Professional Documents
Culture Documents
Compiled by:
Syed Atif Hassan Abidi
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Corporate Laws Made Easy Preface
PREFACE
The Examinations of ICAP are a demanding test of student’s ability to master the wide range of
knowledge and skills required of the modern professionals. Subject of “Corporate Laws” is one of the
efforts made by ICAP in this context for enhancing student’s knowledge about detailed overview of
corporate and other laws & rules prevailing in Pakistan.
The best and most recommended source for this subject are the Bare Laws such as “Companies
Ordinance 1984, Miscellaneous Rules, Regulations, Codes and Sundry Laws”. The basic problems faced
by the students in this subject is the selection of source as the bare laws are sometimes too difficult to
understand or too lengthy to digest & revise at final prep for the ICAP Exam.
For these reasons there arise needs to have some comprehensive and easy notes for this subject. For
this purpose these notes are being prepared using different sources but importantly emphasizing on
the original sources. Following sources are being used in compiling these notes
Now this booklet contains notes of all course contents of Corporate Laws in just 84 pages,
(except Module D portion)
How To use:
It is strongly recommended that first of all you should thoroughly read from the original ordinances,
rules etc. Then you may develop your own notes / short points to have the course contents in your grip
and also its good for revision purposes. You may either consult these notes as guideline for preparation
of your own notes or you may select these notes for your revision, It’s totally upto you.
Syllabus outline by ICAP is the most important thing to ensure completeness which unfortunately is being
ignored by most of the students, hence loosing the grip on the complete course. Therefore the syllabus
outline is provided in these notes as table of contents and all topics are cross referred with that outline.
I have tried to ensure completeness in these notes and where not completed, have referred towards the
best sources available for that data. However human error is expected so if you find anything missing or
some spell / logical mistakes in these notes please mail me about such errors by referring to page no. at
my mail id “aforatif@gmail.com“. In most cases fines & penalties are not incorporated in these notes
Hope these notes could serve you. For notes & other study
material for module E visit
and download mails from
May ALLAH bless all of you with success in every exam of both lives.
E-Mail id:
atifnotes@gmail.com
Please also pray for me
Thanks
Password:
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Syed Atif Hassan Abidi
April 14, 2009 These notes are also
available at
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Corporate Laws Made Easy ICAP Syllabus Outline
Page
ICAP Syllabus Outline
#
MODULE E
PAPER E 16: CORPORATE LAWS (100 marks)
INTRODUCTION
The syllabus aims to provide the knowledge and understanding of corporate and other relevant laws,
rules and regulations and to familiarize with the secretarial practices including the knowledge of
handling various matters usually expected to be performed by the secretary of a corporate entity. Case
studies / scenario based questions in addition to descriptive Questions will be set
in the examination.
The examinees are expected to possess detailed knowledge of the Companies Ordinance 1984 over
and above what they have learnt at the Intermediate stage. Topics examined at the Intermediate stage
may or may not be directly re-examined here, however, examinees would need to utilize knowledge
and skills learnt earlier. The knowledge required for Companies Rules would also be comprehensive
but for other Laws and regulations only general knowledge would suffice.
INDICATIVE GRID
SYLLABUS CONTENT AREA WEIGHTAGE
Note: The weightages given above are for guidance purposes only and deviations in
setting of papers may be expected.
CONTENTS:
1. Areas of the Companies Ordinance, 1984 covered at Module D Examination in Company Law (N-1)
Paper. iv
In the Corporate Laws paper at Final level, students are to have a more in-depth knowledge and
understanding of those parts of the Companies Ordinance, 1984 which were covered in the Company
Law paper at Module D, however, the emphasis of testing at the Final Examination level would be
application of those provisions from a practical viewpoint. Testing would focus on the level of
understanding of those provisions and their application.
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Corporate Laws Made Easy ICAP Syllabus Outline
e. Part XI Winding-up
i) Modes of winding-up, and provisions relating to contributories (sections 297 and 306) 12
i. Part XVI General – legal proceedings, offences etc. (Section 494 and 496) 11
Second Schedule
- Salient features of disclosure requirements for prospectus or statement in lieu of prospectus and
understanding of the reports and certificates to be included in the prospectus.
a. Explanatory provisions only of Companies Rules 1985; knowledge of the contents of the Forms is not 28
expected.
b. Capital Issues – The rules for issue of capital by companies, premium on shares, issue of shares for 36
consideration other than cash and related aspects, covered by the Companies (Issue of Capital) Rules,
1996 and Stock Exchange Rules.
4. Secretarial practices
(N-2)
Floatation of shares and securities including prospectus, offer for sale and convertible securities, stock iv
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exchange listing rules, underwriting, brokerage, etc.; and discount and premium on shares; application
and allotment of shares, issue of share certificates and bonus and right shares and transfer and
transmission of shares of companies, investigation and dividend.
a) Filing requirements, maintenance of statutory books and registers under the Companies Ordinance,
1984.
b) Meetings of shareholders and directors and all proceedings thereto, including notices, agenda,
quorum, voting, poll, proxies, resolutions and minutes.
c) Functions and responsibilities of the Securities and Exchange Commission of Pakistan under the
SECP Act (Act No. XLII of 1997).
Knowledge and application of provisions relating to rules and regulations governing acquisition and
holding of foreign securities, issue, transfer and export of Pakistani securities to non-residents, general
exemption from the restriction on transfer and issue of Pakistani securities to non-residents, procedure
for issue of shares to non-residents, trading of quoted shares by non-residents, and special instructions
regarding shares transferred under the Central Depository System – CDS of the Central Depository
Company.
b) Stock Exchange Listing Rules and Guidelines – especially those relating to secretarial matters, 48
public issue of shares, Code of Corporate Governance and Transfer Pricing. 52
c) Banking Companies Ordinance, 1962 – Sections pertaining to audit and accounts, mainly sections 59
34 to 38 of the Banking Companies Ordinance, 1962.
d) The Central Depositories Act, 1997 and Central Depository Companies (Establishment and 60
Regulation) Rules 1996 – Understanding of provisions relating to 61
- Central Depository System; and
- Effect of the Central Depository on provisions of the Companies Ordinance, 1984 relating to interalia,
sending of notices to members, registration of transfers, payment of dividend, maintenance of register
of members, issue of bonus and right shares and effect on the rights of members.
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Corporate Laws Made Easy ICAP Syllabus Outline
- Fourth Schedule (salient features of matter to be specified in prospectus and reports to be set out
therein)
f) The Insurance Ordinance, 2000 – provisions relating to statutory and special audits and maintenance 67
of accounts, mainly sections 45 to 49, 51 and 52 and the Securities and Exchange Commission
(Insurance) Rules 2002 including regulations and Format accounts. Broad understanding of the Code of
Corporate Governance for listed and unlisted insurance companies.
g) The Securities and Exchange Ordinance 1969 and the Securities and Exchange Rules, 1971 – 68
provisions pertaining to issuance of shares and securities to the general public (mainly section 9 ) and
Insider Trading.
i) Listed Companies (Substantial Acquisition of Voting Shares and Takeover) ordinance, 2002. and 77
Listed Companies (Substantial Acquisition of voting shares and Takeovers) Regulations , 2008
j) Rules and regulations framed by the Federal Government from time to time, as may be specifically
notified by the Institute of Chartered Accountants of Pakistan for inclusion in the syllabus.
Note: Where specific reference to an Act, Ordinance, Rules, Regulations, Guidelines or SRO gazette
notification is given it is to be assumed that it covers any subsequent amendments that may be made
therein from time to time. 57.44
Notes:
N-1. Areas of the Companies Ordinance, 1984 covered at Module D Exam in Company Law Paper.
Should be prepare from the same source as were being prepared in Module D. Some commonly
acceptable standard sources for preparation of Module D course are
9 PAC Book for Module D (Company Law)
9 ATFL (Volume 1)
9 Companies Ordinance 1984 (Section 1 to 262)
This portion involves Practical application of Management & Administration portion of Module D course.
Following sources are very helpful for preparation of this portion
Foot notes of S.A.Salam Ordinance in the portion of Meetings & Administration
Chapters of Meetings & Administration in ATFL. (Vol 1)
ICAP Past Papers
This portion has been taken from Notes of Sir Kashif Adeel available at www.financedoctors.net In these
notes Sir Kashif Adeel have covered Competition Ordinance along with Merger Control &
Leniency Regulations incorporated as & where necessary. We are really thankful to him for such a nice
contribution.
Portion of Syllabus Outline Completeness (Tried to be) ensured in these notes
2.Ordinance 261 onward Maximum as near to original, nearly up to 95% covered
3.Rules 100% Completeness from original sources
5.Other Laws Completed to the extent of Sir Naeem Baig class notes
(except Code of Corp Governance i.e. 100% covered in these notes)
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
SECP may appoint inspectors to investigate and report on affairs of company on:
− Application of Members or Shareholders having 1/10th voting securities.
− Application of persons comprising 1/10th in number of the persons entered in register of members [Co
not having Share Capital]
− Application of Registrar if he called for information or explanation and it was not given or was
unsatisfactory.
− Order of court
− Resolution of company in general meeting.
− Discretion of SECP, if there are circumstances suggesting that:
Power of Inspector
Inspector’s Report
¾ Inspector may (or on direction of SECP shall) make interim reports and on conclusion of investigation
shall make final report to SECP
¾ Such report shall be typed or printed as SECP may direct
¾ SECP shall forward a copy of inspector’s report to:
¾ SECP may forward a copy, on request of and on payment of prescribed fee to:
Members/ Body corporate/ Persons interested in affairs of Company
Persons whose interest as creditor appears to be affected
¾ SECP may send copy to registrar which such directions as think fit.
¾ SECP may get report/any part published itself or may direct Company to do so.
¾ Copy of report shall be admissible in any legal proceedings as evidence of opinion of inspector.
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
Court Orders
If reasons proved after investigation Commission may apply to Court and Court may:
Expenses of Investigation:
If SECP think fit, for finding out relevant facts about any shares, it may impose following restrictions
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
¾ By Written agreement
¾ According to Arbitration Act 1940
¾ On existing or future difference between itself and other company or person
Parties to arbitration may delegate to arbitrator powers to settle any term or determine any matter capable of
being lawfully settled.
If court is satisfied that Compromise/Arrangement cannot work satisfactory, it may (self or on application by
registrar/interested person) make an order of winding up.
Same information required for Trustees of any deed securing issue of debentures, if compromise affects rights
of Debenture holders.
Every director, CE, Managing agent, Trustee for debenture holders shall give to Company
Notice of such matters related to himself necessary for compromise or arrangement
Such further info as requested by Company
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
After the order of transfer, all properties and liabilities stand transferred and removed from charge, if the order
contains so.
Certified copy is filed with registrar within 30 days.
Power and Duty to acquire shares of members dissenting from scheme or contract:
If a scheme of transfer of shares is approved by 9/10th shareholders (holders of shares whose transfer is
involved, other than shares already held by transferee Company at date of offer) within 120 days of offer from
Transferee Company:
Transferee company may give notice to dissenting members within 60 days of its intention to acquire
their shares and
Company will be bound then to acquire shares on same terms and conditions, as given in scheme for
transfer of shares, of approving shareholders.
Dissenting shareholders may apply to court within 30 days of notice.
If court thinks fit, it may direct otherwise.
If court rejects application
a. Order of rejection is to be filed by Transferee Company to Transferor Company
b. Within 30 days (of notice or order whichever is later)
c. Price payable (kept in a separate account in a Schedule bank) will be handed over to transferor
company
d. Instrument of transfer also filed to transferor Company, executed on behalf of shareholders by
any person appointed by trustee
e. Transferee Co shall
Register Transferor Company as holder of those shares
Within 30 days of registration inform dissenting share holders of the fact & receipt
of amount payable to them
Where Transferee Company already holds more than 1/10th shares, above provisions would not apply unless:
¾ Every holder of Transferor Company is offered the same terms. And
¾ The holders, who approve the scheme, shall be 3/4th in majority having 9/10th remaining shares.
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
Prevention of Oppression
Who can apply:
Order of Court:
Power of Court:
1. Court may terminate or modify any agreement between co and any Director including Chief Executive,
Managing Agent or Other officer on terms and conditions as may in the opinion of court are just &
equitable.
2. Court may set aside any transfer/delivery of goods, payment execution or other transaction within 3
months before application, which is deemed in his solvency to be a fraudulent preference.
3. Court may decide any other matter including change in management.
4. Court may on application of any party to the proceedings make interim orders
[Any claim for damages against co would be inadmissible.]
Management by Administrator
Representation to the SECP
If any time creditors having interest of amount not less than 60% of paid up capital represents to SECP that:
SECP may appoint an Administrator within 60 days of receipt of representation to manage the affairs of
company on specified terms
Administrator may be appointed from
Panel maintained by SECP
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
Provisions of winding up
1. A creditor whose Rs. 25,000 or more is due, serves his notice and company within 30 days neither
pays nor secures nor compound for satisfaction of creditor.
2. A suit has been instituted against any member for any sum due from the company/member on behalf of
company and a notice is served to company and company neither pays nor secures within 15 days.
3. Execution issued on a decree obtained in favor of creditor and it returned unsatisfied in whole or in part.
4. If it is proved to the satisfaction of Court
Court shall take into account Prospective and Contingent Liabilities
Contributories:
9 All those liable to contribute for payment of liability, expense of winding up and adjustment of
rights among themselves.
9 If he dies/gets solvent, his heirs/assignees shall be contributories.
Miscellaneous Provisions
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
Miscellaneous provisions:
If Co fails to comply requirements
It shall have no effect on validity of any contract, dealing or transaction entered into by the Company
and liability to be sued
Company can not bring any suit, claim, set-off, counter claim unless all requirements met.
Provisions of Companies Ordinance 1984 relating to name, power of registrar for investigation/inspection
shall apply to this Company.
Where Company intends to cease having place in Pakistan it shall 30 days before ceasing to have place of
business
Intimate to Registrar.
Publish notice of such intention at least in 2 newspapers.
[Obligation of Company to deliver documents shall also cease]
Restriction of going house to house for sale of securities (except offices)
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
If in the opinion of the registrar, any document required or authorized by or under this Ordinance to be filed or
registered with the registrar-
9 contains any matter contrary to law, or does not otherwise comply with the requirements of law;
9 is not complete owing to any defect, error or omission;
9 is insufficiently legible or is written upon paper which is not durable; or
9 is not properly authenticated;
Where the registrar refuses to accept any document for any of the reasons aforesaid
The same shall not be deemed to have been delivered to him in accordance with the provisions of this
Ordinance unless revised document provided in specified time.
The registrar shall communicate his decision in writing to the company.
An order of the SECP shall be final and shall not be called in question before any Court
Liability of directors for allotment of shares for inadequate Consideration ( SEC 494)
Any director, creditor or member of a company may apply to the Court for a declaration that any shares of the
company specified in the application have been allotted for inadequate consideration.
Every director of the company who
1. is a party to making the allotment of such shares
2. had knowledge that the consideration so received by the company was inadequate, or
3. failed to take reasonable steps to ascertain whether such consideration was in fact adequate
Shall be liable, jointly and severally with his co-directors, if found by court after full enquiry into circumstances
of transactions, to make good to the company the following amount
[Consideration to be received – consideration inadequately received]
Penalty for carrying on ultra virus business (SEC 496)
If any business or part of business carried on or any transaction made, by a company is ultra vires of the
company Every person who acted as a director or officer of the company and is responsible for carrying on
such business shall be liable to a fine not exceeding 5,000 rupees and shall also be personally liable for the
liabilities and obligations arising out of such business or transaction.
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
A proceedings in which all affairs of company are wound up, its rights & liabilities ascertained and the
claims of its creditors are paid off out of the proceeds of the assets of the Company including
contributions by its members to necessary extent.
Where any surplus assets are left, the same are distributed to members of company in proportion of
their rights under AOA
Then company is dissolved in compliance with formalities of Company.Ord.1984
Consequences of winding up
Company:
9 Company continues to be a corporate entity with all rights.
9 Only Management & Administration passes to Liquidator.
Shareholders:
9 A new statutory liability comes into existence
9 No transfer or change in shareholdings except with approval of Liquidator.
Creditors:
9 They have to lodge claims with Liquidator and Prove debt (except secured creditor).
9 Cannot file or continue suit against company except with leave of court.
Employees
9 Winding up by court appears to be a notice of termination
They an prove claims/damages in respect of wrongful termination
9 Voluntary winding up does not necessary operates as notice of discharge
Directors
9 Directors/ CE and officers cease to hold office except for the purposes of winding up
9 Committee of inspection or creditors in general meeting may sanction continuance
Properties of company
9 No disposition of properties without leave of court
Modes of winding up
Contributories
“Contributory means every person liable to contribute to the assets of a company in the event of its being
wound up, and include the holder of any shares which are fully paid up; and persons who are deemed to be
contributories or alleged to be a contributory”
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
Liability of contributory accrues on commencement of liability but payable at time specified in calls made on him
for enforcing the liability.
Past and Present members will contribute money to pay all debts, liabilities, expenses of winding up and
adjustment of rights of contributories among themselves with following qualification:
No contribution from past member if member ceases to be a member one year before winding up or
debt was contracted after he ceased to be a member.
Past member will contribute only if court deems it necessary that present members are unable to pay
debt.
For company limited by shares, maximum liability shall be upto amount unpaid on shares.
For company limited by guarantee, maximum liability shall be upto amount undertaken by member.
For company limited by guarantee having share capital, maximum liability shall be amount unpaid on
shares as well as amount undertaken by member.
A sum due to any member in respect of dividend, profit etc. shall not be a debt.
Ordinance not applied where liability of individual is restricted and funds of company liable (e.g. policy
of insurance)
In addition to his liability as ordinary member, such director shall be liable to contribute as if he were a member
of unlimited company provided:
− If he ceased to be a director one year before winding up or if debt was contracted after he ceased
to be a member.
− Contribution will be made only if court deems it necessary subject to Articles.
Death:
1. His legal representative will be liable
2. Deceased’s property if default is made by legal representatives in payment of money
Insolvency:
1. His assignee
2. May be proved against the estate of insolvent.
Winding up:
1. Liquidator.
2. May be proved against assets of body corporate.
______________________________________________________________________________________
Note:
ICAP have specifically excluded following sections from course of Corporate Laws, Module E
Winding up by Court [ 307, 308, 312 to 320, 332, 335, 338, 342 to 345, 351 to 354 ]
Provisions applicable to every mode of winding up [ 408 to 420, 423 to 430, 435 to 442 ]
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
Winding up by Court shall be deemed to commence on presentation of petition for winding up to Court.
Following persons may file petition to court subject to certain conditions mentioned
3. Contributories
If no. of members reduced below minimum numbers (2 or 7).
Shares have been held by him for at-least 6 months during last 18 months.
Minority share holders means shareholders together holding at least 20 % of the share holding
1. If a creditor of lesser of 50,000 or 1% of Paid Up Capital serves a notice at registered office of company
for payment of sum, himself or through agent or legal advisor and within 30 days
9 Company. neither pays the same
9 Nor secures
9 Nor satisfies creditor by compounding it
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
Official liquidator
Court shall maintain a panel of persons form amongst persons specified by SECP
From this panel 1or more OL or Provisional Manager (PM) shall be appointed
Such person with 3 days of communication of order shall inform court of his inability to act so
A person other than panel can be appointed if
1. Court considers it. or
2. On application of creditor whom 60% of issued share capital or more is due
3. Notice of fact sent to Registrar.
Remuneration of OL
In addition to remuneration Court may permit payment of monthly allowance for meeting expenses of
winding up for period of 12 months from date of commencement
Subsequently, remuneration can not be enhanced but may be reduced by court anytime
If OL resigns, removed or otherwise ceases to hold office before conclusion
He shall not be entitled to any remuneration
Remuneration already paid shall be refunded to company
Past acts of OL having defects on appointment or qualification are valid till discovery.
Winding up procedure shall be completed within 1 year. Extension may be granted by court
9 For one month at a time, maximum for six months
9 On ground that any proceedings by or against company are pending in a Superior Court.
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
9 OL shall maintain proper books to make entries or minutes of proceedings, any other prescribed matters
Creditors and contributories can inspect it
Statement of affairs
When:
Within 21 days from the relevant date or time extended by OL, PM, or Court till 45 days.
Relevant date for purpose of this statement of affairs means
o where PM or OL is appointed, its date of appointment or
o where no such appointment is made, the date of winding up order.
Who:
Statement shall be submitted and verified by persons who
¾ Were directors, chief executive or secretary at the relevant date
¾ Have within 1 year of relevant date
9 Been Directors, Chief Executive or Officer
9 Taken part in formation of company
9 Been in employment of company and are capable of giving required information
9 Been in employment of a company which is the officer of the company.
Particulars
1) The assets of company stating separately, Cash in hand, Cash at bank and Negotiable securities
2) Debts and liabilities of company
3) The names, addresses and occupation of the creditors of the company stating separately
o Secured debt (with particulars, value and date of security given)
o Unsecured debt
4) Names, addresses and occupation of debtors and amount likely to be realized from them.
5) Where property of company is in possession of any other person, name of person and place property.
6) Places where company conducted its business in last 6 months from relevant date and name of
incharges there
7) Detail of pending suits or proceedings in which company is a party
8) Any other prescribed information.
On winding up order as soon as possible, after receipt of Statement of Affairs, not later than 30 days or
further 30 days extendable by court shall submit a preliminary report To Court
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
4. Whether in his opinion, further inquiry is desirable to any matter relating to formation, promotion, or
conduct of business
Liquidator’s Account
¾ OL shall present to court an account of his receipts and payments and dealing as liquidator at
prescribed times but not less than twice in a year
¾ Account shall be in prescribed form, made in duplicate & verified by declaration
¾ Court may have such accounts get audited.
¾ 1 copy held with court and other delivered to Registrar along with auditor’s report
¾ Each copy shall be open for inspection by any person on payment of prescribed fees
¾ OL shall send it to every creditor and contributory along with auditor’s report.
OL shall with sanction of court or committee of inspection have following general powers
To institute or defend any suit, action, prosecution or other legal proceedings (civil/criminal) in the name
and on behalf of the company
To carry on business necessary for beneficial winding up.
To sell movable and immovable property of company by Public auction or private contract.
To pay any classes of creditors in full
To compromise or make arrangements with creditors having any type of claim against company
To compromise all calls, debts, liabilities or claim/damages between company and contributories, debtors
or other persons apprehending liabilities and all questions affecting assets or winding up of company
OL shall have following powers subject to any general/special directions of court or committee of inspection
9 OL shall maintain proper books to make entries, or minutes of proceedings, any other prescribed
matters. Creditors and contributories can inspect it.
9 OL shall take property f company in custody from any directors etc, for which he may contract Dist.
Magistrate having jurisdiction over that area
Provisional Manager
At any time after presentation of petition and before Winding up orders, court may appoint a person
eligible for appointment as official liquidator.
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
Court shall give notice to company and provide opportunity to make representation
¾ Court may dispense such notice for reasons to be recorded.
PM shall have same powers as official liquidator
¾ Court may limit and restrict his powers in appointment or subsequent order.
PM shall cease to hold office when order of winding up being made.
Committee of Inspection
Official liquidator shall within 30 days of orders, summon separate meeting of creditors and contributories of
company for determining
9 Whether COI inspection should be appointed to act with official liquidator
9 Who should be its members
Where Winding up order made on ground that company is unable to pay its debts, it is not necessary for
official liquidator to conduct such meeting
If there is a difference between creditors and contributories, court shall decide it
Official liquidator shall, subject to directions of court, distribute surplus funds among
creditors/contributories within 30 days of receipt.
Surplus funds means funds that come in hands of official liquidator after providing
9 Expenses of Winding up
9 Preferential payments
9 Claims against company which are subject matter of adjudication/assessment.
¾ Amount retained for this purpose shall be invested in Khas deposit certificates that shall be
deposited with court and distributions shall be made when claims are settled.
Dissolution of Company
Under following circumstances court shall make an order that the Company be dissolved from date of
order and the company shall be dissolved accordingly
o When affairs of company have been completely wound up
o When court is of the opinion that official liquidator cannot proceed for winding up for want of
funds and assets.
o For any other reason just and reasonable of the case
Dissolution shall not extinguish any right of debt due to company against or from any person.
Copy of order shall be forward to registrar within 15 days of making. Registrar shall make a minute of
dissolution of company.
Court may fix a time within which creditors are to prove their debts/claims or to be excluded from any
distribution made before these debts proved.
Adjust rights of contributories amongst themselves, so distribute any surplus to entitled persons.
When assets are insufficient to satisfy the liability, court may make an order of payment out of assets for
costs, charges and Winding up expenses in such order/priority as court may think fit.
Court may at any time after Winding up order, order any contributory to pay any money due from
him/estate of person whom he represents to company.
In following cases a contributory can setoff any amount, due to him from company, otherwise than as a
member of company
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As soon as may be possible after making a winding up order, court shall settle a list of contributories with
powers of rectify register of members where necessary and shall cause the assets of the company to be
collected and applied in discharge of its liabilities.
Court may dispense with settling list of court where it is not necessary
to make calls
to adjust right of contributories.
Enforcement of Orders
All orders made by court under companies ordinance may be enforced in same manner in which
decree of such court in any suit be enforced.
Such orders for winding up shall be enforceable in any place of Pakistan in the same manner as at
place of jurisdiction.
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
Notice of resolution:
Declaration of solvency:
Directors of company (if more than 3, majority of Directors including Chief Executive) shall at a meeting of
Board of Directors make a declaration, verified by affidavit to the effect that they have made full enquiry and
concluded that
1. Company has no debts or
2. Company is able to pay its debts within 12 months of commencement of winding up.
Company in general meeting shall appoint one or more liquidators to wind up affairs and distribute assets,
receiving
9 Such meeting may fix Remuneration, otherwise it will be same as in winding up by court
On appointment all Powers of Directors, Chief Executives & other officers cease except so far as Company
in general meeting or liquidators allows for
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
If any vacancy occurs by death & resignation or otherwise in office of liquidator, company in general
meeting may fill, subject to arrangement with creditors.
9 Meeting shall be held in manner provided by Co.Ord 1984 or AOA or court may determine
Company shall give notice to registrar within 10 days of appointment, filling vacancy etc
If winding up continues for more than 1 year liquidator shall summon a general meeting of company at
9 End of 1st year of commencement of winding up
9 Within 30 days of extended period, where proceedings are not concluded during 1st year and
extension is granted.
Return of convening meeting, notice, statements shall be filed to Registrar within 10 days.
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
Liquidator of transferor company, with sanction of special resolution of company, may have general or special
authority to
Accept shares or interest in profits of Transferee Company for distribution among members of
Transferor Company
Any dissenting member of transferor company shall apply to liquidator within 7 days for
9 Abstain from carrying resolution into effect
9 Purchase of his interest at price determined by agreement/arbitration
¾ Company shall call a meeting of creditors on or very next day of members’ meeting on which resolution
of winding up was passed.
Notice of both meetings shall be sent together
Notice of creditors meeting shall be advertised in same manner
Appointment of liquidators:
Creditors and company at their respective meetings may nominate a person who has given written
consent to act as liquidator
9 If liquidator not appointed by either of creditor or company, liquidator appointed by other
shall be liquidator.
9 If creditor & company select different persons as liquidator, creditors shall override
company
Company shall within 7 days of nomination by creditors may apply to court for an order directing
9 Person nominated by company shall be liquidator instead of or jointly with nominated by
creditors
9 Any other person to be liquidator (by Court)
On appointment all Powers of Directors, Chief Executives & other officers cease except so far as Company
in general meeting or liquidators allows for
9 Giving notice of resolution to wind up company.
9 Appointment of Liquidator & filing his consent
9 If COI or Creditor(if no COI) may sanction continuation
Creditors at their meeting may appoint a COI containing not more than 5 members
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
Company shall appoint not more than 5 of its members to act as members of COI at meeting for
passing winding up resolution or subsequently
Creditor may refuse all/any of said persons, unless court direct otherwise
o Court may on application by company, appoint other person to act as member in place of those
rejected by creditors
The winding up for which declaration of solvency has been made and delivered to registrar is termed as
“Members Voluntary winding up”, otherwise it would be “Creditor’s voluntary winding up”
Powers of liquidator to accept shares etc as Powers not exercised unless court/COI sanction it
consideration
Final meeting and dissolution Liquidator bound to call meeting of both, and
Person obtaining order shall file same with registrar
within 10 days (not 14 days)
All accounts and statements being placed before meetings of creditors or contributories shall be duly
audited by an auditor.
Auditor’s report shall be annexed to these accounts etc
Auditor shall submit his report within two months of end of period.
Liquidator shall pay debts of company and shall adjust rights of contributories among themselves
Following powers/duties are same as in winding up by court
Distribution of funds
Period of winding up [1 year/ extended period by court]
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
¾ Court may appoint liquidator, he would have same powers/obligations as in winding up by court
¾ Court may remove & appoint new one on application of creditors/contributory/registrar
¾ Remuneration fixed by court as in case of winding up by court
Miscellaneous
Liquidator within 14 days of appointment publish in Official Gazette and deliver notice to registrar
Any arrangement between company, in course of winding up, and creditors shall, subject to appeal within
21 days, be
Binding on Company if sanctioned by special resolution
Binding on creditors if accepted by 3/4th in number & value of creditors
Liquidator may apply to court for public examination of promoters, directors etc
Expenses of winding up including remuneration of liquidator shall be paid in priority of all
Where company is being wound up voluntarily and order is made for winding up by court, court may adopt
all/any of proceedings of voluntary winding up
9 Court may, if think fit, accede wholly/partly for above on conditions as think fit
9 Copy of order staying proceedings of winding up forwarded by company to registrar.
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
Where co has passed resolution for voluntary winding up, court may
Of its own motion or
On application of any person entitled to apply court for winding up
make an order of continuance of voluntary winding up but subject to supervision of court with such
liberty to creditor/contributory etc, & with such conditions as think fit.
9 Court shall appoint an official liquidator who would replace liquidator appointed by company
On application by creditor/contributory/registrar/persons authorized by SECP
9 Liquidator shall, subject to restrictions imposed by courts, exercise all his powers as liquidator of voluntary
winding up without sanction of court
9 Order for winding up under supervision shall not affect duties, obligation etc of liquidator under voluntary
winding up
9 If order for winding up under supervision is made and subsequently order for winding up by court is made,
court may appoint voluntary liquidator as official liquidator
Either provisionally or permanently
Either with or without addition of any other person
Court may in following matters shall have regard to the wishes of creditor or contributories as proved by
sufficient evidence
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Corporate Laws Made Easy Specialised areas of Companies Ordinance 1984
Company being wound up shall continue to be a company for all purposes till its final dissolution
All powers of Co.Ord 1984 shall apply to company mutatis mutandis
In every winding up all debts payable on a contingency and all claims against the company, present or future,
certain or contingent, shall be admissible to prove against company
9 A just estimate being made, if possible, of value of debts/ claims
9 In case of insolvent company: subject to provisions of Co.Ord or law of insolvency
For winding up of insolvent companies, rules & provisions of law of insolvency shall apply
Preferential Payments:
Rent, Rates, and Taxes of Federal Govt., Provincial Govt., or Local authority payable within 12 months
Wages and Salaries payable to employees not exceeding 4 months from the relevant date
Accrued Holiday remuneration and Termination benefits.
Insurance payable as employer (except in case of Reconstruction or Liquidation)
Amount due in respect of compensation for death or disability of employee under Workmen’s
Compensation Act 1923.
Amount due to employees for:
9 Pension fund
9 Provident fund
9 Gratuity fund
9 Other Welfare fund
Expenses of investigation payable.
Avoidance of Transfer:
Supplementary Provisions
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Appointment of Auditor:
Same provisions as applicable to companies not in the process of being wound up, Except
9 All obligations of management with respect to audit vest in liquidator
9 Appointment of auditor made By authority appointing liquidator i.e. (Court, Members, or
Creditors) and same shall fix his Remuneration
Where no auditor is appointed, liquidator shall inform Commission who will appoint.
Note:
The portion of “Provisions applicable to Every Winding up” is highly summarized in these notes, For details of
aforementioned sections and preferential payments, please refer to Companies Ordinance 1984
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Corporate Laws Made Easy Various Rules under Companies Ordinance
These Rules shall be read with relevant sections & provisions of Companies Ordinance 1984. Following table
describes the cross linking (where applicable) between these rules and the relevant sections, of the Companies
Ordinance 1984, to be read together with these rules
Rule Linked with Section Rule Linked with Section Rule Linked with Section
2. Definitions
An application for confirmation of the alteration of any of the provisions of the memorandum of the company
shall be submitted to the SECP by a responsible officer not later than 60 days from the date on which the
special resolution seeking such alteration was passed.
The application shall contain the following information correct as on the day immediately preceding the day of
the passing of the special resolution and signed by a responsible officer, namely:
The following documents correct as on the day immediately preceding the day of the passing of the special
resolution and certified by a responsible officer shall be submitted along with the application, namely:
a. A copy of the memorandum and the articles;
b. A copy of the special resolution;
c. Minutes of the meeting at which the special resolution was adopted;
d. Particulars of dissenting shareholders or creditors together with their objections;
e. A copy of the latest audited balance sheet;
f. Statement in comparative form showing the existing provisions of the memorandum as are proposed to
be altered and the provisions as would appear after the proposed alterations have been made,
indicating the reason for change
g. Pattern of holding of its shares in Form 34;
h. Names and addresses of each of its creditors to whom an amount exceeding 50,000 rupees is due with
the amount mentioned against each along with their consent to the alteration; and
i. Names and addresses of the persons likely to be affected along with their consent to the alteration
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Corporate Laws Made Easy Various Rules under Companies Ordinance
The memorandum and the articles filed for registration to the registrar, shall be properly stamped as required
by the Stamp Act, 1899 (II of 1899), and shall be accompanied by 3 copies duly subscribed and witnessed
along with the specified declaration
The declaration shall be made in Form 1 by a person engaged in the formation of the company who is
1. An advocate, entitled to appear before any High Court in Pakistan or the Supreme Court; or
2. A member of the ICAP or the ICMA practicing in Pakistan;
3. A person named in the articles as a director or other officer of the company.
The registrar may require any person who makes the declaration 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 that objects of company are lawful.
5. Enquiries as to availability of company names for registration under sections 37 and 38.
The promoters of a company desirous of having a company registered, or a responsible officer of a company
intending to change its name, may make an application to the registrar concerned asking for information as to
whether the proposed name is or is not available for adoption, and the registrar shall, furnish the information
ordinarily within 2 days of the receipt of the application.
The promoters or members of an association desirous of obtaining a licence for such association shall make an
application to the SECP in writing duly singed by them or by any person authorized by the association in this
behalf.
SECP on being satisfied that it shall be in the public interest so to do, may grant the license subject to such
conditions as it may deem fit to impose.
Besides others the following conditions shall also be fulfilled and shall be included in MOA
The association shall be formed as a public company;
Payment of remuneration for services or otherwise to its members, whether holding an office in the
company or not, shall be prohibited;
No change in the MOA and the AOA shall be made except with the prior approval of the SECP
The limit of liability of its members shall not be less than a reasonable amount having regard to all the
circumstances of the case
Patronage of any government or authority, express or implied, shall not be claimed unless such
government or authority has signified its consent thereto in writing.
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Corporate Laws Made Easy Various Rules under Companies Ordinance
alteration was passed, make an application in Form 2 to the SECP for its approval.
¾ Any document or additional detail required to be filed or lodged with the SECP or the Registrar under the
Ordinance may be submitted electronically
¾ Any form prescribed under these rules shall be authenticated by the companies by affixing electronic
signature or advanced electronic signature, as defined under the Electronic Transactions Ordinance, 2002,
(LI of 2002).
¾ The filing of electronic documents with the SECP or the registrar, as the case may be, shall be made from
the date of launching of any E-Services Project of the SECP, provided that for a period to be determined by
the SECP from time to time, the submission of documents in paper form shall be permissible.
¾ From date of launching of any E-Services Project, the company shall file any additional document required
to be submitted to the SECP or the registrar under the Ordinance, in a scanned form.
¾ The fee for the filing of documents may be paid through any of the acceptable methods of payment
specified by the SECP from time to time.
¾ The SECP may provide e-service for the electronic filing or lodging of documents required under the
Ordinance to be filed or lodged with the SECP or the registrar.
A copy of or an extract from any document electronically filed or lodged with the SECP or the registrar under
these rules or supplied or issued by the SECP or the registrar shall be admissible in evidence in any
proceedings as of equal validity as the original document.
Where a document is electronically filed or lodged, the SECP or the registrar shall not be liable for any loss or
damage suffered by any person by reason of any error or omission, if such error or omission was made in good
faith and in the ordinary course of the discharge of the duties of the SECP or the registrar or was due to any
defect or breakdown in service or in equipment used for the e-service
13. Verification of copies for purposes of sections 121, 122, 123 and 129.
A copy of every instrument or deed creating or evidencing any charge and required to be filed with the registrar
in shall be verified as follows
Where the instrument or deed relates, whether wholly or partly, to property situate in Pakistan, the copy
shall be verified in same manner as provided in rule 12 above.
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Corporate Laws Made Easy Various Rules under Companies Ordinance
Where the instrument or deed relates solely to property situate outside Pakistan, the copy shall be verified by
an affidavit of a responsible officer of the company, or of a person interested in the mortgage or charge on
behalf of any person other than the company, stating that it is a true copy.
14. Application for extension in the period for holding annual general meeting and laying balance–
sheet, etc., therein under section 158 or 233.
An application for the grant of an extension in the time for holding any AGM (not being first AGM) or laying
before the AGM a balance-sheet and profit and loss account (or in the case of a company not trading for profit,
an income and expenditure account) shall, in the case of a listed company, be submitted to the SECP and, in
any other case, to the registrar concerned not less than 30 days before the last date on which such general
meeting is required to be held
Provided registrar concerned or SECP, may for special reasons to be recorded, entertain an application
submitted less than 30 days before last date on which AGM is required to be held
The company secretary of a single member company shall be a person holding a bachelor degree from a
university recognized by the HEC.
Following shall be particulars of directors and officers, including the CE, managing agent, secretary, chief
accountant, auditors and legal adviser, for the purpose of Register of directors and other officers
Æ For individual, his present name in full, his father’s name, in the case of a married woman or a widow, the
name of her husband or deceased husband, his NIC number and in case of foreign national passport
number, his usual residential address, nationality and, if that nationality is not the nationality of origin,
nationality of origin and his business occupation, if any, and if he holds any other directorship or other office
the particulars of such directorship or office;
Æ For person other than natural person, along with its name and address of registered or principal office, all
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15. Copy of resolution, passed for investment in associates to be filed with SECP and registrar.
A copy of every resolution passed for investment in associates, together with information & documents
specified in Form 30 shall be filed with SECP & registrar concerned in case of a listed company, and with the
registrar concerned in the case of any other company within 14 days from the passing of resolution.
Distribution of bonus shares & allotment of right shares by listed company to existing shareholder either on
basis of his entitlement or on account of purchase of right allotment letters from market shall not constitute
a purchase
Any loss arising out of any transaction in a listed security shall not be set off against the gain arising out of
such security computed in the manner aforesaid:
Amount of brokerage, stamp duty and other expenditure incurred in making the gain may be deducted
subject to production of such documentary evidence in support of expenditure incurred as may be
acceptable to the company.
17. Number of copies of accounts & reports to be filed with SECP, Regsitrar, SE & Shareholders
in case of a listed company, 5 copies of the annual or half-yearly accounts and balance-sheet and other
reports with the registrar concerned & SECP
in case of a public company (not being a listed company), 5 copies of the annual accounts and balance-
sheet and other reports with the registrar concerned
1. Name & address of registered office of the company whose affairs are sought to be investigated;
2. Names and addresses of the applicants, and, in case of a company having a share capital, also total
number of shares of company held by each of them together with amount paid up thereon
3. If company has a share capital, the issued and paid-up capital of the company and the nominal or face
value of the shares or, if the company has no share capital, the total number of its members;
4. Precise & specific reasons for requesting the investigation with particulars of alleged irregularities
5. Whether the applicants agree to give security for payment of the costs of investigation and the ceiling of
the amount up to which they so agree
Such application shall be accompanied by such documentary evidence in support of the reasons for
requesting the investigation and the alleged irregularities as is reasonably open to the applicants
Such application shall be singed by the applicants and shall be verified by their affidavit stating, inter-alia,
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the paragraphs of the application containing statements true to their knowledge and the paragraphs of the
application which contain statements true to the best of their information and belief.
The SECP may, before passing any order on the application, require the applicants or any one or more of
them to produce such further documentary or other evidence as it may consider necessary
For satisfying itself as to the veracity of the allegations made in the application; or
For ascertaining any information which, in the opinion of the SECP, is necessary for enabling it
to pass orders on the application; or
For ascertaining the eligibility of applicants or any number of them to make application.
21. Manner of giving notice to shareholders, dissenting from scheme of amalgamation u/s 289
A notice required to be given by a transferee company to any dissenting shareholder of the transferor company
or to any holders of remaining shares of the transferor company who has not assented to the scheme or
contract shall be given in the manner provided u/s 50 of Ordinance and rule 10 (above)
While making or issuing any offer or issuing any circular containing any recommendation from the directors of
the transferor company to the members of that company to accept such offer, the company shall furnish to
them information specified in form 37 in addition to the statement disclosing steps taken to ensure availability of
necessary cash.
The signature and seal of the public officer or certificate of the Notary Public shall be authenticated by a
Pakistan diplomatic consular or consulate officer and the certificate of the responsible officer mentioned above
shall be singed before a Pakistan diplomatic consular or consulate officer.
23. Certification of translation of documents of Foreign Company required to be filed with registrar and
number of copies of balance sheet, etc., to be filed with registrar u/s 453
5 copies of the balance-sheet and profit and loss account shall be filed with the registrar concerned. The
translation into English or Urdu of documents required to be filed with the registrar shall be certified to be
correct translation of the original in the following manner
Where translation made outside Pakistan, it shall be authenticated by signature & seal, if any, of the
public officer or Notary Public as mentioned in Rule 22:
o Signature or seal of the person certifying be authenticated by Pakistan diplomatic consular or
consulate officer.
Where translation made within Pakistan, it shall be authenticated by affidavit of person having, in
opinion of registrar, an adequate knowledge of the language of original and of English/Urdu
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Corporate Laws Made Easy Various Rules under Companies Ordinance
any proceedings under sub-section (3) of section 476 or sub-section (1) of section 477 or section 484
Provided the written authority entitling person, mentioned in (b) above, shall be furnished to the Federal
government, SECP or the registrar as the case may be, prior to the proceedings
Every application made to the registrar, SECP or Federal Government shall, in addition to complying with other
requirement of Ordinance or rules, be
Duly singed and verified by an affidavit by the applicant indicating complete name and address and, in the
case of a company, signed and verified by an affidavit by a responsible officer of the companyNeatly and
legibly written, typed or printed, setting out precisely the facts, grounds and claims or relief applied for in
serially numbered paragraphs and specifying the relevant provisions of the Ordinance under which action
or relief is applied for;
Accompanied by documents referred to in the application or relied upon and, in the case of an appeal
against any order or decision, by a certified copy of such order or decision;
Accompanied by 1 spare copy, duly signed, dated and verified and accompanied by copies of the
documents as aforesaid
Accompanied by the original bank challan or draft for the fee paid for the application.
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Corporate Laws Made Easy Various Rules under Companies Ordinance
circumstances admit” or under some other similar expression, and it is not practicable for a company to
disclose or provide information as required, the precise reasons as to why it is not practicable / possible to
do so or the circumstances which necessitate deviation from the actual requirements shall be included
instead of the information required to be stated.
33. Mode of furnishing of returns to the SECP.- Any person required by or under any provision of the
Ordinance or these rules to furnish any document, statement, return or report to the 57[SECP] shall deliver it,
either in person or through an agent, against receipt, to the 58[SECP] or send it to the 59[SECP] by registered
post at its Headquarters at Islamabad.
36. Powers of the Federal Government to relax rules.—Where the Federal Government is satisfied that it is
not practicable or necessary to comply with the requirements of rule 22, 23 or 27 it may, for reasons to be
recorded, relax the rule in the such case subject to any conditions deemed fit
However following Forms are important to see as per recommendations of Sir Naeem Baig (CAPS)
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Corporate Laws Made Easy Various Rules under Companies Ordinance
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Corporate Laws Made Easy Various Rules under Companies Ordinance
1. At least 40% share holders undertake to subscribe their portion of right at such premium.
2. The remaining right issue shall be fully under written and the under writers shall give the full
justification of premium in Due Diligence Report.
• The right issue of following shall fully and firmly under written
9 Loss making company or
9 A company whose market share price during preceding 6 months has remained below than
par value,
• Book closure shall be made within 45 days of the announcement of the right issue.
• Payment and renunciation date once announced shall not be extended except under special
circumstances with the permission of respective stock exchange.
• If announcement of bonus and right issue is made simultaneously the resolution of the Board shall
specify whether the bonus shares covered by the announcement qualify for right entitlement.
FREE RESERVES
Free reserves includes any amount which has been set aside out of reserves or other surplus after
adjustment of all intangibles or fictitious assets and is free that it is not retained to meet any specific
liability, diminution in value of asset contingencies and commitments.
Value of assets shall be determined by consulting valuer registered with Pakistan Engineering Council
and is on the penal of atleast two financial institutions as valuer.
Value must be net of depreciation.
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• Size of capital be offered to the public shall be not less than lesser of
¾ 100,000,000 or
¾ 25% of the capital
• No premium shall be charged unless the company has profitable operations of one year.
• In case the premium is charged other formalities regarding premium
9 Offer shall be under written
9 Under writers shall give justification in due diligence report.
9 Full justification of premium shall also be disclosed in offer for sale.
9 Due diligence report forming part of material contracts.
Purchase Price per share may be adjusted by right or bonus shares or similar distribution made out of pre
acquisition reserves.
SECP shall relax these rules for reason to be recorded, if requirements of these rules does’nt seem to
be practicable.
A company having capital not less than 500,000 shall appoint legal advisor
Purpose To advise the company in the performance of its functions and discharge its duties in
accordance with the law
Remuneration The appointment shall be on retainership basis, not less than Rs.1,500 per month
Eligibility
9 No person other than advocate or registered firm of advocates
9 Company shall not appoint an advocate or firm of advocates to be the legal advisor, if at the time of
appointment, the number of companies of which such advocate or firm is legal advisor, will exceed:
• In case of advocate 3
• In case of firm product of 3 and number of partners
If a company contravenes the above provisions the responsible person of the company shall be punishable
with simple imprisonment for a term which may extends to 3 months or fine or both
Legal Formalities
Every company shall obtain certificate from legal advisor once a year that he or they are not engage in more
than 3 companies as legal advisor
The company within 15 days of appointment of legal advisor furnish to the Registrar particulars of legal
advisor (Just like form 29)
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The above ratios shall be disclosed in the explanatory statement annexed with the notice of meeting.
Decision of Purchase
Purchase Procedure
1. A shareholder interested to sell his share to the company in response of the tender notice shall make offer
to sell in writing to the designated branches of the authorized banks providing following information:
2. The company shall take a decision within 10 days of the closing date.
3. In case the offer exceeds the required purchase the acceptance shall be made by the company on pro-rata
basis in lots of 500.
4. The acceptance of the offer shall be communicated to the shareholder within 10 days of the decision.
5. The shareholder whose offer has been accepted shall submit to the bank share certificates along with
verified transfer deed within seven days of the receipt of the acceptance of the company.
• Where the shares are in CDS a confirmation from the CDC about the availability of shares
along with authorization to transfer the shares to the designated bank.
6. In case the company bank (Designated) does not receipt the shares within 7 days the acceptance of the
company shall be deemed to have been revoked.
7. Company shall pay the price of shares purchased within 7 days of the receipt of shares.
Other Formalities
¾ The purchase shall be disclosed in the Balance Sheet as reduction of capital and necessary details
would be provided in the Notes to the Account.
¾ Company shall submit to SECP & Registrar concerned a Return & “Declaration of Solvency” within 30
days of purchase in manner set out in schedule to these rules.
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Corporate Laws Made Easy Various Rules under Companies Ordinance
A company limited by shares may have more than one kind of share capital and may have different classes of
share under each kind. Where a company intends to have different kinds of share capital it shall specifically so
provide in its memorandum & articles.
Dividend
Right shares
Bonus shares
Receiving of notices of meeting and to attend those meetings
Indefinite period
Definite period
Period determined by members from time to time in special resolution
OTHER CONDITIONS
The company has to pass to pass special resolution if it intends to issue different kinds of capital
No company shall issue further capital of any kind except with the approval of SECP
Offer of further capital of any kind shall be made to each existing share holder proportionately without
any discrimination. If any of the existing share holder decline to accept the offer of further capital, the
shares so declined shall be disposed off by the directors in such manner as may be provided in the
articles or special resolution.
If the capital of different kind is offered to general public this fact shall be distinctly mentioned in offering
documents together with respective rights & privileges.
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Permission granted shall be valid for 6 months, or further extension of 3 months on application of promoters
in exceptional circumstances; during this period promoters shall get NBFC incorporated as Public Company
An NBFC seeking permission to undertake Investment advisory or investment management services or
both shall not be eligible for seeking license for any other form of business.
NBFC licensed to carry asset management services shall be eligible to undertake pension fund scheme.
An NBFC seeking permission to undertake Leasing, IFS, HFS or Discounting services or all of these shall
not be eligible for seeking license for any other form of business.
SECP may while granting license, impose such additional conditions as deemed fit by it.
Maintain proper books of account and retain them not less than 10 years; books includes
¾ Journals, cash books & other records
¾ Ledgers reflecting assets, liabilities, income & expenses
¾ Ledgers / comparable records showing securities in portfolio
¾ Record of transactions with banks
¾ Records of meetings of BOD & all relevant committees(audit, investment & credit committees)
¾ Original record of all reports, analysis & memoranda containing Investment advices distributed.
Prepare its accounts according to IAS & technical releases issued by ICAP
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Disclose all the facilities exceeding 20% of its equity in its accounts
Furnish annual audited accounts to SECP within 3 months of close of accounting period
Furnish to SECP quarterly accounts, whether audited or not, within 1 month of close of 1st & 3rd
Quarter and within 2 months of close of 2nd Quarter
Obtain Credit rating & management quality rating, when it becomes eligible for such ratings
¾ Rating be updated at least once in every financial year
¾ Within 1 year of decrease in its rating, from grade specified by SECP, obtain fresh rating
¾ Publish these ratings in its annual & quarterly reports and in advertisements & Brochures
Acquire & maintain membership of relevant association & follow its code, approved by SECP
NBFC engaged in deposit taking shall, within 3 months of close of its financial year, pay to the SECP
an annual monitoring fee as may be specified by SECP by notification in official Gazette
Appoint at least 1/3rd of its directors as independent directors and at least 2 of its directors excluding
CEO shall have relevant experience of at least 5 years in Financial Sector at senior management level
Follow directions issued to protect NBFC against their involvement in money laundering and other
unlawful trades
Opening and closure of bank accounts or account with broker or branches of an NBFC shall be
approved in meeting of BOD after carefully analyzing its merit & Financial impact. Reasons must be
recorded in minutes and such minutes shall be communicated to SECP within 14 days of meeting
Obtain sufficient Insurance coverage on its own/clients benefits against any losses that may incur
due to employee’s fraud or gross negligence.
Make satisfactory arrangements to isolate itself from fluctuation risks associated with foreign
currency obligations & transactions
Appoint a person as internal auditor having minimum 3 years of experience as internal auditor, who is
9 CA
9 ACMA
9 Certified internal auditor
9 Certified Information System auditor
9 Member of recognized foreign accountancy organization
9 M. Com
9 MBA (Finance
9 CA Firm having satisfactory QCR, not being its statutory auditor
Appoint a person as compliance officer to ensure reporting to SECP & compliance with regulations
Appoints its Financial/Chief Accounting Officer having at least 3 years experience who is a:
9 CA
9 ACMA
9 Member of recognized foreign accountancy organization
9 M. Com
9 MBA (Finance)
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Before making any provision an NBFC may avail the benefit of leased assets, or additional collaterals held
against lease, or collaterals held against advances or loans, it can consider the realizable value of
mortgaged or pledged or leased or collaterally held assets for deduction from the outstanding principal
amount of loans or advances or lease against which such assets are leased, mortgaged, pledged or
collaterally held:
The value of the mortgaged, pledged assets, other than Liquid Assets, to be considered for this purpose
shall be the FSV
9 FSV once determined, shall remain valid for 3 years from the date of the valuation during which
period the underlying collateral or leased assets will not be revalued for provisioning purpose.
9 The adjustment factors of 80%, 70% and 50% shall be applied on the value so determined for the
purpose of determining provisioning requirement in 1st, 2nd and 3rd year of valuation, respectively.
9 Thereafter, the assets shall be revalued and the adjustment factor of 50% shall be applied for all
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subsequent years.
9 The FSV of the collateral shall be restricted to fresh revaluation or previous value, whichever is
less.
9 In case of NBFCs, licensed by SECP to undertake housing finance services, FSV once
determined, shall remain valid for a period of 10 years from the date of valuation
[Adjustment factor of 70% shall be applied on the value so determined]
NBFCs shall observe the following criteria for determining the realizable value of mortgaged, pledged,
leased or collaterally held assets, namely:-
a) Only assets having registered mortgage, equitable mortgage (where NOC for creating further
charge has not been issued by NBFC) and pledged or collaterally held assets shall be considered;
b) Assets having pari-passu charge shall be considered on proportionate basis;
c) Hypothecated assets & assets with second / floating charge shall not be considered;
d) Valuations shall be carried out by an independent professional valuer listed on the panel of valuers
maintained by Pakistan Banks Association or Leasing Association of Pakistan;
e) The valuers while assigning any values to the mortgaged, pledged, leased or collaterally held
assets, shall take into account all relevant factors affecting the salability of such assets including
any difficulty in obtaining their possession, their location, their condition and the prevailing
economic conditions in the relevant sector, business or industry;
f) Realizable value of mortgaged, pledged, leased or collaterally held assets determined by the
valuers must take into account the amount that can be realized from the asset if sold in a forced or
distressed sale condition;
g) Valuers shall in their report explain the assumptions, calculations, formula and method adopted in
determination of the realizable values;
h) Valuations shall be conducted at least once in three years: Provided that, except for a Housing
Finance Company, if a valuation is older than three years, a fresh re-valuation shall be done failing
which the valuation shall be taken as nil.
The categories of mortgaged, pledged, leased or collaterally held assets which are considered for valuation
and the discounting factors to be applied shall be as under and no other assets shall be taken into
consideration:
Liquid Assets:
9 Valuation of Liquid Assets shall be determined by NBFC & verified by external auditors.
9 Values of pledged shares of a listed company shall be taken at their market value on balance sheet
date & as per method, if any, specified by ICAP
.
Pledged Stocks:
In the case of pledged stocks of perishable and nonperishable goods,-
9 FSV provided by valuers shall not be more than 6 months old, at each balance sheet date;
9 The goods shall be perfectly pledged;
9 The operation of the godowns shall be in control of the NBFC;
9 Regular and valid insurance and other records should be available; and
In case of perishable goods, the valuers should also give the approximate date when these are
expected to be of no value.
Values of mortgaged, pledged, leased or collaterally held assets determined by valuers shall be subject to
verification by external auditors, who may reject cases of valuation, which in their opinion
9 Do not appear to have been professionally carried out and values determined are unreasonable, or
9 Are not backed by valid documentation of mortgage, pledge, leased or collaterally held asset, and
are not supported by legal opinion wherever required.
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.
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NBFC and Notified Entities Regulations, 2008 Schedule VIII ( Fit & Proper Criteria )
Fit and Proper Criteria” (FPC) in relation to NBFC is applicable on the following persons:
9 Proposed Directors or CE of NBFC shall not assume the charge of their respective offices until their
appointments have been approved by SECP.
9 The application for seeking approval of SECP shall be submitted by the NBFC along with the requisite
information required under Annexure “A” and an Affidavit as specified in Annexure “B”.
9 All persons subject to Fit and Proper Criteria must submit any change in the submitted information
through the company secretary of the NBFC to the SECP.
“Key Executive” means key executives of the NBFC and includes, inter alia, the persons discharging the
following functional responsibilities
9 Any executive, including the chief executive or any officer acting as second to chief executive officer
including chief operating officer or by whatever name called;
9 Chief financial officer, head of accounts or head of finance;
9 Head of internal audit, information technology, credit or risk management, human resource, operations,
marketing, research, treasury, law, company secretary or compliance officer;
9 Investment analyst;
9 Chief Investment Officer
9 Fund manager; and
9 Any other functional responsibility which the SECP may include.
Appointment of Key Executives shall not require prior approval however an NBFC shall ensure at the time of
appointing a Key Executive that such person qualifies the Fit and Proper Criteria.
The fitness & propriety of any person will be assessed taking into account all the relevant factors including but
not limited to the following 4 broad elements: Provided that last 2 elements may not be considered while
assessing the fitness & propriety of promoters and major shareholder of the NBFC.
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2. Financial soundness
Whether such person’s financial statements or record including wealth statements or income tax returns or
assessment orders are available;
Whether the person has been declared by a court of competent jurisdiction as defaulter in repayment of
loan to a financial institution exceeding Rupees one million;
Whether the latest Credit Information Bureau report of the person shows overdue payments or default to a
financial institution;
Whether the person has applied to be adjudicated as an insolvent and his application is pending;
Whether the person is an un-discharged insolvent; and
Whether the person has been declared a defaulter by a stock exchange.
Directors:
Should be individuals having business/mgmt experience of at least 5 years at senior level
Shall have experience and knowledge in any profession such as banking, Collective Investment Scheme,
accounting, law, internal audit or information technology etc;
For CE
Should have a minimum experience of 7-10 years in a senior management position, preferably in the
regulated financial services sector.
Should have demonstrated, through his qualifications and experience, the capacity to successfully
undertake the cognate responsibilities of the position;
For Key Executives
Must be qualified professionals possessing relevant experience and degrees relating to the job/ assignment
4. Conflict of interest
In case of Key Executives, the NBFCs must ensure that no Key Executive shall head more than one functional
area that give rise to conflict of interest within the organization. For example, the departments of audit and
accounts shall not be headed by the same person. Further, a key executive shall not hold directorship in his or
her personal capacity:
¾ In a business concern which is also a client of the NBFC, and
¾ In any other financial institution.
The Fit and Proper Criteria is perpetual in nature and an NBFC shall ensure compliance with the provisions of
Fit and Proper Criteria. And any violations or circumvention of the Fit and Proper Criteria shall be dealt with
under the provisions of the Ordinance
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Eligible Security It means a security which the CDC has declared to be eligible for deposit with CDS
Defaulter Counter It means a separate counter setup by the SE for trading of listed securities who have
committed irregularities in respect of listing regulations.
Listed Security Any Share, Scrip, Debenture, PTC’s, Modaraba Certificates, Musharika Certificates,
TFC’s, Bonds, or such other instrument has the Federal Govt. may by notification
specified and which is accepted for listing on the SE.
Listed Company A company which has listed on the SE. whose securities has listed on the SE and
includes a provisionally listed company.
Credit Information It is department in state Bank that provide information about the loan given to
Bureau (CIB) different companies
• No dealing in the securities of company shall be allowed on the SE either on ready quotations board
or future counter unless the company and the securities have been listed and permission for such
dealing has been granted in accordance with listing regulations.
• The above permission shall be granted upon an application made by the company in prescribe form.
o The SE in granting such permission will consider among other things, sufficiency of public
interest in the company or security.
• Board of SE will be sole authority to grant, refuse or defer such permission.
• Board shall decide permission within 3 months of application
o If refused, the reasons shall be communicated to applicant & SECP within 2 weeks.
o Applicant can reapply after 6 months with fresh application.
• Board may require additional documents other than prescribed
• If not provided, application deemed refused.
Undertaking
No company will be listed unless it is public company and has a minimum capital of Rs. 200 Million.
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Company registered in AJK or in the Northern areas of Pakistan shall be eligible for listing and will be
treated at par with the company registered in Pakistan.
No company shall be listed unless the public issue has been subscribed by not less than 500 applicants.
Company may make public offer of security to be the eligible security in CDS.
The application for shares shall be accepted only through Bankers to the Issue.
The directors shall not participate in the public subscription.
Company shall inform the SE about the subscription receipt with in 3 working days of the closing of the
subscription list.
The company shall take decision about the acceptance of applications within 10 days of the closure of the
subscription list.
9 The company shall refund application money to the unsuccessful applicants within 10 days of
above decision. [ Afterward charges @ 1.5% per month.]
9 In case of over subscription the company shall immediately file ballot register with the SE.
9 The company shall dispatch share certificates to successful applicants in marketable lot within 30
days
9 If the security is eligible security the CDC procedure will be followed.
Company shall consolidate / split, as may be required by security holder in writing, certificates into
marketable lots within 30 days of application.
The company shall verify signature of the share holder within 48 hours of the receipt of application.
The company shall verify signature of the shareholder within 48 hours of the request.
The company shall complete the transfer receipt immediately on receiving the share for transfer.
Prospectus / offer for sale with performa application shall be published atleast in 1 english and urdu
newspaper of Karachi, Lahore & Islamabad between 7 & 30 days of opening of subscription lists.
The company shall give minimum of 21 days notice to the SE prior to the closure of share transfer book for
any purpose.
Company shall issue transfer receipts immediately after receiving shares for transfer
Company shall not charge any transfer fee.
Duration for one time closure [7 days but not exceeding 15 days]
Duration for total closure closures in year [Not exceeding 45 days]
a) The company shall inform SE regarding decision of the directors relating to the announcement of
dividend, bonus issue, right issue, and other entitlement. atleast 21 days before the book closure.
b) Interim dividend warrant shall be dispatch within 45 days from the date of commencement of book
closure.
c) Final dividend warrants shall be dispatch to the shareholder within 45 days from the date of AGM at
which it has approved.
Dividend warrants are dispatched through registered post.
d) The company shall inform the SE as soon as dividend warrants are posted to the share holders.
e) All dividend warrants, in addition to the registered office of the company shall be encashable at
Karachi, Lahore, Hyderabad, Sakkhar, Quetta, Multan, Faisalabad, Islamabad, Rawalpindi and
Peshawar for the period of 3 months from the date of issue.
f) Every company shall send to the SE 300 copies of annual report and interim report as soon as these
are send to the share holders.
a) Company shall hold its AGM within 3 months of close of its financial year.
b) The Modaraba shall hold its ARM (Annual Review Meeting) within 4 months of close of its financial
year.
c) The period holding of AGM may be extended for a period of maximum 60 days with SE approval.
a. SE shall give that approval on production of similar approval from SECP.
b. Fee : 1st month / part => 10,000 2nd month / part => 12,500
d) The company shall obtain prior approval from the SE in respect of time and date of AGM.
e) Company shall furnish copies of minutes of AGM and every EOGM to the SE within 60 days of the
meetings.
f) Company shall furnish a complete list of its shareholders as at 31st December each year, within 30
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days.
Increase in capital
a) Exery listed company shall advice the SE regarding all decisions taken by the BOD for changes in
capital through issuance of right & bonus shares.
b) Company shall issue right letters in marketable lots within 30 days from the date of reopening of share
transfer register.
c) Company shall issue bonus shares within 45 days from the date of reopening of share transfer register.
If the shares of a company are quoted below 50% of the face value for a continues period of 3 years.
If the company has failed to declare dividend or bonus:
If the company has failed to holds its AGM for continues period of 3 years.
If the company has failed to pay annual listing fee for 2 years.
If the company has failed to comply with the listing regulations.
If the company refuse to join CDS.
Company has gone into liquidation, voluntary or by court.
Voluntary De-Listing
A company intending to seek voluntary de-listing shall intimate to the SE immediately regarding
• Intention of the majority shareholders/sponsors to purchase all the shares from other shareholders
with the purpose to de-list the company.
• Reasons of voluntary de-listing
• Minimum price at which the shares are proposed to be purchased.
The minimum purchase price proposed by the sponsors will be the highest of benchmark price based upon
any of the following:
• Current market price
• Average market price (Annual Average)
• Breakup value based historical cost whereas
[ Breakup value = Equity/no. of shares ]
• Earning multiplier approach
Fair value of shares = Estimated Earning x Price Earning Ratio
*Estimated Earning = Average price per share of last 3 years.
*Price Earning Ratio = Market Price per share / EPS
• The maximum price at which the sponsors had purchased shares from the market during the
12 months
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Now SE shall determine the minimum percentage of shares to be purchased by the sponsors to qualify for
de-listing.
9 In case of disagreement of the sponsors on minimum percentage of shares to be purchased. The
sponsors shall file an appeal with the SECP within 10 days of the decision of the SE.
9 The decision of the SECP shall be final and binding.
The sponsors cannot withdraw their offer to purchase their shares if such proposal has been approved by
the company in a general meting by not less than 3/4th majorities through a special resolution.
The SE may for any reasons refuse to accept the proposal of the company.
The copy of the special resolution passed by the company for voluntary de-listing send to SE immediately
alongwith complete list of the shareholders.
Together with the application of de-listing the company shall submit an undertaking from a purchase agent
(who may be commercial bank, investment bank or a member of SE.)
The offer to purchase at the relevant price from the other shareholders shall remain open atleast for a
period of 60 days. The application for voluntary de-listing shall be accompanied with the consent of
purchase agent.
The company after passing special resolution shall convey to all the shareholders the decision of the
majority shareholders through a register post alongwith copy of special resolution. A notice in this regard
shall also be published in two widely circulated news papers including one in Karachi.
On completion of purchase, the company shall submit the following information.
• Total no. of shares issued
• Shares owned by majority shareholders before the offer
• Shares purchased under the offer
• Total shares currently owned by the majority shareholders
• Shares still outstanding with minority shareholders
The sponsors shall continue to remain obliged to purchase the shares still outstanding with the minority
from them at relevant price for a period of 12 months from the expiry of initial pay back period.
The company once de-listed under listing regulation shall not be allowed to re-listing for a period of 5 years.
Transfer Pricing
No listed company shall use a price other than the arm’s length price
9 Except in rare circumstances subject to the approval of the BOD, if it is in the interest of the
company to do so.
Directors shall approve transfer pricing policies for related party transaction.
For each related party, company shall maintain following records:
1. Name of related party;
2. Nature of relationship with related party;
3. Nature of transaction;
4. Amount of transaction;
5. Terms and conditions of transaction, including the amount of consideration received or
given;
6. Basis or method for determining such consideration;
7. Detailed assumption and estimates underlying the transfer price and details of computation
of transfer price; and
8. A statement whether, in management’s opinion, such consideration is an arm’s length
price.
The record of all related party transaction shall also be placed before the Board of Directors at each Board
meeting for formal approval and before the Audit Committee of the company.
9 Transactions not executed as arm’s length shall be separately placed.
The listed companies shall present the record of related party transactions together with all relevant
documents, agreements, calculations and explanations to the statutory auditor for the purposes of the
statutory audit.
All listed companies shall publish and circulate a statement along with their annual reports to setout the
status of their “compliance with the best practices on Transfer Pricing”
All listed companies shall ensure that statement of compliance with the best practices of Transfer Pricing is
reviewed and certified by statutory auditors.
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Board of Directors
Independent director
A director who is not connected with the listed company or its promoters or directors on basis of family
relationship and does not have any other relationship with listed company or its associate or related party.
All listed companies shall encourage effective representation of independent non-executive directors
including directors representing minority interest on the BOD, so that, the board as a group includes core
competence relevant to each listed company.
Minority share holders as a class are facilitated to contest election of directors by obtaining proxies.
a. The company shall annex to the notice of general meting at which director election are to be held, a
statement (by the candidate from the minority share holders who seeks to contest election of the
BOD).
b. This statement shall include the profile of that candidate.
c. Also annex, on request of candidate, an additional copy of proxy form duly filled by the candidate,
and transmit the same to all shareholders.
The directors of the listed company shall also include atleast one independent director representing
institutional equity interest of a banking company, DFI (Development Financial Institute), NBFI (including
modarabas, leasing companies or investment bank), mutual funds or insurance company.
Directors nominated by creditors (sec 182) or Federal govt. or by foreign equity holders shall not be taken
as independent director.
Independent director representing an institutional investor shall be selected by such investors through a
resolution of its BOD and the policy with regards to selection of such person for election on BOD of
investee company shall be disclosed in directors report.
Executive director shall not be more than 75% of the elected directors including chief executive, except
a. Where relaxed by SECP
b. Banking company which is required by prudential regulations not to have more than 25% directors
as paid executive directors.
The directors of listed company at the time of filing of their consent to act as director shall give a declaration
that they are aware of their duties and powers under the relevant clause of Memorandum & Articles of
Association and Listing regulations of SE.
A company shall not have a person a director who is a director of 10 other listed companies.
No person shall be selected as director of listed company if
a. His name not borne on register of National Tax Payers (except: non resident)
b. He has been convicted as defaulter of Banking company, DFI or NBFI.
c. He being a member of SE has been declared as defaulter.
That person or his spouse shall not be engaged in business of stock brokerage,
¾ Unless specifically exempted by SECP
Tenure of Office
3 Years
Any casual vacancy shall be filled by directors within 30 days
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¾ The chairman of the listed company shall preferably be elected from the non-executive directors.
¾ BOD shall clearly define roles and responsibilities of chairman and chief executive, whether or not these
offices are be held by separate individual or same individual
¾ Chairman shall, if present, preside over meetings of BOD.
¾ BOD shall atleast meet once in every quarter of financial year.
¾ Written notices (including agenda) shll be circulated not less than 7 days before
• Except in case of emergency meetings where the period is reduced/waived
¾ The chairman will ensure that the minutes of meeting of the board are properly recorded and circulated to
the directors and officers who entitled to attend meeting not later than 30 days of the meeting unless a
shorter period specified in AOA..
¾ If director of the company is of the view that his dissenting notes have not been appropriately recorded in
the minutes, he may refer to the company secretary to require him to append his dissenting notes with
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minutes of meeting.
• If company secretary fails to do so he may file an objection with the SECP.
The following matters and significant issues shall be placed for information consideration and approval by the
BOD:
Qualification
CFO
• Member of recognized body of professional accountant ; or
• Graduate from recognized university or equivalent having atleast 5 years experience of
financial and corporate affairs of a listed company or a bank or a financial institution.
CS
• Member of recognized body of professional accountants
• Member of recognized body of corporate chartered secretary
• MBA, M.COM, LLB having atleast 5 years of relevant experience
1. The CFO and company secretary shall attend the meeting of BOD and would not be deemed to be
directors and cast vote at the meeting
2. They shall not attend such part of meeting of BOD which involves consideration of agenda items
relating to CFO, CS, CEO or any director.
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• No listed company can circulate its financial unless the CFO and CEO present the financial statement duly
endorsed by their signature for consideration and approval of the directors. The directors after
consideration and approval shall authorize the signing of financial statement for circulation and issuance.
• The company secretary shall furnish a “secretarial compliance certificate” in a prescribed form as part of
annual return filed with the registrar of company to satisfy that secretarial and corporate requirement of the
Companies Ordinance 1984 has been complied with.
The director shall include their statement to the following effect in the director’s report prepared under section
236 of the Companies Ordinance, 1984
9 The financial statement prepared by the management of the listed company, present fairly its state
of affairs the results of operations, cash flow and changes in equity.
9 Proper books of account have been maintained.
9 Appropriate accounting policies have been consistently applied in preparation of financial
statement and accounting estimates are based on reasonable and prudent judgment.
9 International accounting standard as applicable in Pakistan have been followed in preparation of
financial statement and any departure there from have been adequately disclosed.
9 Internal control is sound and effectively implemented.
9 There is no significantly doubt on the ability of company to continue or going concern.
9 There is no material departure from the best practices of the corporate governance.
The following matters shall also be disclosed in the director’s report (if necessary):
¾ If the company is not considered to be going concern the reason shall be disclosed.
¾ Significant deviation from last year operating results along with reasons.
¾ Keep operating and financial data of last 6 years in summarized form.
¾ If the company has no declared dividend or issue bonus shares, the reason shall be given.
¾ Where any statutory payments (Taxes & Duties) are outstanding the reason shall be disclosed.
¾ Significant plans and decisions like corporate restructuring, business expansion and
discontinuance of operations shall be given along with future prospects risks and uncertainty.
¾ Statement on the value of investment of provident fund, gratuity and pension fund shall be
disclosed.
¾ Number of board’s meeting held during the year and attendance by each director shall be
disclosed.
¾ All trade in shares of Company, carried out by its directors, CEO, CFO, Company Secretary and
their spouses & minor children.
¾ The pattern of share holding shall be reported to disclose the aggregate number of shares
(alongwith name wise detail) held by:
o Associated companies and related parties (name wise)
o NIT and ICP (name wise)
o Directors, CEO and their spouses & minor children (name wise)
o Executives; [Employee of company other than CEO & Directors whose
annual basic salary > 500,000]
o Public sector company and corporations (Government owned)
o Banks, DFI, NBFI, insurance companies, modarabas and mutual funds
o Share holders holding 10% or more voting rights
Quarterly unaudited financial statements having directors’ review on affairs of company be published
and circulated within 1 month.
Half yearly statements shall have auditors’ limited review and shall be circulated within 2 months.
Annual reports shall be circulated within 4 months.(Now 3 in Companies Ordinance 1984)
Listed companies shall immediately disseminate information to Stock exchange and SECP which
affects their share price.
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This information may include but shall not be restricted to information regarding a joint venture, merger or
acquisition or loss of any material contract; purchase or sale of significant assets; any unforeseen or
undisclosed impairment of assets due to technological obsolescence, etc.; delay/ loss of production due to
strike, fire, natural calamities, major breakdown, etc.; issue or redemption of any securities; a major change in
borrowings including any default in repayment or rescheduling of loans; and change in directors, Chairman or
CEO of the listed company.
Auditors (partners, spouse, minor children) can not sale, purchaseor hold shares in listed company or its
associate.
If they hold prior to appointment, they will notify in 14 days and will dispose those in 90 days.
Where any director/CEO sells/buys share of its company, he shall notify Company Secretary immediately
and also deliver written record of price, No. of shares/certificates within 4 days to Company Secretary.
This notice shall be presented by company’s secretary at immediate next Board Meeting
If there is default in giving notice by director etc, company’s secretary shall place this matter before
immediate Board meeting.
Every listed company shall determine a closed period prior to announcement of interim/final results and any
business decision which may materially affect share price. No director/CEO/Executive shall deal in shares
of that company whether directly on indirectly, during that closed period.
Every company proposed to be listed at time of public offer shall comply with the requirement as given in
the related listing regulations
According to listing regulation of KSE, company shall offer higher of
i. 250 million or
ii. 25% of share capital.
For companies having share capital < 500 million, atleast 50 % shall be offered
In the event of divestiture of not less than 75% of the total shareholding of a listed company, other than
A divestiture by non-resident shareholderS in favour of other non-resident shareholders; or
A disinvestment through the process of privatization by the Federal or Provincial Government
at a price higher than the market value ruling at the time of divestiture, then…
9 Directors shall allow the transfer of shares after it has been ascertained that an offer in writing has been
made to the minority shareholders for acquisition of their shares at the same price at which the divestiture
of majority shares was contemplated.
9 Where the offer price to minority shareholders is lower than the price offered for acquisition of controlling
interest, such offer price shall be subject to the approval of the SECP
Audit Committee
Composition
9 The director shall establish an audit committee which shall comprise not less than three members including
chairman
9 Majority of members shall be from Non-Executive directors (NED).
9 Chairman of the committee shall be preferably from NED.
9 The names of the members of audit committee shall be given in the annual report.
Frequency of Meetings
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The audit committee shall meet atleast once every quarter of the financial year.
These meetings shall be held
a. Prior to approval of interim results of the company
b. Before and after the completion of external audit.
A meeting of the audit committee shall also be held if requested by external auditor or the head of internal
audit.
Attendance at Meetings
¾ The CFO and the head of internal audit and a representative of external audit shall attend meetings of the
audit committee at which issues relating to the accounts and audit are discussed.
¾ Provided, that atleast once a year the audit committee shall meet alone with the
i. External auditor [without presence of CFO and head of internal audit.]
ii. Head of internal audit [without presence of CFO and external auditor.]
Reporting Procedure
Audit committee shall appoint a secretary who shall circulate the minutes of the meeting to the members of
committee, directors and CFO within the fortnight.
9 The BOD of the company shall determine the terms of reference of audit committee
9 Audit committee shall inter alia (along other things) be responsible for recommending to the BOD, the
appointment of external auditor and shall consider any question of resignation or removal of external
auditor, audit fee and other services by external auditors.
9 The terms of reference also includes the following:
1. Determination of appropriate measures to safe guard company’s assets
2. Review of preliminary announcements of results prior to publication
3. Review of quarterly, half yearly and annual financial statement prior to approval of BOD, focusing on:
• Major judgment areas
• Significant adjustment resulting from the audit
• Going concern assumption
• Changes in accounting policies
• Compliance with applicable accounting standards
• Compliance with listing regulations & other statutory requirement
4. Facilitating the external auditor and discussion with them on their major observations.
5. Review of management letter issued by external auditor and management response thereto.
6. Ensuring coordination between internal and external auditor
7. Review of scope, extent and resources of internal audit function.
8. Consideration of major finding of the internal investigation
9. Ascertaining that the adequacy and affectivity of internal control system including financial and
operational controls and accounting system and reporting structure
10. Monitoring compliance with the best practices of the corporate governance
11. Instituting special projects, value for money studies or other investigations on any matter specified by
BOD in consultation with CEO.
12. Any other matter as may be assigned by the BOD
Internal Auditor
In listed companies, there should be an internal audit function.
Head of internal audit shall have access to the chair of audit committee.
Company shall ensure providence of Internal auditors’ reports for review by external auditors.
Auditors shall discuss any major findings with relation to the reports with audit committee, which shall report
significant matters to BOD.
External Auditor
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No listed company shall appoint as external auditor who is not been given satisfactory rating under the
QCR program of ICAP.
The external auditor shall be compliant with IFAC guidelines on code of ethics as adopted by ICAP.
The BOD shall recommend the appointment of external auditors for one year as suggested by audit
committee. The recommendations shall be included in the director report.
If change of auditor recommended before 3 consecutive years, reasons should be included in
Director’s Report.
No listed company shall appoint external auditor to provide services in addition to audit
Except in accordance with the IFAC guidelines.
All listed company in the financial sector shall change their external auditor every five years.
Financial sector include Banks, NBFCs, Modarbas and Insurance companies.
All listed companies other than these financial sector companies shall at minimum rotate the engagement
partners every 5 years.
No listed company shall appoint as CEO, CFO, Internal auditor or director who was at any time during the
preceding 2 years
a. Partner of the firm of external auditor; or
b. An employee who is involved in the audit of the company; or
c. Close of relation of such partner or employee.
The company shall acquire the external auditor to furnish the management letter to its board of directors
not later than 30 days of audit report.
Every listed company require a partner of the firm of auditor to attend the AGM at which accounts are
approved.
9 The listed company shall publish in the annual reports a “statement of compliance with the best
practice of the code of corporate governance”.
9 This statement shall be reviewed by the external auditors.
9 SECP may relax any of best practices, if it is impracticable to comply, for reasons to be recorded.
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Accounts
9 The provisions of BCO relating to preparation of accounts are applicable to:
Every banking company incorporated in Pakistan
Every banking company incorporated outside Pakistan in respect of business transacted through
branches in Pakistan
9 The accounts are prepared on the expiry of every calendar year
9 The accounts are also published in the prescribed manner in newspaper
9 The accounts shall be signed by
In case of banking company incorporated in Pakistan
Manager or principal officer and atleast 3 directors (if directors < 3, then all)
In case of banking company incorporated outside Pakistan
Manager or principal officer in Pakistan and by another officer next in seniority
9 The requirement of Companies Ordinance, 1984 in respect of preparation, transmission and filling of
accounts etc shall be applicable
Audit
9 B/S and P & L prepared in accordance with provisions of BCO shall be audited by a CA who is borne on
penal of auditors maintained by SBP.
9 Auditors shall hold office for 3 years [cannot be removed before expiry of term except approval by SECP]
9 Accounts & Audit report shall be furnished as returns to SBP within 3 months of close of period to which
they relate. [ further extension of 3 months in special circumstances ]
9 Every banking company incorporated outside Pakistan is required to display at a prominent place in the
principal office and in every branch in Pakistan, copy of latest accounts not later than 1st Monday of
August. These accounts shall remain displayed until replaced by subsequent accounts.
9 Audit is conducted as per direction of SBP
9 3 copies of accounts shall be sent to Registrar
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The CDS is an electronic book entry system to record the transfer of securities.
Central Depository Company (CDC) has implemented it that works similar to a Bank.
Securities be deposited in CDS & transaction be completed electronically, thereby, removing difficulties of
counting, verification, storage & transportation of certificates including settlement on stock exchange
Elements of CDC
¾ Account Holder
¾ Participant (Just like members of Stock Exchange)
¾ Issuer
¾ Eligible pledge
¾ DVP (Delivery Verses Payment) A/c Holder
Account Structure
1. Main Account
Each participant in the CDS is allocated a main Account by virtue of being participant in system. This account is
mainly used as transit account for movement of securities and settlement of deliveries by the participant.
2. House Account
It is used for securities beneficiary owned by the participant
CORPORATE ACTIONS
Meetings
CDS will provide a list of beneficial owners to enable the issuer to issue notices of general meetings under
the Companies Ordinance, 1984.
When shares are in CDS the beneficial owner has to produce original NIC or passport while attending the
meeting.
When proxies are appointed; the form of proxy shall be witnessed and enclosed by attested copies NIC or
passport of the both appointer and the proxy.Form of proxy shall contain CDS A/C # of appointer.
Dividend
The CDC will prepare a list of beneficial owners who are entitled to receive the dividend on the date of book
closure. This list shall contain necessary information like particulars, no. of shares, face value of shares,
gross dividend, income tax, Zakat and net dividend etc.
The company and the issuer or its appointed Registrar will prepare dividend warrant on the basis of above
information and dispatch to beneficial owners.
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Bonus shares
In case of bonus shares the CDC, on receipt of intimation from the company shall increase the holding of each
beneficial owner with the bonus shares.
Right shares
The CDC shall provide list of beneficial owners to the company together with right entitlement.
The company shall prepare letter of right and dispatch to the beneficial owner.
The CDC accounts of beneficial owners shall be credited after subscription of right money.
Renewal of registration.-
¾ The certificate of registration shall be renewable on payment of 100,000 (application in form III).
¾ SECP shall, after making such inquiries and obtaining such further information as consider necessary,
within 30 days of receipt of application, renew the registration of such company for 1 year in form IV.
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Modaraba Means a business in which a person participates with his money and another
with his efforts or skills or both his efforts and skills and includes unit trusts and
mutual funds by whatever name called.
Modaraba Fund Means a fund raised through floatation of Modaraba.
Modaraba Certificate Means a certificate of definite denomination issued to the subscriber of the
modaraba acknowledging receipt of money subscribe by him.
Modaraba Company Means a company engaged in the business of floating and managing modaraba.
Registrar Means the Registrar of modaraba and Modaraba Company appointed by the
Federal Govt. for the purpose of this Ordinance.
Religious Board The Federal Govt. has constituted a religious board which consists of three
members one of whom is chairman and two members are religious scholars and
chairman shall be a person who is to be qualified for a Judge of High Court.
Registration
No company shall operate as Modaraba Company with out registration to Registrar (Modaraba)
• If the company is only engaged in floatation and management of Modaraba, not less than 2.5 million
• If the company is engaged in other business, atleast Rs. 7.5 million of which Rs. 2.5 million must be set
aside for modaraba management.
Registration
A company which is eligible for registration as Modaraba Company may make an application on prescribed
form to registrar. (Form IX)
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3. Documents to be attached
If the Registrar is satisfied that the applicant shall be eligible for registration and it is in the public interest to do
so, it may grant registration.
Types of Modaraba
Specific Purpose Modaraba A modaraba having one specific purpose or objective
Multi Purpose Modaraba A modaraba having more than one specific purpose or objectives
A modaraba may be either for a fixed period or for an indefinite period.
The business objects of modaraba must not be opposed to the injunction of Islam. The Registrar shall not
permit the floatation of modaraba unless the Religious Board has certified in writing that the modaraba is not a
business opposed to the injunction of Islam. The business objects of modaraba are contained in prospectus
and being not a company it has not any MOA & AOA.
Modaraba shall sue and to be sued in its own name but through the modaraba company. The assets and
liabilities of each modaraba shall be separate and distinct from another modaraba and also from the modaraba
company.
Capital of Modaraba
The capital of modaraba shall be called certificate capital. There is no provision in the Modaraba Ordinance for
the minimum capital required, however, modaraba is to be listed on SE it has to follow the Listing Regulations
in this regard. (200 million)
As per Modaraba Rules the modaraba company must subscribe 10% of the modaraba fund, however, through
subsequent guideline the Registrar of modaraba has increase this requirement to 20%.
Further more listing requirement has provided that 30% of the modaraba fund shall subscribe by Modaraba
Company, directors, sponsors, friends and relatives etc.
The modaraba certificates do not carrying any voting rights and these are transferable like share through
transfer deed.
A modaraba company registered under the Modaraba Ordinance can apply to the Registrar for obtaining
permission to floating modaraba. It shall submit an application on prescribe form-I.
Contents of Form-I
• Name and address of Modaraba Company and its registration number
• Name and type of modaraba indicating exact purpose objectives and duration of modaraba
• Description of business operations, organizational set up, plans and prospects along with feasibility
report
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• Details showing how the business and operation shall be conducted and how the operation will no be
opposed to the Principals of Islam
• Amount of modaraba fund to be floated, its division and conditions
• Amount to be subscribe by Modaraba Company and amount to be set aside for modaraba
management
• Form of modaraba certificate [Same as Share Certificate]
The registrar after obtaining a certificate from the Religious Board and after being satisfied that it is in the public
interest shall grant a certificate to the modaraba company authorizing it to float a modaraba.
After getting authorization from Registrar Modaraba the Modaraba Company shall take necessary steps for
listing of Modaraba on SE inviting general public to subscribe to the modaraba certificate. (Listing procedure is
same)
Prospectus of Modaraba
• The disclosure requirement of the prospectus of modaraba are more or less the same as provided in
the Companies Ordinance, 1984, however, the Modaraba Ordinance and Rules prescribe independent
disclosure of the prospectus of Modaraba which are given in the forth schedule to the Modaraba Rules.
• The prospectus is signed by all the directors of Modaraba Company.
• The copy of the prospectus is filed with registrar of Modaraba for registration.
• The business operation of Modaraba are provided in the prospectus which are vetted by the religious
board.
• The Modaraba must be floated within 12 months of the date of authorization.
• A Modaraba Company shall not carry on any business which is carried on by Modaraba floated by it.
• Neither the Modaraba Company nor any of its director/officer shall obtain any loan or advance from
modaraba fund.
• No allotment of modaraba certificate is made unless a prospectus approved by Registrar has been
issued and the minimum subscription has been received.
• All money received from the applicants of modaraba fund shall be deposited in a separate bank
account.
• Modaraba Company shall issue modaraba certificate within 30 days of allotment.
• Modaraba Company shall maintain register of certificate holders.
• Modaraba Company shall maintain separate bank account, fund ,assets and liabilities of each
Modaraba.
The remuneration of Modaraba Company shall be not more than 10% of the annual net profit of the modaraba
on the basis of audited accounts
Accounts
A Modaraba Company is responsible to ensure that proper books of accounts are kept for each Modaraba at
the registered office of the Company.
Modaraba Company shall be responsible to prepare, circulate and file accounts of Modaraba in a prescribe
manner. (Accounts are maintained like listed companies, IAS are applicable, Disclosures are prepared
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Authentication of Accounts
The accounts of Modaraba are authenticated by the chief executive and two directors of the Modaraba
Company.
Audit
Qualification of Auditor
Appointment of Auditor
The appointment of auditor of Modaraba is made by a Modaraba Company with the approval of Registrar. The
auditor of Modaraba shall be independent of the auditor of the Modaraba Company. The terms of appointment
of the auditor of Modaraba and including fee etc. shall be approved by the Registrar annually.
Removal of Auditor
A Modaraba Company seeking to appoint auditor other than the existing auditor, must inform the existing
auditor in writing given reasons of change and copy to Registrar. The Registrar, if he desires and after
obtaining necessary clarifications and explanations from the existing auditor shall take the decision, which shall
be final.
An auditor may resign from his appointment with the approval of Registrar.
A Modaraba may distribute profit in cash or issue of bonus certificates out of capitalize reserves or profit.
Dividend may be interim or final. (Same in case of Companies Ordinance, 1984)
If 90% of profit is distributed to the modaraba certificate holders, the income of the modaraba shall be exempt
from tax. The Modaraba Company before declaring the dividend may set aside necessary reserves to comply
with Prudential Regulation for Modaraba.
Return of Allotment
Whenever the company makes any allotment of modaraba certificates it must file with the Registrar a return of
allotment within one month of allotment.
Every Modaraba Company shall in respect of Modaraba prepares and file with the Registrar a list of certificate
holders & summary in the following manner:
The above list is prepared on the date of reopening of the register of the certificate holders relating to final
dividend and if there is no such date, 31st December of the year.
The list is filed with the Registrar within 30 days of the respective date.
All the charges created on the assets of Modaraba are to be registered with the registrar within 21 days of the
creation of the charge. (procedure is same as in Companies Ordinance, 1984)
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A Modaraba Company may under the authority of a board resolution decide to increase the modaraba fund.
The fund shall be increased after alteration of prospectus with the approval of Registrar.
Before giving approval the registrar at the expense of Modaraba shall issue a notice in news paper for the
proposed increase for knowing the opinion of modaraba certificate holders and others within the period not less
than 14 days.
After getting permission from Registrar Modaraba company shall be authorize to increase the authorize
fund/nominal fund.
• Each Modaraba shall hold an ARM of its certificate holders in the town in which the registered office of
the Modaraba Company is situated.
• The purpose of meeting is to review the performance of Modaraba during the year. It is held within the
4 months of the close of financial year of Modaraba.
• There is no voting right of certificate holders in the meeting.
• For the purpose of notice of the meeting the provision of Companies Ordinance, 1984 is applicable
mutatis mutandis.
Winding up of Modaraba
Circumstances in which Modaraba may be wound up Voluntarily
A Modaraba shall be wound up by the Tribunal on an application made by the Registrar if:
i. In case of voluntary winding up the required declaration has not been filed
ii. In case the registrar has declared that:
iii. The Tribunal of the opinion that it is just and equitable that Modaraba should be wound up.
Misc
On application to Registrar of 10% or more certificate holders of Modarba, there can be an inspection
of modarba or a particular transaction.
A Modarba Company can also be replaced by a new modarba company or by an administrator by
Registrar.
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Every insurer in respect of all insurance business and in case of insurer incorporated outside
Pakistan in respect of insurance business transacted in Pakistan, shall maintain proper books of
accounts
9 A Register of records of policies( with particulars)
9 A Register of records of claims( with particulars)
9 Other books & Records as may be prescribed.
Every Insurer shall furnish a statement of Assets & Liabilities.
The accounts shall be signed in the following manner:
9 Insurer incorporated in Pakistan; Chairman plus 2 directors plus Principal
Officers with names
9 Insurer incorporated outside Pakistan; Principal Officer in Pakistan plus two
directors or closest comparable officer equivalent thereto.
Audit
Every Insurance Compnay shall appoint an auditor who shall be
Approved by SECP to perform audit of Insurance Companies
Authorised by Companies Ordinance 1984 to perform audit of public companies.
• SECP may appoint an auditor (other than company’s) to investigate such accounts, statements
and books as SECP may direct. [Special Audit]
• Audited accounts shall be submitted to SECP within 4 months from end of period.
[Further extension 15 days]
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• Where after listing of the security the SECP or the SE find that
9 The application is deficient in any material respect; or
9 The issuer (Co.) has failed to comply with any prescribed conditions or rules
9 The continued listing of the security would not be in public interest
The SECP/SE may by order require the issuer to correct the deficiency or comply with the prescribed
conditions or may revoke the listing.
INSIDE INFORMATION(15B)
1. Information which has not been made public relating, directly or indirectly, to listed securities or one or
more issuers and which, if it were made public, would be likely to have an effect on the prices of those
listed securities or on the price of related securities;
2. In relation to derivatives on commodities or information which has not been made public, relating, directly or
indirectly, to one or more such derivatives and which are traded in accordance with accepted market
practices on those markets; or
3. In relation to persons responsible for the execution of orders concerning listed securities, information which
is conveyed by a client to such person and related to the client’s pending orders.
INSIDERS(15C)
a) Sponsors, executive officers and directors of an issuer;
b) Sponsors, executive officers, directors and partners of a legal person or unincorporated business
association, in which the issuer holds shares or voting rights, directly or indirectly, of 20% or more;
c) Sponsors, executive officers, directors and partners of a legal person or unincorporated business
association who holds, directly or indirectly, shares or voting rights of 10% or more in an issuer;
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d) Sponsors, executive officers and directors of an organization, that has been engaged in the placement
of listed securities or public offer of securities or issuing and marketing of such securities, who has had
access to insider information during his employment till a period of one year after leaving employment;
e) Any natural person holding, directly or indirectly, 10% or more shares of an issuer;
f) Sponsors, executive officers and directors of credit institutions in which the issuer has an account;
g) Any person obtaining inside information as part of his employment/discharging his usual duties in an
official capacity, or in any other way relating to work performed under contract of employment/
otherwise;
h) Any person obtaining inside information through unlawful means; and
i) A spouse, lineal ascendant or descendant, partner or nominee of any above
SECURITY & EXCHANGE RULES, 1971 not included in these notes. Plz refer to original rules.
These are available at SECP’s site or also can be downloaded from www.canotes.multiply.com under the notes
“Corporate Laws complete course 1 / 2”
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Abuse of dominant position is prohibited. An abuse of dominant position consists of practices which prevent,
restrict, reduce or distort competition in the relevant market.
Examples of such practices include:
a) Limiting production, sale and unreasonable increase in prices or other unfair trading conditions.
b) Charging different prices from different customers for the same goods or services without justification
(price discrimination).
c) Making sale conditional with purchase of other goods or services (tie-ins).
d) Making the conclusion of contract subject to the acceptance of others.
e) Dissimilar conditions for equivalent transactions for different parties (competitive disadvantage).
f) Exit the competitor; prevent new entry and creating monopoly in the market by predatory prices.
g) Boycott, exclude other undertaking from production, distribution or sale of goods or services.
h) Refusal to deal.
An undertaking or an association of undertakings shall not enter into a contract or take a decision for
production, supply, distribution or control of goods or services to prevent, restrict or reduce competition in the
relevant market except when granted exemption under this Ordinance. A contract entered into in contravention
of this section shall be void.
Prohibited agreements include:
a) Fixing prices / imposing restrictive trading conditions for purchase, sale and distribution of goods &
services.
b) Dividing market by territories, volume of sale, purchase or type of goods and services.
c) Fixing quantity of goods for production, sale or means for services.
d) Limiting technical development for production and sales of goods or services.
e) Collusive tendering or bidding for purchase and sale of goods and procurement of services.
f) Applying different conditions for equivalent transactions to different parties.
g) Making conclusion of contract subject to acceptance of others.
EXEMPTIONS TO PROHIBITED AGREEMENTS [5to9]
INDIVIDUAL EXEMPTIONS
When it is granted? If request to CCP for exemption has been made by party to contract; or Practice meets the
criteria for exemption.
Exemption period The exemption shall be for a specified period and may have effect from an earlier date on
which it is granted. The exemption period may be extended in the specified circumstances.
CANCELLATION OF INDIVIDUAL EXEMPTION
When it is cancelled? If the CCP has reasonable grounds that the information was incomplete, false or
misleading or the circumstance has changed upon which the exemption was granted
Consequences and actions CCP may take the following action after a notice in writing:
(i) Cancel the exemption.
(ii) Vary or remove any conditions or obligations.
(iii) Impose additional conditions or obligations.
BLOCK EXEMPTION
Who may grant? CCP
Scope Contracts meeting criteria for individual and block exemption both
When it is cancelled?
• Breach of condition imposed by order.
• Failure to comply with the obligation imposed by order.
• A particular agreement does not meet the criteria for exemption.
Pre-requisites Before making an order the CCP shall:
(i)Publish the details of proposed order for bringing it to the attention of the affected.
(ii) Consider any representation made in this respect.
Retrospective The order may have effect from an earlier date.
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Promoting technical or economic progress allowing consumers a fair share of resulting benefits.
The benefits of that clearly outweigh the adverse effect of absence or lessening of competition.
An undertaking shall NOT enter into the deceptive marketing practices. Deceptive marketing practices shall be
deemed to be continued in following circumstances:
a) Distribution of false/misleading information capable of harming business interests of other undertaking.
b) Distribution of false/misleading information to customers lacking reasonable basis about prices,
character, method or place of production, properties, suitability for use or quality of goods
c) False or misleading comparison of goods in advertising
d) Fraudulent use of another’s trademark, firm name, product labeling or packaging
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fact and objections. The CCP may issue directions to remedy, mitigate or eliminate the effects of merger. The
decision may be placed on website.
COMPLAINTS ABOUT MERGERS
Complainants shall provide following information to the CCP while making the complaints:
Name and address of the complainant;
the relationship between the complainant and the merger parties or merged entity;
a concise explanation of the reasons and details of the complaint, including details of the merger
situation to which the complaint relates, when and how the complainant became aware of the merger
situation, and the relative market positions of the parties named in the complaint;
evidence directly related to the facts set out in the complaint, including appropriate copies of relevant
correspondence, statistics or data which relate to the facts set out in the complaint.
The CCP will consider each complaint on its merits to determine if an investigation is warranted. If the CCP
decides to pursue the complaint, it will seek further information from the merger parties.
The complainant should make clear to CCP if he does not wish to be identified. However, sometimes it is
necessary to reveal information which may identify the source of complaint for effective handling of
complaint. When providing information or documents to the CCP, complainants shall provide a non-
confidential version of complaint & of any other information or documents which complainant may furnish.
The CCP may recognize the importance of complainants voluntarily supplying information and also their
interest in maintaining confidentiality. If the CCP proposes to disclose any of the information over which
confidentiality has been claimed, it may consult the complainant providing the information.
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PROCEDURE
An officer appointed in this behalf shall provide authority of the CCP to the undertaking. The CCP may
authorize a valuer to enter into premises and inspect accounts and documents necessary for his valuation. Any
owner, manager or person present in premises shall provide all facilities and reasonable assistant to the
officer. The authorized officer shall give receipt of documents and computer impounded or retained. The
undertaking shall have right to examine impounded accounts and computer and make an extract or copy
during regular office hours and under supervision.
FORCIBLE ENTRY [35]
If an undertaking refuses an officer of CCP to enter into premises without reasonable cause, an investigating
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officer may enter into premises by force. The order shall be in writing and signed by two members of the CCP.
If an officer exercises his powers which are vexatious, excessive or mala fide intent, such officer shall be
punishable with a fine upto Rs. 500,000 and imprisonment upto one year or both.
When a criminal court passes an order imposing fine, it may order that a sum equal to whole or part of fine
recovered shall be paid to complainant and in case the fine is not recovered, the sum shall be paid out of Fund.
The amount paid shall not prejudice the right of aggrieved person to avail any remedy under any other law.
And awarding compensation in subsequent proceedings in the same matter the court shall take into account
the sum already recovered and paid.
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CONFIDENTIALITY
The CCP shall keep confidential the identity of undertaking coming with the evidence throughout the
proceedings. Immunity granted by CCP shall not affect the right of third parties. Third parties can pursue their
claim in the competent court.
REVOCATION OF LENIENCY
If the CCP finds that the undertaking has given false evidence or failed to comply with the condition upon which
the reduced penalty was impose, it may revoke the leniency and impose penalty at normal rates.
EFFECT OF LENIENCY
Immunity granted by the CCP cannot exclude claims by third parties who may have suffered loss as a result of
the activities in respect of which immunity is granted. Third parties, therefore, shall have the right to pursue the
private claims for damages before the Court.
RECOVERY OF PENALTIES [40]
The CCP may serve notice on concerned person, undertaking, chief executive or director of the undertaking to
pay the said amount within prescribed time. If the penalty is not paid within the prescribed time, the CCP may
recover such amount in any of the following ways:
(a) Attachment of moveable and sale of immoveable property including bank accounts.
(b) Appointment of receiver for management of moveable or immoveable property.
(c) Recovery of the amount as arrears of land revenue through District Revenue Officer.
(d) Require any of the following by notice to deduct and pay the sum specified in notice before specified date:
(i) from whom any money is due or may become due to the undertaking.
(ii) who holds or controls the receipt and disposal of money belonging to undertaking
(iii) who is responsible to pay any sum to the undertaking.
Any bank, receiver, District Revenue Officer or undertaking who has paid any sum to the CCP shall be deemed
to have paid on behalf of the undertaking. A receipt of the CCP shall discharge the liability of such person to
the extent of amount so paid. If a bank, receiver or DRO or undertaking fails to deduct sum specified in the
notice, such person shall be treated as defaulter and money shall be recoverable from him.
APPEALS [41, 42]
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Listed Companies (Substantial Acquisition of Voting Shares & Takeover) Ordinance, 2000
Acquirer Any person who directly and indirectly acquires or has proceeded to acquire voting
shares in the target company, or control of the target company either by himself or
through any person acting in concern.
Control Includes the right to appoint majority of directors or to control management or policy
decisions whether by virtue of shareholding, management right, shareholder agreement
or voting agreement.
Target A listed company whose voting shares or control is directly or indirectly acquired or
Company intended to be acquired.
Public Offer It means public offer for acquisition of voting shares of a target company and includes
any competitive bid.
Offer Period From date of public announcement to closure date of public offer
Public It means public announcement of public offer for acquisition of voting shares and
Announcement includes public announcement of competitive bid.
Persons acting Means a person who cooperates with the acquirer to acquired voting shares or control of
in concern target company.
Manager to the Before making public announcement, acquirer shall appoint a Bank/Financial Institution
offer or member of Stock Exchange to act as so.
Any acquirer who acquires voting shares (taken together with existing shares), which would entitled to
acquires more than 10% voting shares in a listed company shall disclosed the aggregate of his
shareholding to the Stock Exchange.
The above disclosure shall be made within 3 working days of the acquisition.
If he acquires more shares but remain below 25%, he shall not be liable to disclose if additional
acquisition is within 12 months.
9 Before making public announcement the person shall make necessity disclosure to the Target Company
and stock exchange.
9 No acquirer (who has acquired more than 25% but less than 50% of the voting shares or control) shall
acquire additional voting shares or control unless such persons makes a public announcement of the offer.
¾ Provided such acquire shall not be required to make a fresh public announcement of the offer
within period of 12 months from the previous announcement.
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Public announcement
1. The announcement shall be published at least in one Urdu and one English newspaper.
2. The public announcement shall contain prescribed information.
3. Copy of announcement shall be submitted to SECP through manager to the offer atleast 2 days before
issuance.
4. The announcement shall also be sent to all stock exchange where company has registered and to target
company.
5. It shall not contain any misleading information.
Within 2 working days of public announcement, the acquirer shall send to the target company, a copy of
proposed offer letter along with copy to SECP.
The acquirer shall ensure that the offer letter is sent to all the shareholders of Target Company whose
name appear on register of members on date specified in Public Announcement.
Date of acceptance of public offer shall not be later than 60th day from day of Public Announcement.
The acquirers shall complete all the procedures including the payment to shareholders who had accepted
the public offer within 30 days from the date of closure of public offer
The board of directors of Target Company shall not during the offer period:
a. Sell or transfer undertaking of company or any of its subsidiary.
b. Encumber the assets of company or its subsidiary
c. Issue any right or bonus shares
d. Enter into any material contract
The Target company shall furnish to the acquirer a list of its shareholders for sending offer letter.
During the offer period, the board of directors shall not appoint additional directors or fill any casual
vacancy by person representing acquirer.
BOD may, if think fit, give their unbiased comments & recommendations to shareholders on public offer.
Target Company shall facilitate transfer in name of acquirer, the shares.
The acquirer who has acquired 30% of voting shares shall be entitled to the proportionate representation
on the board of directors.
a. The acquirer shall serve a notice to the target company, the copy of which shall be sent to stock
exchange.
b. On receipt of notice, the BOD of Target Company shall cause a Board meeting within 10 days.
c. BOD of Target Company shall fill the casual vacancy created by the resignation of 1 or more
existing directors to accommodate the acquirer.
In case the acquirer does not get proportionate representation on the board of Target Company or the
number of casual vacancies created is not sufficient, he may serve a notice to target company for holding
fresh director’s election and a copy of notice to SECP.
The BOD of Target Company shall hold the election within 30 days of the receipt of above notice.
The BOD so elected shall hold the office during the remainder period of outgoing directors.
Any irregularity in the election of directors may be brought to the notice of SECP within 7 days of
such election.
The SECP may declare the election null & void and order for fresh election under supervision of
SECP.
SECP may appoint inquiry officer to undertake an inquiry for following purposes:
o To inquire into the complaints received from investors holding not less than 10% of the total voting
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power in the Target company regarding any irregularity in substantial acquisition process.
o To inquire suo moto (upon its own knowledge or information) in the best interest of security market
o To ascertain whether the provision of this Ordinance is complied with.
The inquiry officer as soon as possible shall submit a report to SECP
SECP shall communicate the findings to the acquirer, seller the Target Company and manger to the offer.
On receipt of reply from the respective parties, SECP may pass following appropriate directions and take
appropriate measures in the best interest of security market
¾ Directing the persons concern not to further deal in the securities
¾ Prohibiting the concerned person from disposing off the securities acquired in violation of
provisions of this Ordinance.
¾ Directing the concerned person to sell the securities acquired in violation of provisions of this
Ordinance.
¾ Taking any other action.
Penalties
If any person contravenes the provision of this ordinance he may debarred as acquirer for next 3
years.
In case the BOD or management of Target Company contravenes any provision of this Ordinance the
directors, chief executive and company secretary shall stand disqualify to hold such offices in a listed
company for next 2 years.
Fine = Rs.1,000,000 + Rs.10,000 / day for continuing default
“Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2008 not
included in these notes.
Please refer to original sources for these regulations and code These are available at SECP’s site or also can
be downloaded from www.canotes.multiply.com under the notes “Corporate Laws complete course 1 / 2”.
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Foreign currency loan for working capital by Pakistani firms and companies functioning in Pakistan:
Pakistani firms or companies (except banks) can obtain foreign currency loan on:
¾ Non-Repatriable basis
¾ Repatriable basis
Individuals, firms, companies resident in Pakistan, FCC and branches of FCC (except banks) are allowed to
obtain loans from abroad in foreign currency on repatriable basis for any purpose subject to following
conditions:
For Principal:
There is no ceiling on amount of loan.
Repayment period should not be less than 5 years.
Repayment should be made in equal installments.
For Interest:
Interest rate will not exceed LIBOR+1.5%
Interest will be paid in arrears on half yearly or yearly basis.
Borrower shall be free to pay tax at a fixed or floating rate according to above formula.
Payment will be subject to deduction of Pakistani taxes.
Others:
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Security includes shares, stocks, debentures, debenture stocks, govt. securities, deposit, deposit receipts in
respect of deposit of securities and units or sub units of unit trusts but does not include bills of exchange or
promissory notes other than govt. promissory note.
Foreign Security
A security issued elsewhere than in Pakistan and any security which is payable in foreign currency or
elsewhere in Pakistan.
Person resident outside Pakistan (i.e. non-resident)
A foreign national, including a foreign national of indo-pak origin (resident in Pakistan)
A Pakistani holding dual nationality resident in Pakistan
A company registered in Pakistan which is controlled by a person resident outside Pakistan.
Import/Export of Securities:
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Special instructions regarding shares transferred under CDS of Central Depository Companies:
General:
− Special account will be opened at CDC for each non-resident investors.
− There shall be no netting or adjustment and payment/receipt in respect of sales/purchase will be
settled independently.
− Company may export securities to non-resident on Repatriation basis through authorized dealer.
− Authorized dealer may also allow remittance in respect of:
Dividend (net of taxes)
Disinvestment proceeds not exceeding the market value or breakup value
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