12.

Debentures (Questions) Page 662

Ch # 12: Debentures

Practice Questions for Assessment - Open Book Perspective

Q# Question

Q1* Salam Holdings Limited (SHL) is a listed company which has shareholdings in a
number of companies. The board has referred the following matter to SHL’s Corporate
& Legal Affairs Department (CLAD):
SHL had obtained a loan of Rs. 150 million from a financial institution which was
secured by way of mortgage on company’s fixed assets. The loan has been re-paid in
full but SHL has been unable to have the charge vacated because confirmation of
repayment has not been received from the financial institution. (2.5)

Required:
As the head of Corporate & Legal Affairs Department (CLAD) advise the Board about
the above matter, in the light of the provisions of Companies Act, 2017.

Q2* Details of loans obtained by Al-Hamd Engineering Limited (AHEL) from

commercial banks are as follows:

In August 2013, AHEL defaulted on its loan repayment obligations towards both
banks.It has now been discovered by Alpha Bank Limited that the Bank’s legal adviser
who had been assigned to register the charge had failed to deposit the required
documents, which were duly signed by both the parties, with the Registrar of
Companies. The charge in favour of Beta Bank Limited was duly registered. Under the
provisions of the Companies Act 2017:

(a) Advise Alpha Bank Limited about effect of non-submission of the charge
documents with the registrar and how would it affect its position vis-a-vis Beta Bank
Limited. (05)
(b) Explain whether Alpha Bank Limited can now register the charge with the
Registrar of Companies. (04)

Q3* Mr. Yaqoob is a nominee of Foundation Bank Limited on the Board of Saad Textile Mills
Limited (STML). In a meeting of board of directors of STML, company secretary was
not able to offer satisfactory clarifications in respect of the following matters:
12. Debentures (Questions) Page 663

(a) STML had received a loan of Rs. 1.5 billion from Trust Bank Limited which was
secured by a first mortgage on the company’s fixed assets. The company had
repaid the loan to the extent of Rs. 250 million but did not send any intimation to
the registrar as regards the partial re-payment of the loan. (02)

(b) A foreign currency loan of US $ 75 million was obtained from Apex Bank Limited
which was secured by a first mortgage on company’s fixed assets ranking
paripassu with the charge created in favour of Trust Bank Limited. The foreign
currency loan has been paid in full but the company has not approached the
registrar for vacating the charge because confirmation of repayment has not been
received from Apex Bank Limited. (03)
On behalf of Mr. Yaqoob advise the company in the context of Companies Act 2017.

Q4* Mr. Khan, chief executive of Prosperous Engineering Limited, is assessing the
possibility of setting up a new project in Gwadar in collaboration with a prospective
foreign investor. He is confident that the proposed project will reap significant benefits
to the company. Since he does not wish to dilute his holding and voting rights, he is
planning to issue class B shares to the investor along with 16% TFCs with a floating
charge on the book debts of the company and a fixed charge on its machinery in the
manufacturing department. He wants to have your advice on the issue.
Required: Explain the important characteristics of a fixed charge and floating charge
and their registration requirements. (05)

Q5 The trading business of BR (Private) Limited (BRPL) has been growing significantly
during the last few years. To cater to the needs of its expanding business, it has
arranged a short term loan of Rs. 10 million which will be provided by XYZ Bank
Limited on 1 October 2012 and would be secured by mortgage of factory building of
the company. Entire amount of loan would be repaid on 1 May 2013.
In the context of provisions of the Companies Act 2017 discuss the following:
(a) The responsibilities of BRPL relating to the registration of mortgages and matters
related thereto. (05)
(b) Importance of registering the charge with the registrar of companies. (03 marks)

Q6 P.M Limited (PML) is in the process of raising funds through issuance of debentures to
mass public. This is the very first time when the company is going to raise funds from
general public and is somehow confused about the way in which security shall be
given to the mass public regarding repayment of their principals along with the
markup.
As previously the company was getting the finance from Insaaf Muslim Fund (IMF) and
had always mortgaged some property in the name of that institution to get finance and
accordingly have always registered that with registrar within 30 days of creation of
mortgage to avoid infringement of the Companies Act 2017.
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Therefore the company is facing difficulty in understanding the process to offer a

single property based security to the mass audience. Moreover the registration process
of such a security and involvement of any 3rd party in the process is the biggest chaos
at this time

Required:
You are required to explain the following as per the requirements of the Companies
Act 2017
a) How a single property would be offered as a security to mass public
b) What particulars would be required to be submitted with registrar regarding the
said property
c) Would there be any additional filing with the registrar during the process
d) What are rights of any 3rd party acting on behalf of these debenture holders (09)