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2014

Corporate Law and Secretarial


Practices

TOPIC WISE SCENERIO BASED QUESTIONS


COMPILED BY: MUHAMMAD YASIR
M.PHIL SCHOLOR
THE SUPERIOR COLLEGE, UNIVERSITY CAMPUS. | 17-Km Raiwind Road Lahore.

Table of Contents
1.

Introduction of Company ................................................................................................................... 2

2.

Name of a Company ........................................................................................................................... 3

3.

Incorporation of a Company, MOA, AOA .......................................................................................... 4

4.

Alteration of MOA, AOA....................................................................................................................... 9

5.

Prospectus ......................................................................................................................................... 10

6.

Directors of a Company ................................................................................................................... 12

7.

Chief Executive Officers ................................................................................................................... 19

8.

Company Meetings............................................................................................................................ 21

9.

Dividends ........................................................................................................................................... 27

10.

Company Auditors ........................................................................................................................ 30

11. Secretarial Practices ........................................................................................................................ 33


12. Shares and Share Capital ................................................................................................................ 36
13. Alteration and Reduction of Share Capital .................................................................................... 39
14.

Winding up of a Company ........................................................................................................... 41

15.

Miscellaneous Question ............................................................................................................... 45

1. Introduction of Company
A. Fashion Textiles Limited, whose 85 % of sales comprises of exports, has opened a branch
office in South Africa. Mr. Asif, who is responsible for managing the branch office, has
informed the company secretary that he needs companys common seal that will be required
while submitting various documents under the South African regulations.
Advise how the company can authorize Mr. Asif to use the companys common seal under the
provisions of the Companies Ordinance, 1984.

B. On January 1, 2010 Star International Limited (SIL), a company incorporated in Italy, acquired
majority shareholding in Beta Industries Limited, a company listed on the Karachi Stock
Exchange. SIL wants to change the name of Beta Industries Limited to Star Industries Pakistan
Limited, as it believes that on account of international reputation of Star International, the
local sales will improve substantially.

Describe the procedure that would have to be followed to change the name of the
company.

Describe the conditions which the company would be required to comply with after
the change of its name.

C. Alfalah Associates is an association of persons. It wants to register itself as a limited company


but does not wish to include the word Limited in its name. In view of the provisions of the
Companies Ordinance, 1984 you are required to explain the conditions:

That need to be satisfied before the Commission may issue it a license and allow it to
dispense with the word Limited from its name.

Under which the license may be revoked and its consequences.

D. A company duly registered under the Companies Ordinance, 1984 is a separate legal entity
and a distinct person from the shareholders. Do you agree? Elaborate.

2. Name of a Company
(Sec 37-41, 143, 144)

A. What restrictions are laid down in the law relating to naming a new company?
B. A foreign company is in the process of selecting a name for its subsidiary which is being
incorporated as a limited liability company in Pakistan. You are required to inform them
about the prohibitions of certain names, under the Companies Ordinance, 1984.
C. Describe the restrictions that have been mentioned in the Companies Ordinance, 1984
regarding selection of names of companies.
D. A change in the name of company requires a special resolution and approval of Registrar
in writing. Explain exception to it.
E. Shafeeq Refrigerators (Pvt.) Limited is engaged in the trading of refrigerators. It is now
planning to start the business of air conditioners and therefore wants to change its name
to Shafeeq Electronics (Pvt.) Limited. Describe the procedure that the company will be
required to follow.
F. On January 1, 2010 Star International Limited (SIL), a company incorporated in Italy,
acquired majority shareholding in Beta Industries Limited, a company listed on the
Karachi Stock Exchange. SIL wants to change the name of Beta Industries Limited to Star
Industries Pakistan Limited, as it believes that on account of international reputation of
Star International, the local sales will improve substantially.
Describe the procedure that would have to be followed to change the name of the company.

G. Describe the conditions which the company would be required to comply with after the
change of its name.

3. Incorporation of a Company, MOA, AOA


((Sec 15-19, 26, 27, 29, 30-36, 43, 47, 142, 145))
A. A company wishes to borrow a loan for the purposes of its business. Can it do so even if no
express provision is contained in its Memorandum of Association?
B. On 29 April 2012, a memorandum of association of AB Limited was filed for registration in
the office of Registrar. However, on 25 May 2012, a letter from the registrar office was
received by the subscribers to the memorandum in which the registration was refused on the
ground that the objects stated in the memorandum were inappropriate. Describe what
course of action is available to AB Limited in the above situation, according to the Companies
Ordinance, 1984.
C. In the annual general meeting of Sabzazar Limited held on September 29, 2009 some of the
shareholders have raised the following objections:
o Notice of the annual general meeting was not received by them although they are
resident in Pakistan and their registered addresses have also been provided to the
company. Comment.
D. Cannon Industries Limited, a listed company, wishes to change its name to Reliance Foods
Limited because the management feels that the change in name would help in rebranding
and rebuilding the image of the company and in attracting more customers.
o You are required to explain the requirements of the Companies Ordinance, 1984
which the company is required to comply with, in this regard. Also describe the effect
of such change on the rights and obligations of the company.
E. List the conditions specified under the Companies Ordinance, 1984 which a listed company is
required to comply with before placement of its quarterly accounts on its website.
F. Validity of a Certificate of Incorporation cannot be disputed. Comment.
G. A Malaysian company is interested in incorporating a limited liability company in Pakistan.
Discuss provisions of the Companies Ordinance, 1984, relating to the following: contents,
printing and signature of the Articles of Association.
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H. Briefly describe the provisions of Companies Ordinance, 1984 relating to alteration of the
objects of a company.
I. M/s Polo Enterprises has been a well-established partnership firm which submitted its
documents for registration as private limited company with the Registrar of Companies. The
Registrar has refused to register the memorandum of association. You are required to explain
to the management, the steps which they may take in such a situation.
J. A number of shareholders of Nazeer Industries Limited want to hold an extraordinary general
meeting to discuss an important matter relating to the company.
o In view of the provisions contained in the Companies Ordinance, 1984 explain: (a)
the conditions under which it would become mandatory for the company to
convene the meeting.
o The rights of the concerned shareholders in case the company fails to convene the
meeting
K. Bilal Garments Limited (BGL) has recently been incorporated in Pakistan. However, prior to
obtaining the certificate of commencement of business, BGL has entered into an agreement
with Taqi Engineering Limited (TEL) for the supply and installation of machinery at its factory.
BGL has also signed an agreement with a commercial bank for a short term finance facility for
payment of advance to TEL.
o In the light of the provisions of the Companies Ordinance, 1984 comment on the
legality and the implication of entering into the above agreements.
L. Mr. Babar is currently working as a Marketing Manager in ST Limited (STL). The management
intends to appoint him as the Chief Executive of the company. He is willing to accept the offer
and has requested for a loan of Rs. 10 million. Moreover, he had also taken a loan in 2009, of
which Rs.1 million is still outstanding. State the conditions as specified in the Companies
Ordinance, 1984 which STL would need to comply with, in respect of the above loans.
M. The general meeting of VX Limited, a listed company, was convened on 30 May 2012.
However, only four shareholders turned up to attend the meeting. Explain how VX Limited
should deal with the above situation in the light of Companies Ordinance.

N. RK Limited (RKL), a listed company, holds 6.3 million ordinary shares of TK (Private) Limited
(TKPL) whose paid-up capital consists of 10 million ordinary shares of Rs. 10 each. The
remaining shares are held by Mr. Adnan and his family. The Board of TKPL consists of eight
directors of which five directors represent RKL while the remaining three directors, including
the chief executive, are representatives of Mr. Adnan and his family. RKL is presently
considering the following proposals:
o To appoint one of the directors representing RKL, as the chief executive of TKPL,
in place of the existing chief executive.
o To appoint BL & Co., Chartered Accountants, as auditors of TKPL in the
forthcoming annual general meeting. The spouse of one of the partners of BL
Associates holds one hundred thousand shares in TKPL.
o To pledge TKPLs inventories as security against a loan to be obtained by an
associated company of TKPL.
o Comment on the above proposals in the light of provisions contained in the
Companies Ordinance, 1984.
O. Mr. Hameed, who is a director in ABC Limited, a listed company, is planning to move to
Europe for one year to set up his own business. In the light of Companies Ordinance, 1984
you are required to:
o Respond to his request for advice, as regards his responsibilities, under the
Companies Ordinance 1984, in respect of:

Attending the annual general meeting of the company.

Attending the board meetings of the company.

o Discuss the conditions under which he may be allowed to assign his office to
another person.
o State the procedure and the conditions to be complied with if the company wants
to remove Mr. Hameed from the directorship of the company, under each of the
following assumptions:

He was elected as a director of the company.

He became the director of the company by subscribing to the


memorandum of association of the company.

P. Western Cement Limited (WCL) has recently formed a provident fund for the benefit of its
employees. In view of the provisions contained in the Companies Ordinance, 1984 you are
required to advise :
o The directors of WCL and
o The trustees of Provident Fund about their responsibilities with respect to the
amount to be contributed to the fund and investment thereof.
Q. An Extraordinary General Meeting of Mastermind Technologies Limited (MTL), a listed
company, was scheduled to be held on October 31, 2009. The directors adjourned the
meeting for the next week as the quorum was not present within fifteen minutes of the
scheduled time. Based on the provisions of the Companies Ordinance, 1984, you are required
to comment on the following:
o The decision of the directors to adjourn the meeting, assuming:

The meeting was called upon the requisition of the members.

The meeting was called by the directors.

o The impact of the adjournment on the validity and rights of proxies which were
deposited with the company before adjournment.
o The validity of the resolution passed at the adjourned meeting.
R. Karachi Telecommunication (Private) Limited (KTL) was incorporated on 1st March, 2009
under the Companies Ordinance, 1984. Its directors have decided to hold the first Annual
General Meeting (AGM) of the company on August 10, 2010, for placing the first audited
financial statements for the period ended March 31, 2010, for approval. Comment on the
decision of the directors, in the light of provisions contained in the Companies Ordinance,
1984.
S. There are allegations in the press and serious charges have been leveled against STR
Petroleum Limited about misuse of public funds by the management. Zafar, a director of the
company wants to inspect the books of account, in order to ascertain whether the allegations
are true. As Zafar does not have adequate knowledge of accounting, he intends to examine
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the books of account in the presence of his friend Arif, who is a chartered accountant. You
are required to advise the company in respect of the above matter under the provisions of
the Companies Ordinance, 1984.
T. Mr. Waleed has acquired 3 million ordinary shares of Acquired Limited whos paid up share
capital consists of 22 million ordinary shares of Rs. 10 each. The election of the directors of
the company has recently been concluded. Mr. Waleed, being confident of holding a
sufficient number of shares to be elected as a director, has requested the management to
arrange a fresh election. Based on the provisions contained in the Companies Ordinance,
1984 explain whether and under what conditions a fresh election of the directors may be
held.
U. In the annual general meeting of Sabzazar Limited held on September 29, 2009 some of the
shareholders have raised the following objections:
o Shareholders were not allowed to make extracts from the register of members on
the day on which the election of directors was held.
o 10,000 shares of a subsidiary, which are the property of the company, are held in
the name of a director of the company.
o The surplus on revaluation of fixed assets was credited to the reserves of the
company and later used to pay dividend.
o One of the directors is not a member of the company
You are required to satisfy the shareholders by explaining the relevant provisions, if any,
as contained in the Companies Ordinance, 1984.
V. Explain the provisions specified in the Companies Ordinance, 1984 relating to requirements
to be completed before the commencement of business by a public company.
W. The management of Real World (Pvt.) Limited and Fantasy World (Pvt.) Limited intend to
enter into a joint venture agreement under which they would implement a seaside holiday
resort project. However, the Company Secretary has informed that the Memorandum of
Association of Fantasy World (Pvt.) Limited does not authorize the Company to enter into a
joint venture agreement.

Describe the procedure that would have to be followed by Fantasy World (Pvt.) Limited
for making the necessary amendments in its Memorandum of Association.

4. Alteration of MOA, AOA


(Sec 20-25, 28, 108)

A. The Directors of Worldwide Motors Limited (WML) and its subsidiary Worldwide Autos
(Private) Limited (WAPL) have decided in their respective board meetings to shift their
registered offices to Landmark Centre, G.T. Road, Lahore. The present addresses of the
registered offices are:
- Worldwide Motors Limited, 101, Hali Road, Lahore.
- Worldwide Autos (Private) Limited, 2nd Floor, Modern Avenue, Peshawar.
You are required to list the procedures to be followed by each company for shifting its
registered office, as specified under the provisions of the Companies Ordinance, 1984 .
B. The directors of Haq Tractors Limited have decided to acquire the entire shareholding of
Razzak Tractors Limited. However the object clause in the memorandum of association does
not allow the company to carry out such a transaction. Prepare a summary of necessary steps
which the company should take in order to alter the object clause.
C. The management of Real World (Pvt.) Limited and Fantasy World (Pvt.) Limited intend to
enter into a joint venture agreement under which they would implement a seaside holiday
resort project. However, the Company Secretary has informed that the Memorandum of
Association of Fantasy World (Pvt.) Limited does not authorize the Company to enter into a
joint venture agreement. Describe the procedure that would have to be followed by Fantasy
World (Pvt.) Limited for making the necessary amendments in its Memorandum of
Association.
D. How can a company generally alter its memorandum and articles of association and what are
the effects of such alteration?

5. Prospectus
(Sec 52-66)

A. Quite often, a prospectus inviting persons to subscribe for shares in a company contains a
statement from person(s) who are experts in their respective fields.

Describe the term Expert as explained in Companies Ordinance, 1984 in the above
context.

Narrate the conditions that a company should comply with if its prospectus contains
a statement by an expert.

B. On 12 July 2011, JFK Limited issued a prospectus which stated that an application has been
made for permission for the shares being offered, to be dealt on the Karachi Stock Exchange.
Explain the responsibilities of the directors regarding the subscription money received and
the consequences, if the Karachi Stock Exchange refuses to grant such permission.
C. Mr. Zafar a director of Hilltop Limited, a listed company, has received a notice making him
responsible for incorrect information contained in the prospectus issued by the company and
also on account of the companys failure to meet certain requirements related to the issue of
prospectus. You are required to list the relevant provisions of the Companies Ordinance, 1984
on the basis of which Mr. Zafar can claim relief from any liability.
D. Deo Limited (DL) has published a prospectus on March 1, 2009. The subscription list is due to
open on April 5, 2009. Explain whether the company is in compliance with the provisions of
the Companies Ordinance, 1984 regarding the publication of its prospectus. What relaxation
can DL avail, in this regard?
a. Identify the places where DL is required to make available the copies of its prospectus.
E. Mr. Ahmed placed the initial capital for the formation of Mr. Kamals company and also
assisted in circulating the companys prospectus. Company wishes to include a statement by
Mr. Ahmed as an expert regarding a technical issue. Can Mr. Ahmed issue such a statement?
Please reply in the light of provisions of the Companies Ordinance 1984.
F. The registrar shall not register a prospectus unless certain requirements of the companys
ordinance, 1984 are complied with. You are required to list such requirements.
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G. A company wants to vary the terms of contract mentioned in the Prospectus. Advise the
management.
H. Specify the competent authorities who shall be required to grant their approval in the
following situations: Variation in the terms of a contract mentioned in the prospectus of the
company.
I. Explain whether or not the following statements are in accordance with the provisions of the
Companies Ordinance, 1984. Support your answer with reasons. A company cannot vary the
terms of the contract mentioned in the prospectus or statement in lieu of prospectus for a
period of one year.
J. Name the persons who may be liable to pay compensation in case of misstatement in
prospectus.
K. Enumerate the differences between Prospectus and Statement in Lieu of Prospectus .
L.

What is the difference between prospectus and offer for sale?

M. UHY Limited intends to raise funds through issuance of shares to the public. Proceeds of the
issue would be utilized for installation of a new plant. The directors plan to issue the
prospectus on 10 September 2012. The subscription list will be opened in the second or the
third week of October 2012. An expert opinion would also be required to be included in the
prospectus. You are required to advise the company, based on the provisions of the
Companies Ordinance 1984, in respect of the following:

Date of publication of the prospectus and the opening of subscription list.

The places where UHY would be required to make available copies of its prospectus.

The conditions that UHY would be required to comply with in respect of the inclusion
of the statement by the expert.

N. Mr. Zafar a director of Hilltop Limited, a listed company, has received a notice making him
responsible for incorrect information contained in the prospectus issued by the company and
also on account of the companys failure to meet certain requirements related to the issue of
prospectus. You are required to list the relevant provisions of the Companies Ordinance, 1984
on the basis of which Mr. Zafar can claim relief from any liability.
O. Can the promoters of a company issue Prospectus before registration of a company?
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6. Directors of a Company
(Sec 111-112, 174-197A, 214-224)

A. The election of directors of Nihal Motors Limited (NML), a listed company, was held at the
Extraordinary General Meeting where seven out of nine candidates were to be elected as
directors. After the meeting was over, an email was received at NML that Mr. Nihal had
expired in a hospital in England. However, the time of Mr. Nihals death was not mentioned.
The result of the meeting shows that Mr. Nihal had received the sixth highest number of votes
in the election. In the light of Companies Ordinance, 1984 state how the directors should deal
with the above situation.
B. New Chemicals Limited (NCL) is a listed company. The company is in the process of finalization
of a financing facility with a bank. The bank requires a copy of the board resolution for
approval of the terms of the financing. Since five out of seven directors of the company are
currently out of the country, it is not possible for the secretary to convene the meeting of the
board of directors.

In the light of the provisions of the Companies Ordinance, 1984 explain what
alternative course of action is available to the company.

List the steps that NCL would be required to take, if nothing in this regard is stated
in the Articles of Association of the Company.

C. Nihal Limited (NL) is a listed company.


a. Narrate the conditions which a director of NL would be required to comply with under
Companies Ordinance, 1984 in case he/she makes a gain on the sale of companys
shares.
b. Identify the persons other than the directors, to whom the above provisions are also
applicable.
D. Mr. Bilal is the chief executive of Power Shipping Limited (PSL), a listed company. He has
agreed to provide a personal loan of Rs. 5 million to his cousin for purchase of PSLs shares.
The loan will be repaid after two years and would carry a mark-up of 5% per annum. Suggest

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the actions which Mr. Bilal should take to ensure that the provisions of Companies Ordinance,
1984 and the Code of Corporate Governance, 2012 are complied with.
E. Mr. Babar is currently working as a Marketing Manager in ST Limited (STL). The management
intends to appoint him as the Chief Executive of the company. He is willing to accept the offer
and has requested for a loan of Rs. 10 million. Moreover, he had also taken a loan in 2009, of
which Rs.1 million is still outstanding. State the conditions as specified in the Companies
Ordinance, 1984 which STL would need to comply with, in respect of the above loans.
F. Abid, Qasim and Tariq were the only members of Alpha Securities Limited, a public company
and were elected as directors on 30 June 2009. Qasim expired on 2 February 2012 in a road
accident.

Briefly describe the provisions of the Companies Ordinance, 1984 relating to the
casual vacancy as described above.

Discuss the consequences if Abid and Tariq failed to fill the above vacancy.

G. Mr. Hameed, who is a director in ABC Limited, a listed company, is planning to move to
Europe for one year to set up his own business. In the light of Companies Ordinance, 1984
you are required to:
a. Respond to his request for advice, as regards his responsibilities, under the Companies
Ordinance 1984, in respect of:
i. Attending the annual general meeting of the company.
ii. Attending the board meetings of the company.
b. Discuss the conditions under which he may be allowed to assign his office to another
person.
c. State the procedure and the conditions to be complied with if the company wants to
remove Mr. Hameed from the directorship of the company, under each of the
following assumptions:
i. He was elected as a director of the company.
ii. He became the director of the company by subscribing to the memorandum
of the company.

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H. An equitable mortgage was created on the factory building of Asif Textile Mills Limited, a
listed company, to secure a long term loan obtained from Mrs. Wasif, who is the spouse of a
director of the company. All the eight directors of the company were informally aware about
Mr. Wasifs interest in the transaction. The board of directors approved the transaction in
their meeting which was attended by five directors.
Upon inspection of the register of contracts in which directors are interested, a member
of the company filed an appeal with the SECP, claiming that the mortgage is invalid
because Mr. Wasif, who is an interested director, had also voted on the matter and
therefore the contract is void.
In the light of the provisions of Companies Ordinance, 1984 you are required to:

Evaluate the above situation and comment thereon in the light of the
provisions of the Companies Ordinance, 1984.

Explain the manner in which a general notice, regarding disclosure of


interest in a contract, may be given by directors of a company.

I. Mr. Waleed has acquired 3 million ordinary shares of Acquired Limited whos paid up share
capital consists of 22 million ordinary shares of Rs. 10 each. The election of the directors of
the company has recently been concluded. Mr. Waleed, being confident of holding a
sufficient number of shares to be elected as a director, has requested the management to
arrange a fresh election. Based on the provisions contained in the Companies Ordinance,
1984 explain whether and under what conditions a fresh election of the directors may be
held.
J. During the past 12 months Mr. Sohails holding in shares of ABC Ltd (a listed company) has
increased to 13%. Recently, he has written a letter to the company seeking appointment on
its Board of Directors. The company secretary had advised that since the election of directors
was held in the preceding annual general meeting, he cannot be admitted on the board till
the next elections become due. Mr. Sohail is not satisfied with the response and has sought
your advice on the matter. You are required to briefly discuss what course of action is
available to him.

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K. A director of a listed company has proposed to nominate another person to act in his place
as he would be going to Japan to undertake a technical training course. You are required to
state the requirements to be complied with under the Companies Ordinance, 1984.
L. ABC Limited, a listed company, is entering into a contract to purchase machinery worth Rs.
50 million from XYZ (Private) Limited, where the spouse of the chief executive of ABC limited
is also a director. The contract for purchase of said machinery is to be placed before the board
of directors of the company for approval. State the relevant rules as given in the Companies
Ordinance, 1984 and describe the procedure which ABC Limited should follow while entering
into the contract.
a. Explain whether XYZ (Private) Limited will have to follow and comply with the same
rules as are applicable to ABC Limited.
M. Mr. Abbasi is a director of Bright Limited, a listed company. His nephew wants to purchase
shares of Bright Limited. Part of the funds required to make the investment shall be provided
by Mr. Abbasi at a profit of 3% per annum. Describe the actions which Mr. Abbasi should take
to ensure that he complies with the relevant provisions contained in the Companies
Ordinance, 1984 and the Code of Corporate Governance.
N. Explain whether a non-member can become the director of a company.
O. A strategic investor has acquired management control of a company through the privatization
program. The directors of the company were elected only a year ago and still have an
unexpired term of 2 years. Outline the process under which strategic investors will induct
their own directors on Board of company.
P. Directors of a public unlisted company had fixed the number of directors for election at eight.
The present directors being eligible had offered themselves for re-election at the same board
meeting. Considering the fact that there has been no change in the structure of shareholding,
the Board of Directors passed a resolution appointing them as directors. Comment on above
corporate action with reference to the provisions of the Companies Ordinance, 1984.
Q. A shareholder in a listed company has acquired about 8% shares of the company. He intends
to contest for election to the Board of Directors of the company in the forthcoming elections.

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What corporate secretarial steps need to be taken by the member and the company in this
regard?
R. Mr. Siddiqui has been selected for appointment as Chief Executive of M/s Cotton (Private)
Limited. The proposed terms of appointment also include provision of loan of Rs.10 million
each for purchase of a house and shares of M/s Kapas Limited which is listed on all the three
stock exchanges of Pakistan. M/s Kapas Limited and two of its directors hold 67% shares of
M/s Cotton (Private) Limited. You being the secretary of the company are required to give
your comments on the above terms in the light of the provisions of the Companies Ordinance,
1984.
S. Answer the following in the context of a listed company: Under the Companies Ordinance,
1984: In addition to the directors elected to the Board of Directors, who is entitled to attend
the Board meetings and what would be their voting rights thereat?
T. Who is considered to be a beneficial owner of shares under the provisions of the Companies
Ordinance, 1984? What obligations do the relevant provisions of law place on him and the
time period in this regard? Obligation of the company and penalties under law are not
required to be replied.
U. How a director of a company may make an assignment of office? Is it possible for a director
to appoint his alternate and if so under what conditions?
a. List any five contents of report of board of directors required under Companies
Ordinance, 1984.
b. Who can sign the report of directors?
V. Mr. Ibrahim is the Chief Executive of LMN Limited, a listed company. He has requested the
company for a loan of Rs 30.0 million. His annual remuneration is Rs 28 million. State the
conditions mentioned in the Companies Ordinance, 1984, under which such a loan may be
advanced by the company.
W. The Board of Directors of Sunrise Limited (SL), a listed company, intends to give a loan of ten
million rupees to Moonlight (Private) Limited (MPL). The loan would be repayable in two
years and would carry interest at the rate of twelve per cent per annum. The CEO of SL is also
on the Board of Directors of MPL and is its major shareholder.
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Required:
Describe the requirements of Companies Ordinance, 1984 that should be complied with
by the Board of Directors of SL in respect of the proposed loan to MPL.
X. Explain the conditions specified in the Companies Ordinance, 1984 under which a person may
request a listed company to hold election of directors prior to the end of the term of the
present board of directors.
Y. In view of the provisions of the Companies Ordinance, 1984 explain the conditions which are
required to be complied with, if a company wishes to grant loan to its director.
Z. Shams Cement Limited is a company listed on Lahore Stock Exchange. Five of its directors
belong to the same family. The remaining directors represent a financial institution and
minority shareholders. The company has approached a bank for financing of its expansion
project. Beside other collaterals, the bank is asking for making the liability of the directors
unlimited.

Describe the procedure by which the liability of the directors can be made
unlimited.

The directors representing financial institution and minority shareholders have


refused

To accept the proposal. Explain whether the remaining directors can make the
liability of the dissenting directors unlimited.

AA.XYZ Limited, a listed company, has decided to hold an extraordinary general meeting (EOGM)
on April 30, 2010 for election of directors. The company has not yet determined the number
of directors to be elected. Explain the relevant rules for fixing the number of directors to be
elected, under the Companies Ordinance, 1984.
BB. During the past 12 months Mr. Sohails holding in shares of ABC Ltd (a listed company) has
increased to 13%. Recently, he has written a letter to the company seeking appointment on
its Board of Directors. The company secretary had advised that since the election of directors
was held in the preceding annual general meeting, he cannot be admitted on the board till
the next elections become due. Mr. Sohail is not satisfied with the response and has sought

17

your advice on the matter. You are required to briefly discuss what course of action is
available to him.
CC. Explain the exception to the following provisions as specified under the Companies
Ordinance, 1984 : In a meeting of the board of directors, no director shall take any part in the
discussion of, or vote on, any contract or arrangement entered into, or to be entered into, by
or on behalf of the company, if he is in any way, whether directly or indirectly, concerned or
interested in the contract or arrangement, nor shall his presence count for the purpose of
forming a quorum at the time of any such discussion or vote; and if he does vote, his vote
shall be void.
DD.

Narrate the responsibilities of a company or of its directors in the following

circumstances:

Transfer of 5,000 shares held by the shareholder of a listed company to his sister
who is the wife of a Director of the company.

A notice is given to a listed company by a member of the company, 17 days before


the annual general meeting, proposing for a change in the auditors of the
company.

An alteration in Articles of Association of the company is approved by passing a


resolution in the annual general meeting.

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7. Chief Executive Officers


(Sec 198-204A, 206, 207)

A. In the first meeting of Board of Directors of Hamid Textile Mills Limited (HTML), a listed
company, the name of Mr. Imran was proposed for appointment as chief executive of the
Company. Mr. Jamal opposed the proposal on the following grounds:
i. Mrs. Imran is the Chief Executive Officer of Fahad Textile Mills (Private)
Limited.
ii. Mr. Imran is involved in the business of stock brokerage.
iii. Mr. Imran is not a member of HTML. Comment on the objections raised by Mr.
Jamal in the light of the provisions of the Companies Ordinance, 1984.
b. XY Limited (XYL) has recently commenced business. The company has appointed
various distributors for the supply of its products. The distributors have placed
amounts ranging between Rs. 2 - 5 million with XYL as security deposits.
c. Briefly describe the relevant provisions of the Companies Ordinance 1984, which XYL
would have to comply with.
B. In the first meeting of Board of Directors of Alif Cement Ltd a public listed company, Mr. Raoof
proposed the name of Mr. Haseeb for appointment as chief executive of the Company. Mr.
Zahid opposed the proposal on the following grounds:
a. Mr. Haseeb is also the Chief Executive of Bay Cement (Pvt) limited which holds 15%
shares in Alif Limited.
b. He is involved in the business of stock brokerage.
Comment on statement of Mr. Zahid in the light of the provisions of the
Companies Ordinance, 1984.
C. Mr. Zameer is the first chief executive of Ryan Industries Limited, a public company. The
directors of the company are not satisfied with his performance. In view of the provisions of
the Companies Ordinance, 1984 specify the term of office of Mr. Zameer and explain how he
can be removed before expiry of the above term.

19

Describe the provisions of the Companies Ordinance, 1984 which restrict the chief
executive of a public company from carrying on any business competing with the
companys business.

D. In the first meeting of Board of Directors of Alif Cement Ltd a public listed company, Mr. Raoof
proposed the name of Mr. Haseeb for appointment as chief executive of the Company. Mr.
Zahid opposed the proposal on the following grounds: (i) Mr. Haseeb is also the Chief
Executive of Bay Cement (Pvt.) limited which holds 15% shares in Alif Limited. (ii) He is
involved in the business of stock brokerage.
Comment on the statement of Mr. Zahid in the light of the provisions of the Companies
Ordinance, 1984.

20

8. Company Meetings
(Sec 157-173)

A. On declaration of the result of voting in the Annual General Meeting (AGM) by the chairman
of AS Limited, a public company, few shareholders demanded a poll. The chairman refused
to hold the poll and declared the result of voting on show of hands. In the light of Companies
Ordinance, 1984,
a. How would you assess whether or not the Chairmans decision of not holding a poll
was valid?
b. Explain whether the Chairman can delay the holding of poll to a date subsequent to
the date of AGM.

B. The Annual General Meeting of Trade Limited was held at 9:15 a.m. on 31 October 2012.
Certain shareholders of the company have lodged following complaints with the companys
secretary.
i. Since the meeting could not commence at the scheduled time i.e. 9:00 a.m.; it
became invalid and should be called again.
ii. A resolution passed in the meeting was approved by a show of hands.
However, a poll should have been carried out.
iii. Mr. A who voted for a resolution was represented through a proxy which was
deposited at 5:01 p.m. i.e. after office hours on 29 October 2012. Further,
since 30 October 2012 was a public holiday, the condition of depositing the
proxy at least 48 hours before the commencement of the meeting, was not
met.
iv. Mr. G who holds 50,000 shares was represented by two proxies i.e. Mr. C
(30,000 shares) & Mr. D (20,000 shares). Only proxy with 30,000 shares was
counted for the purpose of voting.
v. JKM Limited holding 20,000 shares of the company was represented by Mr.
Waheed, who is neither a director nor an employee of JKM Limited.

21

b. Comment on the validity of each of the above complaints in the light of Companies
Ordinance, 1984.
c. Describe the circumstances under which a court may declare the resolution passed in
the above meeting or the entire proceedings of the meeting as invalid under the
Companies Ordinance, 1984.

C. The general meeting of VX Limited, a listed company, was convened on 30 May 2012.
However, only four shareholders turned up to attend the meeting. Explain how VX Limited
should deal with the above situation in the light of Companies Ordinance, 1984.

D. A number of shareholders of Nazeer Industries Limited want to hold an extraordinary general


meeting to discuss an important matter relating to the company. In view of the provisions
contained in the Companies Ordinance, 1984 explain:
a. The conditions under which it would become mandatory for the company to convene
the meeting.
b. The rights of the concerned shareholders in case the company fails to convene the
meeting.

E. An Extraordinary General Meeting of Mastermind Technologies Limited (MTL), a listed


company, was scheduled to be held on October 31, 2009. The directors adjourned the
meeting for the next week as the quorum was not present within fifteen minutes of the
scheduled time. Based on the provisions of the Companies Ordinance, 1984, you are required
to comment on the following:
a. The decision of the directors to adjourn the meeting, assuming:
i. The meeting was called upon the requisition of the members.
ii. The meeting was called by the directors.
b. The impact of the adjournment on the validity and rights of proxies which were
deposited with the company before adjournment.
c. The validity of the resolution passed at the adjourned meeting.

F. Karachi Telecommunication (Private) Limited (KTL) was incorporated on 1st March, 2009
under the Companies Ordinance, 1984. Its directors have decided to hold first Annual General
Meeting (AGM) of company on August 10, 2010, for placing the first audited financial
22

statements for period ended March 31, 2010, for approval. Comment on decision of the
directors, in the light of provisions contained in the Companies Ordinance, 1984.

G. The annual general meeting (AGM) of Nizam Industries Limited was held on November 16,
2009. Some of the shareholders are not satisfied with the decisions taken at the meeting and
are of the opinion that the directors have manipulated the situation in order to obtain certain
approvals in the annual general meeting. You are required to explain how and under what
conditions the proceedings of the AGM can be declared as invalid.

H. Under the Companies Ordinance, 1984 describe the circumstances in which proceedings of a
general meeting may be declared invalid by the court. Who is eligible to make petition in this
regard.

I. Explain the provisions of the Companies Ordinance, 1984 with regard to the quorum of a
general meeting of a company listed on stock exchange.

J. Arif & Co., Chartered Accountants were to be re-appointed as auditors at the Annual General
Meeting of Rose Limited, an unlisted company. The meeting was held on October 31, 2007
but stood adjourned without discussing the appointment of auditors. Explain the legal
position of the auditors in such a situation.

K. See-green Limited, a public limited company, had convened a general meeting at 9:00 a.m.
on March 25, 2008 to consider and if deemed fit, pass a special resolution approving the
disposal of a part of the companys undertaking. The meeting commenced at 9:16 a.m. as the
quorum was not present at the scheduled time and was attended by 100 members (including
10 members represented through proxies) holding 1,000,000 shares in aggregate. After a
heated debate, voting was held through show of hands and the chairman declared resolution
successful as 78 votes were casted in favor of the resolution. On March 31, 2008, the
shareholders who gave a dissenting vote in the meeting, lodged a protest with the company
claiming that the resolution was invalid on account of the following reasons:
a. Mr. A, who voted for the resolution was represented through a proxy which was
deposited at 5:01 p.m. i.e. after office hours on March 22, 2008. Moreover, since
March 23rd was a public holiday, the condition of depositing the proxy at least 48
hours before the meeting, could not be met.
23

b. Mr. B a shareholder with a holding of 50,000 shares was represented by two proxies
i.e. Mr. C (30,000 shares) & Mr. D (20,000 shares). Both proxies were counted for the
purpose of voting.
c. JK (Pvt) Limited holding 20,000 shares of the company, were represented by Mr.
Sameer, who is neither the director nor the employee of the company. He also voted
in favor of the resolution.
d. The shareholders who lodged the protest hold 300,000 shares and therefore the
resolution was approved by shareholders holding 70% voting rights only.
e. Since the meeting could not be held on time, it became invalid and should be called
again.
Discuss the validity of the resolution under the Companies Ordinance 1984, in view of
the complaint lodged by the dissenting shareholders.

L. A resolution was put before the members in an Annual General Meeting, for voting on a show
of hands. Before the announcement of the result, Mr. Shahab Khan, a shareholder,
demanded a poll, which was refused by the Chairman. Discuss the legality of the chairmans
decision in the light of the Companies Ordinance.

M. A member of a company seeks your guidance regarding the procedure for inspection of the
minutes book of the general meetings. Discuss the requirements relating to the maintenance
of minutes and its inspection by the members.

N. Members of XYZ limited holding 20% of the voting power submitted a requisition to hold an
extraordinary general meeting of the company to remove the auditor of the company. The
company did not call the extra ordinary general meeting and also did not allow the holding
of the meeting at the registered office of the company. The said meeting was held at some
other place and resolution for the removal of the auditor was passed. Examine the
requirements and discuss the validity of the said meeting and resolution passed.

O. A general meeting of a listed company was adjourned by the chairman for want of quorum.
Fresh notice was not served for the adjourned meeting. You are required to explain the
following:
a. Whether a notice is required to be served for the adjourned meeting.
24

b. The minimum number of members required to be present in a general meeting.


c. What shall be the requirement in case of an adjourned meeting?

P. Annual General Meeting of a Public Company was scheduled to be held on March 15, 2006.
Mr. A, a shareholder, issued two Proxies in respect of the shares held by him in favor of Mr.
X and Mr. Y. The proxy in favor of X was lodged on March 12, 2006 and the one in favor
of Mr. Y was lodged on March 15, 2006. The company rejected the proxy in favor of Mr. Y
and accepted the one in favor of Mr. X. Explain whether the rejection by the company is in
order?

Q. State the provisions contained in the Companies Ordinance 1984 relating to extension in the
date of holding the Annual General Meeting.

R. The annual general meeting (AGM) of Nizam Industries Limited was held on November 16,
2009. Some of the shareholders are not satisfied with the decisions taken at the meeting and
are of the opinion that the directors have manipulated the situation in order to obtain certain
approvals in the annual general meeting. You are required to explain how and under what
conditions the proceedings of the AGM can be declared as invalid.

S. Mr. Shakeel has significant shareholdings in various public and private companies. He is not
satisfied with some of the resolutions passed by such companies by show of hands. You are
required to advise him as regards the following:

What conditions would he need to satisfy if Mr. Shakeel wishes to request for a
poll?

Explain whether a company is required to oblige him if he wishes to satisfy himself


about the validity of the results of voting by poll.

T. The Companies Ordinance, 1984 contains certain safeguarding provisions for minority
shareholders. Two of these provisions provide mechanism for providing relief and
safeguarding their interests provided the shareholders own certain percentage of voting
shares. Briefly describe such provisions.

U. Whether it is possible under the provisions of articles of association to provide for a shorter
or larger number of members to be a quorum for a meeting?

25

a. Can proceedings of a general meeting may be declared invalid. If so under what


circumstances and who may initiate this. Is there any time limitation for this?

V. The Board of Directors of Classic Paints Limited, a public listed company, has called an
Extraordinary General Meeting on the requisition of the shareholders holding 10% of the
voting power of the company. Approximately twenty minutes before the commencement of
the meeting, the Chairman of the Board of Directors informed the Company Secretary of his
inability to attend the meeting due to the death of a close relative.
Required:

What would be the quorum of the above meeting?

Mention the latest time by which the quorum of the meeting should be present.
What would be the impact if quorum is not present within the prescribed time?

Who could chair the meeting in the above situation?

W. The annual general meeting of a company was held on October 31, 2009 but on account of
certain disagreements, the members did not adopt the audited financial statements for the
year ended June 30, 2009. In the above situation how would the company comply with the
provisions of the Companies Ordinance, 1984 related to the filing of copies of annual accounts
with the registrar of companies?

X. Under the Companies Ordinance, 1984 describe the circumstances in which proceedings of a
general meeting may be declared invalid by the court. Who is eligible to make petition in this
regard.

Y. In a general meeting, ordinary as well as special businesses are put up for consideration of
members. Distinguish between ordinary businesses as opposed to special business.
b. State the requirements that a company needs to satisfy, as regards notice of the
meeting, in case a special business is to be transacted at a general meeting of the
company.

26

9. Dividends
(Sec 248-251)

1. Flash Limited is a company listed on the Lahore Stock Exchange. The Board of Directors of
Flash Limited, in its meeting held on April 1, 2009, has recommended an interim cash dividend
@ 25%. The Board has announced the dates of book closure from April 23 to April 30, 2009.
o Describe the requirements of Companies Ordinance, 1984 in respect of payment of
the above dividend. Also describe the consequences of non-payment of dividend
within then specified time.
o State the situations in which non-payment of dividend would not be treated as an
offence, under the Companies Ordinance, 1984.
2. Explain the exception to the following provisions as specified under the Companies
Ordinance, 1984. Where a dividend is declared by a company but is not paid within the period
specified in the Companies Ordinance, 1984, the chief executive of the company shall be
punishable with imprisonment for a term which may extend to two years and with fine which
may extend to one million rupees.
3. State in the light of provisions of the Companies Ordinance, 1984: A company has earned
huge profits from sale of fixed assets. Whether company can declare dividend out of above
profits?
4. Explain whether or not the following statements are in accordance with the provisions of the
Companies Ordinance, 1984. Support your answer with reasons. There is no restriction on
the declaration of dividend and the chief executive may declare dividend in the general
meeting of the company out of any kind of profit.
5. What are the provisions of law regarding: Can dividend be paid to anyone else except the
registered shareholders?
6. Can the payment of dividend be delayed/ceased beyond the time limit prescribed by section
251?
7. When a dividend has been declared, it is not lawful for the directors or the company to
withhold or defer its payment. Any non-compliance is punishable with imprisonment and a
27

heavy fine. List down the situations under which delay in payment of dividend shall not be
considered unlawful.
8. The board of directors of Dinar Ltd, a listed company, had recommended a final dividend @
100% for the year ended June 30, 2008. Just a week after the notice for AGM had been
dispatched, the company suffered huge losses due to certain unanticipated events and
incurred heavy liabilities. The company is now considering the following options:

Reducing the dividend to 25%.

Deferring the payment of 75% of the dividend, for six months. Explain whether the
company can exercise the above options, under the Companies Ordinance, 1984.

9. A listed company has declared a dividend but has withheld its payment on account of a
dispute between shareholders regarding right to receive the dividend. Is this a lawful ground
for the company to withhold payment of dividend? What are the other grounds on account
of which the company may hold the payment of dividend?
10. Write short notes on the following: Period for the payment of dividend.
11. Flash Limited is a company listed on the Lahore Stock Exchange. The Board of Directors of
Flash Limited, in its meeting held on April 1, 2009, has recommended an interim cash dividend
@ 25%. The Board has announced the dates of book closure from April 23 to April 30, 2009.

Describe the requirements of Companies Ordinance, 1984 in respect of payment of


the above dividend. Also describe the consequences of non-payment of dividend
within the specified time.

State the situations in which non-payment of dividend would not be treated as an


offence, under the Companies Ordinance, 1984.

12. Explain the exception to the following provisions as specified under the Companies
Ordinance, 1984. Where a dividend is declared by a company but is not paid within the period
specified in the Companies Ordinance, 1984, the chief executive of the company shall be
punishable with imprisonment for a term which may extend to two years and with fine which
may extend to one million rupees.
13. Sigma Industries Limited is a company listed on Karachi Stock Exchange. Its financial year ends
on December 31. The final dividend for the year 2007 was approved in the AGM held on
28

March 31, 2008. To maintain its good payout ratio, the company declared two interim
dividends of 10% and 12% in January and February 2008 respectively. The books were closed
for a period of 12 days and 18 days respectively. The directors of Sigma Industries Limited
have now proposed a final dividend of 20% which is to be approved in the forthcoming AGM
of the company. The directors intend to close the share transfer register from March 25, 2009
for determining shareholders entitlement for the purpose of dividend, meeting, etc.
o In the light of Companies Ordinance, 1984 you are required to advise the directors
as regards the following :

The maximum period for which the books of Sigma Industries Limited can
be closed and the procedure that should be followed in this regard.

o The last date up to which Sigma Industries Limited can hold its AGM.
o The procedure relating to sending of notices, annual report and audited accounts
to the members and concerned authorities.

29

10. Company Auditors


(Sec 252-260)

A. Sahara Pakistan Limited (SPL) is a multinational company listed on the Karachi and Lahore
Stock Exchanges. Mr. Brown, a major shareholder of the company, wants to appoint ABC &
Company, Chartered Accountants, as the new auditors in place of the retiring auditors of SPL.
Narrate the procedure that Mr. Brown would have to follow and the responsibilities of the Company
in the context of provisions of the Companies Ordinance, 1984 for change of auditors.

B. Narrate the provisions of the Companies Ordinance, 1984 relating to a private company in
respect of: Appointment of the first directors and their tenure.
C. Arif & Co., Chartered Accountants were to be re-appointed as auditors at the Annual General
Meeting of Rose Limited, an unlisted company. The meeting was held on October 31, 2007
but stood adjourned without discussing the appointment of auditors. Explain the legal
position of the auditors in such a situation.
D. Write short notes on the following: Appointment of first auditors.
E. Narrate the circumstances in which SECP becomes empowered to appoint auditors under the
Companies Ordinance, 1984.
F. On March 15, 2006, Karom Textile Limited received a notice from a shareholder of the
company nominating another firm of Chartered Accountants as auditors in place of the
existing auditors at the annual general meeting to be held on March 31, 2006. Explain the
conditions required to be fulfilled by a member of the company while making such
nomination under the Companies Ordinance, 1984. Also describe the companys
responsibilities on receiving such notice, towards other members and the existing auditors of
the company.
G. Sahara Pakistan Limited (SPL) is a multinational company listed on the Karachi and Lahore
Stock Exchanges. Mr. Brown, a major shareholder of the company, wants to appoint ABC &
Company, Chartered Accountants, as the new auditors in place of the retiring auditors of SPL.
Narrate the procedure that Mr. Brown would have to follow and the responsibilities of the

30

Company in the context of provisions of the Companies Ordinance, 1984 for change of
auditors.
H. Narrate the responsibilities of a company or of its directors in the following circumstances: A
notice is given to a listed company by a member of the company, 17 days before the annual
general meeting, proposing for a change in the auditors of the company.
I. Briefly explain the exceptions to the following provisions as specified under the Companies
Ordinance, 1984. If a copy of the representation received from the retiring auditor is not sent
to every member of the company because it was received too late or because of the
companys default, the auditor may, without prejudice to his right to be heard in person,
require that the representation shall be read out at the meeting.
J. Explain whether or not the following statements are in accordance with the provisions of the
Companies Ordinance, 1984 and support your answer with reasons: A person who holds
shares in a company cannot be appointed as the auditor of such company.
K. Discuss the following, in the light of provisions of the Companies Ordinance, 1984: On 30
August 2012, Rafiq Nizami & Co. (RNC), Chartered Accountants, were appointed as auditors
of Delton Tractors Limited (DTL), a listed company, for the year ending 30 June 2013. Zafar, a
partner of RNC, holds 5,000 shares of DTL.
L.

What are the provisions of law regarding signature on audit report.

M. The management of Pakpurt Limited had a dispute on taxation matters with their auditors,
ABC & Co. The directors want to remove auditors before finalization of audit and appoint XYZ
& Co. in their place. While discussing the matter Mr. Kazim, one of the directors objected that
the auditors cannot be removed before the annual general meeting.

Keeping in view the above case you are required to comment on the claim of Mr.
Kazim considering the relevant provisions of the Companies Ordinance, 1984.

In case the auditors are removed in AGM, what are the rights of the retiring auditors?

N. On April 30, 2008 the Board of Directors of MIL informed the CFO that it wishes to change
the auditors of the company. The interim audit for the year ended June 30, 2008 is due to
commence shortly. As the CFO of the company, advise the Board about the provisions
contained in the Companies Ordinance, 1984 as regards:
31

Change of auditors prior to the completion of their term.

Restrictions imposed on the appointment of certain persons as auditors of the


company.

O. Mr. Azhar, the sole proprietor of Azhar & Co. Chartered Accountants, was appointed as the
auditor of XYZ Limited, an unlisted public company, for the financial year ending June 30,
2009. Mr. Azhar married Miss Ismat, a director of XYZ Limited, on February 23, 2009. The
company secretary of XYZ Limited wants to know whether the marriage would have any
impact on the status of Mr. Azhar as the auditor of the company.

Discuss the situation with reference to the relevant provisions of the Companies
Ordinance, 1984.

Discuss the provisions of the Companies Ordinance, 1984 related to the attendance
of the auditors in the general meeting of the company.

32

11. Secretarial Practices


(Sec 198-204A, 206, 207)

A. National Travels Limited (NTA), is a listed company, and operates throughout Pakistan. In
order to finalize a running finance arrangement with a bank, it requires a copy of the board
resolution approving the terms of financing. Since five out of eight directors are currently out
of the city, it is not possible for the secretary to arrange the meeting of the board of directors.
In light of the provisions of Companies Ordinance, 1984 you are required to state,
whether the above resolution can be passed by circulation and the steps required to be
taken to pass such a resolution.
B. The Board of Directors of Ghareeb Limited has decided to contribute a fixed amount every
year to a charitable organization. The company secretary notified that a clause needs to be
inserted in the object clause of the Memorandum of Association for the same. Draft a clause
to be included in the Memorandum covering the permissibility of the proposed activity.
C. The board of directors of a listed textile weaving unit (KW Weaving Mills Limited) has
approved a scheme of amalgamation with its fully owned subsidiary, KD Dyeing Mills Limited.
The merger will result in economies of scale which would eventually increase the profitability
of the company in the coming years. You are required to draft the relevant resolutions
necessary to carry out the merger.
D. You are Company Secretary of a public limited company. In the following month the
companys annual general meeting has to be held, for which purpose the Board of
Directors meeting needs to be organized. Following items are included on the agenda:
o investment in an associated company;
o approval of the annual financial statements;
o issuance of shares to new foreign shareholders;
o approval of new company logo;
o remuneration of the recently appointed Chief Financial Officer & Chief Executive
Officer; and
o Recommendation of final dividend.

33

E. Some

of

the

directors

representing

the

foreign

shareholders

with

30%

shareholding/representation on the Board might be traveling and therefore may not be able
to attend the meeting. You have been asked by these non- resident directors to get their
approval on the decisions through circular resolution or any other means. Discuss this
suggestion in the light of the provisions of the Companies Ordinance, 1984 and corporate
practices, including any other alternatives.
F. The following are some points noted by company secretary of a listed company
immediately after the Board meeting for approval of accounts:

Interim dividend 20% already paid; proposed final dividend 20% in addition to
interim.

Auditors existing auditors have consented to their re-appointment.

Acquiring 40% stake in an existing company.

Appointment and remuneration of chief financial officer approved.

Capital expenditure of up to 10% of equity.

Bonus issue utilizing all available reserves (vii) Increase in paid up capital through
further issue to existing shareholders.

Draft a notice for the forthcoming Annual General Meeting (AGM) of the company and
the agenda containing items that are normally included in an AGM for members
approval. Also comment on any aspect that is not in accordance with the provisions of
the company law or related rules.
G. A listed schedule bank is planning to raise its paid up capital to comply with the State Bank of
Pakistans minimum paid up capital requirements. It has requested you to identify options
available to it for increasing its paid up capital and the key corporate and secretarial
requirements it would need to comply with.
H. Draft a notice of an annual general meeting of a listed company. Apart from the usual items
that are included in the agenda of such a meeting, the shareholders approval is also
to be obtained for investment in an associated company. Also list items that would be
included in the statement of material facts about this investment.

34

I. Mr. Moeen, who is the company secretary of Palm Oils Limited, a listed company, made a
gain of Rs. 5,000 on the sale of shares of the company which were purchased by him four
months back.
o Describe the responsibilities of Mr. Moeen in the above situation under the
provisions of the Companies Ordinance, 1984.
o Explain the consequences of Mr. Moeens failure to comply with the relevant
provisions of the Companies Ordinance, 1984.
J. A company recently published a prospectus. The subscription date has passed and balloting
on

account of

over

subscription

has

been

carried

out.

List the subsequent

corporate/secretarial action required for obtaining the commencement of business


certificate.
K. The Articles of Association of a public listed company provides that in case of an equality of
votes in a Board meeting, the Chairman shall have and exercise a second or casting
vote. The Board of Directors comprises 9 members including the Chairman. In the last
meeting of the Board, the Chairman was not present and the meeting was presided by Mr. T
who is the Chief Executive of Messers A (Private) Limited and holds 60% of its shares. In the
same meeting Board has to consider the renewal of contract with Messers A (Private) Limited
for supply of packing material at revised terms. Four directors opposed the renewal at the
revised terms whereas remaining four including Mr. T were in favor of approving the
renewal at the revised terms. At the first instance Mr. T tried to convince the other directors
but on their refusal due to equal division of Board he exercised the casting vote as a
Chairman of the meeting and declared the renewal as approved. Kindly comment
explaining the relevant provisions of the Companies Ordinance, 1984.

35

12. Shares and Share Capital


(Sec 76-81), (Sec 62A, 82-88, and 120)

A. An investor purchased some shares from the stock market in good faith and got them
registered in his name. Subsequently, the company received a notice from the original
member reporting these shares as lost. Discuss the right of such an investor as well as the
original owner under the law.
B. The Secretary of ABC Limited is in the process of preparing the prospectus for public issue.
The company has obtained loans from two financial institutions and has granted option to
these institutions to convert up to 20% of the outstanding balance of the loans into ordinary
shares. State the information required to be disclosed in the prospectus under the Companies
Ordinance, 1984 regarding the option given to the financial institutions.
C. If two or more persons hold one or more shares in a company, do they individually become
separate members of the company?
D. Mega Projects Limited is presently facing financial crunch. In order to overcome this crisis and
to improve profitability, the Board of Directors is considering to raise funds through capital
injection. The existing shareholders and the potential investors may not be willing to invest
at par value which is Rs.10 per share. However, it is estimated that the company could get
just about Rs. 7 per share. The directors have therefore decided to issue shares at discount.
Being a Company Secretary, you are required to advise the directors about the procedure to
be followed in this regard, under the Companies Ordinance, 1984.
E. Blossom Textiles Limited, a listed company, is in urgent need of increasing its paid up capital
to improve balance sheet ratio and satisfy their bankers. The response from the existing
shareholders and the underwriters is quite discouraging. Mr. Majeed, an existing shareholder
has shown his intention to purchase the whole issue at par. Describe the steps that the
company will need to take if it wants to accept the offer by Mr. Majeed.
F. Jahangir Limited a public listed company have incurred losses during the past two years, as a
result of which, 17% of their equity has been wiped out. The board of directors wants to issue
shares worth Rs. 100 million, being 25% of the present share capital at a discount of 20%. You

36

are required to advise them on the matters which the SECP may consider before granting
approval for issue of shares.
G. What do you understand by the term Green-shoe Option?
H. Zeeshan Pharma Limited (ZPL) commenced its business two years ago with a paid up capital
consisting of 80 million ordinary shares of Rs. 10 each. On February 13, 2011 the board of
directors decided to issue right shares at a discount of Rs. 1.50 per share.
Narrate the provisions contained in the Companies Ordinance, 1984 which ZPL would need to
comply with for issuance of shares at discount.

I. DOS Limited is a listed company engaged in providing LDI services to its customers. As a Chief
Financial Officer you informed the board of directors that during the 2nd and 3rd quarter of
year 2006-2007, the company will require short term financing in order to meet the liquidity
shortfall. One of the directors has proposed that the company should raise finance through
Commercial Paper. You as a CFO are required to explain: the eligibility condition that have
been specified by the SECP for a company that wishes to raise finance by issuing 3-6 months
Commercial Paper the prospective investors in Commercial Paper?
J. What do you understand by the term pre-emptive right of a shareholder?
a. What restriction the Companies Ordinance places on redeeming the preference
shares?
b. What are the permissible modes for redeeming the preference shares and what are
the conditions attached to such modes?
K. On 15 August 2011 Ejaz lodged an instrument of transfer with Fast Technology Limited (FTL),
a listed company, for transfer of 10,000 shares in the name of his son, Riaz. However, on 5
September 2011 the directors refused to transfer the shares by giving him notice in writing
in this regard. Explain the recourse available to Ejaz.
L. A company is required to issue shares to a financial institution under the terms of agreement
within the next three day of the happening of certain event. Now the event has happened
and the company has to issue the shares but the authorized capital is fully subscribed. Advise
the company to avoid noncompliance with the terms of the agreement as well as the
provisions of Companies Ordinance, 1984.
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M. Mr. Javed wants to transfer the shares registered in the name of his deceased father to his
own name. Describe the procedure specified under the Companies Ordinance, 1984 which
he would be required to follow.
N. What is the difference between allotment and physical issue of share certificate?
O. Faheem and Naeem are members as well as the directors on the Board of Saleem (Private)
Limited and each of them hold 50% of the share capital. On August 28, 2008, Faheem died in
an accident in London while he was on a business visit. However, Faheems shareholdings
could not be transferred to his nominated legal heirs as all of them were minors. Naeem
continued to carry on the business of the company. In March 2009, the company incurred
heavy losses and could not meet its debt obligations. Zaheer, a creditor of the company,
intends to make Naeem personally responsible for the payment of the amount owed to him
by Saleem (Private) Limited.
Required: Narrate the provisions of the Companies Ordinance, 1984 which are relevant to the
above issue and discuss the above situation in the context of those provisions.
P. The directors of ABC Limited are considering to issue 50% right shares on premium. The issue
would be underwritten and significant amount of commission would be paid to the
underwriters. The directors are however concerned as to whether they are empowered to
pay the commission.
Narrate the relevant provisions of the Companies Ordinance, 1984 regarding the payment of the
commission and the directors responsibility in the above situation.

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13. Alteration and Reduction of Share Capital


(Sec 92-107)

Q. The Board of Directors of KG Limited have decided to buy-back one million of its ordinary
shares. You are required to describe the procedure to be followed by KG Limited to buy-back
its shares in view of the provisions of the Companies Ordinance, 1984.
R. Belfast Pakistan Limited (BPL), engaged in real estate business, is a wholly owned subsidiary
of Belfast International (BI). The company was incorporated in April 2007 with a paid-up
capital of Rs. 100 million. After first three years of unsuccessful operations, BPL has
accumulated losses to the tune of Rs. 34 million. In order to revive the company, management
intends to venture into a new business and wants to cancel its existing paid-up share capital
which has been lost or unrepresented by available assets. Under the provisions of the
Companies Ordinance, 1984 state the steps that need to be taken for reducing the share
capital of the company.
S. In the annual general meeting of Sabzazar Limited held on September 29, 2009 some of the
shareholders have raised the following objection: The Company has issued shares to a
scheduled bank against a part of the outstanding balance of a loan without offering them to
the shareholders by way of a right issue.
T. XYZ Limited, a listed company, has issued ten million shares of classes A and B each. The
company passed a special resolution to alter some of the rights associated with class B
shares, which has aggrieved some of the shareholders. Explain to the shareholders, aggrieved
with the above changes, on the following:
a. What remedy is available to the aggrieved shareholders?
b. Under what conditions can the decision of the company be cancelled?
U. List three key differences between provisions relating to increase and reduction of share
capital of a company limited by guarantee having a share capital as compared to a company
limited by shares.
V. Paragon Industries Limited, after passing a special resolution on October 15, 2009 filed a
petition in the Court on October 20, 2009 to reduce its share capital. After being satisfied with

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respect to the creditors, the Court issued an order on November 30, 2009 confirming the
reduction of share capital of the company.
Describe the statutory formalities which the company is required to carry out after issuance of the
courts order.

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14. Winding up of a Company


(Section 297-310)

A. For the last three months, ANF Limited (ANFL) has been experiencing liquidity crisis and is
unable to meet its financial obligations within the due date. In the light of Companies
Ordinance, 1984 narrate the circumstances under which ANFL would be deemed to be unable
to pay its debts.
B. The members of Tajamul Private Limited (TPL) have decided to go into voluntary winding-up.
Advise TPL about the provisions of the Companies Ordinance, 1984 pertaining to:
a. Fixation of the remuneration to be paid to the liquidator.
b. Filling of vacancy in the event of resignation of the liquidator.
C. The Directors of BD Limited intend to wind up the companys business voluntarily. In the
context of the Companies Ordinance, 1984 you are required to explain the following:
a. The requirement to file a declaration of solvency.
b. The contents of declaration of solvency.
D. Substantial operating losses sustained by Legend Ceramics Limited (LCL) have forced its
directors to proceed for companys voluntary winding up. Accordingly, a general meeting of
LCL was held on July 1, 2010 and Mr. Ateeq was appointed as the Liquidator. In the context
of the provisions contained in the Companies Ordinance, 1984 you are required to explain
the following:
a. The steps that Mr. Ateeq should take if the winding up is not completed till June 30,
2011.
b. Mr. Ateeqs responsibilities as regards final meeting and dissolution of the company.
E. Foreign investor had acquired majority shares in Marine Steel Services Limited (MSSL) in the
year 2006. Due to global recession, MSSL has incurred heavy losses and a major portion of its
equity has been wiped out. Consequently, the investor intends to wind up the operations of
the company voluntarily.
a. In the light of the Companies Ordinance, 1984, advise the management as regards the
following:

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i. When would the voluntary winding up process be deemed to commence and


what would be its effect on the operations of MSSL.
ii. How could the directors ensure that the requirements of making a declaration
of solvency have been complied with?
b. In order to minimize the winding up expenses, the Board wants to appoint one of the
directors as the liquidator, on a monthly remuneration of Rs. 50,000. Advise the Board
as regards the requirements of Companies Ordinance, 1984 with respect to the
appointment and remuneration of liquidator, in the above situation.
F. After incurring continuous losses Shaheen Private Limited had decided to go into members
voluntary winding up. Mr. Sajid was appointed as a liquidator on a remuneration of Rs.
200,000 of which 25% was paid at the time of his appointment. However, in June 2009, Mr.
Sajid tendered his resignation as a liquidator. In the light of the provisions contained in the
Companies Ordinance, 1984 explain the rights and liabilities of Mr. Sajid, in the above
situation. (05)
a. Identify the persons who are eligible to file a petition for winding up of a limited
company in the Court.
G. Friends Textiles Limited has suffered heavy losses and has almost ceased its operations due
to global recession. The directors foresee no improvement in the companys financial health
and are of the opinion that the company should be liquidated now, as otherwise, in view of
the deepening economic crises, it would be difficult for the company to fetch a good value
for its assets.
Required:
a. Narrate the circumstances in which a company may be wound up voluntarily?
b. Advise the directors of the company about the steps that need to be taken to wind up
the company voluntarily.
c. State the requirements and the procedure to be followed for making a Declaration of
Solvency under members voluntary winding up.
H. Synthetic Holdings Limited wishes to close down one of its subsidiary companies listed on the
Lahore Stock Exchange, as it is no more a viable unit. Their legal counsel has advised the
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preparation of a Declaration of Solvency as a starting point to wind up the subsidiary. In this


context, you are required to explain:
a. What is a declaration of solvency and what must it contain?
b. When it made and what is its purpose?
c. What consequences may follow if the declaration is subsequently found to be
incorrect?
I. Company A is in the process of being wound up. The following is a list of amounts payable by
it:
(Rs.000s)
Salaries and wages (staff strength 97; payable for last six months)

3,000

Utility bills

200

Property taxes (payable to City Government)

150

Fuel expenses payable to employees

150

Legal and professional fees

250

Sales tax payable

500

Penalty payable under the Income Tax Act 2001

100

Contributions to employees provident fund

200

Leave encashment

200

Disability insurance received from insurance company and payable to staff

100

Secured loan payable to National Bank of Pakistan Principal

1,200

- Interest

250

Secured trade creditors

400

Unsecured trade creditors

1000

In the light of winding up provisions contained in the Companies Ordinance, 1984, how would
the above amounts be ranked for payment? Assuming that the funds available with the
company are Rs. 1.75 million only, how would the distribution take place?
J. On a petition filed by affected minority shareholders, the court has directed a company to be
wound up and has also appointed a liquidator. The existing management comprising the chief
executive and other board members, is resisting the move and is expected to create hurdles
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in the winding up proceedings including refusal to hand over custody of books and records
and properties to the liquidator. Narrate the powers conferred on the liquidator and the
court, in the above situation and what actions can be taken to proceed with the winding up.
K. As used in the context of winding up of companies, discuss when a company is deemed unable
to pay its debts?
L. The Directors of Genetics (Pvt.) Ltd. had started voluntary winding up proceedings by filing a
declaration of solvency about 15 months ago. The company still owes substantial amount to
the financial institutions. The Directors have assured the financial institutions that their debts
would be settled within the next 6 months and have filed another declaration of solvency
with the Registrar and copied it to the financial institutions. What are the legal implications
if any, on the company or its directors for:
a. Default in payment.
b. Issue of second declaration of solvency.
Also explain what remedy is available to the financial institutions in case of default by the
directors.
M. What is the status of a company, its chief executive and its directors which has commenced
winding up proceedings?
N. What is the effect of appointment of liquidator, on the powers of directors and chief
executive?
O. Briefly describe the contents, signatories and other requirements relating to members
voluntary winding up.

Discuss powers of the Liquidator of a company in a voluntary winding-up proceedings


to make a compromise with the creditors that they should accept forty paisas in the
rupee i.e. 40% of their total dues as full and final settlement.

P. List preferential payments laid down in the law at the winding-up stage of the company.
Q. State the extent of liability of a director having unlimited liability whether past or present, in
case of members voluntary winding up of a limited liability company.
R. A company has resolved to wind up voluntarily. Eight months after the declaration of
solvency, the company has received a notice of legal suit of a material amount, which would
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make the company insolvent. Explain, by reference to the relevant company law provisions,
the implications of the above-mentioned situation on the winding-up process and the
directors.

15. Miscellaneous Question


A. Explain whether or not the following statements are in accordance with the provisions of
the Companies Ordinance, 1984 and support your answer with reasons:

A company limited by shares cannot issue securities outside Pakistan.

All limited companies are required to hold statutory meeting within 6 months of
incorporation.

A person who holds shares in a company cannot be appointed as the auditor of such
company.

Notice of an extraordinary general meeting should always be sent to the shareholders, at


least 21 days before the date of the meeting.

The first chief executive of the company retires on completion of one year. The
subsequent chief executive must be appointed by the shareholders within 30 days from
the date of retirement of the first chief executive.

B. At the annual general meeting of Rahbar Refineries Limited (RRL), certain shareholders have
raised objections on matters related to the use of the companys funds. In the opinion of
those shareholders the directors have exceeded the authority vested upon them by the
Companies Ordinance, 1984. Identify those powers of directors which the shareholders of
RRL may be referring to.
C. What do you understand by the term special business as referred to in the Companies
Ordinance, 1984?
D. Narrate the information that is required to be annexed to the notice of a meeting in which
any special business is to be transacted.
E. Mr. Aslam, a shareholder of ABC Limited, is not satisfied with the election of directors held
last week in the Annual General Meeting of the company. He intends to file a petition in the

45

court but is apprehensive that a delay in getting a decision from the court would cause
financial losses to the company.
Explain the provisions prescribed in the Companies Ordinance, 1984 relating to:

Filing of such application in the court, and

The disposal of such application by the court in a timely manner.

F. In the annual general meeting of Paramount Limited, a shareholder objected to the shifting
of the registered office from Multan to Lahore without obtaining confirmation from the
Commission. Explain whether the objection is valid.
G. What is the required quorum for a board meeting of a listed company and who would be
responsible if a meeting is held without the quorum?
8. Briefly explain the exceptions to the following provisions as specified under the Companies
Ordinance, 1984.

An annual general meeting shall, in the case of a listed company, be held in the town
in which the registered office of the company is situated.

Notice of an extraordinary general meeting shall be sent to the members at least


twenty-one days before the date of the meeting, and in the case of a listed company
shall also be published in the prescribed manner.

No person shall be appointed as a director of a company if he is not a member.

If a copy of the representation received from the retiring auditor is not sent to every
member of the company because it was received too late or because of the companys
default, the auditor may, without prejudice to his right to be heard in person, require
that the representation shall be read out at the meeting.

No director of a company shall, as a director, take any part in the discussion of, or vote
on, any contract or arrangement entered into, or to be entered into, by or on behalf
of the company, if he is in any way, whether directly or indirectly, concerned or
interested in the contract or arrangement, nor shall his presence count for the
purpose of forming a quorum at the time of any such discussion or vote; and if he
does vote, his vote shall be void.

9. Describe the term associated company in accordance with the Companies Ordinance, 1984.
46

10. Explain the exception to the following provisions as specified under the Companies
Ordinance, 1984.
11. State the provisions of the Companies Ordinance, 1984 with respect to carrying on business
with less than the legal minimum number of members.

No association consisting of more than twenty persons shall be formed for the
purpose of carrying on any business with an object for acquisition of gain, unless it is
registered as a company under the Companies Ordinance, 1984.

12. Explain whether or not the following statements are in accordance with the provisions of the
Companies Ordinance, 1984.

A company may change the number of directors to be elected at least 21 days before
the date of general meeting at which the election is to be held.

A duplicate of a certificate of share or debenture shall be issued by the company


within thirty five days from the date of loss of the original certificate.

Directors remuneration for performance of extra services including the holding of


office of the chairman or attending the board meeting is decided by the chief
executive.

A director of a listed company cannot assign his office to another person under any
circumstances.

13. The Board of Directors of ABC Limited, a company listed on Karachi and Lahore Stock
Exchanges, has resolved to transmit its quarterly financial statements to the members of the
company through its corporate website. You are required to discuss the requirements of
Companies Ordinance, 1984 regarding placement of the quarterly accounts on the web.

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