Companies Rules

Volume I
Statutes
(Updated up to 5 December 2013)

Securities and Exchange Commission of Pakistan

Companies Rules
Volume I
Statutes
(Updated up to 5 December 2013)

Securities and Exchange Commission of Pakistan

VOLUME I STATUTES
Insurance Act, 1938 (Repealed) Securities and Exchange Ordinance, 1969 Companies (Appointment of Trustees) Act, 1972 (Repealed) Companies (Appointment of Legal Advisors) Act, 1974 Foreign Private Investment (Promotion & Protection) Act, 1976 (Repealed) Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 Companies Ordinance, 1984 Central Depositories Act, 1997 Securities and Exchange Commission of Pakistan Act, 1997 Insurance Ordinance, 2000 Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Ordinance, 2002 Anti-Money Laundering Act 2010 Stock Exchanges (Corporatisation, Demutualisation and Integration) Act, 2012

VOLUME II RULES
Securities and Exchange Rules, 1971 Investment Companies and Investment Advisors Rules, 1971 (Repealed) Companies Profits (Workers Participation) Rules, 1971 Economic Reforms (Acquisition and Compensation) Rules, 1973 (Repealed) Companies (Appointment of Trustees) Rules, 1973 Companies (Appointment of Legal Advisors) Rules, 1975 Modaraba Companies and Modaraba Rules, 1981

Corporate Law Authority Rules, 1984 (Repealed) Companies (General Provisions and Forms) Rules, 1985 Forms Companies (Invitation and Acceptance of Deposits) Rules, 1987 Companies (Management by Administrator) Rules, 1993 Credit Rating Companies Rules, 1995 Asset Management Companies Rules, 1995 (Repealed) Companies (Issue of Share Capital) Rules, 1996 Venture Capital Companies and Fund Managers Rules, 1995 (Repealed) Employees Provident Fund (Investment in Listed Securities) Rules, 1996 Companies (Issue of Capital) Rules, 1996 Central Depository Companies (Establishment and Regulation) Rules, 1996 Companies (Court) Rules, 1997 Companies (Audit of Cost Accounts) Rules, 1998 Companies (Rehabilitation of Sick Industrial Units) Rules, 1999 Companies (Buy-back of Shares) Rules, 1999 Companies (Asset-Backed Securitization) Rules, 1999

VOLUME III
Companies' Share Capital (Variation in Rights and Privileges) Rules, 2000 Leasing Companies (Establishment and Regulation) Rules, 2000 (Repealed) Members' Agents and Traders (Eligibility Standards) Rules, 2001 Stock Exchange Members (Inspection of Books and Record) Rules, 2001 Public Companies (Employees Stock Option Scheme) Rules, 2001 Brokers and Agents Registration Rules, 2001 Balloters Transfer Agents and Underwriters Rules, 2001 Insurance Rules, 2002

Non-Banking Financial Companies (Establishment and Regulation) Rules, 2003 SECP (Appellate Bench Procedure) Rules, 2003 Single Member Companies Rules, 2003 Margin Trading Rules, 2004 (Repealed) Commodity Exchange and Futures Contract Rules, 2005 Voluntary Pension System Rules, 2005 Clearing Houses (Registration and Regulation) Rules, 2005 Takaful Rules, 2005 (Repealed) Anti Money Laundering Rules, 2008 Securities (Leveraged Markets and Pledging) Rules, 2011 Takaful Rules, 2012 Public Sector Companies (Corporate Governance) Rules, 2013 Microinsurance Rules, 2013

VOLUME IV REGULATIONS
Securities and Exchange Policy Board (Conduct of Business) Regulations, 2000 Regulations for the Karachi Stock Exchange, 2001 Code of Corporate Governance, 2002 Companies (Registration Offices) Regulations, 2003 Prudential Regulations for Modarabas, 2004 Regulations Governing System Audit of Brokers of Exchanges, 2004 Real Estate Investment Trust Regulations, 2008 Private Equity and Venture Capital Fund Regulations, 2008 Private Equity & Venture Capital Fund Regulations, 2008 - Forms and Schedules Group Companies Registration Regulations, 2008 Anti-Money Laundering Regulations, 2008

NBFCs and Notified Entities Regulations, 2008 Prudential Regulations for NBFCs undertaking the Business of Leasing only Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2008 Code of Corporate Governance, 2012 Debt Securities Trustee Regulations, 2012 Insurance Accounting Regulations, 2012 Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2012 Third Party Administrators for Health Insurance Regulations, 2013 Centralised Information Sharing Solution for Life Insurance Industry Regulations, 2013

VOLUME V GUIDELINES
Guidelines for Issue of Certificates of Musharika for Modarabas, 1994 Listed Companies (Prohibition of Insider Trading) Guidelines, 2001 Guidelines for Preparation of Prospectus, 2002 Equity Issues (Checklist of Documents for Approval of Prospectus or Offer for Sale Document), 2002 Guidelines for Appointment on the Board of Directors of the Stock Exchanges, 2002 Term Finance Certificates (TFCs) Issues (Checklist of Documents for Approval of Prospectus, 2002 Guidelines for the Issue of TFCs to General Public, 2002 Guidelines on Issue of Shares at Discount, 2004 Internet Trading Guidelines, 2005 Guidelines for Issue of Commercial Paper, 2006 Guidelines for Bancassurance, 2010 Corporate Social Responsibility Voluntary Guidelines, 2013 Guidelines on Quarterly Accounts

ORDERS
Vegetable Ghee and Cooking Oil Companies (Cost Accounting Records) Order, 1990 Cement Industry (Cost Accounting Records) Order, 1994 Sugar Industry (Cost Accounting Records) Order, 2001 Companies Cost Accounting Records (General Order), 2008 Companies (Corporate Social Responsibility) General Order, 2009 Fertilizer Industry (Cost Accounting Records) Order, 2011 Chemical Fertilizer Industry (Cost Accounting Records) Order, 2012 Synthetic and Rayon Companies (Cost Accounting Records) Order, 2012 Electric Power Generation Industry (Cost Accounting Records) Order, 2012 Pharmaceutical Industry (Cost Accounting Records) Order, 2013

DIRECTIVES
Feb 17, 2005 - Directive under the Credit Rating Companies Rules, 1995 Feb 7, 2003 - Directive to Brokers on Conduct of Business 2003 Jul 18, 2002 - Directive to Brokers or Brokerage Firms or Incorporated Brokerage House Regd. under the Broker & Agents Registration Rules 2001

GUIDE SERIES
A Guide on Accounts and Accounting Reference Dates Change in Company Objects Change of Company Name Availability of Name Guide Conversion of Status of Companies Directors and Secretaries Guide Filing of Statutory Returns Foreign Companies Guide

Appointment of Statutory Auditors and Ancillary Matters Listing of Companies through Initial Public Offerings Obtaining license by an Association not for profit Further Issue of Shares otherwise than Rights Issue of Preference Shares Making Alteration in Memorandum of Association under Section 21 of Companies Ordinance, 1984 Incorporation of Company Information and Procedures Investigation into the Affairs of a Company Company Mortgages and Charges List of sensitive/prohibited words Promoters Guide Modaraba Promoters Guide Shareholders Rights Single Member Company Guide (in Urdu) Winding up / Dissolution of Companies

VOLUME VI FORMS AND APPLICATIONS Forms [See under Companies (General Provisions and Forms) Rules, 1985] Applications
Application for Availability of Name Application for File Inspection Application for Refund of Fee Application for Issuance of Certified To Be True Copy Application for Availability of Name Application for File Inspection

Application for Refund of Fee Application for Issuance of Certified To Be True Copy

NOTIFICATIONS (selected)
S.R.O. 282(I)/1986 Company Names Abbreviations and Urdu Equivalents S.R.O. 865(I)/2005 IFAS 1 Murabaha S.R.O. 431(I)/2007 IFAS 2 Ijarah S.R.O. 640(I)/2011 Maintenance of Website S.R.O. 289(I)/2011 Form of Statement in Lieu of Prospectus S.R.O. 23(I)/2012 Accounting and Financial Reporting Standards for Medium Sized Enterprises and Small Sized Enterprises S.R.O. 25(I)/2012 Maintenance of Website by Listed Companies S.R.O. 320(I)/2012 Amendments in Sixth Schedule to the Companies Ordinance, 1984 S.R.O. 753(I)/2012 Amendments in First Schedule Table A to the Companies Ordinance, 1984 S.R.O. 1354(I)/2012 Delegation of Powers of Commission S.R.O. 130(I)/2013 Recovery of Gain S.R.O. 182(I)/2013 Amendments in Fifth Schedule to the Companies Ordinance, 1984 S.R.O. 183(I)/2013 Amendments in Fourth Schedule to the Companies Ordinance, 1984 S.R.O. 194(I)/2013 Amendments in First Schedule Table A and C to Companies Ordinance, 1984 S.R.O. 210(I)/2013 Amendments in Companies (Registration Offices) Regulations, 2003 S.R.O. 211(I)/2013 eService of SECP S.R.O. 387(I)/2013 Delegation of Powers of Commission S.R.O. 479(I)/2013 Amendments in Public Sector Companies (Corporate Governance) Rules, 2013 S.R.O. 571(I)/2013 IFAS 3 Profit and Loss Sharing on Deposits S.R.O. 677(I)/2013 Amendments Public Sector Companies (Corporate Governance) Rules, 2013

CIRCULARS (selected)
Circular 8/2001 Companies Regularisation Scheme

Circular 1/2002 Adoption of International Accounting Standards 22, 36 and 39 Circular 2/2002 Companies Regularisation Scheme Circular 3/2002 Adoption of International Accounting Standards 40 Circular 4/2002 Adoption of International Accounting Standards 22, 36 and 39 Circular 15/2002 Transfer off Regulatory Supervision of Non-Banking Financial Institutions and Submission of Periodical Returns/Statements Circular 16/2002 Submission of Quarterly Accounts by Listed Companies Circular 17/2002 Information on Current Credit Rating and COIs/CODs being maintained by NBFCs Circular 18/2002 Submission of Quarterly Accounts by Listed Companies Circular 19/2002 - Appointment of External Auditors by the Listed Companies Circular 1/2003 Appointment of Sole Proprietor Chartered Accountants as Auditor by Business Name Circular 2/2003 International Accounting Standard 40 Investment Property Circular 7/2003 Appointment of Directors/Chief Executive in the Modaraba Companies Circular 8/2003 Checklist for Appointment of Directors Circular 9/2003 Preparation and Transmission of Second Quarterly Accounts by the Listed Companies Circular 10/2003 Fresh License(s) to be obtained by Existing Companies in terms of Section 282C of the Companies Ordinance, 1984 for Business(es) being carried out by existing NBFCs Circular 12/2003 Fresh License(s) to be obtained by Existing Companies In terms of Section 282C of the Companies Ordinance, 1984 Circular 13/2003 Maintenance of Website by the Listed Companies Circular 15/2003 Appointment of Whole Time Company Secretary Circular 18/2003 Rules of Business for NBFIs and Submission of Periodic Returns/Statements Circular 19/2003 Applicability of IAS 39 and IAS 40 to NBFCs providing investment finance services (Investment Banks), discounting services and housing finance services Circular 24/2003 Assets provided on Lease/loan basis to the Employees (Excluding CEO and Directors) Circular 25/2003 Use of word Bank or any of its derivatives Circular 26/2003 Circular No. 26 of 2003

Circular 29/2003 Corporate Agriculture Farming (CAF) Policy Circular 30/2003 Attendance of Directors in the Board Meetings through Video Conferencing Circular 6/2004 Appointment of Sole Proprietor Chartered Accountants as Auditors by Business Name Circular 7/2004 Authentication of Statutory Returns Circular 8/2004 Compliance with IAS 12 (Revised) Circular 3/2005 Holding of Election of Directors Pursuant to Companies (Amendment) Ordinance 2002 Circular 6/2005 Conditions for Issuance of Foreign Currency Certificate of Deposits (CODs) and Certificate of Investment (COIs) Circular 8/2005 Investment Policy under Rule 24(3) and Prescribed Allocation Policy for Selection by the Individual Participants under Rule 14(3) & 14(4) of the Voluntary Pension System Rules 2005 Circular 10/2005 Application(s) made under the NBFCs (Establishment and Regulation) Rules, 2003 and the Prudential Regulations for NBFCs Circular 11/2005 Rating of NBFCs and Collective Investment Scheme(s) managed by NBFCs Circular 12/2005 Appointment as a Director on the Board of an NBFC Circular 13/2005 Exemption from Requirements of Clause 3C of Part II of Fourth Schedule to the Companies Ordinance, 1984 Circular 15/2005 Sale of Assets by NBFCs to its Employees Circular 17/2005 Violation of Section 143 of the Companies Ordinance, 1984 by mentioning Incomplete Name Circular 18/2005 Attendance of Directors in the Board Meetings through Tele-Video Conferencing Circular 19/2005 Regulation for Housing Finance Applicable to Individual Borrowers Circular 24/2005 Rotation of External Auditors by Insurance Organizations Circular 3/2006 Holding of Election of Directors Circular 1/2008 Publication of Notices etc in Urdu Newspaper Circular 11/2008 Revision of Fourth and Fifth Schedules to the Companies Ordinance, 1984 Circular 16/2008 Submission of Daily Statement of Assets and Liabilities Circular 3/2009 Available for Sale Investment

Circular 14/2010 United Nations 1267 Committee's Consolidated List of Individuals and Entities regarding Freezing of Funds and Other Resources Circular 14/2010 Amendments dated September 8, 2010 Circular 14/2010 Amendments dated November 2, 2010 Circular 14/2010 Amendments dated December 22, 2010 Circular 15/2010 Related Party Assets Circular 16/2010 Categorization of Open-End Collective Investment Schemes Circular 17/2010 Notice Period for Holding Extraordinary General Meeting to pass Resolution for Filing Application under Companies Easy Exit System (CEES) Circular 18/2010 Additional Condition to the Modaraba Authorization Certificate Circular 21/2010 Clarification on Clause 3(ii) of Part II of the Third Schedule to the Modaraba Companies and Modaraba Rules, 1981 Circular 22/2010 Revised Second Schedule to Modaraba Companies and Modaraba Rules, 1981 Circular 26/2010 Application for Refund of Fees received under Sixth Schedule to the Companies Ordinance, 1984 Circular 28/2010 Application for Refund of Fees received under Sixth Schedule to the Companies Ordinance, 1984 Circular 3/2011 Amendments in Circular 36 of 2009 dated December 10, 2009 Investment and Allocation Policies for Pension Funds Authorized under the VPS Rules, 2005 Circular 4/2011 Categorization of Open-End Collective Investment Schemes Circular 5/2011 Appointment of a Member of the Religious Board by the Federal Government under Section 9 of Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 Circular 6/2011 Withdrawal of Circular 20/2010 dated 30 July 2010 Circular 7/2011 Maximum Management Expense Limits for Life Insurers under Sections 22(9) and 23(9) of the Insurance Ordinance, 2000 Circular 10/2011 Constitution of Modaraba Tribunal-II, Karachi under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 Circular 11/2011 Sharing of Costs of Insurance Ombudsman's Secretariat by Insurance/Takaful Companies Circular 12/2011 Conditions for Grant of License to Associations not for Profit under Section 42 of the Companies Ordinance, 1984 Circular 14/2011 Meetings of the Board of Directors (Abroad)

Circular 15/2011 Additional Condition to the Modaraba Authorization Certificate Circular 17/2011 Annual Supervision Fee for 2012 Circular 18/2011 Product Information on websites Circular 19/2011 Legal Duties of Agents Circular 1/2012 Reporting of Suspicious Transaction Reports (STR) Currency Transaction Reports (CTR) to FMU under Anti Money Laundering (AML) Act, 2010 Circular 2/2012 Conditions for Grant of License to Associations not for Profit under Section 42 of the Companies Ordinance, 1984 Circular 3/2012 Product Publicity Information Circular 4/2012 S.R.O. 16(I)/2012 dated 9 January, 2012 Amendments in the Securities and Exchange Commission [Insurance) Rules, 2002 Circular 5/2012 S.R.O. 29(I)/2012 dated 13 January 2012 Takaful Rules, 2012 Circular 7/2012 Enlistment/Categorisation of Auditors on the Approved List pursuant to Section 48(1) of the Insurance Ordinance, 2000 Circular 08/2012 Shariah Compliance and Shariah Audit Mechanism (SCSAM) for Modarabas Circular 9/2012 Term of Office of Directors Circular 10/2012 Transmission of Notice of Annual General Meetings (AGM) and Extra-Ordinary General Meetings (EOGM) through Electronic Medium Circular 11/2012 Enlistment/Categorisation of Auditors on the Approved List pursuant to Section 48(1) of the Insurance Ordinance, 2000 Circular 12/2012 Launching of Fast Track Registration Services (FTRS) Circular 13/2012 Approval of Short Term Ijarah (Lease) Agreement Circular 14/2012 Launch of Inter-CRO Electronic Inspection Service Circular 15/2012 Minimum Requirement for Exchange Traded Funds to be managed by Asset Management Companies Circular 16/2012 Circular No. 16 of 2012 Circular 17/2012 Additional Disclosures for Workers Welfare Fund (WWF) Liability for Collective Investment Schemes Circular 18/2012 Dividend Mandate under Section 250 of the Companies Ordinance, 1984 Circular 19/2012 Procedure for Convening Meeting of the Unitholders of Open-End and CloseEnd Collective Investment Schemes

Circular 20/2012 Reporting of STRs/CTRs to FMU under the AML Act, 2010 Circular Restriction on sharing of management fee by Asset Management Companies with Unitholders Circular 21/2012 Filing of Returns through Insurance Companies Return Submission (ICRS) System Circular 22/2012 Relaunching of Companies Regularisation Scheme (CRS) Circular 23/2012 Relaunching of CEES Circular 31/2012 Extension in time period of CRS and CEES Circular 36/2012 Circular No. 36 of 2012 Circular 37/2012 New Insurance Accounting Regulations 2012; and Amendments in the SEC (Insurance) Rules, 2002 Circular 39/2012 Clarification on Circular 14/2011 regarding Meetings of Board of Directors (Abroad) Circular 40/2012 Extension in Time Period of CRS and CEES Circular 41/2012 Annual Supervision Fee for the year 2013 Circular 42/2012 Filing of Monthly Returns through Specialised Companies Return System (SCRS) Circular SECP registered 274 companies in August 2012 Circular 1/2013 Rate of Return Assumptions for Life Insurance and Family Takaful Illustrations Circular 2/2013 Training of Insurance Agents Circular 2 of 2/2013 Clarification on the Circular No.2 of 2013 on Training of Insurance Agents Circular 3/2013 Launching eSInsuranceSurveyors: Online Surveyors Licensing and Registration System Circular 5/2013 Examination or Test for Grant of Registration as Authorized Surveying Officer Circular 6/2013 Amendments in Circular No. 36 of 2009 dated December 10, 2009 Investment and Allocation Polices for the Pension Funds Authorized under the VPS Rules, 2005 Circular 7/2013 Clarification on Filing of Revised Annual Audited Accounts by Non-Listed Companies Circular 9/2013 Categorization of Open-End Collective Investment Schemes Circular 11/2013 Amendment to Circular No. 9 of 2005 on Group Insurance Premium Rates Circular 12/2013 Publication of Public Announcements

Circular 13/2013 Clarification regarding Circular No. 36 of 2009 dated December 10, 2009 Circular 17/2013 Mortality Rates as a Part of the Minimum Valuation Basis for the Determination of Minimum Actuarial Reserves for Policyholders Liabilities Circular 18/2013 Draft Bancassurance Regulations, 2013 Circular 19/2013 Appointment of Qualified Auditors Circular 20/2013 Maximum Management Expense Limits for Life Insurers Circular 21/2013 Life Insurance Product Submission Requirements

THE INSURANCE ACT, 1938 ACT NO. IV OF 1938 [26th February, 1938] An Act to consolidate and amend the law relating to the business of insurance. WHEREAS it is expedient to consolidate and amend the law relating to the business of insurance ; It is hereby enacted as follows : -

PART I

PRELIMINARY

1.-(1) This Act may be called the Insurance Act, 1938. (2) It extends to the whole of Pakistan. (3) It shall come into force on such date 3 as the Central Government may, by notification in the official Gazette, appoint in this behalf.

2. In this Act, unless there is anything repugnant in the subject or context,(1) "actuary" means an actuary possessing such qualifications as may be prescribed (3) "approved securities" means Government securities, and any other security charged on the revenues of the Central Government or of a Provincial Government, or guaranteed fully as regards principal and interest by the Central Government or a Provincial Government ; and any debenture or other security for money issued under the authority of any Act of the Central Legislature or any Provincial Legislature by or on behalf of the trustees of the port of Karachi and any security issued by the Government of an Acceding State or a non-Acceding State and specified as an approved security for the purposes of this Act by the Central Government by notification in the official Gazette ; (3A) "approved investments" means such investments as the Central Government may, by notification in the official Gazette, specify as approved investments for the purposes of this Act ; (4) "auditor" means a person qualified under the provisions of section 144 of the Companies Act, 1913, to act as an auditor of companies ; (5) "certified" in relation to any copy or translation of a document required to be furnished by or on behalf of 9[an insurer or a provident society as defined in Part III

means certified by a principal officer of to such insurer or provident society to be a true copy or a correct translation, as the case may be ; (5A) "company" has the meaning assigned to it in clause (2) of section 2 of the Companies Act, 1913 ; (5B) "Controller of Insurance" or "Controller" means the officer appointed by the Central Government to perform the duties of the Controller of Insurance under this Act; (6) "Court" means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction ; (6A) "employer of agents" means a person certified under section 42A who procures insurance business for an insurer whether wholly or in part by employing or causing to be employed insurance agents on behalf of the insurer ; (6B) "fire insurance business" means the business of effecting, otherwise than incidentally to some other class of insurance business, contracts of insurance against loss by or incidental to fire or other occurrence customarily included among the risks insured against in fire insurance policies ; (6C) "general insurance business" means fire, marine or miscellaneous insurance business, whether carried on singly or in combination with one or more of them;. (7) "Government securities" means Government securities as defined in the Securities Act, 1920 ; (8) "insurance company" means any insurer being a company, association or partnership which may be wound up under the Companies Act, 1913, or to which the Partnership Act, 1932, applies ; (8A) "insurance surveyor" means a person (certified under 1 section 44A) who examines the goods, property or any interests insured under a policy of general insurance to ascertain the cause, extent and location of any loss and to determine the amount of such loss and the amount which is payable to the insured by the insurer or insurers or any person liable in respect of such loss ; (9) "insurer" means-----(a) any individual or unincorporated body of individuals or body corporate incorporated under the law of any country or State outside Pakistan, carrying on insurance business not being a person specified in sub-clause (c) of this clause which(i) carries on that business in Pakistan ; or (ii) has his or its principal place of business or is domiciled in Pakistan ; or

(iii) with the object of obtaining insurance business, employs a representative, or maintains a place of business, in Pakistan ; (b) any body corporate not being a person specified in sub-clause (c) of this clause carrying on the business of insurance, which is a body corporate incorporated under any law for the time being in force in Pakistan ; or stands to any such body corporate in the relation of a subsidiary company within the meaning of the Companies Act, 1913, as defined by sub-section (2) of section 2 of that Act, and (c) any person who in Pakistan has a standing contract with underwriters who are members of the Society of Lloyd's whereby such person is authorized within the terms of such contract to issue protection notes, cover notes, or other documents granting insurance cover to others on behalf of the underwriters, but does not include an insurance agent licensed under section 42 or a provident society as defined in Part III ; (10) "insurance agent" means an insurance agent licensed under section 42 being an individual who receives or agrees to receive payment by way of commission or other remuneration in consideration of his soliciting or procuring insurance business ; (11) "life insurance business" means the business of effecting contracts of insurance upon human life including any contract whereby the payment of money is assured on death (except policies for death by accident only) or the happening of any contingency dependent on human life or which is subject to payment of premiums for a term dependent on human life and shall be deemed to include----(a) the granting of disability and double or triple indemnity accident benefits, if so provided in the contract of insurance ; (b) the granting of annuities upon human life ; and (c) the granting of superannuation allowances and annuities payable out of any fund applicable solely to the relief and maintenance of persons engaged or who have been engaged in any particular profession, trade or employment or of the dependents of such person; (12) "manager" and "officer" have the meanings assigned to those expressions in clauses (9) and (11) respectively of section 2 of the Companies Act, 1913 ; (13) "managing agent" means a person, firm or company entitled to the management of the whole affairs of a company by virtue of an agreement with the company, and under the control and direction of the directors except to the extent, if any, otherwise provided for in the agreement, and includes any person, firm or company occupying such position by whatever name called. Explanation.-If a person occupying the position of managing agent calls himself manager or managing director, he shall nevertheless be regarded as managing agent for the purposes of section 32 of this Act ;

(13A) "marine insurance business" means the business of effecting contracts of insurance upon vessels of any description, including cargoes, freights and other interests which may be legally insured, in or in relation to such vessels, cargoes and freights, goods, wares, merchandise and property of whatever description insured for any transit by land, water or air, or by any combination thereof and whether or not including warehouse risks or similar risks in addition or as incidental to such transit, and includes any other risks customarily included among the risks insured against in marine insurance policies ; (13B) "miscellaneous insurance business" means the business of effecting contracts of insurance which is not principally of any kind included in clauses (613), (11) and (13A) ; (13C) "Pakistan Insurance Corporation" means the Corporation established under the Pakistan Insurance Corporation Act, 1952 ; (13D) "policy-holder" includes a person to whom the whole of the interest of the policy-holder in the policy is assigned once and for all, but does not include an assignee thereof whose interest in the policy is defeasible or is for the time being subject to any condition; (14) "prescribed" means prescribed by rules made under section 114 ; and (14A) "private company" has the meaning assigned to it in clause (13) of section 2 of the Companies Act, 1913 ; (14B) "public company" means a company incorporated under the Companies Act, 1913 or under the Indian Companies Act, 1882, or under the Indian Companies Act, 1866, or under any Act repealed thereby, which is not a private company or a subsidiary of a private company; and (15) "scheduled bank" has the meaning assigned to it in clause (m) of section 2 of the State Bank of Pakistan Act, 1956.

PART II PROVISIONS APPLICABLE TO INSURERS

3.-(1) No person shall, after the commencement of this Act, begin to carry on any class of insurance business in Pakistan], and no insurer carrying on any class of insurance business in Pakistan shall, after the expiry of three months from the commencement of this Act, continue to carry on any such business, unless he has obtained from the

Controller of Insurance a certificate of registration for the particular class of insurance business; Provided that in the case of an insurer who was carrying on any class of insurance business in Pakistan at the commencement of this Act, failure to obtain a certificate of registration in accordance with the requirements of this sub-section shall not operate to invalidate any contract of insurance entered into by him if before such date as may be fixed in this behalf by the Central Government by notification in the official Gazette, he has obtained that certificate. (2) Every application for registration shall be accompanied by----(a) a certified copy of the memorandum and articles of association, where the applicant is a company and incorporated under the Companies Act, 1913 or under the Indian Companies Act, 1882, or under the Indian Companies Act, 1866, or under any Act repealed thereby, or, in the case of any other insurer specified in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2, a certified copy of the deed of partnership or of the deed of constitution of the company, as the case may be, or, in the case of an insurer having his principal place of business or domicile outside Pakistan, the document specified in clause (a) of section 63 ; (b) the name, address and the occupation, if any, of the directors where the insurer is a Company incorporated under the Companies Act, 1913, or under the Indian Companies Act, 1882, or under the Indian Companies Act, 1866, or under any Act repealed thereby, and in the case of an insurer specified in sub-clause (a) (ii) of clause (9) of section 2 the names and addresses of the proprietors and of the manager in Pakistan, and in any other case the full address of the principal office of the insurer in Pakistan, and the names of the directors and the manager at such office and the name and address of some one or more persons resident in Pakistan authorized to accept any notice required to be served on the insurer ; (c) a statement of the class or classes of insurance business done or to be done, and a statement that the amount required to be deposited by section 7 or section 98 before application for registration is made has been deposited together with a certificate from the State Bank of Pakistan showing the amount deposited ; (d) where the provisions of section 6 or 97 apply, a statement duly certified by an auditor showing the total paid up capital or the total working capital of the insurer and a declaration verified by an affidavit made by the principal officer of the insurer authorized in that behalf that the provisions of those sections as to paid up capital or working capital, as the case may be, have been complied with; (e) in the case of an insurer having his principal place of business or domicile outside Pakistan, a statement verified by an affidavit made by the principal officer of the insurer setting forth the requirements (if any) not applicable to nationals of the country in which such insurer is constituted, incorporated or domiciled which are imposed by the laws or

practice of that country upon Pakistan nationals as a condition of carrying on insurance business in that country ; (f) a certified copy of the published prospectus, if any, and of the standard policy forms of the insurer and statements of the assured rates, advantages, terms and conditions to be offered in connection with insurance policies together with a certificate in connection with life insurance business by an actuary that such rates, advantages, terms and conditions are workable and sound; Provided that in the ease of marine, accident and miscellaneous insurance business other than workmen's compensation and motor car insurance the Controller of Insurance may exempt any insurer from the above requirements regarding prospectus, forms and statements to such extent and for such period as he may deem fit ; and (g) the receipt showing payment in the prescribed manner of the prescribed fee which shall not be more than five hundred rupees for each class of business. (3) In the case of any insurer having his principal place of business or domicile outside Pakistan, the Controller of Insurance shall withhold registration or shall cancel a registration already made, if he is satisfied that in the country in which such insurer has his principal place of business or domicile Pakistan nationals are debarred by the law or practice of the country relating to, or applied to insurance from carrying on the business of insurance , or that any requirement imposed on such insurer the provisions of section 62 is not satisfied. (4) The Controller of Insurance shall cancel the registration of an insurer either wholly or in so far as it relates to a particular class of insurance business, as the case may be,----(a) if the insurer fails to comply with the provisions of section 7 or section 98 as to deposits, or (b) if the insurer is in liquidation or is adjudged an insolvent, or (c) if the business or a class of the business of the insurer has been transferred to any person or has been transferred to or amalgamated with the business of any other insurer, or (d) if the whole of the deposit made in respect of a class of insurance business has been returned to the insurer under section 9; or (e) if, in the case of an insurer specified in sub-clause (c) of clause (9) of section 2, the standing contract referred to in that sub-clause is cancelled or is suspended and continues to be suspended for a period of six months, and the Controller of Insurance may cancel the registration of an insurer----

(f) if the insurer makes default in complying with, or acts in contravention of, any requirement of this Act or any rule or order made thereunder, and (g) if the Controller of Insurance has reason to believe that any claim upon the insurer arising in Pakistan under any policy of insurance remains unpaid for three months after final judgment in regular course of law. (5) When the Controller of Insurance withholds or cancels any registration under sub-section (3) or clause (a), clause (e), clause (f) or clause (g) of sub-section (4), he shall give notice in writing to the insurer of his decision, and the decision shall take effect on such date as he may specify in that behalf in the notice, such date not being less than one month nor more than two months from the date of the receipt of the notice in the ordinary course of transmission. (5A) When the Controller of Insurance cancels any registration under clause (b), clause (c) or clause (d) of sub-section (4) the cancellation shall take effect on the date on which notice of the order of cancellation is served on the insurer. (5B) When a registration is cancelled the insurer shall not, after the cancellation has taken effect, enter into any new contracts of insurance, but all rights and liabilities in respect of contracts of insurance entered into by him before such cancellation takes effect shall, subject to the provisions of sub-section (5D), continue as if the cancellation had not taken place. (5C) Where a registration is cancelled under clause (a), clause (e), clause (f), or clause (g) of sub-section (4),] the Controller of Insurance may at his discretion revive the registration, if the insurer makes the deposits required by section 7 or section 98, or has his standing contract restored or has had an application under sub-section (4) of section 3A accepted, or satisfies the Controller of Insurance that no claim upon him such as is referred to in clause (g) of sub-section (4) remains unpaid or that he has complied with the requirement for the non-compliance or contravention of which the registration was cancelled under clause (f) of subsection (4) as the case may be, and complies with any directions which may be given to him by the Controller of Insurance. (5D) Where the registration of an insurance company is cancelled under sub-section (4), the Controller of Insurance may, after the expiry of six months from the date on which the cancellation took effect, apply to the Court for an order to wind up the insurance company, or to wind up the affairs of the company in respect of a class of insurance business, unless the registration of the insurance company has been revived under subsection (5C) or an application for winding up the company has been already presented to the Court. The Court may proceed as if an application under this sub-section were an application under sub-section (2) of section 53, or sub-section (1) of section 58, as the case may be. (6) 5[Subject to compliance with the provisions of sections 2C, 5, sub-section (2A) of section 10 and section 32 and of any order made under section 3B, the Controller of

Insurance shall, on being satisfied that the applicant has fulfilled all the requirements of this section applicable to him, register the insurer and grant him] a certificate of registration. (7) The Controller of Insurance may, on payment of the prescribed fee which shall not exceed twenty-five rupees, issue a duplicate certificate of registration to replace a certificate lost, destroyed or mutilated, or in any other case where he is of opinion that the issue of a duplicate certificate is necessary.

PART II PROVISIONS APPLICABLE TO INSURERS

4. Minimum limits for annuities and other benefits secured by policies of life insurance. Omitted by the Insurance (Amdt.) Act, 1958 (XXVII of 1958), s. 8.

5.-(1) An insurer shall not be registered by a name identicalcal with that by which an insurer in existence is already registered, or so nearly resembling that name as to be calculated to deceive except when the insurer in existence is in the course of being dissolved and signifies his consent to the Controller of Insurance. (2) If any insurer, through inadvertence or otherwise, is without such consent as aforesaid registered by a name identical with that by which an insurer already in existence whether previously registered or not is carrying on business or so nearly resembling it as to be calculated to deceive, the first-mentioned insurer shall, if called upon to do so by the Controller of Insurance on the application of the second-mentioned insurer, change his name within a time to be fixed by the Controller of Insurance; Provided that nothing in this section shall apply to any insurer carrying on business before the 27th day of January, 1937, under the Indian Life Assurance Companies Act, 1912 Provided further that in the application of this section to any insurer who begins to carry on insurance business after the commencement of the Insurance (Amendment) Act, 1946, the references to an insurer in existence in sub-section (1) and this sub-section shall be construed as including references to a provident society (as defined in Part III) in existence, whether or not the society is in the course of being dissolved. (3) No insurer other than a provident society as defined in Part III, who begins to carry on insurance business after the commencement of this Act, shall adopt as its name and no such insurer carrying on business before the commencement of this Act shall continue after the expiry of six months from the commencement thereof to use as its name any combination of words which includes the word "provident".

6. No insurer other than an insurer who was registered or any class of insurance business immediately before the commencement of the Insurance (Amendment) ordinance, 1961, shall be registered unless he has a paid up capital of not less than ten lakhs of rupees.

7.-(1) Every insurer not being an insurer specified in sub-clause (c) of clause (9) of section 2 shall, in respect of the insurance business carried on by him in Pakistan, deposit and keep deposited with the State Bank of Pakistan, in one of the offices in Pakistan of the Bank for and on behalf of the Central Government the amount hereafter specified, either in cash or in approved securities estimated at the market value of the securities on the day of deposit, or partly in cash and part in approved securities so estimated (a) where the business done or to be done is life insurance only, two hundred thousand rupees ; (b) where the business done or to be done is fire insurance only, one hundred and fifty thousand rupees; (c) where the business done or to be done is marine insurance only, one hundred and fifty thousand rupees ; (d) where the business done or to be done is miscellaneous insurance only one hundred and fifty thousand rupees ; (e) where the business done or to be done is life insurance and any one of the three classes specified in clauses (b), (c), and (d), three hundred thousand rupees of which two hundred thousand rupees shall be the deposit for life insurance business ; (f) where the business done or to be done is life insurance and any two of the three classes specified in clauses (b), (c) and (d), four hundred thousand rupees of which two hundred thousand rupees shall be the deposit for life insurance business ; (g) where the business done or to be done is life insurance and all three classes specified in clauses (b), (c) and (d), four hundred and fifty thousand rupees of which two hundred thousand rupees shall be the deposit for life insurance business ; (h) where the business done or to be done does not include life insurance but falls under any two of the classes specified in clauses (b), (c) and (d), two hundred and fifty thousand rupees ; (i) where the business done or to be done does not include life insurance but falls under all three classes specified in clauses (b), (c) and (d), three hundred and fifty thousand rupees ; Provided that, where the business done or to be done is marine insurance only and relates exclusively to country craft or its cargo or both, the amount to be deposited under this sub- section shall be ten thousand rupees only. (2) Where the insurer is an insurer specified in sub-clause (c) of clause (9) of section 2, he shall be deemed to have complied with the provisions of this section as to deposits, if in respect of any class of insurance business carried on by him in Pakistan under a standing contract of the nature referred to in sub-clause (c) of clause (9) of section 2, a deposit of an amount one-and-a-half times that specified in sub-section (1) as the deposit for that class of insurance business has been made in the State Bank of Pakistan in one of the offices in Pakistan of the Bank for and on behalf of the Central Government in cash

or approved securities estimated at the market value of the securities on the day of deposit by or on behalf of the underwriters who are members of the Society of Lloyd's with whom he has his standing contract. (5) The deposit may be made in instalments of not less than one-fourth the total amount before the application for registration is made, not less than one-third the balance before the expiry of one year from the commencement of business in Pakistan and not less than one-half the residue before the expiry of two years from the commencement of business in Pakistan, and the balance before the expiry of three years from the commencement of business in Pakistan. Provided that in the case of any insurer not being an insurer specified in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section and incorporated before the commencement of the Insurance (Amendment) Ordinance, 1961, the deposit shall be made in full before the application for registration is made. (6) No class of insurance business in addition to the class or classes in respect of which an insurer is already liable to make a deposit under sub-section (1) or sub-section (2) shall be undertaken by the insurer until the deposit to which he is already liable has been made in full, and the additional deposit required in respect of the additional class of business or so much thereof as under the provisions of sub-section (5) is to be made before the application for registration, has also been made in full. (8) A deposit made in cash shall be held by the State Bank of Pakistan to the credit of the insurer and shall except to the extent, if any, to which the cash has been invested in securities under sub-section (9A), be returnable to the insurer in cash in any case in which under the provisions of this Act a deposit is to be returned ; and any interest accruing due and collected on securities deposited under sub-section (1) or sub-section (2) shall be paid to the insurer, subject only to deduction of the normal commission chargeable for the realization of interest. (9) The insurer may at any time replace any securities deposited by him under this section with the State Bank of Pakistan either by cash or by other approved securities or partly by cash and partly by other approved securities, provided that such cash, or the value of such other approved securities estimated at the market rates prevailing at the time of replacement, or such cash together with such value, as the case may be, is not less than the value of the securities replaced estimated at the market rates prevailing when they were deposited. (9A) The State Bank of Pakistan shall, if so requested by insurer,(a) sell any securities deposited by him with the Bank under this section and hold the cash realised by such sale as deposit, or (b) invest in approved securities specified by the insurer the whole or any part of a deposit held by it in cash or the whole or any part of cash received by it on the sale of or

on the maturing of securities deposited by the insurer, and hold the securities in which investment is so made as deposit, and may charge the normal commission on such sale or on such investment. (9B) Where sub-section (9A) applies,---(a) If the cash realised by the sale of or on the maturing of the securities (excluding in the former case the interest accrued) falls short of the market value of the securities at the date on which they were deposited with the Bank, the insurer shall make good the deficiency by a further deposit either in cash or in approved securities estimated at the market value of the securities on the day on which they are deposited, or partly in cash and partly in approved securities so estimated, within a period of two months from the date on which the securities matured or were sold and unless he does so the insurer shall be deemed to have failed to comply with the requirements of this section as to deposits ; and (b) if the cash realised by the sale of or on the maturing of the securities (excluding in the former case the interest accrued) exceeds the market value of the securities at the date on which they were deposited with the Bank, the Central Government may, if satisfied that the full amount required to be deposited under sub-section (1) is in deposit, direct the State Bank to return the excess. (10) If any part of a deposit made under this section is used in the discharge of any liability of the insurer, the insurer shall deposit such additional sum in cash or approved securities estimated at the market value of the securities on the day of deposit, or partly in cash and partly in such securities,) as will make up the amount so used. The insurer shall be deemed to have failed to comply with the requirements of sub-section (1), unless the deficiency is supplied within a period of two months from the date when the deposit or any part thereof is so used for discharge of liabilities.

8. (1) Any deposit made under section 7 or section 98 shall be deemed to be part of the assets of the insurer but shall not be susceptible of any assignment or charge ; nor shall it be available for the discharge of any liability of the insurer other than liabilities arising out of policies of insurance issued by the insurer so long as any such liabilities remain un-discharged ; nor shall it be liable to attachment in execution of any decree except a decree obtained by a policy-holder of the insurer in respect of a debt due upon a policy which debt the policy-holder has failed to realise in any other way. (2) Where a deposit is made in respect of life insurance business the deposit made in respect thereof shall not be available for the discharge of any liability of the insurer other than liabilities arising out of policies of life insurance issued by the insurer.

9.(1) Where an insurer has ceased to carry on in Pakistan any class of insurance business in respect of which a deposit has been made under section 7 or section 98 and his liabilities in Pakistan in respect of business of that class have been satisfied or are

otherwise provided for, the Court may, on the application of the insurer, order the return to the insurer of so much of the deposit as does not relate to the classes of insurance, if any, which he continues to carry on. (2) An application under this section shall, if the applicant is carrying on any insurance business in any Acceding State or a non-Acceding State notified in this behalf by the Central Government in the official Gazette, be accompanied by a statement to that effect, and in such a case the Court shall not order the return of any deposit under this section unless it is satisfied, after giving notice to the chief insurance authority of that State, that the liabilities of the applicant to that State in respect of the class of business concerned have been satisfied or are otherwise provided for. 10.-(1) Where the insurer carries on business of more than a~ one of the classes specified in clauses (a), (b), (c) and (d) of sub- a, section (1) of section 7, he shall keep a separate account of all receipts and payments in respect of each such class of insurance business and where the insurer carries on business of the class specified in clause (d) of that sub-section whether alone or in conjunction with business of another class, he shall, unless the Controller of Insurance waives this requirement in writing, keep a separate account of all receipts and payments in respect of each such sub-class of the class specified in clause (d) as may be prescribed in this behalf; (2) Where the insurer carries on the business of life insurance, all receipts due in respect of such business, shall be carried to and shall form a separate fund to be called the life insurance fund the assets of which shall be kept free from all encumbrances and distinct and separate from all other assets of the insurer and the deposit made by the insurer in respect of life insurance business shall be deemed to be a part of the assets of such fund ; and every insurer shall furnish to the Controller of Insurance along with the returns referred to in section 11, a statement showing in detail such assets as at the close of ever calendar year duly certified by an auditor; Provided that an insurer may show in such statement all the assets held in his life department and any deductions on account of general reserves and other liabilities of that department; Provided further that the Controller may call for a statement similarly certified of such assets as at any other date specified by him to be furnished within a period of three months from the date with reference to which the statement is called for. (2A) No insurer carrying on life insurance business shall be entitled to be registered for any class of insurance business in addition to the class or classes for which he has been already registered unless the Controller of Insurance is satisfied that the assets of the life insurance fund of the insurer are adequate to meet all his liabilities on policies of life insurance maturing for payment. (3) The life insurance fund shall be as absolutely the security of the life policy-holders as though it belonged to an insurer carrying on no other business than life insurance business and shall not be liable for any contracts of the insurer for which it would not

have been liable had the business of the insurer been only that of life insurance and shall not be applied directly or indirectly for any purposes other than those of the life insurance business of the insurer. 11.-(1) Every insurer, in the case of an insurer specified in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2 in respect of all insurance business transacted by him, and in the case of any other insurer in respect of the insurance business transacted by him in Pakistan, shall at the expiration of each calendar year prepare with reference to that year-----(a) in accordance with the regulations contained in Part I of the First Schedule, a balance-sheet in the form set forth in Part II of that Schedule ; (b) in accordance with the regulations contained in Part I of the Second Schedule, a profit and loss account in the forms set forth in Part II of that Schedule, except where the insurer carries on business of one class only of the classes specified in clauses (a), (b) and (c) of sub-section (1) of section 7 and no other business ; (c) in respect of each class or sub-class of insurance business for which he is required under sub-section (1) of section 10 to keep a separate account of receipts and payments, a revenue account in accordance with the regulations, and in the form or forms, set forth in the Third Schedule applicable to that class or subclass of insurance business. (2) Unless the insurer is a company as defined in clause (2) of sub-section (1) of section 2 of the Companies Act, 1913, the accounts and statements referred to in sub-section (1) shall be signed by the insurer, or in the case of a company by the chairman, if any, and two directors and the principal officer of the company, or in the case of a firm by two partners of the firm, and shall be accompanied by a statement containing the names and descriptions of the persons in charge of the management of the business during the period to which such accounts and statements refer and by a report by such persons on the affairs of the business during that period. 12. The balance-sheet, profit and loss account, revenue At account and profit and loss appropriation account of every insurer, in the case of an insurer specified in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2 in respect of all insurance business transacted by him, and in the case of any other insurer in respect of the insurance business transacted by him in Pakistan, shall, unless they are subject to audit under the Companies Act, 1913, be audited annually by an auditor, and the auditor shall in the audit of all such accounts have the powers of, exercise the functions vested in, and discharge the duties and be subject to the liabilities and penalties imposed on, auditors of companies by" section 145 of the Companies Act, 1913. 13.-(1) Every insurer carrying on life insurance business shall, in respect of the life insurance business transacted by him in Pakistan, and also in the case of an insurer specified in sub clause (a) (ii) or sub-clause (b) of clause (9) of section 2 in respect of all life insurance business transacted by him, once at least in every three years

cause an investigation to be made by an actuary into the financial condition of the life insurance business carried on by him, including a valuation of his liabilities in respect thereto and shall cause an abstract of the report of such actuary to be made in accordance with the regulations contained in Part I of the Fourth Schedule and in conformity with the requirements of Part II of that Schedule. (lA) In the case of an insurer who was registered under this Act on the date of commencement of the Insurance (Amendment) Act, 1958, the date with reference to which such investigation and valuation shall be made shall be;---(i) the 31st December, 1957, in the case of insurers who on the 31st December, 1957, had completed three years from the last valuation or who have completed two calendar years from the date of commencement of business in Pakistan ; (ii) the 31st December, 1958, in the case of insurers who on the 31st December, 1957, had completed two years from the last valuation or who have completed one calendar year from the date of commencement of business in Pakistan ; (iii) the 31st December, 1959, in the case of insurers who on the 31st December, 1957 had completed one year from the last valuation or who have not completed one full calendar year from the date of commencement of business in Pakistan ; (iv) the 31st December, 1960, in all other cases. (1B) An insurer who undergoes a valuation with reference to the 31st December, 1957, shall undergo its next valuation with reference to the 31st December, 1960. (2) The provisions of sub-section (1) regarding the making of an abstract shall apply whenever at any other time an investigation into the financial condition of the insurer is made with a view to the distribution of profits or an investigation is made of which the results are made public. (3) There shall be appended to every such abstract as is referred to in sub-section (1) or sub-section (2) a certificate signed by the principal officer of the insurer that full and accurate particulars of every policy under which there is a liability either actual or contingent have been furnished to the actuary for the purpose of the investigation. (4) There shall be appended to every such abstract a statement, in conformity with the requirements of Part II of the Fifth Schedule and prepared in accordance with the regulations contained in Part I of that Schedule, of the life insurance business in force at the date to which the accounts of the insurer are made up for the purposes of such abstract; Provided that, if the investigation, referred to in sub-sections (1) and (2) is made annually by any insurer, the statement need not be appended every year but shall be appended at least once in every three years.

(5) Where an investigation into the financial condition of an insurer is made as at a date other than the expiration of the year of account, the accounts for the period since the expiration of the last year of account and the balance-sheet as at the date at which the investigation is made shall be prepared and audited in the manner provided by this Act. (6) The provisions of this section relating to life insurance business shall apply also to any such sub-class of miscellaneous insurance business as may be prescribed in this behalf; Provided that no sub-class of miscellaneous insurance business shall be prescribed under this sub-section if the insurance business comprised in the sub-class consists of insurance contracts which are terminable by the insurer at intervals not exceeding twelve months and under which if a claim arises, the insurer's liability to pay benefit ceases within one year of the date on which the claim arose; Provided further that the Controller of Insurance may authorise such modifications and variations of the regulations contained in Part I of the Fourth and Fifth Schedules and of the requirements of Part II of those Schedules as may be necessary to facilitate their application to any such sub-class of miscellaneous insurance business; Provided also that if the Controller of Insurance is satisfied that the number and amount of the transactions carried out by an insurer in any such sub-class of miscellaneous insurance business is so small as to render periodical valuation unnecessary, he may exempt that insurer from the operation of this sub-section in respect of that sub-class.

14. Every insurer, in the case of an insurer specified in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2 in respect of all business transacted by him, and in the case of any other insurer in respect of the insurance business transacted by him in Pakistan, shall maintain-----(a) a register or record of policies, in which shall be entered, in respect of every policy issued by the insurer, the name and address of the policy-holder, the date when the policy was effected and a record of any transfer, assignment or nomination of which the insurer has notice, and (b) a register or record of claims, in which shall be entered every claim made together with the date of the claim, the name and address of the claimant and the date on which the claim was discharged, or, in the case of a claim which is rejected, the date of rejection and the grounds therefor. 15.-(1) The audited accounts and statements referred to in section 11 or sub-section (5) of section 13 and the abstract and statement referred to in section 13 shall be printed, and four copies thereof shall be furnished as returns to the Controller of Insurance in the case of the accounts and statements referred to in section 11 or sub-section (5) of section 13

within six months and in the case of the abstract and statement referred to in section 13 within nine months from the end of the period to which they refer. Provided that the said period of six months shall in the case of insurers having their principal place of business or domicile outside Pakistan and in the case of insurers constituted, incorporated or domiciled in Pakistan but also carrying on business outside Pakistan be extended by three months, and provided further that the Controller may in any case extend the time allowed by this sub-section for the furnishing of such returns by a further period not exceeding one month. (2) Of the four copies so furnished one shall de signed in the case of a company by the chairman and two directors and by the principal officer of the company and, if the company has a managing director by that director in the case of a firm, by two partners of the firm, and, in the case of an insurer being an individual, by the insurer himself and one shall be signed by the auditor who made the audit or the actuary who made the valuation, as the case may be. (3) Where the insurer's principal place of business or domicile is outside Pakistan, he shall forward to the Controller of Insurance, along with the documents referred to in section 11, the balance-sheet, profit and loss account and revenue account and the valuation reports and valuation statements, if any, which the insurer is required to file with the public authority of the country in which the insurer is constituted, incorporated or domiciled, or, where such documents are not required to be filed, a certified statement showing the total assets and liabilities of the insurer at the close of the period covered by the said documents and his total income and expenditure during that period. 16. [Returns by insurers established outside the Provinces, etc.]. Omitted by the Insurance (Amdt.) Act, 1958 (XXVII of 1958), s. 16. 17. Where an insurer, being a company incorporated under the Companies Act, 1913 or under the Indian Companies Act, 1882, or under the Indian Companies Act, 1866, or under VI any Act repealed thereby, in any year furnishes his balance 188 sheet and accounts in accordance with the provisions of section 15, he may at the same time send to the Registrar of Companies copies of such balance-sheet and accounts ; and where such copies are so sent it shall not be necessary for the company to file copies of the balance-sheet and accounts with the Registrar as required by sub-section (1) of section 134 of the first mentioned Act and such copies so sent shall be chargeable with the same fees and shall be dealt with in all respects as if they were filed in accordance with that section. 18. Every insurer shall furnish to the Controller of Insurance a certified copy of every report on the affairs of the concern which is submitted to the members or policy-holders of the insurer immediately after its submission to the members or policy-holders as the case may be.

19. Every insurer, being a company or body incorporated under any law for the time being in force in Pakistan, shall furnish to the Controller of Insurance a certified copy of the minutes of the proceedings of every general meeting as entered in the Minutes Book of the insurer within thirty days from the holding of the meeting to which it relates. 20.-(1) Every return furnished to the Controller of Insurance or a certified copy thereof shall be kept by the Controller and shall be open to inspection; and any person may procure a copy of any such return, or of any part thereof, on payment of a fee of six annas for every hundred words or fractional part thereof required to be copied, any five figures being deemed equivalent to one word. (2) A printed or certified copy of the accounts, statements and abstract furnished in accordance with the provisions of section shall, on the application of any shareholder or policy-holder made at any time within two years from the date on which the document was so furnished, be supplied to him by the insurer within fourteen days when the insurer is constituted, incorporated or domiciled in Pakistan and in any other case within one month of such application. (3) A copy of the memorandum and articles of association of the insurer, if a company, shall on the application of any policyholder, be supplied to him by the insurer on payment of one rupee. 21.-(1) If it appears to the Controller of Insurance that any return furnished to him under the provisions of this Act is inaccurate or defective in any respect, he may----(a) require from the insurer such further information, certified if he so directs by an auditor or actuary, as he may consider necessary to correct or supplement such return ; (b) call upon the insurer to submit for his examination at the principal place of business of the insurer in Pakistan any book of account, register or other document or to supply any statement which he may specify in a notice served on the insurer for the purpose ; (c) examine any officer of the insurer on oath in relation to the return ; (d) decline to accept any such return unless the inaccuracy has been corrected or the deficiency has been supplied before the expiry of one month from the date on which the requisition asking for correction of the inaccuracy or supply of the deficiency was delivered to the insurer and if he declines to accept any such return, the insurer shall be deemed to have failed to comply with the provisions of section 15, or section 28 relating to the furnishing of returns. (2) The Court may on the application of an insurer and after hearing the Controller cancel any order made by the Controller under clause (a), (b) or (c) of sub-section (1) or may direct the acceptance of any return which the Controller has declined to accept, if the insurer satisfies the Court that the action of the Controller was in the circumstances unreasonable;

Provided that no application under this sub-section shall be entertained unless it is made before the expiration of four months from the time when the Controller of Insurance made the order or declined to accept the return. 22.-(1) If it appears to the Controller of Insurance f that an investigation or valuation to which section 13 refers does not properly indicate the condition of the affairs of the insurer by reason of the faulty basis adopted in the valuation, he may, after giving notice to the insurer and giving him an opportunity to be heard, cause an investigation and valuation as at such date as the Controller of Insurance may specify to be made at the expense of the insurer by an actuary appointed by the insurer for this purpose and approved by the Controller of Insurance and the insurer shall place at the disposal of the actuary so appointed and approved all the material required by the actuary for the purposes of the investigation and valuation within such period, not being less than three months, as the Controller of Insurance may specify. (2) The provisions of sub-sections (1) and (4) of section 13, and of sub-sections (1) and (2) of section 15 shall apply in relation to an investigation and valuation under this section; Provided that the abstract and statement prepared as the result of such investigation and valuation shall be furnished by such date as the Controller of Insurance may specify. 23.-(1) Every return furnished to the Controller of Insurance, which has been certified by the Controller to be a' return so furnished, shall be deemed to be a return so furnished. (2) Every document, purporting to be certified by the Controller of Insurance to be a copy of a return so furnished, shall be deemed to be a copy of that return and shall be received in evidence as if it were the original return, unless some variation between it and the original return is proved. 24. Summary of returns to be published. Omitted by the Insurance (Amdt.) Act, 1941 (X111 of 1941), s. 16. 25.-(1) No insurer shall,----(a) make, issue, circulate or cause to be made, issued or circulated, any estimate, illustration, circular or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the bonuses, shareholders' dividends or share of the surplus to be received thereon, or make any false or misleading statement as to the bonuses, shareholders' dividends or share of surplus previously paid on similar policies or make any misleading representation or any misrepresentation as to the financial condition of any insurer or use any name or title of any policy or class of policies misrepresenting the true nature thereof or make any misrepresentation to any policy-holder insured in any company for the purpose of inducing or tending to induce such policy-holder to lapse, forfeit or surrender his insurance; and

(b) make, publish, disseminate, circulate or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated or placed before the public in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster or in any other manner an advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of insurance, or the financial position of any insurer or with respect to any person in the conduct of his insurance business, which is false, untrue, deceptive, misleading or calculated to injure any person engaged in the business of insurance; Provided that nothing contained in this section shall prevent an insurer from publishing any return in a form in which it has been furnished to the Controller of Insurance or a true and accurate abstract from such returns or any other factual statement for the purposes of publicity. 26. Whenever any alteration occurs or is made which affects any of the matters which are required under the provisions of sub-section (2) of section 3 to accompany an application by an insurer for registration, the insurer shall forthwith furnish to the Controller of Insurance full particulars of such alteration. All such particulars shall be authenticated in the manner required by that sub-section for the authentication of the matters therein referred to, and, where the alteration affects. the assured rates, advantages, terms and conditions offered in connection with life insurance policies, the actuarial certificate referred to in clause (f) of the said sub-section shall accompany the particulars of the alteration.

PART II

INVESTMENT, LOANS AND MANAGEMENT

27.-(1) Every insurer shall invest and at all times keep Invest invested in the manner provided in sub-section (2) assets equivalent to not less than the sum of---(a) the amount of his liabilities to holders of life insurance policies in Pakistan on account of matured claims ; and (b) the amount required to meet the liability on policies of life insurance maturing for payment in Pakistan less(i) the amount of premiums which have fallen due to the insurer on such policies but have not been paid and the days of grace for payment of which have not expired, and (ii) any amount due to the insurer for loans granted on and within the surrender values of policies of life insurance maturing for payment in Pakistan issued by him or by an insurer whose business he has acquired and in respect of which he has assumed liability;

Provided that where an insurer has accepted reassurance in respect of any policies of life insurance issued by another insurer and maturing for payment in Pakistan or has ceded reassurance to another insurer in respect of any such policies issued by himself, the said sum shall be increased by the amount of the liability involved in such acceptance and decreased by the amount of liability involved in such cession; Provided further that the said sum shall not be decreased by the amount of any liability in respect of any reinsurances ceded to an insurer not registered in Pakistan for life insurance business except to the extent of the amount of the liability incurred up to the 31st December, 1957. (2) The investment required under sub-section (1) shall be made in the following manner, namely :(i) thirty per cent. of the sum referred to in the said sub- section shall be invested in Government securities ; (ii) a further ten per cent of the said sum shall be invested in Government or other approved securities ; and (iii) the balance shall be invested in approved securities or, subject to such restrictions as may, by notification in the official Gazette, be imposed by the Central Government in approved investment. Explanation.-For the purpose of this sub-section the amount of any deposits made under section 7 or section 98 by the insurer in respect of his life insurance business shall be deemed to be invested or kept invested in Government securities. (3) In computing the assets required by this section to be kept invested by an insurer, a sum equal to the amount of his liabilities to persons who are not citizens of Pakistan in respect of life insurance policies issued in Pakistan in favour of such persons but expressed in a currency other than the Pakistan rupee may, if such sum is invested in securities of, and guaranteed as to principal and interest by, the Government of the country in whose currency such policies are expressed, be taken into account. (4) The assets required by this section to be kept invested by an insurer shall be deposited by the insurer in Pakistan for safe custody in the prescribed manner with a scheduled bank approved by the Central Government and the assets so deposited shall not be released or dealt with in any manner except in such circumstances and in such manner as may be prescribed Provided that the Central Government may, by notification in the official Gazette, exclude from the requirements of this subsection any approved investments which cannot be deposited for safe custody with a scheduled bank on account of the nature of such investments.

28.- (1) Every insurer registered under this Act carrying on the business of life insurance shall every year, within thirty-one days from the beginning of the year, submit to the Controller of Insurance a return showing as at the 31st day of December of the preceding year the assets held invested in accordance with section 27, and all other particulars necessary to establish that the requirements of that section have been complied with, and such return shall be certified by a principal officer of the insurer. (2) Every such insurer shall also furnish, within fifteen days from the last day of March, June and September, a return certified as aforesaid showing as at the end of each of the said months the assets held invested in accordance with section 27. (3) The Controller of Insurance may at his discretion require any insurer to whom sub-section (1) applies to submit before the 1st day of August in each or any year a return of the nature referred to in sub-section (1), certified as required by that sub-section and prepared as at the 30th day of June. (4) In the case of an insurer having his principal place of business or domicile outside Pakistan, the Controller of Insurance may, on application made by the insurer, extend the periods of fifteen and thirty-one days mentioned in the foregoing sub-sections to thirty days and sixty days, respectively. (5) The Controller of Insurance shall be entitled at any time to take such steps as he may consider necessary for the inspection or verification of the assets invested in compliance with section 27 or for the purpose of securing the particulars necessary to establish that the requirements of that section have been complied with the insurer shall comply with any requisition made in this behalf by the Controller of Insurance, and if he fails to do so within two months from the receipt of the requisition he shall be deemed to have made default in complying with the requirements of this section. 29.-(1) No insurer shall grant loans or temporary advances either on hypothecation of property or on personal security or otherwise, except loans on life policies issued by him within their surrender value, to any director, manager, actuary, auditor or officer of the insurer if a company, or where the insurer is a firm, to any partner therein, or to any other company or firm in which any such director, manager, actuary, officer or partner holds the position of a direct manager, actuary, officer or partner; Provided that nothing herein contained shall apply to loans made by an insurer to a banking company ; Provided further that where any event occurs giving rise to circumstances, the existence of which at the time of the grant of any subsisting loan would have made such grant a contravention of this section, such loan shall, notwithstanding any contract to the contrary, be repaid within three months from the occurrence of such event and in case of default, the director, manager, auditor, actuary, officer or partner concerned shall, without

prejudice to any other penalty which he may incur, cease to hold office with the insurer granting the loan on the expiry of the said three months: Provided further that nothing in this section shall prohibit a company from granting such loans or advances to a subsidiary company or to any other company of which the company granting the loan or advance is a subsidiary company. (2) The provisions of section 86D of the Companies Act, 1913, shall not apply to a loan granted to a director of an insurer being a company, if the loan is one granted on the security of a policy on which the insurer bears the risk and the policy was issued to the director on his own life, and the loan is within the surrender value of the policy. (3) Subject to the provisions of sub-section (1), no insurer shall grant to any employee, insurance agent or employer of agents any loans or temporary advances, either on hypothecation of property or on personal security or otherwise except----(a) loans on life policies issued by him to an employee, agent or employer of agents within their surrender value ; and (b) temporary advances to an employee, insurance agent or employer of agents not exceeding,(i) in the case of an employee, two months' salary ; (ii) in the case of an insurance agent the renewal commission earned by him during two years immediately preceding the date of application for the advance, or a sum not exceeding two hundred and fifty rupees if he has not earned any renewal commission or has earned a renewal commission of less than two hundred and fifty rupees ; and (iii) in the case of an employer of agents the renewal commission and the over-riding renewal commission earned by him during the year immediately preceding the date of application for the advance, or a sum not exceeding one thousand rupees if he has not earned any renewal commission and over-riding renewal commission or has earned a renewal and over-riding renewal commission of less than one thousand rupees; Provided that in respect of the life insurance business of an insurer, the total temporary advances referred to in this clause shall not exceed at any time ten thousand rupees in the case of insurers having a life insurance fund of less than ten lakhs of rupees and in any other case one per cent. of the life insurance fund subject to a maximum of one hundred thousand rupees. (4) Every insurer shall before the 30th day of June, 1958, and thereafter before the 1st day of February of every subsequent year, furnish to the Controller of Insurance in the prescribed form a statement showing the particulars of the various advances paid by him and outstanding against an employee, insurance agent or an employer of agents as on the 31st day of December, 1957, and on the 31st day of December of every subsequent year.

(5) Every loan or advance existing as at the 31st day of December, 1957, which is contrary to the provisions of subsection (3), or is in excess of the limits specified therein shall, notwithstanding any contract to the contrary, be repaid within one year of the date of commencement of the Insurance (Amendment) Ordinance, 1958, or within such further period as may be allowed by the Controller of Insurance. (6) Where any event occurs giving rise to circumstances, the existence of which at the time of the grant of any subsisting loan or advance would have made such grant a contravention this section, such loan or advance shall, notwithstanding any contract to the contrary, be repaid within three months from the occurrence of such event, or within such further period as may be allowed by the Controller of Insurance. 30. If by reason of a contravention of any of the provisions of section 27 or section 29, any loss is sustained by the insurer or by the policy-holders, every director, manager, officer or partner who is knowingly a party to such contravention shall, without prejudice to any other penalty to which he may be liable under this Act, be jointly, and severally liable to make good the amount of such loss. 31.-(1) None of the assets in Pakistan of any insurer shall, except in the case of deposits made with the State Bank of Pakistan under section 7 or section 98 or in so far as assets are required to be deposited for safe custody with a scheduled bank under sub-section (4) of section 27, be kept otherwise than S[in the name of a public officer approved by the Central Government, or in tie corporate name of the undertaking, if a company, or in the name of the partners, if a firm, or in the name of the proprietor, if an individual. (2) No insurer incorporated or domiciled in Pakistan shall hold any of his assets kept in an Acceding State or a non-Acceding State otherwise than in the name of an authority approved by the Government of the State, or in the corporate name of the undertaking, if a company, or in the name of the partners, if a firm, or in the name of the proprietor, if an individual, except in the case of deposits made under any law of the State relating to insurance or in so far as assets are required by the law of the State to be vested in trustees. 32. No insurer shall appoint a managing agent for the conduct of his business.

INVESTIGATION
33.-(1) The Controller may, at any time, investigate the affairs of an insurer and, wherever necessary, employ an auditor or actuary or both for assisting him in any such investigation. (2) It shall be the duty of every manager, managing director or other officer of the insurer to produce before the Controller, auditor or actuary all such books of account, registers and other documents in his custody or power and to furnish him with any such statement or information relating to the affairs of the insurer within such time as the Controller, auditor or actuary may require.

(3) When an investigation is made under this section, the Controller may, after giving an opportunity to the insurer to make a representation in writing or be heard in person, by order in writing,-----(a) require the insurer to take such action in respect of any matter arising out of the investigation as he may think fit to secure compliance with the provisions of this Act, or (b) cancel the registration of the insurer under clause (f ) of sub-section (4) of section 3, or (c) apply to the Court for the winding up of the insurer, if a company, whether the registration of the insurer has been cancelled under clause (b) or not. (4) No order made under this section other than an order made sub-section (3) shall be called in question in any Court. under clause (b) of

(5) All expenses of, and incidental to, any investigation made under this section shall be defrayed by the insurer, and shall have priority as debts due from the insurer and be recoverable as an arrear of land revenue. 34. All the books and records of every insurer specified in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2 in respect of all insurance business transacted by him and in the case of any other insurer in respect of the insurance business transacted by him in Pakistan shall at all reasonable times be open to inspection by the Controller of Insurance or any other person appointed by him in this behalf.

AMALGAMATION AND TRANSFER OF INSURANCE BUSINESS

35.-(1) No life insurance business of an insurer specified in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2 shall be transferred to any person or transferred to or amalgamated with the life insurance business of any other insurer except in accordance with a scheme prepared under this section and sanctioned by the Court having jurisdiction over one or other of the parties concerned. (2) Any scheme prepared under this section shall set out the agreement under which the transfer or amalgamation is proposed to be effected, and shall contain such further provisions as may be necessary for giving effect to the scheme. (3) Before an application is made to the Court to sanction any such scheme, notice of the intention to make the application together with a statement of the nature of the amalgamation or transfer, as the case may be, and of the reason therefor shall, at least two months before the application is made, be sent to the Central Government, and certified copies, four in number, of each of the following documents shall be furnished to the Central Government, and other such copies shall during the two months aforesaid be kept

open for the inspection of the members and policy-holders at the principal and branch offices and chief agencies of the insurers concerned, namely :(a) a draft of the agreement or deed under which it is proposed to effect the amalgamation or transfer ; (b) balance-sheets in respect of the insurance business of each of the insurers concerned in such amalgamation or transfer, prepared in the Form set forth in Part II of the First Schedule and in accordance with the regulations contained in Part I of that Schedule ; (c) actuarial reports and abstracts in respect of the life insurance business of each of the insurers so concerned, prepared in conformity with the requirements of Part II of the Fourth and Fifth Schedules and in accordance with the regulations contained in Part I of the Schedule concerned ; (d) a report on the proposed amalgamation or transfer, prepared by an independent actuary who has never been professionally connected with any of the parties concerned in the amalgamation or transfer at any time in the five years preceding the date on which he signs his report ; (e) any other reports on which the scheme of amalgamation or transfer was founded. The balance-sheets, reports and abstracts referred to in clauses (b), (c) and (d) shall all be prepared as at the date at which the amalgamation or transfer if sanctioned by the Court is to take effect, which date shall not be more than twelve months before the date on which the application to the Court is made under this section; Provided that if the Central Government so directs in the case of any particular insurer there may be substituted respectively for the balance-sheet, report and abstract referred to in clauses (b) and (c) prepared in accordance with this sub-section certified copies of the last balance-sheet and last report and abstract prepared in accordance with sections 11 and 13 if that balance-sheet is prepared as at a date not more than twelve months, and that report and abstract as at a date not more than five years, before the date on which the application to the Court is made under this section. 36. When any application such as is referred to in sub section (3) of section 35 is made to the Court, the Court shall cause, if for special reasons it so directs, notice of the application to be sent to every person resident in 3[Pakistan, in an Acceding State or in a non-Acceding State who is the holder of a life policy of any insurer concerned and shall cause a statement of the nature and terms of the amalgamation or transfer, as the case may be, to be published in such manner and for such period as it may direct, and, after hearing the directors and such policy holders as apply to be heard and any other persons whom considers entitled to be heard, may sanction the arrangement if it is satisfied that no sufficient objection to the arrangement has been established and shall make such consequential order as are necessary to give effect to the arrangement, including orders as to the disposal of any deposit made under section 7 section 98;

Provided that-----(a) no part of the deposit made by any party to the amalgamation or transfer shall be returned except where, after effect is given to the arrangement, the whole of the deposit to be made by the insurer carrying on the amalgamated business or the person to whom the business is transferred is completed, (b) only so much shall be returned as is no longer required to complete the deposit last mentioned in clause (a), and (c) while the deposit last mentioned in clause (a) remains uncompleted, no accession, resulting from the arrangement, to the amount already deposited by the insurer carrying on the amalgamated business or the person to whom the business is transferred shall be appropriated as payment or part payment of any instalment of deposit subsequently due from him under section 7 or section 98.

37. Where an amalgamation takes place between any two or more insurers, or where any business of an insurer is transferred whether in accordance with a scheme confirmed by the Court or otherwise, the insurer carrying on the amalgamated business or 3[the person to whom the business is transferred as the case may be, shall, within three months from the date of the completion of the amalgamation or transfer, furnish in duplicate to the Central Government;---(a) a certified copy of the scheme, agreement or deed under which the amalgamation or transfer has been effected, and (b) a declaration signed by every party concerned or in the case of a company by the chairman and the principal officer that to the best of their belief every payment made or to be made to any person whatsoever on account of the amalgamation or transfer is therein fully set forth and that no other payments beyond those set forth have been made or are to be made either in money, policies, bonds, valuable securities or other property by or with the knowledge of any parties to the amalgamation or transfer, and (c) where the amalgamation or transfer has not been made in accordance with a scheme sanctioned by the Court under section 36---(i) balance-sheets in respect of the insurance business of each of the insurers concerned in such amalgamation or transfer, prepared in the Form set forth in Part II of the First Schedule and in accordance with the regulations contained in Part I of that Schedule, and (ii) certified copies of any other reports on which the scheme of amalgamation or transfer was founded.

ASSIGNMENT OR TRANSFER OF POLICIES AND NOMINATIONS

38.-(1) A transfer or assignment of a policy of life insurance, whether with or without consideration, may be made only by an endorsement upon the policy itself or by a separate instrument, signed in either case by the transferor or by the assignor or his duly authorized agent and attested by at least one witness, specifically setting forth the fact of transfer or assignment. (2) The transfer or assignment shall be complete and effectual upon the execution of such endorsement or instrument duly attested but except where the transfer or assignment is in favour of the insurer shall not be operative as against an insurer and shall not confer upon the transferee or assignee, or his legal representative, any right to sue for the amount of such policy or the moneys secured thereby until a notice in writing of the transfer or assignment and either the said endorsement or instrument itself or a copy thereof certified to be correct by both transferor and transferee or their duly authorized agents have been delivered to the insurer; Provided that where the insurer maintains one or more places of business in Pakistan, such notice shall be delivered only at the place in Pakistan mentioned in the policy for the purpose or at his principal place of business in Pakistan. (3) The date on which the notice referred to in sub-section (2) is delivered to the insurer shall regulate the priority of all claims under a transfer or assignment as between persons interested in the policy ; and where there is more than one instrument of transfer or assignment the priority of the claims under such instruments shall be governed by the order in which the notices referred to in sub-section (2) are delivered. (4) Upon the receipt of the notice referred to in sub-section (2), the insurer shall record the fact of such transfer or assignment together with the date thereof and the name of the transferee or the assignee and shall, on the request of the person by whom the notice was given, or of the transferee or assignee, on payment of a fee not exceeding one rupee, grant a written acknowledgment of the receipt of such notice, and any such acknowledgment shall be conclusive evidence against the insurer that he has duly received the notice to which such acknowledgment relates. (5) Subject to the terms and conditions of the transfer or assignment, the insurer shall, from the date of the receipt of the notice referred to in sub-section (2), recognise the transferee or assignee named in the notice as the only person entitled to benefit under the policy, and such person shall be subject to all liabilities and equities to which the transferor or assignor was subject at the date of the transfer or assignment and may institute any proceedings in relation to the policy without obtaining the consent of the transferor or assignor or making him a party to such proceedings.

39.-(1) The holder of a policy of life insurance on his own life, may, when effecting the policy or at any time before the policy matures for payment, nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death ; Provided that where any nominee is a minor, it shall be lawful for the policy-holder to appoint in the prescribed manner any person to receive the money secured by the policy in the event of his death during the minority of the nominee. (2) Any such nomination in order to be effectual shall unless it is incorporated in the text of the policy itself, be mad by an endorsement on the policy communicated to the insure and registered by him in the records relating to the policy an any such nomination may at any time before the policy mature for payment be cancelled or changed by an endorsement or further endorsement or a will, as the case may be but unless notice in writing of any such cancellation or change has bee delivered to the insurer, the insurer shall not be liable for any payment under the policy made bona fide by him to a nominee mentioned in the text of the policy or registered in records the insurer. (3) The insurer shall furnish to the policy-holder a written acknowledgment of having registered a nomination or a cancellation or change thereof, and may charge a fee not exceeding one rupee for registering such cancellation or change. (4) A transfer or assignment of a policy made in accordance with section 38 shall automatically cancel a nomination; Provided that the assignment of a policy to the insurer who bears the risk on the policy at the time of the assignment in consideration of a loan granted by that insurer on the security of the policy within its surrender value, or its re-assignment on repayment of the loan shall not cancel a nomination, but shall affect the rights of the nominee only to the extent of the insurer's interest in the policy. (5) Where the policy matures for payment during the lifetime of the person whose life is insured or where the nominee or, if there are more nominees, than one, all the nominees die before the policy matures for payment, the amount secured by the policy shall be payable to the policy-holder or his heirs or legal representatives or the holder of a succession certificate, as the case may be. (6) Where the nominee or, if there are more nominees than one, a nominee or nominees survive the 2[person whose life is insured] the amount secured by the policy shall be payable to such survivor or survivors. (7) The provisions of this section shall not apply to any policy of life insurance to which section 6 of the Married Women's Property Act, 1874, applies 3[or has at any time applied : Provided that where a nomination made whether before or after the commencement of the Insurance (Amendment) Act, VI 1946, in favour of the wife of the person who has

insured his life 19, or of his wife and children or any of them is expressed, whether or not on the face of the policy, as being made under this section, the said section 6 shall be deemed not to apply or not to have applied to the policy.

(6) Any rights and remedies of an assignee or transferee of a policy of life insurance under an assignment or transfer effected prior to the commencement of this Act shall not be affected by the provisions of this section. (7) Notwithstanding any law or custom having the force of law to the contrary, an assignment in favour of a person made with the condition that it shall be inoperative or that the interest shall pass to some other person on the happening of a specified event during the lifetime of the person whose life is insured, and an assignment in favour of the survivor or survivors of a number of persons, shall be valid.

COMMISSION AND REBATES AND LICENSING OF AGENTS

40.-(1) No person shall, after the expiry of six months from the commencement of this Act, pay or contract to pay any remuneration or reward whether by way of commission or otherwise for soliciting or procuring insurance business in Pakistan to any person except an insurance agent or an employer of agents. (lA) In this section and sections 40A, 41 and 43, references to an insurance agent shall be construed as including references to an individual soliciting or procuring insurance business exclusively in an Acceding State or a non-Acceding State notified in this behalf by the Central Government in the official Gazette and holding a valid licence as an insurance agent under the law of that State. (1B) No person shall pay and no insurance agent shall receive any renewal commission in respect of a life insurance business after the expiry of licence during the validity of which such business was procured by the insurance agent unless such licence has been renewed under sub-section (3) of section 42. Explanation.-For the purposes of this sub-section all the life insurance business to the credit of an insurance agent as at the date of the expiry of his licence, shall be deemed to have been procured by the insurance agent while holding the licence valid on the said date. (2) No insurance agent shall be paid or contract to be paid by way of commission or as remuneration in any form an amount exceeding, in the case of life insurance business, forty per cent. of the first year's premium payable on any policy or policies effected

through him and five per cent. of a renewal premium payable on such a policy, or, in the case of business of any other class, fifteen per cent. of the premium; Provided that insurers, in respect of life insurance business only, may pay, during the first ten years of their business, to their insurance agents fifty-five per cent. of the first year's premium payable on any policy or policies effected through them and six per cent. of the renewal premiums payable on such policies : Provided further that nothing in this sub-section shall apply to any policy of life insurance issued after the 31st day of March, 1958, or to any policy of general insurance issued after the commencement of the Insurance (Amendment) Ordinance, 1958. (2A) Save as hereinafter provided, no insurance agent shall be paid or contract to be paid by way of commission or as remuneration in any form any amount in respect of any policy not effected through him; Provided that where a policy of life insurance has lapsed, and it cannot, under the terms and conditions applicable to it be revived without further medical examination of the person whose life was insured thereby, an insurer, after giving by notice in writing to the insurance agent through whom the policy was effected if such agent continues to be an agent of the insurer an opportunity to effect the revival of the policy within a time specified in the notice, being not less than one month from the date of the receipt by him of the notice, may pay to another insurance agent who effects the revival of the policy an amount calculated at a rate not exceeding the rate of commission at which the agent through whom the policy was effected would have been paid had the policy not lapsed, on the sum payable on revival of the policy on account of arrear premiums (excluding any interest on such arrear premiums) and also on the subsequent renewal premiums payable on the policy. (3) Nothing in this section shall prevent the payment under any contract existing prior to the 27th day of January, 1937, of gratuities or renewal commission to any person, whether an insurance agent within the meaning of this Act or not, or to his representatives after his decease in respect of insurance business effected through him before the said date. 41.-(1) No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in Pakistan, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer; Provided that acceptance by an insurance agent of commission in connection with a policy of life insurance taken out by himself on his own life shall not be deemed to be acceptance of a rebate of premium within the meaning of this sub-section if at the time of

such acceptance the insurance agent satisfies the prescribed conditions establishing that he is a bona fide insurance agent employed by the insurer. (2) Any person making default in complying with the provisions of this section shall be punishable with fine which may extend to five hundred rupees. 42.-(1) The Controller of Insurance or an officer authorized by him in this behalf shall, in the prescribed manner and on payment of the prescribed fee which shall not be more than ten rupees, issue to any individual making an application in the prescribed manner and not suffering from any of the disqualifications hereinafter mentioned a licence to act as an insurance agent for the purpose of soliciting or procuring life insurance business or general insurance business, as the case may be. (lA) A separate application shall be made and a separate licence obtained for life insurance business and general insurance business. (1B) For the purposes of sections 40 and 40A of this Act no insurance agent who is licensed to act as an insurance agent for life insurance business shall be deemed to be an insurance agent for general insurance business and no insurance agent who is licensed to act as an insurance agent for general insurance business shall be deemed to be an insurance agent for life insurance business; Provided that nothing contained in this sub-section shall apply to the licences which are in force on the date of commencement of the Insurance (Amendment) Act, 1958, until after the date of expiry of such licences. (2) A licence issued under this section shall entitle the holder to act as an insurance agent for any insurer. (3) A licence issued under this section shall remain in force for a period of one year only from the date of issue, but shall be renewed for a period of three years at any one time if,----(i) an application in the prescribed form for renewal of the licence reaches the issuing authority at least one month before the date on which the licence ceases to remain in force ; (ii) the applicant has paid the prescribed renewal fee which shall not be more than thirty rupees ; (iii) the applicant does not suffer from any of the disqualifications mentioned in clauses (b), (c) and (d) of sub-section (4) ; and (iv) except in such circumstances as may be prescribed, the applicant in the case of the second or subsequent renewals has earned during the previous three years an average amount of at least two hundred rupees per year as first year commission on life insurance

business, if the licence to be renewed is a licence for life insurance business, or has procured during the previous three years' general insurance business yielding at an average a premium income of not less than one thousand rupees per year, if the licence to be renewed is a licence for general insurance business. Explanation.-The second renewal referred to in this clause shall be deemed to be the one following the first renewal for three years granted after the commencement of the Insurance (Amendment) Act, 1958. (3A) Notwithstanding the provisions of clause (i) of the preceding sub-section, an application for renewal of the licence which does not reach the issuing authority at least one month before the date an which the licence ceases to remain in force shall be entertained if the applicant has paid an additional fee of a prescribed amount not exceeding five rupees by way of penalty but no application for the renewal of a licence under this section shall be entertained if it reaches the issuing authority after the licence ceases to remain in force; Provided that the Controller may, if satisfied that undue hardship would be caused otherwise, entertain an application received after the licence ceases to remain in force on payment by the applicant of a penalty of a prescribed amount not exceeding thirty rupees. (4) The disqualifications above referred to shall be the following :----(a) that the person is a minor ; (b) that he is found to be of unsound mind by a Court of competent jurisdiction ; (c) that he has been found guilty of criminal misappropriation or criminal breach of trust or cheating or forgery or an abetment of or attempt to commit any such offence by a Court of competent jurisdiction; Provided that, where at least five years have elapsed since the completion of the sentence imposed on any person in respect of any such offence, the Controller of Insurance shall ordinarily declare in respect of such person that his conviction shall cease to operate as a disqualification under this clause; (d) that in the course of any judicial proceeding relating to any policy of insurance or the winding up of an insurance company or in the course of an investigation of the affairs of an insurer it has been found that he has been guilty of or has knowingly participated in or connived at any fraud, dishonesty or misrepresentation against an insurer or an insured. (5) If it be found that an insurance agent suffers from any of the foregoing disqualifications, without prejudice to any other penalty to which he may be liable, the Controller of Insurance shall, and if the agent has knowingly contravened any provision of this Act 1[or any rule or order made thereunder may, cancel the licence or licences issued to the agent under this section.

(5A) In the event of cancellation of a licence or licences under sub-section (5) the Controller of Insurance may refuse to grant a fresh licence or licences to the insurance agent for such period as he deems fit. (6) The authority which issued any licence under this section may issue a duplicate licence to replace a licence lost, destroyed or mutilated on payment of the prescribed fee which shall not be more than one rupee. (7) No insurance agent whose licence for general insurance business has not been renewed under sub-section (3) shall be granted a fresh licence for such business until after one year from the date of expiry of his last licence. 43.-{1) Every insurer and every person who acting on behalf of an insurer employs insurance agents shall maintain a register showing the name and address of every insurance agent appointed by him and the date on which his appointment began and the date, if any, on which his appointment ceased. (2) Any individual not holding a licence issued under section 42 who acts as an insurance agent shall be punishable with fine which may extend to fifty rupees, and any insurer who, or any person acting on behalf of an insurer who, appoints as an insurance agent any individual not so licensed, or transacts any insurance business in Pakistan through any such individual, shall be punishable with fine which may extend to one hundred rupees. (3) The provisions of sub-section (2) shall not take effect until the expiry of six months from the commencement of this Act. 44.-(1) Notwithstanding anything to the contrary contained in any contract between any person and any insurance agent providing for the forfeiture or stoppage of payment of renewal commission to such insurance agent, no such person shall, in respect of life insurance business transacted in Pakistan, refuse payment to an insurance agent of commission due to him on renewal premium under the agreement by reason only of the termination of his agreement, except for fraud; Provided that------(a) such agent ceases to act for the insurer concerned after the Controller of Insurance is satisfied and has conveyed the fact to the insurer and the agent that the circumstances in which the said insurer is placed are such as to justify the agent's ceasing to act for him; or (b) such agent has served the insurer continually and exclusively in respect of life insurance business for at least five years and has earned a minimum renewal commission of three hundred rupees during the twelve months preceding the date of his ceasing to act as such agent for the insurer and that in such case the commission on renewal premium payable to him shall not exceed four per cent. in any case ; or

(c) such agent has served the insurer continually and exclusively in respect of life insurance business for at least ten years. (2) Any commission payable to an insurance agent whether under the provisions of sub-section (1) or otherwise shall, notwithstanding the death of the agent and notwithstanding the provisions in this Act regarding the holding of an insurance agent's licence continue to be payable to his heirs for so long as such commission would have been payable had such insurance agent been alive or in one or more lump sums commuted under subsection (4); Provided that no commission on renewal premiums shall be paid under this sub-section if the total amount of commission on renewal premiums earned by the insurance agent during the twelve months preceding the date of his death was less than three hundred rupees. (3) For the purposes of sub-section (2) an insurance agent may nominate the person or persons to whom the commission due to him shall be paid in the event of his death; Provided that any such nomination to be effectual shall be communicated to the insurer and registered by him in writing and any such nomination may at any time before the death of the insurance agent, be cancelled or changed by him, but unless a notice in writing of any such cancellation or change has been delivered to the insurer, the insurer shall not be liable for any payment of the commission made bona fide by him to a nominee registered with the insurer; Provided further that the insurer shall furnish to the insurance agent a written acknowledgment of having registered a nomination or cancellation or change thereof : Provided also that where the nominee is a minor, it shall be lawful for the insurance agent to appoint any person to receive the commission in the event of his death during the minority of the nominee. (4) If the commission payable to any heir or nominee of a deceased insurance agent under the provisions of sub-section (2) is less than three hundred rupees ;a year, the insurer shall and in any other case the insurer may, with the consent of the heir or the nominee of the deceased insurance agent, commute such renewal commission and pay the amount or amounts mutually agreed to in lump sum or sums. (5) An insurer may recover out of the commission payable under sub-section (2) any sums owing to the insurer by the insurance agent at the date of his death.

SPECIAL PROVISIONS OF LAW

45. No policy of life insurance effected before the commencement of this Act shall after the expiry of two years from the date of commencement of this Act and no policy of life insurance effected after the coming into force of this Act shall, after the expiry of two

years from the date on which it was effected, be called in question by an insurer on the ground that a statement made in the proposal for insurance or in any report of a medical officer, or referee, or friend of the insured, or in any other document leading to the issue of the policy, was inaccurate or false, unless the insurer shows that such statement was 'on a material matter or suppressed facts which it was material to disclose and that it was fraudulently made by the policy-holder and that the policy-holder knew at the time of making it that the statement was false or that it suppressed facts which it was material to disclose. Provided that nothing in this section shall prevent the insurer from calling for proof of age at any time if he is entitled to do so, and no policy shall be deemed to be called in question merely because the terms of the policy are adjusted on subsequent proof that the age of the life insured was incorrectly stated in the proposal. 46. The holder of a policy of insurance issued by an insurer in respect of insurance business transacted in Pakistan after the commencement of this Act shall have the right, notwithstanding anything to the contrary contained in the policy or in any agreement relating thereto, to receive payment in Pakistan of any sum secured thereby and to sue for any relief in respect of the policy in any Court of competent jurisdiction in Pakistan ; and if the suit is brought in Pakistan any question of law arising in connection with any such policy shall be determined according to the law in force in Pakistan; Provided that nothing in this section shall apply to a policy of marine insurance. 47.-(1) Where in respect of any policy of life insurance maturing for payment an insurer is of opinion that by reason of conflicting claims to or insufficiency of proof of title to the amount secured thereby or for any other adequate reason it is impossible otherwise for the insurer to obtain a satisfactory discharge for the payment of such amount, the insurer may before the expiry of nine months from the date of the maturing of the policy or, where the circumstances are such that the insurer cannot be immediately aware of such maturing, from the date on which notice of such maturing is given to the insurer, apply to pay the amount into the Court within the jurisdiction of which is situated the place at which such amount is payable under the terms of the policy or otherwise. (2) A receipt granted by the Court for any such payment shall be a satisfactory discharge to the insurer for the payment of such amount. (3) An application for permission to make a payment into Court under this section shall be made by a petition verified by an affidavit signed by a principal officer of the insurer setting forth the following particulars, namely (a) the name of the insured person and his address ; (b) if the insured person is deceased, the date and place of his death ; (c) the nature of the policy and the amount secured by it ;

(d) the name and address of each claimant so far as is known to the insurer with details of every notice of claim received ; (e) the reasons why in the opinion of the insurer a satisfactory discharge cannot be obtained for the payment of the amount ; and (f) the address at which the insurer may be served with notice of any proceeding relating to disposal of the amount paid into Court. (4) An application under this section shall not be entertained by the Court if the application is made before the expiry of six months from the maturing of the policy by survival, or from the date of receipt of notice by the insurer of the death of the insured, as the case may be. (5) If it appears to the Court that a satisfactory discharge for the payment of the amount cannot otherwise be obtained by the insurer it shall allow the amount to be paid into Court and shall invest the amount in Government securities pending its disposal. (6) The insurer shall transmit to the Court every notice of claim received after the making of the application under subsection (3), and any payment required by the Court as costs of the proceedings or otherwise in connection with the disposal of the amount paid into Court shall as to the costs of the application under sub-section (3) be borne by the insurer and as to any other costs be in the discretion of the Court. (7) The Court shall cause notice to be given to every ascertained claimant of the fact that the amount has been paid into Court, and shall cause notice at the cost of any claimant applying to withdraw the amount to be given to every other ascertained claimant. (8) The Court shall decide all questions relating to the disposal of claims to the amount paid into Court. 48.-(1) Where the insurer is a company incorporated under the Companies Act, 1913, or under the Indian Companies Act, 1882, or under the Indian Companies Act, 1866, or under any Act repealed thereby, and carries on the business of life insurance, not less than one-fourth of the whole number of the directors of the company shall notwithstanding any thing to the contrary in the Articles of Association of the company be elected in the prescribed manner by the holders of policies of life insurance issued by the company. (2) Only and all persons holding otherwise than as assignees policies of life insurance issued by the company of such minimum amount and having been in force for such minimum period as may be prescribed shall unless disqualified under sub-section (2A) be eligible for election as directors under subsection (1), and only and all persons holding policies of life insurance issued by the company and having been in force at the time of the election for not less than six months shall be eligible to vote at such elections;

Provided that the assignment of a policy to the person who took out the policy shall not disqualify that person for being eligible for election as a director under sub-section (1). (2A) A person shall be ineligible for election as a director under sub-section (1) of any company if he is a director, officer, employee, or legal or technical adviser of that company, or of any other insurer, and shall cease to be a director under sub-section (1) if after election he acquires any disqualification specified in this sub-section or no longer holds the qualifications required by sub-section (2); Provided that nothing in this sub-section shall disqualify a person who is an elected director under sub-section (1) and is not otherwise disqualified under this sub-section, from being re-elected; (3) The Central Government may, for such period, or to such extent and subject to such conditions as may be specified by it in this behalf, exempt from the operation of this section(a) any Mutual Insurance Company as defined in clause (a) of sub-section (1) of section 95, in respect of which the Controller of Insurance certifies that in his opinion owing to the conditions governing membership of the company or to the nature of the insurance contracts undertaken by it the application of the provisions of this sub-section to the company is impracticable, or (6) any company in respect of which the Controller of Insurance certifies that in his opinion the company, having taken all reasonable steps to achieve compliance with the provisions of this section, has been unable to obtain the required number of directors with the required qualifications. (4) This section shall not take effect, in respect of any company in existence at the commencement of this Act, until the expiry of one year therefrom, and in respect of any company incorporated after the commencement of this Act, until the expiry of two years from the date of registration to carry on life insurance business.

49.-(1) No insurer, being an insurer specified in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2, who carries on the business of life insurance or any other class or subclass of insurance business to which section 13 applies shall for the purpose of declaring or paying any dividend to shareholders or any bonus to policy-holders or of making any payment in service of any debentures, utilize directly or indirectly any portion of the life insurance fund or of the fund of such other class or sub-class of insurance business, as the case may be, except a surplus shown in the valuation balance-sheet in Form I as set forth in the Fourth Schedule submitted to the Controller of Insurance as part of the abstract referred to in section 15 as a result of an actuarial valuation of the assets and liabilities of the insurer ; nor shall he increase such surplus by contributions out of

any reserve fund or otherwise unless such contributions have been brought in as revenue through the revenue account applicable to that class or sub-class of insurance business on or before the date of the valuation aforesaid, except when the reserve fund is made up solely of transfers from similar surpluses disclosed by valuations in respect of which returns have been submitted to the Controller of Insurance under section 15 of this Act or to the Central Government under section l I of the Indian Life Assurance Companies Act, 1912; Provided that payments made out of any such surplus in service of any debentures shall not exceed fifty per cent. of such surplus including any payment by way of interest on the debentures, and interest paid on the debentures shall not exceed ten per cent. of any such surplus except when the interest paid on the debentures is off-set against the interest credited to the fund or funds concerned in deciding the interest basis adopted in the valuation disclosing the aforesaid surplus. (2) No insurer other than an insurer specified in subclause (a) (ii) or sub-clause (b) of clause (9) of section 2 who carries on the business of life insurance in Pakistan shall for the purpose of declaring or paying any bonus to policy-holders in Pakistan utilize directly or indirectly any portion of the life insurance fund except a surplus shown in the valuation balance sheet in Form I as set forth in the Fourth Schedule submitted to the Controller of Insurance as part of the abstract referred to in section 15 as a result of an actuarial valuation of the assets and liabilities of the insurer in Pakistan ; nor shall he increase such surplus by contributions out of any reserve fund or otherwise unless such contributions have been brought in as revenue through the revenue account applicable to life insurance business on or before the date of the valuation aforesaid, except when the reserve fund is made up solely of transfers from similar surpluses disclosed by valuations in respect of which returns have been submitted to the Controller of Insurance under section 15 of this Act or to the Central Government under section 11 of the Indian Life Assurance Companies Act, 1912. 50. An insurer shall, before the expiry of three months from the date on which the premiums in respect of a policy of fife insurance were payable but not paid, give notice to the policy-holder informing him of the options available to him unless these are set forth in the policy. 51. Every insurer shall, on application by a policy-holder and on payment of a fee not exceeding one rupee, supply to the policy-holder certified copies of the questions put to him and his answers thereto contained in his proposal for insurance and in the medical report supplied in connection therewith. 52.-(1) No insurer shall after the commencement of this Act begin, or after three years from that date continue to carry on, any business upon the dividing principle, that is to say, on the principle that the benefit secured by a policy is not fixed but depends either wholly or partly on the results of a distribution of certain sums amongst policies becoming claims within certain time-limits, or on the principle that the premiums payable

by a policy-holder depend wholly or partly on the number of policies becoming claims within certain time-limits; Provided that nothing in this section shall be deemed to prevent an insurer from allocating bonuses to holders of policies of life insurance as a result of a periodical actuarial valuation either as reversionary additions to the sums insured or as immediate cash bonuses or otherwise; Provided further that an insurer who continues to carry on, insurance business on the dividing principle after the commencement of this Act shall withhold from distribution a sum of not less than forty per cent. of the premiums received during each year after the commencement of this Act, in which such business is continued so as to make up the amount required for investment under section 27. 53.-(1) The Court may order the winding up in accordance Winding with the Companies Act, 1913, of any insurance company and the Corm the provisions of that Act shall, subject to the provisions of this Act apply accordingly. (2) In addition to the grounds on which such an order may be based, the Court may order the winding up of an insurance company---(a) if with the sanction of the Court previously obtained a petition in this behalf is presented by shareholders not less in number than one-tenth of the whole body of shareholders and holding not less than one-tenth of the whole share capital or by not less than fifty policy-holders holding policies of life insurance that have been in force for not less than three years and are of the total value of not less than fifty thousand rupees ; or (b) if the Controller of Insurance, who is hereby authorized to do so, applies in this behalf to the Court on any of the following grounds, namely :---(i) that the company has failed to deposit or to keep deposited with the State Bank of Pakistan the amounts required by section 7 or section 98, (ii) that the company having failed to comply with any requirement of this Act has continued such failure 5[or having contravened any provision of this Act has continued such contravention for a period of three months after notice of such failure or contravention has been conveyed to the company by the Controller of Insurance, (iii) that it appears from the returns furnished under the provisions of this Act or from the results of any investigation made thereunder that the company is insolvent, or

MANAGEMENT BY ADMINISTRATOR
54. Notwithstanding anything contained in the Companies Act, 1913, an insurance company shall not be wound up voluntarily except for the purpose of effecting an

amalgamation or a re-construction of the company, or on the ground that by reason of its liabilities it cannot continue its business. 55.-(1) In the winding up of an insurance company or in the insolvency of any other insurer the value of the assets and the liabilities of the insurer shall be ascertained in such manner and upon such basis as the liquidator or receiver in insolvency thinks fit, subject, so far as applicable, to the rule contained in the Sixth Schedule and to any directions which may be given by the Court. (2) For the purposes of any reduction by the Court of the amount of the contracts of any insurance company the value of the assets and liabilities of the company and all claims in respect of policies issued by it shall be ascertained in such manner and upon such basis as the Court thinks proper having regard to the rule aforesaid. (3) The rule in the Sixth Schedule shall be of the same force and may be repealed, altered or amended as if it were a rule made in pursuance of section 246 of the Companies Act, 1913, and rules may be made under that section for the purpose of carrying into effect the provisions of this Act with respect to the winding up of insurance companies. 56.-(1) In the winding up of an insurance company and in the insolvency of any other insurer the value of the assets and the liabilities of the insurer in respect of life insurance business shall be ascertained separately from the value of any other assets or any other liabilities of the insurer and no such assets shall be applied to the discharge of any liabilities other than those in respect of life insurance business except in so far as those assets exceed the liabilities in respect of life insurance business. (2) In the winding up of an insurance company carrying on the business of life insurance or in the insolvency of any other insurer carrying on such business where any proportion of the profits of the insurer was before the commencement of the winding up or insolvency allocated to policy-holders, if, when the assets and liabilities of the insurer have been ascertained, there is found to be a surplus of assets over liabilities (hereinafter referred to as a prima facie surplus) there shall be added to the liabilities of the insurer in respect of the life insurance business an amount equal to such proportion of the prima facie surplus as is equivalent to such proportion of the profits allocated to shareholders and policy-holders as was allocated to policy-holders during the ten years immediately preceding the commencement of the winding up and the assets of the insurer shall be deemed to exceed his liabilities only in so far as those assets exceed those liabilities after such addition; Provided that----(a) if in any case there has been no such allocation or if it appears to the Court that by reason of special circumstances it would be inequitable that the amount to be added to the liabilities of the insurer in respect of the life insurance business should be an amount equal to such proportion as aforesaid, the amount to be so added shall be such amount as the Court may direct, and

(b) for the purpose of the application of this sub-section to any case where before the commencement of the winding up or insolvency a proportion of such profits as aforesaid of a branch only of the life insurance business in question has been allocated to policyholders, the value of the assets and liabilities of the insurer in respect of that branch shall be separately ascertained in like manner as the value of his assets and liabilities in respect of the life insurance business was ascertained, and the surplus so found, if any, of assets over liabilities shall, for the purpose of determining the amount to be added to the liabilities of the insurer in respect of the life insurance business be deemed to be the prima facie surplus. 57.-(1) Where the insurance business or any part of the insurance business of an insurance company has been transferred to another insurance company under an arrangement in pursuance of which the first mentioned company (in this section referred to as the secondary company) or the creditors thereof has or have claims against the company to which such transfer was made (in this section referred to as the principal company then, if the principal company is being wound up by or under the supervision of the Court, the Court shall (subject as hereinafter mentioned) order the secondary company to be wound up in conjunction with the principal company and may by the same or any subsequent order appoint the same person to be liquidator for the two companies and make provision for such other matters as may seem to the Court necessary with a view to the companies being wound up as if they were one company. (2) The commencement of the winding up of the principal company shall, save as otherwise ordered by the Court, be the commencement of the winding up of the secondary company. (3) In adjusting the rights and liabilities of the members of the several companies among themselves the Court shall have regard to the constitution of the companies and to the arrangements entered into between the companies in the same manner as the Court has regard to the rights and liabilities of different classes of contributories in the case of the winding up of a single company or as near thereto as circumstances admit. (4) Where any company alleged to be secondary is not in process of being wound up at the same time as the principal company to which it is alleged to be secondary, the Court shall not direct the secondary company to be wound up, unless, after hearing all objections (if any) that may be urged by or on behalf of the company against its being wound up, the Court is of opinion that the company is secondary to the principal company and that the winding up of the company in conjunction with the principal company is just and equitable. (5) An application may be made in relation to the winding up of any secondary company in conjunction with the principal company by any creditor of, or person interested in, the principal or secondary company.

(6) Where a company stands in the relation of a principal company to one insurance company and in the relation of a secondary company to some other insurance company or where there are several insurance companies standing in the relation of secondary companies to one principal company, the Court may deal with any number of such companies together or in separate groups as it thinks most expedient upon the principles laid down in this section. 58.-(1) If at any time it appears expedient that the affairs of an insurance company in respect of any class of business comprised in the undertaking of the company should be wound up but that any other class of business comprised in the undertaking should continue to be carried on by the company or be transferred to another insurer, a scheme for such purposes may be prepared and submitted for confirmation of the Court in accordance with the provisions of this Act. (2) Any scheme prepared under this section shall provide for the allocation and distribution of the assets and liabilities of the company between any classes of business affected (including the allocation of any surplus assets which may arise on the proposed winding up), for any future rights of every class of policy-holders in respect of their policies and for the manner of winding up any of the affairs of the company which are proposed to be wound up and may contain provisions for altering the memorandum of the company with respect to its objects and such further provisions as may be expedient for giving effect to the scheme. (3) The provisions of this Act relating to the valuation of liabilities of insurers in liquidation and insolvency and to the application of surplus assets of the life insurance fund in liquidation or insolvency shall apply to the winding up of any part of the affairs of a company in accordance with the scheme under this section in like manner as they apply in the winding up of an insurance company, and any scheme under this section may apply with the necessary modifications any of the provisions of the Companies Act, 1913, relating to the winding up of companies. (4) An order of the Court confirming a scheme under this section whereby the memorandum of a company is altered with respect to its object shall as respects the alteration have effect as if it were an order confirmed under section 12 of the Companies Act, 1913, and the provisions of sections 15 and 16 of that Act shall apply accordingly. (5) When making an order confirming a scheme under this section, the Court may make such orders as it considers necessary for the disposal of so much of the deposit made by the company under section 7 or section 98 as does not relate to the classes of insurance business, if any, which the company continues to carry on. 59. In the winding up of an insurance company (otherwise than in a case to which section 58 applies) and in the insolvency of any other insurer the liquidator or assignee as the case may be shall apply to the Court for an order for the return of the deposit made by the company or the insurer, as the case may be, under section 7 or section 98 and the

Court shall on such application order a return of the deposit subject to such terms and conditions as it shall direct. 60. In the winding up of an insurance company for the purposes of a cash distribution of the assets and in the insolvency of any other insurer the liquidator or assignee as the case may be in the case of all persons appearing by the books of the company or other insurer to be entitled to or interested in the policies granted by the company or other insurer shall ascertain the value of the liability of the company or other insurer to each such person and shall give notice of such value to those persons in such manner as the Court may direct and any person to whom notice is so given shall be bound by the value so ascertained unless he gives notice of his intention to dispute such value in such manner and within such time as may be specified by a rule or order of the Court. 61.-(1) Where an insurance company is in liquidation or any other insurer is insolvent the Court may make an order reducing the amount of the insurance contracts of the company or other insurer upon such terms and subject to such conditions as the Court thinks just. (2) Where a company carrying on the business of life insurance has been proved to be insolvent, the Court may if it thinks fit in place of making a winding up order reduce the amount of the insurance contracts of the company upon such terms and subject to such conditions as the Court thinks fit. (3) Application for an order under this section may be made either by the liquidator or by or on behalf of the company or by a policy-holder, or by the Controller of Insurance and the Controller of Insurance and any person whom the Court thinks likely to be affected shall be entitled to be heard on any such application.

SPECIAL PROVISIONS RELATING TO EXTERNAL COMPANIES

62. Where, by the law or practice of any country outside Pakistan in which an insurer carrying on insurance business in Pakistan is constituted, incorporated or domiciled, insurance companies incorporated in Pakistan are required as a condition of carrying on insurance business in that country to comply with any special requirements whether as to the keeping of deposits of assets in that country or otherwise which is not imposed upon insurers of that country under this Act, the Central Government shall, if satisfied of the existence of such special requirement, by notification in the official Gazette, direct that the same requirement, or requirements as similar thereto as may be, shall be imposed upon insurers of that country as a condition of carrying on the business of insurance in Pakistan. 63. Every insurer, having his principal place of business or domicile outside Pakistan, who establishes a place of business within Pakistan, or appoints a representative in Pakistan with the object of obtaining insurance business, shall within three months from the establishment of such place of business or the appointment of such representative, file with the Controller of Insurance-----

(a) a certified copy of the charter, statutes, deed of settlement or memorandum and articles or other instrument constituting or defining the constitution of the insurer, and, if the instrument is not written in the English language, a certified translation thereof, (b) a list of the directors, if the insurer is a company, (c) the name and address of some one or more persons resident in Pakistan authorized to accept on behalf of the insurer service of process and any notice required to be served on the insurer, together with a copy of the power of attorney granted to him, (d) the full address of the principal office of the insurer in Pakistan, (e) a statement of the classes of insurance business to be carried on by the insurer, and (f) a statement verified by an affidavit setting forth the special requirements, if any, of the nature specified in section 62 imposed in the country of origin of the insurer on Pakistan nationals, and, in the event of any alteration being made in the address of the principal office or in the classes of business to be carried on, or in any instrument here referred to, or in the name of any of the persons here referred to, or in the matters specified in clause (f) above, the company shall forthwith furnish to the Controller of Insurance particulars of such alteration. 64. Every insurer having his principal place of business or domicile outside Pakistan shall manage its affairs in Pakistan at his principal office in Pakistan and shall keep thereat all the records relating to the business of the insurer in Pakistan including such books of account, registers and documents as will enable him to furnish the accounts, statements and abstracts which he is required under this Act to furnish to the Controller of Insurance in respect of the insurance business transacted by him in Pakistan.

PROVIDENT SOCIETIES
65.-(1) In this Part "provident society" means, a person who, or a body of persons (whether corporate or unincorporate) which, not being an insurer registered for the time being under Part II of this Act, carries on the business of insuring the payment, on the happening of any of the contingencies mentioned in sub-section (2), of----(a) an annuity of or equivalent to one hundred rupees or less, payable for an uncertain period, or (b) a gross sum of nine hundred rupees or less, whether paid or payable in a lump sum or in two or more instalments over a certain period, exclusively in both cases (a) and (b) of any profit or bonus not being a guaranteed profit or bonus. Explanation.-For the purposes of this sub-section a period is "certain" if its duration is ascertainable in advance and "uncertain" if its duration is not so ascertainable.

(2) The contingencies referred to in sub-section (1) are the following, namely :---(a) the birth, marriage or death of any person or the survival by a person of a stated or implied age or contingency ; (b) failure of issue ; (c) the occurrence of a social, religious or other ceremonial occasion ; (d) loss of or retirement from employment ; (e) disablement in consequence of sickness or accident ; (f) the necessity of providing for the education of a dependent; (g) any other contingency which may be prescribed or which may be authorized by the Provincial Government with the approval of the Central Government. (3) For the purposes of sub-sections (1) and (2)(a) contracts entered into before the commencement of this Act shall not be taken into account ; (b) two or more policies issued to one person shall, for the purposes of determining whether the limits fixed by sub-section (1) have or have not been exceeded, be deemed to be one policy if the contingencies on the happening of which the sums are payable under the policies (whether the contingencies be the same or different) relate to one person only, whether he be the policy-holder or some other person. (4) Every person or body of persons for the time being registered as a provident society under the Provident Insurance of Societies Act, 1912, and every person or body of persons for the time being registered as a provident society under this Act, shall be deemed to be a provident society for all the purposes of this Act. (5) If any question arises whether any person or body of persons is or is not a provident society within the meaning of this section, the Controller of Insurance shall decide the question and his decision shall be final. 66. No provident society shall undertake any form of insurance not falling within the limits fixed by sub-section (1) of section 65, nor shall any provident society be eligible to be registered under section 3. 67. No provident society established after the commencement of this Act, shall adopt as its name, and no provident society established before the commencement of this Act shall continue after the expiry of six months from the commencement thereof to use as its name, any combination of words which fails to include the word " provident " or which includes the word " life ".

68. No provident society shall receive any premium or contribution for insuring money to be paid to any person other than the person paying such premium or contribution or the wife, husband, child, grand-child, parent, brother or sister, nephew or niece of such a person. 69.-(1) No provident society shall carry on any business upon the dividing principle, that is to say, on the principle that the benefit secured by a policy is not fixed but depends either wholly or partly on the results of a distribution of certain sums amongst policies becoming claims within certain time limits, or on the principle that the premiums payable by a policyholder depend wholly or partly on the number of policies becoming claims within certain time-limits. (2) The Controller of Insurance shall, as soon as possible, take steps to have any provident society which carries on business on the dividing principle wound up; Provided that, where any such provident society in existence at the commencement of this Act applies within three months of such commencement to the Controller of Insurance for permission to continue carrying on its business with a view meanwhile to reorganize its business in accordance with the provisions of this Act, the Controller of Insurance may at his discretion, with due regard to the past history of the society, permit the society to continue business for a period not exceeding two years from the date of receipt of such permission, so however that no new business on the dividing principle is undertaken by the society. (3) Where after the commencement of the Insurance (Amendment) Act, 1941, a provident society is to be wound up in pursuance of this section, or where, whether before or after the commencement of that Act, a provident society ceases to carry on business on the dividing principle, the provisions of subsection (2) and sub-section (3) of section 52 shall, so far as may be, apply in like manner as they apply to an insurer ceasing to carry on business on the dividing principle. 70.-(1) No provident society except a provident society R registered under the provisions of the Provident Insurance Societies Act, 1912, shall receive any premium or contribution until it has obtained from the Controller of Insurance a certificate of registration. (2) Every application for registration shall be accompanied by----(a) a certified copy of the rules of the society, and when the society is a company incorporated under the Companies Act, 1913, or under the Indian Companies Act, 1882, or under the Indian Companies Act, 1866, or under any Act repealed thereby, a certified copy of the Memorandum and Articles of Association or where the society is not such a company a certified copy of the deed of constitution of the society ; (b) the names and addresses of the proprietors or directors, and the managers of the society the full address of the registered office of the society, the full address of the principal office of the society in Pakistan, the name of the manager at such office, and the

name and address of some one or more persons resident in Pakistan authorized to accept any notice required to be served on the society ; (c) a certificate from the State Bank of Pakistan that the initial deposit referred to in section 73 has been made; (d) a declaration verified by an affidavit made by the principal officer of the society authorized in that behalf that the minimum working capital required by section 72, is available ; and (e) the receipt showing payment in the prescribed manner of the prescribed fee for registration being not more than two hundred rupees. (3) The Controller of Insurance may refuse to issue a certificate of registration until he is satisfied that the rules of the society comply with the provisions of this Act and that the society complies with the provisions of sections 67, 71, 72, 73 and 73A, but if he is so satisfied he shall register the society and its rules. (4) The Controller of Insurance may, after giving previous notice in writing in such manner as he thinks fit specifying the grounds for the proposed cancellation, and allowing the society concerned an opportunity of being heard, apply to the Court and obtain sanction for cancellation of the registration made under this section or made under the provisions of the Provident Insurance Societies Act, 1912,----(a) if he is satisfied from the returns furnished under the provisions of this Act or as the result of an inquiry made under section 87-----(i) that the society is insolvent or is likely to become so, or (ii) that the business of the society is conducted fraudulently or not in accordance with the rules thereof, or that it is in the interests of the policyholders that the society should cease to carry on business, (b) if the initial deposit or any of the further deposits required by section 73 has not been made, or (c) if the society, having failed to comply with any requirement or having contravened any provision of this Act, has continued such failure or contravention, for a period of one month after notice of such failure or contravention has been conveyed to the society by the Controller of Insurance; Provided that the Controller of Insurance may, if he thinks fit, instead of applying for cancellation of the registration under sub-clause (i) of clause (a) of this sub-section make a recommendation to the Court that the contracts of the society should be reduced in such manner and subject to such conditions as he may indicate;

Provided further that the Controller of Insurance may, without previous notice and without application to the Court for sanction,(a) cancel the registration of a provident society, which has failed to have its registration renewed, or (b) cancel, on such terms and conditions as he thinks fit, the registration of any provident society which applies to him for such cancellation if he is satisfied that the society has ceased to carry on insurance business and that all its liabilities in respect of insurance policies are either satisfied or otherwise provided for;, or (c) cancel the registration of a provident society if he has reason to believe that any claim upon the society arising in Pakistan under any policy of insurance remains unpaid for three months after final judgment in regular course of law. (5) When a registration is cancelled the provident society shall not, after the cancellation has taken effect, enter into any new contracts of insurance, but all rights and liabilities in respect of contracts of insurance entered into by it before such cancellation takes effect shall, subject to the provisions of section 88, continue as if the cancellation had not taken place. (6) Where a registration is cancelled under clause (b) of sub-section (4) or clause (c) of the second proviso to that sub-section, or because the society has failed to have its registration renewed, the Controller of Insurance may at his discretion revive the registration if the provident society, within six months from the date on which the cancellation took effect, makes the deposits required by section 73, or satisfies the Controller of Insurance that no claim upon it such as is referred to in the said clause (c) remains unpaid or has had an application under subsection (3) of section 70A accepted, as the case may be, and complies with any directions which may be given to it by the Controller of Insurance. (7) The Controller of Insurance may, on payment of the prescribed fee which shall not exceed five rupees, issue a duplicate certificate of registration to replace a certificate lost, destroyed or mutilated, or in any other case where he is of opinion that the issue of a duplicate certificate is necessary. 71. The provisions of sections 20, 32, 46 and 53A shall apply to provident societies as they apply to insurers, and in such application references to shareholders of an insurer shall be construed as references to members of a provident society; Provided that a provident society may charge a fee not exceeding one rupee for supplying a copy of any document referred to in sub-section (2) of section 20. 72. No provident society shall be registered unless it has a paid-up capital sufficient to provide as working capital a net sum of not less than five thousand rupees exclusive of

deposits made under this Act and exclusive in the case of a company of any expenses incurred in connection with the formation of the company. 73.-(1) Every provident society shall, if established before the commencement of this Act within one year from such commencement, or, if established after the commencement of this Act before the society applies for registration under section 70, deposit and keep deposited with the State Bank of Pakistan in one of the offices in Pakistan of the Bank, for and on behalf of the Central Government, cash or approved securities amounting at the market value of the securities on the date of deposit to five thousand rupees, and shall thereafter make in each calendar year a further deposit amounting to not less than one-fifth of the premium income for the preceding calendar year as shown in the revenue account of the society (including admission fees and other fees received by the society) until the total amount so deposited and kept is fifty thousand rupees. (2) The provisions of sub-sections (8), (9), 6[(9A), (9B)] and (10) of section 7 and of sub-section (1) of section 8 and of section 9 shall apply to the deposits made under this section as they apply to deposits made by an insurer. 74.-(1) Every provident society shall in its rules set forth---(a) the name, the object and the location of the registered office of the society ; (b) the contingencies or classes of contingency on the happening of which money is to be paid ; (c) the conditions to be complied with before, and the payments to be made on, admission to the society ; (d) the rates of premium or contribution, and the periods for which or the times at which premiums or contributions are payable ; (e) the maximum amount payable to a subscriber or policy-holder ; (f) the nature and amounts of the benefits provided for by the society ; (g) the circumstances in which a bonus may be paid to a policy-holder ; (h) the nature of the evidence required for the proof of the happening of any contingency on which money is to be paid ; (i) the circumstances in which policies may be forfeited or renewed or the whole or a part of the premiums paid on a policy may be returned, or a surrender value of a policy may be granted ; (j) the penalties for delay in paying or failure to pay premiums or contributions ;

(k) the proportion of the annual income of the society which may be disbursed on and the provisions to be made for meeting the expenses of the management of the society ; (l) the person or persons who or the authority which shall have power to invest the funds of the society ; (m) the provisions for appointment of auditors and their remuneration; (n) the procedure to be adopted in altering the rules of the society;

(o) unless these are provided for in the articles of association of a society which is a company incorporated under the Companies Act, 1913, or under the (i) the mode of appointment and removal, the qualification and the powers of a director, manager, secretary or other officer of the society ; (ii) the manner of raising additional capital ; and (iii) the provisions for the holding of general meetings of the members and policy-holders and for the powers to .be exercised and the procedure to be followed thereat ; and (p) such other matters as may be prescribed. (2) Where the rules of any provident society registered under the Provident Insurance Societies Act, 1912, fail to comply with the provisions of this section the society shall, before the expiry of twelve months from the commencement of this Act, 75.-(1) No amendment of any rule of a provident society shall be valid until it has been sent to the Controller of Insurance and has been registered by him. (2) The Controller of Insurance on being satisfied that the proposed amendment is not contrary to the provisions of this Act shall, unless he is of opinion that the amendment unfairly affects the rights of existing members or policy-holders of the 76. Every provident society shall on demand deliver free of cost to any member of the society a copy of the rules of the society and to any person other than a member a copy of such rules on the payment of a sum not exceeding one rupee. 77. Every provident society shall have in Pakistan a principal office (on the outside of which it shall keep displayed its name in a conspicuous position in legible characters) to which all communications and notices may be addressed, and shall give notice to the Controller of Insurance of any change in the location thereof within twenty-eight days of its occurrence.

78. Where any notice, advertisement or other official publication of a provident society contains a statement of the amount of the authorized capital of the society, the publication, shall also contain a statement of the amount of the capital which has been subscribed and the amount paid up.

PART III PROVIDENT SOCIETIES

79. Every provident society shall keep at its principal office in Pakistan--(a) such registers in such form as may be prescribed; (b) a cash book in which shall be entered separately for each class of contingency separately specified in section 65 all sums received and expended by the society and the matters in respect of which the receipt or expenditure takes place ; (c) a ledger ; (d) a journal. 80.-(1) Every provident society shall at the expiry of the calendar year prepare a revenue account and balance-sheet in the prescribed form verified in the prescribed manner, together with a report on the general state of the society's affairs and shall cause the revenue account and balance-sheet to be audited by an auditor, and the auditor shall so far as may be in the audit of a provident society have the powers of, exercise the functions vested in, and discharge the duties and be subject to the liabilities imposed on, an auditor of companies by section 145 of the Companies Act, 1913. (2) Every provident society shall at the expiry of the calendar year prepare with respect to that year(a) a statement showing separately for each class of contingency separately specified in section 65(i) the number of new policies effected, the total amount insured thereby and the total premium income received in respect thereof and the number of existing policies discontinued during the year with the total amount insured thereby, and (ii) the total amount of claims made and the total amount paid in satisfaction thereof ; (b) a statement showing details of every insurance effected on, a life other than the life of the person insuring ; and (c) a statement showing the total amount paid as allowances to agents and canvassers. (3) Until the expiry of two years from the commencement of this Act this section and section 73 shall apply to provident societies registered before the commencement of this

Act under the Provident Insurance Societies Act, 1912, as if the reference to the calendar year were a reference to either the financial year or the calendar year. 81.-(1) Every provident society shall once in every five years or at such shorter intervals as may be laid down by the rules of the society cause an investigation to be made as at the last day of a calendar year into its financial condition including the valuation of its liabilities and assets by an actuary. (2) The report of the actuary shall contain an abstract in which shall be stated---(a) the general principles adopted in the valuation, including the method by which the valuation age of lives was ascertained, (b) the rate at each age of the mortality and any other factor assumed and the annuity values used in valuation, (c) the reserve values held against policies effected, (d) the rate of interest assumed, and (e) the provision made for expenses, and shall have appended to it a certificate signed by a principal officer of the society that all material necessary for proper valuation has been placed at the disposal of the actuary and that full and accurate particulars of every policy under which there is a liability either actual or contingent have been furnished to the actuary for the purpose of the investigation. (3) If the actuary finds that the financial condition of the society is such that no surplus exists for distribution as bonus to the policy-holders or as dividend to the shareholders, he shall state in his report whether in his opinion the society is insolvent and, if so, whether it should be wound up or not, and the extent to which in his opinion existing contracts should be modified or existing rates of premium should be adjusted to make good the deficiency in the assets. 82.-{1) The revenue account and balance-sheet with the S auditor's report thereon and the report on the general state of the society's affairs referred to in sub-section (1) of section 80, shall be printed and four copies of these and of the statements referred to, in sub-section (2) of section 80, shall be furnished as returns to the Controller of Insurance within six months from the end of the period to which they relate. (2) All the material necessary for the proper valuation of the liabilities of the society under the provisions of section 81 shall be placed at the disposal of the actuary within three months from the end of the period to which such material relates, and the report and abstract referred to in section 81 shall be furnished as a return to the Controller of Insurance within a further period of three months.

(3) The provisions of sub-section (2) of section 15 relating to the copies therein referred to shall apply to the returns referred to in sub-section (1) of this section, and the provisions of section 17 shall apply to the accounts and balance-sheet of a provident society being a company incorporated under the Companies Act, 1913, or under the Indian Companies Act, 1882, or under the Indian Companies Act, 1866, or under any Act repealed thereby, as they apply to the accounts and balance sheet of an insurer and the Controller of Insurance may exercise, in respect of returns made by a provident society and in respect of an investigation or valuation to which section 81 refers, the same powers as are exercisable by him under section 21 and section 22, respectively, in the case of an insurer.

83.-(1) Every provident society, registered after the commencement of this Act, shall cause every scheme of insurance which it proposes to put into operation, and every provident society registered before the commencement of this Act under the provisions of the Provident Insurance Societies Act, 1912, shall cause any scheme which it proposes to put into operation for the first time after such commencement to be examined by an actuary, and shall not receive any premium or contribution in connection with the scheme until the actuary has certified that the rates, advantages, terms and conditions of the scheme are workable and sound, and such certificate has been forwarded to the Controller of Insurance. (2) The provisions of sub-section (1) shall apply to any alteration of a scheme already in operation but the Controller of Insurance may, if he is of opinion that the alteration unfairly affects the interests of existing policy-holders, prohibit the alteration, and, if he does so, the society shall not put the altered scheme into operation, unless it first discharges to the satisfaction of the Controller of Insurance all its liabilities to those of the existing policy-holders who dissent from the alteration. (3) Every provident society registered before the commencement of this Act under the provisions of the Provident Insurance Societies Act, 1912, shall, as soon as may be and in any event before the expiry of six months from the commencement of this Act, submit all schemes of insurance which the society has in operation at the commencement of this Act to examination by an actuary and shall, before the expiration of six months from of the commencement of the Insurance (Amendment) Act, 1941, send the report of the actuary, thereon to the Controller of Insurance. (4) The report of the actuary shall state in respect of each scheme whether 3[the rates, advantages, terms and conditions are workable and sound], and, where no actuarial report such as is referred to in section 81 has been made within the two years preceding the examination, the report shall also state whether the assets of the society are sufficient to meet its liabilities under the existing schemes, and if not, how in the opinion of the actuary the existing contracts should be modified.

(5) If the rates, advantages, terms and conditions of any scheme are not reported by the actuary to be workable and sound, the Controller of Insurance shall give notice to the society prohibiting the scheme, and the society shall not after its receipt of such notice enter into any new contract of insurance under the scheme, but all rights and liabilities in respect of contracts of insurance entered into by the society before receipt of the notice shall, subject to the provisions of sub-section (6), continue as if the notice had not been given. (6) Where a scheme is prohibited under the provisions of sub-section (5) the society shall, where its assets are sufficient to meet all existing liabilities, set apart out of its assets the sum sufficient in the opinion of the actuary to meet the liabilities incurred under the scheme so prohibited, and, where its assets are not so sufficient, within three months from the date of the prohibition, apply to the Court for a modification of its existing contracts or failing such modification for the winding up of the society. 84. Where a provident society effects policies of insurance in connection with more than one of the classes of contingency separately specified in sub-section (2) of section 65, the receipts and payments in respect of each such class shall be recorded in a separate account in the cash book kept in accordance with section 79. 85.-(1) Every provident society shall, unless it already holds invested in approved securities or securities mentioned or referred to in clauses (c) and (d) of section 20 of the Trusts Act, 1882, not less than fifty per cent. of the total assets of the takes place and in any case within six months of its taking place, until the total amount so invested amounts to not less than fifty per cent. of the total assets of the society, and shall thereafter keep invested in such securities not less than fifty per cent. of the total assets of the society; Provided that for the purpose of determining the amount to be invested under this sub-section, any deposit made in cash under section 73 shall be taken into account as if such cash were Government securities amounting at the market value of the securities on the date the deposit was made to the total deposited in cash. (2) No funds or investments of a provident society except a deposit made under section 73 or under the law of any State or country relating to insurance shall be kept otherwise than in the name of the society or in the name of a public officer approved by the Central Government. (3) No loan shall be made out of the assets of a provident society to any director, manager, managing agent, auditor, actuary, officer or partner of the society except on the security of a policy of insurance held in the society and within its surrender value and no such loan shall be made to any concern of which a director, manager, managing agent, actuary, officer or partner of the society is a director, manager, managing agent, actuary, officer or partner;

Provided that nothing in this sub-section shall apply to loans made by a provident society to a banking company; Provided further that where any event occurs giving rise to circumstances, the existence of which at the time of the grant of any subsisting loan would have made such grant a contravention of this sub-section, such loan shall, notwithstanding any contract to the contrary, be repaid within three months from the occurrence of such event or from the commencement of the Insurance (Amendment) Act, 1946, whichever is later; and in case of default, the director, manager, auditor, actuary or partner concerned shall, without prejudice to any other penalty which he may incur, cease to hold office in the society on the expiry of the said three months. (3A) Any loan prohibited under sub-section (3), made before and outstanding at the commencement of the Insurance (Amendment) Act, 1940, shall be repaid before the 1st day of January, 1941, and in case of default the director, manager, managing agent, auditor, actuary, officer or partner who has received the loan or is connected with the concern which has received the loan, as the case may be, shall cease to hold office in or be a partner of the society and shall be ineligible to hold office in or be a partner of the society until the loan is repaid. (4) Any director, manager, managing agent, auditor, actuary, officer or partner of a society which contravenes the provisions of sub-section (3) who is knowingly a party to the contravention, shall without prejudice to any other penalty which he may incur be jointly and severally liable to the society for the amount of the loan, and such amount, together with interest from the date of the loan at such rate not exceeding twelve per cent. per annum as the Controller of Insurance may fix, shall on application by the Controller of Insurance to any Civil Court of competent jurisdiction be recoverable by execution as if a decree for such amount had been passed by that Court. (5) The provisions of section 86D of the Companies Act, 1913, shall not apply to a loan granted to a director of a provident society being a company if the loan is once granted on the security of a policy on which the society bears the risk and the policy was issued to the director on his own life and the loan is within the surrender value of the policy. 86. The books of every provident society shall at all reasonable times be open to inspection by the Controller of Insurance or any person appointed by him in this behalf or by any member or policy-holder of the society who has, on application in this behalf, been permitted by the Controller of Insurance, subject to such conditions, if any, as he may impose, to make such inspection. 87.-(1) The Controller of Insurance shall at least once in two years and may, if he thinks fit, at any time visit personally or depute a suitable person to visit the principal office of a provident Society or the principal office in Pakistan of a society having its principal place of business or domicile outside Pakistan and inquire into the affairs of the society, or may, after giving notice to the society and giving it an opportunity to be heard, direct such an inquiry to be made by an auditor or actuary appointed by him or by both an

auditor and an actuary appointed simultaneously, or first by an auditor only or an actuary only and afterwards by an actuary or auditor. (2) For the purposes of any such inquiry the Controller or the auditor or actuary, as the case may be, shall be entitled to examine all books and documents of the society and may demand from the society or any officer of the society such explanations as he may require on any matter relating to the affairs of the society. (3) The results of any such inquiry shall be recorded in writing by the person making the inquiry, and four copies of the record shall be supplied to the Controller of Insurance ; and when the inquiry is completed, a copy of the record, or of each such record where more than one are made in the course of the same inquiry, shall be sent by the Controller of Insurance to the society concerned and shall be open to inspection by any member or policy-holder of the society. (4) All expenses of and incidental to any inquiry made by an auditor or actuary under sub-section (1) including any expenses incurred before the date on which the Controller of Insurance receives notice of an appeal under clause (e) of sub-section (1) of section 110 shall be defrayed by the provident society, shall have priority over other debts due from the society, and shall be recoverable as an arrear of land-revenue. (5) The Controller of Insurance may by notice in writing require the provident society to comply within a time to be specified therein (not being less than fifteen days from the receipt of the notice by the society) with any directions he may issue to remedy defects disclosed by an inquiry under this section. (6) If the society fails to comply with any directions issued under sub-section (5), the Controller of Insurance may, after giving notice to the society and giving it an opportunity to be heard, apply to the Court for the winding up of the society. 88.-(1) The Court may order the winding up of a provident society being a company incorporated under the Companies Act, 1913, or under the Indian Companies Act, 1882, or under the Indian Companies Act, 1866, or under any Act repealed thereby, and the provisions of the Companies Act, 1913, shall, subject to the provisions of this Part, apply accordingly. (2) In addition to the grounds on which such an order may be based, the Court may order the winding up of a provident society if the Controller of Insurance, who is hereby authorized to do so, applies in this behalf to the Court on any of the following grounds, namely :-----(a) that the registration of the society has been cancelled under sub-section (4) of section 70 ;

(b) that it appears from the returns furnished under the provisions of this Act or as the result of an inquiry made under section 87 that the society is insolvent ; (c) that the continuance of the society is prejudicial to the interests of the policy-holders. (3) A provident society being a company incorporated under the Companies Act, 1913, or under the Indian Companies Act, 1882, or under the Indian Companies Act, 1866, or under any Act repealed thereby, may be wound up voluntarily in accordance with the provisions of the Companies Act, 1913, but shall not be so wound up except for the purpose of effecting an amalgamation or reconstruction of the society or on the ground that by reason of its liabilities it cannot continue its business. (4) A provident society not being a company incorporated under the Companies Act, 1913, or under the Indian Companies Act, 1882, or under the Indian Companies Act, 1866, or under any Act repealed thereby, may be wound up voluntarily under this Act if a resolution is passed by the proprietors that the society should be wound up voluntarily for the purpose or on the ground specified in sub-section (3), and the Controller of Insurance may, in any case where he has ordered the cancellation of the registration of a society under sub-section (4) of section 70, order the winding up of the society under this Act. 89. The Court may make an order reducing the amount of the insurance contracts of a provident society upon such terms and subject to such conditions as the Court thinks just----(a) if the Controller of Insurance as an alternative to cancelling the registration of a society under subsection (4) of section 70 applies to the Court in this behalf ; (b) if while a society is in liquidation the Court thinks fit; (c) if when a society has been proved to be insolvent, the Court thinks fit to do so in place of making an order for the winding up of the society ; or (d) if the Court is sati: fled on an application made in this behalf by the society supported by the report of an actuary, and after giving the policy-holders an opportunity to be heard that it is desirable to do so. 90.-(1) Where a provident society is to be wound up whether under the Companies Act, 1913, or under this Act, the society shall, within seven days from the date of the order of the Court ordering the winding up or the passing of the resolution authorizing- the winding up, as the case may be, give notice thereof to the Controller of Insurance and, except where the winding up is done by an order of the Court, the Controller of Insurance shall appoint the liquidator and shall determine the remuneration to be paid to him; Provided that if the Controller of Insurance is not satisfied that the assets of the society are sufficient to meet the costs of liquidation including the remuneration of the liquidator, he may decline to make such appointment, and in such a case the society shall itself

appoint a liquidator who shall carry out the liquidation as if the winding up was being done by an order of the Court. (2) Any liquidator appointed by the Controller of Insurance under sub-section (1)] maybe removed by the Controller of Insurance if satisfied that the duties entrusted to him are not being properly discharged. 91.-(1) A liquidator appointed to wind up a society shall have power(a) to institute or defend any legal proceedings on behalf of the society by his name of office ; (b) to determine the contribution to be made by members of the society respectively to the assets of the society; (c) to investigate all claims against the society and to decide questions of priority arising between claimants ; (d) to determine by what persons and in what proportion the costs of the liquidation including the remuneration of the liquidator and any expenses incurred under clause (g) of this sub-section are to be borne ; (e) to give such directions in regard to the collection and distribution of the assets of the society as may appear to him to be necessary for winding up the affairs of the society ; (f) to summon, and enforce the attendance of, witnesses and to compel the production of documents by the same means and as far as may be in the same manner as is provided in the case of a Civil Court by the Code of Civil Procedure, 1908 ; and (g) with the sanction of the Controller of Insurance, to employ such establishment and to obtain such assistance from an actuary or an auditor as may be necessary for the discharge of his duties. (2) .The liquidator shall, for settling the list of contributories and realising the amount of contributions, have the same powers as an official liquidator appointed by the Court for the winding up of a company under the Companies Act, 1913. 92.-(1) As soon as a liquidator is appointed to wind up a society he shall take charge of all property movable or immovable of the society and of all its books and documents. (2) If any proprietor or officer of the society or any other person retains any portion of the assets of the society or fails to deliver to the liquidator any book or document when so required by the liquidator he shall be punishable with imprisonment which may extend to six months, or with fine which may extend to five hundred rupees, or with both, and the Court may order the delivery of the assets or book or document to the liquidator.

(3) The liquidator shall within fifteen days of his appointment send notice by post to all persons who appear to him to be creditors of the society that a meeting of the creditors of the society will be held on a date not being less than twenty-one nor more than twenty-eight days after his appointment, and at a place and hour to be specified in the notice, and shall also advertise notice of the meeting once in the local official Gazette and once at least in two newspapers circulating in the Province in which the society is situated. (4) At the meeting so held the creditors shall determine whether an application shall be made for the appointment of any person as liquidator in the place of or jointly with the liquidator already appointed, or for the appointment of a committee of inspection, and, if they so resolve and an application accordingly is made at any time not later than fourteen days after the date of the meeting by any creditor appointed for the purpose at the meeting, the Controller of Insurance shall appoint a suitable person in place of or jointly with the liquidator already appointed, and determine the remuneration to be paid to him, and if so desired, shall also appoint a committee of inspection. (5) The committee of inspection shall, subject to any prescribed conditions, have a general power of supervision over the acts of the liquidator and shall have the right to inspect his accounts at all reasonable times. (6) The liquidator shall, with such assistance from an actuary as may be required, ascertain as soon as practicable the amount of the society's liability to every person appearing by the society's books to be entitle to or interested in any policy issued by the society, and shall give notice of the amount so found to each such person in the prescribed manner and each such person on receiving such notice shall be bound by the value so ascertained. (7) The liquidator shall make a valuation of the assets of the society and an estimate of the costs of the winding up, and shall on the basis of these, settle the list of contributories. (8) The liquidator shall apply to the Controller of Insurance for an order for the return of the deposit made by the society under section 73 and the Controller of Insurance shall on such application order the return of the deposit subject to such terms and conditions as he may think fit. (9) In administering and distributing the assets of the society the liquidator shall have regard to any directions that may be given by the creditors or contributories at a general meeting or by the Controller of Insurance. (10) The liquidator shall keep books of account in which he shall record the proceedings at all meetings attended by him, all amounts received or expended by him and any other matter that may be prescribed, and these books may, with the sanction of the Controller of Insurance, be inspected by any creditor or contributory.

(11) If the winding up continues for more than a year, the liquidator shall summon a meeting of the creditors and contributories at the end of the first year and of each succeeding year, and shall lay before them an account of his acts and dealings and of the conduct of the winding up, and that account together with any views expressed thereon by the meeting shall be forwarded by the liquidator to the Controller of Insurance. (12) So far as is not otherwise provided herein or is not otherwise prescribed under this Act, the liquidator shall so far as practicable follow the procedure to be followed by an official liquidator appointed by the Court for the winding up of a company under the Companies Act, 1913. (13) The costs of the liquidation including the remuneration of the liquidator and any expenses incurred under clause (g) of sub-section (1) of section 91 shall, if the liquidator decides that they shall be payable out of the assets of the society, be payable in priority to all other claims.

93.-(1) As soon as the affairs of a provident society are fully wound up, the liquidator shall prepare an account of the winding up showing how the winding up has been conducted and the property of the society has been disposed of and shall call a meeting of the members, creditors and contributories for the purpose of laying before it the account and giving any explanation thereof. (2) Notice of the meeting shall be sent to each person individually and shall be advertised in the local official Gazette and in at least two newspapers circulating in the Province in which the society is situated. (3) Within one week after the meeting the liquidator shall send to the Controller of Insurance a copy of the account and shall report to him the holding of the meeting and its date and shall forward to him a copy of the proceedings of the meeting. (4) The Controller of Insurance may return the account to the liquidator if it is incomplete or unsatisfactory and may require the liquidator to carry out any further steps necessary to complete the winding up and the liquidator shall comply with such requirement and shall submit a further report to the Controller of Insurance within six months. (5) If the Controller of Insurance is satisfied that the affairs of the society have been fully wound up he shall register the account of the liquidator who shall forthwith make over to the Controller of Insurance sums, if any, remaining undisposed of, and on the expiry of three months from the registering of the account the Controller of Insurance shall declare the society dissolved and cause the dissolution of the society to be notified in the local official Gazette, and the liquidator shall thereupon be discharged from further responsibility. (6) If within a period of five years from the date on which any sums have been made over to the 1[Controller of Insurance] under sub-section (5) an order of a Court of competent

jurisdiction has not been obtained at the instance of any claimant to such sums for their disposal the said sums shall become the property of Government. 94.-(1) The provisions of section 38 and section 39 relating to assignment, transfer and nomination in the case of life insurance policies shall, subject to the provisions of this section, apply to policies of insurance issued by any provident society covering any of the contingencies specified in clause (a) of subsection (2) of section 65. (2) No nomination shall be valid if the person nominated is not the husband, wife, father, mother, child, grand-child brother, sister, nephew or niece of the holder of the policy.

PART IV
MUTUAL INSURANCE COMPANIES AND CO-OPERATIVE LIFE INSURANCE SOCIETIES.
95.-(1) In this Part-----(a) " Mutual Insurance Company " means an insurer, being a company incorporated under the Companies Act, 1913, or under the Indian Companies Act, 1882, or under the Indian Companies Act, 1866, or under any Act repealed thereby, which has no share capital and of which by its constitution only and all policy-holders are members ; and (b) " Co-operative Life Insurance Society " means an insurer being a society registered under the Cooperative Societies Act, 1912, or under an Act of a Provincial Legislature governing the registration of co-operative societies which carries on the business of life insurance and which has no share capital on which dividend or bonus is payable and of which by its constitution only original members on whose application, the society is registered and all policyholders are members; Provided that any Co-operative Life Insurance Society in existence at the commencement of this Act shall be allowed a period of one year to comply with the provisions of this Act. (2) Notwithstanding anything contained in sub-section (1), other co-operative societies may be admitted as members of a Co-operative Life Insurance Society, without being eligible to any dividend, profit or bonus. (3) A Provincial Government may, subject to any rules made by the Central Government, empower the Registrar of Co-operative Societies of the Province to register co-operative societies for the insurance of cattle or crops or both under the provisions of the Co-operative Societies Act in force in the Province. (4) A Provincial Government may make rules not inconsistent with any rules made by the Central Government to govern such societies, and the provisions of this Act, in so far as they are inconsistent with those rules, shall not apply to such societies.

96. The provisions of sections 6 and 7 and of sub-section (2) of section 20, so far as those provisions are inconsistent with the provisions of this Part, shall not apply, and the provisions of this Part shall apply to Mutual Insurance Companies and Cooperative Life Insurance Societies. 97. No Mutual Insurance Company incorporated after the 26th day of January, 1937, and no Co-operative Life Insurance Society registered after that date under the Co-operative Societies Act, 1912, or under an Act of a Provincial Legislature governing the registration of co-operative societies shall be registered under this Act, unless it has as working capital a sum of fifty thousand rupees, exclusive of the deposit to be made before or at the time of application for registration in accordance with sub-section (2) of section 98 of this Act and of the preliminary expenses, if any, incurred in the formation of the company or society. 98.-(1) Every Mutual Insurance Company and every Co-operative Life Insurance Society shall, in respect of the life insurance business carried on by it in Pakistan, deposit and keep deposited with one of the offices in Pakistan of the State Bank of Pakistan, for and on behalf of the Central Government, a sum of two hundred thousand rupees in cash or in approved securities estimated at the market value of the securities on the day of deposit. (2) The deposit referred to in sub-section (1) may be made in instalments, of which the first shall be a payment, made before or at the time the application for registration under this Act is made, of not less than twenty-five thousand rupees or such sum as with any deposit previously made by the insurer under the provisions of the Indian Life Assurance Companies Act, 1912, brings the amount deposited, up to not less than twenty-five thousand rupees and the subsequent instalments shall be annual instalments made before the expiry of each subsequent calendar year of an amount in cash or in approved securities estimated at the market value of the securities on the day of payment of the instalment, equal to not less than one-third of the premium income in the preceding calendar year as shown in the revenue account. (3) The provisions of sub-section (7) of section 7 shall apply in respect of a Mutual Insurance Company and a Cooperative Life Insurance Society as if for the words "under the foregoing provisions of this section " the words and figures "under the provisions of section 98 " were substituted. 99. No transferee or assignee of a policy issued by an insurer to whom this Part applies shall become a member of a Mutual Insurance Company or a Co-operative Life Insurance Society merely by reason of any such transfer or assignment. THE INSURANCE ACT, 1938 ACT NO. IV OF 1938 [26th February, 1938] An Act to consolidate and amend the law relating to the business of insurance.

PART IV
MUTUAL INSURANCE COMPANIES AND CO-OPERATIVE LIFE INSURANCE SOCIETIES.
100. Notwithstanding the provisions of section 79 and section 131 of the Companies Act, 1913, a Mutual Insurance Company or a Co-operative Life Insurance Society may, instead of sending the notices and the copies of the balance-sheet, revenue account and other documents which. they are required to send to the members under those sections, publish such notices or documents once in a newspaper published in the English language and in a newspaper published in the local language circulating in the place where the principal office of the company is situated; Provided that, where any members of the company are domiciled in a Province other than that in which the principal office of the company is situated, publication of the notice of the meetings shall be made in a newspaper or newspapers published in the principal languages of that Province and circulating therein and any member of the company domiciled in that Province shall be entitled on application to the company to receive from it a copy of the balance-sheet and revenue account. 100. Notwithstanding the provisions of section 79 and section 131 of the Companies Act, 1913, a Mutual Insurance Company or a Co-operative Life Insurance Society may, instead of sending the notices and the copies of the balance-sheet, revenue account and other documents which. they are required to send to the members under those sections, publish such notices or documents once in a newspaper published in the English language and in a newspaper published in the local language circulating in the place where the principal office of the company is situated; Provided that, where any members of the company are domiciled in a Province other than that in which the principal office of the company is situated, publication of the notice of the meetings shall be made in a newspaper or newspapers published in the principal languages of that Province and circulating therein and any member of the company domiciled in that Province shall be entitled on application to the company to receive from it a copy of the balance-sheet and revenue account. 101. Every Mutual Insurance Company and every Cooperative Life Insurance Society shall, on the application of any member made within two years from the date on which any of such document is furnished to the Registrar of Companies under the provisions of section 134 of the Companies Act, 1913, or to the Registrar of Co-operative Societies of the Province in which the Co-operative Life Insurance Society is registered, furnish a copy of the document free of cost to the member within fourteen days of the application.

PART V MISCELLANEOUS
102.-(1) Except as otherwise provided in this Act, any insurer who makes default in complying with or acts in contravention of any requirement of this Act, and, where the insurer is a company, any director, managing agent, manager or other officer of the company, or where the insurer is a firm, any partner of the firm who is knowingly a party to the default, shall be punishable with fine which may extend to one thousand rupees and, in the case of a continuing default, with an additional fine which may extend to five hundred rupees for every day during which the default continues. (2) Any provident society as defined in Part III which makes default in complying with or acts in contravention of any of the requirements of this Act and any director, managing agent, manager, secretary or other officer of the society who is knowingly a party to the default or contravention, shall be punishable with fine which may extend to five hundred rupees or in the case of a continuing default or contravention with fine which may extend to two hundred and fifty rupees for every day during which the default or contravention continues. 103.-(1) Any insurer or any person acting on behalf of an insurer, who carries on any class of insurance business in contravention of any of the provisions of section 3, section 7, or section 98, or does any one or more of the acts constituting the business of insurance in relation to any insurance business carried on in contravention of any of the said sections shall be punishable with fine which may extend to two thousand rupees. (2) Any person knowingly taking out a policy of insurance with any insurer or person guilty of an offence under sub-section (1) shall be punishable with fine which may extend to five hundred rupees; Provided that nothing in sub-section (1) or sub-section (2)] shall apply to the business of re-insurance between the head office of an insurer in Pakistan and the head office of an insurer not having an office in Pakistan. (3) Any provident society or any person acting on behalf of a provident society who carries on any class of insurance business in contravention of any of the provisions of section 70, section 73 or section 83 or does any one or more of the acts constituting the business of insurance in relation to any insurance business carried on in contravention of any of the said sections shall be punishable with fine which may extend to one thousand rupees. 104. Whoever, in any return, report, certificate, balance-sheet or other document, required by or for the purposes of any fm of the provisions of this Act, wilfully makes a statement false in any material particular, knowing it to be false, shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to one thousand rupees, or with both.

105.-(1)] Any director, managing agent, `manager or other officer or employee of an insurer who wrongfully obtains w possession of any property of the insurer or having any such p property in his possession wrongfully withholds it or wilfully applies it to purposes other than those expressed or authorized by this Act shall on the complaint of the Controller of Insurance made after giving the insurer not less than fifteen days' notice of his intention, or, on the complaint of the insurer or any member or any policy-holder thereof, be punishable with fine which may extend to one thousand rupees and may be ordered by the Court trying the offence to deliver up or refund within a time to be fixed by the Court any such property improperly obtained or wrongfully withheld or wilfully misapplied and in default to suffer imprisonment for a period not exceeding two years. (2) This section shall apply in respect of a provident society as defined in Part III as it applies in respect of an insurer. 106.-(1) If, on the application of the Controller or an Administrator appointed under section 52A or an insurer or any policy-holder or any member of an insurance company or the liquidator of an insurance company (in the event of the insurance company being in liquidation), the Court is satisfied----(a) that any insurer (including in any case where the insurer is an insurance company any person who has taken part in the promotion or formation of the insurance company or any past or present director, managing agent, manager, secretary or liquidator) or any officer, employee or agent of the insurer,(i) has misapplied or retained or become liable or become accountable for any money or property of the insurer ; or (ii) has been guilty of any misfeasance or breach of trust in relation to the insurer ; or (b) that any person, whether he is or has been in any way connected with the affairs of the insurer or not, is in wrongful possession of any money or property of the insurer or having any such money or property in his possession wrongfully withholds it or has converted it to any use other than that of the insurer, or (c) that by reason of any contravention of the provisions of this Act, the amount of the life insurance fund has been diminished ; the court may examine any such insurer, director, managing agent, manager, secretary or liquidator or any such officer, employee or agent of the insurer or such other person, as the case may be, and may compel him to contribute such sums to the assets of the insurer by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust as the Court thinks fit, or to pay such sum as may be found due from him in respect of any money or property of the insurer for which he is liable or accountable or to restore any money or property of the insurer or any part thereof, as the case may be; and where the amount of the life insurance fund has been diminished by reason of any contravention of the provisions of this Act, the Court shall have power to assess the sum by which the amount of the fund has been diminished and to order the person guilty of

such contravention to contribute to the fund the whole or any part of that sum by way of compensation; and in any of the aforesaid cases the Court shall have power to order interest to be paid at such rate and from such time as the Court may deem fit. (2) Without prejudice to the provisions contained in subsection (1) or sub-section (3), where it is proved that any money or property of an insurer has disappeared or has been lost, the Court shall presume that every person in charge of, or having a disposing power over, such money or property at the relevant time (whether a director, manager, principal officer or any other officer) has become accountable for such money or property within the meaning of sub-clause (i) of clause (a) of sub-section (1), and the provisions of that sub-section shall apply accordingly, unless such person proves that the money or property has been utilized or disposed of in the ordinary course of the business of the insurer and for the purpose of that business or that he took all reasonable steps to prevent the disappearance or loss of such money or property or otherwise satisfactorily accounts for such disappearance or loss. (3) Where the insurer is an insurance company and any of the acts referred to in clauses (a), (b) and (c) of sub-section (1) has been committed by any person, every person who was at the relevant time a director, managing agent, manager, liquidator, secretary or other officer of the insurance company shall, for the purposes of that sub-section be deemed to be liable for that act in the same manner and to the same extent as the person who has committed the act, unless he proves that act was committed without his consent or connivance and was not facilitated by any neglect or omission on his part. (4) Where at any stage of the proceedings against any person under this section (hereinafter referred to as the delinquent), the Court is satisfied by affidavit or otherwise---(a) that a prima facie case has been made out against the delinquent ; and (b) that it is just and proper so to do in the interests of the policy-holders of an insurer or of the members of an insurance company, the Court may direct the attachment of(i) any property of the insurer in the possession of the delinquent ; (ii) any property of the delinquent which belongs to him or is deemed to belong to him within the meaning of sub-section (5) ; (iii) any property transferred by the delinquent within two years before the commencement of proceedings under sub-section (1) or during the pendency of such proceedings, if the Court is satisfied by affidavit or otherwise that the transfer was otherwise than in good faith and for consideration. (5) For the purposes of sub-section (4), the following classes of property shall be deemed to belong to a delinquent;

(a) any property standing in the name of any person which by reason of the person being connected with the delinquent, whether by way of relationship or otherwise, or on account of any other relevant circumstances appears to belong to the delinquent; (b) the property of a private company in respect of the affairs of which the delinquent, by himself or through his nominees, relatives, partners or persons interested in any shares of the company is able to exercise or is entitled to acquire control, whether direct or indirect. Explanation.-For the purposes of this section a person shall be deemed to be a nominee of a delinquent, if, whether directly or indirectly, he possesses on behalf of the delinquent, or may be required to exercise on the direction or on behalf of the delinquent, any right or power which is of such a nature as to enable the delinquent to exercise or to entitle the delinquent to acquire control over the company's affairs. (6) Any claim to any property attached under this section or any objection to such attachment shall be made by an application to the Court and it shall be for the claimant or objector to adduce evidence to show that the property is not liable to attachment under this section, and the Court shall proceed to investigate the claim or objection in a summary manner. (7) When disposing of an application under sub-section (1), the Court shall, after giving all persons who appear to it to be interested in any property attached under this section an opportunity of being heard, make such order as it thinks fit respecting the disposal of any such property for the purpose of effectually enforcing any liability under this section, and all such persons shall be deemed to be parties to the proceedings under this section. (8) In any proceedings under this section the Court shall have full powers and exclusive jurisdiction to decide all questions of any nature whatsoever arising thereunder and in particular, with respect to any property attached under this section, and no other Court shall have jurisdiction to decide any such question in any suit or other legal proceeding. (9) In making any order with respect to the disposal of the property of any private company referred to in clause (b) of subsection (5), the Court shall have due regard to the interests of all persons interested in such property other than the delinquent and persons referred to in that clause. (10) This section shall apply notwithstanding that the act is one for which the person concerned may be criminally liable. (11) In proceedings under this section the Court shall have all the powers which a Court has under section 237 of the Companies Act, 1913. (12) This section shall apply in respect of a provident society as defined in Part III as it applies in respect of an insurer. (13) The Court entitled to exercise jurisdiction under this section shall be the High Court within whose jurisdiction the registered office of the insurer is situate (hereinafter referred to as the High Court) and any proceedings under

this section pending immediately before the commencement of the Insurance of (Amendment) Ordinance, 1960, in any court other than the High Court shall, on such commencement, stand transferred to the High Court. (14) The High Court may make rules providing for(a) the manner in which enquiries and proceedings may be held under this section ; (b) any other matter for which provision has to be made for enabling the High Court to effectively exercise its jurisdiction under this section. 107.-(1) Except where proceedings are instituted by the Controller of Insurance, no proceedings under this Act against an insurer or any director, manager or other officer of an insurer or any person who is liable under sub-section (2) of section 41 shall be instituted by any person unless he has previous thereto obtained the sanction of the Advocate General of the Province where the principal place of business in Pakistan of such insurer is situate to the institution of such proceedings. (2) This section shall apply in respect of a provident society as defined in Part III as it applies in respect of an insurer. 108. If in any proceedings, civil or criminal, it appears to the Court hearing the case that a person is or may be liable in respect of negligence, default, breach of duty or breach of trust but that he has acted honestly and reasonably and that having regard to all the circumstances of the case he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, the Court may relieve him either wholly or partly from his liability on such terms as it may think fit. 109. No Court inferior to that of a Magistrate of the first class shall try any offence under this Act. 110.-(1) An appeal shall lie to the Court having jurisdiction from any of the following orders, namely :(a) an order under section 3 refusing to register, or cancelling the registration of, an insurer ; (b) an order under section 5 directing the insurer to change his name ; (c) an order under section 42 or 42A cancelling the licence or the certificate issued to an insurance agent or an employer of agents as the case may be, or an order under section 44A refusing to grant a certificate to or cancelling the certificate of an insurance surveyor ; (d) an order under section 75 refusing to register an amendment of rules ;

(e) an order under section 87 or section 87A; (f) an order made in the course of the winding up or insolvency of an insurer or a provident society. (2) The Court having jurisdiction for the purposes of sub-section (1) shall be the principal Court of civil jurisdiction within whose local limits the principal place of business of the insurer concerned is situate. (3) An appeal shall lie from any order made under subsection (1) to the authority authorized to hear appeals from the decisions of the Court making the same and the decision on such appeal shall be final. (4) No appeal under this section shall be entertained unless it is made before the expiration of four months from the date on which the order appealed against was communicated to the appellant. 111.-(1) Any process or notice required to be served on an insurer or provident society shall be sufficiently served if addressed to any person registered with the Controller of Insurance as a person authorized to accept notices on behalf of the insurer or provident society and left at, or sent by registered post to, the address of such person as registered with the Controller of Insurance. (2) Any notice or other document which is by this Act required to be sent to any policy-holder may be addressed and sent to the person to whom notices respecting such policy are usually sent and any notice so addressed and sent shall be deemed to be notice to the holder of such policy; Provided that, where any person claiming to be interested in a policy as transferee, assignee or nominee has given to an insurer or to a provident society notice in writing of his interest, any notice which is by this Act required to be sent to policyholders shall also be sent to such person at the address specified by him in his notice. 112. Notwithstanding anything to the contrary contained in this Act an insurer carrying on the business of life insurance shall be at liberty to declare an interim bonus or bonuses to policyholders whose policies mature for payment by reason of death or otherwise during the inter-valuation period on the recommendation of the investigating actuary made at the last preceding valuation. 113.-(1) A policy of life insurance under which the whole of the benefits become payable either on the occurrence, or at a fixed interval or fixed intervals after the occurrence, of a contingency which is bound to happen, shall, if all premiums have been paid for at least three consecutive years in the case of a policy issued by an insurer, or five years in the case of a policy issued by a provident society as defined in Part III, acquire a guaranteed surrender value, to which shall be added the surrender value of any subsisting bonus already attached to the policy, and every such policy issued by an insurer shall

show the guaranteed surrender value of the policy at the close of each year after the second year of its currency or at the close of each period of three years throughout the currency of the policy; Provided that the requirements of this sub-section as to the addition of the surrender value of the bonus attaching to a policy at surrender shall be deemed to have been complied with where the method of calculation of the guaranteed surrender value of the policy makes provision for the surrender value of the bonus attaching to the policy; Provided further that the requirements of this sub-section as to the showing of the guaranteed surrender value on a policy shall be deemed to have been complied with where the insurer shows on the policy the guaranteed surrender value of the policy by means of a formula accepted in this behalf by the Controller of Insurance as satisfying the said requirements; Provided further that the provisions of this sub-section as to the showing of the guaranteed surrender value on a policy shall not take effect until after the expiry of six months from such date as the Central Government may, by notification in the official Gazette, appoint in this behalf. (2) Notwithstanding any contract to the contrary, a policy which has acquired a surrender value shall not lapse by reason of the non-payment of further premiums but shall be kept alive to the extent of the paid-up sum insured, and the paid-up sum insured shall for the purposes of this sub-section include in full all subsisting reversionary bonuses that have already attached to the policy, and shall, where the policy is one on which the maximum number of annual premiums payable is fixed and the premiums are of uniform amount, be before the inclusion of such bonuses not less than the amount bearing to the total sum insured by the policy exclusive of bonuses the same proportion as the total period for which premiums have already been paid bears to the maximum period for which premiums were originally payable. (3) A policy kept alive to the extent of the paid-up sum insured under sub-section (2) shall not be entitled by virtue of that sub-section to participate in any profits declared distributable after the conversion of the policy into a paid-up policy. (4) Sub-section (2) and sub-section (3) shall not apply,. (a) where the paid-up sum insured by a policy, being a policy issued by an insurer, is less than one hundred rupees inclusive of any attached bonus, or takes the form of an annuity of less than twenty-five rupees, or where the paid-up sum insured by a policy, being a policy issued by a provident society as defined in Part III, is less than fifty rupees inclusive of any attached bonus or takes the form of an annuity of less than twenty-five rupees, or (b) where the parties after the default has occurred in the payment of the premium agree in writing to some other arrangement, or

(c) to policies in which the surrender value is automatically applied under the terms of the contract to maintaining the policy in force after its lapse through non-payment of premium. 114.-(1) The Central Government may, subject to the condition of previous publication by notification in the official Gazette, make rules 7 to carry out the purposes of this Act. (2) In particular and without prejudice to the generality of the foregoing power, such rules may prescribe(a) the qualifications to be possessed by actuaries ; (b) the manner in which it shall be determined which of the transactions of an insurer are to be deemed for the purposes of this Act to be insurance business transacted in Pakistan; (c) the procedure to be followed by the State Bank of Pakistan in dealing with deposits made in pursuance of this Act, including the receipt of, custody of, withdrawal of, and payment of interest on securities lodged as such deposits, and their inspection and verification by the Controller of Insurance; (e) the manner in which the prospectuses and tables referred to in sub-section (1) of section 41 shall be published and the form in which they shall be drawn up; (f) the matters to be prescribed for the purposes of section 48; (g) the manner in which licences to act as insurance agents may be applied for, issued or cancelled ; (h) the contingencies other than those specified in clauses (a) to (f) of sub-section (2) of section 65 on the happening of which money may be paid by provident societies ; (i) the matters other than those specified in clauses (a) to (o) of sub-section (1) of section 74 on which a provident society shall make rules ; (j) the form of any account, return or register required by Part III and the manner in which such account, return or register shall be verified ; (k) subject to the provisions of this Act, the fees payable thereunder and the manner in which they are to be collected ; (1) the conditions and the matters which may be Prescribed under sub-sections (5), (6), (10) and (12) of section 92 ; (m) any other matter which is to be or may be Prescribed.

(3) Every rule made under this section shall be laid as soon as may be after it is made before the Central Legislature, while it is in session, for a total period of one month which may be comprised in one session or in two or more sessions, and if before the expiry of that period, 6[the Legislature makes any modification in the rule or decides that the rule should not be made, the rule shall, thereafter have effect only in such modified form or be of no effect, as the case may be.

(4) All rules made by a Local Government under the provisions of section 24 of the Provident Insurance Societies Act, v 1912, and in force at the commencement of this Act shall so far as not inconsistent with the provisions of Part III continue in force and have effect as if duly made under this section until they are replaced by rules made under this section.
115. The Central Government may, on the application or with the consent of an insurer, not being a company, alter the forms contained in the Schedules as respects that insurer, for the purpose of adapting them to the circumstances of that insurer; Provided that nothing done under this section shall exempt the insurer from supplying all information required under this Act so far as it is possible for the insurer to do so. 115. The Central Government may, on the application or with the consent of an insurer, not being a company, alter the forms contained in the Schedules as respects that insurer, for the purpose of adapting them to the circumstances of that insurer; Provided that nothing done under this section shall exempt the insurer from supplying all information required under this Act so far as it is possible for the insurer to do so. 116.-(1) The Central Government may, by notification in the official Gazette, exempt any insurer constituted, incorporated or domiciled in an to[Acceding State or a non-Acceding State from any of the provisions of this Act which may be specified in the notification either absolutely or subject to such conditions or modifications as may be specified in the notification; Provided that no such notification shall be issued unless the Central Government is satisfied that insurer constituted, incorporated or domiciled in Pakistan are under the law or practice in such State entitled therein to benefits corresponding to those conferred by the notification or to benefits which in the opinion of the Central Government are at least equivalent thereto. (2) This section shall apply in respect of provident societies as defined in Part III as it applies in respect of insurers.

117. Nothing in this Act shall affect the liability of an insurer being a company or a provident society as defined in Part III being a company to comply with the provisions of the Companies Act, 1913, in matters not otherwise specifically provided for by this Act. 118. Nothing in this Act shall apply to any Trade Union registered under the Trade Unions Act, 1926, or to any insurance business carried on by the Central or by a Provincial Government, or to any provident fund to which the provisions of the Provident Funds Act, 1925, apply, or, if the Controller of Insurance so orders in any case, and to such extent or subject to such conditions or modifications as he specifies in such order, to(a) any fund in existence and officially recognised by the Central Government before the 27th day of January, 1937, maintained by or on behalf of Government servants or Government pensioners for the mutual benefit of contributors to the fund and of their dependents, or (b) any mutual or provident insurance society composed wholly of Government servants or of railway servants which has been exempted from any or all of the provisions of the Provident Insurance Societies Act, 1912. 119. Any person may on payment of a fee of five rupees f inspect the documents filed by an insurer with the Controller of Insurance under clause (f) of sub-section (2) of section 3, and may obtain a copy of any such document or part thereof on payment in advance at the prescribed rate for the making of the copy. 120. The market value on the day of deposit of securities deposited in pursuance of any of the provisions of this Act with the State Bank of Pakistan shall be determined by the State Bank of Pakistan whose decision shall be final. 121-123. [Amendment of section 130, Act, IV of 1882. Amendment of Schedule I, Act IX of 1908. Repeals.] Omitted by the Repealing and Amending Ordinance, 1965 (10 of 1965), s. 3 and 2nd Sch.

PART II PROVISIONS APPLICABLE TO INSURERS

2A. Every insurer shall be subject to all the provisions of this Act in relation to any class of insurance business so long as his liabilities in Pakistan in respect of business of that class remain unsatisfied or not otherwise provided for. 2B. The provisions of this Act shall not apply to an insurer as defined in paragraph (i) or (iii) of sub-clause (a) of clause (9) of section 2 in relation to any class of his insurance business where such insurer has ceased, before the commencement of this Act, to enter into any new contracts of that class of business. 2C.-(1) No person other than------

(a) a public company, or (b) a society registered under the Co-operative Societies Act, 1912 or under any other law for the time being in force in Pakistan relating to co-operative societies, or (c) a body corporate incorporated under the law of any country outside Pakistan not being of the nature of a private company or a subsidiary of a private company, shall start any insurance business in Pakistan and a person, other than a person specified in clause (a), (b) or (c), who, immediately before the commencement of the Insurance (Amendment) Ordinance, 1958, was carrying on such business in Pakistan shall, after the expiry of one year from such commencement, discontinue such business. (2) No Mutual Insurance Company which was not registered, before the commencement of the Insurance (Amendment) Ordinance, 1958, for any class of insurance business, shall be registered for any class of general insurance business and no Mutual Insurance Company which was registered, before such commencement, for any class of insurance business, shall, be registered for any additional class of insurance business unless such company satisfies such conditions as may be prescribed. Explanation.-In this section, `Mutual Insurance Company' has the meaning assigned to it in Part IV of this Act and includes any company constituted or incorporated outside Pakistan which is of the nature of a Mutual Insurance Company. 3A.-(1) An insurer who has been granted a certificate of registration under section 3 shall have the registration renewed annually for each year . (2) An application for the renewal of a registration for any year shall be made by the insurer to the Controller of Insurance before the 31st day of December of the preceding year, and shall be accompanied as provided in sub-section (3) by evidence of payment of the prescribed fee which shall not exceed one thousand rupees for each class of insurance business, but may vary according to the volume of business done by the insurer in Pakistan in each class of insurance business to which the registration relates. (3) The prescribed fee for the renewal of a registration for any year shall be paid into the State Bank of Pakistan], or, where there is no office of that Bank, into the National Bank of Pakistan acting as the agent of that Bank, or into any Government treasury, and the receipt shall be sent along with the application for renewal of the registration. (4) If an insurer fails to apply for renewal of registration before the date specified in sub-section (2) the Controller of Insurance may, so long as an application to the Court under sub-section (5D) of section 3 has not been made, accept an application for renewal of the registration on receipt from the insurer of the fee payable with the application and such penalty, not exceeding the prescribed fee payable by him as the Controller of Insurance may require;

Provided that an appeal shall lie to the Central Government from an order passed by the Controller of Insurance imposing a penalty on the insurer. (5) The Controller of Insurance shall, on fulfilment by the insurer of the requirements of this section, renew the registration and grant him a certificate of renewal of registration. 3B. If, when considering an application for registration under section 3 or at any other time, it appears to the Controller of Insurance that the rates, advantages, terms and conditions offered or to be offered in connection with, or any class, condition or warranty in, any proposal, policy or other forms of any class or sub-class of insurance business are in any respect not workable or sound or are in any respect unrealistic or un-reasonable in relation to the general experience of the business of that class or sub-class in Pakistan, or any provision in the memorandum and articles of association or the instrument constituting or defining the constitution of the insurer is objectionable or that the reinsurance arrangements of the insurer are not adequate, he may, by order in writing and after giving the insurer an opportunity of being heard, issue such directions to the insurer or require the insurer to make within such time as may be specified in the order such modifications, additions, or omissions in the said rates, advantages, terms, conditions, clauses, warranties, memorandum and articles of association, instrument or reinsurance arrangements as he may think necessary; Provided that no directions under this section shall be issued without the prior approval of the Central Government to an insurer already registered under this Act. 3C.-(1) Every insurer shall declare to the Controller of Insurance the total amount of premiums including agents' balances in respect of. fire, marine and miscellaneous insurance business outstanding on the first day of February, 1958, and shall recover the same within such time as may be allowed and comply with such directions as may be given, by the Controller. (2) Every insurance agent and every employer of agents shall, within such time as may be allowed to him by the Controller of Insurance, pay to the insurer for whom he has been acting as an insurance agent or employer of agents, all amounts due to the insurer on account of the premiums in respect of general insurance business received by him on behalf of the insurer and outstanding against him as on the first day of February, 1958. (3) No insurer shall write off any premium in respect of general insurance business which was outstanding on the first day of February, 1958, without the prior approval of the Controller of Insurance. (4) No insurer shall assume in Pakistan any risk in respect of general insurance business unless and until the premium payable or such part thereof as may be prescribed, has been received by him or has been guaranteed to be paid by such person in such manner and within such time as may be prescribed;

Provided that nothing contained in this sub-section shall apply to the insurance of the properties or interests of the Central or a Provincial Government, if such Government gives an undertaking to pay the premium payable within such time and in such manner as may be prescribed. (5) Any refund of premium which may become due to the insured on account of the cancellation of a policy of general insurance or alteration in its terms and conditions shall be paid directly to the insured by a crossed or order cheque or by money order and a proper receipt shall be obtained from the insured, ' and such refund shall in no case be credited to the account of the agent. 3D.-(1) No insurer shall reinsure outside Pakistan any insurance business or any part thereof underwritten by him in Pakistan which is in excess of its treaty reinsurance arrangement a unless a certificate has been obtained from the Controller to the effect that such excess cannot be placed within Pakistan; Provided that nothing contained in this sub-section shall be deemed to prohibit reinsurance by the Pakistan Insurance Corporation. Explanation I.-For the purposes of this sub-section a reinsurance arrangement shall not be deemed to be a treaty reinsurance arrangement if such arrangement operates in a casual manner and in determining whether a particular reinsurance arrangement is a treaty reinsurance arrangement or not, the decision of the Controller of Insurance shall be final. Explanation II.-For the purposes of this sub-section a reinsurance arrangement in respect of life insurance business entered into by an insurer domiciled elsewhere than in Pakistan with his head office shall be deemed to be treaty reinsurance arrangement to the extent determined by the Controller of Insurance. (2) Every insurer shall, when so required, furnish to the Controller of Insurance a certified statement giving the salient features of his reinsurance arrangements or any other information about his reinsurance arrangements as may be required by the Controller. (3) No person shall insure outside Pakistan any risk or any part thereof in respect of any property or interests in Pakistan unless a certificate has been obtained from the Controller to the effect that the risk in question cannot be insured in Pakistan; Provided that the Controller may grant an exemption to any person from the requirements of this sub-section in respect of such property or interests and for such period as he may deem fit. 12A.-(1) The books and records of every insurer, in the SP case of an insurer specified in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2 in respect of all insurance business transacted by him, and in the case of any other insurer in respect of the insurance business transacted by him in Pakistan, shall be audited annually by an auditor

or auditors to be appointed every year by the Controller of Insurance for making such investigation and submitting such reports as may be prescribed; Provided that the auditor or any of the auditors appointed under this section for any year of account shall not be the auditor or auditors employed by the insurer for an audit under the Companies Act, 1913 or under section 12 of this Act for that year of 1913 account. (2) An auditor appointed under this section shall have a right of access to all such books of account, registers, vouchers, correspondence and other documents of the insurer, and shall be entitled to require from the directors and officers of the insurer such information and explanation, as may be necessary for the performance of his functions and duties under this section. (3) Every report prepared by an auditor or auditors appointed under this section shall be submitted in quadruplicate to the Controller who may take such action thereon in accordance with the provisions of this Act as he deems fit. (4) An auditor appointed under this section shall be paid by the insurer such fees as may be prescribed and in prescribing such fees regard shall be had to the size of the insurer and the class or classes of business transacted by him. (5) The fee payable by an insurer under sub-section (4) shall be paid to the auditor within such time as may be specified by the Controller. 17A. This Act not to apply to preparation of accounts, etc., for periods prior to this Act coming into force. Omitted by the Insurance (Amdt.) Act, 1958 (XXVII of 1958), s. 17. 27A.-(1) Every insurer transacting general insurance business in Pakistan shall have assets invested in Pakistan exceeding his liabilities by at least a sum of five lakhs of rupees or ten per cent. of the net premium income, whichever is the higher ; Provided that if any insurer defined in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2 has a paid-up capital of less than five lakhs of rupees or has no paid-up capital, the assets to be invested by him in Pakistan shall exceed his liabilities by the sum of at least one and a half lakh of rupees for every class of general insurance business transacted or ten per cent. of his net premium income, whichever is higher. (2) For the purpose of sub-section (1), the following shall be deemed to be the liability of the insurer, namely :(a) the net claims outstanding in respect of general insurance business in Pakistan ; (b) forty per cent. of the net premium in respect of Fire, Marine and Miscellaneous insurance business written in Pakistan ;

INVESTMENT, LOANS AND MANAGEMENT

32A.-(1) The Central Government may, if it is satisfied that any insurer in the case of an insurer specified in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2 in respect of all insurance business transacted by him and in the case of any other insurer in respect of the insurance business transacted by him in Pakistan is paying any person remuneration, whether by way of commission or otherwise, on a scale disproportionate according to the normal standards prevailing in insurance business to the resources of the insurer, call upon the insurer to comply within six months with such directions as it may think fit to issue in the matter and if compliance with the direction so issued required the modification of any of the terms of the contract entered into by the insurer with such person no compensation shall be payable to such person by the insurer by reason only of such modification or of the resignation of such person if the modified terms are not acceptable to him and no payment by way of renewal commission or otherwise shall be made to such person by the insurer in respect of any payments made after the date of such resignation except at such rates as may be approved by the Central Government in this behalf. (2) Every insurer shall before the 30th day of June, 1958, and thereafter before the first day of March every year submit to the Controller of Insurance a statement in the prescribed form showing the remuneration paid by way of commission or otherwise to any person in cases where such remuneration exceeds the sum of six thousand rupees in the previous calendar year. (3) Where an insurer pays any person remuneration exceeding six thousand rupees a year in pursuance of any agreement between him and such person, the Controller may, by notice in writing, require the insurer to submit a certified copy of such agreement and the insurer shall comply with any such requisition within the time specified in the notice. 32B.-(1) Notwithstanding anything to the contrary contained in the Companies Act, 1913, or in the articles of association of the insurer, if a company, or in any contract or agreement, no insurer shall, after the expiry of one year from the commencement of the Insurance (Amendment) Act, 1958, be directed or managed by, or employ as manager or officer or in any capacity, any person whose remuneration or any part thereof takes the form of commission or bonus on the total insurance business or on the total business of any class or sub-class of insurance business or on a part of any class or sub-class of general insurance business transacted by the insurer; Provided that nothing in this sub-section shall be deemed to prohibit-----(i) the payment of commission to an insurance agent or employer of agents in respect of any insurance business procured by or through him ; (ii) the employment of any individual in a clerical or other subordinate capacity who, as an insurance agent, receives commission in respect of insurance business procured by him ;

(iii) the employment as an officer of any individual who receives commission in respect of life insurance business procured by him in his capacity as an insurance agent or as an employer of agents ; (iv) the payment of a share in the profit of general insurance business ; (v) the payment of bonus in any year on a uniform basis to all salaried employees or any class of them by way of additional remuneration, such bonus, in the case of any employee, not exceeding in amount the equivalent of his salary for a period which, in the opinion of the Central Government, is reasonable having regard to the circumstances of the case. (2) No person shall have any right, whether in contract or otherwise, to any compensation for any loss incurred by reason of the operation of any provision of this section.

COMMISSION AND REBATES AND LICENSING OF AGENTS

40A.-(1) No person shall pay or contract to pay to an insurance agent, and no insurance agent shall receive or contract to receive by way of commission or remuneration in any form in respect of any policy of life insurance issued in Pakistan by an insurer after the 31st day of March, 1958, and effected through an insurance agent an amount exceeding(a) where the policy grants an immediate annuity or a deferred annuity in consideration of a single premium or where only one premium is payable on the policy, two per cent. of that premium ; (b) where the policy grants a deferred annuity in consideration of more than one premium, seven and a half per cent. of the first year's premium, and two per cent. of each renewal premium, payable on the policy ; and (c) in any other case, thirty-five per cent. of the first year's premium, ten per cent. of the second year's renewal premium and thereafter five per cent. of each renewal premium, payable on the policy; Provided that in a case referred to in clause (c), an insurer, during the first ten years of his business, may pay to an insurance agent, and an insurance agent may receive from such an insurer, fifty per cent. of the first year's premium payable on the policy. (2) No person shall pay or contract to pay to an insurance agent, and no insurance agent shall receive or contract to receive by way of commission or remuneration in any form, in respect of any policy of general insurance issued in Pakistan by an insurer after the commencement of the Insurance (Amendment) Ordinance, 1958, and effected through an insurance agent an amount exceeding-

(a) where the policy relates to fire or miscellaneous insurance, fifteen per cent. of the premium payable on the policy, and (b) where the policy relates to marine insurance, ten per cent. of the premium payable on the policy; Provided that a further amount not exceeding five per cent. of the premium payable on the policy may be paid to an insurance agent who procures a yearly business yielding a premium income of not less than thirty thousand rupees and satisfies such other conditions as may be prescribed. (3) No person shall pay or contract to pay to any employer of agents and no employer of agents shall receive or contract to receive, by way of commission, over-riding commission or any other remuneration in any form, in respect of any policy of general insurance issued by an insurer in Pakistan after the commencement of the Insurance (Amendment) Ordinance, 1958, and effected through an employer of agents, an amount exceeding(a) in the case referred to in clause (a) of sub-section (2), fifteen per cent. of the premium payable on the policy, and (b) in the case referred to in clause (b) of sub-section (2), ten per cent. of the premium payable on the policy, inclusive of any commission payable to any insurance agent in respect of the said policy; Provided that a further amount not exceeding five per cent. of the premium payable on a policy may be paid to an employer of agents who procures a yearly business yielding a premium income of not less than thirty thousand rupees and satisfies such other conditions as may be prescribed; Provided further that the Central Government may in such circumstances and to such extent and for such period as may be specified, authorize the payment of commission or remuneration exceeding the limits specified in this sub-section to an employer of agents acting on behalf of an insurer incorporated or domiciled elsewhere than in Pakistan if such employer of agents carries out and has continuously carried out in his own office duties on behalf of the insurer which would otherwise have been performed by the insurer. (4) No insurer shall pay or contract to pay outside Pakistan to any person any commission in any form in respect of the insurance business transacted by such person in Pakistan and no insurer shall receive or contract to receive outside Pakistan from any person any commission in any form in respect of any business reinsured abroad. (5) Without prejudice to the provisions of section 102 in respect of a contravention of any of the provisions of the preceding sub-section by an insurer, an insurance agent or em-

ployer of agents who contravenes any of the provisions of subsections (1), (2), (3), or (4) shall be punishable with fine which may extend to one thousand rupees. (6) An insurer incorporated outside Pakistan who receives or contracts to receive any commission in respect of any business transacted in Pakistan and reinsured abroad shall not be deemed to have contravened the provisions of sub-section (4) if all amounts received by him outside Pakistan in this respect have been fully credited to the Pakistan revenue account. 40B.-(1) No insurer shall, in respect of life insurance business transacted by him in Pakistan, spend as expenses of life management in any calendar year an amount in excess of the prescribed limits and in prescribing any such limits regard shall be had to the size and age of the insurer and the provision generally made for expenses of management in the premium rates of insurers: Provided that the Controller of Insurance may, on an application made to him in this behalf, condone the contravention of this sub-section by an insurer who has, on reasonable grounds, spent as such expenses an amount in excess of such limits. (2) Every insurer transacting life insurance business in Pakistan shall incorporate in the revenue account----(a) a certificate signed by the chairman and two directors and by the principal officer of the insurer, and an auditor's certificate, certifying that all expenses of management in respect of life insurance business transacted by the insurer in Pakistan have been fully debited in the revenue account as expenses ; and (b) if the insurer is carrying on any other class of insurance business in addition to life insurance business, an auditor's certificate certifying that all charges incurred in respect of his life insurance business and in respect of his business other than life insurance business have been fully debited in the respective revenue accounts. Explanation.-In this section "expenses of management" means all charges wherever incurred whether directly or indirectly, and includes :-------(i) commission payments of all kinds ; (ii) a proper share of expenses capitalised ; and (iii) in the case of an insurer having his principal place of business outside Pakistan, a proper share of head office expenses which shall not exceed such percentage of the total net premiums, that is to say, gross premiums written direct in Pakistan plus reinsurances accepted minus reinsurances ceded during the year in respect of life insurance business transacted by him in Pakistan as may be prescribed, but does not in the case of an insurer having his principal place of business in Pakistan include any share of head office expenses in respect of life insurance business transacted by him outside Pakistan.

40C.-(1) No insurer shall, in respect of any class of general insurance business transacted by him in Pakistan, spend in ma any calendar year as expenses of management, including commission or remuneration for procuring business, an amount in excess of the prescribed limits and in prescribing any such limits regard shall be had to the size and age of the insurer; Provided that the Controller of Insurance may on an application made to him in this behalf, condone the contravention of this sub-section by an insurer who has, on reasonable grounds, spent as such expenses an amount in excess of such limits. (2) Every insurer as aforesaid shall incorporate in the revenue account a certificate signed by the chairman, two directors and the principal officer of the insurer, and an auditor's certificate, certifying that all expenses of management wherever incurred, whether directly or indirectly, in respect of the business referred to in this section, have been fully debited in the revenue account as expenses. Explanation.-In this section,-------(a) "expenses of management" means all charges, wherever incurred whether directly or indirectly including commission payments of all kinds and, in the case of an insurer having his principal place of business outside Pakistan, a proper share of head office expenses which shall not exceed such percentage of the total net premiums, that is to say, gross premiums written direct in Pakistan plus reinsurances accepted minus reinsurances ceded during the year as may be prescribed ; and (b) "insurance business transacted in Pakistan" includes insurance business, wherever effected, relating to any property situate in Pakistan or to any vessel or aircraft registered in Pakistan. 40D.-For the purposes of sections 32A, 40, 40A, 40B and 40C, "remuneration" shall be deemed to include travelling and entertainment allowances and all other payments or disbursements of any kind or form. 42A.-(1) The Controller of Insurance or an officer authorized by him in this behalf shall, in the prescribed manner and on payment of the prescribed fee, which shall not be more than fifty rupees, issue to any person making an application in the prescribed manner a certificate to act as an employer of agents on behalf of an insurer for the purpose of procuring life insurance business or general insurance business, as the case may be, if----(a) in the case of an individual, who does not suffer from any of the disqualifications mentioned in subsection (4) of section 42, or (b) in the case of a company or firm, any of its directors or partners does not suffer from any of the said disqualifications.

(2) A separate application shall be made and a separate certificate obtained for life insurance business and general insurance business. (3) For the purposes of sections 40 and 40A of this Act no employer of agents who is certified to act as an employer of agents for life insurance business shall be deemed to be an employer of agents for general insurance business and no employer of agents who is certified to act as an employer of agents for general insurance business shall be deemed to be an employer of agents for life insurance business. (4) A certificate issued under this section shall entitle the holder thereof to act as an employer of agents for any insurer. (5) A certificate issued under this section shall remain in force for a period of one year only from the date of issue, but shall, on application made in this behalf, be renewed from year to year if(i) an application in the prescribed form for renewal of the certificate reaches the issuing authority before the date on which the certificate ceases to remain in force ; (ii) the applicant has paid the prescribed renewal fee which shall not be more than fifty rupees; (iii) in the case of an individual, the applicant or in the case of a company or firm, any of its directors or partners does not suffer from any of the disqualifications mentioned in clauses (b), (c) or (d) of sub-section (4) of section 42 ; and (iv) the applicant has procured or caused to be procured such minimum amounts of insurance business and has complied with such conditions as may be prescribed in this behalf; Provided that an application for renewal of the certificate which does not reach the issuing authority before the certificate ceases to remain in force shall be entertained if the applicant has submitted an application within twelve months from the date the certificate ceases to remain in force and has paid an additional fee of the prescribed amount not exceeding fifteen rupees by way of penalty. (6) Where it is found that an employer of agents being an individual is, or being a company or firm contains a director or partner who is, suffering from any of the disqualifications mentioned in sub-section (4) of section 42, without prejudice to any other penalty to which he may be liable, the Controller shall, and where an employer of agents has contravened any of the provisions of this Act or any rule or order made thereunder may, cancel the certificate or certificates issued under this section to such employer of agents.

(7) ff a certificate issued under this section is not renewed or is cancelled under sub-section (6), the Controller of Insurance may refuse to grant a fresh certificate to the employer of agents for such period as he deems fit. (8) The authority which issued any certificate under this section may issue a duplicate certificate to replace a certificate lost, destroyed or mutilated on payment of the prescribed fee, which shall not be more than five rupees. (9) Any person who acts as an employer of agents without holding a certificate issued under this section to act as such shall be punishable with fine which may extend to five hundred rupees and any insurer who appoints as an employer of agents any person not entitled to act as such or transacts any insurance business in Pakistan through any such person, shall be punishable with fine which may extend to one thousand rupees. (10) Where the person contravening sub-section (9) is a company or a firm then, without prejudice to any other proceedings which may be taken against the company or firm, every director, manager, secretary or any other officer of the company, and every partner of the firm who is knowingly a party to such contravention shall be punishable with fine which may extend to five hundred rupees. (11) The provisions of sub-sections (9) and (10) shall not take effect until the expiry of six months from the commencement of the Insurance (Amendment) Ordinance, 1958. 42-B.-For the purposes of ensuring compliance with the provisions of sections 40, 40A, 40B, 40C, 42, 42A, 44A and 44B the Controller may, by notice,(a) require from an insurer, or an employer of agents or an insurance agent, or an insurance surveyor such information certified, if so required by an auditor or an actuary, as he may consider necessary ; (b) issue such directions to the insurer as he may deem necessary ; (c) require an insurer or an .employer of agents or an insurance agent or an insurance surveyor to submit for his examination at the principal place of business of the insurer in Pakistan, any book of account, register or other document or to supply any statement which may be specified in the notice. 44A.-(1) No person other than an insurance surveyor holding an appropriate certificate under this section shall, after the expiry of six months from the commencement of the Insurance (Amendment) Act, 1958, undertake in Pakistan the surveying, assessment or adjustment of any loss in respect of general insurance business and no insurer shall pay any claim in respect of general insurance business transacted by him in Pakistan unless the loss has been surveyed, assessed or adjusted, as the case may be, by an insurance surveyor holding an appropriate certificate under this section;

44B.-(1) If in any case the Controller of Insurance has reason to believe that an insurance surveyor has given a false report or has grossly over-assessed or under-assessed a loss or has made an adjustment of loss in a grossly unjust manner, he may direct the insurer to arrange for another survey of that loss through any other surveyor or surveyors approved by him. (2) In the event of the second survey made under subsection (1) the surveyor or surveyors shall forward one copy of the report to the Controller who on considering such report and after giving an opportunity to the first surveyor to be heard, may cancel the certificate of the surveyor concerned in accordance with the provisions of sub-section (7) of section 44A.

SPECIAL PROVISIONS OF LAW

47A.-(1) Any dispute arising under a policy of life insurance assuring a sum not exceeding two thousand rupees (exclusive of any profit or bonus not being a guaranteed profit or bonus) issued by an insurer in respect of insurance business transacted by him in Pakistan, between the claimant and the insurer who issued the policy or has otherwise assumed the liabilities in respect thereof, may, at the option of the claimant, be referred to the Controller of Insurance for settlement and the Controller may, after hearing the parties and taking such evidence as he may, in his absolute discretion, consider necessary, settle the dispute. (2) The decision of the Controller under this section shall be final and shall not be called in question in any Court and shall be deemed to be a decree of a Court which would have been competent to decide the dispute and be executed accordingly. (3) The Controller shall, in respect of the duties performed by him for the purpose of this section charge and collect such fees whether by way of percentage or otherwise as may be prescribed. 48A. No insurance agent who solicits or procures life s insurance business, and no employer of agents who procures life insurance business, shall be eligible to be or remain a director of any insurance company carrying on life insurance business; 49A. No insurer transacting life insurance business shall, notwithstanding anything contained in the Memorandum or Articles of Association or any other document of such insurer, after the commencement of the Insurance (Amendment) Ordinance, 1961, allocate for the benefit of policy-holders, a sum less than nine-tenths of the surplus arising out of life insurance business. Explanation.-In this section, "surplus" means the sum shown as surplus in Form I of the Fourth Schedule enhanced by any sum transferred to any reserve other than a reserve for depreciation of investments.

PART II

MANAGEMENT BY ADMINISTRATOR
52A.-(1) If at any time the Controller has reason to believe that an insurer carrying on insurance business is acting in a manner likely to be prejudicial to the interest of holders of insurance policies, he may, after giving such opportunity to the insurer to be heard as he thinks fit, make a report thereon to the Central Government. (2) The Central Government, if it is of opinion after considering the report that it is necessary or proper to do so, may appoint an Administrator to manage the affairs of the insurer under the direction and control of the Controller. (3) The Administrator shall receive such remuneration as the Central Government may direct and the Central Government may at any time cancel the appointment and appoint some other person as Administrator. (4) The management of the business of the insurer shall as on and after the date of appointment of the Administrator vest in such Administrator but except with the leave of the Controller the Administrator shall not issue any further policies. (5) As on and after the date of appointment of the Administrator any person vested with any such management immediately prior to that date shall be divested of that management. (6) The Controller may issue such directions to the Administrator as to his powers and duties as he deems desirable in the circumstances of the case, and the Administrator may apply to the Controller at any time for instructions as to the manner in which he shall conduct the management of the business of the insurer or in relation to any matter arising in the course of such management. 52B.-(1) The Administrator shall conduct the management of the business of the insurer with the greatest economy compatible with efficiency and shall, as soon as may be possible, file with the Controller a report stating which of the following courses is in the circumstances most advantageous to the general interest of the holders of insurance policies, namely :(a) the transfer of the business of the insurer to some other insurer ; (b) the carrying on of its business by the insurer (in case of life insurance business whether with the policies of the business continued for the original sum insured with the addition of bonuses that attach to the policies or for reduced amounts) ; (c) the winding up of business of the insurer ; or (d) such other course as he deems advisable.

(2) On the filing of the report with the Controller, the Controller may take such action as he thinks fit for promoting the interest of the holders of insurance policies in general. (3) Any order passed by the Controller under sub-section (2) shall be binding on all persons concerned, and shall have effect notwithstanding anything in the Memorandum or Articles of Association of the insurer, if a company. 52C. (1) If the Administrated is satisfied that any person has rendered himself liable to be proceeded against under section 106, he may, pending the institution of proceedings against such person under that section, by order in writing prohibit him or any other person from transferring or otherwise disposing of any property which, in the opinion of the Administrator, would be liable to attachment in proceedings under that section. (2) Any person aggrieved by an order made by the Administrator under sub-section (1) may, within fourteen days from the date on which the order is served on him, appeal against such order to the Central Government and the Central Government may pass such order thereon as it thinks fit. (3) An order made by the Administrator under sub-section (1) shall, subject to any order made by the Central Government on appeal, be in force for a period of three months from the date of the order unless, before the expiry of the said period, an application is made under sub-section (1) of section 106 to the court competent to exercise jurisdiction under that sub-section, and when such an application is made, the order shall, subject to any order made by that Court, continue in force as if it were an order of attachment made by that Court in proceedings under that section. (4) An order made by the Administrator under this section shall,-------(a) in the case of an order affecting a corporation or firm, be served in the manner provided for the service of summons in rule 2 of Order XXIX or rule 3 of Order XXX, as the case may be, in the First Schedule to the Code of Civil Procedure, 1908, and (b) in the case of an order affecting a person not being a corporation or firm, be served on such person,---(i) personally, by delivering or tendering to him the order, or (ii) by post, or (iii) where the person cannot be found, by leaving a copy of the order with some adult male member of his family or by affixing such copy to some conspicuous part of the premises in which he is known to have last resided or carried on business or personally worked for gain, and every such order shall also be published in the official Gazette.

(5) If any question arises whether a person was duly served with an order under sub-section (4) the publication of the order in the official Gazette shall be conclusive proof that the order was so served, and a failure to comply with the provisions of clause (a) or clause (b) of sub-section (4) shall not affect the validity of the order. (6) Notwithstanding anything contained in this section, any property in respect of which an order has been made by the Administrator may, with the previous permission of the Administrator and subject to such terms and conditions as he may impose, be transferred or otherwise disposed of. (7) Notwithstanding anything contained in any other law for the time being in force, the transfer or other disposition of any property in contravention of any order made by the Administrator under this section or of any terms and conditions imposed by him shall be void. (8) For the purpose of enabling him to form an opinion as to whether any property would be liable to attachment in proceedings under section 106 or for the purpose of enabling him to institute proceedings under that section, the Administrator may require any person to furnish information on such points or matters as, in the opinion of the Administrator may be relevant for the purpose, and any person so required shall be deemed to be legally bound to furnish such information within the meaning of section 176 of the Pakistan Penal Code. (9) The Administrator shall have all the powers of a civil court under the Code of Civil Procedure, 1908, while trying a suit in respect of the following matters, namely :(a) summoning, and enforcing the attendance of witnesses and examining them on oath ; (b) requiring the production of documents ; and (c) receiving evidence on affidavits ; and any proceeding before the Administrator under this section shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Pakistan Penal Code. (10) Save as provided in this section or in section 106, and notwithstanding anything contained in any other law for the time being in force,(a) no suit or other legal proceeding shall lie in any court to set aside or modify any order of the Administrator or the Central Government made under this section, and (b) no court shall pass any decree, grant any injunction or make any other order which shall have the effect of nullifying or affecting in any way any such order.

52D. The Administrator may, at any time during the continuance of his appointment with respect to any insurer and after giving an opportunity to the persons concerned to be heard, cancel or vary (either unconditionally or subject to such conditions as he thinks fit to impose) any contract or agreement (other than a policy) between the insurer and any other person which the Administrator is satisfied is prejudicial to the interests of holders of insurance policies. 52E. If at any time, on a report made by the Controller in this behalf, it appears to the Central Government that the purpose of the Order appointing the Administrator has been fulfilled or that for any reason it is undesirable that the order of appointment should remain in force, the Central Government may cancel the order and thereupon the Administrator shall be divested of the management of the insurance business which shall, unless otherwise directed by the Central Government, again vest in the person in whom it was vested immediately prior to the date of appointment of the Administrator. 52F. Any order or decision of the Central Government made in pursuance of section 52A or section 52E shall be final and shall not be called in question in any court. 52G. If any director or officer of the insurer or any other person fails to deliver to the Administrator any books of account, registers or any other documents in his custody relating to the business of the insurer the management of which has vested in the Administrator, or retains any property of such insurer, he shall be punishable with imprisonment which may extend to six months, or with fine which may extend to one thousand rupees, or with both. 52H.-(1) No suit, prosecution or other legal proceeding shall lie against an Administrator for anything which is in good faith done or intended to be done in pursuance of section 52A, section 52B, section 52C or section 52D. (2) No suit or other legal proceeding shall lie against the Central Government or the Controller for any damage caused or likely to be caused by anything which is in good faith done or intended to be done under section 52A, section 52B or section 5213. 53A. Notwithstanding anything contained in any other law, in ascertaining for any purpose of this Act the solvency or otherwise of an insurer, no account shall be taken of any assets of the insurer consisting of unpaid-up share capital.

PART III PROVIDENT SOCIETIES

70A.-(1) Every provident society registered under this Act, or under the Provident Insurance Societies Act, 1912, shall have its registration renewed annually for each period of twelve months after that ending on the 30th day of June, 1942. (2) An application for the renewal of a registration shall be made by the society to the Controller of Insurance before the 30th day of June preceding the period for which renewal is sought, and shall be accompanied as provided in sub-section (3) by evidence

of payment of the prescribed fee which shall not exceed two hundred rupees but may vary according to the volume of insurance business done by the society. (3) The prescribed fee for the renewal of a registration for any year shall be paid into the State Bank of Pakistan], or, where there is no office of that Bank, into the Imperial Bank of India acting as the agent of that Bank, or into any Government treasury, and the receipt shall be sent along with the application for renewal of the registration. (4) If a provident society fails to apply for renewal of registration before the date specified in sub-section (2) the Controller of Insurance may, so long as he has taken no action under section 88 to have the society wound up, accept an application for renewal of registration on receipt from the society of the fee payable with the application and such penalty, not exceeding the prescribed fee payable by the society, as he may require. (5) The Controller of Insurance shall, on being satisfied that the society has fulfilled the requirements of this section, renew the registration and grant it a certificate of renewal of registration. 70B.-(1) Every provident society registered under section 70 before the commencement of the Insurance (Amendment) Act, 1941, shall, before the expiration of three months from the commencement of the Insurance (Amendment) Act, 1941, furnish in to the Controller of Insurance such particulars in addition to those already supplied for the purpose of obtaining registration, as are required by sub-section (2) of section 70 of this Act as of amended by the Insurance (Amendment) Act, 1941. (2) Every provident society registered under the provisions of the Provident Insurance Societies Act, 1912, shall, before the expiration of three months from the commencement of the Insurance (Amendment) Act, 1941, furnish to the Controller of Insurance so far as it has not already done so the documents and information required by clauses (a) and (b) of sub-section (2) of section 70 to accompany an application by a provident society for registration under that section.

(3) When any alteration occurs or is made which affects any of the matters which are required under the provisions of sub-section (2) of section 70 to accompany an application by a provident society for registration under that section, or are to be furnished to the Controller of Insurance under this section, the provident society shall furnish forthwith to the Controller of Insurance full particulars duly authenticated of such alteration.

73A.-(1) A provident society shall not be registered by a name identical with that by which an insurer or another provident society in existence is already registered, or so nearly resembling that name as to be calculated to deceive, except when the provident society in existence is in the course of being dissolved and signifies its consent, or the insurer in existence signifies his consent, to the Controller of Insurance. (2) If a provident society, through inadvertence or otherwise, is without such consent as aforesaid registered by a name identical with that by which an insurer or another provident society already in existence is registered, or so nearly resembling it as to be calculated to deceive, the first-mentioned society shall if called upon to do so by the Controller of Insurance on the application of the insurer or the second-mentioned society, change its name within a time to be fixed by the Controller of Insurance; Provided that nothing in this section shall apply to any provident society carrying on business before the commencement of the Insurance (Amendment) Act, 1946. 87A.-(1) The insurance business of a provident society may be transferred to any person or transferred to or amalgamated with the insurance business of any other provident society in accordance with a scheme prepared under this section and sanctioned by the Controller of Insurance. (2) Any scheme prepared under this section shall set out the agreement under which the transfer or amalgamation is proposed to be effected, and shall contain such further provisions as may be necessary for giving effect to the scheme. (3) Before an application is made to the Controller of Insurance to sanction any such scheme, notice of the intention to make the application together with a statement of the nature of the amalgamation or transfer, as the case may be, and of the reason therefor, shall at least two months before the application is made, be sent to the Controller of Insurance and certified copies, four in number, of each of the following documents shall be furnished to him, and other such copies shall during the two months aforesaid be kept open for the inspection of the members and policy-holders at the principal and branch offices of the provident societies concerned, namely (a) a draft of the agreement or deed under which it is proposed to effect the amalgamation or transfer, (b) balance-sheets in respect of the insurance business of each of the provident societies concerned in such amalgamation or transfer, (c) actuarial reports and abstracts in respect of the insurance business of each of the provident societies so concerned, (d) a report on the proposed amalgamation or transfer, prepared by an independent actuary.

(e) any other reports on which the scheme of amalgamation or transfer was founded ; and the balance-sheets, reports and abstracts referred to in clauses (b), (c) and (d) shall all be prepared as at the date at which the amalgamation or transfer if sanctioned by the Controller of Insurance is to take effect, which date shall not be more than twelve months before the date on which the application to the Controller of Insurance is made under this section; Provided that the Controller of Insurance may exempt the provident society or societies concerned from furnishing to him and from keeping open for inspection any one or more of the above documents. (4) When any application such as is referred to in subsection (3) is made to the Controller of Insurance, he may require, if for special reasons he so directs, notice of the application to be sent to every person resident in Pakistan or an Acceding State or a non-Acceding State who is the holder of a policy of any provident society concerned and may cause a statement of the nature and terms of the amalgamation or transfer, as the case may be, to be published in such manner and for such periods as he may direct, and after hearing the societies concerned, such policy-holders as apply to be heard and such other persons as he may deem fit, may sanction the arrangement, if he is satisfied that no sufficient objection to the arrangement has been established and shall make such consequential orders as are necessary to give effect to the arrangement, including orders as to the disposal of any deposit made under section 73; Provided that------(a) no part of the deposit made by any party to the amalgamation or transfer shall be returned except where, after effect is given to the arrangement the whole of the deposit to be made by the provident society carrying on the amalgamated business or the person to whom the business is transferred is completed ; (b) only so much shall be returned as is no longer required to complete the deposit last mentioned in clause (a) ; (c) while the deposit last mentioned in clause (a) remains uncompleted, no accession, resulting from the arrangement, to the amount already deposited by the provident society carrying on the amalgamated business or the person to whom the business is transferred shall be appropriated as payment or part payment of any instalment of deposit subsequently due from it or him under section 73. (5) A copy of the order under sub-section (4) sanctioning or refusing to sanction the arrangement shall be sent to each of the societies concerned and to each of the policy-holders who applied to be heard. (6) If the scheme involves a reduction of the amount of the insurance and other contracts of the transfer or society or of any or all of the societies concerned in the amalgamation,

the Controller of Insurance may sanction the scheme, reducing the amount of such contracts upon such terms and subject to such conditions as he may think proper, and the reduction of the contracts as sanctioned by the Controller of Insurance shall be valid and binding on all the parties concerned. 90A. Notwithstanding anything to the contrary contained in the Companies Act, 1913, the provisions of sections 91, 92 and 93 shall apply to any liquidator appointed to wind up a provident society, whether by the Court, the Controller of Insurance or the society itself.

PART IV
MUTUAL INSURANCE COMPANIES AND CO-OPERATIVE LIFE INSURANCE SOCIETIES.
98A. The provisions of section 29 shall apply to Cooperative Life Insurance Societies as they apply to other insurers, so however that in such application the references in the second proviso to sub-section (1) of the said section to the commencement of this Act shall be construed as references to the commencement of the Insurance (Amendment) Act, 1946. 98A. The provisions of section 29 shall apply to Cooperative Life Insurance Societies as they apply to other insurers, so however that in such application the references in the second proviso to sub-section (1) of the said section to the commencement of this Act shall be construed as references to the commencement of the Insurance (Amendment) Act, 1946. MISCELLANEOUS 106A.-(1) When application is made to the Court for the making of any order to which this section applies the Court shall, unless the Controller of Insurance has himself made the application or has been made a party thereto, send a copy of the application together with intimation of the date fixed for the hearing thereof to the Controller of Insurance, and shall give him an opportunity of being heard. (2) The orders to which this section applies are the following, namely :----(a) an order for the attachment in execution of a decree of any deposit made under section 7 or section 98 ; (b) an order under section 9 or section 59 for the return of any such deposit ; (c) an order under section 36 sanctioning any arrangement for the transfer or amalgamation of life insurance business or any order consequential thereon ;

(d) an order for the winding up of an insurance company or a provident society ; (e) an order under section 58 confirming a scheme for the partial winding up of an insurance company ; (f) an order under section 89 reducing the amount of the insurance contracts of a provident society. 110A. The Controller of Insurance may by general or special order delegate any of his powers or duties under this Act to any person subordinate to him. The exercise or discharge of any of the powers or duties so delegated shall be subject to such restrictions, limitations and conditions, if any, as the Controller of Insurance may impose, and shall be subject to his control and revision. 110B. Every document which is required by this Act or by any rule made thereunder to be signed by the Controller of Insurance or by any person subordinate to him or by any officer authorized by him under sub-section (1) of section 42 or subsection (1) of section 42A or sub-section (4) of section 44A shall be deemed to be properly signed, if it bears a facsimile of the signature of such Controller, person or officer printed, engraved, lithographed or impressed by any other mechanical process approved by the Central Government. 110C.-(1) The Controller may by notice in writing require any insurer to supply him any information relating to his insurance business and the insurer shall comply with such requirement within such period after the receipt of the notice as may be specified therein. (2) Any information supplied under this section shall be certified by the principal officer of the insurer and if the notice so requires, also by an auditor. 116A. The Central Government shall every year cause to be published, in such manner as it may direct, a summary of the accounts, balance-sheets, statements, abstracts and other returns under this Act or purporting to be under this Act which have been furnished in pursuance of the provisions of this Act to the Controller of Insurance during the year preceding the year of publication, and may append to such summary any note of the Controller of Insurance or of the Central Government and any correspondence; Provided that nothing in this section shall require the publication of the statement referred to in sub-section (2) of section 10 or sub-section (4) of section 13 in respect of the first valuation of an insurer or sub-section (2) of section 32A or section 42B or of the returns referred to in sub-section (1) of section 28. 120A. The Central Government shall constitute an Advisory Board to advise the Controller in the performance of his duties under this Act

120B. The Controller of Insurance may, if considered o~ necessary, maintain a regional office in East Pakistan and in any other part of Pakistan and may delegate any of his powers and duties under this Act, to any person subordinate to him. WHEREAS it is expedient to consolidate and amend the law relating to the business of insurance ; It is hereby enacted as follows : THE FIRST SCHEDULE (See section 11) Regulations and Forms for the preparation of Balance-Sheet PART I REGULATIONS 1. The balance-sheet required to be prepared in respect of every class of business carried on by an insurer is, in the form in which it is set out in Part II of this Schedule (Form A), appropriate to a case where the insurer maintains a separate fund in respect of life insurance business. 2. The balance-sheet of life insurance business shall be prepared as a separate document. The balance-sheet of any class of business may be prepared as a separate document instead of being incorporated by the addition of columns and headings in the general balance-sheet, but the totals of each such separate balance-sheet (showing the total assets of the class of business, the balance at the credit of the life insurance fund or other separate fund or account, the amount of shareholders' undivided profits, and outstanding liabilities) must in any case be incorporated in the general balance-sheet. 3. If any combined balance-sheet is for any purpose issued by an insurer, it shall be in accordance with the Form set out in this Schedule, and there shall not be included among the assets shown in any such combined balance-sheet any amount in respect of any holding in or advance to any insurer whose assets and liabilities have been incorporated therein. Every combined balance-sheet must show clearly on the face thereof that it is a combined balance-sheet and must set out fully the name of every insurer whose assets and liabilities have been incorporated therein ; if the assets and liabilities of any person not being an insurer are included in a combined balance-sheet the fact must be stated thereon. 4. Where any guarantee has been given by an insurer (otherwise than in the ordinary course of re-insurance business) in respect of the policies of any other insurer, the balance-sheet of the insurer by whom the guarantee was given must show clearly the name of every insurer whose policies have been so guaranteed and the extent of the guarantee:

Provided that this regulation shall not apply where a combined balance-sheet is issued incorporating the assets and liabilities of the insurer whose policies are guaranteed. 5. Where any part of the assets of an insurer is deposited in any place outside (Subs. by the Central Laws (Statute Reform) Ordinance, 1960 (21 of 1960), s. 3 and 2nd Sch. (with effect from the 14th October, 1955), for "the Provinces and the Capital of the Federation" which had been subs. by A. O., 1949, for "British India".)[Pakistan] as security for the owners of policies issued in that place, the balance-sheet shall state that part of the assets has been so deposited, and, if any such part forms part of the life insurance fund, shall show the amount thereof and the place where it is deposited. Where any combined balance-sheet is issued by an insurer for any purpose, the information required by this regulation shall be shown in the aggregate in respect of all the insurers whose assets and liabilities have been incorporated in the balance-sheet. 6. There shall be appended to the balance-sheet a statement in Form AA as set out in Part II of this Schedule showing the market value and the book value of the assets (Subs. by A. O. 1949, for "in India".) [in Pakistan]. 7. Every balance-sheet shall contain the following certificates, namely(a) a certificate signed by the same persons as are required by this Act to sign the balance-sheet explaining how the values as shown in the balance-sheet of the Investments in Stocks and Shares have been arrived at, and how the market value thereof has been ascertained for the purpose of comparison with the values so shown ; (b) a certificate signed by the same persons as are required by this Act to sign the balance-sheet and signed also, so far as respects the value of any items, shown in the balance-sheet under the heading of "Reversions and Life Interests", by an actuary, certifying that the values of all the assets have been reviewed as at the date of the balance-sheet, and that in their belief the assets set forth in the Balance-sheet are shown in the aggregate at amounts not exceeding their realisable or market value under the several headings "Loans", "Reversions and Life Interests", "Investments", "Agent's Balances", "Outstanding Premiums", "Interest, Dividends and Rents outstanding", "Interest, Dividends and Rents accruing but not due", "Amounts due from other Persons or Bodies carrying on Insurance Business", "Sundry Debtors", "Bills Receivable", "Cash" and the several items specified under "Other Accounts" Provided that if the persons signing the certificate are unable to certify that the assets set forth in the balance-sheet are so shown as aforesaid, a full explanation of the bases upon which the values shown in the balance sheet have been assessed shall be given in the certificate ; (c) a certificate signed by the same persons as are required by this Act to sign the balance-sheet and by the auditor certifying that no parts of the assets of the life insurance fund has been directly or indirectly applied in contravention of the provisions of this Act relating to the application and investment of life insurance funds ; and

(d) certificates signed by the auditor (which shall be in addition to any other certificate or report which he is required by law to give with respect to the balance-sheet) certifying(i) that he has verified the cash balances and the securities relating to the insurer's loans, reversions and life interests, and investments ; (ii) to what extent, if any, he has verified the investments and transactions relating to any trusts undertaking by the insurer as trustee ; and (iii) in the case of a combined balance-sheet, that he has audited the balance-sheet and accounts of every insurer whose assets and liabilities are incorporated therein, or that any such balance-sheet and accounts which have not been audited by him have been certified by independent auditors. The said certificate shall contain a reference to such reservations, if any, as may have been made by any auditor upon any report or certificate given by him with respect to the balance-sheet and accounts of any insurer whose assets and liabilities are incorporated in the combined balance-sheet. 8. If the values shown in the balance-sheet is respect of "Holdings in Subsidiary Companies" or "House property (i) (Subs. by A. O., 1949, for "in India".)[in Pakistan] (ii) (Subs. ibid., for "out of India".) [out of Pakistan]" have been increased since the last previous balance-sheet, the certificate required by paragraph (b) of the last foregoing regulation shall state the amount of every increase not solely due to the cost of subsequent additions or, as respects holdings in controlled companies, to increased profits, and shall contain an explanation of the reason therefore. 9. For the purposes of this Schedule the following expressions have the meanings hereby respectively assigned to them, namely: (a) "combined balance-sheet" includes any combined statement made by an insurer of assets and liabilities in the form of a balance-sheet which includes the assets and liabilities of any other insurer ; and (b) "market value" means as respects any assets the market value thereof as ascertained from published market quotations, or, if there be no such value, its fair value as between a willing buyer and a willing seller.

PART II FORMS FORM A Form of Balance Sheet Balance-Sheet of 19

Life and Annuit y Busines s.(1)

(The letters "Rs. A. P." has been amende d by the Repeali ng and Amend ing Ordina nce, 1965 (10 of 1965),

Other Classes of Busines s (2)( Assets and Liabiliti es, Shareho lders' Capital and Reserve s, not allocate d to any class of business specifie d in column (1) must be shown in column (2).) (The letters "Rs. A. P." has been amende d by the Repeali ng and Amendi ng Ordinan ce, 1965 (10 of 1965), s. 3 and 2nd

Total

Life and Annuit y Busines s (1)

(The letters "Rs. A. P." has been amende d by the Repeali ng and Amend ing Ordina nce, 1965 (10 of 1965),

(The letters "Rs. A. P." has been amende d by the Repeali ng and Amend ing Ordina nce, 1965 (10 of 1965),

Other Classes of Busines s (2)( Assets and Liabiliti es, Shareho lders' Capital and Reserve s, not allocate d to any class of business specifie d in column (1) must be shown in column (2).) (The letters "Rs. A. P." has been amende d by the Repeali ng and Amendi ng Ordinan ce, 1965 (10 of 1965), s. 3 and 2nd

Total

(The letters "Rs. A. P." has been amende d by the Repeali ng and Amend ing Ordina nce, 1965 (10 of 1965),

s. 3 and 2nd Sch, to read as above.) [Rs.] Sharehol ders' capital (each class to be stated separatel y)

Sch, to read as above.)[ Rs.]

s. 3 and 2nd Sch, to read as above.) [Rs.] Loans : -. On Mortgages of property within(Subs. by the Central Laws (Statute Reform) Ordinance, 1960 (21 of 1960), s. 3 and 2nd Sch. (with effect from the 14th October, 1955), for "the Provinces and the Capital of the Federation" which had been subs. by A. O., 1949, for "British India".)[Pakist an] ... ... ...

s. 3 and 2nd Sch, to read as above.) [Rs.]

Sch, to read as above.)[ Rs.]

s. 3 and 2nd Sch, to read as above.) [Rs.]

Authorize d: ...... sh ares of Rs ea ch Rs.

On Mortgages of property outside (Subs. by the Central Laws (Statute Reform) Ordinance, 1960 (21 of 1960), s. 3 and 2nd Sch. (with effect from the 14th October,

1955), for "the Provinces and the Capital of the Federation" which had been subs. by A. O., 1949, for "British India".)[Pakist an] ... ... ... Subscribe d: ..... sh ares of Rs ea ch Rs. Called up : ...... sh ares of Rs ea ch Rs. Less Unpaid calls R s. Reserve or Continge ncy Account (a) Investme nt Reserve Account Profit and Loss Appropri ation

On security of municipal and other public rates On Stocks and Shares On Insurer's Policies within their surrender value

On Personal security

To Subsidiary Companies (other than Reversionary) (f) Reversions and Life Interests

Account Balance. Balances of Funds and Accounts : Life Insurance Fund Fire Insurance Business Account

Reversions and Life Interests purchased. Loans on Reversions and Life Interests Debentures and Debenture Stocks of Subsidiary Reversionary Companies (f)

Marine Insurance Business Account (The words "Accident and" omitted by the Insurance (Amdt.) Act, 1940 (20 of 1940), s. 18.). " Miscellan eous Insurance Business Account (The brackets and letter "(m)" were added by

Ordinary Stocks and Shares of Subsidiary Reversionary Companies (f)

the Insurance (Amdt.) Act, 1941 (13 of 1941), s. 69.)[(m)] Other accounts, if any (to be specified) (l) Pension or Superann uation Accounts (b) ... ... Debentur e Stock per cent.

Loans to Subsidiary Reversionary Companies (f) ... ... Investments

Deposit with (Subs. by the Pakistan (Adaptation of Existing Pakistan Laws) (State Bank of Pakistan) Order, 1948 (G. G. O. 18 of 1948), for "the Reserve Bank of India".)[the State Bank of Pakistan (securities to be specified) (Subs. by A. O., 1949, for "Indian Government Securities".)[P akistan

Government securities Loans and Advances (c) Bills payable (c) Estimated Liability in respect of outstanding claims, whether due or intimated (d) ... ... ... Carried Over Brought Forward

Provincial Government Securities British, British Colonial and British Dominion Government Securities

Carried Over Investments :-contd. Foreign Government Securities ... (Subs. by A. O., 1949, for "Indian Municipal Securities".)[P akistan Municipal Securities] .. British and Colonial Securities ... Foreign Securities ...

Annuities due and unpaid (d)

Outstandi ng Dividend s ... Amounts due to Other Persons or Bodies

carrying on Insurance Business (c) .. Sundry Creditors (includin g outstandi ng and accruing expenses and Taxes) (c) ... ...

Bonds, Debentures, Stocks and other Securities whereon Interest is guaranteed by the (Subs. ibid., for "Indian Government". )[Central Government] or a Provincial Government

Other sums owing by the insurer (particula rs to be given) (c)

Bonds, Debentures, Stocks and other Securities whereon Interest is guaranteed by the British or any Colonial Government ... ... ... Bonds, Debentures, Stocks and other Securities whereon Interest is guaranteed by any Foreign

Continge nt Liabilitie s (to be specified) (c) ...

Government Rs. _____ Debentures of any railway (Subs. ibid., for "in India".)[in Pakistan) ... ... ... ... Debentures of any railway (Subs. ibid., for "out of India".)[out of Pakistan) ... ... .. Preference or guaranteed Shares of any railway (Subs. ibid., for "in India".)[in Pakistan] Preference or guaranteed Shares of any railway (Subs. ibid., for "out of India".)[out of Pakistan] Railway Ordinary Stocks (i) (Subs. ibid., for "in India".)[in Pakistan] (ii) (Subs. ibid., for "out of

India".)[out of Pakistan] ... Other Debentures and Debenture Stock of Companies incorporated (i) (Subs. ibid., for "in India".)[in Pakistan] (ii) (Subs. ibid., for "out of India".)[out of Pakistan] ... Other guaranteed and Preference Stocks and Shares of Companies incorporated (i) (Subs. ibid., for "in India".)[in Pakistan] (iii) (Subs. ibid., for "out of India".)[out of Pakistan] Other Ordinary Stocks and Shares of Companies incorporated (i) (Subs. ibid., for "in India".)[in Pakistan] (ii) (Subs. ibid., for "Indian

Government". )[out of Pakistan] Holdings in Subsidiary Companies (f) House property (i) (Subs. ibid., for "in India".)[in Pakistan] (ii) (Subs. ibid., for "out of India".)[out of Pakistan] .. Freehold and Leasehold ground rents and rent charges Agent's Balances ... Outstanding Premiums (g) (The brackets and letter "(d)" added by the Insurance (Amdt.) Act, 1941 (13 of 1941) s. 69.)[(d)] interest, Dividends and Rents outstanding (d) ... Carried over Interest

Dividends and Rents accruing but no due (d) ... ... Amounts due from other Persons or Bodies carrying on insurance Business (h) ... ... ... Sundry Debtors (i) Bills Receivable Cash : At Bankers on Deposit Account . At Bankers on Current Account and in hand At Call and Short Notice (j) ---Other Accounts (to be specified) (k) ...

NOTES

(a) The Reserves or Contingency Accounts must be separately stated. (b) If the Insurer has not full and unrestricted control of the assets constituting the Pension or Superannuation Accounts, either those accounts and the assets and liabilities relating thereto must be omitted from the balance-sheet or the assets of which the insurer has not such control must be clearly indicated on the face of the balance-sheet. (c) If the Insurer has deposited security as cover in respect of any of these items, the amount and nature of the securities so deposited must be clearly indicated on the face of the balance-sheet. (d) These items are or have been included in the corresponding items in the Revenue or Profit and Loss Account. Outstanding and accruing interest, dividends and rents must be shown after deduction of income-tax or the income-tax must be provided for amongst the liabilities on the other side of the balance-sheet. (e) Such items as amount of liability in respect of bills discounted, uncalled capital of subsidiary companies, uncalled capital of other investments, etc., must either be shown in their several categories under the heading "Contingent Liabilities" or the appropriate items on the assets side must be set out in such detail as will clearly indicate the amount of the uncalled capital. (f) As respects life and annuity business full particulars of holdings in and loans to subsidiary companies must be stated, giving the name of each company, the number and description of each class of shares held, the amounts paid up thereon and the value at which the holdings in each company stand in the balance-sheet. (g) Either this item must be shown net or the commission must be provided for amongst the liabilities on the other side of the balance-sheet. (h) The aggregate amount owing by a subsidiary company or subsidiary companies is to be shown separately from all other assets and the aggregate amount owing to a subsidiary company or subsidiary companies is to be shown separately from all other liabilities. (i) Amounts due from directors and officers must be shown separately. (j) No amounts must be entered under this heading unless fully secured. If not fully secured, the amounts must be included under the heading "Sundry Debtors". (k) Under this heading must be included such items as the following, which must be shown under separate headings suitably described: office furniture, goodwill, preliminary formation and organization expenses, development expenditure account, discount on debentures issued, other expenditure carried forward to be written-off in future years, balance being loss on Profit and Loss Appropriation Accounts, etc. The amounts included in the balance-sheet must not be in excess of cost.

(l) Under the head "Other accounts, if any (to be specified)" on the left hand side, fines realized from the staff and their contribution towards the provident fund, if any, should be shown under separate sub-heads. (Added by the Insurance (Amdt.) Act, 1941 (13 of 1941), s. 69.)[(m) Where the insurer is required to maintain a separate account in respect of any sub-class of miscellaneous incurance business this heading is to be split up accordingly.]

FORM AA Classified Summary of the (Subs. by the Insurance (Amdt.) Act, 1939 (11 of 1939), s. 35, for "Indian Assets".)[Assets (Subs. by A. O., 1949, for "in India".) [in Pakistan]] of the--------------- Company on 19.

Class of Asset.

Remarks as per Book value as Market per (a) below. value as per (c) below. (b) below. Rs. Rs.

(1) (Subs. ibid., for "Government of India".) [Central Government) Securities ... (2) (Subs. ibid., for "Indian Provincial Government".) [Provincial Government] Securities (3) (Subs. ibid., for "Indian Municipal Port and Improvement Trust".) [Pakistan Municipal Port and Improvement Trust] Securities including Debentures. (4) Debentures of (Subs. ibid., for "Indian Railways".) [Pakistan Railways]... (5) Guaranteed and Preference Shares of (Subs. ibid., for "Indian Railways".) [Pakistan Railways]. (6) Annuities of (Subs. ibid., for "Indian Railways".) [Pakistan Railways) ... (7) Ordinary Shares of Railways (Subs. by A. O., 1949, for "in India".) [in Pakistan]. (8) Other Debentures of concerns (Subs. by A. O., 1949, for "in India".) [in Pakistan].

(9) Other Guaranteed and Preference Shares of concerns (Subs. by A. O., 1949, for "in India".) [in Pakistan]. (10) Other Ordinary Shares of concerns (Subs. by A. O., 1949, for "in India".) [in Pakistan]. (11) Loans on the Company's policies effected (Subs. by A. O., 1949, for "in India".) [in Pakistan] and within their surrender value. (12) Loans on Mortgage of property (Subs. by A. O., 1949, for "in India".) [in Pakistan]. (13) Loans on Personal Security to persons domiciled and resident (Subs. by A. O., 1949, for "in India".) [in Pakistan]. (14) Other loans granted (Subs. by A. O., 1949, for "in India".) [in Pakistan] (particulars to be stated). (15) Land and House property (Subs. by A. O., 1949, for "in India".) [in Pakistan]. (16) Cash on Deposit in banks (Subs. by A. O., 1949, for "in India".) [in Pakistan). (17) Cash in Hand and on current account in banks (Subs. by A. O., 1949, for "in India".)[in Pakistan]. (18) Agents' balances and outstanding premiums. (19) Interest, dividends and rents either outstanding or accrued but not due. (20) Other assets (Subs. by A. O., 1949, for "in India".) [in Pakistan] (to be specified).

The statement shall show(a) the value for which credit is taken in the balance-sheet for each of the abovementioned classes of assets,

(b) the market value of such of the abovementioned classes of assets as has been ascertained from published quotations after deduction of accrued interest included in market prices in those cases where accrued interest is included elsewhere in the balance-sheet, (c) how the value of such of the abovementioned classes of assets as has not been ascertained from published quotations has been arrived at, and (d) the rates of exchange at which the values of the assets, other than in rupee currency, have been converted into rupees. The market values need not be shown separately where they are not less than the book values and a certificate to that effect is appended to statement. No amounts on account of any of the following items may be entered in the statement :Goodwill. Preliminary, formation, organization or development expenses. Commission or discount on shares or debentures issued. Commuted Commission. Expenditure carried forward to be written off in future years. THE SECOND SCHEDULE (See section 11) Regulations and Forms for the preparation of Profit and Loss Accounts

PART I REGULATION 1. The items on the income side of the Profit and Loss Account and Profit and Loss Appropriation Account must relate to income whether actually received or not, and the items on the expenditure side must relate to expenditure whether actually paid or not. 2. Deductions from interest, Dividends and Rents to be shown in respect of income-tax must include all amounts in respect of ()[Central] income-tax whether or not it has been or is to be deducted at source or paid direct.

3. The Interest, Dividends and Rents less income-tax thereon shown in the Revenue Accounts for any classes of business other than life insurance business, including annuity business may, if the insurer so desires, be included with the corresponding items in the Profit and Loss Account.

PART II FORMS FORM B Form of Profit and Loss Account Profit and Loss Account of for the year ended (The letters "Rs. A. P." has been amended by the Repealing and Amending Ordinance, 1965 (10 of 1965), s. 3 and 2nd Sch., to read as above.) [Rs.] 19 (The letters "Rs. A. P." has been amended by the Repealing and Amending Ordinance, 1965 (10 of 1965), s. 3 and 2nd Sch., to read as above.) [Rs.]

(Subs. by A. O., 1949, for "British India".) [Central] Taxes on the Insurers Profits (not applicable to any party applicable Fund or Account)

Interest, Dividends and Rents (not applicable to any particular Fund or Account) ... Rs. Less-Income-tax thereon Rs. _____ Profit on realisation of Investments (not credited to Reserves or any particular Fund or Account).

Expenses of Management(not applicable to any particular Fund or Account)( If any sum has been deducted from this item and entered on the assets side of the balance-sheet, the amount must be shown separately.) Loss on Realisation of Investments (not charged to Reserves or any particular Fund or Account) Depreciation of Investments (not charged to Reserves or any particular Fund or Account)

Appreciation of Investments(not credited to Reserves or any particular Fund or Account) .. . Profit transferred from Revenue Accounts (details to be given)

Loss transferred from Revenue Accounts (details to be given) Other Expenditure (to be specified) Balance for the year carried to Appropriation Account

Transfer Fees

Other Income (to be specified) Balance being loss for the year carried to Appropriation Account . .

FORM C Form of Profit and Loan Appropriation Account Profit and Loss Appropriation Account of for the year ended 19 (See foot-note 2, on page 560, supra.)[Rs.] Balance brought forward from last year Rs. Less-Dividends since paid in respect of last year (to Be specified and if "free of Tax" to be so stated)( NOTE.-This item may be shown on the other side of the account if preferred.) ... Rs.

(See foot-note 2, on page 560, supra.)[Rs.] Balance being loss brought forward from last year Balance being loss for the year brought from Profit and Loss Account (as in Form B) ... ...

Dividends paid during the year on account of the current year (to be specified and if free of tax to be so stated) Transfer to any particular Funds or Accounts (details to be given) Balance at end of the year as shown in the Balance-Sheet.

Balance for the year brought from Profit and Loss Account (as in Form B) Balance being loss at end of the year as shown in the Balance-Sheet

THE THIRD SCHEDULE

(See section 11) Regulations and Forms for the Preparation of Revenue Accounts PART I REGULATIONS 1. Form D is, as set out in Part II of this Schedule, appropriate for life insurance business, but a separate revenue account must be prepared for every class (Ins. by the Insurance (Amdt.) Act, 1941 (13 of 1941), s. 70.)[or account. of business in respect of which the insurer is required to maintain a separate 2. Form F is, as set out in Part II of this Schedule, appropriate for fire insurance (Ins. by the Insurance (Amdt.) Act, 1944 (7 of 1944), s. 4.) [and for marine insurance] business. A separate revenue account in the same form must be prepared for (The words "accident and" omitted by the Insurance (Amdt.) Act, 1940 (20 of 1940), s. 19.)* * miscellaneous insurance (Ins. by the Insurance (Amdt.) Act, 1941 (13 of 1941), s. 70.) [exclusive of any sub-class of such business in respect of which the insurer is required to maintain a separate account.] (The words "including workmen's compensation and motor car insurance omitted, ibid.)* * * (The words "Form E is, as set out in Part II of this Schedule, appropriate for marine insurance business omitted by Act 7 of 1944 s. 4.)* * *, (Added by the Insurance (Amdt.) Act, 1941 (13 of 1941), s. 70.)[For a sub-class of miscellaneous insurance in respect of which the insurer is required to maintain a separate account, Form D or Form F as set out in Part II of this Schedule may be used with such modifications as the (Subs. by the Insurance (Amdt.) Act, 1950 (32 of 1950), s. 2, for "Superintendent of Insurance" (with effect from the 15th May, 1950).) [Controller of Insurance] may authorize.] 3. If any combined revenue account is for any purpose issued by an insurer it must be in accordance with the forms specified in this Schedule and must clearly show on the face thereof that it is a combined revenue account, and must set out fully the name of every insurer required to make separate returns under this Act whose revenue and expenditure have been included therein ; if the revenue and expenditure of any person not being an insurer are included in a combined revenue account, the fact must be stated thereon. 4. The items on the income side of the revenue account must relate to income whether actually received or not, and the items on the expenditure side must relate to expenditure whether actually paid or not. 5. Reinsurance premiums, whether on business ceded or accepted, are to be brought into account gross (i.e., before deducting commissions) under the head of premiums.

6. As respects life insurance business the following statements shall be furnished to the (Subs. by the Insurance (Amdt.) Act, 1950 (32 of 1950), s. 2, for "Superintendent of Insurance" (with effect from the 15th May, 1950).) [Controller of Insurance] every year showing details provided for in a Form pertaining thereto :(A) A statement in form DD as set forth in Part II of this Schedule. (B) A statement in form DDD as set forth in Part II of this Schedule. (C) A statement in form DDDD as set forth in Part II of this Schedule. (Subs. by the Insurance (Arndt.) Act, 1958 (27 of 1958), s. 51, for the existing Reg. 7.) [7. In addition to the revenue account information in the prescribed form shall be supplied of the following items relating to every class or sub-class of business in respect of which the insurer is required to maintain a separate account :(i) Gross premium written direct in Pakistan, premium received on reinsurances accepted and premium paid on reinsurances ceded both locally and abroad. (ii) Commission paid on business written direct in Pakistan, commission paid on reinsurances accepted and commission received on reinsurances ceded both locally and abroad. (iii) Gross claims paid directly by the insurer in Pakistan, claims paid on reinsurances accepted and claims received on reinsurances ceded both locally and abroad.] 8. Any office premises which form part of the assets of a life insurance fund must be treated as an interest earning investment, and accordingly, in the revenue account for life insurance business a fair rent for the premises must be included under the heading "Interest, Dividends and Rents" and in the revenue account for every class of business for which the premises are used proper charges for the use thereof must be included under the heading "Expenses of Management". 9. Where an insurer carries on the business of life insurance in conjunction with any other class of insurance business the expenses of management charged to the life insurance revenue account must not include more than a reasonable proportion of the common expenses and in particular, no such account must be charged with more than a fair sum for the use of any office premises having regard to the income from the various classes of business carried on and to the extent to which the premises are used for the purposes of each class of business. 10. Deductions from Interest, Dividends and Rents in respect of income-tax must include all income-tax charged on such income whether or not it has been or is to be deducted at source or paid direct ; the income-tax to be shown as so deducted in the life insurance, Revenue Account is (Subs. by A. O., 1949, for "British India".) [Central or Acceding State], United Kingdom, Foreign and Dominion income-tax, but the income-tax to be

shown as deducted in Revenue Accounts of any other classes of business is (Subs. by A. O., 1949, for "British Indian income-tax".)[Central income-tax] only. (Regulation 11 added by the Insurance (Amdt.) Act, 1958 (27 of 1958), s. 51.) [11. Every revenue account shall be accompanied by a certificate from the auditors that the insurer has not paid to any person any commission in any form outside Pakistan in respect of the insurance business transacted by him in Pakistan and that the insurer has not received outside Pakistan from any person any commission in any form in respect of any business reinsured abroad or that in the case of an insurer incorporated outside Pakistan, the amounts received by him outside Pakistan in this respect have been fully credited to the Pakistan revenue account.]

PART II FORMS FORM D (All the horizontal lines appearing in the columns and the letters "Rs." against the entries "Interest, Dividends and Rents "and "Less-Income-tax thereon (d)" omitted, and horizontal lines under which the totals of the columns are to be inserted, added t the foot of each column, by the Insurance (Amdt.) Act, 1941 (13 of 1941), s. 70 (c) (iii).) Farm of Revenue Account applicable to Life Insurance Business Revenue Account of for the year ended 19 in respect of Business. Business (Subs. by the Federal Laws (Revision and Declaration) Act, 1951 (26 of 1951), s. 4 and 3rd Sch., for "within India".)[within Pakistan]. Rs. Balance of Fund at the beginning of the year Premiums, less Reinsurances

Business (Subs. by the Federal Laws (Revision and Declaration) Act, 1951 (26 of 1951), s. 4 and 3rd Sch., for "within India".)[within Pakistan]. Rs. Claims under Policies (including provision for claims due or intimated), less Reinsurances

Total Business (Subs. by A. O., 1949, for "out of India".)[out of Pakistan]. (a)

Business T (Subs. by A. O., 1949, for "out of India".)[out of Pakistan]. (a)

Rs.

Rs.

Rs.

By death

By maturity Annuities, less Reinsurances. Surrenders (including Surrenders of Bonus), less Reinsurances. Bonuses in Cash, less Re-insurances. Bonuses in Reduction of premiums, less Re-insurances. (The entry "Commission to insurance agents (less that on Re-insurances)" omitted by the Insurance (Amdt.) Act. 1941 (13 of 1941) s. 70.)* * ** Expenses of Management (b)-

(i) (Subs. by the Insurance (Amdt.) Act, 1946 (6 of 1946), s. 48, for "First year premiums".)[First year premiums, where, the maximum premiums paying period(g) istwo years ... three years four years ...

five years six years

... ...

Seven years eight years

...

nine years

ten years

...

eleven years

...

(Subs. by the Insurance (Arndt.) Act, 1941 (13 of 1941), s. 70, for the entry "1. Allowances and Commission (other than commission to insurance agents)".)[1. (a) Commission to insurance agents (less that on Re-insurances) : (b) Allowances and Commission (other than commission included in sub-item (a) preceding)]

twelve years or over (including throughout life)]

(ii) Renewal premiums

(iii) Single premiums: 2. Salaries etc. (other than to agents and those contained in Item No. 1) Consideration for Annuities granted, less Re-insurances (c) Interest, Dividends and Rents Less-Income-tax thereon (d) Registration fees

3. Travelling expenses 4. Directors' fees

5. fees

Auditors'

Other Income (to be specified) (e)

(This entry was ins. ibid.) [6. Medical fees] (The original entries numbered 6 to 12 were re-numbered 7 to 13, ibid.) [7.] Law charges (The original entries numbered 6 to 12 were re-numbered 7 to 13, ibid.) [8.] Advertisements (The original entries numbered 6 to 12 were re-numbered 7 to 13, ibid.) [9.] Printing and Stationery (The original entries numbered 6 to 12 were re-numbered 7 to 13, ibid.) [10.] Other expenses of management (accounts to be specified) (Entry 11 omitted by the Insurance (Amdt.) Act, 1946 (6 of

Loss transferred to Profit and Loss Account ...

Transferred from Appropriation Account ...

1946). s. 48.)* * * * (Subs. by A. O., 1949, for "out of India".)[11.] Rents for offices belonging to and occupied by the insurer (Re-numbered by the Insurance (Amdt.) Act, 1946 (6 of 1.946), s. 48, as previously re-numbered by the Insurance (Amdt.) Act, 1941 (13 of 1941), s. 70.)[12.] Rents of other offices occupied by the insurer Bad Debts ... United Kingdom, (Subs. by A. O., 1949, for "British India".)[Central or Acceding State], Dominion and Foreign Taxes. Other Expenditure (to

be specified) Profit transferred to Profit and Loss Account ... Balance of Fund at the end of the year as shown in the Balance-Sheet

NOTES (a) (The words "In the case of an insurer having his head office in British India" omitted by Act 13 of 1941, s. 70.)* * * These columns apply only to business the premiums in respect of which are (Subs. by the Insurance (Amdt.) Act, 1940 (20 of 1940), s. 19, for "payable outside India".)[ordinarily paid (Subs. by A. O., 1949, for "outside India".)[outside Pakistan]]. (Added by the Insurance (Amdt.) Act, 1940 (20 of 1940), s. 19.)[If any question arises whether any premiums are ordinarily paid (Subs. by A. O., 1949, for "outside India".) [outside Pakistan], the (Subs. by the Insurance (Amdt.) Act, 1950 (32 of 1950), s. 2, for "Superintendent of insurance" (with effect from the 15th May, 1950).) [Controller of Insurance] shall decide the question and his decision shall be final.] (b) If any sum has been deducted from this item and entered on the assets side of the balance-sheet, the amount so deducted must be shown separately. Under this item the salary paid to the managing agent or managing director shall be shown separately from the total amount paid as salaries to the remaining staff. (c) All single premiums for annuities, whether immediate or deferred, must be included under this heading. (d) (Subs. by A.O., 1949, for British India.) [Central or Acceding State], United Kingdom, Foreign and Dominion income-tax on Interest, Dividends and Rents must be shown under this heading, less any rebates of income-tax recovered from the revenue authorities in respect of expenses of management. The separate heading on the other side of the account is for United Kingdom, (Subs. by A.O., 1949, for British India.) [Central or Acceding State], Foreign and Dominion taxes, other than those shown under this item. (e) Under the head "Other Income" fines, if any, realised from the staff must be shown separately. All the amounts received by the insurer directly or indirectly whether from his head office or from any other source (Subs. by A. O., 1949, for "outside India".) [outside

Pakistan] shall also be shown separately in the revenue account except such sums as properly appertain to the capital account. (f) In the case of an insurer having his principal place of business outside (Subs. by the Central Laws (Statute Reform) Ordinance, s. Capital of the Federation" which had been subs. by A. O., 1949, for the Provinces and the Capital of the Federation which had been subs. by A.O., 1949, for British India.) [Pakistan] the expenses of management for business (Subs. by A. O., 1949, for "out of India".) [out of Pakistan] and total business need not be split up into the several sub-heads, if they are not so split up in his own country. (Note (g) ins. by the Insurance (Amdt.) Act, 1946 (6 of 1946), s. 48.) [(g) Where the maximum premiums-paying period includes a fraction of a year, such fraction shall be ignored for the purposes of this revenue account.]

FORM DD Classified statement of life insurance policies of the Company, for the year ending 19 New life insurance business in respect of Total life which a premium has been paid in the year insurance business in force at end of the year Numbe Sums Single Yearly Numbe Sums r of insured premiums renewal r of insured Policies and (including premiu Policies with annuitie consideration m bonuses s per ) for income and annum. immediate annuitie (Ins. by the s per Insurance annum. (Amdt.) Act, 1939 (11 of 1939), s. 36.) [or deferred] annuities and all other premiums paid at the outset where no subsequent premium is payable). Rs. Rs. Rs. Rs.

Premiu m income for which credit has been taken in the account.

Ordinary policies

Rs.

(Subs. by A. O., 1949, for "In India".) [In Pakistan] .. . .. . (Subs. ibid. for "Out of India".) [Out of Pakistan] .. . .. . Total .. . Annuity contracts , etc. (Subs. by A. O., 1949, for "In India".) [In Pakistan] .. . .. . (Subs. ibid. for "Out of

India".) [Out of Pakistan] .. . .. . Total ..

Group insuranc e policies

I (Subs. by A. O., 1949, for "In India".) [In Pakistan] .. . .. . (Subs. ibid. for "Out of India".) [Out of Pakistan] .. . .. .

Total .. . The amounts should be stated to the nearest rupees and after deduction of re-insurances.

(Third Schedule) FORM DDD Additions to and deductions from policies of the 19

Company for the year ending

Ordinary life insurance policies insuring Annuities money to be paid on death or survivance. No. Sum Reversionary No. assured. bonus additions. Rs. Rs. (1) Policies at beginning of year (2) New policies issued ... (3) Old policies revived ... (4) Old policies changed and increased ... (5) Bonus additions allotted ... Total

Annuity per annum. Rs.

THE FOURTH SCHEDULE (See section 13) Regulations for the preparation of Abstracts of Actuaries' Reports and Requirements applicable to such Abstracts

PART I REGULATIONS 1. Abstracts and Statements must be so arranged that the numbers and letters of the paragraphs correspond with those of the paragraphs of Part II of this Schedule. 2. In showing the proportion which that part of the annual premiums reserved as a provision for future expenses and profits bears to the total of the annual premiums, in accordance with the requirements of (Subs. by Act 11 of 1939, s. 37, for "paragraph 3".) [paragraph 4] of Part II of this Schedule, no credit is to be taken for any adjustments made in order to secure that no policy is treated as an asset. 3.--(1) The average rate of interest yielded in any year by the assets constituting a life insurance fund shall, for the purposes of (Subs. ibid., for "paragraph 4".) [paragraph 5] of Part II of this Schedule, be calculated by dividing the interest of the year by the meal fund of the year ; and for the purposes of any such calculation the interest of the year shall be taken to be the whole of the interest credited to the life insurance fund during the year after deduction of income-tax charged thereon (any refund of incometax in respect of expenses of management made during the year being taken into account), and the mean fund of the year shall be ascertained by adding a sum equal to one-half of the amount of the life insurance fund at the beginning of the year to a sum equal to one-half of that fund at the end of the year, and deductions from the aggregate of those two sums an amount equal to one-half of the interest of the year. (2) For the purposes of the calculation aforesaid either(a) all profits and income arising during the year from sums invested in reversions shall be included in the interest credited to the life insurance fund during the year ; or (b) such portion of the life insurance fund as is invested in the purchase of reversions, and the profits and income arising therefrom, shall be excluded from the calculation ; but in that case a statement must be added to the information required under the said (Subs. by the Insurance (Amdt.) Act, 1939 (11 of 1939), s. 37, for "paragraph 4".)[paragraph 5], showing in respect of the portion of the fund so excluded as aforesaid, the average rate of annual profit and income for which credit has been taken during the five years last preceding the valuation date, and explaining the manner in which the said average rate has been calculated. (3) The information given in accordance with the requirements of the said (Subs. by the Insurance (Amdt.) Act, 1939 (11 of 1939), s. 37, for "paragraph 4".) [paragraph 5] shall show clearly by which of the methods hereinbefore in this regulation mentioned the sums invested in reversions and the profits and income arising therefrom have been dealt with.

4. Every abstract prepared in accordance with the requirements of Part II of this Schedule shall be signed by an actuary and shall contain a certificate by him to the effect that he has satisfied himself as to the accuracy of the valuations made for the purposes thereof and of the valuation data Provided that in the case of an abstract prepared on behalf of (Subs. ibid., for "an insurance company".) [an insurer], if the actuary who signs the abstract is not a permanent officer of (Subs. ibid., for "the company".) [the insurer] the certificate as to the accuracy of the valuation data shall be given and signed by the principal officer of (Subs. ibid., for "the company".) [the insurer] and the actuary shall include in the abstract a statement signed by him showing what precautions he has taken to ensure the accuracy of the data. 5. For the purposes of the Schedule the following expressions have the meanings hereby respectively assigned to them, namely : "extra premium" means a charge for any risk not provided for in the minimum contract premium ; "inter-valuation period" means, as respects any valuation, the period to the valuation date of that valuation from the valuation date of the last preceding valuation in connection with which an abstract was prepared under this Act or under the enactments repealed by this Act, or, in a case where no such valuation has been made in respect of the class of business in question, from the date on which the insurer began to carry on that class of business ; "maturity date" means the fixed date on which any benefit will become payable either absolutely or contingently ; "net premiums" means as respects any valuation the premiums taken credit for in the valuation ; "premium term" means the period during which premiums are payable ; "valuation date" means as respects any valuation the date as at which the valuation is made.

PART II REQUIREMENTS APPLICABLE TO AN ABSTRACT IN RESPECT OF LIFE INSURANCE BUSINESS The following tabular statements shall be annexed to every abstract prepared in accordance with the requirements of this Part of this Schedule, namely :-

(a) a Consolidated Revenue Account, in the Form G annexed to this Part of this Schedule, for the inter-valuation period (except that it shall not be necessary to prepare such an account in respect of any class of business so long as the insurer deposits annually with the (Subs. by the Insurance (Amdt.) Act, 1950 (32 of 1950), s. 2, for "Superintendent of Insurance" (with effect from the 15th May, 1950).)[Controller of Insurance] an abstract in respect of that class of business) ; and (b) a Summary and Valuation in the Form H annexed to this Part of this Schedule of the policies included at the valuation date in the class of business to which the abstract relates ; and (c) a Valuation Balance-Sheet in the Form I annexed to this Part of this Schedule ; and (d) a statement in Form DDD as set forth in Part II of the Third Schedule of the additions to and deductions from the number of policies and the sums insured thereunder for each class of life insurance (Subs. by the Insurance (Amdt.) Act, 1941 (13 of 1941), s. 71, for "; and".) [for the inter-valuation period (except that it shall not be necessary to prepare such statement in respect of any class of business so long as the insurer deposits annually with the (Subs. by the Insurance (Amdt.) Act, 1950 (32 of 1950), s. 2, for "Superintendent of Insurance" (with effect from the 15th May, 1950).) [Controller of Insurance] an abstract in respect of that class of business)] ; (Cl. (e) omitted, ibid.)* * * * * *

and every such abstract shall show1. The valuation date. 2. The general principles and full details of the methods adopted in the valuation of each of the various classes of insurances and annuities shown in the said Form H, including statements on the following points :(a) whether the principles were determined by the instruments constituting the company or by its regulations or bye-laws or how otherwise ; (b) the method by which the net premiums have been arrived at and how the ages at entry, premium terms and maturity dates have been treated for the purpose of the valuation ; (c) the methods by which the valuation age, period from the valuation date to the maturity date, and the future premium terms, have been treated for the purpose of the valuation ; (d) the rate of bonus taken into account where by the method of valuation definite provision is made for the maintenance of a specific rate of bonus ; (e) the method of allowing for-

(i) the incidence of the premium income ; and (ii) premiums payable otherwise than annually ; (f) the methods by which provision has been made for the following matters, namely :(i) the immediate payment of claims ; (ii) future expenses and profits in the case of limited payment and paid-up policies ; (iii) the reserve in respect of lapsed policies, not included in the valuation, but under which a liability exists or may arise ; and whether any reserves have been made for the matters aforesaid ; (g) whether under the valuation method adopted any policy would be treated as an asset, and, if so, what steps, if any, have been taken to eliminate such asset ; (h) a statement of the manner in which policies on under-average lives and policies subject to premiums which include a charge for climatic, military or other extra risks have been dealt with ; and (e) the rates of exchange at which liabilities in respect of policies issued in foreign currencies have been converted into rupees and what provision has been made for possible increase of liability arising from future variations in the rates of exchange. 3. The table of mortality used, and the rate of interest assumed, in the valuation. 4. The proportion which that part of the annual premiums reserved as a provision for future expenses and profits bears to the total of the annual premiums separately specified in respect of insurances with immediate profits, with deferred profits, with profits, under discounted bonus systems, and without profits. 5. The average rates of interest yielded by the assets, whether invested or un-invested, constituting the life insurance fund for each of the years covered by the valuation date. 6. The basis adopted in the distribution of profits as between the insurer and policy-holders, and whether such basis was determined by the instruments constituting the company, or by its regulations or bye-laws, or how otherwise. 7. The general principles adopted in the distribution of profits among policy holders, including statements on the following points, namely: (a) whether the principles were determined by the instruments constituting the company or by its regulations or bye-laws, or how otherwise ;

(b) the number of years' premiums to be paid, period to elapse and other conditions to be fulfilled before a bonus is allotted ; (c) whether the bonus is allotted in respect of each year's premium paid, or in respect of each completed calendar year or year of assurance or how otherwise ; and (d) whether the bonus vests immediately on allocation, or, if not, the conditions of vesting. 8.-(1) The total amount of profits arising during the inter-valuation period, including profits paid away and sums transferred to reserve funds or other accounts during that period, and the amount brought forward from the preceding valuation (to be stated separately) and the allocation of such profits(a) to interim bonus paid ; (b) among policy-holders with immediate participation, giving the number of the policies which participated and the sums assured thereunder (excluding bonuses) ; (c) among policy-holders with deferred participation, giving the number of the policies which participated and the sums assured thereunder (excluding bonuses) ; (d) among policy-holders in the discounted bonus class, giving the number of the policies which participated and the sums assured thereunder (excluding bonuses) ; (e) to the insurer or, in the case of an insurance company, among shareholders or to shareholders' accounts (any such sums passed through the accounts during the inter-valuation period to be separately stated) ; (f) to every reserve fund or other fund or account (any such sums passed through the accounts during the inter-valuation period to be separately stated) ; (g) as carried forward unappropriated. (2) Specimens of bonuses allotted (Subs. by the Insurance (Amdt.) Act, 1941 (13 of 1941), s. 71, for "as at the valuation date".)[as a result of this valuation] to policies for one thousand rupees(a) for the whole term of life effected at the respective ages of 20, 30 and 40, and having been in force respectively for five years, ten years and upwards at intervals of ten years ; and (b) for endowment insurances effected at the respective ages of 20, 30 and 40, for endowment terms of fifteen, twenty and thirty years, and having been in force respectively for five years, ten years and upwards at intervals of ten years ;

together with the amounts apportioned under the various manners in which the bonus is receivable. 9. A statement in Form J annexed to this Part of this Schedule of specimen policy reserve values held or required to be held according to the methods adopted in the valuation, and specimen minimum surrender values in respect of whole life insurance policies for Rs. 1,000 with premiums payable throughout life effected at the respective ages of 20, 30, 40 and 50, and immediately on payment of the first, second, third, fourth, (The word and comma "fifth,"- ins. by the Insurance (Amdt.) Act, 1941 (13 of 1941), s. 71.)[fifth,] sixth, seventh, eighth, ninth, tenth, fifteenth and twentieth annual premium ; with similar specimen policy reserve values and specimen surrender values in respect of whole life insurance policies subject to premiums payable for 20 years and of endowment insurance policies maturing at age 55. 10. A statement showing how the liability under any disability clause in a policy has been determined in the valuation with full information of the tables of sickness or accident used for the purpose. (Subs. ibid., for the original Form G.) [Foam G] Consolidated Revenue Account of for years commencing and ending

Total Business (Subs. by the Federal Laws (Revision and Declaration) Act, 1951 (26 of 1951), section 4 and 3rd Sch., for within India.)[within Pakistan] (a). Rs. Rs. Claims under Policies (including provision for claims due or intimated), less Re-insurances By death By maturity Balance of Life Insurance Fund at the beginning of the period.]

Business Total (Subs. by the Federal Laws (Revision and Declaration) Act, 1951 (26 of 1951), section 4 and 3rd Sch., for within India.)[within Pakistan] (a). Rs. Rs.

Premiums, less Re-insurances(i) First year

Annuities, less Re-insurances -

Surrenders (including surrenders of Bonus), less Re-insurances.

premiums. (ii) Renewal premiums. (iii) Single premiums. Consideration for Annuities granted, less Reinsurances (c).

Bonuses in cash, less Reinsurances. Bonuses in Reduction of Premiums, less Re-insurances. Expenses of Management(b) (e)1. (a) Commission to insurance agents (less that on Re-insurances). (b) Allowances and Commission (other than commission included in sub-item (a) preceding). 2. Salaries, etc. (other than to agents and those contained in sub-item 1(b) preceding) ... ... Interest, Dividends and Rents Rs. Less-Income-tax there- on (d) Rs. Registration fees Other Income (to" be specified).

Loss transferred to Profit and Loss Account. Transferred from Appropriation Account.

3. Travelling expenses 4. Directors' fees ... 5. Auditors' fees ... 6. Medical fees ... 7. Law charges ... 8. Advertisements 9. Printing and Stationery ... 10. Other expenses of management (accounts to be specified). 11. Other payments (accounts to be specified) 12. Rent for offices belonging to and occu. pied by the insurer. 13. Rents of other offices occupied by the insurer ... ... Bad debts United Kingdom, (Subs. by A. O., 1949, for "British India".)[Central and Acceding State], Dominion and Foreign Taxes

Other Expenditure (to be specified) .. Profit transferred to Profit and Loss Account. Balance of Life Insurance Fund at end of the period as shown in the Balance-sheet ... Rs. Rs.

NOTES (a) These columns apply to all business except business the premiums in respect of which are ordinarily paid (Subs. ibid., for "outside India".)[outside Pakistan]. If any question arises whether any premiums are ordinarily paid inside or (Subs. ibid., for "outside India".) [outside Pakistan], the (Subs. by the Insurance (Amdt.) Act, 1950 (32 of 1950), s. 2, for "Superintendent of Insurance" (with effect from the 15th May, 1950).) [Controller of Insurance] shall decide the question and his decision shall be final. (b) If any sum has been deducted from this item and enteted on assets side of the balance-sheet, the amount so deducted must be shown separately. (c) All single premiums for annuities, whether immediate or deferred, must be included under this heading. (d) (Subs. by A. O., 1949, for "British Indian".)[Central and Acceding State], United Kingdom, Foreign and Dominion income-tax on Interest, Dividends and Rents must be shown under this heading, less any rebates of income-tax recovered from the revenue authorities in respect of expenses of management. The separate heading on the other side of the account is for United Kingdom, (Subs. by A. O., 1949, for "British Indian".) [Central and Acceding State], Foreign and Dominion taxes, other than those shown under this item.

(e) In the case of an insurer having his principal place of business outside (Subs. by the Central Laws (Statute Reform) Ordinance, 1960 (21 of 1960), s. 3 and 2nd Sch. (with effect from the 14th October, 1955), for "the Provinces and the Capital of the Federation" which had been subs. by A. O., 1949, for "British India".) [Pakistan] the expenses of management for the total business need not be split up into the several sub-heads, if they are not so split up in his own country.]

FORM H Summary and valuation of the Policies of Description Transactions as at 19

of Particulars of the Policies for Valuation Number Sums Bonuses Office Net of Assured yearly yearly polices premiums premiums

Valuation Sums Office Net Assured yearly yearly and premiums prem Bonuses

DIVISION I Insurances Group A With immediate participation in profits For whole term of life Other classes (to be specified) Extra premiums Total Insurances Deduct-Re-insurances Net insurances Group BWith deferred participation in profits For whole term of life Other classes (to be specified) Extra premiums Total Insurances

Deduct-Re-insurances

Net

insurances

Group C Under discounted bonus systems For whole term of life Other classes (to be specified) Extra premiums Total Insurances

Deduct-Re-insurances Net insurances

Total insurances with profits Group D Without participation in profits For whole term of life Other classes (to be specified) Extra premiums Total insurances Deduct-Re-insurances Description of Transactions Net insurances Total insurances without profits Total of the insurances shown in all groups Deduct-Re-insurances Net amount of insurances Adjustments if any (to be separately specified) DIVISION II

Annuities on Lives Immediate Annuities Deferred Annuities with return of premiums Deferred Annuities without return of premiums Other classes (to be specified) Total Annuities Deduct-Re-insurances Net Annuities on Lives Total of the results (after deduction of Re-insurances)

NOTES 1. Items in this Summary are to be stated to the nearest rupee. 2. No policy of insurance upon the lives of a group of persons, whereby sums assured are payable in respect of the several persons included in the group, is to be included in Groups A, B, C, or D of this Form : any such policies must be shown in a separate Group which must be added to the Form. 3. If policies without participation in profits but with a guaranteed rate of bonus are issued, they must be separately specified in Group D of this Form. 4. Policies under which there is a waiver of premiums during disability must be shown as a separate class. 5. Separate forms must be prepared in respect of classes of policies valued by different tables of mortality or at different rates of interest or involving the valuation of net premiums on different bases. 6. In cases where separate valuations of any portion of the business are required under local laws in places outside (Subs by the Central Laws (Statute Reform) Ordinance, 1960

(21 of 1960), s. 3 and 2nd Sch. (with effect from the 14th October, 1955), for the Provinces and the Capital or the Federation" which had been subs. by A. O.,1949, for British India".)[Pakistan] and reserves based on such valuations are deposited in such places; a statement must be furnished in respect of the business so valued in each such place showing the total number of policies, the total sums assured and bonuses, the total office yearly premiums, and the total net liability on the bases as to mortality and interest adopted m each such place with a statement as to such bases respectively. 7. Office and net premiums and the values thereof must be shown after deduction of abatements made by the application of bonus. FORM I as at Rs. Net liability under business as shown in the Summary and Valuation of policies. Surplus, if any Balance of Life Insurance Fund as shown in the Balance-Sheet. Deficiency, if any

Valuation Balance-Sheet of

19. Rs.

NOTE.-If the proportion of surplus allocated to the insurer, or in the case of an insurance company to shareholders, is not uniform in respect of all classes of insurances, the surplus must be shown separately for the classes to which the different

FORM J Specimen policy reserve values and minimum surrender values under a policy for entry 1,000 Age at entry 20 [Numbe Reserv Minimu r of e m annual value. surrende premiu r value. ms paid upto the valuatio n date]. 1 2 3 4 5 6 7 Age at entry 30 Reserv Minimu e m value. surrende r value. Age at entry 40 Reserv Minimu e m value. surrende r value. Age at entry 50 Reserv Minimu e m value. surrende r value.

8 9 10 15 20

NOTE.-Items in this Form to be stated to the nearest rupee. (Note added, ibid.)[None.-The reserve value is to be based on the rate of office premium payable by an insured who entered at the age shown and who had, by the valuation date, paid the number of annual premiums shown in the first column.].

THE FIFTH SCHEDULE (See section 13) Regulations for preparing statements of business in force and requirements applicable to such statements PART I REGULATIONS 1. Statements prepared under this Schedule must be prepared, so far as practicable, in tabular form and must be identified by numbers and letters corresponding with those of the paragraphs of Part II of this Schedule. 2. Except with respect to rates of premium or contribution, items in statements prepared under this Schedule are to be shown to the nearest rupee. 3. Extra premium shown in the forms of Summary and Valuation prepared under the Fourth Schedule to this Act must not be included in statements prepared under this Schedule. 4. Every statement prepared under this Schedule shall be signed by the actuary making the investigation in connection with which it is prepared. 5. For the purposes of this Schedule the following expressions have the meanings hereby respectively assigned to them, namely :-

(a) "annual loading" means the provision made for future expenses and profits ; (b) "extra premiums" means a charge for any risk not provided for in the minimum contract premium ; (c) "net premiums" means the premiums taken credit for in the valuation in connection with which any statement is prepared ; and (d) "valuation date" means as respects any valuation the date as at which the valuation is made.

PART II Requirements for statements applicable to Life Insurance Business The statements required to be prepared under this Part of this Schedule are as follows, namely :1. Statements, separately prepared in respect of policies with and without participation in profits, showing(a) as respects policies for the whole term of life, the rates of office premiums charged, in accordance with the published tables in use, for new policies giving the rates for decennial ages at entry from 20 to 70 inclusive ; and (b) as respects endowment insurance policies, the rates of office premiums charged, in accordance with the published tables in use, for new policies with original terms of ten, fifteen, twenty, thirty and forty years, giving the rates for decennial ages at entry from 20 to 40 inclusive, but excluding policies under which the age at maturity exceeds 60. 2. Statements, separately prepared in respect of policies with immediate profits, with deferred profits, with profits under discounted bonus systems, and without profits, showing in (Subs. by the Insurance (Amdt.) Ordinance, 1960 (5 of 1960), s. 11, for quinquennial".)[annual] groups(a) as respect policies for the whole term of life(i) the total amount assured (specifying sums assured and reversionary bonuses separately), grouped according to ages attained ; (ii) the amount per annum, after deducting abatements made by application of bonus, of office premiums payable throughout life, and of the corresponding net premiums, grouped according to ages attained ; and

(iii) the amount per annum, after deducting abatements made by application of bonus, of office premiums payable for a limited number of years, and, either, the corresponding net premiums grouped in accordance with the grouping adopted for the purposes of the valuation, or, the annual loading reserved for the remaining duration of the policies, grouped according to ages attained ; (b) as respects endowment insurance policies(i) the total amount assured (specifying sums assured and reversionary bonuses separately), grouped in accordance with the grouping adopted for the purposes of the valuation ; and (ii) the amount per annum, after deducting abatements made by application of bonus, of office premiums payable, and of the corresponding net premiums, grouped in accordance with the grouping adopted for the purposes of the valuation Provided that(Cl. (a) omitted by the Insurance (Amdt.) Ordinance. 1960 l5 of 1960). s. 11.)* * * * * * *

(b) where the office premiums payable under policies for the whole term of life for a limited number of years, or the office premiums payable under endowment insurance policies, or the corresponding net premiums, are grouped for the purposes of the valuation otherwise than according to the number of years' payments remaining to be made, or, where the sums assured under endowment insurance policies are grouped for the purposes of the valuation otherwise than according to the years in which the policies will mature for payment or in which they are assumed to mature if earlier than the true year, then, in any such case the valuation constants and an explanation of the method by which they are calculated must be given for each group, and in the case of the sums assured under endowment insurance policies a statement must also be given of the amount assured maturing for payment in each of the two years following the valuation date. 3. Statements as respects any policies in force under which premiums cease to be payable, whether permanently or temporarily, during disability arising from sickness or accident, showing the total amount of the office premiums payable. 4. Statements as respects immediate annuities on single lives for the whole term of life, separately prepared in respect of annuities on male and female lives, showing in uinquennial age groups the total amount of such annuities 5. Statements as respects deferred annuities, separately prepared in respect of annuities on male and female lives, showing the specimen reserve values for annuities of one hundred rupees which will be produced on maturity on the basis of valuation adopted at ages, in the case of male lives, 60 and 65, and in the case of female lives, 55 and 60 ; the said

statements must show the specimen reserve values which will be produced under the table of annual premiums in use for new policies, and if under any other table of annual premiums in use for any other deferred annuity policies in force smaller reserve values will be produced, the like specimens of these must also be given. 6. Statements as respects any policies of insurance upon the lives of a group of persons, whereby sums assured are payable in respect of the several persons included in the group, showing the total claims paid since the date as at which the last statements were prepared under this Part of this Schedule or, where no such statements have been prepared, since the date on which the insurer began to carry on the class of business to which the statements relate, and the reserve for unexpired risks and outstanding claims.

THE SIXTH SCHEDULE (See section 55) Rule as to the valuation of the Liabilities of an insurer in Insolvency or Liquidation The liabilities of an insurer in respect of current contracts effected in the course of life insurance business including annuity business, shall be calculated by the method and upon the basis to be determined by an actuary approved by the Court, and the actuary so approved shall, in determining as aforesaid, take into account(a) the purpose for which such valuation is to be made, (b) the rate of interest and the rates of mortality and sickness to be used in valuation, and (c) any special directions which may be given by the Court. The liabilities of an insurer in respect of current policies other than life policies shall be such portion of the last premium paid as is proportionate to the unexpired portion of the policy in respect of which the premium was paid.

[As Amended Up-to-Date Till 2012] SECURITIES AND EXCHANGE ORDINANCE, 1969 ORDINANCE NO. XVII OF 1969 (28th June, 1969) AN ORDINANCE

To provide for the protection of investors, regulation of markets and dealings in securities

WHEREAS it is expedient to provide for the protection of investors, regulation of markets and dealings in securities and for matters ancillary thereto; AND WHEREAS the national interest of Pakistan in relation to the achievement of uniformity requires 1[Federal] legislation in the matter; NOW, THEREFORE , in pursuance of the Proclamation of the 25th day of March 1969, read with the Provisional Constitution Order, and in exercise of all powers enabling him in that behalf, the President is pleased to make and promulgate the following Ordinance:-

CHAPTER - I PRELIMINARY

1. Short title, extent and commencement.-(1) This Ordinance may be called the Securities and Exchange Ordinance,1969. (2) (3)
1 2

It extends to the whole of Pakistan. It shall come into force on such date as the 2[Federal] Government may, by

Substituted for Central through Presidents Order No. 4 of 1975. Substituted for Central through Presidents Order No. 4 of 1975.

notification in the official Gazette, appoint. 2. Definitions.- 3[(1)] In this Ordinance, unless there is anything repugnant in the subject or context,[ (a) agent means a person appointed by a member to act on his behalf for the purposes recognized by 5[an] exchange; (ab) associate means any partner, employee, officer or director of a member;
4

(ac) asset management company means a company which offers investment schemes under trust deeds and issues redeemable securities; (ad) balloter means a person who provides services to an issuer for selecting the required number of applicants of public issue through a computer draw;] (b) bank means a banking company as defined in the Banking Companies Ordinance,1962 (LVII of 1962); (c) broker means any person engaged in the business of effecting transactions in securities for the account of others; [[(ca)] central depository means a company formed to establish and operate a system for the central handling of securities, whether or not listed on an exchange, whereby such securities are deposited with and held in custody by, or registered in the name of, the company as a nominee for the depositors and dealings in respect of such securities are effected by means of entries in securities accounts without the physical delivery of scrips.]
6

Section 2 renumbered as sub-section (1) through Securities and Exchange (Amendment) Ordinance, 2000 dated September 7, 2000. 4 Clauses (a), (ab), (ac) and (ad) substituted for clauses (aa) and (aaa) through Securities and Exchange (Amendment) Ordinance, 2000 dated September 7, 2000. Earlier clauses (aa) and (aaa) were inserted through Securities and Exchange (Amendment) Ordinance, 1994 and Finance Act, 1995 respectively. The Clauses before substitution read as follows: (a) associate means any partner, employee, officer or director of a member, (aa) asset management company means a company which offers investment schemes under trust deeds and issues redeemable securities; (aaa) Authority means the Corporate Law Authority constituted under the Companies Ordinance, 1984 (XLVII of 1984);
5

Substituted for a stock through Finance Act, 2006 dated July 1, 2006.

Clause (CC) inserted by Securities and Exchange (Amendment) Ordinance, 1994 and re-lettered as (ca) through Securities and Exchange (Amendment) Ordinance, 2000.

[(cb) Commission means the Securities and Exchange Commission of Pakistan established under the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997);]

[(cc) Commodity Exchange means a company that provides or, proposes to provide, the physical facilities necessary for trading in Commodity Futures Contracts;]
9

[(cd) Commodity Futures Contracts means an agreement to purchase or sell a particular commodity for delivery [or settlement]10 in the future at a price that is determined at the initiation of the contract that obligates each party to the contract to fulfill the contract at the specified price and that may be settled by delivery, cash or offset at an organized Exchange duly registered with the Commission and in relation to Commodity Futures the expression commodity includes,(i) agricultural, livestock, fishery, forestry, mining or energy goods, and any product that is manufactured or processed from any such goods; and (ii) any other matter as may be notified by the Commission in the Official Gazette;

(ce) corporatisation means the conversion of a Stock Exchange from a company limited by guarantee to a company limited by shares;

(cf) demutualisation means the segregation of the ownership of a Stock Exchange from the right to trade on such Stock Exchange;] (d) equity security means any stock or transferable share (preferred or common) or similar security representing ownership; any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security; any such warrant or right itself; and such other security as may be prescribed;
11

[(da) Exchange means a Stock Exchange or a Commodity Exchange;]

[(dd) free reserves for the purpose of an investment company, include any amount which, having been set aside out of the revenue or other surpluses is free in that it is not

12

7 8

Clause (cb) inserted through Securities and Exchange (Amendment) Ordinance, 2000 Clause (cc) inserted through Finance Act, 2003. 9 Clauses (cd) to (cf) inserted through Finance Act, 2006. 10 The words or settlement inserted through Finance Act, 2008 dated June 27 2008. 11 Clause (da) inserted through Finance Act, 2006. 12 Clause (dd) inserted through Securities and Exchange (Amendment) Ordinance, 1980.

retained to meet any diminution in value of the assets, specific liability, contingency or commitment of that company known to exist at the date of the balance sheet;]
13

[(de) integration means the merger of two or more Stock Exchanges in accordance with a scheme approved by the Commission;] (e) investment adviser includes, person who is, for compensation, engaged in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing or selling securities, but does not include,(i) (ii) a bank; any lawyer, accountant, engineer or teacher whose performance of such services is solely incidental to the practice of his profession;

(iii) any broker, jobber, member or associate whose performance of such services is solely incidental to the conduct of his business as a broker, jobber, member or associate and who receives no separate compensation therefor; (iv) the publisher of any newspaper, news magazine, or other publication of general and regular circulation; or (v) the Investment Corporation of Pakistan; [(f) Investment Company means a company engaged principally or wholly in buying and selling securities of other companies and includes a company, not being a holding company, the investment of which in the share capital of other companies at any one time is of an amount equivalent to eighty per cent of the aggregate of its own paid up capital and free reserves, but does not include a bank or an insurance company or a corporation which is a member of a Stock Exchange;] (g) issuer means any person who has issued or proposes to issue any security;
14

(h) jobber 15[or dealer] means any person engaged in the business of effecting transactions in securities for his own account, through a broker or otherwise, but does not

13 14

Clause (de) inserted through Finance Act, 2006. Clause (f) substituted through Securities and Exchange (Amendment) Ordinance, 1980. Before Substitution it read as follows: (f) Investment Company means a company engaged principally or wholly in buying and selling securities of other companies and includes a company eighty percent of whose paid up capital is employed at any one time as investment in other companies; but does not include a bank or or an insurance company or a corporation which is member of a Stock Exchange. The words inserted through Securities and Exchange (Amendment) Ordinance, 2000.

15

include any person who trades in securities for his own account, either individually or in some fiduciary capacity, otherwise than as a part of a regular business; (i)
17

member means a member of 16[an] Exchange;

[ ]

(j) person includes a Hindu undivided family, a firm, an association or body of individuals, whether incorporated or not, a company and every other artificial juridical person; (k) (l) prescribed means prescribed by rules made under this Ordinance; security includes(i) any stock, transferable share, scrip, [Modaraba Certificate]18, note, debenture, debenture stock, [participation term certificate,]19 bond, investment contract [, forward or futures contract]20, and preorganization certificate or subscription, and, in general, any interest or instrument commonly known as a security and, any certificate of deposit for, certificate of interest or participation in, temporary or interim certificate for, receipt for , or any warrant or right to subscribe to or purchase, any of the foregoing but does not include currency or any note, draft, bill of exchange or bankers acceptance or any note which has a maturity at the time of issuance of not more than twelve months, exclusive of days of grace, or any renewal thereof whose maturity is likewise limited; any Government security as defined in the Securities Act, 1920 (X of 1920); [ ]21

(ii)

(iii) any bonus entitlement voucher issued by the State Bank of Pakistan in accordance with any scheme announced by the [Commission]22;
16 17

Substituted for a stock through Finance Act, 2006 Clause (ii) omitted through Securities and Exchange (Amendment) Ordinance, 2000. Earlier it was inserted through Securities and Exchange (Amendment) Ordinance, 1980. Clause (ii) before omission read as follows: (ii) officer, for the purposes of Chapters III, IV and V, in relation to an insurer, includes managing agents, manager, secretary, accountant or auditor of the insurer; 18 Words and comma inserted through Securities and Exchange (Amendment) Ordinance, 1980. 19 Words and comma inserted through Securities and Exchange (Amendment) Ordinance, 1980.
20 21

Comma and words inserted through Finance Act, 2003. Word and omitted through Finance Act, 2006. 22 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000.

[and]23 [(iv) Commodity Futures Contract;]24 (m) stock exchange means any person who maintains or provides a market place or facilities for bringing together buyers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a Stock Exchange, as that term is generally understood, and includes such market place and facilities [;]25 [ (n) sub-underwriter means a person who has made a contract with an underwriter to take up a part of the securities not fully subscribed by the public issue; (o) transfer agent means a person appointed by the issuer to assist in the maintenance of record for issuance and transfer of securities and to perform functions of persons commonly known as Registrar; (p) underwriter includes a person who has made a contract with an issuer to subscribe and pay in cash for those securities as are not fully subscribed by the public issue or a person who has initially bought the securities from an issuer for the purpose of selling such securities by means of a public offer; and (q) venture capital company includes a company which is engaged principally in financing through direct equity investment in another company and provides managerial expertise thereto;]26 [Explanation :-In clause (1) Modaraba Certificate has the same meaning as in the Modaraba Companies and Modarabas (Floatation and Control) Ordinance, 1980 (XXXI of 1980).]27 [(2) The words and expressions used but not defined in this Ordinance shall have the same meaning as are assigned to them in the Companies Ordinance, 1984 (XLVII of 1984).]28

23 24

Word and inserted through Finance Act, 2006. Clause (iv) inserted through Finance Act, 2006. 25 Semi-colon substituted for Full stop through Securities and Exchange (Amendment) Ordinance, 2000.
26

Clauses n to q inserted through Securities and Exchange (Amendment) Ordinance, 2000. Explanation inserted through Securities and Exchange (Amendment) Ordinance, 1982.

27

28

Sub-section (2) inserted through Securities and Exchange (Amendment) Ordinance, 2000.

CHAPTER II REGISTRATION AND REGULATION OF STOCK EXCHANGES

3. No [ ]29 Exchange to operate without registration.- [(1)]30 No [ ]31 Exchange shall operate or carry on its functions, and no person shall use or utilize, for the purpose of any transaction or dealing in any security, the facilities or services of [an]32 Exchange, unless such [ ]33 Exchange is registered under this Ordinance. (2) The Authority shall determine the number and places for the establishment of [ ]34 exchanges. 4. Eligibility for registration.- (1) Any [ ]35 Exchange which fulfill such conditions or complies with such requirements as may be prescribed to ensure fair dealings [, protection of investors and its sustainable economic viability]36 shall be eligible for registration under this Ordinance. (2) The conditions or requirements which may be prescribed for the purposes of subsection (1) may, among other matters, relate to(a) qualifications for membership and admission, exclusion, suspension, expulsion and re-admission of members therein to or therefrom; constitution and powers of the governing body and the powers and duties of the office bearers; representation [from a class or classes of persons or professions]37 on the governing body of [an]38 Exchange or any of its Committees; the manner in which business should be transacted including restrictions on the business of the members; Memorandum and Articles of Association, rules, regulations and by-laws of [an]39 Exchange; and

(b)

(c)

(d)

(e)

29 30

The word Stock omitted through Finance Act, 2007. Section 3 re-numbered as sub-section (1) through Finance, Act, 1995. 31 The word Stock omitted through Finance Act, 2007. 32 Substituted for a stock through Finance Act, 2006. 33 The word Stock omitted through Finance Act, 2007. 34 The word Stock omitted through Finance Act, 2007. 35 The word Stock omitted through Finance Act, 2007. 36 Substituted for and to protect investors through Finance Act, 1995. 37 Substituted for of the Federal Government through Finance Act, 1995. 38 Substituted for a stock through Finance Act, 2006.

(f)

the maintenance of accounts [and records]40 including those of members, and their audit.

5. Registration.- (1) Any [ ]41 Exchange which is eligible for registration under section 4 may, in such form[, manner and on payment of such fee]42 as may be prescribed, apply to the [Commission]43 for registration. (2) The [Commission]44, if it is satisfied, after such inquiry and after obtaining such further information as it may consider necessary,(i) (ii) that the [ ]45 Exchange is eligible for registration; and that it would be in the interest of the trade and also in the public interest to register the [ ]46 Exchange;

may grant a certificate of registration to the [ ]47 Exchange. (3) No application for registration shall be refused except after giving the applicant an opportunity of being heard. [5A. Brokers or agents not to engage in business without registration.- No person shall act as broker or agent to deal in the business of effecting transactions in securities unless he is registered with the Commission in such manner, on payment of such fees and charges and on such conditions as may be prescribed.]48 6. Accounts, annual reports, returns, etc.- (1) Every [ ]49 Exchange and every director, officer and member thereof shall prepare and maintain such books of accounts and other documents in such manner as may be prescribed; and every such book of accounts or document shall be subject to inspection at all reasonable times by any person authorised by the [Commission]50 in this behalf.

39

Substituted for a stock through Finance Act, 2006.

40 41

Inserted through Finance Act, 1995. The word Stock omitted through Finance Act, 2007. 42 Substituted for and manner through Finance Act, 1995. 43 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 44 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 45 The word Stock omitted through Finance Act, 2007. 46 The word Stock omitted through Finance Act, 2007. 47 The word Stock omitted through Finance Act, 2007. 48 Inserted through Securities and Exchange (Amendment) Ordinance, 2000.
49 50

The word Stock omitted through Finance Act, 2007. Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000.

(2) Every [ ]51 Exchange shall submit to the [Commission]52, in such manner and containing such particulars as may be prescribed, an annual report and periodical returns relating to its affairs. (3) Without prejudice to the provisions of sub-section (1) and sub-section (2), every [ ]53 Exchange and every director, officer or member thereof shall furnish such documents, information or explanation relating to the affairs of the [ ]54 Exchange or, as the case may be, relating to the business on the [ ]55 Exchange of such director, officer or member as the [Commission]56 may, at any time, by order in writing require. 7. Cancellation of registration, etc.- (1) Where the [Commission]57 is of opinion that[ ]58 Exchange or any member, director or officer of [an]59 Exchange has contravened any provision, or has otherwise neglected or failed to comply with any requirement, of this Ordinance, or of any rule, regulation or direction made or given thereunder, the [Commission]60 may, if it considers it necessary for the protection of investors or to ensure fair dealings or fair administration of the [ ]61Exchange so to do, by order in writing(a) suspend for such period as may be specified in the order the transaction of any business on the[ ]62 Exchange; cancel the registration of the [ ]63 Exchange; supersede the governing body or other authority of the [ Exchange; ]64

(b) (c)

(d)

[suspend or]65 remove the director, officer or member from his office in, or membership of, the [ ]66 Exchange;

51 52

The word Stock omitted through Finance Act, 2007. Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 53 The word Stock omitted through Finance Act, 2007. 54 The word Stock omitted through Finance Act, 2007. 55 The word Stock omitted through Finance Act, 2007. 56 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 57 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 58 The word Stock omitted through Finance Act, 2007. 59 Substituted for a stock through Finance Act, 2006. 60 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000.
61 62

The word Stock omitted through Finance Act, 2007. The word Stock omitted through Finance Act, 2007. 63 The word Stock omitted through Finance Act, 2007. 64 The word Stock omitted through Finance Act, 2007. 65 The words inserted through Securities and Exchange (Amendment) Ordinance, 2000 66 The word Stock omitted through Finance Act, 2007.

Provided that no such order shall be made except after giving the governing body or other authority or, as the case may be, the director, officer or member, an opportunity of being heard. (2) An order made under clause (c) or clause (d) of sub-section (1) may also direct that the functions of the governing body or other authority which has been superseded or of the director or officer who has been removed shall be performed by such authority or person as may be specified therein. (3) An order under sub-section (1) shall have effect notwithstanding anything contained in any other law for the time being in force or in any Memorandum or Articles of Association; Provided that no order made under clause (a) or clause (b) of sub-section (1) shall affect the validity of any contract lawfully entered into before the date of such order. 8. Restriction on dealings in securities.- (1) No person shall transact any business in securities on any Exchange [otherwise than as may be prescribed]67. (2) No business shall be transacted on a Exchange in a security, other than a Government security [ ]68, which is not listed on such Exchange [:]69 [Provided that business may be transacted in a delisted security for a period which may extend to six months in such manner as the Commission may direct.]70 (3) No person shall act as a dealer in a security listed on a Stock Exchange outside such Stock Exchange; [ ]71

(4) No person other than a member shall act as a broker or a jobber for any security not listed on a stock exchange: Provided that the prohibition in this sub-section shall not apply to discounting of any security evidencing a loan. 9. Listing of Securities.- (1) An issuer who intends to get any of his securities listed on a Stock Exchange shall submit an application therefore, in the prescribed form to the Stock Exchange and submit a copy of the application to the [Commission]72.
Substituted for unless he is a member thereof through Finance Act, 2006. Words or a bonus entitlement voucher omitted through Securities and Exchange (Amendment) Ordinance, 2000. 69 Semicolon substituted for colon through Finance Act, 2003. 70 Proviso inserted through Finance Act, 2003. 71 Proviso omitted through Finance Act, 2006. Before omission it read as follows: Provided that prohibition in this sub-section shall not apply to purchase, sale or transfer of any such security by or from investment corporation of Pakistan or the National Investment Trust.
68 67

(2) Upon receipt of an application under sub-section (1), the Stock Exchange may, if it is satisfied after making such inquiry as it may consider necessary that the applicant fulfils the conditions prescribed in this behalf, list the security for dealings on the Stock Exchange. (3) Where a Stock Exchange refuses to list a security, the [Commission]73 may, either on petition by the applicant made within the prescribed time or on its own motion, direct the Stock Exchange to list the security. (4) Where after the listing of a security, the [Commission] or Stock Exchange finds that the application is deficient in any material respect or that the issuer has failed to comply with any prescribed condition or requirement and that the continued listing of the security would not be in the public interest, the [Commission] or, as the case may be, the Stock Exchange may, by order, either require the issuer to correct the deficiency or comply with the prescribed condition or requirement within the time specified in the order or revoke the listing. (5) A listed security may be delisted on application by the issuer to the Stock Exchange which may deny the application or grant it on such conditions as appear necessary or appropriate for the protection of investors. (6) Where a Stock Exchange refuses to delist a security, the [Commission]74 may, on petition by the applicant made within the prescribed time, direct the Stock Exchange to delist the security. [(7) The Commission or a Stock Exchange may, if it considers it to be in the interest of trade or in the public interest so to do, by order recording the reasons, suspend for a period not exceeding sixty days the trading of any listed security and may, from time to time, for the said reasons and in the said manner extend the suspension for further periods not exceeding sixty days at any time.]75 [Omitted]76

72 73

Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 74 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 75 Subsection (7) substituted through Securities and Exchange (Amendment) Ordinance, 2000. Before omission it read as follows: (7) The Federal Government or a Stock Exchange may, if it considers it to be in the interest of trade or in the public interest so to do, suspend, by order recording the reasons, trading in any security. 76 Subsection (8) omitted through Securities and Exchange (Amendment) Ordinance, 2000. Before omission it read as follows: (8) An order under subsection (7) shall remain in force for a period of [sixty days] which the Federal Government or, as the case may be, Stock exchange may extend for further periods not exceeding [sixty days] at any time. Substituted for fourteen through Companies Ordinance, 1984

(9) No application submitted under sub-section (1) shall be refused, and no listing shall be revoked under sub-section (4), unless the issuer has been given an opportunity of being heard. 10. Compulsory listing of securities.- Where the [Commission]77, having regard to the nature of, and the dealings in, any security, is of the opinion that it is necessary or expedient in the public interest so to do, it may, after consulting a Stock Exchange and giving the issuer of such security an opportunity of being heard, direct the Stock Exchange to list the security. CHAPTER III REGULATION OF ISSUER [11. Submission of returns.- Omitted 12. Submission of statement of beneficial owners of listed equity securities. Omitted 13. Prohibition of short-selling.- Omitted 14. Trading by directors, officers and principal shareholders.- Omitted 15. Regulation of proxies.- Omitted]78
77 78

Substituted for Federal Government through Presidents Order No. 4 of 1975. Section 11 to 15 omitted through Companies Ordinance, 1984. Before omission these read as follows: 11. Submission of returns.- (1) An issuer of listed security shall furnish to the Stock Exchange, to the security holders and to the Federal Government an annual report of its affairs and such statements and other reports as may be prescribed. (2) Without prejudice to the provisions of sub-section (1) an issuer of a listed security shall furnish to the Federal Government [, the Stock Exchange and the shareholders] such other documents, information or explanation relating to its affairs as the Federal Government may, at any time, by order in writing require.

12. Submission of statement of beneficial owners of listed equity securities.- Every director or officer of an issuer who is or has been the beneficial owner of any class or its listed equity securities and every person who is directly or indirectly the beneficial owner of more than ten percent of any class of such securities shall submit to the Federal Government such returns pertaining to the beneficial ownership of such securities in such form and at such times or at such intervals as may be prescribed. 13. Prohibition of short-selling.- No director or officer of an issuer of a listed equity security and no person who is directly or indirectly the beneficial owner of not less than ten percent of such securities shall practice directly or indirectly short-selling such securities. 14. Trading by directors, officers and principal shareholders.- (1) Where any director or officer of a listed equity security or any person who is directly or indirectly beneficial owner of not less than ten percent of such securities make any gain by the purchase and sale, or the sale and purchase, of any such security within a period of less than six months, such director, officer or beneficial owner shall make a report and tender the amount of such gain to the issuer: Provided that nothing in this sub-section shall apply to a security acquired in good faith in satisfaction of a debt previously contracted.

[CHAPTER III-A]79

INSIDER TRADING

[15A. Prohibition of insider trading.(1) No person shall indulge in insider trading. (2) Insider trading shall include, (a) an insider person transacting any deal, directly or indirectly, using inside information involving listed securities to which the inside information pertains, or using others to transact such deals; any other person to whom inside information has been passed or disclosed by an insider person transacting any deal, directly or indirectly, using inside information involving listed securities to which the inside information pertains, or using others to transact such deals; transaction by any person as specified in clauses (a) and (b), or any other person who knows, or ought to have known under normal and reasonable circumstances, that the information possessed and used for transacting any deal is inside information; an insider person suggesting or recommending to another person to engage in dealing in any listed securities to which the inside information possessed by the insider person pertains, without the inside information being disclosed to the person who has dealt in such securities:

(b)

(c)

(d)

(3) Nothing in this section shall apply to (a) any transaction performed under an agreement that was concluded before the time of gaining access to inside information; or

(2) Where a director, officer or beneficial owner fails or neglects to tender or the issuer fails to recover, any such gain as is mentioned in sub-section (1) within a period of six months after its accrual, or within sixty days of a demand therefor, whichever is later, such gain shall vest in the Federal Government which may recover the same as arrears of land revenue. 15. Regulation of proxies.- Notwithstanding anything contained in the Companies Act, 1913 or Memorandum and Articles of Association of the issuer of a listed security, the Federal Government may regulate the solicitation of any proxy, consent or authorisation pertaining to the securities of such issuer in such manner as may be prescribed. 79 Chapter III-A inserted through Finance Act, 1995.

(b)

the disclosure of inside information by an insider person as required under law.

(4) No contract shall be void or unenforceable by reason only of an offence under this section. 15B. Inside information.(1) The expression inside information means, (a) 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; 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 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 clients pending orders.

(b)

(c)

15C. Insiders.(1) Insiders shall include, (a) (b) sponsors, executive officers and directors of an issuer; 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 twenty per cent or more; sponsors, executive officers, directors and partners of a legal person or unincorporated business association who holds, directly or indirectly, shares or voting rights of ten per cent or more in an issuer; sponsors, executive officers and directors of an organization, that has been engaged in the placement of listed securities or the public offer of securities or the 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; any natural person holding, directly or indirectly, ten per cent or more shares of an issuer; sponsors, executive officers and directors of credit institutions in which the issuer has an account;

(c)

(d)

(e)

(f)

(g)

any person obtaining inside information as part of his employment or when discharging his usual duties in an official capacity, or in any other way relating to work performed under contract of employment or otherwise; any person obtaining inside information through unlawful means; and a spouse, lineal ascendant or descendant, partner or nominee of a person referred to in clauses (a) to (h).

(h) (i)

15D. Listed companies responsibilities to disclose inside information.(1) Listed companies shall inform the public, in the manner specified by the Commission, as soon as possible of inside information which directly concerns the listed securities. (2) Listed companies may delay the public disclosure of inside information, as referred to in sub-section (1) in order not to prejudice their legitimate interests, provided that such delay does not mislead the public and provided that the company is able to ensure the confidentiality of the information and the company shall inform the Commission of the decision to delay the public disclosure of inside information forthwith. (3) Whenever a listed company or a person acting on its behalf, discloses any inside information to any third party in the normal exercise of employment, profession or duties, complete and effective public disclosure of that information must be made simultaneously in the manner specified by the Commission: Provided that the provisions shall not apply if the person receiving the information owes a duty of confidentiality, regardless of whether such duty is based on a law, regulations, articles of association or contract. (4) Listed companies or persons acting on its behalf, shall maintain and regularly update a list of persons employed, under contract or otherwise in the manner specified by the Commission who have access to inside information and provide such list to the Commission whenever the Commission requests it. (5) Persons discharging managerial responsibilities within a listed company and, where applicable, persons closely associated with them, shall notify the Commission of transactions conducted on their own account relating to the securities of such listed company in the manner specified by the Commission. (6) The Exchanges shall adopt structural provisions, operating procedures and surveillance techniques to detect and prevent insider trading and market abuse practices, within such time as may be specified by the Commission and according to the regulations made hereunder. 15E. Liability for contravention.(1) Any person who contravenes the provisions of subsection (1) of section 15A shall, on being found guilty of contravention by the

Commission, be liable to fine, which may extend to ten million rupees or three times the amount of gain made or loss avoided by such person, or loss suffered by another person, whichever amount is higher. (2) In addition to the fine imposed under sub-section (1), such person, (a) may be directed by the Commission, (i) to surrender to the Commission, an amount equivalent to the gain made or loss avoided by him; or to pay any other person who has suffered a loss, an amount equivalent to the loss so suffered by such person; and

(ii)

(b)

may, where such person is an executive officer, director, auditor, advisor, consultant of a listed company, be removed from such office by an order of the Commission and debarred from auditing any listed company for a period of upto three years; or may, where such person is registered as a broker or agent, be liable to cancellation of registration.

(c)

(3) Where an insider person discloses inside information to any other person who is not required to possess such information for any reason, the insider person shall be liable to fine, to be imposed by the Commission, which may extend to thirty million rupees. (4) The Commission may, by notification in the official Gazette, make regulations to regulate persons who produce or disseminate research concerning listed securities or issuers of listed securities and persons who produce or disseminate other information recommending or suggesting investment strategy, intended for distribution channels or for the general public.]80

Section 15-A and 15 B substituted by 15 A to 15 E through Finance Act, 2008 dated June 27 2008. The substituted section 15-A and 15B read as under: 15-A. Prohibition on stock exchange deals by insiders.- No person who is, or has been, at any time during the preceding six months, associated with a company shall, directly or indirectly, deal on a stock exchange in any listed securities of that or any other company or cause any other person to deal in securities of such company, if he has information whicha) is not generally available; b) would, if it were so available, be likely to materially affect the price of those securities; or c) relates to any transaction (actual or contemplated) involving such company. Explanation.- For the purpose of this section, the expression associated with shall mean a person associated with a company, if he(i) is an officer or employee of that company or an associated company; or (ii) occupies a position which gives him access thereto by reason of any professional or business relationship between him or his employer or a company or associated company of which he is a director.

80

CHAPTER IV PROHIBITIONS AND RESTRICTIONS 16. Credit, [pledging]81 and lending of customers securities.- No member or associate shall, in contravention of any rules made under this Ordinance, directly or indirectly,(a) extend or maintain credit, or arrange for the extension or maintenance of credit, to or for any person for the purpose of purchasing or carrying any security; or borrow on any security or lend or arrange for the lending of any security carried for the account of a customer ; or pledge or arrange for the pledging of any security carried for the account of any customer.]82

(b)

[(c)

17. Prohibition of fraudulent acts, etc._ No person shall, for the purpose of inducing, dissuading, effecting, preventing or in any manner influencing or turning to his advantage, the sale or purchase of any security, directly or indirectly,(a) employ any device, scheme or artifice, or engage in any act, practice or course of business, which operates or is intended or calculated to operate as a fraud or deceit upon any person; or

15 B. Liability for contravention of section 15A.- (1) Where a person contravenes the provisions of section 15A, the Authority may, by a notice in writing, ask such person to show cause for compensating any person who has suffered loss for such contravention and initiating prosecution against him. (2) Where a person to whom a notice has been issued under sub-section (1) satisfy the Authority that (a) any dealing on stock exchange or communication of any information was not made with the intent of making any profit or causing a loss to any person or company; or (b) the dealing on stock exchange or any information was communicated in good faith in discharge of his legal responsibilities. the Authority may withdraw such notice. (3) Where the Authority is not satisfied with the explanation of the person given in response to the show cause notice served upon him under sub-section (1), it may direct him to pay any other person who has suffered loss for any contravention of section 15A, compensation which shall not be less than the amount of loss sustained by any other person as a result of such dealing or communication of information: Provided that where the person who has suffered any loss for any contravention of section 15A is not determined, the amount of compensation equivalent to the gain accrued or the loss avoided by such contravention, shall be payable to the [Commission]. (4) In addition to compensation payable under sub-section (3), a person contravening the provisions of section 15A shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to three times the amount of gain accrued or loss avoided by such contravention, or with both. (5) Any compensation payable under this section shall be recoverable as arrear of land revenue. 81 Substituted for hypothecation through Securities and Exchange (Amendment) Ordinance, 1980.
82

Clause (c) substituted through Securities and Exchange (Amendment) Ordinance, 1980.

(b)

make any suggestion or statement as a fact of that which he does not believe to be true; or omit to state or actively conceal [a material fact]83 having knowledge or belief of such fact; or induce any person by deceiving him to do or omit to do any thing which he would not do or omit if he were not so deceived; or do any act or practice or engage in a course of business, or omit to do any act which operates or would operate as a fraud, deceit or manipulation upon any person, in particular(i) (ii) make any fictitious quotation; create a false and misleading appearance of active trading in any security;

(c)

(d)

(e)

(iii) effect any transaction in such security which involves no change in its beneficial ownership; (iv) enter into an order or orders for the purchase and sale of security which will ultimately cancel out each other and will not result in any change in the beneficial ownership of such security; (v) directly or indirectly effect a series of transactions in any security creating the appearance of active trading therein or of raising of price for the purpose of inducing its purchase by others or depressing its price for the purpose of inducing its sale by others;

(vi) being a director or an officer of the issuer of a listed equity security or a beneficial owner of not less than ten per cent of such security who is in possession of material facts omit to disclose any such facts while buying or selling such security. 18. Prohibition of false statements, etc.- No person shall, in any document, paper, accounts, information or explanation which he is, by or under this Ordinance, required to furnish , or in any application made under this Ordinance, make any statement or give any information which he knows or has reasonable cause to believe to be false or incorrect in any material particular.

83

Substituted for a fact through Securities and Exchange (Amendment) Ordinance, 1980.

[18A. Prohibition of making fictitious and multiple applications for new issues .(1) No person or any other person on his behalf shall make a fictitious application or submit more than one application for share of companies offered to the public. (2) In case of contravention of the provisions of sub-section (1), the application money shall be liable to confiscation: Provided that no action under this sub-section shall be taken without giving the applicant an opportunity of being heard.]84

19. Maintenance of secrecy.- No person shall, except with the permission of the [Commission]85 , communicate or otherwise disclose to any person not legally entitled thereto any information which has been entrusted to him or which he has obtained or to which he had access in the course of the performance of any functions under this Ordinance. 20. Prohibitory orders.- (1) Where the [Commission]86 is of opinion that any person is engaged or is about to be engaged in any act or practice which constitutes or is calculated to constitute a contravention of the provisions of this Ordinance or of any rules made thereunder, or that any person has neglected, or is not likely, to do an act the omission or failure to do which constitutes such contravention, it may, by order in writing, direct such person to abstain from doing the act or committing the practice which constitutes or is calculated to constitute such contravention, or to do the act, the omission or failure to do which constitutes such contravention. (2) Every person to whom a direction under sub-section (1) is given shall comply therewith in such manner, if any, and within such time, as may be specified therein.

CHAPTER V ENQUIRIES, PENALTIES, ORDERS AND APPEALS 21. [(1) The [Commission]87 may, on its own motion or on representation of not less than [one-tenth]88 in number of the members of the [ ]89 Exchange or, in the case of the business or any transaction mentioned in clause (b), on the representation of the [ ]90
84 85

Section 18A inserted through Finance Act, 1995. Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 86 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 87 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 88 Substituted for one fifth through Securities and Exchange (Amendment) Ordinance, 2000. 89 The word Stock omitted through Finance Act, 2007. 90 The word Stock omitted through Finance Act, 2007.

Exchange or any person interested in or affected by such business or transaction, at any time by order in writing, cause an enquiry to be made by any person appointed in this behalf into(a) the affairs of, or dealings in, any[ ]91 Exchange; or

(b) the dealings, business or any transaction in securities by any [person or]92 broker, member, director or officer of [an]93 Exchange. (2) Where any enquiry under sub-section (1) has been undertaken every past or present member, director, manager or other officer of the[ ]94 Exchange [or any other person]95 to which the enquiry relates, and every other person who has had any dealing in the course of his business with such [person or]96 [ ]97 Exchange or with the director, manager or officer thereof, shall furnish such information and documents in his custody or power or within his knowledge relating to or having bearing on the subject-matter or the enquiry as the person conducting the enquiry may require.]98 (3) The person conducting an enquiry under sub-section (1) may, for the purpose of such enquiry, enter into any premises belonging to or in the occupation of the[ ]99 Exchange or the issuer or of the person to whom the enquiry relates, and call for and

91 92

The word Stock omitted through Finance Act, 2007. The words person or inserted through Finance Act, 2008 dated June 27, 2008. 93 Substituted for a Stock though Finance Act, 2006. 94 The word Stock omitted through Finance Act, 2007. 95 The words or any other person inserted through Finance Act, 2008 dated June 27, 2008.
96

The words person or inserted through Finance Act, 2008 dated June 27, 2008.

97 98

The word Stock omitted through Finance Act, 2007. Sub-sections (1) and (2) substituted through Companies Ordinance, 1984. Before substitution these read as follows: (1) The Federal Government may, on its own motion or, in the case of issuer of listed securities, on representation of holders of not less than ten percent of equity securities at any time by order in writing, cause an enquiry to be made by any person appointed in this behalf into(a) The affairs of any Stock Exchange, or any issuer of a listed security; or (b) The business or any transaction in any security by any member director or officer of a Stock Exchange or of an issuer, or of a director or an officer of whereof, or by any person who is directly or indirectly the beneficial owner of not less than ten percent of a listed security.

(2) Where an enquiry under sub-section (1) has been undertaken, every member, director, [auditor], manager, or other officer of the Stock Exchange r the issuer to which, or to whose member, director, officer the enquiry relates and every other person who has had any dealing in the course of his business with such Stock Exchange, or issuer or with the director, [auditor], manager, or other officer thereof, shall furnish such information in his custody or power or within his knowledge relating to or having a bearing on the subject matter of the enquiry as the person conducting the enquiry may require. 99 The word Stock omitted through Finance Act, 2007.

inspect and seize books of accounts or documents in the possession of any such[ ]100 Exchange, issuer or person. (4) The person holding an enquiry under sub-section (1) shall, for the purpose of such enquiry have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (Act V of 1908), when trying a suit, in respect of the following matters, namely :(a) enforcing the attendance of a person and examining him on oath or affirmation; compelling the production of documents; issuing commissions for the examination of witnesses;

(b) (c)

and any proceedings before such person shall be deemed to be judicial proceeding within the meaning of sections 193 and 228 of the Pakistan Penal Code (Act XLV of 1860). 22. Penalty for certain refusal or failure. -(1) If any person(a) refuses or fails to furnish any document, paper or information which he is required to furnish by or under this Ordinance; or refuses or fails to comply with any order or direction of the [Commission]101 made or issued under this Ordinance; or contravenes or otherwise fails to comply with the provisions of this Ordinance [or any rules or regulations made thereunder]102;

(b)

(c)

the [Commission]103 may, if it is satisfied after giving the person an opportunity of being heard that the refusal, failure or contravention was willful, by order direct that such person shall pay to the [Commission]104 by way of penalty such sum not exceeding [fifty million]105 rupees as may be specified in the order and, in the case of a continuing default, a further sum calculated at the rate of [two hundred]106 thousand rupees for every day after the issue of such order during which the refusal, failure or contravention continues.

The word Stock omitted through Finance Act, 2007. Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 102 Words inserted through Finance, Act, 2006. 103 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 104 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 105 Substituted for one hundred thousand through Finance Act, 2007. Earlier it was substituted for thirty through Securities and Exchange (Amendment) Ordinance, 2000. 106 Substituted for two thousand through Finance Act, 2007. Earlier two was substituted for one through Securities and Exchange (Amendment) Ordinance, 2000.
101

100

(2) Any sum directed to be paid under sub-section (1) shall be recoverable as an arrear of land revenue. (3) No prosecution for an offence against this Ordinance shall be instituted in respect of the same facts on which a penalty has been imposed under this section. 23. Civil liabilities.- (1) Every contract made in contravention of any provision of this Ordinance or any rule made thereunder shall be voidable as regards the rights of any party to the contract contravening such provision or any person not being a party to the contract who acquires any right under the contract with actual knowledge of the facts by reason of which its making or performance was in such contravention and any person affected by such contract not being himself a party to the contravention may sue to rescind any such contract to the extent it has been consummated or for damages when recision is not possible. (2) Any person who makes or causes to be made, in any application, report, or document filed with the [Commission]107 or [an]108 Exchange pursuant to this Ordinance or any rule made thereunder, any statement which was false or misleading with respect to any material fact, at the time and in the light of the circumstances under which it was made, shall be liable to any person who has purchased or sold a security in reliance on such statement for damages caused by such reliance, without regard to the presence or absence of any contractual relationship between the two, unless the person who made or caused to be made the application, report or document proves that he acted in good faith and had no knowledge or reasonable ground to believe that the statement was false or misleading. (3) Any person who participates in any act or transaction in contravention of section 17 shall be liable to any person who has purchased or sold a security in reliance on such act or transaction for damages caused by such reliance, without regard to the presence or absence of any contractual relationship between the two, unless the person so contravening proves that he acted in good faith and had no knowledge or reasonable ground to believe that there was any fraud, untruth or omission. (4) Every person who directly or indirectly exercises control over the affairs of any person liable under this section shall also be liable to the same extent as the person whose affairs are so controlled, unless he proves that he acted in good faith and did not directly or indirectly induce the act or acts giving rise to the cause of action. (5) Liability under this section shall be joint and several, and every person who becomes liable may recover contribution as in cases of contract from any person who, if joined in the original suit, would have been liable to make the same payment, unless the plantiff was, and the defendant was not, guilty of fraudulent misrepresentation.

107 108

Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. Substituted for a stock through Finance Act, 2006.

(6) No suit for the enforcement of any right or remedy provided for in this section shall lie after the expiry of three years from the date of the accrual of the cause of action. (7) The rights and remedies provided by this Ordinance shall be in addition to any other rights and remedies available under any other law for the time being in force. 24. Penalty. (1) Whoever contravenes the provisions of section 17 shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to [five hundred]109 thousand rupees, or with both. (2) Where the person guilty of an offence referred to in sub-section (1) is a company or other body corporate, every director, manager or other officer responsible for the conduct of its affairs shall, unless he proves that the offence was committed without his knowledge or that he exercised all diligence to prevent its commission, be deemed to be guilty of the offence. 25. Cognizance of offence.- No court shall take cognizance of any offence punishable under this ordinance except on a report in writing of the facts constituting the offence by an officer authorised in this behalf by the [Commission]110; and no court inferior to that of a court of Session shall try any such offence. 26. [Omitted]111

CHAPTER VI MISCELLANEOUS

Substituted for thirty through Securities and Exchange (Amendment) Ordinance, 2000. Earlier thirty was substituted for ten through Securities and Exchange (Amendment) Ordinance, 2000. 110 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 111 Section 26 omitted through Securities and Exchange (Amendment) Ordinance, 2000. Before omission it read as follows: 26. Revision and Review.- (1) Any order passed or made under this Ordinance by an officer or authority subordinate to the Federal Government or exercising the powers of the Federal Government in pursuance of a directive of under section 28 shall be subject to revision by the Federal Government upon application being made by any aggrieved person within ninety days from the date of such order; and the Federal Governments order in revision shall be final. (2) The Federal Government may, upon an application being made to it within a period of six months from the date of the order passed by it otherwise than in revision under sub-section (1) or on its on motion, review such order; and the Federal Governments order in review shall be final.

109

27. Advisory Committee.- The [Commission]112 may, for the purpose of obtaining advice and assistance in carrying out the purposes of this Ordinance, constitute an Advisory Committee consisting of such persons representing interests affected by this Ordinance or having special knowledge of the subject-matter thereof as it may think fit. 28. [Omitted]113 29. Exemption.- The [Commission]114 may, by notification in the official Gazette, exempt any person or class of persons or any security or class of securities or any transaction or class of transactions from the operation of all or any of the provisions of this Ordinance. 30. Indemnity.- No suit, prosecution or other legal proceedings shall lie against the [Commission]115 or an officer or authority subordinate to it or specially appointed for the purpose of this Ordinance for anything which is in good faith done or intended to be done under this Ordinance or any rules or orders made thereunder. 31. Securities acquired in good faith.- (1) A person who, without fraud and for a lawful consideration, becomes the possessor of a certificate of an equity security, scrip, debenture, debenture stock or bond, and who is without notice that the title of the person from whom he derived his own title was defective shall hold such certificate and all rights attached thereto free from any defect of title of prior parties and free from defences available to prior parties among themselves. (2) [An]116 Exchange may regulate the documentation, procedures and guarantees required to transfer property in securities and the effects thereof on the respective rights and liabilities of the parties and such regulations, if approved by the [Commission]117 , shall constitute binding and enforceable terms and conditions of contracts effected on the exchange, shall govern the rights and liabilities of the parties thereto, and shall govern the rights and liabilities with respect to transfers of shares on its books of the issuer of listed
112 113

Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. Section 28 omitted through Securities and Exchange (Amendment) Ordinance, 2000. Before omission it read as follows: 28. Delegation of Power.- [(1)] The Federal Government may, by notification in the Official Gazette, direct that all or any of its powers and functions under this Ordinance may, subject to such limitations, restrictions or conditions, if any, as it may from time to time impose, be exercised or performed also by any officer or authority subordinate to it or specially appointed for the purpose.

[(2)] Where the Federal Government has, under sub-section (1), directed that any of its powers and functions shall be exercised or performed also by any specified authority, such authority may by notification in the official Gazette, directed that any of the said powers and functions may, subject to such limitations, restrictions or conditions, if any, as it may from time to time impose, be exercised or performed by any officer of the authority specified by it. Section 28 renumbered as sub-section (1) and sub-section (2) inserted through Companies Ordinance, 1984. 114 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 115 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 116 Substituted for a stock through Finance Act, 2006. 117 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000.

securities notwithstanding any provisions to the contrary contained in the Contract Act, 1872 (IX of 1872), the Negotiable Instruments Act, 1881 (XXVI of 1881), the Transfer of Property Act, 1882 (IV of 1882) or the Companies Ordinance, 1984, or any other law for the time being in force. [32. Regulation of business of asset management companies, investment advisers, investment companies and venture capital companies.- The business of asset management companies, investment advisers and investment companies and venture capital companies shall be regulated in such manner as may be prescribed.]118 [32-A. Regulation of central depository companies.- (1) No company shall function as a central depository company unless it is incorporated under the Companies Ordinance, 1984 (XLVII of 1984), and is registered with the Authority in the manner and on payment of such fee as may be prescribed. (2) A certificate of registration granted under this section shall be valid for one year and shall be renewable on payment of such fee as may be prescribed.]119 (3) No application for registration shall be refused except after giving the applicant an opportunity of being heard. (4) Where the Authority is of the opinion that a central depository company has contravened any provision, or has otherwise neglected or failed to comply with any requirement of this Ordinance or the rules, the Authority may suspend the registration for a specified period or cancel the registration of such company: Provided that the registration shall not be suspended or canceled except after giving the central depository company a notice to show cause. [32-B. Registration of credit rating companies.- (1) No company shall function as a credit rating company unless it is incorporated under the Companies Ordinance, 1984 (XLVII of 1984), and is registered with the Authority in the manner and on payment of such fee as may be prescribed. (2) A certificate of registration granted under this section shall be valid for one year and shall be renewable on payment of such fee as may be prescribed.
118

Section 32 substituted through Securities and Exchange (Amendment) Ordinance, 2000. Before substitution it read as follows: 32. Regulation of business of asset management companies, investment advisors and investment companies.- The business of asset management companies, investment advisors and investment companies shall be regulated in such manner as may be prescribed.

Section 32 was earlier substituted through Securities and Exchange (Amendment) Ordinance, 1994. Before substitution it read as follows: 32. Regulation of business of investment advisors and asset management companies.- The business of investment advisors and investment companies shall be regulated in such manner as may be prescribed. 119 Section 32A inserted through Securities and Exchange (Amendment) Ordinance, 1994.

(3) No application for registration shall be refused except after giving the applicant an opportunity of being heard. (4) Where the Authority is of the opinion that a credit rating company has contravened any provision, or has otherwise neglected or failed to comply with any requirement of this Ordinance or the rules, the Authority may suspend the registration for a specified period or cancel the registration of such company: Provided that the registration shall not be suspended or cancelled except after giving the credit rating company a notice to show cause.]120 [32-C. Regulation of business of transfer agents, balloters and underwriters, etc.(1) The business of transfer agents, balloters, underwriters, sub-underwriters, consultants to a public issue and other ancillary business relating to stock market shall be regulated in such manner and on payment of such fees and charges as may be prescribed.]121 [32-D. Regulation of business of Commodity Futures Contract.- The business of Commodity Futures Contract shall be regulated in such manner and on payment of such fees and charges and may be prescribed.]122
123

[32E. Corporatisation, demutualisation and integration of the stock exchanges.(1) Notwithstanding anything in any other law for the time being in force, the stock exchanges shall stand corporatized and demutualised from 31st December, 2006 or from such later date as may be specified by the Commission, in such manner and in accordance with such conditions as may be prescribed. [(1A) Without prejudice to the generality of the foregoing power and sub-section (2) of section 33, the rules made in pursuance of this section may inter alia provide for (a) the matters to be included in any scheme of demutualization and corporatization and the manner of its approval by the members of the stock exchange; the power of the Commission to approve any scheme of demutualization and corporatization including the power to impose any conditions; the process and procedure to be followed for purposes of demutualization and corporatization; matters regarding appointment of directors and chairman of the board of a stock exchange after demutualization, including but not limited to restrictions, if any, on such appointments;

(b) (c)

(d)

120 121

Section 32B inserted through Securities and Exchange (Amendment) Ordinance, 1994. Section 32C inserted through Securities and Exchange (Amendment) Ordinance, 2000. 122 Section 32D inserted through Finance Act, 2003. 123 Section 32E inserted through Finance Act, 2006.

(e)

restriction of rights, if any, attached to the shares issued pursuant to corporatization; matters including restrictions, if any, on disinvestment, further issue and sale and purchase of shares of a stock exchange after demutualization; matters regarding limits or restriction on holding of shares by different categories of shareholders of a stock exchange, and the requirement for divestment of shares by shareholders in particular circumstances; and matters regarding trading rights on a stock exchange and restrictions if any in this regard.]124

(f)

(g)

(h)

(2) From the date of effect of corporatisation and demutualization as aforesaid, no stock exchange shall undertake any activity unless it is corporatised and demutualised. (3) Any two or more stock exchanges may, upon filing a scheme of integration to the Commission for its approval, in such manner and in accordance with such conditions as may be prescribed, be merged so as to transfer to and vest in the successor stock exchange, all the assets, undertaking, liabilities, rights and obligations of any stock exchange which, upon such merger, is proposed to cease to exist. (4) Without prejudice to the provisions of sections 7 and 22, the Commission may, by notice in writing, for the purpose of effecting the corporatisation and demutualisation of the stock exchanges, issue such directions to the stock exchanges, including in respect of their memorandum and articles of association, their management and the transfer of their shares or business, as the Commission may deem expedient. (5) Where a stock exchange fails to comply with any directions issued by the Commission under sub-section (4), such stock exchange shall be liable to be fined by the Commission by an amount not exceeding one hundred thousand rupees.]

33. Power to make rules.- (1) The [Federal Government]125 may, by notification in the official Gazette, make rules for carrying out the purposes of this Ordinance. (2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for -

124

Sub-section (1A) inserted through Finance Act, 2008 dated June 27, 2008. Substituted for Central Government through Presidents Order no. 4 of 1975.

125

(a)

any of the matters which are to be or may be prescribed for the purposes of clause (d) of section 2 and section 4, 5, [5A,]126 6, 9, 11, 12, 15, 16 127[, 32, 32A, 32B, 128{32 C and 32 E}]; and any of the matters with respect to which [the]129 Exchange may make regulations.

(b)

34. Power to make regulations.- (1) [An]130 Exchange may, subject to the previous approval of the [Commission]131, make regulations not inconsistent with the rules to carry out the purposes of this Ordinance. (2) In particular and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters, namely:(i) constitution, powers and functions of the governing body of the[ Exchange; ]132

(ii)

qualification for membership of the [ ]133 Exchange; admission, suspension and expulsion of members; disciplinary matters, including punishment of the members;

(iii) classification of members into categories with regard to(a) whether they are or are not active in dealings on the [ ]134 Exchange, (b) whether they have or have not a place of business in the city where the []135 Exchange is located, and (c) whether a substantial part of their business is in listed or unlisted securities; (iv) a members financial responsibility whether by way of minimum capital or a ratio between net capital or aggregate indebtedness, or both;

126 127

Inserted through Securities and Exchange (Amendment) Ordinance, 2000. Inserted through Securities and Exchange (Amendment) Ordinance, 2000.

128 129

Substituted for and 32C through Finance, Act, 2006. Substituted for an through Finance, Act, 2007. 130 Substituted for a stock through Finance Act, 2006. 131 Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. 132 The word Stock omitted through Finance Act, 2007. 133 The word Stock omitted through Finance Act, 2007. 134 The word Stock omitted through Finance Act, 2007. 135 The word Stock omitted through Finance Act, 2007.

(v)

regulation of dealing by members for their own account; method of soliciting business by members; manner of maintaining books of accounts and financial reports by members;

(vi) methods of selection of officers and committees to ensure a fair representation of the membership; (vii) qualifications and functions of the directors, officers and other functionaries of the [ ]136 Exchange; disciplinary matters, including punishment of the directors, officers and functionaries; (viii) listing and delisting of securities; (ix) the procedure for registration of an issuer and particulars to be furnished for the purpose; (x) regulation of days and hours of trading in securities; suspension of trading;

(xi) types of contracts and settlements in the [ ]137 Exchange and regulation of contracts generally, including the consequences of default or insolvency; confirmation of contracts; (xii) regulation of forward trading, badlas and carry over facilities in relation to transactions and securities; (xiii) manner of making and publishing quotations, fixing of trade units and differentials and publication of transactions both individually and by volume; (xiv) setting up of a clearing house in relation to transactions in securities; (xv) regulation of fictitious and numbered accounts; blank transfers, short sales, options, odd lots and margins, in relation to transactions and securities; (xvi) lending and [pledging]138 of customers securities; (xvii) regulation of brokerages and other charges, including fixation of minimum commission; (xviii)separation of the functions of broker and jobber; (xix) procedure for the settlement of claims or disputes, including arbitration; and

136 137

The word Stock omitted through Finance Act, 2007. The word Stock omitted through Finance Act, 2007. 138 Substituted for hypothecation through Securities and Exchange (Amendment) Ordinance, 1980.

(xx) any other matter for which a regulation is required to be or may be made. (3) All regulations made under this section shall be published in the official Gazette and shall take effect upon such publication. (4) Where the [Commission]139 considers it expedient so to do, it may, by order in writing, direct [an]140 Exchange to make any regulation, or to amend or rescind any regulation already made, within such period as it may specify in this behalf. (5) If an Exchange fails or neglects to comply with any direction under sub-section (4) within the specified period, the [Commission]141 may make or amend, with or without modifications, or rescind, any regulation directed to be made, amended or rescinded; and a regulation so made, amended or rescinded by the [Commission]142 shall be deemed to have been made, amended or rescinded by the Exchange in accordance with the provisions of this section and shall have effect accordingly. [ omitted ]143

139

Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. Substituted for a stock through Finance Act, 2006. Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000. Substituted for Federal Government through Securities and Exchange (Amendment) Ordinance, 2000.

140

141

142

Section 35 omitted through Finance Act, 2007. Before omission it read as follows: 35. Savings.- (1) A Stock Exchange which, immediately before the commencement of this Ordinance, was functioning shall be deemed to be registered under this Ordinance. (2) Any security which immediately before the commencement of this Ordinance, was stood listed on any Stock Exchange shall be deemed to have been listed under this Ordinance. (3) Any rule, regulation, by-law or order made or issued by a Stock Exchange which immediately before the commencement of this Ordinance, was in force, shall, in so far as it is not inconsistent with the provisions of this Ordinance, continue in force as if made or issued under this Ordinance.

143

THE COMPANIES (APPOINTMENT OF TRUSTEES) ACT, 1972 [Gazette of Pakistan, Extraordinary, 25th September, 1972] An Act to provide for the management of the affairs of certain companies. The following Act of the National Assembly received the assent of the President on the 24th September, 1972, and is hereby published for general information;" WHEREAS it is expedient to provide for the management of the affairs of certain companies and for matters connected therewith: It is hereby enacted as follows: 1. Short title, extent, application and commencement.-(1) This Act may be called the Companies (Appointment of Trustees) Act, 1972. (2) It extends to the. whole of Pakistan. (3) It applies only to companies the objects of which are not confined to one Province. (4) It shall come into force at once. 2. Act to override other laws.-- This Act shall have effect notwithstanding anything contained in the Companies Act, 1913 (VII of 1913) or in memorandum or articles of association. 3. Definitions.-- In this Act, unless there is anything repugnant in the subject or context (a) "Assets" include all rights and powers and properties, whether movable or immovable, such balance, reserve funds, investments, deposits and all other interests and rights in or to or arising out of any such property and the books of accounts and documents; (b) "company" has the same meaning as in the Companies Act, 1913 (VII of 1913), and (c) "trustee" in relation to a company means the trustee appointed under section 4 in respect of such company. 4. Appointment of trustees.-- (1) If the Federal Government is of opinion that it is necessary in the public interest so to do, the Federal Government may, by notification in the official Gazette, appoint a trustee in respect of a company the registered office of which is located in Pakistan beyond the provinces of Balochistan, the North-West Frontier, the Punjab and Sindh on such terms and conditions as may be determined by the Federal Government. (2) The trustee shall hold office during the pleasure of the Federal Government. (3) The trustee may, by writing under his own hand addressed to the Federal Government, resign his office. 5. Management of company to vest in trustee.-(1) Upon the appointment of a trustee under section 4 in respect of a company, the management of the affairs of such company in so far as they relate to its business and assets and liabilities in the

Provinces referred to in that section and all such assets and liabilities shall vest in that trustee and any person or authority exercising or having the right to exercise immediately before such appointment any power or function in relation to the management of such affairs shall cease to exercise or to have the tight to exercise such power or function. (2) The trustee appointed in respect of a company shall, where necessary, open on behalf of such a company, with a branch of the National Bank of Pakistan an account to which he shall credit from time to time all moneys received by him on behalf or on the account of the company after deducting therefrom such amount representing the expenses of the management of the affairs of the company as he may determine with the approval of the Federal Government. (3) Every trustee appointed in respect of a company shall keep proper account of all income .and expenditure received or incurred by him on account of company. (4) Where a trustee is appointed in respect of a company, the Federal Government may, by order remove from office any officer howsoever designated performing or having the right to perform any function in relation to the management of the affairs of the company in so far as they relate to its assets or liabilities referred to in subsection (1). 6. All assets to be delivered to trustee.-- No officer of a company, nor any, other person, retain or fail to deliver to the trustee any assets which vest in the trustee under section 5. 7. Powers of trustee.-- The trustee. appointed in respect of a company shall exercise all the powers and functions of the Board of Directors of the company in so far as they relate to the assets and liabilities of the company in the Provinces referred to in section 4. 8. Transfer of assets prohibited.-- No person shall transfer any of the assets of a company in respect of which a trustee has been appointed or create any charge or encumbrance on such assets and any transfer made or charge or encumbrance created in contravention of this section shall be void. 9. Liability of companies.-- When a trustee is appointed in respect of a company only such liabilities of the company shall be deemed to be liabilities relating to the assets of the company vested in the trustee as may by determined by such authority. and in such manner as may be prescribed by rules made under this Act. 10. Amounts payable to trustee.-- (1) Any amount payable to a company in respect of which a trustee has been appointed shall be paid to the trustee by the person liable to pay the same. (2) Any person makes a payment under subsection (1) shall discharged from further liability to pay to the extent of the payment so made. (3) Any payment made otherwise than in accordance with subsection (1) shall not discharge the person paying it from his obligation to pay the amount due, and shall affect the right of the trustee to enforce such obligation against any such person. 11. Instructions to trustee prohibited.-- No person shall except on the authority, of the Federal Government, give any instructions to the trustee, not shall any person in any manner obstruct him in the discharge of his functions. 12. Bar of jurisdiction, etc.-- (1) No Court shall call in question, or permit to be called in

question, anything done or any action taken or purporting to be done or taken under this Act. (2) No Court shall grant any injunction or make any order, nor shall any such Court entertain any proceedings, in relation to anything done or intended or purported to be done under this Act. (3) No suit, prosecution or other legal proceedings shall lie against the Federal Government or the trustee or any person for anything in good faith done under this Act or any rule or order made or notification issued thereunder. 13. Power to make rules.-- The Federal Government may, by Notification in the official Gazette, make such rules as appear to it to be necessary or expedient for carrying out the purposes of this Act. 14. Delegation of powers.-- The Federal Government may, by Notification in the official Gazette, direct that all or any of its powers under this Act shall, subject to such conditions, if any, as may be specified in the notification, be exercised by such officer or authority- as may be so specified. 15. Removal of difficulties.-- If any difficulty arises in giving effect to any provision of this Act, the Federal Government may make such order, not inconsistent with the provisions of this Act, including an order modifying the provisions of the memorandum or articles of association of company, as it considers necessary. or expedient for the purpose of removing of that difficulty. 16. Repeal. [Omitted by Ordinance XXVII of 1981].

THE COMPANIES (APPOINTMENT OF LEGAL ADVISERS) ACT, 1974 (X of 1974) An Act to provider or the appointment of Legal :Advisers to companies (Gazette of Pakistan, Extraordinary, 5th March, 1974) WHEREAS it is expedient to provide for the appointment of Legal Advisers to companies and matters connected therewith it is hereby enacted as follows: 1. Short title, extent and commencement.-(l) This Act may be called the Companies (Appointment of Legal Advisers) Act, 1974. (2) It extends to the whole of Pakistan. (3) It shall come into force at once. 2. Definitions.-- In this Act, unless there is any thing repugnant in the subject or context: (a) "Advocate" means an advocate entered in any roll under the provisions of the Legal Practitioners and Bar Councils Act, 1973 (XXXV of 1973). (b) "Company" means a company formed and registered under the Companies Act, 1913 (VII of 1913), but does not include a company the paidup capital of which is less than five lakh rupees or a company limited by guarantee or an association registered under section 26 of that Act; (c) "Legal Adviser" means a person appointed as such under section 3; and (d) "Registered firm" means firm registered under the Partnership Act, 1932 (IX of 1932), all the partners of which are advocates. 3. Appointment of Legal Adviser.-- (1) Every company shall appoint at least one Legal Adviser on retainership to advise such company in the performance of its functions and the discharge of its duties in accordance with law: Provided that a company in existence immediately before the commencement of this Act shall be deemed to have complied with the provisions of this subsection if it appoints a Legal Adviser before the expiration of three months from such commencement. (2) No person other than an advocate or a registered firm shall be appointed to be a Legal Adviser. 4. Retainer.-- Every Legal Adviser appointed by Company shall be paid by the company a retainer which shall in no case be less than one thousand two hundred rupees per mensum.. 5. Who may not be appointed Legal Adviser.-- A company shall not appoint an advocate or a registered firm to be its Legal Adviser, if upon such appointment, the number of companies of which such advocate or firm is a Legal Adviser will exceed--, (a) in the case of the advocate, three: or

(b) in the case of the firm, the product of three and the total number of partners of the firm: Provided that a company in existence immediately before the commencement of this Act shall be deemed to have complied with the provisions of this subsection if, before the expiration of three months from such commencement, it terminates the appointment of the advocate or registered firm the appointment of whom or which is prohibited by this subsection. (2) No compensation shall be payable for the termination of an appointment of agreement under or by virtue of the operation of the provisions of subsection (2). 6. Power to exempt.-- The Federal Government may, by notification in the official Gazette. exempt any company or class of companies from the operation of the provisions of subsection (1) of section 3 subject to such conditions and for such period as may be specified in the notification. 7. Penalty and procedure.-- (1) If a company contravenes, or fails to comply with any of the provisions of this Act or the rules made thereunder, manager or other officer responsible for the conduct of its affairs shall unless he proves that the contravention or failure took place without his knowledge or that he exercised all diligence to prevent such contravention or failure, be deemed to be guilty of such contravention or failure and be punishable with simple imprisonment for a term which may extend to three months or with fine, or with both. (2) No Court shall take cognizance of any offence punishable under this Act except on a report in writing of the facts constituting such offence made by an officer of the Federal Government or of a Provincial Government authorised by the Federal Government in this behalf. (3) No Court inferior to that of a Magistrate of the first Class shall try an offence punishable under this Act. 8. Power to make rules.-- (l) The Federal Government may by notification in the official Gazette, make rules for carrying out the purposes of the Act. (2) In particular and without prejudice to the generality of the foregoing provision, such rules may provide for the maintenance of registers of Legal Advisers by companies, the form in which such registers shall be maintained, the furnishing of information by companies and the intervals at which such information shall be furnished.

FOREIGN PRIVATE INVESTMENT (PROMOTION AND PROTECTION) ACT, 1976 ACT XLII OF 1976 An Act to provide for promotion and protection of foreign private investment in Pakistan [Gazette of Pakistan, Extraordinary, Part I, I5th June, 1976] The following Act of Parliament received the assent of the President on 4th June, 1976 and is hereby published for general information: Whereas, it is expedient to provide for the promotion and protection of foreign private investment in Pakistan and for matters ancillary. thereto. It is hereby enacted as follows: 1. Short title, commencement and application.--- (1) This Act may be called the Foreign Private investment (Promotion and Protection) Act, 1976. (2) It shall come into force at once. (3) It shall apply to all industrial undertakings in Pakistan having foreign private investment established with the approval of the Federal Government after the first day of September, 1954: Provided that nothing in this Act shall be in derogation of any facilities or protection specifically sanctioned by the Federal Government to foreign private investment in the case of a particular industrial undertaking or a class of industrial undertakings or such facilities or protection as may be available to foreign private investment under a bilateral investment treaty,. 2. Definition.--- (1) In this Act, unless there is anything repugnant in the subject or context,(a) "foreign capital" means investment made by a foreigner in an industrial undertaking in Pakistan (i) in the form of foreign exchange, imported machinery and equipment, or (ii) in any other form which the Federal Government may approve for the purpose: (b) "foreign private investment" means investment in foreign capital by a person who is not a citizen of Pakistan or by a company incorporated outside Pakistan, but does not include investment by a foreign Government or agency of foreign Government. (c) "Industry undertaking" means an industry, undertaking or establishment engaged in the production, distribution or processing of any goods, the providing of services specified in this behalf by the Federal Government or the

development and extraction of such mineral resources and products as may be specified in this behalf by the Federal Government. (2) Words and expressions used but not defined in this Act shall have the same meanings as in the Companies Act. 1913 (VII of 1913). 3. Field for foreign private investment.--- The Federal Government may consistent with the national interest, for the promotion of foreign private investment, authorise such investment in any industrial undertaking... (a) which does not exist in Pakistan and the establishment whereof, in the opinion of the Federal Government is desirable; or (b) Which is not being carried on in Pakistan on a scale adequate to the economic and social needs of country; or (c) which will contribute to (i) the development Of capital, technical and managerial resources of Pakistan; (ii) the discovery, mobilisation or better utilization of the national resources; (iv) increasing employment opportunities in Pakistan; or (v) the economic development of the country in any other manner. 4. Approval of foreign private investment.--- Where the Federal Government sanctions an industrial undertaking having foreign private investment, it may do so subject to such conditions as it may specify. in this behalf. 5. Protection of agreements.--- (1) Where the Federal Government considers it necessary in the public interest to take over the management of an industrial undertaking having foreign private investment or to acquire the ownership of the shares of citizens of Pakistan in the capital of such industrial undertaking, any agreement approved by the Federal Government relating to such undertakings entered into between a foreign investor or creditor and any person in Pakistan shall not be affected by such taking over or acquisition. (2) Foreign capital or foreign private investment in an industrial undertaking shall not be acquired except under due process of law which provide for adequate compensation therefor to be settled in the currency of the country Or origin of the capital or investment and specifies the principles on and the manner in which compensation is to be determined and given. 6. Reparation facilities.--- Subject to the provisions of the Foreign Exchange Regulation Act. 1947 (VII of 1947), (a) a foreign investor in an industrial undertaking established after the Ist day of September 1951. and approved by the Federal Government may at any time repatriate in the currency of the country. from which the investment originated...

(i) foreign private investment to the extent or original investment; (ii) profits earned on such investment; and (iii) any additional amount resulting from the re-invested profits or appreciation of capital investment; and (b) a creditor of an industrial undertaking referred to in clause (a) may repatriate foreign currency loans approved by the Federal Government and interest thereon in accordance with the terms and conditions of the said loan; Provided that nothing in this section shall effect the terms of the permission to make such investment granted to a foreign investor before the commencement of this Act. 7. Remittances by foreign employees.--- Foreign nationals employed with the approval of the Federal Government in any industrial undertaking having foreign private investment may make remittances for the maintenance of their dependents in accordance with the rules, regulations or orders issued by the Federal Government or the State Bank of Pakistan. 8. Tax concession and avoidance of double taxation.--- (1) The Federal Government may allow such concessions to industrial undertakings having foreign private investment as may be admissible under any law for the time being in force. (2) Foreign private investment shall not be subject to other or more burdensome taxes on income than those applicable to investment made in similar circumstances by citizens of Pakistan. (3) Foreign private investment shall be allowed all the tax concessions such may be admissible on the basis of any agreement for avoidance of double taxation which the Government of Pakistan may have entered into with the Government of the country of origin of such investment. 9. Equal treatment--- Industrial undertakings having foreign private investment shall be accorded the same treatment as is accorded to similar industrial undertakings having no such investment in the application of laws, rules and regulations relating to importation and exportation of goods. 10. Removal of difficulties.--- If any difficulty, arises in giving effect to any provisions of this Act, the Federal Government may make such order, not inconsistent with the provisions of this Act, as may appeal to it to be necessary. for tire purpose of removing the difficulty: Provided that no such power shall be exercised after the expire of one year from the commencement of this Act. 11. Power to make rules.--- The Federal Government may, by notification in the official Gazette, make rules for carrying out the purposes of this Act and such rules may, among other matters, provide for the employment of Pakistan and foreign nationals in industrial undertaking having foreign private investment. 12. Repeal.--- The Foreign Private Investment (Promotion and Protection) Ordinance, 1976 (XIV of 1976), is hereby repealed.

[As Amended Up-to-Date Till 2012]

The Gazette of Pakistan

EXTRAORDINARY PUBLISHED BY AUTHORITY
ISLAMABAD, THURSDAY, JUNE 26, 1980

PART I Acts, Ordinance, President's Orders and Regulations including Martial Law Orders and Regulations GOVERNMENT OF PAKISTAN MINISTRY OF LAW AND PARLIAMENTARY AFFAIRS (Law Division) Islamabad, the 26th June, 1980.

No. F. 17(1)/80-Pub.-The following Ordinances made by the President on the 26th June, 1980 are hereby published for general information:-

ORDINANCE XXXI OF 1980 AN ORDINANCE to provide for matters relating to registration of modaraba companies and the floatation, management and regulation of modarabas.

WHEREAS it is expedient to provide for matters relating to registration of modaraba companies and the floatation, management and regulation of modarabas and for matters connected therewith or ancillary thereto:

AND WHEREAS the President is satisfied that circumstances exist which render it necessary to take immediate action;

Now, THEREFORE, in pursuance of the Proclamation of the fifth day of July, 1977, read with the Laws (Continuance in Force) Order, 1977 (C.M.L.A. Order No. 1 of 1977), and in

exercise of all powers enabling him in that behalf, the President is pleased to make and promulgate the following Ordinance:PART 1 PRELIMINARY

1. Short title, extent and commencement.-(1) This Ordinance shall be called the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980. (2) It extends to the whole of Pakistan. (3) It shall come into force at once. 2. Definition.-(1) In this Ordinance, unless there is anything repugnant in the subject or context,-

[(a)

"Commission" means the Commission as defined in the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997);]1 Modaraba means a business in which a person participates with his money and another with his efforts or skill or both his efforts and skill and shall include Unit Trusts and Mutual Funds by whatever name called;]2 "Modaraba Certificate" means a certificate of definite denomination issued to the subscriber of the Modaraba acknowledging receipt of money subscribed by him; "modaraba company" means a company engaged in the business of floating and managing modaraba; Modaraba Fund" means a fund raised through floatation of modaraba; "Prescribed" means prescribed by rules; "Registrar" means the Registrar appointed under section 3; "rules" means rules made under this Ordinance; and "Tribunal" means a Tribunal constituted under section 24.

[(ab)

(b)

(c)

(d) (e) (f) (g) (h)

(2) All terms and expressions used but not defined in this Ordinance shall have the same meaning as in Companies Act, 1913 (VII of 1913).

1 2

Clause (a) inserted through Finance Act, 1999. Clause (a) re-lettered as clause (ab) through Finance Act, 1999.

3. Appointment of Registrar.- The Federal Government may, by notification in the official gazette, appoint a person to be the Registrar for the purpose of this Ordinance. PART II REGISTRATION OF MODARABA COMPANIES 4. No company to operate without registration.- No modaraba company shall operate without registration with the Registrar. 5. Eligibility for registration.- (1) A company shall be eligible for registration as a modaraba company if it fulfills the following conditions, namely:(a) that it is registered under the Companies Act, 1913 (VII of 1913), or is a body corporate formed under any law in force and owned or controlled, whether directly or through a company or corporation, by the Federal Government or a Provincial Government; (b) that, being a company solely engaged in the flotation and management of modaraba, it has a paid up capital of not less than [two and a half million rupees]3; (c) that none of its directors, officers or employees has been convicted of fraud or breach of trust or of an offence involving moral turpitude; (d) that none of its directors, officers or employees has been adjudged an insolvent or has suspended payment or has compounded with his creditors; (e) that its promoters are, in the opinion of the Registrar, persons of means and integrity and have knowledge of matters which the company may have to deal with as a modaraba company; and (f) that, being a company also engaged in business other than floatation and management of modaraba, it has a paid up capital of such amount and of such nature as may be prescribed. 6. Application for registration.- (1) A company which is eligible for registration as a modaraba company may make an application for registration to the Registrar in such form and with such documents as may be prescribed. (2) The Registrar, if he is satisfied after such enquiry and after obtaining such further information as he may consider necessary that the applicant is eligible for registration and that it

Substituted for five million through Modarba Companies and Modarba (Floatation and Control) (Second Amendment) Act, 1985.

is in the public interest so to do, may grant registration to such company on such conditions as he may deem fit. (3) In particular and without prejudice to the generality of the powers conferred by subsection (2), such conditions may include:(i) investments to be made; (ii) (iii) (iv) information and returns to be furnished to the Registrar; business to be undertaken; and restriction on transfer of shares by promoters, sponsors or persons holding controlling interest. PART III PROVISIONS APPLICABLE TO MODARABAS 7. Types of modaraba.- (1) Modaraba may be of two descriptions:(i) Multipurpose Modaraba.-That is to say a modaraba having more than one specific purpose or objective. Specific purpose Modaraba.-That is to say a modaraba having one specific purpose or objective.

(ii)

(2)

A modaraba may be either for a fixed period or for an indefinite period.

8. Creation and maintenance of modaraba.- (1) A modaraba company registered under section 4 shall apply to the Registrar, in such form and with such documents as may be prescribed, for permission to float modaraba. (2) An application for floatation of modaraba shall be accompanied by a prospectus which shall contain, inter alia, the following information, namely; (i) (ii) the name and type of the modaraba; the conditions and amounts of the modaraba to be floated and the division thereof into Modaraba Certificates of fixed amount; the business scheme, prospectus and mode of distribution of profit; the amount to be subscribed by the modaraba company to the modaraba in its own name supported by evidence about its ability to meet the commitment; the form of the Modaraba Certificate; and

(iii) (iv)

(v)

(vi)

such other matters as may be prescribed.

(3) The application, the prospectus and the documents filed therewith shall be authenticated by all the directors of the company. 9. Religious Board.- The Federal Government shall, for the purpose of this Ordinance, constitute a Religious Board which shall consist of such members and shall have such functions, terms and conditions as may be prescribed. 10. Business of modaraba.- No modaraba shall be a business which is opposed to the injunctions of Islam and the Registrar shall not permit the floatation of a modaraba unless the Religious Board has certified in writing that the modaraba is not a business opposed to the injunctions of Islam. 11. Authorization.-The Registrar may, after obtaining from the Religious Board a certificate to the effect mentioned in section 10 and on being satisfied that it is in the public interest so to do, grant a certificate in the prescribed form authorising the floatation of modaraba on such conditions as he may deem fit, including conditions as to the business to be undertaken, expenses relating to the management of the Modaraba Fund, preservation of assets and other matters relating to the mode of management and distribution of profits: Provided that, before issuing the certificate of authorization, the Registrar may require the modaraba company to make such modifications, additions or omissions in the prospectus as the Religious Board may have indicated or as he may deem fit. 12. Modaraba to be a legal person.- (1) A modaraba shall sue and be sued in its own name through the modaraba company. (2) The assets and liabilities of each modaraba shall be separate and distinct from those of another modaraba as also from those of the modaraba company. 13. Conditions applicable to Modaraba.-(1) No allotment of Modaraba Certificates shall be made unless a prospectus approved by the Registrar has been issued and the minimum amount stated in the prospectus to be the amount which must be raised in order to provide for the business operations and expenses has been subscribed. (2) All moneys received from the applicants for Modaraba Certificates for a modaraba shall be deposited and kept in a separate account in a scheduled bank as defined in the State Bank of Pakistan Act, 1956 (XXXIII of 1956), until they are refunded in accordance with the provisions of subsection (3) or until it is certified by the Registrar that Modaraba Certificates have been allotted in an amount not less than the minimum amount referred to in sub-section (1). (3) If the subscription referred to in sub-section (1) has not been received by the date specified in the prospectus, all moneys received from the applicants shall be refunded to them

within fifteen days of the said date and the modaraba company and the directors thereof shall be jointly and severally liable to repay the money which is not so refunded. (4) The modaraba company shall issue Modaraba Certificates within thirty days from the date of allotment. (5) The modaraba company shall maintain a register of holders of Modaraba Certificates in such form and in such manner as may be prescribed. (6) The modaraba company shall maintain separate bank account, funds, assets and liabilities of each modaraba. (7) No modaraba shall be liable for the liabilities, or be entitled to benefit from the assets, of any other modaraba or of the modaraba company. (8) A Modaraba Certificate shall be transferable in the manner provided for in the prospectus of the modaraba. 14. Preparation and circulation of annual accounts, reports, etc.- (1) The modaraba company shall, within six months from the close of the accounting year of the modaraba, prepare and circulate to the holders of modaraba certificates:(i) annual balance sheet and profit and loss account in such form and manner as may be prescribed; a report of the auditor on the balance sheet and profit and loss account; a report by the modaraba company on the state of affairs, activities and business prospects of the modaraba and the amount of profits to be distributed to the certificate holders.

(ii) (iii)

(2) In addition to the documents referred to in sub-section (1) the modaraba company shall furnish to the Registrar and to the holders of Modaraba Certificates such reports, accounts and information as may be prescribed or as the Registrar may, at any time by an order in writing, require. (3) The modaraba company shall submit five copies of the accounts, statements and reports referred to in sub-sections (1) and (2) to the Registrar simultaneously with the circulation of these documents to the holders of Modaraba Certificates. 15. Audit of accounts. - (1)The accounts of a modaraba shall be audited by an auditor who is a Chartered Accountant within the meaning of the Chartered Accountants Ordinance, 1961 (X of 1961), appointed by the modaraba company with the approval of the Registrar and such auditor shall have the same powers, duties and liabilities as an auditor of a company has under the Companies Act, 1913 (VII of 1913), and such other powers, duties and liabilities as are, or may be, provided in this Ordinance and the rules.

(2) In addition to other matters, the auditors shall also state in his report whether in his opinion the business conducted investments made and expenditure incurred by the modaraba are in accordance with the objects, terms and conditions of the modaraba. 16. Prohibition of false statement, etc.- No modaraba company, director, officer, employee or agent or auditor thereof shall, in any document, prospectus, report, return, accounts, information or explanation required to be furnished in pursuance of this Ordinance or the rules or in any application made under this Ordinance or the rules, make any statement or give any information which he knows or has reasonable cause to believe to be false or incorrect or omit any material fact therefrom. 17. Conditions applicable to modaraba company.- (1) No modaraba company shall engage in any business which is of the same nature and competes with the business carried on by a modaraba floated or controlled by it. (2) No modaraba company or any of its directors or officers or their relatives shall obtain loan, advance or credit from the funds of the modaraba or on the security of the assets of the modaraba. Explanation.-In this sub-section, "relative", in relation to a director or officer, means the spouse, brother or sister or any of the lineal ascendants or descendants of the director or officer. (3) A modaraba company shall subscribe in each modaraba floated by it not less than ten per cent of the total amount of Modaraba Certificates offered for subscription. 18. Remuneration of modaraba company.- The remuneration of a modaraba company in respect of a modaraba floated by it shall be a fixed percentage of the net annual profits of the modaraba and shall not exceed ten per cent of such net annual profits computed in the manner to be prescribed. [18A. Power to issue directions.- (1) Notwithstanding anything contained in any other provision of this Ordinance, where the Registrar is satisfied that it is necessary and expedient so to do (a) (b) (c) in the public interest; or to prevent the affairs of any modaraba from being conducted in a manner detrimental to the interest of holders of Modaraba Certificates; or to secure the proper management of any modaraba generally;

he may issue such directions to a modaraba company or the modaraba companies generally, as he may deem fit, to remove and rectify the irregularities and the modaraba company and its management shall be bound to comply with such directions.

(2) The Registrar may, on a representation made to him or on his own motion, modify or cancel any direction issued under sub-section (1), and in so modifying or canceling any direction may impose such conditions as he thinks fit.]4 19. Cancellation of registration.- (1) Where the Registrar is of the opinion that a modaraba company has contravened or has failed to comply with any provision of this Ordinance or the rules or with any direction made or given thereunder, he may, if he considers necessary in the public interest so to do, by order in writing:(a) (b) cancel the registration of the modaraba company; and remove the modaraba company from the management of the modaraba floated by it:

Provided that no such order shall be made without giving the modaraba company an opportunity of being heard. (2) The modaraba company removed from the management of a modaraba under clause (b) of sub-section (1) shall not be entitled to or be paid any compensation or damages for loss or termination of office. (3) A modaraba company removed from the management of a modaraba under clause (b) of sub-section (1) shall not be entitled to float any modaraba. (4) A modaraba company aggrieved by an order of the Registrar under sub-section (1) may prefer an appeal to the [Commission]5 within thirty days of the date of the order. [(5) An appeal preferred under sub-section (4) shall be disposed off by the 6[Commission] 6 after giving the appellant an opportunity of being heard.]7 20. Appointment of Administrator.- (1) If(a) the Registrar, has reason to believe that a modaraba company has been conducting the affairs of a modaraba in a manner prejudicial to the interest of the modaraba or the holders of Modaraba Certificates or in a fraudulent or unlawful manner or has committed a default in complying with the provisions of this Ordinance or the rules or with any direction made or given thereunder or any condition of the modaraba; (b) the registration of a modaraba company has been cancelled; or (c) any other modaraba under the management of the modaraba company has been ordered to be wound up by the Tribunal, the Registrar, after affording the modaraba

4
5 6

Inserted through The Modaraba Companies and Modaraba (Floatation and Control) (Amendment) Act, 2012

Substituted for Federal Government through Finance Act, 1999. Substituted for Federal Government through Finance Act, 1999. 7 Sub-section (5) inserted through Modarba Companies and Modarba (Floatation and Control) (Amendment) Act, 1985.

company an opportunity of being heard, may, without prejudice to any other action under the law, by order in writing:(i) appoint an administrator to take over and manage the modaraba in place of the modaraba company for such period as the Registrar may specify; or require the modaraba company to carry out such changes in the management and procedure as may be specified; or remove the modaraba company and appoint another modaraba company in its place to manage the modaraba.

(ii)

(iii)

(2) The Registrar shall not make an order under sub-section (1) without the approval of the [Commission] 8. 21. Enquiries.- (1) The Registrar may, on his own motion or on an application made by the holders of Modaraba Certificates the value of which is not less than ten per cent of the total subscribed amount of the modaraba, by an order in writing cause on enquiry to be made by a person appointed by him in this behalf into the affairs of a modaraba company or the modaraba or any business transaction thereof. (2) Where an enquiry under sub-section (1) has been ordered, every director, manager or other officer of the modaraba company to which the enquiry relates and every other person who has had any dealing with such modaraba company or director or officer shall furnish such information or document in his custody or power or within his knowledge relating to or having a bearing on the subject matter of the enquiry as the person conducting the enquiry may by notice in writing require. (3) The person conducting an enquiry under sub-section (1) may for the purpose of such enquiry enter into any premises belonging to or in occupation of the modaraba company or of the person to whom the enquiry relates and may call for, inspect and seize books of accounts and documents in possession of any such modaraba company, director, manager or any other officer or employee thereof. (4) The person holding an enquiry under sub-section (1) shall, for the purpose of such enquiry, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (Act V of 1908), when trying a suit in respect of the following matter, namely:(a) (b) (c) enforcing the attendance of a person and examining him on oath or affirmation; compelling the discovery and production of documents; and issuing commissions for the examination of witnesses.

(5) On receipt of the report of the person conducting the enquiry, the Registrar shall take such action as he may consider necessary on the basis of the report.

Substituted for Federal Government through Finance Act, 1999.

WINDING UP 22. Circumstances in which modaraba may be wound up voluntarily.- (1) A modaraba floated for a fixed period or for a specific purpose shall be wound up by the modaraba company itself on the expiry of the period fixed for the modaraba or the accomplishment of the purpose of the modaraba, as the case may be, provided the following conditions are fulfilled, namely:(a) all the directors of the modaraba company shall make a declaration verified by an affidavit to the effect that they have made a full enquiry about the affairs of the modaraba and, having done so, have formed the opinion that the modaraba will be able to discharge its liabilities, pay the amount subscribed by the holders of Modaraba Certificates and all their other dues in full within a period of twelve months from the date of expiry of the period fixed for the modaraba or the accomplishment of the purpose of the modaraba, as the case may be; the declaration referred to in clause (a) shall be supported by a report of the auditor of the modaraba on the affairs of the modaraba and shall have no effect unless it is filed with and approved by the Registrar within ninety days of the date of expiry of the period fixed for the modaraba or the accomplishment of the purpose of the modaraba, as the case may be.

(b)

(2) Any person aggrieved by the decision of the Registrar under clause (b) of sub-section (1) may prefer an appeal to the 8[Commission] 9 within thirty days of the day on which the decision is given. [(3) An appeal preferred under sub-section (2) shall be disposed of by the 10[Commission] 10 after giving the appellant an opportunity of being heard.]11 23. Circumstances in which modaraba may be wound up by the Tribunal.- (1) A modaraba shall be wound up by the Tribunal on an application made by the Registrar if(i) in the case of a modaraba for a fixed period on the expiry of that period or, in the case of a modaraba for a specific purpose on the accomplishment of its purpose, the declaration referred to in section 22 has not been filed with the Registrar within the period specified in that section; in the case of any modaraba, the Registrar has declared that:(a) the modaraba is unable to discharge its liabilities;

(ii)

Substituted for Federal Government through Finance Act, 1999.

Substituted for Federal Government through Finance Act, 1999. Sub-section (3) inserted through Modarba Companies and Modarba (Floatation and Control) (Amendment) Act, 1985.

10 11

(b)

the accumulated losses of the modaraba exceed fifty per cent of the total amount subscribed by the holders of the Modaraba Certificates; or the business of the modaraba is being or has been, conducted for a fraudulent purpose or with intent to defraud the holders of the Modaraba Certificates, or its creditors or any other person;

(c)

(iii)

the Tribunal is of opinion that it is just and equitable that the modaraba should be wound up.

(2) The Registrar may make an application to the Tribunal for the winding up of a modaraba on receipt of an application under sub-section (1) of section 21 or of the report of an enquiry under that section relating to the modaraba. (3) No application shall be made by the Registrar under sub-section (1) or (2) without giving the modaraba company an opportunity of being heard. 24. Constitution of Tribunal.- (1) The Federal Government may, by notification, in the official Gazette, constitute one or more Tribunals for the purpose of this Ordinance and, where it constitutes more than one Tribunal, shall specify in the notification the area within which, or the class of cases in respect of which, each such Tribunal shall exercise jurisdiction under this Ordinance. (2) A Tribunal shall consist of a person who is, or has been, or is qualified to be a judge of a High Court. 25. Powers of a Tribunal.- (1) A Tribunal shall(a) in the exercise of its Civil jurisdiction, have in respect of a claim filed by a holder of Modaraba Certificates against the modaraba company or by a modaraba company against any other party with whom it has entered into business transactions relating to Modaraba Fund, or in respect of an application by the Registrar for the winding up of a modaraba company, all the powers vested in a civil court under the Code of Civil Procedure, 1908 (Act V of 1908); (b) in the exercise of its criminal jurisdiction, try the offences punishable under this Ordinance and shall, for that purpose, have the same powers as are vested in the Court of a Sessions Judge under the Code of Criminal Procedure, 1898 (Act V of 1898): Provided that a Tribunal shall not take cognizance of any offence punishable under this Ordinance except on a complaint in writing made by the Registrar or an officer authorized by him in writing; and (c) exercise and perform such other powers and functions as are, or may be, conferred upon or assigned to it by or under this Ordinance.

(2) All proceedings before a Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 of the Pakistan Penal Code (Act XLV of 1860), and the Tribunal shall be deemed to be a court for the purposes of sections 480 and 482 of the Code of Criminal Procedure, 1898 (Act V of 1898). (3) No court other than the Tribunal shall have or exercise any jurisdiction with respect to any matter to which the jurisdiction of the Tribunal extends under this Ordinance. 26. Procedure of the Tribunal.- (1) Matters before the Tribunal shall come up for regular hearing as expeditiously as possible and, except in extraordinary circumstances and on grounds to be recorded, the Tribunal shall hear the cases from day to day. (2) In the exercise of its civil jurisdiction, the Tribunal shall, in all suits before it, including suits for recovery of money, follow the summary procedure Provided for in Order XXXVII of the First Schedule to the Code of Civil Procedure, 1908 (Act V of 1908). 27. Powers of Tribunal on hearing application for winding up of modaraba.- (1) If, after hearing the application for winding up of a modaraba, the Tribunal decides to wind up the same it shall appoint a liquidator in consultation with the Registrar and approve a general scheme of winding up. (2) After a winding up order has been passed by the Tribunal, the modaraba company shall forthwith hand over charge of the modaraba to the liquidator and furnish him with such statements, documents, records, information and other material as may be required by him. (3) The liquidator shall conduct the winding up proceedings in the prescribed manner under the control and directions of the Tribunal. (4) The winding up proceedings shall be completed within a period of one year from the date of appointment of the liquidator, unless the Tribunal, for special reasons to be recorded in writing, extends the period. (5) During the winding up proceedings, the Tribunal may allow the administrator appointed by the Registrar under section 20, if any, to continue to function or may appoint an administrator to manage the modaraba till the disposal of the proceedings. 28. Judgement and decree.- (1) A Tribunal shall, after the case has been heard, pronounce judgement as early as practicable and on such judgement a decree shall follow forthwith. (2) The Tribunal shall, on the application of the decree-holder, forthwith order execution of the decree: Provided that, if the decree is for money, the recovery in execution thereof shall be made as arrears of land revenue. 29. Finality of orders.- Subject to the provisions for appeal as provided in section 30, no court or other authority shall call or permit to be called in question any order, judgement or

sentence of the Tribunal or the legality or propriety of anything done or intended to be done by the Tribunal under this Ordinance. 30. Appeals. - (1) Any person aggrieved by any order, judgement, decree or sentence of the Tribunal may, within thirty days of such order, judgement, decree or sentence, prefer an appeal to the High Court within whose jurisdiction the order, judgement, decree or sentence is passed: Provided that no appeal shall lie from an interlocutory order which does not dispose of the entire case before the Tribunal. (2) An appeal under sub-section(1) shall be heard by a Bench of two judges of the High Court and shall lie on any one of the following grounds, namely:(a) (b) the decision being contrary to law or to some usage having the force of law; or the decision having failed to determine a material issue of law or usage having the force of law; or a substantial error apparent in the procedure provided by or under this Ordinance, which may possibly have led to an error in the decision.

(c)

(3)

An appeal may be preferred under this section from a decision made ex-parte.

31. Punishment.- (1) Whoever contravenes the provisions of section 4, 10, 13, 14, 16 or 17 shall be punishable with imprisonment of either description for a term which may extend to three years and with fine which may extend to five hundred thousand rupees. (2) Where, the contravention referred to in sub-section (1) has caused loss to the modaraba or any other person, a further fine to the extent of the loss shall be imposed. 32. Penalty.- [(1)]12 If any person(a) refuses or fails to furnish any document, return or information which he is required to furnish by or under this Ordinance; or (b) refuses or fails to comply with any condition imposed or made by the Federal Government or direction made or given under this Ordinance or the rules; or (c) contravenes or otherwise fails to comply with any provision of this Ordinance or the rules other than those referred to in sub-section (1) of section 31, the Registrar, may, if he is satisfied, after giving the person an opportunity of being heard, that the refusal, failure or contravention was willful, by order, direct that such person shall pay to the Federal Government by way of penalty such sum not exceeding one hundred thousand rupees as may be specified in the order and, in the case of a continuing default, a further sum calculated at a rate not exceeding one thousand

12

Section 32 re-numbered as sub-section (1) through Finance Act, 1999.

rupees for every day after the issue of such order during which the refusal, failure or contravention continues. [(2) Any person aggrieved by an order passed under sub-section (1) may, within sixty days of such order, prefer an appeal to the Commission.] 13 33. Liability of director, manager or officer of a company.- (1) Where the person guilty of an offence referred to in sub-section (1) of section 31 or in section 32 is a company or other body corporate, every director, manager, or other officer responsible for the conduct of its affairs shall, unless he proves that the offence was committed without his knowledge, or that he exercised all diligence to prevent its commission, be deemed to be guilty of the offence. (2) Any sum directed to be paid under section 32 shall be recoverable as an arrear of land revenue. (3) No prosecution for an offence against this Ordinance or the rules shall be instituted in respect of the same facts on which a penalty has been imposed under section 32. 34. Powers of the Registrar in relation to certain Proceedings.In any proceedings under section 32, the Registrar shall have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (Act V of 1908), when trying a suit in respect of the following matters, namely:(a) enforcing attendance of a person and examining him on oath or affirmation; and (b) compelling the discovery and production of documents.

35. Application of fine.- The Tribunal imposing any fine under this Ordinance may direct that the whole or any part thereof shall be applied in or towards(i) (ii) payment of costs of the proceedings; payment to an aggrieved party of compensation for any loss caused by the offence; payment of compensation for any loss mentioned in sub-section (2) of section 31.

(iii)

36. Enforcement of provisions of the Ordinance, etc.- (1) If a modaraba company makes default in complying with any provisions of this Ordinance or a direction made or given under this Ordinance and fails to make good the default within thirty days of the service of a notice to the modaraba company requiring it to do so, the Tribunal may, on an application made to the Tribunal by the Registrar, make an order directing the modaraba company and any director or officer thereof to make good the default within such period as may be specified in the order.

13

Sub-section (2) inserted through Finance Act, 1999.

(2) Nothing in this section shall be deemed to prejudice the operation of any provision of this Ordinance providing for the imposition of penalties on the modaraba company or its directors and officers in respect of any such default as aforesaid. 37. Exemption from tax.- The income of a modaraba shall be exempt from tax under the Income Tax Ordinance, 1979 (XXXI of 1979), if not less than ninety per cent of its profits in a year is distributed to the holders of the Modaraba Certificates. 38. Power of Federal Government to exempt, etc.- The Federal Government may, by notification in the official Gazette, exempt from the requirements of sub-sections (1) and (3) of section 17 a company or a body corporate formed under any law and owned or controlled by the Federal Government or a Provincial Government, whether directly or through a company or corporation set up by such Government. 39. Delegation of Powers.- The Registrar may, by notification in the official Gazette, delegate, subject to such limitations, restrictions or conditions, if any, as he may, from time to time specify, such of his powers and functions under this Ordinance as he may deem fit to any officer subordinate to him. 40. Indemnity.- No suit, prosecution or other legal proceeding shall lie against the Federal Government or the Registrar or any other officer for anything which is in good faith done or intended to be done under this Ordinance or any rules. 41. Power to make rules. -(1) The Federal Government may, by notification in the official Gazette, make rules for carrying out the purpose of this Ordinance. (2) In particular and without prejudice to the generality of the foregoing power, such rules may include(i) (ii) (iii) (iv) (v) (vi) (vii) the duties and functions of the Registrar; terms and conditions of a Tribunal; procedure relating to a Tribunal; composition, terms and conditions of the Religious Board; procedure relating to the Religious Board; form, contents and other requirements of a prospectus; issue and allotment of Modaraba Certificates;

(viii) maintenance of modaraba accounts and funds;

(ix) (x) (xi) (xii)

form of balance sheet and profit and loss account; audit and auditor's certificate; annual and periodical accounts and reports; inspection of record and supply of copies of documents;

(xiii) matters relating to winding up; (xiv) (xv) (xvi) matters and procedure relating to enquiries; charging and determination of fees payable under this Ordinance; and such other matters as are to be or may be prescribed.

[41A. Power to make regulations.- (1) The Commission may, by notification in the official Gazette, make such regulations as may be necessary to carry out the purposes of this Ordinance: Provided that the power to make regulations conferred by this section shall be subject to the condition of previous publication and before making any regulations the draft thereof shall be published in the manner considered most appropriate by the Commission for eliciting public opinion thereon within a period of not less than fourteen days from the date of publication. (2) Any regulation made under sub-section (1) may provide that a contravention thereof shall be punishable with a fine which may extend to one hundred thousand rupees and, where the contravention is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which such contravention continues.

41B. Power to issue directives, circulars, guidelines, etc.The Commission may issue such directives, circulars, codes, guidelines or notifications as are necessary to carry out the purposes of this Ordinance and the rules and regulations made thereunder.]14 42. Act to override other laws. -The provisions of this Ordinance shall have effect notwithstanding anything contained in the Companies Act, 1913 (VII of 1913), or any other law for the time being in force. 43. Removal of difficulties. -If any difficulty arises in giving effect to any provision of this

14

Inserted through The Modaraba Companies and Modaraba (Floatation and Control) (Amendment) Act, 2012

Ordinance, the Federal Government may make such order, not inconsistent with the provisions of this Ordinance, as may appear to it to be necessary for the purpose of removing the difficulty.

General, M. ZIA-UL-HAQ, President

A BILL to make provision for the establishment and operation of book-entry systems for the transfer of securities by central depository companies ; WHEREAS it is expedient to make provision for the establishment and operation of book-entry systems for the transfer of securities by central depository companies ; It is hereby enacted as follows : 1.Short title, extent and commencement. (1) This Act may be called the Central Depositories Act, 1997. (2) It extends to the whole of Pakistan. (3) It shall come into force at once. 2. Definitions. In this Act, unless there is anything repugnant in the subject or context, (1) "access, in relation to the central depository system maintained by a central depository, means the placing of information on that system or the retrieval of information therefrom ; (2) "account" means an account maintained by a central depository in the name of an account holder so as to record the title of the account holder to any book-entry securities entered in such account ; (3) "account-holder" means a person who opens and maintains an account with a central depository and operates such account; (4) "Authority" means the Corporate Law constituted under section 11 of the Ordinance, 1984 (XLVII of 1984) ; Authority Companies

(5) "book-entry security", in relation to a central depository, means a security which is transferable by book-entry in the central depository register pursuant to a declaration made by the central depository under sub-section (6) of section 4 and which is

(a) in the case of a security transferable by registration, registered in the name of the central depository or issued to the central depository pursuant to section 14 ; or (b) in the case of a security transferable by delivery or endorsement, deposited with or transferred by endorsement to the central depository ; (6) "central depository" means a central depository as defined in clause (cc) of section 2 of the Securities and Exchange Ordinance, 1969 (XVII of 1969), and registered with the Authority under section 32A of that Ordinance ; (7) "central depository register" means a computerised electronic register maintained by a central depository in respect of book-entry securities ; (8) "central depository system" means central depository system established under section 4 ; (9) "debenture" means a debenture as defined in clause (12) of sub-section (1) of section 2 of the Companies Ordinance, 1984 (XLVII of 1984), and includes a debenture issued by an issuer other than a company ; (10) "document evidencing title" includes, (a) in the case of any security which is not a Government security, the share certificate, debenture certificate, modaraba certificate or any other certificate representing the security ; and (b) in the case of any security which is a Government security, such document or other evidence of title thereto as a central depository may require ; (11) "eligible pledgee" means any person who, in accordance with the regulations, is recognised by a central depository as eligible for the purpose of receiving any pledge of book-entry securities ; (12) "handling", with its grammatical variations and cognate expressions, in relation to a book-entry security, means the transfer of a book-entry security by electronic or similar means, the pledging of a book-entry security in accordance with section 12 or the withdrawal from the central depository system of the security represented by the book-entry security ;

(13) "information" includes data recorded in a form which can be processed by equipment operating automatically in response to instructions given for a particular purpose ; (14) "issuer" means any person, the Federal Government or a Provincial Government who or which has issued or proposes to issue any security ; (15) "jumbo certificates" mean one or more consolidated certificates of the securities of one kind or class issued by an issuer which are registered in the name of a central depository ; (16) "member" means a member as defined in clause (21) of sub-section (1) of section 2 of the Companies Ordinance, 1984(XLVII of 1984), and includes the registered owner of any equity security of an issuer which is established under any other law ; (17) "participant" means (a) an account-holder who is a member of a stock exchange ; and (b) any other account-holder who meets the qualifications of a participant prescribed in the regulations : Provided that such account holders (i) perform services for sub-account holders in accordance with the terms of an agreement entered into between the central depository and each of the participants ; (ii) transfer any securities to the central depository to the credit of any sub-accounts under their respective accounts ; and (iii)handle, on behalf of sub-account holders, the book-entry securities in the sub-accounts under their respective accounts ; (18) prescribed means prescribed by regulations made under this Act; (19) "record" includes, writing, (a) any photograph ; (b) any disc, tape, sound-track or other device in which sounds or other data (not being visual images) are embodied so as to be capable (with or without the aid of some other instrument or machine) of being reproduced therefrom in in addition to a record in

audible or readable form ; and (c) any film, tape or other device in which visual images are embodied so as to be capable (with or without the aid of some other instrument) of being reproduced therefrom in visual form ; and

(d) any reference to a copy of a record includes (i) in the case of a record falling within paragraph (b) but not paragraph (c) of this clause, a transcript of the sounds or other data embodied therein ; (ii) in the case of a record falling within paragraph (c) but not paragraph (b) of this clause, a still reproduction of the images embodied therein, whether enlarged or not ; and (iii)in the case of a record falling within both paragraph (b) and paragraph (c) of this clause, the transcript of the sounds or other data embodied therein together with the still reproduction of the images embodied therein ; (20) "register of members" means the register of members referred to in section 147 of the Companies Ordinance, 1984 (XLVII of 1984), and includes the register of owners of any equity securities of an issuer established under any other law ; (21) "register of debenture-holders" means the register of debenture holders referred to in section 149 of the Companies Ordinance, 1984 (XLVII of 1984), and includes the register of holders of any non-equity securities of an issuer other than a company ; (22) "Registrar" means the Registrar as defined in clause (31) of sub-section (1) of section 2 of the Companies Ordinance, 1984 (XLVII of 1984) ; (23) "regulations" means the regulations made pursuant to section 35 ; (24) "security" means (a) a security as defined in sub-clause (i) of clause (l) of section 2 of the Securities and Exchange Ordinance, 1969 (XVII of 1969) ; (b) any Government security ; (c) any derivative relating to a security or a Government security ; or (d) any other instrument specified by the Federal Government, by a notification in the official gazette, to be a security for the purposes of this Act ; (25) "State Bank" means the State Bank of Pakistan established under the State Bank of Pakistan Act, 1956 (XXXIII of 1956) ;

(26) "stock exchange" means a stock exchange registered under the Securities and Exchange Ordinance, 1969 (XVII of 1969) ; (27) "sub-account" means a sub-account maintained, as part of the account of a participant, in accordance with the regulations by a central depository in the name of a sub-account holder so as to record the title of the sub-account holder to any book-entry securities entered in such subaccount ; and (28) "sub-account holder" means a person in whose name a sub-account is opened and maintained by a participant with a central depository and is operated by that participant. 3.Overriding effect. The provisions of this Act shall have effect notwithstanding anything contained in the Companies Ordinance, 1984 (XLVII of 1984), or in any other law or in any charter, statute or memorandum or articles of association or in any applicable document or resolution. 4.Central depository system. (1) A central depository shall establish a central depository system whereby, in accordance with the regulations, (a) (i) accounts may be opened and maintained with the central depository by the account-holders so as to record the title of the accountholders to book-entry securities entered in such accounts ; or (ii) where the account holders are participants, sub-accounts may be opened and maintained, as part of the accounts of the participants, with the central depository by the participants on behalf of the sub-account holders so as to record the title of the subaccount holders to book-entry securities entered in such sub-accounts ; (b) transfers of such book-entry securities shall be effected electronically or by any similar means ; and (c) pledging of such book-entry securities effected in accordance with section 12. may be

(2) Where any securities are issued to or registered in the name of a central depository or transferred by endorsement to or deposited with a central depository, such securities shall, in accordance with the regulations, be entered in the relevant accounts or sub-accounts, as the case may be, as book-entry securities. (3) Notwithstanding anything contained in sub-section (1), a participant may, with the written authorisation of

his clients, enter book-entry securities beneficially owned by the clients in his own account without establishing subaccounts in the names of such clients in the central depository system : Provided that the central depository may at its discretion, enquire whether such authorisation has been obtained by the participant. (4) Subject to the provisions of this Act, a central depository system shall be operated by a central depository for holding book-entry securities as a nominee for account holders and for facilitating the transfer of such book-entry securities. Provided that nothing contained herein shall be construed as preventing a central depository from holding book-entry securities, as a beneficial owner of such securities, in its own account opened and maintained on its own central depository system. (5) The title to any book-entry securities entered in an account shall vest in the account holder and the title to any book-entry securities entered in a sub-account shall vest in the sub-account holder. (6) The central depository system of a central depository shall handle such securities as book-entry securities as are declared as such by the central depository. (7) Different types of accounts and sub-accounts for different classes of persons may be opened with a central depository in accordance with the regulations. 5. Central depository not to be a member of an issuer etc. (1) Where a central depository is named in the register of members of an issuer, (a) the central depository shall be deemed not to be a member of the issuer ; and (b) the persons named as the account-holders or, as the case may be, the sub-account holders shall, for such period as the book-entry securities representing securities carrying voting rights in the issuer are entered against their names in the central depository register, be deemed to be members of the issuer in respect of such securities and shall, except as is otherwise provided in this Act, be entitled to all the rights, powers and privileges and be subject to all the liabilities, duties and obligations of a member as are or may be conferred by the Companies Ordinance, 1984 (XLVII of 1984), or by any other law for the time being in force or by the charter,

statute or memorandum or association of the issuer.

the

articles

of

(2) Where a central depository is a debenture-holder of an issuer or is the owner of securities of an issuer (whether equity securities or debt securities) which do not carry voting rights in the issuer, (a) the central depository shall be deemed not to be the owner of such securities ; and

(b) the persons named as the account holders or, as the case may be, the sub-account holders shall, for such period as the book-entry securities representing such securities are entered against their names in the central depository register, be deemed to be the owners of such securities and shall, except as is otherwise provided in this Act, be entitled to all the rights, powers and privileges and be subject to all the liabilities, duties and obligations of the owners of such securities as are or may be conferred by the Companies Ordinance, 1984 (XLVII of 1984), or by any other law for the time being in force or in terms of any documents creating such securities. (3) Nothing affecting, in this Act shall be construed as

(a) the obligation of an issuer to keep a register of its members or debenture holders or allow inspections of such register under the provisions of the Companies Ordinance, 1984 (XLVII of 1984), or under any other law for the time being in force : Provided that the issuer shall not be obliged to enter in any registers maintained by it the names and particulars of persons who are members of the issuer under clause (b) of sub-section (1) or owners of the securities of the issuer under clause (b) of sub-section (2) ; (b) (i) the right of an account holder to request withdrawal of his securities from the central depository system at any time and, where applicable, to have them registered in his name, or where the account-holder is a participant, in any other name ; or (ii) the right of a participant to request a withdrawal of his sub-account holders' securities from the central depository system at any time and, where applicable, to have them registered in the name of his sub-account holder ; or (c) the right of a central depository to hold bookentry securities beneficially in its own behalf. (4) Notwithstanding any-thing contained in this Act, an account-holder or a sub-account holder, who is named in the central depository register, at the close of business hours of the central depository on the day before the first day of the period of closure of register of members of an issuer, as the holder of book-entry securities representing securities carrying voting rights in the issuer, shall be

regarded as a member of the issuer for the purpose of attending and exercising all rights at a general meeting of the members of the issuer in respect of which the register of members has been closed. (5) Notwithstanding any-thing contained in this Act, an account-holder or a sub-account holder, who is named in the central depository register, as at the close of business hours of the central depository on the day before the first day of the period of closure of register of non-equity securities of an issuer, as the owner of book-entry securities representing such securities of the issuer, shall be regarded as an owner of such securities for the purpose of attending and exercising all rights at a general meeting of the owners of such securities of the issuer in respect of which the register of such securities has been closed. 6. Transfers under book-entry system. (1) Subject to the provisions of this Act, a transfer of book-entry securities from accounts or sub-accounts to other accounts or sub-accounts shall be made in such manner as may be prescribed and shall be effected by making of an appropriate entry in the central depository register in accordance with such regulations. (2) A transfer of book-entry securities in the manner set out in sub-section (1) shall be a valid and effective transfer of title to the securities represented by the bookentry securities. 7. Effect of book-entry transfer on transferee. If a transfer of book-entry securities takes place at a particular time in accordance with the provisions of section 6 (a) the transferee shall be deemed to have agreed to have accepted the transfer of such book-entry securities subject to the terms and conditions on which the transferor held them immediately before the time of such transfer, and (b) the transferee shall be deemed to have, where applicable, agreed to become a member of the issuer and to be bound by the issuer's charter, statute or memorandum and articles of association, as the case may be. 8. Central depository discharged from liability if acting on instructions. (1) A central depository, if acting in good faith and without negligence, shall not be liable to for any loss, damages, compensation, costs and expenses in tort or under any law or contract for any breach of trust or duty where the central depository has, in the accounts or

sub-accounts maintained by it, made or allowed to be made entries or handled or allowed handling of any book-entry securities, according to the instructions of an accountholder or a participant, notwithstanding that the account holder or the participant, as the case may be, had no right to dispose of or take any other action in respect of such book-entry securities.

(2) A central depository, if acting in good faith and without negligence, shall be fully discharged of its obligations to an account-holder and participant, upon the transfer or delivery of book-entry securities under the instructions of the account holder or participant, as the case may be. (3) A central depository shall not be required to enquire whether or not (a) an account-holder or a participant, has a right to handle any book-entry securities entered in his account or in any sub-account under his account, as the case may be, or to take any action in that regard ; or (b) the document evidencing title in respect of a security deposited with an issuer for the purpose of registration of the transfer of the security in the name of the central depository is genuine. (4) Except as provided in this Act, a central depository shall not owe any fiduciary or any other obligations whatsoever, including, without limitation to the generality of the foregoing, any obligations in law, contract, tort, warranty or strict liability, to the subaccount holders in whose names sub-accounts are maintained in the central depository system. (5) Without prejudice to the provisions of any other law for the time being in force, if any loss is caused to an account holder or a sub-account holder due to any negligent or wrongful act or omission of a central depository or any of its employees, the central depository shall compensate such account holder or sub-account holder for such loss. 9. Central depository to supply information. (1) Every issuer which is a company or other body corporate and whose securities are entered in the central depository system of a central depository shall request the central depository, at such times as may be prescribed in the regulations, for a list of the names and other relevant details of the accountholders and sub-account holders, holding the book-entry securities of such issuer together with details of the bookentry securities of such issuer entered in the accounts of such account holders or sub-account holders, as the case may be (a) for sending notices to any account-holders and sub-account holders of general meetings of the holders of any securities of the issuer ;

(b) for sending any other notices or documents to any account holders and sub-account holders which are required to be sent by the issuer to holders of any securities of the issuer ; (c) for the purpose of allowing any accountholders and sub-account holders to attend general meetings of any holders of securities of the issuer or to appoint proxies for this purpose ; (d) for despatching dividend or other warrants to any account-holders and sub-account holders ; (e) for despatching to any account-holders and sub-account holders any other payments or benefits paid by the issuer ; or (f) for despatching to any account holders sub-account holders formal offers subscription of securities of the issuer. and for

(2) A participant may, in respect of such book-entry securities as are beneficially owned by his clients and entered in his account, supply to the central depository the names and other details of such clients together with instructions that such names and other details be forwarded to the issuer upon a request for information made by the issuer under sub-section (1) : Provided that the persons whose names are supplied by a participant under this sub-section shall be deemed to be sub-account holders holding the book-entry securities to which they are stated by the participant to be entitled and shall be entitled to the rights of sub-account holders set out in section 5. (3) Subject to sub-section (2), the central depository shall supply to an issuer the information requested by the issuer under sub-section (1) in such manner and within such time as may be prescribed in the regulations : Provided that in cases where the information requested by the issuer under sub-section (1) is for the determination of entitlement of any account-holders and subaccountholders, in relation to the book-entry securities of the issuer held by them, to attend any meetings of the issuer or to receive payments of any dividends or other amounts payable by the issuer or to receive any offers for subscription of any shares in the issuer or for any other purpose as required by any law or the issuer's charter, statute or memorandum or articles of association, the central depository shall supply such information to the issuer as is correct as at the close of business hours of the central depository on the day before the first day of the period of closure of register of members, debenture holders or any other securities of the issuer.

(4) Subject to sub-sections (5) and (6), an issuer to whom sub-section (1) applies shall rely upon the information supplied by the central depository under sub-section (3).

(5) An issuer who is liable to pay any dividend or other amount or issue any offer for subscription of any securities to any account-holders or sub-account holders shall pay such dividend or other amount or issue such offer for subscription of securities in accordance with such information as a central depository may give in accordance with the regulations and such payment or issue shall discharge the issuer from any liability in respect of that payment or issue to the relevant account holders or subaccount holders. (6) All notices and other documents which an issuer is obliged or required to send to its members or holders of any of its securities, shall in cases where an account-holder or a sub-account holder is deemed to be a member or holder of any securities of the issuer, be sent directly to the account-holder or the sub-account holder, as the case may be, on the basis of information provided by the central depository under sub-section (3) and in such manner as notices and documents are required to be sent by the Companies Ordinance, 1984 (XLVII of 1984), or any other applicable law or articles of association. 10. Bonus issue by an issuer. (1) Where an issuer whose securities are entered in the central depository system makes a bonus issue, the securities to be issued on the number of securities of that issuer registered in the name of the central depository shall be allotted to the central depository. (2) The central depository shall, upon allotment of securities under sub-section (1), determine the entitlements of the relevant account-holders and sub-account holders to such securities in proportion to the other securities of the same issuer standing in their accounts and sub-accounts, as of the close of business hours of the central depository on the day before the first day of the period of closure of register of members, debenture holders or any other securities of the said issuer and enter the book-entry securities in the relevant accounts and sub-accounts in accordance with the determined entitlements : Provided that fractional entitlements to book-entry securities relating to the bonus securities shall not be credited by the central depository to the relevant accounts and sub-accounts but the book-entry securities representing such fractional entitlements shall be consolidated and dealt with in accordance with the regulations. 11. Bar on rectification of central depository register. Notwithstanding anything contained in section 152 of the Companies Ordinance, 1984 (XLVII of 1984), if

(a) an account-holder or a sub-account holder did not consent to a transfer of any book-entry securities from, or to, his account or sub-account, as the case may be, or (b) the name of any account-holder or sub-account holder is fraudulently or without sufficient cause entered in, or omitted from, the central depository register, the aggrieved party may apply to the court for relief and the court may award damages to the aggrieved party but shall not order rectification of the central depository register. EXPLANATION : The expression "court" for the purposes of this section shall mean the High Court having jurisdiction over the defendant. 12. Pledge of book-entry securities. (1) Book-entry securities shall be pledged only in favour of an eligible pledgee to secure the payment of a debt or liability or performance of any obligation by any account holder directly or by any sub-account holder through instructions given to a participant when the book-entry securities are blocked in the manner set out in sub-section (2). (2) The book-entry securities to be pledged shall be blocked when an account holder or a participant gives instructions to the central depository system in a manner that the pledgor or the relevant participant when the pledgor is a sub-account holder ceases to handle the pledged book-entry securities and notice of the blocking is available through the central depository system to the eligible pledgee. (3) A pledgee of the pledged book-entry securities shall, in addition to the powers available to him under the Contract Act, 1872 (Act IX of 1872), have the following powers : (a) a power, upon the default of the pledgor, to transfer the pledged book-entry securities or any part thereof ; and (b) any other power which may be granted to him in writing by the pledgor in relation to the pledged book-entry securities provided that the central depository shall not be concerned with or affected by the exercise of any such power. (4) The central depository system shall only allow the pledgee to remove the block from the pledged book-entry securities in such manner that they are available to the pledgor for the purpose of handling them.

(5) The central depository system shall not allow the pledgor to handle the pledged book-entry securities save upon the removal by the pledgee of the block from such pledged book-entry securities. (6) A participant shall not create a pledge over any book-entry securities entered in any sub-accounts maintained under his account with the central depository without the authorisation of the sub-account holder concerned. (7) No pledge of any book-entry securities may be made except as provided in this section. (8) Except as otherwise provided in this section, the provisions of the Contract Act, 1872 (Act IX of 1872) , shall be applicable to pledging of book-entry securities. EXPLANATION : For the purpose this section, the account-holder or sub-account holder, as the case may be, pledging any book-entry securities shall be called the "pledgor", the eligible pledgee in whose favour a pledge of book-entry securities is made be called the "pledgee" and the book-entry securities when blocked are be called the "pledged book-entry securities". 13. Consolidation or sub-division of securities by an issuer. When an issuer announces a consolidation or subdivision of his securities, the book-entry securities of such issuer as are entered in the accounts and sub-accounts maintained in the central depository register shall in like manner and in accordance with the regulations shall be consolidated or sub-divided, as the case may be, in the central depository register. 14. Regulations for issue or offer for sale of securities. (1) A central depository may make regulations which permit any issuer to enter into an arrangement with the central depository whereunder the issuer may register in the name of the central depository all the securities of one class after making allocation of such securities to the subscribers of the securities. (2) Where any issuer enters into an arrangement referred to in sub-section (1) with a central depository and registers the securities in the name of the central depository, the central depository shall ensure that every subscriber of the securities or any account holder designated by such subscriber is credited with book-entry securities representing his entitlement to such securities. (3) A central depository may make regulations which permit any person intending to make an offer for sale of securities to the public to enter into an

arrangement with the central depository whereunder the securities which are to be offered for sale by that person may be transferred in the name of the central depository after the acceptance of offer from persons who apply to purchase such securities. (4) Where any person intending to make an offer for sale of securities to the public enters into any arrangement referred to in sub-section (3) with a central depository and transfers the securities in its name, the central depository shall ensure that every purchaser of the securities or any account holder designated by such purchaser is credited with book-entry securities representing his entitlement to such securities. 15. Conversion of non-equity securities into equity securities. Where any debentures, bonds or any other nonequity securities, whether partly or wholly convertible into equity securities or with warrants to subscribe to equity securities of an issuer, are converted into equity securities, a central depository shall take appropriate action, in accordance with the regulations, in respect of the book-entry securities representing such debentures, bonds or other non-equity securities to give effect to such conversion. 16. Issuance of Jumbo Certificates. Every issuer of the securities registered in the name of a central depository shall, if so requested by the central depository in writing, issue to it jumbo certificates, of such denominations as may be requested by the central depository, upon the occurrence of any increase or decrease in the number of the securities of such issuer held by the central depository. 17. Inspection of the central depository register. (1) The central depository register shall, to the extent that it records the holdings of book-entry securities representing securities of an issuer, be open to inspection at the registered or head office of the issuer in the same manner and to the extent provided in any law for the time being in force pursuant to or by which such issuer was established or is governed. EXPLANATION : For the purposes of this sub-section, the expression "law" shall include any rules or regulations governing such issuer. (2) The information made available upon any request for inspection under sub-section (1) shall be correct as of the close of business hours of the central depository on its first working day in the month preceding the month in which

the request for inspection is made : Provided that where any closure of the register of members or debenture holders or of the holders of any other equity or non-equity securities, of the issuer has occurred subsequent to the first working day of the central depository in the month preceding the month in which the request for inspection is made, the information made available upon any request for inspection shall be correct as of the close of business hours of the central depository on the day before the first day of the latest period of closure of register of members or debenture holders or of the holders of any other equity or non-equity securities, as the case may be, of the issuer : Provided further that where notice of a general meeting of the members or debenture holders or of the holders of any other equity or non-equity securities of the issuer has been issued, the information made available upon any request for inspection under sub-section (1) shall be correct as of the close of business hours of the central depository on the third day before the date of receiving the request for inspection. 18. Record of an entry prima facie evidence. A record of an entry in an account or a sub-account shall be prima facie evidence of the truth of the matters so recorded. 19. Borrowing or lending of securities. Book-entry securities may, in accordance with the regulations, be borrowed or lent in the interest of the smooth and orderly functioning of stock exchanges. 20. Duty to maintain secrecy. (1) Except as provided in this Act or in any other law for the time being in force, no director or officer of a central depository or a participant, whether during his tenure of office or during his employment or thereafter, and no other person who has by any means knowledge of any information or document whatsoever relating to the affairs of any of the account holders, and in particular, relating to their accounts or sub-accounts, shall give, divulge, reveal or otherwise disclose such information or document to any other person. (2) A person who has any information or document which to his knowledge has been disclosed in contravention of subsection (1) shall not in any manner howsoever disclose it to any other person. 21. Permitted disclosures. Subject to the provisions

of this Act, the provisions of section 20 shall not entitle any person to refuse to disclose any information or documents (a) which an account-holder or a sub-account holder has authorised in writing to disclose ; (b) in a case where an account-holder or a sub-account holder is declared a bankrupt, or, if the accountholder or sub-account holder, as the case may be, is a company or body corporate and is being or, has been, wound up within or outside Pakistan ; (c) in the case of proceedings ; any litigation or other legal

(d) to any person duly authorised by a competent court, the Authority or the State Bank of Pakistan to investigate into any offence under any law for the time being in force ; (e) for the purpose of enabling or assisting the Authority to exercise any power conferred on it by this Act or by any other law for the time being in force ; (f) for the purpose of enabling or assisting the State Bank of Pakistan to exercise any power conferred on it by any other law for the time being in force ; (g) for the purpose of enabling or assisting a stock exchange or clearing house of a stock exchange to discharge its functions; (h) for the purpose of enabling or assisting auditors of a central depository or participant to discharge their functions ; or (i) to the Authority if the disclosure is required in the interest of investors or in the public interest. 22. Regulation of access to the computer system. (1) A central depository may, in accordance with the regulations, authorise any account holders, the stock exchanges on which the securities in relation to book-entry securities entered in the central depository register of the central depository are listed, clearing houses of such stock exchanges or issuers to have access to its computer system within such limits and for such purposes as may be specified in such regulations. (2) No person (a) who, being a person authorised to have access

under sub-section (1), shall gain access, or attempt to gain access, to a computer system of a central depository, whether by means of any device or apparatus forming part of the computer system or by any other means, beyond the limits or for purposes other than for which he is authorised thereunder ; (b) who, not being a person authorised to have access under sub-section (1), shall gain access, or attempt to gain access, to a computer system of a central depository, whether by means of any device or apparatus forming part of the computer system or by any other means; or (c) shall unlawfully interfere with, or impede, or attempt to interfere with or impede, the operation of a computer system of a central depository. 23. Central depository to provide assistance to the Registrar, the Authority, the State Bank of Pakistan and the stock exchanges. A central depository shall provide such assistance to the Authority, the State Bank of Pakistan, the Registrar, stock exchanges and to any person acting on their behalf, as they reasonably require for the performance of their functions and duties under this Act or under any other law for the time being in force. 24. Handling book-entry securities without authority. (1) A participant shall not handle or authorise or permit any handling of book-entry securities entered in the subaccounts maintained under his account without authority of the sub-account holder. 2) A participant shall not, except with the authority of his clients, handle or authorise or permit any handling of book-entry securities beneficially owned by such clients and entered in his account. 25. Nomination and transmission. The provisions of sections 79, 80 and 81 of the Companies Ordinance, 1984 (XLVII of 1984), shall, mutatis mutandis, apply to bookentry securities and all references to member or holder of debentures in those sections shall be construed as references to account-holders or sub-account holders, and all references to a company shall be construed as references to a central depository in case the book-entry securities belong to an account-holder and to a participant in case the book-entry securities belong to a sub-account holder.

26. Settlement of securities transactions using the central depository system. (1) Subject to the provisions of this Act, no transfer of book-entry securities shall be effected on the central depository system unless at least one party to the transaction in respect of which the transfer of book-entry securities is sought to be effected is a member of a stock exchange. (2) Notwithstanding the provisions of sub-section (1), a central depository shall make regulations prescribing transactions, other than the transactions referred to in that sub-section, in respect of which transfers of bookentry securities may be effected on the central depository system : Provided that a central depository may, before making or allowing the entry to be made, require the production of such documentary evidence as may be prescribed in the regulations. 27. Power of Registrar and Authority to call for information or appoint inspectors. (1) Nothing contained in this Act shall be construed to impose any limits on the powers of the Registrar or the Authority under the Companies Ordinance, 1984 ( XLVII of 1984 ), as regards calling for any information from and appointing any persons as inspectors to investigate the affairs of a central depository or of any participant which is a company or is a corporation to which the provisions of the Companies Ordinance, 1984 (XLVII of 1984), apply.

(2) Nothing contained in this Act shall be construed to impose any limits on the powers of any competent authority under any other law for the time being in force as regards calling for any information from or carrying out any investigation into the affairs of a participant which is established under or is otherwise governed by such law. (3) The Authority, on being satisfied that the affairs of a participant, not being a participant referred to in sub-sections (1) or (2), in relation to his account on a central depository system are being or have been conducted with intent to defraud his creditors or any other persons or for a fraudulent or unlawful purpose, may by order in writing, (a) call upon such participant to furnish in writing such information relating to book-entry securities held by him on the central depository register, whether on his own behalf or on behalf of a client ; or (b) authorise any one or more competent persons as inspectors to investigate the affairs of such participant : Provided that before making an order for enquiry or inspection, the Authority shall give the participant an opportunity to show cause against the action proposed to be taken. (4) A person appointed as inspector under sub-section (3) shall, for the purposes of his investigation, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (Act V of 1908), while trying a suit, in respect of the following matters, namely: (a) enforcing the attendance of persons and examining them on oath or affirmation ; (b) compelling the discovery and production of books and papers and any material objects ; and (c) issuing commissions witnesses ; for the examination of

and every proceeding before such person shall be deemed to be "judicial proceeding" within the meaning of sections 193 and 228 of the Pakistan Penal Code, 1860 (Act XLV of 1860). (5) Any contravention of or non-compliance with any orders, directions or requirement of the inspector exercising powers of a court under sub-section (4) shall, in all respects, entail the same liabilities, consequences and penalties as are provided for such contravention, noncompliance or default under the Code of Civil Procedure, 1908 (Act V of 1908), and the Pakistan Penal Code 1860 (Act XLV of 1860).

(6) employee inspector documents matter of

Every past and present partner, proprietor or of a participant shall on demand produce before all information or such records and other in his custody having a bearing on the subjectthe investigation.

(7) The inspector may, and if so directed by the Authority shall, make interim reports to the Authority, and on the conclusion of the investigation, shall make a final report to the Authority on the basis of which it may take such action as it deems expedient. 8) If, from any report made under sub-section (7), it appears to the Authority that any participant or any other person has been guilty of any offence for which he is criminally liable, the Authority may prosecute such participant or other person for the offence. (9) When an investigation is ordered to be made under this section, the expenses of the investigation shall, in the first instance be defrayed by the Authority ; but any person who is convicted on a prosecution instituted in pursuance of sub-section (8) may, in the same proceedings, be ordered to pay the said expenses to such extent as may be specified by the Authority or as the court may so direct. (10) The amount of expenses which any person is liable under this section to reimburse to the Authority shall be recoverable from that person as arrear of land revenue. (11) In so far as the expenses to be defrayed by the Authority under this section are not recovered thereunder, those shall be borne by the Federal Government. (12) A copy of any report of any inspector or inspectors appointed under this section authenticated in such manner as may be prescribed, shall be admissible in any legal proceedings as evidence of the opinion of the inspector or inspectors in relation to any matter contained in the report. 28. Offences. (1) Whoever knowingly and willfully contravenes or attempts to contravene or abets the contravention of any of the provisions of this Act or the regulations made thereunder shall be punishable with a fine which may extend to five hundred thousand rupees and to a further fine not exceeding ten thousand rupees for every day if such contravention continues after the imposition of the fine. (2) Notwithstanding anything contained in sub-section (1), whoever knowingly and willfully contravenes or attempts

to contravene or abets the contravention of the provisions of section 24 shall be punishable with a fine which may extend to one million rupees and to a further fine not exceeding twenty thousand rupees for every day after the first contravention during which the contravention continues or with imprisonment for a term which may extend to five years, or with both. (3) Where an offence under this Act has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

(4) Notwithstanding anything contained in sub-section (3), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of any director, manager, secretary or other employee of the company, such director, manager, secretary or other employee shall also be deemed to be guilty of the offence. EXPLANATION : For the purposes of this section, (a) "company" means any body corporate and includes a partnership firm or other association of individuals ; and (b) "director", in relation to a firm, means a partner in the firm. 29. Cognizance of offences by courts. No court or authority or officer shall take cognizance of any offence punishable under this Act or any regulations or under any bye-laws made thereunder, save on a complaint made in writing by the Authority. 30. Offences to be non-cognizable. Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (Act V of 1898), every offence under this Act shall, for the purposes of the said Code, be deemed to be non-cognizable. 31. Punishment and adjudication of fine or penalty. (1) A fine for any offence under or contravention of any provisions of this Act may be adjudged and imposed by any

Member of the Authority. (2) The fine as aforesaid shall be imposed after giving the person concerned an opportunity to show cause why he should not be punished for the alleged offence or contravention and, if he so requests, after giving him a reasonable opportunity of being heard personally or through such person as may be prescribed in this behalf. (3) Where imprisonment is provided for any offence under or contravention of any provisions of this Act, it shall be adjudged by a court not inferior to that of a court of session. 32. Review and appeal. Any person (a) aggrieved by any order or sentence passed under sub-section (1) of section 31 may, within thirty days of such order or sentence, apply to the Member of the Authority passing the order or sentence for a review of such order or sentence ; or

(b) aggrieved by any order or sentence passed under sub-section (1) of section 31, may within sixty days of such order or sentence, prefer an appeal to the Authority and the Authority may pass such order in relation to the appeal as it thinks fit : Provided that no order enhancing the fine shall be passed unless the applicant has been given an opportunity of showing cause against it and, if he so requests, of being heard personally or through such person as may be prescribed in this behalf. 33. Powers of the Authority in relation to proceedings. (1) The Authority shall, for the purposes of a proceeding in exercise of its powers and discharge of functions under this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (Act V of 1908), while trying a suit, in respect of the following matters, namely : (a) summoning and enforcing the attendance of any witnesses and examining him on oath or affirmation ;

(b) compelling the discovery or production of any document or other material object ; (c) receiving evidence on affidavit ; and (d) issuing commissions for the examination of witnesses and documents. (2) Any proceeding before the Federal Government or the Authority or a member of the Authority under this Act shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Pakistan Penal Code, 1860 (Act XLV of 1860), and such Government or Authority or a member of the Authority shall be deemed to be a Civil Court for the purposes of section 195 and Chapter XXXV of the Code of Criminal Procedure, 1898 Act V of 1898). 34. Amendment of Ordinance XLVII of 1984. As from the date of commencement of this Act, sections 2, 3, 74, 77 and 209 of the Companies Ordinance, 1984 (XLVII of 1984), shall have effect subject to the amendments specified in the Schedule to this Act. 35. Central depository to have power to make own regulations. (1) Subject to prior approval of the regulations by the Authority, a central depository shall have the power to make regulations from time to time to carry out its functions in accordance with the provisions of this Act. (2) In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters, namely :

(a) manner of opening and maintaining accounts and sub-accounts with the central depository ; (b) criteria for recognition eligible pledgees ; of persons for as the

(c) qualifications of account holders purposes of becoming participants ;

(d) manner and procedure of effecting transfers of book-entry securities ; (e) manner and timing of entering book-entry

securities in accounts and sub-accounts ; (f) types of accounts and sub-accounts which may be established with the central depository for different classes of persons ; (g) manner of withdrawing securities from the central depository system of the central depository ; (h) criteria for determining close of business hours of the central depository on each day ; (i) manner of making entries in accounts and subaccounts maintained with the central depository ; (j) manner of provision of information central depository by a participant sub-section (2) of section 9 ; to a under

(k) manner and timing of provision of information by the central depository to issuers under sub-section (3) of section 9 ; (l) details of information to be given by the central depository to issuers under subsection (5) of section 9 ; (m) procedure for consolidation and sub-division of book-entry securities representing securities which have been consolidated or sub-divided by an issuer ; (n) new issues or offer for sale of securities ; (o) manner of conversion of debt-based book-entry securities into equity-based book-entry securities ; (p) borrowing and securities ; lending of book-entry

(q) regulating access to the computer system of the central depository and the limits of such access ; (r) direct statements sent by a central depository to sub-account holders ; (s) any other matter for which a regulation is required to be or may be made to carry out the purposes of this Act. (3) All regulations made under this section shall be published in the official gazette and shall take effect upon such publication.

(4) Where the Authority considers it expedient so to do, it may, by order in writing, direct a central depository to make any regulation, or to amend or rescind any regulation already made, within such period as it may specify in this behalf. (5) If a central depository fails or neglects to comply with any direction under sub-section (4) within the specified period, the Authority may make or amend, with or without modifications, or rescind, any regulation directed to be made, amended or rescinded, and a regulation so made, amended or rescinded by the Authority shall be deemed to have been made, amended or rescinded by the central depository in accordance with the provisions of this section and shall have effect accordingly. 36.Removal of difficulties. If any difficulty arises in giving effect to any provisions of this Act, the Authority may, by notification in the official gazette, make such provisions as may appear to it to be necessary for the purpose of removing such difficulty.

SCHEDULE (See section 34) AMENDMENT OF ORDINANCE XLVII OF 1984

As from the commencement of this Act, the following amendments shall be made in the Companies Ordinance, 1984 (XLVII of 1984), namely : (a) in section 2, in sub-section (1). (i) in clause (2), in the second proviso, in item (ii), after the words Provincial Government occurring at the end, the words and comma or shares registered in the name of a central depository shall be inserted ; and (ii) after clause (5), the following new clause shall be inserted namely :"(5A) central depository means a central depository as defined in clause (cc) of section 2 of the Securities and Exchange Ordinance, 1969 (XVII of 1969), and registered with the Authority under section 32A of that Ordinance :" ;

(b) in section 3, in sub-section (1), in clause (b), for the full stop at the end a colon shall be substituted and thereafter the following proviso shall be added, namely : "Provided that, where a central depository holds more than fifty percent of the voting securities of a company, such company shall not be deemed to be a subsidiary of the central depository save where such voting securities are held beneficially by the central depository in its own behalf." ; (c) in section 74, in sub-section (1), for the full stop at the end a colon shall be substituted and thereafter the following proviso shall be added, namely : "Provided that, the company shall, within five days after an application is made for the registration of the transfer of any shares, debentures or debenture stock to a central

depository, register such transfer in the name of the central depository." ;

(d) in section 77, in the first proviso, after the words thirty days, the words and comma "or, where the transferee is a central depository, within five days" shall be inserted ; and (e) in section 209, in sub-section (5), (i) in clause (b), in the proviso, the word or occurring at the end shall be omitted ; and (ii) in clause (c), for the full stop at the end the semi-colon and word ; or shall be substituted and thereafter the following new clause shall be added, namely : (d) from depositing with, or transferring to, or holding, or registering in the name of a central depository any shares or securities.

Statement of Objects and Reasons The purpose of this bill is to replace the present manual system of physical handling and settlement of shares and transform the securities industry in Pakistan from manual and laborious setup to a modern and efficient scripless computer-aided system.

(SARTAJ AZIZ) Federal Minister for Finance & Economic Affairs

[As Amended Up-to-Date Till 2012] STATUTORY NOTIFICATION (S.R.O) Government of Pakistan SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN NOTIFICATION

PUBLISHED BY AUTHORITY Islamabad the, December 26, 1998

PART I Acts, Ordinance, Presidents Orders and Regulations SENATE SECRETARIAT No. F.9(51)/97-Legis.- The following Act of Majilis-e-Shoora (Parliament) received the assent of the Acting President on the 19th December, 1997, is hereby published for general information:Act No. XLII of 1997 An Act to provide for the establishment of the Securities and Exchange Commission of Pakistan and to provide for matters connected therewith and incidental thereto. WHEREAS it is expedient to provide for the establishment of the Securities and Exchange Commission of Pakistan for the beneficial regulation of the capital markets, superintendence and control of corporate entities and for matters connected therewith and incidental thereto; It is hereby enacted as follows:PART I PRELIMINARY 1. Short title and commencement. 2. Definitions. PART II

THE COMMISSION 3. Establishment of the Commission. 4. Head Office. 5. The Commissioners 6. The Chairman. 7. Term of office of the Commissioners. 8. Appointment of employees of the Commission. 9. Appointment of advisers and consultants. 10. Delegation of the Commissions functions or powers. 11. The Commission to furnish information. PART III THE BOARD 12. The Securities and Exchange Policy Board. 13. Procedure of the Board. 14. Board may invite others to meetings. 15. Committees of the Board. PART IV CONFLICT OF INTEREST 16. Disclosure of interest by Commissioners and Members. 17. Notification of interest by others. PART V DISQUALIFICATION, REMOVAL, RESIGNATION AND VACANCIES 18. Disqualification of Members and Commissioners. 19. Removal, resignation and vacancies. PART VI POWERS AND FUNCTIONS 20. Powers and functions of the Commission. 21. Functions and powers of the Board. 22. Supplementary provisions. PART VII FINANCE

23. The Fund. 24. Expenditure to be charged on the Fund. 25. Annual report and accounts. 26. Power to obtain finance, borrow money and receive grants. 27. Investment. 28. Bank Accounts. PART VIII ENFORCEMENT AND INVESTIGATION 29. Investigation and proceedings by the Commission. 30. Powers of the investigating officers of the Commission. 31. Forcible entry. 32. Power to call for examination. 33. Appeal to the Appellate Bench of the Commission. 34. Appeal to the Court. PART IX CONFIDENTIALITY OF INFORMATION 35. Obligation of confidentiality. 36. Permitted disclosure. PART X COGNIZANCE AND PROSECUTION OF OFFENCES 37. Cognizance of offences. 38. Conduct of prosecution. PART XI RULES AND REGULATIONS 39. Power to make rules. 40. Power to make regulations. 40A. Penalty for violation of rules and regulations. 40B. Power of the Commission to issue directives, circulars, guidelines, etc. PART XII GENERAL

41. Common seal. 42. Public servants. 43. Abolition of Department of Insurance. 43A. Abolition of Department of Insurance.

44. Savings.

PART I PRELIMINARY 1. Short title and commencement.- (1) This Act may be called as the Securities and Exchange Commission of Pakistan Act, 1997. (2) It extends to the whole of Pakistan.

(3) Save for section 43, the Act shall come into force at once and section 43 shall come into force on such date as the Federal Government may, by notification in the official Gazette, appoint. 2. Definitions.- In this Act, unless there is anything repugnant in the subject or context,(a) (b) appointed day means the day on which section 43 comes into force; Authority means the Corporate Law Authority constituted under the Companies Ordinance, 1984 (XLVII of 1984); Board means the Securities and Exchange Policy Board established under section 12; Chairman means the Chairman of the Commission; civil servant means a civil servant as defined in section 2 of the Civil Servants Act, 1973 (LXXI of 1973); clearing house means a clearing house by whatever name or designation established or arranged to be established by a Stock Exchange for the registration of dealing in securities or settlement of trading in futures contracts; Commission means the Securities and Exchange Commission of Pakistan established under section 3;

(c)

(d) (e)

(f)

(g)

(h)

Commissioner means a Commissioner of the Commission and shall include the Chairman thereof; committee means a committee of the Board constituted under section 15; dealing in securities means making or offering to make, whether as principal or agent, with any person or inducing or attempting to induce any person to enter into or to offer to enter into(i) any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities, or any agreement the apparent or ostensible purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities;

(i) (j)

(ii)

(k) (l)

employee means any officer or servant of the Commission; Fund means the fund established under section 23;

[(la) "Law of Insurance" means the Insurance Ordinance, 2000 (XXXIX of 2000) or any other law in relation to insurance, the administration of which is vested in the Commission by the Federal Government by notification in the official Gazette."]1 (m) Member means a Member of the Board; (n) NBFI means a non-banking financial institution and includes a development finance institution, a modaraba, a leasing company, a housing finance company and an investment bank but shall not include a banking company as defined in clause (c) of section 5 of the Banking Companies Ordinance, 1962 (LVII of 1962); Ordinance means the Companies Ordinance, 1984 (XLVII of 1984); private sector person means a person who is not in the service of Pakistan or of any statutory body or any body which is owned or controlled by the Federal Government or a Provincial Government not including a University or an educational institution; regulations means the regulations made by the Board or the Commission; and rules means the rules made by the Federal Government.

(o) (p)

(q)

(r)
1

Clause (la) inserted by Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000

PART II THE COMMISSION 3. Establishment of the Commission.- (1) There is hereby established a Commission to be called the Securities and Exchange Commission of Pakistan. (2) The Commission shall be a body corporate with perpetual succession and a common seal, and may sue and be sued in its own name and, subject to and for the purposes of this Act, may enter into contracts and may acquire, purchase, take, hold and enjoy movable and immovable property of every description and may convey, assign, surrender, yield up, charge, mortgage, demise, reassign, transfer or otherwise dispose of or deal with, any movable or immovable property or any interest vested in it, upon such terms as it deems fit. 4. Head Office.- The head office of the Commission shall be in Islamabad. The Commission may establish and close down offices at such other places in Pakistan as it considers necessary. 5. The Commissioners.- (1) Subject to sub-section (2), the Commission shall consist of such number of Commissioners, including the Chairman, appointed by the Federal Government as may be fixed by the Federal Government but such number shall not be less than five and more than seven. A Commissioner shall be a person who is known for his integrity, expertise, experience and eminence in any relevant field, including the securities market, law, accountancy, economics, finance 2[, insurance] and industry. (2) The majority of the Commissioners shall always be of private sector persons.

(3) Subject to the provisions of this Act, the Commission shall, in discharge of its functions and exercise of its powers, conduct its proceedings in accordance with the regulations made by the 3[Commission]. [(4)] The Commissioners, including the Chairman, shall be paid such remuneration and allowances as the Commission may, with the approval of the Board, determine.
5 4

[(5) No act or proceeding of the Commission shall be invalid by reason only of the existence of a vacancy in, or defect in the constitution of the Commission.]

Comma and word inserted by Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 3 Substituted for Board by Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 4 Sub-section (4) inserted by Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 5 Sub-section (5) inserted by Finance Act, 2003, dated 17 June, 2003.

6. The Chairman.- (1) The Federal Government shall appoint one of the Commissioners to be the Chairman of the Commission, and no Commissioner shall be appointed Chairman for more than two consecutive terms. (2) The Chairman shall be the chief executive officer of the Commission and shall, together with the other Commissioners, be responsible for the day to day administration of the affairs of the Commission and shall, subject to the regulations made by the Commission, be assisted by the other Commissioners in carrying out the functions of the Commission. 7. Term of office of the Commissioners.- (1) Not less than three of the Commissioners (excluding the Chairman) first appointed under this Act, to be selected at random ballot in accordance with such procedure as may be approved by the Board (the Term A Commissioners) shall hold office for a term of two years, shall retire on the expiration of that term and may be re-appointed for a further term of three years. The Commissioners, other than the Term A Commissioners (including the Chairman, the Term B Commissioners) shall hold office for a term of three years, shall retire on the expiration of that term and may be re-appointed for a further term of three years. (2) At the end of each term, (initial or further) or at the end of the cumulative period of five years, in the case of the Term A Commissioners, or six years, in the case of the Term B Commissioners, as provided for under sub-section (1), the relevant number of Commissioners shall cease to hold office and any vacancy thus arising shall in each case be filled by the appointment of the requisite number of qualified persons as Commissioners, each for a term of three years reckoned from the date [of appointment]6. At the end of each such three-year term, a Commissioner whose term has expired shall retire (unless being eligible for re-appointment he is duly re-appointed). [(3) Notwithstanding anything contained in sub-sections (1) and (2), (a) a person who, on the date of his appointment is more than sixty-two years of age, shall not be appointed as a Commissioner; and a Commissioner shall cease to hold office attaining the age of sixty-five years.]7

(b)

8. Appointment of employees of the Commission.- (1) The Commission may, from time to time, employ persons to be employees of the Commission who shall be paid such remuneration and allowances and shall hold their employment on such terms and conditions as may be determined by the Commission with the approval of the Board.

The words the vacancy being filled occurred substituted with of appointment through Finance Act, 2008 dated June 27, 2008. 7 Sub-section (3) inserted through Finance Act, 2008 dated June 27, 2008.

(2) The employees of the Commission shall hold office during the pleasure of the Commission and shall be liable to disciplinary action in accordance with the procedure laid down by the Commission with the approval of the Board. 9. Appointment of advisers and consultants.- (1) Subject to sub-section (2), the Commission may, employ and pay consultants and agents and technical, professional and other advisers including, without limitation, bankers, stock-brokers, surveyors, valuers, actuaries, accountants, lawyers and other persons to transact any business or to do any act required to be transacted or done in the exercise of its powers, the performance of its functions or for the better implementation of the purposes of this Act. (2) The decision to employ and the terms of employment of external advisers and consultants shall be made by the Commission in accordance with such policy guidelines as the Commission may, in consultation with the Board, establish from time to time. 10. Delegation of the Commissions functions or powers.- (1) The Commission may, subject to such conditions and limitations as it may deem fit to impose, delegate any of its functions or powers to one or more Commissioners or any officer of the Commission. (2) A delegation under this section shall not prevent the concurrent performance or exercise by the Commission of the functions or powers so delegated. 11. The Commission to furnish information.- The Commission shall furnish to the Federal Government or the Board such information with respect to the policy it is pursuing or proposes to pursue in the performance of any of its functions under this Act as the Federal Government or the Board may, from time to time, require.

PART III THE BOARD 12. The Securities and Exchange Policy Board.- (1) The Federal Government shall appoint a Securities and Exchange Policy Board consisting of [nine]8 Members. (2) Of the Members(a) [five]9 shall be-

The word ten substituted with nine through Finance Act, 2008 dated June 27, 2008. Earlier the word nine was substituted by ten through Finance Act, 2007. Earlier the word seven was substituted by nine through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 9 The word six substituted with five through Finance Act, 2008 dated June 27, 2008. Earlier the word five was substituted by six through Finance Act, 2007. Earlier the word four was substituted by

[]10 [(i)]11 ex officio the Secretary to the Government of Pakistan, Finance Division; ex officio the Secretary to the Government of Pakistan, Law Division;

(ii)
12

[(iia) ex officio Secretary to the Government of Pakistan, Commerce Division;]

(iii) ex officio the Chairman of the Commission; and (iv) a Deputy Governor of the State Bank of Pakistan nominated by the Governor of the State Bank of Pakistan; and (b) 13[four] appointed by the Federal Government from private sector each of whom is well-known for his integrity, expertise and experience in the spheres of commerce and industry (including in particular the securities industry), corporate law, accountancy, financial services, investment14[, insurance], banking, academia or other related relevant fields of expertise. (3) A Member, not being an ex-officio Member, shall hold office for a term of four years and shall be eligible for re-appointment for one further four-year term but not more15[: Provided that a Member shall cease to hold office on attaining the age of sixty-five years.] (4) An ex-officio Member shall hold office as Member till such time as he holds the office by virtue of which he is a Member and upon his transfer therefrom or retirement, resignation or removal from office, the person appointed in such Members place shall be the Member.
five through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 10 Sub-clause (i) omitted through Finance Act, 2008 dated June 27, 2008. Earlier sub-clause (i) was inserted through Finance Act, 2007 dated June 30, 2007. Before omission it read as (i) ex-officio the Finace Minister or, in his absence, the Adviser to Prime Minister on Finance, as the case may be;. 11 Sub-clause (ia) renumbered as sub-clause (i) through Finance Act, 2008 dated June 27, 2008. It was earlier renumbered from (i) to (ia) through Finance Act, 2007 dated June 30, 2007. 12 Sub-clause (iia) inserted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 13 Substituted for three through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 14 The Comma and word inserted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 15 Colon substituted for Full stop and proviso inserted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000.

(5) If an ex-officio Member is absent from Pakistan or is unable to attend a meeting of the Board he may authorize an officer, not below the rank of Additional Secretary, of his Division, to act as Member and such officer, if approved by the Board, may act as Member. (6) If an ex-officio Member is disqualified to be a Member or resigns his office, the Federal Government shall,(a) in case he is a person referred to in sub-clause (i) or sub-clause (ii) of clause (a) of sub-section (2), appoint another Secretary as Member, so long such person holds the post; and (b) in case of a Deputy Governor appoint another Deputy Governor as Member. [(7) The Federal Government shall designate one of the Members to be the Chairman of the Board who shall, in the event of a tie, have a casting vote.]16 13. Procedure of the Board.- (1) The Board shall meet as often as may be necessary for the performance of its functions but not less than four times in a calendar year. (2) The quorum for a meeting of the Board shall be four Members, including the Chairman. (3) Subject to the provisions of this Act, the procedure and conduct of business of the Board shall be regulated by the regulations made by the Board. 14. Board may invite others to meetings.- The Board may invite any person to attend any of its meetings or deliberations (including any of its committees) for the purpose of advising it on any matter under discussion but any person so attending shall have no right to participate in any decision or vote at the said meeting or deliberation. 15. Committees of the Board.- (1) The Board may constitute such number of its committees as it considers necessary or expedient to assist it in the performance of its functions under this Act. (2) A committee constituted under this section shall act in accordance with the regulations made by the Board.

16

Sub-section (7) substituted through Finance Act, 2008 dated June 27, 2008. Substituted sub-section was inserted through Finance Act, 2007 dated June 27, 2007. Before omission it read as (7) The Finance Minister or, as the case may be, the Adviser to Prime Minister on Finance shall be the Chairman of the Board who shall, in the event of a tie, have a casting vote.

(3) Except as otherwise provided in the regulations made by the Board, the meetings of a committee shall be held at such times and places as the chairman of the committee may determine. (4) The Members, other than ex-officio Members, Commissioners or employees, and any other person invited to attend any meeting of the Board or a committee shall be entitled to such compensation and reimbursement of expenses as the Board may from time to time determine by regulations. PART IV CONFLICT OF INTEREST 16. Disclosure of interest by Commissioners and Members.- (1) For the purpose of this and the next following section, a person shall be deemed to have an interest in a matter if he has any interest, pecuniary or otherwise, in such matter which could reasonably be regarded as giving rise to a conflict between his duty to honestly perform his functions under this Act and such interest, so that his ability to consider and decide any question impartially or to give any advice without bias, may reasonably be regarded as impaired. (2) A Commissioner or a Member having any interest in any matter to be discussed or decided by the Commission or the Board or a committee shall, prior to any discussion of the matter, disclose in writing, respectively, to the Commission, the Board or a committee, as the case may be, the fact of his interest and the nature thereof. (3) A disclosure of interest under sub-section (2) shall be recorded in the minutes of the Commission, the Board, or a committee, as the case may be, prior to any discussion of, or decision on, the matter and, after the disclosure, the Commissioner or, as the case may be, the Member(a) shall not, save, in the case of Commissioners, as provided in sub-sections (7) to (9), take part nor be present in any deliberation or decision of the Commission, the Board or a committee, as the case may be, and shall be disregarded for the purpose of constitution of a quorum of the Board, the Commission or a committee, as the case may be.

(b)

(4) Any Commissioner, Member or the member of a committee who fails to disclose his interest as required by this section shall be guilty of an offence and shall on conviction be liable to imprisonment for a term which may extend to one year, or a fine not exceeding one million rupees, or both. (5) It shall be a valid defence for a person charged with an offence under sub-section (4), if he proves that he was not aware of the facts constituting the offence and that he

exercised due care and diligence in discovering those facts which he ought reasonably to have known in the circumstances. (6) Each Commissioner shall give written notice to the Federal Government of all direct or indirect pecuniary interests that he has or acquires in a body corporate carrying on a business in Pakistan. The nature of such interests and the particulars thereof shall be disclosed in the annual report of the Commission made under section 25. (7) If a Commissioner is not the Chairman and the Chairman becomes aware that a Commissioner has the interest, the Chairman shall,(a) if the Chairman considers that the Commissioner should not take part, or continue to take part, as the case may require, in determining the matter, direct the Commissioner accordingly, or in any other case, cause the Commissioners interest to be disclosed to the persons concerned in the matter (including any person whose application is pending decision or adjudication by the Commission).

(b)

(8) The Commissioner in respect of whom a direction has been given under clause (a) of sub-section (7) shall comply with the direction. (9) If the Commissioner is the Chairman, he shall disclose his interest to the persons concerned in the matter (including any person whose application is pending decision or adjudication by the Commission). (10) Subject to sub-section (7), the Chairman or the Commissioner who has any interest in any matter referred to in this section shall not take part, or continue to take part, as the case may require, in determining the matter unless everyone concerned in it consents to the Chairman or, as the case may be, the Commissioner so taking part. 17. Notification of interest by others.- (1) Where a person who, in the course of,(a) performing a function, or exercising a power, as a delegate of the Commission, performing functions or service as an employee, or performing a function or services in any capacity by way of assisting or advising the Commission, the Board, any committee or any delegate of the Commission,

(b) (c)

is required to consider a matter in which he has an interest, such person shall forthwith give to the Commission a written notice stating that he is required to consider the matter and has an interest in it and setting out particulars of the interest.

(2) The person referred to in sub-section (1) shall also declare his interest in accordance with the said sub-section whenever it is necessary to avoid the conflict of interest.

PART V DISQUALIFICATION, REMOVAL, RESIGNATION AND VACANCIES 18. Disqualification of Members and Commissioners.- No person shall be appointed or continue as a Member or Commissioner if he(a) has been convicted of an offence involving moral turpitude; (b) (c) has been or is adjudged insolvent; is incapable of discharging his duties by reasons of physical, physiological or mental unfitness and has been so declared by a registered medical practitioner appointed by the Federal Government; being a Member, absents himself from three consecutive meetings of the Board, without leave of the Board and, in the case of a Member ex-officio, or fails to appoint another person to act as member under sub-section (5) of section 12, or fails to disclose any conflict of interest at or within the time provided for such disclosure by or under this Act or contravenes any of the provisions of this Act pertaining to unauthorized disclosure of information.

(d)

(e)

19. Removal, resignation and vacancies.- (1) Subject to sub-section (2), appointment of any Member or Commissioner may, at any time, be revoked and he may be removed from his office by order of the Federal Government if it is found that such person stands disqualified under section 18. (2) Unless a disqualification referred to in section 18 arises from the judgment or order of a court or tribunal of competent jurisdiction under any relevant provision of applicable law, a Member or Commissioner shall not be removed or his appointment revoked without an enquiry by an impartial person or body of persons constituted in accordance with such procedure, as may be prescribed by rules made by the Federal Government, and such rules shall provide for a reasonable opportunity for him to be heard in his defence. (3) A Member or a Commissioner may at any time resign his office by a written notice addressed to the Federal Government. (4) The office of a Member or Commissioner shall ipso facto be vacated if he dies.

PART VI POWERS AND FUNCTIONS 20. Powers and functions of the Commission.- (1) The Commission shall have all such powers as may be necessary to perform its duties and functions under this Act. (2) The Commission may, having regard to its functions and to exercise its powers efficiently, organize itself into divisions, wings or such other sub-divisions as it may consider expedient. (3) The Commission may, from time to time, identify the matters requiring the Board to make policy decisions and may also make recommendations regarding policy to the Board for its consideration. (4) The Commission shall be responsible for the performance of the following functions: (a) regulating the issue of securities; (b) regulating the business in Stock Exchanges [Commodity Exchange]17 and any other securities markets; supervising and monitoring the activities of any central depository and Stock Exchange clearing house; registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, underwriters, portfolio managers, investment advisers and such other intermediaries who may be associated with the securities markets in any manner; proposing regulations for the registration and regulating the working of collective investment schemes, including unit trust schemes; promoting and regulating self-regulatory organizations including securities industry and related organizations such as Stock Exchanges and associations of mutual funds, leasing companies and other NBFIs;

(c)

(d)

(e)

(f)

17

Comma and word inserted by Finance Act, 2003, dated June 17, 2003.

(g)

prohibiting fraudulent and unfair trade practices relating to securities markets; promoting investors education and training of intermediaries of securities markets;

(h)
18

[(ha) hearing and deciding investor complaints against persons involved in brokerage business for violations of securities laws, rules, regulations, directives, codes, etc;] conducting investigations in respect of matters related to this Act and the Ordinance and in particular for the purpose of investigating insider trading in securities and [initiating action against the]19 offenders; regulating substantial acquisition of shares and the merger and take-over of companies;

(i)

(j)
20

(ja) regulating professionals who provide services within the financial services market;

[(jb) maintaining and issuing panels of auditors from which companies may appoint auditors, and approving audit firms for financial institutions, listed companies and NBFIs;]21 (k) calling for information from and undertaking inspections, conducting inquiries and audits of the Stock Exchanges and intermediaries and selfregulatory organizations in the securities market; considering and suggesting reforms of the law relating to companies and bodies corporate, securities markets, including changes to the constitution, rules and regulations of companies and bodies corporate, Stock Exchanges or clearing houses; encouraging the organized development of the capital market and the corporate sector in Pakistan; conducting research in respect of any of the matters set out in this subsection; performing such functions and exercising such powers of the Authority, including any powers of the Federal Government delegated to the Authority,

(l)

(m)

(n)

(o)

18 19

Clause (ha) inserted through Finance Act, 2008 dated June 27, 2008. The word prosecuting substituted with the words initiating action against the through Finance Act, 2008 dated June 27, 2008. 20 Clause (ja) inserted through Finance Act, 2007 dated June 30, 2007. 21 Clause (jb) inserted through Finance Act, 2008 dated June 27, 2008.

(other than the power to make any rules or regulations) under the provisions of the Ordinance, 22[the Securities and Exchange Ordinance, 1969 (XVII of 1969), the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 (XXXI of 1980)] and under any other law for the time being in force under which any function or power has been conferred on the Authority including, but not limited to, the functions and powers set out in the Schedule to this Act; (p) performing such functions and exercising such powers (other than the power to make any rules or regulations) under the Ordinance or any other law for the time being in force as may, after the commencement of this Act, be delegated to it by the Federal Government and exercising any power or performing any functions conferred on it by or under any other law for the time being in force; 23[ ] proposing regulations in respect of all or any of the aforesaid matters for the consideration and approval of the Board24[;] exercising all powers, discharging all duties and performing all functions assigned to the Commission under, and generally administering, the Law of Insurance; ensuring and monitoring compliance by insurers, insurance surveyors and insurance intermediaries of all laws, rules and regulations pertaining to insurance for the time being in force; regulating professional organizations connected with the insurance business; 26 [] encouraging the organized development of the insurance market in Pakistan] [;]27 promoting and regulating development of Private Pension Schemes and Funfs;] [and]29

(q)
25

[(r)

(s)

(t)

(u)
28

[(v)

22 23

Words, commas, figures, and brackets inserted through Finance Act, 1999, dated June 30, 1999 The word and omitted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 24 Substituted the full stop with semicolon through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 25 Clauses (r), (s), (t) and (u) inserted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 26 The word and omitted through Finance Act, 2003 dated June 17, 2003 27 The word and omitted through Finance Act, 2008 dated June 27, 2008. Earlier semicolon and the word and ; and was substituted for full stop through Finance Act, 2003 dated June 17, 2003. 28 Clause (v) inserted through Finance Act, 2003 dated June 17, 2003. 29 The word and inserted through Finance Act, 2008 dated June 27, 2008.

[(w) promoting and regulating any scheme, fund, arrangement or undertaking (including but not limited to pension, superannuation gratuity and provident funds and schemes) established by or on behalf of companies and state owned corporations as employers, for entitlement of post employment benefits of their employees.]30 (5) Without prejudice to the provisions of sub-section (4), the approval of the Commission shall be required by(a) all public companies incorporated in Pakistan which intend to issue or offer for sale securities in markets outside Pakistan or to list such securities on a Stock Exchange outside Pakistan, in each case, whether directly or through an intermediary; all bodies corporate incorporated outside Pakistan which or persons who intend to issue or offer for sale, securities to the public in Pakistan or to list such securities on a Stock Exchange; and all bodies corporate incorporated outside Pakistan which are already listed on a Stock Exchange, for the listing of and quotation for any additional securities.

(b)

(c)

(6) In performing its functions and exercising its powers, the Commission shall strive(a) to maintain facilities and improve the performance of companies and of securities markets, in the interest of commercial certainty, reducing business costs, and efficiency and development of the economy; to maintain the confidence of investors in the securities markets by ensuring adequate protection for such investors; to achieve uniformity in how it performs those functions and exercise those powers; to administer laws effectively but with a minimum of procedural requirements; to receive, process, and store, efficiently and quickly, the documents lodged with, and the information given to, it under this Act, the Ordinance or any other law;

(b)

(c)

(d)

(e)

30

Clause (w) inserted through Finance Act, 2008 dated June 27, 2008.

(f)
32

to ensure that the documents, and the information referred to in clause (e) are available as soon as possible for access by the public; [ ]31

[(fa) to maintain the confidence of holders of insurance policies by protecting the interests of policy holders and beneficiaries of insurance policies in all matters, including assignment of insurance policies, nomination by policy holders, insurable interest, surrender value of policies of life insurance, and other terms and conditions of contracts of insurance;

(fb) to improve existing methods and devise new options for the expeditious settlement of claims and disputes between insurers and policy holders and between insurers and intermediaries; (fc) to promote efficiency in the conduct of insurance business; (fd) to promote the establishment and development of professional and educational organizations connected with insurance business with a view to improving the quality of insurance services in the country;

(fe) to promote awareness among consumers with respect to the benefits of insurance and the existence of measures to safeguard the interests of mortgagers, mortgagees and potential policy holders; and] (g) to take whatever action it can take, and is necessary, in order to enforce and give effect to the Act[, the Ordinance, the Law of Insurance]33 or any other law.

34

[(7) The Commission, and the Commissioner or officer to whom any of the functions or powers have been delegated under section 10 may, for the purposes of a proceeding or enquiry, require anyone(a) to produce before, and to allow to be examined and kept by, an officer of the Commission specified in this behalf, any books, accounts or other documents in the custody or under the control of the person so required, being documents relating to any matter the examination of which may be considered necessary by the Commission or such Commissioner or officer; and

The word and was omitted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 32 Clauses (fa), (fb), (fc) (fd) and (fe) inserted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 33 Substituted for and the Ordinance through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 34 Sub-section (7) inserted through Finance Act, 1999, dated June 30, 1999.

31

(b)

to furnish to an officer of the Commission specified in this behalf such information and documents in his possession relating to any matter as may be necessary for the purposes of the proceeding or enquiry.]

21. Functions and powers of the Board.- (1) Subject to the provisions of this Act, the Board shall(a) when so asked to do and after consultation with the Commission, advise the Federal Government on all matters relating to(i) (ii)
36

the securities industry 35[and insurance industry]; regulation of companies and corporate sector and protection of the interests of investors;

[(iia) regulation of the insurance sector and protection of the interests of insurance policy holders;]

(iii) measures to encourage self-regulation by the Stock Exchanges 37[, insurers, insurance intermediaries, insurance surveyors] and NBFIs by specifying the standards for such self regulatory organizations; (iv) measures to promote the development of and to regulate the securities market 38[and the insurance market]; and other related matters;

(v)
39

[(b) consider and approve (with or without modification) any regulations with respect to implementation of policy decisions, proposed to be made by the Commission under the Act;] consider and approve (with or without modification) the budget for each financial year of the Commission prepared and submitted to it pursuant to the provisions of sub-section (2) of section 24;

(c)

35

The words inserted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 36 Sub-clause (iia) inserted Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 37 Comma and words inserted Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 38 Words inserted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 39 Clause (b) substituted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. Before substitution it read as followed: (b) consider and approve (with or without modification) any regulations proposed to be made by the Commission under the Act;.

(d)

express its opinion in writing on any policy matter referred to it by the Federal Government or the Commission; oversee the performance of the Commission to the extent that the purposes of this Act are achieved; exercise all such powers and perform all such functions as are conferred or assigned to it under this Act; and specify fees, penalties and other charges chargeable by the Commission for carrying out the purposes of this Act.

(e)

(f)

(g)

(2) All policy decisions, including any change in previously established policy, in respect of all and any matters within the jurisdiction of the Commission shall be made only by the Board. The Board may make policy decisions suo motu or adopt such policy recommendations of the Commission, with or without modification, as the Board may deem fit in its sole discretion. 22. Supplementary provisions.- (1) All guidelines, decisions and directives whether of the Board or the Commission shall be in writing expressed by resolutions, orders or in such other form as may be appropriate in the circumstances and shall be authenticated in the manner prescribed by the regulations and where so provided by regulations, also sealed with the seal of the Commission. (2) All policy decisions and directives of the Board and the Commission respectively shall be published in the official Gazette and the Board and the Commission shall make such publications available to the public. (3) The Commission shall, in adjudicating upon the rights of any person whose application on any matter it is required to consider in the exercise of any power or function under this Act, give the reasons for its decision after giving the person concerned a personal hearing, in addition to any written applications or submission which may be required to be made. (4) The Commission when exercising its powers under this Act shall have regard, so far as relevant to the circumstances of the particular case, to(a) (b) the viability of the company or body corporate; the quality and capability of the management of the company or body corporate; the suitability for listing of the company or body corporate on a Stock Exchange where applicable;

(c)

(d)
40

the interest of public investors, existing or potential, in the company or body corporate;

[(da) the professional competence and capability of persons engaged in the provision of services in the insurance industry;

(db) the interest of insurance policy holders, existing or potential, where applicable;] (e) any policy decision or directives of the Board; and (f) the general public interest.

(5) Subject to the compliance of the provisions of sub-section (3), section 24A of the General Clauses Act, 1897 ( X of 1897), shall apply to any order made or direction given under this Act. PART VII FINANCE 23. The Fund.- (1) There is hereby established, for the purposes of this Act, a Fund to be administered and controlled by the Commission. (2) The Fund shall consist of(a) such sums as the Federal Government may from time to time, grant; (b)
41

grants of money and sums borrowed or raised by the Commission for the purposes of meeting any of its obligations or discharging any of its duties; taxes, fees, penalties or other charges levied under this Act, the Ordinance, the Securities and Exchange Ordinance, 1969 (XVII of 1969), the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 (XXXI of 1980), 42[Law of Insurance] and under any other law for the time being administered by the Commission; and]

[(c)

40

Clauses (da) and (db) inserted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 41 Clause (c) substituted through Finance Act, 1999 dated June 30, 1999. Clause (c) before substitution read as follows: (c) fees, penalties or other charges levied by the Commission in exercise of its powers under this Act, and the Ordinance; and 42 Words inserted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000.

(d)

all other sums or property which may in any manner become payable to or vested in the Commission in respect of any matter incidental to the exercise of its functions and powers.

(3) It shall be the duty of the Commission to conserve the Fund by performing its functions and exercising its powers under this Act so as to ensure that the total revenues of the Commission are sufficient to meet all sums properly chargeable to its revenue account. 24. Expenditure to be charged on the Fund.- (1) The Fund shall be expended for the purpose of(a) paying any expenditure lawfully incurred by the Commission, including the remuneration of Commissioners and employees appointed and employed by the Commission, including provident fund contributions, superannuating allowances or gratuities and legal fees and costs and other fees and costs; paying any other expenses, costs or expenditure properly incurred or accepted by the Commission in the performance of its functions or the exercise of its powers under this Act; purchasing or hiring equipment, machinery and any other materials, acquiring land and erecting buildings, and carrying out any other work and undertakings in the performance of its functions or the exercise of its powers under this Act; repaying any financial accommodation received or moneys borrowed under this Act and the profit, return, mark-up or interest due thereon (howsoever called); and generally, paying any expenses for carrying into effect the provisions of this Act.

(b)

(c)

(d)

(e)

(2) Within ninety days of its establishment, the Commission shall prepare and submit to the Board for its approval, a budget for the period up to and including the end of the then current financial year and thereafter it shall, not later than thirty days 43[before the expiry] of each financial year, submit to the Board for approval a budget for the next financial year. (3) No expenditure shall be made for which provision has not been made in any approved budget except if made from any previously approved contingency funds, unless further approval is sought and obtained from the Board.

43

Substituted for from the end through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000.

(4) The Commission shall act as the secretariat of the Board and provide all the necessary facilities to enable the Board to exercise its powers and perform its functions under this Act and the necessary and proper expenses in that connection shall form part of the budget of the Commission. 25. Annual report and accounts.- (1) Within ninety days from the end of each financial year, the Commission shall, in consultation with the Board, cause a report to be prepared on the activities of the Commission (including investigations and enquiries made by the Commission under this Act or the Ordinance 44[or the Law of Insurance] during that financial year and release to the public and simultaneously send a copy of the report to the Federal Government. (2) The Commission shall cause proper accounts to be kept and shall as soon as practicable after the end of each financial year cause to be prepared for that financial year a statement of accounts of the Commission which shall include a balance sheet and an account of income and expenditure.
45

[(3) The Commission shall cause the statement of accounts to be audited by auditors, appointed by the Commission with the approval of the Federal Government, who shall be a firm of chartered accountants. Any casual vacancy in the office of auditor appointed under this section may be filled in by the Commission.] (4) The auditors shall make a report to the Federal Government, upon the annual balance sheet and accounts, and in any such report they shall state whether in their opinion the balance sheet is a full and fair balance sheet containing all necessary particulars and properly drawn up so as to exhibit a true and correct view of the affairs of the Commission and, in case they have called for any explanation or information from the Commission, whether it has been given and whether it is satisfactory. (5) The Federal Government may if it deems fit also require the accounts of the Commission for any financial year to be audited by the Auditor General of Pakistan. (6) The Board shall, within one hundred and twenty days of the end of each financial year, together with the annual report of the Commission under sub-section (2), send a copy of the statement of accounts of the Commission certified by the auditors and a copy of the auditors' report to the Federal Government which shall cause them to be published in the official Gazette and laid before both Houses of the Majlis-e-Shoora (Parliament) within two months of their receipt.

44

Words inserted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000 45 Sub-section (3) substituted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. Before substitution it read as follows: (3) No expenditure shall be made for which provision has not been made in any approved budget except if made from any previously approved contingency funds, unless further approval is sought and obtained from the Board.

26. Power to obtain finance, borrow money and receive grants.- (1) The Commission may, from time to time, and with the approval of the Federal Government, obtain finance or borrow money from sources within Pakistan or from abroad, as the case may be, with such rate of return, profit, mark-up or interest payable thereon, as the case may be, and for such period and upon such terms as to the time and method of repayment and otherwise, in respect of any sums required by the Commission for meeting any of its obligations or performing any of its functions. (2) The Commission may also accept 46[ ] with the approval of the Federal Government, grants from entities both domestic and international, including multilateral agencies. 27. Investment.- (1) Subject to sub-section (2), the Commission may, in so far as its moneys are not required to be expended under this Act, invest in such manner as set out in section 20 of the Trusts Act, 1882 (11 of 1882). (2) The Commission shall not invest its money in listed securities or any derivative thereof whether listed or not.
47

[28. Bank Accounts.- The Commission may 48[ ] open and maintain its accounts in rupees or in any foreign currency at such scheduled banks as it may from time to time determine.] PART VIII ENFORCEMENT AND INVESTIGATION 29. Investigation and proceedings by the Commission.-(1) The Commission may suo motu conduct investigations in respect of any matter that is an offence under this Act 49 [or any other law administered by the Commission]. (2) The Commission may appoint such number of investigating officers to be known as investigating officers of the Commission as it considers necessary for the purposes of carrying out investigation of any offence or inspection under this Act, the Ordinance or any other law in respect of which it has been empowered to exercise the powers of the
46

Commas and words , if so decided by the Board, and omitted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 47 Section 28 substituted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. Before substitution section 28 read as follows: 28. Bank Accounts.- The Commission may open and maintain its accounts at such schedule bank as it may from time to time determine and with the approval of the Board open and maintain account in any foreign currency.
48

Commas and words , with the approval of the Board omitted through Finance Act, 2003 dated June 17, 2003. 49 Words inserted through Finance Act, 2007 dated June 30, 2007.

Authority and such investigating officer shall have all the powers given to any person for the purposes of carrying out investigation of any offence under this Act, the Ordinance and any other law. 30. Powers of the investigating officers of the Commission.- (1) An investigating officer carrying out an investigation or inspection may, only after the written order of the Commission signed by any two Commissioners, enter any place or building(a) to inspect and make copies of or take extracts from any book, minute book, register or document; and where he has reason to believe that an offence has been committed under this Act or the Ordinance or any other law in respect of which the Commission has power to make investigation or inspection, to search for, seize, take possession of and detain any object, article, material, thing, accounts book or other document, including any travel or other personal document which may be used as evidence.

(b)

(2) When an order has been made under sub-section (1) an investigating officer of the Commission may, by notice in writing, require any person to produce before him such books, registers or documents as are in the custody or under the control of that person. (3) A person who(a) fails deliberately to produce any such books, registers or documents as are required by the Commission or an investigating officer; or obstructs or hinders an investigating officer while exercising any of the powers under this section;

(b)

shall be guilty of an offence and shall be liable on conviction to a fine which may extend to one million rupees or to imprisonment for a term not exceeding one month, or to both. (4) Any accounts, book or other document seized and taken possession of by the investigating officer of the Commission under sub-section (1) may be inspected by any person if such person is entitled to inspect such accounts, book or document under this Act, and if so authorized to do in writing by the Commission. (5) Sub-section (1) shall not be construed as limiting or affecting any similar powers conferred on any person under any other law. (6) Any person aggrieved by the conduct of an investigating officer may lodge a complaint in respect thereof to the Commission. (7) The Commission shall, within fifteen days of receipt of the complaint under subsection (6) commence a hearing to determine the veracity of such complaint in

accordance with such procedure as may be prescribed by rules made by the Federal Government. 31. Forcible entry.- (1) For the purpose of exercising his powers under sub-sections (1) and (2) of section 30, an investigating officer of the Commission may enter any place or building by force, if necessary. (2) Notwithstanding anything contained in sub-section (1), no investigating officer of the Commission shall enter any premises by the use of force without a written order of the Commission signed by any two Commissioners. (3) If, on enquiry conducted in accordance with the rules it is found that the exercise by an investigating officer of his power under sub-section (2) was vexatious, excessive or with mala fide intent such officer shall be dismissed from service, and shall be guilty of an offence punishable with fine which may extend to five hundred thousand rupees and imprisonment for a term not exceeding one year. (4) Whenever a criminal court imposes a fine under sub-section (3) it shall, when passing judgment, order that a sum equal to the whole or any part of the fine recovered, be paid to the person on whose complaint the investigating officer was convicted, and in case the fine is not recovered the sum shall be paid out of the Fund. (5) Any sum paid under sub-section (4) shall be without prejudice to the right of the aggrieved person to avail any other remedies available to him under the law but at the time of awarding compensation in any subsequent proceedings relating to the same matter the court shall take into account any sum recovered from the convict and paid to the aggrieved person. 32. Power to call for examination.- (1) For the purpose of sub-section (1) of section 29, the Commission may by notice in writing require any person acquainted with the facts and circumstances of the case to appear before an investigating officer authorized by it in this regard. Such person shall be examined orally and any statement made by such person during the course of the examination shall be reduced into writing. (2) Such person shall be bound to answer all questions relating to such case put to him by the investigating officer, as the case may be, and to state the truth, whether or not the statement is made wholly or partly in answer to questions. (3) Subject to sub-section (4), a statement made by any person under this section shall be taken down in writing and signed by the person making it or affixed with his signature and thumb print, as the case may be, after it has been read to him and after he had been given an opportunity to make any correction he may wish. (4) Where the person examined refuses to sign and affix his thumb print on the statement, the investigating officer of the Commission shall endorse thereon under his

hand the fact of such refusal and the reason therefor, if any, stated by the person examined. (5) Any person who:(a) fails to appear before an investigating officer of the Commission as required under sub-section (1); refuses to answer any question put to him by an investigating officer of the Commission as required under sub-section (2); or knowingly furnishes to an investigating officer of the Commission information or statement that is false or misleading in any material particular; wilfully refuses to obey or disregards any lawful order of the Commission [under this Act or any other law administered by the Commission]50;

(b)

(c)

(d)

shall be guilty of an offence and shall be liable on conviction to a fine not exceeding one hundred thousand rupees or to imprisonment for a term not exceeding one year, or to both. [32A. Implementation of orders of the Commission.The Commission may issue such directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process, including but not limited to, seeking the assistance of the local administration or Police who shall be bound to provide such assistance.]51 33. Appeal to the Appellate Bench of the Commission.- 52[(1) Except as otherwise provided any person aggrieved by an order of the Commission passed by one Commissioner or an officer authorized in this behalf by the Commission, may within thirty days of the order, prefer an appeal to an Appellate Bench of the Commission constituted under sub-section (2) Provided that no appeal shall lie against ---(a) an administrative direction given by a Commissioner or an officer of the Commission; (b) an order passed in exercise of the powers of revision or review;
50 51

The words inserted through Finance Act, 2008 dated June 27, 2008. Section 32A inserted through Finance Act, 2008 dated June 27, 2008.

52

Sub-section (1) substituted through Finance Act, 2007 dated June 30, 2007. Before substitution subsection (1) read as follows: (1) An appeal shall lie to an Appellate Bench of the Commission in respect of the of an order of the Commission made by one Commissioner. The person aggrieved by such order may within thirty days of the passing of the order prefer an appeal to the Appellate Bench of the Commission.

(c) a sanction provided or decision made by a Commissioner or an officer of the Commission to commence legal proceedings [ ]53; and (d) an interim order which does not dispose of the entire matter.] (2) The Commission shall constitute an Appellate Bench of the Commission comprising not less than two Commissioners to hear appeals under sub-section (1). (3) If any Commissioner who is included in the Appellate Bench has participated or been concerned in the decision being appealed against the Chairman shall nominate an other Commissioner to sit in the Bench to hear that appeal. (4) The form in which an appeal is to be filed and the fees to be paid therefor and other related matters shall be prescribed by rules. 34. Appeal to the Court.- (1) An appeal shall lie to the Court referred to in Part II of the Ordinance in respect of an order of the Commission comprising two or more Commissioners or the Appellate Bench. (2) The appeal under sub-section (1) shall be filed within sixty days of the date of the decision and shall by accompanied by a fee of one hundred rupees. PART IX CONFIDENTIALITY OF INFORMATION 35. Obligation of confidentiality.- (1) Subject to this section, any person who is or was at any time(a) acting as a Member of the Board, or (b) (c) engaged as a Commissioner or employee of the Commission, or authorized to perform or exercise any function or power of the Commission or any function or power on behalf of the Commission or to render services to the Commission in the capacity of a consultant or adviser;

shall not, except to the extent necessary to perform his official duties, or in performance or exercise of such a function or power, either directly or indirectly, make a record of, or disclose to any person, any information that is or was acquired by him because of having been so appointed, engaged or authorized, or make use of any such information, for any purpose other than the performance of his official duties or the performance or exercise of that function or power.
53

The words in a court of law omitted through Finance Act, 2008 dated June 27, 2008.

(2) Any person who contravenes sub-section (1) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding one million rupees or to imprisonment for a term not exceeding one year or, to both. (3) The Commission shall take all reasonable measures to protect from unauthorized use or disclosure the information given to it in confidence in or in connection with the performance of its functions or the exercise of its powers. (4) For the purpose of sub-section (1) the disclosure of information as required or permitted by any law for the time being in force in Pakistan or any other jurisdiction shall be taken to be authorized use and disclosure of the information. (5) For the purposes of sub-section (1), the disclosure of information by a person for the purposes of(a) performing his functions as(i) (ii) a Commissioner or employee of the Commission, or a person who is acting as a Commissioner or employee or who is authorized to perform or exercise a function or power of, or on behalf of, the Commission, or

(b)

the performance of functions or service by the person by way of assisting a Commissioner or a delegate of the Commission,

shall be taken to be authorized use and disclosure of the information. (6) Where the Chairman is satisfied that particular information(a) will enable or assist the Board to perform or exercise any of its functions or powers; will enable or assist the government, or an agency of the government to perform a function or exercise a power; or will enable or assist the government, or an agency of the government, of a foreign country to perform a function, or exercise a power, conferred by a law in force in that foreign country;

(b)

(c)

the disclosure of the information to such persons by a person whom the Chairman authorizes for the purpose shall be taken to be authorized use and disclosure of the information. (7) The Chairman may impose conditions to be complied with in relation to information disclosed under sub-section (6).

(8) The disclosure of information to a body specified in sub-section (9) is authorized use and disclosure of the information if: (a) the Chairman is satisfied that the information will enable or assist the body to monitor compliance with, enforce, or perform functions or exercise powers under(i) (ii) any law for the time being in force; the rules and regulations (including the listing rules if any), of the body; and

(b)

the disclosure is made by a person authorized by the Chairman for the purpose.

(9) is-

A body to whom disclosure of information under sub-section (8) may be authorized

(a) a Stock Exchange; or (b) a clearing house; or

(c) a central depository; or (d) such other body corporate as the Federal Government may by notification in the official Gazette specify for the purposes of this sub-section.

(10) The Chairman may impose conditions to be complied with by the body and its officers, employees and agents in relation to the information disclosed to it under subsection (8) and persons in respect of whom conditions are imposed shall be bound to comply with them. (11) If information is disclosed to a body under sub-section (8) the body, or any officer, employee or agent of the body shall not, without the written consent of the Chairman: (a) disclose the information to a person who is not an officer, employee, professional adviser or agent of the body corporate; or

(b) use the information otherwise than for the purpose of monitoring compliance with, enforcing, or performing functions or exercising powers under: (i) (ii) the Ordinance and any other law for the time being in force; or the rules and regulations (including the listing rules, if any), of the body corporate.

(12) The Chairman may delegate all or any of his functions and powers under subsections (6), (7), (8), (10), or (11) to a Commissioner or an employee. (13) Nothing in any of sub-sections (4), (5), (7) and (8) shall limit: (a) anything else in any of those sub-sections; or (b) what may otherwise constitute, for the purposes of sub-section (1), authorized use or disclosure of information.

36.

Permitted disclosure.- Nothing in section 35 shall preclude a person from: (a) producing a document to a court in the course of criminal proceedings or in the course of any proceedings under this Act, the Ordinance or any other law for the time being in force. disclosing to a court in the course of any proceedings referred to in clause (a) any matter or thing, that came under his notice in the performance of official duties or in the performance of a function or the exercise of a power referred to in that section; or producing a document or disclosing information to a person to whom, in the opinion of the Commission, it is in the public interest that the document be produced or the information be disclosed; or producing a document or disclosing information that is required or permitted by any law for the time being in force in Pakistan or any other jurisdiction to be produced or disclosed, as the case may be; or

(b)

(c)

(d)

(e) producing a document or disclosing information to the Commission. PART X COGNIZANCE AND PROSECUTION OF OFFENCES 37. Cognizance of offences.- Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (Act No. V of 1898) no court other than the court of session shall have jurisdiction to try any offence under this Act. 38. Conduct of prosecution.- (1) No prosecution for any offence under this Act against any person shall be instituted except with the consent in writing of the Commission signed by any two Commissioners. (2) Prosecution of any offence under this Act shall be conducted by any officer of the Commission authorized in writing by the Commission.

PART XI RULES AND REGULATIONS 39. Power to make rules.- (1) Subject to sub-section (2), the Federal Government may, by notification in the official Gazette, make rules for all or any of the matters in respect of which it is required to make rules to carry out the purposes of this Act. (2) The power to make rules conferred by this section shall be subject to the condition of previous publication and before making any rules the draft thereof shall be published in the official Gazette for eliciting public opinion thereon within a period of not less than 54 [thirty] days from the date of publication. 40. Power to make regulations.- (1) Subject to sub-section (2),(i) the Board 55[ ] on the recommendation of the Commission and in consultation with the Federal Government; and the Commission 56[in consultation with] the Board,

(ii)

may make such regulations as may be required to carry out the purposes of this Act [or the functions of the Commission specified in sub-section (4) of section 20]57. (2) The power to make regulations conferred by this section shall be subject to the condition of previous publication and before making any regulations the draft thereof shall be published in two newspapers of wide circulation for eliciting public opinion thereon within a period of not less than 58[thirty] days from the date of publication.

59

[40A. Penalty for violation of rules and regulations. (1) Any rule made under section 39 or regulation made under section 40 may provide that a contravention thereof shall be punishable with a fine which may extend to ten million rupees and, where the contravention is a continuing one, with a further fine which may extend to one hundred thousand rupees for every day after the first during which such contravention continues.

54

Substituted for sixty through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 55 Semicolon and words ; suo motto or omitted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 56 Substituted for with the approval of through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000.
57 58

Words inserted through Finance Act, 2007 dated June 30, 2007. Substituted for sixty through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. 59 Section 40A and 40B inserted through Finance Act, 2007 dated June 30, 2007.

(2) A fine under sub-section (1) shall be imposed by the Commission after providing a reasonable opportunity of being heard to the party;

40B. Power of the Commission to issue directives, circulars, guidelines, etc. The Commission shall have the power to issue such directives, Codes, guidelines, circulars or notifications as are necessary to carry out the purposes of this Act, the rules and regulations made thereunder and all laws administered by it.] PART XII GENERAL 41. Common seal.- The Commission shall have a common seal and such seal shall be kept in the custody of the Chairman or such other person as may be authorized by the regulations made by the Commission. Documents required or permitted to be executed under seal shall be specified in and authenticated in such manner as shall be authorized by regulations made by the Board. 42. Public servants.- (1) The Members, Commissioners, employees and other persons authorized to perform or exercise any function or power under this Act or rendering services to Commission as consultant or adviser shall be deemed to be public servants within the meaning of section 21 of the Pakistan Penal Code, 1860 (Act XLV of 1860). (2) Save as otherwise provided by this Act and only for the purposes so provided, nothing herein contained shall be construed to mean that any person referred to in subsection (1) is or shall be deemed to be in the service of Pakistan or is to be regarded or treated as a civil servant.
60

[42A. Indemnity No suit, prosecutions or other legal proceedings shall lie against the Commission, Commissioners, officers, members and officer or any employee of the Commission for anything done in good faith or intended to be done in pursuance of this Act or any administered legislation or any rule or regulation made thereunder.] 43. Dissolution of the Authority.- The Authority is hereby dissolved and at all times thereafter,(a) section 11 and sub-section (3) to (7) (inclusive) of section 12 of the Ordinance shall stand repealed and except as hereinafter provided, all references to the Authority appearing in the Ordinance and any other law for the time being in force shall be deemed to mean and refer to the Commission;

60

Section 42A inserted through Finance Act, 2007 dated June 30, 2007.

61

[(b) the rules under the Ordinance or under any other law for the time being in force being administered by the Commission shall be made by the Commission with the approval of the Federal Government]; save as otherwise provided in clause (b), all powers exercisable by the Federal Government under any provisions of the Ordinance or any other law for the time being in force, which immediately before the appointed day had been delegated to the Authority, shall be exercised by the Commission; all assets, rights, powers, authorities and privileges and all property, movable and immovable, cash and bank balance, reserve funds, investments and all other interests and rights in, or arising out of, such property and all debts, liabilities and obligations of whatever kind of the Authority subsisting immediately before its dissolution shall stand transferred to and vest in the Commission; no officer, employee, servant, or any other person holding any post in connection with the affairs of the Authority, shall have any right or lien to appointment to any post in the Commission; any person referred to in clause (e) who is appointed by the Commission shall have the option either to remain a civil servant or to be an employee of the Commission. The option once exercised shall be irrevocable; in the event of a person referred to in clause (e) opting to be an employee of the Commission, he shall cease to be a civil servant for all purpose and shall be entitled to such remuneration, allowances and other terms and conditions of employment as are applicable to the employees of the Commission. For the service rendered in the Authority such person shall be entitled to such benefits including the transfer of benefits to the Commission as may be prescribed by the rules. But, in the event of such a person opting to remain as a civil servant, he shall be entitled to the same remuneration, allowances and other rights and privileges as are admissible to civil servants but, in other respects such as organizational structure, right to promotion and discipline, he shall be subject to the regulations made by the Commission, and for the period he served the Commission, the Commission shall contribute to the pension, gratuity and final payment of provident fund in accordance with the rules. a person referred to in clause (e) who is not appointed by the Commission shall continue to draw his pay, allowances privileges or other benefits as he was drawing while holding the post in the Authority and unless sooner

(c)

(d)

(e)

(f)

(g)

(h)

61

Clause (b) substituted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000. Before substitution it read as follows: (b) the power to make rules and regulations under the Ordinance, shall be exercised by the Board;

he is appointed by the Federal Government to another post or otherwise ceases to remain in Government service on account of retirement, dismissal, removal, discharge from service or in any other manner applicable to a civil servant, the cost for paying salary, allowance and other benefits to such person shall be borne by the Commission. (i) save as otherwise provided in clauses (e) and (h), all debts and obligations incurred or contracts entered into or rights acquired and all matters and things engaged to be done by, with or for the Authority before the appointed day shall be deemed to have been incurred, entered into, acquired or engaged to be done by, with or for the Commission, as the case may be; and all suits and other legal proceedings instituted by or against the Authority before the appointed day shall be deemed to be suits and proceedings by or against the Commission as the case may be and may proceed and be dealt with accordingly. Abolition of Department of Insurance.- (1) As from the appointed datethe Department of Insurance shall stand abolished; no officer, employee, servant, or any other person holding any post in connection with the affairs of the Department of Insurance, shall have any right or lien to appointment to any post in the Commission. any person referred to in clause (b) who is appointed by the Commission shall have the option either to remain a civil servant or to be an employee of the commission and the option once exercised shall be irrevocable. in the event of a person referred to in clause (b) opting to be an employee of the commission, he shall cease to be a civil servant for purposes and shall be entitled to such remuneration, allowance and other terms and conditions of employment as are applicable to the employees of the Commission. For the service rendered in the Department of Insurance such person shall be entitled to such benefits including the transfer of benefits to the Commission as may be prescribed by the rules. But, in the event of such a person opting to remain as a civil servant , he shall be entitled to the same remuneration, allowances and other rights and privileges as are admissible to civil servants but, in other respects such as organizational structure, right to seniority, promotion and discipline, he shall be subject to the regulations made by the Commission, the Commission shall contribute to the pension, gratuity and final payment of provident fund in accordance with the rules;

(j)

62

[43A. (a) (b)

(c)

(d)

62

Section 43A inserted through Securities and Exchange Commission of Pakistan (Amendment) Ordinance, 2000 dated October 11, 2000

(e)

a person referred to in clause (b) who is not appointed by the commission shall continue to draw his pay, allowances privileges or other benefits as he was drawing while holding the post in the Department of Insurance and unless sooner he is appointed by the Federal Government to another post or otherwise ceases to remain in Government service on account of retirement, dismissal, removal, discharge from service or in any other manner applicable to a civil servant, the cost for paying salary, allowances and other benefits to such person shall be borne by the Commission; save as otherwise provided in this Act, all debts and obligations incurred or contracts entered into or rights acquired and all matters and things engaged to be done by, with or for the Federal Government under or pursuant to the Law of Insurance before the appointed date shall be deemed to have been incurred, entered into acquired or engaged to be done by, with or for the Commission, as the case may be; and all suits and other legal proceedings instituted by or against the Federal Government under, or pursuant to, the Law of Insurance before the appointed date shall be deemed to be suits and proceedings by, or against, the commission as the case may be and may be proceeded with and be dealt with accordingly.]

(f)

(g)

44. Savings.- Save as otherwise provided in this Act, nothing in this Act shall affect or be deemed to affect any thing done, action taken, investigation or proceedings commenced, order, rule, regulation, appointment, document, or agreement made, fee directed, resolution passed, direction given, proceedings taken, or instrument executed or issued under or pursuant to any law amended or repealed by this Act and any such thing, action, investigation, proceedings, order, rule, regulation, appointment, document, agreement, fee, resolution, direction, proceedings or instrument shall, if in force at the commencement date and not inconsistent with any of the provisions of this Act, continue in force and have effect as if it had been respectively done, taken, commenced, made, directed, passed, given, executed or issued under this Act or the law as amended by this Act. 45. Act to override other laws.- The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

THE SCHEDULE POWERS AND FUNCTIONS CONFERRED ON THE AUTHORITY UNDER THE ORDINANCE TO BE EXERCISED BY THE COMMISSION (See clause (o) of sub-section (4) of section 20) 1. To call for any information, document etc. for purposes of any proceeding or inquiry (section 12(4) of the Ordinance). 2. To allow alteration in the Memorandum of Association (section 21 of the Ordinance). 3. To decide whether a name of a company is appropriate and permissible (section 37 of the Ordinance). 4. To grant licence to an association not for profit to be registered as a company (section 42 of the Ordinance). 5. To accord approval for conversion of a public company into a private company (section 44 of the Ordinance). 6. Approval of prospectus (section 57 of the Ordinance). 7. To allow issue of securities outside Pakistan (section 62A of the Ordinance). 8. To specify minimum amount of shares to be applied for and the form of application for shares (section 67 of the Ordinance). 9. To prescribe maximum rate of commission on issue of shares (section 82 of the Ordinance). 10. To sanction issue of shares at discount (section 84 of the Ordinance). 11. To grant extension in time for holding AGM in the case of listed companies (section 158 of the Ordinance). 12. To allow a company to make a loan to a director (section 195 of the Ordinance). 13. To grant exemption for appointment of managing agent and to approve appointment of sole sale/purchase/distribution agents (section 206 of the Ordinance).

14. To recover tenderable gains (section 224 of the Ordinance). 15. To prescribe cost accounting records for manufacturing companies (section 230 of the Ordinance). 16. To extend period for laying annual accounts in the AGM by listed companies (section 233 of the Ordinance). 17. To direct a change in financial year of holding companies and their subsidiaries (section 238 of the Ordinance). 18. To call for additional statements of accounts from companies (section 246 of the Ordinance). 19. To appoint auditors in certain cases (section 252(6) of the Ordinance). 20. To conduct investigation into the affairs of the companies (sections 263 and 265 of the Ordinance). 21. To prosecute a company or person found guilty as a consequence of investigation (sections 270 and 271 of the Ordinance). 22. To appoint administrator (section 295 of the Ordinance). 23. To make application to the Court for winding up a company (section 309 of the Ordinance). 24. To recommend a panel of persons to the Court for appointment as official liquidator (section 321 of the Ordinance). 25. To order restoration of the names of defunct companies (section 439(9) of the Ordinance). 26. To exercise similar powers in the case of foreign companies (section 457 of the Ordinance). 27. To accord special permission to take over original documents from custody of Registrar (section 467 of the Ordinance). 28. To prescribe additional fees for filing of documents (section 469 of the Ordinance). 29. To force companies to comply with the provisions of the Ordinance (section 472 of the Ordinance). 30. To impose fine as penalty (section 476 of the Ordinance). 31. To hear appeals against the orders of Registrar (section 477 of the Ordinance). 32. To exercise powers of court in relation to enquiries and proceedings (section 478 of the Ordinance). 33. To direct appearance of officers of companies (section 479 of the Ordinance). 34. To apply amount of fine towards payments of costs, compensations, etc. (section 483 of the Ordinance). 35. To hear revision petition against the orders of Registrar, etc. (section 484 of the Ordinance). 36. To grant relief in certain cases (section 488 of the Ordinance). 37. To impose penalty for wrongful withholding of company profit (section 493 of the Ordinance). 38. To impose penalty for non-compliance with directions (section 495 of the Ordinance).

ABDUL QAYYUM KHAN Secretary

Government of Pakistan SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

STATUTORY NOTIFICATION (S.R.O)

PUBLISHED BY AUTHORITY
Islamabad the, 28 August, 2000

INSURANCE ORDINANCE, 2000 TABLE OF CONTENTS

PART I PRELIMINARY 1. 2. 3. 4. Short title, extent and commencement Definitions Division of insurance business into life and non-life Classes of life and non-life business PART II PROVISIONS APPLICABLE TO INSURERS 5. Persons eligible to transact insurance business 6. Registration of insurers 7. Commission may register insurer upon satisfaction 8. Inspection and supply of copies filed with Commission 9. Duration and revocation of registration 10. Notification of grant or revocation of registration 11. Conditions imposed on registered insurers 12. Criteria for sound and prudent management 13. Restriction on issue of certain life policies PART III STATUTORY FUNDS OF AND OTHER SPECIAL REQUIREMENTS FOR LIFE INSURANCE COMPANIES 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. Statutory and other funds of life insurance companies Establishment of statutory fund Policies to be referable to specific statutory funds Assets, liabilities, revenues and expenses of funds Disposition of assets of statutory funds Prohibition on reinsurance between statutory funds Capital payments to life insurance statutory funds Distribution of capital in a life insurance statutory fund Allocation of surplus on life insurance business Restriction on dividends and bonuses

24. 25. 26. 27.

Declaration of interim bonuses Transitional provisions Appointed actuary Responsibilities of appointed actuary PART IV REQUIREMENTS AS TO CAPITAL AND STATUTORY DEPOSITS

28. 29. 30. 31.

Requirements as to capital Deposits Reservation of deposits Refund of deposits PART V SOLVENCY REQUIREMENTS

32. Admissible assets 33. Assets and liabilities in Pakistan 34. Valuation of assets and liabilities 35. Net admissible assets of life insurers 36. Insurers of non-life insurance business to have assets in excess of minimum solvency requirement 37. Prohibition of loan 38. Liability of directors, etc for loss due to contraventions of sections 35, 36 or 37 39. Assets of insurer how to be kept PART VI REINSURANCE ARRANGEMENTS 40. 41. 42. 43. 44. Special definitions and conditions applicable to this Part Requirement to effect and maintain reinsurance arrangements Compulsory cession Premiums and statements Rules and regulations for the administration of compulsory reinsurances PART VII ACCOUNTS AND AUDIT 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. Books and records Accounting and reporting Compliance with companies laws relating to accounts, reports, etc. Audit Special audit Actuarial report Submission of returns Exemption from certain provisions of the Companies Ordinance, 1984 Furnishing reports Abstract of proceedings of general meetings Custody and inspection of documents and supply of copies Power of Commission regarding returns Power of Commission to order actuarial report Evidence of documents

PART VIII INVESTIGATION, DIRECTIVES, ETC. 59. Power of Commission to order investigation 60. Power of the Commission to give directions to the insurer 61. Power of Commission to call for information and access 62. Power of Commission to require plan 63. Power of Commission to issue direction to cease entering into new contracts of insurance 64. Power to require calling of meeting of directors etc. 65. Power to remove Chairman, Director, etc. of the insurer 66. Power to prescribe maximum levels of acquisition costs and maximum levels of management expenses PART IX AMALGAMATION AND TRANSFER OF INSURANCE BUSINESS 67. 68. 69. 70. Approval of acquisition or transfer Amalgamation and transfer of life insurance business. Sanction of amalgamation and transfer by Court. Statements required after amalgamation and transfer PART X ASSIGNMENT OR TRANSFER OF POLICIES AND NOMINATION 71. Assignment and transfer of life insurance policies 72. Nomination by policy holder 73. Nomination under group life policies PART XI MARKET CONDUCT 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. 84. 85. 86. 87. Application of this Part only to direct insurance business Duty of utmost good faith Insurer not to engage in misleading or deceptive conduct Construction of ambiguities in favour of policy holder Exclusion of provisions of Ordinance void; an offence Remedies for non-disclosure or misrepresentation Policy not to be called in question on ground of mis-statement after two years Tribunal may disregard avoidance in certain circumstances Cancellation of a life insurance policy for fraudulent claim Power of the Commission to prescribe rules for market conduct Commission to have power to undertake compliance visits Commission to have power to require a survey to be performed Contractual stipulations for placing insurance with specific or named insurers Provisions when not to constitute discrimination PART XII SURRENDER, LAPSE AND FORFEITURE OF CERTAIN LIFE INSURANCE POLICIES

88. 89. 90. 91. 92. 93.

Special definitions and interpretation for this Part Acquisition of surrender value Surrender of policy at policy holders option Surrender of policy at insurers option Paid-up policy at policy holders option Non-forfeiture PART XIII INTERMEDIARIES

94. This Part to apply only to direct insurance business 95. Liability of Insurer for act or omissions of agent 96. Persons acting as agents 97. Minimum qualifications for agents 98. Insurer to maintain register of agents 99. Payments by and to insurance agents 100. Duty to disclose agency 101. Restriction on life insurance agents, becoming directors of life insurance companies 102. Insurance brokers to be licensed 103. Brokers to be presumed agents under certain circumstances; liability of brokers when not so presumed 104. Ownership and management interests inter se of brokers and insurers prohibited 105. Brokers duty to disclose relationships 106. Payments by and to insurance brokers 107. Requirements in respect of persons ceasing to act as insurance brokers 108. Basis for payment of remuneration by insurers to insurance brokers 109. Insurance brokers to report annually to Commission 110. Power to inspect insurance agents and insurance brokers 111. Persons permitted to act as insurance surveyors 112. Licensing of insurance surveyors 113. Registration of authorised surveying officers 114. Classes of insurance surveying PART XIV SPECIAL PROVISIONS OF LAW 115. 116. 117. 118. 119. 120. Application of Pakistan law to policies issued in Pakistan Payment of money into Tribunal Small Disputes Resolution Committees Payment of liquidated damages on late settlement of claims Supply of copies of proposals and medical reports Prohibition of business on dividing principle PART XV INSURANCE TRIBUNAL 121. 122. 123. 124. Constitution of the Tribunal Powers of Tribunal Procedure of the Tribunal Appeal

PART XVI INSURANCE OMBUDSMAN 125. 126. 127. 128. 129. 130. 131. 132. 133. 134. Appointment of Insurance Ombudsman Terms and conditions of Insurance Ombudsman Jurisdiction, functions and powers of Insurance Ombudsman Reference to Insurance Ombudsman by Court Procedure for making complaints Recommendations for implementation Power to call for information Duties of insurers Duty and power of the Insurance Ombudsman to report to the Commission Report of Insurance Ombudsman PART XVII APPOINTMENT OF ADMINISTRATOR 135. 136. 137. 138. 139. 140. 141. 142. When Administrator for management of insurance business may be appointed Powers and duties of the Administrator Powers of Administrator respecting property liable to attachment under section 160 Cancellation of contracts and agreement Termination of appointment of Administrator Finality of decision of appointing Administrator Penalty for withholding document or property from Administrator Protection of action taken under sections 135 to 139 PART XVIII WINDING UP 143. 144. 145. 146. 147. 148. 149. 150. 151. 152. 153. 154. 155. Winding up by the Court Voluntary winding up Court may order continuation of life insurance business Court may appoint special manager of life insurance business Court may appoint independent actuary Powers of Court to reduce contracts of life insurance Commission empowered to apply for directions Commission entitled to notice and hearing Commission entitled to obtain information Determination of insurance liabilities Application of statutory fund assets Winding up secondary companies Return of deposits PART XIX OFFENCES AND PENALTIES 156. Penalty for default in complying with, or acting in contravention of this Ordinance 157. Penalty for transacting insurance business in contravention of sections 5, 6 and 29 158. Penalty for false statement in document 159. Wrongfully obtaining or withholding property 160. Power of Tribunal to order restoration of property of insurer or compensation in certain cases

161. Notice to Commission and hearing 162. Previous sanction of Commission for institution of proceedings 163. Power of Court to grant relief PART XX MISCELLANEOUS 164. Service of notices 165. Insurance of interests in Pakistan 166. Insurance of public property PART XXI RULES AND REGULATIONS 167. Power to make rules and regulations PART XXII REPEAL AND SAVINGS 168. Repeal 169. Repealed Act to apply to certain insurers ceasing to enter into new contracts before commencement of this Ordinance 170. Savings 171. Exemptions 172. Removal of difficulties

INSURANCE ORDINANCE, 2000

PART I PRELIMINARY
1. Short title, extent and commencement. i. This Ordinance may be called the Insurance Ordinance, 2000. ii. iii. It extends to the whole of Pakistan. It shall come into force at once.

2. Definitions. In this Ordinance, unless there is anything repugnant in the subject or context, i. "actuary" means a person possessing such actuarial qualifications as may be prescribed; ii. "appointed actuary" means the actuary required to be appointed by a life insurer pursuant to the provisions of section 26 of this Ordinance; "approved securities" means Government securities, and any other security charged on the revenues of the Federal Government or of a Provincial Government, or guaranteed fully as regards principal and profit or return (however called or designated) by the Federal Government or a Provincial Government; and any debenture or other security for money issued under the authority of any Act of the Federal Legislature or any Provincial Legislature by or on behalf of the trustees of the port of Karachi; any security issued under the authority of any Act of Parliament or of a Provincial Assembly; and any security specified as an approved security for the purpose of this Ordinance by the Federal Government by notification in the official Gazette; "approved auditor" means an auditor approved by the Commission for the purpose of performing the functions assigned to auditors under this Ordinance; "auditor" means a person qualified under the provisions of section 254 of the Companies Ordinance, 1984 (XLVII of 1984), to act as an auditor of companies; "authorised person" means, in the case of a company, a director, including the chief executive, (by whatever name called), or in the case of insurers being bodies corporate incorporated outside Pakistan and continuing business as such after the commencement of this Ordinance, the closest comparable equivalent thereto, under the laws of the place of incorporation of such foreign body corporate; "banking company" has the meaning assigned to the term in clause (a) of section 2 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 (XV of 1997); "base rate" means the effective annual rate implied by the most recent repurchase rate that is published from time to time in a circular issued by the Securities Department of the State Bank of Pakistan for six months Pakistan

iii.

iv.

v.

vi.

vii.

viii.

Treasury Bills, or, if such rate is not available, the most recent repurchase rate for six months Short Term Federal Bonds, or, if neither of such rates is available, the most recent repurchase rate for any other short term paper issued by the Federal Government of an approximately similar tenor, whether in addition to or in substitution for any of the foregoing; ix. x. "Board" means the Policy Board established under section 12 of the SECP Act; "borrower" has the meaning assigned to the term in clause (c) of section 2 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 (XV of 1997); "certified" in relation to any copy or translation of a document required to be furnished by or on behalf of an insurer means certified by an authorised person on behalf of such insurer to be a true copy or a correct translation, as the case may be; "class of business" means a classification of insurance business having similar characteristics, into which life insurance or non-life insurance may be divided; "Commission" means the Securities and Exchange Commission of Pakistan constituted under section 3 of the SECP Act; "company" has the meaning assigned to it in clause (7) of sub-section (1) of section 2 of the Companies Ordinance, 1984 and includes an existing company as defined in clause (15) of sub- section (1) of section 2 of the Companies Ordinance, 1984 (XLVII of 1984); "continuous disability contract" means a contract under which a benefit is payable in the event of: a. the death, by a cause specified in the contract, of the person whose life is insured (the "insured"); or b. injury to, or disability of, the insured as a result of accident or sickness; or the insured being found to have a specified medical condition or disease;

xi.

xii.

xiii.

xiv.

xv.

c.

xvi.

"Court" means the principal civil Court of original jurisdiction in a District, and includes a High Court in exercise of its ordinary civil jurisdiction; and in relation to Part IX and Part XVIII, shall have the meaning as in section 7 of the Companies Ordinance, 1984 (XLVII of 1984); "customer" has the meaning assigned to the term in clause (d) of section 2 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 (XV of 1997); "direct", in relation to the business of insurance, means insurance other than reinsurance; "domestic insurance policy" means a contract of insurance that provides insurance cover in respect of loss of or damage to a building used primarily and principally as a residence for the policy holder, for persons with whom the

xvii.

xviii.

xix.

policy holder has a family or personal relationship, or for both the policy holder and such persons, or loss of or damage to the contents of such a building, or both; xx. "duly attested" means attested in the manner required for financial or future obligations by Article 17 of the Qanun-e-Shahadat Order, 1984 (P.O. 10 of 1984); "electronic media" includes the internet, radio, television, tapes, cassettes, all forms of electronic recording media including computer diskettes and CDROMs; "encumbrance" in relation to any property, movable or immovable, means any mortgage, charge (fixed or floating), hypothecation, pledge, assignment or transfer by way of security, or any other form of security or ownership interest less than absolute legal and beneficial ownership; "eligible person" means a person specified in clauses (a) and (b) of sub-section (1) of section 5; "finance" has the meaning assigned to the term in clause (e) of section 2 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 (XV of 1997);. "Government securities" means Government securities as defined in the Securities Act,1920 (X of 1920); "group" in relation to contracts of life insurance, including health insurance, means contracts having a term not dependent on the termination or continuation of human life, under which the benefits are payable to a member of a group defined in the contract on the happening to that member during the term of the contract of a contingency defined in the contract, not being a contingency which is bound to happen; "insurance" means the business of entering into and carrying out policies or contracts, by whatever name called, whereby, in consideration of a premium received, a person promises to make payment to another person contingent upon the happening of an event, specified in the contract, on the happening of which the second-named person suffers loss, and includes reinsurance and retrocession: Provided that a contract of life insurance shall be deemed to be a contract of insurance notwithstanding that it may not comply with the definition set out in this clause; xxviii. "insurance broker" means a person carrying on the business of insurance broking; "insurance broking" means the arrangement of insurance for reward by a person other than an agent of an insurance company; "Insurance Ombudsman" means the officer appointed by the Federal Government under section 125;

xxi.

xxii.

xxiii.

xxiv.

xxv.

xxvi.

xxvii.

xxix.

xxx.

xxxi.

"insurer" means: a. any company or other body corporate carrying on the business of insurance, which is a company or other body corporate incorporated under any law for the time being in force in Pakistan; and b. any body corporate incorporated under the law of any jurisdiction outside Pakistan carrying on insurance business which carries on that business in Pakistan.

xxxii.

"investment contract" means a contract of insurance, providing for benefits to be paid on death or on a specified date or dates before death where the benefits paid are calculated by reference to either a running account or units under the contract whether or not the minimum value of that account or those units is guaranteed and providing for the account to be increased during the currency of the contract; "investment-linked" in relation to life insurance means investment contracts, the principal object of which is the provision of benefits calculated by reference to units, the value of which is related to the market value of a specified class or group of assets of the party by whom the benefits are to be provided; "lender" means a person inside or outside Pakistan carrying on the business of advancing money by way of loans or finance and includes a banking company; "listed company" means a company, a body corporate or corporation (including a body corporate or corporation incorporated outside Pakistan) or other body whose securities are allowed to be traded on a stock exchange (inside or outside Pakistan); "loan" has the meaning assigned to the term in clause (f) of section 2 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 (XV of 1997); "managing agent" has the meaning ascribed to that term in section 206 of the Companies Ordinance, 1984 (XLVII of 1984); "member of the family" in relation to any person, means the husband or a wife, the dependent father, mother, brother or sister, or a minor son or unmarried daughter of that person; "mutual insurance company" means an insurer, being a company incorporated under the law of Pakistan or any country or state other than Pakistan, which has no share capital and of which, by its constitution, only and all policy holders are members; "National Insurance Corporation" means the corporation established under the National Insurance Corporation Act, 1976; "officer" has the meaning assigned to that expression in clause (24) of subsection (1) of section 2 of the Companies Ordinance, 1984 (XLVII of 1984); "Pakistan Insurance Corporation" means the corporation established under the Pakistan Insurance Corporation Act, 1952 (XXXVIII of 1952);

xxxiii.

xxxiv.

xxxv.

xxxvi.

xxxvii.

xxxviii.

xxxix.

xl.

xli.

xlii.

xliii.

"participating", in reference to life insurance business, means contracts of life insurance, other than investment-linked contracts, health contracts, group life contracts and group health contracts, under the terms and conditions of which the policy holder has an entitlement to participate in distributions by the life insurer of profits or surpluses;

Explanation:
a benefit paid under a policy is not a distribution of profit or surplus if the benefit is determined according to the terms and conditions of the contract and is not subject to the exercise of discretion by the insurer; xliv. "permanent capital fund" means a fund that is established in the records of a life insurance company not having a share capital, and which contains that part of the assets and liabilities of a life insurer which is attributed to it and is not attributed to any statutory fund maintained by that life insurer; "policy" means a contract of insurance; "policy holder" means the person to whom a policy is issued or, in the case of a policy of life insurance, the person to whom the whole of the interest of the policy holder in the policy is assigned once and for all, but does not include an assignee thereof whose interest in the policy is defeasible or is for the time being subject to any condition; "policyholder liability", in relation to life insurance, means: a. a liability that has arisen under a policy of life insurance; or b. a liability that, subject to the terms and conditions of a policy, will arise on the happening of an event, or at a time, specified in the policy;

xlv. xlvi.

xlvii.

xlviii. xlix.

"prescribed" means prescribed by rules made under section 167; "private motor property damage policy" means a contract of insurance that provides insurance cover in respect of loss of or damage to a motor vehicle or of the contents of a motor vehicle used primarily and principally as a means of private transport by the policy holder, by persons with whom the policy holder has a family or personal relationship, or by both the policy holder and such persons; "private company" has the meaning assigned to it in clause (28) of sub-section (1) of section 2 of the Companies Ordinance, 1984 (XLVII of 1984); "public company" has the meaning assigned to that expression in clause (30) of sub-section (1) of section 2 of the Companies Ordinance, 1984 (XLVII of 1984), or an existing company which is not a private company or a subsidiary of a private company; "reinsurance" means a contract of insurance under which the event, specified in the contract, contingent upon the happening of which, payment is promised to be made to the policy holder thereunder, is payment by the policy holder of a claim or claims made against that policy holder under another contract or contracts of insurance issued by that policy holder;

l.

li.

lii.

liii. liv. lv.

"regulations" means regulations made under this Ordinance. "repealed Act" means the Insurance Act, 1938 (IV of 1938); "retrocession" means a contract of reinsurance under which the event, specified in the contract, contingent upon the happening of which, payment is promised to be made to the policy holder thereunder, is payment by the policy holder of a claim or claims made under another contract or contracts of reinsurance issued by that policy holder; "rules" means rules made under this Ordinance. "scheduled bank" has the meaning assigned to it in clause (m) of section 2 of the State Bank of Pakistan Act, 1956 (XXXIII of 1956); "SECP Act" means the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997); "shareholders fund" means a fund that is established in the records of a life insurance company and which contains that part of the assets and liabilities of a life insurer which is attributed to it and is not attributed to any statutory fund maintained by that life insurer; "State Life Insurance Corporation" means the corporation established under Article 11 of the Life Insurance (Nationalization) Order, 1972 (P.O. 10 of 1972); "statutory fund" means a fund that is established in the records of a life insurer and which relates solely to the life insurance business of that life insurer or a particular part of that life insurance business. "subsidiary" or "subsidiary company" has the meaning assigned to it in clause (38) of sub-section (1) of section 2 of the Companies Ordinance, 1984 (XLVII of 1984); "surveyor" means a person (by whatever name called) who examines the goods, property or any interests insured under a contract of non-life insurance to express an independent opinion as to the cause, extent, location and amount of any loss incurred or claimed to be incurred under that contract; "Takaful" means a scheme based on mutual assistance in compliance with the provisions of Islamic shariah, and which provides for mutual financial aid and assistance to the participants in case of occurrence of certain contingencies and whereby the participants mutually agree to contribute to the common fund for that purpose; "Tribunal" means the Tribunal constituted under section 121 of this Ordinance; and "unit", except in section 32, means a notional share in the net value of a specified class or group of assets of a statutory fund of an insurer carrying on life insurance business, the value of which is to be used as a basis for determination of the benefits payable under an investment linked contract.

lvi. lvii.

lviii.

lix.

lx.

lxi.

lxii.

lxiii.

lxiv.

lxv.

lxvi.

3. Division of insurance business into life and non-life. i. For the purposes of this Ordinance insurance business is divided into life insurance business and non-life insurance business. ii. Subject to sub-sections (3), (4) and (5), the effecting and carrying out of any or all of the following type of contracts shall constitute the carrying on of life insurance business; namely:a. a contract of insurance that provides for the payment of money on the death of a person or on the happening of a contingency dependent on the termination or continuance of human life; b. a contract of insurance that is subject to payment of premiums for a term dependent on the termination or continuance of human life; a contract of insurance that provides for the payment of an annuity for a term dependent on the continuance of human life; a contract that provides for the payment of an annuity for a term not dependent on the continuance of human life but exceeding the period of one year; a contract providing an indemnity for medical expenses; a continuous disability income contract; an investment contract; and such contracts as may be prescribed.

c.

d.

e. f. g. h. iii.

Notwithstanding anything in this Ordinance to the contrary, the effecting and carrying out of a contract whose principal object is one of life insurance business, but which contains related and subsidiary provisions of a non-life insurance nature, shall be taken to constitute the carrying on of life insurance business. Notwithstanding anything in this Ordinance to the contrary, the effecting and carrying out of a contract that provides for the payment of money on the death of a person shall not constitute the carrying on of life insurance if the contract is effected and carried out by an insurer who is registered to carry on non-life insurance business; and both of the following conditions exist: 1. by the terms of the contract, the duration of the contract is to be not more than one year; and 2. payment is only to be made in the event of death by accident.

iv.

v.

Notwithstanding anything in this Ordinance to the contrary, the effecting and carrying out of a contract that provides for the payment of money in the event of a person suffering loss, other than death, attributable to accident, sickness or infirmity shall not constitute the carrying on of life insurance if the contract is effected and carried out by an insurer who is registered to carry on non-life insurance business; and by the terms of the contract, the duration of the contract is to be not more than one year.

4. Classes of life and non-life business. i. For the purposes of this Ordinance, the following shall be the classes of business into which life insurance business is divided: . Class 1 being ordinary life business; a. b. c. ii. Class 2 being capital redemption business; Class 3 being pension fund business; and Class 4 being accident and health business.

For the purposes of sub-section (1) . "ordinary life business" means effecting and carrying out contracts of life insurance other than contracts included in Class 2, Class 3 or Class 4; a. "capital redemption business" means effecting and carrying out capital redemption contracts; b. "pension fund business" means effecting and carrying out contracts of life insurance that are maintained for the purposes of a pension or retirement scheme and are owned by trustees under the scheme; and "accident and health business" means effecting and carrying out contracts of insurance providing fixed pecuniary benefits or benefits in the nature of indemnity or a combination of both, against risks of the policy holder or a person for whose benefit the contract was made I. sustaining injury as a result of an accident; II. becoming incapacitated in consequence of an accident or disease; or suffering loss, including medical expenses, attributable to accident, sickness or infirmity.

c.

III.

iii.

For the purposes of this Ordinance, the following shall be the classes of business into which non-life insurance business is divided: . for direct and facultative reinsurance business; I. Class 1 being fire and property damage business; II. III. IV. V. VI. VII. VIII. Class 2 being marine, aviation and transport business; Class 3 being motor third party compulsory business; Class 4 being liability business; Class 5 being workers compensation business; Class 6 being credit and suretyship business; Class 7 being accident and health business; and Class 8 being agriculture insurance including crop insurance;

IX. a.

Class 9 being miscellaneous business;

for treaty reinsurance business: I. Class 9 being proportional treaty business; and

iv.

II. Class 10 being non-proportional treaty business. For the purposes of sub-section (3).. "fire and property damage business" means effecting and carrying out contracts of insurance against loss to the policy holder arising from loss of or damage to property, other than as contained in class2; a. "marine, aviation and transport business" means effecting and carrying out contracts of insurance against loss to the policy holder arising from: I. loss of or damage to, or arising out of or in connection with the use of: II. means of transport, including motor vehicles and railway rolling stock used on land, vessels used on the sea or on inland waters, and aircraft; or the machinery, tackle, furniture or equipment of those means of transport; III. loss of or damage to merchandise, baggage and all other goods in transit, irrespective of the form of transport;

b.

"motor third party compulsory business" means effecting and carrying out contracts of insurance against loss to the policy holder arising from liabilities incurred to third parties arising out of or in connection with the use of motor vehicles on land, as specified in the Motor Vehicles Act, 1939 (IV of 1939); "liability business" means effecting and carrying out contracts of insurance against loss to the policy holder arising from liabilities incurred to third parties, other than in respect of risks specified in class 2, class 3 or class 5; "workers compensation business" means effecting and carrying out contracts of insurance against loss to the policy holder arising from liabilities incurred to workers arising out of or in connection with the employment of the workers by the insured persons; "credit and suretyship business" means effecting and carrying out: I. contracts of insurance against loss to the policy holder arising from failure, whether through insolvency or otherwise, of debtors to pay debts when they fall due; or II. contracts of insurance against loss to the policy holder arising from his having to perform contracts of guarantee entered into by him; or

c.

d.

e.

III.

contracts for fidelity bonds, performance bonds, administration bonds, bail bonds, custom bonds or similar contracts of guarantee;

f.

"accident and health business" means effecting and carrying out contracts of insurance, the duration of which under the contract is not more than one year, providing fixed pecuniary benefits or benefits in the nature of indemnity or a combination of both, against risks of the policy holder or a person for whose benefit the contract was made; I. sustaining injury as a result of an accident; II. III. IV. dying as a result of an accident; becoming incapacitated in consequence of a disease; or suffering loss, including medical expenses, attributable to sickness or infirmity; but excluding contracts of a type included in class 5;

g.

"agriculture insurance" means effecting and carrying out contracts of insurance against loss to the policyholder arising from loss of or damage to agriculture related property including crops; "miscellaneous business" means effecting and carrying out contracts of insurance of types not included in any other class; "proportional treaty business" means effecting and carrying out of contracts of treaty reinsurance, whether obligatory or otherwise, of such a nature that a proportion of premium or of a separately identified part of premium on insurance contracts which are the subject matter of the treaty is payable to the reinsurer by the cedant and an identical proportion of claims or of a separately identified part of claims on those contracts is payable to the cedant by the reinsurer, and including without limitation treaties of quota-share and surplus classifications; and "non-proportional treaty business" means effecting and carrying out of contracts of treaty reinsurance, not being contracts of a type included in Class 9.

h.

i.

j.

v.

The Commission may, by rules, prescribe sub-classes of business into which any of those set out in sub-section (1) and sub-section (3) may be divided. The Federal Government may, by rules, prescribe any class of business set out in sub-section (1) or sub-section (3), or sub-class of business prescribed under sub-section (5), as a restricted class or sub-class as the case may be.

vi.

INSURANCE ORDINANCE, 2000

PART II PROVISIONS APPLICABLE TO INSURERS
5. Persons eligible to transact insurance business. i. After the commencement date no person other than: a. a public company; or b. a body corporate incorporated under the laws of Pakistan (not being a private company or the subsidiary of a private company); shall start any insurance business in Pakistan. ii. After the commencement date no person other than an eligible person or the branch of a body corporate incorporated in any jurisdiction outside Pakistan, which, immediately before the commencement of this Ordinance, was registered to carry on and was carrying on such business in Pakistan, shall, after the expiry of one year from such commencement, continue such business. An insurer, being a body corporate incorporated in a jurisdiction outside Pakistan and registered to carry on and carrying on insurance business in Pakistan at the commencement of this Ordinance, may, within six months of such commencement take steps to transfer the business of such an insurer to a new public company pursuant to a scheme of arrangement under the provisions of sections 284 to 287 of the Companies Ordinance, 1984 and the applicable provisions of this Ordinance, and all such provisions shall apply mutatis mutandis as if the business in Pakistan of such an insurer is being carried on by a public company incorporated in Pakistan.

iii.

6. Registration of insurers. i. No eligible person shall, after the commencement of this Ordinance, begin or, after the expiry of six months from the commencement date, continue, to carry on any insurance business in Pakistan, unless such eligible person has obtained from the Commission a certificate of registration to carry on insurance business under this Ordinance, and that registration has not been revoked. ii. A certificate of registration issued to an insurer under section 3 or section 3A of the repealed Act shall be deemed, for the purposes of this section, to constitute registration under this Ordinance, during the period until the expiry of such existing registration or one year from the commencement date for this section whichever is earlier; and National Insurance Corporation, Pakistan Insurance Corporation and State Life Insurance Corporation shall be deemed, for the purposes of this section, to have been so registered, such registration to continue until one year from the commencement date. During the period of six months from the commencement date, the Commission may on the application of an insurer registered under the repealed Act as at the commencement date extend, for the purposes of this section, the validity of the certificate of registration held by the insurer for a

iii.

period not exceeding six months from the date on which that certificate of registration would otherwise have expired. iv. An eligible person required to register under this Ordinance, may make an application to the Commission for registration as a person authorised to carry on life insurance business or non-life insurance business as the case may be. An application for registration shall be made in writing, in either the English or the Urdu language and shall be signed by authorised persons on behalf of an eligible person. An application for registration shall contain such information and shall be accompanied by such documents, reports, certificates and other matters as may be prescribed. An application for registration made by an insurer carrying on insurance business at the commencement date shall include a plan for the achievement of compliance by the insurer with the paid-up capital and solvency levels set out in Part IV and Part V of this Ordinance by the dates set out in those Parts. An application for registration as a person authorised to carry on life insurance business shall in all cases include or be accompanied by: a. a statement of the rates, advantages, terms and conditions of life insurance policies proposed to be offered by the applicant, including without limitation where the policy acquires a surrender value, the basis on which the surrender value is determined, and including without limitation in the case of investment-linked policies a description of: I. the investments to which the policy is linked; II. the basis on which the benefits payable under the policy are determined; the frequency with which and basis by which the unit values are determined; and the values attributed to units at the time of purchase and sale; the basis by which values are attributed to units at the time of and for the purpose of purchase and sale; the basis on which expenses attributed to the policy are determined; and the basis on which charges for mortality attributed to the policy are determined;

v.

vi.

vii.

viii.

III.

IV.

V.

VI.

b.

a business plan setting out the expected premium income, expenses and results of the applicant for a period of not less than ten years from the date at which authorisation is proposed to be obtained; a copy of any written, electronic or other material proposed to be issued by the applicant for mass communication or for communication with a policy holder or prospective policy holder, in respect of life insurance policies proposed to be offered by the applicant;

c.

d.

a statement by the appointed actuary that the terms and conditions of the life insurance contracts proposed to be entered into are sound and workable; and a statement by the appointed actuary that the business plan has been prepared according to principles which appear to him to be reasonable and sound.

e.

ix.

Where an applicant has made an application under this section for registration and, before registration is granted or refused, a change occurs in the particulars specified in the application or in the matters contained in a document required to accompany the application, the applicant shall, within 14 days after the occurrence of the change, give to the Commission notice in writing signed by any two authorised persons and specifying particulars of the change. An applicant shall not:a. make an application under this section; or b. give to the Commission a notice under sub-section (9); that is false or misleading in a material particular.

x.

7. Commission may register insurer upon satisfaction. i. Where an application for registration is received by the Commission under section 6, the Commission may, subject to sub-section (2) and sub-section (3), register the insurer as authorised to carry on life insurance business or authorised to carry on non-life insurance business as the case may be, if the Commission is satisfied that: a. the provisions of this Ordinance relating to minimum paid-up share capital requirements have been complied with; b. the provisions of this Ordinance relating to minimum statutory deposits have been complied with; the provisions of this Ordinance relating to minimum solvency requirements have been complied with; the provisions of this Ordinance relating to the effecting of reinsurance arrangements have been complied with; the applicant is, and is likely to continue to be, able to meet its liabilities; the applicant meets, and is likely to continue to meet, criteria for sound and prudent management including without limitation those set out in section 12; the applicant has appointed an auditor recognised by the Commission as appropriately qualified to audit the business of life or non-life insurance as the case may be;

c.

d.

e.

f.

g.

h.

the applicant has, if it proposes to carry on life insurance business, appointed an actuary as its appointed actuary, and the Commission does not disapprove that appointment; the applicant is, and is likely to continue to be, able to comply with such other of the provisions of this Ordinance as are applicable to it; and

i.

ii.

on the basis of the information provided by the application and any other information received by the Commission, the application ought to be granted. The Commission shall not grant a certificate of registration if the granting of that certificate would not be in accordance with policy decisions made by the Federal Government. The Commission shall not grant registration to any applicant where the grant of such registration would result in an insurer carrying on both life insurance and non-life insurance business. Where the Commission is not satisfied with respect to all or any of the matters referred to in sub-section (1), it shall refuse an application. Within thirty days of receipt of an application for registration, or such longer period as may be prescribed, the Commission shall, in writing, notify the applicant that the application has been granted or refused, as the case may be; except that: a. if the Commission so notifies the applicant in writing before the expiry of the period of thirty days referred to in this sub-section, the period of thirty days shall be extended to ninety days or such longer period as may be prescribed; and b. if the application is deficient in any technical particular, and the Commission so notifies the applicant before the expiry of the period of thirty days referred to in this sub-section, the application for registration shall not, for the purposes of this sub-section, be treated as received until the applicant has amended the deficiency so notified.

j.

iii.

iv.

v.

vi.

The Commission may, on granting registration, specify any class, classes, subclass or sub-classes of business prescribed as restricted under sub-section (6) of section 4 as a class, classes, sub-class or sub-classes of business which the insurer is not authorised to carry on. The Commission may at any time require a registered insurer or an insurer deemed under this Ordinance to be registered, to comply with such conditions, not inconsistent with the provisions of this Ordinance, as the Commission may specify in writing: Provided that conditions imposed under this sub-section shall be imposed only where the Commission believes on reasonable grounds that such conditions are desirable for the protection of the policy holders and potential policy holders of the insurer and such conditions shall not be imposed in such a manner as to restrict unreasonably the commercial liberty of any insurer as against other insurers or such as to impose an unreasonable burden upon any insurer;

vii.

Provided also that conditions shall not be imposed under this sub-section without giving an insurer to whom the conditions would apply not less than thirty days written notice of intention to impose such conditions, or without giving such insurer an opportunity to be heard. 8. Inspection and supply of copies filed with Commission. Any person may on payment of the prescribed fee inspect such of the documents filed by an insurer with the Commission under section 6 as may be prescribed, and may obtain a copy of any such document or part thereof on payment in advance at the prescribed rate for the making of the copy. 9. Duration and revocation of registration. i. Registration under this Ordinance to carry on insurance business shall continue until it is revoked. ii. Where the Commission is requested in writing by an insurer to revoke the registration of that insurer to carry on insurance business, the Commission may by a written instrument revoke that registration. Registration under this Ordinance to carry on insurance business shall not be revoked unless the Commission is satisfied that adequate provision has been made for the irrevocable transfer to a registered insurer of all insurance liabilities incurred by the insurer seeking revocation of registration under the preceding sub-section. Nothing in this section shall prevent the Commission from exercising the powers available to it under section 63 to direct a registered insurer to cease entering into new insurance contracts.

iii.

iv.

10. Notification of grant or revocation of registration. i. Where registration under the preceding provisions of this Part is granted or revoked, the Commission shall cause notice of the grant (including any limitations as to classes of business which may be underwritten) or revocation of registration to be published in the Gazette. ii. Where registration under the preceding provisions of this Part is granted, the Commission shall issue to the insurer a written certificate of registration, which certificate shall be surrendered to the Commission on revocation of registration. The Commission may, on payment of the prescribed fee, issue a duplicate certificate of registration to replace a certificate of registration to replace a certificate lost, destroyed or mutilated, or in any other case where it is of opinion that the issue of a duplicate certificate is necessary.

iii.

11. Conditions imposed on registered insurers. i. An insurer registered under this Ordinance shall at all times ensure that: a. the provisions of this Ordinance relating to minimum paid-up share capital requirements are complied with; b. the provisions of this Ordinance relating to minimum statutory deposits have been complied with;

c.

the provisions of this Ordinance relating to minimum solvency requirements are complied with; the provisions of this Ordinance relating to the obtaining of reinsurance arrangements are complied with; the insurer is, and is likely to continue to be, able to meet its liabilities; the insurer meets, and is likely to continue to meet, criteria for sound and prudent management including without limitation those set out in section 12; the insurer has appointed an auditor recognised by the Commission as appropriately qualified to audit the business of life or non-life insurance as the case may be; and the insurer is, and is likely to continue to be, able to comply with such other of the provisions of this Ordinance as are applicable to it.

d.

e.

f.

g.

h.

ii.

An insurer registered under this Ordinance shall be deemed to have undertaken to abide by the decisions of any small disputes resolution committee constituted under section 117. An insurer registered under this Ordinance shall pay to the Commission, on or before the fifteenth day of January in every calendar year, an annual supervision fee of the greatest of: a. Rs. 100,000; b. one rupee per thousand of gross direct premium written in Pakistan during the calendar year preceding the calendar year ended on the previous 31st day of December; or such amount as may be prescribed.

iii.

c.

12. Criteria for sound and prudent management. i. For the purposes of this Ordinance, the following shall, without limitation, be recognised as criteria for sound and prudent management of an insurer or applicant for registration as a person authorised to carry on insurance business: a. the business of the insurer or applicant is carried on with integrity, due care and the professional skills appropriate to the nature and scale of its activities; b. each director and officer or (in the case of an applicant which is a body corporate incorporated outside Pakistan) the principal officer in Pakistan of the insurer or applicant is a fit and proper person to hold that position; the insurer or applicant is directed and managed by a sufficient number of persons who are fit and proper persons to hold the positions which they hold;

c.

d.

the insurer or applicant maintains adequate accounting and other records of its business; and the insurer or applicant maintains adequate systems of control of its business and records.

e.

Explanation:
A person is a fit and proper person who possesses such experience and qualifications as are appropriate for the duties for which he is responsible, and conducts those duties with due diligence and skill. A person is not a fit and proper person to hold the position of Chairman, or of Chief Executive or principal officer in Pakistan, of an insurance company if that person does not have experience or qualifications of direct relevance to the conduct of insurance operations. A person is not a fit and proper person if the association of that person with the insurer is or is likely, for whatever reason, to be detrimental to the interest of the insurer or of the policy holders, or is otherwise undesirable. ii. Accounting and other records shall not be regarded as adequate for the purposes of clause (d) of sub-section (1) unless they are such as: a. to enable the business of the insurer or applicant to be prudently managed; and b. to enable the insurer or applicant to comply with the obligations imposed on it by or under this Ordinance.

iii.

In determining whether any systems of control are adequate for the purposes of clause (e) of sub-section (1), the Commission shall have regard to the functions and responsibilities for those systems which are held by the persons who are responsible for the direction and management of the insurer or applicant and to whom clause (b) of sub-section (1) applies. The insurer or applicant shall not be regarded as conducting its business in a sound and prudent manner if it fails to conduct its business with due regard to the interests of policy holders and potential policy holders. The insurer or applicant shall not be regarded as conducting its business in a sound and prudent manner if it: a. fails to satisfy an obligation to which it is subject by virtue of this Ordinance; or b. fails to supervise the activities of a subsidiary with due care and diligence and without detriment to the insurers or applicants business.

iv.

v.

vi.

No insurer shall appoint a managing agent for the conduct of its business.

13. Restriction on issue of certain life policies. 1. No insurer shall offer any policy or contract in respect of life insurance business other than those described in the prescribed documents filed with the Commission under sub-section (6) or sub-section (8) of section 6 or an amendment to such prescribed documents filed with the Commission under

sub-section (9) of section 6, unless the insurer has, not less than thirty days prior to such offer, furnished to the Commission in respect of such contracts the particulars and materials specified in sub-section (8) of section 6. 2. The Commission may, within thirty days of such submission, require the insurer in writing to make such changes in the particulars and materials as the Commission may direct, and where the Commission does so direct the insurer shall not be taken to have complied with sub-section (1) until the insurer has complied with the direction of the Commission.

INSURANCE ORDINANCE, 2000

PART III STATUTORY FUNDS OF AND OTHER SPECIAL REQUIREMENTS FOR LIFE INSURANCE COMPANIES
14. Statutory and other funds of life insurance companies. i. An insurer carrying on the business of life insurance shall at all times maintain at least one statutory fund in respect of its life insurance business. ii. An insurer that carries on life insurance business consisting of the provision of investment-linked benefits shall maintain one or more statutory funds exclusively for that business. An insurer that carries on life insurance business consisting of the provision of capital redemption business shall maintain one or more statutory funds exclusively for that business. An insurer that carries on life insurance business consisting of the provision of pension fund business shall maintain one or more statutory funds exclusively for that business. An insurer that carries on life insurance business consisting of the provision of accident and health insurance business shall maintain one or more statutory funds exclusively for that business. An insurer that carries on life insurance business outside Pakistan shall maintain one or more statutory funds exclusively in respect of that business. An insurer that carries on life insurance business of such class or sub-class as may be prescribed by the Commission for the purposes of this sub-section shall maintain one or more statutory funds exclusively in respect of that business. Statutory funds may not be divided or amalgamated without the approval of the Commission. The Commission may direct a life insurer to amalgamate or transfer a life statutory fund where the Commission believes on reasonable grounds that amalgamation or transfer is required for the protection of the interests of policy holders. An insurer having a share capital and carrying on life insurance business shall maintain a shareholders fund. An insurer not having a share capital and carrying on life insurance business, shall maintain in its records a permanent capital fund. In this Ordinance, a reference to the shareholders fund shall be deemed to include a reference to the permanent capital fund, and provisions which are

iii.

iv.

v.

vi.

vii.

viii.

ix.

x.

xi.

xii.

applicable to the shareholders fund shall apply mutatis mutandis to the permanent capital fund. 15. Establishment of statutory fund. Whenever an insurer establishes a statutory fund for its life insurance business, the insurer shall give the Commission, not later than thirty days prior to the establishment of the fund, written notice (in such form as may be prescribed by the Commission) of: a. b. c. the establishment of the fund; the date on which the fund was established; the nature of the life insurance business of the company to which the fund relates; and such other matters as are prescribed.

d.

16. Policies to be referable to specific statutory funds. A life insurance policy issued by an insurer carrying on life insurance business shall be referable to one or more statutory funds: Provided that a policy which is not investment-linked shall be referable to one statutory fund only; Provided further that if: a. a contract ("the supplementary contract") which is supplementary to the policy ("the principal policy") is of a type which would but for the preceding proviso be required by section 14 to be referable to a different statutory fund from that to which the principal policy is referable, and the premium attributable to such supplementary contract exceeds the premium attributable to the principal policy, the supplementary contract shall be referable to that different statutory fund.

b.

i.

A policy document shall specify the statutory fund or statutory funds to which the policy is referable.

a. b.

A provision in a policy document that a policy is referable to two or more statutory funds is not effective unless it specifies: the benefits under the policy that are to be provided out of each fund; and either: I. the proportion of the premium that is related to the benefits to be provided out of each fund and is to be credited to the fund; or II. the way in which that proportion is to be calculated.

ii.

iii.

The statutory fund or funds to which a policy is referable may be changed by endorsement to the policy document.

iv.

If a change is made, in accordance with the foregoing sub-section, to the statutory fund or funds to which a policy is referable, the insurer shall effect such transfer of assets between the statutory funds concerned as may be determined by the appointed actuary in accordance with such principles as may be prescribed.

17. Assets, liabilities, revenues and expenses of funds. .All assets, liabilities, revenues and expenses of a life insurer shall be referable to one or more funds of the insurer.

Explanation:
in this section the word fund means a statutory fund or the shareholders fund. i. All amounts received by a life insurer in respect of the business of a statutory fund shall be credited to that fund. All assets and investments related to the business of a statutory fund shall be included in that fund. All liabilities (including policy liabilities) of a life insurer arising out of the conduct of the business of a statutory fund shall be treated as liabilities of that fund. All assets, liabilities, revenues and expenses of a life insurer which are referable to the shareholders fund and which are not attributed to a statutory fund shall be attributed to the shareholders fund. If an asset, a liability, a revenue or an expense of a life insurer is referable to two or more statutory funds, or is referable in part to a statutory fund or funds but is also referable to the shareholders fund, the insurer shall apportion such asset, liability, revenue or expense on a fair and equitable basis between the funds to which it is referable. An apportionment made under this section shall only be made after the directors of the insurer have received the appointed actuary's written advice as to the fairness and equity of the proposed basis of allocation.

ii.

iii.

iv.

v.

vi.

18. Disposition of assets of statutory funds. .The assets of a statutory fund are only available for expenditure related to the conduct of the business of the statutory fund. i. Profits and losses of a statutory fund may only be dealt with in accordance with the applicable provisions of this Ordinance.

19. Prohibition of reinsurance between statutory funds. .Reinsurance between statutory funds maintained by one insurer is prohibited. i. For the purposes of this section, reinsurance between statutory funds shall be deemed to exist, (whether or not there is a written contract of reinsurance) where the following circumstances are present: part of the premium payable under a policy referable to one statutory fund is credited to another statutory fund ("the reinsuring fund") to which the policy is not referable; and

a.

b.

a corresponding proportion of the liability under the policy is treated as a liability for the discharge of which the assets of the reinsuring fund are available.

20. Capital payments to life insurance statutory funds. . A life insurer may at any time make a capital payment to a statutory fund. i. For the purposes of this section, a capital payment is an amount credited to a statutory fund that is not required to be credited to that fund and does not represent any part of the assets of another statutory fund. All capital payments made to a statutory fund in accordance with this section shall be credited in the records of the statutory fund to a ledger account clearly identified as capital contributed to the statutory fund.

ii.

21. Distribution of capital in a life insurance statutory fund. . A distribution of capital, other than a distribution to holders of participating policies by way of bonus, shall not be made at any time at which any of the accounts identified in sub-sections (1) and (2) of section 22 have a debit balance. i. A distribution of capital, other than a distribution to holders of participating policies by way of bonus, shall not be made from a statutory fund unless the provisions of sub-sections (3) and (4) of section 35, after such distribution, are complied with. A distribution of capital contributed to a statutory fund may only be made after the directors of the insurer have received the appointed actuary's written advice as to the likely consequences of the proposed distribution. In providing his written advice under sub-section (3), the appointed actuary shall have regard, without limitation, to the effect of the proposed distribution on the compliance by the insurer with the provisions of this Ordinance relating to solvency and on the ability of the insurer to continue to comply with the provisions of this Ordinance relating to solvency in the context of its planned level of activity. Capital contributed to a statutory fund may only be distributed in the following ways: by transfer to the shareholders fund; by transfer to another statutory fund of the company; or by distribution as bonuses to holders of participating policies.

ii.

iii.

iv. a. b. c.

22. Allocation of surplus on life insurance business. . An insurer conducting participating life insurance business shall, in the accounting records of the statutory fund or funds in which that business is carried on, maintain ledger accounts separately identifying the following: a. retained earnings on participating business attributable to participating policyholders; b. retained earnings on participating business attributable to shareholders but not distributable; and

c.

retained earnings on participating business distributable to shareholders.

i.

An insurer conducting business other than participating business shall in the accounting records of the statutory fund or funds in which that business is carried on maintain a ledger account identifying the retained earnings on business other than participating business. For the purposes of this section and section 23, the ledger accounts referred to in clauses (a), (b) and (c) of sub-section (1) and in sub-section (2) are described for reasons of brevity as follows, respectively: the A Account; the B Account; the C Account; and the D Account. The ledger accounts identified in sub-sections (1) and (2) shall not be dealt with other than in accordance with the provisions of this section and section 23, or as the Commission may prescribe. Immediately following each investigation carried out in accordance with section 50, the insurer shall allocate, by debiting or crediting the accounts identified in sub-section (1) and sub-section (2) in each fund, the amount of surplus earned in that fund, in accordance with the provisions of this section. In this section, the term surplus in respect of a year means the increase or decrease in that year of the excess of assets over liabilities (other than policyholder liabilities) of a statutory fund or of a separately identifiable part of a statutory fund, reduced by the increase and enhanced by the decrease (so far, in the case of a separately identifiable part of a statutory fund, as such increase or decrease is attributable to that separately identifiable part) in that year of: the amount of policyholder liabilities; the cumulative amount of capital contributed by the shareholders fund;

ii.

a. b. c. d. iii.

iv.

v.

a. b.

c.

the amount of the accounts identified in sub-sections (1) and (2); and the amount of any reserve required under this Ordinance to be maintained.

d.

Explanation:
All amounts referred to in this sub-section shall be determined in accordance with the accounting rules prescribed for the preparation of the statement of assets and liabilities referred to in sub-clause (i) of clause (a) of sub-section (1) of section 46.

vi. a.

The surplus earned on participating contracts shall be allocated as follows between the A Account and the B Account: not less than ninety per cent. of the amount of surplus earned on participating contracts shall be allocated to the A Account; and the amount represented by the difference between the surplus earned on participating contracts and the amount referred to in clause (a) shall be allocated to the B Account.

b.

Explanation:
in a statutory fund which contains both participating and non-participating policies, the amount of surplus earned on participating contracts for the purposes of this section includes that element of surplus earned other than on participating contracts which is, on a fair and equitable basis, attributable to the participating policy holders having regard to the interest of participating policyholders in the undertakings of the statutory fund. vii. Immediately following the allocation of surplus in accordance with sub-section (7), the amount of surplus adjustment in respect of that year shall be credited to the A Account and debited to the C Account: Provided that where the amount of surplus adjustment exceeds the credit balance of the C Account the amount by which it exceeds that balance shall not be debited to the C Account but shall be debited to the B Account. Provided further that where the amount of surplus adjustment, but for this proviso, exceeds the sum of the credit balance, if any, of the B Account and the credit balance, if any, of the C Account, the amount of surplus adjustment shall for the purposes of this sub-section only be equal to the sum of the credit balance, if any, of the B Account and the credit balance, if any, of the C Account. viii. a. In this section, "surplus adjustment" means ninety per cent. of the sum of the following two amounts: the amount, if any, by which the total amount of management expenses brought to account in determining the surplus earned on participating contracts exceeds such total amount as is determined by the application of such percentages as may be prescribed by the Commission in regulations to first year and renewal premiums brought to account in determining that surplus; and the amount determined by applying for six months on a compound basis, to the amount if any determined in clause (a), the higher of: I. the investment earning rate of the statutory fund during the year, so far as concerns participating contracts; and II. the average base rate during the year, calculated as at the final date of each month on a compound basis.

b.

ix.

The amount of surplus earned in each statutory fund during a year, and in respect of each statutory fund to which sub-section (1) applies the amounts of surplus earned on participating contracts during that year and surplus

adjustment in respect of that year shall be certified by the insurers appointed actuary. x. All surplus other than surplus required to be dealt with under sub-section (7) shall be allocated to the D Account. The Commission may make rules for the administration of any matter in this section, not otherwise provided for.

xi.

23. Restriction on dividends and bonuses. . No insurer carrying on life insurance business shall declare or pay any dividend to shareholders or make any payment in service of any debentures, other than from the shareholders fund. i. a. b. ii. No insurer carrying on life insurance business shall appropriate from any statutory fund to the shareholders fund any amount other than: an amount from the C Account or the D Account; or a distribution of capital in accordance with section 21. No insurer carrying on life insurance business shall allocate, whether by way of cash payment, by addition to policy liabilities or otherwise, as bonuses to participating policy holders any amount other than: an amount from the A Account, or a distribution of capital by way of bonus in accordance with section 21. No amount may be credited to the C Account other than in accordance with the provisions of this section. An appropriation under sub-section (2) or an allocation of bonus under subsection (3) may only be made after the directors of the insurer have received the appointed actuary's written advice as to the likely consequences of the proposed appropriation or allocation. In providing his written advice under sub-section (5), the appointed actuary shall have regard, without limitation, to the effect of the proposed appropriation or allocation on the compliance by the insurer with the provisions of this Ordinance relating to solvency and on the ability of the insurer to continue to comply with the provisions of this Ordinance relating to solvency in the context of its planned level of activity. At the time at which bonuses, other than distributions of capital by way of bonus in accordance with section 21, are allocated to participating policy holders, an amount determined in the following manner may, subject to subsection (12), be debited to the B Account and the amount if any debited to the B Account shall be credited to the C Account: not more than one-ninth of the amount of such bonuses as have been allocated from the A Account; less the lower of: I. the amount if any of surplus adjustment debited to the B Account in accordance with the proviso to sub-section (8) of section 22; and

a. b. iii.

iv.

v.

vi.

a.

b.

II. vii.

(ii) the amount set out in clause (a) of this sub-section.

Where the business in a statutory fund contains investment contracts, not being participating contracts, under the terms of which the insurer has discretion to vary the amount of expenses charged under the policy, the transfer to the shareholders fund which may be made in any one year from the D Account in that statutory fund shall be reduced, to the extent of the balance in the D Account, by the amount of expense adjustment arising in the year ended on the preceding 31st December. For the purpose of sub-section (8), "expense adjustment" means such proportion as may be prescribed of the amount, if any, by which the total amount charged to all such policies to meet management expenses exceeds such total amount as is determined by the application of such percentages as may be prescribed by the Commission to first year and renewal premiums relating to such investment contracts: Provided that, where investment contracts include supplementary benefits, the amount referred to in this sub-section shall be determined with reference to the premiums for the main contract only excluding such supplementary benefits; Provided further that for the purposes of determining the amount of expense adjustment, the amount of management expenses charged to policies shall be determined in accordance with such basis as the Commission may prescribe.

viii.

ix.

The amount of expense adjustment in each year in respect of each statutory fund to which sub-section (8) applies shall be certified by the appointed actuary. An insurer may, subject to sub-section (12), at any time make a transfer from the B Account, the C Account or the D Account to the credit of the A Account. No appropriation, allocation or transfer under sub-section (2) or sub-section (3) or under sub-section (7) or sub-section (11) shall be made if that appropriation, allocation or transfer would result in a debit balance in the ledger account from which the appropriation, allocation or transfer is made. The Commission may make rules for the administration of any matter in this section, not otherwise provided for.

x.

xi.

xii.

24. Declaration of interim bonuses. Notwithstanding anything to the contrary contained in this Ordinance, an insurer carrying on the business of life insurance shall be at liberty to declare an interim bonus or bonuses to policy holders whose policies mature for payment by reason of death or otherwise during the period between two investigations conducted in accordance with section 50, on the recommendation of the appointed actuary made in his report on the last preceding valuation. 25. Transitional provisions. . All life insurance funds maintained under the repealed Act or under the Life Insurance Nationalisation Order, 1972 by an insurer carrying on life insurance business on the commencement date or succeeding to an insurer carrying on life insurance business on

the commencement date shall, with effect on or before 31st December 2001, be converted into one or more statutory fund or funds. i. A conversion to a statutory fund or funds under this section shall be made in accordance with such criteria as may be prescribed by the Commission. For the period until 31st December 2001, an insurer carrying on life insurance business on the commencement date shall not be regarded as being in contravention of the Ordinance by reason only that the statutory funds required to be established under this Part have not been established.

ii.

26. Appointed actuary. . Every life insurer shall appoint an actuary as its appointed actuary. i. The Commission may on reasonable grounds disapprove such appointment and require the appointment of another actuary.

27. Responsibilities of appointed actuary. . The appointed actuary shall be responsible to perform such duties as he may be assigned under this Ordinance. i. a. Such duties shall include: performing an annual investigation into the financial condition of a life insurer according to such scope, and reporting on such investigation in such terms as, may be prescribed by the Commission; providing written advice as to the equitable apportionment of revenues and expenses between funds and between policy holders within funds; certifying that the terms and conditions of a type of policy issued by a life insurer are sound and workable; certifying premium rates at the time of introduction of a new product and any change in these rates; certifying annually mortality, expenses and other charges under investment contracts; and such other duties as may be prescribed by the Commission. The appointed actuary of an insurer shall be entitled at any time to address or to make a report to the Board of Directors of the insurer, with respect to any matter which in the opinion of the appointed actuary requires to be brought to the attention of the Board of Directors. An appointed actuary shall not be dismissed from his office without the permission of the Commission, which shall not unreasonably be withheld. An appointed actuary who resigns his office shall inform the Commission of the reasons for his resignation and of any matters connected therewith which he believes should be brought to the attention of the Commission.

b.

c.

d.

e.

f. ii.

iii.

iv.

v.

An appointed actuary who is dismissed from his office shall inform the Commission of any matters connected with his dismissal which he believes should be brought to the attention of the Commission. An appointed actuary who resigns or is dismissed shall not be liable to any person for any statement properly made with due cause pursuant to subsection (5) or sub-section (6).

vi.

INSURANCE ORDINANCE, 2000

PART IV REQUIREMENTS AS TO CAPITAL AND STATUTORY DEPOSITS
28. Requirements as to capital. i. An insurer registered under this Ordinance to carry on insurance business shall have a paid-up capital of not less than the required minimum amount. ii. For the purposes of this section, the required minimum amount is: a. one hundred and fifty million rupees, or such higher amount as may be prescribed by the Federal Government, for an insurer carrying on life insurance business; and b. eighty million rupees, or such higher amount as may be prescribed by the Federal Government, for an insurer carrying on non-life insurance business; Provided that in respect of clause (a), for an insurer authorised to carry on life insurance business on the commencement date the required minimum amount shall not be less than one hundred million rupees by 31st December 2002 and one hundred and fifty million rupees or such higher amount as may be prescribed by 31st December 2004. Provided further that in respect of clause (b), for an insurer authorised to carry on non-life insurance business on the commencement date the required minimum amount shall not be less than fifty million rupees by 31st December 2002 and eighty million rupees or such higher amount as may be prescribed by 31st December 2004. Provided further that in respect of both clause (a) and clause (b), for the period until 31st December 2002, for an insurer authorised to carry on insurance business on the commencement date the required minimum amount shall be that set out in section 6 of the repealed Act. iii. An insurer, not having a share capital, shall not be required to comply with this section.

29. Deposits. i. Every insurer shall, in respect of the insurance business carried on by him in Pakistan, deposit and keep deposited with the State Bank of Pakistan, in one of the offices in Pakistan of the State Bank of Pakistan for and on behalf of the Federal Government the required minimum amount specified in sub-section (2), either in cash or in approved securities estimated at the market value of the securities on the day of deposit, or partly in cash and partly in approved securities so estimated. ii. For the purposes of this section the required minimum amount is, either: a. the higher of ten million rupees and ten per cent. (10%) of the insurers paid-up capital; or

b.

such amount as may be prescribed by the Commission: Provided that the Commission may, subject to achievement of levels of solvency as required by this Ordinance, abolish the requirement for deposits specified by this section by reducing the required minimum amount to zero.

iii.

A deposit made in cash shall be held by the State Bank of Pakistan to the credit of the insurer and shall except to the extent, if any, to which the cash has been invested in securities under sub-section (5), be returnable to the insurer in cash in any case in which, under the provisions of this Ordinance, a deposit is to be returned; and any profit or return (howsoever called or designated) accruing due and collected on securities deposited under subsection (1) shall be paid to the insurer, subject only to deduction of the normal commission chargeable for the realisation of profit or return (however called or designated). The insurer may at any time replace any securities deposited by him under this section with the State Bank of Pakistan either by cash or by other approved securities or partly by cash and partly by other approved securities provided that such cash, or the value of such other approved securities estimated at the market rates prevailing at the time of replacement, or such cash together with such value, as the case may be, is not less than the value of the securities replaced estimated at the market rates prevailing when they were deposited. The State Bank of Pakistan shall, if so requested by the insurer: a. sell any securities deposited by him with the Bank under this section and hold the cash realised by such sale as deposit, or b. invest in approved securities specified by the insurer the whole or any part of a deposit held by it in cash or the whole or any part of cash received by it on the sale of or on the maturing of securities in which investment is so made as deposit, and may charge the normal commission on such sale or on such investment.

iv.

v.

vi.

Where sub-section (5) applies, if the cash realised by the sale of or on the maturing of the securities (excluding, in the former case, the profit or return (however called or described) accrued) falls short of the market value of the securities at the date on which they were deposited with the Bank, the insurer shall make good the deficiency by a further deposit either in cash or in approved securities estimated at the market value of the securities on the day on which they are deposited, or partly in cash and partly in approved securities so estimated, within a period of two months from the date on which the securities matured or were sold and, unless he does so. the insurer shall be deemed to have failed to comply with the requirements of this section as to deposits. If any part of a deposit made under this section is used in the discharge of any liability of the insurer, the insurer shall deposit such additional sum in cash or approved securities estimated at the market value of the securities on the day of deposit, or partly in cash and partly in such securities, as will make up the amount so used. The insurer shall be deemed to have failed to comply with the requirements of sub-section (1), unless the deficiency is supplied within a

vii.

period of two months from the date when the deposit or any part thereof is so used for discharge of liabilities. viii. The market value on the day of deposit of securities deposited in pursuance of any of the provisions of this Ordinance with the State Bank of Pakistan shall be determined by the State Bank of Pakistan whose decision shall be final.

30. Reservation of deposits. i. Any deposit made under section 29 shall be deemed to be part of the assets of the insurer but shall not be the subject of any encumbrance; nor shall it be available for the discharge of any liability of the insurer other than liabilities arising out of policies of insurance issued by the insurer, so long as any such liabilities remain undischarged; nor shall it be liable to attachment in execution of any decree except a decree obtained by a policy holder of the insurer in respect of a debt due upon a policy which debt the policy holder has failed to realise in any other way. ii. Where a deposit is made in respect of life insurance business the deposit made in respect thereof shall be deemed to be a part of the assets of the shareholders fund. A deposit which, at the commencement date, was, under the repealed Act, an asset of a life insurance fund established under that Act, shall, on or before the date of conversion of that fund under section 25 be transferred to the shareholders fund against receipt of the full value of the deposit. In this section the term full value of the deposit means the cash or the market value of other assets forming the deposit, as certified by the State Bank of Pakistan. For the period from the commencement date and until 31st December 2001, no insurer which was carrying on life insurance business on the commencement date or which succeeds to an insurer which was carrying on life insurance business on the effective date shall be regarded as being in contravention of the Ordinance by reason only that the statutory deposit required by this Part to be made in the shareholders fund has not been made either in part or in full, provided that the sum of the statutory deposit which has been made in the shareholders fund and the statutory deposit which was made in the life insurance fund under the repealed Act and continues to exist as at the relevant date is equal to or greater than the amount required by this Part to be made as a statutory deposit by the insurer.

iii.

iv.

v.

31. Refund of deposits. An insurer may at any time apply to the Commission for consent to return of such portion of the deposit as is in excess of any amount which the insurer is required under this Ordinance to keep deposited, and such consent shall not be unreasonably withheld.

INSURANCE ORDINANCE, 2000

PART V SOLVENCY REQUIREMENTS
32. Admissible Assets. i. For the purposes of this Part, the following are admissible assets: a. Government securities except to the extent that they are subject to any encumbrance; b. assets deposited with the State Bank of Pakistan under section 29; and assets, other than assets referred to in clause (a) or clause (b), not specified in sub-section (2) not to be admissible assets; and assets, being assets referred to in clause (g) of sub-section (2), in respect of which the Commission has declared that those assets are to be admissible for the purposes of this Part.

c.

d.

ii.

For the purposes of this Part, subject to sub-section (1), the following are not admissible assets: a. in a statutory fund of a life insurer, a loan to, capital transfer to or other interest in the shareholders fund of the life insurer; b. in a statutory fund of a life insurer, any asset to the extent that it exceeds such percentage as may be prescribed by the Commission of the value of the fund (being the market value of assets less liabilities other than policyholder liabilities); in the shareholders fund of a life insurer, a loan to, capital transfer to or other interest in a statutory fund of the life insurer; loans (not being loans secured against life insurance policies) to directors, shareholders, agents or employees of the insurer, and accrued profit or return (however called or described) thereon: Provided that a person holding less than one per cent. of the shares of the insurer shall not be considered to be a shareholder for the purposes of this clause. Provided, further, that a loan and accrued profit or return (however called or described) thereon to an employee of an insurer, not being a director of the insurer, shall not be inadmissible by virtue only of the operation of this clause, to the extent that the loan is secured against immovable property. e. loans to life insurance policyholders of the insurer, to the extent that these, together with accrued profit or return (however called or described) thereon, exceed the surrender value of the policies against which they are secured;

c.

d.

f.

loans which are secured against immovable property, to the extent that they exceed, in the aggregate, such percentage as may be prescribed by the Commission of the insurers total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders fund; balances with, shares in, loans to or other amounts due from any body that is related to the insurer or to any director of the insurer; premiums due and payable to the insurer but not paid for more than three months from the date due and payable; Provided that in the case of a life insurer a premium which has not been paid shall be deemed to have been paid to the extent that the provisions of clause (b) of sub-section (4) of section 93 have been applied in respect of that premium;

g.

h.

i.

intangible assets, including but not limited to goodwill, brand names and capitalised establishment costs; deferred tax asset balances; amounts available to the insurer under guarantees; assets subject to encumbrances;

j. k. l.

m. unpaid share capital; n. any unit of immovable property, to the extent that it exceeds such percentage as may be prescribed by the Commission of the insurers total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders fund; immovable property, to the extent that it exceeds in total such percentage as may be prescribed by the Commission of the insurers total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders fund; shares in any one company or group of related companies, to the extent that they exceed such percentage as may be prescribed by the Commission of the insurers total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders fund; shares of listed companies, to the extent that they exceed, in the aggregate, such percentage as may be prescribed by the Commission of the insurers total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders fund;

o.

p.

q.

r.

shares of companies (not being listed companies), to the extent that they exceed, in the aggregate, such percentage as may be prescribed by the Commission of the insurers total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders fund; immovable property and shares in the aggregate, to the extent that they exceed such percentage as may be prescribed by the Commission of the insurers total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders fund; loans to any person or group of related persons, to the extent that they exceed such percentage as may be prescribed by the Commission of the insurers total investments or, in the case of a life insurer, such percentage as may be prescribed by the Commission of the total investments of the relevant statutory fund or shareholders fund; (i) vehicles; i. office equipment and ii. fixtures and fittings which are not immovable property;

s.

t.

u.

v.

such assets as the Commission may prescribe; and

w. assets which are declared by the Commission, pursuant to sub-section (9), not to be admissible assets of an insurer or of a life insurance statutory fund maintained by an insurer. iii. The Commission may, in prescribing matters referred to in sub-section (2), make separate prescription in respect of insurers carrying on life insurance business and those carrying on non-life insurance business; and within the category of life insurance business may make separate prescription in respect of statutory funds which are required by this Ordinance to be established for the conduct of a particular category of life insurance business. For the purposes of this section, the provisions of clauses (p), (q) and (r) of sub-section (2) shall extend mutatis mutandis to investments made in shares (or equity securities by whatever name called) of a body corporate incorporated in a jurisdiction other than Pakistan. For the purposes of this section, immovable property is a "unit" where it is the smallest discrete parcel of immovable property, consisting of land or buildings and structures constructed thereon or both, owned by an insurer and is capable of being lawfully the subject of a transfer or other disposition of the whole of the legal and beneficial interest, without the necessity for any consent, licence, permit or approval from any governmental authority to divide or sub-divide the parcel in order to transfer or otherwise make a disposition of the whole of the legal and beneficial interest therein. In this section, "investments" includes all forms of shares, debentures, bonds, deposits and other securities and derivative instruments, and includes immovable property whether or not occupied by the insurer.

iv.

v.

vi.

vii.

For the purposes of this section, two or more persons are "related" if they are under common control, or if they are connected by an ownership interest of more than 49% or, if they are natural persons, they are members of the same family. A declaration by the Commission under clause (d) of sub-section (1): a. may be made on the application of the insurer; b. c. shall be made in writing to the insurer; shall not be made unless the Commission believes on reasonable grounds, having regard to the circumstances of the insurer, the interests of policyholders of the insurer, the nature of the assets in respect of which the application is made and the nature of the other assets and the liabilities of the insurer, that: I. such a declaration will not adversely affect the ability of the insurer to meet its liabilities, including policyholder liabilities, as they fall due; II. such a declaration is not inconsistent with the principles of sound and prudent management of the insurer set out in section 12; and such a declaration ought to be made;

viii.

III. d.

may be made in respect of the whole of the assets in respect of which application is made, or of such part thereof as the Commission may direct; shall be made subject to such conditions as the Commission may direct; shall have effect not more than three months from the date of such declaration; and shall remain in force for a period of not more than twelve months from the date at which the declaration has effect, unless revoked in writing by the Commission before the expiry of that time.

e.

f.

g.

ix.

A declaration by the Commission under clause (w) of sub-section (2): a. shall be made in writing to the insurer; b. shall not be made unless the Commission believes on reasonable grounds, having regard to the circumstances of the insurer, the nature of the assets and the nature of the other assets and the liabilities of the insurer, and after giving the insurer a chance to be heard, that the assets should be declared not to be admissible assets of that insurer or of a life insurance statutory fund of that insurer; shall have effect not less than three months from the date of such declaration; and shall continue until it is revoked in writing by the Commission.

c.

d.

33. Assets and liabilities in Pakistan. i. For the purposes of this Part, an asset is an asset in Pakistan if a. it is immovable property situated in Pakistan; b. it is movable property (other than money, debts or other actionable claims) physically located in Pakistan and owned by and in the possession of a person resident in Pakistan and no person (other than the owner thereof) has any better right to possession thereof whether by virtue of an encumbrance or otherwise and is lawfully entitled to take it out of Pakistan or remove it from Pakistan; it is money or a debt or an actionable claim denominated or payable only in rupees in Pakistan; or it is money or a debt or an actionable claim denominated or payable in a currency other than rupees in respect of which any person has a right to sue and recover the same by proceedings in Pakistan or it is required by law to be received in Pakistan by or is payable to a person resident in Pakistan.

c.

d.

ii.

For the purposes of this Part, where a liability is undertaken by a person under: a. a contract of insurance made in Pakistan or in respect of which a proposal was accepted or a policy issued in Pakistan, not being a contract . that relates only to a liability contingent upon an event that can happen only outside Pakistan, not being a liability that the person has undertaken to satisfy in Pakistan; or I. where the person carries on insurance business both in and outside Pakistan, that relates only to a liability that the person has undertaken to satisfy outside Pakistan; or

b.

a contract of insurance made outside Pakistan or in respect of which a proposal was accepted or a policy issued outside Pakistan where any part of the negotiations or arrangements leading to the making of the contract, to the acceptance of the proposal or to the issue of the policy took place or were made in Pakistan, being a contract . that relates to a liability contingent upon an event that can happen only in Pakistan; or I. where the person carries on insurance business both in and outside Pakistan, that relates to a liability that the person has undertaken to satisfy in Pakistan; that liability is a liability in Pakistan.

34. Valuation of assets and liabilities. i. For the purposes of this Part, assets and liabilities shall, subject to sub-section (2), be valued in accordance with such accounting rules as may be prescribed by the Commission.

ii.

For the purposes of this Part, as at any date (the "balance date") to which a statement of assets and liabilities (however called or described) is made up: a. no asset of an insurer shall be valued at more than the amount, net of transaction costs incurred by the transferor, at which it could be transferred in an orderly market in a transaction between two willing but not anxious parties; b. no liability of an insurer, not being a policyholder liability, shall be valued at less than the amount, including transaction costs incurred by the transferor, at which it could be transferred in an orderly market in a transaction between two willing but not anxious parties; the liability for outstanding claims of a non-life insurer shall not be valued at less than the expected settlement cost, including settlement expenses, of all claims incurred by the insurer but not paid as at the balance date, whether or not those claims have been reported to the insurer as at that date, and including prudent but reasonable provision for adverse development in that expected settlement cost after balance date; and the liability for unexpired risk of a non-life insurer shall not be valued at less than the sum of the unearned premium reserve and the premium deficiency reserve, where: . the unearned premium reserve is the unexpired portion of the premium which relates to business in force at the balance date; and I. the premium deficiency reserve is the amount if any by which the expected settlement cost, including settlement expenses but after deduction of expected reinsurance recoveries, of claims expected to be incurred after the balance date in respect of policies in force at the balance date, exceeds the unearned premium reserve.

c.

d.

iii.

The Commission may prescribe guidelines for the estimation of amounts set out in sub-section (2).

35. Net admissible assets of life insurers. i. A life insurer shall at all times maintain in its shareholders fund a surplus of admissible assets in Pakistan over liabilities in Pakistan of not less than the required minimum amount. ii. For the purposes of the preceding sub-section, the required minimum amount is seventy-five million rupees or such higher amount as may be prescribed: Provided that for the period from the commencement date and until 31st December 2004, in respect of an insurer which is authorised to carry on insurance business on the commencement date, this sub-section shall apply as if the amount of seventy-five million rupees specified therein shall be substituted by the amount of thirty million rupees. iii. A life insurer shall, in each statutory fund maintained by it for the conduct of business other than investment-linked business, maintain at all times a

surplus of admissible assets in Pakistan over liabilities in Pakistan, other than policyholder liabilities, equal to or greater than the amount of policyholder liabilities calculated in accordance with such principles as may be prescribed by the Commission. iv. A life insurer shall, in each statutory fund maintained by it for the conduct of investment-linked business, maintain at all times a surplus of admissible assets in Pakistan over liabilities in Pakistan, other than policyholder liabilities, equal to or greater than a sum calculated in accordance with such principles as may be prescribed by the Commission. A life insurer shall, in each statutory fund maintained by it, maintain at all times, in each currency in which the policy liabilities of that statutory fund are denominated, a surplus of admissible assets denominated in such currency over liabilities including policyholder liabilities denominated in such currency, in an amount to be determined in accordance with such provisions in this respect as the Commission shall prescribe. Where a life insurer has issued policies the benefits under which are payable in a currency other than Pakistan Rupees, securities denominated in that currency and issued and guaranteed as to principal and profit or return (however called or designated) by the Government of the country in whose currency such benefits are expressed, shall be deemed for the purposes of this section to be admissible assets of a statutory fund to which such policies are referable. The Federal Government may prescribe a percentage or percentages of the assets of the shareholders fund of a life insurer, or of a statutory fund of a life insurer, other than a statutory fund which contains only investment-linked policies, which shall be invested in Government securities, or in a combination of Government securities and other approved securities. The aggregate of percentages prescribed under sub-section (7) shall not exceed forty per cent.

v.

vi.

vii.

viii.

36. Insurers of non-life insurance business to have assets in excess of

minimum solvency requirement.

i. An insurer registered under this Ordinance to carry on non-life insurance business shall at all times have admissible assets in Pakistan in excess of its liabilities in Pakistan of an amount greater than or equal to the minimum solvency requirement. An insurer incorporated in Pakistan and registered under this Ordinance to carry on non-life insurance shall at all times have admissible assets in excess of its liabilities of an amount greater than or equal to the minimum solvency requirement. For the purposes of this section, the minimum solvency requirement is the greatest of: a. such required minimum amount as may be prescribed by the Commission;

ii.

iii.

b.

such percentage as may be prescribed by the Commission of its earned premium revenue in the preceding twelve months, net of reinsurance expense subject to a maximum deduction for reinsurance of fifty per cent of the gross figure; and such percentage as may be prescribed by the Commission of the sum of its liability for unexpired risk and its liability for outstanding claims, net of reinsurance subject to a maximum deduction for reinsurance in each case of fifty per cent of the gross figure: Provided that in the case of an insurer incorporated in a jurisdiction outside Pakistan the amounts set out in clauses (b) and (c) of this subsection shall be calculated with reference to the earned premium revenue, unexpired risk liability and outstanding claims liability and related reinsurance balances of that insurer in respect of its insurance business in Pakistan only.

c.

iv.

The Commission may direct an insurer not to deal with any specified asset for any specified period of time in order to ensure compliance by the insurer with the provisions of this Part.

37. Prohibition of loan. i. No insurer shall grant to, or to any member of the family of, any director, chief executive, appointed actuary, or auditor of the insurer any loan or temporary advance, whether secured by an encumbrance of property or otherwise except a loan, secured by a life policy issued by the insurer, of not more than eighty per cent. of the surrender value of that policy. ii. Except with the prior approval of the Board of Directors at a regularly convened meeting by the vote of not less than two-thirds of the total number of directors, no insurer shall grant any loan or temporary advance to any firm or company in which any director, manager, actuary, auditor or officer of the insurer, or any member of the family of such director, manager, actuary, auditor or officer has any interest as proprietor, partner, director, manager or managing agent: Provided that no such approval shall be required if the loan is secured by a life policy issued by the insurer and is an amount not exceeding eighty per cent. of the surrender value of that policy. iii. The director concerned shall not vote at, or otherwise participate in the proceedings of the meeting of the Board considering the grant of any such loan or advance as is referred to in sub-section (2). Where any event occurs giving rise to circumstances the existence of which at the time of the grant of any subsisting loan or temporary advance would have made such grant a contravention of sub-section (1) or sub-section (2), such loan shall, notwithstanding any contract to the contrary, be repaid within three months from the occurrence of such event and in case of default, the director, manager, actuary, auditor or officer concerned shall, without prejudice to any other penalty to which he may be liable, cease to hold office with the insurer granting the loan or advance on the expiry of the said three months.

iv.

v.

Nothing in sub-section (1) or sub-section (2) shall apply to loans or advances granted by an insurer to a banking company or to a subsidiary company (being an insurer) or to any insurer to which the insurer granting the loan or advance is a subsidiary company. Nothing in sub-section (1) shall apply to any stipend paid to any insurance agent while he is undergoing a course of training approved by the Federal Government. The provisions of section 195 of the Companies Ordinance, 1984 (XLVII of 1984), shall not apply to a loan granted to a director of an insurer being a company, if the loan is one granted on the security of a policy on which the insurer bears risk and the policy was issued to the director on his own life, and the loan is of an amount not more than eighty per cent. of the surrender value of the policy. Except as otherwise provided in this section, an insurer may make a loan or temporary advance to an employee or agent of that insurer in accordance with such conditions as may be prescribed by the Commission. With effect from the commencement date, no loan or temporary advance granted under this section by a life insurer to an employee or an agent of the insurer, other than a loan granted on the security of a policy issued to the employee or agent on his own life and on which the insurer bears risk, shall be made other than from the shareholders fund of the insurer.

vi.

vii.

viii.

ix.

38. Liability of directors, etc for loss due to contraventions of sections 35,

36 or 37.
If by reason of a contravention of any of the provisions of sections 35, 36 or 37, any loss is sustained by the insurer or by the policy holders, every director, manager or officer of the insurer who is knowingly a party to such contravention shall, without prejudice to any other penalty to which he may be liable under this Ordinance, be jointly and severally liable to make good the amount of such loss. 39. Assets of insurer how to be kept. None of the assets in Pakistan of any insurer shall, except in the case of deposits made with the State Bank of Pakistan under section 29, or in the case of assets, other than deposits, with a scheduled bank acting as a custodian, be kept otherwise than in the corporate name and under the direct control of the insurer and, in the case of assets of a statutory fund of a life insurer, in the name of the statutory fund.

INSURANCE ORDINANCE, 2000

PART VI REINSURANCE ARRANGEMENTS
40. Special definitions and conditions applicable to this Part. i. In this Part: a. "Company" means the Pakistan Reinsurance Company Limited; and b. "net retention" means the part of the sum insured in respect of any one risk which is retained by an insurer to his own account.

ii.

This Part, other than section 41, shall cease to have effect on the happening of either of the following events: a. the effective date of a direction by the Commission to the Company to cease entering into new contracts of insurance; or b. the Federal Government ceasing to hold a controlling ownership interest in the Company.

iii.

A provision of this Part, other than section 41, shall not have effect with respect to an insurer if and to the extent that complying with that provision would cause that insurer to contravene a provision of section 11 or section 41. For the purposes of this Part other than section 41 and this section, the Company is not an insurer.

iv.

41. Requirement to effect and maintain reinsurance arrangements. i. An insurer shall effect and shall at all times maintain such reinsurance arrangements as are, in the opinion of the directors (or such other person or body responsible for conducting the management and business of the insurer), formed on reasonable grounds, having regard to the exposures of the insurer in respect of individual contracts accepted and in respect of aggregate losses arising out of individual events, adequate to ensure continuing compliance by the insurer with the provisions of this Ordinance relating to solvency. ii. Every insurer shall submit to the Commission, in the manner prescribed by the Commission and not less than one month prior to the coming into effect, or as soon as practicable thereafter, of any treaty reinsurance arrangement entered into by the insurer as cedant, such features of that reinsurance arrangement as may be prescribed by the Commission. Where any reinsurance treaty the particulars of which have been submitted to the Commission under sub-section (2) is altered or any new treaty reinsurance arrangement is made after the submission of the information under subsection (2), the insurer concerned shall submit to the Commission, in the manner prescribed by the Commission, particulars of such alteration in the treaty or such new treaty reinsurance arrangement within one month of such alteration or arrangement and shall submit such further information or clarification as the Commission may require.

iii.

iv.

The Commission may, at any time and after giving the insurer an opportunity of being heard, for reasons to be recorded in writing, direct the insurer to make such modifications in his reinsurance arrangements as the Commission may specify. The Federal Government may make rules, not inconsistent with sub-section (1), governing the reinsurance outside Pakistan, other than on a treaty basis, of insurance business underwritten by an insurer in Pakistan.

v.

Explanation:
For the purposes of this section, "reinsurance" includes "retrocession". 42. Compulsory cession. i. Every insurer shall in each year reinsure with the Company and the Company shall accept by way of reinsurance not less than such proportion, subject to the maximum of twenty per cent on any individual risk, of the sum insured on each direct non-life insurance contract issued by the insurer in Pakistan in that year, as is determined on such basis as may, from time to time, be notified by the Federal Government in the official Gazette. ii. The Federal Government may, by notification in the official Gazette, direct that every insurer shall offer to reinsure with the Company such proportion as is determined on such basis as may be specified in such notification of its direct non-life insurance business which is in excess of the aggregate of: a. the insurers net retention; b. c. the sum insured required to be reinsured under sub-section (1); and the sum insured otherwise reinsured with the Company or with any other insurer in Pakistan but excluding any part reinsured outside Pakistan.

iii.

The reinsurance set out in sub-section (1) shall for the purposes of this Ordinance constitute a treaty contract of reinsurance between the insurer and the Company, operating on a risks attaching basis. Whoever contravenes the foregoing provisions of this section shall be punishable with a fine which may extend to ten thousand rupees and with a further fine which may extend to one thousand rupees for every day after the day on which the contravention continues. The Federal Government may, by notification in the official Gazette and on reasonable grounds, exempt any insurer and the Company from the preceding requirements of this section so far as concerns any part of any class or subclass of business.

iv.

v.

43. Premiums and statements. i. Every insurer shall pay the amount payable on account of reinsurance with the Company as required under sub-section (1) of section 42, within such period as may be prescribed by regulations and in default of such payment shall be liable to pay the Company for the period during which the default continues a penalty calculated on the amount of the defaulted premium at the base rate prevailing on the date on which the default first occurred.

ii.

Every insurer shall submit to the Company in such manner and form and within such period as may be prescribed by regulations, a statement relating to his business reinsured with the Company under sub-section (1) of section 42. Whoever contravenes sub-section (1) or sub-section (2) shall be punishable with a fine which may extend to ten thousand rupees and with a further fine which may extend to one thousand rupees for every day after the day on which the contravention continues. The Company may call for or examine or cause to be examined such relevant accounts, books, documents, memoranda or other records of an insurer as it may reasonably require for the purpose of verifying the correctness of the claims, declarations, returns, statements or other information submitted to it by that insurer. An insurer shall, when called upon to do so under sub-section (4), produce and make freely accessible to the Company or to its representative duly authorised in this behalf such accounts, books, documents, memoranda or other records as are in his possession or control, and shall otherwise facilitate the examination thereof. Whoever wilfully obstructs the Company or any person authorised by it in the exercise of its or his power or performance of functions under sub-section (4), or fails without reasonable cause to comply with a request made thereunder, or who, being an insurer, fails otherwise to comply with a duty imposed on that insurer under sub-section (5), shall, in respect of each occasion on which any such obstruction or failure takes place, be punishable with fine which may extend to fifty thousand rupees.

iii.

iv.

v.

vi.

44. Rules and regulations for the administration of compulsory

reinsurances.
i. The Federal Government may make such rules and regulations and issue such notifications as are necessary for the administration of section 42 and section 43. Rules, regulations and notifications, made under the authority of the Pakistan Insurance Corporation Act 1952 for the purposes of section 26 of that Act and in force as at the commencement date, shall be deemed to have been made under the provisions of the preceding sub-section and shall apply mutatis mutandis except in so far as and to the extent that they conflict with the provisions of this Ordinance.

ii.

INSURANCE ORDINANCE, 2000

PART VII ACCOUNTS AND AUDIT
45. Books and records. i. Every insurer, in respect of all insurance business transacted by him, and in the case of an insurer incorporated in a jurisdiction outside Pakistan in respect of the insurance business transacted by the insurer in Pakistan, shall maintain proper books and records. ii. Books, accounts and records in respect of insurance business transacted in Pakistan shall be maintained in Pakistan and in either the English or the Urdu language. For the purposes of this Ordinance, proper books and records shall include without limitation: a. a register or record of policies, in which shall be entered, in respect of every policy issued by the insurer, the name and address of the policy holder, the date when the policy was effected and a record of any transfer, assignment or nomination of which the insurer has notice; b. a register or record of claims, in which shall be entered every claim made together with the date of the claim, the name and address of the claimant and the date on which the claim was discharged, or, in the case of a claim which is rejected, the date of rejection and the grounds therefor; and such other books and records as may from time to time be prescribed.

iii.

c. iv.

For the purposes of this Ordinance, the expression "books" includes a. a register; b. accounts or accounting records, however compiled, recorded or stored; a document; and any other record of information.

c. d. v.

A book that is required by this Ordinance or the Companies Ordinance, 1984 to be kept or prepared by an insurer may be kept or prepared a. by making entries in a bound or looseleaf book; b. by recording or storing the matters concerned by means of a mechanical, electronic or other device; or in any other manner approved by the Commission. Provided that the matters recorded or stored are capable, at any time, of being reproduced in a written form or a reproduction of those matters is kept in a written form approved by the Commission.

c.

vi.

An insurer shall take all reasonable precautions, including such precautions, if any, as may be prescribed, for guarding against damage to, destruction of or falsification of or in, and for discovery of falsification of or in, any book or part of a book required to be kept or prepared by an insurer.

46. Accounting and reporting. i. Every insurer shall at the expiration of each year prepare and deliver to the Commission with reference to that year annual statutory accounts comprising the following statements duly audited by an approved auditor: a. in the case of a life insurer, I. a statement of assets and liabilities for each statutory fund operated by the life insurer and the shareholders fund; II. III. a statement of profits and losses for the shareholders fund; a statement of cash flows for each statutory fund operated by the life insurer and the shareholders fund; a revenue account for each statutory fund operated by the life insurer; a statement of premiums for each statutory fund operated by the life insurer; a statement of claims for each statutory fund operated by the life insurer; a statement of expenses for each statutory fund operated by the life insurer; a statement of investment income for each statutory fund operated by the life insurer such other statements as may be prescribed by the Federal Government;

IV.

V.

VI.

VII.

VIII.

IX.

b.

each in such form as may be prescribed by the Commission and prepared in accordance with such regulations as are issued by the Commission from time to time in this behalf; in the case of a non-life insurer, I. a statement of assets and liabilities; II. III. IV. V. VI. VII. a statement of profits and losses; a statement of cash flows; a statement of premiums; a statement of claims; a statement of expenses; a statement of investment income;

VIII. IX. X.

a statement of claims analysis; a statement of exposures; and such other statements as may be prescribed by the Federal Government; each in such form as may be prescribed by the Commission and prepared in accordance with such regulations as are issued by the Commission from time to time in this behalf.

ii.

Every insurer shall furnish, to the Commission, following the last day of December, March, June and September in each year, a statement of assets and liabilities in the form and prepared in accordance with the regulations prescribed under the preceding sub-section made up as of that date and such statement shall be certified by a principal officer of the insurer. Provided that an actuarial valuation of policyholder liabilities as at the date to which such statement is made up is not required by virtue of this sub-section alone, and that the regulations prescribed under this sub-section shall provide for the determination of the value which is to be attributed to policyholder liabilities for the purposes of this sub-section.

iii.

In the case of an insurer registered to conduct life insurance business, such statement shall be furnished separately in respect of each statutory fund maintained by the life insurer and in respect of the shareholders fund. The statements referred to in the foregoing sub-sections shall be prepared in respect of all insurance business transacted by an insurer except that in the case of an insurer incorporated in a jurisdiction outside Pakistan, the statement shall be prepared in respect of the insurance business transacted by the insurer in Pakistan. In the case of a life insurer having in force policies which are investmentlinked, the statement referred to in sub-section (2) shall be accompanied by a statement, signed in the case of a company by any two directors and the principal officer of the company, and in the case of an insurer incorporated in a jurisdiction outside Pakistan, by its principal officer in Pakistan and any two directors (or the closest comparable officer equivalent thereto), containing the following particulars in respect of its investment-linked business: a. the assets underlying the units linked to policies in force; b. c. d. the values assigned to each such asset; the valuation placed on the units; and the amount of any provisions made in determining the valuation.

iv.

v.

vi.

The statements referred to in sub-section (1) shall be signed, in the case of a company, by the chairman, if any, and two directors and the principal officer of the company, or in the case of an insurer incorporated in a jurisdiction outside Pakistan, by its principal officer in Pakistan and any two directors (or the closest comparable officer equivalent thereto) and shall be accompanied by a statement containing the names and descriptions of the persons in charge

of the management of the business during the period to which such accounts and statements refer; by a report by such persons on the affairs of the business during that period; and a statement by such persons signed by the same persons who have signed the accounts that a. in their opinion the annual statutory accounts of the insurer set out in the forms attached to the statement have been drawn up in accordance with the Ordinance and any rules made thereunder; b. the insurer has at all times in the year complied with the provisions of the Ordinance and the rules made thereunder relating to paid-up capital, solvency and reinsurance arrangements; and as at the date of the statement, the insurer continues to be in compliance with the provisions of the Ordinance and the rules made thereunder relating to paid-up capital, solvency and reinsurance arrangements.

c.

47. Compliance with companies laws relating to accounts, reports, etc. i. Every insurer being a company shall deliver to the Commission in such manner as may be prescribed such additional copies as may be prescribed of all accounts, documents, reports and returns filed under the Companies Ordinance, 1984 at the same time as they are required to be filed thereunder. ii. An insurer incorporated in a jurisdiction outside Pakistan registered as an insurer shall comply with all applicable requirements of Part XIV of the Companies Ordinance, 1984 and shall provide to the Commission in such manner as may be prescribed such additional copies as may be prescribed of all accounts, documents, reports and returns filed thereunder at the same time as they are required to be filed under the Companies Ordinance, 1984 (XLVII of 1984); In addition to the requirements of the foregoing sub-section, an insurer which is an insurer incorporated in a jurisdiction outside Pakistan, shall also provide to the Commission, not later than thirty days from such date on which such insurer is required to provide such information to any governmental or independent regulatory authority in accordance with the laws of the jurisdiction of its incorporation or other applicable law in the country in which it has its corporate seat or principal place of business, a copy of the annual accounts prepared under the laws of the place of its incorporation and a copy of any public document which shows or purports to show the annual profit or state of affairs of the insurer in respect of its business in Pakistan. Any materials required to be provided under the provisions of sub-sections (2) and (3), if not in either the English or the Urdu language, shall be accompanied by certified copies (in such number as may be required under the Companies Ordinance, 1984 or as may otherwise be prescribed by the Commission) of an English translation thereof.

iii.

iv.

48. Audit. i. Every insurer shall appoint an auditor who shall be: a. approved by the Commission as qualified to perform audits of insurance companies; and

b.

authorised under the Companies Ordinance to perform audits of public companies. The auditor shall in respect of the statements required to be provided pursuant to sub-section (1) of section 46 express an opinion as to whether: the statements accurately reflect the books and records of the company; the company has maintained proper books and records; the statements present fairly the state of affairs of the company as at the balance date and the result of the company for the financial year ended on that date; in the case of a life insurer, the apportionment required to be performed under section 17 has been performed in accordance with the advice of the appointed actuary; and the statements have been prepared in accordance with this Ordinance.

ii.

a. b.

c.

d.

iii.

The opinion required to be expressed by an auditor under sub-section (2) shall be expressed in writing and a copy of the opinion shall be attached by the insurer to the statements to which it relates, when those statements are delivered to the Commission. The auditor shall in the audit of all such accounts and statements have the powers of, exercise the functions vested in, and discharge the duties and be subject to the liabilities and penalties imposed on, auditors of companies by sections 255, 256, 257 and 260 of the Companies Ordinance, 1984.

iv.

49. Special audit. i. The Commission may at its discretion appoint an auditor, approved by the Commission as qualified to perform audits of insurance companies but not being the auditor, or a partner of the auditor appointed by the insurance company concerned, to perform an investigation of such accounts and statements, books and records of an insurer as the Commission may direct. ii. An auditor appointed under this section shall have a right of access to all such books of account, registers, vouchers, correspondence and other documents of the insurer, and shall be entitled to require from the directors and officers of this insurer such information and explanation, as may be necessary for the performance of his functions and duties under this section. Every report prepared by an auditor or auditors appointed under this section shall be submitted to the Commission. An auditor appointed under this section shall be paid by the insurer such fees as may be prescribed.

iii.

iv.

v.

The fee payable by an insurer under sub-section (4) shall be paid to the auditor within such time as may be specified by the Commission.

50. Actuarial report. i. Every insurer carrying on life insurance business shall, in respect of the life insurance business transacted by it, as at the end of each year cause an investigation to be made by the appointed actuary into the financial condition of the life insurance business carried on by it, including a valuation of its policyholder liabilities in respect thereto and shall cause the report of the appointed actuary to be made in accordance with such conditions as may be prescribed by the Commission. ii. The provisions of sub-section (1) regarding the making of a report shall apply whenever at any other time an investigation into the financial condition of the insurer is made with a view to the distribution of profits or an investigation is made of which the results are made public. There shall be appended to every such report as is referred to in sub-section (1) or sub-section (2) a certificate signed by the principal officer of the insurer that full and accurate particulars of every policy under which there is a liability either actual or contingent have been furnished to the appointed actuary for the purpose of the investigation. The financial condition report prepared under sub-section (1) shall include a statement, prepared in conformity with such conditions as may be prescribed in this behalf, of the life insurance in force at the date to which the accounts of the insurer are made up for the purposes of such report. The financial condition report prepared under sub-section (1) shall include a statement of the minimum actuarial reserve for policyholder liabilities calculated in the manner and on the basis prescribed by the Commission in this behalf.

iii.

iv.

v.

Explanation:
in this section, the "minimum actuarial reserve for policyholder liabilities" means, for each statutory fund of the insurer, the amount of policyholder liabilities referred to in sub-section (3) of section 35 or the sum referred to in sub-section (4) of section 35, whichever is applicable to that statutory fund. vi. If for any statutory fund the amount which, in the opinion of the appointed actuary, represents a realistic valuation of policyholder liabilities existing at balance date, including prudent but reasonable provision for adverse development in those liabilities after balance date, is greater than the minimum actuarial reserve for policyholder liabilities for that statutory fund, the financial condition report prepared under sub-section (1) shall include a statement of that amount. The Commission may require an insurer, or insurers generally, to cause an actuarial investigation to be conducted in such manner as may be prescribed in respect of such class or sub-class of non-life insurance business as may be prescribed, and to provide the Commission with a copy of the actuarys report on that investigation.

vii.

51. Submission of returns. i. The audited statements and report referred to in sub-sections (1) and (5) of section 46 and the report and statement referred to in section 50, including any report referred to in sub-section (7) of section 50, shall be furnished as returns to the Commission in such manner as may be prescribed by the Commission, but in any case including at least one printed copy, within four months from the end of the period to which they refer: Provided that the Commission may on application by an insurer extend the time allowed by this sub-section for the furnishing of such returns by a further period not exceeding one month. ii. The statement referred to in sub-section (2) of section 46 shall be furnished as a return to the Commission in such manner as may be prescribed by the Commission, but in any case including at least one printed copy, within six weeks from the date to which it is made up: Provided that the Commission may on application by an insurer extend the time allowed by this sub-section for the furnishing of such returns by a further period not exceeding fifteen days. iii. One printed copy of the returns shall be signed in the case of a company by the chairman and two directors and by the principal officer of the company and, if the company has a chief executive (by whatever name called), also by him, and in the case of the report and statement referred to in section 50 by the actuary who carried out the investigation. Until 31 December 2000, this section shall apply as though the periods of four months and six weeks contained therein shall be substituted respectively by periods of six months and eight weeks.

iv.

52. Exemption from certain provisions of the Companies Ordinance, 1984. i. The Commission may prescribe a form of balance sheet, profit and loss account, revenue account and any other statement required to be filed by life insurers for the purposes of sub-section (5) of section 233 of the Companies Ordinance, 1984 (XLVII of 1984), and filing made in such form shall satisfy the requirements of that sub-section. ii. The statements required to be filed by life insurers for the purposes of subsection (5) of section 233 of the Companies Ordinance, 1984 (XLVII of 1984), shall be deemed to include the following statements, each in such form as may be prescribed by the Commission: . a statement by the appointed actuary of his opinion as to whether the policyholder liability included in the balance sheet has been determined in accordance with the provisions of this Ordinance; i. a statement by the appointed actuary of his opinion as to whether each statutory fund of the insurer complies with the solvency requirements of this Ordinance; a statement by the directors of the insurer of their opinion as to whether each statutory fund of the insurer complies with the solvency requirements of this Ordinance; and

ii.

iii.

such other statements as may be prescribed by the Commission.

53. Furnishing reports. Every insurer shall furnish to the Commission a certified copy of every report on the affairs of the insurer which is submitted to the members or policy holders of the insurer immediately after its submission to the members or policy holders, as the case may be. 54. Abstract of proceedings of general meetings. Every insurer, being a company or body corporate incorporated under any law for the time being in force in Pakistan, shall furnish to the Commission a certified copy of the minutes of the proceedings of every general meeting as entered in the Minutes Book of the insurer within thirty days from the holding of the meeting to which it relates. 55. Custody and inspection of documents and supply of copies. i. Every return furnished to the Commission, or a certified copy thereof shall be kept by the Commission and shall be open to inspection; and any person may procure a copy of any such return, or of any part thereof, on payment of such fee as may be prescribed. ii. A printed or certified copy of the accounts, statements and report furnished in accordance with the provisions of section 46 shall, on the application of any shareholder or policy holder made at any time within two years from the date on which the document was so furnished be supplied, to him by the insurer within fourteen days when the insurer is a company or body corporate incorporated in Pakistan and in any other case within one month of such application. A copy of the memorandum and articles of association of the insurer, if a company, shall on the application of any policy holder, be supplied to him by the insurer on payment of such fee as may be prescribed.

iii.

56. Power of Commission regarding returns . If it appears to the Commission that any return furnished to it under the provisions of this Ordinance is inaccurate or defective in any material particular, it may: i. require from the insurer such further information, certified if the Commission so directs by an auditor or actuary, as the Commission may consider necessary to correct or supplement such return; ii. call upon the insurer to submit for its examination at the principal place of business of the insurer in Pakistan any book of account, register or other document or to supply any statement which the Commission may specify in a notice served on the insurer for the purpose; examine any officer of the insurer on oath in relation to the return; or decline to accept any such return unless the inaccuracy has been corrected or the deficiency has been supplied before the expiry of one month from the date on which the requisition asking for correction of the inaccuracy or supply of the deficiency was delivered to the insurer and if the Commission declines to accept any such return, the insurer shall be deemed to have failed to comply with the provisions of section 46 or section 51 relating to the furnishing of returns.

iii. iv.

57. Power of Commission to order actuarial report . i. If it appears to the Commission that a report prepared under section 50 does not properly indicate the condition of the affairs of the insurer, the Commission may after giving notice to the insurer and giving him an opportunity to be heard, cause an investigation to be made into the financial condition of the insurer as at such date as the Commission may specify, at the expense of the insurer, by an actuary appointed by the insurer for this purpose and approved by the Commission and the insurer shall place at the disposal of the actuary so appointed and approved all the material required by the actuary for the purposes of the investigation within such period, not being less than three months, as the Commission may specify. ii. Subject to sub-section (3), the provisions of sub-sections (1), (4), (5) and (6) of section 50, and of sub-section (1) of section 51 shall apply in relation to an investigation under this section: Provided that the report and statement prepared as the result of such investigation shall be furnished by such date as the Commission may specify. iii. Where the report first referred to in sub-section (1) was prepared pursuant to sub-section (7) of section 50, sub-section (2) shall not apply, and the provisions of sub-section (7) of section 50 shall apply in relation to an investigation under this section: Provided that the report prepared as the result of such investigation shall be furnished by such date and in such manner as the Commission may specify. 58. Evidence of documents. i. Every return furnished to the Commission, which has been certified by the Commission to be a return so furnished, shall be deemed to be a return so furnished. ii. Every document, purporting to be certified by the Commission to be a copy of a return so furnished, shall be deemed to be a copy of that return and shall be received in evidence as if it were the original return, unless some variation between it and the original return is proved.

INSURANCE ORDINANCE, 2000

PART VIII INVESTIGATION, DIRECTIVES, ETC.
59. Power of Commission to order investigation. i. If the Commission believes upon reasonable grounds that an insurer is or is likely to become unable to meet its liabilities or that there has been or is likely to be a contravention of the provisions of the Ordinance or the rules made thereunder by the insurer, it may investigate the affairs of an insurer and wherever necessary, employ an auditor or actuary or both for assisting it in any such investigation. ii. An investigation under sub-section (1) shall be commenced and carried out in accordance with the provisions of Part VIII of the SECP Act. Provided that for the purposes of this section, the words "the Court referred to in Part II of the Ordinance" contained in sub-section (1) of section 34 of the SECP Act shall be read as though they were omitted and replaced with the words "the Tribunal". iii. When an investigation is made under this section, the Commission may, after giving an opportunity to the insurer to make a representation in writing or be heard in person, by order in writing require the insurer to take such action in respect of any matter arising out of the investigation as it may consider on reasonable grounds to be necessary to secure compliance with the provisions of this Ordinance.

60. Power of the Commission to give directions to the insurer. i. The Commission may, if it believes on reasonable grounds that an insurer registered under this Ordinance has failed, or is about to fail, to comply with the conditions of registration set out in section 11, issue to the insurer such directions, not otherwise provided for in this Ordinance, as it believes on reasonable grounds to be necessary to protect the interests of the policy holders of the insurer. ii. The Commission may, on representation made in this behalf, or on its own motion, modify, or cancel any direction issued under sub-section (1) and may, in so modifying or cancelling a direction, impose such conditions as it may deem on reasonable grounds to be appropriate under the circumstances. Every insurer shall comply with any direction issued under sub-section (1) or such direction as modified under sub-section (2) subject to such further conditions, if any, as may be imposed. The Federal Government may, by rules made in this behalf, provide a. for the procedures which the Commission shall follow with respect to all or any of the matters set out in sub-sections (1) and (2); Provided that no powers shall be exercised under sub-section (1) until such rules, consonant with the provisions of sub-sections (3) and (4) of section 22 of the SECP Act, have been made; and

iii.

iv.

b.

for any other matter supplementary or incidental to or consequential on the matters aforesaid for which provision requires to be made by rules.

61. Power of Commission to call for information and access. i. The Commission may by notice in writing direct any insurer to supply the Commission, within such period as the notice may specify, with any information relating to its insurance business which the Commission may reasonably require. ii. The Commission may direct that any information supplied under sub-section (1) shall be certified by the principal officer of the insurer, by an independent auditor or in the case of a life insurer by the insurers appointed actuary. The Commission may by notice in writing direct the chief executive or principal officer of the insurer to discuss with the Commission any matter pertaining to the business or management of the insurer. The Commission may by notice in writing require the insurer to allow any officers of the Commission nominated for the purpose to observe, for such period as the Commission may specify, the manner in which the affairs of the insurer or of any of its offices or branches are being conducted.

iii.

iv.

62. Power of Commission to require plan. i. The Commission may direct an insurer to prepare, present to its directors and to the Commission, and to report to its directors and to the Commission on the implementation of, a plan for action to rectify or to prevent an actual or apprehended contravention by the insurer of the conditions of registration set out in section 11. ii. The Commission may in making a direction under sub-section (1) direct that such a plan or report on the implementation thereof contain such information and be accompanied by such opinions or certificates as the Commission shall specify.

63. Power of Commission to issue direction to cease entering into new

contracts of insurance.
i. The Commission may issue a direction to cease entering into new contracts of insurance if it believes on reasonable grounds that an insurer registered under this Ordinance has failed, or is about to fail, to comply with the conditions of registration set out in section 11. The Commission shall issue a direction to cease entering into new contracts of insurance if: a. a petition is presented for the winding up of the insurer and has not been withdrawn or vacated within a period of sixty days; b. the whole of the business of an insurer has been transferred to any person; the Tribunal has made an order that a direction be given to that insurer to cease entering into new contracts of insurance; or

ii.

c.

d.

the insurer has failed to comply with a directive issued under this Ordinance concerning a contravention of the Ordinance or the rules made thereunder, within the time specified in the Ordinance or, if not so specified, within the time specified in the directive or three months, whichever is longer, and the directive had stated that the failure to comply would lead to a direction to cease entering into new contracts of insurance: Provided that a direction shall not be issued under clause (d) without giving the insurer an opportunity to be heard.

iii.

A direction to cease entering into new contracts of insurance shall have effect one month from the date of the direction unless a later date is specified in the direction. A direction to cease entering into new contracts of insurance shall be accompanied by a statement of the reasons for the direction. A direction to cease entering into new contracts of insurance shall only be revoked if the reasons for the direction as given in the statement required to be given by the preceding sub-section shall have ceased to exist. An insurer shall not be in contravention of a direction to cease entering into new contracts of insurance by reason only that the insurer continues to carry out its obligations under contracts of insurance entered into before the direction came into effect.

iv.

v.

vi.

64. Power to require calling of meeting of directors etc. If the Commission is satisfied that such action is necessary for the purposes of procuring action by an insurance company, or of satisfying itself that appropriate action is being taken or after an investigation under section 56, the Commission may by order in writing and on such terms and conditions as may be specified therein: i. require an insurance company to call a meeting of its directors for the purpose of considering any matter relating to, or arising out of the affairs of the insurer; require the insurer to allow any officer of the Commission deputised for the purpose to attend, and to speak at, any meeting of the Board of Directors of the insurer or of any committee or other body constituted by the insurer and to furnish such officer with a copy of the proceedings of such meeting; or require the insurer to send in writing to the Commission all notices of, and other communication relating to, any meeting of the Board of Directors of the insurer, or of any committee or other body constituted by the insurer.

ii.

iii.

65. Power to remove Chairman, Director, etc. of the insurer. i. ) If, after the completion of a special audit under section 49 or investigation under section 59, or otherwise on reasonable grounds, the Commission has reason to believe that a person holding the office of Chief Executive, Chairman, director, manager or principal officer, by whatever name called (including the principal officer in Pakistan of an insurer incorporated in a jurisdiction outside Pakistan), of an insurer has contravened the provisions of

any law (including, in the case of a company any such person having become disqualified under the provisions of section 187 of the Companies Ordinance) and that the contravention is of such a nature that the association of such person with the insurer or insurance broker is or is likely to be detrimental to the interest of the insurer or of the policy holders, or is otherwise undesirable, such person not being a fit and proper person to have the charge of an insurer, the Commission shall make a report of the fact to the Tribunal. ii. If, after considering a report under sub-section (1) and after giving such person an opportunity of being heard, the Tribunal is satisfied that the association with the insurer of the person in respect of whom the report has been made is or is likely to be detrimental to the interests of the insurer or the policy holders, or is otherwise undesirable, such person not being a fit and proper person to have the charge of an insurer, it may make an order that such person shall cease to hold the office with the insurer with effect from such date as may be specified in the order, and thereupon that office shall, with effect from the said date, become vacant. An order under sub-section (2) in respect of any person may also provide that he shall not, without the previous permission in writing of the Tribunal in any way, directly, or indirectly, be concerned with, or take part in the management of the insurer or any other insurer for such period not exceeding five years as may be specified in the order. No order under sub-section (2) shall be made in respect of any person without giving him an opportunity of being heard unless the Tribunal is of the opinion that any delay in making the order would be detrimental to the interest of the insurer or of the policy holders. The foregoing provisions of this section shall apply to insurance brokers as they apply to insurers and to such other insurance intermediaries as the Federal Government may specify by notification in the Gazette.

iii.

iv.

v.

66. Power to prescribe maximum levels of acquisition costs and

maximum levels of management expenses.

i. The Commission may make rules limiting the total amount of acquisition costs which may be incurred by an insurer in a year. The Commission may make rules limiting the total amount of management expenses which may be incurred by an insurer in a year. Rules made under sub-section (1) or sub-section (2) shall apply to all insurers to whom the Ordinance applies: Provided that the rules may differentiate between different categories of insurance business for the purposes of determining limits. iv. The power conferred by this section shall expire on 31st December next following the date five years from the commencement date and all rules made under this section shall be repealed on the expiry of that power. For the purposes of this section:

ii.

iii.

v.

a.

"acquisition costs" means such costs as may be prescribed, incurred in acquiring insurance policies and in maintaining such policies, and includes without limitation all forms of remuneration paid to insurance agents and brokers; and "management expenses" means all expenses incurred by an insurer, not being reinsurance expenses or claims expenses or expenses directly referable to claims, and includes without limitation acquisition costs as defined in this sub-section.

b.

INSURANCE ORDINANCE, 2000

PART IX AMALGAMATION AND TRANSFER OF INSURANCE BUSINESS
67. Approval of acquisition or transfer. i. Any proposed transaction for the acquisition of a shareholding of more than ten per cent. (10%) in an insurance company, or, in the case of a non-life insurer, of the whole or any part exceeding ten per cent. (measured by either the premium income or the sum of the liabilities for unearned premium and outstanding claims and the premium deficiency reserve proposed to be acquired) of the business located in Pakistan of an insurer (whether in one or a number of related transactions and whether at the same or different times) shall not proceed unless, on application by the transferor, approval is given by the Commission.

Explanation:
A number of transactions shall be deemed to be related if there being more than one purchaser, those purchasers are acting together or in concert or if, in all the facts and circumstances of the case, there is such a relationship between the purchasers or such common purpose between them so that it would be reasonable to conclude that the transactions are related. ii. The application required under sub-section (1) shall be made in such form and shall be accompanied by such documents as may be prescribed. The Commission may, within 15 days from the receipt of the application, require the applicant to submit such further documents and information as may be required for it to make an informed decision about the transaction in the interests of policy holders and shareholders and the applicant shall provide the same within a period of seven days or such later period as the applicant may in writing request. If after sixty days of the receipt of the application or the receipt of any additional material under sub-section (3), approval has not been granted or a notice given to the applicant declining approval, the Commission shall be deemed to have given its approval. Approval given or deemed to be given by the Commission under this section shall not preclude the necessity of obtaining any such approval or consent required to be obtained from the Commission under the provisions of any other applicable law.

iii.

iv.

v.

68. Amalgamation and transfer of life insurance business. i. No life insurance business of an insurer shall be transferred to any person or transferred to or amalgamated with the life insurance business of any other insurer except in accordance with a scheme prepared under this section and sanctioned by the Court having jurisdiction over one or other of the parties concerned.

ii.

Any scheme prepared under this section shall set out the agreement under which the transfer or amalgamation is proposed to be effected, and shall contain such further provisions as may be necessary for giving effect to the scheme. Before an application is made to the Court to sanction any such scheme, notice of the intention to make the application together with a statement of the nature of the amalgamation or transfer, as the case may be, and of the reason therefore shall, at least sixty days before the application is made, be sent to the Commission, and certified copies, four in number, of each of the following documents shall be furnished to the Commission, and other such copies shall, during the sixty days aforesaid be kept open for the inspection of the members and policy holders at the principal and branch offices and chief agencies of the insurers concerned, namely:a. a draft of the instrument under which it is proposed to effect the amalgamation or transfer; b. statements of assets and liabilities in respect of the insurance business of each of the insurers concerned in such amalgamation or transfer, prepared in the form prescribed by the Commission and in accordance with regulations issued by the Commission from time to time in respect of the completion of that form; an actuarial report on the financial condition of the life insurance business of each of the insurers so concerned, prepared in accordance with the regulations issued by the Commission from time to time in respect of the completion of that report; a report on the proposed amalgamation or transfer, prepared by an independent actuary who has never been professionally connected with any of the parties concerned in the amalgamation or transfer at any time in the five years preceding the date on which he signs his report; any other reports on which the scheme of amalgamation or transfer was founded.

iii.

c.

d.

e.

iv.

The statements of assets and liabilities and reports referred to in clauses (b) (c) and (d) of sub-section (3) shall all be prepared as at the date to which the amalgamation or transfer, if sanctioned by the Court, is to take effect, which date shall not be more than twelve months before the date on which the application to the Court referred to in that sub-section is made.

69. Sanction of amalgamation and transfer by Court. When any application such as is referred to in sub-section (3) of section 68 is made to the Court, the Court shall cause, if for special reasons it so directs, notice of the application to be sent to every person resident in Pakistan or in a non-Acceding State who is the holder of a life policy of any insurer concerned and shall cause a statement of the nature and terms of the amalgamation or transfer, as the case may be, to be published in such manner and for such period as it may direct, and, after hearing the directors and such policy holders as apply to be heard any and other persons whom it considers entitled to be heard, may sanction the arrangement, if it is satisfied that no sufficient objection to the arrangement has been established and shall make such

consequential orders as are necessary to give effect to the arrangement, including orders as to the disposal of any deposit made under section 29: Provided that:i. no part of any deposit made under section 29 by any party to the amalgamation or transfer shall be returned except where, after sanction is given to the arrangement, the whole of the deposit to be made by the insurer carrying on the amalgamation business or the person to whom the business is transferred is completed; ii. only so much shall be returned as is no longer required to complete the deposit last mentioned in clause (a); and while the deposit last mentioned in clause (a) remains uncompleted, no accession, resulting from the arrangement, to the amount already deposited by the insurer carrying on the amalgamated business or the person to whom the business is transferred shall be appropriated as payment or part payment of any instalment of deposit subsequently due from him under section 29.

iii.

70. Statements required after amalgamation and transfer. Where an amalgamation takes place between any two or more insurers, or where any business of an insurer is transferred, whether in accordance with a scheme confirmed by the Court or otherwise, the insurer carrying on the amalgamated business or the person to whom the business is transferred, as the case may be, shall, within three months from the date of the completion of the amalgamation or transfer, furnish in duplicate to the Commission:i. a certified copy of the scheme, agreement or deed under which the amalgamation or transfer has been effected; ii. a declaration signed by every party concerned or in the case of a company by the chairman and by the principal officer that to the best of their belief every payment made or to be made to any person whatsoever on account of the amalgamation or transfer is therein fully set forth and that no other payments beyond those set forth have been made or are to be made either in money, policies, bonds, valuable securities or other property by or with the knowledge of any party to the amalgamation or transfer; and where the amalgamation or transfer has not been made in accordance with a scheme sanctioned by the Court under section 69: statements of assets and liabilities in respect of the insurance business of each of the insurers concerned in such amalgamation or transfer, prepared in the form prescribed by the Commission and in accordance with regulations issued by the Commission from time to time in respect of the completion of that form; and certified copies of any other reports on which the scheme of amalgamation or transfer was founded.

iii.

iv.

v.

INSURANCE ORDINANCE, 2000

PART X ASSIGNMENT OR TRANSFER OF POLICIES AND NOMINATION
71. Assignment and transfer of life insurance policies. i. A transfer or assignment of a policy of life insurance, whether with or without consideration, may be made only by an endorsement upon the policy itself or by a separate instrument, signed in either case, by the transferor or by the assignor or his duly authorised agent and duly attested, specifically setting forth the fact of transfer or assignment. ii. The transfer or assignment shall be complete and effectual upon the execution of such endorsement or instrument duly attested but, except where the transfer or assignment is in favour of the insurer, shall not be operative as against an insurer and shall not confer upon the transferee or assignee, or his legal representative, any right to use for the amount of such policy or the moneys secured thereby until a notice in writing of the transfer or assignment and either the said endorsement or instrument itself or a copy thereof certified to be correct by both transferor and transferee or their duly authorised agents have been delivered to the insurer: Provided that where the insurer maintains one or more places or business in Pakistan such notice shall be delivered only at the place in Pakistan mentioned in the policy for the purpose or at his principal place of business in Pakistan. iii. The date on which the notice referred to in sub-section (2) is delivered to the insurer shall regulate the priority of all claims under a transfer or assignment as between persons interested in the policy and where there is more than one instrument of transfer or assignment the priority of the claims under such instruments shall be governed by the order in which the notices referred to in sub-section (2) are delivered. Upon the receipt of the notice referred to in sub-section (2), the insurer shall record the fact of such transfer or assignment together with the date thereof and the name of the transferee or the assignee and shall, on the request of the person by whom the notice was given, or of the transferee or assignee, grant a written acknowledgment of the receipt of such notice, and any such acknowledgment shall be conclusive evidence against the insurer that he has duly received the notice to which such acknowledgment relates. Subject to the terms and conditions of the transfer or assignment, the insurer shall, from the date of the receipt of the notice referred to in sub-section (2) recognise the transferee or assignee named in the notice as the only person entitled to benefit under the policy, and such person shall be subject to all liabilities and equities to which the transferor or assignor was subject at the date of the transfer or assignment and may institute any proceedings in

iv.

v.

relation to the policy without obtaining the consent of the transferor or assignor or making him a party to such proceedings. vi. Notwithstanding any law or custom having the force of law to the contrary, an assignment in favour of a person made with the condition that it shall be inoperative or that the interest shall pass to some other person on the happening of a specified event during the lifetime of the person whose life is insured, and an assignment in favour of the survivor or survivors of a number of persons shall be valid. No transferee or assignee of a life insurance policy issued by a mutual insurance company shall become a member of that company by reason only of such transfer or assignment.

vii.

72. Nomination by policy holder. i. The holder of a policy of life insurance on his own life, may, when effecting the policy or at any time before the policy matures for payment, nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death: Provided that where any nominee is a minor, it shall be lawful for the policy holder to appoint in the prescribed manner any person to receive the money secured by the policy in the event of his death during the minority of the nominee. ii. Any such nomination in order to be effectual shall, unless it is incorporated in the text of the policy itself, be made by an endorsement on the policy communicated to the insurer and registered by him in the record relating to the policy and any such nomination may, at any time before the policy matures for payment, be cancelled or changed by an endorsement or a further endorsement or a will, as the case may be, but unless notice in writing of any such cancellation or change has been delivered to the insurer the insurer shall not be liable for any payment under the policy made bona fide by him to a nominee mentioned in the text of the policy or registered in records of the insurer. The insurer shall furnish to the policy holder a written acknowledgment of having registered a nomination or a cancellation or change thereof. A transfer or assignment of a policy made in accordance with section 71 shall automatically cancel a nomination: Provided that the assignment of a policy to the insurer who bears the risk on the policy at the time of the assignment in consideration of a loan granted by that insurer on the security of the policy within its surrender value, or its reassignment on repayment of the loan shall not cancel a nomination, but shall affect the right of the nominee only to the extent of the insurers interest in the policy. Provided further that the assignment of a policy to a party other than the insurer who bears the risk on the policy at the time of the assignment, in consideration of a loan granted by that person on the security of the policy within its surrender value shall not cancel a nomination but shall suspend it, to

iii.

iv.

the extent of the interest of that person in the policy, until such time as the policy is re-assigned on repayment of the loan. v. Where the policy matures for payment during the lifetime of the person whose life is insured or where the nominee or, if there are more nominees than one, all the nominees die before the policy matures for payment, the amount secured by the policy shall be payable to the policy holder or his heirs or legal representatives or the holder of a succession certificate, as the case may be. Where the nominee or, if there are more nominees than one, a nominee or nominees, survive the person whose life is insured the amount secured by the policy shall be payable to such survivor or survivors. The provisions of this section shall not apply to any policy of life insurance to which section 6 of the Married Womens Property Act, 1874 (III of 1874), applies or has at any time applied: Provided that where a nomination made before the commencement of this Ordinance, in favour of the wife of the person who has insured his life or of his wife and children or any of them, is expressed, whether or not on the face of the policy, as being made under this section, the said section 6 shall be deemed not to apply or not have applied to the policy. 73. Nomination under group life policies. i. A person whose life is insured under a contract of group life insurance may at any time nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death: Provided that where any nominee is a minor, it shall be lawful for the person whose life is insured to appoint in the prescribed manner any person to receive the money secured by the policy in the event of his death during the minority of the nominee. ii. A nomination made under sub-section (1) shall be made in such manner as may be prescribed.

vi.

vii.

INSURANCE ORDINANCE, 2000

PART XI Market conduct
74. Application of this Part only to direct insurance business. The provisions of this Part shall apply only to direct insurance business. 75. Duty of utmost good faith. i. A contract of insurance is a contract based on the utmost good faith and there shall be implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith. ii. If reliance by a party to a contract of insurance on a provision of the contract would be to fail to act with the utmost good faith, the party may not rely on the provision. In deciding whether reliance by an insurer on a provision of the contract of insurance would be to fail to act with the utmost good faith, the Tribunal shall have regard to any notification of the provision that was given to the policy holder, whether or not the insurer was required by this Ordinance to give such notification. The effect of this section is not limited or restricted in any way by any other law, including the subsequent provisions of this Part, but this section does not have the effect of imposing on an policy holder, in relation to the disclosure of a matter to the insurer, a duty other than the duty of disclosure

iii.

iv.

76. Insurer not to engage in misleading or deceptive conduct. i. An insurer shall not, in the course of its business as an insurer, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. ii. The inclusion in an insurance policy of unusual terms tending to limit the liability of the insurer, without the express acknowledgement of the policy holder, shall constitute misleading or deceptive conduct. Nothing contained in sub-section (2) shall be taken as limiting by implication the generality of sub-section (1). Where a policy holder has relied upon any representations by an insurer or by an agent of an insurer which are incorrect in any material particular, inasmuch as it has the effect of misleading or deceiving the policy holder in entering into a policy, the policy holder shall be entitled to obtain compensation from the insurer for any loss suffered. Notwithstanding the provisions of the foregoing sub-section, the Commission shall also have the power to levy a fine on the insurer which shall be equal to the lesser of twice the loss determined to be suffered by the policy holder under the foregoing sub-section and ten million rupees.

iii.

iv.

v.

77. Construction of ambiguities in favour of policy holder.

i.

Any ambiguity in a contract of insurance shall not be capable of being construed in a manner which is contrary to the interests of the policy holder. An insurer or an insurance intermediary shall: a. when drafting policy documentation, make reasonable efforts to use plain language; and b. when drafting proposal forms and claim forms, make reasonable efforts to ensure that it identifies in those documents the usual information the insurer ordinarily requires to be disclosed; and that those documents are in plain language and provide instructions where necessary on how the questions should be answered; and comply with the law.

ii.

iii.

Failure to comply with foregoing sub-sections shall be an absolute bar and shall preclude an insurer from refusing payment of a claim on grounds of noncompliance or non-disclosure by the policy holder, where it may reasonably be determined that the non-compliance or non-disclosure resulted from inadequate understanding by the policy holder of the language of the policy, proposal or claim form as a result of such failure.

78. Exclusion of provisions of Ordinance void; an offence. Where any provision in a contract of insurance has the effect of modifying or excluding, to the prejudice of any person other than the insurer, any applicable provision of this Ordinance, any such provision shall be void and the insurer shall be liable to punishment for an offence under this Ordinance. 79. Remedies for non-disclosure or misrepresentation. i. This section shall apply where the person who became the policy holder under a contract of insurance upon the contract being entered into: a. failed to comply with the duty of disclosure; or b. made a misrepresentation to the insurer before the contract was entered into.

ii.

The insurer may not avoid a contract of insurance by reason only of the failure to comply with the duty of disclosure or the misrepresentation if: a. the insurer would have entered into the contract, for the same premium and on the same terms and conditions, even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into; or b. the failure to comply with the duty of disclosure or the misrepresentation was not fraudulent: Provided that in circumstances to which clause (b) refers, the insurer shall be entitled to be placed, in such manner, not otherwise inconsistent with this sub-section, as may be prescribed, in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made.

iii.

Subject to sub-section (2), if the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract.

iv.

Nothing in this section shall affect any right of an insurer to recover damages from any person in respect of loss suffered by the insurer as a result of a fraudulent act by that person, or any criminal liability to which any person may be subject by reason of a fraudulent act by that person.

80. Policy not to be called in question on ground of mis-statement after

two years.
Notwithstanding anything in section 79, no policy of life insurance effected before the commencement date of this Ordinance shall after the expiry of two years from the commencement date of this Ordinance and no policy of life insurance effected after the commencement date shall, after the expiry of two years from the date on which it was effected, be called in question by an insurer on the ground that a statement made in the proposal for insurance or in any report of a medical officer, or referee, or friend of the policy holder, or in any other document leading to the issue of the policy, was inaccurate or false, unless the insurer shows that such statement was on a material matter or suppressed facts which it was material to disclose and that it was fraudulently made by the policy holder and that the policy holder knew at the time of making it that the statement was false or that it suppressed facts which it was material to disclose: Provided that nothing in this section shall prevent the insurer from calling for proof of age at any time if he is entitled to do so, and no policy shall be deemed to be called in question merely because the benefits payable under the policy are adjusted on subsequent proof that the age of the life insured was incorrectly stated in the proposal. 81. Tribunal may disregard avoidance in certain circumstances. i. In any proceedings by the policy holder in respect of a contract of insurance that has been avoided on the ground of fraudulent failure to comply with the duty of disclosure or fraudulent misrepresentation, the Tribunal may, if it would be harsh and unfair not to do so, but subject to this section, disregard the avoidance and, if it does so, shall allow the policy holder to recover the whole, or such part as the Tribunal thinks just and equitable in the circumstances, of the amount that would have been payable if the contract had not been avoided. ii. The power conferred by sub-section (1) may be exercised only where the Tribunal is of the opinion that, in respect of the loss that is the subject of the proceedings before the Tribunal, the insurer has not been prejudiced by the failure or misrepresentation or, if the insurer has been so prejudiced, the prejudice is minimal or insignificant. In exercising the power conferred by sub-section (1), the Tribunal a. shall have regard to the need to deter fraudulent conduct in relation to insurance; and b. shall weigh the extent of the culpability of the policy holder in the fraudulent conduct against the magnitude of the loss that would be suffered by the policy holder if the avoidance were not disregarded, but may also have regard to any other relevant matter.

iii.

iv.

The power conferred by sub-section (1) applies only in relation to the loss that is the subject of the proceedings before the Tribunal, and any disregard by the Tribunal of the avoidance does not otherwise operate to reinstate the contract.

82. Cancellation of a life insurance policy for fraudulent claim. i. Notwithstanding anything to the contrary in this Ordinance, a policy of life insurance may be cancelled in accordance with this section by reason that a person having or purporting to have rights under the policy has made a claim under the policy which is fraudulent. ii. A life insurer may apply to the Tribunal for consent to cancel a policy of life insurance in accordance with this section. The life insurer shall give written notice to the policy holder and to any person identified in the application for consent that an application for consent under sub-section (2) is to be made. Where the Tribunal is satisfied with respect to the matters contained in subsection (1), the Tribunal shall give its consent and the insurer may at any time thereafter cancel the policy by written notice to the policy holder. Where a policy is cancelled under this section, the Tribunal may on the application of a person having an interest under the policy award to any person such amount as is just and equitable under the circumstances.

iii.

iv.

v.

83. Power of the Commission to prescribe rules for market conduct. i. The Commission may make rules, not inconsistent with this Part, to govern the conduct of insurers, policy holders and intermediaries in the insurance market in Pakistan. ii. A provision of a Rule made under this section which applies to a contract of insurance to which it is relevant and which is entered into after the commencement date of that Rule shall be deemed to constitute a condition of that contract.

84. Commission to have power to undertake compliance visits. The Commission may, in accordance with procedures prescribed by rules, make visits to the offices and branches of insurers and inspect books, records and papers for the purpose of ensuring compliance with the provisions of this Part (Market Conduct) and Part XIII (Intermediaries). 85. Commission to have power to require a survey to be performed . i. The Commission may make rules requiring that an independent survey be conducted, in accordance with the provisions of the Ordinance, in respect of such class or classes of insurance claims meeting such criteria as may be prescribed by the Commission. ii. A survey conducted pursuant to rules made under sub-Rule (1) shall be conducted at the expense of the insurer and a copy of the report of the surveyor shall be provided to the policy holder.

iii.

The provisions of this section shall not operate to limit, curtail, diminish or extinguish any liability of the insurer to which the insurer would otherwise have been subject.

86. Contractual stipulations for placing insurance with specific or named

insurers.
i. In respect of any contract or arrangement under which one party to the contract or arrangement requires another party to the contract or arrangement to procure, effect and pay for or reimburse the costs of effecting insurance of any property, liability, life or anything connected with any thereof, it shall be unlawful to stipulate, expressly or impliedly, directly or indirectly, that the insurance which is to be procured and effected as a condition of the contract must be placed with any specific or named insurer or insurers, other than insurers specified generally as a class according to objective criteria based on financial strength. Any such stipulation in or arising out of or connected with any such contract or arrangement made after the commencement date shall be void and any such stipulation in or arising out of or connected with any such contract or arrangement made before the commencement of this Ordinance shall thereafter be subject to the provisions of this section. If there is any connection or association between a lender and the insurer it shall be disclosed to the policy holder together with any commissions received by the lender from the insurer in respect of the insurance contract. Disclosure shall in each case be made prior to the making of the contract. It shall be unlawful for insurance to be taken out by a lender without the knowledge and consent of the borrower or customer, unless the borrower or customer having undertaken to do so, has without good cause and for reasons beyond his control failed to comply with his obligations in this respect. Notwithstanding anything contained in this section, until 31st December 2002 lenders may prescribe a listing of unacceptable insurers by name, provided that no insurer which complies with the paid-up capital requirements set out in section 28 of this Ordinance, excluding the provisos to sub-section (2) of that section, may be included on that list.

ii.

iii.

iv.

v.

87. Provisions when not to constitute discrimination. Notwithstanding anything contained in any other law for the time being in force, provisions in respect of the terms and conditions of insurance policies, shall not constitute discrimination provided that differentiation contained therein is based on reasonable classification and: i. is based on actuarial and statistical data from a source on which it is reasonable to rely; and is reasonable having regard to the data and any other relevant factors. The onus of proving that the insurer has complied with this section shall lie upon the insurer.

ii.

INSURANCE ORDINANCE, 2000

PART XII SURRENDER, LAPSE AND FORFEITURE OF CERTAIN LIFE INSURANCE POLICIES
88. Special definitions and interpretation for this Part. i. For the purposes of this Part, a "relevant policy" is a policy of life insurance under which the whole of the benefits become payable either on, or at a fixed interval or intervals after, the occurrence of a contingency which is bound to occur. ii. In this Part, an amount due under a relevant policy includes a premium due under that policy but unpaid.

89. Acquisition of surrender value. i. A relevant policy which has been in force for not less than two years shall have a surrender value which shall be calculated in accordance with the terms of the policy. ii. In the case of a policy issued before the commencement date and still in force immediately after the commencement date, the surrender value shall not at any time be less than the surrender value of the policy immediately before the commencement date. Where under the terms of a policy the basis of calculation of the surrender value may be varied at the discretion of the insurer, the basis of calculation shall be furnished to the Commission and no variation shall be made therefrom unless the insurer has, not less than sixty days before the date of such variation, furnished to the Commission a statement of the proposed variation and the reasons for that variation, accompanied by a statement by the appointed actuary of his opinion as to the appropriateness of the proposed variation. When an insurer furnishes to the Commission the matters referred to in the preceding sub-section relating to a proposed variation, the Commission may within sixty days direct the insurer to make such changes in the proposed variation as it believes on reasonable grounds to be necessary for the protection of the interests of policy holders of the insurer, and the insurer shall comply with any such direction.

iii.

iv.

90. Surrender of policy at policy holders option. i. The holder of a relevant policy which has been in force for not less than two years may make, in writing, a request to the insurer to surrender the policy. ii. Subject to sub-section (3) and sub-section (4), within one month of receiving a request under sub-section (1), such request not having been withdrawn by the policy holder, the insurer shall pay to the policy holder an amount equal to the surrender value of the policy less the amount of any debt owed to the insurer under, or secured by, the policy.

iii.

If an insurer, within fifteen days of receiving a request under sub-section (1), communicates in writing with the policy holder to request the policy holder to consider the advantages of maintaining the policy and to seek professional advice if appropriate, the period of one month referred to in sub-section (2) shall be extended by fifteen days so far as concerns that request. The Tribunal may, on application by an insurer, issue a written order suspending or varying the insurers obligation to make payments under subsection (2), where the Tribunal is satisfied that such suspension or variation is necessary in order to avoid prejudice to: a. the financial stability of the insurer; or b. the interests of the policy holders of the insurer.

iv.

v.

An order issued under sub-section (3) shall: a. be valid for such period as the Tribunal may determine; and b. be subject to such conditions as the Tribunal may determine.

91. Surrender of policy at insurers option. i. A policy which has acquired a surrender value shall not be surrendered other than at the request of the policy holder except as set out in this section. ii. Where the total amount of all debts owed to the insurer under, or secured by, a relevant policy exceeds the surrender value of that policy, the insurer may issue to the policy holder a written notice: a. setting out the amount owed to the insurer under, or secured by the policy at the date of the notice (the debt); b. setting out the surrender value of the policy at the date of the notice; and stating that the policy will be surrendered at the end of 30 days after the notice was issued to the policy holder and the surrender value applied against the debt, if the excess of the debt over the surrender value is not paid to the insurer before the expiry of that period.

c.

iii.

Where at least 30 days have elapsed between the issue of a notice set out in sub-section (2) and the excess of the debt over the surrender value has not been paid to the insurer, the insurer may by written notice to the policyholder effect surrender of the policy and apply the surrender value against the debt, which shall to the extent of the surrender value be extinguished.

92. Paid-up policy at policy holders option. i. An insurer shall, within one month from receipt of an application in writing by the holder of a relevant policy which has been in force for not less than two consecutive years, make the policy paid-up. ii. If an insurer, within fifteen days of receiving an application under sub-section (1), communicates in writing with the policy holder to request the policy holder to consider the advantages of maintaining the policy in full force and to seek professional advice if appropriate, the period of one month referred to in sub-

section (1) shall be extended by fifteen days so far as concerns that application. iii. A policy which is made paid-up shall have a paid-up sum insured, which, subject to clause (b) of sub-section (5),a. shall include in full all subsisting reversionary bonuses that have already attached to the policy; and b. shall, where the policy is one on which the maximum number of premiums payable is fixed and the premiums are of uniform amount and paid at uniform intervals, be, before the inclusion of such bonuses not less than such amount as is prescribed.

iv.

A policy made paid-up under this section shall not be entitled by virtue only of this section to participate in any surplus declared distributable after the conversion of the policy into a paid-up policy. If, when an application is made to an insurer under sub-section (1) to have a policy paid-up, the policy holder owes a debt to the insurer under the policy, or a debt owed by the policy holder to the insurer is secured by the policy, the insurer may either: a. treat the debt as a debt secured by the paid-up policy; or b. in calculating the paid-up sum insured, take the debt into account in such manner as is approved as equitable by the appointed actuary.

v.

vi.

If in calculating the paid-up sum insured, a debt is taken into account in accordance with clause (b) of sub-section (5), the debt is discharged.

93. Non-forfeiture. i. A relevant policy is not liable to be forfeited only because of the non-payment of a premium (the "overdue premium") if a. the policy has been in force for at least two years; and b. the surrender value of the policy exceeds the total of: I. the amount of the overdue premium; and II. the total of any other amounts owed to the insurer under, or secured by, the policy.

ii.

For the purposes of clause (b) of sub-section (1), the surrender value of the policy shall be calculated as at the day on which the overdue premium falls due and shall be calculated as though the premium has been paid. When the holder of a policy to which this section applies fails to pay a premium due under that policy, the insurer shall, before the expiry of three months from the date on which that premium in respect was payable but not paid, give notice to the policy holder informing him of the options available to him. Notwithstanding anything to the contrary in the policy, the options available to the policy holder under this section shall include without limitation two of the following, namely :-

iii.

iv.

a. b.

the policy shall be paid up in accordance with this Part; the surrender value of the policy shall be applied to the payment of the premium due until the surrender value is exhausted; the policy shall be surrendered in accordance with this Part; and the policy shall be surrendered, and the company shall issue to the policy holder a contract for term life insurance for a term to be specified by the policy holder and a sum insured determined on the basis of the surrender value of the policy surrendered less the amount of any debt owed to the company under, or secured by, the policy.

c. d.

v.

Notwithstanding anything to the contrary in the policy, the action taken by the insurer with respect to the policy shall be a. if a course of action not stated in the notice issued under sub-section (3) is agreed in writing between the insurer and the policy holder, after the policy holder has received the notice, that course of action; b. if the policy holder agrees in writing to an option contained in the notice issued under sub-section (3), that course of action; if the policy holder does not respond to the notice issued under subsection (3), and after making reasonable efforts the insurer is unable to contact the policy holder: I. if the policy holder has elected in writing, either at the time of taking the policy or at any time thereafter before the cessation of the payment of premium, that a course of action should be taken; that course of action; otherwise II. if a course of action (not being the course of action set out in clause (b) of sub-section (4)) is stated in the policy, that course of action; otherwise

c.

vi.

III. the course of action set out in clause (a) of sub-section (4). No commission shall be payable to any person in respect of the following, namely:a. the application of the surrender value to the payment of premiums in accordance with clause (b) of sub-section (4); and b. the issue of a contract of term insurance under clause (d) of subsection (4).

INSURANCE ORDINANCE, 2000

PART XIII Intermediaries
94. This Part to apply only to direct insurance business. The provisions of this Part shall apply only to direct insurance business. 95. Liability of Insurer for act or omissions of agent . i. Every insurer shall, so far as relates to a contract of insurance entered into by the insurer through an agent, be liable to the policy holder for the acts or omissions of that agent as though that agent were an employee of the insurer, in circumstances where the policy holder has relied in good faith on the agent and as a consequence has suffered loss or damage. Liability shall be absolute and shall not be capable of being contracted out of, either in the agency agreement or on a policy, proposal or other document. ii. For the purposes of this Part, any person who, for remuneration arranges insurance cover for a policy holder or intending policy holder, and who is not a registered insurance broker, shall be presumed to be the agent of the insurer in relation to any matter relating to insurance. The provisions of the foregoing sub-section shall not operate to limit, curtail, diminish or extinguish any liability of the insurer to which the insurer would otherwise have been subject.

iii.

96. Persons acting as agents. i. It shall be unlawful for any person to act as an agent in respect of an insurer if that person, or, in the case of a body corporate, any director of the body corporate, or officer of the body corporate engaging in the business of insurance agency: a. is a minor; b. c. has been found of unsound mind by a Court of competent jurisdiction; has been found guilty, within the five years preceding the present date, of criminal misappropriation or criminal breach of trust, cheating or forgery or an abetment of or attempt to commit any such offence by a Court of competent jurisdiction; has served any custodial sentence imposed by a Court of competent jurisdiction, ending within the five years preceding the present date; has been found guilty by a Court of competent jurisdiction of any offence involving insurance; or has been otherwise declared as disqualified by the Tribunal, other than for a term which had expired prior to the present date.

d.

e.

f.

ii.

It shall be unlawful for any person to act as an agent in respect of an insurer except under a contract in writing.

iii.

Any person who acts as agent in breach of this section, and any insurer who knowingly permits him to act as agent, shall be guilty of an offence. A contract of agency shall include, and if it does not, shall be deemed to include, as a condition, that the agent must obtain the permission of the insurer before entering into a contract of agency with any other insurer while the contract with the first or any other insurer remains in force. A contract of agency which does not disclose any existing contracts of agency with other insurers shall be deemed to include a warranty that no other such contracts exist.

iv.

v.

97. Minimum qualifications for agents. The Commission may prescribe minimum qualifications for persons appointed as insurance agents, which may extend to educational requirements, experience in the industry and membership of an approved trade or professional organisation. 98. Insurer to maintain register of agents. i. An insurer shall maintain a register of all agents employed by the insurer, containing such particulars as may be prescribed: Provided that in the case of an insurer deemed to be registered at the commencement date, the particulars required by section 43 of the repealed Act to be contained in the register maintained under that section of the repealed Act shall be deemed to constitute the particulars required to be maintained under this sub-section, for a period of one year from the commencement date. ii. Prior to appointing a person as its agent, and at intervals of not more than twelve months thereafter during the time the person continues to act as its agent, an insurer shall obtain from that person in such form as may be prescribed, a declaration in respect of the following matters: a. the information provided by him for inclusion in the register referred to in sub-section (1) is complete and correct; b. he has complied with the requirements of the Ordinance concerning the qualifications of agents; and such other matters as may be prescribed.

c. iii.

It shall be an offence for an insurer to use an agent who has not been included on the register referred to in sub-section (1), or to use an agent who has not made the declaration referred to in sub-section (2), or knowingly to use an agent who has made a false declaration.

99. Payments by and to insurance agents. i. Any sums received by an insurance agent from a policy holder or an insurer, other than remuneration payable to the agent by the insurer, shall be deemed to be held on trust for the insurer. Payment by a policy holder to an insurance agent shall be deemed to constitute payment to the insurer.

ii.

Any payment to which sub-section (1) applies shall be passed on to the insurer or the policy holder (as the case may be) as soon as practicable and in any case not later than two weeks from receipt by the agent. No insurance agent shall, except with the approval of the insurer who is the agents principal, pay to or receive from a policy holder or intending policy holder any sums in relation to a contract of insurance: Provided that this sub-section shall not operate to relieve any person from a liability to which that person is otherwise subject by the operation of this Ordinance.

iii.

iv.

It shall be unlawful for an agent to deduct from premiums paid by and received from a policy holder any sums on account of commission due to the agent. No payment of commission or other remuneration to an insurance agent shall be made otherwise than by a crossed cheque, pay order or electronic funds transfer or in such other manner as may be prescribed: Provided that this sub-section shall not apply to payments to an agent which do not in the aggregate in one year exceed the sum of five thousand rupees.

v.

100. Duty to disclose agency. An agent acting for an insurer shall disclose to the policy holder or intending policy holder the fact that he acts as an agent for that insurer and any relationship between the agent and the insurer. 101.

Restriction on life insurance agents, becoming directors of life insurance companies.

i. No insurance agent who solicits or procures life insurance business, shall be eligible to be or remain a director of any insurance company carrying on life insurance business unless he suspends such solicitation or procurement. Any insurance agent who contravenes the provisions of sub-section (1) shall cease to be a director and shall be disqualified from acting as an insurance agent, for such period as the Tribunal may determine.

ii.

102. i.

Insurance brokers to be licensed.

It shall be unlawful for any person to act as or describe himself or hold himself out or permit himself to be described or held out as an insurance broker in respect of direct insurance business unless he holds a current insurance brokers licence issued by the Commission. No person who is not a company shall be eligible to be licensed as an insurance broker. An insurance brokers licence may only be issued by the Commission to a company which complies with such minimum requirements as may be prescribed by the Government in respect of: a. paid-up capital; b. statutory deposits;

ii.

iii.

c. d. iv.

professional indemnity insurance; and such other matters as may be prescribed.

An application for an insurance brokers licence shall be made in the prescribed form, and shall be accompanied by the following documents, namely:a. the memorandum and articles of the broker; b. c. evidence of professional indemnity insurance; a declaration in a prescribed form to the effect that neither the applicant nor any director or principal officer of the applicant is disqualified from holding his office as such; a letter of support from not fewer than five registered insurers in the prescribed form, each signed, on behalf of the insurer, by a duly authorised representative; evidence of payment of the prescribed fee; and such other evidence and documents as may be prescribed.

d.

e. f. v.

An insurance brokers licence shall be issued initially for a period of one year and may on application in the prescribed form be renewed annually. The Commission may cancel or refuse to issue or renew a broking licence, where the Commission believes on reasonable grounds that the broker has contravened a provision of the Ordinance, including without limitation that the broker has failed to maintain prescribed minimum levels of paid-up capital, statutory deposit or professional indemnity insurance. The Commission may apply for an order from the Tribunal, that a person is disqualified from acting as an insurance broker, or as a director or principal officer of an insurance broker, if it demonstrates on reasonable grounds that the activity of the person as an insurance broker or as a director or principal officer of an insurance broker would be detrimental to the interests of policy holders.

vi.

vii.

103.

Brokers to be presumed agents under certain circumstances; liability of brokers when not so presumed.
i. A licensed insurance broker shall be presumed to act as the agent of any insurer with which such broker has a contract of agency, so far as relates to any policies placed by that broker with that insurer, and the insurer shall be liable for the conduct or misconduct of the broker with respect to such policies. Where a licensed insurance broker is not, by virtue of the foregoing subsection, presumed to act as the agent of an insurer, the broker shall be liable to the policy holder and the insurer shall not be liable for the conduct or misconduct of the broker as distinct from itself or its agents, except as otherwise provided in this Ordinance.

ii.

104.

Ownership and management interests inter se of brokers and insurers prohibited.

No insurer and no director of an insurer shall hold any direct or indirect ownership interest in an insurance broker or take part in the management or direction of an insurance broker, and vice versa. 105. i.

Brokers duty to disclose relationships.

A licensed insurance broker shall disclose to the policy holder or intending policy holder any relationship between the broker and any insurer A licensed insurance broker, in placing business with an insurer with whom the broker has a contract of agency, shall, before the contract of insurance is effected, inform the intending policy holder of both the existence of the contract of agency and that the broker is acting as the agent of the insurer in respect of all matters concerning the contract of insurance.

ii.

106. i.

Payments by and to insurance brokers.

Any sums received by an insurance broker from a policy holder or an insurer, other than remuneration payable to the broker by the insurer, shall be deemed to be held on trust for the insurer. Payment by a policy holder to an insurance broker shall be deemed to constitute payment to the insurer. Any amount held by an insurance broker for payment to the policy holder shall be paid to the policy holder as soon as practicable and in any case in not less than two weeks. Any amount held by an insurance broker for payment to the insurer shall unless the insurer has previously agreed otherwise in writing be paid to the insurer as soon as practicable. Any payment of money (other than premium) from an insurance broker to an insurer or vice versa shall be made by crossed cheque, pay order or electronic funds transfer.

ii.

iii.

iv.

107.

Requirements in respect of persons ceasing to act as insurance brokers.

i. A company ceasing to act as an insurance broker shall maintain, for such period as may be prescribed, such minimum level of professional indemnity insurance in respect of liabilities arising from its activities as an insurance broker to which the company may be subject, as may be prescribed. No company formerly acting as an insurance broker may be voluntarily wound up during the period prescribed in the preceding sub-section.

ii.

108.

Basis for payment of remuneration by insurers to insurance brokers.

i. A licensed insurance broker shall not receive from an insurer or from a person on behalf of an insurer a gift, gratuity, benefit or other reward (however described) except as remuneration for services rendered to the insurer: a. in arranging or effecting a particular contract of insurance; b. in connection with dealing with or settling a claim under a particular contract of insurance; or

c.

otherwise than in connection with the broker arranging or effecting contracts of insurance or dealing with or settling claims under contracts of insurance.

ii.

An insurer shall not pay to an insurance broker, and an insurance broker shall not receive from an insurer, in respect of the arranging or effecting of contracts of insurance by that insurance broker with the insurer, remuneration at a rate or on a basis that has been varied having regard to any one or more of the following: a. the number of contracts so arranged or effected; b. c. the total amount of premiums paid or payable under such contracts; the total amount of sums insured under such contracts.

109. Insurance brokers to report annually to Commission. A licensed insurance broker shall make an annual report to the Commission. Such report shall include audited accounts of the insurance broking business and such other information and statements as may be prescribed, each in such format as may be prescribed. 110. Power to inspect insurance agents and insurance brokers. The Commission may, in accordance with procedures prescribed by rules, visit the premises of an insurance broker or of an agent of an insurance company, to establish compliance by the broker, or the agent, or any insurer of which the broker or agent is agent, with the provisions of this law relating to insurance contracts, brokers and agents. 111. i.

Persons permitted to act as insurance surveyors.

Subject to sub-section (2), it shall be unlawful for any person to act for remuneration as a surveyor, loss adjuster, or loss assessor (by whatever title called) unless such person is a. an adjuster of aviation or maritime losses; or b. ii. a person licensed as a surveyor under this Ordinance.

Nothing in this section shall prevent a. the performance in the course of his employment by an employee of an insurer of activities of the nature of insurance surveying for that insurer; or b. the expression in the course of his general professional practice of an expert opinion on the nature, cause or quantum of an insurance loss by an advocate, solicitor, accountant, actuary or other professional person engaged in a profession other than surveying.

112. i.

Licensing of insurance surveyors.

The Commission may, on application by a person, grant to that person a licence, having a term of not more than twelve months, to act as a surveyor, where the Commission is satisfied that that person is qualified under this section to be granted such a licence.

ii.

A licence granted under the preceding sub-section (or renewed under this subsection) may be renewed for a term of not more than twelve months on application made by the holder of the licence prior to expiry of the licence, where the Commission is satisfied that such person is qualified under this section to be granted such a licence. No person shall be entitled to apply for or to hold a licence as a surveyor under this Ordinance unless the following conditions are fulfilled at the date of the application and at all times during which the licence is held: a. the person is a company with a prescribed minimum share capital; b. the person carries professional indemnity insurance at such level as may be prescribed; reports issued in respect of surveys conducted by the person are signed by natural persons, registered under section 113 as authorised surveying officers; reports issued in respect of surveys conducted by the person contain such information and comply with such conditions as may be prescribed; the person is a member of such approved professional association as may be prescribed; and the person complies with such other conditions as may be prescribed: Provided that a person, including a firm, who or which was, immediately prior to the commencement date, the holder of a certificate of registration under section 44A(4) of the repealed Act, shall be exempt, subject to such conditions as may be prescribed, from compliance with the conditions set out in this subsection. Provided further that the application of such exemption to a person shall cease permanently and immediately on that person ceasing to hold such a certificate or to hold a licence issued under this section in renewal of such a certificate. Provided further that such exemption shall cease permanently and absolutely at the expiry of five years from the commencement date, from which date no firm and no natural person shall be licensed as a surveyor. Provided further that such exemption shall not be available to any person in respect of the requirement for a licence to act as an insurance surveyor in a class of insurance surveying for which a certificate of registration under section 44A(4) of the repealed Act was not held by such person as at the commencement date.

iii.

c.

d.

e.

f.

iv.

An application for a licence or for renewal of a licence under this section shall contain such information and be accompanied by such documents as may be prescribed.

v.

A person licensed as a surveyor who becomes aware that he has ceased, or is about to cease, to comply with any condition of that licence shall, within one week of becoming aware of such non-compliance, notify the Commission of the circumstances surrounding such non-compliance, and his licence shall stand suspended as at the date falling one week after the date on which he became aware, or should reasonably have become aware, of the noncompliance. Such suspension of a licence shall continue until the Commission is satisfied that the person has taken such action as the Commission believes on reasonable grounds to be necessary to remove the causes of the noncompliance, or until the term of the licence expires, whichever is earlier. If the Commission believes on reasonable grounds that a licensed surveyor has failed to comply, or has ceased to comply, with a condition of his licence, the Commission may by notice to the licensed surveyor of not less than two weeks cancel that licence. Provided that a licence shall not be cancelled under this sub-section without giving the holder of the licence an opportunity to be heard.

vi.

vii.

A person who purports to act as a licensed surveyor during the period during which his licence is suspended, or following cancellation of his licence, shall be guilty of an offence and liable on conviction to a fine not exceeding one million rupees.

113. i.

Registration of authorised surveying officers.

The Commission may, on application by a person, register that person for a term of not more than twelve months as an authorised surveying officer, where the Commission is satisfied that such person is qualified to be registered under this section. Registration granted under the preceding sub-section (or renewed under this sub-section) may be renewed for a term of not more than twelve months on application made by the person registered prior to expiry of registration, where the Commission is satisfied that the person is qualified under this section to be so registered. No person shall be entitled to apply to be registered, or to be or remain registered, as an authorised surveying officer unless the following conditions are fulfilled at the date of the application and at all times during which the person is registered a. the person is a natural person; b. the person is a director, officer or employee of a company licensed as a surveyor under this Ordinance; and the person has such qualifications as may be prescribed: Provided that a natural person who was, immediately prior to the commencement date, the holder of a certificate of registration under section 44A(4) of the repealed Act, shall be deemed, subject to such conditions as may be prescribed, to possess the qualifications required under clause (c) of this sub-section.

ii.

iii.

c.

Provided further that the application of the first proviso to this subsection to a person shall cease permanently and immediately on that person ceasing to hold such a certificate or to be registered under this section on renewal of such a certificate. Provided further that the first proviso to this sub-section shall cease to apply permanently and absolutely at the expiry of five years from the commencement date. Provided further that the first proviso to this sub-section shall not apply to any person in respect of the requirement for registration under this Ordinance as an authorised surveying official in a class of insurance surveying for which a certificate of registration under section 44A(4) of the repealed Act was not held as at the commencement date. iv. An application for registration or for renewal of registration under this section shall contain such information and be accompanied by such documents as may be prescribed. A person registered as an authorised surveying officer who becomes aware that he has ceased, or is about to cease, to comply with any condition of that registration shall, within seven days of becoming aware of such noncompliance, notify the Commission of the circumstances surrounding such non-compliance, and his registration shall stand suspended as at the date falling seven days from the date on which he became aware, or should reasonably have become aware, of the non-compliance; and such suspension of a registration shall continue until the Commission is satisfied that the person has taken such action as the Commission believes on reasonable grounds to be necessary to remove the causes of the non-compliance, or until the term of the registration expires, whichever is earlier. If the Commission believes on reasonable grounds that an authorised surveying officer has failed to comply, or has ceased to comply, with a condition of his registration, the Commission may by notice to the authorised surveying officer of not less than fourteen days cancel that registration: Provided that a registration shall not be cancelled under this sub-section without giving the person concerned an opportunity to be heard. vii. A person who purports to act as an authorised surveying officer during the period when his registration is suspended, or following cancellation of his registration, shall be guilty of an offence and liable on conviction to a fine not exceeding one hundred thousand rupees.

v.

vi.

114. Classes of insurance surveying. Surveyors and authorised surveying officers may be classified into such classes or subclasses as may be prescribed, and, if so classified, separate application shall be made and separate licences and certificates issued in respect of each such class or subclass.

INSURANCE ORDINANCE, 2000

PART XIV SPECIAL PROVISIONS OF LAW Application of Pakistan law to policies issued in Pakistan. 115. The holder of a policy of insurance issued by an insurer in respect of insurance business transacted in Pakistan after the commencement of this Ordinance shall have the right, notwithstanding anything to the contrary contained in the policy or in any agreement relating thereto, to receive payment in Pakistan of any sum secured thereby and to sue for any relief in respect of the policy in any Tribunal; and if the suit is brought in Pakistan any question of law arising in connection with any such policy shall be determined according to the law in force in Pakistan:
Provided that nothing in this section shall apply to a policy of marine insurance. 116. i.

Payment of money into Tribunal.

Where in respect of any policy of life insurance maturing for payment an insurer is of opinion that by reason of conflicting claims to or insufficiency of proof of title to the amount secured thereby or for any other adequate reason it is impossible otherwise for the insurer to obtain a satisfactory discharge for the payment of such amount, the insurer may before the expiry of nine months from the date of the maturing of the policy or, where the circumstances are such that the insurer cannot be immediately aware of such maturing, from the date on which notice of such maturing is given to the insurer, apply to pay the amount into the Tribunal within the jurisdiction of which is situated the place at which such amount is payable under the terms of the policy or otherwise. A receipt granted by the Tribunal for any such payment shall be a satisfactory discharge to the insurer for the payment of such amount. An application for permission to make a payment into the Tribunal under this section shall be made by a petition verified by an affidavit signed by a principal officer of the insurer setting forth the following particulars, namely:a. the name of the insured person and his address; b. c. d. if the insured person is deceased, the date and place of his death; the nature of the policy and the amount secured by it; the name and address of each claimant so far as is known to the insurer with details of every notice of claim received; the reasons why in the opinion of the insurer a satisfactory discharge cannot be obtained for the payment of the amount; and the address at which the insurer may be served with notice of any proceeding relating to disposal of the amount paid into the Tribunal.

ii.

iii.

e.

f.

iv.

An application under this section shall not be entertained by the Tribunal if the application is made before the expiry of six months from the maturing of the

policy by survival, or from the date of receipt of notice by the insurer of the death of the person insured, as the case may be. v. If it appears to the Tribunal that a satisfactory discharge for the payment of the amount cannot otherwise be obtained by the insurer it shall allow the amount to be paid into the Tribunal and shall invest the amount in Government securities pending its disposal. The insurer shall transmit to the Tribunal every notice of claim received after the making of the application under sub-section (3), and any payment required by the Tribunal as costs of the proceedings or otherwise in connection with the disposal of the amount paid into the Tribunal shall as to the costs of the application under sub-section (3) be borne by the insurer and as to any other costs be in the discretion of the Tribunal. The Tribunal shall cause notice to be given to every ascertained claimant of the fact that the amount has been paid into the Tribunal, and shall cause notice at the cost of any claimant applying to withdraw the amount to be given to every other ascertained claimant. The Tribunal shall decide all questions relating to the disposal of claims to the amount paid into the Tribunal.

vi.

vii.

viii.

117. i.

Small Disputes Resolution Committees.

The Federal Government shall constitute one or more Small Disputes Resolutions Committees to arbitrate disputes arising between an insurer and a policy holder. The constitution and procedure of the Committees shall be prescribed by rules made by the Federal Government, and the Arbitration Act, 1940 (X of 1940), or any re-enactment thereof shall not apply to such Committees. No person shall be appointed a member of the Committee if he has any interest (as defined in sub-section (1) of section 16 of the SECP Act) in the subject matter of the arbitration. The Committees shall only have jurisdiction in respect of life insurance policies not being group life policies, domestic insurance policies and private motor insurance policies in respect of claims the pecuniary value of which shall be limited to a sum to be prescribed. Provided that the Committees shall not have jurisdiction in respect of claims made under private motor insurance policies for loss to the policy holder arising from liabilities incurred to third parties arising out of or in connection with the use of motor vehicles on land, as specified in the Motor Vehicles Act, 1939 (IV of 1939);.

ii.

iii.

iv.

118. i.

Payment of liquidated damages on late settlement of claims.

It shall be an implied term of every contract of insurance that where payment on a policy issued by an insurer becomes due and the person entitled thereto has complied with all the requirements, including the filing of complete papers, for claiming the payment, the insurer shall, if he fails to make the payment within a period of ninety days from the date on which the payment becomes

due or the date on which the claimant complies with the requirements, whichever is later, pay as liquidated damages a sum calculated in the manner as specified in sub-section (2) on the amount so payable unless he proves that such failure was due to circumstances beyond his control.

Explanation:
for the purposes of this sub-section, failure or delay by any person in making payment (including without limitation payment under a contract of reinsurance) to an insurer shall not constitute circumstances beyond the control of the insurer. ii. The liquidated damages payable under sub-section (1) shall be payable for the period during which the failure continues and shall be calculated at monthly rests at the rate five per cent higher than the prevailing base rate.

119. Supply of copies of proposals and medical reports. Every Insurer shall, on application by a policy holder and on payment of such fee as may be prescribed, supply to the policy holder certified copies of the questions put to him and his answers thereto contained in his proposal for insurance and in any medical report supplied in connection therewith. 120. Prohibition of business on dividing principle. No insurer shall after the commencement of the Ordinance, begin or carry on, any business upon the dividing principle, that is to say, on the principle that the benefit secured by a policy is not fixed but depends either wholly or partly on the results of a distribution of certain sums amongst policies becoming claims within certain time-limits, or on the principle that the premiums payable by a policy holder depend wholly or partly on the number of policies becoming claims within certain time-limits: Provided that nothing in this section shall be deemed to prevent an insurer from allocating bonuses to holders of participating policies of life insurance in accordance with the provisions of this Ordinance, either as reversionary additions to the sums insured or as immediate cash bonuses or otherwise. Provided further that nothing in this section shall apply to the business of Takaful insurance carried on by an insurer in accordance with laws established for the conduct of Takaful business.

INSURANCE ORDINANCE, 2000

PART XV INSURANCE TRIBUNAL
121. i.

Constitution of the Tribunal.

The Federal Government shall constitute a Tribunal or Tribunals in consultation with the Commission and shall in respect of each Tribunal so constituted specify the territorial limits within which, or the class or classes of cases in respect of which each such Tribunal shall exercise jurisdiction under this Ordinance: Provided that the Federal Government may by notification in the official Gazette confer all or any of the powers of the Tribunal on any District or Additional District and Sessions Judge of an area where for any reason it may not be expedient to constitute a separate Tribunal, and in doing so the Federal Government shall also specify the composition and pecuniary and territorial limits of such a Tribunal. ii. The Tribunal shall consist of a Chairperson who shall be a serving or retired judge of the High Court and not less than two members being persons of ability and integrity who have such knowledge or experience of life insurance, non-life insurance, actuarial science, finance, economics, law, accountancy, administration or other discipline as would, in the opinion of the Federal Government, enable them to discharge the duties and functions of members of the Tribunal. To constitute a sitting of a Tribunal the presence of the Chairperson and at least one other member shall be necessary. A Tribunal shall not merely by reason of a change in its composition, or the absence of any member from any sitting, be bound to recall and rehear any witness who has given evidence, and may act on the evidence already recorded by or produced before it. A Tribunal may hold its sitting at such places within its territorial jurisdiction as the Chairperson may decide from time to time. No act or proceeding of a Tribunal shall be invalid by reason only of the existence of a vacancy in, or defect in the constitution of the Tribunal.

iii.

iv.

v.

vi.

122. i.

Powers of Tribunal.
A Tribunal shall: a. in the exercise of its civil jurisdiction, have in respect of a claim filed by a policy holder against an insurance company in respect of, or arising out of a policy of insurance, all the powers vested in a civil Court under the Code of Civil Procedure, 1908 (Act V of 1908); b. in the exercise of its criminal jurisdiction, try the offences punishable under this Ordinance and shall, for this purpose, have the same powers as are vested in the Court of Sessions under the Code of Criminal Procedure, 1898 (Act V of 1898);

c.

exercise and perform such other powers and functions as are, or may be, conferred upon, or assigned to it, by or under this Ordinance; and in all matters with respect to which procedure has not been provided for in this Ordinance, follow the procedure laid down in the Code of Civil Procedure, 1908 (Act V of 1908) or the Code of Criminal Procedure, 1898 (Act V of 1898) as the case may be.

d.

ii.

The jurisdiction of a Tribunal shall not extend to appeals to which section 33 and section 34 of the SECP Act apply. No Court other than a Tribunal shall have or exercise any jurisdiction with respect to any matter to which the jurisdiction of a Tribunal extends under this Ordinance, including a decision as to the territorial limits and the execution of a decree, order or judgment passed by a Tribunal: Provided that for the purposes of this section a Small Claims Settlement Committee established under section 117 shall not be deemed to be a Court.

iii.

123. i.

Procedure of the Tribunal.

A Tribunal shall for the purpose of the trial of an application, follow such procedure as may be prescribed and have the same powers as are vested in a civil court trying a suit under the Code of Civil Procedure, 1908 (Act V of 1908) in respect of: a. summoning and enforcing the attendance of any person and examining him on oath; b. requiring the discovery and production of documents and material objects; receiving evidence on affidavits; and issuing commissions for the examination of witnesses or documents.

c. d. ii.

If, in the course of the trial of an application, any one of its members ceases to hold office, or is, for any reason, unable to attend the sittings of that Tribunal, the trial shall continue notwithstanding such vacancy, and the decision may be given by the remaining members. If upon any matter requiring the decision of the Tribunal there is a difference of opinion among its members, the opinion of the majority shall prevail and the decision of that Tribunal shall be expressed in terms of the view of the majority: Provided that where the members are equally divided on any point it shall be decided in accordance with the views of the Chairperson.

iii.

iv.

The decision of a Tribunal shall be given in writing and shall be signed by the Chairperson. A Tribunal shall give a copy of the decision to each party to the dispute and shall also forward a copy to the Commission.

v.

vi.

A Tribunal shall, upon an application made in this behalf by any party to a dispute adjudicated by it and on payment of such fee not exceeding one rupee for every one hundred words, and subject to such conditions, as may be prescribed, furnish certified copies of its proceedings or of any document submitted to or produced before it.

124. i.

Appeal.
Subject to the right of appeal conferred by sub-section (2) hereof, the decision of the Tribunal on any application shall be final and shall not be questioned in any Court or before any other authority. Any party aggrieved by a decision of the Tribunal may, if the amount of the claim in dispute or the penalty prescribed, as the case may be, is not less than one hundred thousand rupees, prefer an appeal to the High Court within a period of thirty days from the date of such decision. An appeal under sub-section (2) shall be heard by a Bench of not less than two judges of the High Court having territorial jurisdiction over the relevant Tribunal.

ii.

iii.

INSURANCE ORDINANCE, 2000

PART XVI INSURANCE OMBUDSMAN
125. i.

Appointment of Insurance Ombudsman.

As soon as may be, after the commencement of this Ordinance, the Federal Government shall appoint an Insurance Ombudsman. The Insurance Ombudsman shall be a natural person having high integrity and ability and unimpeachable insurance or legal credentials, and shall not at the date of his appointment be more than seventy years of age. He shall not be a shareholder of an insurance company. The Insurance Ombudsman shall hold office for a period of four years from the date of his appointment unless he resigns earlier or is disqualified or removed in accordance with sub-section (2) or (3) of section 126. He shall not be eligible for any extension of tenure or for reappointment under any circumstances whatsoever. Any vacancy occurring in the office of the Insurance Ombudsman shall be filled within sixty days of the occurrence of such vacancy. The Insurance Ombudsman shall not hold any other office of profit in the service of Pakistan or occupy any other position carrying the right to remuneration for the rendering of services, and shall not during the two years immediately prior to his appointment have held any office in any body corporate carrying on insurance business in Pakistan.

ii.

iii.

iv.

v.

126. i.

Terms and conditions of Insurance Ombudsman.

The Insurance Ombudsman shall be entitled to the same salary and allowances as a Judge of a High Court. The Insurance Ombudsman may at any time resign his office by giving written notice to the Commission of not less than three months. The Insurance Ombudsman shall be disqualified from holding his office and his appointment may be revoked if: a. he has been convicted of an offence involving moral turpitude; b. c. d. he has been guilty of misconduct; he has been or is adjudged insolvent; he is incapable of discharging his duties by reason of physical, physiological or mental unfitness and has been so declared by a registered medical practitioner appointed by the Commission; he is disqualified by virtue of holding an office (other than that of Insurance Ombudsman) for which he receives remuneration; or

ii.

iii.

e.

f.

he fails to discharge diligently or impartially his duties under this Ordinance: Provided that, unless a disqualification referred to in this sub-section arises from the judgement or a court or tribunal of competent jurisdiction under any relevant provision of applicable law, the appointment of an Insurance Ombudsman shall not be revoked without an enquiry by an impartial person or body of persons constituted in accordance with such procedure as may be prescribed by rules made by the Federal Government, and such rules shall provide for a reasonable opportunity for him to be heard in his defence.

iv.

The Insurance Ombudsman shall be provided with a secretariat to be appointed in consultation with the Commission. Appointments to the secretariat may be made on deputation from the Commission or other insurance companies or otherwise on the basis of professional qualifications. The costs of the secretariat shall be shared by insurance companies in such proportions as may be determined by the Commission.

127. i.

Jurisdiction, functions and powers of Insurance Ombudsman.

The Insurance Ombudsman may on a complaint by any aggrieved person undertake any investigation into any allegation of mal-administration on the part of any insurance company Provided that the Insurance Ombudsman shall not have any jurisdiction to investigate or inquire into any matters which a. are within the jurisdiction of the Office of the Wafaqi Mohtasib under the Establishment of the Office of Wafaqi Mohtasib (Ombudsman) Order, 1983 (P.O. 1 of 1983) ; or b. are sub-judice before a court of competent jurisdiction or tribunal or board in Pakistan on the date of the receipt of a complaint, reference or motion by him.

ii.

For the purposes of this section "mal-administration" includes a. a decision, process, recommendation, act of omission or commission which: I. is contrary to law, rules or regulations or is a departure from established practice or procedure, unless it is bona fide and for valid reasons; or II. is perverse, arbitrary or unreasonable, unjust, biased, oppressive, or discriminatory; or is based on irrelevant grounds; or involves the exercise of powers, or the failure or refusal to do so, for corrupt or improper motives, such as, bribery, jobbery, favouritism, nepotism and administrative excesses; and

III. IV.

b.

corruption, nepotism, neglect, inattention, inordinate delay, incompetence, inefficiency and ineptitude in the administration or discharge of duties and responsibilities.

iii.

Notwithstanding anything contained in sub-section (1), the Insurance Ombudsman shall not accept for investigation any complaint which is brought by or on behalf of an insurance company and which relates to a contract of reinsurance. Notwithstanding anything contained in sub-section (1), the Insurance Ombudsman shall not accept for investigation any complaint by or on behalf of an employee of an insurance company concerning any matters relating to the insurance company in respect of any personal grievance relating to his service therein. For carrying out the objectives of this Ordinance and, in particular for ascertaining the root causes of corrupt practices and injustice, the Insurance Ombudsman may arrange for studies to be made or research to be conducted and may recommend appropriate steps for their eradication.

iv.

v.

128. Reference to Insurance Ombudsman by Court. If at any time during the pendency of a case, a Court or Tribunal trying a case relating to an insurance company is of the opinion that the management of the insurance company has prima facie acted in a mala fide manner, or in violation of insurance rules and regulations, it may make reference to the Insurance Ombudsman for inquiring into the matter and passing such order in accordance with the provisions hereof as he may deem fit: Provided that the making of a reference shall not prevent the Court or Tribunal from deciding the claim before it on its merits. 129. i.

Procedure for making complaints.

A complaint shall be made on solemn affirmation or oath in writing addressed to the Insurance Ombudsman. The complaint shall set out the full particulars of the transaction complained of and the name and address of the complainant. Prior to making a complaint the complainant shall intimate in writing to the concerned insurance company his intention of filing a complaint and if the insurance company either fails to respond, or makes a reply which is unsatisfactory to the complaint, within a period of one month, the complainant may file a complaint at any time thereafter within a further period of thee months: Provided that the Insurance Ombudsman may, if satisfied that there were reasonable grounds for the delay in filing the complaint, condone the delay and entertain the complaint. iii. The Insurance Ombudsman may adopt any procedure as he considers appropriate for investigating a complaint. Provided that he shall not pass any order against a insurance company without first giving it a notice and an opportunity to be heard. iv. Subject to section 128, the Insurance Ombudsman shall not have any power to issue an order in the nature of a stay order or to entertain any complaints if the matter is pending before a Court, Tribunal or other legal forum.

ii.

v.

The Insurance Ombudsman may reject a complaint summarily or he may accept the same or pass any other order he deems fit. Provided that in each case he shall pass a reasoned order for his decision.

vi.

The Federal Government may further prescribe rules for the conduct of proceedings in relation to complaints brought before the Insurance Ombudsman.

130. i.

Recommendations for implementation.

In the event the Insurance Ombudsman comes to the conclusion that the complaint is justified, in part or in whole, he shall try and facilitate an amicable resolution or settlement by resort to mediation and failing that communicate his findings to the concerned insurance company with the direction a. to reconsider the matter; b. to modify or cancel the earlier decision, action or failure to take appropriate action; to pay reasonable compensation to the complainant as fixed by the Insurance Ombudsman; to take the requisite steps to improve the functioning or efficiency of the insurance company; or to take such other remedial steps or actions as may be specified by the Insurance Ombudsman.

c.

d.

e.

ii.

Any insurance company, or official of a insurance company or a complainant aggrieved by an order passed by the Insurance Ombudsman may file an appeal with the Commission within thirty days which shall pass any order thereon it deems fit. Any order passed by the Insurance Ombudsman which has not been appealed against, or any order passed by the Commission in appeal, as the case may be, shall become final and operative and if not implemented shall render the insurance company concerned liable to such action including the imposition of a fine or penalty as the Commission may deem fit, and in relation to a insurance company officer, to the appropriate disciplinary or other proceedings. Nothing contained herein shall prevent a complainant from filing a suit against an insurance company in the event his complaint is rejected.

iii.

iv.

131. Power to call for information. The Insurance Ombudsman shall have the power for purposes of disposing a case, to require an insurance company to disclose to him any information subject to the following conditions, namely:i. the Insurance Ombudsman shall make every endeavour to ensure that insurance confidentiality is maintained as required by insurance law and procedure and shall take no action which is violative thereof; ii. the Insurance Ombudsman may call for any or all such documents which are relevant or pertinent for purposes of deciding a complaint;

Provided that he shall not be entitled to call for unrelated documents which may compromise the insurance company's position in relation to other customers; iii. in the event of an insurance company refusing to furnish information, or copies of relevant documents, the Insurance Ombudsman may draw an adverse inference and comment on the same in his findings.

132. i.

Duties of insurers.
An insurer shall at all times co-operate with the Insurance Ombudsman and with any person properly authorized by him, in the conduct of an investigation by the Insurance Ombudsman into a complaint which has been brought before him. An insurer that obstructs, through its wilful act or failure to act, any investigation by the Insurance Ombudsman shall be guilty of an offence.

ii.

133.

Duty and power of the Insurance Ombudsman to report to the Commission.

i. Where the Insurance Ombudsman has reason to believe during the course of his investigation into a complaint brought before him, or finds as a result of his investigation that an insurer has a. failed to comply with this Ordinance; or b. c. failed to act in good faith; or acted in such a manner as to bring the insurance industry into disrepute; he shall make a report on that matter to the Commission in such manner as the Commission may prescribe. ii. The Insurance Ombudsman may make a report to the Commission on any matter arising from his investigation into a complaint brought before him, in which he deems it fit or proper to do so. The Insurance Ombudsman may, in a report made under sub-section (1) or under sub-section (2), make recommendations as to action to be taken, including without limitation an investigation by the Commission, or the taking of the requisite steps or legal proceedings against an insurance company which has acted in violation of insurance laws, rules, regulations, procedures, or directives of the Commission.

iii.

134. i.

Report of Insurance Ombudsman.

The Insurance Ombudsman shall prepare and submit to the Federal Government on or before the 31st March in every year following the commencement date a report setting out a review of the activities of his office during the preceding year. The Insurance Ombudsman shall also submit a report or reports to the Federal Government containing the results of such inquiries as he may be directed to conduct by the Federal Government from time to time.

ii.

iii.

All reports submitted by the Insurance Ombudsman shall be published and released to the public unless he directs otherwise for reasons to be recorded.

INSURANCE ORDINANCE, 2000

PART XVII APPOINTMENT OF ADMINISTRATORS
135.

When Administrator for management of insurance business may be appointed.

i. If at any time the Commission has reason to believe that an insurer carrying on insurance business is acting in a manner likely to be prejudicial to the interest of holders of insurance policies it may, after giving an opportunity to the insurer to be heard, appoint an Administrator to manage the affairs of the insurer under the direction and control of the Commission. The Administrator shall receive such remuneration as the Commission may prescribe and the Commission may at any time cancel the appointment and appoint some other person as Administrator. The management of the business of the insurer shall as on and after the date of appointment of the Administrator vest in such Administrator but except with the leave of the Commission the Administrator shall not issue any further policies. As on and after the date of appointment of the Administrator any person vested with any such management immediately prior to that date shall be divested of that management. The Commission may issue such directions to the Administrator as to his powers and duties as the Commission deems desirable in the circumstances of the case, and the Administrator may apply to the Commission at any time for instructions as to the manner in which he shall conduct the management of the business of the insurer or in relation to any matter arising in the course of such management.

ii.

iii.

iv.

v.

136. i.

Powers and duties of the Administrator.

The Administrator shall conduct the management of the business of the insurer with the greatest economy compatible with efficiency and shall, as soon as may be possible, file with the Commission a report stating his opinion as to which of the following courses is in the circumstances most advantageous to the general interest of the holders of insurance policies:a. the transfer of the business of the insurer to some other insurer; b. the carrying on of its business by the insurer (in case of life insurance business whether with the policies of the business continued for the original sum insured with the addition of the bonuses that attach to the policies or for reduced amounts); the winding up of business of the insurer; or such other course as he deems advisable.

c. d. ii.

On the filing of the report with the Commission, the Commission may take such action, not inconsistent with the other provisions of this Ordinance, as it

thinks fit for promoting the interest of the holders of insurance policies in general. iii. Any order passed by the Commission under sub-section (2) shall be binding on all persons concerned, and shall have effect notwithstanding anything in the Memorandum or Articles of Association of the insurer, if a company.

137.

Powers of Administrator respecting property liable to attachment under section 160.

i. If the Administrator is satisfied that any person has rendered himself liable to be proceeded against under section 146, he may, pending the institution of proceedings against such person under that section, by order in writing prohibit him or any other person from transferring or otherwise disposing of any property which, in the opinion of the Administrator, would be liable to attachment in proceedings under that section. Any person aggrieved by an order made by the Administrator under subsection (1) may, within fourteen days from the date on which the order is served on him, appeal against such order to the Tribunal. An order made by the Administrator under sub-section (1) shall, subject to any order made by the Tribunal on appeal, be in force for a period of three months from the date of the order unless before the expiry of the said period, an application is made under sub-section (1) of section 160 to the Court competent to exercise jurisdiction under that sub-section, and when such an application is made, the order shall, subject to any order made by the Court, continue in force as if it were an order of attachment made by that Court in proceedings under that section. An order made by the Administrator under this section shall a. in the case of an order affecting a corporation or firm, be served in the manner provided for the service of summons in rule 2 of Order XXIX or rule 3 of the Order XXX, as the case may be, in the First Schedule to the Code of Civil Procedure, 1908 (Act V of 1908), and b. in the case of an order affecting a person not being a corporation or firm, be served on such person, I. personally, by delivering or tendering to him the order, or II. III. by post, or where the person cannot be found, by leaving a copy of the order with some adult male member of his family or by affixing such copy to some conspicuous part of the premises in which he is known to have last resided or carried on business or personally worked for gains, and every such order shall also be published in the official Gazette.

ii.

iii.

iv.

v.

If any question arises whether a person was duly served with an order under sub-section (4) the publication of the order in the official Gazette shall be conclusive proof that the order was so served, and a failure to comply with the provisions of clause (a) or clause (b) of sub-section (4) shall not affect the validity of the order.

vi.

Notwithstanding anything contained in this section, any property in respect of which an order has been made by the Administrator may, with the previous permission of the Administrator and subject to such terms and conditions as he may impose, be transferred or otherwise disposed of. Notwithstanding anything contained in any other law for the time being in force, the transfer or other disposition of any property in contravention of any order made by the Administrator under this section or of any terms and conditions imposed by him shall be void. For the purpose of enabling him to form an opinion as to whether any property would be liable to attachment in proceedings under section 160 or for the purpose of enabling him to institute proceedings under that section, the Administrator may require any person to furnish information on such points or matters as, in the opinion of the Administrator may be relevant for the purpose, and any person so required shall be deemed to be legally bound to furnish such information within the meaning of section 176 of the Pakistan Penal Code (Act XLV of 1860). The Administrator shall have all the powers of a civil court under the Code of Civil Procedure, 1908 (Act V of 1908), while trying a suit in respect of the following matters, namely:a. summoning and enforcing the attendance of witnesses and examining them on oath; requiring the production of documents; and receiving evidence on affidavits; and any proceeding before the Administrator under this section shall be deemed to be a judicial proceeding within the meaning of section 193 and 228 of the Pakistan Penal Code (Act XLV of 1860)..

vii.

viii.

ix.

b. c.

x.

Save as provided in this section or in section 160, and notwithstanding anything contained in any other law for the time being in force a. no suit or other legal proceeding shall lie in any Court to set aside or modify any order of the Administrator or the Federal Government made under this section; and b. no Court shall pass any decree, grant any injunction or make any other order which shall have the effect of nullifying or affecting in any way any such order.

138. Cancellation of contracts and agreement. The Administrator may, at any time during the continuance of his appointment with respect to any insurer and after giving an opportunity to the persons concerned to be heard, cancel or vary (either unconditionally or subject to such conditions as he thinks fit to impose) any contract or agreement (other than a policy) between the insurer and any other person which the Administrator is satisfied is prejudicial to the interests of holders of insurance policies.

139. Termination of appointment of Administrator. If at any time it appears to the Commission that the purpose of the order appointing the Administrator has been fulfilled or that for any reason it is undesirable that the order of appointment should remain in force, the Commission may cancel the order and thereupon the Administrator shall be divested of the management of the insurance business which shall, unless otherwise directed by the Commission, again vest in the person in whom it was vested immediately prior to the date of appointment of the Administrator. 140. Finality of decision of appointing Administrator. Any order or decision of the Commission made in pursuance of section 135 or section 139 shall be final and shall not be called in question in any Court or Tribunal. 141.

Penalty for withholding document or property from Administrator.

If any director or officer of the insurer or any other person fails to deliver to the Administrator any books of account, registers or any other documents in his custody relating to the business of the insurer the management of which has vested in the Administrator, or retains any property of such insurer, he shall be punishable with imprisonment which may extend to six months, or with fine which may extend to one million rupees, or with both.

142. i.

Protection of action taken under sections 135 to 139.

No suit, prosecution or other legal proceeding shall lie against an Administrator for anything which is in good faith done or intended to be done in pursuance of section 135, section 136, section 137 or section 138. No suit or other legal proceeding shall lie against the Commission for any damage caused or likely to be caused by anything which is in good faith done or intended to be done under section 135, section 136 or section 139.

ii.

INSURANCE ORDINANCE, 2000

PART XVIII APPOINTMENT OF ADMINISTRATORS
143. i.

Winding up by the Court.

The Court may order the winding up in accordance with the Companies Ordinance, 1984 (XLVII of 1984), of any insurance company and the provisions of that Ordinance shall, subject to the provisions of this Ordinance, apply accordingly. The Court may, provided that it is satisfied that such order is in the interests of the policy holders of the company, order the winding up of an insurance company: a. on the grounds set out in section 305 of the Companies Ordinance 1984 (XLVII of 1984), but subject always to the provisions of this Ordinance; b. if with the sanction of the Court previously obtained a petition in this behalf is presented by shareholders not less in number than one-tenth of the whole body of shareholders and holding not less than one-tenth of the whole share capital or by not less than fifty policy holders holding participating policies of life insurance other than paid up policies, that have been in force for not less than three years and have a total sum insured, including bonuses added to the sum assured of not less than fifty million rupees; or if the Commission, who is hereby authorised to do so, applies in this behalf to the Court on any of the following grounds, namely:I. that the company having failed to comply with any requirement of this Ordinance has continued such failure or having contravened any provision of this Ordinance has continued such contravention for a period of three months after notice of such failure or contravention has been conveyed to the company by the Commission; II. that it appears from the returns furnished under the provisions of this Ordinance, or from the results of any investigation made thereunder, or from a report made by any Administrator appointed thereunder that the company is insolvent; or that the continuance of the company is prejudicial to the interests of the policy holders.

ii.

c.

III.

iii.

An insurance company in respect of which a winding up order is made shall immediately cease to enter into new contracts of insurance, whether in life or non-life insurance. All contracts of non-life insurance issued by an insurer which are in force at the date of an order for the winding up of the insurer, shall stand cancelled as at the date of the order or at such later date as may be specified in the order.

iv.

144. Voluntary winding up. Notwithstanding anything contained in the Companies Ordinance, 1984 (XLVII of 1984), an insurance company shall not be wound up voluntarily unless it has first transferred or otherwise made provision for the settlement of its liabilities incurred under insurance contracts, and its registration has been revoked. 145. i.

Court may order continuation of life insurance business.

The liquidator of an insurer carrying on life insurance shall, if the Court so orders, carry on the life insurance business, or the life insurance business carried on in any one or more statutory funds, of the insurer with a view to its being transferred as a going concern to another insurer (being a company) registered under this Ordinance, whether an existing company or a company formed for that purpose. If an order is given under sub-section (1), and has not been revoked, each statutory fund to which the order applies shall be considered for the purposes of the liquidation to constitute a single asset of the insurer, and no assets of any such statutory fund shall be applied in the winding up of the insurer, neither shall any liabilities of any such statutory fund share in any distribution of assets upon winding up. In carrying on the life insurance business in any statutory fund of an insurer in accordance with an order of a Court under sub-section (1), the liquidator may, subject to the provisions of this Ordinance, agree to the variation of any contracts of insurance in existence when the winding up order is made but shall not effect any new contracts of insurance.

ii.

iii.

146. i.

Court may appoint special manager of life insurance business.

If the liquidator of a life insurer is satisfied that the interests of policyholders require the appointment of a special manager of the insurers life insurance business, he may make application to the Court to appoint a special manager. The Court may, on an application made under sub-section (1), appoint a special manager of the insurers life insurance business to act during such time as the Court may direct, with such powers, including any of the powers of a receiver or manager, as may be entrusted to him by the Court.

ii.

147. i.

Court may appoint independent actuary.

The Court may, on the application of the liquidator, of a special manager appointed under section 146 or of the Commission, appoint an actuary (not being the insurers appointed actuary at any time during the five years prior to the insurer entering into liquidation) to investigate the life insurance business of the insurer according to such scope as the Court shall direct, but including without limitation: a. the desirability or otherwise of that business being continued; and b. any reduction in the contracts made in the course of carrying on that business that may be necessary for its successful continuation.

ii.

An actuary appointed under sub-section (1) shall report to the liquidator, the special manager or to the Court and within such time as the Court may direct, on any investigation conducted by the actuary pursuant to this section.

148. i.

Powers of Court to reduce contracts of life insurance.

Where an insurer is in liquidation, the Court may make an order reducing the amount of the insurance contracts of the insurer upon such terms and subject to such conditions as the Court believes to be in the interests of the policy holders of the insurer. This section applies also to the business of a statutory fund of a life insurer which is being carried on by a liquidator pursuant to an order made by the Court under section 145. An application for an order under this section may be made either by the liquidator, or by or on behalf of the company or by a policy holder, or by the Commission; and the Commission and any person whom the Court thinks likely to be affected shall be entitled to be heard on any such application.

ii.

iii.

149. i.

Commission empowered to apply for directions.

The Commission may apply to the Court for directions regarding any matter arising in connection with or upon the winding-up of an insurer. Before making an application under sub-section (1), the Commission shall give the liquidator and the special manager (if any) written notice of that proposed application, including details of the proposed application. The liquidator and the special manager shall be entitled to be heard on the application.

ii.

iii.

150. i.

Commission entitled to notice and hearing.

Before making an application to the Court in relation to a matter arising in connection with or upon the winding-up of an insurer, a liquidator or a special manager shall give the Commission not less than fifteen days written notice of that proposed application, including details of the proposed application. The Commission shall be entitled to be heard on the application.

ii. 151. i.

Commission entitled to obtain information.

The Commission may in writing request a liquidator or a special manager to provide such information as the Commission may deem necessary, in relation to the winding up of an insurer. The liquidator or special manager shall comply with the request within fifteen days or, such further period as the Commission shall, on application made to it for extension of time for providing such information, grant.

ii.

152. i.

Determination of insurance liabilities.

This section shall not apply to the life insurance business of a statutory fund of a life insurer in respect of which an order has been made by the Court under section 145 to continue that business, and that order has not been revoked. In the winding up of an insurer the liquidator shall a. by examination of the books and records of the insurer, identify persons appearing by those books and records to be entitled to or interested in the policies granted by the insurer

ii.

b.

determine the value of the liability of the insurer to each such person; and give notice of such value to those persons in such manner as the Court may direct.

c.

iii.

A determination under clause (b) of subsection (2) shall be made in accordance with the directions of the Court. In giving directions under sub-section (3) the Court shall, and in making the determination under the clause (b) of sub-section (2) the liquidator shall have regard to a. the surrender value of life insurance contracts; b. the amount of surplus, if any, that has been allocated for the benefit of participating life insurance policyholders; and the premium paid, the pattern of risk and the length of the unexpired portion of contracts of non-life insurance.

iv.

c.

v.

Any person to whom notice is given under clause (c) of sub-section (2) shall be bound by the value stated in that notice unless he gives notice of his intention to dispute such value in such manner and within such time as may be specified by applicable rules and failing which by an order of the Court.

153. i.

Application of statutory fund assets.

This section, other than sub-sections (6) and (7), does not apply to a statutory fund of a life insurer in respect of which an order has been made under section 145 to continue the life insurance business of that statutory fund, and that order has not been revoked. In the winding up of an insurance company carrying on life insurance business, the assets and the liabilities of each statutory fund of the insurer shall be ascertained separately from the value of the assets and liabilities of each other statutory fund or of the shareholders fund. Subject to this section, in the winding-up of a life insurer, the assets of a statutory fund shall first be applied in accordance with section 405 of the Companies Ordinance in discharging preferential payments given priority under that section. Sub-section (3) shall have effect only to the extent that creditors of the company which have statutory preference under section 405 of the Companies Ordinance, 1984 (XLVII of 1984), in respect of liabilities which are liabilities that are referable to the business of the statutory fund. If any assets of the statutory fund remain after the application of subsection (3), the assets shall be applied according to the following rules,namely:a. the assets shall be applied first in discharge of policy liabilities of the insurer referable to the statutory fund; b. if any assets remain, they shall be applied in discharge of other liabilities that are referable to the business of the statutory fund;

ii.

iii.

iv.

v.

c.

if, after the application of assets according to clauses (a) and (b), any assets of the statutory fund remain, those assets are to be applied in such manner as the Court directs; directions given for the purpose of clause (c) are to be such directions as the Court considers equitable, having regard in decreasing order of preference to: I. the interests of the holders of policies referable to the statutory fund; II. the interests of the holders of policies referable to statutory funds of the insurer other than the statutory fund; the interests of creditors of the company other than creditors of the statutory fund whose debts have not been discharged by the application of assets according to clause (b); and the interests of shareholders of the company.

d.

III.

IV. vi.

If a liability of the companya. is referable to two or more statutory funds (including a statutory fund or funds referred to in sub-section (1)); or b. is referable in part to a statutory fund or statutory funds (including in both cases a statutory fund referred to in sub-section (1)) but is also related to the shareholders fund;

vii.

the liquidator may apportion the liability so as to determine the part of the liability that is to be borne by each of the statutory funds or by the statutory fund or funds and the shareholders fund, as the case may be on a fair and equitable basis. In making an apportionment under subsection (6), the liquidator shall comply with any directions of the Court. The part of the amount so determined in relation to a statutory fund is to be treated as a liability of the insurer that is referable to the business of the fund.

viii.

154. i.

Winding up secondary companies.

Where the insurance business or any part of the insurance business of an insurance company has been transferred to another insurance company under an arrangement in pursuance of which the first mentioned company (in this section referred to as the secondary company) or the creditors thereof has or have claims against the company to which such transfer was made (in this section referred to as the principal company) then, if the principal company is being wound up by or under the supervision of the Court, the Court shall (subject as hereinafter mentioned) order the secondary company to be wound up in conjunction with the principal company and may be the same or any subsequent order appoint the same person to be liquidator for the two companies and make provision for such other matters as may seem to the Court necessary with a view to the companies being wound up as if they were one company.

ii.

The commencement of the winding up of the principal company shall, save as otherwise ordered by the Court, be the commencement of the winding up of the secondary company. In adjusting the rights and liabilities of the members of the several companies among themselves the Court shall have regard to the constitution of the companies and to the arrangements entered into between the companies in the same manner as the Court has regard to the rights and liabilities of different classes of contributories in the case of the winding up of a single company or as near thereto as circumstances admit. Where any company alleged to be secondary is not in process of being wound up at the same time as the principal company to which it is alleged to be secondary, the Court shall not direct the secondary company to be wound up, unless, after hearing all objections (if any) that may be urged by or on behalf of the company against its being wound up, the Court is of opinion that the company is secondary to the principal company and that the winding up of the company in conjunction with the principal company is just and equitable. An application may be made in relation to the winding up of any secondary company in conjunction with the principal company by any creditor of, or person interested in, the principal or secondary company. Where a company stands in the relation of a principal company to one insurance company and in the relation of a secondary company to some other insurance company or where there are several insurance companies standing in the relation of secondary companies to one principal company, the Court may deal with any number of such companies together or in separate groups as it thinks most expedient upon the principle laid down in this section.

iii.

iv.

v.

vi.

155. Return of deposits. In the winding up of an insurer the liquidator shall apply to the Court for an order for the return of the deposit made by the insurer under section 29 and the Court shall on such application order a return of the deposit subject to such terms and conditions as it shall direct. Provided that in the case of a deposit made under section 29 which by virtue of this Ordinance is deemed to be an asset of a statutory fund in respect of which an order has been made under section 145 to continue the life insurance business of that statutory fund and that order has not been revoked, the Court shall not order the return of that deposit.

INSURANCE ORDINANCE, 2000

PART XIX OFFENCES AND PENALTIES
156.

Penalty for default in complying with, or acting in contravention of this Ordinance.

Except as otherwise provided in this Ordinance, any insurer who makes default in complying with or acts in contravention of any requirement of this Ordinance, and, where the insurer is a company, any director, or other officer of the company, who is knowingly a party to the default, shall be punishable with fine which may extend to one million rupees and, in the case of a continuing default, with an additional fine which may extend to ten thousand rupees for every day during which the default continues.

157.

Penalty for transacting insurance business in contravention of sections 5, 6 and 29.

i. Any insurer or any person acting on behalf of an insurer, who carries on any class of insurance business in contravention of any of the provisions of sections 5, 6 and 29, or does any one or more of the acts constituting the business of insurance in relation to any insurance business carried on in contravention of any of the said sections shall be punishable with fine which may extend to two million rupees. Any person knowingly taking out a policy of insurance with any insurer or person guilty of an offence under sub-section (1) shall be punishable with fine which may extend to five hundred thousand rupees: Provided that nothing in sub-section (1) or sub-section (2) shall apply to the business of reinsurance between an insurer in Pakistan and an insurer not having an office in Pakistan.

ii.

158. Penalty for false statement in document. Except as otherwise provided in this Ordinance, whoever, in any return, report, certificate, balance-sheet or other document, required by or for the purposes of any of the provisions of this Ordinance, wilfully makes a statement false in any material particular, knowing it to be false, shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to one million rupees, or with both. 159. i.

Wrongfully obtaining or withholding property.

Any director, or other officer or employee of an insurer who wrongfully obtains possession of any property of the insurer or having any such property in his possession wrongfully withholds it or wilfully applies it to purposes other than those expressed or authorised by this Ordinance, shall, on the complaint of the Commission made after giving the insurer not less than fifteen days notice of its intention, or on the complaint of the insurer or any member or any policy holder thereof, be punishable with fine which may extend to one million rupees and may be ordered by the Court trying the offence to deliver up or refund within a time to be fixed by the Court any such property improperly obtained or wrongfully withheld or wilfully misapplied and in default to suffer imprisonment for a period not exceeding two years.

ii.

For the purposes of this section, property of a life insurance statutory fund maintained by an insurer is property of that insurer.

160.

Power of Tribunal to order restoration of property of insurer or compensation in certain cases.

i. If, on the application of the Commission or an Administrator appointed under section 135 or an insurer or any policy holder or any member of an insurance company or the liquidator of an insurance company (in the event of the insurance company being in liquidation), the Tribunal is satisfied: a. that any insurer (including in any case where the insurer is an insurance company any person who has taken part in the promotion or formation of the insurance company or any past or present director, managing agent, manager, secretary or liquidator) or any officer, employee or agent of the insurer, I. has misapplied or retained or become liable or become accountable for any money or property of the insurer; or II. has been guilty of any misfeasance or breach of trust in relation to the insurer; or

b.

that any person, whether he is or has been in any way connected with the affairs of the insurer or not, is in wrongful possession of any money or property of the insurer or having any such money or property in his possession wrongfully withholds it or has converted it to any use other than that of the insurer; the Tribunal may examine any such insurer, director, managing agent, manager, secretary or liquidator or any such officer, employee or agent of the insurer or such other person, as the case may be, and may compel him to contribute such sums to the assets of the insurer by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust as the Tribunal thinks fit, or to pay such sum as may be found due from him in respect of any money or property of the insurer for which he is liable or accountable or to restore any money or property of the insurer or any part thereof, as the case may be; and the Tribunal shall have power to order the payment of damages at such rate and from such time as specified in section 118 or as the Tribunal may otherwise deem fit.

ii.

Without prejudice to the provisions contained in sub-section (1) or sub-section (3), where it is proved that any money or property of an insurer has disappeared or has been lost, the Tribunal shall presume that every person in charge of, or having a disposing power over, such money or property at the relevant time (whether a director, manager, principal officer or any other officer) has become accountable for such money or property within the meaning of sub-clause (i) of clause (a) of sub-section (1), and the provisions of that sub-section shall apply accordingly, unless such person demonstrates to the satisfaction of the Tribunal that the money or property has been utilised or disposed of in the ordinary course of the business of the insurer and for the purpose of that business and in accordance with the provisions of this Ordinance, or that he took all reasonable steps to prevent the disappearance or loss of such money or property or otherwise satisfactorily accounts for such disappearance or loss.

iii.

Where the insurer is an insurance company and any of the acts referred to in clauses (a) or (b) of sub-section (1) has been committed by any person, every person who was at the relevant time a director, managing agent, manager, liquidator, secretary or other officer of the insurance company shall, for the purposes of that sub-section be deemed to be liable for that act in the same manner and to the same extent as the person who has committed the act, unless he proves that act was committed without his consent or connivance and was not facilitated by any neglect or omission on his part. For the purposes of this section, money or property of an insurer includes money or property of a life insurance statutory fund maintained by that insurer, and any sum paid to or money or property restored to or liquidated damages paid to an insurer in accordance with sub-section (1) which relate to the money or property of a statutory fund shall be applied to that statutory fund. Where at any stage of the proceedings against any person under this section (hereinafter referred to as the delinquent), the Tribunal is satisfied by affidavit or otherwise:a. that a prima facie case has been made out against the delinquent; and b. that it is just and proper so to do in the interest of the policy holders of an insurer or of the members of an insurance company, the Tribunal may direct the attachment of:I. any property of the insurer in the possession of the delinquent; II. any property of the delinquent which belongs to him or is deemed to belong to him within the meaning of sub-section (6); or any property transferred by the delinquent within two years before the commencement of proceedings under sub-section (1) or during the pendency of such proceedings, if the Tribunal is satisfied by affidavit or otherwise that the transfer was otherwise than in good faith and for consideration.

iv.

v.

III.

vi.

For the purposes of sub-section (5), the following classes of property shall be deemed to belong to a delinquent:a. any property standing in the name of any person which by reason of the person being connected with the delinquent, whether by way of relationship or otherwise, or on account of any other relevant circumstances appears to belong to the delinquent ; b. the property of a private company in respect of the affairs of which the delinquent, by himself or through his nominees, relatives, partners or persons interested in any shares of the company is able to exercise or is entitled to acquire control, whether direct or indirect.

Explanation.
For the purposes of this section a person shall be deemed to be a

nominee of a delinquent, if, whether directly or indirectly, he possesses on behalf of the delinquent, or may be required to exercise on the direction or on behalf of the delinquent, any right or power which is of such a nature as to enable the delinquent to exercise or to entitle the delinquent to acquire control over the companys affairs. vii. Any claim to any property attached under this section or any objection to such attachment shall be made by an application to the Tribunal and it shall be for the claimant or objector to adduce evidence to show that the property is not liable to attachment under this section, and the Tribunal shall proceed to investigate the claim or objection in a summary manner. When disposing of an application under sub-section (1), the Tribunal shall, after giving all persons who appear to it to be interested in any property attached under this section an opportunity of being heard, make such order as it thinks fit respecting the disposal of any such property for the purpose of effectively enforcing any liability under this section, and all such persons shall be deemed to be parties to the proceedings under this section. In any proceedings under this section the Tribunal shall have full powers and exclusive jurisdiction to decide all questions of any nature whatsoever arising thereunder and in particular, with respect to any property attached under this section and no other Tribunal shall have jurisdiction to decide any such question in any suit or other legal proceeding. In making any order with respect to the disposal of the property of any private company referred to in clause (b) of sub-section (6), the Tribunal shall have due regard to the interests of all persons interested in such property other than the delinquent and persons referred to in that clause. This section shall apply notwithstanding that the act is one for which the person concerned may be criminally liable. In proceedings under this section the Tribunal shall have all the powers which a Court has under section 418 of the Companies Ordinance, 1984 (XLVII of 1984). The Tribunal entitled to exercise jurisdiction under this section shall be the Tribunal within whose jurisdiction the registered office of the insurer is situate and any proceedings under this section pending immediately before the commencement of this Ordinance in any Court shall, on such commencement, stand transferred to the Tribunal. A Tribunal may, with the approval of the High Court exercising territorial jurisdiction over it, make rules providing fora. the manner in which enquiries and proceedings may be held under this section; and b. any other matter for which provision has to be made for enabling the Tribunal effectively to exercise its jurisdiction under this section.

viii.

ix.

x.

xi.

xii.

xiii.

xiv.

161.

Notice to Commission and hearing.

i.

When application is made to the Tribunal for the making of any order to which this section applies the Tribunal shall, unless the Commission has itself made the application or has been made a party thereto, send a copy of the application together with intimation of the date fixed for the hearing thereof to the Commission, and shall give the Commission an opportunity of being heard. The orders to which this section applies are the following namely:a. an order for the attachment in execution of a decree of any deposit made under section 29; b. c. an order under section 155 for the return of any such deposit; an order under section 69 sanctioning any arrangement for the transfer or amalgamation of life insurance business or any order consequential thereon; and an order for the winding up of an insurance company.

ii.

d. 162. i.

Previous sanction of Commission for institution of proceedings.

Except where proceedings are instituted by the Commission no proceedings under this Ordinance against an insurer or any director, manager or other officer of an insurer shall be instituted by any person unless he has previous thereto obtained the sanction of the Commission (which shall not unreasonably be withheld) to the institution of such proceedings. Where the proceedings are not initiated by the Commission or the Commission has not been made a party, the Tribunal shall before proceeding further in the matter give notice to the Commission and shall not proceed to hear and decide the matter without giving the Commission the opportunity of participating in the proceedings and being heard.

ii.

163. Power of Court to grant relief. If in any proceedings, civil or criminal, it appears to the Court or the Tribunal hearing the case that a person is or may be liable in respect of negligence, default, breach of duty or breach of trust but that he has acted honestly and reasonably and that having regard to all the circumstances of the case he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, the Court or the Tribunal may relieve him either wholly or partly from his liability on such terms as it may think fit.

INSURANCE ORDINANCE, 2000

PART XX MISCELLANEOUS
164. i.

Service of notices.
Any process or notice required to be served on an insurer shall be sufficiently served if addressed to any person registered with the Commission as a person authorised to accept notices on behalf of the insurer and left at, or sent by registered post to, the address of such person as registered with the Commission. Any notice or other document which is by this Ordinance required to be sent to any policy holder may be addressed and sent to the person to whom notices respecting such policy are usually sent and any notice so addressed and sent shall be deemed to be notice to be holder of such policy: Provided that, where any person claiming to be interested in a policy as transferee, assignee or nominee has given to an insurer notice in writing of his interest, any notice which is by this Ordinance required to be sent to policy holders shall also be sent to such person at the address specified by him in his notice.

ii.

165. i.

Insurance of interests in Pakistan.

The Federal Government may make rules, not inconsistent with this Ordinance, imposing conditions on the ability of any person to insure outside Pakistan any risk or part thereof in respect of any property or interests which are located in Pakistan at the time the insurance is effected. The Federal Government may make rules, not inconsistent with this Ordinance, imposing conditions on the ability of any insurer to issue life insurance policies denominated in currencies other than the Pakistan Rupee to persons who are citizens of Pakistan and resident in Pakistan at the time the insurance is effected.

ii.

166. i. ii.

Insurance of public property.

This section applies to direct non-life insurance of public property. In this section a. Company" means the National Insurance Company Limited; b. "public property" means: I. any property, movable or immovable, which belongs to, or the safety of which is the legal responsibility of, A. the Federal Government, a Provincial Government or a local authority or statutory corporation; or B. any company, firm, undertaking, institution, organisation or other establishment which is managed or controlled by the Federal or a Provincial Government or local authority or statutory corporation or in which such Government, by itself or jointly with a local

authority or corporation or company managed or controlled by it, holds a controlling financial share or interest or which is specified by the Federal Government for the purposes of this clause; and II. a project financed out of an external loan, or with external aid until it reaches: A. in the case of an industrial project, the stage at which it is capable of commencing normal production; and B. in the case of any other project, the stage at which it is capable of being put to the use for which it is intended; and c. "statutory corporation" means a body corporate, other than a company, established or set up by the Federal Government or a Provincial Government in pursuance of any law.

iii.

Subject to the provisions of sub-sections (4) and (5), all insurance business relating to any public property, or to any risk or liability appertaining to any public property, shall be placed with the Company only and shall not be placed with any other insurer: Provided that marine, aviation and transport insurance relating to goods the import of which is financed out of an external loan, or with external aid, may, at the option of the importer, be placed with any insurer authorised to carry out such insurance business in the country giving the loan or aid. Provided that marine, aviation and transport insurance relating to goods the import of which is financed out of an external loan, or with external aid, may, at the option of the importer, be placed with any insurer authorised to carry out such insurance business in the country giving the loan or aid.

iv.

The Federal Government may a. by order in writing exempt from compliance with sub-section (3) any property or liability to which that sub-section applies; or by notification in the official Gazette exclude from the application of sub-section (3) such property or liability as is specified in that notification. If the Company declares in writing that it is not able, by virtue of the operation of a provision of this Ordinance or for any other reason, to enter into a contract of insurance to which sub-section (3) refers, the property or liability which is the subject of that proposed contract of insurance shall be exempted from the provisions of sub-section (3) to the extent of the insurance proposed to be obtained by means of that contract of insurance. Any person who insures, and any insurer which accepts insurance of, any property or liability, knowing such insurance to be in contravention of subsection (3), shall be guilty of an offence: Provided that no person shall be in contravention of sub-section (3) by reason only of that sub-section becoming applicable to property or liability to which it was not applicable at the time that a contract of insurance in respect of that property or liability was taken out. b.

v.

vi.

vii.

The Federal Government may, by notification in the official Gazette, make rules, regulations and notifications, not inconsistent with the provisions of this Ordinance, for carrying out the purposes of this section. Rules, regulations and notifications, made under the authority of the National Insurance Corporation Act 1976 for the purposes of section 10 of that Act and in force as at the commencement date, shall be deemed to have been made under the provisions of the preceding sub-section and shall apply mutatis mutandis except in so far as and to the extent that they conflict with the provisions of this Ordinance. This section shall have effect until the earliest of the following dates: a. the effective date of a notification by the Federal Government in the official Gazette that this section no longer has effect; b. the effective date of a direction by the Commission to the Company to cease entering into new contracts of insurance; and the effective date at which the Federal Government ceases to hold a controlling ownership interest in the Company.

viii.

ix.

c.

INSURANCE ORDINANCE, 2000

PART XXI RULES AND REGULATIONS
167. i.

Power to make rules and regulations.

The Federal Government may, subject to the condition of previous publication by notification in the official Gazette, make rules to carry out the purposes of this Ordinance. The power of the Federal Government to make rules in respect of matters expressly required in this Ordinance to be prescribed by the Commission, shall be deemed to have been hereby delegated to the Commission, who may, subject to the condition of previous publication by notification in the official Gazette, and subject to the condition of previous approval by the Board, make rules in respect of such matters and in respect of any other matters which are required to be or may be prescribed under this Ordinance, which the Federal Government may, in exercise of the power hereby conferred, in writing, published in the Gazette, delegate to the Commission. The powers of the Board and of the Commission to make regulations, which is conferred by section 40 of the SECP Act, shall extend to the making of such regulations as may be required to carry out the purposes of this Ordinance.

ii.

iii.

INSURANCE ORDINANCE, 2000

PART XXII Repeal and Savings Repeal. 168. The Insurance Act, 1938 (IV of 1938) is hereby repealed.
169.

Repealed Act to apply to certain insurers ceasing to enter into new contracts before commencement of this Ordinance.
i. Sections 28, 29, 36 of this Ordinance shall not apply to an insurer in relation to any insurance business where such insurer has ceased, before the commencement of this Ordinance, to enter into any new contracts of insurance and notwithstanding the repeal of the repealed Act, the like provisions of the repealed Act shall for so long as he continues to have any liability under any such contracts, apply to such insurer and any contracts written by him prior to the commencement date: Provided that not later than one month after the commencement date such insurer has given to the Commission notice of having ceased to write new contracts and with such notice provides to the Commission: a. details of all policies which remain in force as at the commencement date; details of all claims reported to the insurer which have not been fully and finally settled as at the commencement date; a statement of assets and liabilities in the form prescribed as at a date not earlier than three months before the commencement date; if the insurer carries on or has carried on non-life insurance, a report certified by an actuary estimating the ultimate settlement cost, inclusive of expenses of settlement, of claims incurred by the insurer under non-life insurance policies issued by it, whether or not reported, as at the date to which the statement of assets and liabilities is made up; if the insurer carries on or has carried on life insurance business, a report in the form prescribed, certified by an actuary, on the financial condition of the life insurance business carried on by the insurer, as at the date to which the statement of assets and liabilities is made up; and such other particulars as may be prescribed.

b.

c.

d.

e.

f. ii.

An insurer to which sub-section (1) applies shall in each year submit to the Commission, at the time it submits its annual statutory accounts, statements as follows: a. details of all policies which remain in force as at 31st December in the year to which the annual statutory accounts relate; and

b.

details of all claims reported which have not been fully and finally settled as at 31st December in the year to which the annual statutory accounts relate.

iii.

Within fifteen days of the insurer ceasing to have any policies in force, an insurer to which sub-section (1) applies shall give notice to the Commission to that effect and thereafter the insurer shall not be required to submit the statement identified in clause (a) of sub-section (2). For the purposes of this section, a policy is in force as at a date if the policy has not lapsed or been cancelled with effect on or before that date, and either a. the term stipulated in the policy during which premium is to be paid has not expired, on or before that date; or b. the term stipulated in the contract during which an insured event may occur has not expired, on or before that date.

iv.

v.

For the avoidance of doubt, a policy of life insurance which has been paid up is a policy in force for the purposes of this section.

170. i.

Savings.
Nothing in this Ordinance shall affect the liability of an insurer, being a company, to comply with the provisions of the Companies Ordinance, 1984 (XLVII of 1984), in matters not otherwise specifically provided for by this Ordinance. Save as otherwise provided in this Ordinance, nothing in this Ordinance shall affect or be deemed to affect anything done, investigation or proceedings commenced, order, rule, regulation, appointment, document or agreement made, fee prescribed or charged, resolution passed, direction given, proceedings taken, or instrument executed or issued under or pursuant to the repealed Act or any law amended or repealed by this Ordinance and any such thing, action, investigation, proceedings, order, rule, regulation, appointment, document or agreement, fee, resolution, direction, proceedings or instrument shall, if in force at the commencement date for this section and not inconsistent with any of the provisions of this Ordinance, continue in force and have effect as if it had been respectively done, taken, commenced, made, prescribed, charged, directed, passed, given, executed or issued under this Ordinance or any other laws as amended by this Ordinance. Save as otherwise provided in this Ordinance, all debts and obligations incurred or contracts entered into or rights acquired and all matters and things engaged to be done by, with or for the Federal Government under or pursuant to the repealed Act before the commencement date shall be deemed to have been incurred, entered into, acquired or engaged to be done by, with or for the Commission, as the case may be. Until the establishment of a Tribunal or Tribunals under this Ordinance, sections 47C to 47L both inclusive and section 110 of the repealed Act shall continue to have effect in relation to the cases already filed or pending before the Claims Settlement Board or Insurance Appellate Tribunal and shall be

ii.

iii.

iv.

determined and decided in according with the law in force immediately before the commencement date. v. All suits and other legal proceedings instituted by or against the Federal Government under or pursuant to the repealed Act before the commencement date shall be deemed to be suits and proceedings by or against the Commission as the case may be and may proceed and be dealt with accordingly.

171. i.

Exemptions.
Nothing in this Ordinance shall apply to any insurance business carried on by the Federal or by a Provincial Government. For the purposes of this section, insurance business carried on by a body corporate shall not be deemed to be insurance business carried on by the Federal or by a Provincial Government by virtue only of the fact that the Federal or Provincial Government holds a controlling ownership interest in the body corporate. Any provision in any other law which exempts an insurer to which this Ordinance applies from compliance with this Ordinance or which requires such an insurer to contravene this Ordinance shall be void to the extent of that exemption or requirement.

ii.

iii.

172. Removal of difficulties. If any difficulty arises in giving effect to the provisions of this Ordinance, the Federal Government may, by notification in the official Gazette, make such provision or order as may appear to it to be necessary for the purpose of removing the difficulty: Provided that the power conferred on the Federal Government by this section shall not be exercised after two years from the commencement date. MUHAMMAD RAFIQ TARAR PRESIDENT OF ISLAMIC REPUBLIC OF PAKISTAN

GOVERNMENT OF PAKISTAN MINISTRY OF LAW, JUSTICE, HUMAN RIGHTS AND PARLIAMENTARY AFFAIRS (Law, Justice and Human Rights Division) Islamabad , the 29th October, 2002
F. No. 2(1)/2002-Pub.- The Following Ordinance promulgated by the President is hereby published for general information: -

ORDINANCE NO. CIII OF 2002 AN ORDINANCE to provide for substantial acquisition of voting shares and take-overs of listed companies

WHEREAS it is expedient to provide for a fair and equal treatment to all the investors as well as a transparent and efficient system for substantial acquisition of voting shares and take-overs of listed companies and matters ancillary thereto or connected therewith; AND WHEREAS the President is satisfied that circumstances exist which render it necessary to take immediate action;

NOW, THEREFORE, in pursuance of the Proclamation of Emergency of the fourteenth day of October, 1999, and Provisional Constitution Order No. 1 of 1999, read with the Provisional Constitution (Amendment) Order No. 9 of 1999, and in exercise of all powers enabling him in that behalf, the President of the Islamic Republic of Pakistan is pleased to make and promulgate the following Ordinance:

CHAPTER I. PRELIMINARY 1. Short title, extent and commencement. (1) This Ordinance may be called

the ListedCompanies (Substantial Acquisition of Voting Shares and Take -overs) Ordinance, 2002.

Page 1 of 24

(2) (3)

It extends to the whole of Pakistan. It shall come into force at once.

2.

Definitions. (1) In this Ordinance, unless there is anything repugnant in the

subject or context,-

(a)

acquirer means any person who, directly or indirectly, acquires or has proceeded to acquire voting shares in the target company, or acquires or has proceeded to acquire control of the target company, either by himself or through any person acting in concert;

(b)

Commission means the Securities and Exchange Commission of Pakistan established under the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997);

(c)

control includes the right to appoint majority of directors or to control management or policy decisions, exercisable by a person individually or through any person acting in concert, directly or indirectly, whether by virtue of his shareholding, management right, shareholders agreement, voting agreement or otherwise;

(d)

financial institution means an institution, other than a banking company as defined in the Banking Companies Ordinance, 1962 (LVII of 1962), notified as such by the Commission either specifically or generally and shall include such other institutions or companies notified by the Federal Government as financial institutions;

(g)

listed company means a company or a body corporate whose voting shares are listed on a stock exchange;

(h)

manager to the offer means a manager appointed under section 7;

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(i)

offer period means the period from the date of public announcement of public offer to the date of closure of public offer or earlier withdrawal thereof;

(j)

person acting in concert means a person who co-operates with the acquirer to acquire voting shares or control of the target company;

(k) (l)

prescribed means prescribed by rules made under this Ordinance; promoters means persons who are in control of a company or named in any offer document and includes

(a) any relative of a promoter; and

(b) in case of a company or body corporate,

(i)

a subsidiary or holding company of such company or body;

(ii)

any company in which the promoter holds ten per cent or more of the equity capital or which holds ten per cent or more of the equity capital; or

(iii) any company or body corporate wherein a group of individuals or companies or bodies corporate or combinations thereof holds twenty per cent or more of the capital in the target company and also holds twenty per cent or more of the capital of the promoter; and (c) in case of an individual,

(i)

any company in which ten per cent or more of the share capital is held by the promoter or a relative of the promoter or a firm or Hindu undivided family in which the promoter

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or his relative is a partner or co-partner or a combination thereof; or (ii) any company in which a company specified in paragraph (i) holds ten per cent or more of the share capital;

(m)

public announcement means public announcement of offer or intention to be made under section 5, section 6 or section 8, as the case may be, and includes any announcement of any competitive bid for acquisition of voting shares of a target company;

(n)

public offer means the public offer for acquisition of voting shares of a target company and includes any competitive bid or bids made for this purpose;

(o) (p)

relative means spouse, lineal ascendants and descendents; voting shares mean the shares in the share capital of a listed company having voting rights; and

(q)

target company means a listed company whose voting shares or control are directly or indirectly acquired or intended to be acquired.

(2) All other expressions used but not defined herein shall have the same meanings as are assigned to them in the Securities and Exchange Ordinance, 1969 (XVII of 1969), or the Companies Ordinance, 1984 (XLVII of 1984). 3. Ordinance not to apply to certain transactions. Nothing contained in this

Ordinance shall apply to

(a)

allotment of voting shares in pursuance of a pre-public issue or public issue;

(b)

allotment of voting shares pursuant to a right issue;

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(c) (d)

allotment of voting shares to the underwriters pursuant to any underwriting agreement; acquisition of voting shares in the ordinary course of business by banks and financial institutions as enforcement of security;

(e)

acquisition of voting shares by succession or inheritance;

(f)

transfer of voting shares from financial institutions, including their subsidiaries, to co-promoters of the company pursuant to an agreement between such financial institution and such co-promoters provided proper disclosure has been made in the prospectus at the time of issue;

(g)

a scheme of arrangement or reconstruction including amalgamation or merger or de-merger under any law for the time being in force;

(h)

acquisition of voting shares in companies whose voting shares are not listed on any stock exchange;

(i)

exercise of option by a bank or a financial institution in pursuance of a conversion option;

(j)

sale of shares in consequence of privatization of a unit or its management rights within the meaning of Privatization Commission Ordinance, 2000 (LII of 2000);

(k)

sale of shares in consequence of any on-going negotiations on the commencement of this Ordinance provided that the negotiations are finalized and agreement reached within 30 days of such commencement ; and

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(l)

existing shares held by a person on the date of commencement of this Ordinance.

CHAPTER II. DISCLOSURE OF SHAREHOLDING IN A LISTED COMPANY 4. Acquisition of more than ten per cent voting shares of a company. (1)

Any acquirer who acquires voting shares, which (taken together with voting shares, if any, held by the acquirer) would entitle the acquirer to more than ten per cent voting shares in a listed company, shall disclose the aggregate of his shareholding in that company to the said company and to the stock exchange on which the voting shares of the said company are listed as provided in sub-section (2).

(2) The disclosure mentioned in sub-section (1), shall be made within two working days of, (a) (b) the receipt of intimation of allotment of voting shares; or the acquisition of voting shares, as the case may be. Explanation. For the purposes of this section expression acquisition shall include purchases confirmed by the member of a stock exchange in accordance with sub-rule (4) of rule 4 of the Securities and Exchange Rules, 1971.

(3) Any acquirer may acquire additional voting shares in any period of twel ve months after acquisition of voting shares pursuant to sub-section (1) without making disclosure as required by sub-section (1) in case the total acquisition does not exceed an aggregate of twenty five per cent.

CHAPTER III. SUBSTANTIAL ACQUISITION OF VOTING SHARES AND ACQUISITION OF CONTROL OF A LISTED COMPANY 5. Additional acquisition of voting shares. (1) No person shall, directly or

indirectly, acquire

Page 6 of 24

a) voting shares, which (taken together with voting shares, if any, held by such person) would entitle such person to more than twenty five per cent voting shares in a listed company; or b) control of a listed company,

unless such person makes a public announcement of offer to acquire voting shares or control of such company in accordance with this Ordinance.

(2) Before making announcement under sub-section (1), such person shall make disclosure in the manner specified in section 4.

6.

Consolidation of holdings. (1) No acquirer, who has acquired more than

twenty-five per cent but less than fifty-one per cent of the voting shares or control of a listed company, shall acquire additional voting shares or control unless such acquirer makes a public announcement of offer to acquire voting shares or control in accordance with this Ordinance: Provided that such acquirer shall not be required to make a fresh public announcement of offer within a period of twelve months from the date of the previous announcement.

(2) No acquirer shall acquire voting shares in excess of the quantity specified in the invitation of offer made by such acquirer and all additional or incremental acquisition beyond the preceding offer shall be valid only through further offer. (3) Nothing in this section apply to a person who has already acquired fifty-one percent or more of the voting share or control in consequence of making a public announcement of the offer. 7. Appointment of manager to the offer. (1) Before making any public

announcement the acquirer shall appoint a bank, or financial institution, or a member of a stock exchange who is not an associate, or group, of the acquirer or the target company, as a manager to the offer.

Page 7 of 24

(2) The manager to the offer shall be deemed to be the agent of the acquirer.

8.

Timing of the public announcement. (1) Before acquisition of voting

shares beyond the threshold specified in section 5 or section 6, the acquirer shall, after giving notice to the Commission as required by sub-section (3) of section 9, make a public announcement of such an intention forthwith.

(2) In case of an acquirer acquiring Global Depository Receipts or American Depository Receipts which, when taken together with the voting shares, if any, already held by the acquirer, would entitle the acquirer to voting shares, exceeding the percentage specified in section 5 or section 6, the public announcement referred to in sub-section (1) shall be made not later than two working days before he acquires voting shares on such securities upon conversion or exercise of option as the case may be.

9.

Public announcement. (1) The public announcement shall be

published at least in one issue each of a daily newspaper in English language and a daily newspaper in Urdu language having circulation in the province or provinces in which the stock exchange, on which the target company is listed, is situated. (2) The public announcement shall contain such information as may be prescribed.

(3) A copy of the public announcement shall be submitted to the Commission through the manager to the offer at least two working days before its issuance.

(4) Simultaneous with the submission of the public announcement to the Commission, the public announcement shall also be sent to all the stock exchanges on which the voting shares of the target company are listed for being notified on the notice board and on the automated information system thereof, and to the target company at its registered office for being placed before the board of directors of such company.

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(5) A public offer under this Ordinance shall be deemed to have been made on the d ate on which the public announcement is made in any of the newspapers as required by sub-section (1).

10.

Contents of public offer, mode of payment and minimum offer price.

The contents of the public offer, its submission to the Commission, the date to be specified for the public announcement, mode of payment and minimum offer price, shall be in such form and manner as may be prescribed.

11.

Public announcement and offer letter etc. not to contain misleading

material. The public announcement, any othe r advertisement, circular, brochure, publicity material or offer letter issued in respect of, or in relation to, the acquisition of voting shares shall not contain any misleading information.

12.

Number of voting shares to be acquired. (1) A public offer shall be made

by the acquirer for such percentage as the acquirer may decide.

(2) Where the number of voting shares offered for sale by the shareholders are more than the voting shares offered to be acquired by the acquirer, the acquirer shall, in consultation with the manager to the offer, accept the public offer or offers received from the shareholders on a proportional basis:

Provided that acquisition of voting shares from a shareholder shall not be less than the minimum marketable lot or the entire holding if it is less than the marketable lot. 13. General obligations of the acquirer. (1) Within two working days of the

public announcement, the acquirer shall send a copy of the proposed offer letter to the target company at its registered office address and all the stock exchanges, where the voting shares of the company are listed, and the Commission.

Page 9 of 24

(2) The acquirer shall ensure that the offer letter is sent to all the shareholders of the target company whose names appear on the register of members of the company as on the date specified in the public announcement:

Provided that where the public announcement is made pursuant to an agreement to acquire voting shares or control of the target company, the offer letter shall be sent to the shareholders other than the parties to the agreement.

(3) A copy of offer letter shall be sent to

(a)

the custodians of Global Depository Receipts or American Depository Receipts to enable such persons to participate in the open offer, if they are entitled to do so; and

(b)

the convertible security holders, where the period of conversion falls within the offer period.

(4) The date of acceptance of a public offer shall be not later than the sixtieth day from the date of public announcement. (5) In case the acquirer is a company, the public announcement, brochure, circular, offer letter or any other advertisement or publicity material issued to shareholders in connection with a public offer shall state that the directors accept the responsibility for the information contained in such documents:

Provided that if any of the directors desires to exempt himself from responsibility for the information in such documents, such director shall issue a statement to that effect together with reasons thereof.

(6) Where a public offer is made conditional upon minimum level of acceptance, the acquirer may accept the acceptances even if such acceptances, put together, do not reach the minimum level so offered:

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Provided that the acquirer may reject all such acceptances if the same do not reach a level indicated in the public offer. (7) Persons, other than the acquirer, representing or having interest in the target company or an insider or a beneficial owner of more than ten per cent of the voting shares during the last twelve months, shall stand excluded and shall not participate in any matters concerning or relating to a public offer including any preparatory steps leading to the offer.

(8) On or before the date of issue of public announcement, the acquirer shall create a security as provided in this Ordinance.

(9) The acquirer shall ensure that firm financial arrangements for fulfilment of the obligations under the public offer and suitable disclosures in this regard have been made in the public announcement.

(10) The acquirer shall, within a period of thirty days from the date of the closure of public offer, complete all procedures relating to the public offer including payment of consideration to the shareholders who have accepted the public offer and for the purpose open a special account as provided in sub-section (1) of section 20:

Provided that where the acquirer is unable to make the payment to the shareholders who have accepted the public offer before the said period of thirty days due to non-receipt of requisite statutory approvals, the Commission may, if satisfied that non-receipt of requisite statutory approvals was not due to any wilful default, neglect or failure of the acquirer to diligently pursue the applications for such approvals, grant extension of time for a period not exceeding thirty days in aggregate.

(11) In the event of withdrawal of public offer, a person shall not make any offer for acquisition of voting shares of the target company for a period of twelve months from the date of public announcement of withdrawal of public offer.

(12) In the event of non-fulfilment of obligations under Chapter III or Chapter IV of this Ordinance, a person shall not make any offer for acquisition of voting

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shares of any listed company for a period of twelve months from the date of closure of public offer. (13) Where the acquirer has not either in the public announcement or in the offer letter, stated his intention to dispose of the undertaking or a sizeable part thereof, of the target company except in the ordinary course of business of the target company, the acquirer, where he has acquired control of the target company, shall be debarred from disposing of the undertaking or a sizeable part thereof, of the target company for a period of two years from the date of acquisition of the control.

14.

General Obligations of the Board of Directors of the target company.

(1) The board of directors of the target company, during the offer period, shall not (a) sell, transfer, or otherwise dispose of or enter into an agreement for sale, transfer, or for disposal of the undertaking or a sizeable part thereof, not being sale or disposal of assets in the ordinary course of business of the company or its subsidiaries;

(b) (c)

encumber any asset of the company or its subsidiary; issue any right or bonus voting shares during the offer period; or

(d)

enter into any material contract.

(2) The target company shall furnish to the acquirer, within seven days of the request of the acquirer or within seven days from the specified date mentioned in the public announcement, whichever is later, a list of convertible security holders as are eligible for participation under clause (b) of sub-section (3) of section 13 containing name, address, shareholding and folio number, and of those pe rsons whose applications for registration of transfer of the securities are pending with the company. (3) Once the public announcement has been made, the board of directors of the target company shall not appoint an additional director or fill in any casu al

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vacancy on the board of directors, by any person representing or having interest in the acquirer till the date of certification by the manager to the offer as provided under sub-section (6).

(4) The board of directors of the target company may, if it so desires, send its unbiased comments and recommendations on the public offer to the shareholders:

Provided that for any misstatement, or for concealment of material information, the directors shall be liable to penalty as provided in this Ordinance.

(5) The board of directors of the target company shall facilitate the acquirer in verification of securities tendered for acceptance. (6) Upon fulfilment of all obligations by the acquirer under this Ordinance as certified by the manager to the offer, the board of directors of the target company shall transfer the securities acquired by the acquirer, whether under an agreement or from open market purchases, in the name of the acquirer.

(7) The target company shall allow such changes in the board of directors as would give the acquirer proportionate representation on the board or control of the company notwithstanding anything contained in the Companies Ordinance, 1984 (XLVII of 1984).

(8) Where an acquirer, in compliance with the provisions of this Ordinance , has acquired at least thirty per cent of the voting shares of the target company, he shall be entitled to a proportionate representation on the board of directors of the target company as hereinafter provided. (9) The acquirer shall serve a notice on the target company together with evidence of his voting power so acquired and a copy of such notice shall also be submitted to the Commission.

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(10) On receipt of notice as specified in sub-section (9), the board of directors of the target company shall cause a meeting of the board to be held within ten days from the receipt of the notice under sub-section (9).

(11) The board of directors of the target company may fill any casual vacancy so created by the resignation of one or more directors with mutual consent to accommodate the acquirer on the board in accordance with his entitlement.

(12) In case the acquirer does not get a proportionate representation on the board of directors of the target company or the number of casual vacancies so created to complete the board on the basis of proportional representation are not sufficient, the acquirer may serve a notice on the target company for holding of fresh elections and shall submit a copy of such notice to the Commission forthwith.

(13) The board of directors of the target company shall cause the election of directors to be held within thirty days from the receipt of the notice under sub-section (12).

(14) The election of directors of the target company shall be held in accordance with the provisions of sub-sections (2) to (5) of section 178 of the Companies Ordinance, 1984 (XLVII of 1984).

(15) The board of directors so elected shall hold office during the remainder of the term of the outgoing directors of the target company.

(16) Any irregularity in the election of directors so held may be brought to the notice of the Commission either by the management of the target company or by the acquirer within seven days of the date of such election.

(17) The Commission may declare the election, so held, null and void if it is satisfied that certain irregularities did exist in the holding of the election and may order the holding of fresh election under the supervision of an independent person to be appointed by the Commission for such purpose.

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(18) In case fresh elections are held as specified in sub-section (17), the Commission may impose such penalty on the outgoing directors in their individual capacity as it may deem fit and such penalty shall in no case be debited to the companys account.

15.

General obligations of the manager to the offer. (1) Before the public

announcement is made, the manager to the offer shall

(a) (b)

ensure that the acquirer is able to implement the public offer; ensure that the provision relating to security referred to in section 19 has been made;

(c)

ensure that firm arrangements for funds and money for payment through verifiable means to fulfil the obligations under the public offer have been made;

(d)

ensure that the public announcement is made in accordance with section 9;

(e)

furnish to the Commission a due diligence certificate which shall accompany a copy of the proposed offer letter;

(f)

ensure that the proposed public announcement and offer letter are filed with the Commission, target company and also sent to the stock exchange on which the voting shares of the target company are listed in accordance with this Ordinance;

(g)

ensure that the contents of the public announcement and offer letter are true, fair and adequate and based on reliable sources, quoting the source wherever necessary;

(h) (i)

ensure compliance of the provisions of the Ordinance and any other laws or rules as may be applicable in this regard; upon fulfilment of the necessary obligations by the acquirer under this Ordinance, cause the bank with whom the security has been deposited to release the balance amount to the acquirer; and

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(j)

send a report to the Commission within forty-five days from the date of closure of public offer or earlier withdrawal thereof.

16.

Procedure for making competitive bid. (1) Any person, other than the

acquirer who has made the first public announcement, who is desirous of making a competitive bid, shall, within twenty-one days of the public announcement of the first offer, make a public announcement of his offer for acquisition of the same voting shares of the target company.

(2) No public announcement of a competitive bid shall be made after twenty-one days from the date of public announcement of the first offer. Explanation. For the purpose of this section a bid shall be deemed as competitive only if it offers a higher purchase price.

(3) A competitive bid shall not be for less than the number of voting shares for which the earlier public offer has been made.

(4) Upon the public announcement of a competitive bid the acquirer, who has made a public announcement of the earlier offer, shall have the option to make another announcement

(a) (b)

revising the public offer; or withdrawing the public offer with the prior approval of the

Commission:

Provided that if no such announcement is made within ten days of the public announcement of the competitive bid, the earlier offer on the original terms shall continue to be valid and binding on the acquirer who has made the earlier public offer, except that the date of closing of suc h public offer shall stand extended to the date of closure of public offer under the last subsisting competitive bid.

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(5) The provisions of this Ordinance shall, mutatis-mutandis, apply to the competitive bid made under sub-section (1).

(6) An acquirer who has made a public announcement, and has not withdrawn his public offer in terms of subsection (4), shall have the option to make an upward revision of his offer in respect of the price and the number of voting shares to be acquired at any time within seven working days prior to the date of closure of the last subsisting public offer without changing any other terms and conditions of the said public offer.

(7) Any upward revision made in terms of sub-section (6), shall be made only on the following conditions, namely:

(a)

the making of a public announcement in respect of such changes or amendments in all the newspapers in which the earlier public announcement was made;

(b)

the informing of the Commission, the stock exchange on which the voting shares of the target company are listed, and the target company at its registered office, simultaneous with the issue of public announcement referred in clause (a); and

(c)

the increase in the value of the security as provided under sub-section (3) of section 19.

(8) Where there is a competitive bid, the date of closure of the earlier bid, as also the date of closure of all the subsequent competitive bids, shall be the date of closure of public offer under the last subsisting competitive bid and the public offers under all the subsisting competitive bids shall close on the same date.

17.

Upward revision of Offer. Irrespective of whether or not there is a

competitive bid the acquirer, who has made the public announcement, may make upward revision in his offer in respect to the price and the number of voting shares to

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be acquired, at any time up to seven working days prior to the date of the closure of public offer: Provided that any such upward revision of the public offer shall be made only on the following conditions, namely:

(a)

the making of a public announcement in respect of such changes or amendments in all the newspapers in which the earlier public announcement was made;

(b)

the informing of the Commission, the stock exchange on which the voting shares of the target company are listed, and the target company at its registered office, simultaneous with the issue of public announcement referred in clause (a); and

(c)

the increase in the value of the security as provided under sub-section (3) of section 19.

18.

Withdrawal of public offer. (1) A public offer, once made, may be withdrawn

(a) (b)

if the withdrawal is consequent upon any competitive bid; if the sole acquirer, being a natural person, has died; or

(c)

in such circumstances as may be prescribed.

(2) In the event of withdrawal of the public offer under any of the circumstances specified under sub-section (1), the acquirer, or the manager to the offer, shall

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(a)

make a public announcement in all the newspapers in which the public announcement was made indicating reasons for withdrawal of the public offer; and

(b)

inform the Commission, the stock exchange on which the voting shares of the target company are listed, and the target company at its registered office, simultaneous with the issue of such public announcement.

19.

Security to be furnished by the acquirer. (1) The acquirer shall furnish a

security for performance of his obligations on such terms and conditions as may be prescribed.

(2) The total consideration payable under the public offer shall be calculated assuming full acceptances irrespective of whether the consideration for the public offer is payable in cash or otherwise.

(3) In case there is any upward revision of offer, consequent upon a competitive bid or otherwise, the value of the security shall be increased as may be prescribed under subsection (1). (4) The security furnished shall be released in such manner as may be prescribed.

20.

Procedure for payment and delivery of voting shares. (1) For the

amount of consideration payable in cash, the acquirer shall, within a period of twenty-one days from the date of closure of the public offer, open a special account with a scheduled bank and deposit therein such sum as would, together with ninety per cent of the security furnished under section 19, make up the entire sum due and payable to the shareholders as consideration for acceptances received and accepted in terms of the public offer.

(2) The unclaimed balance in the account referred to in sub-section (1) shall, at the end of six months from the date of deposit thereof, be refunded to the acquirer in such manner as may be prescribed.

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(3) In respect of consideration payable by way of exchange of securities, the acquirer shall ensure that the securities are actually issued and dispatched to the shareholders.

CHAPTER IV. ENQUIRY AND RELATED MATTERS

21.

Enquiry. The Commission may appoint one or more persons as enquiry

officer or officers to undertake an enquiry for any of the following purposes, namely: (a) to enquire into the complaints received from the investors holding not less than one-tenth of the total voting powers in a target company, on any matter having a bearing on the allegations of substantial acquisition of voting shares and takeovers;

(b)

to enquire suo motu upon its own knowledge or information, in the interest of securities market or the investors, for any breach of the provisions of this Ordinance;

(c)

to ascertain whether the provisions of this Ordinance are being complied with:

22.

Notice before enquiry. (1) Before ordering an enquiry under section 21,

the Commission shall give not less than seven days notice to the acquirer, the seller, the target company, the manager to the offer as the case may be.

(2) During the course of an investigation, the acquirer, the seller, the target company, the manager to the offer, against whom the investigation is being carried out shall be bound to discharge his obligation as provided in this Ordinance and the rules made thereunder.

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23.

Obligations on enquiry by the Commission. (1) It shall be the duty of the

acquirer, the seller, the target company or the manager to the offer, whose affairs are being enquired into and of every director, officer and employee thereof, to produce to the enquiry office r such books, accounts, securities records and other documents in its custody or control and furnish to the enquiry officer such statements and information as he may, within such reasonable period as he may specify, require.

(2) The acquirer, the seller, the target company, the manager to the offer and the persons being enquired into shall allow the enquiry officer to have reasonable access to the premises occupied by such a person or by any other person on behalf of such a person and also extend reasonable facility for examining any books, records, documents and computer data in the possession of such a person and also provide copies of documents or other materials which, in the opinion of the enquiry officer, are relevant for the purposes of the enquiry.

(3) The enquiry officer, in the course of enquiry, may examine or record the statements of any director, officer or employee of the acquirer, the seller, the target company and the manager to the offer.

(4) It shall be the duty of every director, officer or employee of the acquirer, the seller, the target company and the manager to the offer to give to the enquiry officer all assistance in connection with the enquiry which he may require.

24.

Submission of report and communication of findings. (1) The enquiry

officer shall, as soon as possible, on completion of the enquiry, submit report to the Commission. (2) The Commission shall, after consideration of the enquiry report, communicate the findings of the enquiry officer to the acquirer, the seller, the target company, the manager to the offer as the case may be.

(3) On receipt of the reply from the acquirer, the seller, the target company or, as the case may be, the manager to the offer, the Commission may direct them to

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take such measures as it may deem fit in the interest of the securities market and for due compliance with the provisions of this Ordinance and rules made thereunder. 25. Directions by the Commission. The Commission may, in the interests of

the securities market, give such directions as it deems fit including

(a)

directing the person concerned not to further deal in securities;

(b)

prohibiting the person concerned from disposing of any of the securities acquired in violation of provisions of this Ordinance;

(c) (d)

directing the person concerned to sell the voting shares acquired in violation of the provisions of this Ordinance; and taking such action against the person concerned as may be necessary.

26.

Penalties for non-compliance. (1) In the event of withdrawal of public

offer, except as provided in section 18, or contravention of any provision of this Ordinance, the acquirer and any person acting in concert shall stand debarred as acquirers for the next three years.

(2) In case the board of directors or management of the tar get company contravenes any provision of this Ordinance, the directors, the chief executive and the company and secretary, on a finding by the Commission, shall stand disqualified to hold any such office in a listed company for the next two years.

(3) If any person (a) refuses or fails to furnish any document, paper or information which he is required to furnish by, or under, this Ordinance;

(b)

refuses or fails to comply with any order or direction of the Commission made or issued under this Ordinance; or

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(c)

contravenes or otherwise fails to comply with the provisions of this Ordinance,

the Commission may, if satisfied, after giving the person an opportunity of being heard, that the refusal, failure or contravention was wilful, impose penalty which may extend to one million rupees as may be specified in the order and, in the case of a continuing default, a further sum calculated at the rate of ten thousand rupees for every day after the issue of such order during which the refusal, failure or contrave ntion continues.

(4) Any sum directed to be paid under sub-section (3) shall be recoverable as an arrear of land revenue. 27. Delegation of powers. The Commission may, subject to such conditions

and limitations, as it may deems fit to impose, delegate all or any of its powers and functions under this Ordinance to a Commissioner appointed under section 5 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997).

28.

Relaxation of provisions of the rules. Where the Commission is satisfied

that it is not practicable or expedient to comply with any requirement of the rules made hereunder in a particular case, the Commission may, in consultation with the Federal Government and for reasons to be recorded, relax such requirement subject to such conditions as it may deem fit. 29. Power of the Commission to make rules. The Commission may, in

consultation with the Federal Government and by notification in the official Gazette, make rules for carrying out the purposes of this Ordinance. 30. Ordinance to override other laws etc. The provisions of this Ordinance

shall have effect notwithstanding anything contained in the Companies Ordinance, 1984 (XLVII of 1984), or any other law for the time being in force or in any charter, statute or memorandum or articles of association or in any applicable document or resolution.

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31.

Removal of difficulties. If any difficulty arises in giving effect to any

provision of the Ordinance, the Federal Government may make such order, not inconsistent with the provisions of this Ordinance, as may appear to it to be necessary for the purpose of removing the difficulty.

GENERAL PERVEZ MUSHARRAF, PRESIDENT. --------MR JUSTICE MANSOOR AHMED, Secretary.

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