Incorporation of Company

PROMOTER sec 2(50)

A promoter is a person who is represntative in pre-incoporation of comapny. His name is

written as Subscriber in MoA and Prospectus.

He has a control direct or indirect over affairs of company, regarding as directors and so
on so.

His adivse is for BOD accustomed to act on.

RESERVATION OF NAME sec 10

persons involved in pre-incoproration shall reserve name in application with

Commission for 60 days.

An application shall be submitted along with fees and prescribed in application

form .

the comapny shall not state false or misleading information while filling application
form.

if any false/misleading information is quoted, shall be liable for penalty level 1.

if a company is incoporated with false information, shall be provided with

guidelines to improve the mistakes.

if commission rejects the application, aggrieved party is allowed to appeal to SECP

within 30 days.

Prohibition of certain names

inappropriate

similar to incoporated companies' name

deceptive

Created in Effie (Trial)

 shall not be harming some community or patronizing some other group

undesirable

Names with Prior Approval

the names with patronage by Foreign or Pakistani head of state

names with patronage of international org and foreign Govt

comapny related to federal or provincial law

company formed with help of federal govt, provincial or staturoy body

MOA+ AOA

MOA: is framed and altered time to time with accordance of comapny act.

AOA: is article of association, framed with in accordance with comapny law/ act.

1- name clause

2-registered office clause

3-objects clause

4-liablity clause

5-capital clause

6-subscription clause

Alter of MOA

an alteration might be of following:

1- change in registered office location

2- principal line of business

3- any other buisness for which licence is required from commission

steps:

co. shall make special resolution for altering moa

Created in Effie (Trial)

 shall send petition to Commission

Commission shall send copy of order to co. and registered office within 7 days

co. shall frame altered moa with registrar within 30 days

registrar shall issue the certificate as in evidence of moa complying with com act

Alter AOA

1- comapny shall make special resolution

2- if any alteration effects members so 3/4 voting of members is req to alter

3- registrar shall frame the altered Aoa within 30 days of alteration

Effect of Registration

After the certificate of incroporation the company is registered with gives the following
circumstances:

1- Subscibers of Moa and other memebers who will be later joining will become a BODY
CORPORATE

2- Body Corporate is able to exercise the fucntions of perpetual session and have a
common seal

3- The registered office clause will be considered as Registered office of comapny

4-Subscbiers of MOA shall be considered as Initial SHAREHOLDERS

5- person purposed in AOA as directors and auditors shall be appoitned as officers from
that day.

Licencing the Non Profit

Commission if satisfied shall grant licence to company as Public limited comapny if:

a) it's agenda is to promote objects of comapny and public interest

b) apply its profits and other income in objects of company

c) not pay its dividend to shareholders

d) comply accoding to the Pak rules and regulations

Created in Effie (Trial)

Revocation of Licence 42

Commission may revoke its licence if comapny:

1- objects went against public interest

2- went agaisnt pak laws

3- members no. reduced to 3

4- management didnt comply with objectives

Circumstances of Revocation

1- company is not allowed to operate unless collecting its money owed

2- company shall not recieve donations from any sources

3- company after satisfying debts and liablities shall transfer its assts to other comapny
under sec 42 within 90 days

4- directors of revoked company are not allowed to be driectors for 5 years

Penalty sec 44

any officer making default under section 42 and 43 shall be liable of penalty level 2.

Created in Effie (Trial)

Directors

Def of Director

According to company law, the director means a person who is appointed on the position
of director, with whatever name called.

Types of Directors

1. Whole time director: A whole time employee who has a great qualification and
manages affairs of comapny of specific department.

2. Executive director: A director who devotes his whole time to the operations of the
company whether paid or not.

3. Non-executive director: A director who not from executive management team,

who doesnt devoute his whole time to the company and gives legal advises to
comapny from outside point of view and he doesnt charge fee unless meeting
fees only.

4. Independant director: A director who is not involved nor related with following: (i)
company (ii)subsidary company (iii)holding company (iv)associated comapny

Minimum no# of directors in comapny

1. SMC - 1

2. Private - 2

3. Public - 3

4. Listed - 7

no# of directorship

a person who is a director of company is only allowed to hold not more than 7 offices of
different companies at same time, more than 7 he'd be ineligible for.

Created in Effie (Trial)

Ineligiblity of certain person to become director sec 153

1. minor

2. unsound mind person

3. undischarged insolvent

4. the person convicted offense acc to court

5. a non-member (exemption)

6. a person who has taken loan from company

Ineligibility of bankrupt director

fine Rs 100,000/- or imprison for 1 year or both

Non member as a director

the non-member can become a director on following circumstances:

1. a person represnting the party which is not a natural person i.e, body corporate

2. a whole time director

3. CEO

4. a person representing creditors or other interested parties

Requirement to conduct election

a election of director is required if the vacancy has been open for 90 days and no one has
filled it, so members (10% voting pwr) or (10% gurantee) will request commission or
directors (45 days prior) or commission by themseleves conduct the election of directors.

Conduct of election: sec 159

1. an existing directors will fix the number of directors to be elected 35 days before
the election

2. if the fixed number and nomminee number are equal then no election is required
and they shall be called as UNAPPOSED directors

Created in Effie (Trial)

 3. if the fixed number and nominees are unequal then election shall take place

4. the voting rights shall be according to shares or gurantee, a member has right to
use his shares as voting per share, so either he can put votes on one candidate or
divide votes on different candidates

5. limited by gurantee member has only 1 vote

6. the highest votes recieved shall determine the director of comapny and so on so.

Power of court for re-election: sec 160

1. a director or member with 10% voting rights makes a request to re-elect within 30
das of elevtion

2. if the member satisfies the court with proof of election being held on material
irregularity or defect in election

Power of court to re-elect Unlisted comapny: sec 162

1. a member who has requsite shareholding can demand for fresh meeting, in order
to make himeself a director in BOD, so court may allow for re-election within 30
days

Casual Vacancy

a casual vacany of director shall be filled within 90 days, or if the director is outside of
pakistan then he shall appoint alternative director on his position

Vacation of office

1. on the terms that director has been absent on 3 consecutive meetings w/o leave

2. director has contravened the section 182

3. he becomes ineligible on some reason on sec 153

4. standing in other position in other company without telling this company

Removal of Director

Created in Effie (Trial)

1. a special resolution shall be passed with 75 or 3/4 votings in removal of director but:

2. a special resolution shall not be passed of the votes are agaisnt equal to it or more in
poroprtion to it

3. for unappossed directors: average number of votes

4. for elected directors: equal to minumum no# of votes when electing him

Meetings and Proccedings

Quorum

number of directors to be present in quorum 1/3

or four

whichever is higher, via videolink or audio or proxy

public company's directors shall meet at every quater of year

any contravention shall be liable to penalty level 2 and other than listed level 1

Records and Resolutions

records shall be maintained and kept at registered offie

physically for 10 years

electronic forever

minutes shall be recorded and authenticated bu chariman

Created in Effie (Trial)

CEO

Appointment of Ceo

a ceo shall be appointed from 14 days after the election of directors

a ceo shall be appointed from the elcted director

the first ceo shall be determined by the subscibers of MOA

appointed for 3 years

Removal of Ceo

shall be removed by the special resolution made on 75% or 3/4 votes

Chairman

a chairman shall be appointed from non-executive directors and shall be appointed for 3
years.

Created in Effie (Trial)

Auditors

Appointment of Auditors

1. Auditor shall be appointed within 90 days of incoporation of comapny

2. First Auditor - appointed by Board shall retire at the first AGM held

3. Subsequent Auditor- proposed by Directors or Members (having 10% voting

rights) and the consent from auditors shall be taken 14 days prior of AGM, they
shall leave office on next agm

4. If the auditor isnt appointed on first 90 days, or on Agm or office has remained
vacant for more than 30 days then SECP/ Commission shall appoint the auditor
and he shall leave after next agm

Appointment, Removal and Fees of Auditor

Appointment

1- by Board

2- By Directors or Members

3- Secp

Removal

1- the removal shall be stated in Special Resolution

2- the vacancy shall be fulfilled within 30 days

3- the appointed auditor shall leave office on the next agm

Remuneration

1- by board- (90 days appointed)

2- by directors if proposed by them or by memebers if proposed by them

Created in Effie (Trial)

3- by secp if appointed by it

consent to act as auditor

consent shall be taken prior to 14 days Agm

Not eligible to become auditor

1- the directors, officers or employees of comapny who worked for 3 consecutive years in
co.

2- related person to director, officer or employee of co.

3- spouse of director

4- person who is indebted by company (unless co. provided debt on ordianry course of
business)

5- person who is convicted as fraudlent by court for 10 years

6- any body corporate

Signature of Auditors

in auditors report:

name of auditor or engagement partner

signature

date

signature of individual if auditor is individually contracting or if contracting via firm,

then sign of engagement partner

Created in Effie (Trial)

Meeting and Proceedings

Statutory Meeting

by birth meeting

held in 9 months of incorporation

or in 6 months of commencement of business (whiever is earlier)

statutory report is being discussed

with notice, statutory report is sent

21 days prior notice is sent

if general meeting is held before the statuttory meeting then this is not neccessary
to be held anymore

if meeting is adjourned, shall be held with same effect of original meeting

Annual General Meeting

hold after 16 months/ 480 days of incroporation

then every finaincail year within 120 days

30 days extension is allowed by:

(i)SECP to listed companies

(ii)Registrar to other than listed companies

21 days before notice is being sent

notice shall define place, date and hour the meeting is to be held

place to hold meeting at registered office

vidoe link facility shall be give to (i) 10% of paid up capital

Created in Effie (Trial)

 (ii)whoever demands for facility 7 days prior to meeting

penalty: listed co (level 2)

other than listed (level 1)

Extra-ordinary General Meeting

other than statutory or general meeting is considered as EOGM

ic called by Directors or Members

if members are calling for meeting and in 21 dats meeting has been not conducted
then members shall hold the meeting

they shall fill the requisition for meeting:

(i)stating objective of meeting

(ii)sign of requistionist

(iii)shall be deposited to the registeredoffice

notice shall be sent 21 days before meeting

if meeting is not held then members are allowed to hold meeting with 3 months of
deposition of requistion

shall hold the meeting at the situated place and company will pay their expenses
deducted from Directors

members shall be:

having 10% of voting power or

not less than 1/10 total number of members

Notice of Meeting

notice of meeting shall be sent 21 days prior to meeting date

it shall specify date, place and hour of the meeting along with the businesss that
needs to be trascated in the meeting

Created in Effie (Trial)

 it shall consist of ordinary resolution and mention special resloution in notes

shall be sent to members, directors and other entilted relevant person to recieve
notice of meeting

it shall be sent via, post, courrier, electronic means or other way as it may deem fit
to the following above person's usual residential address

Ordinary Business

financial statements and reports of directors and auditors

declaration of distribution of dividends

election and appointement of directors

appointment and remuneration fixation of auditors

all of the following shall be discussed into ordinary business except election of directors

Notice of Resoultion

1- members not having less than 5% of voting power may give notice

2- notice shall be sent 10 days beofre meeting

Proxies

a person who attends meeting on behalf of member of comapny is proxy

1 person shall be apppointed as proxy

more than 1 proxy shall be rendered as invalild

proixies shall be member or non-memeber if the AOA of co. states

the proxy form shall be submitted within 48 hours prior to the meeting

Quorum of Meeting

Listed comapny

10 members shall be present

Created in Effie (Trial)

 physically present or via vidoe link

holding 25% of voting power in the comapny

or whichever is deemed fit acc to AOA

Other than listed company

2 members shall be present

physically or via video-link

holding 25% of voting power

or whichever is deemed fit acc to AOA

in case of co. with shares, whatever AOA deems to state.

if quorum isnt fulfilled in 30 mins of meeting the meeting shall be adjourned (if called by
Board) OR dissolved (if called by members)

if the adjourned meeting is not yet fulfilling the quorum then with at least 2 memebers
meeting shall be conducted and finallized decsisons shall be ammedned in Aoa

Demand for Poll

1- a chairman may demnad for poll on his own motion

2- members with 1/10 voting power can demand for poll

Time for Poll

1- election of chairman or adjourment of meeting- immediatly

2- other matters- within 14 days of demand

Power of Court to declare Proceedings invalid

a member with 10% of voting power shall make a petition to court for asking for
fresh meeting and decalring their rights were not used appropriately

the member shall give proof to satisfy the court that their rights were being not
used

Created in Effie (Trial)

 give court the evidence if the company made deault in sending notice to them

if the deault was ommission or incomplete information shall be deemed to be

invalid

the petition shall be drawn within 30 days after impunged meeting

Filing of Resolution

1- resoultions shall be filed with registrar within 15 days of resolution and

2- signed by Director OR Secretary of Company

Records of Resolution

meetings records shall be saved in registrar office

physically for 20 years

electronic for forever

Inspection of Records

for 2 hrs to members

within 7 days of filing shall be given to members who demand by charging such fees

Shares and Voting

Voting can be done through shares too, since according to the shares a person is enable
to vote with number of shares either given vote to one person or divide votes accordinly
to number of shares and vote different persons

1 person= 50 shares (50x2= 100 votes)

Limited with Gurantee/ or with no shares

1 person = 1 vote

Voting

Voting shall be done by:

show of hands

postal ballot

Created in Effie (Trial)

secret ballot

Created in Effie (Trial)

Dividend

Final and interim dividend

Final dividend is the dividend which is paid at the end of AGM.

Interim dividend is dividend whihc is paid in between the year and the amount is
deducted from final dividend.

Decission od shareholders

1. accept the dividend at ordinary resolution

2. reject the dividend

3. reduce the amount per share and accept the dividend

Restrictions on declaration of dividend

1. a dividend shall be only paid through the ordinary profits not unrealized gains

2. the amount of dividend shall not excced upto which was decided by board

3. dividend shall not be paid through (i) sale or dispose of immoviable prpoperty
(ii)sale of assets from acquired company or associating co. [unless the saale is on
the terms of ordinary course of business]

Dividend to be paid through Profits

dividend shall be paid in form of cash, cheques or shares

the mode of paying is through following:

1. designated bank

2. dividend warrants

3. cross cheques

Created in Effie (Trial)

Dividend shall be paid only to registered shareholders

within 15 days after the declaration

Directors to not withhold the payment of dividend

directors shall not withhold or defer the payment on dividend either the CEO shall be
punished on the consequences of withholding the payment, he might be imprisoned for 2
years or he might be fined with 5 million or extended.

Company may withhold the payment of dividend

on the following consequences:

1. by the operation of law

2. dispute amongst the right to recieve

3. by deduction of loan taken from shareholder through dividend

4. not fault of comapny: nataural diaster etc

5. if the shareholder has provided incomplete infromation to the company

Unpaid Dividend

the unapid dividend is the dividend which has been returned to unclaimed by
shareholder, it could be on reasons such as, death of shareholder or change/ not recieved
through registered address

1. the uncailmed profits shall be returned to company and kept in scheduled bank's
account

2. after the 90 days of deposit the comapny may publish the information about the
shareholder and his unclaimed profits along with application

3. upon recieveing the application the dividend shall be paid within 30 days

4. any contravention done under this section shall be laible of penalty level 3

Created in Effie (Trial)

Financial Books of Companies

1. a comapny must maintain books of accounts and other papers and keep them in
Registered office

2. branches of comapny shall maintain the books separately but consolidate and
summariize the books and submit them at Registered office

3. if not keeping at Registered office then shall be decided by board and

acknowledge Registrar in 7 days

4. a comapny shall keep the records of books for 10 financial years

5. if any contravention in maintianing books in listed company:

(a) fine 5 miilion

(b) imprison 2 years

6. if any contravention in maintaining books in other than listed:

(a) fine 1 million

(b) imprison 1 year

Created in Effie (Trial)

Code of Corporate Governance

Def: it is the collection of procedures, mechanisms and provisions of corparate bodies of

being regulated and operated.

Types of Regualations

1- Mandatory regulations: the regulations which are strictly compliance provissions and in
non-compliance of the regulations may lead to the penal proccedings as defined under
regulation 37.

2- Comply or Explain: this apporach is non-mandatory provision, in which either there is

compliance towards that provision and if not complying than explaination is required in
report along within directors report and shall give an alternative to that approach of
compliance.

3- Recommendatory: these provisons include the code word "may" or "encourgaed",

which is eitehr if complying or not there is no penal proceeding under this provision. i.e,
directors training program, disclosure of signisficant issues on website, nomination
committee, risk management committee.

No# of Directorship in company

a person can hold 7 companies as director, if it exceeds than 7 then within 1 year a person
is required to vacant his office(s).

Composition of Board

listed company is required to have 7 directos in board and shall consist:

2 independant directors

2 executive directors

3 non-executive directors

(shall include 1 female director in any category)

Created in Effie (Trial)

independant directors number should be at least 2 or 1/3 if not rounded upto 1 then
explaintation is required

independant director shall be a not related either financlally or in another way with:

1- company 2- holding co 3- subsidary co. 4- associated co. 5- director

ineligbility to become independant director:

1- person has been epmloyee for 3 years ofco.

2- person has been CEO for 3 years of co.

3- person has material business relation as partner or major shareholder 3 yrs

4- person is relative of director, ceo or major shareholder of co.

5- person has recieved remuneration for 3 years as director.

executive directors shall be 1/3 of number and if rounded upto 1 then shall do an
explaination

executive director is a director who devotes his whole time to the operations of the
company whether paid or not.

ceo shall be appointed from executive directors

chairman shall be appointed from non-executive directors

Minorty shareholders

a collection of shareholders who collectively hold the minor or small part of shares in
company, hence in cocg the regualtion states:

minorty shareholders are allowed to appoint their proxy for meetings

one member from minority shareholder shall be elected as director to reperesent

minorty shareholders.

remuneration of directors

shall be decided at AGM but according to their expertise and responsiblities

Penalty of non-compliance of mandatory provisions

Created in Effie (Trial)

fine of 5 million and everyday of non-complaince may lead to rs100,000/- penalty.

Audit committee

shall consists: 2 non-executive directors and 1 independent director and 1 finaincial

literate.

chairman of commiittee shall be independant director

secretary of committee shall be either Head of Internal Audit or Company's

Sectretary

Financaial literate:

1-a person who is member of professional accounting bodies,

2- has been post gradguate of finance or audit in university in pak or HEC

recognized,

3- 10 years experience in audit committee

4- 20 years experience in senior management of finance or audit

CEO or CFO is not required in the meeting

meeting shall be conducted in every quater of the year

HR committee

shall consists 3 directors, majority of non-executive directors and 1 independant

director

chairman of committee shall be independant director

secretary of committeee shall be Head of HR

committee shall meeting shall be conducted at every finiancail year

ceo may be included in the meeting if he's not the member

Nomination Committee

Created in Effie (Trial)

a recommnedatory regualtion based committee which is contructed to supervise and look
after the committe's number of boards and if there is any vacancy coming it shall fulfill it
immediatly.

Qualification of CFO

3 years : member of ICMAP or ICAP

5 years: postgraduate of audit or finance fron university or body coporate

recognized by HEC

7 years: postgraduate of aduit or finaice or has coporate experience

Qualification of Internal Auditor

3 years memeber of ICMP or ICAP

5 years: CIA, CICA, CFE or postgraduate from aduit in uni or other body corporate
regonized by HEC

7 years: post graduate in audit or finance from uni or body corporate recognized by
HEC or has corporate expeience

Internal Audit Functions Reg 31

the internal auditor shall report to the audit committee and ceo

if the outsourcing is allowed the outsoucing shall be allowed wholly or partially

from the company to the professional service corporates and internal auditors shall
be able to provide it from holding company. The company which is providing
outsourcing shall ensure that external auditors are not outsouricng as internal
auditors.

Terms of appointment of external audirtor

the comapny shall not appoint the person as ext. auditor if:

a) he comes not satisfactory QCR under ICAP rating

b) he is partner in non-complicane with Guidelines of codes of ethics under ICAP

Created in Effie (Trial)

 if the person is the relative of audit company

co . shall ensure auditor is not involved in management of co.

co. shall ensure auditor is not doing additonal operations except audit in co.

an auditor shall give report 45 days prior to the director's annual report

Rotation of Auditors: every 5 years

Significant issues ref 14

1- ceo comes to find out the obligation of loan

2- strategic planning and cash flows

3- budget and capital along with overheads

Directors training program

14 years of education

15 years of corporate

Created in Effie (Trial)

Winding Up of Company

Modes of Winding up

voultarily

by court

under the supervission of court

Winding up by Court (301)

1. if in special resolution it is stated

2. deafult in having 2 consecutive AGMs

3. numer of member reduced below public(3) and private(2)

4. If company violated laws for time

5. if comapny is unable to pay its debt

6. if comapny's licence is revoked on which it was incoporated

Unable to pay its Debt (302)

1. when creditor who indebted 100,000Rs/- or more demands money and co.
refuses, neglects or compunds the payment

2. if court is proved that company is unable to pay its debt

3. if court or other competitive authority states in favour of creditor

4. cout may decide if comapny is able to pay its debt, it could through its contingent
liablilites

Application for Winding up (304)

Petition shall be made by:

Created in Effie (Trial)

 1. comapny (via special resolution)

2. creditors (indebted 100,000)

3. contributries (who will contibute in co. asset at time of winding up)

4. any of them above, tgt or separate

5. SECP or Registrar

6. authrozed person from SECP

authorized person shall order for petition to court when:

1- company is incorporated for fraudlent purpose

2- business ran w/o authrozation of MOA

Commence of Winding Up (306)

shall commence from date of order of petition is given

Power of Court Hearing applicstion

a court may order after 90 days of recieving petition and may order the following:

1. dismiss order with or w/o cost

2. interim order

3. appoint provisional manager

4. pass order of winding up

5. or whichever may deem fit

court may not refuse the order i fthe company is holding mortgage of assets or liablities

Contributors

1. past or present memebers may be liable to pay for the amount if they have been
in company at time of winding up

2. past member who ceased to be a memeber is not liable to contribute by time of

winding up

Created in Effie (Trial)

 3. if past memeber ceased to be a member more than a year then he is not liable

4. past or presennt memeber is not liable in case of shares until he has any unpaid
amount left

5. member shall be liable of aumount in case of limited by gurantee c. for the

amount he has undertaken

Official Liqidator

Conditions to Appoint

1. Secp may have panel of people, Court is allowed to appoint to company

2. Official liquidator shall have 10 years of experince in accounts, finance or law

3. o.l is allowed to hold office not more than 3 at same time

4. more than 2 o.l appointed: court shall distribute responsiblity

5. o.l shall not quit office until procceding of liquitation is not complted except
disablitly or death

Removal

Court may remove them if they:

1. misconduct

2. fraud

3. professional incompetent

4. inability to act provisional manager or ol

5. conflict of interest

Remuneration Restriction

1. court shall decide the remuneration of ol according to his experience , knowledge

and case of comp.

Created in Effie (Trial)

2. court shall allow his remuneration on monthly allownaces, from date of winding
up

3. if o.l is quitting office so the amount paid to him shall be refunded

4. if ol fails to liquidate the company no such payment shall be made to him

Created in Effie (Trial)

Associated Companies

Investment in Associcated Companies sec: 199

1. while investing in company which is associated shall be disclosed in Speical

Resoultion

2. in special resolution it shall be stated:

(a) nature of investment

(b) period of investment

(c) amount of investment

(d) with terms and conditions attested to it

3. the investment shall be in form of equity, gurantee, advances and loans

4. in undertaking company the investment shall not include advances or loans unless
its approved through agreement

5. the agreement shall state the following:

(i) nature (ii) period (iii) porpose (iv) secuirty (v)resturn on investment (vi)penalty

6. any contrevention shall make person liable to penalty level 3

7. any change or increase in agreement shall be discussed through special resolution

8. the return on investment shall be :

(i) not less than the borrowing cost

(ii) as specified by SECP

whichever is higher.

9. the investment shall not include:

Created in Effie (Trial)

(a) any due from trade transaction on ordinary course of business

Associated companies

a person owner o fcompany A is owner of company B

a person owner of company A is director or KMP in comapny B

a person who is owner of company A is shareholder in comapny B

any holding or subsidary company is associated company

any company and modaraba is associated company

Created in Effie (Trial)

Related Party Transactions

Method of RPT sec 208

1. a person may enter into contract with a related party after getting a approval from
the board

2. after getting the approval of board, person/ director or employee should present
the report along with the justification of entering into rpt to shareholders

3. if the person has entered into contract without approval of board then the
contract shall be ratified within the 90 days

4. either it will be considered by board as Voidable contract

5. the transactions include the following:

(i) buy, sell or supply of goods and material

(ii) sale or dispose of property

(iii )leasing of property

(iv) rendering of services

(v) appointing an agent to buy, sale , supply material, sevices or goods

6. contrevention shall make listed company liable to level 3

7. Company can proceed for recovery of losses from director or employee who has
entered into such contract or arrangement

Related Party includes

1. director or his relatives

2. Key management personnel or his relatives

3. in private firm director or his relatives partner

Created in Effie (Trial)

4. in public company director or his relatives who are accustomed to act according
to his directions

5. in comapny director or his relatives with the significant influence (20% investment
in the company)

Created in Effie (Trial)

Related Party Regualtions

Approval of Board with minimum conditions reg 3

1. board shall approve on the minimum information regarding nature and

relationship of rpt

2. limitations and conditions regarding rpt

3. risk and mitigation of risk

4. pricing policy

Arm lenght transaction reg 4

a contract in which both party conduct a transaction seemingly in way they are unrelated
or dont have any undue influence or pressure

Responsibility of Board reg 6

1. train and eduacte employees so they can identify and report rpt to board

2. give directions to directors and employess to consult for rpt

3. identify whether approval of members is needed or not

4. set general cirteria for approval of rpt

Created in Effie (Trial)

Postal Ballot Regulations

Responsiblity of Company

1. approval by board for procedure of e-voting and information provision

2. company shall maintain records of members via emails and phone numbers

3. company shall provide members with:

website portal and username and password

verification code via SMS or 2f

e-signature

Procedure of E-voting

1. ballot shall be open for 3 days

2. shall close at 5PM PST of preceeding poll date

3. members shall be identify through:

e-signature

authentication by login

4. members shall cast vote at time prescribed

5. when voted shall not change the vote

6. evoting service provider shall:

keep result confidential

give access to chairman to unblock the result

E-voting service provider:

Created in Effie (Trial)

 1. shall be licenced by central depository of securites act, 2015

2. shall own a web-portal or security system by cyber security

3. web portal shall be certified by external auditors and experts

4. web portal shall have:

e-signature and authentication

maintanance of password

CAPTCHA mechanisms

Procedure of voting

3 working days company shall publish in eng and urdu, in daily newspaper circultated
nationwide the ballots announcement

along with address and contact details of chairman

and procdeure to submit ballot paper

member shall submit duly signed ballot paper with copy of cnic through post to chairman
1 day before poll

signature of ballot paper shall match sign of cnic

Result of Poll

polling is done for elections of directors

chairman shall record the date and time of reciept of ballot papers

chairman's decission for ballot validty shall be final

chiarman shall unblock the result in the meeting and announce the result

within 24 hrs of meeting shall publish on website

Created in Effie (Trial)

Insurance Ordinance, 2000

Sec 3# divison of life and non-life insurance

life insurance:

1. payment of money on death of person

2. term determined payment

3. payment on annuity

4. payment on annuity exceeding 1 year

non-life insurance:

1. any business which is not a life business

2. payment of moeny on death of person by accident

3. payment on losses such as accident, disablity, immuity

Classes of life and non-life business

life business:

1. ordinary life business

2. capital redemption business

3. pension fund business

4. accident and health business

non-life business:

1. fire or damage property business

2. marine, air or transport business

Created in Effie (Trial)

 3. motor 3rd party business

4. liablity business

Eligibility of being insruance company

1. public company

2. body corporate (except private co)

3. certifcate registered under SECP

Certificate

peson shall file an application with SECP

application shall be in written, eng and urdu, documneted, authorized signed

Registration by SECP

secp shall register the insurer if:

1. applicant is having:

minimum paid up capital

minimum statutory deposits

solvency requirements

2. applicant is able to meet its: liablities, sound management and compliance with
ordinance

3. if statutory auditor is appropraite according to his position

4. if life business is registered under SECP

Time for Granting and Refusal

secp shall notify insurer for grant or refusal within 30 days

it may be extedend to 60 days

Created in Effie (Trial)

Revocation

SECP may not grant the cetificate of insurance if:

1. it is not complying with accordance of FG policies

2. it is conducting life and non-life business

Notification of Grant or Refusal

SECP shall send the notice of grant or refusal of insurance business

Supervision fee

Secp shall be paid with supervision fee: 100,000/- or 0.1% of dispose of premium

Sound and Prudent Management sec 12

1. business shall comply with intergirty

2. incorporated in pak: director shall be fit and proper for his position

3. incorporate out pak: principal officer shall be fit and proper for his position

4. auidtor shall maintain records and accounting books accordingly

Statutory fund:

statutory fund is only shown in reords of life insurance policy and it should be maintianed
for at least 1 or more life insuracne, ie, capital redemption, pension fund etc

Insurer having share capital shall:

maintain shareholders capital

maintain in its recrods permenant capital

Solvency Requirement

in life business: admissbale asset surplus greater than liablities (75 M or higher)

in non-life business: admissbale asset greater than laiblities

Created in Effie (Trial)

Books and Records

books and records of policy: state name and address of policy holder, date of
effect, records of any transaction

books and records of claim: date of claim, anme and address of claimant, date of
discharge, date of rejection with grounds

signed by:

in pak: chairman + 2 directors + principal officer

out pak: chairman + 2 directors + equivalent to principla officer

Filing

shall be sned to secp within 4 months of calender closing

with sign of chaiman+ directors and principal officer

Quaterly returns

march, june, sept, dec

Requirement of deposits sec 28

in life business: 150 million or high

in non-life business: 80 million or high

Created in Effie (Trial)

Banking Companies

Prohibiton of employee of managing agent

shall not be insolvetn, convicted crime or has remuneration or shares in the company.

regulation of authorized, subscribed and paid up captial

subscribed captial shall not be less than 1/2 of authorized capital

paid up capital shall not be less than 1/2 of subscribed capital

voting rights shall be according to 1 sahreholder having voting right in proportion

to his contribution in paid up capital

voting rights of shareholder shall not exceed 5% of total voting rights

Election of new Directors

SBP shall call upon the banking compnay to hold a fresh election of directors

shall hold not less than 2 months of order

SBP may appoint 1 director in bod

Restriction of term of office

director shall not hold office more than 6 consecutive years

3 years gap is required in order to be reelected

2 terms are usually given

Vacation of office

SBP may remove the director if he failed to perform undertaking OR he failed to pay the
loan or any due (1 month warning is given )

Restriction on payment of dividends

Created in Effie (Trial)

 1. banking co. may not pay dividend out of its shares until all capitalized expenses
are written off

2. may pay dividend without writing off depreciation and bad debts

3. may becomes eligible to pay dividends if it meets its minimum CAR

4. SBP may restrict payment if banking co. SOFP is not satisfactory

Reserve fund

reserve fund + share premium > paid up capital (20% of profit )

reserve fund + share premium = or < paid up capital (10% of profit)

Cash fund

5% of demand liability

2% of time liablity

Restriction on loans and advances

1. banking comapny shall not grant loans and advances agaisnt its securites of its
own shares

2. shall not grant unsecured loan on gurantee of directors or family members of

directors OR public or private company with substaintial interest

Authentication of account

in pk: principal officer + 3 directors

out pk: agent of principla officer

filing of accounts

shall be done at end end of an year (december)

signed by : principla officer and directors

Created in Effie (Trial)

shall be send 3 furnished as returns copies of b/s and accounts to SBP 3 months before
the calender closing

Display of accounts

at first monday of august

Audit

shall be done by CA qualified as auditor

from panel of auditors selected by SBP

auditor shall be appointed for 3 years

Created in Effie (Trial)

NBFC

Business of NBFC

1- Invesstment Finanacial Services

2- Investment Adivsory Services

3- Discounting Services

4- Leasing

5- Venture Capital Investment

6- Asset Management

Eligibility of Members in NBFC

1. a director, ceo, sponsor shall not be involved in illegal banking business

2. he shall not be director of company which has been deafult in paying loan

3. he shall not be director of dafulting cooperative society

4. he sall not be convicted insolvent

5. he shall not be convicted of fradulent

Permission to form NBFC (Rule 04)

1. a person desiring to form NBFC shall file an application with Comission

2. application shall be attested with form I along with non-refundable fees of Rs

100,000/-

3. if the comission is satisfied it may grant the application in written order

4. the grant order shall be valid for 6 months

5. it may be extedned to 3 months

Created in Effie (Trial)

Conditions to Grant Licence (Rule 05)

1. when the person has granted the permission for forming NBFC, he shall apply for
Form II for granting licence

2. the application shall be along with the non-refunable fees 100,000

3. the validity of this licence is 1 year

4. it shall be renewed with 25,000 fees

5. if any nbfcs opeating before this time shall form with licence with feees 50,000/-

Conditions to Grant Licence

IFS --300M

IAS + AM-- 100M

DS--200M

L--200M

VCI--5M

Records Maintenance

maintained for 10 yrs

shall be maintiend in the form ledgers

finicnal audit ledger

shall be inspected

Credit Rating

AA- or above = 2 of equity

A- to A+ = 1.5 of equity

BBB- = 0.5 of equity

NBFC SHALL NOT IN CREDIT RATING:

1. appoint directors from 25% of same family

Created in Effie (Trial)

 2. shall not

NBFC to prevetn AML

1. nbfc shall follow the regualtions and provisions given by comission

2. nbfc shall not make an account of the person who is not giving his true identity

3. nbfc shall not pay or lend more than 50,000

4. nbfc shall not make a transaction which may seem suspicious

5. nbfc shall make strict monitoring measure while creating accounts

creating of Reserfe fund

20% of Profit after tax until it's equal to the equity of reserve fund

5% of profit after tax from reserve finds when it is equal to reserve fund

then the reserve fund shall be given in form of Bonus issues

maximun exposure of NBFC to person and group

person ( total 20% ) and (maximum 15%)

group (total 25%) and (maximun 20%)

Capital adequacy Ratio CAR

8% at first 2 years then 10% for subsequent years

limits of unsecured finance

200,000/- shall be given to single borrower

shall not be above equity of unsecured finance

shall not be more than 50% of unsecrued finance

shall not be applicable to Microfinancing NBFC

Incorporation of NBFC

1. prior approval is not needed by SECP

Created in Effie (Trial)

 2. approval of commencemtn of business is needed from secp

3. registed by shareholders

4. approval shall be granted for 6 months

5. if the co. which is not incorporated under shall apply for approval of licence

Procedure of Amalgamtion

1. draft of amalgamamtion shall be presented to the shareholders

2. notice of meeting shall be sent to shareholders of both NBFCs specifying the date,
time and place along with the objective of amalgamtion

3. if shareholders of both NBFCs approve for amalgamation at 2/3 of voting then the
sanction shall be passed by SECP

4. the registrar shall be informed about the amalgamtion within 15 days to strike the
old name off and present as amalgamated NBFCs

5. the liablites and assts of one NBFC shall be transferred to amalgamted NBFC

Definitions

Connected Person: a person who has:

10 % of trustee in notified entities

10% of voting power

notified entitiy is managed by NBFC

NBFC is itself managed by Notified entity

is cosignee or trustee of notified entity

Venture Project: a business which is new formed or expanded, has business of services,
production or manufactrung with focus of new process or technologies, located at the
remote or underdeveloped area, the key is that it is finaced by venture capital investment
or NBFC if it comes under these conditions.

Created in Effie (Trial)

Companies introduction

Types of Companies

1. Incorporation

Registered

statutory

foreign comapny

2. Liability

Limited by Shares

Limited by Gurantee

Unlimited Liability

3. Control

Holding company

subsidary comapy

wholly owned subsidary

4. Transfer of Shares

SMC

Private company

listed company

public company

Public Sector Company

Created in Effie (Trial)

a company in which Govenrnment has invested more than 51% in it's capital share.

Body Corporate

A combination of statutory company, registed company and foreign comapny.

Mode of Forming Company

1. 3 or more person- public company

2. 2 or more person - private company

3. 1 person to form SMC

Liablilty if the member is reduced

if the company's member has reduced in public company below 3 and in private company
below 2, and the business kept operating for 6 months then,

member is laible to pay debts for the time he has been present in company OR will be
jointly suied (joinder suied)

Obligation to Register partnership, association or companies Sec 09

person above 20 are not considered to form a company, association or partnership and
will be deemed illegal, unless:

exemtions to Sec 09

1- a partnership or community is formed under other laws in Pakitan for time being

2- Joint family business consisting 20 or more carrying family business

3-2 or more joint family business carried in pakistan i.e, hindu family business

4-any partneship formed in which professional practices are being carried, i.e,
accountants association, lawyers society etc.

Created in Effie (Trial)