corporate laws made easy volume 1

8/10/2019 Corporate Laws Made Easy Volume 1

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PREFACE

The Examinations of ICAP are a demanding test of students ability to master the wide range of

knowledge and skills required of the modern professionals. Subject of Corporate Law is one of the

efforts made by ICAP in this context for enhancing students knowledge about detailed overview of

corporate laws prevailing in Pakistan.

After analyzing the trends of ICAP papers, It has been noted that approximately half of the paper of

Corporate Laws at module E is being set from Module D and related rules & circulars. Unfortunately there

is not even a single book available in market that serves the purpose of this portion for module E level,

rather the books are compiled at module D level skipping many provisions and explanations relevant for

advanced students like module E.

The best and most recommended source for portion is Companies Ordinance 1984. The basic

problems faced by the students is that the Companies Ordinance 1984 is sometimes too difficult tounderstand or too lengthy to digest & revise at final prep for the ICAP Exam.

For these reasons there arise needs to have some comprehensive and easy notes for this subject that

shall be serving both purposes

Completeness of Companies Ordinance 1984

Smartness and easiness of the notes book

For this purpose after the continues efforts of 2 years, We are being able to develop these notes as being

quick revision summaries of Companies Ordinance 1984 covering each and every section, sub-section,

clauses, sub-clauses, provisio and explanations. The notes contain all sections presented in bullets form

making it easy to remember and cram the points (just like ICAP examiner wants). Most Importantly all thesections are cross referenced by relevant Rules and SECPs circulars for practical implication

being required by ICAP examiner.

How To use:

It is strongly recommended that first of all you should thoroughly read from the Companies

Ordinance. Then you may either consult these notes as guideline for preparation of your own notes or

you may select these notes for your revision, Its totally upto you. These notes are not meant for firstsource and does not contain legal language. (These are for revision purposes)

We have tried to ensure completeness in these notes and have made amendments on the basis of

feedback from our students of corporate laws in last 3 sessions. However human error is expected in

these notes, so if you find anything missing or some spell / logical mistakes in these notes please mail us

about such errors by referring to the section number at our mail [email protected] .

In most cases fines & penalties are not incorporated in these notes. Moreover sub-sections that were

transitional and relevant only for 6 month after coming Companies Ordinance 1984 in force are skipped.

I am especially thankful to my colleagues for effective coordination in making of these notes

Hope these notes could serve you.

May ALLAH bless all of you with success in every exam of both lives.

Please also remember us in your prayers

Atif Abidi

www.canotes.net

September 6, 2012

For notes & other study

material for ICAP subjects

www.canotes.net
mailto:[email protected]:[email protected]://www.canotes.net/http://www.canotes.net/http://www.canotes.net/http://www.canotes.net/http://www.canotes.net/http://www.canotes.net/http://www.canotes.net/mailto:[email protected]


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Talib e Doa : Atif Abidi - 1 - Module D (Quick Revision) Notes

Sec Section Title Quick Revision of the Section

PRELIMINARY

1 Short title, extent andcommencement

- Name: Companies Ordinance 1984- Extends to Whole Pakistan

2 Definitions

3 Meaning of subsidiary and holdingcompany

One Co is subsidiary of other Co, if that other Co Directly/indirectly controls or holds >50% of its voting securities Has power to elect and appoint >50% of its directors; or Is holding of its holding Co

(50% holding condition not applicable to CDC)

4 Ordinance not to apply to certaincorporations

Trading corporation owned/controlled by Province (business only within that Province) Co-operative society University.

5 Application of ordinance to non-trading companies with purelyprovincial objects

Powers conferred by this Ordinance on FG or SECP shall, in relation to companies which are nottrading corporations (confined to single Province), be the powers of the Provincial Government.

6 Ordinance to overridememorandum, articles, etc.

Hierarchical series: Ord.>MOA>AOA>Agreement>Resolution.

JURISDICTION OF COURTS

7 Jurisdiction of courts -High Court having Jurisdiction over place of registered office-FG may empower any civil court to exercise powers-For w/up place which was reg. office of Co for longest duration during preceding 6months.

Nothing in this section shall invalidate proceeding taken in Court other than High Court or civil court

8 Constitution of company benches One or more by company benches constituted by Chief Justice of High Court.

9 Procedure of the court - Day to day hearing (As expeditiously as possible)- Final judgment not later than 90 days from petition- Adjourned not for > 14 days at one time or > 30 days in total.

10 Appeals against court orders -

Appeal to Supreme Court- If Co ordered to be wound up has Capital < 1 Million; Appeal shall lie only if supreme

court grants leave to appeal (in other cases no approval required).

- Judgment within 90 days of appeal.

SECURITIES AND EXCHANGE SECP OF PAKISTAN

11 Deleted

12 Powers and functions of the SECP - Such Functions as conferred by this ordinance- FG may authorize SECP to exercise some of its powers (with limitations/conditions)

13 Reference by federal government orSECP to the court

- FG of SECP may refer to court for any matter/question regarding affairs of Co- Court may make just & Equitable order on such reference

INCORPORATION OF COMPANIES AND MATTERS INCIDENTAL THERETO

14 Obligation to register certainassociations, partnerships, etc, ascompanies

- No association/partnership/company of >20 persons shall be formed for carrying on anybusiness without registration as Co under Ordinance.

- All Liable person -----Fine = 5000 + personally liable for all liabilities incurred

Exceptions

any society, body or association, other than a partnership, formed or incorporatedunder any other Pakistan law; or

a joint family carrying on joint family business; or a partnership of two or more joint families where the total number of members of such

families, excluding the minor members, does not exceed twenty; or

a partnership formed to carry on practice as lawyers, accountants or any otherprofession where practice as limited liability Co not permitted under relevant laws /regulations


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MEMORANDUM OF ASSOCIATION

15 Mode of forming a company - Subscribe to MOA & comply with requirements.- Min Members (Public = 3, Private = 2, SMC = 1)- May be Limited by shares, guarantee or unlimited.

16 Memorandum of company limited byshares

Contents of MOA

Name of Co with Last word ("limited" for public & "(Private) Limited" for private) Reg.Office (Province/part of Pakistan not forming part of Province)

Objects of Co and territories to which they extend (except in the case of a trading Co.) Liability of the members is limited; and Amount of share capital and division into shares of a fixed amount

-No subscriber of the memorandum shall take less than one share; and-Each subscriber shall write opposite to his name number of shares he takes.

Single Member Companies Rules 2003Single Member Companies should have last words (SMCPrivate) Limited

17 Memorandum of company limited byguarantee

Contents of MOA

Name of Co with Last word "(Guarentee) Limited

Reg.Office (Province/part of Pakistan not forming part of Province) Objects of Co and territories to which they extend (except in the case of a trading Co.) Liability of the members is limited; and Amount each member undertake to contribute in winding up (not > specific amount)

Additional Contents (if Co also has a share capital) Amount of share capital and division into shares of a fixed amount No subscriber of the memorandum shall take less than one share; and Each subscriber shall write opposite to his name number of shares he takes.

18 Memorandum of unlimited company Contents of MOA

Name of Co Reg.Office (Province/part of Pakistan not forming part of Province) objects of Co and territories to which they extend (except in the case of a trading Co.)

If Co has share capital-No subscriber of the memorandum shall take less than one share; and-Each subscriber shall write opposite to his name number of shares he takes.

19 Printing, signature, etc. of

memorandum

Printed, divided into paragraph numbered consecutively, signed by subscribers, dated

(Deemed power to borrow and issue non interest bearing securities to financial institutions)>In addition to the general particulars to be added on signing MOA a subscriber shall specify his NIC number or hispassport number in the case of foreign national Provided that in case of a person other than a natural person, theaddress of its registered office or principal office shall be specified and the authorized representative signing thedocuments shall also add his particulars as stated in this rule

20 Restriction on alteration ofmemorandum

Cannot be altered, except to the cases, mode & extent provided in Ord.

21 Alteration of Memorandum ** By special resolution alter the registered office or objects clause to enable it to:

Carry on its business more economically/efficiently Attain its main purpose by new or improved means Enlarge or change the local area of its operations Carry on some business, not being a business specified in its MOA, in addition to existing Restrict or abandon any of the objects specified in the MOA

Sell or dispose of the whole or any part of the undertaking of Co Amalgamate with any other company or body of persons.

** Confirmation by the SECP on petition required:

(No confirmation required if moving from Punjab to Islamabad Capital Territory or vice

verca)

** Before confirming SECP must be satisfied that

Sufficient notice given to every holder of debentures & persons whose interest will beaffected

Consent of Every creditor, entitled to object (and signifies his objection in mannerdirected by SECP) has been obtained or his debt or claim has been discharged or secured

>Application for confirmation of alteration be submitted to SECP by a responsible officer not later than 60 days from dateof special resolution. Application shall contain following information correct as on the day immediately preceding date ofspecial resolution and signed by a responsible officer


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Name and address of company;

Number and date of incorporation; Subscribed and paid-up capital; Redeemable capital; Business actually being carried on and the clause in the memorandum justifying it Reasons for the proposed alteration

Following documents correct as on day immediately preceding date of special resolution and certified by responsibleofficer shall be submitted with application

A copy of memorandum and the articles; A copy of special resolution; Minutes of meeting at which special resolution was adopted; Particulars of dissenting shareholders or creditors together with their objections;

A copy of the latest audited balance sheet; Statement in comparative form showing existing provisions of memorandum as are proposed to be altered andthe provisions as would appear after the proposed alterations have been made, indicating the reason forchange

Pattern of holding of its shares in Form 34; Names and addresses of each of its creditors to whom an amount exceeding 50,000 rupees is due with the

amount mentioned against each along with their consent to alteration; and Names and addresses of the persons likely to be affected along with their consent to the alteration

22 Power of SECP when confirmingalteration

Either wholly or in part, on such terms & conditions deemed appropriate by SECP.

23 Exercise of discretion by SECP SECP may adjourn the proceedings of alteration so that an arrangement may be made for thepurchase of the interests of dissident members.

(No part of the capital of Co may be expended in such purchase.)

24 Procedure on confirmation of thealteration

Certified copy of order of SECP + altered MOA filed with registrar for registrationWithin 90 days of passing of order by SECP.

The registrar shall register and shall certify the registration under his hand.Certificate shall be conclusive evidence that all requirements compliedExtension (in 90 days) may be granted by SECP.

25 Effect of failure to register within90 days

-Alteration become null & void if order of SECP not filed within 90 days (or extended time).-Application for revival order may be filed within further 90days.

ARTICLES OF ASSOCIATION

26 Registration of Articles Ltd. By shares may adopt Table A; Mandatory for others to register AOA with MOA For Guarantee Ltd. Or Unlimited Co AOA shall state:

If have share capital : the amount of share capital at time of registration If not having share capital : number of members at time of registration

List & enumerate voting & other rights attached to different classes of shares andsecurities issued or to be issued by the Co.

27 Printing, signature, etc., of articles Printed, divided into paragraph numbered consecutively, signed by subscribers and dated

>In addition to the general particulars to be added on signing MOA a subscriber shall specify his NIC number or hispassport number in the case of foreign national Provided that in case of a person other than a natural person, theaddress of its registered office or principal office shall be specified and the authorized representative signing thedocuments shall also add his particulars as stated in this rule

28 Alteration of articles Co by special resolution alter AOA (as valid as originally contained in AOA) If alteration affects the rights/liabilities of members / class of members, it shall be

carried out only by approval of 3/4th Majority of those.

FORMS OF MEMORANDUM AND ARTICLES

29 Forms of memorandum and articles Company Type First Schedule

-

Co Ltd by Shares AOA Table A-Co Ltd by Shares MOA Table B-Co Ltd by Guarentee (Not having Sh.Cap) - MOA+AOA Table C-Co Ltd by Guarentee (Having Sh.Cap) - MOA+AOA Table D-Unlimited Co - MOA+AOA Table E

GENERAL PROVISIONS WITH RESPECT TO REGISTRATION OF MEMORANDUM AND ARTICLES

30 Registration of memorandum andarticles

-MOA & AOA+ Declaration of compliance with req. of ordinance filed with registrar.-Registrar if satisfied may register the MOA & AOA-If registrar refused to register; subscribers shall supply deficiency or appeal within 30days to.

Registrar; If refusal passed by Additional/Joint/Deputy/Assistant Registrar SECP; If refusal passed by Registrar; SECP decision shall be final & not be challenged


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Sec Section Title Quick Revision of the Section>

MOA and AOA filed for registration to registrar, shall be properly stamped as required by Stamp Act, 1899, and shallbe accompanied by 3 copies duly subscribed and witnessed along with specified declarationDeclaration shall be made in Form 1 by a person engaged in formation of the company who is

1. An advocate, entitled to appear before any High Court in Pakistan or the Supreme Court; or2. A member of the ICAP or the ICMA practicing in Pakistan;3. A person named in the articles as a director or other officer of the company.

Registrar may require any person making declaration or is a promoter or director of proposed Co or is a witness tosignatures of subscribers to memorandum to furnish such information, clarification or document as deem necessary.

31 Effect of memorandum and articles -On registration Bind the Co. & members just as it is signed by each member-All money payable by any member to Co under MOA/AOA shall be debt due from him to Co.

32 Effect of registration - The registrar shall certify the incorporation of a company.- From the date of incorporation subscribers of AOA become members of Co- Company shall start by name contained in MOA as separate legal person.

33 Conclusiveness of Certificate ofIncorporation

Evidence of compliance with all requirements of Co.Ord 1984 in respect of registration.

This should not be deemed permission to carry out any business (mentioned in MOA) where further permission,license etc of relevant public authority are required. Co must take permission from relevant authority.

34 Effect of alteration in memorandumor articles

Members are not bound by the alteration which increases their liability or require them tosubscribe for more shares unless he agrees in writing.

35 Copies of memorandum and articlesto be given to members.

Within 14 days of request on payment of prescribed amount.

36 Alteration of memorandum orarticles to be noted in every copy

Every copy of MOA & AOA issued after alteration shall confirm with altered MOA & AOA.

PROVISIONS WITH RESPECT TO NAMES OF COMPANIES

37 Prohibition of certain names -No company shall be registered by a name which is Inappropriate or deceptive (in the opinion of the SECP) see guideline on page 7 Designed to exploit or offend the religious susceptibilities of the people. Identical with name of a company already registered Nearly resembling that name of a company already registered

(except where Existing Co is in course of being dissolved & signifies its consent) -Prior approval of SECP required if name suggests

The patronage of any, past or present, Pakistani or foreign, Head of State

Any connection with the Federal Government or a Provincial Government or anydepartment or authority of any such Government;

Any connection with any corporation set up by or under any Federal or Provincial law The patronage or any connection with foreign Government/international organisation

-Decision of the SECP regarding validity of name shall be final

>Promoters of Co desirous of having Co registered, or a responsible officer of company intending to change itsname, may make an application to registrar concerned asking for information as to whether proposed name is or isnot available for adoption, and registrar shall, furnish information within 2 days of receipt of application.

38 Rectification of name of a company If wrong name selected by Co, it may change name with the approval of registrar &shall if registrar directs within 30days of direction.

Registrar shall, before issuing direction for change of name, afford Co an opportunityto make representation against proposed direction

Registrar cannot bound Co to change name after expiration of 3 yrs from registration

39 Change of name by a company Special Resolution + Approval of registrar.- No approval required if addition or deletion of word (Private)

40 Registration of change of name andeffect thereof

Registrar shall issue a new certificate of incorporation altered to meet circumstances Continue to mention former name along with its new name on the outside every

business place and in all documents (for 1 year from date of issue of new certificate)

Change of name shall not affect the rights & obligations of Co. Legal proceeding may be continued against the Co in new name

(Addition or deletion of word (Private)not deemed as a change of name)

41 Alteration of names ofcommencement of ordinance andchange of status of company

Every existing company deemed to include, before last word "Limited", "(Private)" forprivate company and the "(Guarantee)" in the case of a company limited by guarantee

Conversion of a public company into private company registrar shall add "(Private)" Conversion of a private company into public company registrar shall delete "(Private)"


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ASSOCIATIONS NOT FOR PROFIT

42 Power to dispense with Limitedinthe name of charitable and othercompanies

If an association formed for promoting commerce, art, science, religion, sports, social services,charity or any other useful object, and applies / intends to apply its profits/income inpromoting its objects, and to prohibit the payment of any dividend to its members,

SECP may grant license & direct its registration as Co with limited liability, without addition of words "Limited", "(Private) Limited" or "(Guarantee) Limited", to its name.

License granted on such conditions and subject to such regulations as SECP thinks fit

Association enjoy all privileges of limited Co and be subject to all its obligations, except using the words "Limited", "(Private) Limited" or "(Guarantee) Limited", License may at any time be revoked by SECP; the registrar shall again add the above

words to name and association cease to enjoy exemptions & privileges

Before revocation SECP give association an opportunity of submitting representation.

>Promoters or members of such association shall make an application to SECP in writing duly singed by them or byany person authorized by association accompanied by

3 copies of draft memorandum and articles of proposed association;

A list of promoters of the association with their occupations and addresses; Declaration by a person specified in rule 4 (sec 30) that he has scrutinized application and

accompanying documents, and is satisfied about compliance with provisions of ordinance & fulfillmentof conditions

Names of companies, associations and other institutions in which promoters of proposed associationhold any office stating the office held in each case;

If association is already in existence, a copy of audited BS, I&E a/c and annual report on working ofassociation for the financial year immediately preceding the date of application

Estimate of future annual income & expenditure of proposed Co, specifying sources of income &objects

Brief statement of work already done by the association or proposed to be done after registration.

Besides others the following conditions shall also be fulfilled and shall be included in MOAThe association shall be formed as a public company;Payment of remuneration for services or otherwise to its members, whether holding an office in thecompany or not, shall be prohibited;No change in the MOA and the AOA shall be made except with the prior approval of SECPThe limit of liability of its members shall not be less than a reasonable amountPatronage of any government or authority, express or implied, shall not be claimed unless suchgovernment or authority has signified its consent thereto in writing.

Only one of the aforementioned objects allowed (Cannot take license for multiple objects)

There must be atleast 3 subscribers/members of the association Promoters shall give undertaking that they have sufficient skills & expertise and they shall contribute

atleast Rs.500,000 as startup donation

Year end shall be June 30.

No investment in associated companies (except approval of SECP) License valid for 5 years, and is renewable for further 5 years on application In winding up surplus assets not be distributed in existing members but shall be transferred to another

such association u/s 42 to be decided by members by Special Resolution

COMPANIES LIMITED BY GUARANTEE

43 Provisions as to companies limitedby guarantee

Any provision in MOA/AOA/Resolution of Co Ltd by Guarantee (not having Sh.Cap)giving any non member right to participate in the divisible profits of Co shall be void.

Every provision in MOA/AOA/Resolution of Co Ltd by Guarantee purporting to divideundertaking of Co into shares/interests shall be treated as a provision for sharecapital

PROVISIONS RELATING TO CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY AND

VICE VERSA AND OTHER MATTERS

44 Conversion of public company intoprivate company

Prior approval of SECP in writing, and subject to such conditions as may be imposed by SECP

>Where the alteration of articles has effect of converting a public Co into a private Co, the Co shall, not later than60 days from date on which special resolution was passed, make application in Form 2 to SECP for its approval.

45 Prospectus or statement in lieu ofprospectus to be filed by privatecompany ceasing to be a privatecompany

- Within 14 days of such change File Prospectus or SILOP to registrar.- Prospectus or SILOP shall comply with prescribed conditions (Part V of Co.Ord 1984)

46 Consequences of default incomplying conditions constituting acompany a private company

Cessation of privileges & exemptions availed by a Pvt. Co. May be relived of the consequences of such non compliance on an application made to

SECP by Co or interested persons


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CARRYING ON BUSINESS WITH LESS THAN THE LEGAL MINIMUM OF MEMBERS

47 Liability for carrying on businesswith less than three or, in case of a private company, two members

Co carries on business > 6 months with less than minimum members, every member of Co(knowing the fact) during that time shall be severally liable for payment of the whole debts ofthe Co contracted during that time

SERVICE AND AUTHENTICATION OF DOCUMENTS

48 Service of documents on company Sending it to Co / officer at Reg. Office of Co by Post under a certificate of posting or Registered post, or Leaving it at Reg. Office of Co

49 Service of documents on registrar Sending it to Registrar at his office by Registered post, Delivering it to him, Leaving it for him at his office, against an acknowledgment of receipt.

>

Rule 8: An application or any document submitted to the SECP or registrar shall be deemed to have been receivedor delivered to it or him on the day on which it is received by its or his office.

Rule 30: Every application made to the registrar, SECP or Federal Government shall be

Duly singed and verified by an affidavit by applicant indicating complete name and address and, in the caseof a company, signed and verified by an affidavit by a responsible officer of the company neatly and legiblywritten, typed or printed, setting out precisely the facts, grounds and claims or relief applied for in seriallynumbered paragraphs specifying relevant provisions of Ordinance under which action or relief is applied for;

Accompanied by documents referred to in application or relied upon and, in the case of an appeal againstany order or decision, by a certified copy of such order or decision;

Accompanied by 1 spare copy, duly signed, dated and verified and accompanied by copies of documents

Accompanied by the original bank challan or draft for the fee paid for the application.

Rule 32. Copies of applications to various authorities, etc., to be forwarded to others.-A copy of every application together with a copy of each of the documents enclosed therewith shall be forwardedby the applicant and stating the same fact therein

-7 If application made to the Federal Government, forward to SECP and registrar concerned;-7 If application made to the SECP or the registrar who is head of the organisation for the registration of

companies in Pakistan, forward to the registrar concerned;

Rule 33. Mode of furnishing of returns to the SECP.-Any person required by or under any provision of the Ordinance or these rules to furnish any document

statement, return or report to the SECP shall deliver it, either in person or through an agent, against receipt, tothe SECP or send it to the SECP by registered post at its Headquarters at Islamabad.

50 Service of notice on members, etc. Personally Sending it by post to him to his registered address or, If has no registered address in Pak, to address, if any, within Pakistan supplied by him

- Where a notice is sent by post, notice deemed to have been effected at the time at which the letter would be delivered in he ordinary course of post.

- If a member has no registered address in Pakistan, nor supplied any other address; advertisement in newspaper circulating in province of registered office deemed to benotice duly given to him on the day on which the advertisement appears

- For listed Co, also publish notice in 1 English + 1 Urdu newspaper having circulation inprovince of stock exchange

- Notice to joint-holders of share may be given to joint-holder named first in the register- Notice in case of death/insolvency given to legal representative/assignee of insolvent

-

Notice of every general meeting shall be given to every member, legal representative (incase of death) or assignee (in case of insolvent) and auditors.

Any report, notice, statement, circular or other document required under the Ordinance or any rule to becirculated, transmitted or forwarded to the members debenture-holders or creditors shall be sent, transmitted orforwarded by post under certificate of posting or through a courier service

Except it is delivered to addressee personally against acknowledgement or sent by registered post

Notice shall be published in Urdu language in Urdu newspaper and in English language in English newspaper

Companies shall select newspaper having sufficient circulation in complete province (not in 1 or 2 cities) For Co listed on more than 1 stock exchange; Shall be published in newspaper having countrywide circulation Shall be published in national Morning newspaper at appropriate pages distinctively and conspicuously

visible (not in local newspaper at a place like classified etc)


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51 Authentication of documents andproceedings

Document/proceeding requiring authentication by Co- May be signed by CE or a director, secretary or other authorised officer of Co; and- Need not be under its common seal

>

Rule 27. Translation of documents other than companies established outside Pakistan.If any document or portion of it, required to be filed /registered with Registrar, is not in English or Urdu language,translation of that document or portion in English or Urdu language be authenticated by affidavit of personhaving, in registrarsopinion, an adequate knowledge of language of original and transaltion, shall be attached.

Rule 28. Signing and authentication of applications, documents, etc.

All applications and documents filed with or sent to the Federal Government, SECP or registrar, by or on behalf ofCo, shall be signed and verified by a responsible officer or, in the case of any individual entitled to submit anapplication, by such individual, and the Federal Government, SECP or the registrar, may require suchdocumentary proof with respect to the status, designation or entitlement of the person or individual making orauthenticating application as it or he may deem necessary.

>

Words Allowed for

Association Association u/s 42 of Co.Ordinance or established as Trade Organization under Trade Organizations Ordinance, 2007.

Benevolent/ Foundation Association u/s 42 of Co.Ordinance

Society If proper justification is provided

Fund NBFC or association u/s 42 of Co.Ordinance.

Council Association u/s 42 of Co.Ordinance, Sports Association and Professional Bodies.

Chamber of Commerce Entities formed as Trade Bodies under license under Trade Organization Ordinance, 2007

Trust REITs to be established on grant of license by SECP.

Assurance/ Assurer/ Insurance/

Insurer/ Re-Assurance/ Re-Assurer/

Re-Insurance/ Re-Insurer

Companies involved in Insurance, Assurance, Re-insurance and Reassurance business.(Prior permission of SECP

required).

Board companies desirous to engage in the business of Paper &/or Board or to public sector companies.

Bahria/ Askari/ Fouji/ Fazaiya/

Cadet

companies to be established by the relevant agency.

Banks/Banking Company On basis of permission from SBP u/s 8 of Banking Companies Ordinance, 1962 and section 5(1) of Microfinance

Institutions Ordinance, 2001.

Charter/Chartered Companies having charter from the sovereign authority of the Federation and the Province

Exchange/Bourse Stock Exchange, Commodity Exchange and Exchange Companies subject to NOC from relevant authority.

Familiar Trade Names if NOC of familiar trade name user is provided or proper documentary evidence of ownership/use of trade name isfurnished by the applicant

Famous/ Distinct Personalities if proper justification and approval of relevant authority is provided.

Federation Sports Federations licensed under section 42 of Ordinance or trade bodies under Trade Organizations Ordinance, 2007.

Federal if the proposed company has a connection or any patronage with Federal Government. (With approval of SECP)

Group If use of this word implies several companies under single corporate ownership and applicants have to provide evidence

of subsidiary/associate relationship with two or more other Pakistani Companies

Holding company which establishes that it qualifies to be a holding company as defined in Section 3 of the Ordinance i.e. thecompany has object clause showing its intention to act as holding company after incorporation

Institution Public sector companies

Investment NBFC, REITs and brokerage houses or any public sector financial institution or investment company.

Investment Finance, Investment

Advisory, Leasing, Asset

Management, Housing Finance

NBFC

Name of Company containing

country name or nationality other

than Pakistan

Not allowed unless sufficient justification is provided.

Name of Company containing name

of two countries i.e. Pakistan/Pak

and any other foreign company

Companies where documentary evidence is provided in support of the fact that the company is a Joint Venture of twoGovernments or companies of two countries.

New/Modern/The/Al Allowed, however these expressions will not be acceptable if used to make proposed company as distinctive from

already existing companies.

State Companies formed by the Federal Government

UNO, World BANK, IMF, Red Cross,

Red Crescent, Authority/ Register/

Registered/ Co-operative/ Bureau/

Division

Not Allowed

University University Management Company for the management of University in terms of guidelines of HEC


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PROSPECTUS

52 Prospectus to be dated Date of prospectus = Date of its publication. (unless the contrary is proved)

53 Matters to be stated and reports tobe set out in prospectus

- Every prospectus issued by or on behalf of Co or any person who has been engaged orinterested in the formation of Co Shall state the matters specified in Second Scheduleand set out the reports specified therein

- Sufficient number of copies of prospectus shall be made available with Registered office of Co

Stock exchange at which Co is listed/proposed to be listed Bankers to the issue

- Prospectus in its full text or in prescribed abridged form shall be published at least in oneUrdu and one English daily newspaper

- Prospectus shall not be issued or an advertisement be published in newspaper less than 7 days or more than 30 days before the subscription list is due to open

[SECP may for special reasons allow more than thirty days]- Any condition requiring waiver to any requirement of this section shall be void- Form of application shall be accompanied by a prospectus

Not apply if form of application was issued in connection with underwriting agreement or In relation to shares or debentures not offered to the public.

- Director/other person responsible for prospectus shall not be liable for non-compliance if As regards any matter not disclosed, he proves that he had no knowledge hereof; or He proves that contravention arose from an honest mistake of fact on his part; or Contravention was immaterial or in opinion of registrar reasonably to be excused

- Director/other person shall not be liable for failure to include in prospectus, interest of

directors/promoters in Cos promotion or properties; unless it is proved that he hadknowledge of the matters not disclosed.

- This section shall not apply to the issue To existing members or debenture-holders of Co of a prospectus/application form

(whether right to renunciation is available or not); or Of a prospectus or application form uniform with shares or debentures previously

issued and quoted on a stock exchange

54 Expert to be unconnected with theformation or management ofcompany

Prospectus shall not include a statement (purporting to be made by an expert), unless expert is/has not been engaged/interested in formation/promotion/in management of Co.

55 Expertsconsent to issueprospectus containing statement byhim

A prospectus including statement by expert shall not be issued unless- Expert has given his written consent to issue and has not withdrawn such consent before

delivery of a copy of prospectus for registration; and

-

Statement of the fact (given consent & not withdrawn consent) appears in prospectus.

56 Penalty and interpretation In sections 54 & 55, "EXPERT" includes an Engineer, Valuer, Accountant and every other personwhose profession gives authority to a statement made by him.

57 Approval, issue and registration ofprospectus

- Listed Co and Co proposes to be listed shall not issue, circulate or publish any prospectusor other document offering for subscription/sale unless approval of SECP been obtained60 days before the date of issue.

- SECP may, while according approval, impose such condition as it may deem necessary.- Prospectus shall not be issued unless on or before date of its publication, Co ha

delivered to registrar a copy signed by every person named as a director/proposeddirector and have included in

Any consent to issue of prospectus from any expert (if his statement included); and In the case of a prospectus issued generally, also

1) Copy of every contract appointing or fixing remuneration of CE/managing

agent/secretary;2) Copy of other material contracts (not being contract in ordinary course ofbusiness or contract entered into > 2 years before date of prospectus)

3) Where persons making any report under prospectus, a written statementsigned by those setting adjustments on figures of those reports + reasons.

- Every prospectus shall, on the face of it State that a copy has been delivered to registrar Specify any documents required to be included to the copy so delivered or refer to

statements included in prospectus which specify those documents; and

State that application has been made/proposed to be made for listing(if applicable)- Registrar shall not register prospectus unless

Requirements of sections 52-57 have been complied with; and It is accompanied by consent in writing of person (if any), named as auditor, legal

adviser, attorney, solicitor, banker or member of SE to act in that capacity.


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Sec Section Title Quick Revision of the Section>An application for approval of prospectus of a listed company or of a company which proposes to make anapplication to a stock exchange for the listing of its securities, submitted to the SECP, shall be accompanied by 3copies of the prospectus along with other required certificates documents, and an affidavit affirming that all theinformation in the prospectus and other documents filed is true and correct.

58 Terms of contract mentioned inprospectus or statement in lieu ofprospectus not to be varied

Except subject to approval / authority given by Co in general meeting.

59 Civil liability for misstatements in

prospectus

Person liable for misstatements in prospectus

-

Following persons shall be liable jointly & severely to pay compensation to every personwho subscribes for or purchases any share/debentures on faith of prospectus for any lossor damage he may have sustained by reason of any untrue statement included therein

Directors of Co at time of issue of prospectus; Every person authorising himself to be named and is named in prospectus either as a

director, or having agreed to become director(immediately/after some time)

Promoter of Co (who was a party to preparation of prospectus or a portion thereof) Auditor/legal adviser/atorney/solicitor/banker/member of SE to act in that capacity

- Where consent of any person is required to issue of prospectus and he has given thatconsent, he shall not be treated as person authorising the issue of prospectus

(Except for any untrue statement purporting to be made by him as an expert)

Waiver of Liability

No person shall be liable if he proves that- After agreed to become a director, he withdrew his consent before issue of prospectus

and it was issued without his authority/consent- Prospectus was issued without his knowledge or consent, and on becoming aware of its

issue, he forthwith gave reasonable public notice of the fact- After the issue of prospectus and before allotment, he (on becoming aware of any untrue

statement) withdrew his consent and gave reasonable public notice of fact + reason- As regard every untrue statement purporting to be a statement

Not be made on authority of an expert or of a public official document/statement, he believe, and did up to time of allotment believe that statement was true; and

By an expert, he believe, and did up to the time of issue of prospectus believe, that person making statement was competent to make it and that person had givenconsent to issue of prospectus and had not withdrawn consent before delivery toregistrar

By an official person, it was a correct and fair representation of the statement, or a correct copy of, or a correct and fair extract from, the document:

If an Expert has authorised issue of prospectus; He shall not be liable in respect of an untruestatement purporting to be made by him as an expert, if he proves that

After giving his consent, he withdrew it in writing before delivery to registrar; After delivery to registrar and before allotment, he (becoming aware of any untrue

statement) withdrew his consent & gave reasonable public notice of fact + reason He was competent to make statement and had reasonable ground to believe, and

did up to the time of allotment believe, that the statement was true.

Directors (excluding those without whose knowledge or consent the prospectus was issued),and every other person who authorised the issue thereof, shall be liable to indemnify againstall damages, costs and expenses to which he may be made liable or in defending himselfagainst any suit or legal proceeding brought against him (due to his name in prospectus)

- Any person: Where prospectus specifies him as director and he has not consented tobecome a director, or withdrawn his consent before the issue of prospectus, and has notauthorised or consented to issue thereof; or

- Expert: Where his consent is required for issue of prospectus and he either has not given

that consent or has withdrawn it before the issue of prospectus;Expert shall not be deemed to have authorised the issue of a prospectus by reason only of his having

given the consent to be included in a statement purporting to be made by him as an expert.

60 Criminal liability for misstatementsin prospectus

For untrue statement in prospectus, everyone who signed or *authorised issue of prospectus bepunishable (Unless proves that statement was immaterial or he believes statement to be true)

- Imprisonment for a term which may extend to 2 years, or- Fine which may extend to 10,000, or- Both

**Expert, auditor, legal adviser, attorney, solicitor, banker or broker shall not be deemed to have authorised the issue of a prospectus by reason only of giving consent

61 Document containing offer ofshares or debentures for sale to be

- Where Co allots/agrees to allot with a view to all or any being offered for sale to public,any document offering for sale to public shall be deemed to be a prospectus issued by Co.


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Sec Section Title Quick Revision of the Sectiondeemed prospectus All enactments & rules for contents, filing & registration of prospectus shall apply

Provisions for misstatements/omissions in prospectus shall also apply. Person also required to file authorization with registrar (like directors u/s 57). Where offering person is a Co; it shall be signed by 2 directors (or authorsied agents)

Where person is a Firm; shall be signed by at least 50% partners (or authorised agent )- It shall be evidence that allotment was made with a view to being offered for sale to

public, if it is shown that

Offer for sale to public was made within 1 year of allotment/agreement to allot; At the date when offer was made; whole of the consideration to be received by Co

in respect of shares or debentures had not been received by it; or Offer was made in pursuance of an understanding to which Co was a party or a

condition imposed by any authority in relation to position/business/privileges of Co.

- Prospectus shall state (in addition to matters required by sec 53) Net amount of consideration received/to be received by Co; and Place and time at which contract of allotment may be inspected.

62 Offer of shares or debentures forsale by certain persons

- Person having >10% shares/debentures shall not offer for sale to public except SECPsapproval-Any document offering for sale to public shall be deemed to be a prospectus issued by Co.

Where offering person is a Co; it shall be signed by 2 directors (or authorsied agents)

Where person is a Firm; shall be signed by at least 50% partners (or authorised agent ) All enactments & rules for contents, filing & registration of prospectus shall apply Provisions for misstatements/omissions in prospectus shall also apply. Person also required to file authorization with registrar (like directors u/s 57).

A notice, circular, advertisement or other offering document issued by scheduled bank or financial

institution shall not be deemed to be a prospectus/offer for sale u/s 61 & 62

Person holding >10% of shares of Co may offer such shares for sale to public subject to following conditions:

Size of capital be offered to the public shall be not less than lesser of

'Y 100,000,000 or

'Y 25% of the capital

No premium shall be charged unless the company has profitable operations of 1 year.

In case the premium is charged other formalities regarding premium Offer shall be under written

Under writers shall give justification in due diligence report. Full justification of premium shall also be disclosed in offer for sale. Due diligence report forming part of material contracts.

62A Issue of securities outside Pakistan. Co cannot issue any security outside Pakistan except with prior approval of SECP

63 Interpretation of provisionsrelating to prospectus

Statement included in prospectus or any report/memorandum appearing on face or reference- Untrue Statement = Misleading Statement (In form & context)

- Untrue Statement = Omission (Where omission misleads the user)

64 Newspaper advertisement ofprospectus

Newspaper publication may omit contents of MOA/Signatories/No of shares subscribed

65 Construction of references tooffering shares or debentures tothe public etc.

- In Ordinance/AOA Public includes any section of public (for such offer)- "Section of public" includes existing members/debenture-holders or clients of issuer.- Offer/invitation shall not be treated as made to public, if it can properly be regarded

As not being offered to persons other than those receiving offer/invitation; or Otherwise as being domestic concern of persons making&receiving offer/invitation

- A provision in CosAOA prohibiting invitations to public shall not be taken as prohibitingsuch invitation to members/debenture-holders

- References in this section are applicable to Private Cos

66 Penalty for fraudulently inducingpersons to invest money

If knowingly/recklessly makes statement/promise/forecast that is false/deceptive/misleading/ dishonest concealment of material facts, induces another person to enter into

- Agreement for acquiring/disposing of/subscribing for/underwriting shares or debentures

-

Agreement for the purpose of securing profit to any of parties from yield of shares ordebentures, or by reference to fluctuations in value of shares or debentures;

(Imprisonment up to 3 years or fine up to 20,000 or both)

ALLOTMENT

67 Application for, and allotment of,shares and debentures

- Application shall not be made of less than nominal amount as SECP may from time to time specify (generally/particularly).

- SECP may specify ApplicationForm for subscription- Form shall form part of prospectus.- All certificates, statements & declarations made by applicant shall be binding on him.- Application in pursuance of a prospectus shall be irrevocable.


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Sec Section Title Quick Revision of the Section68 Restriction as to allotment For first allotment only

- Allotment shall not be made unless minimum subscription (as defined in prospectus) hasbeen paid to & received in cash by Co (shall be regarded exclusively otherwise than cash)

- All moneys received shall be deposited in separate bank account in scheduled bank untilreturned (due to contravention) or until certificate to commence business is obtained.

Amount payable on application shall be full nominal amount of the share.- If above conditions not been complied with until 40 days after first issue of prospectus

All money received from applicants shall be forthwith repaid without surcharge If money not repaid within 50 days after prospectus, directors shall be jointly &

severally liable for money + surcharge(1.5% per month/part thereof) from 50h day

No liability if he proves that default wasntdue to his misconduct/ negligence- Any condition requiring waiver of compliance with requirements of section shall be void.- For Co which does not issue invitation to public for subscription; no allotment shall be

made unless following minimum subscription been received by Co(other than Pvt Co) Amount (if any) fixed by MOA/AOA and specified in SILOP Whole Share capital that is otherwise than in cash (If no amount fixed & specified)

69 Statement in lieu of prospectus(SILOP)

Co having a share capital- which does not issue a prospectus on or with reference to its formation, or- which has issued such a prospectus but has not proceeded to allot any of sharesShall deliver to registrar a SILOP at least 3 days before first allotment, signed by every personnamed therein as a director or proposed director of Co or by authorised agent, in form andcontaining the particulars set out in 2nd Schedule.- Every SILOP shall have a written statement signed by aforesaid persons, setting out

adjustments mentioned in 2nd schedule and giving the reasons thereof.- For untrue statement in SILOP, everyone who signed or authorised be punishable (Unless

proves that statement was immaterial or he believes statement to be true) Imprisonment for a term which may extend to 2 years, or Fine which may extend to 10,000, or Both

- For statement included in SILOP/report/memorandum appearing on face or reference Untrue Statement = Misleading Statement (In form & context) Untrue Statement = Omission (Where omission misleads the user)

[This section shall not apply to a private company.]

70 Effect of irregular allotment - Allotment in contravention of sec 68 or 69 shall be voidable at instance of applicantwithin 30 days after holding of statutory meeting (Even Co is in course of winding up)

Where Co is not required to hold statutory meeting or where allotment is madeafter statutory meeting, within 30 days after date of allotment

- Defaulting officer shall be liable to compensate Co + Allottee for any loss, damages orcosts sustained by Co or allottee

(Loss, damages or costs cannot be recovered after 2 years from date of allotment)

71 Repayment of money received forshares not allotted

- Co shall take decision of acceptance within 10 days of closure of the subscription lists- Co shall refund money of unaccepted/unsuccessful applications within 10 days of decision- If refund not made within specified time, directors shall be jointly and severally liable to

Repay money; and Surcharge @ 1.5%/month or part thereof from expiration of 15th day;

Fine 5,000 (For continuing offence 100/day after 15th day)- Director not be liable if proves that default was not due to his misconduct or negligence- Any waiver to any requirement of this section shall be void.

72 Allotment of shares and debenturesto be dealt in on stock exchange

- Where prospectus states that application has been or will be made for permission forshares or debentures offered to be dealt in on any stock exchange, Allotment be void if

Permission has not been applied until 7 days after the date of prospectus

Permission has not been granted until 21 days from closure of subscription lists[Stock Exchange may allow further 21 days(maximum) and notify to applicant]

- If permission not applied/granted as aforesaid, directors be jointly & severally liable to

Repay money; and Surcharge @ 1.5%/month or part thereof from expiration of 8th day; Fine 5,000 (For continuing offence 100/day after 8th day)

- Director not be liable if proves that default was not due to his misconduct or negligence- All moneys received shall be deposited in separate bank account in scheduled bank until

returned (due to contravention)

- Any waiver to any requirement of this section shall be void.- Permission shall not be deemed to be refused if it is intimated that the application (yet

not granted) will be given further consideration.

- This section shall also be applicable to Shares or debentures agreed to be taken by an underwriter; and Prospectus offering shares for sale with following modifications

a. Reference to sale shall be substituted for reference to allotment;b. Person by whom offer is made be liable to repay money (not Co); andc. Person by whom offer is made be liable to default (not Co)


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Sec Section Title Quick Revision of the Section73 Return as to allotment Co having share capital shall within 30 days of allotment

- File with registrar a return of the allotment, stating Number of shares Nominal amount of shares comprised in allotment Such particulars (as may be prescribed) of each allottee Amount paid on each share; and

- Shares allotted otherwise than in cash; Produce for inspection & examination of registrar contract in writing constituting

title of allottee to the allotment + any contract of sale, or for services or otherconsideration in respect of which that allotment was made

These contracts shall be duly stamped

File with registrar copies verified in prescribed manner of all such contracts Where contract not reduced to writing, Co shall, within 30 days after allotment

file with registrar prescribed particulars of contract stamped with same stampduty as would have been payable if the contract had been reduced to writing.

File a Return stating No and nominal amount of shares so allotted, amount to betreated as paid-up, and consideration for which they have been allotted

- Bonus Shares File with registrar, Return stating No & amount of such shares and particulars as

may be prescribed of each allottee + copy of resolution authorising bonus issue

- Issue of shares on discount File with registrar, Copy of resolution passed by Co + copy of order of SECP

sanctioning the issue, and where maximum rate of discount exceeds 10%, a copyof SECP order permitting the issue at the higher percentage.

Shares allotted to scheduled bank or a financial institution

-

Section shall apply mutatis mutandis to shares allotted to scheduled bank or a financialinstitution in pursuance of any obligation of Co to issue shares to theseWhere default made by Co in filing Return of allotment, the scheduled bank or financial institutionmay file return of allotment with registrar + such documents as may be specified by SECP, and shalbe entitled to recover from Co amount of any fee properly paid by it to registrar

Registrar may extend the period of filing (if satisfies that 30 days is inadequate)

>Copies of contracts filed with registrar when allotted as paid up otherwise than in cash, shall be verified

By an affidavit of a responsible officer that these are true copies; or

By a certification of the public officer having custody of the original document.

Following are the conditions for valuation of assets representing consideration for shares:

Value of assets shall be determined by consulting valuer registered with Pakistan Engineering Counciland is on the penal of atleast two financial institutions as valuer.

Value must be net of depreciation.

Goodwill and intangible assets shall be excluded from the consideration. A certificate from a practicing CA shall be obtained for compliance of above conditions.

CERTIFICATE OF SHARES AND DEBENTURES

74 Limitation of time for issue ofcertificates

Co shall complete and have ready for delivery the certificates of all shares, debentures, alldebenture stock allotted/transferred and shall give notice of this fact to applicant within

- 90 days after allotment (New Shares)- 45 days after application (Transfer)- 05 days after application (if transfer in name of CDC)

[ Transfer means transfer duly stamped & valid, and does not include transfer as Co entitled to refuse ]

Exceptions to time limit

- Sent by post or delivered to the applicant- Conditions of issue of shares, debentures or debenture stock provide otherwise

Under agreement signed between Government of Pakistan and WTO on financial services; Following requirementsshall have to be followed:

- Prior approval of SBP required for holding 5% ownership- Investments shall only be for trading purposes.

75 Issue of duplicate certificates - Within 45 days from date of application if original is proved to have been lost or destroyed, or having been defaced or mutilated or torn is surrendered to Co.

- Co issue duplicate after making inquiry and on such terms & conditions as may deem fit- Co shall not charge fee exceeding sum prescribed + actual expenses incurred on inquiry.- If Co for any reasonable cause is unable to issue duplicate certificate, it shall notify this

fact + reasons within 30 days of application

-


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TRANSFER OF SHARES AND DEBENTURES

76 Transfer of shares and debentures - Application for transfer may be made either by transferor or transferee- Co shall not register a transfer unless proper instrument of transfer duly stamped and

executed by transferor and transferee has been delivered to Co along with certificate.

- Where transfer deed is lost, destroyed or mutilated before lodgement, Application made by transferee bearing stamp required by instrument of transfer Transferee shall prove to directors that transfer deed lost/destroyed/mutilated

- Co may demand such indemnity as it may think fit before registering the transfer

- Register of transfers of shares & debentures shall be maintained at Reg.office & shall be opento inspection by members & supply copy in manner stated in Sec-150 (members register)

- Section shall apply mutatis mutandis for transmission of shares & debentures.- Public Co may appoint financial institution duly approved by SECP as transfer agent

If shares are in name of beneficial owner; certificates to be destroyed after 6 months of transfer and

transfer deed to be retained for 3 years If shares are not in name of beneficial owner; certificates and transfer deed to be retained for 3 years

(Certificates shall be destroyed in presence of CosChief Executive and auditor; Shall certify same)

77 Directors not to refuse transfer ofshares

- Directors shall not refuse unless transfer deed is defective or invalid- Within 30 days of deposit of instrument of transfer notify defect/invalidity to transferee

(if transferee is CDC: within 5 days)

- Applicant shall be entitled to relodge transfer deed after removal of defect/invalidity.- AOA may impose any limitations & restrictions on this process for Private Co.

78 Notice of refusal to transfer Co shall within 30 days after the date on which instrument of transfer was lodged with Co,send to transferee notice of the refusal + reasons for refusal.

78A Appeal against refusal forregistration of transfer

- Transferor/Transferee/Successor in interest may appeal to SECP against any refusal toregister transfer/transmission or against any failure to send notice of refusal u/s 78

- Appeal to SECP may be preferred within 2 month of receipt of notice of refusal (if notice of refusal given) 2 month of expiry of 30 days u/s 78 (if no notice of refusal given).

SECP Order- SECP shall, give reasonable notice + opportunity to make representation to Co and

Transferor/ Transferee/ Successor in interest- SECP may direct Co to register the transfer or transmission or that it need not be

registered (Co shall give notice of the decision within 15 days of receipt of order)

- Before making order, SECP may require Co to disclose the reasons for refusal.

-

SECP may give such incidental & consequential directions as to payment of costs orotherwise as it deems fit.

79 Transfer to successor-in-interest - Nominee or successor shall made an application duly supported by document evidencingnomination or lawful award of relevant property to him

- Nominee or successor shall be entered as a member- Co may ask for a suitable indemnity before transfer

80 Transfer to nominee of deceasedmember

- A person may at any time after becoming shareholder deposit with Co a nominationspecifying person(s) right to become shareholder in the event of his death

- If shareholder nominates more than 1 person, he shall specify the extent of right of eachnominee (if no of shares are possible of ascertainment in whole numbers)

- Nominee shall on death of shareholder, become entitled, to become shareholder and allrights of original member shall be passed to the nominee

- On receipt of proof of the death of shareholder along with the relevant scripts, saidshares shall be registered in favour of nominee unless such nomination

Was replaced by another nomination deposited by same member before death; or Was expressly cancelled by notice in writing to Co by same member; or Becomes invalid by reason of some contingency specified therein; or Becomes void by death of nominee before the member

- Nominee can only be one of these relatives(spouse, father/mother, brother/sister and son/daughter, including step/adopted child.)

Nomination would not restrict shareholder dealing in ordinary course with such shares before his death.

81 Transfer by a nominee of legalrepresentative

Transfer of shares of debentures by a nominee shall be valid as if he had been a member at thetime of execution of the instrument of transfer.

SECP, DISCOUNT, PREMIUM AND REDEEMABLE PREFERENCES SHARES


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Sec Section Title Quick Revision of the Section82 Power to pay certain SECPs, and

prohibition of payment of otherSECPs, discounts, etc.

- Co may pay SECP to any person in consideration of his subscribing or agreeing tosubscribe, whether absolutely or conditionally, for any shares in or debentures of Co if

SECP is authorised by AOA; Rate of SECP shall not exceed the rate fixed by SECP Rate of SECP shall be disclosed in Prospectus, Statement in lieu of prospectus,

circular or notice whichever applicable No of shares or debentures which persons have agreed for a SECP to subscribe

absolutely is disclosed- No allotment of shares/debentures or related SECP/discount/allowance to any person

subscribing/agreeing to subscribe in contravention of sec 82 & 84.Whether its forming part of purchase money of any property or contract price of any servicesacquired by Co, or money paid out of nominal purchase money or contract price, or otherwise.

- Brokerage on shares shall not in any case exceed 1% of the sale price or shall not morethan such other % as may from time to time be specified by SECP

- A vendor, promoter, or other person who receives payment in shares, debentures ormoney from Co shall have power to apply any part of the shares, debentures or money soreceived in payment of any SECP.

83 Application of premium receivedon issue of shares

- Premium shall be transferred to " share premium account"- Provisions of this Ordinance for reduction of share capital shall apply as if share

premium account werepaid-up share capital of Co

- Share premium account may be applied by Co in writing off the preliminary expenses writing off SECP paid or discount allowed on issue of shares/debentures redemption of any redeemable preference shares or debentures on preminum issuing fully paid bonus shares to members of Co

A Company may issue shares to the public on premium subject to the following conditions:

Company shall have profitable operation record of at least one year. The premium on public offer shall not exceed premium charged on placement (local or foreign)

[Names & addresses of such institutions must be disclosed in prospectus]

Issue be fully underwritten. UnderWriters shall give justification of premium in Due Diligence Report.

The Due Diligence Report shall form the part of material contract. Full justification of the premium shall be disclosed in prospectus. Employees getting preferring allocation shall be charged premium at the same rate as to the public. If there is preferential allocation at Par to any person

'Y Such shares shall not be saleable for the period of two years.'Y These persons shall be issued Jumbo Certificate with marking Not saleable for two years.

After the expiry of prescribed period the shares would be splited into Marketable Lots

84 Power to issue shares at discount - Shares cannot be issued on discount within 1 year of commencement of business- Discount must be authorised by resolution passed in general meeting of Co

Resolution must specify maximum rate of discount- After passing resolution Co may apply to SECP for an order sanctioning the issue

SECP may make an order sanctioning issue on such terms & conditions as think fit. Shares to be issued within 60 days after sanctioning by SECP or within such

extended time as SECP may allow

- Issue of shares at a discount shall not be deemed to be reduction of capital.- Every prospectus and every balance-sheet issued by Co subsequent to issue of shares shall

contain particulars of discount allowed.

> Guidelines will apply to Companies to whom the Companies (Issue of Capital) Rules, 1996 apply.Co shall submit prescribed documents along with application for issue of shares on discountFollowing policy would be followed by SECP while considering the applications

o Financial projections must establish that injection of fresh capital will result in enoughprofits enabling Co to amortize the discount within a period of not more than 5 years.

o Not be allowed to Co in financial sector where capital is proposed to be issued to meet anyprescribed equity/paid up capital requirements.

o SECP may impose such conditions as may deem fit while granting sanction; may include that Shares allotted to sponsors and directors at a discount shall not be disposed off by

allotees for a period of 3 years

Percentage of shares held by the directors shall not increase as a consequence ofallotment made otherwise than by way of right offer

85 Redemption of preference shares Co Ltd by shares may redeem preference shares issued by it under following conditions- Shares shall not be redeemed unless they are fully paid- Shares shall be redeemed out of

Distributable profits of Co; or Sinking fund created for this purpose; or Proceeds of a fresh issue of shares made for this purpose; or Sale proceeds of any property of Co;

- When shares are redeemed otherwise than out of the proceeds of a fresh issue Amount applied in redeeming the shares shall be transferred from distributable

profits to capitalredemption reserve fund

Provisions of this Ordinance shall apply as if capital redemptionreserve fundwere paid-up share capital of Co.


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Sec Section Title Quick Revision of the Section- When shares redeemed out of proceeds of fresh issue; Premium, if any, must have been

provided out of share premium account or distributable profits of Co before redemption- Redemption shall not be deemed as reduction of Authorised share capital.- AOA may impose any terms & manner on redemption of preference shares

FURTHER ISSUE OF CAPITAL

86 Further issue of capital Where directors decide to increase capital of co by issuing further shares- Shares shall be offered to members in exact proportion to existing shares held by them- Offer shall be made by notice specifying No of shares to which the member is entitled

with a time limitation within which offer(if not accepted) will be deemed to be declined- Fractional shares shall not be offered and all fractions less than a share shall beconsolidated and disposed of by Co and proceeds shall be paid to willing shareholders.

- If whole/part of shares offered is declined/not subscribed, directors may allot and issuesuch shares in such manner as they may deem fit

Circular alongwith offer:- Offer of new shares shall be accompanied by circular duly signed by directors/authorised

officer of Co in prescribed form containing material information about affairs of Co + latest statement of accounts + necessity for issue of further capital.

- Copy of circular shall be filed with registrar before sending to shareholders.- It shall specify a date by which offer (if not accepted) will be deemed to be declined.

Exceptions- Federal Government may, on an application made by any Public Co on basis of a special

resolution passed by it, allow such Co to raise further capital without issue of right shares- Public Co may reserve certain percentage of further issue for its employees under

EmployeesStock Option Schemeto be approved by SECP (with prescribed rules)

The company shall not make a right issue within 1 year of1. First issue of capital to the public; or2. Further issue of capital through right issue.

The company while announcing right issue shall clearly state1. The purpose of right issue

2. Benefits to the company & use of funds3. Financial projection for 3 years that shall be signed by all directors who were present in the

meeting in which the right issue was approved.

The decision of the company to issue right shares shall be communicated to the SECP and therespective stock exchange on the day of decision.

The company may charge premium on the right shares up to free reserves per share as certified by thecompanys auditor, provided where a company purposes to charge premium on right issue above thefree reserves per share shall be required to fulfill additional conditions:

1. At least 40% share holders undertake to subscribe their portion of right at such premium.

2. The remaining right issue shall be fully under written and the under writers shall give the

full justification of premium in Due Diligence Report. The right issue of following shall fully and firmly under written

Loss making company or Co whose market share price during last 6 months has remained below than par value,

Book closure shall be made within 45 days of the announcement of the right issue.

Payment and renunciation date once announced shall not be extended except under special circumstances with the permission of respective stock exchange.

If announcement of bonus and right issue is made simultaneously the resolution of the Board shall specify whether the bonus shares covered by the announcement qualify for right entitlement.

87 Issue of shares in lieu ofoutstanding balance of any loans,etc.

Co may issue ordinary shares or grant option to convert 20% of outstanding balance of anyloans, advances or credit, as defined in the Banking Companies Ordinance, 1962 or other non-interest bearing securities and obligations outstanding if following conditions are met:

- Term of loan 3 years

- Atleast 2 years have been passed from date of commencement of commercial production- In any 2 of preceding 3 years, return on such non interest bearing securities, obligations,

loans, advances etc has fallen below minimum rate prescribed by SBP for those years.

REGULATION OF DEPOSITS

88 Deposits not to be invited withoutissuing and advertisement

- Federal Government may prescribe limits up to which, the manner in which and theconditions subject to which deposits may be invited, accepted or retained by a Co.

- No Co shall invite, or allow any person to invite, any deposit unless Deposit is invited or is caused to be invited in accordance with these rules; and An advertisement, including therein a statement showing financial position of Co,

has been issued by Co in such form and in such manner as may be prescribed.

- Provisions of Ordinance for prospectus shall apply mutatis mutandis to advertisement.- Nothing contained in this section shall apply to-

a banking company, or such other class of companies as the SECP may specify in this behalf.

Deposit means any deposit of money with, and includes any amount borrowed by Co, but shall notinclude loan raised by issue of debentures or loan obtained from banking company or financial institution.


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SHARE CAPITAL

89 Nature of shares and certificate ofshares

- Shares/other interest of any member in Co shall be moveable property, transferable inmanner provided by AOA.

- Each share in Co shall have a distinctive number.- A certificate under common seal of Co specifying any shares held by any member shall be

prima facie evidence of the title of the member to the shares.

CLASSES AND KINDS OF SHARES

90 Classes and kinds of share capital - Co limited by shares may have different kinds of share capital and classes as provided byits MOA & AOA:

- Different rights and privileges in relation to different classes of shares may only beconferred in such manner as may be prescribed

GENERAL PROVISIONS AS TO SHARE CAPITAL

91 Only fully paid shares to be issued - No Co shall issue partly paid shares- Where Co has partly paid shares on commencement of Ordinance, it shall

Not issue further Share capital until all previous shares become fully paid up; and Pay dividend only in proportion to amount paid up on each share

92 Power of a company limited byshares to alter its share capital - Co limited by shares, (if authorised by AOA), may alter conditions of MOA so as to Increase its share capital by such amount as it thinks expedient; Consolidate & divide whole or any part of its share capital into shares of larger

amount than its existing shares;

Sub-divide shares, or any of them, into smaller amount than fixed by MOA Cancel shares which have not been taken or agreed to be taken by any person as

at the date of resolution for such,and diminish the amount of its share capital(shall not be deemed to be a reduction of share capital under this ordinance)

- Rights attaching to new shares shall be same and strictly proportional to the rightsattaching to previous shares so consolidated or sub-divided

- New shares issued shall rank pari passu with existing shares in all matters including right to bonus or right issue and dividend

- If authorised capital is fully subscribed, or unsubscribed capital is insufficient, it shall bedeemed to have been increased to extent necessary for issue of shares to scheduled bankor financial institution in pursuance of any obligation of Co to issue shares to them(Notwithstanding anything contained in Ordinance/any other lawMOA/AOA)

-

Powers under this section shall be exercisable by Co only in a general meeting.- Co shall file with registrar notice of exercise of any power within 15 days from exercise

93 Notice to registrar of consolidationof s/cap etc,

- Where Co having a share capital has consolidated and divided its share capital into sharesof larger amount than existing, it shall, within 15 days of such, file notice with registrar

94 Notice of increase of share capitalor of members

If Co having Sh. capital has resolved to increase its sh. capital (u/s 92 or beyond authorisedcapital), and where Co not having Sh. capital has resolved to increase number of its membersbeyond the number previously registered

- File with registrar, within 15 days after passing of resolution, a notice of the fact- Scheduled bank/fin.institution to whom shares issued may also file notice of increase

Notice shall be deemed to have been filed by Co itself Co bound to reimburse fee properly paid to the registrar by them

- Notice shall include particulars of shares to be affected and conditions thereof (if any)- Resolution shall not take effect unless notice give to registrar

95 Prohibition of purchase or grant offinancial assistance by a companyfor purchase of its own or itsholding companysshares

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No company shall have power to buy its own shares or shares of its holding Co:Exception for subsidiary Co:

Allowed as acting trustee except holding Co beneficially interested under trust Can deal in shares of holding Co in ordinary course of business, if carries business

of brokerage (Subsidiary Co shall not exercise voting rights attached to shares)- Public Co (and private Co subsidiary of a public Co) shall not give (directly/indirectly) any

financial assistance for purchase of own shares or holding Cosshares by means of a loanguarantee, provision of security or otherwise

Co can advance or secure an advance to any of its salaried employees, includingCE who, before his appointment was not a director (and excluding all directors) for purchase of shares of Co/Holding/Subsidiary if its a part of contract of service

- Nothing in this section shall prevent- Co from redeeming any shares or any other redeemable security issued in

accordance with provisions of Ordinance

Listed Co from purchasing its own shares in accordance with 95A


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Sec Section Title Quick Revision of the Section95A Power of a company to purchase its

own sharesListed Co may (subject to provisions of 95A and regulations by SECP) purchase its own shares

- Purchase shall be authorised by a special resolution which shall indicate Maximum number of shares to be purchased; Maximum price at which the shares may be purchased; and Period within which the purchase is to be made.

- Notice of meeting shall contain explanatory statement containing material facts including justification for purchase; source of funding; effect on financial position of Co; and nature and extent of interest (if any) of every director directly/indirectly.

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Purchase shall always be in cash and shall be out of the distributable profits.- If purchased on premium, premium shall be charged to SharePremium Account If no premium account exists, charged to the distributable profits.

- Co shall have prescribed debt equity (75:25) and current ratios (1:1).- Majority of directors including CE, shall at meeting make declaration of solvency verified

by an affidavit that they have made a full inquiry into affairs of Co and have formedopinion that Co shall continue to operate as going concern and is capable of meeting itsliabilities on time during period up to end of immediately succeeding financial year.

- Purchase shall be made through a tender system- Mode of tender shall be decided by Co in general meeting through a special resolution.- Shares purchased shall not be resold and shall be cancelled forthwith.- Amount of Cospaid up capital shall be diminished by nominal value of such shares- Co shall maintain a register of shares so purchased and enter following particulars

numbers of shares purchased; consideration paid for the shares purchased; mode of purchase; and

date of cancellation of such shares.- Declaration of solvency + Return about purchase of shares (containing such particulars as

may be prescribed) shall be filed with SECP and registrar within 30 days of purchase

Capital Re-purchase Reserve Account- Nominal amount of shares cancelled shall be transferred from distributable profits to an

account to be called CapitalRe-purchase Reserve Account

- If purchase at discount, the difference (discount) shall be credited to this reserve- For purpose of reduction of Cosshare capital; reserve deemed to be paidup capital of Co- Reserve may be applied in paying up its un-issued shares to be allotted to members of Co

as fully paid bonus shares._

Amendment in Section 95A was proposed through Companies (Amendment) Ordinance 2009 which was notapproved by parliament within 120 days and was considered to be lapsed. Major changes proposed to 95A were

Allowed for a listed company for cancellation of share or issuance of treasury stock in place of ord.capWhere retained as treasury stock, no voting rights, no cash dividend and no distribution in w/up.(Bonus shares and redemption allowed)

>Company shall have sufficient cash availableCompany shall have following ratios

'Y Debt Equity Ratios 75:25'Y CurrentRatio 1:1

The above ratios shall be disclosed in the explanatory statement annexed with the notice of meeting.

Decision of Purchase

The Directors of the company in a meeting shall take decision of'Y Purchase'Y Purchase price'Y Number of shares to be purchased

They shall fix a date for General Meeting of the company to pass Special Resolution. The decision of the Directors shall be communicated to the SECP and SE on the date of decision.

The tender notice shall contain the following information:'Y Maximum No. of shares to be purchased.'Y The manner in which offer to be communicated. 'Y The last date by which the offer to sell shall be made by the shareholder. 'Y The names and addresses of the designated branches of the authorized banks.

Purchase Procedure

1. A shareholder interested to sell his share to the company in response of the tender notice shall make offerto sell in writing to the designated branches of the authorized banks providing following information:

'Y Name of the shareholder'Y Father name / Husband name'Y NIC No

'Y Address

'Y No. of shares offered'Y Shares distinctive number [If shares are not in CDS]'Y Folio number [If shares are not in CDS]'Y The account number [If shares are in CDS]

2. The company shall take a decision within 10 days of the closing date.3. In case the offer exceeds the required purchase the acceptance shall be made by the company on pro-rata

basis in lots of 500.4. The acceptance of the offer shall be communicated to the shareholder within 10 days of the decision.


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Sec Section Title Quick Revision of the Section5. The shareholder whose offer has been accepted shall submit to the bank share certificates along with

verified transfer deed within seven days of the receipt of the acceptance of the company.

Where the shares are in CDS a confirmation from the CDC about the availability of sharesalong with authorization to transfer the shares to the designated bank.

6. In case the company bank (Designated) does not receipt the shares within 7 days the acceptance of thecompany shall be deemed to have been revoked.

7. Company shall pay the price of shares purchased within 7 days of the receipt of shares.

Other Formalities

'Y The purchase shall be disclosed in the Balance Sheet as reduction of capital and necessary details would be provided in the Notes to the Account.

'Y Company shall submit to SECP & Registrar concerned a Return & Declaration of Solvency within 30

days of purchase in manner set out in schedule to these rules.

REDUCTION OF SHARE CAPITAL

96 Reduction of share capital With court confirmation; Co Ltd by shares (if authorised by AOA), may by special resolution(Resolution for reducing share capital) reduce its share capital in any way, and may

Ex

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