MOCK EXAMINATION

Certified Finance and Accounting Professional (CFAP)

26 May 2021
3 hours – 100 marks
Additional reading time – 15min
CORPORATE LAWS
Instructions to Examinees
(i) Answer All questions.
(ii) Answer in black pen only.
(iii) Stop writing after 3 hours 15 minutes
(iv) Be honest with yourself

Question 01. (A)

A.H. Hali Limited (AHHL) is a public company listed on Pakistan Stock Exchange. The company’s Board of
directors have passed a resolution to buy back 20% of the total paid up shares of the company from
market. The notice for Extra-ordinary General Meeting, to be held in few days’ time, has been issued and
book closure for ascertaining the entitlement of the shareholders have been announced.
You are the corporate advisor of the company and have been approached by the company opine on the
impact of the following on the decision of the directors and also on the special resolution to be passed on
the matter by the shareholders.
a. During the BOD meeting, two out of 8 directors voted against the resolution to buy back the
shares on the grounds that the company might not have sufficient funds to purchase the shares.
The CEO of the company, after a consultation with the CFO ensured the BOD that the company
shall use its ready finance facility in case they face any shortage of funds.
b. During the BOD meeting, one of the directors of the company showed apprehension about the
danger that the company might not be able to pay its liabilities arising the next twelve months
after the purchase. However, The CEO of the company, after a consultation with the CFO ensured
the BOD that the company has got very good terms with its creditors especially the banks to
whom the company owe major funds and they shall be able to defer the liabilities without any
additional burden in case they need to do so. The BOD was assured that the company shall not
face any solvency issues due to non-payment of liabilities.
c. After the notice of the EOGM has been issued, one of the existing shareholders (an institution) of
the company holding 15% shares in the company issued a public announcement of intention to
purchase 20% more shares in the company under the requirements of the Securities Act 2015.
d. The company has just received a notice from the Sindh High Court that one of the payables of the
company whose debt was considered as disputed and bogus by the company has filed a petition
for winding up of the company on the grounds that the company is unable to pay its debts. The
copy of the notice has also been sent to the PSX by the high court. The amount involved in the
suit is Rs. 200,000/- Only.
e. One of the creditors of the company has written a letter to the company showing his displeasure
at the decision of the BOD to buy back the shares and demanded that his money may be paid