Companies Rules Volume III

8/13/2019 Companies Rules Volume III

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Securities and Exchange

Commission of Pakistan

Companies Rules

Volume III

Rules (From 2000 to till date)

(Updated up to 5 December 2013)


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Companies Rules

Volume III

Rules (From 2000 to till date)

(Updated up to 5 December 2013)

Securities and Exchange

Commission of Pakistan


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VOLUME I

STATUTES

Insurance Act, 1938 (Repealed)

Securities and Exchange Ordinance, 1969

Companies (Appointment of Trustees) Act, 1972 (Repealed)

Companies (Appointment of Legal Advisors) Act, 1974

Foreign Private Investment (Promotion & Protection) Act, 1976 (Repealed)

Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980

Companies Ordinance, 1984

Central Depositories Act, 1997

Securities and Exchange Commission of Pakistan Act, 1997

Insurance Ordinance, 2000

Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Ordinance, 2002

Anti-Money Laundering Act 2010

Stock Exchanges (Corporatisation, Demutualisation and Integration) Act, 2012

VOLUME II

RULES

Securities and Exchange Rules, 1971

Investment Companies and Investment Advisors Rules, 1971 (Repealed)

Companies Profits (Workers Participation) Rules, 1971

Economic Reforms (Acquisition and Compensation) Rules, 1973 (Repealed)

Companies (Appointment of Trustees) Rules, 1973

Companies (Appointment of Legal Advisors) Rules, 1975

Modaraba Companies and Modaraba Rules, 1981


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Corporate Law Authority Rules, 1984 (Repealed)

Companies (General Provisions and Forms) Rules, 1985

Forms

Companies (Invitation and Acceptance of Deposits) Rules, 1987

Companies (Management by Administrator) Rules, 1993

Credit Rating Companies Rules, 1995

Asset Management Companies Rules, 1995 (Repealed)

Companies (Issue of Share Capital) Rules, 1996

Venture Capital Companies and Fund Managers Rules, 1995 (Repealed)

Employees Provident Fund (Investment in Listed Securities) Rules, 1996

Companies (Issue of Capital) Rules, 1996

Central Depository Companies (Establishment and Regulation) Rules, 1996

Companies (Court) Rules, 1997

Companies (Audit of Cost Accounts) Rules, 1998

Companies (Rehabilitation of Sick Industrial Units) Rules, 1999

Companies (Buy-back of Shares) Rules, 1999

Companies (Asset-Backed Securitization) Rules, 1999

VOLUME III

Companies' Share Capital (Variation in Rights and Privileges) Rules, 2000

Leasing Companies (Establishment and Regulation) Rules, 2000 (Repealed)

Members' Agents and Traders (Eligibility Standards) Rules, 2001

Stock Exchange Members (Inspection of Books and Record) Rules, 2001

Public Companies (Employees Stock Option Scheme) Rules, 2001

Brokers and Agents Registration Rules, 2001

Balloters Transfer Agents and Underwriters Rules, 2001

Insurance Rules, 2002


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Non-Banking Financial Companies (Establishment and Regulation) Rules, 2003

SECP (Appellate Bench Procedure) Rules, 2003

Single Member Companies Rules, 2003

Margin Trading Rules, 2004 (Repealed)

Commodity Exchange and Futures Contract Rules, 2005

Voluntary Pension System Rules, 2005

Clearing Houses (Registration and Regulation) Rules, 2005

Takaful Rules, 2005 (Repealed)

Anti Money Laundering Rules, 2008

Securities (Leveraged Markets and Pledging) Rules, 2011

Takaful Rules, 2012

Public Sector Companies (Corporate Governance) Rules, 2013

Microinsurance Rules, 2013

VOLUME IV

REGULATIONSSecurities and Exchange Policy Board (Conduct of Business) Regulations, 2000

Regulations for the Karachi Stock Exchange, 2001

Code of Corporate Governance, 2002

Companies (Registration Offices) Regulations, 2003

Prudential Regulations for Modarabas, 2004

Regulations Governing System Audit of Brokers of Exchanges, 2004

Real Estate Investment Trust Regulations, 2008

Private Equity and Venture Capital Fund Regulations, 2008

Private Equity & Venture Capital Fund Regulations, 2008 - Forms and Schedules

Group Companies Registration Regulations, 2008

Anti-Money Laundering Regulations, 2008


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NBFCs and Notified Entities Regulations, 2008

Prudential Regulations for NBFCs undertaking the Business of Leasing only

Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2008

Code of Corporate Governance, 2012

Debt Securities Trustee Regulations, 2012

Insurance Accounting Regulations, 2012

Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2012

Third Party Administrators for Health Insurance Regulations, 2013

Centralised Information Sharing Solution for Life Insurance Industry Regulations, 2013

VOLUME V

GUIDELINES

Guidelines for Issue of Certificates of Musharika for Modarabas, 1994

Listed Companies (Prohibition of Insider Trading) Guidelines, 2001

Guidelines for Preparation of Prospectus, 2002

Equity Issues (Checklist of Documents for Approval of Prospectus or Offer for Sale Document), 2002

Guidelines for Appointment on the Board of Directors of the Stock Exchanges, 2002

Term Finance Certificates (TFCs) Issues (Checklist of Documents for Approval of Prospectus, 2002

Guidelines for the Issue of TFCs to General Public, 2002

Guidelines on Issue of Shares at Discount, 2004

Internet Trading Guidelines, 2005

Guidelines for Issue of Commercial Paper, 2006

Guidelines for Bancassurance, 2010

Corporate Social Responsibility Voluntary Guidelines, 2013

Guidelines on Quarterly Accounts


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ORDERS

Vegetable Ghee and Cooking Oil Companies (Cost Accounting Records) Order, 1990

Cement Industry (Cost Accounting Records) Order, 1994

Sugar Industry (Cost Accounting Records) Order, 2001

Companies Cost Accounting Records (General Order), 2008

Companies (Corporate Social Responsibility) General Order, 2009

Fertilizer Industry (Cost Accounting Records) Order, 2011

Chemical Fertilizer Industry (Cost Accounting Records) Order, 2012

Synthetic and Rayon Companies (Cost Accounting Records) Order, 2012

Electric Power Generation Industry (Cost Accounting Records) Order, 2012

Pharmaceutical Industry (Cost Accounting Records) Order, 2013

DIRECTIVES

Feb 17, 2005 - Directive under the Credit Rating Companies Rules, 1995

Feb 7, 2003 - Directive to Brokers on Conduct of Business 2003

Jul 18, 2002 - Directive to Brokers or Brokerage Firms or Incorporated Brokerage House Regd.

under the Broker & Agents Registration Rules 2001

GUIDE SERIES

A Guide on Accounts and Accounting Reference Dates

Change in Company Objects

Change of Company Name

Availability of Name Guide

Conversion of Status of Companies

Directors and Secretaries Guide

Filing of Statutory Returns

Foreign Companies Guide


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Appointment of Statutory Auditors and Ancillary Matters

Listing of Companies through Initial Public Offerings

Obtaining license by an Association not for profit

Further Issue of Shares otherwise than Rights

Issue of Preference Shares

Making Alteration in Memorandum of Association under Section 21 of Companies Ordinance, 1984

Incorporation of Company Information and Procedures

Investigation into the Affairs of a Company

Company Mortgages and Charges

List of sensitive/prohibited words

Promoters Guide

Modaraba Promoters Guide

Shareholders Rights

Single Member Company Guide (in Urdu)

Winding up / Dissolution of Companies

VOLUME VI

FORMS AND APPLICATIONS

Forms[See under Companies (General Provisions and Forms) Rules, 1985]

Applications

Application for Availability of Name

Application for File Inspection

Application for Refund of Fee

Application for Issuance of Certified To Be True Copy

Application for Availability of Name

Application for File Inspection


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Application for Refund of Fee

Application for Issuance of Certified To Be True Copy

NOTIFICATIONS (selected)

S.R.O. 282(I)/1986 Company Names Abbreviations and Urdu Equivalents

S.R.O. 865(I)/2005 IFAS 1 Murabaha

S.R.O. 431(I)/2007 IFAS 2 Ijarah

S.R.O. 640(I)/2011 Maintenance of Website

S.R.O. 289(I)/2011 Form of Statement in Lieu of Prospectus

S.R.O. 23(I)/2012 Accounting and Financial Reporting Standards for Medium Sized Enterprises

and Small Sized Enterprises

S.R.O. 25(I)/2012 Maintenance of Website by Listed Companies

S.R.O. 320(I)/2012 Amendments in Sixth Schedule to the Companies Ordinance, 1984

S.R.O. 753(I)/2012 Amendments in First Schedule Table A to the Companies Ordinance, 1984

S.R.O. 1354(I)/2012 Delegation of Powers of Commission

S.R.O. 130(I)/2013 Recovery of Gain

S.R.O. 182(I)/2013 Amendments in Fifth Schedule to the Companies Ordinance, 1984

S.R.O. 183(I)/2013 Amendments in Fourth Schedule to the Companies Ordinance, 1984

S.R.O. 194(I)/2013 Amendments in First Schedule Table A and C to Companies Ordinance, 1984

S.R.O. 210(I)/2013 Amendments in Companies (Registration Offices) Regulations, 2003

S.R.O. 211(I)/2013 eService of SECP

S.R.O. 387(I)/2013 Delegation of Powers of Commission

S.R.O. 479(I)/2013 Amendments in Public Sector Companies (Corporate Governance) Rules, 2013

S.R.O. 571(I)/2013 IFAS 3 Profit and Loss Sharing on Deposits

S.R.O. 677(I)/2013 Amendments Public Sector Companies (Corporate Governance) Rules, 2013

CIRCULARS (selected)

Circular 8/2001 Companies Regularisation Scheme


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Circular 1/2002 Adoption of International Accounting Standards 22, 36 and 39

Circular 2/2002 Companies Regularisation Scheme

Circular 3/2002 Adoption of International Accounting Standards 40

Circular 4/2002 Adoption of International Accounting Standards 22, 36 and 39

Circular 15/2002 Transfer off Regulatory Supervision of Non-Banking Financial Institutions and

Submission of Periodical Returns/Statements

Circular 16/2002 Submission of Quarterly Accounts by Listed Companies

Circular 17/2002 Information on Current Credit Rating and COIs/CODs being maintained by

NBFCs

Circular 18/2002 Submission of Quarterly Accounts by Listed Companies

Circular 19/2002 - Appointment of External Auditors by the Listed Companies

Circular 1/2003 Appointment of Sole Proprietor Chartered Accountants as Auditor by Business

Name

Circular 2/2003 International Accounting Standard 40 Investment Property

Circular 7/2003 Appointment of Directors/Chief Executive in the Modaraba Companies

Circular 8/2003 Checklist for Appointment of Directors

Circular 9/2003 Preparation and Transmission of Second Quarterly Accounts by the Listed

Companies

Circular 10/2003 Fresh License(s) to be obtained by Existing Companies in terms of Section 282C

of the Companies Ordinance, 1984 for Business(es) being carried out by existing NBFCs

Circular 12/2003 Fresh License(s) to be obtained by Existing Companies In terms of Section 282C

of the Companies Ordinance, 1984

Circular 13/2003 Maintenance of Website by the Listed Companies

Circular 15/2003 Appointment of Whole Time Company Secretary

Circular 18/2003 Rules of Business for NBFIs and Submission of Periodic Returns/Statements

Circular 19/2003 Applicability of IAS 39 and IAS 40 to NBFCs providing investment financeservices (Investment Banks), discounting services and housing finance services

Circular 24/2003 Assets provided on Lease/loan basis to the Employees (Excluding CEO and

Directors)

Circular 25/2003 Use of word Bank or any of its derivatives

Circular 26/2003 Circular No. 26 of 2003


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Circular 29/2003 Corporate Agriculture Farming (CAF) Policy

Circular 30/2003 Attendance of Directors in the Board Meetings through Video Conferencing

Circular 6/2004 Appointment of Sole Proprietor Chartered Accountants as Auditors by Business

Name

Circular 7/2004 Authentication of Statutory Returns

Circular 8/2004 Compliance with IAS 12 (Revised)

Circular 3/2005 Holding of Election of Directors Pursuant to Companies (Amendment) Ordinance

2002

Circular 6/2005 Conditions for Issuance of Foreign Currency Certificate of Deposits (CODs) and

Certificate of Investment (COIs)

Circular 8/2005 Investment Policy under Rule 24(3) and Prescribed Allocation Policy for

Selection by the Individual Participants under Rule 14(3) & 14(4) of the Voluntary Pension System

Rules 2005

Circular 10/2005 Application(s) made under the NBFCs (Establishment and Regulation) Rules,

2003 and the Prudential Regulations for NBFCs

Circular 11/2005 Rating of NBFCs and Collective Investment Scheme(s) managed by NBFCs

Circular 12/2005 Appointment as a Director on the Board of an NBFC

Circular 13/2005 Exemption from Requirements of Clause 3C of Part II of Fourth Schedule to the

Companies Ordinance, 1984

Circular 15/2005 Sale of Assets by NBFCs to its Employees

Circular 17/2005 Violation of Section 143 of the Companies Ordinance, 1984 by mentioning

Incomplete Name

Circular 18/2005 Attendance of Directors in the Board Meetings through Tele-Video Conferencing

Circular 19/2005 Regulation for Housing Finance Applicable to Individual Borrowers

Circular 24/2005 Rotation of External Auditors by Insurance Organizations

Circular 3/2006 Holding of Election of Directors

Circular 1/2008 Publication of Notices etc in Urdu Newspaper

Circular 11/2008 Revision of Fourth and Fifth Schedules to the Companies Ordinance, 1984

Circular 16/2008 Submission of Daily Statement of Assets and Liabilities

Circular 3/2009 Available for Sale Investment


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Circular 14/2010 United Nations 1267 Committee's Consolidated List of Individuals and Entities

regarding Freezing of Funds and Other Resources

Circular 14/2010 Amendments dated September 8, 2010

Circular 14/2010 Amendments dated November 2, 2010

Circular 14/2010 Amendments dated December 22, 2010

Circular 15/2010 Related Party Assets

Circular 16/2010 Categorization of Open-End Collective Investment Schemes

Circular 17/2010 Notice Period for Holding Extraordinary General Meeting to pass Resolution for

Filing Application under Companies Easy Exit System (CEES)

Circular 18/2010 Additional Condition to the Modaraba Authorization Certificate

Circular 21/2010 Clarification on Clause 3(ii) of Part II of the Third Schedule to the Modaraba

Companies and Modaraba Rules, 1981

Circular 22/2010 Revised Second Schedule to Modaraba Companies and Modaraba Rules, 1981

Circular 26/2010 Application for Refund of Fees received under Sixth Schedule to the Companies

Ordinance, 1984

Circular 28/2010 Application for Refund of Fees received under Sixth Schedule to the Companies

Ordinance, 1984

Circular 3/2011 Amendments in Circular 36 of 2009 dated December 10, 2009 Investment and

Allocation Policies for Pension Funds Authorized under the VPS Rules, 2005


Circular 5/2011 Appointment of a Member of the Religious Board by the Federal Government

under Section 9 of Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980

Circular 6/2011 Withdrawal of Circular 20/2010 dated 30 July 2010

Circular 7/2011 Maximum Management Expense Limits for Life Insurers under Sections 22(9)

and 23(9) of the Insurance Ordinance, 2000

Circular 10/2011 Constitution of Modaraba Tribunal-II, Karachi under the Modaraba Companies

and Modaraba (Floatation and Control) Ordinance, 1980

Circular 11/2011 Sharing of Costs of Insurance Ombudsman's Secretariat by Insurance/Takaful

Companies

Circular 12/2011 Conditions for Grant of License to Associations not for Profit under Section 42

of the Companies Ordinance, 1984

Circular 14/2011 Meetings of the Board of Directors (Abroad)


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Circular 15/2011 Additional Condition to the Modaraba Authorization Certificate

Circular 17/2011 Annual Supervision Fee for 2012

Circular 18/2011 Product Information on websites

Circular 19/2011 Legal Duties of Agents

Circular 1/2012 Reporting of Suspicious Transaction Reports (STR) Currency Transaction

Reports (CTR) to FMU under Anti Money Laundering (AML) Act, 2010

Circular 2/2012 Conditions for Grant of License to Associations not for Profit under Section 42 of

the Companies Ordinance, 1984

Circular 3/2012 Product Publicity Information

Circular 4/2012 S.R.O. 16(I)/2012 dated 9 January, 2012 Amendments in the Securities and

Exchange Commission [Insurance) Rules, 2002

Circular 5/2012 S.R.O. 29(I)/2012 dated 13 January 2012 Takaful Rules, 2012

Circular 7/2012 Enlistment/Categorisation of Auditors on the Approved List pursuant to Section

48(1) of the Insurance Ordinance, 2000

Circular 08/2012 Shariah Compliance and Shariah Audit Mechanism (SCSAM) for Modarabas

Circular 9/2012 Term of Office of Directors

Circular 10/2012 Transmission of Notice of Annual General Meetings (AGM) and Extra-Ordinary

General Meetings (EOGM) through Electronic Medium

Circular 11/2012 Enlistment/Categorisation of Auditors on the Approved List pursuant to Section48(1) of the Insurance Ordinance, 2000

Circular 12/2012 Launching of Fast Track Registration Services (FTRS)

Circular 13/2012 Approval of Short Term Ijarah (Lease) Agreement

Circular 14/2012 Launch of Inter-CRO Electronic Inspection Service

Circular 15/2012 Minimum Requirement for Exchange Traded Funds to be managed by Asset

Management Companies


Circular 17/2012 Additional Disclosures for Workers Welfare Fund (WWF) Liability for

Collective Investment Schemes

Circular 18/2012 Dividend Mandate under Section 250 of the Companies Ordinance, 1984

Circular 19/2012 Procedure for Convening Meeting of the Unitholders of Open-End and Close-

End Collective Investment Schemes


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Circular 20/2012 Reporting of STRs/CTRs to FMU under the AML Act, 2010

Circular Restriction on sharing of management fee by Asset Management Companies with

Unitholders

Circular 21/2012 Filing of Returns through Insurance Companies Return Submission (ICRS)

System

Circular 22/2012 Relaunching of Companies Regularisation Scheme (CRS)

Circular 23/2012 Relaunching of CEES

Circular 31/2012 Extension in time period of CRS and CEES


Circular 37/2012 New Insurance Accounting Regulations 2012; and Amendments in the SEC

(Insurance) Rules, 2002

Circular 39/2012 Clarification on Circular 14/2011 regarding Meetings of Board of Directors(Abroad)

Circular 40/2012 Extension in Time Period of CRS and CEES

Circular 41/2012 Annual Supervision Fee for the year 2013

Circular 42/2012 Filing of Monthly Returns through Specialised Companies Return System (SCRS)

Circular SECP registered 274 companies in August 2012

Circular 1/2013 Rate of Return Assumptions for Life Insurance and Family Takaful Illustrations

Circular 2/2013 Training of Insurance Agents

Circular 2 of 2/2013 Clarification on the Circular No.2 of 2013 on Training of Insurance Agents

Circular 3/2013 Launching eSInsuranceSurveyors: Online Surveyors Licensing and Registration

System

Circular 5/2013 Examination or Test for Grant of Registration as Authorized Surveying Officer

Circular 6/2013 Amendments in Circular No. 36 of 2009 dated December 10, 2009 Investment

and Allocation Polices for the Pension Funds Authorized under the VPS Rules, 2005

Circular 7/2013 Clarification on Filing of Revised Annual Audited Accounts by Non-ListedCompanies


Circular 11/2013 Amendment to Circular No. 9 of 2005 on Group Insurance Premium Rates

Circular 12/2013 Publication of Public Announcements


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Circular 13/2013 Clarification regarding Circular No. 36 of 2009 dated December 10, 2009

Circular 17/2013 Mortality Rates as a Part of the Minimum Valuation Basis for the Determination

of Minimum Actuarial Reserves for PolicyholdersLiabilities

Circular 18/2013 Draft Bancassurance Regulations, 2013

Circular 19/2013 Appointment of Qualified Auditors

Circular 20/2013 Maximum Management Expense Limits for Life Insurers

Circular 21/2013 Life Insurance Product Submission Requirements


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SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

***

Islamabad, the 28th August 2000

NOTIFICATION

S.R.O.599 (I)/2000.- In exercise of the powers conferred by section

506, of the Companies Ordinance, 1984 (XLVII of 1984), read with

section 90 thereof, and clause (b) of section 43 of the Securities and

Exchange Commission of Pakistan Act, 1997 (XLII of 1997), the

Securities and Exchange Policy Board hereby makes the following rules,

the same having been published previously as required under the said

section 506, namely:-

THE COMPANIES' SHARE CAPITAL (VARIATION

IN RIGHTS AND PRIVILEGES) RULES, 2000

1. Short tit le and commencement.- (1) These rules may be called

the Companies' Share Capital (Variation in Rights and Privileges) Rules,

2000.

(2) They shall come into force at once.

2. Definitions.- (1) In these rules, unless there is anything

repugnant in the subject or context,-

(a) "Commission" means the Securities and Exchange

Commission of Pakistan; and

(b) "Ordinance" means the Companies Ordinance, 1984

(XLVII of 1984).


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(2) All other terms and expressions used but not defined in these rules

shall have the same meaning as assigned to them in the Ordinance.

3. Kinds and classes of share capital.- (1) A company limited by

shares may have more than one kind of share capital and may have

different classes of shares under each kind.

(2) Where a company intends to have different kinds of share

capital and classes of shares therein, it shall specifically so provide in its

memorandum and articles.

4. Nature of rights and privileges.- Each kind of share capital of a

company and class or classes of its shares, if any, as specified in the

memorandum and articles may have different rights and privileges,

which shall be provided in the articles. The variation in the rights and

privileges of the shareholders in a kind of share capital or class or

classes therein may be of the nature, including the following, namely:-

(a) different voting rights; voting rights disproportionate to

the paid up value of shares held; voting rights for

specific purposes only; or no voting rights at all;

(b) different rights for entitlement of dividend, right shares

or bonus shares or entitlement to receive the notices

and to attend the general meetings; and

(c) rights and privileges for indefinite period, for a limited

specified period or for such periods as may from time

to time be determined by the members through special

resolution.


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5. Conditions.- (1) No company shall issue further share capital of

any kind or class carrying different rights and privileges except with prior

approval of the Commission to be obtained on the basis of a special

resolution.

(2) Subject to the provisions of section 86 of the Ordinance, offer

of further share capital of any kind or class carrying different rights and

privileges shall be made to each existing shareholder proportionately

without any discrimination.

(3) If any of the existing shareholders declines to accept the offer

made under sub-rule (2), the shares so declined shall be disposed of by

the directors in such manner as may be provided in the articles or in

accordance with the special resolution passed by shareholders.

(4) In case share capital of a company has different classes

having different rights and privileges and the same is to be offered to the

general public, the fact shall be distinctly mentioned in the offering

document and the difference in the rights and privileges of any class of

share capital shall be conspicuously mentioned in the offering document

or prospectus, etc.

No.F.ED/SECP-5/2000

(Hizbullah Siddiqui)Joint Director (Admn.)


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The Gazette of Pakistan

EXTRA ORDINARY

PUBLISHED BY AUTHORITY

ISLAMABAD, SEPTEMBER 25, 2000

PART II

Statutory Notifications (S.R.O.)

GOVERNMENT OF PAKISTANSECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

Islamabad, the 25th September, 2000

NOTIFICATION

S.R.O. ----(I)/2000.- In exercise of powers conferred by section 506 of the

Companies Ordinance, 1984 (XLVII of 1984), read with Finance Division's Notification

No. S.R.O. 698(I)/86, DATED July 2, 1986, the Securities and Exchange Commission

of Pakistan hereby makes the following rules, the same having been published

previously as required by the said section, namely :-

THE LEASING COMPANIES (ESTABLISHMENT AND REGULATION) RULES, 2000

(As amended upto December 21, 2000)

1. Short title and commencement. - (1) These rules may be called theLeasing Companies (Establishment and Regulation) Rules, 2000.


2. Definitions. - (1) In these Rules, unless there is anything repugnant inthe subject or context ,-

(a) Certificate of investment means a certificate of investment issued by a

leasing company under these rules;

(b) Commission" means the Securities and Exchange Commission ofPakistan established under Securities and Exchange Commission ofPakistan Act , 1997(XLII of 1997);

(c) company means a company incorporated under the CompaniesOrdinance, l984 (XLVII of l984);


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(d) "documents" include vouchers, bills, promissory notes, securities forleases, advances and claims by or against the company and otherdocuments supporting entries in the books of the leasing company;

(e) "equity" includes paid up share capital, free reserves,unappropriated profits and subordinated loans excluding deferred taxreserves and treasury stocks;

(f) "exposure or facilities" include fund based and non-fund based facilities;

(g) "Form" means the Form annexed to the rules;

(h) "Government securities" include such types of Pakistani rupee and foreigncurrency obligations of the Federal Government or of a Corporation whollyowned or controlled, by the Federal Government or ProvincialGovernment and guaranteed by the Federal Government as the FederalGovernment may, by notification in the Official Gazette, declare to the

extent determined from time to time, to be Government securities;

(i) "leasing company" means a company engaged wholly in the business ofleasing or which invests in such business at any one time an amountequivalent to at least seventy per cent of its assets.

Provided that cash and bank balances and investment ingovernment securities shall be excluded to calculate investment in leasingbusiness for purposes of this definition;

(j) "lease key money" means lease security deposit;

(k) "major shareholder" means any person holding five per cent or more ofthe paid-up share capital;

(l) "NBFI" means a Non-Bank Financial Institution and includes a DFI,Modaraba, Leasing Company, Housing Finance Company, InvestmentBank, Discount House and Venture Capital Company;

(m) Ordinance means the Companies Ordinance, l984 (XLVII of l984);

(n) "person" includes an individual, a Hindu undivided family, a firm, anassociation or body of individuals whether incorporated or not, acompany and every other juridical person;

(o) "records" includes ledgers day books, cash books and all other manualsor magnetic records used in the business of the leasing company; and

(p) "small entrepreneurs" mean individuals, firms and companies having fixedassets excluding land and building of the value of not more than twenty


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million rupees and facilities allowed to the software exporters or softwarehouses and information technology companies;

(2) The words and expressions used in these rules but not defined shall havethe same meanings as are assigned to them in the Companies Ordinance, 1984 (XLVIIof 1984).

3. Eligibility conditions for the establishment of a leasing company.-Aleasing company may be established if each of its sponsors, proposed directors, chiefexecutive and chairman of the Board of Directors fulfills the following terms andconditions, namely:-

(a) he has not been associated with any illegal banking business, deposittaking or financial dealings;

(b) he and companies in which he is a director or major shareholder, have noover-due loans or instalments outstanding towards banks or NBFIs;

(c) neither he nor the companies in which he is a director or majorshareholder has defaulted in the payment of taxes as on the date ofapplication;

(d) he has not been sponsor, director or chief executive of a defaulting co-operative finance society or finance company;

(e) he has never been convicted of fraud or breach of trust or of an offenceinvolving moral turpitude or removed from service for misconduct;

(f) he has neither been adjudged as insolvent nor suspended payment of hisdebts nor has compounded with his creditors; and

(g) except for a nominee director, his net-worth as per wealth statementssubmitted with the tax authorities is not less than twice the amount to besubscribed by him personally;

4. Permission to form a leasing company.- (1) A person desirous offorming a leasing company shall make an application to the Commission as set out inForm-1 providing information, as given in Annexure thereto, along with all the relevantdocuments and receipt evidencing the payment of non-refundable processing feeamounting to one hundred thousand rupees.

(2) The Commission may, if it is satisfied that the persons seeking permissionto form the leasing company has fulfilled the terms and conditions specified in rule 3,permit by an order in writing such person to establish a leasing company.

(3) The permission granted under sub-rule (2) shall be valid for a period of sixmonths unless extended for a maximum period of three months under special


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circumstances, on the application of the promoters made before the expiry of said sixmonths.

5. Conditions for grant of licence.- A leasing company shall not begranted licence unless it fulfills the following conditions, namely;

(a) it is incorporated as a public limited company under the Ordinance;

(b) it has a minimum paid-up share capital of two hundred million rupees;

(c) ithas allotted at least fifteen per cent of the paid-up share capital to thepromoters;

(d) its promoters and directors have given undertaking that they shall notdispose of their shares for a minimum period of three years from the dateof commencement of business except with the prior approval of theCommission;

(e) appoints its chief executive who does not hold such office in any bank orNon-Bank Financial institution or insurance company or investmentcompany;

(f) it has given an undertaking that no change in the Memorandum ofAssociation and in the directors shall be made without prior authorizationof the Commission and that all conditions of rule 3 shall be complied with;and

(g) it has given undertaking that the conditions of operation set out in these

rules or specified by special order of Commission shall be duly complied.

6. Commencement of leasing operations.- (1) A leasing company shallcommence business and its operations only after it has been issued a licence underthese rules.

(2) A leasing company shall make an application for obtaining a licence inForm- II.

(3) The licence to carry on business as a leasing company shall be grantedby the Commission as set out in Form- III.

(4) Without prejudice to the terms and conditions set out in rule 7, theCommission may while granting licence, or subsequently, impose any other conditionsas it may deem necessary.

7. Terms and conditions of operation.- A leasing company shall operatein accordance with the following conditions, namely:-

(1) it shall -


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(i) invest its assets in leasing business as provided in clause (i) of rule2;

(ii) appoint as its chief executive and at least one of the directors having

senior management level experience in financial sector preferablyin leasing sector for at least five years ;

(iii) appoint its chief accounting officer who is a chartered accountant ora Cost and Management Accountant or a person having MastersDegree in Commerce or Business Administration with financespecialization and experience of at least five years of accounting ina responsible position;

(iv) disclose all facilities exceeding thirty per cent of its equity in itsaccounts;

(v) maintain accounts of leasing operations having regard to theInternational Accounting Standards notified under sub-section (3) ofsection 234 of the Ordinance and technical releases issued byInstitute of Chartered Accountants of Pakistan;

(vi) create reserve fund to which shall be credited -

(a) an amount not less than twenty per cent of its after tax profits tillsuch time the reserve fund equals the amount of the paid upcapital; and

(b) thereafter, a sum not less than five per cent of its after taxprofits:

Explanation.-Issuance of bonus shares shall only be madefrom the reserves available after appropriation created underclause (b) and since such bonus shares will increase the paidup capital, the leasing company shall transfer further amountsto the reserves in order to comply with condition of clause (a);

(vii) ensure, while granting any facilities, that total facilities availed by anyborrower or lessee from Non-Bank Financial Institutions and Banksdoes not exceed ten times of the equity of the borrower or lesseeand obtain copy of accounts relating to the business of each of itsborrower/lessee for analysis and record in the following manner,namely :-


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Explanat ion .- Surplus arising on revaluation of assets determined inaccordance with International Accounting Standards by a firm ofChartered Accountants approved by the Commission for this purposemay be considered for the purpose of calculating the exposure limitunder this rule. The surplus on revaluation of assets so determined isrequired to be reflected in the balance sheet of the borrower orlessee.

(viii) ensure, while granting any facility exceeding one million rupees, that-

(a) current asset to current liabilities ratio of the borrower/lesseedoes not fall below 1:1: or any ratio as prescribed from time totime, however, this condition may be relaxed in case of facilitiesupto two million rupees by recording reasons itsof.


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Provided that current maturities of long term debt notyet due for payment may be excluded from the current liabilitiesfor the purpose of calculating this ratio;

(b) long term debt equity ratio does not exceed 60:40 or any otherratio as prescribed; and

(c) due weightage is given to credit report relating to the borroweror lessee and his group obtained from Credit InformationBureau of the State Bank of Pakistan. If the credit reportsindicate default, the further facilities shall be extended only afterrecording reasons to do so;

Explanation.- "Group" means a set of business companies orconcerns under joint control or associated together orsubsidiaries of a holding company; and

(d) lessee is registered tax payer and has paid its utility bills.

(ix) provide facilities at least five per cent of its fund based facilities tosmall entrepreneurs.

(x) acquire and maintain membership of Leasing Association of Pakistan(LAP) and follow the code of conduct prescribed by the said

Association.

(xi) follow guidelines issued to safeguard leasing company against their

involvement in money laundering activities and other unlawful trades,it shall add to or reinforce the following precautions, a leasingcompany may have been taking in this regard; namely :-

(a) leasing company shall make reasonable efforts to determine thetrue identity of the customer before extending their services andparticular care shall be taken to identify ownership of allaccounts and those using safe custody facilities, effectiveprocedures shall be instituted for obtaining identification fromnew customers and an explicit policy shall be devised to ensurethat significant business transactions are not conducted withcustomers who fail to provide evidence of their Identity;

(b) leasing company shall ensure that business is conducted inconformity with high ethical standards and that rules andregulations are adhered to. It is accepted that leasing companynormally does not have effective means of knowing whether atransaction stems form or forms part of wrongful activity.Similarly, in an International context, it may be difficult to ensurethat cross border transactions on behalf of customers are in


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compliance with the regulations of another country.Nevertheless, leasing company shall not set out to offerservices or provide active assistance in transactions which intheir opinion are associated with money derived from illegalactivities; and

(c) leasing company shall establish specific procedures forascertaining customer status and his sources of earning formonitoring of accounts on a regular basis for checking identitiesand bonafides of remitters and beneficiaries, for retaininginternal record of transactions for future reference. Thetransactions, which are out of character with the normaloperation of the account involving high deposits, withdrawalsand transfers, shall be viewed with suspicion and propertyinvestigated.

(xii) keep the information upto date provided in annexures to Form I and

II by communicating changes and modification therein withinfourteen days of such change or modifications.

(xiii) provide return on deposits which may be different for differentvolumes of deposits provided uniformity is observed within eachcategory but deposits etc. of listed companies, recognised charitabletrusts and statutory bodies shall, however, be exempt.

(2) It shall not -

(i) make exposure to a single group for more than twenty per cent of

the net investment in leasing finance, however, in arriving atexposure per person under this rule, the following shall beexcluded, namely :-

(a) ninety per cent of certificates of deposit and certificates ofinvestments of the lessee under lien with the leasingcompany;

(b) face value of FIBs lodged by the lessee as collateral; and

(c) Pak rupee equivalent of the face value of Special US DollarBonds converted at official rate, lodged by the lessee ascollateral.

(ii) allow facilities to any of its directors or to individuals, firms orcompanies in which it or any of its director is interested as partner,director or guarantor, as the case may be, its chief executive andits major shareholders, including their spouses, parents andchildren or to firms and companies in which they are interested as


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partners, directors or major shareholders of that concern withoutthe approval by the directors of that leasing company:

Provided that the director interested in seeking suchapproval shall not take part in the proceedings of the approval ofthe facility;

(iii) allow unsecured facilities or facilities secured only by guaranteesexcept the facilities provided against bank guarantees, the end useof which will be verified by the leasing company to be productive;

Provided that the bank providing guarantee shall have ratinggrade not lower than BBB;

(iv) grant unsecured facilities to or allow facilities on the guarantees ofits chief executive, directors and major shareholders including theirspouses, parents, and children or to firms and companies in which

they are interested as partners, directors or major shareholders ofthat concern;

(v) appoint or elect more than twenty-five percent of its directors fromthe same family, including spouse, dependent lineal ascendantsand descendants and dependent brothers and sisters;

(vi) undertake the business of real estate or provide funds to theconstruction companies, builders and developers and companiesdealing in real estate:

Provided that a leasing company may lease machinery,equipment and vehicles to the construction companies;

(vii) hold, deal, or trade in real estate except for use of leasing companyitself;

(viii) engage in leasing operations pertaining to -

(a) open land;

(b) buildings, other than factory building and office buildinglocated within or outside the factory premises to be usedexclusively as such by a lessee, subject to a maximum of onehundred and twenty square feet per employee and residentialundertaking and warehouses; and

(c) furniture or furnishing of any type:


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Provided that the company may lease hard furnitureexcluding carpets and curtains upto five per cent of itsportfolio;

(ix) fix the period of lease for less than three years in the case of anylease agreement except in case of computers and other equipmentused in information technology;

(x) remove any of its records or documents relating to its businessfrom Pakistan to a place outside Pakistan without the priorpermission of the Commission;

(xi) allow facilities for speculative purposes;

(xii) make change in its chief executive and board of directors excludingdirector nominated by creditors and sponsoring financial institutionswithout prior approval of the Commission; and

(xiii) make investment in un-quoted shares of any company without theapproval of the Commission

(3) The companies granted licence before the commencement of theseRules, shall raise the paid up capital to two hundred million rupees by 30th June, 2001.

8. Limits on exposure.- (1) Liabilities, excluding contingent liabilities, of aleasing company shall not exceed seven times of its equity during first two years of itsoperations and ten times of the equity in the subsequent years.

(2) Contingent liabilities of a leasing company shall also not exceed seventimes of its equity during the first two years of its operations and ten times of the equityin the subsequent years.

9. Margin against facilities.- (1) Following minimum margins shall bemaintained against various facilities and all guarantees will be backed by 100%realizable securities -

(a) in case of performance bonds, the condition of 100% cover ofrealizable securities may be relaxed subject to minimum compulsoryrealizable security cover equivalent to 20% of the amount of theperformance bond;

(b) in case of guarantees issued against mobilisation advance, thecondition of 100% cover of realizable securities may be relaxedsubject to the following conditions, namely :-

(i) guarantees issued should contain a clause that themobilisation advance shall be released by the beneficiarythrough the guarantor leasing company only; and


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(ii) at the time of issuing such a guarantee the beneficiary shouldsign an agreement with the leasing companies that releasesout of mobilisation advance would be covered by realizableassets; and

(c) in case of bid bonds issued on behalf of domestic consultancy firmsbidding for international contracts where the consultancy fees are tobe received in foreign exchange, the requirement of 100% cover byrealizable securities may be waived off, and this relaxation wouldalso be available to all suppliers of goods and services biddingagainst international tenders.

(2) No leasing company shall provide unsecured facilities to finance subscriptiontowards floatation of share capital of public limited companies or allow facilities againstits own shares or shares of its associated undertaking and subsidiaries thereof orshares of companies not listed on the Stock Exchange and shares of listed companies

obtained as collateral shall be subject to the following minimum margins,namely :-

(a) where the current market value does not exceed the precedingtwelve months average market value, 20% of the current marketvalue;

(b) where current market value exceeds the preceding twelve months'average market value but does not exceed twice the precedingtwelve months' average market value, 40% of the current marketvalue; and

(c) Where the current market value exceeds twice the preceding twelvemonths' average current market value, 50% of the current marketvalue.

Provided that no leasing company shall hold shares in anycompany as pledgee or mortgagee, of an amount exceeding thirtypercent of its own equity or thirty per cent of the paid-up capital ofthat company whichever is less.

(3) Certificates of deposit of banks with investment grade will be subject to amargin of 15% and COIs/COMs, TFCs with investment grade rating but not lower thanBBB will be subject to a margin of 25% of face value or market value whichever is less.

(4) Facilities against pledge of trading stocks shall be subject to a margin of25%.

(5) Facilities against hypothecation shall be subject to a margin of 50%.


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10. Provisioning for non-performing assets:- Every leasing company shallfollow prudential guidelines in the matter of classification of its assets and provisioningthere against as specified below:

A. Short Term Facilities:-

Nature OfClassificat-ion

For Finance Lease,Operating Lease andTerm Loans

Provisions to be made

1. Overdue Where rentals, profit ormark up or principal areoverdue (past due) by180 days from the duedate.

No provision is to be made.

2. Substandard Where rentals, profit ormark up or principal are

overdue (past due) by181 days but less thanone year from the duedate.

Provision of 20% of the differenceresulting from the outstanding

balance of net investment in leasefinance and principal less theamount of liquid assets realizablewithout recourse to a Court of Lawand forced sale value of leasedassets as valued by valuersfulfilling prescribed eligibilitycriteria, in accordance with theguidelines provided in this rule.

3. Doubtful Where rentals, profit ormark up or principal

are overdue (past due)more than one year butless than two yearsfrom due date.

Provision of 50% of the differenceresulting from the outstanding

balance of net investment in leasefinance and principal less theamount of liquid assets realizablewithout recourse to a Court of Lawand forced sale value of leasedassets as valued by valuersfulfilling prescribed eligibilitycriteria, in accordance with theguidelines provided in this rule.

4. Loss Where rentals, profit or

mark up or principalare overdue (past due)beyond two years fromthe due date.

Provision of 100% of the

difference resulting from theoutstanding balance of netinvestment in lease finance andprincipal less the amount of liquidassets realisable without recourseto a Court of Law and forced salevalue of leased assets as valuedby valuers fulfilling prescribedeligibility criteria, in accordance


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with the guidelines provided in thisrule.

B - Long Term Facilities:-

Nature OClassification For Finance Lease/ OperatingLease/ Term Loans Provisions to be made

1.Overdue Where rentals, profit or mark upor principal are overdue (pastdue) for one year from the duedate.

No provision is to be made.

2.Substandard Where rentals, profit or mark upor principal are overdue (pastdue) by one year but less thantwo years from the due date.

Provision of 20% of thedifference resulting fromthe outstanding balance ofnet investment in leasefinance and principal less

the amount of liquid assetsrealizable without recourseto a Court of Law andforcedsale value of leased assetsas valued by valuersfulfilling prescribedeligibility criteria, inaccordance with theguidelines provided in thisrule.

3. Doubtful Where rentals, profit or mark upor principal are overdue (pastdue) by more than two yearsbut less than three years.

Provision of 50% of thedifference resulting fromthe outstanding balance ofnet investment in leasefinance and principal lessthe amount of liquid assetsrealisable without recourseto a Court of Law andforcedsale value of leased assetsas valued by valuersfulfilling prescribed eligibilitycriteria, in accordance withthe guidelines provided inthis rule.

4. Loss. Where rentals, profit or mark upor principal are overdue (pastdue) beyond three years from

Provision of 100% of thedifference resulting fromthe outstanding balance of


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the due date. net investment in leasefinance and principal lessthe amount of liquid assetsrealisable without recourseto a Court of Law andforcedsale value of leased assetsas valued by valuersfulfilling prescribed eligibilitycriteria, in accordance withthe guidelines provided inthis rule.

Notes.-

1. Where profit is overdue (past due) by one hundred and eighty days or more fromthe due date, unrealised profit shall be put in a Suspense Account and shall not becredited to Income Account.

2. Liquid assets mean realizable amount of bank deposits, certificates of deposit,government securities, shares of listed companies, NIT units, certificates of mutualfunds, gold ornaments, inventories pledged to leasing companies with possession with'perfected lien' duly supported with flawless documentation.

3. Subjective evaluation of performing and non-performing lease portfolio shall bemade for risk assessment and where considered necessary the category of

classification determined on the basis of time based criteria shall be furtherdowngraded. Such evaluation shall be carried out on the basis of adequacy of securityinclusive of its realizable value, cash flow of lessee, his operation in the account,documentation covering advances and credit worthiness of the lessee, etc.

4. The rescheduling or restructuring of non-performing lease facilities shall notchange the status classification of a lease facilities etc, unless the terms and conditionsof rescheduling/restructuring are fully met for a period of at least one year (excludinggrace period, if any) from the date of such rescheduling / restructuring. Accordingly,leasing companies are directed to ensure that status of classification as well asprovisioning is not changed in relevant reports merely because of the fact that a leasefacility has been restructured or rescheduled. However, while reporting to the CIB,such lease facilities may be shown as "rescheduled/restructured" instead of "default".

5. Leasing companies will continue to classify their lease facilities portfolio andmake provision there against in accordance with the time based criteria prescribedabove. However, where a leasing company wishes to avail of the benefit of collateralsheld against lease facilities, they can consider the realizable value of mortgaged orpledged assets for deduction from the outstanding principal amount of lease rentalsagainst which such assets are mortgaged/pledged, before making any provisions. The


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realizable value shall be the value that could currently be obtained by selling themortgaged or pledged assets in a forced/distressed sale conditions. Accordingly,leasing companies shall take into account only forced sale value into considerationwhile determining the required provisions. Lease rentals against which securities arenot available, or which have not been valued according to these guidelines and verifiedby the external auditors, shall continue to be classified and provided for according tothe time-based criteria. Leasing companies shall follow the following uniform criteria,for determining the realizable value of mortgaged, pledged or leased assets, namely:-

(i) Only leased assets having registered mortgage, equitable mortgage(where NOC for creating further charge has not been issued by leasingcompany) and pledged/leased assets shall be considered. Assets havingpari passu charge shall be considered on proportionate basis;

(ii) hypothecated assets and assets with second charge and floating chargeshall not be considered;

(iii) valuations shall be carried out by an independent professional valuer whoshould be listed on the panel of valuers mainted by the Leasing

Association of Pakistan (LAP) for this purpose. LAP shall lay down theminimum eligibility criteria with the prior approval of the Securities &Exchange Commission of Pakistan for placement of valuers on the panelto be maintained by it. The valuer while assigning any values to themortgaged, pledged or leased assets, shall take into account all relevantfactors affecting the saleability of such assets including any difficulty inobtaining their possession, their location and condition and the prevailingeconomic conditions in the relevant sector, business or industry. Therealizable values of mortgaged, pledged or leased assets so determined

by the valuers must have to be a reasonably good estimate of the amountthat could currently be obtained by selling such assets in aforced/distressed sale condition. The valuers should also mention in theirreport the assumptions made, the calculations/formulae/basis used andthe method adopted in determination of the realisable values;

(iv) valuation shall be done at least once in three years. For example, anyvaluation done on 1st November, 1999 would be valid for considerationfor the accounting periods ending on December 31, 1999, and December31, 2001 and for subsequent accounting periods a fresh valuation wouldbe required. If valuation is older than three years as explained above, are-valuation should be done, otherwise the valuation shall be taken as nil;

(v) the categories of mortgaged, pledged or leased assets to be consideredfor valuation along with discounting factors to be applied would be asunder (no other assets shall be taken into consideration) :-

(a) Liquid assets : Valuation of Liquid Assets, excluding pledgedstocks, which are dealt with at (d) below, shall be determined bythe leasing company itself and verified by the external auditors.


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However, in the case of pledged shares of listed companies valuesshould be taken at market value as per active list of StockExchange on the balance sheet date and as per guidelines given inthe TR-23 issued by the Institute of Chartered Accountants ofPakistan. Moreover, valuation of shares pledged against leaserentals after issuance of this circular shall be considered only ifthese have been routed through Central Depository Company ofPakistan (CDC), otherwise these will not be admissible fordeduction as liquid assets while determining required provisions;

(b) Land and building : Valuation of land and buildings would beaccepted as determined by the valuers in accordance with thecriteria given at point 5(iii) above and no further discounting factorwould be applied on forced sale value determined by them; and

(c) Plant and machinery : Entries of classified lessees shall bedivided into following categories at the balance sheet date and

discounting factors shall be applied to forced sale value asspecified below :

Category Discounting factors to be appliedto forced state value

A. In operation No discussing factors to be applied

B. In operation at the timeof valuation but nowclosed/in liquidation

15% of forced sale value on thedate of closure.

1st year after closure - 25% of

forced sale value. 2nd year - 50% of forced sale

value.C. Closed / in liquidation

at the time of valuationand no change insituation.

After valuation - 1st year 25% offorced sale value.

2nd year - 50% of forced salevalue.

(d) Pledged stocks: In case of pledged stocks of perishable and non-perishable goods, forced sale value should be provided by valuers,which should not be more than six months old, at each balancesheet date. The goods should be perfectly pledged, the operationof the godowns should be in the control of the leasing companyand regular valid insurance and other documents should beavailable. In case of perishable goods, the valuer should also givethe approximate date when these are expected to be of no value.

(vi) for valuations of mortgaged or leased assets carried out within a period oftwelve months prior to December 31, 1999, these may be considered


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provided they were carried out by an independent professional valuer anda revised certificate is obtained from the valuer regarding the forced salevalue of the assets as on the date the valuation was carried out. Thesevaluations should then be subject to the discounting percentages andother criteria as laid down in this Circular.

(vii) the values of mortgaged/pledged/leased assets determined by the valuersshall be subject to verification by the external auditors, who may rejectcases of valuation, which in their opinion, do not appear to have beenprofessionally carried out and values determined are unreasonable, or inthe case of which valid documentation of mortgage, pledge or lease,supported by legal opinion wherever required, is not available on record.

6. Investments and other assets.- Subjective evaluation of lease portfolio andother assets shall be carried out by the leasing company. Classification of such assetsand provision required thereagainst shall be determined keeping in view the riskinvolved and the requirements of the International Accounting Standards.

7. Timing of creating provisions.-Leasing companies shall review, at least on aquarterly basis, the collectibility of their lease rentals portfolio and shall properlydocument the evaluation so made. Shortfall in provisioning, if any, determined as aresult of the quarterly assessment shall be provided for immediately in their books ofaccounts by the leasing companies.

8. Verification by the Auditors.- The external auditors as a part of their annualaudits of leasing companies shall verify that all requirements of this rule in classificationof assets and determination of provisions required thereagainst have been compliedwith. The Securities and Exchange Commission of Pakistan shall also check the

adequacy of provisioning during on-site inspection.

11. Overdues and defaults - recovery thereof:- (1) Every leasing companyshall furnish the Commission with a list of defaulters on prescribed format, on quarterlybasis. A list of rescheduled and restructured facilities would also be submitted to theCommission in the similar manner on prescribed format. A person, whether natural or

juristic, shall be deemed to be defaulter if he (or his dependent family members orconcerns owned or controlled by him or concerns in which he or his dependent familymembers are major shareholders) has failed to pay off or liquidate any fiduciaryobligation towards any leasing company in Pakistan as was agreed upon or requiredunder the terms and conditions of availment of the financing facility or to do or performan act agreed to or undertaken in writing to be done or performed by him and suchfailure has continued for a period of 360 days from the date on which he was requiredto make the payment or to do or perform the act.

(2) Every leasing company shall nominate an officer as recovery officer orconstitute a section as recovery section depending upon the magnitude of defaults.


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(3) Besides the measures presently instituted by each leasing company, theleasing company will set quarterly recovery targets as a percentage of the overdueobligations and communicate the same on quarterly basis to the Commission.

(4) A progress report on the recovery in relation to the targets shall besubmitted to the Commission on quarterly basis. The leasing company will also berequired to explain deficiency if any, in meeting the targets and the strategies evolvedwith a view to ensuring achievement of subsequent targets.

(5) Wherever considered legally appropriate by the leasing company, casesof default may be referred to the Courts. The list of such cases and progress ofrecovery shall also be sent to the Commission on a quarterly basis.

l2. Bar to certain transactions.- No leasing company shall -

(a) transfer ownership of controlling shares, merge with, acquire ortake over any other leasing company unless it has obtained prior

approval of the Commission to the scheme of such merger,acquisition or take over; or

(b) employ as a broker, directly or indirectly, any of its directors,officers, or employees, or a person, or a major shareholder whobeneficially owns, whether individually or in association with closerelatives more than five percent either of the equity or othersecurities with voting rights, if any, issued by the leasing company.

Explanation.- "Relative" means spouse, brothers, sisters, father,mother, grand father, grand mother, other lineal ascendants and

descendants, sons, daughters, grand sons and grand daughters.

13. Rate of mark up and fees.- A leasing company may charge rental, markup, commitment fee or other charges on its facilities as the case may be in accordancewith the prevailing rates.

l4. Insurance coverage.-A leasing company shall -

(a) obtain sufficient insurance coverage on its own or on its clientsbenefit against any losses that may be incurred as a result ofemployees fraud or gross negligence;

(b) ensure that properties being financed by it have adequateinsurance cover; and

(c) provide full insurance cover for its deposits/COIs etc. of less thanone hundred thousand rupees.


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15. Internal audit.- Every leasing company shall have an Internal AuditDepartment whose head will report to its chief executive directly and shall, inter alia, beresponsible for compliance with these rules and establish an effective means of testing,checking and compliance with its policy and procedures established by it.

16. Places of business.- (1) A leasing company may open further places ofbusiness but it shall intimate the same to the Commission within fifteen days.

(2) A Leasing Company shall also intimate to the Commission the closure ofany of its places of business within fifteen days.

17. Issue of certificates of investment.-(1) A leasing company which fulfilsthe following conditions, may apply to the Commission for its permission to issuecertificates of investment, namely:-

(a) the company has been actively engaged in leasing business for aperiod of two years;

(b) the corporate and fiduciary conduct of the company and itsdirectors has been satisfactory; and

(c) the company has obtained credit rating of minimum investmentgrade from a credit rating agency registered with the Commissionunder the Securities and Exchange Ordinance, 1969 (XVII of1969), and such credit rating shall be updated each year during thecurrency of the issue:

Provided that the company shall publish the credit rating in

each financial statement, advertisement and brochures.

(2) If the Commission is satisfied that the company, fulfils the conditions ofeligibility specified in sub-rule (1), it may give permission to such company to issuecertificates of investment.

(3) All leasing companies issuing certificates of investment shall observe thefollowing conditions, namely:-

(a) a certificate of investment issued under these rules shall beregistered in the name of the person to whom it is issued;

(b) the maturity period of certificate of investment shall not be less thanthree months and more than five years:

Provided that a certificate shall be redeemable before itsmaturity period but no return shall be paid if redeemed earlier thanthree months;


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(c) no advertisement inviting the general public for making investmentin such certificates shall be published unless prior approval of theCommission to this effect has been obtained and suchadvertisement shall contain the credit rating;

Provided that if no decision of the Commission is conveyed to theleasing company within fifteen days of the receipt of application,the advertisement shall be deemed to have been cleared forpublication; and

(d) not less than fifteen per cent of the resources raised throughcertificates of investment shall either be invested in registeredNational Investment Trust units, Government securities or listedsecurities subject to the conditions as prescribed in the rules madefor investment of provident fund in listed securities excluding thecertificates of investment held by financial institutions.

18. Eligibility of banks and NBFIs to undertake leasing business .- (1)Banks and NBFIs may undertake leasing business subject to licence to be granted bythe Commission.

(2) The Commission may, while granting the licence under sub-rule (1),impose such conditions as it may deem necessary.

l9. Submission of reports, etc..- (1)The Commission may, by general orspecial order, require a leasing company, to prepare and send to members, theregistrar, any authority, a stock exchange and any other person such periodicalstatement of accounts, information or other reports in such forms and manner and

within such time, as may be specified in the order.

(2) The Commission shall monitor the general financial condition of a leasingcompany, and, at its discretion, may order special audit and appoint an auditor to carryout detailed scrutiny of the affairs of the company, or appoint both an auditor and aninspector, provided that the Commission may, during the pendency of the scrutiny, passsuch interim orders and directions as may be deemed appropriate.

(3) On receipt of the special audit report or report from the inspector, theCommission may direct the company to do or to abstain from doing certain acts andissue directives for immediate compliance which shall forthwith be complied.

(4) Every leasing company shall submit returns as may be prescribed by theCommission from time to time.

20. Penalties.- (1) Whoever fails or refuses to comply with, orcontravenes any provision of these rules, or knowingly and willfully authorises orpermits such failure, refusal or contravention shall, in addition to any other liability underthe Ordinance, be also punishable with fine which may extend to two thousand rupeesand where, the contravention is a continuing one, with or further fine which may extend


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to one hundred rupees for every day after first during which such contraventioncontinues.

(2) Notwithstanding anything contained in sub-rule (1), in case ofcontravention of any provision of these rules, the Commission may cancel the licence ofthe leasing company after issuing a show cause notice and giving such company anopportunity of being heard or pass any other order deemed appropriate by theCommission.

21. Repeal.- The Leasing Companies (Establishment and Regulation) Rules,1996 are hereby repealed.

FORM-I[See rule 4(1)]

APPLICATION FOR PERMISSION TO FORM A LEASING COMPANYDated, the

To

The Securities and ExchangeCommission of Pakistan,Islamabad.

Dear Sir,

We hereby apply for grant of permission under rule 4 of the Leasing Companies(Establishment and Regulation) Rules, 2000, to form a leasing company under thename and style of ----------------------------------------------------------------------------------------

The information and documents as required in the Annexure to this form dulyverified and signed by all promoters and proposed directors along with five spare copiesof this application and an affidavit by them as to the correctness of the details, issubmitted.

We undertake to keep this information upto date by communicating changes ormodifications therein within fourteen days of such changes/modifications.

A receipt of Rs.---------------------being the processing fee, deposited in-------------- on ------------------------is enclosed.

Yours faithfully,

------------------------Verification byOath Commissioner.


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ANNEXURE

[See rule 4(1) and 7(1) (xiii)]

INFORMATION TO BE SUPPLIED FOR OBTAINING

PERMISSION TO FORM A LEASING COMPANYAND SUBSEQUENT CHANGE IN DIRECTORSHIP AND CHIEF EXECUTIVE

1. Full name, former name if any, fathers or husbands name, nationality,residential and business address, national tax number, present occupation of eachsponsor, proposed director, proposed chief executive and proposed chairman of theBoard. (Institutional sponsors shall mention their names and addresses only instead ofgiving all these particulars of their nominee directors).

2. Names and addresses of companies, firms and other organizations of which theaforesaid sponsors, proposed chief executive and proposed chairman are or have beendirectors, partners or office holders during the last ten years. Copies of annual

accounts of such companies and firms for the last three years alongwith summary oftheir paid-up share capital, free reserves, profit after tax and dividend payment to beprovided.

3. Financial standing, educational as well as professional qualifications andexperience of persons mentioned in paragraph 1 above, supported by documentaryevidence.

4. Percentage of capital, each sponsor proposes to contribute in the proposedcompany.

5. Feasibility report of the proposed company.

6. Evidence of payment of income tax and wealth tax by the sponsors in individualcapacity as well as by the companies, firms, etc., wherein they are or have beendirectors during the preceding five years.

7. Net-worth certificate of each sponsor supported by a duly authenticated copy ofthe latest wealth statement filed with the taxation department. In the case ofsponsors/directors residing in countries where filing of wealth statement is not therequirement of law, a certificate of personal net-worth and general reputation issued bya bank of international repute shall be acceptable.

8. Names of the bankers of the sponsors alongwith their account numbers.

9. Draft of the Memorandum and Articles of Association.

10. Affidavit from each person mentioned in paragraph 1 above, stating that-

(i) he has not been associated with any illegal banking business, deposittaking or financial dealings;


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(ii) he and companies in which he is a director or major shareholder have noover-due loans or installments outstanding towards banks or otherfinancial institutions;

(iii) neither he nor companies in which he is a director or major shareholderhas defaulted in paying taxes as on the date of application;

(iv) he has not been sponsor, director or chief executive of a defaultingcooperative finance society or finance company;

(v) he has never been convicted of fraud or breach of trust or of an offenseinvolving moral turpitude or removed from service for misconduct;

(vi) he has neither been adjudged an insolvent nor has defaulted in makingpayments, to his creditors;

(vii) his net-worth is not less than twice the amount to be subscribed by himpersonally (not applicable to a nominee director).

FORM-II[See rule 6(2) and 7(1)(xiii)}

APPLICATION OBTAINING FOR LICENCE TO OPERATEAS A LEASING COMPANY

Dated, the--------------To,

The Securities & ExchangeCommission of Pakistan,

Islamabad.

Dear Sir,We hereby apply for grant of licence under rule 6 of the Leasing Companies

(Establishment and Regulation) Rules, 2000, to operate as a leasing company.

2. We hereby furnish the following information:-

(a) Date of incorporation as a limited company.(b) Authorised, subscribed and paid-up share capital of the company

(sponsors' equity indicated separately).(c) Names and addresses of directors and number of shares held by each of

them.(d) Directors' interest, direct or indirect, in any other company(ies) with details

of such interest.(e) Details of persons or group controlling the company including major

shareholders with number and value of shares held.(f) Name(s) of holding, subsidiary and associated undertaking(s), if any.(g) Details of qualified staff engaged.(h) Reasons for selecting the proposed place of business with statistical data.


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(i) Additional facts in support of this application.

3. Certified copies of the Memorandum and Articles of Association and Certificateof Incorporation are enclosed.

4. An affidavit as to the correctness of the above information by the chief executiveand two director is also furnished herewith. We undertake to keep this information uptodate by communicating changes or modifications therein within fourteen days of suchchange or modifications.

Yours faithfully,

Signature-----------------(To be signed by all the directors)

FORM -III[See rule 6 (3)]

Securities & Exchange Commission of PakistanIslamabad, Dated, the __________

Registration No. _________

LICENCE TO CARRY ON THE BUSINESS OF A LEASING COMPANY

The Securities & Exchange Commission of Pakistan having considered theapplication for grant of licence under rule 6 of the Leasing Companies (Establishmentand Regulation) Rules, 2000, by *_____________________________________ andbeing satisfied that the said * ________________________________________ iseligible for the licence , hereby grants, in exercise of the powers conferred by sub-rule(3) of rule 6 of the Leasing Companies (Establishment and Regulation) Rules, 2000,licence to * ______________________________________ subject to the conditionsstated herein below or as may be prescribed or imposed hereafter.

Signature of the Officer

______________________________________________________* Name of the Company

----------------------------------------------------------------------------------------------------------------

(HIZBULLAH SIDDIQUI)Joint Director

No.F. 3(5A)/Misc/LES/96 dated _______ 22nd September, 2000


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The Gazette of PakistanEXTRAORDINARY

PUBLISHED BY AUTHORITY

Islamabad, Saturday, March 10, 2001

Part II

Statutory Notifications (S.R.O.)

Government of Pakistan


NOTIFICATION

Islamabad, the 9thMarch, 2001

S.R.O. 150 (I)/2001.-In exercise of the powers conferred by section 33 of the Securities and Exchange Ordinance, 1969

(XVII of 1969), read with clause (b) of section 43 of the Securities and Exchange Commission of Pakistan Act, 1997(XLII of

1997), the Securities and Exchange Commission of Pakistan, with the approval of the Federal Government is pleased to make

the following rules, namely:-

MEMBERS AGENTS AND TRADERS (ELIGIBILITY STANDARDS) RULES, 2001

1. Short title and commencement.--(1) These rules may be called the Members Agents and Traders (Eligibility

Standards) Rules, 2001.


2. Definitions.-In these rules, unless there is anything repugnant in the subject of context, --

(a) agent means a person appointed by a member of a Stock Exchange to act on his behalf for the purpose

recognized by a stock exchange and includes a sub-broker or head of a branch office;

(b) Commission means Securities and Exchange Commission of Pakistan;

(c) trader means an employee of a member who is authorized by such member to execute trade of the investors

through the automated trading system in such exchange.

3. Eligibility criteria.-(1) The eligibility criteria for registration as an agent shall be as follows, namely :-

In the case of an individual, the applicant:

(a) is not less than 21 years of age;

(b) is a citizen of Pakistan;


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(c) is not a lunatic or a person of unsound mind;

(d) has not been convicted of any offence involving fraud or breach of trust;

(e) has not been removed as an agent by a member of a stock exchange for fraud or breach of trust and

furnish a certificate of that effect from his previous employee;

(f) has at least passed graduation or equivalent examination from an institution recognized by the

Government:

Provided that the Commission may relax the educational qualification on merits having regard to the

applicants experience;

(g) has attended a course for the agents prescribed by the stock exchange and approved by the

Commission;

(h) has at least two years experience in a related field such as banking, accountancy or in a brokers office;

(i) has faithfully complied with all general and specific directives of the Commission; and

(j) in the case of partnership a firm or a body corporate, the partners or directors, as the case may be, shallcomply with the requirements contained in clause (i).

(2) The aforesaid conditions shall also apply to the trader employed by a member.

ABDUL HALEEM JADRAN

Joint Director


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STATUTORY NOTIFICATION (S.R.O)Government of Pakistan


PUBLISHED BY AUTHORITYIslamabad the, 26 April, 2000

S. R. O. No. 250 /2001. In exercise of the powers conferred by section 33 of the Securitiesand Exchange Ordinance, 1969 (XVII of 1969), read with clause (b) of section 43 of theSecurities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997), the Securities andExchange Commission of Pakistan, with the approval of the Federal Government, is pleased tomake the following rules, namely:-

Stock Exchange Members (Inspection of Books and Record) Rules , 2001

1. Short title, commencement and application.-i. These rules may be called the Stock Exchange Members (Inspection of Books

and Record) Rules, 2001.ii. They shall come into force at once.

iii. They shall apply to all members of the stock exchanges in Pakistan.2. Definitions.- In these Rules, unless there is anything repugnant in the subject or

context,-

a. Branch office means an office, branch or shop opened and maintainedby a member within or outside the premises of a stock exchange for

conducting the business and trading of shares and securities;b. Central Depository Companies Regulations means the regulations of a

central depository company registered with the Commission under theCentral Depository Companies (Establishment and Regulation) Rules,

1996;

c. Central Depository System means the central depository systemestablished under section 4 of the Central Depositories Act, 1997 (XIX of

1997); and

d. member means a member of a stock exchange.i. All other words and expressions used but not defined in these rules

shall have the same meaning as are assigned to them in the

Securities and Exchange Ordinance, 1969 (XVII of 1969), theCompanies Ordinance, 1984 (XLVII of 1984), or the CentralDepositories Act, 1997 (XIX of 1997).

3. Inspection by a member.- The Commission may order inspection of books andrecord required to be maintained by a member of stock exchange under theserules.

4. Procedure for inspection.-


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. As and when the Commission decides to undertake an inspection, a noticeof fifteen days shall be given to the member of the exchange for suchpurpose. Provided that the notice, as aforesaid, shall not be required if the

Commission is satisfied that immediate inspection is necessary in the

interest of investors and the securities market.

i.

The Commission may appoint one or more persons as inspectors to inspectthe books and record of a member of a stock exchange.

5. Obligations of a member.-. Every director, proprietor, partner, officer and employee of the member of

stock exchange, who is being inspected, shall produce such books of

accounts, record and other documents under his custody or control with

information relating to transaction in securities market within such time asmay be required by the person inspecting the record.

i. The member, referred to in sub-rule(1) shall, in addition to the recordrequired to be maintained under the Securities and Exchange Rules, 1971,

maintain and provide the following record and documents for inspection to

the person authorized by the Commission for the purpose, namely:-. documents relating to opening of the sub-account of the customerswith the Central Depository Company of Pakistan Limited;

a. documents of sub-account holders and the group account holdersas per requirement of the Central Depository Company regulations;

b. documents relating to Zakat status of a customer having an accountwith the Central Depository Company;

c. written consent of clients in respect of contracts entered into asprincipals;

d. margin deposit book;e. registers of accounts of agents;f. an agreement with an agent specifying the scope of authority and

responsibilities of the member and his agent.

g. record of pledging or arranging for the pledging of any securitycarried for the account of any customer, whether physically held orin the Central Depository System with a commercial bank;

h. record of extension or maintenance of credit or arranging for theextension or maintenance of credit to the customers for the purposeof purchasing or carrying any security;

i. record of borrowing on any security or lending or arranging for thelending of any security carried for the account of the customer;

j. record of dealing in foreign currencies as a dealer duly authorizedby the State Bank of Pakistan within the brokerage house at the

stock exchange premises;k. record of establishment of branch offices within or outside the

premises of the stock exchange with the following information,

namely:-

l. has been suspended by a stock exchange,i. Location of the branch offices;

ii. intimation to the stock exchange of such offices;


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iii. status of the person authorized to manage the branch officewhether as an authorized agent or an employee as per theStock Exchange Regulations.

iv. proof of business being done at the branch office in thename of the member;

v.

authority given to the agent or employee to perform all actson behalf of the member;

vi. proof of maintenance of the branch offices bank account inthe name of the member;

vii. proof of proper maintenance of accounts of the customersat the branch offices; and

viii. any other documents and records required to be maintainedunder regulations made by the stock exchange.

ii. A member shall allow a person carrying out inspection to have reasonableexcess to the premises occupied by him or any other person on his behalf

and also extend reasonable facility for examining any books, record,

documents computer-data in possession of the member or any other personand also provide copies of documents or other materials which, in the

opinion of the person carrying the inspection, are relevant.

iii. Every member shall intimate to the Commission the place where thebooks of accounts, records and documents are maintained.

iv. WWithout prejudice to sub-rule (1), every member shall, after theclose of each accounting period furnish to the Commission, if so

required, as soon as possible but not later than six months from theclose of the said period, a copy of the audited balance sheet and profit

and loss account, as at the end of the said accounting period.v. The books of account and other records maintained shall be preserved

for a minimum period of five years.

6.

Submission of inspection report.-. A person authorized to carry inspection shall submit his report to theCommission within the time specified in the order.

i. A person carrying out the inspection shall be entitled to examine orrecord statements of any member, director, partner, proprietor andemployee of the member.

ii. The inspection report shall be in accordance with the terms ofreference given in the order of inspection. In addition, specific findingsor views of the authorized person shall also be given in the report

about the maintenance of books and record in accordance with theserules.

7. Communication of findings.-.

The Commission shall communicate findings of the inspection to themember within fifteen days of the submission of inspection report.i. The Commission shall provide an opportunity of being heard to the

member concerned before taking any action under the law in the lightof any findings of the inspection.

8. Action on findings.- On receipt of explanation, if any, from a member,inspected under these rules, the Commission may require such member totake such measures as it may deem fit in the interest of the securities market


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GOVERNMENT OF PAKISTAN SECURITIES AND EXCHANGE COMMISSION OF

PAKISTAN

Islamabad, the May 10, 2001NOTIFICATION

S.R.O. 300(1)/2001.--In exercise of the powers conferred by section 506 of the

Companies Ordinance, 1984 (XLVII of 1984), and clause (b) of section 43 of theSecurities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997),

Companies Rules Volume III

Documents

Transcript of Companies Rules Volume III