time (SEC 469.000 rupees and shall also be personally liable for the liabilities and obligations arising out of such business or transaction. The registrar shall communicate his decision in writing to the company. 469) Registrar not to accept defective documents (SEC 468) If in the opinion of the registrar. or upheld in appeal. within thirty days of the order of refusal. to make good to the company the following amount [Consideration to be received – consideration inadequately received] Penalty for carrying on ultra virus business (SEC 496) If any business or part of business carried on or any transaction made. the registrar may accept same on payment by the company or other person concerned of such additional fee as may be prescribed by the Commission. not exceeding 3 times the amount of the specified fee payable in respect thereof No such document shall be deemed to have been filed with the registrar until the specified has been paid in full. If registration of any document is refused. error or omission.) Where any document required or authorized by or under Company’s Ordinance to be filed or registered with the registrar within a specified period is presented after the expiry of such period. failed to take reasonable steps to ascertain whether such consideration was in fact adequate Shall be liable. a joint registrar. is insufficiently legible or is written upon paper which is not durable. or is not properly authenticated. the company may either Supply the deficiency and remove the defect pointed out or. Where the registrar refuses to accept any document for any of the reasons aforesaid The same shall not be deemed to have been delivered to him in accordance with the provisions of this Ordinance unless revised document provided in specified time. is a party to making the allotment of such shares 2. offences etc ( SEC 494. The registrar may either require the company to file a revised document on specified form & within specified time Refuse to accept or register the same. Every director of the company who 1. delay in filing or other failure to comply with the requirements of Companies Ordinance. where the order has been passed.Corporate Laws Made Easy ~ 11 ~ Specialised areas of Companies Ordinance 1984 Registration offices and fees( SEC 468. a deputy registrar or an assistant registrar SECP. by a company is ultra vires of the company Every person who acted as a director or officer of the company and is responsible for carrying on such business shall be liable to a fine not exceeding 500. where the order of refusal has been passed by an additional registrar. or does not otherwise comply with the requirements of law. Acceptance of the document by the registrar shall not absolve the defaulting company or other person concerned of any liability arising from the default.

Only Management & Administration passes to Liquidator. Cannot file or continue suit against company except with leave of court. and persons who are deemed to be contributories or alleged to be a contributory” . Where any surplus assets are left.Corporate Laws Made Easy ~ 12 ~ Specialised areas of Companies Ordinance 1984 Introduction to winding up (SEC 297 to 304) Meanings & Objectives of Winding up A proceedings in which all affairs of company are wound up.Ord. Employees Winding up by court appears to be a notice of termination They an prove claims/damages in respect of wrongful termination Voluntary winding up does not necessary operates as notice of discharge Directors Directors/ CE and officers cease to hold office except for the purposes of winding up Committee of inspection or creditors in general meeting may sanction continuance Properties of company No disposition of properties without leave of court Modes of winding up Company can be wound up in any of the following modes 1) By court [Compulsory winding up] 2) Voluntary 3) Under supervision of court Contributories “Contributory means every person liable to contribute to the assets of a company in the event of its being wound up. Creditors: They have to lodge claims with Liquidator and Prove debt (except secured creditor). and include the holder of any shares which are fully paid up. Shareholders: A new statutory liability comes into existence No transfer or change in shareholdings except with approval of Liquidator. even a solvent company may sometimes wind up in apprehension of future losses Effects of winding up as regards to different persons are Company: Company continues to be a corporate entity with all rights. the same are distributed to members of company in proportion of their rights under AOA Then company is dissolved in compliance with formalities of Company.1984 Consequences of winding up Winding up puts an end to business of company Winding up doesn’t means that company s financially embarrassed. its rights & liabilities ascertained and the claims of its creditors are paid off out of the proceeds of the assets of the Company including contributions by its members to necessary extent.

His assignee 2. Contribution will be made only if court deems it necessary subject to Articles. maximum liability shall be upto amount undertaken by member. Liquidator. May be proved against assets of body corporate. For company limited by guarantee having share capital. ______________________________________________________________________________________ Note: ICAP have specifically excluded following sections from course of Corporate Laws. 308. 435 to 442 ] Please refer to ICAP course outline for any change therein. Death: 1. shall not be a debt. 2. maximum liability shall be upto amount unpaid on shares. Contributories in case of death. such director shall be liable to contribute as if he were a member of unlimited company provided: − − If he ceased to be a director one year before winding up or if debt was contracted after he ceased to be a member. profit etc. policy of insurance) Liability of director whose liability is unlimited: In addition to his liability as ordinary member. 342 to 345. For company limited by shares. A sum due to any member in respect of dividend. expenses of winding up and adjustment of rights of contributories among themselves with following qualification: No contribution from past member if member ceases to be a member one year before winding up or debt was contracted after he ceased to be a member. maximum liability shall be amount unpaid on shares as well as amount undertaken by member.Corporate Laws Made Easy ~ 13 ~ Specialised areas of Companies Ordinance 1984 Liability of contributory accrues on commencement of liability but payable at time specified in calls made on him for enforcing the liability. Past member will contribute only if court deems it necessary that present members are unable to pay debt. For company limited by guarantee. His legal representative will be liable 2. 335. May be proved against the estate of insolvent. liabilities. Liability of contributories as past and present members Past and Present members will contribute money to pay all debts. 423 to 430. . 312 to 320. Ordinance not applied where liability of individual is restricted and funds of company liable (e. 332. Deceased’s property if default is made by legal representatives in payment of money Insolvency: 1. Module E Winding up by Court [ 307. 351 to 354 ] Provisions applicable to every mode of winding up [ 408 to 420. insolvency or winding up of member. Winding up: 1. 338.g.

Shares have been held by him for at-least 6 months during last 18 months.000 or 1% of Paid Up Capital serves a notice at registered office of company for payment of sum. SECP. It is proved to court that company is unable to pay debt Court shall take into account Contingent and Prospective liabilities .1984. Ultravires Memorandum. On Special resolution by members of Company 2. Illegal b. Management is guilty of fraud. after Special resolution Company has to file particulars of assets. himself or through agent or legal advisor and within 30 days Company.Corporate Laws Made Easy ~ 14 ~ Specialised areas of Companies Ordinance 1984 Winding up by Court (SEC 305 to 357) Petition for winding up Winding up by Court shall be deemed to commence on presentation of petition for winding up to Court. 6. Following persons may file petition to court subject to certain conditions mentioned 1. neither pays the same Nor secures Nor satisfies creditor by compounding it 2. If court thinks it just and equitable. after investigation that Business of company is Illegal. Where the business of company is a. 4. Company. 7. 1. Holding Statutory meeting b. 8. liabilities and suits against it 2. Minority share holders means shareholders together holding at least 20 % of the share holding Company when deemed unable to pay its debts. 9. of members reduced below minimum numbers (2 or 7). Oppressive to minority shareholders. 4. Holding Statutory report c. Creditors including contingent or prospective creditors Have to give security for costs of winding up 3. Company Ceased to be a listed company. Default by company in a. If a creditor of lesser of 50. Contributories If no. if was so Unable to pay debt. If court order in favor of creditor and still he remains unsatisfied 3. AOA or Co Ord. does not commence business within 1 year of incorporation Company suspends its business for whole year. or misconduct towards MOA. ultravires MOA or oppressive to members or Management is guilty of fraud or misfeasance or misconduct Circumstances in which company may be wound up by Court 1. promoters and members d. Number of members fall below minimum number. Holding any 2 consecutive AGM 3. Registrar (with sanction of SECP) 5. 5. c. Company. misfeasance.

Notice of fact sent to Registrar. not to make secret profits He is paid agent of company: bound to carry out duties with due care and skills Appointment of Official Liquidator (OL) Court shall maintain a panel of persons form amongst persons specified by SECP From this panel 1or more OL or Provisional Manager (PM) shall be appointed Such person with 3 days of communication of order shall inform court of his inability to act so A person other than panel can be appointed if 1. maximum for six months On ground that any proceedings by or against company are pending in a Superior Court. removal & Filling Vacancy: OL Can’t resign before conclusion of winding up o except on personal disability to the satisfaction of court Can be removed by court any time. he shall cease to hold office Be disqualified for 5 years to hold any other office including that of Director in any company. Any vacancy in office of OL to be filled by Court. o Outgoing OL shall continue to act until successor takes his place. . remuneration can not be enhanced but may be reduced by court anytime If OL resigns. removed or otherwise ceases to hold office before conclusion He shall not be entitled to any remuneration Remuneration already paid shall be refunded to company General provisions as to Official Liquidator Past acts of OL having defects on appointment or qualification are valid till discovery. On application of creditor whom 60% of issued share capital or more is due 3. Remuneration of OL OL is paid remuneration for his services as follows %age of amount realized on disposal of assets There may be different %age for different class of assets Fixed by the Court having regard to amount and nature of work done Or In addition to remuneration Court may permit payment of monthly allowance for meeting expenses of winding up for period of 12 months from date of commencement Subsequently. A Receiver can not be appointed for assets in the hands of Liquidator except by leave of court. Winding up procedure shall be completed within 1 year. court shall declare whether any act shall be done by all or some or anyone Court shall decide whether any security needed to be given by OL Resignation. Court considers it. breach or default.Corporate Laws Made Easy ~ 15 ~ Specialised areas of Companies Ordinance 1984 O fficial liquidator Official Liquidator occupies dual position on winding up He represents company & creditors He is bound to be impartial. OL shall forthwith start his duties till conclusion of winding up Where more than 1 person are appointed. or 2. If OL is convicted of misfeasance. Extension may be granted by court For one month at a time.

Cash in hand. its date of appointment or o where no such appointment is made. Relevant date for purpose of this statement of affairs means o where PM or OL is appointed. Particulars 1) The assets of company stating separately. Unpaid calls 3. Who: Statement shall be submitted and verified by persons who Were directors. addresses and occupation of debtors and amount likely to be realized from them. Bank and negotiable securities b. subscribed and paid up 2. Estimated amount of assets and liabilities giving separately a. OL may reimburse expenses incurred in preparation of report from company’s assets. name of person and place property. Whether in his opinion. not later than 30 days or further 30 days extendable by court shall submit a preliminary report To Court Such statement shall contain following particulars 1. Cause of failure if company has failed 4. Expenses may include preparation of affidavit for verification purposes Report by Official Liquidator On winding up order as soon as possible. 5) Where property of company is in possession of any other person. 6) Places where company conducted its business in last 6 months from relevant date and name of incharges there 7) Detail of pending suits or proceedings in which company is a party 8) Any other prescribed information. Cash at bank and Negotiable securities 2) Debts and liabilities of company 3) The names. Cash. any other prescribed matters Creditors and contributories can inspect it OL shall take property of company in custody from any directors etc He may contact dist. promotion.Corporate Laws Made Easy ~ 16 ~ Specialised areas of Companies Ordinance 1984 OL shall maintain proper books to make entries or minutes of proceedings. Chief Executive or Officer Taken part in formation of company Been in employment of company and are capable of giving required information Been in employment of a company which is the officer of the company. addresses and occupation of the creditors of the company stating separately o Secured debt (with particulars. Magistrate having jurisdiction over that area Statement of affairs When: Within 21 days from the relevant date or time extended by OL. or conduct of business . Any Creditor or Contributory can take copy on payment of prescribed fee. Debts due from Contributories c. further inquiry is desirable to any matter relating to formation. or Court till 45 days. value and date of security given) o Unsecured debt 4) Names. after receipt of Statement of Affairs. the date of winding up order. Movable and Immovable properties of company e. chief executive or secretary at the relevant date Have within 1 year of relevant date Been Directors. Capital issued. PM. Debts due to company and securities(if any) available against them d.

PM shall have same powers as official liquidator Court may limit and restrict his powers in appointment or subsequent order. for which he may contract Dist. Powers of Official Liquidator OL shall with sanction of court or committee of inspection have following general powers To institute or defend any suit. To sell movable and immovable property of company by Public auction or private contract. debts. any other prescribed matters. 1 copy held with court and other delivered to Registrar along with auditor’s report Each copy shall be open for inspection by any person on payment of prescribed fees OL shall send it to every creditor and contributory along with auditor’s report. rank and claim in bankruptcy/insolvency of any contributory for any balance against his estate and receive dividends in bankruptcy/insolvency in respect of that balance To accept. Certified copy of report shall also be sent to registrar simultaneously. Magistrate having jurisdiction over that area Provisional Manager At any time after presentation of petition and before Winding up orders. To pay any classes of creditors in full To compromise or make arrangements with creditors having any type of claim against company To compromise all calls. prosecution or other legal proceedings (civil/criminal) in the name and on behalf of the company To carry on business necessary for beneficial winding up. or minutes of proceedings. . he may make a further report stating Manner in which company was formed or promoted Whether in his opinion any fraud has been committed by any person (director or other officer) in its formation or promotion since its formation. make. liabilities or claim/damages between company and contributories. debtors or other persons apprehending liabilities and all questions affecting assets or winding up of company OL shall have following powers subject to any general/special directions of court or committee of inspection To execute all deeds and use company seal To prove. or endorse bills of exchange To raise on security of assets of company any money requisite To take out in his official name letter of administration to any deceased contributory. Creditors and contributories can inspect it. OL shall take property f company in custody from any directors etc. Liquidator’s Account OL shall present to court an account of his receipts and payments and dealing as liquidator at prescribed times but not less than twice in a year Account shall be in prescribed form. made in duplicate & verified by declaration Court may have such accounts get audited. Court shall give notice to company and provide opportunity to make representation Court may dispense such notice for reasons to be recorded. PM shall cease to hold office when order of winding up being made. action. court may appoint a person eligible for appointment as official liquidator. do any other act for payment due from contributory To appoint an agent to do business which he himself can not do To do acts to recover payments due from a contributory To do other acts as are necessary for winding up and distribution of assets Certain obligations of Official Liquidator OL shall maintain proper books to make entries.Corporate Laws Made Easy ~ 17 ~ Specialised areas of Companies Ordinance 1984 If OL thinks fit.

officer. employee or auditor of company to convey. as regards call made after. books. agent. due to him from company. property. Adjust rights of contributories amongst themselves. distribute surplus funds among Surplus funds means funds that come in hands of official liquidator after providing Expenses of Winding up Preferential payments Claims against company which are subject matter of adjudication/assessment. Amount retained for this purpose shall be invested in Khas deposit certificates that shall be deposited with court and distributions shall be made when claims are settled. surrender. In following cases a contributory can setoff any amount. of court. court shall decide it Distribution by official liquidator Official liquidator shall. banker. At any time after Winding up order require any of . papers or documents of company in his hands. deliver or transfer to OL any Money. court may make an order of payment out of assets for costs. Dissolution of Company Under following circumstances court shall make an order that the Company be dissolved from date of order and the company shall be dissolved accordingly o When affairs of company have been completely wound up o When court is of the opinion that official liquidator cannot proceed for winding up for want of funds and assets. charges and Winding up expenses in such order/priority as court may think fit. so distribute any surplus to entitled persons. subject to directions creditors/contributories within 30 days of receipt. o For any other reason just and reasonable of the case Dissolution shall not extinguish any right of debt due to company against or from any person. order any contributory to pay any money due from him/estate of person whom he represents to company. otherwise than as a member of company In case of unlimited companies Limited company. trustee. Powers of the Court Court may fix a time within which creditors are to prove their debts/claims or to be excluded from any distribution made before these debts proved. it is not necessary for official liquidator to conduct such meeting If there is a difference between creditors and contributories. . Copy of order shall be forward to registrar within 15 days of making. where directors liability is unlimited Cases where creditors are paid in full. Registrar shall make a minute of dissolution of company. summon separate meeting of creditors and contributories of company for determining Whether COI inspection should be appointed to act with official liquidator Who should be its members Where Winding up order made on ground that company is unable to pay its debts. Court may at any time after Winding up order.Corporate Laws Made Easy ~ 18 ~ Specialised areas of Companies Ordinance 1984 Committee of Inspection Official liquidator shall within 30 days of orders. receiver. When assets are insufficient to satisfy the liability. Contributory.

Court may dispense with settling list of court where it is not necessary to make calls to adjust right of contributories. In settling list of contributories. Such 2nd court shall enforce matters in the same manner. Where any order of court is to be enforced by any other court A certified copy of order to be produced to proper officer of court required to enforce the same.Corporate Laws Made Easy ~ 19 ~ Specialised areas of Companies Ordinance 1984 Settlement of List of Contributories As soon as may be possible after making a winding up order. . Enforcement of Orders All orders made by court under companies ordinance may be enforced in same manner in which decree of such court in any suit be enforced. Such orders for winding up shall be enforceable in any place of Pakistan in the same manner as at place of jurisdiction. court shall settle a list of contributories with powers of rectify register of members where necessary and shall cause the assets of the company to be collected and applied in discharge of its liabilities. Production of such copy shall be evidence of that order. court shall distinguish between Person who are contributories in their own rights Person who are contributories as being representative of or liable for debts of others.

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Voluntary Winding up (SEC 358 to 395) Circumstances for voluntary winding up: A company may be voluntary wound up under following circumstances 1. When period, if any, fixed by articles expires; or 2. Where event, if any, occurs the occurrence of which AOA provides for dissolution and company in general meeting passes a resolution for it 3. Where Company resolves by general meeting that company be wound up voluntary Voluntary winding up deemed to commence at date on which resolution passed. Consequences of winding up: Company ceases to carry on business o except for requirements of winding up. Corporate state/powers continue until company is dissolved. Notice of resolution: Notice of resolution for winding up company is to be given within 10 days By advertisement in Official Gazette In newspapers having circulation in • Province of registered office • For listed; also in Province of Stock exchange (English & Urdu) To Registrar Declaration of solvency: Directors of company (if more than 3, majority of Directors including Chief Executive) shall at a meeting of Board of Directors make a declaration, verified by affidavit to the effect that they have made full enquiry and concluded that 1. Company has no debts or 2. Company is able to pay its debts within 12 months of commencement of winding up. Declaration shall not be effective unless Made within 5 weeks immediately preceding date of resolution Delivered to registrar for registration within 5 weeks of passing of resolution Supported by auditor’s report on P&L A/C and Balance Sheet. If Directors make declaration without reasonable ground they will be punishable Imprisonment of six months or Fine Rs. 10,000 or Both o If debts are not paid within specified period, it will be assumed that directors did not have any reasonable ground.

M em bers V oluntary w inding up
Appointment of liquidator: Company in general meeting shall appoint one or more liquidators to wind up affairs and distribute assets, receiving Such meeting may fix Remuneration, otherwise it will be same as in winding up by court On appointment all Powers of Directors, Chief Executives & other officers cease except so far as Company in general meeting or liquidators allows for

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Giving notice of resolution to wind up company. Appointment of Liquidator Filing consent of Liquidator. If any vacancy occurs by death & resignation or otherwise in office of liquidator, company in general meeting may fill, subject to arrangement with creditors. For this purpose general meeting may be called by Out going liquidator: or Continuing liquidator or Any contributory or Court on application of • Registrar or • Any other person interested in winding up Meeting shall be held in manner provided by Co.Ord 1984 or AOA or court may determine Company shall give notice to registrar within 10 days of appointment, filling vacancy etc

Calling creditor’s meeting in case of insolvency Liquidator shall call a meeting of creditors where 12 months expires without paying debt or Liquidator thinks that company is unable to pay debt in stated time. OL shall present Statement of Affairs. Creditors may appoint different liquidator who has consented to act as such. Notice of meeting, Return of meeting and Statement of Affairs are to be sent to Registrar within 10 days of meeting. Duty of Liquidator to call general meeting at end of each year: If winding up continues for more than 1 year liquidator shall summon a general meeting of company at st End of 1 year of commencement of winding up st Within 30 days of extended period, where proceedings are not concluded during 1 year and extension is granted. Liquidator shall lay before general meeting Audited receipts and payments Dealing as liquidator & conduct of winding up Reason for delay, steps taken, time required. Return of convening meeting, notice, statements shall be filed to Registrar within 10 days. Final meeting and Dissolution: 1. As soon as affairs of company are fully wound up, Liquidator shall Make up a report & accounts of winding up, showing how it has been conducted and how property being disposed off. Call a general meeting of Company for giving report + notice + any explanation Get accounts audited and copy of audited accounts with auditor’s report shall be sent to each contributory by post at least 10 days before meeting 2. Notice for meeting must be published at least 10 days before meeting 3. Within 1 week after meeting Liquidator shall sent followings to Registrar: a. Copy of his report and account b. Return of holding meeting + minutes or c. Return of non-holding meeting + fact of no quorum

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4. Registrar shall register it these documents after scrutiny 5. On expiration of 3 months company deemed to be dissolved. 6. Court may order to defer date of winding up on application of liquidator or interested person and certified copy of this order is to be filed with Registrar. Powers to accept shares etc. as consideration: Liquidator of transferor company, with sanction of special resolution of company, may have general or special authority to Accept shares or interest in profits of Transferee Company for distribution among members of Transferor Company Any dissenting member of transferor company shall apply to liquidator within 7 days for Abstain from carrying resolution into effect Purchase of his interest at price determined by agreement/arbitration

V oluntary w inding up by creditors
Meeting of Creditors: Company shall call a meeting of creditors on or very next day of members’ meeting on which resolution of winding up was passed. Notice of both meetings shall be sent together Notice of creditors meeting shall be advertised in same manner Directors and Chief Executive of company shall Cause, a full statement of company’s affairs together with list of creditors(and estimated amount of their claims), to be laid before creditor meeting. Appoint one of directors to preside at meeting, who shall attend & preside accordingly If meeting of voluntary winding up is adjourned, resolution passed at creditor’s meeting shall be deemed to have been passed immediately after adjourned meeting is held Notice of any resolution passed at creditors’ meeting is to be given to registrar within 10 days along with consent of appointed liquidator. Appointment of liquidators: Creditors and company at their respective meetings may nominate a person who has given written consent to act as liquidator If liquidator not appointed by either of creditor or company, liquidator appointed by other shall be liquidator. If creditor & company select different persons as liquidator, creditors shall override company Company shall within 7 days of nomination by creditors may apply to court for an order directing Person nominated by company shall be liquidator instead of or jointly with nominated by creditors Any other person to be liquidator (by Court) On appointment all Powers of Directors, Chief Executives & other officers cease except so far as Company in general meeting or liquidators allows for Giving notice of resolution to wind up company. Appointment of Liquidator & filing his consent If COI or Creditor(if no COI) may sanction continuation Committee of Inspection (COI) Creditors at their meeting may appoint a COI containing not more than 5 members

and Person obtaining order shall file same with registrar within 10 days (not 14 days) Final meeting and dissolution Provisions applicable to every V oluntary W inding U p Accounts and Statements to be audited All accounts and statements being placed before meetings of creditors or contributories shall be duly audited by an auditor. otherwise it would be “Creditor’s voluntary winding up” Provisions same in members/creditors voluntary winding up Remuneration of auditor Filing vacancy of liquidator Powers of liquidator to accept shares etc as consideration Creditors meeting in insolvency Subject to following Exception Same Same Powers not exercised unless court/COI sanction it Liquidator bound to call meeting of both creditors and members Liquidator bound to call meeting of both. appoint other person to act as member in place of those rejected by creditors Main Difference between members & creditors voluntary winding up The winding up for which declaration of solvency has been made and delivered to registrar is termed as “Members Voluntary winding up”. Auditor’s report shall be annexed to these accounts etc Auditor shall submit his report within two months of end of period. distributed to members according to their rights. unless AOA provides otherwise.Corporate Laws Made Easy ~ 23 ~ Specialised areas of Companies Ordinance 1984 Company shall appoint not more than 5 of its members to act as members of COI at meeting for passing winding up resolution or subsequently Creditor may refuse all/any of said persons. Distribution of property of company Properties of company on winding up be applied in satisfaction of its liabilities pari passu. unless court direct otherwise o Court may on application by company. Subject to such application. Powers and duties of liquidator in voluntary winding up Exercise powers of court of setting lists of contributories Exercise Powers of court to make calls Creditor/contributory may apply to court with respect to any powers exercise by liquidator Liquidator shall pay debts of company and shall adjust rights of contributories among themselves Following powers/duties are same as in winding up by court Distribution of funds Period of winding up [1 year/ extended period by court] Liability for misfeasance or breach of trust etc Determination of duties by court among more than 1 liquidator .

and creditors shall. .Corporate Laws Made Easy ~ 24 ~ Specialised areas of Companies Ordinance 1984 Power of court to appoint & remove liquidator Court may appoint liquidator. subject to appeal within 21 days. if think fit. court may adopt all/any of proceedings of voluntary winding up Power to apply to court to have questions determined or powers exercised Liquidator or any contributory or any creditor may apply to court to Determine any question arising in winding up of company Exercise all/any powers of court as if it was winding up by court. accede wholly/partly for above on conditions as think fit Copy of order staying proceedings of winding up forwarded by company to registrar. be Binding on Company if sanctioned by special resolution th Binding on creditors if accepted by 3/4 in number & value of creditors Liquidator may apply to court for public examination of promoters. in course of winding up. he would have same powers/obligations as in winding up by court Court may remove & appoint new one on application of creditors/contributory/registrar Remuneration fixed by court as in case of winding up by court Miscellaneous Liquidator within 14 days of appointment publish in Official Gazette and deliver notice to registrar Any arrangement between company. Court may. directors etc Expenses of winding up including remuneration of liquidator shall be paid in priority of all Where company is being wound up voluntarily and order is made for winding up by court.

court may appoint voluntary liquidator as official liquidator Either provisionally or permanently Either with or without addition of any other person Court shall use all powers as if it were a winding up by court Regards to wishes of creditors and contributories Court may in following matters shall have regard to the wishes of creditor or contributories as proved by sufficient evidence In directing between winding up by court and winging up under supervision of court In appointment of liquidator In all matters relating to winding up under supervision of court . Petition of continuance of voluntary winding up under supervision of court shall be deemed to be petition for winding up by court for purposes of legal proceedings Winding up subject to supervision of court and effect on liquidator Court shall appoint an official liquidator who would replace liquidator appointed by company On application by creditor/contributory/registrar/persons authorized by SECP Liquidator shall. exercise all his powers as liquidator of voluntary winding up without sanction of court Order for winding up under supervision shall not affect duties. & with such conditions as think fit. obligation etc of liquidator under voluntary winding up If order for winding up under supervision is made and subsequently order for winding up by court is made. court may Of its own motion or On application of any person entitled to apply court for winding up make an order of continuance of voluntary winding up but subject to supervision of court with such liberty to creditor/contributory etc. subject to restrictions imposed by courts.Corporate Laws Made Easy ~ 25 ~ Specialised areas of Companies Ordinance 1984 Winding up subject to supervision of court (SEC 396 to 401) Power to order winding up subject to supervision Where co has passed resolution for voluntary winding up.

Disallowance of all or part of remuneration Removed from office by Court. Rates. present or future. Avoidance of Transfer: Transfer of Shares after commencement of winding up is void unless approved by Liquidator.m.Ord or law of insolvency For winding up of insolvent companies. of value of debts/ claims In case of insolvent company: subject to provisions of Co.Corporate Laws Made Easy ~ 26 ~ Specialised areas of Companies Ordinance 1984 Provisions applicable to every mode of winding up Status of company being wound up Company being wound up shall continue to be a company for all purposes till its final dissolution All powers of Co. Disclaimer of property (Sec 407)……….. or Local authority payable within 12 months Wages and Salaries payable to employees not exceeding 4 months from the relevant date Accrued Holiday remuneration and Termination benefits. Transfer of property (movable or immovable) made within one year before commencement of winding up is void unless in ordinary course of business and in good faith for valuable consideration. rules & provisions of law of insolvency shall apply Preferential Payments: Rent. Insurance payable as employer (except in case of Reconstruction or Liquidation) Amount due in respect of compensation for death or disability of employee under Workmen’s Compensation Act 1923. Supplem entary Provisions Payments received by Liquidator: Liquidator shall open an account in a Scheduled Bank in company name. . certain or contingent. If liquidator retains amount exceeding 500 rupees or such amount as authorised by Court. shall be admissible to prove against company A just estimate being made. All receipts shall be deposited within 3 days in that account. Provincial Govt.. if possible.Ord 1984 shall apply to company mutatis mutandis Proof & R anking of claim s In every winding up all debts payable on a contingency and all claims against the company. he shall be punishable as follows: Make good any loss Pay surcharge @ 2% p. and Taxes of Federal Govt. Amount due to employees for: Pension fund Provident fund Gratuity fund Other Welfare fund Expenses of investigation payable.

may alter any requirement. Meetings to ascertain wishes of creditors (Sec 422)………. Federal Govt. Any money unpaid after 15 years shall be transferred to general revenue A/C of Fed. or Creditors) and same shall fix his Remuneration Where no auditor is appointed. liquidator shall inform Commission who will appoint. in Company Liquidation Account Liquidator shall forthwith submit to Registrar a statement containing particulars of persons entitled to participate along with official receipt of SBP Liquidator responsibility ceases on receipt of deposit from SBP.. Appointment of Auditor: Same provisions as applicable to companies not in the process of being wound up. Note: The portion of “Provisions applicable to Every Winding up” is highly summarized in these notes. Thereafter Registrar can make payment after approval of authority. please refer to Companies Ordinance 1984 . Any Creditor/Contributory can inspect it.e. (Court. accounts and other proceedings to be kept by liquidator: At Registered Office. Liquidator to exercise certain powers subject to sanction (sec 421)……. Members.Corporate Laws Made Easy ~ 27 ~ Specialised areas of Companies Ordinance 1984 Unclaimed dividends and undistributed assts: Money With liquidator (after 6 months) shall be submitted to SBP + credit to Federal Govt. Except All obligations of management with respect to audit vest in liquidator Appointment of auditor made By authority appointing liquidator i.Govt Books. For details of aforementioned sections and preferential payments.

They shall come into force at once 2. b. e.(1) 121.A. Particulars of dissenting shareholders or creditors together with their objections. Short title & commencement Companies (General Provisions and Forms) Rules.(1) & 233. Additional particulars to be specified by a subscriber.(b) 278 289 & 50 451. 1985.(1) 208 224 233. namely: a.452 & 453 136.(1) 73. indicating the reason for change g.(c) 21 30 37. and shall be accompanied by 3 copies duly subscribed and witnessed along with the specified declaration .000 rupees is due with the amount mentioned against each along with their consent to the alteration. Names and addresses of each of its creditors to whom an amount exceeding 50. f. d.(3). of the Companies Ordinance 1984. The memorandum and the articles filed for registration to the registrar. A copy of the memorandum and the articles. h. A copy of the latest audited balance sheet. 1985 These Rules shall be read with relevant sections & provisions of Companies Ordinance 1984. In addition to the general particulars to be added on signing MOA a subscriber shall specify his NIC number or his passport number in the case of foreign national Provided that in case of a person other than a natural person.(1).(2). 1899 (II of 1899). Definitions 2. Minutes of the meeting at which the special resolution was adopted.(c) & 27 (1).(1) 196. 150 & 471 476. c. Number and date of incorporation. Business actually being carried on and the clause in the memorandum justifying it Reasons for the proposed alteration The following documents correct as on the day immediately preceding the day of the passing of the special resolution and certified by a responsible officer shall be submitted along with the application.(1) & 484 504 506 1. Subscribed and paid-up capital. 242. Registration of memorandum. etc. shall be properly stamped as required by the Stamp Act.(1) 451. and i. A copy of the special resolution. u/s 30. to be read together with these rules Rule 2A 3 4 5 6 7 11 12 13 Linked with Section 19. the address of its registered office or principal office shall be specified and the authorized representative signing the documents shall also add his particulars as stated in this rule 3. Application for confirmation of alteration of memorandum under section 21. Statement in comparative form showing the existing provisions of the memorandum as are proposed to be altered and the provisions as would appear after the proposed alterations have been made.(1) & 245. An application for confirmation of the alteration of any of the provisions of the memorandum of the company shall be submitted to the SECP by a responsible officer not later than 60 days from the date on which the special resolution seeking such alteration was passed.(j) 205.(1) 255 237 263 Rule 19 20 21 22 23 24 25 26 35 Linked with Section 269. Names and addresses of the persons likely to be affected along with their consent to the alteration 4.123 & 129 Rule 14 14A 14C 15 16 17 17A 17C 18 Linked with Section 158.(5). Redeemable capital.(2).. namely: Name and address of the company.(4) & 38 42 44 57.Corporate Laws Made Easy ~ 28 ~ Various Rules under Companies Ordinance Companies (General Provisions and Forms) Rules.122. The application shall contain the following information correct as on the day immediately preceding the day of the passing of the special resolution and signed by a responsible officer. 477. Following table describes the cross linking (where applicable) between these rules and the relevant sections. Pattern of holding of its shares in Form 34.

or a responsible officer of a company intending to change its name. Service of documents on public functionaries. income and expenditure account and the annual report on the working of the association for the financial year immediately preceding the date of the application An estimate of the future annual income and expenditure of the proposed company. Enquiries as to availability of company names for registration under sections 37 and 38. The promoters of a company desirous of having a company registered. Mode of submission of returns and applications to the SECP A document. 5. whether holding an office in the company or not. return. the company shall. or 2. may be sent to the SECP or the Stock Exchange at its headquarters by registered post or by delivery either in person or through an agent. The application shall be accompanied by 3 copies of the draft memorandum and the articles of the proposed association. If the association is already in existence. specifying the sources of income and objects of expenditure. shall not be claimed unless such government or authority has signified its consent thereto in writing. The names of companies. 7. make an application in Form 2 to the SECP for its approval. 3. statement. be deemed to have been received or delivered to it or him on the day on which it is received by its or his office. entitled to appear before any High Court in Pakistan or the Supreme Court. Payment of remuneration for services or otherwise to its members. A member of the ICAP or the ICMA practicing in Pakistan. Application for grant of a license for Associations not for profit The promoters or members of an association desirous of obtaining a licence for such association shall make an application to the SECP in writing duly singed by them or by any person authorized by the association in this behalf. . express or implied. shall be prohibited.Corporate Laws Made Easy ~ 29 ~ Various Rules under Companies Ordinance The declaration shall be made in Form 1 by a person engaged in the formation of the company who is 1. A person named in the articles as a director or other officer of the company. may grant the license subject to such conditions as it may deem fit to impose. The registrar may require any person who makes the declaration or is a promoter or director of the proposed company or is a witness to the signatures of the subscribers to the memorandum to furnish such information. Besides others the following conditions shall also be fulfilled and shall be included in MOA The association shall be formed as a public company. clarification or document as he may deem necessary to satisfy himself that objects of company are lawful. 9. 6. Conversion of a public company into a private company under section 44. report. An application or any document submitted to the SECP or the registrar for the purposes of any of the provisions of the Ordinance shall. associations and other institutions in which the promoters of the proposed association hold any office stating the office held in each case. and Brief statement of work already done by the association or proposed to be done after registration. may make an application to the registrar concerned asking for information as to whether the proposed name is or is not available for adoption. a copy each of the audited balance-sheet. An advocate. A declaration by a person specified in rule 4 to the effect that he has scrutinized the application and the accompanying documents. against an acknowledgment of receipt. 8. not later than 60 days from date on which the special resolution seeking such alteration was passed. Where the alteration of the articles of a company has the effect of converting a public company into a private company. and that he is satisfied about compliance with the provisions of the ordinance and fulfillment of conditions for license. No change in the MOA and the AOA shall be made except with the prior approval of the SECP The limit of liability of its members shall not be less than a reasonable amount having regard to all the circumstances of the case Patronage of any government or authority. communication or application required to be submitted to the SECP or a Stock Exchange. SECP on being satisfied that it shall be in the public interest so to do. A list of promoters of the association with their occupations and addresses. furnish the information ordinarily within 2 days of the receipt of the application. and the registrar shall.

The fee for the filing of documents may be paid through any of the acceptable methods of payment specified by the SECP from time to time. the submission of documents in paper form shall be permissible. as the case may be. (LI of 2002). the copy shall be verified by an affidavit of a responsible officer of the company. transmitted or forwarded to the members debenture-holders or creditors shall be sent. An application for the grant of an extension in the time for holding any AGM (not being first AGM) or laying before the AGM a balance-sheet and profit and loss account (or in the case of a company not trading for profit. and an affidavit affirming that all the information in the prospectus and other documents filed is true and correct. therein under section 158 or 233. Where a document is electronically filed or lodged. 123 and 129. in any other case. A copy of or an extract from any document electronically filed or lodged with the SECP or the registrar under these rules or supplied or issued by the SECP or the registrar shall be admissible in evidence in any proceedings as of equal validity as the original document. stating that it is a true copy. be submitted to the SECP and. or of a person interested in the mortgage or charge on behalf of any person other than the company. A copy of every instrument or deed creating or evidencing any charge and required to be filed with the registrar in shall be verified as follows Where the instrument or deed relates. Application for extension in the period for holding annual general meeting and laying balance– sheet. the company shall file any additional document required to be submitted to the SECP or the registrar under the Ordinance. shall be made from the date of launching of any E-Services Project of the SECP. to property situate in Pakistan. if such error or omission was made in good faith and in the ordinary course of the discharge of the duties of the SECP or the registrar or was due to any defect or breakdown in service or in equipment used for the e-service 10. Verification of copies of contracts for purposes of section 73 Copies of contracts. The filing of electronic documents with the SECP or the registrar. required to be filed with the registrar when allotted as paid up otherwise than in cash. 13. 2002. the SECP or the registrar shall not be liable for any loss or damage suffered by any person by reason of any error or omission. the copy shall be verified in same manner as provided in rule 12 above. 122. Any report. notice. Circulation of reports and notices by companies. shall be accompanied by 3 copies of the prospectus along with other required certificates documents. Submission of prospectus for approval of the SECP under section 57 An application for approval of prospectus of a listed company or of a company which proposes to make an application to a stock exchange for the listing of its securities. whether wholly or partly. Where the instrument or deed relates solely to property situate outside Pakistan. 14. 12. The SECP may provide e-service for the electronic filing or lodging of documents required under the Ordinance to be filed or lodged with the SECP or the registrar. Verification of copies for purposes of sections 121. or By a certification of the public officer having custody of the original document. statement. provided that for a period to be determined by the SECP from time to time. to the registrar concerned not less than 30 days before the last date on which such general meeting is required to be held Provided registrar concerned or SECP. submitted to the SECP. as defined under the Electronic Transactions Ordinance. circular or other document required under the Ordinance or any rule to be circulated. in a scanned form..Corporate Laws Made Easy ~ 30 ~ Various Rules under Companies Ordinance Any document or additional detail required to be filed or lodged with the SECP or the Registrar under the Ordinance may be submitted electronically Any form prescribed under these rules shall be authenticated by the companies by affixing electronic signature or advanced electronic signature. entertain an application submitted less than 30 days before last date on which AGM is required to be held . may for special reasons to be recorded. an income and expenditure account) shall. transmitted or forwarded by post under certificate of posting or through a courier service • Except it is delivered to addressee personally against acknowledgement or sent by registered post 11. in the case of a listed company. etc. shall be verified– By an affidavit of a responsible officer that these are true copies. From date of launching of any E-Services Project.

all particulars (motioned above) of its directors/office bearers. address and (above mentioned) particulars of each partner. nationality of origin and his business occupation. that is to say. auditors and legal adviser. the full name. chief accountant. A recognized body of professional accountants. and the recoverable amount calculated with respect to every individual transaction by reference to the difference between the purchase price and the sale price of any purchase and sale. A copy of every resolution passed for investment in associates. or sale and purchase disregarding any other transactions. or A recognized body of corporate or chartered secretaries. 14C. and with the registrar concerned in the case of any other company within 14 days from the passing of resolution. Shall be accompanied by a copy of the last audited balance-sheet and profit and loss account. name and address of the company. and such information being accompanied by a certificate of the company’s auditor as to the state of its accounts. The company secretary of a single member company shall be a person holding a bachelor degree from a university recognized by the HEC. For person other than natural person. Computation of amount to be tendered to listed company by certain beneficial owners Any gain made from the purchase and sale. his usual residential address. 15. the exact state of books of accounts with reasons for such. The amount of capital expenditure to be incurred on any single item and the amount of book value for the disposal of a fixed asset. secretary. Approval of capital expenditure etc. may continue in that capacity if he has an experience of not less than 5 years. by directors / officers etc. Following shall be particulars of directors and officers. or An MBA. and if he holds any other directorship or other office the particulars of such directorship or office. shall be exceeding 1 million rupees & 100 thousand rupees respectively. Directors of public listed company shall take reasonable steps to ensure that company secretary is a person who appears to them having requisite knowledge & experience to discharge his functions & who is A member of. and the date on which each became a partner. passed for investment in associates to be filed with SECP and registrar. reasons for delay in completion of audit and minimum time required for it. the name of her husband or deceased husband. Qualifications of company secretary. Date up to which AGM is required to be held and financial statements & reports laid therein Reasons for not being able to hold AGM or laying financial statements & reports at the general meeting by the required date and justification for extension in period to the extent applied When delay is attributed to non-completion of books of accounts / non-finalization of audit. including the CE. 14B. 2002. of a listed security within a period of less than 6 months. by the directors.COM or a law graduate from a university recognized by the HEC. and to be tendered to the company shall be computed in the following manner Purchase at lowest rates shall be matched against Sales at highest rates prevailing within the 6 months. 14A. his NIC number and in case of foreign national passport number. or sale and purchase. the lowest in rate and highest out rate of the purchases and sales or the sales and purchases shall be matched Purchases & sales shall be matched as aforesaid so long as the securities involved in the purchase and sale are of the same class and of the same listed company . in the case of a married woman or a widow. M. Particulars of directors and officers. For firm. having at least 2 years relevant experience A retired government servant in BS-19 or equivalent or above with at least 15 years service th Provided that a person already engaged by a public listed company as company secretary before 26 october. Copy of resolution. 16. together with information & documents specified in Form 30 shall be filed with SECP & registrar concerned in case of a listed company.Corporate Laws Made Easy ~ 31 ~ Various Rules under Companies Ordinance The application of extension shall state The registration number. his father’s name. along with its name and address of registered or principal office. nationality and. his present name in full. if that nationality is not the nationality of origin. managing agent. for the purpose of Register of directors and other officers For individual. Date on which the last general meeting was held and the financial year for which the financial statements and reports relating to accounts were laid at such meeting. if any. that is required to be reported to the SECP & Registrar. etc.

19. the paragraphs of the application containing statements true to their knowledge and the paragraphs of the application which contain statements true to the best of their information and belief. in the opinion of the SECP. Authentication of copy of Inspector’s report u/s 278 A copy of Inspector’s Report. the total number of its members. Number of copies of accounts & reports to be filed with SECP. If company has a share capital. shall be authenticated either By a responsible officer under the seal of company whose affairs have been investigated. 20. Regsitrar. Name & address of registered office of the company whose affairs are sought to be investigated. 2. and. require the applicants or any one or more of them to produce such further documentary or other evidence as it may consider necessary For satisfying itself as to the veracity of the allegations made in the application. 5 copies of the annual accounts and balancesheet and other reports with the registrar concerned Rule 17A 17B 17C Auditors Report on Accounts of a Company Accounts of a Banking Company Consolidated Financial Statements Review Report on subsidiary’s accounts Under Section 255 255 237 (3) 237 (4) Form 35-A 35-B 35-C 35-D 18. or By a certificate of the SECP or the registrar having custody of the report. or For ascertaining the eligibility of applicants or any number of them to make application. dissenting from scheme of amalgamation u/s 289 A notice required to be given by a transferee company to any dissenting shareholder of the transferor company or to any holders of remaining shares of the transferor company who has not assented to the scheme or contract shall be given in the manner provided u/s 50 of Ordinance and rule 10 (above) While making or issuing any offer or issuing any circular containing any recommendation from the directors of . Manner of giving notice to shareholders. 4. Names and addresses of the applicants. The SECP may. inter-alia. is necessary for enabling it to pass orders on the application. Precise & specific reasons for requesting the investigation with particulars of alleged irregularities 5. the issued and paid-up capital of the company and the nominal or face value of the shares or. SE & Shareholders in case of a listed company. 17. also total number of shares of company held by each of them together with amount paid up thereon 3. Shall be the same as is payable to the registrar under the 6th Schedule for the supply of a certified copy or extract of any document or register kept by the registrar. if the company has no share capital. stamp duty and other expenditure incurred in making the gain may be deducted subject to production of such documentary evidence in support of expenditure incurred as may be acceptable to the company. 21. 5 copies of the annual or half-yearly accounts and balance-sheet and other reports with the registrar concerned & SECP in case of a public company (not being a listed company). or For ascertaining any information which. Fee payable for acquiring Inspector’s report u/s 269. before passing any order on the application.Corporate Laws Made Easy ~ 32 ~ Various Rules under Companies Ordinance Distribution of bonus shares & allotment of right shares by listed company to existing shareholder either on basis of his entitlement or on account of purchase of right allotment letters from market shall not constitute a purchase Any loss arising out of any transaction in a listed security shall not be set off against the gain arising out of such security computed in the manner aforesaid: Amount of brokerage. in case of a company having a share capital. Application for investigation on affairs of the Company Every such application for investigation shall specify 1. Whether the applicants agree to give security for payment of the costs of investigation and the ceiling of the amount up to which they so agree Such application shall be accompanied by such documentary evidence in support of the reasons for requesting the investigation and the alleged irregularities as is reasonably open to the applicants Such application shall be singed by the applicants and shall be verified by their affidavit stating.

duly authorised in writing by the said officer or person for the purpose of the proceedings. shall be furnished to the Federal government. 22. or b) Any other person who could make a declaration under rule 4 and who is authorised in writing by the company for the purpose or c) Secretary of the company. prior to the proceedings 26. other than a creditor or member of the company. unless otherwise required by the Federal government. or A Notary public of the country where the company is incorporated. SECP or the registrar Provided the written authority entitling person. by such individual. it shall be authenticated by affidavit of person having. A copy of any charter. or b) Any other person who could make a declaration under rule 4. 27. Translation of documents other than companies established outside Pakistan. 28. Where translation made within Pakistan. SECP or registrar. The signature and seal of the public officer or certificate of the Notary Public shall be authenticated by a Pakistan diplomatic consular or consulate officer and the certificate of the responsible officer mentioned above shall be singed before a Pakistan diplomatic consular or consulate officer. shall be same as in Rule 19 25. shall be attached to each copy of document furnished to registrar. or An affidavit of a responsible officer of the company in the country where the company is incorporated. of the public officer or Notary Public as mentioned in Rule 22: o Signature or seal of the person certifying be authenticated by Pakistan diplomatic consular or consulate officer. The translation into English or Urdu of documents required to be filed with the registrar shall be certified to be correct translation of the original in the following manner Where translation made outside Pakistan. statute. required to be filed / registered with Registrar. may require . in opinion of registrar. Forms prescribed under section 504. SECP or the registrar. Signing and authentication of applications. Maximum fees to be charged by companies. any form in the Schedules shall be deemed annexed to these rules. All applications and documents filed with or sent to the Federal Government. translation of that document or portion in English or Urdu language be authenticated by affidavit of person having. The fee to be charged by a company for inspection of any document or register or for the supply of any copy thereof to a person. if any. etc. to be filed with registrar u/s 453 5 copies of the balance-sheet and profit and loss account shall be filed with the registrar concerned. constituting or defining constitution of a foreign company required to be filed with registrar shall be duly certified to be a true copy by The public officer in country where the company is incorporated to whose custody the original is committed. Certification of documents delivered to registrar by Foreign Company u/s 451. articles or other instrument. 23. Persons authorised to represent in proceedings Following persons shall be entitled to appear before the Federal Government or the SECP or the registrar in any proceedings under sub-section (3) of section 476 or sub-section (1) of section 477 or section 484 If the proceedings are against a company a) Chief executive of the company. SECP or the registrar as the case may be. an adequate knowledge of language of original and of English/Urdu. is not in English or Urdu language. etc. or d) Such other person who possesses the qualification specified by the SECP If proceedings are against an officer of company or any other individual allegedly responsible for offence a) Officer or person so alleged. and the Federal Government. in opinion of registrar. Certification of translation of documents of Foreign Company required to be filed with registrar and number of copies of balance sheet. If any document or portion of it.. memorandum. mentioned in (b) above. in the case of any individual entitled to submit an application. shall be signed and verified by a responsible officer or. an adequate knowledge of the language of original and of English/Urdu 24. the company shall furnish to them information specified in form 37 in addition to the statement disclosing steps taken to ensure availability of necessary cash. documents.Corporate Laws Made Easy ~ 33 ~ Various Rules under Companies Ordinance the transferor company to the members of that company to accept such offer. For the purpose of section 504. by or on behalf of the company. it shall be authenticated by signature & seal.

duly signed.000 . 23 or 27 it may. . in the case of an appeal against any order or decision. “as near thereto as circumstances admit” or under some other similar expression. in the case of a company. against receipt. Copies of applications to various authorities. relax the rule in the such case subject to any conditions deemed fit 37. All fees. 30.. to be forwarded to others.—Where the Federal Government is satisfied that it is not practicable or necessary to comply with the requirements of rule 22. forward to SECP and registrar concerned. Every application made to the registrar. For the application and interpretation of the requirements of the schedules or forms. SECP or Federal Government shall. to the 58[SECP] or send it to the 59[SECP] by registered post at its Headquarters at Islamabad. [i. Penalty for contravention of these rules As provided in sub-section (2) of section 506.. The particulars contained in the forms are hereby prescribed as the particulars. etc. Interpretation of the requirements of the Schedules and forms. be Duly singed and verified by an affidavit by the applicant indicating complete name and address and. Payment of fees. Rs 500. forward to the registrar concerned. grounds and claims or relief applied for in serially numbered paragraphs and specifying the relevant provisions of the Ordinance under which action or relief is applied for. an express statement giving the factual position would be required to be made instead of the information to be stated. charges and other sums payable under the Ordinance or any rules or any order of the Federal Government. 35. 32. 33.Any person required by or under any provision of the Ordinance or these rules to furnish any document. designation or entitlement of the person or individual making or authenticating application as it or he may deem necessary. 31. and it is not practicable for a company to disclose or provide information as required.000/day ] 36. Mode of submission of applications. for reasons to be recorded. required under the relevant provision or provisions of the Ordinance. the following shall apply: If an information is required to be disclosed and. 34. For continuing default 10. 29. there is no information which could be so disclosed. Prescribed particulars. in the application of the provision to a company. if any. Accompanied by documents referred to in the application or relied upon and. either in person or through an agent. the precise reasons as to why it is not practicable / possible to do so or the circumstances which necessitate deviation from the actual requirements shall be included instead of the information required to be stated. unless the subject or context otherwise requires. typed or printed. dated and verified and accompanied by copies of the documents as aforesaid Accompanied by the original bank challan or draft for the fee paid for the application.A copy of every application together with a copy of each of the documents enclosed therewith shall be forwarded by the applicant and stating the same fact therein If application made to the Federal Government. SECP or the registrar shall be accounted for to the and deposited with a designated bank branch specified by the SECP and the original receipt thereof shall be furnished to the concerned authority. statement. If application made to the SECP or the registrar who is head of the organisation for the registration of companies in Pakistan. etc. return or report to the 57[SECP] shall deliver it. signed and verified by an affidavit by a responsible officer of the companyNeatly and legibly written. setting out precisely the facts. Mode of furnishing of returns to the SECP. “if determinable”. Accompanied by 1 spare copy. 1941 are hereby repealed. Powers of the Federal Government to relax rules.Corporate Laws Made Easy ~ 34 ~ Various Rules under Companies Ordinance such documentary proof with respect to the status.e. in addition to complying with other requirement of Ordinance or rules. If a certain information is required to be disclosed “if practicable”. by a certified copy of such order or decision. etc. Repeal The Companies Rules.

22. Knowledge of contents of the Forms is not expected However following Forms are important & recommended to have just a look at Form – 1 Form – 3 Form – 7 Form – 10 Form – 16 Form – 21. CE etc Beneficial ownership Pattern of Shareholding Extension of period of dividend Related to Foreign Company .32 Form – 34 Form – 35 Form – 38-46 Incorporation of Companies Return of Allotment Notice of increase in nominal Capital Mortgages & Charges Modification in Mortgages & Charges Related to Commencement of business Statutory Report certification Special resolution List of Person consenting to act as Directors Consent of Directors Particulars of Directors.23 Form – 25 Form – 26 Form – 27 Form – 28 Form – 29 Form – 31.Corporate Laws Made Easy ~ 35 ~ Various Rules under Companies Ordinance FO RM S associated w ith these R ules As per course outline issued by ICAP only explanatory provisions of Companies Rules 1985.

Further issue of capital through right issue. or 2. If there is preferential allocation at Par to any person Such shares shall not be saleable for the period of two years. The Sponsors shall all the time retain at least 25% of the capital of the Company. The Under Writers shall give justification of premium in Due Diligence Report. The auditor shall certify that the Sponsor’s subscription has been received in full and at least 80% utilized in the project. The company while announcing right issue shall clearly state 1. These persons shall be issued Jumbo Certificate with the marking “Not saleable for two years”. That shall be signed by all the directors who were present . EQUITY BASED PROJECT The fixed capital expenditure shall be entirely financed by Equity. Employees getting preferring allocation shall be charged premium at the same rate as to the public. Financial projection for three years. The appraisal report shall be accompanied by a certificate from the auditor conforming that: Capital allocated to the Sponsors. Benefits to the company & use of funds 3. 2. The land for the project have been acquired L/C’s has been established and shipment schedule for plant & machinery with the supplier has been finalized. The issue shall be fully underwritten and the Under Writers (Not being Associated Co. LOAN BASED PROJECT Financial plan be approved by institution financing the project.) shall include atleast two financial institution including Commercial Banks and Investment Banks. The project must be appraised by a Financial Institution or a Commercial Bank or an Investment Bank. The purpose of right issue 2. Stock Exchange shall certify that Atleast 30% of plant & machinery has been installed Last consignment of plant & machinery has been shipped. After the expiry of prescribed period the shares would be splited into Marketable Lots ISSU E O F R IG H T SH AR E S B Y A LISTE D CO M PA N Y • • The company shall not make a right issue within 1 year of 1. Underwriting is not mandatory. Foreign and Local investors have been fully paid. Sponsors subscription must be received in full before public issue and auditors must certify the same The Sponsors shall retain atleast 25% of the capital of the Company for the period of 5 years from the date of public subscription. Size of capital to be issued shall be in accordance with the financial plan approved by the Institution financing the project. ISSU E O F SH AR E S O N PR E M IU M A Company may issue shares to the public on premium subject to the following conditions: Company shall have profitable operation record of at least one year.Corporate Laws Made Easy ~ 36 ~ Various Rules under Companies Ordinance Companies (Issue of Capital) Rules 1996 POLICY F OR ISSU E O F CAPITA L (F irst Offer) A company which owns a Loan Based Project or Equity Based Project and proposes to raise capital through public offer for the first time shall comply with the following conditions: 1. The Under Writers shall evaluate the project in their independent Due Diligence Report. The premium on public offer shall not exceed the amount of premium charged on placement (local or foreign) [Names & addresses of such institutions must be disclosed in prospectus] The issue shall be fully underwritten. Full justification of the premium shall be disclosed in prospectus. First issue of capital to the public. The Due Diligence Report shall form the part of material contract.

Payment and renunciation date once announced shall not be extended except under special circumstances with the permission of respective stock exchange. If announcement of bonus and right issue is made simultaneously the resolution of the Board shall specify whether the bonus shares covered by the announcement qualify for right entitlement. provided where a company purposes to charge premium on right issue above the free reserves per share shall be required to fulfill additional conditions: 1. Goodwill and intangible assets shall be excluded from the consideration. diminution in value of asset contingencies and commitments. The remaining right issue shall be fully under written and the under writers shall give the full justification of premium in Due Diligence Report. The company may charge premium on the right shares up to free reserves per share as certified by the company’s auditor. on very next day before 09:45 am] Free Reserves retained after bonus issue must be 25 % of enhanced capital [ Free Reserves – Bonus ] = atleast 25% [ Capital + Bonus ] The auditor shall certify the same. Value must be net of depreciation. O FFE R O F SH A R ES B Y CE RTA IN PE R SON S A person who holds more than 10% of shares of the company may offer such shares for sale to general public subject to following conditions: • Size of capital be offered to the public shall be not less than lesser of . [If SECP closed at that time. Book closure shall be made within 45 days of the announcement of the right issue. The decision of the company to issue right shares shall be communicated to the SECP and the respective stock exchange on the day of decision. • • • • The right issue of following shall fully and firmly under written Loss making company or A company whose market share price during preceding 6 months has remained below than par value.Corporate Laws Made Easy ~ 37 ~ Various Rules under Companies Ordinance • • in the meeting in which the right issue was approved. FREE RESERVES Free reserves includes any amount which has been set aside out of reserves or other surplus after adjustment of all intangibles or fictitious assets and is free that it is not retained to meet any specific liability. A certificate from a practicing CA shall be obtained for compliance of above conditions. ISSU E O F B O N U S SH AR E S B Y A LISTE D CO M P AN Y • • • • The decision of directors regarding bonus issue shall be communicated to stock exchange & SECP on the date of decision. But does not include the followings Reserve for revaluation of assets Goodwill reserve Depreciation reserve Development allowance reserve Worker’s Welfare Fund Provision for taxation [ deferred/current ] Capital redemption reserve ISSU E O F SH A R ES A G A IN ST CO N SID E RA TIO N O TH E RW ISE TH A N IN CA SH Following are the conditions for valuation of assets representing consideration for shares: Value of assets shall be determined by consulting valuer registered with Pakistan Engineering Council and is on the penal of atleast two financial institutions as valuer. 2. All contingent liabilities shall be deducted while calculating free reserves. At least 40% share holders undertake to subscribe their portion of right at such premium.

Address & Remuneration] (Just like form 29) Every company shall maintain a register in the form set out in Schedule I (Given Below) . COMPANIES (APPOINTMENT OF LEGAL ADVISOR) ACT. if requirements of these rules does’nt seem to be practicable. 1974 RULES 1975 A company having capital not less than 500. In case the premium is charged other formalities regarding premium Offer shall be under written Under writers shall give justification in due diligence report. the new management shall not offer shares to the public for a period of 3 years from the date of privatization at a price higher than a purchased price per share. will exceed: • In case of advocate 3 • In case of firm product of 3 and number of partners If a company contravenes the above provisions the responsible person of the company shall be punishable with simple imprisonment for a term which may extends to 3 months or fine or both Legal Formalities Every company shall obtain certificate from legal advisor once a year that he or they are not engage in more than 3 companies as legal advisor The company within 15 days of appointment of legal advisor furnish to the Registrar particulars of legal advisor [Name. if at the time of appointment.Corporate Laws Made Easy ~ 38 ~ Various Rules under Companies Ordinance • • 100.000.000 or 25% of the capital No premium shall be charged unless the company has profitable operations of one year. not less than Rs. Purchase Price per share may be adjusted by right or bonus shares or similar distribution made out of pre acquisition reserves. SECP shall relax these rules for reason to be recorded. or the Provincial Govt. Full justification of premium shall also be disclosed in offer for sale.200 per month Eligibility No person other than advocate or registered firm of advocates Company shall not appoint an advocate or firm of advocates to be the legal advisor. the number of companies of which such advocate or firm is legal advisor. Due diligence report forming part of material contracts. O FFE R FO R SALE BY A PR IV A TIZ ED CO M PA N Y Where a company has been privatized by the Federal Govt.1.000 shall appoint legal advisor To advise company in performance of its functions and discharge its duties in accordance with the law The appointment shall be on retainership basis.

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THE COMPANIES (BUY BACK OF SHARES) RULES 1999 – Linked with section 95A Company shall have sufficient cash available Company shall have following ratios Debt Equity Ratios 75:25 Current Ratio 1:1 The above ratios shall be disclosed in the explanatory statement annexed with the notice of meeting. Decision of Purchase The Directors of the company in a meeting shall take decision of Purchase Purchase price Number of shares to be purchased They shall fix a date for General Meeting of the company to pass Special Resolution. The decision of the Directors shall be communicated to the SECP and SE on the date of decision. The tender notice shall contain the following information: Maximum No. of shares to be purchased. The manner in which offer to be communicated. The last date by which the offer to sell shall be made by the shareholder. The names and addresses of the designated branches of the authorized banks. Purchase Procedure 1. A shareholder interested to sell his share to the company in response of the tender notice shall make offer to sell in writing to the designated branches of the authorized banks providing following information: Name of the shareholder Father name / Husband name NIC No Address No. of shares offered Shares distinctive number [If shares are not in CDS] Folio number [If shares are not in CDS] The account number [If shares are in CDS] 2. The company shall take a decision within 10 days of the closing date. 3. In case the offer exceeds the required purchase the acceptance shall be made by the company on pro-rata basis in lots of 500. 4. The acceptance of the offer shall be communicated to the shareholder within 10 days of the decision. 5. The shareholder whose offer has been accepted shall submit to the bank share certificates along with verified transfer deed within seven days of the receipt of the acceptance of the company. • Where the shares are in CDS a confirmation from the CDC about the availability of shares along with authorization to transfer the shares to the designated bank. 6. In case the company bank (Designated) does not receipt the shares within 7 days the acceptance of the company shall be deemed to have been revoked. 7. Company shall pay the price of shares purchased within 7 days of the receipt of shares. Other Formalities The purchase shall be disclosed in the Balance Sheet as reduction of capital and necessary details would be provided in the Notes to the Account. Company shall submit to SECP & Registrar concerned a Return & “Declaration of Solvency” within 30 days of purchase in manner set out in schedule to these rules.

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COMPANIES SHARE CAPITAL (variation in rights & privileges) RULES 2000 – Linked with section 108 KINDS & CLASSES OF CAPITAL A company limited by shares may have more than one kind of share capital and may have different classes of share under each kind. Where a company intends to have different kinds of share capital it shall specifically so provide in its memorandum & articles. NATURE OF RIGHT & PRIVILEGES • Different voting rights Voting right disproportionate to the paid up value of shares Voting right for specific purpose No voting right Different right of entitlement of: Dividend Right shares Bonus shares Receiving of notices of meeting and to attend those meetings • Right & Privileges for period: Indefinite period Definite period Period determined by members from time to time in special resolution

OTHER CONDITIONS The company has to pass to pass special resolution if it intends to issue different kinds of capital No company shall issue further capital of any kind except with the approval of SECP Offer of further capital of any kind shall be made to each existing share holder proportionately without any discrimination. If any of the existing share holder decline to accept the offer of further capital, the shares so declined shall be disposed off by directors in such manner as may be provided in the AOA or special resolution. If the capital of different kind is offered to general public this fact shall be distinctly mentioned in offering documents together with respective rights & privileges.

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NBFC Rules 2003 [ 1 to 10 ; Amended] – Linked with section 282A – 282N Rule 1: These rules may be called Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003. DEFINITIONS (Rule 2) Asset management services Assets Services provided for management of collective investment schemes;

Closed-end fund Closed-end scheme

Properties of all kinds tangible or intangible, including shares, units, certificates, securities, deposits, right and bonus shares, cash, bank balances, profits, dividends, fees, commissions, all receivables, claims, derivatives contract, licences, privileges, accrued/accruing/contingent Investment company or a closed-end scheme; Scheme constituted by way of trust to raise funds through issue of certificates to the public for investing in securities including money market instruments for a definite or indefinite period but which does not continuously offer certificates entitling the holder of such certificates, to receive, on demand, his proportionate share of the net assets of the closed-end scheme; Includes spouse, lineal ascendants and descendants and brothers and sisters; A closed-end fund and an open-end scheme;

Close relative Collective investment scheme Connected person

Constitutive documents Custodian

Discounting services Equity

In relation to an NBFC or a collective investment scheme, means,a) Any person or trust beneficially owning, directly or indirectly, ten percent or more of capital of the NBFC or the collective investment scheme; b) Any person able to exercise, directly or indirectly, ten percent or more of the total voting power in that NBFC or the collective investment scheme; c) A collective investment scheme being managed by an NBFC; d) The NBFC managing a collective investment scheme; e) A trustee or custodian of the collective investment scheme; f) Any person or trust controlled by a person who or which meets the descriptions given in sub-clause (a) to (e); g) Any member of the group of which that person, or trust forms part; and h) Any director or officer of that NBFC or the investment company being managed by that NBFC or of any of their connected persons as specified in sub-clauses (a) to (g); Trust deed, offering documents and other principal documents governing the formation of a closed-end scheme or an open-end scheme including all related material agreements; Includes a bank licensed under the Banking Companies Ordinance, 1962 or a trust company which is a subsidiary of such bank or a central depository company approved by the Commission or an NBFC carrying out investment finance services provided it has been approved by the Commission to act as custodian or such other company as may be approved by the Commission to act as custodian; Services relating to the discounting of financial instruments; Includes paid up share capital, reserves, subordinated loans and unappropriated profits (minus accumulated losses) excluding deferred tax reserves, Surplus on Revaluation of Fixed Assets Account as described in section 235 of the Ordinance, treasury stocks and redeemable preference shares: Explanation.- For the purpose of this clause the expression “subordinated loans” means loans given or arranged by the sponsors, free of cost, to meet any short fall in the minimum equity requirement specified under these rules; Includes a financing under a system which is based on participation in profit and loss, mark-up or mark-down in price, hire-purchase, lease, rent-sharing, bills of exchange, promissory notes or other instruments with or without buy-back arrangement by seller, participation term certificate, musharika or modaraba certificate, term finance certificate or any other mode, guarantee, indemnity, LC and any other obligation, whether fund based or non-fund based Loan provided to individuals for the purchase of residential house or apartment or land including the facilities availed for the purpose of making improvements in house or apartment or land; Services provided for, managing discretionary or non-discretionary portfolios for both individual and institutional clients and include the business of advising others as to the value of securities or as to the advisability of investing in, purchasing or selling of securities, for remuneration; Means a company registered with the Commission under the Ordinance in accordance with such criteria as may be specified by the Commission by notification in the official Gazette;


Housing finance services Investment advisory services Investment company

holds ten percent or more shares having voting rights of the paid-up capital of the company. have control or hold substantial ownership interest or have power to exercise significant influence over the other. and d) “significant influence” refers to the management control of the company or the ability to participate in financial and operating policies. or. b) Control shall have the same meaning as defined in section 2 of the listed companies (substantial acquisition of voting shares and takeovers) ordinance. its subsidiary or associated company. Eligibility Conditions for establishment of NBFC (Rule 3) NBFC may be established if its promoters. proposed directors. generated. Includes an individual. In relation to a collective investment scheme. Persons. means the excess of assets over liabilities of the collective investment scheme. Open-end scheme Person Promoter or sponsor Records Trustee Include money market activities.” A scheme constituted by way of a trust deed that continuously offers for sale its units as specified in the constitutive document that entitle the holder of such units on demand to receive his proportionate share of the net assets of the scheme less any applicable charges. an association or body of individuals whether incorporated or not. The regulations made by the Commission in exercise of its powers under Part VIIIA of the Ordinance. The schedule to these rules. Chief Executive and Chairman of BOD fulfills terms & conditions mentioned in “Fit & Proper Criteria” & complies with Ordinance. NBFC Rules & Regulations . 1969 (XVII of 1969). 1997 A company as defined under the Companies Ordinance. 1962 (LVII of 1962) or a trust company which is a subsidiary of such a bank or a central depository company approved by the Commission or a NBFC carrying out investment finance services provided it has been approved by the Commission to act as trustee or such other company or trust as may be approved by the Commission to act as trustee. a firm. a Hindu undivided family. A trust established by a deed under the provisions of the Trusts Act. in accordance with (in accordance with applicable International Accounting Standards) or any other admissible mode determined by the Commission from time to time. l984 (XLVII of l984). Central depository as defined under Securities and Exchange Ordinance. The Companies Ordinance. a company and every other legal person. either exercised by representation on the board of directors. 2001. l984 The forms annexed to the rules. in case of a natural person.” Securities and Exchange Commission of Pakistan established under the Securities and Exchange Commission of Pakistan Act. project finance activities. such excess being computed in the manner specified by the Commission by notification in the official Gazette. 1882 (II of 1882). if it is a legal person. through partnership or by statute or by agreement in the policy making process.Corporate Laws Made Easy ~ 42 ~ Various Rules under Companies Ordinance Investment finance services Group Leasing Major shareholder Net assets. REFERENTIAL DEFININTIONS Associated companies Brokerage business Central depository company Commission Company Form Forms of business NBFC Ordinance Regulations Schedule Trust Associated companies and associated undertakings as defined in Companies Ordinance Services being provided by a broker registered under the Brokers and Agents Registration Rules. For the purpose of this clause the expressiona) Subsidiary shall have the same meaning as defined in companies ordinance 1984. corporate finance services and general services as specified by the Commission by notification in the official Gazette. sent. received or stored.” All documentary and electronic materials created. Includes a bank licensed under the Banking Companies Ordinance. A person who has made an application to the Commission to form an NBFC under rule 4 and has contributed initial capital in the proposed company or a person who replaces him. individually or in concert with his family or as part of a group. if one of them or his close relatives. 2002 c) Substantial ownership means beneficial shareholding of ten percent by a person or by close relative. capital market activities. whether natural or legal. Person who. communicated. Includes financial services provided on operating lease or finance lease basis. regardless of physical form or characteristics. A non-banking finance company as defined in clause (a) of section 282A of the Ordinance. Any of the forms of business specified in clause (a) of section 282A of the Ordinance.

License shall be deemed cancelled. If NBFC fails to commence business within 1 year of the issuance of licence.2010) from date of issuance and shall be renewable on application at least 1 month before expiry of 3 year.During this period promoters shall get NBFC incorporated as Public Company Commencement of operations by NBFC (Rule 6) NBFC shall commence or continue business and operations only after it has complied with requirements of these rules and the regulations and has been issued a license to carry out a form of business. If NBFC fails to commence business within 3 year of issuance of license or fails to apply for renewal before 1 month of expiry of validity.Corporate Laws Made Easy ~ 43 ~ Various Rules under Companies Ordinance Permission to form a NBFC (Rule 4) Application to SECP made on Form I + Annexures + Non Refundable Fee specified by SECP SECP (if satisfied that applicant has fulfilled required criteria) may permit establishment of NBFC Permission granted shall be valid for 6 months. HFS or Discounting services or all of these shall not be eligible for seeking license for any other form of business. liabilities. Conditions A pplicable to N B FC (R ule 7) NBFC shall: 1) Maintain proper books of account and retain them not less than 10 years.272 (I)/2010 dated April 21. from grade specified by SECP. SECP may while granting license. Company is not part of a Group of Companies already holding license for same type of business 4) 5) 6) 7) 8) An NBFC seeking permission to undertake Investment advisory or investment management services or both shall not be eligible for seeking license for any other form of business. books includes Journals. cash books & other records Ledgers reflecting assets. income & expenses Ledgers / comparable records showing securities in portfolio Record of transactions with banks Records of meetings of BOD & all relevant committees(audit. NBFC licensed to carry asset management services shall be eligible to undertake pension fund scheme. it shall be deemed to be cancelled or otherwise as specified by SECP by notification in the official Gazette. SECP may (after granting licence) impose any other condition. when it becomes eligible for such ratings Rating be updated at least once in every financial year Within 1 year of decrease in its rating. as deem fit in the public interest. obtain fresh rating Publish these ratings in its annual & quarterly reports and in advertisements & Brochures . it shall provide an evidence to the satisfaction of SECP. research etc possess sufficient educational qualifications for business. C onditions for grant of License (R ule 5) Separate application for different forms of businesses (Form II + Non refundable fee) SECP may grant license if satisfied that person seeking permission have fulfilled following conditions: 1) 2) 3) Company shall have separate minimum capital requirement for each business The company has allocated at least 25% of the capital to the sponsors/promoters The promoters & director of the company shall give an undertaking that they shall not dispose off their shares for a period of 3 years except with the prior approval of SECP Deposit their share in CDC in account marked as “Blocked” Shares shall be free from any lien and charge The chief executive shall not held any similar position in any other company. that person appointed for executive posts . Company has furnished an undertaking that within 90 days of grant of certificate of registration. analysis & memoranda containing Investment advices distributed. 2) Prepare its accounts according to IAS & technical releases issued by ICAP 3) Ensure that its statutory auditors are from approved list of auditors circulated by SECP 4) Disclose all the facilities exceeding 20% of its equity in its accounts 5) Furnish annual audited accounts to SECP within 3 months of close of accounting period st rd 6) Furnish to SECP quarterly accounts. impose such additional conditions as deemed fit by it. (further extension 3 months on application of promoters in exceptional circumstances).O. IFS. License granted by SECP shall be valid for 3 year (S. [ Except for a fund being managed by such company with prior approval of SECP ] The company shall give undertaking that conditions set out in these rules. within 1 month of close of 1 & 3 Quarter nd and within 2 months of close of 2 Quarter 7) Obtain Credit rating & management quality rating. An NBFC seeking permission to undertake Leasing.R. whether audited or not. investment & credit committees) Original record of all reports. regulations and any directions given by NBFC shall be duly complied with.

Reasons must be recorded in minutes and such minutes shall be communicated to SECP within 14 days of meeting Insurance coverage (Rule 9) A NBFC shall obtain sufficient insurance coverage on its own or for its clients’ benefit against any losses that may be incurred as a result of employee’s fraud or gross negligence: Exchange fluctuation risk. deal or Trade in Real Estate except for its own use or where specified by SECP Undertake brokerage business without forming separate company. employee or person who beneficially owns ≥10% voting right. (Exception: NBFC licensed for IFS) Encumber/mortgage/pledge/transfer clients assets deposited as security with NBFC for securing own obligation. Have a common director/officer/employee of broker.Co/directors/executives/related parties) and at least 2 of its directors excluding CEO shall have relevant experience of at least 5 years in Financial Sector at senior management level 10) Follow directions issued to protect NBFC against their involvement in money laundering and other unlawful trades 11) Appoint a person as compliance officer to ensure reporting to SECP & compliance with regulations 12) Appoint a person as internal auditor having minimum 3 years of experience as internal auditor. officer. for undertaking a form of business. Make investment in unquoted shares in excess of 20% of its equity. who is CA or CA Firm having satisfactory QCR. acquire or takeover any other company without SECP approval Make investment in subsidiaries. not being its statutory auditor ACMA Certified internal auditor Certified Information System auditor Member of recognized foreign accountancy organization M. [Not applicable to nominees of Federal/Provincial Government or any other specified exception] Appoint or change its Chief Executive or director not fulfilling “Fit & Proper Criteria” Monitoring fee (Rule 7A) An NBFC engaged in deposit taking shall. Restriction shall not apply to such NBFCs that have such policy duly approved by BOD: Before entering transaction Prior approval of BOD (excluding beneficiary directors) required Enter into transaction with any broker exceeding 10% of total brokerage expense in 1 accounting year. except out of surplus equity (over & above minimum equity requirement) Purchase or sell anything to director. Opening or closure of bank account. Appoint director who hold such office in any other NBFC licensed for same form of business. merge with. (Rule 10) Make satisfactory arrangement to insulate itself from risks associated with foreign currency transactions . shall not be taken into account for calculating the limit for unquoted shares Offer any of its securities for consideration otherwise than in cash Raise funds in any form from individual except where specified by SECP Provide unsecured facilities or exposures Hold. (Rule 8) Opening and closure of bank accounts or account with broker or branches of an NBFC shall be approved in meeting of BOD after carefully analyzing its merit & Financial impact. Com or MBA (Finance) NBFC shall not: Transfer ownership of controlling shares. Shall be approved in board meeting after carefully analyzing the merits and financial impact and recording the decision in detail in minutes of meeting and such decisions shall be communicated to SECP within 14 days of the meeting along with copy of minutes. approved by SECP rd 9) Appoint at least 1/3 of its directors as independent directors (not connected on basis of family with Co/promoters/directors or other relationship with Co/Ass. account with a broker or branch. Com or MBA (Finance) 13) Appoints its Financial/Chief Accounting Officer having at least 3 years experience who is a: CA ACMA Member of recognized foreign accountancy organization M. Remove any record/documents out of Pakistan without prior approval.Corporate Laws Made Easy ~ 44 ~ Various Rules under Companies Ordinance 8) Acquire & maintain membership of relevant association & follow its code. within 3 months of close of its financial year. pay to SECP an annual fee as may be specified by SECP by notification in the official Gazette. Investment by an NBFC in its wholly owned subsidiaries.

other than Liquid Assets. licensed by SECP to undertake housing finance services. the recovery of their loans.perform ing assets. if any. pledged assets. if any) from date of such rescheduling/ restructuring. Subjective Evaluation of Loans & Advances In addition to time based criteria provided in Schedule X & Schedule XI subjective evaluation of performing & non-performing advances. advances and lease portfolio & shall properly document the evaluations so made: Shortfall in provisioning. and At least 20% of the outstanding amount is recovered in cash: Condition of 6 months retention period shall not apply if the Borrower repays or adjusts at least 50% of the restructured or rescheduled loan amount in cash. time to time. NBFC shall ensure that status of classification & provisioning of a rescheduled/restructured non-performing Facility is not changed in its reports to SECP merely due to rescheduling/restructuring of a Facility and rescheduled/restructured loans shall be reported to the Credit Information Bureau (CIB) as such and not as default. Investment Finance Company and Housing Finance Company shall observe the criteria for classification of its assets and provisioning as provided in Schedule X till June 30. 2008 ) R egulation 25: Classification and Provisioning Provisio ning for nonnon . The FSV of the collateral shall be restricted to fresh revaluation or previous value. 2010. loans and lease port-folio shall be made for risk assessment Where considered necessary the category of classification determined on the basis of time based criteria shall be further downgraded: Such evaluation shall be carried out on the basis of adequacy of security inclusive of its realizable value. 70% and 50% shall be applied on the value so determined for the purpose of determining provisioning requirement in 1st. Valuation of Security and Realizable Value Before making any provision an NBFC may avail the benefit of leased assets. determined as a result of quarterly assessment. Rescheduling / Restructuring of Non-Performing Facility Status of classification of a rescheduled/restructured non-performing Facility shall be changed only when: Terms and conditions of rescheduled/restructured Facility are fully met for a period of at least 6 months (excluding grace period.Corporate Laws Made Easy ~ 45 ~ Various Rules under Companies Ordinance Regulation 25 ( NBFC & Notified Entities Regulations. At the time of rescheduling / restructuring an NBFC shall reconsider and re-examine the viability of the project or business and shall accordingly secure its interests. NBFC shall review. A Leasing Company. shall remain valid for 3 years from the date of the valuation during which period the underlying collateral or leased assets will not be revalued for provisioning purpose. The adjustment factors of 80%. to be considered for this purpose shall be the FSV FSV once determined. whichever is less. 2nd and 3rd year of valuation. it can consider the realizable value of mortgaged or pledged or leased or collaterally held assets for deduction from the outstanding principal amount of loans or advances or lease against which such assets are leased. pledged or collaterally held: The value of the mortgaged. the NBFC shall classify the loan or lease in the same category as it was in at the time of rescheduling / restructuring and NBFC may further downgrade the classification after taking into account the time based criteria stated in Schedule X or XI. cash flow of the Borrower or lessee. or collaterals held against advances or loans. at least on a quarterly basis. Classification of such assets and provisioning required against them shall be determined keeping in view the risk involved and the requirements of the International Accounting Standards as notified by SECP under the Ordinance and the Technical Releases issued by ICAP. Thereafter. the assets shall be revalued and the adjustment factor of 50% shall be applied for all subsequent years. Subjective evaluation of investment portfolio and other assets shall also be carried out by NBFC. respectively. In case of NBFCs. shall immediately be provided in the books. 2010 and Schedule XI with effect from July 01. mortgaged. operations in the account and records covering advances and credit worthiness of the Borrower or lessee. FSV once . Where the Borrower subsequently defaults (either on principal or mark-up) after the rescheduling / restructuring. or additional collaterals held against lease.

pledged. The external auditors as a part of the annual audit of the NBFC shall verify that all requirements under these Regulations or any other circular issued by the Commission for classification of assets and determination of provisions required against them have been complied with. pledged. leased or collaterally held assets. their condition and the prevailing economic conditions in the relevant sector. b) Assets having pari-passu charge shall be considered on proportionate basis. except for a Housing Finance Company. The categories of mortgaged. f) Realizable value of mortgaged. equitable mortgage (where NOC for creating further charge has not been issued by NBFC) and pledged or collaterally held assets shall be considered. their location. e) The valuers while assigning any values to the mortgaged. formula and method adopted in determination of the realizable values. business or industry. h) Valuations shall be conducted at least once in three years: Provided that. pledged. Values of pledged shares of a listed company shall be taken at their market value on balance sheet date & as per method. shall remain valid for a period of 10 years from the date of valuation [Adjustment factor of 70% shall be applied on the value so determined] NBFCs shall observe the following criteria for determining the realizable value of mortgaged. a fresh re-valuation shall be done failing which the valuation shall be taken as nil. leased or collaterally held assets which are considered for valuation and the discounting factors to be applied shall be as under and no other assets shall be taken into consideration: Liquid Assets: Valuation of Liquid Assets shall be determined by NBFC & verified by external auditors. leased or collaterally held assets determined by valuers shall be subject to verification by external auditors. c) Hypothecated assets & assets with second / floating charge shall not be considered. leased or collaterally held assets.FSV provided by valuers shall not be more than 6 months old. and In case of perishable goods. the valuers should also give the approximate date when these are expected to be of no value. Regular and valid insurance and other records should be available.Corporate Laws Made Easy ~ 46 ~ Various Rules under Companies Ordinance determined. pledged. at each balance sheet date. pledge. The goods shall be perfectly pledged. if any. calculations. leased or collaterally held assets determined by the valuers must take into account the amount that can be realized from the asset if sold in a forced or distressed sale condition. g) Valuers shall in their report explain the assumptions. The operation of the godowns shall be in control of the NBFC. namely:a) Only assets having registered mortgage. and are not supported by legal opinion wherever required. or Are not backed by valid documentation of mortgage. specified by ICAP . who may reject cases of valuation. . shall take into account all relevant factors affecting the salability of such assets including any difficulty in obtaining their possession. pledged. d) Valuations shall be carried out by an independent professional valuer listed on the panel of valuers maintained by Pakistan Banks Association or Leasing Association of Pakistan. Pledged Stocks: In the case of pledged stocks of perishable and nonperishable goods. which in their opinion Do not appear to have been professionally carried out and values determined are unreasonable. Values of mortgaged. leased or collaterally held asset. if a valuation is older than three years.

interest. leased or collaterally held assets as valued by independent professional Valuer listed on the panel of valuers maintained by the Pakistan Banks Association or the Leasing Association of Pakistan. interest. 2. PROVISIONS TO BE MADE [N-1] 20% 1. pledged. FINANCING FACILITIES CLASSIFICATION DETERMINANT TREATMENT OF INCOME Unrealized mark-up. interest or profit to be put in Suspense Account and not to be credited to Income Account except when realized in cash. profit or principal is overdue by 180 days or more from the due date. Substandard. mark-up. As above. 50% . (b): Where Trade Bills (Import. markup. profit or principal is overdue by 180 days or more from the due date. Doubtful. Export or Inland Bills) are not paid or adjusted within 180 days of the due date. 3. mark-up. 100% As above. mark-up. Medium and Short Term Financing Facilities) A): SHORT / MEDIUM / LONG TERM . profit or principal is overdue by 90 days or more from the due date. (a): Where Rental.Corporate Laws Made Easy ~ 47 ~ Various Rules under Companies Ordinance NBFC and Notified Entities Regulations. . As above. interest. Loss. profit or principal is overdue by 1 year or more from the due date. 2008 Schedule X (Long. N-1]: Rate of Provision to be applied at the difference resulting from outstanding balance of principal against the facility less the amount of Liquid Assets realizable without recourse to a Court of Law and adjusted FSV of mortgaged. Where Rental. Where Rental. (c): In case of Credit Cards where Rental. interest.

and Any other functional responsibility which the SECP may include. Integrity and Track Record 2. Financial soundness 3. Conflict of interest 1. inter alia. Is ineligible. Has entered into a plea bargain arrangement with the national accountability bureau. 2008 Schedule IX ( Fit & Proper Criteria ) Fit and Proper Criteria” (FPC) in relation to NBFC is applicable on the following persons: 1. from acting as a director or serving in a managerial capacity of an NBFC or a company. research. the persons discharging the following functional responsibilities Any executive. Appointment of Key Executives shall not require prior approval however an NBFC shall ensure at the time of appointing a Key Executive that such person qualifies the Fit and Proper Criteria. Director of NBFC Chief Executive (CE) of NBFC Key Executives of NBFC. 2. All persons subject to Fit and Proper Criteria must submit any change in the submitted information through the company secretary of the NBFC to the SECP. Chief financial officer. human resource. fraud. including the chief executive or any officer acting as second to chief executive officer including chief operating officer or by whatever name called. by the SECP or any other regulatory or professional body or government agency. after conducting an inquiry. does not have an established and proven track record of successfully running a business enterprise for 3 to 5 years. credit or risk management. Head of internal audit. financial or business misconduct. under the ordinance or any other legislation or regulation. The fitness & propriety of any person will be assessed taking into account all the relevant factors including but not limited to the following 4 broad elements: Provided that last 2 elements may not be considered while assessing the fitness & propriety of promoters and major shareholder of the NBFC. 3. and In case of promoters or major shareholders of NBFC. Promoters and major shareholders of the NBFC. “Key Executive” means key executives of the NBFC and includes. etcetera. financial misconduct or malpractices. law. 4. company secretary or compliance officer. In case of promoters or major shareholder of NBFC. does not have the requisite disclosed and verifiable financial resources. treasury. operations. the following shall be considered: . Has been involved in the mismanagement of investments. Chief Investment Officer Fund manager. Competence and Capability 4. Has been actively involved in the management of a company or firm whose registration or license has been revoked or cancelled or which has gone into liquidation or other similar proceedings due to mismanagement of affairs. head of accounts or head of finance. information technology. 2. Proposed Directors or CE of NBFC shall not assume the charge of their respective offices until their appointments have been approved by SECP. 1. preferably a public listed company. Has been the subject to adverse findings. Integrity and Track Record A person shall not be considered Fit and Proper if he: Has been convicted of an offence involving moral turpitude. Investment analyst. The application for seeking approval of SECP shall be submitted by the NBFC along with the requisite information required under Annexure “A” and an Affidavit as specified in Annexure “B”. marketing.Corporate Laws Made Easy ~ 48 ~ Various Rules under Companies Ordinance NBFC and Notified Entities Regulations. Financial soundness In determining a person’s financial soundness.

Further. and Whether the person has been declared a defaulter by a stock exchange. 3. the departments of audit and accounts shall not be headed by the same person. law. the capacity to successfully undertake the cognate responsibilities of the position. In case of Key Executives. chief financial officer. Whether the person has been declared by a court of competent jurisdiction as defaulter in repayment of loan to a financial institution exceeding Rupees one million. and Be a member of a stock exchange engaged in the business of brokerage or is a spouse of such member or in control of more than 20% shareholding. Competence and Capability Directors: Should be individuals having business/mgmt experience of at least 5 years at senior level Shall have experience and knowledge in any profession such as banking. the NBFCs must ensure that no Key Executive shall head more than one functional area that give rise to conflict of interest within the organization. Collective Investment Scheme. accounting. chief executive. research analyst or a trader (by whatever name or designation called) in a stock brokerage house or in any company or entity owned and controlled by a member of a stock exchange. internal audit or information technology etc. through his qualifications and experience. For CE Should have a minimum experience of 7-10 years in a senior management position. Whether the person has applied to be adjudicated as an insolvent and his application is pending. And any violations or circumvention of the Fit and Proper Criteria shall be dealt with under the provisions of the Ordinance . For Key Executives Must be qualified professionals possessing relevant experience and degrees relating to the job/ assignment 4. and In any other financial institution. a key executive shall not hold directorship in his or her personal capacity: In a business concern which is also a client of the NBFC. directly or indirectly through his close relatives. Be a director. preferably in the regulated financial services sector. Provided that this condition shall not apply to nominees of the Federal or Provincial Governments on the board of any NBFC. Whether the person is an un-discharged insolvent. The Fit and Proper Criteria is perpetual in nature and an NBFC shall ensure compliance with the provisions of Fit and Proper Criteria. Conflict of interest The directors or chief executive of NBFC shall not: Be a director in any other NBFC engaged in a similar business in Pakistan. chief internal auditor.Corporate Laws Made Easy ~ 49 ~ Various Rules under Companies Ordinance Whether such person’s financial statements or record including wealth statements or income tax returns or assessment orders are available. Should have demonstrated. For example. Whether the latest Credit Information Bureau report of the person shows overdue payments or default to a financial institution.

Bonds. may by notification specified and which is accepted for listing on the SE. Board shall decide permission within 3 months of application o If refused.000. Sponsors in excess of 25% b. sponsors. Modaraba Certificates.000 Capital beyond 500. Offer of Capital by Companies / Modarabas to the Public The capital is upto Rs. application deemed refused. It is department in state Bank that provide information about the loan given to different companies Listed Company Credit Information Bureau (CIB) Listing Of Companies & Securities • • • • • • No dealing in the securities of company shall be allowed on the SE either on ready quotations board or future counter unless the company and the securities have been listed and permission for such dealing has been granted in accordance with listing regulations. • SE can delist company/security on non compliance. Undertaking The company or authorized representative shall undertake that: • Securities shall be quoted at the discretion of SE • SE shall have right to suspend or remove any security without notice. PTC’s. sufficiency of public interest in the company or security.500. . Debenture.000 Allocation of capital to overseas Pakistani Allocation of capital to employee Atleast 50% shall be offered to public Atleast 250. TFC’s.000.Corporate Laws Made Easy ~ 50 ~ Other Laws LISTING REGULATIONS OF KARACHI STOCK EXCHANGE Eligible Security Defaulter Counter Listed Security It means a security which the CDC has declared to be eligible for deposit with CDS It means a separate counter setup by the SE for trading of listed securities who have committed irregularities in respect of listing regulations. Allocation of shares under pre-IPO placement including employees shall not be saleable for a period of six months from the date of public subscription. Balance 70% shall be offer to the public as per Modaraba Rules. Shall not exceed 20% of public offer. Any Share. refuse or defer such permission. relatives and associates. Musharika Certificates.000 or 25% of the capital which ever is higher. o Applicant can reapply after 6 months with fresh application. Shall not exceed 5% of the public offer In case of Modaraba applying for listing 30% of the capital of the Modaraba shall be subscribed by Modaraba Company. A company which has listed on the SE. • The allocation of capital to: a. The above permission shall be granted upon an application made by the company in prescribe form.000. o The SE in granting such permission will consider among other things. whose securities has listed on the SE and includes a provisionally listed company. Board may require additional documents other than prescribed If not provided. Furthermore company cannot bind SE to remove its securities. the reasons shall be communicated to applicant & SECP within 2 weeks. • The provision of listing regulations shall supersede the articles of association that are not in conformity. Board of SE will be sole authority to grant. Scrip. friends. or such other instrument has the Federal Govt.

right issue. Multan. atleast 21 days before the book closure. e) All dividend warrants. Company may make public offer of security to be the eligible security in CDS. st nd b. The directors shall not participate in the public subscription. The company shall dispatch share certificates to successful applicants in marketable lot within 30 days If the security is eligible security the CDC procedure will be followed. The company shall take decision about the acceptance of applications within 10 days of the closure of the subscription list. Sakkhar.000 2 month / part => 12.5% per month. The company shall verify signature of the share holder within 48 hours of the receipt of application.] In case of over subscription the company shall immediately file ballot register with the SE. Company registered in AJK or in the Northern areas of Pakistan shall be eligible for listing and will be treated at par with the company registered in Pakistan. Faisalabad. Dividend warrants are dispatched through registered post. b) The Modaraba shall hold its ARM (Annual Review Meeting) within 4 months of close of its financial year. Prospectus / offer for sale with performa application shall be published atleast in 1 english and urdu newspaper of Karachi. Rawalpindi and Peshawar for the period of 3 months from the date of issue. d) The company shall inform the SE as soon as dividend warrants are posted to the share holders. Duration for one time closure [7 days but not exceeding 15 days] Duration for total closure closures in year [Not exceeding 45 days] Dividend & Entitlement It is applied on only listed companies. The company shall give minimum of 14 days notice to the SE prior to the closure of share transfer book for any purpose.Corporate Laws Made Easy ~ 51 ~ Other Laws Prospectus. Company shall consolidate / split. certificates into marketable lots within 30 days of application. bonus issue. Islamabad. c) The period holding of AGM may be extended with SE approval. The company shall refund application money to the unsuccessful applicants within 10 days of above decision. Lahore. [ Afterward charges @ 1. c) Final dividend warrants shall be dispatch to the shareholder within 30 days from the date of AGM at which it has approved. Lahore & Islamabad between 7 & 30 days of opening of subscription lists. Issue and Transfer of Shares No company will be listed unless it is public company and has a minimum capital of Rs. 200 Million. The application for shares shall be accepted only through Bankers to the Issue. Fee : 1 month / part => 10. as may be required by security holder in writing.500 d) The company shall obtain prior approval from the SE in respect of time and date of AGM. Quetta. Allotment. No company shall be listed unless the public issue has been subscribed by not less than 500 applicants. Company shall issue transfer receipts immediately after receiving shares for transfer Company shall not charge any transfer fee. The company shall complete the transfer receipt immediately on receiving the share for transfer. . a) The company shall inform SE regarding decision of the directors relating to the announcement of dividend. b) Interim dividend warrant shall be dispatch within 30 days from the date of commencement of book closure. Hyderabad. f) Every company shall send to the SE such number of copies as may be prescribed (Previously it was 300) of annual report and interim report as soon as these are send to the share holders. The company shall verify signature of the shareholder within 48 hours of the request. Annual General Meeting a) Company shall hold its AGM within 4 months of close of its financial year. SE shall give that approval on production of similar approval from SECP. a. Company shall inform the SE about the subscription receipt with in 3 working days of the closing of the subscription list. and other entitlement. in addition to the registered office of the company shall be encashable at Karachi.

Company has gone into liquidation. c) Company shall issue bonus shares within 45 days from the date of reopening of share transfer register. If the company has failed to comply with the listing regulations. Suspension and defaulter counter A company may be de-listed. Securities on default counter shall be affected separately. Listed company shall obtain prior approval of the SE for any amendment in the Mamorandom and Articles of Association.[For manufacturing company] For 5 years from the date of commencement of business [in all other case]. voluntary or by court. st th st g) Intimate “Free Float” securities as on March 31 . If the company refuse to join CDS. Listing of Subsidiary Company A listed company distributing shares of its unlisted subsidiary company in the form of dividend. Intimate SE regarding issue of Participation Term Certificate De-listing. The minimum purchase price proposed by the sponsors will be the highest of benchmark price based upon any of the following: • Current market price • Average market price (Annual Average) • Breakup value based historical cost whereas [ Breakup value = Equity/no. If the company has failed to declare dividend or bonus: o o o For 5 years from the declaration of last dividend and bonus. Lien shares and sponsors’ compulsory shares etc not be counted] Increase in capital a) Every listed company shall advice the SE regarding all decisions taken by the BOD for changes in capital through issuance of right & bonus shares within 120 days of approval of decision by shareholders in meeting. (prices quoted separately) Suspension or delisting shall be communicated to company and notified to trade by posting it on notice board of SE. • Reasons of voluntary de-listing • Minimum price at which the shares are proposed to be purchased. b) Company shall issue right letters in marketable lots within 30 days from the date of reopening of share transfer register.Corporate Laws Made Easy ~ 52 ~ Other Laws e) Company shall furnish copies of minutes of AGM and every EOGM to the SE within 60 days of the meetings. Company shall immediately notify to the SE regarding any change in the BOD. If the company has failed to pay annual listing fee for 2 years. Sep 30 and Dec 31 . If the company has failed to holds its AGM for continues period of 3 years. right issue etc (in kind) shall get such company listed on the SE. For 5 years from the date of commencement of production. [Free float >>> available for trading. suspended or placed on the defaulter counter for any of the following reasons: If the shares of a company are quoted below 50% of the face value for a continues period of 3 years. of shares ] • Earning multiplier approach Fair value of shares = Estimated Earning x Price Earning Ratio *Estimated Earning = Average price per share of last 3 years. *Price Earning Ratio = Market Price per share / EPS . Voluntary De-Listing A company intending to seek voluntary de-listing shall intimate to the SE immediately regarding • Intention of the majority shareholders/sponsors to purchase all the shares from other shareholders with the purpose to de-list the company. st f) Company shall furnish a complete list of its shareholders as at 31 December each year. within 30 days.

4. The sponsors cannot withdraw their offer to purchase their shares if such proposal has been approved by the company in a general meting by not less than 3/4th majorities through a special resolution. A statement whether. in management’s opinion. including the amount of consideration received or given. The listed companies shall present the record of related party transactions together with all relevant documents. For each related party. In case of disagreement of the sponsors on minimum percentage of shares to be purchased. 6. and 8. 5. company shall maintain following records: 1. 3. All listed companies shall publish and circulate a statement along with their annual reports to setout the status of their “compliance with the best practices on Transfer Pricing” All listed companies shall ensure that statement of compliance with the best practices of Transfer Pricing is reviewed and certified by statutory auditors. The record of all related party transaction shall also be placed before the Board of Directors at each Board meeting for formal approval and before the Audit Committee of the company. Name of related party. Terms and conditions of transaction. such consideration is an arm’s length price. the company shall submit the following information. • • • • • Total no. agreements. if it is in the interest of the company to do so. Detailed assumption and estimates underlying the transfer price and details of computation of transfer price. of shares issued Shares owned by majority shareholders before the offer Shares purchased under the offer Total shares currently owned by the majority shareholders Shares still outstanding with minority shareholders The sponsors shall continue to remain obliged to purchase the shares still outstanding with the minority from them at relevant price for a period of 12 months from the expiry of initial pay back period. The company once de-listed under listing regulation shall not be allowed to re-listing for a period of 5 years. The application for voluntary de-listing shall be accompanied with the consent of purchase agent.Corporate Laws Made Easy ~ 53 ~ Other Laws • The maximum price at which the sponsors had purchased shares from the market during the 12 months Now SE shall determine the minimum percentage of shares to be purchased by the sponsors to qualify for de-listing. calculations and explanations to the statutory auditor for the purposes of the statutory audit. The copy of the special resolution passed by the company for voluntary de-listing send to SE immediately alongwith complete list of the shareholders. 2. Transactions not executed as arm’s length shall be separately placed. Nature of transaction. The SE may for any reasons refuse to accept the proposal of the company. The decision of the SECP shall be final and binding. Nature of relationship with related party. Directors shall approve transfer pricing policies for related party transaction. On completion of purchase. investment bank or a member of SE. . Basis or method for determining such consideration. The sponsors shall file an appeal with the SECP within 10 days of the decision of the SE.) The offer to purchase at the relevant price from the other shareholders shall remain open atleast for a period of 60 days. Amount of transaction. 7. A notice in this regard shall also be published in two widely circulated news papers including one in Karachi. Transfer Pricing (Related Party) No listed company shall use a price other than the arm’s length price Except in rare circumstances subject to the approval of the BOD. Together with the application of de-listing the company shall submit an undertaking from a purchase agent (who may be commercial bank. The company after passing special resolution shall convey to all the shareholders the decision of the majority shareholders through a register post alongwith copy of special resolution.

b) BOD of each Co shall have at least one and preferably one third of the total members of the board as independent directors. major shareholder or director of a body that has such a relationship with the company: (Major shareholder means a person who. He/she is a close relative of the company’s promoters. any of its subsidiaries or holding company within the last three years. associated company. a statement by a candidate among minority shareholders who seeks to contest election of BOD. including independent directors and those representing minority interests with the requisite skills. excluding retirement benefits from the company apart from a director’s fee or has participated in the company’s share option or a performance-related pay scheme. . annex to the notice an additional copy of proxy form duly filled in by such candidate(s). The board shall state in the annual report the names of the non-executive. associated undertaking or holding company in the last three years. whether pecuniary or otherwise. lineal ascendants and descendants and siblings) He/she holds cross-directorships or has significant links with other directors through involvement in other companies or bodies. holding company or directors. holds 10% or more shares having voting rights in the paid-up capital of the company) He/she has received remuneration in the three years preceding his/her appointment as a director or receives additional remuneration. or indirectly as a partner. provide information regarding members and shareholding structure to the candidate(s) representing minority shareholders. for which purpose the companies shall: annex with the notice of meeting on which election is to be held. either specifically or generally. The test of independence principally emanates from the fact whether such person can be reasonably perceived as being able to exercise independent business judgment without being subservient to any form of conflict of interest. such statement shall include a profile of the candidate(s). and on a request by candidate(s) representing minority shareholders and at the cost of the company. subsidiaries. its associated companies. All provisions except where explicitly stated otherwise are mandatory. For this purpose companies shall take the following steps: a) Minority shareholders as a class are facilitated to contest election of directors by proxy solicitation. He/she has. considered relevant in the context of the company’s operations. Independent director means a director who is not connected or does not have any other relationship. including gender. He/she is or has been the CEO of subsidiaries. Any person nominated as a director under Sections 182 and 183 of the Ordinance. and the policy with regard to selection of such person for election on the BOD of the investee company shall be annexed to the Directors' Report of the investor company. competence. or has had within the last three years. No director shall be considered independent if one or more of the following circumstances exist: He/she has been an employee of the company. with the Co. knowledge and experience so that the board as a group includes core competencies and diversity. a material business relationship with the company either directly. Composition of the Board The BOD is encouraged to have a balance of executive and non-executive directors. shall not be taken to be an "independent director" for the above-mentioned purposes.Corporate Laws Made Easy ~ 54 ~ Other Laws CODE OF CORPORATE GOVERNANCE The code is applicable to Listed companies only All companies shall ensure compliance with the following Code of Corporate Governance (CCG). individually or in concert with his family or as part of a group. The director representing an institutional investor shall be selected by such investor through a resolution of its BOD. He/she has served on the board for more than three consecutive terms from the date of his first appointment provided that such person shall be deemed “independent director” after a lapse of one term. directors or major shareholders: (Close relative means spouse(s). executive and independent director(s).

including the Chief Executive: Provided that nothing contained in this clause shall supersede any law for the time being in force or regulation made by any regulator regarding the composition of the board. contributions and other payments of a similar nature. Determination of terms of credit and discount to customers.e. planning and control. Borrowing of moneys. Responsibilities. Investors’ relations including but not limited to general investor awareness. d) A system of sound internal control is established. Investments and disinvestment of funds. senior management and other employees in the form of a Code of Conduct. Procurement of goods and services.. Human resource management including preparation of a succession plan. d) executive directors. Significant policies for this purpose may include: Governance. risk management and compliance issues. A complete record of particulars of the significant policies along with the dates on which they were approved or amended by the BOD shall be maintained.. which is effectively implemented and maintained at all levels within the company. The BOD of a Co shall ensure that: a) Professional standards and corporate values are put in place that promote integrity for the board. g) BOD shall define the level of materiality. c) A vision and/or mission statement and overall corporate strategy for the Co is prepared and adopted. f) The decisions on the following material transactions or significant matters are documented by a resolution passed at a meeting of the board: Investment and disinvestment of funds where the maturity period of such investments is six months or more. charities. a mechanism is put in place for an annual evaluation of the board’s own performance. non-banking finance companies and insurance companies. b) Adequate systems and controls are in place for identification and redress of grievances arising from unethical practices. Write-off of bad/doubtful debts. advances and receivables. Determination and delegation of financial powers.Corporate Laws Made Easy ~ 55 ~ Other Laws c) professional indemnity insurance cover in respect of independent directors shall be encouraged. Transactions or contracts with associated companies and related parties. The corporate social responsibility (CSR) initiatives and other philanthropic activities including donations. etc. powers and functions of BOD The BOD of a Co shall exercise its powers and carry out its fiduciary duties with a sense of objective judgment and independence in the best interests of the Co. Health. Capital expenditure. It shall further ensure that significant policies have been formulated. Board shall take appropriate steps to disseminate Code of Conduct throughout the company along with supporting policies and procedures and these shall be put on the company’s website. Determination of nature of loans and advances made by the Co and fixing a monetary limit thereof. keeping in view specific circumstances of the company and recommendations of any technical or executive subcommittee of board that may be set up for the purpose. Marketing. defining therein acceptable and unacceptable behaviors. e) Within two years of coming into force of this Code. paid executives of the company from among senior management. except in the case of banking companies. complaints & communication. and The whistleblower policy. safety and environment. i. shall not be more than one third of the elected directors. . Maximum number of directorships to be held by a director No person shall be elected or nominated as director of more than 7 companies simultaneously: Limit shall not include the directorships in the listed subsidiaries of a listed holding company Filling up a casual vacancy Any casual vacancy on the BOD of a Co shall be filled up by directors at earliest but not later than 90 days.

Significant public or product liability claims made or likely to be made against the Co. dangerous occurrences and instances of pollution and environmental problems involving the Co. forecasts and strategic plan. Where a director is of the view that his dissenting note has not been satisfactorily recorded in minutes of meeting. enforcement of an accounting standard and such other matters as may affect the Co. Meetings of the board All written notices. The director may require the note to be appended to the minutes. Whistleblower protection mechanism. including the agenda. along with variance analyses. and deposits made by the Co. Full details of the company’s failure to meet obligations shall be provided in the company’s quarterly and annual financial statements. Any show cause. and Terms and conditions of transaction. Nature of transaction. bribery. bank or financial institution or default in payment of public deposit). including any adverse judgment or order made on the conduct of the Co or of another company that may bear negatively on the Co. Report on governance. as soon as it is foreseen that the company will not be in a position of meeting its obligations on any loans (including penalties on late payments and other dues. Failure to recover material amounts of loans. Details of joint venture or collaboration agreements or agreements with distributors. including the amount of consideration received or given. . Promulgation or amendment to a law. including trade debts and inter-corporate finances. and Payment for goodwill. corruption. notice period may be reduced or waived) Chairman shall ensure that minutes of meetings are appropriately recorded. of meetings shall be circulated at least 7 days before meetings (except for emergency meetings. etc. Annual business plan. Every company shall maintain a party wise record of transactions. Chairman shall be elected from among the non-executive directors. The Chairman shall be responsible for leadership of the board and shall ensure that board plays an effective role in fulfilling all its responsibilities. brand equity or intellectual property. to a creditor. Significant issues to be placed for decision of BOD Significant issues for this purpose may include: The CEO shall immediately bring before the board. Report on CSR activities. filed by or against the Co.. The record of related party transactions shall include the following particulars in respect of each transaction: Name of related party. Status and implications of any law suit or proceedings of material nature. only if such terms can be substantiated. Internal audit reports. including cases of fraud. cash flow projections. Amount of transaction. rule or regulation. Risks considered shall include reputational risk and shall address risk analysis. tfcs. Disputes with labor and their proposed solutions. advances. Quarterly operating results of the Co as a whole and in terms of its operating divisions or business segments. in each financial year. BOD shall clearly define the respective roles and responsibilities of the Chairman and CEO. Nature of relationship with related party. agents. otherwise he may file an objection with SECP in the form of a statement (Objection may be filed with SECP within 30 days of date of confirmation of the minutes of meeting). Management letter issued by the external auditors. he may refer the matter to Company Secretary.Corporate Laws Made Easy ~ 56 ~ Other Laws Chairman and CEO (by whatever name called) shall not be the same person except where provided for under any other law. manpower and overhead budgets. Matters recommended and/or reported by the committees of the board. Related party transactions Details of all related party transactions shall be placed before Audit Committee of Co and upon recommendations of Audit Committee same shall be placed before BOD for review and approval. or irregularities of a material nature. Transactions not executed at arm's length price shall also be placed separately at board meeting along with necessary justification for consideration & approval of BOD on recommendation of Audit Committee BOD of company shall approve pricing methods for related party transactions that were made on the terms equivalent to those that prevail in arm’s length transaction. demand or prosecution notice received from revenue or regulatory authorities. risk management and risk communication. Any significant accidents. entered into with related parties in that year along with all relevant documents and explanations. any agreement with the labor union or collective bargaining agent and any charter of demands on the Co. Budgets including capital. risk management and compliance issues. Sukuks or any other debt instrument.

or b) a Certified Internal Auditor (CIA). 2) Proper books of account of the Co have been maintained. Qualification of Head of Internal Audit Should have 5 years of relevant audit experience and is: a) a member of a recognized body of professional accountants. applicable laws. Individuals serving as CFO of a Co for the last five years at the time of coming into effect of this Code shall be exempted from the above qualification requirement. Requirement to attend board meetings CFO and Company Secretary Co (or in their absence. nominee appointed by board). have been followed in preparation of financial statements and any departures therefrom has been adequately disclosed and explained. cash flows and changes in equity. or d) a Certified Internal Control Auditor Individuals serving as Head of Internal Audit of a Co for last 5 years at the time of coming into effect of this Code shall be exempted from the above qualification requirement. Company Secretary and Head of Internal Audit Appointment and removal Appointment. 2016 every year. as applicable in Pakistan. It shall be mandatory for all the directors of the companies to have certification under any directors’ training program offered by institutions—local or foreign—that meet the criteria specified by the SECP: Provided that from June 30.Corporate Laws Made Easy ~ 57 ~ Other Laws Directors’ Training Program All companies shall make appropriate arrangements to carry out orientation courses for their directors to acquaint them with this code. Provided that CFO and Company Secretary shall not attend such part of a meeting of BOD. 2012 to June 30. prepared by the management of the Co. Qualifications of CFO No person shall be appointed as the CFO of a Co unless he/she has at least five years of experience of handling financial or corporate affairs of a Co or a bank or a financial institution and is: a) a member of a recognized body of professional accountants. remuneration and terms and conditions of employment of CFO. the Company Secretary and the Head of Internal Audit of companies shall be determined by BOD. Corporate and financial reporting framework Directors shall annex statements to the following effect with Directors’ Report u/s 236 of Ordinance 1) Financial statements. which involves consideration of an agenda item relating to CFO and Company Secretary respectively. present its state of affairs fairly. or c) a Certified Fraud Examiner. 5) System of internal control is sound in design and has been effectively implemented & monitored. 3) Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment. 4) IFRS. Company Secretary and Head of Internal Audit. a minimum of one director on the board shall acquire the said certification under this program each year and thereafter all directors shall obtain it: Provided further that individuals with a minimum of 14 years of education and 15 years of experience on the board of a Co—local and/or foreign—shall be exempted from the directors’ training program. or b) has a postgraduate degree in finance from a recognized university or equivalent. their duties and responsibilities to enable them to effectively manage the affairs of the companies for and on behalf of shareholders. Removal of CFO and Company Secretary shall be made with the approval of the BOD. the result of its operations. Chief Financial Officer (CFO). shall attend all meetings of BOD. and 6) There are no significant doubts upon the Co’s ability to continue as a going concern: . The removal of Head of Internal Audit shall be made with the approval of the board only upon recommendation of the Chairman of the Audit Committee: Removal shall include non renewal of contracts of the CFO.

public sector companies and corporations. Executive here means the CEO. the fact along with the reasons shall be disclosed. the amount together with a brief description and reasons for the same shall be disclosed. shareholders/board shall determine the remuneration for nonexecutive directors. 9) The details of training programs attended by directors. banks. Directors’ remuneration There shall be a formal and transparent procedure for fixing remuneration packages of individual directors. TFCs. No director shall be involved in deciding his/her own remuneration.Corporate Laws Made Easy ~ 58 ~ Other Laws Where necessary the following information shall also be annexed to the Directors’ Reports: 1) 2) If the Co is not considered to be a going concern. II. such as corporate restructuring. There shall be a clear presentation with details as to the aggregate amount of the debt overdue or likely to become overdue and the reasons for the default/emerging default situation and the measures taken by the company to address and settle such default situation. Companies shall ensure that second quarterly financial statements are subjected to a limited scope review by statutory auditors in manner and terms & conditions as may be determined by ICAP and approved by SECP. 7) A statement as to the value of investments of provident. Significant deviations from last year in operating results of the Co shall be highlighted and reasons thereof shall be explained. takaful. business expansion and discontinuance of operations. V. These shall be subject to prior approval of shareholders/board as required by company’s AOA. associated companies. and VII. sukuks or any other debt instruments in which the company is in default or likely to default. CFO. . modarabas and pension funds. Company's Annual Report shall contain details of the aggregate remuneration separately of executive and non-executive directors. 4) If Co has neither declared dividend nor issued bonus shares for any year. and other employees of the company for whom the BOD will set the threshold to be reviewed on an annual basis and disclosed in the annual report. III. Subject to provisions of Ordinance and AOA. 11) The directors’ report shall cover. 12) All trades in the shares of the Co. 8) Number of board and committees’ meetings held during year and attendance by each director shall be disclosed. executives and their spouses and minor children shall also be disclosed. shall not be at a level that perceived to compromise their independence. including salary/fee. shall be included. gratuity and pension funds. reasons thereof shall be given. shareholders holding five percent or more voting rights in the Co (name wise details). loans. duties. levies and charges is outstanding. However. executives. COO. 3) Key operating and financial data of last six years shall be summarized. Executive here means an employee of a Co other than the CEO and directors. based on their respective audited accounts. carried out by its directors. The mode of dissemination of information shall be prescribed by the stock exchange on which shares of the company are listed. Head of Internal Audit and Company Secretary by whatever name called. risks and uncertainties surrounding the Co. Every Co shall immediately disseminate to the SECP and the stock exchange on which its shares are listed all material information relating to the business and other affairs of the Co that will affect the market price of its shares. development finance institutions. 6) Significant plans and decisions. non-banking finance companies. VI. directors and their spouse(s) and minor children (name wise details). 5) Where any statutory payment on account of taxes. IV. shall be outlined along with future prospects. Levels of remuneration shall be appropriate to attract and retain the directors needed to govern the company successfully. benefits and performance-linked incentives etc. 10) The pattern of shareholding shall be reported to disclose the aggregate number of shares (along with name wise details where stated below) held by: I. Frequency of financial reporting Quarterly unaudited financial statements of companies shall be published and circulated along with directors’ review on the affairs of the Co. undertakings and related parties (name wise details). mutual funds (name wise details). Directors’ remuneration packages shall encourage value creation within company. insurance companies.

brand name. CEO or executive shall. natural calamities. Every Co shall advise its directors about the closed period at the time of circulating agenda and working papers for the board meetings. goodwill. evaluation. compensation (including retirement benefits) of COO. on the prescribed form (Appendix A). directly or indirectly. purchase or sale of significant assets. number of shares. Disclosure of interest by a director holding company’s shares Where any director/CEO/executive/their spouses sell. . Recommending to the board the selection. etc. fire. etc. The Company Secretary of a Co shall furnish a Secretarial Compliance Certificate. financial plan. major breakdown. a major change in borrowings including projected gains to accrue to the company. along with sending intimation of the same to the stock exchanges. for consideration and approval of the BOD. is sent to BOD and terminate after the information is made public. o In the event of default by such person to give a written notice or deliver a written record. o Closed period shall start from day when any document/statement forming the basis of price sensitive information. along with annual return filed with the registrar concerned certifying that the secretarial and corporate requirements of the Ordinance have been complied with. o Such notice shall be presented by the Company Secretary at meeting of BOD immediately subsequent to such transaction. form of share certificates. franchise. any default in repayment or rescheduling of loans. buy or transact (directly or indirectly) in Co’s shares.Corporate Laws Made Easy ~ 59 ~ Other Laws This information may include but shall not be restricted to any material change in the nature of business of the company. issue or redemption of any securities. royalty. It shall be mandatory for the CEO and CFO to have the second quarterly and annual accounts (both separate and consolidated where applicable) initialed by the external auditors before presenting it to the audit committee and the BOD for approval. and Consideration and approval on recommendations of CEO on such matters for key management positions who report directly to CEO or COO. CEO if member of HR&R Committee shall not participate in the proceedings of committee on matters that directly relate to his performance and compensation. delay or loss of production due to strike. Recommending to the board the selection.. compensation (including retirement benefits) and succession planning of the CEO. Such person shall also deliver a written record of the price. which may materially affect the market price of its shares. merger or acquisition or any material contract entered into or lost. any unforeseen or undisclosed impairment of assets due to technological obsolescence. duly endorsed under their respective signatures. evaluation. Chairman or CEO of the Co: Such information shall be disseminated to the above-mentioned entities as soon as any decision about above referred matters or any other significant issue is taken by the board or a significant matter requiring disclosure has come into the knowledge of company’s management. Responsibility for financial reporting and corporate compliance No Co shall circulate its financial statements unless the CEO and the CFO present the financial statements. deal in the shares of the Co in any manner during the closed period. CFO. he shall immediately notify in writing to Company Secretary of such transaction. Committee shall be responsible for: Recommending human resource management policies to the board. and nature of transaction to the Company Secretary within four days of effecting the transaction. information regarding any joint ventures. No director. Committees of the board Human Resource and Remuneration (HR&R) Committee At least 3 members comprising majority of non-executive directors. including preferably an independent director. and change in directors. Company Secretary and Head of Internal Audit. etc. CEO may be included as a member of committee but not as chairman of committee. (physical or electronic under CDS). the Company Secretary shall place the matter before the BOD in its immediate next meeting: Each Co shall determine a closed period prior to announcement of interim/ final results and any business decision.

c) Review of preliminary announcements of results prior to publication. assets and liabilities and the reporting structure are adequate and effective. Frequency of meetings. The going concern assumption. it shall record the reasons thereof. receipts and payments. Terms of reference BOD shall determine terms of reference of Audit Committee. prior to their approval by the BOD. recommend BOD the appointment of external auditors. These meetings shall be held prior to the approval of interim results of the Co by its BOD and before and after completion of external audit. d) Facilitating the external audit and discussion with external auditors of major observations arising from interim and final audits and any matter that the auditors may wish to highlight (in the absence of management. where necessary). focusing on: Major judgmental areas. their removal. half-yearly and annual financial statements of the listed company. Compliance with applicable accounting standards. Review of quarterly. in consultation with CEO and to consider remittance of any matter to external auditors or to any other external body. and n) Consideration of any other issue or matter as may be assigned by the BOD. attendance. not being the chairman of the board. Significant adjustments resulting from the audit. value for money studies or other investigations on any matter specified by BOD. Audit Committee shall meet alone with External auditors (without CFO and Head of Internal Audit being present) Head of internal audit (without CFO and the external auditors being present) Provided further that the chairman of Audit Committee and representative of external auditor shall be present at the AGM for necessary feedback to the shareholders. g) Review of the scope and extent of internal audit and ensuring that the internal audit function has adequate resources and is appropriately placed within the Co. e) Review of management letter issued by external auditors and management’s response thereto. terms of reference and reporting procedures Audit Committee of a Co shall meet at least once every quarter of the financial year. Attendance at meetings CFO. Board shall satisfy itself that at least 1 member has relevant financial skills/expertise and experience. j) Review of Co’s statement on internal control systems prior to endorsement by the BOD and internal audit reports. Head of Internal Audit and external auditors (represented by engagement partner or any other partner designated by audit firm) shall attend meetings of Audit Committee at which issues relating to accounts and audit are discussed: At least once a year. i) Ascertaining that the internal control systems including financial and operational controls. at least of 3 members comprising of non-executive directors.Corporate Laws Made Easy ~ 60 ~ Other Laws AUDIT COMMITTEE BOD shall establish an Audit Committee. l) Determination of compliance with relevant statutory requirements. provision by external auditors of any service to Co in addition to audit BOD shall give due consideration to the recommendations of the Audit Committee in all these matters and where it acts otherwise. corruption and abuse of power and management's response thereto. inter alia. f) Ensuring coordination between the internal and external auditors of the Co. m) Monitoring compliance with best practices of corporate governance and identification of significant violations thereof. audit fees. and Significant related party transactions. . The terms of reference of the Audit Committee shall also include the following: a) b) Determination of appropriate measures to safeguard the Co’s assets. Meeting shall also be held. Compliance with listing regulations and other statutory and regulatory requirements. k) Instituting special projects. Chairman of committee shall be independent director. if requested by external auditors or Head of Internal Audit. h) Consideration of major findings of internal investigations of activities characterized by fraud. Board shall provide adequate resources & authority to Audit Committee Audit Committee shall. accounting systems for timely and appropriate recording of purchases and sales. Any changes in accounting policies and practices.

to act as coordinator between firm providing internal audit services and the board: Provided that while outsourcing the function. BOD of a Co shall recommend appointment of external auditors for a year. company shall appoint or designate a fulltime employee other than CFO. Every Co shall require external auditors to furnish a Management Letter to its BOD within 45 days of the date of audit report: Provided that any matter deemed significant by the external auditor shall be communicated in writing to the board prior to the approval of the audited accounts by the board. an internal auditor or a director of the Co. rotate engagement partner after every 5 years. engaged in business of providing financial services shall appoint the same firm of auditors to conduct the audit of their accounts and b) All companies other than financial sector shall. to ensure independence of the internal audit function. the Chairman of the Audit Committee shall communicate a synopsis of the proceedings to the board and the minutes shall be circulated immediately after the meeting of the board. i. In case of a recommendation for appointment of an auditor other than the retiring auditor the reasons for the same shall be included in the Directors’ Report. as adopted by the ICAP. <<<Names of members of the committees of the board shall be disclosed in each Annual Report of Co>>> Internal audit There shall be an internal audit function in every Co. The recommendations of the Audit Committee for appointment of an auditor or otherwise shall be included in the Directors’ Report. Head of internal Audit and CFO prior to next meeting of board and where this is not practicable. parents. However. External auditors An audit firm having satisfactory rating under Quality Control Review program of the ICAP. who are conversant with the company's policies and procedures. modarabas and insurance/takaful companies. All companies shall ensure that internal audit reports are provided for the review of external auditors. spouse.e. The internal audit function may be outsourced by a Co to a professional services firm or be performed by the internal audit staff of holding company. of the CEO. as suggested by the Audit Committee.. In the event of outsourcing the internal audit function. No Co shall appoint its auditors to provide services in addition to audit except in accordance with the regulations and shall require the auditors to observe applicable IFAC guidelines in this regard and shall ensure that the auditors do not perform management functions or make management decisions. in any capacity. as Head of Internal Audit. responsibility for which remains with the BOD and management of the Co. the company must not appoint its existing external auditors as internal auditors. No Co shall appoint a person as an external auditor or a person involved in the audit of a Co who is a close relative. provided that all inter related companies/ institutions. No Co shall appoint a firm of auditors which or a partner of which is non-compliant with IFAC Guidelines on Code of Ethics. in the internal audit function. are engaged in the internal audit. (CFO shall not be appointed as the secretary to the Audit Committee) Secretary shall circulate minutes of meetings of Audit Committee to all members. means banks. the CFO. dependents and non-dependent children. A director cannot be appointed. NBFC’s. which shall report matters of significance to the BOD.Corporate Laws Made Easy ~ 61 ~ Other Laws Reporting procedure Audit Committee shall appoint a secretary of committee who shall either be Company Secretary or Head of Internal Audit. due care shall be exercised to ensure that suitably qualified and experienced persons. at a minimum. The auditors shall discuss any major findings in relation to the reports with the Audit Committee. Financial sector. The Head of internal Audit shall functionally report to the Audit Committee and administratively to the CEO. directors. . a) All companies in the financial sector shall change their external auditors every 5 years.

Within two years of the implementation of the Code 2012. The Chairman and CEO shall not be the same person. Appointment. It will be mandatory for directors of companies to attain certification under any director training program (DTP) offered by any institution (local or foreign). Maximum number of Executive Directors cannot be more than 1/3rd of elected directors including CEO. Training of the BOD 7. The removal of Head of IA is with the approval of the Board only upon 9. for reasons to be recorded. it may. - The appointment. The criteria are available at the websites of the stock exchanges and the SECP. the PICG was to provide the training but later it was opened to other institutions. A director can be on the board of 7 companies at the most at any one time. - 6. remuneration and terms and conditions of employment of the CFO. Office of Chairman and CEO The Chairman of a Co shall preferably be elected form among the non-executive directors of the Co. Number of Executive Directors not to be more than 75% of elected directors including CEO A director can be on the board of no more than 10 companies at any one time. Issue Independent Director 1. The removal will also be by the Board for CS and CFO. Number of directorships 4. Initially. The Chairman shall be elected from amongst the non-executive directors of the Co.Corporate Laws Made Easy ~ 62 ~ Other Laws COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE All companies shall publish and circulate a statement along with their annual reports to set out the status of their compliance with requirements set out above. 8. provided they met the criteria specified by the SECP. Criteria has been substantially expanded 2. The statement shall be specific and deemed to be supported by necessary evidence held by Co All companies shall ensure that statement of compliance with the best practices of corporate governance is reviewed and certified by statutory auditors before its publication. the Board has to put in place a mechanism for undertaking annual evaluation of the performance of the Board. Appointment and removal and qualification criteria for Chief Financial Officer (CFO) and Company Secretary (CS) The Head of Internal Audit (IA) It is mandatory for directors of companies to attain certification. . the limit does not include directorship in listed subsidiaries of a listed holding company. relax the same subject to such conditions as it may deem fit. Qualification introduced for Head of IA. Code 2002 Encouraged a minimum of one independent director on the board of a Co. Statutory auditors of Co shall ensure that any non-compliance with the CCG requirements is highlighted in their review report. which meets the criteria specified by the SECP. Where the SECP is satisfied that it is not practicable to comply with any of the best practices of corporate governance in a particular case. However. unless specifically provided in any other law. Very scanty criteria provided Code 2012 1 independent director is mandatory while preference is for 1/3rd of the total members of board to be independent directors. remuneration and terms and conditions of employment of CFO and CS determined by CEO and approved by Board. CS and the Head of Internal Audit (IA) of companies shall be determined by the Board. The same mechanism followed for removal. Criteria for assessment of independence Executive Directors 3. Board evaluation 5.

Audit is conducted as per direction of SBP 3 copies of accounts shall be sent to Registrar .Corporate Laws Made Easy ~ 63 ~ Other Laws BANKING COMPANIES ORDINANCE. copy of latest accounts not later than 1st Monday of August. 1962 (BCO) Accounts The provisions of BCO relating to preparation of accounts are applicable to: Every banking company incorporated in Pakistan Every banking company incorporated outside Pakistan in respect of business transacted through branches in Pakistan The accounts are prepared on the expiry of every calendar year The accounts are also published in the prescribed manner in newspaper The accounts shall be signed by In case of banking company incorporated in Pakistan Manager or principal officer and atleast 3 directors (if directors < 3. [ further extension of 3 months in special circumstances ] Every banking company incorporated outside Pakistan is required to display at a prominent place in the principal office and in every branch in Pakistan. Auditors shall hold office for 3 years [cannot be removed before expiry of term except approval by SECP] Accounts & Audit report shall be furnished as returns to SBP within 3 months of close of period to which they relate. then all) In case of banking company incorporated outside Pakistan Manager or principal officer in Pakistan and by another officer next in seniority The requirement of Companies Ordinance. These accounts shall remain displayed until replaced by subsequent accounts. transmission and filling of accounts etc shall be applicable Audit B/S and P & L prepared in accordance with provisions of BCO shall be audited by a CA who is borne on penal of auditors maintained by SBP. 1984 in respect of preparation.

House Account It is used for securities beneficiary owned by the participant 3. Group Client Account Used by clients who do not want to utilize the facility of sub-accounts. verification. The company and the issuer or its appointed Registrar will prepare dividend warrant on the basis of above information and dispatch to beneficial owners. This list shall contain necessary information like particulars. Sub Account (Client Account) It is used for keeping the securities belonging to the client of the participant. Dividend The CDC will prepare a list of beneficial owners who are entitled to receive the dividend on the date of book closure. Central Depository Company (CDC) has implemented it that works similar to a Bank.Form of proxy shall contain CDS A/C # of appointer. no. storage & transportation of certificates including settlement on stock exchange Basic Operations of CDS Deposit of existing securities into CDS Withdrawal of security from system Free transfer or book entry transfer without physical movement Pledge and de-pledge of securities DVP delivery vs. Main Account Each participant in the CDS is allocated a main Account by virtue of being participant in system.Corporate Laws Made Easy ~ 64 ~ Other Laws CENTRAL DEPOSITORY ACT. Zakat and net dividend etc. removing difficulties of counting. . Cash Accounts / DVP Account The participants who opts DVP facility are required to deposit a rolling settlement fund to be used for settlement of DVP obligations. Each group account contains securities owned by the group of clients. Balance of that fund would be stored in that account CO R PO R A TE A CTIO N S Meetings CDS will provide a list of beneficial owners to enable the issuer to issue notices of general meetings under the Companies Ordinance. income tax. the form of proxy shall be witnessed and enclosed by attested copies NIC or passport of the both appointer and the proxy. 2. When proxies are appointed. thereby. A participant is allowed to open any number of sub-accounts 4. Detailed break up of securities held by each member is maintained outside CDS 5. payment facility Various corporate actions under Companies Ordinance. face value of shares. 1997 and Relevant Rules The CDS is an electronic book entry system to record the transfer of securities. When shares are in CDS the beneficial owner has to produce original NIC or passport while attending the meeting. of shares. This account is mainly used as transit account for movement of securities and settlement of deliveries by the participant. 1984 Elements of CDC Account Holder Participant (Just like members of Stock Exchange) Issuer Eligible pledge DVP (Delivery Verses Payment) A/c Holder Account Structure 1. Securities be deposited in CDS & transaction be completed electronically. 1984. gross dividend.

A sponsor. deposit taking or financial dealings. Promoters of such company are persons of means and integrity and have special knowledge of matters which the company may have to deal with as a central depository company. 1984 It has entered into equity participation or technical collaboration arrangement with an internationally recognized institution or agency. from time to time. on receipt of intimation from the company shall increase the holding of each beneficial owner with the bonus shares. SECP shall.Corporate Laws Made Easy ~ 65 ~ Other Laws Bonus shares In case of bonus shares the CDC. Consolidation and sub division of capital CDC will calculate new share balance on the basis of existing share holding.CDC shall file its annual report and account within 6 months of close of accounting period alongwith following:Names of the issuers who are members of the company. SECP may establish an Advisory Committee in respect of a CDC whose functions shall be advising CDC on matters relating to services provided by such depository company. Renewal of registration. director . Submission of annual report. breach of trust or an offence involving moral turpitude or removed from service for misconduct or has been adjudicated as insolvent. No promoter. Number of account holders as well as sub-account holders. and to make recommendations for improving the efficiency of the CDC. and it would be in interest of the capital market so to do.000 (application in form III). may grant a certificate of registration in form II on such conditions as it may deem appropriate.The certificate of registration shall be renewable on payment of 100.000 SECP. Central D epository Companies (E stablishm ent and Regulation) Rules 1996 Eligibility for registration. and A defaulter of any commercial bank or financial institution including non-banking financial institution or has suspended payment or has compounded with his creditors. Application to the SECP in form I + Rs 500. require . renew the registration of such company for 1 year in form IV. A program will run which will replace the old balances with the new balances. Right shares The CDC shall provide list of beneficial owners to the company together with right entitlement. The company shall prepare letter of right and dispatch to the beneficial owner. within 30 days of receipt of application. List of shareholders of company indicating change in shareholdings. At least one stock exchange in Pakistan is a shareholder of such a company. officer or employee of such a company has beenConvicted of fraud. by order in writing. if satisfied. Associated with any illegal banking business. that applicant is eligible for registration. The CDC accounts of beneficial owners shall be credited after subscription of right money. A company desirous of commencing business as a central depository company shall be eligible for registration under these rules if it fulfils the following conditions Such company is incorporated as a public limited company under Companies Ordinance. etc. after such inquiry obtaining such further information as consider necessary. Such other documents. information or explanation relating to its affairs as the SECP may. director. after making such inquiries and obtaining such further information as consider necessary. if any Names of senior management staff of company with qualifications & experience. chief executive or a senior management officer of a defaulting co-operative finance society or finance company. Names of the participants who are members of the company.

for the purpose of this Ordinance.5 million of which Rs. atleast Rs. Particulars of Directors and Officers • General particulars • Names of associated company and the company where they have directors in the past • Financial standing • Professional qualification • Experience along with supported documents • Affidavit of each person .5 million • If the company is engaged in other business.Corporate Laws Made Easy ~ 66 ~ Other Laws MODARABAS COMPANIES AND MODARABA (Floatation & Control) ORDINANCE. The directors and officers must fulfill the following conditions: • Normal criteria (as mentioned in Companies Ordinance. Means a fund raised through floatation of Modaraba. 1980 Modaraba Means a business in which a person participates with his money and another with his efforts or skills or both his efforts and skills and includes unit trusts and mutual funds by whatever name called.5 million must be set aside for modaraba management. (Form IX) Contents of Application (Form IX) 1. 2. not less than 2. Means a certificate of definite denomination issued to the subscriber of the modaraba acknowledging receipt of money subscribe by him. holding and associated companies • Description and place of business 2. Minimum capital requirement: • If the company is only engaged in floatation and management of Modaraba. The Federal Govt. Means a company engaged in the business of floating and managing modaraba. 1984) • The promoters and directors should be in the opinion of Registrar persons of means and integrity and have special knowledge of the matters which the modaraba company has to deal. Modaraba Fund Modaraba Certificate Modaraba Company Registrar Religious Board Registration No company shall operate as Modaraba Company with out registration to Registrar (Modaraba) Eligibility for Registration 1. Means the Registrar of modaraba and Modaraba Company appointed by the Federal Govt. Particulars of the company: • Name • Status • Date & placement of registration • Address • Authorized and Paid up Capital • Details of persons or group controlling the company • Names of subsidiary. has constituted a religious board which consists of three members one of whom is chairman and two members are religious scholars and chairman shall be a person who is to be qualified for a Judge of High Court. 3. Registration A company which is eligible for registration as Modaraba Company may make an application on prescribed form to registrar. 7. Company must be incorporated 2.

The Registrar shall not permit the floatation of modaraba unless the Religious Board has certified in writing that the modaraba is not a business opposed to the injunction of Islam. Further more listing requirement has provided that 30% of the modaraba fund shall subscribe by Modaraba Company. The modaraba certificates do not carrying any voting rights and these are transferable like share through transfer deed. Contents of Form-I • Name and address of Modaraba Company and its registration number • Name and type of modaraba indicating exact purpose objectives and duration of modaraba • Description of business operations. Floatation and Authorization of Modaraba A modaraba company registered under the Modaraba Ordinance can apply to the Registrar for obtaining permission to floating modaraba. modaraba is to be listed on SE it has to follow the Listing Regulations in this regard. Documents to be attached The application shall be accompanied by following documents: • • • • • Five copies of MOA & AOA Five copies of certificate of incorporation Five copies of latest audited accounts Precise description of business being done The undertaking that any change made by the company in the MOA & AOA and the BOD as may be required by the Registrar If the Registrar is satisfied that the applicant shall be eligible for registration and it is in the public interest to do so. There is no provision in the Modaraba Ordinance for the minimum capital required. however. Modaraba to be Legal Person Modaraba shall sue and to be sued in its own name but through the modaraba company. through subsequent guideline the Registrar of modaraba has increase this requirement to 20%. The business objects of modaraba are contained in prospectus and being not a company it has not any MOA & AOA. plans and prospects along with feasibility report • Details showing how the business and operation shall be conducted and how the operation will no be . Types of M odaraba Specific Purpose Modaraba Multi Purpose Modaraba A modaraba having one specific purpose or objective A modaraba having more than one specific purpose or objectives A modaraba may be either for a fixed period or for an indefinite period. Business Objects of Modaraba The business objects of modaraba must not be opposed to the injunction of Islam. however. it may grant registration. Capital of Modaraba The capital of modaraba shall be called certificate capital. directors.Corporate Laws Made Easy ~ 67 ~ Other Laws 3. It shall submit an application on prescribe form-I. sponsors. friends and relatives etc. organizational set up. The assets and liabilities of each modaraba shall be separate and distinct from another modaraba and also from the modaraba company. (200 million) As per Modaraba Rules the modaraba company must subscribe 10% of the modaraba fund.

(Accounts are maintained like listed companies. The Modaraba must be floated within 12 months of the date of authorization. its division and conditions Amount to be subscribe by Modaraba Company and amount to be set aside for modaraba management Form of modaraba certificate [Same as Share Certificate] The following documents shall be annexed with the application: • Certified copy of the registration certificate of the modaraba company • Five copies of prospectus signed by all directors of Modarba Company. The copy of the prospectus is filed with registrar of Modaraba for registration. No allotment of modaraba certificate is made unless a prospectus approved by Registrar has been issued and the minimum subscription has been received. The prospectus is signed by all the directors of Modaraba Company. Modaraba Company shall maintain separate bank account. Modaraba Company shall maintain register of certificate holders. circulate and file accounts of Modaraba in a prescribe manner. however. • Five copies of the latest audited accounts of the company The registrar after obtaining a certificate from the Religious Board and after being satisfied that it is in the public interest shall grant a certificate to the modaraba company authorizing it to float a modaraba.Corporate Laws Made Easy ~ 68 ~ Other Laws • • • opposed to the Principals of Islam Amount of modaraba fund to be floated.assets and liabilities of each Modaraba. Modaraba Company shall be responsible to prepare. Neither the Modaraba Company nor any of its director/officer shall obtain any loan or advance from modaraba fund. Listing on the Stock Exchange After getting authorization from Registrar Modaraba the Modaraba Company shall take necessary steps for listing of Modaraba on SE inviting general public to subscribe to the modaraba certificate. Remuneration of Modaraba Company The remuneration of Modaraba Company shall be not more than 10% of the annual net profit of the modaraba on the basis of audited accounts Accounts and Audit Accounts A Modaraba Company is responsible to ensure that proper books of accounts are kept for each Modaraba at the registered office of the Company. IAS are applicable. The business operation of Modaraba are provided in the prospectus which are vetted by the religious board. the Modaraba Ordinance and Rules prescribe independent disclosure of the prospectus of Modaraba which are given in the forth schedule to the Modaraba Rules. Conditions Applicable to Modaraba Company and Modaraba • • • • • • • A Modaraba Company shall not carry on any business which is carried on by Modaraba floated by it. 1984. All money received from the applicants of modaraba fund shall be deposited in a separate bank account. Disclosures are prepared rd according to 3 schedule to the Modaraba Rules) . fund . Modaraba Company shall issue modaraba certificate within 30 days of allotment. (Listing procedure is same) Prospectus of Modaraba • • • • • The disclosure requirement of the prospectus of modaraba are more or less the same as provided in the Companies Ordinance.

Annual List of Certificate Holders Every Modaraba Company shall in respect of Modaraba prepares and file with the Registrar a list of certificate holders & summary in the following manner: • • Within 18 months from modaraba floatation and Thereafter. The list is filed with the Registrar within 30 days of the respective date. The Registrar. (Same in case of Companies Ordinance. the income of the modaraba shall be exempt from tax. 1984. The terms of appointment of the auditor of Modaraba and including fee etc. Dividend may be interim or final. An auditor may resign from his appointment with the approval of Registrar. 31 December of the year. Appointment of Auditor The appointment of auditor of Modaraba is made by a Modaraba Company with the approval of Registrar. (procedure is same as in Companies Ordinance. Profit Distribution of Modaraba A Modaraba may distribute profit in cash or issue of bonus certificates out of capitalize reserves or profit. must inform the existing auditor in writing given reasons of change and copy to Registrar. which shall be final. Removal of Auditor A Modaraba Company seeking to appoint auditor other than the existing auditor. Mortgage & Charges All the charges created on the assets of Modaraba are to be registered with the registrar within 21 days of the creation of the charge. The Modaraba Company before declaring the dividend may set aside necessary reserves to comply with Prudential Regulation for Modaraba.Corporate Laws Made Easy ~ 69 ~ Other Laws Authentication of Accounts The accounts of Modaraba are authenticated by the chief executive and two directors of the Modaraba Company. once atleast in every year The above list is prepared on the date of reopening of the register of the certificate holders relating to final st dividend and if there is no such date. 1984) Increasing the Modaraba Fund (Nominal Fund) . 1984) If 90% of profit is distributed to the modaraba certificate holders. if he desires and after obtaining necessary clarifications and explanations from the existing auditor shall take the decision. The auditor of Modaraba shall be independent of the auditor of the Modaraba Company. A udit Qualification of Auditor Same as provided in Companies Ordinance. Return of Allotment Whenever the company makes any allotment of modaraba certificates it must file with the Registrar a return of allotment within one month of allotment. shall be approved by the Registrar annually.

It is held within the 4 months of the close of financial year of Modaraba. In case of voluntary winding up the required declaration has not been filed ii. ii. Before giving approval the registrar at the expense of Modaraba shall issue a notice in news paper for the proposed increase for knowing the opinion of modaraba certificate holders and others within the period not less than 14 days. 1984 is applicable mutatis mutandis. there can be an inspection of modarba or a particular transaction.Corporate Laws Made Easy ~ 70 ~ Other Laws A Modaraba Company may under the authority of a board resolution decide to increase the modaraba fund. iii. Further Issue of Modaraba Certificates in the Form of Right Same as in case of Companies Ordinance. The above declaration shall be supported by auditor certificate and it shall have no effect unless it is filed with the Registrar within 90 days expiry of period for which Modaraba has formed or accomplishing the purpose of Modaraba. A Modarba Company can also be replaced by a new modarba company or by an administrator by Registrar. There is no voting right of certificate holders in the meeting. For the purpose of notice of the meeting the provision of Companies Ordinance. The fund shall be increased after alteration of prospectus with the approval of Registrar. Misc On application to Registrar of 10% or more certificate holders of Modarba. . Modaraba has unable to pay its liabilities Accumulated losses of the Modaraba exceeds 50% of the paid up fund Business of the Modaraba has been conducted for a fraudulent purpose The Tribunal of the opinion that it is just and equitable that Modaraba should be wound up. After getting permission from Registrar Modaraba company shall be authorize to increase the authorize fund/nominal fund. W inding up of o f M odaraba Circumstances in which Modaraba may be wound up Voluntarily i. In case the registrar has declared that: • • • iii. Circumstances in which Modaraba may be wound up by Modaraba Tribunal A Modaraba shall be wound up by the Tribunal on an application made by the Registrar if: i. A Modaraba may be wound up voluntarily under the following conditions: • Time period for which the Modaraba was formed has been expired • The specific purpose for which the Modaraba was formed has been achieved All the directors of Modaraba Company shall make a declaration (Declaration of Solvency) that they have made full inquiry about the affairs of Modaraba and they have formed an opinion that Modaraba shall be able to discharge its liabilities and pay the amount of modaraba fund in full within the period of 12 months. The purpose of meeting is to review the performance of Modaraba during the year. 1984 Annual Review Meeting of Modaraba (ARM) • • • • Each Modaraba shall hold an ARM of its certificate holders in the town in which the registered office of the Modaraba Company is situated.

Corporate Laws Made Easy ~ 71 ~ Other Laws INSURANCE ORDINANCE.canotes. [Special Audit] Audited accounts shall be submitted to SECP within 4 months from end of period. [Further extension 15 days] Following course grid is not covered in this portion…. Every Insurer shall furnish a statement of Assets & Liabilities. 2000 Every insurer in respect of all insurance business and in case of insurer incorporated outside Pakistan in respect of insurance business transacted in Pakistan. statements and books as SECP may direct. Broad understanding of the Code of Corporate Governance for listed and unlisted insurance companies” Please refer to original sources for these regulations and code These are available at SECP’s site or also can be downloaded from www. Chairman plus 2 directors plus Principal Officers with names Insurer incorporated outside Pakistan. Principal Officer in Pakistan plus two directors or closest comparable officer equivalent .canotes. “Securities and Exchange Commission (Insurance) Rules 2002 including regulations and Format accounts. • • SECP may appoint an auditor (other than company’s) to investigate such accounts. The accounts shall be signed in the following manner: Insurer incorporated in Pakistan. (Link also available on under the notes “Corporate Laws complete course 1 / 2”. Audit Every Insurance Compnay shall appoint an auditor who shall be Approved by SECP to perform audit of Insurance Companies Authorised by Companies Ordinance 1984 to perform audit of public companies. shall maintain proper books of accounts A Register of records of policies( with particulars) A Register of records of claims( with particulars) Other books & Records as may be prescribed..multiply.

No contract shall be void or unenforceable by reason only of an offence under this section. – An insider person transacting any deal. • Stock Exchange if satisfied may list the securities for dealing on the Stock Exchange. without the inside information being disclosed to the person who has dealt in such securities: Nothing in this section shall apply to Any transaction performed under an agreement that was concluded before the time of gaining access to inside information. would be likely to have an effect on the prices of those listed securities or on the price of related securities. In relation to derivatives on commodities or information which has not been made public. directly or indirectly. directly or indirectly. of 20% or more. SECP through an Order may direct the Stock Exchange to list the securities. or The disclosure of inside information by an insider person as required under law. or ought to have known under normal and reasonable circumstances. or any other person who knows. if it were made public. information which is conveyed by a client to such person and related to the client’s pending orders. or using others to transact such deals. INSIDERS(15C) a) Sponsors. A listed security may de-listed on the application of issuer. The SECP or the SE. relating. or The issuer (Co. to listed securities or one or more issuers and which. directly or indirectly. b) Sponsors. 1969 LISTING OF SECURITIES (Section 9) • Any Issuer (Company) who intends to get its securities listed on the Stock Exchange shall submit an application in a prescribed form to the Stock Exchange and a copy to SECP. o The SE may deny or grant the de-listing for the protection of investor. directly or indirectly. directly or indirectly. Insider trading shall include. directors and partners of a legal person or unincorporated business association who holds. using inside information involving listed securities to which the inside information pertains. 2. if thinks appropriate may suspend the trading of any listed security for a period of 60 days and the suspension period and the suspension period may be extended for another 60 days. directly or indirectly. executive officers. or 3. Transaction by any person mentioned in above cases. . Information which has not been made public relating. using inside information involving listed securities to which the inside information pertains. c) Sponsors.) has failed to comply with any prescribed conditions or rules The continued listing of the security would not be in public interest The SECP/SE may by order require the issuer to correct the deficiency or comply with the prescribed conditions or may revoke the listing. or using others to transact such deals Any other person to whom inside information has been passed or disclosed by an insider person transacting any deal. • • PROHIBITION OF INSIDER TRADING(15A) No person shall indulge in insider trading. directors and partners of a legal person or unincorporated business association. that the information possessed and used for transacting any deal is inside information. executive officers. to one or more such derivatives and which are traded in accordance with accepted market practices on those markets. in which the issuer holds shares or voting rights. An insider person suggesting or recommending to another person to engage in dealing in any listed securities to which the inside information possessed by the insider person pertains. executive officers and directors of an issuer. • Where after listing of the security the SECP or the SE find that The application is deficient in any material respect. shares or voting rights of 10% or more in an issuer. o Where SE refuses to de-list a security the SECP on the petition of issuer may direct the SE to de-list the security.Corporate Laws Made Easy ~ 72 ~ Other Laws SECURITY & EXCHANGE ORDINANCE. If the Stock Exchange refuses to list the securities then company can file petition with SECP. In relation to persons responsible for the execution of orders concerning listed securities. INSIDE INFORMATION(15B) 1.

canotes. be removed from such office by an order of the SECP and debarred from auditing any listed company for a period of upto three years. in order not to prejudice their legitimate interests. intended for distribution channels or for the general public SECURITY & EXCHANGE RULES. to be imposed by SECP. which may extend to 10. be liable to cancellation of registration. Persons discharging managerial responsibilities within a listed company and. or o Where such person is registered as a broker / agent. operating procedures and surveillance techniques to detect and prevent insider trading and market abuse practices. provided that such delay does not mislead the public and provided that the company is able to ensure the confidentiality of the information and the company shall inform the SECP of the decision to delay the public disclosure of inside information forthwith. lineal ascendant or descendant. whichever amount is higher.canotes. Where an insider person discloses inside information to any other person who is not required to possess such information for any reason. or loss suffered by another person. be liable to fine.multiply. persons closely associated with them.Corporate Laws Made Easy ~ 73 ~ Other Laws d) Sponsors. consultant of a listed company. director. shall notify the SECP of transactions conducted on their own account relating to the securities of such listed company in the manner specified by the SECP. under contract or otherwise in the manner specified by the SECP who have access to inside information and provide such list to the SECP whenever the SECP requests it. articles of association or contract. complete and effective public disclosure of that information must be made simultaneously in the manner specified by SECP: Provided that the provisions shall not apply if the person receiving the information owes a duty of . The SECP may. which may extend to 30 million rupees. Whenever a listed company or a person acting on its behalf. an amount equivalent to the loss so suffered by such person. In addition to the fine imposed.000. executive officers and directors of credit institutions in which the issuer has an account. regardless of whether such duty is based on a law. within such time as may be specified by the SECP and according to the regulations made hereunder. and i) A spouse. advisor. shall maintain and regularly update a list of persons employed. or To pay any other person who has suffered a loss. Listed companies or persons acting on its behalf. LIABILITY FOR CONTRAVENTION (15E) Any person who contravenes the provisions of this ordinance under the notes “Corporate Laws complete course 1 / 2” (Link also available on www. or in any other way relating to work performed under contract of employment/ otherwise. g) Any person obtaining inside information as part of his employment/discharging his usual duties in an official capacity. These are available at SECP’s site or also can be downloaded from www. in the manner specified by the SECP. profession or duties. who has had access to insider information during his employment till a period of one year after leaving employment. discloses any inside information to any third party in the normal exercise of employment. 1971 not included in these notes. make regulations to regulate persons who produce or disseminate research concerning listed securities or issuers of listed securities and persons who produce or disseminate other information recommending or suggesting investment strategy. as soon as possible of inside information which directly concerns the listed securities. auditor. and o Where such person is an executive officer. that has been engaged in the placement of listed securities or public offer of securities or issuing and marketing of such securities. where applicable. an amount equivalent to gain made or loss avoided by him. Listed companies may delay the public disclosure of inside information. partner or nominee of any above LISTED COMPANIES RESPONSIBILITIES TO DISCLOSE INSIDE INFORMATION (15D) Listed companies shall inform the public. Plz refer to original rules. 10% or more shares of an issuer. by notification in the official Gazette. on being found guilty of contravention by the SECP. regulations. such person may o Be directed by the SECP To surrender to SECP.000 rupees or 3 times the amount of gain made or loss avoided by such person. the insider person shall be liable to fine. directly or indirectly. f) Sponsors. h) Any person obtaining inside information through unlawful means. executive officers and directors of an organization. The Exchanges shall adopt structural provisions. e) Any natural person holding.

c) Fixing quantity of goods for production. exclude other undertaking from production. EXEMPTIONS TO PROHIBITED AGREEMENTS [5to9] INDIVIDUAL EXEMPTIONS When it is granted? If request to CCP for exemption has been made by party to contract. d) Limiting technical development for production and sales of goods or services. The exemption period may be extended in the specified circumstances. BLOCK EXEMPTION Who may grant? CCP Scope Contracts meeting criteria for individual and block exemption both When it is cancelled? • Breach of condition imposed by order. f) Exit the competitor. e) Collusive tendering or bidding for purchase and sale of goods and procurement of services. d) Making the conclusion of contract subject to the acceptance of others. prevent new entry and creating monopoly in the market by predatory prices. 2.financedoctors.Corporate Laws Made Easy ~ 74 ~ Other Laws COMPETITION ORDINANCE. Pre-requisites Before making an order the CCP shall: (i)Publish the details of proposed order for bringing it to the attention of the affected. supply. c) Making sale conditional with purchase of other goods or services (tie-ins). purchase or type of goods and services. distribution or control of goods or services to prevent. or Practice meets the criteria for exemption. (ii) Consider any representation made in this respect. restrict or reduce competition in the relevant market except when granted exemption under this Ordinance. (iii) Impose additional conditions or obligations. Prohibited agreements include: a) Fixing prices / imposing restrictive trading conditions for purchase. 2007 & REGULATIONS Taken from Notes of Sir Kashif Adeel available at www. An abuse of dominant position consists of practices which prevent. b) Charging different prices from different customers for the same goods or services without justification (price discrimination). distribution or sale of goods or services. volume of sale. Examples of such practices include: a) Limiting production. sale and unreasonable increase in prices or other unfair trading conditions. . • Failure to comply with the obligation imposed by order. PROHIBITED AGREEMENTS [4] An undertaking or an association of undertakings shall not enter into a contract or take a decision for production. sale and distribution of goods & services. • A particular agreement does not meet the criteria for exemption. A contract entered into in contravention of this section shall be void. (ii) Vary or remove any conditions or obligations. CANCELLATION OF INDIVIDUAL EXEMPTION When it is cancelled? If the CCP has reasonable grounds that the information was incomplete. sale or means for services. Retrospective The order may have effect from an earlier PRO H IBITION S: S: 1. g) Boycott. g) Making conclusion of contract subject to acceptance of others. h) Refusal to deal. Exemption period The exemption shall be for a specified period and may have effect from an earlier date on which it is granted. b) Dividing market by territories. ABUSE OF DOMINANT POSITION [3] Abuse of dominant position is prohibited. e) Dissimilar conditions for equivalent transactions for different parties (competitive disadvantage). false or misleading or the circumstance has changed upon which the exemption was granted Consequences and actions CCP may take the following action after a notice in writing: (i) Cancel the exemption. restrict. f) Applying different conditions for equivalent transactions to different parties. CRITERIA FOR INDIVIDUAL AND BLOCK EXEMPT ION CCP may grant individual & block exemption on application by undertaking in respect of following agreements: Improving production or distribution. reduce or distort competition in the relevant market.

) 250. The application may be manner rejected if it is not in compliance. 3.000 400. Individual Company or body corporate Application to be filed by: Authorized officer Partnership firm Partner.000 Exceeding 1. (iii) Undertaking(s) meet the pre-merger notification threshold.000 Fees (Rs. 1 billion The CCP may change the thresholds from time to time after publication in Gazette. character. THRESHOLD FOR APPLICAT ION Application for clearance shall be made for intended merger which may substantially lessen the competition by dominant position. method or place of production. 1 / more persons or other undertakings acquire direct or indirect control of the whole or part of one or more other undertakings. Rates of fee: Turnover (Rs in million) Upto 500 500-750 750-1. REQUIREMENTS AS TO APPLICATION Dispensing: The CCP may dispense with any particular information by giving a notice with to applicant.Corporate Laws Made Easy ~ 75 ~ Other Laws Promoting technical or economic progress allowing consumers a fair share of resulting benefits. b) Distribution of false/misleading information to customers lacking reasonable basis about prices. Fee: The application shall be accompanied by fee paid by challan or draft. M E R G E R S LE SSE N IN G CO M PE TITIO N [11 & R E G U LA TIO N S] PROHIBITION An undertaking shall NOT enter into a merger which substantially lessens the competition by creating or strengthening a dominant position in the relevant market. of another undertaking is to place the first undertaking in a position to replace or substantially replace the second undertaking. suitability for use or quality of goods c) False or misleading comparison of goods in advertising d) Fraudulent use of another’s trademark. 1 billion Annual turnover of undertaking in preceding year Rs. No. 300 million Combined assets (all undertakings) Rs. Where application is made jointly. product labeling or packaging 4. Acquisition by one undertaking of the assets or a substantial part of the assets. properties. (ii) Two or more undertakings intend to merge whole or part of their businesses.000 . Deceptive marketing practices shall be deemed to be continued in following circumstances: a) Distribution of false/misleading information capable of harming business interests of other undertaking. firm name. DECEPTIVE MARKETING PRACTICES [10] An undertaking shall NOT enter into the deceptive marketing practices. 500 million Combined turnover (all undertakings) Rs. REQUIREMENT FOR PRIOR CLEARANCE An undertaking(s) shall apply for clearance of the intended merger if: (i) An undertaking intends to acquire shares or assets of other undertaking. Compliance: The CCP may allow the part of application to be complied with in alternate and alternate manner if it is impossible to be complied with.000 750. A collaborative arrangement by which two or more undertaking devote their resources to pursue a common objective. WHAT IS MERGER? Merger shall be deemed to have occurred if: 2 / more independent undertakings merge into new undertaking & cease to exist as separate legal entities 1 undertaking is absorbed by another with the latter retaining its legal entity and former ceasing to exist. The benefits of that clearly outweigh the adverse effect of absence or lessening of competition. Rs. The application shall not be made unless: The Value of Is at least Gross asset of undertaking excluding goodwill. PRE MERGER APPLICATION Applicant Individual.000 500. joint representatives may be authorized by CCP on behalf of joint applicants. The undertaking(s) shall give notice of intended merger within 07 days of agreement of intended merger. of copies: 3 copies or as many copies and in such manner as required.

the CCP may require the undertaking to provide additional information for a second phase review. (b) Prescribe modification or additions in the original order. however. On initiation of second phase review. it shall. and product differentiation. The CCP shall pass an order within 30 days of receipt of application whether the intended merger meets the threshold and presumption of dominance. production and distribution of goods & services. (g) whether the business or part of the business of a merger party or merger has failed or is likely to fail. (f) the nature and extent of vertical integration in the market. it may: (a) Prohibit the consummation of transaction. (b) Such efficiency could not reasonably be achieved by a less restrictive means of competition. (e) the dynamic characteristics of the market. the CCP shall pass order against such merger (under section 31) after giving opportunity of being heard. innovation. CCP may specify to give notice to such other parties if the applicant is unable to contact other parties. TRANSACTION NOT MEETING ABOVE CRITERIA If CCP determines that transaction under review does not meet the above criteria. (b) the ease of entry into the market. it shall mean that the CCP has no objection on intended merger. If order is not passed within 30 days of application. The CCP will not take further action in this period unless the circumstance arise which lead to the subsequent review. The CCP may require further information in phase-II review. in the market. FACTORS FOR DETERMINAT ION OF SUBSTANTIAL LESSENING OF COMPETITION The CCP shall asses the strength of competition and the probability that the parties after merger will behave competitively in the relevant market after taking into account the following factors: (a) the actual and potential level of import competition in the market. in exceptional circumstance the hearing may be conducted in public. after providing opportunity of being heard: (a) Undo such merger or acquisition. (c) the level and trends of concentration. the CCP shall assess and give decision within 90 days of receipt of additional information whether the merger will substantially lessen the competition by dominant position in the relevant market. An ex-prate decision may be made if the undertaking does not afford opportunity. When the CCP makes unfavorable decision it shall issue a notice to the parties stating the . MERGERS WITHOUT APPROVAL If the undertaking(s) consummate merger without approval of CCP. If the CCP finds that exemption was based on false or misleading information or the conditions has not been fully complied with. and history of collusion. The CCP shall decide on receipt of complete application whether the transaction falls within the meaning of merger and inform the applicant if the transaction is not within the meaning of merger. HEARING AND DECISIONS The CCP shall provide opportunity of being heard before passing an order. (d) the degree of countervailing power in the market. (d) It is the least anti-competitive option for the failing undertaking’s assets when one undertaking is facing actual or imminent financial failure. including growth. Further. still it may approve merger on the following grounds: (a) It substantially contributes to the efficiency. (b) Approve the transaction by imposing conditions. including tariff and regulatory barriers. The CCP may reject the application if the required information is not provided. REVIEW OF CONDITIONS OF EXEMPTION The CCP may review the conditions subject to which the exemption was granted either on its own motion or on application made by undertaking within one year of exemption. it shall mean that the CCP has no objection on intended merger.Corporate Laws Made Easy ~ 76 ~ Other Laws NOTICE TO OTHER PARTIES Notice of intended merger is to be given to all other parties. and (h) whether the merger situation will result in the removal of an effective competitor PHASE–I ORDER BY CCP: Whether merger is dominance Phase-I review shall entail a quick review and allow merger situation to proceed without delay which do not raise competition. PHASE–II ORDER BY CCP: Whether dominance lessens the competition If the CCP is unable to determine on the basis of phase-I review that the situation does not raise competition it shall carry out a phase-II review. The hearing shall be private. (c) The benefits of that clearly outweigh the adverse effect of lessening or absence of competition. If the CCP make a favorable decision it may impose conditions and shall give notice to undertaking(s). APPROVAL OF MERGER If the CCP determines in second phase review that intended merger will substantially lessen the competition by dominant position. (c) Approve the transaction on condition that undertaking shall not enter into legally enforceable agreements. The CCP may specify the period of the decision within which the merger shall be carried out in effect depending on the circumstances. The decision may be placed on website. If the decision is not made within 90 days.

Corporate Laws Made Easy ~ 77 ~ Other Laws fact and objections. the CCP may give appropriate written directions to remedy. FU N CTION S AN D POW ERS OF CCP [28] The following are functions and powers of CCP: (a) To initiate proceedings in accordance with procedures of this Ordinance and make orders in respect of contravention of provisions of this Ordinance. including details of the merger situation to which the complaint relates. regulations and orders. the rules. guarantee or other form of security on required terms and conditions. TRANSNATIONAL MERGERS Where the merger situation is subject to review under merger laws in more than one jurisdiction. The persons suffering loss from the merger are entitled to commence civil action seeking relief against relevant undertaking(s). If the CCP proposes to disclose any of the information over which confidentiality has been claimed. (b) requiring the merger parties to enter into such legally-enforceable agreements specified to prevent or lessen the anti-competitive effects which have arisen. (b) To conduct studies for promoting competition in all sectors of commercial economic activity. When providing information or documents to the CCP. it may consult the complainant providing the information. it will seek further information from the merger parties. including appropriate copies of relevant correspondence. The CCP will consider each complaint on its merits to determine if an investigation is warranted. The directions may include the following: (a) Prohibiting an intended merger from being carried into effect or requiring a merger to be dissolved or modified in required manner. in the merger review as recognized under reviewing country’s merger laws. assets or shares of such undertaking in required manner. a concise explanation of the reasons and details of the complaint. (e) give an opportunity to third parties. and the relative market positions of the parties named in the complaint. (f) treat foreign undertakings. The complainant should make clear to CCP if he does not wish to be identified. mitigate or eliminate the effects of merger. statistics or data which relate to the facts set out in the complaint. the CCP shall: (a) without compromising effective enforcement of the domestic law seek to cooperate its reviews of transnational mergers in appropriate cases. with a legitimate interest. . to express their review under the merger review process. The CCP may recognize the importance of complainants voluntarily supplying information and also their interest in maintaining confidentiality. (g) endeavor in reaching. The guidelines shall be illustrative and not exhaustive and shall not set a limit on the investigation and enforcement powers of the CCP. the opportunity to consult with the concerned competition authority at key stages of investigation with respect to any significant or practical issue that may arise during the course of investigation. complainants shall provide a nonconfidential version of complaint & of any other information or documents which complainant may furnish. sometimes it is necessary to reveal information which may identify the source of complaint for effective handling of complaint. in particular with respect to timing of notifications and voluntary waivers of confidentiality rights. without drawing any negative inferences from a party’s decision not to do so. Such right shall arise on the decision of appeal or expiry of period of appeal. or at least non-conflicting outcomes ISSUANCE OF GUIDELINES The CCP may issue guidelines in respect of the merger frame work. The decision may be placed on website. when and how the complainant became aware of the merger situation. (c) requiring the merger parties to dispose of such operations. (d) To give advice to undertakings whether action taken by undertaking is within provisions of this Ordinance. (d) give the merging parties. consistent. COMPLAINTS ABOUT MERGERS Complainants shall provide following information to the CCP while making the complaints: Name and address of the complainant. (c) To conduct inquiries into affairs of undertakings. (c) encourage merging parties to facilitate coordination among competition authorities. (f) To take all other actions necessary of purpose of this ordinance. in so far as possible. (d) providing a performance bond. mitigate or prevent the effects of merger. the relationship between the complainant and the merger parties or merged entity. no less favorably than domestic undertakings in like circumstances. (e) To engage in competition advocacy. DIRECTIONS AND LITIGATION If the CCP concludes that the situation may prevails after an intended merger which substantially lessens competition in the relevant market. If the CCP decides to pursue the complaint. The CCP may issue directions to remedy. However. The guidelines shall not be a substitute for the Ordinance. (b) consider actions by which they can eliminate or reduce the impediments to cooperation and coordination. evidence directly related to the facts set out in the complaint.

The CCP may authorize a valuer to enter into premises and inspect accounts and documents necessary for his valuation. -prohibit merger only after second phase review. 1908 while trying a suit in the following matters: (a) Summoning and enforcing attendance of witness and examining him on oath. The authorized officer shall give receipt of documents and computer impounded or retained. PROCEDURE An officer appointed in this behalf shall provide authority of the CCP to the undertaking. (b) Reviewing the policy for fostering competition and making recommendations to FG or PG for amendments in the laws affecting competition. POWER TO ENTER AND SEARCH PREMISES [34] The CCP may authorize any officer to enter and search premises of an undertaking. The CCP may require the undertaking to produce any books. FORCIBLE ENTRY [35] If an undertaking refuses an officer of CCP to enter into premises without reasonable cause. The CCP: (a) shall have full and free access to premises. documents or information to be examined and kept by any officer of the CCP. INTERIM ORDER CCP may pass an interim order after giving the undertaking an opportunity of being heard if it appears that: (a) Final order will take time. 32] The CCP may pass following orders: In Case of abuse of dominant position: require the undertaking to take actions necessary to restore the competition and not to repeat prohibitions and not to engage in the similar practices. accounts. merger guidelines and educational material on its website. prohibited agreement: annul or amend the agreement or related practices and not to repeat prohibitions or enter into similar contract or practices deceptive marketing require the undertaking to take actions specified in the order necessary to restore the competition and not to repeat prohibitions merger -authorize the merger subject to conditions. an investigating . documents or computer stored information. (d) Requisitioning of any public record from any court or office.Corporate Laws Made Easy ~ 78 ~ Other Laws COMPETITION ADVOCACY [29] The CCP shall promote competition through advocacy which shall include: (a) Awareness. An interim order shall remain in force until cancelled by CCP or final order is passed. manager or person present in premises shall provide all facilities and reasonable assistant to the officer. (c) Issuing interim order is in public interest. PROCEEDINGS IN CASE OF CONTRAVENTION [30] The CCP may pass orders(s) as it deem appropriate in case of contravention of prohibitions under this Ordinance. (b) Discovering and production of documents or material object as evidence. (e) Issuing of a commission for the examination of any witness or document. inquiries under review and completed. Any proceedings before the CCP shall be deemed to be judicial proceedings. -authorize merger after second phase review. documents and computer. (d) may impound and retain computer for necessary period where a hard copy of computer stored record is not made available. (c) may impound any accounts or documents and retain for necessary period. (c) Accept evidence on affidavit. Any owner. (b) There is a situation that may cause serious or irreparable damage. (b) may stamp or make extracts or copy of accounts. The undertaking shall have right to examine impounded accounts and computer and make an extract or copy during regular office hours and under supervision. (d) Posting all decisions made. In case the undertaking does not avail the opportunity. place accounts. training and other necessary actions for the promotion of competition. The CCP may impose penalty in all such contraventions after giving notice and opportunity of being heard. ORDERS OF CCP [31. An order shall have effect notwithstanding anything contrary contained in any other law or any contract or memorandum or articles. POWERS OF CCP IN PROCEEDINGS or INQUIRY [33] In case of inquiry or proceedings the CCP shall have the powers of Civil Court under the Code of Civil Procedures. (c) Holding open hearings and expressing opinion on the issues affecting state of competition or commercial activities. The CCP shall publish its order along with basis of order in its Official Gazette. The CCP may direct the undertaking to do or refrain from doing any act specified in the order. the CCP shall pass ex-prate order.

impedes. The amount paid shall not prejudice the right of aggrieved person to avail any remedy under any other law. director. The CCP may also initiate proceedings in a court of competent jurisdiction. 50 million. If an officer exercises his powers which are vexatious. When a criminal court passes an order imposing fine. imperils or obstructs the process of CCP in any manner Provided that fair comments made in good faith and public interest on working or order of CCP after completion of proceeding shall not be subject to penalty. GRANT OF 100% REDUCTION IN PENALTY An undertaking may benefit 100% reduction in penalty if: (a) the undertaking is the first to provide with evidence of prohibited activities. excessive or mala fide intent. LEN IEN CY [39 & RELEV AN T REGU LATION S] LESSER PENALTY If the CCP is satisfied that the undertaking being a party to the prohibited agreements alleged to have violated this Ordinance has made a full and true disclosure.Corporate Laws Made Easy ~ 79 ~ Other Laws officer may enter into premises by force. (iv) must not have been the one to initiate the prohibited activity. such officer shall be punishable with a fine upto Rs. document or information continuing default of order of CCP: -an amount not exceeding Rs. notice or requisition of CCP or failure -amount not exceeding Rs. 500. (ii) maintains continuous and complete cooperation throughout the proceedings until the conclusion of any action. GRANT OF IMMUNITY CCP may grant an undertaking total immunity from financial penalties if the following conditions are satisfied: (a) The undertaking is the first to provide with evidence of any activity leading to violations of section 3-11 provided that the CCP does not already have such information. and (v) must not have coerced another undertaking to take part in prohibited activities. it may order that a sum equal to whole or part of fine recovered shall be paid to complainant and in case the fine is not recovered. 1 million for every day after the first day The CCP may vary the amount and rate of penalties in public interest after approval of FG. (b) The undertaking: (i) provides all the information. 25 M. POWER TO CALL FOR INFORMATION [36] ENQUIRY AND STUDIES [37] PEN ALTIES AN D APPEALS PENALTY [38] The CCP may pass order directing the undertaking. . it may impose a lesser penalty. interferes with. officer or employee of the undertaking to pay penalty after giving opportunity of being heard where the undertaking: (a) has been engaged in prohibited activity (b) failed to comply with order of CCP (c) failed to supply with the copy of required document or information (d) has furnished false or inaccurate information or statement (e) knowingly abuses. And awarding compensation in subsequent proceedings in the same matter the court shall take into account the sum already recovered and paid. or -amount not exceeding 15% of the turnover non-compliance of order. PROCEEDINGS IN COURT The failure to comply with the orders of the CCP shall constitute a criminal offence punishable with imprisonment of 01 year and fine of Rs. 1 million to supply copy of agreement. (c) the conditions prescribed are satisfied. documents and evidence available to it regarding the prohibited activity.000 and imprisonment upto one year or both. the sum shall be paid out of Fund. (b) information is given after CCP has started proceedings but before sufficient information to issue a written notice that it proposes to make a decision. RATES OF PENALTY In case of Penalty (depending upon circumstances) contravention of prohibitions: -amount not exceeding Rs. The order shall be in writing and signed by two members of the CCP. (iii) refrains from further participation in the alleged activity from the time of its disclosure to the CCP.

EFFECT OF LENIENCY Immunity granted by the CCP cannot exclude claims by third parties who may have suffered loss as a result of the activities in respect of which immunity is granted. It may provide the type and duration of infringement of provisions. The application for leniency shall be in writing and supported with evidence. such person shall be treated as defaulter and money shall be recoverable from him. The appeal shall be in prescribed form and with prescribed fee. product affected and identity of those involved. If a bank. chief executive or director of the undertaking to pay the said amount within prescribed time. (ii) who holds or controls the receipt and disposal of money belonging to undertaking (iii) who is responsible to pay any sum to the undertaking. A receipt of the CCP shall discharge the liability of such person to the extent of amount so paid. and (c) the quality of the information provided by the undertaking. The undertaking may provide the evidence with the application or a list of proposed evidences to be provided later. it may revoke the leniency and impose penalty at normal rates. . (d) Require any of the following by notice to deduct and pay the sum specified in notice before specified date: (i) from whom any money is due or may become due to the undertaking. any subsequent applicant shall move up from him in priority. (b) the evidence already in the CCP’s possession. If the applicant does not fulfill the obligations. The appellate bench shall comprise of at least 02 members. (b) Appointment of receiver for management of moveable or immoveable property. shall have the right to pursue the private claims for damages before the Court. The application shall be submitted within 8 weeks of initial contact. therefore. RECOVERY OF PENALTIES [40] The CCP may serve notice on concerned person. Third parties can pursue their claim in the competent court.Corporate Laws Made Easy ~ 80 ~ Other Laws GRANT OF 50% REDUCTION IN PENALTY An undertaking may benefit 50% reduction in penalty if it provides evidence of prohibited activities before the CCP issues a written notice but are not the first to come forward. The initial contact may be made by telephone. receiver. FACTORS FOR CONSIDERING REDUCTION Any reduction in penalty under these circumstances is discretionary. receiver or DRO or undertaking fails to deduct sum specified in the notice. Immunity granted by CCP shall not affect the right of third parties. District Revenue Officer or undertaking who has paid any sum to the CCP shall be deemed to have paid on behalf of the undertaking. 42] THE APPELLATE BENCH OF CCP Any person aggrieved by the order of CCP or Member or authorized officer of the CCP may submit an appeal before appellate bench of CCP within 30 days of passing the order. Any bank. However. The CCP shall take into account the following in exercising its discretion: (a) the stage at which the undertaking comes forward. CONFIDENTIALITY The CCP shall keep confidential the identity of undertaking coming with the evidence throughout the proceedings. undertaking. If the penalty is not paid within the prescribed time. (c) Recovery of the amount as arrears of land revenue through District Revenue Officer. the application shall contain relevant information along with the name of undertaking. Third parties. REVOCATION OF LENIENCY If the CCP finds that the undertaking has given false evidence or failed to comply with the condition upon which the reduced penalty was impose. APPEALS [41. The member who passed the order appealed against shall not be member of the appellate bench. the order appealed against shall have effect of final order. PROCEDURE FOR REQUESTING IMMUNITY OR REDUCTION IN PENALTY An undertaking or person empowered by it seeking leniency shall contact the CCP. Initial contact may be without disclosure of identity. In case of a tie. the CCP may recover such amount in any of the following ways: (a) Attachment of moveable and sale of immoveable property including bank accounts. THE COURT Any person aggrieved by the order of the appellate bench may prefer an appeal to Supreme Court within 60 days of communication of the order. The decision of the appellate bench shall be made unanimously or by majority where the bench comprises more than two members.

shareholder agreement or voting agreement. Acquisition of shares by succession inheritance. 2000 Transfer of voting shares to a person’s relatives without monetary consideration. Means a person who cooperates with the acquirer to acquired voting shares or control of target company. he shall not be liable to disclose if additional acquisition is within 12 months. Control Target Company Public Offer Offer Period Public Announcement Persons acting in concern Manager to the offer This Ordinance not to be applied to certain transactions Shares issued under pre-IPO’s Right issue (Except disposal by directors after decline by shareholders u/s 86(7) Companies Ordinance 1984) Shares allocated under underwriting arrangements. Transfer by sponsors of a holding company to such holding company within two years of incorporation of holding company. Shares of unlisted companies Conversion option by Banks (20% outstanding Loan Balance) Privatization of unit or its management rights under the Privatization Commission Ordinance. 2000 Acquirer Any person who directly and indirectly acquires or has proceeded to acquire voting shares in the target company. voting shares of such listed company or companies held by the sponsors on the date of incorporation of the holding company. The above disclosure shall be made within 3 working days of the acquisition. Acquisition of voting shares by a strategic investor in case of disinvestment by existing shareholders of a stock exchange pursuant to the demutualization Acquisition of more than 10% of voting shares of company (Sec 4) Any acquirer who acquires voting shares (taken together with existing shares). which would entitled to acquires more than 10% voting shares in a listed company shall disclosed the aggregate of his shareholding to the Stock Exchange. or control of the target company either by himself or through any person acting in concern. Schemes of mergers & reconstruction of companies. .Corporate Laws Made Easy ~ 81 ~ Other Laws Listed Companies (Substantial Acquisition of Voting Shares & Takeover) Ordinance. which will after the transfer of such shares become subsidiary or subsidiaries of the said holding company. Includes the right to appoint majority of directors or to control management or policy decisions whether by virtue of shareholding. Scheme of rehabilitation of a company approved by the Commission. If he acquires more shares but remain below 25%. acquirer shall appoint a Bank/Financial Institution or member of Stock Exchange to act as so. management right. From date of public announcement to closure date of public offer It means public announcement of public offer for acquisition of voting shares and includes public announcement of competitive bid. Substantial acquisition of voting share and acquisition of control of a listed company Additional acquisition (Sec 5 & 6) No person shall directly or indirectly acquire Voting shares (taken together with existing shares) which would entitled such person to more than 25% of voting shares in a listed company. Before making public announcement. A listed company whose voting shares or control is directly or indirectly acquired or intended to be acquired. Acquisition of shares by financial institution as enforcement of securities. It means public offer for acquisition of voting shares of a target company and includes any competitive bid. or Control of a listed company.

BOD may. The acquirer who has acquired 30% of voting shares shall be entitled to the proportionate representation on the board of directors. offer letter or any other advertisement or publicity material issued to shareholders for public offer shall state that “directors accept the responsibility for information contained in such documents” General Obligations of the BOD of target company The board of directors of Target Company shall not during the offer period: a. The announcement shall also be sent to all stock exchange where company has registered and to target company. brochure. 5. give their unbiased comments & recommendations to shareholders on public offer. the shares. The acquirer shall serve a notice to the target company. Before making public announcement the person shall make necessity disclosure to the Target Company and stock exchange. Issue any right or bonus shares d. BOD of Target Company shall fill the casual vacancy created by the resignation of 1 or more . If no of shares offered for sale by shareholders are more than shares offered to be acquire. the copy of which shall be sent to stock exchange. 4. circular. acquirer shall in consultation with mnager to the offer accept shares on proportional basis. 3. The public announcement shall contain prescribed information.Corporate Laws Made Easy ~ 82 ~ Other Laws Unless such person makes a public announcement of the offer to acquire voting shares or control of listed company. a. c. the acquirer shall send to the target company. if think fit. a copy of proposed offer letter along with copy to SECP. Enter into any material contract The Target company shall furnish to the acquirer a list of its shareholders for sending offer letter. Number of shares to be acquired Offer by acquirer shall be a %age of Total Capital as SECP may prescribe. the board of directors shall not appoint additional directors or fill any casual vacancy by person representing acquirer. Provided such acquire shall not be required to make a fresh public announcement of the offer within period of 12 months from the previous announcement. b. if they are less than marketable lot. During the offer period. the BOD of Target Company shall cause a Board meeting within 10 days. The acquirer shall ensure that the offer letter is sent to all the shareholders of Target Company whose name appear on register of members on date specified in Public Announcement. Target Company shall facilitate transfer in name of acquirer. It shall not contain any misleading information. public announcement. On receipt of notice. General obligation of acquirer Within 2 working days of public announcement. th Date of acceptance of public offer shall not be later than 60 day from day of Public Announcement. Public announcement 1. o Provided that acquisition shall not be less than minimum marketable lot or entire shares. b. No acquirer (who has acquired more than 25% but less than 50% of the voting shares or control) shall acquire additional voting shares or control unless such persons makes a public announcement of the offer. Copy of announcement shall be submitted to SECP through manager to the offer atleast 2 days before issuance. The announcement shall be published at least in one Urdu and one English newspaper. The acquirers shall complete all the procedures including the payment to shareholders who had accepted the public offer within 30 days from the date of closure of public offer If acquirer is a company [whether incorporated in or outside Pakistan]. Encumber the assets of company or its subsidiary c. 2. Sell or transfer undertaking of company or any of its subsidiary.

shall. Ensure that firm arrangements for funds and money for payment through verifiable means to fulfil the obligations under the public offer have been made Ensure that the public announcement is made in accordance with this Ordinance Furnish to SECP a due diligence certificate which shall accompany a copy of the proposed offer letter. Procedure for making competitive bid Any person. General Obligations of the manger to the offer Before the public announcement is made.Corporate Laws Made Easy ~ 83 ~ Other Laws existing directors to accommodate the acquirer. The BOD so elected shall hold the office during the remainder period of outgoing directors. quoting the source wherever necessary The manager to the offer shall. Total consideration payable under public offer shall be calculated assuming full acceptances irrespective of whether consideration for public offer is payable in cash / otherwise. shall have the option to make an upward revision of offer in respect of the price and the number of voting shares to be acquired at any time within 7 working days prior to date of closure of the last subsisting public offer without changing any other terms and conditions of the said public offer. the earlier offer on the original terms shall continue to be valid and binding on acquirer Provisions of this Ordinance shall. In case the acquirer does not get proportionate representation on the board of Target Company or the number of casual vacancies created is not sufficient. target company and SE on which the voting shares of the target company are listed After ensuring compliance with these provisions and any other laws / rules & regulations as may be applicable. fair and adequate and based on reliable sources. The BOD of Target Company shall hold the election within 30 days of the receipt of above notice. the manager to the offer shall : Ensure that the acquirer is able to implement the public offer. Ensure that the contents of the public announcement and offer letter are true. The SECP may declare the election null & void and order for fresh election under supervision of SECP. 1 person shall have option to make another announcement a. Withdrawing the public offer with the prior approval of the Commission: If no such announcement made within 10 days of public announcement of competitive bid. Revising the public offer. Any irregularity in the election of directors may be brought to the notice of SECP within 7 days of such election. or b. and has not withdrawn his public offer. apply to the competitive bid Upward revision of Offer Whether or not there is a competitive bid. make a public announcement of his offer for acquisition of the same voting shares of the target company Shall not be for less than number of voting shares for which the earlier public offer has been made st On public announcement of competitive bid. send report to SECP within 45 days from date of closure of public offer or earlier withdrawal Security to be furnished by the acquirer. . In case there is any upward revision of offer. he may serve a notice to target company for holding fresh director’s election and a copy of notice to SECP.— On the day of the public announcement of offer ensure that the proposed public announcement of offer is filed with SECP. who is desirous of making a competitive bid (Higher than 1st). mutatis-mutandis. the value of the security shall be increased as may be prescribed The security furnished shall be released in such manner as may be prescribed. consequent upon a competitive bid or otherwise. within 21 days of public announcement of the first offer. Acquirer shall furnish security for performance of obligations. other than the acquirer who has made the first public announcement. An acquirer who has made public announcement.

and the target company at its registered office. seller the Target Company and manger to the offer. Increase in the value of the security Withdrawal of public offer. Making of a public announcement in respect of such changes or amendments in all the newspapers in which the earlier public announcement was made. simultaneous with the issue of such public announcement.Corporate Laws Made Easy ~ 84 ~ Other Laws Any upward revision shall be made only on the following conditions: a. SECP may pass following appropriate directions and take appropriate measures in the best interest of security market Directing the persons concern not to further deal in the securities Prohibiting the concerned person from disposing off the securities acquired in violation of provisions of this Ordinance. shall: Make a public announcement in all the newspapers in which the public announcement was made indicating reasons for withdrawal of the public offer. Taking any other action. Inquiry & Action by SECP SECP may appoint inquiry officer to undertake an inquiry for following purposes: o To inquire into the complaints received from investors holding not less than 10% of the total voting power in the Target company regarding any irregularity in substantial acquisition process. (Link also available on www. Ordinances. Fine = Rs.000 / day for continuing default “Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations. (b) if the sole acquirer.1. has died.000 + Rs.canotes. chief executive and company secretary shall stand disqualify to hold such offices in a listed company for next 2 years. In case the BOD or management of Target Company contravenes any provision of this Ordinance the directors. once made.10. SE on which the voting shares of the target company are listed. Rules etc”. In withdrawal of public offer under any of the circumstances. b. and the target company at its registered office. SE on which the voting shares of the target company are listed.canotes. and Inform SECP. The inquiry officer as soon as possible shall submit a report to SECP SECP shall communicate the findings to the acquirer. o To inquire suo moto (upon its own knowledge or information) in the best interest of security market o To ascertain whether the provision of this Ordinance is complied . Directing the concerned person to sell the securities acquired in violation of provisions of this Ordinance. — A public offer. Penalties If any person contravenes the provision of this ordinance he may debarred as acquirer for next 3 years. or (c) in such circumstances as may be prescribed.000. simultaneous with the issue of public announcement c. or the manager to the offer. being a natural person. Informing of SECP. On receipt of reply from the respective parties. may be withdrawn— (a) if the withdrawal is consequent upon any competitive bid. Please refer to original sources for these regulations and code These are available at SECP’s site or also can be downloaded from www. the acquirer. 2008 not included in these under the notes “Bare Act.

SBP has given general permission to private sector entrepreneurs to obtain foreign currency loans subject to following conditions: 1. Foreign currency loan by FCCs: FCCs are allowed to contract foreign currency loans from − Banks or financial institutions abroad − Their head offices − Other overseas branches/associates Following are conditions in this behalf: − Loans are obtained for working capital requirements − Repayment period should not exceed 12 months. Loans are obtained from i. Repayment period of such loans should not be less than five years. Suppliers as supplier credit including credit under PAYE Scheme. a branch office. 4. Banks or financial institutions abroad ii. branch or office of a company or a firm which is: In case of company incorporated outside Pakistan. DFI and other financial institutions 2. Obtained for financing the foreign currency cost of projects covered by Govt. From loans raised abroad with the permission of FG/State bank. . 2. Parent companies of multinationals iii. In case of partnership 50% or more of the capital is owned by foreign nationals or The majority of the partners are foreign nationals No loan to company controlled by persons resident outside Pakistan (i. such companies are allowed to raise Rupee loans through medium and long-term local borrowing. Lending for Capital expenditure: − FCCs are normally required to meet their capital expenditure requirements out of 1. F oreign Private L oan No loan from abroad: Borrowing from abroad is prohibited except with approval of SBP.Corporate Laws Made Easy ~ 85 ~ Other Laws Foreign Exchange Regulations Foreign E xchange R egulations (Loans) R upee Loan Foreign Controlled Company means a firm. Their Rupee resources 2. Taking loans from banks. 5. FCC) Lending to FCC for working capital: Authorized dealers can give Rupee loan to FCC to meet working capital requirements subject to Prudential Regulations. In case of company incorporated inside Pakistan 50% of the shares or more is subscribed by foreign nationals or 50% of the directors or more are foreign nationals In case of equal shareholding. − FCC engaged in manufacturing are permitted to meet their requirements of capital expenditure by: 1. Loans should be contracted on best possible terms. Loans do not involve government guarantee 3. Issuing participation term certificates. − In special circumstances.e.’s Industrial/Investment Policy. Chief executive is foreign national.

FCC and branches of FCC (except banks) are allowed to obtain loans from abroad in foreign currency on repatriable basis for any purpose subject to following conditions: For Principal: There is no ceiling on amount of loan. Period of loan is not less than one year. − Authorized dealer gets satisfaction that applicant is FCC. Repayment period should not be less than 5 years. No facility of absorption of exchange risk by Govt.5% Interest will be paid in arrears on half yearly or yearly basis. − On confirmation. Foreign currency loan for any other purpose: Individuals. Agreement for repatriable loan will be provided to SBP for registration. companies resident in Pakistan. No forward cover. Payment will be subject to deduction of Pakistani taxes. For Interest: Interest rate will not exceed LIBOR+1. − On maturity having received inward remittance. Borrower shall be free to pay tax at a fixed or floating rate according to above formula. FCC can contract loan and repatriate the amount for credit to their Rupee account with authorized dealer. No forward cover will be provided by authorized dealer. Repayment should be made in equal installments. firms. Repayment Schedule will also be provided to SBP for registration along with proceeds realization certificate (after remittance). − While reporting remittance of Principal. a copy of proceeds realization certificate will be attached with FormM. Branches of foreign companies in Pakistan are not allowed to pay interest on such loans. Authorized dealer issues a proceeds realization certificate and record the particulars of loan. . Others: Exchange risk will be borne by borrower. authorized dealer will allow payment of Interest – tax and Principal. − While reporting remittance of interest a certificate confirming applicable LIBOR and Payment of tax will be attached with Form-M. Conditions for repatriable loan: Loan is interest free. of Pakistan. No bank guarantee for securing such loan from Pakistan. − On receipt of loan. − Such loan can be rolled over for further period not exceeding 12 months. Principal and interest will be paid in Pakistan and will not be remitted to abroad. Procedure for obtaining and repayment of such loan: − FCC approaches Authorized dealer. Foreign contractors are not allowed to pay interest. Foreign currency loan for working capital by Pakistani firms and companies functioning in Pakistan: Pakistani firms or companies (except banks) can obtain foreign currency loan on: Non-Repatriable basis Repatriable basis Conditions for non-repatriable loan: Loan would be treated as rupee loan to the extent of rupees generated out of inward remittance.Corporate Laws Made Easy ~ 86 ~ Other Laws − Rate of interest should not exceed 1% over LIBOR.

Export of foreign securities: A Pakistani national can hold foreign securities. securities. It includes transfer of: o Pakistani securities (held by person resident in or out of Pakistan) o Foreign securities (held by Pakistani national) Pledge or hypothecation to non-resident is also prohibited. deposit receipts in respect of deposit of securities and units or sub units of unit trusts but does not include bills of exchange or promissory notes other than govt. sale proceeds will be repatriated to Pakistan. Permission will be granted if authorized dealer declares that o Security will be received back in Pakistan within specified time. Import/Export of Securities: Import of securities (Foreign and Pakistani): No restriction on import into Pakistan whether Pakistani or foreign securities. (Application may also be given for exchange of Pakistani securities with foreign securities) Transfer of securities to non-resident: Transfer of securities to non-resident is prohibited except with permission of State Bank. Break up value of shares (in case of unlisted shares) . Pakistani having dual nationality 3. Price must be paid in foreign exchange through normal banking channel or out of foreign currency account in Pakistan. Foreign national 4.e. To send abroad for sale/transfer. stocks. ii.Corporate Laws Made Easy ~ 87 ~ Other Laws No bank guarantee from Pakistan. Export of Pakistani securities: Specific/general prior approval of SBP through authorized dealer. Price quoted on stock exchange (in case of listed shares) b. he will intimate details to Investment Division at Karachi along with proceeds realization certificate. Non-resident Pakistani 2. Thereafter. debenture stocks. including a foreign national of indo-pak origin (resident in Pakistan) A Pakistani holding dual nationality resident in Pakistan A company registered in Pakistan which is controlled by a person resident outside Pakistan. Foreign Security A security issued elsewhere than in Pakistan and any security which is payable in foreign currency or elsewhere in Pakistan. Person resident outside Pakistan (i. promissory note. Exemption to rule “no transfer of securities outside Pakistan” Issue/transfer/export allowed on repatriation basis to: 1. A firm or trust or mutual fund registered and functioning outside Pakistan Conditions to be satisfied: i. authorized dealer will be free to remit installment of principal and interest on due dates. F oreign E xchange R egulations (Securities) Security includes shares. o If sold. deposit. Agreement will be provided to authorized dealer for registration who will handle all related transactions and on completion of disbursement. he should apply to State Bank through Authorized dealer for export license. Concerned company/non-resident should apply to State Bank through authorized dealer. non-resident) A foreign national. Purchase price is not less than a. debentures. govt.

a statement showing position of balance in SCRA on each Saturday within 2 days of weekend. − Fund available in SCRA can be transferred to: Another country Another foreign currency. money shall be repatriated into Pakistan and account will be closed within one week.Corporate Laws Made Easy ~ 88 ~ Other Laws This exemption applies in following cases: 1. − Account will be credited on proceeds of disinvestments and dividend. Pakistani having dual nationality c. Transfer of shares of above companies (3b) 5. − For unsuccessful applicants. Issued against Foreign currency: − If payment is made in foreign currency to foreign currency account with authorized dealer. − Account will be debited on purchase of quoted shares. − Such account can be fed by: Remittance from abroad. money shall be refunded. Transfer from a Foreign currency account in Pakistan. Issue of right and bonus shares to non-resident holding shares under exemption. A manufacturing company b. − Exchange Entitlement Certificate will be issued by State Bank at average of selected authorized dealers’ buying and selling rates on date of filing of Bill of Entry with Customs. Special instructions regarding shares transferred under CDS of Central Depository Companies: . Placement of new/initial shares with foreign investors by a public or private listed company which is: a. Issue to non-resident against Plant and Machinery: − An application along with import documents shall be submitted to Exchange Policy Department for issue of Exchange Entitlement Certificate. Issue of NIT units to followings: a. Issue of shares out of new public offer (irrespective of nature of business) 2. − PRC is obtained from authorized dealer. authorized dealer will issue a certificate showing date wise deposit and buying exchange rates at separate dates. Transfer of Pakistani securities by non-resident to eligible non-resident on same repairable basis. 4. − Company can issue shares to non-resident up to value mentioned in Exchange Entitlement Certificate. 8. Non-resident Pakistani b. − Authorized dealers will submit to State Bank. Issue of government securities to foreign nationals 7. Foreign nationals Procedure for issue of shares to non-resident: Issued to non-resident out of new public offer: − Company may open foreign currency account in Pakistan or abroad for collection. Trading of quoted shares by non-resident: − Non-residents are allowed to trade freely on stock exchanges in Pakistan. − Non-residents will open “Special Convertible Rupee Account” with authorized dealer. A service organization in sectors open for foreign investors as per Investment Policy of government. In case of subscription directly received in Pakistan. Transfer of listed shares (irrespective of nature of business) 3. without prior approval of State Bank. − For successful candidates. 6. shares may be issued for equivalent rupees as per PRC. − Company issue securities on equivalent rupees at exchange rates shown on certificate.

Corporate Laws Made Easy ~ 89 ~ Other Laws General: − − Special account will be opened at CDC for each non-resident investors. PRCs) will be submitted to company by Participant along with certificate that shares are in the name of CDC and have been deposited/withdrawn from non-resident account at CDC. Subsequent transactions in CDC: − For investment involving SCRA. company will verify holding from its records. authorized dealer will maintain complete records of all transactions and statement of SCRA will be furnished to State Bank. company will obtain requisite documents issued in the name of nonresident e. Initial transfer in CDC: While approving initial transfer: − Company will ensure that shares are registered on repatriation basis in the name of non-resident. − If shares are not so registered. original documents (broker’s memo. − For non-residents investing through SCRA. There shall be no netting or adjustment and payment/receipt in respect of sales/purchase will be settled independently. − For non-residents’ not investing through SCRA. − Authorized dealer will keep it for onward submission to SBP. . Dividend. Right shares: − CDC will issue to respective company a list of beneficial non-resident shareholders.g. company will obtain undertaking cum certificate from authorized dealer. Record shall not be destroyed until audited. PRC and transferee’s certificate (if shares purchased from another non-resident). Documents to be submitted on issue/transfer of securities to non-resident: By company to authorized dealer within 30 days of transfer/issue. − Company will update non-resident’s record and will furnish to authorized dealer. Authorized dealer may also allow remittance in respect of: Dividend (net of taxes) Disinvestment proceeds not exceeding the market value or breakup value Books and audit: Authorized dealer shall maintain complete record of shares held by non-resident including proof and shall produce for audit by inspection team of State Bank. − SECP’s approval − State Bank’s Exchange Entitlement Certificate − Encashment certificate and/or PRCs from authorized dealer − Copy of Board’s resolution Remittance to non-resident through authorized dealer: − − Company may export securities to non-resident on Repatriation basis through authorized dealer. broker’s memo. − For investment not involving SCR. Bonus. MOA/AOA/COI if not already submitted.

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