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C
Contents
Page
Question and Answers Index v
Questions
Section A Multiple choice questions 1
Section B Part A Mercantile Law - Objective test and long-form questions 11
Part B Company Law - Objective test and long-form questions 21
Answers
Section C Multiple choice answers 33
Section D Part A Mercantile Law - Objective test and long-form answers 37
Part B Company Law - Objective test and long-form answers 67
I
Index to Objective test and long-form
questions and answers
Question Answer
page page
Mercantile Law
Chapter 1 - Introduction to the legal
system
2 Courts 11 37
3 Binding precedent 11 38
4 High courts 11 38
6 Process of legislation 11 39
8 Acceptance 12 41
9 Lapse of an offer 12 41
10 Revocation of proposal 12 42
Question Answer
page page
11 Minor 12 42
Chapter 5 - Consideration
12 Consideration 12 43
13 Consideration 12 43
14 Coercion 12 43
15 Fraud 12 44
16 Misrepresentation 12 44
17 Mistake 13 45
18 Legality of object 13 45
20 Legality of consideration 13 46
22 Contingent contracts 13 47
24 Quasi contracts 13 48
25 Quasi contracts 14 48
28 Devolution of liabilities 14 50
Question Answer
page page
30 Reciprocal promises 14 51
31 Appropriation 15 51
33 Supervening impossibility 15 51
35 Damages 16 52
36 Indemnity 16 52
37 Guarantee 16 52
38 Guarantee 16 52
39 Guarantee 16 53
40 Guarantee 16 53
41 Duties of bailor 16 54
42 Particular lien 17 54
43 Termination of bailment 17 54
44 Finder of goods 17 54
45 Pledge 17 55
46 Pledge 17 55
47 Rights of pawner 17 56
Chapter 16 - Agency
48 Ratification 17 56
49 Duties of an agent 17 57
Question Answer
page page
51 Rights 18 58
52 Misconduct by agent 18 58
53 Substituted agent 18 58
54 Irrevocable agency 18 58
55 Duties of partner 18 59
58 Liabilities 19 60
59 Implied authority 19 60
60 Holding out 19 61
61 Transfer of interest 19 61
62 Partnership property 19 62
63 Minor 19 62
64 Promissory notes 19 62
Presumptions of negotiable
65 20 62
instrument
67 Ambiguous Instruments 20 63
69 Cheque 20 64
70 Bill of Exchange 20 65
72 Material alteration 20 65
Question Answer
page page
Company Law
Chapter 19 - Company
74 Association NFP 21 67
75 Private company 21 68
76 KRL 21 68
77 Fajita 22 68
78 Zouk 22 69
80 Commencement of business 22 69
82 MOA – alteration 22 70
83 Articles of association 23 71
86 Incorporation 23 72
87 Name 23 73
88 Disallowed name 23 73
92 Objections 24 74
Question Answer
page page
95 Prospectus – registration 24 75
97 Minimum subscription 25 76
98 Face of prospectus 25 76
Chapter 24 – Meetings
104 Polling 26 78
105 Minutes 26 78
107 Quorum 26 79
109 Circulation 27 80
114 Commission GM 27 82
Chapter 25 – Management
Question Answer
page page
118 Election 28 83
119 Presence 28 84
122 Loans 29 85
123 Power 29 85
126 Removal 30 87
134 Qualification 31 89
Question Answer
page page
SECTION
A
Multiple choice questions
1 Based on the Legal System of Pakistan, identify the correct answer of the following:
(6) The Federal Shariat court examines and decides the question whether or not any
law or provision of law is repugnant to the Injunctions of Islam on:
(a) its own motion.
(b) the petition of a citizen of Pakistan.
(c) the petition of Federal/Provincial Government.
(d) initiation from any of the above.
(8) A High Court has a supervisory role over other courts subordinate to it. It may
issue a writ of habeas corpus which is an order:
(a) to prevent a court or tribunal from exceeding its jurisdiction.
(b) to submit the record of the subordinate court’s proceedings to the High
Court for review.
(c) for the release of a person wrongfully detained.
(d) to carry out a public duty.
2 In view of the provisions of Contract Act, 1872 identify the correct answer:
(1) Wasi, with intent to deceive Tipu, falsely represented that twenty thousand
motorcycles are manufactured annually at his factory and induced him to buy the
factory. The contract is:
(a) void
(b) voidable
(c) illegal
(d) valid
(5) Karim borrowed Rs. 500,000 from Bashir in 2002. The debt became time-barred
under the limitation law. However, Karim met Bashir in 2009 and verbally
acknowledged his liability to the extent of Rs. 300,000. Can Bashir hold Karim
liable?
(a) No, the promise should be for entire debt.
(b) Yes, the promise is valid as an exception to agreement without
consideration.
(c) No, because it is not a written and signed promise.
(d) Yes, he admitted his liability partly in satisfaction of whole debt.
(6) The effect of refusal to accept a properly made offer of performance is that:
(a) the promisor is not responsible for non-performance and can sue the
promisee for the breach of contract.
(b) such offer lapses on rejection by the offeree.
(c) the contract is rendered voidable at the option of promisor.
(d) the contract is discharged by anticipatory breach.
(8) Which of the following case is not covered by the concept of supervening
impossibility?
(a) Destruction of subject matter
(b) Death or incapacity of the promisor
(c) Outbreak of war
(d) Difficulty of performance
(11) Under the Contract Act, 1872 a person is said to be of sound mind for the
purpose of making a contract if:
(a) he is not illiterate and can read and understand the terms of the contract.
(b) he is capable of understanding the contract and forming a rational
judgement as to its effect upon his interests.
(c) he is of the age of majority and is not disqualified from contracting by any
law to which he is subject.
(d) he is not suffering from any mental disease or distress.
(12) Pervaiz contracted with Dilbar, a comedian, for performance in a live show and
paid Rs. 200,000 in advance. Before the show, Dilbar had an accident and was
hospitalized. He could not appear in the show due to which Pervaiz suffered a
loss of Rs. 500,000. Dilbar is liable to pay Pervaiz:
(a) Rs. 200,000
(b) Rs. 500,000
(c) Rs. 700,000
(d) nothing as his absence was not wilful.
(13) A positive assertion, in a manner not warranted by the information of the person
making it, of that which is not true, though he believes it to be true is said to be a:
(a) fraud
(b) misrepresentation
(c) mistake
(d) misinterpretation
(18) C refused to sell certain goods to D at the previously agreed price of Rs. 240
thousand. D sued C for breach of contract. If identical goods are readily available
in the market at a price of Rs. 220 thousand, which one of the following is
correct?
(a) D is entitled to an order of specific performance, forcing C to carry out the
contract.
(b) D is entitled to damages of Rs. 20,000.
(c) D is entitled to nominal damages only.
(d) D is not entitled to damages.
(19) A owns some land, part of which is woodland. He sells the land to B who
covenants in the contract that he will not cut down the trees. One year later, B
prepares to cut down the trees. What remedy can A seek?
(a) damages.
(b) specific performance.
(c) injunction.
(d) rescission.
3 In the light of the provisions of Partnership Act, 1932 select the correct answer:
(1) Public notice is NOT required to be given in case of:
(3) The implied authority of a partner does NOT empower him to:
(a) submit a business dispute to arbitration
(b) withdraw a suit filed on behalf of the firm
(c) open a banking account on behalf of the firm
(d) all the above
(5) Where a partner has paid a premium on entering into partnership for a fixed term
and the firm is dissolved before the expiration of that term, such partner shall
NOT be entitled to repayment of the premium if the dissolution is:
(a) mainly due to his own misconduct
(b) in pursuance of an agreement between all the partners, containing no
provision for the return of the premium
(c) caused by the death of the partner
(d) all the above
(6) On dissolution of a firm, where there are joint debts due from the firm and also
separate debts due from any partner, the separate property of a partner:
(a) shall be applied proportionately in the payment of the firm’s debts and his
separate debts
(b) cannot be used in the payment of the firm’s debts
(c) shall be applied, in the first instance, in payment of the firm’s debts and the
surplus, if any, in payment of his separate debts
(d) shall be applied first in the payment of his separate debts and the surplus, if
any, in the payment of the firm’s debts
(7) A firm is liable to make good the loss of third party if:
(a) one of the partners acting within his apparent authority misapplies
the money or property received from a third party.
(b) one of the partners misapplies the money or property received from a third
party by the firm in the course of its business while it is in the custody of the
firm.
(c) by the wrongful act or omission of a partner acting in the ordinary course of
the business of a firm, loss or injury is caused to any third party.
(d) all of the above.
(9) Subject to contract between the partners, a change may be made in the nature
of business of the firm:
(a) with the consent of active partners managing the business.
(b) with the consent of majority of partners.
(c) with the consent of all the partners.
(d) with the consent of all the partners and Registrar of Firms.
(11) Emmad and Faraz are partners in cloth trading business. In the presence of
Faraz, his friend Ghalib boasted that he is also a partner in the business, in front
of Haroon, a customer. Haroon gave this information to Ismail and on this belief,
Ismail supplied cloth on credit to the firm. Can Ismail make Ghalib liable for the
unpaid amount in this transaction?
(a) No, as Ghalib did not present himself as a partner, in front of Ismail.
(b) Yes, as Ismail gave credit to the firm on the faith of Ghalib’s representation.
(c) No, as Ghalib is not a partner in the firm.
(d) Yes, as Ghalib did it intentionally to deceive others.
4 In the light of the provisions of Negotiable Instruments Act, 1881 select the correct
answer:
(3) Sohail issued a cheque of Rs. 500,000 payable to Tanveer at sight. Sohail had
sufficient funds at the bank to meet this payment. However, Tanveer presented
the cheque at the bank after two weeks by which time the bank had failed. Can
Tanveer recover the amount from Shoail?
(a) Yes, as the debt is not discharged.
(b) Yes, as Sohail has not suffered actual damage through any delay in
presenting the cheque.
(c) Yes, as Sohail did not advise Tanveer to encash the cheque immediately.
(d) No, Sohail is discharged and Tanveer can now claim the amount of cheque
from the bank.
(4) Ghalib accepted for honour a bill of exchange which has been noted and
protested for non-acceptance. If his acceptance does not express for whose
honour it is made, then such acceptance is:
(a) invalid.
(b) deemed to be made for the honour of the drawee.
(c) deemed to be made for the honour of the drawer.
(d) for the honour of any party to the bill
SECTION
B
Part A - Mercantile Law
Objective test and
long-form questions
CHAPTER 1 – INTRODUCTION TO THE LEGAL SYSTEM
1 Federal Shariat Court
Briefly describe the kind of cases handled by the Federal Shariat Court and
the procedures followed in the discharge of these cases. (07)
2 Courts
(a) What is the composition and tenure of Federal Shariat Court? (03)
(b) What does court of first instance mean? List the areas of jurisdiction of the High
Court. (03)
3 Binding precedent
What are the requisites of a binding precedent? (04)
4 High courts
How does the High Court exercise its supervisory role over subordinate courts?
Describe the three types of prerogative orders that it may issue. (05)
6 Process of legislation
How is a law promulgated when national assembly is not in session? Is such law in
any way different from an Act of parliament? What is its tenure? (05)
9 Lapse of an offer
Discuss the circumstances under which an offer lapses and stands revoked (07)
10 Revocation of proposal
Identify the circumstances under which a proposal may be revoked under the
Contract Act, 1872. (07)
CHAPTER 5 - CONSIDERATION
12 Consideration
Mohsin promised Ahsan that he will pay his university fee. Later Mohsin suffered
losses in his business and refused to pay the fee. Mohisn is of the view that since the
agreement was without consideration, it does not constitute a valid contract.
However, Ahsan believes that the agreement is enforceable under law as it meets
certain other conditions.
You are required to narrate the conditions which Ahsan may be referring to. (04)
13 Consideration
Describe the circumstances under which an agreement made without
consideration is considered valid and binding under the Contract Act, 1872. (07)
15 Fraud
What constitutes fraud under the provisions of Contract Act, 1872? (04)
16 Misrepresentation
Explain the acts which constitute misrepresentation under the contract act, 1872 and
describe the circumstances in which the party whose consents is obtained by
misrepresentation loses right of rescission of contract? (05)
17 Mistake
Explain what effects following have on the validity of the contract:
(a) Unilateral mistake of law in force in Pakistan
(b) Unilateral mistake as to matter of fact
(c) Mutual mistake of foreign law (05)
made the payment to Sami which Qurban was legally bound to make and being a quasi
contract Baqir is entitled to the reimbursement.
Explain whether Baqir is justified in his suit. (04)
25 Quasi contracts
Explain the term “Quasi contract”. Briefly describe different types of relationships
commonly referred to as quasi contracts under the Contract Act, 1872. (10)
28 Devolution of liabilities
Sohail and Afaq lent Rs. 2.0 million to Mohsin, Laila and Faizan jointly. On due date
Laila became insolvent. Without informing Sohail, Afaq wants Mohsin to repay the
full amount to him.
Under the provisions of Contract Act, 1872 explain:
(a) whether Mohsin can be compelled to pay the full amount to Afaq.
(b) what rights are available to Mohsin, if he repays the full amount. (05)
30 Reciprocal promises
Maimar promised to manufacture and deliver to Nasir, remote-controlled toy
helicopters of agreed specifications in first week of March 2011. Nasir in turn
promised to pay for them by second week of March 2011. Maimar did not deliver
the toys according to his promise. Should Nasir keep his promise and what remedy, if
any, is available to him? (02)
31 Appropriation
(a) Following is the statement on August 4, 2011 of sums payable by Ubaid on
account of cloth supplied by Bilal:
Date of transaction Rupees Remarks
01/01/2008 37,000 Time barred under Limitation Act.
02/03/2009 20,000
30/08/2010 50,000 Guaranteed by Wasim.
28/04/2011 63,000
170,000
Ubaid sent a cheque for Rs. 70,000 on August 5, 2011. There being no
instructions from Ubaid, Bilal adjusted the payment against the following:
Date of transaction Rupees
01.1.2008 37,000
02.3.2009 20,000
28.4.2011 13,000
70,000
The guarantor (Wasim) objected to such appropriation and claimed that since
the amount of Rs. 37,000 was time barred, it should not be adjusted and the full
amount guaranteed by him should be fully adjusted. Is the objection of Wasim
valid? (05)
(b) Discuss how the above payment of Rs. 70,000 should be applied under
each of the following independent circumstances, according to the
provisions of the Contract Act, 1872:
(a) The following words were written on the back of the cheque:
(20,000 + 50,000 = 70,000) (02)
(b) No instructions about appropriation of payment were given by Ubaid. Bilal
did not make any appropriation either. (02)
33 Supervening impossibility
State the grounds in which a contract is discharged by supervening impossibility.
Narrate the rights of Akhtar and Bushra in the above situation. (05)
35 Damages
Describe the principles of determining compensation for loss or damages caused due to
breach of contract. (04)
37 Guarantee
Bashir supplies goods worth Rs. 100,000 each month to Anwar under a contract
which is due to expire on December 31, 2009. Ameen has guaranteed that he will
compensate Bashir in case of default by Anwar.
On August 29, 2008 the amount due to Bashir is Rs. 325,700. Ameen intends to
revoke his guarantee. Can he do so? Discuss. (03)
38 Guarantee
Raheel leased a building from Atif, on five years term, for a rent of Rs. 200,000 per
annum and the payment was guaranteed by Kamal. Raheel defaulted in payment of
the rent in the third year. Atif sued Kamal and recovered the rent from him. Later,
Kamal gave a notice to Atif for revoking his guarantee for the remaining period of lease.
Under the Contract Act, 1872 discuss whether Kamal is justified in doing so. (04)
39 Guarantee
Amin, Imran and Shahid agreed to act as sureties for Emmad to Saleem and agreed to
pay Rs. 20,000, Rs. 30,000 and Rs. 40,000 respectively in case of default by Emmad.
On such surety Saleem lent Rs. 90,000 to Emmad. Emmad repaid Rs. 6,000 only.
Saleem called upon the sureties to pay the balance of Rs. 84,000. Discuss keeping
in view the Contract Act, 1872 how much should each surety pay. (03)
40 Guarantee
(a) Faiz had sold goods on credit to Gulzar for Rs. 5 million on guarantee of
Haseeb. Gulzar has also mortgaged his shop as a security against the above
amount. Haseeb was unaware of this mortgage and honoured his guarantee
when Gulzar failed to make the payment. What rights are available to Haseeb
under the Contract Act, 1872? (04)
(b) When and how a continuing guarantee is revoked? (06)
You are required to state the amount, if any, which Sara needs to reimburse to Farha in
each of the situations given below. Justify your answer with reasons under the
provisions of Contract Act, 1872.
(a) No remuneration was agreed to be paid to Farha for the safe custody of the pet.
(b) Sara had agreed to remunerate Farha for her services. (04)
42 Particular lien
Majid gave a piece of fabric to Stylish Suiting for sewing a coat at a consideration of
Rs. 5,000. On completion, Majid paid the whole amount; however, Stylish Suiting
refused to deliver the coat until the payment of previous dues of Rs. 3,000.
Explain under the provisions of Contract Act, 1872, whether Stylish Suiting is
justified in refusing to deliver the coat. (02)
43 Termination of bailment
Under what circumstances a contract of bailment may be terminated? (05)
44 Finder of goods
Discuss the rights of the finder of goods under the Contract Act, 1872. (04)
45 Pledge
Explain the term “pledge”. Identify the circumstances under which a pledge made by
a non-owner will be considered valid even if the owner has not authorized him to pledge
the goods. (07)
46 Pledge
Shahid pledged gold with Mehreen against a loan of Rs. 100,000 at a markup of
15% per annum. Being concerned with the growing incidences of burglary in the
city, Mehreen insured the gold. At the time of repayment, Mehreen claimed the cost of
insurance cover in addition to the principal sum due and interest thereon.
In the light of Contract Act, 1872 briefly explain whether Mehreen is justified in her
claim. (02)
47 Rights of pawner
Ramla borrowed Rs. 100,000 from Ovais for a period of three months and kept her
jewellery with Ovais as a security. On due date, Ramla defaulted in repayment. In
view of the provisions of Contract Act, 1872 describe the remedies available to Ovais
under the circumstances. (04)
CHAPTER 16 - AGENCY
48 Ratification
(a) Explain the term ratification in relation to the contract of agency under the
Contract Act, 1872. What is the effect of a valid ratification? (03)
(b) List down the conditions necessary for a valid ratification. (04)
49 Duties of an agent
Briefly state the duties of an agent towards his principal. (05)
51 Rights
Explain the following as described under the Contract Act, 1872.
(a) Agent’s authority in an emergency
(b) Agent’s right of retainer
(c) Agent’s right of lien (07)
52 Misconduct by agent
Aslam appointed Zakir to recover Rs. 7.0 million from Naveed. Zakir misbehaved with
Naveed as a result of which Naveed sued Aslam. Later, Aslam sued Zakir
claiming reimbursement of the cost incurred by him in defending the suit filed by
Naveed. Explain whether Aslam is justified in his claim. (02)
53 Substituted agent
Briefly explain the term ‘substituted agent’ in the light of Contract Act, 1872. Is
the (original) agent responsible to the principal for the acts of a substituted agent? (05)
54 Irrevocable agency
When may an agent’s authority be revoked by the principal under the Contract Act,
1872? Also narrate the exceptions to the above provision. (05)
58 Liabilities
Describe the liabilities of:
(a) a partner for the acts of the firm.
(b) the firm for wrongful acts of a partner.
(c) the firm for misapplication of money or property by a partner. (08)
59 Implied authority
The authority of a partner to bind the firm is called “Implied Authority.” List the acts
which cannot be exercised by a partner as his implied authority. (04)
60 Holding out
Explain the concept of “Holding out” as described in the Partnership Act, 1932. (04)
61 Transfer of interest
Sameer, Fauzia and Sualat are partners in a firm. Fauzia transferred her interest in
the firm absolutely to her son Adil. In the light of the provisions of Partnership Act,1932
would Adil be considered a new partner in the firm? Also describe the rights and
restrictions on Adil in view of such transfer. (06)
62 Partnership property
Kashif, Irfan and Shujaat are partners in a firm. Irfan bought a shop in his own name.
He issued a cheque from the partnership account and debited his account with the
purchase price. He rented out the shop and credited the receipts of rent in his capital
account. Kashif has objected to this practice and asked Irfan to register the shop in the
firm’s name contending that the shop is partnership’s property. Irfan disagrees.
Explain what constitutes partnership property under the Partnership Act, 1932 and
whether the shop is partnership property or not. (07)
63 Minor
A, B and C, partners of a firm, admitted D, a minor to the benefits of the firm. D
attained majority on 6th March 2007. He became aware of the fact that he has been
admitted to the benefits of the firm on 16th August 2007. Being undecided about the
situation he preferred to wait for some time before announcing his decision about
joining the firm. On 27th February 2008, the firm suffered heavy losses due to an
unforeseen event. A, B and C informed D that on account of such losses, his capital in
the firm has been reduced by 40%. Discuss the rights and liabilities of D in the above
situation. (06)
(iv) I promise to pay Mahi or order Rs. 5,000 with interest calculated at quarterly rests.
(v) I promise to pay you or your successors on demand Rs. 10,000.
(vi) I promise to pay Rafi or order Rs. 10,000 seven days after Salik’s death.
(vii) I am liable to pay Ahmad Rs. 5,000. (07)
67 Ambiguous Instruments
Explain the term “ambiguous instruments” giving at least two examples. Can such
instruments be negotiated? (04)
69 Cheque
(a) Explain the term “Cheque” as defined in the Negotiable Instruments Act, 1881
and list down the essential elements of a valid cheque. (07)
(b) Who can cross the cheque after its issue? Also describe the manner in which it
can be crossed. (04)
70 Bill of Exchange
What liabilities does the drawer of a bill of exchange incur under the
Negotiable Instruments Act, 1881? (03)
72 Material alteration
Any material alteration to a negotiable instrument renders the instrument void. What
are the exceptions to this rule? (07)
SECTION
B
Part B - Company Law
Objective test and
long-form questions
CHAPTER 19 – COMPANY
73 Subsidiary and holding co.
Identify the situations specified under the Companies Ordinance, 1984 in which a
company shall be considered to be a subsidiary of another company. (04)
74 Association NFP
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:
(a) that need to be satisfied before the Commission may issue it a licence and allow
it to dispense with the word “Limited” from its name. (07)
(b) under which the licence may be revoked and its consequences. (04)
75 Private company
State the conditions which make a company a private company or a public company
under the Companies Ordinance 1984 (04)
76 KRL
Kaghan Resham Limited” (KRL) holds 60 percent shares out of total paid up capital of
another public company named “Narran Silk Limited” (NSL). NSL further owns 14
percent shares of “Thandiyani Ice-creams Limited” (TIL). NSL has also entered into an
agreement with other shareholders of TIL to appoint four out of seven directors on the
board of directors of TIL.
Explain their relationships with each other under Companies Ordinance 1984. (04)
78 Zouk
Mr. Zouk is an employee in a brokerage house and he wants to prepare some reports
on request of some potential investors for a company named as “Arizona Grill Limited”.
For the preparation of the report he requires Memorandum & Articles of association of
the company.
State whether he can obtain such copies of Memorandum & Articles of Association
from “Arizona Grill Limited” and explain why? (03)
80 Commencement of business
Explain the provisions specified in the Companies Ordinance, 1984 relating to
requirements to be completed before the commencement of business by a public
company. (06)
82 MOA – alteration
The alteration in the memorandum shall not take effect until it is confirmed by the
Commission. State the conditions a company is required to fulfill in order to obtain
confirmation from the Commission and the procedure to be followed on confirmation.(04)
83 Articles of association
A Malaysian company is interested in incorporating a limited liability company in
Pakistan.
Discuss provisions of the Companies Ordinance, 1984, relating to the following:
(a) Contents, printing and signature of the Articles of Association (05)
(b) Registration of the Articles of Association (02)
(c) Alteration of the Articles of Association after its registration (04)
86 Incorporation
What are the criteria based on which the registrar shall incorporate any company and
grant a certificate of incorporation? (05)
87 Name
Certain names cannot be given to the company. Explain what such names are and
explain who the final authority is, regarding allowance of disallowance, of any name
given to a company. (05)
88 Disallowed name
Discuss the powers of registrar when a company is registered with a name not allowed
by the Ordinance. (03)
(a) The conditions which the aggrieved shareholders will have to comply with, to be
eligible for filing an application in the court for the cancellation of the above
resolution. (02)
(b) The matters which the Court would consider while making a decision on the
above application. (02)
92 Objections
Who has the right to object to resolutions passed for variation in rights of any particular
class of the shareholders and what shall the procedure be for lodging such an
objection? (05)
95 Prospectus - registration
The registrar shall not register a prospectus unless certain requirements of the
Companies Ordinance, 1984 are complied with. You are required to list such
requirements. (06)
97 Minimum subscription
Under the second schedule to the Companies Ordinance 1984, what are the contents
of the prospectus as regards minimum subscription? (05)
98 Face of prospectus
What are the matters to be stated on the face of the prospectus under the Companies
Ordinance 1984? (04)
CHAPTER 24 – MEETINGS
101 AGM timeline
Explain the exceptions to the following provisions as specified under the Companies
Ordinance, 1984:
Every company shall hold its annual general meeting within a period of four months
following the close of its financial year and not more than fifteen months after the
holding of its last preceding annual general meeting. (03)
104 Polling
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:
(a) What conditions would he need to satisfy if Mr. Shakeel wishes to request for a
poll? (05)
(b) 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. (02)
105 Minutes
Discuss the provisions contained in the Companies Ordinance, 1984 relating to
maintenance of minutes of the general meetings of the company. (08)
107 Quorum
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:
(a) What would be the quorum of the above meeting?
(b) 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?
(c) Who could chair the meeting in the above situation? (10)
109 Circulation
The annual general meeting of Iqra Industries Limited (IQL), a listed company, is to be
held on October 25, 20X3. In addition to the normal businesses, the company is
planning to discuss a strategic business plan for the approval of the shareholders.
Explain the requirements of Companies Ordinance, 1984 as regards the
circulation of information/documents to various stake holders, prior to the above
meeting. (11)
114 Commission GM
Under what circumstances does the Commission have the power to call a general
meeting of the company? (04)
CHAPTER 25 – MANAGEMENT
115 Subsequent CEO
Explain whether or not the following statements are in accordance with the provisions
of the Companies Ordinance, 1984. Support your answer with reasons.
A chief executive, other than the first chief executive of the company, is appointed by
the shareholders in the annual general meeting of the company, for a period up to the
next annual general meeting. (03)
118 Election
Narrate the provisions of the Companies Ordinance, 1984 relating to a private
company in respect of:
(a) Appointment of the first directors and their tenure. (03)
(b) Procedure for election of subsequent directors. (09)
119 Presence
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. (04)
122 Loans
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.
(05)
123 Power
At the annual general meeting of Rahbar Refineries Limited (RRL), certain
shareholders have raised objections on matters related to the use of the company’s
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. (05)
126 Removal
Lalazar Limited, a pubic unlisted company has a paid up capital of Rs 100 million
consisting of shares having face value of Rs 10 each. Last election of its Board of
Directors was held on April 15, 20X3 in which eight directors were elected. Four of the
directors belonged to the same family. The remaining directors were Mr. Javed, Mr.
Bader, Mr. Qasim and Mr. Dawood. They secured
600,000, 350,000, 480,000 and 220,000 votes respectively. The remaining votes were
equally distributed among the four directors of the family. Mr. Javed died on May 30,
20X3 and Mr. Aslam was appointed as a director on June 15, 20X3 to fill in the casual
vacancy.
Explain the following in the light of the provisions of the Companies Ordinance, 1984:
The conditions required to be fulfilled if a person desires to remove the following
directors:
(i) Mr. Aslam
(ii) Mr. Bader (05)
SECTION
C
Multiple choice answers
CHAPTER 1
1 (1) (d)
(2) (c)
(3) (b)
(4) (d)
(5) (b)
(6) (d)
(7) (a)
(8) (c)
2 (1) (b)
(2) (a)
(3) (a)
(4) (c)
(5) (c)
(6) (a)
(7) (c)
(8) (d)
(9) (b)
(10) (b)
(11) (b)
(12) (a)
(13) (b)
(14) (a)
(15) (c)
(16) (c)
(17) (c)
(18) (c)
(19) (c)
(20) (c)
(21) (d)
3 (1) (a)
(2) (b)
(3) (d)
(4) (c)
(5) (d)
(6) (d)
(7) (d)
(8) (a)
(9) (c)
(10) (c)
(11) (b)
(12) (d)
4 (1) (c)
(2) (b)
(3) (d)
(4) (c)
SECTION
D
Part A - Mercantile Law
Objective test and
long-form answers
2 Courts
(a) The Federal Shariat Court:
The Federal Shariat Court consists of not more than eight Muslim
Judges including the Chief Justice which are appointed by the President
in accordance with Article 175A.
Out of the number not more than three shall be Ulema having at least
fifteen years’ experience in Islamic law, research or instruction and
not more than four each one of them
is or
has been or
is qualified
to be a Judge of High Court.
The judges hold office for a period of three years. However, the
President may, extend such period.
3 Binding precedent
For a precedent to be binding it must meet the following requirements:
(i) The ratio decidendi (reason for judgment) is clearly identified;
(ii) The material facts of the case must be similar;
(iii) The status of the court which set the precedent must be such as to bind the
present court.
4 High court
The High Court exercises its supervisory role in the following manner:
(i) It may issue a writ of habeas corpus. That is, it may order for the release of
a person wrongfully detained by a court subordinate to it or any government
agency.
(ii) It may issue prerogative orders against sub-ordinate courts, tribunals and
other bodies such as local authorities in so far as they have a duty to
exercise a decision fairly.
There are three types of prerogative orders:
Mandamus requires the court or other body to carry out a public duty.
Prohibition prevents a court or tribunal from exceeding its jurisdiction.
Certiorari is exercised when an inferior court has acted illegally by
exceeding its jurisdiction or reached its decision contrary to the
principles of natural justice without giving the person concerned the
right to know and reply to the case against him. Essentially it is a
review of what has been done after it has been done.
6 Process of legislation
If the President deems necessary to take an immediate action, he has the power to
promulgate an ordinance if the Senate or National Assembly is not in session. Such
ordinances have the same force and effect as an Act of the Parliament. The
Ordinance stands repealed after one hundred twenty days if it is not passed by the
National Assembly or by National Assembly and Senate both as the case may be.
However, National Assembly may extend it for another period of one hundred twenty
days. Thereafter it will stand repealed.
e) Free Consent
An agreement must be made between parties by free consent. In other
words, the consent must not be obtained from following:
Coercion
Undue influence
Fraud
Misrepresentation
Mistake
f) Lawful Object
The object of an agreement must be lawful. An object is said to be
unlawful when: [Section 23]
It is forbidden by law
Is of such a nature that if permitted would defeat the provisions of
any law
It is fraudulent
It involves an injury to the person or property of another
The court regards it as immoral, or opposed to public policy
g) Not declared as void
An agreement which is not enforceable by law is called void agreement.
There are certain agreements which have been expressly declared as
void such as: [Section 24 to 30]
agreement, the object or consideration of which is unlawful
agreement, without consideration is void
agreement in restraint of marriage
agreement in restraint of legal proceedings
agreement in restraint of trade
agreement is void if meaning of which is uncertain
wagering agreement
h) Certainty
An agreement may be void on the grounds of uncertainty. The meaning of
the agreement must be certain or capable of being certain. [Section 29]
i) Possibility of performance
The terms of the agreement must be capable of being performed else
it is void. [Section 56]
j) Legal formalities
An oral contract is a perfectly valid contract, except in certain cases where
a contract must comply with the necessary formalities as to writing,
registration and stamping.
8 Acceptance
Section 2(b) and 7 of the Contract Act
When the person to whom the proposal is made signifies his assent to the offer, the
proposal is said to be accepted.
(i) Acceptance must be absolute and unqualified.
(ii) It must be expressed in some usual and reasonable manner, unless the
proposal prescribes the manner in which it is to be accepted. If the proposal
prescribes a manner in which it is to be accepted, and the acceptance is not
made in such manner, the proposer may, within a reasonable time after the
acceptance is communicated to him, insist that his proposal shall be accepted
in the prescribed manner and not otherwise, but if he fails to do so, he
accepts the acceptance.
(iii) Acceptance must be made by the offeree i.e. by the person(s) to whom offer
was made and only such person or a person with his authority must
communicate the acceptance to the offeror.
(iv) Acceptance must be given within a reasonable time and before the offer
lapses and/or is revoked.
(v) Acceptance must succeed the offer.
9 Lapse of an offer
Section 6 of the Contract Act
An offer is lapsed in following ways:
Revocation
An offer may be revoked before its acceptance by the offeree.
Lapse of time
An offer will come to an end if it is not accepted within the time specified or within a
reasonable time where no time is specified. What is the reasonable time is a
question of fact depending upon the subject matter and circumstances.
Death or insanity
An offer comes to an end by the death or insanity of the offeror if the fact of his death
or insanity comes to the knowledge of the acceptor before acceptance.
Non-fulfilment of condition precedent
An offer comes to an end when the acceptor fails to fulfil the conditions precedent to
the offer.
Counter offer
An offer comes to an end if the counter offer is made.
Non-acceptance according to requirement
An offer comes to an end if it is not accepted according to the requirement (if any) of
the offeror.
Non-acceptance / Rejection
An offer comes to an end if it is not accepted by the offeree. An offer is said to be
rejected if the offeree expressly rejects.
10 Revocation of proposal
Section 5 and 6 of the Contract Act
Revocation of a proposal
A proposal may be revoked at any time before the communication of its acceptance
is complete as against the proposer, but not afterwards. A valid proposal comes to
an end upon happening of any one of the following:
(a) by communication of notice of revocation by the proposer.
(b) by the lapse of time prescribed in such proposal for its acceptance, or if no
time is prescribed, by the lapse of a reasonable time, without communication
of the acceptance.
(c) by failure of the acceptor to fulfill a condition precedent to acceptance.
(d) by the death or insanity of the proposer, if the fact of his death or insanity
comes to the knowledge of acceptor before acceptance.
(e) if a counter proposal is made by the acceptor to the proposer.
(f) if the proposal is not accepted in some usual or reasonable manner, where
no mode is so prescribed.
(g) subsequent illegality or destruction of subject matter.
(h) rejection of proposal by the offeree.
11 Minor
Section 10, 11 and 68 of the Contract Act
Section 30 of the Partnership Act
If the guardian or manager of the minor entered into on behalf of a minor being
within the scope of the authority and for the benefit of the minor than such
agreements can be enforced by or against the minor.
A person who supplied necessaries to a minor is entitled to be reimbursed from
the property of such minor. Such claim is against the property of the minor but
not against the minor personally.
12 Consideration
(a) Section 25 of the Contract Act
The conditions under which the said contract is enforceable are:
Mohsin and Ahsan stand in near relation to one another.
The agreement is out of natural love and affection.
The said contract is in writing.
The contract is registered.
13 Consideration
Section 25 and 185 of the Contract Act
14 Coercion
Section 15 and 19 of the Contract Act
Yes, Bano can avoid the contract as her consent was caused by coercion.
15 Fraud
Section 17 of the Contract Act
(a) Fraud – Fraud means acts committed by a party to a contract, or with his
connivance, or by his agent with intent to deceive another party thereto or his
agent, or to induce to enter into the contract and includes any of the following:
(i) the suggestion, as a fact of that which is not true by one who does not
believe it to be true;
(ii) the active concealment of a fact by one having knowledge or belief of
the fact;
(iii) a promise made without any intention of performing it;
(iv) any other act fitted to deceive;
(v) any such act or omission as the law specially declares to be fraudulent.
16 Misrepresentation
Section 18 of the Contract Act
Following are the acts which constitute misrepresentation:
(a) Unwarranted statement
When a person makes a positive statement that a fact is true when his
information does not warrant it to be so, though he believes it to be true this
amounts to misrepresentation.
(b) Breach of duty
Any breach of duty which
without an intent to deceive,
gains an advantage to the person committing it, or
anyone claiming under him,
by misleading another
to his prejudice or
to the prejudice of anyone claiming under him.
(c) Inducing mistake about subject matter (Innocent misrepresentation)
A party to an agreement induces (however innocently) the other party to make a
mistake as to the nature or quality of the subject of the agreement.
Following are the circumstances were a party whose consent has been
obtained by misrepresentation cannot rescind the contract:
(i) where the party whose consent was caused by misrepresentation had the
means of discovering the truth with ordinary diligence;
(ii) where the party gave the consent in ignorance of misrepresentation;
(iii) where the party after becoming aware of the misrepresentation, takes a
benefit under the contract;
(iv) where an innocent third party, before the contract is rescinded, acquires
for consideration some interest in the property passing under the contract;
(v) where the parties cannot be restored to their original position.
17 Mistake
Section 20 to 22 of the Contract Act
The effects on the validity of the contract are given below:
(a) In case of unilateral mistake of law in force in Pakistan the contract is not
voidable.
(b) In case of unilateral mistake of fact the contract is not voidable
(c) In case of mutual mistake of foreign law the agreement is void.
18 Legality of object
Section 2(e), (g), 23 and 24 of the Contract Act
(a) Agreement
Every promise and every set of promises, forming the consideration for each
other, is an agreement.
An agreement not enforceable by law is said to be void.
Circumstances in which an object of an agreement is considered unlawful:
The object of an agreement is unlawful when:
(i) it is forbidden by law; or
(ii) is of such a nature that, if permitted, it would defeat the provisions of any
law; or
(iii) is fraudulent; or
(iv) involves or implies injury to the person or property of another; or
(v) the court regards it as immoral, or opposed to public policy.
20 Legality of consideration
Section 23
No, the agreement is void as its object is unlawful.
22 Contingent contracts
Section 31 of the Contract Act
Contingent Contract
No, this is not a contingent contract as the condition i.e. construction of a bungalow
is not collateral to the contract; but in itself forms a consideration and is thus an
integral part of the contract.
Essentials of a contingent contract
The following are the essential characteristics of a contingent contract:
(i) the performance of such a contract depends upon the happening or non-
happening of some future event;
(ii) the event must be uncertain;
(iii) the event must be collateral i.e. incidental to the contract.
24 Quasi contracts
Section 69 of the Contract Act
Reimbursement of person paying money due by another, in payment of which
he is interested
No, however, Baqar may recover the amount, if he has his interest in the payment.
To constitute a quasi contract and be entitled for reimbursement, following
conditions must be satisfied:
(a) the person who made the payment must have his own interest in the payment;
and
(b) the other person must be bound by law to pay.
25 Quasi contracts
Section 68 to 72 of the Contract Act
Quasi contract:
A quasi contract is a relation resembling to those created by a contract by which one
party is bound to pay money in consideration of something done or suffered by the
other party, though; no contractual relation exists between the parties. As a result of
the above, certain legal rights and obligations are created between the concerned
parties. Such type of relations resembles those created by the contract and such a
contract is called Quasi contract.
It is an obligation based on the principle of equity and justice, which the law creates
in the absence of any formal agreement.
28 Devolution of liabilities
Section 43 and 44 of the Contract Act
(a) Afaq alone cannot compel Mohsin to make payment unless a contrary
intention appears from the contract. The right to claim performance rests with
all the promisees jointly and a single promisee cannot demand performance.
(b) Mohsin may compel every other joint promisor to contribute equally with
himself to the performance of the promise, unless a contrary intention appears
from the contract.
Therefore, Faizan must share the loss arising from default of Laila equally with
Mohsin.
30 Reciprocal promises
Section 54 of the Contract Act
No, Nasir need not perform his promise to pay and Maimar must compensate Nasir
for any loss which Nasir may sustain due to Maimar’s non-performance.
31 Appropriation
Section 59 to 61 of the Contract Act
(a) The payment is correctly applied by Bilal and the objection of Wasim is not
valid. In the absence of any intimation from debtor or circumstances indicating
to which debt payment is to be applied, the creditor is free to use his discretion
and apply it to any lawful debt actually due and payable to him from the debtor
whether its recovery is or is not barred by the law in force for the time being as
to the limitation of suits.
(b) (a) The payment should be applied in discharging the following debts:
Debt of Rupees
March 2, 2009 20,000
August 30, 2010 50,000
70,000
As Ubaid has written the break-up of payment at the back of the cheque,
it implies that payment should be applied to discharge those particular
debts.
(b) The payment should be applied in discharging the debts in the order in
which they became due.
It is irrelevant whether the debts are or are not barred by the law in force
for the time being as to limitation of suits.
33 Supervening impossibility
Section 56 of the Contract Act
A contract is discharged by supervening impossibility in the following cases:
Destruction of subject matter
If the subject matter of the contract is destroyed after the formation of the contract
without any fault of either party then a contract is said to be discharged.
Death or Personal incapacity (Doctrine of Frustration)
If a contract is of personal nature then on the death / incapacity / illness of a person a
contract is said to be discharged.
Declaration of war
At the time of declaration of war the contracts with alien enemies are either
suspended or declared as void.
Change of law
If the performance of the contract becomes impossible or unlawful due to change in
law after the formation of the contract than the contract is said to be discharged.
Particular state of things ceases to exist or occur
The contract is discharged if that particular state of thing which forms the basis of a
contract ceases to exist or occur.
35 Damages
Section 73 of the Contract Act
The party who suffers from breach of contract is entitled to receive compensation for
any loss or damage caused to it, which naturally arose from the usual course of
things from such breach, or which the parties knew, when they made the contract to
be likely to result from such breach.
Such compensation is not to be given for any remote or indirect loss or damage
sustained by reason of the breach.
36 Indemnity
Section 124 of the Contract Act
A contract, by which one party promises to save the other from loss caused to it by
the conduct of the promisor himself, or by the conduct of any other person, is called a
“contract of indemnity”.
37 Guarantee
Section 130 of the Contract Act
The guarantee given by Ameen is a continuing guarantee. It can be revoked by
Ameen (surety) at any time as to future transactions but he will remain liable to Bashir
for Rs. 325,700.
38 Guarantee
Section 130 of the Contract Act
Revocation of a Continuing guarantee:
No, Kamal is not competent to revoke his guarantee. Where a guarantee is given for
an entire consideration, the contract is not divisible and the guarantee is considered
as a specific guarantee. In this case also, the contract is not one of a continuing
guarantee because “lease for five years” is an entire or indivisible consideration and
not a fragmented one.
39 Guarantee
Section 146 and 147 of the Contract Act
Co-sureties who are bound in different sums are liable to pay equally as far as
limits of their respective obligations permit.
Therefore, the co-sureties should pay:
Rupees
Amin 20,000
Imran 30,000
Shahid 34,000
84,000
40 Guarantee
Section 140, 141 and 145 of the Contract Act
(a) Haseeb upon payment of guaranteed amount is invested with all rights which
Faiz (the creditor) had against Gulzar (the principal debtor).
Haseeb the surety is entitled to the benefit of every security which Faiz (the
creditor) has against Gulzar (the principal debtor) at the time when the contract
of suretyship is entered into whether Haseeb knows of the existence of such
security or not.
He is entitled to recover from Gulzar (the principal debtor) whatever sum he has
rightfully paid under the guarantee, but no sums which he has paid wrongfully.
(b) Section 62, 130, 131, 133 to 135, 139 and 141 of the Contract Act
A continuing guarantee may at any time be revoked by the surety, as to
future transactions by notice to the creditor.
(i) In the absence of any contract to the contrary, the death of the surety
results in the revocation of a continuing guarantee, as regards future
transactions.
Other modes of revocation of a continuing guarantee:
(ii) If the terms of the contract are changed by the creditor and the principal
debtor by a contract without the consent of the surety.
(iii) When a creditor discharges principal debtor from the liability.
(iv) When the creditor makes a composition with, or promises to give time to,
or not to sue the principal debtor, without the consent of the surety.
(v) When a creditor’s act or omission impairs the eventual remedy of a
surety.
(vi) When a creditor loses security under the contract, the surety gets
discharged to the extent of the value of the security.
41 Duties of bailor
Section 158 of the Contract Act
(a) Repayment by bailor of necessary expenses
(i) No remuneration is to be paid to Farha for the safe custody of pet:
Sara should reimburse Rs. 1,500 to Farha, as where, by the conditions of
the bailment, the goods are to be kept or to be carried, or to have work
done upon them by the bailee for the bailor, and the bailee is to receive
no remuneration, the bailor shall repay to the bailee the necessary
expenses incurred for the purpose of the bailment.
(ii) Farha is to be remunerated for her services:
Sara should reimburse Rs. 1,000 to Farha, as where, under the terms of
the bailment, the bailee is to receive remuneration for his services; it is
the duty of the bailor to bear extraordinary expenses only, if any, incurred
by the bailee in relation to the thing bailed.
42 Particular lien
Section 170 of the Contract Act
Stylish Suiting is not justified to refuse delivery of the coat to Majid, because a bailee
who renders a service involving the exercise of labour or skill in respect of the goods
bailed which improves the value of the article, is entitled to a right of particular lien,
and not a general lien until and unless agreed for it.
43 Termination of bailment
Section 153, 159 and 162 of the Contract Act
(a) A contract of bailment may be terminated under the following circumstances:
(i) If the bailee does any act with regard to the goods bailed, which is
inconsistent with the terms of bailment, the bailment may be terminated
by the bailor even though the term of bailment has not expired or the
purpose of bailment has not been accomplished.
(ii) If the bailment is gratuitous, and involves lending of goods, it may be
terminated by the bailor at any time, even before the specified time or
before the purpose is achieved; however, where such termination causes
loss in excess of benefit actually derived by the bailee, the bailor must
indemnify the bailee.
A contract of bailment may also be terminated:
(iii) If the bailment is for specific period, on expiry of the stipulated period.
(iv) If the bailment is for a specific purpose, on fulfilment of the purpose.
(v) If gratuitous, on the death either of the bailor or of the bailee.
44 Finder of goods
Section 168 and 169 of the Contract Act
Right of Reward
The finder of goods may retain the goods for the expenses incurred by him to
preserve the goods and to find out the owner, until he receives compensation, and
where the owner has offered a specific reward for the return of goods lost, the finder
may sue for such reward, and may retain the goods until he receives it.
The finder of goods may sell the goods if the owner cannot be found or he refuses to
pay lawful charges of the finder:
(a) and the goods are in danger of perishing or losing the greater part of their value;
or
(b) when the lawful charges amount to 2/3rd of its value.
45 Pledge
Section 172, 178 and 179 of the Contract Act
Section 30 of the Sales of Goods Act
Pledge
The bailment / delivery of goods as security for payment of a debt or performance of a
promise is called a pledge.
Under the following circumstances a pledge can be made by non-owners:
1. Pledge by mercantile agent
If a mercantile agent is in possession of goods or the title documents with the
consent of the owner and he pledges the goods while acting in the ordinary
course of business of a mercantile agent, the pledge shall be valid, provided
that the pawnee acts in good faith.
2. Pledge by person in possession under voidable contract
When the pawner has obtained possession of the goods pledged by him under
a voidable contract but the contract has not been rescinded at the time of
pledge, he can make a valid pledge provided the pledgee acts in good faith.
3. Pledge where pawner has only a limited interest
Where a person pledges goods in which he has only a limited interest, the
pledge is valid to the extent of that interest.
4. Seller in possession of goods after sale
If a seller is, left in possession of the goods sold, a pledge created by him will
be valid, provided the pawnee acted in good faith and had no notice of the sale
of goods to the buyer.
5. Buyer in possession of goods under an “agreement to sell”
Where a buyer has acquired possession of goods under an ‘agreement to sell’
wherein the goods are to become the property of the buyer on fulfillment of
certain conditions, a pledge created by him is valid, provided the pledgee acted
in good faith.
46 Pledge
Section 175 of the Contract Act
Right to extra ordinary expenses:
The pawnee is entitled to receive from the pawner extraordinary expenses incurred
by him for the preservation of the goods pledged.
Therefore, Mehreen is entitled to claim the cost of insurance, in addition to the
principal and interest.
47 Rights of pawner
Section 176 of the Contract Act
Pawnee’s right where pawner makes default:
On default in payment of debt by Ramla, Ovais may:
(a) bring a suit against Ramla upon the debt and retain the goods pledged as a
collateral security; or
(b) he may sell the jewellery pledged on giving Ramla reasonable notice of the
sale.
If the proceeds of such sale are less than the amount due in respect of the debt,
Ramla would still be liable to pay the balance.
If the proceeds of the sale are greater than the amount so due, Ovais shall pay over
the surplus to Ramla.
48 Ratification
Section 196 to 200 of the Contract Act
(a) Ratification
Ratification means the subsequent adoption and acceptance of an act originally
done without authority.
Where acts are done by one person on behalf of another, but without his
authority, he may elect to ratify or to disown such acts. If he accepts them, the
same effects will follow as if they had been performed by his authority.
(b) Essentials of a valid ratification:
A valid ratification must fulfill the following conditions:
(i) The agent must purport to act as agent for a principal who is in
contemplation and is identifiable at the time of contract.
(ii) The principal must be in existence at the time of contract.
(iii) The principal must be competent to contract both at the time of the
contract and at the time of ratification.
(iv) The act to be ratified must not be void, or illegal.
(v) Ratification must be made with full knowledge of all material facts.
(vi) The principal must signify his unconditional acceptance of the act.
(vii) Ratification must be made within a reasonable time.
(viii) Ratification must be of whole transaction.
(ix) Ratification must be communicated.
(x) Ratification must not injure a right of third person.
49 Duties of an agent
Section 209, 211 to 218 of the Contract Act
Duties of an agent towards his principal
1. Duty to follow principal’s directions / instructions / mandate / orders or customs
2. Duty to carry out the work with reasonable skill and diligence
3. Duty to render accounts
4. Duty to communicate with the principal, in cases of difficulty, for obtaining his
instructions.
5. Duty not to deal on his own account.
6. If an agent, without the knowledge of his principal, deals in the business on his
own account the principal is entitled to claim any benefit which may have
resulted to him from the transaction.
7. Duty not to make profit on his own account or to make secret profit.
8. When an agency is terminated on the death of the principal or on his becoming
of unsound mind, the agent must take, all reasonable steps for the protection
and preservation of the interests of his late principal’s representatives.
9. Duty not to delegate authority subject to certain exceptions.
10. Duty to act with ordinary prudence in case of emergency in order to protect the
principal from loss.
51 Rights
Section 189, 217 and 221 of the Contract Act
(i) Agent’s authority in an emergency
An agent has authority, in an emergency to do all such acts for the purpose of
protecting his principal from loss as would be done by a person of ordinary
prudence, in his own case, under similar circumstances.
(ii) Agent’s right of retainer
An agent may retain, out of any sums received on account of the principal in
the business of the agency, all moneys due to himself in respect of advances
made or expenses properly incurred by him in conducting such business, and
also such remuneration as may be payable to him for acting as agent.
(iii) Agent’s right of lien
In the absence of any contract to the contrary, an agent is entitled to retain
goods, papers and other property, whether movable or immovable, of the
principal received by him, until the amount due to himself for commission,
disbursements and services in respect of the same has been paid or accounted
for to him.
52 Misconduct by agent
Section 212 of the Contract Act
It is the duty of an agent to act diligently as a man of ordinary prudence. He must
compensate his principal in respect of the direct consequences of his negligence.
Zakir being an agent of Aslam is responsible for his misconduct due to which Aslam
had to pay Naveed. Therefore, Aslam is justified in his suit.
53 Substituted agent
Section 194 and 195 of the Contract Act
Where an agent, holding an express or implied authority to name another person to
act for the principal in the business of the agency, has named another person
accordingly, such person is a substituted agent, and an agent of the principal for such
part of the business of the agency as is entrusted to him.
The original agent is not responsible to the principal for the acts or negligence of the
substituted agent so selected if he has exercised in selecting such agent the same
amount of discretion as a man of ordinary prudence would exercise in his own case.
54 Irrevocable agency
Section 202 to 204 of the Contract Act
The principal may revoke the authority of the agent, at any time before the agent has
exercised his authority so as to bind the principal.
55 Duties of partner
Section 16(a) of the Partnership Act
Personal profits earned by partners
No, Talha and Umair are not liable to share such profits with Sohail as this transaction
was not within the scope of the partnership.
Subject to the contract between the partners, the partner shall account for that profit
and pay it to the firm, which:
(a) he derives for himself, from any transaction of the firm, or from the use of the
property or business connection of the firm or the firm’s name; or
(b) he made for himself, from carrying on any business of the same nature as and
competing with that of the firm.
(vi) where a partner is entitled to interest on the capital subscribed by him such
interest shall be payable only out of the profits;
(vii) a partner making, for the purposes of the business, any payment or advance
beyond the amount of capital he has agreed to subscribe, is entitled to
interest thereon at the rate of six percent per annum;
(viii) the firm shall indemnify a partner in respect of payments made and liabilities
incurred by him:
in the ordinary and proper conduct of the business, and
in doing such act, in an emergency, for the purpose of protecting the firm
from loss, as would be done by a person of ordinary prudence, in his own
case, under similar circumstances; and
(ix) a partner shall indemnify the firm for any loss caused to it by his willful neglect
in the conduct of the business of the firm.
58 Liabilities
Section 25 to 27 of the Partnership Act
(i) Liability of a partner for acts of the firm
Every partner is liable jointly with all the other partners and also severally for all
acts of the firm done while he is a partner.
(ii) Liability of the firm for wrongful acts of a partner
Where, by the wrongful act or omission of a partner acting in the ordinary
course of the business of a firm, or with the authority of his partners, loss or
injury is caused to any third party, or any penalty is incurred, the firm is liable to
the same extent as the partner.
Although the firm is liable to the third party for the loss caused to him (third
party) by fraud committed by a partner, but, as between the partners, the same
must be borne by the partner committing the fraud and cannot be shared
among all the partners.
(iii) Liability of firm for misapplication of money or property by a partner
The firm is liable to make good the loss where:
A partner acting within his apparent authority receives money or property
from a third party and misapplies it, or
A firm in the course of its business receives money or property from a third
party, and the money or property is misapplied by any of the partners while
it is in the custody of the firm.
59 Implied authority
Section 19 of the Partnership Act
Partner’s act not under implied authority
In the absence of any usage or custom of trade to the contrary, the implied authority
of a partner does not empower him to:
(a) submit a dispute relating to the business of the firm to arbitration,
(b) open a banking account on behalf of the firm in his own name,
60 Holding out
Section 28 of the Partnership Act
If a person represents to the outside world by words spoken or written or by his
conduct or by lending his name, that he is a partner in a certain partnership firm, he
becomes liable as a partner in that firm to anyone who has on the faith of such
representation granted credit to the firm, whether the person representing himself or
allowing himself to be so represented does or does not know that the representation
has reached the person so giving credit.
The doctrine of holding out or estoppel does not extend to:
Where after a partner’s death the business is continued in the old firm name the
continued use of that name or of the deceased partner’s name as a part thereof shall
not of itself make his legal representative or his estate liable for any act of the firm
done after his death.
61 Transfer of interest
Section 29 of the Partnership Act
Rights of transferee of a partner’s interest
Where a partner’s interest is transferred, the transferee does not become a partner
and similarly the transferor does not cease to be a partner. Therefore, Adil would not
be considered as a partner in the firm.
Rights of Adil:
Adil would be entitled only to receive the share of the profits of the firm to which
Fauzia is entitled. He would be bound to accept the account of profits agreed to by
the partners.
Upon dissolution of the firm or, in case, if Fauzia ceases to be a partner, Adil would
be entitled, as against the remaining partners, to receive the share of the assets of
the firm, to which Fauzia was entitled and for the purpose of ascertaining that share
he would be entitled to ask for the accounts as from the date of the dissolution.
Restrictions on Adil:
Adil would not be entitled, during the continuance of the partnership:
(i) to interfere in the conduct of the business; or
(ii) to require accounts; or
(iii) to inspect the books of the firm.
62 Partnership property
Section 14 of the Partnership Act
The property of the firm
Subject to the contract between the partners, the property of the firm includes:
(i) all property and rights and interests in property originally brought into the stock
of the firm or
(ii) all property acquired by purchase or otherwise, by or for the firm or for the
purposes and in the course of the business of the firm,
(iii) the goodwill of the business.
(iv) property and rights and interests in property acquired with money belonging to
the firm unless the contrary intention appears.
The shop is not property of the firm as Irfan has bought it with the firm’s money and
by debiting it in his account, he showed his intention of taking the money as loan.
63 Minor
Section 30 of the Partnership Act
D becomes a partner in the firm after 6 months of the date on which he became
aware of the fact that he was entitled to the benefits in the firm i.e. on 16th February
2008. Therefore, he shall be liable to share the losses of the firm, incurred thereafter.
His failure to announce his decision will have no bearing on the situation.
64 Promissory notes
Section 4 of the Negotiable Instruments Act
(i) It is not a promissory note as promise to pay is not “unconditional”.
(ii) It is a valid promissory note containing all the essential elements.
(iii) It is not a promissory note as the payment is not in terms of money only.
(iv) It is not a promissory note as the amount payable under it is not certain.
(v) It is not a promissory note as the payee in the instrument is not certain.
(vi) It is a valid promissory note. It is not considered to be conditional, for it is
certain that Salik will die, though the exact time of his death is uncertain.
(vii) It is not a promissory note as it lacks unconditional undertaking. There is only
an acknowledgement of indebtedness.
(iii) Time of acceptance: that every accepted bill of exchange was accepted
within a reasonable time after its date and before its maturity;
(iv) Time of transfer: that every transfer of a negotiable bill of exchange was
transferred within a reasonable time after its date and before its maturity;
(v) Order of endorsements: that the endorsements appearing on a negotiable
instrument were made in the order in which they appear thereon;
(vi) Stamps: that a lost promissory note, bill of exchange or cheque was duly
stamped;
(vii) That the holder is a holder in due course;
Provided that, where the instrument has been obtained from any person in
lawful custody thereof by means of an offence or fraud or for unlawful
consideration, the burden of proving that the holder in due course lies upon
him (the holder).
(viii) Presumption on proof of protest: In a suit upon an instrument which has
been dishonoured, the court shall, on proof of the protest, presume the fact of
dishonour, unless and until such fact is disproved.
67 Ambiguous Instruments
Section 17 of the Negotiable Instruments Act
Where an instrument may be construed either as a promissory note or a bill of
exchange, it is called an ambiguous instrument.
Yes, ambiguous instruments are negotiable.
Examples:
(i) Where the drawer and drawee are the same person.
(ii) Where the drawee is a fictitious person.
(iii) Where the drawee is incompetent to contract.
69 Cheque
Section 6 of the Negotiable Instruments Act
(a) Cheque
A “cheque” is a bill of exchange drawn on a specified banker and not
expressed to be payable otherwise than on demand.
Essential elements of a valid cheque:
Following are the essential elements of a valid cheque.
(i) It must be in writing,
(ii) It must contain an unconditional order to pay,
(iii) It must contain an order to pay in terms of money,
(iv) It must contain an order to pay a definite amount of money,
(v) The parties to the cheque must be certain (real),
(vi) It must be signed by the drawer,
(vii) It must be drawn on a specified banker,
(viii) It must be payable on demand.
(b) Who can cross the cheque after issue
Section 125 of the Negotiable Instruments Act
Following persons can cross the cheque:
(i) Holder
(ii) Banker
Crossing of cheque after issue
(i) Where a cheque is uncrossed, the holder may cross it generally or
specially.
(ii) Where a cheque is crossed generally, the holder may cross it specially.
(iii) Where a cheque is crossed generally or specially, the holder may add
the words “not negotiable”.
(iv) Where a cheque is crossed specially, the banker to whom it is crossed
may again cross it specially to another banker, his agent, for collection.
(v) When an uncrossed cheque, or a cheque crossed generally, is sent to
a banker for collection, he may cross it specially to himself.
70 Bill of Exchange
Section 30 of the Negotiable Instruments Act
The liabilities incurred by the drawer of a bill are as follows:
(i) on due presentment, the bill shall be accepted. and paid according to its
tenor, and that
(ii) if the bill is dishonoured, the drawer shall compensate the holder or any
endorser who is compelled to pay it, provided that due notice of dishonour
of the bill is given to or received by the drawer.
(iii) until acceptance, the drawer is liable thereon as principal debtor.
(ii) Holder
Section 8 of the Negotiable Instruments Act
The ‘holder’ of a negotiable instrument means
any person entitled to the possession of the instrument in his own name
and to receive or recover the amount due thereon from the parties liable
thereto.
72 Material alteration
Section 20, 87 and 89 of the Negotiable Instruments Act
In the following situations, the alteration does not prejudice the rights and liabilities
of the parties to a negotiable instrument :
(i) Alteration made for the purpose of correcting a mistake or a clerical error.
(ii) Alteration made to carry out the common intention of the original parties.
(iii) Alteration made with the consent of the parties liable on the instrument.
(iv) Conversion of bearer cheque into an order cheque.
(v) Crossing of an uncrossed cheque.
(vi) Filling blanks in the case of inchoate or incomplete instruments
(vii) Conversion of blank endorsement into an endorsement in full.
(viii) Making qualified acceptance.
(ix) Alteration which is the result of an accident, e.g., mutilation by washing,
ravages by white ants, document torn by a child, document burnt in part by
the hot end of a cigarette.
(x) Alternation made before the instrument is issued.
SECTION
D
Part B - Company Law
Objective test and
long-form answers
74 Association NFP
(a) The Commission may grant a licence and direct that the Alfalah Associates be
registered as a company with limited liability, without the addition of the words
"Limited", to its name, if Alfalah Associates satisfies the following conditions:
(i) It should be capable of being formed as a limited company.
(ii) It should be formed for promoting commerce, art, science, religion, sports,
social services, charity or any other useful object.
(iii) It applies or intends to apply its profits/income in promoting its objects.
(iv) It prohibits the payment of any dividend to its members.
(v) A licence may be granted on such conditions and regulations as the
Commission thinks fit and those conditions and regulations shall be
binding on the association and shall, if the Commission so directs, should
be inserted in the memorandum and articles, or in one of those
documents.
(b) The licence may be revoked at any time by the Commission after giving a notice
in writing of its intention and shall afford Alfalah Associates an opportunity of
submitting a representation in opposition to the revocation. On revocation of the
licence, the registrar shall enter the word Limited at the end of the name of the
Alfalah Associates in the register, and Alfalah Associates will be required to use
the name as entered in the register.
75 Private company
A private company is a company which, by its articles of association
Restricts the right of members to transfer the shares
Restricts the right of members to fifty
Prohibits the invitation of subscriptions against its securities from general
public.
And any company which is not a private company, is a public company
76 KRL
Kaghan Resham Limited (KRL) is the holding company of Naran Silk Limited (NSL)
as KRL holds more than 50 percent shares of NSL
NSL is the holding company of Thandyani Ice-creams Limited (TIL) as NSL can
appoint more than fifty percent directors of TIL
So as per the definition of the holding and subsidiary company under the Ordinance,
KRL is also the holding company of TIL
77 Fajita
June 10, 2010
Warsi family
Fajita Specialists
Subject: Opinion regarding incorporation of “Fajita Specialists” as a Limited
Liability Company
Respected members of the Warsi family
As per company’s ordinance 1984, any association, partnership or company formed
for the purpose of carrying on any business shall be required to be registered as a
company under the Ordinance if it consists of more than twenty persons. However if
the association or company is a joint family carrying on joint family business then
they shall not be required to be registered as a Company under the Companies
Ordinance 1984.
As your business is a joint family business carried on by a joint family, it shall not be
required to be registered as a company even if its number of members exceeds
twenty.
If you require any further information regarding the matter, the undersigned shall be
pleased to assist.
Kind regards
Corporate Advisor
78 Zouk
The Companies Ordinance 1984 requires the company to forward a copy of
Memorandum of Association and Articles of Association on the request of a member
only on payment of certain fixed fee. Any unconcerned person cannot demand such
copies from the company. So “Arizona Grill Limited” is not bound to provide such
copies to Mr Zouk.
80 Commencement of business
A company shall not commence any business or exercise any borrowing powers
unless:
(i) Shares held subject to the payment of the whole amount thereof in cash have
been allotted to an amount not less in the whole than the minimum
subscription;
(ii) Every director of the company has paid to the company full amount on each
of the shares taken or contracted to be taken by him;
(iii) No money is or may become liable to be repaid to applicants for any shares
or debentures which have been offered for public subscription by reason of
any failure to apply for or to obtain permission for the shares or debentures to
be dealt in on any stock exchange.
(iv) There has been filed with the registrar a duly verified declaration by the chief
executive or one of the directors and the secretary in the prescribed from that
the aforesaid conditions have been complied with and the registrar has issued
a certificate of commencement of business; and
(v) In the case of a company which has not issued a prospectus inviting the
public to subscribe for its shares, a statement in lieu of prospectus has been
filed with the registrar.
82 MOA – alteration
The commission may confirm the alteration in the memorandum of association
of the company if it is satisfied that:
(i) Sufficient notice has been given to every debenture holder of the
company, and to any person or class of persons whose interest will, in the
opinion of the Commission, be affected by the alteration; and
(ii) With respect to every creditor who in the opinion of the Commission is
entitled to object, and who signifies his objection in the manner directed by
the Commission either his consent to the alteration has been obtained or
his debt or claim has been discharged or determined, or has been
secured to the satisfactions of the Commission.
83 Articles of association
(a) Section 26 & 27,Companies Ordinance, 1984
(i) The company may adopt all or any of the regulations specified in Table A in
the First Schedule to the Companies Ordinance, 1984 in its articles of
association.
(ii) The articles of the company shall be explicit and without ambiguity and also
list and enumerate the voting and other rights attached to the different
classes of shares and other securities to be issued by it.
(iii) The Articles of Association shall be:
printed
divided into paragraphs numbered consecutively
signed by each subscriber
dated
(b) Section 26, Companies Ordinance, 1984
The articles of association sets out regulations for the company and are
required to be registered along with the memorandum, with the registrar.
These must be signed by the subscribers to the memorandum.
(c) Section 28 & 36, Companies ordinance, 1984
(i) Subject to the conditions of the company’s memorandum the Articles
of Association are allowed to be altered after its registration. A
company may by passing a special resolution make alteration or
addition to its articles. Any alteration or addition made is as valid as if
originally contained in the articles.
(ii) Where such alteration affects the substantive rights or liabilities of
members or of a class of members, the special resolution shall be
passed only if a majority of at least three-fourths of the members or of
the class of members affected by such alteration, vote for such
alteration, personally or through proxy.
(iii) When an alteration is made in the articles of a company, such
changes are required to be made in every copy of the articles issued
after the date of the alteration.
86 Incorporation
Registration of a company is actually registration of the certificate of memorandum of
the company as the memorandum is actually a charter of the company. For registration
of a memorandum of association, it shall be filed with the registrar of companies. A
declaration of compliance (on Form 1) with requirements of the Ordinance in getting
the company registered shall be provided to the registrar along with the memorandum.
Registrar shall register the memorandum of association only if it is satisfied that:
the company is being formed for lawful purposes,
none of its objects stated in the memorandum is inappropriate or deceptive or
insufficiently expressive and
all the requirements of this Ordinance and the rules made thereunder have been
complied with in respect of registration.
If the registrar of companies for any reason refuses the registration of the
memorandum, the company may file an appeal before a registrar higher in rank or
ultimately to the commission if no relief is received against such a refusal. Order of
Commission on such appeal shall be final.
87 Name
When selecting the name it should be considered that the name:
is not inappropriate or deceptive;
is not designed to exploit or offend the religious sentiments of the people;
is not a name identical with the name of the company already registered and
does not closely resemble with the name of the company already registered
under the Ordinance, except where the company in existence, is in the course of
being dissolved and signifies its consent in granting its name to the new company
in such manner as the registrar requires.
Whatever name is proposed, the final authority to decide whether or not a name is in
line with the provisions of the Ordinance lies with the Commission.
88 Disallowed name
Where a company has, due to any reason, been registered with a name which is not
permitted by the Ordinance, the company may, on its own, change the name with the
approval of the registrar.
The registrar may also direct the company to change its name within thirty (30) days of
the receipt of such directions. The registrar cannot issue any direction in this regard
after the expiration of three years from the date of registration of the name of the
company.
The registrar shall give to the company an opportunity of being heard before issuing
such direction.
(b) The Court shall pass an order for cancellation of the resolution only if it is
satisfied that some facts having impact on the decision of the shareholders
were withheld by the company in getting the special resolution passed or, the
variation in rights would unfairly prejudice the shareholders of the class
represented by the applicant.
92 Objections
The resolution to vary the rights of the members needs approval by three fourth
majority of the members of the particular class affected by the variation. However, r any
member or members of the affected class representing at least ten percent
shareholding of that class may apply to the court for an order against the resolution
varying their rights. The court has got the powers to declare the resolution null and void
if it feels that either;
the company withheld certain facts while getting the resolution passed. Had the
members been in knowledge of those facts, they would not have passed the
resolution varying the rights of a particular class; or
the change is otherwise prejudicial to the interest of members.
Such application for getting an order against the resolution should be filed by the
persons aggrieved by the change within 30 days of the date of resolution. The decision
of the court on such matter shall be final and appeal cannot be filed against such
decision and the company is required to file a copy of the order of the court to the
registrar within fourteen days of receipt of the order.
95 Prospectus - registration
Section 52, 53 , 54, 55, 57
The registrar shall not register a prospectus unless the following requirements
have been complied with:
i) Prospectus is dated.
ii) It shall state the matters and reports specified in the Second Schedule.
iii) Experts whose statements are included have not been connected with the
formation, promotion or management of the company.
iv) Experts whose statements are included in the prospectus have given written
consent for issue of such statements.
v) All requirements regarding approval, issue and registration have been
complied with.
vi) The prospectus is accompanied by the written consent of the auditor, legal
adviser, attorney, solicitor, banker and the broker who have agreed to act
in that capacity.
opinion of the registrar or officer dealing with the case, were immaterial, or was
otherwise such as ought, in the opinion of that registrar or officer, as the case may
be, having regard to all the circumstances of the case, reasonably to be excused.
97 Minimum subscription
The amount of minimum subscription must be stated in the prospectus. This includes:
Purchase price of property to be purchased.
Preliminary expenses including underwriting commissions etc.
Repayment of any money borrowed for above matters.
Working capital.
Any other expenditure.
If the company intends to meet all or any of the above needs from any source
other than the issue of shares, such source shall be disclosed.
98 Face of prospectus
Following matters shall be stated on the face of the prospectus:
That a copy of this prospectus has been filed with the registrar for registration
purpose.
List of documents or a reference to any note in the prospectus containing the list
of documents that were filed with the registrar along with the copy of the
prospectus when it was filed for registration.
That an application for listing of the shares or debentures offered under the
prospectus has been filed or shall be filed with the stock exchange.
(viii) or other interest based on agreement for the issue of any instrument in
the nature of redeemable capital.
(ix) or other interest based on a Musharika agreement.
(x) or other interest based on a hire-purchase or leasing agreement for
acquisition of fixed assets.
(xi) floating charge on the undertaking or property of the company, including
stock-in-trade.
(b) The registrar can enter in the register of mortgages and charges a
memorandum of satisfaction or release of charge without receiving any
intimation from the Company, on evidence being given to his satisfaction with
respect to any registered charge, that the:
(i) debt for which the charge was given has been paid or satisfied in whole or
in part, or
(ii) part of the property or undertaking charged has been released from the
charge or has ceased to form part of the company's property or
undertaking;
(b) In the case of an emergency affecting the business of the company the
registrar may on the application of the directors authorize such meeting to be
held at such shorter notice as he may specify.
104 Polling
(a) If Mr. Shakeel intends to make a request for a poll, the chairman of the meeting
would be required to accept his request provided the request is supported:
(i) in the case of a public company, by at least five members having the right
to vote on the resolution and present in person or by proxy;
(ii) in the case of a private company, by one member having the right to vote
on the resolution and present in person or by proxy if not more than seven
such members are personally present, and by two such members present
in person or by proxy if more than seven such members are personally
present.
(iii) by any member or members present in person or by proxy and having not
less than one-tenth of the total voting power in respect of the resolution.
(iv) by any member or members present in person or by proxy and holding
shares in the company conferring a right to vote on the resolution, being
shares on which an aggregate sum has been paid up which is not less
than one-tenth of the total sum paid up on all the shares conferring that
right.
(b) When a poll is taken, the chairman or his nominee and a representative of the
members demanding the poll i.e. Mr.Shakeel and members requesting the poll,
shall scrutinize the votes given on the poll. However, the results of the poll shall
be announced by the chairman of the meeting.
105 Minutes
Every company shall enter a fair and accurate summary of the minutes of all
proceedings of general meetings in the properly maintained minute book along with
the names of those participating in the meetings.
Minute are required to be signed by the chairman of the general meeting or by
107 Quorum
(a) Being a public listed company, the quorum of the meeting is not less than 10
members present personally who represent not less than 25% of the total
voting power, either of their own account or as proxies, unless the articles
provide for a larger number.
(b) The quorum of the meeting should be present within half an hour from the
time for the meeting otherwise the meeting shall be dissolved as it has been
called on the requisition of members.
(c) Since chairman of the board of directors cannot attend the meeting
therefore, any one of the directors present may be elected to be chairman.
(d) However, if none of the directors is present or is unwilling to act as chairman,
the members present shall choose one of the members to be the chairman.
109 Circulation
Following information/ documents are required to be circulated to various stake
holders at least twenty one days prior to the meeting.
(i) Notice of meeting specifying the place and the day and hour of the meeting
along with a statement of the business to be transacted at the meeting and in
respect of the special business, statement setting out all material facts
concerning the business, including, in particular the nature and extent of the
interest therein, if any, of every director
Every notice of a meeting of a company shall be accompanied by a proxy
form.
The notice shall be sent to the following:
All the members;
Any person entitled to a share in consequence of death of a member if
the interest of such person is known to the company;
The auditor or auditors of the company.
(ii) Being a listed company, such notice shall also be published at least in one
daily newspaper in English language and a daily newspaper in Urdu language
having circulation in the Province in which the stock exchange on which the
election of directors,
appointment and fixing of the remuneration of auditors.
Examples:
(i) Disposal of a significant business segment of company.
(ii) Investment in associated undertaking.
Provisions as to the meetings and votes, (Section 160 - b)
114 Commission GM
Commission has got the powers to call general meetings of the company if the
company fails to
a) Call a general meeting
b) Call a statutory meeting or
c) Call an extraordinary general meeting on the requisition of the members.
118 Election
(a) The number and names of the first directors of the company shall be determined
in writing by the majority of subscribers of the memorandum of the company and
until so determined, all the subscribers of the memorandum, who are natural
persons, shall be deemed to be the directors of the company.
The first directors shall hold office until the election of directors in the first annual
general meeting of the company.
(b) The following procedure should be followed by a private company while holding
its election of directors:
(i) The existing directors of a company must fix the number of elected directors
of the company at least thirty-five days before the convening of the general
meeting at which directors are to be elected. The number of directors so
fixed cannot be changed except, with the prior approval of a general
meeting of the company.
(ii) The notice of the general meeting at which election of directors is to be held
must state:
the number of elected directors fixed for election.
the names of the retiring directors.
(iii) The company must receive a notice of intention to offer themselves for
election as a director, from the persons who seek to contest an election,
whether they are a retiring director or otherwise, at least 14 days before the
date of the general meeting at which elections are to be held.
Any such person may at any time before the holding of election withdraw
such notice.
(iv) All notices received by the company must be circulated among the
members, not later than seven days before the date of the general meeting
in the manner provided by the company for sending of a notice of general
meeting.
(v) The directors of the company having a share capital shall, unless the
number of persons who offer themselves to be elected is not more than the
number of directors fixed, be elected by the members of the company in
general meeting in the following manner,
A member shall have such number of votes as is equal to the product
of the number of voting shares or securities held by him and the
number of directors to be elected.
A member may give all his votes to a single candidate or divide them
between more than one of the candidates in such manner as he may
choose; and
The candidate who gets the highest number of votes shall be declared
elected as director and then the candidate who gets the next highest
number of votes shall be so declared and so on until the total number
of directors to be elected has been so elected.
119 Presence
This rule is not applicable to:
(i) a private company which is neither a subsidiary nor a holding company of a
public company;
(ii) any contract of indemnity against any loss which the directors, or any one or
more of them, may suffer by reason of becoming or being sureties or a
surety for the company;
(iii) any contract or arrangement entered into or to be entered into with a public
company, in which the interest of the director aforesaid consists solely in his
being a director of such company and the holder of no more than such
shares therein as are requisite to qualify him for appointment as a director
thereof, he on being nominated as such director by the sending company.
(b) The statement is not in accordance with the provisions of the Companies
Ordinance 1984. The directors’ remuneration for performing extra services,
including the holding of the office of chairman, is determined by the directors or
the company in general meeting in accordance with the provisions in the articles
of association of the company.
(c) The statement is not in accordance with the provisions of the Companies
Ordinance 1984. The assignment of office is possible provided it is allowed under
the articles of association of the company and assignment is approved by a
special resolution passed by the shareholders at the general meeting of the
company.
122 Loans
The company may grant loan to a director if he is in the whole time employment of
the company. Such loan may be granted after getting prior approval from the
Commission.
The purpose for which a company may grant the loan are as follows:
(a) For acquisition or construction of a dwelling house or land therefore
(b) For defraying the cost of any conveyance for personal use or household
effects
(c) For defraying any expense on his medical treatment or the medical treatment
of any relative as are ordinarily made or provided by the company to its
employees.
123 Power
Powers of Directors.
The shareholders seem to be referring to the following powers of the directors of
RRL:
(i) Make calls on shareholders in respect of moneys unpaid on their shares.
(ii) Borrow moneys otherwise than on debentures.
(iii) Invest the funds of the company.
(iv) Make loans.
(v) Incur capital expenditure on any single item or dispose of a fixed asset, in
accordance with the limits prescribed.
(vi) Undertake obligations under leasing contracts exceeding one million rupees.
(vii) Issue shares
(viii) Issue debentures or any other instrument in the nature of redeemable
capital.
(ix) Declare interim dividend
(x) Write off bad debts, advances and receivables
(xi) Write off inventories and other assets of the company
(xii) To authorize sale, purchase or supply contracts with interested companies
and firms
(xiii) To approve annual, half yearly or other periodical accounts to be circulated to
members.
(xiv) To approve bonus to employees
126 Removal
Removal of Directors-Section 181,Companies Ordinance,1984
A company may by resolution in a general meeting remove a director appointed to fill
in the casual vacancy or a director appointed by members in a general meeting of
the company.
(i) The situation relates to the removal of director appointed to fill in the casual
vacancy. Therefore, the number of votes cast against the resolution should not
be equal to or exceed the total number of votes for the time being computed in
a manner similar to the method used for directors’ election divided by the
number of directors, which in this case would be 10,000,000 x 8 ÷ 8 =
10,000,000.
(ii) Mr. Badar can be removed from his office only when the votes cast against the
resolution are less than 220,000 i.e. the minimum number of votes through
which the director was elected in the immediately preceding election of
directors.
for the annual general meeting and shall also publish it at least in one issue each of
a daily newspaper in English Language and a daily newspaper in Urdu Language
having circulation in the Province in which the stock exchange on which the company
is listed is situated.