M6 - CGBLE Study Text

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ALL RIGHTS RESERVED
This book and material including write-up, tables, graphs, figures, etc.,
therein are copyright material and are protected under Copyright Laws
of Pakistan. No part of this publication can be reproduced, stored in a
retrieval system or transmitted in any physical photocopying, recording
or otherwise without prior written permission or the ICMA Pakistan’s
Head Office.
Institute of Cost and Management Accountants of Pakistan

Published by:
Institute of Cost and Management Accountants of Pakistan
Email : education@icmap.com.pk
Website : www.icmap.com.pk
Phone : + 92-21-99243900
Fax : + 92-21-99243342
First Edition 2014

Contents developed by a consortium lead by KAPLAN.
Second Edition 2020
Contents updated by the ICMA Pakistan.
Disclaimer
This document has been developed to serve as a comprehensive study and
reference guide to the faculty members, examiners and students. It is neither
intended to be exhaustive nor does it purport to be a legal document. In case
of any variance between what has been stated and that contained in the
relevant act, rules, regulations, policy statements etc., the latter shall prevail.
While utmost care has been taken in the preparation / updating of this
publication, it should not be relied upon as a substitute of legal advice.
Any deficiency found in the contents of study text can be reported to the
Education Department at education@icmap.com.pk
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CONTENTS
1 COMPANY 01
2 INCORPORATION OF COMPANIES 31
3 AUTHORITIES 86
4 SECURITIES ACT 2015 108
SHARE CAPITAL-ISSUE AND

5 FURTHER ISSUE OF SHARES 176
SHARE CAPITAL TRANSFER

6 AND ALLOTMENT OF SHARES 202
SHARE CAPITAL BUY BACK AND

7 REDUCTION OF SHARE CAPITAL
217
ADMINISTRATION-DIRECTORS AND CHIEF EXECUTIVE 245

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ADMINISTRATION-CODE OF
9 CORPORATE GOVERNANCE
279
10 MEETINGS AND PROCEEDINGS 311
11 BORROWINGS BY THE COMPANY 336
12 BOOKS OF ACCOUNTS 362
13 AUDITORS 393
14 INVESTIGATIONS AND ARRANGEMENTS 410
15 REGISTERS AND STATUTORY BOOKS 425
16 INVESTMENT OF COMPANIES 436
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WINDING UP INTRODUCTION AND
462
17 WINDING UP BY COURT
18 MODARABA & MODARABA COMPANY 501
19 NON-BANKING FINANCE COMPANIES 539
20 PAKISTAN STOCK EXCHANGE RULE BOOK 584
21 ANTI MONEY LAUNDERING 659
22 PROFESSIONAL ETHICS 686
23 COMPANY SECRETARY & E-SERVICES 694
24 MEETINGS AND RESOLUTIONS 710
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HOW TO USE THE MATERIAL
The main body of the text is divided into a number of chapters, each of which is
organized on the following pattern:
 Detailed learning outcomes. You should assimilate these before beginning

detailed work on the chapter, so that you can appreciate where your studies are
leading.
 Step-by-step topic coverage. This is the heart of each chapter, containing

detailed explanatory text supported where appropriate by worked examples and
exercises. You should work carefully through this section, ensuring that you
understand the material being explained and can tackle the examples and
exercises successfully. Remember that in many cases knowledge is cumulative;
if you fail to digest earlier material thoroughly; you may struggle to understand
later chapters.
 Examples. Most chapters are illustrated by more practical elements, such as

relevant practical examples together with comments and questions designed to
stimulate discussion.
 Self-Test question. The test of how well you have learned the material is your
ability to tackle standard questions. Make a serious attempt at producing your
own answers, but at this stage don’t be too concerned about attempting the
questions in exam conditions. In particular, it is more important to absorb the
material thoroughly by completing a full solution than to observe the time limits
that would apply in the actual exam.
 Solutions. Avoid the temptation merely to ‘audit’ the solutions provided. It is an

illusion to think that this provides the same benefits as you would gain from a
serious attempt of your own. However, if you are struggling to get started on a
question you should read the introductory guidance provided at the beginning of
the solution, and then make your own attempt before referring back to the full
solution.
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STUDY SKILLS AND REVISION GUIDANCE
Planning
To begin with, formal planning is essential to get the best return from the time
you spend studying. Estimate how much time in total you are going to need for
each subject you are studying for the Managerial Level. Remember that you
need to allow time for revision as well as for initial study of the material. This
book will provide you with proven study techniques. Chapter by chapter it covers
the building blocks of successful learning and examination techniques. This is the
ultimate guide to passing your ICMA Pakistan written by a team of developers
and shows you how to earn all the marks you deserve, and explains how to avoid
the most common pitfalls.
With your study material before you, decide which chapters you are going to
study in each week, and which weeks you will devote revision and final question
practice.
Prepare a written schedule summarizing the above and stick to it.
It is essential to know your syllabus. As your studies progress you will become
more familiar with how long it takes to cover topics in sufficient depth. Your
timetable may need to be adapted to allocate enough time for the whole syllabus.
Tips for effective studying
(1) Aim to find a quiet and undisturbed location for your study, and plan as far
as possible to use the same period of time each day. Getting into a routine
helps to avoid wasting time. Make sure that you have all the materials you
need before you begin so as to minimize interruptions.
(2) Store all your materials in one place, so that you do not waste time
searching for items around your accommodation. If you have to pack
everything away after each study period, keep them in a box or even a
suitcase, which will not be disturbed until the next time.
(3) Limit distractions. To make the most effective use of your study periods
you should be able to apply total concentration, so turn off all
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entertainment equipment, set your phones to message mode and put up
your ‘do not disturb’ sign.
(4) Your timetable will tell you which topic to study. However, before dividing in
and becoming engrossed in the finer points, make sure you have an
overall picture of all the areas that need to be covered by the end of that
session. After an hour, allow yourself a short break and move away from
your study text. With experience. You will learn to assess the pace you
need to work at.
(5) Work carefully through a chapter, note imported points as you go. When
you have covered a suitable amount of material, very the pattern by
attempting a practice question. When you have finished your attempt,
make notes of any mistakes you make, or any areas that you failed to
cover or covered more briefly.
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Corporate Governance Business Laws and Ethics (Study Text) 1|Page
Companies Act, 2017
Section 2 to 4, 42 to 44
Chapter Learning Objectives:

Upon completion of this chapter, you will be able to understand:
1. Concept of Company
2. Types of Company
a. According to legal form
i. Statutory Company
ii. Registered Company
 Company limited by shares
 Company limited by guarantee
 Unlimited company
b. According to articles of association
i. Private company
ii. Public company
iii. Single member company
c. Holding, Associated companies and associated undertakings
d. Public sector company
3. Association not for profit
4. Definitions & Important Terms
5. Non-Applicability of the Companies

Introduction
“A society or association of persons, in considerable number, interested in a

common object, and uniting themselves for the prosecution of some commercial
or industrial undertaking, or other legitimate business”
(Black’s Law dictionary)
The term company is interchangeably used for Corporation, Body corporate or

sometimes corporate alone. However companies Act 2017 states the company
as “company” means a company formed and registered under this Act or the
company law”; [(Section 2 (1) (17)]
Company law [(Section 2 (1) (18)]
“Company law” means the repealed Companies Act, 1913 (VII of 1913),
Companies Ordinance, 1984(XLVII of 1984), Companies Ordinance, 2016 (VI of
(2016) and also includes this Act unless the context provides otherwise”
Companies Act further goes on to differentiate a company from a body

corporate or Corporation by defining that the “body corporate or Corporation
includes
(a) a company incorporated under this Act or company law; or
(b) a company incorporated outside Pakistan, or
(c) a statutory body declared as body corporate in the relevant statute, but does
not include—
(i) a co-operative society registered under any law relating to cooperative

societies; or
(ii) any other entity, not being a company as defined in this Act or any other
law for the time being which the concerned Minister-in-Charge of the
Federal Government may, by notification, specify in this behalf. [(Section
2 (1) (9)]
There might be various types of Companies under the Companies Act,
2017

1- By Virtue Of Legal Form
By virtue of their legal form, companies can be classified in the following types:
a. Statutory company:
The companies which are formed under special statutes are termed as
statutory companies. These are governed by the Acts or Ordinances
through which these are created. Example of such type of companies is
the State Bank of Pakistan, Small Business Finance Corporation,
Investment Corporation of Pakistan, etc.
Registered company:
Registered companies are those companies which are registered in
Pakistan under the Companies Act, 2017 or any previous Companies Act
or Ordinance. These companies are further classified into the following
three broad classifications [Section: 14(2)]:
i.Company Limited by Shares [Section: 2(1)(20)]

It means a company; having the liability of its members limited by the
memorandum to the extent of amount, if any, remaining unpaid on the
shares respectively held by them.
ii. Company Limited by Guarantee [Section: 2(1)(19)]

It means a company having the liability of its members limited by the
memorandum to such amount as the members may respectively thereby
undertake to contribute to the assets of the company in the event of its
being wound up.
iii. Unlimited Company [Section: 2(1)(71)]

It means a company not having any limit on the liability of its members.
2- ON THE BASIS OF ARTICLES OF ASSOCIATION
By virtue of provisions of the articles, companies can further be divided into the
following categories:
a. PRIVATE COMPANY [Section: 2(1)(49)]

“private company” means a company which, by its articles-
(a) restricts the right to transfer its shares;

(b) limits the number of its members to fifty not including persons who are in the
employment of the company; and
(c) prohibits any invitation to the public to subscribe for the shares, if any, or
debentures or redeemable capital of the company:
Note: Where two or more persons hold one or more shares in a company jointly,
they shall, for the purposes of this definition, be treated as a single member.
b. PUBLIC COMPANY
It is a company which is not a private company. [Section: 2(1)(52)]
It is a company which does not:
a) limit the maximum number of its members;

b) restrict the right to transfer its shares, and
c) prohibit from inviting public to subscribe for the shares or debentures of
the company.
A public limited company can be formed with at least three (3) members.
Public limited companies may further be classified in the following two
categories.
i) Listed Companies
It means a public company, body corporate or any other entity whose securities
are listed on securities exchange. [Section: 2(1)(38)]
So the companies whose securities are allowed to be traded on a stock exchange

are called listed companies.
ii) Un-Listed Companies

The Companies whose securities are not listed on securities exchange or the
companies whose securities are not allowed to be traded on a stock exchange
are called un-listed companies.
c. SINGLE MEMBER COMPANY: [Section: 2(1)(65)]
It means a company which has only one member.

3- ON THE BASIS OF COMPOSITION OF SHAREHOLDING:
One the basis of composition of shareholding, companies can be classified in any

of the following types:
a. HOLDING COMPANY [Section: 2(1)(37)]

It means a company which is another company’s holding company if, but only if,
that other company is its subsidiary;
b. SUBSIDIARY COMPANY [Section: 2(1)(68)]

“subsidiary company” or “subsidiary”, in relation to any other company (that is
to say the holding company), means a company in which the holding company.
(a) controls the composition of the board; or
(b) exercises or controls more than one-half of its voting securities either by itself
or together with one or more of its subsidiary companies:
Provided that such class or classes of holding companies shall not have
layers of subsidiaries beyond such numbers, as may be notified,
Explanation. For the purposes of this clause

(i) a company shall be deemed to be a subsidiary company of the holding
company even if the control referred to in sub-clause (a) or sub-clause (b) is
of another subsidiary company of the holding company;
(ii) the composition of a company’s board shall be deemed to be controlled by

another company if that other company by exercise of power exercisable by it
at its discretion can appoint or remove all or a majority of the directors;
(iii) the expression “company” includes anybody corporate;
(iv) “layer” in relation to a holding company means its subsidiary or subsidiaries;

c. ASSOCIATED COMPANIES AND ASSOCIATED UNDERTAKINGS [SECTION
2(1)(4)]
“associated companies” and “associated undertakings” mean any two or
more companies or undertakings, or a company and an undertaking,
interconnected with each other in the following manner, namely:—
(a) if a person who is owner or a partner or director of a company or undertaking,

or who, directly or indirectly, holds or controls shares carrying not less than twenty
percent of the voting power in such company or undertaking, is also the owner or
partner or director of another company or undertaking, or directly or indirectly,
holds or controls shares carrying not less than twenty percent of the voting power
in that company or undertaking; or
(b) if the companies or undertakings are under common management or control or

one is the subsidiary of another; or
(c) if the undertaking is a modaraba managed by the company; and a person who
is the owner of or a partner or director in a company or undertaking or, who so
holds or controls shares carrying not less than ten percent of the voting power in a
company or undertaking, shall be deemed to be an "associated person" of every
such other person and of the person who is the owner of or a partner or director in
such other company or undertaking, or who so holds or controls such shares in
such company or undertaking:
Provided that—
(i) shares shall be deemed to be owned, held or controlled by a person if they

are owned, held or controlled by that person or by the spouse or minor children
of the person;
(ii) directorship of a person or persons by virtue of nomination by concerned

Minister-in-Charge of the Federal Government or as the case maybe, a
Provincial Government or a financial institution directly or indirectly owned or
controlled by such Government or National Investment Trust; or
(iii) directorship of a person appointed as an “independent director”; or
(iv) shares owned by the National Investment Trust or a financial institution

directly or indirectly owned or controlled by the Federal Government or a
Provincial Government; or shares registered in the name of a central

depository, where such shares are not beneficially owned by the central
depository; shall not be taken into account for determining the status of a
company, undertaking or person as an associated company, associated
undertaking or associated person;
d. PUBLIC SECTOR COMPANY [Section: 2(1)(54)]

It means a company, whether public or private, which is directly or indirectly
controlled, beneficially owned or not less than fifty-one percent of the voting
securities or voting power of which are held by the Government or any agency
of the Government or a statutory body, or in respect of which the Government
or any agency of the Government or a statutory body, has otherwise power to
elect, nominate or appoint majority of its directors and includes a public sector
association not for profit, licensed under section 42:
Provided that nomination of directors by the Commission on the board of the

securities exchange or any other entity or operation of any other law shall not
make it a public sector company.

4- ASSOCIATIONS NOT FOR PROFIT
Licencing of associations with charitable and not for profit objects. [SECTION 42]
Satisfaction of the Commission

(1) Where it is proved to the satisfaction of the Commission that an association is to be
formed as a limited company—
(a) for promoting commerce, art, science, religion, health, education, research,
sports, protection of environment, social welfare, charity or any other useful object;
(b) such company—

(i) intends to apply the company’s profits and other income in promoting its objects;
and
(ii) prohibits the payment of dividends to the company’s members; and

(c) such company’s objects and activities are not and shall not, at any time, be against
the laws, public order, security, sovereignty and national interests of Pakistan, the
Commission may, by license for a period to be specified, permit the association to
be registered as a public limited company, without addition of the word “Limited” or
the expression“(Guarantee) Limited”, to its name.
Grant of license may be on some conditions and subject to regulations

(2) A license under sub-section (1) may be granted on such conditions and subject to
such regulations as the Commission thinks fit and those conditions shall be
inserted in and deemed part of the memorandum and articles, or in one of those
documents.
Table F for Memorandum and articles of association

(3) Memorandum and articles of association of a company, licensed under this section,
shall be in accordance with the form set out in Table F in the First Schedule or as near
there to as circumstances admit and approved by the Commission.
Privileges and obligations of a limited company

(4) The association on registration under this section shall enjoy all the privileges and
be subject to all the obligations of a limited company.
Revocation of license
(5) The Commission may at any time by order in writing, revoke a license granted
under sub-section (1), with such directions as it may deem fit, on being satisfied
that—
(a) the company or its management has failed to comply with any of the terms or
conditions subject to which a license is granted; or
(b) any of the requirements specified in sub-section (1) or any regulations made
under this section are not met or complied with; or
(c) affairs of the company are conducted in a manner prejudicial to public

interest;
or
(c) the company has made a default in filing with the registrar its financial
statements or annual returns for immediately preceding two consecutive
financial years; or
Corporate Governance Business Laws and Ethics (Study Text) 10 | P a g e

(d) the company has acted against the interest, sovereignty and integrity of
Pakistan, the security of the State and friendly relations with foreign States;
or
(e) the number of members is reduced, below three; or
(f) the company is—
(i) conceived or brought forth for, or is or has been carrying on, unlawful or
fraudulent activities; or
(ii) run and managed by persons who fail to maintain proper and true accounts
or they commit fraud, misfeasance or malfeasance in relation to the
company; or
(iii) run and managed by persons who are involved in terrorist financing or
money laundering; or
(iv) managed by persons who refuse to act according to the requirements of

the memorandum or articles or the provisions of this Act or failed to carry
out the directions or decisions of the Commission or the registrar given in
exercise of the powers conferred by this Act; or
(v) not carrying on its business or is not in operation for one year; or
(g) it is just and equitable that the License should be revoked: Provided that
before a license is so revoked, the Commission shall give to the company a
notice, in writing of its intention to do so, and shall afford the company an
opportunity to be heard.
No registration without a license

(6) Notwithstanding anything contained in this Act or any other law, no association shall
be registered as a company with the objects as mentioned in clause (a) and the
conditions provided in clause (b) of sub-section (1) without a license granted in
pursuance of this section.
Effect of revocation of license. (Section 43)

On revocation of license (a) stop all its activities (b) No donations (c) All assets
after satisfaction of all debts and liabilities to transfer to another company
licensed under section 42, Retention of reasonable amount for voluntary winding

up or making an application to the registrar for striking the name of the company
off the register
(1) On revocation of license of a company under section 42, by the Commission-
(a) the company shall stop all its activities except the recovery of money owed to it, if
any;
(b) the company shall not solicit or receive donations from any source; and
(c) all the assets of the company after satisfaction of all debts and liabilities shall, in the
manner as may be specified, be transferred to another company licensed under section
42, preferably having similar or identical objects to those of the company, within ninety
days from the revocation of the license or such extended period as may be allowed by
the Commission:
Provided that a reasonable amount to meet the expenses of voluntary winding up or

making an application to the registrar for striking the name of the company off the
register in terms of sub-section (3), may be retained by the company.
Filing of a report to the registrar

(2) After compliance of the requirements mentioned in sub-section (1), the board of the
company shall file within fifteen days from the date of such compliance, a report to the
registrar containing such information and supported with such documents as may be
specified.
Proceedings for winding up voluntarily/striking of the name of the company off

the register
(3) Within thirty days of acceptance of the report by the registrar, submitted by the
company under sub-section (2), the board shall initiate necessary proceedings for
winding up of the company voluntarily or where it has no assets and liabilities make an
application to the registrar for striking the name of the company off the register.
In case of failure, appointment of the administrator

(4) If the company fails to comply with any of the requirements of this section within the
period specified or such extended period as may be allowed by the Commission, the
Commission may, without prejudice to any other action under the law, appoint an
administrator to manage affairs of the company subject to such terms and conditions as
may be specified in the order and initiate necessary proceedings for winding up of the
company.

Application of section 291 to the Administrator
(5) The provisions of section 291, except those of sub-section (1) thereof, shall apply
mutatis mutandis to the administrator appointed under this section.
The members and officers or any of their family members not to hold any office in
the company for a period of five years
(6) Where any assets of the company are transferred, in consequence of revocation of
license, to another company licensed under section 42, the members and officers of the
first mentioned company or any of their family members shall not be eligible to hold any
office in the later company for a period of five years from the date of transfer of such
assets.
Application of this section for the companies revoked before the commencement
of this Act
(7) Where the license of a company has been revoked before the commencement of
this Act and such company is not in the process of winding up, this section shall apply
as if the license was revoked immediately after the commencement of this Act.
Penalty (Section 44)

If a company licensed under section 42 or any of its officers makes default complying
with any of the requirements of sections 42 and 43 or the rules or regulations or the
terms or conditions to which the license is subject or any directions contained in a
revocation order, it shall without prejudice to any other action be punishable by a
penalty not exceeding of level 2 on the standard scale.
5. Difference between Private and Public Company:
Public Company Private Company

1- A public company should have at 1- A private company should have
least three (3) members in case of at least two (2) members except
unlisted company and seven (7) single member company (SMC).
members in case of listed company.
2- There is no restriction on the 2- Maximum members cannot

maximum no. of members. exceed fifty (50). However, the
employee members are not
counted for the purpose of
deciding upper limit.

3- A public company can invite 3- A private company cannot
subscription from general public. invite subscription from general
public.
4- Members of a public company 4- Transfer of share is restricted

can transfer its shares without any in private company.
restriction.
5- A public company has to seek 5- No such certificate is required

certificate for commencement of and it can commence business
business. just after is incorporation.
6- The public company has to raise 6- There is no requirement to

minimum subscription before raise minimum subscription.
obtaining certificate of
commencement of business.
7- A public company is required to 7- There is no requirement of

file the prospectus or a statement in filing prospectus or statement in
lieu of prospectus (SILOP) for lieu of prospectus for a private
obtaining the certificate for company.
commencement of business.
8- A public company is required to 8- Filing of accounts is not

file its accounts with the registrar. required by the private company if
its paid up capital is not
exceeding ten million rupees.
9- Auditor’s qualification is required 9- No qualification is required for

as Chartered Accountants. an auditor of a private company
except when it has a paid up
capital of three million rupees or
more.
10- A public company should have 10- A private company should

at least three (3) directors in case of have least two (2) directors
unlisted company and seven (7) except single member company
directors in case of listed company. (SMC).

6. Difference between public listed and public unlisted company:
Public Listed Public Unlisted

1- Minimum number of directors should 1- Minimum number of directors
be seven (7). should be three (3).
2- A listed company should have at 2- An unlisted should have at least

least seven (7) members. three (3) members.
3- A listed public company is required to 3- An unlisted public company is

file its accounts with Commission and required to file its accounts with the
the Registrar. Registrar only.
4- Beneficial ownership of a listed public 4- No such restriction on unlisted

company is controlled and reported. public company.
5- Unless the AOA define a larger 5- Unless the AOA define a larger
number the quorum for general meeting number quorum for general meeting
of listed company is ten (10) members of an unlisted company is two (2)
present in person representing not less members present in person
than 25% of total voting power either of representing not less than 25% of total
their own account or as proxy. voting power, of their own account or
as proxy.
6- Listed public company prepares its 6- Unlisted company prepares its
account in accordance with fourth accounts in accordance with fifth
schedule and IASs. schedule and IASs.
7- A person engaged in the business of 7- There is no such restriction on

brokerage or is a spouse of such person unlisted public company.
or is a sponsor, director or officer of a
corporate brokerage house cannot
become directors of a listed company.
8- It is required to issue prospectus. 8- It is only required to file statement

in lieu of prospectus if prospectus is
not issued inviting the public to
subscribe for shares.

7. IMPORTANT DEFINITIONS AND TERMS CONTAINED IN THE ACT
Every law defines various things in its own context and for its own purposes.
Companies Act 2017 also defines various items, the important of which are defined here
as under.
7.1 “Alter” or “alteration” [Section 2(1) (2)]

“Alter” or “alteration” includes making of additions or omissions without
substituting or destroying main scheme of the document;
7.2 Articles [Section 2(1) (3)]

“Articles” mean the articles of association of a company framed in accordance
with the company law or this Act;
7.3 Beneficial ownership of shareholders or officer of a company [Section 2(1) (7)]

It means ownership of securities beneficially owned, held or controlled by any
officer or substantial shareholder directly or indirectly, either by-
(a) him or her;
(b) the wife or husband of an officer of a company, not being herself or himself an officer
of the company;
(c) the minor son or daughter of an officer where “son” includes step-son and “daughter”
includes step-daughter; and “minor” means a person under the age of eighteen
years;
(d) in case of a company, where such officer or substantial shareholder is a

shareholder, but to the extent of his proportionate shareholding in the company:
Provided that “control” in relation to securities means the power to exercise a

controlling influence over the voting power attached thereto:
Provided further that in case the substantial shareholder is a non-natural person,

only those securities will be treated beneficially owned by it, which are held in its
name.

Explanation. For the purpose of this Act “substantial shareholder”, in relation
to a company, means a person who has an interest in shares of a company-
(a) the nominal value of which is equal to or more than ten per cent of the issued
share capital of the company; or
(b) which enables the person to exercise or control the exercise of ten per cent
or more of the voting power at a general meeting of the company;
7.4 “Book and paper” and “book or paper” [Section 2(1) (10)]
“Book and paper” and “book or paper” includes books of account, cost
accounting records, deeds, vouchers, writings, documents, minutes and
registers maintained on paper or in electronic form;
7.5 Books of account [Section 2(1) (11)]

“Books of account” include records maintained in respect of—
(a) all sums of money received and expended by a company and matters in
relation to which the receipts and expenditure take place;
(b) all sales and purchases of goods and services by the company;
(c) all assets and liabilities of the company; and
(d) items of cost in respect of production, processing, manufacturing or mining
activities;
7.6 Central depository [Section 2(1) (12)]

“Central depository” shall have the same meaning as assigned to it under the
Securities Act, 2015 (III of 2015).

7.7 Chartered accountant [Section 2(1) (13)]
“Chartered accountant” shall have the same meaning as assigned to it under
the Chartered Accountants Ordinance, 1961 (X of 1961);
7.8 Chief executive [Section 2(1) (14)]

“Chief executive” in relation to a company means an individual who, subject to
control and directions of the board, is entrusted with whole, or substantially hole,
of the powers of management of affairs of the company and includes a director or
any other person occupying the position of a chief executive, by whatever name
called, and whether under a contract of service or otherwise;
7.9 Chief financial officer [Section 2(1) (15)]

“Chief financial officer” means an individual appointed to perform such
functions and duties as are customarily performed by a chief financial officer;
7.10 Commission [Section 2(1) (16)]

“Commission” shall have the same meaning as assigned to it under the
Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997)
7.11 Company secretary [Section 2(1) (21)]

“Company secretary” means any individual appointed to perform secretarial
and other duties customarily performed by a company secretary and declared
as such, having such qualifications and experience, as may be specified;
7.12 Cost and management accountant [Section 2(1) (22)]

“Cost and management accountant” shall have the same meaning as
assigned to it under the Cost and Management Accountants Act, 1966 (XIV of
1966);
7.13 Debenture [Section 2(1) (24)]

“Debenture” includes debenture stock, bonds, term finance certificate or any
other instrument of a company evidencing a debt, whether constituting a
mortgage or charge on the assets of the company or not;
7.14 Document [Section 2(1) (26)]

“Document” includes any information or data recorded in any legible form or
through use of modern electronic devices or techniques whatsoever, including
books and papers, returns, requisitions, notices, certificates, deeds, forms,
registers, prospectus, communications, financial statements or statement of

accounts or records maintained by financial institutions in respect of its
customers;
7.15 E-service [Section 2(1) (27)]

“E-service” means any service or means provided by the Commission for the
lodging or filing of electronic documents;
7.16 Employees’ stock option [Section 2(1) (29)]

“Employees’ stock option” means the option given to the directors, officers or
employees of a company or of its holding company or subsidiary company or
companies, if any, which gives such directors, officers or employees, the right to
purchase or to subscribe for shares of the company at a price to be determined
in the manner as may be specified;
7.17 Expert [Section 2(1) (30)]

“Expert” includes an engineer, a valuer, an actuary, a chartered accountant or a
cost and management accountant and any other person who has the power or
authority to issue a certificate in pursuance of any law for the time being in force
or any other person notified as such by the Commission;
7.18 Financial institution [Section 2(1) (31)]

“Financial institution” includes—
(a) any company whether incorporated within or outside Pakistan which
transacts the business of banking or any associated or ancillary business in
Pakistan through its branches within or outside Pakistan and includes a
government savings bank, but excludes the State Bank of Pakistan;
(b) a modaraba or modaraba management company, leasing company,

investment bank, venture capital company, financing company, asset
management company and credit or investment institution, corporation or
company; and
(c) any company authorized by law to carry on any similar business, as the
concerned Minister-in-Charge of the Federal Government may by notification in
the official Gazette, specify;
7.19 Financial period [Section 2(1) (32)]

“Financial period” in relation to a company or any other body corporate, means
the period (other than financial year) in respect of which any financial
statements thereof are required to be made pursuant to this Act;

7.20 Financial statements [Section 2(1) (33)]
“Financial statements” in relation to a company, includes—
(a) a statement of financial position as at the end of the period;
(b) a statement of profit or loss and other comprehensive income or in the case
of a company carrying on any activity not for profit, an income and expenditure
statement for the period;
(c) a statement of changes in equity for the period;
(d) a statement of cash flows for the period;
(e) notes, comprising a summary of significant accounting policies and other
explanatory information;
7.21 Financial year [Section 2(1) (34)]

“Financial year” in relation to a company or any other body corporate, means
the period in respect of which any financial statement of the company or the
body corporate, as the case may be, laid before it in general meeting, is made
up, whether that period is a year or not;
7.22 Foreign company [Section 2(1) (35)]

“Foreign company” means any company or body corporate incorporated
outside Pakistan, which—
(a) has a place of business or liaison office in Pakistan whether by itself or

through an agent, physically or through electronic mode; or
(b) conducts any business activity in Pakistan in any other manner as may be
specified;
7.23 Memorandum [Section 2(1) (40)]

“Memorandum” means the memorandum of association of a company as
originally framed or as altered from time to time in pursuance of company law
or of this Act;
7.24 “Modaraba" and "Modaraba company” [Section 2(1) (41)]

“Modaraba" and "Modaraba company” shall have the same meaning as
assigned to it in the Modaraba Companies and Modaraba (Floatation and
Control) Ordinance, 1980 (XXXI of 1980);

7.25 Mortgage or charge [Section 2(1) (42)]
“Mortgage or charge” means an interest or lien created on the property or
assets of a company or any of its undertakings or both as security;
7.26 Net worth [Section 2(1) (43)]

“Net worth” means the amount by which total assets exceed total liabilities;
7.27 Officer [Section 2(1) (45)]

“Officer” includes any director, chief executive, chief financial officer, company
secretary or other authorized officer of a company;
7.28 Ordinary resolution [Section 2(1) (46)]

“Ordinary resolution” means a resolution passed by a simple majority of such
members of the company entitled to vote as are present in person or by proxy
or exercise the option to vote through postal ballot, as provided in the articles or
as may be specified, at a general meeting;
7.29 Postal ballot [Section 2(1) (47)]

“Postal ballot” means voting by post or through any electronic mode: Provided
that voting through postal ballot shall be subject to the provision in the articles of
association of a company, save as otherwise provided in this Act;
7.30 Prescribed [Section 2(1) (48)]

“Prescribed” means prescribed by rules made by the Federal Government
under this Act;
7.31 Promoter [Section 2(1) (50)]

“Promoter” means a person-
(a) who is named as a subscriber to the memorandum of association of a

company; or
(b) who has been named as such in a prospectus; or
(c) who has control over affairs of the company, directly or indirectly whether as
a shareholder, director or otherwise; or
(d) in accordance with whose advice, directions or instructions the board of

the company is accustomed to act:
Provided that—

(i) nothing in sub-clause (d) shall apply to a person who is acting merely in a
professional capacity; and
(ii) nothing contained in sub-clause (d) shall apply to the Commission,

registrar or any authorized officer by virtue of enforcement or regulation of
the provisions of this Act or any rules, regulations, instructions, directions,
orders thereof;
7.32 Prospectus [Section 2(1) (51)]

“Prospectus” shall have the same meaning as assigned to it under the
Securities Act, 2015 (III of 2015);
7.33 Public interest company [Section 2(1) (53)]

“Public interest company” means a company which falls under the criteria as
laid down in the Third Schedule to this Act or deemed to be such company
under section 216;
7.34 Redeemable capital [Section 2(1) (55)]

“Redeemable capital” includes sukuk and other forms of finances obtained on
the basis of participation term certificate (PTC), musharika certificate, term
finance certificate (TFC) or any other security or obligation not based on
interest, representing an instrument or a certificate of specified denomination,
called the face value or nominal value, evidencing investment of the holder in
the capital of the company other than share capital, on terms and conditions of
the agreement for the issue of such instrument or certificate or such other
certificate or instrument as the concerned Minister-in-Charge of the Federal
Government may, by notification in the official Gazette, specify for the purpose;
Explanation.- “sukuk” represents redeemable investment in certificates of equal

nominal value representing undivided shares in ownership of tangible assets of a
particular project or specific investment activity, usufruct and services;
7.35 Register of companies [Section 2(1) (56)]

“Register of companies” means the register of companies maintained by the
registrar on paper or in any electronic form under this Act;
7.36 Registrar [Section 2(1) (57)]

“Registrar” means registrar, an additional registrar, an additional joint registrar,
a joint registrar, a deputy registrar, an assistant registrar or such other officer as

may be designated by the Commission, performing duties and functions under
this Act;
7.37 “Regulations” [Section 2(1) (58)]

“Regulations” means the regulations made by the Commission under this Act;
7.38 Rules [Section 2(1) (59)]

“Rules” means rules made by the Federal Government under this Act;
7.39 Securities [Section 2(1) (61)]

“Securities” include the securities as provided in sub-clauses (a) to (i) of clause
(lii) of section 2 of the Securities Act, 2015 (III of 2015) whether listed or not;
7.40 “Securities exchange” [Section 2(1) (62)]

“Securities exchange” means a public company licensed by the Commission
as a securities exchange under the Securities Act, 2015 (III of 2015);
7.41 “Share” [Section 2(1) (63)]

Share means a share in the share capital of a company;
7.42 “Shariah compliant company” [Section 2(1) (64)]

“Shariah compliant company” means a company which is conducting its
business according to the principles of Shariah;
7.43 Special resolution [Section 2(1) (66)]

“Special resolution” means a resolution which has been passed by a majority
of not less than three-fourths of such members of the company entitled to vote
as are present in person or by proxy or vote through postal ballot at a general
meeting of which not less than twenty one days' notice specifying the intention
to propose the resolution as a special resolution has been duly given:
Provided that if all the members entitled to attend and vote at any such meeting
so agree, a resolution may be proposed and passed as a special resolution at a
meeting of which less than twenty-one days’ notice has been given;
7.44 Specified [Section 2(1) (67)]

Specified means specified through regulations made under this Act;

7.45 Turnover [Section 2(1) (70)]
“Turnover” means the aggregate value of sale, supply or distribution of goods
or on account of services rendered, or both, net of discounts, if any, held by
the company during a financial year;
7.46 Valuer [Section 2(1) (72)]

“Valuer” means a valuer registered with the Commission;
7.47 Voting right [Section 2(1) (73)]

“Voting right” means the right of a member of a company to vote on any
matter in a meeting of the company either present in person or through video-
link or by proxy or by means of postal ballot:
Provided that attending of meeting through video-link shall be subject to such

facility arranged by the company and in the manner as may be specified, save as
otherwise provided in this Act;
7.48 Wholly owned subsidiary [Section 2(1) (74)]

A company shall be deemed to be a wholly owned subsidiary of another
company or the statutory body if all its shares are owned by that other company
or the statutory body.
8. SOME IMPORTANT TERMS USED IN COMPANIES ACT, 2017

These terms have not been defined in the companies Ordinance however that
are used in the ordinance and require elaboration hence explained hereunder
8.1 Artificial Person

It means that a company possesses separate legal entity, identity and personality
of its own, apart from its shareholders. It can borrow money, enter into contracts,
and hold property in its own name. It can sue and be sued by its shareholders.
8.2 Auditors
Auditors are independent persons who examine the accounts of the company
and report on the same. They express their opinion on the accounts and are also
supposed to detect frauds, manipulations of accounts aimed at concealment of
true financial position of the company.

8.3 Common Seal
Every company must have a seal of its own, called “Common Seal”. Directors
must provide for its safe custody. This shall be affixed to share certificates and
any other instrument, only on the authority of a resolution of directors.
8.4 Covenant
An agreement convention, or promise of two or more parties, by deed in writing,
signed, and delivered, by which either of the parties pledges himself to the other
that something is either done, or shall be done, or shall not be done or stipulates
for the truth of certain facts.
In its broadest usage, it means any agreement or contract.
8.5 Fiduciary
This term is used to refer to a person having duties involving good faith, trust
special confidence, and candor towards other.
8.6 Fiduciary behavior

It refers to the behavior in good faith, trust, special confidence, and candor
towards other.
8.7 Incorporated Association

Incorporation means the recognition of the existence of a company, in the eyes of
law, as a separate legal entity.
8.8 Ipso Facto

It means:
a) By the fact itself; or
b) By the mere fact; or
c) By the mere effect of an act or a fact
8.9 Irredeemable Share Capital

Share capital is the capital collected by the subscription to the shares of the
company. This capital is non-refundable except in the case of winding up and
reduction of capital.
8.10 Limited Liability

It means that the liability of the members of the company to pay back the debts of
the company is limited up to the face value of their shares. The fact of limited

liability stems from the fact of company being an artificial person. Liabilities for
repayments of loans tend to be divided between company and the shareholders.
Note:
The Privilege of limited liability has been defeated to a large extent by other
laws, such as Taxation Law which lays down that in the case of private
company’s directors and shareholders holding not less than 10% of the
company’s shares individually shall be personally liable for the company’s
unpaid tax liability. Moreover, Banks have made it a usual practice to obtain
personal guarantees from the directors of companies for the loans which they
advance to the companies, however, this practice is more common in case of
private companies.
8.11 Mutatis Mutandis

It means that matters or things are generally the same, but to be entered when
necessary, as to names, offices, and the like.
8.12 Par Value/Stated Value

The face or stated value of a share or stock or bond is called par value.
8.13 Pari Passu Charge

It means a charge by equal progress; equably; ratably; and without preference.
8.14 Perpetual Succession

It means that a company possesses permanent life which is not affected by
death, insolvency, insanity or withdrawal of any of its members.
8.15 Prima Facie

It means:
a) At first sight; or
b) On the first appearance; or
c) Presumably.
8.16 Proviso
A condition, stipulation, limitation, or provision which is inserted in a deed, lease,
mortgage, or contract, or on the performance or non-performance of which the
validity of the instrument frequently depends; it usually begins with the word
“provided”.

8.17 Share Transferability
The shares of public companies are easily transferable without any restriction
whereas in case of private companies this is subject to restrictions as may be
imposed in the Articles of Association.
8.18 Special Purpose

A company is incorporated for the accomplishment of special purpose or
purposes which are clearly laid down in the objects clause of memorandum of
association. Any act beyond those is an ultra vires act.
8.19 Successor in Interest

One who follows another in ownership or control of property.
In order to be a “successor in interest”, a party must continue to retain the same
rights as original owner without change in ownership and there must be a change
in form only and not in substance, and transferee is not a “successor in interest”.
In case of corporations, the term ordinarily indicates statutory succession as, for
instance, when corporation changes its name but retains same property.
8.20 Successors
Those persons, other than creditors, who are entitled to property of a decedent
under his will or succession statute.
8.21 Team of Management

Shareholders, being the entrepreneurs, are owners of the company and as such
have the right to manage the company. But owing to their large number, they
delegate most of their managerial powers to their elected representatives called
Directors. Board of Directors appoints Chief Executive as the nucleus.
Thus a team of management gets constituted as follows:

(a) Chairman,
(b) Chief Executive
(c) Board of Directors
(d) Secretary,
(e) Chief Accountant,
(f) Managers, and
(g) Other Functionaries.
8.22 Ultra Vires

It means, “an act performed without any authority to act on the subject.”

8.23 Without Prejudice
Where an offer or admission is made, “without prejudice”, or a motion is denied or
a suit dismissed “without” prejudice, it is meant as a declaration that no rights or
privileges of the party concerned are to be considered as thereby waived or lost
except in so far as may be expressly conceded or decided.
NON-APPLICABILITY OF THE COMPANIES ACT
9 Application of Act to non-trading companies with purely provincial objects (Section 3)
(1) The powers conferred by this Act on the concerned Minister-in-Charge of the
Federal Government or the Commission, in relation to companies which are not
trading corporations and the objects of which are confined to a single Province,
may be exercised by the Minister-in-Charge of the Provincial Government:
Provided that where the license is issued by the Provincial Government or, as the
case may be, its concerned Minister-in-Charge, in exercise of the powers
conferred by this section, the company shall mention this fact in all its documents.
(2) A non-trading corporation formed under sub-section (1) extending its operational
activities beyond the territorial limits of its respective province shall be liable to a
penalty of level 3 on the standard scale and be wound up on the application by the
Commission.
10 Act to override (Section 4)

Save as otherwise expressly provided herein-
(a) the provisions of this Act shall have effect notwithstanding anything contained
in any other law or the memorandum or articles of a company or in any
contract or agreement executed by it or in any resolution passed by the
company in general meeting or by its directors, whether the same be
registered, executed or passed, as the case may be, before or after the
coming into force of the said provisions; and
(b) any provision contained in the memorandum, articles, contract, agreement,

arrangement or resolution aforesaid shall, to the extent to which it is repugnant
to the aforesaid provisions of this Act, become, or be, void, as the case may
be.

QUESTIONS
1) What characteristics differentiate a Private Company from a Public Company?
2) A company can be a holding company if its acquires majority shareholding in that

other company, explain.
3) Shareholdings and directorships of certain persons and bodies are not

considered for ascertaining the relationship as associated companies or
undertakings. What are those persons?
4) Association not for profit is a company which enjoys special privilege over the
limited companies, what are those privileges?

Multiple Choice Questions
1. An association not for profit
a. Is a private company without commercial activity
b. Is a company registered as a not for profit organization with Commission
c. Is a company which distributes its entire earnings for the year
d. Is a company is an unlimited company
2. Maximum limit of number of members for private company is:

a. 20
b. 30
c. 50
d. 80
3. What majority of the members is required to pass special resolution?

a. Two third
b. Three forth
c. One third
d. One fourth
4. If one company is subsidiary of another company, such company may also be

referred to as:
a. Public company
b. Listed company
c. Private company
d. Associated company
5. Minimum number of persons required to form a public company are:

a. 1
b. 2
c. 3
d. 5
6. Minimum period of notice given for passing special resolution is:

a. 10 days
b. 14 days
c. 15 days
d. 21 days
MCQs (Answers)
1. b 2. c 3. b 4. d 5. c 6. d

Companies Act, 2017
Section 9 to 41
Section 46 to 52
Section 98 to 99
Companies (Incorporation) Regulations, 2017
Chapter Learning Objectives
1. Obligation to be registered as a company

2. Procedure for incorporation
3. Conversion of a company of any class into a company of another class
and related matters
4. Liability for carrying on business with less than three or, in the case of a
private company, two members
5. Commencement of Business by a public company
6. Name of Company
7. Registration of change of name
8. Other provisions regarding name of company
9. Memorandum of Association
10. Alteration in the memorandum of association
11. Articles of association
12. Unlimited liability of directors
13. Companies (Incorporation) Regulations, 2017

1. OBLIGATION TO BE REGISTERED AS COMPANY
If any association, partnership or company comprises of more than twenty

persons and it is formed for carrying on any business for profit for itself or for its
members, it has an obligation to get itself registered as a company under the
Companies Act, 2017 (Section-9)
EXCEPTIONS
However, this provision shall not apply in the following cases:
i) Any society, body or association, other than a partnership, formed under
any other Pakistan law; or
ii) A joint family carrying on a joint family business; or
iii) A partnership of two or more joint families where the total number of
members, excluding the minor members, does not exceed twenty; or
iv) A partnership formed to carry on practice as lawyers, accountants or any
other profession where practice as a limited liability company is not
permitted under the relevant laws or regulations of such practice.
Penalty Provision
A person guilty of an offence shall be liable to a penalty not exceeding of level 1
on the standard scale and also be personally liable for all the liabilities incurred in
such business.
2- INCORPORATION
Firstly, the persons who intend to incorporate a company shall apply to the registrar for
availability and approval of the name of the company.
2.1 Registration of memorandum and articles (Section 16)
An application on the prescribed form for incorporation of the company shall be

filed with the registrar.
(1) There shall be filed with the registrar an application on the specified form containing
the following information and documents for incorporation of a company, namely:—

Declaration of compliance
(a) a declaration on the specified form, by an authorized intermediary or by a person
named in the articles as a director, of compliance with all or any of the requirements of
this Act and the rules and regulations made thereunder in respect of registration and
matters precedent or incidental thereto;
Memorandum of Association
(b) memorandum of association of the proposed company signed by all subscribers,
duly witnessed and dated;
Articles of Association
(c) there may, in the case of a company limited by shares and there shall, in the case
of a company limited by guarantee or an unlimited company, be the articles of
association signed by the subscribers duly witnessed and dated; and
Address of for correspondence

(d) an address for correspondence till its registered office is established and notified.
In case of deficiency
(2) Where the registrar is of the opinion that any document or information filed with him
in connection with the incorporation of the company contains any matter contrary to law
or does not otherwise comply with the requirements of law or is not complete owing to
any defect, error or omission or is not properly authenticated, the registrar may either
require the company to file a revised document or remove the defects or deficiencies
within the specified period.
In case deficiency is not removed

(3) Where the applicant fails under sub-section (2) to remove the deficiencies conveyed
within the specified period, the registrar may refuse registration of the company.
In case registrar is satisfied

(4) If the registrar is satisfied that all the requirements of this Act and the rules or
regulations made thereunder have been complied with, he shall register the
memorandum and other documents delivered to him.
Issuance of Certificate of incorporation

(5) On registration of the memorandum of a company, the registrar shall issue a
certificate that the company is incorporated.

Contents of certificate of incorporation
(6) The certificate of incorporation shall state—
(a) the name and registration number of the company;
(b) the date of its incorporation;
(c) whether it is a private or a public company;
(d) whether it is a limited or unlimited company; and
(e) if it is limited, whether it is limited by shares or limited by guarantee.
Signatures or authentication of certificate of incorporation

(7) The certificate under sub-section (5) shall be signed by the registrar or authenticated
by the registrar’s official seal.
Certificate of incorporation as conclusive evidence

(8) The certificate under sub-section (5) shall be conclusive evidence that the
requirements of this Act as to registration have been complied with and that the
company is duly registered under this Act.
In case of refusal of registration—Appeal to Commission

(9) If registration of the memorandum is refused, the subscribers of the memorandum or
any one of them authorized by them in writing may, within thirty days of the order of
refusal, prefer an appeal to the Commission.
Order of the Commission final

(10) An order of the Commission under sub-section (9) shall be final and shall not be
called in question before any court or other authority.
2.2 Effect of memorandum and articles. (Section 17)
Binds company and members

(1) The memorandum and articles shall, when registered, bind the company and the
members thereof to the same extent as if they respectively had been signed by
each member and contained a covenant on the part of each member, his heirs and
legal representatives, to observe and be bound by all the provisions of the
memorandum and of the articles, subject to the provisions of this Act.
Money payable by subscriber—as debt , if not paid, shares be deemed cancel and
name be removed from the register.
(2) All moneys payable by a subscriber in pursuance of his undertaking in the
memorandum of association against the shares subscribed shall be a debt due from

him and be payable in cash within thirty days from the date of incorporation of the
company:
Provided that in case the share money is not deposited within the prescribed time, the
shares shall be deemed to be cancelled and the name of that subscriber shall be
removed from the register and the registrar shall give such direction to the company in
each case as deemed appropriate for compliance with the provisions of the company
law.
Receipt of money from subscribers to report to the Registrar accompanied by a

certificate by a chartered accountant or a cost and management accountant
verifying receipt of money
(3) The receipt of subscription money from the subscribers shall be reported by the
company to the registrar on a specified form within forty-five days from the date of
incorporation of the company, accompanied by a certificate by a practicing
chartered accountant or a cost and management accountant verifying receipt of the
money so subscribed.
Penalty provision
(4) Any violation of this section shall be an offence liable to a penalty of level 1 on the
standard scale.
2.3 Effect of registration (Section 18)

The registration of the company has the following effects, as from the date of
incorporation-
Subscribers and members—a body corporate

(a) the subscribers to the memorandum, together with such other persons as may from
time to time become members of the company, are a body corporate by the name
stated in the certificate of incorporation;
Functions, perpetual succession and common seal

(b) the body corporate is capable of exercising all the functions of an incorporated
company, having perpetual succession and a common seal;
Status and registered office

(c) the status and registered office of the company are as stated in, or in connection
with, the application for registration;

Subscribers as holder of initial shares
(d) in case of a company having share capital, the subscribers to the memorandum
become holders of the initial shares; and
Proposed directors
(e) the persons named in the articles of association as proposed directors, are deemed
to have been appointed to that office.
2.4 Registered Office of Company [Section-21]

Following are the provisions of Companies Act, 2017 regarding the registered office of a
company:
Registered office to notify to Registrar

(1) A company shall have a registered office to which all communications and notices
shall be addressed and within a period of thirty days of its incorporation, notify to the
registrar in the specified manner.
Notice of Change in situation of the registered office and special resolution for
such certain changes
(2) Notice of any change in situation of the registered office shall be given to the
registrar in a specified form within a period of fifteen days after the date of change:
Provided that the change of registered office of a company from-
(a) one city in a Province to another; or

(b) a city to another in any part of Pakistan not forming part of a Province; shall
require approval of general meeting through special resolution.
Penalty provision
(3) If a company fails to comply with the requirements of sub-section (1) or (2), the
company and its every officer who is responsible for such noncompliance shall be liable
to a penalty not exceeding of level 1 on the standard scale.

3. CONVERSION OF A COMPANY OF ANY CLASS INTO A COMPANY OF
OTHER CLASS AND RELATED MATTERS
3.1 Conversion of public company into private company and vice-versa (Section 46)
For Public to Private
Prior approval of the Commission by passing special resolution, if listed, notice

by the Commission to the Securities Exchange
(1) A public company may be converted into a private company with the prior approval
of the Commission in writing by passing a special resolution in this behalf by the public
company amending its memorandum and articles of association in such a manner that
they include the provisions relating to a private company in the articles and complying
with all the requirements as may be specified:
Provided that in case of conversion of a listed company into a private company, the
Commission shall give notice of every application made to it, to the securities exchange
and shall take into consideration the representation if any, made to it by the securities
exchange.
Commission to allow conversion by an order in writing

(2) On an application for change in status of a company under subsection (1), if the
Commission is satisfied that the company is entitled to be so converted, such
conversion shall be allowed by an order in writing.
Copy of the order to company and registrar

(3) A copy of the order, confirming the conversion under sub-section (2), duly certified
by an authorised officer of the Commission shall be forwarded to the company and to
the registrar within seven days from the date of the order.
Altered copy of MOA and AOA to be filed with the registrar

(4) A copy of the memorandum and articles of association as altered pursuant to the
order under sub-section (2) shall, within fifteen days from the date of the order, be filed
by the company with the registrar and he shall register the same and henceforth the
memorandum and articles so filed shall be the memorandum and articles of the newly
converted company.

For private to Public
Alteration in articles, Altered copy of MOA and AOA along with special resolution
is to be filed with the registrar
(5) If a company, being a private company, alters its articles in such a manner that they
no longer include the provisions which, under sub-section (1) of section 2, are required
to be included in the articles of a company in order to constitute it a private company,
the company shall—
(a) as on the date of the alteration, cease to be a private company; and
(b) file with the registrar a copy of the memorandum and articles of association as
altered along with the special resolution.
Penalty provision
(6) If default is made in complying with the provisions of any of the preceding sub-
sections, the company and every officer of the company who is in default shall be liable
3.2 Conversion of status of private company into a single-member company and

vice-versa (Section 47)
FROM PRIVATE TO SMC
Prior approval of the Commission by passing a special resolution

(1) A private company may be converted into a single-member company with prior
approval of the Commission in writing by passing a special resolution in this behalf by
the private company amending its memorandum and articles of association, in such a
manner that they include the provisions relating to a single-member company in the
articles and complying with all the requirements as may be specified.


(3) A copy of the order, confirming the conversion under sub-section (2), duly certified
by an authorised officer of the Commission shall be forwarded to the company and to
the registrar within seven days from the date of the order.

order under sub- section (2) shall, within fifteen days from the date of the order, be filed
converted company.
For ceasing SMC
(5) If a company, being a single member company, alters its articles in such a manner
that they no longer include the provisions which are required to be included in the
articles of a company in order to constitute it a single member company, the company
shall—
(a) as on the date of the alteration, cease to be a single member company; and
Penalty provision
sections, the company, and every officer of the company who is in default, shall be
liable to a penalty not exceeding of level 2 on the standard scale.

3.3 Conversion of status of unlimited company as limited company and vice-
versa (Section 48)
From Unlimited to Limited

(1) An unlimited company may be converted into a limited company with prior approval
of the Commission in writing by passing a special resolution in this behalf by the
unlimited company amending its memorandum and articles of association in such a
manner that they include the provisions relating to a company limited by shares in the
articles and complying with all the requirements as may be specified.


(3) A copy of the order, confirming the conversion under sub-section (2) duly certified by
an authorised officer of the Commission shall be forwarded to the company and to the
registrar within seven days from the date of the order.
From Limited to Unlimited
(4) If a company, being a limited company, alters its memorandum and articles in such a
manner that they include the provisions which constitute it as a company having
unlimited liability of its members, the company shall—
(a) as on the date of the alteration, cease to be a limited company; and

Penalty provision

3.4 Conversion of a company limited by guarantee to a company limited by
shares and vice-versa (Section 49)
From guarantee to limited by shares

(1) A company limited by guarantee may be converted into a company limited by shares
with prior approval of the Commission in writing by passing a special resolution in this
behalf by the company limited by guarantee amending its memorandum and articles of
association in such a manner that they include the provisions relating to a company
limited by shares in the articles and complying with all the requirements as may be
specified.


(3) A copy of the order, confirming the conversion under sub-section (2) duly certified by
an authorised officer of the Commission shall be forwarded to the company and to the
registrar within seven days from the date of the order.

order under sub-section (2) shall within fifteen days from the date of the order be filed
converted company.
From limited to guarantee
Alteration in MOA and articles, Altered copy of MOA and AOA along with special
resolution is to be filed with the registrar
(5) If a company, being limited by shares, alters its memorandum and articles in such a
manner that they include the provisions which constitute it a company limited by
guarantee, the company shall—

(a) as on the date of the alteration, cease to be a company limited by shares; and
Penalty provision
3.5 Issue of certificate and effects of conversion (Section 50)
Certificate by the registrar

(1) The registrar upon registration of the memorandum and articles of association as
altered by the company upon conversion under sections 46 to 49, shall issue a
certificate to that effect.
Conversion not to affect debts, liabilities, obligations or contracts, rights, legal

proceedings etc.
(2) The conversion of status of a company under sections 46 to 49 shall not affect.
(a) any debts, liabilities, obligations or contracts incurred or entered into, by or on behalf
of the company before conversion and such debts, liabilities, obligations and contracts
may be enforced in the manner as if such registration had not been done; and
(b) any rights or obligations of the company or render defective any legal proceedings
by or against the company and any legal proceedings that might have been continued
or commenced against the company before conversion may be continued or
commenced upon its conversion.
3.6 Power of unlimited company to provide for reserve share capital on

conversion of status to a limited company (Section 51)
If from unlimited to limited, may increase the nominal amount of share capital by
increasing the nominal amount of each share
An unlimited company having a share capital may, by its resolution for registration as a
limited company in pursuance of this Act, increase the nominal amount of its share
capital by increasing the nominal amount of each of its shares, subject to the condition

that no part of the amount by which its capital is so increased shall be capable of being
called up except in the event and for the purpose of the company being wound up.
3.7 Consequence of default in complying with conditions constituting a company

a private company (Section 52)
Consequences if provisions of section 2 are not complied with: this Act shall
apply to the company as if it were not a private company, if Commission satisfied,
make order that the company be relieved from such consequences as aforesaid
Where the articles of a company include the provisions which, under sub-section (1) of
section 2, are required to be included in the articles of a company in order to constitute
it as a private company, but default is made in complying with any of those provisions,
the company shall cease to be entitled to the privileges and exemptions conferred on
private companies by or under this Act and this Act shall apply to the company as if it
were not a private company:
Provided that the Commission, on being satisfied that the failure to comply with the
conditions was accidental or due to inadvertence or to some other sufficient cause or
that on other ground it is just and equitable to grant relief, may, on the application of the
company or any other person interested and on such terms and conditions as seem to
the Commission just and expedient, make order that the company be relieved from such
consequences as aforesaid.
4. Liability for carrying on business with less than three or, in the case of a
private company, two members. (Section 15)
If members are reduced for the period more than one hundred and eighty days,
Liability for payment of whole debts
If at any time the number of members of a company is reduced, in the case of a private
company other than a single member company, below two or in the case of any other
company, below three and the company carries on business for more than one hundred
and eighty days while the number is so reduced, every person who is a member of the
company during the time that it so carries on business after those one hundred and
eighty days and is cognizant of the fact that it is carrying on business with fewer than
two members or three members, as the case may be, shall be severally liable for
payment of whole debts of the company contracted during that time and may be sued
therefor without joinder in the suit of any other member.

5. Commencement of business by a public company (Section 19)
A public company not to start operations or exercise borrowing power unless

certain conditions are met.
(1) A public company shall not start its operations or exercise any borrowing powers
unless—
(a) shares held subject to payment of the whole amount thereof in cash have been
allotted to an amount not less in the whole than the minimum subscription and the
money has been received by the company;
(b) 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 and for which he is liable to pay in cash;
(c) no money is or may become liable to be repaid to applicants for any shares which
have been offered for public subscription;
(d) 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 specified form that the
aforesaid conditions have been complied with; and
(e) in the case of a company which has not issued a prospectus inviting the public to
subscribe for its shares, there has been filed with the registrar a statement in lieu of
prospectus as per the Second Schedule annexed to this Act.
Explanation.—―minimum subscription‖ means the amount, if any, fixed by the

memorandum or articles of association as minimum subscription upon which the
directors may proceed to allotment or if no amount is so fixed and specified, the whole
amount of the share capital other than that issued or agreed to be issued as paid up
otherwise than in cash.
Acceptance and registration of documents by the Registrar

(2) The registrar shall, on filing of a duly verified declaration in accordance with the
provisions of sub-section (l) and after making such enquiries as he may deem fit to
satisfy himself that all the requirements of this Act have been complied with in respect of
the commencement of business and matters precedent and incidental thereto, accept
and register all the relevant documents.

Acceptance and registration of documents by the registrar as conclusive
evidence to start operation and exercise borrowing powers
(3) The acceptance and registration of documents under sub-section (2) shall be a
conclusive evidence that the company is entitled to start its operations and exercise any
borrowing powers.
Section not to apply: company converted from private to public and limited by
guarantee not having share capital
(4) Nothing in this section shall apply—
(a) to a company converted from private to a public;
(b) to a company limited by guarantee and not having a share capital.
6 Consequences of non-compliance of section 19 (Section 20)
Penalty provision
(1) If any company starts its business operations or exercises borrowing powers in
contravention of section 19, every officer or other person who is responsible for
contravention shall without prejudice to other liabilities be liable to a penalty not
exceeding level 2 on the standard scale.
Status of contract made before commencement of business

(2) Any contract made by a company before the date at which it is entitled to commence
business shall be provisional only and shall not be binding on the company until that
date and on that date it shall become binding.
6. NAME OF THE COMPANY

After conceiving the idea of forming a company the next step is to select a
suitable name for it. The name so selected is then forwarded to the Registrar of
Joint Stock Companies for ascertainment whether this name is available for
registration or not.
PROVISIONS WITH RESPECT TO NAMES OF COMPANIES
6.1 Prohibition of certain names (Section 10)
Companies not to be registered with certain names with such word or expression
as notified by the Commission or in the opinion of the registrar
(1) No company shall be registered by a name which contains such word or expression,
as may be notified by the Commission or in the opinion of the registrar is—

(a) identical with or resemble or similar to the name of a company; or
(b) inappropriate; or
(c) undesirable; or
(d) deceptive; or
(e) designed to exploit or offend religious susceptibilities of the people; or
(f) any other ground as may be specified.
Prior approval of the Commission is required for certain names

(2) Except with prior approval in writing of the Commission, no company shall be
registered by a name which contains any word suggesting or calculated to suggest—
(a) the patronage of any past or present Pakistani or foreign head of state;
(b) any connection with the Federal Government or a Provincial Government or any
department or authority or statutory body of any such Government;
(c) any connection with any corporation set up by or under any Federal or Provincial
law;
(d) the patronage of, or any connection with, any foreign Government or any
international organization;
(e) establishing a modaraba management company or to float a modaraba; or
(f) any other business requiring license from the Commission.
Final decision regarding name----Commission

(3) Whenever a question arises as to whether or not the name of a company is in
violation of the foregoing provisions of this section, decision of the Commission shall be
final.
Reservation of name
(4) A person may make an application, in such form and manner and accompanied by
such fee as may be specified, to the registrar for reservation of a name set out in the
application for a period not exceeding sixty days.
Cancellation of reservation of name

(5) Where it is found that a name was reserved under sub-section (4), by furnishing
false or incorrect information, such reservation shall be cancelled and in case the
company has been incorporated, it shall be directed to change its name. The person

making application under sub-section (4) shall be liable to a penalty not exceeding level
1 on the standard scale.
If reservation of name is refused by the registrar—appeal to Commission

(6) If the name applied for under sub-section (4) is refused by the registrar, the
aggrieved person may within thirty days of the order of refusal prefer an appeal to the
Commission.
Order of the Commission shall be final

(7) An order of the Commission under sub-section (6) shall be final and shall not be
called in question before any court or other authority.
6.2 Addition Of The Word ‘Limited’, ‘(Private) Limited’, “(SMC-Private)

Limited,‘(Guarantee) Limited’ and “Unlimited”
The name of a public company limited by shares shall include the word ‘Limited’ as
the last word. [Section 27(A)(i)]
The name of a private company limited by shares shall include the word ‘(Private)
Limited’ as the last word. [Section 27(A)(i)]
The name of a Single member company shall include the word ‘(SMC-Private)
Limited’ as the last word. [Section 27(A)(i)]
The name of a company limited by guarantee shall include the word ‘(Guarantee)
Limited’ as the last word. [Section 28(1)(a)]
The name of an Unlimited company shall include the word “Unlimited’ as the last
word. [Section 29(a)]
6.3 Rectification of name of a company (Section 11)
If the name is in contravention of section 10 or due to furnishing false or incorrect

information, company may change or on the direction of registrar shall change its
name, if direction—opportunity to make representation
(1) A company which, through inadvertence or otherwise, is registered by a name in
contravention of the provisions of section 10 or the name was obtained by furnishing
false or incorrect information-
(a) may, with approval of the registrar, change its name; and

(b) shall, if the registrar so directs, within thirty days of receipt of such direction, change
its name with approval of the registrar:
Provided that the registrar shall, before issuing a direction for change of the name,
afford the company an opportunity to make representation against the proposed
direction.
If no compliance with the direction of the registrar

(2) If the company fails to report compliance with the direction issued under sub-section
(1) within the specified period, the registrar may enter on the register a new name for
the company selected by him, being a name under which the company may be
registered under this Act and issue a certificate of incorporation on change of name for
the purpose of section 13.
Penalty provision
(3) If a company makes default in complying with the direction issued by the registrar
under sub-section (1) or continue using previous name after the name has been
changed by the registrar under sub-section (2), shall be liable to a penalty of level 1 on
the standard scale.
6.4 Change of name by a company (Section 12)
Special resolution, approval of the registrar, Circumstances where approval not

required
A company may, by special resolution and with approval of the registrar signified in
writing, change its name:
Provided that no approval under this section shall be required where the change in the
name of a company is only the addition thereto, or the omission therefrom, of the
expression “(Private)” or “(SMC-Private)” or “(Guarantee) Limited” or “Limited” or
“Unlimited”, as the case may be, consequent upon the conversion of the status of a
company in accordance with the provisions of sections 46 to 49.
7 Registration of change of name and effect thereof (Section 13)
Certificate of incorporation
(1) Where a company changes its name the registrar shall enter the new name on the
register in place of the former name, and shall issue a certificate of incorporation altered
to meet the circumstances of the case and, on the issue of such a certificate, the
change of name shall be complete.

To mention its former name
(2) Where a company changes its name it shall, for a period of ninety days from the
date of issue of a certificate by the registrar under sub-section (1), continue to mention
its former name along with its new name on the outside of every office or place in which
its business is carried on and in every document or notice referred to in section 22.
Not to affect rights or obligations or legal proceedings

(3)The change of name shall not affect any rights or obligations of the company, or
render defective any legal proceedings by or against the company and any legal
proceedings that might have been continued or commenced against the company by its
former name may be continued by or commenced against the company by its new
name.
7.1 Mode of forming a company (Section 14)
For lawful purpose—three or more persons to form Public company, two or more
persons for private company, one person for SMC, SMC subscriber to nominate a
person, responsibilities of nominee
(1) Any—
(a) three or more persons associated for any lawful purpose may, by subscribing their
names to a memorandum of association and complying with the requirements of this
Act in respect of registration, form a public company; or
(b) two or more persons so associated may in the like manner form a private company; or
(c) one person may form a single member company by complying with the requirements
in respect of registration of a private company and such other requirement as may be
specified. The subscriber to the memorandum shall nominate a person who in the event
of death of the sole member shall be responsible to—
(i) transfer the shares to the legal heirs of the deceased subject to succession to be
determined under the Islamic law of inheritance and in case of a non-Muslim members,
as per their respective law; and
(ii) manage the affairs of the company as a trustee, till such time the title of shares are
transferred:
Provided that where transfer by virtue of this sub-section is made to more than one
legal heir, the company shall cease to be a single member company and comply with
the provisions of section 47.

Types of company with respect to liability to be registered
(2) A company formed under this section may be a company with or without limited
liability, that is to say—
(a) a company limited by shares; or
(b) a company limited by guarantee; or
(c) an unlimited company.
8- OTHER PROVISIONS REGARDING THE NAME OF THE COMPANY
8.1 Publication of name by a company (Section 22)
(i) Display of name and incorporation number (ii) Display a certified copy of
certificate of incorporation (iii) Name, address, telephone No, Fax No., e-mail and
website address on all documents (iv) Name of company on various documents
Every company shall—
(a) display in a conspicuous position, in letters easily legible in English or Urdu
characters its name and incorporation number outside the registered office and every
office or the place in which its business is carried on;
(b) display a certified copy of certificate of incorporation at every place of business of

the company;
(c) get its name, address of its registered office, telephone number, fax number, e-mail
and website addresses, if any, printed on letter-head and all its documents, notices and
other official publications; and
(d) have its name mentioned in legible English or Urdu characters, in all bills of
exchange, promissory notes, endorsements, cheques and orders for money or goods
purporting to be signed by or on behalf of the company and in all bills of parcels,
invoices, receipts and letters of credit of the company.
8.2 Penalties for non-publication of name (Section 24)
Penalty for non-displaying its name

(l) If a company does not display its name in the manner provided for by this Act, it shall
be liable to a penalty not exceeding level 1 on the standard scale and every officer of
the company who authorises or permits the default shall be liable to the like penalty.

Penalty for non-publication of name of company on various documents
(2) If any officer of a limited company issues or authorises the issue of any bill-head,
letter paper, document, notice or other official publication of the company, or signs or
authorises to be signed on behalf of the company any bill of exchange, promissory note,
endorsement, cheque or order for money or goods, or issues or authorises to be issued
any bill of parcels, invoice, receipt or letter of credit of the company, wherein its name is
not mentioned in the manner aforesaid, he shall be liable to a penalty not exceeding of
level 1 on the standard scale and shall further be personally liable to the holder of any
such bill of exchange, promissory note or order for money or goods, for the amount
thereof unless the same is duly paid by the company.
8.3 Publication of authorised as well as paid-up capital (Section 25)
If any notice, advertisement or other official publication contains “authorized

capital” shall also contain “paid up capital” in an equally prominent position
conspicuous characters
(1) Where any notice, advertisement or other official publication of a company contains
a statement of amount of authorised capital of the company, such notice, advertisement
or other official publication shall also contain a statement in an equally prominent
position and in equally conspicuous characters of amount of the paid up capital.
Penalty provision
(2) Any company which makes default in complying with the requirements of sub-
section (1) and every officer of the company who is party to the default shall be liable to
a penalty not exceeding of level 1 on the standard scale.
8.4 Business and objects of a company (Section 26)
Lawful business or activity, Principal line of business, Change in principal line of

business and explanation of principle line of business
(1) A company may carry on or undertake any lawful business or activity and do any act
or enter into any transaction being incidental and ancillary thereto which is necessary in
attaining its business activities:
Provided that—
(i) the principal line of business of the company shall be mentioned in the
memorandum of association of the company which shall always
commensurate with name of the company; and

(ii) any change in the principal line of business shall be reported to the registrar within
thirty days from the date of change, on the form as may be specified and registrar may
give direction of change of name if it is in violation of this section.
Explanation.—―principal line of business‖ means the business in which substantial

assets are held or likely to be held or substantial revenue is earned or likely to be
earned by a company, whichever is higher.
Company not to engage in business which is (a) prohibited by law or (b)

restricted by any law, rules or regulations unless necessary license, registration,
permission or approval has been obtained
(2) A company shall not engage in a business which is—
(a) prohibited by any law for the time being in force in Pakistan; or
(b) restricted by any law, rules or regulations, unless necessary license, registration,
permission or approval has been obtained or compliance with any other condition has
been made:
Provided nothing in sub-section (1) shall be applicable to the extent of such companies.
9. MEMORANDUM OF ASSOCIATION
9.1- Definition [2(1)(40)]

“memorandum” means the memorandum of association of a company as originally
framed or as altered from time to time in pursuance of company law or of this Act.
“Memorandum of association is a document which sets out the constitution of the

company and as such is the foundation upon which the structure of the company is
based. It describes the scope of the company’s activities and its relations with outsides.
9.2. Form Of Memorandum and Articles [Section 41]

The First schedule to the Companies Act 2017 describes various formats for
preparation of the memorandum by various companies.

CLASS OF COMPANY TABLE APPLICABLE
Company limited by shares Table – B
Company limited by guarantee and not having share capital Table – C
Company limited by guarantee and having share capital Table – D
Unlimited company Table – E
9.2.1 Provision as to companies limited by guarantee (Section 45)
A company limited by guarantee may have share capital

(1) A company limited by guarantee may have share capital.
If not having share capital, Not to give right to any person to participate in the
divisible profit, if so, void
(2) In the case of a company limited by guarantee and not having a share capital, every
provision in the memorandum or articles or in any resolution of the company purporting
to give any person a right to participate in the divisible profits of the company otherwise
than as a member shall be void.
Division of undertaking into shares or interests shall be treated as a provision for

a share capital
(3) For the purpose of the provisions of this Act relating to the memorandum of a
company limited by guarantee and of sub-section (2), every provision in the
memorandum or articles, or in any resolution, of a company limited by guarantee
purporting to divide the undertaking of the company into shares or interests shall be
treated as a provision for a share capital, notwithstanding that the nominal amount or
number of the shares or interests is not mentioned thereby.
9.3- Contents Of Memorandum Of Association

Company Limited by Shares [Section 27] Company Limited by Guarantee
[Section 28] Unlimited Company [Section 29]
a) the memorandum shall state-
i) the name of the company with the word “limited” as the last word of the name in the
case of a public limited company, the parenthesis and words “(Private) limited” as the
last words of the name in the case of a private limited company and the parenthesis
and words “(SMC-Private) Limited” as the last words of the name in the case of single
member company.

ii) the Province or the part of Pakistan not forming part of a Province, as the case may
be, in which the registered office of the company is to be situated;
iii) Principal line of business
iv) an undertaking as may be specified
v) that the liability of the members is limited;
vi) the amount of share capital with which the company proposes to be registered, and
the division thereof into shares of a fixed amount;
b) no subscriber of the memorandum shall take less than one share; and
c) each subscriber of the memorandum shall write opposite to his name the number of
shares he agrees to take.
a) the memorandum shall state—

i) the name of the company with the parenthesis and words“(Guarantee) Limited” as the
last words of its name;
be, in which the registered office of the company is to be situated;
v) that the liability of the members is limited
vi) that each member undertakes to contribute to the assets of the company in the
event of its being wound up while he is a member, or within one year afterwards, for
payment of the debts and liabilities of the company contracted before he ceases to be
a member, and of the costs, charges and expenses of winding up, and for adjustment
of the rights of the contributors among themselves, such amount as may be required,
not exceeding a specified amount; and

b) IF THE COMPANY HAS A SHARE CAPITAL
i) the memorandum shall also state the amount of share capital with which the company
proposes to be registered and the division thereof into shares of a fixed amount; and
ii) the number of shares taken by each subscriber.
a) the memorandum shall state—

i) the name of the company with the word “Unlimited” as last words of its name;
be, in which the registered office of the company is to be situated; and
v) that the liability of the members is unlimited
b) IF THE COMPANY HAS A SHARE CAPITAL
i) the memorandum shall also state that amount of share capital with which the
company proposes to be registered and
ii) the number of shares taken by each subscriber.
9.4 Explanation Of The Contents Of Memorandum Of Association
Memorandum of Association is the constitution of a company. It is the most

important document of a company. It defines the boundaries of the company and
determines the powers, objects and limits of a company. A company cannot go
beyond its Memorandum.
It is a charter of a company which defines the limitations of the power of the

company established under the Law. It contains the fundamental conditions
upon which a company is allowed to be incorporated. It is the constitution of the
company and is the foundation on which the structure of the company is based.
It defines its relation with the outside world and the scope of its activities. Its
purpose is to enable the shareholders and those who deal with the company to
know that what the permitted range of enterprise is.

CONTENTS OF THE MEMORANDUM
The contents of the Memorandum of Association of a limited company as given
in Tables B, C and D of the First Schedule to the Ordinance can be classified in
the following broad categories:
(See Annexure-1)
9.4.1 NAME CLAUSE

The memorandum shall state the name of the company with the word “limited”
“(Private) limited” “(SMC-Private) Limited” “(Guarantee) limited’ or “Unlimited” as
last word of the name of a public, private, Single member company, guarantee
limited company or Unlimited company respectively.
9.4.2 REGISTERED OFFICE / DOMICILE CLAUSE

Under this clause the Province or part of Pakistan not forming part of a Province,
in which the registered office of the company is to be situated, is mentioned.
9.4.3 PRINCIPAL LINE OF BUSINESS CLAUSE

Principal line of business means the business in which substantial assets are
held or likely to be held or substantial revenue is earned or likely to be earned by
a company, whichever is higher
It is the most important portion of the memorandum of association. It contains not only
the main object of the company but also the objects which a company is likely to
undertake in future. A company cannot go beyond the objects mentioned in its
memorandum. Thus while drafting the object clause special care has to be taken that
any object which the company can undertake in the remote future period should also be
included in it.
9.4.4 UNDERTAKING AS MAY BE SPECIFIED CLAUSE
9.4.5 THE LIABILITY CLAUSE

This clause contains the extent of the liability of the members of the company. It
should state whether the liability of the members is limited, unlimited or limited to
the guarantee given by each member.
9.4.6 THE CAPITAL CLAUSE

The amount of authorized share capital with which the company proposes to be
registered, the number of shares and the nominal value of each share is
mentioned under this clause.

This clause in not applicable to a company which does not have a share capital.
9.4.6 THE ASSOCIATION OR SUBSCRIPTION CLAUSE

The memorandum of a company limited by shares shall contain the following
statement:
We, the several persons whose names and addresses are subscribed, are
desirous of being formed into a company, in pursuance of the memorandum of
association, and we respectively agree to take the number of shares in the
capital of the company set opposite to our respective names.
The memorandum of a company limited by guarantee shall contain the following

statement:
We, the several persons whose names and addresses are subscribed, are
desirous of being formed into a company, in pursuance of the memorandum of
association.
9.4.7 FORMAT OF ASSOCIATION AND SUBSCRIPTION CLAUSE

The statements mentioned above shall be written here and thereafter the details
of the persons desirous of being formed as a company be given in the format
given hereunder: (format on next table)
Present Name Father’s/ Nationali Occupati Usual Number of Signature
in Full (in ty on Residential shares taken by
Husband’s
block letter) address in each subscriber
Name in full
full or agreed to be
taken
Dated the .............day of ........................200X.........
Witness to above signatures.
...............................................................
(Full Name, Father’s/Husband’s Name)
(in Block Letters)
Signature............................................
Occupation........................................
Full Address......................................

9.4.8 Borrowing powers to be part of memorandum (Section 30)
Memorandum and Articles be deemed to include the power to enter into any
arrangement for obtaining loans, advances, finances or credit as per Banking
Companies Ordinance, 1962
Notwithstanding anything contained in this Act or in any other law for the time being
in force or the memorandum and articles, the memorandum and articles of a company
shall be deemed to include and always to have included the power to enter into any
arrangement for obtaining loans, advances, finances or credit, as defined in the Banking
Companies Ordinance, 1962 (LVII of 1962) and to issue other securities not based on
interest for raising resources from a scheduled bank, a financial institution or general
public.
9.5 PRINTING, SIGNATURE ETC. OF MEMORANDUM
9.5.1 Memorandum to be printed, signed and dated [SECTION 31]

Description of memorandum: (i) Printed (ii) Paragraphs (iii) Signed by subscribers
(iv) Dated
The memorandum shall be—

(a) printed in the manner generally acceptable;
(b) divided into paragraphs numbered consecutively;
(c) signed by each subscriber, who shall add his present name in full, his occupation,
and father‘s name or, in the case of a married woman or widow, her husband‘s or
deceased husband‘s name in full, his nationality and his usual residential address and
such other particulars as may be specified, in the presence of a witness who shall attest
the signature and shall likewise add his particulars; and
(d) dated.
10 ALTERATION IN THE MEMORANDUM
10.1 Alteration of memorandum (Section 32)

Special resolution for (i) Change the place of registered office (ii) Change the
principal line of business (iii) adopt or change any business activity which is
subject to license, registration, permission or approval under any law.

(1) Subject to the provisions of this Act, a company may by special resolution alter the
provisions of its memorandum so as to—
(a) change the place of its registered office from.—

(i) one Province to another Province or Islamabad Capital Territory and vice
versa; or
(ii) one Province or Islamabad Capital Territory to a part of Pakistan not forming
part of a Province and vice versa; or
(b) change its principal line of business; or
(c) adopt any business activity or any change therein which is subject to license,
registration, permission or approval under any law.
Confirmation of the Commission (No confirmation if change is in Principal line of

business)
(2) The alteration shall not take effect until and except in so far as it is confirmed by the
Commission on petition:
Provided that an alteration so as to change its principal line of business shall not require
confirmation by the Commission.
Copy of the Commission’s confirmation order to the Company and registrar

(3) A copy of the order confirming the alteration duly certified by an authorised officer of
the Commission shall be forwarded to the company and to the registrar within seven
days from the date of the order.
Registration by the registrar

(4) A copy of the memorandum of association as altered pursuant to the order under
this section shall within thirty days from the date of the order be filed by the company
with the registrar, who shall register the same and issue a certificate which shall be
conclusive evidence that all the requirements of this Act with respect to the alteration
and the confirmation thereof have been complied with and henceforth the memorandum
so filed shall be the memorandum of the company:
Provided that the Commission may by order, at any time on an application by the
company, on sufficient cause shown extend the time for the filing of memorandum with
the registrar under this section for such period as it thinks proper.

Transfer of physical record of the company
(5) Where the alteration involves a transfer of registered office from the jurisdiction of
one company registration office to another, physical record of the company shall be
transferred to the registrar concerned of the company registration office in whose
jurisdiction the registered office of the company has been shifted.
If Change is in principal line of business, amended MOA to be filed with the

registrar
(6) Where the alteration involves change in principal line of business, the company shall
file the amended memorandum of association with the registrar within thirty days, which
shall be recorded for the purposes of this Act.
10.2 Powers of Commission when confirming alteration (Section 33)
Powers of Commission to include terms and conditions in the confirmation order

The Commission may make an order confirming the alteration on such terms and
conditions as it thinks fit and make such order as to costs as it thinks proper.
10.3 Exercise of discretion by Commission (Section 34)
Commission having regard to the rights and interests of the members and
creditors
The Commission shall in exercising its discretion under sections 32 and 33 have regard
to the rights and interests of the members of the company or of any class of them, as
well as to the rights and interests of the creditors and may, if it thinks fit, give such
directions and make such orders as it may think expedient for facilitating or carrying into
effect any such arrangement.
10.3 Effect of alteration in memorandum or articles (Section 35)
Alteration not binding on members if alteration is made after the date of their
membership (ii) Exception (Where member agrees in writing)
Notwithstanding anything contained in the memorandum or articles of a company, no
member of the company shall be bound by an alteration made in the memorandum or
articles after the date on which he became a member if and so far as the alteration
requires him to take or subscribe for more shares than the number held by him at the
date on which the alteration is made or in any way increases his liability as at that date
to contribute to the share capital of or otherwise to pay money to the company:

Provided that this section shall not apply in any case where the member agrees in
writing either before or after the alteration is made to be bound thereby.
11. ARTICLES OF ASSOCIATION
Definition
Section 2(1)(3) of the Companies Act, 2017 defines the articles as
“Articles” mean the articles of association of a company

framed in accordance with the company law or this Act.
11.2- Form And Contents Of The Articles Of Association [Section 41]

Various tables in the First Schedule attached to the Companies Act, 2017 deal
with the form and contents of the articles of association. Hereunder is given a
schedule of the classes of companies and the Table applicable to each of them:
CLASS OF COMPANY TABLE APPLICABLE

Company limited by shares Table – A
Company limited by guarantee and having share capital Table – D
Unlimited company Table – E
Following are the general contents of an Articles of Association:
a- Definitions:
This clause contains the definitions of the words and phrases used in the
articles.
b- Business:
The brief contents of the objects of the company are mentioned under this
caption.
c- Shares:
This section contains the matters relating to the classes of shares, offer to
and subscription by the general public, the procedure to be adopted for
allotment, issuance of original or duplicate and transfer of the shares,
d- Transfer and transmission of shares

This section contains the matters regarding transfer and transmission of
shares.

e- Alteration of Capital:
The powers of the company to alter its share capital and the procedure to
be followed while exercising this power is also mentioned in the articles.
f- General Meetings and the Board Meetings:

The types of meetings of the company and of the directors and the rules
and regulations in this connection are to be mentioned in the articles of the
company.
g- Votes of Members:
This section contains the rules regarding the voting powers of the
members of the company, and the procedure of the voting in the meetings
of the company.
h- Directors:
The articles should contain the number and the name of the first directors,
the qualifications of the subsequent directors, the appointment of director,
filling of the casual vacancy in the office of director, the rules for fixation of
the remuneration of the directors, their powers and duties and the way in
which directors can be removed.
i- The Seal of the Company:

The rules regarding the safe custody of the common seal of the company
and the procedure to be adopted while affixing it on the documents should
be mentioned in the articles. The documents upon which the seal is to be
affixed and the record to be maintained in this regard are also mentioned
in the articles.
j- Dividend and Reserve:

The rules regarding the declaration and payment of dividend (both the
interim and the final) and transfer of any amount to various reserves and
the utilization of such reserves shall be stated in the articles.
k- Accounts:
This section contains the rules and regulations regarding the books of
account to be maintained, their safe custody, the place where these books
are to be kept, the inspection of books by the members, preparation of
financial statements, approval of the accounts by the company, the
appointment of the auditors of the company and fixation of their
remuneration, etc.

l- Notices:
The articles should state the rules regarding the notices to be issued to the
members, directors and the creditors of the company. The contents of
such notices and ways of giving the notices should also be stated.
m- Indemnity:
This clause contains the rules regarding the indemnity to or by the
company for damages.
n- Winding up:
This section deals with the circumstances and the ways in which a
company can be wound up, the appointment of the liquidator, the
procedure to be adopted in disposal of assets, settlement of liabilities and
distribution of remaining assets among the members of the company.
11.3- General Provisions Regarding The Articles
a) It is the option for the company limited by shares to get the articles
registered or adopt Table A as its articles. But the registration of the
articles of association is necessary for a company limited by guarantee
and an unlimited company. [Section 36(1) and (2)];
b) The articles of an unlimited company or a company limited by guarantee

(if both have a share capital) shall state the amount of share capital with
which the company proposes to be registered. [Section 36 (3)]
c) The articles of an unlimited company or a company limited by guarantee

(if both have no share capital) shall state the number of members with
which the company proposes to be registered. [Section 36 (4)]
d) The articles shall be printed, divided into paragraphs numbered

consecutively, signed by every subscriber to the memorandum and dated.
[Section 37]
e) The articles and the memorandum, when registered, bind company and its
members to the same extent as if they respectively had been signed by
each member. Any money payable by the member to the company under
the articles and the memorandum shall be a debt due to the company
[Section-17]

f) Where the alteration is made after the date on which a person became
the member of a company and the alteration requires him to take more
shares than the number held by him at the date of such alteration, the
member shall not be bound to take such shares as are required by such
alteration. However, if the member agrees in writing either before or after
the alteration he is bound to fulfill his agreement. [Section-35]
g) Every company, upon the request and payment of a prescribed amount

by its member, shall supply within a period of fourteen days a copy of the
memorandum and articles of the company. [Section-39]
h) Every copy issued after the date of the alteration in the memorandum or
articles of a company shall contain such alteration. Every company and
its officer who contravenes this provision shall be liable to a penalty not
exceeding of level 1on the standard scale. for each copy so issued.
[Section-40]
11.4- Registration of articles (Section 36)

Articles signed by the subscribers to the memorandum be registered with the
memorandum
(1) There may, in the case of company limited by shares and there shall, in the case of
a company limited by guarantee or an unlimited company, be registered with the
memorandum, articles of association signed by the subscribers to the memorandum
and setting out regulations for the company.
Adoption of Table A by a company limited by shares

(2) Articles of association of a company limited by shares may adopt all or any of the
regulations contained in Table A in the First Schedule to this Act.
Amount of Share Capital to be stated (for unlimited and Guarantee limited)
(3) In the case of an unlimited company or a company limited by guarantee, the articles,
if the company has a share capital, shall state the amount of share capital with which
the company proposes to be registered.

If no share capital, state the number of members with which the company
proposes to be registered
(4) In the case of an unlimited company or a company limited by guarantee, if the
company has no share capital, the articles shall state the number of members with
which the company proposes to be registered.
Articles for company limited by shares/Table A

(5) In the case of a company limited by shares and registered after the commencement
of this Act, if articles are not registered, or, if articles are registered, in so far as the
articles do not exclude or modify the regulations in Table A in the First Schedule to this
Act, those regulations shall, so far as applicable, be the regulations of the company in
the same manner and to the same extent as if they were contained in duly registered
articles.
The articles be explicit and without ambiguity and shall list voting and other
rights
(6) The articles of every company shall be explicit and without ambiguity and, without
prejudice to the generality of the foregoing, shall list and enumerate the voting and other
rights attached to the different classes of shares and other securities, if any, issued or to
be issued by it.
Penalty Provision
(7) If a company contravenes the provisions of its articles of association, the company
and every officer of the company shall be liable to a penalty not exceeding of level 1 on
the standard scale.
11.5- Articles to be printed, signed and dated (section 37)
Description of articles: (i) printed (ii) paragraphs (iii) Signed by each subscriber
(iv) dated
The articles shall be—
(a) printed in the manner generally acceptable;
(b) divided into paragraphs numbered consecutively;
(c) signed by each subscriber, who shall add his present name in full, his occupation,
and father‘s name or, in the case of a married woman or widow, her husband‘s or
deceased husband‘s name in full, his nationality and his usual residential address and
such other particulars as may be specified, in the presence of a witness who shall attest
the signature and shall likewise add his particulars; and

(d) dated.
11.6 Alteration of articles (Section 38)
Special resolution, if alteration in substantive rights or liabilities of members,

minimum three-fourths majority of the members or of the class of members
(1) Subject to the provisions of this Act and to the conditions contained in its
memorandum, a company may, by special resolution, alter its articles and any alteration
so made shall be as valid as if originally contained in the articles and be subject in like
manner to alteration by special resolution:
Provided that, where such alteration affects the substantive rights or liabilities of
members or of a class of members, it shall be carried out only if a majority of at least
three-fourths of the members or of the class of members affected by such alteration, as
the case may be, exercise the option through vote personally or through proxy vote for
such alteration.
Altered copy of the AOA to be filed with the registrar

(2) A copy of the articles of association as altered shall, within thirty days from the date
of passing of the resolution, be filed by the company with the registrar and he shall
register the same and henceforth the articles so filed shall be the articles of the
company.
11.7 Copies of memorandum and articles to be given to members (Section 39)
Copy of MOA and AOA to be sent to members at their request

(1) Each company shall send to every member, at his request and within fourteen
days thereof, on payment of such sum, as the company may fix, a copy of the
memorandum and the articles, if any.
Penalty provision
(2) If a company makes default in complying with the requirements of
sub-section (1), it shall be liable to a penalty not exceeding of level 1 on the
standard scale.

11.8 Alteration of memorandum or articles to be noted in every copy(Section 40)
Alteration to be noted in every copy of MOA or AOA issued after alteration

(1) Where an alteration is made in the memorandum or articles of a company, every
copy of the memorandum or articles issued after the date of the alteration shall conform
to the memorandum or articles as so altered.
Penalty provision
(2) If, where any such alteration has been made, the company at any time after the date
of the alteration issues any copies of the memorandum or articles which do not conform
to the memorandum or articles as so altered it shall be liable to a penalty not exceeding
of level 1 on the standard scale for each copy so issued and every officer of the
company who is in default shall be liable to the like penalty.
12. UNLIMITED LIABILITY OF DIRECTORS
12.1 Limited company may have directors with unlimited liability (Section 98)
Limited company – Directors’ liability unlimited – if provided by the memorandum
(1) In a limited company, the liability of the directors or of any director may, if so
provided by the memorandum, be unlimited.
Certain requirements for election of the director having liability unlimited

(2) In a limited company in which the liability of any director is unlimited, the directors of
the company, if any, and the member who proposes a person for election or
appointment to the office of director, shall add to that proposal a statement that the
liability of the person holding that office will be unlimited and the promoters and officers
of the company, or one of them shall, before that person accepts the office or acts
therein, give him notice in writing that his liability will be unlimited.
Penalty provision
standard scale and shall also be liable for any damage which the person so elected or
appointed may sustain from the default, but the liability of the person elected or
appointed shall not be affected by the default.

12.2 Special resolution of limited company making liability of directors unlimited
(Section 99)
Authorization by Articles, Alteration of memorandum by special resolution—
Consent of director already holding office of director
A limited company, if so authorised by its articles, may, by special resolution, alter its
memorandum so as to render unlimited the liability of its directors or of any director:
Provided that an alteration of the memorandum making the liability of any of the
directors unlimited shall not apply, without his consent, to a director who was holding
the office from before the date of the alteration, until the expiry of the term for which he
was holding office on that date.
Companies (Incorporation) Regulations, 2017
CHAPTER I
PRELIMINARY
1. Short title and commencement.__ (1) These Regulations shall be called the
Companies (Incorporation) Regulations, 2017.
(2) They shall come into force on August 14, 2017.

2. Definitions. –
(1) In these regulations, unless there is anything repugnant in the subject or context,-
(i) “Act” means the Companies Act, 2017 (XIX of 2017);
1 [(ii) “annexure” means an annexure appended to these regulations;]

2 [(iia) “authorized intermediary” shall have the same meaning as assigned to it in
clause (iii) of sub-regulation (1) of regulation 2 of the Intermediaries (Registration)
Regulations, 2017;]
(iii) “Commission” means the Securities and Exchange Commission of Pakistan
established under the Securities and Exchange Commission of Pakistan Act, 1997 (XLII
of 1997);
3 [(iiia) “form” means form appended to these regulations; and]

(iv) “regulations” means the Companies (Incorporation) Regulations, 2017;
(2) Words and expressions used but not defined in these regulations shall have the
same meaning as assigned to them in the Act, the Securities and Exchange

Commission of Pakistan Act, 1997, the Limited Liability Partnership Act, 2017, the
Securities Act, 2015 and any rules made thereunder.
CHAPTER II
RESERVATION OF NAME
4[3. Reservation of Name. –

(1) Any person desirous of forming a company shall have the option to file either
separate application for reservation of name in the manner as provided in sub-regulation
(2) of this regulation or combined application for reservation of name and incorporation of
company in the manner as provided in sub-regulation (3) of regulation 5.
(2) Separate application for reservation of name in terms of sub-section (4) of section 10
of the Act shall be made along with non-refundable application fee as specified in
Seventh Schedule of the Act, in the following manner,-
(i) online application through e-service; or

(ii) physical application as per Inc. Form-I of the regulations with the registrar.
(3) The applicant may propose up to three names in order of priority for reservation of
any one of them, ensuring that the proposed names fulfil the criteria specified in section
10 of the Act and these regulations.
(4) The registrar, if satisfied that any one of the proposed names in the order of priority,
fulfills the criteria specified in the Act and these regulations, may issue availability of
name as per Inc. Annexure-I for a period of sixty days from the date of availability of
name letter.
(5) If the applicant fails to file application for incorporation of company along-with
evidence of payment of fee within sixty days period, the name shall not remain
available.
(6) In case of refusal of the proposed name(s), the registrar shall issue the order of
refusal as per Inc. Annexure-II.
(7) The registrar, while considering the application for reservation of name may require
the applicant to furnish such additional information as deemed appropriate:

Provided that where the requisite information is not provided within fifteen days or any
further time allowed by the registrar, the application shall be disposed of on the basis of
available information.]
5[3A. Modes of payment of fee. –

The fee as per Seventh Schedule of the Act as required under these regulations, may
be paid through-
(a) credit card; or
(b) debit card; or
(c) other mode of online payment made available by the Commission; or
(d) challan in the designated branch of the bank.]
4. Prohibition of certain names.–

(1) Subject to section 10 of the Act, the following words and combinations thereof shall
not be used in the name of a company in English or any of the languages depicting the
same meaning,-
(i) Federal Government, Provincial Government, Name depicting association with any
foreign government, Name suggesting association with any political personality,
Commission, Authority, Register or Registered, Co-operative, Bureau, Division,
Department, Undertaking, Municipal, Union, Republic, Nation, President, Governor,
Prime Minister, Chief Minister, Minister, Cabinet, Senate, National Assembly,
6[Provincial Assembly,] Parliament/ Parliamentary, Statute/ Statutory, Court/ Judiciary/
Judge,7[Jury,] Administrator.
(ii) Names of International bodies and abbreviations thereof including, but not limited to,
United Nations, South Asian Association for Regional Cooperation, Organization of
Islamic Conference, World Bank, International Finance Corporation, Asian Development
Bank, Islamic Development Bank, International Monetary Fund, Red Cross, Red
Crescent.
Provided that the Commission may allow any of the above names under special
circumstances on the request of any government or authority.
(2) Subject to section 10 of the Act, the following words 8[or acronyms] and
combinations thereof may only be used in the name of a company subject to the criteria
mentioned in each case,-

(i) Association or Foundation - In case of companies to be established on grant of
license by the Commission under section 42 of the Act or which are licensed by the
Directorate General of Trade Organizations under the Trade Organizations Act, 2013.
(ii) Fund - In case of a public sector company, a trade organization, a Non-Banking

Finance Company to be established to undertake asset management services or private
equity and venture capital fund management services subject to prior approval of the
Commission or a company to be established on grant of license by the Commission
under section 42 of the Act.
(iii) Council - In case of a company to be established on grant of license by the

Commission under section 42 of the Act. Moreover, this expression may also be
allowed to Sports Association, Trade Organization or a Professional Body.
(iv) Chamber - In case of an entity which is to be established as a Trade Organization

under Trade Organizations Act, 2013.
(v) Trust - In case of Non-Banking Finance Company to be established to undertake

REIT management services or asset management services subject to prior approval by
the Commission.
(vi) Society - In case of a company if proper justification is provided to the satisfaction of

the registrar.
(vii) Assurance/Assurer/Insurance/Insurer/Re-Assurance/Re-Assurer/Re-Insurance/Re-
Insurer – In case of companies to be established to undertake business of Insurance,
Assurance, Reinsurance and Re-assurance subject to prior approval of the
Commission.
(viii) Board - In case of a company desirous to engage in the business of Paper and/or
Board or to public sector companies.
(ix) Bahria/Askari/Fauji/Fazaiya/Cadet/Armed Forces or Forces/Army/Navy/Air

Force/Shaheen/Military/ defense - In case of companies to be established by the
relevant agency.
(x) Bank/Banking/Banker - In case of companies to be established to undertake banking

business subject to prior approval of State Bank of Pakistan or an investment bank
subject to prior approval of the Commission.

9 [(xa) Chapter – In case of companies where NOC or permission of the organization/
entities having various chapters locally or globally, is provided.]
(xi) Charter/Chartered - In case of companies having charter from the sovereign

authority of the Federation or the Province.
(xii) Corporation - In case of companies where proper justification is submitted to the

satisfaction of registrar.
(xiii) Exchange/Bourse - In case of Securities Exchange, Commodity Exchange,

Mercantile Exchange and Exchange Company, subject to prior approval from the
relevant authority.
(xiv) 10 [Omitted ]
[(xv) Names of Famous/Distinct Personalities – In case of a company, where no

objection certificate from the personality is provided or where proper justification is
submitted to the satisfaction of registrar.]
(xvi) Federation - In case of a company licensed under section 42 of the Act or trade
bodies under Trade Organizations Act, 2013.
(xvii) Federal - In case of a company where it has a connection with or patronage of the
Federal Government subject to prior approval of the Commission.
(xviii) Province/Provincial/Sindh/Punjab/Baluchistan/Khyber Pakhtunkhwa or

KPK/FATA/Gilgit Baltistan or FANA/ Azad Jammu & Kashmir or AJK. In case of a
company where it has a connection with or patronage of the concerned Government
subject to prior approval of the Commission.
(xix) Group - In case of a company where this word implies several companies under
single corporate ownership and applicants have to provide evidence of
subsidiary/associate relationship with two or more companies.
(xx) Holding - In case of a company where it qualifies to be a holding company as

defined in clause 37 of sub-section (1) of section 2 of the Act to the satisfaction of the
registrar.
(xxi) Institute/Institution - In case of a company where it has submitted proper

justification to the satisfaction of the registrar.

(xxii) Finance, Financial, Investment Finance, Investment Advisory, Leasing, Asset
Management, Housing Finance, Modaraba, Venture Capital, Private Equity - In case of
Non-Banking Finance Company, investment company, Modaraba company, brokerage
house subject to prior approval by the Commission. In case of any public sector
financial institution subject to prior approval by the Commission or State Bank of
Pakistan, as the case may be.
(xxiii) Name of Company containing country name or nationality other than Pakistan - In
case of the companies where appropriate justification is submitted to the satisfaction of
the registrar.
(xxiv) Name of Company containing names of two countries i.e., Pakistan/Pak and any
other foreign country - In case of companies where documentary evidence is provided
to the satisfaction of the registrar to support the fact that the company is a Joint Venture
of two Governments or companies 12[or individuals of two relevant countries].
(xxv)New/Modern/The/Al/International/Company/Co./Inc./Firm/Partnership/LLP/LLC/
Proprietor/Enterprise/Mills/Factory - In case of a company where proper justification is
submitted to the satisfaction of the registrar. However, these expressions will not be
acceptable if used to make proposed company name distinctive from existing
companies.
(xxvi) State - In case of public sector companies.
(xxvii) University - In case of University Management Company for the management of

University in terms of guidelines of Higher Education Commission.
(3) The name shall be considered undesirable, if—
(i) 13[Omitted]
(ii) it includes any word or words which are offensive to any section of the people;
(iii) it is identical with or resemble or similar to name of Limited Liability Partnership
registered under the Limited Liability Partnership Act, 2017;
(iv) any other word which in the opinion of registrar is undesirable.

CHAPTER III
INCORPORATION OF COMPANY
14[5. Application for incorporation of company. –

(1) An application for incorporation of company along with specified fee, shall be filed in
any of the following modes, namely:-
(i) separate application for incorporation of company in the manner as provided in sub-
regulation (2); or
(ii) combined application for reservation of name and incorporation of company in the
manner as provided in sub-regulation (3).
(2) An applicant shall make separate application for incorporation of company either
online through e-service or in physical form to the registrar as per Inc. Form-II along
with the following documents,-
(i) memorandum (in case of online application, e-service shall automatically generate
memorandum on the basis of information provided by the applicant except for
companies having specialized business);
(ii) articles where required;
(iii) copies of valid NIC/NICOP (national identity card/ national identity card for overseas
Pakistanis) of the subscribers/ directors/chief executive officer or copies of valid
Passport in case of a foreigner;
(iv) in case of a single member company copy of valid NIC/NICOP of nominee or copy
of valid Passport in case of a foreigner;
(v) copy of NIC of witness in case of physical filing of application;
(vi) in case of physical application, authority letter on stamp paper of requisite value in
favour of any one of the subscribers or registered intermediary, authorizing him to file
documents for incorporation of company on behalf of subscribers, make correction
therein, if required and collect certificate of incorporation and other documents after
incorporation of company. The authority letter shall be witnessed with his particulars
and shall also be notarized;

(vii) NOC/Letter of Intent/ License (if any)/ approval letter of the relevant regulatory
authority in case of specialized business as mentioned in regulation 4;
(viii) in case of physical application, original paid bank challan or other evidence of
payment of fee specified in Seventh Schedule of the Act.
(ix) copy of valid NIC/Passport of person duly authorized by the Board of directors of a
body corporate which is a subscriber along with copy of Board resolution. In case of a
subscriber which is a limited liability partnership, copy of valid NIC/ Passport of
designated partner empowered to act as such, along with copy of instrument
empowering him.
(x) in case the subscriber is a foreign company or a foreign body corporate, the profile
of the company, detail of its directors, their nationality and country of origin, copy of its
charter, statute or memorandum and articles etc., certified in the manner as specified in
regulation 15.
(3) The combined application for reservation of name and incorporation of company
limited by shares shall be filed online through e-service on payment of fee along with
scanned copies of only relevant and applicable documents, as mentioned in sub-
regulation (2) except memorandum of association and articles of association, which
shall be generated by e-service:
Provided that facility of combined application shall not be available for companies to be
formed to carry on or engage in any business which is subject to a license or
registration, permission or approval as required under the respective law:
Provided further that the applicant shall enter three names for the proposed company in
the order of priority, out of which any one may be approved by the registrar subject to
fulfillment of criteria mentioned in section 10 of the Act and in these regulations. If the
name as per option one is not available, the name from other options in order of priority
shall be considered for incorporation and in case of refusal of the proposed names, the
registrar shall issue the order of refusal as per Inc.Annexure-II.
(4) Any person may obtain certified copies of the extract of information contained in item
2.1 or 2.2 of Part-II (A), Part-II (D), Part-II (E) and Part-III of Inc. Form-II.]

6. Memorandum of Association. –
(1) The memorandum of association shall be in conformity with Table B, C, D, E or F of

the First Schedule to the Act and any other rules and regulations notified by the
Commission/Federal Government, as applicable to the kind of the company. It shall
contain an undertaking that the company shall not engage in any of the restricted
business, launch multi-level marketing (MLM), Pyramid and Ponzi Schemes, or other
related activities/businesses or any lottery business, or engage in any of the permissible
business unless the requisite approval, permission, consent or license is obtained from
competent authority as may be required under any law for the time being in force.
Explanation.- For the purposes of this regulation, “restricted business” 15[includes]

undertaking or indulging, directly or indirectly in the business of a Banking Company,
Non-Banking Finance Company, Mutual Fund, Private Fund, Leasing, Investment
Company, Investment Advisor, REIT Management Company, Housing Finance
Company, Discounting Services Microfinance or Microcredit business, Insurance
Business, Modaraba Management Company, Stock Brokerage business, forex,
managing agency, business of providing the services of security guards, securities
broker, securities adviser, securities manager, share registrar, credit rating company,
balloter, underwriter, debt securities trustee or any other business restricted under any
law for the time being in force or as may be notified by the Commission 16[or any other
government authority].
(2) 17[ Omitted ]
(3) 18[ Omitted ]
(4) The memorandum filed in physical form under sub-section (1) of section 16 of the
Act, shall be properly stamped as required by the Stamp Act, 1899 (II of 1899), if
applicable, duly subscribed and witnessed along with the declaration made thereunder:
Provided that in case of electronic submission of memorandum of association, the

stamp duty shall not be paid till the time the Provincial Governments devise and
implement appropriate measures for payment and recovery of stamp duty through
electronic means in terms of section 10 of the Electronic Transactions Ordinance, 2002
(LI of 2002).
(5) The registrar may require any person who makes a declaration under sub-section

(1) of section 16 of the Act or is a promoter or director of the proposed company or is a
witness to the signatures of the subscribers to the memorandum to furnish such
information, clarification or document as he may deem necessary to satisfy himself for
purposes of sub-sections (2) and (4) of section 16 of the Act.
19[7. Articles of Association. –

(1) In case, the subscribers opt to file combined application for reservation of name and
incorporation of company in the manner specified under sub-regulation (3) of regulation
5, the articles as per Table A of First Schedule to the Act shall be the articles of the
company.
(2) In case of separate application for incorporation of company, the subscribers of the
company limited by shares may adopt the articles as per Table A of First Schedule to
the Act and notify the same to the registrar concerned as per Inc. Form-II and filing of
articles separately shall not be required by company adopting Table A:
Provided that in case articles as per Table A of the First Schedule to the Act are not
adopted, the company limited by shares shall file the articles with the registrar along
with application for incorporation.
(3) In the case of a company limited by guarantee or an unlimited company, the

company shall file the articles with the registrar along with application for incorporation.]
20[7A. Signing of memorandum of association and articles of association. –

(1) The memorandum and articles of the company shall be signed physically or
electronically, as the case may be, by each subscriber to the memorandum and articles
of association and where required, to be witnessed.
(2) Where a subscriber is other than a natural person, the memorandum and articles of
association shall be signed by a natural person on its behalf in the following manner:
(i) in case of a body corporate, duly authorized by a resolution of the board of directors;
(ii) in case of a limited liability partnership, a designated partner empowered to act as

such, along with copy of instrument empowering him; and
(iii) in any other case by an authorized representative duly authorized to sign as such.]

8. Appointment of First Directors and Chief Executive Officer. –
(1) The subscribers to the memorandum shall determine the number of directors and
the names of the first directors in terms of provisions of section 157 of the Act.
(2) The subscriber to the memorandum shall also determine the name of the first chief
executive officer in terms of provisions of section 186 of the Act.
(3) The number of directors as determined by the subscribers and particulars of first
directors and first chief executive officer shall be stated in the application for
incorporation of company as per 21[Inc. Form -II].
9. Other information to be provided.-
(1) In addition to the particulars of subscribers as provided in section 31 and 37 of the

Act, following further information shall be provided namely:-
22[(i) a subscriber, in case of a Pakistani national, shall also specify number of his valid
NIC/ NICOP and in the case of foreign national, number of his valid passport.]
(ii) in case of a person other than a natural person, the address of its registered office or
principal office shall be mentioned and the authorized representative signing the
documents shall 23[likewise] provide his particulars.
10. Witness in case of physical submission of a document.-
(1) In case of electronic submission of documents for incorporation of a company a

witness is not required in terms of Section 3 of Electronic Transactions Ordinance,
2002.
(2) In case of physical submission of documents for incorporation of a company, the

same shall be witnessed by a Pakistani National having valid CNIC:
Provided that where a document is required to be attested by a notary public or an oath

commissioner or class I magistrate, the same shall be witnessed in accordance with the
relevant law.

11. Examination of documents by the registrar.-
(1)The registrar shall examine the documents submitted for registration of a company
and if he/she is satisfied that the same are complete in all respects and all the
requirements of the Act and regulations relating to incorporation of the company have
been complied with, he shall register the memorandum and other documents delivered
to him.
(2) In case any discrepancies and deficiencies are observed by the registrar in the
documents filed, the same shall be communicated to the applicant in writing for
resolution and the applicant shall remove the discrepancies and provide requisite
information within seven days of date of written communication from the registrar.
(3) In case no response is received within stipulated time period, a first reminder shall
be issued and a final reminder shall be issued seven days thereafter by the registrar
concerned.
(4) In case no response is received from the applicant or the applicant fails to remove
discrepancies or provide requisite information to the satisfaction of registrar within
seven days of issue of final reminder, the registration of the 24[memorandum and other
documents] may be refused.
12. Issuance of Certificate of Incorporation.-
(1) On registration of memorandum of association of a company, the registrar shall

issue a certificate of incorporation, under his signatures or authenticated by his official
seal, as per 25[Inc. Annexure-III], which shall be conclusive evidence that the
requirements of the Act as to registration have been complied with and that the
company is duly incorporated under the Act.
(2) The certificate of incorporation may be issued electronically or in physical form.
13. Additional requirements for a single member company.-
(1) A person desirous of forming a single member company shall comply with all the
requirements for incorporation of a company as per regulation 5 of these Regulations.
(2) The person to be nominated under section 14 of the Act shall be in accordance with
sub-Section (3) of Section 79 of the Act.

14. Additional requirements for an association not for profit.-
The subscribers to the memorandum of an association not for profit shall obtain license
26[under section 42 of the Act], before filing application in terms of regulation 5 of these
regulations.
27[15. Additional requirements for foreign subscribers and security clearance.-
(1) In case the subscriber is a foreign company or a foreign body corporate, the registrar
shall require additional information including but not limited to, the profile of the foreign
company or foreign body corporate, detail of its directors, their nationality and country of
origin, copy of its charter, statute or memorandum and articles etc.:
Provided that the copy of any charter, statute, memorandum, articles or other
instrument, constituting or defining the constitution of a foreign company or a foreign
body corporate required to be filed with the registrar shall be duly certified to be a true
copy by –
(i) the public officer in the country where the foreign company or foreign body corporate
is incorporated to whose custody the original is committed; or
(ii) a Notary public of the country where the foreign company or foreign body corporate
is incorporated; or
(iii) an affidavit of a responsible officer of the foreign company or foreign body corporate
in the country where the company is incorporated:
Provided further that the signature and seal of the official referred to in clause (i) or the
certificate of the Notary Public referred to in clause (ii) above shall be authenticated by a
Pakistan diplomatic consular or consulate officer and the certificate of the officer of the
foreign company or foreign body corporate referred to in clause (iii) above shall be
signed before a Pakistan diplomatic consular or consulate officer.
(2) In case the subscriber to the memorandum is an individual of foreign nationality, he

may be required to file additional documents as deemed necessary by the registrar.
(3) The Commission shall obtain security clearance from Ministry of Interior (MoI) in
following cases and in the manner prescribed hereunder:

(i) companies having foreign (other than Afghan and Indian national or origin)
subscribers/officers will be incorporated on the basis of an undertaking of each foreign
subscriber /officer and case shall be forwarded for security clearance:
Provided that in case name of subscriber/officer is not security cleared by MoI, the
subscriber/officer and the company, shall take immediate steps for replacement and
shall transfer shares if any, held by the subscriber;
(ii) companies having foreign subscribers/ officers who are Afghan or Indian national or
of Afghan or Indian Origin will be incorporated after receipt of security clearance;
(iii) security services provider companies will be incorporated after receipt of

security clearance from MoI.
(4) The manner of security clearance shall be subject to any change in the security
policy of government from time to time.] 16. 28[ Omitted ]

QUESTIONS
1. According to the relevant provisions of the Companies Act 2017, which
partnership firms needs registration as a company under the Companies Act
2017.
2. According to the relevant provisions of the Companies Act 2017, which

partnership firms needs not to be registered as a company under the Companies
Act 2017
3. According to the relevant provisions of the Companies Act 2017 what are the
pre-requisites for commencement of business by various companies.
4. According to the relevant provisions of the Companies Act 2017 what type of
proposed names of companies need prior approval of Commission.
5. What are the contents of memorandum of association of the company limited by

guarantee under Companies Act 2017?
6. Can a limited company have directors with unlimited liability?
7. Mr. Adeel is a fresh graduate. He started a Social Welfare Association along with
twenty of his class fellows in the name and style of “Aasra Association”
(AA)Through “AA” they go door to door and collect unused or leftover medicine
from public, which they further provide to the needy and poor patients at general
hospitals at very nominal rates. The work has been admired by majority of public
and “AA” has hired a number of employees for collection of medicines and has
also set up different Medical stores near general hospitals for this purpose. The
monies received from the poor and needy people against the medicines are used
in payment of salaries to the employees.
Aasra Association has received a notice from the Registrar of Companies

requiring the association to be registered as a Company under the Companies
Act 2017. You are required to explain the situation to Mr. Adeel.
8. What are the changes to be made in the articles of association of a company

when it is converted from a public limited company to a private limited company?

1. If a company carries on business with less than minimum number of members for
a period of six months ,then on expiry of that six month period:
a. Every director of the company who is in the knowledge that business is

being conducted with less than minimum required member, shall be
severally liable for the debts of the company contracted during that time.
b. Every member of the company who is in the knowledge that business is

being conducted with less than minimum required member, shall be jointly
liable for the debts of the company contracted during that time.
c. Every member of the company who is in the knowledge that business is

being conducted with less than minimum required member, shall be
severally liable for the debts of the company contracted during that time.
d. Every member of the company who has the knowledge that business is
being carried on with less than minimum required members shall be liable
to imprisonment.
2. What shall be the conclusive evidence that all requirements of this Act in respect
of registration has been complied with?
a. A certificate of commencement of business.
b. A certificate of incorporation.
c. An acknowledgement by registrar of the availability of name of company.
d. A declaration given by the company to registrar that all requirements of

companies Act relating to registration of company have been complied
with.
3. Within how many days of receipt of direction from the registrar company is
required to change its name under section 11 of the Companies Act, 2017?
a. 30 days
b. 45 days
c. 60 days
d. 90 days

4. Approval of what authority is required for the change of name of a company
under section 12 of the Companies Act, 2017?
a. Court
b. Commission
c. Registrar
d. Board of Directors
5. What type of table in the first schedule is in accordance with the Articles of
Association of a limited company by shares?
a. Table A
b. Table B
c. Table C
d. Table D
MCQs (Answers)
1. c 2. b 3. a 4. c 5. a

Companies Act, 2017

1. COURT [Section 2(1)(23)]
2. SECURITIES & EXCHANGE COMMISSION OF PAKISTAN
3. REGISTRAR [SECTION 2(1)(57)]

Authorities under the Act
Under Companies Act 2017 there are various authorities having powers to
regulate the affairs of the companies. Each authority has its own sphere of
powers, rights and responsibilities. Some of these powers are exercisable
unsolicited and at some other times on the application of interested
parties.
Details regarding such authorities are as follows
1- COURT (Section 2(1)(23)
“Court” means a Company Bench of a High Court having jurisdiction under this Act;
1.1 Jurisdiction of the Court and creation of Benches (Section 5)

(1) The Court having jurisdiction under this Act shall be the High Court having
jurisdiction in the place at which the registered office of the company is situate.
(2) Notwithstanding anything contained in any other law no civil court as provided in the
Code of Civil Procedure, 1908 (Act V of 1908) or any other court shall have jurisdiction
to entertain any suit or proceeding in respect of any matter which the Court is
empowered to determine by or under this Act.
(3) For the purposes of jurisdiction to wind up companies, the expression “registered
office” means the place which has longest been the registered office of the company
during the one hundred and eighty days immediately preceding the presentation of
the petition for winding up.
(4) There shall be, in each High Court, one or more benches on permanent basis, each
to be known as the Company Bench, to be constituted by the Chief Justice of the High
Court to exercise the jurisdiction vested in the High Court under this Act:
Provided that Benches constituted under the Companies Ordinance, 1984 (XLVII of
1984), shall continue to function accordingly unless otherwise notified by the respective
Chief Justice of the High Court: Provided further that provisions of section 6 shall be
effective from the date of notification by the Chief Justice of the respective High Court
within one hundred and eighty days from the date of the commencement of this Act.

(5) There shall be a Registrar to be known as “Registrar of the Company Bench” duly
notified by the Chief Justice of the respective High Court who shall be assisted by such
other officers as may be assigned by the Chief Justice of the respective High Court.
(6) The Registrar of the Company Bench shall perform all the functions assigned to it
under this Act including all ministerial and administrative business of the Company
Bench such as the receipt of petitions, applications, written replies, issuance of notices,
service of summons and such other functions or duties as may be prescribed under
section 423.
(7) The Chief Justice of the respective High Court, if deemed appropriate, may also
establish a secretariat in each Company Bench of the respective High Court in such
form and manner to provide secretarial support and to perform such functions as may
be prescribed under section 423.
1.2 Procedure of the Court and appeal(Section 6)
(1) Notwithstanding anything contained in any other law for the time being in force all
written submissions to the Court under this Act shall be filed with the Registrar of the
Company Bench.
(2) For the purposes of this Act, written submissions shall, inter alia, include-
(a) a petition or application setting out a concise statement of facts, grounds and the
relief claimed;
(b) a written reply with particulars of set off, if any;
(c) an affidavit of facts by the petitioner or applicant, or respondent, as the case may be,
including affidavits, if required, of other persons in support of the case, duly attested by
the oath commissioner, or as may be provided under the rules;
(d) any other relevant documents in possession of the petitioner or applicant or

respondent, as the case may be;
(e) any application for discovery of documents or interim injunction, if required;
(f) a list of any case law along with a summary of the same on which the petitioner or
applicant is placing reliance;

(g) address for effecting service, mobile number, email and fax or any other mode
notified by the Court; and
(h) any other document as may be required by the Registrar of the Company Bench.
(3) Where any petition or application is filed under any provision of this Act, summons
may be issued by the Registrar of the Company Bench along with a copy of the petition
or application and the documents annexed therewith and the same shall be served on
the respondent through the bailiff or process-server of the Court, through registered
post, acknowledgement due, by courier and by publication in one English language and
one Urdu language daily newspaper and, in addition, if so directed by the Court through
electronic modes, and the service duly effected through any one of the modes
mentioned under this sub-section shall be deemed to be valid service.
Explanation. “electronic modes” means service of summons on a party or other

person by electronic transmission through devices such as, facsimile, email, or in such
other form or mode as may be notified by the Court.
(4) The respondent shall file a written reply and particulars of set-off, if any, as set out in
sub-section (2) of this section with the concerned Registrar of the Company Bench
within thirty days from the date of first service through any of the modes as laid down in
sub-section (3).
(5) Where the respondent fails to file the written reply within the time prescribed in sub-
section (4), a report shall be submitted by the Registrar of the Company Bench before
the Court and the Court may pass necessary orders to proceed exparte and announce
the final order on the basis of the documents available on record.
(6) The Registrar of the Company Bench, on completion of receipt of all written
submissions and after ensuring that all copies of such written submissions are duly
supplied to the parties as per procedure laid down by the Court, shall present the case
file to the Court on a day fixed under notice to the parties, within forty-five days of the
first service of notices or such extended time as may be granted by the Court.
(7) The Court after consulting the counsel of the parties shall fix a date and allocate time
for hearing of the case.
(8) No adjournment shall be granted once the Court has fixed a date of hearing under
sub-section (7) and it will be duty of the parties to ensure the presence of their
respective counsel or in absence of the counsel make alternate arrangements:

Provided that only in exceptional circumstances beyond control of a party, the Court
may grant another opportunity of hearing subject to the payment of an amount of rupees
ten thousand or such higher amount as may be determined by the Court as costs to be
paid to the Court.
(9) The Court shall treat affidavits, counter affidavits and other documents filed by the
parties to the proceedings as evidence and decide the matter on the basis of the
documents and affidavits placed before the Court, in a summary manner and pass final
orders within the time stipulated in subsection (11).
(10) In exceptional circumstances where the Court is of the view that any issue of facts
requires cross examination, the Court may order attendance of the relevant deponent or
deponents for the purposes of cross examination by such opposing party or parties as
the Court deems fit and for the purposes of this section the affidavit filed by such
deponent shall be considered as his examination-in-chief:
Provided that—
(i) the Court may refer the matter to the Registrar of the Company Bench or any other
person for recording of cross examination of the deponent who shall complete recording
of cross examination within thirty days from the date of the order of the Court, or such
extended time as may be allowed by the Court which shall not be more than fifteen days
on payment of rupees ten thousand or such higher amount as may be determined by
the Court as costs payable to the Court and to submit a report accordingly;
(ii) all questions and answers along with any objections raised by any party shall be duly
recorded in writing; and (iii) the Registrar of the Company Bench shall have all the
powers of the Civil Court under the Code of Civil Procedure, 1908 (V of 1908) for the
purposes of execution of service and summoning of deponents and conducting cross
examination in accordance with the directions of the Court.
(11) The petition presented before the Court shall be decided within a period of one
hundred and twenty days from the date of presentation of the case and for this
purpose the Court may, if it is in the interest of justice, conduct the proceedings on a
day to day basis and if the Court deems fit it may impose costs which may extend to
one hundred thousand rupees per day or such higher amount as the Court may
determine against any party to the proceeding causing the delay.
(12) The Court may, at any time, take notice of serious misstatements and material non-
disclosure of facts by any party to the proceedings and dismiss the petition or

application or close the right of defence of the respondent with costs of the proceedings
and impose a fine which may extend to one hundred thousand rupees whichever is
higher and pass a final order.
(13) Notwithstanding anything contained in this section, the Registrar of the Company
Bench shall place any application for interim relief including any interlocutory order
before the Court for adjudication immediately upon its filing.
(14) Any person aggrieved by any judgment or final order of the Court passed in its
original jurisdiction under this Act may, within sixty days, file a petition for leave to
appeal in the Supreme Court of Pakistan:
Provided that no appeal or petition shall lie against any interlocutory order of the Court.
(15) Save as otherwise expressly provided under this Act, the provisions of the Qanun-
e-Shahadat (Order)1984 (P.O. No. X of 1984) and the Code of Civil Procedure, 1908
(Act V of 1908) shall not apply to the proceedings under this section except to such
extent as the Court may determine in its discretion.
1.3 POWER TO MAKE REFERENCE TO THE COURT
Reference by the Federal Government or Commission to the Court (Section 8)

(1) Without prejudice to the powers, jurisdiction and authority exercisable by the
concerned Minister-in-Charge of Federal Government or any functionary thereof or the
Commission under this Act, the concerned Minister-in-Charge of the Federal
Government or the Commission, as the case may be, may make a reference to the
Court, on any question or matter which is considered to be of special significance
requiring orders, determination or action concerning affairs of a company or class of
companies or any action of any officer thereof.
Explanation.—In this sub-section "officer" includes an auditor, liquidator or agent of the

company.
(2) Where a reference is made to the Court under sub-section (1), the Court may make
such order as it may deem just and equitable under the circumstances.

POWERS OF COURT HEARING APPLICATION
1.4 Application for winding up of company or an order under section 286

(Section 268)
If any company or other body corporate the affairs of which have been investigated by
inspectors is liable to be wound up under this Act, and it appears to the Commission
from any report made under section 262 that it is expedient so to do by reason of any
such circumstances as are referred to in sub-clause (i) or sub-clause (ii) or sub-clause
(iii) or sub-clause (iv) or sub-clause (vii) of clause (b) of sub-section (1) of section 257,
the Commission may, unless the company or other body corporate is already being
wound up by the Court cause to be presented to the Court by the registrar or any
person authorised by the Commission in this behalf—
(a) a petition for the winding up of the company or body corporate, on the ground that it
is just and equitable that it should be wound up;
(b) an application for an order under section 286; or
(c) both a petition and an application as aforesaid.
1.5. Proceedings for recovery of damages or property (Section 269)

(1) If from any report referred to in sub-section (1) of section 262 it appears to the
Commission that proceedings ought, in the public interest, to be brought by the
company or anybody corporate whose affairs have been investigated in pursuance of
section 260—
(a) for the recovery of damages in respect of any fraud, misfeasance, breach of trust or
other misconduct in connection with the promotion or formation, or the management of
the affairs, of such company or body corporate; or
(b) for the recovery of any property of such company or body corporate which has been
misapplied or wrongfully retained;
the Commission may itself bring proceedings for that purpose in the name of such
company or body corporate.
(2) The Commission shall be indemnified by such company or body corporate against
any costs or expenses incurred by it in, or in connection with, any proceedings brought
by virtue of sub-section (1) and the Court or other authority before which proceedings
are brought shall pass an order accordingly.

1.6 Expenses of investigation (Section 270)
(1) When an investigation is ordered to be made under section 256 or 257 or 258, the
expenses of and incidental to the investigation shall in the first instance be defrayed by
the Commission; but the following persons shall, to the extent mentioned below, be
liable to reimburse the Commission in respect of such expenses, namely—
(a) any person who is convicted on a prosecution instituted in pursuance of section 263
or is ordered to pay damages or restore any property as a result of proceedings under
section 269 may in the same proceedings be ordered to pay the said expenses to such
extent as may be specified by the Commission or the Court convicting such person or
ordering him to pay such damages or restore such property, as the case may be;
(b) any company or body corporate in whose name proceedings are brought as
aforesaid shall be liable, to the extent of the amount or value of any sums or property
recovered by it as a result of the proceedings;
(c) where the investigation was ordered by the Commission under clause (c) of sub-
section (1) of section 256 or 257 or 258, the company or body corporate whose affairs
are ordered to be investigated, shall be liable; and
(d) where the investigation was ordered under section 256 on an application of the
members, the members making the application and the company or body corporate
dealt with by the report shall be liable to such extent, if any, as the Commission may
direct.
(2) The amount of expenses which any company, body corporate or person is liable
under this section to reimburse to the Commission shall be recoverable from that
company, body corporate or person as provided under section 486.
(3) For the purposes of this section, any costs or expenses incurred by the Commission
in or in connection with proceeding brought by the Commission under section 269 shall
be treated as expenses of the investigation giving rise to the proceedings.
(4) Any liability to reimburse the Commission imposed by clauses (a) and (b) of sub-
section (1) shall, subject to satisfaction of the right of the Commission to re-
imbursement, be a liability also to indemnify all persons against liability under clause (c)
of that sub-section.

(5) Any such liability imposed by clause (a) of sub-section (1) shall, subject as
aforesaid, be a liability also to indemnify all persons against liability under clause (b) of
that sub-section.
(6) Any person liable under clause (a) or clause (b) or clause (c) of sub- section (1) shall
be entitled to contribute from any other person liable under the same clause according
to the amount of their respective liabilities thereunder.
(7) In so far as the expenses to be defrayed by the Commission under this section are
not recovered thereunder, they shall be borne by the Commission.
1.7 Inspector’s report to be evidence (Section 271)

A copy of any report of any inspector or inspectors appointed under sections 256, 257
or 258 authenticated in such manner, if any, as may be specified, shall be admissible in
any legal proceedings as evidence of the opinion of the inspector or inspectors in
relation to any matter contained in the report.
1.8 Imposition of restrictions on shares and debentures and prohibition of

transfer of shares or debentures in certain cases (Section 272)
(1) Where it appears to the Commission in connection with any investigation that there
is good reason to find out the relevant facts about any shares, whether issued or to be
issued, and the Commission is of the opinion that such facts cannot be found out unless
the restrictions specified in sub-section (2) are imposed, the Commission may, by order,
direct that the shares shall be subject to the restrictions imposed by sub-section (2) for
such period not exceeding one year as may be specified in the order:
Provided that, before making an order under this sub-section, the Commission shall
provide an opportunity of showing cause against the proposed action to the company
and the persons likely to be affected by the restriction.
(2) So long as any shares are directed to be subject to the restrictions imposed by this
sub-section—
(a) any transfer of those shares shall be void;
(b) where those shares are to be issued, they shall not be issued; and any issue thereof
or any transfer of the right to be issued therewith, shall be void;
(c) no voting right shall be exercisable in respect of those shares;

(d) no further shares shall be issued in right of those shares or in pursuance of any offer
made to the holder thereof; and any issue of such shares or any transfer of the right to
be issued therewith, shall be void;
(e) except in a liquidation, no payment shall be made of any sums due from the
company on those shares, whether in respect of dividend, capital or otherwise; and
(f) no change other than a change by operation of law shall be made in the directors or
the chief executive.
(3) Where a transfer of shares in a company has taken place and as a result thereof a
change in the directors of the company is likely to take place and the Commission is of
opinion that any such change will be prejudicial to the public interest, the Commission
may, by order, direct, that—
(a) the voting rights in respect of those shares shall not be exercisable for such period
not exceeding one year as may be specified in the order; and
(b) no resolution passed or action taken to effect a change in the directors before the
date of the order shall have effect unless confirmed by the Commission.
(4) Where the Commission has reasonable ground to believe that a transfer of shares in
a company is likely to take place as a result of which a change in the directors of the
company will follow and the Commission is of opinion that any such change will be
prejudicial to the public interest, the Commission may, by order, prohibit any transfer of
shares in the company during such period not exceeding one year as may be specified
in the order.
(5) The Commission may, by order, at any time, vary or rescind any order made by it
under sub-section (1) or sub-section (3) or sub-section (4).
(6) Where the Commission makes an order under sub-section (1) or sub- section (3) or
sub-section (4) or sub-section (5) or refuses to rescind any such order, any person
aggrieved thereby may apply to the Court and the Court may, if it thinks fit, by order,
vacate any such order of the Commission:
Provided that no order, whether interim or final shall be made by the Court without
giving the Commission an opportunity of being heard.
(7) Any order of the Commission rescinding an order under sub-section (1), or any order
of the Court vacating any such order, which is expressed to be made with a view to

permitting a transfer of any shares, may continue the restrictions mentioned in clauses
(d) and (e) of sub-section (2), either in whole or in part, so far as they relate to any right
acquired, or offer made, before the transfer.
(8) Any order made by the Commission under sub-section (5) shall be served on the
company within fourteen days of the making of the order.
(9) Any person who—
(a) exercises or purports to exercise any right to dispose of any shares or of any right to
be issued with any such shares, when to his
knowledge he is not entitled to do so by reason of any of the restrictions applicable to

the case under sub-section (1); or
(b) votes in respect of any shares, whether as holder or proxy, or appoints a proxy to
vote in respect thereof, when to his knowledge he is not entitled to do so by reason of
any of the restrictions applicable to the case under sub-section (2) or by reason of any
order made under sub-section (3); or
(c) transfers any shares in contravention of any order made under sub- section (4); or
(d) being the holder of any shares in respect of which an order under sub- section (2) or
sub-section (3) has been made, fails to give notice of the fact of their being subject to
any such order to any person whom he does not know to be aware of that fact but
whom he knows to be otherwise entitled to vote in respect of those shares, whether as
holder or a proxy;
shall be punishable with imprisonment for a term which may extend to one year, or with
fine which may extend to one million rupees, or with both.
(10) Any contravention or default in complying with requirements of sub-section (2) shall
be an offence liable to a penalty of level 2 on the standard scale.
(11) A prosecution shall not be instituted under this section except by or with the
consent of the Commission.
(12) This section shall also apply in relation to debentures as it applies in relation to
shares.

1.9 Saving for legal advisers and bankers (Section 273)
Nothing in sections 256 to 263 shall require the disclosure to the registrar or to the
Commission or to an inspector appointed by the Commission—
(a) by a legal adviser, of any privileged communication made to him in that capacity,
except as respects the name and address of his client; or
(b) by the bankers of any company, body corporate, or other person, referred to in the
sections aforesaid, as such bankers, of any information as to be the affairs of any of
their customers other than such company, body corporate, or person.
1.10 Enquiries and investigation not to be affected by winding up (Section 274)

An inspection, enquiry or investigation may be initiated or proceeded with under
sections 221, 254, 255, 256, 257 and 260 and any consequential action taken in
accordance with any provisions of this Act notwithstanding that—
(a) the company has passed a resolution for winding up;
(b) a petition has been submitted to the Court for winding up of the company; or
(c) any other civil or criminal proceedings have been initiated against the company or its
officers under any provision of this Act.
1.11 Application of sections 254 to 274 to liquidators and foreign companies

(Section 275)
The provisions of sections 254 to 274 shall apply mutatis mutandis to companies in the
course of winding up, their liquidators and foreign companies.
2- SECURITIES & EXCHANGE COMMISSION OF PAKISTAN.
Organization
Securities and Exchange Commission of Pakistan (SECP) established under the
Securities and Exchange Commission of Pakistan Act 1997 was operationalized as a
body Corporate on 1st January 1999. SECP replaced Corporate Law Authority, the
former corporate regulatory body. It has been vested with adequate operational,
administrative and financial autonomy.
The SECP’s head office is at the Federal Capital, Islamabad and it has eight
regional offices (Company Registration Offices), one at Federal Capital, four at

provincial capitals and three in other major cities i.e. Multan, Faisalabad and
Sukkur. The SECP has been organized into following Divisions:
• Company Law Division;

• Securities Market Division;
• Specialized Companies Division;
• Finance & Admin Division;
• HR& Training Division;
• Insurance Division;
• Information System & Technology Division.
Functions
SECP’s main functions include; regulation of securities market and related
institutions like Central Depository Company (CDC), Credit Rating Companies
and Modarabas (funds operating on the basis of Islamic economic principles);
administration of the company law; regulation of non-banking finance companies
like leasing companies, investment banks and mutual funds, regulation of
insurance business and private pensions.
Powers and functions of the Commission (Section 7)

(1) The Commission shall exercise such powers and perform such functions as are
conferred on it by or under this Act.
(2) The powers and functions of the Commission under this Act shall be in addition to
and not in derogation to the powers and functions of the Commission under the
Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997).
3- REGISTRAR [SECTION 2(1)(57)]
“Registrar” means registrar, an additional registrar, an additional joint registrar, a joint

registrar, a deputy registrar, an assistant registrar or such other officer as may be
designated by the Commission, performing duties and functions under this Act;
4- RIGHTS, DUTIES AND LIABILITIES OF REGISTRAR:
Under the Companies Act, 2017, a Registrar has been given number of duties which he
is required to perform in order to regulate or monitor performance of the companies. In
order to enable him to perform his duties he has been given various powers also. Some
of his rights and duties are given below:

4.1 RIGHTS OF REGISTRAR
a) right to receive documents necessary for the incorporation of a company;
and other forms and reports which companies are required to file with the
Registrar under the Companies Act, 2017.
d) right to inspect books of account and other books and papers of a
company.
c) right to require information and explanations from the company and its
officers
4.2 DUTIES AND OBLIGATION OF REGISTRAR

a) to keep the register of mortgages and charges of the companies;
b) to issue the certificate of incorporation of companies;
c) to issue the certificate of commencement of business to the companies.
d) to rectify the registers of the companies regarding any change in:
i) Article of association;
ii) Memorandum of association; and
iii) Any mortgage or charge; etc.
e) to enter the fact, regarding the appointment of receiver or manager of the
company, in the register of mortgages and charges.
5- POWER OF REGISTRAR TO CALL FOR INFORMATION
5.1 Power of registrar to call for information or explanation (Section 254)

Registrar may, by a written notice, call upon the company and any of its present
or past directors, officers or auditors to furnish such information or explanation
in writing or document
Where on a scrutiny of any document filed by a company or on any information received

by him under this Act, or any notice, advertisement, other communication, or otherwise,
the registrar is of opinion that any information, explanation or document is necessary
with respect to any matter, he may, by a written notice, call upon the company and any
of its present or past directors, officers or auditors to furnish such information or
explanation in writing, or such document, within thirty days:
Provided that a director, officer or auditor who ceased to hold office more than six years
before the date of the notice of the registrar shall not be compelled to furnish
information or explanation or document under this subsection.

Company and directors, officers or auditors of the company to furnish
information, explanation or documents
(2) On receipt of the notice under sub-section (1) it shall be the duty of the company and
all persons who are or have been directors, officers or auditors of the company to
furnish such information, explanation or documents as required.
If no information or explanation or documents is furnished

(3) If no information or explanation is furnished within the time specified or if the
information or explanation furnished is, in the opinion of the registrar,inadequate, the
registrar may if he deems fit, by written order, call on the company and any such person
as is referred to in sub-section (1) or (2) to produce before him for his inspection such
books and papers as he considers necessary within such time as he may specify in the
order; and it shall be the duty of the company and of such persons to produce such
books and papers.
Penalty provision
(4) If the company or any such person as is referred to in sub-section (1), (2) or (3)
refuses or makes default in furnishing any such information in producing any such
books or papers-
(a) the company shall be liable to a penalty of level 2 on the standard scale; and
(b) every officer of the company who authorises or permits, or is a party to,the default
shall be punishable with imprisonment of either description for a term which may extend
to two years, and shall also be liable to fine which may extend to one million rupees and
the court trying the offence may, make an order directing the company to produce such
books or papers as in its opinion may reasonably be required by the registrar.
the registrar may annex or any copy thereof or extract therefrom to the original
document
(5) On receipt of such information or explanation or production of any books and
papers, the registrar may annex the same or any copy thereof or extract therefrom to
the original document submitted to him; and any document so annexed shall be subject
to the provisions as to inspection and the taking of extracts and furnishing of copies
to which the original document is subject.

If the information or explanation or book or papers is not furnished or
unsatisfactory state of affairs—Report to Commission
(6) If the information or explanation or book or papers required by the registrar under
sub-section (1) is not furnished within the specified time, or if after perusal of such
information or explanation or books or papers the registrar is of opinion that the
document in question or the information or explanation or book or paper discloses an
unsatisfactory state of affairs, or that it does not disclose a full and fair statement of the
matter to which it purports to relate, the registrar shall without prejudice to any other
provisions, and whether or not action under sub-section (3) or sub-section (4) has been
taken, report in writing the circumstances of the case to the Commission.
5.2 Seizure of documents by registrar, inspector or investigation officer (Section 255)
Upon information to enter place and search, freeze, seize or take possession of
and retain any document etc.
(1) Notwithstanding anything contained in Code of Criminal Procedure, 1898(Act V of
1898) or any other law including Banking Companies Ordinance (Act LVII of 1962) the
registrar, inspector or investigation officer, as the case may be, upon information in his
possession or otherwise or during investigation, has reasons to believe that documents,
books and papers or anything relating to any company or any chief executive or officer
of such company or any associate of such person or is useful or relevant to any
proceedings or investigation under this Act which is required or may be destroyed,
mutilated, altered, falsified or secreted, the registrar, inspector, or investigation officer
after obtaining prior permission of the Commission, signed by one Commissioner,
without warrants, enter such place and cause a search to be made at any time freeze,
seize or take possession of and retain any document, object, article, material, thing,
account books, movable or immovable property or cause any account, property or thing
to be maintained in specific manner.
Registrar or authorized person to enter the place where he has reasons to believe
that any of the items are kept
(2) For the purposes of sub-section (1), the registrar may, after he has obtained the
permission from the Commission under that sub-section (1), may also authorise any
officer subordinate to him, not inferior in rank to an assistant registrar to enter, with such
assistance as may be required, the place where he has reasons to believe that any of
the items referred in sub-section (1) are kept;
(a) to search that place; and
(b) to seize any of the items referred in sub-section (1) as he considers necessary.

Time frame for returning the seized items
(3) The registrar shall return the items seized under this section as soon as may be and
in any case not later than thirty days after such seizure, to the company or, as the case
may be, to the chief executive or any other person from whose custody or power they
were seized:
Provided that the Commission may, after providing to the company an opportunity to
show cause against the order proposed to be made by it, allow the registrar to retain the
items seized for a further period not exceeding thirty days:
Provided further that the registrar may, before returning items as aforesaid, take copies
of, or extracts from them or put such marks of identification thereon as he considers
necessary.
A search-warrants from the concerned Magistrate may be obtained.

(4) Where, the registrar, inspector or investigation officer, as the case may be, has
apprehension that any person or occupants of any place to be searched may create
hindrance, resist search, or such document or thing is not known to be in the
possession of any person, or where general search is required for the purposes of any
proceedings, inspection or investigation under this Act, or any person will not or would
not produce any document or thing as required by the registrar, inspector or
investigation officer in any proceedings, inspection or investigation under this Act, a
search-warrants from the concerned Magistrate may be obtained.
Registrar to enter any place and seize any property, material, document or thing
(5) The registrar, inspector or investigation officer after obtaining warrant under sub-
section (4) may conduct search of such person and enter any place and seize any
property, material, document or thing required under this Act or is associated with
commission of any offence under this Act or administered legislation and Magistrate
while issuing orders under this section may also direct local police, authority or any
agency to provide necessary assistance to such person.
Registrar to proceed in manner provided in the Criminal Procedure Code 1898

(6) The registrar, inspector or investigation officer executing the warrants shall comply
and proceed in manner provided in the Criminal Procedure Code 1898(Act V of 1898)
including sections 102, 48 and 52:
Provided that any proceeding under this section shall not be vitiated or called into
question for non–observance of any requirement of Section 103 of the Code and shall
be admissible in the Court of law.

Retention of Seized property and to produce when required during the trial
(7) Notwithstanding anything contained in sub section (3) in case of seizure of any
property, material or thing by the investigation officer, in relation to any offense under
this Act or administered legislation or scheduled offences, may retain any property,
material, document or thing seized under sub section (1) or (5) which is a case property
and produce the same as and when required during the trial in accordance with law.
Commission to freeze account, securities and other moveable property or part or

parts thereof
(8) Where the Commission has reason to believe that proceeds of crime of any offence
under this Act or administered legislation, it may pass an order to freeze account,
securities and any other moveable property or part or parts thereof for not more than
thirty days.
Aggrieved person may approach the Court

(9) Any person aggrieved of the seizure, freezing or retention by the investigation officer
may approach the Court and obtain order for release of such accounts, securities,
movable or immovable property, things or material seized or retained, after expiry of
thirty days of such seizure or freezing order by the inspector or investigator under sub-
sections (1), (5) or (8), if it can satisfy the Court that such property, accounts, securities,
material or thing is not associated with any offence under this Act or any administered
legislation and Court while passing order of release may impose such restriction and
condition as deemed necessary.
Explanation I.— For the purposes of sub-section (8) the expression “Court” means the
Company Bench of the High Court having jurisdiction where registered office is situated,
in case of company or any connected person and in all other case, it will be the
Company Bench of the High Court having territorial jurisdiction over area where the
search has been conducted under this section.
Explanation II.— For the purposes of this Act, the expression “administrated
legislation” shall have the same meaning as provided in clause (aa) of sub-section (1) of
section 2 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of
1997).

QUESTIONS
1. The court shall hear the petitions files under the Companies Act 2017 from
day to day. What action court can take if any party to the proceeding causing the
delay?
2. Appeal against order of the court shall be heard by Supreme Court, explain the
relevant provisions of the Act regarding such appeal.
3. Registrar can seize the books and records of any company if in his opinion it is
necessary so to do. Explain
4. Explain the powers of the Registrar to call for information from various persons.

1. The court having jurisdiction under companies Act shall:
a. Be any high court of Pakistan.

b. Supreme court of Pakistan.
c. Be high court, which has jurisdiction in the place at which registered office
of company is situated.
d. None of the above.
2. Which of the following statement is correct in relation to company benches:
a. In each high court, there shall be one bench constituted by the chief
justice of high court.
b. In each high court, there shall be one or more benches constituted by the
chief justice of supreme court.
c. In each high court, there shall be one or more benches constituted by the
chief justice of high court.
d. In each high court, there shall be one or more benches constituted by any
justice of high court.
3. If registrar believes that books and papers of the company may be destroyed,
mutilated, altered, falsified or secreted, the registrar may:
a. After obtaining permission from SECP, seize such books and papers.
b. On his own, seize such books and papers.
c. After obtaining permission form magistrate, seize such books and papers.
d. After obtaining permission from magistrate, authorize any person below
the rank of assistant registrar to seize books and papers.

4. Books and papers seized by registrar shall be returned as soon as possible but:
a. Not later than 30 days.

b. Not later than 30 days initially, and with the permission of magistrate
retention period may be extended for another 15 days.
c. Not later than 30 days initially, and with the permission of commission
d. Not later than 30 days initially, and with the permission of commission
MCQs (Answers)
1. c 2. c 3. a 4. d

1. Section 2, 6, 7, 19, 77, 87 to 96
2. Public Offering Regulations, 2017
3. Chapter I to V & First Schedule

Securities Act 2015
1. Definitions
Customer [(Section 2 (xv)]

“Customer” means a person on whose behalf a regulated person carries on any
regulated securities activity and includes any person commonly known as an investor;
Director [(Section 2 (xxi)]

“Director”, in relation to a company, includes any person occupying in relation to the
position of a director, by whatever name called;
Expert [(Section 2 (xxii)]

“Expert” includes banker, securities advisor, engineer, valuer, accountant, lawyer and
any other person whose profession gives authority to a statement made by him;
Issuer [(Section 2 (xxvii)]

“Issuer”, in relation to securities, means any person who has issued or proposes to
issue a security;
Listed company [(Section 2 (xxix)]

“Listed company” means a public company, body corporate or other entity any of whose
securities are listed on securities exchange;
Listed securities [(Section 2 (xxx)]

“Listed securities” means securities listed on the securities exchange;
Offeror [(Section 2 (xxxvi)]

“Offeror” means any person or entity holding, directly or indirectly, such number of
securities as may be prescribed and offers such securities for sale to the public or
invites any other person to make subscription for such an offer and includes an issuer;
Principal [(Section 2 (xxxviii)]

“Principal”, in relation to a representative, means the regulated person which the
representative represents;
Prospectus [(Section 2 (xli)]

“Prospectus” means any document described or issued as a prospectus and includes
any document, notice, circular, material, advertisement, offer for sale document,

publication or other invitation offering to the public (or any section of the public) or
inviting offers from the public for the subscription or purchase of any securities of a
company, body corporate or entity, other than deposits invited by a bank and certificate
of investments and certificate of deposits issued by non-banking finance companies;
Securities [(Section 2 (lii)]

“securities” in the case of listed instruments includes
(a) shares and stock of a company (shares);
(b) any instrument creating or acknowledging indebtedness which is issued or proposed

to be issued by a company including, in particular, debentures, debenture stock, loan
stock, bonds, notes, commercial paper, sukuk or any other debt securities of a
company, whether constituting a charge on the assets of the company or not (debt
securities);
(c) loan stock, bonds, sukuk and other instruments creating or acknowledging
indebtedness by or on behalf of a government, central bank or public authority
(Government and public debt securities);
(d) modoraba certificates, participation term certificates and term finance certificates;
(e) any right (whether conferred by warrant or otherwise) to subscribe for shares or debt
securities (warrants);
(f) any option to acquire or dispose of any other security (options);
(g) units in a collective investment scheme, including units in or securities of a trust fund
(whether open-ended or closed end);
(h) the rights under any depository receipt in respect of shares, debt securities and
warrants (custodian receipts); and
(i) any other instrument notified by the Commission to be securities for the purpose of
this Act, but does not include
(a) futures contracts;

(b) bills of exchange;
(c) promissory notes; and
(d) certificates of deposit;

Securities exchange [(Section 2 (lv)]
“Securities exchange” means a public company that is licensed by the Commission as a
securities exchange under section 5;
Shelf registration [(Section 2 (lx)]

“Shelf registration” means an arrangement that allows a single offering document
allowing companies to make multiple offerings as disclosed in the offering document
within a prescribed time and subject to prescribed conditions;
Substantial shareholder [(Section 2 (lxii)]

“Substantial shareholder”, in relation to a company, means a person who has an
interest in shares of a company
(a) the nominal value of which is equal to or more than ten per cent of the issued share
capital of the company; or
(b) which enables the person to exercise or control the exercise of ten per cent or more
of the voting power at a general meeting of the company;
Trading right entitlement certificate [(Section 2 (lxiv)]

“Trading right entitlement certificate” or “TRE certificate” means a trading right
entitlement certificate as defined in the Stock Exchanges (Corporatization,
Demutualization and Integration) Act, 2012 (XV of 2012);
“Trading right entitlement certificate holder” or “TRE certificate holder”

[(Section 2 (lxv)]
“Trading right entitlement certificate holder” or “TRE certificate holder” means a trading
right entitlement certificate holder as defined in the Stock Exchanges (Corporatization,
Demutualization and Integration) Act, 2012 (XV of 2012);
2. Duties of securities exchange. (Section 6)
Duties: (a) a fair, transparent and efficient market in securities (b) to manage the
risk relating to business and operations
(1) It shall be the duty of a securities exchange to ensure
(a) a fair, transparent and efficient market in securities that are traded on its securities
market; and
(b) that risks associated with its business and operations are managed prudently.

For discharging duties the securities exchange to act in the public interest, and to
ensure the interest of investor, customer and public at large prevails in case of
conflicts with the interest of Securities Exchange, TRE certificate holder,
shareholders, board of directors and management
(2) In discharging its duty under sub-section (1), a securities exchange shall
(a) act in the public interest; and
(b) ensure that the interest of investor, customer and public at large prevails where it
conflicts with the interest of the securities exchange, TRE certificate holder,
shareholders, board of directors and management.
A securities exchange to operate its facilities as per regulations

(3) A securities exchange shall operate its facilities in accordance with the regulations
made under section 7 and approved under section 8.
A securities exchange to regulate the operations, practice and conduct of TRE

certificate holders and their representatives and other employees as per
regulations, policies, procedures and practices
(4) A securities exchange shall regulate the operations, standards of practice and
business conduct of TRE certificate holder and their representatives and other
employees in accordance with the regulations, policies, procedures and practices of the
securities exchange.
A securities exchange to ensure that the listed companies and its designated
officers to comply with the regulations, policies, procedures and practices
(5) A securities exchange shall ensure that the listed companies and its designated
officers shall comply with the regulations, policies, procedures and practices of the
A securities exchange shall preserve confidentiality of all information in its

possession, only to disclose if required in writing by the Commission or by
clearing house under regulations or required under law or ordered by the Court
(6) A securities exchange shall preserve confidentiality with regard to all information in
its possession concerning TRE certificate holder and their customers, except that such
information may be disclosed by the securities exchange as and when required in
writing to do so by the Commission or by a clearing house under its regulations or
required under any law for the time being in force, or it is ordered to do so by the Court.

Efficient procedures and arrangements to address customer’s complaints
(7) A securities exchange shall have efficient procedures and arrangements for
addressing customer’s complaints.
To prevent inside trading and market abuse

(8) The securities exchange shall put in place such structural provisions, operating
procedures, and surveillance techniques to detect and prevent insider trading and
market abuse.
A securities exchange shall immediately notify the Commission if it becomes

aware (a) financial irregularity, (b) any TRE certificate holder is unable to comply
with regulation, (c) financial irregularity relating to TRE certificate holder (d) Non-
compliance or violation of this Act or any regulations by a listed company
(9) A securities exchange shall immediately notify the Commission if it becomes aware
(a) of a financial irregularity or other matter which in the opinion of the securities
exchange may indicate that its financial integrity is in question or that it is unable to
meet its legal obligations;
(b) that any TRE certificate holder is unable to comply with any regulation of the
securities exchange or any financial resources regulation;
(c) of a financial irregularity or other matter which in the opinion of the securities
exchange may indicate that the financial standing or integrity of a TRE certificate holder
is in question or that a TRE certificate holder may not be able to meet his legal
obligations; or
(d) of non-compliance or violation by a company listed on such securities exchange of

any provisions of this Act or any regulations made by there under.
To notify the Commission of any action taken against a TRE certificate holder or
listed company
(10) A securities exchange shall immediately notify the Commission of any action taken
against a TRE certificate holder or listed company.
Securities Exchange to maintain equipped premises, automated system and

business continuity plan
(11) A securities exchange shall at all times provide and maintain, for the conduct of its
business,

(a) adequate and properly equipped premises;
(b) automated systems with adequate capacity, facilities to meet contingencies or

emergencies, physical, virtual and logical security arrangements and technical support; and
(c) comprehensive business continuity plan.
It shall ensure that appointment or removal of CEO and Chief regularity officer is made
with the prior approval of the Commission
(12) A securities exchange shall ensure that appointment or removal of chief executive
officer and chief regulatory officers by whatever names called is made with the prior
approval of the Commission.
3. Regulations of securities exchange (Section 7)
The regulations of securities exchange may make provisions relating to certain

different areas of operation
(1) Without limiting the generality of sub-section (4) of section 5, the regulations of a
securities exchange, may make provision
(a) with respect to the constitution, powers and functions of the governing body of the
securities exchange and matters relating to disciplining of the directors, officers and
functionaries of the securities exchange;
(b) with respect to the development of risk management system, including control
measures and safeguards with respect to large exposures, and matters connected
therewith;
(c) with respect to the risk management procedures, misalignment of incentives and
conflict of interest between securities broker, its employees and its clients;
(d) with respect to disclosure of conflict of interest by directors and employees of the
securities exchanges;
(e) with respect to the eligibility, admittance and conduct of TRE certificate holder;
(f) with respect to listing and delisting of securities;
(g) with respect to the appointment and functioning of internal auditors;

(h) expulsion, suspension or disciplining of TRE certificate holder for conduct
inconsistent with just and equitable principles in connection with trading in securities or
for a contravention of the regulations of the securities exchange;
(i) with respect to liquidation of the assets of securities brokers deposited or in control of
the securities exchange to fulfill customer claims arising there from;
(j) with respect to the terms and conditions under which securities may be traded;
(k) with respect to operational, information system and regulatory audit of securities
broker and securities exchange including the regular assessment of trading systems as
well as the assessment of reliability and effectiveness of all risk management and
control measures implemented by securities exchange;
(l) with respect to the mechanism for inspection and provisions relating to audit and
compliance of securities brokers including cooperation with other licensed entities for
violation of any requirement of this Act or any rules or regulations made there under;
(m) with respect to proprietary trading by TRE certificate holder;
(n) effective surveillance and monitoring to detect and prevent insider trading and
market abuse practices;
(o) with respect to fair and properly supervised trading practices;
(p) with respect to the prohibition of trading in securities by securities brokers or their
representatives, either directly or indirectly, for their own accounts or accounts of
associated persons, except in accordance with the regulations of the securities
exchange;
(q) with respect to measures to prevent manipulation, market rigging and artificial
markets in its securities market;
(r) for preventing the excessive use of credit by way of initial or maintenance margin in
respect of the purchase or carrying of any securities;
(s) for effective know your customer and customer due diligence policies and
procedures and other matters ancillary to anti-money laundering;
(t) the recording and publishing of details of trading;

(u) the financial integrity of securities broker such as to provide reasonable assurance
that all obligations out of the trading in securities on the securities market of that
securities exchange will be met;
(v) with respect to the fee and charges payable for facilities and services provided by
the securities exchange;
(w) with respect to brokerage and other charges by securities brokers;
(x) with respect to the equitable allocation of the dues, fees and other charges levied by
the securities exchange;
(y) with respect to settlement of claims and dispute resolution between any of its
securities brokers, or between securities brokers and their customers, or between
securities brokers and their accredited representatives or between accredited
representative(s) of securities brokers and their customers, in relation to any market
contract of the securities exchange;
(z) where a securities broker appears to be unable or likely to become unable, to meet
his obligations in respect of one or more market contracts, to enable action to be taken
to close out his position in relation to all unsettled market contracts to which he is a
party, including facilitation in default proceedings; and
(aa) generally for the carrying on the business of the securities exchange with due
regard to the interests and protection of the investing public.
The regulations to apply to the securities exchange, securities brokers and listed
company
(2) The regulations of a securities exchange shall apply to
(a) the securities exchange, its employees and its directors and the securities exchange
shall be responsible to ensure their compliance with such regulations;
(b) securities brokers, their representatives and other employees and the securities
broker shall be responsible to ensure their compliance with such regulations; and
(c) listed company.

Securities Exchange to place the regulations on website of the Securities
Exchange for a period of not less than seven days for eliciting public opinion,
Commission may waive this condition in cases requiring immediate
implementation
(3) The power to make regulations conferred by this section on the securities exchange
shall be subject to the condition of previous placement of the said regulations on the
website of the securities exchange along with the rationale for eliciting public opinion
thereon for a period of not less than seven days starting from the date of its placement
on the website:
Provided that, on an application by the securities exchange, the Commission may waive
the condition of eliciting public opinion in cases requiring the immediate implementation
of a proposed regulation(s).
The Commission by notice require the securities exchange to make regulations

specified in the notice or to amend regulations as specified in the notice within
specified period
(4) The Commission may, by notice in writing served on a securities exchange, require it
(a) to make regulations specified in the notice within the period specified; or
(b) to amend regulations referred to in the notice in the manner and within the period
specified in the notice.
In case of non-compliance of the requirement of sub-section 4 by the securities

exchange within the specified period, Commission may make or amend the
regulations specified in the notice
(5) Where the Commission is satisfied that a securities exchange has not complied with
a requirement referred to in sub-section (4) within the period specified in the notice, the
Commission may make or amend the regulations specified in the notice instead of the
securities exchange and the regulations so made or amended shall be deemed to have
been made or amended by the securities exchange and shall have effect accordingly.

4. Listing of securities (Section 19)
An application for listing of securities in the specified form and manner be

submitted to the Securities Exchange with a copy the Commission
(1) A company that wishes to have its securities listed on a securities exchange shall
submit an application in the form and manner specified by the securities exchange, and
send a copy of the application to the Commission.
If securities exchange is satisfied, list the securities for trading on the securities
exchange
(2) Upon receipt of an application under sub-section (1), the securities exchange may, if
it is satisfied after making such inquiry as it may consider necessary that the applicant
fulfils the conditions prescribed in this behalf, list the securities for trading on the
In case of refusal, the Commission may on the petition by the applicant or on its
own motion direct the securities exchange to list the securities
(3) Where a securities exchange refuses to list a company’s securities, the Commission
may, either on petition by the applicant made within the prescribed time or on its own
motion, direct the securities exchange to list the securities.
After listing the securities, if it is found that the application is deficient or the
company has failed to comply with any prescribed condition or requirement and
not in the public interest, the Commission or securities exchange may by order
require the company to correct the deficient or comply with the requirements
within specified time or revoke the listing
(4) Where, after the listing of securities, the Commission or securities exchange finds
that the application is deficient in any material respect or that the company has failed to
comply with any prescribed condition or requirement and that the continued listing of the
securities would not be in the public interest, the Commission or the securities
exchange may, by order, either require the company to correct the deficiency or comply
with the prescribed condition or requirement within the time specified in the order or
revoke the listing.
Securities may be delisted on the application of company, application may be

denied or grant on such conditions as appear necessary
(5) A company’s listed securities may be delisted on application by the company to the
securities exchange which may deny the application or grant it on such conditions as
appear necessary or appropriate for the protection of customers.

In case of refusal of delisting, Commission on the petition by the company, may
direct the security exchange to delist the security
(6) Where a securities exchange refuses to delist a company’s securities, the
Commission may, on petition by the company made within the specified time, direct the
securities exchange to delist the security.
Commission or a securities exchange may, if in the interest of an orderly market

or in public interest, suspend with the recorded reasons for a period not
exceeding sixty days and may extend the suspension from time to time with the
stated reasons
(7) The Commission or a securities exchange may, if it considers it to be in the
interests of an orderly market or in the public interest so to do, by order recording the
reasons, suspend for a period not exceeding sixty days the trading of any listed
securities and may, from time to time, for stated reasons and in the said manner extend
the suspension for such further periods as it deems appropriate.
No listing shall be refused and no listing shall be revoked without giving an

opportunity to be heard
(8) No application for the listing of securities shall be refused and no listing shall be
revoked, without first giving the relevant company an opportunity to be heard
5. Short selling (Section 77)
A person not to sell listed securities that he or his principal does not own either
for his own account or for the account of another person
(1) Except in accordance with regulations, a person shall not sell any listed securities
that he or his principal does not own either for his own account or for the account of
another person.
A person who sells the securities includes a person who (a) sells the securities;
(b) purports to sell the securities; (c) offers to sell the securities; (d) holds himself
out as entitled to sell the securities; or (e) instructs a securities broker to sell the
securities.
(2) For the purposes of sub-section (1), a person who sells securities includes a person
who
(a) sells the securities;
(b) purports to sell the securities;
(c) offers to sell the securities;
(d) holds himself out as entitled to sell the securities; or
(e) instructs a securities broker to sell the securities.

A person is treated as owning securities in certain circumstances
(3) For the purposes of sub-section (1), a person is treated as owning securities only if
(a) he or his agent is legally entitled to the securities;
(b) he has purchased the securities or has entered into an unconditional contract to
purchase the securities, even if he does not yet have title to them;
(c) he owns other securities convertible into or exchangeable for the securities and has
tendered the other securities for conversion or exchange;
(d) he has an option to acquire the securities and has exercised the option; or
(e) he has rights or warrants to subscribe to the securities and has exercised the rights
or warrants.
6. Offer of securities (Section 87)
This part relates to offer of securities other than Government debt securities
(1) This Part applies to offer of securities other than Government debt securities.
No public offer unless prospectus is approved by the Commission

(2) Subject to the provisions of this Part, no person shall make a public offer of
securities unless the issuer or offeror of the securities has submitted for approval to the
Commission, and the Commission has approved prospectus.
No public offer of securities if its directors, sponsors or substantial shareholders

have been holding the office of the directors, or have been sponsors or
substantial shareholders in any company, which (a) had been declared defaulter,
(b) whose TRE certificate has been cancelled or forfeited (c) has been de-listed by
a securities exchange due to non-compliance of its regulations: Commission may
grant relaxation upon reasons to be recorded
(3) No person shall make a public offer of securities if such person or its directors,
sponsors or substantial shareholders have been holding the office of the directors, or
have been sponsors or substantial shareholders in any company, which—
(a) had been declared defaulter by the securities exchange; or

(b) whose TRE certificate has been cancelled or forfeited by the securities exchange; or
(c) which has been de-listed by a securities exchange due to non-compliance of its
regulations:
Provided that the Commission may grant relaxation upon reasons to be recorded, and
rectification of cause leading to such de-listing.
Sub-section 2 not to apply to certain securities

(4) Sub-section (2) shall not apply—
(a) to securities offered by the State Bank of Pakistan;
(b) where the securities are offered in connection with a private offering or private
placement; and
(c) issue of shares of a subsidiary to the members of a listed holding company by way
of specie dividend or any other distribution in the prescribed manner.
(d) where the securities are offered by the issuer to—
(i) members or employees of the issuer; or
(ii) members of the families of any such members or employees; and
(e) where the securities are shares and are offered as bonus shares to any or all of the
members of the issuer;
Approved prospectus by the Commission be valid for sixty days or longer period
approved by the Commission in case of shelf registration, supplement to the
prospectus to contain updated disclosures, Commission may extend the time
period of sixty days provided for approval of the prospectus by reasons to be
recorded in writing
(5) A prospectus approved by the Commission shall be valid for a period of sixty days
from the date of such approval or for a longer period approved by the Commission in
case of shelf registration, provided that the supplement to the prospectus for each
offering shall contain updated disclosures:
Provided that the time period of sixty days provided for approval of prospectus may be
extended by the Commission by reasons to be recorded in writing.
Commission not liable to any action in damages suffered as a result or approval

of the prospectus
(6) The Commission shall not be liable to any action in damages suffered as a result of
any prospectus approved by the Commission.
False or fictitious application—an offence

(7) A person who, in connection with a public offer of securities, makes a false or
fictitious application, commits an offence.

Commission to forfeit money paid or payable in respect of an offering application
under sub-section 7 after an opportunity of being heard
(8) The Commission may, where it considers it appropriate, forfeit any or all of the
money paid or payable in respect of an offering application under sub-section (7) after
providing the applicant a reasonable opportunity of being heard.
7. Approval, issue, circulation and publication of prospectus (Section 88)
No prospectus including shelf-prospectus or supplement to the prospectus to

issue, circulate and publish until approved by the Commission
(1) No person shall issue, circulate and publish prospectus including a shelf-prospectus
or supplement to the prospectus until it has been approved by the Commission which
approval may be subject to such conditions or restrictions as the Commission considers
necessary.
Time frame for submission of prospectus to the Commission for approval

(2) The issuer or the offeror, as the case may be, shall, not less than twenty one days
before the proposed date of publication of the prospectus, submit a copy to the
Commission for approval.
In case of public offer in Pakistan, prospectus be published in full text or in

abridged from as prescribed at least in one Urdu and one English daily
newspaper
(3) Where a public offer of securities is to be made in Pakistan the issuer or offeror, as
the case may be, shall publish the prospectus in full text or in such abridged form as
may be prescribe, at least in one Urdu and one English daily newspaper.
Time frame for publishing the prospectus before the commencement of public
subscription
(4) The prospectus shall not be published in the newspapers less than seven days or
more than thirty days before the commencement of the public subscription.
Sufficient number of copies to make available free of charge at certain places

from the date of publication till the closing of the subscription
(5) The issuer or the offerer, as the case may be, shall make available sufficient number
of copies of the prospectus approved by the Commission under subsection (1), free of
charge, from the date of its publication in the newspapers till the closing of the
subscription at the registered office of the issuer, with all the securities exchanges of the

country, with all the bankers to the issue, the concerned share registrar, the concerned
ballotter and the concerned credit rating agency, if any.
The prospectus in full text and the shares subscription form be uploaded on the
website from the date of its publication till the closing of the subscription.
(6) The prospectus in full text and the shares subscription form shall be uploaded on the
website of the issuer and shall remain there from the date of its publication in the
newspapers till the closing of the subscription.
No person to issue advertisement announcing a public offer for which prospectus

is required unless a prospectus is published and the advertisement gives an
address in Pakistan from which it can be obtained.
(7) No person shall issue, circulate, publish, telecast or broadcast without the prior
written approval of the Commission, an advertisement, other than a prospectus,
announcing a public offer of securities for which a prospectus is required under this Part
unless a prospectus has been published and the advertisement gives an address in
Pakistan from which it can be obtained.
Terms of clauses in the prospectus not to vary except subject to the approval of
the Commission
(8) The issuer or offeror, as the case may be, shall not, at any time, vary the terms of
the clauses stipulated in its prospectus except subject to the approval of the
Commission.
Supplement to the prospectus can be issued inviting for subscription of the

securities earlier offered through shelf-prospectus if (a) it has obtained prior
written approval of the Commission (b) the last supplement be published within
such time period to be prescribed by the Commission (c) the aggregate amount
of the offer or issue not to exceed the total issue size as mentioned in the shelf-
prospectus.
(9) Where an issuer or the offeror, as the case may be, can issue, circulate and publish
supplement to the prospectus inviting the general public for subscription of the
security(ies) earlier offered to the public through shelf-prospectus, provided that—
(a) it has obtained prior written approval of the Commission for its issue, circulation and
publication;
(b) the last supplement should be published within such time period to be prescribed by
the Commission; and

(c) the aggregate amount of the offer or issue floated in tranches should not exceed the
total issue size as mentioned in the shelf-prospectus.
Copy of each supplement be filed with the registrar on or before the date of issue
(10) A copy of each supplement to the prospectus shall be filed with the registrar on or
before the date of its issue, circulation or publication.
Supplement to the prospectus to contain such information as specified by the

Commission, be published in those newspapers in which the shelf-prospectus
has been issued
(11) A supplement to the prospectus shall contain such information as may be
prescribed by the Commission and it shall be published in atleast all those newspapers
in which the shelf-prospectus has been published.
If misstatement or omission from supplement to the prospectus, section 92 and

93 to apply
(12) In case of any misstatement or omission of material information from the
supplement to the prospectus, sections 92 and 93 shall apply mutatis mutandis.
8. Contents of prospectus (Section 89)
The Commission may approve a prospectus if it contains such information and reports
as may be prescribed.
9. Expert to be independent (Section 90)
Expert not to engage or interested in the information or in the management of the

company
A prospectus shall not contain a statement purporting to be made by an expert unless
the expert is a person who is not, and has not been, engaged or interested in the
formation or promotion or in the management of the company.
Written consent of the expert to the issue of prospectus—a statement in the

prospectus that the expert has given and has not withdrawn his consent
10. Expert’s consent to issue of prospectus containing statement made by him

(Section 91)
A prospectus that contains a statement purporting to be made by an expert or to be
based on a statement made by an expert shall not be issued, circulated or published
unless—

(a) the expert has given, his written consent to the issue of the prospectus with the
statement in the form and context in which it is included; and
(b) there appears in the prospectus a statement that the expert has given and has not
withdrawn his consent.
11. Criminal liability for defective prospectus (Section 92)
A person commits an offence if prospectus is misleading, incorrect, untrue or

deceptive statement or omits information
A person commits an offence, who—
(a) makes a misleading, incorrect, untrue or deceptive statement in a prospectus; or
(b) omits information or a statement from a prospectus that this Act or any rule or
regulation made under this Act, requires to be included in the prospectus.
12. Compensation for false or misleading prospectus (Section 93)
Offeror, Issuer or person who signed the prospectus shall be liable to pay
compensation to any person who acquires shares in reliance upon the
prospectus which is misleading and suffers loss,
Every offeror, issuer, director of an offeror or issuer or any person who has signed the
prospectus shall be liable to pay compensation to any person who acquires any of the
securities, in reliance upon the prospectus, to which the prospectus relates and suffers
loss in respect of them as a result of any incorrect, untrue or misleading statement in
the prospectus or the omission from it of any matter required to be included by or under
section 89.
13. Abridged prospectus (Section 94)
Conditions for publication of an abridged version of a prospectus instead of a

prospectus
Notwithstanding the provisions of this Part, a public offer of securities may be made by
publication of an abridged version of a prospectus (an abridged prospectus), instead of
a prospectus, if—
(a) a prospectus is prepared in accordance with section 89 and the abridged prospectus
is prepared in accordance with such requirements as may be prescribed;

(b) a copy each of the prospectus and the abridged prospectus is submitted to the
Commission at the same time for approval and both the prospectus and the abridged
prospectus are approved by the Commission;
(c) sufficient copies of the prospectus are made available for collection at the times and
places specified in section 88 and the abridged prospectus; and
(d) the public offer complies with such other requirements as may be prescribed.
14. Issue of securities outside Pakistan (Section 95)
Prior approval of Commission is required for issuance or listing of securities

outside Pakistan
No company shall, except with the prior approval of the Commission, issue or list any
securities outside Pakistan.
15. Disclosure of price sensitive information (Section 96)
Listed Company to disclose price sensitive information which would material to

an investor’s investment decision, such information (a) enables the public to
appraise the position of the company (b) avoids the creation or continuation of a
false market or (c) be expected to materially affect the market activity and the
price
(1) Except as provided in sub-section (4), a listed company shall disclose to the public
forthwith any price sensitive information relating to the company or its subsidiaries
which has come to the company’s knowledge and which would be material to an
investor’s investment decision, including information that—
(a) is necessary to enable the public to appraise the position of the company and its
subsidiaries;
(b) is necessary to avoid the creation or continuation of a false market in the securities
of the company (false market being defined as an uninformed market or one which is
based on incomplete information); or
(c) might reasonably be expected to materially affect the market activity and the price of
its securities.

Listed company to ensure that disseminating information provides access by the
holders of the securities equally, timely and effectively
(2) A listed company shall ensure that, when disclosing information pursuant to clauses
(a) to (c) of sub-section (1), the means it uses for disseminating information are such
that it equally, timely and effectively provides access to such information by the holders
of the securities of the company and investors.
Listed company to make the information public in a manner that would be likely
to bring it to the attention of the investor
(3) A listed company meets the requirements of sub-section (1) when information that
affects the market or a sector of the market generally is made public in a manner that
would be likely to bring it to the attention of persons who commonly invest in securities
of a kind whose price or value might be affected by the information.
A listed company may delay the public disclosure of price sensitive information
with certain conditions
(4) A listed company may, under its own responsibility, delay the public disclosure of
price sensitive information such as not to prejudice its legitimate interests, provided
that—
(a) such delay would not be likely to mislead public investors;
(b) any person receiving the information owes the listed company a duty of
confidentiality, regardless of whether such duty is based on law, regulations, articles of
association or contract; and
(c) the listed company is able to ensure the confidentiality of that information.
If a listed company is also traded or listed on a foreign market or exchange, the

listed company shall ensure that where information is released to those markets
the same information is released in Pakistan simultaneously
(5) In the event that a listed company is also traded or listed on a foreign market or
exchange, the listed company shall ensure that where information is released to those
markets the same information is released in Pakistan simultaneously.
Listed company to comply with such further obligations and requirements as

prescribed
(6) Without limiting the generality of this section the listed company shall also comply
with such further obligations and requirements as may be prescribed.

Public Offering Regulations, 2017
Chapter I to V & First Schedule
Public Offering Regulations, 2017
CHAPTER I
PRELIMINARY
1. Short title, commencement and applicability.__ (1) These Regulations shall be

called the Public Offering Regulations, 2017.
(2) They shall come into force at once.
(3) They shall apply to:

(i) a public limited company or body corporate proposing to issue securities to the
general public;
(ii) an Offeror who intends to offer securities to the general public; and
(iii) sponsors of the public limited company or body corporate, the Consultants to the
Issue, the Underwriter, the Book Runner, the Designated Institution, the Banker to an
Issue, Investment Agent and Issuing and Paying Agent.
(4) These Regulations shall not apply to an Issue by Special Purpose Vehicle or body
corporate specifically setup by the Federal Government or any provincial Government
for the purpose of issue of any debt security, under any other law or offer of securities
as mentioned under sub-section (4) of section 87 of the Act.
2. Definitions.__ (1) In these Regulations, unless there is anything repugnant in the

subject or context, –
(i) “Abridged Prospectus” means condensed form of the Prospectus containing such
information and disclosures as mentioned in Second Schedule to these Regulations;
(ii) “Act” means the Securities Act, 2015 (III of 2015);
(iii) “Application Supported by Blocked Amount” means an application for subscription to

shares or bidding, where money is blocked in the applicant’s or bidder’s respective bank
account;

(iv) “Banker to an Issue” means a scheduled bank licensed by the Commission as a
Banker to an Issue.;
1[(v) “Bid” in case of shares means an intention to buy a specified number of shares at
a specified price;]
2[(va) “Bid” in case of debt securities means an intention to buy a specified number of
debt securities for a particular profit rate/spread;]
(vi) “Bid Amount or Bid Money” 3[in case of shares] means the amount equal to the
product of the number of shares bid for and the Bid Price;
4[(via) “Bid Amount or Bid Money” in case of debt securities means the amount equal to
the product of the number of debt securities bid for and the face value of debt security;]
(vii) “Bid Collection Center” includes designated offices of the Book Runner, specified
branches of any scheduled bank and offices of any other institution specified by the
Book Runner where bids are received and processed;
(viii) “Bidder” means an investor who makes a bid for subscription of 5[securities] in the
Book Building process;
(ix) “Bidding Period” means the period during which bids for subscription of 6[securities]
are received;
(x) “Bid Price” means the price at which Bid is made for a specified number of shares;
7[(xi) “Book Building” in case of shares means a process undertaken to elicit demand
for shares under which bids are collected from the Bidders and a book is built which
depicts demand for the shares at different price levels;]
8[(xia) “Book Building” in case of debt securities means a process undertaken to elicit
demand for debt securities under which bids are collected from the Bidders and a book
is built which depicts demand for the debt securities at different profit rate/spread
levels;]
(xii) “Book Building Portion” means the part of the total Issue which has been allocated
for subscription through Book Building;
(xiii) “Book Building System” means an online electronic system operated by the
Designated Institution for conducting Book Building;

(xiv) “Book Runner” means a securities broker or a scheduled bank who holds a valid
license from the Commission to act as an Underwriter;
(xv) “Centralized E-PO System (CES)” means a centralized system through which
applications for subscription of securities through Public Offering can be made
electronically through internet, Automated Teller Machines (ATM) and mobile phones;
(xvi) “Commercial Paper” means an unsecured debt security with a maturity of not less
than 30 days and not more than one year;
9[(xvia) Companies Act” means Companies Act, 2017 (XIX of 2017);]
(xvii) “Consultants to the Issue” means any person licensed by the Commission to act
as a Consultant to the Issue 10[, which may also be called Lead Manager or Advisor];
(xviii) “Consolidated Bid” mean a bid which is fully or partially beneficially owned by
persons other than the one named therein.
11[(xviiia) “Cut off profit rate/spread” mean the profit rate/spread of a debt security
determined on the basis of book building process.]
(xix) “Debt Securities Trustee” means a person licensed by the Commission under the
Act and appointed as a Debt Securities Trustee by an Issuer of debt security;
(xx) “Designated Institution” includes the securities exchange, central depository and
clearing company to provide Book Building System;
(xxi) “Dutch Auction Method” means the method through which Strike Price is
determined by arranging all the Bids in descending order based on the Bids Prices
along with the number of shares and the cumulative number of shares bid for. The
Strike Price is determined by lowering the Bid Price to the extent that the total number
of securities offered under the Book Building Portion are subscribed;
(xxii) “Financial Institution” means a financial institution as defined in the 12[Companies

Act];
(xxiii) “Floor Price” in case of book building means the minimum price per share set by
the Issuer in consultation with Consultant to an Issue;
13[(xxiiia) “Green Field Project” includes a project that is being newly built by the Issuer
and has not commenced commercial production/operation;]

14[(xxiiib) “Government Guaranteed Sukuk” means Sukuk issued by any corporation or
body corporate owned and controlled by the Federal Government and such Sukuk is
guaranteed by the Federal Government;]
(xxiv) “Green Shoe Option” means a pre-determined number of securities to be issued

by the Issuer in case of over-subscription of the issue;
(xxv) “Initial Public Offering or IPO” means first time offer of securities to the general
public;
(xxvi) “Institutional Investors” means any of the following entities:
(a) A financial institution;
(b) A company as defined in the 15[Companies Act];
(c) An insurance company established under the Insurance Ordinance, 2000;
(d) A securities broker;
(e) A fund established as Collective Investment Scheme under the Non-Banking

Finance Companies and Notified Entities Regulations, 2008;
(f) A fund established as Voluntary Pension Scheme under the Voluntary Pension
System Rules, 2005;
(g) A private fund established under Private Fund Regulations, 2015;
(h) Any employee’s fund established for beneficial of employees;
(i) Any other fund established under any special enactment; 16[ ]
17[(ia) A foreign company or any other foreign legal person; and]
(j) Any other entity as specified by the Commission.
(xxvii) “Investment Agent” means an 18[ ] Institution licensed by the Commission as a

Debt Securities Trustee and appointed by the Issuer through execution of investment
agency agreement. The Investment Agent shall be responsible to facilitate issue and

sale of Sukuk and other Shariah compliant securities under these Regulations and to
safeguard interest of the holders of Sukuk and other Shariah compliant securities;
(xxviii) “Issue” means public offer of securities to the general public or a class thereof by
an Issuer;
19[(xxix) “Issuer” in relation to securities, means any person including a company, a

Special Purpose Vehicle and a body corporate who has issued or proposes to issue a
security and includes an Offeror;]
(xxx) “Issuing and Paying Agent” means a Financial Institution appointed by an Issuer of
Commercial Paper under these Regulations as an Issuing and Paying Agent;
20[omitted]
21[(xxxii) “Limit Bid” in case of shares mean a bid placed by the bidder at a maximum
price that he is willing to pay for shares under the Book Building method;]
22[(xxxiib) Limit bid in case of debt security means a bid placed by the bidder for a
particular profit rate/spread under the book building method.]
23[(xxxiia) “Limited Liability Partnership (LLP)” means a partnership registered under

the Limited Liability Partnership Act, 2017;]
(xxxiii) “Minimum Bid Size” means the Bid Amount equal to 24[one] million rupees under
the Book Building method;
(xxxiv) “Offeror” means any person or entity holding, directly or indirectly, such number
of securities as prescribed in these Regulations and offers such securities for sale to the
public or invites any other person to make subscription for such an offer and includes an
Issuer;
(xxxv) “Offer Size” means the total number of securities offered for sale comprising
allocation to the Book Building Portion and allocation to the retail portion, if any,
excluding pre-IPO placement;
25[(xxxva) “Offer Price” means the price per share at which shares are offered to the
general public in case of Fixed Price method and the retail investors in case of the Book
Building and set by the Issuer in consultation with the Consultant to the Issue;]

(xxxvi) “Offer for Sale” means an offer of securities for sale to the general public by an
Offeror;
26[(xxxvii) “Price Band” in case of Book Building means Floor Price with an upper limit
of 40% above the Floor Price, allowing Bidder to make Bid at Floor Price or within the
Price Band;]
27[Omitted]
(xxxviii) “Prospectus” includes any document, notice, circular, material, advertisement,

offer for sale document, publication or other invitation offering to the public (or any
section of the public) or inviting offers from the public for the subscription or purchase of
any securities of a company, body corporate or entity, other than deposits invited by a
bank and certificate of investments and certificate of deposits issued by non-banking
finance companies;
(xxxix) “Public Offer” means offer of securities by an Issuer including an offer to the
general public or a section of the public but does not include Private Offer or Private
Placement;
(xl) “Regulations” means the Public Offering Regulations, 2017;
(xli) “Related Employees” mean such employees of the Issuer, the Offeror, the Book
Runner, the Underwriters, and the Consultants to the Issue, who are involved in the
Issue or the Offer for Sale;
(xlii) “Retail Investor” means an investor who bids for a security or make an application
for subscription of a security out of the offer size allocated to the general public;
28[(xliia) “Reverse Dutch Auction Method” means the method through which the cutoff
profit rate/spread is determined by arranging all the profit rate/spread in an ascending
order along with the number of debt securities and the cumulative number of debt
securities bid for at each profit rate/spread. The cut off profit rate/spread is determined
by increasing the profit rate/spread to the extent that the total number of debt securities
offered under the Book Building portion are subscribed.]
(xliii) “securities” means shares and debt securities
(xliv) “Schedule” means a schedule to these Regulations;

(xlv) “Secondary Public Offering” means offer of securities to the general public
subsequent to IPO;
29[(xlvi) “Shariah Advisor” means an individual, a Limited Liability Partnership (LLP) or a

company who/that meets the fit and proper standards specified by the Commission;]
30[(xlvii) “Shariah Compliant Security” means a security structured on the basis of any
of the Shariah concepts;]
31[(xlviia) “Shariah concepts” for the purpose of these Regulations includes Ijarah,
Musharakah, Murabahah, Modaraba, Salam and any other concept allowed by the
Shariah Advisor;]
32[(xlviii) “Shariah certificate” for the purpose of these Regulations means a Shariah
pronouncement, a fatwa or Shariah opinion signed by Shariah Advisor in such form and
manner as notified by the Commission from time to time;]
33[(xlix) “Shelf Registration” means an arrangement that allows the Issuer to make
offering in multiple tranches through a single offering document i.e. Prospectus;]
(l) “Supplement to the shelf prospectus” means an updated condensed form of the full
prospectus for inviting public subscription through subsequent tranche(s);
(li) “Step Bid” 34[in case of shares] means a series of Limit Bids at increasing prices
provided that Bid Amount of any step is not less than 35[one] million rupees under the
Book Building method;
36[(lia) “Step Bid” in case of debt securities means a series of Limit Bids at different
profit rates/spreads provided that Bid Amount of any step is not less than one million
rupees under the Book Building method;]
(lii) “Strike Price” means the price per share determined on the basis of Book Building
process;
37[(liii) “Special Purpose Vehicle (SPV)” for the purpose of these regulations means a
public limited company or a body corporate registered with the Commission under the
Companies (Asset Backed Securitization) Rules, 1999;]
(liv) “Sponsor” means:

(a) a person who has contributed initial capital in the issuing company or has the right to
appoint majority of the directors on the board of the issuing company directly or
indirectly;
(b) A person who replaces the person referred to in clause (a) above; and
(c) A person or group of persons who has control of the issuing company whether
directly or indirectly.
(lv) “Sukuk” means an instrument of equal value representing undivided share 38[ ] in
ownership of the identified tangible assets, usufruct and services or in the ownership of
the assets of particular projects or special investment activity;
39[(lvi) “Tranche” means offer of a certain portion out of the total issue size as disclosed
in the shelf prospectus; and]
(lvii) “Valuation Section” means a section in the prospectus containing the justifications
given by the Consultant to the Issue in support of the offer price or Floor Price set by the
Issuer 40[and disclosure of post issue Free Float as number of shares as well as in
percentage].
(2) Words and expressions used but not defined in these Regulations shall have the
same meaning as are assigned to them in the Act, the 41[Companies Act], or the
CHAPTER II
GENERAL CONDITIONS
3. General Conditions for Public Offer of Securities.__ (1) An Issuer shall make a
public offer of securities, subject to the following general conditions, namely. – 42
43[omitted]
44[(i) the Issuer has obtained approval from its Board of Directors relating to Public
Offering.]
(ii) the Issuer has profitable track record for at least 2 preceding financial years from its
core business activities;

45[Provided that in case of non-compliance with profitability criteria, the sponsors of the
Issuer shall retain at least 51% of the post issue paid-up capital till the company reports
net profit after tax for two consecutive financial years including profit from its core
business activities;
Provided further that the issuer shall: (a) submit a business plan to turnaround the
company into a profitable venture; and (b) disclose the following on the cover page of
the Prospectus in bold language:
“This is a loss-making company. The risks associated with loss making companies are
comparatively much higher than profitable companies. The prospective investor should,
therefore, be aware of the risk of investing in such companies and should make the
decision to invest only after careful due diligence. It is advisable to consult any
independent investment advisor before making any investment.”]
(iii) not less than 51% of the shares of the issuer are held by same persons for at least 2
preceding financial years;
46[Provided that this clause shall not apply in case of new issuance of shares by the
issuer.
47[Provided further that the above clauses (ii) and (iii) shall not apply in case of: (i)
Green Field Project; (ii) public offering of debt security whose debt servicing is
guaranteed from the Government. (iii) public offering of debt security by multilateral
agencies. (iv) public offering of debt security by state owned enterprises having entity
rating of BBB+ and above.]
Provided further that Commission may consider relaxing any of the above clauses (ii) to
(iii) in case of privatization of government owned entities by privatization Commission
through capital markets.]
48[(iv) In case of green field project, following criteria shall be applicable:
a. Sponsors’ contribution, in the form of equity in a green field project at the time of IPO,
shall not be less than 51% of the entire equity and shall be retained till the
commencement of commercial production.
b. In case the project requires debt financing, in addition to equity funding, financial
close shall be mandatory.

c. Successful business track record of sponsors preferably running a listed
company/ies, manufacturing/industrial units etc. considering various parameters such
as operational profitability, operating cash flows, EPS and dividend payout etc.
d. Experience and skills of the Management to run the proposed project.
e. If required, Engineering, Procurement and Construction (EPC) contract shall be in

place.
f. Land for the project, if required is acquired by the Issuer and the same is in the name
of the issuer.
g. the sponsors of the Issuer shall retain at least 51% of the post issue paid-up capital
till the company reports net profit after tax for two consecutive financial years including
profit from its core business activities.
h. The Issuer shall disclose the following on the cover page of the Prospectus in bold
language:
“It is a green field project. The risks associated with the green field project are much
higher than a project that has commenced commercial production/operations. The
prospective investor should, therefore, be aware of the risk of investing in such projects
and should make the decision to invest only after careful due diligence. It is advisable to
consult any independent investment advisor before making any investment.”]
(v) The securities shall be issued in book-entry form only;]
(2) No Issuer shall make a public offer if
(i) the Issuer, its sponsors, promoters, substantial shareholders 49[and ] directors 50[ ]
have over dues or defaults, irrespective of the amount, appearing in the report obtained
from the credit information bureau; and
51[Provided that the clause (i) above shall not apply to the nominee director of the
government and financial institution/ creditor.
Provided further that the clause (i) shall not apply to independent director.]

(ii) the Issuer or its directors, sponsors or substantial shareholders have been holding
the office of the directors, or have been sponsors or substantial shareholders in any
company,
(a) which had been declared defaulter by the securities exchange or futures exchange;
or
(b) whose TRE certificate has been cancelled or forfeited by the securities exchange; or
(c) which has been de-listed by the securities exchange due to non-compliance of its
regulations.
Provided that Commission may grant relaxation upon reasons to be recorded, and
rectification of cause leading to such delisting
52[(3) The Issuer shall appoint Consultant to the Issue, Book Runner, Underwriter,
Balloter and Share Registrar and Banker to an Issue, where required, through separate
agreements in writing.
Provided that appointment of consultant to the Issue shall not be mandatory in case of
initial public offering of other class of shares by listed companies.
Provided further that the Commission may consider relaxing the appointment of
Consultant to the Issue in case of privatization of government owned entities by
Privatization Commission through capital markets
Provided further, that in case the Consultant to the Issue is not appointed by the Issuer
than a specific disclosure in this context shall be made on the Cover page of the
Prospectus.
Provided further, that scheduled bank, investment finance service license holder and
development financial institution can only act as Consultant to the Issue in case of
public offering of debt securities.
Provided further, that sub-regulation (3) shall not apply to the extent if the issue or offer
of securities is made simultaneously both in domestic and international markets.]
(4) The Consultant to the Issue, Book Runner and Underwriter and their associates
shall not publish any research report by whatever name called in respect of the Issuer

or Issue from the date of their appointment as Consultant to the Issue, Book Runner
and Underwriter 53[till] the date of allotment of securities to the general public 54[:
Provided that information memorandum and other marketing material may be prepared
and shared with the prospective investors through private arrangement.]
(5) Subsequent to the underwriting agreement with the issuer, the underwriter to the
issue may enter into separate agreements with other underwriters 55[duly licensed by
the Commission], with the consent of the issuer 56[and any such arrangement shall be
disclosed in the Prospectus in case of fixed price method and in supplement to the
Prospectus in case of book building method].
(6) The Consultant to the Issue may enter into separate agreements with any expert for
performance of its duties;
Provided that the said agreement(s) shall not absolve the Consultant to the Issue from
its obligations as specified in these Regulations and the agreement entered with the
Issuer.
(7) Issuer shall ensure that Centralized E-PO System (CES) is available for the general
public
(8) The Issuer 57[itself or] through its Consultant to the Issue, 58[if any] shall submit an
application along with draft prospectus for listing of its securities to the securities
exchange under section 19 of the Act read with the relevant regulations of the securities
exchange. The copy of the said application along with draft prospectus shall also be
sent to the Commission for its record;
(9) The Issuer while submitting draft prospectus to the securities exchange shall comply
with the following requirements with respect to the contents of the draft prospectus and
advertisement;
59[(i) Prepare the draft prospectus as per the format and disclosures prescribed in First
Schedule and should be translated into Urdu in addition to English version.]
(ii) Prepare the draft abridge prospectus, if any, 60[as per the disclosures] prescribed in
Second Schedule.
(iii) Prepare the draft advertisement, if any, 61[as per the disclosures] prescribed in
Third Schedule.

(iv) Prepare the draft supplement to the prospectus, in case of shelf registration, 62[as
per the disclosures] prescribed in Fourth Schedule.
63[(9a) The Issuer and Consultant to the Issue, if any shall ensure that all applicable
disclosures as prescribed under First Schedule are made in the draft prospectus.
(9b) In case, some disclosures are not applicable to a particular issue, the Issuer and
Consultant to the Issue, if any shall report the same to the Commission along with
rationale.]
(10) The language of the draft prospectus should be simple, plain, clear, precise and
easily understandable.
(11) The draft prospectus as submitted by the Issuer shall be placed by the securities
exchange on its website for a period of seven working days and the same shall be
notified by the securities exchange to its members, for seeking public comments. The
draft prospectus shall also be placed on the website of the Issuer and Consultant to the
Issue 64[, if any];
(12) The securities exchange shall ensure that all comments received on the draft
prospectus have been incorporated and suitably addressed by the Consultant to the
Issue and the Issuer to the satisfaction of the securities exchange.
65[Provided that in case where Consultant to the Issue is not appointed, the Issuer,
itself shall address the comments received on the draft prospectus.]
66[(13) While processing any application submitted by the Issuer
67[itself or through its] Consultant to the Issue
68[, if any] under section 19 of the Act for its approval, the securities exchange, in
addition to any other requirements, shall examine the proposed issue from various
aspects including eligibility requirements and suitability of the Issuer or security for
listing considering the interest of general public and its benefits to the capital market. In
order to assess the suitability aspect, the securities exchange shall ensure that the
Issuer has made all such disclosures as are necessary to comply with the requirements
of sub-section 4(a) of Section 20 read with Section 22 of the SECP Act, 1997. The
securities exchange may ask for any additional information as required.]

69[(14) The securities exchange shall communicate its approval or reasons for rejection
of the application to the Consultant to the Issue, if any, the Issuer and the Commission.]
70[(15) After obtaining the approval of the securities exchange, the Issuer itself or
through its Consultant to the Issue, if any, shall submit an application along with the
documents prescribed in Eight Schedule to the Commission for its approval under
section 87 and 88 of the Act. The application shall be accompanied by the processing
fee as prescribed in Fifth Schedule.]
71[(15a) Any change in the Prospectus subsequent to its approval by the Commission
and prior to its publication, may be made only with prior written approval of the
securities exchange and the Commission.”; and
(15b) Any change in the Prospectus subsequent to its publication, may be made only
with the prior written approval of the securities exchange and the Commission and such
change shall be disseminated to the public through publication of addendum to the
Prospectus in at least all those newspapers, websites in which the Prospectus has been
published earlier]
72[(16) In case application for listing is refused by the securities exchange, the Issuer
itself or through its Consultant to the Issue, if any, may file a petition before the
Commission within thirty days of such refusal.]
(17) A company may issue securities outside Pakistan subject 73[to] prior approval of
the Commission under section 95 of the Act and payment of non-refundable fee of one
million rupees and submission of such documents as prescribed in Sixth Schedule.
(18) Securities of any company established outside Pakistan can be offered for sale to
the public under sections 87 and 88 of the Act read with 74[section 446 and 447 of the
Companies Act].
Provided such foreign company is compliant with the provision of Part 75[XII of the
Companies Act], these Regulations and meets requirements of regulations of the
securities exchange for listing of companies and securities.
76[(19) The securities subscription form on the format provided in Seventh Schedule
shall be made part of the Prospectus.

77[(20) the Issuer, the Consultant to the Issue, the Underwriter, the Book Runner and
the Designated institution shall maintain record of the issue for a period of at least ten
years from the closing of the public subscription.]
(21) The offer size and allocation of capital to the general public shall be as per the
requirements of the relevant regulations of the securities exchange.]
CHAPTER III
Public Offer of Shares
4. Methods for public offer of shares: An Issuer including an Offeror may make public
offer of shares as per any of the method given below:
(1) Fixed Price Method: Under the fixed price method, the offer price is set by the
Issuer in consultation with the Consultant to the Issue.
(2) Book Building Method: Book building is a mechanism of price discovery of shares
through 78[Bidders who make Bids at Floor Price or within the Price Band]. Bids
received are listed in descending order of price evidencing demand at different price
levels 79[at Floor Price or within the Price Band] . A Strike Price is arrived at through
Dutch Auction Method.
5. Conditions for public offer of Shares.- An Issuer shall comply with the following
conditions, namely,-
(1) The sponsors of the Issuer shall retain their entire shareholding in the company for a
period of not less than twelve months from the last date for public subscription or in
case of green field projects from the date of commencement of commercial operations
or production by the company, whichever is later;
(2) The sponsors of the Issuer shall retain not less than twenty five percent of the paid
up capital of the company for not less than three financial years from the last date for
the public subscription or, in case of green field projects, from the date of
commencement of commercial operations or production by the company, whichever is
later;
80[Provided that sub regulation (1) and (2) shall not apply in case of: (i) secondary
public offering; and (ii) initial public offering of other class of shares by listed
companies.]

(3) The shares of the sponsors mentioned at (1) and (2) above shall be kept
unencumbered in a blocked account with central depository;
(4) Subject to compliance with sub-regulation (1) and (2) above, and with the approval
of the securities exchange, the sponsors of the Issuer may sell their shareholding
through block-sale to any other person who shall be deemed sponsor for the purposes
of these Regulations. Any such person and its directors, sponsors and substantial
shareholders shall comply with conditions as stipulated in sub regulation (1) of
regulation 3 above;
(5) The issuer may allot shares on account of preferential allocation to its employees at
the same price at which shares are offered to the general public;
(6) In case of public offer of shares for a green field project, balancing, modernization
and replacement or expansion,-
(i) The public offer of shares shall be in accordance with the financial plan approved by
the board of directors of the Issuer. The financial plan shall be disclosed in the
prospectus along with rationale for variations, if any;
81[omitted]
CHAPTER IV
Offer of shares through fixed price method
6. Conditions for public offer of shares through fixed price method.- In addition to
the conditions as mentioned at regulation 5 above, an Issuer shall comply with the
following conditions, namely,-
82[(1) The Issuer shall decide the offer price in consultation with the Consultant to the
Issue, if any. The Consultant to the Issue, if any or the Issuer shall provide explanations
in support of the offer price under a separate section titled as “Valuation Section” of the
prospectus.]
(2) The public offer under the fixed price method shall be fully underwritten.
(3) An issuer shall issue shares to the general public at the price not higher than the
price at which the shares were issued to investor during the period of six months prior to
the date of public subscription.

83[(4) After approval of the prospectus by the Commission, the Issuer itself or through
its Consultant to the Issue, if any shall seek from the securities exchange the dates for
the publication of prospectus and the subscription period.]
(5) Non-compliance with any of the condition imposed by the securities exchange and
the Commission while granting approval for issuance, circulation and publication of the
prospectus shall be considered as violation of the prospectus and the Act.
84[(6) After inserting the dates of the subscription period, the copy of the approved
Prospectus shall be placed on the website of the Issuer, the securities exchange and
the Consultant to the Issue, if any.]
(7) The prospectus shall be issued, circulated and published not less than seven days
and not more than thirty days before the commencement of the subscription period for
the retail portion of the Issue.
(8) The prospectus or abridged prospectus, as approved by the Commission shall be

published in at least one English and one Urdu Newspaper.
(9) The general public shall submit application for the subscription of shares to the
Banker to an Issue either in physical form or electronically. The application shall be duly
accompanied by a crossed cheque or demand draft or pay order in the name of the
Issuer or evidence of direct debit of subscription money from the applicant’s bank
account or blocking of the subscription money in the applicant’s bank account.
(10) Within 85[10 working] days of the close of public subscription period or such
shorter period of time as may be specified by the Commission from time to time, the
shares shall be allotted and issued against the accepted and successful applications
and the subscription money of the unsuccessful applicants shall be unblocked/
refunded.
86[(11) The company whose shares are offered through fixed price method shall not be
provisionally listed.]

CHAPTER V
Public Offer of shares through book building method
7. Conditions for offer of shares through Book Building: In addition to the

conditions as mentioned at regulation 5 above, the Issuer shall comply with the
following conditions, namely:
(1) The offer Size is not less than twenty five million shares and two hundred fifty million
rupees or such higher number of shares and amount as may be specified by the
Commission from time to time;
(2) The company whose shares are issued through Book Building shall not be
provisionally listed.
(3) Maximum seventy-five percent of the offer size is allocated to book building portion
and the remaining minimum twenty-five percent to the retail investors. The retail portion
of the public offer shall be fully underwritten.
87[Omitted]
Provided further that the Commission may allow undertaking of book building process
and subscription by retail investors simultaneously, subject to the condition that the
Consultant to the Issue, the Book Builder and the Issuer shall satisfy the Commission
that the necessary arrangements in terms of IT infrastructure, underwriting for the retail
portion, distribution network, etc are in place for simultaneously undertaking book
building and retail subscription;
(4) The bidders may be allowed to place bids for hundred percent of the offer size and
the strike price shall be the price at which the hundred percent of the offer size is
subscribed. However, the successful bidders would be allotted and issued only seventy-
five percent of the offer size and the remaining twenty five percent would be offered to
the retail investors. The bidders shall give an undertaking along with the application that
they would subscribe to the unsubscribed shares, if any, by the retail investors and their
remaining bid money would remain deposited/ blocked till allotment of unsubscribed
shares by the retail investors, if any, to them on pro-rata basis. In case the retail portion
is fully subscribed, the bid money shall be immediately refunded or unblocked. In this
case, the retail portion may not be underwritten.
88[Omitted]

(6) Book building portion shall be 89[credit] underwritten by one or more book runners.
(7) The Issuer and the Consultant to the Issue 90[, if any] shall provide names and
Unique Identification Numbers of all their associates, if any, to the Book Runner; at least
three working days before the commencement of the Bidding Period. The book runner
shall enter the names and UIN number of associates of the Issuer, the associates of the
Consultant to the Issue and its associates, if any in the book building system in order to
ensure compliance with these regulations.
91[(8) The associates of the Issuer as disclosed in the Prospectus shall not in
aggregate make bids in excess of ten percent of the shares offered though Book
Building.]
92[(9) The associates of the Consultant to the Issue and Book Runner shall not in
aggregate make bids in excess of 93[ten percent] of the shares offered through Book
Building:
Provided that sub-regulation (9) shall not apply to such associates of the Consultant to
the Issue and the Book Runner that are Financial Institutions 94[,] Mutual Funds 95[and
Insurance Companies].]
(10) The consultant to the issue shall ensure that the issuer has entered into a tripartite
agreement in writing with the Designated Institution and the Book Runner. The said
agreement shall specify inter-alia, the rights, privileges, duties, responsibilities and
obligations of each party to the agreement and shall provide a clause on dispute
resolution mechanism among the parties to the agreement.
96[Provided that in case where there is no consultant to the Issue, the Issuer itself shall
ensure that tripartite agreements contain the required content as prescribed above.]
(11) The Issuer, the Consultant to the Issue, the Book Runner, the Underwriter and the
Designated Institution shall maintain record of the issue for a period of at least ten years
from the closing of the public subscription.
8. Procedure for public offer of shares through Book Building.- The following
procedure shall be adopted for book building process:
97[(1) The Issuer shall decide the Floor Price and the Price Band in consultation with
the Consultant to the Issue, if any.

Provided that the upper limit of the Price Band should not be more than 40% of the
Floor Price. The Floor Price and its determination shall be disclosed under a separate
section titled as “Valuation Section” in the prospectus. The Consultant to the Issue, if
any or the Issuer shall Justify the Floor price.]
(2) After approval of the prospectus by the Commission, the 98[Issuer itself or through
its] Consultant to the Issue 99[, if any] shall seek from the securities exchange the dates
for the publication of prospectus and the Bidding Period.
(3) Non-compliance with any of the condition imposed by the securities exchange and
the Commission while granting approval for issue, circulation and publication of the
prospectus shall be considered as violation of the prospectus and the Act.
(4) The prospectus and abridged prospectus as approved by the Commission shall be
published in at least one English and one Urdu Newspaper.
(5) The prospectus shall be issued, circulated and published not less than seven days
and not more than thirty days before the commencement of the subscription period for
the retail portion of the Issue.
100[(6) After inserting the dates of the Bidding period, the copy of the approved
Prospectus shall be placed on the website of the Issuer, the Book Runner, the
Designated Institution, the securities exchange and the Consultant to the Issue, if any.]
101[6(a) The Issuer shall publish the Prospectus at least one day before the
commencement of registration of bidders by the Book Runner]
(7) The bidding shall be conducted electronically through the System in a fair, efficient
and transparent manner.
102[(8) Save as provided in regulation 3(15)(a) and (b), Floor price shall not be revised
once the Prospectus has been approved by the Commission.]
(9) The registration of bidders by the Book Runner shall commence at least three
working days before the start of the bidding period and shall remain open till 03:00 pm
on the last date of the bidding period.
(10) The Book Runner shall at least establish bid collection centers in Islamabad, all the
provincial capitals, Azad Kashmir and Gilgit/ Baltistan. The Book Runner may also
designate any of the Bankers to an Issue as its collection agent.

(11) The Book Runner shall provide a mechanism for registration of the bidders at the
bid collection centers and collection agents.
(12) The Book Runner shall make all necessary arrangements for receiving bids and the
instruments evidencing payment of the bid money
(13) The Book Runner shall put in place a mechanism to enter details including the
maximum Bid amount of the Bidders into the System
(14) Once details of the bidders are entered into the System, the Designated Institution
shall assign and communicate password and user ID to the bidders enabling them to
directly place the bid and revise the bid 103[ ], if required.
104[(15)The bidding shall remain open for at least one working day.]
(16) The Book Building process shall be considered as cancelled if the Issuer does not
receive bids for the number of shares allocated under the Book Building Portion and the
same shall be immediately intimated by the Book Runner and Consultant to the Issue to
the Commission, the securities exchange, the Designated Institution and the bankers to
an issue. All the Bankers to an Issue shall be advised by the book runner for refund/
unblocking of the Bid Money of the bidders. The margin money shall be unblocked/
refunded to the bidders, where required, immediately but not later than three working
days of the closing of the Bidding Period;
(17) The Book Building process shall be considered as cancelled if the total number of
bids received is less than 105[forty]; and
(18) The Book-Runner shall ensure that subscription money received against the bids
accepted shall not be released to the Issuer by the Banker to the Book Building Portion
until:
(i) credit 106[ ] of all shares allocated under the retail portion of the issue; and
(ii) issuance of NOC by the securities exchange in case the company is already listed or
formal trading of the company in case of new listing.
9. Procedure for bidding.__ The following procedure shall be followed for bidding:
(1) Bids can be placed 107[as] ‘Limit 108[Bid]’ or a ‘Step Bid’ either electronically or with
the bid collection centers and collection agent.

Provided that the minimum size of a limit bid and that of any step, in case of a Step Bid,
shall not be less than 109[one] million rupees;
(2) The book runner shall vet the bid applications and accept only such bid applications
that are duly filled in and supported by a crossed cheque or demand draft or pay order
or confirmation from the Banker to an Issue that Bid Money has been electronically
debited from the bidder account or is blocked in the bidder account;
(3) In case of institutional investors, the book runner may accept bid applications with
minimum 25% margin money.
110[Provided that the book runner may waive this margin requirement for institutional
investors at its own discretion.]
(4) On receipt of bid application, the Book Runner shall enter the Bid into the System
and issue to the bidder an electronic receipt bearing name of the book runner, name of
the bidding center, date and time;
(5) The bidding shall commence from 09:00 a.m. and close at 05:00 p.m. on all days of
the Bidding Period. The bids shall be collected and entered into the system by the
Book-Runner till 05:00 p.m. on the last day of the bidding period;
(6) The bidders can revise the bids upward till 05:00 p.m. on the last day of the Bidding
Period;
(7) The Book Runner may reject any bid application for reasons to be recorded in
writing provided the reason of rejection is disclosed to such bidder. Decision of the Book
Runner shall not be challengeable by the bidder.
(8) The Designated Institution shall through the System display live throughout the
bidding period an order book in descending order showing demand for shares at various
prices and the accumulated number of shares bid for along with percentage of the total
shares offered. The order book should also show the revised bids. The order book shall
be accessible through websites of the Designated Institution, Book Runner, the
Consultant to the Issue, securities exchange, clearing house and the central depository;
(9) At the close of the bidding period, Strike Price shall be determined on the basis of
Dutch Auction Method by the Designated Institution;

(10) The bidders who have made bids at prices above the Strike Price shall be allotted
shares at the Strike Price;
(11) In case the bids received are sufficient to allot the total number of shares offered
for sale under the Book Building Portion, the allotment shall be made on the basis of
highest bid priority that is the bid made at the highest price shall be considered first for
allotment of shares.
111[(12)In case all the bids made above the Strike Price are accommodated and shares
are still available for allotment, such available shares shall be allotted against the bids
made at the Strike Price on proportionate basis]
(13) The bidders who have made bids below the Strike Price shall not qualify for
allotment of securities and the book runner shall intimate their respective banks for
unblocking their Bid Money within one working day of the close of the bidding period;
(14) Within one day of the closing of the bidding period, successful bidders shall be
intimated the Strike Price and the number of shares provisionally allotted to each of
them;
(15) The bid money of bidders who have undertaken to subscribe the unsubscribed
retail portion shall remain deposited or blocked till allotment of unsubscribed retail
portion, if any, to them on pro-rata basis; and
(16) The successful bidders shall be issued securities only after the end of the public
subscription, in the form of book-entry to be credited in their respective accounts. All the
bidders shall, therefore, provide number of their accounts in the bid application; and
(17) The Designated Institution shall continue to display on its website, the data
pertaining to the Book Building and determination of the Strike Price for a period of at
least three working days after closure of the bidding period.
10. Restrictions: (1) The biding period shall not be extended except in extra ordinary
circumstances like closure of banks, failure of System, etc. In such case, Book Runner
shall apply to the Commission for extension in the Bidding Period after obtaining NOC
from securities exchange. In case extension is granted, the same shall be disseminated
through publication in all those newspapers where the prospectus was published and
the website of the issuer, consultant to the issue, book runner, the designated institution
and the securities exchange.

(2) The bidder shall not 112[ ]–
(i) 113[make] bid below the Floor Price 114[and above the upper limit of the Price
Band];
(ii) 115[make] bid for more than 116[10%] of the shares allocated under the Book
Building Portion 117[ ];
(iii) subject to the provision of clause (i) above, 118[make] bid with price variation of
more than 10% of the prevailing indicative strike price or such other percentage as may
be specified by the Commission;
(iv) 119[make] consolidated bid;
(v) 120[make more] than one bid either severally or jointly;
(vi) 121[make downward revision both in terms of Bid Price and Bid Volume;
Provided that in case of upward revision of the Bid Price, the number of shares Bid for
i.e. Bid Volume may be adjusted ensuring that the bid amount or bid money remains the
same; or]
122[(vii) withdraw the Bid.]
(3) No person shall take part in the book building process, directly or indirectly severally
or jointly in any manner or engage in any act or practice which create a false and
misleading appearance of active bidding for raising or depressing strike price in the
book building process.
11. Procedure for allocation of shares to retail investors.__ The following procedure
shall be followed for allocation of shares to retail investors:
123[(1) Within three working days of the closing of the Bidding Period, the Issuer itself
or through its Consultant to the Issue, if any shall publish supplement to the prospectus
in those newspapers in which the prospectus was earlier published and also
disseminate the same to the securities exchange, banker to an issue and underwriter.
For this clause the term supplement to the prospectus means information relating to
results of the Book Building or any other information prescribed below that is important
for the retail investors.]

124[(1a) The supplement to the prospectus shall contain the information relating to the
Strike Price, the Offer Price, names of the underwriters of the retail portion of the Issue
if any, underwriting commission bifurcating as take up commission or any other,
commitment by the successful bidders for subscribing the undersubscribed retail portion
in case of hundred percent book building, category wise breakup of the successful
bidders along with number of shares allocated to them, dates of public subscription and
such other information as specified by the Commission.]
(2) The issuer may offer the shares to the retail investors at a certain discount to the
strike price.
(3) The general public shall submit application for the subscription of shares to the
Banker to an Issue either in physical form or electronically. The application shall be duly
accompanied by a crossed cheque or demand draft or pay order in the name of the
Issuer or evidence of direct debit of subscription money from the applicant’s bank
account or blocking of the subscription money in the applicant’s bank account.
(4) Within 10 125[working] days of the close of public subscription period or such
shorter period of time as may be specified by the Commission from time to time, the
shares shall be allotted and issued against the accepted and successful applications
and the subscription money of the unsuccessful applicants shall be unblocked/
refunded.
(5) In case retail portion of the issue, if any, remains unsubscribed, the unsubscribed
shares shall either be taken up by the underwriters or allotted to successful bidders at
the strike price determined in the book building process on pro-rata basis.
FIRST SCHEDULE
FORMAT OF THE PROSPECTUS169[, DISCLOSURE REQUIREMENTS] AND
REPORTS TO BE SET OUT THERE IN
Section 1
Format of the prospectus
1. Cover Page:
(i) The following statement should appear on the upper most top in bold capital letters: -

“ADVICE FOR INVESTORS
INVESTORS ARE STRONGLY ADVISED IN THEIR OWN INTEREST TO

CAREFULLY READ THE CONTENTS OF THIS PROSPECTUS, ESPECIALLY THE
RISK FACTORS GIVEN AT PART --- BEFORE MAKING ANY INVESTMENT
DECISION.
SUBMISSION OF FALSE & FICTITIOUS APPLICATIONS IS PROHIBITED AND

SUCH APPLICATIONS’ MONEY MAY BE FORFEITED UNDER SECTION 87(8) OF
THE SECURITIES ACT, 2015.”
(ia.) The following additional statement should appear in case of offering of equity
securities: -
"Investment in equity securities involves a degree of risk and investors should not invest
any funds in this offer unless they can afford to take the risk of losing their investment.
Investors are advised to read the risk factors carefully before taking an investment
decision in this offering. For taking an investment decision, investors must rely on the
examination of the issuer and the offer including the risks involved as disclosed at Part
…… of the Prospectus
.
(ii) The following statement should appear in case of offer of shares through book
building after the above-mentioned statement: -
“ADVICE FOR INSTITUTIONAL INVESTORS AND HIGH NET WORTH INDIVIDUAL

INVESTORS
A SINGLE INVESTOR CANNOT SUBMIT MORE THAN ONE BIDDING APPLICATION

EXCEPT IN THE CASE OF UPWARD REVISION OF BID. IF AN INVESTOR SUBMITS
MORE THAN ONE BIDDING APPLICATION THEN ALL SUCH APPLICATIONS SHALL
BE SUBJECT TO REJECTION.
SUBMISSION OF CONSOLIDATED BIDIS PROHIBITED UNDER THESE

REGULATIONS. A BID APPLICATION WHICH IS BENEFICIALLY OWNED (FULLY
OR PARTIALLY) BY PERSONS OTHER THAN THE ONE NAMED THEREIN SHALL
BE DEEMED TO BE A CONSOLIDATED BID.
PLEASE NOTE THAT A SUPPLEMENT TO THE PROSPECTUS SHALL BE

PUBLISHED WITHIN THREE WORKING DAYS OF THE CLOSING OF THE BIDDING
PERIOD WHICH SHALL CONTAIN INFORMATION RELATING TO THE STRIKE

PRICE, THE OFFER PRICE, NAMES OF THE UNDERWRITERS OF THE RETAIL
PORTION OF THE ISSUE IF ANY, UNDERWRITING COMMISSION, BIFURCATING
AS TAKE UP COMMISSION OR ANY OTHER, COMMITMENT BY THE SUCCESSFUL
BIDDERS FOR SUBSCRIBING THE UNDERSUBSCRIBED RETAIL PORTION IN
CASE OF HUNDRED PERCENT BOOK BUILDING, CATEGORY WISE BREAKUP OF
THE SUCCESSFUL BIDDERS ALONG WITH NUMBER OF SHARES ALLOCATED TO
THEM, DATES OF PUBLIC SUBSCRIPTION AND SUCH OTHER INFORMATION AS
SPECIFIED BY THE COMMISSION”
(iii) Full name of the Issuer (including previous name, if any) along with logo/monogram,
if any, date and place of its incorporation, incorporation number, address of its
registered and corporate offices, telephone number, contact person, website address
and e-mail address.
(iv) In case of offer for sale, full Name of the Offeror and the following statement:
“THIS IS NOT A PROSPECTUS BY [… NAME OF THE ISSUER …] (THE

“COMPANY”) BUT AN OFFER FOR SALE BY THE [… NAME OF THE OFFEROR …]
(THE “OFFEROR”) FOR OFFER FOR SALE OF SHARES HELD IN THE COMPANY.”
(v) Total issue size i.e. the number of securities to be offered with breakup of pre-IPO
preferential allocation, if any; allocation to book building portion, in case of book
building; allocation to retail investors; and allocation under the green shoe option, if any.
In case of shelf registration, the total approved issue size, the size of the current tranche
and the time period of shelf registration.
(vi) The offer price, the Floor Price, the Price Band, in case of book building.
(vii) In case of book building, dates for registration of the bidders; dates of bidding i.e
the bidding period along with timing.
(viii) Date(s) of public subscription along with timing in bold letters.
(ix) Name of the consultants to the issue, the book runner in case of book building, the
bankers to an issue; web link along with timing through which e-application for
subscription of securities can be submitted; and names of the underwriters.
(x) Disclosure regarding availability of Centralized E-PO System and any other
additional electronic system offered for Public Subscription.

(xi) Contact details of at least two relevant persons of the Issuer, consultants to the
issue, Book Runner and Underwriter, if any, well conversant with the issue who could
be contacted by the investors, if needed.
(xii) Website addresses from where the prospectus, application and bidding forms can
be downloaded.
(xiii) Date of publication of the prospectus.
(xix) Name of the securities exchange where the specified securities are proposed to be
listed.
(xv) Additional information in case of issuance of debt securities:
(a) Entity and instrument rating,

(b) name of the rating agency;
(c) tenor;
(d) name of Shariah advisor/Shariah board (in case of issuance of Islamic debt security
or such other securities which are claimed to be Shariah compliant); and
(e) rate of profit.
2. Inside Cover Page:

(i) The following undertaking by the Issuer:
“WE …….THE CHIEF EXECUTIVE OFFICER AND……. CHIEF FINANCIAL OFFICER

……CERTIFY THAT;
(1) THE PROSPECTUS CONTAINS ALL INFORMATION WITH REGARD TO THE

ISSUER AND THE ISSUE, WHICH IS MATERIAL IN THE CONTEXT OF THE ISSUE
AND NOTHING HAS BEEN CONCEALED IN THIS RESPECT;
(2) THE INFORMATION CONTAINED IN THE PROSPECTUS IS TRUE AND

CORRECT TO THE BEST OF THEIR KNOWLEDGE AND BELIEF;
(3) THE OPINIONS AND INTENTIONS EXPRESSED THEREIN ARE HONESTLY

HELD;
(4) THERE ARE NO OTHER FACTS, THE OMISSION OF WHICH MAKES THE
PROSPECTUS AS A WHOLE OR ANY PART THEREOF MISLEADING; AND

(5) ALL REQUIREMENTS OF THE SECURITIES ACT, 2015; THE DISCLOSURES IN
PUBLIC OFFERING REGULATIONS, 2017 FOR PREPARATION OF PROSPECTUS,
RELATING TO APPROVAL AND DISCLOSURES HAVE BEEN FULFILLED.”
(6) NO CHARGES, FEE, EXPENSES, PAYMENTS ETC. HAVE BEEN COMMITTED

TO BE PAID TO ANY PERSON IN RELATION TO THIS PUBLIC OFFERING EXCEPT
FOR THOSE AS DISCLOSED IN THIS PROSPECTUS.
For and on behalf of (… Name of the Issuer…and in case of an offer for sale …
name of the offeror…)
……..Sd-………… ……….Sd-………
Name of the Chief Executive Name of the Chief Financial

Officer Officer”
(ii) In case of book building, a supplement to the prospectus as per the following format.
“Supplement to the Prospectus
This Supplement is being published pursuant to Public Offering Regulations 2017 and in
continuation of the prospectus of …(name of the Issuer)… earlier published on MM DD,
YYYY.
Name of the Issuer…

Floor Price
Strike Price
Issue Price
Price Band]
Underwriters to the retail portion of
Names
the issue
of underwriter
Number of shares
Amount (Rs. in million)
if any S. No. underwritten
(i)
(ii)
Total
3. Glossary of Technical Terms: All the technical terms and abbreviations used in
prospectus must be defined in the glossary.

4. Definitions
5. Table of Content
6. Part I: Approvals, Consents and Listing on the Securities Exchange:

(i) Approval of the Commission: Detail of approvals obtained from the Commission
with respect to the issue. The detail must contain nature of approval, date of approval
and relevant law.
(ii) The following disclaimer must be given:
“DISCLAIMER:
It must be distinctly understood that in giving this approval, SECP does not take any
responsibility for the financial soundness of the Company and any of its schemes stated
herein or for the correctness of any of the statements made or opinions expressed with
regards to them by the Company in this Prospectus.
SECP has not evaluated quality of the issue and its approval for issue, circulation and
publication of the Prospectus should not be construed as any commitment of the same.
The public/investors should conduct their own independent due diligence and analysis
regarding the quality of the issue before subscribing.”
(iii) Approval of the Securities Exchange: Detail of approvals obtained from the
Securities Exchange with respect to the issue. The detail must contain nature of
approval, date of approval and relevant law.
(iv) The following disclaimer must be given:
“DISCLAIMER:
(a) The Securities Exchange has not evaluated the quality of the issue and its approval
should not be construed as any commitment of the same. The public/investors should
conduct their own independent investigation and analysis regarding the quality of the
issue before subscribing.
(b) The publication of this document does not represent solicitation by the Securities
Exchange.
(c) The contents of this document does not constitute an invitation to invest in shares or
subscribe for any securities or other financial instrument by the Securities Exchange,

nor should it or any part of it form the basis of, or be relied upon in any connection with
any contract or commitment whatsoever of the Exchange.
(d) It is clarified that information in this Prospectus should not be construed as advice on
any particular matter by the Securities Exchange and must not be treated as a
substitute for specific advice.
(e) The Securities Exchange disclaims any liability whatsoever for any loss however
arising from or in reliance upon this document to any one, arising from any reason,
including, but not limited to, inaccuracies, incompleteness and/or mistakes, for decisions
and/or actions taken, based on this document.
(f) The Securities Exchange neither takes responsibility for the correctness of contents
of this document nor the ability of the Company to fulfill its obligations there under.
(g) Advice from a suitably qualified professional should always be sought by investors in
relation to any particular investment.”
(v) Statement on filing of the Prospectus and other documents like experts’ reports and
contracts mentioned in the Prospectus, with the registrar of companies.
(vi) Statement about making of application to the securities exchange for listing of the
Issuer, in case of unlisted entity.
7. Part II Summary of the Prospectus:
This part shall contain summary of the following information, as applicable:

i. Primary business of the Issuer and the industry in which it operates;
ii. Names of the Sponsors;
iii. Salient features of the Issue including method of offering;
iv. Pre and Post issue shareholding of the Sponsors;
v. Principal purpose of the Issue and utilization of the proceeds;
vi. Cross-reference to the Part--- titled Valuation Section.
vii. Qualified opinion, if any given by the auditor during the last three financial years.
viii. Following details as per the financial statements for last 3 years or for a shorter
period if 3 years of commencement of business are not completed in tabular format and
cross reference to the Part ------ titled financial information:
a. Share capital;
b. Net Worth;
c. Revenue;

d. Gross margin
e. Operating margin
f. Profit after tax;
g. Profit after tax margin;
h. Earnings per share;
i. Breakup value per share;
j. Total borrowings as per the balance sheet;
k. Total debt to equity ratio;
l. Cash flow from operations
ix. Summary table of outstanding legal proceedings other than the normal course of
business against the issuer its sponsors, substantial shareholders, directors or its
associated group companies, over which the issuer has control, that could have
material impact on the issuer and a cross-reference to the Part --------- titled “Legal
proceeding and Overdue Loans”
x. Cross-reference to the Part ------ titled ‘Risk Factors’
xi. Summary of related party transactions for last 3 years
8. Part III Overview, History and Prospects:
(i) Background and history of the company including its name, registration number, date
of incorporation, date of commencement of business, date of conversion into public
limited company, description of the business including core and others, if any.
(ii) Pattern of shareholding of the company.
(iii) revenue and cost driver of the company in detail
(iv) Organizational structure of the company; group information, if any;
(v) Major events in the history of the issuer such as:
a) Significant financial or strategic partnerships as per Issuer.
b) Time/cost overrun in setting up projects.
c) Capacity enhancement, location of plants.
d) launch of key products or services.
e) entry in new geographies or exit from existing markets.
f) Key awards, accreditations or recognition .
g) Defaults or rescheduling/ waiver / restructuring of borrowings with financial
institutions/ banks.
(vi) Nature and location of the company’s projects, if any; current implementation and
operational status of the projects; nature and type of plant and machinery; total capacity
and capacity utilization; financial plan with detailed breakup, in case the proceeds of the
issue are to be used for financing a project.

(vii) Infrastructure facilities like roads, buildings, housing colonies; utilities like water,
electricity; raw materials.
(viii) Product or services of the issuer:
a) Nature of the product(s)/services

b) Approach to marketing of products and services
(ix) End users, demand for the products, names of the competitors.
(x) Intellectual property rights
(xi) Details of material property
(xii) Future prospects, demand outlook.
(xiii) Vendors to the issuer
(xiv) Approvals: All government and other approvals which are material and necessary
for carrying on the business of the issuer.
(xv) Group Structure of the Issuer showing shareholding in relative and absolute term.
(xvi) Details regarding Associated companies of the issuer including:
a) Name of company
b) Nature of business
c) Nature of relation
d) Shareholding of Issuer
(xvii) Related parties’ transactions, if any and their significance on the financial
performance of the Issuer.
(xviii) Performance for the last three years, of associated listed companies of the Issuer
over which the issuer has control along with following information:
a) Name of the company;

b) Date of incorporation;
c) Registration number;
d) Nature of business
e) date of listing;
f) Paid-up-capital; equity; total assets; total liabilities; profit before and after tax; rate of
cash dividends paid; break-up value per share; earning per share, return on equity and
return on assets.
(xix) Industry overview and sector analysis.

9. Part IIIA. Share Capital and Related Matters
(i) Share Capital in tabular form (both existing and post IPO) along-with necessary notes
relating to the issued and allocated shares, if any.
(ii) Pattern of shareholding of the issuer in both relative and absolute terms.
(iii) Number of shares held by the sponsors of the Issuer that shall be kept in blocked
form as per regulation 5 of these regulations.
(iv) Present issue size of the issue with detailed break-up of allocation to Pre-IPO
investors including their names, employees, non-resident Pakistanis etc., if any and
general public.
(v) Details of Green Shoe Option, if any:
(a) Maximum number of equity shares under green shoe option

(b) Maximum amount of funds to be received by the issuer in case of oversubscription.
(vi) Break up of shares issued during preceding years.

(vii) Bonus shares, right shares and non-cash shares issued during the preceding years.
(viii) Details of employee’s stock option scheme, if any offered to the employees.
(ix) Shares issued at a price lower than the offer price during the preceding one year.
(x) Undertaking from the Sponsors of the Issuer that IPO proceeds shall be utilized as
per the purpose disclosed in the prospectus.
10. Part IV. Principal Purpose of the Issue and funding arrangements:
a. Details of the principal purpose of the issue.

b. Additional disclosures relating to purpose of the issue shall be made in case of the
following:
i. One of the purpose of the issue is to finance a project:

Details of:
(a) location of the project;

(b) plant and machinery, technology, process, etc.;
i) Details shall be given in a tabular form, which shall include the details of the machines
required to be bought by the issuer, cost of the machines, name of the suppliers, date of
placement of order and the date or expected date of supply, etc.
ii) The percentage and value terms of plant and machinery delivered
iii) The percentage and value terms of the plant and machinery for which orders are yet
to be placed.

(c) The details of the second hand machinery bought or proposed to be bought, if any,
including the age of the machines, balance estimated life, performance guarantee etc.
(d) The following information regarding persons or entities with whom technical
agreement, if any have been entered into shall be given:
i) place of registration and year of incorporation.

ii) Nature of business
iii) paid up share capital.
iv) Net worth
v) Revenue
vi) general information relevant to the issuer.
ii. One of the purpose of the issue is to finance working capital:
(a) Basis of estimation of working capital requirement

(b) Reasons for raising additional working capital.
iii. One of the purpose of the issue is to purchase Plant/ Equipment/ Technology:
a. Details in a tabular form, which shall include the details of the equipment required to
be bought by the issuer, cost of the equipment, name of the suppliers, date of
placement of order and the date or expected date of supply, etc.
b. The percentage and value terms of the equipment delivered
c. The percentage and value terms of the equipment for which orders are yet to be
placed.
d. The details of the second hand equipment bought or proposed to be bought, if any,
including the age of the machines, balance estimated life, etc.
e. The following information regarding persons or entities with whom technical
agreement, if any have been entered into shall be given:
i) place of registration and year of incorporation.

ii) Nature of business
iii) paid up share capital.
iv) Net worth
v) Revenue
vi) general information relevant to the issuer.
iv. One of the purpose of the issue is to acquire Land:
a. location of the land

b. area of the land
c. estimated cost of the land
d. Details of whether the land has been acquired by the Issuer

e. Title of the land.
v. One of the purpose of the issue is loan repayment:
(a) details of loan proposed to be repaid such as name of the lender, brief terms and
conditions and amount outstanding;
c. Requirement of Funds.
d. Details of source of funding.
e. Status of debt financing, if any.
f. Details regarding financial close of the project.
g. Details of letter of credit, if applicable.
h. Utilization of the proceeds at Floor Price:
i. Utilization of excess IPO funds, in case the strike price is determined above the floor
price.
j. Breakup of the funds required and funds already deployed
k. Implementation schedule of the project like land acquisition, execution of civil works,
installation of plant and machinery, date of trial production, date of commercial
production.
l. Details regarding implementation of the project.
m. Pre and post expansion production capacity of the Issuer, if applicable.
11. Part IVA: Valuation Section
170[(i) Justifications given by the Consultant to the Issue, if any or the issuer in support
of the Offer/ Floor Price set by the Issuer.]
(ii) Disclosure of Post issue Free Float both in terms of the number of shares and
percentage.
(iii) Disclosure of Peer group comparison with respect to the following:
a. Earning per share;

b. Book value per share;
c. Market value per share;
d. P/E multiple;
e. P/B multiple;
f. Return on Equity;
g. Return on Assets; and
h. Free Float as number of shares as well as in percentage
12. Part V: In case of issue of debt securities (Islamic and conventional): In case of
issue of debt securities, the following shall be disclosed, inter-alia,-

(i) Structure of the issue, i.e. issue size with breakup of pre-IPO placement, if any,
preferential allocation, if any, and allocation to the general public.
(ii) Salient features of the issue including its tenor, rate of return, denomination of the
certificate, market lot, secured/unsecured, credit rating details, purpose of the issue and
utilization the proceeds thereof; brief security arrangement with reference to main part
on security in case of secured, restrictions and covenants, if any; opening and closing of
the subscription list; investors eligibility; facilities available to investors local, foreign and
NRPs, minimum application amount and basis of allotment; minimum amount that must
be raised; refund/unblocking of subscription money of the unsuccessful applications;
issue, credit of securities; procedure for transfer of securities.
(iii) Details of outstanding debt securities issued during preceding years along with date
of issue, issue size, amount redeemed, amount outstanding; amount of profit paid;
tenor; and credit rating.
(iv) Redemption schedule; redemption reserve, if any.
(v) Interest of the existing holders of the security being issued; nature of the security
whether registered or bearer;
(vi) Options like conversion option, put options, call option etc.
(vii) Market Making and liquidity
(viii) Deduction of Zakat
(ix) Taxations, like applicability of tax on income from investment in the security;
withholding tax, capital gain tax, stamp duty, capital value tax etc.
(x) Deferred Taxation
(xi) In case of issue of Shariah compliant securities, structure of the instrument, Shariah
principle based of which the instrument is structured; name and profile of the Shariah
advisor; Shariah Certificate by the Shariah advisor.

13. Part VI: Risk Factors:
i. Risk factors shall be classified as internal and external risk factor.
ii. Risk factors shall be disclosed in the descending order of materiality.
iii. All possible risk factors relating to business of the company, the project, technology,
competition, suppliers, consumers, industry, liquidity, regulatory, changes in Govt.
policies, law and order situation, capital market, pending litigations, defaults etc. shall be
disclosed.
iv. Additional risk factors relating to the following areas shall necessarily be disclosed in
the prospectus, wherever applicable:
a) Approvals that are yet to be received by the issuer;

b) Seasonality of the business;
c) Risk associated with orders not having been placed for plant and machinery in
relation to the principal purpose of the issue;
d) Lack of experience of the Management to run the business;
e) If the issuer has incurred losses in the last three financial years;
f) Dependence of the issuer or any of its business segments upon a single customer or
a few customers
g) Loans, if any, taken by the issuer and its subsidiaries that can be recalled at any
time.
h) In case of outstanding debt instruments, any default in compliance with the material
covenants;
i) Default in repayment of loan by the issuer and associated group companies, if any.
j) Potential conflict of interest of the Sponsors, substantial shareholders or directors of
the issuer if involved with one or more ventures which are in the same line of activity or
business as that of the issuer.
k) Excessive dependence on any key managerial personnel for the project for which the
issue is being made.
l) Any material investment in debt instruments by the issuer which are unsecured.
m) Pending legal Proceeding against the issuer and associated group companies,
which could have material adverse comments.
n) Negative cashflow from operating activities in the last three preceding financial years.
o) Any restrictive covenant that could hamper the interest of the equity shareholders
p) Low credit rating of the Issuer.
v. A statement that to the best of our knowledge and belief all risk factors have been
disclosed shall be given immediately after the risk factors.

14. Part VII: Financial Information:
(i) Auditor’s report as certificate on issued, subscribed and paid-up capital.
(ii) Auditor's certificate on break-up value per share, free float before and after Issue.
(iii) In case of subsidiaries auditors’ certificates based on consolidated accounts of the

issuing company.
(iv) Latest management/un-audited accounts of the company, if any.
(v) Summary of financial highlights of the Issuer along with key financial ratios for the
last 3 years or for a shorter period if 3 years of commencement of business are not
completed.
(vi) Summary of major items of revenue and expenditure for the last 3 years.
(vii) Bifurcation of revenue with respect to local and export sales, if applicable.
(viii) Summary of revenue on account of major product/major activities.
(ix) In case other income constitute more than 25% of the operating income or 10% of
the Revenue, the breakup of the same along with the nature of the income i.e. recurring
or nonrecurring.
(x) If a material part of the revenue i.e. 50% or more is dependent upon a single
customer or few major customers than the same shall be disclosed.
(xi) If the material part of the company’s purchases i.e. 50% or more is dependent upon
a single supplier or few major suppliers then the same shall be disclosed.
(xii) Comparative financial analysis with peer group companies.
15. Part VIIA: Revaluation of the assets

Details of valuation, if any, of assets
16. Part VIIB: Dividend policy:

i. Dividend policy: The Issuer shall clearly mention its existing dividend policy, past 5
years dividend track record and future dividend policy. The Issuer shall clearly state the
factors on which future dividend payments would depend. These factors may include

earnings, capital requirements, contractual obligations including restrictive covenants
under financing agreements the Issuer may enter into to finance the fund requirements
for its business activities, applicable legal restrictions and overall financial position and
projections of the Issuer.
ii. Dividend payout history of listed associated companies over which the Issuer has
control.
17. Part VIIC: Credit Rating (in case of debt securities):
(i) Credit rating report in summarized/press release form.

(ii) Complete credit rating report showing instrument or entity rating, whichever is
applicable;
(iii) Credit rating of the Issuer for the last three years, if undertaken, along with name of
the respective rating agency;
18. Part VIID: Trustee and Security (in case of debt securities):
(i) Details of security and assets backing the instrument including nature of assets, book
value of the assets as per the latest audited accounts; nature of charge established in
favour of the Trustee, number and nature of charges on the said assets; names of the
creditors having charge on these assets; and aggregate amount and type of such
borrowing;
(ii) Name of the Trustee, amount or rate of fee payable to the trustee;
(iii) Event of defaults as mentioned in the Trust Deed;
(iv) Circumstance under which security becomes enforceable;
(v) Mechanism for enforcement of security including authority by way of special
resolution by the security holders; quorum of the meeting; authority for approval of
resolution etc.
19. Part VIII: Management of the Company

(i) Composition of the board of directors of the company along with their names,
executive or non-executive director, independent director or otherwise, addresses,
CNIC number, brief profile, qualification, period of directorship and directorship in other
companies.
(ii) For each director, details of current and past directorship(s) in listed companies
whose shares have been/were suspended from being traded on the securities
exchange during his/her tenure, as follows:

a. Name of the Company:
b. date of Listing
c. reasons for suspension and period of suspension.
b) If the suspension of trading revoked,
c) the date of revocation of suspension.
d) Term of the director in the above company/companies.
(iii) For each director, details of current and past directorship(s) in listed companies
which have been/were delisted from the stock exchange(s), during his/her tenure, as
follows:
a) Name of the Company

b) Date of Listing
c) Date of delisting
d) Compulsory or voluntary delisting:
e) Reasons for delisting:
f) Term of the director in the above company/companies.
(iv) Profile of the senior management including chief executive officer, chief financial
officer, chief operating officer and company secretary.
(v) Appointment and election of directors and chief executive
(vi) Interest of the directors and promoters along with number and value of shares held
by each of them, if any.
(vii) Interest of the director and promoter in property/assets and profit of the company.
(viii) Benefits (monetary or otherwise) provided to sponsors, substantial shareholders

and directors during last three years.
(ix) Composition of the audit committee and its role and responsibilities.
(x) Powers of the directors including any borrowing power
(xvii) Indemnity available to the board of directors and other employees of the company.
Statement on compliance with the code of corporate governance

20. Part IX: Legal proceedings and overdue loans:
i. Legal proceedings:
a) Any outstanding legal proceeding other than the normal course of business involving
the issuer, its sponsors, substantial shareholders, directors and associated companies,
over which the Issuer has control, that could have material impact on the issuer.
b) Action taken by the securities exchange against the issuer or associated listed
companies of the issuer during the last three years due to noncompliance of the its
regulations.
ii. Overdue loans: Details of overdue amount, if any appearing in the Credit information
Bureau (CIB) report of the Issuer, its sponsors, promoters, substantial shareholders,
directors and associated group companies over which the issuer has control.
21. Part X: Underwriting arrangement, Commissions, Brokerage and other Expenses:
(i) Underwriting; name of the underwriters and amount underwritten by each of them.
(ii) Opinion of the directors regarding resources of the underwriters
(iii) Rate of the underwriting and take up commission.
(iv) Statement about non-execution of any buy-back, or repurchase agreement between
the underwriters or their associates and the Issuer or its associates.
(v) Fees and expenses for Centralized E-PO system.
(vi) Rate of commission to the banker to an issue.
(vii) Rate of the brokerage commission.
(viii) Fees and expenses for Shariah advisory and Shariah audit in case of Shariah
compliant debt security.
(vi) Breakup of the expenses of the issue including fee/amount payable to (a) consultant
to the issue; the book runners; the ballotters and registrar to the issue; the underwriters;
listing fee; CDC fee; SECP fee; printing and publication cost fee etc.
22. Part XI: Miscellaneous Information
(i) Address of the registered and corporate office of the company (complete address,
telephone & fax numbers and e-mail address)
(ii) Name, address, telephone number and email address of bankers to the company(iii)
Name, address, telephone number and email address of the company’s auditors
(iv) Name, address, telephone number and email address of the legal advisors to the
company
(v) Name, address, telephone number and email address of legal advisor to the issue

(vi) Name, address, telephone number and email address of the ballotters and share
registrar
(vii) Name, address, telephone number and email address of Consultant to the Issue
23. Part XII: Material Contracts:
i. Details of material contracts referred to in the prospectus like:

a) underwriting agreements,
b) due diligence reports by the underwriters and consultant to the issue,
c) private placement agreements,
d) project related agreements,
e) long term and short-term financing agreements
f) technical agreements,
g) letter of credits and bank/corporate guarantees,
h) related party agreements. etc.
(ii) Title and date of document/contract, parties to the contract, amount involved, if any, etc.
(iii) Inspection of Documents & Contracts by security exchange
Place and timing where documents relating to the Issuer and the issue can be
inspected. The documents to be made available there must include copies of all those
agreements, contracts, reports etc. referred to in the prospectus. The timing of
inspection must be the usual business hours on working days at the registered office of
the company from the date of publication of the prospectus until the closing of
subscription list.
24 Part XIII-: Book Building Procedure/instructions for registration and bidding:

(i) In case of issue through book building, information needed to be disclosed i.e.
number of shares allocated under the book building portion and retail portion, Floor
Price and the Price Band,
(ii) Types of bids and procedure for making a bid.
(iii) Mechanism for determination of the strike price.
(iv) Time frame for intimation to the successful bidders. Mechanism for payment of the
balance amount by the successful bidders
(v) Name of the book runner, its roles and responsibilities, Address, telephone number,
cell number and fax number of the bid collection centers.
(vi) Name of the designated institution and its roles and responsibilities.
(vii) Role and responsibilities of the Issuer.
(viii) Opening and closing of the bidding period.
(ix) Eligibility to participate in bidding.

(x) Information about availability of the prospectus, the registration form, and the bidding
form.
(xi) Procedure for registration.
(xii) Procedure for bidding.
(xiii) Title and number of the bank account for book building portion of the issue and
Mechanism for payment of the margin money into the book building account. (xiv)
Procedure for payment of the margin money by the foreign investors.
(xv) Procedure for rejection of bids.
(xvi) Time frame for upward revision of bids by the bidder.
(xvii) Procedure for withdrawal of issue.
(xviii) Mechanism for determination of strike price.
(xix) Basis of allotment of share.
(a) In case the bids received are sufficient to allot the total number of shares offered for
sale under the Book Building Portion, the allotment shall be made on the basis of
highest bid priority that is the bid made at the highest price shall be considered first for
allotment of shares.
(b) In case all the bids made above the Strike Price are accommodated and shares are
still available for allotment, such available shares shall be allotted against the bids made
at the Strike Price on proportionate basis
(i) Mechanism and mode for refunding/unblocking of the margin money.

(ii) Procedure and time frame for publication of the supplement to the prospectus.
(iii) Procedure for allotment of shares in case of 100% book building and allotment of
unsubscribed retail portion to the bidders.
25. Part XIV: Application and Allotment instructions for retail portion:
i. Eligible Investors Instructions for submitting application.

ii. Opening and closing of subscription list. Procedure for public subscription through
physical form.
iii. Procedure for public subscription through Centralized E-PO System and other
additional electronic system
iv. Facilities available to local, Non-Resident Pakistanis and Foreign Investors.
v. Code of occupation of investors/applicants.
vi. Nationality Code.
vii. Minimum amount of application and basis for allotment of shares.
viii. Refund/Unblocking of subscription money to unsuccessful applicants.
ix. Minimum amount of application and basis of allotment.

x. Issue and credit of shares.
xi. Transfer of shares.
xii. List of Bankers to the Issue
xiii. List of E-IPO facilities
xiv. Interest of share holders
xv. Eligibility for dividend
xvi. Deduction of Zakat.
xvii. Taxations, like applicability of capital gain tax, withholding tax on dividends, tax on
bonus shares, federal excise duty and capital value tax & withholding tax on
sale/purchase of shares.
xviii. Tax on income of the Issuer, sales tax.
xix. Deferred taxation.
xx. Tax credit for enlistment, tax credit for investment in IPOs.
26. Part XV: Signatories to the Prospectus:
(i) List of the signatories to the prospectus and their signatures in original duly dated
and witnessed
(ii) The Prospectus should be signed by every director and CEO of the Issuer and shall
be duly witnessed.
Provided that in case of offer for sale of shares the prospectus should also be signed by
every Offeror or the persons authorized in writing by the Offerors
27. Part XVI: Memorandum of Association:
Memorandum of Association of the Issuer
28. Application Form
The application form both front and back containing instructions and other information
29. Bidding Form
The bidding form both front and back containing bidding procedure, strike price
determination mechanism and basis of allotment.

Section 2
REPORTS TO BE SET OUT IN THE PROSPECTUS
1. A report made by auditors (who shall be named in the prospectus) for each of the two
financial year immediately preceding the issue of the prospectus with respect to the
following:
(a) Profits and losses and assets and liabilities, in accordance with the clause (2) or (3),
as the case may require; and
(b) the details of dividend (date, rate, class of shares) paid by company during last two
financial years immediately preceding the issue of prospectus of the company. if no
accounts have been made up in respect of any part of the period of two years ending on
a date three months before the issue of the prospectus, containing a statement of that
fact.
2. If the company has no subsidiaries, the report shall so far as regard profits and
losses, assets and liabilities for each of the two financial years immediately preceding
the issue of the prospectus;
3. If the company has subsidiaries, the report shall so far as regard profits and losses,
assets and liabilities of the company as a whole with combined profits and losses of its
subsidiaries, and individually with profit and losses of each subsidiary concern;
4. If any shares have been or are to be issued or the proceeds, or any part of the
proceeds, of the issue of the securities are or is to be applied directly or indirectly for the
purchase of any business and by reason of that purchase entitled to an interest, as
respects either the capital or profits and losses or both, in such business exceeding fifty
per cent thereof, a report made by auditors (who shall be named in the prospectus)
upon profit and loses and assets and labilities of the business;
5. If the proceeds, or any part of the proceeds, of the issue of the shares or debt
securities are or is to be applied directly or indirectly in any manner resulting in the
acquisition by the company of shares in any other body corporate and by reason of that
acquisition or anything to be done in consequence thereof or in connection therewith,
that body corporate will become a subsidiary of the company, a report made by auditors
(who shall be named in the prospectus) upon the profits or losses, the assets and
labilities of the other body corporate for each of the two financial year immediately
preceding the issue of the prospectus;

6. The said report shall indicate how the business acquired is in the best interest of
shareholders of the issuer. Where the business being acquired has subsidiaries, how
such subsidiaries are in the best interest of shareholders;
7. In case of debt security, summary of the credit rating report by the credit rating
agency, report by the company’s auditors on security backing the issue and report by
the debt security trustee that the security arranged and the mechanism for its
enforcement, if needed, is appropriate for safeguarding interest of the security holders;
8. Statement on accuracy of the contents of the prospectus; and
9. The Chief Executive and Chief Financial Officer of the company shall certify that the
prospectus constitutes a full, true and plain disclosure of all material facts relating to the
securities offered by the prospectus.]

Companies Act, 2017
Section 57 to 62
Section 81 to 83
Companies (Further Issue of Shares) Regulations, 2020

1. Introduction to Shares & Share Capital
2. Classes and Kinds of Share Capital and prospectus
3. Variation of Share holders’ rights
4. Types of shares and share capital
5. Issue of shares at discount
6. Permissible usages of share premium account
7. Further issue of shares
8. Companies (Further Issue of Shares) Regulations, 2020

1. SHARE
“share” means a share in the share capital of a company. [Section: 2(1)(63)]
A share is a right to receive a certain proportion of the profits made by a company while
it is a going concern and of the capital when it is wound up. It includes stocks, except
when the distinction between stocks and shares is expressed or implied.
1.1 Numbering of shares (Section 60)
Distinctive number of each share, Section not to apply if CDC system

Every share in a company having a share capital shall be distinguished by its distinctive
number:
Provided that nothing in this section shall apply to a share held by a person whose
name is entered as holder of beneficial interest in such share in the records of a central
depository system.
1.2 Nature of shares or other securities (Section 61)
Shares: movable property to be transferred as per articles

The shares or other securities of any member in a company shall be movable property
transferable in the manner provided by the articles of the company.
1.3 Shares certificate to be evidence (Section 62)
shares in physical form, shares in book-entry form, evidence of the title

(1) A certificate, if issued in physical form under common seal of the company or under
official seal, which must be facsimile of the company‘s common seal or issued in book-
entry form, specifying the shares held by any person or shares held in central
depository system shall be prima facie evidence of the title of the person to such
shares.
Manner of issue and form of certificate of shares (specified)

(2) Notwithstanding anything contained in the articles of a company, the manner of
issue of a certificate of shares, the form of such certificate and other matters shall be
such as may be specified.
1.4 SHARE CAPITAL

Share capital means a particular amount of money with which a business is
started. It may be:

a) Nominal or authorized capital
“Authorised capital” or “nominal capital” [Section: 2(1)(63)]

“authorised capital” or “nominal capital” means such capital as is authorised by the
memorandum of a company to be the maximum amount of share capital of the
company;
It is the maximum amount of capital which a company can issue according to its
memorandum.
b) Issued capital
That part of amount of authorized capital which is offered by directors or
promoters for subscription.
c) Subscribed capital
That part of amount of issued capital which is taken by the people.
d) Paid up capital
That part of subscribed capital against which money has been received.
2- KINDS OF SHARES
a) Ordinary Shares:
These carry the right to share in profits, if available, the right to share in
surplus assets on winding up, and the voting rights.
b) Preference Shares:
These carry the right to a fixed dividend which is payable before payment of
any dividend on the ordinary shares, but these shares have no voting right
except when the rights of the holders are affected. The right to receive
dividend may either be cumulative or non-cumulative.
c) Redeemable Preference Shares:

These are preference shares which are redeemable at the option of the
company.
In addition to the above shares, a company’s capital may contain redeemable

capital (like PTCs, TFCs, musharika certificates, or participatory redeemable
capital).

2.1 Prospectus (Section 57)
Copy of prospectus to be filed with the registrar before the date of its publication
(1) No prospectus shall be issued by or on behalf of a company unless on or before the
date of its publication, a copy thereof signed by every person who is named therein as a
director or proposed director of the company has been filed with the registrar.
Penalty Provision
(2) In case of any contravention of this section, the company and every person who is a
party to the issue, publication or circulation of the prospectus shall be liable to a penalty
not exceeding of level 2 on the standard scale.
3- CLASSES AND KINDS OF SHARE CAPITAL
3.1 Classes and kinds of share capital (Section 58)
(i) Different kinds and classes (ii) Different rights and privileges
A company having share capital shall issue only fully paid shares which may be of
different kinds and classes as provided by its memorandum and articles:
Provided that different rights and privileges in relation to the different kinds and classes
of shares may only be conferred in such manner as may be specified.
A company limited by shares can have different kinds of share capital with different
classes in accordance with its Memorandum and Articles of Association with different
rights and privileges of the different classes.
Note: Relevant regulations of section 58: Chapter V of the Companies (Further Issue of
shares) Regulations 2020
3.2 Variation of shareholders’ rights (Section 59)
Variation of the right as per section 38

(1) The variation of the right of shareholders of any class shall be effected only in the
manner laid down in section 38.

Aggrieved not less than ten percent of the class of shareholders to apply to the
court, Grounds for the decision of the court
(2) Not less than ten percent of the class of shareholders who are aggrieved by the
variation of their rights under sub-section (1) may, within thirty days of the date of the
resolution varying their rights, apply to the Court for an order cancelling the resolution:
Provided that the Court shall not pass such an order unless it is shown to its
satisfaction that some facts which would have had a bearing on the decision of the
shareholders were withheld by the company in getting the aforesaid resolution passed
or, having regard to all the circumstances of the case, that the variation would unfairly
prejudice the shareholders of the class represented by the applicant.
Application by one of more by authorization

(3) An application under sub-section (2) may be made on behalf of the shareholders
entitled to make it by such one or more of their number as they may authorise in writing
in this behalf.
Company to forward copy of the order to the registrar

(4) The company shall, within fifteen days of the service on the company of any order
made on any such application, forward a copy of the order to the registrar and, if default
is made in complying with this provision, the person making the default shall be guilty of
an offence under this section and be liable to a penalty not exceeding of level 1 on the
standard scale.
(5) The expression “variation” under this section includes abrogation, revocation or
enhancement.
4- TYPES OF SHARES & SHARE CAPITAL
Scrip less shares

It is option of the shareholders of the listed companies to keep the shares in
physical form with them or to deposit those shares with Central Depository
Company (CDC) and enjoy the ownership of the shares without having scrip of
those shares with them. The shares are kept deposited in an account opened
with CDC. CDC acts just like a bank for securities. It does not own the shares
although the securities are registered in the name of CDC.
CDC is named as a member in the members’ register but it does not beneficially
own the securities, it is just a trustee, holding the shares in trust on behalf of
owners of shares.

5- FULLY PAID SHARES ONLY (Section 58)
No company is allowed to issue partly paid shares i.e. full nominal value of shares
should be received by every company with the application for shares.
TYPES OF PREFERENCE SHARES.
a. Cumulative preference shares:

If the Company is not able to pay preference dividend in one year, the arrears of
dividend are to be carried forward and paid out of the profits of the subsequent
years, such preference shares are known as cumulative Preference shares.
b. Non-cumulative preference shares:

If unpaid dividend is not carried forward but lapses then such shares are known
as noncumulative preference shares.
c. Participatory preference shares:

Preference shares which are entitled to participate in surplus profits, i.e. profit
proposed to be distributed among the shareholders after dividend to preference
and ordinary shareholders, are termed as participatory preference shares.
Similarly in the winding up of a company, if, after paying back both the
preference and ordinary shareholders, there is surplus, and the preference
shareholders are entitled to share in the distribution of available surplus, then
such preference shares are also known as participatory preference shares.
d. Convertible preference shares:

Preference shares which are convertible into any other shares of the Company
after a specified period of time or on occurrence of a defined event are termed as
convertible preference shares.
e. Redeemable preference shares:

Preference shares which are issued for a definite time period after the expiry of
which the preference shares will be redeemed in cash are termed as redeemable
preference shares.
f. Irredeemable preference shares:

If preference shares are not redeemable / convertible after a specific period of
time are called irredeemable preference shares.

g. Stepped preference shares:
Preference shares with dividend which increases annually by a specified amount
and with a pre-determined capital return.
h. Zero dividend preference shares:

Preference shares which receive no dividend throughout their lives and instead a
fixed known amount is paid at maturity.
6. ISSUANCE OF SHARES AT A DISCOUNT. (SECTION 82)
Issuance of shares at a discount means that company shall not receive the
full face value of the shares and the shareholder will get the benefit of
acquiring the share at lower than the face value of the share. The
companies usually issue shares at a discount whenever the company is in
financial difficulties and the issue of shares at discount is one of the last
options available with the company. The relevant provisions of the
Companies Act regarding the issue of shares at a discount are as follows.
6.1 Power to issue shares at a discount (Section 82)
(a&b) Special resolution which must specify certain matters. (c) Condition for
listed company (d) Sanction by the Commission and exception for listed
company (e) Certain conditions for sanction by the Commission (f) Directors and
sponsors of listed companies to subscribe their portion (g) period of Three years
elapsed since the commencement of business (viii) validity of sanction: sixty
days or as extended by the Commission.
(l) Subject to the provisions of this section, it shall be lawful for a company to issue
shares in the company at a discount:
Provided that—
(a) the issue of shares at a discount must be authorised by special resolution passed in
the general meeting of the company;
(b) the resolution must specify the number of shares to be issued, rate of discount, not
exceeding the limits permissible under this section and price per share proposed to be
issued;
(c) in case of listed companies discount shall only be allowed if the market price is lower
than the par value of the shares for a continuous period of past ninety trading days
immediately preceding the date of announcement by the board; and

(d) the issue of shares at discount must be sanctioned by the Commission:
Provided further that approval of the Commission shall not be required by a listed
company for issuing shares at a discount if the discounted price is not less than ninety
percent of the par value;
(e) no such resolution for issuance of shares at discount shall be sanctioned by the
Commission if the offer price per share, specified in the resolution, is less than-
(i) in case of listed companies, ninety percent of volume weighted average daily closing
price of shares for ninety days prior to the announcement of discount issue; or
(ii) in case of other than listed companies, the breakup value per share based on assets
(revalued not later than 3 years) or per share value based on discounted cash flow:
Provided that the calculation arrived at, for the purpose of sub clause (i) or (ii) of clause
(e) above, shall be certified by the statutory auditor;
(f) directors and sponsors of listed companies shall be required to subscribe their
portion of proposed issue at volume weighted average daily closing price of shares for
ninety days prior to the announcement of discount issue;
(g) not less than three years have elapsed since the date on which the company was
entitled to commence business;
(h) the share at a discount must be issued within sixty days after the date on which the
issue is sanctioned by the Commission or within such extended time as the Commission
may allow.
Application to the Commission for sanction order

(2) Where a company has passed a special resolution authorising the issue of shares at
a discount, it shall apply to the Commission where applicable, for an order sanctioning
the issue. The Commission on such application may, if, having regard to all the
circumstances of the case, thinks proper so to do, make an order sanctioning the issue
of shares at discount subject to such terms and conditions as it deems fit.

Not reduction of share capital
(3) Issue of shares at a discount shall not be deemed to be reduction of capital.
Prospectus and statement of financial position shall contain particulars of

discount.
(4) Every prospectus relating to the issue of shares, and every statement of financial
position issued by the company subsequent to the issue of shares, shall contain
particulars of the discount allowed on the issue of the shares.
Penalty provision
standard scale.
7 Permissible usages of Share Premium Account
7.1 Application of premium received on issue of shares. (Section 81)
Share premium account

(1) If a company issues shares at a premium, whether for cash or otherwise, a sum
equal to the aggregate amount or the value of the premiums on those shares must be
transferred to an account, called "the share premium account".
Three usages: (i) Preliminary expenses (ii) Expenses, commission paid, discount
allowed on issue of shares (iii) Premium payable on redemption of redeemable
preference shares
(2) Where, on issuing shares, a company has transferred a sum to the share premium
account, it may use that sum to write off-
(a) the preliminary expenses of the company;
(b) the expenses of, or the commission paid or discount allowed on,any issue of shares
of the company; and
(c) in providing for the premium payable on the redemption of any redeemable
preference shares of the company.
Fourth usage: Issue of bonus shares

(3) The company may also use the share premium account to issue bonus shares to its
members.

8. FURTHER ISSUE OF CAPITAL
8.1 Further issue of capital (Section 83)
Shares be offered (a) to existing members in proportion to the existing shares

subject to following conditions: (i) in proportion (ii) contents of letter of offer (iii)
If listed, member not interested may renounce the shares (iv) if declined,
directors may allot such shares, b. Shares to be issued to any person with the
approval of the Commission and special resolution, value of non-cash assets
shall be determined by the valuer.
(1) Where the directors decide to increase share capital of the company by issue of
further share capital, such shares shall be offered:
(a) to persons who, at the date of the offer, are members of the company in proportion
to the existing shares held by sending a letter of offer subject to the following conditions,
namely-
(i) the shares so offered shall be strictly in proportion to the shares already held in
respective kinds and classes;
(ii) the letter of offer shall state the number of shares offered and limiting a time not
being less than fifteen days and not exceeding thirty days from the date of the offer
within which the offer, if not accepted, shall be deemed to have been declined;
(iii) in the case of a listed company any member, not interested to subscribe, may
exercise the right to renounce the shares offered to him in favour of any other person,
before the date of expiry stated in the letter of offer; and
(iv) if the whole or any part of the shares offered under this section is declined or is not
subscribed, the directors may allot such shares in such manner as they may deem fit
within a period of thirty days from the close of the offer as provided under sub-clause (ii)
above or within such extended time not exceeding thirty day with the approval of the
Commission.:
Provided that a public company may reserve a certain percentage of further issue for its
employees under ―Employees Stock Option Scheme‖ to be approved by the
Commission in accordance with the procedure and on such conditions as may be
specified.

(b) subject to approval of the Commission, to any person, in the case of public company
on the basis of a special resolution either for cash or for a consideration other than
cash:
Provided that the value of non-cash asset, service, intellectual property shall be
determined by a valuer registered by the Commission.
Procedure for signatures and dispatch of letter of offer

(2) The letter of offer referred to in sub-clause (ii) of clause (a) of subsection (1) duly
signed by at least two directors shall be dispatched through registered post or courier or
through electronic mode to all the existing members, ensuring that it reaches the
members before the commencement of period for the acceptance of offer.
Copy of the Letter of offer be filed with registrar simultaneously when dispatched
to the members
A copy of the letter of offer, referred to in sub-section (2) shall, simultaneously with the
dispatch to the members, be sent to the registrar.
Loan obtained from Government by public sector company may be converted

into shares
(4) Notwithstanding anything contained in this section, where loan has been obtained
from any Government by a public sector company, and if that Government considers it
necessary in the public interest so to do, it may, by order, direct that such loan or any
part thereof shall be converted into shares in that company, on such terms and
conditions as appear to the Government to be just and reasonable in the circumstances
of the case even if the terms of such loan does do not include the option for such
conversion.
Government to have due regard to the financial position of public sector

company when determining terms and conditions of conversion
(5) In determining the terms and conditions of conversion under subsection
(4), the Government shall have due regard to the financial position of the public sector
company, the terms of the rate of interest payable thereon and such other matters as it
may consider necessary.

If shares are issued to Government, a schedule bank or financial institution,
authorized capital shall be deemed to have been increased even that is fully
subscribed or unsubscribed capital is insufficient.
(6) Notwithstanding anything contained in this Act or any other law for the time being in
force or the memorandum and articles, where the authorized capital of a company is
fully subscribed, or the un-subscribed capital is insufficient, the same shall be deemed
to have been increased to the extent necessary for issue of shares to the Government,
a scheduled bank or financial institution in pursuance of any obligation of the company
to issue shares to such scheduled bank or financial institution.
Notice of increase in share capital to the registrar by company, if failure,

Government, a schedule bank or financial institution to whom shares have been
issued may file notice of such increase
(7) In case shares are allotted in terms of sub-section (6), the company shall be
required to file the notice of increase in share capital along with the fee prescribed for
such increase with the registrar within the period prescribed under this Act:
Provided that where default is made by a company in complying with the requirement of
filing a notice of increase in the authorised capital under this Act as well as the fee to be
deposited on the authorised capital as deemed to have been increased, the
Government, scheduled bank or the financial institution to whom shares have been
issued may file notice of such increase with the registrar and such notice shall be
deemed to have been filed by the company itself and the Government, scheduled bank
or financial institution shall be entitled to recover from the company the amount of any
fee paid by it to the registrar in respect of such increase.
Penalty provision
standard scale.
Note: Relevant regulations of section 83: Chapter II of the Companies (Further Issue of
shares) Regulations 2020

Companies (Further Issue of Shares) Regulations, 2020
CHAPTER 1
PRELIMINARY
1. Short Title and Commencement.- (1) These regulations shall be called the
Companies (Further Issue of Shares) Regulations, 2020.
(2) They shall come into force at once except in the case of issues announced on or
before the date of these regulations.
(3) These regulations shall apply to the companies issuing further capital by way of:
(i) right shares;
(ii) other than right shares;
(iii) bonus shares;
(iv) employee stock option schemes; and
(v) shares with different rights including preference shares.
2. Definitions. – (1) In these regulations, unless there is anything repugnant in the

subject or context, –
(i) “Act” means the Companies Act, 2017 (XIX of 2017);
(ii) “issue of share at discount” means issue of share at a price below face value of such
share;
(iii) “further issue of shares” means issue of shares under section 83 of the Act and
does not include Initial Public Offer or offer for sale of shares by any person holding
shares in listed company or further issue of shares pursuant to any scheme of
arrangement including merger, demerger, amalgamation etc.;
(iv) "exercise" means making of an application by an employee to a company for issue
of shares against option vested in him in pursuance of a Scheme;
(v) "exercise period" means the time period after vesting within which an employee may
exercise his right to apply for shares against an option vested in him in pursuance of the
Scheme;
(vi) "exercise price" means the price payable by an employee for exercising an option
granted to him in pursuance of the Scheme;
(vii) “initial public offer or IPO” means first time offer of securities to the general public;
(viii) “issue” for the purpose of these regulations, means further issue of shares;
(ix) “issue size” means the total number of shares issued or proposed to be issued by a
company;
(x) “issue price” means the price per share at which shares are offered or issued;
(xi) “issue of shares by way of other than right” means issue of shares out of the share
capital of a company or body corporate to any person without right offer, either for cash
or for consideration otherwise than in cash;

(xii) “market price” for the purpose of a scheme means latest available closing price of
the share on a securities exchange on which the shares of the company are listed and
where share price is not traded on a given date, then the share price on the last trading
day shall be considered;
(xiii) "option" means a right but not an obligation granted to an employee in pursuance
of a Scheme to apply for shares of a company at a pre- determined price;
(xiv) “preference shares” mean the shares which carry or would carry such preferential
rights or privileges as provided for in the articles of association of the company including
but not limited to the following:
(a) carry preferential right over the rights of ordinary shareholders to receive dividend;
preference dividend may be cumulative or non-cumulative;
(b) carry preferential right over the rights of ordinary shareholders to participate in profits
of company;
(c) carry preferential rights over the rights of ordinary shareholders to be paid in the
event of winding up of the issuer; and
(d) voting and non-voting rights

(xv) “right issue” means the shares offered by a company to its members strictly in
proportion to the shares already held in respective kinds and classes ;
(xvi) “scheme” means an Employees Stock Option Scheme (ESOS) approved by the
Commission in accordance with procedure and on conditions specified through these
regulations;
(xvii) “schedule” means the schedule appended with these regulations.
(xviii) "vesting" means to give or earn a right to apply for conversion of the options,
granted under a scheme, into shares of the company; and
(xix) "vesting period" means the period during which the vesting of an option granted to
an employee in pursuance of a scheme takes place.
(2) All terms and expression used but not defined in these regulations shall have the
same meaning as assigned to them in the Act, the Securities Act, 2015 (III of 2015) and
the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997).

CHAPTER II
RIGHT ISSUE
3. Conditions for right issue. – (1) Subject to requirements of section 83 of the Act, a
listed company issuing right shares shall, comply with the following general conditions,
namely. –
(i) board shall approve the decision to increase share capital and the said decision shall
be communicated on the same day to the Commission and to the securities exchange
for public dissemination;
(ii) Fractional shares, if any, shall not be offered and all fractions less than a share shall
be consolidated and disposed of by the company and the proceeds from such
disposition shall be paid to such of the entitled shareholders as may have accepted
such offer;
(iii) the decision of board shall clearly state the following-
(a) quantum of the issue i.e. as percentage of existing paid up capital;

(b) issue size;
(c) issue price;
(d) purpose of the issue;
(e) utilization of the proceeds of the issue;
(f) benefits of the issue to the company and its shareholders;
(g) risks, if any, associated with the issue to which the company and/or its members are
exposed to;
(h) justification for issue of shares at, premium or at discount to face value (if
applicable);
(iv) where announcement of the issue of bonus and right shares is made
simultaneously, the resolution of the board shall specify whether such bonus shares
qualify for right entitlement or not;
(v) the letter of offer under section 83 of the Act and information specified in Schedule I
to these regulations, shall be sent to all the members along with copy of the extract of
the resolution of the board’s meeting approving the right issue; and
(vi) A listed company may issue right shares at face value or at premium to face value
provided the directors and substantial shareholders of the company undertake in writing
that:
(a) they will subscribe the right shares to be offered to them as per their right entitlement
or arrange subscription for the same through other persons; and

(b) the balance of the right issue is underwritten through at least two underwriters, not
being associated companies or associated undertakings of the issuer;
Explanation: An underwriter may enter into sub-underwriting arrangement through sub-
underwriting agreement in writing provided such sub-underwriter is licensed by the
Commission to undertake underwriting of securities.
(2) Subject to compliance with the requirements of section 82 of the Act, a company
may issue right shares at discount to face value provided the issue is underwritten in the
form and manner as stated in sub-regulation (1).
(3) The book closure for the issue shall be made within thirty days from the date of the
board’s resolution or within such time period as approved by the Commission.
(4) In case of a listed company, the letter of offer of right shall be dispatched or credited
within the time period as specified by the listings regulations of the securities exchange.
(5) Right issue once announced by the board of a listed company shall not be varied,
postponed, withdrawn or cancelled.

CHAPTER III
BONUS ISSUE
4. Conditions for bonus issue. - (1) A company, in accordance with the provisions of its
articles of association, may issue bonus shares subject to the following conditions,
namely: -
(i) the issue of bonus shares is approved by the board;

(ii) in case of a listed company, the resolution of board approving to issue bonus shares
is communicated to the Commission and the securities exchange on the same day i.e.
on the day of the decision;
(2) The decision of the board to issue bonus shares, once announced, shall not be
varied, postponed, withdrawn or cancelled.
CHAPTER IV
ISSUE OF SHARES BY WAY OF OTHER THAN RIGHT OFFER
5. Conditions for issue of shares by way of other than right offer. - (1) A public company
may issue further shares, by way of other than right, under sub-section (1) of section 83
of the Act subject to the following general conditions, namely. –
(i) the issue is proposed by the board;

(ii) the aforesaid proposal of the board clearly states the following-
(a) proposal of the board to issue shares without right offer is subject to approval of the
shareholders and the Commission;
(b) quantum of the issue both in terms of the number of shares and percentage of paid
up capital before and after the issue;
(c) issue price per share and justification for the same;
(d) consideration against which shares are proposed to be issued i.e. cash or other than
cash;
(e) name of person(s), their brief profile, existing shareholding, if any, in the company, to
whom the shares are proposed to be issued;
(f) purpose of the issue;
(g) justification for issue of the shares by way of other than right;
(h) benefits of the issue to the company and its members;
(i) breakup value per share as per the latest available audited and reviewed accounts;
(j) consent of the person(s) to whom the shares are to be issued is(are) obtained;
(k) the proposed new shares shall rank pari passu in all respects with the existing
ordinary shares of the company. In case the proposed new shares are different from the
issued ordinary shares in any respect, then the board’s decision must state the
differences in detail

(l) average market price of the share, in case of a listed company, during the last three
months preceding the board’s decision as well as the latest available market price; and
(m) where shares are proposed to be issued for consideration other than in cash, the
value of non-cash assets or services or intangible assets shall be determined by a
valuer:
Provided that the valuation shall not be older than six months from the date of
submission of the application to the Commission.
(2) The aforesaid decision of the board, in case of a listed company shall be
communicated to the Commission and the securities exchange on the same day i.e. on
the date of the decision of the board.
CHAPTER V
CLASSES AND KINDS OF SHARE CAPITAL
6. Conditions for issuance of shares with different rights. - A company may issue shares
with differential rights under section 58 of the Act subject to compliance with the
following conditions, namely-
(i) the issue of shares with different rights is recommended by the board through
resolution;
(ii) the decision of the board shall, in addition to particulars required under clauses (a) to
(g) of regulation 3 (iii), state the following-
(a) description of different kind of shares such as ordinary shares and preference
shares;
(b) description of different rights such as different class in each kind, rights and
privileges attached to each class or kind of capital;
(c) whether the shares are being issued as right or other than right;
(d) whether the holders of such shares shall be entitled to participate in profits or
surplus funds of the company;
(e) whether the holders of such shares shall be entitled to participate in surplus assets
and profits of the company on its winding-up which may remain after the ordinary
shareholders has been repaid;
(f) whether payment of dividend on preference shares is on cumulative or non-
cumulative basis;
(g) in case the shares being issued are convertible into ordinary shares, then mode,
mechanism and manner of such conversion;
(h) rights of holders of preference shares regarding dividend, participation in general
meetings and voting therein before and after conversion of preference shares into
ordinary shares;

(i) in case the shares are partially or wholly redeemable, then mode and manner of
redemption;
(j) any other feature as deem appropriate by the board.
(iii) the issue of shares is authorized by a special resolution;
(iv) the company shall seek approval of the Commission for issuance of such shares;
(v) the company shall not amend, alter, vary or reassess the terms and conditions of
such issue without approval of the preference shares holders and the Commission;
(vi) in case a company perform an act which is contradictory to the provision to clause
(v) above, the Commission may:
(a) direct such company to redeem the entire issue with immediate effect and make full
compensation along with interest accrued therein, if any; or
(b) direct such company to convert the entire issue into ordinary shares with immediate
effect; or
(c) give direction as deemed appropriate by the Commission through an order after
providing the company an opportunity of hearing.
CHAPTER VI
EMPLOYEE STOCK OPTION SCHEME
7. Condition for issue of Employee Stock Option Scheme. - (1) A public company, may
issue shares to employees pursuant to a Scheme under section 83 of the Act, subject to
the following conditions-
(i) the articles of association of the company expressly provides and authorizes the offer
of scheme;
(ii) the board shall form a compensation committee for administration and
superintendence of the scheme provided that the chairman of the compensation
committee of listed company shall be an independent director;
(iii) board shall consider and resolve to offer the scheme;
(iv) the aforesaid decision of the board shall provide information required under sub-
clause (a) to (f) of clause (ii) of sub-regulation (1) of regulation 5, as applicable;
(v) the offer of scheme is authorized by a special resolution;
Provided that separate special resolution shall be required for the following, where a
scheme provides so,
(a) grant of option to employees of a subsidiary or holding company; and

(b) grant of option to identified employees, during any one year, equal to or exceeding
one per cent of the issued capital (excluding outstanding conversions) of the company
at the time of grant of option;
(vi) In case shares are to be issued at discount to the face value, the company shall
also obtain approval of shareholders and the Commission under section 82 of the Act;

(vii) the company and compensation committee shall ensure that its executive directors
and employees in senior management shall not participate in the deliberation or
discussion of their own allocation of options under the scheme;
(viii) a company shall not vary the terms of a scheme in any manner which may be
detrimental to the interests of its employees:
Provided that a company may by special resolution in a general meeting vary the terms
of a scheme offered pursuant to an earlier resolution but not yet exercised by its
employees provided that such variation is not prejudicial to the interests of the option
holders.
(2) There shall be a minimum period of one year between the grant of option and
vesting of option.
(3) Where options are granted by a company under its scheme in lieu of options held by
the same person under a scheme in another company, which has merged or
amalgamated with the first mentioned company, the period during which the options
granted by the merging or amalgamating company were held by him shall be adjusted
against the minimum vesting period required under these regulations.
(4) A company shall have the freedom to specify the lock-in period for the shares issued
pursuant to an exercise of option.
(5) An employee shall not have the right to receive any dividend or to vote or be entitled
to rights of members in respect of option granted to him, till shares are issued to such
employee on exercise of option.
(6) In case of failure to exercise the option, the options granted shall lapse and such
lapsed options may be granted to other employees within a period of thirty days from
the date of lapse.
(7) An option granted to an employee shall not be transferable to any other person
except to an entitled employee of the company:
Provided that:

(i) in the event of death of an employee while in employment of a company, all options
granted to him till the date of his death shall vest in his legal heirs or nominees;
(ii) in case an employee suffers a permanent incapacity while in employment of a
company, all options granted to him, as on the date of permanent incapacitation, shall
vest in him on that day;
(iii) in the event of resignation or termination of service of an employee, all options not
vested as on that day shall expire. Provided, the employee shall, subject to the terms
and conditions of the scheme, may be entitled to retain all the vested options.
(8) An option granted to an employee shall not be pledged, hypothecated, mortgaged or

otherwise alienated in any other manner.
8. Scheme offered at the time of public offering. - If any options granted to

employees in pursuance of a scheme are outstanding at the time of IPO, the offering
document shall disclose number of such outstanding options, exercise price, exercise
period and impact on shareholding of the members in case all the outstanding options
are exercised.
CHAPTER VII
GENERAL CONDITIONS, REPORTING AND DISCLOSURE REQUIREMENTS
9. General conditions. - (1) The board shall not decide or recommend increase in
capital by way of further issue of shares, beyond the authorized capital as stipulated in
the memorandum and articles of association of the company or where resolution to give
effect to such increase is passed by the members or to be passed by the members
before any such increase.
(2) In case share capital of a company has different classes or kinds having different
rights and privileges, this fact shall be distinctly mentioned in the letter of offer in case of
right issue and the difference in the rights and privileges of each class of share capital
shall be clearly stated in directors’ report to members.
10. Reporting. - (1) The company shall, within 30 days from the date of issue of shares,
submit a report to the Commission clearly indicating the shares issued to:
(i) directors;
(ii) associated companies;
(iii) other shareholders; and
(iv) persons to whom unsubscribed shares are issued under sub-clause (iv) of clause
(a) of sub-section (1) of section 83 of the Act.

(2) After issuance of right shares, the listed entity shall submit to the Commission
progress report on utilization of the proceeds of the right issue on quarterly basis
containing the following –
(i) item-wise breakup of the proceeds utilized both in terms of amount and percentage of
the total allocation made to the relevant item. The breakup must be provided in
comparative form with the utilization plan earlier disclosed to the members;
(ii) deviation, if any, from the purpose or use of proceeds earlier disclosed to the
members along-with justification for such deviation;
(iii) the progress report shall be continuously submitted till such time the proceeds from
the right issue have been fully utilized or the purpose for which the proceeds were
raised is achieved.
CHAPTER VIII
MISCELLANEOUS
11. Penalty for contravention of Regulations: Whoever fails or refused to comply

with, or contravenes any requirements of the regulations shall be punishable with
penalty as provided under sub-section (2) of section 512 of the Act.
12. Repeal and Savings. - (1) The Companies (Further Issue of Shares) Regulations,
2018, hereinafter referred to as the repealed regulations shall, upon coming into force of
these regulations, stand repealed:
Provided that repeal of the repealed regulations shall not-
(i) revive anything not in force at the time at which the repeal take effect; or
(ii) affect the previous operation of the repealed instruments or anything duly done or
suffered thereunder; or
(iii) affect any right, privilege, obligation or liability acquired, accrued or incurred under
or in respect of the said repealed regulations; or
(iv) affect any penalty imposed, forfeiture made or punishment incurred in respect of any
offence committed against or in violation of the repealed regulations; or
(v) affect any inspection, investigation, prosecution, legal proceeding or remedy in
respect of any obligation, liability, penalty, forfeiture or punishment as aforesaid, and
any such inspection, investigation, prosecution, legal proceedings or remedy may be
made, continued or enforced and any such penalty, forfeiture or punishment may be
imposed, as if these regulations has not been notified.
(2) Save as otherwise specifically provided, nothing in these regulations shall affect or
deemed to affect any action taken, orders issued, relaxation granted unless withdrawn,
fee paid or accrued, resolution passed, direction given under the repealed regulations
shall, if in force at the effective date of these regulations and not inconsistent with

provision of these regulations, shall continue to be in force and have effect as if it were
respectively taken, made, directed, passed, given, executed or issued under these
regulations
Schedule I to the Companies (Further Issue of Shares) Regulations, 2020

Following information shall be sent to the members along with the letter of offer for right
issue by a listed company:
(A) Information pertaining to company offering right issue:
(a) Company profile and history
(i) Name of Company
(ii) Incorporation date
(iii) Date of commencement of business
(iv) Corporate Universal Identification Number (CUIN)
(v) Website address and web-link where latest available financial statements are placed
(in case of listed company)
(vi) Contact details for shareholder facilitation (in form of postal address, phone number
or email address)
(b) profile of management and sponsors
(i) Profile of directors (names, executive/ nonexecutive/ independent/nominee director

and tenure of directorship held)
(ii) other directorships held (provide names of the company(ies))
(c) name(s) of the statutory auditor(s)
(d) existing capital indicating classes of shares, if any, separately
(i) authorized Capital amounting to Rs._______ divided in to _____________ shares of
Rs. _____ each.
(ii) paid-up capital amounting to Rs._______ divided in to _____________ shares of Rs.

_____ each.
(e) name of holding company, if any
(f) financial highlights of company for preceding three years including revenue/ sales,
gross profit, profit before interest, tax, profit after tax, accumulated profit or (loss), total
assets, total liabilities, net equity, break up vale per share, earnings per share, dividend,
if any, bonus issue, if any.
(g) financial highlights for preceding one year of consolidated financial statements same
as (f) above, if any
(h) detail of issue of capital in previous five years
(i) year wise detail of issue of capital (right issue or other than right)
(ii) brief details of funds utilization through previous issue of right shares, if any

(B) Details of the current right issue:
(a) description of issue:
size of the proposed issue Rs.____________
divided into ______________
of Rs. __________ each
(b) face value of the share Rs.________each
(c) basis of determination of price of the right issue
(d) proportion of new issue to existing issued shares with condition, if any
(e) date of meeting of board of directors (BOD) wherein the right issue was approved
(f) names of directors attended the BOD meeting
(g) justification for the issue
(i) details of the main objects for raising funds through present right issue:
a) detail of project
b) total funds required for the project
c) percentage of funds required financed through the right issue
d) percentage of funds required financed from other sources, if any
e) time of completion of project
(ii) expected benefits of the issue to the company and its members (description and
amount)
(h) Average market price of the share of the company during the last six months
(i) financial effects arising from right issue

(i) increase in paid-up share capital
(ii) net asset/breakup value per share before and after right issue
(iii) gearing ratio before and after right issue
(j) Total expenses to the issue

(i) bankers’ commission
(ii) others, if any

(C) Information regarding risk and risk mitigating factors, as applicable:
(a) description of major risks and company’s efforts to mitigate them:
(i) risks relating to the project for which proceeds of the right issue are to be utilized
(ii) risks relating to subscription/under-subscription of right issue
(iii) material contingencies
(iv) material commitments
(v) any adverse issue reported by the auditor in their audit reports in previous five years
(b) names of underwriters, (if required)
(D) Eligibility criteria & associated matters:
(a) members’ eligible / entitlement of getting the Letter of Right
(b) bankers to the issue
(c) date upto which the offer, if not accepted, shall be deemed to have been declined
(d) mode of acceptance (only through banking channel)
(i) bank account number
(ii) date by which amount to be credited in bank account to constitute valid acceptance
(iii) number and date of pay order / bank draft and other banking instrument.
(E) Any other material information that may have direct or indirect bearing on the
investment decision.

Companies Act, 2017
Section 67 to 80
1. Allotment
2. Certificate of shares and other securities
3. Transfer of shares and other securities

The allotment of shares means the process whereby shares are allotted to the
applicants against the subscriptions received from those persons. The procedure of
issue of shares completes at the allotment of shares and the allotment of shares is
completed at the time when the intimation of transfer is given to the registrar.
1. ALLOTMENT
1.1 Application for, and allotment of, shares and debentures (67)
Application not less than nominal amount as specified by the Commission

(1) No application for allotment of shares in and debentures of a company in pursuance
of a prospectus shall be made for shares or debentures of less than such nominal
amount as the Commission may, from time to time, specify, either generally or in a
particular case.
Form of application specified by Commission with certain declarations

(2) The Commission may specify the form of an application for subscription to shares in
or debentures of a company which may, among other matters, contain such
declarations or verifications as it may, in the public interest, deem necessary; and such
form then shall form part of the prospectus.
Certificates, statements and declaration binding

(3) All certificates, statements and declarations made by the applicant shall be binding
on him.
Application irrevocable
(4) An application for shares in or debentures of a company which is made in pursuance
of a prospectus shall be irrevocable.
Penalty provision
(5) Whoever contravenes the provisions of sub-section (1) or sub-section (2), or makes
an incorrect statement, declaration or verification in the application for allotment of
shares, shall be liable to a penalty of level 2 on the standard scale.

1.2 Repayment of money received for shares not allotted (Section 68)
Refund of money if application is unaccepted or unsuccessful

(1) Where a company issues any invitation to the public to subscribe for its shares
or other securities, the company shall refund the money in the case of the unaccepted
or unsuccessful applications within the time as may be specified.
Penalty Provision
(2) If the refund required by sub-section (1) is not made within the time specified, the
directors of the company shall be jointly and severally liable to repay that money with
surcharge at the rate of two percent for every month or part thereof from the expiration
of the fifteenth day and, in addition, shall be liable to a penalty of level 3 on the standard
scale.
1.3 Allotment of shares and other securities to be dealt in on securities

Exchange (Section 69)
Permission of the securities exchange, If no permission, allotment void.

(1) Where a prospectus, whether issued generally or not, states that application has
been or will be made for permission for the shares or other securities offered thereby to
be dealt in on the securities exchange, any allotment made on an application in
pursuance of the prospectus shall, whenever made, be void if the permission has not
been applied for before the seventh day after the first issue of the prospectus or if the
permission has not been granted before the expiration of twenty-one days from the date
of the closing of the subscription lists or such longer period not exceeding forty-two days
as may, within the said twenty-one days, be notified to the applicants for permission by
the securities exchange.
Time frame for Refund of money if no permission, if not refunded, surcharge and
penalty
(2) Where the permission has not been applied for or has not been granted as
aforesaid, the company shall forthwith repay without surcharge all money received from
applicants in pursuance of the prospectus, and, if any such money is not repaid within
eight days after the company becomes liable to repay it, the directors of the company
shall be jointly and severally liable to repay that money from the expiration of the eighth
day together with surcharge at the rate of two percent for every month or part thereof
from the expiration of the eighth day and in addition, shall be liable to a penalty of level

Money to keep in separate bank account, Penalty provision
(3) All moneys received as aforesaid shall be deposited and kept in a separate bank
account in a scheduled bank so long as the company may become liable to repay it
under sub-section (2); and, if default is made in complying with this sub-section, the
company and every officer of the company who authorises or permits the default shall
be liable to a penalty of level 2 on the standard scale.
Permission not deemed to be refused if further consideration

(4) For the purposes of this section, permission shall not be deemed to be refused if it is
intimated that the application for it, though not at present granted, will be given further
consideration.
Further effect of this section

(5) This section shall have effect-
(a) in relation to any shares or securities agreed to be taken by a person underwriting

an offer thereof by a prospectus as if he had applied therefor in pursuance of the
prospectus; and
(b) in relation to a prospectus offering shares for sale with the following modifications,
that is to say-
(i) reference to sale shall be substituted for reference to allotment;

(ii) the person by whom the offer is made and not the company, shall be liable under
sub-section (2) to repay the money received from applicant, and reference to the
company's liability under that sub-section shall be construed accordingly; and
(iii) for the reference in sub-section (3) to the company and every officer of the company
there shall be substituted a reference to any person by or through whom the offer is
made and who authorises or permits the default.
1.4 Return as to allotments (Section 70)
Time frame of filing return as to allotment (a) Particulars of return (b) a report
from Auditor Chief Executive if paid up in cash (c) To submit documents and
valuation report if allotted otherwise than in cash (d) If bonus shares, Issue of
shares at a discount, To submit certain documents with return.
(1) Whenever a company having a share capital makes any allotment of its shares, the
company shall, within forty-five days thereafter-

(a) file with the registrar a return of the allotment, stating the number and nominal
amount of the shares comprised in the allotment and such particulars as may be
specified, of each allottee, and the amount paid on each share; and
(b) in the case of shares allotted as paid up in cash, submit along with the return of
allotment, a report from its auditor to the effect that the amount of consideration has
been received in full by the company and shares have been issued to each allottee.
Provided that in case, the appointment of auditor is not mandatory by a company, the
report for the purpose shall be obtained from a practicing chartered accountant or a cost
and management accountant;
(c) in the case of shares allotted as paid up otherwise than in cash, submit along with
the return of allotment, a copy of the document evidencing the transfer of non-cash
asset to the company, or a copy of the contract for technical and other services,
intellectual property or other consideration, along with copy of the valuation report
(verified in the specified manner) for registration in respect of which that allotment was
made;
(d) file with the registrar-
(i) in the case of bonus shares, a return stating the number and nominal amount of such
shares comprised in the allotment and the particulars of allottees together with a copy of
the resolution authorising the issue of such shares;
(ii) in the case of issue of shares at a discount, a copy of the resolution passed by the
company authorising such issue and where the maximum rate of discount exceeds ten
per cent, a copy of the order of the Commission permitting the issue at the higher
percentage.
Explanation.— Shares shall not be deemed to have been paid for in cash except to the
extent that the company shall actually have received cash therefor at the time of, or
subsequent to, the agreement to issue the shares,and where shares are issued to a
person who has sold or agreed to sell property or rendered or agreed to render services
to the company, or to persons nominated by him, the amount of any payment made for
the property or services shall be deducted from the amount of any cash payment made
for the shares and only the balance, if any, shall be treated as having been paid in cash
for such shares, notwithstanding any bill of exchange or cheques or other securities for
money.

Extension in filing period by the registrar
(2) If the registrar is satisfied that in the circumstances of any particular case the period
of forty five days specified in sub-sections (1) for compliance with the requirements of
this section is inadequate, he may extend that period as he thinks fit, and, if he does so,
the provisions of sub-sections (1) shall have effect in that particular case as if for the
said period of forty five days the extended period allowed by the registrar were
substituted.
No return for subscribers to the memorandum

(3) No return of allotment shall be required to be filed for the shares taken by the
subscribers to the memorandum on the formation of the company.
Penalty provision
standard scale.
Application of this section if shares are allotted to scheduled bank or a financial

institution, if company fails to file return, the same may be filed by the Scheduled
bank or financial institution
(5) This section shall apply mutatis mutandis to shares which are allotted or issued or
deemed to have been issued to a scheduled bank or a financial institution in pursuance
of any obligation of a company to issue shares to such scheduled bank or financial
institution:
Provided that where default is made by a company in filing a return of allotment in

respect of the shares referred to in this sub-section, the scheduled bank or the financial
institution to whom shares have been allotted or issued or deemed to have been issued
may file a return of allotment in respect of such shares with the registrar together with
such documents as may be specified by the Commission in this behalf, and such return
of allotment shall be deemed to have been filed by the company itself and the
scheduled bank the financial institution shall be entitled to recover from the company
the amount of any fee properly paid by it to the registrar in respect of the return.

3. Certificate of shares and other Securities
3.1 Limitation of time for issue of certificates (Section 71)
Delivery of certificate of shares within 30 days after the allotment

(1) Every company shall issue certificates of shares or other securities within thirty days
after the
allotment of any of its shares or other securities and ensure delivery of the certificates to
the person entitled thereto at his registered address.
Penalty provision
standard scale.
3.2 Issuance of shares in book-entry form (Section 72)
Shares in book-entry form the notified date

(1) After the commencement of this Act from a date notified by the Commission, a
company
having share capital, shall have shares in book-entry form only.
Existing companies to replace physical shares with book-entry form from the
notified date
(2) Every existing company shall be required to replace its physical shares with book-
entry form in a manner as may be specified and from the date notified by the
Commission, within a period not exceeding four years from the commencement of this
Act:
Provided that the Commission may notify different dates for different classes of
companies:
Provided further that the Commission may, if it deems appropriate, extend the period
for another two years besides the period stated herein.
Section not to apply to the shares of such companies as notified by the

Commission
(3) Nothing contained in this section shall apply to the shares of such companies or
class of companies as may be notified by the Commission.

3.3 Issue of duplicate certificates (Section 73)
Time frame for issuance of duplicate certificate and grounds for applying
duplicate of a certificate.
(1) A duplicate of a certificate of shares, or other securities, shall be issued by the
company within thirty days from the date of application if the original-
(a) is proved to have been lost or destroyed, or
(b) having been defaced or mutilated or torn is surrendered to the company.
Company’s inquiry and charging fee

(2) The company, after making such inquiry as to the loss, destruction, defacement or
mutilation of the original, as it may deem fit to make, shall, subject to such terms and
conditions, if any, as it may consider necessary, issue the duplicate:
Provided that the company may charge fee and the actual expenses incurred on such
inquiry.
Notify the fact and reasons if not to issue

(3) If the company for any reasonable cause is unable to issue duplicate certificate, it
shall notify this fact, along with the reasons within twenty days from the date of the
application, to the applicant.
Penalty provision
standard scale.
Penalty if company issues duplicate certificate to defraud

(5) If a company with intent to defraud, issues a duplicate certificate thereof, the
company shall be punishable with fine which may extend to one hundred thousand
rupees and every officer of the company who is in default shall be punishable with
imprisonment for a term which may extend to one hundred and eighty days, or with fine
which may extend to fifty thousand rupees, or with both.

4. Transfer of shares and other securities
4.1 Transfer of shares and other securities (Section 74)

Proper instrument of transfer and Time frame
(1) An application for registration of transfer of shares and other transferable securities
along with proper instrument of transfer duly stamped and executed by the transferor
and the transferee may be made to the company either by the transferor or the
transferee, and subject to the provisions of this section, the company shall within fifteen
days after the application for the registration of the transfer of any such securities,
complete the process and-
(a) ensure delivery of the certificates to the transferee at his registered address; and
(b) enter in its register of members the name of the transferee:
Provided that in case of conversion of physical shares and other transferable securities
into book-entry form, the company shall, within ten days after an application is made for
the registration of the transfer of any shares or other securities to a central depository,
register such transfer in the name of the central depository:
Provided further that nothing in this section shall apply to any transfer of shares or other
securities pursuant to a transaction executed on the securities exchange.
If transfer deed is lost, destroyed or mutilated

(2) Where a transfer deed is lost, destroyed or mutilated before its lodgment, the
company may on an application made by the transferee and bearing the stamp required
by an instrument of transfer, register the transfer of shares or other securities if the
transferee proves to the satisfaction of the board that the transfer deed duly executed
has been lost, destroyed or mutilated:
Provided that before registering the transfer of shares or other securities, the company
may demand such indemnity as it may think fit.
If company is not having share capital

(3) All references to the shares or other securities in this section, shall in case of a
company not having share capital, be deemed to be references to interest of the
members in the company.

a register of transfers of shares and other securities
(4) Every company shall maintain at its registered office a register of transfers of shares
and other securities and such register shall be open to inspection by the members and
supply of copy thereof in the manner stated in section 124.
Transmission by operation of law

(5) Nothing in sub-section (1) shall prevent a company from registering as shareholder
or other securities holder a person to whom the right to any share or security of the
company has been transmitted by operation of law.
Penalty Provision
standard scale.
4.2 Board not to refuse transfer of shares(Section 75)
Board not to refuse unless defective or invalid transfer deed, Time frame to notify
the defect or invalidity, Private company subject to its articles
The board shall not refuse to transfer any shares or securities unless the transfer deed
is, for any reason, defective or invalid:
Provided that the company shall within fifteen days or, where the transferee is a central
depository, within five days from the date on which the instrument of transfer was
lodged with it notify the defect or invalidity to the transferee who shall, after the removal
of such defect or invalidity, be entitled to re-lodge the transfer deed with the company:
Provided further that the provisions of this section shall, in relation to a private company,
be subject to such limitations and restrictions as may have been imposed by the articles
of such company.
4.3 Restriction on transfer of shares by the members of a private company

(Section 76)
Intimation to the board if selling any shares by member
(1) Notwithstanding anything contained in section 75, a member of a private company
desirous of selling any shares held by him, shall intimate to the board of his intention
through a notice.

Board to offer shares to the members, Prior to this Act, private companies as per
articles and agreement
(2) On receipt of such notice, the board shall, within a period of ten days, offer those
shares for sale to the members in proportion to their existing shareholding:
Provided that a private company may transfer or sell its shares in accordance with its
articles of association and agreement among the shareholders, if any, entered into prior
to the commencement of this Act:
Provided further that any such agreement will be valid only if it is filed with the registrar
within ninety days of the commencement of this Act.
Letter of offer to members

(3) The letter of offer for sale specifying the number of shares to which the member is
entitled, price per share and specifying the time limit, within which the offer, if not
accepted, be deemed as declined, shall be dispatched to the members through
registered post or courier or through electronic mode.
If offer is declined, offer to other members

(4) If the whole or any part of the shares offered is declined or is not taken, the board
may offer such shares to the other members in proportion to their shareholding.
If all the members decline, shares may be sold to any other person
(5) If all the members decline to accept the offer or if any shares are left over, the
shares may be sold to any other person as determined by the member, who initiated the
offer.
Mechanism to determine the price-specified

(6) For the purpose of this section, the mechanism to determine the price of shares shall
be such, as may be specified.
4.4 Notice of refusal to transfer (Section 77)
Time frame of refusal, Failure to give notice be deemed refusal

(1) If a company refuses to register a transfer of any shares or other securities, the
company shall, within fifteen days after the date on which the instrument of transfer was
lodged with the company, send to the transferee notice of the refusal indicating reasons
for such refusal:

Provided that failure of the company to give notice of refusal after the expiry of the
period mentioned in this section or section 75, shall be deemed refusal of transfer.
Penalty provision
standard scale.
4.5 Transfer to successor-in-interest (Section 78)
If deceased, transfer of shares on application

The shares or other securities of a deceased member shall be transferred on
application duly supported by succession certificate or by lawful award, as the case may
be, in favour of the successors to the extent of their interests and their names shall be
entered in the register of members.
4.6 Transfer to nominee of a deceased member (Section 79)
Deposit of nomination of a person to protect the interest of legal heirs as trustee

(1) Notwithstanding anything contained in any other law for the time being in force or in
any disposition by a member of a company of his interest represented by the shares
held by him as a member of the company, a person may on acquiring interest in a
company as member, represented by shares, at any time after acquisition of such
interest deposit with the company a nomination conferring on a person the right to
protect the interest of the legal heirs in the shares of the deceased in the event of his
death, as a trustee and to facilitate the transfer of shares to the legal heirs of the
deceased subject to succession to be determined under the Islamic law of inheritance
and in case of a non-Muslim members, as per their respective law.
Person nominated shall be deemed as a member till transfer of shares to the legal
heirs
(2) The person nominated under this section shall, after the death of the member, be
deemed as a member of company till the shares are transferred to the legal heirs and if
the deceased was a director of the company, not being a listed company, the nominee
shall also act as director of the company to protect the interest of the legal heirs.
No nominee other than relatives

(3) The person to be nominated under this section shall not be a person other than the
relatives of the member, namely, a spouse, father, mother, brother, sister and son or
daughter.

Right of the member
(4) The nomination as aforesaid, shall in no way prejudice the right of the member
making the nomination to transfer, dispose of or otherwise deal in the shares owned by
him during his lifetime and, shall have effect in respect of the shares owned by the said
member on the day of his death.
4.7 Appeal against refusal for registration of transfer (Section 80)
Appeal to Commission if aggrieved by the refusal

(1) The transferor or transferee, or the person who gives intimation of the transmission
by operation of law, as the case may be, aggrieved by the refusal of transfer under
section 75 to 79 may appeal to the Commission within a period of sixty days of the date
of refusal.
Commission to provide opportunity of hearing and issue order

(2) The Commission shall, provide opportunity of hearing to the parties concerned and
may, by an order in writing, direct that the transfer or transmission should be registered
by the company and the company shall give effect to the decision within fifteen days of
the receipt of the order.
Commission may give directions

(3) The Commission may, in its aforesaid order, give such incidental and consequential
directions as to the payment of costs or otherwise as it deems fit.
Penalty provision
(4) If default is made in giving effect to the order of the Commission within the period
specified in sub-section (2), every director and officer of the company shall be liable to a
penalty of level 3 on the standard scale.
QUESTIONS
1. What shall be the particulars to be filed with the Registrar in case of allotment of
shares against a consideration otherwise than in cash?
2. What are special privileges available to financial institutions under the Companies
Act, 2017 regarding filing of return of allotment in case of company’s default?
3. Name the persons who can be appointed as a nominee by any shareholder for
any shares in case of his death.

1. Application for allotment of shares or debentures of the company shall be

made:
a. On form prescribed by company.
b. On form prescribed by commission and not less than such amount as
prescribed by company.
c. On form prescribed by commission and not less than such amount as
prescribed commission.
d. In writing, on the company’s letter head.
2. An application for allotment of shares or debentures made in pursuance of a

prospectus:
i. May be revoked by applicant before allotment of shares.
ii. Shall be irrevocable.
iii. Shall be binding on applicant.
iv. May be revoked by applicant with the approval of company.
a) i only
b) iii and iv
c) ii and iii
d) None of the above
3. If no application has been made for permission for the shares offered to be dealt
in on the securities exchange under section 69 of the Companies Act, 2017, any
allotment made on an application in pursuance of the prospectus shall be
a. valid
b. void
c. voidable
d. None of the above
4. Return of allotment shall be filed

a. Within 30 days after the allotment of shares.
b. Within 45 days after the allotment of shares.
c. Within 60 days after the allotment of shares.
d. Within 90 days after the allotment of shares.
MCQs (Answers)
1. c 2. c 3. b 4. b

Companies Act, 2017
Section 85 to 97
1. Power of Company to alter its share capital

2. Prohibition of purchase by company or giving of loans by it for purchase of
its shares
3. Subsidiary company not to hold shares in its holding company
4. Power of a company to purchase its own shares
5. Reduction of Share Capital
6. Listed Companies (Buy-Back of Shares) Regulations, 2019

Companies Act, 2017 Section 85 to 97
 Prohibition of Buy back of shares
 Permission of buy back of shares
 Reduction of Share Capital
Listed Companies (Buy-Back of Shares) Regulations, 2019

Generally companies are not allowed to buy back their shares as the ordinary
share capital of the company is irredeemable. Neither the company has got
power to forcefully demand back its shares nor can the shares holders force the
company to repurchase their own shares. Listed companies are allowed to buy
back its own shares to reduce share capital of the company but subject to and
after completing certain requirements”.
Further a company may vary the conditions of its Memorandum so as to make

alteration in authorized share capital of the company. With passing times
companies grow bigger and higher finance is required by them so they have to
increase the paid up capital of the company and resultantly someday the
authorized capital remains insufficient to issue new shares hence they have to
alter the Memorandum of Association so as to increase the authorized capital Act
also prohibits the buyback of shares from the shareholders of the company but it
allows the same for the listed companies. Companies are also allowed to reduce
the share capital of the company by completing certain requirements.
1. Authorized capital and Alteration

Power of company to alter its share capital (Section 85)
Alteration through special resolution, Increase, consolidation, sub-division and

cancellation of the shares
(1) A company having share capital may, if so authorised by its articles, alter the
conditions of its memorandum through a special resolution, so as to
(a) increase its authorised capital by such amount as it thinks expedient;

(b) consolidate and divide the whole or any part of its share capital into shares of larger
amount than its existing shares;
(c) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by
the memorandum:
(d) cancel shares which, at the date of the passing of the resolution in that behalf, have
not been taken or agreed to be taken by any person, and diminish the amount of its
share capital by the amount of the share so cancelled:

Provided that, in the event of consolidation or sub-division of shares, the rights attaching
to the new shares shall be strictly proportional to the rights attached to the previous
shares so consolidated or sub-divided:
Provided further that, where any shares issued are of a class which is the same as that
of shares previously issued, the rights attaching to the new shares shall be the same as
those attached to the shares previously held.
New shares rank pari passue with existing shares

(2) The new shares issued by a company shall rank pari passu with the existing shares
of the class to which the new shares belong in all matters, including the right to such
bonus or right issue and dividend as may be declared by the company subsequent to
the date of issue of such new shares.
Cancellation---Not a reduction of share capital

(3) A cancellation of shares in pursuance of sub-section (1) shall not be deemed to be a
reduction of share capital within the meaning of this Act.
Notice to file with the registrar

(4) The company shall file with the registrar notice of the exercise of any power referred
to in sub-section (1) within fifteen days from the exercise thereof.
Penalty Provision
standard scale.
2. Prohibition of purchase by company or giving of loans by it for purchase of

its shares (Section 86)
No company to buy its own shares except listed company

(1) No company having a share capital, other than a listed company shall have power to
buy its own shares.
No financial assistance
(2) No public company or a private company being subsidiary of a public company shall
give financial assistance whether directly or indirectly for the purpose of, or in
connection with, a purchase or subscription made or to be made, by any person of any
shares in the company or in its holding company.

Sub-section 2 not to apply
(3) Nothing in sub-section (2) shall apply to—
(a) the lending of money by a banking company in the ordinary course of its business;
(b) the provision by a company of money in accordance with any scheme approved by
company through special resolution and in accordance with such requirements as may
be specified, for the purchase of, or subscription for shares in the company or its
holding company, if the purchase of, or the subscription for, the shares held by a trust
for the benefit of the employees or such shares held by the employee of the company;
(c) the provision or securing an advance to any of its employees, including a chief
executive who, before his appointment as such, was not a director of the company, but
excluding all directors of the company, for purchase of shares of the company or of its
subsidiary or holding company.
Penalty provision
standard scale.
3. Subsidiary company not to hold shares in its holding company (Section 87)
Holding of shares by subsidiary company in its holding company shall be void

(1) No company shall, either by itself or through its nominees, hold any shares in its
holding company and no holding company shall allot or transfer its shares to any of its
subsidiary companies and any such allotment or transfer of shares of a company to its
subsidiary company shall be void:
Provided that a subsidiary shall not be barred-

(a) from acting as a trustee unless its holding company is beneficially interested under
the trust; and
(b) from dealing in shares of its holding company in the ordinary course of its business,
on behalf of its clients only subject to non-provision of any financial assistance where
such subsidiary carries on a bona fide business of brokerage:
Provided further that a subsidiary dealing in shares of its holding company in the
ordinary course of its brokerage business, shall not exercise the voting rights attached
to such shares.

Provided also that the provisions of this section shall not be applicable where such
shares are held by a company by operation of law.
Penalty Provision
standard scale.
4. Power of a company to purchase its own shares (Section 88)
Listed company to purchase its own shares

(1) Notwithstanding anything contained in this Act or any other law, for the time being in
force, or the memorandum and articles, a listed company may, subject to the provisions
of this section and the regulations specified in this behalf, purchase its own shares.
Shares be cancelled or held as treasury shares

(2) The shares purchased by the company may, in accordance with the provisions of
this section and the regulations, either be cancelled or held as treasury shares.
Conditions for holding treasury shares: (a) No voting rights (b) No cash dividend,
But allowed: (i) Bonus shares (ii) payment on redemption of treasury shares
(3) The shares held by the company as treasury shares shall, as long as they are so
held, in addition to any other conditions as may be specified, be subject to the following
conditions, namely—
(a) the voting rights of these shares shall remain suspended; and
(b) no cash dividend shall be paid and no other distribution, whether in cash or
otherwise of the company‘s assets, including any distribution of assets to members on a
winding up shall be made to the company in respect of these shares:
Provided that nothing in this sub-section shall prevent—

(a) an allotment of shares as fully paid bonus shares in respect of the treasury shares;
and
(b) the payment of any amount payable on the redemption of the treasury shares, if they
are redeemable.
Recommendation of the Board

(4) The board shall recommend to the members purchase of the shares. The decision of
the board shall clearly specify the number of shares proposed to be purchased, purpose
of the purchase i.e. cancellation or holding the shares as treasury shares, the purchase

price, period within which the purchase shall be made, source of funds, justification for
the purchase and effect on the financial position of the company.
Special resolution
(5) The purchase of shares shall be made only under authority of a special resolution.
Regulations
(6) The purchase of shares shall be made within a period as specified in the regulations.
To communicate to Commission and the Securities Exchange

(7) The proposal of the board to purchase shares shall, on conclusion of the board‘s
meeting, be communicated to the Commission and to the securities exchange on which
shares of the company are listed.
Relevant Regulations: Listed Companies (Buy-Back of Shares) Regulations, 2019
5 REDUCTION OF SHARE CAPITAL
5.1 Reduction of share capital (Section 89)
Conditions: Confirmation of court, authorized by the articles, special resolution

for cancellation, pay off any paid-up share capital
Subject to confirmation by the Court a company limited by shares, if so authorised by its
articles, may by special resolution reduce its share capital in any way, namely—
(a) cancel any paid-up share capital which is lost or unrepresented by available assets;
(b) pay off any paid-up share capital which is in excess of the needs of the company.
5.2 Objection by creditors and settlement of list of objecting Creditors (Section 90)
Objection to the reduction by Creditor

(1) Where the proposed reduction of share capital involves the payment to any
shareholder of any paid-up share capital, and in any other case if the Court so directs,
every creditor of the company who is entitled to any debt or claim, shall be entitled to
object to the reduction.
List of creditors to be settled by the court

(2) The Court shall settle a list of creditors so entitled to object, and for that purpose
shall ascertain, as far as possible without requiring an application from any creditor, the

names of those creditors and the nature and amount of their debts or claims, and may
publish notices fixing a period within which creditors not entered on the list are to claim
to be so entered or are to be excluded from the right of objecting to the reduction.
5.3 Power to dispense with consent of creditor on security being given for his
debt (Section 91)
Power of court to dispense with consent of creditor

Where a creditor entered on the list of creditors whose debt or claim is not discharged
or determined does not consent to the reduction, the Court may, if it thinks fit, dispense
with the consent of that creditor, on the company securing payment of his debt or claim
by appropriating as the Court may direct, the following amount, that is to say-
(a) if the company admits the full amount of his debt or claim, or, though not admitting it,
is willing to provide for it, then the full amount of the debt or claim; and
(b) if the company does not admit or is not willing to provide for the full amount of the
debt or claim, or if the amount is contingent or not ascertained, then an amount fixed by
the Court after the like inquiry, and adjudication as if the company were being wound up
by the Court.
5.4 Order confirming reduction (Section 92)
Order of the Court confirming the reduction

If the Court is satisfied with respect to every creditor of the company who under this Act
is entitled to object to the reduction that either his consent to the reduction has been
obtained or his debt or claim has been discharged or has been determined or has been
secured, the Court may make an order confirming the reduction on such terms and
conditions as it thinks fit.
5.5 Registration of order of reduction (Section 93)
Registrar to be registered confirming order

(1) The registrar on the filing with him of a certified copy of order of the Court confirming
the reduction of the share capital of the company, shall register the same.
Resolution for reduction of share capital shall take effect on registration

(2) A resolution for reducing share capital as confirmed by an order of the Court
registered under sub-section (1) shall take effect on such registration and not before.

Certificate of registration by the registrar as conclusive evidence
(3) The registrar shall certify under his hand the registration of the order and his
certificate shall be conclusive evidence that all the requirements of this Act with respect
to reduction of share capital have been complied with, and that the share capital of the
company is such as is stated in the order.
5.6 Liability of members in respect of reduced shares (Section 94)
No liability of past or present member, If any creditor not entered on the list
(1) A member of the company, past or present, shall not be liable in respect of any
share to any call or contribution exceeding in amount the difference, if any, between the
amount paid, or, as the case may be, the received amount, if any, which is to be
deemed to have been paid, on the share and the amount of the share as fixed by the
order:
Provided that, if any creditor, entitled in respect of any debt or claim to object to the
reduction of share capital, is, by reason of his ignorance of the proceedings for
reduction, or of their nature and effect with respect to his claim not entered on the list of
creditors, and, after the reduction, the company is unable, within the meaning of the
provisions of this Act with respect to winding up by the Court, to pay the amount of his
debt or claim, then-
(a) every person who was a member of the company at the date of the registration of
the order for reduction shall be liable to contribute for the payment of that debt, or claim
an amount not exceeding the amount which he would have been liable to contribute if
the company had commenced to be wound up on the day before that registration; and
(b) if the company is wound up, the Court on the application of any such creditor and
proof of his ignorance as aforesaid, may, if it thinks fit, settle accordingly a list of
persons so liable to contribute, and make and enforce calls and orders on the
contributories settled on the list as if they were ordinary contributories in a winding up.
No effect on the right of contributories among themselves

(2) Nothing in this section shall effect the rights of the contributories among themselves.

5.7 Penalty on concealment of name of creditor (Section 95)
Penalty provision
If any officer of the company conceals the name of any creditor entitled to object to the
reduction, or willfully misrepresents the nature or amount of the debt or claim of any
creditor, or if any officer of the company abets any such concealment or
misrepresentation as aforesaid, every such officer shall be punishable with
imprisonment for a term which may extend to one year, or with fine which may extend to
five million rupees, or with both.
5.8 Publication of reasons for reduction (Section 96)
Court may require to publish reasons for reduction

In the case of reduction of share capital, the Court may require the company to publish
in the manner specified by the Court the reasons for reduction, or such other
information in
regard thereto as the Court may think expedient with a view to giving proper information
to the public, and, if the Court thinks fit, the causes which led to the reduction.
5.9 Increase and reduction of share capital in case of a company limited by

guarantee having a share capital (Section 97)
A company limited by guarantee may, if it has a share capital and is so authorised by its
articles, increase or reduce its share capital in the same manner and on the same
conditions subject to which a company limited by shares may increase or reduce its
share capital under the provisions of this Act.
Listed Companies (Buy-Back of Shares) Regulations, 2019

CHAPTER I
PRELIMINARY
1. Short title, commencement and applicability.- (1) These regulations shall be

called the Listed Companies (Buy-Back of Shares) Regulations, 2019.
(2) They shall come into force at once.
(3) These regulations shall be applicable to buy-back of shares of companies listed on
the securities exchange, in pursuance of section 88 of the Companies Act , 2017 (XIX of
2017).
2. Definitions.- (1) In these regulations, unless there is anything repugnant in the

subject or context,-
(a) “Act” means the Companies Act, 2017 (XIX of 2017);

(b) “authorized officer” mean an officer of the company appointed by the board of
directors to act as manager to the offer;
(c) "inside information" has the same meaning as assigned to it under section 129 of the
Securities Act;
(d) “offer letter” means offer letter format prescribed under schedule I of these
regulations;
(e) "public announcement" means an announcement made by the purchasing company
for purchase or sale of its shares as per the format prescribed in these regulations;
(f) "purchase" means buy-back of its own shares by a purchasing company under
section 88 of the Act and these regulations;
(g) "purchasing company" means a listed company that buy-back its own shares under
section 88 of the Act and these regulations;
(h) "purchase period" means the time period specified in regulation 7 of these
regulations within which the purchase is to be made;
(i) "Schedule" means schedule annexed to these regulations;
(j) "Securities Act" means the Securities Act, 2015 (III of 2015);
(k) “treasury shares” means the shares purchased and held by the purchasing company
in its own name in accordance with section 88 of the Act and these regulations.
2. All other words and expressions used but not defined in these regulations shall have
the same meanings as are assigned to them in the Act, the Securities Act and the
CHAPTER II
ELIGIBILITY FOR PURCHASE
3. Eligibility Requirements for the Purchase.- (1) A company shall be eligible to

purchase if it fulfils the following conditions, namely:-
(a) it is listed on the securities exchange for a period of not less than three years;
(b) it is compliant with the minimum capital or equity requirements or minimum free float
requirement of the securities exchange, as set out in listing regulations or licensing
requirements , if any, after the purchase;
(c) it has obtained approval of its memb for purchase through special resolution;
(d) board has undertaken that the funds specified for the purchase by the board of
directors of the purchasing company are available with the company and after the
purchase, the purchasing company is capable of meeting its obligations on time during
the period up to the end of the immediately succeeding twelve months;
(e) the purchasing company should not be on the defaulter counter;
(f) board of directors of a purchasing company shall not propose or recommend a
purchase in any of the following namely:-

(i) winding up proceedings has commenced;
(ii) a scheme of arrangement, compromise, reconstruction, merger or demerger is
approved by the board of directors unless the Purchase is a part of such arrangement,
compromise, reconstruction, merger or demerger;
(iii) a public offer for acquisition of shares of the purchasing company under the
Securities Act has been announced; and
(g) before the expiry of six months from the date of an earlier general meeting in which
the purchase was disapproved by the members.
4. Procedure for Purchase.- (1) The general meeting in which the special resolution is
to be passed shall be held not later than thirty days of the date of the meeting of the
board of directors in which the purchase is recommended.
(2) The purchasing company shall make a public announcement within two working
days of passing of the special resolution.
(3) The board of directors of purchasing company shall, before making the public
announcement, authorize an officer of the company to act as manager to the offer who
shall ensure compliance with the legal requirements pertaining to purchase of shares.
(4) The purchasing company shall, within five days of the public announcement,
dispatch through registered mail or courier or electronic mode of communication, to all
its members including custodian of depository receipts and other securities convertible
into shares being purchased, if any, whose names appear on the register of members:
(a) the offer letter on format specified in Schedule I;
(b) a copy of the public announcement on format specified in Schedule II; and
(c) in case of a tender offer, the share tender form on format specified in Schedule III.
(5) The authorized officer shall, within fifteen days of the closing of the purchase period,
submit a final report on the purchase to the Commission and the securities exchange on
the format specified in Schedule IV;
5. Purchase Procedure for Tender offer.- Where the purchase is made through a
tender offer to the shareholders, following procedure shall be followed in addition to the
procedure provide in regulation 4,-
(a) the purchasing company shall, before making the public announcement, open an
escrow account with a scheduled bank;
(b) the purchasing company shall at all times during the purchase period maintain a
deposit equivalent to twenty five percent of the consideration payable in the escrow
account;

(c) the remaining amount shall be deposited by the purchasing company in the escrow
account at least three working days before the close of the purchase period;
(d) the purchasing company shall open a designated CDC account;
(e) shares tendered for sale in physical form shall not be accepted for the purchase;
(f) shares shall be tendered through the share tender form to the authorized officer and
the share tender form must be received before the closing of the purchase period;
(g) within five days of the closing of the purchase period, the authorized officer shall
prepare a list containing names of all those shareholders who have tendered shares for
sale, the number of shares tendered and the number of shares accepted by the
purchasing company for the purchase from each shareholder;
(h) where the shares tendered for sale by shareholders exceed the number of shares
announced to be purchased, the following procedure shall be adopted-
(i) where all applications for up to five hundred shares can be accommodated, then all
such applications shall be accommodated first. Where all application for five hundred
shares cannot be accommodated, then balloting by authorized officer will be conducted
among applications for five hundred shares only;
(ii) where all applications for up to five hundred shares have been accommodated and
shares are still available for purchase, then all applications for up to one thousand
shares shall be accommodated. Where all applications for up to one thousand shares
cannot be accommodated, then balloting by authorized officer will be conducted among
applications for up to one thousand shares only;
(iii) where all applications for up to five hundred shares and one thousand shares have
been accommodated and shares are still available for purchase, then all applications for
up to fifteen hundred shares shall be accommodated. Where all applications up to
fifteen hundred shares cannot be accommodated, then balloting by authorized officer
will be conducted among applications for up to fifteen hundred shares only;
(iv) where all applications for up to five hundred shares, one thousand shares and
fifteen hundred shares have been accommodated and shares are still available for
purchase, then all application for up to two thousand shares shall be accommodated.
Where all applications for up to two thousand shares cannot be accommodated, then

balloting by authorized officer will be conducted among applications for up to two
thousand shares;
(v) after the purchase in the above mentioned manner, the balance shares, if any, shall
be purchased on prorate basis from all the shareholders who have tendered more than
two thousand shares;
(i) where the shares tendered for sale by a shareholder are less than the minimum
marketable lot, five hundred shares or marketable lot, whichever is lower shall be
accepted;
(j) the payment for accepted shares shall be made by the authorized officer through a
bank draft or pay order out of the escrow account not later than seven days of the
closing of the purchase period; and
(k) the unaccepted shares, if any, shall be returned within seven days of the
closing of the purchase period.
6. Purchase through securities exchange.- Purchase shall be made through

securities exchange subject to the following procedure, in addition to the purchase
procedure provided in regulation 4, namely,-
(a) the purchase shall be made through the automated trading system of the securities
exchange; and
(b) bid(s) for the purchase shall not be made during the first half hour and the last half
hour of each trading session.
7. Purchase Period.-
(1) Purchase through tender offer shall be for a period of thirty days commencing from
the date of dispatch of the offer letter.
(2) The purchase period for purchase through securities exchange shall start not later
than seven days from the date of public announcement and shall close within ninety
days from the date of special resolution wherein members have given approval of the
Purchase or till such date that the purchase is completed, whichever is earlier.
8. Purchase Price.-
(1) In case of purchase through tender offer, the purchase price shall be the price as
recommended by the board of directors and approved by the members through special
resolution:
Provided that it shall not be less than the preceding five trading days weighted average

price of the shares.
(2) Purchase through securities exchange shall be made at the spot/current share price.
9. Maximum holding of Treasury Shares.-

(1) Treasury shares shall not at any time exceed twenty percent of the total paid up
share capital of the purchasing company [ ].1
(2) Where the purchasing company has different classes of shares, the treasury shares
for any class of shares shall not exceed twenty percent of total issued at any time and
paid up shares of such class of shares.
(3) The treasury shares shall be held in the name of the purchasing company in a CDC
blocked account in freeze form.
(4) The treasury shares shall not be placed under collateral either directly or indirectly.
(5) Any shares allotted as fully paid bonus shares in respect of the treasury shares,
shall be treated as treasury shares for the purposes of these regulations and shall be
held in the name of the company in CDC blocked account in freeze form.
CHAPTER III
OBLIGATIONS AND RESTRICTIONS
10. Obligations of the Purchasing company.-

The purchasing company shall- (a) communicate to the Commission and the securities
exchange simultaneously, the decision of the board of directors regarding
recommendation of the purchase on the day the decision is made;
1 Following words omitted vide SRO 54 (I)/2020 dated January 28, 2020 “provided that
the free float of company after the purchase does not fall below twenty five percent of
the total paid up share capital of the purchasing company”
(b) make public announcement on the format specified in Schedule II and publish it in at
least two daily newspapers, one each in Urdu and English languages having nationwide
circulation at least seven days before the commencement of the purchase period;
(c) the purchasing company shall deposit the consideration payable in the designated
clearing bank account at least one day before the settlement date;

(d) cancel the shares within ten days of the closing of the purchase period where the
purchase is made for the purpose of cancellation;
(e) submit to the Commission, the securities exchange and CDC, a copy of the special
resolution authorizing the purchasing company to purchase on next working day of the
general meeting in which it is passed and such resolution shall specify the indicative
number and percentage of shares to be purchased, mode of the purchase, allocated
funds and the purchase period;
(f) submit to the Commission and the securities exchange, the published copies of the
public announcement within two days of its publication;
(g) intimate to the Commission and the securities exchange on the day of the closing of
the purchase period, the number of shares purchased, and advertise the same within
two days of the closure of purchase period in same newspapers in which the public
announcement was published;
(h) disclose in its annual report, detail of the shares purchased and detail of the treasury
shares disposed of and such disclosures shall contain at least the number of shares
purchased or sold and the price of the purchase or sale; and
(i) file with the registrar concerned within thirty days of the closing of the purchase
period the following documents-
(i) copy of the board of directors resolution regarding the purchase;

(ii) copy of the special resolution authorizing the purchase;
(iii) copy of the notice of the general meeting in which the special
resolution was passed; and
(iv) copy of the public announcement;
(j) In case of purchase through securities exchange, report to the securities exchange
the number of shares purchased on daily basis for public dissemination;
(k) open Investor Account Service (IAS) at CDC for the purpose of the purchase; and
(l) CDC shall ensure that the shares shall remain in Blocked account until the company
decides to sell the treasury shares in accordance with these regulations.

11. Restriction on the purchasing company.-
The purchasing company shall not-
(a) apply for voluntary delisting or voluntary winding up within a period of twelve months
of the close of the purchase period;
(b) engage in the sale of the already held treasury shares through the securities
exchange-
(i) during the purchase period and during six months after the closing of the purchase
period; and
(ii) during the period it is in possession of price sensitive information;
(c) save as provided in regulation 12, withdraw, cancel or postpone the purchase once
announced;
(d) make a purchase before the expiry of [six months]2 from the last date of subscription
by shareholders in respect of any further issue of capital
[Explanation: further issue of capital shall not include bonus issue of shares]3.
(e) make a new purchase before the expiry of at-least one year from the date of
submission of the final report of the previous purchase to the Commission by authorized
officer for the purchase in accordance with these regulations.
Explanation: For the purposes of clause (d) and (e), the purchase or the new purchase
shall be deemed to commence from the date of general meeting of the purchasing
company wherein the purchase is approved.
12. General Restrictions.-

(1) Except where the recommendation for the purchase is not approved by the
members in the general meeting, the recommendation for the purchase by the board of
directors shall not be withdrawn.
(2) The sponsors, directors, officers, associated companies and undertakings and
shareholders holding more than ten percent of the voting shares of the purchasing
company shall not directly or indirectly trade in shares of the purchasing company
during the following periods-
(a) from the date of meeting of the board of directors in which the purchase is
recommended till completion of the purchase; and

(b) from the date of meeting of the board of directors in which the disposal of treasury
shares is recommended till completion of the sale.
CHAPTER IV
MISCELLANEOUS
13. Disposal of the Treasury Shares and procedure.-

(1) The treasury shares shall not be sold, transferred or otherwise disposed of by the
purchasing company within a period of six months from the closure of the purchase
period.
(2) The treasury shares shall not be sold by the purchasing company unless it has
obtained approval of its board of directors.
(3) The purchasing company shall make a public announcement as per Schedule V
within two working days of decision of board of directors.
(4) The board of directors of the purchasing company shall before making the public
announcement, designate an authorized officer for completion of sale of treasury
shares.
(5) The purchasing company shall not issue further capital, other than bonus shares
unless the treasury shares held by it are disposed of.
(6) The purchasing company may, subject to sub-regulation (1), dispose of treasury
shares in full or any part thereof in any of the following manners or combination thereof:
(a) sell the treasury shares against consideration in the market through the securities
exchange's automated trading system in transparent manner, as approved by board of
directors; and
(b) sell the treasury shares to its employees under the Companies (further issue of
shares) Regulations, 2018 under the authority of a special resolution and with prior
written approval of the Commission.
2 Substituted for words ‘three years’ vide S.R.O 857(I)/2019 dated July 25, 2019
3 Inserted vide S.R.O 857(I)/2019 dated July 25, 2019

(7) In case of sale of treasury shares the following procedure shall be followed,-
(a) the decision of sale shall be made by the board of directors shall be communicated
to the Commission and the securities exchange on the day the decision is made;
(b) sale of treasury shares shall start not later than seven days from the date of public
announcement and shall close within forty-five days from the date of decision of board
or till such date that the sale is completed, whichever is earlier.
(8) The purchasing company shall not dispose of the treasury shares in any manner
from the date of a public announcement of offer for acquisition of shares of the
purchasing company made by an acquirer under the Securities Act till the time the
acquisition process is complete.
(9) The purchasing company shall file the following information with the registrar
concerned within thirty days of the disposal of the treasury shares-
(a) mode of disposal;

(b) maximum number of treasury shares available for sale;
(c) total number of shares sold;
(d) date-wise and price-wise breakup of shares sold;
(e) total consideration received;
(f) cumulative number of treasury shares sold to date;
(g) number of balance treasury shares if any; and
(h) cumulative number of shares cancelled to date.
(10) The purchasing company shall report to the securities exchange the number of
shares sold on daily basis for public dissemination.
14. Power to give directions:-

Where the Commission is satisfied, on its own motion or on the basis of any information
received by it, that it is necessary and expedient so to do-
(a) in the interest of the shareholders of the purchasing company;

(b) in the interest of investors or the market generally; or
(c) to prevent the abuse of law or the process laid down in these regulations;
it may issue directions to the purchasing company, any of its directors, officers, or any
other person; including but not limited to-
(i) stopping the purchasing company at any stage from making the purchase or sale, as
applicable;

(ii) to do or desist from doing such acts as the Commission may determine; and
(iii) carry out such steps as are necessary to rectify the situation.
15. Repeal and Saving.-

(1) The Listed Companies (Buy-back of shares) Regulations, 2016, hereinafter referred
as repealed Regulations, shall stand repealed:
Provided that repeal of repealed Regulation shall not –

(a) revive anything not in force at the time at which the repeal takes effect; or
(b) affect the previous operation of the repealed Regulations or anything duly done or
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under
the said repealed Regulations; or
(d) affect any penalty imposed, forfeiture made or punishment awarded in respect of
any offence committed under the repealed Regulations; or
(e) affect any inspection, investigation, prosecution, legal proceeding or remedy in
respect of any obligation, liability, penalty, forfeiture or punishment as aforesaid,and any
such inspection, investigation, prosecution, legal proceeding or remedy may be made,
continued or enforced and any such penalty, forfeiture or punishment may be imposed,
as if these Regulations had not been commenced.
(2) Notwithstanding the repeal of the repealed Regulations anything done, actions
taken, proceedings initiated and instituted, processes or communications issued and
powers conferred, assumed or exercised by the Commission under the repealed
Regulations shall, on the coming into force of these regulations, be deemed to have
been validly done, taken, passed, issued, initiated or instituted, conferred, assumed and
exercised and every action, order, directive, notification, circular etc. issued by the
Commission shall be deemed to have been validly initiated or issued and shall be
proceeded with to completion and be enforced and have effect accordingly.

SCHEDULE I
OFFER LETTER IN CASE OF PURCHASE THROUGH TENDER OFFER OR
PURCHASE THROUGH SECURITIES EXCHANGE [See Regulation 4(4)(a)]
(To be on the letterhead of the purchasing company and to be sent to all its
members)
To: [Name and address of the member]

Subject:- Offer for buy-back of shares by … (name of the purchasing company) …
Dear Sir/Madam,
1. Pursuant to the Public Announcement dated … (date of the Public Announcement) …
(copy enclosed) by … (name of the purchasing company) … (hereinafter referred to as
the Company) published in various daily newspapers on … [name and date of the
Newspapers in which the Public Announcement is published] this is to inform you that
the Company intends to buy-back its own … [number of shares] shares.
2. Therefore, the Company hereby makes you an offer to buy-back shares held by you
at a purchase price of Rs. … (Purchase Price approved by members of the purchasing
company in general meeting) … per share. Please note that this offer for Purchase is
valid till closing of the Purchase Period, i.e., __________(date of the close of the
Purchase Period).
3. In case you are willing to sell the shares or part thereof held by you in the purchasing
company, you may;
(a) (In case of Tender Offer) tender the same through the Share Tender Form
supporting by the free-delivery note evidencing credit of shares in the designated CDC
account to the authorised officer. The Share Tender Form shall contain details of shares
to be tendered, CDS account number, full name of the shareholder, father’s
name/husband’s name, CNIC number, folio number, signature, phone number and
postal & email addresses.
(b) (In case of purchase through Securities Exchange) sell such shares or part
thereof to the securities broker through the securities exchange by placing a sale order
through your securities broker.

4. The authorized officer shall acknowledge receipt of the shares.
5. Purchase shall be made in accordance with the provisions of section 88 of the

Companies Act, 2019 and the Listed Companies (Buy-back of Shares) Regulations,
2019.
6. In case of any query regarding this offer for buy-back of shares, you may contact the
Company at the following addresses:
[Name, phone & fax numbers and postal & e-mail addresses of the contact person of
the purchasing company]
_________________________
_________________________
[Name, phone & fax numbers and postal & e-mail addresses of the contact person of
the authorized officer]
_________________________
_________________________
7. The directors of the purchasing company accept full responsibility for the correctness
of information contained in this Offer Letter.
Yours truly,
Date: _______
Place: ______ [Name, signature phone number and postal
address of the secretary of the Purchasing
company]

SCHEDULE II
PUBLIC ANNOUNCEMENT FOR BUY BACK OF SHARES BY {NAME OF THE

PURCHASING COMPANY
[See Regulation 4(4)(b) and 10(b)]
To be published in the newspapers and on the website of the purchasing company

1. The public announcement shall contain at least the following information:
(a) Name and address of the registered office of the purchasing company;
(b) purpose of the purchase;
(c) indicative quantum of the purchase both in terms of number and as a percentage
of the paid up capital of the purchasing company, as applicable;
(d) date of commencement of the purchase i.e., effective date of the purchase;
(e) duration of the purchase period: From …( the date of commencement) to …(the date
of closing) ... both days inclusive
(f) name of the securities exchange;
(g) name, phone number, postal and email addresses of the authorized officer
appointed by purchasing company;
(h) name, contact number(s), postal & email address of the contact person(s) appointed
by the Company to handle queries and complaints regarding the Purchase;
(i) any other information the purchasing company deems necessary to provide.
2. It is clarified that all those persons who validly hold shares of the purchasing
company are eligible to participate in the purchase even if their names do not appear on
Members' register of the purchasing company.
Date: _____
Place: _____
Name, signature & address of the Secretary of the purchasing
company
***

SCHEDULE III
SHARES TENDER FORM
[See Regulation 4(4)(c) and Regulation 5(f)]
(Letter to be sent to the purchasing company by all those shareholders of the

purchasing company who accept the offer for Purchase and intend to sell shares
in full or part thereof held by them in the purchasing company)
To,
The Chief Executive Officer,
… (full name of the Authorised officer and address of its registered office) …
Subject:- Tendering of shares for sale to …... (name of the purchasing company)
Pursuant to Offer Letter dated … (date of Offer Letter) … and the Public Announcement
dated … (date of the Public Announcement) published in the newspapers, I hereby
tender … (No. of shares) shares held by me in … (full name of the purchasing
company) … for sale to … (full name of the purchasing company) through you being
their authorised officer.
Free-delivery note evidencing credit of shares in the designated CDC account is
attached herewith in original. Detail of the transfer is as under:-
CDC Transaction
ID
CDC sub-account CDC
Investor
account No.
No. of
Participant shares
ID
Sub-account
No
I hereby undertake and affirm that I have read the contents of the Offer Letter and the
Public
Announcement.
Yours truly,
Date: _______ [Full name, father’s name/husband’s name, CNIC number, folio
number, signature, phone number and postal & email addresses of the shareholder]
***

SCHEDULE IV
FINAL REPORT ON THE PURCHASE TO BE SUBMITTED TO THE

COMMISSION AND THE SECURITIES EXCHANGE BY AUHORISED OFFICER
[See Regulation 4(5)]
To,
(i) The Director,
Securities and Exchange Commission of Pakistan,
Islamabad.
(ii) The Chief Executive,
The Pakistan Stock Exchange Limited,
Karachi.
As required under regulation 4(5) of the Companies (Buy-Back of Shares) Regulations,
2019,information on the Purchase by … {Name of the purchasing company} is as under,
(i) date of the board of directors meeting in which the Purchase was decided;
(ii) date of the general meeting of the members of the purchasing company in which
special resolution regarding the Purchase was passed;
(iii) date of publication of the Public Announcement;
(iv) Purchase Period;
(v) Purchase price (in case of tender offer);
(vi) date-wise and price-wise breakup of the purchase (in case of purchase through
securities exchange)
(vii) date of publication of the Public Announcement;
(viii) date of dispatch of the Offer Letters;
(ix) total number of shares tendered for sale;
(x) total number of shares accepted;
(xi) criteria/procedure adopted for acceptance of shares;
(xii) number and date of return of unaccepted shares;
(xiii) amount, date and mode of payment against the shares accepted;
(xiv) number of treasury shares; and
(xv) number of purchased shares cancelled, if any.
Yours truly,
Date: _______
Place: ______ [Name, signature, phone number, email and
postal address of the authorised officer]
***

SCHEDULE V
PUBLIC ANNOUNCEMENT FOR SALE OF TREASURY SHARES BY

{NAME OF THE COMPANY}
[See Regulation 13(3)]
To be published in the newspapers and website of the purchasing company

(1) The public announcement shall contain at least the following information:
(a) Name and address of the registered office of the purchasing company;
(b) purpose of the sale;
(c) indicative quantum of the sale both in terms of number and as a percentage of the
paid up capital of the company;
(d) date of commencement of the sale i.e., effective date of the sale;
(e) duration of the sale period: From …( the date of commencement) to … (the date of
closing) ... both days inclusive
(f) name of the securities exchange;
(g) name, phone number, postal and email addresses of the authorized officer
appointed by the company;
(h) any other information the purchasing company deems necessary to provide.
Date: _____
Place: _____
[Name, signature & address of the Secretary of the company]

QUESTIONS
1. Which companies can buy their shares back and what is the procedure for such buy
back of shares?
2. What conditions does a company need to fulfil if it desires to change the conditions of
its Memorandum as to the Authorised share capital of the company?
3. Under what conditions can a listed company alter its memorandum of association
order to allow the cancellation of its shares? Would such cancellation be considered
as reduction of share capital of the company?
4. Narrate the provisions contained in the Companies Act, 2017 as regards reduction of
share capital of a company limited by shares.

1. In order to be able to buy back the shares, A company must be a

a. Public unlisted company
b. Public Listed Company
c. A private company
d. A single member company
2. A company may not purchase

i. Its own shares
ii. Shares of its holding company
iii. Shares of its associated company
iv. Debentures of its associated company
a. i & ii
b. i, ii & iii only
c. all of the above
d. none of the above
3. Company can provide financial assistance to purchase its own shares to

a. Its employees
b. Its directors
c. Its chief executive who was a director before his appointment as a chief
executive.
d. Anyone who so requests but at not less than the borrowing cost of the
company.
MCQs (Answers)
1. b 2. a 3. a

COMPANIES ACT, 2017
Section 118, 153 to 198
1. Members of a company
2. Appointment and removal of directors
3. Disqualification of directors by the Commission
4. Chief Executive
5. Register of directors and other officers

Directors are the anchors of the company. They are the ones who are
responsible for the day to day decision making regarding the affairs of the
company. They are the agents of the members of the company as well. So it can
be said that the directors are in a fiduciary relationship with the members of the
company.
Directors are collectively named as board of directors or simply Board.

Companies Act provides a detailed guidance as to the roles and responsibilities
of the board of directors as well as the conditions are restrictions attaching such
rights etc.
1. Appointment and removal of directors
1.1 Ineligibility of certain persons to become director (Section 153)
A person shall not be eligible for appointment as a director of a company, if he —
(a) is a minor;
(b) is of unsound mind;
(c) has applied to be adjudicated as an insolvent and his application is pending;
(d) is an undischarged insolvent;
(e) has been convicted by a court of law for an offence involving moral turpitude;
(f) has been debarred from holding such office under any provision of this Act;
(g) is lacking fiduciary behaviour and a declaration to this effect has been made by the
Court under section 212 at any time during the preceding five years;
(h) does not hold National Tax Number as per the provisions of Income Tax Ordinance,
2001 (XLIX of 2001):
Provided that the Commission may grant exemption from the requirement of this clause
as may be notified.
(i) is not a member:

Provided that clause (i) shall not apply in the case of, –
(i) a person representing a member which is not a natural person;
(ii) a whole-time director who is an employee of the company;
(iii) a chief executive; or
(iv) a person representing a creditor or other special interests by virtue of contractual
arrangements;

(j) has been declared by a court of competent jurisdiction as defaulter in repayment of
loan to a financial institution;
(k) is engaged in the business of brokerage, or is a spouse of such person or is a
sponsor, director or officer of a corporate brokerage house:
Provided that clauses (j) and (k) shall be applicable only in case of listed companies.
1.2 Minimum number of directors of a company (Section 154)
Minimum = SMC = 1, Private Co. = 2, Public unlisted Co. = 3, Listed = 7,

Public interest companies = Female representation---specified
(1) Notwithstanding anything contained in any other law for the time being in force,
(a) a single member company shall have at least one director;
(b) every other private company shall have not less than two directors;
(c) a public company other than a listed company shall have not less than three
directors; and
(d) a listed company shall have not less than seven directors:
Provided that public interest companies shall be required to have female representation
on their board as may be specified by the Commission.
Only natural person

(2) Only a natural person shall be a director.
1.3 Number of directorships (Section 155)
Not more than specified number of directorships

(1) No person shall, after the commencement of this Act, hold office as a director,
including as an alternate director at the same time in more than such number of
companies as may be specified:
Provided that this limit shall not include the directorships in a listed subsidiary.
If more than seven companies, compliance of this section within one year
(2) A person holding the position of director in more than seven companies on the
commencement of this Act shall ensure the compliance of this section within one year of
such commencement.

Time frame of filling casual vacancy to be filled by directors of listed company
(3) Any casual vacancy on the board of a listed company shall be filled up by the
directors at the earliest but not later than ninety days from the date, the vacancy
occurred.
1.4 Compliance with the Code of Corporate Governance (Section 156)
Commission to provide framework—specified

The Commission may provide for framework to ensure good corporate governance
practices, compliance and matters incidental and axillary for companies or class of
companies in a manner as may be specified.
1.5 First directors and their term (Section 157)
Number and names of first directors be determined by subscribers

(1) The number of directors and the names of the first directors shall be determined by
the subscribers of the memorandum and their particulars specified under section 197
shall be
submitted along with the documents for the incorporation of the company.
Increase in number of first directors in general meeting, period: until the election
of directors in the first AGM
(2) The number of first directors may be increased by appointing additional directors by
the members in a general meeting. The first directors shall hold office until the election
of directors in the first annual general meeting of the company.
1.6 Retirement of first and subsequent directors (Section 158)
Time of retirement of directors

(1) All directors of the company-
(a) on the date of first annual general meeting; or
(b) in case of subsequent directors on expiry of term of office of directors mentioned in
section 161,
shall stand retired from office and the directors so retiring shall continue to perform their
functions until their successors are elected.
Timeframe and Steps to be taken for holding of election

(2) The directors so continuing to perform their functions shall take immediate steps to
hold the election of directors and in case of any impediment report such circumstances
to the registrar within forty-five days before the due date of the annual general meeting

or extra ordinary general meeting, as the case may be, in which elections are to be
held:
Provided that the holding of annual general meeting or extra ordinary general meeting,
as the case may be, shall not be delayed for more than ninety days from the due date of
the meeting or such extended time as may be allowed by the registrar, for reasons to be
recorded, only in case of exceptional circumstances beyond the control of the directors,
or in compliance of any order of the court.
Registrar’s direction to hold meeting

(3) The registrar, may on expiry of period as provided in sub-section (2), either—
(a) on its own motion; or
(b) on the representation of the members holding not less than one tenth of the total
voting powers in a company having share capital; or
(c) on the representation of the members holding not less than one tenth of the total
members of the company not having share capital of the company, directs the company
to hold annual general meeting or extra ordinary general meeting for the election of
directors on such date and time as may be specified in the order.
Penalty provision
(4) Any officer of the company or any other person who fails to comply with the direction
given under sub-section (3) shall be guilty of an offence liable to a fine of level 2 on the
standard scale.
1.7 Procedure for election of directors (Section 159)
Time frame for fixing the number of directors

(1) Subject to the provision of section 154, the existing directors of a company shall fix
the number of directors to be elected in the general meeting, not later than thirty-five
days before convening of such meeting and the number of directors so fixed shall not
be changed except with the prior approval of the general meeting in which election is to
be held.
Notice of the meeting to state number of directors fixed and name of retiring
directors
(2) The notice of the meeting at which directors are proposed to be elected shall among
other matters, expressly state-
(a) the number of directors fixed under sub-section (1); and
(b) the names of the retiring directors.

Notice of intention to contest the election
(3) Any member who seeks to contest an election to the office of director shall, whether
he is a retiring director or otherwise, file with the company, not later than fourteen days
before the date of the meeting at which elections are to be held, a notice of his intention
to offer himself for election as a director:
Provided that any such person may, at any time before the holding of election, withdraw
such notice.
Transmission of notices to members

(4) All notices received by the company in pursuance of sub-section (3) shall be
transmitted to the members not later than seven days before the date of the meeting, in
the same manner as provided under this Act for sending of a notice of general meeting.
In the case of a listed company such notice shall be published in English and Urdu
languages at least in one issue each of a daily newspaper of respective language
having wide circulation.
Procedure of election
(5) The directors of a 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 under sub-section (1), be elected by the members of the company in general
meeting in the following manner, namely-
(a) 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;
(b) 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
(c) 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.
For Guarantee not having share capital – as per articles

(6) The directors of a company limited by guarantee and not having share capital shall
be elected by members of the company in general meeting in the manner as provided in
articles of association of the company.

1.8 Powers of the Court to declare election of directors invalid (Section 160)
For application ten percent of the voting power and grounds for decision
The Court may, on the application of members holding ten percent of the voting power
in the company, made within thirty days of the date of election, declare election of all
directors or any one or more of them invalid if it is satisfied that there has been material
irregularity in the holding of the elections and matters incidental or relating thereto.
1.9 Term of office of directors (Section 161)
Term: Three years, For company limited by guarantee not having share capital—
as per articles
(1) A director elected under sections 159 or 162 shall hold office for a period of three
years unless he earlier resigns, vacates office due to fresh election required under
section 162 as the case may be, becomes disqualified from being a director or
otherwise ceases to hold office:
Provided that the term of office of directors of a company limited by guarantee and not
having share capital may be a period of less than three years as provided in the articles
of association of a company.
Casual vacancy to be filled by directors, period: remainder of the term

(2) Any casual vacancy occurring among the directors may be filled up by the directors
and the person so appointed shall hold office for the remainder of the term of the
director in whose place he is appointed.
1.10 Fresh election of directors (Section 162)
Fresh election may be held if required by a member having requisite

shareholding. For listed company – procedure specified
(1) Notwithstanding anything contained in this Act, a member having acquired, after the
election of directors, the requisite shareholding to get him elected as a director on the
board of a company, may require the company to hold fresh election of directors in
accordance with the procedure laid down in section 159:
Provided that the number of directors fixed in the preceding election shall not be
decreased.
Provided further that a listed company for the purpose of fresh election of directors
under this section shall follow such procedure as may be specified by the Commission

Time frame for holding election
(2) The board shall upon receipt of requisition under sub-section (1), as soon as
practicable but not later than thirty days from the receipt of such requisition, proceed to
hold fresh election of directors of the company.
1.11 Removal of directors (Section 163)
Resolution in general meeting for the directors appointed under 157, 161, 162, 159
A company may by resolution in general meeting remove a director appointed under
sections 157, 161 or section 162 or elected in the manner provided for in section 159:
Provided that a resolution for removing a director shall not be deemed to have been
passed if the number of votes cast against it is equal to, or exceeds-
(a) the total number of votes for the time being computed in the manner laid down in
sub-section (5) of section 159 divided by the number of directors for the time being, if
the resolution relates to removal of a director appointed under sections 157, 161 or
section 162 or where the directors were elected unopposed; or
(b) the minimum number of votes that were cast for the election of a director at the
immediately preceding election of directors, if the resolution relates to removal of a
director elected in the manner provided in sub-section (5) of section 159.
1.12 Nominee directors (164)
Nominated by creditors or other special interest because of contractual

arrangements
(1) In addition to the directors elected or deemed to have been elected by shareholders,
a company may have directors nominated by the company's creditors or other special
interests by virtue of contractual arrangements.
Government owned corporation may also have nominated directors

(2) A body corporate or corporation owned or controlled by the Federal Government or
as the case may be, a Provincial Government may also have directors nominated on
the board to whom such corporation or company has extended credit facilities.
1.13 Certain provisions not to apply to directors representing special interests

(Section 165)
Nothing of the given sections shall apply to various type of directors::
Section 158, 159, 161, 162, 163
(1) Nothing in sections 158, 159,161, 162 or 163 shall apply to-

(a) directors nominated by a body corporate or company or any other entity owned or
controlled, whether directly or indirectly, by the Federal Government or as the case may
be, a Provincial
Government on the board of the company in which such body corporate or company or
entity has made investment;
(b) directors nominated by virtue of investment made by the Federal Government or as
the case may be, a Provincial Government or the Commission on the board; or
(c) directors nominated by foreign equity holders on the board or any other body
corporate set up under a regional co-operation or other co-operation arrangement
approved by the Federal Government.
Exclusion of numbers of votes required to elect the director

(2) For the purpose of nominating directors referred to in clause (a), (b) and (c), the
number of votes computed in the manner laid down in sub-section (5) of section 159 as
are proportionate to the number of votes required to elect the director if they had offered
themselves for election, shall stand excluded from the total number of votes available to
the nominating body at an election
of directors, which may be proportionate to their voting power required to elect directors
at an election of directors of a company.
Period of nominee director—pleasure of the nominating body

(3) A director nominated under sub-section (1) shall hold office during the pleasure of
the nominating body.
1.14 Manner of selection of independent directors and maintenance of

databank of independent directors (Section 166)
Data bank of independent directors

(1) An independent director to be appointed under any law, rules, regulations or code,
shall be selected from a data bank containing names, addresses and qualifications of
persons who are eligible and willing to act as independent directors, maintained by any
institute, body or association, as may be notified by the Commission, having expertise in
creation and maintenance of such data bank and post on their website for the use by
the company making the appointment of such directors:
Provided that responsibility of exercising due diligence before selecting a person from
the data bank referred to above, as an independent director shall lie with the company
or the Government, as the case may be, making such appointment.

Meanings of Independent director and circumstances
(2) For the purpose of this section, an independent director means a director who is not
connected or does not have any other relationship, whether pecuniary or otherwise, with
the company, its associated companies, subsidiaries, holding company or directors; and
he can be reasonably perceived as being able to exercise independent business
judgment without being subservient to any form of conflict of interest:
Provided that without prejudice to the generality of this sub-section no director shall be
considered independent if one or more of the following circumstances exist—
(a) he has been an employee of the company, any of its subsidiaries or holding
company within the last three years;
(b) he is or has been the chief executive officer of subsidiaries, associated company,
associated undertaking or holding company in the last three years;
(c) he has, or has had within the last three years, a material business relationship with
the company either directly, or indirectly as a partner, major shareholder or director of a
body that has such a relationship with the company.
Explanation: The major shareholder means a person who, individually or in concert

with his family or as part of a group, holds 10% or more shares having voting rights in
the paid-up capital of the company;
(d) he has received remuneration in the three years preceding his/her appointment as a
director or receives additional remuneration, excluding retirement benefits from the
company apart from a director‘s fee or has participated in the company‘s stock option or
a performance-related pay scheme;
(e) he is a close relative of the company‘s promoters, directors or major shareholders:
Explanation: ―close relative means spouse(s), lineal ascendants and descendants

and siblings;
(f) he holds cross-directorships or has significant links with other directors through
involvement in other companies or bodies not being the associations licensed under
section 42;
(g) he has served on the board for more than three consecutive terms from the date of
his first appointment, and for more than two consecutive terms in case of a public sector
company, provided that such person shall be deemed “independent director” after a
lapse of one term;

(h) a person nominated as a director under sections 164 and 165:
Provided further that for determining the independence of directors for the purpose of
sub-clauses (a), (b) and (c) in respect of public sector companies, the time period shall
be taken as two years instead of three years. Further, an independent director in case
of a public sector company shall not be in the service of Pakistan or of any statutory
body or any body or institution owned or controlled by the Government.
To elect independent directors in listed company

(3) The independent director of a listed company shall be elected in the same manner
as other directors are elected in terms of section 159 and the statement of material facts
annexed to the notice of the general meeting called for the purpose shall indicate the
justification for choosing the appointee for appointment as independent director.
Consent of independent director for data bank

(4) No individual shall be selected for the data bank referred to in sub-section (1)
without his consent in writing.
Qualification and other requirements by the Commission

(5) The manner and procedure of selection of independent directors on the databank
who fulfill the qualifications and other requirements shall be specified by the
Commission.
Relaxation till notification and on application

(6) The requirements of sub-section (1)—
(a) shall be deemed relaxed till such time a notification is issued by the Commission;
and
(b) may be relaxed by the Commission on an application made by the company

supported with the sufficient justification or the practical difficulty, as the case may be.
1.15 Consent to act as director to be filed with company( Section 167)
Consent in writing for director or chief executive

(1) No person shall be appointed or nominated as a director or chief executive of a
company or represent as holding such office, nor shall any person describe or name
any other person as a director or proposed director or chief executive or proposed chief
executive of any company, unless such person or such other individual has given his
consent in writing to the company for such appointment or nomination.

Consent to be filed with the registrar
(2) The consent given to the company under sub-section (1) shall be filed with the
registrar within fifteen days thereof.
1.16 Validity of acts of directors (Section 168)
Acts of director to be valid if afterwards discovered defect in his appointment

The acts of a person acting as a director are valid notwithstanding that it is afterwards
discovered that there was a defect in his appointment; or he was disqualified from
holding office; or he had ceased to hold such office:
Provided that, as soon as any such defect has come to notice, the director shall not
exercise the right of his office till the defect has been removed.
1.17 Penalties (Section 169)
Penalty provision for sections 154 to 168

Whoever contravenes or fails to comply with any of the provisions of sections 154 to
168 or is a party to the contravention of the said provisions shall be liable to a penalty of
level 2 on the standard scale and may also be debarred by the authority which imposes
the penalty from becoming or continuing a director of the company for a period not
exceeding three years.
1.18 Restriction on director’s remuneration (Section 170)
Determination of remuneration for extra services

(1) The remuneration of a director for performing extra services, including the holding of
the office of chairman, shall be determined by the board or the company in general
meeting, as the case may be, in accordance with the provisions in the company‘s
articles.
Remuneration for attending meetings

(2) The remuneration to be paid to any director for attending the meetings of the board
or a committee of directors shall not exceed the scale approved by the company or the
board, as the case may be, in accordance with the provisions of the articles:

1.19 Vacation of office by the directors (Section 171)
Circumstances to cease to hold office of director

(1) A director shall ipso facto cease to hold office if—
(a) he becomes ineligible to be appointed as a director on any one or more of the
grounds enumerated in section 153;
(b) he absents himself from three consecutive meetings of the board without seeking
leave of absence;
(c) he or any firm of which he is a partner or any private company of which he is a

director—
(i) without the sanction of the company in general meeting accepts or holds any office of
profit under the company other than that of chief executive or a legal or technical
adviser; or
(ii) accepts a loan or guarantee from the company in contravention of section 182;
Additional grounds in articles

(2) Nothing contained in sub-section (l) shall be deemed to preclude a company from
providing by its articles that the office of director shall be vacated on any grounds
additional to those specified in that sub-section.
1.20 Disqualification orders (Section 172)
Commission to pass disqualification order under various circumstances

(1) In any of the circumstances stated hereunder, the Commission may pass a
disqualification order against a person to hold the office of a director of a company for a
period up to five years beginning from the date of order—
(a) conviction of an offence in connection with the promotion, formation, management or
liquidation of a company, or with the receivership or management of a company‘s
property;
(b) persistent default in relation to provisions of this Act requiring any return, account or
other document to be filed with, delivered or sent, or notice of any matter to be given, to
the Commission or the registrar;
(c) a person has been a director of a company which became insolvent at any time
(while he was a director or subsequently):

Provided that order against any such person shall not be made after the end of the
period of two years beginning with the day on which the company of which that person
is or has been a director became insolvent;
(d) the business of the company in which he is or has been a director, has conducted to
defraud its creditors, members or any other persons or for a fraudulent or unlawful
purpose, or in a manner oppressive of any of its members or that the company was
formed for any fraudulent or unlawful purpose; or
(e) the person concerned in the formation of the company or the management of its
affairs have in connection therewith been guilty of fraud, misfeasance, breach of trust or
other misconduct towards the company or towards any of its member; or
(f) the affairs of the company of which he is a director have been conducted in a manner
which has deprived the shareholders thereof of a reasonable return; or
(g) the person has been convicted of allotment of shares of a company for inadequate
consideration; or
(h) the person is involved in illegal deposit taking; or
(i) the person has been convicted of financial irregularities or malpractices in a company
or
(j) the company of which he is a director has acted against the interests of the
sovereignty and integrity of Pakistan, the security of the State, friendly relations with
foreign States; or
(k) the company of which he is a director refuses to act according to the requirements of
the memorandum or articles or the provisions of this Act or fail to carry out the directions
of the Commission given in the exercise of powers under this Act; or
(l) the person is convicted of insider trading or market manipulation practices; or
(m) the person has entered into a plea bargain arrangement with the National
Accountability Bureau or any other regulatory body;
(n) the person has been declared a defaulter by the securities exchange;

(o) that it is expedient in the public interest so to do.
Disqualification order to run concurrently

(2) Where a disqualification order is made against a person who is already subject to
such an order, the periods specified in those orders shall run concurrently.
Order by the Commission to issue on own motion or on complaint

(3) An order under this section may be made by the Commission on its own motion or
upon a complaint made in this regard.
Opportunity of representation and of being heard

(4) Before making an order the Commission shall afford the person concerned an
opportunity of representation and of being heard.
Order shall be without prejudice to the powers of the Commission to take further
action
(5) Any order made by the Commission under this section shall be without prejudice to
the powers of the Commission to take such further action as it deems fit with regard to
the person concerned.
1.21 Personal liability for company’s debts where person acts while disqualified
(Section 173)
Personally responsible for all the relevant debts if: (a) contravention of
disqualification (b) person acts on instructions of disqualified person
(1) A person shall be personally responsible for all the relevant debts of a company if at
any time—
(a) in contravention of a disqualification order under section 172, he is involved in the
management of the company, or
(b) as a person who is involved in the management of the company, he acts on

instructions given without the leave of the Commission by a person whom he knows at
that time to be the subject of a disqualification order:
Provided that where the decision is taken in the board, the disqualified director shall be
personally responsible to the extent of proportionate amount of liability so incurred.
A person liable jointly and severely for relevant debts

(2) Where a person is personally responsible under this section for the relevant debts of
a company, he is jointly and severally liable in respect of those debts with the company
and any other person who, whether under this section or otherwise, is so liable.

Relevant debts
(a) in relation to a person who is personally responsible under paragraph (a) of sub-
section (1), such debts and other liabilities of the company as are incurred at a time
when that person was involved in the management of the company; and
(b) in relation to a person who is personally responsible under paragraph (b) of that sub-
section, such debts and other liabilities of the company as are incurred at a time when
that person was acting on instructions given as mentioned in that paragraph.
Company means a public interest company

(4) For the purposes of this section, company means a public interest company and a
person shall be deemed involved in the management of the company, if he is a director
or concerned, whether directly or indirectly or takes part in the management of such
company.
1.22 Prohibition on assignment of office by directors (Section 174)
Not to assign office to any other person

(1) A director of any company shall not assign his office to any other person and any
such appointment shall be void ab-initio.
Appointment of alternate or substitute director

(2) Notwithstanding anything contained in sub-section (1), the appointment by a
director, with the approval of the board, of an alternate or substitute director to act for
him during his absence from Pakistan of not less than ninety days, shall not be
deemed to be an assignment of office.
Period of alternate or substitute director

(3) The alternate director appointed under sub-section (2) shall ipso facto vacate office if
and when the director appointing him returns to Pakistan.
1.23 Penalty for unqualified person acting as director (Section 175)
Penalty for director or chief executive who is not qualified but acts as a director
or chief executive
If a person who is not qualified to be a director or chief executive or who has otherwise
vacated the office of director or chief executive describes or represents himself or acts
as a director or chief executive, or allows or causes himself to be described as such,
shall be liable to a penalty of level 1 on the standard scale.

1.24 Proceedings of the board (Section 176)
Quorum for a meeting of board of listed company

(1) The quorum for a meeting of board of a listed company shall not be less than one-
third of number of directors or four, whichever is greater and the participation of the
directors by video conferencing or by other audio visual means shall also be counted for
the purposes of quorum under this sub-section:
Provided that if at any time, there are not enough directors to form a quorum to fill a
casual vacancy, all the remaining directors shall be deemed to constitute a quorum for
this limited purpose.
Quorum for a meeting of the board of other than listed company

(2) The quorum for a meeting of the board of other than listed company shall be as
provided in the articles.
Meeting of board of public company—once in each quarter

(3) The board of a public company shall meet at least once in each quarter of a year.
Penalty provision
(4) If a meeting of the board is conducted in the absence of a quorum or a meeting of
board is not held as required by sub-section (3), the chairman of the directors and the
directors shall be liable—
(a) if the default relates to a listed company, to a penalty of level 2 on the standard
scale; and
(b) if the default relates to any other company, to a penalty of level 1 on the standard
scale.
1.25 Ineligibility of bankrupt to act as director (Section 177)
Undischarged insolvent not to act as chief executive or director, otherwise

fine/punishment
If any person being an undischarged insolvent acts as chief executive or director of a
company, he shall be liable to imprisonment for a term not exceeding two years or to a
fine not exceeding one hundred thousand rupees, or to both.

1.26 Records of resolutions and meetings of board (Section 178)
Record of resolution and minutes of meeting

(1) Every company shall keep records comprising—
(a) all resolutions of the board passed by circulation; and
(b) minutes of all proceedings of board meetings or committee of directors along with
the names of participants, to be entered in properly maintained books.
Authentication of the minutes of the meeting

(2) Minutes recorded in accordance with sub-section (1), if purporting to be
authenticated by the chairman of the meeting or by the chairman of the next meeting,
shall be the evidence of the proceedings at the meeting.
Minutes to be deemed calling , holding and conducting of meeting

(3) Until the contrary is proved, every meeting of board or committee of directors in
respect of the proceedings whereof minutes have been so made shall be deemed to
have been duly called, held and conducted.
Copy of the minutes of meeting to be furnished to every director

(4) A copy of the draft minutes of meeting of board shall be furnished to every director
within fourteen days of the date of meeting.
Record to be kept at registered office for certain period

(5) The records must be kept at the registered office of the company from the date of
the resolution, meeting or decision simultaneously in physical and electronic form and it
shall be preserved for at least ten years in physical form and permanently in electronic
form.
Penalty provision
(6) Any contravention or default in complying with requirement of this section shall be an
offence liable to a penalty of level 1 on the standard scale.

1.27 Passing of resolution by the directors through circulation (Section 179)
Resolution signed by all the directors shall be valid as it passed at the meeting
(1) A resolution in writing signed by all the directors or the committee of directors for the
time being entitled to receive notice of a meeting of the directors or committee of
directors shall be as valid and effectual as if it had been passed at a meeting of the
directors or the committee of directors duly convened and held.
Resolution to be circulated to all the directors

(2) A resolution shall not be deemed to have been duly passed, unless the resolution
has been circulated, together with the necessary papers, if any, to all the directors.
Resolution part of minutes of meeting

(3) A resolution under sub-section (1) shall be noted at a subsequent meeting of the
board or the committee thereof, as the case may be, and made part of the minutes of
such meeting.
Resolution by circulation may not be revoked

(4) A directors‘ agreement to a written resolution, passed by circulation, once signified,
may not be revoked.
1.28 Liabilities of directors and officers (Section 180)
(i) Exemption or indemnifying against any liability be void (ii) Exceptions

Any provision, whether contained in the articles of a company or in any contract with a
company or otherwise, for exempting any officer or auditor of the company, from, or
indemnifying him against, any liability which by virtue of any law would otherwise attach
to him in respect of any negligence, default, breach of duty or breach of trust of which
he may be guilty in relation to the company, shall be void except as otherwise specified
for:
(a) provisions of insurance undertaken by a company on behalf of such officers of the
company; or
(b) qualifying third party indemnity provisions undertaken by a company on behalf of
such officers of the company:
Provided that, notwithstanding anything contained in this section, a company may, in

pursuance of any such provision as aforesaid, indemnify any such director, chief
executive, officer against any liability incurred by him in defending any proceedings,
whether civil or criminal, in which judgment is given in his favour or in which he is

acquitted, or in connection with any application under section 493 in which relief is
granted to him.
1.29 Protection to independent and non-executive directors (Section 181)
Liability of independent director and non-executive director

(1) Notwithstanding anything contained in this Act—
(a) an independent director; and
(b) a non-executive director;
shall be held liable, only in respect of such acts of omission or commission by a listed
company or a public sector company which had occurred with his knowledge,
attributable through board processes, and with his consent or connivance or where he
had not acted diligently.
Meanings of non-executive director

(2) For the purpose of this section a non-executive director means, a person on the
board of the company who-
(a) is not from among the executive management team and may or may not be
independent;
(b) is expected to lend an outside viewpoint to the board of a company;
(c) does not undertake to devote his whole working time to the company and not involve
in managing the affairs of the company;
(d) is not a beneficial owner of the company or any of its associated companies or
undertakings;
(e) does not draw any remuneration from the company except the meeting fee.
1.30 Loans to directors: requirement of members’ approval (Section 182)
No loan and no guarantee for directors

(1) A company shall not—
(a) make a loan to a director of the company or of its holding company; or to any of his
relatives;
(b) give a guarantee or provide security in connection with a loan made by any person
to such a director; or to any of his relatives;

unless the transaction has been approved by a resolution of the members of the
company:
Provided that in case of a listed company, approval of the Commission shall also be
required before sanctioning of any such loan.
Explanation.—For the purpose of this section ―relative‖‗ in relation to a director

means his spouse and minor children.
Nothing to apply for ordinary course of business

(2) Nothing contained in sub-section (1) shall apply to a company which in the ordinary
course of its business provides loans or gives guarantees or securities for the due
repayment of any loan.
Fine for contravention

(3) Every person who is a party to any contravention of this section, including in
particular any person to whom the loan is made or who has taken the loan in respect of
which the guarantee is given or the security is provided, shall be punishable with fine
which may extend to one million rupees or with simple imprisonment for a term which
may extend to one year.
If contravention, liability for repayment of loan with mark up

(4) All persons who are parties to any contravention of sub-section (1) shall be liable,
jointly and severally, to the lending company for the repayment of the loan or for making
good the sum with markup not less than the borrowing cost of the lending company
which the lending company may have been called upon to pay by virtue of the
guarantee given or the security provided by such company.
Sub-section (1) to apply to book-debt which was from its inception in the nature
of a loan or an advance
(5) Sub-section (1) shall apply to any transaction represented by a book-debt which was
from its inception in the nature of a loan or an advance.
1.31 Powers of board (Section 183)
Business to be managed by the board

(1) The business of a company shall be managed by the board, who may exercise all
such powers of the company as are not by this Act, or by the articles, or by a special
resolution, required to be exercised by the company in general meeting.

Powers on behalf of the company by passing resolution at their meeting
(2) The board shall exercise the following powers on behalf of the company, and shall
do so by means of a resolution passed at their meeting, namely:—
(a) to issue shares;
(b) to issue debentures or any instrument in the nature of redeemable capital;
(c) to borrow moneys otherwise than on debentures;
(d) to invest the funds of the company;
(e) to make loans;
(f) to authorise a director or the firm of which he is a partner or any partner of such firm
or a private company of which he is a member or director to enter into any contract with
the company for making sale, purchase or supply of goods or rendering services with
the company;
(g) to approve financial statements;
(h) to approve bonus to employees;
(i) to incur capital expenditure on any single item or dispose of a fixed asset in
accordance with the limits as may be specified:
Provided that the acceptance by a banking company in the ordinary course of its
business of deposit of money from the public repayable on demand or otherwise and
withdrawable by cheque, draft, order or otherwise, or placing of moneys on deposit by a
banking company with another banking company such conditions as the board may
prescribe, shall not be deemed to be a borrowing of money or, as the case may be, a
making of loan by a banking company with the meaning of this section;
(j) to undertake obligations under leasing contracts exceeding such amount as may be
notified;
(k) to declare interim dividend; and
(l) having regard to such amount as may be determined to be material (as construed in
Generally Accepted Accounting Principles) by the board—

(i) to write off bad debts, advances and receivables;
(ii) to write off inventories and other assets of the company; and
(iii) to determine the terms of and the circumstances in which a law suit may be
compromised and a claim or right in favour of a company may be released,
extinguished or relinquished.
(m) to take over a company or acquire a controlling or substantial stake in another

company;
(n) any other matter which may be specified.
Board not to do except with the consent of general meeting

(3) The board of a company shall not except with the consent of the general meeting
either specifically or by way of an authorisation, do any of the following things,
namely.—
(a) sell, lease or otherwise dispose of the undertakings or a sizeable part thereof unless
the main business of the company comprises of such selling or leasing; and
Explanation.—For the purposes of this clause-
(i) ―undertaking‖ shall mean an undertaking in which the investment of the company
exceeds twenty percent of its net worth as per the audited financial statements of the
preceding financial year or an undertaking which generates twenty percent of the total
income of the company during the previous financial year;
(ii) the expression ―sizeable part‖ in any financial year shall mean twenty five percent
or more of the value of the assets in that class as per the audited financial statements of
the preceding financial year;
(b) sell or otherwise dispose of the subsidiary of the company;
(c) remit, give any relief or give extension of time for the repayment of any debt
outstanding against any person specified in sub-section (1) of section 182.

Sub-section 3 shall not entitle a listed company to sell or otherwise dispose of
the undertaking
(4) Nothing contained in sub-section (3) shall entitle a listed company to sell or
otherwise dispose of the undertaking, which results in or may lead to closure of
business operation or winding up of the company, without there being a viable alternate
business plan duly authenticated by the board.
Validity period of resolution of section 3—one year

(5) Any resolution passed under sub-section (3) if not implemented within one year from
the date of passing shall stand lapsed.
Penalty Provision
offence liable to a penalty of level 2 on the standard scale and shall be individually and
severally liable for losses or damages arising out of such action.
1.32 Prohibition regarding making of political contributions (Section 184)
Company not to contribute any political party or for political purpose.

(1) Notwithstanding anything contained in this Act, a company shall not contribute any
amount or allow utilization of its assets—
(a) to any political party; or
(b) for any political purpose to any individual or body.
Penalty provision for company,every director and officer

(2) If a company contravenes the provisions of sub-section (1), then—
(a) the company shall be liable to a penalty of level 2 on the standard scale; and
(b) every director and officer of the company who is in default shall be punishable with
imprisonment of either description for a term which may extend to two years and shall
also be liable to a fine of one million rupees.

1.33 Prohibition regarding distribution of gifts (Section 185)
Company not to distribute gifts in meeting
(1) Notwithstanding anything contained in this Act, a company shall not distribute gifts in
any form to its members in its meeting.
Penalty provision
2. CHIEF EXECUTIVE
2.1 Appointment of first chief executive (Section 186)
Every company shall have a chief executive

(1) Every company shall have a chief executive appointed in the manner provided in this
section and section 187.
First name by subscribers to be submitted along with the documents for

incorporation
(2) The name of first chief executive shall be determined by the subscribers of the
memorandum and his particulars specified under section 197 shall be submitted along
with the documents for the incorporation of the company.
Period of first Chief Executive—up to first AGM

(3) The first chief executive shall, unless he earlier resigns or otherwise ceases to hold
office, hold office up to the first annual general meeting of the company or, if a shorter
period is fixed by the subscribers at the time of his appointment, for such period.
Government is empowered to nominate CE for Public Sector Company

(4) Notwithstanding anything contained in this section, the Government shall have the
power to nominate chief executive of a public sector company in such manner as may
be specified.
2.2 Appointment of subsequent chief executive (Section 187)
(i) Time frame for the appointment of subsequent CE and period of appointment,
(ii) Period of appointment against casual vacancy.

(1) Within fourteen days from the date of election of directors under section 159 or the
office of the chief executive falling vacant, as the case may be, the board shall appoint
any person, including an elected director, to be the chief executive, but such
appointment shall not be for a period exceeding three years from the date of
appointment:
Provided that the chief executive appointed against a casual vacancy shall hold office till
the directors elected in the next election appoint a chief executive.
CE eligible for reappointment after expiry of term

(2) On the expiry of his term of office under section 186 or sub-section (1) of this
section, a chief executive shall be eligible for reappointment.
CE shall continue to perform till successor

(3) The chief executive retiring under section 186 or this section shall continue to
perform his functions until his successor is appointed, unless non-appointment of his
successor is due to any fault on his part or his office is expressly terminated.
Government power to nominate CE if majority of the directors is nominated by

the Government
(4) Notwithstanding anything contained in this section, the Government shall have the
power to nominate chief executive of a company where majority of directors is
nominated by the Government, in such manner as may be specified.
2.3 Terms of appointment of chief executive (Section 188)
Terms and conditions of CE—by the Board or Company in general meeting

(1) Save as provided in sub-section (2), the terms and conditions of appointment of a
chief executive shall be determined by the board or the company in general meeting in
accordance with the provisions in the company‘s articles.
Terms and conditions of nominated CE under section 186 and 187—by the
government
(2) The terms and conditions of appointment of a chief executive nominated under
section 186 or 187 shall be determined by the Government, in such manner as may be
specified.

CE if already not director, deemed to be a director
(3) The chief executive shall if he is not already a director of the company, be deemed
to be its director and be entitled to all the rights and privileges, and subject to all the
liabilities, of that office.
2.4 Restriction on appointment of chief executive (Section 189)
CE no to appoint if CE is ineligible under section 153 or disqualified under

section 171 or 172
No person who is ineligible to become a director of a company under section 153 or
disqualified under sections 171 or 172 shall be appointed or continue as the chief
executive of any company.
2.5 Removal of chief executive (Section 190)
(i) Board resolution—with not less than three-fourths majority of the total number
or (ii) Special resolution
(1) The board by resolution passed by not less than three-fourths of the total number of
directors for the time being, or the company by a special resolution, may remove a chief
executive before the expiration of his term of office notwithstanding anything contained
in the articles or in any agreement between the company and such chief executive.
Government to remove Chief Executive if more than seventy-five percent of the

voting rights are held by the Government
(2) Notwithstanding anything contained in this section, the Government or an authority
or a person authorized by it shall have the power to remove chief executive of a
company where more than seventy-five percent of the voting rights are held by the
Government.
2.6 Chief executive not to engage in business competing with company’s

business (Section 191)
Chief Executive not to engage in same business—Explanation: even spouse or

minor children
(1) A chief executive of a public company shall not directly or indirectly engage in any
business which is of the same nature as and directly competes with the business
carried on by the company of which he is the chief executive or by a subsidiary of such
company.

Explanation.—A business shall be deemed to be carried on indirectly by the chief
executive if the same is carried on by his spouse or any of his minor children.
Forthwith disclosure in writing of the business on appointment

(2) Every person who is appointed as chief executive of a public company shall forthwith
on such appointment disclose to the company in writing the nature of such business and
his interest therein.
2.7 Chairman in a listed company (Section 192)
Time frame for the appointment of Chairman of a listed company

(1) The board of a listed company shall within fourteen days from the date of election of
directors, appoint a chairman from among the non-executive directors who shall hold
office for a period of three years unless he earlier resigns, becomes ineligible or
disqualified under any provision of this Act or removed by the directors.
Board to define the respective roles and responsibilities of the chairman and
chief executive
(2) The board shall clearly define the respective roles and responsibilities of the
chairman and chief executive:
Provided that the Commission may specify the classes of companies for which the
chairman and chief executive shall not be the same individual.
Chairman as leader of the board

(3) The chairman shall be responsible for leadership of the board and ensure that the
board plays an effective role in fulfilling its responsibilities.
Review report by the Chairman

(4) Every financial statements circulated under section 223 of this Act shall contain a
review report by the chairman on the overall performance of the board and
effectiveness of the role played by the board in achieving the company‘s objectives.
2.8 Penalty (Section 193)
Penalty provision for sections 186 to 192

Any contravention or default in complying with requirements of sections 186 to 192 shall
be an offence liable to a penalty of level 2 on the standard scale and may also be
debarred by the authority which imposes the penalty from becoming a director or chief
executive of a company for a period not exceeding five years.

2.9 Public company required to have secretary (Section 194)
Public company to have a company secretary

A public company must have a company secretary; possessing such qualification as
may be specified.
2.10 Listed company to have share registrar (Section 195)
Listed company to have a share registrar with such qualification—specified

Every listed company shall have an independent share registrar possessing such
qualifications and performing such functions as may be specified.
2.11 Bar on appointment of sole purchase, sales agents (Section 196)
Approval of the Commission to appoint sale of distribution agent, sub- section

not to apply unless major portion of the business of a company incorporated
outside Pakistan is conducted in Pakistan
(1) No company whether incorporated in Pakistan or outside Pakistan which is carrying

on business in Pakistan shall, without the approval of the Commission, appoint any sole
purchase, sale or distribution agent:
Provided that this sub-section shall not apply to a sole purchase, sale or distribution
agent appointed by a company incorporated, outside Pakistan, unless the major portion
of the business of such company is conducted in Pakistan.
Penalty provision (Fine or Punishment)

(2) Whoever contravenes any of the provisions of this section shall be punished with
imprisonment for a term which may extend to two years, or with fine which may extend
to one hundred thousand rupees, or with both; and, if the person guilty of the offence is
a company or other body corporate, every director, chief executive, or other officer,
agent or partner thereof shall, unless he proves that the offence was committed without
his knowledge or that he exercised all due diligence to prevent its commission, be
deemed to be guilty of the offence.

3. REGISTER OF DIRECTORS AND OTHER OFFICERS
3.1 Register of directors, officers (Section 197)

Every company to keep its register of directors and officers at registered office
with particulars specified
(1) Every company shall keep at its registered office a register of its directors and
officers, including the chief executive, company secretary, chief financial officer,
auditors and legal adviser, containing with respect to each of them such particulars as
may be specified.
Time frame for every person on his appointment or change to provide particulars
(2) Every person referred to in sub-section (1) shall, within a period of ten days of his
appointment or any change therein, as the case may be, furnish to the company the
particulars specified under sub-section (1).
Time frame for filing the particulars with the registrar

(3) Every company shall, within a period of fifteen days from the date of appointment of
any person referred in sub-section (1) or any change among them, or in any of their
particulars, file with the registrar a return in the specified form:
Provided that this sub-section shall not apply to the first appointment made at the time
of incorporation of the company.
Penalty provision
(4) Any contravention or default in complying with requirement of sub-section (1) or sub-
section (3) shall be an offence liable to a penalty of level 1 on the standard scale.
Rectification of the register of directors---by the court

(5) If the name of any person is fraudulently or without sufficient cause entered in or
omitted from the register of directors of a company the person aggrieved or the
company, may apply to the Court for rectification of the register of directors.
The Court may either refuse the application or may order rectification of the
register
(6) The Court may either refuse the application or may order rectification of the register
on such terms and conditions as it may deem fit and may make order as to costs.

Court may send reference for adjudication
(7) Where the Court has passed and order under sub-section (6) that prima facie entry
in or omission from, the register of directors the name or other particulars of any person,
was made fraudulently or without sufficient cause, the Court may send a reference for
adjudication of offence under sub-section (8) to the court as provided in section 482.
Punishment or fine provision

(8) Anyone who fraudulently or without sufficient cause enters in, or omits from the
register of directors the name or other particulars of any person, shall be punishable
with imprisonment for a term which may extend to three years or with fine which may
extend to one million rupees, or with both.
Copy of the order of the court to the company and notice from company to be
filed with the registrar
(9) When it makes an order for rectification of the register of directors in respect of a
company, the Court shall cause a copy of the order to be forwarded to the company and
shall, by its order, direct the company to file notice of the rectification with the registrar
within fifteen days from the receipt of the order.
3.2 Rights to inspect (Section 198)
Inspection of register of directors, officers

(1) The register kept under section 197 shall, be open to the inspection of any member
of the company and of any other person during business hours, subject to such
reasonable restrictions, as the company may impose by its articles or in general
meeting, so that not less than two hours in each day are allowed.
Inspection fee—for members without charge and for any other person as fixed by
the company
(2) Inspection by any member of the company shall be without charge, and in the case
of any other person on payment of such fee as may be fixed by the company for each
inspection.
Inspection on request
(3) A person seeking to exercise the rights conferred by this section must make a
request to the company to that effect.
Information to be given in the request

(4) The request must contain the following information—

(a) in the case of an individual, his name and address;
(b) in the case of an organisation, its name and address and also of the authorised
person; and
(c) the purpose for which the information is to be used.
If inspection is refused—Application to Registrar

(5) In the case any inspection is refused, the registrar on application made by the
person to whom inspection has been refused and upon notice to the company, may by
order direct an immediate inspection of the register.
Penalty provision
(6) Any contravention or default in complying with requirements of this section shall be
an offence shall be liable to a penalty of level 1 on the standard scale

Multiple choice questions
1. Which company has the minimum requirement of one director

a) A private limited company
b) A single member company
c) A public company
d) All of the above
2. Ali already a director of XYZ Traders Ltd. wants to be re-elected as director

a) He cannot be re-elected as a director for 2nd term.
b) He must file notice fourteen days before the meeting for election of
directors.
c) He must seek permission from Registrar for 2nd term directorship before
contesting election.
d) He must seek permission from Commission for elections 2 nd term
directorship before contesting election.
3. The consent to act as director or chief executive of a company must be filed with
a) Commission
b) Registrar
c) Company
d) Federal Government
4. A Chief Executive of XYZ Fast Foods Ltd. has vast experience of Fast Food
industry.
a) But he cannot carry out the business of fast food of his own.
b) But he can setup a business of fast food for his spouse.
c) But he can setup a business of fast food as author and trustee for his
minor children.
d) None of the above.
5. The quorum for a meeting of directors of a listed company

a) Shall not be less than two-third of their number or seven, whichever is greater.
b) Shall not be less than three-fourth of their number or six, whichever is greater.
c) Shall not be less than one-third of their number or four, whichever is greater.
d) Shall not be less than one-fourth of their number or three, whichever is greater.
MCQs (Answers)
1. b 2. b 3. b 4. a 5. c

Listed Companies (Code of Corporate Governance) Regulations, 2019

1. CHAPTER I (PRELIMINARY)
2. CHAPTER II (NUMBER OF DIRECTORSHIP AND COMPOSITION OF BOARD)
3. CHAPTER III (BOARD OF DIRECTORS, ITS MEMBERS AND MEETING OF
BOARD)
4. CHAPTER IV (ISSUES TO BE PLACED FOR DECISION OF THE BOARD OF
DIRECTORS)
5. CHAPTER V (REMUNERATION OF DIRECTORS)
6. CHAPTER VI (DIRECTORS’ TRAINING PROGRAM)
7. CHAPTER VII (CHIEF FINANCIAL OFFICER, COMPANY SECRETARY AND
HEAD OF INTERNAL AUDIT)
8. CHAPTER VIII (RESPONSIBILITY FOR FINANCIAL REPORTING AND
CORPORATE COMPLIANCE)
9. CHAPTER IX (COMMITTEES OF THE BOARD)
10. CHAPTER X (INTERNAL AUDIT)
11. CHAPTER XI (EXTERNAL AUDIT)
12. CHAPTER XII (REPORTING AND DISCLOSURE)
13. CHAPTER XIII (MISCELLANEOUS)

As per Securities and Exchange Commission of Pakistan
“Good governance instills investor confidence. The investment decisions taken by

the local and international investors are impacted by the governance practices.
As markets compete to attract the capital from world over, companies are gauged
by the investors using various factors that demonstrate sustainable track record.
In order for our companies to compete globally, they have to follow enhanced
corporate governance standards. This is a major factor towards making capital
markets transparent, protecting rights of minority shareholders and attracting and
retaining foreign investment.
The importance of corporate governance lies in its contribution both to business

prosperity and to accountability. The Securities and Exchange Commission of
Pakistan (SECP) thus endeavors to raise the corporate governance standards in
the country. The first major effort was made in March 2002, when the Code of
Corporate Governance (Code) was issued by SECP. It was subsequently made
part of the listing regulations of the three stock exchanges and became applicable
to all public listed companies.
The revisions in the Code are indicative of the fact that governance standards are
dynamic and need to be reviewed to keep the governance framework relevant
and effective.
Therefore, in order to keep pace with the constantly evolving corporate sector
and financial markets and the resultant governance benchmarks, the process of
revising the Code was initiated. The objective was to further improve and raise
the standards of corporate governance in the country while at the same time
taking into consideration the global developments in corporate governance.”

Listed Companies (Code of Corporate Governance) Regulations, 2019
CHAPTER 1
PRELIMINARY
1. Short Title and Commencement.- (1) These Regulations shall be called the Listed
Companies (Code of Corporate Governance) Regulations, 2019.
(2) These Regulations shall apply to the listed companies based on “comply or explain
approach” except the requirements for which it is explicitly stated as “mandatory” and it
shall be the responsibility of the board of directors (the “Board”) to use this approach
wisely and of investors to assess differing company approaches thoughtfully.
(3) These Regulations shall come into force from the date of its publication.
2. Definitions. – (1),- In these Regulations, unless there is anything repugnant in the

subject
or context,
(a) “Annexure” annexure mean annexure appended to these Regulations;
(b) “Comply or explain approach” means discretion of a company with respect to

non-mandatory provisions of these Regulations either to comply or provide appropriate
explanation as to any impediment in its compliance in the compliance report along with
the financial statements;
(c) “Mandatory” in relation to these Regulations, means such provisions that are
construed to be strictly complied with by the company and non-compliance of such
Regulations leads to penal proceedings under regulation 37;
(2) Unless otherwise specified, words and expressions used but not defined in these
Regulations shall have the same meaning as assigned to them in the Companies Act,
2017 (“the Act”) and the Securities and Exchange Commission of Pakistan Act, 1997
(XLII of 1997).

CHAPTER II
NUMBER OF DIRECTORSHIP AND COMPOSITION OF BOARD
3. Number of Directorship.- Subject to the requirements of section 155 of the Act, it is

mandatory that no person shall be elected or nominated or hold office as a director of a
listed company including as an alternate director of more than seven listed companies
simultaneously:
Provided that the said limit on directorship shall be effective when the Board shall be
reconstituted not later than expiry of its current term.
4. Diversity in the Board.- The Board shall comprise of members having appropriate
mix of core competencies, diversity, requisite skills, knowledge, experience and fulfils
any other criteria as deem relevant in the context of the company’s operations.
5. Representation of Minority shareholders.- The minority members as a class shall

be facilitated by the Board to contest election of directors by proxy solicitation, for which
purpose, the listed companies shall:
(i) annex to the notice issued under sub-section (4) of section 159 of the Act, a
statement by a candidate from among the minority shareholders who seeks to contest
election to the Board, including a profile of the candidate(s);
(ii) provide information regarding members and shareholding structure to the

candidate(s); and
(iii) on a request by the candidate(s) and at the cost of the company, annex to the notice
issued under sub-section (4) of section 159 of the Act, an additional copy of proxy form
duly filled in by such candidate(s).
6. Independent Director.- (1) It is mandatory that each listed company shall have at
least two or one third members of the Board, whichever is higher, as independent
directors.
Explanation.—For the purposes of this sub-regulation, a listed company shall explain
the reasons, in the compliance report, if any fraction contained in such one-third number
which is not rounded up as one.
(1) For the purpose of electing independent director, the Board shall be reconstituted
not later than expiry of its current term.

(2) It is mandatory that the independent director shall submit his consent to act as
director, along with declaration to the company that he qualifies the criteria of
independence notified under the Act and such declaration shall be submitted to
chairman of the Board at first meeting which is held after election of directors as well as
on an event of any change affecting his independence.
7. Female Director.- Subject to section 154 of the Act, it is mandatory that the Board
shall have at least one female director when it is reconstituted after the expiry of its
current term.
8. Executive Director.- (1) It is mandatory that the executive directors, including the
chief executive officer, shall not be more than one third of the Board.
(2) For the purpose of compliance with the requirement of the above sub-regulation (1),
the Board shall be reconstituted not later than expiry of its current term.
Explanation I.—For the purposes of this regulation, a listed company shall explain the
reasons, in compliance report, any fraction contained in such one-third number which is
rounded up as one.
Explanation II.- Executive director means a director who devotes the whole or
substantially the whole of his time (whether paid or not) to the operations of the
company.
9. Chairman of the Board.- (1) The Chairman and the chief executive officer of a
company, by whatever name called, shall not be the same person.
(2) The Chairman shall be elected subject to the terms and conditions and
responsibilities provided under section 192 of the Act and these Regulations.

CHAPTER III
BOARD OF DIRECTORS, ITS MEMBERS AND MEETING OF BOARD
10. Responsibilities of the Board and its members.- (1) Subject to the requirements
of section 183 and 204 of the Act, the Board is responsible for adoption of corporate
governance
practices by the company and monitoring effectiveness of such practices and the
members of the Board shall ensure high ethical standards in performing their
responsibilities.
(2) The Board is responsible for the governance of risk and for determining the
company’s level of risk tolerance by establishing risk management policies and for this
purpose the Board is encouraged to undertake at least annually, an overall review of
business risks to ensure that the management maintains a sound system of risk
identification, risk management and related systemic and internal controls to safeguard
assets, resources, reputation and interest of the company and shareholders.
(3) The Board of the company shall ensure that,-
(i) a vision and/or mission statement monitoring the effectiveness of the company’s
governance practices and overall corporate strategy for the company is prepared,
adopted and reviewed as and when deemed appropriate by the Board;
(ii) a formal code of conduct is in place that promotes ethical culture in the company and
prevents conflict of interest in their capacity as member of the Board, senior
management and other employees. The Board shall take appropriate steps to
disseminate code of conduct throughout the company along with supporting policies
and procedures;
(iii) adequate systems and controls are in place for identification and redressal of
grievances arising from unethical practices;
(iv) a system of sound internal control is established, which is effectively implemented

and maintained at all levels within the company; and
(v) a formal and effective mechanism is put in place for an annual evaluation of the
Board’s own performance, members of the Board and of its committees.

(4) The Board shall ensure that complete record of particulars of the significant policies
along with their dates of approval or updating is maintained by the company. The
significant policies may include but not limited to the following,-
(i) governance of risks and internal control measures;

(ii) human resource management including preparation of a succession plan;
(iii) permissible fee for non-executive directors including independent directors;
(iv) procurement of goods and services;
(v) communication policy and investors’/shareholders’ relations;
(vi) marketing;
(vii) determination of terms of credit and discount to customers;
(viii) write-off of bad/doubtful debts, advances and receivables;
(ix) sale and lease of assets, undertaking, capital expenditure, planning and control;
(x) investments and disinvestment of funds;
(xi) debt coverage;
(xii) determination and delegation of financial powers;
(xiii) transactions or contracts with associated companies and related parties;
(xiv) environmental, social and governance (ESG) including but not limited to health and
safety aspects in business strategies that promote sustainability, corporate social
responsibility initiatives and other philanthropic activities, donations, contributions to
charities and other matters of social welfare; and
(xv) whistle blowing policy, by establishing a mechanism to receive, handle complaints
in a fair and transparent manner while providing protection to the complainant against
victimization.
(5) The Chairman of the Board shall, at the beginning of term of each director, issue
letter to directors setting out their role, obligations, powers and responsibilities in
accordance with the Act and the company’s Articles of Association, their remuneration
and entitlement.
(6) All directors of a company shall attend its general meeting(s), (ordinary and extra-
ordinary unless precluded from doing so due to any reasonable cause.
11. Agenda and discussion in meetings.- (1) The Chairman shall set agenda of the
meeting of the Board and ensure that reasonable time is available for discussion of the
same.
(2) All written notices and relevant material, including the agenda of the meeting shall
be circulated at least seven days prior to the meeting, except in the case of emergency
meeting, where the notice period may be reduced or waived.

12. Minutes of meeting,- (1) The Chairman shall ensure that minutes of the meetings
of the Board are kept in accordance with the requirements of section 178 and 179 of the
Act.
(2) The company secretary shall be secretary to the Board.
(3) Where a director of a company is of the view that his dissenting note has not been
satisfactorily recorded in the minutes of a meeting, the matter may be referred to the
company secretary for appending such note to the minutes and where the company
secretary fails to do so, the director may file an objection with the Commission in the
form of a statement to that effect within 30 days of the date of confirmation of the
minutes of the meeting.
13. Attendance at meeting.- The chief financial officer and company secretary or in
their absence, the nominee appointed by the Board, shall attend all meetings of the
Board:
Provided that the chief financial officer and company secretary shall not attend such
part of the Board meeting wherein agenda item relates to consideration of their
performance or terms and conditions of their service or when, in the opinion of the
Board, their presence in the meeting on any agenda item is likely or may tend to impair
the organizational discipline and harmony of the company.

CHAPTER IV
ISSUES TO BE PLACED FOR DECISION OF THE BOARD OF DIRECTORS
14. Significant issues.- The chief executive officer of the company shall place
significant issues for the information, consideration and decision, as the case may be, of
the Board or its committees that include but are not limited to the following:
(i) as soon as chief executive officer foresees risk of default concerning obligations on
any loans (including penalties and other dues to a creditor, bank or financial institution
or default in payment of public deposit), Term Finance Certificates (TFCs), Sukuk or any
other debt instrument, the same shall be brought to the attention of the Board;
(ii) annual business plan, cash flow projections, forecasts and strategic plan;
(iii) budgets including capital, manpower and overhead budgets, along with variance
analysis;
(iv) matters recommended and/or reported by the audit committee and other
committees of the Board;
(v) quarterly operating results of the company as a whole and in terms of its operating
divisions or business segments;
(vi) internal audit reports, including cases of fraud, bribery, corruption, or irregularities of
material nature;
(vii) management letter issued by the external auditors;
(viii) details of joint venture or collaboration agreements or agreements with

distributors, agents etc.;
(ix) promulgation of or amendment to a law, rule or regulation, applicability of financial

reporting standard and such other matters as may affect the company and the status of
compliance therewith;
(x) status and implications of any law suit or proceedings (show cause notice, demand
or prosecution notice) of material nature, filed by or against the company;
(xi) failure to recover material amounts of loans, advances, and deposits made by the
company, including trade debts and inter corporate finance;

(xii) any significant accidents, fatalities, dangerous occurrences and instances of
pollution and environmental problems involving the company;
(xiii) significant public or product liability claims made or likely to be made against the
company, including any adverse judgment or order made on the conduct of the
company or of another company that may bear negatively on the company;
(xiv) report on governance, risk management and compliance issues. Risks to be

considered shall include reputational risk and shall address risk analysis, risk
management and risk communication;
(xv) disputes with labor and their proposed solutions, any agreement with the labor
union or collective bargaining agent and any charter of demands on the company;
(xvi) reports on /synopsis of issues and information pursued under the whistle blowing
policy, clearly disclosing how such matters were dealt with and finally resolved or
concluded;
(xvii) implementation of environmental, social & governance; and health & safety
business practices including report on corporate social responsibility activities and
status of adoption/compliance of the Corporate Social Responsibility (Voluntary)
Guidelines, 2013 or any other regulatory framework as applicable;
(xviii) payment for goodwill, brand equity or intellectual property;
(xix) sale of assets, investments and interest in subsidiaries and undertakings, of

material amount or significant nature, which is not in the ordinary course of business;
and
(xx) quarterly details of foreign exchange exposures and the safeguards taken by
management against adverse exchange rate movement, if material.
15. Related party transactions.- The details of all related party transactions shall be
placed periodically before the audit committee of the company and upon
recommendations of the audit committee, the same shall be placed before the Board for
review and approval:
Provided where majority of the directors are interested in such transactions, the matter
shall be placed before the general meeting for approval.

CHAPTER V
REMUNERATION OF DIRECTORS
16. Formal Policy.- The Board shall have in place a formal policy and transparent
procedure for fixing the remuneration packages of individual directors for attending
meetings of the Board and its committees.
17. Determination of remuneration.- (1) No director shall determine his own

remuneration and levels of remuneration shall be appropriate and commensurate with
the level of responsibility and expertise, to attract and retain directors needed to govern
affairs of the company successfully and to encourage value addition provided that it
shall not be at a level that could be perceived to compromise their independence.
(2) The process adopted for determination of director’s remuneration shall comply with
the provisions of the Act and the company’s articles of association.

CHAPTER VI
DIRECTORS’ TRAINING PROGRAM
18. Directors’ Orientation Program.- All companies shall make appropriate

arrangements to carry out orientation for their directors to acquaint them with these
Regulations, applicable laws, their duties and responsibilities to enable them to
effectively govern the affairs of the listed company for and on behalf of shareholders.
19. Directors’ Training.- (1) It is encouraged that:

(i) by June 30, 2020 at least half of the directors on their Boards;
(ii) by June 30, 2021 at least 75% of the directors on their Boards; and
(iii) by June 30, 2022 all the directors on their Boards have acquired the prescribed
certification under any director training program offered by institutions, local or foreign,
that meet the criteria specified by the Commission and approved by it.
(2) A newly appointed director on the Board may acquire, the directors training program
certification within a period of one year from the date of appointment as a director on the
Board:
Provided that director having a minimum of 14 years of education and 15 years of
experience on the Board of a listed company, local and/or foreign, shall be exempt from
the directors training program.
(3) Companies are also encouraged to arrange training for:

(i) at least one female executive every year under the Directors’ Training program from
year July 2020; and
(ii) at least one head of department every year under the Directors’ Training program
from July 2022.

CHAPTER VII
CHIEF FINANCIAL OFFICER, COMPANY SECRETARY AND HEAD OF INTERNAL
AUDIT
20. Approval.- The Board shall appoint, determine remuneration, renew contracts and
terms and conditions of employment of chief financial officer, company secretary and
head of internal audit of the company.
21. Removal.- The removal of the chief financial officer, company secretary and head of
internal audit of a company shall be made with the approval of the Board:
Provided that the head of internal audit may be removed only upon recommendation of
the audit committee.
22. Qualification of chief financial officer.- No person shall be appointed as the chief
financial officer of a company unless,-
(i) he/ she has at least three years of managerial experience in the fields of audit or
accounting or in managing financial or corporate affairs functions of a company and is a
member of the Institute of Chartered Accountants of Pakistan or Institute of Cost and
Management Accountants of Pakistan; or
(ii) he/ she has at least five years of managerial experience in fields of audit or
accounting or in managing financial or corporate affairs functions of a company and is
either a member of professional body of accountants whose qualification is recognized
as equivalent to post graduate degree by Higher Education Commission of Pakistan or
has a postgraduate degree in finance from a university in Pakistan or equivalent
recognized and approved by the Higher Education Commission of Pakistan; or
(iii) he/ she has at least seven years of managerial experience in fields of audit or
accounting or in managing financial or corporate affairs functions of a company and has
a suitable degree from a university in Pakistan or abroad equivalent to graduate degree,
recognized and approved by the Higher Education Commission of Pakistan:
Provided that existing chief financial officer of a listed company having at least fifteen
years of experience on the same position in a listed company shall be exempted from
qualification criteria given above.

23. Qualification of internal auditor.- No person shall be appointed as the head of
internal audit unless:
(i) he/she has three years of relevant experience in audit or finance or compliance
function and is a member of the Institute of Chartered Accountants of Pakistan or
Institute of Cost and Management Accountants of Pakistan; or
(ii) he/she has five years of relevant experience in audit or finance or compliance
function and:
(a) is a Certified Internal Auditor; or
(b) is a Certified Fraud Examiner; or
(c) is a Certified Internal Control Auditor; or
(d) has a post graduate degree in business, finance from a university or equivalent
recognized and approved by the Higher Education Commission of Pakistan and is a
member of a professional body relevant to such qualification, if applicable;
(iii) he/ she has at least seven years of managerial experience in fields of audit or
accounting or in managing financial or corporate affairs functions of a company and has
a suitable degree from a university in Pakistan or abroad equivalent to graduate degree,
recognized and approved by the Higher Education Commission of Pakistan.
Explanation: the expression, “body of professional accountants” means body of

professional accountants,-
(i) established in Pakistan, governed under a special enactment of the Federal
Government as a self-regulatory organization managed by a representative National
Council, and has a prescribed minimum criterion of examination and entitlement of
membership of such body; or
(ii) established outside Pakistan under a special enactment in the country of its origin
and is a member of the International Federation of Accountants (IFAC): \
provided that existing head of internal audit of a listed company having atleast fifteen
years of experience on the same position in a listed company shall be exempted from
qualification criteria given above.
24. Qualification of company secretary.- No person shall be appointed as the

company secretary unless he holds the qualification as specified under the relevant
Regulations by the Commission:
Provided, the same person shall not simultaneously hold office of chief financial officer
and the company secretary of a listed company.

CHAPTER VIII
RESPONSIBILITY FOR FINANCIAL REPORTING AND CORPORATE COMPLIANCE
25. Financial statement endorsed by chief financial officer and chief executive
officer.- The chief executive officer and the chief financial officer shall duly endorse the
quarterly, half-yearly and annual financial statements under their respective signatures
prior to placing and circulating the same for consideration and approval of the Board.
26. External Auditor.- Chief executive officer and chief financial officer shall have the
annual and interim financial statement, both standalone and consolidated where
applicable, initiated by the external auditors before presenting it to the audit committee
and the Board for approval.

CHAPTER IX
COMMITTEES OF THE BOARD
27. Audit Committee.- (1) It is mandatory that the audit committee shall be constituted
by the Board keeping in view the following requirements,-
(i) the Board shall establish an audit committee of at least three members comprising of
non-executive directors and at least one independent director;
(ii) chairman of the committee shall be an independent director, who shall not be the
chairman of the Board;
(iii) the Board shall satisfy itself that at least one member of the audit committee shall be
“financially literate”;.
Explanation:- for the purposes of this clause the expression, “financial literate” means a
person who,-
(a) is a member of a recognized body of professional accountants; or

(b) has a post graduate degree in finance from a university or equivalent
institution, either in Pakistan or abroad, recognized by the Higher
Education Commission of Pakistan; or
(c) has atleast ten (10) years of experience as audit committee member; or
(d) atleast twenty (20) years of senior management experience in overseeing of

financial, audit related matters.
(iv) the Audit Committee of a company shall appoint a secretary of the committee who
shall either be the company secretary or head of internal audit.
(2) It is mandatory that meetings of the audit committee shall be held as per the
following requirements,-
(i) the audit committee of a company shall meet at least once every quarter of the
financial year. These meetings shall be held prior to the approval of interim results of
the company by its Board and after completion of external audit;
(ii) a meeting of the audit committee shall also be held, if requested by the external
auditors, head of internal audit or by chairman of the audit committee;

(iii) the head of internal audit and external auditors represented by engagement partner
or in his absence any other partner designated by the audit firm shall attend meetings of
the audit committee at which issues, if any, relating to accounts and audit are
discussed:
Provided that chief executive officer and the chief financial officer shall not be members
of the audit committee but should be available to attend its meetings at the invitation of
the chairman of audit committee:
Provided further that at least once a year, the audit committee shall meet the external
auditors without the chief financial officer and the head of internal audit being present:
Provided also that at least once a year, the audit committee shall meet the head of
internal audit and other members of the internal audit function without the chief financial
officer and the external auditors being present.
(3) It is mandatory that the Board of every company shall determine the terms of
reference of the audit committee.
(4) It is mandatory that the Board shall provide adequate resources and authority to
enable the audit committee to carry out its responsibilities effectively and the terms of
reference of the audit committee shall be explicitly documented which shall also include
the following,-
(i) determination of appropriate measures to safeguard the company’s assets;
(ii) review of annual and interim financial statements of the company, prior to their
approval by the Board, focusing on,-
(a) major judgmental areas;
(b) significant adjustments resulting from the audit;
(c) going concern assumption;
(d) any changes in accounting policies and practices;
(e) compliance with applicable accounting standards;
(f) compliance with these Regulations and other statutory and regulatory requirements;
and
(g) all related party transactions;
(iii) review of preliminary announcements of results prior to external communication and

publication;

(iv) facilitating the external audit and discussion with external auditors of major
observations arising from interim and final audits and any matter that the auditors may
wish to highlight (in the absence of management, where necessary);
(v) review of management letter issued by external auditors and management’s

response thereto;
(vi) ensuring coordination between the internal and external auditors of the company;
(vii) review of the scope and extent of internal audit, audit plan, reporting framework and
procedures and ensuring that the internal audit function has adequate resources and is
appropriately placed within the company;
(viii) consideration of major findings of internal investigations of activities characterized

by fraud, corruption and abuse of power and management's response thereto;
(ix) ascertaining that the internal control systems including financial and operational
controls, accounting systems for timely and appropriate recording of purchases and
sales, receipts and payments, assets and liabilities and the reporting structure are
adequate and effective;
(x) review of the company’s statement on internal control systems prior to endorsement
by the Board and internal audit reports;
(xi) instituting special projects, value for money studies or other investigations on any
matter specified by the Board, in consultation with the chief executive officer and to
consider remittance of any matter to the external auditors or to any other external body;
(xii) determination of compliance with relevant statutory requirements;
(xiii) monitoring compliance with these Regulations and identification of significant

violations thereof;
(xiv) review of arrangement for staff and management to report to audit committee in
confidence, concerns, if any, about actual or potential improprieties in financial and
other matters and recommend instituting remedial and mitigating measures;
(xv) recommend to the Board the appointment of external auditors, their removal, audit
fees, the provision of any service permissible to be rendered to the company by the
external auditors in addition to audit of its financial statements, measures for redressal
and rectification of non-compliances with the Regulations. The Board shall give due

consideration to the recommendations of the audit committee and where it acts
otherwise it shall record the reasons thereof;
(xvi) consideration of any other issue or matter as may be assigned by the Board;
(5) It is mandatory that the secretary of audit committee shall circulate minutes of
meetings of the audit committee to all members, directors, head of internal audit and
where required to chief financial officer prior to the next meeting of the Board:
Provided that where this is not practicable, the chairman of the audit committee shall
communicate a synopsis of the proceedings to the Board and the minutes shall be
circulated along with the minutes of the meeting of the Board.
28. Human Resource and Remuneration Committee.- (1) There shall be a human
resource and remuneration committee of at least three members comprising a majority
of non-executive directors of whom at least one member shall be an independent
director.
(2) The chairman of the committee shall be an independent director and the chief
executive officer may be included as a member of the committee.
(3) The committee shall meet at least once in a financial year and may meet more often
if requested by a member of the Board, or committee itself or the chief executive officer
and the head of human resource or any other person appointed by the Board may act
as the secretary of the committee.
(4) The chief executive officer (if not a member of the committee), head of human
resource (if not the secretary to committee) or any other advisor or person may attend
the meeting only by invitation.
(5) A member of the committee shall not participate in the proceedings of the committee
when an agenda item relating to his performance or review or renewal of the terms and
conditions of his service comes up for consideration.
(6) The terms of reference of committee shall be determined by the Board which may
include the following,-
(i) recommendation to the Board for consideration and approval a policy framework for
determining remuneration of directors (both executive and non-executive directors and
members of senior management). The definition of senior management will be

determined by the Board which shall normally include the first layer of management
below the chief executive officer level;
(ii) undertaking, annually, a formal process of evaluation of performance of the Board as

a whole and its committees either directly or by engaging external independent
consultant and if so appointed, a statement to that effect shall be made in the directors’
report disclosing therein name and qualifications of such consultant and major terms of
his / its appointment;
(iii) recommending human resource management policies to the Board;
(iv) recommending to the Board the selection, evaluation, development, compensation

(including retirement benefits) of chief operating officer, chief financial officer, company
secretary and head of internal audit;
(v) consideration and approval on recommendations of chief executive officer on such
matters for key management positions who report directly to chief executive officer or
chief operating officer; and
(vi) where human resource and remuneration consultants are appointed, they shall
disclose to the committee their credentials and as to whether they have any other
connection with the company.
29. Nomination Committee.- (1) The Board may constitute a separate committee,
designated as the nomination committee, of such number and class of directors, as it
may deem appropriate in its circumstances.
(2) The nomination committee shall be responsible for,-

(i) considering and making recommendations to the Board in respect of the Board’s
committees and the chairmanship of the Board’s committees; and
(ii) keeping the structure, size and composition of the Board under regular review and
for making recommendations to the Board with regard to any changes necessary.
(3) The terms of reference of nomination committee shall be determined by the Board
ensuring there is no duplication or conflict with matters stipulated under terms of
reference of Human Resource and Remuneration (HR&R) Committee.
30. Risk Management Committee.- (1) The Board may constitute the risk
management committee, of such number and class of directors, as it may deem
appropriate in its circumstances, to carry out a review of effectiveness of risk
management procedures and present a report to the Board.

(2) The terms of reference of the committee may include the following,-
(i) monitoring and review of all material controls (financial, operational, compliance);
(ii) risk mitigation measures are robust and integrity of financial information is ensured;
and
(iii) appropriate extent of disclosure of company’s risk framework and internal control
system in Directors report.

CHAPTER X
INTERNAL AUDIT
31. Composition of internal audit function.-
(1) There shall be an internal audit function in every company.
(2) The head of internal audit shall functionally report to the audit committee and
administratively to the chief executive officer and his performance appraisal shall be
done jointly by the Chairman of the audit committee and the chief executive officer.
(3) No director on the Board, shall be appointed, in any capacity, in the internal audit
function of the company.
(4) The Board shall ensure that the internal audit team comprises of experts of relevant
disciplines in order to cover all major heads of accounts maintained by the company.
(5) The company shall ensure that head of internal audit is suitably qualified,
experienced and conversant with the company's policies and procedures.
(6) The internal audit function, wholly or partially, may be outsourced by the company to
a professional services firm or be performed by the internal audit staff of holding
company and in lieu of outsourcing, the company shall appoint or designate a fulltime
employee other than chief financial officer, as head of internal audit holding equivalent
qualification prescribed under these Regulations, to act as coordinator between firm
providing internal audit services and the Board:
Provided that while outsourcing the function, the company shall not appoint its existing
external auditors or any of its associated company or associated undertaking, as
internal auditors.
(7) All companies shall ensure that internal audit reports are provided for the review of
external auditors.
(8) The auditors shall discuss any major findings in relation to the reports with the audit
committee, which shall report matters of significance to the Board.

CHAPTER XI
EXTERNAL AUDIT
32. Terms of appointment of external auditor.- (1) It is mandatory that no company

shall appoint an external auditors, a firm of auditors, which has not been given a
satisfactory rating under the Quality Control Review program of the Institute of
Chartered Accountants of Pakistan and registered with Audit Oversight Board of
Pakistan under section 36I of the Securities and Exchange Commission of Pakistan Act,
1997 (XLII of 1997).
(2) It is mandatory that no company shall appoint as external auditors, a firm of

auditors which or a partner of which is non-compliant with the International Federation
of Accountants' Guidelines on Code of Ethics, as adopted by the Institute of Chartered
Accountants of Pakistan.
(3) It is mandatory that the Board of a company shall recommend appointment of

external auditors for a year and its remuneration, as suggested by the audit committee
and such recommendations shall be included in the Directors’ Report and in case a
recommendation for appointment of an auditor is other than the retiring auditor, the
reasons for the same shall be included in the Directors’ Report.
(4) It is mandatory that no company shall appoint its external auditors to provide
services in addition to audit except in accordance with these Regulations and shall
require the auditors to observe applicable International Federation of Accountants
guidelines in this regard.
(5) It is mandatory that the company shall ensure that the auditors do not perform
management functions or make management decisions, responsibility for which
remains with the Board and management of the company.
(6) It is mandatory that no company shall appoint a person as an external auditor or a

person involved in the audit of a company who is a close relative (spouse, parents,
dependents and non-dependent children) of the chief executive officer, the chief
financial officer, the head of internal audit, the company secretary or a director of the
company.
(7) It is mandatory that every company requires the external auditors to furnish a
management letter to its Board within 45 days of the date of audit report:

Provided that any matter deemed significant by the external auditor shall be
communicated in writing to the Board prior to the approval of the audited accounts by
the Board.
33. Rotation of auditors.- (1) It is mandatory that all listed companies in the financial
sector shall change their external auditors every five years:
Provided that all inter related companies/ institutions, engaged in business of providing
financial services shall appoint the same firm of auditors to conduct the audit of their
accounts.
Explanation:- Financial sector, for this purpose, means banks, non-banking financial
companies (NBFCs), modarabas and insurance or takaful insurance companies.
(2) It is mandatory that all listed companies other than those in the financial sector
shall, at the minimum, rotate the engagement partner after every five years:
Provided that in case the audit firm is a sole proprietorship then after completion of five
years such audit firm shall be changed.

CHAPTER XII
REPORTING AND DISCLOSURE
34. Directors’ Report.-
(1) The quarterly financial statements of companies shall be published and circulated
along with directors’ review on the affairs of the company.
(2) The Directors’ Report shall include the following,-

(i) total number of directors including the following,-
(a) Male; and
(b) Female;
(ii) composition including the following,-
(a) Independent directors;
(b) Non-executive directors;
(c) Executive directors; and
(d) Female director.
(iii) The names of members of the Board’s committees.
(iv) The directors in their report to members shall state the remuneration policy of non-
executive directors including independent directors, as approved by the Board, which
shall also include disclosing the significant features and elements thereof.
(3) The company's Annual Report shall contain details of aggregate amount of
remuneration separately of executive and non-executive directors, including salary/fee,
perquisites, benefits and performance-linked incentives etc. Companies are encouraged
to provide aforesaid details of remuneration of individual directors in annual report.
35. Disclosure of significant policies on website.- The company may post the
following on its website:
(1) key elements of its significant policies including but not limited to the following:
(i) communication and disclosure policy;

(ii) code of conduct for members of board of directors, senior management and other
employees;
(iii) risk management policy;

(iv) internal control policy;
(v) whistle blowing policy;
(vi) corporate social responsibility/sustainability/ environmental, social and governance
related policy.
(2) brief synopsis of terms of reference of the Board’s committees including:
(i) Audit Committee

(ii) HR and Remuneration Committee
(iii) Nomination Committee
(iv) Risk Management Committee
(3) key elements of the directors’ remuneration policy.
36. Compliance Statement and Auditor Review.- (1) It is mandatory that the
company shall publish and circulate a statement, as given under Annexure A to these
Regulations, along with their annual reports to set out the status of their compliance with
the requirements of these Regulations and the said statement shall be specific and
supported by necessary explanations..
(2) It is mandatory that the company shall ensure that the statement of compliance is
reviewed and certified by statutory auditors as per relevant Regulations specified by
Commission.
(3) It is mandatory that the statutory auditors of company shall highlight any non-
compliance with these Regulations in their review report.

CHAPTER XIII
MISCELLANEOUS
37. Penalty.- Whoever fails or refused to comply with, or contravenes regulation 3, 6, 7,

8, 27, 32, 33 and 36 of these Regulations, shall be punishable with penalty as provided
under sub-section (2) of section 512 of the Act.
38. Relaxation from requirements of Regulations.- Where the Commission is

satisfied that it is not practicable to comply with any of the mandatory requirements of
the regulation 3, 6, 7, 8, 27, 32, 33 and 36 of these Regulations, it may, for reasons to
be recorded in writing, on the application by the company, extend the time for
compliance of the same subject to such conditions as it may deem fit.
39. Repeal and Savings.- (1) The Listed Companies (Code of Corporate Governance)
Regulations, 2017, hereinafter called as repealed regulations, shall stand repealed:
Provided that repeal of the repealed regulations shall not-
(a) revive anything not in force at the time at which the repeal take effect; or
(b) affect the previous operation of the repealed regulations or anything duly done or
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under or
in respect of the said repealed regulations; or
(d) affect any penalty imposed, forfeiture made or punishment incurred in respect of any
offence committed against or in violation of the repealed regulations; or
(e) affect any inspection, investigation, prosecution, legal proceeding or remedy in
imposed, as if these Regulations has not been notified.
(2) Save as otherwise specifically provided, nothing in these Regulations shall affect or
deemed to effect any action taken, orders issued, application received, relaxation
granted unless withdrawn, fee paid or accrued, resolution passed, direction given under
the repealed regulations shall, if in force at the effective date of these Regulations and
not inconsistent with provision of these Regulations, shall continue to be in force and
have effect as if it were respectively taken, made, directed, received, passed, given,
executed or issued under these Regulations.

Annexure A
[see regulation 36(1)]
Statement of Compliance with Listed Companies (Code of Corporate Governance)

Regulations, 2019
Name of company …………………………………………………………………………

Year ending………………………………………………………………………………….
The company has complied with the requirements of the Regulations in the following
manner:-
1. The total number of directors are ____ as per the following,-

a. Male:
b. Female:
2. The composition of the Board is as follows:

i. Independent directors
ii. Non-executive directors
iii. Executive directors
v. Female directors
3. The directors have confirmed that none of them is serving as a director on more than
seven listed companies, including this company;
4. The company has prepared a code of conduct and has ensured that appropriate
steps have been taken to disseminate it throughout the company along with its
supporting policies and procedures;
5. The Board has developed a vision/mission statement, overall corporate strategy and
significant policies of the company. The Board has ensured that complete record of
particulars of the significant policies along with their date of approval or updating is
maintained by the company;
6. All the powers of the Board have been duly exercised and decisions on relevant
matters have been taken by the Board/ shareholders as empowered by the relevant
provisions of the Act and these Regulations;
7. The meetings of the Board were presided over by the Chairman and, in his absence,
by a director elected by the Board for this purpose. The Board has complied with the

requirements of Act and the Regulations with respect to frequency, recording and
circulating minutes of meeting of the Board;
8. The Board have a formal policy and transparent procedures for remuneration of
directors in accordance with the Act and these Regulations;
9. The Board has arranged Directors’ Training program for the following:
(Name of Director)
(Name of Executive & Designation (if applicable);
10. The Board has approved appointment of chief financial officer, company secretary
and head of internal audit, including their remuneration and terms and conditions of
employment and complied with relevant requirements of the Regulations;
11. Chief financial officer and chief executive officer duly endorsed the financial
statements before approval of the Board;
12. The Board has formed committees comprising of members given below.-
a) Audit Committee (Name of members and Chairman)
b) HR and Remuneration Committee (if applicable) (Name of members and Chairman)
c) Nomination Committee (if applicable) (Name of members and Chairman)
d) Risk Management Committee (if applicable) (Name of members and Chairman)
13. The terms of reference of the aforesaid committees have been formed, documented
and advised to the committee for compliance;
14. The frequency of meetings (quarterly/half yearly/ yearly) of the committee were as
per following,-
a) Audit Committee;
b) HR and Remuneration Committee (if applicable);
c) Nomination Committee (if applicable);
d) Risk Management Committee (if applicable);
15. The Board has set up an effective internal audit function/ or has outsourced the
internal audit function to who are considered suitably qualified and experienced for the
purpose and are conversant with the policies and procedures of the company;
16. The statutory auditors of the company have confirmed that they have been given a

Pakistan, that they and all their partners are in compliance with International Federation
of Accountants (IFAC) guidelines on code of ethics as adopted by the Institute of
Chartered Accountants of Pakistan and that they and the partners of the firm involved in
the audit are not a close relative (spouse, parent, dependent and non-dependent
children) of the chief executive officer, chief financial officer, head of internal audit,
company secretary or director of the company;
17. The statutory auditors or the persons associated with them have not been appointed
to provide other services except in accordance with the Act, these Regulations or any
other regulatory requirement and the auditors have confirmed that they have observed
IFAC guidelines in this regard;
18. We confirm that all requirements of regulations 3, 6, 7, 8, 27,32, 33 and 36 of the

Regulations have been complied with; and
19. Explanation for non-compliance with requirements, other than regulations 3, 6, 7, 8,

27, 32, 33 and 36 are below (if applicable):
__________________
Signature (s)
(Name in block letters)
Chairman
QUESTIONS
1) What should be the composition of board of directors of a listed company as per the
requirements of the code of corporate governance?
2) Narrate the relevant provisions of the code of corporate governance regarding the
remuneration of directors.
3) Narrate the qualifications of a Chief Financial Officer under the code of corporate
governance.

MULTIPLE CHOICE QUESTIONS
1) Written notices and relevant material, including the agenda of the meeting of
directors shall be circulated
a) At least 7 days prior to the meeting.
b) At least 14 days before the date of meeting.
c) Agenda and notice are not compulsory.
d) Notice may be given at any time before the board meeting.
2) Maximum number of directorships of a person in listed companies is

a) 10 Companies
b) 5 companies
c) 7 companies
d) 7 companies excluding the subsidiaries of the holding companies.
3) Chief Executive and Chairman of a listed company

a) Should be a single individual.
b) May be a single individual.
c) Should not be a single individual.
d) Can be a single individual but prior approval of commission is required.
MCQs (Answers)
1. a 2. c 3. c

Companies Act, 2017

1. MEETINGS AND PROCEEDINGS

(Section 131 to 152)
2. SERVICE AND AUTHENTICATION OF DOCUMENTS

(Section 53 to 56)

MEETINGS AND PROCEEDINGS
The companies have to conduct variety of meetings during their lifetime. Some of
them are mandatory as per the ordinance and the others are conducted as and
when required basis. The broader categories of the meetings are as follows
1. Board of directors Meetings

2. General Meetings/Meetings of the members
For the directors there may be certain committees in place so the meetings of
those committees may also be held. In certain cases companies have more than
one class of members, so there may be meetings of various classes of members.
The relevant provisions applicable to the company meetings are as follows
1. Meetings and Proceedings
STATUTORY MEETING
1.1 Statutory meeting of company (Section 131)
Every Public company – time frame – if AGM earlier, no statutory meeting

(1) Every public company having a share capital shall, within a period of one hundred
and eighty days from the date at which the company is entitled to commence business
or within nine months from the date of its incorporation whichever is earlier, hold a
general meeting of the members of the company, to be called the “statutory meeting”:
Provided that in case first annual general meeting of a company is decided to be held
earlier, no statutory meeting shall be required.
Notice of meeting with statutory report

(2) The notice of a statutory meeting shall be sent to the members at least twenty-one
days before the date fixed for the meeting along-with a copy of statutory report.

Contents of statutory report
(3) The statutory report shall state—
(a) the total number of shares allotted, distinguishing shares allotted other than in cash,
and stating the consideration for which they have been allotted;
(b) the total amount of cash received by the company in respect of all the shares
allotted;
(c) an abstract of the receipts of the company and of the payments made there out up to
a date within fifteen days of the date of the report, exhibiting under distinctive headings
the receipts of the company from shares and debentures and other sources, the
payments made there out, and particulars concerning the balance remaining in hand,
and an account or estimate of the preliminary expenses of the company showing
separately any commission or discount paid or to be paid on the issue or sale of shares
or debentures;
(d) the names, addresses and occupations of the directors, chief executive, secretary,
auditors and legal advisers of the company and the changes, if any, which have
occurred since the date of the incorporation;
(e) the particulars of any contract the modification of which is to be submitted to the
meeting for its approval, together with the particulars of the modification or proposed
modification;
(f) the extent to which underwriting contracts, if any, have been carried out and the
extent to which such contracts have not been carried out, together with the reasons for
their not having been carried out; and
(g) the particulars of any commission or brokerage paid or to be paid in connection with
the issue or sale of shares to any director, chief executive, secretary or officer or to a
private company of which he is a director; and certified by the chief executive and at
least one director of the company, and in case of a listed company also by the chief
financial officer.

Statutory report to contain state of the company’s affairs
(4) The statutory report shall also contain a brief account of the state of the company‘s
affairs since its incorporation and the business plan, including any change or proposed
change affecting the interest of shareholders and business prospects of the company.
Report of the auditor

(5) The statutory report shall, so far as it relates to the shares allotted by the company,
the cash received in respect of such shares and to the receipts and payments of the
company, be accompanied by a report of the auditors of the company as to the
correctness of such allotment, receipt of cash, receipts and payments.
Copy of the statutory report to deliver to Registrar

(6) The directors shall cause a copy of the statutory report, along-with report of the
auditors as aforesaid, to be delivered to the registrar for registration forthwith after
sending the report to the members of the company.
List of directors and particulars

(7) The directors shall cause a list showing the names, occupations, nationality and
addresses of the members of the company, and the number of shares held by them
respectively, to be produced at the commencement of the meeting and to remain open
and accessible to any member of the company during the continuance of the meeting.
No resolution without notice

(8) The members of the company present at the meeting shall be at liberty to discuss
any matter relating to the formation of the company or arising out of the statutory report,
whether previous notice has been given or not, but no resolution of which notice has not
been given in accordance with the articles may be passed.
Adjournment of meeting
(9) The meeting may adjourn from time to time, and at any adjourned meeting any
resolution of which notice has been given in accordance with the articles, either before
or after the original meeting, may be passed, and an adjourned meeting shall have the
same powers as an original meeting.
Section not to apply to Public company converted from private company after
one year of its incorporation
(10) The provisions of this section shall not apply to a public company which converts
itself from a private company after one year of incorporation.

Penalty provision
(11) Any contravention or default in complying with requirement of this section shall be
an offence liable—
(a) in case of a listed company, to a penalty of level 2 on the standard scale; and
(b) in case of any other company, to a penalty of level 1 on the standard scale.
1.2 Annual general meeting (Section 132)
Time frame for meeting, Extension of time not exceeding thirty days, for Listed
company—Commission, for any other case—Registrar
(1) Every company, shall hold, an annual general meeting within sixteen months from
the date of its incorporation and thereafter once in every calendar year within a period of
one hundred and twenty days following the close of its financial year:
Provided that, in the case of a listed company, the Commission, and, in any other case,
the registrar, may for any special reason extend the time within which any annual
general meeting, shall be held by a period not exceeding thirty days.
If listed, meeting in registered office town or nearest city, listed company to

provide the facility of video-link on demand of the members residing in a city and
holding at least ten percent of the total paid up capital or other percentage—
specified
(2) An annual general meeting shall, in the case of a listed company, be held in the
town in which the registered office of the company is situate or in a nearest city:
Provided that at least seven days prior to the date of meeting, on the demand of
members residing in a city who hold at least ten percent of the total paid up capital or
such other percentage as may be specified, a listed company must provide the facility of
video- link to such members enabling them to participate in its annual general meeting.
Notice of the meeting, if listed—also to Commission and publish

(3) The notice of an annual general meeting shall be sent to the members and every
person who is entitled to receive notice of general meetings at least twenty-one days
before the date fixed for the meeting:
Provided that in case of a listed company, such notice shall be sent to the Commission,
in addition to its being dispatched in the normal course to members and the notice shall
also be published in English and Urdu languages at least in one issue each of a daily
newspaper of respective language having nationwide circulation.

Section not to apply to SMC
(4) Nothing in this section shall apply to a single member company.
Penalty provision
offence liable—
1.3 Calling of extra-ordinary general meeting (Section 133)
EOGM is other than AGM and Statutory meeting

(1) All general meetings of a company, other than the annual general meeting referred
to in section 132 and the statutory meeting mentioned in section 131, shall be called
extra-ordinary general meetings.
Board may call EOGM at any time

(2) The board may at any time call an extra-ordinary general meeting of the company to
consider any matter which requires the approval of the company in a general meeting.
Requisition made by the members to call EOGM

(3) The board shall, at the requisition made by the members—
(a) in case of a company having share capital, representing not less than one-tenth of
the total voting power as on the date of deposit of requisition; and
(b) in case of a company not having share capital, not less than one-tenth of the total
members;
forthwith proceed to call an extra-ordinary general meeting.
Requisition to state objects and be signed by the requisitionists

(4) The requisition shall state the objects of the meeting, be signed by the requisitionists
and deposited at the registered office of the company.
If the board does not proceed, requisitionists, may themselves call the meeting
(5) If the board does not proceed within twenty-one days from the date of the requisition
being so deposited to cause a meeting to be called, the requisitionists, may themselves
call the meeting, but in either case any meeting so called shall be held within ninety
days from the date of the deposit of the requisition.

Calling of meeting in the same manner as by the board
(6) Any meeting called under sub-section (5) by the requisitionists shall be called in the
same manner, as nearly as possible, as that in which meetings are to be called by
board.
Expenses to be reimbursed by the company

(7) Any reasonable expenses incurred by the requisitionists in calling a meeting under
sub-section (5) shall be re-imbursed to the requisitionists by the company and the sums
so paid shall be deducted from any fee or other remuneration payable to such of the
directors who were in default in calling the meeting.
Notice of EOGM
(8) Notice of an extra-ordinary general meeting shall be served to the members in the
manner provided for in section 55:
Provided that in case of a company other than listed, if all the members entitled to
attend and vote at any extraordinary general meeting so agree, a meeting may be held
at a shorter notice.
Penalty provision
offence liable—
1.4 Provisions as to meetings and votes (Section 134)
Provisions regarding notice of meeting, if listed, facility of video link

(1) The following provisions shall apply to the general meetings of a company or
meetings of a class of members of the company, namely:
(a) notice of the 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 shall be given—
(i) to every member or class of the members of the company as the case may be;
(ii) to every director;
(iii) to any person who is entitled to a share in consequence of the death or bankruptcy
of a member, if the company has been notified of his entitlement;

(iv) to the auditors of the company;
in the manner in which notices are required to be served by section 55, but the
accidental omission to give notice to, or the non-receipt of notice by, any member shall
not invalidate the proceedings at any meeting;
(b) in case of a listed company, if certain members who hold ten percent of the total
paid up capital or such other percentage as may be specified, reside in a city, it shall be
mentioned in the notice that such members, may demand the company to provide them
the facility of video-link for attending the meeting.
Ordinary business and special business

(2) For the purposes of sub-section (1), in the case of an annual general meeting, all the
businesses to be transacted shall be deemed special, other than—
(a) the consideration of financial statements and the reports of the board and auditors;
(b) the declaration of any dividend;
(c) the election and appointment of directors in place of those retiring; and
(d) the appointment of the auditors and fixation of their remuneration.
If special business, annex to the notice of meeting a statement of all material

facts
(3) Where any special business is to be transacted at a general meeting, there shall be
annexed to the notice of the meeting a statement setting out all material facts
concerning such business, including, in particular, the nature and extent of the interest,
if any, therein of every director, whether directly or indirectly, and, where any item of
business consists of the according of an approval to any document by the meeting, the
time when and the place where the document may be inspected, shall be specified in
the statement.

Participation: personally, through video link or by proxy
(4) Members of a company may participate in the meeting personally, through video-link
or by proxy.
Chairman of the meeting

(5) The chairman of the board, if any, shall preside as chairman at every general
meeting of the company, but if there is no such chairman, or if at any meeting he is not
present within fifteen minutes after the time appointed for holding the meeting, or is
unwilling to act as chairman, any one of the directors present may be elected to be
chairman, and if none of the directors is present or is unwilling to act as chairman the
members present shall choose one of their member to be the chairman.
Votes proportionate to the paid-up value, fractional votes not to be taken

(6) In the case of a company having a share capital, every member shall have votes
proportionate to the paid-up value of the shares or other securities carrying voting rights
held by him according to the entitlement of the class of such shares or securities, as the
case may be:
Provided that, at the time of voting, fractional votes shall not be taken into account.
Not to be debarred from casting vote

(7) No member holding shares or other securities carrying voting rights shall be
debarred from casting his vote, nor shall anything contained in the articles have the
effect of so debarring him.
Guarantee not having share capital, each member shall have one vote
(8) In the case of a company limited by guarantee and having no share capital, every
member thereof shall have one vote.
If poll, votes may be given personally or through video-link or by proxy or

through postal ballot—conditions specified
(9) On a poll, votes may be given either personally or through video-link or by proxy or
through postal ballot in a manner and subject to the conditions as may be specified.
Power of Commission to notify any business be transacted through postal ballot

(10) Notwithstanding anything contained in this Act, the Commission shall have the
power to notify any business requiring the approval of the members shall only be
transacted through postal ballot for any company or class of companies.

If SMC, all meeting requirements deemed to comply with if minutes book entry is
made and signed
(11) All the requirements of this Act regarding calling of, holding and approval in general
meeting, board meeting and election of directors in case of a single member company,
shall be deemed complied with; if the decision is recorded in the relevant minutes book
and signed by the sole member or sole director as the case may be.
Penalty provision
1.5 Quorum of general meeting (Section 135)
Quorum of (i) public listed company, (ii) any other company having share capital
(iii) Company not having share capital (iv) If quorum not present
(1) The quorum of a general meeting shall be—
(a) in the case of a public listed company, unless the articles provide for a larger
number, not less than ten members present personally, or through video-link who
represent not less than twenty-five percent of the total voting power, either of their own
account or as proxies;
(b) in the case of any other company having share capital, unless the articles provide for
a larger number, two members present personally, or through video-link who represent
not less than twenty-five percent of the total voting power, either of their own account or
as proxies;
(c) in the case of a company not having share capital, as provided in the articles:
Provided that, if within half an hour from the time appointed for the meeting a quorum is
not present, the meeting, if called upon the requisition of members, shall be dissolved;
in any other case, it shall stand adjourned to the same day in the next week at the same
time and place, and, if at the adjourned meeting a quorum is not present within half an
hour from the time appointed for the meeting, the members present personally or
through video-link being not less than two shall be a quorum, unless the articles provide
otherwise.

Penalty provision
offence liable—
1.6 Power of the Court to declare the proceedings of a general meeting invalid
(Section 136)
Court on petition may declare the proceedings of general meeting invalid,

Grounds of the decision, time limit for petition
The Court may, on a petition, by members having not less than ten percent of the voting
power in the company, that the proceedings of a general meeting be declared invalid by
reason of a material defect or omission in the notice or irregularity in the proceedings of
the meeting, which prevented members from using effectively their rights, declare such
proceedings or part thereof invalid and direct holding of a fresh general meeting:
Provided that the petition shall be made within thirty days of the impugned meeting.
1.7 Proxies (Section 137)
To appoint another person by a member to attend and vote at a meeting as his

Proxy. Sub-section not to apply for company not having share capital, not more
than one proxy, If more than one proxy-all invalid, proxy must be member unless
articles provide non-member as proxy.
(1) A member of a company entitled to attend and vote at a meeting of the company
may appoint another person as his proxy to exercise all or any of his rights to attend,
speak and vote at a meeting:
Provided that—
(a) unless the articles of a company otherwise provide, this sub-section shall not apply
in the case of a company not having a share capital;
(b) a member shall not be entitled to appoint more than one proxy to attend any one
meeting;

(c) if any member appoints more than one proxy for any one meeting and more than
one instruments of proxy are deposited with the company, all such instruments of proxy
shall be rendered invalid; and
(d) a proxy must be a member unless the articles of the company permit appointment of
a non-member as proxy.
Notice of meeting to set out the right to appoint a proxy and be accompanied a
proxy form
(2) Subject to the provisions of sub-section (1), every notice of a meeting of a company
shall prominently set out the member‘s right to appoint a proxy and the right of such
proxy to attend, speak and vote in the place of the member at the meeting and every
such notice shall be accompanied by a proxy form.
Description of instrument of proxy

(3) The instrument appointing a proxy shall—
(a) be in writing; and
(b) be signed by the appointer or his attorney duly authorised in writing, or if the
appointer is a body corporate, be under its seal or be signed by an officer or an attorney
duly authorised by it.
Instrument of proxy of Table A shall not be questioned

(4) An instrument appointing a proxy, if in the form set out in Regulation 43 of Table A in
the First Schedule shall not be questioned on the ground that it fails to comply with any
special requirements specified for such instruments by the articles.
Time frame of proxies lodgment

(5) The proxies must be lodged with the company not later than forty-eight hours before
the time for holding a meeting and any provision to the contrary in the company‘s
articles shall be void.
Period of lodging proxy not to include any part of the day that is not working day
(6) In calculating the period mentioned in sub-section (5), no account shall be taken of
any part of the day that is not a working day.
Entitlement of members or proxies in a general meeting

(7) The members or their proxies shall be entitled to do any or all the following things in
a general meeting, namely—
(a) subject to the provisions of section 143, demand a poll on any question; and

(b) on a question before the meeting in which poll is demanded, to abstain from voting
or not to exercise their full voting rights;
and any provision to the contrary in the articles shall be void.
Inspection of proxies by the member

(8) Every member entitled to vote at a meeting of the company shall be entitled to
inspect during the business hours of the company all proxies lodged with the company.
Section to apply to the meeting of particular class of members

(9) The provisions of this section shall apply mutatis mutandis to the meeting of a
particular class of members as they apply to a general meeting of all the members.
Penalty provision
(10) Failure to issue notices in time or issuing notices with material defect or omission or
any other contravention of this section which has the effect of preventing participation or
use of full rights by a member or his proxy shall make the company and its every officer
who is a party to the default or contravention liable to—
(a) a penalty of level 2 on the standard scale if the default relates to a listed company;
and
(b) to a penalty of level 1 on the standard scale if the default relates to any other
company.
1.8 Representation of body corporate or corporation at meetings (Section 138)
If body corporate or corporation is a member—authorization by resolution of

board or other governing body
(1) A body corporate or corporation (whether or not a company within the meaning of
this Act) which is a member of another company may, by resolution of its board or other
governing body authorise an individual to act as its representative at any meeting of that
other company, and the individual so authorised shall be entitled to exercise the same
powers on behalf of the corporation which he represents.
If creditor of a company—authorization by resolution of board or other governing

body for meeting of the creditors
this Act) which is a creditor of another company may, by resolution of its board or other
governing body authorise an individual to act as its representative at any meeting of the
creditors of that other company held in pursuance of this Act or any other meeting to

which it is entitled to attend in pursuance of the provisions contained in any instrument
and the person so authorised shall be entitled to exercise the same powers on behalf of
the corporation which he represents.
1.9 Representation of Federal Government at meetings of companies (Section 139)
Representation of Federal Government/provincial Government at meetings of

companies, if a member of a company
(1) The concerned Minister-in-Charge of the Federal Government, or as the case may
be, a Provincial Government, as the case may be, if a member of a company, may
appoint such individual as it thinks fit to act as its representative at any meeting of the
company or at any meeting of any class of members of the company.
Powers of representative in the meeting

(2) An individual appointed to act as aforesaid shall, for the purpose of this Act, be
deemed to be a member of such a company and shall be entitled to exercise the same
rights and powers, including the right to appoint proxy, as the concerned Minister-in-
Charge of the Federal Government or as the case may be, the Provincial Government,
as the case may be, may exercise as a member of the company.
1.10 Notice of resolution (Section 140)
Contents of the notice of the meeting

(1) The notice of a general meeting of a company shall state the general nature of each
business proposed to be considered and dealt with at a meeting, and in case of special
resolution, accompanied by the draft resolution.
Members may give notice of a resolution, procedure for giving such notice
(2) The members having not less than ten percent voting power in the company may
give notice of a resolution and such resolution together with the supporting statement, if
any, which they propose to be considered at the meeting, shall be forwarded so as to
reach the company—
(a) in the case of a meeting requisitioned by the members, together with the requisition
for the meeting;
(b) in any other case, at least ten days before the meeting; and the company shall
forthwith circulate such resolution to all the members.

Penalty Provision
offence liable—
1.11 Voting to be by show of hands in first instance (Section 141)

At any general meeting, a resolution put to the vote of the meeting shall, unless a poll is
demanded, be decided on a show of hands.
1.12 Declaration by chairman on a show of hands (Section 142)
Declaration by chairman – conclusive evidence

(1) On a vote on a resolution at a meeting on a show of hands, a declaration by the
chairman that the resolution—
(a) has or has not been passed; or
(b) passed unanimously or by a particular majority;
is conclusive evidence of that fact without proof of the number or proportion of the votes
recorded in favour of or against the resolution.
Minutes of meeting – conclusive evidence

(2) An entry in respect of such a declaration in minutes of the meeting recorded in
accordance with section 151 is also conclusive evidence of that fact without such proof.
1.13 Demand for poll (Section 143)
Before or on the declaration of result Poll may be ordered by chairman of his own
motion or shall be ordered on a demand by the members
(1) Before or on the declaration of the result of the voting on any resolution on a show of
hands, a poll may be ordered to be taken by the chairman of the meeting of his own
motion, and shall be ordered to be taken by him on a demand made in that behalf by
the members present in person or through video-link or by proxy, where allowed, and
having not less than one-tenth of the total voting power.

Withdrawal of demand at any time
(2) The demand for a poll may be withdrawn at any time by the members who made the
demand.
1.14 Poll through secret ballot (Section 144)
Poll by secret ballot: may be ordered by chairman of his own motion and shall be
ordered on demand by the members
Notwithstanding anything contained in this Act, when a poll is demanded on any
resolution, it may be ordered to be taken by the chairman of the meeting by secret ballot
of his own motion, and shall be ordered to be taken by him on a demand made in that
behalf by the members present in person, through video-link or by proxy, where
allowed, and having not less than one-tenth of the total voting power.
1.15 Time of taking poll (Section 145)
When forthwith and when not more than fourteen days
Forthwith if question of adjournment, not more than fourteen days if any other
question
(1) A poll demanded on the election of a chairman or on a question of adjournment shall
be taken forthwith and a poll demanded on any other question shall be taken at such
time, not more than fourteen days from the day on which it is demanded, as the
chairman of the meeting may direct.
Chairman or his nominee and representative of the members demanding poll to

scrutinize
(2) When a poll is taken, the chairman or his nominee and a representative of the
members demanding the poll shall scrutinize the votes given on the poll and the result
shall be announced by the chairman.
Chairman to regulate the manner for poll

(3) Subject to the provisions of this Act, the chairman shall have power to regulate the
manner in which a poll shall be taken.
Result as the decision of the meeting

(4) The result of the poll shall be deemed to be the decision of the meeting on the
resolution on which the poll was taken.

1.16 Resolutions passed at adjourned meeting (Section 146)
Resolution to be deemed passed on the date on which it was in fact passed

Where a resolution is passed at an adjourned meeting of—
(a) a company;
(b) the holders of any class of shares in a company;
(c) the board; or
(d) the creditors of a company;
the resolution shall, for all purposes, be treated as having been passed on the date on
which it was in fact passed, and shall not be deemed to have been passed on any
earlier date.
1.17 Power of Commission to call meetings (Section 147)
If default is made in calling any meeting, Commission may of own motion or on

the application of any director or member may call or direct the calling of meeting
(1) If default is made in holding the statutory meeting, annual general meeting or any
extraordinary general meeting in accordance with sections 131, 132 or 133, as the
case may be, the Commission may, notwithstanding anything contained in this Act or in
the articles of the company, either of its own motion or on the application of any
director or member of the company, call, or direct the calling of, the said meeting of the
company in such manner as the Commission may think fit, and give such ancillary or
consequential directions as the Commission thinks expedient in relation to the calling,
holding and conducting of the meeting and preparation of any document required with
respect to the meeting.
Explanation.—The directions that may be given under sub-section (1) may include a
direction that one member of the company present in person or by proxy shall be
deemed to constitute a meeting.
Meeting shall be deemed duly called, held and conducted

(2) Any meeting called, held and conducted in accordance with any such direction shall,
for all purposes, be deemed to be a meeting of the company duly called, held and
conducted, and all expenses incurred in connection thereto shall be paid by the

company unless the Commission directs the same to be recovered from any officer of
the company which he is hereby authorised to do.
1.18 Punishment for default in complying with provisions of section 147 (Section 148)
Penalty provision
If any person makes default in holding a meeting of the company in accordance with
section 147 or in complying with any directions of the Commission, shall be liable to a
1.19 Passing of resolution by the members through circulation (Section 19)
Private or public unlisted company, having not more than 50 members may pass
resolution by circulation
(1) Except for the businesses specified under sub-section (2) of section 134 to be
conducted in the annual general meeting, the members of a private company or a public
unlisted company (having not more than fifty members), may pass a resolution (ordinary
or special) by circulation signed by all the members for the time being entitled to receive
notice of a meeting.
Such resolution shall be valid and effectual

(2) Any resolution passed under sub-section (1), shall be as valid and effectual as if it
had been passed at a general meeting of the company duly convened and held.
Resolution be circulated together with the necessary papers

has been circulated, together with the necessary papers, if any, to all the members.
Resolution by circulation may not be revoked

(4) A members‘ agreement to a written resolution, passed by circulation, once signified,
may not be revoked.
minutes of meeting
(5) A resolution under sub-section (1) shall be noted at subsequent meeting of the
members and made part of the minutes of such meeting.

1.20 Filing of resolution (Section 150)
Time frame for filing special resolution with the registrar

(1) Every special resolution passed by a company shall, within fifteen days from the
passing thereof, be filed with the registrar duly authenticated by a director or secretary
of the company.
Copy of every special resolution to be embodied in or annexed to articles issued

after the date of resolution
(2) Where articles have been registered, a copy of every special resolution for the time
being in force shall be embodied in or annexed to every copy of the articles issued after
the date of the resolution.
Copy of special resolution to member at his request

(3) A copy of every special resolution shall be forwarded to any member at his request
on payment of such fee not exceeding the amount as the company may determine.
Penalty provision
1.21 Records of resolutions and meetings (Section 151)
Keeping the record of copies of resolutions and minutes

(1) Every company shall keep records of—
(a) copies of all resolutions of members passed otherwise than at general meetings;
and
(b) minutes of all proceedings of general meetings along with the names of participants,
to be entered in properly maintained books;
Authentication of minutes
Minutes shall be deemed to call, hold and conduct the meeting

(3) Until the contrary is proved, every general meeting of the company in respect of the
proceedings whereof minutes have been so made shall be deemed to have been duly
called, held and conducted.

Record at registered office and period of the record
shall be preserved for at least twenty years in physical form and permanently in
electronic form.
Penalty provision
1.22 Inspection of records of resolutions and meetings (Section 152)
Inspection of minutes by members without charge

(1) The books containing the minutes of proceedings of the general meetings shall be
open to inspection by members without charge during business hours, subject to such
reasonable restrictions as the company may by its articles or in general meeting impose
so that not less than two hours in each day be allowed for inspection.
Copy of the minutes of meeting to be furnished on request of member

(2) Any member shall at any time after seven days from the meeting be entitled to be
furnished, within seven days after he has made a request in that behalf to the company,
with a certified copy of the minutes of any general meeting at such charge not
exceeding the amount as may be fixed by the company.
Penalty provision
(3) If any inspection required under sub-section (1) is refused, or if any copy required
under sub-section (2) is not furnished within the time specified therein, the person guilty
of an offence shall be liable to a penalty of level 1 on the standard scale, and the
registrar may direct immediate inspection or supply of copy, as the case may be.

2. SERVICE AND AUTHENTICATION OF DOCUMENTS
2.1 Service of documents on a company (Section 53)
Service of documents on a company or its officers-at registered office against an

acknowledgement, Post or courier, electronic means, any other manner specified.
A document or information may be served on the company or any of its officers at the
registered office of the company against an acknowledgement or by post or courier
service or through electronic means or in any other manner as may be specified.
2.2 Service of documents on Commission or the registrar (Section 54)
Service of documents on Commission or the registrar against an acknowledgement,

Post or courier, electronic means, any other manner specified.
A document or information may be served on the Commission or the registrar against
an acknowledgement or by post or courier service or through electronic means or in any
other manner as may be specified.
2.3 Service of notice on a member (Section 55)
Service of notice on a member at his registered address against an

acknowledgement, by post or courier, electronic means, any other manner
specified.
(1) A document or information may be served on a member at his registered address or,
if he has no registered address in Pakistan, at the address supplied by him to the
company for the giving of notices to him against an acknowledgement or by post or
courier service or through electronic means or in any other manner as may be specified.
Notice be sent by post

(2) Where a notice is sent by post, service of the notice shall be deemed to be effected
by properly addressing, prepaying and posting a letter containing the notice and, unless
the contrary is proved, to have been effected at the time at which the letter will be
delivered in the ordinary course of post.
Notice to the joint holders—notice to joint-holder named first in the register

(3) A notice may be given by the company to the joint-holders of a share by giving the
notice to the joint-holder named first in the register in respect of the share.

Notice in case of death or insolvency
(4) A notice may, in the manner provided under sub-section (1), be given by the
company to the person entitled to a share in consequence of death or insolvency of a
member addressed to him by name or by the title or representatives of the deceased or
assignees of the insolvent or by any like description, at the address supplied for the
purpose by the person claiming to be so entitled.
2.4 Authentication of documents and proceedings (Section 56)
Authentication of documents by an officer or authorized representative by the

board
Save as expressly provided in this Act, a document or proceeding requiring
authentication by a company may be signed either by an officer or a representative
authorized by the board.
QUESTIONS
1. What are the time lines for the holding of a statutory and an annual general
meeting of the company?
2. What are the requirements of the Act in case of requisition of a general meeting
by the members of the company?
3. Who can demand poll in general meeting of the companies?
4. What are the requirements for giving notices of resolutions under the Companies
Act, 2017?
5. What are the requirements of the Act regarding maintenance of minutes of
meetings?

MCQs
1) Which of the following companies shall hold statutory meeting:

i. A Public company limited by shares.
ii. Company limited by guarantee not having share capital.
iii. Company limited by guarantee having share capital.
iv. Company not having share capital.
a) Both i and ii
b) i and iii
c) ii and iv
d) i only
2) Statutory report shall be forwarded:

i. By the promoters to the members, at least 21 days before the date.
on which the statutory meeting is held.
ii. To the members, at least 21 days before the date fixed for the
statutory meeting.
iii. By the directors to the registrar.
a) i and iii
b) ii only
c) iii only
d) ii and iii only
3) Statutory report shall state:

i. The total number of shares allotted.
ii. The names, addresses and occupations of the directors, auditors
and legal advisor.
iii. The opinion expressed by the auditor on statutory financial
statements.
iv. Total amount of cash received by the company in respect of all
shares allotted.
a) i and ii
b) ii and iii
c) iii only
d) i, ii and iv

4) Every private company having share capital shall hold:
i. Statutory meeting once in its life.
ii. Annual general meeting in every calendar year.
iii. Annual meeting of creditors.
iv. A meeting with registrar and SECP annually.
a) i, ii and iv
b) ii and iii
c) ii only
d) All of above
5) Annual general meeting of a listed company shall be held:

a. In the province where its registered office is situated.
b. In the province where stock exchange is situated on which the securities
of the company are listed.
c. In the town where registered office is situated or in a nearest city.
d. In the town where registered office is situated, however commission may
allow particular meeting of company to be held at any other place.
6) In case of a company having share capital, extraordinary general meeting may

be called by
i. The directors on their own will as and when required.
ii. Shall be called by the directors on requisition of members
representing not less than 25% of total voting power in the
company.
iii. May be called by requisitionists, if directors do not proceed to call
the meeting within twenty days of depositing the requisition.
iv. The members of the company having not less than one-tenth of the
total voting power as on the date of deposit of requisition.
a) i and iii
b) i, iii and iv
c) i only
d) i and iv
MCQs (Answers)
1. d 2. d 3. d 4. c 5. c 6. d

Companies Act, 2017

1. DEFINITION AND KINDS OF DEBENTURES
2. SPECIAL PROVISIONS AS TO DEBENTURES

(Section 63 to 66, 84)
3. REGISTRATION OF MORTGAGES, CHARGES, ETC.

4. RECEIVERS AND MANAGERS


Debentures, Mortgages & Charges
1- DEFINITION
Debenture is a document issued by the company as an evidence of its debt. It is
a security issued or allotted to the investors under the seal of the company. It
contains a contract for the repayment of a debt and the interest thereon at a
specified rate.
Companies Act Defines it as [(Section 2 (1) (24)]

“Debenture” includes debenture stock, bonds, Term Finance Certificate or any
other instrument of a company evidencing a debt, whether constituting a
mortgage or charge on the assets of the company or not.
Thus debenture means any securities (excluding the shares) issued by the
company against the amount received by it as loan. Such securities may or may
not constitute a charge against the assets of the company.
2- KINDS OF DEBENTURES
a) Ordinary debentures:
The debentures which are issued without any security for repayment are
called ordinary debentures.
b) Redeemable debentures:
The debentures which are repayable either at a particular stated time or
on the happening/non-happening of an event or after an indefinite period
are known as redeemable debentures.
c) Irredeemable debentures:
The debentures which are not payable during the life time of the company
which is issuing such debentures are called irredeemable debentures.
d) Bearer debentures:
The debentures which do not specify the name of the owner is called
bearer debenture. Any holder of such debenture is entitled to receive
interest on due dates.

e) Perpetual debentures:
These are the debentures which are not cancelled on redemption and can
be re-issued at any time after their redemption.
f) Secured/mortgaged debentures:
The debenture which is secured by a mortgage on the property of the
company is called mortgage debenture.
g) Convertible debentures:
The debentures which are convertible into the shares of the company are
called convertible debentures.
3- TRUST, TRUST DEED AND TRUSTEES
Whenever debentures are issued by the company to ensure security of

repayment the company forms a trust and appoints trustees under a trust deed.
The purpose and functioning of the trust is stated in the trust deed.
The trustees are responsible for safeguarding the rights of debenture holders and
mortgage deed is entered into between the company and trustees.
Certain powers and liabilities of the trustees as stated in the ordinance are as
follows.
3.1 Powers/Rights
The trustees can sue the company for all redemption monies and interest in the
following cases:
(a) where the issuer of debentures as mortgager binds himself to pay the
debenture loan and/or accrued interest thereon, he can be sued on the
due date if the amount remains unpaid;
(b) where the mortgaged property has become insufficient due to reasons
other than the wrongful act or default of the issuer, and security is not
made up despite the provision of reasonable opportunity by the trustees;
(c) where trustees are deprived of all or part of security because of wrongful
act of the issuer; and

(d) where the trustee is entitled to take possession of the mortgaged property
and that possession is not delivered to him by the issuer or any other
person claiming the title of that property.
If the trust deed so provides, the trustees can sell the mortgaged property or
assets of the company without suing it.
The trustees cannot be indemnified against any liability for breach of trust due to
lack of care and negligence as a trustee. Any such indemnification in the trust
deed would be void.
4- ISSUE OF SECURITIES AND REDEEMABLE CAPITAL NOT BASED ON INTEREST
A company may by public offer, or upon terms and conditions contained in an

agreement in writing issue redeemable capital in any or several forms to one or
more scheduled banks, financial institutions or persons specified by the Federal
Government for this purpose.
Such capital may be issued either through public issue or upon terms and
conditions contained in an agreement in writing.
Such capital may be issued in consideration of any funds, moneys or

accommodation received or to be received by the company, whether in cash or
specie or against any promise or guarantee, undertaking or indemnity issued to
or in favour of or for the benefit of the company.
The agreement should provide for the following:
(a) mode and basis of repayment of redeemable capital within a certain

period of time;
(b) arrangement for sharing of profit or loss;
(c) creation of special reserve called the “participation reserve” by the
company in the manner provided in the agreement; and
(d) in the case of loss on participatory redeemable capital on maturity, the
conversion of redeemable capital into ordinary shares at the break-up
price calculated in the prescribed manner.
The terms and conditions for the issue of certificate of redeemable capital and
the rights of their holders shall not be challenged or questioned by the company
or any of its shareholders.

The provisions of the Companies Act relating to creation, issue, increase or
decrease of the capital shall not apply to the redeemable capital.
5. MORTGAGES AND CHARGES
Following definitions needs understanding before we proceed on to study

the relevant provisions of the Act regarding mortgages and charges.
5.1 MODES OF GIVING SECURITY FOR BORROWING
CHARGE:
Charge means encumbrance (a legal claim), lien (a right to retain possession of
property till the repayment of a debt) or a claim.
MORTGAGE:
A mortgage is an interest in land created by a written instrument providing
security for the performance of a duty or the payment of a debt.
HYPOTHECATION:
Hypothecation means the pledge of a property as security or collateral for a debt.
Generally physical transfer or transfer of title does not take place in
hypothecation.
PLEDGE:
Contract Act defines pledge as a ‘bailment’ of goods as security for the
repayment of a debt or performance of a promise.
5.2- TYPES OF CHARGES:

Following are types of charges:
a) Floating Charge:
A company can deal with the property in the ordinary course of business
unless charge is crystallized (i.e. the company goes into liquidation or
receiver is appointed.)
Following are the major elements/features of a floating charge:
i) It is a charge on a class of assets present or future;

ii) Class of assets may change from time to time;
iii) Until some further step is taken, the company may ordinarily carry
on business;

b) Fixed Charge:
A fixed charge is a mortgage of specific property and prevents the
company from realizing that property i.e. disposing it without the consent
of the holders of the charge. A charge-holder must be paid first whatever
is due to him in order to get the property free of charge.
DIFFERENCE BETWEEN FIXED CHARGE & FLOATING CHARGE
Fixed Charge Floating Charge

1. Fixed charge is created on Floating charge relates to all assets
specific and ascertained assets of a company present or future.
of the company.
2. Assets which are subject to a Assets under floating charge may in

fixed charge cannot be the ordinary course of business be
changed except with the changed from time to time.
consent of the charge holder.
3. Fixed charge is a legal charge. Floating charge is an equitable

charge.
4. At the time of winding-up of the At the time of winding-up it will

company the status will not automatically become fixed charge.
change.
6- SPECIAL PROVISIONS AS TO DEBENTURES
6.1 Issue of debentures (Section 63)
Different kinds with different classes, rights and privileges—specified

(1) A company may issue different kinds of debentures having different classes, rights
and privileges as may be specified.
Rights, privileges and procedure, form of debenture trust deed—specified

(2) The rights, privileges and the procedure, for securing the issue of debentures, the
form of debenture trust deed, the procedure for the debenture holders to inspect the
trust deed and to obtain a copy thereof shall be such as may be specified.

6.2 Payment of certain debts out of assets subject to floating charge in priority to
claims under the charge (Section 64)
Debentures secured by a floating charge shall be paid forthwith out of any assets
coming to the hands of the receiver in priority to any claim for principal or interest
(1) Where either a receiver is appointed on behalf of the holders of any debentures of a
company secured by a floating charge, or possession is taken by or on behalf of these
debenture holders of any property comprised in or subject to the charge, then, if the
company is not at the time in course of being wound up, the debts which in every
winding up are under the provisions of Part-X relating to preferential payments to be
paid in priority to all other debts, shall be paid forthwith out of any assets coming to the
hands of the receiver or other person taking possession as aforesaid in priority to any
claim for principal or interest in respect of the debentures.
Date of appointment of receiver be taken for reckoning the periods of time mentioned in
the provisions of Part-X
(2) The periods of time mentioned in the said provisions of Part-X shall be reckoned
from the date of the appointment of the receiver or of possession being taken as
aforesaid, as the case may be.
Any such payments made to be recouped out of assets of the company available
for payment of general creditors
(3) Any payments made under sub-section (1) shall be recouped, as far as may be, out
of the assets of the company available for payment of general creditors.
6.3 Powers and liabilities of trustee (Section 65)
Trust to have the right to sue for all redemption monies and interest in different
cases
(1) The trustee nominated or appointed under the trust-deed for securing an issue of
debentures shall, if so empowered by such deed, have the right to sue for all
(a) where the issuer of the debentures as mortgagor binds himself to repay the
debenture loan or pay the accrued interest thereon, or both to repay the loan and pay
the interest thereon, in the manner provided on the due date;
(b) where by any cause other than the wrongful act or default of the issuer the
mortgaged property is wholly or partially destroyed or the security is rendered

insufficient within the meaning of section 66 of the Transfer of Property Act, 1882 (Act
IV of 1882), and the trustee has given the issuer a reasonable opportunity of providing
further security adequate to render the whole security sufficient and the issuer has failed
to do so;
(c) where the trustee is deprived of the whole or part of the security by or in
consequence of any wrongful act or default on the part of the issuer; and
(d) where the trustee is entitled to take possession of the mortgaged property and the
issuer fails to deliver the same to him or to secure the possession thereof without
disturbance by the issuer or any person claiming under a title superior to that of the
issuer.
If suit is under clause (a) or (b) of sub-section (1) the court may stay the suit and
all proceedings
(2) Where a suit is brought under clause (a) or clause (b) of sub-section (1) the Court
may at its discretion stay the suit and all proceedings therein notwithstanding any
contract to the contrary, until the trustee has exhausted all his available remedies
against the mortgaged property or what remains of it unless the trustee abandons his
security and, if necessary, retransfers the mortgaged property.
Trustee, if so authorized by the trust deed, sell or concur in selling the mortgaged
property without intervention of the court
(3) Notwithstanding anything contained in sub-sections (1) and (2) or any other law for
the time being in force, the trustee or any person acting on his behalf shall, if so
authorised by the trust-deed, sell or concur in selling, without intervention of the Court,
the mortgaged property or any part thereof in default of payment according to re-
payment schedule of any redemption amount or in the payment of any accrued interest
on the due date by the issuer.
Explanation.—“Issuer” for the purpose of this section, shall mean the company
issuing debentures and securing the same by mortgage of its properties or assets, or
both its properties and assets, and appointing a trustee under a trust-deed.
Any provision in a trust-deed or in any contract of exempting a trustee or

indemnifying him against liability for breach of trust shall be void
(4) Subject to the provisions of this section, any provision contained in a trust-deed for
securing an issue of debentures, or in any contract with the holders of debentures
secured by a trust-deed, shall be void in so far as it would have the effect of exempting

a trustee thereof from, or indemnifying him against, liability for breach of trust, where he
fails to show the degree of care and diligence required of him as trustee, having regard
to the provisions of the trust-deed conferring on him any power, authority or discretion.
Sub-section (4) not to invalidate certain acts, provision, agreement

(5) Sub-section (4) shall not invalidate-
(a) any release otherwise validly given in respect of any act or omission by a trustee
before the giving of the release; or
(b) any provision enabling such a release to be given—
(i) on the agreement thereto of a majority of not less than three-fourths in value of the
debenture-holders present and voting in person or, where proxies are permitted, by
proxy, at a meeting summoned for the purpose; and
(ii) either with respect to specific acts or omissions or on the trustee dying or ceasing to
act.
Sub-section (4) shall not operate to invalidate certain provision or to deprive

certain person
(6) Sub-section (4) shall not operate-
(a) to invalidate any provision in force immediately before the commencement of this
Act, so long as any person then entitled to the benefit of that provision or afterwards
given the benefit thereof under sub-section (7) remains as trustee of the deed in
question; or
(b) to deprive any person of any exemption or right to be indemnified in respect of any
act or omission by him while any such provision was in force.
If Trustee entitles the benefit, the same may be given to all trustees of deed, any
named trustees or proposed trustees by a resolution
(7) While any trustee of a trust-deed remains entitled to the benefit or provision saved
by sub-section (6), the benefits of that provision may be given either—
(a) to all trustees of the deed, present and future; or
(b) to any named trustees or proposed trustees thereof;

by a resolution passed by a majority of not less than three-fourths in value of the
debenture-holders present in person or, where proxies are permitted, by proxy, at a
meeting called for the purpose in accordance with the provisions of the deed or, if the
deed makes no provisions for calling meetings, at a meeting called for the purpose in
any manner approved by the Court.
6.4 Issue of securities and redeemable capital not based on interest (Section 66)
A company by public offer or an agreement issue any instrument in the nature of

redeemable capital to one or more scheduled banks, financial institutions or such
other persons notified by the Commission
(1) A company may by public offer or, upon terms and conditions contained in an
agreement in writing, issue to one or more scheduled banks, financial institutions or
such other persons as are notified for the purpose by the Commission either severally,
jointly or through their syndicate, any instrument in the nature of redeemable capital in
any or several forms in consideration of funds, moneys or accommodations received or
to be received by the company, whether in cash or in specie or against any promise,
guarantee, undertaking or indemnity issued to or in favour of or for the benefit of the
company.
An agreement may provide mode of basis of repayment by the company, sharing

of profit and loss, creation of special reserve called the “Participation reserves”,
if net loss on the date of maturity, the right to convert the balance into ordinary
shares
(2) In particular and without prejudice to the generality of the forgoing provisions, the
agreement referred to in sub-section (1) for redeemable capital may provide for, adopt
or include, in addition to others, all or any of the following matters, namely-
(a) mode and basis of repayment by the company of the amount invested in
redeemable capital within a certain period of time;
(b) arrangement for sharing of profit and loss;
(c) creation of a special reserve called the “participation reserves” by the company in
the manner provided in the agreement for the issue of participatory redeemable capital
in which all providers of such capital shall participate for interim and final adjustment on
the maturity date in accordance with the terms and conditions of such agreements; and
(d) in case of net loss on participatory redeemable capital on the date of maturity, the
right of holders to convert the outstanding, balance of such capital or part thereof as

provided in the agreement into ordinary shares of the company at the break-up price
calculated in the specified manner.
The terms and conditions for the issue and the rights of the holders shall not be
challenged or questioned by the company or any of its shareholders
(3) The terms and conditions for the issue of instruments or certificates of redeemable
capital and the rights of their holders shall not be challenged or questioned by the
company or any of its shareholders unless repugnant to any provision of this Act or any
other law or the memorandum or articles or any resolution of the general meeting or
directors of the company or any other document.
The provision relating to creation, issue, increase or decrease of the capital not to
apply to the redeemable capital
(4) The provision of this Act relating to the creation, issue, increase or decrease of the
capital shall not apply to the redeemable capital.
6.5 Prohibition on acceptance of deposits from public (Section 84)
No company to invite, accept or renew deposits

(1) On and after the commencement of this Act, no company shall invite, accept or
renew deposits from the public:
Provided that nothing in this sub-section shall apply to a banking company and such
other company or class of companies or such deposits as the Commission may, notify
in this behalf.
Explanation.—For the purposes of this section, “deposit” means any deposit of money
with, and includes any amount borrowed by, a company, but shall not include a loan
raised by issue of debentures or a loan obtained from a banking company or financial
institution or an advance against sale of goods or provision of services in the ordinary
course of business.
Penalty provision for company

(2) Where a company accepts or invites, or allows or causes any other person to accept
or invite on its behalf, any deposit, the company shall be punishable—
(a) where such contravention relates to the acceptance of any deposit, with penalty
which shall not be less than the amount of the deposit so accepted; and

(b) where such contravention relates to the invitation for any deposit, shall be liable to a
Penalty provision for officers

(3) In addition to the fine on the company under sub-section (2), every officer of the
company which is in default shall be punishable with imprisonment for a term which may
extend to two years and shall also be liable to fine which may extend to five million
rupees.
7 REGISTRATION OF MORTGAGES, CHARGES, ETC.
7.1 Requirement to register a mortgage or charge (Section 100)
Particulars of mortgage or charge together with a copy of the instrument, if any,

to be filed with the registrar
(1) A company that creates a mortgage or charge to which this section applies must file
the specified particulars of the mortgage or charge, together with a copy of the
instrument, if any, verified in the specified manner, by which the mortgage or charge is
created or evidenced, with the registrar for registration within a period of thirty days
beginning with the day after the date of its creation:
Provided that—
(a) in the case of a mortgage or charge created out of Pakistan comprising solely
property situated outside Pakistan, thirty days after the date on which the instrument or
copy could, in due course of post, and if dispatched with due diligence, have been
received in Pakistan shall be substituted for thirty days after the date of the creation of
the mortgage or charge as the time within which the particulars and instrument or copy
are to be filed with the registrar; and
(b) in case the mortgage or charge is created in Pakistan but comprises property
outside Pakistan, a copy of the instrument creating or purporting to create the mortgage
or charge verified in the specified manner may be filed for registration notwithstanding
that further proceedings may be necessary to make the mortgage or charge valid or
effectual according to the law of the country in which the property is situate:
Provided further that any subsequent registration of a mortgage or charge shall not
prejudice any right acquired in respect of any property before the mortgage or charge is
actually registered.

Application of this section to various type of mortgages or charges
(2) This section applies to the following charges—
(a) a mortgage or charge on any immovable property wherever situate, or any interest
therein; or
(b) a mortgage or charge for the purposes of securing any issue of debentures;
(c) a mortgage or charge on book debts of the company;
(d) a floating charge on the undertaking or property of the company, including stock-in-
trade; or
(e) a charge on a ship or aircraft, or any share in a ship or aircraft;
(f) a charge on goodwill or on any intellectual property;
(g) a mortgage or charge or pledge, on any movable property of the company;
(h) a mortgage or charge or other interest, based on agreement for the issue of any
instrument in the nature of redeemable capital; or
(i) a mortgage or charge or other interest, based on conditional sale agreement, namely,
lease financing, hire-purchase, sale and lease back, and retention of title, for acquisition
of machinery, equipment or other goods:
Provided that where a negotiable instrument has been given to secure the payment of
any book debts of a company, the deposit of the instrument for the purpose of securing
an advance to the company shall not for the purpose of this sub-section be treated as a
mortgage or charge on those book debts.
Explanation—For the purposes of this Act―charge includes mortgage or pledge.
Certificate of registration by the Registrar

(3) The registrar shall, on registration of a mortgage or charge under sub-section (1)
issue a certificate of registration under his signatures or authenticated by his official seal
in such form and in such manner as may be specified.

Application of this section to a company acquiring any property subject to a
mortgage or charge
(4) The provisions of this section relating to registration shall apply to a company
acquiring any property subject to a mortgage or charge.
Charge not registered shall not be taken into account by the liquidator or any
other creditor
(5) Notwithstanding anything contained in any other law for the time being in force, no
mortgage or charge created by a company shall be taken into account by the liquidator
or any other creditor unless it is duly registered under sub-section (1) and a certificate of
registration of such charge is given by the registrar under sub-section (3).
No effect of sub-section (5) on contract or obligation for repayment of money

(6) Nothing in sub-section (5) shall prejudice any contract or obligation for repayment of
the money thereby secured.
If charge is registered, any person shall be deemed to have notice of the

mortgage or charge
(7) Where any mortgage or charge on any property or assets of a company or any of its
undertakings is registered under this section, any person acquiring such property,
assets, undertakings or part thereof or any share or interest therein shall be deemed to
have notice of the mortgage or charge from the date of such registration.
7.2 Particulars in case of series of debentures entitling holders pari passu

(Section 101)
In case of series of debentures entitling holders pari passu, certain particulars

are to be filed with the registrar
Where a series of debentures containing, or giving by reference to any other instrument,
any charge to the benefit of which the debenture-holders of that series are entitled pari
passu is created by a company, it shall be sufficient for the purposes of section 100 if
there are filed with the registrar within thirty days after the execution of the deed
containing the charge or, if there is no such deed, after the execution of any debentures
of the series, the following particulars, namely—
(a) the total amount secured by the whole series;
(b) the dates of the resolutions authorising the issue of the series and the date of the
covering deed, if any, by which the security is created or defined;

(c) a general description of the property charged; and
(d) the names of the trustees, if any, for the debenture-holders;
together with a copy of the deed verified in the specified manner containing the charge:
Provided that, where more than one issue is made of debentures in the series, there
shall be filed with the registrar for entry in the register particulars of the date and amount
of each issue, but an omission to do this shall not affect the validity of the debentures
issued.
7.3 Register of charges to be kept by registrar (Section 102)
Registrar to keep the register of charges of every company

(1) The registrar shall, in respect of every company, keep a register containing
particulars of the charges registered under this Part in such form and in such manner as
may be specified.
Inspection of the register

(2) A register kept in pursuance of this section shall be open to inspection by a person
on payment of such fees as may be prescribed.
7.4 Index to register of mortgages and charges (Section 103)
Registrar to keep a chronological index

The registrar shall keep a chronological index, in the form, containing such particulars,
as may be specified, of the mortgages or charges registered with him under the
company law.
7.5 Endorsement of certificate of registration on debenture or certificate of

debenture stock (Section 104)
Company to be endorsed on every debenture or certificate of debenture stock,

If in the book-entry form—disclosure specified, Company not to endorse on such
certificate of debenture or debenture stock, if issued before the creation of
mortgage or charge
The company shall cause a copy of every certificate of registration given under section
100 to be endorsed on every debenture or certificate of debenture stock which is issued
by the company and the payment of which is secured by the mortgage or charge so
registered:

Provided that in case the certificate of debenture or debenture stock is issued in the
book-entry form, appropriate disclosure in pursuance of this section shall be made in
the manner as may be specified:
Provided further that nothing in this section shall be construed as requiring a company
to cause a certificate of registration of any mortgage or charge so given, to be endorsed
on any debenture or certificate of debenture stock which has been issued by the
company before the mortgage or charge was created.
7.6 Duty of company and right of interested party as regards registration

(Section 105)
Duty of company to file the particulars of mortgage or charge with the registrar
but registration of such mortgage or charge may be effected on the application of
any person interested therein
(1) It shall be the duty of a company to file with the registrar for registration the specified
particulars of every mortgage or charge created by the company and of the issue of
debentures of a series, requiring registration under section 100, but registration of any
such mortgage or charge may be effected on the application of any person interested
therein.
some person other than the company may recover from the company the amount
of any fee
(2) Where the registration is affected on the application of some person other than the
company, that person shall be entitled to recover from the company the amount of any
fees properly paid by him to the registrar on the registration.
7.7 Modification in the particulars of mortgage or charge (Section 106)
If modified, particulars of modification shall also be sent to the registrar

Whenever the terms or conditions or extent or operation of any mortgage or charge
registered under this Part are modified, it shall be the duty of the company to send to
the registrar the particulars of such modification together with a copy of the instrument
evidencing such modification verified in the specified manner, and the provisions of this
Part as to registration of mortgage or charge shall apply to such modification of the
mortgage or charge as aforesaid.

7.8 Copy of instrument creating mortgage or charge to be kept at registered office
(Section 107)
Every company shall cause a copy of every instrument creating any mortgage or charge
requiring registration under this Part and of every instrument evidencing modification of
the terms or conditions thereof, to be kept at the registered office of the company.
7.9 Rectification of register of mortgages (Section 108)
Commission to rectify (a) Omission to file the particulars of any mortgage or

charge or modification therein (b) omission or mis-statement of any particular
(1) The Commission on being satisfied that—
(a) the omission to file with the registrar the particulars of any mortgage or charge or
any modification therein within the time required by section 100 or 101, as the case may
be; or
(b) the omission or mis-statement of any particular with respect to any such mortgage or
charge;
was accidental or due to inadvertence or to some other sufficient cause, or is not of a

nature to prejudice the position of creditors or shareholders of the company, or that on
other grounds it is just and equitable to grant relief, may, on the application of the
company or any person interested and, on such terms and conditions as seem to the
Commission just and expedient, order that the time for filing the required particulars be
extended, or, as the case may be, that the omission or mis-statement be rectified, and
may make such order as to the costs of the application as it thinks fit.
Copy of the order of the Commission to the Registrar

(2) A copy of the order passed under this section duly certified by the Commission or its
authorised officer shall be forwarded to the concerned registrar within seven days from
the date of the order.
Extension of time by the Commission shall not affect rights in respect of the
property prior to the time of actual registration of mortgage or charge
(3) Where the Commission extends the time for the registration of a mortgage or
charge, the order shall not prejudice any rights acquired in respect of the property
concerned prior to the time when the mortgage or charge is actually registered.

7.10 Company to report satisfaction of charge (Section 109)
Intimation of payment or satisfaction to the registrar

(1) A company shall give intimation to the registrar in the manner specified, of the
payment or satisfaction, in full, of any mortgage or charge created by it and registered
under this Part, within a period of thirty days from the date of such payment or
satisfaction.
Notice by the registrar to the holder of mortgage or charge calling upon him to
show cause
(2) The registrar shall, on receipt of intimation under sub-section (1), cause a notice to
be sent to the holder of the mortgage or charge calling upon him to show cause within
such time not exceeding fourteen days, as may be specified in such notice, as to why
payment or satisfaction in full shall not be recorded as intimated to the registrar, and if
no cause is shown, by such holder of the mortgage or charge, the registrar shall accept
the memorandum of satisfaction and make an entry in the register of charges kept by
him under section 102:
Provided that the notice referred to in this sub-section shall not be required if a no
objection certificate on behalf of the holder of the mortgage or charge is furnished,
along-with the intimation to be submitted under sub-section (1).
If any cause is shown, registrar to record a note and inform the company
(3) If any cause is shown, the registrar shall record a note to that effect in the register of
charges and shall inform the company.
Power of registrar under section 102 to make an entry

(4) Nothing in this section shall be deemed to affect the powers of the registrar to make
an entry in the register of charges under section 102 or otherwise than on receipt of an
intimation from the company.
In case of failure, to file particulars with additional fee and penalty

(5) If a company fails to file the particulars of satisfaction of mortgage or charge within
the period specified under this section, the required particulars may be submitted with
the additional fee, as may be specified and imposing the penalty as specified in this
Part.

7.11 Power of registrar to make entries of satisfaction and release in absence of
intimation from company (Section 110)
Entry by the registrar against evidence of debt satisfaction or release of property

or ceased to form part of the company’s property even no intimation has been
received by him from the company
The registrar may, on evidence being given to his satisfaction with respect to any
registered charge-
(a) that the debt for which the charge was given has been paid or satisfied in whole or in
part; or
(b) that 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;
enter in the register of charges a memorandum of satisfaction in whole or in part, or of

the fact that part of the property or undertaking has been released from the charge or
has ceased to form part of the company‘s property or undertaking, as the case may be,
and inform the parties concerned, notwithstanding the fact that no intimation has been
received by him from the company.
7.12 Punishment for contravention (Section 111)
Penalty provision
Any violation of this Part shall be an offence liable to a penalty of level 1 on the standard
scale.
7.13 Company’s register of mortgages and charges (Section 112)
Company to maintain register of mortgages and charges

(1) Every company shall maintain a register of mortgages and charges requiring
registration under this Part, in such form and in such manner as may be specified and
any violation under this section shall be an offence punishable under this Act.
Inspection of the register—for member and creditor without fee, for any other
person such fee as may be fixed by the company for each inspection
(2) The register of charges maintained under this section and the copies of instrument
creating any mortgage and charge or modification thereof, kept in pursuance of this part
shall be open to inspection of-

(a) any member or creditor of the company without fee; and
(b) any other person on payment of such fee as may be fixed by the company for each
inspection.
Penalty for refusal of inspection

(3) The refusal of inspection of the said copies or the register shall be an offence under
this section and any person guilty of an offence under this section shall be liable to a
penalty of level 1 on the standard scale, and every officer of the company who
knowingly authorises or permits the refusal shall incur the like penalty, and in addition to
the above penalty, the registrar may by order compel an immediate inspection of the
copies or register.
Penalty Provision
(4) If any officer of the company authorises or permits the omission of any entry
required to be made in pursuance of sub-section (1), shall be liable to a penalty of level
8. RECEIVERS AND MANAGERS

Courts appoint receivers to take custody, manage, and preserve money or property that
is subject to litigation so that when the final judgment is rendered, the property remains
available to accomplish what has been ordered. The power to appoint a receiver is
rarely utilized by the courts, and only upon a showing that it is required to preserve the
property. Receivership cannot properly be used to coerce a party or to gain control of a
business from someone who is capable of managing it. Receivership is an extraordinary
remedy, designed to benefit everyone involved. It is, however, a harsh remedy, since it
involves restraining an individual's property, removing it from his control, and causing
additional legal expenses.
The appointment of a receiver, which is a provisional remedy to be exercised while

litigation is pending, is ordinarily prescribed by statute, as are a receiver's powers.
Ordinarily a receiver can be appointed only after a lawsuit is initiated.
Relevant provisions of the Companies Act 2017 are summarized as under

8.1 Registration of appointment of receiver or manager (Section 113)
To file with the registrar a notice of appointment as a receiver or manager

(1) Where in order to ensure enforcement of security of a company‘s property, a person
obtains an order for the appointment of a receiver or manager, or appoints such a
receiver or manager under any powers contained in any instrument, he shall within
seven days of the order or of the appointment under the powers contained in the
instrument, file a notice of the fact with the registrar.
To give the registrar a notice of ceasing to act as receiver of manager

(2) Where a person appointed as a receiver or manager under this section ceases to
act as such, the person who had obtained the order or appointed such a receiver or
manager pursuant to the powers contained in any instrument shall on ceasing of the
receiver or manager, give the registrar a notice to that effect within seven days.
Registrar to enter the fact in the register of mortgages and charges

(3) The registrar shall enter the fact of which he is given notice under this section in the
register of mortgages and charges.
Penalty provision
(4) Any violation of sub-sections (1) and (2) shall be an offence liable to a penalty of
level 1 on the standard scale.
8.2 Filing of accounts of receiver or manager (Section 114)

Time frame to file with the registrar an abstract of receipts and payments and to file with
the registrar notice of ceasing to act as receiver
(1) Every receiver of the property of a company who has been appointed under the
powers contained in any instrument, and who has taken possession, shall within thirty
days of expiry of every one hundred and eighty days while he remains in possession,
and also within thirty days on ceasing to act as receiver, file with the registrar an
abstract in the form specified of his receipts and payments during the period to which
the abstract relates, and shall also, within fifteen days of ceasing to act as receiver, file
with the registrar notice to that effect, and the registrar shall enter the notice in the
register of mortgages and charges.

A statement that a receiver has been appointed to be mentioned on certain
documents
(2) Where a receiver of the property of a company has been appointed, every invoice,
order for goods, or business letter issued by or on behalf of the company or the receiver
of the company, being a document on or in which the name of the company appears,
shall contain a statement that a receiver has been appointed.
The sub-sections (1) and (2) to apply to any person appointed to manage the
property of a company
(3) The provisions of sub-sections (1) and (2) shall apply to any person appointed to
manage the property of a company under any powers contained in an instrument in the
same manner as they apply to a receiver so appointed.
Penalty provision
(4) Any contravention or default of this section by the receiver, or person appointed to
manage the property of the company referred to sub-section (3), shall be an offence
liable to a penalty of level 1 on the standard scale.
8.3 Disqualification for appointment as receiver or manager (Section 115)

The following shall not be appointed as a receiver or manager of the company‘s
property, namely-
(a) a minor;
(b) a person who is of unsound mind and stands so declared by a competent court;
(c) a body corporate;
(d) a director of the company;
(e) an un-discharged insolvent unless he is granted leave by the court by which he has
been adjudged an insolvent; or
(f) a person disqualified by a Court from being concerned with or taking part in the
management of the company in any other way, unless he is granted leave by the Court.

8.4 Application to Court (Section 116)
Receiver or manager to apply to the Court for directions in relation to any

particular matter arising in connection with the performance of his functions
(l) A receiver or manager of the company‘s property appointed under the powers
contained in any instrument may apply to the Court for directions in relation to any
particular matter arising in connection with the performance of his functions, and on any
such application the Court may give such direction, or may make such order declaring
the rights of persons before the Court, or otherwise, as the Court thinks just.
A receiver or manager shall be personally liable on any contract entered into by

him in the performance of his functions
(2) A receiver or manager of the company‘s property appointed as aforesaid shall, to the
same extent as if he had been appointed by order of a Court be personally liable on any
contract entered into by him in the performance of his functions, except in so far as the
contract otherwise provides, and entitled in respect of that liability to indemnity out of the
assets; but nothing in this sub-section shall be deemed to limit any right to indemnity
which he would have apart from this sub-section, or to limit his liability on contracts
entered into without authority or to confer any right to indemnity in respect of that
liability.
8.5 Power of Court to fix remuneration of receiver or manager (Section 117)
The court may by order fix the amount to be paid as remuneration on an

application by the receiver or manager not exceeding such limit as may be
specified
(1) The Court may, on an application made to it by the receiver or manager of the
property, by order fix the amount to be paid by way of remuneration to any person who,
under the power contained in an instrument, has been appointed as receiver or
manager of the company‘s property:
Provided that the amount of remuneration shall not exceed such limits as may be
specified.
Power of the court to be exercised in matters

(2) The power of the Court under sub-section (1) shall, where no previous order has
been made with respect thereto—
(a) extend to fixing the remuneration for any period before the making of the order or the
application therefore;

(b) be exercisable notwithstanding that the receiver or manager had died or ceased to
act before the making of the order or the application therefore; and
(c) where the receiver or manager has been paid or has retained for his remuneration
for any period before the making of the order any amount in excess of that so fixed for
that period, extend to requiring him or his representative to account for the excess or
such part thereof as may be specified in the order:
Provided that the power conferred by clause (c) shall not be exercised as respects any
period before the making of the application or the order unless in the opinion of the
Court there are special circumstances making it proper for the power to be so
exercised.
The court on an application vary or amend an order made under sub-section (1)
(3) The Court may from time to time, on an application made either by the liquidator or
by the receiver or manager, or by the registrar, vary or amend an order made under
sub-section (1) and issue directions to the receiver respecting his duties and functions
or any other matter as it may deem expedient:
Provided that an order made under sub-section (1) shall not be varied so as to
increase the amount of remuneration payable to any person.
QUESTIONS
1. List the mortgages and charges which are required to be filed with the registrar
for registration.
2. Narrate the provisions of Companies, Act 2017 relating to rectification of register

of mortgages.
3. What action is taken by the registrar on receipt of intimation of the payment or

satisfaction of any charge or mortgage under section 109 of the Companies Act,
2017?
4. What is redeemable capital and how it is issued?

5. How can a registrar enter the satisfaction of any mortgage or charge in absence
of any information obtained from the company in this behalf?
MCQs
1. Trustees under the trust deed has powers to

a. Take possession of the property secured.
b. Sell the property secured.
c. Sue the company for redemption of money.
d. All of the above.
e. None of the above.
2. It is the responsibility of the _______to get the mortgage or charge registered

a. Company
b. Provider of finance
c. Trustees
3. If there is any error in registration of Mortgages or charges, it can be rectified

only by the approval of
a. Commission
b. Court
c. Registrar
d. Federal Government
4. Under section 100 of the Companies Act, 2017 mortgage and charges must be
filed with the registrar within certain period beginning with the day after the date
of its creation. What is that period?
a. 30 days
b. 60 days
c. 90 days
d. 120 days
MCQs (Answers)
1. d 2. a 3. a 4. a

COMPANIES ACT, 2017

1. DEFINITION
2. ACCOUNTS OF COMPANIES
Section 220 to 239
3. DIVIDENDS AND MANNER AND TIME OF PAYMENT THEREOF
Section 240 to 245

Companies Act 2017 describes various requirements for maintenance of proper books of
accounts by the companies and also about the preparation and presentation of annual
and interim financial statements. The requirements of the Act are summarized as under.
1. “Book and paper” and “book or paper” [(Section 2 (1) (10)]

“Book and paper” and “book or paper” includes books of account, cost accounting
records, deeds, vouchers, writings, documents, minutes and registers maintained on
paper or in electronic form;
2. Books of account [(Section 2 (1) (11)]

“Books of account” include records maintained in respect of—
(a) all sums of money received and expended by a company and matters in relation to
which the receipts and expenditure take place;
(b) all sales and purchases of goods and services by the company;
(c) all assets and liabilities of the company; and
(d) items of cost in respect of production, processing, manufacturing or mining activities;
3. ACCOUNTS OF COMPANIES
3.1 Books of account, to be kept by company (Section 220)
Every company to keep books of accounts at registered office (ii) Maintenance of

Cost record for manufacturing and mining concerns (iii) Books may be kept any
other place and notice to this effect is to be filed with the registrar
(1) Every company shall prepare and keep at its registered office books of account and
other relevant books and papers and financial statements for every financial year which
give a true and fair view of the state of the affairs of the company, including that of its
branch office or offices, if any:
Provided that in the case of a company engaged in production, processing,

manufacturing or mining activities, such particulars relating to utilisation of material or
labour or the other inputs or items of cost as may be specified, shall also be maintained:
Provided further that all or any of the books of account aforesaid and other relevant
papers may be kept at such other place in Pakistan as the board may decide and where
such a decision is taken, the company shall, within seven days thereof, file with the
registrar a notice in writing giving the full address of that other place.

If branch office, proper book at the branch office—summarized returns to be sent
to Registered office or other place referred to in sub-section (1) periodically
(2) Where a company has a branch office in Pakistan or outside Pakistan, it shall be
deemed to have complied with the provisions of sub-section (1), if proper books of
account relating to the transactions effected at the branch office are kept at that office
and proper summarized returns are sent periodically by the branch office to the
company at its registered office or the other place referred to in sub-section (1).
Inspection of the books by director

(3) The books of account and other books and papers maintained by the company
within Pakistan shall be open for inspection at the registered office of the company or at
such other place in Pakistan by any director during business hours, and in the case of
financial information, if any, maintained outside the country, copies of such financial
information shall be maintained and produced for inspection by any director.
Officers and other employees of the Company to provide all assistance during
inspection of the director
(4) Where an inspection is made under sub-section (3), the officers and other
employees of the company shall give to the director making such inspection all
assistance in connection with the inspection which the company is reasonably expected
to give.
Period of record for books of account—not less than ten financial years
immediately preceding a financial year
(5) The books of account of every company relating to a period of not less than ten
financial years immediately preceding a financial year, or where the company had been
in existence for a period less than ten years, in respect of all the preceding years
together with the vouchers relevant to any entry in such books of account shall be kept
in good order.
Penalty provision
(6) If a company fails to comply with any of the requirements of this section, every
director, including chief executive and chief financial officer, of the company who has by
his act or omission been the cause of such default shall—
(a) in respect of a listed company, be punishable with imprisonment for a term which
may extend to two year and with fine which shall not be less than five hundred thousand
rupees nor more than five million rupees, and with a further fine which may extend to
ten thousand rupees for every day after the first during which the default continues; and

(b) in respect of any other company, be punishable with imprisonment for a term which
may extend to one year and with fine which may extend to one hundred thousand
rupees.
Section to apply to books of liquidator (except sub-section (5))

(7) The provisions of this section except those of sub-section (5), shall apply mutatis
mutandis to the books of account which a liquidator is required to maintain and keep.
3.2 Inspection of books of account by the Commission (Section 221)
Books open for inspection by any officer authorized by the Commission

(1) The books of account and books and papers of every company shall be open to
inspection by any officer authorised by the Commission in this behalf if, for reasons to
be recorded in writing, the Commission considers it necessary so to do.
Every director, officer or other employee to produce “books of account” and

“books and papers” and furnish him statement, information or explanation as he
may require
(2) It shall be the duty of every director, officer or other employee of the company to
produce to the person making inspection under sub-section (1) all such books of
account and books and papers of the company in his custody or under his control, and
to furnish him with any such statement, information or explanation relating to the affairs
of the company, as the said person may require of him within such time and at such
place as he may specify.
To give to the person making inspection all assistance and facilitation

(3) It shall also be the duty of every director, officer or other employee of the company
to give to the person making inspection under this section all assistance and facilitation
in connection with the inspection which the company may be reasonably expected to
give.
During the course of inspection , the officer may make copies of books, place
marks of identification and take possession of documents and retain them for
thirty days
(4) The officer making the inspection under this section may, during the course of
inspection—
(a) make or cause to be made copies of books of account and other books and papers;
or

(b) place or cause to be placed by marks of identification thereon in token of the
inspection having been made;
(c) take possession of such documents and retain them for thirty days if there are
reasonable grounds for believing that they are evidence of the commission of an
offence.
If inspection by an officer authorized by the Commission—Report to the

Commission
(5) Where an inspection of the books of account and books and papers of the company
has been conducted under this section, by an officer authorised by the Commission,
such officer shall make a report to the Commission.
Authorized officer shall have all powers of the Commission for making inquiries under
this Act
(6) Any officer authorised to make an inspection under this section shall have all the
powers that the Commission has under this Act in relation to the making of inquiries.
3.3 Default in compliance with provisions of section 221 (Section 222)
Penalty Provision
(1) If default is made in complying with the provisions of section 221, every person who
is in default shall be punishable with imprisonment for a term which may extend to one
hundred and eighty days and with fine which may extend to one hundred thousand
rupees.
If convicted under this section, deemed to have vacated his office, disqualified for
holding such office in any company for a period of three years
(2) Where a director or any other officer of a company has been convicted of an offence
under this section, he shall, on and from the date on which he is so convicted, be
deemed to have vacated his office as such and, on such vacation of office, shall be
disqualified for holding such office in any company, for a period of three years.

3.4 Financial Statements (Section 223)
The board must lay before the company financial statements in annual general
meeting
(1) The board of every company must lay before the company in annual general
meeting its financial statements for the period, in the case of first such statements since
the incorporation of the company and in any other case since the preceding financial
statements, made up to the date of close of financial year adopted by the company.
Time frame for laying financial statements before the company in AGM
(2) The financial statements must be laid within a period of one hundred and twenty
days following the close of financial year of a company:
Provided that, in the case of a listed company the Commission, and in any other case
the registrar, may, for any special reason, extend the period for a term not exceeding
thirty days.
Time frame of first financial statement and subsequent financial statement

(3) Subject to the provision of sub-section (2), the first financial statement must be laid
at some date not later than sixteen months after the date of incorporation of the
company and subsequently once at least in every calendar year.
Period relating to financial statement except first—one year, Exception: Special

permission of the registrar for exceeding one year
(4) The period to which the statements aforesaid relate, not being the first, shall not
exceed one year except where special permission of the registrar has been obtained.
Audit of financial statements, Auditor’s report to be attached thereto, This sub-

section not to apply to a private company having a paid up capital not exceeding
one million rupees or higher amount as may be notified by the Commission
(5) The financial statement shall be audited by the auditor of the company, in the
manner hereinafter provided, and the auditor‘s report shall be attached thereto:
Provided that nothing in this sub-section shall apply to a private company having the
paid up capital not exceeding one million rupees or such higher amount of paid up
capital as may be notified by the Commission.

Company to send audited financial statements with auditor’s report, director’s
report and in case of a listed company the chairman’s review to every member
and keep a copy at the registered office of the company
(6) Every company shall send in the form and manner specified audited financial
statements together with the auditors‘ report, directors‘ report and in the case of a listed
company the chairman‘s review report to every member of the company and every
person who is entitled to receive notice of general meeting, either by post or
electronically at least twenty-one days before the date of meeting at which it is to be laid
before the members of the company, and shall keep a copy at the registered office of
the company for the inspection of the members.
Listed company to send by post three copies of financial statements and

electronically a copy to Commission, Register and Securities Exchange and to
post on company’s web site for a period—specified
(7) A listed company shall, simultaneously with the dispatch of the financial statements
together with the reports referred to in sub-section (6), send by post three copies and
electronically a copy of such financial statements together with said reports to each of
the Commission, registrar and the securities exchange and shall also post on the
company‘s website:
Provided that the reports shall be made available on the website of the Company for a
time period as may be specified.
Penalty provision
(8) The provisions of sub-section (6) of section 220 shall apply to any person who is a
party to the default in complying with any of the provisions of this section.
Section not to apply to SMC except to the extent as provided in sub-section (5)
(9) This section shall not apply to a single member company except to the extent as
provided in sub-section (5).
3.5 Classification of Companies (Section 224)
Companies classified in such categories as may be specified in the Third

Schedule
For the purpose of this Act, the companies may be classified in such categories as may
be specified in the Third Schedule.

3.6 Contents of Financial Statements (Section 225)
True and fair view, Financial reporting standards, Third Schedule, sub section not
to apply to an insurance or banking company or to any other class of companies
for which requirements of financial statements are specified in the law regulating
such class of companies except to the extent, otherwise notified by the
Commission
(1) The financial statements shall give a true and fair view of the state of affairs of the
company, comply with the financial reporting standards notified by the Commission and
shall be prepared in accordance with the requirements contained in the Third Schedule
for different class or classes of companies:
Provided that for the purpose of preparation of financial statements and related
accounting treatment of associated companies shall be in accordance with financial
reporting standards or such other standards as may be notified by the Commission:
Provided further that, except to the extent, otherwise notified in the official Gazette by
the Commission, this sub-section shall not apply to an insurance or banking company or
to any other class of companies for which the requirements of financial statements are
specified in the law regulating such class of companies.
Commission to modify the requirements of the relevant schedule for adapting it

to the circumstances of a company
(2) The Commission may, of its own motion or upon application by a company, modify,
in relation to that company, the requirements of the relevant Schedule for the purpose of
adapting it to the circumstances of a company.
Power of Commission to grant exemptions from compliance of all or any of the

requirements of the relevant schedule
(3) The Commission shall have power from time to time to grant exemption to any
company or any class of companies if it is in the public interest so to do, from
compliance with all or any of the requirements of the relevant Schedule.
Permission for unreserved compliance of IFRs

(4) Notwithstanding anything in this Act any company that intends to make unreserved
compliance of IFRS issued by the IASB shall be permitted to do so.
Explanation.—The expression ”IFRS” means International Financial Reporting

Standards and the expression “IASB” means International Accounting Standards Board.

Penalty provision
3.7 Duty to prepare directors’ report and statement of compliance (Section 226)
Board to prepare directors’ report, sub-section not to apply to a private company

having paid up capital not exceeding three million rupees
(1) The board shall prepare a directors‘ report for each financial year of the company:
Provided that nothing in this sub-section shall apply to a private company, not being a
subsidiary of public company, having the paid up capital not exceeding three million
rupees.
Commission to direct class or classes of companies to prepare a statement of

compliance
(2) The Commission may by general or special order, direct such class or classes of
companies to prepare a statement of compliance.
Holding company required to prepare consolidated financial statements to

include in its report information as per section 227
(3) The board of a holding company, required to prepare consolidated financial
statements under section 228, shall in its report to the members as provided in section
227, include information on matters specified in sub-section (2) of section 227 with
respect to the consolidated financial statements.
Emphasis to the significant matters in the directors’ report

(4) The directors in their report shall give greater emphasis to the matters that are
significant to the undertakings included in the consolidation.
Penalty provision
an offence liable to a penalty of level 1 on the standard scale.

3.8 Contents of directors’ report and statement of compliance (Section 227)
Directors to make out report with respect to the state of the company’s affairs
and a fair review, (ii) dividend (iii) reserve fund, General reserve or reserve
account
(1) The directors shall make out and attach to the financial statements, a report with
respect to the state of the company‘s affairs and a fair review of its business, the
amount (if any), that the directors recommend should be paid by way of dividend and
the amount (if any), they propose to carry to the Reserve Fund, General Reserve or
Reserve Account.
Additional matters to be stated in the director’s report of public company or a

private company which is a subsidiary of a public company
(2) In the case of a public company or a private company which is a subsidiary of a
public company, the directors report, in addition to the matters specified in sub-section
(1) must state—
(a) the names of the persons who, at any time during the financial year, were directors
of the company;
(b) the principal activities and the development and performance of the company‘s
business during the financial year;
(c) a description of the principal risks and uncertainties facing the company;
(d) any changes that have occurred during the financial year concerning the nature of
the business of the company or of its subsidiaries, or any other company in which the
company has interest,;
(e) the information and explanation in regard to any contents of modification in the
auditor‘s report;
(f) information about the pattern of holding of the shares in the form specified;
(g) the name and country of origin of the holding company, if such company is a foreign
company;
(h) the earning per share;
(i) the reasons for loss if incurred during the year and future prospects of profit, if any;

(j) information about defaults in payment of any debts and reasons thereof;
(k) comments in respect of adequacy internal financial controls;
(l) any material changes and commitments affecting the financial position of the
company which have occurred between the end of the financial year of the company to
which the financial statement relates and the date of the report; and
(m) any other information as may be specified.
In case of listed company—a business review

(3) In the case of a listed company, the business review must, to the extent necessary
for understanding the development, performance or position of the company‘s business,
include—
(a) the main trends and factors likely to affect the future development, performance and
position of the company‘s business;
(b) the impact of the company‘s business on the environment;
(c) the activities undertaken by the company with regard to corporate social
responsibility during the year; and
(d) directors‘ responsibility in respect of adequacy of internal financial controls as may

be specified.
Statement of compliance—specified
(4) The board shall make out and attach to the financial statement such statement of
compliance as may be specified.
Approval and signatories of Directors’ report and statement of compliance
(5) The directors‘ report and statement of compliance must be approved by the board
and signed by the chief executive and a director of the company.
Penalty provision
(6) Whoever contravenes any of the provisions of this section shall—

(a) in respect of a listed company, be punishable with imprisonment for a term which
may extend to two years and with fine may extend to five hundred thousand rupees and
with a further fine which may extend to ten thousand rupees for every day after the first
during which the default continues; and
(b) in respect of any other company, be punishable with imprisonment for a term which
may extend to one year and with fine which may extend to one hundred thousand
rupees.
3.9 Consolidated financial statements (Section 228)
Consolidated Financial statements for holding companies, to comply with the

disclosure requirements of the relevant schedule and financial reporting
standards notified by the Commission, this sub section not to apply to a private
company and its subsidiary, where none of the holding and subsidiary company
has the paid up capital exceeding one million rupees.
(1) There shall be attached to the financial statements of a holding company having a
subsidiary or subsidiaries, at the end of the financial year at which the holding
company‘s financial statements are made out, consolidated financial statements of the
group presented as those of a single enterprise and such consolidated financial
statements shall comply with the disclosure requirements of the relevant Schedule and
financial reporting standards notified by the Commission:
Provided that nothing in this sub-section shall apply to a private company and its
subsidiary, where none of the holding and subsidiary company has the paid up capital
exceeding one million rupees.
If financial year of holding and subsidiary is not same, if more than ninety days,
subsidiary’s interim closing
(2) Where the financial year of a subsidiary precedes the day on which the holding
company‘s financial year ends by more than ninety days, such subsidiary shall make an
interim closing, on the day on which the holding company‘s financial year ends, and
prepare financial statements for consolidation purposes.
Auditor of holding company shall also report on Consolidated Financial

statements
(3) Every auditor of a holding company appointed under section 246 shall also report, in
the specified form, on consolidated financial statements and exercise all such rights and
duties as are vested in him under sections 248 and 249 respectively.

Disclosure of note or saving in the consolidated financial statements
(4) There shall be disclosed in the consolidated financial statements any note or saving
contained in such accounts to call attention to a matter which, apart from the note or
saving, would properly have been referred to in such a qualification, in so far the matter
which is the subject of the qualification or note is not covered by the holding company‘s
own accounts and is material from the point of view of its members.
Signatories of Consolidated Financial statements

(5) Every consolidated financial statement shall be signed by the same persons by
whom the individual financial statements of the holding company are required to be
signed, under section 232.
All provisions of certain sections to apply to holding company required to

prepare consolidated financial statements
(6) All provisions of sections 223, 233, 234, 235 and 236 shall apply to a holding
company required to prepare consolidated financial statements under this section as if
for the word “company” appearing in these sections, the words “holding company” were
substituted.
On application of holding company, Commission to direct not to apply this

section to specified extent
(7) The Commission may, on an application of a holding company, direct that the
provisions of this section shall not apply to such extent as may be specified in the
direction.
Penalty provision
3.10 Financial year of holding company and subsidiary (Section 229)
Financial year of holding company and subsidiary company should be coincides

if no good reason
(1) The board of a holding company shall ensure that, except where in their opinion
there are good reasons against it, its financial year and each of its subsidiaries
coincides.

Commission may, on application of holding company, extend the financial year
(2) The Commission may, on an application of a holding company or a subsidiary of the
holding company, extend the financial year of any such company for the purpose of
sub-section (1).
Commission to extend other relaxations as may be incidental or ancillary thereto

(3) While granting any extension under sub-section (2), the Commission may grant such
other relaxations as may be incidental or ancillary thereto.
3.11 Rights of holding company’s representatives and members (Section 230)
Authorized by resolution representative to inspect the books of account of its

subsidiaries
(1) A holding company may, by resolution, authorise representatives named in the
resolution to inspect the books of account kept by any of its subsidiaries; and the books
of account of any such subsidiary shall be open to inspection by those representatives
at any time during business hours.
The rights of members of holding to be exercised as if they also were members of

the subsidiary.
(2) The rights conferred by section 256 upon members of a company may be exercised,
in respect of any subsidiary, by members of the holding company as if they also were
members of the subsidiary.
3.12 Financial Statements of modaraba company to include modaraba accounts

(Section 231)
Modaraba company to attach the annual accounts and other reports of modaraba
with its financial statements
(1) There must be attached to the financial statements of a modaraba company, the
annual accounts and other reports circulated in pursuance of the provisions of section
14 of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance,
1980 (XXXI of 1980), made out—
(a) as at the end of the financial year of the modaraba where such financial year
coincides with the financial year of the modaraba company; and
(b) as at the end of the financial year of the modaraba last before that of the modaraba
company, where the financial year of the modaraba does not coincide with that of the
modaraba company.

Penalty provision
3.13 Approval and authentication of Financial Statements (Section 232)
Approval—Board and signatories—Chief Executive and at least one director

If Chief Executive not available, at least two directors. In case of private company
having a paid up capital not exceeding one million rupees, the financial
statements be accompanied by an affidavit executed by the chief executive that
the financial statements have been approved by the board
(1) The financial statements, including consolidated financial statement, if any, must be
approved by the board of the company and signed on behalf of the board by the chief
executive and at least one director of the company, and in case of a listed company
also by the chief financial officer:
Provided that when the chief executive is for the time being not available in Pakistan,
then the financial statements may be signed by at least two directors:
Provided further that in case of a private company having a paid up capital not
exceeding one million rupees, the financial statements shall also be accompanied by an
affidavit executed by the chief executive if the accounts are signed by him or by any of
the directors if the accounts has been signed by two directors, as the case may be, that
the financial statements have been approved by the board.
Financial statements of SMC—signed by one director

(2) The financial statements of a single member company shall be signed by one
director.
Penalty provision
3.14 Copy of Financial Statements to be forwarded to the registrar (Section 233)
Audited financial statements to be filed with the registrar

(1) Without prejudice to the provisions of sub-section (5) of section 223, after the
audited financial statements have been laid before the company at the annual general
meeting and duly adopted, a copy of such financial statements together with reports and

documents required to be annexed to the same, duly signed in the manner provided by
sections 226, 232 and 251, shall be filed by the company with the registrar within thirty
days from the date of such meeting in case of a listed company and within fifteen days
in case of any other company.
If financial statement is not adopted by the general meeting, a statement of that fact
and of the reasons therefor shall be annexed to the financial statement
(2) If the general meeting before which the financial statement is laid does not adopt the
same or defers consideration thereof or is adjourned, a statement of that fact and of the
reasons therefor shall be annexed to the said financial statements required to be filed
with the registrar.
This section not to apply to a private company having paid up capital not
exceeding ten million or such higher amount as may be notified by the
Commission
(3) Nothing in this section shall apply to a private company having the paid up capital
not exceeding ten million rupees or such higher amount of paid up capital as may
be notified by the Commission.
Penalty provision
3.15 Filing of unaudited financial statements (Section 234)
A private company having paid up capital not exceeding one million rupees or
such other amount notified by Commission be filed its financial statements,
whether audited or not, with registrar
(1) A private company, not being a subsidiary of public company, having the paid up
capital not exceeding one million rupees or such other amount of paid up capital as may
be notified by the Commission, shall file the duly authenticated financial statements,
whether audited or not, with the registrar within thirty days from the holding of such
meeting.
Penalty provision

3.16 Right of member of a company to copies of the Financial Statements and
the auditor’s report (Section 235)
Copy of financial statements to be provided on the request of the member
(1) Any member of the company is entitled, on request and on payment of such fee as
may be fixed by the company to be provided with a copy of any financial statement. The
copy must be provided within seven days after the request is received by the company.
Penalty provision
3.17 Penalty for improper issue, circulation or publication of Financial Statements

(Section 236)
Penalty Provision
If any copy of financial statements is issued, circulated or published without there being
annexed or attached thereto, as the case may be, a copy each of (i) any component of
financial statements, reports, or statements referred therein, (ii) the auditors‘ report, (iii)
review reports on the statement of compliance, (iv) the directors‘ report and (v) the
statements of compliance, the company, and every officer of the company who is in
default shall be liable to a penalty of level 1 on the standard scale.
3.18 Quarterly financial statements of listed companies (Section 237)
Time frame for Listed company to prepare quarterly financial statements

(1) Every listed company shall prepare the quarterly financial statements within the
period of—
(a) thirty days of the close of first and third quarters of its year of accounts; and
(b) sixty days of the close of its second quarter of its year of accounts:
Provided that the cumulative figures for the half year, presented in the second quarter
accounts shall be subjected to a limited scope review by the statutory auditors of the
company in such manner and according to such terms and conditions as may be
determined by the Institute of Chartered Accountants of Pakistan and approved by the
Commission:

Provided further that the Commission may, upon an application by the company, extend
the period of filing in case of accounts of first quarter for a period not exceeding thirty
days, if the company was allowed extension in terms of sections 223.
Quarterly statements to be posted on web site and transmitted electronically to

Commission, Securities Exchange and Registrar, in physical form to the member
on request, Commission to specify the time period for website
(2) The quarterly financial statements shall be posted on the company‘s website for the
information of its members and also be transmitted electronically to the Commission,
securities exchange and with the registrar within the period specified under sub-section
(1):
Provided that a copy of the quarterly financial statements shall be dispatched in physical
form if so requested by any member without any fee:
Provided further that the Commission may specify the time period for which the
quarterly financial statements shall be made available on the website of the company.
Provisions of section 232 to apply

(3) The provisions of section 232 shall be applicable to the quarterly financial
statements.
Penalty provision
(4) If a company fails to comply with any of the requirements of this section, every
director, including chief executive and chief financial officer of the company who has by
his act or omission been the cause of such default shall be liable to a penalty of level 2
on the standard scale.
3.19 Power of Commission to require submission of additional statements of

accounts and reports (Section 238)
Commission may order to prepare and send periodical statements of accounts,

information or other reports to the members, the Commission, the registrar, the
securities exchange and any other person
(1) Notwithstanding anything contained in any other provision of this Act the
Commission may, by general or special order, require companies generally, or any
class of companies or any particular company, to prepare and send to the members, the
Commission, the registrar, the securities exchange and any other person such
periodical statements of accounts, information or other reports, in such form and
manner and within such time, as may be specified in the order.

Penalty provision
3.20 Rights of debenture-holders to obtain copies of financial statements

(Section 239)
Holder of debentures including the trustees for holders of debentures also

entitled for have copies of financial statements
(1) The holders of debentures, including the trustees for holders of debentures, of a
company shall be entitled to have copies of financial statements of the company and
other reports on payment of such fee as may be fixed by the company.
Penalty provision
4. DIVIDENDS AND MANNER AND TIME OF PAYMENT THEREOF
4.1 Certain restrictions on declaration of dividend (Section 240)
Company to declare dividend in general meeting, not exceeding the amount

recommended by the board
(1) The company in general meeting may declare dividends; but no dividend shall
exceed the amount recommended by the board.
Company not to pay dividend from sale of immoveable property or asset of

capital nature.
(2) No dividend shall be declared or paid by a company for any financial year out of the
profits of the company made from the sale or disposal of any immovable property or
assets of a capital nature comprised in the undertaking or any of the undertaking of the
company, unless the business of the company consists, whether wholly or partly, of
selling and purchasing any such property or assets, except after such profits are set off
or adjusted against losses arising from the sale of any such immovable property or
assets of a capital nature:
Provided that no dividend shall be declared or paid out of unrealized gain on investment
property credited to profit and loss account.

4.2 Dividend to be paid only out of profits (Section 241)
Any dividend may be paid by a company either in cash or in kind only out of its profits.
Explanation.—The payment of dividend in kind shall only be in the form of shares of

listed company held by the distributing company.
4.3 Dividend not to be paid except to registered shareholders (Section242)
Dividend to pay registered shareholders or to their order within the period—

specified, payment through electronic mode directly into the bank account
Any dividend declared by a company must be paid to its registered shareholders or to

their order within such period and in such manner as may be specified:
Provided that any dividend payable in cash may be paid by cheque or warrant or in any
electronic mode to the shareholders entitled to the payment of the dividend, as per their
direction:
Provided further that in case of a listed company, any dividend payable in cash shall
only be paid through electronic mode directly into the bank account designated by the
entitled shareholders.
4.4 Directors not to withhold declared dividend (Section 243)
Dividend not to withhold or defer once declared, Chief Executive shall be

responsible
(1) When a dividend has been declared, it shall not be lawful for the directors of the
company to withhold or defer its payment and the chief executive of the company shall
be responsible to make the payment in the manner provided in section 242.
Explanation.—Dividend shall be deemed to have been declared on the date of the

general meeting in case of a dividend declared or approved in the general meeting and
on the date of commencement of closing of share transfer for purposes of determination
of entitlement of dividend in the case of an interim dividend and where register of
members is not closed for such purpose, on the date on which such dividend is
approved by the board.

If dividend declared and not paid, CE responsible, punishment of CE, Cases when
offence shall not be deemed committed
(2) Where a dividend has been declared by a company but is not paid within the period
specified under section 242, the chief executive of the company shall be punishable
with imprisonment for a term which may extend to two years and with fine which may
extend to five million rupees:
Provided that no offence shall be deemed to have been committed within the meaning
of the foregoing provisions in the following cases, namely—
(a) where the dividend could not be paid by reason of the operation of any law;
(b) where a shareholder has given directions to the company regarding the payment of
the dividend and those directions cannot be complied with;
(c) where there is a dispute regarding the right to receive the dividend;
(d) where the dividend has been lawfully adjusted by the company against any sum due
to it from the shareholder; or
(e) where, for any other reason, the failure to pay the dividend or to post the warrant
within the period aforesaid was not due to any default on the part of the company; and
the Commission has, on an application of the company on the specified form made
within forty-five days from the date of declaration of the dividend, and after providing an
opportunity to the shareholder or person who may seem to be entitled to receive the
dividend of making representation against the proposed action, permitted the company
to withhold or defer payment as may be ordered by the Commission.
Company to withhold the payment where the member not provided the complete
information or documents
(3) Notwithstanding anything contained in sub-section (2), a company may withhold the
payment of dividend of a member where the member has not provided the complete
information or documents as specified by the Commission.
CE convicted under sub-section (2) ceases to hold office and shall not be eligible
to be the CE of that company or any other company for a period of five years
(4) Chief executive convicted under sub-section (2) shall from the day of the conviction
cease to hold the office of chief executive of the company and shall not, for a period of
five years from that day, be eligible to be the chief executive or a director of that
company or any other company.

4.5 Unclaimed shares, modaraba certificates and dividend to vest with the
Federal Government (Section 244)
If unclaimed shares or dividend, ninety days notice, final notice in two daily
newspapers
(1) Notwithstanding anything to the contrary contained in this Act or any other law—
(i) where shares of a company or modaraba certificates of a Modaraba have been

issued; or
(ii) where dividend has been declared by a company or Modaraba;
which remain unclaimed or unpaid for a period of three years from the date it is due and
payable, or
(iii) any other instrument or amount which remain unclaimed or unpaid, having such
nature and for such period as may be specified;
the company shall give ninety days notices to the shareholders or certificate holders or
the owner, as the case may be, to file claim, in the following manner—
(a) by a registered post acknowledgement due on his last known address; and
(b) after expiry of notice period as provided under clause (a), final notice in the specified
form shall be published in two daily newspapers of which one will be in Urdu and one in
English having wide circulation.
Explanation.—For the purpose of this section “shares” or “modaraba certificates”

include unclaimed or undelivered bonus shares or modaraba certificates and “company”
includes a “modaraba company”.

After ninety days from the date of publication of notice, In case of sum of money,
company to deposit amount to the credit of federal government and in case of
shares, modaraba certificates or other instrument, Commission to sell and
deposit the proceeds to the credit of Federal Government, Company to preserve
the record
(2) If no claim is made before the company by the shareholder, certificate holder or the
owner, as the case may be, the company shall after ninety days from the date of
publication of notice under clause (b) of sub-section (1) shall—
(a) in case of sum of money, deposit any unclaimed or unpaid amount to the credit of
the Federal Government; and
(b) in case of shares or modaraba certificates or other instrument, report and deliver to
the Commission such shares or modaraba certificates or other instrument and the
Commission shall sell such shares or modaraba certificates or other instrument, as the
case may be, in the manner and within such period as may be specified and deposit the
proceeds to the credit of Federal Government:
Provided that where the company has deposited the unclaimed or unpaid amount or
delivered the shares or modaraba certificates or other instrument with the Commission
for credit of the Federal Government, the company shall preserve and continue to
preserve all original record pertaining to the deposited unclaimed or unpaid amount and
the shares or modaraba certificates or other instrument and provide copies of the
relevant record to the Commission until it is informed by the Commission in writing that
they need not to be preserved any longer.
The amount shall be maintained in a profit bearing account with the State Bank of
Pakistan or National Bank of Pakistan
(3) Notwithstanding anything contained in any law or procedure for the time being in
force, the unclaimed or unpaid amount as well as the proceeds from the sale of shares
or modaraba certificates or any other instrument or any benefit accrued thereon, as the
case may be, shall be maintained in a profit bearing account with the State Bank of
Pakistan or National Bank of Pakistan to be called ―Companies Unclaimed Instruments
and Dividend and Insurance Benefits and Investors Education Account‖ as may be
notified by the concerned Minister-in-Charge of the Federal Government and shall be
deemed to be part of public accounts and interest / profit accumulated thereon shall be
credited on quarterly basis to the Fund established under section 245 of this Act.

Any person claiming may apply to the Commission
(4) Any person claiming to be entitled to any money paid into “Companies Unclaimed
Instruments and Dividend and Insurance Benefits and Investors Education Account”
may in pursuance of this section apply to the Commission in such manner along with
such documents as may be specified for payment thereof, and the Commission after
necessary verification from the company concerned forward to the bank as notified
under sub-section (3) to make the payment to entitled person of the sum equivalent to
his unclaimed or unpaid dividend or amount of proceeds:
Provided that the payment to the claimant shall be made within a period of thirty days
from the date of verification by the company.
A person shall be entitled to receive the shares or modaraba certificates or any

other instrument before the sale
(5) A person shall be entitled to receive the shares or modaraba certificates or any other
instrument as delivered to the Commission by the company, making a claim under this
Act before the sale of such unclaimed shares or modaraba certificates or the
instrument, is effected by the Commission.
A person claiming shall be entitled to the proceeds of the sale of the shares or
modaraba certificates or the instrument
(6) A person making a claim under this section shall be entitled to the proceeds of the
sale of the shares or modaraba certificates or the instrument less any deduction for
expenses of sale.
Payment to the claimant and a receipt given by the bank shall be a good
discharge to the Commission and the bank
(7) Payment to the claimant pursuant to sub-section (4) and a receipt given by the bank
in this respect shall be a good discharge to the Commission and the bank.
Where any dispute, Commission to process the claim in accordance with the
decision of authority or Court.
(8) Where any dispute regarding unclaimed shares, modaraba certificates, the
instrument or dividend arises or is pending adjudication before the competent authority
or Court, the Commission shall process the claim in accordance with the decision of
such authority or Court.

No claim after the period of ten years
(9) No claim whatsoever shall be entertained after the period of ten years from the credit
of any amount to the account of the Federal Government to be maintained under this
section.
Company to submit a return of unclaimed shares, modaraba certificates, the

instruments or dividend to the Commission
(10) Every company within thirty days of the close of each financial year shall submit to
the Commission a return of all unclaimed shares, modaraba certificates, the instruments
or dividend in its books in the manner as may be specified by the Commission.
Penalty provision
(11) Whoever contravenes the provisions of this section shall be punishable with a
The account under sub-section (3) shall be available on the direction of Minister-
in-Charge to serve as a collateral in order to facilitate the provision of credit
facility to the clearing house
(12) The account to be maintained under sub-section (3) shall be available on the
direction of Minister-in-Charge to serve as a collateral in order to facilitate the provision
of credit facility to the clearing house to address any systemic risk in the capital market:
Provided that powers under this sub-section shall be exercised only in case where in
opinion of the Commission the resources of the clearing house are or likely to be
insufficient for timely settlement of trades executed at the securities and future
exchanges.
4.6 Establishment of Investor Education and Awareness Fund (Section 245)
A fund is to be established named Investor Education and Awareness Fund

managed and Controlled by the Commission
(1) There is hereby established a fund to be called Investor Education and Awareness
Fund (hereinafter in this section referred to as “Fund”) to be managed and controlled by
the Commission as may be prescribed through rules.

The Fund shall be credited with—
(a) the interest/profit earned (b) forfeited amounts (c) grants or donations (d)
interest or other income received out of the investment (e) the amount realised as
per fourth proviso of section 341 or fourth proviso of sub-section (4) of section
372; (f) other amount—prescribed
(2) The Fund shall be credited with—

(a) the interest/profit earned on the “Companies Unclaimed Instruments and Dividend
and Insurance Benefits and Investors Education Account”;
(b) forfeited amounts under sub-section (7) of section 87 of the Securities Act, 2015;
(c) grants or donations given by the Federal Government, Provincial Governments,

companies, or any other institution or person for the purposes of the Fund;
(d) the interest or other income received out of the investments made from the Fund;
(e) the amount realized in terms of fourth proviso of section 341 or fourth proviso of
sub-section (4) of section 372; and
(f) such other amounts as may be prescribed.
Utilization of fund
(3) The Fund shall be utilized for—
(a) the promotion of investor education and awareness in such manner as may be
prescribed;
(b) without prejudice to the generality of the object of sub-clause (a) of sub-section (3),
the Fund may be used for the following purposes, namely—
(i) educational activities including seminars, training, research and publications aimed at
investors;
(ii) awareness programs including through media – print, electronic, social media, aimed
at investors;
(iii) funding investor education and awareness activities approved by the Commission;
and
(iv) to meet the administrative expenses of the Fund.

Explanation.—“Investors” means investor in securities, insurance policyholders and
customers of non-bank finance companies and Modarabas.
Commission to constitute an advisory committee

(4) The Commission shall, by notification in the official Gazette, constitute an advisory
committee with such members as may be prescribed, for recommending investor
education and awareness activities that may be undertaken directly by the Commission
or through any other agency, for utilization of the Fund for the purposes referred to in
sub-section (3).
Fund to be audited by Auditors appointed by the Commission

(5) The accounts of the Fund shall be audited by auditors appointed by the Commission
who shall be a firm of chartered accountants. The Commission shall ensure
maintenance of proper and separate accounts and other relevant records in relation to
the Fund giving therein the details of all receipts to, and, expenditure from, the Fund
and other relevant particulars.
The Commission may invest the moneys of the Fund

(6) The Commission may invest the moneys of the Fund in such manner as set out in
section 20 of the Trusts Act, 1882 (II of 1882).
QUESTIONS
1. Explain the provisions of the Companies Act, 2017 regarding maintenance books
of accounts by the company.
2. What are the requirements for preparation and presentation of financial
statements by a company?
3. Explain the provisions relating to the consolidated financial statements and
financial year of holding company and subsidiary.

MCQs
1. Every company shall keep at its registered office proper books of account with
respect to:
i. All sales and purchases of goods by the company.
ii. All assets of the company.
iii. The monetary value of all shares issued by the company, including
total number of shares and nominal value of each share.
iv. All liabilities of the company.
a) i and iii only

b) ii and iv only
c) i, ii and iv only
d) ii, iii and iv only
2. Particulars relating to utilization of material or labor or the other inputs or items of

cost as may be specified, are required to be maintained by which of the following
companies:
i. Company which is engaged in trading of goods business.
ii. Company which is engaged in production of goods business.
iii. Company which is engaged in mining activities.
iv. Company specifically engaged in fertilizer sector only.
a) i and iii only

b) ii and iii only
c) iii only
d) iv only

3. If company wants to keep its books of account at any place other than registered
office, the company can do so by:
a. Passing a special resolution in general meeting and informing the

registrar within 7 days of passing the resolution by giving him full
address of the other place where company wants to keep its books of
account.
b. Approval of board, and informing the registrar within seven day of
approval by board by filing with the registrar a notice in writing giving the
full address of the other place where company keeps its books of
account.
c. Obtaining prior permission from SECP.
d. Passing an ordinary resolution in general meeting and informing the
registrar within 7 days of passing the resolution by giving him full
address of the other place where company wants to keep its books of
account.
4. Where company has branch office, whether in or outside Pakistan, the company
shall be deemed to have complied with the requirements of companies Act
relating to books of account, if:
a. Proper books of account relating to the transactions effected at the branch

office are kept at the registered office of the company.
b. Proper books of account relating to the transactions effected at the branch
office are kept at the branch office and proper detailed returns, made up to
date at interval of not more than three months are sent by branch office to
registered office.
c. Proper books of account relating to the transactions effected at the branch
office are kept at the branch office and proper summarized returns, are
sent by branch office to registered office as and when required by the
auditors of the company.
d. Proper books of account relating to the transactions effected at the branch
office are kept at the branch office and proper summarized returns are
sent periodically by branch office at registered office or the other place.

5. Every company shall preserve its books and accounts in good order:
b. Relating to a period not less than 5 years immediately preceding the

current year.
c. Relating to a period not less than 10 financial years immediately preceding
a financial year.
d. Relating to each and every year after the incorporation of the company.
e. Relating to years for which company’s inquiries and investigations etc. are
started by Commission.
6. The books of account and books and papers of every company shall be open to
inspection by
i. Registrar of companies.
ii. Any Director of the company during the business hours.
iii. Any officer authorized by the commission.
iv. Any member of the company at any time he wants.
a) ii and iii only

b) i and iv
c) i, ii and iii
d) iii only
MCQs (Answers)
1. c 2. b 3. b 4. d 5. b 6. a

COMPANIES ACT, 2017
1. AUDIT
Section 246 to 247
2. RIGHTS AND DUTIES OF AUDITOR
Section 248 to 253
3. Listed Companies (Code of Corporate Governance) Regulations, 2019

Companies must have appointed independent auditors during all the times. They
are the persons who are required to express an independent opinion on the
financial statements of the company to its members. They give an independent
report about the fairness or otherwise of the financial statements of the company.
Guidance about the auditors and Different provisions regarding their

appointment, term of office and retirement and the reports required out of them
are summarized as under
1. AUDIT
1.1 Appointment, removal and fee of auditors (246)
Time frame for the appointment of first auditor—within ninety days of the date of
incorporation—to be retired on the conclusion of the first annual general meeting
(1) The first auditor or auditors of a company shall be appointed by the board within
ninety days of the date of incorporation of the company; and the auditor or auditors so
appointed shall retire on the conclusion of the first annual general meeting.
Appointment of subsequent auditor

(2) Subject to the provisions of sub-section (3), the subsequent auditor or auditors shall
be appointed by the company in the annual general meeting on the recommendation of
the board after obtaining consent of the proposed auditors, a notice shall be given to the
members with the notice of general meeting. The auditor or auditors so appointed shall
retire on the conclusion of the next annual general meeting.
A member or members having not less than ten percent shareholding entitled to
propose auditor
(3) A member or members having not less than ten percent shareholding of the
company shall also be entitled to propose any auditor or auditors for appointment
whose consent has been obtained by him and a notice in this regard has been given to
the company not less than seven days before the date of the annual general meeting.
The company shall forthwith send a copy of such notice to the retiring auditor and shall
also be posted on its website.
Procedure for appointment of proposed auditor—Right of auditor to make

representation in writing
(4) Where an auditor, other than the retiring auditor is proposed to be appointed, the
retiring auditor shall have a right to make a representation in writing to the company at
least two days before the date of general meeting. Such representation shall be read
out at the meeting before taking up the agenda for appointment of the auditor:
Provided that where such representation is made, it shall be mandatory for the auditor
or a person authorized by him in writing to attend the general meeting in person.
Removal of auditor—special resolution

(5) The auditor or auditors appointed by the board or the members in an annual general
meeting may be removed through a special resolution.
Casual vacancy of an auditor—filled by the board—hold office until the

conclusion of the next annual general meeting, if removal during tenure—
approval of the Commission
(6) Any casual vacancy of an auditor shall be filled by the board within thirty days from
the date thereof. Any auditor appointed to fill in any casual vacancy shall hold office until
the conclusion of the next annual general meeting:
Provided that where the auditors are removed during their tenure, the board shall
appoint the auditors with prior approval of the Commission.
In case of failure, Commission’s power to appoint auditor
(7) If the company, fails to appoint—
(a) the first auditors within a period of ninety days of the date of incorporation of the
company;
(b) the auditors at an annual general meeting; or
(c) an auditor in the office to fill up a casual vacancy within thirty days after the
occurrence of the vacancy; and
(d) if the appointed auditors are unwilling to act as auditors of the company;
the Commission may, of its own motion or on an application made to it by the company
or any of its members direct to make good the default within such time as may be
specified in the order. In case the company fails to report compliance within the period
so specified, the Commission shall appoint auditors of the company who shall hold
office till conclusion of the next annual general meeting:

Remuneration of the auditor—fixed by company in general meeting, board or
Commission if the auditors are appointed by the board or by the Commission
(8) The remuneration of the auditors of a company shall be fixed—
(a) by the company in the general meeting;
(b) by the board or by the Commission, if the auditors are appointed by the board or the
Commission, as the case may be.
Company to send to the registrar intimation of appointment of auditor

(9) Every company shall, within fourteen days from the date of any appointment of an
auditor, send to the registrar intimation thereof, together with the consent in writing of
the auditor concerned.
1.2 Qualification and disqualification of auditors (Section 247)
Chartered Accountant for public company or a private company which is

subsidiary of public company or private company having paid up capital of three
million rupees or more, For other than these companies—Chartered Accountant
or Cost and Management Accountant having valid certificate of practice, If the
firm—appointment shall be by its firm name
(1) A person shall not be qualified for appointment as an auditor—
(a) in the case of a public company or a private company which is subsidiary of a public
company or a private company having paid up capital of three million rupees or more
unless such person is a chartered accountant having valid certificate of practice from
the Institute of Chartered Accountants of Pakistan or a firm of chartered accountants;
and
(b) in the case of a company other than specified in clause (a), unless such person, is a
chartered accountant or cost and management accountant having valid certificate of
practice from the respective institute or a firm of chartered accountants or cost and
management accountants, having such criteria as may be specified:
Provided that for the purpose of clause (a) and (b), a firm whereof majority of practicing
partners are qualified for appointment shall be appointed by its firm name to be auditors
of the company.

If partnership firm is appointed, only qualified partners shall be authorized to act
and sign on behalf of the firm
(2) Where a partnership firm is appointed as auditor of a company, only the partners
who meet the qualification requirements as provided in sub-section (1), shall be
authorized to act and sign on behalf of the firm.
The persons who shall not be appointed as auditor—various circumstances

(3) None of the following persons shall be appointed as auditor of a company, namely—
(a) a person who is, or at any time during the preceding three years was, a director,
other officer or employee of the company;
(b) a person who is a partner of , or in the employment of, a director, officer or employee
of the company;
(c) the spouse of a director of the company;
(d) a person who is indebted to the company other than in the ordinary course of
business of such entities;
(e) a person who has given a guarantee or provided any security in connection with the
indebtedness of any third person to the
company other than in the ordinary course of business of such entities;
(f) a person or a firm who, whether directly or indirectly, has business relationship with
the company other than in the ordinary course of business of such entities;
(g) a person who has been convicted by a court of an offence involving fraud and a
period of ten years has not elapsed from the date of such conviction;
(h) a body corporate;
(i) a person who is not eligible to act as auditor under the code of ethics as adopted by
the Institute of Chartered Accountants of Pakistan and the Institute of Cost and
Management Accountants of Pakistan; and
(j) a person or his spouse or minor children, or in case of a firm, all partners of such firm
who hold any shares of an audit client or any of its associated companies:

Provided that if such a person holds shares prior to his appointment as auditor, whether
as an individual or a partner in a firm the fact shall be disclosed on his appointment as
auditor and such person shall disinvest such shares within ninety days of such
appointment.
Explanation.—Reference in this section to an “officer” or “employee” shall be

construed as not including reference to an auditor.
Explanation of clause (d) of sub-section (3)

(4) For the purposes of clause (d) of sub-section (3) a person who owes—
(a) a sum of money not exceeding one million rupees to a credit card issuer; or
(b) a sum to a utility company in the form of unpaid dues for a period not exceeding
ninety days;
shall not be deemed to be indebted to the company.
A person not to be qualified as auditor

(5) A person shall also not be qualified for appointment as auditor of a company if he is,
by virtue of the provisions of sub-section (3), disqualified for appointment as auditor of
any other company which is that company‘s subsidiary or holding company or a
subsidiary of that holding company.
If, after his appointment, an auditor becomes subject to any of the

disqualifications—shall be deemed to have vacated his office
(6) If, after his appointment, an auditor becomes subject to any of the disqualifications
specified in this section, he shall be deemed to have vacated his office as auditor with
effect from the date on which he becomes so disqualified.
Penalty Provision
(7) A person who, not being qualified to be an auditor of a company, or being or having
become subject to any disqualification to act as such, acts as auditor of a company shall
Act of unqualified or disqualified person as auditor be void, If company appoints

such person, Commission may appoint a qualified person in place of that auditor
(8) The appointment as auditor of a company of an unqualified person, or of a person
who is subject to any disqualifications to act as such, shall be void, and, where such an

appointment is made by a company, the Commission may appoint a qualified person in
place of the auditor appointed by the company.
2. RIGHTS AND DUTIES OF AUDITOR
2.1 Auditors’ right to information (248)
Various rights of auditor

(1) An auditor of a company has a right—
(a) of access at all times to the company‘s books, accounts and vouchers (in whatever
form they are held); and
(b) of access to such copies of, an extracts from, the books and accounts of the branch
as have been transmitted to the principal office of the company;
(c) to require any of the following persons to provide him with such information or
explanations as he thinks necessary for the performance of his duties as auditor—
(i) any director, officer or employee of the company;
(ii) any person holding or accountable for any of the company‘s books, accounts or
vouchers;
(iii) any subsidiary undertaking of the company; and
(iv) any officer, employee or auditor of any such subsidiary undertaking of the company
or any person holding or accountable for any books, accounts or vouchers of any such
subsidiary undertaking of the company.
Penalty provision
(2) If any officer of a company refuses or fails, without lawful justification, the onus
whereof shall lie on him, to allow any auditor access to any books and papers in his
custody or power, or to give any such information possessed by him as and when
required, or otherwise hinders, obstructs or delays an auditor in the performance of his
duties or the exercise of his powers or fails to give notice of any general meeting to the
auditor or provides false or incorrect information, he shall be liable to penalty as
provided under section 252.

2.2 Duties of auditor (249)
Preparation of report
(1) A company‘s auditor shall conduct the audit and prepare his report in compliance
with the requirements of International Standards on Auditing as adopted by the Institute
of Chartered Accountants of Pakistan.
Examination to form opinion

(2) A company‘s auditor must carry out such examination to enable him to form an
opinion as to—
(a) whether adequate accounting records have been kept by the company and returns
adequate for their audit have been received from branches not visited by him; and
(b) whether the company‘s financial statements are in agreement with the accounting
records and returns.
The auditor to make out a report to the members of the company, Contents of the
report
(3) The auditor shall make out a report to the members of the company on the accounts
and books of accounts of the company and on every financial statements and on every
other document forming part of such statements including notes, statements or
schedules appended thereto, which are to be laid before the company in general
meeting and the report shall state—
(a) whether or not they have obtained all the information and explanations which to the
best of their knowledge and belief were necessary for the purposes of the audit and if
not, the details thereof and the effect of such information on the financial statements;
(b) whether or not in their opinion proper books of accounts as required by this Act have
been kept by the company;
(c) whether or not in their opinion the statement of financial position and profit and loss
account and other comprehensive income or the income and expenditure account and
the cash flows have been drawn up in conformity with the requirements of accounting
and reporting standards as notified under this Act and are in agreement with the books
of accounts and returns;

(d) whether or not in their opinion and to the best of their information and according to
the explanations given to them, the said accounts give the information required by this
Act in the manner so required and give a true and fair view—
(i) in the case of the statement of financial position, of the state of affairs of the company
as at the end of the financial year;
(ii) in the case of the profit and loss account and other comprehensive income or the
income and expenditure account, of the profit or loss and other comprehensive income
or surplus or deficit, as the case may be, for its financial year; and
(iii) in the case of statement of cash flows, of the generation and utilization of the cash
and cash equivalents of the company for its financial year;
(e) whether or not in their opinion—
(i) investments made, expenditure incurred and guarantees extended, during the year,
were for the purpose of company‘s business; and
(ii) zakat deductible at source under the Zakat and Usher Ordinance, 1980 (XVIII of
1980), was deducted by the company and deposited in the Central Zakat Fund
established under section 7 of that Act.
Explanation.—Where the auditor‘s report contains a reference to any other report,

statement or remarks which they have made on the financial statements examined by
them, such statement or remarks shall be annexed to the auditor‘s report and shall be
deemed to be a part of the auditor‘s report.
The report shall state the reason for negative answer or qualification
(4) Where any of the matters referred to in sub-section (2) or (3) is answered in the
negative or with a qualification, the report shall state the reason for such answer along
with the factual position to the best of the auditor‘s information.
Commission by general or special order to include additional matters in the

report
(5) The Commission may, by general or special order, direct that, in the case of all
companies generally or such class or description of companies as may be specified in
the order, the auditor‘s report shall also include a statement of such additional matters
as may be so specified.

The auditor shall express unmodified or modified opinion in compliance with the
requirements of International Standards on Auditing
(6) The auditor shall express unmodified or modified opinion in his report in compliance
with the requirements of International Standards on Auditing as adopted by the Institute
of Chartered Accountants of Pakistan.
Commission to direct for review of statement of compliance by Auditor

(7) The Commission may by general or special order, direct, that the statement of
compliance as contained in sub-section (4) of section 227 of this Act, shall be reviewed
by the auditor who shall issue a review report to the members on the format specified by
the Commission.
The auditor of a company be entitled to attend any general meeting of the

company, and to receive all notices, For listed company, auditor or a person
authorised by him in writing shall be present in the general meeting in when
considered the financial statements and the auditor‘s report
(8) The auditor of a company shall be entitled to attend any general meeting of the
company, and to receive all notices of, and any communications relating to, any general
meeting which any member of the company is entitled to receive, and to be heard at
any general meeting which he attends on any part of the business which concerns him
as auditor:
Provided that, in the case of a listed company, the auditor or a person authorised by him
in writing shall be present in the general meeting in which the financial statements and
the auditor‘s report are to be considered.
2.3 Audit of cost accounts (Section 250)
For company or class of companies required to include in its books of account

the particulars referred to the first proviso of sub-section (1) of section 220,
Commission may direct to conduct the cost audit
(1)Where any company or class of companies is required under first proviso of sub-
section (1) of section 220 to include in its books of account the particulars referred to
therein, the Commission may direct that an audit of cost accounts of the company shall
be conducted in such manner and with such stipulations as may be specified in the
order by an auditor who is a chartered accountant within the meaning of the Chartered
Accountants Ordinance, 1961 (X of 1961), or a cost and management accountant within
the meaning of the Cost and Management Accountants Act, 1966 (XIV of 1966); and
such auditor shall have the same powers, duties and liabilities as an auditor of a
company and such other powers, duties and liabilities as may be specified.

Cost audit shall be directed by the Commission subject to the recommendation of
the regulatory authority supervising the business of relevant sector or any entity
of the sector
(2) The audit of cost accounts of the company under sub-section (1) shall be directed by
the Commission subject to the recommendation of the regulatory authority supervising
the business of relevant sector or any entity of the sector.
2.4 Signature of auditor’s report (Section 251)
Auditor’s report—Name of the auditor, management partner signatures, dated

and place
(1) The auditor‘s report must state the name of the auditor, engagement partner, be
signed, dated and indicate the place at which it is signed.
If individual, signatures on report by individual

(2) Where the auditor is an individual, the report must be signed by him.
If firm—signed by the partnership firm and name of the engagement partner

(3) Where the auditor is a firm, the report must be signed by the partnership firm with
the name of the engagement partner.
2.5 Penalty for non-compliance with provisions by companies (Section 252)
Penalty provision
Any contravention or default in complying with requirements of sections 246, 247, 248
and 250 shall be an offence liable to a penalty of level 3 on the standard scale.
2.6 Penalty for non-compliance with provisions by auditors (Section 253)
Penalty Provision
(1) If any auditor‘s report or review report is made, or any document of the company is
signed or authenticated otherwise than in conformity with the requirements of section
131, sections 249 and 251 or is otherwise untrue or fails to bring out material facts
about the affairs of the company or matters to which it purports to relate, the auditor
concerned and the person, if any, other than the auditor who signs the report or signs or
authenticates the document, and in the case of a firm all partners of the firm, shall be
liable to a penalty of level 2 on the standard scale.

Penalty Provision
(2) If the auditor‘s report to which sub-section (1) applies is made with the intent to profit
such auditor or any other person or to put another person to a disadvantage or loss or
for a material consideration, the auditor shall, in addition to the penalty provided by that
sub-section, be punishable with imprisonment for a term which may extend to two years
and with penalty which may extend to one million rupees.
Requirements of External Audit for listed Companies
3. Listed Companies (Code of Corporate Governance) Regulations, 2019
CHAPTER XI
EXTERNAL AUDIT
32. Terms of appointment of external auditor.- (1) It is mandatory that no company

shall appoint an external auditors, a firm of auditors, which has not been given a
Pakistan under section 36I of the Securities and Exchange Commission of Pakistan Act,
1997 (XLII of 1997).
(2) It is mandatory that no company shall appoint as external auditors, a firm of

auditors which or a partner of which is non-compliant with the International Federation
of Accountants' Guidelines on Code of Ethics, as adopted by the Institute of Chartered
Accountants of Pakistan.
(3) It is mandatory that the Board of a company shall recommend appointment of

external auditors for a year and its remuneration, as suggested by the audit committee
and such recommendations shall be included in the Directors’ Report and in case a
recommendation for appointment of an auditor is other than the retiring auditor, the
reasons for the same shall be included in the Directors’ Report.
(4) It is mandatory that no company shall appoint its external auditors to provide
services in addition to audit except in accordance with these Regulations and shall
require the
auditors to observe applicable International Federation of Accountants guidelines in this
regard.

(5) It is mandatory that the company shall ensure that the auditors do not perform
management functions or make management decisions, responsibility for which
remains with the Board and management of the company.
(6) It is mandatory that no company shall appoint a person as an external auditor or a

person involved in the audit of a company who is a close relative (spouse, parents,
dependents and non-dependent children) of the chief executive officer, the chief
financial officer, the head of internal audit, the company secretary or a director of the
company.
(7) It is mandatory that every company requires the external auditors to furnish a
management letter to its Board within 45 days of the date of audit report:
communicated in writing to the Board prior to the approval of the audited accounts by
the Board.
33. Rotation of auditors.- (1) It is mandatory that all listed companies in the financial
sector shall change their external auditors every five years:
Provided that all inter related companies/ institutions, engaged in business of providing
financial services shall appoint the same firm of auditors to conduct the audit of their
accounts.
Explanation:- Financial sector, for this purpose, means banks, non-banking financial
companies (NBFCs), modarabas and insurance or takaful insurance companies.
(2) It is mandatory that all listed companies other than those in the financial sector
shall, at the minimum, rotate the engagement partner after every five years:
Provided that in case the audit firm is a sole proprietorship then after completion of five
years such audit firm shall be changed.

QUESTIONS
1. Who shall appoint the first auditor and what shall be the term of the first auditors
of the company?
2. How the auditors may be removed from their office before the expiry of their
term?
3. When does Commission appoint auditors of a company?
4. Which persons are in-eligible to become the auditors of a company?

MCQs
1. Every company shall at each annual general meeting appoint an auditor to hold office:
a. From conclusion of that annual general meeting up to the date on which
next annual general meeting is scheduled.
b. For a term not exceeding three years.
c. From conclusion of that annual general meeting up to the conclusion of
next annual general meeting.
d. For a term a specified by the company at the time of appointment.
2. An auditor of the company appointed by commission:

i. May be removed by company through a special resolution of
members.
ii. May be removed by company through a special resolution of
directors.
iii. Cannot be removed by the company.
iv. Cannot receive any remuneration from company, the commission
will pay his fees.
a. i only
b. ii and iv
c. iii only
3. The remuneration of the auditors shall be decided by

i. The members of the company
ii. Directors of the company
iii. Commission
iv. The appointing authority
a) i and iii
b) ii only
c) iii only
d) iv only
4. First auditor of the company shall be appointed by:

i. The members of the company within 60 days of incorporation of
company.
ii. The board within 90 days of the date of incorporation of the company.
iii. If no auditor is appointed within 120 days of incorporation, the
commission shall appoint the first auditor within next 30 days.

iv. If no auditor is appointed within 120 days of incorporation, the
registrar shall appoint the first auditor within next 7 days.
a) i and ii
b) iii only
c) ii only
d) None of the above
5. The powers of the commission to appoint auditor shall become exercisable in the
following cases:
i. When first auditor is not appointed within 90 days of
incorporation of the company.
ii. Subsequent auditors are not appointed in the annual general
meeting.
iii. If Casual vacancy is not filled up within 30 days after the
occurrence of the vacancy.
iv. Auditors appointed are unwilling to act as auditors of the
company.
a) i only
b) ii and iii
c) i and ii
d) All of above
6. Casual vacancy in the office of the auditor shall be filled by:

i. Members of the company within 30 days of its occurrence.
ii. Board of the company within 30 days from the date of occurrence.
iii. Commission within 30 days of its occurrence.
iv. Commission, if no auditor is appointed within 30 days after the
occurrence of the vacancy.
a) i and iv
b) ii and iv
c) iii only
d) iii and iv
MCQs (Answers)
1. c 2. c 3. d 4. c 5. d 6. b

COMPANIES ACT, 2017
INVESTIGATION AND RELATED MATTERS


Commission has got powers to look into the affairs of the companies to
safeguard the interests of the members and creditors along with all other
stakeholders.
Exercising such powers may be of own motion of Commission or on the

application of other interested persons having such requisite voting powers as
are provided by the Act.
INVESTIGATION AND RELATED MATTERS
1. Investigation into affairs of company (Section 256)
Commission to order an investigation into the affairs of the company on the

application of the members (a) for a company having share capital—holding not
less than one tenth of the total voting power (b) for a company not having share
capital—not less than one tenth of the total members (c) On receipt of report
under section 221(5) or 254(6), Commission to appoint one or more persons as
inspectors to investigate, Commission to give the company an opportunity of
being heard
(1) Where the Commission is of the opinion, that it is necessary to investigate into the
affairs of a company—
(a) on the application of the members holding not less than one tenth of the total voting
power in a company having share capital;
(b) on the application of not less than one tenth of the total members of a company not
having share capital;
(c) on the receipt of a report under sub-section (5) of section 221 or on the report by the
registrar under sub-section (6) of section 254;
it may order an investigation into the affairs of the company and appoint one or more
persons as inspectors to investigate into the affairs of the company and to report
thereon in such manner as the Commission may direct:
Provided that before making an order of investigation, the Commission shall give the
company an opportunity of being heard.

Commission to define the scope of the investigation, the period to extend and
any other matter
(2) While appointing an inspector under sub-section (1), the Commission may define the
scope of the investigation, the period to which it is to extend or any other matter
connected or incidental to the investigation.
If On application, evidence for showing the good reason of investigation may be

required by the Commission
(3) An application by members of a company under clause (a) or (b) of sub-section (1)
shall be supported by such evidence as the Commission may require for the purpose of
showing that the applicants have good reason for requiring the investigation.
Commission to require applicant for security as costs of the investigation

(4) The Commission may, before appointing an inspector, require the applicants to give
such security for payment of the costs of the investigation as the Commission may
specify.
2. Investigation of company’s affairs in other cases (Section 257)
(a) Commission to appoint inspectors if (i) Special resolution by company (ii) by

order of the court, (b) Commission to appoint inspector if certain circumstances
suggest investigation, Commission to give the company an opportunity of being
heard
(1)Without prejudice to its power under section 256, the Commission—
(a) shall appoint one or more competent persons as inspectors to investigate the affairs
of a company and to report thereon in such manner as the Commission may direct, if—
(i) the company, by a special resolution, or
(ii) the Court, by order, declares that the affairs of the company ought to be investigated;
and
(b) may appoint one or more competent persons as inspectors to investigate the affairs
of a company and to report thereon in such manner as the Commission may direct if in
its opinion there are circumstances suggesting—
(i) that the business of the company is being or has been conducted with intent to
defraud its creditors, members or any other person or for a fraudulent or unlawful

purpose, or in a manner oppressive of any of its members or that the company was
formed for any fraudulent or unlawful purpose; or
(ii) that persons concerned in the formation of the company or the management of its
other misconduct towards the company or towards any of its members or have been
carrying on unauthorised business; or
(iii) that the affairs of the company have been so conducted or managed as to deprive
the members thereof of a reasonable return; or
(iv) that the members of the company have not been given all the information with
respect to its affairs which they might reasonably expect; or
(v) that any shares of the company have been allotted for inadequate consideration; or
(vi) that the affairs or the company are not being managed in accordance with sound
business principles or prudent commercial practices; or
(vii) that the financial position of the company is such as to endanger its solvency:
Provided that, before making an order under clause (b), the Commission shall give the
company an opportunity of being heard.
Commission to define the scope of the investigation, the period to extend or

otherwise
(2) While appointing an inspector under sub-section (1), the Commission may define the
scope of the investigation, whether as respects the matters or the period to which it is to
extend or otherwise.
3. Serious Fraud Investigation (Section 258)
Commission may authorize its officers or appoint professionals as an inspector

or investigation officer for serious nature of offences as provided in Sixty
Schedule
(1) Notwithstanding anything contained in sections 256 and 257, the Commission may
authorize any one or more of its officers or appoint such number of professionals from
amongst the persons of ability, integrity and having experience in the fields of corporate
affairs, accountancy, taxation, forensic audit, capital market, banking, information
technology, law or such other fields as may be notified, as an inspector or investigation

officer to investigate such serious nature of offences relating to a company as provided
in Sixth Schedule.
Powers of the inspectors or investigation officer

(2) The persons appointed as inspectors or investigation officer under sub-section (1)
shall have all powers of investigation officer under this Act, the Securities and Exchange
Commission of Pakistan Act, 1997 (XLII of 1997) and Code of Criminal Procedure, 1898
(Act V of 1898), mutatis mutandis and shall report in such manner as the Commission
may direct.
If no procedure in this Act or SECP Act 1997, then Investigating officer to comply
with the relevant provisions of Code of Criminal Procedure, 1898 (Act V of 1898)
(3) Where no procedure is provided in this Act or Securities and Exchange Commission
of Pakistan Act, 1997 (XLII of 1997) the investigation officer shall comply with the
relevant provisions of Code of Criminal Procedure, 1898 (Act V of 1898).
Commission may request to form a Joint investigation team

(4) Notwithstanding anything contained in this Act or any other law, the Commission
may, if it is satisfied that the matter is of public importance or it is in the interest of public
at large, request the concerned Minister-in-Charge of the Federal Government to form a
Joint Investigation Team to be headed by a senior level officer of the Commission, not
below the rank of additional director, and may include any person mentioned in sub
section (1) alongwith Gazetted officer of any Federal law enforcement agency, bureau
or authority for providing assistance in investigating the offence under this section and
the direction of the concerned Minister-in-Charge of the Federal Government under this
section shall be binding and any person who fails to comply with such directions, shall
be guilty of an offence punishable with simple imprisonment of thirty days or fine up to
one hundred thousand rupees by the Court:
Provided that nothing in this section shall be in derogation to or affect any proceedings
under powers of the Commission to send reference under section 41B of the Securities
and Exchange Commission of Pakistan Act, 1997 (XLII of 1997).
Joint Investigation team to submit report before the Court through the Special
Public Prosecutor
(5) Upon completion of investigation, the Joint Investigation Team shall, through the
Special Public Prosecutor, submit a report before the Court as mentioned in section 483
of this Act:

Provided that notwithstanding anything contained in the Qanun-e-Shahadat (Order),
1984 (P.O. No. X of 1984) or any other law, such report shall be admissible as an
evidence in the Court.
While trying any offence under this Act, Court may try any other offence charged
under any other law
(6) While trying any offence under this Act, the Court may also try any other offence, in
which an accused may be charged under any other law, at the same trial if the offence
is connected with such other offence.
the Court may convict an accused for such other offence and pass any sentence
under this Act or any other law if it is found that the accused person has
committed any other offence in addition to any offences connected with the
scheduled offences, If the court is special court equal to the Court of Session,
joint trial will be conducted of all the offences
(7) Where, in the course of any trial under this Act, it is found that the accused person
has committed any other offence in addition to any offences connected with the
scheduled offences, the Court may convict an accused for such other offence and pass
any sentence under this Act or any other law:
Provided that where such offence is tried by any special court having jurisdiction, higher
or equal to the Court of Session, joint trial will be conducted by such special court of all
the offences and convict an accused accordingly under the process provided in the
special law.
4. Inspector to be a Court for certain purposes (Section 259)
Commission shall have all the powers as provided under the Securities and
Exchange Commission of Pakistan Act, 1997(XLII of 1997) if Commission on its
own motion or on the basis of any information that any offence has been
committed under this Act
(1) Notwithstanding anything contained in any other law for the time being in force, the
Commission may either on its own motion or on the basis of any information received, is
of the view that any offence has been committed under this Act or any person is
engaged in any fraud, misfeasance, misconduct or any other activity prejudice to the
public interest shall have all the powers as provided under the Securities and Exchange
Commission of Pakistan Act, 1997(XLII of 1997).

A person appointed as inspector shall have the same powers as are vested in a
Court under the Code of Civil Procedure, 1908 (Act V of 1908)
(2) A person appointed as inspector under sections 256, 257 and 258 shall, for the
purposes of his investigation, have the same powers as are vested in a Court under the
Code of Civil Procedure, 1908 (Act V of 1908), while trying a suit, in respect of the
following matters, namely—
(a) enforcing the attendance of persons and examining them on oath or affirmation;
(b) compelling the discovery and production of books and papers and any material
objects; and
(c) issuing commissions for the examination of witnesses;
and every proceeding before such person shall be deemed to be “judicial proceeding”
within the meaning of sections 193 and 228 of the Pakistan Penal Code, 1860 (Act XLV
of 1860).
Penalty for any contravention or non-compliance with any orders, directions or

requirement of the inspector
(3) Any contravention of or non-compliance with any orders, directions or requirement of
the inspector exercising powers of a Court under sub-section (1) shall, in all respects,
entail the same liabilities, consequences and penalties as are provided for such
contravention, non-compliance or default under the Code of Civil Procedure, 1908 (Act
V of 1908) and Pakistan Penal Code, 1860 (Act XLV of 1860).
5. Power of inspectors to carry investigation into affairs of associated companies

(Section 260)
Inspector may probe the affairs of associated company of undertaking for the
reasons to be recorded and with the approval of the Commission,
Before approval Commission shall provide opportunity of being heard to the
associated company or undertaking or the Chief Executive
If an inspector appointed under sections 256, 257 or 258 to investigate the affairs of a
company considers it necessary for reasons to be recorded in writing, he may probe
after seeking prior approval of the Commission, the affairs of any other associated
company or associated undertaking which is, or has been associated and also from the
chief executive of any such company:

Provided that the Commission shall not grant approval under this section without
providing opportunity of being heard to the associated company or associated
undertaking or the chief executive, as the case may be.
6. Duty of officers to assist the inspector (Section 261)
To give all assistance in connection with investigation by the officers and other
employees of the company
(1) It shall be the duty of all officers and other employees and agents of the company
and all persons who have dealings with the company to give to the inspector all
assistance in connection with the investigation.
Punishment and fine provision

(2) Any such person who makes default in complying with the provisions of sub-section
(1) shall, without prejudice to any other liability, be publishable in respect of each
offence with imprisonment of either description for a term which may extend to two
years and shall also be liable to a fine which may extend to one million rupees.
(3) In this section—
(a) the expression “agents”, in relation to any company, body corporate or person,
includes the bankers, legal advisers and auditors of the company;
(b) the expression “officer”, in relation to any company or body corporate, include any
trustee for the debenture-holders of such company or body corporate; and
(c) any reference to officers and other employees and agents shall be construed as a
reference to past as well as present officers and other employees and agents, as the
case may be.
7. Inspector’s report (Section 262)
Inspector to make interim report and final report if so directed by the Commission
(1) The inspector may, and if so directed by the Commission shall, make an interim
report, and on the conclusion of the investigation a final report to the Commission.

Commission to forward a copy of any report made by the Inspector to the
company and other persons
(2) The Commission—
(a) shall forward a copy of any report made by the inspector to the company at its
registered office with such directions as the Commission thinks fit;
(b) may, if it thinks fit, furnish a copy thereof, on request and on payment of the
specified fee, to any person-
(i) who is a member of the company or other body corporate or is interested in the
affairs of the company;
(ii) whose interests as a creditor of the company or other body corporate appear to the
Commission to be affected;
(c) shall, when the inspectors are appointed under clause (a) or clause (b) of section
256, furnish, at the request of the applicants for the investigation, a copy of the report to
them;
(d) shall, where the inspector are appointed under section 257 in pursuance of an order
of the Court, furnish a copy of the report to the Court;
(e) may forward a copy of the report to the registrar with such directions as it may deem
fit; and
(f) may also cause the report or any part thereof to be posted on its website.
8. Prosecution (Section 263)
From any repot if it appears to the Commission that any person is guilty of any
offences for which he is criminally liable, Commission may prosecute such
person for the offence
(1) If, from any report made under section 262, it appears to the Commission that any
person has, in relation to the company or in relation to any other body corporate, whose
affairs have been investigated by virtue of sections 256, 257 and 258, been guilty of any
offense for which he is criminally liable, the Commission may, prosecute such person
for the offence, and it shall be the duty of all officers and other employees and agents of
the company or body corporate, as the case may be, other than the accused in the
proceedings, to give the Commission or any person nominated by it in this behalf all
assistance in connection with the prosecution which they are reasonably able to give.

Application of section 261 (3) to apply to this section
(2) Sub-section (3) of section 261 shall apply for the purpose of this section as it applies
for the purposes of that section.
9. Power of Commission to initiate action against management (Section 264)
On the basis of the contents of report, Commission the Commission may apply to
the Court and the Court may, after taking such evidence as it may consider
necessary, by an order, take different types of action against the management of
the company
(1) If from any report made under section 262, the Commission is of the opinion that—
(a) the business of the company is being or has been conducted with intent to defraud
its creditors, members or any other persons or for a fraudulent or unlawful purpose, or in
a manner oppressive of any of its members or that the company was formed for any
fraudulent or unlawful purpose; or
(b) the person concerned in the formation of the company or the management of its
other misconduct towards the company or towards any of its member or have been
carrying on unauthorized business; or
(c) the affairs of the company have been so conducted or managed as to deprive the
shareholders thereof of a reasonable return; or
(d) that the members of the company have not been given all the information with
respect to its affairs which they might reasonably expect; or
(e) any shares of the company have been allotted for inadequate consideration; or
(f) the affairs of the company are not being managed in accordance with sound
business principles or prudent commercial practices; or
(g) the financial position of the company is such as to endanger its solvency;
the Commission may apply to the Court and the Court may, after taking such evidence
as it may consider necessary, by an order—

(i) remove from office any director including the chief executive or other officer of the
company; or
(ii) direct that the directors of the company shall carry out such changes in the
management or in the accounting policies of the company as may be specified in the
order; or
(iii) notwithstanding anything contained in this Act or any other law for the time being in
force, direct the company to call a meeting of its members to consider such matters as
may be specified in the order and to take appropriate remedial actions; or
(iv) direct that any existing contract which is to the detriment of the company or its
members or is intended to or does benefit any officer or director shall be annulled or
modified to the extent specified in the order:
Provided that no such order shall be made so as to have effect from any date preceding
the date of the order:
Provided further that any director, including a chief executive or other officer who is
removed from office under clause (i), unless the Court specified a lesser period, shall
not be a director, chief executive or officer of any company for a period of five years
from the date of his removal.
Before order, an opportunity of being heard shall be given by the Court

(2) No order under this section shall be made unless the director or other officer likely to
be affected by such order has been given an opportunity of being heard.
The action under sub-section (1) shall be in addition to and not in substitution of
any other action or remedy provided in any other law
(3) The action taken under sub-section (1) shall be in addition to and not in substitution
of any other action or remedy provided in any other law for the time being in force.

10. Effect of Court’s order (Section 265)
If the Order of the Court removes from office any director including Chief
Executive or other officer, be deemed to vacate his office, (a) If the order of the
Court removes director, casual vacancy shall be filled as per section 161, (b) If
removal is of Chief Executive, Board shall appoint another person as CE, (c) If
removal is of all directors including CE, General meeting for electing new
directors
On the issue of the Court‘s order under section 264 removing from office any director,
including chief executive or other officer, such director or other officer shall be deemed
to have vacated his office and—
(a) if the Court‘s order has removed a director, the casual vacancy in the office of
director shall be filled in accordance with the relevant provisions of section 161 of this
Act; and
(b) if the Court‘s order has removed from office a chief executive, the board shall
appoint another person to be the chief executive; and
(c) if the Court‘s order has removed from office all the directors including the chief
executive, a general meeting of the company shall be called forthwith for electing new
directors.
11. No compensation to be payable for annulment or modification of contract

(Section 266)
No compensation for annulment or modification of a contract if such contract is

annulled or modified by an order issued by the Court
Notwithstanding anything contained in any other law for the time being in force, and
except as ordered by the Court for special reasons to be recorded in writing, no director,
chief executive or other officer of the company shall be entitled to be paid any
compensation for annulment or modification of a contract to which he is a party or of
which he is a beneficiary, if such contract is annulled or modified by an order issued by
the Court under section 264.

12. No right to compensation for loss of office (Section 267)
No Compensation for loss of office

No person shall be entitled to or be paid any compensation or damages for the loss of
office by reason of an order issued under section 264.
QUESTIONS
1. Explain the circumstances in which Commission may order investigation into the
affairs of the company.
2. Explain the powers of inspector appointed for investigation as regards
investigation of the associated companies and chief executives etc.

MCQ
1. On receipt of report of inspector _______ can order for removal of directors.

a. Commission
b. Court
c. Registrar
d. Federal Government
2. The inspector, if so directed by the Commission, shall make an investigation

report to the Commission. The Commission:
a. Shall forward a copy of any report made by the inspector to the company
at its registered office with such directions as the Commission thinks fit.
b. May, it thinks fit, furnish a copy of the report to a member of the company
on request and on payment of the specified fee.
c. May, it thinks fit, furnish a copy of the report to a creditor of the company
on request and on payment of the specified fee.
d. All of the above.
3. Who may apply to the court for an order against management

a. Members having 20 percent of the total paid up capital of the company or
b. Creditors having total interest in the company of an amount equal to or
more than 20 percent of the total paid up capital of the company or
c. The Registrar
d. The Commission
e. None of the above
MCQs (Answers)
1. b 2. d 3. d

COMPANIES ACT, 2017
REGISTER AND INDEX OF MEMBERS


Companies are required to maintain a number of registers under the ordinance.
Every register serves some specific purposes. The registers for members of the
company and holder of debentures are discussed under this chapter.
It is pertinent to mention that, in case of listed companies, the particulars of the

members or debenture holders holding physical securities are entered in the
register of members and for all the members possessing scrip less shares the
name of CDC is entered in the register of members.
1. MANAGEMENT AND ADMINISTRATION
1.1 Members of a company (Section 118)
Subscribers and other persons to whom shares allotted or becomes the holder of
shares, if Company not having share capital, agreed to become a member
The subscribers to the memorandum of association are deemed to have agreed to
become members of the company and become members on its registration and every
other person-
(a) to whom is allotted, or who becomes the holder of any class or kind of shares; or
(b) in relation to a company not having a share capital, any person who has agreed to
become a member of the company; and whose names are entered; in the register of
members, are members of the company.
2. REGISTER AND INDEX OF MEMBERS
2.1 Register of members (Section 119)
Every Company to keep register of members

(1) Every company shall keep a register of its members and any contravention or
default in complying with requirement of this section shall be an offence punishable
under this Act.
Specified particulars of each member to be entered in the register

(2) There must be entered in the register such particulars of each member as may be
specified.

If joint holders, names of each but regarded as single member, address of the
first name in the register
(3) In the case of joint holders of shares or stock in a company, the company‘s register
of members shall state the names of each joint holder. In other respects joint holders
shall be regarded for the purposes of this Part as a single member and the address of
the person named first shall be entered in the register;
Penalty provision
(4) A person guilty of an offence under this section shall be liable to a penalty of level 1
2.2 Index of members (Section 120)
If more than fifty members, index is required unless the register of members
constitute in itself an index
(1) Every company having more than fifty members shall keep an index of the names of
the members of the company, unless the register of members is in such a form as to
constitute in itself an index.
Time frame for alteration in the index

(2) The company shall make any necessary alteration in the index within fourteen days
after the date on which any alteration is made in the register of members.
Index to contain sufficient indication to be readily found

(3) The index shall contain, in respect of each member, a sufficient indication to enable
the account of that member in the register to be readily found.
Penalty provision
2.3 Trust not to be entered on register (Section 121)
No notice of any trust be entered on the register

No notice of any trust, expressed, implied or constructive, shall be entered on the
register of members of a company, or be receivable by the registrar.

2.4 Register of debenture-holders (Section 122)
Company to keep register of Debenture-holders

(1) Every company shall keep a register of its debenture-holders and any contravention
or default in complying with requirement of this section shall be an offence punishable
under this Act.
Specified particulars to be entered

(2) There must be entered in the register such particulars of each debenture-holder as
may be specified.
Section not to apply to bearer

(3) This section shall not apply with respect to debentures which, ex facie, are payable
to the bearer thereof.
Penalty provision
2.5 Index of debenture-holders (Section 123)
If more than fifty Debenture-holders, index is required unless the register of

Debenture-holders constitute in itself an index
(1) Every company having more than fifty debenture-holders shall keep an index of the
names of the debenture-holders of the company, unless the register of debenture-
holders is in such a form as to constitute in itself an index and any contravention or
default in complying with requirement of this section shall be an offence punishable
under this Act.
Time frame for alteration in the index

(2) The company shall make any necessary alteration in the index within fourteen days
after the date on which any alteration is made in the register of debenture-holders.
Index to contain sufficient indication to be readily found

(3) The index shall contain, in respect of each debenture-holder, a sufficient indication
to enable the account of that debenture-holder in the register to be readily found.
Penalty provision

2.6 Rights to inspect and require copies (Section 124)
Registers and index of members and debenture-holders shall be open to the

inspection of members or debentures-holders
(1) The registers and the index referred to in sections 119, 120, 122 and 123 shall, be
open to the inspection of members or debentures-holders during business hours,
subject to such reasonable restrictions, as the company may impose, so that not less
than two hours in each day be allowed.
Charges/fee of inspection—for member or debenture-holder without charge, for

any other person on payment of fee as may be fixed by the company
(2) Inspection by any member or debenture-holder of the company shall be without
charge, and in the case of any other person on payment of such fee as may be fixed by
the company for each inspection.
Any person may require Certified copy of register and index on payment of fee
fixed by the company
(3) Any person may require a certified copy of register and index or any part thereof, on
payment of such fee as may be fixed by the company.
Time frame to provide certified copies

(4) The certified copies requested under this section shall be issued within a period of
seven days, exclusive of the days on which the transfer book of the company is closed.
To make request for certified copies or inspection

(5) A person seeking to exercise either of the rights conferred by this section must make
a request to the company to that effect.
Contents of request
(6) The request must contain the following information—
(a) in the case of an individual, his name and address;
(b) in the case of an organisation, its name and address and also of the authorised
person; and
(c) the purpose for which the information is to be used.

Penalty provision
(7) Any refusal of inspection required under sub-section (1), or if any copy required
under sub-section (3) is not issued within the specified period shall be an offence and
any person guilty of an offence under this section shall be liable to a penalty of level 1
on the standard scale; and the registrar may by an order compel an immediate
inspection of the register and index or direct that copies required shall be sent to the
persons requiring them.
2.7 Power to close register (Section 125)
Seven days previous notice, Commission may on application to extend period for
further fifteen days
(1) A company may, on giving not less than seven days‘ previous notice closes its
register of members, or the part of it relating to members holding shares of any class,
for any period or periods not exceeding in the whole thirty days in each year:
Provided that the Commission may, on the application of the company extend the
period mentioned in sub-section (1), for a further period of fifteen days.
If listed company, notice to be given in English and Urdu in one issue each of
daily newspaper of respective language
(2) In the case of listed company, notice for the purposes of sub-section (1), must be
given by advertisement in English and Urdu languages at least in one issue each of a
daily newspaper of respective language having wide circulation.
Section to apply closure of the register of debenture-holders

(3) The provision of this section shall also apply for the purpose of closure of register of
debenture-holders of a company.
Penalty provision
2.8 Power of Court to rectify register (Section 126)
If name is entered or omitted, unnecessary delay in entering, apply to the court

(1) If—
(a) the name of any person is fraudulently or without sufficient cause entered in or
omitted from the register of members or register of debenture-holders of a company; or

(b) default is made or unnecessary delay takes place in entering on the register of
members or register of debenture-holders the fact of the person having become or
ceased to be a member or debenture-holder;
the person aggrieved, or any member or debenture-holder of the company, or the
company, may apply to the Court for rectification of the register.
Court to refuse or may order rectification of the register

(2) The Court may either refuse the application or may order rectification of the register
on payment by the company of any damages sustained by any party aggrieved, and
may make such order as to costs as it in its discretion thinks fit.
Court may decide any question relating to the title

(3) On any application under sub-section (1) the Court may decide any question relating
to the title of any person who is a party to the application to have his name entered in or
omitted from the register, whether the question arises between members or debenture-
holders or alleged members or debenture-holders, or between members or alleged
members, or debenture-holders or alleged debenture-holders, on the one hand and the
company on the other hand; and generally may decide any question which it is
necessary or expedient to decide for rectification of the register.
Court may send a reference for adjudication, if entry in or omission from the
register made fraudulently or without sufficient cause
(4) Where the Court has passed an order under sub-section (3) that prima facie entry in
or omission from, the register of members or the register of debenture-holders the name
or other particulars of any person, was made fraudulently or without sufficient cause, the
Court may send a reference for adjudication of offence under section 127 to the court as
provided under section 482.
2.9 Punishment for fraudulent entries in and omission from register (127)
Punishment /fine
Anyone who fraudulently or without sufficient cause enters in, or omits from the register
of members or the register of debenture-holders the name or other particulars of any
person, shall be punishable with imprisonment for a term which may extend to three
years or with fine which may extend to one million rupees, or with both.

2.10 Notice to registrar of rectification of register (Section 128)
Copy of the order to the company, notice of the rectification from company to
Registrar on the direction of the court
When it makes an order for rectification of the register of members in respect of a
company which is required by this Act to file a list of its members with the registrar, the
Court shall cause a copy of the order to be forwarded to the company and shall, by its
order, direct the company to file notice of the rectification with the registrar within fifteen
days from the receipt of the order.
2.11 Register to be evidence (Section 129)
Register be prima facie evidence

The registers referred to in sections 119 and 122 shall be prima facie evidence of any
matter which by this Act is directed or authorised to be inserted therein.
2.12 Annual return (Section 130)
If having share capital: Once in each year, as on the date of the AGM or where no
meeting, last day of the calendar year.
(1) Every company having a share capital shall, once in each year, prepare and file with
the registrar an annual return containing the particulars in a specified form as on the
date of the annual general meeting or, where no such meeting is held or if held is not
concluded, on the last day of the calendar year.
If not having share capital: as on the date of the AGM or where no meeting, last
day of the calendar year.
(2) A company not having a share capital shall in each year prepare and file with the
registrar a return containing the particulars in a specified form as on the date of the
annual general meeting or, where no such meeting is held or if held is not concluded, on
the last day of the calendar year.
Time frame for filing with the registrar, In case of listed company, registrar to
extend the period
(3) The return referred to in sub-section (1) or sub-section (2) shall be filed with the
registrar within thirty days from the date of the annual general meeting held in the year
or, when no such meeting is held or if held is not concluded, from the last day of the
calendar year to which it relates:

Provided that, in the case of a listed company, the registrar may for special reasons
extend the period of filing of such return by a period not exceeding fifteen days.
Particulars to be entered in the register previously

(4) All the particulars required to be submitted under sub-section (1) and sub-section (2)
shall have been previously entered in one or more registers kept by the company for the
purpose.
Section not to apply if there is no change of particulars in the last annual return
but to inform the registrar of no change except SMC and Private Company having
paid up capital of not more than three million rupees
(5) Nothing in this section shall apply to a company, in case there is no change of
particulars in the last annual return filed with the registrar:
Provided that a company, other than a single member company or a private company
having paid up capital of not more than three million rupees, shall inform the registrar in
a specified manner that there is no change of particulars in the last annual return filed
with the registrar.
Penalty provision
offence liable—
QUESTIONS
1. Narrate the provisions of Companies Act relating to power of company to close

register of members.
2. Court can rectify the register of members. Describe the provisions of such
rectification under section 126 of the Companies, Act 2017.
3. What are the provisions of the Act regarding filing of annual list of members?

MCQ
1. ______ shall be final authority regarding any entry or omission in the register of
members
a. Commission
b. Court
c. Registrar
d. Company
2. Inspection of register of members without charge may be done by

a. Any person
b. Only members
c. Only by representative of Commission or Registrar
3. Index of register of members should be updated

a. Within 14 days after the date on which any alteration is made in the
register of members
b. Within 7 days of the entry to the register of members
c. Forthwith the entry to the register of members
d. On directions of Commission
MCQs (Answers)
1. b 2. d 3. a

COMPANIES ACT, 2017
MISCELLANEOUS PROVISIONS REGARDING INVESTMENTS, CONTRACTS

OFFICERS AND SHAREHOLDINGS, TRADING AND INTERESTS

MISCELLANEOUS PROVISIONS REGARDING INVESTMENTS, CONTRACTS
OFFICERS AND SHAREHOLDINGS, TRADING AND INTERESTS
1. Investments in associated companies and undertaking (Section 199)
Company not to make investment in associated companies or undertakings

except special resolution, Investment includes equity, loans, advances,
guarantees, by whatever name called except normal trade credit
(1) A company shall not make any investment in any of its associated companies or
associated undertakings except under the authority of a special resolution which shall
indicate the nature, period, amount of investment and terms and conditions attached
thereto.
Explanation: The term “investment” shall include equity, loans, advances, guarantees,
by whatever name called, except for the amount due as normal trade credit, where the
terms and conditions of trade transaction(s) carried out on arms-length and in
accordance with the trade policy of the company.
No loan or advance to any associated company or undertaking except with an

agreement in writing, return not less than borrowing cost, Directors to certify
(2) The company shall not invest in its associated company or associated undertaking
by way of loans or advances except in accordance with an agreement in writing and
such agreement shall inter-alia include the terms and conditions specifying the nature,
purpose, period of the loan, rate of return, fees or commission, repayment schedule for
principal and return, penalty clause in case of default or late repayments and security, if
any, for the loan in accordance with the approval of the members in the general
meeting:
Provided that the return on such investment shall not be less than the borrowing cost
of the investing company or the rate as may be specified by the Commission whichever
is higher and shall be recovered on regular basis in accordance with the terms of the
agreement, failing which the directors shall be personally liable to make the payment:
Provided further that the directors of the investing company shall certify that the
investment is made after due diligence and financial health of the borrowing company is
such that it has the ability to repay the loan as per the agreement.

Commission to notify for certain companies restrictions of sub-section 1 no to
apply, through regulations to specify disclosure requirements, conditions and
restrictions
(3) The Commission may—
(a) by notification in the official Gazette, specify the class of companies or undertakings
to which the restriction provided in sub-section (1) shall not apply; and
(b) through regulations, specify such disclosure requirements, conditions and

restrictions on the nature, period, amount of investment and terms and conditions
attached thereto, and other ancillary matters.
Increase or change in the nature of investment through special resolution

(4) An increase in the amount or any change in the nature of investment or the terms
and conditions attached thereto shall be made only under the authority of a special
resolution.
Company to keep register of investment at Registered office

(5) Every company shall maintain and keep at its registered office a register of
investments in associated companies and undertakings containing such particulars as
may be specified.
Penalty provision
an offence liable to a penalty of level 3 on the standard scale and in addition, shall
jointly and severally reimburse to the company any loss sustained by the company in
consequence of an investment which was made without complying with the
requirements of this section.
2. Investments of company to be held in its own name (Section 200)
Investment to make in company’s own name, Company may hold shares in its
subsidiary company in the name of the nominee of the company to ensure that
the number of members not reduced below the statutory limit
(1) All investments made by a company on its own behalf shall be made and held by it
in its own name:
Provided that the company may hold any shares in its subsidiary company in the name
of any nominee of the company, if it is necessary to do so, to ensure that the number of
members of the subsidiary company is not reduced below the statutory limit.

If the company has a right to appoint or get elected any person as a director of
any other company, the shares of an amount not exceeding the nominal value of
the qualification shares required to be held by a director may be registered or
held by such company jointly in its own name and in the name of such person or
nominee, or in the name of such person or nominee alone
(2) Where the company has a right to appoint or get elected any person as a director of
any other company and a nominee of the company in exercise of such right has been
so appointed or elected, the shares in such other company of an amount not exceeding
the nominal value of the qualification shares which are required to be held by a director
thereof, may be registered or held by such company jointly in its own name and in the
name of such person or nominee, or in the name of such person or nominee alone.
This section not to prevent a company from depositing with, or transferring to, or
holding or registering in the name of a central depository any shares or securities
(3) Nothing in this section shall be deemed to prevent a company from depositing with,
or transferring to, or holding, or registering in the name of a central depository any
shares or securities.
Entry in a register if shares are not held in its own name

(4) Where, in pursuance of proviso to sub-section (1) or provisions of sub-sections (2) or
(3), any shares or securities in which investments have been made by a company are
not held by it in its own name, the company shall forthwith enter in a register maintained
by it for the purpose at its registered office the nature, value and such other particulars
as may be necessary fully to identify such shares or securities.
Inspection of the register—members without charge and fees as specified by

company for any other person
(5) The register maintained under sub-section (4) shall, be open to the inspection of
members without charge, and to any other person on payment of such fees as the
company may specify in this behalf during business hours, subject to such reasonable
restrictions, as the company may impose, so that not less than two hours in each day
be allowed.
Member my require Certified copy of register—on payment of fee as fixed by the

company
(6) Any member may require a certified copy of register or any part thereof, on payment
of such fee as may be fixed by the company.

Certified copies requested to be issued within a period of seven days
(7) The certified copies requested under this section shall be issued within a period of
seven days.
Inspection or Certified copy—on request by a member

(8) A member seeking to exercise either of the rights conferred by sub-sections (5) or
(6) must make a request to the company to that effect.
Punishment/Fine for contravention of sub-section 1

(9) If a company contravenes the provisions of sub-section (1), the company shall be
punishable with fine which may extend to five million rupees and every officer of the
company who is in default shall be punishable with imprisonment for a term which may
extend to two years or with fine which may extend to one million rupees, or with both.
Penalty provision of sub-section 4,5 or 6

(10) Any contravention or default in complying with requirements of sub-sections (4), (5)
or (6), shall be an offence liable to a penalty of level 1 on the standard scale; and the
registrar may by an order compel an immediate inspection of the register or direct that
copies required shall be sent to the persons requiring them.
3. Method of contracting (Section 201)
Procedure for entering into contract by a company—If by law, required be by

deed, or otherwise in writing, be signed under the name of the company by a
director, attorney or any other person duly authorised by the board and may affix
common seal—If not by law, required be in writing, may be in writing or orally by
a person acting under the company’s express or implied authority
(1) A contract or other enforceable obligation may be entered into by a company as
follows:
(a) an obligation which, if entered into by a natural person, will, by law, be required to be
by deed or otherwise in writing, may be entered into on behalf of the company in writing
signed under the name of the company by a director, attorney or any other person duly
authorised by the board and may affix common seal of the company;
(b) an obligation which, if entered into by a natural person, is not, by law, required to be
in writing, may be entered into on behalf of the company in writing or orally by a person
acting under the company‘s express or implied authority.

Contract to be effectual binding on the company and its successors and all other
parties, their heirs, or legal representatives
(2) All contracts made according to sub-section (1) shall be effectual in law and shall
bind the company and its successors and all other parties thereto, their heirs, or legal
representatives as the case may be.
4. Execution of bills of exchange, promissory notes and deeds (Section 202)

Procedure for execution of bill of exchange or promissory note—by any person acting
under the authority, express or implied
(1) A bill of exchange or promissory note shall be deemed to have been made, drawn,
accepted or endorsed on behalf of a company if made, drawn, accepted or endorsed in
the name of, or on behalf of or on account of, the company by any person acting under
its authority, express or implied.
A company may, by writing, authorise any person as its attorney

(2) A company may, by writing, authorise any person, either generally or in respect of
any specified matters, as its attorney to execute deeds on its behalf in any place either
in or outside Pakistan.
Deed by such attorney shall be binding on company

(3) A deed signed by such an attorney on behalf of the company and under his seal
shall bind the company and have the effect as if it was made by the company itself.
5. Company to have official seal for use abroad (Section 203)
Company’s common seal and official seal

(1) A company that has a common seal may have an official seal for use outside
Pakistan.
Official seal must be a facsimile

(2) The official seal must be a facsimile of the company‘s common seal, with the
addition on its face of the name of every territory where it is to be used.
Document with official seal having same effect as common seal

(3) The official seal when duly affixed to a document has the same effect as the
company‘s common seal.

Authorization of any person to affix official seal
(4) A company having such an official seal may, by writing under its common seal,
authorise any person appointed for the purpose in any territory not situate in Pakistan to
affix the same to any deed or other document to which the company is party in that
territory.
Period of conferring such authority

(5) The authority of any such agent shall, as between the company and any person
dealing with the agent, continue during the period, if any, mentioned in the instrument
conferring the authority, or if no period is mentioned therein, then until notice of the
revocation or determination of the agent‘s authority has been given to the person
dealing with him.
Date and place of affixing the official seal

(6) The person affixing any such official seal shall, by writing under his hand, on the
deed or other document to which the seal is affixed, certify the date and place of affixing
the same.
Deed or other document with official seal binding on company as of common seal
(7) A deed or other document to which an official seal is duly affixed shall bind the
company as if it had been sealed with the common seal of the company.
5.1 Company to have common seal (Section 23)
Every company to have a common seal

(1) Every company shall have a common seal.
Common seal to have company’s name engraved on it in legible form

(2) A company‘s common seal must be a seal having the company‘s name engraved on
it in legible form.
Penalty Provision
(3) If any of the provision of this section is contravened or an officer of a company or a
person on behalf of a company uses or authorises the use of another seal that purports
to be the company‘s common seal, shall be liable to a penalty not exceeding of level 1

6. Duties of directors (Section 204)
Director to act as per articles

(1) Subject to the provisions of this Act, a director of a company shall act in accordance
with the articles of the company.
A director to act in good faith

(2) A director of a company shall act in good faith in order to promote the objects of the
company for the benefit of its members as a whole, and in the best interests of the
company, its employees the shareholders the community and for the protection of
environment.
A director to discharge his duties with due and reasonable care

(3) A director of a company shall discharge his duties with due and reasonable care,
skill and diligence and shall exercise independent judgment.
No conflict of interest with the company directly or indirectly

(4) A director of a company shall not involve in a situation in which he may have a direct
or indirect interest that conflicts, or possibly may conflict, with the interest of the
company.
A director not to achieve any undue gain or advantage

(5) A director of a company shall not achieve or attempt to achieve any undue gain or
advantage either to himself or to his relatives, partners, or associates and if such
director is found guilty of making any undue gain, he shall be liable to pay an amount
equal to that gain to the company.
A director not to assign his office

(6) A director of a company shall not assign his office and any assignment so made
shall be void.
Specified duties by Commission

(7) In addition to the preceding sub-sections, the Commission may provide for the
extent of duties and the role of directors as may be specified.
Any breach to ratify through special resolution, Commission may impose any
restrictions as may be specified
(8) Any breach of duty, default or negligence by a director in contravention of the
articles of the company or any of its policy or decision of the board may be ratified by

the company through a special resolution and the Commission may impose any
restriction as may be specified.
Penalty provision
(9) Without prejudice to any other action that may be taken under this Act or any other
law, any contravention or default in complying with requirements of this section shall
7. Disclosure of interest by director (Section 205)
Every director interested in any contract to disclose the nature of his concern or
interest, Director be deemed interested or concerned if any of his relatives is so
interested—Relatives include the spouse, children including the step children,
parents
(1) Every director of a company who is in any way, whether directly or indirectly,
concerned or interested in any contract or arrangement entered into, or to be entered
into, by or on behalf of the company shall disclose the nature of his concern or interest
at a meeting of the board:
Provided that a director shall be deemed also to be interested or concerned if any of his
relatives, is so interested or concerned.
Explanation.— For the purpose of this section “director’s relatives”, are—
(a) the director‘s spouse;
(b) the director‘s children, including the step children;
(c) the director‘s parents;
Procedure for disclosure—at the meeting of the board in which such contract is
first considered, if director not concerned or interested on the date of that
meeting, at the first meeting of the board held after he becomes so concerned or
interested, in the case of any other contract or arrangement, at the first meeting
of the board held after the director becomes concerned or interested
(2) The disclosure required to be made by a director under sub-section (1) shall be
made—
(a) in the case of a contract or arrangement to be entered into, at the meeting of the
board at which the question of entering into the contract or arrangement is first taken

into consideration or, if the director was not, on the date of that meeting, concerned or
interested in the contract or arrangement, at the first meeting of the board held after he
becomes so concerned or interested; and
(b) in the case of any other contract or arrangement, at the first meeting of the board
held after the director becomes concerned or interested in the contract or arrangement.
Disclosure through general notice

(3) For the purposes of sub-sections (1) and (2), a general notice given to the board to
the effect that a director is a director or a member of a specified body corporate or a
partner of a specified firm and is to be regarded as concerned or interested in any
contract or arrangement which may, after the date of the notice, be entered into with
that body corporate or firm, shall be deemed to be a sufficient disclosure of concern or
interest in relation to any contract or arrangement so made.
Expiry of general notice and its renewal—expiry at the end of financial year, for
renewal by a fresh notice given in the last month of the financial year in which it
would otherwise expire
(4) Any such general notice shall expire at the end of the financial year in which it is
given, but may be renewed for further period of one financial year at a time, by a fresh
notice given in the last month of the financial year in which it would otherwise expire.
General notice to be given at the meeting of a board or to ensure that it is brought

up and read at the first meeting of the board after it is given
(5) No such general notice, and no renewal thereof, shall be of effect unless either it is
given at a meeting of the board, or the director concerned takes reasonable steps to
ensure that it is brought up and read at the first meeting of the board after it is given.
Penalty provision
(6) Any contravention or default in complying with requirements of sub-sections (1) or
(2), shall be an offence liable to a penalty of level 1 on the standard scale.

8. Interest of officers (Section 206)
Other officer interested in a contract not enter into any contract unless he
discloses his interest and prior approval of the board is obtained
(1) Save as provided in section 205 in respect of directors, no other officer of a
company who is in any way, directly or indirectly, concerned or interested in any
proposed contract or arrangement with the company shall, unless he discloses the
nature and extent of his interest in the transaction and obtains the prior approval of the
board, enter into any such contract or arrangement.
Penalty provision
(2) Any contravention or default in complying with requirement under this section shall
9. Interested director not to participate or vote in proceedings of board

(Section 207)
Interested director not to take part in discussion or vote nor his presence count
for a quorum; if he does vote, his vote shall be void
(1) No director of a company shall, as a director, take any part in the discussion of, or
vote on, any contract or arrangement entered into, or to be entered into, by or on behalf
of the company, if he is in any way, whether directly or indirectly, concerned or
interested in the contract or arrangement, nor shall his presence count for the purpose
of forming a quorum at the time of any such discussion or vote; and if he does vote, his
vote shall be void:
Provided that a director of a listed company who has a material personal interest in a
matter that is being considered at a board meeting shall not be present while that matter
is being considered.
If majority of the directors are interested—approval in general meeting

(2) If majority of the directors are interested in, any contract or arrangement entered
into, or to be entered into, by or on behalf of the company, the matter shall be laid
before the general meeting for approval.
Sub section 1 not to apply in certain matters

(3) Sub-section (1) shall not apply to—
(a) a private company which is neither a subsidiary nor a holding company of a public
company;

(b) any contract of indemnity or insurance coverage executed by the company in favour
of interested director against any loss which he may suffer or incur by reason of
becoming or being a surety for the company or while undertaking any transaction on
behalf of the company:
Provided that for the purpose of clause (b), a company shall only insure the liability of
interested director where such liability arises out of a transaction validly approved by the
board or the members of the company as the case may be:
Penalty provision
(4) Any contravention or default in complying with requirements under this section shall
10. Related party transactions (Section 208)
Contract with a related party transactions as per approved policy of the board
subject to conditions as may be specified, where majority of the directors are
interested—Special resolution, nothing to apply to transactions entered into
ordinary course of business
(1) A company may enter into any contract or arrangement with a related party only in
accordance with the policy approved by the board, subject to such conditions as may be
specified, with respect to—
(a) sale, purchase or supply of any goods or materials;
(b) selling or otherwise disposing of, or buying, property of any kind;
(c) leasing of property of any kind;
(d) availing or rendering of any services;
(e) appointment of any agent for purchase or sale of goods, materials, services or
property; and
(f) such related party‘s appointment to any office or place of profit in the company, its
subsidiary company or associated company:
Provided that where majority of the directors are interested in any of the above
transactions, the matter shall be placed before the general meeting for approval as
special resolution:

Provided also that nothing in this sub-section shall apply to any transactions entered
into by the company in its ordinary course of business on an arm‘s length basis.
Explanation.—In this sub-section—
(a) the expression “office of profit” means any office—
(i) where such office is held by a director, if the director holding it receives from the
company anything by way of remuneration over and above the remuneration to which
he is entitled as director, by way of salary, fee, commission, perquisites, any rent-free
accommodation, or otherwise;
(ii) where such office is held by an individual other than a director or by any firm, private
company or other body corporate, if the individual, firm, private company or body
corporate holding it receives from the company anything by way of remuneration,
salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
(b) the expression “arm’s length transaction” means a transaction which is subject to
such terms and conditions as may be specified.
(c) the expression “related party” includes—
(i) a director or his relative:
(ii) a key managerial personnel or his relative;
(iii) a firm, in which a director, manager or his relative is a partner;
(iv) a private company in which a director or manager is a member or director;
(v) a public company in which a director or manager is a director or holds along with his
relatives, any shares of its paid up share capital;
(vi) any body corporate whose chief executive or manager is accustomed to act in
accordance with the advice, directions or instructions of a director or manager;
(vii) any person on whose advice, directions or instructions a director or manager is

accustomed to act:

Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or
instructions given in a professional capacity;
(viii) any company which is—

(A) a holding, subsidiary or an associated company of such company; or
(B) a subsidiary of a holding company to which it is also a subsidiary;
(ix) such other person as may be specified;
Explanation.—For the purpose of this section “relative” means spouse, siblings and
lineal ascendants and descendants of a person.
Every such contract be referred to in the board’s report along with justification
(2) Every contract or arrangement entered into under sub-section (1) shall be referred to
in the board‘s report to the shareholders along-with the justification for entering into
such contract or arrangement.
Commission may specify the record for such transaction

(3) The Commission may specify the record to be maintained by the company with
regards to transactions undertaken with the related party.
Such contract without consent of the board or approval of special resolution shall
be voidable
(4) Where any contract or arrangement is entered into by a director or any other
employee, without obtaining the consent of the board or approval by a special resolution
in the general meeting under sub-section (1) and if it is not ratified by the board or, as
the case may be, by the shareholders at a meeting within ninety days from the date on
which such contract or arrangement was entered into, such contract or arrangement
shall be voidable at the option of the board and if the contract or arrangement is with a
related party to any director, or is authorised by any other director, the directors
concerned shall indemnify the company against any loss incurred by it.
The company to proceed against a director or any employee for recovery of any
loss
(5) Without prejudice to anything contained in sub-section (4), it shall be open to the
company to proceed against a director or any employee who had entered into such
contract or arrangement in contravention of the provisions of this section for recovery of
any loss sustained by it as a result of such contract or arrangement.

Penalty provision
(6) Any director or any other employee of a company, who had entered into or
authorised the contract or arrangement in violation of the provisions of this section shall
be liable—
(a) in case of listed company, be punishable with imprisonment for a term which may
extend to three years or with fine which shall not be less than five million rupees, or with
both; and
11. Register of contracts or arrangements in which directors are interested

(Section 209)
Company to keep register for the particulars of all contract or arrangements—

manner and particulars specified by Commission
(1) Every company shall keep one or more registers giving separately the particulars of
all contracts or arrangements, in such manner and containing such particulars as may
be specified by the Commission.
Every director to disclose to the company the particulars relating to his concern
or interest to be included in the register
(2) Every director shall, within a period of thirty days of his appointment, or
relinquishment of his office, as the case may be, disclose to the company the particulars
relating to his concern or interest in the other associations which are required to be
included in the register under sub-section (1) or such other information relating to
himself as may be specified.
Register to be kept at registered office and its inspection, taking extract and
copies by any member
(3) The register referred to in sub-section (1) shall be kept at the registered office of the
company and it shall be open for inspection at such office during business hours and
extracts may be taken therefrom, and copies thereof as may be required by any
member of the company shall be furnished by the company to such extent, in such
manner, and on payment of such fees as may be specified.

Register to be produced at the commencement of every AGM, open and
accessible during meeting
(4) The register to be kept under this section shall also be produced at the
commencement of every annual general meeting of the company and shall remain open
and accessible during the continuance of the meeting to any person having the right to
attend the meeting.
Sub-section 1 not to apply to certain contract or arrangement

(5) Nothing contained in sub-section (1) shall apply to any contract or arrangement—
(a) for the sale, purchase or supply of any goods, materials or services if the value of
such goods and materials or the cost of such services does not exceed five hundred
thousand rupees in the aggregate in any year; or
(b) by a banking company for the collection of bills in the ordinary course of its business.
Penalty provision
12. Contract of employment with directors (Section 210)
Company to keep copy of the contract of employment with director or written

memorandum at its registered office
(1) Every company shall keep at its registered office—
(a) where a contract of service with a director is in writing, a copy of the contract; or
(b) where such a contract is not in writing, a written memorandum setting out its terms.
Copies to open for the inspection of members

(2) The copies of the contract or the memorandum kept under sub-section (1) shall be
open to inspection by any member of the company without payment of fee.
Penalty provision
(3) Any contravention or default in complying with requirement under this section shall
Section not to apply to a private company

(4) The provisions of this section shall not apply to a private company.

13. Restriction on non-cash transactions involving directors (Section 211)
Company not to enter into an arrangement that a director acquires assets for
consideration other than cash from company or company acquires assets for
consideration other than cash from director, unless prior approval by a resolution
in general meeting
(1) No company shall enter into an arrangement by which—
(a) a director of the company or its holding, subsidiary or associated company or a

person connected with him acquires or is to acquire assets for consideration other than
cash, from the company; or
(b) the company acquires or is to acquire assets for consideration other than cash, from
such director or person so connected; unless prior approval for such arrangement is
accorded by a resolution of the company in general meeting and if the director or
connected person is a director of its holding company, approval under this sub-section
shall also be required to be obtained by passing a resolution in general meeting of the
holding company.
Notice of meeting to include the particulars of the such arrangement along-with

the value of asset
(2) The notice for approval of the resolution by the company or holding company in
general meeting under sub-section (1) shall include the particulars of the arrangement
along-with the value of the assets involved in such arrangement duly calculated by a
registered valuer.
Contravention shall be voidable unless certain conditions are met

(3) Any arrangement entered into by a company or its holding company in contravention
of the provisions of this section shall be voidable at the instance of the company
unless—
(a) the restitution of any money or other consideration which is the subject- matter of the
arrangement is no longer possible and the company has been indemnified by any other
person for any loss or damage caused to it; or
(b) any rights are acquired bona fide for value and without notice of the contravention of
the provisions of this section by any other person.

Cash Transactions with directors only through banking channel
(4) The company shall ensure that all cash transactions with its directors are conducted
only through banking channels.
14. Declaring a director to be lacking fiduciary behavior (Section 212)
Court to declare a director lacking of fiduciary behavior, Court to afford an

opportunity of showing cause
The Court may declare a director to be lacking fiduciary behaviour if he contravenes the
provisions of section 205 or sub-section (1) of section 206 or sections 207 or 208:
Provided that before making a declaration the Court shall afford the director concerned
an opportunity of showing cause against the proposed action.
15. Disclosure to members of directors’ interest in contract appointing chief

executive or secretary (Section 213)
Director’s interest in any appointment or of Chief Executive to disclose at the

meeting of the board wherein such appointment or contract is to be approved,
such director not to participate and vote in the proceedings of the board
concerned or interested, in any appointment or contract for the appointment of a chief
executive, whole-time director or secretary of the company shall disclose the nature of
his interest or concern at a meeting of the board in which such appointment or contract
is to be approved and the interested director shall not participate or vote in the
proceedings of the board.
Contract for appointment of CE, whole-time director or Secretary to be kept at

registered office
(2) All contracts entered into by a company for the appointment of a chief executive,
whole-time director or secretary shall be kept at the registered office of the company.
Inspection of such contracts by any member without charge

(3) Every contract required to be kept under sub-section (2) must be open to inspection
by any member of the company without charge.

Copy of contract to provide member on request and payment of fee as may be
fixed by the company
(4) Any member of the company is entitled, on request and on payment of such fee as
may be fixed by the company, to be provided with a copy of any such contract. The
copy must be provided within seven days after the request is received by the company.
Penalty provision
16. Contracts by agents of company in which company is undisclosed principal

(Section 214)
In case of undisclosed principal—make a memorandum in writing of the terms of

contract, and specify therein the person with whom it has been made
(1) Every officer or other agent of a company, other than a private company, not being
the subsidiary company of a public company, who enters into a contract for or on behalf
of the company in which contract the company is an undisclosed principal shall, at the
time of entering into the contract, make a memorandum in writing of the terms of
contract, and specify therein the person with whom it has been made.
Officer or other agent to deliver memorandum to the company or its directors to

lay it before next meeting of the board
(2) Every such officer or other agent shall forthwith deliver the memorandum aforesaid
to the company and its directors which shall be laid before next meeting of the board.
In case of default by officer or agent to comply with the requirements—contract

be void and officer or other agent liable to penalty
(3) If any such officer or other agent makes default in complying with the requirements
of this section—
(a) the contract shall, at the option of the company, be void as against the company;
and
(b) such officer or other agent shall be liable to a penalty of level 1 on the standard
scale.

17. Liability for undesired activities of the shareholders (Section 215)
Conduct of the shareholder not considered disruptive

(1) A member of a company shall act in good faith while exercising its powers as a
shareholder at the general meetings and shall not conduct themselves in a manner that
is considered disruptive to proceedings of the meeting.
Member not to approach the management directly for decision leading to create
hurdle
(2) Without prejudice to his rights under this Act, a member of the company shall not
exert influence or approach the management directly for decisions which may lead to
create hurdle in the smooth functioning of management.
Penalty provision
(3) Any shareholder who fails to conduct in the manner provided in this section and as
specified by the Commission shall be guilty of an offence under this section and shall be
18. Company deemed to be a public interest company in certain circumstances

(Section 216)
Public interest company as per Third schedule

(1) Notwithstanding anything contained in this Act, a company shall be deemed to be a
company with public interest as envisaged in the Third Schedule.
Public interest company to comply with disclosure and reporting requirements as

specified by the Commission
(2) Upon being deemed as a company with public interest, the company shall be
required to comply with such disclosure and reporting requirements as may be specified
by the Commission.
Exemption from the requirements of this section by the Commission after giving
an opportunity of hearing to a company, Such order to be posted on the official
website of the Commission
(3) The Commission may as specified, after giving an opportunity of hearing to a
company or class of companies, by an order in writing exempt such company from the
requirements of this section if the Commission determines that such exemption is in the
interest of the public:
Provided that such order shall be posted on the official website of the Commission.

19. Securities and deposits (Section 217)
Company not to receive or utilize security or deposit except as per contract in

writing
(1) Save as provided in section 84, no company or any of its officers or agents shall
receive or utilize any money received as security or deposit, except in accordance with
a contract in writing.
Money to keep in special account

(2) The money so received shall be kept in a special account maintained by a company
with a scheduled bank.
Section not to apply to the nature of an advance payment for goods to be delivered or
sold
(3) This section shall not apply where the money received is in the nature of an advance
payment for goods to be delivered or sold to an agent, dealer or sub-agent in
accordance with a contract in writing.
20. Employees’ provident funds, contributory retirement funds and securities

(Section 218)
Money or securities from employees to be kept in a special account
(1) All moneys or securities deposited with a company by its employees in pursuance of
their contracts of service with the company shall be kept or deposited by the company
within fifteen days from the date of deposit in a special account to be opened by the
company for the purpose in a scheduled bank or in the National Saving Schemes, and
no portion thereof shall be utilized by the company except for the breach of the contract
of service on the part of the employee as provided in the contract and after notice to the
employee concerned.
Fund to be deposited or invested

(2) Where a provident fund, contributory pension fund or any other contributory
retirement fund has been constituted by a company for its employees or any class of its
employees, all moneys contributed to such fund, whether by the company or by the
employees or by both, or received or accruing by way of interest, profit or otherwise
from the date of contribution, receipt or accrual, as the case may be, shall either—

(a) be deposited—
(i) in a National Savings Scheme;
(ii) in a special account to be opened by the company for the purpose in a scheduled
bank; or
(iii) where the company itself is a scheduled bank, in a special account to be opened by
the company for the purpose either in itself or in any other scheduled bank; or
(b) be invested in—
(i) Government securities; or
(ii) bonds, redeemable capital, debt securities or instruments issued by a statutory body,
units of collective investment schemes registered as notified entities with the
Commission, and in listed securities including shares of companies, bonds, redeemable
capital, debt securities and equity securities, subject to the conditions as may be
specified.
In case of trust, Company to pay such contributions of employees as well as its

own contributions, if any, to the trustees
(3) Where a trust has been created by a company with respect to any provident fund or
a contributory pension fund or any contributory retirement fund referred to in sub-section
(2), the company shall be bound to collect the contribution of the employees concerned
and pay such contributions as well as its own contributions, if any, to the trustees within
fifteen days from the date of collection, and thereupon, the obligations laid on the
company by that sub-section shall devolve on the trustees and shall be discharged by
them instead of the company.
Trustee to have appropriate representation from the members of fund

(4) The trustees of provident fund, contributory pension or retirement fund shall have
appropriate representation from the members of the funds.

21. Penalty for contravention of section 217 or 218. (Section 219)
Penalty provision for section 217 or 218

Any contravention or default in complying with requirements of sections 217 or 218 shall
be an offence liable to a penalty of level 1 on the standard scale and shall also be liable
to pay the loss suffered by the depositor of security or the employee, on account of such
contravention.
QUESTIONS
1. What are the requirements of the Companies Act, 2017 with regard to the
investment in an associated undertaking?
2. A director is indirectly interested in a contract. You are required to discuss the

manner and the period within which the director can disclose his interest.
3. A company has received security deposits from its customers. Describe the
provisions of the Companies Act, 2017 relating to security deposit.
4. Discuss the provisions of the Companies Act, 2017 regarding collection and
deposit of contributions relating to the provident fund.

MCQ.
1. A company can make investment in any of its associated companies or

associated undertakings under the authority of a special resolution which shall
indicate:
i. Time period for which the investment will be made.
ii. Nature of the investment.
iii. Amount to be invested.
iv. Terms and conditions attached to investment.
a) i and iii only

b) ii & iv only
c) iv only
d) All of above
2. Register kept by the company in respect investments in shares and debentures

which are not held by the company in its own name:
i. Shall be open to inspection by member of the company without charge
and to any other person on payment of such fee as the company may
specify.
ii. Shall be open to inspection by creditors of the company on payment of
prescribed fee.
iii. Shall be open to inspection by any member, creditor or debenture
holder without any charge.
iv. Shall be open to inspection by any member, creditor or debenture
holder without any charge, however the company may impose
permanent restrictions on such inspection by a special resolution.
a) i and ii
b) i only
c) iii and iv
d) iii only
3. The official seal of the company shall:

i. Be facsimile of the common seal.
ii. Have, on its face, the name of the agent who will use this seal.
iii. Have, on its face, the name of every territory where it is to be used.
iv. Be used in any territory not situate in Pakistan.

a) ii only
b) ii and iii
c) i, iii and iv
d) All of above
MCQs (Answers)
1. d 2. b 3. c

COMPANIES ACT, 2017
1. INTRODUCTION AND SOME IMPORTANT CONCEPTS OF WINDING UP
2. WINDING UP
3. GENERAL
4. SCHEDULES, TABLES, FORMS AND GENERAL RULES


Introduction and General Requirements of Winding Up
The term ‘winding up’ of a company may be defined as the proceedings by which
a company is dissolved (i.e. the life of a company is put to an end). Thus, the
winding up is the process of putting an end to the life of the company. And during
this process, the assets of the company are disposed of, the debts of the
company are paid off out of the realized assets or from the contributories and if
any surplus is left, it is distributed among the members in proportion to their
shareholding in the company. The winding up of the company is also called the
‘liquidation’ of the company. The process of winding up begins after the Court
passes the order for winding up or a resolution is passed for voluntary winding
up. The company is dissolved after completion of the winding up proceedings.
On the dissolution, the company ceases to exist. So, the legal procedure by
which the existence of an incorporated company is brought to an end is known
as winding up.
LIQUIDATOR
A person appointed to carry out the winding up of a company is called liquidator.
If the winding up is through Court, the term used for such person is official
liquidator. The duties of liquidator include to get in and realize the property of the
company, to pay its debts, and to distribute the surplus (if any) among the
members. The official liquidator acts under the supervision of the Court, through
a recognized reporting system.
Consequences of winding up
Some important consequences of winding up of company are:
As regards the company itself:

Winding up does not mean that the company has ceased to exist. The company
exists as a corporate entity with all the rights of such entity, with only change that
its management and administration is to be carried on through liquidator/
liquidators till the final dissolution of the company.
As regards the shareholders:

A new statutory liability as contributories comes into existence. Every transfer of
shares or alteration in the status of a shareholder, after the winding up has
commenced by the order of the Court, shall unless approved by the liquidator, be
void.

As regards the creditors:
i. They cannot file or continue suits against the company, except with the
leave of the Court.
ii. They cannot proceed with the execution, if they have obtained decrees
already.
iii. They must lodge their claim and prove their debt before the liquidator.
As regards the management

On appointment of liquidator, all the powers of the directors, chief executive and
other officers, shall cease, except for the purpose of giving notice of resolution to
wind up and appointment of liquidator and filing of consent of liquidator etc.
As regards the disposition of company’s property

All such dispositions are void unless with the leave of the Court or the liquidator.
1. Modes of Winding Up
Winding up of a company might be

1 By court- Court orders a winding up of the company and appoints an official
liquidator of the company on the basis of some petition filed by any of the
interested persons discussed later in this chapter.
2 Voluntary Winding up.
a. Members voluntary winding up- When the members of the company

decide to wind up the company by passing a special resolution and the
directors give a declaration of solvency that the company shall be able
to meet all its liabilities and hence being a sovereign company, the
members take charge of the winding up proceedings and appoint a
liquidator themselves, details are discussed later in this chapter.
b. Creditors voluntary winding up- When the members of the company

decide to wind up the company by passing a special resolution and the
directors cannot give a declaration of solvency because in their opinion
the company shall not be able to meet all its liabilities and hence not
being a sovereign company, the members give the charge of the
winding up proceedings to the creditors hence the liquidator is also
appointed by the creditors, details are discussed later inn this chapter.

c. Subject to the supervision of court.- This is a type of winding up in
which the voluntary winding up proceedings continue but under the
supervision of the court.
Provisions Relating to Every Winding Up

Irrespective of the type of winding up, following provisions shall be applicable to
every type of winding up of the company.
2. Some Important Concepts about Winding up
2.1 Contributories
1) Contributory means every person liable to contribute to the assets of a
company in the event of its being wound up, and includes the holder of any
shares which are fully paid up but no contribution shall be required from a
contributory in excess of
a) the amount unpaid on his shares in case he has got partly paid shares in a
company limited by shares or
b) the amount guaranteed by him in case of a company limited by guarantee
not having share capital
c) the amount guaranteed by him along with any sum unpaid on his shares in
case of a company limited by guarantee and having share capital
2) Liability of a contributory is a debt due from him but payable only when the
call shall be made for such amount.
3) In case of death of a contributory at any time his legal representatives shall
make the payment for such liability.
4) In case contributory is an insolvent, his legal assignees shall represent him in
the winding up proceedings and shall pay accordingly. They may be asked to
pay current as well as estimated future calls on such insolvents property. In
case the member of the company was a body corporate which itself in under
winding up, liquidator of that body corporate shall represent on behalf of
Member Company and may be asked to fulfill current or future calls on the
company.
5) Every present and past member shall be required to contribute to the assets
of the company for the following purposes on its winding up.
a. Payment of debts and liabilities

b. Cost, charges and expenses of winding up
c. Adjustment of the rights of the contributories among themselves

6) Provisions for past members
However following shall apply in case of a past member
a. If one year has lapsed since someone left the company, he shall
not be considered as past member for the purpose of winding up
b. Past member shall not be required to contribute for the amounts
contracted or liabilities incurred after he ceased to be a member
c. Past member shall contribute only if courts so feels that the present
members are not able to fulfill liabilities
7) Unpaid Dividend & Creditors

Dividends etc. payable shall not be paid if the question arises between member
and creditor however such entitlements may be considered on final adjustment of
the rights of the contributories among themselves.
8) Directors with Unlimited Liability

If the company has director (present or past) having his liability un limited by
MOA following shall apply in his case
a. He shall have liability as an individual contributory as well as his
additional liability due to unlimited liability.
b. He shall not be liable for the liability contracted after he ceased to
be a director of the company.
c. He shall be required to contribute only if court so feels that it is
necessary to get contributions from him.
3. WINDING UP
3.1 Modes of winding up (Section 293)
Three modes of winding up
(1) The winding up of a company may be either—
(a) by the Court or
(b) voluntary; or
(c) subject to the supervision of the Court.

Provisions of this Act to apply to any of the winding up modes unless otherwise
expressly provided
(2) Save as otherwise expressly provided, the provisions of this Act with respect to
winding up shall apply to the winding up of a company in any of the modes specified in
sub-section (1).
3.2 Liability as contributories of present and past members (Section 294)
In case of winding up, every present and past member shall be liable to
contribute subject to the provisions of section 295 with certain qualifications
(1) In the event of a company being wound up, every present and past member shall,
subject to the provisions of section 295, be liable to contribute to the assets of the
company to an amount sufficient for payment of its debts and liabilities and the costs,
charges and expenses of the winding up, and for the adjustment of the rights of the
contributories among themselves, with the following qualifications, that is to say—
(a) a past member shall not be liable to contribute if he has ceased to be member for
one year or upwards before the commencement of the winding up;
(b) a past member shall not be liable to contribute in respect of any debt or liability of
the company contracted after he ceased to be a member;
(c) a past member shall not be liable to contribute unless it appears to the Court that the
present members are unable to satisfy the contributions required to be made by them in
pursuance of this Act;
(d) in the case of a company limited by shares, no contribution shall be required from
any past or present member exceeding the amount, if any, unpaid on the shares in
respect of which he is liable as such member;
(e) in the case of a company limited by guarantee, no contribution shall, subject to the
provisions of sub-section (2), be required from any past or present member exceeding
the amount undertaken to be contributed by him to the assets of the company in the
event of its being wound up;
(f) nothing in this Act shall invalidate any provision contained in any policy of insurance
or other contract whereby the liability of individual members on the policy or contract is
restricted, or whereby the funds of the company are alone made liable in respect of the
policy or contract; and

(g) a sum due to any past or present member of a company in his character as such, by
way of dividends, profits or otherwise, shall not be deemed to be a debt of the company
payable to that member in a case of competition between himself and any other creditor
not being a member of the company, but any such sum may be taken into account for
the purpose of the final adjustments of the rights of the contributories among
themselves.
If company limited by guarantee having share capital, every member liable to

contribute to the extent of any sum unpaid on any shares in addition to the
amount undertaken
(2) In the winding up of a company limited by guarantee which has a share capital,
every member of the company shall be liable, in addition to the amount undertaken to
be contributed by him to the assets of the company in the event of its being wound up,
to contribute to the extent of any sum unpaid on any shares held by him, as if the
company were a company limited by shares.
3.3 Liability of directors whose liability is unlimited (Section 295)
In addition to his liability as ordinary member be liable for further contribution

In the winding up of a limited company any director, whether past or present, whose
liability is, in pursuance of this Act, unlimited, shall, in addition to his ability, if any, to
contribute as an ordinary member, be liable to make a further contribution as if he were,
at the commencement of the winding up, a member of an unlimited company:
Provided that—
(a) a past director shall not be liable to make such further contribution if he has ceased
to hold office for a year or upwards before the commencement of the winding up;
(b) a past director shall not be liable to make such further contribution in respect of any
debtor liability of the company contracted after he ceased to hold office;
subject to the articles, a director shall not be liable to make such further contribution
unless the Court deems it necessary to require that contribution in order to satisfy the
debts and liabilities of the company, and the costs, charges and expenses of the
winding up.

3.4 Liability of Contributory having fully paid share (Section 296)
A person holding fully paid-up shares shall have no liabilities of a contributory

A person holding fully paid-up shares in a company shall be considered as a
contributory but shall have no liabilities of a contributory under this Act while retaining
rights of such a contributory.
Explanation.—The term “contributory” means a person liable to contribute towards the

assets of the company on the event of its being wound up.
3.5 Nature of liability of contributory (Section 297)
Liability shall create a debt accruing due from him

The liability of a contributory shall create a debt accruing due from him at the time when
his liability commenced, but payable at the time specified in calls made on him for
enforcing the liability.
3.6 Contributories in case of death of member (Section 298)
In case of death of contributory his legal representatives shall be liable as

contributory, If they make default, proceedings may be initiated for administering
the property of the deceased
If a contributory dies, whether before or after being placed on the list of contributories of
a company:
(a) his legal representatives shall be liable, in due course of administration, to contribute
to the assets of the company in discharge of his liability, and shall be contributories
accordingly; and
(b) if the legal representatives make default in paying any money ordered to be paid by
them, proceedings may be initiated for administering the property of the deceased
contributory, and of compelling payment of the money due, out of assets of the
deceased.

3.7 Contributory in case of insolvency of member (Section 299)
In case of insolvency of the contributory, his assignees in insolvency shall

represent him for all the purposes of the winding up
If a contributory is adjudged insolvent whether before or after he has been placed on the
list of contributories of a company, then—
(a) his assignees in insolvency shall represent him for all the purposes of the winding
up, and shall be contributories accordingly, and may be called on to admit to proof
against the estate of the insolvent, or otherwise to allow to be paid out of his assets in
due course of law, any money due from the insolvent in respect of his liability to
contribute to the assets of the company; and
(b) there may be proved against the estate of the insolvent the estimated value of his
liability to further calls as well as calls already made.
3.8 Contributories in case of winding up of a body corporate which is a member

(Section 300)
If a body corporate is a contributory and is ordered to be wound up, the liquidator
of the body corporate shall represent it for all purposes of the winding up
If a body corporate which is a contributory is ordered to be wound up, whether before or
after it has been placed on the list of contributories of a company—
(a) the liquidator of the body corporate shall represent it for all purposes of the winding
up of the company and shall be a contributory accordingly, and may be called on to
admit to proof against the assets of the body corporate, or otherwise to allow to be paid
out of its assets in due course of law, any money due from the body corporate in
respect of its liability to contribute to the assets of the company; and
(b) there may be proved against the assets of the body corporate the estimated value of
its liability to future calls as well as calls already made.
WINDING UP BY COURT
3.9 Circumstances in which a company may be wound up by Court (Section 301)

A company may be wound up by the Court—
(a) if the company has, by special resolution, resolved that the company be wound up
by the Court; or

(b) if default is made in delivering the statutory report to the registrar or in holding the
statutory meeting; or
(c) if default is made in holding any two consecutive annual general meetings; or
(d) if the company has made a default in filing with the registrar its financial statements
or annual returns for immediately preceding two consecutive financial years; or
(e) if the number of members is reduced, in the case of public company, below three
and in the case of a private company below two; or
(f) if the company is unable to pay its debts; or
(g) if the company is—
(i) conceived or brought forth for, or is or has been carrying on, unlawful or fraudulent
activities; or
(ii) carrying on business prohibited by any law for the time being in force in Pakistan; or
restricted by any law, rules or regulations for the time being in force in Pakistan; or
(iii) conducting its business in a manner oppressive to the minority members or persons
concerned with the formation or promotion of the company; or
(iv) run and managed by persons who fail to maintain proper and true accounts, or
commit fraud, misfeasance or malfeasance in relation to the company; or
(v) managed by persons who refuse to act according to the requirements of the
memorandum or articles or the provisions of this Act or failed to carry out the directions
or decisions of the Commission or the registrar given in the exercise of powers under
this Act; or
(h) if, being a listed company, it ceases to be such company; or
(i) if the Court is of opinion that it is just and equitable that the company should be
wound up; or
(j) if a company ceases to have a member; or

(k) if the sole business of the company is the licensed activity and it ceases to operate
consequent upon revocation of a license granted by the Commission or any other
licencing authority; or
(l) if a license granted under section 42 to a company has been revoked or such a
company has failed to comply with any of the provisions of section 43 or where a
company licensed under section 42 is being wound up voluntarily and its liquidator has
failed to complete the winding up proceedings within a period of one year from the date
of commencement of its winding up; or
(m) if a listed company suspends its business for a whole year.
Explanation I.—The promotion or the carrying on of any scheme or business,

howsoever described—
(a) whereby, in return for a deposit or contribution, whether periodically or otherwise, of

a sum of money in cash or by means of coupons, certificates, tickets or other
documents, payment, at future date or dates of money or grant of property, right or
benefit, directly or indirectly, and whether with or without any other right or benefit,
determined by chance or lottery or any other like manner, is assured or promised; or
(b) raising un-authorised deposits from the general public, indulging in referral
marketing, multi-level marketing (MLM), Pyramid and Ponzi Schemes, locally or
internationally, directly or indirectly; or
(c) any other business activity notified by the Commission to be against public policy or
a moral hazard;
shall be deemed to be an unlawful activity.
Explanation II.—“Minority members” means members together holding not less than
ten percent of the equity share capital of the company.
3.10. Company when deemed unable to pay its debts (Section 302)
Unable to pay debts: (a) company is indebted in a sum exceeding one hundred
thousand rupees, then due, Creditor has served on the company a demand,
company neglected to pay the sum for thirty days thereafter, nothing to do for
satisfaction of the creditor

(b) If decree or order of court or authority is returned unsatisfied in whole or in
part
(c) If it is proved to the satisfaction of the Court that the company is unable to pay
its debts
(1) A company shall be deemed to be unable to pay its de
(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum
exceeding one hundred thousand rupees, then due, has served on the company, by
causing the same to be delivered by registered post or otherwise, at its registered office,
a demand under his hand requiring the company to pay the sum so due and the
company has for thirty days thereafter neglected to pay the sum, or to secure or
compound for it to the reasonable satisfaction of the creditor; or
(b) if execution or other process issued on a decree or order of any Court or any other
competent authority in favour of a creditor of the company is returned unsatisfied in
whole or in part; or
(c) if it is proved to the satisfaction of the Court that the company is unable to pay its
debts, and, in determining whether a company is unable to pay its debts, the Court shall
take into account the contingent and prospective liabilities of the company.
For clause (a) Demand be deemed given if it is signed by an agent or legal adviser
duly authorised
(2) The demand referred to in clause (a) of sub-section (1) shall be deemed to have
been duly given under the hand of the creditor if it is signed by an agent or legal adviser
duly authorised on his behalf.
3.11 Transfer of proceedings to other Courts (Section 303)
Court after making order for winding up may direct for subsequent proceedings
to be held in any other high court with the consent of such court
Where the Court makes an order for winding up a company under this Act, it may, if it
thinks fit, direct all subsequent proceedings to be held in any other High Court, with the
consent of such court and thereupon, for the purposes of the winding up of the
company, such Court shall be deemed to be the “Court” within the meaning of this Act
and shall have all the powers and jurisdiction of the Court thereunder.

PETITION FOR WINDING UP
3.12 Provisions as to applications for winding up (Section 304)
An application to the court for winding up of a company by different authorities

like Company, creditors, contributory, registrar or a person authorized by the
Commission subject certain conditions
An application to the Court for the winding up of a company shall be by petition
presented, subject to the provisions of this section, either by the company, or by any
creditor or creditors (including any contingent or prospective creditor or creditors), or by
any contributory or contributories, or by all or any of the aforesaid parties, together or
separately or by the registrar, or by the Commission or by a person authorised by the
Commission in that behalf:
Provided that—
(a) a contributory shall not be entitled to present a petition for winding up a company
unless-
(i) either the number of members is reduced, in the case of a private company, below
two, or, in the case of public company, below three; and
(ii) the shares in respect of which he is a contributory or some of them either were
originally allotted to him or have been held by him, and registered in his name, for at
least one hundred and eighty days during the eighteen months before the
commencement of the winding up, or have or devolved on him through the death of a
former holder;
(b) the registrar shall not be entitled to present a petition for the winding up of a
company unless the previous sanction of the Commission has been obtained to the
presentation of the petition:
Provided that no such sanction shall be given unless the company has first been
afforded an opportunity of making a representation and of being heard;
(c) the Commission or a person authorised by the Commission in that behalf shall not
be entitled to present a petition for the winding up of a company unless an investigation
into the affairs of the company has revealed that it was formed for any fraudulent or
unlawful purpose or that it is carrying on a business not authorised by its memorandum
or that its business is being conducted in a manner oppressive to any of its members or

persons concerned in the formation of the company or that its management has been
guilty of fraud, mis-feasance or other misconduct towards the company or towards any
of its members; and such petition shall not be presented or authorised to be presented
by the Commission unless the company has been afforded an opportunity of making a
representation and of being heard:
Provided that if sole business of the company is the licensed activity and that license is
revoked, no investigation into the affairs of the company shall be required to present the
petition for winding up of the company;
(d) the Court shall not give a hearing to a petition for winding up a company by a
contingent or prospective creditor until such security for costs has been given as the
Court thinks reasonable and until a prima facie case for winding up has been
established to the satisfaction of the Court;
(e) the Court shall not give a hearing to a petition for winding up a company by the
company until the company has furnished with its petition, in the prescribed manner, the
particulars of its assets and liabilities and business operations and the suits or
proceedings pending against it.
3.13 Right to present winding up petition where company is being wound up

voluntarily or subject to Court‘s supervision (Section 305)
If a company is being wound up Voluntarily or subject to supervision of the court,

any person authorized to do so under section 304 may present a petition for its
winding up by the Court.
(1) Where a company is being wound up voluntarily or subject to the supervision of the
Court, a petition for its winding up by the Court may be presented by any person
authorised to do so under section 304 and subject to the provisions of that section.
Court to satisfy that voluntary winding up or winding up subject to supervision of

the court cannot be continued.
(2) The Court shall not make a winding up order on a petition presented to it under sub-
section (1) unless it is satisfied that the voluntary winding up or winding up subject to
the supervision of the Court cannot be continued with due regard to the interests of the
creditors or contributories or both or it is in the public interest so to do.

3.14 Commencement of winding up by Court (Section 306)
Commencement of winding up by the court—the time of the presentation of the

petition
A winding up of a company by the Court shall be deemed to commence at the time of
the presentation of the petition for the winding up.
POWERS OF COURT HEARING APPLICATION
3.15 Court may grant injunction (Section 307)
The Court may restrain further proceeding upon application before making order
The Court may, at any time after presentation of the petition for winding up a company
under this Act, and before making an order for its winding up, upon the application of
the company itself or of any its creditors or contributories, restrain further proceedings in
any suit or proceeding against the company, upon such terms as the Court thinks fit.
3.16 Powers of Court on hearing petition (Section 308)
The court may pass order: dismiss it, make interim order, appoint a provisional
manager, make order for winding up with or without costs, any other order as it
thinks fit
(1) The Court may, on receipt of a petition for winding up under section 304 pass any of
the following orders, namely—
(a) dismiss it, with or without costs;
(b) make any interim order as it thinks fit;
(c) appoint a provisional manager of the company till the making of a winding up order;
(d) make an order for the winding up of the company with or without costs; or
(e) any other order as it thinks fit:
Provided that an order under this sub-section shall be made within ninety days from the
date of presentation of the petition:
Provided further that before appointing a provisional manager under clause (c), the
Court shall give notice to the company and afford a reasonable opportunity to it to make

its representations, if any, unless for special reasons to be recorded in writing, the Court
thinks fit to dispense with such notice:
Provided also that the Court shall not refuse to make a winding up order on the ground
only that the assets of the company have been mortgaged for an amount equal to or in
excess of those assets, or that the company has no assets.
If the ground is that it is just and equitable to wind up, court may refuse to make
an order for winding up, if in the opinion of the court some other remedy is
available
(2) Where a petition is presented on the ground that it is just and equitable that the
company should be wound up, the Court may refuse to make an order of winding up, if
it is of the opinion that some other remedy is available to the petitioners and that they
are acting unreasonably in seeking to have the company wound up instead of pursuing
the other remedy.
Court to send intimation to official liquidator forthwith and to the registrar

(3) Where the Court makes an order for the winding up of a company, it shall forthwith
cause intimation thereof to be sent to the official liquidator appointed by it and to the
registrar.
3.17 Copy of winding up order to be filed with registrar (Section 309)
Copy of the order to the registrar by petitioner and the company

(1) Within fifteen days from the date of the making of the winding up order, the petitioner
in the winding up proceedings and the company shall file a certified copy of the order
with the registrar.
Penalty Provision
(2) If default is made in complying with the foregoing provision, the petitioner or, as the
case may require, the company, and every officer of the company who is in default,
shall be liable to a penalty of level 1 on the standard scale.
The registrar to make a minute in his books relating to the company on the filing
of a certified copy of a winding up order
(3) On the filing of a certified copy of a winding up order, the registrar shall forthwith
make a minute thereof in his books relating to the company, and shall simultaneously
notify in the official Gazette that such an order has been made.

Order be deemed notice of discharge to the employees except when the business
of the company is continued
(4) Such order shall be deemed to be notice of discharge to the employees of the
company, except when the business of the company is continued.
3.18 Suits stayed on winding up order (Section 310)
After winding up order or appointment of provisional manager, no suit or legal

proceedings be proceeded with or commenced except by leave of the court
(1) When a winding up order has been made or a provisional manager has been
appointed, no suit or other legal proceeding shall be proceeded with or commenced
against the company except by leave of the Court, and subject to such terms as the
Court may impose.
The Court winding up the company have jurisdiction to entertain or dispose of

any suit or proceeding by or against the company
(2) The Court which is winding up the company shall, notwithstanding anything
contained in any other law for the time being in force, have jurisdiction to entertain, or
dispose of, any suit or proceeding by or against the company.
Any suit or proceeding pending in any court be transferred to and dispose of by

the Court
(3) Any suit or proceeding by or against the company which is pending in any court
other than that in which the winding up of the company is proceeding may,
notwithstanding anything contained in any other law for the time being in force, be
transferred to and disposed of by the Court.
3.19 Court may require expeditious disposal of suits (Section 311)
The Court may issue directions to the subordinate court or request otherwise that
court for expeditious disposal of the suit or proceedings in that court, the Court
may issue directions to the officer, authority or other body for expeditious action
and disposal of the proceedings pending before any officer, authority or other
body relating to tax, duty or levies or appeal or review petitions
(1) Notwithstanding anything contained in any other law—
(a) If any suit or proceedings, including an appeal, by or against the company which is
allowed to be proceeded with in any Court other than the Court in which winding up of
the company is proceeding, the Court may issue directions to that other Court if that
Court is subordinate to it and, in any other case, make a request to that other Court for
expeditious disposal of the pending suit or proceedings by or against the company; and

(b) If any proceedings, including proceedings for assessment or recovery of any tax,
duty or levies or appeal or review petitions against any order is pending or is likely to be
instituted, before any officer, authority or other body, the Court may issue directions to
that officer, authority or other body for expeditious action and disposal of the said
proceedings.
Upon direction or request, the Court, officer, authority or body to dispose of the
suit or other proceedings expeditiously by according it special priority and inform
the court
(2) Upon issue of a direction or making of a request as aforesaid, the Court, officer,
authority or body to whom the same is addressed shall, notwithstanding anything
contained in any other law, proceed to dispose of the said suit or other proceedings
expeditiously by according it special priority and adopting such measures as may be
necessary in this behalf, and shall inform the Court issuing the direction or making the
request of the action taken.
3.20 Effect of winding up order (Section 312)
An order for winding up to operate in favour of all the creditors and

contributories As made joint petition
An order for winding up a company shall operate in favour of all the creditors and of all
contributories of the company as if made on the joint petition of a creditor and of a
contributory.
3.21 Power of Court to stay winding up (Section 313)
The Court not later than three years after an order for winding up, on application
of any creditor or contributory, registrar, Commission or a person authorized by
it, if satisfied that winding up ought to be stayed, withdrawn, cancelled or revoked
may make an order accordingly
(1) The Court may at any time not later than three years after an order for winding up,
on the application of any creditor or contributory or of the registrar or the Commission or
a person authorised by it, and on proof to the satisfaction of the Court that all
proceedings in relation to the winding up ought to be stayed, withdrawn, cancelled or
revoked, make an order accordingly, on such terms and conditions as the Court thinks
fit.

Before making such order, the Court may require the official liquidator to furnish
the report wih respect to relevant fact or matter
(2) On any application under sub-section (1), the Court may, before making an order,
require the official liquidator to furnish to the Court a report with respect to any facts or
matters which are in his opinion relevant to the application.
Copy of order to the registrar to make a minute of the order in his books relating
to the company
(3) A copy of every order made under sub-section (1) shall forthwith be forwarded by
the Court to the registrar, who shall make a minute of the order in his books relating to
the company.
3.22 Court may ascertain wishes of creditors or contributories (Section 314)
Court may have regard to the wishes or creditors or contributories, To ascertain

their wishes, court to order for meetings of the creditors or contributories and
appoint a person to act as chairman and submit report in this regard
(a) have regard to the wishes of creditors or contributories of the company, as proved to
it by any sufficient evidence in a manner as provided under this Act;
(b) if it thinks fit for the purpose of ascertaining their wishes, order meetings of the
creditors or contributories to be called, held and conducted in such manner as may be
directed; and
(c) appoint a person to act as chairman of any such meeting and to submit a report in
this regard.
For the purpose of ascertaining such wishes, regard shall be had to the value of
each debt of the creditor or the voting power exercised by each contributor
(2) While ascertaining the wishes of creditors or contributories under sub-section (1),
regard shall be had to the value of each debt of the creditor or the voting power
exercised by each contributory, as the case may be.

OFFICIAL LIQUIDATORS
3.23 Appointment of official liquidator (Section 315)
For winding up, the Commission to maintain a panel of persons from whom the
Court to appoint a provisional manager or official liquidator
(1) For the purpose of the winding up of companies by the Court, the Commission shall
maintain a panel of persons from whom the Court shall appoint a provisional manager
or official liquidator of a company ordered to be wound up.
Appointment not more than three companies at one point of time

(2) A person shall not be appointed as provisional manager or official liquidator of more
than three companies at one point of time.
The Persons in the panel to have at least ten years experience in the field of
accounting, finance or law and other person as specified by the Commission
having at least ten years professional experience
(3) The panel for the purpose of sub-section (1) shall consist of persons having at least
ten years experience in the field of accounting, finance or law and as may be specified
by the Commission such other persons, having at least ten years professional
experience.
The provisional manager shall have the same powers as the liquidator, the court
may limit and restrict his powers by the order of appointment or subsequent
order
(4) Where a provisional manager is appointed by the Court, the Court may limit and
restrict his powers by the order appointing him or by a subsequent order, but otherwise
he shall have the same powers as a liquidator.
Provisional manager or official liquidator to file a declaration disclosing conflict

of interest or lack of independence
(5) On appointment as provisional manager or official liquidator, as the case may be,
such liquidator shall file a declaration within seven days from the date of appointment in
the specified form disclosing conflict of interest or lack of independence in respect of his
appointment, if any, with the Court and such obligation shall continue throughout the
term of his appointment.

the Court may appoint a provisional manager, if any, under clause (c) of sub-
section (1) of section 308 as the official liquidator for the conduct of the
proceedings for the winding up
(6) While passing a winding up order, the Court may appoint a provisional manager, if
any, under clause (c) of sub-section (1) of section 308, as the official liquidator for the
conduct of the proceedings for the winding up of the company.
If more than one are appointed as official liquidator, the court to declare any act
is to be done by all or any one or more of such persons, in case of dispute
amongst the liquidators, matter shall be referred to the court
(7) If more persons than one are appointed to the office of official liquidator, the Court
shall declare whether any act by this Act required or authorised to be done by the
official liquidator is to be done by all or any one or more of such persons:
Provided that in case of any dispute or any varying stance amongst the liquidators, the
matter shall be referred to the Court for an appropriate order in chambers in the
presence of the parties concerned.
The Court may determine the security to be given by an official liquidator
(8) The Court may determine whether any, and what, security is to be given by any
official liquidator on his appointment.
On the application of creditors of the amount not less than sixty percent of the
issued share capital, the court may appoint a person whose name does not
appear on the panel
(9) Notwithstanding anything contained in sub-section (1), the Court may, on the
application of creditors to whom amounts not less than sixty percent of the issued
share-capital of the company being wound up are due, after notice to the registrar,
appoint a person whose name does not appear on the panel maintained for the
purpose, to be the official liquidator.
An official liquidator not to resign or quit except personal disability to the

satisfaction of the court
(10) An official liquidator shall not resign or quit his office before conclusion of the
liquidation proceedings except for reasons of personal disability to the satisfaction of the
Court.

Casual vacancy to be filled by the court from the panel, in case of resign outgoing
will continue till the person appointed in his place takes charge
(11) Any casual vacancy in the office of an official liquidator occurred due to his death,
removal or resignation, shall be filled up by the Court by the appointment of another
person from the panel maintained under sub-section (1):
Provided that in case of resignation, the outgoing official liquidator shall, unless the
Court directs otherwise, continue to act until the person appointed in his place takes
charge.
The Commission may remove the name of any person from the panel due to
misconduct, fraud, misfeasance, breach of duties or professional incompetence but with
the opportunity of being heard
(12) The Commission may of its own, remove the name of any person from the panel
maintained under sub-section (1) on the grounds of misconduct, fraud, misfeasance,
breach of duties or professional incompetence:
Provided that the Commission before removing him from the panel shall give him a
reasonable opportunity of being heard.
The person appointed shall be subject to such code of conduct and comply with
the requirement of any professional accreditation programs specified by the
Commission
(13) The person appointed on the panel under this section shall be subject to such code
of conduct and comply with the requirement of any professional accreditation programs
as may be specified by the Commission.
3.24 Removal of official liquidator (Section 316)
The court may remove the official liquidator on a reasonable cause including but
not limited to lack of independence or lack of impartiality, on the grounds of
misconduct, misfeasance, professional incompetence, inability to act as
provisional manager or official liquidator, conflict of interest
(1) The Court may, on a reasonable cause being shown including but not limited to lack
of independence or lack of impartiality, remove the provisional manager or the official
liquidator, as the case may be, on any of the following grounds, namely:—

(a) misconduct;
(b) fraud or misfeasance;
(c) professional incompetence or failure to exercise due care and diligence in

performance of the powers and functions;
(d) inability to act as provisional manager or official liquidator, as the case may be;
(e) conflict of interest during the term of his appointment that will justify removal.
Where the Court is of the opinion that any official liquidator is responsible for any
loss or damage, the Court may recover such loss or damage from the provisional
manager or official liquidator and pass such other orders as it may think fit
(2) Where the Court is of the opinion that any liquidator is responsible for causing any
loss or damage to the company due to fraud or misfeasance or failure to exercise due
care and diligence in the performance of his powers and functions, the Court may
recover or cause to be recovered such loss or damage from the provisional manager or
official liquidator, as the case may be, and pass such other orders as it may think fit.
3.25 Remuneration of official liquidator (Section 317)
Court to fix terms and conditions of appointment of a provisional manager or

official liquidator and fee payable to him on the basis of task required,
experience, qualification and size of the company
(1) The terms and conditions of appointment of a provisional manager or official
liquidator and the fee payable to him shall be fixed by the Court on the basis of task
required to be performed, experience, qualification of such liquidator and size of the
company.
Remuneration: by way of percentage of amount by disposal of assets fixed by the

Court, different percentage rates may be fixed for different types of assets
(2) An official liquidator, shall also be entitled to such remuneration by way of
percentage of the amount realised by him by disposal of assets as may be fixed by the
Court having regard to the amount and nature of the work actually done and subject to
such limits as may be prescribed:
Provided that different percentage rates may be fixed for different types of assets and
items.

In addition, monthly allowance for meeting expenses for a period not exceeding
one year from the date of winding up order
(3) In addition to the remuneration payable under sub-section (2), the Court may permit
payment of a monthly allowance to the official liquidator for meeting the expenses of the
winding up for a period not exceeding one year from the date of the winding up order.
Remuneration not to enhance subsequently, but may be reduced by the Court

(4) The remuneration fixed as aforesaid shall not be enhanced subsequently but may be
reduced by the Court at any time.
In case of resignation or removal of service or otherwise to cease holding office, not to

entitle any remuneration, and to refund remuneration already received
(5) If the official liquidator resigns, is removed from office or otherwise ceases to hold
office before conclusion of the winding up proceedings, he shall not be entitled to any
remuneration and the remuneration already received by him, if any, shall be refunded
by him to the company.
No remuneration if fails to complete winding up within the prescribed period or

the extended time allowed by the Court
(6) No remuneration shall be payable to official liquidator who fails to complete the
winding up proceedings within the prescribed period or such extended time as may be
allowed by the Court.
3.26 Style and title of official liquidator (Section 318)
The official liquidator be described the official liquidator of the particular

company
The official liquidator shall be described by the style of “the official liquidator” of the
particular company in respect of which he acts, and in no case he shall be described by
his individual name.
3.27 General provisions as to liquidators (Section 319)
Official liquidator to perform the duty as the court may impose

(1) The official liquidator shall conduct the proceedings in winding up the company and
perform such duties in reference thereto as the Court may impose.

The acts of liquidator be valid even any defect be discovered afterwards in his
appointment or qualification but after that no act shall be valid
(2) The acts of a liquidator shall be valid, notwithstanding any defect that may
afterwards be discovered in his appointment or qualification:
Provided that nothing in this sub-section shall be deemed to give validity to acts done by
a liquidator after his appointment has been shown to be invalid.
Official liquidator to complete winding up proceedings within the time determined

by the court
(3) The winding up proceedings shall be completed by the official liquidator within a
period as determined by the Court under section 322.
If official liquidator is convicted, shall cease to be official liquidator and become

disqualified for a period of five years
(4) If an official liquidator is convicted of misfeasance, or breach of duty or other lapse
or default in relation to winding up proceedings of a company, he shall cease to be the
official liquidator of the company and shall also become disqualified, for a period of five
years from such conviction, from being the liquidator or to hold any other office including
that of a director, in any company and if he already holds any such office he shall
forthwith be deemed to have ceased to hold such office.
The registrar or the Commission to report to the Court if any lapse, delay or other
irregularity on the part of official liquidator comes to their knowledge
(5) The registrar or the Commission shall take cognizance of any lapse, delay or other
irregularity on the part of the official liquidator and may, without prejudice to any other
action under the law, report the same to the Court.
3.28 Statement of affairs to be made to official liquidator (Section 320)
On appointment of a provisional manager or an official liquidator, there shall be

made out and submitted to the provisional manager or official liquidator, a
statement as to the affairs of the company in the prescribed form, verified by an
affidavit, and containing the certain particulars
(1) Where the Court has appointed a provisional manager or made a winding up order
and appointed an official liquidator, there shall be made out and submitted to the
provisional manager or official liquidator, a statement as to the affairs of the company in
the prescribed form, verified by an affidavit, and containing the following particulars,
namely—

(a) particulars of the company‘s assets, debts and liabilities;
(b) the detail of cash balance in hand and at the bank;
(c) the names and addresses of the company‘s creditors stating separately the amount
of secured debts and unsecured debts, and, in the case of secured debts, particulars of
the securities given, their value and the dates when they were given.
(d) the names, residential addresses and occupations of the persons from whom debts
of the company are due and the amount likely to be realised therefrom;
(e) where any property of the company is not in its custody or possession, the place
where and the person in whose custody or possession such property is;
(f) full address of the places where the business of the company was conducted during
the one hundred and eighty days preceding the relevant date and the names and
particulars of the persons incharge of the same;
(g) details of any pending suits or proceedings in which the company is a party; and
(h) such other particulars as may be prescribed or as the Court may order or the
provisional manager or official liquidator may require in writing, including any
information relating to secret reserves and personal assets of directors.
The statement to be verified by persons who are at the relevant date the directors,
chief executive, chief financial officer and secretary
(2) The statement shall be submitted and verified by persons who are at the relevant
date the directors, chief executive, chief financial officer and secretary of the company.
Subject to the direction of the Court, provisional manager or official liquidator

may also require to make out and submit to him a statement of affairs of the
company
(3) The provisional manager or official liquidator, subject to the direction of the Court,
may also require to make out and submit to him a statement in the prescribed form as to
the affairs of the company by some or all of the persons—
(a) who have been directors, chief executives, chief financial officer, secretary or other
officers of the company within one year from the relevant date;

(b) who have taken part in the formation of the company at any time within one year
before the relevant date;
(c) who are in the employment of the company, or have been in the employment of the
company within the said year, and are in the opinion of the official liquidator or
provisional manager capable of giving the information required and to whom the
statement relates;
Time frame for submission of report

(4) The statement shall be submitted within fifteen days from the relevant date, or within
such extended time not exceeding forty-five days from that date as the official liquidator
or provisional manager or the Court may, for special reasons, appoint.
Entitlement of reasonable expenses incurred in preparation of statement

(5) Any person making the statement required by this section shall be entitled to and be
paid by the official liquidator or the provisional manager, as the case may be, the
reasonable expenses incurred in preparation of such statement.
Penalty Provision
an offence liable to a daily penalty of level 2 on the standard scale.
Court may take cognizance of an offence and try the offence itself in accordance
with the procedure laid down in the Code of Criminal Procedure, 1898 (Act V of 1898)
(7) Without prejudice to the operation of any provisions imposing penalties in respect of
any such default as aforesaid, the Court which makes the winding up order or appoints
a provisional manager may take cognizance of an offence under sub-section (6) and try
the offence itself in accordance with the procedure laid down in the Code of Criminal
Procedure, 1898 (Act V of 1898), for the trial of cases by Magistrates and further direct
the persons concerned to comply with the provisions of this section within such times as
may be specified by it.
Creditor or contributory to inspect the statement on payment of the prescribed fee

(8) Any person stating himself in writing to be a creditor or contributory of the company
shall be entitled, by himself or by his agent, at all reasonable times, on payment of the
prescribed fee, to inspect the statement submitted in pursuance of this section, and to a
copy thereof or extract therefrom.

Any person untruthfully so stating himself to be a creditor or contributory shall
be guilty of an offence and on the application of official liquidator or provisional
manager be punishable
(9) Any person untruthfully so stating himself to be a creditor or contributory shall be
guilty of an offence under section 182 of the Pakistan Penal Code, 1860 (Act XLV of
1860), and shall, on the application of the official liquidator or provisional manager, be
punishable accordingly.
Explanation of expression “the relevant date”

(10) In this section, the expression “the relevant date” means, in a case where a
provisional manager is appointed, the date of his appointment, and, in a case where no
such appointment is made, the date of the winding up order.
3.29 Report by official liquidator (Section 321)
Report to the Court by the official liquidator after receipt of the statement
containing certain particulars within the stated period
(1) Where the Court has made a winding up order and appointed an official liquidator,
such liquidator shall, as soon as practicable after receipt of the statement to be
submitted under section 320 and not later than sixty days, from the date of the winding
up order submit a report to the Court, containing the following particulars, namely.—
(a) the nature and details of the assets of the company including their location and
current value duly ascertained by a registered valuer;
(b) the cash balance in hand and in the bank, if any, and the negotiable securities, if
any, held by the company;
(c) the amount of authorised and paid up capital;
(d) the existing and contingent liabilities of the company indicating particulars of the
creditors, stating separately the amount of secured and unsecured debts, and in the
case of secured debts, particulars of the securities given;
(e) the debts due to the company and the names, addresses and occupations of the
persons from whom they are due and the amount likely to be realised on account
thereof;
(f) debts due from contributories;

(g) details of trademarks and intellectual properties, if any, owned by the company;
(h) details of subsisting contracts, joint ventures and collaborations, if any;
(i) details of holding and subsidiary companies, if any;
(j) details of legal cases filed by or against the company;
(k) any other information which the Court may direct or the official liquidator may
consider necessary to include.
The report to include the manner in which the company was promoted or formed
and whether in his opinion any fraud has been committed by any person in its
promotion or formation
(2) The official liquidator shall also include in his report the manner in which the
company was promoted or formed and whether in his opinion any fraud has been
committed by any person in its promotion or formation, or by any director or other officer
of the company in relation to the company since its formation.
The official liquidator to make a report about the business or the steps necessary
to maximize the value of the assets
(3) The official liquidator shall also make a report on the viability of the business of the
company or the steps which, in his opinion, are necessary for maximizing the value of
the assets of the company.
The official liquidator to make further reports if he thinks fit or upon directions of
the court
(4) The official liquidator may also, if he thinks fit or upon directions of the Court, make
any further report or reports.
A certified copy of the reports be sent to the Registrar simultaneously submitted

to the Court
(5) A certified copy of the reports aforesaid shall also be sent to the registrar
simultaneously with their submission to the Court.

4. GENERAL
Section 451 to 453
Shariah compliant company [Section 2(1) (64)]
“Shariah compliant company” means a company which is conducting its business

according to the principles of Shariah;
4.1 Certification of Shariah compliant companies and Shariah compliant securities

(Section 451)
No company shall to claim a Shariah compliant company unless declared

(1) No company shall claim that it is a Shariah compliant company unless it has been
declared Shariah compliant in such form and manner as may be specified.
No person tol claim a security, listed or not, a Shariah compliant unless declared
(2) No person shall claim that a security, whether listed or not, is Shariah compliant
unless it has been declared Shariah compliant in such form and manner as may be
specified.
No company to appoint or engage any person for Shariah compliance, Shariah

advisory, or Shariah audit unless that person meets the fit and proper criteria and
fulfills such terms and conditions as may be specified, Time frame for the person
already appointed
(3) For the purposes of sub-section (1) and (2), no company shall appoint or engage
any person for Shariah compliance, Shariah advisory, or Shariah audit unless that
person meets the fit and proper criteria and fulfills such terms and conditions as may be
specified:
Provided that the person already appointed or engaged by a company for the purpose
of sub-section 3 shall have 180 days to meet the fit and proper criteria and fulfill such
terms and conditions as may be specified.
Penalty: Provision
(4) Every person who is responsible for contravention of this section shall without
prejudice to other liabilities be liable to a penalty not exceeding level 3 on the standard
scale.

Section not to apply to a banking company or any other company required to
follow the Shariah governance framework prescribed by the State Bank of
Pakistan.
(5) Nothing in sub-section (1) and (3) shall apply to a banking company or any other
company which is required to follow the Shariah governance framework prescribed by
the State Bank of Pakistan.
4.2 Companies’ Global Register of Beneficial Ownership (Section 452)
Every substantial shareholder or officer of a company who is citizen of Pakistan,

including dual citizenship holder whether residing in Pakistan or not having
shareholding in a foreign company or body corporate shall report to the company
his shareholding or any other interest as may be notified by the Commission
within stated period
(1) Every substantial shareholder or officer of a company incorporated under the
Company law, who is citizen of Pakistan within the meaning of the Citizenship Act, 1951
(II of 1951), including dual citizenship holder whether residing in Pakistan or not having
shareholding in a foreign company or body corporate shall report to the company his
shareholding or any other interest as may be notified by the Commission, on a specified
form within thirty days of holding such position or interest.
Explanation.—For the purposes of this section the expression “foreign company”

means a company or body corporate incorporated or registered in any form, outside
Pakistan regardless of the fact that it has a place of business or conducts any business
activity or has a liaison office in Pakistan or not.
Company to submit information received by it to the registrar along with the

annual return
(2) The company shall submit all the aforesaid information received by it during the year
to the registrar along with the annual return.
Any investment in securities or other interest by a company incorporated under

this Act, in a foreign company or body corporate or any other interest shall also
be reported to the registrar along with the annual return.
(3) Any investment in securities or other interest as may be notified in sub-section (1) by
a company incorporated under this Act, in a foreign company or body corporate or any
other interest shall also be reported to the registrar along with the annual return.

Time frame from the commencement of this Act for special return containing all
the above information to report to the Registrar
(4) All the above information shall be reported to the registrar through a special return
on a specified form within sixty days from the commencement of this Act and thereafter
in accordance with the sub-section (2).
Penalty Provision
an offence liable to a fine of level 1 on the standard scale and the registrar shall make
an order specifying time to provide information under sub-section (1) and (3).
Punishment/Fine
(6) Any person who fails to comply with the direction given under sub-section (5) by the
registrar shall be punishable with imprisonment which may extend to three years and
with fine up to five hundred thousand rupees or both.
Commission to keep record of the information in the Companies‘ Global Register of

Beneficial Ownership.
(7) The Commission shall keep record of the information in the Companies‘ Global
Register of Beneficial Ownership.
Commission to provide the information maintained to the Federal Board of

Revenue or to any other agency, authority and court
(8) The Commission shall provide the information maintained under sub-section (7) to
the Federal Board of Revenue or to any other agency, authority and court.
4.3 Prevention of offences relating to fraud, money laundering and terrorist

financing (Section 453)
Every officer of a company shall endeavor to prevent the commission of any

fraud, offences of money laundering including predicated offences as provided in
the Anti-Money Laundering Act, 2010
(1) Every officer of a company shall endeavor to prevent the commission of any fraud,
offences of money laundering including predicated offences as provided in the Anti-
Money Laundering Act, 2010 (VII of 2010) with respect to affairs of the company and
shall take adequate measures for the purpose.

Punishment and fine, Officer taking reasonable measures available shall not be
liable under this section, This punishment shall be in addition to any punishment
under Anti-Money Laundering Act, 2010
(2) Whosoever fails to comply with the provisions of this section shall be liable to
punishment of imprisonment for a term which may extend to three years and with fine
which may extend to one hundred million rupees:
Provided that where any such officer has taken all reasonable measures available
under the applicable laws within his capacity to prevent commission of such offence,
shall not be liable under this section.
Provided further that the punishment provided under this section shall be in addition to
any punishment attracted due to active involvement of such officer in commission of an
offence of money laundering under Anti-Money Laundering Act, 2010 (VII of 2010).
5. SCHEDULES, TABLES, FORMS AND GENERAL RULES (Section 506 to 515)
5.1 Forms (Section 506)

The forms in the schedules or forms as near thereto as circumstances admit and such
other forms as may be prescribed in the rules or specified through regulations shall be
used in all matters to which those forms refer.
5.2 Power to alter schedules (Section 507)

(1) The concerned Minister-in-Charge of the Federal Government may, by notification,
in the official Gazette, alter or add to, the Sixth and Eighth Schedules.
(2) The Commission may, by notification in the official Gazette, alter or add to any of the
tables, regulations, requirements, forms and other provisions contained in any of the
schedules except Sixth and Eighth Schedules, and such alterations or additions shall
have effect as if enacted in this Act and shall come into force on the date of the
notification, unless the notification otherwise directs.
5.3 Power of the Federal Government to make rules (Section 508)

(1) In addition to the powers conferred by any other section, the Federal Government
may, by notification in the official Gazette, make rules—
(a) for the matters which by this Act are to be prescribed;
(b) for establishment and regulating the activities of any company or class of
companies; and

(c) generally to carry out the purposes of this Act:
Provided that, before making any such rule, the draft thereof shall be published by the
concerned Minister-in-Charge of the Federal Government in the official Gazette for
eliciting public opinion thereon within a period of not less than fourteen days from the
date of publication.
(2) Any rule made under sub-section (1) may provide that a contravention thereof shall
be punishable with a penalty which may extend to five million rupees and, where the
contravention is a continuing one, with a further penalty which may extend to one
hundred thousand rupees for every day after the first during which such contravention
continues.
5.4 Repeal and savings (Section 509)

(1) The Companies Ordinance, 1984 (XLVII of 1984), hereinafter called as repealed
Ordinance, shall stand repealed, except Part VIIIA consisting of sections 282A to 282N,
from the date of coming into force of this Act and the provisions of the said Part VIIIA
along with all related or connected provisions of the repealed Ordinance shall be
applicable mutatis mutandis to Non-banking Finance Companies in a manner as if the
repealed Ordinance has not been repealed:
Provided that repeal of the repealed Ordinance shall not-

(a) affect the incorporation of any company registered or saved under repealed
Ordinance; or
(b) revive anything not in force at the time at which the repeal take effect; or
(c) affect the previous operation of the repealed Ordinance or anything duly done or
(d) affect any right, privilege, obligation or liability acquired, accrued or incurred under
the said repealed Ordinance; or
(e) affect any penalty imposed, forfeiture made or punishment awarded in respect of
any offence committed under the repealed Ordinance; or
(f) affect any inspection, investigation, prosecution, legal proceeding or remedy in


imposed, as if this Act has not been passed.
(2) Notwithstanding the repeal of the repealed Ordinance—
(a) any document referring to any provision of the repealed Ordinance shall be
construed as referring, as far as may be, to this Act, or to the corresponding provision of
this Act;
(b) all rules, regulations, notification, guideline, circular, directive, order (special or
general) or exemption issued, made or granted under the repealed Ordinance shall
have effect as if it had been issued, made or granted under the corresponding provision
of this Act unless repealed, amended or substituted under this Act;
(c) any official appointed and any body elected or constituted under repealed Ordinance
shall continue and shall be deemed to have been appointed, elected or constituted, as
the case may be, under the corresponding provision of this Act;
(d) all funds and accounts constituted or maintained under the repealed Ordinance shall
be deemed to be in continuation of the corresponding funds and accounts constituted or
maintained under this Act;
(e) every mortgage and charge recorded in any register or book maintained at any office
under the repealed Ordinance shall be deemed to have be recorded in the register or
book maintained under the corresponding provisions of this Act;
(f) any license, certificate or document issued, made or granted under the repealed
Ordinance shall be deemed to have been issued, made or granted under this Act and
shall, unless cancelled, in pursuance of any provisions of this Act, continue to be inforce
until the date specified in the license, certificate or documents.
(3) The mention of particular matters in this section or in any other section of this Act
shall not prejudice the general application of section 6 of the General Clauses Act, 1897
(X of 1897), with regard to the effect of repeals.
(4) After the commencement of this Act, the expression Companies Ordinance,
1984(XLVII of 1984) and any referring sections thereof, used in any law for the time
being in force including all administered legislation and rules, regulations and guidelines
made thereunder, shall be read as Companies Act, 2017 along with corresponding
provisions of Companies Act, 2017 unless the context requires otherwise.

5.5 Power to issue directives, circulars, guidelines (Section 510)
(1) The Commission may issue such directives, prudential requirements, codes,
guidelines, circulars or notifications as are necessary to carry out the purposes of this
Act and the rules and regulations made under this Act.
(2) Any person, who obstructs or contravenes or does not comply with any directive,
prudential requirements, codes, circulars or notifications, given under this section shall
5.6 Power of the Commission to permit use of Urdu words of abbreviations

(Section 511)
The Commission may, by notification in the official Gazette, permit use of an Urdu
equivalent of any English word or term required to be used pursuant to or for the
purposes of this Act or an abbreviation of any such word or term instead of such word or
term.
5.7 Power to make regulations (Section 512)

(1) The Commission may, by notification in the official Gazette, make such regulations
as may be necessary to carry out the purposes of this Act:
Provided that the power to make regulations conferred by this section shall be subject to
the condition of previous publication and before making any regulations the draft thereof
shall be published in the manner considered most appropriate by the Commission for
eliciting public opinion thereon within a period of not less than fourteen days from the
date of publication.
(2) Any regulation made under sub-section (1) may provide that a contravention thereof
shall be punishable with a penalty which may extend to five million rupees and, where
the contravention is a continuing one, with a further penalty which may extend to one
hundred thousand rupees for every day after the first during which such contravention
continues.
5.8 Validation of laws (Section 513)

(1) All amendments made to the Companies Ordinance, 1984 (XLVII of 1984) or any
administered legislation through various Finance Acts shall be deemed to have been
validly made from the date of commencement of such Acts.
(2) Notwithstanding anything contained in any other law, all orders made, proceedings
taken and acts done, rules, regulations, instructions, notifications and other legal
instruments made at any time before the promulgation of companies Ordinance, 1984

(XLVII of 1984) or any administered legislation, including appeals decided by the
Appellate Bench of the Commission or authorization of investigation, enquiry and
inspection by the Federal Government, the Commission or any officer of the
Commission under delegated authority, the registrar or any other officer having authority
under the law in exercise or purported exercise of powers under amendments made to
Companies Ordinance, 1984 (XLVII of 1984) or any administered legislation through
various Finance Acts, and that have now been promulgated as well as affirmed in terms
of sub-section (1) of this section, are declared and affirmed to have been and shall be
deemed to have always been, validly made, decided, taken or done.
5.9 Former registration offices and registers continued (Section 514)

(1) The offices existing at the commencement of this Act for registration of companies
shall be continued as if they had been established under this Act.
(2) Any books of account, book or paper, register or document kept under the provisions
of any previous law relating to companies shall be deemed part of the books of
accounts, book or paper, register or document to be kept under this Act.
5.10 Removal of difficulty (Section 515)

If any difficulty arises in giving effect to any provision of this Act, the concerned Minister-
in-Charge of the Federal Government may, by notification in the official Gazette make
such provisions as may appear to it to be necessary for the purpose of removing the
difficulty.
QUESTIONS
1. What are the possible modes of winding up of a company?

2. Who are contributories of the company in case of a company limited by
guarantee and having share capital?
3. What are the circumstances in which a company is considered unable to pay its
debts by the court?
4. What is the extent of liability of the director with unlimited liability in case of
winding up of the company?
5. What are the provisions of the Act regarding appointment and remuneration of
official liquidator?

MCQs
1. Remuneration of the official liquidator

i. Shall be fixed by the court.
ii. Shall be fixed by the members.
iii. Shall be a fixed percentage of the value of assets realised by the
company.
iv. None of the above.
a) ii & iii only

b) i only
c) i & iii only
d) iv only
2. Company may be ordered to be wound up by the court if

a) It has failed to pay its debts.
b) It is just to wind it up in the opinion of court.
c) The Commission or a person authorised by the Commission so applied to the
court on basis of investigation report.
d) All of the above.
e) None of the above.
3. Company is considered unable to pay its debts

a) When an amount exceeding one hundred thousand rupees is payable and is
returned unpaid by the company.
b) When an amount equal to 1% of the paid up capital of the company is
returned unpaid by the company.
c) Higher of the both above.
d) Lower of the both above.
MCQs (Answers)
1. c 2. d 3. a

Part A
1. Modaraba Companies (Flotation & Control) Ordinance 1980,

(Section 1 to 26 and 33)
Part B
2. Modaraba & Modaraba Companies Rules 1981

PART A
MODARABA COMPANIES AND MODARABA (FLOATATION AND CONTROL)

ORDINANCE, 1980
PRELIMINARY
Short title, extent and commencement-
(1) This Ordinance shall be called the Modaraba Companies and Modaraba
(Floatation and Control) Ordinance, 1980.
(2) It extends to the whole of Pakistan.
(3) It shall come into force at once.
DEFINITIONS-(Section 2)
In this Ordinance, unless there is anything repugnant in the subject or context,-
a. Modaraba [(Section 2 (1) (ab)]

means a business in which a person participates with his money and another
with his efforts or skill or both his efforts and skill and shall include Unit Trusts
and Mutual Funds by whatever name called;
b. Modaraba Certificate [(Section 2 (1) (b)]

means a certificate of definite denomination issued to the subscriber of the
Modaraba acknowledging receipt of money subscribed by him;
c. Modaraba company [(Section 2 (1) (c)]

means a company engaged in the business of floating and managing modaraba;
d. Modaraba Fund [(Section 2 (1) (d)]

means a fund raised through floatation of modaraba;
e. Registrar [(Section 2 (1) (f)]

means the Registrar appointed under section 3;
f. Tribunal [(Section 2 (1) (h)]

means a Tribunal constituted under section 24.
Appointment of Registrar - (Section 3)

The Federal Government may, by notification in the official gazette, appoint a
person to be the Registrar for the purpose of this Ordinance.

Registration of Modaraba Company (section 4)
No modaraba company shall operate without registration with the Registrar.
Eligibility for registration-(section 5)

A company shall be eligible for registration as a modaraba company if it fulfills
the following conditions, namely:-
a) that it is registered under the Companies Act, 1913, or is a body corporate

formed under any law in force and owned or controlled, whether directly or
through a company or corporation, by the Federal Government or a Provincial
Government;
b) that, being a company solely engaged in the flotation and management of

modaraba, it has a paid up capital of not less than two and a half million
rupees;
c) that none of its directors, officers or employees has been convicted of fraud or
breach of trust or of an offence involving moral turpitude;
d) that none of its directors, officers or employees has been adjudged an

insolvent or has suspended payment or has compounded with his creditors;
e) that its promoters are, in the opinion of the Registrar, persons of means and
integrity and have knowledge of matters which the company may have to deal
with as a modaraba company; and
f) that, being a company also engaged in business other than floatation and
management of modaraba, it has a paid up capital of such amount and of
such nature as may be prescribed.
Application for registration-(section 6)

1. A company which is eligible for registration as a modaraba company may make
an application for registration to the Registrar in such form and with such
documents as may be prescribed in rules.
2. The Registrar, if he is satisfied after such enquiry and after obtaining such further
information as he may consider necessary that the applicant is eligible for
registration and that it is in the public interest so to do, may grant registration to
such company on such conditions as he may deem fit.

3. In particular and without prejudice to the generality of the powers such conditions
may include:-
i. investments to be made;
ii. information and returns to be furnished to the Registrar;
iii. business to be undertaken; and
iv. restriction on transfer of shares by promoters, sponsors or persons
holding controlling interest.
Types of modaraba-(section 7)
1. Modaraba may be of two descriptions:-
i. Multipurpose Modaraba.-That is to say a modaraba having more than one

specific purpose or objective.
ii. Specific purpose Modaraba.-That is to say a modaraba having one

specific purpose or objective.
2. A modaraba may be either for a fixed period or for an indefinite period.
Creation and maintenance of modaraba-(section 8)

1. A modaraba company registered under the Ordinance shall apply to the
Registrar, in such form and with such documents as may be prescribed, for
permission to float modaraba.
2. An application for floatation of modaraba shall be accompanied by a prospectus

which shall contain, inter alia, the following information, namely;
i. the name and type of the modaraba;
ii. the conditions and amounts of the modaraba to be floated and the
division thereof into Modaraba Certificates of fixed amount;
iii. the business scheme, prospectus and mode of distribution of profit;
iv. the amount to be subscribed by the modaraba company to the
modaraba in its own name supported by evidence about its ability to
meet the commitment;
v. the form of the Modaraba Certificate; and
vi. such other matters as may be prescribed.
3. The application, the prospectus and the documents filed therewith shall be
authenticated by all the directors of the company.

Religious Board-(section 9)
The Federal Government shall, for the purpose of this Ordinance, constitute a
Religious Board which shall consist of such members and shall have such
functions, terms and conditions as may be prescribed.
Business of modaraba-(Section 10)

No modaraba shall be a business which is opposed to the injunctions of Islam
and the Registrar shall not permit the floatation of a modaraba unless the
Religious Board has certified in writing that the modaraba is not a business
opposed to the injunctions of Islam.
Authorization-(Section 11)
The Registrar may, after obtaining from the Religious Board a certificate and on
being satisfied that it is in the public interest so to do, grant a certificate
authorising the floatation of modaraba on such conditions as he may deem fit,
including conditions as to the business to be undertaken, expenses relating to
the management of the Modaraba Fund, preservation of assets and other
matters relating to the mode of management and distribution of profits:
Provided that, before issuing the certificate of authorization, the Registrar may
require the modaraba company to make such modifications, additions or
omissions in the prospectus as the Religious Board may have indicated or as he
may deem fit.
Modaraba to be a legal person-(Section 12)

1. A modaraba shall sue and be sued in its own name through the modaraba
company.
2. The assets and liabilities of each modaraba shall be separate and distinct from
those of another modaraba as also from those of the modaraba company.
Conditions applicable to Modaraba-(Section 13)

1. No allotment of Modaraba Certificates shall be made unless a prospectus
approved by the Registrar has been issued and the minimum amount stated in
the prospectus to be the amount which must be raised in order to provide for the
business operations and expenses has been subscribed.
2. All moneys received from the applicants for Modaraba Certificates for a
modaraba shall be deposited and kept in a separate account in a scheduled bank

until they are refunded or until it is certified by the Registrar that Modaraba
Certificates have been allotted in an amount not less than the minimum
3. If the subscription has not been received by the date specified in the prospectus,
all moneys received from the applicants shall be refunded to them within fifteen
days of the said date and the modaraba company and the directors thereof shall
be jointly and severally liable to repay the money which is not so refunded.
4. The modaraba company shall issue Modaraba Certificates within thirty days from
the date of allotment.
5. The modaraba company shall maintain a register of holders of Modaraba

Certificates in such form and in such manner as may be prescribed.
6. The modaraba company shall maintain separate bank account, funds, assets
and liabilities of each modaraba.
7. No modaraba shall be liable for the liabilities, or be entitled to benefit from the
assets, of any other modaraba or of the modaraba company.
8. A Modaraba Certificate shall be transferable in the manner provided for in the

prospectus of the modaraba.
Preparation and circulation of annual accounts, reports, etc-(Section 14)

1. The modaraba company shall, within six months from the close of the accounting
year of the modaraba, prepare and circulate to the holders of modaraba
certificates:-
i. annual balance sheet and profit and loss account in such form and
manner as may be prescribed;
ii. a report of the auditor on the balance sheet and profit and loss
account;
iii. a report by the modaraba company on the state of affairs, activities
and business prospects of the modaraba and the amount of profits to
be distributed to the certificate holders.
2. In addition to the documents referred above the modaraba company shall furnish
to the Registrar and to the holders of Modaraba Certificates such reports,
accounts and information as may be prescribed or as the Registrar may, at any
time by an order in writing, require.

3. The modaraba company shall submit five copies of the accounts, statements and
reports to the Registrar simultaneously with the circulation of these documents to
the holders of Modaraba Certificates.
Audit of accounts – (Section 15)

1. The accounts of a modaraba shall be audited by an auditor who is a Chartered
Accountant within the meaning of the Chartered Accountants Ordinance, 1961,
appointed by the modaraba company with the approval of the Registrar and such
auditor shall have the same powers, duties and liabilities as an auditor of a
company has under the Companies Act, 1913, and such other powers, duties
and liabilities as are, or may be, provided in this Ordinance and the rules.
2. In addition to other matters, the auditors shall also state in his report whether in
his opinion the business conducted investments made and expenditure incurred
by the modaraba are in accordance with the objects, terms and conditions of the
modaraba.
Prohibition of false statement, etc-(Section 16)

No modaraba company, director, officer, employee or agent or auditor thereof
shall, in any document, prospectus, report, return, accounts, information or
explanation required to be furnished in pursuance of this Ordinance or the rules
or in any application made under this Ordinance or the rules, make any
statement or give any information which he knows or has reasonable cause to
believe to be false or incorrect or omit any material fact there from.
Conditions applicable to modaraba company-(Section 17)

1. No modaraba company shall engage in any business which is of the same nature
and competes with the business carried on by a modaraba floated or controlled
by it.
2. No modaraba company or any of its directors or officers or their relatives shall

obtain loan, advance or credit from the funds of the modaraba or on the security
of the assets of the modaraba. Explanation.-In this sub-section, "relative", in
relation to a director or officer, means the spouse, brother or sister or any of the
lineal ascendants or descendants of the director or officer.
3. A modaraba company shall subscribe in each modaraba floated by it not less

than ten per cent of the total amount of Modaraba Certificates offered for
subscription.

Remuneration of modaraba company-(Section 18)
The remuneration of a modaraba company in respect of a modaraba floated by it
shall be a fixed percentage of the net annual profits of the modaraba and shall
not exceed ten per cent of such net annual profits computed in the manner to be
prescribed.
18A. Power to issue directions-(Section 18A)

(1) Notwithstanding anything contained in any other provision of this Ordinance,
where the Registrar is satisfied that it is necessary and expedient so to do –
(a) in the public interest; or
(b) to prevent the affairs of any modaraba from being conducted in a manner
detrimental to the interest of holders of Modaraba Certificates; or
(c) to secure the proper management of any modaraba generally; he may issue
such directions to a modaraba company or the modaraba companies
generally, as he may deem fit, and the modaraba company and its
management shall be bound to comply with such directions.
(2) The Registrar may, on a representation made to him or on his own motion,
modify or cancel any direction issued under sub-section (1), and in so
modifying or canceling any direction may impose such conditions as he
thinks fit.]4
Cancellation of registration-(Section 19)

1. Where the Registrar is of the opinion that a modaraba company has contravened
or has failed to comply with any provision of this Ordinance or the rules or with
any direction made or given thereunder, he may, if he considers necessary in the
public interest so to do, by order in writing:-
a. cancel the registration of the modaraba company; and
b. remove the modaraba company from the management of the modaraba

floated by it: Provided that no such order shall be made without giving the
modaraba company an opportunity of being heard.
2. The modaraba company removed from the management of a modaraba under

clause (b) above shall not be entitled to or be paid any compensation or
damages for loss or termination of office.
3. A modaraba company removed from the management of a modaraba under
clause (b) above shall not be entitled to float any modaraba.

4. A modaraba company aggrieved by an order of the Registrar under sub-section
(1) may prefer an appeal to the commission within thirty days of the date of the
order.
Appointment of Administrator-(Section 20)

1. If-
a. the Registrar, has reason to believe that a modaraba company has been
conducting the affairs of a modaraba in a manner prejudicial to the interest
of the modaraba or the holders of Modaraba Certificates or in a fraudulent
or unlawful manner or has committed a default in complying with the
provisions of this Ordinance or the rules or with any direction made or
given thereunder or any condition of the modaraba;
b. the registration of a modaraba company has been cancelled; or
c. any other modaraba under the management of the modaraba company

has been ordered to be wound up by the Tribunal, the Registrar, after
affording the modaraba company an opportunity of being heard, without
prejudice to any other action under the law, by order in writing:-
i. appoint an administrator to take over and manage the modaraba in
place of the modaraba company for such period as the Registrar
may specify; or
ii. require the modaraba company to carry out such changes in the
management and procedure as may be specified; or
iii. remove the modaraba company and appoint another modaraba
company in its place to manage the modaraba.
2. The Registrar shall not make an order under sub-section (1) without the approval
of the Commission
Enquiries–(Section 21)
1. The Registrar may, on his own motion or on an application made by the holders
of Modaraba Certificates the value of which is not less than ten per cent of the
total subscribed amount of the modaraba, by an order in writing cause on enquiry
to be made by a person appointed by him in this behalf into the affairs of a
modaraba company or the modaraba or any business transaction thereof.
2. Where an enquiry has been ordered, every director, manager or other officer of
the modaraba company to which the enquiry relates and every other person who
has had any dealing with such modaraba company or director or officer shall

furnish such information or document in his custody or power or within his
knowledge relating to or having a bearing on the subject matter of the enquiry as
the person conducting the enquiry may by notice in writing require.
3. The person conducting an enquiry may for the purpose of such enquiry enter into
any premises belonging to or in occupation of the modaraba company or of the
person to whom the enquiry relates and may call for, inspect and seize books of
accounts and documents in possession of any such modaraba company,
director, manager or any other officer or employee thereof.
4. The person holding an enquiry shall, for the purpose of such enquiry, have the
same powers as are vested in a court under the Code of Civil Procedure, 1908,
when trying a suit in respect of the following matter, namely:-
a. enforcing the attendance of a person and examining him on oath or
affirmation;
b. compelling the discovery and production of documents; and
c. Issuing commissions for the examination of witnesses.
5. On receipt of the report of the person conducting the enquiry, the Registrar shall
take such action as he may consider necessary on the basis of the report.
WINDING UP
Circumstances in which modaraba may be wound up voluntarily-

(Section 22)
1. A modaraba floated for a fixed period or for a specific purpose shall be wound up
by the modaraba company itself on the expiry of the period fixed for the
modaraba or the accomplishment of the purpose of the modaraba, as the case
may be, provided the following conditions are fulfilled, namely:-
a. all the directors of the modaraba company shall make a declaration

verified by an affidavit to the effect that they have made a full enquiry
about the affairs of the modaraba and, having done so, have formed he
opinion that the modaraba will be able to discharge its liabilities, pay the
amount subscribed by the holders of Modaraba Certificates and all their
other dues in full within a period of twelve months from the ate of expiry of
the period fixed for the modaraba or the accomplishment of the purpose of
the modaraba, as the case may be;

b. the declaration referred to in clause (a) shall be supported by a report of
the auditor of the modaraba on the affairs of the modaraba and shall have
no effect unless it is filed with and approved by the Registrar within ninety
days of the date of expiry of the period fixed for the modaraba or the
accomplishment of the purpose of the modaraba, as the case may be.
2. Any person aggrieved by the decision of the Registrar under clause (b) of sub-
section (1) may prefer an appeal to the Commission within thirty days of the day
on which the decision is given.
3. An appeal preferred under sub-section (2) shall be disposed of by the

Commission after giving the appellant an opportunity of being heard.
Circumstances in which modaraba may be wound up by the Tribunal.-

(Section 23)
1. A modaraba shall be wound up by the Tribunal on an application made by the

Registrar if-
i. in the case of a modaraba for a fixed period on the expiry of that period or,
in the case of a modaraba for a specific purpose on the accomplishment
of its purpose, the declaration referred to above has not been filed with the
Registrar within the period specified in that section;
ii. in the case of any modaraba, the Registrar has declared that:-
a. the modaraba is unable to discharge its liabilities;
b. the accumulated losses of the modaraba exceed fifty per cent of
the total amount subscribed by the holders of the Modaraba
Certificates; or
c. the business of the modaraba is being or has been, conducted for a
fraudulent purpose or with intent to defraud the holders of the
Modaraba Certificates, or its creditors or any other person;
iii. the Tribunal is of opinion that it is just and equitable that the modaraba
should be wound up.
2. The Registrar may make an application to the Tribunal for the winding up of a
modaraba on receipt of the report of an enquiry under that section relating to the
modaraba.
3. No application shall be made by the Registrar under sub-section (1) or (2)

without giving the modaraba company an opportunity of being heard.

Constitution of Tribunal-(Section 24)
(1) The Federal Government may, by notification, in the official Gazette, constitute
one or more Tribunals for the purpose of this Ordinance and, where it
constitutes more than one Tribunal, shall specify in the notification the area
within which, or the class of cases in respect of which, each such Tribunal shall
exercise jurisdiction under this Ordinance.
(2) A Tribunal shall consist of a person who is, or has been, or is qualified to be a
judge of a High Court.
Powers of a Tribunal-(Section 25)

(1) A Tribunal shall-
(a) in the exercise of its Civil jurisdiction, have in respect of a claim filed by a holder of
Modaraba Certificates against the modaraba company or by a modaraba
company against any other party with whom it has entered into business
transactions relating to Modaraba Fund, or in respect of an application by the
Registrar for the winding up of a modaraba company, all the powers vested in a
civil court under the Code of Civil Procedure, 1908 (Act V of 1908);
(b) in the exercise of its criminal jurisdiction, try the offences punishable under this
Ordinance and shall, for that purpose, have the same powers as are vested in the
Court of a Sessions Judge under the Code of Criminal Procedure, 1898 (Act V of
1898):
Provided that a Tribunal shall not take cognizance of any offence punishable
under this Ordinance except on a complaint in writing made by the Registrar or an
officer authorized by him in writing; and
(c) exercise and perform such other powers and functions as are, or may be,
conferred upon or assigned to it by or under this Ordinance.
(2) All proceedings before a Tribunal shall be deemed to be judicial proceedings

within the meaning of sections 193 and 228 of the Pakistan Penal Code (Act XLV
of 1860), and the Tribunal shall be deemed to be a court for the purposes of
sections 480 and 482 of the Code of Criminal Procedure, 1898 (Act V of 1898).

(3) No court other than the Tribunal shall have or exercise any jurisdiction with
respect to any matter to which the jurisdiction of the Tribunal extends under this
Ordinance.
Procedure of the Tribunal - (Section 26)

(1) Matters before the Tribunal shall come up for regular hearing as expeditiously as
possible and, except in extraordinary circumstances and on grounds to be
recorded, the Tribunal shall hear the cases from day to day.
(2) In the exercise of its civil jurisdiction, the Tribunal shall, in all suits before it,
including suits for recovery of money, follow the summary procedure Provided for
in Order XXXVII of the First Schedule to the Code of Civil Procedure, 1908 (Act V
of 1908).
Liability of director, manager or officer of a company - (Section 33)
(1) Where the person guilty of an offence referred to in sub-section (1) of section 31
or in section 32 is a company or other body corporate, every director, manager,
or other officer responsible for the conduct of its affairs shall, unless he proves
that the offence was committed without his knowledge, or that he exercised all
diligence to prevent its commission, be deemed to be guilty of the offence.
(2) Any sum directed to be paid under section 32 shall be recoverable as an arrear
of land revenue.
(3) No prosecution for an offence against this Ordinance or the rules shall be
instituted in respect of the same facts on which a penalty has been imposed under
section 32.
PART B
MODARABA COMPANIES AND MODARABA RULES, 1981 (Rule 2)
(1) In these rules, unless there is anything repugnant in the subject or context,
a) “Advocate” means a person entered in any role under the provisions of the
Legal Practitioners and Bar Councils Act, 1973 (XXV of 1973);
b) “Certificate holders” means holders of Modaraba Certificates;
c) “Chairman” means the Chairman of the Religious Board;

d) “Form” means a form set out in the First Schedule;
e) “Member” means a member of the Religious Board and includes the Chairman;
f) “Ordinance” means the Modaraba Companies and Modaraba (Floatation and

Control) Ordinance, 1980
g) “Religious Board” means the Board constituted under section 9 of the

Ordinance;
h) “Section” means a section of the Ordinance;
i) All other terms and expressions used but not defined in these rules shall have
the same meanings as are assigned to them in the Ordinance.
Registrar (Rule 3)
1. The headquarters of the Registrar shall be at Islamabad.
2. Without prejudice to the powers, duties and functions conferred or imposed

on him by the Ordinance, the following shall be the duties and functions of the
Registrar, namely
a) to receive applications for registration as modaraba companies;
b) issue to a modaraba company a Certificate of Registration which

indicates the serial number of registration, year of registration and
office of issue and has the official seal of the Registrar affixed thereto;
c) to provide secretarial services to the Religious Board;
d) to refer the applications for floatation of modaraba which shall be in

Form-I, to the Religious Board and obtain their certificate in writing in
Form II that the modaraba is not a business opposed to the injunctions
of Islam;
e) to receive applications for and grant Certificate of Authorization in

Form III for floatation of modarabas on such conditions as he may
deem fit in keeping with the provisions of section 11;
f) to lay-down, receive and examine all reports, accounts and other
documents referred to in section 14 and to pass orders for and receive

such additional documents or reports or information as may be
considered necessary;
g) to issue a certificate in Form IV on receipt of a declaration in Form V

that Modaraba Certificate have been allotted in an amount not less
than the minimum amount stated in the prospectus to be raised in
order to provide for the business operations and expenses;
h) to allow issue of certificates of a modaraba at a premium or at a

discount.
3. The Registrar shall examine or cause to be examined any documents

received and return for rectification any document filed with or delivered to
him for registration, filing or recording if it is found to be defective or
incomplete or mutilated and shall not register file or record such document
until the requirements indicated by him have been complied with and a
revised or corrected document furnished:
Provided that the Registrar may for special reasons instead of returning the
document demand a fresh document or ask the modaraba company to
depute a representative to rectify or complete the document as may be
necessary.
4. The Registrar shall not register, file or record any document in respect of
which a fee is payable until such fee has been deposited in the correct head
of account and receipt furnished to him and shall, pending the payment of
such fee, act in the same way as if no such document had been tendered for
registration, filing or record.
5. When a document is accepted for being registered, filed or recorded, the

Registrar shall issue an acknowledgement in Form VI of the First Schedule.
6. All documents of each modaraba company and each modaraba shall be kept
together, distinct and separate from those of other modaraba companies and
modarabas.
7. The Registrar shall make endorsement of the following particulars on every

document registered, filed or recorded in his office, namely serial number (a
separate serial number shall be given to each document); name of the
modaraba company and of the modaraba; brief description of the document

including its enclosures; and the date on which the document is registered,
filed or recorded, and shall sign, and affix his official seal, to every such
endorsement.
8. In the office of the Registrar, there shall be maintained a register of

modaraba companies and a register of modarabas in Forms VII and VIII in
which particulars of the companies and the modarabas shall be entered in the
order in which they are registered or authorized, as the case may be.
9. In the pages allotted to each modaraba company in the register, a note shall
be made of every document or fact relating to the modaraba company or
modaraba which is registered, recorded or filed with the Registrar.
10. The Registrar shall also cause an alphabetical index to be maintained of

modaraba companies and modarabas in the register;
11. The Registrar shall permit members of the public to inspect such registers
and records of documents maintained under this rule and such other rules as
he may deem fit, provided that, before such permission is granted, prescribed
inspection fee has been paid.
12. The inspection of the documents shall be allowed during the office hours and
in the presence of the Registrar or a person authorized by him in his behalf.
13. The Registrar shall, on the application of a person, grant copies of entries in
the registers and documents as are open to inspection duly signed, sealed
and dated by him on payment of the prescribed fees.
14. The Registrar shall take cognizance of omission to file or register documents
on due date or any other omission, lapse, irregularity or infraction of the law
by or in relation to a modaraba company or modaraba.
15. The Registrar shall institute such enquiries or proceedings in respect of any
matter as may, in his opinion, be necessary to obtain information or evidence
respecting defaults or any lapse, irregularity or infraction of the law by any
modaraba company or in relation to a modaraba or any promoter, officer,
employee, liquidator or receiver.

16. The Registrar shall cause to be prepared and keep a seal for authentication
of documents and certificates required for or connected with the registration
of modaraba companies and modarabas and related matters.
17. The Registrar may assign any of the duties prescribed under the Ordinance
or these rules and generally regulate performance of duties and issue
directions to any officer or officials subordinate to him in such manner as he
may think fit.
18. There shall be paid in respect of the several matters mentioned in the Second
Schedule the several fees therein specified.
19. All fees, charges and other sums paid or realized under the Ordinance or
under any order of the Registrar, Tribunal or the Federal Government in
pursuance of the Ordinance and the rules shall be accounted for to the
Federal Government in the State Bank of Pakistan or any other bank acting
as agent of that Bank or the Government Treasury under head “1213-
ECONOMIC REGULATION-RECEIPTS UNDER MODARABA ORDINANCE”
and the receipt thereof shall be furnished to the Registrar, the Tribunal or the
Federal Government along with the documents, application or otherwise, as
the case may be.
Registration of Modaraba Company (Rule 4)

1. An application for registration of a modaraba company shall be made to the
Registrar in Form IX.
2. The application shall be accompanied by__
a. five copies of the Memorandum and Articles of Association;
b. five copies of Certificate of incorporation;
c. receipted Treasury Challan in respect of the fees paid for the
application;
d. five copies of the latest audited accounts, if the company has already
been in business; and
e. a precise description of the business being done, if it is already
engaged in business other than floatation of modaraba or if it proposes
to undertake such business in addition to flotation and management of
modarabas.
3. The company shall make such changes in its Memorandum and Articles of
Association or in their Board of Directors as may be required by the Registrar.

4. The Registrar on being satisfied that the company is eligible to be registered
shall issue a Certificate of Registration in Form X on such conditions as may
be specified.
Capital of company also engaged in other business (Rule 7)

Unless it is a body corporate formed under any law and owned or controlled by
the Federal or a Provincial Government, whether directly or through a company
or corporation set up by such Government, a company which is also engaged in
business other than floatation and management of modaraba shall be eligible for
registration as a modaraba company only if it has a paid up capital of at least
seven and a half million rupees of which an amount of not less than two and a
half million rupees shall be set aside for the modaraba free from any
encumbrances.
Accounts and audit (Rule 8)

1. Every modaraba company shall cause to be kept proper books of account for
each modaraba with respect to:-
a. all sums of money received and expended by the modaraba and the
matters in respect of which the receipt and expenditure takes place;
b. all sales and purchases of goods by the modaraba; and
c. the assets and liabilities of the modaraba.
Explanation:- For the purpose of this sub-rule proper books of account shall not
be deemed to be kept with respect to the matters aforesaid if there are not kept
such books as are necessary to give a true and fair view of the state of the
modaraba’s affairs and to explain its transactions.
2. The books of account shall be kept at the registered office of the Modaraba
company or at such other place as may be authorized by the Registrar.
3. Where a modaraba has a branch office, the modaraba company shall be
deemed to have complied with the provisions of sub-rule (1) and sub-rule (2)
if proper books of account relating to the transactions effected at the branch
office are kept at the branch office and proper summarized returns, made up
to dates at intervals of not more than one month, are sent by the branch office
to the registered office of the modaraba company or other place referred to in
sub-rule (2).
4. Every balance sheet of a modaraba shall give a true and fair view of the state
of affairs of the modaraba as at the end of its financial year, and every profit
and loss account ** [,cash flow statement and statement of changes in equity]

of a modaraba shall respectively give a true and fair view of the result of **[its
operations, cash flows and changes in equity] for the year then ended.
Submission of annual report by modaraba company (Rule 9)

1. The annual report required by section 14 to be furnished by the modaraba
company shall include a balance sheet, a profit and loss account, a cash flow
statement and a statement of changes in equity in respect of each modaraba
and fullest information and explanations in regard to any reservation,
observation, qualification or adverse remarks contained in the auditor’s report.
2. The balance sheet and profit and loss account included in the annual report
prepared by the modaraba company shall comply with the requirements of
the Third Schedule as nearly as possible and the balance sheet, profit and
loss account, cash flow statement and statement of changes in equity
prepared by the modaraba company shall conform with such International
Accounting Standards and other standards as are notified from time to time in
the official Gazette by the Securities and Exchange Commission of Pakistan
under sub-section (3) of section 234 of the Companies Ordinance, 1984
(XLVII of 1984)]
3. The balance sheet profit and loss account, cash flow statement and
statement of changes in equity together with the notes forming part thereof
and profit and loss account and statement of financial changes shall be
audited by the auditor of the modaraba and the report of the auditor shall be
as prescribed in Form XI.
Submission of periodical report (Rule 10)

Every modaraba company shall, within one month of the close of first, second
and third quarters of the financial year of each modaraba, prepare in accordance
with such International Accounting Standards and other standards, as may be
specified from time to time by notification in the official Gazette, for the purpose
by the Securities and Exchange Commission of Pakistan under sub-section (3) of
section 234 of the Companies Ordinance, 1984 (XLVII of 1984), AND TRANSMIT
BY REGISTERED POST TO THE Registrar and under postal certificate to its
certificate holders a profit and loss account, a cash flow statement and a
statement of changes in equity for, and a balance sheet as at the end of, that
quarter, whether audited or otherwise.

Annual balance sheet (Rule 11)
1. The directors of every modaraba company shall some date not later than
eighteen months after the floatation of each modaraba and subsequently
once at least in every calendar year prepare an annual balance sheet and
profit and loss account and a cash flow statement and statement of changes
in equity in respect of each modaraba for the period in the case of the first
account since the floatation of the modaraba and in any other case since the
preceding account.
2. The accounting year adopted under the preceding sub-rule shall not be
changed without the prior approval of the Registrar.
Authentication of balance sheet (Rule 12)

1. Save as provided by sub-rule (2), the balance sheet and profit and loss
account and a cash flow statement and statement of changes in equity shall
be signed by the chief executive and two directions of the modaraba
company.
2. When the total number of directors of the modaraba company for the time
being in Pakistan is less than the number of directors whose signatures are
required by sub-rule (1), then the balance sheet, profit and loss account, cash
flows statement and statement of changes in equity shall be signed by all the
directions for the time being in Pakistan or, if there is only one director for the
time being in Pakistan, by such director, but in such a case there shall be
sub-joined to the balance sheet, profit and loss account, cash flows statement
and statement of changes in equity a statement signed by such directors or
director explaining the reason for non-compliance with the provisions of sub-
rule (1).
Access to minutes of proceedings of general meetings of modaraba

company and of itsdirectors (Rule 13)
The auditor of a modaraba shall have full access to the minute books of the
modaraba company and in case the modaraba company is also engaged in other
business he shall be provided with authenticated copies of the minutes and
decisions concerning the affairs of the modaraba.

Expenses to be re-imbursed to modaraba company’s etc. __ (Rule 16)
1. The modaraba company shall be entitled to be re-imbursed annually
reasonable expenses other than any remuneration in respect of directors,
officers and employee of the modaraba company.
2. Such expenses shall be audited by the auditors of the modaraba company

and classified under appropriate headings as used in Profit and Loss
Account, and will form part of the annual accounts of the modaraba.
3. For the purposes of the calculation of the remuneration payable to the

modaraba company under section 18 the profit shown in the audited profit
and loss account of the modaraba shall form the basis.
Capitalization of profits (Rule 17)

1. The Board of Directors of a modaraba company may resolve that it is
desirable to capitalize any part of the amount for the time being standing to
the credit of any of the modaraba’s reserve accounts or to the credit of the
profit and loss account or otherwise available for distribution and accordingly
decide that such sum be set free for distribution amongst the Certificate
holders who would have been entitled thereto if distributed by way of profit
and in the same proportions on conditions that the same be not paid in cash
but heapplied either in or towards paying up any amounts for the time being
unpaid on any certificates held by such members respectively or paying up in
full un-paid issued certificates of the modaraba to be allotted and distributed
credited as fully paid-up bonus certificates to and amongst such Certificate
holders in the proportion aforesaid, or partly in one way and partly in the
other, and the modaraba company shall give effect to such resolution.
2. Whenever such a resolution as aforesaid shall have been passed the

directors shall make all appropriations and application of the un-divided profits
resolved to be capitalized thereby; and all allotments and issues of fully paid
certificates, if any, and generally shall do all acts and things required to give
effect thereto, with full powers to the directors to make such provisions to the
issue of fractional certificates or by payment in cash or otherwise as they
think fit for the case of certificates becoming distributable in, fractions, and
also to authorize any person to enter on behalf of all the Certificate holders
entitled thereto into an agreement with the modaraba providing for the
allotment to them respectively, credited as fully paid-up, of any further
certificates to which they may be entitled upon such capitalization, or (as the
case may require) for the application thereto of their respective proportional of

the profits resolved to be capitalized, of the amounts or any part of the
amounts remaining un-paid on their existing certificates and any agreement
made under such authority shall be effective and binding on all such
Certificate holders.
Distribution of profit and reserves (Rule 18)

1. The distribution of profit shall include distribution in cash or issue of bonus
certificates out of the capitalized profit or any other security.
2. The Board of a modaraba company may from time to time distribute to the
Certificate holders such interim profits as appear to the Board to be justified
by the profits of the modaraba.
3. No distribution shall be made otherwise than out of profits of the year or any
other un-distributed profits or realized capital gains.
4. The Board of a modaraba company may, before making any distribution of

profits, set aside out of the profits of the modaraba such sums as it thinks
proper as a reserve or reserves which shall, at the discretion of the Board, be
applicable for meeting contingencies, or for equalizing distribution of profit, or
for any other purpose to which the profits of the modaraba may be properly
applied, and pending such application may, either be employed in the
business of the modaraba or be invested in such investments (other than
certificate of the modaraba) as the Board may from time to time think fit).
5. If several persons are registered as joint-holders of any certificate any one of

them may give effectual receipts for any profit payable on the certificates.
6. Notice of any profit distribution that may have been declared shall be given by
post to the Certificate holder at his registered address or, if he has no
registered address in Pakistan, to the address, if any, within Pakistan
supplied by him to the modaraba company for giving notice to him.
7. Where a notice is sent by post, service of the notice shall be deemed to be

effected by properly addressing, prepaying and posting a letter containing the
notice and, unless the contrary is proved, to have been effected at the time at
which the letter would be delivered in the ordinary course of post.
8. If a Certificate holder has no registered address in Pakistan, and has not

supplied to the company an address within Pakistan for the giving of notices

to him, a notice addressed to him or to the Certificate holders generally and
advertised in a newspaper circulating in the neighborhood of the registered
office of the company shall be deemed to be duly given to him on the day on
which the advertisement appears.
9. The final distribution of the profit in respect of any accounting period shall be
made within six weeks after re-opening of the register of Certificate holders.
Appointment and removal of auditors (Rule 19)

1. Every modaraba company shall, state in the prospectus the name and the
address of the auditor of the modaraba duly approved by the Registrar, who
shall not be the auditor of the modaraba company.
2. The terms of the appointment of auditor shall be renewed every year with the
approval of the Registrar.
3. If the modaraba company wishes to appoint an auditor other than the existing
auditor for the next accounting period, it shall inform the existing auditor in
writing giving reasons for such change, with a copy to the Registrar.
4. The Registrar may, if he so desires, seek such information as he may

consider necessary either from the modaraba company or from the auditor or
from both and on being so desired the parties concerned shall provide the
Registrar with the required information.
5. The auditor on his own accord shall be entitled to make such submissions in
connection with the proposed change to the Registrar as he may like.
6. The Registrar’s decision on the proposed change of auditor shall be final.
7. An auditor may resign from his appointment with the approval of the
Registrar obtained in writing.
Prospectus (Rule 20)

1. Every prospectus issued by a modaraba company in respect of any
modaraba shall be dated, and that date shall, unless the contrary be proved,
be taken as the date of publication of the prospectus.
2. A copy of the every such prospectus, signed by every person who is named
therein as a director or proposed director of the modaraba company, or by his

agent authorized in writing, shall be filed for registration with the Registrar on
or before the date of its publication, and no such prospectus shall be issued
until a copy thereof has been so filed for registration.
3. The Registrar shall not register any prospectus unless it is dated, and the
copy thereof signed, in the manner required by this rule.
4. Every prospectus shall state on the face of it that a copy has been filed for
registration as required by this rule.
5. If a prospectus is issued without a copy thereof being so filed, the modaraba

company, and every person who is knowingly a party to the issue of the
prospectus, shall be liable to a fine as laid down in section 32.
6. Every prospectus of a modaraba must state the matters specified in Part I of

the Fourth Schedule and set out the reports specified in Part II of that
schedule and the said parts I and II shall have effect subject to the provisions
contained in part III of that Schedule.
1 Power to increase modaraba Fund (Rule 20A)

1. A Modaraba company may, under the authority of a resolution passed at a
meeting of its directors and with the approval of the Registrar, alter the
prospectus of a modaraba floated by it so as to increase the Modaraba Fund
by issue of new modaraba certificates subject to such conditions as may be
imposed by the Registrar: Provided that, before according his approval, the
Registrar shall, at the expense of the modaraba, issue a notice of the
proposed increase and conditions attaching thereto for eliciting opinion of the
modaraba certificate holders and others concerned within a period of not less
than fourteen days from the date of publication in at least 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
modaraba is listed is situate or, if the modaraba is not listed, in the Province
in which the registered office of the modaraba company is situate.
2. Except to the extent otherwise specified by the Registrar for reasons to be

recorded, the new modaraba certificates shall rank pari passu with the
existing certificates in all matters including the right to such bonus or right
issue and dividend as may be declared subsequent to the date of issue of
such new certificates.

3. The modaraba company shall file with the Registrar a notice of exercise of
any power referred to in sub-rule (1) and pay fees as specified for
authorization to float modaraba on the additional amount of modaraba fund
increased in the manner laid down in sub-rule (1), within fifteen days from the
exercise thereof indicating the conditions attaching thereto and shall also
issue a notice thereof in newspapers in the manner laid down in Proviso to
sub-rule (1).
Further issue of Modaraba Certificates (Rule 20B)

1. Where the modaraba company decides to increase the modaraba fund of a
modaraba by the issue of new modaraba certificates, such certificates shall
subject to the conditions imposed by the Registrar, be offered to the existing
certificate holders in proportion to the existing certificates held by them, and
such offer shall be made by notice specifying the number of certificates to
which the certificate holder is entitled, and limiting a time within which the
offer, if not accepted, will be deemed to be declined.
2. The offer of new modaraba certificates shall be accompanied by a circular

duly signed by the directors of the modaraba company or an officer of the
company authorized by them in this behalf in the form prescribed by the
Registrar containing material information about the affairs and accounts of the
modaraba and setting forth the necessity for raising of further funds with
business prospects.
3. A copy of the circular referred to in sub-rule (2) signed in the manner

specified therein shall be filed with the Registrar before it is sent to the
modaraba certificate holders.
4. If, in any case, the whole or any part of the issue of certificates so offered is
declined or is not subscribed, the modaraba company may offer the
unsubscribed part in such manner as my be approved by the Registrar.
5. Where the new modaraba certificates forming part of the Modaraba Fund are
to be issued to the public, a prospectus shall be issued which shall comply, in
all respects, with the requirements applicable to a prospectus and be subject
to the liabilities specified in the Ordinance and the rules therefore.}

Annual list of Certificate holders and summary (Rule 23)
1. Every modaraba shall within eighteen months from its flotation, and thereafter
once at least in every year, make a list of all persons who, on the date of the
re-opening of the register of certificate holders relative to declaration of final
dividend or, where there is no such date in any particular year as, on 31st
December of the year, are Certificate holders and of all persons who have
ceased to be Certificate holders since the date of the last return or in the case
of the first return since the floatation of the modaraba.
2. The list shall state the names, addresses, and occupations of all the past and
present Certificate holders therein mentioned, and the number of certificates
held by each of the existing Certificate holders at the date of the return,
specifying certificates transferred since the date of the last return, or in case
of the first return, of the floatation the modaraba by persons who are still
members and persons who have ceased to be Certificate holders respectively
and the dates of registration of the transfers, and shall contain a summary
distinguishing between certificates issued for cash and certificates issued as
fully or partly paid up as bonus certificates or issued as fully or partly paid
certificates otherwise than in cash, and specifying the following particulars,
namely:-
a. the amount of the certificates of the modaraba and the number of

certificates into which it is divided;
b. the number of certificates taken from the commencement of the
modaraba up to the date of the return;
c. the amount called up on each certificates;
d. the total amount of calls received;
e. the total amount of calls un-paid;
f. the total amount of the sums (if any) paid by way of commission in
respect of any certificates or allowed by way of discount in respect of
any certificates since the date of the last return or so much thereof as
has not been written off at the date of the return;
g. the names and addresses of the persons who at the date of the return
are the directors of the modaraba company and of the persons (if any)
who at the said date are the managers or officers of the modaraba
company, and the changes in the personnel of the directors, managers
and officers of the modaraba company, and the changes in the
personnel of the directors, managers and since the last return together
with dates on which they took place; and

h. the total amount of debt due from the modaraba in respect of all
mortgages and charges which are required to be registered with the
Registrar under these rules.
4. The above list and summary shall be contained in a separate part of the register
of Certificate holders and shall be completed within thirty days from the date
referred to in sub-rule (1) and the modaraba company shall forthwith file with the
Registrar a copy signed by a director or by the manager or secretary of the
modaraba company, together with a certificate from the such director, manager
or secretary that the list and summary state the facts as they stood on the day
aforesaid.
Power to close register (Rule 25)

A modaraba company may, on giving seven day’s previous notice by
advertisement in some newspapers circulating in the province in which the
registered office of the modaraba company is situate, close the register of
Certificate holders for any time or times not exceeding in the whole forty-five
days in each year and not exceeding fifteen days at any one time.
Return as to allotment (Rule 26)

1. Whenever a modaraba company floats any modaraba and makes any
allotment of its certificates, the modaraba company shall, within one month
thereafter:-
a. file with the Registrar a return of the allotments, stating the number and
nominal amount of the certificates comprised in the allotment, the
names and address of the allottees and the amount paid if any due or
payable on each certificate; and
b. in the case of a certificate allotted as fully or partly paid up otherwise
than in cash, produce for the inspection and examination of the
Registrar a contract in writing constituting the title of the allottee to the
allotment together with any contract of sale, or for services or other
consideration for which the allotment was made, such contracts being
duly stamped, and file with the Registrar verified copies of all such
contracts and a return stating the number and nominal amount of
certificates so allotted, the extent to which they are to be treated as
paid up, and the consideration for which they have been allotted.
2. Where such a contract as is referred to in sub-rule (1) is not reduced to

writing, the modaraba company shall, within one month after the allotment,

file with the Registrar the required particulars of the contract stamped with the
same stamp duty as would have been payable if the contract had been
reduced to writing, and these particulars shall be deemed to be an instrument
within the meaning of the Stamp Act, 1899, and the Registrar may, as a
condition of filing the particulars, require that the duty payable thereon be
adjudicated under section 31 of that Act.
3. (3) If the Registrar is satisfied that in the circumstances of any particular case
the period of one month specified in sub-rules (1) and (2) for compliance with
the requirements of those subrules is inadequate, he may extend that period
as he thinks fit, and in that event, the provisions of sub-rules (1) and (2) shall
have effect in that particular case as if for the said period of one month the
extended period allowed by the Registrar were substituted:
Provided that in case of default in filing with the Registrar within the time
specified in sub-rules (1) and (2) any document required to be filed by this
rule, the modaraba company, or any person liable for the default, may apply
to the Federal Government for relief, and the Federal Government, if satisfied
that the omission to file the document was accidental or due to inadvertence
or that on other grounds it is just and equitable to grant relief, may make an
order extending the time for the filing of the document for such a period as the
Federal Government may think proper.
Certain mortgages and charges to be void if not registered (Rule 27)

1. Every mortgage or charge created by a modaraba and being either :-
a. a mortgage or charge for the purpose of securing any issue of
Participation Term Certificate (PTC); or
b. a mortgage or charge on any immovable property wherever situate or
any interest therein ; or
c. a mortgage or charge on any book debts of the modaraba; or
d. a mortgage of a charge, not being a pledge, on any movable property
of the modaraba except stock-in-trade ; or
e. a floating charge on the undertaking or property of the modaraba;
shall, so far as any security on the modaraba property or undertaking is thereby

conferred, be void against the liquidator and any creditor of the modaraba, unless
the required particulars of the mortgage or charge, together with the instrument, if
any, by which the mortgage or charge is created or evidenced, or a verified copy
thereof, are filed with the Registrar for registration in the manner required by
these rules within twentyone days after the date of its creation, but without

prejudice to any contract or obligation for repayment of the money thereby
secured, and on a mortgage or charge thus becoming void under this rule, the
money secured thereby shall immediately become payable:
Provided that:-
i. in the case of a mortgage or charge created out of Pakistan comprising

solely property situate outside Pakistan twenty-one days after the date on
which the instrument or copy could, in due course of post, and if
dispatched with due diligence, have been received in Pakistan shall be
substituted for twenty-one days after the date of the creation of the
mortgage or charge, as the time within which the particulars and
instrument or copy are to be filed with the Registrar, and
ii. where the mortgage or charge is created in Pakistan but comprises

property outside Pakistan, the instrument creating or purporting to create
the mortgage or charge or a copy thereof verified in the required manner
may be filed for registration notwithstanding that further proceedings may
be necessary to make the mortgage or charge valid or effectual according
to the law of the country in which the property is situate; and
iii. where a negotiable instrument has been given to secure the payment of
any book debts of a modaraba, the deposit of the instrument for the
purpose of securing an advance to the modaraba shall not for the purpose
of this rule be treated as a mortgage or charge on those book debts; and
iv. the holding of PTC entitling the holder to a charge on immovable property
shall not be deemed to be an interest in immovable property.
2. Where any mortgage or charge on any property or a company required to be

registered under sub-rule (1) has been so registered, any person acquiring
such property or any part thereof, or any share or interest therein, shall be
deemed to have notice of the said mortgage or charge as from the date of
such registration.
Registration of charge on properties (Rule 28)

Whenever the modaraba acquires any property which is subject to a charge of
any such kind as would, if it had been created by the modaraba after the
acquisition of the property, have been required to be registered under these
rules, the modaraba shall cause the required particulars of the charge, together
with certified copy of the instrument, if any, by which the charge was created or is

evidenced, to be delivered to the Registrar for registration in the manner required
by these rules within twenty-one days after the date on which the acquisition is
completed:
Provided that, if the property is situated and the charge was created outside
Pakistan, twenty-one days after the date on which the copy of the instrument
could in due course of post, and if dispatched with due diligence, have been
received in Pakistan shall be substituted for twenty-one days after the completion
of the acquisition as the time within which the particulars and the copy of the
instruments are to be delivered to the Registrar.
THE FIRST SCHEDULE

FORM No.1
(Section 8)
[ See Rule 3(2) (d) ]
To
The Registrar
Modaraba Companies & Modarabas
Corporate Law Authority
Government of Pakistan
Islamabad.
Dear Sir,
We_________________ being a duly registered Modaraba Company, registered
vide Registration No. _______________ dated________ hereby apply for the
grant of permission to float a ________________ modaraba to be called
_________________ under section 8 of the Modaraba Companies and
Modarabas (Floatation and Control) Ordinance, 1980 (XXXI of 1980), and submit
herewith:
1. 5 duly certified copies of the Registration Certificate as a Modaraba
Company one copy thereof being certified by the Registrar.
2. 5 copies of the prospectus duly signed by all directors.
3. 5 copies each of the latest Audited Balance Sheet and Profit & Loss
Account of Modaraba Company and existing Modarabas.
4. Necessary information required in the annexure to this form.
5. A receipt for Rs.____________ deposited in _________________ on
__________ on account of fee for authorization to float Modaraba.

We confirm that there has been no change in our Memorandum and Articles of
Association or statute except to the extent indicated below (specify) since last
submitted on _____________ together with Form-I.
We undertake :
i. to keep the information upto date.
ii. to take all steps necessary for floatation and carrying out the functions of
the modaraba.
We solemnly affirm and declare that the information contained in the prospectus
and all other documents filed herewith is correct and that nothing has been
concealed.
Yours faithfully,
ANNEX TO FORM No.1

(See Section 8)
[ See rule 3 (2) (d)]
1. Name, address and telephone No. of applicant company.
2. No. and date of registration as a Modaraba Company.
3. Name and type of Modaraba, indicating exact purpose or objective and

duration.
4. Description of business operations to be undertaken, organizational set up,

plans and prospects of the proposed modaraba with feasibility or viability
reports, duly supported by evidence.
5. Details showing how the business and operations shall be conducted spelling
out how the operations will not be opposed to the tenets of Islam and mode of
distribution of profit.
6. Amount of modaraba to be floated, division thereof and condition attached

thereto if there be any.
7. Form of modaraba certificate in Form No. XII.
8. Amount to be subscribed by modaraba company in the proposed modaraba

supported by evidence that the modaraba company has the ability to meet the
commitment.

9. Amount to be set aside for the modaraba management indicating the manner
in which it is to be kept.
10. Particulars of application for floatation of modaraba submitted in the past, if

any, with decision thereon alongwith particulars of existing modaraba under the
management of the modaraba company or associated undertakings.
Verification and signatures of all directors
Dated:
FORM-IX
[See rule 4(1)]
APPLICATION FOR REGISTRATION OF MODARABA COMPANY
Dated_________
To
The Registrar Modaraba Companies and Modarabas,
Corporate Law Authority,
Government of Pakistan,
Islamabad.
Dear Sir,
We hereby apply for registration under section 6 of the Modaraba
Companies and Modaraba (Floatation and Control) Ordinance, 1980 as a
modaraba company.
We are registered by the name of _________________________ as a

public/private Company under the Companies Act 1913/a body corporate formed
under ______________________________ and owned or controlled by the
Government of _____________________________.
A receipt of Rs.________________, being the registration fee, deposited
in _________________________________ on ______________________ is
enclosed.
Information and documents as required in the Annexure to this form duly verified
and signed by all directors alongwith five spare copies of this application and an
affidavit as to the correctness of the details by the Chief Executive and two
directors are furnished herewith. We undertake to keep this information up to
date by communicating changes/modifications therein within fourteen days of
such changes/modifications.

We further undertake that no change in the Memorandum and Articles of
Association nor any change in the majority share-holders and directors shall be
made without prior written authorization of the Registrar and that we shall comply
with all requirements of law and conditions of registration.
We being authorized by the directors solemnly declare and affirm that to that best
of our knowledge and belief the information contained in this application and the
documents accompanying it are true and correct and that the requirements of the
Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980
and rules framed thereunder in respect of all matters precedent to the registration
of the said --------------------------------------------as a modaraba company or
incidental thereto have been duly complied with.
Yours faithfully,
Verification by ______________
Oath Commissioner
_____________________
ANNEX T FORM No. IX
[ See rule 4(1)]
I. Particulars of the Modaraba Company.
1. Name of the company/body corporate.

2. Public/Private/body corporate indicating how formed.
3. Date and place of registration.
4. Address of registered office and other offices, Telephone Nos., Telegraphic
addresses and Telex Number.
5. Authorized, Subscribed and Paid-up Capital.
6. Details of persons or group controlling the company including of those holding
more than10% shares with the number and value of shares held.
7. Names of any holding, subsidiary and associated undertakings.
8. Description and place of the business operations and undertakings.
(Information about objects stated in the Memorandum and Articles of Association
not required)
II. Particulars of Directors and Officers:

1. Full names, any former names, Father’s/Husband’s name, nationality full
residential and business addresses and details of other directorships and
occupations of all directors and officers including Chief Executive and
Chairman of the Board indicating their respective designation and name of
firms in which any one is a partner.

2. Names of companies, firms or organizations of which the aforesaid directors
and officers have been directors, managers, officers, employees or partners in
the past.
3. Financial standing, professional qualifications and experience of persons
mentioned in (1) above, supported by documentary evidence.
4. Whether any aforesaid person has ever been coveted of fraud or breach of
trust or of an offence involving moral turpitude or removed from service. If so,
full particulars thereof.
5. Whether any person referred to in (1) above or any company or firm in which
he has been associated in the past has been adjudicated an insolvent or has
suspended payment or defaulted in making payments or has compounded
with his or their creditor or gone into liquidation. If so, full particulars thereof.
6. Shareholding or other investment of each of the person referred to in (1) above
in the company.
[Note: There should be furnished a separate declaration in respect of each
person as referred to above.]
ANNEX TO FORM No.IX (Continued)

[See rule 4(1)]
Verified that the information given above and in the accompanying documents
are true and correct to the best of our knowledge and belief and that nothing has
been concealed.
Dated__________ 200
All Directors
Following certified documents should be appended:-
1. Memorandum and Articles of Association or other documents under which
formed, one copy of which should be certified by the Registrar of Joint Stock
Companies.
2. Certificate of Incorporation one copy of which should be certified by the
Registrar of Joint Stock Companies.
3. Last three year’s audited Balance Sheet and Profit and Loss Account together
with related documents, certified by the company’s auditors.

FORM No. XI
[See rule 9 (3)]
AUDDITOR’S REPORT TO THE CERTIFICATE HOLDER
We have audited the annexed Balance Sheet as at _________________ 198

and the related Profit and Loss Account and* Statement of Changes in Financial
Position/Statement of Sources and Application of Funds together with the Notes
to the Accounts for the year ended _____________________ of
_______________________ Modaraba which are modaraba company’s (name
of the modaraba company to be indicated) representation and we state that we
have obtained all the information and explanation which we required and, after
due verification thereof, we report that :
(a) In our opinion proper books of account have been kept by the modaraba
company in respect of _____________ Modaraba as required by the
Modaraba Companies and Modaraba (Floatation and Control) Ordinance,
1980; and Modaraba Companies and Modaraba Rules, 1981;
(b) In our opinion the Balance Sheet and the Profit and Loss Account have been
drawn up in conformity with the Modaraba Companies and Modaraba
(Floatation and Control) Ordinance, 1980 and Modaraba Companies and
Modaraba Rules, 1981; and
(c) In our opinion and to the best of our information and according to the
explanations given to us;
(i) the Balance Sheet and the related Profit and Loss Account and *Statement
of Changes inFinancial Position/Statement of Sources and Application of
funds, which are in agreementwith the books of accounts, exhibit
respectively a true and fair view of the state of theModaraba’s affairs as at
_________________________ 19 __; and the *Profit/Loss and thechanges
in the *Financial Position/Sources and Application of Funds for the year
ended on that date;
ii) Zakat deductable at source under the Zakat and Ushar Ordinance, 1980,
has been deductedby the Modaraba and deposited in the Central Zakat
Fund established under section 7 ofthat Ordinance; and
(iii) the business conducted, investments made and expenditure incurred by
the Modaraba are in accordance with the objects, terms and conditions of
the Modaraba.
Place _______________
Chartered Accountants
(*Delete as appropriate)

QUESTIONS
1. What are pre-requisites for the registration of a modaraba company?

2. What does a religious board means and how it functions?
3. What are the conditions applicable to Modaraba company?
4. Write a note about the powers and duties of the Registrar of Modaraba.

Multiple choice questions
1. What is status of Modaraba

a. It is a company
b. It is a firm
c. It is an undertaking
d. It is a separate legal entity
2. Modaraba shall be registered with

a. Registrar of companies
b. Securities and Exchange Commission of Pakistan
c. Court
d. Registrar of Modarabas
3. Modaraba is managed by
a. Directors appointed by modaraba
b. Directors appointed by registrar
c. Modaraba company
d. Directors of modaraba company
4. Modaraba can be
a. Single object modaraba
b. Multi object modaraba
c. Both of the above
MCQs (Answers)
1. d 2. d 3. c 4. c

COMPANIES ORDINANCE, 1984
Section 282A to 282N

1. Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003
(Rule 1 to 7)
2. Non-Banking Finance Companies and Notified Entities Regulations, 2008
(Regulations 2, 3, 9, 10, 15B, 16-18, 25)

COMPANIES ORDINANCE, 1984
[PART VIII A - NON-BANKING FINANCE COMPANIES]

PROVISIONS AS TO ESTABLISHMENT AND REGULATION OF NON-BANKING
FINANCE COMPANIES
282A. Application of this Part - The provisions of this Part shall apply to-
(a) non-banking finance companies (NBFCs) which include companies licensed
by the Commission to carry out any one or more of the following forms of
business, namely.-
(i) Investment Finance Services;
(ii) Leasing;
(iii) Housing Finance Services;
(iv) Venture Capital Investment;
(v) Discounting Services;
(vi) Investment Advisory Services;
1. (vii) Asset Management Services; and

(viii) any other form of business which the Federal Government may, by notification in
the official Gazette specify from time to time; and
(b) [notified entities which include]44 such other company or class of companies
or corporate body [or trust or any other entity or person]45 as the Federal
Government may, by notification in the official Gazette specify for the purpose
under this clause.
282B. Power to make [Rules and regulations and issue directives, circulars, codes,
guidelines, etc.-]46 (1) The Federal Government may make rules for establishment and
regulation of NBFCs [and notified entities and their business and activities]47 and such
rules may, inter alia, in addition to anything already provided in this Ordinance, provide
for and any other matter which the Commission may deem fit for the effective regulation
of NBFCs and the notified entities.
[(2) The Commission may make regulations, for the establishment and regulation NBFCs
and notified entities and their business and activities and such regulations may provide
for any matter which the Commission deems fit for the effective regulation of NBFCs,
and notified entities and their business and activities.
(3) The Commission may issue such directives, circulars, codes, notifications, and
guidelines as are necessary to carry out the purposes of Part VIIIA and the rules and
regulations made thereunder.]48

282C. Incorporation of NBFC.- (1) A NBFC shall not be incorporated without prior
approval of the Commission.
(2) Notwithstanding anything contained in any other provision of this Ordinance, a NBFC
shall not carry on business unless it holds a license issued in that behalf by the
Commission; and any such license may be issued subject to such conditions, [and
payment of such fees]49 as the Commission may deem fit to impose.
(3) Every company in existence which is engaged in any one or more forms of business
as specified in section 282 A, before the expiry of six months from coming into force of
this section and every other company before commencing any form of business as
specified in [clause (a) of]50 section 282 A, shall apply in writing to the Commission for
grant of a license under this section. The Commission, if it is satisfied that the company
has fulfilled the conditions prescribed by the Commission in respect of the business for
which the license is being sought, may grant licenses to such company for one or more
of the forms of business specified in clause (a) of section 282 A.
(4) A NBFC shall not commence or carry on business unless it has such minimum
[equity]51 as may be prescribed by the Commission from time to time in respect of each
form of business as specified in [clause (a) of]52 section 282 A.
[(5) Notwithstanding anything in this Ordinance, the provisions of this Part VIIIA and the
rules and regulations made thereunder shall continue to apply to any NBFC whose
license has expired, or any NBFC or notified entity whose license or registration has
been cancelled or suspended, or to any existing company or entity carrying on a
business specified in clause (a) of section 282A or notified under clause (b) of section
282A which has not applied for a fresh license or registration, or whose application for a
fresh license or registration has not been decided by the Commission.]53
[282CA. Registration of notified entities.—(1) Any entity notified by the Federal

Government under clause (b) of section 282A shall not operate without prior registration
with the Commission.
(2) Notwithstanding anything contained in this Ordinance or any other law, the
Commission may register the notified entity on such terms and conditions and payment
of such fee, as the Commission may deem fit to impose from time to time.
(3) Every entity notified by the Federal Government under clause (b) of section 282A
which is in existence before the commencement of this provision, and every other entity
notified by the Federal Government under the aforesaid section shall within a period of

six months apply in writing to the Commission for registration under this section, and the
Commission after being satisfied that the applicant has fulfilled the conditions specified
by the Commission may register the notified entity.]54
282D. Power to issue directions-. (1) Notwithstanding anything contained in any other
provision of this Ordinance, where the Commission is satisfied that it is necessary and
expedient so to do –
(a) in the public interest; or
(b) to prevent the affairs of any NBFC [or notified entity from]55 being conducted in a
manner detrimental to the interests of shareholders [or unit or certificate holders as the
case may be,]56 or persons whose interests are likely to be affected or in a manner
prejudicial to the interests of the NBFC [or notified entity]57; or
(c) to secure the proper management of any NBFC [or notified entity]58 generally, [it
may]59 issue directions to NBFCs [or notified entities]60 generally or to any NBFC [or
notified entity]61 in particular [to do or desist from doing such acts as the Commission
may deem fit and]62 to carry out such changes as are necessary to rectify the situation
and the NBFCs [or notified entities]63 shall be bound to comply with such directions.
(2) The Commission may, on representation made to it or on its own motion, modify or
cancel any direction issued under sub-section (1), and in so modifying or canceling any
direction may impose such conditions as it thinks fit.
282E. Power to remove-. (1) Notwithstanding anything contained in any other provision
of this Ordinance, where the Commission is satisfied that –
(a) continued association of any chairman or director or chief executive [by whatever
name called]64 or any other officer [or person responsible for the affairs]65 of a NBFC
[or a notified entity], is or is likely to be detrimental to the interests of NBFC [or a notified
entity]66 or its shareholders [or the notified entity]67 or persons whose interest is likely to
be affected; or
(b) the public interest so demands; or
(c) to prevent the affairs of a NBFC [or a notified entity]68 being conducted in a manner
detrimental to the interest of its shareholders [or unit or certificate holders, as the case

may be, or the participants]69 or in a manner prejudicial to the interests of NBFC [or a
notified entity]70; or
(d) to secure a proper management of the NBFC [or a notified entity,]71

it is necessary so to do, the Commission may, for reasons to be recorded in writing, by
order, remove from office, with effect from such date as may be specified in the order, any
chairman or director or chief executive [by whatever name called]72 or other officer [or
person responsible for the affairs] of the NBFC [or a notified entity.]73
(2) No order under sub-section (1) shall be made unless the chairman or director or chief
executive or other officer [or person responsible for the affairs]74 has been given a
reasonable opportunity of making a representation and of being heard:
Provided that if, in the opinion of the Commission, any delay would be detrimental to the
public interest or the interest of its shareholders [or unit holders as the case may be]75 ,
the Commission may, at the time of giving the opportunity aforesaid or at any time
thereafter and pending the consideration of the representation aforesaid, if any, by order
direct that—
(i) the chairman or, director or chief executive [by whatever name called]76 or other
officer [or person responsible for the affairs]77 shall not, with effect from the date of the
order-
(a) act as such chairman or director or chief executive or other officer [or person
responsible for the affairs]78 of the NBFC [or a notified entity]79; or
(b) in any way, whether directly, or indirectly, be concerned with, or take part in the
management of the NBFC or a notified entity;
(ii) any person authorized by the Commission in this behalf shall act as such
chairman or director or chief executive of the NBFC [or a notified entity]80 till another
person is elected in a general meeting or a board meeting , as may be directed by the
Commission, to fill in the vacancy.
(3) Where any order under sub-section (1) is made in respect of a chairman or director or
chief executive [by whatever name called]81 or other officer [or person responsible for
the affairs]82 of a NBFC [or a notified entity]83, he shall cease to be a chairman or a
director or chief executive or other officer of the NBFC [or a notified entity]84 and shall
not in any way, whether directly or indirectly, be concerned with, or take part in, the

management of the NBFC [or a notified entity]85 or any other NBFC [or a notified
entity]86 for such period not exceeding three years as may be specified in the order.
(4) Any person appointed as chairman or director or chief executive under sub-section
(2) shall—
(a) hold office during the pleasure of the Commission subject to such conditions
as may be specified in the order of his appointment and, subject thereto, for
such period, not exceeding three years as the Commission may specify; and
(b) not incur any obligation or liability for anything which is done or intended to be
done in his capacity as such chairman or director or chief executive.
(5) No person removed from office under sub-section (1) shall be entitled to claim any
compensation for the loss or termination of office.
282F. Power to supersede Board of Directors.- (1) Notwithstanding anything

contained in any other provision of this Ordinance, where the Commission is satisfied
that the association of the Board of Directors of any NBFC [or a notified entity]87 is or is
likely to be detrimental to the interest of the NBFC [or a notified entity]88 or its
shareholders or is otherwise undesirable; or for all or any of the reasons specified in
section 282 E; it is necessary so to do, the Commission may, for reason to be recorded
in writing, by order, supersede the Board of Directors of a NBFC [or a notified entity]89
with effect from such date and for such period as may be specified in the order.
(2) The period of supersession specified in an order under sub-section (1) may from time
to time be extended by the Commission so, however, that the total period of
supersession does not exceed three years.
(3) All powers and duties of the Board of Directors; shall, during the period of
supersession, be exercised and performed by such person as the Commission may from
time to time appoint in this behalf.
(4) The provisions of sub-sections (2), (3), (4) and (5) of section 282 E shall, with
necessary modifications apply to an order made under sub-section (1) or (3) of this
section.
282G. Power to require to furnish information, etc.- (1) The Commission may, at any
time, by notice in writing, require NBFCs generally, or any NBFC [or a notified entity]90
in particular to furnish it within the time specified therein or such further time as the
Commission may allow, with any statement or information of document relating to the
business or affairs of such NBFC [or a notified entity]91 or NBFCs (including any

business or affairs with which such NBFC [or a notified entity]92 or NBFCs is or are
concerned) and, without prejudice to the generality of the foregoing power, may call for
information, at such intervals as the Commission may deem necessary.
(2) No NBFC [or a notified entity]93, director, officer, employee or agent or auditor
thereof shall, in any document, prospectus, report, return, accounts, information or
explanation required to be furnished in pursuance of this part or the rules [or
regulations]94 made thereunder, or in any application made under this Part or the rules
[or regulations]95, make any statement or give any information which he knows or has
reasonable cause to believe to be false or incorrect or omit any material fact therefrom.
282H. Special Audit.- (1) Notwithstanding anything contained in any other provision of
this Ordinance, the Commission shall monitor the general financial condition of a NBFC
[or a notified entity]96, and, at its discretion, may order special audit and appoint an
auditor to carry out detailed scrutiny of the affairs of NBFC [or a notified entity]97,
provided that the Commission may, during the pendency of the scrutiny, pass such
interim orders and directions as may be deemed appropriate by the Commission.
(2) On receipt of the special audit report, the Commission may direct a NBFC [or a
notified entity]98 to do or to abstain from doing certain acts and issue directives for
immediate compliance which shall forthwith be complied with, or take such other action
under this Ordinance as it deems fit.
282I. Inquiry by the Commission.- (1) The Commission may cause an enquiry or
inspection to be made by any person appointed in this behalf into the affairs of a NBFC
[]99 or [of any notified entity or]100 of any of its directors, managers or other officers [or
persons responsible for its affairs.]101
(2) [Notwithstanding anything contained in any other law for the time being in force
where,]102 an enquiry or inspection under sub-section (1) has been ordered, every
director, manager or other officer of the NBFC [or the notified entity]103 to which or to
whose director, manager or other officer the enquiry or inspection relates and every
other person who has had any dealing with such NBFC [or the notified entity]104 , its
director, partner, manager or officer shall furnish such information in his custody or
power or within his knowledge relating to, or having bearing on the subject-matter of the
enquiry or inspection as the person conducting the enquiry or inspection may by notice in
writing require.

(3) The person conducting an enquiry or inspection under sub-section (1) may call for,
inspect and seize books of account and documents in possession of any such NBFC [or
the notified entity]105 or any of its directors, managers or other officers.
282J. Penalty for failure, refusal to comply with, or contravention of any provision
of this Part.- (1) Notwithstanding anything contained in any other provision of this
Ordinance, if a NBFC [or the notified entity]106 or its officers (including auditors) fails or
refuses to comply with, or contravenes any provision contained in this Part or of any of
the provisions of the rules [or regulations]107 made under section 282 B [or regulation,
circular or directive or]108 any direction or order passed by the Commission under the
provisions contained in this Part or knowingly and willfully authorizes or permits such
failure, refusal or contravention, shall, in addition to any other liability under this
Ordinance, be also punishable with fine the amount of which shall not exceed [fifty]109
million rupees:
Provided that if the failure, refusal, default, contravention is committed by NBFC [or the
notified entity]110, every director, manager, or other officer [or person responsible for the
conduct of its affairs]111 shall, unless he proves that the failure or contravention or
default took place or committed without his knowledge, or that he exercised all diligence
to prevent its commission, be deemed to be guilty of the offence.
(2) Without prejudice to the provisions of sub-section (1), in case of contravention of any
provision of this Ordinance or rules[or regulations]112 made or non-compliance of any
direction given or order passed thereunder by the Commission, the Commission may
cancel [or suspend]113 any one or more of the licenses in respect of the various forms of
business of the NBFC [or registration granted to any notified entity]114 , after issuing a
show cause notice and giving such NBFC [or notified entity as the case may be]115, an
opportunity of being heard or pass any other order which may be deemed appropriate by
the Commission.
(3) Upon cancellation of all the licenses [or registrations]116 the functions and carrying
on the business of NBFC [or the notified entity]117 shall cease and [notwithstanding
anything contained in section 305 or sub-clause (c) of the proviso to section 309,]118 the
Commission may move the Court for winding up of the NBFC [or the notified entity]119.
(4) [Where a NBFC or a notified entity carries on the business after its license or
registration to do such business has been suspended by the Commission, the chief
executive, by whatever name called, and every director, manager, and other officer of
the NBFC or the notified entity as the case maybe, who is responsible for such default,
shall be punishable with fine not exceeding fifty million rupees and to a further fine of two

hundred thousand rupees for every day after the first during which the default
continues.]120
(5) Notwithstanding anything to the contrary contained in this Ordinance, if an officer

(which expression includes auditors) of a NBFC fails to make payment, within six months
of the order imposing penalty on him, the Commission may, by an order in writing,
disqualify him from holding any office in any company or NBFC for such period as may
be specified in the order.
282K. Penalty for making false statement, etc.- (1) Notwithstanding anything
contained in any other provision of this Ordinance, if any person, being the chairman,
director, chief executive, by whatever name called [or a person not being a professional
advisor in accordance with whose directions or instructions the directors are accustomed
to act,]121 or official liquidator or any officer of a NBFC [or a notified entity] in any
document, prospectus, report, return, accounts, information or explanation required to be
furnished in pursuance of this Ordinance or the rules [or regulations]122 made
thereunder, willfully makes a statement which is false in any material particular knowing
it to be false, or willfully omits to make a material statement, mismanages the affairs of
the NBFC [or a notified entity]123 or misuses his position for gaining direct or indirect
benefit for himself or any of his family members, he shall be punishable with
imprisonment for a term which may extend to three years and shall also be liable to fine
which shall be not less than one hundred thousand rupees, and shall be ordered by the
Court trying the offence, to deliver up or refund within a time to be fixed by the Court any
property acquired or gained by him in his own name or in the name of his family
members by so mismanaging the affairs of the NBFC [or a notified entity]124 or misusing
his position or, in default, to suffer imprisonment for a term which may extend to three
years.
(2) Any officer, director or chief executive of a NBFC [or the notified entity]125 who is
either directly or indirectly owned, controlled or managed by the Federal Government or
a Provincial Government who extends, or aides in extending, a loan, advance, or any
financial facility to a borrower or customer on the verbal instruction of a holder of a
public officer without reducing the terms of the instructions into writing and drawing
them to the attention of his superior officer, or the board of directors, shall be guilty of
an offence punishable with imprisonment of either description which may extend to one
year, or with fine, or with both, in addition to such other action which may be taken
against him in accordance with law.
(3) If any company which is not a NBFC [or a notified entity,]126 or a company which
does not hold a license under section 282C or the license granted to which has been

cancelled, [or which has not been registered under section 282C or its registration has
been cancelled]127 or any individual or association or body of individuals, transacts the
business specified in section 282 A, the chief executive, by whatever name called, of the
company and every director, manager, and other officer of the company, and the
individual and every member of the association or body of individuals, shall be deemed
to be guilty of such contravention and shall be punishable with imprisonment of either
description for a term which may extend to seven years and with fine the amount of
which shall not exceed one million and shall be ordered by the Court trying the offence to
pay the fine within a time to be fixed by the Court or in default to suffer further
imprisonment for a term which may extend to five years.
Explanation.- For the purposes of this section a director or chief executive or other
officer shall be deemed to have acted knowingly if he has departed from established
NBFC business practices and procedures or circumvented the regulations or directions/
restrictions laid down by the Commission from time to time.
282L. Procedure for amalgamation of NBFCs.—(1) Without prejudice to the provisions

contained in Part IX of this Ordinance, NBFCs may be amalgamated with each other
provided a scheme containing the terms of such amalgamation has been placed in draft
before the shareholders of each of the NBFC concerned separately, and approved by a
resolution passed by a majority in number representing two thirds in value of the
shareholders of each of the said NBFCs, present either in person or by proxy at a
meeting called for the purpose.
(2) Notice of every such meeting as is referred to in sub-section (1) shall be given to
every shareholder of each of the NBFC concerned in accordance with the relevant
articles of association, indicating the time, place and object of the meeting, and shall also
be published at least once a week for three consecutive weeks in not less than two
newspapers which circulate in the locality or localities where the registered offices of the
NBFCs concerned are situated, one of such newspapers being in a language commonly
understood in the locality or localities.
(3) Any shareholder, who has voted against the scheme, of amalgamation at the meeting
or has given notice in writing at or prior to the meeting to the NBFC concerned or the
presiding officer of the meeting that he dissents from the scheme of amalgamation, shall
be entitled, in the event of the scheme being sanctioned by the Commission to claim
from the NBFC concerned, in respect of the shares held by him in that NBFC, their value
as determined by the Commission when sanctioning the scheme and such determination
by the Commission as to the value of the shares to be paid to dissenting shareholder
shall be final for all purposes.

(4) If the scheme of amalgamation is approved by the requisite majority of shareholders
in accordance with the provisions of this section, it shall be submitted to the Commission
for sanction and shall, if sanctioned by the Commission by an order in writing passed in
this behalf be binding on the NBFCs concerned and also on all the shareholders thereof.
(5) Where a scheme of amalgamation is sanctioned by the Commission under the

provisions of this section, the remaining or resulting entity shall transmit a copy of the
order sanctioning the scheme to the registrar before whom the NBFC concerned have
been registered and the registrar shall, on receipt of any such order, strike off the name
of the NBFC hereinafter in this section referred to as the amalgamated NBFC which by
reason of the amalgamation will cease to function.
(6) On the sanctioning of scheme of amalgamation by the Commission, the property of

the amalgamated NBFC shall, by virtue of the order of sanction, be transferred to and
vest in, and the liabilities of the said NBFC shall, by virtue of the said order be
transferred to and become the liabilities of the NBFC which under the scheme of
amalgamation is to acquire the business of the amalgamated NBFC, subject in all cases
to the terms of the order sanctioning the scheme.
282M. Punishment and adjudication of fine or penalty.-(1) Where a penalty or fine

other than fine in addition to, or in lieu of, imprisonment is provided for any offence,
contravention of, or default in complying with, any provision of this Part or rules [or
regulations]128 made thereunder or a directive or order of the Commission or other
officer or authority empowered to issue a directive under any provision of this Ordinance,
the same shall be adjudged and imposed by the Commission or any officer of the
Commission empowered, in writing, to exercise the said powers in respect of any case or
class of cases, either to the exclusion of, or concurrently with, any other officer of the
Commission: Provided that the fine or penalty as aforesaid shall be imposed after giving
the person concerned an opportunity to show cause why he should not be punished for
the alleged offence, contravention, default or non-compliance, and if he so requests,
after giving him an opportunity of being heard personally or through such person as may
be prescribed in this behalf.
(2) No Court shall take cognizance of any offence punishable under section 282 K
except on a complaint in writing made by an officer of the Commission generally or
specially authorized in writing in this behalf by the Commission and no Court other than
the High Court shall try such offence.]

[282N. Rehabilitation of NBFCs and notified entities.—(1) Notwithstanding anything
contained in this Ordinance, the Commission shall have the same powers as are
exercisable by the Federal Government under section 296 for the rehabilitation of a
NBFC or a notified entity which is facing financial or operational problems.
(2) Where in exercise of its powers granted under sub-section (1) the Commission declares
a NBFC or a notified entity as sick, the Commission may, in addition to any other
powers specified in section 296,—
(a) make an application to the Court under section 412 or section 413 and the provisions
contained in sections 412 to 415 shall, mutatis mutandis, apply thereto in all respects;
and
(b) make an application to the Court for declaring any preference, made or done by or
against the NBFC or the notified entity within twelve months before such NBFC or
notified entity is declared sick, as fraudulent as provided in section 408, and the
provisions contained in sections 408 and 409 shall mutatis mutandis apply thereto in all
respects.
(3) Whosoever fails to give effect, or carry out or implement the rehabilitation plan approved
by the Commission or any matter provided therein or any direction issued, shall be
liable to a fine not exceeding ten million rupees and, in case of a continuing failure, to a
further fine not exceeding ten thousand rupees for every day after the first during which
the failure or default continues.]129
Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003
Definitions and Explanations.

NBFC’s mean the companies authorized by Commission to take up any one or
more of the following businesses
1. Investment Finance Services

2. Leasing
3. Housing Finance Services
4. Venture Capital Investments-(Relevant rules etc. for such companies have
been repealed and a new set up named Private Equity and Venture Capital
Fund has been established)
5. Discounting Services
6. Investment advisory services

7. Asset Management Services
8. Any other services notified by federal government
Further the provisions of this part shall also apply to the notified entities which
mean the entities notified by the federal government for this purpose.
Explanation of Services
“investment finance services” include money market activities, capital market

activities, project finance activities, corporate
finance services and general services as
specified by the Commission by notification in
the official Gazette;
Leasing “includes financial services provided on

operating lease or finance lease basis, (in
accordance with applicable International
Accounting Standards) or any other admissible
mode determined by the Commission from time
to time”
Housing Finance Service “means the services related to loans provided

to individuals for the purchase of residential
house or apartment or land including the
facilities availed for the purpose of making
improvements in house or apartment or land”
Discounting Services “means the services relating to the discounting

of financial instruments”
Investment Advisory Services “means the services provided for, managing

portfolios for both individual and institutional
clients and include the business of advising
others as to the value of securities or as to the
advisability of investing in, purchasing or selling
of securities, for remuneration”

Asset Management Services “mean the services provided for management of
collective investment schemes.”
Collective investment scheme “means a closed-end fund and an open end

scheme”.
Open-End Scheme “A scheme constituted by way of a trust deed

that continuously offers for sale its units as
specified in the constitutive document that
entitle the holder of such units on demand to
receive his proportionate share of the net assets
of the scheme less any applicable charges.”
Closed End Fund “means an investment company or a closed-end

scheme”
Closed End Scheme means a scheme constituted by way of trust to

raise funds through issue of certificates to the
public for investing in securities including money
market instruments for a definite or indefinite
period but which does not continuously offer
certificates entitling the holder of such
certificates, to receive, on demand, his
proportionate share of the net assets of the
closed-end scheme
Investment Company “means a company registered with the

Commission under the Ordinance in accordance
with such criteria as may be specified by the
Commission by notification in the official Gazette”
(converted to notified entities through NBFC
Regulations 2008)

Important Definitions (Rule 2)
“asset management services” mean the [business of providing services]1 for

management of collective investment schemes;
“closed-end fund” means an investment company or a closed-end scheme;
“closed end scheme” means a collective investment scheme having a specified period
of maturity which does not continuously offer its certificates for sale to investors and
entitles the holder of certificates, to receive, proportionate share of the net assets of the
closed end scheme:
Provided that existing closed end scheme shall be classified as closed end scheme until
revoked or converted into open end scheme for the purpose of these rules,”;]2
“collective investment scheme” means any arrangement whose sole purpose is the
collective investment of funds in a portfolio of securities, or other financial assets for
profits, income or other returns, and where the participants, who have pooled in the
funds, do not have any day to day control over the management of the scheme, whether
or not they have the right to be consulted or to give direction in respect of such
management:
Provided that the following shall not be considered as a Collective Investment Scheme
for the purpose of these rules:-
(i) employee welfare trusts or gratuity trusts or employees provident funds or employees
pension funds setup for the benefit of employees by companies; and
(ii) any such pool of funds which is separately regulated by the Commission or which is
already established under any specific law;]3
“connected person" in relation to an NBFC or a [notified entity]4, means,-
(a) any person or trust beneficially owning, directly or indirectly, ten percent or more of
capital of the NBFC or the [notified entity]5;
(b) any person able to exercise, directly or indirectly, ten percent or more of the total
voting power in that NBFC or the [notified entity]6;
(c) a [notified entity]7 being managed by an NBFC;

(d) the NBFC managing a [notified entity]8;
[(da) notified entities being managed by the same NBFC;]9
(e) a trustee or custodian of the [notified entity]10;
(f) any person or trust controlled by a person who or which meets the descriptions given
in sub-clause (a) to (e);
(g) any member of the group of which that person, or trust forms part; and
(h) any director or officer of that NBFC or the investment company being managed by
that NBFC or of any of their connected persons as specified in sub-clauses (a) to (g);
“custodian” includes a bank licensed under the Banking Companies Ordinance, 1962
(LVII of 1962) or a trust company which is a subsidiary of such bank or a central
depository company approved by the Commission or an NBFC carrying out investment
finance services provided it has been approved by the Commission to act as custodian
or such other company as may be approved by the Commission to act as custodian;
“discounting services” means the business of discounting of financial instruments on

conventional or Islamic basis;]12
“equity” includes paid up ordinary share capital, preference shares which are
compulsorily convertible into ordinary shares, general reserves, statutory reserves,
balance in share premium account, reserve for issue of bonus shares, subordinated
loans and unappropriated profits, excluding accumulated losses.
Explanation.-
(i) Surplus on revaluation of fixed assets as described in section 235 of the Ordinance,
treasury stocks, intangible assets, deferred tax reserves, and surplus on revaluation of
investments shall not be included in the equity.
(ii) A loan may be classified as subordinated loan if it complies with the following
conditions:-
(a) subordinated loan can be raised from any person, preferably from the sponsors;
(b) rate of profit on subordinated loan, if any shall be decided by NBFC subject to the
clearance of the Commission;

(c) neither the interest nor the principal shall be paid even at maturity if such payment
would result in non-compliance with the equity or capital adequacy requirements;
(d) subordinated loan shall be un-secured and sub-ordinate to all other indebtedness
including deposits;
(e) subordinated loan shall be in the form of cash or liquid assets only;
(f) auditor certificate evidencing injection of funds into NBFC as subordinated loan;
(g) minimum tenor of subordinated loan shall be specifically mentioned; and
(h) prior approval of the Commission is required for repayment of subordinated loan.
(iii) For the purpose of calculating minimum equity requirements for licensing purposes,
the exposure of an NBFC in its subsidiaries and strategic investments shall be deducted
from equity:
Provided that the equity investment in subsidiary and strategic investment shall be taken
at cost.;]14
“finance" means provision of,-

(i) any accommodation or facility on the basis of participation in profit and loss,
musharika or modaraba basis, mark-up or mark-down in price, hirepurchase, lease, rent-
sharing, bills of exchange, promissory notes or other instruments with or without buy-
back arrangement by a seller, participation term certificate, musharika or modaraba
certificate, term finance certificate;
(ii) guarantees, indemnities, letters of credit or any other financial engagement, issued or
undertaken on behalf of a person, with a corresponding obligation of that person;
(iii) a loan, advance, discounting services to any person;
(iv) micro financing including any form of finance such as leases advances, consumer
loans, housing finance;
(v) a financial facility or accommodation provided on the basis of Islamic mode of

financing; and
(vi) any other form of financial facility provided to a person;]15

“financial services company” for the purposes of these rules, means a financial
institution incorporated in Pakistan or outside Pakistan, insurance company, broker i.e. of
stock market or money market or commodities market; a company which is primarily
involved in distribution of securities, insurance products and units or certificates of a
notified entity, and any other company as notified by the Commission in the official
Gazette;]16
“forms of business” means following forms of business as notified in the official

Gazette by the Federal Government or any other form of business which the Federal
Government may, by notification in the official Gazette specify from time to time,
namely:-
(a) asset management services;

(b) discounting services;
(c) housing finance services;
(d) investment advisory services;
(e) investment finance services;
(f) leasing;
(g) pension fund scheme business;
(h) private equity and venture capital fund management services;
(i) REIT management services; and
(j) venture capital investment;]17
“fund management NBFC” means an NBFC licensed by the Commission to

undertake Asset Management Services or REIT Management Services or Pension
Fund Scheme Business or Private Equity and Venture Capital Fund Management
Services or Investment Advisory Services or any combination thereof;]18
“group” means persons, whether natural or legal, if one of them or his close relatives, in
case of a natural person, or, its subsidiary or associated company, if it is a legal person,
have control or hold [direct or indirect]19 substantial ownership interest or have power to
exercise significant influence over the other. For the purpose of this clause the
expression-
(a) subsidiary shall have the same meaning as defined in sub-section (2) of section 3 of
the Ordinance;
(b) control shall have the same meaning as defined [Securities Act, 2015 (III of 2015)]20;

(c) substantial ownership means beneficial shareholding of ten percent by a person or by
close relative; and
(d) “significant influence” refers to the management control of the company or the ability
to participate in financial [operational and risk management]21 policies, either exercised
by representation on the Board of Directors, through partnership or by statute or by
agreement in the policy making process;
“housing finance services” means the business of providing consumer or commercial

Finance on conventional or Islamic basis to a person for the purchase or construction of
house or apartment or for purchase of land and construction thereupon including the
facilities availed for the purpose of making improvements in house or apartment;]22
“investment advisory services” means the services provided for, managing

discretionary or non-discretionary portfolios for both individual and institutional clients
and include the business of advising others as to the value of securities or as to the
advisability of investing in, purchasing or selling of securities, for remuneration;
“investment company” means a company registered with the Commission under

the Ordinance in accordance with such criteria as may be specified by the Commission
by notification in the official Gazette;
“investment finance services” means the business of providing finance on

conventional or Islamic basis;
“leasing” means the business of providing finance on operating lease or finance

lease or Ijarah basis;]24
“major shareholder” means a person who, individually or in concert with his family or
as part of a group, holds ten percent or more shares having voting rights of the paid-up
capital of the company;
“lending NBFC” means an NBFC licensed by the Commission to undertake leasing or

housing finance services or investment finance services or discounting services;
“NBFC” means a non-banking finance company which includes company licensed by

the Commission to carry out any one or more forms of business as specified in clause
(a) of section 282A of the Ordinance;]25

“non-bank micro finance company” means a non-deposit taking NBFC primarily
engaged in the business of Micro Financing as specified by the Commission from time to
time;]26
“Open End Scheme” means a collective Investment Scheme which offers units for sale
based on net asset value on continuous basis without specifying any duration for
redemption and which entitles the holder of such units on demand to receive his
proportionate share of the net assets of the scheme less any applicable charges on
redemption or revocation;]27
“promoter or sponsor” means a person who has made an application to the

Commission to form an NBFC under rule 4 and has contributed initial capital in the
proposed company or a person who replaces him;”
“Private Fund” means an arrangement which has the purpose of pooling funds from
one or more Eligible Investors for investment in a portfolio of securities or other financial
assets for profit, income or other returns and where participants of the funds, neither
have day to day control over the management of fund property, nor the right to give
directions in respect of such management and which is established and operated by
private fund management company:
Provided that for the purpose of these rules following shall not classify as a private fund:
(i) collective investment schemes regulated under the Non-Banking Finance Companies
and Notified Entities Regulations, 2008;
(ii) employee welfare trusts or gratuity trusts or employees provident fund or employee
pension fund setup for the benefit of employees by companies; and
(iii) any such pool of funds which is separately regulated by the Commission or which is
already established under any other specific law.
“private fund management company” means company licensed by the Commission to

provide private equity and venture capital fund management services;
“private equity and venture capital fund management services” means services
provided for management of private funds;]28
“securities broker” means a trading right entitlement certificate holder or “TRE”

certificate holder who, by way of business,

(a) makes or offers to make with any person or induces or attempts to induce any person
to enter into or to offer to enter into, any agreement for or with a view to buying, selling,
exchanging or subscribing for, securities; or
(b) solicits or accepts any order for or otherwise trading in, or effects transactions in,
securities for clients or on its own account;”;]29
“strategic investment” means an investment which an NBFC makes with the intention
to hold it for a period of minimum 5 years and is more than 10% of its equity;]30
Eligibility criteria for the establishment of a NBFC (Rule 3)

A NBFC may be established, if each of its promoters, proposed directors, chief executive
and chairman of the Board of Directors fulfills the terms and conditions mentioned in the
fit and proper criteria as may be specified by the Commission by notification in the official
Gazette and complies with the requirements of the Ordinance, these rules and the
regulations made under the Ordinance.
Permission to form a NBFC (Rule 4)

(1) A person desirous of forming a NBFC [to undertake any form of business]33 shall
make an application to the Commission as set out in Form-1 providing information, as
given in Annexure thereto, along with all the relevant documents and receipt evidencing
the payment of non-refundable processing fee as may be specified by the Commission
by notification in the official Gazette.
(2) The Commission, if it is satisfied that the person seeking permission to form the
NBFC [to undertake any form of business]34 has fulfilled the criteria in terms of rule 3
and the regulations, may permit by an order in writing [ ]35 to establish a NBFC.
[(3) The permission granted under sub-rule (2) shall be valid for a period of six months
unless extended for a maximum period of further three months under special
circumstances, on the application of the promoters made before the expiry of initial six
months During the validity of this permission, the promoters shall get the NBFC
incorporated and submit an application to the Commission for grant of license, after
fulfilling all the conditions specified in these rules.]36
Conditions for grant of license (Rule 5)

[(1) An NBFC or any other company subject to eligibility in terms of schedule I shall
make separate applications to the Commission for grant of license for carrying out each
form of business. The said application shall be submitted to the Commission in Form-II

along with a non-refundable processing fee as may be specified by the Commission by
notification in the official Gazette for each license.
(2) A fund management NBFC shall not be eligible for seeking license for any form of
business allowed to lending NBFC and a lending NBFC shall not be eligible for seeking
license for any form of business allowed to fund management NBFC.
(3) An NBFC or any other company may apply to the Commission for grant of license
subject to eligibility criteria given in Schedule I.
(4) The Commission may issue a license for asset management services to manage only
closed end fund. License granted to an NBFC for investment finance services shall be
valid for undertaking leasing, housing finance services and discounting services and
such an NBFC shall not be required to obtain separate licenses for each form of
business i-e., leasing, housing finance services and discounting services specified in
these rules.
(5) Every other person engaged in any form of business shall within a period of six
months of coming into force of these rules apply in writing to the Commission, for grant
of a license along with a non-refundable processing fee as specified by the Commission
by notification in the official Gazette.]37
Provided that persons already engaged in business of micro financing shall for grant of
license apply in writing to the Commission within six months from the date of publication
of this Notification or such other extended date as may be specified by the Commission
through Notification in the official Gazette:
Provided further that a person shall not be required to obtain license, if engaged in
business of micro financing, but having less than five thousand active borrowers or
having outstanding loan portfolio of less than fifty million rupees:
Provided also that such person should be receiving funding or financing from a bona fide
source such as local or international donor agencies of repute or Federal or Provincial
Governments or their agencies or entities regulated by the Commission or State Bank of
Pakistan or such other sources as specified by the Commission and such providers of
fund shall endeavor to route the funding through proper banking channels and to
oversee its operations so that these are conducted legitimately, as specified by the
Commission.; and
(6) The Commission shall, after making necessary inquiries and after obtaining such

further information, as it may consider necessary, and if it is satisfied that each of its
promoters, directors, chief executive and chairman of the Board of Directors fulfills the
terms and conditions mentioned in the fit and proper criteria, grant license as per Form-
III for one or more forms of businesses subject to compliance of all or any of following
conditions:-
(a) the company fulfills the eligibility criteria given in Schedule I;
(b) the company is not part of a group of companies already holding a license, under
these rules, for the same form of business;
(c) the company meets minimum equity requirements or any other requirement in
lieu of minimum equity requirement as may be prescribed by the Commission for
specific form of business or class of companies by notification in the official Gazette, in
respect of each form of business;
(d) the company has allotted at least twenty five percent of the paid-up share capital
to the promoters;
(e) the company’s promoters or majority shareholders and directors have deposited
their shares with Central Depository Company of Pakistan Limited in an account marked
as blocked and such shares shall not be sold or transferred without prior approval of the
Commission and shall be kept unencumbered:
Provided that directors holding qualifying shares, maximum up to 2 per cent of the total
share capital shall be exempt from this requirement;
(f) the company’s promoters or majority shareholders and directors have given an
undertaking that they shall not enter into any agreement for sale or transfer of their
shares in any manner without prior approval of the Commission;
Provided that directors holding qualifying shares, up to maximum up to 2 per cent of the
total share capital shall be exempt from this requirement;
(g) the company appoints its chief executive who does not hold such office in any other
company except for an investment company being managed by the said company,
provided that prior approval of the Commission has been obtained in this regard;
(h) the company shall not make any change in the Memorandum of Association, other
than increase in the authorized share capital, without prior approval of the Commission;

(i) the company shall comply with the conditions as set out in these rules, the regulations
or any direction given by the Commission;
(j) the company shall furnish evidence to the satisfaction of the Commission that the
personnel employed by it for executive positions, research or other related functions
possess sufficient educational qualifications and professional experience to undertake
the proposed form of business:
Provided that a new company shall furnish the evidence within 90 days of grant of
license;
(k) the company obtaining licenses for multiple forms of business or any company
undertaking any form of business as an ancillary activity must have, other than chief
executive, at least one person responsible for heading each licensed form of business;
(l) the company incorporated as NBFC in accordance with criteria mentioned in rule 4
shall not undertake any other activity except the licensed activity; and (m) the company,
its promoters and major shareholders, its chief executive and its directors shall furnish
separate undertakings to the Commission that they shall comply in letter and spirit with
the requirements of the Ordinance, these rules, the regulations made under the
Ordinance and the directions issued by the Commission:
Provided that the Commission may, impose additional conditions or grant time to the
company for compliance with any of the above conditions as it deems appropriate:
Provided further that the Commission may further extend the time granted to the
company for compliance.]38
(7) Without prejudice to the conditions prescribed under sub-rule (6) above, the
Commission may, while granting license, impose such additional conditions, as it may
deem necessary.
[(7a) If a company fails to commence business within the period as specified by the
Commission while issuing license, the license shall be deemed to be cancelled unless
the specified period is extended by the Commission on the application made by the
company.]39
(8) The license granted [ ]40 shall be valid for three years41 from the date of its issuance
and shall be renewable upon expiry of the said period by making an application at least

one month prior to the expiry as set out in Form IV along with payment of a fee as
specified by the Commission by notification in the official Gazette.
(9) The Commission may, after making such inquiry and after obtaining such further
information, as it may consider necessary, renew the license[ ]42, for three years43 in
Form V on such conditions, as it may deem necessary:
Provided that till such time that the license is renewed, the existing license shall be
deemed valid for the purposes of these rules and the regulations unless the company
fails to apply as specified in sub-rule (8) and fulfill all the requirements to the satisfaction
of the Commission for the [renewal]44 of a license:
Provided further that if the company fails to apply within the stipulated time period and
fulfills all the requirements to the satisfaction of the Commission its license shall stand
cancelled and the Commission may initiate further proceedings to give effect to the
cancellation.
[(10) Without prejudice to the terms and conditions prescribed in rule 7, the Commission
may, subsequent to the grant or renewal of license, impose any other condition as it may
deem necessary in the public interest.]45
[ ]46
Conditions applicable to a NBFC (Rule 7)

(1) A NBFC shall,
(a) maintain such books of accounts and other records, as prescribed under the
Ordinance, as shall depict a true and fair view of its state of affairs, including,__
(i) journals, cash books and other records of original entry forming the basis of entry in
any ledger;
(ii) ledgers (or other comparable record) reflecting assets, liabilities, income and
expenses along with all supporting documents or records;
(iii) ledgers (or other comparable record) showing securities in the portfolio;
(iv) record of transactions with banks;
(v) record of the meetings of the board of directors and all relevant committees including
the audit committee, credit committee and investment committee; and

(vi) original record of all reports, analysis and memoranda containing investment advice
distributed;
(b) maintain such books of accounts and other records, as prescribed under the
Ordinance, to depict a true and fair view of its state of affairs for a period of not less than
ten years;
(ba) ensure that its statutory auditors are from the approved list of auditors circulated by
the Commission;
(c) appoint an individual, having minimum three years experience, as its financial or chief
accounting officer who is-
(i) a chartered accountant; or

(ii) a cost and management accountant; or
(iii) a member of a recognized foreign accountancy organization; or
(iv) a person having master’s degree in commerce or business administration with
specialization in finance,
[Provided that a non-deposit taking and unlisted lending NBFC may designate another
officer as its financial or chief accounting officer;]47
(ca) appoint [as internal auditor]48;
[(i) a person having minimum three years relevant experience who is-]49
(a) a chartered accountant; or
(b) a cost and management accountant; or
(c) a certificated internal auditor; or
(d) a certified information system auditor; or
(e) a member of recognized foreign accountancy organization; or
(f) an individual having master degree in commerce or business administration with
specialization in finance; or
(ii) a chartered accountancy firm having satisfactory Quality Control Review (QCR) and
not being the statutory auditors to whom this function is outsourced[.]50
[Provided that the internal auditor shall report directly to the board of directors or the
audit committee of the board of the NBFC.]51
(cb) appoint a person as compliance officer to ensure reporting to the Commission of

status of compliance with the existing regulatory framework by the NBFC[:
Provided that a non-deposit taking and unlisted Lending NBFC may designate another
officer as its compliance officer;]52
(cc) appoint such executives who shall fulfill the terms and conditions mentioned in
the fit and proper criteria specified by the Commission by notification in the official
Gazette;
[(cd) appoint the directors in accordance with Schedule I, provided that the Commission
shall be the final authority to determine the status of a director as independent or
otherwise;]53
(d) prepare its accounts in conformity with the International Accounting Standards
notified under sub-section (3) of section 234 of the Ordinance and technical releases
issued by Institute of Chartered Accountants of Pakistan from time to time;
[(da) furnish to the Commission its quarterly and annual financial statements in
accordance with Schedule I;]54
(g) follow directions issued to protect NBFCs against their involvement in money
laundering activities[, terrorist financing]56 and other unlawful trades;
(h) [obtain rating in accordance with Schedule-I]57 as and when it becomes eligible
for rating as per the rating criteria of a rating agency registered with the Commission,
and such rating shall be updated at least once every financial year:
Provided that the NBFC shall within one year of the decrease in its rating from the grade
specified by the Commission by notification in the official Gazette, obtain a fresh rating
and during the period that its rating is below the grade so specified, the NBFC may be
allowed by the Commission to continue its operations on such conditions as are deemed
appropriate by the Commission;
[(i) publish the rating in its annual report and quarterly reports, annual and quarterly
reports of the collective investment schemes managed by it, if applicable, and any
advertisement and brochures in relation to promotion of its business;]58 and
(j) acquire and maintain membership of the relevant association and follow the code
of conduct specified by the said association approved by the Commission.”;
[(k) seek registration of notified entities as per the regulations notified by the Commission
in the Official Gazette before offering of unit, certificates or shares of notified entities:]59

(2) A NBFC shall not,
(a) appoint as directors [those]60 persons who hold such office in any other NBFC
licensed for the same form of business.
Provided that this clause shall not apply to the nominees of the Federal or Provincial
Governments on the board of any NBFC or, any exception specified by the Commission;
(aa) appoint or change its chief executive or any of its directors subject to fulfillment of
the fit and proper criteria and prior approval of the Commission provided that the
Commission may refuse appointment of any person[ ]61;
Explanation.- This clause shall not apply to a director nominated by the Federal
Government or Provincial Governments;
[(b) enter into premises leasing or renting, and sale or purchase of any kind with their
directors, officers, employees or their close relatives or any person acting on their behalf
or such persons who either individually or in concert with family members beneficially
own 10% or more of the equity of the NBFC:
Provided that this restriction shall not apply to such NBFCs that have a policy to this
effect duly approved by their board of directors:
Provided further that in case of any sale and purchase to the directors the prior approval
in writing of the board, excluding the participation of the beneficiary directors, is
required;]62
[(ba) hold or make investment in a subsidiary other than that which is a financial services
company:
Provided that an NBFC may make strategic investments in financial services company
with the approval of the Commission;]63
Provided further that non-banking microfinance companies may set up non-financial

subsidiaries with intimation to the Commission, whose business is conducted so as to
supplement or complement the community service objective of the non-bank
microfinance company:

Provided also that the conditionalities and modalities pertaining to these investments
shall be specified by the Commission and any exceptions thereto shall be decided by the
Commission on case to case basis;.
[(c) form, sell or transfer ownership of shares in subsidiary or associated company,

merge with, acquire or takeover any other company unless it has obtained prior approval
of the Commission in writing to such formation or sale or transfer;]64
[(ca) sell strategic investment unless it has obtained prior approval of the Commission in
writing to such sale;
(cb) merge with, acquire or takeover any other company unless it has obtained prior
approval of the Commission in writing to such scheme of merger, acquisition or
takeover;]65 [ ]66
(f) remove any of its records or documents relating to its business from Pakistan to a
place outside Pakistan without the prior permission of the Commission;
[(h) make aggregate investment in shares of unlisted company in excess of twenty

percent of its equity. Investment in unlisted company shall be approved in a board
meeting after carefully analyzing the merits and financial impact of the investment and
recording the decision in detail in minutes of the meeting and such decisions shall be
communicated to the Commission within fourteen days of the board meeting along with
copy of the minutes:
Provided that the NBFC shall not own shares of any one unlisted company in excess of
ten per cent of its own equity or of the issued capital of that company, whichever is less:
Provided further that investment by an NBFC out of its surplus equity (i.e. over and
above the required minimum equity requirements) in unlisted shares of its subsidiaries or
any other financial services company in the group, shall not be taken into account for
calculating the limit for unquoted shares;]67
(i) offer any of its own or other securities for any consideration other than cash [or liquid
assets]68 nor make any loan or advance against these securities. Unless otherwise
specified by the Commission by notification in the official Gazette;
(j) hold, deal or trade in real estate except for the use of NBFC itself or where specified
by the Commission by notification in the official Gazette[:

Provided that properties acquired by lending NBFC in satisfaction of its claims shall be
disposed of within a maximum period of seven years from the date of acquisition;]69
[(k) raise deposits in any form by whatever name called except as specified by the
Commission in the Non-Banking Finance Companies and Notified Entities Regulations,
2008;]70
(l) provide unsecured facilities or exposures except as specified by the Commission by

notification in the official Gazette; [and]71
(m) encumber or mortgage or pledge or transfer clients’ assets deposited as security
with the NBFC against any facility extended to the client, for securing its own
obligation[.]72
(n) undertake the brokerage business in capital market except by forming a separate
company for this purpose73.
[ ]74
[(3) An NBFC shall comply with such minimum equity requirement or any other
requirement in lieu of minimum equity requirement as may be prescribed by the
Commission from time to time for specific form of business or class of companies by
notification in the official Gazette.]75
Non-Banking Finance Companies and Notified Entities Regulations, 2008
Important Definitions (Regulation 2)

“Asset Management Company” means an NBFC licensed by the Commission to
provide asset management services;
“Borrower” means a person who has obtained Finance from an NBFC];

“Collective Investment Scheme” means any arrangement whose sole purpose is
the collective investment of funds in a portfolio of securities, or other financial assets for
profits, income or other returns, and where the participants, who have pooled in the
funds, do not have any day to day control over the management of the scheme, whether
or not they have the right to be consulted or to give direction in respect of such
management:
Provided that the following shall not be considered as a Collective Investment Scheme
for the purpose of these regulations:-
(a) employee welfare trusts or gratuity trusts or employees provident funds or

employees’ pension funds setup for the benefit of employees by companies; and

(b) any such pool of funds which is separately regulated by the Commission or which is
already established under any specific law;]
“Closed End Fund” means an Investment Company or a Closed End Scheme;
“closed end scheme” means a collective investment scheme having a specified period
of maturity which does not continuously offer its certificates for sale to investors and
entitles the holder of certificates, to receive, proportionate share of the net assets of the
closed end scheme:
Provided that existing closed end scheme shall be classified as closed end scheme until
revoked or converted into open end scheme for the purpose of these regulations;]
“Constitutive Documents” means the trust deed, Offering Document and other
principal documents governing the formation of a Closed End Scheme or an Open End
Scheme, including all related material agreements;
“Consumer Financing” means the financing allowed to individuals for meeting their
personal, family or household needs.]
“Consumer Leasing” means any leasing allowed to individuals for meeting their
personal, family or household needs;
“Contingent Liabilities” mean, - (a) a possible obligation that arises from past events,
the existence of which will be confirmed only by the occurrence or non-occurrence of one
or more uncertain future events not wholly within the control of the entity; or
(b) a present obligation that arises from past events but is not recognized on the books
of the NBFC and Notified Entity because:
(I) it is not probable that an outflow of resources embodying economic benefits will be
required to settle the obligation; or
(II) the amount of the obligation cannot be measured with sufficient reliability and
includes letters of credit, letters of guarantee, bid bonds or performance bonds, advance
payment guarantees and Underwriting Commitments;]
“deposit taking NBFC” means a lending NBFC with a valid permission to raise
Deposits or have outstanding Deposits on its books;

“discount house” means an NBFC licensed by the Commission to provide discounting
services.
“Distributor” means a person who performs distribution function for Collective

Investment Schemes;]
“Equity of the Borrower” includes paid-up capital, general reserves, balance in share
premium account, reserve for issue of bonus shares and retained earnings or
accumulated losses, revaluation reserves on account of fixed assets and Subordinated
Loans:
Explanation: (i) Revaluation reserves will remain part of the equity for first three years
only, from the date of asset revaluation, during which time the borrower will strengthen
its equity base to enable it to avail facilities without the benefit of revaluation reserves.
However, if a borrower gets revaluation during the three years period, the borrower will
be allowed the benefit from fresh revaluation, to the extent of increase in revaluation
reserves, but restricting the benefit of such incremental value to 3 years only. Similarly, if
after 3 years, the borrower again gets revaluation of the assets with resultant addition in
their value, the benefit of such revaluation may also be allowed for the next 3 years,
again to the extent of increase in revaluation reserves.
(ii) For a loan to be classified as subordinated loan, the following conditions shall be met:
(a) Subordinated loan shall be un-secured and sub-ordinate to NBFC indebtedness; and
(b) Subordinated loan shall be documented by a formal subordination agreement

between the provider of the loan and the Borrower that the loan is subordinate to NBFC
claim;]
“Exposure” includes Finance, subscription to or investment in securities, debt

instruments, units or certificates or shares of a Notified Entity , placements, deposits with
Financial Institutions, derivatives, Margin Trading System (MTS) or any mechanism that
replaces it, but does not include:
(a) obligations under letters of credit and letters of guarantee to the extent of cash
margin held by an NBFC;
(b) Finance provided to financial institutions through REPO transactions with underlying
statutory liquidity requirement eligible securities;

(c) deposits in current and savings accounts other than term deposits;]
“finance” means provision of,-

(a) any accommodation or facility on the basis of participation in profit and loss,
musharika or modaraba basis, mark-up or mark-down in price, hire-purchase, lease,
rent-sharing, bills of exchange, promissory notes or other instruments with or without
buy-back arrangement by a seller, participation term certificate, musharika or modaraba
certificate, term finance certificate;
(b) guarantees, indemnities, letters of credit or any other financial engagement, issued or
undertaken on behalf of a person, with a corresponding obligation of that person;
(c) a loan, advance, discounting services to any person;
(d) micro financing including any form of Finance such as leases, advances, consumer
loans, housing finance;
(e) a financial facility or accommodation provided on the basis of Islamic mode of

financing; and
(f) any other form of financial facility provided to a person;]
“Housing Finance Company” means an NBFC licensed by the Commission to provide

housing finance services;
“Investment Advisor” means an NBFC licensed by the Commission to provide

investment advisory services;
“Investment Company” means a company registered with the Commission in

accordance with these Regulations;
“Investment Finance Company” means an NBFC licensed by the Commission to

provide investment finance services;
“Leasing Company” means an NBFC licensed by the Commission to provide leasing;
“Margin Financing” means Margin Financing as defined in sub-rule (k) of rule 2 of

Securities (Leveraged Markets and Pledging) Rules, 2011;]

“Micro Financing” means Finance provided to a poor person or microenterprise;
“Microenterprises” means projects or businesses in trading or manufacturing or

services or agriculture that lead to livelihood improvement and income generation. These
projects or businesses are undertaken by micro entrepreneurs who are either self-
employed or employ few individuals not exceeding 10 (excluding seasonal labour);]
“Net Assets”, in relation to a collective investment scheme, means the excess of assets
over liabilities of the collective investment scheme, such excess being computed in the
manner provided in these regulation;
“non-deposit taking NBFC” means a Lending NBFC which does not have a permission
to raise Deposits;]
“Non-Discretionary Portfolio” means a portfolio of securities and deposit with financial

institution managed by an Investment Advisor under an agreement entered into with the
client on a duly notarised stamp paper of applicable value whereby investment decisions
are executed by the Investment Advisor on written instructions of the client;]
“Notified Entity” means a company or class of companies or corporate body or trust or

any other entity or person notified by the Federal Government in the official Gazette;
“Offering Document” means a published document containing information on a

Collective Investment Scheme to invite the public for purchase of certificates or units in
that scheme;
“Open End Scheme” means a collective Investment Scheme which offers units for sale
based on net asset value on continuous basis without specifying any duration for
redemption and which entitles the holder of such units on demand to receive his
proportionate share of the net assets of the scheme less any applicable charges on
redemption or revocation;]
“small enterprise” and “medium enterprise”, (together referred to as the SME)”,

includes,-
(a) small enterprise:- a business entity not a public limited company that has annual
turnover up to Rs. 150 million and employees (including contractual) up to 50; and
(b) medium enterprise:- a business entity that has annual turnover of more than Rs. 150
million and up to Rs. 800 million and number of employee (including contractual)

between 51 to 100 for trading entity and between 51 to 250 for manufacturing or service
entity.]
“Unlisted Equity Security” means an equity security not listed or quoted on a stock
exchange.
“Unsecured” means the Exposure without any security or collateral.]
Application of this part.- (Regulation 3)

The provisions of this part shall apply to the following form of business,-
(i) Asset Management Services
(ii) Leasing;
(iii) Discounting Services;
(iv) Housing Finance Services;
(v) Investment Advisory Services; and
(vi) Investment Finance Services;]
Prevention of NBFCs involvement in money laundering, terrorist financing and

other illegal trades.– (Regulation 9)
(1) All NBFCs shall ensure prevention of money laundering and other illegal trades and
abide by such laws, directives and circulars as may be issued by the Federal
Government or the Commission to safeguard the NBFC against involvement in money
laundering activities and other illegal trades.
(2) Notwithstanding the generality of Regulation 9(1) an NBFC shall comply with the
following conditions, -
(a) it shall determine the true identity of the prospective customer or investor before
extending its services and care shall be taken to establish beneficial ownership of all
accounts and those using safe custody.;
For the purpose of this regulation, customer means a person who has placed a Deposit
with the Lending NBFC or has invested in the units or certificates of a Notified Entity or
has obtained Finance from a Lending NBFC or has any business relationship with the
NBFC or Notified Entity.
(b) it shall accept money from a customer only after ensuring that an account has been
opened in the name of the customer using the account opening form developed by the
respective industry associations in consultation with the Commission;

(c) it shall establish effective procedures for obtaining identification from new customers
and devise a policy to ensure that business transactions are not conducted with persons
who fail to provide evidence of their identity;
(d) it shall conduct its business in conformity with the Rules and these Regulations and
shall not offer services or provide any assistance in transactions which, in the opinion of
the NBFC, are associated with illegal activities or relating to terrorist financing from
legitimate or illegal means;
(e) it shall establish effective procedures for monitoring of customer accounts on a

regular basis, checking identities and bonafide of remitters and beneficiaries of
transactions and retain record of transactions; and
(f) it shall not make payment or receive amounts in cash exceeding Rs.50,000/-.
Provided that the above limit shall not apply to cash payments made for repayment of
Finance by an existing borrower.
(3) All transactions into or from the account maintained with the NBFC which are not
usual transactions shall be thoroughly scrutinized and properly investigated by the
NBFC.]
Procedure for 39[ ] approval for appointment 40[or re-appointment] of directors

and chief executives.- (Rule 10)
An NBFC shall follow the following procedure for obtaining approval of appointment 41[or
re-appointment] or any change of its directors or chief executive, -
42[(a) in case of election of directors in the Annual or Extraordinary General Meeting, the
NBFC, 10 days before the date of the meeting in which election of directors is to be held,
shall submit an application for the individuals seeking to contest the elections whether
they are retiring directors or otherwise;
43[(aa) within ten days from the date of election of directors in a general meeting, the
NBFC shall submit an application for appointment or reappointment of chief executive;]
44[(b) in case of occurrence of any casual vacancy in respect of a director or a chief

executive, the NBFC shall submit an application within ten days;]
(ba) in case the Board of Directors of an NBFC decides to remove its chief executive
before the expiration of his term of office or the chief executive decides to tender his

resignation before the completion of his term of office or replacement of Chief Executive
on completion of his term, the NBFC shall 45[immediately inform the Commission] along
with reasons for the same:
Provided that the NBFC shall, within 46[a period of ten days], submit an application
complete in all respects, for obtaining approval for appointment of the new chief
executive;]
(c) the application shall be submitted in compliance with the requirements of Schedule IX
and be accompanied by information and documents required therein; and
(d) any deficiency or shortcoming in the information or documents submitted by the

NBFC to the Commission shall be rectified by the NBFC within 14 days of the issue of
the letter by the Commission informing the NBFC of the deficiency or shortcoming:
Provided that where the NBFC does not remove the deficiency or shortcoming, the
Commission may close the matter.
Limit on aggregate liabilities of an NBFC.- (Regulation 15B)

(1) Aggregate liabilities, excluding contingent liabilities and security deposits, of a non-
deposit taking NBFC shall not exceed ten times of its equity 59[:
Provided that for an NBFC engaged exclusively in the business of issuance of

guarantees to enhance the quality of debt instruments issued to finance infrastructure
projects in Pakistan, the aggregate liabilities, excluding contingent liabilities and security
deposits shall not exceed ten times of its equity and qualified capital and for this purpose
the Commission may specify, through circular, qualified capital and its terms and
conditions.]
(2) Contingent Liabilities of an NBFC shall not exceed the limits prescribed below:
Credit Rating Maximum Limit
AA- and above 2 times of equity
A- to A+ 1.5 times of equity
BBB+ 0.5 times of equity
60[Provided that for an NBFC engaged exclusively in the business of issuance of

projects in Pakistan, contingent Liabilities shall not exceed the 10 times of the equity and
qualified capital and for this purpose the Commission may, through circular, specify the
qualified capital and its terms and conditions.]

Provided that the following shall not constitute contingent liabilities for the purpose of this
regulation,-
(a) non-fund based Finance to the extent covered by liquid assets;
(b) non-fund based finance where the payment is guaranteed by the Federal
Government, Provincial Government, Financial Institution rated AA by a credit rating
agency registered with the Commission; and
(c) claims other than those related to provision of Finance (fund based or non-fund
based) to the NBFCs’ constituents, where the probability of conversion of these claims
into liabilities is remote in the view of the Auditor.
Creation of reserve fund.– (Regulation 16)

61[A deposit taking lending] NBFC shall create a reserve fund wherein at least 20% of
the after tax profits of the NBFC shall be credited till the time that the reserve fund equals
the amount of the paid up capital of the NBFC and thereafter a sum not less than 5% of
its after tax profits shall be credited to the reserve fund.
Explanation. - Issuance of bonus shares may be made from the reserve fund after
appropriation made under Regulation 16 however the NBFC shall transfer further
amounts to the reserve fund in order to comply with the requirements of Regulation (16).
Maximum Exposure of NBFC to a single person, or Group.- (Regulation 17)

(1) The total outstanding Exposure (fund based and non-fund based) by an NBFC to a
person shall not at any time exceed twenty per cent (20) of the equity of an NBFC (as
disclosed in the latest financial statements):
Provided that the maximum outstanding fund based Exposure does not exceed fifteen
per cent (15) of the equity of an NBFC 63[:
Provided further that for an NBFC engaged exclusively in the business of issuance of
projects in Pakistan, the total outstanding Exposure (fund based and non-fund based) by
an NBFC to a person shall not at any time exceed forty per cent (40%) of the equity (as
disclosed in the latest financial statements) and Qualified Capital and for this purpose the
Commission may, through circular, specify qualified capital and its terms and conditions:
Provided also that this relaxation shall be applicable to the NBFC as mentioned above:
(i) for the first [five (5)] years of its operations; and

(ii) for total outstanding Exposure in relation to finance raised otherwise from the public]
64[:
Provided further that an infrastructure finance company and a non deposit taking NBFC
that is not involved in retail lending and provides finance to other NBFCs or financial
institutions, may exceed the above limits by up to five percent and ten percent of its
equity, respectively.
Explanation:- For the purposes of this regulation, the infrastructure finance company
means an NBFC that deploys at least seventy per cent of its total assets in infrastructure
finance for the infrastructure projects, which the Commission may notify through circular
and is compliant with minimum equity and CAR requirement.]
(2) The total outstanding Exposure (fund based and non-fund based) by an NBFC to any
group shall not exceed twenty five per cent (25) of the equity of an NBFC (as disclosed
in the latest financial statements):
Provided that the maximum outstanding fund-based Exposure does not exceed twenty
per cent (20) of the equity of an NBFC:
Provided further that the limits prescribed in sub-regulation (1) and (2) shall not be
applicable to exposure taken by an NBFC in its own subsidiaries out of its surplus equity
65[:
Provided further that for an NBFC engaged exclusively in the business of issuance of
projects in Pakistan, the total outstanding Exposure (fund based and non-fund based) to
any group shall not exceed fifty per cent (50%) of the equity (as disclosed in the latest
financial statements) and Qualified Capital and for this purpose the Commission may,
through circular, specify qualified capital and its terms and conditions:
Provided also that this relaxation shall be applicable to the NBFC as mentioned above:
(i) for the first [five (5)] years of its operations; and
(ii) for total outstanding Exposure in relation to finance raised otherwise from the public]
66[:
Provided further that an infrastructure finance company and a non-deposit taking NBFC
that is not involved in retail lending and provides finance to other NBFCs or financial

institutions, may exceed the above limits by up to five percent and ten percent of its
equity, respectively.]
67[(3) In case of micro financing, the following Exposure limits shall be applicable:
(a) Poor Person

Rs.1,500,000 for housing loan;
Rs.500,000 for general loans other than housing loan;
(b) Microenterprise
Rs.1,500,000]
(4) Exposure under this Regulation shall be calculated as under, -

(a) hundred per cent (100) of the deposits placed with the lending NBFC, under
perfected lien, shall be deducted from Exposure;
(b) ninety per cent (90) of the following shall be deducted from Exposure, -
(i) deposits with any other financial institution or scheduled bank rated at least A or
equivalent by a credit rating agency registered with the Commission, under perfected
lien; and
(ii) encashment value of Government Securities and National Saving Scheme securities
deposited by the Borrower with the lending NBFC as collateral;
(c) 85% of the unconditional financial guarantees, payable on demand, issued by the
scheduled banks rated at least ‘A’ or equivalent by a credit rating agency registered with
the Commission, accepted as collateral by NBFCs shall be deducted from the Exposure;
(d) thirty per cent (30) of listed Term Finance Certificates and Sukuks and shares of the
KSE 100 index companies held as security with duly marked lien shall be deducted:
Explanation.- The TFCs and Sukuks to qualify for this purpose should have been rated at
least ‘A’ or equivalent by a credit rating agency registered with the Commission;
(e) seventy five per cent (75) of the Encashment Value of a Life Policy issued by an A-
rated insurance company, duly assigned and endorsed in favor of the lending NBFC
using it as a Security”; and
(f) the following weightage will be applicable in respect of placements with financial
institutions,-

(i) 10% weightage on Exposure to financial institutions with ‘AAA’ Rating;
(ii) 25% weightage on Exposure to financial institutions rated at least ‘AA‘;
(iii) 75% weightage on Exposure to financial institutions rated at least ‘A’.]
68[(5) This regulation, with exception of sub-regulation (4), shall not apply to an NBFC
not accessing Public Funds in Pakistan.
Explanation:- Public Funds include public deposits, inter-corporate deposits, bank

finance and all funds received whether directly or indirectly from outside sources such as
funds raised by issue of debentures, commercial papers, etc. Further, indirect receipts of
public funds means funds received not directly but through associates and group entities
which have access to public funds;]
Maintenance of Capital Adequacy Ratio (‘CAR’).- (Regulation 17A)

A deposit taking NBFC shall be required to maintain CAR of eight per cent (8) for the first
two years from coming into force of these regulations and ten per cent (10) for
subsequent years as per the criteria given in Schedule IXA.
Asset Liability Management System. – (Regulation 17B)

The board of directors of a deposit taking NBFC shall approve a policy for effective
monitoring of the NBFC’s assets and liabilities profiles for managing liquidity risks by
containing mismatches (running total) in maturity of assets and liabilities across all time
buckets by establishing internal prudential limits.
Exposure Limits in Capital Market.- (Regulation 17C)

(1) An NBFC’s aggregate exposure in listed equity securities (in the ready as well as in
futures market), and spread transactions shall not exceed fifty percent of its equity.
Explanation:- For the purpose of this Regulation “spread transactions” mean such
transactions where shares of one company are purchased on one settlement date and
simultaneously sold on another settlement date, that will be considered as one
transaction:
Provided that the above condition shall not be applicable on non-deposit taking NBFCs.
(2) An NBFC’s investment in equity securities of any company shall not exceed ten
percent (10) of the paid-up capital of the investee company or ten per cent (10) of its own
equity, whichever is less and the shares acquired in excess of the ten per cent limit, due

to the Underwriting Commitments, shall be sold off within a period of six months from the
date of acquisition of such shares:
Provided that the amount of provisions created against permanent diminution shall be
deducted from the cost of acquisition of equity investments and the maximum limit:
Provided further that the above restriction shall not be applicable to investments made by
an NBFC in its own subsidiaries and long term strategic investments out of surplus
equity.
Explanation:- For the purpose of this Regulation “investments in equity securities” shall
be valued at cost of acquisition for the purpose of calculating the above limit.]
Limit on clean placements.- (Regulation 18)

An NBFC shall make clean placement only with financial institutions rated at least A- or
equivalent by a credit rating agency registered with the Commission:
Provided further that the aggregate Exposure of Deposit taking NBFC shall not exceed
its equity.
Explanation. For the purpose of this Regulation “clean placement” means Exposure
without taking any security or collateral.]
Classification and Provisioning for non-performing assets. (Regulation 25)

(1) A Lending NBFC shall observe the criteria for classification of its assets and
provisioning as provided in Schedule X 82[:
Provided that after adoption and implementation of IFRS 9, the requirements of IFRS 9
shall be applicable]
(2) In addition to time based criteria provided in Schedule X subjective evaluation of

performing and non-performing Finance shall be made for risk assessment and where
considered necessary the category of classification determined on the basis of the
aforementioned time based criteria shall be further downgraded:
Provided that such evaluation shall be carried out on the basis of adequacy of security
inclusive of its realizable value, cash flow of the Borrower or lessee, operations in the
account and records covering advances and credit worthiness of the Borrower or lessee.

(3) The status of classification of a rescheduled or restructured non-performing Finance
shall be changed only when the terms and conditions of the rescheduled or restructured
Finance are fully met for a period of at least six months (excluding grace period, if any)
from the date of such rescheduling or restructuring and when at least 20% of the
outstanding amount (principal and mark up) is recovered in cash:
Provided that the above condition of six months retention period shall not apply if the
Borrower repays or adjusts at least 50% of the restructured or rescheduled loan amount
(principal and markup) in cash either at the time of restructuring agreement or later-on
during the grace period if any.
(4) An NBFC shall ensure that the status of classification and provisioning of a
rescheduled or restructured non-performing Finance is not changed in its reports to the
Commission merely due to rescheduling or restructuring of a Finance and rescheduled
or restructured Finance shall be reported to the Credit Information Bureau as such and
not as default.
(5) Where the Borrower subsequently defaults (either on principal or mark-up) after the
rescheduling or restructuring of the non-performing Finance the NBFC shall classify the
Finance in the same category as it was in at the time of rescheduling or restructuring and
NBFC may further downgrade the classification after taking into account the applicable
criteria stated in Schedule X.
(6) At the time of rescheduling or restructuring, an NBFC shall reconsider, re-examine

and record in detail the viability of the project or business and shall accordingly obtain a
revised business plan, latest CIB report and endeavor to obtain additional security to
protect its interests.
(7) A Lending NBFC shall take benefit of realizable value of assets held as collateral
against non-performing Finance as per criteria given in Schedule XI;
(8) Subjective evaluation of investment portfolio and other assets shall be carried out by
the NBFC. Classification of such assets and provisioning required against them shall be
determined by keeping in view the risks involved and the requirements of the
International Accounting Standards as notified by the Commission under Section 234(3)
of the Ordinance and the Technical Releases issued by the ICAP, from time to time.
(9) An NBFC shall review, at least on a quarterly basis, the recovery of their Finance,
portfolio and shall properly document the evaluations so made:

Provided that shortfall in provisioning, if any, determined as a result of quarterly
assessment, shall immediately be provided in the books of accounts by the NBFC.
(10) The external auditors as a part of the annual audit of the NBFC shall verify that all
requirements under these Regulations or any other circular issued by the Commission
for classification of assets and determination of provisions required against them have
been complied with.]

Chapter 5, 5A and 5B of Rule Book of Pakistan Stock Exchange:

CHAPTER 5 of Rule Book of Pakistan Stock Exchange

1. LISTING OF COMPANIES AND SECURITIES REGULATIONS
Chapter 5A of Rule Book of Pakistan Stock Exchange

2. REGULATIONS GOVERNING LISTING AND TRADING OF EQUITY SECURITIES
OF SMALL AND MEDIUM ENTERPRISES (SMEs)
Chapter 5B of Rule Book of Pakistan Stock Exchange

3. LISTING OF DEBT SECURITIES REGULATIONS

Chapter 5 of Rule Book:
LISTING OF COMPANIES AND SECURITIES REGULATIONS
5.1. DEFINITIONS:
5.1.1. In this chapter, unless there is anything repugnant in the subject or context:
(a) “Book Runner”, shall mean a Brokerage House or a Scheduled Bank duly licensed
by the Commission as an Underwriter and appointed as Book Runner by the
Issuer/Offeror;
(b) “Defaulters’ Segment”, shall mean a separate segment of companies, which have
committed irregularities mentioned in clause 5.11.1;
(c) “Final Prospectus”, shall mean the prospectus containing all the information &
disclosures as required under the Securities Act, 2015 together with disclosure of the
Strike Price and results of the Book Building process;
(d) “Floor Price”, shall mean the minimum price set by the Issuer/Offeror for offer of
shares;
(e) “General Public”, shall mean all individual and Institutional Investors including both
Pakistani (residents & non-residents) and foreign investors;
(f) “High Net Worth Individual Investor (HNWI)”, shall mean an individual investor who
applies or bids for shares of the value of Rs.1,000,000/- or above in the Book Building
process;
(g) “Investment Finance Company”, shall mean an investment finance company as

defined in the Non-Banking Finance Companies (Establishment and Regulation) Rules,
2003;
(h) “Institutional Investor”, shall mean an investor who is not an individual and includes
both local and foreign institutional investors;
(i) “Lead Manager”, shall mean a Consultant to the Issue duly licensed by the
Commission and appointed as Lead Manager by the Issuer/Offeror;

(i).a. “Listing Committee”, shall mean a committee comprising of at least seven
members including at least three external members for review and approval of the
prospectus and the listing application;
(i).b. “Listed Shell Company”, shall mean any Listed Company, classified by the
Exchange with reasons to be recorded in writing, as a Listed Shell Company for the
purposes of Reverse Merger on the basis of erosion of its equity, no or nominal
business operations in its principal line of business as per Memorandum of Association
or no or nominal assets;
(j) “Member” means a member as defined in the Companies Ordinance, 1984;
(k) “Offeror”, shall mean a person who directly or indirectly holds more than 10% of any
shares of a public limited company or a body corporate and offer for sale such shares,
in full or in part, to the General Public;
(l) “Offer Price”, shall mean the price per share at which shares are offered for sale to
the General Public. This may either be the Strike Price or a price at a certain discount to
the Strike Price;
(l).a. “Operating Unlisted Company”, shall mean an unlisted company currently in

operation which is intending to merge with a Listed Shell Company;
(m) “Preliminary Prospectus”, shall mean the prospectus approved by the Commission
under section 87(2) read with section 88(1) of the Securities Act, 2015 and issued to the
Institutional Investors and HNWIs for the Book Building process;
(n) “Prescribed”, means prescribed by these Regulations or under authority hereof;
(o) “Public Issue/Offer”, shall mean issue/offer of shares by an Issuer/Offeror to the

General Public;
(p) “Regulations”, shall mean this chapter of the PSX Regulations for the time being in
force;
(p).a. “Reverse Merger”, shall mean any transaction pursuant to which an Operating
Unlisted Company becomes a Listed Company by merging with and into a Listed Shell
Company;
(q) “Step Bid”, shall mean a series of limit bids at increasing prices;

(r) “Surviving Company”, shall mean the Listed Company survived pursuant to scheme
of arrangement of an Operating Unlisted Company with a Listed Shell Company
approved by the relevant competent authority;
5.1.2. Words or expressions defined in the Ordinance and the Securities Act, 2015
shall, except those defined herein or where the subject or the context forbids, bear the
same meanings as in the Ordinance and the Securities Act, 2015 or either of them and
in the case of word or expression bears different meanings under the Ordinance and the
Securities Act 2015, that meaning which is carried or included in the Ordinance shall
prevail and have preferred application.
5.2. LISTING OF COMPANIES AND SECURITIES:

5.2.1. DEALING IN THE SECURITIES OF A COMPANY AT THE EXCHANGE:
(a) No dealings in securities of a company shall be allowed on the Exchange, either on
the Ready Delivery Contract Market or Futures Counter, unless the company or the
securities have been listed and approval for such dealing has been granted in
accordance with the Regulations.
(b) The approval under sub-regulation 5.2.1.(a) may be granted upon an application
made by the company or in respect of the securities in the manner prescribed. The
Board itself or through the Listing Committee constituted by the Board for this purpose
review and approve the prospectus and the listing application. Prior to granting its
approval, the Board or the Listing Committee, as the case may be, examine the
proposed issue from various aspects including eligibility requirements and suitability of
the issuer or the security for listing considering the interest of the general public and its
benefits to the capital market. In order to assess the suitably aspect, the exchange may
ask for any additional information from the issuer and the Consultant to the Issue
including financial projections, future strategies of the issuer, experts report, etc.
Explanation: The term suitability with regard to the listing of securities includes
assessing various risks involved such as sector risk, operational risk, legal risk, etc.,
track record of the sponsors, quality and capability of the management, past financial
performance of the issuer, future strategies of the issuer, dividend pay-out history of the
group’s listed companies, if any, financial projections, financial viability, dividend policy,
etc. among other things, sufficiency of public interest in the company or the securities.
(c) The Exchange shall decide the application within a maximum period of forty-five (45)
calendar days from the date of receipt of the additional information and documents
required, if any. In case the approval is refused, after providing an opportunity of making

a representation before the approving authority, the reasons thereof will be
communicated to the applicant and the Commission within two weeks of the decision.
(d) The Board or the Listing Committee will be the sole authority to grant, defer or refuse
such approval subject only to two-third majority of the members present at such meeting
of the committee or the Board.
Provided that quorum for meeting of the Listing Committee shall be four members
comprising at least two external members.
Provided further that in case of refusal by the Listing Committee, the applicant company
may file an appeal before the Board against the decision of the Listing Committee.
(e) The Exchange shall maintain a panel of the external experts representing each
sector of the economy. At least two experts shall be retained on the panel from each
sector.
5.2.2. LISTING PROCESS AT THE EXCHANGE:

(a) The application for approval of listing shall be made on Form-I by the applicant
company and shall be accompanied by the documents as mentioned in Appendix-I to
this chapter.
Provided that copy of the complete application shall be submitted to the Commission for
its record.
(ab) The Exchange has an option to visit the applicant company’s head office, factory,
plant, and/or premises to know the listing applicant and its business.
(ac) The Exchange shall place the draft prospectus on its website for a period of seven
working days and shall notify the same, for seeking public comments. The Exchange
shall ensure that all comments received on the draft prospectus are incorporated and
suitably addressed by the Consultant to the Issue and the issuing company to its
satisfaction.
(ad) The Exchange shall submit the application to the Listing Committee for its
consideration and approval.
(ae) The Exchange, before appointing any external expert on the Listing Committee for
a specific issue, shall obtain declaration on conflict of interest from such expert.

(b) The Exchange may require such additional evidence declarations, affirmations,
information or other forms to be filled up as it may consider necessary and all such
requisitions shall be deemed as prescribed requisitions for the purpose of a proper
application for consideration by the Exchange for approval of listing.
(c) If an application together with the additional information referred to in sub-clause
5.2.2.(b) is not submitted, the Exchange may defer consideration or decline to consider
it in which case such application will stand disposed-off as refused. However, the
applicant may move a fresh application after six months from the date of refusal unless
the Exchange otherwise decides.
(d) An applicant company or security applying for listing shall furnish full and authentic
information in respect thereof and such other particulars as the Exchange may require
from time to time. All routine particulars may be called for by the Secretary.
5.2.3. THE EXCHANGE SHALL NOT ENTERTAIN LISTING APPLICATION OF A

COMPANY:
(a) If any overdue/past due payment to a financial institution, irrespective of amount, is

appearing in the overdue column of the latest CIB report of the company, its chief
executive, directors, sponsors/promotors, substantial shareholders, associated and
group companies and undertakings and the companies, firms, sole proprietorships, etc.
where the chief executive, directors, sponsors/ promotors and substantial shareholders
are interested as chief executive, director (other than nominee director), owner or
partner, etc. Provided that this condition may be waived of where:
(i) Amount overdue is under litigation and the same is also appearing as amount under
litigation in CIB report, or
(ii) No overdue payment appears in the overdue column in the subsequent latest CIB
Report.
Provided that condition (a) shall not apply in case of listing of open-end mutual funds.
Provided further that the condition (a), (b) and (d) shall not apply to nominee directors of
the Government and Financial Institutions.
(b) Whose promoters/ sponsors/ controlling directors are also promoters/ sponsors/
controlling directors in other Listed Companies, which are in the Defaulters’ Segment.
Further, no person shall be allowed to act as sponsor/controlling director of the

applicant, if such person has remained sponsor/controlling director of a company which
was delisted and non-compliant of any provision of this Chapter at the time of its
delisting. The company shall also submit a list of its promoters/sponsors/controlling
directors containing details of directorship in existing companies as well as the
directorship of each director held in the past.
(c) Which is a wholly owned subsidiary company, of a Listed Company which is in the
Defaulters’ Segment.
(d) Which is an associated company of any other Listed Company which is in the
Defaulters’ Segment.
Provided further that the condition (a), (b) and (d) shall not apply to nominee directors of
the Government and Financial Institutions.
5.2.4. The loan amounting to Rs.500,000 or more written-off by a financial institution

during last five years be disclosed in the prospectus.
5.3. UNDERTAKING:
5.3.1. No listing of a company or security shall be approved unless the applicant
company provides an undertaking on Form-II to abide by these Regulations.
5.3.2. The company and/or the authorized representative, as the case may be, shall
further undertake:
(a) that the securities shall be quoted on the Ready Delivery Contract Market and/or the
Futures Counter at the discretion of the Exchange;
(b) that the Exchange shall not be bound by the request of the company to remove its
securities from the Ready Delivery Contract Market and/or the Futures Counter;
(c) that the Exchange shall be authorized and have the right, at any time and without
serving notice if it be deemed proper, to suspend or to remove any shares or securities
from the Ready Delivery Contract Market and/or the Futures Counter for any reason
which the Exchange considers sufficient in public interest subject to the procedure laid-
down in the Securities Act, 2015;
(d) that such provisions in the articles of association of a company or in any declaration
or basis relating to any other security as are or otherwise not deemed by the Exchange
to be in conformity with the Regulations shall, upon being called upon by the Exchange,

be amended forthwith and until such time as these amendments are made, the
provisions of these Regulations shall be deemed to supersede the articles of
association of the company or the nominee relating to the other securities to the extent
indicated by the Board for purpose of amendment;
(e) that none of the directors, sponsors and substantial shareholders of the applicant
company has been the sponsor or substantial shareholder in any company, which:
(i). is in the Defaulters’ Segment; or
(ii) was delisted by the Exchange due to its non-compliance of any applicable provision
of PSX Regulations; or
(iii) whose TRE Certificate has been cancelled or forfeited by the Exchange, PMEX or
any other registered stock exchange of Pakistan that existed prior to integration of stock
exchanges pursuant to Integration Order number 01/2016 dated January 11, 2016
issued by the Commission due to non-compliance of any applicable rules, regulations,
notices, procedures, guidelines etc.
(f) that none of the Sponsors, substantial shareholders, directors or management of the
company as well as the company itself or its associated company/entity have been
found guilty of being engaged in any fraudulent activity. The company has made full
disclosure regarding any/or all cases in relation to involvement of the person named
above in any alleged fraudulent activity which is pending before any court of law,
regulatory body, investigation agency in or outside of the country;
(g) that the company or the security may be de-listed by the Exchange in the event of
non-compliance and breach of undertaking given hereunder.
5.4. OFFER OF CAPITAL BY COMPANIES/MODARABAS TO THE GENERAL PUBLIC:
5.4.1. In case of offer of capital by the issuing company by way of IPO or offer for sale,
the allocation to General Public shall be as under:
(a) FOR COMPANIES SEEKING LISTING:
(i) In case post-issue paid-up-capital of the company is up to Rs.500 million, the

allocation of capital to the General Public, excluding premium amount and Pre-IPO
placement, if any, shall not be less than 25% of the post-issue paid-up capital of the
company.

(ii) In case post-issue paid-up-capital of the company is above Rs.500 million, the
allocation of capital to the General Public, excluding premium amount and Pre-IPO
placement, if any, shall be at least Rs.125 million or 12.5% of the post-issue paid-up-
capital, whichever is higher. Such company, will however, be required to subsequently
enhance the quantum of public shareholding to 25% within next four years of its listing
through:
i. Issuance of new shares to public through prospectus; or

ii. Offer for sale of shares held by the promoters to public through prospectus; or
iii. Sale of shares held by the promoters through the secondary market; or
iv. Sale of shares to employees under the Employees Stock Option Schemes; or
v. Any other method as may be allowed by the Exchange with the approval of the
Commission.
(b) FOR COMPANIES ALREADY LISTED:
In case of an already listed company at the Exchange, the size of offer of capital shall
not be less than Rs.100 million.
Explanation: For the purpose of this clause, the term “size of the offer” means the
product of the offer price and the number of shares being offered.
5.4.2. The Issuer or the Offeror, as the case may be, may allocate share capital up to
twenty percent (20%) of the public offer to overseas Pakistanis. The amount should be
subscribed through proper banking channel.
Provided that in case of under subscription in either of the categories i.e., the quota
allocated to resident or non-resident Pakistanis, the unsubscribed portion will be
allocated to the applicants of other category.
5.4.3. The Issuer or Offeror, as the case may be, may allocate share capital up to five
percent (5%) of the public offer to its employees of the company whose shares are
offered.
5.4.4. In the case of a Modaraba applying for listing on the Exchange, thirty percent
(30%) of the total Paid-up capital shall be subscribed by the sponsors or their
associates or friends, relatives and associated undertakings and the balance of seventy
percent (70%) shall be offered to the General Public.

Provided that the Exchange, if it is satisfied that it is not practicable to comply with the
requirements of any of the above regulations in a particular case or class of cases may,
for reasons to be recorded, relax the regulations subject to approval of the Commission.
5.4.5. THE ALLOCATION OF SHARE CAPITAL:
The shares shall be allotted or allocated to any persons including sponsors or

employees in the manner and with such terms and conditions as prescribed under the
Public Offering Regulations, 2016.
5.4.6. OFFER/ISSUE THROUGH BOOK BUILDING:
In case where the shares of the company are issued/offered through Book Building, it
shall comply with the requirements as prescribed in the Public Offering Regulations
2016.
5.5. PROSPECTUS, ALLOTMENT, ISSUE AND TRANSFER OF SHARES:

5.5.1. No Company will be listed unless it is registered under the Ordinance as a public
limited company and its minimum paid-up capital is Rs.200 million.
5.5.2. The Companies registered in Northern Areas and Azad Jammu and Kashmir will
be eligible for listing and will be treated at par with Companies registered in Pakistan.
5.5.3. Despite receiving the application for approval of listing and any preliminary
actions thereon, no company shall be listed unless it has made a public issue which is
subscribed by not less than 500 applications.
5.5.4. The requirements of sub-section 5.5.1. or 5.5.3. shall not apply to listing of
Securities other than shares of Companies unless any law so requires or the Federal
Government in the exercise of its powers under the Securities Ordinance so directs.
5.5.5. The Companies may make a public offer of securities to be eligible securities in
the CDS.
5.5.6. In all the prospectuses/offer for sale, the following disclosures must be made:
(a) The audited accounts to be incorporated in the Prospectus / Offer for sale document
which shall not be older than 6 months from the date of publication of the Prospectus /
Offer for sale document.

(b) Break-up value of the shares on the basis of the latest audited account supported by
a certificate from the auditors.
(c) In the financial plan, the amount of interest/mark-up/financial charges during pre-
production period shall be shown separately.
(d) A brief write-up of each of the directors and CEO of the company along with
academic qualification and relevant experience.
(e) Detail of project, if any, like status of civil work, break up of plant and machinery, its
cost, made, supplier, status i.e. new or used, ordered, shipped, reached at site,
installed, etc. Total project cost, means of financing, cost incurred, Project
implementation schedule, expected date of trial production and commercial production
etc.
(f) Any other disclosure which the Exchange may require for the benefit of the investors.
5.5.7. APPROVAL OF PROSPECTUS:
(a) The prospectus shall be submitted to and approved by the Exchange before an
application for its approval is made to the Commission. The Exchange may require
additional information, data, certification or requirement to be included in the
prospectus. If any applicant fails to comply with such requirements, the Exchange may
refuse to issue approval under these Regulations.
(b) The prospectus shall conform to and be in accordance with the requirements and
provisions of the Securities Act, 2015 and any other law or legal requirement for the
time being applicable. The application made to the Commission shall, amongst other
things, be accompanied by the approval given by the Exchange under sub-regulation
5.5.7.(a) above.
(c) Without prejudice to the foregoing, the prospectus or the offer for sale shall fulfill all
requirements of the law and instructions of the Commission as well as the criteria for
listing and the guidelines laid down by the Exchange from time to time, not being
inconsistent with law or instructions of the Commission.
(d) The prospectus with the proforma application form shall be published by the
company in at least one widely circulated English and Urdu daily newspaper each at
Karachi, Lahore and Islamabad or as the Exchange may in addition require, at least 7

(seven) days in advance but not more than 30 (thirty) days before the date of the
opening of the subscription list.
(e) The issuer shall make available to the Exchange and to bankers to the issue for
distribution printed copies of prospectus or offer for sale and application forms for
shares in the quantity to be determined by the Exchange and the bankers. The
company shall also accept applications on identical forms.
(f) The applications for shares shall be accepted only through bankers to the issue,
whose names shall be included in the prospectus or the offer for sale.
(g) The directors or the offerors, as the case may be, shall not participate in subscription
of shares offered to the general public.
(h) The company shall, where required, submit, progress report on implementation of
the project, with breakup of the proceeds utilized, on quarterly basis till commencement
of the commercial production or operation of the project, to the securities exchange for
public dissemination.
5.5.8. The share certificates shall be issued in such marketable lots or in any other
manner as may be determined or approved by the Exchange.
5.5.9. The application money shall be refunded, within such time as is prescribed in
regulation 5.5.10.(d), if the company is not listed at the Exchange for any reason
whatsoever or the listing is refused.
5.5.10. SUBSCRIPTION PROCESS:
(a) The company shall inform the Exchange of the subscription received which
information shall be communicated in writing under the hand of an authorized person
with certificate(s) from bankers to the issue, within three (3) working days of the closing
of subscription.
(b) Within 10 days of the close of public subscription period, the company shall allocate
shares against the accepted and successful applications and the subscription money of
the unsuccessful applicants shall be refunded.
(c) In case the application for listing is refused by the Exchange, for any or whatsoever
reasons, the company shall forthwith pay without surcharge all moneys received from
applicants in pursuance of the prospectus or the offer for sale and any such director of

the company shall be, jointly and severally, liable to repay that money with surcharge at
the rate of one and half percent (1-1/2%) for every month or part thereof from the
expiration of the fifteenth (15) day.
(d) In case of over-subscription, the company, or the Offerors, as the case may be, shall
immediately submit to the Exchange copies of the ballot register of successful
applications.
(e) The company shall credit and dispatch all shares certificates, in marketable lots,
within ten (10) days of the closing of subscription list to all the successful applicants
under intimation to the Exchange.
Provided that where the security has been declared to be an eligible security, share
certificates shall be issued by the company and deposited directly into the CDS in such
manner as may be prescribed by the CDC provided the applicant has provided his CDC
account on the application form.
5.5.11. BROKERAGE TO TRE CERTIFICATE HOLDERS:
The Company or the Offeror, as the case may be, shall, within thirty (30) days of closing
of subscription list, pay brokerage to the TRE Certificate Holders of the Exchange at a
rate not more than one percent (1%) of the value of the shares actually sold through
them.
5.5.12. SPLIT/CONSOLIDATION OF PHYSICAL INSTRUMENTS:
(a) The Company shall split allotment letters and letters of right into marketable lots
within seven (7) days of receipt of such application.
(b) The Company shall consolidate or split, as may be required by a Security holder in
writing certificates into marketable lots within thirty (30) days of receipt of such
application. In case the split/consolidation results in lots other than marketable lots, the
company may charge an amount, which shall not exceed Rs.100/- for each certificate.
5.5.13. VERIFICATION OF SIGNATURE AND PHYSICAL TRANSFER:
(a) The Company shall verify the signature of shareholders within forty eighty (48) hours
of such a request.

(b) The Company shall complete shares transfer and have ready for delivery the share
certificates lodged for registration of transfer within forty five (45) days of the application
for such transfer and its registration.
5.5.14. CLOSURE OF SHARE TRANSFER BOOKS:
(a) A company, excluding open-end mutual funds, may close its share transfer books for
any purpose and shall give a minimum of fourteen (14) days’ notice to the Exchange
prior to closure of Share Transfer Books.
Provided that the Companies quoted on the Futures Counter shall intimate to the
Exchange the dates of their book closure and corporate actions, if any, on or before
twentieth (20th) day of the month with a notice period of at least twenty one (21) days
after the said twentieth (20th) day for commencement of book closure.
(b) The Company shall treat the date of posting as the date of lodgment of shares for
the purpose for which shares transfer register is closed, provided that the posted
documents are received by the Company before relevant action has been taken by the
Company.
(c) The Company shall issue transfer receipts immediately on receiving the shares for
transfer.
(d) The Company shall not charge any transfer fee for transfer of shares.
(e) The Company shall provide a minimum period of seven (7) days but not exceeding
fifteen (15) days at a time for closure of Shares Transfer Register, for any purpose, not
exceeding 45 days in a year as a whole.
5.5.15. No listed Company shall exercise any lien whatsoever on fully paid shares and
nor shall there be any restriction on transfer of fully paid shares. The same shall apply
to all listed Securities.
5.6. DIVIDENDS, ENTITLEMENTS AND DISCLOSURE OF PRICE-SENSITIVE

INFORMATION:
5.6.1. DISCLOSURE OF PRICE-SENSITIVE INFORMATION:
(a) Every Listed Company shall immediately disseminate to the Commission and the
Exchange all price-sensitive information relating to the business and other affairs of the

listed company that may affect the market price of its shares in the manner prescribed
by the Exchange from time to time. The said information shall be communicated to the
Exchange prior to its release to any other person or print / electronic media.
The price-sensitive information may include but shall not be limited to:
(i) any material change in the nature of business of the company due to technical,
strategic, manufacturing, or marketing related changes, opening of new line of business
or closure of any existing line of business, either partly or fully;
(ii) information regarding any joint ventures, merger, demerger, restructuring, acquisition
or any material contract entered into or lost;
(iii) all decisions of the Board of Directors of the company relating to cash dividend,
bonus issue, right issue or any other entitlement or corporate action, buy back of
securities or voluntary delisting;
(iv) purchase or sale of significant assets, franchise, brand name, goodwill, royalty,
financial plan, etc.;
(v) any undisclosed revaluation of assets including impairment of assets due to any
reason;
(vi) delay or loss of production due to strike, fire, natural calamities, major breakdown,
etc.;
(vii) a major change in borrowings including projected gains to accrue to the company;
(viii) issue or redemption of securities or any change in the terms of issued securities;
(ix) material change in ownership of the company;
(x) any default in repayment, rescheduling or restructuring of loans or breach of loan

agreement by the company;
(xi) default, delay, rescheduling or restructuring in payment of markup, profit, interest or

rent etc., as the case may be and in redemption of principal amount in respect of Debt
Securities issued by a Listed Company along with reasons thereof;
(xii) change in directors, Chairman, CEO or auditors of the company;

(xiii) fraud/default by the company or fraud/default/arrest of its directors, CEO or
executives;
(xiv) initiation of winding up proceedings against the company or any of its

associated/subsidiary company;
(xv) non-renewal of license by the Commission or any other relevant licensing authority
along with reason(s) of the non-renewal; and
(xvi) any other information that is deemed price sensitive information.
Explanation: Such information shall be disseminated to the Commission and the

Exchange as soon as any decision about above referred matters or any other significant
issue is taken by the board or a significant matter requiring disclosure has come into the
knowledge of the company’s management.
(b) Whenever a listed Company becomes aware or is made aware of any rumor or
report containing material information that is likely to affect market price of its listed
Securities or trading volume, which is in any form whatsoever and howsoever, including
that of being broadcasted/presented through the electronic media and not limited to an
article/news or otherwise, published in a newspaper, newswire, magazine, or any other
publication, the Company should clarify / confirm or deny the rumor or false information
and set forth the facts sufficient to clarify the same in writing to the Exchange, within
one (1) day of such publication / broadcast.
In the event that the Exchange enquires from the Issuer concerning unusual
movements in the price or trading volume of its Securities or any related matters, the
Issuer shall respond promptly to the Exchange by giving sufficient information as is
available to the Issuer in order to clarify its position.
(c) Intimation of dividend and of all other entitlements shall be sent to the Exchange not
later than fourteen (14) days prior to commencement of the book closure.
(d) Where any director, CEO, substantial shareholder or executive of a Listed Company
or their spouses sell, buy or take any beneficial position, whether directly or indirectly, in
shares of the Listed Company of which he/she is a director, CEO, substantial
shareholder or executive, as the case may be, he/she shall immediately notify in writing
to the Company Secretary. Such director, CEO, substantial shareholder or executive, as
the case may be, shall also deliver a written record of the price, number of shares, form
of share certificates, (i.e., whether physical or electronic into Central Depository

System), and nature of transaction to the Company Secretary within two days of
effecting the transaction. The Company Secretary shall immediately forward the same
to the Exchange for its dissemination to all concerned. The notice of the director, CEO,
substantial shareholder or executive, as the case may be, shall also be presented by
the Company Secretary at the meeting of the board of directors immediately
subsequent to such transaction. In the event of default by a director, CEO or executive
to give a written notice or deliver a written record, the Company Secretary shall place
the matter before the board of directors in its immediate next meeting.
Provided that each listed company, excluding open-end mutual funds, shall determine a
closed period prior to the announcement of interim/final results and any business
decision, which may materially affect the market price of its shares. No director, CEO or
executive shall, directly or indirectly, deal in the shares of the listed company in any
manner during closed period. The closed period shall start from the day when any
document/statement, which forms the basis of price sensitive information, is sent to the
board of directors and terminate after the information is made public. Every listed
company shall advise its directors about the closed period at the time of circulating
agenda and working papers for the board meetings, along with sending intimation of the
same to the Exchange.
Explanation: For the purpose of clause 5.6.1 (a) and 5.6.1 (d), the expression
“executive” means the CEO, Chief Operating Officer, Chief Financial Officer, Head of
Internal Audit and Company Secretary by whatever name called, and other employees
of the company for whom the board of directors will set the threshold to be reviewed on
an annual basis and disclosed in the annual report.
(e) Where Exchange receives any information from an acquirer under section 110 of the
Securities Act 2015, the Exchange, upon receipt of such information, shall immediately
disseminate the same to all concerned.
5.6.2. NON COMPLIANCE WITH DISCLOSURE OF MATERIAL INFORMATION TO

THE EXCHANGE:
(a) In case a Listed Company or Issuer of a Listed Security fails to communicate the
complete financial results timely, or any other price sensitive information immediately, it
will make the company liable to pay penalty at a minimum of Rs.100,000/- (Rupees one
hundred thousand only) and maximum up to Rs.1,000,000/- (Rupees One million only)
to be determined by the Exchange.

(b) In case a Listed Company or Issuer of a Listed Security fails to communicate the
accurate/complete financial results, or any other price sensitive information, the Chief
Executive Officer (CEO) as well as Chief Financial Officer (CFO) of such Listed
Company or Issuer will be liable to pay a penalty to be determined by the Exchange.
Provided that the amount of such penalty shall not be less than Rs.100,000/- (Rupees
one hundred thousand only) and shall not exceed Rs.1,000,000/- (Rupees one million
only).
5.6.3. Every Listed Company and Issuer of Listed Security shall send to the Exchange
its quarterly and annual financial results, in the manner prescribed by the Exchange
from time to time.
5.6.4. PROVISION OF STATUTORY REPORTS, AUDITED ACCOUNTS, NOTICE,

RESOLUTION AND QUARTERLY REPORTS TO THE EXCHANGE:
(a) The Company shall send/transmit to the Exchange its statutory report, annual report
containing therein the audited financial statements, auditors’ report, directors’ report and
the chairman’s review report, in the manner prescribed by the Exchange not later than
twenty one (21) days before a meeting of the shareholders is held to consider the same.
(b) The Company shall transmit to the Exchange all notices as well as resolutions prior
to their publication and dispatch to the shareholders and also file with the Exchange
certified copies of all such resolutions as soon as these have been adopted and
become effective.
(c) The Company shall send/transmit to the Exchange its quarterly accounts in the
manner prescribed by the Exchange from time to time and within the time stipulated
under the Companies Act, 2017.
5.6.5. DISPATCH OF DIVIDEND WARRANTS:
(a) Every listed Company shall:
(i) dispatch the interim and final dividend warrants to the shareholders concerned within
the time lines specified in section 251 of the Ordinance;
(ii) dispatch the interim and final dividend warrants to the shareholders by registered
post or through courier services unless those entitled to receive the dividend require
otherwise in writing;

(iii) intimate the Exchange immediately as soon as all the dividend warrants are posted
to the shareholders.
(b) All dividend warrants, in addition to the place of the Registered office of the issuing
companies, shall be en-cashable at Karachi, Hyderabad, Sukkur, Quetta, Multan,
Lahore, Faisalabad, Islamabad, Rawalpindi and Peshawar for a period of three (3)
months from the date of issue.
5.6.6. SUSPENSION OF TRADING IN THE SHARES OF A LISTED COMPANY

PURUANT TO SCHEME OF MERGER/ AMALGAMATION/ RECONSTRUCTION:
Where a Listed Company enters into a scheme of reconstruction of the company/

companies or amalgamation of any two or more Listed Companies or division/ splitting
of a Listed Companies into one or more companies, pursuant to the order of the Court,
Commission or State Bank of Pakistan as per the Scheme of Merger/ Amalgamation/
Reconstruction already notified by the Exchange, the Exchange on announcement of
final dates of closure of share transfer registers by the Listed Company for determining
the entitlement, shall suspend trading in the shares of the Listed Company being
merged as per the Exchange’s trading schedule already notified. The Exchange, as the
case may be, shall also issue a separate notice for delisting of the merged Listed
Company upon fulfilment of the applicable requirements.
5.7. ANNUAL GENERAL MEETINGS/ANNUAL REVIEW MEETINGS, ETC.:
5.7.1. HOLDING OF MEETING:
(a) All listed companies shall obtain prior approval of the Exchange in respect of the
date and time of holding of its annual general meetings.
(b) A listed Company shall hold its annual general meetings and lay before the said
meetings its financial statements within four (4) months following the close of financial
year. Each Modaraba shall hold an annual review meeting of its certificate holders and
lay before the said meeting its financial statements within four (4) months following the
close of its financial year.
Provided that it shall be mandatory for a Company to notify the Exchange of any
extension in time of holding the Annual General Meeting by furnishing to the Exchange
a copy of the letter of approval from the Commission allowing such extension, within 48
hours of receipt of the same.

5.7.2. FURNISHING OF MINUTES OF MEETING AND OTHER INFORMATION:
(a) The company shall furnish certified true copies of minutes of its Annual General
Meeting and of every extraordinary general meeting to the Exchange within sixty (60)
days of such meeting.
(b) The Company shall furnish to the Exchange a complete list of all its security holders
as at 31st December in each calendar year, duly affirmed to be correct as and up to that
date, within thirty (30) days thereof.
(c) Every listed company or issuer of a listed security shall:
(i) ensure that requisite input into the CDC free-float functionality is entered in a timely
manner to enable the Exchange to access the number and break-up of Free-Float
shares of the company on quarterly basis i.e. as on March 31, June 30, September 30
and December 31 each year, within fifteen (15) days of close of each quarter.
(ii) submit directly to the Exchange along with the annual audited accounts as
prescribed in clause 5.6.4.(a) of the PSX Regulations, an annual Free-Float certificate
duly verified by the auditor, in the format specified by the Exchange.
The CDC shall notify to the Exchange late/non-submission of quarterly Free-Float

information by any listed company within the timeframe specified in clause (i) above, for
initiating necessary action as provided in the PSX Regulations.
(d) A company or an issuer of a Listed Security which fails to communicate the correct
details of Free-Float of shares shall be liable to pay a penalty of Rs. 5,000/- per day
from the date of first communication of such details till the correct details are
communicated.
5.8. INCREASE OF CAPITAL AND ALLIED ISSUES:
Every listed Company shall immediately advise the Exchange of all decisions taken by
its board of directors regarding any change in authorized, issued or paid-up capital, by
issue of bonus shares, right shares or reduction of capital, etc.

5.8.1. THROUGH ISSUING OF ENTITLEMENT LETTERS OR RIGHT OFFERS:
(a) A listed Company shall issue entitlement letters or right offers in marketable lots to
all the Security holders within a period of thirty (30) days from the date of re-opening of
security transfer register of the company closed for this purpose.
Provided that this regulation shall not apply on the Security which is eligible to be
deposited into CDS. In such cases, the procedure as prescribed by the CDC shall be
complied with.
(b) The company shall pay the following fees for extension granted by the Exchange
with regard to issuance of entitlement letters, etc.
(i) for the first fifteen (15) days Rs. 250/- per day
(ii) for the next fifteen (15) days Rs. 500/- per day
Failure to seek extension from the Exchange shall make the company liable to a penalty
at double the rate of extension fee provided above.
Provided that extension shall not be granted beyond 30 days.
5.8.2. THROUGH ISSUING OF BONUS SHARES:
(a) A listed Company shall issue bonus shares certificates within a period of thirty (30)
days from the date of re-opening of the share transfer register closed for this purpose:
(i) Bonus shares shall be credited into the respective CDS Accounts of shareholders
maintained with the CDC or dispatched to the shareholders concerned by registered
post or through courier services unless those entitled to receive the bonus share
certificates require otherwise in writing;
(ii) The Exchange shall be immediately intimated as soon as the bonus shares are
credited / dispatched to the shareholders;
Provided that in case of Book-Entry Securities deposited into the CDS, in addition to the
above, procedure as prescribed by the CDC shall also be complied with.

5.9. LISTING OF SUBSIDIARY COMPANY AND OTHER MATTERS:
5.9.1. SPECIE DIVIDEND OF SUBSIDIARY COMPANY:
(a) A listed company distributing shares of its unlisted subsidiary company in the form of
specie dividend, right shares or any similar distribution, shall get such subsidiary
Company listed on the Exchange within a period of one hundred twenty (120) days from
the date of approval of such distribution by the shareholders at a meeting of such
company.
(b) In case of failure of such subsidiary company to apply for listing or refusal by the
Exchange for such listing on account of insufficient public interest, or for any other
reason whatsoever, the Company distributing specie dividend shall en-cash the shares
of the subsidiary company at the option of the recipients at a price not less than the
current break-up value, or face value, whichever is higher, within thirty (30) days from
the expiry of one hundred twenty 120 days or from the date of refusal of listing
whichever is earlier, failure in which behalf shall be default in which event the trading in
the shares of the listed Company be suspended by the Board or the company de-listed.
5.9.2. A listed Company shall obtain prior clearance of the Exchange for any
amendment proposed to be made in its memorandum and articles of association before
the same are placed for the approval of the shareholders.
5.9.3. Every listed company shall advise the Exchange of:
(a) the decision to issue Participation Term Certificates and the purpose thereof
notwithstanding that application is to be made to the authorities later;
(b) submit copy of the application made to authorities with relevant details and certified
copy of the consent order.
All material particulars of the Participation Term Certificates including conditions

governing the issue, details of guarantee/ securities, trustees and name of the
subscribing institution(s).
5.9.4. Every listed company and issuer of listed security shall notify to the Exchange at
least 1 week in advance the date, time and place of its board meeting specially called
for consideration of its quarterly and annual accounts or for declaration of any
entitlement for the security holders in the manner prescribed by the Exchange from time
to time.

5.9.5. Where no trading has taken place on the Exchange in the securities of a listed
company for a continuous period of 180 days, the Exchange, if it is satisfied that the
prices quoted are not in accordance with the market realities, may except in cases
where the earlier quotation is below par value and, with the prior approval of the
Commission, quote such companies at par from the one hundred and eighty first day
irrespective of the price earlier prevalent.
5.10. QUALITY OF AUDIT:

5.10.1. All listed companies shall facilitate the Quality Control Review (QCR) of the audit
working papers of practicing chartered accountants, carried out by the Institute of
Chartered Accountants of Pakistan (ICAP) and, therefore, shall authorize their auditors
to make available all the relevant information including the audit working papers to the
QCR Committee of ICAP.
5.10.2. (a) No listed company shall appoint or continue to retain any person as an
auditor, who has been found guilty of professional misconduct, by the Commission or by
a Court of Law, for a period of five years unless a lesser period is determined by the
Commission. In case a firm has been appointed as an auditor, and if any of its partners
has been held guilty of professional misconduct, the firm shall only be eligible for
appointment as an auditor provided a written confirmation is given by the firm to all the
stock exchanges of the country and the Commission with a copy to ICAP to the effect
that such a partner shall not be engaged in the audit of any listed company for the
specified period.
(b) A person appointed as an auditor shall be guilty of “professional misconduct” if he:
(i) fails to report a material misstatement or fact known to him and non-disclosure of
which may render the financial statements misleading or disclosure of which is
necessary in his professional capacity;
(ii) fails to obtain sufficient information to warrant the expression of an opinion or his
exceptions are sufficiently material to negate the expression of an opinion;
(iii) makes a statement which is misleading, or deceptive;
(iv) incites any one to commit a criminal offence, or helps or encourages anyone in
planning or execution of a criminal offence which is committed;

(v) agrees with anyone to prevent or obstruct the course of justice by concealing,
destroying or fabricating evidence by a misleading statement which he knows to be
untrue;
(vi) deceives any person, either by making a statement, which he knows to be false, or
by suppressing matters relevant to a proper appreciation of its significance;
(vii) expresses his opinion on financial statements of any business or enterprise in

which he, his firm or a partner in his firm has substantial interest;
(viii) is penalized under any of the provisions of the Companies Ordinance, 1984 in
relation to his function as an auditor of a listed company; and
(ix) is guilty of any other act which is determined as professional misconduct by the
Commission in relation to his function as an auditor of a listed company.
5.10.3. A listed company shall not appoint or continue to retain any person as an
auditor, who is engaged by the company to provide services that are prohibited or if a
person associated with the auditor is, or has been, at any time during the preceding one
year engaged as a consultant or advisor or to provide any services that are prohibited.
Explanation:
For the purposes of this regulation, the expression “associated with” shall mean any
person associated with the auditor, if the person:
(a) is a partner in a firm, or is a director in a company, or holds or controls shares

carrying more than twenty percent of the voting power in a company, and the auditor is
also partner of that firm, or is a director in that company or so holds or controls shares in
such company; or
(b) is a company or body corporate in which the auditor is a director or holds or controls
shares carrying more than twenty percent of the voting power in that company or has
other interest to that extent.
Explanation: For the purposes of this regulation the services that are “prohibited
services” shall mean the following:
(a) Preparing financial statements, accounting records and accounting services;

(b) Financial information technology system design and implementation, significant to
overall financial statements;
(c) Appraisal or valuation services for material items of financial statements;
(d) Acting as an Appointed Actuary within the meaning of the term defined by the
Insurance Ordinance, 2000;
(e) Actuarial advice and reviews in respect of provisioning and loss assessments for an
insurance entity;
(f) Internal audit services related to internal accounting controls, financial systems or
financial statements;
(g) Human resource services relating to:
(i) Executive recruitment;
(ii) Work performed (including secondments) where management decision will be made
on behalf of a listed audit client;
(h) Legal Services;
(i) Management functions or decisions;
(j) Corporate finance services, advice or assistance which may involve independence
threats such as promoting, dealing in or underwriting of shares of audit clients;
(k) Any exercise or assignment for estimation of financial effect of a transaction or event
where an auditor provides litigation support services as identified in paragraph 9.187 of
Code of Ethics for Chartered Accountants;
(l) Share Registration Services (Transfer Agents); and
(m) Any other service(s) which the Council with the prior approval of the Commission,
may determine to be a “prohibited service”.
The Commission may on the recommendation of ICAP or in its sole discretion and to
the extent deemed fit and proper exempt one or more services from the restriction
aforesaid.

5.11. DEFAULTERS’ SEGMENT, SUSPENSION AND DE-LISTING:
5.11.1. A listed company may be placed in the Defaulters’ Segment if:
(a) It has not commenced its commercial production in the case of a manufacturing
company or business operations in the case of any other company within ninety (90)
days of the date of commencement of commercial production/ business operations as
disclosed in its Prospectus;
(b) It has suspended commercial production/ business operations in its principle line of
business for a continuous period of one year;
(c) It has failed to hold its one Annual General Meeting as per law;
Upon placement of such company on the Defaulters’ Segment, the Exchange shall only
initiate actions under Regulation 5.11.2(a) and 5.11.2(b). However, if such company
fails to hold its Annual General Meeting for two consecutive years, trading in shares of
the company shall be suspended immediately by the Exchange and the company shall
be given 90 days to rectify the non-compliance, failing which, the Exchange shall initiate
further actions against the company commencing from Regulation 5.11.2(e).
(d) It has failed to submit its annual audited accounts for the immediately preceding
financial year as per law;
initiate actions under Regulation 5.11.2(a) and 5.11.2(b). However, if such company
fails to submit its annual accounts for two consecutive years, trading in shares of the
company shall be suspended immediately by the Exchange and the company shall be
given 90 days to rectify the non-compliance, failing which, the Exchange shall initiate
further actions against the company commencing from Regulation 5.11.2(e).
(e) It has failed to pay within the time specified by the Exchange:
(i) the annual listing fees for two (2) years; or

(ii) any penalty imposed by the Exchange under these Regulations though final order; or
(iii) any other dues payable to the Exchange under these Regulations;
(f) It for any reason whatsoever has failed to join CDS after its security has been
declared eligible security;

Trading in shares of such company shall be suspended by the Exchange for a period
not exceeding 90 days, immediately upon its placement on the Defaulters’ Segment,
following which the Exchange shall initiate further actions against the company
commencing from Regulation 5.11.2(e).
(g) Its CDS eligibility has been suspended by the CDC;
(h) Its CDS eligibility has been revoked by the CDC;
Trading in shares of such company shall be suspended by the Exchange for a period
not exceeding 90 days, immediately upon its placement on the Defaulters’ Segment,
following which the Exchange shall initiate further actions against the company
commencing from Regulation 5.11.2(e).
(i) Its statutory auditor has issued a qualified opinion on the going concern assumption
or has issued a disclaimer or an adverse opinion in the audit report;
initiate actions under Regulation 5.11.2(a) and 5.11.2(b). However, if the audit report for
the following year also contains any of the above concern(s)/opinion(s), trading in
shares of the company shall be suspended immediately by the Exchange and the
company shall be given 90 days to rectify the non-compliance, failing which, the
Exchange shall initiate further actions against the company commencing from
Regulation 5.11.2(e).
(j) License of the listed regulated person or listed company, as the case may be, has
been cancelled or revoked by the Commission or licensing authority;
Trading in shares of such company shall be suspended immediately by the Exchange
and the company shall be given 90 days to rectify the non-compliance, failing which, the
Exchange shall initiate further actions against the company commencing from
Regulation 5.11.2(e).
(k) It has failed to comply with any provision of this Chapter or where, in the opinion of
the Exchange, it is necessary to do so in the interest of protecting investors and
maintaining a fair, orderly and transparent market;
(l) A show cause notice for winding up has been issued to the company by the
Commission;

Upon placement of such company on the Defaulters’ Segment from the date on which
the Exchange receives information from the Commission regarding issuance of show
cause notice for winding-up of the company, the Exchange shall initiate actions under
Regulation 5.11.2(a) and 5.11.2(b).
Provided that the Exchange upon receiving information that the Commission has
passed order for winding-up of the company, shall immediately disseminate such
information to the general public as per format of notice agreed with the Commission
under Regulation 5.11.2(a).
Provided further that upon receipt of information regarding filing of winding-up petition
against the company in Court by the Commission, the Exchange shall provide the
company with notice of 14 trading days to rectify its default by obtaining clearance from
the Commission. Upon failure of the company to rectify its default within 7 trading days
from the date of such notice, trading in shares of the company shall be allowed only on
T+0 (SPOT) for next 7 days, and upon continued failure of the company to rectify its
default, the Exchange shall suspend trading in the shares of the company from the 15th
trading day from receipt of information regarding filing of winding-up petition against the
company in Court by the Commission. The Exchange shall proceed to delist such
company upon appointment of official liquidator by Court, without providing the
company with opportunity for compulsory buy-back.
(m) Winding-up petition is filed by creditor(s) or shareholder(s) in the Court subject to

the following conditions:
(i) such creditor or creditors, either severally or jointly, have a claim against the
company which is equivalent to at least ten percent of the equity of the company as per
the latest accounts available with the Exchange; or
(ii) such shareholder or shareholders, either severally or jointly, own at least ten percent
of the company’s paid-up capital;
Upon placement of such company on the Defaulters’ Segment from the date on which
the Exchange receives information regarding commencement of its winding-up, the
Exchange shall initiate actions under Regulation 5.11.2(a) and 5.11.2(b) and provide the
company with notice of 14 trading days for submitting reasons as to why trading in its
shares may not be suspended by the Exchange. Upon failure of the company to rectify
its default within 7 trading days from the date of such notice, trading in shares of the
company shall be allowed only on T+0 (SPOT) for the next 7 days, and upon continued
failure of the company to rectify its default, the Exchange shall suspend trading in the

shares of the company from the 15th trading day of its placement on the Defaulters’
Segment.
The Exchange shall proceed to delist such company upon appointment of official
liquidator by Court, without providing the company with opportunity for compulsory buy-
back.
Provided that where winding-up proceedings are initiated by creditor(s) or

shareholder(s) who do not meet the conditions specified in sub-clause (i) or (ii) above,
the Exchange may place the company in the Defaulters’ Segment and suspend trading
in its shares after expiry of two years from the date of commencement of the winding-up
proceedings, if the matter is yet to be disposed-off by the Court.
(n) Voluntary winding-up proceedings have commenced through passing of special

resolution;
Upon placement of such company on the Defaulters’ Segment from the date of receipt
of information from such company regarding passing of special resolution for voluntary
winding-up, the Exchange shall initiate actions under Regulation 5.11.2(a) and 5.11.2(b)
and immediately suspend trading in the shares of such company. The Exchange shall
proceed to delist such company upon appointment of liquidator/official liquidator as the
case may be, without providing the company with opportunity for compulsory buy-back.
5.11.2 Upon placement of a Company or its Security on the Defaulters’ Segment
pursuant to sub-clause 5.11.1, the Exchange shall initiate the following actions unless
specific actions are provided under any of the sub-clauses to Regulation 5.11.1 above:
(a) Issue notice(s) for the general public disclosing the information available with the
Exchange regarding placement of the company or its securities on the Defaulters’
Segment as per the format of notice agreed with the Commission;
(b) Advise the CDC and/ or Registrar in case of physical shares to freeze the shares of
the company placed on the Defaulters’ Segment in the CDS accounts or in the name of
the sponsors, directors and senior management of the Company, as per relevant
information to be provided to the CDC/ Registrar by the Exchange;
Provided that in case of change of management/ revival of the company, the Exchange
may request CDC/ Registrar to allow transfer of such blocked shares to any other
person(s) in the same form upon submission of a valid scheme of revival including
supporting documents and agreements to the Exchange.

(c) Instruct the Company to rectify the non-compliance(s) within the specified time not
exceeding 90 days from the date of placement of the Company on the Defaulters’
Segment;
Provided that upon placement of a Company on the Defaulters’ Segment under sub-
clause 5.11.1 (a) and (b), the Exchange may in addition to taking action as above
instruct such Company to take necessary measures to commence/ resume commercial
production or business operations, as the case may be, within 90 days from the date of
such placement and submit monthly progress report to the Exchange for dissemination
to market participants.
(d) In case a Company fails to rectify the non-compliance(s) within the timeframe
specified in sub-clause 5.11.2 (c) or as otherwise specifically provided under sub-
clauses to Regulation 5.11.1 above, the Exchange shall suspend trading in the shares
of such Company and provide it further period not exceeding 90 days to rectify the non-
compliance(s);
(e) In case a Company still fails to rectify the non-compliance(s) within the timeframe
specified in sub-clause 5.11.2 (d) or as otherwise specifically provided under sub-
clauses to Regulation 5.11.1 above, the Exchange shall issue compulsory buy-back
directions to the majority shareholders/sponsors having control of the Company in the
manner as provided under clause 5.13 within the time specified by the Exchange, not
exceeding 90 days from the date of such direction or rectify the non-compliance(s)
within such period;
(f) Upon completion of the buy-back process of shares by majority shareholders/

sponsors of the Company or failure to comply with the compulsory buy-back directions
or failure to rectify the non-compliance(s) within the timeframe specified under sub-
clause 5.11.2 (e) or as otherwise specifically provided under sub-clauses to Regulation
5.11.1 above, the Exchange shall delist such Company within 90 days through a notice
in writing under intimation to the Commission;
(g) Submit complete details of the case to the Commission for further action as deemed
appropriate under relevant provisions of the Securities Act, 2015 and the Companies
Act, 2017.
5.11.3. Any information/ notices issued in relation to actions taken against any company
under Regulation 5.11.1 and 5.11.2 or restoration of such company to the normal ready
market counter shall be disseminated by the Exchange to the market participants prior
to opening of market on the next trading day.

5.11.4. For companies already placed on the Defaulters’ Segment due to any previous
non-compliance(s), the Exchange shall from the effective date of Regulation 5.11.1 and
5.11.2, initiate such further actions against the company under relevant sub-clause of
Regulation 5.11.1 or Regulation 5.11.2 that are yet to be taken against the company,
subject to fresh notice(s) being issued under sub-clause (a) of Regulation 5.11.2.
5.11.5. No company which has been de-listed under these Regulations, shall be
restored and its shares re-quoted until it removes the causes of de-listing and receives
the assent of the Board for the restoration.
5.11.6. No company shall be de-listed under these Regulations, unless such company
has been provided an opportunity of being heard. In case of failure of the company to
avail the hearing opportunity, the Exchange shall proceed to delist the company on ex-
parte basis.
5.11.7. In case of a company having more than one ground for placement on Defaulters’
Segment, the Exchange shall follow the steps prescribed for the ground that leads to
earlier suspension or delisting of the company, as the case may be.
5.12. EFFECTS OF SUSPENSION OF TRADING:
EFFECTS OF SUSPENSION OF TRADING IN THE SHARES OF A COMPANY

SUSPENDED AT ALL THE STOCK EXCHANGES ON WHICH IT IS LISTED:
5.12.1. Transfer in the physical shares of such company shall be restricted. However,
such restriction shall not be applicable in cases where:
(a) the Share Registrar/ Transfer Agent/ the company has received transfer request
from a shareholder prior to the date of suspension; or
(b) the shares have been purchased prior to the date of suspension of trading and the
shareholder provides proper instrument of transfer, evidencing purchase of such shares
prior to the date of suspension, to the Share Registrar/ Transfer Agent/ the company.
5.12.2. It shall be mandatory upon the company to ensure that no transfers in physical
shares, other than as specified in Regulation 5.12.1.(a) and 5.12.1.(b) above, take place
during the period of suspension. The company shall provide the Exchange with a copy
of its Share Transfer Register, as of the day prior to the day of suspension, and details
of any transfers registered under Regulation 5.12.1.(a) and 5.12.1.(b) subsequent to

suspension in trading of its shares shall also be submitted to the Exchange within 48
hours of registration of such transfer.
5.12A. RESTORATION OF TRADING IN THE SHARES OF SUSPENDED COMPANY:
The Exchange, upon submission of application for restoration of trading by a company,

may restore trading in the shares of such company, where the cause of suspension of
trading has been removed to the satisfaction of the Exchange. Where trading in the
shares of such company is suspended continuously for 180 days or more, the
Exchange may require such company to comply with any one or more of the following
conditions and in such manner/ time as may be specified by the Exchange:
(a) Submit a satisfactory resumption proposal with a view to resuming trading in its
securities including short-term milestones to implement such proposal;
(b) Publish an appropriate announcement to the public detailing the measures adopted
for removal of cause of suspension;
(c) Conduct a corporate briefing session for the shareholders and analysts;
(d) Release latest annual or quarterly financial report or any other relevant report/
documents deemed acceptable by the Exchange for the purpose; and/ or
(e) Comply with any specific requirements or conditions as may be prescribed by the
Exchange.
5.13. VOLUNTARY DE-LISTING:
5.13.1. Any company intending to seek voluntary de-Iisting from the Exchange shall
intimate to the Exchange, immediately, of the intention of the majority security
holders/sponsors to purchase all securities, without exception, from all the security
holders with the purpose to de-Iist the security along with the reasons thereof. Such
intimation shall also include minimum price at which the securities are proposed to be
purchased.
Provided that the minimum purchase price proposed by the sponsors will be the highest
of the benchmark price based on any of the following:
(a) Current Market Price as of the date the exchange receives the sponsors/ majority
security holders’ intimation under 5.13.1

(b) Average Market Price (Annualized)
(c) Intrinsic value per share (estimated net realizable value of assets of the company)
(d) Earnings Multiplier approach (for profitable companies)
(e) The maximum price at which the Sponsors had purchased these shares from the
open market in the preceding one year
Explanation:
Intrinsic value per share:
The intrinsic value per share will be determined on the basis of revaluation of assets,
carried out by professional evaluator approved by Pakistan Banks’ Association (PBA),
any Investment Bank or Valuers having relevant expertise and duly certified by the
Auditors falling in Category ‘A’ or ‘B’ of SBP list. The revaluation of assets carried out by
the evaluators shall not be older than three months from the date of completion of
documents/information required to be submitted by the applicant company with the
formal application under the Regulations. The intrinsic value may also include any other
factor in addition to tangible and intangible assets of company, which may be
considered appropriate by the Exchange, while fixing the price of shares.
Earning Multiplier approach (for profitable companies):

A profitable company is a company that declares an after tax profit for the three years
preceding the date of the application for voluntary de-Iisting as reported in its annual
audited accounts.
Fair value = Estimated Earnings * P/E ratio:

Estimated earnings should be arrived at using the weighted average earning per share
of the last three years audited accounts. For this purpose, higher of, weights of 45%,
35% and 20% assigned to preceding three years respectively or latest earning per
share should be used. The P/E ratio to be used may be of the date the Exchange
receives the application under 5.13.1.
This approach is based on the identity that a stock’s current price is the product of its
actual earnings per share and the P/E ratio. The P/E ratio is calculated by dividing the
current price by the actual earnings per share. To determine the value of stock, both the
earnings and the P/E ratio will have to be estimated.
Price may be determined as a multiple of the P/E ratio of the related sector as on the
date of application for the voluntary buy-back of shares. Earnings per share may be
based on the latest audited accounts of the companies in that sector or a weighted
average earning per share of last 3 years of those companies.

Average Market Price:
Daily closing price of the three years preceding the date the Exchange receives the
intimation under 5.13.1 should be used to calculate the Average Market Price.
5.13.2. The final minimum purchase price of the securities to be de-Iisted shall be fixed
with the approval of the Exchange.
At the same time the Exchange shall determine the minimum percentage of securities to
be purchased by sponsors to qualify for de-Iisting and the same will be communicated
to the company.
5.13.3. In case of disagreement of sponsors on minimum percentage of securities to be

purchased as determined by the Exchange, the sponsors will file an appeal with the
Commission within 10 days of receipt of communication of such determination under
intimation to the Exchange. The decision taken by the Commission will be final and
binding.
5.13.4. The sponsors/majority shareholders shall submit an undertaking that they will
abide by these Regulations, which pertain to purchase of shares/voluntary de-listing of
securities.
5.13.5. The sponsors/majority shareholders shall submit an undertaking to the effect

that all material disclosures relating to the affairs of the company have been made to
the shareholders of the company and the Exchange and that they do not have any
information which will constitute an offence under Section 15-A of the Securities
Ordinance.
5.13.6. The sponsors/majority security holders shall not withdraw their offer to purchase
all securities from all the security holders with the purpose to de-list the security after
such proposal has been approved by the company in a general meeting as required
under 5.15.2.
5.14. VOLUNTARY DE-LISTING OF A SECURITY SHALL BE SUBJECT TO THE

FOLLOWING:
5.14.1. Approval of the proposal in general meeting of the company by not less than ¾
of the security holders present in person or by proxy at such general meeting.
5.14.2. Compliance by the company with the prescribed procedure, guidelines/criteria

and other terms and conditions as may be laid down by the Exchange.

The Exchange may for any reason whatsoever refuse to accept the proposal of the
company, the purchase price and/or the request to de-Iist the securities.
5.15. PROCEDURE FOR VOLUNTARY DE-LISTING:

5.15.1. A formal application shall be made by the company for de-listing supported by
reasons thereof and the proposed purchase price along with non-refundable application
fee of Rs. 250,000/- (Rupees two hundred and fifty thousand only) to be paid by the
sponsors.
Provided, in case of satisfactory fulfillment of the requirements of the Regulation and

delisting of the company from the Exchange, Rs.150,000/- (Rupees one hundred and
fifty thousand only) will be refunded by the Exchange.
5.15.2. On approval by the Exchange of the application, the company shall call a
general meeting of its security holders and pass a special resolution approved by not
less than ¾ of their number present at such meeting resolving that the securities be de-
Iisted on the terms stipulated by the Exchange.
5.15.3. A copy of special resolution referred to above shall be sent to the Exchange
immediately along with a complete list of holders of the security to be de-Iisted,
containing information with regard to securities held by the majority security holders and
others, their names/category, the number of securities and addresses.
5.15.4. Together with the application for deIisting made under Regulation 5.15.1, the
company must submit an undertaking from a Purchase Agent (who may be a
commercial bank, or an investment bank or a Broker of the Exchange) on behalf of the
majority security holders, in the format specified by the Exchange, which will constitute
an irrevocable open offer to purchase securities from the other security holders at the
purchase price approved in the general meeting of the security holders called under
Regulation 5.15.2. The said offer shall remain valid at least for a period of 60 days or as
may be fixed by the Exchange from the date of commencement of purchase.
5.15.5. Upon approval of the minimum purchase price in the general meeting of the
shareholders, the Company shall submit the bank guarantee of the Purchase Agent in
an amount and such format as is demanded by the Exchange to secure its obligation.
The said bank guarantee shall remain valid for a period not less than 15 days from the
expiry date of the initial buy back period or when all outstanding shares have been
purchased by the majority shareholders, whichever is earlier.

Provided that where a Broker of the Exchange is appointed as Purchase Agent and the
total purchase amount does not exceed Rs. 2.5 million, the requirement of Bank
Guarantee can be replaced with the undertaking of such Broker of the Exchange on the
prescribed format.
Provided further that in case of appointment of purchase agent other than a Broker of
the Exchange, all trades shall be routed through a Broker of the Exchange.
Provided further that all the trades during the initial period of 60 days will be conducted
on KATS only irrespective of marketable lot. The purchase agent will be required to
maintain a live bid in the System at the minimum purchase price approved by the
Exchange. The purchase price shall be based on market forces, subject to minimum
purchase price determined by the Exchange.
5.15.6. The application for de-Iisting shall be supported by a written consent of the
purchase agent to act as agent for purchase of the securities to be de-Iisted on behalf of
the majority security holders as contemplated by these Regulations.
5.15.7. The company shall convey to all the holders of the securities other than majority
security holders on their addresses available in the records of the company through
registered post the decision taken in their General Meeting to purchase the securities
together with a copy of the special resolution and also publish a notice in this behalf
duly approved by the Exchange through two widely circulated newspapers including one
of Karachi.
5.15.8. The company shall also submit the following information on completion of the
period of purchase of securities to be de-Iisted:
(a) Total number of issued securities (with percentage)

(b) Securities owned by majority security holders before the offer (with percentage)
(c) Securities bought under the offer (with percentage)
(d) Total securities currently owned by majority security holders (with percentage)
(e) Securities still outstanding with minority holders (with percentage)
(f) Amount of Bank Guarantee required @ Rs.___________ (at the purchase price
approved by the Exchange/Commission) per outstanding security.
5.15.9. BUY-BACK PROCESS:
(a) With regard to the outstanding securities identified in para 5.15.8.(e). above, the
sponsors shall continue to remain obliged to purchase the same at the relevant price

(purchase price approved by the Exchange/Commission) for a period of 12 months from
the day following the expiry of initial buy-back period of 60 days and the sponsors shall
submit a Bank Guarantee valid for 12 months in an amount and format acceptable to
the Exchange to secure such obligation.
Provided that the requirement of submission of Bank Guarantee will not be applicable
where a Broker of the Exchange act as purchase agent on behalf of the sponsors. In
such a situation, the purchase agent will be required to submit an undertaking in the
format prescribed by the Exchange.
(b) The company once allowed delisting under these Regulations will not be allowed
relisting of any of its securities which have been de-Iisted at least for a period of five
years from the date of delisting. However, the Exchange may allow, on case to case
basis, listing of such securities on the Over-the-Counter (OTC) market.
5.16. TIME FRAME FOR COMPLETION FOR REQUIREMENTS:

5.16.1. The company shall immediately intimate (if the decision of its Board of Directors
is made during trading hours or before the beginning of the opening of trading, then
intimation to the Exchange must be made during trading hours and otherwise if the
decision is made after trading hours then the intimation must be made to the Exchange
before the opening of trading of the Exchange on the next working day) the decision of
its Board of Directors to de-Iist the securities, including a copy of the relevant resolution
passed in this regard.
5.16.2. Within one week of the aforementioned intimation, the company will furnish its
sponsors’/majority shareholders’ undertaking in such format as specified by the
Exchange, to purchase the securities owned by persons other than the sponsors at the
purchase price approved in the general meeting of the security holders called under
Regulation 5.15.2.
5.16.3. The Exchange shall be empowered to ask for any additional information or
details, which shall be provided by the company within 15 days of the date of such
request by the Exchange.
5.16.4. The Board on its own or on the basis of recommendations of the Special
Committee will determine/approve the purchase price. The decision of the Board will be
communicated to the sponsors/company and shall also be notified and announced
immediately.

Provided that any member of the Board and/or Special Committee holding 2% or more
shares of the company applying for voluntary de-listing will not participate in the
deliberations while the case of the company is considered by the Board/Committee.
5.16.5. The sponsors/majority shareholders will be required to convey their

acceptance/refusal to the purchase price approved by the Board within 7 days of
conveying of the relevant decision to them.
If the company wishes to appeal this decision to the Commission it must do so within 10
days of the decision in which case no further steps will be taken on the deIisting
application until the Commission determines the purchase price.
5.16.6. Once the purchase price has been finalized either by determination by the
Commission in appeal or by the sponsors accepting the price stipulated by the
Exchange, the company will be required to comply with the following procedure:
(a) To obtain approval of the proposal of voluntary de-Iisting in the general meeting of
the holders of the securities within 30 days of the acceptance of sponsors.
(b) After approval of the general meeting, the requirements under Voluntary De-listing
Regulations shall be completed within 7 days of the general meeting to commence the
purchase of shares.
(c) The sponsors will purchase the securities for a period of 60-days.
(d) Upon expiry of the said purchase period, the company will submit the relevant
documents/information to the Exchange within a period of 21 days.
(e) After receipt of the required documents/information and compliance of the relevant
requirements as stipulated by the Exchange, the securities of the company shall stand
de-listed after a period of 30 days.
5.17. RELAXATION:
Where the Exchange is satisfied that it is not practicable to comply with any requirement
pertaining to voluntary delisting under these Regulations, in a particular case or class of
cases, the Exchange may, for reasons to be recorded, relax such requirement subject
to such conditions as it may deem fit.

5.18. LISTING AND ANNUAL FEES:
5.18.1. LISTING FEE SCHEDULE:

(a) A company applying for listing on the Exchange, shall pay an initial listing fee
equivalent to one tenth of one percent of the PAID-UP-CAPITAL subject to a maximum
of rupees one million and five hundred thousand.
Provided that in case of Open-Ended Mutual Funds, the initial listing fee shall be
charged at the rate of one twentieth of one percent of the amount of total fund size of
Mutual Fund subject to a maximum of Rupees 0.5 million.
(b) Whenever, a listed company increases the paid-up capital of any class or classes of
its shares, or securities listed on the Exchange, it shall pay to the Exchange a fee
equivalent to one tenth of one per cent of increase in paid-up capital at par value or
0.4% of the actual amount of additional capital raised, whichever is lower.
(c) Every listed company shall pay, in respect of each financial year of the Exchange,
commencing from 1st July and ending on 30th June next, an annual listing fee
calculated on the basis of the company’s *market capitalization, which shall be payable
by or before the 30th September in each calendar year, as per following schedule,
subject to a maximum of Rupees three million:
* Explanation: For the purpose of this sub-clause, the market capitalization shall be
calculated by multiplying the last one year’s volume weighted average price with the
company’s outstanding ordinary shares as on June 30, of the preceding year.
Rate of Fee applicable for FY2018-2019:
COMPANIES HAVING MARKET RATE OF FEE PER ANNUM

CAPITALIZATION AS ON JUNE 30
Up to Rs.100 million Rs. 100,000
Above Rs.100 million & up to Rs. 250 Rs. 100,000+0.075% on excess over
million Rs.100 million
Above Rs. 250 million & up to Rs.500 Rs. 212,500+0.045% on excess over Rs.
million 250 million
Above Rs. 500 million & up to Rs.1,000 Rs. 325,000+0.02% on excess over Rs.

million 500 million
Above Rs. 1,000 million & up to Rs. 2,000 Rs. 425,000+0.01% on excess over
million Rs.1,000 million
Above Rs. 2,000 million & up to Rs.10,000 Rs. 525,000+0.0045% on excess over
Above Rs.10,000 million & up to Rs. 885,000+0.001% on excess over

Rs.20,000 million Rs.10,000 million
Above Rs. 20,000 million & up to Rs. 985,000+0.0004% on excess over

Above Rs.50,000 million Rs. 1,105,000+0.0003% on excess over

Rs.50,000 million
Rate of Fee applicable for FY2019-2020 and onwards:
COMPANIES HAVING MARKET RATE OF FEE PER ANNUM
CAPITALIZATION AS ON JUNE 30
Up to Rs.100 million Rs. 100,000
Above Rs.100 million & up to Rs. 250 Rs. 100,000+0.075% on excess over
million Rs.100 million
Above Rs. 250 million & up to Rs.500 Rs. 212,500+0.06% on excess over Rs.
million 250 million
Above Rs. 500 million & up to Rs.1,000 Rs. 362,500+0.025% on excess over Rs.
million 500 million
Above Rs. 1,000 million & up to Rs. 2,000 Rs. 487,500+0.015% on excess over
Above Rs. 2,000 million & up to Rs.10,000 Rs. 637,500+0.0065% on excess over
Above Rs.10,000 million & up to Rs. 1,157,500+0.0025% on excess over

Above Rs. 20,000 million & up to Rs. 1,407,500+0.00075% on excess over

Above Rs.50,000 million Rs. 1,632,500+0.0005% on excess over

Rs.50,000 million
Provided that in case of Open-Ended Mutual Funds, the annual listing fee shall be
payable in respect of each financial year of the Exchange, commencing from 1st July
and ending on 30th June next, before the 30th September in each calendar year, as per
following schedule:
SIZE OF INSTRUMENT RATE OF FEE
Up to Rs.150 million Rs.20,000

Above Rs.150 million Rs.25,000
Provided further that the Board may revise the above fees or any of the slabs or add
new slabs with the approval of the Commission.
Provided further that every company applying for listing shall not be charged annual
listing fee for twelve (12) months from the date of its listing.
(d) The above Listing fee or any other sum fixed by the Board shall be payable by 30 th
September in advance for every financial year.
(e) Failure to pay the annual fee by 30th September shall make the company liable to
pay a surcharge at the rate of 1.5 per cent (one and a half per cent) per month or part
thereof, until payment. However, if reasonable grounds are adduced for nonpayment or
delayed payment of annual fee, the Exchange may, reduce or waive the surcharge
liability.
(f) A company applying for enlistment on the Exchange shall, in addition to other fees,
pay a sum of Rs. 50,000/- (Rupees fifty thousand only) as non-refundable service
charges. An open-end mutual fund applying for listing on the Exchange shall pay a sum
of Rs. 25,000/- (Rupees twenty five thousand only) as non-refundable service charges.
(g) A company applying for revalidation of approval earlier granted by the Exchange for
issue, circulation and publication of prospectus upon lapse of its validity shall pay to the
Exchange a revalidation fee at the rate of one twentieth of one percent of paid up capital
subject to a maximum of Rs.1 million.

Provided that such fee shall be charged only in cases where validity of approval of the
Commission for issue, circulation and publication has also lapsed.
Provided further that the Board may revise the above fees or any of the slabs or add
new slabs with the approval of the Commission.
Provided further that every company applying for listing shall not be charged annual
listing fee for twelve (12) months from the date of its listing.
(d) The above Listing fee or any other sum fixed by the Board shall be payable by 30th
September in advance for every financial year.
(e) Failure to pay the annual fee by 30th September shall make the company liable to
pay a surcharge at the rate of 1.5 per cent (one and a half per cent) per month or part
thereof, until payment. However, if reasonable grounds are adduced for nonpayment or
delayed payment of annual fee, the Exchange may, reduce or waive the surcharge
liability.
(f) A company applying for enlistment on the Exchange shall, in addition to other fees,
pay a sum of Rs. 50,000/- (Rupees fifty thousand only) as non-refundable service
charges. An open-end mutual fund applying for listing on the Exchange shall pay a sum
of Rs. 25,000/- (Rupees twenty five thousand only) as non-refundable service charges.
(g) A company applying for revalidation of approval earlier granted by the Exchange for
issue, circulation and publication of prospectus upon lapse of its validity shall pay to the
Exchange a revalidation fee at the rate of one twentieth of one percent of paid up capital
subject to a maximum of Rs.1 million.
Provided that such fee shall be charged only in cases where validity of approval of the
Commission for issue, circulation and publication has also lapsed.
5.18.2. LISTING FEE PAYMENT PROCESS:
(a) All Exchange dues shall be paid by cheques, pay orders or bank drafts payable to
the Exchange at any Bank Branch located in Karachi.
(b) Without prejudice to the action which the Exchange may take under these
Regulations in the event of default in payment of its dues, nothing shall prevent the
Exchange from recovering such dues through posting defaulters names on the notice

board of the Exchange or by invoking the process of law and obtaining order of a
competent court.
5.18.3. DISCIPLINARY ACTIONS AGAINST NON-PAYMENT OF PENALTIES:
(a) Without prejudice to various specific or other Penalties provided or available under
these Regulations, the Exchange shall have powers to place the company in the
Defaulters Segment, suspend or delist it, if in the opinion of the Exchange, such
company has defaulted or contravened any of these Regulations.
(b) The placement of a company in the Defaulters Segment, its suspension or de-listing
under Regulations 5.11. or the preceding sub-regulation shall be communicated to the
Commission, such company and simultaneously notified to the market participants,
inter-alia by posting it on the notice board and website of the Exchange and publishing
it, if deemed necessary, in the Daily Quotations of the Exchange.
(c) Trading in the securities of a suspended or de-listed company shall forthwith cease
and shall not commence until the suspension is withdrawn or the de-listing is restored
by the order of the Board.
(d) Trading in the securities of a company placed in Defaulters' Segment, if allowed,

shall be affected separately and the prices shall also be quoted separately in the Daily
Quotations until such company is removed from the Defaulters' Segment and restored
to the ready market of the Exchange.
(e) No listed company shall appoint a person as an external auditor or a person involved
in the audit of a listed company who is a close relative, i.e., spouse, parents,
dependents and non-dependent children, of the CEO, the CFO, an internal auditor or a
director of the listed company.
(f) Every listed company shall require external auditors to furnish a Management Letter
to its board of directors within 45 days of the date of audit report:
communicated in writing to the Board of Directors prior to the approval of the audited
accounts by the Board.

5.19. COMPLIANCE WITH ACCESS TO INSIDE INFORMATION REGULATIONS,
2016:
(a) All Listed Companies shall maintain and regularly update a register to enlist persons
employed under contract or otherwise, who have access to inside information, in the
manner as provided in Access to Inside Information Regulations, 2016 as may be
amended from time to time.
(b) For the purpose of sub-clause (a), a Listed Company shall designate a senior
management officer who shall be responsible for entering or removing names of
persons in the said register in a timely manner. The said designated officer shall be
obliged to keep proper record including basis for inclusion or exclusion of names of
persons in the said list and make the same available as and when required by the
Commission.
5.20. PENALTY:
5.20.1. Any Company and whoever fails or refuses to comply with, or contravenes any
provision of these Regulations, or knowingly and willfully authorizes or permits such
failure, refusal or contravention, shall, be liable to penalty as specified below:
REGULATION NO. AMOUNT OF PENALTY AMOUNT OF PENALTY

FOR EVERY DAY
DURING WHICH THE
DEFAULT CONTINUE
5.7.2.(b), 5.7.2.(c) - Rs.10,000
5.5.10., 5.6.4., 5.6.5., 5.7.1., - Rs.5,000
5.8.2.(a)
5.8.1.(a) - Rs.10,000
5.7.1. Rs.10,000 -
5.13., 5.14., 5.15., 5.16. Rs.200,000 10,000
5.20.2. In cases where specific Penalty provisions have not been provided in these
Regulations, then whoever fails or refuses to comply with, or contravenes any provision
of these Regulations, or knowingly and willfully authorizes or permits such failure,
refusal or contravention, shall, be liable to fine not exceeding five hundred thousand
rupees for each default, and, in case of continuing failure, refusal or contravention, to a
further fine not exceeding Rs.10,000/- (Rupees ten thousand only) for every day after
the first day during which such contravention continues.

Provided that no such penalty shall be imposed unless an opportunity of being heard
has been granted.
5.20.3. The amount of penalty shall be paid to the Exchange.
5.20.4. The name of company which is in default of Regulation 5.5.10. shall be notified
to the TRE Certificate Holders of the Exchange and placed on the website of the
Exchange.
5.20.5. The Exchange may also notify the fact of default and the name of defaulting
company, for Regulation 5.6.5., 5.7.1. by notice and also by publication in the Daily
Quotations of the Exchange.
5.20.6. The Board may suspend or if it so decides, delist any company which makes a
default in complying with the requirements of Regulation 5.6.5., 5.7.1., 5.8.2. and 5.9.1.
5.20.7. Any action under this Regulation shall be without prejudice to the action or steps
taken by any other person or Commission.
No company which has been suspended or de-listed, as the case may be, shall be
restored and its shares shall be re-quoted on Exchange until it has paid the full amount
of penalty for the days of the default and receives the assent of the Board for the
restoration.
5.21. REVERSE MERGER REGULATIONS:

5.22.1. The following clauses shall be applicable on the Listed Company in relation to
Reverse Merger transactions, for ensuring timely disclosure of information and
compliance with all applicable requirements of this Chapter.
5.21.2 Every Listed Company, in order to enable the Exchange to determine its status
as Listed Shell Company and assess applicability of the provisions prescribed in relation
to Reverse Merger, shall intimate the Exchange immediately upon approval by its board
of directors to consider the proposal received from Operating Unlisted Company for
merger. The Listed Company shall also obtain from the Operating Unlisted Company
and submit to the Exchange, confirmation that the Operating Unlisted Company has
received the approval by the board of directors of the Listed Company to initiate merger
negotiations with the Operating Unlisted Company.
5.21.3 The Exchange may require the Listed Company to provide any additional
information as deemed appropriate, for determining the proposed transaction as a

Reverse Merger. The Exchange shall communicate in writing, within a maximum period
of 15 days from the date of receipt of such intimation, if the proposed transaction is a
Reverse Merger or otherwise. In case the Exchange confirms that the proposed
transaction is a Reverse Merger, the Listed Shell Company shall ensure compliance
with all applicable requirements as provided for herein below.
5.21.4 The Listed Shell Company shall submit to the Exchange the information /
documents as mentioned in Appendix-2 to this Chapter and give an undertaking on non-
judicial stamp paper confirming that the proposed Surviving Company shall fulfill the
following conditions:
(a) The minimum paid-up capital shall not be less than Rs. 200 million;
(b) The minimum Free Float shall not be less than 25% of the issued share capital and
5 million Free Float shares within one year from the date of approval of the scheme of
arrangement by the competent authority;
(c) The Promoters/ Sponsors/ Controlling Directors / Majority Shareholders are / were
not also the Promoters/ Sponsors/ Controlling Directors / Majority Shareholders in a:
i. Listed Company, which is in the Defaulters’ Segment; or
ii. Listed Company, which was delisted due to noncompliance of any applicable
provision of PSX Regulations within the past five years; or
iii. Corporate Brokerage House whose TRE Certificate has been cancelled/forfeited by
the Exchange or any other stock exchange of Pakistan that existed prior to integration
of stock exchanges pursuant to Integration Order number 01/2016 dated January 11,
2016 issued by the Commission; or declared defaulter by the Exchange or any other
stock exchange of Pakistan that existed prior to January 11, 2016 or the NCCPL, due to
noncompliance of any applicable rules, regulations, notices, procedures, guidelines etc.
but shall not include any TRE Certificate surrendered voluntarily to the Exchange, if
such TRE Certificate Holder does not have any pending investor claims.
(d) It is not an associated company or a wholly owned company of any other Listed
Company, which is in the Defaulters’ Segment or trading in its shares is suspended due
to violation/non-compliance of laws.
(e) There are no overdue loan/ payments to any financial institution against the CEO/
Promoters/ Sponsors/ Directors/ Major Shareholders of the Surviving Company either in

their individual capacity or as CEO, Director, Partner or Owner in any Company / Firm /
Sole Proprietorship;
(f) There are no overdue loan/ payments to any financial institution against the
Operating Unlisted Company, its associated/ group companies and undertakings;
(g) None of its Sponsors, Major Shareholders, Directors and Management, Associated
Company/Entity has been declared involved in any fraudulent activity by the
Commission, SBP or any other investigation agency or court of law;
(h) None of the Sponsors, Major Shareholders, Directors and Management, Associated
Company/Entity of the Listed Shell Company has been declared involved in any
fraudulent activity by the Commission, SBP or any other investigation agency or court of
law;
(i) The shares of sponsors shall be inducted into CDS in freeze status for a period of not
less than three years and the sponsors shall not be allowed to sell their shares during
this period;
(j) It shall ensure compliance with all requirements of the PSX Regulations.
Provided that the condition (d), (e) and (f) shall not apply to nominee directors of the
Government and Financial Institutions.
5.21.5 The Listed Shell Company shall obtain confirmation from the Exchange that it
has complied with the requirements of this Clause and any other condition specified by
the Exchange before seeking the shareholders' approval for a scheme of Reverse
Merger.
5.21.6 If a Listed Shell Company enters into a scheme of Reverse Merger without
complying with any requirement(s) of this Clause and any other specified condition, the
Exchange shall place such Company or the Surviving Company, as the case may be, in
the Defaulters’ Segment and/or initiate any other actions including suspension of trading
in its shares or delisting as determined by the Exchange.
5.21.7 Where the Exchange is satisfied that it is not practicable to comply with any
requirement pertaining to Reverse Merger as provided in the PSX Regulations, in a
particular case or class of cases, the Exchange may, for reasons to be recorded, relax
such requirement subject to such condition(s) as it may deem fit.

5.22 POWER TO OBTAIN DOCUMENTS:
The Exchange may, by issuing a notice in writing, require a Listed Company/
management company, trustee, or its directors, officers, employees or advisers to
produce any documents/information (whether in documentary or electronic form) for
investigating into a matter of possible breach of any relevant provision of PSX
Regulations.
Chapter 5A of Rule Book:

REGULATIONS GOVERNING LISTING AND TRADING OF EQUITY SECURITIES OF
SMALL AND MEDIUM ENTERPRISES (SMEs)
5A.1. DEFINITIONS:
5A.1.1. In this chapter, unless the subject or context otherwise requires:
(a) “Advisor and Consultant to the Issue” means an advisor and consultant to the issue
as defined in the Rules made under section 175 of the Securities Act, 2015;
(b) "Bid Price" means the price a Market Maker is willing to pay for the purchase of
equity securities of an SME;
(c) “Designated Institution” means an institution as defined in the Book Building

Regulations, 2015;
(d) "High Net Worth Individual Investor (HNWI)" means an individual investor who
applies or bids for shares of the value of rupees one million or above;
(e) "Information Memorandum" means a document outlining the salient features, risks
and terms of equity securities offered/issued to QIBs and HNWIs through private
placement;
(f) "Market Maker" has the same meaning as defined in chapter 12 of the PSX
Regulations relating to the Market Makers Regulations;
(g) "Market Making" means the continuous tender of two-way quotes by a Market Maker
i.e. Bid Price and Offer Price for the purchase and sale of the equity securities of an
SME;
(h) "Offer Price" means the price a Market Maker is willing to receive for the sale of the
equity securities of an SME;

(i) "Qualified Institutional Buyers (QIBs)" for the purpose of these regulations means:
(i) Any of the following entity:
a. a financial institution as defined in the Companies Ordinance, 1984.
b. an insurer as defined in the Insurance Ordinance, 2000.
c. a company licensed by the Commission as securities broker under the Securities Act,
2015.
d. a fund established under the Collective Investment Scheme under the Non-Banking
Companies (Establishment and Regulation) Rules 2003.
e. a pension fund as defined in the Voluntary Pension System Rules, 2005.
(ii) Any other company as defined in section 2(1)(7) of the Companies Ordinance, 1984
meeting the criteria prescribed by the Exchange with prior approval of the Commission.
(j) "Small and Medium Sized Enterprise (SME)" means a public company, registered
under the Companies Ordinance, 1984, having a post issue paid up capital not less
than Rs. 25 million and not more than Rs. 200 million;
(k) "SME Board" means the board developed by the Exchange for listing and trading of
equity securities of SMEs;
(l) "Spread" means the difference between the Offer Price and the Bid Price of an equity
security to be quoted by a Market Maker.
5A.1.2. Words and expressions used but not defined in this chapter shall, unless there
is anything repugnant in the subject or context, have the same meanings as are
assigned to them in the Companies Ordinance, 1984 and the Securities and Exchange
Ordinance, 1969.
5A.2. ELIGIBILITY CRITERIA FOR LISTING OF EQUITY SECURITIES OF SMEs:

An SME shall be eligible to apply for listing of its equity securities under this chapter
provided that:
(a) the Memorandum and Articles of Association of the SME authorize it to list its equity
securities/raise capital on/through stock exchanges;

(b) not less than 20% of the post issue paid-up capital of the SME is offered only to
QIBs and HNWIs entirely through private placement by circulation of Information
Memorandum;
(c) the offer is made through fixed price method, the book building method or any other
method acceptable to the Exchange.
Provided that the book building method shall only be allowed in case the post issue paid
up capital of the SME is not less than Rs. 100 million and the offer size is not less than
2 million shares and 20% of the post issue paid up capital of SME.
For the book building of equity securities of SMEs, book building system of the
Designated Institution shall be used in accordance with the criteria prescribed by the
Exchange in Annexure-II of this Chapter.
(d) the number of initial subscribers in private placement is not less than five (05);
(e) the bid size for each initial subscriber is not less than rupees one million;
(f) its sponsors hold not less than 25% of the post issue paid up capital of the SME for a
lock-in period of not less than three years;
(g) its sponsors retain their entire shareholding in SME and subsequent right and bonus
shares issued thereon for a lock-in period of not less than twelve months.
(h) For the purpose of clause (f) and (g) above, the lock-in periods shall start from the
date of listing of the SME or from the date of commencement of commercial operation
or production by the SME whichever is later, or till such additional period as may be
specified by the Exchange;
(i) Subject to clauses (f) and (g) above, the sponsors may sell their shareholding
through block-sale and shall report the sale of shares, on same trading day, to the
Exchange and notify to the Commission change in particulars of their shareholdings in
the form and manner as specified in section 103 of the Securities Act, 2015 and
regulations made thereunder.
(j) The equity securities to be listed are issued only in Book-Entry form through CDS
and this information is disclosed in Information Memorandum;

(k) It has appointed at least one Advisor and Consultant to the Issue to perform
functions in accordance with this chapter;
(l) It has developed its own website and disseminated the basic information about the
SME and its business activities including the Information Memorandum, its annual and
half-yearly financial statements and quarterly accounts and monthly progress report on
implementation of the project, where required. The monthly progress report shall also
be submitted to the Exchange for public dissemination;
(m) The promoters/sponsors/controlling directors are not also promoters/sponsors/

controlling directors in other listed companies, which are in default of any Listing
Regulation of the Exchange. None of its promoters, sponsors, or controlling directors is
sponsor/controlling director of a company which was delisted during last five years due
to non-compliance with any of the Listing Regulations. However, this will not apply to
nominee directors of the Government and Financial Institutions. The company shall also
provide a list of Controlling Directors;
(n) The company is not an associated company of any other listed company which has
violated the Listing Regulations of the Exchange and is still in default of any Listing
Regulation. However, this will not apply to nominee directors of the Government and
Financial Institutions;
(o) its Chief Executive has not served or is not serving as Chief Executive of a listed
company which has significantly violated and/or failed to comply with any provision of
chapter 5 relating to "Listing of Companies and Securities Regulations" during his
tenure as the Chief Executive; and
(p) its Promoters/sponsors/controlling directors are not in the defaulters list of the State
Bank of Pakistan either in their individual capacity or in the capacity as directors of other
listed companies. This will not apply to the directors nominated by the Federal
Government or any Provincial Government and the Financial Institutions.
5A.3. ISSUE OF EQUITY SECURITIES AT PREMIUM:

An SME may issue its equity securities at premium subject to the following conditions:
(a) The SME has commenced commercial operations and based on its latest audited
financial statements for not less than twelve months, it has earned:
(i) profit from its principal operations; and
(ii) positive earnings per share.

(b) The premium on offer to QIBs and HNWIs shall not exceed the amount of premium
charged on placements with foreign or local Investors/institutions, if such placement has
been made within a period of six months preceding the commencement of the
subscription/bidding period and the names and addresses of such Investors/institutions
shall be disclosed in Information Memorandum;
(c) The SME shall justify the amount of premium and such justification shall be
disclosed in the Information Memorandum;
(d) The sub-clauses (a) and (b) shall not apply where the equity securities are
issued/offered through book building process.
5A.4. LISTING PROCEDURE:

5A.4.1. An SME that fulfils the eligibility criteria specified in clause 5A.2. may apply for
listing of its equity securities on the SME Board by making an application to the
Exchange on Form-I attached to this chapter accompanied with such information and
documents as mentioned at Annexure-I to Form-I along with payment of initial listing fee
as prescribed under this chapter.
5A.4.2. The Exchange may reject a listing application, at its sole discretion if it deems
that listing of the SME is not in the interest of the market or the SME does not meet any
of the eligibility criteria prescribed above.
Provided that the SME shall be given an opportunity of hearing by the Exchange before
the listing application is rejected.
5A.5. CONTENTS OF INFORMATION MEMORANDUM:

5A.5.1. The Information Memorandum, to be circulated to QIBs and HNWIs for
issuance/offer of equity securities of an SME, shall contain at least such information as
provided in Schedule-I of this chapter.
5A.5.2. The SME shall place the Information Memorandum on its own website and
ensure that the Information Memorandum is also placed on the websites of the
Exchange and the Advisor and Consultant to the Issue.
5A.5.3. The SME shall not use the Information Memorandum as a document inviting the
general public for subscription of equity securities and shall include a statement to this
effect on the cover page of the Information Memorandum.

5A.6. APPOINTMENT AND DUTIES OF ADVISOR AND CONSULTANT TO THE
ISSUE:
Prior to applying for listing on the Exchange, the SME shall, through an agreement in
writing, appoint an Advisor and Consultant to the Issue till the date of its formal listing.
The Advisor and Consultant to the Issue shall perform the following duties:
The Advisor and Consultant to the Issue shall appraise the SME and its project, either
on its own or in consultation with other expert(s), and submit a feasibility report
containing financial plan, if required, and at least five years financial projections to the
Exchange and state in the feasibility report that the Advisor and Consultant to the Issue:
(i) has examined the technical, managerial, commercial, economic and financial aspects
of the project and/or the SME;
(ii) has reviewed all the material contracts/agreements relating to issue/offer of equity
securities by the SME;
(iii) has reviewed all the contents of the Information Memorandum and found them true
and complete to the best of its knowledge and belief;
(iv) is satisfied that the SME has or will have the necessary operational infrastructure to
carry out its business;
(v) is satisfied that the SME and its project are viable and investment worthy;
(vi) ensures that the SME complies with its obligations under this chapter;
(vii) shall act honestly, impartially and with due care and skill; and
(viii) shall comply with the applicable regulatory and contractual obligations.
5A.7. APPOINTMENT AND FUNCTIONS OF MARKET MAKERS:
5A.7.1. APPOINTMENT OF MARKET MAKER:
The SME may, through an agreement in writing, appoint a Market Maker for a period of
not less than three years from the date of listing of the SME.
In case a Market Maker is not available at any time or discontinues to act as Market
Maker upon completion of initial period of three years or due to any reason, the SME

may immediately appoint another person eligible to act as Market Maker and shall notify
the same to the Exchange and through its website on the same day.
5A.7.2. FUNCTIONS OF MARKET MAKER:
The Market Maker shall be responsible for performing the following functions:
(i) The Market Maker shall provide two-way quotes in all equities securities of SMEs for
which it is appointed as a Market Maker.
(ii) The Market Maker shall not quote beyond the maximum Spread of 10% which shall
be disclosed in the Information Memorandum.
(iii) Market Maker shall hold a minimum inventory per security equivalent to 5% of free
float of the security.
(iv) Market Maker shall purchase or arrange purchase of the equity securities of
respective SME from any holder that tenders such equity securities for sale.
(v) Market Maker shall sale or arrange sale of the equity securities of respective SME to
any Investor who intends to purchase such securities.
5A.8. TRADING OF SECURITIES ON EXCHANGE, RISK MANAGEMENT AND

ALLIED MATTERS:
5A.8.1. TRADING THROUGH KATS:
(i) Any Broker can trade under SME Board either on his own account or on account of
his clients subject to prior notification in writing to the Exchange.
(ii) Trading in SME Board shall take place through KATS.
5A.8.2. MINIMUM ORDER SIZE (MARKETABLE LOT):
The minimum order size for trading in equity securities of SME on the Exchange shall
be Rs. 100,000/-
5A.8.3. CIRCUIT BREAKERS OR MARKET HALT:
(i) There shall be a security-wise circuit breaker or market halt in SME Board in a
manner as may be prescribed by the Exchange from time to time.

(ii) No trade in any equity security of an SME shall be allowed beyond the above
prescribed upper and lower limits.
5A.8.4. MINIMUM FREE FLOAT:
The SME shall maintain at all times the minimum Free Float of 20% of its post issue
paid up capital.
5A 8.5. EXPOSURE MARGINS:
Exposure margin on equity security of an SME shall be 25% or VaR, whichever is lower,
of the total Exposure.
5A.8.6. TRADING FEE (LAGA):
The Exchange shall prescribe, from time to time, trading fee on the value of the
transaction and other contribution/charges payable by the Broker. However, there shall
be no trading fee for 1 year from the applicability of this chapter. 5A.8.7. CLEARING
AND SETTLEMENT:
Clearing and settlement of the transactions executed at the SME Board shall be done
under T+2 settlement system through the NCCPL.
5A.8.8. PROHIBITION OF SHORT SALE AND BLANK SALE:
Short Sale and Blank sale of equity securities of SMEs shall not be permissible.
5A.9. NON-APPLICABILITY OF THE LISTING OF COMPANIES AND SECURITIES

REGULATIONS OF THE EXCHANGE:
An SME listed under this chapter shall not be subject to compliance with the provisions
of chapter 5 relating to "Listing of Companies and Securities Regulations" of the PSX
Regulations. The SME shall be required to disclose this fact in the Information
Memorandum and all the subsequent annual and half-yearly financial reports.
5A.10. APPLICABILITY OF SUBSTANTIAL ACQUISITION LAWS:

Any person who, directly or indirectly, intends to acquire voting shares of an SME, shall
be subject to compliance with the provisions of the Securities Act, 2015 and with all the
relevant requirements laid therein including the requirements laid in the Listed
Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations,
2008.

5A.11. AUDITED FINANCIAL STATEMENTS AND INFORMATION REQUIREMENT:
5A.11.1. The SME shall prepare its periodic financial statements as required under the
applicable laws and shall get the same audited by a QCR rated chartered accountant.
5A.11.2. The SME shall place its periodic financial statements on its website. The SME
shall also immediately notify the Exchange about the placement of such information on
its website.
5A.12. REPORTING AND DISCLOSURE BY SME:

An SME listed under this Chapter shall be required to disseminate the following
information:
(a) DISCLOSURE OF PRICE SENSITIVE INFORMATION:
Every listed SME shall communicate to the Exchange any non-public material
information about the SME such as all decisions of its Board of Directors relating to
cash dividend, bonus issue, right issue or any other entitlement or corporate action,
change of management, significant change in its financial condition, sphere of activity
and current and expected business performance or any other price-sensitive non-public
information which if made public will likely cause a substantial change in the market
price of its equity securities. Such information must be notified without delay to the
Exchange according to the procedure laid down in the Exchange’s Correspondence
Manual.
(b) DISCLOSURE OF RELATED PARTY TRANSACTIONS:
Every listed SME shall communicate to the Exchange all related party transaction,
without delay as soon as the terms of a transaction with a related party are agreed,
according to the procedure laid down in the Exchange’s Correspondence Manual. Such
information should including the following:
(i) Nature of the transaction and amount involved;
(ii) Name of the related party(ies) and the nature and extent of their interest in the
transactions;
(iii) Effect of the transaction on the SME;

(iv) Any other information necessary to enable Investors to evaluate the effect of the
transaction on the SME; and
(v) A statement that the directors, excluding those who are involved in the transaction
as a related party, consider that the terms of the transaction are fair and reasonable in
so far as its shareholders are concerned.
(c) REPORTING OF REGULATORY COMPLIANCE:
The Chief Executive Officer/Managing Director of the SME shall:
(i) be responsible for ensuring compliance by the SME with all the requirements of these
Regulations and all other applicable rules, regulations, notices, guidelines, orders and
the directives issued by the Commission or the Exchange from time to time;
(ii) report status of the compliance mentioned in sub-clause (i) above to the Board of
Directors of the SME and the Exchange within 15 days from the end of each half year;
(iii) act with due skills, diligence and care at all times.
(d) DISCLOSURE OF MISCELLANEOUS INFORMATION:
An SME shall notify, without delay, to the Exchange the information relating to:
(i) change of its Market Maker (if any);
(ii) any change in its accounting reference date;
(iii) any change in its registered address;
(iv) the resignation, dismissal or appointment of any director giving the date of such
occurrences; and;
(v) any other information in such form and within such timeframe as may be required by
the Exchange.

5A.13. SUSPENSION OF TRADING:
The Exchange may suspend trading in the equity securities of an SME in case:
(a) trading in the shares is not being conducted in an orderly manner;
(b) the SME fails to comply with any provision of this chapter;
(c) it is required to do so in the best interest of the market and the protection of
Investors; or
(d) the integrity and reputation of the market has been or may be impaired by dealings
in the equity security of SME.
5A.14. DISCIPLINARY ACTIONS:

If the Exchange considers that an SME has contravened any of the provisions of this
chapter, it may take one or more of the following measures:
(a) Censure the SME;
(b) Impose a fine on the SME or the promoters/ sponsors/directors/CEO of the SME;
(c) Publicly disclose the fact that the SME has been fined or censured;
(d) Disclose the names of the directors and CEO of the SME through its website;
(e) Place the SME in the defaulters’ segment; or
(f) Suspend trading in the shares of the SME.
5A.15. EXIT FROM THE SME BOARD:

An SME may be excluded from the SME Board in the following events:
(a) Voluntary de-listing
(b) Compulsory de-listing
(c) Migration from SME Board to the Exchange’s main board.
5A.16. VOLUNTARY DE-LISTING OF SME FROM THE SME BOARD:

5A.16.1. The SME may apply to the Exchange for delisting from the SME Board
supported by reasons thereof and the proposed purchase price of equity security to be
delisted after obtaining approval in general meeting of the SME by not less than ¾ of
the security holders present in person or by proxy at such general meeting.
The purchase price may be determined either through the reverse book building
process, to be prescribed by the Exchange, or through the mechanism given in the
following clause.
5A.16.2. The purchase price proposed by the sponsors will be the highest of the
benchmark price based on any of the following:
(a) Current market price as of the date the Exchange receives the intimation under para
5A.16.1. above;

(b) Average Market Price: calculated based on the daily closing price of the three years
preceding the date the Exchange receives the intimation under para 5A.16.1. If the SME
has been in existence less than three years, the average shall be based on the period
since the listing of the SME on the SME Board;
(c) The intrinsic value per share: determined on the basis of revaluation of assets,
carried out by professional evaluator approved by Pakistan Banks’ Association (PBA) or
any Investment Bank. The revaluation of assets carried out by the evaluators shall not
be older than six months from the date the Exchange receives the intimation under para
5A.16.1. above;
(d) The maximum price at which the sponsors had purchased these shares from the
open market in the preceding one year.
5A.16.3. While evaluating the SME application for the delisting, the Exchange may
require the SME to take precautions in order to avoid the infringement of the investors’
rights. In any case voluntary de-listing of an SME shall be subject to compliance by the
SME with the prescribed procedure, guidelines/criteria and other terms and conditions
as may be laid down by the Exchange.
5A.16.4. The Exchange may for any reason whatsoever refuse to accept the proposal of
the company, the purchase price and/or the request to de-list the securities.
5A.17. COMPULSORY DE-LISTING OF SME FROM THE SME BOARD:

5A.17.1. An SME may be delisted from the SME Board, if:
(a) Disciplinary action has been taken against the SME by the Exchange under para
5A.14. and the SME fails to rectify the default for a period of six months;
(b) The independent audit report on the annual financial statement of the SME sets forth
an adverse opinion or the disclaimer of opinion by an auditor for two consecutive
periods.
Provided that the Exchange shall issue a warning to the SME for correcting the
problems prior to taking a decision to delist the SME from the SME Board.
5A.17.2. If it fulfills the criteria for migration to the main board and its application for the
listing to the main board is accepted by the Exchange;

5A.17.3. Where an SME is delisted under clause 5A.17.1.(a) above, no company
promoted by promoters and directors of such delisted company shall be permitted to be
listed on SME board for a period of five years from the date of such delisting.
5A.18. MIGRATION FROM SME BOARD TO THE MAIN BOARD:

5A.18.1. Where paid-up capital of an SME exceeds Rs200 million or its equity,
excluding surplus on revaluation of fixed assets, exceeds Rs300 million, such SME
shall, within twelve months of such increase, seek its listing on main board of the
Exchange.
Provided that at least three annual audited financial statements are published before
SME could migrate to the Main Board.
Explanation: In case of paid up capital, the time period of twelve months shall be
reckoned from the date of issue of shares causing increase in the paid up capital
beyond Rs.200 million and in case of equity it shall be reckoned from the last date of the
closing of the financial year in which the equity has exceeded the threshold of Rs300
million;
5A.18.2. An SME applying for listing on the main board of Exchange shall, in addition to
the requirements laid down in chapter 5 of PSX Regulations, comply with the additional
requirements as may be prescribed by the Exchange with the approval of the
Commission.
5A.18.3. The Exchange, with prior approval of the Commission, may waive any listing
requirements of chapter 5 of PSX Regulations for an SME migrating to the main board.
5A.18.4. The Exchange shall waive initial and annual listing fee for listing on main board
in the first year of migration of an SME to the main board.
5A.19. INITIAL AND ANNUAL LISTING FEES:

5A.19.1. An SME applying for listing of its equity securities under this chapter shall be
required to pay an initial listing fee equivalent to 0.05% of its post issue paid-up capital
subject to a maximum of Rs. 50,000/-.
5A.19.2. Whenever the SME increases its paid-up capital, it shall be required to pay to
the Exchange an additional listing fee equivalent to 0.05% of increase in the paid-up
capital subject to a maximum of Rs. 50,000/-
.

5A.19.3. The SME shall pay an annual listing fee for each subsequent financial year of
the Exchange, commencing from 1st July and ending on 30 June , which shall be
payable by or before the 30th September in each calendar year, as per the following
schedule:
S.# SMEs having Paid-up Capital Amount of fee

(i) Up to Rs.50 million Rs.20,000
(ii) Above Rs.50 million & up to Rs.100 Rs.30,000
million
(iii) Above Rs.100 million Rs.40,000
Provided that the Exchange may relax/revise the above fees or any of the slabs or add
new slabs as it may deemed appropriate, subject to prior approval of the Commission.
Provided further that every SME applying for listing shall pay annual listing fee for the
entire financial year of the Exchange along with listing application irrespective of the
date of its listing during the financial year.
Chapter 5B of Rule Book:

LISTING OF DEBT SECURITIES REGULATIONS
5B.1. APPLICABILITY OF REGULATIONS:

5B.1.1. All the provisions provided in the chapter 5 of PSX Regulations relating to
Listing of Companies and Securities Regulations, presently in force or as amended from
time to time, shall be applicable unless otherwise provided in this chapter.
5B.1.2. The provisions of this chapter shall not apply to the matters relating to
Government Debt Securities Regulations as provided in chapter 6 of PSX Regulations.
5B.2. DEFINITIONS:
In this chapter, unless the subject or context otherwise requires:
(a) “Bid Price” shall mean the price for which a Market Maker is willing to pay for the
purchase of Debt Securities;
(b) “Debt Security” shall mean any instrument creating or acknowledging indebtedness
which is issued or proposed to be issued by an Issuer including, in particular,
debentures, debenture stock, loan stock, bonds, notes, commercial paper, sukuk or any
other debt security of an Issuer, whether constituting a charge on the assets of the
company or not;

(c) “Debt Securities Trustee” shall mean a person as defined in the Debt Securities
Trustee Regulations, 2012;
(d) “Information Memorandum” for the purpose of this chapter shall mean a document
outlining the salient features, risks and terms of Debt Securities circulated to pre-IPO
Investors to assess demand for the Debt Securities and to enable the prospective
Investors to make an informed investment decision;
(e) “Market Maker” for the purpose of this chapter means a person appointed by the
Issuer for Market Making of its Debt Security;
(f) “Market Making” shall mean the display of two-way quotes i.e. Bid Price and Offer
Price on continuous basis during the designated market making period by the Market
Maker for the purchase and sale of the concerned Debt Securities” in accordance with
this chapter;
(g) “Offer Price” shall mean the price for which a Market Maker is willing to sell Debt
Securities;
(h) “Short Term” shall mean a period of one or less than one (1) year;
(i) “Spread” shall mean the difference between the Bid Price and the Offer Price.
5B.3. ELIGIBILITY FOR LISTING:

5B.3.1. Any Issuer may apply for listing of its Debt Securities offered to the General
Public under this chapter provided it fulfills the following criteria:
(a) it has commenced commercial operations;
(b) it is allowed by the Commission to issue, circulate and publish prospectus for issue
of such Debt Security;
(c) its paid up capital is not less than Rs. 200 million and the total issue size including
pre-IPO placement if any, is not less than Rs. 200 million;
(d) its entity rating and the instrument rating is not less than BBB. Instrument rating in
case of Short Term instruments may not be required;
(e) any of its Securities is not on the Defaulter’s Segment of the Exchange, if it is
already listed;

(f) it and its sponsors and directors has/have no overdue loans of any bank or financial
institution.
5B.3.2. The Exchange shall not entertain listing application of an Issuer:
(a) Whose Chief Executive has been found to have violated any provision of this
chapter or chapter 5 of PSX Regulations of any others/listed company on the Exchange
in which he had been the Chief Executive.
(b) Whose promoters/ sponsors/ controlling directors are in the defaulters list of State
Bank of Pakistan either in their individual capacity or in the capacity of directors of other
companies. Or there is an overdue payment reflected against the name of promoters/
sponsors/ controlling directors in the latest CIB report.
Provided that such person will be allowed if he clears his name after settling his dues.
However, this will not apply to nominee directors of the Government and Financial
Institutions. The Issuer shall also provide a list of its Controlling Directors.
(c) Whose promoters/ sponsors/ controlling directors are also promoters/ sponsors/
controlling directors in other listed companies, which are in default of any provision of
this chapter or chapter 5 of PSX Regulations. Further, no person shall be allowed to act
as sponsor/controlling director of a company which was delisted during last five years
and non-compliant of any provision of this chapter or chapter 5 of PSX Regulation at the
time of its delisting. However, this will not apply to nominee directors of the Government
and Financial Institutions. The Issuer shall also provide a list of Controlling Directors.
(d) Which is a wholly owned subsidiary company of a Listed Company which has
violated any provision of this chapter or chapter 5 of PSX Regulations and is still in
default of any such provision.
(e) Which is an associated company of any other Listed Company which has violated
the Listing Regulations of the Exchange and is still in default of any provision of this
chapter or chapter 5 of the PSX Regulations. However, this will not apply to nominee
directors of the Government and Financial Institutions.
(f) If any of its directors/sponsors/substantial shareholders had been declared defaulter

by the stock exchange or has been the promoter/sponsor/substantial shareholder of a
Brokerage House which was expelled or whose TRE Certificate was cancelled/forfeited
by a stock exchange.

(g) A running company for one full year or more, reflecting losses in their last audited
accounts, shall not qualify for listing its equity is eroded by 40% or more.
5B.4. CONDITIONS FOR LISTING OF DEBT SECURITIES:

The Issuer that intends to list any of its Debt Securities on the Exchange shall comply
with the following conditions:
5B.4.1. Minimum allocation of capital to the General Public excluding the Pre-IPO
investors shall be as under:
(i) in case issue size is up to Rs. 500 million, the allocation of capital to the General
Public shall not be less than Rs. 100 million or 25% of the issue size, whichever is
higher;
(ii) in case issue size is above Rs. 500 million and up to Rs. 2 billion, the allocation of
capital to the General Public shall not be less than Rs. 125 million or 15% of the issue
size, whichever is higher;
(iii) in case issue size is above Rs. 2 billion and up to Rs. 10 billion, the allocation of
capital to the General Public shall not be less than Rs. 300 million or 10% of the issue
size, whichever is higher;
(iv) in case issue size is above Rs. 10 billion, the allocation of capital to the General
Public shall not be less than Rs. 1,000 million or 5% of the issue size, whichever is
higher.
The Exchange, while keeping in view appetite for the Debt Securities being offered, may
change the above allocation in any manner it may deem fit.
5B.4.2. The Issuer shall appoint a Debt Securities Trustee for a period not less than the
tenure of the Debt Security.
5B.4.3. The Issuer shall appoint, through agreement in writing, a Market Maker for a
period not less than the tenure of the Debt Security.
5B.4.4. The Company Secretary or any other officer of the Issuer shall be designated as
Compliance Officer who shall perform such functions as mentioned in regulation 5B.12.
5B.4.5. The Issuer, before publication of prospectus, shall obtain CDC’s notice with
respect to declaration of its Debt Security as CDS eligible Security.

5B.4.6. The Debt Securities shall be issued only in Book-Entry form;
5B.4.7. All Debt Securities other than Short Term shall be rated from a credit rating
company registered with the Commission. The credit rating report of the entity and the
instrument shall be prepared on the basis of the Issuer’s latest audited accounts or on
the basis of the Issuer’s reviewed accounts if the audited accounts are older than six
months. In case where the instrument and entity rating is obtained from more than one
credit rating agencies, all the ratings, including the unaccepted rating(s), shall be
disclosed in the prospectus.
5B.4.8. In case of secured Debt Security, the Issuer shall give an undertaking in the
prospectus to the effect that the assets on which charge has been created are free from
any encumbrances and if the charged assets are already charged to secure any other
debt, consent of the creditors having charge on the charged assets has been obtained.
5B.4.9. Save as provided in the Trust Deed, the Issuer shall not make any change in the
charged assets i.e. the assets backing the Debt Security;
5B.4.10. Trading in Debt Securities listed under this chapter shall commence one
trading day after the date of their formal listing;
5B.4.11. The Debt Securities shall be traded at the Exchange’s Bond Automated
Trading System (BATS);
5B.4.12. The Issuer shall make available to the Exchange and to the bankers to the
issue for distribution printed copies of the prospectus and application forms in the
quantity to be determined by the Exchange and the bankers to the issue and the
distribution agent, if any. The Issuer shall also accept applications on identical forms;
5B.4.13. The sponsors and directors of the Issuer shall not participate in subscription of
Debt Securities offered to the General Public.
5B.4.14. In case there is any allocation of capital, out of the pre-IPO placement, if any,
to the associated companies or associated undertakings of the Issuer, such allocation
shall not in aggregate exceed 25% of the total issue;
5B.4.15. The prospectus with the proforma application form shall be published by the
Issuer in at least one widely circulated English and Urdu daily newspaper each at
Karachi, Lahore and Islamabad or as the Exchange may in addition require, at least

seven (7) days in advance but not more than thirty (30) days before the date of the
opening of the subscription list.
5B.4.16. The prospectus and proforma application form shall be placed on the website
of the Issuer and the consultant/Lead Manager to the issue.
5B.4.17. Allocation of capital, out of the pre-IPO placement, if any, to any single investor
shall not exceed 25% of the total issue;
5B.4.18. The Issuer shall inform the Exchange, in writing, of the subscription received
under the hand of an authorized person with certificate(s) from the bankers to the issue,
within five (05) working days of the closing of subscription.
5B.4.19. The Issuer shall take a decision within ten (10) days of the closure of
subscription list as to which applications have been accepted or are successful and
submit allotment register to the Exchange within ten (10) days of such decision.
5B.4.20. The Issuer shall refund the application money in case of unaccepted or
unsuccessful applications within 10 days of the date of such decision.
5B.4.21. The Issuer shall ensure credit of the Debt Security in CDS, to the successful
applicants within twenty one (21) days of the closing of public subscription, under
intimation to the Exchange.
5B.4.22. The Issuer shall ensure completion of the relevant requirements of formal
listing of the Debt Security within twenty one (21) days from the date of closure of public
subscription.
5B.4.23. The Issuer shall, within twenty one (21) days of closing of subscription list, pay
brokerage to the TRE Certificate Holders of the Exchange at a rate not more than one
per cent of the value of the Debt Securities actually sold through them.
5B.4.24. Any Issuer which makes a default in complying with the requirements of
regulations 5B.4.21., 5B.4.22. and 5B.4.23., shall pay to the Exchange a penalty of Rs.
5,000/- (Rupees five thousand only) for every day during which the default continues.
The name of Debt security may be notified to the TRE Certificate Holders of the
Exchange and placed on the website of the Exchange.
5B.4.25. In case the Debt Security is not listed on the Exchange or the listing is refused
by the Exchange, for any reason, whatsoever, the Issuer shall forthwith pay without

surcharge all moneys received from the applicants in pursuance of the prospectus and
every director of the Issuer, other than the nominee directors shall be, jointly and
severally, liable to repay that money with surcharge at the rate of one and half percent
for every month or part thereof from the expiration of the fifteenth day.
5B.4.26. An Issuer may issue Debt Securities which are convertible or exchangeable
into ordinary shares provided such ordinary shares are listed on any recognized stock
exchange.
5B.5. PROCEDURE FOR LISTING OF DEBT SECURITIES UNDER THIS CHAPTER:

For listing of Debt Securities under this chapter the following procedure shall be
followed:
5B.5.1. The Issuer shall for listing of any of its Debt Securities, make an application on
Form-A to the Exchange along with the documents/information as mentioned in
Annexure-I.
5B.5.2. The Issuer shall pay an initial listing fee of such amount as mentioned in
regulation 5B.9.
5B.5.3. The Exchange may reject any application, made under this chapter at its sole
discretion if it deems that listing of the Debt Securities is not in the interest of the
market, the Issuer does not meet the minimum eligibility criteria set out in this chapter or
the Issuer is in contravention of these Regulations:
Provided that, the Issuer shall be given an opportunity of hearing by the Exchange
before the listing application is rejected.
5B.6. ISSUE OF DEBT SECURITIES:

5B.6.1. Issue of Debt Securities to the General Public by the Issuer shall be made
through prospectus which shall be issued, circulated and published after approval of the
Commission as required under the Ordinance. The prospectus shall contain such
information, material and disclosures as required under the Ordinance; and
5B.6.2. The Issuer shall also comply with the guidelines for listing of Debt Securities as
laid down by the Exchange and/or Commission from time to time.

5B.7. CONTENTS OF INFORMATION MEMORANDUM:
5B.7.1. The Information Memorandum, if any, to be circulated to pre-IPO investors for
offer of Debt Securities shall contain at least such information as provided in Annexure-
II to this chapter.
5B.7.2. Information Memorandum shall be a private document and shall be circulated

only to pre-IPO investors. Information Memorandum shall not be used as a document
inviting the General Public or a class of the General Public for subscription of Debt
Securities and shall include a statement to this effect.
5B.8. POST LISTING REQUIREMENTS:

5B.8.1. Payment of markup, profit, interest or rent, as the case may be, and repayment
of principal amount to Debt Security holders shall be credited in their respective bank
accounts electronically;
5B.8.2. The instrument rating shall be reviewed annually based on the latest audited
accounts from the credit rating agency registered with the Commission and revision in
the rating shall be intimated promptly by the Issuer to the Exchange and the Debt
Securities Trustee.
5B.8.3. The Issuer shall provide access to the Debt Securities Trustee to the books of
accounts and record relating to the Debt Security.
5B.8.4. The Issuer shall submit to the Exchange and the Debt Securities Trustee
minutes of the meeting of Debt Security holders within fourteen days of the date of such
meeting.
5B.8.5. The Issuer shall maintain a register of Debt Security holders and inform the
Exchange and the Debt Securities Trustee of the address where the register is kept.
5B.8.6. The Issuer shall provide to the Exchange and the Debt Securities Trustee the
following documents/information:
(i) A statement regarding the payment of markup, profit, interest or rent, as the case
may be, on Debt Securities and redemption of the principal amount, on semi-annual
basis till complete redemption of such Debt Security;
(ii) Copy of its latest audited annual, half-yearly and quarterly accounts as and when
finalized along with key financial ratios. The key financial ratios must include at least the
debt/equity ratio, current ratio, return on equity, return on assets, earning per share,
debt service coverage ratio;

(iii) Copy of any notice, circular, resolution, letter etc. including notice for meeting of the
Debt Security holders, letter/circular issued to the Debt Security holders in connection
with the Debt Security and resolution relating to new issue of Debt Securities by the
Issuer;
(iv) Certificate from its auditors regarding maintenance of 100% security cover in
respect of the Debt Security, if it is secured. The certificate should be submitted on
annual basis along with submission of the annual accounts;
(v) Certificate from its auditors regarding maintenance of redemption reserve, where
required on annual basis;
(vi) Decision of the Board of Directors of the Issuer regarding prepayment of any debt
obligation, if any.
5B.8.7. The Issuer shall, in addition to the documents/information mentioned above,

submit to the Exchange the following information, documents and reports:
(i) any delay/default in payment of profit/mark up/interest and principal amount on any
other debt obligation and reasons thereof;
(ii) the date, at least five working days in advance, of the meetings of its Board of
Directors at which recommendation or declaration of issue of any Debt Security or any
other matter affecting the rights or interests of holders of the Debt Security is proposed
to be taken up;
(iii) change, if any, of the Debt Security Trustee on same day;
(iv) change, if any, subject to the provisions of the prospectus and the Trust Deed, in the
nature and features of the Debt Security or in the rights or privileges of its holders as
and when occurred;
(v) change, if any, in its accounting policies;
(vi) change, if any, in the credit rating of the Issuer;
(vii) change, if any, in its management and address of its registered office;

(viii) change, if any, that may have effect on the rights and privileges of the Debt
Security holders;
(ix) change, if any, in the nature of business of the Issuer due to any reason;
(x) prohibitory order, if any, restraining the Issuer from transferring the Debt Security
from the name of any Debt Security holder;
(xi) any transaction whether related party or otherwise that adversely affect interest of
the Debt Security holders;
(xii) any action against or by the Issuer which will result in the redemption, conversion,
cancellation, retirement in whole or in part of the Debt Security;
(xiii) any action against or by the Issuer that would adversely affect payment of principal
amount and profit/mark up/interest on the Debt Security;
(xiv) any other information that is not in the public domain but necessary to be known to
the holders of Debt Security to enable them to avoid creation of a false market in the
Debt Security; and
(xv) any other information/documents as required by the Exchange.
5B.8.8. The Issuer, till complete redemption of the Debt Security, shall ensure that:
(i) The unclaimed profit/mark-up/interest, if any, is not forfeited and is kept under a
separate head of account namely, “Unclaimed Profit/Mark-up/Interest”;
(ii) Proper book closure is announced for the purpose of payment of profit/mark-
up/interest, redemption of the principle amount, meeting of the security holders or for
such other purposes as the Exchange may deem fit; and
(iii) No modification has been made in the features of the Debt Security like in its term,
coupon rate, conversion, redemption, security etc. by any manner otherwise than that
as disclosed in the prospectus and the Trust Deed;
5B.8.9. Upon request, copies of its annual audited accounts and quarterly accounts are
provided to the Debt Security holders;

5B.8.10. The Issuer shall provide a minimum period of 7 days but not exceeding 15
days at a time for closure of Security Transfer Register, for any purpose, not exceeding
45 days in a year in the whole.
5B.8.11. Book closure for entitlement of the Debt Security holders shall be intimated to
the Exchange not later than 14 days prior to commencement of the same.
5B.8.12. No Issuer shall exercise any lien whatsoever on listed Debt Securities and nor
shall there be any restriction on their transfer.
5B.8.13. In case the Issuer fails to pay its repayment obligations including interest,
mark-up, profit or rent, as the case may, on the due date, it shall promptly inform the
Exchange of such a default and call a meeting of the Debt Securities holders within 15
days of the due date to explain the reasons for default. Senior level representation from
the Issuer, including Chief Executive, shall attend this meeting. The Exchange may
notify the fact of such default and the name of the defaulting company by notice and
also by publication of the same in the Daily Quotations of the Exchange.
5B.8.14. The Issuer shall furnish to the stock exchange soft copy of the complete list of
its Debt Security holders within 30 days of the end of each calendar year.
5B.9. PAYMENT OF LISTING FEE:

The Issuer shall pay to the Exchange initial listing fee and annual listing fee at the rate
as mentioned below: (i) an initial listing fee equivalent to 0.05% of the total issue size of
the Debt Security subject to a maximum of Rs. 0.5 million.
(ii) an annual listing fee shall be payable in respect of each financial year of the
Exchange, commencing from 1st July and ending on 30th June next, before the 30th
September in each calendar year, as per following schedule:
S.# Total issue size Amount of fee

(i) Up to Rs.500 million Rs.30,000
(ii) Above Rs.500 million & up to Rs.1000 million Rs.40,000
(iii) Above Rs.1000 million Rs.50,000
The Exchange with prior written approval of the Commission may revise the above
mentioned initial and annual listing fees.

5B.10. FUNCTIONS OF A DEBT SECURITIES TRUSTEE:
The Debt Securities Trustee shall be responsible to perform such functions and duties
as prescribed in the Debt Securities Trustee Regulations, 2012.
5B.11. APPOINTMENT AND FUNCTIONS OF MARKET MAKER:

5B.11.1. For the purpose of this chapter, Market Maker shall be appointed by the Issuer.
5B.11.2. A person shall be eligible to be appointed as a Market Maker if such person:

(a) Is:
i. A Corporate Brokerage House; or
ii. A financial institution which satisfies the eligibility criteria devised by the Exchange
with prior approval of the Commission. In such case, the application shall be
accompanied with prior written consent from the concerned designated Broker.
(b) Has a minimum equity (net of provisions and capitalized losses if any) of Rs. 100
million as per the latest audited financial statements.
5B.11.3. A Market Maker may resign after three months of commencement of its term
by providing the Issuer and Exchange at least two months’ prior written notice along
with the reasons for resignation and specifying the effective date of resignation,
provided that a substitute Market Maker in the Debt Security which fulfills the eligibility
criteria is ready to take the outgoing Market Maker’s role and responsibilities for the
remaining period of the term of such Debt Security.
5B.11.4. The Market Maker shall be responsible to perform the below mentioned
functions:
(a) The spread charged by the Market Maker shall not be more than the one as
disclosed in the prospectus for issue of the Debt Security.
(b) The Market Makers must at all times hold at least one percent of the outstanding
amount of the Debt Security.
(c) The Market Maker shall mandatorily make available two way quotes on continuous
basis during Market Making period; Market Maker shall be bound to purchase or sell a
maximum of one percent of total principal outstanding of the issue in the Debt Security
during a trading day or such other percentage as may be prescribed by the Exchange;

(d) Market Maker shall make available copy of the prospectus to the investors at all
times;
(e) It shall be obligatory for a Market Maker to replenish its orders/quotes within 90
seconds following full execution, withdrawal, expiration or any change in the price of
either bid or offer;
(f) The Market Making Orders/Quotes are to be maintained on both sides during Market
Making period as per Market Making agreement which shall be for the tenure of the
Debt Security.
(g) The Market Maker shall be allowed to Blank Sale in Debt Security subject to
sufficient pre-existing interest at the end of each Blank Sale day to validate that the
Market Maker can deliver the quantity sold blank during the trading day.
5B.12. FUNCTIONS OF THE COMPLIANCE OFFICER:

5B.12.1. The compliance officer shall be responsible for ensuring compliance by the
Issuer with all the requirements of this chapter and the directives issued, if any, by the
Exchange.
5B.12.2. The compliance officer shall report status of the compliance mentioned in
regulation 5B.12.1 above at every meeting of the Board of Directors of the Issuer till
complete redemption of the issue; and
5B.12.3. The compliance officer shall also report status of the compliance, mentioned in
regulation 5B.12.1. above, directly to the Exchange and the Debt Securities Trustee.
5B.13 CIRCUIT BREAKERS AND SUSPENSION OF TRADING:

5B.13.1. The security-wise circuit breakers imposed by the Exchange from time to time
shall also be applicable on Debt Securities.
Further, the Market Maker may not be required to enter two-way quotes where the
relevant Debt Security continuously trades for fifteen minutes within one percent below
the applicable circuit breakers.
5B.13.2. The Exchange may suspend trading in any Debt Security where:
(a) the integrity and reputation of the market has been or may be impaired by dealings
in the Debt Security;

(b) it considers that the Issuer has failed to comply with any provision of these
Regulations including post listing requirements as provided under regulation 5B.8 or if
payment of profit/mark-up/interest or redemption of principal amount is delayed ; or
(c) the protection of investors so requires.
5B.14. DISCIPLINARY ACTION:
If the Exchange considers that the Issuer of any listed Debt Securities has defaulted or
contravened any provision of this chapter, it may take any or all of the following
measures:
5B.14.1. It may impose a fine on the Issuer to the extent not exceeding Rs. 100,000 for
each default or contravention, and, in case of continuing default, failure, refusal or
contravention, to a further fine not exceeding Rs. 10,000/- (Rupees ten thousand only)
for every day after the first day during which such contravention continues:
Provided that no such penalty shall be imposed unless an opportunity of hearing has
been granted;
5B.14.2. Publish the fact that the Issuer has been fined or warned; and
5B.14.3. It may place the Debt Security on the Defaulters’ Segment and may suspend
its trading if payment of profit/mark-up/interest or redemption of principal amount is
delayed.

Anti-Money Laundering Act, 2010
(Section 2 to 20 and 30)

Anti-Money Laundering Act, 2010
Definitions
In this Act, unless there is anything repugnant in the subject or context,
(i) “AML/CFT” means Anti Money Laundering and Countering Financing of Terrorism;
(ii) “AML/CFT regulatory authority” means the regulator or SRB as defined under
section 6A of this Act;
(iii) “attachment” means prohibition of transfer, conversion, disposition or movement of

property by an order issued under section 8;
(iv) “beneficial owner” means,— (a) natural person who ultimately owns or controls a
customer or the natural person on whose behalf a transaction is being conducted; or
(b) natural person who exercises ultimate effective control over a legal person or legal
arrangement;
(v) “business relationship” means professional or commercial relationship between a

reporting entity and a customer to conduct transaction, activity or to provide service or
product;
(vi) “CDD” means customer due diligence and the obligations set out in section 7A;
(vii) “company” means any body corporate and includes a firm or other association of
individuals;
(viii) “Competent authorities” means the regulators, oversight bodies for SRBs, the
Financial Monitoring Unit and the Investigating or prosecuting agencies as defined in
this Act;
(ix) “Corporate group” means a group that consists of a parent entity exercising
control or management on branch or subsidiary that are subject to AML/CFT policies
and procedures at the group level;
(x) “Court” means the Court specified under section 20;
(xi) “CTR” means report on currency transactions exceeding such amount as may be
specified by the National Executive Committee by notification in the official Gazette;

(xii) “Designated non-financial businesses and professions or DNFBPs” mean the
following persons, namely:-
(a) real estate agents, including builders and real estate developers, when performing
the prescribed activities in the prescribed circumstances and manner;
(b) dealers in precious metals and precious stones, including jewellers and gem
dealers, when performing the prescribed activities in the prescribed circumstances and
manner;
(c) lawyers, notaries, accountants and other legal professionals who carryout monetary
transactions for their clients concerning the following activities:-
(I) managing, operating, buying and selling of real estate, legal persons and legal
arrangements and preparing documents therefor;
(II) managing of client money, securities or other assets;
(III) managing bank, savings or securities accounts; or
(IV) organizing contributions for the creation, operation or management of companies;
(d) trust and company service providers, when they carry out monetary transactions or
services for a client concerning the following activities:–
(I) acting as a formation agent of legal persons;
(II) acting as or arranging for another person to act as a director or secretary of a

company, a partner of a partnership, or a similar position in relation to other legal
persons;
(III) providing a registered office, business address or accommodation, correspondence

or administrative address for a company, a partnership or any other legal person or
arrangement;
(IV) acting as or arranging for another person to act as a trustee of a trust or performing
the equivalent function for another form of legal arrangement; and
(V) acting as or arranging for another person to act as a nominee shareholder for
another person; and

(e) such other designated non-financial businesses and professions as may be notified
by the Federal Government;
(xiii) “Director General” means the Director General of FMU appointed under sub-
section (3) of section 6;
(xiv) “financial institution” includes any person carrying on any one or more of the
following activities, namely:-
(a) acceptance of deposits and other repayable funds from the public;
(b) lending in whatsoever form;
(c) financial leasing;
(d) money or value transfer;
(e) issuing and managing means of payments including but not limited to credit
and debit cards, cheques, traveller’s cheques, money orders, bank drafts and
electronic money;
(f) financial guarantees and commitments; and
(g) trading in —
(i) money market instruments;

(ii) foreign exchange;
(iii) exchange, interest rate and index instruments;
(iv) transferable securities;
(v) commodity futures trading;
(vi) participation in shares issues and the provision of services related to such issues;
(vii) individual and collective portfolio management;
(viii) safekeeping and administration of cash or liquid securities on behalf of other
persons;
(ix) investing, administering or managing funds or money on behalf of other persons;
(x) insurance business transactions;
(xi) money and currency changing; and
(xii) carrying out business as intermediary;
(xv) “FMU” means the Financial Monitoring Unit established under section 6;
(xvi) “foreign serious offence” means an offence,
(a) against the law of a foreign state stated in a certificate issued by, or on behalf of, the
government of that foreign state; and

(b) which, had it occurred in Pakistan, would have constituted a predicate offence;
(xvii) “investigating officer” means the officer nominated or appointed under section
24;
(xviii) “investigating or prosecuting agency” means the National Accountability

Bureau (NAB), Federal Investigation Agency (FIA), Anti-Narcotics Force (ANF),
Directorate General of (Intelligence and Investigation – Customs) Federal Board of
Revenue, Directorate General (Intelligence and Investigation Inland Revenue) Federal
Board of Revenue, Provincial Counter Terrorism Departments or any other law
enforcement agency as may be notified by the Federal Government for the investigation
or prosecution of an offence under this Act;
(xix) “legal arrangements” means trusts, waqfs or other similar legal arrangements as
may be defined in any other law;
(xx) “legal person” means companies, associations, foundations, partnerships,

societies and any other legal person as may be defined in any other law;
(xxi) “National Executive Committee” means the National Executive Committee

constituted under section 5;
(xxii) “occasional transactions” means any transaction conducted by a reporting

entity for a customer with whom the reporting entity does not have a business
relationship;
(xxiii) “offence of money laundering” has the meaning as defined in section 3;
(xxiv) “oversight body for SRB” means a body appointed by the Federal Government
by notification in the Official Gazette to monitor the compliance of an SRB with respect
to the provisions of this Act;
(xxv) “person” means any natural or legal person;
(xxvi) “predicate offence” means an offence specified in Schedule-I to this Act;
(xxvii) “prescribed” means prescribed by rules or regulations made under this Act;

(xxviii) “proceeds of crime” means any property derived or obtained directly or
indirectly by any person from the commission of a predicate offence or a foreign serious
offence;
(xxix) “proliferation financing” means the financing of proliferation of weapons of

mass destruction;
(xxx) “property” means property or assets of any description, whether corporeal or

incorporeal, movable or immovable, tangible or intangible, and includes deeds and
instruments evidencing title to, or interest in, such property or assets, including cash
and monetary instruments, wherever located;
(xxxi) “property involved in money laundering” means, regardless of who holds or

has held the property, proceeds of crime, property derived or obtained directly or
indirectly from the offence of money laundering and property used or intended to be
used in commission of the offence of money laundering, a predicate offence or a foreign
serious offence;
(xxxii) “record” includes the records maintained in the form of books or stored in a
computer or any electronic device, or such other form as may be prescribed;
(xxxiii) “regulator” means a regulator as mentioned in clause (1) of Schedule –IV of

this Act; 7
(xxxiv) “reporting entity” means financial institutions and DNFBPs and any other
person notified by the Federal Government in the official Gazette;
(xxxv) “risk” means the risk of money laundering or the risk of financing of terrorism;
(xxxvi) “SBP” means State Bank of Pakistan established under the State Bank of
Pakistan Act, 1956 (XXXIII of 1956);
(xxxvii) “Schedule” means schedule to this Act;
(xxxviii) “SECP” means Securities and Exchange Commission of Pakistan established

under the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997);
(xxxix) “SRB” means a self-regulatory body as mentioned in clause (2) of Schedule-IV

of this Act;

(xL) “STR” or “Suspicious Transaction Report” means the report on suspicious
transaction as provided under section 7;
(xLi) “TFS” or “Targeted Financial Sanctions” means the freezing and prohibition
obligations in relation to the property of the designated or proscribed persons under the
United Nations (Security Council) Act 1948 or the Anti-terrorism Act, 1997 and any rules
or regulations made thereunder; and
(xLii) “transfer” means sale, lease, purchase, mortgage, pledge, gift, loan or any other
form of transfer of right, title, possession or lien.
1. Offence of money laundering

A person shall be guilty of offence of money laundering, if the person:
(a) acquires, converts, possesses, uses or transfers property, knowing or having reason
to believe that such property is proceeds of crime;
(b) conceals or disguises the true nature, origin, location, disposition, movement or
ownership of property, knowing or having reason to believe that such property is
proceeds of crime;
(c) holds or possesses on behalf of any other person any property knowing or having
reason to believe that such property is proceeds of crime; or
(d) participates in, associates, conspires to commit, attempts to commit, aids, abets,
facilitates, or counsels the commission of the acts specified in clauses (a), (b) and (c).
Explanation-I.— The knowledge, intent or purpose required as an element of an offence

set forth in this section may be inferred from factual circumstances in accordance with
the Qanun-e-Shahadat Order, 1984 (P.O. 10 of 1984).
Explanation II.- For the purposes of proving an offence under this section, the conviction
of an accused for the respective predicate offence shall not be required.
2. Punishment for money laundering

(1) Whoever commits the offence of money laundering shall be punished with rigorous
imprisonment for a term which shall not be less than one year but may extend upto ten
years and shall also be liable to fine which may extend upto twenty-five million rupees
and shall also be liable to forfeiture of property involved in money laundering or property
of corresponding value.

(2) The fine under sub-section (1) may extend upto one hundred million rupees in case
of a legal person. Any director, officer or employee of such legal person who is also
found guilty under this section shall also be punishable as provided under sub-section
(1).
3. National Executive Committee

(1) Within thirty days of the commencement of this Act, the Federal Government shall,
by notification in the official Gazette, constitute a committee to be known as the National
Executive Committee which shall consist of the members as mentioned in Schedule-II
of this Act.
(2) The National Executive Committee shall hold its meetings atleast twice a year and
shall be responsible to perform the following functions, namely:-
(a) make recommendations to the Federal Government to make rules for effective
implementation of this Act and framing of national policy to combat money laundering
and financing of terrorism;
(b) make recommendations to the Federal Government to make rules for the
determination of offences existing in Pakistan that may be considered to be predicate
offences for the purposes of this Act;
(c) make recommendations to the Federal Government on the application of

countermeasures as called for by the Financial Action Task Force (FATF) to combat
money laundering and financing of terrorism;
(d) provide guidance and recommendations in making rules and regulations under this
Act;
(e) approve, review and oversee the implementation of a national strategy to fight
money laundering and financing of terrorism;
(f) seek reports from competent authorities as it may require, including an annual report
containing overall analysis of the STRs and CTRs, statistics concerning the
investigations and prosecutions conducted in relation to the offences of money
laundering and the financing of terrorism in Pakistan, statistics of supervisory actions
taken by the AML/CFT regulatory authorities according to clause (i) of sub-section (2) of
section 6A or by the oversight body for SRB according to Section 6C. In this behalf,
Secretary of the National Executive Committee may call periodic reports from the

AML/CFT regulatory authorities, Oversight body for SRB, investigating and prosecuting
agencies in such manner as may be specified by him;
(g) discuss any other issue of national importance relating to money laundering and
financing of terrorism; and
(h) undertake and perform such other functions as assigned to it by the Federal
Government, relating to money laundering and financing of terrorism.
(3) The National Executive Committee may constitute one or more sub-committees to
perform such functions as it may deem fit.
(4) The National Executive Committee may delegate or assign its functions to the
General Committee or a subcommittee, if deems appropriate.
(5) The Federal Government shall, by notification in the Official Gazette, constitute a
committee to be known as the General Committee which shall consist of the members
as mentioned in Schedule-III of this Act.
(6) The General Committee shall assist the National Executive Committee for the
purposes of this Act.
(7) The General Committee may invite any person to participate in the meeting as it
deems necessary.
(8) The General Committee shall perform the following functions namely:-
(a) develop a national strategy to fight money laundering and financing of terrorism;
(b) issue necessary directions to the investigating or prosecuting agencies, AML/CFT

regulatory authorities, FMU and any other authority appointed by the Federal
Government involved in the implementation and administration of this Act, including
measures for development and performance review of such agencies and authorities;
(c) seek reports from the competent authorities as it may require, including an annual
report containing overall analysis of the STRs and CTRs, statistics concerning the
investigations and prosecutions conducted in relation to the offences of money
laundering and the financing of terrorism in Pakistan, statistics of supervisory actions
taken by the AML/CFT regulatory authorities according to clause (i) of sub-section (2) of
section 6A or by the oversight body for SRB according to Section 6C. In this behalf,
Secretary of the General Committee may call periodic reports from the AML/CFT

regulatory authorities, oversight body for SRB, investigating and prosecuting agencies
in such manner as may be specified by the Secretary;
(d) approve FMU’s budgetary proposals for achieving the objects of this Act;
(e) approve FMU’s staffing requirements, pay, allowances, privileges and compensation
packages and other matters incidental thereto;
(f) provide necessary assistance to the National Executive Committee in carrying out its
functions and duties under this Act;
(g) discuss any other issue of national importance relating to money laundering and
terrorist financing; and
(h) undertake and perform such other functions as assigned or delegated to it by the
National Executive Committee.
(9) The General Committee may constitute one or more sub-committees to perform
such functions as it may deem fit.
4. Financial Monitoring Unit

(1) The Federal Government shall, by notification in the official Gazette, establish a
Financial Monitoring Unit which shall be housed in SBP or at any other place in
Pakistan.
(2) The FMU shall have independent decision making authority on day-to-day matters
falling within its area of responsibility.
(3) The Federal Government in consultation with SBP shall appoint a Director General
who shall be a financial sector specialist to head FMU. He shall exercise all powers and
functions of the FMU subject to the administrative oversight of the General Committee.
(4) The FMU shall have the following powers and the functions, namely:
(a) to receive STRs and CTRs from reporting entities as may be necessary to
accomplish the objectives of this Act;
(b) to analyse the STRs and CTRs and in that respect the FMU may call for record and
information from any agency or person in Pakistan related to the transaction in question.
All such agencies or persons shall be required to promptly provide the requested record
and information;

(c) to disseminate on a confidential basis, after analyzing the STRs, and CTRs and
other record, necessary information or material to the concerned investigating or
prosecuting agencies for enquiry or other action under this Act or any other applicable
law;
(d) to create and maintain a data base of all STRs and CTRs, related information and
such other materials as the Director General determines are relevant to the work of the
FMU and in that respect, the FMU is authorized to establish necessary analytic software
and computer equipment to effectively search the database, sort and retrieve
information and perform real time linkages with databases of other agencies both in and
outside Pakistan as may be required from time to time;
(e) to cooperate with financial intelligence units of other countries and to make
reciprocal arrangements in order to share, request and receive information relating to
money laundering, predicate offences and financing of terrorism and any other
information that may be necessary to accomplish the objectives of this Act;
(f) to represent Pakistan at all international and regional organizations and groupings of
financial intelligence units and other international groups and forums which address the
offence of money laundering, financing of terrorism and other related matters;
(g) to request the investigating or prosecuting agencies any feedback regarding the
disseminations made under sub-clause (c) in the form of periodic reports or statistics
concerning the investigations and prosecutions of money laundering and financing of
terrorism in Pakistan;
(h) to frame regulations in consultation with the AML/CFT regulatory authorities for
ensuring receipt of STRs and CTRs from reporting entities with the approval of the
National Executive Committee;
(i) to enter into arrangements with domestic agencies, authorities, or any reporting entity
or any of its officers as may be necessary for getting facilitation in implementation of the
provisions of this Act, or the rules or regulations made hereunder; and
(j) to perform all such functions and exercise all such powers as are necessary for, or
ancillary to, for the attainment of the objectives of this Act.

(5) On considering STR or CTR, the FMU may, if deems necessary, convey matters
involving regulatory or administrative action to the concerned regulatory or administrative
body for appropriate action.
(6) Subject to the regulations sanctioned by the National Executive Committee in this
behalf, the Director General may, if there appear to be reasonable grounds to believe
that a property is involved in money laundering, order freezing of such property, for a
maximum period of fifteen days, in any manner that he may deem fit in the
circumstances.
4A. AML/CFT regulatory authority

(1) AML/CFT regulatory authority means the regulators and SRBs as specified in
Schedule IV. They shall exercise the powers and perform the functions as set out in this
Act and as prescribed thereunder.
(2) AML/CFT regulatory authority shall exercise the following powers and functions with
respect to its reporting entities, namely: - (a) licensing or registration of reporting
entities;
(b) imposing any conditions to conduct any activities by reporting entities to prevent the
offence of money laundering, predicate offence or financing of terrorism;
(c) issuing regulations, directions and guidelines with respect to sections 7A to 7H of

this Act;
(d) issuing regulations, directions and guidelines with respect to financing of proliferation
obligations;
(e) providing feedback to reporting entities for the purpose of compliance with the
requirements of sections 7A to 7H of this Act and as prescribed thereunder;
(f) monitoring and supervising, including conducting inspections, for the purpose of
determining compliance with the requirements of sections 7(1), 7(3) to 7(6) and 7A to
7H of this Act and any rules or regulations made thereunder and with the orders or
regulations made thereunder that impose TFS obligations;
(g) compelling production of information relevant to monitoring compliance with the

requirements of sections 7(1), 7(3) to 7(6) and 7A to 7H of this Act and any orders, rules
or regulations made thereunder that impose TFS obligations;

(h) impose sanctions, including monetary and administrative penalties to the extent and
in the manners as may be prescribed, upon their respective reporting entity, including its
directors and senior management and officers, who violates any requirement in section
7(1), 7(3) to 7(6) and 7A to 7H and any rules or regulations made thereunder or those
who fail to comply with the TFS regulations. Any person aggrieved by the imposition of
sanctions under this clause may prefer an appeal in such manner and within such
period to such authority as may be prescribed;
(i) maintaining statistics of the actions performed in respect of the functions and powers
conferred by this Act, in order to report to the National Executive Committee and the
General Committee as required; and
(j) exercising any other such powers and performing any other such functions that may
be otherwise granted in any other applicable law.
4B. International cooperation by regulators

The regulators as specified in clause (1) Schedule IV of this Act shall co-operate with
their foreign counterparts and shall make reciprocal arrangements reduce in writing to
share, request and receive information relating to the requirements of this Act and any
regulations made there under.
(a) make regulations for the SRB with respect to the provisions of this Act;
4C. Oversight Body for SRBs

The Federal Government shall by notification in the Official Gazette appoint an
Oversight Body for the SRBs mentioned in clause (2) of Schedule IV which shall
exercise and perform the following powers and functions with respect to their respective
SRB, namely:-
(a) make regulations for the SRB with respect to the provisions of this Act;
(b) monitor and oversee the SRB in accordance with the provisions of this Act;
(c) impose sanctions to the extent and in the manner as may be prescribed, upon their
respective SRB who fails to comply with any provision of this Act and any rules or
regulations made thereunder; and
(d) exercise any other powers and perform any other functions as may be notified by the
Federal Government in the official Gazette.
5. Procedure and manner of furnishing information by reporting entities

(1) Every reporting entity shall file with FMU, to the extent and in the manner prescribed
by the FMU, Report of Suspicious Transaction conducted or attempted by, at or through

such reporting entity, if it knows, suspects or has reason to suspect that the transaction
or a pattern of transactions of which the transaction is a part,-
(a) involves funds derived from illegal activities or is intended or conducted in order to
hide or disguise proceeds of crime;
(b) is designed to evade any requirements of this Act 8;
(c) has no apparent lawful purpose after examining the available facts, including the
background and possible purpose of the transaction; or
(d) involves financing of terrorism, including fund collected, provided, used or meant for,
or otherwise linked or related to, terrorism, terrorist acts or organizations and individuals
concerned with terrorism:
Provided that STR shall be filed by the reporting entity with the FMU promptly.
(2) Any government agency, autonomous body, oversight body for SRB, AML/CFT
regulatory authority, domestic or foreign, may share intelligence or report their
suspicions within the meaning of STR or CTR to FMU in normal course of their business
and the protection provided under section 12 shall be available to such agency, body or
authority.
(3) All CTRs shall, to the extent and in the manner prescribed by the FMU, be filed by
the reporting entities with the FMU immediately, but not later than seven working days,
after the respective currency transaction.
(4) Every reporting entity shall keep and maintain all record related to STRs and CTRs
filed by it for a period of at least ten14 years after reporting of transaction under sub-
sections (1), (2) and (3).
(5) The provisions of this section shall have effect notwithstanding any obligation as to
secrecy or other restriction on the disclosure of information imposed by any other law or
written document.
(6) Notwithstanding anything contained in any other law for the time being in force, any
STRs15 required to be submitted by any person or entity to any investigating or
prosecuting agency shall, on the commencement of this Act, be solely and exclusively
submitted to FMU to the exclusion of all others.

(7) omitted.
5A. Conducting CDD
(1) Every reporting entity shall conduct CDD in the manner as may be prescribed and in
accordance with provisions of this Act in the following matters, namely:-
(a) entering into a business relationship; (a) identify the customer and verify the
customer’s identity on the basis of documents, data or information obtained from
reliable and independent sources;
(b) identify the beneficial owner and take reasonable measures to verify the beneficial
owner’s identity on the basis of documents, data or information obtained from reliable
sources and be satisfied that it knows who the beneficial owner is;
(c) understand and, as appropriate, obtain information on the purpose and intended
nature of the business relationship; and
(d) monitor the business relationship on an ongoing basis.
5B. Reliance on third parties

A reporting entity may rely on third party to perform CDD in the manner as may be
prescribed.
(a) shall not open the account, commence business relations or perform the transaction;
or shall terminate the business relationship if any; and
(b) shall promptly consider filing a Suspicious Transaction Report in relation to the
customer.
5C. Record keeping

Every reporting entity shall maintain a record of all transactions for a period of at least
five years following the completion of the transaction, and records of account files,
business correspondence, documents, of all records obtained through CDD and the
results of any analysis undertaken for a period of at least five years following the
termination of the business relationship.
5D. Inability to complete CDD and tipping off

(1) Where a reporting entity is unable to complete CDD requirements,

(2) Where a reporting entity forms a suspicion of money laundering or terrorist financing,
and reasonably believes that performing the CDD process will tip-off the customer, the
reporting entity shall not pursue the CDD process and shall file a STR.
5E. Anonymous business relationships and transactions

No reporting entity shall enter into a business relationship or conduct any transaction
with a customer who is anonymous or provides a fictitious name.
5F. Risk understanding

Every reporting entity shall take appropriate steps to identify, assess and understand
the risks to which its business is subjected to, in accordance with this Act and as
prescribed.
5G. Compliance program

Every reporting entity shall implement compliance management arrangements,
including the appointment of a compliance officer at a management level and training
programs, having regard to the money laundering and terrorism financing risks and the
size of the business during the course of their activities subject to this Act and as
prescribed.
5H. Policies and procedures

Every reporting entity shall implement policies and procedures to ensure their
compliance with the provisions of this Act and orders, rules or regulations made
thereunder that impose TFS obligations upon reporting entities.
5I. Sanctions for reporting entities

If any reporting entity or natural person contravenes any of the provisions of sections
7(1), 7(3) to 7(6) and 7A to 7H, it may be subjected to sanctions, as mentioned under
clause (h) of section 6A of this Act and as may be prescribed.
5J. Appeal to concerned AML/CFT Regulatory Authority

(1) Any person aggrieved by the delay or failure of a reporting entity to complete CDD
requirements or establish business relationship or conduct any transaction, may file an
appeal to the concerned AML / CFT Regulatory Authority within ninety days.
(2) The concerned AML / CFT Regulatory Authority shall decide the appeal within sixty
days.
6. Attachment of property involved in money laundering

(1) An investigating officer may, on the basis of the report in his possession received
from the concerned investigating or prosecuting agency, by order in writing, with prior
permission of the Court, provisionally attach a property, which he reasonably believes to
be the property involved in money laundering for a period not exceeding one hundred
and eighty days from the date of the order;
Provided that the Court may grant further extension for a period up to one hundred and
eighty days.
(2) The investigating officer shall, within forty-eight hours immediately after attachment
under sub-section (1), forward a copy of the order and the report referred to in that sub-
section to the head of the concerned investigating agency in a sealed envelope.
(3) Every order of attachment made under sub-section (1) shall cease to have effect
after the expiry of the period specified in that sub-section or on the date of the finding
made under sub-section (2) of section 9 whichever is earlier.
(4) Nothing in this section shall prevent the person interested in the enjoyment of the
immovable property attached under sub-section (1) from such enjoyment.
Explanation.—For the purposes of this sub-section, “person interested”, in relation to

any immovable property, includes all persons claiming or entitled to claim any interest in
the property.
(5) The investigating officer who provisionally attaches any property under sub-section
(1) shall submit to the Court monthly report of the progress made in the investigation.
7. Investigation
(1) The investigating officer shall, not later than seven days from the date of order of
attachment made under sub-section (1) of section 8 or, seizure of property under
section 14 or section 15, serve a notice of not less than thirty days on the person
concerned. The notice shall call upon such person to indicate the sources of his income,
earning or assets, out of which or by means of which he has acquired the property
attached under sub-section (1) of section 8, or, seized under section 14 or section 15,
the evidence on which he relies and other relevant information and particulars, and to
show cause why all or any of such properties should not be declared to be the
properties involved in money laundering and forfeited to the Federal Government:

Provided that where a notice under this sub-section specifies any property as being held
by a person on behalf of any other person, a copy of such notice shall also be served
upon such other person:
Provided further that where such property is held jointly by more than one person, such
notice shall be served upon all persons holding such property.
(2) The investigating officer shall, after—

(a) considering the reply, if any, to the notice issued under subsection (1);
(b) hearing the aggrieved person; and
(c) taking into account all relevant materials placed on record before him;
record finding whether all or any other properties referred to in the notice issued under
sub-section (1) are properties involved in money laundering:
Provided that if the property is claimed by a person, other than a person to whom the
notice had been issued, such person shall also be given an opportunity of being heard
to prove that the property is not a property involved in money laundering.
(3) Where the investigating officer on the basis of report received from the concerned
investigating agency determines under sub-section (2) that a property is the property
involved in money laundering, he shall, apply to the Court for an order confirming the
attachment of the property made under subsection (1) of section 8 or retention of
property or record seized under section 14 or section 15.
“(3A) The Court may, after giving opportunity of hearing to the persons concerned with
the property attached under sub-section (1) of section 8 or retained or seized under
section 14 or section 15, pass an order confirming the attachment, retention, seizure or
as the case may be, release of the property. The attachment or retention or seizure of
the property shall-
(a) continue during the pendency of the proceedings relating to any predicate offence or
money laundering before a Court; and
(b) become final if it is proved in the Court that the property is the property involved in
money laundering.”
(4) Where the provisional order of attachment made under sub-section (1) of section 8
has been confirmed under sub-section (3A), the investigating officer shall forthwith take
possession of the attached property:

Provided that where the property seized is perishable in nature or subject to speedy and
natural decay, or when the expense of keeping it in custody is likely to exceed its value,
the Court may, on the application of the investigating officer, order immediate sale of the
property in any manner deemed appropriate in the circumstances.
(5) Where on conclusion of a trial for any predicate offence and money laundering, the
person concerned is acquitted, the attachment of the property or retention or seizure of
the property or record under sub-section (3A) and net income, if any, shall cease to
have effect.
(6) Where the attachment of any property or retention or seizure of the property or
record becomes final under clause (b) of sub-section (3A), the Court shall make an
order for forfeiture of such property.
(7) After passing the order of forfeiture under sub-section (6), the Court shall direct the
release of all properties other than the properties involved in money laundering to the
persons from whom such properties were seized.
7A. Application of investigation techniques

(1) The investigating officer may with the permission of the court, within sixty days of
such permission, use techniques including undercover operations, intercepting
communications, assessing computer system and controlled delivery for investigation of
offences of money laundering, associated predicate offences and financing of terrorism.
The aforementioned period of sixty days may be extended upto further period of sixty
days by the court on a request made to it in writing. The court may grant extension, if it
is satisfied on the basis of situation or reasons given in the written request. The
provisions of this sub-section shall be in addition to and not in derogation of any other
law for the time being in force.
(2) The Federal Government may make rules to regulate the procedure and for
execution of order for the purposes of this section.
8. Vesting of property in Federal Government

Where an order of forfeiture has been made under sub-section (6) of section 9 in
respect of any property of a person, all the rights and title in such property shall vest
absolutely in the Federal Government free from all encumbrances:
Provided that where the Court, after giving an opportunity of being heard to any other
person interested in the property attached under section 8, or seized under section 14,

is of the opinion that any encumbrance on the property or leasehold interest has been
created with a view to defeat the provisions of this Act, it may, by order, declare such
encumbrance or lease-hold interest to be void and thereupon the aforesaid property
shall vest in the Federal Government free from such encumbrances or lease-hold
interest:
Provided further that nothing in this section shall operate to discharge any person from
any liability in respect of such encumbrances, which may be legally enforced against
such person.
9. Management of forfeited properties

(1) The Federal Government may, by order published in the Official Gazette, appoint as
many trustees and receivers as it thinks fit to perform the functions of an Administrator.
(2) The Administrator appointed under sub-section (1) shall receive and manage the
property in relation to which an order has been made under sub-section (6) of section 9
in such manner and subject to such conditions as may be prescribed.
(3) The Administrator shall also take such measures, as the Federal Government may
direct, to dispose of the property which is vested in the Federal Government under
section 10:
Provided that, where the property seized is perishable in nature or subject to speedy
and natural decay, or when the expense of keeping it in custody is likely to exceed its
value, the Administrator may sell it at once after reasonable notice to the Federal
Government.
10. No civil or criminal proceeding against reporting entities in certain cases

Save as otherwise provided in section 7, the reporting entities and their officers
including but not limited to directors, chief executive, chief financial officer, employees,
agents of the reporting entity or other authorized officers of a reporting entity shall not
be liable to any civil, criminal or disciplinary proceedings against them for furnishing
information required under this Act or the rules or regulations made thereunder in good
faith.
11. Power of survey

(1) Notwithstanding anything contained in any other provisions of this Act, where an
investigating officer, on the basis of material in his possession, has reasons to believe
that an offence of money laundering has been committed, he may, with the permission
of the Court, enter any place,

(a) within the limits of the area assigned to him; or
(b) in respect of which he is authorized for the purposes of this section by such other
authority who is assigned the area within which such place is situated, at which any act
constituting the commission of such offence is carried on, and may require any
proprietor, employee or any other person who may at that time and place be attending
in any manner to, or helping him in, such act so as to,
(i) afford him the necessary facility to inspect such record as he may require and which
may be available at such place;
(ii) afford him the necessary facility to check or verify the proceeds of crimes or any
transaction related to proceeds of crimes which may be found therein; and
(iii) furnish such information as he may require as to any matter which may be useful
for, or relevant to, any proceedings under this Act.
Explanation.—For the purpose of this sub-section, a place, where an act which

constitutes the commission of the offence is carried on, shall also include any other
place, whether any activity is carried on therein or not, in which the person carrying on
such activity states that any of his records or any part of his property relating to such act
are or is kept.
(2) The investigating officer referred to in sub-section (1), shall, after entering any place
referred to in that sub-section and within forty-eight hours immediately after completion
of survey, forward a copy of the report on survey to the head of the concerned
investigating or prosecuting agency in a sealed envelope.
(3) The investigating officer acting under this section may,
(a) place marks of identification on the records inspected by him and make or cause to
be made extracts or copies there from.
(b) make an inventory of any property checked or verified by him, and
(c) record the statement of any person present in the place which may be useful for or
relevant to any proceeding under this Act.

12. Search and seizure
(1) Subject to sub-section (2), where the investigating officer, on the basis of information
in his possession, has reason to believe that any person
(a) has committed any act which constitutes money-laundering;
(b) is in possession of any property involved in money laundering; or
(c) is in possession of any record which may be useful for or relevant to proceedings
under this Act, he may either himself, or authorize any officer subordinate to him to,
(i) enter and search any building, place, vessel, vehicle or aircraft where he has reason
to suspect that such record or properties are kept;
(ii) break open the lock of any door, box locker, safe, almirah or other receptacles for
exercising the powers conferred by clause (i) where the keys thereof are not available;
(iii) seize any such record or property found as a result of such search;
(iv) place marks of identification on such record or make, or cause to be made, extracts
or copies therefrom;
(v) make a note of any inventory of such record or property; or
(vi) examine any person, who is found to be in possession or control of any such record
or property, in respect of all matters relevant for the purposes of any investigation under
this Act.”;
(2) The powers to search under sub-section (1) shall be exercisable by the investigating
officer with the prior permission of the Court:
Provided that where immediate action is required, the powers of search and seizure
shall be exercisable with the prior permission of the senior officer of the concerned
investigating or prosecuting agency not below the rank of an officer of BS-20.
(3) The investigating officer shall, within forty-eight hours immediately after search and
seizure, forward a copy of the report on search and seizure to the head of the
concerned investigating or prosecuting agency in a sealed envelope.

(4) Where the investigating officer, upon information obtained during survey under
section 13, is satisfied that any evidence shall be or is likely to be concealed or
tampered with, he may, for reasons to be recorded in writing, enter and search the
building or place where such evidence is located and seize that evidence.
(5) omitted.
13. Search of persons

(1) If an investigating officer, has reason to believe (the reason for such belief to be
recorded in writing) that any person has secreted about the person or anything under
his possession, ownership or control, any record or property which may be useful for or
relevant to any proceedings under this Act, he may search that person and seize such
record or property which may be useful for or relevant to any proceedings under this
Act.
(2) The investigating officer shall, within forty-eight hours immediately after search and
seizure, forward a copy of the report on search and seizure to the head of the
concerned investigating or prosecuting agency in a sealed envelope.
(3) omitted.
(4) omitted.
(5) omitted.
(6) No female shall be searched by any one except a female.
(7) The investigating officer shall record the statement of the person searched under
sub-section (1) in respect of the records or property involved in money laundering and
found or seized in the course of the search.
(8) omitted.
(9) omitted.
14. Retention of property

(1) Where any property has been seized under section 14 or section 15 and the
investigating officer has, on the basis of material in his possession, reason to believe
that such property is required to be retained for the purposes of investigation under

section 9, such property may be retained for a period not exceeding ninety days from
the time such property was seized:
Provided that the investigating officer shall duly inform the Court about any peculiar
nature of the seized property and, where necessary, seek appropriate directions for its
proper care during retention.
(2) The investigating officer, immediately after he has passed an order for retention of
property for purposes of investigation under section 9, shall forward a copy of the order
to the head of the concerned investigating or prosecuting agency in a sealed envelop.
(3) On the expiry of the period specified under sub-section (1), the property shall be
returned to the person from whom such property was seized unless the Court permits
retention of such property beyond the said period.
(4) The Court, before authorizing the retention of such property beyond the period
specified in sub-section (1), shall satisfy itself that the property is prima facie property
involved in money laundering and the property is required for the purposes of
investigation under section 9.
(5) omitted.
15. Retention of records

(1) Where any record has been seized under section 14 or section 15 and the
investigating officer has reason to believe that any of such records are required to be
retained for an investigation under this Act, he may retain such records for a period not
exceeding ninety days from the time the record was seized.
(2) The person, from whom records were seized, shall be entitled to obtain copies of
records retained under sub-section (1).
(3) On the expiry of the period specified under sub-section (1), the records shall be
returned to the person from whom such records were seized unless the Court permits
retention of such records beyond the said period.
(4) The Court before authorizing the retention of such records beyond the period
mentioned in sub-section (1) shall satisfy itself that the records were required for the
purposes of investigation under section 9.
(5) omitted.

16. Presumption as to records or property in certain cases
Where any document of public record is found in the possession or control of any
person in the course of a survey or a search under this Act or where any records have
been received from any place outside Pakistan duly authenticated by such authority or
person and in such manner as may be prescribed in the course of proceedings under
this Act, the Court or the investigating or prosecuting agency as the case may be, shall-
(a) presume, that the signature and every other part of such record which purports to be
in the hand writing of any particular person or which the Court may reasonably assume
to have been signed, by or to be in the hand writing of, any particular person, is in that
person’s hand writing; and in the case of a record executed or attested, that it was
executed or attested by the person by whom it purports to have so executed or attested;
and
(b) admit the document in evidence, notwithstanding that it is not duly stamped, if such
document is otherwise admissible in evidence.
17. Jurisdiction
(1) The Court of Sessions established under the Code of Criminal Procedure, 1898 (V
of 1898) shall, within its territorial jurisdiction, exercise jurisdiction to try and adjudicate
the offences punishable under this Act and all matters provided in, related to or arising
from this Act:
Provided,
(a) where the predicate offence is triable by any court other than the Court of Session,
the offence of money laundering and all matters connected therewith or incidental
thereto shall be tried by the Court trying the predicate offence; and
(b) where the predicate offence is triable by any court inferior to the Court of Session,
such predicate offence, the offence money laundering and all matters connected
therewith or incidental thereto shall be tried by the Court of Session.
18. Attachment, seizure and forfeiture etc., of property in a contracting State or

Pakistan
(1) Where the investigating officer has made an order for attachment of any property
under section 8 or where the court has made an order confirming such attachment or

forfeiture of any property under section 9 and such property is suspected to be in a
contracting state, the Court on an application by the investigating officer, may issue a
letter of request to a Court or an authority in the contracting state for execution of such
order.
(2) Where a letter of request is received by the Federal Government from a court in a
contracting State requesting attachment or forfeiture of the property in Pakistan derived
or obtained, directly or indirectly, by any person from the commission of an offence
under section 3 committed in that contracting State, the Federal Government may
forward such letter of request to the investigating agency, as it thinks fit, for execution in
accordance with the provisions of this Act or permit execution of the request in the
manner sought by the contracting state so long as doing so would not violate Law of
Pakistan or is, in any manner, not prejudicial to the sovereignty, security, national
interest or public order.
(3) The Federal Government may, on receipt of a letter of request under section 27 or
section 28, direct any investigating agency under this Act to take all steps necessary for
tracing and identifying such property.
(4) The steps referred to in sub-section (3) may include any inquiry, investigation of
survey in respect of any person, place, property, assets, documents, books of accounts
in any reporting entity39 or any other relevant matters.
(5) Any inquiry, investigation, or survey referred to in sub-section (4) shall be carried out
by an agency mentioned in sub-section (3) in accordance with such directions issued in
accordance with the provisions of this Act.
(6) The provisions of this Act relating to attachment, adjudication, forfeiture vesting of
property in the Federal Government, survey, search and seizures shall apply to the
property in respect of which letter of request is received from a court or contracting
State for attachment or forfeiture of property.

1. Introduction & Scope
2. Professional Competence
3. Honesty & Integrity
4. Respect for all Members
5. Confidential Information
6. Dealing with Outside People
7. Prompt Communications
8. Conflict of Interest
9. Health, safety, and environment
10. Grievances
11. Compliances
12. Violation of the Code
13. Amendment

CODE OF ETHICS BY THE INSTITUTE OF COST AND MANAGEMENT
ACCOUNTANTS OF PAKISTAN
Whereas the Council has considered it necessary that in order to promote transparency
and the highest standards of ethical conduct as well as maintain the status and
standards of professional qualifications, it is necessary to issue a code of ethics that
sets out the clear expectations and requirements of ethical conduct by the members as
well as those serving the Institute in various capacities.
1. Introduction & Scope
1.1. This Code of Ethics shall be called the “Code of Ethics by the Institute of Cost and
Management Accountants of Pakistan” (the “Code").
1.2. The Code applies to all members of the Institute including (but not limited to) those
serving on the National Council, Branch Councils, Standing and other Committees, as
well as those members/ nonmembers nominated by the Institute/ or the Federal
Government to either serve as member of the National Council or other accounting
bodies (hereinafter collectively referred to as the “Members”) of the Institute of Cost and
Management Accountants of Pakistan (the "Institute”) in relation to their conduct with,
as well as in matters in relation to, the Institute.
1.3. The Code envisages that all Members must act ethically and conduct themselves
with honesty and responsibility in all matters relating to the Institute, including in their
dealings and conduct with other Members of the Institute.
1.4. The Code sets high standards for Members to abide by the five (05) core values of
the Institute which are transparency, competence, innovation, ethics and
professionalism, and to prevent Members from participating in any unethical activities
which may adversely affect the Institute, or any Members, or the profession of cost and
management accountancy in the country.
1.5. The Code is also designed to help Members deal with any grievance situations
which may arise at the Institute and to resolve disagreements and disputes in an
amicable, responsible, and efficacious way.

2. Professional Competence:
Members shall maintain the highest standards of professional competence and refrain
from any behavior that comes within the purview of ‘professional and other misconduct’
as defined under regulation 126 of the Cost and Management Accountants Regulations,
1990 (the “Regulations”) read with Schedule A to the Regulations.
3. Honesty & Integrity
3.1. Members shall at all times conduct their activities on behalf of, and in relation to,
the Institute with honesty, integrity, fairness, professionalism, dignity, courtesy, respect,
and loyalty. All Members shall discharge their duties, fulfill their fiduciary obligations,
and act on a fully informed basis, with responsibility, due diligence, care, and
competence, without allowing their independent judgement to be subordinated, and in
the best interest of the Institute.
3.2. Members shall not engage in activities that are dishonest or lacking in integrity such
as, the following:
3.2.1. Issuing untrue, misleading, deceptive, or fraudulent statements regarding the

Institute, its activities and affairs, or any Member;
3.2.2. Adoption of any illegal means in the performance of their duties; and
3.2.3. Indulging in bribery or unfair and illegal inducement of any other sort;
3.3. Members shall not accept fees, gifts, payment for experience or any other thing of
monetary value which will give rise to: (1) preference treatment of any student,
employee, or citizen or (2) the loss of impartiality in decision making.
4. Respect for all Members
4.1. The Institute’s vision is based on inspiring and developing outstanding abilities and
maintaining a safe and professional environment at the Institute. This will only be
possible in an environment where the Members respect the rights of all other Members
and the employees, personnel, and staff of the Institute.

4.2. Therefore, Members shall demonstrate and maintain the highest standards of
decency, personal integrity, truthfulness and honesty and shall, through personal
conduct, inspire public trust and confidence in the Institute.
4.3. Members shall strive to maintain cordial and professional relations with all other
Members of the Institute as well as the employees, personnel, and staff of the Institute
and shall tackle any professional or institutional disagreements with mutual respect.
4.4. Members shall ensure that:
4.4.1. Subject to compliance with any applicable laws regarding positive discrimination,
any other Member(s) is not discriminated against on the basis of race, religion, color,
age, disability, gender, or marital status, and the sole criterion for recognition within the
Institute is that of performance and excellence.
4.4.2. Racial, sexual, or any other kind of harassment is not tolerated within the
Institute.
4.4.3. Personal beliefs of individuals are respected and that the Institute specifically
disassociates itself from any activity, which challenges its commitment to cultural
diversity and equal opportunities.
4.5. Any member or a group of members shall exercise caution while expressing their
views about other Members and shall not, resort to making comments, whether they be
oral or in writing and through any medium (including but not limited to any social media
forum, mobile telecommunication application or the internet), which incite hatred or
violence, or are threatening or defamatory, or otherwise damage the reputation of the
Institute or any other Member, employee, personnel, or staff of the Institute.
4.6. Where Member(s) express views about the Institute or other Members (or
employees, personnel, or staff) and make factual allegations, they shall furnish proof
and supporting material evidencing the truth of their assertions.
5. Confidential Information
5.1. Members shall not disclose any confidential information which shall include but is
not limited to all information on trade, trade secrets, confidential and privileged
information regarding employees, non-public information about discussions and
deliberations relating to business/administrative issues and decisions, between and
among Members in a formal meeting or otherwise, and shall include all information in
respect of the Institute which is not available in the public domain at that point of time.

The confidential information shall further include any information concerning the
Institute's business, which is not in public domain and to which Members have access
or which is possessed by them by virtue of their position in or membership of the
Institute.
5.2. The restrictions referred to in clause 4.1 shall not apply to any confidential
information to the extent that such information:
5.2.1. Is authorized to be disclosed by the competent authority or otherwise permissible

in accordance with this Code;
5.2.2. Is part of the public domain at the time of disclosure; or
5.2.3. Is required to be disclosed in accordance with applicable laws.
6. Dealing with Outside People
6.1. Members shall take care to separate their personal roles from their institutional
position when communicating on matters not involving the Institute’s business, including
but not limited to any position or view expressed on any social media forum, mobile
telecommunication application or the internet.
6.2. When communicating publicly on matters that involve the Institute, a Member shall
not presume to speak for the Institute on any topic, unless they have obtained
authorization from the relevant competent authority that the views they express are
those of the Institute, and it is the Institute’s desire that such views be publicly
disseminated by such Member.
6.3. When dealing with anyone outside the Institute, or at any public forum all Members
shall take care not to compromise the integrity or damage the reputation of either the
Institute, or any Member. In fact, Members are expected to, through their personal
conduct, inspire public trust and confidence in the Institute.
7. Prompt Communications:
All Members are required to communicate in courteous and timely manner with
decorum when dealing with government authorities, the public and/or other Members in
the Institute or in the affairs of the Institute.

8. Conflict of Interest
8.1. Members shall conduct their activities in such a manner that any actual, potential or
perceived conflict of interest situation is avoided.
8.2. They shall protect the Institute’s assets and resources and use the same only for
advancing the Institute’s purposes and not for personal gain or advantage.
9. Health, safety, and environment
Members shall cause the Institute to strive to provide a safe and healthy working
environment and comply, in the conduct of the affairs and purposes of the Institute, with
all applicable laws regarding the preservation of the environment of the territory it
operates in.
10. Grievances
10.1. This section of the Code is designed to provide a grievance handling procedure
which Members shall resort to in order to deal with any grievances, concerns, problems,
or complaints, that any Member may have in relation to the affairs of the Institute.
10.2. As far as possible, Members shall strive that any disagreements or disputes are
resolved amicably and respectfully.
10.3. Where it is not possible to resolve a grievance informally, the Member shall raise
the matter in writing within 30 days with the appropriate official forum within whose
domain the matter falls i.e. the receiving authority. All grievances must be in writing,
setting out the nature and description of the grievance and contain material supporting
the assertions made therein.
10.4. The receiving authority initially Executive Director Secretariat itself or by

nominating the official(s) shall arrange for a formal meeting with the concerned
Member(s) as soon as may be reasonably practicable after receipt of the grievance.
10.5. The complainant(s) shall be allowed to explain the grievance and how he / she
thinks it should be resolved. Consideration shall be given to adjourning the meeting for
any investigation that may be necessary and for inviting the opinion or views of, or
information from, from any other relevant persons / bodies by constituting an official
team for this purpose.

10.6. The relevant official forum/ authority shall be the Disciplinary Committee or the
Executive Committee as the case may be depending upon the management of ICMA
Pakistan. Once the relevant official forum has heard the complaining Member, as well
as carried out any investigation (if necessary), or heard any other views (if necessary),
or receiving any other information (if necessary and sought) the authority shall decide
on what action, if any, to take. The decision shall be communicated to the party in
writing addressed to the person setting out the reasons and what action (if any) the
authority intends to take if their intervention or action is required).
10.7. If the Member is not satisfied with the decision or the course of action proposed to
be taken, the Member may elevate the matter to the next higher official forum that is
National Council who has jurisdiction to deal with the subject matter in the same manner
as above and so forth. However, where the decision has been made by the National
Council then such decision shall be final.
10.8. In all cases opportunity of hearing shall be given to the aggrieved

person/complainant(s).
11. Compliances:
The Members shall comply with all applicable laws and regulations.
12. Violation of the Code:
It shall be the duty of the Members to abide by the Code. In case of breach of any
provision of the Code by any Member, the same shall be considered for initiating
appropriate action including disciplinary action as deemed necessary.
13. Amendment:
The provisions of the Code can be amended/modified by the Competent Authority from
time to time and all such amendments/modifications shall take effect from the date
stated therein. All Members shall be duly informed of such amendments and
modifications.

1. Company Secretary
1a. COMPANY SECRETARY [SECTION 2(1)(33)]
1b. Requirement Of A Company Secretary
1c. Qualification Of A Company Secretary
1d. Provisions relating to a company secretary
1e. Duties Of A Secretary
1f. (A) Secretarial functions
(B) Legal obligations of secretary
(C) To maintain the following statutory books
2. E-Services

COMPANY SECRETARY
Company secretary is an individual appointed by the company for insuring compliance
with relevant laws applicable to the company especially but not limited to corporate
laws. his qualification etc as per the requirements of law is described as under.
As per Companies Act, 2017
1- COMPANY SECRETARY [SECTION 2(1)(33)]
“Company secretary” means any individual appointed to perform secretarial and other
duties customarily performed by a company secretary and declared as such, having
such qualifications and experience, as may be specified;
2. Requirement Of A Company Secretary
Public company required to have secretary (Section 194)

A public company must have a company secretary; possessing such qualification
as may be specified.
3. Qualification Of A Company Secretary
As per Companies (General Provisions and Forms) Regulations, 2018
Qualifications and Experience of company secretary (Regulation 22)

Subject to the provisions of section 194 of the Act, the public company shall appoint as
company secretary—
(a) a person who is a member of—

(i) a recognized body of professional accountants; or
(ii) a recognized body of corporate or chartered secretaries; or
(b) a person holding a master degree in business administration or commerce or being

a law graduate from a university recognized by the Higher Education Commission of
Pakistan or in case of foreign qualification in the above disciplines, holds an
equivalence certificate from Higher Education Commission of Pakistan and having at
least five years relevant experience in case of listed company or two years relevant
experience in case of other public company; or

(c) a retired government servant in BS-18 or equivalent or above with at least fifteen
years’ service:
Provided that a person already engaged by a public company as company secretary in

terms of the Companies (General Provisions and Forms) Rules 1985 may continue in
that capacity.
As per Listed Companies (Code of Corporate Governance) Regulations, 2019
Approval - (Regulation 20)

The Board shall appoint, determine remuneration, renew contracts and terms and
conditions of employment of chief financial officer, company secretary and head of
internal audit of the company.
Removal - (Regulation 21)

The removal of the chief financial officer, company secretary and head of internal audit
of a company shall be made with the approval of the Board:
Provided that the head of internal audit may be removed only upon recommendation of
the audit committee.
Qualification of company secretary - (Regulation 24)

No person shall be appointed as the company secretary unless he holds the
qualification as specified under the relevant Regulations by the Commission:
Provided, the same person shall not simultaneously hold office of chief financial officer
and the company secretary of a listed company.
4. Provisions relating to a company secretary

a) A listed Company and a single member company shall have a whole time
secretary possessing such qualifications as may be prescribed by the
Commission [section 204A(1)]
b) The Secretary shall furnish his particulars to the company within 10 days
of his appointment; [Section 197(2)]
c) All particulars relating to secretary of the company shall be recorded in the

register of directors and officers of the company; [Section 197(1)]
d) the company shall file a return of all particulars of the secretary with the
registrar within 15 days of his appointment [Section 197(3)]

5. Duties Of A Secretary:
The duties of a company secretary have not been described by the Companies
Act, 2017. However, following duties may be performed by a company secretary:
a) to ensure that the statutory requirements of a company are fulfilled and
various forms required to be filed by the company from time to time are
duly filed;
b) to have a knowledge about the contents of memorandum and articles of
association;
c) to prepare and issue the notices for general meetings and directors’
meetings;
d) to arrange for the allotment letters, issue of share certificates, and the
register relating thereto;
e) to ensure that all the statutory books are properly maintained;
f) to keep the seal of the company in his safe custody and to ensure its
careful use;
g) to send the registrar the copy of special resolution; to supply a copy of
accounts to every member; to send annual audited accounts at least 21
days before the meeting at which these are to be laid;
h) to arrange inspection of all the company’s books and records to the
people entitled to do so.
5.A. Secretarial functions:

1. To ensure compliance of the provisions of Ordinance and rules made there-
under and other statutes and bye-laws of the company.
2. To ensure that business of the company is conducted in accordance with its
objects as contained in its memorandum of association.
3. To ensure that affairs of the company are managed in accordance with its
objects contained in the articles of association and the provisions of the
Ordinance.
4. To prepare the agenda in consultation with the Chairman and the other
documents for all the meetings of the board of directors.
5. To arrange with and to call and hold meetings of the board and to prepare a
correct record of proceedings.
6. To attend the broad meetings in order to ensure that the legal requirements
are fulfilled, and provide such information as are necessary.
7. To prepare, in consultation with the chairman, the agenda and other
documents for the general meetings.

8. To arrange with the consultation of chairman the annual and extraordinary
general meetings of the company and to attend such meetings in order to
ensure compliance with the legal requirements and to make correct record
thereof.
9. To carry out all matters concerned with the allotment of shares, and issuance
of share certificates including maintenance of statutory Share Register and
conducting the appropriate activities connected with share transfers.
10. To prepare, approve, sign and seal agreements leases, legal forms, and other
official documents on the company’s behalf, when authorised by the broad of
the directors or the executive responsible.
11. To advise, in conjunctions with the company’s solicitors, the chief executive or
other executive, in respect of the legal matters, as required.
12. To engage legal advisors and defend the rights of the company in Courts of
Law.
13. To have custody of the seal of the company.
5.B. Legal obligations of secretary:

1. Filling of various documents/returns with the Registrar / Commission as
required under the provisions of the Ordinance. .
2. Proper maintenance of books and registers of the company as required under
the provisions of the Ordinance.
3. To see whether legal requirements of the allotment, issuance and transfer of
share certificates, mortgages and charges, have been complied with.
4. To convene/arrange the meetings of directors, on their advice.
5. To issue notice and agenda of board meetings to every director of the
company.
6. To carry on correspondence with the directors of the company on various
matters.
7. To record the minutes of the proceedings of the meetings of the directors.
8. To implement the policies formulated by the directors.
9. To deal with all correspondence between the company and the shareholders.
10. To issues notice and agenda of the general meetings to the shareholders.
11. To keep the record of the proceedings of all general meetings.
12. To make arrangement for the payment of the dividend within prescribed
period as provided under the provisions of the Ordinance.
5.C. To maintain the following statutory books

1. the register of transfer of shares (section 74);
2. the register of buy-backed shares by a company (section 88);
3. the register of mortgages, charges etc. (section 112);

4. the register of members (section 119);
5. the register of debenture-holders (section 122);
6. the register of directors and other officers (section 197);
7. the register of contracts or arrangements in which directors are interested
(section 209);
8. the register of Pakistani members and debenture-holders, directors and
officers, in case of a foreign company (section 438)
9. Minute books;
10. Books of accounts
Does a company secretary has any powers?

The Act allows him to sign the statutory returns and applications to be furnished
to the Registrar and the Commission.
What are the rights of a company secretary?

The rights of a company secretary depend on the terms of his or her contract
with the company. The secretary has no special rights under the Act.

E-Services
Frequently Asked Questions (FAQs) on E-Services

GENERAL
Q.1. What are E-Services and how to access the E-Services?
Ans. E-Services is a 24/7 available portal developed by SECP to facilitate the users in
reservation of name, incorporation of companies, filing of specified forms and related
documents required under the Companies Ordinance, 1984 and the Rules and
Regulations being administered by SECP, in electronic form to the Registrar of
Companies for registration. E-Services can be accessed through SECP’s website at
www.secp.gov.pk.
Q.2. What are the benefits of using E-Services?
Ans. Following are the benefits of using e-Services instead of physical filing:
a. Simple and hassle-free procedure to create account on e-Services
b. Accessible 24/7 from anywhere in the world
c. Lower fee compared to physical submission of documents
d. No need to visit Company Registration Offices (CROs)
Q.3. Which equipment is required for using e-Services?
Ans. A personal computer equipped with a web browser and internet access, preferably
broadband connection.
Q.4. How can I get help on E-Services?
Ans. For E-Services assistance, you can call the Service Desk at UAN: 051-111-117-
327.
CREATING ACCOUNT ON E-SERVICES
Q.5. Who can register as a user of the e-Services?
Ans. Any person can register as an Individual User. This may include a director / chief
executive/ company secretary /authorized representative / manager of a company who

is a natural person and is authorized to sign documents electronically on behalf of the
company. An Intermediary / Consultant can also register as a user of the e-Services.
Q.6. How to apply for user registration and what is the user registration fee?
Ans. Online user registration is available at e-Services at www.secp.gov.pk, for which

Rs. 100/- only will be charged subsequently at the time of submission of documents.
Please refer to User Registration Step by Step Process.
Q.7. What are the requirements for user registration?
Ans. For Individual (National): CNIC/NICOP/POC, Mobile number & Email address.
For Individual (Foreign National): Attested copy of valid passport, Attested photograph,
Mobile number & Email address.
Q.8. How can I recover forgotten Password or reset PIN?
Ans. You can make use of the “Forget Login Information” function provided on the
login page of the e-Services. You have to provide information of your identification to
enable the system to retrieve your Login information.
In case you forgot your password, you have to provide the Answer to your selected
Security Question to enable the system to verify your identity. The system will reset your
password after successful verification. The system-generated Password/PIN will be sent
to your registered email address and mobile phone number automatically by the
system.
Q. 9. What are the Terms of Use of e-Services?
Ans. Following are the terms of use of e-services for information security:
a. Use of logins-
 Your login information is a valuable and confidential item that authenticates your
online identity. You must, therefore, take good care of your login information/
PIN, as well as the security questions you choose when creating a login, and
keep them secure.
 You will not knowingly or recklessly use or attempt to use any service, login,
hardware device or code for a purpose for which it was not intended, including
any unlawful purpose.

 You will notify the SECP Help Desk immediately if you know or have reason to
believe that there has been or is about to be fraudulent or other unlawful use of
any of your login, hardware device or code.
b. Protecting logins, security questions and PIN

You must immediately change your password, security questions, or PIN and notify the
SECP Help Desk if you believe that the security of your password, security questions
which you answered, or PIN you created have been compromised or you become
aware of any unauthorised use of your username or password.
c. Recommended practices
You should
 not use an email address that is shared with other people (as it is to this email
address that your username, temporary password or other information will be
sent when you request support for your login, for example when you forget your
username or password);
 choose a password that is a secret known only to you which cannot be easily
guessed by anyone else;
 not disclose your password to anyone, including SECP services personnel

(please note that SECP services personnel will never ask you for your password
or PIN);
 keep your password and PIN safe from being discovered by others if you write
your password or PIN down or store them electronically (unencrypted files on a
computer or notes on your monitor are not safe options);
 take care when answering your security questions to ensure you can remember
the answers at a later date;
 not tell anyone your answers to the security questions, other than services
personnel when they require those answers to help you;
 not allow anyone to see your password, any of your answers to the security
questions, or PIN or have the opportunity to see them or record them;
 not use an app other than system-generated codes as they have not been tested
for compatibility or security; and

 keep your contact details up to date.
ONLINE NAME RESERVATION

Q.10. How can we reserve name for a new company by using E-Services?
Ans. Please follow the procedure given below to reserve name for a new company by
using E-Services:
 Sign up and generate Personal Identification Number (PIN) using the user
registration procedure referred to in Question 6.
 After successful user registration in e-services, login to E-Services through

SECP’s website https://E-Services.secp.gov.pk/E-Services/ using CNIC/
NICOP/ POC/ Passport no. as Login ID and the entering the Password.
 Upon successful login, all available processes will be displayed.
 Click on name reservation process.
 Fill in the requisite data and click “Continue” button which will display the screen
where “Sign form” option is available.
 Open and Save Challan Form which is automatically generated through the
System. Do not print Challan at this stage.
 Click “Sign form”. Please note that sign form link will be activated when once
mandatory attachments are made to the process and challan is saved.
 Enter the PIN and click “Apply user PIN”, field for “PIN APPLIED” will be auto-
populated and on clicking “Submit process to SECP” button, process will be
submitted to SECP.
 Print the Challan from “Submitted Processes” link available on the left side of the
page and pay this Challan in the designated branch of MCB/UBL.
 In case of payment through credit card, please click on “online payment’ link and
follow procedure.

 In case of payment thorough online fund transfer facility, please follow the
procedure given in the “online fund transfer guide” available on the website at
https://E-Services.secp.gov.pk/E-Services/
After you have submitted the process and made payment, your process will be assigned
to the concerned officer for processing after verification of payment. You will receive an
email letting you know about the status of your case whether it is accepted, rejected or
further information is required for issue resolution.
Please note that Name Availability Cases are processed at the concerned Company
Registration Office (CRO).
ONLINE INCORPORATION OF COMPANY
Q.11. How can we incorporate a new company by using E-Services?
Ans. Please follow the procedure given below for company registration using e-
Services:
 Reserve Company name by following the procedure detailed in Question No. 10.
 Create separate User IDs and PIN for all proposed Subscribers.

 Upon successful login, all available processes will be displayed.
 Click on Company registration process.
 Fill out the data and click “Continue” button, which will display the screen where
“Sign form” option is available.
 Attach and Save Memorandum of Association in the attachment link provided.

Please note that the attachment size should not exceed 2 MB.

 Attach and Save Articles of Association in the attachment link provided. Please
note that the attachment size should not exceed 2 MB.
 Attach and Save copies of CNICs/passports of all the Subscribers, copy of name
availability email/letter, and any other required document(s) under Fill New
Attachment Form link.
submitted to SECP. Every Subscriber needs to sign forms by logging through
his/her User ID and applying PIN.
 After your process is submitted, you will see a submitted process reference
number on the screen. Please print a copy of this page for future reference.
follow procedure.
email conveying the status of your case whether it is accepted, rejected or further
information is required for issue resolution.
Please note that Company Incorporation Cases are processed at the concerned
Company Registration Office (CRO).

FILING OF RETURNS
Q.12. How can we submit Forms/Returns by using E-Services?
Ans. The general steps of the process are given below. Procedure may vary slightly
depending on the kind of process selected by you.

 Upon successful login, list of all companies related with user are displayed.
 Click “login” appearing after the relevant company
 The list of all available processes will be displayed.
 Click the relevant process.
 Fill out the data and click “Continue” button, which will display the screen where
“Sign form” option is available.
 Attach the required document(s), if any.
submitted to SECP.
 After your process is submitted, you will see a submitted process reference
number on the screen. Please print a copy of this page for future reference.

follow procedure.
email conveying the status of your case whether it is accepted, rejected or further
information is required for issue resolution.
Please note that the Filing of Returns cases are processed at the concerned Company
Registration Office (CRO).
Q.13. How can I get Challan form for online filing in E-Services?
Ans. Challan form is automatically generated and filled out by the System after you
enter the required information in the application/form. You have to save and print this
challan and make payment in the designated branch. Do not use a manual challan for
making payment for online filing.
Q.14. Why the Sign Forms link is not active/clickable?
Ans. Please note that sign form link will be activated when once mandatory
attachments are made to the process and challan is saved.
Q.15. Why am I getting an error while trying to Sign Forms?
Ans. Major reasons why you get an error while signing forms are as follows:
a. The size of files e.g. Memorandum and Articles of Association attached by you is
large. File size for each of these documents should not exceed 2 MB. You can reduce
file size by keeping low resolution while scanning documents.
b. Another reason might be that you are trying to sign forms for all persons from one
login. You have to login through each User ID to sign forms.

c. Compatibility view is not enabled in Internet Explorer. Please add SECP website to
Compatibility View under Tools> Compatibility View Settings.
d. Security Settings for java are not set as per requirement.
Q.16. If I login and find out that the data in the system is not updated for my company,
then how do I get that data rectified in the system?
Ans. Contact the concerned Company Registration Office (CRO) for further assistance/
information in the matter.

Part A
Security and Exchange Commission of Pakistan (SECP)
Practices Guide
Conducting Board Meetings and General Meetings
Part B
Samples of Notice of Annual General Meeting, Board of Directors Meeting and

Resolutions

PART A
Security & Exchange Commission of Pakistan (SECP)
Practices Guide
Conducting Board Meetings & General
Meetings
PART B
SAMPLES OF NOTICE OF ANNUAL GENERAL
MEETING, BOARD OF DIRECTORS MEETING AND
RESOLUTIONS

Foreword
Securities and Exchange Commission of Pakistan (“SECP”) has issued this guide for
companies focused on preparing, convening and conducting effective meetings of
board of directors (“board meeting”) and general meetings. This Guide does not aim
to coverall possible practices rather it is intended that the Guide stimulates thinking
on how companies, their boards and members can carry out their role smoothly and
most effectively. Boards and companies are encouraged to use this guide as a
reference point in holding meetings. For newly inducted and aspiring directors of
companies, this Guide will be a useful introduction to board and general meetings
while seasoned directors can benefit from the best practices recommended in the
Guide.
SECP believes that companies shall endeavor to embrace best practices and take
necessary measures to facilitate good governance.
This Guide only recommends good practices for conducting board meetings and general meeting of
companies. This guide does not in any way vary or amend obligation of stakeholders in complying
with requirements of applicable laws. Nothing in this Code overrides or is intended as an
interpretation of applicable law. In case of any conflict, the requirements of relevant laws and directives
shall prevail over this Guide. The Companies shall ensure compliance with relevant regulatory
requirements as per law.

TABLE OF CONTENTS
Page No.
A. Meeting of Board of Directors ……………………………………5

1. Preparation of Agenda ……………………………………….. 7
2. Convening Board meeting ……………………………………….. 9
3. Conduct of Directors during meeting ……………………………. 11
4. Quorum of Board meeting ………………………………………. 12
5. Interest of Directors ……………………………………………... 13
6. Minutes of Board meeting ……………………………………….. 14
B. General Meetings …………………………………………………17

1. Persons entitled to attend general meeting ………………………...19
2. General Principles ………………………………………………. 19
3. Responsibility of the Company ………………………………..... 21
4. Convening general meeting ……………………………………… 25
5. Minutes of general meeting ……………………………………… 31
6. Rights & responsibilities of members ………………………….… 34
C. Annexure …………….…………………………………………….39

MEETING OF BOARD OF DIRECTORS
“The meeting of board of directors is the forum for
the decisions and resolutions required to discharge
the formal responsibilities of office. The overarching
purpose of boardroom procedure is to facilitate
good decision making.”

Board meetings
Board of Directors (“Board”), collectively, is responsible for directing and
managing the activities of a company. Formal board meetings are
necessary, serving as one of the key mechanism to enable directors to serve
the best interests of the company. If a board does not meet regularly, board
leadership and decision-making may be compromised which will bring
increased risk to the company and to the directors.
Progressive behavior and inclusive conduct of members during board

meetings promote good debate and robust decision making. The
Companies Act, 2017 (XIX of 2017) provides a framework for holding
regular board meetings and provides modus operandi for such meetings1.
Directors are expected to acquaint themselves with the relevant legal
requirements and articles of the Company.
The Board as well as the management should prepare well before a board
meeting. Having a periodic plan, a well structured agenda, comprehensive
board papers and conclusive minutes are the cornerstones of effective
decision-making. Preferably, an annual schedule of meetings can be agreed
upon by members in their first meeting of board for the year to enable the
scheduling of discussion on key matters, for e.g. strategic planning,
company’s performance review, financial reporting etc. and accordingly
directors may book meeting dates in their calendars.

1. Preparation of Agenda for Board meeting
Planning and preparation is critical to effective board meetings. A well structured

agenda and comprehensive board papers, are the cornerstones of effective decision-
making. An agenda serves as the roadmap for a meeting and is therefore key to
constructive discussion making process. The agenda of board meeting should reflect
the mandate of the board. The chairman (or chairperson) of the Board (“board chair”)
generally finalizes and oversees the agenda of board meeting2. Board chair should
consider how to ensure the board receives the necessary information and has time to
discuss the issues at its meetings. This should cover the future schedule of meetings as
well as the detailed agenda for each meeting.
Key matters to be stated in agenda generally include the following:

 the date, time and place of the meeting
 minutes of the last meeting
 action points from the last meeting
 register of interest
 management reports (including financial statements)
 decision papers and discussion on key strategic and operational issues
 any other matter deemed significant to be discussed in the meeting
Balance of structural, compliance and performance matters in agenda enables the

board to deliberate and make decisions regarding significant short-term issues and
long-term strategic policy matters.
Generally, the Company secretary is assigned the task of handling administrative

matters related to Board Meetings and has following main duties to prepare for a board
meeting:
 send the agenda to board members
 assemble the minutes (previous meeting)
 gather the information/details relevant to agenda of the meeting
 ensure that all necessary administrative arrangements are made
 identify the decisions to be considered by the board
 circulate the agenda with all relevant material at least seven days prior to the
meeting (except in the case of emergency meetings, where the notice period has
been allowed to be reduced/waived.)
 provide procedural recourse for any queries/response. Directors may also
recommend (the chair of) any matter they wish to raise before the meeting so
they can be incorporated into the agenda.

2. Convening Board meeting
Board chair ensures that the board plays an effective role in fulfilling its responsibilities.
One of the responsibilities of board chair is to regulate discussion amongst members in
meetings of the board.
Board chair shall strive to give all participants appropriate opportunity to present their
point of view by considering following important matters:
 recognizing quorum sufficiency
 calling meeting to order
 ensuring that participants are aware of the protocols for participating in meetings
(preferably formal code of conduct expressly providing rules of engagement)
approve the agenda and minutes
 facilitate and regulate discussion on any agenda, communication and provision of
 relevant reports, if any
 putting forth old/new/other business for consideration of Board
 the venue and timings for the next meeting should preferably be decided
 close the meeting
Further, the board chair shall facilitate protocols for conducting meeting that may
include the following:
 only one person speaks at a time
 the speaker must preferably be recognized before speaking
 comments must preferably be made through the board chair
 comments are confined to the current issue
 discussion should alternate between pro and con arguments
 preventing reading out lengthy papers, already circulated with agenda, during the
meeting unless deemed necessary
 no cross conversations
 no verbal attacks of other members
 all rules shall be respected and adhered to by directors
In cases where a significant issue requires a board decision, or if insufficient time or

information has been allowed for preparation, directors may defer/decline to approve a
matter. In such cases the board may decide to:
 request further information from management

 seek independent advice

 establish a sub-committee of the board to carry out in-depth work and make a
recommendation to the board.
3. Conduct of Directors during Board meeting
The boardroom is a place of mutual respect. There should be respect for the office of
the chair as well as all other people at the table, including directors and any other
attendees. Any debate in board meetings should remain focused on the issues.
Directors must strive to reach the venue of meeting on time and be prepared w.r.t
agenda of the meeting. It is the responsibility of each board member to thoroughly
review the agenda and ancillary information presented for discussion. It is also expected
that, during discussion in meetings, directors are persuasive in presenting their point of
view, are receptive to suggestion/ arguments by other members and are open-minded
in building consensus for decision-making.
Generally, face-to-face meetings facilitates better interaction, relationship building and

growing a strong board culture. However, boards have the option to attend meeting via
telephone or video-conference.
Directors can be subject to legal, regulatory or constitutional obligations to treat

confidential information with due care and discretion. Information pertaining to any
agenda of meeting, shared with Board, may contain sensitive information and the
directors are expected to take due care and appropriate measures for securing,
handling, dissemination and discussing such information. Broadly, boards must
endeavor towards building consensus in decision-making as well as assuming collective
responsibility.
4. Quorum of Board meeting
One of the first duties of the board chair is to determine if a quorum is present. Quorum
requirements for meeting of the board is provided in articles of the company. The
quorum for a meeting of board of a listed company is mandated to be not less than one-
third of number of directors or four, whichever is greater. Participation of the directors by
video conferencing or by other audio visual means shall also be counted for the
purposes of quorum.
In case of absence of any director from Board meeting, reason of such absence may
preferably be recorded in minutes. The chair may invite any officer in board meeting for

matters deemed important and relevant by Board. However, an officer shall not attend
such part of Board meeting in which the matter directly conflicting their interest (for e.g.
performance) is to be discussed6.
5. Interest of Directors
Directors and other board members must endeavor to carry out their duties fairly and free
from prejudice. As part of decision making, directors may be confronted with situations
where conflicts of interest (or biases) may affect their professional judgement and their
ability to remain impartial. It is crucial for boards to have procedures in place to deal with
such conflicts. Further laws are also in place comprising mainly of three steps i.e.
identification, declaring and managing process of conflict of interest or conflict of duties.
Best practices and applicable law requires that every director of a company who is in
any way, whether directly or indirectly, concerned or interested in any contract or
arrangement entered into, or to be entered into, by or on behalf of the company must
disclose the nature of his concern or interest at a meeting of the board. Directors are
also mandated not to take part in the meeting or agenda if he/she is directly or indirectly
concern with the matter under discussion6. Generally, for matters where majority of
directors are interested (in any contract/arrangement) and consequently fail to form a
quorum, such matters are disclosed and referred to shareholders in the general meeting
for their approval7.
In case of listed companies, at least two independent directors shall be present in the
meeting for forming a quorum where any such matter (i.e. agenda item where directors
are interested) comes up for the first time for consideration and decision of the board8.
6. Minutes of Board
Minutes of Board meeting serve as an official and legal record of the meeting of the
Board of Directors. Each board will decide the format and manner of recording such
minutes.
Generally, minutes do not quote the meeting verbatim, however they are expected to be
detailed enough to ensure an accurate reflection of the meeting and explain the reasons for
any decisions were taken. Minutes must demonstrate that the directors have done what is
required to discharge their duty of care, diligence and skill. Therefore, minutes, at the
minimum, are expected to be reflective of the following information to the extent possible:
 date, time and place of the meeting
 names of the meeting participants and absentees

 corrections and amendments to previous meeting minutes, if any
 additions to the current agenda
 whether a quorum is present
 motions taken or rejected and their justifications
 any dissent, abstentions (and reasons provided for them)
 other important matters report, including the report on implementation status of
previous resolutions
 follow up steps for agreed agenda actions/ deadlines (if any)
 items to be held over (if any)
 any conflicts of interest including what the conflict was and how the board
handled the situation
 new / special business (if any)
 date and time of next meeting (if decided)
 time of adjournment (if any)
The Company Secretary shall record, circulate and keep record of the minutes of the
meeting. The minutes should be as objective as possible, devoid of any inflammatory
remarks, clear, unambiguous and complete. Director/(s) who disagree with a decision
taken, may want their position noted in the minutes. Company Secretary should ensure
that the same is duly recorded in minutes.
Generally, following the meeting, the minutes are first reviewed by the chair and then
circulated to directors in draft form within fourteen days of the meeting to which they refer.
The chair, usually at the next board meeting, then signs the minutes.
Directors need to be vigilant in their attention to details in signing off board meeting
minutes as a true and accurate record of the meeting. In case dissenting note of any
director has not been recorded in the minutes of the meeting, the same shall be referred
to the company secretary. Provided if the dissenting note is not recorded despite being
referred to company secretary, such director has the option of filing the objection with
the competent authority9.
An action list i.e. a list of matters arising at the meeting where action is required, setting
out who is responsible for each matter, the estimated date of completion and a brief
description of progress can also be prepared by company secretary or any other
designated officer. Such action list, followed by the minutes, shall be indicative tool for
directors and management to prioritize their responsibilities.

GENERAL MEETINGS
“General meeting is an important forum for two-way
communication between a company and its members.
They provide an opportunity for a company to impart to
members a greater understanding of its business,
governance practices, financial performance and
prospects, as well as to discuss areas of concern or
interest to the board and management. They also provide
an opportunity for members to express their views to the
Company’s board and management about any areas of
concern or interest for them.”

General Meetings
General Meeting serves as a forum for members to discuss any matters relevant to the
affairs and business of a company with the Board of directors and management.
Attendance and active participation of members in general meeting encourages
openness, integrity and accountability of the Board of Directors promoting good
governance and at the same time protecting interest of members. Similarly, Board of
directors are expected to maintain ongoing dialogue with members and in particular,
use general meetings to communicate and encourage participation of members. Board
may also establish a member’s communications policy, designate an authorized person
to handle members communications and review it on periodic basis. Nevertheless, the
main business of the general meeting for the Board is to propose, make
recommendations and seek member’s views and approval on matters prescribed under
law.
Processes and procedures for general meetings should allow for equitable treatment of
all members. General meetings included in this guide refer to general principles for
holding statutory meeting, annual general meeting and extraordinary general meeting.
1. Persons entitled to attend Meetings
Following persons are entitled to attend a general meeting:

 every member or a particular class of members, as the case maybe.
 any person, who is entitled and notified the same by the company, to a share in
consequence of the death or bankruptcy of a member may attend a general
meeting.
 the auditor of the company or his authorized representative is also entitled to
attend any general meeting of the company and to be heard on any matter that
concerns the company in his capacity as the auditor.
 it is mandatory for directors of listed company to attend the general meeting
unless precluded from doing so. All other companies must endeavor that their
directors ensure maximum participation in general meetings.

2. General Principles
General meetings should be organized in a manner that facilitates participation of

members and ensure they have an opportunity to present their views. This way,
members can be involved in the direction and development of the Company in the short
and long term. The principles detailed below facilitate orderly functioning of general
meetings:
 companies shall endeavor to place the notice of general meeting on their

website, any information required by applicable law in relation to the agenda and
any other relevant information that the members might need in order to cast their
vote. For instance, where the agenda of general meeting includes deliberation on
election of directors, the corresponding proposed resolution shall be useful if it is
accompanied by the following information placed on website of the Company as:
(i) the professional profile of the director (name, qualification, expertise);

(ii) directorship on boards of directors at other companies (if any);
(iii) category of director i.e. executive, non-executive, independent;
(iv) the date of his first and subsequent appointments as director of the Company and
(v) The means and procedures for granting a proxy to attend the general meeting.
 time, place and venue of meeting must be clearly communicated, be logically

scheduled, easy to approach and be safe. Guide / maps regarding venue and
contact person may be given in notice of meeting and/ or placed on website of
Company.
 orderly conduct of meetings require companies to have formal communication

policy and procedures for interaction to be in place, be communicated to
participants of the meeting and may also be placed on website of the Company.
 directors should also endeavor to engage with members and encourage their
active participation prior to general meeting, during the meeting and also after the
meeting. (through post, designated person or designated email).
 general meetings and specifically annual general meeting is mostly the only
occasion where directors meet and physically address the members. Companies
should consider requiring directors and management to cordially interact with
members before, during and/or following the meeting. Companies should
endeavor maximum participation of directors in general meetings.

 members have the right to vote on separate and distinct issues. The board must
endeavor not to combine different issues and present them for a single vote.
 right of members to vote should be facilitated without undue influence of

management. Similarly, members have the right to approve or reject any
resolution that alters their fundamental rights and relationship with the Company.
 the Chairman and the Directors shall take steps to ensure that no behavior or
intervention is prejudicial to the rights and interests of any members or holders of
other securities, as relevant.
3. Responsibility of the Company

Without prejudice to the applicable laws, companies shall facilitate members at the
general meeting and their participation therein, through the following measures:
a) Administrative measures
(i) publish on its website the text of all resolutions proposed by Board of Directors with
respect to the agenda items, unless the Board of Directors deems that there are justified
grounds for not doing so.
(ii) notice of meeting shall clearly state the place, day and hour of such meeting along
with the statement of the business to be transacted at the meeting.
(iii) notice of meeting shall set out the member’s right to appoint a proxy and right of
such proxy to attend, speak and vote in place of member at such meeting.
(iv) every notice of meeting shall be accompanied by proxy form. The notices shall be
available on website of the Company atleast 21 days before the meeting and should be
in a format easy to view and download.
(v) proxy form and if appropriate identification cards shall be available in downloadable
form on the website of the Company.
(vi) rules and procedures for participating and voting shall be placed on website of the
Company.
(vii) management is expected to be receptive to queries/clarifications from members

through emails/ letters prior to the meetings.

(viii) relevant information regarding venue of meeting/access to the relevant room be
aptly communicated and same is also displayed on website of the Company.
(ix) use of audio/visual aids are encouraged to facilitate active participation.
(x) Appropriate surveillance, safety and security measures, as well as systems for
managing the physical access to the meeting shall be established in order to ensure the
safety of the attendees and the orderly conduct of the general meeting.
Companies are expected to take appropriate measures facilitating access of venue by

the disabled members of the company.
(xi) all relevant information/ documents that are legally required to be made available
to the members with respect to the proposed agenda of the meeting are duly provided.
(xii) chairman, directors and senior management (if relevant) is primed with relevant
records / papers to address agenda of meeting and discuss other important matters with
members.
(xiii) arrangement shall be made available for simultaneous interpretation/translation

of discussion or information in Urdu when the number of attendees who do not speak
English so justifies or when it is deemed appropriate for any reason.
(xiv) entire proceedings of the general meeting may be the subject of audiovisual
recording, if so determined by the Chairman thereof. The said fact shall be disclosed to
the members also.
b) Quorum
The Company shall ensure the quorum requirements are duly fulfilled. Following are the
requirements of quorum for a general meeting:
(i) In case of a public listed company, unless the articles provide for a larger number, at
least ten members present personally or through video link representing not less than
twenty-five percent of the total voting power, either of their own account or as proxies.
(ii) in the case of any other company having share capital, unless the articles provide for

a larger number, at least two members present personally or through video-link
representing not less than twenty-five percent of the total voting power, either of their
own account or as proxies.
(iii) in case of company not having capital, the quorum requirements as provided in the
articles shall be followed.
(iv) meetings called upon the requisition of members shall be dissolved if within half an
hour from the time appointed for the meeting, a quorum is not present.
(v) In any other case, meetings shall stand adjourned to the same day in the next week
at the same time and place. If quorum is not present within half an hour from the
appointed time for such adjourned meeting, the members present personally or through
video-link being not less than two shall be a quorum, unless the articles provide
otherwise.
c) Presiding committee
 The chairman of the board of directors, if any, shall preside as chairman at every
general meeting of the company.
 If there is no such chairman, or if at any meeting he is not present within fifteen
minutes after the time appointed for holding the meeting, or is unwilling to act as
chairman, any one of the directors present may be elected to be chairman.
 If none of the directors is present or is unwilling to act as chairman the members
present shall choose one of their member to be the chairman.
4. Convening general meetings

The Chairman shall declare the existence of a valid quorum for the meeting, direct and
moderate the discussions/presentations and the time assigned thereto.
The conduct of the meeting are expected to be administered keeping in view the
following:
a) Proceedings of meetings:
Following considerations are essential for ensuring efficient conduct of proceedings of

general meeting:
(i) appropriate time shall be given to determine presence of appropriate quorum:
(ii) chairman or, by his delegation, the Company Secretary shall read aloud the overall

data resulting from the list of attendees, stating the total number of members with the
right to vote attending the meeting in person or by proxy, the total number of shares
they own and/ or the percentage of capital they represent.
(iii) once the Chairman or Company Secretary has publicly announced this information,
the Chairman shall declare the existence of a proper and sufficient quorum at the
general meeting.
(iv) chairman or any designated officer may communicate the mode and manner of
interaction at the meeting. This includes provision of appropriate audio visual facilities
and communication protocols and discussion decorum for all participants.
(v) members attending the general meetings may record any reservation regarding
existence of a valid quorum or regarding the overall information from the list of
attendees which was previously read aloud, in order to duly record such reservation in
minutes of the general meeting, but such process shall not imply as delay, interruption
or postponement of normal proceeding of such meeting.
(vi) no general meeting shall start or end at a time making it difficult for member to
attend.
(vii) where the general meeting becomes disruptive, as a result of which no resolutions
can be passed and no business can be transacted in an orderly manner and it appears
to the Chairman that an adjournment is necessary to protect the safety of any person
attending the meeting, the Chairman may adjourn the meeting. Such adjournment shall
be for a reasonable time.
(viii) in the event it is not possible to complete a meeting within one day, it may adjourn
until next day however shall comply with applicable law. Appropriate justification shall
also be recorded in the minutes for adjournment of such meeting.
(ix) chairman, considering the circumstances, determines the time initially allotted for
discussion on each agenda by allotting reasonable time (generally not less than ten
minutes) for each agenda item. Chairman shall also inform all participants the
repercussions for disorderly conduct.
(x) questions for speakers and requests for word shall be made as per the procedure
adopted by the Chairman. Members may also pass notes /questions to the Company
Secretary during the proceedings of meeting.

(xi) generally, possible questions and appropriate answers should be prepared,
circulated and practiced by relevant company representatives to ensure accurate
answers are provided at the meeting. The chairman and CEO should ensure that they
are fully conversant, up-to-date and aligned on significant issues.
(xii) for questions received prior to general meeting, the company will need to decide
how and when such questions will be addressed. Some alternatives maybe:
(a) incorporate answers into the chair’s and CEO’s addresses.
(b) provide a separate summary of answers at the beginning of question time, after the
chairman and/ or CEO’s addresses.
(c) to include a selection of the more significant questions and answers on the
company’s website.
(d) use electronic web-based options (for example, emails or preparing an AGM blog)
and to present the chair’s and CEO’s addresses (for example, by webcast).
(xiii) in answering questions (at any time), those responding must be careful to ensure
that no new, price-sensitive information is released thereby contravening the applicable
laws or that there are objective reasons to consider that it could be used for non-
corporate purposes or that its disclosure could harm the Company or its related
companies.
(xiv) companies may consider making provision for members or proxy holders who are
nervous about asking questions publicly in such a formal setting, by having staff
members on hand who will put the question to the chair on behalf of the member.
(xv) companies are expected to carefully plan the most appropriate method of
communicating with members.
(xvi) chairs of committee, in particular audit and human resource committees, of listed
companies are expected to be available to answer questions at the general meeting.
The chairman should encourage them to make a statement on the activities and
achievements of the committee over the year and details of engagement with members
on significant matters.

(xvii) chairman, having the key role to play in representing the company to its key
stakeholders, is encouraged to report personally about board leadership and
effectiveness.
(xviii) in exercise of the Chairman’s powers to preside over general meetings and
without prejudice to other action that may be taken, the Chairman:
a) may extend the time initially allocated to each member, when the Chairman so
deems it appropriate;
b) may request clarification on issues that have not been understood or insufficiently
explained;
c) moderate discussion without prejudice to any participants that includes informing

presenters to adjust their discourse within allotted time and withdraw floor on lapse of
such time;
d) if a participant, despite being cautioned more than once, continues to divert debate/
discussion to irrelevant or inappropriate direction disrupting the proper order and normal
conduct of the meeting, the Chairman may order adopt measures to preserve order of
meeting (for e.g. procedural motions, instructions to refer to any director/management
personnel / body, close the microphone or in rare circumstances, may instruct disrupting
person to leave the premises). However, the aforesaid shall be recorded in the minutes
of the meeting.
e) chairman may exercise all powers necessary for the proper organization and
functioning of the meetings that may include impartially end the debate where an issue
has been sufficiently discussed, order votes to be taken or resolve any questions that
may arise in connection with the agenda.
f) where it is not possible to respond to member’s queries/ observations during the

proceedings of the general meeting, the directors are expected to provide requested
information (preferably in writing or in the manner requested) to the interested member
within reasonable time after the meeting (preferably not more than seven days of the
close of such meeting).
g) companies may face questions that are of detailed or personal nature or can be best
addressed by senior executives, the chair, if deemed appropriate, may authorize the
executive to meet with the member immediately after the meeting so that the member’s
concern can be addressed appropriately.

h) chairman, where legally authorized, shall declare that the meeting is
closed/adjourned.
i) chairman, directors and management must refrain from making improper statements
or exercising their right in an abusive or obstructionist manner.
b) Additional requirements for holding general meeting through video conferencing

The Chairman and Company secretary are responsible for ensuring that adequate
facilities are available and appoint a coordinator to facilitate such meetings. Listed
companies are required to comply with the relevant legal requirements for holding
meetings via video conferencing.
c) Voting
In the case of a company having a share capital, every member shall have votes
held by him according to the entitlement of the class of such shares or securities. In
case of a company limited by guarantee and having no share capital, every member
thereof shall have one vote. However, fractional votes shall not be taken into account at
the time of voting.
The Chairman or any designated officer should read out, the procedure of voting loud
and clear, prior to discussion of subject agenda item. At any general meeting, a
resolution put to the vote shall, unless a poll is demanded, be decided on a show of
hands.
The Chairman shall declare that on a show of hands, a resolution has or has not been
carried, unanimously or by a particular majority. The Company Secretary shall record
the said declaration in the minutes of the general meeting. Before or on the declaration
of the result of the voting through show of hands, a poll may be ordered to be taken by
the chairman of the meeting on:
a) his own motion
b) or on a demand made by members holding not less than one-tenth of voting power,
present in person or through video-link or proxy.
The requirements of relevant Regulations shall be adhered to by listed companies

required to arrange for members the option to vote in general meeting through postal
balloting.

5. Minutes of the general meeting
Every company shall cause a fair and accurate summary of the minutes of all
proceedings of general meetings along with the names and signatures of those
participating in such meetings, to be entered in properly maintained books. Minutes,
among others, must reflect a record of motions, votes, and abstentions.
The minutes of meeting are expected to be reflecting of the following elements:

 name of the Company;
 description of general meeting (statutory, annual, extra-ordinary etc.);
 date and place of the general meeting;
 starting time of the general meeting;
 number of members present in person or through proxy, as well as the number of
votes
members are representing (in order to determine the quorum);
 names of the chairman, directors and company secretary of the Company
attending the
general meeting;
 names of invitees convened by the Board of Directors (if any, for e.g., auditor);
 text of the resolutions to be voted upon;
 result of voting under the heading of relevant item on the agenda, as applicable;
 questions on the agenda and response (identifying person and brief narration);
 text of the resolution approved by the members;
 time at which the general meeting ended or was adjourned, as the case may be;
 The name and designation of the persons who sign the minutes.
It is also useful to annex the attendance sheet to the minutes so that may be verified
whether the required quorum has been reached and calculate the majority required for
the adoption of the resolutions voted upon.
The minutes must be drawn up with impartiality and precision, following the
chronological order of the general meeting. It is therefore important to record, in full, the
content of each resolution presented, reasons for its adoption or rejection and to
indicate the result of the vote. In addition, it is necessary to mention the reservations
expressed by the opposing members on the legality of the decisions. Although the
minutes must reflect the reality of the debates, it is not required or even desirable that
all statements made during the general meeting be fully reported.

Minutes constitute the material proof of the existence and content of each resolution
submitted to the general meeting. The books containing the minutes of proceedings of
the general meetings shall be kept at the registered office of the company and open to
inspection by members without charge during business hours, subject to reasonable
restrictions so that not less than two hours in each day be allowed for inspection. After
seven days from the meeting, any member is entitled to receive (within seven days after
request) the certified copy of the minutes of any general meeting at charge prescribed
by the Company.
6. Rights and responsibilities of members
Members of a company shall act in good faith while exercising their powers as a
is considered disruptive to proceedings of the meeting. Members are encouraged to
take active interest in affairs of Company for safeguarding their investments.
Without prejudice to the requirements of relevant law, members are entitled to

following rights with reference to general meeting:
 all members or their proxies are entitled to attend general meeting of a company
(unless the general meeting is called for particular class of members).
 to receive notice of general meetings specifying the place, day and time of
meeting along with a statement of business to be transacted at the meeting. The
Company shall comply with its legal obligations to provide information to the
members through its website, without prejudice to its right to use any other
means for such purpose or to the members’ right to request information in written
form pursuant to applicable law.
 to participate and vote in general meetings either personally, through video link
or through proxy (members, holding at least ten percent of the total paid up
capital residing in the same city, may demand video-link facility for attending
general meeting).
 to receive dividends in due time once approved in general meetings.
 members holding at least 10% of voting power of a company having share capital
or one tenth of total members of a company not having share capital, may make
requisition to board to call extraordinary general meeting.

 members or their proxies are entitled to demand a poll on any question in general
meeting. The demand may be withdrawn at any time by such members.
 members or their proxies have the right to abstain from voting or not to exercise
their full voting rights on a question before the meeting in which poll is
demanded.
 during business hours of the company, right to inspect proxies lodged with the
company.
 to apply to SECP for calling general meetings.
 to inspect the minutes book of the general meetings during business hours.
 to receive certified copies of the minutes of general meeting after seven days of
the general meeting.
 members may request in writing any information or clarification that they consider
necessary or formulate in writing the questions that they deem pertinent in
relation to the items on the agenda contained in the notice or the information
available to the public or on the company’s website. It is expected that members
put forth such request in reasonable time (preferably 4-5 days) prior to general
meeting.
Without prejudice to the requirements of relevant law, the responsibilities of

members attending general meeting are summarized below:
 appoint not more than one proxy to attend any one meeting. The proxy must be a
member unless the articles of the company permit appointment of a non-member.
 proxy forms shall be lodged with the company at least two working days, before
the time for holding general meeting.
 be well prepared for effective participation in the general meeting i.e. examine
notices, financial statements, where applicable and other relevant document
pertaining to the agenda prior to attending the general meeting.
 visit the website of companies on regular intervals and where possible access
information through the website.

 be acquainted with the names of directors, chief executive officer, company
Secretary and rules of attending general meeting (as communicated by
company).
 preferably address any queries or request information by post, email or through

the means provided in the notice of the meeting including their first and last
names, with evidence of the shares owned. The member shall be responsible for
maintaining proof of delivery of the request to the Company as and when due.
 follow specific directions regarding access to place and time of general meetings.
 sign the attendance sheet of general meetings enabling record of presence and
effective exercise of rights.
 be receptive to directions of Chairman regarding proceedings of meetings and

discussion on agenda items.
 place all queries / clarification during meeting to Company Secretary or as per

procedure adopted and announced by Chairman. It is also encouraged that the
members wishing to make statements at the general meeting submit a request
prior to the start of the meeting to the company secretary (or any member/
investor relation officer of the Company) placing on record their name and/ or
name of the member they represent, the number of shares they hold and/or
represent and text /summary of their statement in order to expedite the process.
However the aforesaid does not limit the right of member to address queries
verbally in the general meetings.
 ensure that during their turn in the debate, they remain brief and relevant.
Moreover, they must raise their observation/objection within the time allotted by
Chairman.
 the queries/ observations and use of language should not be abusive, biased,
personally targeted and out of context.
 vote on resolutions as per the procedure adopted and announced by Chairman.
 be vigilant of matters presented by Board, purpose of proposed resolution and

avoid prejudice when exercising right to approve or disapprove any matter
proposed by Board.

 Abstain from taking any measure that disrupt orderly conduct of proceedings of
the meeting.
 If general meeting is subject to audio/video recording, members are expected not

to use photographic, video, image and/or sound recording equipment or other
similar equipment in the room where such general meeting is taking place,
except to the extent allowed by the Chairman.
 It is expected that members understand that there is no obligation to provide the

requested information if such information is not necessary to protect members’
rights, there are objective reasons to consider that it could be used for non-
corporate purposes or that its disclosure could harm the Company or its related
companies.
 Refrain from making unlawful demands from companies during the proceedings
of the meeting. This includes demand or pressurizing company or management
to give gifts/incentives in lieu of gifts/coupons, tokens, takeaway packages in any
form or manner.
Gift in any form by company to members is prohibited and liable to penalty.
ANNEXURE
Relevant Statutory requirements regarding Board meetings:
The relevant requirements of Companies Act, 2017 are provided below:
Section 176: Proceedings of the board

(1) The quorum for a meeting of board of a listed company shall not be less than one-
third of number of directors or four, whichever is greater and the participation of the
directors by video conferencing or by other audio visual means shall also be counted for
the purposes of quorum under this sub-section:
Provided that if at any time, there are not enough directors to form a quorum to fill a
casual vacancy, all the remaining directors shall be deemed to constitute a quorum for
this limited purpose.
(2) The quorum for a meeting of the board of other than listed company shall be as
provided in the articles.
(3) The board of a public company shall meet at least once in each quarter of a year.

(4) If a meeting of the board is conducted in the absence of a quorum or a meeting of
board is not held as required by sub-section (3), the chairman of the directors and the
directors shall be liable-
(a) if the default relates to a listed company, to a penalty of level 2 on the standard
scale; and
(b) if the default relates to any other company, to a penalty of level 1 on the standard
scale.
Section 179: Passing of resolution by the directors through circulation:
(1) A resolution in writing signed by all the directors or the committee of directors for the
time being entitled to receive notice of a meeting of the directors or committee of
directors shall be as valid and effectual as if it had been passed at a meeting of the
directors or the committee of directors duly convened and held.
has been circulated, together with the necessary papers, if any, to all the directors.
(3) A resolution under sub-section (1) shall be noted at a subsequent meeting of the
board or the committee thereof, as the case may be, and made part of the minutes of
such meeting.
(4) A directors’ agreement to a written resolution, passed by circulation, once signified,

may not be revoked.
Section 205: Disclosure of interest by director
concerned or interested in any contract or arrangement entered into, or to be entered
into, by or on behalf of the company shall disclose the nature of his concern or interest
at a meeting of the board:
Provided that a director shall be deemed also to be interested or concerned if any of his
relatives, is so interested or concerned.

Explanation. For the purpose of this section “director’s relatives”, are
(a) the director’s spouse;

(b) the director’s children, including the step children;
(c) the director’s parents;
(2) The disclosure required to be made by a director under sub-section (1) shall be
made-
(a) in the case of a contract or arrangement to be entered into, at the meeting of the
board at which the question of entering into the contract or arrangement is first taken
into consideration or, if the director was not, on the date of that meeting, concerned or
interested in the contract or arrangement, at the first meeting of the board held after he
becomes so concerned or interested; and (b) in the case of any other contract or
arrangement, at the first meeting of the board held after the director becomes
concerned or interested in the contract or arrangement.
(3) For the purposes of sub-sections (1) and (2), a general notice given to the board to
the effect that a director is a director or a member of a specified body corporate or a
partner of a specified firm and is to be regarded as concerned or interested in any
contract or arrangement which may, after the date of the notice, be entered into with
that body corporate or firm, shall be deemed to be a sufficient disclosure of concern or
interest in relation to any contract or arrangement so made.
(4) Any such general notice shall expire at the end of the financial year in which it is
given, but may be renewed for further period of one financial year at a time, by a fresh
notice given in the last month of the financial year in which it would otherwise expire.
(5) No such general notice, and no renewal thereof, shall be of effect unless either it is
given at a meeting of the board, or the director concerned takes reasonable steps to
ensure that it is brought up and read at the first meeting of the board after it is given.
(6) Any contravention or default in complying with requirements of sub-sections (1) or

(2), shall be an offence liable to a penalty of level 1 on the standard scale.
Section 207: Interested director not to participate or vote in proceedings of board
(1) No director of a company shall, as a director, take any part in the discussion of, or
vote on, any contract or arrangement entered into, or to be entered into, by or on behalf
of the company, if he is in any way, whether directly or indirectly, concerned or

interested in the contract or arrangement, nor shall his presence count for the purpose
of forming a quorum at the time of any such discussion or vote; and if he does vote, his
vote shall be void:
Provided that a director of a listed company who has a material personal interest in a
matter that is being considered at a board meeting shall not be present while that matter
is being considered.
(2) If majority of the directors are interested in, any contract or arrangement entered
into, or to be entered into, by or on behalf of the company, the matter shall be laid
before the general meeting for approval.
(3) Sub-section (1) shall not apply to:
(a) a private company which is neither a subsidiary nor a holding company of a public
company;
(b) any contract of indemnity or insurance coverage executed by the company in favour
of interested director against any loss which he may suffer or incur by reason of
becoming or being a surety for the company or while undertaking any transaction on
behalf of the company:
Provided that for the purpose of clause (b), a company shall only insure the liability of
interested director where such liability arises out of a transaction validly approved by the
board or the members of the company as the case may be:
Relevant Statutory Requirements regarding conduct of general meetings:
The relevant requirements of Companies Act, 2017 are provided below:
Section 131: Statutory meeting of company
(1) Every public company having a share capital shall, within a period of one hundred
and eighty days from the date at which the company is entitled to commence business
or within nine months from the date of its incorporation whichever is earlier, hold a
general meeting of the members of the company, to be called the statutory meeting:

Provided that in case first annual general meeting of a company is decided to be held
earlier, no statutory meeting shall be required.
(2) The notice of a statutory meeting shall be sent to the members at least twenty-one
days before the date fixed for the meeting along-with a copy of statutory report.
(3) The statutory report shall state:
a) the total number of shares allotted, distinguishing shares allotted other than in cash,
and stating the consideration for which they have been allotted;
b) the total amount of cash received by the company in respect of all the shares allotted;
c) an abstract of the receipts of the company and of the payments made there out up to
a date within fifteen days of the date of the report, exhibiting under distinctive headings
the receipts of the company from shares and debentures and other sources, the
payments made there out, and particulars concerning the balance remaining in hand,
and an account or estimate of the preliminary expenses of the company showing
separately any commission or discount paid or to be paid on the issue or sale of shares
or debentures;
d) the names, addresses and occupations of the directors, chief executive, secretary,
auditors and legal advisers of the company and the changes, if any, which have
occurred since the date of the incorporation;
e) the particulars of any contract the modification of which is to be submitted to the

meeting for its approval, together with the particulars of the modification or proposed
modification;
f) the extent to which underwriting contracts, if any, have been carried out and the
extent to which such contracts have not been carried out, together with the reasons for
their not having been carried out; and
g) the particulars of any commission or brokerage paid or to be paid in connection with

the issue or sale of shares to any director, chief executive, secretary or officer or to a
private company of which he is a director; and certified by the chief executive and at
least one director of the company, and in case of a listed company also by the chief
financial officer.

(4) The statutory report shall also contain a brief account of the state of the company‘s
affairs since its incorporation and the business plan, including any change or proposed
change affecting the interest of shareholders and business prospects of the company.
(5) The statutory report shall, so far as it relates to the shares allotted by the company,
the cash received in respect of such shares and to the receipts and payments of the
company, be accompanied by a report of the auditors of the company as to the
correctness of such allotment, receipt of cash, receipts and payments.
(6) The directors shall cause a copy of the statutory report, along-with report of the
auditors as aforesaid, to be delivered to the registrar for registration forthwith after
sending the report to the members of the company.
(7) The directors shall cause a list showing the names, occupations, nationality and
addresses of the members of the company, and the number of shares held by them
respectively, to be produced at the commencement of the meeting and to remain open
and accessible to any member of the company during the continuance of the meeting.
(8) The members of the company present at the meeting shall be at liberty to discuss
any matter relating to the formation of the company or arising out of the statutory report,
whether previous notice has been given or not, but no resolution of which notice has not
been given in accordance with the articles may be passed.
(9) The meeting may adjourn from time to time, and at any adjourned meeting any
resolution of which notice has been given in accordance with the articles, either before
or after the original meeting, may be passed, and an adjourned meeting shall have the
same powers as an original meeting.
(10) The provisions of this section shall not apply to a public company which converts
itself from a private company after one year of incorporation.

Section 132: Annual general meeting
(1) Every company, shall hold, an annual general meeting within sixteen months from
the date of its incorporation and thereafter once in every calendar year within a period of
one hundred and twenty days following the close of its financial year:
Provided that, in the case of a listed company, the Commission, and, in any other case,
the registrar, may for any special reason extend the time within which any annual
general meeting, shall be held by a period not exceeding thirty days.
(2) An annual general meeting shall, in the case of a listed company, be held in the
town in which the registered office of the company is situate or in a nearest city:
Provided that at least seven days prior to the date of meeting, on the demand of
members residing in a city who hold at least ten percent of the total paid up capital or
such other percentage as may be specified, a listed company must provide the facility of
video-link to such members enabling them to participate in its annual general meeting.
(3) The notice of an annual general meeting shall be sent to the members and every
person who is entitled to receive notice of general meetings at least twenty-one days
before the date fixed for the meeting:
Provided that in case of a listed company, such notice shall be sent to the Commission,
in addition to its being dispatched in the normal course to members and the notice shall
also be published in English and Urdu languages at least in one issue each of a daily
newspaper of respective language having nationwide circulation.
(4) Nothing in this section shall apply to a single member company.
offence liable—

Section 133: Calling of extraordinary general meeting
(1) All general meetings of a company, other than the annual general meeting referred
to in section 132 and the statutory meeting mentioned in section 131, shall be called
extra-ordinary general meetings.
(2) The board may at any time call an extra-ordinary general meeting of the company to
consider any matter which requires the approval of the company in a general meeting.
(3) The board shall, at the requisition made by the members—
a) in case of a company having share capital, representing not less than one-tenth of
the total voting power as on the date of deposit of requisition; and
(b) in case of a company not having share capital, not less than one-tenth of the total
members; forthwith proceed to call an extra-ordinary general meeting.
(4) The requisition shall state the objects of the meeting, be signed by the requisitionists
and deposited at the registered office of the company.
(5) If the board does not proceed within twenty-one days from the date of the requisition
being so deposited to cause a meeting to be called, the requisitionists, may themselves
call the meeting, but in either case any meeting so called shall be held within ninety
days from the date of the deposit of the requisition.
(6) Any meeting called under sub-section (5) by the requisitionists shall be called in the
same manner, as nearly as possible, as that in which meetings are to be called by
board.
(7) Any reasonable expenses incurred by the requisitionists in calling a meeting under
sub-section (5) shall be re-imbursed to the requisitionists by the company and the sums
so paid shall be deducted from any fee or other remuneration payable to such of the
directors who were in default in calling the meeting.
(8) Notice of an extra-ordinary general meeting shall be served to the members in the
manner provided for in section 55:
Provided that in case of a company other than listed, if all the members entitled to
attend and vote at any extraordinary general meeting so agree, a meeting may be held
at a shorter notice.

offence liable—
Section 134: Provisions as to meetings and votes
(1) The following provisions shall apply to the general meetings of a company or
meetings of a class of members of the company, namely:
(a) notice of the meeting specifying the place and the day and hour of the meeting
alongwith a statement of the business to be transacted at the meeting shall be given—
(i) to every member or class of the members of the company as the case may be;
(ii) to every director;
(iii) to any person who is entitled to a share in consequence of the death or bankruptcy
of a member, if the company has been notified of his entitlement;
(iv) to the auditors of the company;
in the manner in which notices are required to be served by section 55, but the
accidental omission to give notice to, or the non-receipt of notice by, any member shall
not invalidate the proceedings at any meeting;
(b) in case of a listed company, if certain members who hold ten percent of the total
paid up capital or such other percentage as may be specified, reside in a city, it shall be
mentioned in the notice that such members, may demand the company to provide them
the facility of video-link for attending the meeting.
(2) For the purposes of sub-section (1), in the case of an annual general meeting, all the
businesses to be transacted shall be deemed special, other than—
(a) the consideration of financial statements and the reports of the board and auditors;
(b) the declaration of any dividend;
(c) the election and appointment of directors in place of those retiring; and

(d) the appointment of the auditors and fixation of their remuneration.
(3) Where any special business is to be transacted at a general meeting, there shall be
annexed to the notice of the meeting a statement setting out all material facts
concerning such business, including, in particular, the nature and extent of the interest,
if any, therein of every director, whether directly or indirectly, and, where any item of
business consists of the according of an approval to any document by the meeting, the
time when and the place where the document may be inspected, shall be specified in
the statement.
(4) Members of a company may participate in the meeting personally, through video-link
or by proxy.
(5) The chairman of the board, if any, shall preside as chairman at every general
meeting of the company, but if there is no such chairman, or if at any meeting he is not
present within fifteen minutes after the time appointed for holding the meeting, or is
unwilling to act as chairman, any one of the directors present may be elected to be
chairman, and if none of the directors is present or is unwilling to act as chairman the
members present shall choose one of their member to be the chairman.
(6) In the case of a company having a share capital, every member shall have votes
held by him according to the entitlement of the class of such shares or securities, as the
case may be:
Provided that, at the time of voting, fractional votes shall not be taken into account.
(7) No member holding shares or other securities carrying voting rights shall be
debarred from casting his vote, nor shall anything contained in the articles have the
effect of so debarring him.
(8) In the case of a company limited by guarantee and having no share capital, every
member thereof shall have one vote.
(9) On a poll, votes may be given either personally or through video-link or by proxy or
through postal ballot in a manner and subject to the conditions as may be specified.

(10) Notwithstanding anything contained in this Act, the Commission shall have the
power to notify any business requiring the approval of the members shall only be
transacted through postal ballot for any company or class of companies.
(11) All the requirements of this Act regarding calling of, holding and approval in general
meeting, board meeting and election of directors in case of a single member company,
shall be deemed complied with; if the decision is recorded in the relevant minutes book
and signed by the sole member or sole director as the case may be.
Section 135: Quorum of general meeting
(1) The quorum of a general meeting shall be—
(a) in the case of a public listed company, unless the articles provide for a larger
number, not less than ten members present personally, or through video-link who
represent not less than twenty-five percent of the total voting power, either of their own
account or as proxies;
(b) in the case of any other company having share capital, unless the articles provide for
a larger number, two members present personally, or through video-link who represent
not less than twenty-five percent of the total voting power, either of their own account or
as proxies;
(c) in the case of a company not having share capital, as provided in the articles:
Provided that, if within half an hour from the time appointed for the meeting a quorum is
not present, the meeting, if called upon the requisition of members, shall be dissolved;
in any other case, it shall stand adjourned to the same day in the next week at the same
time and place, and, if at the adjourned meeting a quorum is not present within half an
hour from the time appointed for the meeting, the members present personally or
through video-link being not less than two shall be a quorum, unless the articles provide
otherwise.

offence liable—
Section 136: Power of the Court to declare the proceedings of a general meeting
invalid
The Court may, on a petition, by members having not less than ten percent of the voting
power in the company, that the proceedings of a general meeting be declared invalid by
reason of a material defect or omission in the notice or irregularity in the proceedings of
the meeting, which prevented members from using effectively their rights, declare such
proceedings or part thereof invalid and direct holding of a fresh general meeting:
Provided that the petition shall be made within thirty days of the impugned meeting.
Section 137: Proxies
(1) A member of a company entitled to attend and vote at a meeting of the company
may appoint another person as his proxy to exercise all or any of his rights to attend,
speak and vote at a meeting:
Provided that—
(a) unless the articles of a company otherwise provide, this sub-section shall not apply
in the case of a company not having a share capital;
(b) a member shall not be entitled to appoint more than one proxy to attend any one
meeting;
(c) if any member appoints more than one proxy for any one meeting and more than
one instruments of proxy are deposited with the company, all such instruments of proxy
shall be rendered invalid; and
(d) a proxy must be a member unless the articles of the company permit appointment of
a non-member as proxy.
(2) Subject to the provisions of sub-section (1), every notice of a meeting of a company
shall prominently set out the member‘s right to appoint a proxy and the right of such

proxy to attend, speak and vote in the place of the member at the meeting and every
such notice shall be accompanied by a proxy form.
(3) The instrument appointing a proxy shall—
(a) be in writing; and
(b) be signed by the appointer or his attorney duly authorised in writing, or if the
appointer is a body corporate, be under its seal or be signed by an officer or an attorney
duly authorised by it.
(4) An instrument appointing a proxy, if in the form set out in Regulation 43 of Table A in
the First Schedule shall not be questioned on the ground that it fails to comply with any
special requirements specified for such instruments by the articles.
(5) The proxies must be lodged with the company not later than forty-eight hours before
the time for holding a meeting and any provision to the contrary in the company‘s
articles shall be void.
(6) In calculating the period mentioned in sub-section (5), no account shall be taken of
any part of the day that is not a working day.
(7) The members or their proxies shall be entitled to do any or all the following things in
a general meeting, namely—
(a) subject to the provisions of section 143, demand a poll on any question; and
(b) on a question before the meeting in which poll is demanded, to abstain from voting
or not to exercise their full voting rights; and any provision to the contrary in the articles
shall be void.
(8) Every member entitled to vote at a meeting of the company shall be entitled to
inspect during the business hours of the company all proxies lodged with the company.
(9) The provisions of this section shall apply mutatis mutandis to the meeting of a
particular class of members as they apply to a general meeting of all the members.
(10) Failure to issue notices in time or issuing notices with material defect or omission or
any other contravention of this section which has the effect of preventing participation or

use of full rights by a member or his proxy shall make the company and its every officer
who is a party to the default or contravention liable to—
(a) a penalty of level 2 on the standard scale if the default relates to a listed company;
and
(b) to a penalty of level 1 on the standard scale if the default relates to any other
company.
Section 138: Representation of body corporate or corporation at meetings
this Act) which is a member of another company may, by resolution of its board or other
governing body authorise an individual to act as its representative at any meeting of that
other company, and the individual so authorised shall be entitled to exercise the same
powers on behalf of the corporation which he represents.
this Act) which is a creditor of another company may, by resolution of its board or other
governing body authorise an individual to act as its representative at any meeting of the
creditors of that other company held in pursuance of this Act or any other meeting to
which it is entitled to attend in pursuance of the provisions contained in any instrument
and the person so authorised shall be entitled to exercise the same powers on behalf of
the corporation which he represents.
Section 139: Representation of Federal Government at meetings of companies
(1) The concerned Minister-in-Charge of the Federal Government, or as the case may
be, a Provincial Government, as the case may be, if a member of a company, may
appoint such individual as it thinks fit to act as its representative at any meeting of the
company or at any meeting of any class of members of the company.
(2) An individual appointed to act as aforesaid shall, for the purpose of this Act, be
deemed to be a member of such a company and shall be entitled to exercise the same
rights and powers, including the right to appoint proxy, as the concerned Minister-in-
Charge of the Federal Government or as the case may be, the Provincial Government,
as the case may be, may exercise as a member of the company.

Section 141: Voting to be by show of hands in first instance
At any general meeting, a resolution put to the vote of the meeting shall, unless a poll is
demanded, be decided on a show of hands.
Section 142: Declaration by chairman on a show of hands
(1) On a vote on a resolution at a meeting on a show of hands, a declaration by the

chairman that the resolution—
(a) has or has not been passed; or
(b) passed unanimously or by a particular majority;
is conclusive evidence of that fact without proof of the number or proportion of the votes
recorded in favour of or against the resolution.
(2) An entry in respect of such a declaration in minutes of the meeting recorded in

accordance with section 151 is also conclusive evidence of that fact without such proof.
Section 143: Demand for poll
(1) Before or on the declaration of the result of the voting on any resolution on a show of
hands, a poll may be ordered to be taken by the chairman of the meeting of his own
motion, and shall be ordered to be taken by him on a demand made in that behalf by
the members present in person or through video-link or by proxy, where allowed, and
having not less than one-tenth of the total voting power.(2) The demand for a poll may
be withdrawn at any time by the members who made the demand.
Section 144: Poll through secret ballot
Notwithstanding anything contained in this Act, when a poll is demanded on any

resolution, it may be ordered to be taken by the chairman of the meeting by secret ballot
of his own motion, and shall be ordered to be taken by him on a demand made in that
behalf by the members present in person, through video-link or by proxy, where
allowed, and having not less than one-tenth of the total voting power.

Section 145: Time of taking poll
(1) A poll demanded on the election of a chairman or on a question of adjournment shall

be taken forthwith and a poll demanded on any other question shall be taken at such
time, not more than fourteen days from the day on which it is demanded, as the
chairman of the meeting may direct.
(2) When a poll is taken, the chairman or his nominee and a representative of the
members demanding the poll shall scrutinize the votes given on the poll and the result
shall be announced by the chairman.
(3) Subject to the provisions of this Act, the chairman shall have power to regulate the
manner in which a poll shall be taken.
(4) The result of the poll shall be deemed to be the decision of the meeting on the
resolution on which the poll was taken.
Section 146: Resolutions passed at adjourned meeting
Where a resolution is passed at an adjourned meeting of—

(a) a company;
(b) the holders of any class of shares in a company;
(c) the board; or
(d) the creditors of a company;
the resolution shall, for all purposes, be treated as having been passed on the date on
which it was in fact passed, and shall not be deemed to have been passed on any
earlier date.
Section 147: Power of Commission to call meetings
(1) If default is made in holding the statutory meeting, annual general meeting or any
extraordinary general meeting in accordance with sections 131, 132 or 133, as the case
may be, the Commission may, notwithstanding anything contained in this Act or in the
articles of the company, either of its own motion or on the application of any director or
member of the company, call, or direct the calling of, the said meeting of the company in
such manner as the Commission may think fit, and give such ancillary or consequential
directions as the Commission thinks expedient in relation to the calling, holding and
conducting of the meeting and preparation of any document required with respect to the
meeting.

Explanation.—The directions that may be given under sub-section (1) may include a
direction that one member of the company present in person or by proxy shall be
deemed to constitute a meeting.
(2) Any meeting called, held and conducted in accordance with any such direction shall,
for all purposes, be deemed to be a meeting of the company duly called, held and
conducted, and all expenses incurred in connection thereto shall be paid by the
company unless the Commission directs the same to be recovered from any officer of
the company which he is hereby authorised to do.
Section 148: Punishment for default in complying with provisions of section 147
If any person makes default in holding a meeting of the company in accordance with
section 147 or in complying with any directions of the Commission, shall be liable to a
Section 149: Passing of resolution by the members through circulation
(1) Except for the businesses specified under sub-section (2) of section 134 to be
conducted in the annual general meeting, the members of a private company or a public
unlisted company (having not more than fifty members), may pass a resolution (ordinary
or special) by circulation signed by all the members for the time being entitled to receive
notice of a meeting.
(2) Any resolution passed under sub-section (1), shall be as valid and effectual as if it
had been passed at a general meeting of the company duly convened and held.
has been circulated, together with the necessary papers, if any, to all the members.
(4) A members‘ agreement to a written resolution, passed by circulation, once signified,

may not be revoked.
(5) A resolution under sub-section (1) shall be noted at subsequent meeting of the
members and made part of the minutes of such meeting.

Section 151: Records of resolutions and meetings
(1) Every company shall keep records of—
(a) copies of all resolutions of members passed otherwise than at general meetings;
and
(b) minutes of all proceedings of general meetings along with the names of participants,
to be entered in properly maintained books;

(3) Until the contrary is proved, every general meeting of the company in respect of the
proceedings whereof minutes have been so made shall be deemed to have been duly
called, held and conducted.
shall be preserved for at least twenty years in physical form and permanently in
electronic form.
Section 152: Inspection of records of resolutions and meetings
(1) The books containing the minutes of proceedings of the general meetings shall be
open to inspection by members without charge during business hours, subject to such
reasonable restrictions as the company may by its articles or in general meeting impose
so that not less than two hours in each day be allowed for inspection.
(2) Any member shall at any time after seven days from the meeting be entitled to be
furnished, within seven days after he has made a request in that behalf to the company,
with a certified copy of the minutes of any general meeting at such charge not
exceeding the amount as may be fixed by the company.
(3) If any inspection required under sub-section (1) is refused, or if any copy required
under sub-section (2) is not furnished within the time specified therein, the person guilty

of an offence shall be liable to a penalty of level 1 on the standard scale, and the
registrar may direct immediate inspection or supply of copy, as the case may be.
Section 215: Liability for undesired activities of the shareholders
(1) A member of a company shall act in good faith while exercising its powers as a
is considered disruptive to proceedings of the meeting.
(2) Without prejudice to his rights under this Act, a member of the company shall not
exert influence or approach the management directly for decisions which may lead to
create hurdle in the smooth functioning of management.
(3) Any shareholder who fails to conduct in the manner provided in this section and as
specified by the Commission shall be guilty of an offence under this section and shall be

Disclaimer
This document is a guide to provide general background information
and a starting point for convening board meeting and general
meeting. It is not designed to replace legal advice or a detailed
review of the subject matter. This Guide does not constitute legal,
accounting or other professional advice. While reasonable care has
been taken in its preparation, Securities and Exchange Commission
of Pakistan does not make any express or implied representations or
warranties as to the completeness, currency, reliability or accuracy of
the material in this document. This document should not be used or
relied upon as a substitute for professional advice or as a basis for
formulating business decisions. To the extent permitted by law, the
Securities and Exchange Commission of Pakistan excludes all
liability for any loss or damage arising out of the use of the material
in this document. Any references are provided for convenience only.
Published by Securities and Exchange Commission of Pakistan
Postal address:
Securities and Exchange Commission of Pakistan
National Insurance Corporation Building,
Jinnah Avenue,
Islamabad-44000, Pakistan.
For queries and complaints: https://sdms.secp.gov.pk

PART B
SAMPLES OF NOTICE OF ANNUAL GENERAL

MEETING, BOARD OF DIRECTORS MEETING
AND RESOLUTIONS
ICMA Pakistan SOLUTION QUESTION NO.7 (a), Fall 2019 EXAMINATION
NOTICE OF THE BOARD OF DIRECTORS MEETING
Notice is hereby given that meeting of Board of Directors of Shahwaiz Chemicals

Limited will be held at 10:30 am on Monday, February 24, 2020 at Registered Office of
the Company, situated at Shahwaiz Plaza, Lahore to transact the following business:
AGENDA
1. To confirm the minutes of the last Board of Directors Meeting held on November 25,
2019.
2. To consider and approve Audit Committee’s recommended, Auditors’ Reviewed six

monthly financial statements of the Company for the period ended December 31,
2019.
3. To transact any other business with the permission of the Chair.
On behalf of the Board

Company Secretary
Lahore: February 17, 2020
(Note: date must be at least 7 days before the meeting date)

ICMA Pakistan SOLUTION QUESTION NO.7, SPRING 2019 EXAMINATION
NOTICE OF ANNUAL GENERAL MEETING

NOTICE is hereby given that the 10th Annual General Meeting of Bright Stars Limited
will be held at 10:30 am, on Friday, September 20, 2019 at its Registered Office located
at BSL Building Islamabad to transact the following business:
1. Consideration of financial statements and reports of directors and auditors.

2. Declaration of any dividend
3. Appointment of the auditors and fixation of their remuneration
4. To elect seven directors as fixed by the Board of Directors in accordance with the
provision of section 159 (1) of the Companies Act, 2017 for the next tenure of three
years. The names of the retiring directors are as follows:
i. Mr. Asad
ii. Mr. Behroz Shah
iii. Ms. Erum Khan
iv. Mr. Dilshad
v. Ms. Saira Dilshad
vi. Mr. Nusrat
vii. Mr. Ozair
By order of the Board

Company Secretary
Islamabad
August 26, 2019 (Any date atleast 21 days before date of AGM)

ICMA Pakistan SOLUTION QUESTION NO.7(a), SPRING 2018 EXAMINATION
(i) Extract from the notice of Annual General Meeting
“To elect seven directors as fixed by the Board of Directors (BODs) in accordance with
the provision of section 159 (1) of the Companies Act, 2017 for the next tenure of three
(03) Years.”
The names of the retiring directors are as follows:
 Mr. Amir
 Mr. Bilawal
 Mr. Chowdhry Shahid
 Mr. Dawood
 Mr. Emran
 Mr. Fahad
 Mr. Jibran
(ii) ELECTION OF DIRECTORS NOTICE UNDER SECTION 159 (4) OF THE

COMPANIES ACT, 2017
DIAMOND PACKAGES LIMITED
Members are hereby notified that pursuant to Section 159 (3) of the Companies Act, 2017,
the following persons have filed with the Company notices of their intention to offer
themselves for Election of Directors of the Company at the Annual General Meeting to be
held on September 30, 2018, Karachi.
 Mr. Amir
 Mr. Bilawal
 Mr. Chowdhry Shahid
 Mr. Dawood
 Mr. Emran
 Mr. Fahad
 Mr. Jibran
Since the number of persons who have offered themselves to be elected is not more
than the seven (07) number of directors fixed by the Board under Section 178 (1) of the
Act, 2017, therefore, the above mentioned persons shall be deemed to be elected at the
forthcoming Annual General Meeting.

(iii) The number of directors as fixed by the directors under section 159(1) of the Act
shall not be changed except with the prior approval of the general meeting in
which election is to be held.
ICMA Pakistan SOLUTION QUESTION NO.7(a)(i), SUMMER 2018 EXAMINATION
FRIENDS LIMITED
NOTICE OF ANNUAL GENERAL MEETING
NOTICE is hereby given that the 25th Annual General Meeting of M/s. Friends Limited
will be held at 11:00 am, on Saturday, June 30, 2018 at its Registered Office located at
Friends Tower, Lahore, to transact the following ordinary business:
1. The consideration of financial statements and reports of directors and auditors.

2. The declaration of any dividend
3. The election and appointment of directors in place of retiring
4. The appointment of the auditors and fixation of their remuneration
By the order of the Board

Company Secretary
Lahore
June 09, 2018
Notes for video link facility
Members residing in a city who hold at least 10% of the total paid up capital may demand the
Company, at least seven days prior to the date of meeting, to provide them the facility of video-
link to such members enabling them to participate in the meeting.

ICMA Pakistan SOLUTION QUESTION NO.7 (c), FALL 2018 EXAMINATION
NOTICE OF THE BOARD OF DIRECTORS MEETING
Notice is hereby given that meeting of Board of Directors of Noor sons Limited will be held at
11:00 am on Friday, February 15, 2019 at Registered Office of the Company A-55, first floor,
Global Towers, Islamabad to transact the following business:
AGENDA
1. To confirm the minutes of the last Board of Directors Meeting held on October 30, 2018.
2. To consider and approve annual audited financial statements of the Company for the year
ended December 31, 2018.
3. To approve appointment of auditors M/s. ANZ and Company for the year ending
December 31, 2019 and fix their remuneration. The Audit Committee has recommended
their re-appointment.
4. To transact any other business with the permission of the Chair.
On behalf of the Board

Company Secretary
Islamabad: February 07, 2019

ICMA Pakistan SOLUTION QUESTION NO.7(a), FALL 2017 EXAMINATION
Notice of Annual General Meeting:
Notice is hereby given that the 64th Annual General Meeting of Jamal Fabric Limited
will be held on Saturday, March 31, 2018 at 09:00 a.m. at the registered office of the
Company situated at Jamal House, Shahrah-e-Faisal, Karachi to transact the following
business:
Ordinary Business:
1. To receive consider and approve the Audited Accounts of the Company for the year
ended December 31, 2017 together with the Auditors’ and Directors Report thereon.
2. To consider and approve the payment of final cash dividend of 40% (Rs.4.00 per
ordinary share of Rs.10 /each) for the year ended December 31, 2017. As
recommended by the Directors of the company.
3. To appoint Auditors of the Company for the year ending December 31, 2018 and fix
their remuneration. The Present Auditor M/s ABC & Company Chartered Accountants,
being eligible, have offered themselves for reappointment.
Special Business:
4. To consider and, if thought fit, pass special resolution pursuant to Section 199 of the
Companies Act, 2017 to authorize investment in Share Capital of Jamal Food (Private)
Limited a subsidiary of the company up to a value of approximately Rs.50 million in
aggregate.
Resolved that Pursuant to the requirements of section 199 of the Act, the company be
and is hereby authorized to invest in Share Capital of the subsidiary, Jamal Food
(Private) Limited up to a value of approximately Rs.50 million.
Resolved further that the Chief Executive Officer and the Company Secretary of the
company be and are hereby authorized singly to take all steps necessary, ancillary and
incidental, corporate and legal formalities for the completion of above transactions but

not limited to filing of the entire requisite statutory forms and all other documents with
SECP, executing documents all such notice, reports, letters and any other documents
or instrument to give effect to the above resolution.
5. To consider any other business with the permission of Chairman.

Place: By Order of the Board
Date: March 09, 2018 Company Secretary
ICMA Pakistan SOLUTION QUESTION NO.6 (b), SPRING 2017 EXAMINATION
(b) Resolved that:
 The directors be and are authorised to purchase 50,000 shares of Al-Meezan

Sugar Industries at the market price of Rs.1,250 per share.
 The purchase of shares be made within 30 days.
 The purchase be made through an open tender to be published in the
newspapers having country side circulation.
Further resolved that:

The Chief Executive Officer and Company Secretary be and is/are hereby authorized to
do all acts, deeds and things, take any or all necessary actions to complete all legal
formalities and file all necessary documents as may be necessary or incidental for the
purpose of implementing the aforesaid resolution.


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i

Institute of Cost and Management Accountants of Pakistan

First Edition 2014

4 SECURITIES ACT 2015 108

SHARE CAPITAL-ISSUE AND

SHARE CAPITAL TRANSFER

SHARE CAPITAL BUY BACK AND

ADMINISTRATION-DIRECTORS AND CHIEF EXECUTIVE 245

10 MEETINGS AND PROCEEDINGS 311

11 BORROWINGS BY THE COMPANY 336

12 BOOKS OF ACCOUNTS 362

14 INVESTIGATIONS AND ARRANGEMENTS 410

15 REGISTERS AND STATUTORY BOOKS 425

16 INVESTMENT OF COMPANIES 436

18 MODARABA & MODARABA COMPANY 501

19 NON-BANKING FINANCE COMPANIES 539

20 PAKISTAN STOCK EXCHANGE RULE BOOK 584

21 ANTI MONEY LAUNDERING 659

22 PROFESSIONAL ETHICS 686

23 COMPANY SECRETARY & E-SERVICES 694

24 MEETINGS AND RESOLUTIONS 710

 Detailed learning outcomes. You should assimilate these before beginning

 Step-by-step topic coverage. This is the heart of each chapter, containing

 Examples. Most chapters are illustrated by more practical elements, such as

 Solutions. Avoid the temptation merely to ‘audit’ the solutions provided. It is an

Prepare a written schedule summarizing the above and stick to it.

Tips for effective studying

Chapter Learning Objectives:

3. Association not for profit

4. Definitions & Important Terms

5. Non-Applicability of the Companies

Corporate Governance Business Laws and Ethics (Study Text) 2|Page

“A society or association of persons, in considerable number, interested in a

The term company is interchangeably used for Corporation, Body corporate or

Company law [(Section 2 (1) (18)]

Companies Act further goes on to differentiate a company from a body

(a) a company incorporated under this Act or company law; or

(b) a company incorporated outside Pakistan, or

(i) a co-operative society registered under any law relating to cooperative

Corporate Governance Business Laws and Ethics (Study Text) 3|Page

i.Company Limited by Shares [Section: 2(1)(20)]

ii. Company Limited by Guarantee [Section: 2(1)(19)]

iii. Unlimited Company [Section: 2(1)(71)]

2- ON THE BASIS OF ARTICLES OF ASSOCIATION

a. PRIVATE COMPANY [Section: 2(1)(49)]

(a) restricts the right to transfer its shares;

Corporate Governance Business Laws and Ethics (Study Text) 4|Page

a) limit the maximum number of its members;

So the companies whose securities are allowed to be traded on a stock exchange

ii) Un-Listed Companies

c. SINGLE MEMBER COMPANY: [Section: 2(1)(65)]

It means a company which has only one member.

Corporate Governance Business Laws and Ethics (Study Text) 5|Page

One the basis of composition of shareholding, companies can be classified in any

a. HOLDING COMPANY [Section: 2(1)(37)]

b. SUBSIDIARY COMPANY [Section: 2(1)(68)]

(a) controls the composition of the board; or

Explanation. For the purposes of this clause

(ii) the composition of a company’s board shall be deemed to be controlled by

(iii) the expression “company” includes anybody corporate;

(iv) “layer” in relation to a holding company means its subsidiary or subsidiaries;

Corporate Governance Business Laws and Ethics (Study Text) 6|Page

(a) if a person who is owner or a partner or director of a company or undertaking,