corporate law new1 study pack

8/19/2019 Corporate Law NEW1 Study Pack

1/48

orporate Law and Secretarial

Practices

2014

TOPIC WISE SCENERIO BASED QUESTIONSCOMPILED BY: MUHAMMAD YASIR

M.PHIL SCHOLOR

THE SUPERIOR COLLEGE, UNIVERSITY CAMPUS. | 17-Km Raiwind Road Lahore.


2/48

1

Table of Contents1. Introduction of Company ................................................................................................................... 2

2. Name of a Company ........................................................................................................................... 3

3. Incorporation of a Company MOA AOA .......................................................................................... 4

4. Alteration of MOA AOA ....................................................................................................................... 9

5. Prospectus ......................................................................................................................................... 10

6. Directors of a Company ................................................................................................................... 12

7. Chief Executive Officers ................................................................................................................... 19

8. Company Meetings ............................................................................................................................ 21

9. Dividends ........................................................................................................................................... 27

10. Company Auditors ........................................................................................................................ 30

11. Secretarial Practices ........................................................................................................................ 33

12. Shares and Share Capital ................................................................................................................ 36

13. Alteration and Reduction of Share Capital .................................................................................... 39

14. Winding up of a Company ........................................................................................................... 41

15. Miscellaneous Question ............................................................................................................... 45


3/48

2

1. Introduction of Company

A. Fashion Textiles Limited, whose 85 % of sales comprises of exports, has opened a branch

office in South Africa. Mr. Asif, who is responsible for managing the branch office, has

informed the company secretary that he needs company’s common seal that will be required

while submitting various documents under the South African regulations.

Advise how the company can authorize Mr. Asif to use the company’s common seal unde r the

provisions of the Companies Ordinance, 1984.

B. On January 1, 2010 Star International Limited (SIL), a company incorporated in Italy, acquired

majority shareholding in Beta Industries Limited, a company listed on the Karachi Stock

Exchange. SIL wants to change the name of Beta Industries Limited to Star Industries Pakistan

Limited, as it believes that on account of international reputation of Star International, the

local sales will improve substantially.

Describe the procedure that would have to be followed to change the name of the

company.

Describe the conditions which the company would be required to comply with after

the change of its name.

C. Alfalah Associates is an association of persons. It wants to register itself as a limited company

but does not wish to include the word “Limited” in its name. In view of the provisions of the

Companies Ordinance, 1984 you are required to explain the conditions:

That need to be satisfied before the Commission may issue it a license and allow it to

dispense with the word “Limited” from its name.

Under which the license may be revoked and its consequences.

D. A company duly registered under the Companies Ordinance, 1984 is a separate legal entity

and a distinct person from the shareholders. Do you agree? Elaborate .


4/48

3

2. Name of a Company

(Sec 37-41, 143, 144)

A. What restrictions are laid down in the law relating to naming a new company?

B. A foreign company is in the process of selecting a name for its subsidiary which is being

incorporated as a limited liability company in Pakistan. You are required to inform them

about the prohibitions of certain names, under the Companies Ordinance, 1984.

C. Describe the restrictions that have been mentioned in the Companies Ordinance, 1984

regarding selection of names of companies.

D. A change in the name of company requires a special resolution and approval of Registrar

in writing. Explain exception to it.

E. Shafeeq Refrigerators (Pvt.) Limited is engaged in the trading of refrigerators. It is now

planning to start the business of air conditioners and therefore wants to change its name

to Shafeeq Electronics (Pvt.) Limited. Describe the procedure that the company will be

required to follow.

F. On January 1, 2010 Star International Limited (SIL), a company incorporated in Italy,

acquired majority shareholding in Beta Industries Limited, a company listed on the

Karachi Stock Exchange. SIL wants to change the name of Beta Industries Limited to Star

Industries Pakistan Limited, as it believes that on account of international reputation of

Star International, the local sales will improve substantially.

Describe the procedure that would have to be followed to change the name of the company.

G. Describe the conditions which the company would be required to comply with after the

change of its name.


5/48

4

3. Incorporation of a Company MOA AOA

( (Sec 15-19, 26, 27, 29, 30-36, 43, 47, 142, 145) )

A. A company wishes to borrow a loan for the purposes of its business. Can it do so even if no

express provision is contained in its Memorandum of Association?

B. On 29 April 2012, a memorandum of association of AB Limited was filed for registration in

the office of Registrar. However, on 25 May 2012, a letter from the registrar office was

received by the subscribers to the memorandum in which the registration was refused on the

ground that the objects stated in the memorandum were inappropriate. Describe what

course of action is available to AB Limited in the above situation, according to the Companies

Ordinance, 1984.

C. In the annual general meeting of Sabzazar Limited held on September 29, 2009 some of the

shareholders have raised the following objections:

o Notice of the annual general meeting was not received by them although they are

resident in Pakistan and their registered addresses have also been provided to the

company. Comment.

D. Cannon Industries Limited, a listed company, wishes to change its name to Reliance Foods

Limited because the management feels that the change in name would help in rebranding

and rebuilding the image of the company and in attracting more customers.

o You are required to explain the requirements of the Companies Ordinance, 1984

which the company is required to comply with, in this regard. Also describe the effect

of such change on the rights and obligations of the company.

E. List the conditions specified under the Companies Ordinance, 1984 which a listed company is

required to comply with before placement of its quarterly accounts on its website.

F. Validity of a Certificate of Incorporation cannot be disputed. Comment.

G. A Malaysian company is interested in incorporating a limited liability company in Pakistan.

Discuss provisions of the Companies Ordinance, 1984, relating to the following: contents,

printing and signature of the Articles of Association.


6/48

5

H. Briefly describe the provisions of Companies Ordinance, 1984 relating to alteration of the

objects of a company.

I. M/s Polo Enterprises has been a well-established partnership firm which submitted its

documents for registration as private limited company with the Registrar of Companies. The

Registrar has refused to register the memorandum of association. You are required to explain

to the management, the steps which they may take in such a situation.

J. A number of shareholders of Nazeer Industries Limited want to hold an extraordinary general

meeting to discuss an important matter relating to the company.

o In view of the provisions contained in the Companies Ordinance, 1984 explain: (a)

the conditions under which it would become mandatory for the company to

convene the meeting.

o The rights of the concerned shareholders in case the company fails to convene the

meeting

K. Bilal Garments Limited (BGL) has recently been incorporated in Pakistan. However, prior to

obtaining the certificate of commencement of business, BGL has entered into an agreement

with Taqi Engineering Limited (TEL) for the supply and installation of machinery at its factory.

BGL has also signed an agreement with a commercial bank for a short term finance facility for

payment of advance to TEL.o In the light of the provisions of the Companies Ordinance, 1984 comment on the

legality and the implication of entering into the above agreements.

L. Mr. Babar is currently working as a Marketing Manager in ST Limited (STL). The management

intends to appoint him as the Chief Executive of the company. He is willing to accept the offer

and has requested for a loan of Rs. 10 million. Moreover, he had also taken a loan in 2009, of

which Rs.1 million is still outstanding. State the conditions as specified in the Companies

Ordinance, 1984 which STL would need to comply with, in respect of the above loans.M. The general meeting of VX Limited, a listed company, was convened on 30 May 2012.

However, only four shareholders turned up to attend the meeting. Explain how VX Limited

should deal with the above situation in the light of Companies Ordinance.


7/48

6

N. RK Limited (RKL), a listed company, holds 6.3 million ordinary shares of TK (Private) Limited

(TKPL) whose paid-up capital consists of 10 million ordinary shares of Rs. 10 each. The

remaining shares are held by Mr. Adnan and his family. The Board of TKPL consists of eight

directors of which five directors represent RKL while the remaining three directors, including

the chief executive, are representatives of Mr. Adnan and his family. RKL is presently

considering the following proposals:

o To appoint one of the directors representing RKL, as the chief executive of TKPL,

in place of the existing chief executive.

o To appoint BL & Co., Chartered Accountants, as auditors of TKPL in the

forthcoming annual general meeting. The spouse of one of the partners of BL

Associates holds one hundred thousand shares in TKPL.

o To pledge TKPL‟s inventories as security against a loan to be obtained by an

associated company of TKPL.

o Comment on the above proposals in the light of provisions contained in the

Companies Ordinance, 1984.

O. Mr. Hameed, who is a director in ABC Limited, a listed company, is planning to move to

Europe for one year to set up his own business. In the light of Companies Ordinance, 1984

you are required to:o Respond to his request for advice, as regards his responsibilities, under the

Companies Ordinance 1984, in respect of:

Attending the annual general meeting of the company.

Attending the board meetings of the company.

o Discuss the conditions under which he may be allowed to assign his office to

another person.

o

State the procedure and the conditions to be complied with if the company wantsto remove Mr. Hameed from the directorship of the company, under each of the

following assumptions:

He was elected as a director of the company.


8/48

7

He became the director of the company by subscribing to the

memorandum of association of the company.

P. Western Cement Limited (WCL) has recently formed a provident fund for the benefit of its

employees. In view of the provisions contained in the Companies Ordinance, 1984 you are

required to advise :

o The directors of WCL and

o The trustees of Provident Fund about their responsibilities with respect to the

amount to be contributed to the fund and investment thereof.

Q. An Extraordinary General Meeting of Mastermind Technologies Limited (MTL), a listed

company, was scheduled to be held on October 31, 2009. The directors adjourned the

meeting for the next week as the quorum was not present within fifteen minutes of the

scheduled time. Based on the provisions of the Companies Ordinance, 1984, you are required

to comment on the following:

o The decision of the directors to adjourn the meeting, assuming:

The meeting was called upon the requisition of the members.

The meeting was called by the directors.

o The impact of the adjournment on the validity and rights of proxies which were

deposited with the company before adjournment.o The validity of the resolution passed at the adjourned meeting.

R. Karachi Telecommunication (Private) Limited (KTL) was incorporated on 1st March, 2009

under the Companies Ordinance, 1984. Its directors have decided to hold the first Annual

General Meeting (AGM) of the company on August 10, 2010, for placing the first audited

financial statements for the period ended March 31, 2010, for approval. Comment on the

decision of the directors, in the light of provisions contained in the Companies Ordinance,

1984.S. There are allegations in the press and serious charges have been leveled against STR

Petroleum Limited about misuse of public funds by the management. Zafar, a director of the

company wants to inspect the books of account, in order to ascertain whether the allegations

are true. As Zafar does not have adequate knowledge of accounting, he intends to examine


9/48

8

the books of account in the presence of his friend Arif, who is a chartered accountant. You

are required to advise the company in respect of the above matter under the provisions of

the Companies Ordinance, 1984.

T. Mr. Waleed has acquired 3 mill ion ordinary shares of Acquired Limited who’s paid up share

capital consists of 22 million ordinary shares of Rs. 10 each. The election of the directors of

the company has recently been concluded. Mr. Waleed, being confident of holding a

sufficient number of shares to be elected as a director, has requested the management to

arrange a fresh election. Based on the provisions contained in the Companies Ordinance,

1984 explain whether and under what conditions a fresh election of the directors may be

held.

U. In the annual general meeting of Sabzazar Limited held on September 29, 2009 some of the

shareholders have raised the following objections:

o Shareholders were not allowed to make extracts from the register of members on

the day on which the election of directors was held.

o 10,000 shares of a subsidiary, which are the property of the company, are held in

the name of a director of the company.

o The surplus on revaluation of fixed assets was credited to the reserves of the

company and later used to pay dividend.o One of the directors is not a member of the company

You are required to satisfy the shareholders by explaining the relevant provisions, if any,

as contained in the Companies Ordinance, 1984.

V. Explain the provisions specified in the Companies Ordinance, 1984 relating to requirements

to be completed before the commencement of business by a public company.

W. The management of Real World (Pvt.) Limited and Fantasy World (Pvt.) Limited intend to

enter into a joint venture agreement under which they would implement a seaside holidayresort project. However, the Company Secretary has informed that the Memorandum of

Association of Fantasy World (Pvt.) Limited does not authorize the Company to enter into a

joint venture agreement.


10/48

9

Describe the procedure that would have to be followed by Fantasy World (Pvt.) Limited

for making the necessary amendments in its Memorandum of Association.

4. Alteration of MOA AOA

(Sec 20-25, 28, 108) A. The Directors of Worldwide Motors Limited (WML) and its subsidiary Worldwide Autos

(Private) Limited (WAPL) have decided in their respective board meetings to shift their

registered offices to Landmark Centre, G.T. Road, Lahore. The present addresses of the

registered offices are:

- Worldwide Motors Limited, 101, Hali Road, Lahore.

- Worldwide Autos (Private) Limited, 2nd Floor, Modern Avenue, Peshawar.

You are required to list the procedures to be followed by each company for shifting itsregistered office, as specified under the provisions of the Companies Ordinance, 1984 .

B. The directors of Haq Tractors Limited have decided to acquire the entire shareholding of

Razzak Tractors Limited. However the object clause in the memorandum of association does

not allow the company to carry out such a transaction. Prepare a summary of necessary steps

which the company should take in order to alter the object clause.

C. The management of Real World (Pvt.) Limited and Fantasy World (Pvt.) Limited intend to

enter into a joint venture agreement under which they would implement a seaside holidayresort project. However, the Company Secretary has informed that the Memorandum of

Association of Fantasy World (Pvt.) Limited does not authorize the Company to enter into a

joint venture agreement. Describe the procedure that would have to be followed by Fantasy

World (Pvt.) Limited for making the necessary amendments in its Memorandum of

Association .

D. How can a company generally alter its memorandum and articles of association and what are

the effects of such alteration?


11/48

10

5. Prospectus

(Sec 52-66)

A. Quite often, a prospectus inviting persons to subscribe for shares in a company contains a

statement from person(s) who are experts in their respective fields.

Describe the term “Expert” as explained in Companies Ordinance, 1984 in the above

context.

Narrate the conditions that a company should comply with if its prospectus contains

a statement by an expert.

B. On 12 July 2011, JFK Limited issued a prospectus which stated that an application has been

made for permission for the shares being offered, to be dealt on the Karachi Stock Exchange.

Explain the responsibilities of the directors regarding the subscription money received and

the consequences, if the Karachi Stock Exchange refuses to grant such permission.

C. Mr. Zafar a director of Hilltop Limited, a listed company, has received a notice making him

responsible for incorrect information contained in the prospectus issued by the company and

also on account of the company’s failure to meet certain requirements related to the issue of

prospectus. You are required to list the relevant provisions of the Companies Ordinance, 1984

on the basis of which Mr. Zafar can claim relief from any liability.D. Deo Limited (DL) has published a prospectus on March 1, 2009. The subscription list is due to

open on April 5, 2009. Explain whether the company is in compliance with the provisions of

the Companies Ordinance, 1984 regarding the publication of its prospectus. What relaxation

can DL avail, in this regard?

a. Identify the places where DL is required to make available the copies of its prospectus.

E. Mr. Ahmed placed the initial capital for the formation of Mr. Kamal’s company and also

assisted in circulating the company’s prospectus. Company wishes to include a statement byMr. Ahmed as an expert regarding a technical issue. Can Mr. Ahmed issue such a statement?

Please reply in the light of provisions of the Companies Ordinance 1984.

F. The registrar shall not register a prospectus unless certain requirements of the company’s

ordinance, 1984 are complied with. You are required to list such requirements.


12/48

11

G. A company wants to vary the terms of contract mentioned in the Prospectus. Advise the

management.

H. Specify the competent authorities who shall be required to grant their approval in the

following situations: Variation in the terms of a contract mentioned in the prospectus of the

company.

I. Explain whether or not the following statements are in accordance with the provisions of the

Companies Ordinance, 1984. Support your answer with reasons. A company cannot vary the

terms of the contract mentioned in the prospectus or statement in lieu of prospectus for a

period of one year.

J. Name the persons who may be liable to pay compensation in case of misstatement in

prospectus.

K. Enumerate the differences between Prospectus and Statement in Lieu of Prospectus .

L. What is t he difference between “prospectus” and “offer for sale”?

M. UHY Limited intends to raise funds through issuance of shares to the public. Proceeds of the

issue would be utilized for installation of a new plant. The directors plan to issue the

prospectus on 10 September 2012. The subscription list will be opened in the second or the

third week of October 2012. An expert opinion would also be required to be included in the

prospectus. You are required to advise the company, based on the provisions of theCompanies Ordinance 1984, in respect of the following:

Date of publication of the prospectus and the opening of subscription list.

The places where UHY would be required to make available copies of its prospectus.

The conditions that UHY would be required to comply with in respect of the inclusion

of the statement by the expert.

N. Mr. Zafar a director of Hilltop Limited, a listed company, has received a notice making him

responsible for incorrect information contained in the prospectus issued by the company andalso on account of the company’s failure to meet certain requirements related to the issue of

prospectus. You are required to list the relevant provisions of the Companies Ordinance, 1984

on the basis of which Mr. Zafar can claim relief from any liability.

O. Can the promoters of a company issue Prospectus before registration of a company?


13/48

12

6. Directors of a Company

(Sec 111-112, 174-197A, 214-224)

A. The election of directors of Nihal Motors Limited (NML), a listed company, was held at the

Extraordinary General Meeting where seven out of nine candidates were to be elected as

directors. After the meeting was over, an email was received at NML that Mr. Nihal had

expired in a hospital in England. However, the time of Mr. Nihal’s death was not mentioned.

The result of the meeting shows that Mr. Nihal had received the sixth highest number of votes

in the election. In the light of Companies Ordinance, 1984 state how the directors should deal

with the above situation.

B. New Chemicals Limited (NCL) is a listed company. The company is in the process of finalization

of a financing facility with a bank. The bank requires a copy of the board resolution for

approval of the terms of the financing. Since five out of seven directors of the company are

currently out of the country, it is not possible for the secretary to convene the meeting of the

board of directors.

In the light of the provisions of the Companies Ordinance, 1984 explain whatalternative course of action is available to the company.

List the steps that NCL would be required to take, if nothing in this regard is statedin the Articles of Association of the Company.

C. Nihal Limited (NL) is a listed company.

a. Narrate the conditions which a director of NL would be required to comply with under

Companies Ordinance, 1984 in case he/she makes a gain on the sale of company’s

shares.

b. Identify the persons other than the directors, to whom the above provisions are also

applicable.

D. Mr. Bilal is the chief executive of Power Shipping Limited (PSL), a listed company. He has

agreed to provide a personal loan of Rs. 5 million to his cousin for purchase of PSL’s shares.

The loan will be repaid after two years and would carry a mark-up of 5% per annum. Suggest


14/48

13

the actions which Mr. Bilal should take to ensure that the provisions of Companies Ordinance,

1984 and the Code of Corporate Governance, 2012 are complied with.

E. Mr. Babar is currently working as a Marketing Manager in ST Limited (STL). The management

intends to appoint him as the Chief Executive of the company. He is willing to accept the offer

and has requested for a loan of Rs. 10 million. Moreover, he had also taken a loan in 2009, of

which Rs.1 million is still outstanding. State the conditions as specified in the Companies

Ordinance, 1984 which STL would need to comply with, in respect of the above loans.

F. Abid, Qasim and Tariq were the only members of Alpha Securities Limited, a public company

and were elected as directors on 30 June 2009. Qasim expired on 2 February 2012 in a road

accident.

Briefly describe the provisions of the Companies Ordinance, 1984 relating to thecasual vacancy as described above.

Discuss the consequences if Abid and Tariq failed to fill the above vacancy.

G. Mr. Hameed, who is a director in ABC Limited, a listed company, is planning to move to

Europe for one year to set up his own business. In the light of Companies Ordinance, 1984

you are required to:

a. Respond to his request for advice, as regards his responsibilities, under the Companies

Ordinance 1984, in respect of:i. Attending the annual general meeting of the company.

ii. Attending the board meetings of the company.

b. Discuss the conditions under which he may be allowed to assign his office to another

person.

c. State the procedure and the conditions to be complied with if the company wants to

remove Mr. Hameed from the directorship of the company, under each of the

following assumptions:i. He was elected as a director of the company.

ii. He became the director of the company by subscribing to the memorandum

of the company.


15/48

14

H. An equitable mortgage was created on the factory building of Asif Textile Mills Limited, a

listed company, to secure a long term loan obtained from Mrs. Wasif, who is the spouse of a

director of the company. All the eight directors of the company were informally aware about

Mr. Wasif’s interest in the transaction. The board of directors approved the transaction in

their meeting which was attended by five directors.

Upon inspection of the register of contracts in which directors are interested, a member

of the company filed an appeal with the SECP, claiming that the mortgage is invalid

because Mr. Wasif, who is an interested director, had also voted on the matter and

therefore the contract is void.

In the light of the provisions of Companies Ordinance, 1984 you are required to:

Evaluate the above situation and comment thereon in the light of theprovisions of the Companies Ordinance, 1984.

Explain the manner in which a general notice, regarding disclosure of

interest in a contract, may be given by directors of a company.

I. Mr. Waleed has acquired 3 million ordinary shares of Acquired Limited who’s paid up share

capital consists of 22 million ordinary shares of Rs. 10 each. The election of the directors of

the company has recently been concluded. Mr. Waleed, being confident of holding a

sufficient number of shares to be elected as a director, has requested the management toarrange a fresh election. Based on the provisions contained in the Companies Ordinance,

1984 explain whether and under what conditions a fresh election of the directors may be

held.

J. During the past 12 months Mr. Sohail’s holding in shares of ABC Ltd (a listed company) has

increased to 13%. Recently, he has written a letter to the company seeking appointment on

its Board of Directors. The company secretary had advised that since the election of directors

was held in the preceding annual general meeting, he cannot be admitted on the board tillthe next elections become due. Mr. Sohail is not satisfied with the response and has sought

your advice on the matter. You are required to briefly discuss what course of action is

available to him.


16/48

15

K. A director of a listed company has proposed to nominate another person to act in his place

as he would be going to Japan to undertake a technical training course. You are required to

state the requirements to be complied with under the Companies Ordinance, 1984.

L. ABC Limited, a listed company, is entering into a contract to purchase machinery worth Rs.

50 million from XYZ (Private) Limited, where the spouse of the chief executive of ABC limited

is also a director. The contract for purchase of said machinery is to be placed before the board

of directors of the company for approval. State the relevant rules as given in the Companies

Ordinance, 1984 and describe the procedure which ABC Limited should follow while entering

into the contract.

a. Explain whether XYZ (Private) Limited will have to follow and comply with the same

rules as are applicable to ABC Limited.

M. Mr. Abbasi is a director of Bright Limited, a listed company. His nephew wants to purchase

shares of Bright Limited. Part of the funds required to make the investment shall be provided

by Mr. Abbasi at a profit of 3% per annum. Describe the actions which Mr. Abbasi should take

to ensure that he complies with the relevant provisions contained in the Companies

Ordinance, 1984 and the Code of Corporate Governance.

N. Explain whether a non-member can become the director of a company.

O.

A strategic investor has acquired management control of a company through the privatizationprogram. The directors of the company were elected only a year ago and still have an

unexpired term of 2 years. Outline the process under which strategic investors will induct

their own directors on Board of company.

P. Directors of a public unlisted company had fixed the number of directors for election at eight.

The present directors being eligible had offered themselves for re-election at the same board

meeting. Considering the fact that there has been no change in the structure of shareholding,

the Board of Directors passed a resolution appointing them as directors. Comment on abovecorporate action with reference to the provisions of the Companies Ordinance, 1984.

Q. A shareholder in a listed company has acquired about 8% shares of the company. He intends

to contest for election to the Board of Directors of the company in the forthcoming elections.


17/48

16

What corporate secretarial steps need to be taken by the member and the company in this

regard?

R. Mr. Siddiqui has been selected for appointment as Chief Executive of M/s Cotton (Private)

Limited. The proposed terms of appointment also include provision of loan of Rs.10 million

each for purchase of a house and shares of M/s Kapas Limited which is listed on all the three

stock exchanges of Pakistan. M/s Kapas Limited and two of its directors hold 67% shares of

M/s Cotton (Private) Limited. You being the secretary of the company are required to give

your comments on the above terms in the light of the provisions of the Companies Ordinance,

1984.

S. Answer the following in the context of a listed company: Under the Companies Ordinance,

1984: In addition to the directors elected to the Board of Directors, who is entitled to attend

the Board meetings and what would be their voting rights thereat?

T. Who is considered to be a beneficial owner of shares under the provisions of the Companies

Ordinance, 1984? What obligations do the relevant provisions of law place on him and the

time period in this regard? Obligation of the company and penalties under law are not

required to be replied.

U. How a director of a company may make an assignment of office? Is it possible for a director

to appoint his alternate and if so under what conditions?a. List any five contents of report of board of directors required under Companies

Ordinance, 1984.

b. Who can sign the report of directors?

V. Mr. Ibrahim is the Chief Executive of LMN Limited, a listed company. He has requested the

company for a loan of Rs 30.0 million. His annual remuneration is Rs 28 million. State the

conditions mentioned in the Companies Ordinance, 1984, under which such a loan may be

advanced by the company.W. The Board of Directors of Sunrise Limited (SL), a listed company, intends to give a loan of ten

million rupees to Moonlight (Private) Limited (MPL). The loan would be repayable in two

years and would carry interest at the rate of twelve per cent per annum. The CEO of SL is also

on the Board of Directors of MPL and is its major shareholder.


18/48

17

Required:

Describe the requirements of Companies Ordinance, 1984 that should be complied with

by the Board of Directors of SL in respect of the proposed loan to MPL.

X. Explain the conditions specified in the Companies Ordinance, 1984 under which a person may

request a listed company to hold election of directors prior to the end of the term of the

present board of directors.

Y. In view of the provisions of the Companies Ordinance, 1984 explain the conditions which are

required to be complied with, if a company wishes to grant loan to its director.

Z. Shams Cement Limited is a company listed on Lahore Stock Exchange. Five of its directors

belong to the same family. The remaining directors represent a financial institution and

minority shareholders. The company has approached a bank for financing of its expansion

project. Beside other collaterals, the bank is asking for making the liability of the directors

unlimited.

Describe the procedure by which the liability of the directors can be made

unlimited.

The directors representing financial institution and minority shareholders have

refused

To accept the proposal. Explain whether the remaining directors can make theliability of the dissenting directors unlimited.

AA. XYZ Limited, a listed company, has decided to hold an extraordinary general meeting (EOGM)

on April 30, 2010 for election of directors. The company has not yet determined the number

of directors to be elected. Explain the relevant rules for fixing the number of directors to be

elected, under the Companies Ordinance, 1984.

BB. During the past 12 months Mr. Sohail’s holding in shares of ABC Ltd (a listed company) has

increased to 13%. Recently, he has written a letter to the company seeking appointment onits Board of Directors. The company secretary had advised that since the election of directors

was held in the preceding annual general meeting, he cannot be admitted on the board till

the next elections become due. Mr. Sohail is not satisfied with the response and has sought


19/48

18

your advice on the matter. You are required to briefly discuss what course of action is

available to him.

CC. Explain the exception to the following provisions as specified under the Companies

Ordinance, 1984 : In a meeting of the board of directors, no director shall take any part in the

discussion of, or vote on, any contract or arrangement entered into, or to be entered into, by

or on behalf of the company, if he is in any way, whether directly or indirectly, concerned or

interested in the contract or arrangement, nor shall his presence count for the purpose of

forming a quorum at the time of any such discussion or vote; and if he does vote, his vote

shall be void.

DD. Narrate the responsibilities of a company or of its directors in the following

circumstances:

Transfer of 5,000 shares held by the shareholder of a listed company to his sister

who is the wife of a Director of the company.

A notice is given to a listed company by a member of the company, 17 days before

the annual general meeting, proposing for a change in the auditors of the

company.

An alteration in Articles of Association of the company is approved by passing a

resolution in the annual general meeting.


20/48

19

7. Chief Executive Officers

(Sec 198-204A, 206, 207) A. In the first meeting of Board of Directors of Hamid Textile Mills Limited (HTML), a listed

company, the name of Mr. Imran was proposed for appointment as chief executive of theCompany. Mr. Jamal opposed the proposal on the following grounds:

i. Mrs. Imran is the Chief Executive Officer of Fahad Textile Mills (Private)

Limited.

ii. Mr. Imran is involved in the business of stock brokerage.

iii. Mr. Imran is not a member of HTML. Comment on the objections raised by Mr.

Jamal in the light of the provisions of the Companies Ordinance, 1984.

b. XY Limited (XYL) has recently commenced business. The company has appointedvarious distributors for the supply of its products. The distributors have placed

amounts ranging between Rs. 2 - 5 million with XYL as security deposits.

c. Briefly describe the relevant provisions of the Companies Ordinance 1984, which XYL

would have to comply with.

B. In the first meeting of Board of Directors of Alif Cement Ltd a public listed company, Mr. Raoof

proposed the name of Mr. Haseeb for appointment as chief executive of the Company. Mr.

Zahid opposed the proposal on the following grounds:a. Mr. Haseeb is also the Chief Executive of Bay Cement (Pvt) limited which holds 15%

shares in Alif Limited.

b. He is involved in the business of stock brokerage.

Comment on statement of Mr. Zahid in the light of the provisions of the


C. Mr. Zameer is the first chief executive of Ryan Industries Limited, a public company. The

directors of the company are not satisfied with his performance. In view of the provisions of

the Companies Ordinance, 1984 specify the term of office of Mr. Zameer and explain how he

can be removed before expiry of the above term.


21/48

20

Describe the provisions of the Companies Ordinance, 1984 which restrict the chief

executive of a public company from carrying on any business competing with the

company’s business.

D. In the first meeting of Board of Directors of Alif Cement Ltd a public listed company, Mr. Raoof

proposed the name of Mr. Haseeb for appointment as chief executive of the Company. Mr.

Zahid opposed the proposal on the following grounds: (i) Mr. Haseeb is also the Chief

Executive of Bay Cement (Pvt.) limited which holds 15% shares in Alif Limited. (ii) He is

involved in the business of stock brokerage.

Comment on the statement of Mr. Zahid in the light of the provisions of the Companies

Ordinance, 1984.


22/48

21

8. Company Meetings

(Sec 157-173)

A. On declaration of the result of voting in the Annual General Meeting (AGM) by the chairman

of AS Limited, a public company, few shareholders demanded a poll. The chairman refused

to hold the poll and declared the result of voting on show of hands. In the light of Companies

Ordinance, 1984,

a. How would you assess whether or not the Chairman’s decision of not holding a poll

was valid?

b. Explain whether the Chairman can delay the holding of poll to a date subsequent to

the date of AGM.

B. The Annual General Meeting of Trade Limited was held at 9:15 a.m. on 31 October 2012.

Certain shareholders of the company have lodged following complaints with the company’s

secretary.

i. Since the meeting could not commence at the scheduled time i.e. 9:00 a.m.; it

became invalid and should be called again.

ii. A resolution passed in the meeting was approved by a show of hands.

However, a poll should have been carried out.iii. Mr. A who voted for a resolution was represented through a proxy which was

deposited at 5:01 p.m. i.e. after office hours on 29 October 2012. Further,

since 30 October 2012 was a public holiday, the condition of depositing the

proxy at least 48 hours before the commencement of the meeting, was not

met.

iv. Mr. G who holds 50,000 shares was represented by two proxies i.e. Mr. C

(30,000 shares) & Mr. D (20,000 shares). Only proxy with 30,000 shares wascounted for the purpose of voting.

v. JKM Limited holding 20,000 shares of the company was represented by Mr.

Waheed, who is neither a director nor an employee of JKM Limited.


23/48

22

b. Comment on the validity of each of the above complaints in the light of Companies

Ordinance, 1984.

c. Describe the circumstances under which a court may declare the resolution passed in

the above meeting or the entire proceedings of the meeting as invalid under the


C. The general meeting of VX Limited, a listed company, was convened on 30 May 2012.

However, only four shareholders turned up to attend the meeting. Explain how VX Limited

should deal with the above situation in the light of Companies Ordinance, 1984.

D. A number of shareholders of Nazeer Industries Limited want to hold an extraordinary general

meeting to discuss an important matter relating to the company. In view of the provisions

contained in the Companies Ordinance, 1984 explain:a. The conditions under which it would become mandatory for the company to convene

the meeting.

b. The rights of the concerned shareholders in case the company fails to convene the

meeting.

E. An Extraordinary General Meeting of Mastermind Technologies Limited (MTL), a listed

company, was scheduled to be held on October 31, 2009. The directors adjourned the

meeting for the next week as the quorum was not present within fifteen minutes of the

scheduled time. Based on the provisions of the Companies Ordinance, 1984, you are required

to comment on the following:

a. The decision of the directors to adjourn the meeting, assuming:

i. The meeting was called upon the requisition of the members.

ii. The meeting was called by the directors.

b. The impact of the adjournment on the validity and rights of proxies which were

deposited with the company before adjournment.

c. The validity of the resolution passed at the adjourned meeting.

F. Karachi Telecommunication (Private) Limited (KTL) was incorporated on 1st March, 2009

under the Companies Ordinance, 1984. Its directors have decided to hold first Annual General

Meeting (AGM) of company on August 10, 2010, for placing the first audited financial


24/48

23

statements for period ended March 31, 2010, for approval. Comment on decision of the

directors, in the light of provisions contained in the Companies Ordinance, 1984.

G. The annual general meeting (AGM) of Nizam Industries Limited was held on November 16,

2009. Some of the shareholders are not satisfied with the decisions taken at the meeting andare of the opinion that the directors have manipulated the situation in order to obtain certain

approvals in the annual general meeting. You are required to explain how and under what

conditions the proceedings of the AGM can be declared as invalid.

H. Under the Companies Ordinance, 1984 describe the circumstances in which proceedings of a

general meeting may be declared invalid by the court. Who is eligible to make petition in this

regard.

I. Explain the provisions of the Companies Ordinance, 1984 with regard to the quorum of ageneral meeting of a company listed on stock exchange.

J. Arif & Co., Chartered Accountants were to be re-appointed as auditors at the Annual General

Meeting of Rose Limited, an unlisted company. The meeting was held on October 31, 2007

but stood adjourned without discussing the appointment of auditors. Explain the legal

position of the auditors in such a situation.

K. See-green Limited, a public limited company, had convened a general meeting at 9:00 a.m.

on March 25, 2008 to consider and if deemed fit, pass a special resolution approving the

disposal of a part of the company’s undertaking. The meeting commenced at 9:16 a.m. as the

quorum was not present at the scheduled time and was attended by 100 members (including

10 members represented through proxies) holding 1,000,000 shares in aggregate. After a

heated debate, voting was held through show of hands and the chairman declared resolution

successful as 78 votes were casted in favor of the resolution. On March 31, 2008, the

shareholders who gave a dissenting vote in the meeting, lodged a protest with the company

claiming that the resolution was invalid on account of the following reasons:

a. Mr. A, who voted for the resolution was represented through a proxy which was

deposited at 5:01 p.m. i.e. after office hours on March 22, 2008. Moreover, since

March 23rd was a public holiday, the condition of depositing the proxy at least 48

hours before the meeting, could not be met.


25/48

24

b. Mr. B a shareholder with a holding of 50,000 shares was represented by two proxies

i.e. Mr. C (30,000 shares) & Mr. D (20,000 shares). Both proxies were counted for the

purpose of voting.

c. JK (Pvt) Limited holding 20,000 shares of the company, were represented by Mr.

Sameer, who is neither the director nor the employee of the company. He also voted

in favor of the resolution.

d. The shareholders who lodged the protest hold 300,000 shares and therefore the

resolution was approved by shareholders holding 70% voting rights only.

e. Since the meeting could not be held on time, it became invalid and should be called

again.

Discuss the validity of the resolution under the Companies Ordinance 1984, in view of

the complaint lodged by the dissenting shareholders.

L. A resolution was put before the members in an Annual General Meeting, for voting on a show

of hands. Before the announcement of the result, Mr. Shahab Khan, a shareholder,

demanded a poll, which was refused by the Chairman. Discuss the legality of the chairman’s

decision in the light of the Companies Ordinance.

M. A member of a company seeks your guidance regarding the procedure for inspection of the

minute’s book of the general meetings. Discuss the requirements relating to the maintenance of minutes and its inspection by the members.

N. Members of XYZ limited holding 20% of the voting power submitted a requisition to hold an

extraordinary general meeting of the company to remove the auditor of the company. The

company did not call the extra ordinary general meeting and also did not allow the holding

of the meeting at the registered office of the company. The said meeting was held at some

other place and resolution for the removal of the auditor was passed. Examine the

requirements and discuss the validity of the said meeting and resolution passed.

O. A general meeting of a listed company was adjourned by the chairman for want of quorum.

Fresh notice was not served for the adjourned meeting. You are required to explain the

following:

a. Whether a notice is required to be served for the adjourned meeting.


26/48

25

b. The minimum number of members required to be present in a general meeting.

c. What shall be the requirement in case of an adjourned meeting?

P. Annual General Meeting of a Public Company was scheduled to be held on March 15, 2006.

Mr. A, a shareholder, issued two Proxies in respect of the shares held by him in favor of Mr.‘X’ and Mr. ‘Y’. The proxy in favor of ‘X’ was lodged on March 12, 2006 and the one in favor

of Mr. ‘Y’ was lodged on March 15, 2006. The company rejected the proxy in favor of Mr. ‘Y’

and accepted the one in favor of Mr. ‘X’. Explain whether the rejection by the company is in

order?

Q. State the provisions contained in the Companies Ordinance 1984 relating to extension in the

date of holding the Annual General Meeting.

R. The annual general meeting (AGM) of Nizam Industries Limited was held on November 16,2009. Some of the shareholders are not satisfied with the decisions taken at the meeting and

are of the opinion that the directors have manipulated the situation in order to obtain certain

approvals in the annual general meeting. You are required to explain how and under what

conditions the proceedings of the AGM can be declared as invalid.

S. Mr. Shakeel has significant shareholdings in various public and private companies. He is not

satisfied with some of the resolutions passed by such companies by show of hands. You are

required to advise him as regards the following:

What conditions would he need to satisfy if Mr. Shakeel wishes to request for a

poll?

Explain whether a company is required to oblige him if he wishes to satisfy himself

about the validity of the results of voting by poll.

T. The Companies Ordinance, 1984 contains certain safeguarding provisions for minority

shareholders. Two of these provisions provide mechanism for providing relief and

safeguarding their interests provided the shareholders own certain percentage of voting

shares. Briefly describe such provisions.

U. Whether it is possible under the provisions of articles of association to provide for a shorter

or larger number of members to be a quorum for a meeting?


27/48

26

a. Can proceedings of a general meeting may be declared invalid. If so under what

circumstances and who may initiate this. Is there any time limitation for this?

V. The Board of Directors of Classic Paints Limited, a public listed company, has called an

Extraordinary General Meeting on the requisition of the shareholders holding 10% of thevoting power of the company. Approximately twenty minutes before the commencement of

the meeting, the Chairman of the Board of Directors informed the Company Secretary of his

inability to attend the meeting due to the death of a close relative.

Required:

What would be the quorum of the above meeting?

Mention the latest time by which the quorum of the meeting should be present.

What would be the impact if quorum is not present within the prescribed time? Who could chair the meeting in the above situation?

W. The annual general meeting of a company was held on October 31, 2009 but on account of

certain disagreements, the members did not adopt the audited financial statements for the

year ended June 30, 2009. In the above situation how would the company comply with the

provisions of the Companies Ordinance, 1984 related to the filing of copies of annual accounts

with the registrar of companies?

X. Under the Companies Ordinance, 1984 describe the circumstances in which proceedings of ageneral meeting may be declared invalid by the court. Who is eligible to make petition in this

regard.

Y. In a general meeting, ordinary as well as special businesses are put up for consideration of

members. Distinguish between ordinary businesses as opposed to special business.

b. State the requirements that a company needs to satisfy, as regards notice of the

meeting, in case a special business is to be transacted at a general meeting of the

company.


28/48

27

9. Dividends

(Sec 248-251)

1. Flash Limited is a company listed on the Lahore Stock Exchange. The Board of Directors of

Flash Limited, in its meeting held on April 1, 2009, has recommended an interim cash dividend

@ 25%. The Board has announced the dates of book closure from April 23 to April 30, 2009.

o Describe the requirements of Companies Ordinance, 1984 in respect of payment of

the above dividend. Also describe the consequences of non-payment of dividend

within then specified time.

o State the situations in which non-payment of dividend would not be treated as an

offence, under the Companies Ordinance, 1984.

2. Explain the exception to the following provisions as specified under the Companies

Ordinance, 1984. Where a dividend is declared by a company but is not paid within the period

specified in the Companies Ordinance, 1984, the chief executive of the company shall be

punishable with imprisonment for a term which may extend to two years and with fine which

may extend to one million rupees.

3. State in the light of provisions of the Companies Ordinance, 1984: A company has earned

huge profits from sale of fixed assets. Whether company can declare dividend out of above

profits?

4. Explain whether or not the following statements are in accordance with the provisions of the

Companies Ordinance, 1984. Support your answer with reasons. There is no restriction on

the declaration of dividend and the chief executive may declare dividend in the general

meeting of the company out of any kind of profit.

5. What are the provisions of law regarding: Can dividend be paid to anyone else except the

registered shareholders?

6. Can the payment of dividend be delayed/ceased beyond the time limit prescribed by section

251?

7. When a dividend has been declared, it is not lawful for the directors or the company to

withhold or defer its payment. Any non-compliance is punishable with imprisonment and a


29/48


30/48

29

March 31, 2008. To maintain its good payout ratio, the company declared two interim

dividends of 10% and 12% in January and February 2008 respectively. The books were closed

for a period of 12 days and 18 days respectively. The directors of Sigma Industries Limited

have now proposed a final dividend of 20% which is to be approved in the forthcoming AGM

of the company. The directors intend to close the share transfer register from March 25, 2009

for determining shareholders entitlement for the purpose of dividend, meeting, etc.

o In the light of Companies Ordinance, 1984 you are required to advise the directors

as regards the following :

The maximum period for which the books of Sigma Industries Limited can

be closed and the procedure that should be followed in this regard.

o The last date up to which Sigma Industries Limited can hold it’s AGM.

o The procedure relating to sending of notices, annual report and audited accounts

to the members and concerned authorities.


31/48

30

10. Company Auditors

(Sec 252-260)

A. Sahara Pakistan Limited (SPL) is a multinational company listed on the Karachi and Lahore

Stock Exchanges. Mr. Brown, a major shareholder of the company, wants to appoint ABC &

Company, Chartered Accountants, as the new auditors in place of the retiring auditors of SPL.

Narrate the procedure that Mr. Brown would have to follow and the responsibilities of the Company

in the context of provisions of the Companies Ordinance, 1984 for change of auditors.

B. Narrate the provisions of the Companies Ordinance, 1984 relating to a private company in

respect of: Appointment of the first directors and their tenure.

C. Arif & Co., Chartered Accountants were to be re-appointed as auditors at the Annual General

Meeting of Rose Limited, an unlisted company. The meeting was held on October 31, 2007

but stood adjourned without discussing the appointment of auditors. Explain the legal

position of the auditors in such a situation.

D. Write short notes on the following: Appointment of first auditors.

E. Narrate the circumstances in which SECP becomes empowered to appoint auditors under the


F. On March 15, 2006, Karom Textile Limited received a notice from a shareholder of the

company nominating another firm of Chartered Accountants as auditors in place of the

existing auditors at the annual general meeting to be held on March 31, 2006. Explain the

conditions required to be fulfilled by a member of the company while making such

nomination under the Companies Ordinance, 1984. Also describe the company’s

responsibilities on receiving such notice, towards other members and the existing auditors of

the company.

G. Sahara Pakistan Limited (SPL) is a multinational company listed on the Karachi and Lahore

Stock Exchanges. Mr. Brown, a major shareholder of the company, wants to appoint ABC &

Company, Chartered Accountants, as the new auditors in place of the retiring auditors of SPL.

Narrate the procedure that Mr. Brown would have to follow and the responsibilities of the


32/48


33/48

32

Change of auditors prior to the completion of their term.

Restrictions imposed on the appointment of certain persons as auditors of the

company.

O. Mr. Azhar, the sole proprietor of Azhar & Co. Chartered Accountants, was appointed as the

auditor of XYZ Limited, an unlisted public company, for the financial year ending June 30,

2009. Mr. Azhar married Miss Ismat, a director of XYZ Limited, on February 23, 2009. The

company secretary of XYZ Limited wants to know whether the marriage would have any

impact on the status of Mr. Azhar as the auditor of the company.

Discuss the situation with reference to the relevant provisions of the Companies

Ordinance, 1984.

Discuss the provisions of the Companies Ordinance, 1984 related to the attendanceof the auditors in the general meeting of the company.


34/48

33

11. Secretarial Practices

(Sec 198-204A, 206, 207) A. National Travels Limited (NTA), is a listed company, and operates throughout Pakistan. In

order to finalize a running finance arrangement with a bank, it requires a copy of the board

resolution approving the terms of financing. Since five out of eight directors are currently out

of the city, it is not possible for the secretary to arrange the meeting of the board of directors.

In light of the provisions of Companies Ordinance, 1984 you are required to state,

whether the above resolution can be passed by circulation and the steps required to be

taken to pass such a resolution.

B. The Board of Directors of Ghareeb Limited has decided to contribute a fixed amount every

year to a charitable organization. The company secretary notified that a clause needs to be

inserted in the object clause of the Memorandum of Association for the same. Draft a clause

to be included in the Memorandum covering the permissibility of the proposed activity.

C. The board of directors of a listed textile weaving unit (KW Weaving Mills Limited) has

approved a scheme of amalgamation with its fully owned subsidiary, KD Dyeing Mills Limited.

The merger will result in economies of scale which would eventually increase the profitability

of the company in the coming years. You are required to draft the relevant resolutions

necessary to carry out the merger.

D. You are Company Secretary of a public limited company. In the following month the

company’s annual general meeting has to be held, for which purpose the Board of

Directors meeting needs to be organized. Following items are included on the agenda:

o investment in an associated company;

o approval of the annual financial statements;

o issuance of shares to new foreign shareholders;

o approval of new company logo;

o remuneration of the recently appointed Chief Financial Officer & Chief Executive

Officer; and

o Recommendation of final dividend.


35/48

34

E. Some of the directors representing the foreign shareholders with 30%

shareholding/representation on the Board might be traveling and therefore may not be able

to attend the meeting. You have been asked by these non- resident directors to get their

approval on the decisions through circular resolution or any other means. Discuss this

suggestion in the light of the provisions of the Companies Ordinance, 1984 and corporate

practices, including any other alternatives.

F. The following are some points noted by company secretary of a listed company

immediately after the Board meeting for approval of accounts:

Interim dividend 20% already paid; proposed final dividend 20% in addition to

interim.

Auditors – existing auditors have consented to their re-appointment. Acquiring 40% stake in an existing company.

Appointment and remuneration of chief financial officer approved.

Capital expenditure of up to 10% of equity.

Bonus issue utilizing all available reserves (vii) Increase in paid up capital through

further issue to existing shareholders.

Draft a notice for the forthcoming Annual General Meeting (AGM) of the company and

the agenda containing items that are normally included in an AGM for members’approval. Also comment on any aspect that is not in accordance with the provisions of

the company law or related rules.

G. A listed schedule bank is planning to raise its paid up capital to comply with the State Bank of

Pakistan’s minimum paid up capital requirements. It has requested you to identify options

available to it for increasing its paid up capital and the key corporate and secretarial

requirements it would need to comply with.

H. Draft a notice of an annual general meeting of a listed company. Apart from the usual itemsthat are included in the agenda of such a meeting, the shareholders’ approval is also

to be obtained for investment in an associated company. Also list items that would be

included in the statement of material facts about this investment.


36/48

35

I. Mr. Moeen, who is the company secretary of Palm Oils Limited, a listed company, made a

gain of Rs. 5,000 on the sale of shares of the company which were purchased by him four

months back.

o Describe the responsibilities of Mr. Moeen in the above situation under the


o Explain the consequences of Mr. Moeen’s failure to comply with the relevant


J. A company recently published a prospectus. The subscription date has passed and balloting

on account of over subscription has been carried out. List the subsequent

corporate/secretarial action required for obtaining the commencement of business

certificate.

K. The Articles of Association of a public listed company provides that in case of an equality of

votes in a Board meeting, the Chairman shall have and exercise a second or casting

vote. The Board of Directors comprises 9 members including the Chairman. In the last

meeting of the Board, the Chairman was not present and the meeting was presided by Mr. T

who is the Chief Executive of Messer’s A (Private) Limited and holds 60% of its shares. In the

same meeting Board has to consider the renewal of contract with Messer’s A (Private) Limited

for supply of packing material at revised terms. Four directors opposed the renewal at therevised terms whereas remaining four including Mr. T were in favor of approving the

renewal at the revised terms. At the first instance Mr. T tried to convince the other directors

but on their refusal due to equal division of Board he exercised the casting vote as a

Chairman of the meeting and declared the renewal as approved. Kindly comment

explaining the relevant provisions of the Companies Ordinance, 1984.


37/48

36

12. Shares and Share Capital

(Sec 76-81), (Sec 62A, 82-88, and 120)A. An investor purchased some shares from the stock market in good faith and got them

registered in his name. Subsequently, the company received a notice from the originalmember reporting these shares as lost. Discuss the right of such an investor as well as the

original owner under the law.

B. The Secretary of ABC Limited is in the process of preparing the prospectus for public issue.

The company has obtained loans from two financial institutions and has granted option to

these institutions to convert up to 20% of the outstanding balance of the loans into ordinary

shares. State the information required to be disclosed in the prospectus under the Companies

Ordinance, 1984 regarding the option given to the financial institutions. C. If two or more persons hold one or more shares in a company, do they individually become

separate members of the company?

D. Mega Projects Limited is presently facing financial crunch. In order to overcome this crisis and

to improve profitability, the Board of Directors is considering to raise funds through capital

injection. The existing shareholders and the potential investors may not be willing to invest

at par value which is Rs.10 per share. However, it is estimated that the company could get

just about Rs. 7 per share. The directors have therefore decided to issue shares at discount.Being a Company Secretary, you are required to advise the directors about the procedure to

be followed in this regard, under the Companies Ordinance, 1984.

E. Blossom Textiles Limited, a listed company, is in urgent need of increasing its paid up capital

to improve balance sheet ratio and satisfy their bankers. The response from the existing

shareholders and the underwriters is quite discouraging. Mr. Majeed, an existing shareholder

has shown his intention to purchase the whole issue at par. Describe the steps that the

company will need to take if it wants to accept the offer by Mr. Majeed. F. Jahangir Limited a public listed company have incurred losses during the past two years, as a

result of which, 17% of their equity has been wiped out. The board of director’s wants to issue

shares worth Rs. 100 million, being 25% of the present share capital at a discount of 20%. You


38/48

37

are required to advise them on the matters which the SECP may consider before granting

approval for issue of shares.

G. What do you understand by the term “Green -shoe Op tion”?

H. Zeeshan Pharma Limited (ZPL) commenced its business two years ago with a paid up capital

consisting of 80 million ordinary shares of Rs. 10 each. On February 13, 2011 the board of

directors decided to issue right shares at a discount of Rs. 1.50 per share.

Narrate the provisions contained in the Companies Ordinance, 1984 which ZPL would need to

comply with for issuance of shares at discount.

I. DOS Limited is a listed company engaged in providing LDI services to its customers. As a Chief

Financial Officer you informed the board of directors that during the 2nd and 3rd quarter of

year 2006-2007, the company will require short term financing in order to meet the liquidity

shortfall. One of the directors has proposed that the company should raise finance through

Commercial Paper. You as a CFO are required to explain: the eligibility condition that have

been specified by the SECP for a company that wishes to raise finance by issuing 3-6 months

Commercial Paper the prospective investors in Commercial Paper?

J. What do you understand by the term pre-emptive right of a shareholder?

a. What restriction the Companies Ordinance places on redeeming the preference

shares?

b. What are the permissible modes for redeeming the preference shares and what are

the conditions attached to such modes?

K. On 15 August 2011 Ejaz lodged an instrument of transfer with Fast Technology Limited (FTL),

a listed company, for transfer of 10,000 shares in the name of his son, Riaz. However, on 5

September 2011 the directors refused to transfer the shares by giving him notice in writing

in this regard. Explain the recourse available to Ejaz.

L. A company is required to issue shares to a financial institution under the terms of agreement

within the next three day of the happening of certain event. Now the event has happened

and the company has to issue the shares but the authorized capital is fully subscribed. Advise

the company to avoid noncompliance with the terms of the agreement as well as the

provisions of Companies Ordinance, 1984.


39/48

38

M. Mr. Javed wants to transfer the shares registered in the name of his deceased father to his

own name. Describe the procedure specified under the Companies Ordinance, 1984 which

he would be required to follow.

N. What is the difference between allotment and physical issue of share certificate?

O. Faheem and Naeem are members as well as the directors on the Board of Saleem (Private)

Limited and each of them hold 50% of the share capital. On August 28, 2008, Faheem died in

an accident in London while he was on a business visit. However, Faheem’s shareholdings

could not be transferred to his nominated legal heirs as all of them were minors. Naeem

continued to carry on the business of the company. In March 2009, the company incurred

heavy losses and could not meet its debt obligations. Zaheer, a creditor of the company,

intends to make Naeem personally responsible for the payment of the amount owed to him

by Saleem (Private) Limited.

Required: Narrate the provisions of the Companies Ordinance, 1984 which are relevant to the

above issue and discuss the above situation in the context of those provisions.

P. The directors of ABC Limited are considering to issue 50% right shares on premium. The issue

would be underwritten and significant amount of commission would be paid to the

underwriters. The directors are however concerned as to whether they are empowered to

pay the commission.Narrate the relevant provisions of the Companies Ordinance, 1984 regarding the payment of the

commission and the directors’ responsibility in the ab ove situation.


40/48

39

13. Alteration and Reduction of Share Capital

(Sec 92-107) Q. The Board of Directors of KG Limited have decided to buy-back one million of its ordinary

shares. You are required to describe the procedure to be followed by KG Limited to buy-back

its shares in view of the provisions of the Companies Ordinance, 1984.

R. Belfast Pakistan Limited (BPL), engaged in real estate business, is a wholly owned subsidiary

of Belfast International (BI). The company was incorporated in April 2007 with a paid-up

capital of Rs. 100 million. After first three years of unsuccessful operations, BPL has

accumulated losses to the tune of Rs. 34 million. In order to revive the company, management

intends to venture into a new business and wants to cancel its existing paid-up share capital

which has been lost or unrepresented by available assets. Under the provisions of the

Companies Ordinance, 1984 state the steps that need to be taken for reducing the share

capital of the company.

S. In the annual general meeting of Sabzazar Limited held on September 29, 2009 some of the

shareholders have raised the following objection: The Company has issued shares to a

scheduled bank against a part of the outstanding balance of a loan without offering them to

the shareholders by way of a right issue.

T. XYZ Limited, a listed company, has issued ten million shares of classes ‘A’ and ‘B’ each. The

company passed a special resolution to alter some of the rights associated with class ‘B’

shares, which has aggrieved some of the shareholders. Explain to the shareholders, aggrieved

with the above changes, on the following:

a. What remedy is available to the aggrieved shareholders?

b. Under what conditions can the decision of the company be cancelled?

U. List three key differences between provisions relating to increase and reduction of share

capital of a company limited by guarantee having a share capital as compared to a company

limited by shares.

V. Paragon Industries Limited, after passing a special resolution on October 15, 2009 filed a

petition in the Court on October 20, 2009 to reduce its share capital. After being satisfied with


41/48

40

respect to the creditors, the Court issued an order on November 30, 2009 confirming the

reduction of share capital of the company.

Describe the statutory formalities which the company is required to carry out after issuance of the

court’s order.


42/48

41

14. Winding up of a Company

(Section 297-310)A. For the last three months, ANF Limited (ANFL) has been experiencing liquidity crisis and is

unable to meet its financial obligations within the due date. In the light of Companies

Ordinance, 1984 narrate the circumstances under which ANFL would be deemed to be unable

to pay its debts.

B. The members of Tajamul Private Limited (TPL) have decided to go into voluntary winding-up.

Advise TPL about the provisions of the Companies Ordinance, 1984 pertaining to:

a. Fixation of the remuneration to be paid to the liquidator.

b. Filling of vacancy in the event of resignation of the liquidator.

C. The Directors of BD Limited intend to win d up the company’s business voluntarily. In the

context of the Companies Ordinance, 1984 you are required to explain the following:

a. The requirement to file a declaration of solvency.

b. The contents of declaration of solvency.

D. Substantial operating losses sustained by Legend Ceramics Limited (LCL) have forced its

directors to proceed for company’s voluntary winding up. Accordingly, a general meeting of

LCL was held on July 1, 2010 and Mr. Ateeq was appointed as the Liquidator. In the context

of the provisions contained in the Companies Ordinance, 1984 you are required to explain

the following:

a. The steps that Mr. Ateeq should take if the winding up is not completed till June 30,

2011.

b. Mr. Ateeq’s responsibilities as regards final meeting and dissolution of the c ompany.

E. Foreign investor had acquired majority shares in Marine Steel Services Limited (MSSL) in the

year 2006. Due to global recession, MSSL has incurred heavy losses and a major portion of its

equity has been wiped out. Consequently, the investor intends to wind up the operations of

the company voluntarily.

a. In the light of the Companies Ordinance, 1984, advise the management as regards the

following:


43/48

42

i. When would the voluntary winding up process be deemed to commence and

what would be its effect on the operations of MSSL.

ii. How could the directors ensure that the requirements of making a declaration

of solvency have been complied with?

b. In order to minimize the winding up expenses, the Board wants to appoint one of the

directors as the liquidator, on a monthly remuneration of Rs. 50,000. Advise the Board

as regards the requirements of Companies Ordinance, 1984 with respect to the

appointment and remuneration of liquidator, in the above situation.

F. After incurring continuous losses Shaheen Private Limited had deci ded to go into members’

voluntary winding up. Mr. Sajid was appointed as a liquidator on a remuneration of Rs.

200,000 of which 25% was paid at the time of his appointment. However, in June 2009, Mr.

Sajid tendered his resignation as a liquidator. In the light of the provisions contained in the

Companies Ordinance, 1984 explain the rights and liabilities of Mr. Sajid, in the above

situation. (05)

a. Identify the persons who are eligible to file a petition for winding up of a limited

company in the Court.

G. Friends Textiles Limited has suffered heavy losses and has almost ceased its operations due

to global recession. The directors foresee no improvement in the company’s financial healthand are of the opinion that the company should be liquidated now, as otherwise, in view of

the deepening economic crises, it would be difficult for the company to fetch a good value

for its assets.

Required:

a. Narrate the circumstances in which a company may be wound up voluntarily?

b. Advise the directors of the company about the steps that need to be taken to wind up

the company voluntarily.c. State the requirements and the procedure to be followed for making a Declaration of

Solvency under members’ voluntary winding up.

H. Synthetic Holdings Limited wishes to close down one of its subsidiary companies listed on the

Lahore Stock Exchange, as it is no more a viable unit. Their legal counsel has advised the


44/48

43

preparation of a Declaration of Solvency as a starting point to wind up the subsidiary. In this

context, you are required to explain:

a. What is a declaration of solvency and what must it contain?

b. When it made and what is its purpose?

c. What consequences may follow if the declaration is subsequently found to be

incorrect?

I. Company A is in the process of being wound up. The following is a list of amounts payable by

it:

(Rs.000s)

Salaries and wages (staff strength 97; payable for last six months) 3,000

Utility bills 200

Property taxes (payable to City Government) 150

Fuel expenses payable to employees 150

Legal and professional fees 250

Sales tax payable 500

Penalty payable under the Income Tax Act 2001 100

Contributions to employees provident fund 200

Leave encashment 200Disability insurance received from insurance company and payable to staff 100

Secured loan payable to National Bank of Pakistan – Principal 1,200

- Interest 250

Secured trade creditors 400

Unsecured trade creditors 1000

In the light of winding up provisions contained in the Companies Ordinance, 1984, how would

the above amounts be ranked for payment? Assuming that the funds available with thecompany are Rs. 1.75 million only, how would the distribution take place?

J. On a petition filed by affected minority shareholders, the court has directed a company to be

wound up and has also appointed a liquidator. The existing management comprising the chief

executive and other board members, is resisting the move and is expected to create hurdles


45/48

44

in the winding up proceedings including refusal to hand over custody of books and records

and properties to the liquidator. Narrate the powers conferred on the liquidator and the

court, in the above situation and what actions can be taken to proceed with the winding up.

K. As used in the context of winding up of companies, discuss when a company is deemed unable

to pay its debts?

L. The Directors of Genetics (Pvt.) Ltd. had started voluntary winding up proceedings by filing a

declaration of solvency about 15 months ago. The company still owes substantial amount to

the financial institutions. The Directors have assured the financial institutions that their debts

would be settled within the next 6 months and have filed another declaration of solvency

with the Registrar and copied it to the financial institutions. What are the legal implications

if any, on the company or its directors for:

a. Default in payment.

b. Issue of second declaration of solvency.

Also explain what remedy is available to the financial institutions in case of default by the

directors.

M. What is the status of a company, its chief executive and its directors which has commenced

winding up proceedings?

N.

What is the effect of appointment of liquidator, on the powers of directors and chiefexecutive?

O. Briefly describe the contents, signatories and other requirements relating to members

voluntary winding up.

Discuss powers of the Liquidator of a company in a voluntary winding-up proceedings

to make a compromise with the creditors that they should accept forty paisa’s in the

rupee i.e. 40% of their total dues as full and final settlement.

P. List preferential payments laid down in the law at the winding-up stage of the company.Q. State the extent of liability of a director having unlimited liability whether past or present, in

case of members’ voluntary winding up of a limited liability company.

R. A company has resolved to wind up voluntarily. Eight months after the declaration of

solvency, the company has received a notice of legal suit of a material amount, which would


46/48

45

make the company insolvent. Explain, by reference to the relevant company law provisions,

the implications of the above-mentioned situation on the winding-up process and the

directors.

15. Miscellaneous Question

A. Explain whether or not the following statements are in accordance with the provisions of

the Companies Ordinance, 1984 and support your answer with reasons:

A company limited by shares cannot issue securities outside Pakistan.

All limited companies are required to hold statutory meeting within 6 months of

incorporation.

A person who holds shares in a company cannot be appointed as the auditor of such

company.

Notice of an extraordinary general meeting should always be sent to the shareholders, at

least 21 days before the date of the meeting.

The first chief executive of the company retires on completion of one year. The

subsequent chief executive must be appointed by the shareholders within 30 days from

the date of retirement of the first chief executive.

B. At the annual general meeting of Rahbar Refineries Limited (RRL), certain shareholders have

raised objections on matters related to the use of the company’s funds. In the opinion of

those shareholders the directors have exceeded the authority vested upon them by the

Companies Ordinance, 1984. Identify those powers of directors which the shareholders of

RRL may be referring to.

C. What do you understand by the term “special business” as referred to in the Companies

Ordinance, 1984?

D. Narrate the information that is required to be annexed to the notice of a meeting in which

any special business is to be transacted.

E. Mr. Aslam, a shareholder of ABC Limited, is not satisfied with the election of directors held

last week in the Annual General Meeting of the company. He intends to file a petition in the


47/48

46

court but is apprehensive that a delay in getting a decision from the court would cause

financial losses to the company.

Explain the provisions prescribed in the Companies Ordinance, 1984 relating to:

Filing of such application in the court, and

The disposal of such application by the court in a timely manner.

F. In the annual general meeting of Paramount Limited, a shareholder objected to the shifting

of the registered office from Multan to Lahore without obtaining confirmation from the

Commission. Explain whether the objection is valid.

corporate law new1 study pack

Documents