Companies Rules Volume V

Securities and Exchange Commission of Pakistan

Companies Rules

Volume V

Guidelines, Orders, Directives & Guide Series

(Updated up to 5 December 2013)

Companies Rules

Volume V

Guidelines, Orders, Directives & Guide Series

(Updated up to 5 December 2013)


VOLUME I

STATUTES

Insurance Act, 1938 (Repealed)

Securities and Exchange Ordinance, 1969

Companies (Appointment of Trustees) Act, 1972 (Repealed)

Companies (Appointment of Legal Advisors) Act, 1974

Foreign Private Investment (Promotion & Protection) Act, 1976 (Repealed)

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

Companies Ordinance, 1984

Central Depositories Act, 1997

Securities and Exchange Commission of Pakistan Act, 1997

Insurance Ordinance, 2000

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

Anti-Money Laundering Act 2010

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

VOLUME II

RULES

Securities and Exchange Rules, 1971

Investment Companies and Investment Advisors Rules, 1971 (Repealed)

Companies Profits (Workers’ Participation) Rules, 1971

Economic Reforms (Acquisition and Compensation) Rules, 1973 (Repealed)

Companies (Appointment of Trustees) Rules, 1973

Companies (Appointment of Legal Advisors) Rules, 1975

Modaraba Companies and Modaraba Rules, 1981

Corporate Law Authority Rules, 1984 (Repealed)

Companies (General Provisions and Forms) Rules, 1985

Forms

Companies (Invitation and Acceptance of Deposits) Rules, 1987

Companies (Management by Administrator) Rules, 1993

Credit Rating Companies Rules, 1995

Asset Management Companies Rules, 1995 (Repealed)

Companies (Issue of Share Capital) Rules, 1996

Venture Capital Companies and Fund Managers Rules, 1995 (Repealed)

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

Companies (Issue of Capital) Rules, 1996

Central Depository Companies (Establishment and Regulation) Rules, 1996

Companies (Court) Rules, 1997

Companies (Audit of Cost Accounts) Rules, 1998

Companies (Rehabilitation of Sick Industrial Units) Rules, 1999

Companies (Buy-back of Shares) Rules, 1999

Companies (Asset-Backed Securitization) Rules, 1999

VOLUME III

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

Leasing Companies (Establishment and Regulation) Rules, 2000 (Repealed)

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

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

Public Companies (Employees Stock Option Scheme) Rules, 2001

Brokers and Agents Registration Rules, 2001

Balloters Transfer Agents and Underwriters Rules, 2001

Insurance Rules, 2002

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

SECP (Appellate Bench Procedure) Rules, 2003

Single Member Companies Rules, 2003

Margin Trading Rules, 2004 (Repealed)

Commodity Exchange and Futures Contract Rules, 2005

Voluntary Pension System Rules, 2005

Clearing Houses (Registration and Regulation) Rules, 2005

Takaful Rules, 2005 (Repealed)

Anti Money Laundering Rules, 2008

Securities (Leveraged Markets and Pledging) Rules, 2011

Takaful Rules, 2012

Public Sector Companies (Corporate Governance) Rules, 2013

Microinsurance Rules, 2013

VOLUME IV

REGULATIONS

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

Regulations for the Karachi Stock Exchange, 2001

Code of Corporate Governance, 2002

Companies (Registration Offices) Regulations, 2003

Prudential Regulations for Modarabas, 2004

Regulations Governing System Audit of Brokers of Exchanges, 2004

Real Estate Investment Trust Regulations, 2008

Private Equity and Venture Capital Fund Regulations, 2008

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

Group Companies Registration Regulations, 2008

Anti-Money Laundering Regulations, 2008

NBFCs and Notified Entities Regulations, 2008

Prudential Regulations for NBFCs undertaking the Business of Leasing only

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

Code of Corporate Governance, 2012

Debt Securities Trustee Regulations, 2012

Insurance Accounting Regulations, 2012

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

Third Party Administrators for Health Insurance Regulations, 2013

Centralised Information Sharing Solution for Life Insurance Industry Regulations, 2013

VOLUME V

GUIDELINES

Guidelines for Issue of Certificates of Musharika for Modarabas, 1994

Listed Companies (Prohibition of Insider Trading) Guidelines, 2001

Guidelines for Preparation of Prospectus, 2002

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

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

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

Guidelines for the Issue of TFCs to General Public, 2002

Guidelines on Issue of Shares at Discount, 2004

Internet Trading Guidelines, 2005

Guidelines for Issue of Commercial Paper, 2006

Guidelines for Bancassurance, 2010

Corporate Social Responsibility Voluntary Guidelines, 2013

Guidelines on Quarterly Accounts

ORDERS

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

Cement Industry (Cost Accounting Records) Order, 1994

Sugar Industry (Cost Accounting Records) Order, 2001

Companies Cost Accounting Records (General Order), 2008

Companies (Corporate Social Responsibility) General Order, 2009

Fertilizer Industry (Cost Accounting Records) Order, 2011

Chemical Fertilizer Industry (Cost Accounting Records) Order, 2012

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

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

Pharmaceutical Industry (Cost Accounting Records) Order, 2013

DIRECTIVES

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

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

Jul 18, 2002 - Directive to Brokers or Brokerage Firms or Incorporated Brokerage House Regd. under the Broker & Agents Registration Rules 2001

GUIDE SERIES

A Guide on Accounts and Accounting Reference Dates

Change in Company Objects

Change of Company Name

Availability of Name Guide

Conversion of Status of Companies

Directors and Secretaries Guide

Filing of Statutory Returns

Foreign Companies Guide

Appointment of Statutory Auditors and Ancillary Matters

Listing of Companies through Initial Public Offerings

Obtaining license by an Association not for profit

Further Issue of Shares otherwise than Rights

Issue of Preference Shares

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

Incorporation of Company – Information and Procedures

Investigation into the Affairs of a Company

Company Mortgages and Charges

List of sensitive/prohibited words

Promoters’ Guide

Modaraba Promoters’ Guide

Shareholders’ Rights

Single Member Company Guide (in Urdu)

Winding up / Dissolution of Companies

VOLUME VI

FORMS AND APPLICATIONS

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

Applications

Application for Availability of Name

Application for File Inspection

Application for Refund of Fee

Application for Issuance of Certified To Be True Copy

Application for Availability of Name

Application for File Inspection

Application for Refund of Fee

Application for Issuance of Certified To Be True Copy

NOTIFICATIONS (selected)

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

S.R.O. 865(I)/2005 – IFAS 1 Murabaha

S.R.O. 431(I)/2007 – IFAS 2 Ijarah

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

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

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

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

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

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

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

S.R.O. 130(I)/2013 – Recovery of Gain

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

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

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

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

S.R.O. 211(I)/2013 – eService of SECP

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

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

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

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

CIRCULARS (selected)

Circular 8/2001 – Companies Regularisation Scheme

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

Circular 2/2002 – Companies Regularisation Scheme

Circular 3/2002 – Adoption of International Accounting Standards 40

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

Circular 15/2002 – Transfer off Regulatory Supervision of Non-Banking Financial Institutions and Submission of Periodical Returns/Statements

Circular 16/2002 – Submission of Quarterly Accounts by Listed Companies

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

Circular 18/2002 – Submission of Quarterly Accounts by Listed Companies

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

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

Circular 2/2003 – International Accounting Standard 40 “Investment Property”

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

Circular 8/2003 – Checklist for Appointment of Directors

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

Circular 10/2003 – Fresh License(s) to be obtained by Existing Companies in terms of Section 282C of the Companies Ordinance, 1984 for Business(es) being carried out by existing NBFCs

Circular 12/2003 – Fresh License(s) to be obtained by Existing Companies In terms of Section 282C of the Companies Ordinance, 1984

Circular 13/2003 – Maintenance of Website by the Listed Companies

Circular 15/2003 – Appointment of Whole Time Company Secretary

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

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

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

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

Circular 26/2003 – Circular No. 26 of 2003

Circular 29/2003 – Corporate Agriculture Farming (CAF) Policy

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

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

Circular 7/2004 – Authentication of Statutory Returns

Circular 8/2004 – Compliance with IAS 12 (Revised)

Circular 3/2005 – Holding of Election of Directors Pursuant to Companies (Amendment) Ordinance 2002

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

Circular 8/2005 – Investment Policy under Rule 24(3) and Prescribed Allocation Policy for Selection by the Individual Participants under Rule 14(3) & 14(4) of the Voluntary Pension System Rules 2005

Circular 10/2005 – Application(s) made under the NBFCs (Establishment and Regulation) Rules, 2003 and the Prudential Regulations for NBFCs

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

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

Circular 13/2005 – Exemption from Requirements of Clause 3C of Part II of Fourth Schedule to the Companies Ordinance, 1984

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

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

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

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

Circular 24/2005 – Rotation of External Auditors by Insurance Organizations

Circular 3/2006 – Holding of Election of Directors

Circular 1/2008 – Publication of Notices etc in Urdu Newspaper

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

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

Circular 3/2009 – Available for Sale Investment

Circular 14/2010 – United Nations 1267 Committee's Consolidated List of Individuals and Entities regarding Freezing of Funds and Other Resources

Circular 14/2010 – Amendments dated September 8, 2010

Circular 14/2010 – Amendments dated November 2, 2010

Circular 14/2010 – Amendments dated December 22, 2010

Circular 15/2010 – Related Party Assets

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

Circular 17/2010 – Notice Period for Holding Extraordinary General Meeting to pass Resolution for Filing Application under Companies Easy Exit System (CEES)

Circular 18/2010 – Additional Condition to the Modaraba Authorization Certificate

Circular 21/2010 – Clarification on Clause 3(ii) of Part II of the Third Schedule to the Modaraba Companies and Modaraba Rules, 1981

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

Circular 26/2010 – Application for Refund of Fees received under Sixth Schedule to the Companies Ordinance, 1984

Circular 28/2010 – Application for Refund of Fees received under Sixth Schedule to the Companies Ordinance, 1984

Circular 3/2011 – Amendments in Circular 36 of 2009 dated December 10, 2009 – Investment and Allocation Policies for Pension Funds Authorized under the VPS Rules, 2005


Circular 5/2011 – Appointment of a Member of the Religious Board by the Federal Government under Section 9 of Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980

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

Circular 7/2011 – Maximum Management Expense Limits for Life Insurers under Sections 22(9) and 23(9) of the Insurance Ordinance, 2000

Circular 10/2011 – Constitution of Modaraba Tribunal-II, Karachi under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980

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

Circular 12/2011 – Conditions for Grant of License to Associations not for Profit under Section 42 of the Companies Ordinance, 1984

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

Circular 15/2011 – Additional Condition to the Modaraba Authorization Certificate

Circular 17/2011 – Annual Supervision Fee for 2012

Circular 18/2011 – Product Information on websites

Circular 19/2011 – Legal Duties of Agents

Circular 1/2012 – Reporting of Suspicious Transaction Reports (STR) Currency Transaction Reports (CTR) to FMU under Anti Money Laundering (AML) Act, 2010

Circular 2/2012 – Conditions for Grant of License to Associations not for Profit under Section 42 of the Companies Ordinance, 1984

Circular 3/2012 – Product Publicity Information

Circular 4/2012 – S.R.O. 16(I)/2012 dated 9 January, 2012 – Amendments in the Securities and Exchange Commission [Insurance) Rules, 2002

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

Circular 7/2012 – Enlistment/Categorisation of Auditors on the Approved List pursuant to Section 48(1) of the Insurance Ordinance, 2000

Circular 08/2012 – Shari’ah Compliance and Shari’ah Audit Mechanism (SCSAM) for Modarabas

Circular 9/2012 – Term of Office of Directors

Circular 10/2012 – Transmission of Notice of Annual General Meetings (AGM) and Extra-Ordinary General Meetings (EOGM) through Electronic Medium

Circular 11/2012 – Enlistment/Categorisation of Auditors on the Approved List pursuant to Section 48(1) of the Insurance Ordinance, 2000

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

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

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

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


Circular 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

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-Listed Companies


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

Circular 12/2013 – Publication of Public Announcements

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

Circular 17/2013 – Mortality Rates as a Part of the Minimum Valuation Basis for the Determination of Minimum Actuarial Reserves for Policyholders’ Liabilities

Circular 18/2013 – Draft Bancassurance Regulations, 2013

Circular 19/2013 – Appointment of Qualified Auditors

Circular 20/2013 – Maximum Management Expense Limits for Life Insurers

Circular 21/2013 – Life Insurance Product Submission Requirements

CSR Guidelines, 2013 Securities and Exchange Commission of Pakistan


1. Introduction and Scope

1.1 In order to promote responsible business conduct that supports community growth for

public interest, eliminates adverse practices impacting the public sphere and ensures

corporate accountability, the Securities and Exchange Commission of Pakistan (“SECP”) is

pleased to issue the Guidelines for Corporate Social Responsibility (“the Guidelines”).

1.2 These Guidelines are voluntary in nature and businesses are encouraged to move beyond the

recommended minimum provisions articulated in this document.

1.1 The Guidelines are being published for all companies that have initiated or intend to initiate

corporate social responsibility (“CSR”) activities. Further, it is expected that all companies

may endeavor to adopt working models that complement the recommended guidelines with

a focus on fair, transparent and responsible business practices.

1.2 For the purpose of facilitation, companies are encouraged to use (self-assessment) CSR

governance benchmark and terms of reference of CSR committee, annexed to the guidelines.

1.3 The Guidelines are being issued in exercise of powers under section 506B of the Companies

Ordinance, 1984.

2. Objective

The objective of these Guidelines is to promote the development of a framework for CSR

initiatives by all companies. Companies are encouraged to strive and work in cooperation with

stakeholders for implementing a transparent and socially responsible strategy.

3. CSR governance

Companies are encouraged to have a CSR policy endorsed by the board of directors (“board”)

of the company, reflecting their understanding and commitment to CSR, thereby ensuring that:

a) CSR policy is incorporated into the vision, code of ethics and business plan/strategy of the

company.

b) CSR commitment statement is agreed through meetings/session by Board of Directors w.r.t

CSR definition, business value of CSR, vision and commitment (resources, time,

personnel).

c) Output of the CSR commitment is integrated into a board level CSR policy.


d) CSR mandate is executed either through a pre-existing committee or by forming a new CSR

committee.

e) Hold education/orientation sessions to ensure that board members have adequate

understanding and expertise of CSR for making informed decisions.

f) Include CSR activities as part of agenda of the board meetings and incorporate CSR as part

of annual board evaluation.

g) Periodically review operations of the board to identify and implement measures to align the

board operations with CSR strategy of the company.

h) Ensure that CSR goals, objectives and targets are incorporated into business plans/strategy.

i) Board members determine CSR risks, opportunities and impact prior to any major business

decisions (acquisition, mergers, product variation, capital expenditures).

j) Review and approve CSR related communications to internal and external stakeholders

ensuring compliance with relevant reporting framework.

4. Consultative Committee The Company is expected to adopt a focused approach towards CSR through formation of a CSR

Consultative Committee ideally led by a CSR expert. The committee members are expected to have

an understanding and experience of implementing CSR activities/projects. The committee may be

entrusted to ensure transparent, specialized supervision of CSR activities and periodic reporting to

Board of Directors in adoption of CSR policy and reporting its progress.

A sample term of reference of CSR Committee is annexed to these Guidelines.

5. CSR Management Systems

CSR policy of a company is expected to be formulated in a manner that serves as a guide to its

strategic plans, paves way for a systematic CSR management system and projects the roadmap

of CSR initiatives. The systems are expected to reflect following broad indicators:

a) Express commitment of the board and the top management to formulate and implement

CSR Policy

b) Ensure that policies, processes and systems exist and support the CSR policy. This is

measured by:

(i) Specifying the organizational approach towards CSR

(ii) Incorporating the CSR approach into code of ethics of company


(iii) Defining objectives for carrying out CSR activities

(iv) Setting targets for achievement of CSR objectives

(v) Determining the working model and devising action plan (time, resources,

budget)

(vi) Delegating responsibility and management of resources with respect to CSR

policy

c) Sensitization and training of the board, senior management and employees for

implementation of CSR targets

d) Mechanism for stakeholder engagement prior, during and on conclusion of CSR plans

e) Periodic monitoring and evaluation of CSR activities

f) Disclosure and reporting of CSR achievements

g) Recognizing and documenting the shortfalls/failures

h) Incorporating improvement in future CSR policy/plans

6. Areas of Interest

CSR policy is expected to clearly determine the priority areas wherein the CSR projects are

currently being managed (ongoing projects) and are planned to be initiated (upcoming

projects). The areas may broadly cover:

a) Community investment (skill development, livelihood, health, education, infrastructure,

social enterprise development, safe drinking water, poverty alleviation, youth

development and environment conservation)

b) Governance (human rights, transparency, anti-corruption, business practices,

stakeholder relations, responsible marketing)

c) Product responsibility

d) Work life balance

e) Safety (risk management, disaster management)

f) Climate Change

7. Implementation Structure

7.1 The CSR policy is expected to be implemented through a systemized structure that

measures and reflects progress of CSR goals/targets. It is imperative that the system must

be able to identify the role of the company and the extent of involvement of internal and

external stakeholders for carrying out CSR plans.

7.2 The implementation system may indicate the following:

a) Specific goals, business plan and working model to be implemented

b) Resources aligned for implementation of CSR goals

c) Extent of implementation and completion of CSR activities


d) Incorporating changes in its working model to changes in business/social needs

e) Specifying the role and resources of partnering agencies

f) Systemized periodic assessment of impact of CSR policy/goals

g) Define systematic reporting of implementation status to internal and external

stakeholders

8. Allocation of Resources

The company is expected to earmark specified resources (quantifiable), specific criteria (for e.g.

hours of service at partnering agency) or a proportion of their profit (preferably 1-2%) for selected

CSR initiatives. The method of allocation of resources or identified criteria must ideally be

predetermined, duly endorsed by the board and form part of CSR Policy.

9. External Assurance

9.1 The company may undertake arrangement for obtaining assurance by an external party.

The external assurance is expected to be implemented in a manner that is systematic,

documented, evidence-based, and characterized by defined procedures.

9.2 External assurance 1:

Be conducted by entities, groups or individuals external to the reporting organization, who are demonstrably competent in the subject matter and assurance practices;

Should utilize groups or individuals who are not unduly limited by their relationship with the organization or its stakeholders to reach and publish an independent and impartial conclusion on the report;

Is implemented in a manner that is systematic, documented, evidence-based, and characterized by defined procedures;

Assesses whether the CSR report of the company provides a reasonable and balanced presentation of performance, taking into consideration the veracity of report data and the overall selection of content;

Assesses the extent to which the report preparer has applied any Reporting Framework; and

Results in an opinion or set of conclusions that is publicly available in written form, and a statement from the assurance provider on their relationship to the report preparer.

9.3 The assurance report may form part of its CSR Report.

1 Derived from GRI’s key qualities for external assurance


10. Disclosure and Reporting

10.1 Companies are expected to report concise and material information regarding their CSR

policy and activities that may be consolidated and reported in the form of a separate CSR

Report.

10.2 CSR report may prominently disclose the CSR objectives, working model, implementation

status, impact/achievements, risks, opportunities, challenges and working partners. This

may also include comparison drawn from previous year.

10.3 CSR reporting is expected to state the goals that the board has planned to set forth for the

next year. This may be descriptive narration of the areas of concentration or any specific

projects along with brief overview of source of generation of funds for said goals.

10.4 Companies are expected to prominently disclose CSR report (summarized or detailed

format). The said reports may be disseminated on its website (if any), annual reports,

separate report and other communication media.

10.5 Notwithstanding the preparation of CSR Report, the company shall provide descriptive as

well as monetary disclosures of the CSR activities undertaken by it during each financial

year in line with the requirements of Companies (Corporate Social Responsibility) Order,

2009. This may also include disclosure to the effect of compliance by companies with

relevant industry/regulator guidelines or standards.


CSR Committee

Terms of Reference

a) Strategy and Policies:

Review and recommend to the board of the company in forming or refining the CSR vision,

strategy and policy of the company. This includes ensuring that appropriate management

systems, implementation model and regulatory compliance are in place.

b) Assessing indicators:

Monitor and recommend changes in working model of CSR in line with best practices,

economic indicators, social implications and stakeholder trends that may impact the

company.

c) Stakeholder Engagement:

Review and monitor stakeholder relations and devise mechanism to incorporate input of

partnering agencies/stakeholders into CSR plans/policies

d) Management of Risk:

Monitor, periodically review and document the major CSR risks, opportunities and impact

of CSR policy. It may also recommend to the board the appropriate changes in CSR

policy/management systems.

e) CSR Assessment:

Review and report impact of CSR plans/activities on business. Further review and

recommend impact of CSR policy on major business decisions.

f) CSR Report:

Determine the overall extent of reporting of CSR activities, provide input on CSR reports

and recommend to the board for adoption of CSR report. This includes ensuring CSR

reports are in accordance to relevant CSR reporting framework.


Corporate Social Responsibility

Governance Benchmark

Board of Directors is expected to develop and evaluate their governance framework w.r.t corporate

social responsibility initiatives. Following is a self-assessment table that shall complement Board of

Directors in the evaluation process:

S.N. Direction Assessment (please tick) Comments

Yes No Partial Don’t Know

Not relevant

1. Has Board developed a CSR vision and strategy?

2. Have Board and management expressly declared its commitment to CSR?

3. Has board communicated the company’s business case for CSR to management?

4. Do Board and management share common CSR aspirations?

5. Does CSR vision coincide with the vision and Code of Ethics of the Company?

6. Does the Board have clear understanding of CSR and industry practices?

7. Are CSR goals incorporated in the business plans of the business?

8. Is there a specific CSR committee?

9. Does the CSR Committee comprise of one or more CSR experts? (Indicate the number in comments section)

10. Is there a designated CSR committee member reporting to Board?

11. Does CSR committee seek guidance with board approved CSR policy?

12. Does the CSR committee periodically report the progress of company on CSR goals, objectives and targets?


13. Does the CSR committee review and make recommendations in the implementation model of the Company?

14. Is the CSR committee involved in preparing implementation model for CSR plans?

15. Is management’s incentives linked to CSR goals/ targets?

16. Is CSR progress included as a factor in remuneration/ recruitment of CEO?

17. Does the CSR committee review and recommend suggestion for incorporating CSR risk in Company’s risk management policy?

18. Is CSR committee entrusted with the role of recommending major CSR risk and its impact prior to major business decisions?

19. Are CSR risk, opportunities, impact and issues are considered by Board and management in approving major business decisions?

20. Is there a system of implementation of CSR goals?

21. Are there adequate measures in place to determine the impact of CSR policies by Board and senior management?

22. Does the internal audit process include assessment of CSR commitments?

23. Does the board hold CSR orientation session and periodically review progress on CSR commitment/goals?

24. Does the CSR committee provide its input in preparation of CSR reports?

25. Does the Board give its input in extent of disclosure in the CSR reports?

26. Does the board review and approve external reporting of CSR issues in compliance of relevant regulatory requirements?

27. Does the board consider CSR


report as a record of company’s performance on CSR goals for disclosure to its stakeholders?

28. Does the Board approve external assurance of CSR activities?

29. Does the Board approve the external assurance report to be made part of CSR report of the Company?

30. Does the Board approve of placing the CSR report on website of the Company?

_____________________________________________________________________________________________ Page 1 of 10 Guidelines for Issue of Commercial Paper

SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

GUIDELINES FOR ISSUE OF COMMERCIAL PAPER

1. Introduction and Scope: -

1.1 In order to develop and broaden the money market and also provide an

additional financial instrument to investors, it is considered desirable to allow

highly rated companies to diversify their sources of short-term financing by

issue of commercial paper (CP) as an instrument of redeemable capital under

section 120 of the Companies Ordinance, 1984.

1.2 These guidelines are made pursuant to Section 22 of the Securities and

Exchange Commission of Pakistan Act, 1997 in order to provide the regulatory

framework and procedure for issuing commercial paper.

2. Definitions.__ (1) In these Guidelines unless there is any thing repugnant in the

subject or context,-

(a) “advisor” means a Scheduled Bank, Registered Corporate Broker or an

Investment Finance Company appointed by the issuer to provide

advice on the structuring, placement and issue of the commercial paper

(b) “Banking Company” means a banking company as defined in the

Banking Companies Ordinance, 1962

(c) “commercial paper” means an unsecured promissory note with a

maturity of not less than 30 days and not more than one year


(d) “Commission” means the Securities and Exchange Commission of

Pakistan

(e) “company” means a company as defined in the Companies Ordinance,

1984

(f) “dealers” means Investment Finance Companies, Registered Corporate

Broker or Banking Companies who buys commercial paper and resell

to investors

(g) “DFIs” means any institution as defined in State Bank of Pakistan’s

(SBP’s) Guidelines on Commercial Paper or as subsequently defined

by SBP from time to time

(h) “financial institution” means a financial institution as defined in the

Financial Institutions (Recovery of Finances) Ordinance, 2001 and the


(i) “Guidelines” means the Guidelines for Issue of Commercial Paper

(j) “Investment Finance Company” means a company as defined under

The Non-Banking Finance Companies (Establishment and Regulation)

Rules, 2003

(k) “investors” means the initial investors or subsequent buyers of

commercial paper in the secondary market

(l) “issuer” means a company that intends to raise short-term finance by

issuing commercial paper


(m) “Issuing and Paying Agent (IPA)” means a Scheduled Bank, an

Investment Finance Company or a DFI having a minimum Credit

Rating Grade of “A-“ (medium to long term) and “A2” (short term)

from any rating agency

(n) “rating agency” means a Credit Rating Agency (CRA) registered with

the Commission under the Credit Rating Companies Rules, 1995

(o) “Registered Corporate Broker” means a company engaged in the

business of effecting transactions in securities for the account of others

and registered with the Commission under Brokers and Agents

Registration Rules, 2001

(p) “Scheduled Bank” means a scheduled bank as defined in the State Bank

of Pakistan Act 1956

(q) “working capital limit” means the aggregate fund-based limits

including those by way of purchase/discount of bills sanctioned by one

or more financial institutions to a company for meeting its working

capital requirements, and also includes any working capital term

finance limits.

(2) All other words and expressions used but not defined in these Guidelines shall

have the same meanings as are assigned to them in the Companies Ordinance, 1984

(XLVII of 1984), the Securities and Exchange Ordinance, 1969 (XVII of 1969) and

the Securities and Exchange Commission of Pakistan Act, 1997.

3. Eligibility for issue of commercial paper

A company, which satisfies the following requirements, shall be eligible to

issue commercial paper subject to the terms and conditions contained in these

Guidelines:


(a) The equity of the company is not less than Rs. 100 million as per the

latest audited balance sheet;

(b) The company has obtained the credit rating from a rating agency. The

minimum credit rating of the issuer shall be “A-” (medium to long-

term) and “A2” (short-term). At the time of issue of commercial paper,

the company shall ensure that the rating is current and not more than

two months old;

(c) The company should have no overdue loan or defaults in the report

obtained from the Credit Information Bureau (CIB) of the State Bank of

Pakistan (SBP), and the said report should not be more than two months

old; and

(d) As per the latest audited balance sheet, the company maintains a

minimum current ratio of 1: 1 and debt/equity ratio of 60: 40.

Explanation – For the purpose of this paragraph, “equity” shall mean the

paid-up capital plus free reserves as defined in rule 5 of the Companies (Issue

of Capital) Rules, 1996 minus accumulated losses as per the latest audited

balance sheet of the company.

4. Minimum and maximum period of commercial paper

(a) The commercial paper shall be issued for maturities between 30 days

and one year from the date of subscription.

(b) If the maturity date happens to be a holiday, the company shall be

liable to make payment on the immediate following working day.

(c) Commercial paper may be rolled over at maturity subject to the written

consent of the investor(s) provided a clause to this effect is mentioned


on the commercial paper and in the terms and conditions of the

agreement under which the commercial paper has been issued and the

issuer fulfills the requirement of clause 3 of the Guidelines at the time

of roll over. Further, the issuer may redeem the commercial paper

before maturity under the call option, if any, and the investor may ask

the issuer for early redemption under the put option, if any.

5. Minimum size and Denomination of commercial paper

(a) The minimum size of the issue of commercial paper shall not be less than

Rs.10 million.

(b) The commercial paper, in case of private placement, may be denominated

in Rs. 100,000 (face value) or in multiples thereof and in case of offer to

general public, may be denominated in Rs. 5,000 or in multiples thereof.

6. Ceiling on amount of issue of commercial paper

The aggregate amount of commercial paper raised by an issuer shall be within

the limit as provided by its Board of Directors in accordance with the

prudential regulations or the quantum indicated by the rating agency for the

specified rating, whichever is lower.

7. Mode of issue and discount rate

The commercial paper shall be in the form of a promissory note and be issued

at such discount to face value as may be determined by the issuer keeping in

view the prevailing T-Bill rates, KIBOR and its Credit Rating.

8. Issuer expenses:

A company issuing commercial paper shall bear the expenses of issue

including the fees payable to the advisor, the issuing and paying agent, the

dealers, the rating agency, and any other relevant charges connected with such

issue


9. Investors in commercial paper

Commercial paper may be issued by way of Public offer and/or to Scheduled

Banks, Financial Institutions, and/or such other persons as are specified for

this purpose by the Commission by notification in the official gazette under

Section 120 of the Companies Ordinance, 1984.

10. Procedure for issue of commercial paper

(a) The issuer may appoint an adviser for assistance on the structure and

placement of the commercial paper issue.

(b) The issuer, shall thereafter appoint an IPA and, dealers if so desired,

for private placement/sale of the issue.

(c) The commercial paper issue in case of private placement must be

completed within a period of two weeks from the date on which the

issuer opens the issue for subscription. Any unsold portion of the issue

after two weeks of its opening for subscription shall not be issued. In

case of public offer it should be completed within the period as

specified in the Companies Ordinance, 1984.

(d) The initial investors in commercial paper shall pay through the issuing

and paying agent, the discounted value of the commercial paper by

means of crossed account payee cheque to the account of the issuing

company.

(e) The issuer shall intimate in writing to all initial investors and all

financial institutions, who have provided working capital limits to the

company, about the amount and tenure of the commercial paper issue,

and copies of such intimation should be provided to the issuing and

paying agent.


(f) The issuer shall intimate to the Commission, the amount of

commercial paper actually issued, within three days of the closing of

subscription list.

11. Role and Responsibilities

The role and responsibilities of issuer, IPA and CRA are set out below:

(a) Issuer

The issuer shall ensure that the Guidelines and procedures laid down for

commercial paper issuance are strictly adhered to.

(b) Issuing and Paying Agent (IPA)

(i) IPA shall ensure that issuer has the minimum credit rating as

stipulated by the Commission and the quantum of amount raised

through issuance of commercial paper is within the limit as disclosed

in clause 3(b) and clause 6 respectively.

(ii) IPA shall ensure that the issuer has met all the regulatory

requirements as prescribed by the Commission and SBP before the

issue of commercial paper and shall communicate the same to the

Commission.

(iii) IPA has to verify all the documents submitted by the issuer viz.,

copy of Board’s resolution, signatures of authorized executants (if

commercial paper is in physical form) and issue a certificate that

documents are in order. It should also certify that it has a valid

agreement with the issuer.

(iv) Certified copies of original documents verified by the IPA should be

held in the custody of IPA.


(v) On the issue date, the issuing and paying agent would deliver the

commercial paper to investors against proof of payment and, at

maturity, having received funds from the issuer; it will effect

repayment on receipt of the commercial paper back from the

investors.

(vi) IPA shall make it clear to the investors in the offering document that

investors’ investment is subject to credit and other risks inherent in

such instruments and payment will be made to them only if the issuer

has made the funds available to IPA.

(vii) IPA shall inform the prospective investors that in case of any default

by the issuer IPA will not be in a position to seek recovery from the

issuer or initiate any action against the issuer either on its own or on

behalf of the investors.

(viii) In case of any default by the issuer, it will be the responsibility of the

IPA to promptly notify such default to the investors and the

Commission within five (5) working days of occurrence of such

default. For the purpose of these Guidelines, payment of only partial

amount shall also be considered default.

(ix) In case of partial payment by the issuer, IPA shall distribute the

received funds, among all the investors, on pro-rata basis. However,

while doing so, they shall take all necessary measures to safeguard

their position against any adverse consequences including

incorporation of this provision in the agreement executed between

the issuer and the IPA.

(c) Credit Rating Agency (CRA)


(i) All eligible issuers shall obtain credit rating for issuance of

commercial paper from the credit rating agencies duly registered

with the Commission under the Credit Rating Companies Rules,

1995.

(ii) The CRA would ensure that the impact of the additional amount of

funding raised through commercial paper has been taken into

consideration while assigning the rating. Accordingly, CRA shall at

the time of rating, clearly indicate the circumstances in which the

rating shall be due for review. Such circumstances may include

amongst others roll over of commercial paper at maturity, fresh issue

of securities by the issuer, any other activity undertaken by the issuer

which would further reduce the minimum current ratio, debt-equity

ratio required to be maintained by the issuer under these Guidelines.

12. Payment of commercial paper

On maturity of commercial paper, the holder of the commercial paper shall

present the instrument for payment to the issuing and paying agent who,

having received funds from the issuer, shall effect payment through crossed

cheques.

13. Miscellaneous

(a) Commercial paper shall be transferable by endorsement and delivery.

However, the issuer at its absolute discretion may decline to accept

any purchaser or transferee of the commercial paper, unless a transfer

memo which records such transfer is submitted to the issuer. Upon

receipt of the duly completed transfer memo, the issuer shall record

such transfer in its books.

(b) The issuer will regard the last named endorsee(s) of the commercial

paper as the absolute owner(s) thereof and the issuer shall not be


bound to take notice of any trust whether, expressed, implied or

constructive to which the commercial paper may be subject, save by an

order of a court of competent jurisdiction to recognize any trust or

equity affecting the title of the commercial paper or the monies

secured thereby.

(c) If any commercial paper issued pursuant to these Guidelines be worn

out or defaced, then upon production to the issuer, it may issue a fresh

commercial paper in lieu thereof, and if any commercial paper is lost

or destroyed then upon proof to the satisfaction of the issuer and on

such indemnity and/or such other requirements as the issuer may deem

adequate being given, a new commercial paper in lieu thereof may be

given to the person entitled to such lost or destroyed instrument. The

cost involved in issue of fresh Instrument will be payable by the

person entitled thereto.

14. Relaxation of the Guidelines

Where the Commission is satisfied that it is not practicable to comply with any

requirement of these Guidelines in a particular case or class of cases, the

Commission may, for reason to be recorded, relax such requirement subject to

such conditions as it may deem fit.

******

IN THE NAME OF ALLAH THE MOST BENEFICIENT, THE MOST

COMPASSIONATE

GUIDELINES FOR ISSUE OF CERTIFICATES OF MUSHARAKA FOR MODARABAS

The following guidelines are issued dated 7th Sept., 94 with the approval of the Religious Board, constituted under section 9 of the Modaraba Ordinance, 1980, for allowing the Modarabas to issue Certificates of Musharaka.

1. DEFINITION

(1) In these Guidelines, unless any thing is repugnant to the subject or context: (a) “Certificate” means a certificate of definite denomination issued by the Modaraba to the contributory acknowledging the receipt of money contributed by him under these guidelines on the basis for arrangement described herein:

(b) “Contributory” means the holder of a valid Certificate. ( c ) “Contributories Fund” means the amount contributed by the Contributories through the Certificates issued under these Guidelines. (d)“Modaraba” means a legal entity established and floated under the Ordinance. (e) “Modaraba Fund” means the daily product of the following, based on the books of account of a Modaraba:

i) paid up fund of the Modaraba; ii) revenue and capital reserves; iii) un-appropriated profit; and iv) accumulated losses, if any, which shall be deducted from the

aggregate of (i) , (ii) and (iii) above. (f)“Ordinance” means the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980.

(g)“Principles of Sharia” means the pertinent principles of Sharia as interpreted by the Religious Board; (h)“Total Fund” means the aggregate of Contributories Fund and Modaraba Fund as defined in ( c ) and (e) above.

2. All the definitions, terms and expression used but not defined in these Guidelines

shall have the same meanings as in the Modaraba Companies and Modaraba (Floatation & Control), Ordinance, 1980 and the Modaraba Companies and Modaraba Rules, 1981.

3. SUPREMACY OF SHARIA

(1) In all matters relating to application of these Guidelines, Sharia shall be

absolutely supreme and over-riding in all respects.

(2) The management of a Modaraba authorized through these Guidelines to raise capital through Certificates of Musharaka shall ensure that all the business transactions and dealings undertaking by the Modaraba and its conduct in all respects shall conform with Sharia. All the business arrangements and agreements shall be in accordance with those approved by the Religious Board.

(3) None of the business undertaken by the Modaraba, financing arrangements

and transactions shall involve directly or indirectly any element of “Riba”. (4) These Guidelines have been approved by the Religious Board in its meeting

held on September 07, 1994 and any change in these Guidelines shall be made with the approval of Religious Board.

4. MUSHARAKA ARRANGEMENT

(1) The amount received by a Modaraba from the Contributories shall be invested

in the overall business activity of the Modaraba on the basis of full participation in the profit and loss of the Modaraba;

(2) The profit and loss of the Modaraba shall be shared on following basis;

(i) Losses shall be shared by the Contributories and the Modaraba in proportion of their fund in the total fund;

(ii) Upto 90% of the total profit shall be shared by the Contributories and the Modaraba certificate holders in accordance with ratio declared by the Modaraba and accepted by the contributory, and in the absence of any such declaration in proportion of their respective contribution to the total fund.

(3) Unless otherwise provided the profit and loss of the Modaraba shall be

determined at quarterly intervals. The quarterly profit and loss account of the Modaraba shall be published in at least two national newspapers for the information of this Musharaka Certificate holders.

(4) In case of loss resulting into winding up of the Modaraba, the payments out of

the realizable assets shall be made after discharging liability of creditors, to the Musharaka Certificate holders and Modaraba Certificate holders.

(5) The Musharaka arrangements specified by the Modaraba shall clearly indicate

the frequency of distribution of profit or adjustment of losses to the Musharaka Certificate holders i.e. quarterly, half yearly, annually or at maturity. In all cases the concept of final determination and adjustment of profit and loss at maturity against the total sum repayable to the Musharaka Certificate holders must be clearly stated in all schemes of Musharaka Certificate under these Guidelines.

5. APPROVAL BY THE RELIGIOUS BOARD The Musharaka agreement as well as the certificate of Musharaka and any document providing the terms and conditions of Certificate of Musharaka or pertaining to mobilization of finances by the Modaraba shall be got approved by the Religious Board.

6. FEATURES OF CERTIFICATE OF MUSHARAKA

(1) A certificate of Musharaka issued under these Rules shall be registered in the name of Contributory/Contributories to who it is issued.

(2) The maturity period of Certificate of Musharaka shall not be less than three

months. However, the term of certificate must be specified at the time of issue and shall be indicated in the certificate of Musharaka.

(3) The return on Certificate of Musharaka shall be determined and payable in

accordance with the Musharaka arrangements stated herein. (4) The Certificates of Musharaka may be listed on the Stock Exchange or traded

over the counter. (5) Any public notice or offer issued in connection with sale of Certificate of

Musharaka shall specify that the certificates are not guaranteed by the Government and shall also include other conditions that the Registrar may prescribe.

(6) The Certificates of Musharaka shall be transferable in the manner and upon

such conditions as are applicable to the Modaraba Certificates under the Ordinance.

7. PURCHASE OF CERTIFICATES OF MUSHARAKA BEFORE MATURITY

BY THE MODARABA.

7.1 The Modaraba shall not redeem or encash certificates of Musharaka before its maturity; however, in the case of certificates of Musharaka traded over the counter the Modaraba may provide a facility of purchase of such certificates of Musharaka on the basis of the guidelines specified hereunder:

7.2 Every Modaraba permitted by the Registrar to issue Musharaka Certificate

over the counter under these guidelines shall: a) Appoint a Trustee to oversee the Musharaka Certificates redemption

reserve fund and use of fund for the purchase of Musharaka Certificates by the Modaraba before maturity, and

b) Establish a “Redemption Reserve Fund” to provide for the scheme for purchase of Certificates of Musharaka from such reserve fund, before maturity.

8. THE TRUSTEES

8.1 The Trustee for the purposes of these guidelines shall be appointed from the practicing members or firms of Chartered Accountants or the practicing members of Cost and Management Accountants, Investment Banks, Commercial Banks and DFI’s.

8.2 The Trustee shall report any discrepancy or lack of compliance of these guidelines in

respect of the Musharaka Certificates redemption reserve fund or its usage for purchase of Musharaka Certificates before maturity.

8.3 Any dispute between the Trustee and the Modaraba shall be referred to the Registrar

and his decision in such matter shall be final.

8.4 Any dispute pertaining to encashment of Musharaka Certificates before or after maturity or arising between Modaraba and contributory shall be referred for decision of Trustee and any party aggrieved of the said decision shall have the right of representation before the Registrar whose decision on the representation shall be final.

8.5 The maximum remuneration of trustee shall be 0.05% per annum of the total

Musharaka fund and may be paid quarterly.

9. MUSHARAKA CERTIFICATE REDEMPTION RESERVE FUND

9.1 The purchase of Musharaka Certificates out of Redemption Reserve Fund price approved by the Trustee and posted by the Modaraba.

9.2 The minimum contribution to the Musharaka Certificates redemption reserve fund

shall be 5% of the amount of Musharaka Certificates outstanding.

9.3 The certificates purchased from the Redemption fund may be sold over the counter or retained till maturity.

9.4 The Modaraba shall not exceed the purchase of certificates of Musharaka

commitment beyond the amount of the reserve fund.

10. SAFEQUARDS

10.1 State Bank of Pakistan’s Rules of Business for NBFIs including the exposure limits will also apply to the Musharaka Certificates issued by the Modaraba.

10.2 Subject to Rule 3 of these Guidelines, in all cases International Accounting Standards as adopted by the Government of Pakistan shall be followed.

10.3 A quarterly report on the Certificates of Musharaka issued by a Modaraba shall be furnished to the Registrar within 10 days fro the close olf each quarter, as prescribed by the Registrar.

11. CONDITIONS OF ELIGIBILITY

11.1 The following conditions of eligibility shall be fulfilled by the Modaraba for

the grant of consent by the Registrar to issue of Certificates of Musharaka.

(i) The prospectus of Modaraba as approved by the Religious Board contains provisions for resource mobilization on Musharaka basis.

(ii) The paid up fund of the Modaraba is not less than fifty million rupees; (iii) The Modaraba is actively engaged in business for a period of two

years and has obtained credit rating of minimum investment grade from a credit rating agency registered with the Commission and such credit rating shall be updated at least once every year during the currency of the issue.”

(iv) The corporate and fiduciary conduct of the Modaraba and the directors

of the Modaraba Company has been found to be satisfactory.

12. PERMISSION TO ISSUE MUSHARAKA CERTIFICATES

If the Registrar is satisfied that the Modaraba fulfills the conditions of eligibility as published and the Modaraba has complied with the Modaraba Ordinance, Rules made thereunder, these guidelines and requirements of its prospectus, he may consent to the issuance of Certificates of Musharaka by the Modaraba.

FORMAT OF CERTIFICATE OF MUSHARAKA ISSUED BY _______________________________MODARABA Managed by_________________________________(Co.) Folio Number Certificate Number Distinctive Numbers (inclusive) From To Number of Musharaka Certificates

OPTIONAL TERMS (TO BE PRINTED AS APPLIED) These certificates will be listed on the Stock Exchange. These Certificates will be sold and purchased over the Counter at _______________________________ Upto ______________% of total profit shall be shared By the contributories and the Modaraba

Given under the common Seal of the Company This __________________day_________________19_____________ __________ _______________________

DIRECTOR DIRECTOR/SECRETARY

This is to certify that is/are the Registered Holders of fully paid Musharaka Shares of Rupees_______ each as mentioned and numbered in the appropriate boxes on the left in _______Modaraba subject to the term and conditions as specified in the Guidelines for issue of Certificate of Musharaka/Redeemable Capital Certificates for Modaraba.

Memorandum of Transfers

Date of Transfer

No. of Transfer

Name of Transferee Register Folio

Authorized Signature

For Director/Secretary









IN THE NAME OF ALLAH THE MOST BENEFICIENT, THE MOST

COMPASSIONATE

GUIDELINES FOR ISSUE OF CERTIFICATES OF MUSHARAKA FOR MODARABAS

The following guidelines are issued dated 7th Sept., 94 with the approval of the Religious Board, constituted under section 9 of the Modaraba Ordinance, 1980, for allowing the Modarabas to issue Certificates of Musharaka.

1. DEFINITION

(1) In these Guidelines, unless any thing is repugnant to the subject or context: (a) “Certificate” means a certificate of definite denomination issued by the Modaraba to the contributory acknowledging the receipt of money contributed by him under these guidelines on the basis for arrangement described herein:

(b) “Contributory” means the holder of a valid Certificate. ( c ) “Contributories Fund” means the amount contributed by the Contributories through the Certificates issued under these Guidelines. (d)“Modaraba” means a legal entity established and floated under the Ordinance. (e) “Modaraba Fund” means the daily product of the following, based on the books of account of a Modaraba:

i) paid up fund of the Modaraba; ii) revenue and capital reserves; iii) un-appropriated profit; and iv) accumulated losses, if any, which shall be deducted from the

aggregate of (i) , (ii) and (iii) above. (f)“Ordinance” means the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980.

(g)“Principles of Sharia” means the pertinent principles of Sharia as interpreted by the Religious Board; (h)“Total Fund” means the aggregate of Contributories Fund and Modaraba Fund as defined in ( c ) and (e) above.

2. All the definitions, terms and expression used but not defined in these Guidelines

shall have the same meanings as in the Modaraba Companies and Modaraba (Floatation & Control), Ordinance, 1980 and the Modaraba Companies and Modaraba Rules, 1981.

3. SUPREMACY OF SHARIA

(1) In all matters relating to application of these Guidelines, Sharia shall be

absolutely supreme and over-riding in all respects.

(2) The management of a Modaraba authorized through these Guidelines to raise capital through Certificates of Musharaka shall ensure that all the business transactions and dealings undertaking by the Modaraba and its conduct in all respects shall conform with Sharia. All the business arrangements and agreements shall be in accordance with those approved by the Religious Board.

(3) None of the business undertaken by the Modaraba, financing arrangements

and transactions shall involve directly or indirectly any element of “Riba”. (4) These Guidelines have been approved by the Religious Board in its meeting

held on September 07, 1994 and any change in these Guidelines shall be made with the approval of Religious Board.

4. MUSHARAKA ARRANGEMENT

(1) The amount received by a Modaraba from the Contributories shall be invested

in the overall business activity of the Modaraba on the basis of full participation in the profit and loss of the Modaraba;

(2) The profit and loss of the Modaraba shall be shared on following basis;

(i) Losses shall be shared by the Contributories and the Modaraba in proportion of their fund in the total fund;

(ii) Upto 90% of the total profit shall be shared by the Contributories and the Modaraba certificate holders in accordance with ratio declared by the Modaraba and accepted by the contributory, and in the absence of any such declaration in proportion of their respective contribution to the total fund.

(3) Unless otherwise provided the profit and loss of the Modaraba shall be

determined at quarterly intervals. The quarterly profit and loss account of the Modaraba shall be published in at least two national newspapers for the information of this Musharaka Certificate holders.

(4) In case of loss resulting into winding up of the Modaraba, the payments out of

the realizable assets shall be made after discharging liability of creditors, to the Musharaka Certificate holders and Modaraba Certificate holders.

(5) The Musharaka arrangements specified by the Modaraba shall clearly indicate

the frequency of distribution of profit or adjustment of losses to the Musharaka Certificate holders i.e. quarterly, half yearly, annually or at maturity. In all cases the concept of final determination and adjustment of profit and loss at maturity against the total sum repayable to the Musharaka Certificate holders must be clearly stated in all schemes of Musharaka Certificate under these Guidelines.

5. APPROVAL BY THE RELIGIOUS BOARD The Musharaka agreement as well as the certificate of Musharaka and any document providing the terms and conditions of Certificate of Musharaka or pertaining to mobilization of finances by the Modaraba shall be got approved by the Religious Board.

6. FEATURES OF CERTIFICATE OF MUSHARAKA

(1) A certificate of Musharaka issued under these Rules shall be registered in the name of Contributory/Contributories to who it is issued.

(2) The maturity period of Certificate of Musharaka shall not be less than three

months. However, the term of certificate must be specified at the time of issue and shall be indicated in the certificate of Musharaka.

(3) The return on Certificate of Musharaka shall be determined and payable in

accordance with the Musharaka arrangements stated herein. (4) The Certificates of Musharaka may be listed on the Stock Exchange or traded

over the counter. (5) Any public notice or offer issued in connection with sale of Certificate of

Musharaka shall specify that the certificates are not guaranteed by the Government and shall also include other conditions that the Registrar may prescribe.

(6) The Certificates of Musharaka shall be transferable in the manner and upon

such conditions as are applicable to the Modaraba Certificates under the Ordinance.

7. PURCHASE OF CERTIFICATES OF MUSHARAKA BEFORE MATURITY

BY THE MODARABA.

7.1 The Modaraba shall not redeem or encash certificates of Musharaka before its maturity; however, in the case of certificates of Musharaka traded over the counter the Modaraba may provide a facility of purchase of such certificates of Musharaka on the basis of the guidelines specified hereunder:

7.2 Every Modaraba permitted by the Registrar to issue Musharaka Certificate

over the counter under these guidelines shall: a) Appoint a Trustee to oversee the Musharaka Certificates redemption

reserve fund and use of fund for the purchase of Musharaka Certificates by the Modaraba before maturity, and

b) Establish a “Redemption Reserve Fund” to provide for the scheme for purchase of Certificates of Musharaka from such reserve fund, before maturity.

8. THE TRUSTEES

8.1 The Trustee for the purposes of these guidelines shall be appointed from the practicing members or firms of Chartered Accountants or the practicing members of Cost and Management Accountants, Investment Banks, Commercial Banks and DFI’s.

8.2 The Trustee shall report any discrepancy or lack of compliance of these guidelines in

respect of the Musharaka Certificates redemption reserve fund or its usage for purchase of Musharaka Certificates before maturity.

8.3 Any dispute between the Trustee and the Modaraba shall be referred to the Registrar

and his decision in such matter shall be final.

8.4 Any dispute pertaining to encashment of Musharaka Certificates before or after maturity or arising between Modaraba and contributory shall be referred for decision of Trustee and any party aggrieved of the said decision shall have the right of representation before the Registrar whose decision on the representation shall be final.

8.5 The maximum remuneration of trustee shall be 0.05% per annum of the total

Musharaka fund and may be paid quarterly.

9. MUSHARAKA CERTIFICATE REDEMPTION RESERVE FUND

9.1 The purchase of Musharaka Certificates out of Redemption Reserve Fund price approved by the Trustee and posted by the Modaraba.

9.2 The minimum contribution to the Musharaka Certificates redemption reserve fund

shall be 5% of the amount of Musharaka Certificates outstanding.

9.3 The certificates purchased from the Redemption fund may be sold over the counter or retained till maturity.

9.4 The Modaraba shall not exceed the purchase of certificates of Musharaka

commitment beyond the amount of the reserve fund.

10. SAFEQUARDS

10.1 State Bank of Pakistan’s Rules of Business for NBFIs including the exposure limits will also apply to the Musharaka Certificates issued by the Modaraba.

10.2 Subject to Rule 3 of these Guidelines, in all cases International Accounting Standards as adopted by the Government of Pakistan shall be followed.

10.3 A quarterly report on the Certificates of Musharaka issued by a Modaraba shall be furnished to the Registrar within 10 days fro the close olf each quarter, as prescribed by the Registrar.

11. CONDITIONS OF ELIGIBILITY

11.1 The following conditions of eligibility shall be fulfilled by the Modaraba for

the grant of consent by the Registrar to issue of Certificates of Musharaka.

(i) The prospectus of Modaraba as approved by the Religious Board contains provisions for resource mobilization on Musharaka basis.

(ii) The paid up fund of the Modaraba is not less than fifty million rupees; (iii) The Modaraba is actively engaged in business for a period of two

years and has obtained credit rating of minimum investment grade from a credit rating agency registered with the Commission and such credit rating shall be updated at least once every year during the currency of the issue.”

(iv) The corporate and fiduciary conduct of the Modaraba and the directors

of the Modaraba Company has been found to be satisfactory.

12. PERMISSION TO ISSUE MUSHARAKA CERTIFICATES

If the Registrar is satisfied that the Modaraba fulfills the conditions of eligibility as published and the Modaraba has complied with the Modaraba Ordinance, Rules made thereunder, these guidelines and requirements of its prospectus, he may consent to the issuance of Certificates of Musharaka by the Modaraba.

FORMAT OF CERTIFICATE OF MUSHARAKA ISSUED BY _______________________________MODARABA Managed by_________________________________(Co.) Folio Number Certificate Number Distinctive Numbers (inclusive) From To Number of Musharaka Certificates

OPTIONAL TERMS (TO BE PRINTED AS APPLIED) These certificates will be listed on the Stock Exchange. These Certificates will be sold and purchased over the Counter at _______________________________ Upto ______________% of total profit shall be shared By the contributories and the Modaraba

Given under the common Seal of the Company This __________________day_________________19_____________ __________ _______________________

DIRECTOR DIRECTOR/SECRETARY

This is to certify that is/are the Registered Holders of fully paid Musharaka Shares of Rupees_______ each as mentioned and numbered in the appropriate boxes on the left in _______Modaraba subject to the term and conditions as specified in the Guidelines for issue of Certificate of Musharaka/Redeemable Capital Certificates for Modaraba.

Memorandum of Transfers

Date of Transfer

No. of Transfer

Name of Transferee Register Folio

Authorized Signature











Islamabad, March 27, 2001.

LISTED COMPANIES (PROHIBITION OF INSIDERS TRADING) GUIDELINES

CHAPTER I Preliminary

1. Short title and commencement.- (1) These guidelines may be called the

Listed Companies (Prohibition Of Insiders Trading) Guidelines.

(2) These shall come into force at once.

2. Definitions.- In these guidelines, unless the context otherwise requires:-

(a) "Act" means the Securities and Exchange Commission of Pakistan Act, 1997;

(b) "associate" means an associate as defined in clause (ab) of sub-

section (1) of section 2 of the Ordinance; (c) "Company" means a company as defined in clause (7) of sub-

section (1) of section 2 of the Companies Ordinance, 1984. (d) "Commission" means the Securities and Exchange Commission of

Pakistan.

(e) "connected person" means any person who-

(i) is a director, as defined in clause (13) of sub-section (1) of section 2 of the Companies Ordinance, 1984; or

(ii) occupies the position as an officer or an employee of the

company or holds a position involving a professional or

2

business relationship between himself and the company and who may reasonably be expected to have an access to unpublished price sensitive information in relation to that company;

(f) "dealing in securities" means an act of buying, selling or agreeing

to buy, sell or deal in any securities by any person either as principal or agent;

(g) "insider" means-

(i) a person who is a director, chief executive, managing agent, chief accountant, secretary or auditor of a listed company or the beneficial owner holding directly or indirectly not less than 10% of the shares of a listed company; or

(ii) a person who, is or was connected with the company or is

deemed to have been connected with the company, and who is reasonably expected to have access, by virtue of such connection, to unpublished price sensitive information in respect of securities of the company who has received or has had access to such unpublished price sensitive information;

(h) "Listed" in relation to securities, means securities which have been

allowed to be traded on a stock exchange.

(i) "officer" means a person as defined in clause (24) of sub-section (1)

of section 2 of the Companies Ordinance, 1984 and includes an

auditor of the company;

(j) "Ordinance" means the Securities and Exchange Ordinance, 1969; (k) "person is deemed to be a connected person" if such person-

3

(i) is a company under the same management or group or any subsidiary company;

(ii) is an official or a member of a stock exchange or of a clearing house of that stock exchange, or any employee of a member of a stock exchange;

(iii) is an investment bank, share transfer agent, registrar to

an issue, Trustee of Term Finance Certificates, Investment Advisor, Investment Company (closed end mutual fund) or an employee thereof, or, is a member of the Board of Directors of an investment company or a member of the Board of Directors of the Asset Management of an Investment Scheme (open-end mutual fund) or is an employee having fiduciary relationship with the company;

(iv) is a member of the Board of Directors, or an employee, of a financial institution as defined in clause (15A) of sub-section (1) of section 2 of the companies Ordinance 1984;

(v) is an official or an employee of a self-regulatory

organisation recognised by the Commission; (vi) is a relative of any of the aforementioned persons; or

(vii) is a banker of the company.

(l) "stock exchange" means a stock exchange which is registered with the Commission under section 5 of the Ordinance, 1969;

(m) "unpublished price sensitive information" in relation to a listed

security means any information which relates to the following matters or is of concern, directly or indirectly, to a company, and

4

is not generally known or published by such company for general information, but which if published or known, is likely to materially affect the price, of securities of that company in the market:-

(i) financial results (both half-yearly and annual) of the

company; (ii) intended declaration of dividends (both interim and

final); (iii) issue of shares by way of rights, bonus, etc.; (iv) any major expansion plans or execution of new projects; (v) amalgamation, mergers and takeovers; (vi) disposal of the whole or substantially the whole of the

undertaking; (vii) such other information as may affect the earnings of the

company; and (viii) any changes in policies, plans or operations of the

company.

CHAPTER II Prohibition on dealing, communicating or counseling

3. Prohibition on dealing, communicating or counseling by insiders.- No person who is or has been, at any time during the preceding six months associated with a company shall:

(i) either on his own behalf or on behalf of any other person, deal in securities of a company listed on a stock exchange

5

on the basis of any unpublished price sensitive information; or

(ii) communicate any unpublished price sensitive information to

any person, with or without his request for such information, except as required in the ordinary course of business or under any law; or

(iii) counsel or procure any other person to deal in securities of

any company on the basis of unpublished price sensitive information.

4. Violation of provisions relating to insider trading.- A person who deals in securities or communicates any information or counsels any person dealing in securities in contravention of the provisions of paragraph 3 shall be guilty of insider trading and shall be liable to penal action under section 15B of the Ordinance.

CHAPTER III Liability, Action by Commission on behalf of Issuer

5. Liability.- (1) Every connected person who purchases, sells or otherwise deals in and with securities of an issuer with the knowledge of unpublished price sensitive information with respect to the issuer that has not been generally disclosed is liable to compensate the seller or purchaser of the securities, as the case may be, for damages as a result of the trade unless,

(a) the connected person proves that the person reasonably believed that the unpublished price sensitive information had been generally disclosed; or

(b) the unpublished price sensitive information was known or ought

reasonably to have been known to the seller or purchaser, as the case may be.

6

(2) Every insider who informs another person of unpublished price sensitive information with respect to the issuer that has not been generally disclosed, shall be liable to compensate for damages any person that thereafter sells securities of the issuer to or purchases securities of the issuer from the person that received the Information unless;-

(i) the person who informed the other person proves that the informing person reasonably believed the unpublished price sensitive information had been generally disclosed;

(ii) the unpublished price sensitive information was known or ought reasonably to have been known to the seller or purchaser, as the case may be; or

(iii) in the case of an action against an issuer or a person in

special relationship with the issuer, the information was given in the necessary course of business;

(3) Any person who has access to information concerning the investment

program of a mutual fund in Pakistan or in the investment portfolio managed

for a client by an investment adviser and uses that information for his, her or

its direct benefit or advantage to purchase, sell or otherwise deal in and with

securities of an issuer for his, her or its account where the portfolio securities

of the mutual fund or the investment portfolio managed for the client by the

investment adviser includes securities of that issuer is accountable to the

mutual fund or the client of the investment adviser, as the case may be, for

any benefit or advantage received or receivable as a result of such purchase or

sale.

(4) Every person who is an insider or associate of an issuer that,-

7

(a) sells or purchases the securities of the issuer with knowledge of a unpublished price sensitive information with respect to the issuer that has not been generally disclosed; or

(b) communicates to another person, other than in the necessary course of business, knowledge of unpublished price sensitive information with respect to the issuer that has not been generally disclosed.

(5) Where more than one person in a special relationship with an issuer is

liable under sub-paragraph (I) or (2) of this paragraph as to the same

transaction or series of transactions, their liability is joint and several.

(6) In assessing damages under sub-paragraph (1) or (2) of this paragraph,

the Court may consider,

(a) if the plaintiff is a purchaser, the price paid by the plaintiff for the security less the average market price of the security in the twenty trading days following general disclosure of the unpublished price sensitive information; or

(b) if the plaintiff is a vendor, the average market price of the security

in the twenty trading days following general disclosure of the unpublished price sensitive information less the price received by the plaintiff for the security,

In addition to the above, the Court may consider such other measures of

damages as may be relevant in the circumstances.

8

6. Action by Commission on behalf of issuer (1) Upon application by the Commission or by any person who was at the

time of a transaction referred to in sub-paragraph (1) or (2) of paragraph 5 or is

at the time of the application a security holder of the issuer, the Court may, if

satisfied that,

(a) the Commission or the person has reasonable grounds for believing that the issuer has a cause of action under sub- paragraph (4) of paragraph 5; and

(b) the issuer has failed to obtain prosecution of an action

commenced by it under paragraph 5, make an order, upon such terms as to security for costs and otherwise as to

the Court seems fit, requiring the Commission or authorizing such person or

the Commission to commence or continue an action in the name of and on

behalf of the issuer to enforce the liability created by sub- paragraph (4) of

paragraph 5.

(2) Where an action under sub-regulations (3) or (4) of regulation 5 is,

(a) commenced; (b) commenced and prosecuted; or (c) continued,

by a board of directors of an issuer or the Court may order that the costs

properly incurred by the Board in commencing, commencing and prosecuting

or continuing the action, as the case may be, shall be paid by the issuer, if the

Court is satisfied that there were apparent grounds for believing the action was

in the best interest of the issuer and the security holders thereof.

9

(3) Where an action under sub-paragraph (3) or (4) of paragraph 5 is,

(a) commenced;

(b) commenced and prosecuted; or

(c) continued,

by a person who is a security holder of the issuer or the Court may order that

the costs properly incurred by such person in commencing, commencing and

prosecuting or continuing the action, as the case may be, shall be paid by the

issuer, if the Court is satisfied that,

(i) the issuer failed to commence the action or had commenced it but had failed to prosecute it diligently; and

(ii) there are apparent grounds for believing that the

continuance of the action is in the best interest of the issuer and the security holders thereof.

(4) In determining whether there are apparent grounds for believing that an

action or its continuance is in the best interest of an issuer and the

security holders thereof, the Court shall consider the relationship

between the potential benefit to be derived from the action by the issuer

and the security holders thereof and the cost involved in the prosecution

of the action.

(5) Notice of every application under sub-paragraph (I) or (2) of paragraph 5

shall be given to the Commission, the issuer or the mutual fund as the

case may be, and each of them may appear and be heard thereon.

10

(6) Every order made under sub-paragraph (I) or (2) of this paragraph,

requiring or authorizing the Commission to commence and prosecute or

continue an action, shall provide that the issuer or mutual fund, as the

case may be, shall co-operate fully with the Commission in the

commencement and prosecution or continuation of the action, and shall

make available to the Commission all books, records, documents and

other material or information known to the issuer or mutual fund or

reasonably ascertainable by the issuer or mutual fund relevant to such

action.

CHAPTER IV Investigation

7. Investigation by the Commission.- (1) Where the Commission, on the

basis of the information available with it, is of the opinion that it is necessary

to investigate and inspect the books of account, other records and documents

of an insider and that of the member of a stock exchange for such a purpose, it

may appoint an enquiry officer for the said purpose.

(2) The purpose referred to in sub-paragraph (1) may include:-

(a) to investigate into the complaint received from an investor, market intermediary or any other person on any matter having a bearing on the allegations of insider trading; and

(b) to investigate suo-moto on the basis of its own knowledge or

information in its possession to protect the interest of investors and the securities market.

11

8. Procedure for investigation.- (1) Before undertaking any investigation under paragraph 7, the Commission shall provide an opportunity of being heard with a reasonable notice to the insider for that purpose. (2) Notwithstanding anything contained in sub-paragraph (1), where the Commission is satisfied that in the interest of investors or in public interest no such notice should be given, it may by an order in writing direct that the investigation be taken up without such notice. (3) On being empowered by the Commission, the enquiry officer shall undertake the investigation and inspection of books of accounts, records and documents of the insider. Such a person shall be bound to discharge his obligations as provided in paragraph 9. 9. Obligations of insider on investigation by the Commission.- (1) It shall be the duty of every insider, who is being investigated, to produce to the enquiry officer such books of account and other documents in his custody or control and furnish the statements and information relating to the transactions in securities market within such time as the enquiry officer may require. (2) The insider shall allow the enquiry officer to have reasonable access to the premises occupied by such insider and also extend reasonable facility for examining any books, records, documents and computer data in the possession of the stock broker or any other person and also provide copies of documents or other materials which, in the opinion of the enquiry officer are relevant. (3) The enquiry officer, in the course of enquiry, shall be entitled to examine or record statements of any member, director, partner, proprietor and employee of the insider. (4) It shall be the duty of every director, proprietor, partner, officer and employee of the insider to give the enquiry officer all assistance in connection with the investigation, which the insider may be reasonably expected to give.

12

10. Submission of Report to the Commission.- The enquiry officer shall furnish enquiry report to the Commission within such time as may be specified by the Commission.

11. Communication of findings, etc.- (1) The Commission shall after consideration of the enquiry report communicate the findings to the insider and he shall be given an opportunity of being heard before any action is taken by the Commission on the findings of the enquiry report. (2) On receipt of the explanation, if any, from the insider, the Commission

may call upon the insider to take such measures as the Commission may

deem fit to protect the interest of investors and in the interest of the securities

market and for due compliance with the provisions of the Act, the Ordinance

and the guidelines.

12. Appointment of Auditor.- Notwithstanding anything contained in paragraph 6, the Commission may appoint an auditor who shall be a practicing Chartered Accountant to investigate into the books of account or the affairs of the insider: Provided that, the auditor so appointed shall have the same powers of the enquiry officer as stated in paragraph 6 and the insider shall have the obligations specified in paragraph 9. 13. Directions by the Commission.- On receipt of the explanation, if any, from the insider under sub-paragraph (2) of paragraph 11, the Commission may without prejudice to its right to initiate criminal prosecution under section 15B of the Ordinance, give such directions to protect the interest of investors and in the interest of the securities market and for due compliance with the provisions of the Act, the Ordinance and the guidelines, as it deems fit for all or any of the following purposes, namely:-

13

(a) directing the insider not to deal in securities in any particular manner;

(b) prohibiting the insider from disposing of any of the securities

acquired in violation of these regulations; (c) restraining the insider to communicate or counsel any person to

deal in securities.


Securities Market Division

June 27, 2002

Guidelines for Preparation of Prospectus

The Securities Market Division of the Securities and Exchange Commission of Pakistan had initiated a review of the prospectus and supporting documents to improve the level of quality of disclosure and rationalize the supporting documents that are submitted to the Commission. After consultation with the stakeholders viz. issuers of securities, advisers & arrangers, and stock exchanges, the Commission has made the following guidelines to help the issuers in providing a full, true, and fair disclosure of all material information to a common investor.

1. Language & Sequencing

The language of the prospectus should be simple, clear, and brief. Relative emphasis on and sequencing of different information in a prospectus should be from the perspective of a common investor.

2. Risk Factors

The risk factors and management perception of these factors should be adequately disclosed. Risk factors should include macro-economic risks, industry risks, company specific risks, security specific risks etc. In addition, the issuer should make a clear statement that all material risk factors have been disclosed. Where a security is credit rated, the credit rating report shall be reported in full including the disclaimer, if any.

3. Primary Purpose

The primary purpose of the issue should be explained in appropriate detail specifying the use of the subscription proceeds.

4. Dividend Policy

The disclosure of dividend policy should be meaningful. It should be made explicit whether the company intends to follow a consistent dividend payout policy or policy of retention of profit etc.

5. Material and Immaterial Information

All material information such as change in key personnel, statement on capital

structure before and after the issue, management profile, etc. should be reported.

Immaterial information such as voting rights of TFCs, dividend policy of other

associated companies in which there is cross-directorship etc should not be

reported.

6. Publication of Prospectus in Urdu Language.

In order to further facilitate the investors, broaden the circulation and readability,

SEC would encourage publication of the abridged prospectus in Urdu language in

addition to English. The translation should be functional and words from English may

be borrowed, where necessary.

7. Use of Photos and Formatting

The prospectus being a legal document should not be used as a marketing tool. Its

layout should be simple and plain. Photos and fancy formatting are not to be used.

8. Expenses to the Issue

All material expenses to the issue should be disclosed in full including advisory &

arrangement fees, trustee fee, stamp duties, listing fee, SEC fee etc.

9. Elimination or Substitution of Supporting Documents

The list of supporting documents for approval of the Prospectus has been revised. Therefore, the Issuers/Advisors need to provide only those documents, given in the prescribed checklists, now available at www.secp.gov.pk.



No.SMD/CIW/Misc./08/20009 August 26, 2010

LIST OF DOCUMENTS TO BE SUBMITTED TO THE COMMISSION BY COMPANIES

ALONGWITH APPLICATION FOR APPROVAL TO ISSUE, CIRCULATE AND PUBLISH

PROSPECTUS/OFFER FOR SALE DOCUMENT

(For Equity Issues)

The following documents shall be submitted to the Commission alongwith application for approval to issue, circulate and publish prospectus/ Offer for sale document. S. No.

Document

Documents required to be submitted alongwith application:

1 Application under Section 57(1) or 62(1) of the Companies Ordinance, 1984 (the Ordinance) as the case may be.

2 Application made to Stock Exchange (s) along‐with copy of enclosures.

3 Clearance letter from the concerned stock exchange(s).

4

Copy, both in hard and soft form of the Prospectus/Offer for Sale Document duly cleared by the stock exchange both in full and abridged with last page signed in original by directors of the Company and duly witnessed and that of the advertisement, if any.

5

Affidavit, on Non‐Judicial Stamp Paper, from the Chief Executive (CEO) & the Chief Financial Officer (CFO) of the Company and Offerer (where applicable) on accuracy of the disclosures made in the prospectus, certified by the Oath Commissioner.

6

Non‐refundable application processing fee in the following manner:‐ (i) In case size of the total issue including all types of securities is up to Rs.250

million, a fee of Rs.25,000/‐ (ii) In case size of the total issue including all types of securities is more than

Rs.250 million and up to Rs.1,000 million, a fee of Rs.50,000/‐ (iii) In case size of the total issue including all types of securities is more than

Rs.1,000 million, a fee of Rs.100,000/‐

7 Undertaking on Non‐Judicial Stamp Paper from the Balloter, Transfer Agent (Share Transfer Agent) and Underwriter(s) that they fulfill all the conditions of rule‐4 of the Balloters, Transfer Agents, and Underwriters Rules, 2001.

8 Copies of the commitment letter(s)/ willingness /consent(s) of Pre‐IPO Investors (where applicable).

9 Undertaking on Non‐Judicial Stamp Paper regarding no buy‐back/re‐purchase agreement from the Underwriters.

10 Form 29 duly certified from concerned Company Registration Office.

11 Confirmation that issued capital of the company does not consist of shares issued against intangible assets.

12

Affidavit, on Non‐Judicial Stamp Paper, from CEO, Directors, Company Secretary & CFO of the Company and Offerer (where applicable) that they have fully disclosed all legal proceedings pending in court of law which may have an adverse material impact on the business of the Company, certified by the Oath Commissioner.

Any other document/information as may be required by the Commission for its own record or for inclusion in the prospectus.

Documents required after Approval and before Public Subscription:

13 Five printed copies of the prospectus along with copies of all those newspapers in which the prospectus has been published within two days of such publication.

Documents required after Approval and after Subscription:

14 Report containing information about the public issue, advertisement of the prospectus, subscription received, basis of allotment, refund made and related matters, within 30 days of the public offer.

Note: The documents submitted in the form of photocopy, must be certified by the Company Secretary or the CEO.

***



June 29, 2002

TERM FINANCE CERTIFICATES (TFCs) ISSUES

CHECKLIST OF DOCUMENTS FOR APPROVAL OF PROSPECTUS

S. No Name of Document

For All Companies

1. Application under Section 57(1) of Companies Ordinance, 1984 2. Application(s) made to Stock Exchange (s) 3. Clearance Letter(s) from concerned Stock Exchange (s) 4. Affidavit, on Non-Judicial Stamp Paper, from Chief Executive & Chief

Financial Officer on accuracy of disclosure, certified by Oath Commissioner 5. In case of subsequent tranches, an undertaking/affidavit, on Non-Judicial

Stamp Paper, from Chief Executive to the effect that basic structure/features of the issue and/or instrument is/are in consonance with the Prospectus approved by the Commission. If there is any change/deviation, it should be clearly indicated in the said undertaking/affidavit

6. Power of Attorney, on Non-Judicial Stamp Paper, in favor of consultants to the issue, certified by Notary Public

7. Application filing and processing fee amounting to Rs.25,000/- 8. Draft full Prospectus (alongwith abridged prospectus, if any) with the last

page signed in original by all directors of the company and duly witnessed 9. Certificate from auditors under Section 53(1) of the Companies Ordinance,

1984 and statement on break-up value per share 10. Consent from Experts/Auditors under Section 55 of the Companies

Ordinance, 1984 11. Consents from Bankers to the issue 12. Consent from Balloter to the issue 13. Consent from Legal Advisor to the issue 14. Consents from Chief Executive and Directors 15. Consent from Company Secretary 16. Form-28 duly certified from concerned Company Registration Office (CRO) 17. Form-29 duly certified from concerned CRO 18. Feasibility Report and/or Information Memorandum 19. Copy of only one Investor Agreement in full, if the terms and conditions of

all the Agreements are same, along with key pages of others

20. Copies of Underwriting Agreements (if underwritten) 21. Certificate(s) on non-judicial stamp paper regarding no-buy-back / re-

purchase agreement from sponsors/sponsoring directors 22. Certificate(s) on non-judicial stamp paper regarding no-buy-back / re-

purchase agreement from underwriters (if underwritten) 23. Audited Annual Accounts for the last five years 24. Full Credit Rating Report 25. Trust Deed 26. Letter of Hypothecation along with details of assets hypothecated 27. Full credit rating report from another Rating Agency, in case of issues of

one billion rupees or above and/or with lowest investment rating grade viz BBB- (triple B minus), if so desired by the Commission

28. Undertaking from the Balloter, Transfer Agent (Registrar to the Issue) and Underwriter(s) that they fulfill all the conditions of rule-4 of the Balloters, Transfer Agents and Underwriters Rules, 2001

29. Copy of Memorandum and Articles of Association duly certified from the concerned Company Registration office (CRO)

Additional Documents For Un-listed Public Companies

30. Copy of Certificate of Incorporation duly Certified from concerned CRO 31. Copy of Certificate of Commencement of Business duly Certified from

concerned CRO 32. Certificate from Auditors testifying subscription of sponsors’ money 33. Form-3 certified from concerned CRO 34. Form-27 duly certified from concerned CRO

Documents required after Approval, before Subscription

35. Auditors certificate confirming receipt of proceeds of subscription of TFCs under Pre-IPO placement three days prior to the subscription date

36. Application for clearance, of any advertisement in the press and/or electronic media, inviting public subscription for TFC

37. Ten printed copies of the Prospectus along with copies of all newspapers in which the prospectus has been published within two days of the publication

Documents required after Approval, after Subscription

38. Supplemental Trust Deed and Letter of Hypothecation, where necessary

39.

Report containing information about the public issue, advertisement of the Prospectus, subscription received, basis of allotment, refund made and related matters, within 30 days of the public offer

40. Statement regarding the payment of profit/interest on TFCs and redemption of the principle amount, regularly on semiannual basis

Note: Copies of all the documents should be truly certified by the Company Secretary.

Securities and Exchange Commission of Pakistan NIC Building, Jinnah Avenue, Islamabad

Islamabad, November 20, 2002. GUIDELINES FOR THE ISSUE OF TERM FINANCE CERTIFICATES (TFCs) TO

GENERAL PUBLIC

CHAPTER I

Preliminary

1. Short title and commencement.- (1) These guidelines may be called GUIDELINES FOR THE ISSUE OF TERM FINANCE CERTIFICATES (TFCs) TO GENERAL PUBLIC.

(2) These shall come into force at once.

2. Introduction and Scope: -

2.1 These guidelines set out the minimum information required to be disclosed in a Prospectus (including full prospectus, abridged prospectus and supplement to the prospectus) for offer of TFCs to general public (hereinafter referred to as “issue, offer or invitation”) under Section 57 read with Section 120 of the Companies Ordinance, 1984 (the Ordinance).

2.2 These guidelines are made pursuant to sub-section (4) of Section 20 of the Securities and Exchange Commission of Pakistan Act, 1997 in order to facilitate the Issuers to disclose all such information and facts in the prospectus as are required under Section 53 of the Ordinance and 2nd schedule to the Ordinance.

2.3 These guidelines are general in nature and should not be construed as the sole criteria for disclosure. Directors, promoters and advisers to the issue shall have the primary obligation and responsibility in relation to the contents of the Prospectus and they should ensure that all such information and facts that are necessary for assessment of the instrument, offered through the Prospectus, are disclosed.

3. Definitions.- (1) In these guidelines unless there is any thing repugnant in the subject or context,-

(a) “Abridged Prospectus,” means the condensed form of the full Prospectus.

(b) “Commission” means the Securities and Exchange Commission of Pakistan.

(c) “Green Shoe Option (GSO)” means a pre-determined amount of TFCs to be retained in case of over-subscription of the issue.

(d) “Instrument” means the Term Finance Certificate (TFC).

(e) “Shelf Registration” means the sanctioned amount of TFCs to be issued in tranches over a period of time as specified in the Prospectus.

(f) “Supplement to the prospectus” means an updated condensed form of the full prospectus for inviting public subscription through subsequent tranche(s).

(g) “Term Finance Certificate” means a debt instrument issued for the purpose to raise fund in the form of redeemable capital.

(h) “Tranche” means an offer of a certain portion out of the total amount of TFCs approved by the Commission.

(2) All other words and expressions used but not defined in these guidelines shall have the same meanings as are assigned to them in the Companies Ordinance, 1984 (XLVII of 1984) and Securities and Exchange Ordinance,1969 (XVII of 1969)

CHAPTER II

Eligibility, Procedure and Contents of the Prospectus

4. Eligibility

A Public Limited Company is eligible to offer TFCs to the general public through issue, publication and circulation of prospectus under section 57 read with section 120 of the Ordinance. The entity as well as the instrument should have a minimum credit rating grade of Triple B Minus (BBB-) assigned by a credit rating agency registered with the Commission under the Credit Rating Companies Rules, 1995.

5. Procedure

The issuer will be required to file an application with the Commission under Section 57 of the Ordinance for approval to issue, circulate and publish prospectus for offer of TFCs to the general public. Before filing the application the issuer will be required to fulfill the following requirements: -

i) In case of a new project, Expansion or Balancing, Modernization & Replacement (BMR), a feasibility study should be conducted and a report should be prepared.

ii) Pre-IPO placement of TFCs should be finalized.

iii) Underwriting arrangements, if any, should be completed.

iv) Credit rating of the entity as well as the instrument from any rating agency should be carried out.

v) Trustee, Bankers to the Issue, Balloters, Registrar (Transfer Agent) and Legal Adviser to the Issue should be appointed.

vi) Clearance of the prospectus from the concerned stock exchange(s) should be obtained.

vii) Auditor’s certificates as required under Section 53 of the Ordinance read with clause 28(1) of Section 2 of Part-I of the 2nd schedule to the Ordinance should be obtained.

6. Contents of the Prospectus

The prospectus should contain all material facts, information and disclosures as required under Section 53 of the Ordinance, and 2nd schedule to the Ordinance. However in order to facilitate the issuers the contents of the Prospectus have been provided for guidance as per Annexure-I, Annexure-II and Annexure-III for full Prospectus, abridged Prospectus and supplement to the Prospectus respectively. In addition to these, the Commission may ask for disclosure of any material information.

CHAPTER III

Risk Analysis, Categorization, Filing of Documents and Issuance of TFCs in Tranches

7. Risk Analysis

7.1 The Prospectus should contain information about all material risks, contingent or otherwise, associated with the lending to the issuer. Any risk disclosed in the Prospectus should be accompanied by a statement indicating the likely impact that the risk factors might have on the issuer and the instrument. If possible, the effects should be quantified. The disclosure should include risks relating to the issuer’s financial performance. Any subsequent material change must be reflected in the supplement to the Prospectus, in case of subsequent tranche(s).

7.2 The material risks set out below are only a guide to some of the types of risks that may apply to the issuer and the instrument. The issuer has an obligation to disclose all material risks, contingent or other wise, in addition to those mentioned below: -

(i) Risks associated with the nature of business of the issuer;

(ii) If the issuer has no operating history or its history is limited, the risks of investing in a new or relatively new venture;

(iii) Risks arising from economic conditions and cycles that are significant or peculiar to the issuer’ s business;

(iv) Risks relating to any form of government control or regulation that, when changed, have financial consequences on the issuer;

(v) Risks relating to legal uncertainties concerning the issuer’s business or operations or contractual agreements;

(vi) Risks relating to financial performance, like covenants under borrowing facility, which limits the issuer/group’s operating and financial flexibilities, foreseeable capital commitments and indebtedness.

(vii) General Risks associated with the issue, instrument, Law & Order situation, etc.

7.3 The risk factors should include a note at the end in bold letters stating the following:- “IT IS AFFIRMED THAT ALL MATERIAL RISK FACTORS HAVE BEEN DISCLOSED TO THE BEST OF OUR KNOWLEDGE AND BELIEF AND THAT NOTHING HAS BEEN CONCEALED IN THIS RESPECT”.

8. Categorization of TFCs

The application for subscription of TFCs should be categorized as for Rs. 5,000/-, Rs. 25,000/-, Rs. 50,000/-, Rs. 100,000/- and in multiples of the highest category. The TFCs offered to the general public should be allocated among different categories of applications in the following manner:-

In case of Public Offer Up to Rs. 50 Million

Category of Application Reserve Allocation of TFCs For and in multiple of Rs. 5,000/- 100% of the public offer

In case of Public Offer above Rs. 50 Million and up to Rs. 100 Million

Category of Application Reserve Allocation of TFCs 1 For Rs. 5,000/- Minimum Rs. 50 million. 2 For Rs. 25,000/

3 For and in multiple of Rs. 50,000/-

The balance should be equally allocated to each category .

In case of Public Offer above Rs. 100 Million

Category of Application Reserve Allocation of TFCs

1 For Rs. 5,000/- 25% of the public offer, Minimum Rs. 50 million.

2 For Rs. 25,000/- 3 For Rs. 50,000/-

4 For and in multiple of Rs. 100,000/-

The balance should be equally allocated to each category.

9 Filing of Documents

The issuer will be required to provide all necessary documents alongwith the application for approval of the Commission. These documents have been listed at Annexure-IV

10 TFC Issues under Shelf Registration

10.1 TFCs can be offered in tranches, however, in case of each subsequent tranche, the issuer will not be permitted to alter the basic features/structure of the issue and the instrument.

10.2 In a supplement to the prospectus for subsequent tranche(s) the issuer cannot make any change except the followings;

i. The rate of return.

ii. List of institutional investors.

iii. Updation of the clauses of Income Tax, Withholding Tax, Wealth Tax, Zakat, Capital Gain where necessary.

iv. Security & Trustee clauses.

v. Expenses of the issue.

vi. Advisors & Arranger

vii. Underwriters.

viii. Bankers to the Issue.

ix. Risk Factors.

x. Material Contracts.

xi. The information about company’s progress and strategy may be up-dated.

xii. Financials may be up-dated.

xiii. Change in the percentage of Green Shoe Option

CHAPTER IV

Approval and General Requirements

11. Approval of Prospectus

The approval of Commission for issue, circulation and publication of prospectus shall be valid for a period of 60 days from the date of sanction. The approval of prospectus under Shelf Registration will be valid for a period mentioned therein, however, the company shall submit supplement for approval of the Commission before going public, for subsequent tranches.

12. General Requirement

I. Language & Sequencing

The language of the prospectus should be simple, clear, and brief. Relative emphasis and sequencing of different information in a prospectus should be from the perspective of a common investor.

II. Signatories to the Prospectus

The full Prospectus should be signed by every director of the company as required under sub-section (3) of Section 57 of the Ordinance. The abridged prospectus as well as the supplement should be signed by at least one director authorized by the Board of Directors, Chief Financial Officer and the Company Secretary.

III. Availability of Application forms

Under the existing Laws, application form for subscription of TFCs are required to be available with the stock exchanges at which the TFCs are to be listed and with its members, the Bankers to the Issue and at the Registered Office of the Company. It is advised that the said forms be made available to other stock exchange(s) as well where the instrument is not listed.

IV. Refund of Subscription Money

Although under the law subscription money is required to be refunded within ten days of the decision regarding acceptance of applications whereas the said decision is required to be taken within ten days of the closing of the subscription list. It is advised that the decision be made within seven days of the closure of the subscription list and the subscription money is refunded to unaccepted or unsuccessful applicants within five days of the said decision.

V. Underwriting

In case of Green Field Projects, Expansion or BMR, the issues are required to be fully underwritten.

VI. Primary Purpose

The primary purpose of the issue should be explained in appropriate detail specifying the use of the subscription proceeds.

VII. Publication of Prospectus in Urdu Language.

In order to further facilitate the investors, broaden the circulation and readability, the Commission would encourage publication of the abridged prospectus and/or supplement in Urdu language in addition to English. The translation should be functional and words from English may be borrowed, where necessary.

VIII. Use of Pictures and Formatting

The prospectus being a legal document should not be used as a marketing tool. Its layout should be simple and plain. Pictures and fancy formatting are not to be used.

IX. Expenses of the Issue

All material expenses of the issue should be disclosed in full including advisory & arrangement fees, trustee fee, stamp duties, listing fee, SEC fee etc.

X. Listing of TFCs.

TFCs to be offered to general public should be listed at least on any one Stock Exchange of the country.

XI. Credit Rating

a) The company shall have the instrument rated on continuous basis till its life period and provide the rating to the Stock Exchange(s) where it is listed, the Trustee, TFC holders and the Commission. The TFCs rating should also be disclosed in the accounts of the company.

b) The issuer shall not change the Rating Agency without prior approval of the Commission during the tenure of the TFC.

XII Creation of Redemption Fund

In order to protect interest of small investors, redemption reserve shall be created in case of unsecured TFCs or bullet payment (repayment of principal in a single chunk at maturity). Only small investors holding TFCs of the value of two hundred thousand rupees or below will be eligible to be compensated, if found necessary, from this fund.

XIII Market Maker

In order to make the TFCs more liquid, the issuers are encouraged to appoint a Market Maker. The Market Maker shall give the offer and bid prices of TFCs daily in the secondary market. A market maker may be a Brokerage House or an Investment Bank.

XIV Trustee

Trustee shall be appointed by the issuer in all cases irrespective of the fact whether the instrument is secured or not. The power, role, liabilities and responsibilities of the Trustee shall be defined in the Security Trust Deed, as required under Section 119 of the Ordinance.

XV Features Of TFCs

The TFCs may have different features that should be disclosed in the prospectus. These may include: -

i. Secured or un-secured

ii. Short Term (Maturity/ life upto 12 months)

iii. Long Term (Maturity/ life beyond 12 months)

iv. Role-over at maturity (containing call and put option)

v. Bullet payment i.e repayment of principle amount in one chunk

XVI Glossary of Defined Terms

Prospectus should provide a glossary of the abbreviations and technical terms, if any used therein.

ANNEXURE-I

CONTENTS OF FULL PROSPECTUS FOR TFCS

1. Cover Page: -

The cover page of the prospectus should contains the following:-

i The words “PROSPECTUS FOR PUBLIC OFFER OF TERM FINANCE CERTIFICATES ” should be written on the top.

ii The following statement should appear near bottom; “THE INVESTORS ARE ADVISED IN THEIR OWN INTEREST TO READ THE CONTENTS OF THE PROSPECTUS ESPECIALLY THE RISK FACTORS CAREFULLY BEFORE MAKING ANY INVESTMENT DECISION”

iii Credit Rating Grade alongwith name of Credit rating agency.

iv Total amount of TFCs, amount of respective tranche, if any, and amount to be retained under Green Shoe Option, if any.

v Full name of the issuer. Logo/monogram, if any (optional).

vi Date of Publication of the prospectus;

vii Date of Subscription in bold letters.

viii Full name(s) of the underwriters;

ix Full name of the Adviser/Arranger/Lead manager

2. Table of Contents.

The contents of the prospectus should appear in the following order.

3. Part I

Approvals, Consents, & Listing

i. Approval of SECP

ii. Clearance of Prospectus by Stock Exchange

iii. Filing of documents with Registrar

iv. Listing on the Stock Exchange

4. Part II

TFCs and Related Matters

i. TFC Issue

ii. Opening & Closing of Subscription

iii. Investor Eligibility

iv. Minimum Amount of Application

v. Basis of Allotment of TFCs

vi. Refund of Money to Unsuccessful Applicants

vii. Minimum Subscription

viii. Issue and Dispatch of TFCs

ix. Transfer of TFCs in case of Physical Scrip and Transfer under book entry system

x. TFC Issued in Preceding Two Years

xi. Principal Purpose of the Subscription Money

xii. Instrument Registration

xiii. Redemption of TFCs

xiv. Call and put Options, if any

xv. Redemption Reserve

xvi. Zakat

xvii. Wealth Tax

xviii. Income Tax

xix. Withholding Tax

xx. Capital Gains Tax

xxi. Market Maker/Market Liquidity

xxii. Deferred Taxation

5. Part III

Underwriting, Commission, Brokerage & Other Expenses of the Issue

i. Underwriting

ii. No buyback/repurchase Agreement

iii. Underwriting Commission

iv. Commission to Banker to the Issue

v. Brokerage

vi. Expenses of the Issue

6. Part IV

History & Prospects

i. History

ii. Prospects

7. Part V

Risk Factors

Regulatory, Liquidity, Reinvestment, Business Specific, Industry related, Competitors, Suppliers, Consumers risk etc. Risks related to changes in Govt. policies, Law and Order situation etc.

9. Part VI

Financial Information & Credit Rating Report

i. Auditor's Certificate under Section 53(1) read with clause 28(1) of Section 2 of Part-I of the 2nd schedule to the Ordinance containing a statement on Break-up Value per share of the issuer

ii. Auditor's Certificate on Issued, Subscribed, & Paid-up Capital

iii. Full Credit Rating Report

10. Part-VII

Trustee & Security

i. Security

ii. Trustee

iii. Trust Deed

11. Part VIII

Management of the Company

i. Management Information

ii. Number of Directors

iii. BOD (Name, Address, Designation, Other Directorships)

iv. Information in respect of dividend payments by group companies in which directors of the issuers holding directorship.

v. Overdue Loans

vi. Power of Directors

vii. Profiles of Chairman, Chief Executive, MD, CFO, COO and Secretary of the Company

viii. Qualification of Directors

ix. Remuneration of Directors

x. Benefits to Promoters & Officers during last two years

xi. Interest of the Directors

xii. Interest of the Director in Property acquired by the Company

xiii. Election of Directors

xiv. Borrowing Power

12. Part IX

Miscellaneous Information

a. Addresses of the Registered Office, Head office and Factory

b. Bankers to the Company

c. Bankers to the Issue

d. Auditors

e. Legal Advisor to the Issue

f. Advisors & Arrangers to the Issue

g. Balloter to the Issue

h. Material Contracts (Nature, amount and dates of different agreements executed with respect to the issue and that of Trust Deed, Letter of Hypo; L.Cs etc.)

i. Inspection of Documents & Contracts

j. Legal Proceedings

k. Indemnity

l. Capitalization of Reserves

m. Revaluation of Fixed Assets

n. Memorandum of Association

o. Vendors

p. Subsidiary Companies

q. Associated Companies and investment therein, if any, and latest market value of the this investment

r. Registrar (Transfer Agent)

s. Tax Adviser

13. Part X

Application & Allotment Instructions

i. Allotment instructions

ii. Basis of Allotment

iii. List of Bankers to the issue and their Bank Code

iv. Code of Occupation

14. Part XI

Signatories to the Prospectus

List of the signatories to the prospectus and their signatures in original duly dated and witnessed

15. Part XII

Memorandum of Association

16. Application Form

The Application Form should contains allotment instructions, basis of allotment, list of bankers to the issue & their bank code and code of different occupations

17. Any other material information directed by the Commission should be disclosed

ANNEXURE-II

CONTENTS OF ABRDIGED PROSPECTUS

Caption:

Contains word "Abridged Prospectus”, name of issuer, total issue size, subscription date(s), lead advisors and arranger; credit rating, and rating agency and approvals.

Part 1

Issuer - History including profile of management & sponsors

Part 2

i. Description of Issue, including rate of return

ii. Primary purpose of issue

iii. Break-up of the issue in Private Placement & Public Offer

iv. Options, if any - Call, Put, Green Shoe, Minimum Subscription

v. Return & Redemption Schedule(s) for smallest denomination

vi. Zakat & Taxes

vii. Listing(s)

viii. Market Maker(s)

Part 3

i. Risk Factors

ii. Underwriters

iii. Trustee & Responsibility

iv. Security & Negative Pledge

v. Redemption Reserve

vi. Overdue debt servicing liabilities

vii. Legal Cases

viii. Total Expenses to the issue

Part 4

a. Investor Eligibility

b. Denomination(s)

c. Bankers to the Issue

d. Issue, Dispatch & Transfer of TFCs

e. Address of the issuer

ANNEXURE-III

CONTENTS OF SUPPLEMENT TO THE PROSPECTUS

1. Cover Page: - The cover page of the supplement should contains the following: -

i. The words “SUPPLEMENT FOR THE SECOND/THIRD/(whichever is applicable) TRANCHE OF THE FIRST/SECOND/THIRD/(whichever is applicable) PUBLIC OFFER OF TERM FINANCE CERTIFICATES ” should be written on the top.

ii. The following statement should appear near bottom; “THE INVESTORS ARE ADVISED IN THEIR OWN INTEREST TO READ THE CONTENTS OF THE SUPPLEMENT ESPECIALLY THE RISK FACTORS CAREFULLY BEFORE MAKING ANY INVESTMENT DECISION”

iii. Credit Rating Grade alongwith name of credit rating agency

iv. Total amount of TFCs, amount of respective tranche, and amount to be retained under Green Shoe Option, if any

v. Full name of the issuer, logo/monogram, if any (optional)

vi. Date of publication of the Supplement

vii. Date of subscription in bold letters

viii. Full name(s) of the underwriters

ix. Full name of the Adviser/Arranger/Lead manager

2. Table of Contents.

The contents of the Supplement should appear in the following order.

1. Approvals and list of documents filed with Registrar Joint Stock Companies

2. The Issuer

3. The Tranche

4. Principal purpose of the subscription money

5. Application Procedure

6. Underwriting and expenses of the issue

7. Contracts and Legal Cases

8. Summary of the financial statements

9. Summarized credit rating report

10. Security & Trustee

11. Application and allotment instructions

3. Approval and list of documents filed with Registrar Joint Stock Companies

i. Approval of SECP and clearance from the stock exchange(s).

ii. List of documents filed with Registrar Joint Stock Companies.

iii. Total amount of the Issue and the amount and date(s) of previous tranche(s)

4. The Issuer

i. History/Background

ii. Project Information

5. The Tranche

i. The Total amount of TFC under shelf registration, the amount of previous tranche(s), and the break-up of the amount of current tranche in to Pre-IPO and IPO.

ii. Green Shoe Option, if any.

iii. Denomination of TFCs

iv. Redemption of TFCs

v. Call and put Options, if any

vi. Zakat

vii. Wealth Tax

viii. Income Tax

ix. Withholding Tax

x. Capital Gains Tax

xi. Market Maker/Market Liquidity

xii. Deferred Taxation

xiii. Basis of Allotment of TFCs

xiv. Refund of Money to Unsuccessful Applicants

xv. TFC Issued in Preceding Two Years

xvi. Risk Factors

6. Principal purpose of the subscription Money

7. Application Procedure

i. Investor eligibility

ii. Opening & closing of subscription

iii. Bankers to the Issue

iv. Minimum amount of application

v. Availability of application forms

8. Underwriting and expenses of the issue

9. Contracts and Legal Cases

i. Legal Cases

ii. Material Contracts

iii. Inspection of Documents and Contracts

10. Summary of the financial statements

11. Summarized Credit Rating Report

12. Trustee & Security

i. Security

ii. Trustee

13. Application and Allotment Instructions

The Application Form should contain allotment instructions, basis of allotment, list of bankers to the issue & their bank code and code of different Occupations

14. Any other material information as directed by the Commission should be disclosed

ANNEXURE-IV

CHECKLIST OF DOCUMENTS FOR APPROVAL OF PROSPECTUS OF TERM FINANCE CERTIFICATES

S. No. Name of Document 1. Application under Section 57(1) of Companies Ordinance, 1984

2. Application(s) made to Stock Exchange (s)

3. Clearance Letter(s) from concerned Stock Exchange (s)

4. Affidavit, on Non-Judicial Stamp Paper, from Chief Executive & Chief Financial Officer on accuracy of disclosure, certified by Oath Commissioner

5. Power of Attorney, on Non-Judicial Stamp Paper, in favor of consultants to the issue, certified by Notary Public

6. Application filing and processing fee of Rs. 25,000/-

7. Draft full Prospectus (alongwith abridged prospectus, if any) with the last page signed in original by all directors of the company and duly witnessed

8. Certificate from auditors under Section 53(1) of the Companies Ordinance, 1984 and statement on break-up value per share

9. Consent from Experts/Auditors under Section 55 of the Companies Ordinance, 1984

10. Consents from Bankers to the issue

11. Consent from Balloter to the issue

12. Consent from Legal Advisor to the issue

13. Consents from Chief Executive and Directors

14. Consent from Company Secretary

15. Form-28 duly certified from concerned Company Registration Office (CRO)

16. Form-29 duly certified from concerned CRO

17. Feasibility Report and/or Information Memorandum

18. Copy of only one Investor Agreement in full, if the terms and conditions of all the Agreements are same, along with key pages of others

19. Copies of Underwriting Agreements (if underwritten)

20. Certificate(s) on non-judicial stamp paper regarding no-buy-back / re-purchase agreement from sponsors/sponsoring directors

21. Certificate(s) on non-judicial stamp paper regarding no-buy-back / re-purchase agreement from underwriters (if underwritten)

22. Audited Annual Accounts for the last five years

23. Full Credit Rating Report

24. Trust Deed

25. Letter of Hypothecation along with details of assets hypothecated

26. Undertaking from the Balloter, Transfer Agent (Registrar to the Issue) and Underwriter(s) that they fulfill all the conditions of rule-4 of the Balloters, Transfer Agents and Underwriters Rules, 2001

27. Copy of Memorandum and Articles of Association duly certified from the concerned Company Registration office (CRO)

28. Undertaking on non-judicial stamp paper from the directors of the company that all legal proceedings other than ordinary routine litigations incidental to the business of the company as described in clause 27 of the part-I of 2nd schedule to the Companies Ordinance, 1984, have been disclosed in the prospectus

29. Application for clearance, of any advertisement in the press and/or

electronic media, inviting public subscription for TFCs

Additional Documents For Un-listed Public Companies

30. Copy of Certificate of Incorporation duly Certified from concerned CRO

31. Copy of Certificate of Commencement of Business duly Certified from concerned CRO

32. Certificate from Auditors testifying subscription of sponsors’ money

33. Form-3 Certified from concerned CRO

34. Form-27 duly Certified from concerned CRO

Documents required after Approval, before Subscription

35. Auditors certificate confirming receipt of proceeds of subscription of TFCs under Pre-IPO placement three days prior to the subscription date

36. Ten printed copies of the Prospectus along with copies of all newspapers in which the prospectus has been published within two days of the publication

Documents required after Approval, after Subscription

37. Supplemental Trust Deed and Letter of Hypothecation, where necessary

38. Report containing information about the public issue, advertisement of the Prospectus, subscription received, basis of allotment, refund made and related matters, within 30 days of the public offer

The Report to be submitted to the Commission within 30 days of the Public Subscription should include information on the following:

1. Brief History and Financial Highlights of the Issuer; 2. Summary of the TFC Issue including; Amount (Pre-IPO and IPO),

Tenor, Return, green shoe option, Credit Rating, Listing etc.; 3. Sector-wise breakup of Private Placement Investors (Amounts and

percentage of total Pre-IPO); 4. Total number and amount of Applications received in response to the

Public Offer; 5. Odd Amounts or Multiple Applications received if any; 6. Refunds or Confiscation (of multiple applications if any); 7. Exercise of green shoe option; and

Sector-wise breakup of successful applicants in the public offer (Amount and percentage of total public offer & Green shoe Option, if any).

39. Statement regarding the payment of profit/interest on TFCs and redemption of the principle amount, regularly on semiannual basis

Note: Copies of all the documents should be truly certified by the Company Secretary.

Guidelines on issue of shares discount Dated: 18-3-2004.

1


PROFESSIONAL SERVICES & POLICY DIVISION

GUIDELINES ON ISSUE OF SHARES AT A DISCOUNT

These Guidelines will apply to issue of shares at a discount by any

company to whom the Companies (Issue of Capital) Rules, 1996 apply.

2. The following policy would be followed by the Commission while

considering the applications for issue of shares at a discount: -

(a) Discount shall be allowed only if the financial projections establish

that injection of the fresh capital will result in enough profits

enabling the company to amortize the discount within a period of

not more than 5 years.

(b) Issue of shares at a discount shall not be allowed to companies in

the financial sector where capital is proposed to be issued to meet

any prescribed equity/paid up capital requirements.

(c) Commission may impose such conditions as it may deem fit while

granting sanction under section 84 of the Companies Ordinance.

Such conditions may include the following:-

(i) that shares allotted to sponsors and directors at a discount

shall not be disposed off by allotees for a period of three

years.

(ii) that the percentage of shares held by the directors shall not

increase as a consequence of allotment made otherwise than

by way of right offer.


2

3. The issuers desirous of issuing shares at a discount shall accordingly

submit adequate information/documents requisite, as below, for an early

decision by the Commission whether to grant or not to grant the sanction applied

for under sub-section (2) of section 84 of the Companies Ordinance 1984: -

A. Issue at discount to existing shareholders as a right issue.

(i) A statement signed by all the directors of the company (except

the nominee directors), who were present at the board meeting

in which the issue of shares at a discount was decided upon

stating that the funds in question are essentially required and

they have explored all other avenues of funding available and

shares at a discount are being issued as a last resort.

(ii) The details of issue of shares at par or at a discount in the last

five years stating purpose, utilization of funds and benefit arisen

to the company and its shareholders. The amount of capital

injected thereby and the increase in profit before tax in

consequence thereof shall be stated.

(iii) A certified copy of the notice of general meeting published and

circulated among the shareholders.

(iv) A copy of the statement annexed to the said notice in pursuance

of section 160 (1)(b) ibid; setting out information required under

that section and containing all the material facts concerning the

issue of shares at discount, including the matters listed in these

guidelines.

(v) A certified copy of Resolution passed in the general meeting

authorizing issue of shares at discount.

(vi) A certified copy of minutes of the respective general meeting

indicating the number of shareholders present in person or

through proxies.


3

(vii) A certified copy of the underwriting agreement which shall inter

alia contain a clause that the underwriter shall subscribe or

arrange to subscribe any unsubscribed portion of the offer

within fifteen days of being called upon to do so by the company

alongwith a copy of due diligence report by underwriters. It

should be mandatory on the issuer to make available at it’s

registered office for inspection, the due diligence report of the

underwriters.

(viii) A copy of financial plan, projections and other information as

listed in rule 5(ii) of the Companies (Issue of Capital) Rules,

1996 alongwith the schedule of discount amortization.

(ix) In case of discount more than 10 percent, a copy of the project

appraisal report by a Development Financial Institution, a

commercial bank or an investment bank.

(x) Break-up value of the Company’s share at the end of last

financial year as determined by the auditor. In case of discount

exceeding 10 percent, breakup value of shares based on

valuation of assets by a consulting engineer registered with

Pakistan Engineering Council may also be provided.

(xi) Audited annual accounts for the last three years along with

latest half yearly and quarterly accounts.

(xii) Turnover details and market share price of Company’s share

during preceding 6 months.

(xiii) Details of advances/loans to the associated companies and

directors during preceding three years and justification thereof.

(xiv) Latest pattern of shareholding and variation in shareholding of

the shareholders, having 10% or more shares in the company in

the last six months and after the proposed issue.


4

B. Issue of shares at discount by way of other than right offer.

In addition to requirements laid in foregoing paragraph “A” above,

companies will be required to submit: -

(i) Significance of the project and its national importance, if

that forms the basis for the application.

(ii) If an arrangement has been made with a person to whom

shares are proposed to be allotted, a copy of the agreement/

consent of that person.


1



GUIDELINES ON ISSUE OF SHARES AT A DISCOUNT

These Guidelines will apply to issue of shares at a discount by any

company to whom the Companies (Issue of Capital) Rules, 1996 apply.

2. The following policy would be followed by the Commission while

considering the applications for issue of shares at a discount: -

(a) Discount shall be allowed only if the financial projections establish

that injection of the fresh capital will result in enough profits

enabling the company to amortize the discount within a period of

not more than 5 years.

(b) Issue of shares at a discount shall not be allowed to companies in

the financial sector where capital is proposed to be issued to meet

any prescribed equity/paid up capital requirements.

(c) Commission may impose such conditions as it may deem fit while

granting sanction under section 84 of the Companies Ordinance.

Such conditions may include the following:-

(i) that shares allotted to sponsors and directors at a discount

shall not be disposed off by allotees for a period of three

years.

(ii) that the percentage of shares held by the directors shall not

increase as a consequence of allotment made otherwise than

by way of right offer.


2

3. The issuers desirous of issuing shares at a discount shall accordingly

submit adequate information/documents requisite, as below, for an early

decision by the Commission whether to grant or not to grant the sanction applied

for under sub-section (2) of section 84 of the Companies Ordinance 1984: -

A. Issue at discount to existing shareholders as a right issue.

(i) A statement signed by all the directors of the company (except

the nominee directors), who were present at the board meeting

in which the issue of shares at a discount was decided upon

stating that the funds in question are essentially required and

they have explored all other avenues of funding available and

shares at a discount are being issued as a last resort.

(ii) The details of issue of shares at par or at a discount in the last

five years stating purpose, utilization of funds and benefit arisen

to the company and its shareholders. The amount of capital

injected thereby and the increase in profit before tax in

consequence thereof shall be stated.

(iii) A certified copy of the notice of general meeting published and

circulated among the shareholders.

(iv) A copy of the statement annexed to the said notice in pursuance

of section 160 (1)(b) ibid; setting out information required under

that section and containing all the material facts concerning the

issue of shares at discount, including the matters listed in these

guidelines.

(v) A certified copy of Resolution passed in the general meeting

authorizing issue of shares at discount.

(vi) A certified copy of minutes of the respective general meeting

indicating the number of shareholders present in person or

through proxies.


3

(vii) A certified copy of the underwriting agreement which shall inter

alia contain a clause that the underwriter shall subscribe or

arrange to subscribe any unsubscribed portion of the offer

within fifteen days of being called upon to do so by the company

alongwith a copy of due diligence report by underwriters. It

should be mandatory on the issuer to make available at it’s

registered office for inspection, the due diligence report of the

underwriters.

(viii) A copy of financial plan, projections and other information as

listed in rule 5(ii) of the Companies (Issue of Capital) Rules,

1996 alongwith the schedule of discount amortization.

(ix) In case of discount more than 10 percent, a copy of the project

appraisal report by a Development Financial Institution, a

commercial bank or an investment bank.

(x) Break-up value of the Company’s share at the end of last

financial year as determined by the auditor. In case of discount

exceeding 10 percent, breakup value of shares based on

valuation of assets by a consulting engineer registered with

Pakistan Engineering Council may also be provided.

(xi) Audited annual accounts for the last three years along with

latest half yearly and quarterly accounts.

(xii) Turnover details and market share price of Company’s share

during preceding 6 months.

(xiii) Details of advances/loans to the associated companies and

directors during preceding three years and justification thereof.

(xiv) Latest pattern of shareholding and variation in shareholding of

the shareholders, having 10% or more shares in the company in

the last six months and after the proposed issue.


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B. Issue of shares at discount by way of other than right offer.

In addition to requirements laid in foregoing paragraph “A” above,

companies will be required to submit: -

(i) Significance of the project and its national importance, if

that forms the basis for the application.

(ii) If an arrangement has been made with a person to whom

shares are proposed to be allotted, a copy of the agreement/

consent of that person.

(1) Recognized body of professional accountants for the purpose of appointment of CFO

(i) (a) The body of professional accountants has been

established in Pakistan under a special enactment of the Federal Government and is fully operational within the framework of the enactment. (b) For entitlement of membership of the body, there

must be a basic condition of passing all parts of the examination unless some exemptions are allowed with restriction on passing some other examination of equal or higher standard.

(c) The body is a self regulatory organization managed

by a representative National Council.

(ii) Bodies of professional accountants established in foreign countries shall also be recognized subject to the following conditions:-

(a) The body has been established under a special

enactment in the country of its origin. (b) It is a member of International Federation of

Accountants (IFAC).

(2) Recognized Body of corporate/chartered secretaries for the purpose of appointment of secretary in a listed company

(i) (a) It has been established in Pakistan under a special

enactment of the Federal Government and is fully operational within the framework of the enactment.

(b) The body, not having been established in Pakistan

under a special enactment as per (a) above, has come into existence through another legal instrument, and has a detailed syllabus including the subjects relevant to the job of secretary of a listed company, like (i) accountancy; (ii) corporate laws; (iii) mercantile laws; (iv) tax laws; (v) financial management; (vi) information technology; and (vii) corporate secretarial practices, etc. of the level of post-graduate syllabi prescribed by recognized universities of Pakistan.

(c) For entitlement of membership of the body, there must be a basic condition of passing all parts of the examination unless some exemptions are allowed with restriction on passing some other examination of equal or higher standard.

(ii) A body of corporate/chartered secretaries established in a

foreign country, provided such a body has been established under a special enactment of the country of origin.

Internet Trading Guidelines March 2005


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Internet Trading Guidelines, 2005 1) Short Title and Scope: - (1) These Guidelines are called the Internet Trading

Guidelines, 2005.

(2) The scope of the Guidelines extends to all internet trading service providers. The Guidelines shall not apply to proprietary trade networks or private trading networks operated between a Stock or Commodity Exchange and its members.

2) Definitions :- (1) In these Guidelines, unless there is anything repugnant in the

subject or context,

(a) “Advanced Electronic Signature” has the same meaning as given in section 2(1)(e) of the Electronic Transactions Ordinance, 2002;

(b) “broker” means any broker registered with the Commission under Broker and Agents Registration Rules, 2001 or under the Commodity Exchange and Future Contracts Rules, 2004;

(c) “Commission” has the same meaning as given in section 2(2)(g) of the Securities and Exchange Commission of Pakistan Act, 1997;

(d) “Commodity Exchange” has the same meaning as given in section 2(1)(cc) of the Securities & Exchange Ordinance, 1969;

(e) “Electronic Signature” has the same meaning as given in section 2(1)(n) of the Electronic Transactions Ordinance, 2002;

(f) “Internet trading service provider” means any person offering trading service in securities through the internet under these Guidelines ;

(g) “person” has the same meaning as given in section 2(1) (j) of the Securities and Exchange Ordinance, 1969;

(h) “Securities or Security” has the same meaning as given in section 2(1)(l) of the Securities and Exchange Ordinance, 1969; and

(i) “Stock or Commodity Exchange” means :

(i) any Stock Exchange defined under section 2(1)(m) of the Securities and Exchange Ordinance, 1969

(ii) any Commodity Exchange defined under clause 2(1) (cc) of the Securities and Exchange Ordinance, 1969; and

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

Guidelines shall have the same meanings as are assigned to them in


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the Companies Ordinance, 1984 (XLVII of 1984), the Securities and Exchange Ordinance, 1969 (XVII of 1969) and the Securities and Exchange Commission of Pakistan Act, 1997(XLII of 1997).

3) Commencement of Service : - (1) Prior to commencement of service every

internet trading service provider shall submit details to the Commission of the service to be provided.

(2) Prior to commencement of service every internet trading service provider shall demonstrate its ability to provide the service under these Guidelines.

(3) Prior to commencement every internet trading service provider shall have the systems, controls and procedures of the internet trading service audited independently by an audit firm approved by the Commission. (4) All existing internet trading service providers shall comply with these Guidelines within six weeks of the date of issue of these Guidelines.

4) Service Requirements:- Every internet trading service provider shall ensure

that satisfactory arrangements are in place to:

(1) ensure confidentiality of information in such a way that information is only accessible to an authorized person or system; and in particular that satisfactory measures are in place to prevent:

(a) unwanted disclosure of inter alia persona l data, transactions, activity and presence on the internet;

(b) misappropriation of IDs;

(c) impersonation, leading to unauthorised (illegal) transactions;

(d) unauthorised usage and inability to detect such malpractices in a timely fashion and/or identify the perpetrator;

(e) attacks from third parties designed to interrupt the service or aimed at the service becoming an agent for an attack against another web-site ;

(f) analysis of data by unauthorized third parties.

(2) safeguard the integrity of the service including controls to prevent:

(a) non-compliance with laws, rules, regulations and Guidelines issued by the Commission, leading to illegal transactions , fraud or malpractice;


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(b) presentation of incorrect data, whether unintentionally or malevolently;

(c) false presentation, or the use of incomplete information for transactions ;

(d) manipulation of data;

(e) viruses, leading to inter alia loss of data, unauthorized access to or manipulation of data, unavailability or threat of unavailability of systems;

(f) cyber extortion, selling or provision of data stolen from (or illegally obtained from) service providers.

(3) ensure the availability of the service in the event that:

(a) the site is not reachable, and that there is no possibility to trade, or to get or give information; or

(b) that parts of the site are not reachable either through a denial of service attack or lack of capacity; or

(c) that the provider of the service is unable to give timely access to the site or parts of the site.

(4) ensure that satisfactory alternative arrangements and contingency plans

are in place to ensure that business can continue in the event of a large-scale disruption (Disaster Recovery Planning/Business Continuity Planning);

(5) ensure that the identity of the person or system accessing the service is

properly verified by the use of PINs, passwords, electronic signatures or such other approved mechanism so as to exclude unauthorized access;

(6) ensure that satisfactory arrangements are in place so that a broker can

at all times uniquely identify each and every order during the different stages of processing;

(7) ensure that orders placed through its systems are fairly allocated in

accordance with the rules of the relevant Stock or Commodity Exchange;

(8) ensure that there is an effective audit trail to address risks arising from:

(a) the opening, modification or closing of a client account ;

(b) any transaction with significant financial consequences;

(c) any authorisation granted to a customer to exceed a limit;


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(d) any granting, modification or revocation of systems access rights or privileges.

5) Service Agreement/Arrangement:- Every internet trading service provider

shall :

(a) have an agreement with clients to whom it offers an internet trading service that contains appropriate and prominent risk disclosures highlighting the risks associated with internet transactions ;

(b) have appropriate arrangements in place to assess a client’s

suitability to undertake securities transactions via the internet;

(c) have appropriate arrangements in place to approve a

client’s account for day trading; (d) have adequate risk management systems for controlling

exposure to internet clients and in particular for monitoring margin trading;

(e) have an adequate number of suitably qualified staff to

control and monitor transactions and render clients services in accordance with the rule s and Guidelines;

(f) either have suitably qualified staff to operate and maintain

the systems used for internet trading services or have an irrevocable agreement with a suitably qualified third party service provider for the operation and maintenance of those systems;

(g) be responsible for settlement of each and every trade

executed through the internet trading service. 6) Requirements by the Exchanges: - A Stock or Commodity Exchange may

specify its own requirements, in addition to these Guidelines , for allowing an internet trading service provider to continue its business.

7) Client Identity: - Every internet trading service provider shall submit to the

Commission the details as to how it will satisfy itself as to the true identity of a person opening an account and what measures it intends to take to ensure that the account will be maintained and operated by the person opening the account.

8) Security of Data:-. (1) To reduce the risk of third party interception of

information sent between a client's computer and the system of an internet trading service provider , every internet trading service provider is required to use some form of encryption.


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(a) The encryption shall apply not only to orders being entered

but to any communication with clients that contains confidential information.

(b) Every internet trading service provider is also required to

use a firewall to prevent intrusions by unauthorized persons (e.g., a cracker or hacker, who may obtain unauthorized access to a computer system by bypassing passwords or otherwise breaching computer security).

(c) Every internet trading service provider shall ensure that its

system shall be configurable to allow auto-logoff in case of inactivity of the trading terminal and the trading website.

(d) Every internet trading service provider shall demonstrate

that they have in place a written security policy based on or containing these Guidelines as part of the ir security policy.

9) Operational Capacity: - Every internet trading service provider shall ensure

that its operational capacity is re-evaluated at regular intervals and every internet trading service provider shall give the Commission details of the procedures for undertaking such an evaluation, the time at which such an evaluation will be undertaken, and a copy of the results of such evaluation.

10) Systems Modification: - Every internet trading service provider is required to

submit to the Commission, in advance , with information relating to any significant changes to its systems or any changes to the functionality of its systems identifying the areas and the reasons for the change.

11) Periodic Audit: - (1) Every internet trading service provider shall ensure that

its systems, controls and procedures are audited independently by an audit firm approved by the Commission once every financial year.

(2) Every internet trading service provider shall submit report of the

auditor to the Commission within four months of the date of the close of its financial year.

12) Customer Information:- (1) Every internet trading service provider shall ensure that its system shall provide the following information in plain English or Urdu language and in an easily accessible form:

(a) a basic explanation of securities trading; including

definitions of common terms used on the trading screen; (b) a general statement and information regarding the manner

in which orders are accepted, processed, settled and cleared via the internet;


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(c) disclosure about the risks of securities trading, including the risk of systems outages and failures and any alternative means of placing orders;

(d) disclosure about the risks involved in trading securities in a

margin account;

(e) procedures to cancel pending orders during a system failure;

(f) a glossary explaining key investment terms and concepts

such as;

(i) the differences between the various types of orders that may be placed (e.g., a market order, a limit order);

(ii) notice that a market order may be executed at a

price higher or lower than the quote displayed on the website at the time of order entry;

(iii) an explanation of how the customer's orders are

executed;

(iv) any situations in which customers may not receive an execution;

(v) any restrictions on the types of orders that

customers can place; and

(vi) how market volatility can affect customers' orders.

(g) the rules and Guidelines affecting inter alia client broker relationship, arbitration rules , investor protection rules.

(h) a hyper link to the website/page on the website of the

relevant Stock or Commodity Exchange displaying rules/Guidelines/circulars ; and

(i) a “Terms of Use” policy document which includes proper

and fair disclaimers.

(2) Every internet trading service provider shall ensure that its ticker/quote/order book displayed will display the time stamp as well as the source of such information against the given information.

13) Duplicate orders: - Every internet trading service provider is required to

ensure that its system has mechanisms to prevent executions of unintended duplicate orders.


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14) Independent assessment: - The Commission may employ technical experts to undertake an independent assessment of the operational capacity and security of a system.

15) Order/Trade Confirmation: - (1) Every internet trading service provider

shall ensure the trade confirmations and contract notes are sent to the client. Subject to the rules and regulations of the Stock or Commodity Exchange, these may be sent by email on condition that the broker:

(a) notifies the Stock or Commodity Exchange concerned of

the intention to use of electronic trade confirmations and/or contract notes one month in advance; and

(b) obtains prior written consent from the clients concerned.

(2) Every internet trading service provider shall ensure that any trade confirmations and/or contract notes sent by email shall be digitally signed by Electronic Signature or Advanced Electronic Signature.

16) Outsourcing: - (1) Every internet trading service provider considering

entering into outsourcing arrangements with a third party supplier of internet trading services shall ensure that they cannot contract out of their core functions and regulatory obligations.

(2) Every internet trading service provider when negotiating an outsourcing arrangement may, inter alia , consider the following:

(a) notification and reporting requirements;

(b) intellectual property and information ownership rights, confidentialit y agreements and Chinese Walls ;

(c) the need for, and adequacy of, any guarantees or indemnities;

(d) compliance with the internet trading service provider’s own policies, for example on information security;

(e) arrangements to ensure business continuity and the extent to which facilities that provide the outsourcing are or are not available to provide business continuity for third parties;

(f) approval process for changes to outsourcing arrangements; and

(g) agreed conditions for terminating outsourcing arrangements.


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(3) Every internet trading service provider entering into outsourcing arrangements with a supplier of internet trading services shall enter into a service level agreement that includes:

(h) qualitative and quantitative performance targets;

(i) evaluation of performance, for example by third parties, internal audits, self certification; and

(j) remedial action and escalation processes for dealing with inadequate performance.

(4) Every internet trading service provider that enters into an outsourcing arrangement with a supplier of internet trading services shall have appropriate contingency arrangements in place in the event that the supplier of the service is unable to continue to provide a service.

17) Monthly reporting : - Every internet trading service provider shall provide

monthly reports to the Commission on the reliability of the service. These reports must show:

(a) number of users of the system as at the end of the month:

(i) for Stock or Commodity Exchanges this is number

of brokers; (ii) for brokers this is the number of clients.

(b) daily average number of transactions (of all types)

processed by the system during the month and the highest number of transactions processed by the system on a single day during the month;

(c) percentage of the scheduled time for availability for which

the service was not available; and

(d) reason for non-availability.

18) Dispute Resolution: - In case of any dispute arising between Broker and Broker, and Broker and Client, the matter will be resolved in accordance with the existing procedures of arbitration and dispute resolution of the Stock or Commodity Exchange.

19) Cooperation with Commission: - (1) To assist the Commission in

investigating instances of suspected market abuses such as insider trading and market manipulation, internet trading service providers shall provide full and prompt responses to all requests for information by the Commission.


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(2) Every internet trading service provider shall ensure that information displayed on its website is kept in an accessible form for a minimum of twelve months.


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Guidance Notes Clause Guidance Note 1 Scope The scope of the Guidelines extends to trading

through the Internet. The Guidelines do not apply to proprietary trading networks or private trading networks operated between an exchange and its members. However, the Guidelines do apply if that trading service is Internet based and extends beyond the member to clients of the member. If in doubt, exchanges and/or their members should consult with the Commission.

3(1) Prior to commencement of service every internet trading service provider shall submit details to the Commission of the service to be provided.

Internet trading service providers are required to provide details of the service to be offered and must demonstrate compliance with the Guidelines. The Commission will not prescribe what systems should be implemented for internet trading as this would tend to stifle innovation. Instead, the Commission will satisfy itself that the systems to be used have adequate controls and procedures in place to ensure confidentiality of information, integrity and availability of the service; together with contingency plans in the event of a loss of service. Internet trading service providers should state details and/or examples of how the internet trading service provider is ensuring confidentialit y of information; how the internet trading service provider is safeguarding the integrity of the service; what plans the internet trading service provider has for enabling clients to continue to trade in the event of a temporary loss of service; what plans the internet trading service provider has for coping with a disaster scenario such as loss of premises hosting the service etc.

3(3) Prior to commencement every internet trading service provider shall have the systems, controls and procedures of the inte rnet trading service audited independently by an audit firm approved by the Commission.

The audit of internet trading service provider’s systems, controls and procedures must be conducted by a firm drawn from a panel selected by the Commission.

4(2) (a) presentation of incorrect data, whether unintentionally or malevolently;

(b) false presentation, or the use of incomplete information

Concern has been expressed that delayed data might be interpreted as inaccurate or false data. The Commission will not take this view where data has been delayed due to exceptional circumstances. However, the Commission will


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for transactions;

expect internet trading service providers to be responsible for timeliness of distribution of data from its central systems and the Commission will in particular want internet trading service providers demonstrate that all clients accessing the systems are treated fairly and equally depending upon their method of access.

4(2) (e) viruses, leading to inter alia loss of data, unauthorized access to or manipulation of data, unavailability or threat of unavailability of systems;

The Commission will expect internet trading service providers to have effective anti-virus software in place and that this will be updated in accordance with the manufacturers’ recommendations.

4(3) ensure the availability of the service in the event that:

(a) the site is not reachable, and that there is no possibility to trade, or to get or give information; or

(b) that parts of the site are not reachable either through a denial of service attack or lack of capacity; or

(c) that the provider of the service is unable to give timely access to the site or parts of the site.

The Commission will wish to see from the internet trading service provider what arrangements are in place for the temporary interruption in the service either because the site cannot be reached or that parts of the site cannot be reached or that there is a degradation in timeliness of access to the site or parts of the site. This could be a dedicated telephone help desk or other means of accepting orders from clients. What is not acceptable is that the internet trading service provider does not have alternative arrangements in place. The Commission will want to be satisfied that alternative arrangements are in place and that these have been notified to clients in advance.

5(a) and 5(b)

have an agreement with clients to whom it offers an internet trading service that contains appropriate and prominent risk disclosures highlighting the risks associated with internet transactions;

have appropriate arrangements in place to asse ss a client’s suitability to undertake securities transactions via the internet;

Brokers will be expected to have separate client agreement letters for those clients to whom it offers an internet trading service. With online trading comes the increased popularity of day trading which can pose unique investor protection concerns. Individuals engaging in day trading activities often trade their accounts aggressively. However, the ability to engage effectively in day trading requires not only sufficient capital but also a sophisticated understanding of securities markets and trading techniques. Such investors should be made aware that the risk of loss of capital can be very high.

5(e) have an adequate number of suitably qualified staff to control and monitor transactions and render clients services in

The number and qualifications of the staff will vary according to the service being offered but clearly there must be staff employed or contracted on a permanent basis who have the business and


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accordance with the rules and Guidelines ;

technical skills to be able to operate the service on behalf of the internet trading service provider. This would include staff who will provide emergency cover and assistance in the event of a temporary interruption in the normal service.

8(1) (a)The encryption should apply not only to orders being entered but to any communication with clients that contains confidential information.

Encryption should be such that it is designed to prevent unauthorised interception of the information by a third party during transmission using an encryption and electronic signature system that ensures the authenticity, integrity and confidentiality of the information sent.

9 Every internet trading service provider shall ensure that its operational capacity is re-evaluated at regular intervals and every internet trading service provider shall give the Commission details of the procedures for undertaking such an evaluation, the time at which such an evaluation will be undertaken, and a copy of the results of such evaluation.

The frequency of evaluation of operational capacity will depend upon a number of factors including the growth rate of the service being provided by the in ternet trading service provider. If growth is rising faster than all expectations, operational capacity must the re-evaluated more frequently to ensure that the service can meet future growth. At minimum however, operational capacity should be reviewed on at least an annual basis.

10 Every internet trading service provider is required to submit to the Commission, in advance, with information relating to any significant changes to its systems or any changes to the functionality of its systems identifying the areas and the reasons for the change.

Rectification of software defects or minor modifications to systems and software need not be notified but any major upgrades to systems and changes to the functionality of a system should be notified to the Commission in advance.

13 Every internet trading service provider is required to ensure that its system has mechanisms to prevent executions of unintended duplicate orders.

Duplicate orders can happen when reports of fills or order cancellations are significantly delayed (by hours or even days) so that a customer may assume that his/her initial order was not executed. Duplicate orders have resulted in customers placing unintended short sales or buying beyond their available funds. Mechanisms to eliminate duplicate orders may include (but are not limited to): i) the provision of trading status screens that

provide information as to whether an order has been filled or is still pending;

ii) a "lock" on the securities, funds, or buying power subject to a sell or buy request, which is not removed until confirmation of the cancellation is received from the marketplace;


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iii) automatic notification to investors of an order pending in the same security whenever they enter a new buy or sell order.

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GUIDELINES FOR BANCASSURANCE - 2010

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1. PREAMBLE 1.1 The advantages of a potential customer-base of banks and the trust their customers repose in them has led to the phenomenal success of selling insurance products via banks, wherever introduced.

1.2 “Bancassurance” – the selling of insurance products by banks as distribution channels (on behalf of the insurance companies) is yet to be defined in Insurance Ordinance 2000 (“the Ordinance”).

1.3 Section 95 (2) of the Ordinance defines an insurance agent and Section 96(1) of the Ordinance

allows a corporate body to act as an insurance agent. These provisions of the laws are being used by insurance companies to employ banks as their distribution channels in the role and style of corporate insurance agents.

1.4 For ensuring the protection of the policyholders’ interest in respect of any insurance product

being offered to them through the banks, it is pertinent that Bancassurance be developed in an orderly manner to efficiently deliver and distribute the insurance products and services to the consumers.

1.5 It is envisaged to ensure, through these Guidelines, that the insurance products distributed through the banks benefit the consumers by not only being cost-effective, but also facilitating the consumer to compare the products being offered through Bancassurance arrangements with similar products available in the market from other distribution channels. Further, the consumers’ traditional trust and confidence in their banks demand enhanced product transparency.

1.6 In these Guidelines, the word “Takaful” may be used interchangeably with the word

“Insurance”, “Family Takaful” with “Life Insurance”, “General Takaful” with “Non-Life Insurance”, “contribution” with “premium” and “Company” & “Insurer” with “Operator”

2. Definitions In these Guidelines, unless there is anything repugnant in the subject or context;

(a). “Bancassurance Agency Agreement, called by whatever name or title, means a legal contract between the Bank and the Insurer under which the former acts as the corporate insurance agent of the latter, meeting all the requirements of the relevant provisions of the Ordinance and relevant rules; (b). “Bancassurance” means the selling, marketing and distribution of insurance products by Banks on behalf of an insurer under an agreement. This includes, but is not limited to, insurance products which are (i) bundled with banking products, (ii) actively sold as independent products through the branch banking network, (iii) actively sold through other channels such as direct sales personnel of the Bank or Insurer, telemarketing, direct mail shots, newspaper, ATM screens, website, email, SMS or (iv) sold through any other channel that is recognized as an acceptable sales channel for banks by the State Bank of Pakistan; (c). “Bank”, for the purpose of these guidelines, means:

i. a “banking company” as defined in Clause (vii) of Section 2 of the Ordinance; or ii. a “scheduled bank” as defined in Clause (lvii) of Section 2 of the Ordinance; or iii. any other institution or organisation directly or indirectly regulated by the State

Bank of Pakistan.

(d). “Bank Insurance Executive” means an employee of the Bank, called by whatever name, title or designation, holding a responsible position with the delegated authority to be directly responsible for managing the Bancassurance arrangement with the Insurer, for the Bank, and who complies with the provisions of Section 96 (1) of the Ordinance. Such an individual shall also be deemed to be complying with the provision of Section 97 of the Ordinance. (e). "Certification" means the process by which a Specified Person is issued a certificate jointly by the Bank and the Insurance Company entitling him to solicit and procure insurance business on behalf of the Insurance Company under the Bancassurance Agency Agreement; (f). “Designated Insurance Executive” means an employee of the Insurer, called by whatever name, title or designation, holding a responsible position with the delegated authority to be directly responsible for managing the Bancassurance arrangement with the Bank for the Insurer;

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(g). “Insurance Company” or “Insurer” means a company registered as an “insurer” under the Ordinance; (h) “Insurance Consultant” means a Specified Person who is an employee of the Insurance Company and is responsible for soliciting and procuring insurance business under the Bancassurance Agency Agreement; (i). “Ordinance” means the Insurance Ordinance, 2000 (XXXIX of 2000). (j) “Persistency” means the ratio of renewal premiums collected/paid in a policy year to the premiums due in the same policy year (the premiums due being inclusive of any increase as a result of a policy provision). This terminology applies from 2nd policy year and onwards of a regular premium individual life policy, excluding annuity plans. (k). “Policyholder” shall have the same meaning as given in Section 2(xlvi) of the Ordinance. (l). “Practical training” includes orientation, particularly in the area of insurance sales, service and marketing, as per the relevant provisions of the Ordinance, the Rules and the directives issued by Securities and Exchange Commission of Pakistan (“the Commission”) from time to time. (m). “Rules” mean the Securities and Exchange Commission (Insurance) Rules 2002, Insurance Rules 2002; and/or Takaful Rules 2005 or any other rule(s) issued under the Ordinance. (n). "Specified Person" means either an employee of the Bank or an employee of the Insurance Company, who has undergone the required practical training, examination, certification in respect of Bancassurance arrangement/product, and who is responsible for soliciting and procuring insurance business for the Insurance Company under the Bancassurance Agency Agreement; All words and expressions used herein and not defined but defined in the Ordinance, or in any of the subservient rules and regulations notified by the Commission shall have the meanings respectively assigned to them therein.

3. Basis of Contract

3.1 An insurance contract is based on offer and acceptance.

3.2 The sale of all insurance products by any Bank (on behalf of an Insurer) must be done in such

a manner which demonstrates that the prospective purchaser makes an offer (either by signing a proposal form or recording verbal consent) to enter into the insurance contract, and either the Bank (being a corporate insurance agent) on behalf of the Insurer signifies acceptance or the Insurer directly signifies acceptance.

3.3 Without the evidence of Offer and Acceptance, no insurance sale shall be deemed to be completed and the insurance contract shall be considered null and void. 4. Bancassurance Arrangement between Insurer and Bank 4.1 Any Bancassurance arrangement shall not be valid unless it incorporates the following

components and is entered into in writing in the form of a Bancassurance Agency Agreement which shall: (a) not contain any provisions which reduce, in any way, the liability or responsibility of the

Insurer towards the Policy Holder under the Ordinance and Rules; (b) specify any functions which the Insurer, as a part of such an arrangement, intends to

delegate to the Bank; (c) clearly define the Certification process which shall include a definition of the training

required prior to certification; and (d) contain a provision which clearly states the “termination of agreement” clause and

responsibilities of the Bank and Insurance Company subsequent to such termination. This clause shall also state the treatment to be given to existing policyholders and remuneration to the bank subsequent to the termination.

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(e) contain a provision whereby the Bank explicitly agrees to adhere to the provisions of these Guidelines and also the provisions of the Ordinance and Rules in its capacity as a corporate insurance agent.

4.2. Premium Collection:

4.2.1 The Insurer may transfer the responsibility of collecting premiums due on policies, once issued, to the Bank. Before it does this, however, the Insurer shall ensure that the Bank has the necessary premium collection system, such as an automated direct debit system, debit on credit cards, or any other system, in place. Should the Insurer not be satisfied with the Bank’s capability to collect regular premiums and to effectively follow up on premiums due but not paid, the premium collection function shall be controlled by the Insurer.

4.2.2 The Insurer shall also ensure that the Bank’s premium collection system is effectively

working and, if it is not, shall take such action as is required to ensure that it is effective in the future, including the withdrawal of the premium collection function from the Bank.

4.2.3 The premium collection function shall be deemed to be ineffective if the premium

collection ratio, i.e. the ratio of premiums collected to premiums due, is less than 85% or any figure which the Commission may subsequently prescribe. The terminology of “Premium collection ratio” in this paragraph is not intended to address the aspect of “persistency” in the case of Life Insurance.

4.2.4 Every Bank shall, with a view to conserve the insurance business already procured

through it, make every attempt to ensure remittance of the premiums by the policyholders within the stipulated time, by giving notice to the policyholder orally and in writing, or through other means such as call centre, email or SMS. The Insurer shall advise the Bank of its desired level of business persistency from time to time. The Bank shall make all reasonable efforts to ensure that its systems and processes are in place to meet these levels.

4.2.5 In the case of Life Insurance, the Insurer shall also ensure that notices under

Section 93 of the Ordinance are sent to the Policy Holder. 4.3. Marketing Brochures and Sales material

4.3.1 The content and layout of all marketing and sales related materials used to solicit Bancassurance business shall be approved both by the Bank and the Insurer.

4.3.2 In all such material the relative roles of the Bank and the Insurer shall clearly be stated at a prominent place. Such statement must particularly contain the fact that the Bank’s role is that of a corporate insurance agent and that the Insurer is responsible for all liabilities under the Policy. 4.3.3 Also, in all such material the name, address and contact details of the Insurer shall be mentioned at a prominent place. 4.3.4 The market conduct rules and guidelines issued in respect of the insurance agent by

the Commission shall be observed by the Bank. 4.3.5 For Life Insurance, wherever applicable, Illustration of Benefits, based on the

prescribed format provided by the Insurer shall be signed by the Specified Person and the intending Policyholder. Any insurance proposal, where the Illustration of Benefits is missing, unsigned or is not based on the product parameters mentioned in the proposal form, shall not be accepted by the Insurer.

4.4. Claims Handling

4.4.1 Under the arrangement claim adjudication and settlement shall be the responsibility of the Insurer. 4.4.2 The Bank shall play a facilitating role by assisting the policyholder or nominee(s), as

the case may be, in claim processing. The contact details of the Insurer for claim settlement shall be prominently displayed on the insurance contract and also be

5

made available by the Insurer to the Bank so that the information can be cascaded to the policyholder or nominee(s) at the time of claim intimation.

4.4.3 The Bank shall facilitate the Insurer in all possible manner in collecting the necessary documents and information related to claims, as requested by the Insurer. The Bank shall not question the information requested by the Insurer for claim adjudication and settlement, and shall not interfere with or influence the decision of the Insurer regarding the payment or repudiation of a claim.

4.4.4 The Insurer shall make the claim settlement directly in the name of the policyholder

or his nominee, as the case may be. 4.5 Code of Conduct 4.5.1 Every Bank shall abide by the code of conduct, specified below:

(a). to ensure that the Bank Insurance Executive and all Specified Persons are properly trained, as per the relevant provisions of the Ordinance and possess sound knowledge of the insurance products they would market, and have undergone the process of the Certification; (b). to ensure that the Bank Insurance Executive and the Specified Person do not

make any misrepresentation or make misleading statement to the prospect on policy benefits and returns available under the policy which may tantamount to misleading or being deceptive under the relevant provisions of the Ordinance in respect of the market conduct;

(c). to ensure that no prospect is coerced by the Bank Insurance Executive or Specified Person to buy an insurance product; (d). to give adequate pre-sale and post-sale advices to the prospective insured in respect of the insurance product; (e). to extend all possible assistance and cooperation to an insured/nominee in

completion of all formalities and documentation in the event of a claim; and (f). to give due publicity to the fact that the Bank does not underwrite the risk or act as an Insurer;

4.5.2 Every Bank Insurance Executive or a Specified Person shall also follow the code of conduct specified below:

(a) to identify that the Bank is acting as an agent of the Insurer at every meet with the prospect and shall always ensure mentioning the name of the Insurer to the prospect;

(b) to disseminate the requisite information in respect of the insurance products offered for sale by the Insurer and take into account the needs of the prospect while recommending/tailoring a specific insurance plan;

(c) to indicate the premium to be charged by the Insurer for the insurance product offered for sale;

(d) for an insurance product which is bundled with a bank product, mention the cost of the insurance product and the bank product separately.

(e) to guide the prospect in completing the proposal form and also explain to him the importance of disclosure of material information required under the relevant insurance contract;

(f) to obtain the requisite documents at the time of completion of the proposal form by the prospect and other documents subsequently asked by the Insurer in connection therewith; and

(g) to render such assistance to the policyholder or claimant or nominee, as may be required, in complying with the requirements for settlement of claims by the insurer;

4.5.3 No Specified Person shall:

(a) solicit or procure insurance business without undergoing the Certification process;

(b) give information to the prospect which deviates from the information provided by the Insurer with regard to the insurance product;

6

(c) induce or misguide the prospect to avoid disclosing any material information in the proposal form;

(d) induce or misguide the prospect to submit wrong information in the proposal form or documents submitted to the Insurer for acceptance of the proposal;

(e) behave in a discourteous manner with the prospect;

(f) interfere with any proposal introduced by any other Specified Person or any insurance agent of the Insurer;

(g) offer different rates, benefits, terms and conditions other than those agreed by the Insurer;

(h) demand or receive a share of proceeds from the nominee under an insurance contract;

(i) force a policyholder to terminate the existing policy and to effect a new proposal from him within three years from the date of such termination; and

(j) become or remain a director of any insurance company; 5. Remuneration of Bank 5.1 The level of remuneration payable to the Bank for its role of soliciting and procuring

insurance business as corporate insurance agent may vary based on any performance criteria which the Insurer and Bank may agree. The rates and structure of the remuneration shall be clearly mentioned in the Bancassurance Agency Agreement.

5.2 Any remuneration paid by the Insurer to the Bank must be on premiums received by the

Insurer. Under no circumstances will remuneration, on premiums to be received in future, be paid.

5.3 The Bank shall not charge, to the Policyholder, any service fee, processing fee, administration

charge or any other charge unless such a charge is required to be included by the Insurer in the premium to be payable by the policyholder.

5.4 Nothing in 5.1 shall prevent the Insurer from sharing any third party costs incurred by the

Bank related to advertising or development of marketing material 5.5. The insurer shall always quote the gross premium rate to the policyholder and shall ensure

that no further charges are levied by the Bank. The insurer shall also, at the time of quoting the gross premium rate, clearly specify the commission rate payable to the Bank as a corporate insurance agent.

5.6 The following shall be applicable for Life Insurers, in addition to those stated above:

(a) The remuneration payable to the Bank shall be in the form as set out in these Guidelines and shall not exceed the limits set out in section 7 of these Guidelines.

(b) Any sharing of third party costs incurred by the Bank related to advertising or

development of marketing material shall be subject to any limits prescribed in section 7 of these Guidelines.

6. Pricing/Risk Assessment/Insurance Related Documents 6.1. Pricing of insurance products shall be the sole domain of the Insurer and the Bank shall not interfere in this process. 6.2. Risk assessment and insurance underwriting shall also be the responsibility of the Insurer and the Bank shall not interfere in this process. 6.3. If the Insurer has provided an automated underwriting software to the Bank to accept and underwrite insurance proposals, the Bank may use the system based on the exact guidelines provided by the Insurer. For insurance proposals underwritten through such a system, and where the policy can be issued immediately without referring the proposal to the Insurer, the Bank, based on the guidelines provided by the Insurer, may issue policy/certificate/document to the policyholder.

7

6.4. The Bank shall abide by the guidelines provided by the Insurer for usage of the automated underwriting computer system. Use of the system by any sales channel of the Bank does not imply in any way, or entitle the Bank to pose or act as the insurance underwriter.

6.5 The Bank’s name shall not appear in the policy document as this could mislead or deceive the buyer of the insurance product. 6.6 All requirements for new products (for life insurance), as mentioned in the Ordinance, shall

be complied with by the Insurer. 6.7 The Insurer shall submit a copy of the Bancassurance Agency Agreement that it has entered

into with the Bank for the record of the Commission. This requirement shall apply to both Life and Non-Life Insurers.

7. Limits on Acquisition costs in respect of Life insurance products for

Bancassurance business 7.1. This section covers direct costs incurred by Life Insurers to procure Bancassurance business

such as commissions on premiums, sales and marketing incentives to banks, production bonuses linked to premium, persistency bonus, and salaries and incentives to “Insurance Consultants”

7.2. Savings Products refer to regular premium individual life insurance products which have a

savings or investment portion for the policyholder. This includes Investment Linked Unit Linked policies, Investment Linked Account Value policies, Universal Life policies, and With/without profits conventional endowment and whole life plans.

7.3. Protection Products refer to regular premium individual insurance products with no element

of savings or investments for the policyholder, such as term life policies. 7.4. Group Term Life Policies exclude Individual Life policies which may be sold to a group of

individuals. 7.5. Direct Sales Model

If a Bank uses its own sales force to market and distribute insurance products through its own distribution channel then such a model shall be referred to henceforth as the Direct Sales Model 7.5.1 Regular Premium Individual Life Plans (Savings Products and Protection Products)

(a) First year Commission to Bank (as % of first year collected premium):

Maximum 55% (The Insurer may, based on the product structure, link the commission rate to the premium paying term of the policy, subject to the condition that the maximum commission at any premium paying term shall not exceed the above maximum limit).

(b) For the Bank’s efforts in collecting renewal premium, second year

Commission to Bank (as a % of the second year collected premium): Maximum 5%

(c) For the Bank’s efforts in collecting renewal premium, third year onwards

commission to the Bank (as a % of the third year and onwards collected premium): Maximum 2.5%

(d) Share in Investment Management Charge (as an alternative to second year

and onwards commission rate): Starting from the second policy year onwards, for Investment Linked Unit Linked and Investment Linked Account Value products, the insurer shall be allowed to share with the bank, a part of the Investment Management Fee as a % of the net asset value (NAV) of the underlying unit linked fund, or the investment fund up to the extent of the fund attributable to the policies procured through the Bank. The maximum share of the bank in the NAV shall at any time not exceed 50% of the total Investment Management Fee charged by the insurer on the fund to the extent of the policies procured through the Bank, up to a maximum of 0.75% per annum of the NAV.

8

(e) Production Bonus: An Insurer shall be allowed to pay Production Bonus to the Bank linked to achievement of mutually agreed new business targets. This Production Bonus shall be over and above the maximum commission rate mentioned in 7.5.1(a) above. The Production Bonus in aggregate as a % of the first policy year collected premium shall not exceed 5%.

(f) Persistency Bonus:

For the Bank’s efforts in collecting renewal premium, and improving and maintaining persistency, an Insurer shall be allowed to pay Persistency Bonus to the Bank based on second policy year persistency rates over and above the maximum commission rate mentioned in 7.5.1(b) above. The Persistency Bonus in aggregate as % of the second policy year collected premium shall not exceed 5%.

(g) The maximum commission payable, i.e. cumulative First year, Second year

and Third year onwards commission, as stated above, over the entire premium paying term of a policy shall not exceed 105% of the average annual premium collected over the policy period for a policy with premium payment term of 20 years and more. For a policy with premium paying term of 10 years, this limit shall be 80%. For policies with premium paying terms between 10 and 20 years, or terms less than 10 years, these limits shall be prorated according to premium paying term.

7.5.2 Single Premium Savings products:

Commission as % of single premium: Maximum 2%

7.5.3 Single Premium Term Life products, including mortgage plans Commission as % of single premium: Maximum 5%

7.5.4 Single Premium immediate and deferred annuities:

Commission as % of single premium: Maximum 2%

7.5.5 Regular Premium annuities: First year Commission to Bank (as % of first year collected premium): Maximum 10% Second year onwards Commission to Bank (as % of 2nd year onwards collected premium): Maximum 2.5%

7.5.6 Regular premium personal accident type policies Commission as % of premium: Maximum 50%

7.5.7 Group Term Life Policies for retail customers of Bank, including yearly renewable

term policies, personal accident policies, credit life policies Commission as % of collected premium to Bank: Maximum 50%

7.6. Sales and Marketing Incentives to Banks

To promote Bancassurance business, an insurer shall be allowed to share with the bank in the costs of sales and marketing incentives. The share of the insurer in such activities shall not exceed 5% of the first policy year collected premium.

7.7 Referral Model If an Insurer uses its own “Insurance Consultants” to market and distribute insurance

products through the Banks’ distribution channel based on sales leads generated by the Bank, such a model shall be referred to henceforth as the “Referral Model”.

7.7.1 The total direct acquisition expenses incurred by the Insurer in the first policy year

as commission to the Bank, salaries and commission to its Insurance Consultants, sales and marketing incentives to the Bank or its Insurance Consultants and Production Bonuses shall be within the aggregate of all first year limits prescribed in 7.5 and 7.6 above for each type of product.

7.7.2 The total second and third year onwards direct acquisition cost incurred by the

Insurer such as commission to the Bank and/or its Insurance Consultants, and Persistency Bonus shall be within the aggregate of all second and third year onwards limits prescribed in 7.5 and 7.6 above for each type of product.

7.7.3 The following shall apply to Regular Premium Individual Life Plans (Savings

Products and Protection Products), in addition to 7.7.1 and 7.7.2, where relevant:

9

(a) First year Commission to Bank (as % of first year collected premium): Maximum 40% (The Insurer may, based on the product structure, link the commission rate to the premium paying term of the policy, subject to the condition that the maximum commission at any premium paying term shall not exceed the above maximum limit).

(b) For the Bank’s efforts in collecting renewal premium, second year

Commission to Bank (as a % of the second year collected premium): Maximum 5%

(c) Persistency Bonus:

For the Bank’s efforts in collecting renewal premium, and improving and maintaining persistency, an Insurer shall be allowed to pay Persistency Bonus to the Bank based on second policy year persistency rates over and above the maximum commission rate mentioned in 7.7.3(b) above. The Persistency Bonus in aggregate as % of the second policy year collected premium shall not exceed 2.5%.

7.8 An Insurer shall not give remuneration to a Bank in any manner other than as described

above in this section. 7.9. Regular reporting of Bancassurance business for Life Insurers

To enable the Commission to effectively monitor the implementation of this section of these Guidelines, the Insurer shall once a year, along with the Statement of Maximum Management Expenses as required under Sections 22(9) and 23(9) of the Ordinance, file an itemized computation for each Bank and product based on the format prescribed in Annexure A. This statement shall be certified by the external auditor and Appointed Actuary.

8. Applicability

8.1. These Guidelines shall apply on all new Bancassurance Agency Agreements signed on or after

February 1, 2010 and on existing Bancassurance Agency Agreements in force as on February 1, 2010

8.2. For existing Bancassurance Agency Agreements, the Bank and the Insurer shall make

amendments in the existing relationship, wherever necessary, to comply with these Guidelines. Such amendments shall be completed no later than 30th April, 2010. The Insurer shall send a written confirmation, signed by the Designated Insurance Executive, to the Commission mentioning that the necessary changes have been completed and that the relationship with the Bank complies with the guidelines.

8.3. In the case of Life Insurers, for the year 2010, the reporting, under 7.9, above shall be for

the period 1 May 2010 to 31 December 2010. For subsequent years, the reporting shall be based on full calendar year starting on 1 January and ending on 31 December every year.

Guidelines

On

Quarterly Accounts


Table of Contents Chapter Page

No.

Introduction 1

1 Requirements of the Companies Ordinance, 1984 2

2 Requirements of the International Accounting Standards 4

3 Requirements of the Code of Corporate Governance 7

Illustration 8

General Information 12

This booklet is a guide only and should be read in conjunction with the relevant legislation and pronouncements

1

INTRODUCTION

Timely and reliable financial reporting helps investors, creditors and other stakeholders

to understand an enterprise’s capacity to generate earnings and cash flows and its financial condition and liquidity. This booklet is a guide to the laws and rules gove rning preparation of quarterly accounts (interim financial statements) by all listed companies as required under the Companies Ordinance, 1984 (the “Ordinance”). These guidelines shall also be followed by all listed commercial banks, investment banks, insurance companies, modarba companies, leasing companies etc. besides complying with the other requirements stipulated in the relevant laws governing these companies. The booklet highlights the topic under the following three laws: 1. The Companies Ordinance, 1984

Section 245 of the Ordinance lays down the provisions for the preparation and transmission of quarterly accounts to the Members, Stock Exchanges, Registrar and the Commission. Non-compliance with this statutory requirement attracts imposition of heavy penalties. As such, it is important that the directors, CEO, CFO, Company Secretary and any other persons responsible for preparation, approval and filing of quarterly accounts are aware of the filing deadlines and other related legal requirements.

2. International Accounting Standard 34 (Interim Financial Reporting)

International Accounting Standard (IAS)-34 (the “Standard”) prescribes the contents of an interim financial report, including minimum disclosure requirements. It also identifies the accounting recognition and measurement principles that should be applied in an interim financial report.

3. Code of Corporate Governance

Code of Corporate Governance (the “Code”) enforced through the stock exchange regulations also lays down provisions to be followed by the listed companies while preparing quarterly accounts.

The following topics relating to quarterly accounts may be referred from the SEC’s Guide on “Accounts and Accounting Reference Dates”:-

i). Preparing and filing quarterly accounts; and ii). Contents of quarterly accounts.

2

CHAPTER 1 PROVISIONS OF THE COMPANIES ORDINANCE, 1984 Section 245 of the Ordinance sets out the provisions relating to transmission of quarterly accounts by listed companies. According to the said Section:

Every listed company shall:

(a) Within one month of the close of first, second and third quarter of its year of account, prepare and transmit to the members and the stock exchange in which shares of the company are listed, a profit and loss account and a balance-sheet as at the end of that quarter, whether audited or otherwise; and

(b) Simultaneously with the transmission of the quarterly profit and loss

account and balance-sheet to the members and the stock exchange, file with the Registrar and the Commission at least three copies of the same.

1.2 The cumulative figures for the half-year, presented in the second quarter accounts are subject to a limited scope review by the statutory auditors. Such a review is not required for the first and third quarter accounts. (Commission’s Circular 16 dated December 11, 2002). 1.3 As regards authentication and contents of quarterly accounts, the provisions of sub-section (1) and (2) of Section 241 of the Ordinance and IAS-34 as notified vide SRO.33 (I)/2000 dated January 27, 2000 shall apply to the quarterly accounts. (Commission’s Circular 16 dated December 11, 2002). 1.4 The Commission, considering the practical difficulties faced by the company’s management, has granted a general relaxation of one month to the listed companies, permitting them to circulate second quarter accounts with limited scope review by their statutory auditors within a period of two months of the close of second quarter. (Commission’s Circular 9 dated March 19, 2003) I .5 The listed companies finding it difficult to circulate quarterly accounts to their shareholders, may in lieu thereof, publish quarterly accounts in two leading morning newspapers, one in English and the other in Urdu language, having circulation in the Province in which stock exchange on which the company is listed, is situate. Such publication of quarterly accounts would be considered sufficient compliance with law as regards transmission of quarterly accounts to the shareholders. Notwithstanding this option, the listed companies must file quarterly accounts with the Commission, the Registrar and transmit the same to the concerned stock exchange (s) as required under Section 245 of the Ordinance. Further, they will also provide a copy of quarterly accounts free of cost, to shareholders on demand. (Commission’s Circular 16 dated December 11, 2002).

3

1.6 The listed companies have been allowed to place quarterly accounts on their website subject to fulfillment of certain conditions, which will be treated compliance of the provisions of Section 245 of the Ordinance. (Commission’s Circular 19 dated April 14, 2004). 1.7 Sub-section (7) of Section 237 of the Ordinance requires that provisions of Section 245 of the Ordinance shall apply to a holding company for preparing interim consolidated financial statements. 1.8 The quarterly accounts may be submitted through registered post or by delivery either in person or through an agent, against an acknowledgement of receipt. However, they would be deemed to have been received or delivered on the date, they are received by the Commission. [Rules 8, 9 and 10 of the Companies (General Provisions and Forms) Rules, 1985]. 1.9 Directors are encouraged to give “director’s review” on the interim financial statements which besides information about the affairs of the company and significant events, specifically include reasons for incurring losses, if any, during the period and the prospects of the company for the next quarter. 1.10 Who is competent to authenticate? The interim financial statements are required to be approved by the Board of Directors (the “Board"). The CEO and the CFO shall present the financial statements, duly endorsed under their respective signatures, for consideration and approval of the Board and the Board, after consideration and approval, authorize the signing of financial statements for issuance and circulation. The interim financial statements shall be signed by the chief executive and at least one director. If the chief executive for the time being is not in Pakistan, then the financial statements are to be signed by at least two directors present in Pakistan. However, in the aforesaid case, a statement signed by such directors explaining the reasons for non-authentication by the chief executive has to be subjoined to the balance-sheet and the profit and loss account or income and expenditure account. [Clause (xxiv) of the Code of Corporate Governance and Sections 241 & 245 of the Ordinance]. 1.11 What is the result of non-filing? If a company fails to comply with any of the requirements of Section 245 of the Ordinance, every director, including chief executive and chief accountant of the company would be liable to a fine not exceeding one hundred thousand rupees and to a further fine of one thousand rupees for every day during which the default continues.

4

CHAPTER 2 REQUIREMENTS OF THE INTERNATIONAL ACCOUNTING STANDARDS

It is mandatory for the listed companies, in terms of Sub-section (3) of Section 234 of the Ordinance, to follow the requirements of the Standard for the preparation of quarterly accounts. 2.2 IAS-34 permits the companies to either publish a complete set of financial statements in conformity with lAS-I or a set of condensed financial statements with selected explanatory notes. Minimum contents of an interim financial report as per Para 8 of the Standard are as under:

a) condensed balance sheet; b) condensed income statement/profit and loss account; c) condensed statement showing either (i) all changes in equity, or (ii) changes in

equity other than those arising from capital transactions with owners and distributions to owners;

d) condensed cash flow statement; e) selected explanatory notes.

2.3 Where an entity publishes a set of condensed financial statements, it should include at a minimum, each of the headings and sub totals tha t were included in the most recent annual financial statements and selected explanatory notes. Additional line items may be included if their omission would make the condensed financial statements misleading to the users. 2.4 Basic and diluted earnings per share are to be presented on the face of the interim income statement. 2.5 Following information should be included, as a minimum, in the notes to the interim financial statements:

a) A statement that the same accounting policies and methods of computation are followed as per the last annual financial statements, or in case of deviation the nature and effect of the change;

b) Explanatory comments about the seasonality or cyclicality of interim operations; c) Nature and amount of unusual items; d) Nature and amount of changes in estimates; e) Issuance, repurchase and repayment etc of debt and equity securities; f) Dividend paid be separately reported for ordinary and other shares; g) Segment results of primary basis of segment reporting; h) Material events subsequent to interim period; i) Changes in composition of enterprise during the period; and j) Changes in contingent assets/liabilities since last annual balance sheet date

2.6 If an enterprise’s interim financial report is in compliance with this Standard, that fact shall be disclosed. An interim financial report should not be described as complying with the IAS unless it complies with all of the requirements of each applicable standard and each applicable Interpretation of the Standing Interpretation Committee. Specific

5

disclosures of each IAS are not required in interim report where it includes condensed financial statements. 2.7 Appendix “A” of the Standard illustrates the periods for which the interim financial report is required to be presented:

(a) balance sheet as of the end of the current interim period and a comparative balance sheet as of the end of the immediately preceding financial year;

(b) income statements for the current interim period and cumulatively for the current financial year to date, with comparative income statements for the comparable interim periods (current and year-to-date) of the immediately preceding financial year;

(c) statement showing changes in equity cumulatively for the current financial year to date, with a comparative statement for the comparable year-to-date period of the immediately preceding financial year; and

(d) cash flow statement cumulatively for the current financial year to date, with a comparative statement for the comparable year-to-date period of the immediately preceding financial year.

Illustration at the end of this booklet gives the guidance as to how the current and comparative figures are to be reflected in the quarterly accounts. 2.8 Appendix “B” of the Standard provides examples of applying the general recognition and measurement principles on certain specific items such as:

a) Employees’ payroll taxes and insurance contributions b) Major planned periodic maintenance or overhaul c) Provisions d) Year-end bonuses e) Contingent lease payments f) Intangible assets g) Pensions h) Vacations, holidays and other short term compensated absences i) Other planned but irregularly occurring costs j) Measuring interim income tax k) Difference in financial reporting year and tax year l) Tax credits m) Tax loss and tax credit carry backs and carry forwards n) Contractual or anticipated purchase price changes o) Depreciation and amortization p) Inventories q) Net realizable value of inventories r) Interim period manufacturing cost variances s) Foreign currency translation gains and losses t) Impairment of assets

6

2.9 Appendix “C” of the Standard provides example of the following items where the use of estimates can be made in preparation of interim financial statements:

a) Inventories b) Classifications of current and non-current assets and liabilities c) Provisions d) Pensions e) Income taxes f) Contingencies g) Revaluations and fair value accounting h) Inter-company reconciliations i) Specialized industries

7

CHAPTER 3 REQUIREMENTS OF THE CODE OF CORPORATE GOVERNANCE

Clause (xx) of the Code requires that the quarterly financial statements of listed companies shall be published and circulated along with Director’s review on the affairs of the listed company for the quarter. 3.2 All listed companies shall ensure that half-yearly (second quarter) financial statements are subjected to a limited scope review by the statutory auditors in such manner and according to such terms and conditions as may be determined by the Institute of Chartered Accountants of Pakistan and approved by the Securities and Exchange Commission of Pakistan. 3.3 Only statutory auditors appointed to conduct the annual audit of a listed company can carry out a limited scope review of the company's half-yearly (second quarter) accounts (FAQ 25 of the Code). 3.4 As per Clause (xxxiii) of the Code, Audit Committee shall review the quarterly financial statements of the listed company, prior to their approval by the Board, focusing on:

• major judgmental areas; • significant adjustments resulting from the review; • the going-concern assumption; • any changes in accounting policies and practices; • compliance with applicable accounting standards; and • compliance with listing regulations and other statutory and regulatory requirements

8

ILLUSTRATION A. Listed Companies whose financial year-end is June 30 will need to reflect the current and comparative figures in their interim financial statements as under: Balance Sheet As At ---------------

Quarter Current figures as at Comparative figures as at

1st Quarter September 30, Xl June 30, X1

2nd Quarter December 31, Xl June 30, Xl

3” Quarter March 31, X2 June 30, Xl Profit and Loss Account for the Period Ended -------------

Current figures Comparative figures

Quarter

For the quarter ended Cumulatively up to period ended

For the quarter ended Cumulatively up to period ended

1st Quarter September 30, Xl - September 30, X0 — 2nd Quarter December 31, Xl December 31, Xl

(6 months) December 31, X0 December 31, X0

(6 months) 3” Quarter March 31, X2 March 3l, X2

(9 months) March 3l, Xl March 3l, X1

(9 months)

Cash Flow Statement for the Period Ended --------------

Statement of Changes in Equity for the Period Ended --------------

Quarter Current cumulative figures up to

period ended Comparative figures cumulatively

up to period ended 1st Quarter September 30, Xl

(3 months) September 30, X0

(3 months) 2nd Quarter December 31, XI

(6 months) December 31, X0

(6 months) 3” Quarter March 31, X2

(9 months) March 31, XI

(9 months)

Quarter

Current cumulative figures up to period ended

Comparative figures cumulati vely up to period ended

1st Quarter September 30, Xl (3 months)

September 30, X0 (3 months)

2nd Quarter December 31, XI (6 months)

December 31, X0 (6 months)

3” Quarter March 31, X2 (9 months)

March 31, XI (9 months)

9

Presentation of Statement of Changes in Equity (A Specimen): A specimen for “Statement of Changes in Equity” for the period of nine months is given below. Similar specimen may be used for other periods.

Statement of Changes in Equity For the period of nine months ended on March 31, 2005

Amount in Rs. ------- Share

Capital Capital Reserve

Surplus on revaluation

of fixed assets

Unrealized gain on

available for sale

investment

General Reserve

Accumulated Profit / loss

Total

Balance as at July 1, 2003 Profit for the nine months ended on March 31, 2004

Unrealized gain on available for sale investment

Incremental depreciation for the period nine months from 1.7.2003 to 31.3.2004

Interim Dividend Bonus Transferred to reserves Balance as at March 31, 2004 Balance as at July 01, 2004 Profit for the nine months ended on March 31, 2005

Incremental depreciation for the period on nine months 1.7.2004 to 31.3.2005

Interim Dividend Bonus during the period Transferred to reserves Balance as at March 31, 2005

10

B. Listed Companies whose financial year-end is September 30 will need to reflect the current and comparative figures in their interim financial statements as under: Balance Sheet As At --------------------

Profit and Loss Account for the Period Ended


Quarter

For the quarter ended

Cumulatively up to period ended



1st Quarter December 31, Xl - December 31, X0 -- 2nd Quarter March 31, X2 March 31, X2

(6 months) March 3l, Xl March 3l, X1

(9 months) 3rd Quarter June 30, X2 June 30, X2

(9 months) June 30, X1 June 30, XI

(9 Months) Cash Flow Statement for the Period Ended

Statement of Changes in Equity for the Period Ended------------


1st Quarter December 31, Xl September 30, XI

2nd Quarter March 31, X2 September 30, Xl

3rd Quarter June 30, X2 September 30, Xl



up to period ended 1st Quarter December 31, Xl


(3 months) 2nd Quarter March 31, XI

(6 months) March 31, X1

(6 months) 3rd Quarter June 30, X2

(9 months) June 30, XI (9 months)

Quarter Current cumulative figures

up to period ended Compar ative figures cumulatively

up to period ended 1st Quarter December 31, Xl


(3 months) 2nd Quarter March 31, X2

(6 months) March 31, X1

(6 months) 3rd Quarter June 30, X2

(9 months) June 30, XI (9 months)

11

C. Listed Companies whose financial year-end is December 31 will need to reflect the current and comparative figures in the interim financial statements as under: Balance Sheet As At ----------------

Profit and Loss Account for the Period Ended


Quarter





1st Quarter March 31, X2 - March 31, XI -- 2nd Quarter June 30, X2 June 30, X2

(6 months) June 30, X1 June 30, XI

(9 Months) 3rd Quarter September 30, X2

September 30, X2

(9 months)

September 30, X1

September 30, X1 (9months)

Cash Flow Statement for the Period Ended –---------------

Statement of Changes in Equity for the Period Ended ---------------


1st Quarter March 31, X2 December 31, X1

2nd Quarter June 30, X2 December 31, Xl

3rd Quarter September 30, X2 December 31, Xl

Quarter Current cumulative

figures up to period ended Comparative figures cumulatively

up to period ended 1st Quarter March 31, X2

(3 months) March 31, Xl (3 months)

2nd Quarter June 30, X2 (6 months)

June 30, Xl (6 months)

3rd Quarter September 30, X2 (9 months)

September 30, Xl (9 months)



up to period ended

1st Quarter March 31, X2 (3 months)

March 31, Xl (3 months)

2nd Quarter June 30, X2 (6 months)

June 30, Xl (6 months)

3rd Quarter September 30, X2 (9 months)

September 30, Xl (9 months)

12

General Information

The companies are encouraged to disclose addresses of their Registered Office and Factory along with telephone numbers and the names of following persons in their corporate profile attached to the interim report:

Ø Chief Executive Ø Directors Ø Auditors Ø Members of Audit Committee Ø Company Secretary Ø Chief Financial Officer Ø Share Registrar Ø Bankers

The quarterly accounts may be titled as: “Quarterly Accounts for the Period Ended--------------------”

13

SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN N.I.C BUILDING, JINNAH AVENUE, ISLAMABAD – PAKISTAN

Ph: 051- 9207091-4 Fax: 051-9204915 E-mail: [email protected]

URL; www.secp.gov.pk


NIC BUILDING, BLUE AREA, ISLAMABAD

(Securities Market Division)

********

GUIDELINES FOR APPOINTMENT ON THE BOARD OF DIRECTORS OF

THE STOCK EXCHANGES

The composition of the Board of Directors (the “Board”) of the stock exchanges has

been reconstituted, in pursuance of the Securities and Exchange Commission of

Pakistan’s (SEC) directives dated August 13, and August 30, 2002 whereby the Board

shall now consist of 5 elected directors and four non-member directors to be appointed

by the SEC. Consequently it is felt expedient to issue the following guidelines for the

appointment of the four non-member directors on the Boards of the exchanges.

A. CRITERIA FOR INVITING NAME(S) AND APPROVAL OF A PANEL BY THE COMMISSION

i) The Securities Market Division (SMD) of the SEC may request various

professional bodies to recommend a minimum of fifteen candidates for

consideration of their name for inclusion in the panel of professionals

from where nomination on the Boards of the exchanges would be made.

These bodies include, but are not limited to, the Management Association

of Pakistan, the Institute of Chartered Accountants of Pakistan (ICAP), the

Institute of Cost and Management Accountants of Pakistan (ICMAP),

Pakistan Banks Association, Investment Banks Association of Pakistan,

Modaraba Association of Pakistan, Leasing Association of Pakistan,

Mutual Funds Association of Pakistan and Pakistan Chapter of Investment

Professionals.

ii) The SMD may, itself recommend the names of reputable professionals to

the respective associations and with their consultation may draw a list of

candidates who could be considered for inclusion in the panel.

iii) The SMD Division may follow either procedure given in (i) & (ii) above,

or both, to select candidates for inclusion in the panel. However, the

Commission shall have the absolute power to place a suitable person

on the panel of persons to be considered for appointment as non-

members directors on the Board of the Exchanges.

iv) The existing non-member directors who are presently serving on the

Boards of respective stock exchanges shall stand included in the panel.

v) The SMD will, review the names of professionals received by it and

finalize a panel of minimum sixty persons from the nominations received

including those who are presently serving in the Board of the exchanges.

vi) The panel so constituted by the SMD shall be forwarded to the

Commission for approval. The Commission may, for reasons recorded in

writing, refer back name(s) to the SMD for review and submission of

other name(s) to the Commission for approval.

B. ELIGIBILITY CRITERIA FOR NOMINATION ON THE PANEL

A person shall be eligible for inclusion in the panel if he/she:

i. is a graduate from a recognized university or equivalent;

ii. has a professional qualification/University degree or diploma in

business, finance and management or a closely related discipline; and

iii. has at least 5 years of experience in matters relating to stock exchanges,

accounting, banking, investment advisory, management, economics,

fund management and IT etc;

No person shall be eligible for inclusion in the panel if he/she:

i. has been associated with any illegal banking business, deposit taking or

financial dealings;

ii. has been convicted of fraud or breach of trust or of an offence involving

moral turpitude or removed from service for misconduct;

iii. has been adjudged as insolvent or suspended payment of debts or has

compounded with his creditors;

iv. has betrayed lack of fiduciary behaviour and a declaration to this effect

has been made by the Court under section 217 of the Companies

Ordinance, 1984 at any time during the preceding five years; and

v. has been convicted by a court of competent jurisdiction as a defaulter in

payment of any loan to a banking company, a Development Financial

Institution or a Non-Banking Financial Institution.

C. PROCEDURE FOR SELECTION OF DIRECTORS FROM THE PANEL

The SMD shall select a list of four persons from the panel approved by the Commission,

after reviewing their eligibility as per the criteria outlined above for each stock exchange,

and forward the same to the Chairman SEC for his approval along with the list of panel.

If the Chairman SEC does not approve of any of the proposed names from the list

submitted by the SMD, he shall, for reasons to be recorded in writing, refer the matter

back to the SMD for review and submission of another suitable name for approval

thereof.

THE GAZETTE OF PAKISTAN

PART II

Statutory Notifications (S.R.O)

GOVERNMENT OF PAKISTAN

CORPORATE LAW AUTHORITY

(Corporate Regulation Wing)

NOTIFICATIONS

Islamabad, the Ist November, 1990

VEGETABLE GHEE AND COOKING OIL COMPANIES

(COST ACCOUNTING RECORDS) ORDER, 1990

S.R.O. 1131 (1) 90, - In exercise of the powers conferred by sections 230 and 506 of the Companies Ordinance, 1984 (XIVII of 1984) read with the Finance Division Notification No. S.R.O 698 (1) dated the 2nd July, 1980, the Corporate Law Authority is pleased to make the following Order, the same having been previously published as required by the said section 506, namely:-

VEGETABLE GHEE AND COOKING OIL COMPANIES (COST ACCOUNTING RECORDS) ORDER, 1990

1. Short title, extent and commencement, (1) This Order may be called the Vegetable Ghee and Cooking Oil Companies (Cost Accounting Records Order 1990.

(2) It extends to the whole of Pakistan. (3) It shall come into force on such date as the Corporate Law Authority may by

notification in the official Gazette, appoint.

2. Application, - This Order shall apply to every company engaged in production, processing or manufacturing of:-

(a) Vegetable ghee, cooking oil, margarine bakery shortening and allied products; and

(b) In addition for vegetable ghee and cooking oil, any other product such as refined

hard oil, margarine or any such product using the same plant or machinery, partly or fully.

3. Maintenance or records, - (1) Every company to which this Order applies shall

in respect of each financial year commencing on or after the commencement of this Order, keep cost accounting records, containing inter the particulars in Schedule I and II to this Order.

(2) Where a company is manufacturing any other product in addition to those referred to in paragraph 2, the particulars relating to the utilised on of materials, labour and other items of cost insofar as they are applicable to such other product shall not be included in the cost of the products referred to in that paragraph.

(3) The cost accounting records referred to in sub-paragraph (1) shall be kept in such

a way as to make it possible in calculate from the particular therein the cost of production and cost of sales of each of the products referred to in paragraph 2 during a financial year.

(4) It shall be the duty of every person referred to in sub-section (7) of section 230 of

the Companies Ordinance, 1984 (XLVII of 1984), to company with the providing of sub-paragraphs (1) and (3) in the same manner as they are liable to maintain financial accounts required under section 233 of the said Ordinance.

4. Penalty, - If a company contravenes the provisions of paragraph 3, the company and every officer there of who is in default, including the person referred to in sub-paragraph (4) of paragraph 3, shall be punishable under sub-section (7) of section 230 of the Companies Ordinance - 1984.

MUHAMMAD HAYAT JASRA Joint Registrar (H.Q)

SCHEDULE 1 (See paragraph 3)

1. Production material (Raw edible oils, chemicals and vitamins)

(a) Record of each item of production material in stock, required or actually used for producing, processing or manufacturing any of the products referred to in paragraph 2 shall be maintained. It shall show the quantity and cost of every receipt and issue made from the stock. All issues of production materials shall be reconciled with the figure shown in Performa ‘B’ of Schedule II, or in any form as near thereto as possible. Any losses surpluses arising as a result of physical verification of inventories and adjustment thereof shall be clearly indicated in the cost records.

(b) Record of purchase/supply contracts entered into with local and foreign suppliers

will be maintained showing the rate at which the various quantities of materials are to be purchased. The record shall indicate principal features of each contract, particularly, conditions relating to the quality, price and period of delivery, discount for transit loss and terms of payment including cash discounts, if any, and compensation, the supply shall pay for delay in delivery and non-delivery. The records shall also show the deliveries received against each contract of material supply. The supply contracts shall also indicate the conditions relating to rebate for quality variations in FFA (free fatty acids), colour and moisture in case of raw edible oils: and in case of other materials usual quality standards shall be specified in the supply contracts for the purpose of rebates.

(c) Where arrangements exist for production of any of the production materials by

the facilities owned by the company, separate records showing the cost of manufacture of such materials indicating the break-up of raw materials consumed and conversion cost shall be maintained. The records shall also indicate the basic on which such materials are priced for transfer to the manufacture or processing of vegetable ghee cooking oil.

(d) The cost, in addition to the basic price of the materials shown in the records shall

also include all other direct charges incidental to the procurement of production materials up to the works.

(e) Any abnormal wastage of material whether in transit, storage or for the other

reason, shall be recorded separately indicating the stagy at which such losses occur. Method of dealing with such losses in the calculation of cost shall be indicated in the records. Normal wastages will be absorbed by the remaining material itself.

(f) Difference between the quantities of the edible oils introduced the process and

yield obtained commonly referred to as the process loss or refining loss, includes waste materials (by produce) called invisible loss which is part of TFM (total fatty matter) and a small quantity of invisible loss. Realisable value of the by-products, extracted from the oil, shall be credited to the cost of oil.

(g) Realisable value of the used chemicals recovered shall be credited to the cost of

such materials to arrive at the net cost of chemicals consumption. (h) By products, such as oxygen or carbon dioxide and the oxygen as the case may

be obtained from the generation of hydrogen, by different products shall also be credited to the respective process cost centres to determine the net cost of hydrogen available for use.

(i) The records shall be maintained in such detail as may enable the company to

compile the cost data in Annexure A-1 of Performa ‘A’ of Schedule II or in any form as near thereto as practicable.

II. Direct Labour

(a) Adequate record shall be maintained to show the attendance of workers employed by the company whether on regular, temporary, or price-rate basis or on contractual basis. Proper record shall also be maintained in respect or payment made for overtime work and other production incentives given to the workers and payments to any contract for the work performed.

(b) Fair and reasonable allocation shall be made for wages, paid to such direct labour

as has been utilised in more than one department, between the various manufacturing departments or cost centres and the basis of such allocation shall be consistently followed. Idle time or lay-off payments shall be recorded separately indicating the reasons and the method of treatment in the calculation of the cost of the items referred to in paragraph 2. Any wages being expenditure on additions to plant, machinery or other fixed assets shall be allocated to the relevant capital heads in the accounts.

(c) In case of wages and salaries being allocated on a basis other than actual,

reconciliation of wages and salaries to the actual and the treatments of variances, if nay, in determining the cost of the products shall also be indicated in the cost records.

III. Steam

(a) Adequate records shall be maintained to ascertain the cost of steam produced and charged to different produces. The cost of steam may be determined on an estimated basis if it is not possible to determine the actual cost. In case the cost of steam is allocated to different processes on any basis other than actual cost, reconciliation of the actual cost of steam produced and the treatment of variances, if any, in determining the cost of items referred to in Paragraph 2, shall be indicated in the cost records.

(b) The record shall be maintained in such details as may enable the company to

compile the cost data in Annexure A 3 of Performa ‘A” of Schedule II or in any form as near thereto as practicable.

IV. Hydrogen Adequate records shall be maintained to ascertain the cost of hydrogen produced and

charged to vegetable ghee and cooking oil production as well as that sold. V. Water

Appropriate record shall be maintained to determine the cost of water used by the company. The expenditure on water shall be allocated to boiler house and oil processing on estimated basis, which shall be used consistently from year to year and indicated in the cost records.

VI. Electric Power

(a) Adequate records, showing quantity and cost of electric power purchased, with fixed charges and duties incurred thereon, shall be maintained. The cost of electric power shall be kept separately for each item. The consumption shall be calculated on a reasonable basis and applied consistently.

(b) Where electric power is generated by the company itself or by its wholly owned

subsidiary, separate records, shall be maintained in such details as may enable the company to compile; cost data in Annexure A-4 or proforma ‘A’ of ‘Schedule II’ or in any form as near thereto as practicable.

(c) The records shall be so maintained as to enable the assessment of consumption

of power by the different departments or manufacturing units or cost centres. Allocation of the cost of electric power shall be on the basis of actual consumption, if separate meters are installed or on the basis of technical estimates in the absence of meters. In the case of fixed charges or fuel adjustment surcharge claimed by KESC or WAPDA, irrespective of the actual power consumed and if the amount payable as per actual consumption falls below the contractual minimum, the difference between the contractual minimum and the acutal amount consumed in and chargeable to non-manufacturing departments. If significant shall be , shown separately.

VII. Consumable Stores

(a) Record of each item of consumable stores shall be maintained to show the

receipts, issues and balances, both in quantities and values, required or actually used for the manufacture of items referred to in paragraph 2.

(b) Cost of consumable stores shall include all direct charges incidental to

procurement of each item up to works. The cost of such stores consumed shall

be charged to relevant cost centres on the basis of actual consumption. The items issued for capital expenditure, such as addition to plant and machinery, shall be shown under relevant heads.

(c) Wastage of consumable stores, whether in transit, storage or at any point, shall be

quantified and shown separately. Method of dealing with such losses in costing shall also be indicated in the cost records.

VIII. Repairs and maintenance

Adequate records showing expenditure incurred on workshop facilities for repairs and

maintenance of plant and machinery shall be maintained. Details of cost determination and their basis of allocation of repairs and maintenance expenditure to different departments or manufacturing units or cost centres shall be indicated. Cost of work of capital nature of heavy repairs and maintenance cost, benefit of which is likely to be spread over a period longer than one financial year, shall be shown separately.

IX. Packing

(a) Adequate records shall be maintained showing the cost of packing materials and direct wages and other expenses incurred in respect of different items packed. Where such expenses are not capable of being charged directly against individual items, basis of apportioning the expenses shall be clearly indicated in the cost records and applied consistently.

(b) Where the tin containers are fabricated by the company itself or wholly or partly

fabricated by the outside in fabricators for the company or wholly or partly manufactured tin containers are purchased from the market, separate record shall be maintained for each lot of the containers under each category.

(c) In case of the tin containers are wholly or partly manufactured fabricated by the

company itself the records shall be maintained in such details as may enable the company to compile the cost data in the form of Annexure A 5 of proforma ‘A’ of Schedule II.

X. Chilling Appropriate record of cost incurred in connection with refrigeration facilities

provided for chilling of items referred to in paragraph 2 shall be maintained in sufficient details as may enable the company to compile the cost data in Annexure A-6 of proforma ‘A’ of Schedule II.

XI. Depreciation

(a) Adequate records shall be maintained showing values and other particulars of the

fixed assets in respect of which depreciation is to be provided. The records shall inter alia indicate the cost of each item of assets the data of its acquisition and the rate of depreciation.

(b) Basis on which depreciation is calculated and allocated to the various

departments and products shall be clearly indicated in the records.

(c) Amount of depreciation chargeable to the different departments, manufacturing

units or cost centres, for the financial year shall be in accordance with the provisions of clause ‘F’ of part II of the Fourth Schedule to the Companies Ordinance, 1984 and than relate to the plant and machinery and other fixed assets utilised in such departments or units or cost centres. The method once adopted shall be applied consistently.

XII. Insurance

(a) Record shall be maintained showing the insurance premia paid for the various risks covered on the assets and other interests of the company.

(b) Method of allocating insurance can to the various cost centres shall be indicated

in the cost records and followed consistently.

XIII. Other fixed overheads Adequate records showing the amounts comprising the manufacturing overhead

expense and details of apportionment thereof to the various departments or manufacturing units or cost centres shall be maintained. The factory over heads shall include among other items, indirect labour cost alongwith its share of labour related costs such as fringe benefits, other labour and staff welfare expenses, and establishment expenses of manufacturing of items referred to in paragraph 2.

XIV. Administration, selling and distribution Adequate records shall be maintained showing the items comprising administration,

selling and distribution expenses and apportionment thereof to the different products and the basis of allocation of overhead cost shall be indicated in the records.

XV. By-product Adequate records shall be maintained showing the quantity of by-products obtained

and the basis of pricing adopted for giving credit thereof to the main product. Any subsequent use of the by-product, such as soap stock being converted into laundry soap, and other products like glycerene etc., shall also be recorded and reconciled.

XVI. Work-in-process and finished goods inventories Record of work-in-process inventories, at each material stage of process and finished

goods, inventories, physically checked and verified at the close of the financial period, duly reconciled with the books of accounts, shall be maintained. Method of valuation of work-in-process and the finished goods inventories shall be indicated in the cost records so as to reveal the cost elements which have been taken into account in such computation. The cost elements shall be related to the items referred to in the proforma ‘A’ of Schedule II. The method adopted shall be consistently followed. Treatment of differences, if any, on physical verification of stocks with book balances, shall also be indicated in the records.

XVII. Statistical statements and other records

(a) Statistical statements and other records such as yield statement. TFM (total fatty matter), recovery and other by-products statement details relating to chemical and energy consumption, tinplate yield and scrap records and relevant data shall be maintained in such details as may enable the company to comply with the requirements of this Schedule and Schedule II and to enable the cost auditor to report and perform his duties under section 258 of the Companies Ordinance 1984.

(b) Companies may develop appropriate standards for use as a basis to evaluate

performance properly.

XVIII. Reconciliation of cost and financial accounts

(a) The cost records shall be periodically reconciled with the financial accounts to ensure accuracy. Variations, if any, shall be clearly indicated and explained.

(b) The reconciliation shall be done in such a manner that the profitability of the

product, as per cost statements, is correctly judged and reconciled with the overall profits of the company from all its activities.

(c) Adequate cost records shall be maintained in a manner so that the cost statements

as required in Schedule II (proforma ‘A’ and annexures) can be compiled and the cost auditor is able to verify the statements with the records.

Schedule II

(see paragraph 3)

PROFORMA “A” Name and address of the company

STATEMENT SHOWING COST OF VEGETABLE GHEE COOKING OIL MANUFACTURED AND SOLD DURING THE

PERIOD FROM __________ TO ____________. 1- Capacity

Current period : previous period

(a) Number of days worked: (b) Installed capacity (Tonnes):

(c) Utilised capacity (Tonnes): (i) Vegetable ghee: 16 kg pack 5 kg pack 2.5 kg pack

(ii) Cooking oil 17 litre pack 5 litre pack 2.5 litre pack

(iii) Margarine (iv) Bakery shortening

(v) Others if any (specify) II- Costs: Current period Previous period Particulars

Total cost Cost per tonns


1- Direct materials (i) Raw edible oils

(as per Annexure A-1) (ii) Chemicals: (as per Annexure A-2) Production materials 2- Direct Labour 3- Variable factory Overheads

(i) Steam : (as per Annexure A-3)

(a) Used in neutraliser and other process: (b) Used in deodoriser:

(ii) Hyderogen:

(a) By gas Cracking process (b) By electrolysis process (iii) Water: (iv) Electric power cost (a) Purchased from WAPDA/KESC (b) Own generation (as per Annexure A-4) (v) Consumable stores: (vi) repairs and maintenance; (vii) Other overheads (specify) Variable factory overheads 4- Total Variable cost

(Item 1+2+3)

5- Packing cost (as per Annexure A-5) 6- Chilling cost (as per Annexure A-6) 7- Total variable cost including packing and chilling cost. Current period Previous period Particulars



8- Adjustment of work in process inventory (I) Add: Opening stock

(a) At packing stage (b) At chilling stage

(II) Less: Closing stock:

(a) At packing stage (b) At chilling stage

9- Total variable cost of packed and chilled vegetable ghee/choking oil (Item 7+8) 10- Fixed Overheads 11- Total cost of goods manufactured (Item 9+10) 12- Adjustment of finished goods inventories. (i) Add: Opening stock (ii) Less: Closing stock 13- Net ex-works cost of sales. (Item 11+12) III. Sales. (i) Gross sales (ii) Less commission and discount (iii) Sales [(item (i) and (ii)] (iv) Less: Excise duty (v) Net sales

Annexure A-1 Name and address of the Company

STATEMENT SHOWING THE RAW EDIBLE OILS CONSUMED DURING THE PERIOD FROM:__________ TO _________

CURRENT PERIOD

PREVIOUS PERIOD

PARTICULARS

Oil blend

%

Qty. tonne

Rate Total cost

Oil blend

%

Qty. tonne

Rate Total cost

1- Oil in Put Imported (a) Palm oil (b) Soyabean oil (c) Others (specify)

Local (a) Cottonseed oil (b) Rapeseed oil (c) Sunflower oil (d) Others (specify)

Total: 2- Adjustment of oil in process

inventories (i) Add: Opening stock

(ii) Less: closing stock 3- Total oil consumed

(Item 1+2)

4- Yield (Net production) 5- Process Loss:

(Item 3-4) (a) By-products:-

Visible loss (actual quantity) at realisable value credited to cost of oil).

(b) Invisible loss (quantity only)Sub-total of process loss.

6- Net cost of oil charged to

production value at item 4 less 5(a).

100%

100%

Annexure A-2

Name and address of the Company

STATEMENT SHOWING THE COST OF CHEMICAL CONSUMED DURING THE PERIOD FROM:__________ TO _________

CURRENT PERIOD PREVIOUS PERIOD CONSUME

Per M.T. Yield CONSUME

Per M.T. Yield CHEMICAL

Qty. Rate Total cost

Cost per

tonne

Qty. per

tonne

Qty. Rate Total cost

Cost per

tonne

Qty. per

tonne (a) Bleaching earth (b) Activated carbon (c) Nickle catalyst (d) Caustic soda (e) Citric acid (f) Phospheric acid (g) Anti oxidant (h) Common salt (i) Ghee flavour (j) Filter aids (k) Vitamins A and D (l) Other (specify Total chemicals Less: Credit for used chemical waste. (Realisable value)

(a) Used fullers earth (b) Used nickle catalyst. (c) Others (specify)

Net cost of chemical


STATEMENT SHOWING THE COST OF STEAM PRODUCED FOR THE PERIOD FROM:__________ TO _________

I- Capacity: Type of steam boilers Current period Previous period (a) Number of days worked (b) Installed capacity

(steam in cubit meters) (c) Capacity utilisation

(Steam in cubic meters)

II- Cost:

Boiler houses expenses Current period Previous period Total cost Cost per M3

of steam Total cost Cost per M3

of steam (i) Fuel (coal/gas/furnace oil)

(i) Fuel(coal/gas/furnace oil) (ii) Water (iii) Electricity

(iv) Chemicals (v) Consumable stores (vi) Salaries and wages (vii) Repair and maintenance (viii) Depreciation (ix) Insurance (x) Other

Total cost of steam produced III- Sales and Transfers:

(a) Vegetable ghee/cooking oil production

(i) Neutilizers and other process (ii) Deodorizer (b) To gas cracking (c) To any other section (specify) Total


STATEMENT SHOWING THE COST OF ELECTRIC POWER GENERATION FOR THE PERIOD FROM:__________ TO _________

I- Capacity: Current period Previous period (i) Number of hours worked (ii) Installed capacity (KWH). (iii) Unutilised capacity (KWH).

II- Cost:

Particulars Current period Previous period Total cost Cost per

KWH

Total cost Cost per KWH

1- Fuel and oil 2- Salaries and wages 3- Consumable Store 4- Repair and maintenance 5- Depreciation 6- Insurance 7- Other overheads Total cost :

III- Sales and Transfers:

Current period Previous period Particulars



(i) Sales to outsiders (ii) charged to production (iii) charged to general uses (iv) Any other department (specify) Total sales/allocation


STATEMENT SHOWING THE COST OF TIN MANUFACTURED DURING THE PERIOD FROM:__________ TO _________

I- Capacity: Current period Previous period (i) Number of days worked (ii) Installed capacity 16 Kg/17 litre 5 Kg/5 litre 2.5 Kg/2.5 litre

Tin plate consumed (Tonnes)

Total tins produced (Nos.)

Yield tins Tonne (Nos.)

Tin plate consumed (Tonnes)

Total tins produced (Nos.)

Yield per tonne (Nos.)

(iii) Capacity utilisation 16 Kg/17 litre 5 Kg/5 litre 2.5 Kg/2.5 litre

II- Cost: Current period Previous period Particular Qty. Rate Total cost

per tin Qty. Rate Total cost

per tin 1 2 3 4 5 6 7 8 9

1- Materials

Tinplate (M. Tons)

Less: (i) Tinplate scrap (ii) Ticklies Net credit for tinplate scrap Net cost of tinplate be forward consumed 2- G.I. Wire hangers 3- Chemicals:

(i) Soldering materials

(ii) Zinc (iii) Hydrochloric acid

1 2 3 4 5 6 7 8 9 4- Labels/printing of tins 5- Electricity, Power and/fuel 6- Consumable stores 7- Salaries and wages 8- Repairs and maintenance 9- Depreciation 10- Insurance 11- Other overheads (specify)

Total:

12- Adjustment of work in process inventories (i) Add: (Opening stock) (ii) Less: (Closing stock)

13- Total cost of tins manufactured

14- Adjustment of finished tins inventories (i) Add: (Opening stock) (ii) Less: (Closing stock)

15- Cost of tins consumed

Annexure A-6

Name and address of the Company

STATEMENT SHOWING THE COST OF CHILING FOR THE PERIOD FROM:__________ TO _________

I- Capacity:

Current period

Previous period

1- Number of days worked 2- Chilling capacity (Tonne) 3- Capacity utilisation (Tonne)

II- Cost:

Current period Previous period total Cost per

tonne/output total Cost per

tonne/output (a) Freon/amonia (b) Power (c) Wages and salaries (d) Consumable stores (e) Repairs and maintenance (f) Depreciation (g) Insurance (h) Other overheads Total chiling cost

Proforma “B” Name and address of the Company

STATEMENT SHOWING INVENTORIES OF FINISHED GOODS, RAW & PACKING MATERIALS AND OTHER ITEMS FOR THE PERIOD FROM:__________ TO _________

Particular

Opening stock (Qty.)

Received during the

period (Qty.)

Issued during the period

(Qty.)

Physical stock adjustments if

any (Qty.)

Closing stock (Qty.)

1 2 3 4 5 6 1- Finished goods (M. tons) (a) Vegetable ghee: 16 Kg. Pack 5 Kg. Pack 2.5 Kg. Pack (b) Cooking Oil: 17 litre pack 5 litre pack 2.5 litre pack (c) Margarine (d) Bakery shortening (e) Others (specify)

Total:

2- Empty finished tins (Numbers) 16 Kg. 17 Litre 5 Kg./5 Litre 2.5 Kg./2.5 litre

Total:

3- By-products (sepcify)

1 2 3 4 5 6 4- Raw edible Oil (tonnes) Imported: i- Palm Oil ii- Soybean Oil iii- Others (sepcify) Local: i- Cottonseed Oil ii- Rapeseed Oil iii- Sunflower Oil iv- Others (specify)

Total:

5- Chemical (KG): i- Bleaching earch

ii- Activated carbon iii- Caustic soda iv- Nickle catalyst v- Citric acid vi- Phospheric acid vii- Anti oxidant viii- Common salt ix- Filter acids x- Ghee flavour xi- Vitamins A and D xii- Others (specify)

Total:

6- Others materials:

i- Ti plant (Tonne). ii- G.A. wire (Tonne). iii- Soldering materials (K.G.) iv- Others (specify)

7- Small tools 8- Any others stores (specify)

Total:

PART-II

Statutory Notifications (S.R.O.) GOVERNMENT OF PAKISTAN

CORPORATE LAW AUTORITY (Corporate Regulation Wing) NOFITIFCATION

Islamabad, the 14th may, 1994

S.R.O. 386 (I)/94.- In exercise of powers conferred by section 230 and 506 of the Companies Ordinance, 1984 (XLVII of 1984), read with the Finance Division Notification No. S.R.O. 698 (I)/86, dated the 2nd July, 1986, the Corporate Law Authority is pleased to make the following Order, the same having been previously published as required by sub-section (I) of section 506 of the said Ordinance, namely:-

CEMENT INDUSTRY (COST ACCOUNTING RECORDS) ORDER 1994

1. Short title, application and commencement. – (1) This Order may be called the Cement Industry (Cost Accounting Records), Order 1994.

(2) This Order shall apply to every company engaged in production, processing and

manufacturing of clinker or cement or both. (3) It shall come into force on such date as the Corporate Law Authority may, by

Notification in the official Gazette, appoint. 2. Maintenance of records. – (1) Every company shall, in respect of each financial

year commencing on or after the commencement of this Order, keep cost accounting records, containing inter-alia the particulars specified in the Schedule to this Order.

(2) The records referred to in sub-paragraph (1) shall be kept in such a way as to

make it possible to calculate from the particulars entered therein the cost of production and cost

of sales of each of the products referred to in sub-paragraph (2) of paragraph (1) separately,

during a financial year.

(3) Where a company is manufacturing any other product in addition to clinker or

cement or both, the particulars relating to the utilisation of materials, labour and other items of

cost in so far as they are applicable to such other product shall not be included in the cost of

clinker or cement or both.

(4) It shall be the duty of every person referred to in sub-section (7) of section 230 of

the Companies Ordinance, 1984 (XLVII of 1984), to comply with the provisions of sub-

paragraphs (1), (2) and (3) in the same manner as they are liable to maintain financial accounts

required under section 233 of the said Ordinance.

3. Penalty.- If a company contravenes any of the provisions of this Order, such company and every officer thereof referred to in sub-paragraph (4) of paragraph 2 shall be punishable under sub-section (7) of section 230 of the Companies Ordinance (XLVII of 1984), 1984.

SCHEDULE

[(See paragraph 2 (1)] Subject to the provisions of paragraph 1 (c) of this Schedule, cost records on quantitative and money value basis shall be maintained in respect of each of the following departments as applicable to each company:-

1. Quarry .. .. .. .. Annexure I 2. Transportation .. .. Annexure II 3. Crusher .. .. .. .. Annexure III 4. Stock hall (where applicable) .. .. Annexure IV 5. Raw mill .. .. .. Annexure V 6. Kiln .. .. .. .. Annexure VI 7. Grinding .. .. .. Annexure VII 8. Packing and storage .. .. Annexure VIII

Note:

(a) The cost record regarding cement stored in silos shall be covered in record of the grinding department; and

(ii) The cost record regarding packed cement shall be covered in record of the

packing and storage department. Cost of these departments are to be classified as “direct departmental cost” and “indirect departmental cost” so as to conform to or as near thereto as possible to such detailed headings as described in the various annexures. Indirect departmental cost represent cost of service departments such as those producing compressed air (Annexure IX), power (Annexure X) and other general expenses (Annexure XI). The indirect departmental cost shall be transferred to the above production departments. Cost of each production department i.e. total of direct and indirect departmental cost, shall be transferred to the next production department on the basis of quantity of output transferred out to next department. Annexure XII represents a Summary of all production costs for a cement factory as derived from Annexure I to XI. Important items of costs have been described in the following paragraphs:

1. Raw Materials:

(1) Adequate records shall be maintained showing receipts issues and balances, both in quantities and values of each of raw material required for manufacture of clinker or cement. The basis on which the value of receipts and issues have been calculated shall be clearly indicated in the cost records maintained or, if so desired by the company, in a separate manual of procedure, if any, maintained by the company or in foot notes or separate explanatory notes to the cost statements for the relevant period. Such basis shall be paid consistently throughout the relevant period. The values shall include all direct charges upto works such as royalty, excise duty, haulage, transport, freight, handling and insurance:

(a) All issues of production materials shall be reconciled in Annexures I to

VIII, or in any form as near thereto as possible. Any losses or surpluses arising as a result of physical verification of inventories and adjustment thereof shall be clearly indicated in the cost records. Statutory records liable to be maintained under Mining and Explosive Acts and rules may be considered adequate if they meet the requirements specified here.

(b) Record of quarrying contracts, purchases and supply entered into with

lessors and suppliers will be maintained showing the rate at which the various quantities of materials are to be supplied. The record shall indicate principal features of each contract, particularly conditions relating to the quality, price and period of delivery, discount for any transit losses and terms of payment including cash discounts, if any, and compensation the supplier shall pay for delay in delivery or non-delivery. The records shall also show the deliveries received against each contract of supply of materials till the contracted quantities are received in full. The lease and supply contracts shall also indicate the conditions relating to rebate for quality variations in chemical composition, colour and moisture content in case of limestone of particular quality, clay, shale and gypsum in case of white cement, iron slag in case of slag cement and in case of other materials usual quality standards shall be specified in the supply contracts for the purpose of rebates.

(c) Where some items of the raw materials are raised form mines owned or

leased by the companies or are produced or manufactured by them, separate records showing the cost of raising, producing and manufacturing such raw materials shall be maintained in such detail as may enable the company to fill up the necessary particulars in the annexurs or in proformae as near thereto as possible. Where such items of raw materials are obtained on the basis of supply contracts Anenxures I, II or III and not required otherwise, need not be maintained.

(d) The cost, in addition to the basic price of the materials shown in the

records, shall also include all other direct charges incidental to the procurement of production materials and transporting the same up to the factory. In case of own quarry of limestone, records of overburden raised shall be kept in terms of cost incurred. The basis of distributing

the case of removal of overburden over the entire period of quarry working in the particular area shall be determined and consistently applied.

(e) Any wastage, whether in handling, transit, storage or in any other stage,

shall be shown separately. The method of dealing with such losses in the calculation of cost shall also be indicated in the cost records. Realisable value of any waste material or by-product recovered or sale proceeds of any process material such as clinker shall be credited to the cost of such process to arrive at the net cost of cement.

(f) The records shall be maintained in such detail as may enable the

company to compile the cost in the various annexures. 2. Labour:

(a) Adequate record shall be maintained to show the attendance of workers employed by the company whether on regular, temporary or piece-rate basis or on contract basis, as the case may be. Proper record shall also be maintained in respect of payments made for overtime work and production incentives given to the workers. This will be done in a manner that labour cost is available for each cost centre.

(b) Fair and reasonable allocation shall be made for wages paid to such labour as has

been utilised in more than one department, between the various departments or cost centres and the basis of such allocation shall be consistently followed. Reasons for idle time or lay off payments shall be recorded alongwith the method of treatment in the calculation of the cost of the items referred to in sub-paragraph (2) of paragraph 1. Any wages paid for additions to plant and machinery or other fixed assets, shall be excluded form the cost of production.

(c) Benefits paid to the employees other than covered in (a) above shall be worked

out separately and shown in the cost statement department-wise. 3. Furnace Oil/Gas:

(a) Adequate records shall be maintained to ascertain the cost of furnace oil/gas purchased and furnace oil/gas charged to different departments. In case the cost of furnace oil/gas is allocated to different departments on any basis other than the actual cost, reconciliation with the actual cost and the treatment of variances, shall be indicated in the cost records.

(b) Adequate record shall be maintained showing measurement of furnace oil before

and after each filling in such a manner that quantity purchased is reconciled with the addition is stock on each filling.

(c) The records shall be maintained in such details as may enable the company to

compile the cost data in the annexures.

4. Electric Power:

(a) Adequate records, showing quality and cost of electric power generated and purchased with fixed charges and duties incurred thereon, shall be maintained.

(b) Where electric power is generated by the company itself or by its wholly owned

subsidiary or a sister concern, separate records shall be maintained in such details as may enable the company to compile cost data in Annexure X.

(c) The records shall be so maintained as to enable assessment of consumption of

power by different departments or manufacturing units or cost centres. Allocation of cost of electric power shall be on the basis of actual consumption if separate meters are installed: or on the basis of technical estimates in the absence of separate meters. In the case of fixed charges or fuel adjustment surcharge claimed by KESC, WAPDA or any other supplier of electricity, irrespective of the actual power consumed and if the amount payable as per actual consumption falls below the contractual minimum, the difference between the contractual minimum and the actual amount shall be treated as fixed or period cost and transferred to Annexure XI. Cost of power consumed in and chargeable to non-manufacturing departments, if significant, shall be shown separately.

5. Consumable Stores:

(a) Record of each item of consumable stores shall be maintained to show receipts, issue and balances, both in quantities and values, required or actually used.

(b) Cost of consumable stores shall include all direct charges incidental to

procurement of each item up to the factory. The cost of such stores consumed shall be charged to relevant departments on the basis of actual consumption. The items issued for capital expenditure, such as additions to plant and machinery, shall be shown under relevant capital expenditure heads and not in the cost statements.

(c) The requirements of Mining Act 1923 with relevant rules made thereunder, shall

be fully compiled with. In the same manner, requirements of Explosives Act, 1884, and Explosive Rules, 1940, shall also be compiled with as required in this behalf as far as acquisition, storage and consumption of explosives for quarrying purposes is concerned.

(d) Wastage of consumable stores, whether in transit, storage or at any point, shall be

quantified and shown separately. Method of dealing with such losses in costing shall be indicated in the cost records.

6. Repairs and maintenance:

Adequate records showing expenditure incurred on in-house repair and maintenance, and repair and maintenance through outside agencies shall be maintained. Records of workshop for quarrying of lime stone and clay shall be kept separately and costs charged to quarrying operation. Details of cost determination and their basis of allocation of repairs and maintenance expenditure to different departments or manufacturing units or cost centres shall be inducted. Cost of work of capital nature, of

heavy repairs, maintenance and overhaul cost, benefit of which is likely to spread over a period longer than one financial year shall be shown separately.

7. Compressed Air:

Appropriate record of cost of compressed air incurred in connection with the generation of compressed air, if centralised and provided for the consuming departments, shall be maintained in sufficient details as may enable the company to compile the cost data to be charged as part of other manufacturing over heads in Annexure IX.

8. Depreciation:

(a) Adequate records preferably in the form of an annexure shall be maintained showing values and other particulars of fixed assets in respect of which depreciation is to be provided. The records shall inter alia indicate the cost of each item of asset, the date of its acquisition, its economic life and the rate of depreciation.

(b) Basis on which depreciation is calculated and allocated to the various

departments and products shall be clearly indicated in the records. (c) Amount of depreciation chargeable to different departments, manufacturing units

or cost centres for the financial year shall be in accordance with the provisions of clause (F) of Part II of the Fourth Schedule to the Companies Ordinance 1984, and shall relate to the plant and machinery and other fixed assets utilised in such departments or units or cost centres. The method once adopted shall be applied consistently.

9. Insurance:

(a) Record shall be maintained showing the insurance premia paid for the various risks covered on the assets and other interests of the company.

(b) Method of allocating insurance cost to the various departments shall be indicated

in the cost records and followed consistently. 10. Other Overheads:

Overheads items which cannot conveniently be identified or apportioned over individual departments may be accumulated in Annexure XI and prorated over various departments on such basis or such one or more bases as may be deemed necessary. The basis or bases of apportionment shall be stated in the said Annexure.

11. Administration, Selling and Distribution Expenses:

Adequate records shall be maintained showing the items comprising administration, selling and distribution expenses and apportionment thereof to the different grades of cement if produced in the same factory. It clinker is being sold in

addition to cement, the basis of allocation of these expenses shall be indicated records. If only one grade of cement is being sold, the entire amount of administration, selling and distribution expenses may be allocated to that grade.

12. Work-in-process and Finished Goods Inventories:

Record of work-in-process inventories at each stage of process, quarrying, transpiration, raw material crushing, stock hall, raw material mixing and grinding, clinking, clinker grinding cement in soils and packing and storage shall be maintained and inventories will be physically checked and verified at the close of the financial period and duly reconciled with the books of accounts. Automatic data recording devices built into the crushing, mixing, clinkering and other plants, if available , may be utilised for reconciling in-put and out-put. Measurement of furnace oil will be done before and after each filling. Method of valuation of work-in-process and the finished goods inventories shall be indicated in the cost records so as to reveal the cost elements which have been taken into account in such computation. The cost elements shall be related to the items referred to the Annexures. The costing method adopted shall be consistently followed. Treatment of differences, if any, on physical verification of stocks with book balances, shall also be indicated in the records. Special care shall be thane or moisture absorption and drying of limestone and clay because of weather conditions.

13. Packing

(a) Adequate records as required for the purposes of Annexure VIII shall be maintained showing the cost of packing materials used and direct wages and other expenses incurred in respect of different types and weights of packages. In case of bulk supplies, necessary cost adjustments will be made.

(b) Adequate records shall be maintained showing quality, rate and value of packing

material charged to the cost of sale. (c) Where packing material is produced in-house by the company, the record shall

reflect the method of its valuation. In case packing material is purchased form a subsidiary or an associated company, the record shall disclose the name of such company and the purchase agreement with such company. The record shall the purchase agreement with the supplier even if it is an outside company/party.

14. Statistical Statements and other Records:

Companies shall develop appropriate standards for use as a basis to evaluate performance. Quality reports based on standards of strength as per B.S.S. or other standards adopted by the industry may be maintained. Consumption ratios such as yield of explosives, furnace oil per ton of clinker, usage of clinker per ton of cement, percentage of gypsum, slag in cement, power consumption in terms of kwh for per ton of cement produced, etc., are also recommended to be worked out and compared with last year.

15. Reconciliation of Cost and Financial Accounts:

(a) If integrated accounts are not maintained, the cost records shall be periodically reconciled with the financial accounts to ensure accuracy. Variations, if any, shall be clearly indicated and explained.

(b) The reconciliation shall be done in such a manner that the profitability of each

product produced and sold is correctly judged and reconciled with the overall profits of the company from all of its activities.

(c) Adequate cost records shall be maintained in a manner so that the cost statements

may be compiled.

Annexure - I

DEPARTMENTAL COST STATEMENT (One sheet for each quarry item)

Name of Department: LIMESTONE, CLAY GYPSUM, QUARRY FOR THE YEAR ENDED:____

A. Quantitative data Opening stock at quarry, Quantity quarried Total: Quantity transported to crusher Stock adjustment (if any) Closing stock at quarry

For the Year:______

tonnes

Last year tones

Increase/decrease Over last year tonnes

Reason for adjustment B. Cost Statement

Cost

For the year

Last year

Rs. in 000

Rs. Per tonne

Rs. In 000 Rs. Per tonne

Direct Departmental Cost: Explosives (if any) Royalty and duties Labour cost. Salaries Employee’s other benefits Indirect materials Insurance Repair & maintenance Fuel oil Gas Depreciation (Annex…..) Other overheads

Sub-total: Indirect Departmental Cost: Compressed Air (Annexure IX) Power (Annexure X). Other factory expenses (Annexure XI).

Sub-total: Total cost of the period Add: cost of opening stock

Total cost of available stock: C. Cost Distribution Cost transferred to crusher Cost of closing stock Total cost accounted for

Annexure - II

DEPARTMENTAL COST STATEMENT

Name of Department: TRANSPORTATION FOR THE YEAR ENDED:________

A. Quantitative data Quantity transported from quarry i- Clay/shale ii- Lime Stone iii- Gypsum.

For the Year:______

tonnes

Last year tonnes

Increase/decrease tonnes

B. Cost Statement

Cost

For the year

Last year

Increase/ decrease

Rs. in

000

Rs. Per

tonne

Rs. In

000

Rs. Per

tonne

Rs. In 000

Rs. Per

tonne Direct Departmental Cost: (a) Outside contract cost of transpiration: i- Clay/Shale ii- Lime Stone iii- Gypsum

Sub-total: (b) Own Transportation Cost: Duties (if any) Labour costs Salaries Employee’s other benefits Indirect material Insurance Repair and maintenance Fuel oil Greases Gas Tyres and tubes Depreciation (Annex…………) Other Overheads

Sub-total: Indirect Departmental Cost: Compressed Air (Annexure IX) Power (Annexure IX) Other Factory Expenses

Sub-Total:

Total own transportation cost. (c) Total transportation cost.

C. Cost Distribution Appointed to: i- Clay/Shale ii- Lime Stone iii- Gypsum

Total:

Annexure - III


Name of Department: RUSHING FOR THE YEAR ENDED:________

A. Quantitative data Clay/Shale

tonnes Lime Stone

tones Gypsum tonnes

Opening Stock (uncrushed material). Add: Received from quarry/purchase.

For the year

Last year

For the year

Last year

For the year

Last year

Total available for crushing: Less: closing stock (uncrushed material). Crushed during the period. Add: Opening stock (Crushed material)

Total crushed material: Less: Closing stock (crushed material) Stock reconciliation: Transferred to raw mill Stock adjustment

Total:

For the year

Last year

Rs. in 000

Rs. Per tonne

Rs. In 000

Rs. Per tonne

Direct Departmental Cost: Direct material (if any) Labour Cost Salaries Employee’s other benefits Indirect material Repair and maintenance Insurance Fuel oil Greases Gas Depreciation (Annex…………) Other Overheads

Sub-total (a): Indirect Departmental Cost: Compressed Air (Annexure IX) Power (Annexure IX) Other Factory Expenses

Sub-total (b): Total Cost (a+b):

C- Cost Distribution (On time or other appropriate basis)

For the year

Last year

Rs. in 000

Rs. Per tonne

Rs. In 000

Rs. Per tonne

Clay/Shale Lime Stone Gypsum.

D- Cost Transferred and Cost of Closing Stock cost summary

Clay/Shale Lime Stone Gypsum a- Opening Stock (Uncrushed). b- Cost received (during the year) c- Total cost for uncrushed material (a+b) d- Cost applicable to closing stock (uncrushed) e- Cost applicable to crushed material (c-d). f- Cost of crushing process (from above). g- Opening stock (crushed material). h- Total cost applicable to crushed material (e+f+g) i- Closing stock (crushed material) j- Cost transferred to stock hall (Raw material storage) (h-I)

Annexure - IV

DEPARTMENTAL COST STATEMENT Name of Department: STOCK HALL STORAGE/ISSUAGE OF RAW MATERIAL FOR THE YEAR ENDED:________


tonnes Lime Stone

tones Gypsum tonnes

Opening Stock Received from crusher Purchased. Total Issued to mix/slurry Stock adjustment Closing stock.

For the year

Last year

For the year

Last year

For the year

Last year

B- Cost Statement: For the year

Rs. 000 per tonnes Last year

Rs. 000 per tonnes Labour cost: Salaries Employee’s other benefits Indirect material Repair and maintenance Insurance Fuel-oil Gas Depreciation (Annex…………) Other Overheads (Annex…………)

Sub-Total (a): Indirect Departmental Cost: Compressed Air (Annexure IX) Power (Annexure IX) Other Factory Expenses

Sub-total (b): Total Cost (a+b): C- Cost Distribution Quality issued

to Raw Mill (Tonnes)

Cost of Stock Hall Applicable

to issues

Cost Applicable to closing stock

Rs. in

000

Rs. Per

tonne

Rs. In 000

Rs. Per tonne

Clay/Shale. Lime Stone Gypsum Total

D- Cost Summary (Upto Stock Hall Stage) Cost transferred and cost of closing stock:

Quantity Received (Tonnes) Clay Shale Lime Stone Gypsum Total Quantity Issued (Tonnes)

Rs. 000

Per tonne

Rs. 000

Per tonne

Rs. 000

Per tonne

Opening Stock Add: Received from Crusher/purchases. Stock Hall Cost

Total: Less: Cost of Closing stock Cost Applicable to Quantities Issued to Raw Mill.

Annexure - V

DEPARTMENTAL COST STATEMENT (Separate sheet for wet/dry process)

Name of Department: RAW MILL (FOR MIX/SLURRY) FOR THE YEAR ENDED:________


tonnes Lime Stone

tones Mix/Slurry tonnes

Opening Stock Received from stock.

For the year

Last year

For the year

Last year

For the year

Last year

Total: Issued for Mix/Slurry Total Mix/Slurry made Mix/Slurry transferred to clinkering Stock adjustment Closing stock


Rs. 000 per tonnes Last year

Rs. 000 per tonnes Direct Material: 1- Opening stock 2- Received from stock hall 3- Total 4- Closing stock

Cost of raw materials processed (3)-(4) Cost of opening stock Direct Departmental Costs Materials added eg. Laterite Labour Salaries Employee’s other benefits Grinding material Lining plates Indirect material Repair and maintenance Water Fuel-oil Gas Depreciation (Annex…………) Other Overheads

Sub-Total (a): Indirect Departmental Cost: Compressed Air (Annexure IX) Power (Annexure IX) Other Factory Expenses (Annexure IX)

Sub-total (b): Total Cost (a+b): C- Cost Distribution

For the year Last year

Rs. in 000

Rs. Per tonne

Rs. In 000

Rs. Per tonne

Transferred to Kiln Closing stock of mix/slurry

Total:

Annexure - VI

DEPARTMENTAL COST STATEMENT (Separate sheet for wet/dry process Clinker)

Name of Department: KILN FOR THE YEAR ENDED:___________

A. Quantitative data For the year

tonnes Last year

tonnes Opening Stock Quantity received from Raw Mill.

Total: Quantity fed into (the) Kiln. Stock adjustment Closing stock

Clinker produced Opening stock clinker Total: Clinker transferred to Grinding Clinker sold Stock adjustment Closing stock of clinker.

Total: B- Cost Statement: For the year

Last year

Rs.

in 000 Rs. Per tonne


Cost received from Raw Mill: 1- Opening stock 2- Received during the year 3- Total 4- Closing stock Cost to be charged to the process (3)-(4). Direct Departmental cost: Material added (if any). Labour Salaries

Employee’s other benefits Indirect materials. Fuel-oil Gas Repair and maintenance Depreciation (Annex…………X) Other Overheads Sub-Total (a): Indirect Departmental Cost: Compressed Air (Annexure IX) Power (Annexure IX) Other Factory Expenses (Annexure IX)

Sub-total (b): Total Cost (a+b): Less: value of clinker sold (if any)

C- Cost Distribution


Rs. in 000

Rs. Per tonne

Rs. In 000

Rs. Per tonne

Cost transferred to Grinding Cost of Closing stock of Clinker

Total:

Annexure - VII


Name of Department: GRINDING (CEMENT) FOR THE YEAR ENDED:___________


tonnes Last year

tonnes Opening Stock (Clinker) Clinker received from kiln. Total: Clinker fed into grinding Stock adjustment. Closing stock of clinker.

Tonnes Tonnes Opening stock of cement Cement produced. Cement produced as % of input Cement transferred to silos. Stock adjustment Closing stock of cement.


Last year

Rs.



Cost received from Kiln: 1- Opening stock 2- Received during the year for clinker 3- Total cost of clinker. 4- Cost of Closing stock of (Clinker)

Cost of clinker fed to Grinding process (3)-(4). Direct Departmental cost: Material added

Gypsum Slag Others Royalty/duties Labour Salaries Employee’s other benefits Indirect materials. Repair and maintenance Grinding materials Lining plates Fuel-oil Gas Depreciation (Annex…………X) Other Overheads Sub-Total (a): Indirect Departmental costs: Compressed air (Annex IX) Power (Annex X) Other factory expenses (Annex XI)

Sub-Total (b) Total cost (a+b)

C- Cost Distribution Cost transferred to silos Cost of closing stock of cement.

Total

Annexure - VIII DEPARTMENTAL COST STATEMENT

Name of Department: PACKING & STORAGE FOR THE YEAR ENDED:___________


tonnes Last year

tones Last year tonnes

Opening Stock of cement (un-packed) Add: Cement received from Grinding Deptt. Total: Less: Closing stock of cement (unpacked) Cement packed during the period (No. of bags) Less: Quantity sold (No. bags). Closing stock of cement (packed) No. of bags) Stock adjustment (if any) (No. of bags)


Last year

Rs.



Cost opening stock un-packed: Cost transferred in from cement grinding department. Direct Departmental cost Packing material Other materials Labour Salaries Employee’s other benefits Indirect materials. Repair and maintenance Fuel-oil Gas Depreciation (Annex…………X) Other Overheads

Sub-Total (a): Indirect Departmental costs:

Compressed air (Annex IX) Power (Annex X) Other factory expenses (Annex XI) Sub-Total (b) Total cost (a+b) Less: Cost applicable to un-packed closing stock Cost applicable to packed closing stock Balance: Cost of packed cement sold:_______ Cost of loose cement sold Sold. (if any): _______

Cost transferred to silos Cost of total cement sold.

Annexure - IX


Name of Department: AIR COMPRESSING FOR THE YEAR ENDED:___________


tonnes Last year

tonnes Compressed Air Produced


Last year

Direct Departmental Cost: Labour Salaries Employee’s other benefits Insurance Indirect materials. Repair and maintenance Fuel-oil Gas Depreciation (Annex…………X) Purchased Power Other Overheads

Sub-Total (a): Indirect Departmental costs: Power (Annex X) Other factory expenses (Annex XI)

Sub-Total (b) Total cost (a+b)

C- Cost Distribution

Departments using compressed air:

Quantity Cost

Annexure - X


STATEMENT SHOWING THE COST OF POWER GENERATED/PURCHASED AND CONSUMED DURING THE YEAR ENDED:___________

A. Quantitative data For the year Last year

Installed capacity KWH. No. of Units generated No. of units purchased Total: Self-consumption in power house Losses: Net units consumed by various other department: 1- Percentage of loss to total power generated and purchased. 2- % of power generated to installed capacity.

B- Cost Statement:

S. No. Particular

Qty. Units

Rate Rs.

Amount Rs.

Cost per unit of power generated and

purchased

Current year

Previous year

1- Fuel oil/steam consumed 2- Other material (specify) 3- Consumable stores 4- Other direct charges

5- Salaries and wages 6- Repairs and maintenance 7- Other overheads 8- Depreciation. Total Less: (1) Supplies to other units of the company (Not engaged in the manufacture of cement)

Net cost of Power generated. Purchased power (on actual consumption basis)

Total cost of power: Cost per unit (average).

C- Cost Distribution Consumed in:-

- Lime stone, clay, gypsum Quarry - Transportation - Crushing - Stock hall - Raw mills - Kilns - Cement grinding - Storage and packing - Air compressing - Others.

Total cost distribution:

Annexure - XI

OTHER FACTORY EXPENSES-FACTORY GENERAL FOR THE YEAR ENDED: ___________

A. Cost Statement For the year Last year

Direct Departmental Cost: Labour cost Salaries Employee’s other benefit Contractor’s labour Depreciation Stores and spares Repair and maintenance Electricity Compressed Air (Annexure IX) Power (Annexure X). Miscellaneous Expenses. (Tele printing stationery, T.A./D.A., rates and taxes, insurance and fixed charges paid to WAPDA Flowers, seeds, plants, cleanliness materials, uniform of security staff etc.)

B- Cost Distribution:

S. No. Particular


Basis Rs. In 000

Basis Rs. In 000

Lime stone, Clay, Gypsum, Quarry Transpiration Crushing Stock hall Raw Mill Cement Grinding Packing and Storage Air Compressing (if any) Power generation (if any)

Total


EXTRAORDINARY PUBLISHED BY AUTHORITY

------------------------------------------------------------------------------------------------------------------------- ISLAMABAD, WEDNESDAY, FEBRUARY 14, 2001

PART II

Statutory Notifications (S.R.O.) Securities and Exchange Commission of Pakistan

NOTIFICATION

Islamabad, the 13th February, 2001

S.R.O. 97(1)/2001.- In exercise of powers conferred by clause (c) of sub-section (1) of section 230 of the Companies Ordinance, 1984 (XLVII of 1984), and clause (o) of sub-section (4) of section 20 of the Securities and Exchange Commission Act, 1997 (XLII of 1997), the Securities and Exchange Commission of Pakistan is pleased to make the following Order, namely:-

SUGAR INDUSTRY (COST ACCOUNTING RECODS) ORDER, 2001

1. Short title, application and commencement.- (1) This order may be called the Sugar Industry (Cost Accounting Records) Order, 2001.

(2) This Order sha ll apply to every company engaged in production of sugar in any form

excepting liquid sugar. (3) It shall come into force at once.

2. Maintenance of Records .- (1) Every company to which this order applies shall, in respect of each financial year commencing on or after the commencement of this order, keep cost accounting records, containing, inter-alia, the particulars specified in Schedules I, II and III to this Order.

(2) The cost accounting records referred to sub-paragraph (1) shall be kept in such a way as to make it possible to calculate from the particulars entered therein, the cost of production and cost of sales of white sugar separately, during a financial year.

(3) Where a company is manufacturing any other product in addition to sugar, the particulars

relating to the utilization of materials, labour and other items of cost in so far as they are applicable to such other product, shall not be included in the cost of sugar.

(4) It shall be the duty of every person referred to in sub-section (7) of Section 230 of the

Companies Ordinance, 1984 (XLVII of 1984), to comply with the provisions of sub-

paragraph (1), (2), (3), in the same manner as they are liable to maintain books of financial accounts required under Section 230 of the said Ordinance.

3, Penalty. -- If a Company contravenes the provisions of this order, such Company and every officer thereof referred to in sub-paragraph (4) of paragraph 2 shall be punishable under sub-section (7) of section 230 of the Companies Ordinance, 1984 (XLVII of 1984).

SCHEDULE I [See paragraph 2(1)])

I. MATERIALS:

(i) Direct Materials:

(a) Adequate records shall be maintained showing separately the quantity and cost of sugar-cane procured at the factory gate or other collection centers. Where sugar cane is grown in farms owned or taken on lease by the company, detailed records shall be maintained in a mill suitable proforma so as to enable computation of the cost of such sugar cane. The rate fixed by the Government from year to year adopted for pricing the sugar cane supplied by the sugar cane grower (growers) to the sugar shall be indicated in the cost records.

(b) Where beet is used as raw material for the production of sugar, separate records shall be

maintained on the lines similar to sugar-cane. (c) A separate proforma must be maintained to record sugar-cane and beet procurement expenses

along with other related expenses. These expenses shall be separately determined. (d) All issues of materials shall be reconciled with figures shown in Annexure to Schedule III, or

in any other form as near thereto as possible. Any losses or surpluses arising as a result of physical verification of inventories and adjustments thereof shall be clearly indicated in the cost records.

(e) Record of purchase/supply through Indent by suppliers shall be maintained showing the rates

at which the various quantities of materials are to be acquired. The records shall indicate principal features of each Indent particularly conditions relating to quantity, quality, price, period of delivery and discounts.

(f) If the quantity and value of materials consumed in a company are determined on any basis other than actuals for

example at standards, the method adopted shall be mentioned in cost records and followed consistently. The overall reconciliation of such quantities and values of materials with the actuals shall be made at the end of the financial year explaining the reasons for variances. The treatment of such variances in determining the cost of items referred to in Para 2 shall be indicated in the cost records.

(g) The records shall be maintained in such detail as ma enable the company to readily provide data required in the various Annexures to Schedule III to this order in a verifiable state.

(ii) Process material:

Adequate records shall be maintained to show the receipts, issues and balances, both in quantities and costs of each item of the process material such as lime, sulphur, super phosphate, caustic soda, filter cloth and other chemicals. The cost shall include all direct charges up to works, wherever specifically incurred. The issues of material shall properly be identified with the departments or cost centers. (iii) Consumable stores, small tools, machinery spares etc.

(a) Adequate records shall be maintained to show the receipts, issues and balances, both in quantities and cost of each item of consumable stores, small tools and machinery spares. The costs shown shall include the direct charges up to works, wherever specifically incurred.

(b) In case of small tools, the costs of which are insignificant, the company may maintain such

records for the main groups of such items. (c) The cost of issues of consumable stores, small tools and machinery spares, shall be charged

to the relevant heads of accounts such as repairs to plant and machinery, or repairs to building. Material consumed on capital works such as addition to buildings, plant and machinery and other assets shall be shown under the relevant capital heads.

(iv) Wastages, spoilages, rejections or losses etc.: Adequate records shall be maintained showing the quantity and cost of wastages, spoilages, rejections and losses of sugar-cane and other raw materials, process materials, consumable stores, small tools and machinery spares, whether in transit, storage, or for any other reason. The method followed for adjusting the above losses as well as the income derived from the disposal of scrap, if any, in determining the cost of the product shall be disclosed in such details as may enable the company to arrive at the net cost of white sugar produced.

II. EXCISE DUTY AND SALES TAX Adequate record of excise duty and Sales Tax paid and the rebate claimed or earned in case of allowance for excess production or export of sugar shall be maintained along with the record of white sugar manufactured. Calculation for rebate shall be worked out through formula prescribed by the government. The working of the adjustment or claim, if any, shall also be shown.

III. SALARIES AND WAGES:

(a) Adequate record shall be maintained to show the attendance of workers employed by the company whether on regular, seasonal, temporary, or on contract basis, as the case may be. Proper record shall also be maintained in respect of payment made for overtime work and production incentives whether in the shape of production bonus or incentives based on output given to the workers. Payment of any retirement benefits including pension, provident fund, gratuity , old age benefits, contribution and any welfare expenses shall also be included in the labour or factory overhead cost of beneficiary cost center/

department. This will be done in a manner that labour cost is available for each cost center or department and for each product whether by-product or main product so that different Annexures of Schedule III to this order, are filled properly and easily.

(b) Fair and reasonable allocation shall be made for wages paid to such direct labour as has been

utilized in more than one departments, between the various departments or cost centers and the basis of such allocation shall be consistently followed. Idle time or lay-off payments shall be recorded separately indicating the reasons and the method of treatment in the calculation of the cost of the items referred to in Paragraph 2. Any wages paid for additions to plant a machinery or other capitalised assets, shall be capitalized and excluded from the cost statements of white sugar produced.

(c) Benefits paid to the employees other than covered in (a) above shall be worked out separately

and shown in the cost statement department wise.

IV. SERVICE /DEPARTMENTS Adequate records shall be maintained to indicate the expenses incurred for each services department or cost center. In the case of multi-product companies these expenses shall be apportioned to other service and production departments on an equitable basis. Where these service departments serve products other than white bagged sugar suitable bases shall be worked out so that the share apportioned to white bagged sugar is worked out and applied consistently.

V. UTIITIES

(i) Steam.- Adequate records showing the quantity and cost of steam raised and consumed shall be maintained in such detail as may enable the company to fill up the necessary particulars in Annexure 7 to schedule II to this Order. The cost of steam consumed by the Sugar mill and other units of the company shall be calculated on a reasonable basis and applied consistently. The cost of steam should be allocated to electric power house, white bagged sugar and other users including staff colony and office building etc. Basis adopted for valuation of steam at different pressures shall also be indicated in the records.

(ii) Electric Power.- Adequate record of cost of electric power generated by the company and

purchased sha ll be kept in such details as may enable the company to furnish the necessary cost data as in Annexure 8 to Schedule III to this Order. The records shall be so maintained as to enable assessment of consumption of power by different departments or production units or cost centers. Allocation of cost of electric power shall be on the basis of actual consumption, if separate meters are installed; or on the basis of technical estimates in the absence of separate meters. In the case of fixed charges or fuel adjustment surcharge claimed by the utility company, irrespective of the actual power consumed and if the amount payable as per actual consumptions fall below the contractual minimum, the difference between the contractual minimum and the actual amount shall be treated as fixed or period cost and transferred to other factory expenses statement [Annexure 9 of Schedule III]. Cost of power consumed in and chargeable to non-production departments, if significant, shall be shown separately. Record shall also be kept for any electric power sold to out-side agencies.

Note: In case of self-generation quantity and reasons for under utilization shall be specified and the relevant cost shall be treated as fixed or period cost.

VI. REPAIRS AND MAINTENANCE

Adequate records showing the expenditure incurred on workshop facilities for repairs and maintenance of buildings, civil works, offices and plant and machinery in different departments and cost centers shall be maintained on regular basis. Details of costs incurred and the basis of allocation of repairs and maintenance expenditure to different departments or production units shall be indicated. Cost of work of capital nature, heavy repairs, and overhaul cost, benefit of which is likely to be spread over a period longer than the financial year, shall be shown separately. If a separate maintenance team is working for a particular department, the salaries, wages, cost of consumables, spars and tools shall be charged as direct expense of that department. If the maintenance services are utilized for other products, the portion utilized for them shall be segregated and charged thereto.

VII. DEPRECIATION

(a) Adequate records shall be maintained showing values and other particulars of fixed assets in respect of which depreciation is to be provided. The records shall, inter alia, indicate the cost of each item of asset, the date of its acquisition, accumulated depreciation, the rate of depreciation and the depreciation charge, for the relevant period.

(b) Basis on which depreciation is calculated and allocated to the various departments and

products shall be clearly indicated in the records.

(c) Amount of depreciation chargeable to different departments, production units or cost centers, for the financial year shall be in accordance with the provisions of clause (F) of Part II of the Fourth Schedule to the Companies Ordinance, 1984, and shall relate to the plant and machinery and other fixed assets utilized in such departments or units or cost centers. The method once adopted shall be applied consistently.

VIII. INSURANCE

(a) The record shall be maintained showing the insurance premia paid for the various risks

covered on the assets and other interests of the company. (b) Method of allocating insurance cost to the various departments shall be indicated in the cost

records and followed consistently.

IX. OTHER OVERHEADS Adequate records showing the amounts comprising the manufacturing overhead expenses other than those already mentioned and details of apportionment thereof to the various departments or processes shall be maintained. If products other than white bagged sugar are also being produced in the factory, adequate bases should be developed to apportion the overhead cost equitably.

X. BY-PRODUCTS

Detailed records shall be maintained for each item of by-product showing the production, disposal and balance both in quantity and value. The basis adopted for valuation of the by-products shall be equitable and consistent. Records indicating the actual sales realisation of by-products shall also be maintained.

XI. WHITE SUGAR TRANSFERRED FOR SELF USE Adequate records shall be maintained showing the quantity and cost of white sugar transferred to other units of the company for self consumption. The rate at which such transfers are affected shall be disclosed in the cost records.

XII. WORK-IN-PROCESS AND FINSIHED GOODS STOCK The method of valuation of work-in-process and finished goods stock shall be indicated in the cost records so as to reveal the cost elements that have been taken into account in such computation. The cost element shall be related to the items referred to in the relevant Annexures to Schedule III to this Order. The costing method adopted shall be consistently followed. Treatment of differences, if any, on physical verification of stocks with book balances, shall also be indicated in the cost records.

XIII. ADJUSTMENT OF COST VARIANCE

Where the company maintains cost records on any basis other than actuals, such as standard costing, the records shall indicate the procedures followed by the company in working out the actual cost of the product under such systems. The method followed for adjusting the cost variances in determining the actual cost of the product shall be indicated clearly in the cost records. The reasons for the variances shall be indicated in detail in the cost records.

XIV. INTER-COMPANY TRANSACTIONS In respect of supplies made or services rendered by the company to its holding company or a subsidiary of a company in the same group or company in which a Director of the Company is also a Director in such companies and vice versa, records shall be maintained showing contracts entered into, agreements or understanding reached, in respect of:-

(a) Purchase and sale of raw materials and process materials; (b) Utilisation of plant facilities; (c) Supply of utilities; and (d) Administrative, technical, managerial and other consultancy services.

These records shall indicate the basis followed to arrive at the rates charged between them so as to enable determination of the reasonableness of the rate charged or paid for such services.

XV. RECONCILIATION OF COST AND FINANCIAL ACCOUNTS

(a) If integrated accounts are not maintained, the cost records shall be periodically reconciled with the financial accounts to ensure accuracy. Variations, if any, shall be clearly indicated and explained.

(b) The reconciliation shall be done in such a manner that the profitability of each product

produced and sold is correctly judged and reconciled with the overall profits of the company from all of its activities.

(c) Adequate cost records shall be maintained in a manner so that the cost statements may be

properly compiled.

XVI. STATISTICAL RECORDS

(a) Data such as the duration of crushing period, the quantity of each grade of white sugar produced, mill stoppages during the season indicating the reasons, quantity of by-products obtained, percentage of sugar balance, bagasse, press-mud, molasses and sugars shall be kept in detail.

(b) The data maintained in the cost records shall be reconciled with the periodical returns

submitted by the company to excise and other authorities. (c) Companies may develop an appropriate standard for use as a basis to evaluate performance

properly. A. COMPANY INFORMATION

1. Name of the Company. 2. Date of Incorporation. 3. Location of Registered Office. 4. Location of Factory/Factories. 5. Products other than sugar being manufactured. 6. Installed Cane Crushing Capacity in tones.

B. PRODUCTION DATA S.No (1)

Particulars (2)

Current Year (3)

Previous Year (4)

1 (a) (b)

CANE CRUSHED Date of start Date of Finish Duration of run days Total number of hours in duration Total number of hours of actual crushing Total numbers of hour lost Total cane milled (tonnes) Converted maunds Total mixed juice obtained (tonnes)

GUR MELTED

2 3 4 5 6 7

JUICE & ADDED WATER

Average mixed juice % cane Average added water % cane

SAGAR MADE Total sugar bagged of all grade (100 kg) ( 50 kg) Sugar bagged (tonnes) Sugar in process (tonnes)

MOLASSES EXTRACTED Total molasses sent out (tonnes) Molasses in process (tonnes)

RECOVERY % Laboratory test percentage recovery of sugar cane Average recovery of marketable white sugar % cane Average production of final molasses % cane

BY- PRODUCTS Bagasses % cane (calculated) (tonnes) V.F. Cake % cane (tonnes)

CLARIFICATION PROCESS Specify the process used by the mill

Annexure 1.

SCHEDULE III [see para 2(1)]

STATEMENT SHOWING COST OF PRODUCTION & SALE OF WHITE BAGGED SUGAR FOR THE YEAR ENDED ________

Quantitative Data – Bagged Sugar

Opening Stock (M.Ton) Production (M.Ton) Closing Stock (M.Ton) Sales (M.Ton)

Current Year Previous Year S.No (1)

Particulars (2) Amount

Rs Cost per Ton

of Sugar Amount

Rs. Cost per Ton

of Sugar 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Raw Materials a) Sugar Cane (Annex 3) b) Beet (Annex 4) c) Gur d) Raw Sugar e) Process Material (Annex 5) Salaries/Wages and benefits (Annex 6) Consumable Stores Repairs and maintenance

Utilities Steam (Annex 7) Electric Power (Annex 8) Water & Gas Insurance Depreciation Other Factory Overheads (Annex 9) Total Cost ADD : Opening Stock of W.I.P. LESS : Closing Stock of W.I.P. Total Cost of goodsManufacturing Less: Realisable value of By-Products Molasses Bagasse Others Net Cost of goods Manufacturing: Add: Packing Material & Handling Net Cost of Bagged Sugar Add: Excise Duty / sales tax Total Cost of Bagged Sugar: Add: Opening Stock of Sugar Less: Closing Stock of Sugar Cost of Sales Administrative Expenses (Annex 10) Selling & Distrib. Expenses (Annex 11) Financial Expenses Other Charges

Total Cost to Make and Sell

Annexure 2

STATEMENT SHOWING COST OF SUGARCANE PRODUCED FOR THE YEAR ENDED ______

Current Year Previous Year

S.No (1)

Particulars (2)

Quantity Rs (3)

Amount Rs (4)

Quantity Rs. (5)

Amount Rs (6)

1 2

Seeds and Other inputs

Seed Fertilizers, herbicides etc. Insecticides Abiana/Water Charges Total Cost of Inputs

Labour Cost

Land preparation Plantation Maintenance of cane crop/ratoons Operation of Tractors Harvesting Total Labour Cost

Other Cost Fuel for Tractors operation Maintenance and over haul of Tractors Insurance Interest expenses Depreciation of equipments Rent of agriculture equipments (if any) Total Other Costs Total Cost of own production (1+2+3) Sales value at controlled price Profit/Loss on own production

Note: 1. This Annexure will be prepared by those enterprises which cultivate sugarcane on their own farms. 2. Similar Annexure will be prepared by those enterprises which cultivate beet on their own farms.

Annexure 3

STATEMENT SHOWING COST OF SUGARCANE CRUSHED FOR THE YEAR ENDED ______

Current Year Previous Year S. No.

(1)

Particulars

(2)

Quantity M. Ton

(3)

Rate Rs./M. Ton

(4)

Amount

Rs. (5)

Quantity M. Ton

(6)

Rate Rs./M. Ton (7)

Amount Rs.

(8) 1. 2. 3. 4. 5. 6. 7. 8.

Total sugarcane purchased at Government fixed rate Sugarcane produced from own farm (Annex 2) Less: Loss in transit Sugarcane received at factory gate Commission Quality premium Loading/unloading charges Cane development expenses: a) Salaries and Wages of Supply and Development Staff b) Sugarcane Development Research c) Supply staff and transportation expenses d) Other expenditure Taxes and Levies: a) Cane cess/ purchase tax b) Market committee fee c) Road cess d) Octroi e) Other levies Transportation Charges a) Delivery expenses b) Transport subsidy c) Others Other Expenditures at Cane Collection Centers a) Salaries and Wages b) Stores c) Repairs and Maintenance d) Others

9 Total cost of “SUGARCANE” Transferred to production processes (Annex 1)

Notes: 1. Cane supplied from own farm shall be charged at controlled rate & the profit/loss on farm shall be taken to profit &loss account directly. 2. All expenses relating to own farm shall be excluded from this Annexure.

3. Where beet is used in addition to sugarcane, separate Annexures shall be maintained on similar lines for beet also.

Annexure 4 STATEMENT SHOWING COST OF BEET CONSUMED FOR THE YEAR ENDED ______


S. No.

(1)

Particulars

(2)

Quantity M. Ton

(3)

Rate Rs./M. Ton

(4)

Amount Rs.

(5)

Quantity M. Ton

(6)

Rate Rs./M. Ton (7)

Amount Rs. (8)

1. 2. 3. 4. 5. 6 . 7.

Total beet purchased at Government fixed rate Less: Loss in transit Beet received at factory gate Commission paid Loading unloading Beet development expenses: a) Salaries and Wages of Supply and Development Staff b) Sugar Development Research c) Supply staff and transportation expenses d) Other expenditure Taxes and Levies (if any) a) Purchase tax b) Market committee fee c) Road cess d) Octroi e) Other levies Transportation Charges a) Delivery expenses/travelling from purchases centre to

mill gate b) Transport subsidy c) Others Other Expenditures at Beet Collection Centers a) Salaries and Wages b) Stores c) Repairs and Maintenance d) Others

8 Total cost of “BEET” Transferred to production processes (Annex 1)

Notes: 1 Beet supplied from own farm shall be charged at controlled rate & the profit/loss on farm shall be taken to profit &loss account directly.

2, All expenses relating to own farm shall be excluded from this Annexure. 3. Where sugarcane is used in addition to beet, separate Annexures shall be maintained on similar lines for sugarcane also.

Annexure 5

STATEMENT SHOWING COST OF PROCESS MATERIAL CONSUMED

FOR THE YEAR ENDED ________________

Current Season Previous Season S.No (1)

Particulars (2) Amount

Rs Cost per Ton of Sugar

Amount Rs.

Cost per Ton of Sugar

1. 2. 3. 4. 5. 6. 7. 8. 9.

10. 11. 12. 13. 14. 15. 16.

Total Sugar Produced (M-Tons) Unslaked Lime Phosphoric Acid Filter Acid Sulphur Caustic Soda Soda Ash Tri sodium Phosphate Bleaching Powder Anti Foam Formaline Laboratory Chemicals Filter Cloth Sewing Thread Cleaning Brushes Lubricant and Grease Other (Specify) Total Less allocated to

(a) Electricity generation (b) Steam Generation (c) Raw Material (d) Admin Expenses (e) Selling and Distribution Expenditure (f) Any Other Specify

Balance transferred to production process Annexure 1.

Annexure 6

STATEMENT SHOWING COST OF SALARIES, WAGES AND BENEFITS

FOR THE YEAR ENDED ____________________

Current Year Previous Year S.No

(1)

Particulars

(2)

Amount Rs

(3)


(4)

Amount Rs.

(5)


(6)

1.

(i) (ii) (iii) (iv)

2.

(i) (ii) (iii) (iv) (v) (vi) (vii)

(viii) (ix) (x)

(xi)

Total Sugar Produced (M-Tons) Cost

Salaries/Wages: Officers and Permanent Staff Seasonal Staff Daily rated and Contract Labour Bonuses

Benefits: Medical Expenses Canteen Expenses Welfare, Recreation Transport and Travelling Education Cess/Expenses Group Insurance/Workmen Comp. Insurance Prov. Fund (Employer’s Contribution) Gratuity/Pension Other Benefits (if any) Total Less allocated to- (a). Electricity Generation (b). Steam Generation (c). Raw Material (d). Admin Expenses (e). Selling & Distribution Expenses (f). Any Other Specify Balance transferred to production process (Annexure)

Annexure 7

STATEMENT SHOWING COST OF STEAM/GENERATED CONSUMED FOR THE YEAR ENDED ______

S.No

(1)

Particulars

(2)

Unit

(3)

Current year (4)

Previous Year (5)

Variance

(6) 1. 2. 3. 4. 5.

Types of steam boilers used No. of days worked Installed Capacity (steam in tonnes) Utilised capacity (steam in tonnes) Production:

a) High pressure steam b) Medium pressure steam c) Low pressure steam d) Less: transit losses e) Total

Percentage of capacity utilization (3/2 * 100)


S. No. (1)

Particulars (2)

Quantity (3)

Rate per Unit Rs. (4)

Amount

Rs. (5)

Quantity (6)

Rate per Unit Rs. (7)

Amount

Rs. (8)

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Water Fuels: a) Bagasse

(i) Own (ii) Purchased

b) Pith c) Coal purchased d) Furnace Oil e) Fire Wood f) Gas g) Other fuels, if any (to be specified) Quantity of waste heat from the plant, if any Consumable stores Direct salaries, Wagws and benefits Repairs and Maintenance Other direct expenses (e.g. Boiler inspect ion fee etc.) Insurance Depreciation Total Cost of Steam Raised Less : Outside sale Total Cost of Steam for Self Consumption Add: Cost of steam purchased Total Cost of Steam Consumed

ALLOCATION Total of item 12 allocated to i) White bagged sugar ii) Electric power house iii) Others:

a) Staff colony

b) Office building etc.

Total Notes: 1. The rate at which waste heat is evaluated vide item 3 of this annex should be indicated giving details of cost centre from which transferred.

2 Basis adopted for valuation of steam at different pressures be also indicated in the records. 3. Realisations, if any, by sale of steam to outside parties and waste products such as boiler ash shall be shown separately against item 10. 4. Where meters are not installed, consumption of steam shall be assessed on a reasonable basis and applied consistently. Annexure 8

STATEMENT OF COST OF ELECTRIC POWER PURCHASED / GENERATED & CONSUMED

FOR THE YEAR ENDED ______


Variance

2. 3. 4. 5. 6. 7.

8.

Installed Capacity (KWH) No. of units generated (KWH) No. of units purchased (KWH) Total (2+3) Consumption in Power House including other losses Net units consumed (4-5) Percentage of Consumption and losses to total units Available =5/4* 100 Percentage of power generated to installed capacity 2/1 * 100


S. No.

(1)

Particulars (2)

Quantity M. Ton

(3)

Rate

Rs./M. Ton (4)

Amount

Rs. (5)

Quantity M. Ton

(6)

Rate Rs./M.

Ton (7)

Amou

nt Rs. (8)

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Steam (Annex 7) Consumable Stores Salaries and Wages Other direct expenses Repairs and maintenance Duty on electricity Depreciation Total • Less: a) Credit for exhaust steam used in process etc.

b) Other credits, if any Cost of power generated Less: Cost of power sold Add: Cost of power purchased Total net cost of power consumed Cost per unit average ALLOCATIONS Total at item 12 allocated to: e) White bagged sugar ii) Self consumption iii) Others:

a) Staff colony b) Office building c) Other (specify)

9 Total Notes: .1. Credit for the cost of exhaust steam supplied to the sugar factory and for other units shall be determined on a reasonable basis and shown against item 8(a).

2. Realisation, if any, by sale of steam to outside parties, etc. shall be shown separately against item 8(b). 3. Cost per unit shall be worked out with reference to the net units of power available for use after deducting consumption in the power house and other losses.

Annexure 9 STATEMENT SHOWING OTHER FACTORY OVERHEADS

FOR THE YEAR ENDED _________

Amount in Rupees Current Year Previous Year

S. No

Description

Amount Rs


Amount Rs.


1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

12.

Total Sugar Produced (M-Tons)

Cost Rent, Rate and Taxes Printing & Stationery Postage & Telegram Telephone Fax & Telex Travelling & Conveyance Subscriptions, Books & Periodicals Entertainment Vehicle Running Expenses Security Fire Fighting Other Expenses Total Allocated to i)White bagged sugar ii) Electric Power House iii)Steam Generation iv) Others:

a) Staff colony b) Office building etc

Total as per item 12 above Note: 1. Bases of allocation should be disclosed.

2. Expenses are illustrative only. Companies should provide in detail all items of general overheads.

Annexure 10

STATEMENT SHOWING ADMINISTRATIVE EXPENSES FOR THE YEAR ENDED _________


S. No

Particulars Amount Rs


Amount Rs.


1.

2. - - - - - - - - - - - - - - - - - -

Total Sugar Sold (M-Tons)

Cost Salaries, Wages & Benefits (Annex 6) Rent, Rate and Taxes Insurance Water, Gas & Electricity Printing & Stationery Postage & Telegram Telephone Fax & Telex Repair & Maintenance Travelling & Conveyance Subscriptions, Books & Periodicals Entertainment Advertising Legal & Professional Exp Auditors remuneration Vehicle Running Expenses Charity & Donation Others

- Total

Annexure 11.

STATEMENT SHOWING SELLING EXPENSES DURING THE YEAR ENDED _________


S.No.

Particulars Amount Rs


Amount Rs.


1.

2. - - - - - - - - - -

Total Sugar Sold (M-Tons)

Cost Salaries, Wages & Benefits (Annex 6) Travelling & Conveyance Commission Freight Outwards Stacking/Restacking Loading/Unloading Export Expenses Vehicle Running Expenses Advertising for Sales Promotion Other Expenses

- Total

SH' [ 'RlT I rs ,\ '11) EXr! IA:'IO(;.· ('(HI \ 1ISSI U" OF" 1' ..\ I( 1ST ,\ '"

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til IIIn-e. \Ia'ni~ l.-

(~I '\J"~".I" "",,,m, 'hall he ma;nui"ed .OO''' ''S r<:,e Lpl<, i"Lles "nd bala""o'. bOlh." 'luant;tto, and, alue< of e""h item "f drrect n,at,r;.) ""I,,;red 10l" pro,,,l,,,, ,,,),, "f.h,·m,ullmdiLef of an~ t~~ rhc: N,,' <In "'h"b .he \alt><: "f r~."pI and

"'" M\C boxn Qkulated ""'II be dearl~ IndlC.lted m the: '''''' =oni<."",,,,u,,oa! or ,f «I ~,m! b:- 1M ,omplln~ in . ~par1II" manWlIof pro;:cdu'C"\. ifa,,~. mamu",,,J '" the mml""n~ or '" f(\<lt·"ote. '" ~P"rate e'rllnatol) no: Ie' 10Ihe ,'" 1 , late""nl, fOf ,h, rd.,ant !,"r",d , ' "d , ba.,\ 'hall be arrll,-de,"'" te"ll~ tl",',,~hoUl th" rc ln ant r>eriod. 1ho 'alue••!wll ;""lud" all <\""'""""go P 10 "<lT~' ""h a. n.i", dut>. haulase. 'Bn'P""". Ii-e,g'\!, IImdhnll and""'''''1(;" I" ,a-o: of imp<'f1ed mat"ri:al 0"""",,, dut>. Iqn ....."tarac l"''",1Iart;e>. mland fn;'~t o~" fre,~lll and in.........e dlafl':C'" I... ca., and ...~",!ItT I.:- c> pa~ahk.t the lime <>( import ;hall be .no..lI "'pr.llel> and IndudedI., "orl; "lit landed '" 1

(t» If the ,,,I,,,, of dlfe,,1 mater,.1 " """" i, dc:temIincJ on aN" "'her Ih."30;" '. lh" ",",'!>oJ adopl'.,J for h 'aluation I.' "'ell 2... the metlkld for"',"""'illal''''' of ...... ,"".....1OIl ", 1OIl and the "",.hod f"" d«!inlt .. ,thutiat:,,,,.. f an~. -"all he d,,,;1o>ed In the coot =oro. or ;n<!icaled ~ "'"> ort<'OI""I" Ctf In an~ (>I ....... "'il&l>l" ....nncr

(c) \11 ;'':'0' or ",,'ol"'lion rr.~,~r;31. ,h,,11 be reconciled "illl Ii~un:s ,ho"n In\n"."o, of'S.::hoJuk III. or In an, other f"mI a, therelO a' pu"ible An>

""', a."""'g'" a ~!l of ph>,i",,1 ,.,..ifi~...on of ,n" "",,"",,, and">1"""11< t"""= f shall be dcar1~ indic,ted;n the: rost =ord

(,h Record of ptm,h~", s\ll'rl~ ""nlf"I' ~"t~rcJ ;n1n "ilh 1",.1 and r",ei~" 'upplle...a, the """, rna, be ,h.1I hc 111 ail1 \o1il1 . <1 , I",,,m~ II>.: "Ue al "hioh sar;o",

"nnmlC' of maler;ll, are to be a"'lui~, 1M record, .t>all ,nd'"ate pri",;pa.1!~alurc. 01 e""h conlr""l pIoni"..!",!> "on,lI liNK ...1111"110 quant t:o. qwltl~ and.

"• ..., , f .Mal>~, oh<m int- lhe" life. lind in ca", of d>rfltlOak !hell" """"ph andt~hnlU! <: "'lenb.. pri,.:. PCllOO of deli,"'). dl><ovnl I", lratl>'l Io1.s and ,."."" ufpa, m"" Ind"din~",h dl",o"nt'

I') '\lll .Ibm>rmal ".;\a~e (\1'mater;al "heth'" ," tran.it. storol!0 or fur an; "t it",-eeson. h,ll be ""'ordcJ ....-pant.el> ind;"llIins Ihe "'"I" at ",hl"h slKh \0.,.,..0<:,,,' 'nd rca • lhe:reof \Ict1'Dd of dealinll .. ttll .... 11 k",.n in I"" ,akul.otion

f ,c.1 "'" indl\.'.lled on the: ,«o"is 'Ofmal "'SI'~kK...." 0.1"" 10h'''''''~e or e'''I'''f1IhO;''' ""' and p'" due: 10 "klllgIUio" or ah<orpl," "f

moi. ;u"" <I. ",II "" Il».or'hod b:- -he n:m. ;n ; l1~ matorial ihd f,

(I) il.ealiuhl, ,.1"" "f an~ "" I" mater ..l, hy·prOO",,1 <>r mtermcJia') pr.'ol\OCl""'o'em! ''f >3le pn.lo;«e, of .n~ I""'",e.. malC'l'I;lI or ;nl,-nncdllry producl '" Itoe ..-n:dil~ ro the "'>'ill of ....h I"'~"" 10 'IThe at l!>r 11(1. "0>1 of lhat pan",,,!.Il't .:<"', and 1'",,11> l'ul of lhe fen;",,,r prod""cd

•

2

~;;.Villi

/'--\ ()

,

"Pj()~~j 1"" ~41 UI p"l~JIPU! "'l ''' I~ lie,!, :lUll''''' ut '~"('I 4~n,

'1\'·" :l\lI\f~p.10 P041~1'l; . '1~I1,-md ~~ 1I ." " 4" pue pJ!lll UC llb oq ttc4'" :\1'00"'1;0 \UO:II! '" ~~P.J01' 'W"J~Jl UI J~4P'l" ",,",i, "~l~ l' ~14~UIII'U"~ "'I"" lU~4" )0 ~~Cl'" ,\ (I'). .

P~""l l''J .\IlUJ1""',,, oq [1~1l' puv ,pJ<':>'lJ I"'.' ~'l1 IIII'."~~IPU! "'1 I IR,!' U1JI! '1""J.lQ u''' ldUIn'U<lJ pUB ld!~",,, J" U'''loml~' jl> s"~q JLU (J)

'1'!j~lnW

Jil' ,I" 0J!I I".p , n jJ,O ISO'~4 1 III P~P"P"'" Jr." ~U() j(U!I"'J~~" 'J!I 'i" \\ I"! -' ."'"I" J«l.J -lW' 4~ r" \'1 P~l\I"""G 'l ,un u~l"'pwd ''l1 J,"CI I'J~IU"UI" S1 '~Ul ! l

I" I",!".<.I. J~.'" uO I1~"I''''d Ol ;>lq~l~Pj ~j~ 'pi"" 'J« I"l~~ .I" 1"'-'.1 'j.'l'I'1.J~J

IC,"W 0'l.'.Ill 'IU~IU~Jnl< IS<" ~'Il '" lCIU I'ILV ' 1" " 4 l(IC·\~I~ lJp Un \1""'1' "'l1l~L!'

\.1;;"14_"" " P "~ lU~l'" <'>1 'OO LllPP~ <r ",' -;)JlIllpUJJ x~ 1 " I ' oJ~~ JOJ P~''''! <LLJ ~I ! ~~ 1"U~"'~IP.IS l'OJ '''1' U! 1"'jUO'~' '" LJ "! l oJ WIl<UO~ Ir."p" .10 '!'1!q ~111 ,," <J," "~"

)'O ~ lur·'~I:U 01 p,i!l"~ ~ ~ lle~s p;"" n'u,,~ -~1~ iO",.~d'-'-'~JO l' "Ir~,w"•.p 4'"' J"1"'" '''1-1 '-"OI'1'J ~'jl 01 d" UJ~H 'I""" JO 1u~w~'''''-\Jd 01 lP.l"~P !'U ! ,~ll,c~~ 1~.'''''P

IW ~I'II P lL ! 11"'1' 'lfI!d ~'OO' pun "\JUI' "lqml'lIwo ~ "I ~ ~"U :l\P "l' (11'1 '" .10 1'0.1 (q)

""IU ~~ Im~ '''"'~I''J

:''11"'J 1""11 'II~IIP" ,oiPun "'"I'U"J 1P'~"u'4~ J" U"!I""p"-'d J"J P"!t\O~, ·.~nl" \1"'" ""1!llWnb U' 410q ·<J~\WIr. 4 I' ''~ ,;Il\<~' ·'ld!~:l." ''')4' 01 r~"'"I" !r,,, eq lIe~<

""rd< """'1' '14"' u nsuo~ "'le~!w~ '1 ~ "I'·(1P.1P.~ JO U'''l' \I ~~~ JO 1U0:>;>' "lml0Jpy Ie)

:on ·..,.",I",""J01" 314r wn<",,;) ·' I F.~ n" ·"1 ) "'4'0 '", '1' 'l P. ;) II I

'~Wl' '1'l~Uu", e LJI )~1\J()

' !'11 <It p:>q1J""-"\Jd ' 1""U~I~IS r.;oJ <[I,,,,"., "1\ '" P~I!"I>."\J '" nlr.r "P!.,u,d 'I'I'"~'

01 ,u"J LlJ O' "41 ~14"'" , mu ," l!tPI' 4'''< U! p'l'!"IUl"lU oq [!"4' <P"';I;>1 ~4.!. ( ~)

I"'pl\ l" ~ ~jr. <r"~4'~ " , ~"'l'~j'''i.l

I'" '' j"'~ "~"'''''-l -' PP" 4'" ' o ~'''I"'I''''!W P1' ' ~4 IO )0 "'"'1-; 'llO!PUI""d 01""'tt l"''1'" ' '1' '>, " ,,,!,e,I"!"''''P" J" " "'I' PU" 'IYII~II'0 \" '-" " l :'lll ~ ·1<0:) ~~ 'Old",] IXl,.{ I'l'O.) Ir"·' I"I\ J)~,,(\ i,,'pnpu, 1"'-" 1" P·'III"' "'" '1""'l"W P""'l'ql1 U"'" ,II"S (I)

'I"O~ 1" !'·' I"UJ ~41 JII lJOO 'U"'.! IOUII'" ~"u'''Il''Jo> 11l~ l ll .'td U!l '11U ~~""' I~X~ ~4 1 '" ,illlU 'l~ HJ, nb..<'1I1< 'U" -U"!p\.",,rJ\ "4'10 ,""r "11 \'" "1'" "'11 jf p.'lJJ ' ''0' '! I~UJI"'U p.,po,lulI JO IU.'U<Xl"'M ' OJ"J ~4.1 ())

'''111 10'.\ <n ~~'" ,<0, ~1'l""lddn J:'4'" '''Id 1" 1" ,,,,oJ<" ,."'-" 10 1'~'I,jll n, l\l1J~I"W 10 "", '41 , n U.'~"I <' p;'IJ'''O' " IIT".'l""'.Io 1"" ~'11

'1"'!lddu, ""!'~''''' '0 1."~WLlJ·"41O JOJ "~"f'P "" U! l' " " n b~" " -t'U" lnw f .'1'''1.\\ ('II

•·'1"0'""" l"'~ "4' U! 1'·'1"" 1""

'''111"4' ~ 4d~J~"j"d LJI "1I'"Jl~J"J ""OJ! j() 1S" , ~41 ilU!U!IJ "'I~P "! <." ""!'"' 4" "jU 1".> Llll""l ~41 -'~'''"!l".' 'OJ "'o.~~, ~'I I ll "!U!"ld~~ "'" 1"!~L1""~1 ~4l :)lIlJ"P'1"11"110 1<""1 1" ~P"W "'l11"4' IUI\)' " ~41 4"" ' 1 " ! j~I"Ul.l0 '~III" \ 1'''" " !I!ll1\'''b'1 ~'" ,10 <1<"1"'1"""':" lI"'~'O "41 " l ll'~"!"'O~ P~""II"J "4 11"'1< I' 1'''" 'rm~,,"I''' ~ "! r;>u,,"u~w;>q 11 "1(' 'llmlJt Ut\jll~t(\" sueq e uo pJ ltlllll.,pr J' .,,,t't.l,,,,,,e '" 1" """U(l' 'IRU_ltUi J" ~"Ie., pi'" 'l! IUP. t1 t> ~\II JOJ p'lll"l'p. 1''''(1 '''' ~4.1 l ' )

II. SALAIUrs xvn WAGES

I I) AJ~qlLat~ ,~c"rd shall h,' maintained I" , h"" \h<: all~nd"nc e of w",~~" emp l ,,~ ed h~ 1M,,'mpa,,~ "hether ,," rC ~lLl ar. \cmpora~ . "r l>n C""lr""l ba, i,. a<Ihe en", ma, be . Pmper ",,,ord , hall "I",be ma"lIaincd ;11 rC'll¢cl or pa:ment m;lde Ii" ",.ni m~ "or'.. and 1'""l lIclion i",:c11l iYe< \\""Ii1,,, ," the',ha l'" of prod"Clion ho", ,, <or incent ;\6 based on ow-p"t ~" e" 10 the w",h r>. I'a~me nt of an: "'lir,mcnthenel'l' ;nduJ illtt pem i<' ll . pr,\\ iden) fLlnd . ~r~I Lli~. ,,1..1 .~e bOllefil, and an~ " e1 f, rc e ~p"n,", ,hall at",b<: Lndu,kd ;n thc labour '" racl<"~ O\erl,,'ad cost of hcndi"iar) eo,l cen le, ·'dcp,,,,mcnL Thi, will I",d" ,,,: in a m"una that labour ,"" I., "",ilable f,'r ~ ' l<: h e0<.1 ~cn\e, or dcpanmem '111 ..1 for each product\\hClher l ", enn~..J ia~ . bJ·ptodoCI <)r ,,,,, in I',",,,h... , "', Ihat differcm (0,1 Sta\emem; are ti llcd p"'T'er1~

_,n,1e",il:_

(:f rai, and rc"-""",blc all<><:31i"n ,hall he made f,.... \\ag~' paiJ 10 >ueh ,l i,\:cI lab-'ur as I""!>ccu Ul ili,,'<1 In more Iha ll Clne dCl'anme nt. OC", ,-.:n Ihc '·' '' ClUS del"'n ltl<nts ()f CO>, .cnle" a ll" Ihe hasis<.>! ,ueh ,dl<lcal iM ,hall!'C ",'"s i,I.,,\l~ r"lIc"' ed . ,\,,~ "ages paid fOf addui"n , to pla"l and m:lchi:Kr;- ,",'I h", ~~pi",-li'od assc\> shall be ;::IPil.1 1if"...! and o ~' luJed from lile co , t , I:I\emenl, or che mi,-a l fenil izor

111. r-m.rru s

( I) ."" lc'I""tc r""""is . hall I>c maintai"cd sho" inll thc qllanl it ~ and c,,,t " r \'ariou< u)Iii, i"and ' "''''''n bc>lil p"rd' a,,~1 "nd proo Llc<d a" Jct~ilcd l>e lo,,' and con~umc'J and Ulilo",d bv d lili: rcm <0"eear.,< .

(a) I',,,,;,(bi ~leam

(el Pe-m;ncra li",d W;,le'(d) Comp ressed AirIe) Ot!,cr; (to be 'I'"~itied)

(.1 I Thc re""rd s ,hall I>c m~intained >0 a' t" enab l. a, ,,, ,,menl of "On5Ul11pU"" or ut ili,at;o"of s"" ices b~ ,iiffe,o'" ,kp~rtme,",. "ost cenlCrs or """'Ufa<:lu, in\: unit>. ,\ !IOC21;01\ "r CD>! "r util i,a ' lO ll,hall he "" l~e baslS "f ""'ual ,on ' Lll1l rt ion. ,f p"",ib lc. Or "n ''Ie OO. i< of lechni<al ", t;matc , in lileabse"co " r aClUal mea;u, ~mol\l. In ,he ~asc of fi,~'<1 cha rge, 0' fuel .dju"c menl ,o"harg. for e le Clm' i l ~

dJlmed b:- the IItilil: eompall ~ . IrTc ,pc<li'e o f t h ~ ~clual power C<ln , "", ed and ir Ihe a"'''un! pa}.1\>10 U'p'," aotual COn"J111pt i"n fall. oclo" the con lr.tetua l minimllm. tile d iff~fencc bCl" ecn the eO"lra,tua lminimum and tltc a, llIal "mclInl .hal l be trealed a< li w d '" period '''''' and transferred III role"anl COS!"lalomcnt. C,,,l of "''' i, e ; ,tdudn'~ il''''or .wI ""S con,,,mcd in and ehargcab l ~ to non-m3 ", d'\cl LJr;,,~

depo,...p'etlt;, ;r , i!(1ifi, ,," '_sh" II ho ,ho" " <cpa rateIy.

\" ",": - l~ ~a,~ l1f ,c:f gener-at i,,,, q Ll"nI;l~ and rea""" for underm ililat",,, ,hall .'" , pec;fic-J and(he ",k,al1l co,l ,h,'u\J \>•. treated a, Iiwd period co<1 In "a<e of ,wural ga. ' opumte records , hall hetllaintJII'cJ f"r n ,~ of \1-3' a, d;ro,'1 makrial and use of !", in "t ility <e rv;« . or hx ' UPl' ly 10 h",,,i n ~

""i""ie, . if 3'1y' _ \ 1",« " cr. Co,t of "Iilili. , generaled r", ,ale to <"'ls ide partIC' i, arr;' cd a , r ",1 of _",Ifg..ne'ated ut Iil:,c> 1'1,,> dist r;b,,\ ,on ,0:\1 plo' ' hare of <\drn in i,t rati, e mcrhead< pi", mar~cling <l' erhea(!>

-\ de'lU3\C reo,>rds ; I"", ;n!, e~p,.-r"l i \LJ,e incurred on wnr'..,J",p lacilitic> for rcpa ir< andn,,,inlen.a ns·c of plam 3".1 mad ll".') in diffc rcnt d " I~~rtme"l, and cost cel1!~'" , ha ll hc maintJi"eJ " "f'<: rr" ane~t b.hi<_ [)cla il< of eMt detern, inal;on and the ba, i. of all ,,,,a(i<>n of "'pai" a,,,i main' cnance,'~pen,iilllre 1U diff~", nt dCP '" I11~'tI l' or manulacluring unils <>r co<l ecnlCr, ,hall "" indical .'d. ("" sl "r

•

"ork ,,1' ca pilal nalme. of nea') rcpa,r;. and "" "' baLJ I CO'I. benef'l " f " n;en i' likcl~ 10 be <pread o,cr al'Criod I",,~e, th'\I ' one financial year, <h,1I l.>e slit", ,, ,eparalely. If a ' cparate maim'nanee tea'" i," ('rk inl/. lor a f';"li, ular dcpanmcm Ille , ,,b r;e, . .... age,. eml of cO"'"ma l>k ,. 'pares and 1001< <h""I <I keharl:ed a; d i"'Cl nrcn," " I' th'1\ <lcpar1mcm, Ir Ihe mainlenane" 'cn'ico<are mili...·,j 1<" othe' produ<t,.Ihc poni'Hl \lliI; , cd for thcm <hall be "';trcgale~ and char.wd lhcrclo

v ll H IU("1 '\ T10 :\

(11 \ Lk ~ uale ,e""rd" ,11011be main\aio"d , I", ,,i,,),\ "IUCi an,1" Iher panicul." "rfL ~.d """'''III rc,p'''''1 of " h L~ h dcp.rcd ali,' n " I" be prmided. 1h" r""",d, ,hall illle,-alia mdical" Ihe ",.1 0 1' c, elliMt\ "I' a,sel- dc:ails of re, alualion of a""t, . ;I'any. the d. le nr i1> . Cllui, ilion_aOe Lt111u latc-d del',ce '"lion,the 'ak "I dcprc<;alion Md 'h c ,kprcd alion charge, for the rele"am period

1:1 Ba, i' <"1 "beh deprccial i<>I\ i< calculaleJ and allocated 10 lb,' ,"r;ou< del"m menh "Oldp""d"c\, 'hall k dearly ind'caled "ll)'e n:~,>rd,

,-,j "' hcre ,,"~II \', ILlc ,Iem< arc ,,,;\1en off lill l\ at the t1lnc "f I'"reha ,e i~ 1i"."ei,,1~"Co"nK l~e " n'e may hoe gcnnal l, ad"p,eJ for eM1 acc",,~h .

\1. l''il R\:\Cr.

•

,I>om o'ed on

K"cord >hall be maintai,1Cd 'ho" ing in, urance premium paid for Ill< ""rin,,, ".k>~he 3~ ',.:' and olher intero'l< " f the "O"'l'an~,

(2) \ k :OOd "r allO<:ating i",u.--:mce CI""1 10 the 'ariou, e",t ecmc,,; <hall be indi"at"" in Ihe"",I rNord, "",j t" I1,,,,,,d eon'i'ten tl).

\ceq"" t,· re, N d ;m;luding tcdmi('al ag,eeme nt' ' hall be mait\laitlCd in ' "'1""<:1 of fcc paid t" ilK

co llabora'or< or lcchno l".fI.:' .upplier> on r~c ulT i n),\ or n",,_reeurring. lxI,i.... parly-" i<~ The ba, i, 01"ha'cing "",h am"\i~I.:U lhe benef'ciating funn Ll laliom <halll:>c indicallXl in Ihe er,,' ,"c",d"

\ 11 1.OTlII: R OHJU I L\IlS

Adc,!Ual" record ' ' I"' .... ;ng lhe am"unl' c"", prising lh~ ", "" ufaelu" n!! o\'cl he~d "xpcn>c' mher:ha~ lh"", alr<ady rnemi""w a"d de,. il, of appon i"" "' ""1the~f 10 II", \ a, i" u, depallmc nt, or 1"<>0:;,.""".," ",,,I ""nle,>.•h. ' 1 he mainlained, I he faelOl) ll\ crh e~d' ,hall include, among. olhc, item•• ;ndi« cllab~ ur c,'" "h'ng "i\h "h~r" of labour rd~ted cost ' ''''h a, rringe benefit"- other labour ~nd statf \\.11"' 0e~f>C n ses. ~n<! c,rabli,hmcnt ex,,,,,n,,,,, of ",,"" lL fac l LJ ''''~ of il"mS refer red 10 in I"' r~g",p l1 2. Ir pm.1u"l."Iher tha" ehe"",,,.1 fcnihle" :"cI"din~ .alable b, ·pr"d"e" arc ,,1 <0 bei,,;; produced i" thc fael"')."deq""le ba,e~ .h,' " ':1 ~c d.."z'<'pd ~~ apl"'nioo lhe ,,,,.,he, d cost equil,b ly

IX. QI-' \ Ll TY , OY lIH lI , EX I'E"SE~

In caw ce"o ", ,'h<;mi,al f,," iIi' cT> require po:r iodi" check> b~ the 'Ill' ]it} "" !!Iml del'"nment. '" I"the ch"", ;,'al 'lrcogtl1 « ,,,ronni,,),\ 10 'ta"d "rJ., !aid dO'''l by lhe Go,em",""t or ind" .I') _ "e"e'",,~

,<"""rd. ,hftll be mainla;n ed ", \ll ;u Ihe nl'en,c> inemred on Ihe <l 1", lily eonl,ol depa rt""'''l arc ,ollede,Jand d'",gcd to ,he d;fr,,,'r.: r' r" du"t' \deq"al" 'ecord;, shall be mai"'a ined or rejeded fen ih, crs.imenn ediaf) proo""t> and by_pn-,d"" I", Fxpen"" iU'; LJ rr"d on qualily' c" "lml buill_in "ithin a certainJcp~nmem 'hall be charj:ed A, direct d~panmenlal n rcnse

s

:\ . JOI:"T l ' IUlI)l:CfS

WheT mQr~ than 01'" JIf\>dUC! arises. from I process. the ~C'll $hall be alocatoo ro the dille",nl·,,,,duel' <' n .""me re a, n"a~k ba'" "h"'h 'hall be Coo, t.Ienlly ;ll'plied during n-c reto" "'I p",- iOO n,..",,,i, on II hi. h ,,,, h join! C"'IS are allo,:nled h, tho diff"r"Llt [lIwl,,"t, ari;;inll tinm a l'rnce" ,h.n Ix';~ dk a' cd in If C","I ree" rd,.

I he c\J' h ilK ,m~d ," 'Ill ;Iltcrlll<diar: I"'''''''' II iII bo tmn;f,·rr..<! pro[x",i" ,,,,,,· ,n ,Ill' ' I,,,t";')rall;f"rr..d 10111.. IWV ,,"';';e;,

XII. WORK-I:\.I'RO( [SS ,\:" 11 H 'i ISli U I ( ,OI IIlS I ' Y L NTtHlI I S

I h" In"th"d of , 'tlLaliun"f ll",~- i n -~r,,,e,, and Ihe flni, he<1 8"",1, im'cl1 l<>ri~ , ' hall b~ i'Hk al"d" Ihe ""'I rc,-,,", ,d, sn 10' In reveal Ih< "''-'I ~kll1 e " I' " hich ha'" been laKcn i"lo ace"",,. in ,,,d,

••'mpUlall,' '' , 'fh" ,,0,1 ek,.,cn:> ,hall be ",Imed 10 th. ilCmS ",rem,llo in III.. rde,alll ("o;;t ~t;lt"Il1"nl

I he e" ' 1i,,!'- ,n 'clh,><! ",h' pld ' ha!I he cm , i, teml) f" lI~w ed. 'I ' ."lEnent ~f ,l irrc~n" e , . Ir ;lll' . ,," ph, 'ieal',e":'cal i"" p" ' l' .... k.- WIth o.)ok bala<l""', 'hall . 1", be ;ndi~ated in Ire c," 1,-""",,1,.

XIII . I'.-\("KI:\( ;

\de'pate rec<>n1, ,1,,,11 be m"inta;ned ,how"g all tl'" ,-"""ir l>. i,,,,e, and hal"ncc, both inLllIa nl;:ic, and C,1>I of ,a ri~u s pad,ing lnaleri" I, ' ''cll a' ,Ir;p, . "'npoutes, "'ial" boltle" carll"'. bow , ."'ds. ""d lil,,'"I''''' f", c~:'- :Or." "'r"r"".I~ \d"'l.<al. ' ""ord • .t..11 at.o be "",in\dillc<l for "a~e, and>ther ~'PC",se, incur,,'" in rcSpo.-'::1 nf d iffe,-~m ,i fe "r packs ad~plcd for """"etin!! or forll ,,,!ali,,,,,'Cj'~ rm" I" The d<:tail, or "ari",,, p;lckin~ m"Ic, ial, ."wall) u",d ami ,pu;led , hall 1", mairta,n"d i'l,<:,t><:el ",f ca,h f",mulati",,- \\ here an~ rorm"lalinn i! repacked due 10 detcctive packing. dctai , nf ,,,,'II'"p"ckirlg for ~'I"h pack ,h"l1l", delermi""d if ,,· pad, i"!.! , 0' 1 i, , ignilic""l. In c",e an} packing ", ateri, l,~re ~,,'d ~ ,,; ed bv Ihe ccmp'n), 1'''' [''-'' "~0!'<1 .h"''' n~ lho ~o.l and m,tj\~ f""tu,~ "f >ud, it"mt ~h,,11 bellainUlI""d. Ie u"" of npun p""kin\,- 'eparale re"ord, and addl[i"nal """ki"g.co,t <Judi be "'ail~aiox-<l,

:\1\' . r-oxr ST ,>;I t:\IE:" 'IS

Delailcd ,m!! "de,!""t" "o>! , Iate"'""I, ' h"11 ~c p"l'" ,cd fL H ""cll type of lerll liL<:r prcd",I,r1lem,,,,lian prn~u~l a~d b:'-p",JlI~I '~I'H'lc1y, a, ""l,i red "ide. S, l~'<1uk Ill.

X\' , AlJ .JlSD· l f!'i T m' COST VARIA.'SCf

III \\'h"n lite ,...,,"pa ,, ~' "'4in '~1I" "',,, 1~~orJ, "''' al:'" b"' i, "Ihe' til"" acIu"l. ,"ch a'""n,brJ ~osl i l111. Ihe ,~" o rd; ~h,, 1 1 indic" uc the pr<><:"cure [ollo" cu by Ih" comp.ny ;11 "'Ork i~ mOl 110"'~1U..1 C",1 0" prod""l under '"ell .y~t<m. 1'h" method f"lIo" ed 10. adj".[ing Ihe ,{l>! 'ariar.c~' III,Ic:e':"" ill ;r.g Ihe (lo w,,1 ,,(\Sl of the pm,h,el , h,l l hoc ;ndi,alcd c1earh in Ihe cost records. t he ""'I 'll ri"n"",.hall be ,holl n " ~a i 'h I Ihe rol,,' a-u head.. til Ihe "" peCI ,,~ eml Slale11enl.

(:) Th ~ rc~"'''' ro' \ "r i"" ~,,, in re' p""t of "' "t<:r ial' ,I",II "" cr-31ia be r",nished "'1'3'''1.:1\"or ,,,oj'"~ 'lLal",iak Va, i"r". 811~ly~i, ,ball hoc ma,1e qua""rly durinS th" 1""'3n" ia l year and a<o al th"e~'·e"d. Th~ I'<;a""o, ~ or variances ,hall be s,wn in the cost record,

6

•

·\dm;n j<; t r~t ;' ~ n pcn"" l11 a, k ,pht u~ on lh~ ba,i< of l~tJI fa~\,,,;; "",t of e,,~h >alahle 1,,"J uCla",l/ol cp" "r i ",~"n<:d f~n i l i ;"" if ",Id h) tbe comp"t1 ) or an~ t'1 h~, ha, i, ~dopled il) thc ((l"'l'an~ .

'>uch b",;, , hall be ~: e ...rly indicalcd III the c",t re~(}fd,

X\lI. "'IC U .I'\(; ,-\'\ Il msuum TIO'\ f:XPr.:"SL'"

( I ) Sc i i lll~ and di,tr ibuli<>n np~n,c' in re'p~et of fcrtili7er shall be "ppO<1 i"ned I" <l in·eremTi nal ;,r<>d UC\' " ~d ",lab', t-;. ·~ro J ,,,·1, and Imcr",cd i ill~ .prodUC1~ UI1 the ba,i, of sa l<:> ,evenue or ""ne,,,her <qUllabk 00," "Illeh shall he inJi~atC<l in lhe 00"1 reomd, lind , nail he r"I\,mC<l ,,,,,,, iSleml).

\2) If ,mP<" lcd !i;n Hi,cr, ore al«., w lJ ny the '"", pany. ,.;Iling expe l" e, ,hall be all""at~xl

"" lh,' 1>"", of , a le, fC·'"nU~ or "n) mh~r a~,<:~plabk b",,, lhat lhc e""' pany may adnr l llo"e,e•. theba. i, nf " II<'C'~;on , k ' i t -c c 'n,;, ~~nll) rollo" <:<1.

\ \1 11. xrt.r.tx c ,\ vnmsuaut-nox [ XI' 1" ' S[S

(I ) -\ e"mn' On ~0.1 "lhe ""q of opcMing. a C<' lllmnn facility, ~~ I ,,'i l~ <)< ",,,ice or Ihal ,~

,I, . ,~d ~ I"" o r m.' re e"'1 obi,·d ' .

Ie) Th~ ",'n,," <.>n co<1 i, ~~ner.1I'~ lo"c. lh,,,, lhe 'land-a.l<, ne i"di, 'idual eo,t 10 e""b coMobi", I. had til,· r",ility n<>1,h~ red

( 3) ("(' 1111ll 0'l ~o,t i. \he. eh,,.., allocJted 10 ~"cb (0'1 objoc\ b.1>e<! on the ind i\ idual c[><.l' "rlhe cost object

•

X I\: . ST,·\T!"'TIC,\L vr.vr Dl t:~TS "' '' II OTHUt RF.COIUlS

C""'I' ;'n,o, .,,, , d~\Oh'p .1pp",~,i " l e "an~a"!< t\1r ,,, e a, a basis l<l e>aluale perrornw""c ,.-\lleMatd) f" n MI> ;",xedur~' ~dorld b) the indmlry in gene,a l ,hQuld l>c mainta i11 cd,

xx. R, ECO"iC"l UAr to x OF CO ST A"In " .\'\C1AI. A (" (" OI "' '1S

(1 ) Th" c ~,~ rcc" ,d, ,hall lJ,.. pc:i"d i ~HI I ; .cwm~ilcd lI'ith the financ ial . ",,~unl' I" en" ,,',·","uru<:) if imegmwJ .ecmmt, ~.c r.o: mainl:lincd, Varial;(lIl, . if a t1) . , hall be dearl) ",J icalC<l.llde" ,'Rined,

( =) The r"con~i liati"n ,h , n be d<>ne in " ",b a ",anne. lh. t lbe rr"li l.b ilil , orlhe dinc,entprodLLct>. ~, p<:r ~<,,' '1~lc111e"". is eo"cclly judg<-,j and .econcilC<l "ilh the ,,' (,.11 l'",f'l< or lhe CO"'P''''~

lro", a ll "f 'I> "oli>ili<;,

(.1)

e,'mr ,icd\ d~'I " ~te Cl"1 re~Nd , shall be mai"ta ined in a man"e. tuat lhe ""I ' !atom"n:, call t><

7

SCII Ell liLE II

GE~ E H.A L l:\fOR:\IA TlO'\"

'arne 01 the Compan~_

() te of Ik=J \keli n~ .. here COl>! " t3lem.:n L<".m: appfU,,:d

•

10 Per Da~

M.Tonno:sPC I ,".:;U

\1 T01Ul<;~

•

lnstallcd Capac.tv

Ca;'3c;l~ l ::. '/..d

'\0. ofD,l~" in the ~~ar

II \ hin produch:nC""i~'JI~ Ca~ "'1~

I n ~lallcd Capacity

Capadl~ l "lili.,..'d

" ." Da~~ in.~ ~e3r

, .....,c 0 th", Process Invento r Paten{ holder,

•

~("I IEl>r LE III

.1"'k'\I"-" I[..:e para 1(1)]

I .... ' i:R\lnH .\J t\ I'IH l m c-r r -ovr ~ IATF\Il:"'" nm Til E \ L\R ...... !lUI

1"'C'<1t><O,h~ 1',('<1".,'arne

~:;;~Q~L" \ , rlT \T I \l I l\ 1 \ _Till' n .A}!; 1." ' 1 \ I \!l;

_11,,"n~ ..J!!!''''''I

,;

Of>c" ~ '>h,,;kPT >du.:~ Our II; :hc P..,.:od1,all'Icm.'<.I ,....., ...'<.1 from (l(I\a" PIa t " \11'1'1"..,l . ~ 'i:,,,~

I ~'I" 1', 'l!\I<' T C'fTC'd I" lbe ~"I Proc~ ,

",,'n to I \It'i,-pl RRJ"1.' I \11,_

1 0 1 .\ l ""'1 nR' ,1'>1R, 10"'1R., . rill' In( , \I oil

IllTU. " rrR( 1.... . ,1. fl It>

+--'~ •\la:<'..

•

•

<

"

,"'"'" ... Ito ~

~ L_~ T "'......-,Il.-...t \la,",......"."•<,,>:, \\a, U~

Il~~,. ~"'- ........R • _ <'~,,,,

O_'>cr ()o rfI>noj,

l""" _t<>F"", Ill" ....... " 1«.1a1i<;",n~

l T1UTlF!> \ lI o<.n~l)

J'<_o"k...h) ,,,,,.,,,"'.4)" •. Cub,; 'I.,.) ('"",,,or,;"L~....." ((ub" \ktn) l.""",,,,,,·q,11cm...",1.l't<!\\ ...... O '.. I'\"""~...... lOl\ l ll K' ... Ill) ( '0"1Plan, I ·,.on<OfI"S llq>oortmc-n, C...lP "'" I""h"",.1 ~"mentCr.... \liUlOl••m.'" lkp.-lrntnl ('ct,1 t""","· <" .~

r..n, • ,n I,om 1'",,,,,,,, I'T"""P,,,,hU<;d (!'Om ~ '" '"Wli""

I., r,a""" 'n"",.,&1<1. R).p'O<!U"1Cloo:l ¥ ',."k I

( "" of In''''"",J .r~ 1',,,,1""1 I"""r<N~ ,,, " "x: I""""""c;:;-;; -LSc~'"n~ ':.'"m,,~', 1\,111 be P'''P"",<l for """h i"tcrn",<l ial) prodOCI.

,

-,

.-

.,,

>.;, .,' •

Annexlln' ]

•1I \\'1 vr I R

I ' "~"<>L

II \ ) I

Cm t of I"lon or d ia~ I' rOO\l~ t l'r"n,terrc' d'"i,C.- - co-r I'\ ('l IlIU'IlIl' nn, [) rl''''!l T~1F,''-T

!low \btor,,,,,

\,ll " TlBT)"-rm~ ' T AR

lon 0'O! ) ~

I

,\ lAI" PROllllCT ST,\TDIEY" SHO W l" C COST TO ;l.l.-\hT .-\"'-1) SELL FO R 'nn:n :.\R ["nEn _

\Iain I'rOO ,," ,'a"," ,.

I )

",.

s•to"

,'ak abl:

,(i;l(lll Jr "eo' ica'>_R_,,;-;C"",'~"h ";'C":Ilai me''' '''cc "nOT.'R<pai" "oJ \1ai",.,,,,,,,·~al~rie,_ WaF ' ~ () , j" r Ren'[1'Ren,. Kalo> & T.,..

R~:.I"""

D:preei" " ,"Other (hTrhn d.P.~ ", ent, ,~ I-'urci~n hgi"",e" <t T" hn;c;a" ,l T1Ll l'l FS ALLO C I TEllr"".,.(~"hl (An""",,,·..!)\Leom (Cu\>,c \ I. l. n IAt'l''''u,,-, )Con'prc<,cd ,~j, (Cubi,- \I 't"," (Ann.\urt-6)l): ",;rleral:,o. l\'a,c' (:"i",', (A"".XLL'O· 7)I I.LOcnHl (0'1

_0: F n~:n:",t'~' o.:p'''m<1' ("""Plar.' T«hr ical lk ra rt",enl (;""PaClO':' '1.1a~,·rr<'n L DorM ",.TIl e""

23 I rac~i"~. H~n;ll n~ "~~ Swm. o('"":-1 Total C" ,ofPrOC,,",,"

\(Id: <:~""f~ni~~",,>r\;

10 I \-,,,1<,: ofCl,,",,ng ~IO"~

TOlal ",' " i l"~ l e for \ ;,10Ado:: ,Ijrr'r,i" r~'"" ['1'<"'"'

firal'<ial f,p,", ",

~.i 1I:~ & D "ibuLL'''' hP<""O';;::;;:;I ,,'~ I Co<, to 'la~r.t sen

~~P"-'-"-"-'-'tah:r"orn 'ha,i,'~"-p~rc par~d for cadI m"in P'OOLl<;1 and:-ur1h~r l"': l!\ n " -_ ~

Annexur.' J

•!'.\[Hln L\R~,

-

,

•

,

,

lh " \ ' .'m31, PeTch., ..(uiii)(1111I oal!lnf 6:. ~"c~ io~ of F'"ih'''''\ ' ~ "ne na""" ~\.".c, .n,~ ~r llrt'

,01.,;" , \\ ,&. Ik n, I~ [>

tkO''' i'' '''''.'. : C" "'l. _~-,

'J r.ru.n II>. \l. t o(..-n r n10 Po,,", (~",hj

O ' hor ~pecif~

"'. :"0,

ll \l-'.OC \ n :ll r osrI" Pl' n' Fnl\IIW<T iog [)<p0l'1 moIl1 C""

1'3""" ~lo"'~ c",e"t ()~ ~ ""m ",,' ("""u1·\ IT",.Il '". ,

I,\ d,J; R. : ',")' Sliding C"",' b

"

" " I,'• . 0" 1,\ ' 0 HE CO \ 1PI. F] t V If TO'( \I. I'\("I<;'''l ;, !l\\ULlW;\\U STOK\GF. ("0"" HI~'

()R ~ lORE OF 1I1[ TOT :\ l. rocr O t ~ROllln l( '" \' E" TlO\ ru ,\ T"\" [ 'I; IR 1:· 2 'E fl. 1~ I .",,0. n

A">I<:,wrt'- ../

•

•r",,' I'" l n" .r r. " ",

( ,.....1t~ .~ "" , , ~..«l

(""Onl~ l' '''' ;'' ; '~K, 'I K.

0·""';"(\ ~''' l,f .~~

,1" fud'), S.'u" I ( ;a'

01 ():c..,. Sl,:".>- 'p"c ;f) i

rUn,u",,"'< ,",,"(lIh" [l",,, ( ' I",~"

' al.,,~ \I~~c, & II< ,<Ii,>Fop.",,- \1. ',,·," 0",0, hc,", ,rt1<.>d•

D"r"'''''''''', TILl l a :s ~ H OC H 1:11

~""",.,'LUI(' ~ 1'1' [1 (,OS'IP',,, : l , h'.<·:"~[),"",,,,,<,,,C' ~!I

F'" t"'1 \ I '" I<jl<c""" Ikp.l~ ,"cot U", b b I

ST.\TF'l E:\T SIlOWI:\( ; TI lE CO,,! OF 1'0\\ I:: R GE,\; Flun :Ulrt'lKIl ASFIl &CO,\;Sl \IEI) FOR r ut YEAR r xm:n

~' "..,.,,"'f:['~"""~-

",

",•

,< ,

",1, ,I c j (:If"") ~"t>

,:'"" ,'fln,t (.-"0-.'« "Ol,II S~ ~,t nil' I'""'h , ,.,,j ,~" 'I ~ : TO'.o I:' "

15 , ~, I fl ,,",,;rnl"""" in 1'""" II"",," "r~ "~,, "'",.>'~' '''' 'n,t (,~<"~,~ "

"1 r<r"'''''\i< "f l"",_", '" ''',,' ;>'J",' r ~,,,,,,,:;;>j on. PUrc"",",1 j, . 100'.~.Ji!..5" g~"!!Jl<"<"",<t,n i", ,, I!c, ' ''l''!' ,. 2- I • 1"0 -'", -,---

II " . I To'" (' 0. (por ( 'orr.n(un;' , ..,I ll... . II,.i ' ,

n

"

•

I :". I I~:;;; , I I, ,\ S PEl(~1 '~f,.,'"«;;;" "O,,;,"- _===-=::±~===-t -====

S ote," , rl S" TO IIF CO " rl .r 'l ll If I' O \ \ [ R (;E'\ I.R\H LJ,,'I'\ II.C ·H ~"F.U $. COS" . ' It [I .-\Il E

'0'/. O R ' IORI: Of II IIi TO! ' L ( 'OST OF lHU T l ES .b CO " p. ' "n" g.,,,,...,,"" . ho uld "" "-or!<ed OLl1 with ,d.,..... t '" no' q "",,' i l~ of 1'0\\0' ","il,bi< . ncr

Jcd",: i ,,~ """ ,um,,1;"" ;n the 1''''' '' ~ouse lUI" " ,her 1o, ,,,,, .... hcn mo'ors .ro n,,' ,",Jailed ,on,u rnp,;"" b} d, ff~r<:nt cos. t c"fIt<r< ,b. 11 be , ,,...,,J "n • ,••" ,n. hl.

h.." aed ~l'rlieJ con';'IO"ll},<t '\ c" ",~ I i"" i,," if ~"Y b) ..k ~r l"""<' I" (\ul, id. ~g~ci", " lOll 1'< ,h"wn ><P\l'.lol) ,gait'" ;I.m ",,0

I '(ii •.

•l ------n:-RRI \+IU \lll1-'- -

~l \R I \[\R _

l-"",,\ R I n 'l L \R~

,~nnexllr~ -j

STA lE\IF. '\T SIIO" I,\( ; T HE COST OF "'TE.-\:\ l It ..... I'~ED .-\ '\0 CO:" S! :\IEIlFOR T il E YEAR E:"I)F.D

~::;;:;;

(: ) vo ",.;),,,, \\ ," ,,,'~

'," \ In""lIc~ C~p~, i;; rS',c"m ,n ,u~:c m.,~rl\

(jl l ' , i li,d ." p.t" '~ ':,0" 111 ",,,cb:c m<:en l,~\ P<,«n"~<,,f[~p><i') ,til: ,,"; ()n

~ :' ,!XI

\ ,\l"---

=L:-

or cvmv( ' IT,

--"

0'LY TO IH, CO ' ll' LEH [) II COST 01' s TL n l R\ISrl) ..... ...-D CO :"S l ' \ IED h In".OR 'IOII F O f I II£. TOT.-\L COY1 OF I' Tt LlTl FS,I' :,J"',' '",'riled Ie ."~ ,~h", " " " i'k ? rt} , "",e,,,,,y " .dit' for 1'<'0'('7) "h.l l b< g;\ "" apin l ~ No I~Ilo,,', ad<>p1e~ f,,' " I,," i,," "r>I"dm at dilf,,'"n l pr."u"", , nould . 1", be indicated i., Ih. re<"..d\ h'''''',,", 10> ."~ , ~"th ," q"."'il~ .lId ",," 'h ,11 1><' ,1>0,," in a ,c ~" '"tc '1:1~"",nt i"J i ,"l i., ~ t~~=f,

,

"

",'

1\0'....1" "'1" ",,' m '-";'": (oa'

, l"h'" 'w0< 1"" ' ""{,,">U....ol' ",,'",""'-"" \\,,'<> i-: R<lC~'

iter'" ~ \I.>.om"".""O,h"O,,,L><N<, i" ,i,mllll l:'tFS,\llU( \TED

~ I'""., I.~', I I","',\ LI.O(' \ T l ll l 'O ST

~ PI"" ['" ""n, ':k~.~n" ,,' L""l~ l," r" ",,,,, \' " o~c ")'0 "-,,, r',, H

I' \Kl l l t L \R"

B

=-=±=t--=t- --]-1\",,-,-,--\~P-'-'-'-'I D1-','-\Il()~\""""C';,j,~-_.::===-!J-= _-=:±~-

"-,,, .. : !C

,.

"I

.' l nnex!ln' ·6

AIR IO\l I' IU :",""I:\ C ,,\ :\ 1) AI'I'OKTlO:\\IE:\ T F.XI'E:\Sf:S rOK TH~~ \[AR F. \ IWD

""'-"'c>,II "".~ ,< """'=f",1 ,."'" A' '0"'"" P"~"'l",~ .."r"""""''" I D<r"' ''''''·• (m" ,n,«hcads

,11 of' " 1Ell lU> '' f ",.." nl" ' '' ''''' 11",...."".... r ~1'. -l ',, " I ! ..'1,,<> '~","",""" D,'O>" """,, l '" .

K,,,, " .I. 'I••",.."",

-"-T...1('." of l ' '''1",,«<1 , ',

m :I' \RT :\I £ ;,\T~

It',Iii)( ii i)I i, )r" )1\ i)(, i i)(, ,, i)

( i \ J I1 \~-'T-.-\ L_A_S PF I{_'_H_'_'_'_ ,\ nn\ f~-;A"'~' """'"~,,~_"_=:i====-e.====:-i=_~_

0 ' 1. \ TQ IIf n n ll'U1 U) IF COST O F .\ l R CO:\ll' l{ESSI:\ G l ~ [0 % IlR ' IORI (J ~

Tt lETOI~ L ('() ~T O~ IITtLlTI F....\~c" ""' 1 :", I" a~~ both in '1". nt ,! ~ ~nd ",,, I ,"o il be <ho"o in "'paral" "Oleo,,,,n,

the'",,:,

•

•

•I nil \ .,un«

,

=:~--=t ~==":,:,:,,~:===-,,:l. " ,, , ", -J

(,1 ' ' ' 111\ r IM ( l ~ ~ . " ,t>~ II'"I'l l l HR N, M'

11. ,,~

-'---- • < • -----+--- -, .----, ~ " P\RTI<I I 'II'

,I, "" "fllJ"lh rl.J<21 I" l311.J COP"';!: (Lu~",,)

(3) ,~ ", "al l'roJ u" iof1 l uuh;<J <ora. it,.I'J I Pc" <· 'Jg~ <>r C"r'''' :t )- ull ,sa:i""

3'2'\00

\\ '" (hccli,.,h

'"I ii( j - I

2 lun""",.~I, ".",_,) ' .,1 ,,,' ,,", .....t'" '" B ," , ~ , '

~ Rep",,, ",.,I \,'" ·...w~,'

• (el,,, O' C'"''''~

;Xp:<" . , j""U 11.1 I II:S \U.OC~TI;I}

P,,'.o, ."h) I~'I

~' ''''' ,('", '<\1,"«" '" HI',I " '" ' Lito".'\l .l()(, \ I I Il COHPI.,,' fo "<OTi, ., Doo"," n: CP"'I~ -I ,Fact"ry- \ \IlI' '''''''''' , ll,-r Mm,,", l'<'",~ ~)

$ To"" I. ' I'''''' ''i -,. r""

0. 0'1-' 1'0 til: CO~ll' LrrFl) If ( 'OSl O F AIR (O\Il'IU:SSI",G I" 111':;' 011. 'iORI: l il A"IIlE T(1l ,\!_em I O F ITlLI I'll:S.

h ·\~nort" . l I"" .rar.)-. Mth in uu.n",y and 0,,'1 "tall ". sho,, " in " 'opa ,OI" .:al~mcnt ;nd" . ,ing r=n,"'""',,' Q'I.._ _ -':Ili r Ah m.'d Sh ah "cn

I ,Ie " \10 \ I i , : .'" ~ o [)." I '01 I

ECURITIES AND EXCHANGE COMMISSION OF PAKISTANNOTIFICATION

Islamabad, the December 21, 2012

S In exercise of powers conferred by clause (e) of sub-section (1) ofsection 30 and clause (o) of sub section (4) of section 20 of the Securities and ExchangeCommis •ion of Pakistan Act, 1997 (XLII of 1997), the Securities and Exchange Commissionof Pakist n is pleased to make the following Order, namely:-

SYNT ETIC AND RAYON COMPANIES (COST ACCOUNTING RECORDS) ORDER2012.

1. `port title, extent and commencement- (1) This Order shall be called the Syntheticand Rayon Companies (Cost Accounting Records) Order, 2012.

( ) It shall come into force with effect from July 1, 2013.

( ) This Order shall apply to every company engaged in production, processingand man facturing of following products:-

(a) Synthetic fibre and yarn in all forms including but not limited to ;Polyester Fibre.Polyester Filament Yarn.

iii. Polyester chips(b) Rayon(c) Viscose tyre yarn/cord.

aintenance of Records:-(l) Every company to which this order applies shall, inf each financial year commencing on or after the commencement of this Order, keepunting records, containing, inter alia, the particulars referred in Schedules I, II andxure A to K) annexed to this Order.

2.respectcost aceIII (Ann

( ) Where a company is manufacturing any other product in addition to thosereferred to in sub paragraph (3) of paragraph 1, the particulars relating to utilization ofmaterial •, labour and other items of cost in so far as they are applicable to such other productshall not be included in the cost of products referred in that product.

( ) The cost accounting records referred to in sub-paragraph (I) shall be kept insuch a ay as to make it possible to calculate from the particulars entered therein the totaland unit wise cost of production and cost of sales of each of the products referred toparagrap 1 during a financial year.

( ) It shall be the duty of every person referred to in sub-section (7) of Section230 of ompanies Ordinance, 1984 (XLVII of 1984) to comply with the provisions of sub-paragrap s (1) and (3) of this Order.

nalty. If a company contravenes the provisions of rule 2, the company andincluding chief executive and chief accountant who is in default including theeferred in sub-rule (4), shall be punishable under sub-section (7) of section 230 ofes Ordinance, 1984 (XLVII of i 984).

3.directorspersonsCompan

SCHEDULE I(See Paragraph 2)

I. Materials:

Raw Material. —

Proper records shall be maintained showing separately the quantityand cost of each raw material used for manufacture of synthetic fibreand yarn in all forins.

Proper records shall be maintained showing separately the quantityand cost of Rayon Grade Pulp. Caustic Soda and other materials usedin the manufacture of Tyre Yarn. Where Rayon Grade Pulp isobtained from different sources, the records shall be maintained insuch a manner that the cost of Rayon Grade Pulp obtained fromimported and indigenous sources are available. If Rayon Grade Pulp ismanufactured by the company, detailed records indicating the breakupof raw materials consumed for its production and conversion costshall be maintained in such details as to enable ascertainment of thecost of the Rayon Grade Pulp including charges incurred upto therayon factory.

The records shall also indicate the proportion of different kinds ofpulp used from different sources for the manufacture of the differentrayon'products.

Proper records shall also be maintained showing the quantity and costof packing and other items received along with different rawmaterials, which are either re-used or sold. Credits for such items shallbe afforded to the respective raw materials as far as possible.Otherwise the credits should be allocated to different products on anequitable basis.

(e) Proper records shall be maintained to arrive at the cost of RayonGrade Pulp purchased by the company inclusive of all direct chargessuch as freight, insurance, octroi, etc., incurred unto works. Therecords shall show the receipts, issues and balances both in quantityand cost of Rayon Grade Pulp separately by sources of purchase andfor different qualities.

Similar records as detailed in pans (i) to (iv) above shall bemaintained in respect of cotton linters of different grades used in themanufacture of acetate yarn/fibre. These records shall show thereceipts, issues and balances both in quantity and cost of cotton lintersof different grades like second cut linters, defibrated linters and millrun linters.

Process Materials. - Proper records shall be maintained to show the receipts,issues an' balance both in quantities and cost of each item of process materials used for themanufact e of product mentioned in paragraph (1) of the Order. In case of certain chemicalsused as •atalysts having longer life of more than a year, the costs of such items should bedeferred on appropriate basis. The costs shall include all direct charges upto and includingthe wor wherever specially incurred. The issues shall be properly identified with thedepartme ts, cost centers and products manufactured. Where these process materials areproduced by the company, separate records showing the cost of manufacture of each suchmaterials indicating the breakup of raw materials consumed for their production andconversion cost shall be maintained in such details as may enable the company to determinethe cost of such process materials produced. In case caustic soda is manufactured proper

(0

records of he same shall be maintained. Where any of the plants for process chemicals areused for rocessing such chemicals on behalf of outsiders, proper records about thequantities o processed, the details of the costs incurred therefore and the amounts recoveredas convers on charges shall also be maintained.

Consumable Stores, Small Tools, Machinery Spares, etc. —

Proper records shall be maintained to show the receipts, issues andbalances both in quantities and cost of each item of consumablestores, small tools and machinery spares. The costs shown shallinclude all direct charges unto works, wherever specifically incurred.

In the case of consumable stores and small tools, the cost of which areinsignificant, the company may, if it so desires, maintain such recordsfor the main groups of such items,

(c) The cost of consumable stores, small stools and machinery spares,issued shall be charged to the relevant heads of account such asproduction, repairs to plant and machinery, repairs to buildings.Materials consumed on capital works such as addition to buildings,plant and machinery and other assets shall be shown under therelevant capital leads.

Wastages, Spoilages, Rejections, Losses, etc. of Materials. –

Proper records shall be maintained showing the quantity and cost ofwastages, spoilages, rejections and losses of raw materials, processmaterials, consumable stores, small tools and machinery spares,whether in transit; storage, manufacture of for any other reasons.Threshold for recording abnormal losses is 5% and above.

The total waste in terms of cellulosic content of pulp made up fromwastes in different department like viscose, spinning, bleaching,coning and reeling shall also be recorded separately to enable controlof such losses and identifying the realization therefore. Separaterecords of different types of wastes like clean, oily and other wastefibres obtained in the process of conversion of viscose staple into topseither through own unit or through outside combing units shall also bekept indicating the respective quantities and sales realization. Themethod followed for adjusting the above losses as well as the incomederived from the disposal of rejected and waste materials includingscrap, if any, shall be indicated in the cost records.

II. Salaries and Wages:

( ) Proper records shall be maintained to show the attendance and earnings of allemploye s and the departments or units or cost centers and the work on which they areemploye. The records shall also indicate separately: -

Overtime wages earned.Piece-rate wages earned.Incentive wages earned, either individually or collectively as productionbonus or under any other scheme based on output.Earnings of casual labour.

(P) Any wages and salaries allocable to capital works such as addition or heavyrepair rks to plant and machinery, buildings or other fixed assets shall be accounted forunder re evant capital heads.

(3)

III. Service Department Expenses:

D tailed records shall be maintained to indicate expenses incurred for each serviceDepartme t or cost center like water supply, laboratory, air-conditioning, welfare etc. Theseexpenses all be apportioned to other service and production departments on an equitablebasis and pplied consistently.

IV. Utilities:

Water. Proper records showing the quantity and cost of water treatedfor the manufacture of synthetic & rayon in different departments/cost centers etc.aintained in such details as may enable the company to furnish the necessaryin Annexure Ito this Schedule. The cost of water allocated shall be on reasonablepplied consistently.

Steam. Where steam is raised by the company proper records showing thed cost of steam raised and consumed for the production of Rayon in different

is or cost centers shall be maintained in such detail as may enable the company tonecessary particulars in Annexure (ii) to this Schedule. Adequate records shall beto show the quantity and cost of steam purchased, if any. The cost of the steamby the Rayon factory and other units of the company shall be calculated onbasis and applied consistently.

Power and Gas

When power is generated by the company, proper records showing thequantity and cost of power generated and consumed for the productionof product mentioned at Sub Paragraph (3) of paragraph I of theOrder in different departments or cost centers as the case may be shallbe maintained in such details as may enable the company to furnishthe necessary particulars in Annexure E to this Schedule. Adequaterecords shall also be maintained to show the quantity and cost ofpower purchased.

Where power is generated and supplied by another unit of thecompany to the factory, adequate records shall be maintained to assessthe quantity and cost of power so supplied. The rate charged by thatunit shall be on a reasonable basis. Necessary records shall also bemaintained to show the consumption of power by various departmentsor cost centers, as the case may be . The cost of power allocated toproduction shall be on a reasonable basis and applied consistently.

V. Workshop Repairs and Maintenance:

r records showing the expenditure incurred by the workshop under different basisirs and maintenance by the various departments and cost centers shall be

The records shall also indicate the basis of charging the workshop expenses toartments, cost centers and units. Expenditure on major works from which benefit is

e for more than one financial year shall be shown separately in the cost recordsmethod of its accounting in determining the cost of Rayon manufactured during

period. Expenditure incurred on works of capital nature shall be capitalized. Theobs shall include the expenditure on material, labour and a share of the overheads.'ed out by the workshop of any other unit of the company to the Rayon Factory/ created on a reasonable basis and applied consistently.

consumeshall beparticularbasis and

(2quantitydepartmefurnish thmaintainconsumereasonabl

(3

Propand on repmaintained.different delikely to accindicating tthe relevantcost of suchThe jobs caand vice ver

(2)indicated in

comprisingadministratimanufacturindicate theexpenses o

records. Thto the prodof the overabove cateexpenses sand thereabe allocate'

• VI. Depreciation:

Adequate records shall be maintained showing values and other particulars ofthe fixed assets in respect of which depreciation is to be provided. The records shall inter aliaindicate the cost of each item of asset, the date of its acquisition and the rate of depreciation.

Basis on which depreciation is calculated and allocated to the variousdepartments rind products shall be clearly indicated in the records.

(3) Amount of depreciation chargeable to the different departments, manufacturingunits or cost 'centers, for the financial year shall be in accordance with the provisions of Clause`F' of Part II of the Fourth Schedule of the Companies Ordinance, 1984 and shall relate to theplant and machinery and other fixed assets utilized in such departments or units or cost centers.The method once adopted shall be applied consistently.

VII. Insurance:

(1) Records shall be maintained showing the Insurance premium paid for variousrisks covered on the assets and other Interests of the Company.

Method of allocating insurance cost to the various cost centers shall behe cost records and followed consistently.

VIII. Other Overheads:

Proper records shall be maintained showing the various items of expenses• verheads. These expenses shall be analyzed, classified and grouped in the works,• n and selling and distribution overheads. Where the company is engaged in the

of any other products in addition to rayon products, the records shall clearlybasis followed for apportionment of the common overheads including head-officethe company to different rayon activities and other activities.

Overheads allocable to capital works shall be indicated separately in the costmethods followed for the levy and absorption of the above categories of overheads

ct,s shall be indicated in the cost records. The basis followed for levy and absorptioneads shall be equitable and applied consistently. In case any expense included in theories of overheads can be identified with a particular activity/product, such11 be segregated and charged to the relevant activity/product at the first instance

er the remaining common expenses under the above categories of overheads shallon a reasonable and equitable basis and applied consistently.

IX. Expense on Export:

Re ords showing expenses incurred on export of Rayon products if any, shall beseparately aintained, so that the cost of export sales can be determined correctly. Theexpenses i curred on export, as well as any export incentive earned shall be reflected in the coststatements elating to export sales.

X. By-Products:

per records shall be maintained for each item of by-product derived showing theues and balances both in quantity and value. The basis adopted for valuation of the

shall be equitable and consistent. Records indicating the expenses incurred onessing of by-products like glauber salt into sodium sulphate as well as the actualtion of the ultimate by-product i.e. sodium sulphate shall be maintained. Creditthe quantity of glauber salt got converted into sodium sulphate shall be reasonable.

Prreceipts, isby-productfurther prosales realiafforded fo

XI. Research and Development Expense:

Adequate records showing the details of expenses incurred by the companyfor the development of existing products or new products or processes, if any, shall bemaintained separately. Such records shall indicate the expenses incurred on genenic researchand brand prOmotion separately. Expenses incurred on brand promotion shall be excluded fromcosts and charged to profit directly. If the research and development department is also engagedin the design and development of plant facilities, the appropriate share thereof shall becapitalized. The method of charging research and development expenses to the cost ofproduction shall be indicated in the cost records and such expenses shall be charged to viscosestaple fibre of 'different enduses, viscose filament yarn and viscose tyre yarn on a reasonablebasis. Howe er, the research and development cost must be measured and disclosed in line withthe Intematic nal Financial reporting Standards as applicable in Pakistan.

Expenses incurred by the Research & Development Department forfurnishing technical know-how to outsiders shall be recorded separately and excluded from thecost of pro ucts referred to in paragraph (3) of paragraph 1 of this Order. The amountsrecovered fo providing technical know-how to outsiders shall also be indicated separately.

XII. Products for self-consumption:

Proer records shall be maintained showing the quantity and cost of each item of rayonproducts tra4iisferred to another department/unit of the company for self-consumption. The ratesat which such transfers are affected shall be disclosed in the cost statement.

XIII. Packing:

(1)various pacsteel wires,of packagecommon thshall be equ

Proper records shall be maintained showing the quantities and cost ofing materials such as polythene sheets, !craft paper. jute packing sheets, hoofs, mildones and wages and other expenses incurred in respect of different types and sizesadopted for marketing of Rayon products. Where the expenses are incurred inbasis of apportioning such expenses amongst different types of Rayon products

table and clearly indicated in the records and applied consistently.

The quantity and cost of packing materials recovered from purchased rawmaterials a d that re-used in packing shall be maintained. The basis of valuation adopted forsuch materi Is shall be reasonable.

kept separatDetailed records of the expenses incurred on export packing shall also be

ly and exhibited in the relevant cost statements for exports.

XIV. Work-in-process and finished goods:

The method followed for determining the cost of work-in-process and finished goodsstock shalle indicated in the cost records so as to reveal the cost elements that have been taken1{into accoun in such computation. The method adopted shall be followed consistently.

XV. Cost Statement:

Coin sub para

t statement showing the cost of production and cost of sales of products mentionedof para 1 of this Order shall be prepared by the management.

XVI. Reconciliation of Cost and Financial Accounts:

(1) The cost records shall be reconciled periodically with the financial books ofaccount so as the ensure accuracy. Variations, if any, shall be clearly indicated and explained.The period for which such reconciliation is effected shall not exceed the period of the financialyear of the Company. The reconciliation shall be done in such a manner that the profitability ofthe product under reference can be correctly adjudged and reconciled with the overall profits ofthe company.

•

(2) A statement showing the total expenses incurred and the income received bythe company and the share applicable to Rayon products shall be maintained in Annexure 'G'duly reconci d with the financial accounts.

XVII Adjustment of Cost Variances:

Where the company maintains cost records on any basis other than actual, such asstandard cost, the records shall indicate the procedures followed by the company in working outthe cost of the products under such a system. The method followed for adjusting the costvariances in determining the actual cost of the product shall be indicated clearly in the costrecords. The cost variances shall be shown against the relevant heads in the respectiveAnnexure of Schedule II. The reasons for the variances shall be detailed in the cost records.

XVIII. Records of Physical Verification:

*cords of physical verification shall be maintained in respect of all items held instock such as raw materials, process materials, packing materials, consumable stores,machinery spares, chemicals, fuels, finished goods and fixed assets Reasons forshortage/su luses arising out of such verification and method followed for adjusting the samein the cost of the products shall be indicated in the records.

XIX. Statistical Records:

atistical and other records maintained in accordance with the provisions of thise such as to enable the company to exercise, as far as possible, control over thetions and costs with a view to achieve optimum economies in costs and to providedata required by the cost auditor to suitably report on all the points referred to in

Order shallvarious opethe necessthe Compan es (Audit of Cost Accounts) Rules, 1998,

SCHEDULE II

GENERAL INFORMATION

Name of the Company.

2 Date of Incorporation.

3 Place of Registered Office or other office where Books of Account are maintained.

6 Ltication of Factory/Factories.

7 Type/Types of products (All products as mentioned above) being produced.

8 4y salable by-products.

9 I4ermediary products: Per Day Per YearM. Tonnes

M. Tonnes(a Installed / Normal Capacity

(bbCapacity Utilized

No. of Days in the year on which capacity is calculated

10 ?vain products:

Installed /Normal Capacity

Capacity Utilized

(cb

No. of Days in the year on which capacity is calculated

Foreign Technical Collaboration

N e of the Process/Inventor/Patent holder.

Schedule ID(See paragraph 2) ANNEXURE A

Name of d1ompanyName & address of Rayon/Polyester Factory

Statement shpwing the Cost of Product— manufactured during the year ending ----------

Processing

TypeDescriptionQualityDenierProductionTotal dry cellulose content of wood pulp consumedTotal dry cellulose content of outputWaste percentage

ProcessingSteeping/Slurry/other processStaple length of FibreCurrent year Previous yearTonnesTonnesTonnes

1

Particulars,

Quantity(Units)

Rate per unit(Rs)

Total Cost Cost ser Kg(Rs) Current year Previous year

( t ) (2) (3) (4) (5) (6)1. Raw Materials purdhased/

previous departmer

—

transferred in fromt

----- 1-- 2, Process Chemicals

—

---- ------

(c)-(1)— 4

(8)

Direct Salaries & Wages (Annexure G)Utilities

v: (a) Power (Annexure E)'''- ' (b) Nitrogen (Annexure C)

Steam (Arinexure D)Air-Conditioning (Annexure F)

Repairs & Maintenance.Stores and spares IInsuranceManufacturing Ovrlrheads (Annexure I)Other works overh$adsPacking cost

----- ------------—

(e) I I. Research & Development expenses

Depreciation /

Share of administrative Overheads (Annexurc H)Total

14. Less credit for

(c) —

Adjustment for opening and closing balance ofWork-in-process IStock adjustmentAdd opening stockLess closing stock

17. Total cost of product—IS. Transferred to the ether department

Selling & Distribution expenses (Annexurel)Net sales realization

1

ANNEXURE B

Name of CompanyName & gddress of Rayon/Polyester Factory

Statement howing the Cost of Goods sold during the year ending

Product Total Costof Goods

+i.cldOpeningWIPnventory

Less ClosingWIP Inventory

Less-calizablevalue of byproduct

'Cost of Goodsmanufactured

Add Opening 'LessFinished goods

ClosingFinished goods

Add packingmaterial andFederal exciseand sales tax

Cost ofsales

ABCD

•

Annexure C

Name of companyName & address of Rayon/Polyester Factory

Statement showing the Cost of Nitrogen produced and consumed during the yearending

No of units producedNo of units purchased,'Consumption including other lossesNet units consumed

Particulars IiI

(Units) Rate(Rs)

Quantity (Amount)

( I ) I (2) (3) (4) (5)I. (a) Ammonia

(b) activated aluminum(c ) Molecular sieves

N-. - (d) othersConsumable storesOther services

Power (AnnexureCompressed air

(c) Water

E)

Salaries & Wages (Annexure G)Repair & maintenance

Sub totalOverheadsDeprecation

TotalNitrogen purchase

TotalLess recoveiies if, any

Net Total(purchasld and produced)

Apportionment:I

-

r-,

Polymerization )lantPolyester fibre plant

iii) Polyester filamttnt yarn plant

No of units Amount (Rs)

li

Annexure D

Name of CompanyName & address of Rayon/Polyester Factory

Statement sihowing the Cost of Steam raised/consumed during the year ending

Installed steam generation capacity Kg/hr at Kg/CmgQuantity of steam raised, Tonnes Pressure-Kg/CmgCost per tonne of steam raised

Particulars Quantity(units)

Rate(Rs)

(Amount)(Rs)

(3 )(2) (4)WaterFuels:

CoalFuel OilElectricityOther fuels, if any (to be specified)

3.Other Direct Expe ses(such as Boi er inspection fees)

Consumables StorSalaries and wages (Annexure G)Repair & maintenanceOther overheadsDeprecation

TotalLess credits for coal Ash, Condensate and other credits,

if anyLess (a) cos of steam used by power house

(b) oth r units of the companyQuantity and cost of Balance steam

Apportionment:

PolymeriStionPolyester Olament

iv) Other unit[

iii) Polyester fibre

plantyarn

spinning plantof the company

Units PressureKg/Cmg

Amount

Notes:If steam is supplied any other outside party, necessary credit for recoveries made shall be given against item 10.Where metres are n t installed, consumption of steam shall be assessed on a reasonable basis and applied consistently.

Annexure E

Name of CompanyName & address of Rayon Factory

Statement siiowing the Cost of Power generated/purchased and consumedduring the year ending

Installed generation Capacity MWNo of Units generate0 KWH : No of Units Purchasep KWHConsumption in power house KWHNet units consumed 1 KWH :

Particulars Quantity Rate (Amount)(units) (Rs) (Rs)

1 ( 1 ) (2) (3) (4)1 (a) steam (as per Annexure D/purchased)'1.

(b) other materials if any, (to be specified)Consumables Store.,Other direct charges (such as Electricity duty etc)Salaries and wages (Annexure G)Repair & maintenanceOther overheadsDeprecation

Sub totalPower purchased

Gross TotalLess recoveries if any

TotalCost per unit (purchakd and generated)

Apportionment : I Quantity Rate AmountNitrogen plaint (Rs)(Rs)

Steam genetiationAir ConditiOningPolyester chip plantPolyester fibre/filament yarn plantOther units bf the company

Notes:Cost per units shall be worked out with reference to the Net units of power available for use after deductingconsumptiOn in the power house and other losses.Where meters are not installed, consumption of power shall be assessed on a reasonable basis and appliedconsisten4.

3. Bonus to employees other than incentive bonus, provisions for statutory gratuity and interest charges shall be shownin Annexure '13' and 'F' only and not in any other annexure.

Annexure FName of CompanyName &address of Rayon/Polyester Factory

Statement showing the Cost of Air-Conditioningduring the year ending

Installed capacityAverage operating loadNo of hours operation; during the year

Thermal unitsthr

44

Pirticulars Quantity(Units)

Rate(Rs)

(Amount)(Rs)

(I) (2) (3) (4)ChemicalsSalaries and wages (Annexure G)

(3) Power and other services..., , power

Water(4) Consumable Stores

Repair & MaintenanceWorks overhead

(7) DepreciationTotal cost

Apportionment Rate(Rs)

Amount(Rs)

I. Polyester fibre(a) Polymeilzation(5) Spinnitfg

Finishing

1I_ rOthers

2. Polyester filament yarnPolymerization

1 SpinningConing

1

1others

Note:I.. The apportionment of Air -Conditioning cost to the different departments and cost centers shall be done on scientific and reasonablemanner and applied consistently.2. Bonus to employees other than incentive bonus, provision for statutory gratuity and interest charges shall be shown in Annexure 'D' and'F' only and not in any other Proforma. •

Annexure G


Statemdnt showing the Cost of salaries, Wages and other benefits for the YearEnded

S.No n Particulars Current Year Previous Year

Salaries and Wages:(1) OffiCers and Permanent Staff

LabOur on Contract and Daily basisBonUses

2 Benefits:Medical Expenses. Canteen ExpensesWelfare, RecreationTransport and TravelingEducational Cess/ ExpensesGroup Insurance/Workmen CompensationProvident Fund (Employer's Contribution)Glittuity/Pension/Retiring Benefits

(ix) Other Benefits (if any)

Total3 Apportionment

Nitrogen (Annexure C)Power (Annexure E)Steam generation (Annexure D)Air Conditioning (Annexure F)Product A Product B

vii. Product C

•

Annexure HName of ompanyName & address of Rayon/Polyester Factory

Statement showing the Cost of Administrative overheads for the Year Ended

/ Current Year Previous Year

I. Salaries Wages & Other Benefits (Annexure G)

DirectPrs Remuneration

Directprs Traveling

Staff Traveling

Vehicle Running Expenses

6, Communication Expenses

7. Repair & Maintenance

Office Equipments

Fbmiture & Fixtures

8. Building others (to be specified)

Adv isement

Util ties

Ren , Rates & Taxes

Prinking & Stationary

Legal & Professional Expenses/

Entertainment

Insurance Costs

Cha)lty & Donation

others to be specified

Depreciation

' TotalApportignment

1

tv.

Nitrogen (Annexure C)Power (Annexure E)

di. Steam generation (Annexure I))iv, Air Conditioning (Annexure F)

Product AProduct B Product C

•.

Annexure I


Statement showing the Cost of manufacturing overheads for the Year Ended

PARTICULARS CURRENTYEAR

PREVIOUS YEAR

1 Consumable stores and spare parts

2 Repair and maintenance13 Ithilities

4 insurance

5 Lubrication oil

6 Rent

7 i Rates & Taxes

8 Office Supplies

9 Other Overheads (to be specified)

10 DepreciationApportionment

Nitrogen (Annexure C)Power (Annexure E)Steam generation (Annexure D)Air Conditioning (Annexure F)Product AProduct B

vii. Product C -----

Annexure J


Statement shoving the Cost of Selling, Distribution for the Year Ended

Current Year

(Rs.)

Previous Year

(Rs.)

Salaries, Wages & Other Benefits (Annexure G)I

Commission to Selling agents

Freight and transport

customers

charges less recoveries from1

Loading and unloading charges

Godown rent i

Retail sales office expenses such as . rent etc., if any

Other expensed.,

Share of Administration OverheadsI

Stores & Spates

Loose Tools1I

Depreciation!

Insurance1 •

Other Overlfeads

Total

Apportionmeip

vii.

Nitrogen (Annex= C)Power (Annexure E)Steam generation (Annexure D)Air Conditioning (Annexure F)Product AProduct B Product C

Name of CompanyName address of Rayon/Polyester Factory

Annexure K•

Statement of Fixed Assets and allocation of Depreciation for the Year Ended

Cost De a reeiation WrittenDownValue

TotalDepreciation

I

CostOpening

Additions/Deletions

CostClosing

Rate%

Ace. DepOpening

Chargefor theYear

Ace. DepClosing

Sr # 1 .

Electrical DepartmentnBuilding

Plant & Machinery

Electrical InstallationsFurniture & Fixtures I

TO'T'AL

WorkshoBuilding

Tools & Equipment'Furniture & Fixtures

TOTAL.

Stores & Allied Facilities---Building

Storage Tanks 'Furniture & Fixtures

TOTAL

Administrative 1

Building JOffice Equipment

Vehicles 'Furniture & FixturesElectrical Appliances

707;11.

(Bushra Aslam)

Secretary to the Commission

No. CLD NO 230(8) RCP/ 2002

1

THE GAZETTE OF PAKISTAN EXTRAORDINARY

PART II

Statutory Notifications (S.R.O)


NOTIFICATION

Islamabad, the November 16, 2009

S.R.O. 983(I)/2009.- In exercise of powers conferred by sub-section (1) of section 246 of the

Companies Ordinance, 1984 (XLVII of 1984) delegated vide S.R.O 659(I)/2009 dated July

14, 2009, the Commissioner (Company Law Division) is pleased to issue the following

General Order, namely:-

COMPANIES (CORPORATE SOCIAL RESPONSIBILITY)

GENERAL ORDER, 2009 1. Short title, application and commencement.- (1) This General Order shall be called

the Companies (Corporate Social Responsibility) General Order, 2009.

(2) It shall be applicable on all the public companies from the financial year beginning on

or after July 1, 2009.

(3) Words and expressions used but not defined in this General Order shall have the same

meaning as are assigned to them in the Companies Ordinance, 1984 (the Ordinance).

2. Obligations under the law- (1) Every company shall provide descriptive as well as

monetary disclosures of the Corporate Social Responsibility activities undertaken by it

during each financial year.

2

(2) Such disclosures shall be made in the directors’ report to the shareholders annexed to

the annual audited accounts. The disclosure of such activities will be in addition to the

disclosure requirements already mentioned in the Ordinance.

(3) The disclosures, wherever required, shall include, but shall not be limited to the

following:

(i) corporate philanthropy (ii) energy conservation (iii) environmental protection measures (iv) community investment and welfare schemes (v) consumer protection measures (vi) welfare spending for under-privileged classes (vii) industrial relations (viii) employment of special persons (ix) occupational safety and health (x) business ethics and anti-corruption measures (xi) national-cause donations (xii) contribution to national exchequer (xiii) rural development programmes.

(4) It shall be the duty of every person referred to in sub-section (2) of section 246 of the

Ordinance to comply with the provisions of this General Order.

No. CLD/RD/602(34)/2009

(Salman Ali Shaikh) Commissioner (CLD)

1

THE GAZETTE OF PAKISTAN EXTRAORDINARY

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

PART II

Statutory Notifications (S.R.O.)


NOTIFICATION

Islamabad, the 26th September, 2008

S.R.O. /I/2008.- In exercise of powers conferred by clause (e) of sub-section (1) of

section 230 read with section 246 of the Companies Ordinance, 1984 (XLVII of 1984), and

section 43 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLVII of

1997), the Securities and Exchange Commission of Pakistan is pleased to make the following

Order; namely:-

1. Short title, application and commencement.- (1) This order may be called the

Companies Cost Accounting Records (General Order), 2008.

(2) This Order shall apply to companies engaged in production, processing,

manufacturing or mining activities as specified in sub-paragraph (3) below. However, those

classes of companies for which special orders have been issued as at the date of this

notification shall continue to be governed under their respective orders, except as provided

otherwise in paragraph 4 below.

(3) This order shall be applicable to all companies engaged in the following industries

from the financial year commencing on or after October 1, 2008,-

1. fertilizer,

2. thermal energy,

3. petroleum refining,

2

4. natural gas, and

5. polyester fiber.

2. Maintenance of Records. - Every company to which this Order applies shall keep

such cost accounting records including all particulars relating to utilization of material,

labour or other inputs or items of cost as would be necessary to comply with the requirements

in Appendix III of the Companies (Audit of Cost Accounts) Rules, 1998. The cost accounting

records shall be kept in such a manner and in such detail as to make it possible for the auditor

to audit the same and to produce his report as required under the law.

3. Obligations under the law.- Each company to which this order applies will be required to

(a) have a cost audit conducted as at the end of each year, through an independent firm of

cost or chartered accountants; and

(b) produce a reconciliation of the cost accounts with the audited financial accounts, to

comply with the requirements of paragraph 15 of Appendix III of the Companies (Audit of

Cost Accounts) Rules, 1998.

4. Circulation and distribution of reports.- (1) Each company which falls within the

industries specified in paragraph 1(3) above, shall be required to circulate the cost auditor’s

report to Directors prescribed in sub-rule (3) of rule 4 of the Companies (Audit of Cost

Accounts) Rules, 1998 together with the Reconciliation stipulated in 3 (b) above within 6

months of the close of the financial year to members, directors and shareholders of the

company, the Commission and the Registrar concerned. Such reports may be disseminated to

its shareholders by posting the same on the company’s website within six months of the

close of the financial year. The cost audit report shall not be required to be printed and it

shall be permissible to circulate photo-copies thereof.

(2) Every company in respect of which a special order has been issued by the

Commission prior to this notification that is to say companies engaged in production of

cement, vegetable ghee and sugar industries shall be required to comply with the

requirements of this paragraph and paragraph 2 and 3 above.

3

(3) It shall be the duty of every person referred to in sub-section (7) of Section 230 or

sub-section (2) of section 246 of the Companies Ordinance, 1984 (XLVII of 1984), to

comply with the provisions of this Order in the same manner as they are liable to maintain

books of financial accounts required under section 230 of the said Ordinance.

F.No. DCS/24/SECP/2008

Abdul Rehman Qureshi Advisor/Secretary

ELECTRIC POWER GENERATION INDUSTRY

(COST ACCOUNTING RECORDS)

ORDER, 2012

1



NOTIFICATION

Islamabad, the 26th March, 2012

S.R.O. 302-(I)/2012.- The following draft of Electric Power Generation Industry (Cost Accounting

Records) Order, 2012 which is proposed to be made in exercise of powers conferred by clause (e) of sub-

section (1) of section 230 read with section 246 of the Companies Ordinance, 1984 (XLVII of 1984), and

section 40B of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997) is hereby

published for the information of all persons 1ike1y to be affected thereby and notice is hereby given that the

draft will be taken into consideration after thirty days of its publication in the Official Gazette.

Any objection or suggestion which may be received from any person in respect of the said draft before

the expiry of the said date will be considered by the Securities and Exchange Commission of Pakistan.

ELECTRIC POWER GENERATION INDUSTRY (COST ACCOUNTING RECORDS)

ORDER, 2012

1. Short title, extent, commencement and application.- (1) This Order shall be called the

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

(2) It shall come into force with effect from July 1, 2012.

(3) This Order shall apply to every company engaged wholly or partially in Generation of Electric

Power Energy in Pakistan under the license(s) granted by the National Electric Power Regulatory Authority

(NEPRA) of Pakistan.

2. Maintenance of records and independent auditors’ assurance.- (1) Every company to

which this Order applies shall, in respect of each financial year commencing on or after the commencement of

this Order, keep cost accounting records, containing, inter-alia, the particulars specified in Schedule I, II and III

to this Order.

(2) The cost accounting records referred to in sub-paragraph (1) shall be kept in such a way as to

make it possible to calculate from the particulars entered therein the cost of generation and cost of sales of each

of the generation facility licensed by NEPRA referred to in sub-para (3) of para (1), during a financial year.

(3) Where a company is engaged in any other business(es) in addition to those referred to in sub-

para (3) of para (1), the particulars relating to the utilization of materials, labour and other items of cost in so

far as they are applicable to such other product shall not be included in the cost of product referred to in that

para.

(4) It shall be the duty of every person referred to in sub-section (7) of section 230 of the

Companies Ordinance, 1984 (XL VII of 1984), to comply with the provisions of sub-paragraph (1) to (3) in

the same manner as they are liable to maintain financial accounts required under section 230 of the said

Ordinance.

3. Penalty.- If a company contravenes the provisions of para 2 of this Order, every director,

including chief executive and chief accountant, of the company who has knowingly by his act or omission been

the cause of such default shall be punishable under sub-section (7) of section 230 of the companies Ordinance,

1984 (XL VII of 1984)

(Nazir Ahmed Shaheen)

Executive Director (C&C)

2

SCHEDULE 1

(See paragraph2)

I. MATERIAL

(1) Direct Material.-

(a) Following raw/direct materials are considered as prime sources of energy in

their respective Electric Power Generation process:

(i) Furnace Oil;

(ii) Diesel Oil;

(iii) Gas;

(iv) Coal;

(v) Water;

(vi) Wind;

(vii) Steam; and

(viii) Others (to be specified)

(b) Adequate records shall be maintained for above material where applicable for

receipt, issue and balances both in quantities and values. The basis on which

the value of receipt and issue has been calculated shall be indicated clearly in

the cost records maintained or if so desired by the company in a separate

manual of procedures, if any maintained by the company or in foot-notes or

separate explanatory notes to the cost statements for the relevant period. Such

basis shall be applied consistently, throughout the relevant period.

(c) The values shall include all direct charges upto plant site such as excise duty,

haulage charges, transport, freight, handling and transit insurance premium

incurred for local procurement.

(d) In case of imported materials/sources of energy such as oils or coal, all import

charges, custom duty, port dues, ocean/air freight, inland freight, marine

insurance and all other charges leviable and payable at the time of import, shall

be shown separately and included to work out the landed cost of oils or coal.

(e) Where coal is raised from mines owned or taken on lease by the company,

separate record showing the cost of raising shall be maintained in such detail as

may enable the company to establish proper cost of the above referred material

in cost records.

(f) Adequate records shall be maintained to establish the correct quantities or

volume of gas used. For ascertainment of value of gas, all the expenses

incurred (all Government dues local or central, and all other expenses

necessary to fetch the gas to plant site) for the procurement of gas at plant site,

3

shall be shown separately and included to work out the cost of gas actually

consumed during the process.

(g) Proper records shall be maintained showing the quantity and value of wastage,

spoilage, rejection and losses of input material/fuels and consumables stores

whether in transit, storage, operations or at any other stage. The method

followed for adjusting the above losses as well as income derived from disposal

of rejected and waste material including spoilage, if any, in determining the

cost of activities shall be indicated in cost records.

(h) Realizable value of waste or by-product, if any, shall be credited to arrive at the

net cost of power produced

(i) Records shall be maintained in such detail to enable the company to readily

provide data required in the various Cost Statements prescribed in this Order in

a verifiable state.

(2) Lubrication oil consumption in engines and turbines.- Adequate records shall be

maintained in respect of all receipts, issues and balances, both in quantities and values. Separate

record for regular consumption and routine oil change at standard hours of run shall be maintained in

the cost statement as prescribed in this Order so that cost and quantities may be verified with

standards.

(3) Consumable stores, small tools, machinery spare parts, etc

(a) Adequate records shall be maintained to show the receipts, issues and balances,

both in quantities and cost of each item of consumable stores, small tools,

machinery spares.

(b) The cost of issue of consumable stores, small tools and machinery spares shall

be charged to the relevant heads of accounts such as repairs to plant and

machinery or repairs to building. Material consumed on capital works such as

addition to buildings, plant and machinery and other assets shall be shown

under the relevant capital heads and not in the cost statements of electric power

generating companies.

(c) Wastage of any consumable stores whether in transit, storage or in any other

plant activity shall be quantified and shown separately. Method of dealing with

such losses in costing shall also be indicated in the cost records.

4

II. INVENTORY

(1) The inventories shall be measured at the lower of cost and net realisable value. Net

realizable value is the estimated selling price in the ordinary course of business less the estimated

costs of completion and the estimated costs necessary to make the sale. The cost of inventories shall

comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories

to their present location and condition.

(2) It shall also be disclosed that the cost of inventories shall be assigned by using the

first-in, first-out (FIFO) or weighted average cost formula. An entity shall use the same cost formula

for all inventories having a similar nature and use to the entity. For inventories with a different nature

or use, different cost formulas may be justified. However, the cost of inventories of items that are not

ordinarily interchangeable and goods or services produced and segregated for specific projects shall

be assigned by using specific identification of their individual costs.

III. SALARIES AND WAGES

(1) Adequate records shall be maintained to show the attendance of workers employed by

the company whether on regular, temporary or on contract basis, as the case may be.

(2) Adequate record shall be maintained in respect of payments made for over time in such

manner that labour cost is available for each cost center.

(3) Proper record shall be maintained in respect of earnings of all the employees, function

or activity-wise, and the works on which they are employed. The record shall also indicate the

following separately for each such function or activity.-

(a) Direct wages and salaries

(i) Regular salaries/wages

(ii) Contract salaries/wages

(iii) Piece rate wages

(b) Indirect salaries and wages

(i) Incentives

(ii) Bonuses

(iii) Scheme based earnings

(iv) Overtime

(v) Gratuity or statutory dues

5

(4) Fair and reasonable allocation shall be made for wages paid to such labour as has

been utilized in various departments or cost centers and the basis of such allocation shall be followed

constantly.

(5) Reasons for idle time or layoff payments shall be recorded separately and their

treatment in the calculations of cost of power produced/generated shall be indicated in the cost

statements.

(6) Any wages paid for addition to plant and machinery or other fixed assets shall be

capitalized and excluded from the cost of power produced/generated.

(7) Benefits paid to the employees other than covered in above paragraphs shall be

worked out separately and shown in cost statements, department-wise or cost center wise.

IV. SERVICE DEPARTMENT

Adequate records shall be maintained showing expenses incurred for each service department

e.g. workshop, laboratory, transport and testing house etc. These expenses shall be apportioned to

other cost centers including service departments on an equitable basis. Where these service

departments serve other departments such as steam department or furnace oil handling department,

suitable basis shall be worked out so that the apportionment to other departments or to saleable

products, is duly worked out and applied consistently.

V. UTILITIES

(1) Adequate records shall be maintained showing the quantity and cost of various utilities

consumed and utilized by different departments and cost centers.

(2) Records shall be maintained to enable the assessment of consumption or utilization by service

departments. Allocation of cost shall be made on the basis of actual consumption or on basis of

technical estimates in the absence of actual measurement.

(3) Details shall be available to determine the actual consumption by the power house. The

cost of power consumed by the company shall be shown separately in cost statements.

(4) Appropriate records shall be maintained of pumping, storage and distribution of water

to determine the actual cost of water used by the different cost centers e.g. cooling towers, purifiers

and by other service departments. Basis of allocating the cost of water amongst the different cost

centers shall also be indicated in the records.

6

(5) Adequate records of cost of compressed air shall be maintained. The allocation of cost

of compressed air to different departments shall be indicated in the cost records.

VI. REPAIR AND MAINTENANCE / WORKSHOP CHARGES

(1) Adequate records of expenditure incurred on workshop facilities provided for repair

and maintenance of plant and machinery in cost centers shall be maintained.

(2) Record of repair and maintenance contracts shall be maintained separately. The basis

of allocation of repairs and maintenance to different cost centers shall be indicated in the cost records.

Cost of work of capital nature and/or of heavy repairs and overhauls, benefits of which are likely to

spread over a longer period, shall be capitalized.

(3) If a separate team is working for the maintenance of a particular cost centre, the

salaries/wages and cost of consumables, spare parts and tools shall be charged as direct expense of

that cost centre.

(4) If maintenance services are utilized by other saleable items like waste, heat energy, the

portion utilized for them should be segregated and charged thereto.

VII. DEPRECIATION

(1) Adequate records shall be maintained showing values and other particulars of fixed

assets in respect of which depreciation is to be provided. The record shall inter-alia indicate the cost

of, accumulated depreciation, rate of depreciation and the amount of depreciation charged for the

relevant period.

(2) The basis on which the depreciation is calculated and allocated to various cost centers

and product(s) shall be indicated in the records.

VIII. INSURANCE

(1) Adequate records shall be maintained showing the insurance premium paid for the

various risks covered for the assets and other interests of the company.

(2) Insurance costs shall be allocated to different cost centers and methods allocating such

cost shall be indicated in the cost records.

7

IX. ROYALTY OR TECHNICAL KNOW HOW/SERVICE FEE

Adequate records including technical agreements shall be maintained party wise in respect of

fee paid to the collaborators or technology suppliers on recurring or non–recurring basis.

X. OTHER OVERHEADS

(1) Adequate records showing the expenditure incurred as power generation overheads,

other than those specified, shall be maintained and method of allocation to different cost centers shall

be stated in the cost records/ statements for the relevant period.

(2) If other saleable products like steam are produced, suitable basis shall be adopted to

apportion the cost equitably.

XI. DISTRIBUTION EXPENSES

(1) Power distribution shall be considered a separate line of activity in power sector.

Adequate record shall be maintained for the expenditure incurred on distribution lines, gauging

installations, repair and maintenance and extension of distribution network.

(2) Record shall be maintained for all those expenses which are incurred on activities that

can be reasonably and fairly be attributed to distribution services.

XII. ENERGY LOSSES

Adequate record shall be maintained to evaluate the cost of energy losses as expenses and it

would be clearly indicated whether these are normal or abnormal losses, in case allocated to different

cost centers, adequate justification for the allocation shall be given. In case of abnormal losses these

shall be separately disclosed. Where energy losses exceed the normal limits, the reasons shall also be

disclosed in the cost records.

XIII. RESEARCH AND DEVELOPMENT EXPENDITURE

Adequate record shall be maintained and kept for research and development separately and

proper basis shall be established for charging to different cost centers and saleable products.

8

XIV. ADMINISTRATION OVERHEADS

Administration overheads shall be recorded separately and proper basis shall be established

for charging to different cost centers and saleable products.

XV. ADJUSTMENT OF COST VARIANCE

(1) Where a company maintains records on the basis other than actual cost, such as

standard costing, the record shall indicate the procedure followed by the company to work out the

actual cost of power produced under such system. The method followed for adjusting the cost

variances in determining the actual cost of the power produced as well as the reasons for variances

shall be indicated in the cost records.

(2) The reasons for variances in material, labour, overheads cost and sales should be

disclosed separately while preparing the reconciliation of profit arrived.

XVI. COST STATEMENTS

Cost statements shall be prepared as prescribed in this Order, by the power generating

companies regularly on periodic basis and on the basis of reviews made on those cost statements,

corrective action taken shall be stated along with reasons.

XVII. STATISTICAL STATEMENTS AND OTHER RECORDS

(1) The companies shall develop appropriate internal Key Performance Indicators (KPIs)

for use as basis to evaluate actual performance with the standards/benchmarks prescribed by the

NEPRA and other Government and Regulatory Authorities.

(2) Adequate record of generation and hours run shall be maintained engine wise and

generation shall be recorded so as to make available information for the compilation of the cost

records.

XVIII. RECONCILIATION OF COST AND FINANCIAL ACCOUNTS

(1) The cost records shall be reconciled with the audited financial accounts of the

corresponding period to ensure accuracy if integrated accounts are not maintained. Variations, if any,

shall be clearly indicated and explained.

9

(2) The reconciliation shall be done in such a manner that the profitability of the

different products, as per cost statements, is correctly judged and reconciled with the overall profits of

the company from all of its activities.

(3) Adequate cost records shall be maintained in a manner that the cost statements can be

compiled.

XIX. COMPARATIVE FIGURES

Wherever possible corresponding figures for the previous year shall be arranged, grouped and

provided in cost statements.

10

SCHEDULE II

GENERAL INFORMATION

1. General Information

(a) Name of the company

(b) Registered office address of the company

2. Corporate Information

(a) Status of the company whether public limited (listed or non-listed),

private limited or Single Member Company.

(b) Company’s financial year for which audit is being conducted.

(c) Date of Board of Director’s meeting where Cost Statements were

approved.

(d) Name, qualification and designation of the officer heading the cost

accounting section

3. Technical Information

(a) Location of plant Site

(i) Location of plant site

(ii) Location of mines, if any

(b) Capacity of Power Generation

(i) Installed capacity.

(ii) Licensed capacity.

(iii) Utilized capacity

(iv) Normal capacity

(c) Date of commencement of commercial operation

(d) Type of Project. (IPP/WAPDA subsidiary/other)

(e) Type of raw/direct material used for producing power

11

4. Detail of distribution network

(a) Local arrangements

(b) Export

(c) Sale to WAPDA and other distribution companies

(d) Sale at bulk to other customers (to be specified)

5. Tariff

(a) Period of application

(b) Notification No. and date approving the tariff

(c) Other important features of tariff approved

6. Applicability of Tax laws

(a) Application of tax laws

(b) Any exemption available from excise and other levies.

7. Cost Accounting System

(a) Brief description of the system

(b) Major accounting policies

12

SCHEDULE III

Annexure 1

[see para 2(1)]

STATEMENT OF CAPACITY FOR THE YEAR ENDED__________


No. of Generators Installed ***

Capacity of Each Generator**

Nature of Capacity

Mega Watts

(MW)

Percentage Mega Watts

(MW)

Percentage

A Licensed Capacity 100 100

B Installed Capacity % of Licensed

Capacity ( A)

% of Licensed

Capacity ( A)

C Normal Capacity % of Installed

Capacity ( B)

% of Installed

Capacity ( B)

D Standby Capacity (if any) % of Normal

Capacity ( C)

% of Normal

Capacity ( C)

E Planned Capacity = (C-D) % of Normal

Capacity ( C)

% of Normal

Capacity ( C)

F Utilized Capacity % of Normal

Capacity ( C)

% of Normal

Capacity ( C)

*G Over or Under Utilized of Capacity % of Normal

Capacity ( C)

% of Normal

Capacity ( C)

* Reasons for over/under utilization of capacity to be disclosed

** Make or Model of generation facilities along with new or old description

*** Type of generation

13

Annexure -2 STATEMENT OF QUANTITY OF POWER PRODUCED AND SOLD FOR THE YEAR

ENDED____________


Qty Percentage Qty Percentage

Mega

Watts

(MW)

Mega Watts

(MW)

A Units Generated (MW)

(i) By furnace/diesel oil

(ii) By Coal

(iii) By Gas

(iv) By any other (to be

specified)

B Less: Losses during generation of

power

% of total units

generated ( A)

%of total units

generated ( A)

C Units Delivered = (A-B) %of total units

generated ( A)

%of total units

generated ( A)

D Line Losses %of units Delivered

( C)

%of units

Delivered ( C)

E Consumption in Power House %of units Delivered

( C)

%of units

Delivered ( C)

F Units available for sale [C-(D+E)] %of units Delivered

( C)

%of units

Delivered ( C)

G Sales Made %of units generated

( A)

%of units

generated ( A)

14

Annexure -3

STATEMENT SHOWING COST OF POWER PRODUCED AND SOLD FOR THE

YEAR ENDED _______

Particulars


S.No Amount

(Rs.)

Cost Per Unit

(Rs.)

Amount

(Rs.)

Cost Per Unit

(Rs.)

A No. of units generated Mega Watts (MW)

B Raw Direct Materials

(i) Furnace Oil/Diesel Oil Consumed

(Annexure-4)

(ii) Coal Consumed (Annexure-5)

(iii) Gas Consumed

(Annexure-6)

(iv) Any other material consumed (to be

specified)

C Transportation charges

D Lubrication of Lube oil (Annexure-7)

E Salaries, Wages ,.other Benefits (Annexure-8)

F Manufacturing Overheads (Annexure-9)

G Total Cost of Electric Power Generated

=B+C+D+E+F

H Administrative Overheads (Annexure-10)

I Selling & Distribution Overheads

(Annexure-11)

J Financial Overheads

K Total Cost to Make = G+H+I+J

L Abnormal Losses

M Total Cost to Sell = K+L

15

Annexure -4 STATEMENT OF CONSUMPTION OF FURNACE OIL/ DIESEL OIL AND VARIANCE IN

CONSUMPTION FOR YEAR ENDED _______

CURRENT YEAR PREVOIUS YEAR VARIANCE

Qty

(tons)

Price

Value Qty

(tons)

Price

Value Qty

(tons)

Price

(Rs.)

Value

A Opening Furnace/Diesel

Oil

B Furnace Oil/Diesel Oil

Purchased

C Total Furnace Oil/Diesel

Oil Available (A+B)

D Closing Balance

E Gross Consumption (C-D)

F Shortage/Wastage

G Sludge Extracted

H Net Consumption (E-F-G)

I Electric Power Generated

(KW) : (Annexure-2)

J Grammage / unit (Gm per

kwh) (H/I)

K Cost / Unit (Rs. per kwh)

(H/I)

(Annexure-3)

Reasons for variances, if any, to be explained separately

16

Annexure -5

STATEMENT SHOWING CONSUMPTION OF COAL AND VARIANCE IN CONSUMPTION FOR THE

YEAR ENDED _______

CURENT YEAR

PREVIOUS YEAR Variance

Qty

(tons)

Price

Rs.)

Value Qty

(tons)

Price

(Rs)

Value Qty

(tons)

Price

(Rs.)

Total

A Opening Stock

B Purchased during the year

C In case of coal mines owned or taken

on lease by the company:

Amortization (Nature to be

specified)

Total cost

D Total Available for consumption

(A+B+C)

E Wastage

F Closing Balance

G Total Coal combusted (D-E-F)

H Electric Power Generated (KWH) :

(Annexure-2)

I Cost/Unit (G/H)

(Annexure-3)

17

Annexure -6

STATEMENT SHOWING CONSUMPTION OF GAS FOR THE YEAR ENDED

_______ Current Year Previous Year

A Total Gas combusted (MMBTU)

B Total Heat Equivalent of Gas Combusted

C Price

D Value of Gas Combusted (A x C)

E Electric Power Generated (KWH) :

F Heat Rate (E / B)

G Cost/Unit (D / E)

(Annexure -3)

18

Annexure -7 STATEMENT SHOWING CONSUMPTION OF LUBE OIL AND VARIANCE IN CONSUMPTION FOR

THE YEAR ENDED _______

Current Month

For the Year Variance

Qty

(Liters)

Price

Value Qty

(Liters)

Price

Value Qty

(Liters)

Price

(Rs.)

Total

A Opening Stock

B Lube Oil Purchased

C Total Oil Available (A+B)

D Wastage

E Closing Balance

F Gross Consumption (C-D-E)

G Routine Oil Change

H Net Consumption (F+G)

I Electric Power Generated

(KWH) :

J Grammage / Unit (H/I)

K Cost/Unit (H/I) (Annexure-3)

19

Annexure -8

STATEMENT SHOWING SALARIES, WAGES AND OTHER

BENEFITS FOR THE YEAR ENDED______________

S.No Particulars Current Year Previous Year

Total Power Generated (Watts)

1 Salaries and Wages:

(i) Officers and Permanent Staff

(ii) Labour on Contract and Daily basis

(iii) Bonuses

2 Benefits:

(i) Medical Expenses

(ii) Canteen Expenses

(iii) Welfare, Recreation

(iv) Transport and Traveling

(v) Educational Cess/ Expenses

(vi) Group Insurance/Workmen Compensation

(vii) Provident Fund (Employer’s Contribution)

(viii) Gratuity/Pension/Retiring Benefits

(ix) Other Benefits (if any)

3 Total (1+2)

4 Less allocated to-

(a) Admin Overheads

(b) Selling & Distribution Overheads.

(c) Any Other (Specify)

5 Balance Transferred to Generation Process

(3-4) (Annexure-3)

20

Annexure-9 STATEMENT OF MANUFACTURING OVERHEADS FOR THE

YEAR ENDED _______

PARTICULARS CURRENT

YEAR

PREVIOUS

YEAR

1 Consumable stores and spare parts

2 Repair and maintenance

3 Utilities

4 Insurance

5 Lubrication oil

6 Rent

7 Rates & Taxes

8 Office Supplies

9 Other Overheads (to be specified)

10 Depreciation

Total (Annexure-3)

21

Annexure -10

STATEMENT OF ADMINISTRATIVE OVERHEADS FOR THE YEAR ENDED _______


1. Salaries Wages & Other Benefits (Annexure-8)

2. Directors Remuneration

3. Directors Traveling

4. Staff Traveling

5. Vehicle Running Expenses

6. Communication Expenses

7. Repair & Maintenance

i) Office Equipments

ii) Furniture & Fixtures

8. Building others (to be specified)

9. Advertisement

10. Utilities

11. Rent, Rates & Taxes

12. Printing & Stationary

13. Legal & Professional Expenses

14. Entertainment

15. Insurance Costs

16. Charity & Donation

17. Others to be specified

18. Depreciation

Total- (Annexure-3)

22

Annexure-11

STATEMENT OF SELLING, DISTRIBUTION AND TRANSMISSION EXPENSES FOR THE YEAR ENDED

_________

Current Year

(Rs.)

Previous Year

(Rs.)

Salaries, Wages & Other Benefits (Annexure-8)

Stores & Spares

Loose Tools

Depreciation

Insurance

Line Losses (normal)

Other Overheads (to be specified)

Total - (Annexure-3)

23

Annexure-12

STATEMENT OF FIXED ASSETS AND ALLOCATION OF DEPRECIATION FOR

THE YEAR ENDED ______ Cost Depreciation

Written

Down

Value

Total

Depreciatio

n

Cost

Opening

Additions

/

Deletions

Cost

Closing

Rate

%

Acc.

Dep

Openi

ng

Charge

for the

Year

Acc.

Dep

Closing

Sr. #

Generation

Generation System

(Engine Room)

Building

Plant & Machinery

Electrical Installations

Furniture & Fixtures

Transferred from other

Departments

TOTAL (Annexure-9)

Electrical Department

Building

Plant & Machinery

Electrical Installations


TOTAL (Annexure-9)

Workshop

Building

Tools & Equipment


TOTAL (Annexure-9)

24

Stores & Allied

Facilities

Building

Storage Tanks


TOTAL (Annexure 9)

Distribution System

Meters

Distribution Lines

Grids & Transformers

TOTAL

(Annexure -11)

Administrative

Building

Office Equipment

Vehicles


Electrical Appliances

TOTAL (Annexure-10)

..

-.


EXTRAORDINARYPUBLISHED BY COMMISSION

ISLAMABAD

Part II

2013

Statutory Notifications (S.R.O.)


NOTIFICAnON

Islamabad, the April 23, 2013

s.R.o.31.3 /2013.- The following draft of Pharmaceuticals Industry (Cost AccountingRecords) Order, 2013 which is proposed to be made in exercise of powers conferred by clause (e) ofsub-section (1) of section 230 and clause (0) of sub section (4) of section 20 of the Securities andExchange Commission of Pakistan Act, 1997 (XLII of 1997) is hereby published for the informationof all persons likely to be affected thereby and notice is hereby given that the draft will be taken intoconsideration after thirty days of its publication in the Official Gazette.

Any objection or suggestion which may be received from any person in respect of the saiddraft before the expiry of the said date shall be considered by the Securities and ExchangeCommission of Pakistan.

PHARMACEUTICALS INDUSTRY (COST ACCOUNTING RECORDS) ORDER, 2013

1. Short title, application and commencement. - (1) This Order shall be called thePharmaceutical Industry (Cost Accounting Records) Order, 2013.

(2) This Order shall apply to every company, including a foreign company as defined undersection 450 of the Companies Ordinance, 1984, which is engaged in the production, processing andmanufacturing of pharmaceuticals products.

(3) It shall come into force with effect from July 1st 2013.

2. Maintenance of records> (l) Every company to which this Order applies shall, in respect ofeach financial year commencing on or after the commencement of this Order, keep cost accountingrecords, containing, inter-alia, the particulars specified in Schedule I, II and III to this Order.

Page 1 of17

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Islamabad, the 17th February, 2005

SUBJECT: Directive under the Credit Rating Companies Rules, 1995 For establishing a procedural framework for credit rating companies and in the interest of public and the capital market, the Commission, in exercise of the powers conferred by rule 7 of the Credit Rating Companies Rules 1995 is pleased to direct that the Credit Rating Companies shall follow and comply with the following Code of Conduct with immediate effect.

1. CREDIT RATING PROCESS:- The credit rating company (hereinafter referred to as ‘CRC’) shall –

(a) lay down rating methodology for each product and, shall file a copy of the

same and any subsequent modification thereof with the Commission for record;

(b) establish adequate infrastructure and employ persons having required professional and other relevant experience to enable it to provide rating services in accordance with the Rules;

(c) form professional rating committees, comprising members who are adequately qualified and knowledgeable to assign a rating;

(d) ensure that only the rating committee takes all the rating decisions, including the decisions regarding changes in rating, without any let or hindrance from other officers or forces within or outside the CRC;

(e) use a rigorous and systematic assessment methodology based both on qualitative and quantitative techniques consistent with the prevalent international best practices;

(f) not change the rating definition, symbols, and/or rating process without prior intimation to the Commission and the public atleast fifteen days prior to such a change. While informing the public, the existing ratings shall be harmonized through newspapers/websites etc.;

(g) inform the Commission about its new rating product/service; and

2

(h) continuously monitor all its ratings and carry out periodical reviews of all its current outstanding ratings.

2. DISCLOSURE REQUIREMENT:- The credit rating company shall –

(a) make public the rating definition and the symbol related thereto;

(b) ensure that detailed credit rating report and the rating notification contains the names and contact information of the rating analysts and provides the rationale and basic principles/assertions underlying the rating issued and risk factors considered in the assessment;

(c) also state that the rating does not constitute recommendations to buy, hold or

sell any securities;

(d) publicly disseminate all ratings assigned by them, whether solicited by their clients or unsolicited, through press release in at least one English and one Urdu national daily, within two working days of the notification of such ratings. In cases where rating is unsolicited, the rating report shall clearly state this fact and whether the rated entity was a part of this process and also the source of information on which it is based. The disseminated ratings shall contain the rationale of the ratings, covering an analysis of the various factors justifying the assessment, as well as factors constituting a risk: Provided that solicited ratings which are not required to be published by virtue of any statutory requirement and the rated entity is not engaged in soliciting public deposits in any way, may be kept confidential if the client wishes to do so;

(e) develop and maintain a web site on which press releases in respect of solicited

ratings and rating reports in respect of unsolicited ratings shall be kept available for not less than three years from the date of the report. The website shall also contain information relating to:

(i) actual default rates experienced in each rating category; and (ii) rating transitions of client over time (i.e. AAA credit rating transiting to

AA etc. over time).

For the purposes of items (i) and (ii), the time period would be five years.

3. AGREEMENT WITH CLIENTS:- The CRC shall enter into a written agreement with each client for solicited ratings and every such agreement shall inter-alia include the following provisions, namely:-

(a) The rights and liabilities of each party shall be clearly defined;

3

(b) The fee to be charged by the CRC shall be specified for specified period;

(c) The client shall agree to co-operate with the CRC in order to enable the latter to arrive at and maintain a true and accurate rating of the client/client’s security and shall in particular provide to the latter a true, complete and timely information for the purpose;

(d) The client shall agree to a periodic review of the ratings by the CRC during the

tenure of the rating and the periodicity of review shall not be less than once a year;

(e) If the client does not co-operate with the CRC to enable the CRC to comply

with its obligations, the CRC shall suspend the rating/withdraw from the engagement and in case of existing/outstanding rating, the CRC shall promptly notify this fact to the Commission and the public.

4. OTHER OBLIGATIONS OF CRCs:- The CRC shall abide by the following:

(a) It shall not accept a rating assignment where a client has prematurely

terminated a rating contract with another credit rating company, unless it obtains a written no-objection from the previously engaged credit rating company stating the reasons for cancellation of its rating contract.

(b) It shall not rate securities issued by it.

(c) It shall not rate a client nor rate securities issued by such client, which is an

associated company or undertaking as defined in the Companies Ordinance, 1984.

(d) It shall not provide consultancy/advisory services to any client or to any of its

associated company that is being rated or has been rated by it during the preceding three years.

(e) It shall exercise due diligence and observe high standards of integrity,

transparency and fairness in all its professional dealings.

(f) It shall establish, document, and ensure implementation and compliance of, policies and procedures to protect against potential conflicts of interest and disclose to the client all possible sources of conflict of interests including that of its directors, management, rating committee and employees.

(g) It shall not get involved in unfair competitive practices nor shall solicit the

clients of any other rating company on implicit or explicit assurance of higher rating or any other undue benefit.

4

(h) It shall not make unsubstantiated claims, in order to solicit clients, about qualifications of its professional staff or its capability to render certain services or its achievements concerning services rendered to other clients.

(i) It shall not, without obtaining prior written approval of the rated client,

disclose to other clients, press or any other party any confidential information about its client, which has come to its knowledge in the course of the rating process, except when such disclosure is required in terms of a legal obligation.

(j) It shall document and ensure implementation and compliance of policies and

procedures to prevent the disclosure of non-public information to outside parties that may benefit from this information. In cases where a CRC is a parent, subsidiary, joint venture partner or affiliate of any organization that might benefit from non-public information, the CRC shall ensure strong firewalls that prevent the disclosure to or use of non-public information by these related or affiliated businesses or their personnel.

(k) It shall require its employees to sign a non-disclosure agreement that prohibits

them from using their access to such information for their own personal benefit.

(l) It shall appropriately record, and ensure confidentiality of, the

information/documents provided by the issuer during the rating process.

(m) It shall not make untrue statement or suppress any material fact in any documents, reports, papers or information furnished to the Commission or to public or to stock exchange.

(n) It shall not generally and in particular situations in relation to its rating, be

party to –

(i) creation of false market; (ii) passing of price sensitive information to brokers, members of the stock

exchanges, other players in the capital market or to any other person or take any other action which is unethical or unfair to the investors.

(o) It shall create firewalls to restrict any information flow between its credit

rating activity and any other activity that it may undertake. (p) A CRC or any of its employees shall not provide, directly or indirectly, any

investment advice or opinion about any security in the publicly accessible media, whether real - time or non- real time, unless a disclosure of its interest in the said security has been made, while rendering such advice.

5

(q) It shall acquire and maintain membership of the Association of Credit Rating Agencies in Asia (ACRAA) and follow the best practices guidelines issued by ACRAA from time to time.

5. FILING OF REPORTS BY THE CRCs:

The CRC shall file a yearly report containing a clause-wise compliance status of this code. The first such report shall be filed within one month of the issuance of this code.

Provided that the Commission may extend the time period for the filing of this report if it considers it to be in the interest of the capital market and the general public.

(Etrat H. Rizvi) Commissioner

Securities and Exchange Commission of Pakistan NIC Building, Jinnah Avenue, Islamabad

July18, 2002

Broker(s)/Brokerage Firm(s)/Incorporated Brokerage House(s) registered with the Commission.

Subject: - DIRECTIVE TO BROKERS / BROKERAGE FIRMS/ INCORPORATED BROKERAGE HOUSES REGISTERED UNDER THE BROKER AND AGENTS REGISTRATION RULES 2001

Dear Sirs,

In order to prohibit unfair trade practices, to ensure a level playing field, to inculcate good governance in business conduct and to promote transparency in the Securities Market, the competent authority is pleased to direct that the following shall not be eligible to become a Director or a Nominee Director of a listed company: -

i. Any Broker or Brokerage Firm registered with the Commission or the Chief Executive Officer, Chief Financial Officer, Head of Internal Audit, Research Analysts, Traders, Agents or Nominees thereof.

ii. Anyone holding a controlling interest in, or a Director, Chief Executive Officer, Chief Financial Officer, Head of Internal Audit, Research Analysts, Traders, Agents or Nominee of an Incorporated Brokerage House registered with the Commission.

iii. Firms/Companies owned or controlled by any of those mentioned at (i) to (ii) above.

Notwithstanding anything stated above, anyone can become a Director of a listed company if he has a minimum shareholding of 10% or above, in the company where he intends to become a Director/Nominee Director.

2. Subject to what is stated above: -

i. A Broker/Brokerage Firm or an Incorporated Brokerage House whose directors or nominee directors are represented on the Board of Directors of a listed company shall not trade in the securities of such a listed company.

ii. No Broker shall act as a Consultant / Adviser to a listed company of which he/his Nominee is a Director.

3. The above directive shall not be applicable to a Non-Executive Director on the Board of an Incorporated Brokerage House, provided, however, that the Incorporated Brokerage House shall neither trade nor act as a Consultant / Advisor to such listed company of which the Non-Executive Director is a Director.

4. The above directive shall be applicable to such Director of a listed company who is elected as a Director, as a result of an election held after 31st August, 2002.

5. The Securities and Exchange Commission of Pakistan (SEC) may relax all or any of the above conditions on a case-to-case basis.

Yours truly,

(Abbas Hasan Kizilbash) Joint Director (SE)

C.C:

1. The Managing Director, Karachi Stock Exchange (Guarantee) Ltd. Karachi.

2. The Managing Director, Lahore Stock Exchange (Guarantee) Ltd. Lahore.

3. The Secretary Islamabad Stock Exchange (Guarantee) Ltd. Islamabad.

Securities and Exchange Commission of Pakistan NIC Building, Jinnah Avenue, Islamabad (Securities Market Division)

SMD/SEC/2(40) 2002 February 07, 2003

Subject: - DIRECTIVE TO BROKERS ON CONDUCT OF BUSINESS

Dear Sirs,

I am hereby directed by the Executive Director (SM) to notify that in order to safeguard public interest, prohibit unfair trade practices, inculcate good governance in business conduct and to ensure that a broker does not engage in certain types of conduct in the Securities Market that are against the interest of an investor, the Commission in exercise of powers conferred upon it under clause (d) of sub-section (4) and of section 20 and clause (g) of sub-section (4) of section 20 of the Securities and Exchange Commission of Pakistan Act, 1997 read with sub-section (1) of section 20 of the Securities and Exchange Ordinance, 1969 hereby directs as under:

i. A broker shall provide brokerage services to an investor only after ensuring that an account has been opened in the investor’s name using an account opening form that is to be developed by the stock exchanges in consultation with the Securities and Exchange Commission of Pakistan.

ii. A broker shall not recommend to an investor the purchase or sale of a security that is unsuitable given the investor's age, financial situation, investment objective and investment experience. Without limitation, investment in a particular type of security may be considered unsuitable or the amount or frequency of transactions may be excessive and therefore unsuitable for a given investor.

iii. A broker shall not guarantee investors that they will not lose money on particular securities transaction, making specific price predictions, or agreeing to share in any losses in the investor 's account.

iv. A broker shall not purchase or sell securities in an investor's account without the investor’s approval, unless the investor has given written discretionary authority to effect transactions in the account.

v. A broker shall not trade on his own behalf or on behalf of his brokerage firm in preference to an investor by trading ahead of a limit order from an investor.

vi. A broker shall not remove funds or securities from an investor 's account without the investor’s prior authorization.

vii. A broker shall not purchase or sell a security while in possession of material, non-public information regarding an issuer.

viii. A broker shall not misrepresent material facts concerning an investment. Examples of information that may be considered material and that should be accurately presented to an investor inter alia include: the risks of investing in a particular security; the charges or fees involved; company’s financial information or any other material information.

The aforesaid directive shall be effective as of 31st March 2003. Please acknowledge receipt.

Yours Faithfully,

(Jahanara Sajjad Ahmad) Joint Director (Policy and Regulation)

C.C.

1. The Managing Director, Karachi Stock Exchange (Guarantee) Ltd. Karachi.

2. The Managing Director, Lahore Stock Exchange (Guarantee) Ltd. Lahore.

3. The Managing Director, Islamabad Stock Exchange (Guarantee) Ltd. Islamabad.

A Guide

Accounts and Accounting

Reference Dates

A Guide

Accounts and Accounting

Reference Dates

Table of Contents

Chapter # Page

1

2

3

a 8

10

Introduction

1 Accounting reference dates

2 Preparing and filing of annual and quarterly accounts

3 Contents of nnual and quarterly accounts

4 Filing exemption for private companies

5 Further information, advice and guidance 11

This booklet is a guide only and should be read in conjunctionwith the relevant legislation.

Introduction

1. Accounting referencedates (ARD)

2. Preparing and filing of annual and quarterly accounts

3. Content of the annual and quarterly accounts

This booklet is a guide to the law and rules governing public disclosure of accounts by limited companies incorporated under the Companies Ordinance, 1984 (the “Ordinance”).

The booklet covers three main topics:

The ARD is the financial year-end. It is also the date that determines when the annual and quarterly accounts of listed companies are due for delivery to the shareholders, concerned stock exchanges, the Company Registration Office (CRO) and the Securities and Exchange Commission of Pakistan (“the Commission”). Every company has an ARD and its accounts are prepared and finalized in light of the same.

There are deadlines by which annual and quarterly accounts must be prepared and delivered to the shareholders, the concerned stock exchange, the CRO and the Commission. When you fail to meet with the requirements, penalty will be levied as provided under the Companies Ordinance. So, it is important that you, your accountants, auditors and consultants are aware of the filing/transmission deadlines.

This booklet also provides guidance as to the contents of the annual and quarterly accounts and will also tell you as to what documents / information make up the annual and quarterly accounts.

1

CHAPTER 1

Accounting reference dates

1. What is a financial year?

2. How is the ARD fixed?

3. What period must a company's first accounts cover?

4. Can the ARD be changed?

5. Are there any restrictions on changing the ARD?

Every company must prepare annual accounts that report on the performance and activities of the company during the year. The period reported on in the accounts is called the financial year. This starts on the day after the previous financial year ended or, in the case of a new company, on the day of incorporation.

A more precise term for a financial year is an accounting reference period.

The accounting reference period ends on the accounting reference date (ARD).

For a new company, the ARD is set using its date of incorporation -see question 3. You can change the first accounting reference period and subsequent accounting reference periods by changing the ARD-see questions 4 and 5.

For all new companies, the first accounting reference period must be set by the Board of Directors keeping in view the requirements of tax laws. The period to which first accounts relates may exceed twelve months.

Yes, by making an application to the Registrar under Rule 30 of the Companies (General Provisions and Forms) Rules, 1985.

You may change an ARD by shortening an accounting reference period by as many months as you like. Likewise, an ARD can be changed by extending an accounting reference period, however, the accounts must be made up to a date not earlier than the date of the meeting by more than four months.

2

CHAPTER 2

Preparing and filing of annual and quarterly accounts

1. Do all companies have to keep accounting records?

2. For how long the prior accounting records are required to be keptby a company?

3. Where the accounting records of a company is to be kept?

4. Can the accounting records be kept at a place other than theregisteredoffice of the company?

5. What period must the accounts cover?

Annual accounts

This chapter explains the basic rules on preparing and filing of annual and quarterly accounts.

Yes. All companies must keep proper accounting records.

The books of account of every company relating to a period of not less than ten years immediately preceding the current year should be preserved in good order. However, in the case of a company incorporated less than ten years before the current year, the books of account for the entire period preceding the current year must be preserved.

The accounting record are to be kept at the registered office of the company.

Yes, all or any of the books of account can be kept at such other place in Pakistan as the directors may decide, and when the directors have so decided, the company has to file with the registrar, within seven days of the decision, a notice in writing on Form 33 of the Companies (General Provisions and Forms) Rules, 1985 (the “Rules”).

The period to which the annual accounts relate shall not exceed twelve months. This period can, however, be extended with the special permission by the registrar. For this purpose, an application is required to be made to the Registrar under Rule 30 of the Rules.

3

A company's first annual accounts cover the period starting on the date of incorporation, not the first day of commencement of trading or business. They end on the accounting reference date (ARD). Subsequent accounts start on the day after the previous accounts ended.

The period to which the quarterly accounts relate shall not exceed three months.

Every company is required to send a set of annual accounts to the registered address of every member of the company at least twenty-one days before the annual general meeting at which it is to be laid before the members of the company and also keep a copy at the registered office of the company for the inspection of the members of the company during a period of at least twenty-one days before that meeting. A listed company is also required to send five copies each of such balance-sheet and profit and loss account and other documents (auditors' report, directors' report etc) to the Commission, the stock exchange and the registrar at least twenty-one days before the date of annual general meeting.

Stock exchanges also require the listed companies to submit additional copies of annual accounts for which the listing regulations of the stock exchange where the company is listed, may be referred.

After the balance-sheet and profit and loss account or the income and expenditure account, have been laid before the company at the annual general meeting, every listed company is required to file with the Registrar at least three copies duly signed by the chief executive, directors, chairman of directors or the auditors of the company, as the case may be along with the reports and other documents whereas in case of a public company, which is not a listed company at least two copies, within thirty days from the date of such meeting.

Quarterly accounts

6. When and how many copies of annual accounts are required to besent to the Members, Commission, Stock Exchange and theRegistrar?

4

If the general meeting before which a balance-sheet is laid, does not adopt the balance-sheet and profit and loss account or the income and expenditure account or defers its consideration or is adjourned, a statement of that fact and of the reasons thereof are required to be annexed to the aforesaid documents and also to the copies thereof required to be filed with the Registrar.

Every listed company is required to prepare and circulate its quarterly accounts within one month of the close of first and third quarter of its year of account, to the members and the stock exchange in which the shares of the company are listed a profit and loss account and a balance-sheet as at the end of that quarter, whether audited or otherwise. For the second quarter, the period within which the quarterly accounts shall be submitted with limited scope review is two months. Moreover, three copies of the quarterly accounts are also required to be transmitted to the Stock exchanges, the Registrar and the Commission within the aforesaid period. Stock exchanges also require the listed companies to submit additional copies of quarterly accounts for which the listing regulations of the stock exchange where the company is listed, may be referred.

Yes, the period for delivering accounts can be extended by a maximum period of two months. For this purpose, an application is required to be made to the Commission to extend the time for laying and delivering annual accounts if there is a special reason for doing so. For example, if there has been an unforeseen event which was outside the control of the company and its auditors. The application must be made under Rule 14 and 30 of the Rules to the Commission in the case of a listed company and to the Registrar in the case of other companies not less than thirty days before the last date on which the annual accounts are to be laid before the annual general meetings.

However, in the case of a listed company, the Commission, and in any

7. When must I deliver my quarterly accounts to the shareholders,stock exchange and the Commission?

8. Can the time allowed for laying accounts be extended?

Annual accounts

5

other case, the registrar, may, for any special reason, extend the period for delivering accounts for a term not exceeding two months from the due date of holding of annual general meeting and presentation of accounts therein.

If a company fails to deliver accounts on time then every director, including chief executive and chief accountant of the company who has knowingly by his act or omission, caused such default shall be liable for punishment in respect of a listed company, with imprisonment for a term which may extend to one year and with fine which would not be less than twenty thousand rupees nor more than fifty thousand rupees, and with a further fine which may extend to five thousand rupees for every day after the first during which the default continues; and in respect of any other company, be punishable with imprisonment for a term which may extend to six months and with fine which may extend to ten thousand rupees.

Similarly, if a company fails to deliver its quarterly accounts on time then every director, including chief executive and chief accountant of the company who has knowingly by his act or omission caused such default would be liable to a fine not exceeding one hundred thousand rupees and to a further fine of one thousand rupees for every day during which the default continues.

The annual and quarterly accounts are required to be approved by the directors and signed by the chief executive and at least one director. Where the chief executive is for the time being not present in Pakistan, then the balance-sheet and profit and loss account or income and

In the case of quarterly accounts, the period cannot be extended.

Quarterly accounts

9. What if the accounts are delivered late?

Annual Accounts

Quarterly Accounts

10. Who can approve and sign the annual and quarterly accounts?

6

expenditure account of the company should be signed by at least two directors present for the time being in Pakistan however, in such a case there shall be subjoined to the balance-sheet and profit and loss account or income and expenditure account a statement signed by such directors explaining the reasons for non-compliance with the aforesaid procedure.

Consolidated financial statements are to be signed by the same persons by whom the individual balance sheet and the profit and loss account or income and expenditure account of the holding company are required to be signed.

Yes, if any copy of a balance-sheet is issued, circulated or published without there being annexed thereto a copy each of (i) the profit and loss account or income and expenditure account, (ii) any accounts, reports, notes or statements referred therein, (iii) the auditor's report, and (iv) the directors report, the company and every officer of the company who is knowingly and willfully in default is to be punished with fine which may extend to five thousand rupees.

Yes, the directors of every company have to lay the annual accounts within eighteen months after the incorporation of the company and subsequently once at least in every calendar year, before the company in annual general meeting in the case of the first account for the period since the incorporation of the company and in any other case since the preceding account, made up to a date not earlier than the date of the meeting by more than four months.

11. Who can sign the consolidated financial statements?

12. Are there any penalties for improper issue, circulation orpublication of Accounts?

13. Do the companies have to present their accounts in AnnualGeneral Meeting?

7

CHAPTER3

Contents of annual and quarterly accounts

1. What does an annual report include?

······

····

2. What does a set of interim accounts include?

······

3. To which laws shall the annual accounts comply with?

Generally, annual report must include:

Balance Sheet;Profit and loss account or income and expenditure account;Notes to the accounts; Auditors' report;Directors' report; and Consolidated accounts and directors' report (if applicable).

The set of annual report of listed companies shall also

include the following documents:

Cash Flow Statement;Statement of Changes in Equity;Compliance statement on Code of Corporate Governance; and Auditors' Review Report on Compliance of Code of

Corporate Governance

General quarterly accounts must include the following?

Condensed balance sheet;Condensed income statement;Condensed cash flow statements;Condensed statement of changes in equity;Selected explanatory notes; andDirectors report;

Further guidance on the contents of quarterly accounts can be found in

International Accounting Standard 34 (Interim Financial Reporting).

The annual accounts of a listed company shall comply with the

8

provisions of the Ordinance including the Fourth Schedule,

International Accounting Standards and the Code of Corporate

Governance.

l

The quarterly accounts shall be prepared in accordance with the

provisions of Section 245 of the Ordinance, International Accounting

Standard 34 and the requirements of Code of Corporate Governance.

Yes, the listed companies are required to prepare and circulate the

consolidated quarterly accounts as per requirements of Section 237.

4. To which aws the quarterly accounts comply with?

5. Whether the listed companies are required to prepare

consolidated quarterly accounts?

9

CHAPTER 4

Filing exemption for private companies

Single member companies and other private companies are not required to file their annual and quarterly accounts with the Commission or the Registrar.

10

CHAPTER5

Further information, advice and guidance

1. From where do I get forms and guidance booklets?

2. How do I send information to the Commission/Registrar?

Head Office

Company Law Division

This is one of a series of the Commission booklets that provide a simple guide to the Companies Ordinance, 1984 in respect of accounts and accounting reference dates. For further guidance, you should seek professional advice from a legal expert.

The quickest way to get them is through our web site www.secp.gov.pk.

Various forms can be downloaded from aforesaid website and can also be obtained from the stationers, accountants, legal advisers and corporate practitioners.

You may deliver documents to the Commission/Registrar by post, courier or by hand to one of the following relevant addresses.

Securities and Exchange Commission of PakistanNIC Building, 63 Jinnah AvenueIslamabadPhone: 051-9207091-4Fax: 051-9218592E-mail: [email protected]

Mr. Abdul Rehman QureshiCommissioner

th11 Floor, NIC Building, 63 Jinnah Avenue Islamabad.Phone: 051-9202692E-mail: [email protected]

11

Mr. Rashid SadiqExecutive Director (Enforcement)

th7 Floor, NIC Building, 63 Jinnah Avenue, Islamabad.Phone: 051-9212084E-mail: [email protected]

The Joint Registrar of CompaniesCompany Registration OfficeState Life Building, 7-Blue Area, Islamabad. Phone: 051-9208740, Fax: 051-9208740Email: [email protected]

The Additional Registrar of CompaniesCompany Registration Office4th Floor, SLIC Building No.2, Karachi. Phone: 021-2415855, 2416778, Fax: 021-2416788Email: [email protected]

The Additional Registrar of CompaniesCompany Registration Office3rd & 4th Floors, Associated House,7-Egerton Road, Lahore. Phone: 042- 9200274, Fax 042-9202044Email: [email protected]

The Deputy Registrar of CompaniesCompany Registration Office63-A, Nawa-i-Waqt Building, Abdali Road, Multan.Phone: 061-9200920, Fax: 061-9200920Email: [email protected]

CRO Islamabad

CRO Karachi

CRO Lahore

CRO Multan

12

CRO Faisalabad

CRO Peshawar

CRO Quetta

CRO Sukkur

The Joint Registrar of CompaniesCompany Registration Office356-A, Al-Jamil PIaza, 1st Floor, Peoples Colony, Small D Ground, Faisalabad. Phone: 041-9220284 Fax: 9220284Email: [email protected]

The Joint Registrar of CompaniesCompany Registration Office1st Floor, State Life Building, The Mall, Peshawar Cantt. Phone: 091-9213178Fax: 091-9213178Email: [email protected]

The Deputy Registrar of CompaniesCompany Registration Office382/3, (IDBP House), Shahrah-e-Hali, Quetta Cantt. Phone:081-844136Email: [email protected]

The Assistant Registrar of CompaniesCompany Registration OfficeB-30, Sindhi Muslim Housing Society, Airport Road, Sukkur. Phone: 071-30517

13

Printe

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86

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abad. Ph:

2273756

SECP Guide SERIES


GUIDE

FOR

CHANGE IN COMPANY OBJECTS

Published by Registration Department

N.I.C BUILDING, JINNAH AVENUE, ISLAMABAD - PAKISTAN

Ph: 051-9207091- 4 Fax: 051-9204915 Website: www.secp.gov.pk

E-mail: [email protected]

INTRODUCTION

The business proposed to be undertaken by a company is mentioned in clause III of

its Memorandum of Association, which relates to objects of a company. The

Companies Ordinance, 1984 (the Ordinance) allows a company to alter the object

clause of its Memorandum of Association with the approval of the Securities &

Exchange Commission of Pakistan (SECP), on the petition filed by a company

within 60 days of the passing of Special Resolution, for the reasons provided under

section 21 of the Ordinance and the procedure laid down under rule 3 read with

rules 28, 30 and 32 of the Companies (General Provisions and Forms) Rules, 1985

(the Rules).

ABOUT THIS GUIDE

This Guide is intended to provide basic information about the alteration in the

object clause of the Memorandum of Association of a company and making a

petition to the SECP for confirmation of the alteration; so as to facilitate the

companies from the point of view of practical approach to law and corporate

procedure. This is a guide only and must be read with the relevant provisions of

law.

CHAPTER 1 APPROVING AUTHORITY

An alteration takes effect only if and to the extent confirmed by SECP. However, in order to

facilitate the corporate sector, the powers of SECP have been delegated to the registrars

concerned i.e. the Incharges of the Company Registration Offices (CROs) of SECP situated

in different cities all over the country i.e. Karachi, Lahore, Islamabad, Peshawar,

Faisalabad, Multan, Sukkur and Quetta. The addresses of the CROs are given at the end of

this Guide.

REASONS/GROUNDS FOR MAKING ALTERATION IN OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION Clause III of the Memorandum of Association of a company may be altered on any of the

following grounds:

to carry on some business, not being a business specified in its memorandum,

which may conveniently or advantageously be combined with the business of

the company; or

to enlarge or change the local area of its operations; or

to carry on its business more economically or more efficiently; or

to attain its main business purpose by new or improved means; or

to restrict or abandon any of the objects specified in the memorandum; or

to sell or dispose of the whole or any part of the undertaking of the company;

or

to amalgamate with any other company or body of persons.

CHAPTER 2 PROCEDURE FOR CHANGE IN COMPANY OBJECTS

INTERNAL PROCEDURE Step-wise internal procedure for change in objects of a company 1. Seek the approval of the board of directors for placing special resolution before the

company in general meeting for alteration in Memorandum of Association (change

in objects). The reasons for making alteration fall within the broad categories as

mentioned in chapter 1 of this Guide.

2. Send at least 21 days notice, to the members for convening of the general meeting - Annual

General Meeting (AGM) or Extraordinary General Meeting (EOGM). However, an EOGM

may be held at a shorter notice with the approval of registrar in case of an emergency

affecting the business under proviso to section 159(7) of Companies Ordinance, 1984. The

draft special resolution for change in objects and statement of material facts is also sent

alongwith the said notice to members. In case of a listed company, notice is also required to

be published at least in one issue each of a daily newspaper in English and Urdu languages

having circulation in the Province in which the stock exchange(s) on which the company is

listed is/are situated.

3. Pass special resolution with a majority of not less than 3/4th of the members entitled to vote

as are present in person or through proxy in the general meeting.

4. File copy of the special resolution on prescribed Form 26 (format available on SECP

website) along with paid challan of prescribed filing fee within 15 days of passing of

Special Resolution with the Registrar concerned (in case of submission in physical form).

The fee as specified in Annex-A is to be deposited; in the designated branches of MCB Bank

Limited. For submission in physical form, preprinted Challans are available at all the

designated branches of MCB Bank Limited. In case of online submission, challan is auto

generated by the system as explained in the procedure for online submission.

5. Submit application to SECP (the registrar concerned) in the manner provided in chapter 3.

CHAPTER 3

PROCEDURE FOR SUBMISSION OF APPLICATION FOR CHANGE IN COMPANY OBJECTS

This part of this guide explains the procedure for the submission of application and

relevant documents to be submitted with offline application and stepwise procedure to file

online application.

Modes of Submission There are two modes of submission of Form 26 as well the application for alteration in the

Memorandum of Association of a company namely;

i. Offline - submission of application in physical form. ii. Online - submission of application by using eServices of SECP.

The details about both the modes of submissions are given below:

Procedure for offline submission The petition alongwith relevant documents shall be filed with the Registrar concerned within 60

days of passing of Special Resolution. There is no specific format of the petition, however, the

application must contain the information and accompanied with the documents, as provide

under rule 3 of the Rules, as mentioned in the specimen application hereunder:

The Securities & Exchange commission of Pakistan

Companies Registration Office, ______________________ ______________________ Name of City (Karachi/Lahore/Islamabad/Peshawar/Quetta/Faisalabad/Multan/Sukkur)

Subject: APPLICATION U/S. 21 FOR ALTERATION IN THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION OF THE COMPANY Dear Sir, We submit the following information/documents for seeking your approval for alteration in

the object clause of Memorandum of Association of the company in accordance with the

Special Resolution adopted by the members of the company in their meeting held on

_________, subject to approval of the SECP:

1 Name and Address of the

company A B C (Private) Limited having its registered office at ______________________ _________________________________________ Karachi.

2 Number and date of Incorporation

No. 0000000/0000 dated 000000

3 Subscribed and paid up capital

Rs. 00,000/- divided into 000 shares of Rs. 10/- each)

4 Redeemable capital

Rs. 00,000/- divided into 000 shares of Rs. 10/- each) OR Nil (as the case may be)

5 Business actually being carried on and the clause in the memorandum justifying it

The company is presently engaged in the business of providing consultancy services, conducting of feasibility studies and preparation of feasibility reports for setting up of petroleum industries including but not limited to crude oil refining and processing of , LPG, CNG, LNG, Bitumen and other hydrocarbons in terms of sub clause 1 of clause III of the Memorandum of the Association.

6 Reasons for the proposed alteration

To increase the scope of the business in the inflationary period for the Financial Strength of the Company.

7 Names and addresses of each of company’s creditors to whom an amount exceeding fifty thousand rupees is due with the amount mentioned against each

S. No. Names and

addresses of creditors

Amount due

1 2 3

8 Consent of creditors to the proposed alteration

As per Annexure “A-1 to A-3.

9 Copy of Special Resolution As per Annexure “B”

10 Minutes of the meeting As per Annexure “C”

11 Statement in a comparative form showing the existing provisions of the memorandum as are proposed to be altered and the provisions as would appear after the proposed alterations indicating the clause of sub-section (1) of section 21 under which each alteration is considered permissible by the company along with brief reasons explaining how it considers it permissible

As per Annexure “D”

12. Existing memorandum and articles of association

As per Annexure “E”

13. Amended Memorandum and articles of association

As per Annexure “F”

14. Pattern of holding of shares on form 34

As per Annexure “G”

15. Names and addresses of the persons likely to be affected along with their consent to the alteration

S. No.

Names anaddresses

Copy of consent

1 Annex H-1 2 Annex H-2 3 Annex H-3

16. Particulars of dissenting shareholders or Creditors together with their objections:

S. No.

Names and addresses

Copy of consent

(If any):

1 Annex I-1 2 Annex I-2 3 Annex I-3

17. Copy of latest audited accounts:

As per Annexure “J”

18. Affidavit by the Secretary verifying the correctness of the contents and enclosures

As per Annexure “K”

19. Original Bank Challan evidencing the deposit of Rs. 10,000/- in the any of the designated branches of MCB, being application fee.

As per Annexure “L”

It is requested that the approval to the alteration in the Object Clause of Memorandum of

Association of the Company may please be granted.

Yours truly,

Chief Executive/ Director/Secretary ABC (Private) Limited

Step Wise Procedure for Online Submission: Like many of our online services, online change in company objects process requires no

paper work and enables the company to submit application without visiting offices of

SECP. The application can be submitted by using eServices portal of SECP. The process for

online submission is very simple and easy.

Step 1: Log on to eServices • In case the company has eServices Login name and Password: Connect to eServices https://eservices.secp.gov.pk/eServices and log on to your account

using your eServices Login name and Password provided by SECP.

Important Note: PLEASE NOTE THAT “SIGN UP” LINK ON eServices WEBPAGE, IS FOR NEW INCORPORATION PROCESS ONLY AND NOT FOR ALREADY INCORPORATED COMPANIES. • In case the company has not obtained eServices Login name and Password,

please follow the procedure as under:

1. Apply for an eServices Login name and Password by writing a letter, on the company

letterhead, duly signed by the Chief Executive Officer and the Company Secretary, or

Chief Financial Officer, or one of the Directors of the company, along with a copy of

their CNIC.

2. Mention the email address on which the eServices Login name and Password will be

dispatched. Please, only provide POP3 email address such as [email protected], free

email address such as hotmail, gmail, or yahoo is not acceptable.

3. SECP will confirm the validity of the email address; after validation, the eServices

Login name and Password will be emailed to the specified email address.

4. All letters requesting an eServices User Identification and Password to be addressed to

Director (MIS), SECP at one of the following addresses:

Director (MIS) SECP, NIC Building, Registration Department, Jinnah Avenue Islamabad, Pakistan email: [email protected] Phone: +92-51-9207091-3 (Ext: 280)

Deputy Director (MIS) SECP, NIC Building, Registration Department, Jinnah Avenue Islamabad, Pakistan email: [email protected] Phone: +92-51-9207091-3 (Ext: 286)

Note

The request for User ID and password may also be sent to SECP by

email. The scanned image of the signed application shall be sent at

the address given above.

Step 2: Enter information

Click the relevant process available on the process listing webpage “Change in Company

Objects". An input page is displayed wherein the following information will be entered by

the user.

i. Company information: Details of Company Name, Incorporation Number and date will be automatically

generated from the system.

ii. Payment Details: Select Bank Branch from the list, where fee will be deposited.

iii. Resolution Details: Fill the details of the resolution as a result of which the decision for alteration in the

object clause of memorandum of association took place. These include date of

dispatch of notice, date of passing of Special Resolution and the reason for

alteration.

iv. Members Details : Fill details of total number of members, members present in the meeting, members

voted for and against the motion and their share representation in the company

v. Meeting Address: Fill details of address, City, Province and Postal Code of the venue where the

general meeting took place at which the resolution for change of company name was

passed.

vi. Signatory:

Enter details of signatory. Signatory could be Chief Executive or one of the Directors

or Company Secretary.

vii. Press Continue Link:

By pressing Continue Link, Process Document Listing Page will be displayed,

containing the following links:

a. Update Form Data:

Click link if you want to update the data. After updating data, press

Continue link again. Process Document Listing Page will be displayed again.

b. View Form 26:

System automatically fills out the Form using the data entered by you. You

can view the Form by clicking on this link.

c. Fill New Attachment Form:

In this link, you can attach the required documents in PDF format. The size

of the attachment should be of less than 2 MB. Attach the required document

and click Save Form. The following documents are to be attached with the

application:

(1) Justification/reasons for the proposed alteration; (2) Copy of Special resolution on Form-26; (3) Copy of Minutes of Meeting (4) Copy of Existing Memorandum of Association (5) Comparative statement showing the existing provision and the provision as

would appear after the proposed alteration (6) Amended Memorandum and Articles of Association (7) Patter of holding of shares on prescribed form 34 (8) Copy(ies) of NOC(s) from creditor(s) (9) NOC of the respective regulatory authority (in case of special nature

business company) (10) Objections of dissenting shareholders/creditors

(11) Names and addresses of interested parties likely to be affected by proposed amendment (12) A copy of the latest balance sheet (13) Authority Letter in favour of the consultant, if any. (14) Clippings of Urdu and English newspapers (in case of a Listed Company only)

d. Fill Bank Challan Form:

Click link and Bank Challan will be displayed. Bank Challan is automatically

populated with prescribed fee and other information by the eServices

application.

Press “Save Form button” to save challan.

e. Sign Form:

By clicking Sign Form, the digital Signature Pad window will appear. Form

is signed using the digital certificates. Digital Certificates are obtained from

the NIFT (www.niftetrust.com). Select all the options available Under “Select

for Signature” Column. Now, select the correct Digital Signature from the

dropdown menu. Press “Sign” button.

Persons competent to sign the application The Chief Executive or director or secretary of the company, if authorized by the board, may sign or digitally sign in case of online submission, the application and all its enclosures, with the affidavit that the contents of the application and its enclosures are true and correct.

After you press Sign button, click “Submit to SECP” button. All the documents will

be submitted to the SECP and a process reference number will be generated and

displayed.

Step 3 - Printing of challan and deposit of fee

i. Click “submitted process” button on the left hand side of the screen. ii. Click “challan form” link for printing the challan. iii. Click print form button. Four copies namely “original, bank copy, SECP copy

and depositor copy” shall be automatically printed. The fee shall be deposited in the Bank branch selected by the applicant from the branches of MCB Bank Limited. The bank shall retain the SECP and bank copies and return original and depositor copy to the depositor.

The process will be initiated as soon as the SECP receives the verification of deposit

of fee from the Bank.

User will get the response by receiving an email notifying approval, rejection or

seeking compliance.

CHAPTER 4

Post Submission procedure

This part of guide explains the post submission procedure i.e issuance of order by the

competent authority, filing of certified copy of order by the company and the issuance of

filing certificate by the registrar.

Confirmation of alteration by the Commission ( powers now delegated to the registrar concerned)

The Commission (powers now delegated to the registrar concerned) may make an order

confirming the alteration either wholly or in part, and on such terms and conditions as it

thinks fit.

Procedure on confirmation of the alteration.- (only for Offline submission)

A certified copy of the order confirming the alteration, together with a printed copy of the

memorandum as altered shall be filed by the company with the registrar within ninety

days from the date of the order. This requirement is applicable only if the documents have

been submitted in the physical form (Offline). The registrar shall register the same, and

issue an Acknowledge of filing, which shall be conclusive evidence that all the

requirements of this Ordinance with respect to the alteration and the confirmation thereof

have been complied with and thenceforth the memorandum so altered shall be the

memorandum of the company.

The Commission may by order at any time extend the time for the filing of the aforesaid

documents with the registrar section for such period as it thinks proper.

Effect of failure to register within ninety days.- (always for offline submission) If the certified copy of order and other relevant documents are not filed with the registrar

within 90 days from the date of order or within such further time, as may be allowed by the

Commission (powers now delegated to the registrar concerned), as aforesaid the order

becomes null and void.

Provided that the Commission (powers now delegated to the registrar concerned) may, on

sufficient cause shown, revive the order or alteration, as the case may be, on application

made within a further period of ninety days.

ANNEXURE “A”

CHECK LIST

S. No. Documents No. Yes × √

1. Have you filed Form 26 (only in case of physical submission).

2. Have you given all the information as required by Rule 3 of the Companies (General Provisions and Forms) Rules, 1985?

3. Have you enclosed copy of special Resolution on

ANNEXURE “B” SCHEDULE OF FEE

Item Fee for online submission

Fee for submission in physical form

Form-26? 4. Have you enclosed copy of Minutes of Meeting? 5. Have you enclosed Copy of Existing Memorandum

of Association?

6. Have you enclosed Copy of Amended Memorandum of Association

7. Have you enclosed statement in comparative form showing existing and proposed provisions of Memorandum of Association?

8. Have you enclosed a copy of latest audited balance sheet?

9. Have you enclosed copy(ies) of NOC(s) from creditor(s)?

10. Have you enclosed pattern of holding of shares? 11. Have you enclosed Affidavit from the Chief

Executive or Secretary?

12. Have you enclosed copy of Authority Letter in favor of consultant?

13. Have you enclosed Original paid Bank Challan of Rs. 10,000/- being application fee, in case of physical submission?

14. Have you deposited the fee Rs. 5,000/- being application fee, in case of online submission?

15. Have you enclosed Clippings of Urdu and English newspapers if you are a Listed Company?

16. Have you enclosed objections of dissenting shareholders/creditors?

17. Have you enclosed names and addresses of the persons whose interests likely to be affected by proposed amendment?

18. Are you filing petition within 60 days of passing of special resolution?

Filing of Form 26 600 1,500

Application fee 5,000 10,000 Filing of copy of Order confirming alteration and amended copy of memorandum

600 1,500

Further information

Statutory forms and guidance booklets are available, on SECP”s website, http://www.secp.gov.pk. These Guides briefly describe procedures of important matters relating to the Ordinance and the rules and regulations made thereunder. For further details please consult relevant law, rules or contact with any of the Company Registration offices (CROs) of SECP as per addresses given hereunder: 1. Company Registration Office,

4th Floor, State Life Building No.2, Karachi. Phone: 021-99213272, Fax 021-99213279 Email: [email protected]

2. Company Registration Office, 63-A, Nawa-i-Waqt Building, Abdali Road, Multan. Phone: 061-9200530 Fax 061-9200530 Email: [email protected]

3. Company Registration Office, 3rd & 4th Floors, Associated House, 7-Egerton Road, Lahore. Phone: 042- 99200274, Fax 042-99202044 Email: [email protected]

4. Company Registration Office, 356-A, Al-Jamil PIaza, 1st Floor, Peoples Colony, Small D Ground, Faisalabad. Phone: 041-9220284 Fax: 041-2899134 Email: [email protected]

5. Company Registration Office, State Life Building, 7-Blue Area, Islamabad Phone: 051-9208740, Fax 051-9206893 Email: [email protected]

6. Company Registration Office, 382/3, (IDBP House), Shahrah-e- Hali,

Quetta Cantt. Ph: 081-2844136 Fax: 081- Email: [email protected]

7. Company Registration Office,

1st Floor, State Life Building, The Mall, Peshawar Cantt.

8. Company Registration Office, House # 28, Hamdard Housing Society,

Phone: 091-9213178, Fax 091-9213686 Email: [email protected]

Airport Road, Sukkur. Ph: 071-5633757 Fax: 071-5630517

Email: [email protected]

PUBLIC CONSULTATION

If you have any suggestions for the development in the legal framework or otherwise,

please let us know about your opinion/comments on the following address:

Executive Director (Registration) of Companies, Securities and Exchange Commission of Pakistan, NIC building, Jinnah Avenue, Blue Area, Islamabad, Pakistan. Comments can also be sent via electronic mail at the following address:

[email protected]

DISCLAIMER

The booklet has been published with the intention to create an awareness of the concept of the relevant matters. However, the booklet does not tell everything and the opinions or legal interpretations, contained in the booklet are circumstantial and may vary under different situations. If the reader is in doubt or dealing with any specific condition, it is recommended to refer to the Ordinance and allied laws and consult an adviser for seeking professional advice.

SECP GUIDE SERIES (till the preparation of this Guide) 1. Company Name Availability Guide 2. Promoters’ Guide (in English, Urdu, Arabic, Chinese & Persian) 3. Single Member Company Guide (in Urdu) 4. Modaraba Promoters’ Guide 5. Insurance Guide 6. Directors and Secretaries Guide 7. Company Mortgages and Charges 8. Investors Guide (Vol.-I) 9 Investors Guide (Vol.-II) 10 Investor’s Guide for Lodging Complaints 11 Guide on Accounts and Accounting Reference Dates

12 Guidebook on Further Issue of Shares otherwise than Rights 13 Guidebook on Issue of Preference Shares 14 Conversion of Status of Companies 15 Shareholders’ Rights 16 Winding up and Dissolution of Companies 17 Investigation into the affairs of a company 18 Foreign Companies Guide 19 Licensing & Registration of Associations Not-For-Profit 20 Guide for Appointment of Statutory Auditors and Ancillary Matters 21 Filing of Statutory Returns (note: it has been prepared, but its name is missing)

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SECP Guide

SERIES


(SECP)

Change of Company

Name Guide Published by Registration Department

NIC Building, Jinnah Avenue, Islamabad, Pakistan

Ph. No.: 051-9207091-4, Fax: 051-9204915

Website: www.secp.gov.pk e-mail: [email protected]

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Introduction

Almost every country has its own unique laws/rules and requirements for change of company name; however, basic procedures regarding change in company name across the jurisdictions are almost the same and commonly understood. In Pakistan, a company name can be changed in terms of section 38 or 39 of the Companies Ordinance, 1984.

A company may either change its name on its own, with the approval of Registrar or on the direction of the Registrar.

In case of company seeking to change its name on its own, it may change its name due to any valid reason including the following:

• A company may change its name, if the company, through inadvertence or otherwise, is registered by a name in contravention of the provisions of Section 37 of the Companies Ordinance 1984 (the Ordinance).

• Many companies adopt new names to express their new identity due to their business development in the national and international arena.

• If one company is taken over by another company, the members may choose the name of the acquiring company, combine the two old company names, or think up altogether a new name.

• A change of management may be another reason. • If the company intends to carry out some other

appropriate/ suitable business. • If the existing company name does not match, with the

business specified in its memorandum of association. • Sometimes the name of a company does not remain

attractive in the market, so company seeks to change its name according to new market trends and conditions.

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• Any other given reason/ reasons.

The Registrar may direct a company to change its name if the company, through inadvertence or otherwise, is registered by a name in contravention of the provisions of Section 37 of the Ordinance.

This Guide has been developed to provide overall guidance and also to describe the stepwise procedure for change of name of a company. This is a guide only and must be read with the relevant legislation. You will find the relevant law in Section 39 of the Ordinance.

This guide has been divided in 3 parts for the convenience of users:

(i) Company’s Internal Procedure (ii) Application procedure (iii) Post Submission

Part 1: Company’s Internal Procedure

This part of guide booklet explains the circumstances leading to company name change and company’s internal procedure for changing its name.

A. Circumstances of Changing a Company name: 1. Change of name by a company under section 39 of the

Ordinance A company may, if it so desires, change its name with the approval of registrar by adopting procedure as laid down under the law and fulfilling requirements.

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2. Change of name by a company on the direction of the

Registrar of Companies under section 38 of the Ordinance

A company which, through inadvertence or otherwise, is registered by a name in contravention of the provisions of Section 37 of the Ordinance,

(i) may change its name on its own, and (ii) shall change its name on the direction of Registrar.

For both the situations, the approval of the Registrar is mandatory. Other details and stepwise procedure/requirements are given in this guidebook. B. Where approval of registrar is not required for change

in a company’s name: Any change in name of a company involving the deletion or addition as the case may be, of the parenthesis and word “(Private)”, as a result of its conversion from a private limited company into a public company or vice versa, shall not be deemed as a change of name. In such cases, approval of registrar is not required. C. Step Wise internal procedure for changing name of

company: Two Processes:

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An application for change of name of a company can be submitted through any of the following two processes.

i. Offline - Manual submission of application. ii. Online - by using eServices of SECP.

Like many of our online services, online change of name process requires no paper work and enables the company to submit application without visiting SECP. The process involves simple and easy steps for company name change application submission, by using eServices portal. Common Procedure: 1. Initial discussion and decision to seek availability of

name from the registrar concerned. For offline submission, availability of name application is submitted with challan of Rs. 500/-. For Online submission, fees for seeking availability of name is Rs. 200/-, detailed procedure of which is given at Para E.

2. Approval by the board of directors for change of name

of the company. 4. Send at least 21 days notice, to the members for

convening of the general meeting - Annual General Meeting (AGM) or Extraordinary General Meeting (EOGM). However, an EOGM may be held at a shorter notice with the approval of registrar in case of an emergency affecting the business. The draft special resolution for change of name and statement of material facts shall also be sent along with the said notice to members. In case of a listed company, notice is also required to be published at least in one issue each of a daily newspaper in English language and a daily newspaper in Urdu language having circulation in the

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Province in which the stock exchange on which the company is listed is situate.

5. Pass special resolution with a majority not less than 3/4th of the members entitled to vote as are present in person or through proxy in the general meeting.

6. File copy of the special resolution on prescribed Form 26

(Format available on SECP website) along with paid challan of prescribed filing fee.

7. Submit application to the registrar concerned through

online/off-line.

Part 2: Application Procedure

This part of guide booklet explains the application procedure, relevant documents to be submitted with offline application and stepwise procedure to file online application.

D. Documents to be Submitted with the Offline Application for Change of Company Name:

No specific format of the application is prescribed. However, the application must be accompanied with the documents, as mentioned in the specimen application attached as under:

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The Registrar of Companies, Company Registration Office, ________________ Subject: Application for change of name Dear Sir,

It is submitted that M/S ABC (Private) Limited

has passed a special resolution on 00.00.0000 to change its

name to XYZ (Private) Limited subject to approval of the

registrar. Requisite information/ documents are provided as

under:

(1) Justification/reasons for the proposed change;

(2) Copy of Special resolution on Form-26; (3) Amended Memorandum and Articles of

Association(showing the changed name); (4) NOC of the respective regulatory authority

(in case of special nature business company)

(5) Bank challan for Rs. 5,000/(deposited in any of the designated branches of MCB Bank Limited) being application fee;

(6) Affidavit on stamp paper of appropriate value;

(7) Copy of availability of name letter. It is requested that approval for change of name

may please be granted at the earliest.

Yours truly,

(ABC)

Chief Executive/ Director/Secretary

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E. Step Wise Procedure for Online Submission of application for Change of Company Name: Step 1: Log on to eServices

• In case the company has eServices Login name and Password:

Connect to eServices https://eservices.secp.gov.pk/eServices and log on to your account using your eServices Login name and Password provided by SECP.

Important Note: PLEASE NOTE THAT “SIGN UP” LINK ON eServices WEBPAGE, IS FOR NEW INCORPORATION PROCESS ONLY AND NOT FOR ALREADY INCORPORATED COMPANIES.

• In case the company has not been provided eServices Login name and Password, please follow the procedure as under:

1. Apply for an eServices Login name and Password

by writing a letter, on the company letterhead, duly signed by the Chief Executive Officer and the Company Secretary, or Chief Financial Officer, or one of the Directors of the company, along with a copy of their CNIC.

2. Mention the email address on which the eServices

Login name and Password will be dispatched. Please, only provide POP3 email address such as [email protected], free email address such as hotmail, gmail, or yahoo is not acceptable.

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3. SECP will confirm the validity of the email address, after validation the eServices Login name and Password will be emailed to the specified email address.

4. All letters requesting an eServices User

Identification and Password to be addressed to Director (MIS), SECP at one of the following addresses:

Director (MIS) SECP, NIC Building, Registration Department, Jinnah Avenue Islamabad, Pakistan email: [email protected] Phone: +92-51-9207091-3 (Ext: 280)

Deputy Director (MIS) SECP, NIC Building, Registration Department, Jinnah Avenue Islamabad, Pakistan email: [email protected] Phone: +92-51-9207091-3 (Ext: 286)

Step 2: Enter Information

A successful logon to eServices by entering Login name and password will display a list of available and unavailable processes.

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For online processing of change of name of the company, it is necessary that the reservation of a new company name is obtained first.

Step 2 (a): Click on “Company name reservation” process. An input page is displayed wherein the following information will be entered by the user.

i. Company information:

Enter company’s proposed name and select company kind from the drop down list.


iii. Applicant information:

Enter applicant name, C.N.I.C number, telephone number, address, email address and main object.

iv. Press Continue Link:

By pressing Continue Link, Process Document Listing Page will be displayed, containing the following links:


Click link if you want to update the data. After updating data, press Continue link again. Process Document Listing Page will be displayed again.

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b. View Company Name Reservation Form:

System automatically fills out the required form using the data entered by you. You can view this form by clicking on this link.


In this link, you can attach the required documents (if any) in PDF format and click Save Form. Please note that file size must not exceed 2 MB.

d. Fill new Bank Challan Form:

Click link and Bank Challan will be displayed. Bank Challan is automatically populated with prescribed fee and other information by the eServices application.

Press print form button and then save Form. Four copies will automatically be printed as original copy, bank copy, SECP copy and depositor copy. The fee shall be deposited in the Bank branch selected by the applicant from the branches of MCB Bank Limited. The bank shall retain the SECP and bank copies and return remaining two copies (original and depositor copy) to the depositor.

e. Start Process

Click Start Process to submit Company name reservation request. An acknowledgment will be displayed after submitting company name reservation request, stating: “Your application has been successfully submitted to SECP. The documents will be processed only after verification that the prescribed fee has been deposited in any of designated bank branches.”

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User will get the response by receiving an email notifying approval, rejection or seeking compliance.

Step 2 (b): After receiving approval of company name reservation, connect to eServices and log on to your account by entering login name and password.

Click the "Change of Company Name" process available on the process listing webpage. An input page is displayed wherein the following information will be entered by the user.

i. Company information:

Details of Company Name, Incorporation Number, and date will be automatically generated from the system.


iii. Resolution Details:

Fill the details of the resolution as a result of which the decision of change of company name took place. These include date of dispatch of notice, date of passing of Special Resolution, proposed name for the company and the reason for name change.

iv. Member Details :

Fill details of total number of members, members present in the meeting, members voted for and against the motion and their share representation in the company.

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v. Meeting Address: Fill details of address, City, Province and Postal Code of the venue where the general meeting took place at which the resolution for change of company name was passed.

vi. Signatory:

Enter details of signatory. Signatory could be Chief Executive or one of the Directors or Company Secretary.

vii. Press Continue Link:



Click link if you want to update the data. After updating data, press Continue link again. Process Document Listing Page will be displayed again.

b. View Form 26:

System automatically fills out the Form 26 using the data entered by you. You can view this form by clicking on this link.


In this link, you can attach the required documents in PDF format e.g., Amended Memorandum and Articles of Association (less than 2 MB), Affidavit etc. Attach the required document and click Save Form.

14

d. Fill Bank Challan Form:

Click link and Bank Challan will be displayed. Bank Challan is automatically populated with prescribed fee and other information by the eServices application.

Press Print Form button and then Save Form. Four copies will automatically be printed as original copy, bank copy, SECP copy and depositor copy. The fee shall be deposited in the Bank branch selected by the applicant from the branches of MCB Bank Limited. The bank shall retain the SECP and bank copies and return remaining two copies (original and depositor copy) to the depositor.

e. Sign Form:

By clicking Sign Form, the digital Signature Pad window will appear. Form is signed using the digital certificates. Digital Certificates are obtained from the NIFT. Select the eForm available Under “Select for Signature” Column. Now, select the correct Digital Signature from the drop down menu. Press “Sign” button.

After you press Sign button, click “Submit to SECP” button. All the documents will be submitted to the SECP and a process reference number will be generated and displayed.

The process will be initiated as soon as the SECP receives the verification of deposit of fee from the Bank.

User will get the response by receiving an email notifying approval, rejection or seeking compliance.

15

F. Persons competent to make an application: The Chief Executive or director or secretary of the company, if authorized by the board, may sign or digitally sign in case of online application, the application and all its enclosures, with the affidavit that the contents of the application and its enclosures are true and correct.

Part 3: Post Submission

This part of guide booklet explains the post submission procedure, issuance of certificate of change of company name and effect of change of company name.

G. Issuance of Certificate of Change of Company Name: After the approval by the registrar concerned, he issues certificate for change of name of the company and the same is dispatched through Courier. H. Effect of Change of Company Name: The change must be noted in the memorandum and articles of association and all documents, invoices, letterheads, bills, signboards, seal, etc. In addition, the company which changes its name, shall for a period of one year from the date of the change, continue to mention its former name along with its new name in the manner XYZ (Pvt.) Limited (formerly ABC (Pvt.) Limited), on the outside of every office or place in which its business is carried on, in bill heads, letter papers, documents, notices, official publications, invoices, etc.

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The change of name shall not affect any rights or obligations of the company or any legal proceedings by or against the company. Any legal proceeding commenced against the company by its former name shall continue against the company by its new name.

Further Information The SECP is publishing a series of its Guides. These Guides briefly describe procedures of important matters relating to the Ordinance, and the rules and regulations made thereunder. Statutory forms and guidance booklets are available, on our website, http://www.secp.gov.pk.

List of Company Registration Offices 1. Company Registration Office,



3. Company Registration Office, State Life Building, 7-Blue Area, Islamabad Phone: 051-9208740, Fax 051-9206893


17

4. Company Registration Office, 1st Floor, State Life Building, The Mall, Peshawar Cantt. Phone: 091-9213178, Fax 091-9213686 Email: [email protected]

5. Company Registration Office, 63-A, Nawa-i-Waqt Building, Abdali Road,

Multan. Phone: 061-9200530 Fax 061-9200530 Email: [email protected]

6. Company Registration Office, 356-A, Al-Jamil PIaza,

1st Floor, Peoples Colony, Small D Ground, Faisalabad. Phone: 041-9220284 Fax: 041-2899134 Email: [email protected]


382/3, (IDBP House), Shahrah-e-Hali, Quetta Cantt. Ph: 081-2844136 Fax: 081- Email: [email protected]

8. Company Registration Office, House # 28, Hamdard Housing Society, Airport Road, Sukkur. Ph: 071-5633757 Fax: 071-5630517 Email: [email protected]

18

PUBLIC CONSULTATION

If you have any suggestions for the development in the legal framework or otherwise, please let us know about your opinion/comments on the following address:

Registrar of Companies, Securities and Exchange Commission of Pakistan, NIC building, Jinnah Avenue, Blue Area, Islamabad, Pakistan.

Comments can also be sent via electronic mail at the following address: [email protected]

DISCLAIMER


19

SECP GUIDE SERIES 1. Company Name Availability Guide 2. Promoters’ Guide (in English, Urdu, Arabic, Chinese &

Persian) 3. Single Member Company Guide (in Urdu) 4. Modaraba Promoters’ Guide 5. Insurance Guide 6. Directors and Secretaries Guide 7. Company Mortgages and Charges 8. Investors Guide (Vol.-I) Investors Guide (Vol.-II) 9. Investor’s Guide for Lodging Complaints 10. Guide on Accounts and Accounting Reference Dates 11. Guidebook on Further Issue of Shares otherwise than Rights 12. Guidebook on Issue of Preference Shares 13. Conversion of Status of Companies 14. Shareholders’ Rights 15. Winding up and Dissolution of Companies 16. Investigation into the affairs of a company 17. Foreign Companies Guide 18. Licencing & Registration of Associations Not-For-Profit 19. Guide for Appointment of Statutory Auditors and Ancillary

Matters

2

Table of Contents Page # Introduction 3

Chapters

1. Guidelines for selection of a name 4 - 5

2. Prior approval of Commission required 5-12 for certain company names

3. Name Search Facility on web-site 12

4. Application Procedure and Fee 12-16

5. Application against refusal of a name 16

6. Further Information 16-19

3

Introduction

Company is a legal entity formed by a person or association of persons for lawful business activities registered under the Companies Ordinance, 1984 (the ‘Ordinance’). The first step towards incorporation of a company is to seek the “availability of name” for the proposed company from the concerned registrar of companies. Although, it sounds simple enough, but there are certain prohibitions and restrictions, the applicant has to look into while choosing a name for a company. In this regard, it must be ensured that the name chosen for the proposed company is neither inappropriate, deceptive or designed to exploit or offend the religious susceptibilities of the people, nor identical or closely resembling with the name of an existing company. This guide is intended for those persons who are desirous of forming a company and to help them in understanding the process of choosing an appropriate name for their company in order to save time and efforts for registering a company. (To know about the procedure of incorporation of a company, please read “Promoters Guide” available in English, Urdu, Arabic and Chinese languages).

4

Chapter – 1

Guidelines for selection of a name Section 37 of the Ordinance provides that:

• the proposed name should not be inappropriate, deceptive, or designed to exploit or offend the religious susceptibilities of the people;

• the proposed company name shall not be identical or

have close resemblance. It must be distinguishable from the names of existing companies, and any name that has already been reserved by the Registrar for registration of a company. Following guideline must be kept in mind to avoid applying for identical names:

o A name is not distinguishable by differences in

punctuation or capital words, or the presence or absence of articles, conjunctions or prepositions as symbols or words (including “the,” “THE”, “a,” “A”, “and,” “of,” “in”, “at”, “Al”, “New”, “Modern”).

o A word in the plural form will be regarded as being

identical to a word in the singular form and vice versa. For example 'industry' and 'industries' would be regarded as being identical;

o Also, names which have close phonic resemblance

with the name of existing companies are not distinguishable.

5

It is in the interest of promoters of a company to ensure that the name selected for their company should portray true inculcate of their business and have difference with any other name on the register. This will reduce the risk of confusion and the following potential difficulties like:

o Objections to the company name. o Confusion with other companies with a poor trading

record. o Litigation in civil law.

Important Note Regarding Spellings of Proposed Names It is pertinent to mention here that the application for availability of name will be considered only if the spelling of proposed name is according to dictionary. Any deviation in dictionary spellings will not be accepted and the name will be rejected. e.g., Imerica for America, carachi for Karachi, etc.

Chapter – 2

Prior approval of Commission required for certain company names

There are certain words and expressions which if used in a company name may imply business pre-eminence, a particular status or specific function. These words are generally allowed on producing sufficient justification by the promoters so as to ensure that public may not mislead with the name. These include names which contain any words suggesting or calculated to suggest:

6

• patronage of any past or present Pakistani or Foreign Head of State.

• any connection with the Federal Government or Provincial Government or any department or authority of any such Government.

• any connection with any corporation setup by or under any Federal or Provincial law; or

• patronage of or any connection with any Foreign Government or any International organization.

Guideline on prohibitions of certain types of words in a company name, are given below: Association

This word may be included in the name of companies to be established on grant of license by the Commission under section 42 of Ordinance or which are established as a Trade Organization under Trade Organizations Ordinance, 2007. Benevolent/ Foundation

These words may be included in the name of companies to be established on grant of license by the Commission under section 42 of Ordinance. Society This word may be included in the name of companies if proper justification is provided

7

Fund This word may be allowed in the name of company if the company will function as Non-Banking Financial Company under the license of Specialized Companies Division of the Commission or to public sector company on grant of license by the Commission under section 42 of the Ordinance. Council

This word may be included in the name of companies to be established on grant of license by the Commission under section 42 of Ordinance. Moreover, this expression is also allowed to Sports Association and Professional Bodies. Chamber of Commerce

This word may be included in the name of entities which are being formed as Trade Bodies under license under Trade Organization Ordinance, 2007, from Director General Trade Organization, Ministry of Commerce Government of Pakistan. Authority/ Register/ Registered/ Co-operative/ Bureau/ Division

These words are not allowed Trust This word may be included in the name of REITs to be established on grant of license by the Specialized Companies Division of the Commission.

8

Assurance/ Assurer/ Insurance/ Insurer/ Re-Assurance/ Re-Assurer/ Re-Insurance/ Re-Insurer These words may be included in the name of companies involved in Insurance, Assurance, Re-insurance and Re-assurance business. Prior permission of Insurance Division of the Commission would be required at the time of Incorporation. Board This word may be included in the name of companies desirous to engage in the business of Paper &/or Board or to public sector companies. Bahria/ Askari/ Fouji/ Fazaiya/ Cadet

This word may be included in the name of companies to be established by the relevant agency. Banks/Banking Company

These words may be included in the name of companies on the basis of permission from State Bank of Pakistan under section 8 of the Banking Companies Ordinance, 1962 and section 5(1) of Microfinance Institutions Ordinance, 2001. Charter/Chartered

These words may be included in the name of companies having charter from the sovereign authority of the Federation and the Province

9

Exchange/Bourse

These words are only allowed in the name of Stock Exchange, Commodity Exchange and Exchange Companies subject to NOC from relevant authority.

Familiar Trade Names These words may be included in the name of companies only if NOC of familiar trade name user is provided or proper documentary evidence of ownership/use of trade name is furnished by the applicant Famous/ Distinct Personalities These words may be included in the name of companies if proper justification and approval of relevant authority is provided. Federation This word may be included in the name of Sports Federations licensed under section 42 of Ordinance or trade bodies under Trade Organizations Ordinance, 2007. Federal This word is allowed in the name of company with the approval of the Commission, if the proposed company has a connection or any patronage with Federal Government. Group

This word may be included in the name of companies if use of this word implies several companies under single corporate ownership and applicants have to provide evidence of

10

subsidiary/associate relationship with two or more other Pakistani Companies. Holding

This word may be included in the name of company which establishes that it qualifies to be a holding company as defined in Section 3 of the Ordinance i.e. the company has object clause showing its intention to act as holding company after incorporation. Institution This word may be included in the name of the public sector companies Investment

This word may be included in the name of Non-Banking Finance Companies, REITs and brokerage houses or any public sector financial institution or investment company. Investment Finance, Investment Advisory, Leasing, Asset Management, Housing Finance

This word may be included in the name of Non-Banking Finance Companies. Name of Company containing country name or nationality other than Pakistan

These names are not allowed unless sufficient justification is provided.

11

Name of Company containing name of two countries i.e. Pakistan/Pak and any other foreign company

These words may be included in the name of companies where documentary evidence is provided in support of the fact that the company is a Joint Venture of two Governments or companies of two countries. New/Modern/The/Al

These words may be included in the name of companies. However, these expressions will not be acceptable if used to make proposed company as distinctive from already existing companies. Patronage of past or present, Pakistani or Foreign, Head of State/ any connection with Federal or Provincial Government, Department or authority/any connection with corporation set up by or under Federal/Provisional Law/ the patronage of, or any connection with, any Foreign Government or any International Organization

These words may be included in the name of companies with the approval of the Commission provided sufficient justification is furnished. State This word may be included in the name of companies formed by the Federal Government University This word may be allowed only in the name of University Management Company for the management of University in terms of guidelines of Higher Education Commission.

12

UNO, World BANK, IMF, Red Cross, Red Crescent These words are not allowed

Chapter – 3

Name Search Facility on web-site For the facilitation of general public and promoters desirous of forming a company, the Commission has provided a name search facility on eServices portal at https://eservices.secp.gov.pk/eServices/NameSearch.jsp. Any person can check the availability of a proposed company name i.e., whether the company name is available for registration or otherwise by simply searching the desired name through the facility, before actually applying for a company name. It may be noted that a company name search for checking the availability of a proposed company name on the website does not necessarily mean that the proposed name is available for registration. Registrar examines and dispose off each request in accordance with law and may reject such a proposed name, if found in violation of Section 37 of the Ordinance Chapter – 4

Application Procedure and Fee There are two methods for the submission of application for seeking confirmation of availability of name:-

13

1. THROUGH ELECTRONIC MODE/ ONLINE: eServices by Securities and Exchange Commission of Pakistan (the Commission) has enabled the promoters of a company to seek company name availability online, using the eServices Portal, without visiting the Company Registration Office (CRO). Application fee for the availability of name through online is Rs. 200/- only, cheaper than through offline, which is Rs.500/-. For this purpose, an applicant has to follow certain steps in order to reserve a desired name for the proposed company. The steps are;

Log on to eServices:

The client will connect to, https://eservices.secp.gov.pk/eServices, for signup. Click on sign up button to open the Form. Fill in the required information and click on sign up button to submit the Form. User will receive an e-mail containing the user activation link. By clicking on the link, user account will be activated. Enter Information A successful logon to eServices by entering user ID and password, and clicking login button, will make available Company Name Reservation process. User will click on the Company Name Reservation process. An input page is displayed, wherein the information will be entered by the user. After clicking the ‘Continue’ button, the process

14

document listing page is displayed, containing the following links: a. Update Form(s) Data: Click link if you want to update the data. b. View Company Name Reservation Form: Click link and view the automatically filled eForm based on your input. c. Fill New Attachment Form: Click link and an attachment form window will be displayed. Attach document, if any, and click Save Form Button. Please note that only PDF files are allowed for attachment. Process document listing page will be displayed. d. Fill New Bank Challan Form: Click link and auto filled bank challan will be displayed. Click Print Form Button. Four copies will automatically be printed as original copy, bank copy, SECP copy and depositor copy. After printing, Click Save Form Button. The fee shall be deposited in the Bank branch selected by the applicant from the designated branches of MCB Bank Limited. The bank shall retain the SECP and bank copies and return remaining two copies (original and depositor copy) to the depositor.

Submit the process: After saving the Bank Challan, Process document listing page will be displayed. Click on Start Process link. All the documents will be automatically submitted to the SECP. The

15

process of the SECP will be initiated as soon as the SECP receives the verification of deposit of fee from the Bank. For more information about the eServices, please visit the website at https://eservices.secp.gov.pk/eServices/ 2. MANUAL SUBMISSION OF APPLICATION For this purpose, application can be made on a plain paper addressed to the registrar concerned. A specimen of application for seeking availability of name is appended below. The application fee for the availability of name is Rs. 500/- for each proposed name. The fee can be paid in the designated branches of MCB Bank Limited through Challan Form which is available “Free of Cost” at the “Facilitation Counters” of the CROs and branches of MCB Bank Limited.

16

On acceptance of application (for a company’s name reservation), the name is reserved for a period of 90 days, further extendable upto the same period on receipt of fresh application. Confirmation of availability or non-availability of name is instantly sent on the e-mail address (if provided by the company). Simultaneously, letter is also dispatched on the postal address.

The _____ Registrar of Companies Company Registration Office ___________ Subject: Application seeking confirmation of Availability of a Name –

(Proposed). Dear Sir,

It is submitted that we want to incorporate a company with the name and style as “ ____Name of the company (Proposed).” under the Companies Ordinance, 1984. A copy of the Original Challan of Rs.------ deposited in MCB Bank Limited, ___Name of City___ on account of necessary fee for Availability of the proposed name is enclosed.

It is requested that the requisite availability of name certificate may be issued at the earliest.

Yours truly, Name & Complete Address

17

Chapter – 5

Application against refusal of a name If application for the availability of a proposed company name is refused by the concerned registrar for any reason and the applicant feel aggrieved by his decision, he can file an application for review of the said decision with the Registration Department. The application for review must be supported by reasons for review of the decision and should be accompanied by the following documents:

• Deposited bank Challan for application fee of Rs. 500/- • Copy of decision letter by concerned Registrar. • Affidavit.

Chapter – 6

Further Information The Commission is publishing a series of its Guides. These Guides briefly describe procedures of important matters relating to the Ordinance and the rules and regulations made thereunder. Statutory forms and guidance booklets are available, free of charge from the Commission Headquarters and the following Companies Registration Offices. The quickest way to get these is through our website, http://www.secp.gov.pk/.

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1. Company Registration Office, State Life Building, 7-Blue Area, Islamabad

Phone: 051-9208740, Fax 051-9208740 Email: [email protected]


4th Floor, SLIC Building No.2, Karachi. Phone: 021-99213272, Fax 021-9213278 Email: [email protected]


3rd & 4th Floors, Associated House, 7-Egerton Road, Lahore. Phone: 042- 9200274, Fax 042-9202044 Email: [email protected]

4. Company Registration Office, 63-A, Nawa-i-Waqt Building, Abdali Road, Multan.

Phone: 061-9200530 Fax 061-9200530 Email: [email protected]


1st Floor, Peoples Colony, Small D Ground, Faisalabad. Phone: 041-9220284 Fax: 9220284 Email: [email protected]

6. Company Registration Office, 1st Floor, State Life Building,

The Mall, Peshawar Cantt. Phone: 091-9213178, Fax 091-9213178 Email: [email protected]

7. Company Registration Office, 382/3, (IDBP House), Shahrah-e-Hali, Quetta Cantt. Ph: 081-2844136 Email: [email protected]

19


House # 28, Hamdard Housing Society, Airport Road, Sukkur. Ph: 071-5630517 Email: [email protected]

PUBLIC CONSULTATION


Executive Director (Registration), Securities and Exchange Commission of Pakistan, NIC building, Jinnah Avenue, Blue Area, Islamabad, Pakistan.


20

DISCLAIMER


` SECP Guide

SERIES


Guide on

Conversion of Status of

Companies


Ph. No. : 051-9207091-4, Fax: 051-9204915 / 9218591

Website: www.secp.gov.pk E-mail: [email protected]

.

---------------------------------------------------------------------------------------------------------------- Guide on Conversion of Companies (www.secp.gov.pk )

1

AIMS AND OBJECTIVES 1. AIMS AND OBJECTIVES

This is simply a guide to understand the procedures involved in conversion of

status of a public company into a private company and vice versa; as well as a

single member company into a multi-members private company and vice versa.

It must be read in conjunction with the relevant provisions of the Companies

Ordinance, 1984 (“Ordinance”) and the rules framed there-under such as the

Companies (General Provisions and Forms) Rules, 1985 (“the Rules”), the Single

Member Companies Rules, 2003 (“the SMC Rules”) etc.

2. TYPES OF CONVERSION OF STATUS OF COMPANIES

Generally, following are the types of conversion of companies:-

a) Private Company into Public Company;

b) Public Company into Private Company;

c) Private (Multi-members) Company into Single Member Company;

and

d) Single Member Company into Private (Multi-members) Company.

3. CONVERSION FROM PRIVATE COMPANY INTO PUBLIC

COMPANY

Section 45 of the Ordinance provides that a private company may convert its

status into a public company by altering its articles of association in such a

manner that they no longer include the provisions which, under clause (28) of

sub-section (1) of section 2 of the Ordinance, are required to be included in the

articles of association of a company to constitute it as a private company. The

company shall:-

a) on the date of the alteration, cease to be a private company; and

.


2

b) within a period of fourteen days after the said date, file with the

registrar either a prospectus or a statement in lieu of prospectus.

No approval of any authority for the conversion of status from a private

company into public company is required. However the company has to adopt

below mentioned stepwise procedure for such conversion:-

3.1 PROCEDURE FOR THE CONVERSION OF STATUS OF COMPANY FROM PRIVATE COMPANY INTO PUBLIC COMPANY

Following procedure is required for conversion of private company into

public company:-

Step 1: The proposal for conversion of status of private company into public

company is firstly discussed and approved by the Board of Directors.

Step 2: 21 days notice accompanied with the proposed special resolution is

issued for convening the general meeting of shareholders of the

company.

Step 3: Resolution for conversion of the status from Private Company into

Public Company and alteration in Articles of Association is placed

before the members which is carried as special resolution. A special

resolution is to be passed by the majority of not less than three-

fourth, of such members entitled to vote as are present in person or

by proxy at a general meeting.

There is significant difference in the Articles of both the types of

companies. Therefore; the Articles are required to be amended on

.


3

change of the status, especially restrictive clauses applicable on a

private company are to be deleted.

Step 4: The Company shall increase its directors and shareholders if they are

less than the minimum number which are required for a public

company.

Step 5: The company shall file the under-mentioned documents with the

registrar concerned:-

a) Form - 26 within 15 days of passing of special resolution.

b) Amended copy of the Memorandum and Articles of

Association.

c) Prospectus or Statement in Lieu of Prospectus within 14 days of

passing of special resolution.

Prospectus is required to be filed by the company which invites

subscription from the general public; otherwise a Statement in

Lieu of Prospectus is to be filed. Prospectus is prescribed in Part

I of the Second Schedule to the Ordinance and also requires

prior approval by the Commission. The Statement in Lieu of

Prospectus as prescribed in Part III of the Second Schedule to

the Ordinance is to be filed.

d) Form – 3 (allotment of shares to new members / directors in

case, the new directors are not members of company)

e) Form – 27 i.e. list of persons consenting to act as directors.

f) Form – 28 Consent to act as directors.

g) Form - 29 (in case of increase of directors, if the company does

not already have three directors required for a public company)

.


4

h) Bank challan evidencing the deposit of filing fee of the

documents in any of the designated branches of MCB as per

schedule given in annexure-A.

Step 6: The registrar concerned shall issues a certificate regarding conversion of status of private company into public company and a filing certificate.

Step 7: The Company may obtain a certified copy of Memorandum and Articles

of Association on payment of copying fee of Rs. 500/- for the application submitted online and Rs. 1,000/- for the application submitted in the physical form.

Step 8: The name of the company with the changed status i.e. without the word

“private” shall be mentioned in all letterheads, bills, invoices, seal etc.

Copies of Memorandum and Articles of Association are also recorded

with the alteration.

4. CONVERSION FROM PUBLIC COMPANY INTO PRIVATE

COMPANY

A public company can be converted into a private company with the prior approval in

writing, and subject to such conditions as may be imposed by the Securities and

Exchange Commission of Pakistan (Commission) in terms of section 44 read with section

28 of the Ordinance and in compliance with rules 7, 28, 30, 32 and 34 of the Rules.

Under rule 7 of the Rules, where the articles of association of a public company

have been amended having the effect of converting its status from public

company into a private company, the company is required to make an

application not later than sixty days from the date on which the special

resolution seeking such alteration was passed, on Form 2 to the Commission for

its approval under section 44 of the Ordinance.

.


5

4.1 PROCEDURE FOR THE CONVERSION OF STATUS OF COMPANY FROM PUBLIC COMPANY INTO PRIVATE COMPANY

Following procedure is required for conversion of public company into

private company:-

Step 1: The proposal for the conversion of status of a public company into

private company is firstly discussed and approved by the Board of

Directors.


issued for convening the general meeting of the shareholders of the

company.

Step 3: Resolution for the conversion of status from Public Company into

Private Company and alteration in Articles of Association is placed

before the members, which is carried as special resolution.



change of the status; therefore the same must be amended to change the

status especially the imposition of restrictions meant for a private

company.

Step 4: Special Resolution on Form 26 along with Bank challan evidencing the

deposit of fee in any of the designated branches of MCB (as per schedule

given in Annexure A), shall be filed with the registrar concerned within

15 days passing thereof.

.


6

Step 5: Application shall be sent to the Commission within 60 days of the date

of passing of the special resolution. Such application shall be

accompanied with the following documents:-

i. Form 2. (prescribed under the Rules)

ii. Copy of Form 26 (Special Resolution).

iii. Copy of the Memorandum and Articles of Association duly

amended.

iv. Certified copy of the existing Memorandum and Articles of

Association.

v. Copy of latest audited Balance Sheet and Profit and Loss Account.

vi. Copy of minutes of the General Meeting.

vii. Bank challan evidencing the deposit of fee in any of the

designated branches of MCB, as per schedule given in Annexure-

A, on account of application fee (Form-2)

viii. Affidavit that the contents of the application are true.

ix. Application must be in duplicate and a copy is required to be sent

to the registrar concerned under Rule 32 of the Rules.

Step 6: The Commission gives approval for conversion of public company into

private company through an Order.

Step 7: Certified copy of the order of the Commission is obtained by depositing

the fee as per schedule given in Annexure A for each copy and the

requisite court fee stamps.

Step 8: Certified copy of the order along with amended copy of the

Memorandum and Articles of Association are filed with the registrar

concerned with bank challan evidencing the deposit of filing fee in any

of the designated branches of MCB (as per schedule given in Annexure

A).

.


7

Step 9: The registrar shall issue certificate on conversion of status of a public

company into a private company and the filing certificate in respect of

Special Resolution and Order of the Commission.

The company may obtain a certified copy of the Memorandum and

Articles of Association on payment of copying fee of Rs. 250/- for the

application submitted online and 500/- in physical form, and the


5. CONVERSION FROM PRIVATE COMPANY TO SINGLE MEMBER COMPANY

A private company (Multi-members Company) can be converted into a single

member company in terms of Rule 9 of SMC Rules and for this purpose, the

company has to pass a special resolution for change of its status, make necessary

alteration in its articles and obtain approval of the Commission.

In terms of rule 10 of the SMC Rules, the parenthesis, letters, hyphen and the

words “(SMC-Private) Limited”, shall form part of the name of every single

member company and “XYZ (SMC-Private) Limited” shall be the pattern and

style of the name of a single member company.

5.1 PROCEDURE FOR THE CONVERSION OF STATUS OF A PRIVATE COMPANY (MULTI-MEMBERS) INTO SINGLE MEMBER COMPANY

Following procedure is required to be adopted for conversion of private

company (multi-members) into single member company:-

Step 1: Approval of the Board of Directors for change of status of private

company into single member company is sought.

.


8


issued for convening the general meeting of the shareholders of the

company.

Step 3: Resolution for conversion of the status from Private Company into

Single Member Company and alteration in Articles of Association is

placed before the members which is carried as special resolution.



change of the status; therefore the same must be amended to change the

status especially the imposition of restrictions meant for single member

private companies. The regulations in S-8 of the SMC Rules may be

adopted for this purpose.

Step 4: Special Resolution on Form - 26 along with bank challan evidencing the

deposit of filing fee in any of the designated branches of MCB (as per

schedule given in Annexure-A), is filed with the registrar concerned

within 15 days of passing of the special resolution. A special resolution

is to be passed by the majority of not less than three-fourth, of such

members entitled to vote as are present in person or by proxy at a

general meeting.

Step 5: Application is sent to the Commission within 30 days of the date of

passing of the special resolution. Such application is accompanied with

the following documents:-

i. Form S - 4 prescribed under the SMC Rules.

ii. Copy of Form - 26 (Special Resolution) – see section 172.

.


9

iii. Copy of the Memorandum and Articles of Association, duly

amended.

iv. Certified copy of the existing Memorandum and Articles of

Association.

v. Minutes of the General Meeting.

vi. Bank challan evidencing the deposit of fee in any of the

designated branches of MCB, as per schedule given in Annexure-

A, on account of application fee (Form S-4).

vii. Affidavit that the contents of the application are true.

viii. Application must be in duplicate and a copy is required to be sent

to the registrar concerned under Rule 32 of the Rules.

Step 6: The Commission gives approval for conversion of private company into

single member company through an Order.

Step 7: Certified copy of the order along with Form S-1, Form S-5 and amended

copy of the Memorandum and Articles of Association are filed with the

registrar concerned with bank challan evidencing the deposit of filing

fee of all the aforesaid documents in any of the designated branches of

MCB, as per schedule given in Annexure-A.

Step 8: The registrar issues filing certificate of Special Resolution and Order of

the Commission.

Step 9: The Company shall transfer the shares to Single Member within 15 days

of the order of conversion by the Commission.

Step 10: The Company shall also file the particulars of out going directors (being

more than one Director) on Form – 29 within 14 days of the change, to

the registrar concerned.

.


10

Step 11: In terms of section 204-A of the Ordinance and rule 6 of SMC Rules, a

single member company is required to appoint a company secretary

within fifteen days of incorporation or of becoming a single member

company. The appointment of company secretary is to be reported to

the registrar concerned on prescribed Form-29 within 14 days from the

date of appointment.

Step 12: In terms of 7 of SMC Rules, the single member shall nominate two

individuals; one of whom shall be the nominee director to work in case

of death of single member. The other shall be alternate nominee director

to act as nominee director in case of non-availability of nominee director.

The nominee director is required to:

(a) manage the affairs of the company in case of death of single

member till the transfer of shares to legal heirs of the single

member;

(b) inform the registrar concerned of the death of single member,

provide particulars of the legal heirs and in case of any

impediment, report the circumstances, if any, seeking the

directions, in the form as set out in Form S-3 within seven days of

the death of the single member;

(c) transfer the shares to legal heirs of the single member; and

(d) call the general meeting of the members to elect directors.

6. CONVERSION FROM SINGLE MEMBER COMPANY INTO PRIVATE COMPANY

A single member company (originally incorporated as Single Member Company

or converted from private company as such) may convert into private company

in accordance with rule 4 of the SMC rules. The persons becoming members due

.


11

to transfer or transmission or further allotment of shares, as the case may be,

shall pass a special resolution to make alteration in articles and appoint one or

more additional directors. Where a single member company converts into a

private company pursuant to sub-rule (1), it shall file a notice of the fact in

writing in the form as set out in Form S-2 with the registrar within 30 days from

the date of passing of special resolution.

A single member company may be converted into a private company on increase

of the number of its members to more than one due to transfer of shares or

further allotment of shares or death of the single member or operation of law as

provided in rule 4 of SMC Rules.

No approval of any authority for the conversion of status from a Single Member

Company into Private Company is required. However, the company has to

adopt the below mentioned procedure for conversion.

6.1 PROCEDURE FOR THE CONVERSION OF STATUS OF COMPANY FROM SINGLE MEMBER COMPANY INTO PRIVATE COMPANY

Step 1: The proposal for conversion of status of single member company into

private company is firstly discussed and approved by the Board of

Directors.


issued for convening the general meeting of shareholders of the

company.

Step 3: Resolution for conversion of the status from Single Member Company

into Private Company and alteration in Articles of Association is

placed before the members which is carried as special resolution.

.


12


companies. Therefore; the resolution not only meant for removal of

word “(SMC)” from the name of the company, but would also to

substitute new articles for a private company.

Step 4: The company has to increase its directors and shareholders to

minimum number i.e. 2 required for private company within 15 days

of the passing of special resolution under section 174 (i) (b) of the

Ordinance.

Step 5: The company has to file the under-mentioned documents with the

registrar concerned:-

a) Form 26 within 15 days of passing of special resolution.

b) Amended copy of Memorandum and Articles of Association.

c) Circular u/s 86(3) (if further shares are offered to the existing

members)

d) Form - 3 (in case if further allotment of shares is made).

e) Form - 29 (for the appointment of additional director, within 14

days of the date of appointment).

f) Bank challan evidencing the deposit of filing fee of all the

aforesaid documents in any of the designated branches of MCB,

as per schedule given in Annexure-A.

Step 6: The registrar concerned issues a filing certificate regarding conversion

of single member company into private company and a filing

certificate.

.


13

Step 7: The Company may obtain a certified copy of the Memorandum and

Articles of Association on payment of copying fee of Rs. 250/- for the

application submitted online and 500/- in physical form, and the


Step 8: Change of status is recorded in all letterheads, bills, invoices, seal etc.

Copies of the Memorandum and Articles of Association are also

recorded with the alteration.

PUBLIC CONSULTATION

If you have any suggestions for the development in the legal framework or

otherwise, lease let us know about your opinion/comments on the following

address.

Registrar of Companies, Securities and Exchange Commission of Pakistan,

NIC Building, Jinnah Avenue, Blue Area, Islamabad, Pakistan

Telephone No. (051)-9206306

Comments can also be sent via electronic mail at the following address:

[email protected]

.


14

ANNEXURE “A”

SCHEDULE OF FEE

Item Fee for online submission

Fee for submission in physical form

Form 3 600 1,500

Form 26 600 1,500

Form 27 600 1,500

Form 28 600 1,500

Form 29 600 1,500

Form S-1 600 1,500

Form S-2 600 1,500

Form S-3 600 1,500

Form S-5 600 1,500

Copy of SECP’s Order 100 200

Application fee (Form 2 or Form S-4 as the case may be

2,500 5,000

.


15

DISCLAIMER The booklet has been published with the intention to create an awareness of the

concept of the relevant matters. However, the booklet does not tell everything

and the opinions or legal interpretations, contained in the booklet are

circumstantial and may vary under different situations. If the reader is in doubt

while dealing with any specific condition, it is recommended to refer to the

Companies Ordinance, 1984 and allied laws and consult a professional for

seeking advice.


NIC Building, Jinnah Avenue, Blue Area

Islamabad, Pakistan

Ph. No.: 051 – 9207091 – 4, Fax: 051 – 9204915

Website: www.secp.gov.pk



Directors and Secretaries Guide

NIC Building, Jinnah Avenue, Islamabad, Pakistan.

Ph. No.: 051-9207091-4, Fax: 051-9204915 Website: www.secp.gov.pk


SECP Guide

SERIES

Table of Contents Page

Introduction 2 1. Limited companies: the basic 4 2. Role of a company director 6 3. Role and duties of a company secretary 10 4. What documents are to be provided to the

Commission and the registrars? 14 5. Quality of documents 17 6. Further information 20

2

The Law recognizes a company, as a “legal person” which in its own rights, is capable of owning property, making contracts, conducting litigations and also responsible for doing wrongs. When we look at these matters from practical angle, and at the way in which this artificial legal person functions; its corporate will is manifested, its decisions taken and its acts performed, we see that a company cannot do any thing at all except through the human beings. The business of a company is run and managed by its board of directors; which is headed by a Chief Executive. The companies appoint these officers as required by the Companies Ordinance, 1984 (hereinafter referred to as “the Ordinance”). The Ordinance necessitates the appointment of at least one director and a company secretary for a single member company, two directors for a private limited company, three directors for an unlisted public company and seven directors and a company secretary for a public listed company. The director, or directors, must manage the company’s affairs in accordance with its memorandum and articles of association and the law. Certain responsibilities apply to all directors, whether executive or non-executive. This booklet:

• explains some of the main responsibilities of a company's officers; and

• deals with some of the key requirements of the Ordinance in relation to the filing of documents with the Securities and Exchange Commission of Pakistan (the Commission) and the Company Registration Offices (CROs). The booklet will not tell you everything about being a director or secretary, but it will give you a good idea of your responsibilities as they relate to the Commission and CROs.

Introduction

3

If, after reading this booklet, you are in doubt about your responsibilities, you should seek professional advice from a legal adviser or a professional accountant.

4

Limited companies: the basics

1. Do I really need to incorporate a limited company? The basic features and advantages to carry out the business through a company are as under:-

• DISTINCT LEGAL ENTITY Separate from its shareholders/directors. It has its own rights and liabilities. It can borrow money and invests funds, own property, sue and be sued, enter into contracts etc.

• LIMITED LIABILITY - PROTECTION OF PERSONAL

ASSETS Incorporation gives the privilege of limited liability to its members up to a maximum of their investment or share in the entity or undertaken by them in event of winding up.

Debts of company are the debts of this artificial legal person and not of the people running the company or owning shares in it. Personal property of the shareholders can not be attached for the recovery of debts

Chapter

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5

• EASY MEASUREMENT OF INVESTMENT OF EVERY

PERSON The investment of every person is known / determined

• EASY TRANSFERABILITY OF OWNERSHIP OF

SHARES Clear and convenient legal framework for the transferability of interest (shares) -

• PERPETUAL SUCCESSION

In distinction to partnership, the death of one or more or even of all the members does not affect its legal status and do not end the company

• EASY TO RAISE FUNDS

Preference by the financial sector in extending the financial assistance to documented and organized form of incorporated business

• PART OF REGULATED AND DOCUMENTED SECTOR

• ACCOUNTABILITY AND RESPONSIBILITY

Preparation and audit of accounts

• ELEVATION OF BUSINESS STATUS Incorporation gives a status higher than partnership and Proprietor-ship in the organizational hierarchy.

• ESTABLISH CREDIBILITY Having an incorporated business would give any business more credibility among potential customers, vendors, partners and employees

• COMPACT LEGAL AND ORGANIZATIONAL

FRAMEWORK

6

The entity must function within the limits prescribed through its charter and regulates its existence through a set of bylaws.

2. What does limited liability mean? This means that if a company is put into liquidation, the people who own the company will only be required to pay what they have already paid or agreed to pay towards settling its debts. Limited liability gives the owners of the company (its members) protection if the company fails. 3. How do I set up a limited company? If you decide, may be after taking professional advice, that a limited company is the best thing for your business, you can incorporate a company with the CRO under the provisions of the provisions of the Ordinance - for details see our booklet “Promoters’ Guide” and guidelines for “Company Name Selection” also available on the Commission’s web-site “http://www.secp.gov.pk/CLD/cld_guides.asp ”. 4. What can I do with an unwanted company?

If you decide that you do not need a company that you have set up, you should consider putting it into winding up. For detailed procedure with regard to winding up of the company, please see our guide booklet titled with “Winding up and Dissolution of Companies”

4. What happens if accounts and other statutory returns are filed late and other statutory returns? As a director of a public limited company or a private limited company having the paid up capital of Rs. 7.5 million or more you normally have a maximum of 5 months from the close of accounting year for filing your company’s audited accounts.

7

If the accounts or other return(s) is / are received late, the company will not only pay additional filing fee but the company and its officers can also be punished with fine. In addition to normal the additional fee will be payable as under:- 5. What is the query of non-presentation of annual account

in the annual general meeting? If accounts or copy(ies) of other return(s) is/are received late, the company will not only pay additional filing fee but the company and its officers can also be punished with fine.

8

Role of a company director 1. Who can be appointed as a director? Generally it is up to the members to appoint the people they believe will run the company well on their behalf. The ineligibilities that prevent anyone becoming a director are; If he:

• is a minor; • is of unsound mind; • has applied to be adjudicated as an insolvent and his application is

pending; • is an undischarged insolvent; • has been convicted by a court of law for an offence involving moral

turpitude; • has been debarred from holding such office under any provision of

this Ordinance; • has lacked fiduciary behaviour and a declaration to this effect has

been made by the Court under section 217 of the Ordinance at any time during the preceding five years;

• is not a member ; This disqualification shall not apply in the case of a person representing the Government or an institution or authority which is a member, a whole-time director who is an employee of the company, a chief executive or a person representing a creditor;

Chapter

2

9

• has been declared by a Court of competent jurisdiction as defaulter in repayment of loan to a financial institution, exceeding Rs. 1,000,000* and

• is a member of a Stock Exchange engaged in the business of brokerage, or is a spouse of such member*. (* The restrictions are applicable only in case of listed companies).

2. What responsibilities does a director have towards Commission and the registrar?

Every company director has a personal responsibility to ensure that all the statutory documents are filed with the Registrar and the Commission as and when required under the Ordinance. In particular:

• audited accounts (only for public limited companies including association not for profit); and private limited companies having paid up capital of Rs. 7.5 million or more);

• annual returns (Form A/B); • particulars of directors or other officers (Form 29); and • notice of change of registered office (Form 21).

Chapter 4 summarizes what documents a limited company has to file with the Commission and the Registrar. 3. What happens if accounts or annual returns are not filed? Failure to deliver documents on time is an offence under the Ordinance. On conviction, a director could be penalized with a fine and also debarred from becoming director. 4. Are directors really prosecuted? Yes. On average of more than 2,000 directors are adjudicated / prosecuted each year for failing to file accounts and other statutory returns with the Registrar within the prescribed time. Persistent failure to comply with the statutory requirements on time may also lead to a director being disqualified and the company may also be wound up under certain circumstances.

10

5. What happens if accounts are filed late? As a director of a public limited company, or a private limited company having the paid up capital of Rs. 7.5 million or more you normally have a maximum of 5 months from the close of accounting year for filing your company’s audited accounts.

If the accounts or other return(s) is/are received late, the company will not only pay additional filing fee but the company and its officers can also be punished with fine. In addition to normal the additional fee will be payable as under:-

Period of delay Additional Filing Fee

(a) If a document is filed with a delay of not more than fifteen days.

Additional fee equal to the usual fee specified for the document in the Sixth Schedule.

(b) If a document is filed with a delay of more than fifteen days but not more than forty-five days.

Additional fee equal to two times of the usual fee specified for the document in the Sixth Schedule.

(c) If a document is filed with a delay of more than forty-five days.

Additional fee equal to three times of the usual fee specified for the document in the Sixth Schedule.

6. What are the consequences of non-presentation of Annual Accounts in the Annual General Meeting? It is the responsibility of the Board of Directors of a company to maintain proper books of accounts get the annual accounts audited by the auditor of the company, present the audited accounts before the Annual General Meeting for approval of the members within the prescribed period as provided under the law. In case of non-compliance, in filing the statutory returns within prescribed period and apart from the other penalties for violating the specific provisions of the Ordinance, which include heavy amounts of fines and prosecution of the management leading to imprisonment of the defaulting directors/officers are liable to pay additional fee (as discussed at para-5 of the guide.

11

7. How can prosecution and penalties/fines be avoided?

Make sure your company complies within the prescribed time, with all its statutory obligation not only pertaining to filing of its accounts and other statutory returns as required to be filed under the provisions of the Ordinance and the rules frame there-under but also with respect to:-

• Issuance of shares certificates to the shareholders. (S.74 to 75) • Transfer of shares. (S. 76 to 81) • Registration of Charges (S. 121 to 136) • Maintenance of Registered Office Address (S. 143) • Holding of statutory meetings by a public company (S. 157) • Maintenance of Minute’s Book (S. 173) • Election of Directors (S. 178 to 180) • Appointment of Chief Executive (S. 198 to 203) • Appointment of Company Secretary (where applicable) (S. 204A) • Maintenance of books of accounts and other statutory register (S.

230) • Preparation, audit and presentation of accounts in the AGM (S. 233) • Preparation of quarterly accounts by a listed company S. 245) • Payment of Dividends within the prescribed period (S. 248 to 251) • Appointment of Auditor (S. 252 to 254) • Appointment of Legal Adviser (Companies Appointment of Legal

Advisor’s Act, 1974).

8. Why does the Company Registration Office need this information? In exchange for the benefits of trading with limited liability, companies must deliver certain information about themselves to the Registrar, who makes this information available for inspection by the public so that they can make informed decisions about companies that they may wish to invest in or do business with.

12

9. Isn’t my legal/corporate consultant supposed to do all this?

Your legal/corporate consultant’s responsibilities to you depend on the agreement between you and him or her. However, the responsibility to file accounts and other statutory documents rests entirely with the directors. Ensure that your legal/corporate consultants have all the necessary information/document to prepare and file the statutory returns on time. If necessary, change your consultants. Don’t just assume that they are getting on with the job.

Accountants, legal, corporate and financial advisers do not get adjudicated / prosecuted or penalized for late filing under the

Ordinance. You do!

10. Why does the Company Registration Office need this

information? Documents / informations maintained by the registrar is the public record and available for inspection by the rest of the world i.e. the creditors, venders and general public for the purpose of making investment in the company, enter into contract and for other useful purposes.

Remember, filing of documents does not take place until they reach the

Registrar.

13

Role and duties of a company secretary 1. Does every company need a secretary? No. Companies Ordinance requires only a listed company to have a whole time secretary and a single member company to have a secretary. 2. Does a company secretary need any qualifications?

The secretary to be appointed by a listed company shall be a member of a recognized body of professional accountants, or a member of a recognized body of corporate / chartered secretaries or a person holding a masters degree in Business Administration or Commerce or is a Law graduate from a university recognized by Higher Education Commission and having at least two years relevant experience. Further, a person being engaged by a public listed company as secretary before the 26th October, 2002 is permitted to continue as such if he has practical experience of five years in that position. However, the company secretary of a single member company shall be a person holding a bachelor degree from a university recognized by the Higher Education Commission. 3. What are the duties of a company secretary? These are not specified by the Ordinance, but are usually contained in an employment contract. However, the company secretary generally performs the following functions:-

Chapter

3

14

Functions of secretary:

A. Secretarial functions:

To ensure compliance of the provisions of Ordnance and rules made there-under and other statutes and bye-laws of the company.

To ensure that business of the company is conducted in accordance with its objects as contained in its memorandum of association.

To ensure that affairs of the company are managed in accordance with its objects contained in the articles of association and the provisions of the Ordnance.

To prepare the agenda in consultation with the Chairman and the other documents for all the meetings of the board of directors.

To arrange with and to call and hold meetings of the board and to prepare a correct record of proceedings.

To attend the broad meetings in order to ensure that the legal requirements are fulfilled, and provide such information as are necessary.

15

To prepare, in consultation with the chairman, the agenda and other documents for the general meetings.

To arrange with the consultation of chairman the annual and extraordinary general meetings of the company and to attend such meetings in order to ensure compliance with the legal requirements and to make correct record thereof.

To carry out all matters concerned with the allotment of shares, and issuance of share certificates including maintenance of statutory Share Register and conducting the appropriate activities connected with share transfers.

To prepare, approve, sign and seal agreements leases, legal forms, and other official documents on the company’s behalf, when authorised by the broad of the directors or the executive responsible.

To advise, in conjunctions with the company’s solicitors, the chief executive or other executive, in respect of the legal matters, as required.

To engage legal advisors and defend the rights of the company in Courts of Law.

To have custody of the seal of the company.

B. Legal obligations of secretary:

16

Filling of various documents/returns with the Registrar / Commission as required under the provisions of the Ordinance. .

Proper maintenance of books and registers of the company as required under the provisions of the Ordinance.

To see whether legal requirements of the allotment, issuance and transfer of share certificates, mortgages and charges, have been complied with.

To convene/arrange the meetings of directors, on their advise.

To issue notice and agenda of board meetings to every director of the company.

To carry on correspondence with the directors of the company on various matters.

To record the minutes of the proceedings of the meetings of the directors.

To implement the policies formulated by the directors.

To deal with all correspondence between the company and the shareholders.

17

To issues notice and agenda of the general meetings to the shareholders.

To keep the record of the proceedings of all general meetings.

To make arrangement for the payment of the dividend within prescribed period as provided under the provisions of the Ordinance.

C. To maintain the following statutory books

the register of transfer of shares (section 76);

the register of buy-backed shares by a company (section 95A);

the register of mortgages, charges etc. (section 135);

the register of members and index thereof (section 147);

the register of debenture-holders (section 149);

the register of directors and other officers (section 205);

the register of contracts (section 219);

the register of directors' shareholdings and debentures (section

220);

the register of Pakistani members, directors and officers, in case

of a foreign company (section 454);

Minute books;

Proxy register;

Register of beneficial ownership;

18

Register of deposits;

Register of director’s share holding; and

Register of contracts, arrangements and appointments in

which directors etc are interested

. D. Other duties

The company secretary usually undertakes the following duties:

(a) Ensuring that statutory forms are filed promptly. You

cannot simply send a letter to notify the Registrar that you wish to change the situation of the company's registered office or that change has occurred among directors or secretaries or auditors or particulars. You should normally use forms 21 and 29 as appropriate. You may also use the Form A/B for filing the annual return if the return is due at the current time. Changes in directors and secretaries or in time particulars must be notified to the Registrar within 14 days. There are many other forms that need to be delivered to the Registrar. See Chapter 4, 'What you have to send to the Commission and the Registrar for more information.

(b) Providing members and auditors with notice of meeting.

You must give them 21 days written notice for holding of annual and other general meetings.

(c) Sending the Registrar copy of special resolutions. You must

file with the Registrar special resolution on Form-26 within 15 days of its being passed.

E. Supplying a copy of the accounts to every member of the company,

every debenture holder and every person who is entitled to receive notice of general meetings. You must send annual audited accounts at D.

19

eneral Meeting at which they are to be laid - see section 233 of the Ordinance.

F.Keeping or arranging for the having of minutes of directors' meetings and

general meetings. Apart from monitoring the Directors and Members minutes books, copies of the minutes of board meetings should also be provided to every director within 15 days of the meeting.

G.Ensuring that people entitled to do so, can inspect company records. For

example, members of the company are entitled to a copy of the company's register of members, and to inspect the minutes of its general meetings and to have copies of these minutes.

H. Custody and use of the common seal. Companies are required to have a

common seal and the secretary is usually responsible for its custody and use. (Common seals can be bought from seal makers)

4. Does a company secretary has any powers?

The Ordinance allows him to sign the statutory returns and applications to be furnished to the Registrar and the Commission.

5. What are the rights of a company secretary? The rights of a company secretary depend on the terms of his or her contract with the company. The secretary has no special rights under the Ordinance.

20

What documents are to be provided to the Commission and the Company Registration Office?

Company directors and secretaries are responsible for filing various returns containing information to the Commission and the Registrar. There are over 46 forms that companies could file. The following information deals only with the most common forms and documents that companies will use. 1. Accounts.- All limited companies, whether trading or not, must keep accounting records but only public companies (including associations not for profit, and by guarantees) are required to file annual audited accounts with the Registrar. Listed companies are also required to send quarterly accounts to the Commission and the Registrar. The accounts will include:

• directors' report signed by the chief executive and a director; • a balance sheet signed by the chief executive and a director; • a profit and loss account (or income and expenditure account if

the company is not trading for profit); • an auditors' report signed by the auditor; • notes to the accounts; and • consolidated accounts (if applicable).

Accounts must be produced to a standard that we can scan to reproduce electronically - see chapter 5.

Chapter

4

21

Directors are personally responsible for ensuring that accounts are prepared and delivered to the Commission and the Registrar. Failure to do so may result in a criminal conviction for the director(s) and financial penalties as well. 2. Annual returns (Form A/B) An annual return is a snapshot of general information about a company giving details of its chief executive, directors, chief accountant, secretary, legal adviser and auditors, registered office address, shareholders and share capital. If you file the annual return late or not at all, the company and its director(s) and secretary can be prosecuted under the Ordinance. Please note that annual returns are quite separate from annual accounts. 3. Change of registered office - Form 21 Every company must have a registered office: it is the 'home' of the company to which all official documents, notices and court papers have to be sent by law. The address must be a physical location, not just a post office box. This is because people have the right to visit your office to inspect certain registers and documents, and to deliver documents. It is vital that you keep us informed of the location of your registered office to send all formal communications. You can change your registered office address by filing a notice for change on Form 21 with the Registrar within 28 days of such change. E-mail address must also be mentioned in all of your communications so that relevant information and communications are sent to you through E-mail. 4. Particulars of directors and other officers – Form 29 Form 29 is used for:-

• the appointment of an officer (Chief Executive, Director, Company Secretary, Chief Accountant, Chief Financial Officer, Auditor, Legal Adviser)

• an officer ceasing to act (resignation, removal, death etc.)

22

• a change in particulars of an officer, for example, a change of name

or new residential address.

• a change in particulars of an officer, for example, a change of name or new residential address.

All changes in particulars of directors and other officers must be sent to the registrar within 14-days of the change. 5. Allotments of shares - Form 3. This form should be sent to Registrar within 30 days of the shares being allotted. 6. Mortgages and charges – Forms 10, 11, 13, 14, 16 and 17. Particulars of any mortgage or charge created by the company, modification or satisfaction thereof must be sent to Registrar within 21 days of its creation or satisfaction. 7. Special Resolutions – Form 26 The Special Resolution passed by a company is to be filed with the registrar within 15 days from the date of passing.

23

Quality of documents What happens to documents sent to the registrar? 1. Electronic Documents The documents filed electronically i.e. through eServices are examined and if found in order, are accepted by the concerned registrar and saved in the system in the electronic form 2. Physical documents

The documents and forms you file with the registrar in the physical form are scanned to produce an electronic image. The original documents are then kept in files and the electronic image would be used as working documents. When your business contacts would view and get copies of your company record, they would see the electronic image, copy it or simply make inspection. So it is important that not only the original is legible, but a clear copy can also be made of it. This chapter lays down a few quality guidelines to follow when preparing a document for filing with the registrar. 3. What happens if your documents do not meet the guidelines?

Section 468 of the Ordinance allows the registrar to reject document that is insufficiently legible or is written upon paper, which is not durable, giving a notice to file a revised document. An acceptable document must be delivered within the time mentioned in the notice (otherwise the registrar treats the original as not having been filed).

Chapter

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4. How should documents be set out? Every document delivered to the registrar must state in a prominent position the registration number of the company, and must comply with any requirement specified by the registrar relating to the legibility of that document. Briefly, documents should be on A4 size, plain white paper between 80 grams and 100grams in weight with a matt finish. Text should be black, clear, legible, and of uniform density. Letters and numbers must not be less than 1.8mm high, with a line width of not less than 0.25mm. When you fill in a form:

• use black ink or black type;

• use bold lettering ;

• don't send a carbon copy;

• don't use a dot matrix printer; and

• remember - photocopies can result in a grey shade that will not scan well.

When you complete other documents, please remember:

• the points already made relating to completing forms;

• to use A4 size paper with a good margin;

• to supply them in portrait format (that is with the shorter edge across the top);

• to include the company registration number in the top right-hand corner of the first page.

25

Important: colored ink can drop out (disappear) when a document is scanned to produce an image. To prevent this - always use black ink to complete and sign all documents. 5. What are the most common mistakes to avoid? Glossy accounts If you are producing colour-printed glossy accounts, please save them for your members and others who will appreciate them. We still need black ink on white paper with a matt finish. A typed unbound version or printer's proof is ideal, provided it has the necessary signatures. Members lists Our requirements on document quality apply equally to the lists of members / shareholders that accompany annual returns and allotment forms. If these are computer prints, it is essential that the print quality is good. We have particular problems with lists printed on green-lined computer paper. It would be better if the member’s list is provided on A4 size paper. Listed companies are required to send to the Commission their Annual Return (Form A) containing list of members on floppy diskette. 5. How to get further guidance on quality of documents?

For further guidance, contact 051-9206306 and 051-9205869. For guidance on acceptable floppy diskette and formats,

contact 051-9207091-4/ext304.

26

Further information

1. Can I obtain information about a company from Commission and the registrar?

Yes. Company information is vital for informed decision-making. In the concerned Company Registration Office, you'll find information on every company registered with the CRO, from names and addresses to annual returns and accounts. But note that private companies do not have to file their accounts. You can also get information about foreign companies that establish a place of business in this country or open a branch here. You can order a company search by visiting any of our CRO. 2. Where do I get forms and guidance booklets? This is one of a series of the Commission’s booklets which provide a simple guide to the Ordinance. The quickest way to get the statutory forms and guide-booklets is through SECP’s website i.e. www.secp.gov.pk Forms can also be obtained from stationers, accountants, legal advisers and corporate practitioners. If in doubt about your responsibilities, seek professional advice.

Chapter

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27

NOTE: For filing of returns on Form-29, i.e. notifying the particulars of directors and secretary to the registrar please see our guide-booklets titled with “Filing of Return Guide”.

3. How information can be sent to the registrar? You may file documents to the registrar concerned through eServices. The detailed procedure for filing the documents is provided in the “filing of statutory returns guide”. Alternatively, the documents may be filed to the registrar concerned in physical form (personally or by sending by post or by courier service). If documents are sent by post or courier it should be addressed to any one of the following Company Registration Offices (CROs), having territory/ jurisdiction on your company:-

1. Company Registration Office, State Life Building, 7-Blue Area, Islamabad. Phone No.: 051-9208740 Fax No: 051-9208740 Email: [email protected]


4th Floor, SLIC Building No.2, Wallace Road, Karachi. Phone No: 021-99213272 Fax No. 021-99213278 Email: [email protected]


3rd & 4th Floor, Associated House, 7-Egerton Road, Lahore Phone No. 042-99204962 – 6 Fax No: 042-99202044 Email: [email protected]

28


63-A, 2nd Floor, Nawa-e-Waqt Building, Adbali Road, Multan. Phone No: 061-9200530/9200920 Fax No: 061-9200920 Email: [email protected]


356-A, Akram Plaza, Small D ground. Peoples Colony No. 1, Faisalabad. Phone No: 041-9220284 Fax No: 041-9220152 Email: [email protected]


1st Floor, State Life Building, The Mall, Peshawar Cantt. Phone No: 091-9212178 , Fax No: 091-9213178 Email: [email protected]


382/3, (IDBP House), Shahrah-e-Hali, Quetta Cantt. Phone No: 081-2844136 Fax No: 081-2899134 Email: [email protected]


28-D, Hamdard Housing Society, Airport Road, Sukkur, Phone No: 071-5630517 Fax No: 071-5633757 Email: [email protected]

SECP

Guide

SERIES


(SECP)

GUIDE ON

‘FILING OF STATUTORY RETURNS’



Ph. No.: 051-9207091-4, Fax: 051-9204915

FILING OF STATUTORY RETURNS

SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN 1

Table of Contents Page Introduction 2 - 3

Chapter 1 Procedure for filing of Statutory Return 4 -10 Chapter 2 Points to Remember before Submission 11- 12 Chapter 3 Procedure if returns/ forms are filed late 13 -14 Chapter 4 Regular Statutory Returns 15 -18



Introduction 1. What is a ‘Statutory Return’? All the Forms/returns or documents required to be filed with concerned authorities i.e., registrar concerned, Commission and Stock Exchanges (where required) under various provisions of the Companies Ordinance, 1984 (the “Ordinance”), or rules/regulations made thereunder are termed as Statutory Returns. Statutory return contains information which are filed with the registrar concerned of the Company Registration Office (CRO) where they are made publicly available, so that anyone can verify the details about any company. All the returns/Forms are to be filed with prescribed fee and within the prescribed timeframe. Format can be downloaded from the link, http://www.secp.gov.pk/forms.asp Statutory Returns are filed under any of the following three situations:

Immediately after incorporation of company Periodical (annual, half yearly, quarterly) On the occurrence of any particular event.

The Securities and Exchange Commission of Pakistan (the “SECP”) has prescribed the formats of the Statutory Returns in the Companies (General Provisions and Forms) Rules, 1985 (the “Rules”). Specific forms for Single member Companies are prescribed under the Single Member Companies Rules, 2003 (the SMC Rules). Formats of Annual returns i.e., Form A/B are prescribed under Third Schedule to the Ordinance. Format of the Circular to be sent to members alongwith the notice offering new shares is prescribed through S.R.O No. 192(I)/86 dated Feb. 05,1986, under Section 86(3) of the Ordinance. 2. What is the utility of statutory returns for stakeholders? The returns/forms filed by the Company become part of the Company’s record maintained by the registrar concerned. Regulation 18 and 19 of the Companies (Registration Offices) Regulations, 2003, ( the Regulations) read with sub- section 6 of section 466 of the Ordinance authorizes the registrar concerned to permit member of the public, to inspect or obtain copy of documents on payment of the fee prescribed under the Sixth Schedule to the Ordinance. The Company record



is open for inspection by the general public so that the stakeholders e.g., banks, investors, vendors, suppliers, creditors, importers , exporters etc, may be well informed with state of affairs of the Company, make decisions about their investment and to deal business with the Company. These stakeholders and any member of public can also obtain certified true copies of the relevant corporate record of the companies, when needed or asked by any institution as part of documentation. Therefore, it is important to file statutory returns so that updated record of the Company could be maintained/made available by the registrar concerned.



Filing of Statutory Returns

This guide has been divided in 4 parts for the convenience of users:

(i) Procedure for filing ‘Statutory Return’ (ii) Points to Remember before Submission (iii) Procedure if returns/ forms are filed late (iv) Regular Statutory returns

CHAPTER 1 Procedure for filing of ‘Statutory Return’

This part of guide booklet explains the modes and procedure for submission of statutory returns.

3. What are the modes of submission of statutory returns? There are two modes of filing statutory returns with the registrar concerned:

i. e-Filing: You may file returns online through eServices.

ii. Physical

• Personally: You may visit the CRO and file the return by hand.

• By post: You may post the return through registered mail or

courier at the postal addresses of CROs (as given at the end of this guide booklet).



4. Can information given by the Company in simple letter, without prescribed form /return and fee, be considered as submitted return with the registrar concerned? No. Any information which is required to be notified by the Company should be filed on the prescribed form with the applicable fee. For example, if the Company changes its registered office address, the company cannot simply send a letter to notify Registrar that company had changed its registered office address from one place to another. The company should report the same on prescribed Form 21. 5. From where format of returns/forms be obtained? Online: In case of online submission, the statutory returns/ forms on the prescribed format containing the existing information shall automatically appear in the eServices portal. Detailed procedure is explained at Q. No. 8 of this guide below. In case of physical submission, there are three sources of getting statutory returns/Forms:

• You may refer to the Rules and find the relevant statutory form. • You may download these formats from the Commission’s website at

the link http://www.secp.gov.pk/forms.asp which is the quickest and easiest way to get the forms. By using the downloaded forms, additional space can also be created in the fields available for information, according to your requirements.

• You may visit the regional offices of the Commission (Company

Registration Offices) personally and get forms free of cost.

6. What is filing fee of forms/returns? The filing fee of various returns/forms is prescribed in 6th Schedule to the Ordinance, which may be accessed at Commission’s website. For detailed information regarding fees schedule, (both online/physical) kindly visit the link http://www.secp.gov.pk/notification/pdf/2010/SixthSchedule26‐10‐2010.pdf

http://www.secp.gov.pk/notification/pdf/2010/SixthSchedule26-10-2010.pdf



7. Who is competent to sign/authenticate the return/forms? As required, under the Law, Chief Executive, Director or Company Secretary are authorized to sign the returns/forms. 8. How statutory returns can be filed through eServices? Below is the procedure for filing statutory returns through eServices:

(1) Log on to eServices

• In case the company has obtained eServices Login name and Password:

Connect to eServices https://eservices.secp.gov.pk/eServices, and log on to your account using your eServices Login name and Password provided by SECP. Procedure for obtaining Login name and Password has been provided in subsequent process.

Important Note: PLEASE NOTE THAT “SIGN UP” LINK ON eServices

WEBPAGE, IS FOR NEW INCORPORATION PROCESS ONLY AND NOT FOR ALREADY INCORPORATED COMPANIES.

• In case the company has not obtained eServices Login name and

Password, please follow the procedure as under:

a. Apply for an eServices Login name and Password by writing a letter, on the company letterhead, duly signed by the Chief Executive alongwith the either of the Company Secretary, Chief Financial Officer, or one of the Directors of the company, with a copy of their CNIC, to be addressed to the following address:

Director (MIS), Registration Department, Securities and Exchange Commission of Pakistan, NIC Building, Jinnah Avenue, Islamabad, Pakistan email: [email protected] Phone: +92-51-9207091-3 (Ext: 280)



b. Mention the email address on which the eServices Login name and Password will be dispatched. Please, only provide POP3 email address such as [email protected]; free email address such as hotmail, gmail, or yahoo is not acceptable.

c. SECP will confirm the validity of the email address. After validation

the eServices Login name and Password will be emailed to the specified email address.

(2) Enter Information

• A successful logon to eServices by entering Login name and

password will display a list of available processes

• For filing Annual Returns (Form A/B and Form 29)

simultaneously, click Filing of Statutory Return (Multiple

Forms)

• For filing forms separately or filing all other forms, click Filing

of Statutory Return.

• List of forms containing all the statutory returns will appear

• Click the relevant form which is to be filed.

• Enter required information on the page

• Click the Continue button, the process document listing page

shall be displayed, containing the following links:

a. Update Form

Click link if you want to update the data.

After updating data, click continue button

Process document listing page will be displayed

b. View Form

• Click link.

• The form on the prescribed format shall be

automatically generated based on your input.

• View Form.



• If data displayed in the form is correct, click the back

button on the screen

• Process document listing page will be displayed

c. Fill New Attachment Form

• Click link and an attachment form window will be

displayed.

• Attach document, if any.

• Click Save Form button.

Please note that only PDF format is allowed for attachment.

Size of the file must not exceed 2 MB.

• Process document listing page will be displayed.

d. Fill New Bank Challan

• Click link – auto filled bank challan will be displayed.

• Click Print Form button at the bottom of the page and

four copies namely original, bank copy, SECP copy

and depositor copy will be printed.

• After printing, click Save Form button at the bottom of

the page.


e. Sign Forms

• Procedure for obtaining Digital Signatures:

Any return/form filed through e-services shall be

authenticated by companies by affixing electronic

signatures. Detailed procedure for obtaining digital



signatures from National Institutional of Facilitation

Technologies (NIFT) for SECP eServices is available at the

following link of NIFT website:

https://secp.niftetrust.com/.

• Click on Sign Forms link.

• Digital signature pad window will appear.

Select all the form(s)/Attachment(s) available for

signature by clicking the check boxes.

• Select the required signature from the drop down

menu

• Click Sign button (After signing, submit to SECP

button will be enabled.)

• Click Submit to SECP button.

• All the documents will be automatically submitted to

the SECP.

• Please note down the Tracking Number, appearing on

the screen.

• Deposit fee through the challan printed during the

process, in the selected branch of MCB

• The bank shall retain the SECP and bank copies and

return remaining two copies (original and customer

copy) to the customer



9. How to pay filing fee? The filing fee can be paid /deposited through challans in any of the designated branches of MCB Bank Limited. Online: In case of online submission, challans are auto generated. Procedure is explained above at Q. No. 8 of this guide. Physical: In case of physical submission, challans in the physical form are available at all the designated branches of MCB Bank Limited.



CHAPTER 2

Points to Remember before Submission

This part of guide booklet explains points that must be remembered by the companies while submitting returns/ forms.

10. What points to remember while submitting/completing printed filled return/form? In case of physical submission, companies should ensure the following standardized criteria while submitting the documents, statutory forms and other returns to the Registrar or the Commission:

• Use A4 size paper with good margin; • Use only black typing to complete and sign the documents; • Use bold letters; • Do not send carbon copies; • Do not use a dot matrix printer; and • Do not send colored printed documents.

11. What points to remember while submitting/ completing hand written filled return/form: In case of physical submission, if a company wants to submit hand written filled returns, it is necessary that it should not be filled with ink, as writing may be erased if it becomes wet/moist, resulting into loss of information. It should be therefore, filled in by using ball point. Since all the returns filed by the Companies are scanned to create electronic data base of the Companies, therefore, it should also be ensured that writings are clear and easily recognized/readable by the scanners. 12. When return will be considered filed with the Registrar in the prescribed period? Filing of returns/forms does not take place until these reach with the Registrar office with in the prescribed period as laid down under the law/rules. For example, Form-29 is required to be filed within 14 days of the date of reporting change. It means Form-29 should be received by the Registrar within 14 days of the change, otherwise it will be considered late filing of Form/return.



13. What will be the status of the return/ form filed without payment of filing fee? Any return filed without filing fee will be considered in the same way as if no such return had been filed by the Company. Therefore, ensure that the payment of prescribed fees has been made in the manner as provided above at Q. No. 9 of this guide. 14. Are there any attachments required to be submitted with the return/ Form? In case of physical submission, bank challan in original is required to be submitted as an attachment. In case of both physical and online submission, company must ensure that necessary attachments as specified on the form, are attached. Any other necessary document related to the form may also be attached. 15. Who is responsible to file returns/ forms with the Registrar/Commission? Management of the Company is responsible for filing of the forms/returns within statutory time period. Legal/corporate consultant’s services may be hired for this purpose, but responsibility to file statutory returns within due time rests entirely with Chief Executive and directors. Therefore, ensure that your legal/corporate consultants have all the necessary information to prepare your returns. It is advisable to follow up your consultant and don’t assume they are getting the job done.



CHAPTER 3 Procedure if returns/ forms are filed late

This part of guide booklet explains the procedure for late filing of returns and additional fee for late filing.

16. What if form/ return could not be filed within statutory time period? A form/return is considered to be ‘late’ filed, if it is filed beyond statutory period as prescribed under the law. In terms of Section 469 of the Ordinance and Regulation 10 of Companies (Registration Offices) Regulations, 2003, such return can be filed late with the Registrar by depositing additional filing fee in addition to normal filing fee of the returns/forms. Slabs for payment of additional fee for late filing of document are as under:

Sr. NO. Period of delay Additional filing fee 1. If a document is filed

with a delay of not more than 15 days

Additional fee equal to the usual fee specified for the document in the 6th Schedule.

2. If a document is filed with a delay of more than 15 days but not more than 45 days

Additional fee equal to two times of the usual fee specified for the document in 6th Schedule.

3. If a document is filed with a delay of more than 45 days

Additional fee equal to three times of the usual fee specified for the document in 6th Schedule.

If returns/forms are filed late by the companies, apart from the additional fee as mentioned above, the companies and its management shall be liable for committing default of the specific provisions of the Ordinance, which include heavy amount of fines to the defaulting director/officer of the company. 17. How to pay filing/additional filing fee/penalty? The filing/additional filing fee/penalty can be paid/deposited through challans in designated branch of MCB Bank Limited. In case of online submission, challans are auto generated. Procedure is explained above at Q. No.8 of this



guide. Challans in the physical form are also available at all the branches of MCB Bank Limited. Deposit of filing/additional filing fee/penalty through bank drafts and pay orders is also acceptable mode of payment.



CHAPTER 4

Regular Statutory Returns

This part of guide booklet gives description of regular statutory returns, i.e., Forms A/B, Form-29 and annual audited accounts.

ANNUAL RETURNS (FORMS A/B)

Introduction: Annual return on Form A/B is required to be filed by the companies, in terms of Section-156 of the Ordinance. An annual return is a snapshot of general information about a Company giving details of its chief executive, directors, chief accountant, secretary, legal adviser and auditors, registered office address, shareholders and share capital. A company having a share capital files annual return on Form-A A company not having a share capital files annual return on Form-B When it is required to be filed: There may be two situations while filing annual returns: 1. In case Annual General Meeting is held: If Annual General Meeting is held by the Company, then annual return should be filed within:

• 45 days from the date of Annual General Meeting in case of listed company.

• 30 days from the date of Annual General Meeting in case of any other

company.

2. In case Annual General Meeting is not held: If no Annual General Meeting is held in a year, the annual return is filed within:



• 45 days from the 31st December of that year in case of listed company i.e.,

on or before 15th Feb. of the following year. • 30 days from the 31st December of that year in case of any other company

i.e., 30th Jan. of the following year Listed company may file application to the Registrar to seek extension and the Registrar may for special reasons extend the period of filing of such return by a period not exceeding 15 days.

It may be noted that every company is required to file annual return with the Registrar once in a year whether it has held its Annual General Meeting or not;

whether it is functioning or not. Note: All listed companies are required to file Form A on a floppy diskette, with the Commission vide Circular No. 6, Reference No. 1(7) Misc.B.O/2001. Where to download annual return: Annual returns are prescribed in 3rd Schedule to the Ordinance. It may also be downloaded from link http://www.secp.gov.pk/notification/doc/3rdScheduleFormA.doc What if annual return is late filed/not filed? If any Company files annual return late or not at all, the Company and its officers may be fined as under:

• In case of listed company: fine upto Rs.10,000/- and further upto Rs.200/- for every day during which default continues

• In case of any other Company: fine up to Rs.2,000/- and further fine up

to Rs.50/- for every day during which default continues

PARTICULARS OF DIRECTORS AND OTHER OFFICERS – FORM 29

Introduction:

In terms of Section-205 of the Ordinance, Form 29 is used to report:-



• Appointment of officers of the company i.e. director, chief executive, managing agent, secretary, chief accountant; auditors and legal advisor.

• Ceasing of officers of the company (resignation, removal, death etc.). • Any change in particulars/details of officers of the company, for

example, a change of name or new residential address. When it is required to be filed? The company has to notify the particulars of officers, as well as change therein, on prescribed form 29 (in duplicate) within 14 days from happening thereof and file with register in duplicate. What if Form-29 is late filed/not filed? If any Company files Form-29 late or not at all, the Company and its officers may be fined upto Rs. 500/- and further upto Rs. 50/- for every day during which default continues

ANNUAL AUDITED ACCOUNTS

Introduction: In terms of Section-230 to 233 of the Ordinance, all the companies registered under the Ordinance, are required to keep proper accounting records and prepare, circulate and approve the Annual audited Accounts in the Annual General Meeting. Which companies are required to file Annual Audited Accounts? Following companies are required to file annual audited accounts with Registrar:

• all public companies (including associations not for profit and companies limited by guarantees); and

• private companies having share capital of Rs. 7.5 Million or more. Filing of Annual Audited Accounts: In terms of Section-242 of the Ordinance, every listed company is required to file with the Registrar at least three copies duly signed/authenticated, whereas in case of other companies, at least two copies, within 30 days from the date of Annual General Meeting. Moreover, in



terms of Section-233 of the Ordinance, every listed company is required to file 5 copies of annual accounts with the Registrar and the Commission at least 21 days before Annual General Meeting. Filing of Quarterly Accounts: In term of Section-245 of the Ordinance, every listed company is required to file 1st,, 2nd and 3rd quarter accounts within one month of end of the quarter. Who can authenticate/sign the annual and quarterly accounts? The annual and quarterly accounts are required to be approved by the directors and signed by the chief executive and at least one director. Where the chief executive is for the time being not present in Pakistan, then the balance-sheet and profit and loss account or income and expenditure account of the company should be signed by at least two directors present for the time being in Pakistan. What are, the amount of fine and other consequences for non-filing / late filing of important returns? Six forms namely Form A, 29, 3, 7, 10 and 29 are very frequently filed by the companies. The amount of fine of the said returns is as under:

Name of

Form

Maximum initial fine

Fine for continuing default

Other consequences

A

Listed company Rs. 10,000/- Other than listed company Rs. 2,000/-

Rs. 200/- per day Rs. 50/- per day

29

Rs. 500/-

Rs. 50/- per day

3 Rs. 500/- per day

------



7

Rs. 100/- per day ------

10

Rs. 500/- per day

-------- The charge can only be registered with the leave of SECP u.s.131 of the Companies Ordinance, 1984

21 Rs. 200/- per day

-------

OTHER STATUTORY RETURNS For detailed information regarding other forms/returns and fees schedule, kindly visit the link http://www.secp.gov.pk/ List of Company Registration Offices:

Karachi 1. Company Registration Office,


Lahore


Islamabad 3. Company Registration Office, State Life Building, 7-Blue Area, Islamabad Phone: 051-9208740, Fax 051-9206893

Email: [email protected] Peshawar



4. Company Registration Office, 1st Floor, State Life Building, The Mall, Peshawar Cantt. Phone: 091-9213178, Fax 091-9213686 Email: [email protected]

Multan



Faisalabad 6. Company Registration Office, 356-A, Al-Jamil PIaza,

1st Floor, Peoples Colony, Small D Ground, Faisalabad. Phone: 041-9220284 Fax: 041-9220152

Email: [email protected] Quetta

7. Company Registration Office, 382/3, (IDBP House), Shahrah-e-Hali, Quetta Cantt. Ph: 081-2844136 Fax: 081-2899134 Email: [email protected]

Sukkur




PUBLIC CONSULTATION If you have any suggestions for the development in the legal framework or otherwise, please let us know about your opinion/comments on the following address:



DISCLAIMER

The Guide has been published with the intention to create an awareness of the concept of the relevant matters. However, the Guide does not tell everything and the opinions or legal interpretations, contained in the booklet are circumstantial and may vary under different situations. If the reader is in doubt while dealing with any specific condition, it is recommended to refer to the Companies Ordinance, 1984 and allied laws and consult an adviser for seeking professional advice.

1

SECP

Guide

SERIES


(SECP)

Foreign Companies’ Guide



Ph. No.: 051-9207091-4, Fax: 051-9204915


2

Table of Contents Page Introduction Chapter 1 Registration of foreign company 4 - 7 Chapter 2 Filing of Returns/ Accounts 8 - 10

and disclosure requirements of a foreign company

Chapter 3 Ceasing to have place of business 11

in Pakistan/ Liquidation of a foreign company

Chapter 4 Further Information 12 -14

3

Introduction This booklet outlines the statutory requirements under the Companies Ordinance, 1984 for a ‘Foreign Company’. A company which is incorporated or formed outside Pakistan which establishes its place of business within Pakistan is called a ‘Foreign Company’. The booklet is intended as an introductory guide only. You can obtain, on request, further information from the Company Registration Offices. However, it is advisable to consult a professional for detailed guidance. The relevant provisions of law are contained in Part XIV of the Companies Ordinance, 1984 (the Ordinance) and Rules 22 & 23 of the Companies (General Provisions and Forms) Rules, 1985 (the Rules) (This is a guide only and should be read with the relevant legislation).

4

CHAPTER 1 REGISTRATION OF A FOREIGN COMPANY 1.1 Who needs to deliver the requisite documents? Every foreign company which establishes a place of business in Pakistan has to deliver the requisite documents to the registrar concerned within 30 days of establishment of a place of business in Pakistan. 1.2 What is a Place of Business? A place of business includes branch, management, share transfer or registration office, factory, mine or fixed place of business but does not include an agency unless the agent exercises a general authority to negotiate and conclude contract or maintains stock of merchandise on behalf of the company. Following are the exceptions:

1. Company shall not be deemed to have an established place of business in Pakistan merely because it carries on business dealings in Pakistan through a bona fide broker or general commission agent acting in the ordinary course of his business.

2. The fact that a company has a subsidiary which is incorporated, resident,

or carrying on business in Pakistan, shall not of itself constitute the place of business of that subsidiary an established place of business of the company.

1.3 What are the steps for registration of a foreign company? Registration of a Foreign Company comprises of following two steps:

1. Seek Availability of Company Name 2. Documentation

Step 1. Seek Availability of Company Name:

The first step in the process of registration of a Foreign Company is to seek availability of name of the proposed company from the registrar. The name of the proposed company should not be:

• Inappropriate

5

• Deceptive. • Designed to exploit or offend the religious susceptibilities of the people. • Identical or having close resemblance with already existing company. • Suggesting connection with any Government or its organization or any

international organization.

Fees for seeking availability of company name through online processing is Rs. 200 and for offline processing is Rs. 500. For detailed procedure for seeking availability of company name, please see the ‘Company Name Availability Guide’ available at the link, http://www.secp.gov.pk/GuideSeries.asp Step 2. Documentation After seeking company name availability, next step is documentation. A foreign company is required to file the following documents, under the provisions of the Ordinance, within thirty days of establishing a place of business in Pakistan, to the registrar concerned:

I. Forms (38-43) as prescribed under the Rules

• Form 38: Certified copy of the charter, statute or Memorandum and Articles of the company.

• Form 39: Address of registered office or principal office of the

company.

• Form 40: Particulars of directors, Chief Executive and Secretary, if any, of the company.

• Form 41: Particulars of principal officer of the company in Pakistan.

• Form 42: Particulars of person(s) resident in Pakistan authorized

to accept service on behalf of the foreign company alongwith the certified copy of the appointment order, authority letter of board of directors’ resolution and consent of the principle officer.

• Form 43: Address of principal place(s) of business in Pakistan of

the foreign company.

II. Authority letter in the name of authorized representative of the foreign company.

III. Fee Challan

6

1.4 What type of certification is required for the documents constituting or defining the constitution of a foreign company? A copy of the charter, statute, memorandum and articles of association, or other instrument, constituting or defining the constitution of a foreign company is required to be duly certified by:- (a) the public officer in the country where the company is incorporated in whose custody the original is committed; or (b) a notary public of the country where the company is incorporated; or (c) an affidavit of a responsible officer of the company in the country where the company is incorporated. In first two situations, at (a) and (b), certification is required to be authenticated by a Pakistan diplomatic consular or consulate officer, while in third situation at (c) above, affidavit shall be signed before a Pakistan diplomatic consular or consulate officer. [Rule 22 of Companies (General Provisions and Forms) Rules, 1985] 1.5 What are the requirements, if charter, statute, memorandum and articles of association, or other instrument, constituting or defining the constitution of a foreign company, is in language other than English? If the document constituting or defining the constitution of a foreign company, charter, statute or memorandum and articles of association is not in English or Urdu, duly certified translation in English or Urdu language is required to be provided. Translation of document constituting charter in English or Urdu, is required to be certified to be correct translation of the original. [Rule 23 of Companies (General Provisions and Forms) Rules, 1985] Where translation is made outside Pakistan, it shall be authenticated by the signature and seal of:

• the public officer in the country where the company is incorporated; or • a notary public of the country where the company is incorporated.

Signature and seal of the person so certifying shall be authenticated by a Pakistan diplomatic consular or consulate officer. Where translation is made within Pakistan, it shall be authenticated by an affidavit of any person having in the opinion of the registrar, an adequate

7

knowledge of the language of the original and of English or Urdu, as the case may be. 1.6 What are the fees for registration of a foreign company?

Fees Offline (Rs.) Online (Rs.)

Registration of a Foreign Company

50,000 25,000

Filing of each Statutory Return/ Form

1,500 600

Fees for online submission have been set lower as compared to manual

submission, to encourage online services.

1.7 Is a foreign company required to obtain any other permission from any other organization for opening and maintaining of its branch/ liaison office in Pakistan? A foreign company is required to obtain a permission letter from the Board of Investment with a specific validity period for opening and maintaining of its branch/liaison office in Pakistan. Copy of such permission letter is required to be furnished with the documents meant for registration. Renewal/ extension of the permission to open/maintain a branch/liaison office is also required to be obtained from the Board of Investment on the expiry of the validity period of the permission originally granted. Whenever such renewal/extension is granted, a copy must be furnished to the registrar concerned.

8

CHAPTER 2 FILING OF RETURNS/ ACCOUNTS AND OTHER REQUIREMENTS OF A FOREIGN COMPANY 2.1 Which provisions of the Ordinance are applicable regarding the change

of name of the foreign company? The provisions of Section 37 to 41 of the Ordinance relating to the name and any change in such name are also applicable to a foreign company. A foreign company becomes subject to the same restrictions on its name as applicable to other companies which are incorporated in Pakistan. 2.2 Whether a foreign company is required to file any statutory return or deliver any document to the registrar concerned on change or alteration therein? Any change or alteration in particulars of the documents and returns filed at the time of registration (as specified under section 451 and discussed at 1.3) is required to be notified within 30 days of such change or alteration (Section 452), in the following manner: • Form 44: Any change or alteration in the Memorandum of Association,

Charter and Statute etc., previously filed on Form 38, is required to be filed on Form 44 within 30 days of such change or alteration.

• Forms 39, 40, 41, 42 and 43: Any alteration in the information filed on any

of these Forms, is required to file on the same Form. 2.3 Are there any statutory obligations for the foreign companies under the Companies Ordinance, 1984? A foreign company is required to comply under Section 454 of the Ordinance with the following statutory obligations:- • To maintain registers of Pakistani members and debenture-holders,

directors and officers at its principal place of business and keeping it open to inspection.

• To state the country of origin in every prospectus inviting subscriptions

for its shares or debentures in Pakistan.

• To exhibit the name of the company and the country of its incorporation on the outside of every place of business in Pakistan, in letters easily

9

legible in English or Urdu characters and also if the place of business is beyond the local limits of the ordinary original civil jurisdiction of a High Court, in the characters of one of the vernacular language used in that place.

• To mention the company's name and country of incorporation in English

or Urdu characters on all letter paper, bill heads, notices, advertisements, documents and other official publications of the company.

• To state the fact that the liability of the members of the company is limited

in legible English or Urdu characters in every prospectus inviting subscription for its shares, all letter papers, bill heads, notices, advertisements, and other official publications of the company.

2.4 Is a foreign company obliged to register a mortgage/ charge under the Companies Ordinance, 1984? Under the Section 463 of the Ordinance, the provisions of Section 121 to 136 as applicable to other companies, relating to the registration of mortgage and charges are also applicable to a foreign company. A foreign company at the time of creation of a mortgage or charge on their property in Pakistan, is required to file particulars of the mortgage or charge, together with a copy of the instrument creating or evidencing thereof, with the concerned registrar. The documents must be filed within 21 days after the creation of the mortgage/charge, as required under Section 121 of the Ordinance. Section 121 of the Ordinance enlists the mortgages and charges to be registered. If a foreign company has already created a charge on a property in Pakistan, otherwise registerable under the Ordinance, it is required to file the documents within thirty days of the establishment of a place of business in Pakistan. All details about registration of mortgage and charge are available in the SECP’s Guide of “Company Mortgages and Charges”. 2.5 Does a foreign company maintain books of accounts? The provisions of Section 230 of the Ordinance, relating to the maintenance of books of account by companies, apply to the foreign companies to the extent of requiring them to keep at their principal place of business in Pakistan the books of account with respect to money received and expended, sales and purchases made, and assets and liabilities of its business in Pakistan.

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2.6 Which financial statements are required to be filed with the Registrar by a foreign company registered in Pakistan? Under the provisions of Section 453 of the Ordinance, A foreign company is required to file with the registrar concerned the following accounts/ documents every year within 45 days of filing of the accounts to the public authority of the country of origin, or within six months of the date upto which the relevant accounts are made up, whichever is earlier:

(a) Form 45 - containing places of business of the company in Pakistan, alongwith Annual audited accounts in respect of its operations within Pakistan.

(b) Global audited accounts.

(c) List of Pakistani members and debenture holders.

Note: All foreign companies must deliver accounts - there is no exception. The accounts for its operations in Pakistan would be prepared and audited just like a public company.

Global accounts are the accounts which a foreign company files with the authorities in country of origin. If a foreign company is not required to file the Accounts in country of origin, it shall prepare Global Accounts and get the same audited for purpose of filing of such accounts under the Ordinance like a public company. 2.7 What are the consequences of failure to comply with the requirements of registration or reporting any change/ alteration in any return/ document? According to the provision of Section 456 of the Ordinance, failure by a foreign company to comply with any of the requirements of registration or reporting any change/ alteration in returns/ documents shall not affect the validity of any contract, dealing or transaction entered into by the company or the company’s liability to be sued in respect thereof; but the company shall not be entitled to bring any suit, claim any set off, make any counter claim or institute any legal proceedings in respect of any such contract, dealing or transaction.

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CHAPTER 3

CEASING TO HAVE PLACE OF BUSINESS IN PAKISTAN/ LIQUIDATION OF A FOREIGN COMPANY 3.1 How does a foreign company cease its activities in Pakistan? Under the Section 458 of the Ordinance, if a foreign company ceases to have place of business in Pakistan, it is required to give notice to the registrar concerned at least 30 days before it intends to cease to have any place of business in Pakistan on prescribed Form 46 and to publish a notice of such intention at least in two daily newspapers circulating in the Province(s) in which such place(s) of business is situated. All obligations of the company to deliver documents to the registrar concerned ceases from the date of such intention to cease to have any place of business in Pakistan, except that such foreign company does not have any other place of business in Pakistan. 3.2 What are the requirements if a foreign company goes into liquidation in the country of its incorporation? If a foreign company having an established place of business in Pakistan goes into liquidation in the country of its incorporation, it is required to:

a) give notice to the registrar concerned within 30 days; b) simultaneously publish a notice at least in two daily newspapers

circulating in the Province or Provinces or the part of Pakistan not forming part of a Province, as the case may be, in which its place or places of business are situated

c) furnish to the registrar concerned all returns relating to the

liquidation and the liquidation account in respect of such portion of the company’s affairs as relates to its business in Pakistan, within thirty days of the conclusion of the liquidation proceedings; and

d) publish a statement on every invoice, order, letter paper, bill head,

notice of other publications in Pakistan that the company is being wound up in the country of its incorporation.

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CHAPTER 4

FURTHER INFORMATION 4.1 Where can you obtain the Forms and SECP Guide series? The Commission has published a series of its Guides. These Guides briefly describe procedures of important matters relating to the Companies Ordinance, 1984, and the rules and regulations made thereunder. Statutory forms and guidance booklets are available, free of charge from our website,http://www.secp.gov.pk/. 4.2 How does a company send information to the registrar concerned? You may file documents to the concerned Registrar, by hand, personally or by post or through courier to the Company Registration Offices concerning your company: Documents can also be submitted online through eServices. List of Company Registration Offices:

Karachi 1. Company Registration Office,


Lahore


Islamabad 3. Company Registration Office, State Life Building, 7-Blue Area, Islamabad Phone: 051-9208740, Fax 051-9206893


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Peshawar 4. Company Registration Office, 1st Floor, State Life Building, The Mall, Peshawar Cantt. Phone: 091-9213178, Fax 091-9213686 Email: [email protected]

Multan



Faisalabad 6. Company Registration Office, 356-A, Al-Jamil PIaza,

1st Floor, Peoples Colony, Small D Ground, Faisalabad. Phone: 041-9220284 Fax: 041-9220152

Email: [email protected] Quetta

7. Company Registration Office, 382/3, (IDBP House), Shahrah-e-Hali, Quetta Cantt. Ph: 081-2844136 Fax: 081-2899134 Email: [email protected]

Sukkur


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PUBLIC CONSULTATION




DISCLAIMER

The Guide has been published with the intention to create an awareness of the concept of the relevant matters. However, the Guide does not tell everything and the opinions or legal interpretations, contained in the booklet are circumstantial and may vary under different situations. If the reader is in doubt while dealing with any specific condition, it is recommended to refer to the Companies Ordinance, 1984 and allied laws and consult an adviser for seeking professional advice.

SECP

Guide

SERIES


A Guide for

Appointment of Statutory Auditors

and Ancillary Matters Published by Registration Department


Ph. No.: 051-9207091-4, Fax: 051-9204915


2

Table of Contents Page #

Introduction 3

Chapters

1. Appointment of Auditors 4 - 7

2. Qualification and Disqualification of Auditors 8 - 9 3. Powers and Duties of Auditors 10 - 12

4. Removal of Auditors 12 - 13

5. Penalty for Non-Compliance with Audit related provisions 13 6. Further Information 14 - 16

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Introduction

An auditor is a person who is assigned the job to audit the financial statements of

a company in accordance with the provisions of law and auditing standards as

applicable in Pakistan. Appointment of an auditor is mandatory by every

company, as required under the provisions of Section 252 of the Companies

Ordinance (the ‘Ordinance’).

This guide outlines the procedure for appointment, removal of company

auditors, and other ancillary matters related to the auditor of a company as laid

down under relevant provisions of the Ordinance. It also explains the rights and

duties of a company auditor.

This is a guide only and should be read with the relevant legislation. You will

find the relevant provisions of law in Sections 252 to 260 of the Ordinance.

Some of the other relevant legislations may include:

• SECP Rules, Notifications and Circulars etc; and

• Listing Regulations/ Code of Corporate Governance

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CHAPTER 1 Appointment of Auditor

1. What is Audit?

An audit is an unbiased examination and valuation of the financial statements of an organization to form an independent opinion. The objective of audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework.

An audit under the Ordinance is conducted in accordance with the provisions of auditing standards as applicable in Pakistan and based on the audit, the company auditor expresses an opinion on such financial statements in accordance with requirements of Section 253(3) of the Ordinance. Further, the company auditor of a holding company is also required to report on consolidated financial statements in accordance with Section 237 of the Ordinance. 2. Who is an Auditor?

An auditor is a person who is assigned the job to audit the financial statements of a company. He is appointed under section 252 of the Ordinance by a company to audit its financial statements. The preparation and presentation of financial statements is the responsibility of management of the company and auditor is only responsible for audit of financial statements and giving an opinion on the fairness of the financial statements.

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3. How is an Auditor of a company appointed?

First Auditor

The directors appoint the first auditor of the company within sixty days of the date of incorporation of the company under section 252 (3) of the Ordinance. The first auditor holds office until the conclusion of the first annual general meeting of the company. If the directors fail to appoint first auditor, the members in general meeting of the company may appoint the first auditor. In case, the first auditor is not appointed within one hundred and twenty days of the date of incorporation of the company, the Commission may appoint the auditor to fill the vacancy.

Subsequent Auditor

On the conclusion of first annual general meeting, first auditor stands retired. Thereafter, the auditor is appointed by the members at an annual general meeting and such auditor holds the office until the conclusion of the next annual general meeting. The retiring auditor of the company is, however, eligible for re-appointment. A notice shall be required for a resolution at a company’s annual general meeting appointing as auditor a person other than a retiring auditor, in accordance with the provisions of Section 253 of the Ordinance.

A company is required to send intimation thereof to the registrar concerned, on Form-29 under section 205 of the Ordinance, within fourteen days from the date of appointment of an auditor, along with the consent in writing of the auditor concerned as per requirement of section 253 (5) of the Ordinance. The Form- 29 to be submitted to the Commission shall include particulars of auditor as required in Section 205 of the Ordinance and Rule 14 C of the Companies (General Provisions and Forms) Rules, 1985 (the Rules).

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4. Who fixes remuneration of an Auditor? In case an auditor is appointed by the company directors or the Commission, the directors or the Commission, as the case may be, shall fix the remuneration. In all other cases, by the company members in general meeting or in such manner as the general meeting may determine. 5. How is an Auditor appointed in case of casual vacancy? Casual vacancy of the auditor is filled by the directors but the surviving auditor may continue to hold office till vacancy is filled. Auditor appointed to fill up the casual vacancy holds office till the conclusion of the next annual general meeting.

A company is required to send intimation thereof to the registrar concerned, on Form-29 under section 205 of the Ordinance, within fourteen days from the date of appointment of an auditor, along with the consent in writing of the auditor concerned.

In case, a casual vacancy in the office of an auditor is not filled within thirty days after the occurrence of the vacancy, the Commission may appoint the auditor.

6. When does the Commission appoint Auditor? The Commission has the power to appoint auditor under the following circumstances: -

(1) If first auditor is not appointed within one hundred and twenty days of the date of incorporation of a company.

(2) Auditor is not appointed at an annual general meeting and directors also

fail in filling the vacancy within thirty days thereafter.

(3) Auditor appointed is unwilling to act as auditor of the company.

(4) A casual vacancy in the office of an auditor is not filled within thirty days after the occurrence of the vacancy.

(5) Auditor is removed by the members through special resolution in a

general meeting.

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(6) Where a company appoints an unqualified person as auditor or a person

who is subject to any disqualifications to act as an auditor. 7. What is the company required to do when the Commission’s power

becomes exercisable for the appointment of auditor? The company is required to give notice of the fact to the Commission, within one week from the date on which the Commission’s power to appoint auditors becomes exercisable. As soon as the auditor is appointed by the Commission, the company is required to send intimation thereof to the registrar concerned on Form 29 within fourteen days from the date of the appointment of auditor alongwith copy of order by the Commission. Which documents are required to be submitted to the SECP for appointment of auditors? Following documents are required to be submitted by a company to the Commission for appointment of auditor:

Notice to the Commission under Section 252(6) of the Ordinance, Reasons as to how the Commission’s power to appoint auditors becomes

exercisable, Period of audit for which auditor is to be appointed; and Consent letter from the proposed auditor.

In case of removal of an auditor, the following additional documents are required to be submitted:

Justification for removal of existing auditor, Copy of the notice of the general meeting sent to the members and

outgoing auditors, mentioning the agenda to remove the auditor, Minutes of the general meeting in which resolution to remove the existing

auditor is passed, Copy of special resolution on Form-26, certified by the registrar

concerned; and Copy of the Form 29 notifying the removal of auditor, duly certified by

the registrar concerned.

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CHAPTER 2

Qualification and Disqualification of Auditor 1. Who is qualified for appointment as auditor? A chartered accountant is qualified to become the auditor of a public company or a private company which is a subsidiary of a public company or a private company having paid up capital three million rupees or more. An association not for profit under section 42 of the Ordinance and companies limited by guarantee under section 43 of the Ordinance, are also required to appoint an auditor, qualified as chartered accountant. 2. Who is disqualified for appointment as auditor? Following persons are ineligible for appointment as auditor of a company:- (1) Present or past director, officer or employee of the company during the

preceding three years. (2) A partner or person in the employment of a director, officer or employee of

the company. (3) Spouse of a director of the company. (4) A person who is indebted to the company. A person who owes a sum of

money not exceeding five hundred thousand rupees to a credit card issuer or a sum to a utility company in form of unpaid dues for a period not exceeding ninety days, shall not be deemed to be indebted to the company.

(5) A body corporate. (6) A person or his spouse or minor children, or in case of a firm, all partners of

such firm who holds any shares of an audit client or any of its associated companies provided that if such a person holds shares prior to his appointment as auditor, whether as an individual or a partner in a firm, the fact shall be disclosed on his appointment as auditor and such person shall disinvest such shares within ninety days of such appointment. Such listed

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company shall take measures to ensure that the auditor disclose the interest in listed company within fourteen days of appointment.

(7) A person who is disqualified for appointment as auditor of the company’s

subsidiary or holding company or a subsidiary of that holding company. (8) Cost auditor, if appointed by the company. Requirements of Listing Regulations (9) No listed company shall appoint or continue to retain any person as an

auditor, who has been found guilty of professional misconduct, by the Commission or by Court of Law for a period of three years unless a lesser period is determined by the Commission.

Requirements of Code of Corporate Governance (10) No listed company shall appoint as external auditors a firm of auditors

which has not been given a satisfactory rating under the Quality Control Review programme of the Institute of Chartered Accountants of Pakistan.

(11) No listed company shall appoint as external auditors a firm of auditors

which firm or a partner of which firm is non-compliant with the International Federation of Accountants' (IFAC) Guidelines on Code of Ethics, as adopted by the Institute of Chartered Accountants of Pakistan.

(12) All listed companies in the financial sector shall change their external

auditors every five years. All listed companies other than those in financial sector shall, at a

minimum, rotate the engagement partner after every five years. The appointment as auditor of a company of an unqualified person, or of a person who is subject to any disqualifications to act as such, shall be void. An auditor shall deem to have vacated his office as an auditor with effect from the date on which he becomes so disqualified.

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CHAPTER 3

Powers and Duties of Auditor 1. What are the rights of an auditor? An auditor has right of access to the books, papers, accounts and vouchers of the company, whether kept at registered office of the company or elsewhere. He is entitled to require from the company and the directors and other officers of the company such information and explanation as he thinks necessary for the performance of the duties of the auditor.

In the case of a company having a branch office outside Pakistan, it shall be sufficient if the auditor is allowed access to such copies of, and extracts from, the books and papers of the branch as have been transmitted to the principal office of the company in Pakistan.

The auditor of a company is entitled to attend any general meeting of the company and to receive all notices and any communications relating to any general meeting which any member of the company is entitled to receive. He is entitled to be heard at any general meeting which he attends, on any part of the business concerning him as auditor.

2. What are the major duties of an auditor? The auditor is required to make a report to the members of the company on the financial statements and books of account of the company and on every balance-sheet and profit and loss account or income and expenditure account. His report covers all other documents forming part of the balance-sheet and profit and loss account or income and expenditure account, including notes, statements or schedules annexed with the financial statements and which are laid before the members of company in general meeting during his tenure of office.

The auditor’s report to the members covers the following matters:-

(a) Confirmation as to whether all information and explanations necessary for the purposes of the audit have been obtained or not

(b) Confirmation as to whether proper books of account are being maintained

by the company as required by Ordinance or not. (c) Confirmation ads to whether that preparation of the balance sheet and the

profit and loss account or the income and expenditure account are in

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conformity with the Ordinance and in agreement with the books of accounts;

(d) Opinion regarding true and fair view of the following:

o The balance sheet as at the end of its financial year o the profit and loss account or the income and expenditure account

and of the profit or loss or surplus or deficit for its financial year and

o statement of changes in financial position or sources and application of funds of a listed company, of the changes in the financial position or the sources and application of funds for its financial year.

(e) Opinion regarding the following:

o incurring of expenditure during the year for the purposes of the company’s business and

o conducting the business, making investments and incurring of expenditure during the year in accordance with the objects of the company.

(f) Opinion regarding:

o deduction of Zakat deductible at source under the Zakat and Usher Ordinance, 1980; and

o deposit thereof in the Central Zakat Fund, if applicable.

3. What is qualified auditor’s report and how is it dealt with? If the auditor answers any of the matters given above in the negative or with a qualification, the reasons for such an answer shall be provided in the auditor’s report. An auditor is also required to state the factual position to the best of his information. 4. What is the prescribed format of an auditor’s report? The auditor’s report on the financial statements of a company (other than a banking company) is required to be given on Form 35 A, as prescribed under the Rule 17 A of the Companies (General Provisions and Forms) Rules, 1985 (the Rules). For a banking company, the prescribed form is Form 35 B, as prescribed under 17 B of the Rules. An auditor of the holding company is also required to

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report on consolidated financial statements, on Form 35 C and review report on the subsidiary accounts on Form 35 D, as prescribed under 17 C of the Rules. The forms are downloadable at the link available at SECPs web-site, http://www.secp.gov.pk./divisions/Portal_RD/Forms.htm 5. Is it mandatory for the auditors to attend the AGM? In the case of a listed company, the auditor (partner of the firm) or his authorized representative (authorized by him in writing) is required to be present in the general meeting in which the balance-sheet and profit and loss account and the auditor’s report are to be considered. They have to reply to the questions of members. In case of other companies, the auditors are given the notices and they may attend the AGM, but their presence is not mandatory. 6. What are the requirements regarding reading and inspection of the auditor’s report? The auditors’ report is read before the company in the general meeting. This report will remain open for inspection by any member of the company.

7. How is the auditor’s report signed?

The person, appointed as auditor, or in case where a firm is appointed, a partner practicing in Pakistan, shall sign the auditor’s report or authenticate any other document, required to be authenticated by the auditor(s).

The report shall be dated and shall indicate the place at which it is signed by the auditor.

CHAPTER 4

Removal of auditor 1. How can an auditor be removed? Members may remove an auditor from office during their tenure through passing special resolution in a general meeting. There should be a proper justification for removing the auditor in compliance with Section 253(3) of the Ordinance.

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A company is also required to send intimation thereof to the registrar concerned, on Form-29, under section 205 of the Ordinance within fourteen days from the date of removal.

CHAPTER 5

Penalty for non –compliance with the audit related provisions

1. What is the penalty for non-compliance with the provisions by companies?

Section 259 of the Ordinance deals with the penal provisions, i.e., if default is made by a company in complying with any of the provisions of Sections 252 to 254 or 256 to 258, the company and every officer of the company who is knowingly and willfully a party to the default shall be punishable with a fine which may extend to fifty thousand rupees and in case of continuing default to a further fine which may extend to two thousand rupees for every day after the first during which the default continues.

2. What is the penalty for non-compliance with the provisions by auditors?

Section 260 of the Ordinance deals with the penal provisions, i.e., if any auditor’s report is made, or any document of the company is signed or authenticated otherwise than in conformity with the requirements of section 157, Section 255 or Section 257 or is otherwise untrue or fails to bring out material facts about the affairs of the company or matters to which it purports to relate, the auditor concerned and the person, if any, other than the auditor who signs the report or signs or authenticates the document, and in the case of a firm all partners of the firm, shall, if the default is willful , be punishable with fine which may extend to one hundred thousand rupees.

If the auditor’s report to which sub-section 260 (1) applies is made with the intent to profit such auditor or any other person or to put another person to a disadvantage or loss or for a material consideration, the auditor shall, in addition to the penalty provided by that sub-section, be punishable with imprisonment for a term which may extend to one year and with fine which may extend to one hundred thousand rupees. A person who, not being qualified to be an auditor of a company, or being or having become subject to any disqualification to act as such, acts as auditor of a company shall be liable to fine which may extend to twenty five thousand rupees.

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CHAPTER 6

Further information

1. Where does a company get forms and guidance booklets? This is one of a series of the Commission’s guidance booklets, which provide a simple guide to the Ordinance, and the rules and regulations made thereunder.

Statutory forms and guidance booklets are available, free of charge from the SECP Headquarters and the Companies Registration Offices (CROs). The quickest way to get them is through our website, http://www.secp.gov.pk.

2. How does a company send information to the Registrar? You may file documents to the concerned Registrar electronically by following the link https://eservices.secp.gov.pk/eServices, or in manual form by hand (personally or by post or through courier).

1. Company Registration Office, State Life Building, 7-Blue Area, Islamabad Phone: 051-9208740, Fax 051-9208740

Email: [email protected] 2. Company Registration Office,

4th Floor, SLIC Building No.2, Karachi. Phone: 021-99213272, Fax 021-9213278 Email: [email protected]


3rd & 4th Floors, Associated House, 7-Egerton Road, Lahore. Phone: 042- 9200274, Fax 042-9202044 Email: [email protected]

4. Company Registration Office, 63-A, Nawa-i-Waqt Building, Abdali Road, Multan. Phone: 061-9200530 Fax 061-9200530 Email: [email protected]


1st Floor, Peoples Colony, Small D Ground, Faisalabad. Phone: 041-9220284 Fax: 9220284

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Email: [email protected] 6. Company Registration Office, 1st Floor, State Life Building,

The Mall, Peshawar Cantt. Phone: 091-9213178, Fax 091-9213178 Email: [email protected]

7. Company Registration Office, 382/3, (IDBP House), Shahrah-e-Hali, Quetta Cantt. Ph: 081-2844136 Email: [email protected]

8. Company Registration Office, House # 28, Hamdard Housing Society, Airport Road, Sukkur. Ph: 071-5630517

[email protected]

PUBLIC CONSULTATION


Registrar of Companies, Securities and Exchange Commission of Pakistan, NIC Building, Jinnah Avenue, Blue Area, Islamabad, Pakistan.

Comments can also be sent via electronic mail at the following address:

[email protected]

DISCLAIMER The booklet has been published with the intention to create an awareness of the concept of the relevant matters. However, the booklet does not tell everything and the opinions or legal interpretations, contained in the booklet are circumstantial and may vary under different situations. If the reader is in doubt or dealing with any specific condition, it is recommended to refer to the Companies Ordinance, 1984 and allied laws and consult an adviser for seeking professional advice.

16

SECP GUIDE SERIES

1. Promoters’ Guide 2. Single Member Company Guide (in Urdu) 3. Modaraba Promoters’ Guide 4. Insurance Guide 5. Directors and Secretaries Guide 6. Company Mortgages and Charges 7. Investors Guide (Vol.-I) Investors Guide (Vol.-II) 8. Investor’s Guide for Lodging Complaints 9. Guide on Accounts and Accounting Reference Dates 10. Guidebook on Further Issue of Shares otherwise than Rights 11. Guidebook on Issue of Preference Shares 12. Conversion of Status of Companies 13. Shareholders’ Rights 14. Winding up and Dissolution of Companies 15. Investigation into the affairs of a company 16. Foreign Companies Guide 17. Company Name Availability Guide 18. Licencing & Registration of Associations Not-For-Profit

NIC Building, 63 Jinnah Avenue, Islamabad, PakistanTel: 051-9207091-4, UAN: 111 117 327

Fax: 051-9204915Website: www.secp.gov.pk


Guide for Listing of Companiesthrough Initial PublicOfferings

Securities Market DivisionSecurities and Exchange Commission of Pakistan

ISE


Guide for Listing of Companiesthrough Initial Public

Offerings

Securities Market DivisionSecurities and Exchange Commission of Pakistan

NIC Building, 63 Jinnah Avenue, Islamabad, PakistanTel: 051-9207091-4, UAN: 111 117 327

Fax: 051-9204915Website: www.secp.gov.pk


DISCLAIMER

This Guidebook has been prepared with the intention to create

awareness of the process of Initial Public Offerings (IPOs) for the

general public and in particular to facilitate the Issuers/Offerers.

However, the Guidebook does not tell each and everything and the

opinions or legal interpretations, contained in it are circumstantial and

may vary under different situations. The information contained herein is

subject to change without prior notice. The Securities and Exchange

Commission of Pakistan makes no guarantee and assumes no liability

for any errors or omissions of the information. No one can use the

information for any claim, demand or cause action.

If the reader is in a doubt while dealing with any specific condition, it is

recommended to refer to the Companies Ordinance, 1984 and allied

laws and consult professionals of the relevant field for seeking advice.

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2

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9

10

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TABLE OF CONTENTS

Introduction

Purpose of Listing

Benefits of Listing

Major Legal Requirements applicable to IPO's and Listing

Criteria for Listing

Companies' Readiness for Listing

Listing Incentives by the Government

Intermediaries to IPO's

Method of Offering of Shares

Cost involved in Listing

INTRODUCTION

Listing of a company or a security on a stock exchange is all about raising money to enable businesses to meet their funding needs. When you need money on a large scale or you are a small business looking to expand, you might need more money than your close acquaintances can provide. At this stage some people look to borrow money from the banks or venture capitalists. Others decide to try and raise money from a wider group of investors through stock market in the form of equity, quasi equity or debt.

Listing means registration of a company or a security on a stock exchange for trading and display of its name and quotation on the official list of the stock exchange. The securities may be of any public limited company, corporation or Government.

This Guidebook may be helpful to understand the purpose of listing, its benefits, minimal requirements and procedure of listing. The Guidebook refer various provisions of the applicable laws, rules and regulations, the checklist of the contents of an equity prospectus, the format of applications for seeking approval of a stock exchange and the Securities and Exchange Commission of Pakistan (SECP or the Commission) and checklist of documents required to be provided to the stock exchange and SECP along with the application. The Guidebook can assist the Issuers and their Lead Manager/Consultants/Advisors, the Book Runners and the Underwriters to make their Initial Public Offering (IPOs) smoothly and efficiently.

PURPOSE OF LISTING:

The primary purpose of listing of a company on a stock exchange is to raise funds for meeting financial needs, however, listing may be done for other reasons like realization of the investment by the existing shareholders and raising profile of the company etc.

For all the glamour associated with going public, the fact remains that the decision to do so should be based on hard business realities. As an owner or major shareholder, you must weigh the advantages and disadvantages of going public in light of the plans and goals you have set for your company.

1

suppliers, investors and the media. As a result more

business opportunities become available.

(b) A listed company is included in the stock exchange's

Index Series, thus creating additional exposure for the

company both locally and internationally and,

therefore, may be covered by the analyst in their

reports.

(c) A listed company may also be considered for awards

like stock exchange top 25 companies awards that

bring credibility and investors' confidence in the

company.

(d) Listed companies are benefitted of the general

perception that after listing financial and business

strength of the companies is improved.

(e) A listed company can use its shares to fund

acquisitions through mergers as shareholders of the

merged entity might be more interested in listed

shares.

(iii) Listing creates value and liquidity for shareholders,

because listed shares are independently assessed

and valued. Listing boosts liquidity and help in

broadening the shareholders base. Shareholders of

listed companies can realize their investment easily.

(iv) Shares of listed companies can be sold easily at a fair

price through secondary offering by the company or by

the sponsors/promoters through divestment.

The decision to list your company needs to be made once you have realistically assessed your company, its management, resources, stage of development, long term strategy, goals and future prospects. You would also need to consider the timing of a listing in terms of market conditions and where your business is at that point in time.

Listing is accompanied by benefits as well as responsibilities and public scrutiny. There are many specific requirements that you need to comply with as a listed entity. It would be a good idea to familiarize yourself with these requirements to assess whether your company will be able to fully comply.

You may want to list your company for various reasons. Perhaps you need access to capital to further your growth, raise your profile or the shareholders may want to realize their investment in the company.

BENEFITS OF LISTING:

Some of the benefits of listing of a company on a stock exchange are given as under:

(1) For the Issuing Company:

(i) Additional avenue for fund raising:

Listed companies have the incentive to tap capital market as an

additional avenue for fund raising through IPOs, secondary

offerings and right issues for financing Green Field

Projects/new projects, BMR and expansions. It is often

cheaper to raise equity capital rather than to rely on debt

finance, to fund the expansion of a company's business. It is

easier for a listed company to raise equity from the capital

market any time.

(ii) Improvement in the company's credentials:

(a) Listing raises company's public profile with customers,

32

(vi) Increased disclosure/reporting requirements enhance

transparency and curtails risks of the investors.

(vii) Attract international investors who can easily trade in

listed shares without any restrictions which helps in

image building of the country's capital market in the

eyes of foreign investors.

(4) For Government:

(i) A source of revenue generation through privatization

of State Owned Organizations.

MAJOR LEGAL REQUIREMENTS APPLICABLE TO

IPO's AND LISTING:

(1) Application for Listing to the Stock Exchange:

An issuer that intends to list any of its security on a stock exchange shall make an application to such stock exchange under section 9 of the Securities and Exchange Ordinance, 1969. The application under section 9 shall be made on the format given at Annexure-I and shall be accompanied by such documents and information as mentioned therein. Any security offered and issued to the general public needs to be listed on a stock exchange so that the holders of such security is provided an exit route.

(2) Issue of shares by a company or a body corporate through IPO:

A company may raise fund for meeting its financing needs through issue of securities i.e. shares, bonds etc. to various classes of investors including the general public. Whenever a company decides to raise fund from the general public, it is required under section 57 of the Companies Ordinance, 1984 (the Ordinance) to issue, circulate and publish, after approval of SECP, prospectus i.e. a document inviting the general public for subscription of securities of the company. In case of a

(v) Listing helps in offering of Employees Stock Option

Schemes to retain hardworking professionals and gain

their loyalties.

(vi) Listing helps in attracting institutional and professional

investors as business partners.

(2) For economy of the country:

(i) Increase in revenue in the form of income tax paid by

the Stock Exchanges, Depository Company, Clearing

Company and members of the Stock Exchanges.

(ii) Capital Gain Tax (CGT) paid by the investors on gain

on sale of shares.

(iii) Listing provides investment opportunities to the

investors and so savings of individuals are mobilized.

(iv) Decrease in dependence on the banking sector and so

resources of the banking sector can be utilized for the

development of the under-developed sectors of the

economy.

(v) Increase in employment opportunities.

(3) For capital market:

(i) Market capitalization increases.

(ii) Investor base increases.

(iii) Inflow of foreign portfolio investment increases.

(iv) Revenue of stock exchange and related inter-

mediaries increases.

(v) Recognition of the local stock exchange globally due

to increase in listed companies, market capitalization

and investor base.

54

the Contents of the prospectus provided at Annexure-IV attached herewith.

The signatories to the prospectus, the promoters, the existing directors, the persons agreed to become director and other persons named in the prospectus as expert in their respective areas for which they have given consent in writing to act as and be named therein have to make sure that no misstatement has been given in the prospectus and that no material fact or information which was required to be disclosed has been concealed.

(6) Issue size and Allocation of Capital:

Keeping in view the minimum bench mark of Rs.200 million paid-up capital, the size of issue and allocation to various categories of investors has been set as under:

(i) In case post issue paid-up capital of the issuing company is up to Rs.500 million, at least 50% of such capital shall be offered to the general public; and

(ii) In case capital of the issuing company is beyond Rs.500 million, public offer shall be at least Rs.250 million or 25% of the post issue paid-up capital, whichever is higher.

(iii) In case of offer for sale of shares by an existing shareholder, the offer size shall be atleast Rs. 100 million or 25% of the paid up capital of the company whichever is lower.

(iv) Upto 5% of the issue size can be allocated to employees of the issuing company.

(v) Upto 20% of the issue size can be allocated to overseas Pakistanis.

(vi) In case of Modarabas at least 70% of the issue size shall be allocated to general public/retail investors.

foreign company having place of business in Pakistan, section 461 read with section 57 of the Ordinance is relevant. The application under section 57 shall be made on the format given at Annexure-II and shall be accompanied by such documents and information as mentioned therein.

(3) Offer for sale of shares to the public by an existing shareholder:

A person who holds more than ten percent shares in a company or a body corporate may offer for sale such shares in totality or a part thereof to the general public through an offer for sale document i.e. prospectus published, issued and circulated after approval of the Commission under section 62 read with section 57 of the Ordinance. In case of offer for sale of shares of a foreign company having place of business in Pakistan, section 461 read with section 62 and 57 of the Ordinance are relevant. The application under section 62 shall be made on the format given at Annexure-III and shall be accompanied by such documents and information as mentioned therein.

(4) Eligibility for Listing:

Any public limited company or body corporate having minimum paid up capital of two hundred million rupees (Rs.200 million) may apply for listing on a stock exchange in Pakistan. Section 2 of the Ordinance prohibits private limited companies to invite general public for subscription of their securities including shares. A foreign company having place of business in Pakistan can also apply for listing on a stock exchange in Pakistan.

(5) Disclosures requirements:

The prospectus to be issued, circulated and published for information of the general public should contain atleast all those information, reports and material as required under section 53 read with part-I of the Second Schedule of the Ordinance. The prospectus should contain all such other material and information which in the opinion of its signatories are necessary for decision making by the prospective investors. While drafting the prospectus, the issuers and their Lead Manager/Advisors/ Consultants to the Issue, the Book Runner, Legal Advisors, Auditors and other related parties are advised to also consult the Checklist on

76

said rules are available at the link http://www.secp.gov.pk/corporatelaws/pdf/Feb_02_1996.pdf

(iv) The Securities and Exchange Rules, 1971: The said rules are available at the link http://www.secp.gov.pk/Services/laws_policies.asp#rules

(v) Guidelines for the preparation of Prospectus: The said Guidelines are available at the link http://www.secp.gov.pk/otherlinks/GuidelinesChecklist/Guidelines.pdf

(vi) Listing Regulations of the Stock Exchanges: The said regulations are available at the link http://www.kse.net.pk http://www.lahorestock.com and http://www.ise.com.pk

CRITERIA FOR LISTING

For listing of a company on a stock exchange, the following criterion shall be followed:

(i) Application to the stock exchange under section 9 of the Securities and Exchange Ordinance, 1969 read with the Listing Regulations and copy thereof to SECP.

(ii) In case of issue of new shares by a company,

application to SECP under section 57 of the

Companies Ordinance, 1984 read with the Companies

(Issue of Capital) Rules, 1996.

(iii) In case of divestment by any shareholder of the

issuing company, application to SECP under section

Keeping in view the appetite for IPOs, the offer price, nature of business of the issuer and issuer's pattern of shareholding, the requirement of minimum allocation to retail investors can be relaxed as deemed appropriate by SECP.

(7) Circulation and Publication of Prospectus in Abridged Form:

The prospectus is required to be circulated to the stock exchange at which the company is listed or proposed to be listed and all the bankers to the issue in addition to make it available at the registered office of the issuer. The prospectus is required to be published at least in one Urdu and one English daily Newspaper. In order to make the publication cost minimal, the law allows publication of the prospectus in abridged form in terms of Section 53 of the Ordinance.

(8) Laws, Rules, Regulations and Guidelines applicable on

IPOs and Listing:

Some of the major laws applicable on public offering of securities and listing of a company or a security on a Pakistani stock exchange are referred to as under:

(i) Part V of the Ordinance namely, “Prospectus, Allotment, Issue and Transfer of shares and debentures, Deposits etc.” mainly section 53, 57 and 62 and second Schedule. Section 461 of part XIV of the Ordinance, in case the issuer is a foreign company. The said Ordinance is available at the link: http://www.secp.gov.pk/corporatelaws/pdf/CompaniesOrdinance984-17-03-2011.pdf

(ii) Section 9 of the Securities and Exchange Ordinance, 1969 which is available at link http://www.secp.gov.pk/corporatelaws/pdf/secord1969_sep08.pdf

(iii) The Companies (Issue of Capital) Rules, 1996: The

98

LISTING INCENTIVES BY THE GOVERNMENT:

Government of Pakistan through the Finance Act, 2011 has announced a tax holiday for five years for newly established industrial undertakings, BMR and expansion provided such projects are financed entirely through equity. For detail Sections 65D and 65E of the Income Tax Ordinance, 2001 may be consulted. To be benefitted of this incentive, the companies may raise equity through the capital market for financing their projects.

INTERMEDIARIES TO IPO:

In order to make the IPOs smooth and efficient, the issuing company before publication of the prospectus shall appoint the following intermediaries:

§ Book Runner to the Issue, in case of book building.

§ Lead Managers/Advisor/Arranger/Consultant to the Issue, if so required by the Issuer.

§ Underwriters, where required.

§ Independent Share Registrars and Transfer Agents/ The Balloter.

§ Bankers to the Issue.

§ Legal Advisor to the Issue.

METHODS OF OFFERING OF SHARES:

The most popular methods used for offering of shares include the Fixed Price Method and the Book Building Process. The method that is used in most of the jurisdictions is the Book Building Process. Salient features of these methods are given as under:

(i) Fixed Price Method:

Under this method the offer price is set by the issuer or the Offerer, as the case may be. The issue is underwritten through

62 read with section 57 of the Companies Ordinance,

1984 read with the Companies (Issue of Capital)

Rules, 1996.

(iv) After approval of SECP under section 57 or 62, as the

case may be, approval of the stock exchange for

allocation of dates for publication of prospectus,

commencement of bidding period (in case the offer is

made through Book Building mechanism) and

commencement of period for public subscription shall

be sought. The period for public subscription shall not

be earlier than seven days and later than thirty days

from publication of the prospectus.

(v) For acceptance of bids, display of order book and

basis of allotment of shares etc, the procedure

provided in the prospectus read with the relevant laws

shall be followed.

COMPANIES' READINESS FOR LISTING:

Companies that are ready to go public, generally have certain specific characteristics. Most of such companies have progressed beyond the start-up phase to a certain size and have become profitable; with prospects of further significant growth.

The market readily accepts companies that have achieved the followings:

(i) A track record of revenue growth(ii) Capable leadership(iii) An experienced and credible management team(iv) Operations in a strong industry with potential for high

performance

1110

This Guidebook, the Profarma applications and checklists mentioned

herein can be downloaded from the following Website

Http://www.secp.gov.pk

1312

independent institutions which provide comfort to the prospective investors as far as the offer price is concerned. The basis of issue price is disclosed in the prospectus where the issuer gives detail about the qualitative and quantitative factors justifying the issue price. In the Fixed Price Method, the investors subscribe for the shares at the price already decided by the issuer.

(ii) Book Building Process:

Book-Building is a mechanism of price determination through which indication of interest for investment in the shares offered by an issuer/Offerer is collected from Institutional Investors and High Net worth Individual Investors through making of bids and a book is built which gives a picture of demand for the shares at different price levels. Floor Price is decided by the Issuer/ Offerer in consultation with the Book Runner whereas Strike Price is determined at the end of the bidding period on the basis of bids received through the Dutch Auction Method. Under the Dutch Auction Method, Strike Price is the price at which bids for the entire shares offered for sale are made. Book Building portion of the offer is underwritten by the Book Runner.

Detail procedure of issue/offer of shares through Book Building is given in the Appendix-4 of the Listing Regulations of the Stock Exchanges.

COST OF LISTING:

The cost of listing of a company on a stock exchange includes the initial listing fee of the stock exchange, SECP fee, underwriting fee, advisory fee of the Lead Manager and Book Runner, commission to the Bankers to the issue, the Ballotters and Share Registrars, prospectus' printing and publication cost. Amount of fees paid to the Commission, the stock exchanges and the brokers are nominal and may be seen at Annexure-V attached herewith.

Annexure-I

FORM OF APPLICATION UNDER SECTION 9 OF THE SECURITIES AND EXCHANGE ORDINANCE, 1969

FOR LISTING A SECURITY ON A STOCK EXCHANGE

To:

The General Manager,Karachi Stock Exchange (Guarantee) Limited,Karachi

Dear Sir,

1. We hereby apply for the listing of our …….. (Name of Company…..) on your Stock Exchange.

2. Necessary information and documents as required in the annexure to this form are enclosed herewith.

Yours faithfully,________________Signature & Address

c.c. To: The SECP, Islamabad as required under Sub-Section (1) of Section 9 of the Securities and Exchange Ordinance, 1969.

Documents to be submitted with listing Application to the Exchange

1. An application for Listing on Form I and copy thereof to the Commission along with all the documents.

2. An undertaking on Form-II as required under regulation 5(1).3. An undertaking, on Form-III, pertaining to issue of share

certificates, computerized transfer deeds and verification of signatures on transfer deeds;

15

of Section 2 of Part-I of the Second Schedule to the Companies Ordinance, 1984. The certificate shall also state Earning Per Share of the company for the last five years or for a shorter period if five years of the commencement of business are not completed.The audited accounts disclosed in the Prospectus / Offer For Sale shall not be older than six months from the date of publication of the Prospectus / Offer For Sale Document.

18. Auditor's certificate on the Break-up value of shares on the basis of the latest audited accounts along with its calculation.

19. Copy of Information Memorandum prepared for placement of shares to local and foreign investors;

20. Names of Directors/shareholders common to the company and the institutions/funds, which have subscribed the shares under private placement.

21. No Objection Certificates from the Underwriter(s) to the Issue/Offer, if any, on Form-IV.

22. Copies of all material contracts and agreements relating to the public issue/offer of shares and project, if any.

23. Copies of the Consent Letters from Bankers to the issue/offer. The letter shall state that;

(i) the Bank has given its consent to act as one of the Bankers to Issue/Offer;

(ii) this consent has not been withdrawn;(iii) it has no objection on publication of its name in the

prospectus/offer for sale document;(iv) the bank has undertaken that the subscription money

shall be kept in a separate bank account and shall not be released to the company/the offerer without prior written approval of the Exchange and/or until the company is formally listed.

24. Copies of the title deeds of land duly attested by a gazetted officer;

25. Copy of the consent from the auditor, expert/legal advisors to the Issue/Offer, if any, under Sub-section (5) of Section 57 of the Companies Ordinance, 1984;

26. Copy of letter jointly signed by the Chief Executive Officer and

4. Copy of the certificate of incorporation.5. Copy of the conversion certificate from private to public

company; if applicable.6. Copy of the certificate of commencement of business.7. Copy of the certificate for change of name of the company, if

applicable.8. Copy of the Feasibility Report, in case of a new project. The

report shall contain a letter from the Chief Executive Officer (CEO) of the institution who has prepared the report, brief profile of such institution, scope of work of the institution for conducting feasibility study and preparing the report. The report shall be dated and each page of it shall carry signature or initial of CEO or any other officer authorized to do so by the Board of Directors of such institution by way of a Resolution.

9. Copy of the resolution passed by the Board of Directors of the company with respect to listing and issue of shares to the general public.

10. Copy of the certificate of registration of Modaraba Management Company, if required.

11. Copy of authorization for flotation of Modaraba by the Registrar of Modarabas.

12. Copy of the license, consent, approval, NOC etc. from the concerned regulatory authority for undertaking / carrying on the business.

13. Pay Order/Bank Draft/Cheque in favour of the Exchange for payment of initial listing fee at the rate as mentioned in regulation 32.

14. Pay Order/Bank Draft/Cheque in favour of the Exchange for payment of annual listing fee at the rate as mentioned in regulation 32.

15. Pay Order/Bank Draft/Cheque in favour of the Exchange for payment of service charges at the rate as mentioned in regulation 32.

16. Auditor's Certificate, separately indicating the amount subscribed by the sponsors/promoters/ directors/ associates/ friends/relatives and shares subscribed by the foreign/local investors under private placement. The certificate shall be supported by copies of Form-3 i.e., return of allotment of shares.

17. Auditors' Certificates under Section 53 read with Clause 28(1)

1716

their individual capacity or in the capacity of Directors of other companies. (This will not apply to nominee Directors of the Government and Financial Institutions).

35. Report of State Bank of Pakistan that the name of the company as well as the names of other companies in which directors of the company are holding directorship are not in the defaulter's list of State Bank of Pakistan.

36. Printed copy of share certificate duly cancelled.37. Documents as prescribed under Annexure-A, in relation to the

requirements of Annexure to Form III of the Securities and Exchange Rules, 1971.

38. Documents as prescribed under Annexure-B, in relation to the requirements mentioned in the Companies (Issue of Capital) Rules, 1996.

39. Any other document/material/information as may be required by the Exchange for its own record or for inclusion in the prospectus/offer for sale document.

Notes:i) Please note that copies of all the documents are certified

by the Company Secretary/CEO.ii) Please note that all documents relating to regulatory

authority are duly certified from the concerned Company Registration Office or concerned Regulatory Authority.

iii) Please note that in addition to the above-mentioned documents, the following shall be also be submitted:

a) Soft copy of the draft prospectus / offer for sale document;b) Scanned copy of the Memorandum & Articles of

Association; andc) Scanned copy of the audited annual accounts of the

company for the last 5 years or for a shorter period if five years of the commencement of business are not completed and its latest half yearly and quarterly accounts.

Chief Financial Officer of the company confirming that they have reviewed the contents of the draft prospectus / offer for sale and to the best of their knowledge and belief these have been stated/disclosed correctly and fairly.

27. Copies of individual consent letters from all Directors, Chief Executive and Secretary of the Company for publishing their names as Directors, Chief Executive and Secretary respectively in the Prospectus/Offer For Sale Document. The consent letter shall be dated and contain full name, father's name, CNIC Number & latest postal address of the Directors, Chief Executive and the Company Secretary.

28. Copy of consent from the Ballotters to the Issue/Offer. The Ballotters to the Issue/Offer shall not be associated company or associated undertaking of the issuing company/the offerer.

29. 25 copies of draft full Prospectus / Offer for Sale draft abridged prospectus and advertisement, if any, with last page signed in original by directors of the Company or the offerer, as the case may be.

30. 25 copies of audited annual accounts of the company for the last 5 years and its latest half yearly and quarterly accounts, if any or for a shorter period if five years of the commencement of business are not completed.

31. A List of employees, who have been allocated shares out of the present issue along with their full particulars i.e., names, addresses and number of shares offered to each of them;

32. In issues where premium is to be charged from public, the shares allocated to any person on account of preferential allocation at par shall not be saleable for a period of two years from the date of public subscription. Such shares shall be deposited in a Blocked Account with a depository company and their deposit shall be certified by the depository company. The particulars of these shares shall be furnished to the Stock Exchange. Provided that charges of opening and operating of the said Blocked Account with the depository company shall be borne by the holder of such shares.

33. Copy of application submitted with CDC for declaration of such company as CDC eligible security.

34. Report of State Bank of Pakistan that the names of promoters/sponsors/controlling directors of the company are not in the Defaulter's List of State Bank of Pakistan either in

1918

Annexure-A

1. Memorandum and Articles of Association and, in case of debentures, a copy of the trust deed

2. Copies of prospectus issued by the Company in respect of any security already listed on the Stock Exchange;

3. A brief history of the company since incorporation giving details of its activities including any re-organization, changes in its capital structure and borrowings

4. A statement showing:

(a) cash dividends and bonuses paid during the last 10 years or such shorter period as the company may have been in existence;

(b) dividends or interest in arrears, if any.

5. Certified copies of agreements or other documents relating to arrangements with or between:

(a) vendors and/or promoters

(b) underwriters

(c) brokers

6. Certified copies of agreements with:

(a) managing agents.

(b) selling agents.

(c) Managing Director and technical directors.

7. Certified copies of the agreements with the NIT, ICP, PICIC, IDBP and any other financial institution.

8. A statement containing particulars, dates of and parties to all material contracts, agreements (including agreements for technical advice and collaboration), concessions and similar other documents except those entered into in the normal course of the company's business or intended business together with a brief description of the terms of such agreements.

2120

9. Names and addresses of the directors and persons holding ten per cent or more of any class of equity security as on the date of application together with the number of share or debentures held by each of them.

10. Particulars of the security listing of which is sought.

Annexure-B

In case of Equity-based Project:1. Certificate from the auditors that the fixed capital expenditure is

entirely financed by equity and that the capital allocated to sponsors, foreign and local investors, if any, has been fully paid.

2. Project appraisal report from a financial institution or a commercial bank or an investment bank.

3. Certificate from the auditors that the land for the project has been acquired, transferred/registered in the name of company, letters of credit have been established and shipment schedule of plant and machinery has been finalized by the suppliers.

4. Undertaking on Non-Judicial Stamp Paper from the Sponsors that they shall retain at least twenty-five per cent of the capital of the company for a period of five years from the date of public subscription.

5. Underwriting arrangement in the manner as prescribed in sub rule (II)(iv) of rule 3 of the Companies (Issue of Capital) Rules, 1996.

In case of Loan-based Project:1. Certificate from auditors that sponsors' subscription has been

received in full and at least 80% thereof has been utilized in the project.

2. Certificate from the concerned Stock Exchange that at least 30% of the plant and machinery has been installed and last consignment of plant and machinery, where required has been shipped to the company.

3. Undertaking on Non-Judicial Stamp Paper from the Sponsors that they shall at all times retain at least 25% of the capital of the company.

Annexure-II

APPLICATION UNDER SECTION 57(1) OF THE COMPANIES ORDINANCE, 1984 (ON THE COMPANY'S LETTERHEAD)

No………… Date………….

The Commissioner,Securities Market Division,Securities and Exchange Commission of Pakistan,Islamabad.

Subject: Application under Section 57(1) of the Companies Ordinance, 1984 for approval to issue, circulate and publish the Prospectus for offer of ……….million …… [name of the securities] by ……… [name of Company].

Dear Sir,

I …………….…..…, the Company Secretary/the Chief Financial Off icer/the Chief Executive Off icer of …………..(name of the company)….. duly authorized by the Board of Directors to do so hereby apply under Section 57(1) of the Companies Ordinance, 1984 for seeking approval to issue circulate and publish the prospectus for issue of ……million …… [name of securities]….. to the general public.

2. I have gone through the draft prospectus attached to this application and ensure that all material facts, information and risk factors related to the offer are disclosed in a simple and plain language and in a proper manner, that nothing has been concealed and that the attached draft prospectus illustrates full, true and fair picture of the issue and the issuing company.

3. Salient features of the issue are attached herewith.

2322

Yours truly,

Signatures:………………Name:…………………..CNIC No…………………..Designation……………....Date…………………….....Place……………………....Official Stamp…………......

Note:- This application should be signed by the company secretary, the chief financial officer or the chief executive officer of the issuing company duly authorized by the board of directors to do so.

A. Information about the issuing company and the proposed Issue:

1. Name of the issuing company.

2. Nature of the security proposed to be offered to the public.(e.g. ordinary shares, preference shares, TFCs, PTCs, Sukuks etc.).

3. Number and amount of securities alongwith percentage proposed to be offered to the public.

4. Purpose of the issue and break-up of the utilization of the proceed of the issue.

5. Offer mechanism [tick v the relevant box please]

6. Offer Price /Floor Price (in case of book building)

7. Capital Structure i.e. authorized capital and break up of Paid-up Capital of the Company before and after the proposed offer alongwith price per share comprising face vale and premium, if any.

8. Latest Credit rating of the issuing company and the instrument alongwith name of the rating agency, where applicable.

9. Name of the stock exchange where the security will be listed.

Fixed Price Book Building

10. Registered Office address, phone & fax number alongwith website & email address, of the issuing company.

11. Number and date of registration of the issuing company, date of commencement of business and nature of business of the issuing company.

12. Name of the advisor/consultant/lead manager to the issue, if any, alongwith its address, phone & fax number and website & email addresses.

13. Name of the contact person(s) alongwith his address, phone & fax number and email address, to be contacted for seeking information /documents related to the issue.

14. Brief financial position of the issuing company for the last three years.

15. Detail of the undergoing projects, if any, alongwith their implementation schedule.

B. General information:

1. Whether the prospectus is cleared by the stock exchange. [tick v the relevant box please]

2. Whether the application accompanied by all the documents mentioned in the Commission's checklist of documents for approval of prospectus.

3. If the answer to above is “No' then please indicate documents yet to be submitted to the Commission alongwith expected date of submission.

4. Whether soft copy of the full and abridged prospectus alongwith advertisement, if any, has been provided to the concerned officer of the Commission.

5. Whether approval under Section 86(1) of the Companies Ordinance, 1984 has been obtained for further issue of share capital, where required.

6. Whether approval for the proposed offer from any other regulatory authority is also required? If so, then please indicate whether such approval has been obtained.

7. Whether the company intends to seek any relaxation from the requirement of any of the law/rule/regulation relating to the proposed offer? If so, then please indicate relevant provision of the law.

Yes No

Yes No

Yes No

Yes No

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C. Payment details

1. Amount of application processing fee paid:

2. Nature of payment instrument (i.e. bank draft, pay order, bank challan, cheque):

3. Number and date of the payment instrument:

4. Drawn on (name of the bank and the relevant branch)

Rs.

LIST OF DOCUMENTS TO BE SUBMITTED TO THE COMMISSION BY COMPANIES ALONG WITH

APPLICATION FOR APPROVAL TO ISSUE, CIRCULATE AND PUBLISH

PROSPECTUS/OFFER FOR SALE DOCUMENT

1. Application under Section 57(1) or 62(1) of the Companies Ordinance, 1984 (the Ordinance) as the case may be.

2. Application made to Stock Exchange (s) along-with copy of enclosures.

3. Clearance letter from the concerned stock exchange(s).4. Copy, both in hard and soft form of the Prospectus/Offer for Sale

Document duly cleared by the stock exchange both in full and abridged with last page signed in original by directors of the Company and duly witnessed and that of the advertisement, if any.

5. Affidavit, on Non-Judicial Stamp Paper, from the Chief Executive (CEO) & the Chief Financial Officer (CFO) of the Company and Offerer (where applicable) on accuracy of the disclosures made in the prospectus, certified by the Oath Commissioner.

6. Non-refundable application processing fee in the following manner:-

a. In case size of the total issue including all types of securities is up to Rs.250 million, a fee of Rs.25,000/-

b. In case size of the total issue including all types of securities is more than Rs.250 million and up to Rs.1,000 million, a fee of Rs.50,000/-

c. In case size of the total issue including all types of securities is more than Rs.1,000 million, a fee of Rs.100,000/-

7. Undertaking on Non-Judicial Stamp Paper from the Balloter, Transfer Agent (Share Transfer Agent) and Underwriter(s) that they fulfill all the conditions of rule-4 of the Balloters, Transfer Agents, and Underwriters Rules, 2001.

8. Copies of the commitment letter(s)/willingness/consent(s) of Pre-IPO Investors (where applicable).

9. Undertaking on Non-Judicial Stamp Paper regarding no buy-back/re-purchase agreement from the Underwriters.

10. Form 29 duly certified from concerned Company Registration Office.

11. Confirmation that issued capital of the company does not consist of shares issued against intangible assets.

12. Affidavit, on Non-Judicial Stamp Paper, from CEO, Directors, Company Secretary & CFO of the Company and Offerer (where applicable) that they have fully disclosed all legal proceedings pending in court of law which may have an adverse material impact on the business of the Company, certified by the Oath Commissioner

Any other document/information as may be required by the Commission for its own record or for inclusion in the prospectus.

Documents required after Approval and before Public Subscription:13. Five printed copies of the prospectus along with copies of all those

newspapers in which the prospectus has been published within two days of such publication.

Documents required after Approval and after Subscription:14. Report containing information about the public issue,

advertisement of the prospectus, subscription received, basis of allotment, refund made and related matters, within 30 days of the public offer.

Note: The documents submitted in the form of photocopy, must be certified by the Company Secretary or the CEO.

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Annexure-III

APPLICATION UNDER SECTION 62(1) OF THE COMPANIES ORDINANCE, 1984

(on the Company's letterhead, where the offerer is a Company)

No…………… Date………….

The Commissioner,Securities Market Division,Securities and Exchange Commission of Pakistan,Islamabad.

Subject: Application under Section 62(1) of the Companies Ordinance, 1984 for approval to issue, circulate and publish the Offer for Sale Document for offer of …………….million …… [name of the securities] of … [name of the issuing company]… by ……… [name of Offerer].

Dear Sir,

I …………….…..…, duly authorized by … [name of the Offerer]….. To do so hereby apply under Section 62(1) read with Section 57 of the Companies Ordinance, 1984 for seeking approval to issue circulate and publish the Offer For Sale Document for offer of ……million …… [name of securities]….. to the general public.

2. I have gone through the draft Offer for Sale Document attached to this application and ensure that all material facts, information and risk factors related to the offer are disclosed in a simple and plain language and in a proper manner, that nothing has been concealed and that the attached draft Offer for Sale Document illustrates full, true and fair picture of the issue and the issuing company

3. Salient features of the issue are attached herewith.

Yours truly,

Signatures:………………Name:…………………..CNIC No…………………..Designation……………..Date……………………..Place……………………Official Stamp………….

Note: This application should be signed by the company secretary, the chief financial officer or the chief executive officer of the Offerer, in case the Offerer is a company, duly authorized by the board of directors of the Offerer to do so. In case the Offerer is individual then this application should be signed by him/her or by the person authorized by him/her in writing to do so.

A. INFORMATION ABOUT THE ISSUING COMPANY AND THE PROPOSED ISSUE:

1. Name of the Offerer(s).

2. Name of the issuing company.

3. Nature of the security proposed to be offered to the public.(e.g. ordinary shares, preference shares, TFCs, PTCs, Sukuks etc.).

4. Number and amount of securities alongwith percentage proposed to be offered to the public.

5. Purpose of the offer and break-up of the utilization of proceed of the offer.

6. Offer mechanism [tick v the relevant box please]

7. Offer Price /Floor Price (in case of book building)

8. Capital Structure i.e. authorized capital and break up of Paid-up Capital of the company before and after the proposed offer alongwith price per share comprising face vale and premium, if any.

9. Latest Credit rating of the issuing company and the instrument alongwith name of the rating agency, where applicable.

Fixed Price Book Building

2928

B. General information:

1. Whether Offer for Sale Document is cleared by the stock exchange. [tick v the relevant box please]

2. Whether the application accompanied by all the documents mentioned in the Commission's checklist of documents for approval of the Offer for Sale Document/prospectus.

3. If the answer to above is “No' then please indicate documents yet to be submitted to the Commission alongwith expected date of submission.

4. Whether soft copy of the full and abridged Offer for Sale Document/prospectus alongwith advertisement, if any, has been provided to the concerned officer of the Commission.

5. Whether approval of the board of directors of the Offerer, in case the Offerer is a company, has been obtained for divestment of securities through the proposed public offer.

Yes No

Yes No

Yes No

Yes No

10. Name of the stock exchange where the security will be listed.

11. Registered Office address, phone & fax number alongwith website & email address, of the Offerer and the issuing company.

12. Number and date of registration of the company, date of commencement of business and nature of business of the issuing company.

13. Name of the advisor/consultant/lead manager to the issue, if any, alongwith its address, phone & fax number and website & email addresses.

14. Name of the contact person(s) alongwith his address, phone & fax number and email address, to be contacted for seeking information /documents related to the offer.

15. Brief financial position of the issuing company for the last three years.

16. Detail of the undergoing projects, if any, of the issuing company alongwith their implementation schedule.

C. Payment details

1. Amount of application processing fee paid:

2. Nature of payment instrument (i.e. bank draft, pay order, bank challan, cheque):

3. Number and date of the payment instrument:

4. Drawn on (name of the bank and the relevant branch)

Rs.

Note: The documents to be submitted with this application are same as listed down in the checklist of documents mentioned above.

6. Whether approval for the proposed divestment from any regulatory authority is also required? If so, then please indicate whether such approval has been obtained.

7. Whether the Offerer intends to seek any relaxation from the requirement of any of the law/rule/regulation relating to the proposed offer? If so, then please indicate relevant provision of the law.

3130

Annexure-IV

STANDARD DISCLOSURE IN FULL PROSPECTUS FOR ISSUE OF SHARES

3332

3534

For and on behalf of (Name of the Company)

Chief Financial Officer

Annexure-V

FEE CHARGED BY THE SECP, THE STOCK EXCHANGES AND THE BROKERS

§ SECP Fee:o In case size of the total issue including all types of

securities is up to Rs.250 million, a fee of Rs.25,000/-

o In case size of the total issue including all types of securities is more than Rs.250 million and up to Rs.1,000 million, a fee of Rs.50,000/-

o In case size of the total issue including all types of securities is more than Rs.1,000 million, a fee of Rs.100,000/-

§ Initial Listing Fee of the Stock Exchanges:Initial Listing Fee of the exchanges is one tenth of one percent of the Paid-Up-Capital of the issuing company subject to a maximum of rupees two million and five hundred thousand.

§ Brokerage Commission:Brokerage Commission1% of the amount of the successful applications.

Note: Commission to the underwriters, Lead Manager / Advisor / Consultant / Arranger, Book Runner, Bankers to the issue, Balloter / share registrar to the issue and Legal advisor to the issue are deregulated and may be agreed between the concerned intermediaries.

4342

01

03

05

07

09

07

09

PROCEDURE

FOR OBTAINING LICENCE BY

AN

ASSOCIATION

NOT FOR PROFIT UNDER SECTION 42 OF

THE COMPANIES ORDINANCE, 1984

ITS INCORPORATION

AS A COMPANY

LIMITED BY GUARANTEE

&

RENEWAL OF ITS LICENCE

2

A not-for-profit association (more commonly

called an NGO) may be registered as company

under the provisions of the Companies

Ordinance, 1984 (the „Ordinance‟). Any such

association is required to obtain licence under

Section 42 of the Ordinance read with rule 6 of

the Companies (General Provisions and Forms)

Rules, 1985 (the „Rules‟) from the Securities and

Exchange Commission of Pakistan (the

„Commission‟) prior to its registration as a

company limited by guarantee. The licence is

issued for a period of five (5) years, renewable for

further term (s) of five (5) years each. The

procedure for obtaining licence, subsequent

registration of such Association as company,

and thereafter renewal of the licence when due,

is provided hereinafter.

3

SSSTEPTEPTEP 1: A1: A1: AVAILABILITYVAILABILITYVAILABILITY OFOFOF NNNAMEAMEAME

The first step is to seek availability of the

proposed name for the company. The application

for availability of name can be made online

through eServices OR offline through physical

filing to any one of the Company Registration

Offices (CROs) of the Commission.

For online submission of application, the fee is

Rs. 200/-, which is much cheaper than the

manual submission of application. All information of

eServices are available at the web portal of the Commission at

http://www.secp.gov.pk/eServices/index.asp

For offline, an application is to be made to the

Company Registration Office alongwith the

original Bank challan of Rs. 500/-, paid as

application fee, in the authorized branches of

MCB Bank Limited or alongwith a Bank Draft/

Pay Order of the same amount, drawn in favour

of the “Securities and Exchange Commission of

Pakistan”. Addresses of CROs are provided in the Promoters

guide placed at the Commission’s website at

http://www.secp.gov.pk/Guides/PromotersGuideEnglish-new.pdf

http://www.secp.gov.pk/eServices/index.asp

http://www.secp.gov.pk/Guides/PromotersGuideEnglish-new.pdf

4

STEP 2: APPLICATION FOR GRANT OF LICENCE

An application by the promoters or members of an association desirous of obtaining a licence under section 42, is submitted through duly authorized

representative with the subject: “Application for Grant of Licence under section 42 to M/s „……<Association>………‟ (Proposed)”, is addressed to:

The Chairman, Securities and Exchange Commission of Pakistan, 63-Jinnah Avenue, NIC Building, Blue Area, Islamabad

The following information/documents are required to be submitted alongwith the application:

1 Original Bank challan of Rs. 25,000/-, paid as

application fee, in the authorized branches of MCB Bank Limited or a Bank Draft/Pay Order of

the same amount, drawn in favour of the

Securities and Exchange Commission of Pakistan.

2 Copy of letter showing that the proposed name is

available. (Please see Step-1 above for reference)

3 Three (3) printed copies of Memorandum and

Articles of Association. Specimen of Memorandum and

Articles of Association is provided at the end of this booklet and also placed on the Commission‟s website at: http://

w w w . s e c p . g o v . p k / M e m o A n d A r t i c l e / d o c s /

Spec_MemArticles42_16_01_2012.doc

4 A list of promoters of the association with their

occupations and addresses; [Format at Annex-I]

5 Attested photocopies of CNICs (Passport, in case

of foreigner) of each of the promoter.

5

6 A statement the names of companies, associations

and other institutions in which the promoters of

the proposed association holds any office stating the office held (position/designation) in each case; [Format at Annex-II]

7 A declaration by a person of the effect that he has

scrutinized the application and the accompanying documents, and that he is satisfied that the same

are drawn up in conformity with the provisions of the Ordinance and fulfill the conditions for the

grant of licence laid therein and the rules; [Format at Annex-III]

8 An undertaking on the stamp paper of appropriate

value from each promoter to the effect that they have sufficient skills, expertise and resources for

the attainment of object of the proposed association. Moreover, the said undertaking

should indicate that each promoter shall contribute a reasonable amount (e.g.,

Rs.200,000/-) as start up donation having regard

to the circumstances of the case. The amount shall be deposited in the company‟s account

within a period of six months of the date of its incorporation which shall be used for the

attainment of the object and should not be

refundable to the promoters, directly or indirectly through any means;

[Format at Annex-IV]

9 An estimate of the future annual income and

expenditure of the proposed company, specifying the sources of income and objects of expenditure.

The statement should also reflect the aforesaid startup donation of the each subscriber. [Format at

Annex-V]

6

10 A brief statement of work already done (if any) and

the work proposed to be done after incorporation as a company specifying salient features of the

project(s) e.g., their location, size, duration, etc., to be undertaken in pursuance of object of the

company. [Format at Annex-VI]

11 Power of Attorney (Authority Letter) on Stamp

Paper of appropriate value made by all the

promoters in favour of a person to present the application before the Commission on their behalf,

and to make other amendments, additions, corrections etc., in the documents and also to

collect licence. [Format at Annex-VII]

12 Resume of all promoters. [Format at Annex-VIII]

13 Affidavit on Stamp Paper of appropriate value duly

attested by an Oath Commissioner made by all the promoters affirming that they are not defaulter of

loans, etc. [Format at Annex-IX]

14 Affidavit on Stamp Paper of appropriate value duly

attested by an Oath Commissioner affirming

correctness of contents of the Application. [Format at

Annex-X]

15 The application needs to indicate whether the association is already in existence or not. If the

association is already in existence, the following information/documents relating to the existing

entity also to be furnished :

A– In case, the existing entity is a society, trust, etc., (i.e.,

other than a company registered in Pakistan):

7

a. A copy each of the audited balance-sheet, income and expenditure account and the annual report on the working of the existing entity for the financial year

immediately preceding the date of the application;

b. Attested copy of Certificate of Registration (if it has any

legal status);

c. Copy of resolution regarding dissolution and taking over of the assets and liabilities of the existing entity by the proposed company within three months of its

incorporation;

d. Attested copy of List of members of Board of Directors/

Governors/ Trustees of the existing entity;

e. Attested copy of Memorandum and Articles of Association, Charter, or Statute by which it was

registered.

B- In case, the existing entity is already registered as a

company in Pakistan:

a. A copy each of the audited balance-sheet, income and expenditure account and the annual report on the working of the existing entity for the financial year

immediately preceding the date of the application; and

b. A copy of special resolution proposing to seek licence under section 42 of the Ordinance and amendments in its memorandum and articles of association to bring it

in conformity with the licencing requirements.

Please Note:

A copy of application alongwith its enclosures are also required to be forwarded by the applicant to the Company Registration Office

concerned.

(Addresses of CROs are provided in the Promoters guide placed

at the Commission’s website at

http://www.secp.gov.pk/Guides/PromotersGuideinEnglishdec022010.pdf

8

The Commission on being satisfied, after such

enquiry and obtaining such further information,

as it may consider necessary, that it shall be in

the public interest so to do, may grant the

licence applied for, subject to such conditions as

it may deem fit to impose.

9

STEP 3:

REGISTRATION OF ASSOCIATION

AS A COMPANY LIMITED BY GUARANTEE

After obtaining licence from the Commission, the Association must be incorporated under provisions of the Ordinance, within a period of three months from the date of the licence.

The procedure for the incorporation of Associations is provided in the Promoters Guide placed at the Commission‟s website at: http://www.secp.gov.pk/Guides/PromotersGuideinEnglishdec022010.pdf

10

RENEWAL OF LICENCE

The licence is issued for a definite period of five (5)

years, renewable for further term(s) of five (5)

years, each, on an application to be submitted to

the Commission, three months before the

expiration of period of licence by the association

alongwith the following documents:

a. Copies of annual audited accounts for the last five (5) years.

b. Certificate from concerned registrar regarding compliance with provisions of the Ordinance and the Rules.

c. Attested copy of latest annual return/Form-B filed with the concerned registrar.

d. List and complete profile of existing Chief Executive and Directors of the company.

e. Affidavit by Chief Executive and all directors affirming that they are not defaulters of

loans, etc.

f. List of existing members with their occupations, residential addresses, contact numbers and copies of their CNICs.

11

g. Brief statement of the work done by the association during the last three years;

h. Details of the amount of donations and grants received during last five (5) years duly certified by the Chartered Accountants that funds/donations was/were received through banking channel, and details of the donors.

i. A detailed report with regard to the performance of the association for achieving its aims and objects during the preceding four years, preceding the date on which

application is made, duly evaluated and certified by Pakistan Centre for Philanthropy (a company set up under section 42 of the Ordinance).

The Commission on being satisfied of the past

corporate behaviour of the company, after such enquiry and obtaining such further information, as it may consider necessary, that it shall be in the public interest so to do, may renew the licence for further period of five years, subject to such conditions as it may deem fit to impose.

DISCLAIMER The aforesaid procedure has been provided with the intention to create an awareness of the concept of the relevant matters. However, the procedure does not tell everything and the opinions or legal interpretations referred therein are circumstantial and may vary under different situations. If the reader is in doubt or dealing with any specific condition, it is recommended to refer to the Companies Ordinance, 1984 and allied laws or consult an adviser for seeking professional advice.

12

Important

There must be at least 3 subscribers/

members/promoters of the company and who must have sufficient skills, expertise and resources for the attainment of object of the proposed company.

Each promoter shall contribute a reasonable amount as start up donation having regard to the circumstances of the case.

All conditions of licence shall be mentioned in the Memorandum of Association of the company.

{Please see Clauses IV to IX of the specimen of Memorandum and

Articles of Association which is placed on the Commission‟s website and downloadable at: http://www.secp.gov.pk/

MemoAndArticle/docs/Spec_MemArticles42_16_01_2012.doc

13

ANNEX-I

LIST OF PROMOTERS

OF M/S (PROPOSED)

[Section 42 and rule 6(2)(b)]

Signatures: ________________________

Name: ________________________ [To be signed by the person presenting documents]

Name of Promoter Occupation Address

14

ANNEX-II

OFFICES HELD BY PROMOTERS OF

M/S (PROPOSED)

IN OTHER COMPANIES, ASSOCIATIONS, AND INSTITUTIONS, ETC.

[Section 42 and rule 6(2)(d)]

Signatures: ________________________ Name: ________________________

[To be signed by the person presenting documents]

Name of Promoter Office (s) Held

(position/designation)

Name (s) of other

companies /associations/institutions

15

ANNEX-III

DECLARATION OF COMPLIANCE

WITH THE REQUIREMENTS OF THE COMPANIES ORDINANCE, 1984

AND THE COMPANIES (GENERAL PROVISIONS AND FORMS) RULES, 1985

[Section 42 and rule 6(2)(c)]

I, …………………………………………………… son/daughter/widow of …………….

…………………….………………... do solemnly and sincerely declare:-

i) that I [am an Advocate entitled to appear before a High Court / Supreme Court /

a Chartered Accountant / a Cost and Management Accountant practicing in

Pakistan and am engaged in the formation of the proposed association, namely,

…………………………………………………………… /] am a person named in the

Articles of Association as a director/officer of the proposed association, namely,

……………………………………………………………..; and

ii) that I have scrutinized the application and the accompanying documents, and

that I am satisfied that the same are drawn up in conformity with the provisions

of the Ordinance and fulfill the conditions for the grant of licence laid therein

and the Companies (General Provisions and Forms) Rules, 1985.

Signature: ……………………

Full Name (in Block Letters),

Designation, NIC Number,

and Full Address

Date: …………………….

Place: ……………………

Witness to the signature:

Signature: …………………… Full Name, Father‟s/ Husband‟s

Name (in Block Letters)

NIC Number, Occupation and Full Address

[To be made on stamp paper duly verified by an Oath Commissioner]

Attested by an Oath Commis-

sioner

[Under his

Stamp]

16

ANNEX-IV

UNDERTAKING

I, __________________________, Son of _________________________,

resident of _______________________________________________, subscriber of

M/s. _____________________________________________ (Proposed), do hereby

undertake on oath that:

(i) I have sufficient skills, expertise and resources for

attainment of the object(s) of M/s. __________________________

(Proposed); and

(ii) I shall contribute an amount of Rs. /- as start

up donation to Ms. ___________________________ (Proposed),

and the said amount shall be deposited in the company‟s

account within a period of six months of the date of its

incorporation which shall be used for the attainment of

company‟s object(s) and shall not be refundable to the

promoter, directly or indirectly through any means.


Full Name (in Block Letters), Designation, NIC Number,

and Full Address

Date: …………………….

Place: ……………………

Witness to the signature:

Signature: …………………… Full Name, Father‟s/ Husband‟s Name (in Block Letters)

NIC Number, Occupation Full Address



sioner

[Under his

Stamp]

17

ANNEX-V

Statement of Estimated Future Annual Income and Expenditure

of M/s. (Proposed) [Section 42 and rule 6(2)(f)]

(Amounts in Pak Rupees)

Note: Above referred Notes attached herewith give details about the above estimates with

year wise break-ups and where needed, alongwith sufficiently descriptive explanations.

Signatures: ________________________

Name: ________________________ [To be signed by the person presenting documents]

INCOME Notes Year 1 Year 2 Year 3

Donations and Grants - Local 1 0,000,000 0,000,000 0,000,000

Donations and Grants - Foreign 2 0,000,000 0,000,000 0,000,000

Member‟s donations – Start-up 0,000,000 0 0

Member‟s donations – Other 3 0,000,000 0,000,000 0,000,000

Other sources, specify, if any 4 0,000,000 0,000,000 0,000,000

Previous year‟s surplus (deficit) B/F 0 0000,000 0,000,000

Total Income 0,000,000 0,000,000 0,000,000

EXPENDITURE Year 1 Year 2 Year 3

Registration and Legal fee 000,000 0 0

Object related projects:

Specify (name of) project 1

5

000,000

000,000

000,000

Specify (name of) project 2, if any 6 0,000,000 0,000,000 0,000,000

Specify (name of) project 3, if any, etc. 7 000,000 0,000,000 0,000,000

Administrative and operational expendi-

tures

8 000,000 000,000 000,000

Total Expenditures 0,000,000 0,000,000 0,000,000

Income over Expenditures/Surplus

(Deficit), if any

0,000,000 0,000,000 0,000,000

18

ANNEX-VI

BRIEF STATEMENT OF THE WORK ALREADY DONE BY THE

ASSOCIATION OR PROPOSED TO BE DONE AFTER ITS BEING GRANTED THE LICENCE AND REGISTRATION UNDER SECTION 42

OF THE COMPANIES ORDINANCE, 1984 [As required under Rule 6(2)(g) of the Companies (General Provisions

and Forms) Rules, 1985]

M/s. (Proposed).

Work already done (salient features of work/projects, etc), if any:

1. 2. 3.

Work Proposed to be done (salient features of work/projects, etc) after grant of licence:

1.

2. 3.

Signatures: ________________________ Name: ________________________

[To be signed by the person presenting documents]

19

ANNEX-VII

Power of Attorney / Authority Letter

We, the following persons, being promoters / subscribers of M/s. ……………………………………………………….. (proposed), do hereby appoint

and authorize Mr. / Ms ……………………………. Son/Daughter/Wife of ………………………....…resident of …………………………………………………….……………………………, whose signatures appear below, to present us before

the Securities and Exchange Commission of Pakistan to submit application/ documents for grant of license under section 42 of the Companies

Ordinance, 1984, and to make necessary amendments therein as required by the SECP, to collect license, and to sign and give necessary explanation

on our behalf in relation to the above and the allied matters.

Signature: …………………

[Authorized Representative] Full Name with NIC Number

Witness to the signatures:


Full Name, NIC Number, Father‟s/ Husband‟s Name,

Occupation and Full Address

Date: ……………………. Place: ……………………

[To be made on Stamp Paper of appropriate value duly attested by Notary Public]

Sr. Name of Promoter Signature

Attested by

Notary Public

[Under his

Stamp]

20

ANNEX-VIII RESUME

Promoter/Subscriber of

M/s. (Proposed).

Educational Qualifications: ____________________________________________

Experience Details (with dates, period, organizations, nature of projects/work responsibilities):

A. Now working as (describing offices held at the moment and related work responsibilities):

___________________________________________________________________

___________________________________________________________________ ___________________________________________________________________

B. Previous Experience relating to Object of the proposed Association now being formed:

1. _________________________________________________________________ _________________________________________________________________

2. _________________________________________________________________ _________________________________________________________________

C. Other Experience:

1. _________________________________________________________________ _________________________________________________________________

2. _________________________________________________________________

Signature: ________________________

Name: ________________________ [To be signed by the promoter himself /herself or the authorized person presenting documents]

Note: If needed, the space for experience details may be expanded or extra pages may be annexed.

Promoter’s Name: ________________________________________________

Nationality: ________________________________________________

CNIC No./ Passport No. (in

case of foreigner) ________________________________________________

Old NIC No. ________________________________________________

National Tax Number: ________________________________________________

Date of Birth / Age: ________________________________________________

Father‟s/Husband‟s Name: ________________________________________________

Postal Address: ________________________________________________

________________________________________________

Permanent Address: ________________________________________________

________________________________________________

Email / Telephone / Fax No. ________________________________________________

________________________________________________

21

ANNEX-IX

AFFIDAVIT

I, Mr. _________________________ son of ____________________ resident of

_______________________ and promoter of _________________________, do hereby, solemnly

affirm and testify that the contents of the application for grant of licence under section 42

of the Companies Ordinance, 1984 to the proposed Association are true and correct to the

best of my knowledge and belief and declare that:

(a) I have not been associated with any illegal banking business, deposit taking or

financial dealings;

(b) I and the companies in which I am director or major shareholder have no over-

due loans or installments exceeding Rs.300,000/- outstanding towards banks or

other financial institutions;

(c) neither I nor companies in which I am a director or major shareholder have

defaulted in paying taxes as on the date of application;

(d) I have not been a sponsor, director or chief executive of a defaulting cooperative

finance society or finance company;

(e) I have never been convicted of fraud or breach of trust or of an offence involving

moral turpitude or removed from services for misconduct;

(f) I have neither been adjudged an insolvent nor have defaulted in making

payments to my creditors; and

(g) the funds raised shall be spent for objects of the proposed Association and for

other lawful purposes.

DEPONENT

________________

(Signature)

Dated: ___________



sioner

[Under his

Stamp]

22

ANNEX-X

AFFIDAVIT

I, Mr. _________________________ son of __________________, NIC number

_________________ resident of _______________________ and do hereby, solemnly

affirm and testify that the contents of the application under section 42 of the

Companies Ordinance, 1984 and annexed documents are true and correct to the

best of my knowledge and belief and declare that:

1. I am promoter / subscriber / proposed director of M/s.

_________________________ and fully aware of the affairs of the proposed

company particularly the application under section 42 of the Companies

Ordinance, 1984.

2. Whatsoever stated in the application and accompanied documents is

true and nothing has been concealed in the application.

DEPONENT

(Signature)

Dated: ___________



sioner

[Under his

Stamp]

23

STANDARD SPECIMEN

A company set up under Section 42 of the Companies Ordinance, 1984

MEMORANDUM OF ASSOCIATION

OF

XYZ ASSOCIATION / FOUNDATION

I. The name of the Company is “XYZ ASSOCIATION / FOUNDATION”.

II. The Registered Office of the Company will be situated in Islamabad Capital Territory / the

Province of -------------------

III. The object for which the Company is established is as follows:

If an association proposes to engage in Education activities, it may adopt the object stated below:-

(1) To establish, manage, maintain, own, administer, promote and subsidize educational institutions, computer literacy centres, schools, colleges, institutions for study and research, centres of learning, reading rooms, and other institutions for basic education, adult literacy, advanced studies and other educational fora with the permission of competent authority but not to act as a degree awarding institute.

(2) To provide scholarships to students and grant aid including supply of books,

stipends, medals, prizes, grants, awards, medicines, educational career support, bursaries and other incentives for purposes of advancement of knowledge, education and literacy.

OR in Research activities:

(3) To provide a platform for research and development relating to object of the company and in this regard:-

(a) to make available key knowledge tools such as :-

(i) a well equipped library;

(ii) database and electronic connectivity; and

(iii) website for research publications and interaction.

(b) to undertake steps for promotion of research such as :-

(i) to define and support research;

(ii) to encourage members to conduct research; and

(iii) to participate in regional and international research initiatives;

(c) to undertake any activity for development such as;

(i) to arrange funding for supporting research; and

(ii) to organize and set up of a think tank related to the objects of the company; and

24

(d) to provide a forum for participation of all concerned and to:

(i) solicit views vis-à-vis the objects of the company; and

(ii) enable discussion/dialogue for promoting quality research.

OR

If an association proposes to engage in Special Education activities, it may adopt the object stated below:- To establish, own, maintain, erect, construct, furnish, equip, promote, organize, manage and run institutions for special education and to provide grants and facilities for education and training to the persons who are mute, deaf, dumb or blind, crippled or otherwise physically or mentally handicapped and to provide books, proper medical attendance, nursing, food, medicine, drugs and special appliances of educational, surgical, or other nature.

OR If an association proposes to engage in Professional Institutions activities, it may adopt the object stated below:- To establish an institute for advancement and raising standards of professional education in the field of accountancy, cost accounting, financial management, secretarial practice and cognate subjects as applied to all or any of the professional services provided by accountants in general and to provide a platform for members and to facilitate dissemination of information, making available the course materials and holding of examinations and to protect and preserve their professional independence and to exercise professional supervision over them.

OR If an association proposes to engage in Religious activities, it may adopt the object stated below:- To promote the real values of Islam and in view thereof to initiate research, analytical study, seminars, talks and discussions and to promote public awareness, education and understanding of Islamic ideology, economic system and philosophy and provide forum for research scholars, specialists, experts, writers, speakers, thinkers for free intellectual interaction and to develop consensus and understanding in vital Islamic issues.

OR

If an association proposes to engage in Social Infrastructure and Human Resource Development activities, it may adopt the object stated below:- To work for development of human resources, promotion of social and economic well being of the masses, improvement of social status, social mobilization for prosperous society, and elimination of gender discrimination particularly in the rural areas of Pakistan.

OR

If an association proposes to engage in Rural Support Programme activities, it may adopt the object stated below:- To develop the rural areas and the resources of land, undertake, support and subsidize measures, programmes, plans and schemes for rural development including development and improvement of townships, settlements and villages, houses, buildings, roads, water courses, play grounds, and other civic amenities and to undertake measures for improvement of conditions of housing, work,

25

health, hygiene, sanitation and the quality of life.

OR If an association proposes to engage in Health Services activities, it may adopt the object stated below:- To aid, assist, set up, maintain, administer and run hospitals, nursing homes, mother and child care centres, clinics, dispensaries, immunization and vaccination centres and places of medical aid, convalescent homes, family planning centres, X-ray clinics, radio therapy centres, pathological and clinical laboratories, blood banks, eye banks or other centres connected with the care of the human body, both in urban and rural areas.

OR If an association proposes to engage in Arts, Sciences and Literature activities, it may adopt the object stated below:- To promote and foster study in arts, sciences, literature and to give literary, arts and sciences awards, scholarships and prizes for its encouragement.

OR

If an association proposes to engage in Culture and heritage activities, it may adopt the object stated below:-

To undertake, aid, support, assist, promote, manage, research and encourage projects or programmes concerned or dealing with the restoration, conservation, revitalization, preservation and reuse of architectural structures, buildings, forts, palaces, mausoleums, monuments, mosques, places of historical or cultural significance, archaeological sites, town squares, markets, gardens and parks in Pakistan.

OR

If an association proposes to engage in Charity activities, it may adopt the object stated below:- To establish, maintain, run, manage and administer aid programmes providing relief and help to the needy, the poor and the destitute, undertake charitable and philanthropic activities for benefit of the mankind and work for alleviation of human sufferings from catastrophes.

OR

If an association proposes to engage in Sports activities, it may adopt the object stated below:-

To promote and develop centres for sports and sporting activities and encourage talent thereto and through them endeavour to bring about national integration and provide fields, grounds and other facilities and amenities including coaching and training facilities in developed and developing areas of the country and to promote and organize activities such as bird watching, trekking, mountaineering, hunting, archery, camping, fishing, rock climbing and all other outdoor sports.

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IV. In order to achieve its object, the Company shall exercise the following powers:

1. To appeal, solicit or accept contributions, donations, grants and gifts, in cash or in kind, from lawful sources and to apply the same or income thereof for the objects of the Company.

2. To open and operate bank accounts in the name of the Company and to draw, make, accept, endorse, execute and issue promissory notes, bills, cheques and other instruments.

3. To acquire, alter, improve, charge, take on lease, exchange, hire, sell, let or otherwise dispose of any movable or immovable property and any rights and privileges whatsoever for any of the objects or purposes specified herein above. Provided that the Company shall not undertake the business of real estate or housing schemes.

4. To borrow or raise money, with or without security, required for the purposes of the company upon such terms and in such manner as may be determined by the company for the promotion of its objects.

5. To mortgage the assets of the company and / or render guarantee for the performance of any contract made, discharge of any obligation incurred or repayment of any moneys borrowed by the Company.

6. To purchase, sell, exchange, take on lease, hire or otherwise acquire lands, construct, maintain or alter any building and any other moveable or immovable properties or any right or privileges necessary or convenient for the use and purposes of the company.

7. To nominate delegates and advisors to represent the Company at conferences, government bodies and other gatherings.

8. To co-operate with other charitable trusts, societies, associations, institutions or companies formed for all or any of these objects and statutory authorities operating for similar purposes and to exchange information and advice with them.

9. To pay out of the funds of the company the costs, charges and expenses of and incidental to the formation and registration of the Company.

10. To invest the surplus moneys of the company not immediately required in such a manner as may from time to time be determined by the company.

11. To create, establish, administer and manage funds including endowment fund conducive for the promotion of the objects of the company.

12. To enter into agreements, contracts and arrangements with organizations, institutions, bodies and individuals for the purpose of carrying out the functions and activities of the Company.

13. To take such actions as are considered necessary to raise the status or to promote the efficiency of the company.

14. To conduct, hold and arrange symposia, seminars, conferences, lectures, workshops and dialogue and to print, publish and prepare journals, magazines, books, circulars, reports, catalogues and other works relating to any of the objects of or to the work done by the Company, subject to the permission, if required of the relevant authorities.

15. To do all other such lawful acts and things as are incidental or conducive to the attainment of the above objects or any one of them.

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V. The Company shall achieve the above said objects subject to the following conditions:-

1. The company is formed as a public company limited by guarantee and not having a share capital.

2. Payment of remuneration for services or otherwise to its members, or their family members whether holding an office in the company or not, shall be prohibited.

3. No change in the Memorandum and Articles of Association shall be made except with the prior approval of the Securities and Exchange Commission of Pakistan.

4. Patronage of any government or authority, express or implied, shall not be claimed unless such government or authority has signified its consent thereto in writing.

5. The company shall not itself set up or otherwise engage in industrial and commercial activities or in any manner function as a trade organization.

6. The company shall not exploit or offend the religious susceptibilities of the people.

7. The subscribers to the Memorandum and Articles of Association of the Company shall continue to be the members of the Company unless allowed by the Commission on application to quit as members and will be held responsible and accountable.

8. The company in all its letterheads, documents, sign boards, and other modes of communication, shall with its name, state the phrase “A company set up under section 42 of the Companies Ordinance, 1984.”

9. The income and any profits of the company, shall be applied solely towards the promotion of objects of the company and no portion thereof shall be distributed, paid or transferred directly or indirectly by way of dividend, bonus or otherwise by way of profit to the members of the company or their family members.

10. The Company shall not appeal, solicit, receive or accept funds, grants, contributions, donations or gifts, in cash or in kind, from foreign sources except with the prior permission, clearance or approval from the relevant public authorities as may be required under any relevant statutory regulations and laws. No funds shall be received otherwise than through proper banking channels i.e., through crossed cheque, pay-order, bank draft, etc.

11. The Association shall close its accounts on 30th of June each year.

12. The Association shall make no investment, whatsoever, in its associated companies except with the prior approval of the Commission and subject to such conditions as it may deem fit to impose.

13. The company shall not undertake any trading activities and shall conform to relevant statutory regulations and laws.

14. Notwithstanding anything stated in any object clause, the company shall obtain such other licenses, permissions, or approvals of the relevant public authorities as may be required under any relevant statutory regulations and laws for the time being in force, to carry out its specific object.

15. The company shall comply with such conditions as may be imposed by the Securities and Exchange Commission of Pakistan from time to time.

VI. The territories to which the object of the company shall extend are declared to include whole of Pakistan.

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VII. The liability of the members is limited. VIII. Every member of the company undertakes that he shall contribute to the assets of the

Company in the event of its being wound up while he is a member or within one year afterwards, for payment of the debts or liabilities of the Company contracted before he ceases to be a member and the costs, charges and expenses of winding up and for adjustment of the rights of the contributories among themselves such amount as may be required but not exceeding Rs. 100,000/- (Rupees One Hundred Thousand Only).

IX. In the case of winding up or dissolution of the Company, any surplus assets or property,

after the satisfaction of all debts and liabilities, shall not be paid or disbursed among the members, but shall be given or transferred to some other company established under section 42 of the Companies Ordinance, 1984, having similar or identical objects to those of the Company to be decided by the members of the Company in their general meeting by a special resolution, and with the approval of Commissioner of Income Tax under section 61 read with section 2(36) of the Income Tax Ordinance, 2001, under intimation to the Securities and Exchange Commission of Pakistan, within three months.

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We, the several, persons whose names and addresses are subscribed below are desirous of being formed into a Company in pursuance of this Memorandum of Association:-

Dated the……………………. day of………………………, 201…

Name and surname (present & former) in full

(in Block Letters)

NIC No. (in case of

foreigner, Passport

No)

Father's/ Hus-

band's Name in

full

Nationality(ies) with any

former Na-

tionality

Occupa-

tion Residen-tial Ad-dress in

full

Signature

1. AB nnnnn-nnnnnnn-n

GH Pakistani Resident Director, Household Appliances Ltd., La-hore

14-A, Street No.2, Sa-daf Colony, Quetta.

2. CD nnnnn-nnnnnnn-n

IJ Pakistani Advocate -do-

3. XYZ Limited

through

EF

nnnnn-nnnnnnn-n

KL

Pakistani

Company

Director,

ABC Ltd

House No 176, Street No.204, F-10/1, Is-lamabad

14-A, Street No.2, Sa-daf Colo-ny, Quetta.

Witness to above signatures

Signature

Full Name (in Block Letters)

Father’s/ Husband’s name

Nationality

Occupation

CNIC NO

Full Address

30

A company set up under Section 42 of the Companies Ordinance, 1984

ARTICLES OF ASSOCIATION

OF

XYZ ASSOCIATION / FOUNDATION

PRELIMINARY

1. In these Articles, unless the context or the subject matter otherwise requires:

(a) “The Company” means XYZ ASSOCIATION / FOUNDATION.

(b) “The Office” means the Registered Office for the time being of the company.

(c) “The Directors” mean the Directors for the time being of the company.

(d) “The Seal” means the Common Seal of the company.

(e) “The Ordinance” means the Companies Ordinance, 1984.

(f) “The Commission” means the Securities and Exchange Commission of Pakistan.

(g) “The Registrar” means the Registrar of Companies.

(h) “The Register” means the Register of the members to be kept in pursuant to Section 147 of the Ordinance.

(i) “Chief Executive” means the Chief Executive of the company.

(j) “Secretary” means the Company Secretary of the company.

(k) “Memorandum” means the memorandum of association of the company.

(l) “Person” includes an individual, company, corporation and body corporate.

(m) “Articles” means the articles of association of the company.

(n) “Board” means the board of directors of the company.

(o) “Year” used in the context of financial matters shall mean financial year of the company.

(p) Expressions referring to writing shall be construed as including references to typewriting, printing, lithography, photography and other modes of representing or reproducing words in visible form.

(q) Words importing the singular number include the plural number and vice versa and words importing the masculine gender include the feminine gender.

(r) Unless the context otherwise requires words or expressions contained in these Articles shall be of the same meaning as in the Ordinance or any statutory modification thereof in force at the date at which these Articles become binding on the company.

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MEMBERSHIP

2. The number of members with which the Company proposes to be registered is --------

(number of members with which the Company is going to be incorporated is to be given) but the minimum number of members shall not be, at any time, less than three (3). However, the directors may, from time to time, whenever the company or the business of the company requires, increase the number of members.

3. The company in General Meeting may from time to time lay down the qualifications and

conditions subject to which any person or class of persons shall be admitted to membership of the company.

4. The rights and privileges of a member shall not be transferable and shall cease on his death

or otherwise ceasing to be a member. 5. The subscribers to the memorandum and such other persons as the directors shall admit to

membership shall be members of the company. 6. One person shall have the right to hold one membership.

ADMISSION TO MEMBERSHIP

7. The application for seeking membership of the company shall be required to be seconded by an existing member whereupon the board of directors shall decide the matter of his admission as member or otherwise within three months of making of such application. No minor or lunatic shall be admitted as a member of the company.

8. Every person, upon applying for admission to membership, shall sign an undertaking that he

will, if admitted, so long as he is a member, duly observe the Articles of the company for the time being in force.

9. The Board shall subject to the Articles, accept or reject any application for admission to

membership. The Board’s decision shall be final and it shall not be liable to give any reasons thereof.

CESSATION / EXPULSION FROM MEMBERSHIP

10. A member renders himself liable to expulsion or suspension by the Board if:

(a) he refuses or neglects to give effect to any decision of the Board; or

(b) he infringes any of the regulations of the Articles; or

(c) he is declared by a court of competent jurisdiction to have committed a fraud, or to be bankrupt, or to be insane or otherwise incompetent; or

(d) he is held by the Committee of the company to have been guilty of any act discreditable to a member of the company; or

(e) he is acting or is threatening to act in a manner prejudicial to the interest or functioning of the company or any other institute, body corporate, society, association or institution in which the company has an interest.

11. The company in general meeting may, on an appeal of the aggrieved member and after giving an opportunity of hearing, annul or modify the decision of the board with regard to expulsion of the member by resolution supported by two-thirds majority. The person expelled shall be reinstated as a member from the date of the resolution of the general meeting annulling the decision of the Board.

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12. Termination of membership shall occur automatically:

(a) in the event of the death of a member; and (b) in the event a member fails to pay any amount due by him to the company within

three (3) months after such obligation has become due.

GENERAL MEETINGS AND PROCEEDINGS

13. ANNUAL GENERAL MEETING:

A general meeting to be called annual general meeting, shall be held, in accordance with the provisions of Section 158, within eighteen (18) months from the date of incorporation of the company and thereafter once at least in every calendar year within a period of four (4) months following the close of its financial year and not more than fifteen (15) months after the holding of its preceding annual general meeting as may be determined by the directors.

14. OTHER GENERAL MEETINGS:

All other meetings of the members of the company other than an annual general meeting shall be called “Extraordinary General Meetings”.

15. EXTRAORDINARY GENERAL MEETINGS:

The directors may, whenever they think fit, call an Extraordinary General Meeting, and Extraordinary General Meetings shall also be called on such requisition(s), as is provided by Section 159 of the Ordinance.

16. NOTICE OF GENERAL MEETINGS:

Twenty-one (21) days notice at least (exclusive of the day on which the notice is served or deemed to be served, but inclusive of the day for which notice is given) specifying the place, the day and the hour of meeting and, in case of special business, the general nature of that business, shall be given in the manner provided by the Ordinance for the general meeting, to such persons as are, under the Ordinance or the Articles of the company, entitled to receive such notices from the company but the accidental omission to give notice to or the non-receipt of notice by any member shall not invalidate the proceedings at any general meeting.

17. SPECIAL BUSINESS:

All business that is transacted at an extra ordinary general meeting and that is transacted at an annual general meeting with the exception of the consideration of the accounts, balance sheet and the reports of the director and auditors, the election of directors, the appointment of and the fixing of remuneration of the auditors shall be deemed special business.

18. QUORUM:

No business shall be transacted at any general meeting unless a quorum of members representing not less than twenty five percent (25%) of the total voting power present in person but being not less than two (2) members, is present at that time when the meeting proceeds to business.

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19. EFFECT OF QUORUM NOT BEING PRESENT:

If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if called upon the requisition of members, shall be dissolved and in any other case, it shall stand adjourned to the same day in the next week at the same time and place and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the members present, shall be a quorum.

20. CHAIRMAN OF MEETING:

The chairman of the Board of directors, shall preside as chairman at every general meeting of the company, but if he is not present within fifteen minutes after the time appointed for the meeting, or is unwilling to act as chairman, any of the directors present may be elected to be the chairman and if none of the directors present is willing to act as chairman, the members present shall choose one of their number to be the chairman.

21. ADJOURNMENT:

The chairman may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for thirty (30) days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.

22. VOTING:

At any general meeting a resolution put to the vote to the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded. Unless a poll is so demanded, a declaration by the chairman that a resolution has, on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book of the proceedings of the company shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of or against that resolution.

23. DEMAND FOR POLL:

A poll may be demanded in accordance with the provisions of Section 167 of the Ordinance.

24. MANNER OF TAKING POLL:

If a poll is duly demanded, it shall be taken in accordance with the manner laid down in Section 168 of the Ordinance and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded.

25. TIME OF TAKING POLL:

A poll demanded on the election of chairman or on a question of adjournment shall be taken at once.

26. CASTING VOTE:

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In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll takes place, shall have and exercise a second or casting vote.

27. VOTES OF MEMBERS: On a show of hands every member present in person shall have one vote and upon a poll every

member present in person shall have one vote. 28. OBJECTION TO VOTE:

No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is given and tendered, and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection made in due time shall be referred to the chairman of the meeting, whose decision shall be final and conclusive.

MANAGEMENT AND ADMINISTRATION

29. There shall be, for the overall management of the company’s affairs, a Board of directors, which

will be elected from amongst the members. 30. One term of the Board of directors would be for three years. 31. No person shall be appointed as a director if he is ineligible to hold office of director of a

company under section 187 of the Ordinance. 32. No member / person shall hold more than one office in the company, such as those of Chief

Executive / director or company secretary. 33. FIRST DIRECTORS:

The subscribers to the Memorandum of Association shall be the first directors of the company whose names are given below and they shall hold office until the election of directors in the first Annual General Meeting, subject to the provisions of Sections 174 and 176 of the Ordinance.

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

34. NUMBER OF DIRECTORS:

The number of directors shall not be less than three (3) and not more than ( ). The company may, however, determine through Special Resolution, such other number not being less than three (3), before the election of the directors. A retiring director shall be eligible for re-election.

35. PROCEDURE FOR ELECTION OF DIRECTORS:

(i) The directors of the company shall be elected in accordance with provisions of sub sections (1) to (4) of section 178 of the Ordinance, in the following manner:

(a) The directors of the company shall be elected by the members of the company in general meeting;

(b) The directors of the company shall be elected on the basis of one member one vote;

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(c) The candidate who gets the highest number of votes shall be declared elected as director and then the candidate who gets the next highest number of votes shall be so declared and so on until the total number of directors to be elected has been so elected.

(ii) If the number of persons who offer themselves to be elected is not more than the number of directors fixed by the directors under sub-section (1) of section 178, all persons who offered themselves shall be deemed to have been elected as directors.

36. CASUAL VACANCY AND ALTERNATE OR SUBSTITUTE DIRECTORS:

(a) Any casual vacancy occurring among the directors may be filled up by the directors within thirty days of the vacancy and the person so appointed shall hold office for the remainder of the term of director in whose place he is appointed.

(b) An existing director may, with the approval of the board of directors, appoint an alternate director to act for him during his absence from Pakistan of not less than three months. The alternate director so appointed shall ipso facto vacate office if and when the director appointing him returns to Pakistan.

37. REMOVAL OF DIRECTOR:

The company may remove a director through a resolution passed in a general meeting of members in accordance with Section 181 of the Ordinance.

38. CHAIRMAN OF THE BOARD:

The directors may elect one of their members as the Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board but, if at any meeting the chairman is not present within ten minutes after the time appointed for holding the same or is unwilling to act as chairman, the directors present may choose one of their member to be chairman of the meeting.

DUTIES AND POWERS OF THE BOARD

39. The Board shall conduct and manage all the business affairs of the company, exercise all the powers, authorities and discretion of the company, obtain or oppose the application by others for all concessions, grants, charters and legislative acts and authorization from any government or authority, enter into such contracts and do all such other things as may be necessary for carrying on the business of the company, except only such of them as under the statutes and Articles are expressly directed to be exercised by general meetings and (without in any way prejudicing or limiting the extent of such general powers) shall have the following special powers and duties:

(a) To present to the general meeting of the company any matters which the directors feel are material to the company, its objects or interests or affecting the interests of members and make suitable recommendations regarding such matters.

(b) To regulate, through articles, the admission of members.

(c) To appoint, remove or suspend the legal advisors, bankers, or other officers on such terms and conditions as they shall think fit and as may be agreed upon.

(d) To appoint any qualified person as a first auditor(s) subject to provisions of the Ordinance;

(e) To determine the remuneration, terms and conditions and powers of such

36

appointees and from time to time, revoke such appointments and name another person of similar status to such office except for the auditor in which case the relevant provisions of the Ordinance shall be followed.

(f) To delegate, from time to time, to any such appointee all or any of the powers and authority of the Board and to reconstitute, restrict or vary such delegations.

(g) To agree upon and pay any expenses in connection with the company’s objects and undertakings and pay all the expenses incidental to the formation and regulation of the company.

(h) To constitute from time to time committee(s) from among themselves or co-opt other persons for the purpose and delegate to them such functions and powers as the Board may see fit to carry out the objects of the company.

(i) Subject to the provisions of Section 196 of the Ordinance, the directors may exercise all the powers of the company to borrow and mortgage or charge its undertaking, property and assets (both present and future) or issue securities, whether outright security for any debt, liability or obligation of the company.

PROCEEDINGS OF THE BOARD

40. The Board shall meet at least once in each quarter of every year, subject thereto meetings of

the Board shall be held at such time as the directors shall think fit. All meetings of the Board shall be held at the registered office of the Company or at such other place as the Board shall from time to time determine. The meetings of the Board shall be called by the chairman on his own accord or at the request of the Chief Executive (or any three directors) by giving at least seven (7) days notice to the members of the Board.

41. At least twenty five percent of the total number of directors or two (2) directors whichever is

higher, for the time being of the company, shall constitute a quorum.

Note : If the number of directors as mentioned in clause 33 are more than three, then the following standard clause is proposed in place of above which will fulfill the requirements of income tax rules for tax exemption.

“At least one-third (1/3rd) of the total number of directors or four (4) directors whichever is higher, for the time being of the company, shall constitute a quorum.”

42. Except as otherwise provided by these Articles, every question at meetings of the Board shall

be determined by a majority of votes of the directors present, each director having one vote. In case of an equality of votes or tie, the chairman shall have a casting vote in addition to his original vote as a director.

43. Minutes of the proceedings of every meeting of the Board and a record of attendance of the

directors thereat shall be recorded by the Secretary in a book kept for that purpose. These shall be signed by the chairman of the meeting at which they are read.

RESOLUTION THROUGH CIRCULATION

44. A resolution in writing signed by all directors for the time being entitled to receive notice of the

meeting of directors or affirmed by them in writing shall be as valid and effectual as if it had been passed at a meeting of the directors duly convened and held.

45. CHIEF EXECUTIVE:

The directors may appoint a person to be the Chief Executive of the company and vest in him such powers and functions as they deem fit in relation to the management and administration of

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the affairs of the company subject to their general supervision and control. The Chief Executive, if not already a director, shall be deemed to be a director of the company and be entitled to all the rights and privileges and subject to all the liabilities of that office.

46. QUALIFICATION OF THE CHIEF EXECUTIVE:

No person who is not eligible to become a director of the company under section 187 of the Ordinance, shall be appointed or continue as the Chief Executive of the company.

47. REMOVAL OF CHIEF EXECUTIVE:

The directors by passing resolution by not less than three-fourths of the total number of directors for the time being or the company may by a Special Resolution passed in a general meeting remove a Chief Executive before the expiry of his term in office.

48. MINUTE BOOKS:

The directors shall cause minutes to be duly entered in a book or books provided for the purpose of:

(a) all resolutions and proceedings of General Meeting(s) and the meeting(s) of directors and Committee(s) of directors, and every member present at any General Meeting and every director present at any meeting of directors or Committee of directors shall put his signature in a book to be kept for that purpose;

(b) recording the names of the persons present at each meeting of the directors and of any committee of the directors, and the general meeting; and

(c) all orders made by the directors and Committee(s) of directors.

SECRETARY

49. The Secretary shall be appointed (or removed) by the Chairman of the company with the

approval of the Board. 50. The Secretary shall be responsible for all secretarial functions and shall ensure compliance

with respect to requirements of the Ordinance concerning the meetings and record of proceedings of the Board, committees and the general meeting of members, review the applications for admission to membership and the recommendations accompanying the same to ensure that they are in the form prescribed, ensure that all notices required by these Articles or under the Ordinance are duly sent and that all returns required under the Ordinance are duly filed with concerned Company Registration Office.

51. COMMITTEES:

The directors may delegate any of their powers to committees consisting of such member or members of their body as they think fit and they may from time to time revoke such delegation. Any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may from time to time be imposed on it by the directors.

52. CHAIRMAN OF COMMITTEE MEETINGS:

A committee may elect a chairman of its meetings, but, if no such chairman is elected, or if at any meeting the chairman is not present within ten (10) minutes after the time appointed for

38

holding the same or is unwilling to act as chairman, the members present may choose one of them to be the chairman of the meeting.

53. PROCEEDINGS OF COMMITTEE MEMBERS:

A committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall be determined by a majority of votes of the members present. In case of an equality of votes, the chairman shall have and exercise a second or casting vote.

54. VALIDITY OF DIRECTORS’ ACTS:

All acts done by any meeting of the directors or of a committee of directors, or by any person acting as a director, shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of such directors or persons acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director.

55. THE SEAL:

The directors shall provide for the safe custody of the seal, which shall not be affixed to any instrument except by the authority of a resolution of the Board or by a committee of directors authorized in that behalf by the directors, and two directors or one director and the Secretary of the company shall sign every instrument to which the seal shall be affixed.

FINANCES

56. The funds of the Company shall be applied in defraying the expenses and shall be applicable in or towards the acquisition by purchase, lease or otherwise and furnishing and maintenance of suitable premises and assets for the use of the Company and shall be subject to the general control and direction of the Board.

57. No person, except persons duly authorized by the Board and acting within the limits of the

authority as conferred, shall have authority to sign any cheque or to enter into any contract so as thereby to impose any liability on the Company or to pledge the assets of the Company.

ACCOUNTS

58. BOOKS OF ACCOUNT:

The directors shall cause to be kept proper books of account as required under Section 230 of the Ordinance so that such books of account shall be kept at the registered office or at such other place as the directors think fit as provided in the said section 230 and shall be open to inspection by the directors during business hours.

59. INSPECTION BY MEMBERS:

The directors shall from time to time determine the time and places for inspection of the accounts and books of the company by the members not being directors, and no member (not being a director) shall have any right to inspect any account and book or papers of the company except as conferred by law or authorized by the directors or by the company in general meeting.

60. ANNUAL ACCOUNTS:

The directors shall as required by section 233 of the Ordinance cause to be prepared and to be laid before the company in Annual General Meeting such Balance Sheet and Income and

39

Expenditure Account and Cash Flow Statement duly audited and reports as are required in the Ordinance.

61. COPY OF ACCOUNTS TO BE SENT TO MEMBERS:

A copy of balance sheet and profit and loss account and the Cash flow statement alongwith the reports of directors and Auditors of the company shall, at least twenty-one (21) clear days before the holding of the General Meeting, be sent to all the members and the persons entitled to receive notices of general meetings, in the manners in which notices are to be given as provided in section 50 of the Ordinance.

62. AUDIT:

Auditors shall be appointed and their duties regulated in accordance with Sections 252- 254 or 256-258 of the Ordinance.

63. NOTICE TO MEMBERS:

Notice shall be given by the company to members and auditors of the company and other persons entitled to receive notice in accordance with section 50 of the Ordinance.

64. INDEMNITY: Every officer or agent for the time being of the company may be indemnified out of the assets of

the company against any liability incurred by him in defending any proceedings, whether civil or criminal, arising out of his dealings in relation to the affairs of the company, except those brought by the company against him in which judgment is given in his favour or in which he is acquitted, or in connection with any application under section 488 in which relief is granted to him by the Court.

65. SECRECY

Every director, secretary, auditor, trustee, member of a committee, officer, servant, agent, accountant, or other person employed in the business of the Company shall observe strict secrecy representing all transactions of the Company, and the state of account with individuals and in matters relating thereto and shall not reveal any of the matters which may come to his knowledge in the discharge of his duties except when required so to do by the directors or the Company in general meeting or by a court of law, and except so far as may be necessary in order to comply with any of the provisions herein contained.

WINDING UP

66. In the case of winding up or dissolution of the Company, any surplus assets or property, after the satisfaction of all debts and liabilities, shall not be paid or disbursed among the members, but shall be given or transferred to some other company established under section 42 of the Companies Ordinance, 1984, having similar or identical objects to those of the Company to be decided by the members of the Company in their general meeting by a special resolution, and with the approval of Commissioner of Income Tax under section 61 read with section 2(36) of the Income Tax Ordinance, 2001, under intimation to the Securities and Exchange Commission of Pakistan, within three months.

40

67. SUPPLEMENTARY PROVISIONS RELATING TO TAX:

The company shall abide by and adhere to the following rules:

(i) The company shall get its annual accounts audited from a firm of Chartered Accountants.

(ii) The company shall, in the event of its dissolution, after meeting all liabilities, transfer all its assets to an Institution, fund, trust, society or organization, which is an approved non-profit organization, and intimation of such transfer will be given to Commissioner, Federal Board of Revenue, within three months of the dissolution.

(iii) The company shall utilize its money, property or income or any part thereof, solely for promoting its objects.

(iv) The company shall not pay or transfer any portion of its money, property or income, directly by way of dividend, bonus or profit, to any of its members(s) or the relative or relatives of member or members.

(v) The company shall maintain its banks accounts with a scheduled bank or in a post office or national saving organization, National Bank of Pakistan or national commercialized banks.

(vi) The company shall regularly maintain its books of accounts in accordance with generally accepted accounting principles and permit their inspection to the interested members of the public, without any hindrance, at all reasonable times.

(vii) Without prejudice to the powers conferred on the Commission under section 42 of the Companies Ordinance, 1984, the association shall not change its memorandum and articles of association without approval of Commissioner, Income Tax, if it has been approved by him as a non-profit organization.

(viii) The company shall restrict the surpluses or monies validly set apart, excluding restricted funds, upto twenty five percent (25%) of the total income of the year. Provided that such surpluses or monies set apart are invested in Government Securities, a collective investment scheme authorized or registered under the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003, mutual funds, a real estate investment trust approved and authorized under Real Estates Investment Trust Regulations, 2008 or scheduled banks.

41

We, the several, persons whose names and addresses are subscribed below are desirous of being formed into a Company in pursuance of these Articles of Association:-

Dated the……………………. day of………………………, 201…

Name and surname (present & former)

in full (in Block

Letters)

NIC No. (in case of for-

eigner, Pass-

port No)

Father's/ Husband's

Name in

full

Nationality(ies) with any former

Nationality

Occupation Residential Address in

full

Signature

1. AB nnnnn-nnnnnnn-n

GH Pakistani Resident Director, Household Appliances

Ltd., Lahore

14-A, Street No.2, Sadaf Colony, Quet-

ta.

2. CD nnnnn-nnnnnnn-n

IJ Pakistani Advocate -do-

3. XYZ Limited

through

EF

nnnnn-nnnnnnn-n

KL

Pakistani

Company

Director,

ABC Ltd

House No 176, Street No.204, F-10/1, Islama-

bad

14-A, Street No.2, Sadaf Colony, Quet-

ta.

Witness to above signatures

Signature

Full Name (in Block Letters)

Father’s/ Husband’s name

Nationality

Occupation

CNIC NO

Full Address

Guidebook

On

Further Issue of Shares Otherwise Than Rights


NIC Building, Jinnah Avenue, Islamabad, Pakistan Phone No. : 051-9207091-4, Fax: 051-9204915


1

Table of Contents Chapter

Page No.

1. Introduction 2

2.

Specific Requirements of Law: 1. The Companies Ordinance, 1984 2. Companies (General Provisions and Forms) Rules, 1985 3. Sixth Schedule of the Companies Ordinance, 1984

3 - 4

3 General Requirements of the Ordinance 5 - 6

4.

1. Notice of General Meeting 2. Statement of Material Facts 3. Minimum disclosure of information to shareholders

7 - 8

5. Application to the Commission 9

2

Chapter No. 1 INTRODUCTION This booklet is a guide to the laws and rules governing further issue of shares otherwise than rights, by a company limited by shares. This guide is designed to explain and clarify the procedure of obtaining approval from the existing shareholders and filing an application with the Securities and Exchange Commission of Pakistan (the “Commission”) under the provisions of the Companies Ordinance, 1984 (the “Ordinance”) and Companies (General Provisions and Forms) Rules, 1985 (the “Rules”). Every company is required to comply with following requirements of the law before filing an application with the Commission:-

i). Alter Memorandum of Association to give effect to increase in authorized capital of the Company through a special resolution, where existing authorized capital of a company is fully subscribed, or the un-issued capital is insufficient for the new issue;

ii). Approval of shareholders through a special resolution for further issue of shares otherwise than rights passed by a majority of not less than three-fourths of such members entitled to vote, as are present in person or by proxy at the general meeting;

iii). Application to be submitted in a manner prescribed under Rule 30 of the Rules.

The guide highlights the topic under the Companies Ordinance, 1984 and Companies (General Provisions and Forms) Rules, 1985.

3

Chapter No. 2

Relevant provisions of the Ordinance and Rules, in brief, stipulating various conditions regarding further issue of shares by a company are narrated hereunder however detailed provisions may be referred to from the Ordinance and the Rules:- 2.1. The Companies Ordinance, 1984 Specific Requirements ü Provisions of Section 28 of the Ordinance require that a company may alter or

add to its Articles of Association by passing a special resolution and any alteration or addition so made shall be as valid as if originally contained in the articles, and be subject in like manner to alteration by special resolution. The Company needs to pass a special resolution to alter its Memorandum of Association, to give effect to the increased authorized capital of the Company, if required.

ü Proviso to Sub-section (1) of Section 86 of the Ordinance regarding further

issue of capital provides that the Federal Government may, on an application made by any public company on the basis of special resolution passed by it, allow such company to raise its capital without issue of right shares.

While issuing notice of general meeting, to be held for taking approval of the shareholders for issuance of shares otherwise than rights, following provisions of the Ordinance stipulating certain conditions may be kept in mind: ü Provisions of Clause (b) of Sub-section (1) of Section 160 of the Ordinance, as to

meetings and votes, requires that: where any special business, that is to say business other than consideration of the accounts, balance-sheets and the reports of the directors and auditors, the declaration of a dividend, the appointment and fixation of remuneration of auditors, and the election or appointment of directors, is to be transacted at a general meeting, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning such business, including, in particular, the nature and extent of the interest, if any, therein of every director, whether directly or indirectly, and, where any item of business consists of the according of an approval to any document by the meeting, the time when and the place where the document may be inspected shall be specified in the statement;

2.2. Companies (General Provisions and Forms) Rules, 1985

ü Rule 30 of the Rules explains the mode of submission of application to the Commission. It is provided therein that the application shall, in addition to complying with any other requirement of the Ordinance or the rules, be –

4

(i) duly signed and verified by an affidavit by the applicant indicating complete name and address and, in the case of a company, signed and verified by an affidavit by a responsible officer of the company; (ii) neatly and legibly written, typed or printed, setting out precisely the facts, grounds and claims or relief applied for in serially numbered paragraphs and specifying the relevant provisions of the Ordinance under which action or relief is applied for; (iii) accompanied by documents referred to in the application or relied upon and, in case of an appeal against any order or decision, by a certified copy of such order or decision; (iv) accompanied by one spare copy, duly signed, dated and verified and accompanied by copies of the documents as aforesaid; and (v) accompanied by the original bank challan or draft for the fee paid for the application.

2.3. Sixth schedule of the Ordinance Para VII of the Sixth Schedule of the Ordinance provides that filing fee, by or on behalf of a company, for application with the Commission or the Registrar shall be Rs.500.

5

Chapter No. 3 General Requirements of the Ordinance The Company shall also take care of the following provisions of the law while considering issue of shares otherwise than rights:- ü Provisions of Section 91 of the Ordinance stipulate that only fully paid shares

should be issued and no company shall issue partly paid shares. ü Section 92 of the Ordinance provides that a Company limited by shares, if so

authorized by its articles, may alter the conditions of its memorandum so as to increase its share capital by such amount as it thinks expedient. Sub-section (2) of the aforesaid provision of the Ordinance explains that new shares issued by the company shall rank pari passu with the existing shares of the class to which the new shares belong in all matters, including the right to such bonus or right issue and dividend as may be declared by the company subsequent to the date of issue of such new shares. Provisions of Sub-section (3A) provide that notwithstanding anything contained in this Ordinance or any other law for the time being in force or the memorandum and articles, where the authorized capital of a company is fully subscribed, or the un-subscribed capital is insufficient, the same shall be deemed to have been increased to the extent necessary for issue of shares to a scheduled bank or financial institution in pursuance of any obligation of the company to issue shares to such scheduled bank or financial institution.

ü Provisions of Sub-section (1) of Section 94 of the Ordinance state that where a

company having a share capital has resolved to increase its share capital beyond the authorized capital or such capital is increased under Sub-section (3A) of Section 92 of the Ordinance it shall file with the registrar, within fifteen days after passing of the resolution, a notice of the increase of capital and the registrar shall record the increase.

Provided that where default is made by a company in filing a notice of increase in the authorized capital under Sub-section (3A) of Section 92, the scheduled bank or the financial institution to whom shares have been issued may file notice of such increase with the registrar and such notice shall be deemed to have been filed by the company itself and the scheduled bank or financial institution shall be entitled to recover from the company the amount of any fee properly paid by it to the registrar in respect of such increase.

Sub-section (2) of the aforesaid provisions of the Ordinance provides that the notice to be given under Sub-section (1) shall include particulars of the shares to be affected and the conditions, if any, subject to which the new shares are to be issued.

6

ü Provisions of Section 95 of the Ordinance require that : (1) No company shall have power to buy its own shares or the shares of its holding company.

(2) No company limited by shares, other than a private company, not being a subsidiary of a public company, shall give, whether directly or indirectly and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with purchase made or to be made by any person of any shares in the company or, where the company is a subsidiary, in its holding company:

Provided that nothing in this Sub-section shall prevent the company from advancing or securing an advance to any of its salaried employees, including a chief executive who, before his appointment as such, was not a director of the company, but excluding all directors of the company, for purchase of shares of the company or of its subsidiary or holding company, if making or securing of such advance is a part of the contract of service of such employee.

7

Chapter No. 4 4.1 Notice of General Meeting

The notice of general meeting shall be sent to the members at least twenty-one days before the date of the meeting and, in the case of a listed company, such notice, in addition to its being dispatched in the normal course, shall also be published at least in one issue each of a daily newspaper in English language and a daily newspaper in Urdu language having circulation in the Province in which the stock exchange on which the company is listed is situate. [Section 158 & 159 of the Ordinance]

Notice of general meeting must be faxed to the Commission along with statement under Section 160 of the Ordinance on the same date on which it is sent to the shareholders and copies of the newspapers in which the notices of general meeting are published may be sent to the Commission within 07-days of their publication. [Circular No. 5 dated March 14, 2002]

Notice of the general meeting at which business for issuance of further capital, otherwise than rights, is placed before the shareholders for approval, must specifically indicate:

1. the proposed resolution is a special resolution; 2. provision of the Ordinance under which the resolution is proposed; 3. total number of shares to be issued; 4. price per share; 5. total amount of capital to be issued; 6. the fact that the shares are to be issued otherwise than rights; 7. to whom these shares are proposed to be issued.

Illustration Agenda item 3: to pass a special resolution under the provisions of Section 86(1) of the Companies Ordinance, 1984, for issuance of 1,000 ordinary shares of the Company at Rs.10 each, total amounting to Rs.10,000.00 (rupees ten thousand only), by way of otherwise than rights, to ABC. 4.2 Statement of Material Facts

Clause (b) of Sub-section (1) of Section 160 of the Ordinance requires that where any special business is to be transacted at a general meeting, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning such business. As provisions of Section 86 of the Ordinance require that where a public Company intends to issue shares otherwise than rights it may file an application with the Commission, on the basis of special resolution passed by it.

8

In view of the above a Company is required to circulate statement of material facts along with the notice of general meeting at which the issuance of further shares, otherwise than rights, by the Company is placed before the shareholders of the Company for approval.

4.3 Information to be disclosed to the shareholders

Section 160 of the Ordinance states that the statement annexed to the notice of the general meeting with regards to special business provides all material facts concerning such business. Therefore the aforesaid statement, at minimum may include the following information with regards to issue of further shares without rights to the existing shareholders:-

ü Justification as to why proposed shares are to be issued otherwise than rights and not as rights shares;

ü Name of the person(s) / organization(s) / company(s) etc. to whom shares will be issued;

ü Price at which the proposed shares will be issued. Justification, with details of the latest available market price and break up value per share, if such price differs from par value;

ü Detail of asset(s), if proposed shares are to be issued for consideration otherwise than cash ;

ü Purpose of the issue, utilization of the proceeds of the issue and benefits to the Company and its shareholders with necessary details;

ü Existing shareholding of the person(s) / organization(s) / company(s) etc. to whom the proposed shares will be issued (in number as well as percentage vis-à-vis to existing paid up capital of the Company);

ü Total shareholding of the person(s) / organization(s) / company(s) etc. after the proposed issue of shares (in number as well as percentage vis-à-vis to increased paid up capital of the Company);

ü Whether the person(s) / organization(s) / company(s) etc. has provided written consent to the Company for purchase of such shares;

ü The fact that these shares will rank pari passu in all respects with the existing shares of the Company. Details if there is any change.

ü The fact that this issue of shares is subject to approval of the Commission; If proposed shares are preference shares then the Commission’s Guidebook on “Issue of preference shares” may be consulted.

9

Chapter No. 5 Application to the Commission The Company after passing the special resolution has to file duly filled form 26 with the concerned Registrar and obtain a certified copy of the same. The application to be filed with the Commission, for its approval, under proviso to Sub-section (1) of Section 86 of the Ordinance shall be submitted in a manner provided in Rule 30 of the Rules together with the following information / documents:- ü The application must narrate in detail the specific purpose for which the

proceeds of the issue will be utilized; ü The application must be signed by the officer/director of the Company who has

been authorized by the shareholder to accomplish the transaction; ü Financial projections for next three years reflecting implementation of the plan

and its benefits; ü If the Memorandum and Articles of Association of the Company have been

amended then a certified copy of the same may also be provided; ü Certified copy of form 26 with detailed text of special resolution;

ü Justification as to why shares are proposed to be issued otherwise than rights;

ü Relevant detail of the shares issued within past two years;

ü Minutes of the board of director’s meeting, along with attendance sheet, in

which decision for issuance of further shares otherwise than rights was made; ü Attendance sheet of shareholders, who attended the general meeting either in

person or through proxies; ü Affidavit as required under Rule 30 of the Rules;

ü Copy of voucher evidencing deposit of application fee.

10


Ph: 051- 9207091-4 Fax: 051-9204915 Web: www.secp.gov.pk


Guidebook

On

Issue of Preference Shares


NIC Building, Jinnah Avenue, Islamabad, Pakistan Phone No. : 051-9207091-4, Fax: 051-9204915


1

Table of Contents Chapter

Page No.

1. Introduction 2

2. Basic Concepts 3-4

3.

Specific Requirements of Law: 1. The Companies Ordinance, 1984 2. Companies Share Capital (Variation in Rights and

Privileges) Rules, 2000 3. Companies (Issue of Capital) Rules, 1996 4. Companies (General Provisions and Forms) Rules, 1985 5. Sixth Schedule of the Companies Ordinance, 1984

5 - 8

4. General Requirements of the Ordinance 9

5.

1. Notice 2. Statement of Material Facts 3. Minimum disclosure of information to shareholders

10 - 12

6. Application to the Commission 13

2

Chapter No. 1 INTRODUCTION This booklet is a guide to the laws and rules governing issue of preference shares by a company limited by shares. This guide is designed to understand the procedure of obtaining approval from the shareholders and filing an application with the Securities and Exchange Commission of Pakistan (the “Commission”) under the provisions of the Companies Ordinance, 1984 (the “Ordinance”), Companies Share Capital (Variation in Rights and Privileges) Rules, 2000 (the “Share Capital Rules”), Companies (Issue of Capital) Rules, 1996 (the “Capital Issue Rules”) and Companies (General Provisions and Forms) Rules, 1985 (the “Companies Rules”). The guidebook summarizes the provisions of the Ordinance and the Rules relating to preference shares and steps to be taken by companies for issuance of these shares.

The provision of Section 90 of the Ordinance was substituted through Finance Act, 1999 in the year 1999, through which limited companies were allowed to have different kinds of share capital and classes therein as provided in their memorandum and article of associations. Further, under Section 90 of the Ordinance, the Share Capital Rules were prescribed in the year 2000. Rule 3 (1) of the Share Capital Rules provide that a company limited by shares may have more than one kind of share capital and may have different classes of shares under each kind.

Earlier to this provision of the Ordinance, companies could have only one class of share capital i.e. Ordinary shares having same kind of rights and privileges, attached thereto. However, now under the provisions of Section 90 of the Ordinance and under Rule 4 of the Share Capital Rules, different rights and privileges in relation to the different classes of shares have been conferred in a manner as prescribed in the aforesaid rule.

The guidebook highlights the important provisions of the following laws:

• The Companies Ordinance, 1984; • The Companies Share Capital (Variation in Rights and Privileges) Rules, 2000; • The Companies (Issue of Capital) Rules, 1996; and • The Companies (General Provisions and Forms) Rules, 1985.

3

Chapter No. 2 Basic concepts: Preference shares: Generally the preference shares means shares which fulfills the following conditions:

1. During the continuance of the company it must have assured preferential dividend. The preferential dividend may consist of a specified amount payable to preference shareholders before any thing is paid to ordinary shareholders, or the amount payable as preferential dividend may be calculated at a fixed rate / percentage.

2. On the winding up of the company it usually carry a preferential right to be paid, that is, the amount paid up on preference shares must be paid back before any thing is paid to the ordinary shareholders.

3. Generally such shares do not carry voting rights. Cumulative preference shares: If the Company is not able to pay preference dividend in one year, the arrears of dividend are to be carried forward and paid out of the profits of the subsequent years, such preference shares are known as cumulative Preference shares. Non cumulative preference shares: If unpaid dividend is not carried forward but lapses then such shares are known as non-cumulative preference shares. Participatory preference shares: Preference shares which are entitled to participate in surplus profits, i.e. profit proposed to be distributed among the shareholders after dividend to preference and ordinary shareholders, are termed as participatory preference shares. Similarly in the winding up of a company, if, after paying back both the preference and ordinary shareholders, there is surplus, and the preference shareholders are entitled to share in the distribution of available surplus, then such preference shares are also known as participatory preference shares. Convertible preference shares: Preference shares which are convertible into any other shares of the Company after a specified period of time or on occurrence of a defined event are termed as convertible preference shares. Redeemable preference shares: Preference shares which are issued for a definite time period after the expiry of which the preference shares will be redeemed in cash are termed as redeemable preference shares.

4

Irredeemable preference shares: If preference shares are not redeemable / convertible after a specific period of time are called irredeemable preference shares. Stepped preference shares: Preference shares with dividend which increases annually by a specified amount and with a predetermined capital return. Zero dividend preference shares: Preference shares which receive no dividend through out their lives and instead a fixed known amount is paid at maturity.

5

Chapter No. 3

Relevant provisions of the Ordinance, in brief, stipulating various conditions regarding further issue of capital by a Company are narrated hereunder however detailed provisions may be read from the Ordinance and the Rules:- 2.1. The Companies Ordinance, 1984 Specific Requirements ü Section 28 of the Ordinance regarding alteration of articles requires that a company may

alter its Articles of Association by passing a special resolution and any alteration or addition so made shall be as valid as if originally contained in the articles, and be subject in like manner to alteration by special resolution. The Company needs to pass a special resolution to alter its Articles of Association, to give effect to the increased authorized and paid up capital of the Company and different kinds and classes therein.

ü Section 86 of the Ordinance regarding further issue of capital requires that where the

directors decide to increase the capital of the company by issue of further shares, such shares shall be offered to the members in proportion to the existing shares held by each member, irrespective of class, and such offer shall be made by notice specifying the number of shares to which the member is entitled and limiting a time, within which the offer, if not accepted, will be deemed to be declined:

Provided that the Federal Government may, on an application made by any public company on the basis of special resolution passed by it, allow such company to raise its further capital without issue of right shares.

ü Section 90 of the Ordinance regarding “Classes and kinds of share capital” states that a

company limited by shares may have different kinds of share capital and classes therein as provided by its memorandum and articles:

Provided that different rights and privileges in relation to the different classes of shares may only be conferred in such manner as may be prescribed

ü Section 85 of the Ordinance regarding the redemption of preference shares states that:

(1) Subject to the provisions of this section, a company limited by shares may redeem the preference shares issued by it:

Provided that—

(a) no such shares shall be redeemed except out of profits of the company which would otherwise be available for dividend or from out of a sinking fund created for this purpose or out of the proceeds of a fresh issue of shares made for the purposes of the redemption or out of sale proceeds of any property of the company; (b) no such shares shall be redeemed unless they are fully paid;

6

(c) where any such shares are redeemed otherwise than out of the proceeds of the fresh issue, there shall be out of profits which would otherwise have been available for dividend be transferred to a reserve fund, to be called “the capital redemption reserve fund”, a sum equal to the amount applied in redeeming the shares, and the provisions of this Ordinance relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the capital redemption reserve fund were paid-up share capital of the company;

(d) where any such shares are redeemed out of the proceeds of a fresh issue, the premium, if any, payable on redemption must have been provided for out of the profits of the company before the shares are redeemed or out of the share premium account.

(2) If a company fails to comply with the provisions of sub-section (1), the company and every officer of the company who knowingly and willfully is in default shall be liable to a fine not exceeding five thousand rupees.

(3) The redemption of preference shares under this section by a company shall not be taken as reducing the amount of its authorized share capital.

(4) Subject to the provisions of this section, the redemption of preference shares there under may be effected on such terms and in such manner as may be provided by the articles of the company.

ü Provisions of Sub-section (b) of Section 160 of the Ordinance, as to meetings and votes,

requires that:

where any special business, that is to say business other than consideration of the accounts, balance-sheets and the reports of the directors and auditors, the declaration of a dividend, the appointment and fixation of remuneration of auditors, and the election or appointment of directors, is to be transacted at a general meeting, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning such business, including, in particular, the nature and extent of the interest, if any, therein of every director, whether directly or indirectly, and, where any item of business consists of the according of an approval to any document by the meeting, the time when and the place where the document may be inspected shall be specified in the statement;

2.2 The Companies Share Capital (Variation in Rights and Privileges) Rules, 2000 Relevant Rules of the Share Capital Rules are as under:

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;

7

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:

1. 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;

2. different rights for entitlement of dividend, right shares or bonus shares or

entitlement to receive the notices and to attend the general meetings; and

3. 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.

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) of Rule 5, 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.

2.3 Companies (Issue of Capital) Rules, 1996 Relevant extracts of Rule 5 of the Capital Issue Rules regarding issue of right shares by listed company requires that a listed company may issue right shares subject to following conditions, namely:-

8

i. the company shall not make a right issue within one year of the first issue of capital to the public or further issue of capital through right issue;

ii. the company while announcing right issue, shall clearly state the purpose of the right issue, benefits to the company, use of funds and financial projections for three years. The financial plan and projections shall be signed by all the directors who were present in the meeting in which the right issue was approved.

iii. the decision of the company to issue right shares shall be communicated to the Authority and the respective stock exchange on the day of the decision;

iv. book closure shall be made within forty-five days of the announcement of the right issue and the payment and renunciation date once announced for the letter of right shall not be extended except with the permission of the respective stock exchange under special circumstances; and

v. if the announcement of bonus and right issue is made simultaneously, resolution of the board of directors shall specify whether the bonus shares covered by the announcement qualify for right entitlement

2.3. Companies (General Provisions and Forms) Rules, 1985 ü Rule 30 of the Companies Rules explain the mode of submission of application to the

Commission for its approval allowing the Company to issue preference shares. It has been stated that the application shall, in addition to complying with the any other requirement of the Ordinance or the rules, be –

(i) duly singed and verified by an affidavit by the applicant indicating complete name and address and, in the case of a company, signed and verified by an affidavit by a responsible officer of the company; (ii) neatly and legibly written, typed or printed, setting out precisely the facts, grounds and claims or relief applied for in serially numbered paragraphs and specifying the relevant provisions of the Ordinance under which action or relief is applied for; (iii) accompanied by documents referred to in the application or relied upon and, in the case of an appeal against any order or decision, by a certified copy of such order or decision; (iv) accompanied by one spare copy ,duly signed ,dated and verified and accompanied by copies of the documents as aforesaid; and (v) accompanied by original bank challan or draft for the fee paid for the application.

2.3. Sixth schedule of the Ordinance:- Para VII of the Sixth Schedule of the Ordinance provides that filing fee, by or on behalf of a company, for application with the Commission or the Registrar shall be Rs.500.

9

Chapter No. 4 General Requirements of the Ordinance:

Only relevant extracts are reproduced hereunder: ü Provisions of Section 91 of the Ordinance stipulate that only fully paid shares should be issued

and no company shall issue partly paid shares.

ü Section 92 of the Ordinance states that a Company limited by shares, if so authorized by its articles, may alter the conditions of its memorandum so as to increase its share capital by such amount as it thinks expedient. Sub-section (2) of the aforesaid provision of the Ordinance explains that the new shares issued by the company shall rank pari passu with the existing shares of the class to which the new shares belong in all matters, including the right to such bonus or right issue and dividend as may be declared by the company subsequent to the date of issue of such new shares. Provisions of Sub-section (3A) provides that notwithstanding anything contained in this Ordinance or any other law for the time being in force or the memorandum and articles, where the authorized capital of a company is fully subscribed, or the un-subscribed capital is insufficient, the same shall be deemed to have been increased to the extent necessary for issue of shares to a scheduled bank or financial institution in pursuance of any obligation of the company to issue shares to such scheduled bank or financial institution

ü Provisions of Sub-section (1) of Section 94 of the Ordinance states that where a company having a share capital has resolved to increase its share capital beyond the authorized capital or such capital is increased under sub-section (3-A) of section 92 of the Ordinance it shall file with the registrar, within fifteen days after the passing of the resolution, a notice of the increase of capital and the registrar shall record the increase.

Provided that where default is made by a company in filing a notice of increase in the authorized capital under sub-section (3-A) of section 92, the scheduled bank or the financial institution to whom shares have been issued may file notice of such increase with the registrar and such notice shall be deemed to have been filed by the company itself and the scheduled bank or financial institution shall be entitled to recover from the company the amount of any fee properly paid by it to the registrar in respect of such increase.

ü Sub-section (2) of the aforesaid provisions of the Ordinance provides that the notice to be given

under sub-section (1) shall include particulars of the shares to be affected and the conditions, if any, subject to which the new shares are to be issued.

ü Provisions of Section 95 of the Ordinance require that (1) No company shall have power to buy its own shares or the shares of its holding company.

(2) No company limited by shares, other than a private company, not being a subsidiary of a public company, shall give, whether directly or indirectly and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with purchase made or to be made by any person of any shares in the company or, where the company is a subsidiary, in its holding company: Provided that nothing in this sub-section shall prevent the company from advancing or securing an advance to any of its salaried employees, including a chief executive who, before his appointment as such, was not a director of the company, but excluding all directors of the company, for purchase of shares of the company or of its subsidiary or holding company, if making or securing of such advance is a part of the contract of service of such employee.

10

Chapter No. 5

4.1 Notice of General Meeting

The notice of general meeting shall be sent to the members at least twenty-one days before the date of the meeting and, in the case of a listed company, such notice, in addition to its being dispatched in the normal course, shall also be published at least in one issue each of a daily newspaper in English language and a daily newspaper in Urdu language having circulation in the Province in which the stock exchange on which the company is listed is situate [Section 158 & 159 of the Ordinance].

Notice of general meeting must be faxed to the Commission along with statement under Section 160 of the Ordinance on the same date on which it is sent to the shareholders and copies of the newspaper in which the notices of general meeting are published may be sent to the Commission within 07-days of their publication. [Circular No. 5 dated March 14, 2002]

The notice of the general meeting in which business for issuance of preference shares is placed before the shareholders for approval, must specifically indicate:

1. the proposed resolution is a special resolution; 2. the fact that this issue of shares is subject to approval of the Commission; 3. provision of the Ordinance under which the resolution is proposed; 4. provision of the Share Capital Rules; 5. amendments to be made in the Memorandum and Articles of Association with regards

to: i). give effect to the increased authorized capital, if necessary;

ii). specify the various kinds and classes of shares i.e. ordinary and preference shares; iii). specify the rights and privileges attached to each kind and class of shares;

6. total number of preference shares to be issued; 7. price per such share; 8. total amount of capital to be issued; 9. rate of preference dividend; 10. preference shares to be issued as rights or otherwise than rights; 11. In case the preference shares are to be issued otherwise than right then to whom these

shares are to be issued.

11

4.2 Statement of Material Facts

Clause (b) of Sub-section (1) of Section 160 of the Ordinance requires that where any special business is to be transacted at a general meeting, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning such business. As the provisions of Rule 5(1) of the share Capital 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. In view of the above a Company is required to circulate statement of material facts along with the notice of general meeting in which the agenda for issuance of preference shares has been placed before the shareholders of the Company for approval.

4.3 Information to be disclosed to the shareholders

The provisions of Section 160 of the Ordinance clearly states that the statement annexed with the notice of the general meeting with regards to special business provide all material facts concerning such business. Therefore the aforesaid statement at minimum may include the following information with regards to issue of preference shares:- ü Justification for issuance of preference shares and for not issuing ordinary shares;

ü Price at which the proposed shares will be issued. Justification, with details of the latest

available market price, if any of the previous issue of preference shares is already listed on the Stock Exchange;

ü Purpose of the issue, utilization of the proceeds and benefits to the Company and its

shareholders with necessary details; ü Rate of preference dividend;

ü Specific Rights and privileges attached to the proposed preference shares such as voting

rights, participation in future issue of rights shares and bonus shares etc.; ü Whether the preference shares will be listed on Stock Exchange(s);

ü Nature of preference shares i.e. redeemable or otherwise, cumulative or otherwise,

participatory, convertible etc. If Redeemable:

ü Maximum number of preference shares which will be redeemed; ü Maximum period after which preference shares will be redeemed;

12

ü Mechanism / scheme for redemption clearly describing the modus operandi for both call and put options whichever is applicable;

ü Specific time period during which redemption of preference shares will be made;

ü What remedy is available to either party i.e. Company or the preference shareholder, if the shares could not be redeemed within the specified period;

ü Whether the preference shareholders will be entitled to participate in the surplus available for shareholders in the event of winding up of the Company;

If Irredeemable:

ü What precise exit is available to Irredeemable preference shareholders; ü Whether the preference shareholders will be entitled to participate in the

surplus available for shareholders in the event of winding up of the Company.

If Cumulative:

ü The circumstances in which the Company will be authorized to cumulate the preference dividend;

ü Revised rate of preference dividend in case of accumulation; ü Scope / limit of maximum accumulations; ü Whether at the time of redemption / conversion the accumulated preference

dividend will also be redeemed or converted; ü If the Company fails to redeem or convert the preference shares on specified

date, whether preference dividend will be accrued till the final redemption / conversion.

If convertible:

ü Maximum number, along with percentage, of preference shares which will be converted into other kinds and classes of shares of the Company;

ü Present status of the kinds and classes of the shares (total issued capital, listing status, market price etc.) in which conversion of preference shares is proposed;

ü Period after which the preference shares will be eligible for conversion; ü Event on the occurrence of which conversion option can be exercised by any

of the two parties i.e. the Company or the preference shareholders; If preference shares are proposed to be issued otherwise than rights then the Commission’s Guidebook for “Further issue of shares otherwise than rights” may be consulted.

13

Chapter No. 6 Application to the Commission: The Company after passing of the special resolution has to file duly filled form 26 with the concerned Registrar and obtain a certified copy of the same. The application to be filed with the Commission, for its approval, under Rule 5 of the Share Capital Rules read with Section 90 of the Ordinance (and under proviso to Sub-section (1) of Section 86 of the Ordinance, if issued otherwise than rights) may be submitted in a following manner accompanying with the following documents:- ü The application must narrate detailed information of BMR / expansion plan or any

other purpose for which the proceeds of the issue will be utilized; ü The application must be signed by the officer/ director of the Company who have been

authorized by the shareholder to accomplish the transaction; ü Financial projections for next three years reflecting the implementation of the plan and

its benefits; ü Amended certified copy of the Memorandum and Articles of Association of the

Company; ü Certified copy of form 26 along with special resolution;

ü Minutes of the board of director’s meeting, along with attendance sheet, in which

decision for issuance of further shares otherwise than rights was made; ü Attendance sheet of shareholders, who attended the general meeting either in person or

through proxies; ü Affidavit as required under Rule 30 of the Rules;

ü Copy of voucher evidencing deposit of application fee.

14


Ph: 051- 9207091-4 Fax: 051-9204915 Web: www.secp.gov.pk


Guidelines for making alteration in Memorandum of Association Page 01 of 03 .

SSSEEECCCUUURRRIIITTTIIIEEESSS AAANNNDDD EEEXXXCCCHHHAAANNNGGGEEE CCCOOOMMMMMMIIISSSSSSIIIOOONNN OOOFFF PPPAAAKKKIIISSSTTTAAANNN

About this Guide

This Guide is intended to provide basic information about alteration in Memorandum of Association and making a petition to SEC for

confirmation of the alteration so as to facilitate the Management of the Companies from the point of view of practical approach to law and corporate

procedure.

1. Ensure that reasons for making alteration fall within one of the permissible

2. Ensure that Procedure is followed. 3. Ensure that documents required to accompany the

application are submitted. See Check List 4. Filing Time of Petition is within 60 days of passing of

Special Resolution. 5. Filing Time of Form 26 with Company Registration Office

within 15 days of passing of Special Resolution. 6. Application Fee @ Rs. 5000/= for Commission and

Rs.200/- for Company Registration Office as filing fee of Form 26

7. Ensure that a copy of petition has been filed with concerned Company Registration Office.

q to carry on some business, not being a business specified in its memorandum, which may conveniently or advantageously be combined with the business of the company; or

q to enlarge or change the local area of its operations; or q to carry on its business more economically or more

efficiently; or q to attain its main business purpose by new or improved

means; or q to restrict or abandon any of the objects specified in the

memorandum; or q to sell or dispose of the whole or any part of the undertaking

of the company; or q to amalgamate with any other company or body of persons.

______________________________________________ Note: An alteration aforesaid takes effect only if and to the extent

confirmed by SEC.

GUIDELINES ON MAKING ALTERATION IN MEMORANDUM OF ASSOCIATION UNDER SECTION 21 OF THE COMPANIES ORDINANCE, 1984.

REASONS FOR MAKING ALTERATION IN MEMORANDUM OF ASSOCIATION.

GENERAL REQUIREMENTS


Compliance of section 21 of the Companies Ordinance, 1984 and Rule 3

of the Companies (General Provisions and Forms) Rules, 1985 is required to

be made by companies which are desirous of making amendments in

Memorandum of Association.

PROCEDURE OF AMENDMENT IN MEMORANDUM OF

ASSOCIATION.


"………Cut / Copy and file…………...."

�

No Yes

X a

Have you given all the information required by application format?

Have you included Additional information required under Rule 3 sub rule (3) of the Companies (General Provisions and Forms) Rules, 1985?

Have you enclosed copy of Special Resolution on Form 26?

Have you enclosed copy of Notice of Meeting?

Have you enclosed copy of Minutes of Meeting?

Have you enclosed Copy of Existing Memorandum of Association?

Have you enclosed Copy of Amended Memorandum of Association (pasting of new clauses)?

Have you enclosed Copy of NOCs from creditors?

Have you enclosed Pattern of holding of shares?

Have you enclosed Affidavit from applicant Chief Executive or Secretary?

Have you enclosed copy of Authority Letter in favour of consultant?

Have you enclosed Original paid Bank Challan of Rs.5000/- being application fee?

Have you enclosed Clippings of Urdu and English newspapers if you are a Listed Company?

Have you filed a copy of the petition with Company Registration Office where the company is registered?

Have you enclosed objections of dissenting shareholders / creditors?

Have you enclosed names and addresses of interests likely to be affected by proposed amendment?

"………Cut / Copy and file…………...."

Check List of Documents required to be submitted with the application.

1

SECP GUIDE SERIES


COMPANY MORTGAGES

AND CHARGES



Ph. No.: 051-9207091-4, Fax: 051-9204915

2

Table of Contents S .No. Chapters Page No.

1. Introduction ………… 3

2. Registration of Mortgages and charges ………… 4 – 9

3. Modification of mortgages and charges ………… 10

4. Satisfaction of mortgages and charges

………… 11

5. Rectification of mortgages and charges ………… 12 – 13

6. Further Information ………… 14 – 20

This is a guide only and should be read with the relevant legislation

3

Introduction Whenever, a company obtains a loan and provides its assets to the lender as a security for the repayment of loan or other obligations, this activity is called the creation of the mortgage/charge on the assets of the company. The particulars of the charge are required to be reported to the Registrar concerned in the manner provided under the Companies Ordinance, 1984 (the Ordinance) and the rules framed there-under. Part 7 (sections 121 to 136) of the Ordinance deals with the matters relating to the registration of a charge, any modification therein and satisfaction thereof. The particulars of mortgage/charge are required to be reported to the Registrar concerned within 21 days from the date of its creation alongwith relevant documents. Similarly any modification in the particulars of the mortgage/charge is also required to be reported to the Registrar within the said period. As soon as the loan is repaid, it is the responsibility of the company to get the mortgage/charge vacated. This process is called the satisfaction of mortgage/charge. Again, the time frame for reporting the satisfaction of mortgage/charge to the registrar is 21 days from the date of its satisfaction. In case of omission in filing the particulars of mortgage/charge or any modification therein or satisfaction thereof within the prescribed period of 21 days, the company is required to seek leave of the Commission for getting the particulars recorded beyond the prescribed period of 21 days. This booklet is a guide to help companies or any interested parties to file particulars of a mortgage or charge correctly and timely. For further details and legal advice, please approach your legal advisor.

4

CHAPTER 1

Registration of Mortgages and Charges 1. What are mortgages and charges?

As defined in section 58 of the Transfer of Property Act 1882, a mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt or the performance of an engagement which may give rise to a pecuniary liability.

A charge is security for the payment of a debt or other obligation that does not pass ‘title of the property’ or any right to its possession to the person to whom the charge is given.

2. What mortgages and charges must be registered?

Section 121 of the Companies Ordinance lists the following mortgages and charges to be registered under the Companies Ordinance, 1984:-

(a) a mortgage or charge for the purpose of securing any issue of

debentures; or

(A debenture is an instrument issued by a company as evidence of a debt or other obligation. It includes debenture stock, bonds and any other securities of a company, whether or not it forms a charge on the assets of the company.)

(b) A mortgage or charge on uncalled share capital of the company; or

(Uncalled share capital is the balance owing for shares that are issued partly paid.)

(c) a mortgage or charge on any immovable property wherever situate, or any interest therein; or

(d) a mortgage or charge on any book debts of the company; or

(Book debts are debts that in the ordinary course of a company’s business are commonly entered in its books.)

5

(e) A mortgage or charge, not being a pledge, on any movable property of the company; or

(f) A floating charge on the undertaking or property of the company,

including stock-in-trade; or (A floating charge is a charge that does not affect the assets charged until some event crystallizes the charge fixing it to a certain point in time.

3. Which documents are required to be filed for registration of mortgage or

charge?

The following documents are required to be filed for registration of a mortgage or charge:

• Form 10 containing particulars of mortgage/charges etc.

• Copy of instrument(s) creating the mortgage or charge.

• An Affidavit to the effect that the copy(ies) of the instrument(s)

is/are the true copy(ies).

• Bank challan evidencing the payment of Rs. 7,500 being filing fee for submission in physical form or Rs. 5,000 for submission through eServices as the case may be.

4. How much does each registration cost?

There is a fee of Rs. 7,500 for filing each Form 10, 11, 13 and 14 with the Registrar concerned for submission in physical form or Rs. 5,000 for submission through eServices, as the case may be.

Same fee is applicable for filing of Modification in the Particulars of Mortgage or charge on Form 16 or Memorandum of satisfaction of mortgage or charge on form 17. These forms are available on SECP’s web site: www.secp.gov.pk

5. What do ‘instrument’ and evidence’ mean in this chapter?

An ‘instrument’ is usually a document evidencing creation of mortgage or charge which should be in legible form but it can also exist in electronic form.

‘Evidence’ means to provide proof of the existence of something.

6

6. Which form should be used?

Different forms are required to be used for different purposes as per details given hereunder. The form numbers in this table correspond to the relevant sections of the Companies Ordinance, 1984 and rules contained in the Companies (General Provisions and Forms) Rules, 1985:-

Form Description Section

Form No. 10 Particulars of mortgages, charges, etc.

121, 129 and 463

Form No. 11 Particulars of mortgage or charge subject to which property has been acquired

122 and 463

Form No. 13 Registration of entire series of debentures / redeemable capital

123, 124 and 463

Form No. 14 Particulars of an issue of redeemable capital / debentures in a series when more than one issue in the series is made.

123 and 463

Form No. 16 Particulars of modification of mortgage, charge, etc.

129(3) and 463

Form No. 17 Memorandum of complete satisfaction of mortgage, charge, etc.

132 and 463

• Select the correct form, fill it and send to the concerned Registration

office. Act as quickly as possible, you have only 21 days from the date of creation of the mortgage or charge to get the correct particulars of the Mortgage/Charge registered.

• Attach the copy(ies) of the instrument(s) creating or evidencing the

mortgage/charge with the form, if there is an instrument, as there usually will be.

• Copy(ies) of the instrument(s) shall be verified by an Affidavit to the

effect that the same are true copies of the original.

• Make sure the details on the form are correct and match the instrument. If the registrar finds errors, he will convey the deficiencies to the company. The company has to make good the deficiencies within the 21-days time limit.

7

• Please ensure this information is complete and accurate.

• Make sure that the company name and number are correct.

• Make sure that the creation date and description of the charge agree with the instrument.

• Make sure that the amount secured accurately reflects what is stated

in the instrument.

• Make sure that the name of the mortgagee/chargee matches with the instrument, (‘Mortgagee/Chargee’ means the person to whom property is mortgaged/charged’).

• Make sure that the short particulars of the property

mortgaged/charged in Form 10 accurately reflect what is stated in the instrument.

• For mortgaged land it is desirable that you give the complete address

of the Property.

• Ensure that charging clauses are always inserted, including reference to fixed and floating charges.

• Sign and date the form.

• Complete the forms legibly using black ink or, preferably, type the

form.

• The forms are scanned and reproduced electronically by the Registrar so that the public can inspect them. The Registrar may refuse documents that are not suitable for scanning and reproduction.

Please note if you omit or mis-state any detail in the documents registered, then you should apply to the Commission to correct it under section 131 of the Ordinance.

8

7. What happens when the documents for registration reaches registrar concerned?

If the document is acceptable, the registrar concerned takes details from it and records the particulars in the register and issue the certificate of registration of mortgage or charge,.

8. What if registrar concerned has any query on the documents?

Registrar will communicate queries to the company. If the documents need to be corrected, it must be done within 21 days from the date of creation, modification or satisfaction etc. of charge, as the case may be.

9. What if the charge is not registered in time?

If a charge is not registered in time, then it is void against the liquidator or administrator and any creditor of the company. This means that the debt for which the charge was given will remain payable, but it will be unsecured.

If a company fails to deliver a charge, and no interested party has registered it, then the company and every officer of the company who is in default are liable to a fine. If the default continues, they are liable to a daily default fine.

10. Can a charge be registered after the expiry of 21 days from the date of its

creation? Only the Commission can grant an extension of time for registration of a charge that was not received in time. The normal time limit is 21 days from the date of creation of the charge.

11. What must I do if my company acquires property that is already charged?

If the charge is of a type which the company would have had to register if it had created the charge itself, then it must notify the fact that it has acquired this property. To do this the company must complete and send Form 11 with the registrar concerned, with a certified copy of any instrument that created or evidenced the charge. This must be done within 21 days after the company completed the acquisition of the property. If the charged property is outside Pakistan and the charge was created outside Pakistan, the 21 days runs from date when the copy instrument could have been received in Pakistan in the normal course of post, assuming that it had been dispatched with due Diligence.

9

12. What are the rights of the mortgagee/charge? If the company does not send the particulars of charge for registration, then the chargee (the person to whom property is charged) – or some other interested person may file the required documents. In certain circumstance a chargee can appoint a receiver or manager, or ask the court to appoint a receiver or manager, over the property charged – for example, if the company defaults in payment of the debt secured by the charge. The chargee must notify the appointment with the registrar concerned within 15 days using form 18. Registrar will then enter this in the register of charges.

On ceasing to act, a receiver or manager must notify the registrar concerned within 30 days using Form 19. Registrar will then enter the fact in the register of charges.

10

CHAPTER 2 Modification of Mortgages and Charges 1. What is modification in a mortgage or a charge?

Modification is change in the mortgage or charges i.e. change in:-

• Amount of mortgage / charge (enhancement or reduction in amount).

• Change in particulars of property (excluding or including certain

property or asset).

• Variation in the rate of markup or interest.

• Extension of time for repayment on period of maturity (Rescheduling) or change in other terms and conditions.

2. Which documents are required to be filed for modification in a mortgage

or charge?

The following documents are required to be filed for modification in a mortgage or charge:-

• Form 16 containing particulars of modification in mortgage/charge etc.

• Copy of instrument modifying the mortgage or charge.

• Affidavit that the copy(ies) of the instrument is/are true copy(ies).

• Bank challan evidencing the payment of Rs. 7,500 being filing fee for

submission in physical form or Rs. 5,000 for submission through eServices, as the case may be.

3. Whether partial payment is treated as partial satisfaction or modification

of a mortgage or charge?

Partial payment is modification of a mortgage or charge and cannot be treated as satisfaction.

11

CHAPTER 3

Satisfaction of Mortgages and Charges 1. What should the company do when the charge is paid off (or ‘satisfied’)?

On the one hand it is in the company’s own interest and on the other hand it is the requirement of law that the company should inform the registrar concerned that the charge has been fully satisfied so that the stake holders i.e. investors and lenders should know that all of the debt has been paid off. The particulars of satisfaction of mortgage/charge shall be submitted to the registrar concerned on prescribed form 17 within 21 days from the date of satisfaction/repayment.

2. What if charged property ceases to be charged or to belong to the

company?

As stated above, the company needs to inform registrar concerned as soon the property has been released from a mortgage/charge. If the charge property is acquired by a company, it is the responsibility of the company to report the particulars on prescribed form 11.

3. Is there a fee for registering Form 17?

Yes, a fee of Rs. 7,500 being the filing fee for submission in physical form or Rs. 5,000 for submission through eServices, as the case may be, shall be deposited. In case of submission in physical form, the original challan evidencing the payment of fee is to be annexed with Form 17.

12

CHAPTER 4

Rectification of Mortgages and Charges

1. What are the grounds of rectification of register of mortgages or charges?

The following are grounds of rectification of register of mortgages or charges:-

Omission to file particulars of charge within 21 days from the

date of creation of charge.

Failure to file particulars of modification of charge within 21 days from the date of modification.

Omission to intimate payment or satisfaction within 21 days.

Omission in compliance with observation within 21 days from

the date of creation, modification, satisfaction etc. of charge.

Omission or misstatement in the particulars.

2. Who is empowered to order for rectification of register of mortgages or charges?

The Commission is empowered to order for rectification of register of mortgages or charges.

3. Which documents should be enclosed with the application for

rectification to be filed before the Commission?

The following documents should be enclosed with the petition for rectification to be filed before the Commission.

• Copy of Form 10, 11, 13, 16 or 17; as case may be.

• Copy of instrument for creating, modifying, satisfying charge

etc.

13

• Observation memorandum, if any, issued by the registrar concerned.

• Affidavit verifying that the contents of application are true.

• Bank challan evidencing the payment of Rs. 7,500 being the

application fee.

4. Which documents should be filed with the registrar concerned after passing of order by the Commission?

The following documents should be filed with the registrar concerned after passing of order by the Commission.

• Form 10, 11, 13, 16 or 17, as the case may be.

• Copy(s) of the instrument(s) relating to creation, modification, or

a confirmation letter from the Bank for the satisfaction of charge.

• Copy of order of the Commission.

• Affidavit that the copies of the instruments are true copies.

• Bank challan evidencing the payment of Rs. 7,500 being filing fee

for submission in physical form or Rs. 5,000 for submission

through eServices, as the case may be.

Please note that particulars of mortgages or charges

or modification or satisfaction thereof are required to

be registered within 21 days. Mere filing within 21

days may cause certain difficulties leading to filing

petition before the Commission for extension in time.

It would be advisable if the documents are filed

much earlier so that these may be registered.

14

CHAPTER 5

Further information:

1. Who should respond to the query made by the company about the registration?

The officers sitting in the CROs shall willingly answer general queries regarding the procedure but note legal points, which should be referred to your legal advisor.

The telephone number of all the Company Registration Office concerned given in the list at the end of this booklet.

2. What are the modes of submission of statutory returns?

There are two modes of filing statutory returns with the registrar concerned: i. In physical form

Personally: You may visit the CRO and deliver the documents

by hand. The authorized staff of the Registrar concerned shall acknowledge the receipt of documents if delivered to him by hand.

By post: You may post the return through registered mail or

courier at the postal addresses of CROs (as given at the end of this guide booklet).

ii. Electronically using e.Services portal of SECP

3. From where format of returns/forms be obtained?

For submission in physical form In case of physical submission, there are three sources of getting statutory returns/Forms:

• You may refer to the Rules and find the relevant statutory

form.

15

• You may download these formats from the Commission’s

website at the link http://www.secp.gov.pk/forms.asp which is the quickest and easiest way to get the forms. By using the downloaded forms, additional space can also be created in the fields available for information, according to your requirements.

• You may visit the regional offices of the Commission

(Company Registration Offices) personally and get the forms.

For Online submission:

In case of online submission, the statutory returns/ forms on the prescribed format containing the existing information shall automatically appear in the eServices portal. Detailed procedure is explained at Q. No. 7 of this guide below.

4. What is filing fee of forms/returns?

The filing fee of various returns/forms is prescribed in 6th Schedule to the Ordinance, which may be accessed at Commission’s website. For detailed information regarding fees schedule, (both online/physical) kindly visit the link http://www.secp.gov.pk/notification/pdf/2010/SixthSchedule26-10-2010.pdf

5. Who is competent to sign/authenticate the return/forms?

As provided under the Companies Ordinance, 1984, Chief Executive, Director and the Company Secretary are authorized to sign the returns/forms.

6. How to pay filing fee?

The filing fee can be paid /deposited through challans in any of the designated branches of MCB Bank Limited.

Online:

In case of online submission, challans are auto generated. Procedure is explained above at Q. No. 7 of this guide.

16

Physical:

In case of physical submission, challans in the physical form are available at all the designated branches of MCB Bank Limited.

7. How statutory returns can be filed through eServices?

Below is the procedure for filing statutory returns through eServices:

(1) Log on to eServices

• In case the company has obtained eServices Login name and Password:

Connect to eServices https://eservices.secp.gov.pk/eServices, and log on to your account using your eServices Login name and Password provided by SECP. Procedure for obtaining Login name and Password has been provided in subsequent process.

Important Note: PLEASE NOTE THAT “SIGN UP” LINK ON eServices WEBPAGE, IS FOR NEW INCORPORATION PROCESS ONLY AND NOT FOR ALREADY INCORPORATED COMPANIES.

• In case the company has not obtained eServices Login name and

Password, please follow the procedure as under:

a. Apply for an eServices Login name and Password by writing a letter, on the company letterhead, duly signed by the Chief Executive alongwith the either of the Company Secretary, Chief Financial Officer, or one of the Directors of the company, with a copy of their CNIC, to be addressed to the following address:

Director (MIS), Registration Department, Securities and Exchange Commission of Pakistan, NIC Building, Jinnah Avenue, Islamabad, Pakistan email: [email protected] Phone: +92-51-9207091-3 (Ext: 280)

17

b. Mention the email address on which the eServices Login name and Password will be dispatched. Please, only provide POP3 email address such as [email protected]; free email address such as hotmail, gmail, or yahoo is not acceptable.

c. SECP will confirm the validity of the email address. After validation

the eServices Login name and Password will be emailed to the specified email address.

(2) Enter Information

• A successful logon to eServices by entering Login name and

password will display a list of available processes

• Click Filing of Statutory Returns

• List of forms containing all the statutory returns will appear

• Click the relevant form (Form 10 to 17, as the case may be)

• Enter required information on the page

• Click the Continue button, the process document listing page shall

be displayed, containing the following links:

a. Update Form

o Click link if you want to update the data.

o After updating data, click continue button

o Process document listing page will be displayed

b. View Form

• Click link.

• The form on the prescribed format shall be

automatically generated based on your input.

• View Form.

• If data displayed in the form is correct, click the back

button on the screen

• Process document listing page will be displayed

18

c. Fill New Attachment Form

• Click link and an attachment form window will be

displayed.

• Attach document, if any.

• Click Save Form button.

Please note that only PDF format is allowed for attachment. Size of

the file must not exceed 2 MB.


d. Fill New Bank Challan

• Click link – auto filled bank challan will be displayed.

• Click Print Form button at the bottom of the page and

four copies namely original, bank copy, SECP copy and

depositor copy will be printed.

• After printing, click Save Form button at the bottom of

the page.


e. Sign Forms

• Procedure for obtaining Digital Signatures:

Any return/form filed through e-services shall be

authenticated by companies by affixing electronic signatures.

Detailed procedure for obtaining digital signatures from

National Institutional of Facilitation Technologies (NIFT)

for SECP eServices is available at the following link of NIFT

website: https://secp.niftetrust.com/.

19

• Click on Sign Forms link.

• Digital signature pad window will appear.

Select all the form(s)/Attachment(s) available for

signature by clicking the check boxes.

• Select the required signature from the drop down menu

• Click Sign button (After signing, submit to SECP button

will be enabled.)

• Click Submit to SECP button.

• All the documents will be automatically submitted to

the SECP.

• Please note down the Tracking Number, appearing on

the screen.

• Deposit fee through the challan printed during the

process, in the selected branch of MCB.

• The bank shall retain the SECP and bank copies and

return remaining two copies (original and customer

copy) to the customer

If the documents are sent by post or courier, the same can be addressed to one of the following Company Registration Offices (CROs), having jurisdiction on your company.

Company Registration Office, State Life Building, 7-Blue Area, Islamabad. Phone No.: 051-9208740 Fax No: 051-9208740 Email: [email protected]

Company Registration Office,



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3rd & 4th Floor, Associated House, 7-Egerton Road, Lahore Phone No. 042-99204962 – 6 Fax No: 042-99202044 Email: [email protected]




356-A, Ikram Plaza, Small D ground. Peoples Colony No. 1, Faisalabad. Phone No: 041-9220284 Fax No: 041-9220152 Email: [email protected]


1st Floor, State Life Building, The Mall, Peshawar Cantt. Phone No: 091-9213178, Fax No: 091-9213686 Email: [email protected] / [email protected]




28 – D , Hamdard Housing Society, Airport Road, Sukkur, Phone No: 071-5630517 Fax No: 071-5633757 Email: [email protected]

LIST OF SENSITIVE/PROHIBITED WORDS

Sensitive/Prohibited Words Association This word may be included in the name of companies to be established on grant of license by the Commission under section 42 of Companies Ordinance 1984 or which are established as a Trade Organization under Trade Organizations Ordinance, 2007. Benevolent/ Foundation These words may be included in the name of companies to be established on grant of license by the Commission under section 42 of Companies Ordinance 1984. Society This word may be included in the name of companies if proper justification is provided. Fund This word may be allowed in the name of company if the company will function as Non-Banking Financial Company under the license of Specialized Companies Division of the Commission or to public sector company on grant of license by the Commission under section 42 of the Companies Ordinance, 1984. Council This word may be included in the name of companies to be established on grant of license by the Commission under section 42 of Companies Ordinance 1984. Moreover, this expression is also allowed to Sports Association and Professional Bodies. Chamber of Commerce This word may be included in the name of entities which are being formed as Trade Bodies under license from Director General Trade Organization, Ministry of Commerce Government of Pakistan. Authority/ Register/ Registered/ Co-operative/ Bureau/Division These words are not allowed. Trust This word may be included in the name of REITs to be established on grant of license by the Specialized Companies Division.

Assurance/Assurer/ Insurance/Insurer/ Re-Assurance/ Re-Assurer/ Re-Insurance/ Re-Insurer These words may be included in the name of companies involved in Insurance, Assurance, Re-insurance and Re-assurance business. Prior permission of Insurance Division of the Commission would be required at the time of Incorporation. Board This word may be included in the name of companies desirous to engage in the business of Paper &/or Board or to public sector companies. Bahria/Askari/Fouji/ Fazaiya/Cadet This word may be included in the name of companies to be established by the relevant agency. Banks/Banking Company These words may be included in the name of companies on the basis of permission from State Bank of Pakistan under section 8 of the Banking Companies Ordinance, 1962 and section 5(1) of Microfinance Institutions Ordinance, 2001. Charter/Chartered These words may be included in the name of companies having charter from the sovereign authority of the Federation and the Province. Exchange/Bourse These words are only allowed in the name of Stock Exchange, Commodity Exchange and Exchange Companies subject to NOC from relevant authority. Familiar Trade Names These words may be included in the name of companies only if NOC of familiar trade name user is provided or proper documentary evidence of ownership/use of trade name is furnished by the applicant. Famous/Distinct Personalities These words may be included in the name of companies if proper justification and approval of relevant authority is provided. Federation This word may be included in the name of Sports Federations licensed under section 42 of Companies Ordinance, 1984 or trade bodies under Trade Organizations Ordinance, 2007.

Federal This word is allowed in the name of company with the approval of the Commission, if the proposed company has a connection or any patronage with Federal Government. Group This word may be included in the name of companies if use of this word implies several companies under single corporate ownership and applicants have to provide evidence of subsidiary/associate relationship with two or more other Pakistani Companies. Holding This word may be included in the name of company which establishes that it qualifies to be a holding company as defined in Section 3 of the Companies Ordinance, 1984 i.e. the company has object clause showing its intention to act as holding company after incorporation. Institution This word may be included in the name of the public sector companies. Investment This word may be included in the name of Non-Banking Finance Companies, REITs and brokerage houses or any public sector financial institution or investment company. Investment Finance, Investment Advisory, Leasing, Asset Management, Housing Finance This word may be included in the name of Non-Banking Finance Companies. Name of Company containing country name or nationality other than Pakistan These names are not allowed unless sufficient justification is provided. Name of Company containing name of two countries i.e. Pakistan/Pak and any other foreign company These words may be included in the name of companies where documentary evidence is provided in support of the fact that the company is a Joint Venture of two Governments or companies of two countries. New/Modern/The/Al These words may be included in the name of companies. However, these expressions will not be acceptable if used to make proposed company as distinctive from already existing companies.

Patronage of past or present, Pakistani or Foreign, Head of State/ any connection with Federal or Provincial Government, Department or authority/any connection with corporation set up by or under Federal/Provisional Law/ the patronage of, or any connection with, any Foreign Government or any International Organization These words may be included in the name of companies with the approval of the Commission provided sufficient justification is furnished. State This word may be included in the name of companies formed by Government. University This word may be allowed only in the name of University Management Company for the management of University in terms of guidelines of Higher Education Commission. UNO, WORLD BANK, IMF, RED CROSS, RED CRESCENT These words are not allowed. Important Note Regarding Spellings of Proposed Names It is pertinent to mention here that the application for availability of name will be considered only if the spelling of proposed name is according to dictionary. Any deviation in dictionary spellings will not be accepted and the name will be rejected.

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SECP GUIDE SERIES


PROMOTERS’ GUIDE

FORMATION AND INCORPORATION OF COMPANIES UNDER THE COMPANIES ORDINANCE 1984


N.I.C BUILDING, JINNAH AVENUE, ISLAMABAD - PAKISTAN

Ph: 051-9207091- 4 Fax: 051-9204915 Website: www.secp.gov.pk


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SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN (SECP)

Organization

Securities and Exchange Commission of Pakistan (SECP) established under the Securities and Exchange Commission of Pakistan Act 1997 was operationalized as a body Corporate on 1st January 1999. SECP replaced Corporate Law Authority, the former corporate regulatory body. It has been vested with adequate operational, administrative and financial autonomy.

The SECP’s head office is at the Federal Capital, Islamabad and it has eight regional offices (Company Registration Offices), one at Federal Capital, four at provincial capitals and three in other major cities i.e. Multan, Faisalabad and Sukkur. The SECP has been organized into following Divisions:

• Company Law Division; • Securities Market Division; • Specialized Companies Division; • Insurance Division • Finance & Admin Division; • HR& Training Division; • Information System & Technology Division.

Functions SECP’s main functions include; regulation of securities market and related institutions like Central Depository Company (CDC), Credit Rating Companies and Modarabas (funds operating on the basis of Islamic economic principles); administration of the company law; regulation of non-banking finance companies like leasing companies, investment banks and mutual funds, regulation of insurance business and private pensions. One of the important functions of the SECP is the incorporation/registration of companies. This task has been entrusted to the Registration Department, Company Law Division which has its field offices known as Company Registration Offices (CROs) for the purpose of incorporation / registration of different type of companies. Since the inception of SECP, a number of operational changes have been introduced and a friendly environment has been created at the CROs. Incorporation of companies has been made much easier, smooth and swift ensuring completion of this process within three days. Other public services like availability of name, providing of certified copies etc., are rendered within one day. e.Services has been launched by the SECP in Sep. 2008, which facilitates online availability of name, online incorporation of companies and e-filing of statutory returns. It enables the

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promoters and management of the company to interact online using the eServices portal, without visiting the SECP offices. Online services save time and resources, increase efficiency, create a paperless environment, promote confidence and strengthen the country’s economy. INCORPORATION OF A COMPANY For the convenience of general public, promoters and directors of companies, SECP has established its eight CROs at Islamabad, Karachi, Lahore, Peshawar, Faisalabad, Multan, Sukkur and Quetta. Online facilities for incorporation of companies and filing of returns have been made available. Besides registration of companies and monitoring of their working according to law, functions of CRO’s include providing services and guidance and also to ensure that the companies and their directors comply with the statutory requirements as provided under the Companies Ordinance, 1984 (the Ordinance). The record of companies maintained by the CROs is public record and the investors, shareholders, creditors and general public, may inspect the record of any company whenever they need and they may also obtain certified copy of any specific document on payment of nominal amount of fee. Any three or more persons associated for lawful purpose may, by subscribing their names to the Memorandum of Association and complying with the requirements of the Ordinance form a public company and any one or more persons so associated may, in like manner, form a private company. If only one member forms a private company, it is called a single member company and if it is formed by more than one member, it is termed as a private company. Prior approval of the Ministries/Departments etc. noted against each category of the following companies is required to be obtained before incorporation of companies: -

(a) A banking company I) Ministry of Finance. II) State Bank of Pakistan.

(b) A non-banking finance company (NBFC)


(c) A security service providing company Interior Division

(d) A corporate brokerage house

Stock Exchange (for transfer of member ship card in favour of proposed company)

(e) A money exchange company State Bank of Pakistan

(f) An Association not for profit u/s 42 of the

Licence from Securities and Exchange Commission of

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Pakistan

(g) A trade organization u/s 42 of the Companies Ordinance, 1984

Licence from Ministry of Commerce

Following are the requirements for registration of a new company under the Companies Ordinance, 1984:-

a. Availability of Name

The first step with regard to incorporation of a company is to seek the availability of the proposed name for the company from the registrar. For this purpose, an application is to be made and Rs.200/- for online application and Rs. 500/- for offline application is required to be paid for seeking availability certificate for each name. The promoters desirous of forming a company should make sure that the name chosen is not otherwise inappropriate, deceptive or designed to exploit or offend the religious susceptibilities of the people and neither is identical nor closely resembling with the name of an existing company. To facilitate the promoters, a list of prohibited/sensitive names has also been provided at the link: https://www.secp.gov.pk/ns/pdf/Prohibited_words.pdf

b. Documents for registration of a limited company

The following documents are required to be filed with the registrar concerned for registration of a private limited company:-

I. Copy of national identity card or passport, in case of foreigner, of each subscriber and witness to the memorandum and article of association.

II. Memorandum and articles of association

Four printed copes of Memorandum and Articles of Association in case of offline submission and one copy for online submission, duly signed by each subscriber in the presence of one witness. In order to facilitate the general public, the standardized specimen of Memorandum of Association of various sectors has been provided on the Commission’s Website.

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III. Form - 1

Declaration of compliance with the pre-requisites for the formation of a company

IV. Form – 21

Notice of situation of registered office of the company

V. Form – 29

Particulars of first directors of the company

VI. Registration/filing fee

Original paid Challan evidencing the payment of fee as prescribed in Table – II, in any of the authorized branches of MCB Bank Limited.

VII. Authorization by sponsors

The authorization of sponsors in favour of a person to make good the deficiencies, if any, in the memorandum and articles of association and other documents as may be pointed out by the registrar concerned and to collect the certificate of incorporation.

c. Additional Requirements for the Incorporation of a public Company

In addition to the requirements for incorporation of a private limited company as stated above, the public companies are required to file the following documents at the time of incorporation:

i. Form 27 (List of persons consenting to act as director ii. Form 28 (Consent of Directors)

d. Additional Requirements for incorporation of a Single Member Company

Any person may form a single member company and would file with the registrar at the time of incorporation a nomination in the form as set out in Form S1 indicating at least two individuals to act as nominee director and alternate nominee director, of the company in the event of his death. All the other requirements for incorporation of a private

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limited company shall mutatis mutandis apply to a single member company.

e. Additional Requirements for Incorporation of a Company having objects of providing Security Services

In case of company intending to provide the services of security guard, nine additional sets of each of the documents at I and II above alongwith the bio-data, four attested photographs of each subscriber and financial position/bank statement of the subscribers (Aggregate wealth should not be less than 1.5 million) are also required to be provided. Ministry of Interior grants NOC for a security object company.

f. Transfer of membership of Single Member Company to a new member.

If the membership of a single member company is transferred to a new member, the company shall, within fifteen days from such transfer, also file with the registrar, a nomination in the form as set out in Form S1.

g. Change in status of a single member company.- A single member company can be converted into a private company on increase of the number of its members to more than one. The company shall pass a special resolution for change of status and alter its articles accordingly within thirty days and transfer the shares within seven days. The company shall appoint and elect one or more additional directors within fifteen days of passing the special resolution and notify the appointment on Form 29 prescribed under the Companies (General Provisions and Forms) Rules, 1985 (the Rules) within fourteen days. Further, the company is required to file a notice of the fact in writing in the form as set out in Form S2, with the registrar within sixty days from the date of passing of special resolution.

h. Company becoming a single member company.- A private company having two or more members shall convert its status into single member company by passing a special resolution for change of its status, making necessary alteration in its articles and obtaining the approval of the Commission. An application for seeking Commission’s approval shall be submitted by the company in the form as set out in Form S4 within thirty days of passing the special resolution for change of status to single member company.

The company shall transfer shares in the name of single member within fifteen days of the approval of the Commission and notify change in the

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board of directors on Form 29 within fourteen days from date of transfer of shares.

A certified copy of the order containing the approval together with a notice in the form as set out in Form S5 and a nomination of nominee directors in the form as set out in Form S1 shall be filed with the registrar concerned within fifteen days.

i. Obtaining Certified Copies of Memorandum & Articles of Association and Certificate of Incorporation.

In order to obtain certified copies of memorandum of Association, articles of association and certificate of incorporation, challan of the requisite copying fee and Court stamps fee of the requisite value should be furnished alongwith registration documents.

j. Documents for incorporation of an association not for profit

All the documents meant for incorporation of a limited company alongwith a licence issued by the SECP. In case of a trade body, a licence issued by Ministry of Commerce would also be submitted to the registrar concerned. The application for obtaining the requisite licence from the Commission should be accompanied by draft memorandum and Articles of Association, list of promoters, bio-data of each promoter, declaration, names of companies in which the promoters of the proposed association hold any office, estimates of annual income and expenditure and brief statement of work already done or to be done. (Section 42 & Rule 6). Detailed guidance is provided on the link: http://www.secp.gov.pk/divisions/Portal_RD/registration_promoters.asp

STEP WISE PROCEDURE FOR ONLINE SUBMISSION

Log on to eServices: The client will connect to https://eservices.secp.gov.pk/eServices, to log on to his/her account or signup, in case of a new user. User will receive an e-mail containing the user activation link. By clicking on the link, user account will be activated.

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Enter Information: A successful logon to eServices by entering user ID and password, will display a list of available and unavailable processes. If the Company name has been reserved successfully, the Company Incorporation facility will be available at this stage. User will click on the company incorporation process. An input page is displayed, wherein the following information will be entered by the user.

(i) Application Details:

Fill in the details of the proposed company in terms of its complete name, kind, and designated bank branch to be selected, in the first section.

(ii) Declarant: In this section, enter the compulsory information about the declarant/company representative. A declarant can be any person authorized to represent the proposed company by the Owners/Board of Directors. Any employee or even the director could be chosen for this responsibility.

(iii) Director/ Subscriber:

Enter detailed data regarding the Board of Directors and Subscribers in this section. “Add” and “Delete” buttons will create and remove rows for data entry.

(iv) Company information:

Enter company information e.g., registered office address, sector-wise classification, share capital, objects, in this section.

(v) Signatory:

Enter details of a signatory in this section.

(vi) Press Continue Link:


a. Update Form(s) Data:

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Click link if you want to update the data. After updating data, press Continue link again. Process Document Listing Page will be displayed again. b. View Forms:

System automatically fills out the required forms using the data entered by you. You can view these forms by clicking on the given link.

c. View Company Profile Form:

To see company profile, click this link. d. Fill New Attachment Form:

In this link, you can attach the required documents in PDF format e.g., copy of CNIC, power of attorney, etc. Press Save Form button after attaching the required documents.

e. Fill New Attachment Form Articles of Association:

Click this link and attach the Articles of Association in PDF format. Press Save Form button after attaching the said file.

f. Fill New Attachment Form Memorandum of Association:

Click this link and attach the Memorandum of Association in PDF format. Attachment size should be less than 2 MB. Press Save Form button after attaching the said file.

g. Fill New Bank Challan:

Click link and bank challan will be displayed. Bank Challan is automatically populated with prescribed fee and other information by the eServices application.

Press print form button and then save form. Four copies will automatically be printed as original copy, bank copy, SECP copy and depositor copy. The fee shall be deposited in the Bank branch selected by the applicant from the designated branches of MCB Bank Limited. The bank shall retain the SECP and bank copies and return remaining two copies (original and depositor copy) to the client.

h. Sign Forms:

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Sign Forms will be enabled. Click on Sign Forms link. Forms are signed using the digital certificates. Digital Certificates are obtained from the NIFT. Select all the eForms available Under “Select for Signature” Column. Now, select the correct Digital Signature from the drop down menu. Press “Sign” button. After you press Sign button, “Submit to SECP” button will become active.

Click this button. All the documents will be submitted to the SECP and a process reference number will be displayed.

The process will be initiated as soon as the SECP receives the verification of deposit of fee from the Bank. User will receive response from the SECP via email, with any of the response, acceptance (Incorporation Certificate Dispatched through Courier), rejection or issue resolution. For more information about eServices, please visit the website at https://eservices.secp.gov.pk/eServices REQUIREMENTS AFTER INCORPORATION

a. Private companies

i. Directors of every company are required to appoint the first chief executive not later than fifteen days from the date of incorporation and thereafter within fourteen days from the date of election.

ii. The first auditor is required to be appointed by the directors within sixty days from the date of incorporation and thereafter in each AGM of the company.

iii. A single member company is also required to appoint a company secretary within fifteen days of incorporation or of becoming a single member company or of the office of company secretary falling vacant and notify such appointment on Form 29 within fourteen days of the date of such appointment.

iv. First directors i.e. the directors appointed at the time of incorporation of the company shall hold office till the election of directors in the first annual general meeting. The directors so elected shall hold office for a period of three years. However, casual vacancy occurring on account of death, resignation or

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removal of any director may be filled up by the other directors for the remainder period of the term.

v. Any appointment, election or change in the Directors, Chief Executive, Auditors, Chief Accountant, legal adviser etc is required to be notified to the registrar concerned on Form '29' within 14 days of the said election, appointment or change (Section 205).

vi. A company is required to notify the change in its registered office on Form-21 within 28 days from the date of change. (Section 142)

vii. First Annual General Meeting (AGM) of the company is required to be held within eighteen months from the date of incorporation and subsequent Annual General Meetings are required to be held once at least in every calendar year, within a period of four months following the close of its financial year and not more than fifteen months after holding of its last preceding AGM (Section 158).

viii. Directors of every company are required to lay before the company in its AGM audited balance sheet and profit and loss accounts in case of first accounts since the incorporation of the company and in any other case since the preceding account, made up to a date not earlier than the date of the meeting by more than four months (Section 233).

ix. Annual return on prescribed Form ‘A’ is required to be filed with the registrar concerned once in each year made as on the date of Annual General Meeting, where no such meeting is held, on the last day of the calendar year (Section 156).

x. In case of increase in paid-up capital, the company is required to offer new shares to the existing shareholders and the offer is required to be accompanied by a circular issued under section 86(3) to all the shareholders strictly in proportion to the shares held by them and, on the allotment of shares, return of allotment on Form '3' is required to be filed with registrar concerned within 30 days from the date of allotment of shares. Partly paid shares are not allowed to be issued at all. (Sections 73 & 86).

xi. The company is required to issue share certificates to its shareholders within 90 days from the date of allotment or

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within 45 days after the date of filing of application for registration of transfer of shares (Section 74).

xii Particulars of every mortgage or charge created by the company on its property or undertaking and every modification therein or satisfaction thereof are required to be filed and registered with the registrar concerned within 21 days after the date of its creation, modification or satisfaction (Sections 121, 129 & 132).

xiii. In case of death of single member of a Single Member Company, the nominee director of SMC is required to inform the registrar concerned of death of the single member, provide particulars of the legal heirs and in case of any impediment report the circumstances seeking the directions in the form as set out in Form S3 within seven days of the death of the single member.

xiv. The decisions taken by the single member or sole director in the meeting of director and member of a Single Member Company are required to be drawn up in writing and recorded in the minute’s book by the company secretary.

b. Public companies

i. All the requirements meant for private companies given at serial Nos. (i) to (xii) above are also applicable to public companies. However, the listed companies are also required to file list of members on floppy diskette to the Commission and the associations are required to file with the registrar concerned annual return on Form ‘B’ instead of Form ‘A’.

ii. List of Directors and consent of Directors and Chief Executive are required to be filed within 14 days of after the election of Directors and appointment of Chief Executive on Forms 27 & 28.

iii. A private company may commence its business immediately after its incorporation. However, a public Company shall be entitled to commence its business after obtaining commencement of business certificate from the registrar concerned (Section 146).

iv. Statutory meeting is required to be held within a period of not less than three months but not more than six months from the date at which the company is entitled to commence business. A

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statutory report is required to be circulated to the members and five copies thereof certified in the prescribed manner are required to be filed with the registrar concerned, at least 21 days before the date of Statutory Meeting. A private company which converts itself to public company after one year of incorporation is not required to hold such statutory meeting and issue such statutory report (Section 157).

v. Two copies of the audited balance sheet and profit and loss accounts signed in the prescribed manner are required to be filed by public companies with the registrar concerned within 30 days from the date of their AGM (Sections 233 & 242).

vi. Every listed company is required to file three copies of audited balance sheet and profit and loss accounts to the SECP, Stock Exchange and the registrar at the time of sending the notice of AGM to the members as well as within 30 days of holding the Annual General Meeting.

vii. Return containing beneficial ownership of listed securities and change therein on Form 31 and Form 32 are required to be filed with the Registrar concerned and the SECP.

viii. A listed company is also required to appoint a company secretary.

c. Requirements for establishment of place of business by foreign companies

A Foreign Company incorporated outside Pakistan, is required to file the following documents to the registrar concerned within 30 days from the establishment of its place of business in Pakistan (Sections 450 to 458 of the Companies Ordinance, 1984):

i. A certified copy of the charter, statute or Memorandum and Articles of the company accompanied by Form 38. The certification is to be given by:-

(a) the public officer in the country where the company is

incorporated to whose custody the original is committed or

(b) a notary public of the country where the company is

incorporated; or

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(c) an affidavit of a responsible officer of the company in the

country where the company is incorporated.

The signature or seal of the person so certifying shall be authenticated by a Pakistani diplomatic consular or consulate officer.

If the document is not in English, duly certified translation in English or Urdu language is provided (Rule 23 of Companies (General Provisions and Forms) Rules, 1985.

ii. Address of registered office or principal office of the company, on Form 39;

iii. Particulars of directors, Chief Executive and secretary (if any) of the company, on Form 40;

iv. Particulars of principal officer of the company in Pakistan, on Form 41;

v. Particulars of person(s) resident in Pakistan authorized to accept service on behalf of the foreign company, on Form 42 alongwith the certified copy of the appointment order, authority letter of board of directors’ resolution and consent of the principle officer;

vi. Address of principal place of business in Pakistan of the foreign company, on Form 43 (Section 451).

vi. Permission letter from the Board of Investment with a specific validity period for opening and maintaining of a branch/liaison office by a foreign company.

SUBSEQUENT REQUIREMENTS FOR A FOREIGN COMPANY

• Any change or alteration in particulars stated in the documents and returns filed at the time of registration u/s 451 is required to be filed on form 44 with the registrar concerned within 30 days of such change or alteration (Section 452).

• Foreign company is required to file annually with the registrar concerned annual accounts in respect of its operations within Pakistan as well as its global accounts together with the list of Pakistani members and debenture holders and of places of business

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of the company in Pakistan within the prescribed period (Section 453).

• Foreign company is required to submit the renewal/extension of the permission to open/maintain a branch/liaison office from the Board of Investment on the expiry of the validity period of the permission, originally granted.

• Foreign company is required to give notice on form 46 to the registrar concerned at least 30 days before it intends to cease to have a place of business in Pakistan and to publish a notice of such intention at least in two daily newspapers circulating in the Province or Provinces in which such place or places of business are situated

INFORMATION FOR THE COMPANIES HAVING FOREIGN INVESTMENT/ COLLABORATION

Foreign Investors are permitted to hold 100% equity of industrial projects without any permission of the Government. No Government sanction is required for setting up any industry, in terms of field of activity, location and size except for the following:

A. Arms and ammunitions.

B. High explosives

C. Radio-active substances

D. Security printing, currency and mint.

No new units for the manufacture of alcoholic beverages or liquors will be allowed. There is no requirement for obtaining No Objection Certificates (NOC) from the provincial governments for locating the project anywhere in the country except in areas that are notified as negative areas. With the announcement of Investment Policy, 1997 by Government of Pakistan, the foreign investment has since been allowed on repatriate able basis in agriculture, service, infrastructure and social sectors subject to conditions indicated against each. They will have to simply register a company with the SEC under the Ordinance and to inform the State Bank of Pakistan provided the relevant conditionality is fulfilled.

(a) Service Sector:

Activities

"Foreign Direct Investment (FDI) in Service Sector is allowed for any activity subject to any condition that services which require prior

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permission/NOC or licence from the concerned agencies will continue to get the same treatment until and unless de-regulated by such agencies and will be subject to provisions of respective sectoral policies. The list of deregulated services in telecommunications is as under; -

a) E-mail/Internet/Electronic Information services (EIS)

b) Data Communication Network services

c) Trunk Radio services

d) Cellular Mobile telephone Services

e) Audiotex Services

e) Audiotex Services

f) Voice Mail Services

g) Card Pay Phone Services

h) Close User Group for Banking Operations

i) International Satellite Operations for Domestic Data Communication

j) Paging Services

k) Vehicle Tracking System (VTS)

l) Burglar Alarm System (BAS)

m) Global Mobile Personal Communication System (GMPCS)

n) Any other telecommunication service, which is deregulated in future, will become part of this list.

Note: - Those sectors which have not been deregulated, and are with Pakistan Telecommunication Corporation Limited (PTCL), are open to foreign investors in collaboration with PTCL”

Conditions

i. The amount of foreign equity investment in the company /project shall be at least US $ 0.3 million.

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ii. Foreign investors are allowed to hold 100 % of the equity subject to the condition that the repatriation of profit shall be restricted to a maximum of 60 % of the total equity or profits and that a minimum of 40 % of equity is held by Pakistani investor (including sale of shares in stock exchange) within five years.

(b) Infrastructure sector:

Activities

"Infrastructure projects including development of industrial zones”

Conditions

i. The amount of foreign equity investment in the company/ project shall be at least US $ 0.3 million.

ii. 100% foreign equity is allowed on repatriate able basis.

(c) Social sector:

Activities

"Education, Technical/Vocational Training, Human Resource Development (HRD), Hospitals, Medical and Diagnostic Services."

Conditions

i. The amount of foreign equity investment in the company/project shall be at least US $ 0.3 million.

ii. 100% foreign equity is allowed.

(d) Corporate Agriculture Farming (CAF) sector :

The Cabinet decision dated June 19th, 2002 on Corporate Agriculture Farming (CAF) policy enunciates that such local and foreign companies would be entitled CAF legal entity that are locally incorporated under the Companies Ordinance, 1984. In this connection, in case of foreign collaboration, 60% foreign equity is allowed with minimum investment of US$ 0.3 million. Beside the following agriculture related activities are included in CAF under the approved policy package, -

i. Land development/reclamation of batter land, desert and hilly areas for agriculture purpose and Crop farming

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ii Reclamation of water Front Areas/Creeks.

iii. Crops. Fruits, Vegetables, Flowers Farming/ Integrated Agriculture (Cultivation and processing of Crops)

iv. Modernization and Development of Irrigation Facilities and Water Management.

v. On farm construction of wheat/grain storage and construction of cold storage for captive use (not on commercial basis)

(e) Others.-

i) Tourism: Tourism has been given the status of industry and placed under priority industries i.e. category “C” of the Investment Policy.

ii) Housing and Construction: The Housing and Construction sector has also been declared as Industry and placed under priority Industries i.e. category “C” of the Investment Policy.

iii) Local and Foreign Companies involved in real estate projects will not market these projects unless the title of the property is transferred in the name of a locally incorporated company and the “Commencement of Business” certificate is issued by the Securities and Exchange Commission of Pakistan (SECP) to the company.

iv) Information Technology: Computer Software and Information Technology (IT) have been declared as Industry.

Table – I RATES OF STAMP DUTY

Stamp duty, previously levied on Memorandum and Articles of Association of a company, has been abolished by all the provincial governments. It now remains applicable in I.C.T. only, the rates of which are Rs. 60/- on Memorandum of Association and Rs. 200/- on Articles of Association. However, no stamp duty is required to be levied in case of applications submitted through eServices.

19

Table – II

TABLE OF FEE

SCHEDULE OF FEE EFFECTIVE FROM 26.10.2010 SRO.996 (I)/2010 dated 26.10.2010 Fee Calculator In order to facilitate the corporate sector and the general public, Fee Calculator has been provided on the SECP website (www.secp.gov.pk) for instant calculation of the registration fee as well as fee for enhancement of authorized capital. The Registration Fee payable by a company having share capital at different levels of capital and the other fee payable under the Ordinance are given in the chart as under:

ON LINE PHYSICAL (OFF-LINE)

Authorized Capital

In case of online submission of documents

* Fling Fee of

Documents (In case of

online submission

of documents)

Total

In case of physical submission of documents

* Fling Fee of

Documents (In case of physical

submission of

documents)

Total

100,000

2,500

2,400

4,900

5,000

6,000

11,000

200,000

3,000

2,400

5,400

6,000

6,000

12,000

300,000

3,500

2,400

5,900

7,000

6,000

13,000

400,000

4,000

2,400

6,400

8,000

6,000

14,000

500,000

4,500

2,400

6,900

9,000

6,000

15,000

600,000

5,000

2,400

7,400

10,000

6,000

16,000

700,000

5,500

2,400

7,900

11,000

6,000

17,000

800,000

6,000

2,400

8,400

12,000

6,000

18,000

900,000

6,500

2,400

8,900

13,000

6,000

19,000

20

1,000,000 7,000 2,400 9,400 14,000 6,000 20,000

2,000,000

12,000

2,400

14,400

24,000

6,000

30,000

3,000,000

17,000

2,400

19,400

34,000

6,000

40,000

4,000,000

22,000

2,400

24,400

44,000

6,000

50,000

5,000,000

27,000

2,400

29,400

54,000

6,000

60,000

6,000,000

32,000

2,400

34,400

64,000

6,000

70,000

7,000,000

37,000

2,400

39,400

74,000

6,000

80,000

8,000,000

42,000

2,400

44,400

84,000

6,000

90,000

9,000,000

47,000

2,400

49,400

94,000

6,000

100,000

10,000,000

52,000

2,400

54,400

104,000

6,000

110,000

20,000,000

82,000

2,400

84,400

179,000

6,000

185,000

30,000,000

112,000

2,400

114,400

254,000

6,000

260,000

40,000,000

142,000

2,400

144,400

329,000

6,000

335,000

50,000,000

172,000

2,400

174,400

404,000

6,000

410,000

100,000,000

322,000

2,400

324,400

779,000

6,000

785,000

5,000,000,000

15,022,000

2,400

15,024,400

37,529,000

6,000

37,535,000

6,000,000,000

16,272,000

2,400

16,274,400

40,029,000

6,000

40,035,000

8,000,000,000

18,772,000

2,400

18,774,400

45,029,000

6,000

45,035,000

10,000,000,000

21,272,000

2,400

21,274,400

50,029,000

6,000

50,035,000

11,000,000,000

22,522,000

2,400

22,524,400

52,529,000

6,000

52,535,000

12,000,000,000

23,772,000

2,400

23,774,400

55,029,000

6,000

55,035,000

15,000,000,000

27,522,000

2,400

27,524,400

62,529,000

6,000

62,535,000

20,000,000,000

33,772,000

2,400

33,774,400

75,029,000

6,000

75,035,000

21

I. By a company having a share capital

In case of online

submission of documents

In case of physical

submission of documents

For filing, registering or recording any document other than the documents listed below. 600 1,500

Documents notifying particulars of relating mortgage/Charge…. 5,000 7,500

II. By a company not having a share capital, other than a company registered under a license granted under section 42:-

For registration of a new company, a fee of 20,000 30,000

For filing, registering or recording any document other than the documents relating mortgage/Charge…. 600 1,500

Documents notifying particulars relating mortgage/Charge…. 5,000 7,500

III. By a company registered under a license granted under section 42:-

Application seeking grant of license or its renewal…. 15,000 25,000

For Registration, a fee of …………… 25,000 50,000

For filing, registering or recording any document other than the documents relating mortgage/Charge…. 500 1,000

Documents notifying particulars of relating mortgage/Charge…. 5,000 7,500

IV. By a company established outside Pakistan which has a place of business in Pakistan:- (Foreign Company) For filing, registering or recording a document containing charter/statute/memorandum and articles, etc 25,000 50,000

Documents notifying particulars relating mortgage/Charge…. 5,000 7,500

For filing, registering or recording any documents other than the documents relating mortgage/Charge…. 600 1,500

V. Inspection of File: For inspecting documents kept by the registrar in respect of a company or inspecting any register kept by him in relation to a company

200 500

VI. Certified copy Certificate of Incorporation

100 200 Certificate of Commencement of Business.

22

Certificate of registration of mortgage or charge. (For private limited company) Certified Copy of the M/A/A 250 500

Certified Copy of any return 100 200

(Other than private limited company)

Certified Copy of the M/A/A 500 1,000

Certified Copy of any return 200 300

Certified Copy or extract of any other document or register, calculated at the rate, per page or fractional part thereof required to be copied, subject to a minimum fee of one hundred rupees, a fee of ………..

20 20

For providing list of companies, a fee calculated at the rate per data field, subject to a minimum fee of five hundred rupees, a fee of …………

Rs. 2 per data field

Rs. 2 per data field

For a Corporate Registration and Compliance System generated company profile, per company, a fee of ………… 200 200

VII: For any application/appeal/complaint submitted to the Registrar or the Commission under the Ordinance.

Application under section 21 for Alteration in the Memorandum of Association 5,000 10,000

Application confirming Availability of Name 200 500

Application for Change of Name 2,500 5,000

Conversion of status of company from public to private 2,500 5,000 Conversion of status of company from private to single member company 2,500 5,000

Approval to issue prospectus Size of total issue including all types of securities up to Rs. 250 million, a fee of ……

N/A 25,000

Size of total issue including all types of securities more than Rs. 250 million and up to Rs. 1,000 million, a fee of ………

N/A 50,000

Size of total issue including all types of securities more than Rs. 1000 million, a fee of…..

N/A 100,000

Issuance of shares at discount under section 84 10,000

23

Application to issue shares, otherwise than right under first proviso of section 86(1) a fee of (the aforesaid fee shall not apply to applications for issuance of shares under section 86 for the purpose of the Employee Stock Option Scheme)

N/A

Rs.50,000 or 0.1% of the proposed

capital increase,

whichever is higher

Application for relaxation from the requirements of the Companies (Issue of Capital) Rules, 1996 under Rule 10 thereof:

Share Capital upto Rs. 50 million N/A Rs.25,000/-

Share capital above R.s.50m to Rs.100m N/A Rs.37,500/-

Share capital above 100m N/A Rs.50,000/-

Issuance of shares with different rights and privileges under section 90 read share capital rules, 2000

Rs.50,000 or 0.1% of the proposed

capital increase,

whichever is higher

Rectification in particulars of mortgages 5,000 7,500

Extension in the prescribed period for holding annual general meeting;

By a public company, a fee of 15,000 15,000

By a private company, a fee of …. 5,000 5,000

Permission to hold annual general meeting by listed company at a place other then the town in which the registered office of the company is situated.

2,500 5,000

Permission to hold extra ordinary general meeting at a shorter notice 2,500 5,000

Direction for holding annual general meeting/extra ordinary meeting under section 170

By a public company, a fee of 15,000 15,000

By a private company, a fee of …. 5,000 5,000

Election of directors by a listed company under section 178 5,000 10,000

Approval of loan to director under section 195 5,000 10,000

Exemption from the applicability of provisions under clause (b) of sub section (3) of section 206 10,000 20,000

24

Approval for the appointment of any sole purchase, sale or distribution agent under sub-section (3) of section 206, a fee of… 10,000 20,000

Preparation of accounts of more than twelve months under section 233, a fee of… 2,500 5,000

Special audit under section 234A, a fee of… 10,000 20,000

Exemption from the applicability of fourth schedule or 5th schedule under sub-section (5) of section 234, a fee of… 2,500 5,000

Exemption from the applicability of section 237 under sub-section (8) thereof, a fee of... 2,500 5,000

Appointment of auditor under sub-section (7) of section 252 2,500 5,000

Appointment of cost audit under section 258, a fee of… 1,000 2,000 Investigation into the affairs of a company under the second proviso of section 263, a fee of… 10,000 20,000

Restoration of a company struck off by the Registrar under sub-section (9) of section 439… 5,000 10,000

Application under the Companies Easy Exit Scheme launched by the Commission, a fee of... 5,000 10,000

For an application to the Commission seeking approval to issue securities outside Pakistan, a fee of… 200,000

For an application other than those specified in part VII above or an appeal submitted to the registrar or the Commission under the Ordinance by or on behalf of a company, a fee of… 500 1,000

For an application/appeal /complaint submitted to the registrar or the Commission under the Ordinance:-

By a member of the company or any other person having dealing with the company, a fee of… 500 500

By any creditor of the company, a fee of… 500 1,000 Abbreviations/References:

CRO: Company Registration Office. SECP: Securities & Exchange Commission of Pakistan.

25

Forms: Different Specimen forms available at the SECP HQ, CROs and SECP Website.

Rules: Companies General Provisions & Forms Rules. Sections: Sections of the Companies Ordinance, 1984.

Fee can be paid through Bank draft, Pay Order or challan in all branches of Muslim Commercial Bank Limited (MCB) Location and contract details of Company Registration Offices

Company Registration Office, State Life Building, 7-Blue Area, Islamabad. Phone No.: 051-9208740 Fax No: 051-9208740 Email: [email protected]



Company Registration Office, 3rd & 4th Floor, Associated House, 7-Egerton Road, Lahore Phone No. 042-99204962 – 6 Fax No: 042-99202044 Email: [email protected]




356-A, Ikram Plaza, Small D ground. Peoples Colony No. 1, Faisalabad. Phone No: 041-9220284 Fax No: 041-9220152 Email: [email protected]

26

Company Registration Office, 1st Floor, State Life Building, The Mall, Peshawar Cantt. Phone No: 091-9213178, Fax No: 091-9213686 Email: [email protected] / [email protected]



Company Registration Office, 28 – D , Hamdard Housing Society, Airport Road, Sukkur, Phone No: 071-5630517 Fax No: 071-5633757 Email: [email protected]

1


(SPECIALIZED COMPANIES DIVISION)

MODARABA PROMOTERS’ GUIDE

FORMATION OF MODARABA MANAGEMENT COMPANY AND FLOATATION OF MODARABAS

UNDER THE MODARABA COMPANIES AND MODARABA (FLOATATION AND CONTROL)

ORDINANCE, 1980

2

REQUIREMENTS FOR REGISTRATION AS

MODARABA COMPANY In order to be eligible for registration as Modaraba Company, the following conditions have to be fulfilled:

(a) The Company should be registered under the Companies

Ordinance, 1984 or be a body corporate formed under any law in force and owned or controlled whether directly or through a company or Corporation by the Federal Government or a Provincial Government.

(b) If a Company is to be engaged solely in the floatation and

management of modaraba, it has to have a paid-up capital not less than Rs.2.5 million but if it is engaged in other business as well then its paid up capital should be minimum Rs.7.5 million.

(c) None of its directors, officers or employees has been convicted of

fraud or breach of trust or of an offence involving moral turpitude.

(d) None of its above quoted persons should have been adjudged an insolvent or have suspended payment or compounded with their creditors.

(e) The promoters should, in the opinion of Registrar, be persons of

means and integrity and have knowledge of matters, which the company may have to deal with as Modaraba Company.

APPLICATION FOR REGISTRATION

A company which is eligible for registration as Modaraba Company may make an application to the Registrar duly signed by all directors and verified by an Oath Commissioner with:

(i) 5 copies of Memorandum and Articles of Association of the Company; (One copy which should be certified by the Registrar of respective Company Registration Office).

3

(ii) 5 copies of Certificate of Incorporation of the company (one copy of which should be certified by the Registrar of respective Company Registration Office).

(iii) Original depositor’s Challan of Rs. 250,000/- on account of

registration and filing fee (non-refundable) deposited in the head of account of the Securities and Exchange Commission of Pakistan maintained in the designated branches of MCB Bank Limited.

(iv) Latest audited accounts, if the company is already in business.

(v) Precise description of the business being done, if the company is

already engaged in business other than floatation of modaraba or if it proposes to undertake such business in addition to floatation and management of Modaraba.

After an application has been made for registration, the Registrar, may after being satisfied grant registration to such companies on such conditions as he may deem fit.

OTHER IMPORTANT REQUIREMENTS AFTER REGISTRATION

(i) No Modaraba Company shall engage in any business which is of the

same nature and competes with the business carried on by a Modaraba floated or controlled by it [Section 17(1)].

(ii) No Modaraba Company or any of its directors or their relatives shall

obtain loan, advance or credit from the funds of the Modaraba or on the security of the assets of the Modaraba [Section 17 (2)].

(iii) The Modaraba Company shall subscribe at least 10% of the total

amount of subscription in each Modaraba floated by it. In order to compensate it, it has been laid down that the Modaraba Company will get as remuneration a fixed percentage of the net annual profit of the Modaraba which shall not exceed 10% of such net annual profit [Section 17 (3), 18].

(iv) A fee of Rs. 25, 000/- shall be remitted by Modaraba Company

through Challan as annual renewal fee in the month of January every year.

4

(v) Annual audited accounts, director’s report and auditor’s report of the company are required to be filed with the Registrar simultaneously with its circulation to share holders.

(vi) No change, in the Memorandum and Articles of Association or in

the majority shareholders and directors, shall be made without prior written authorization of the Registrar.

PERMISSION TO FLOAT A MODARABA

A duly registered Modaraba Company can apply for floatation of a Modaraba (section 8). Documents to be furnished to the Registrar for the grant of permission to float a Modaraba. Five copies each of:

(i) Application for the grant of permission to float Modaraba on Form No. 1 with other necessary information required in the annexure to the Form.

(ii) Duly certified copies of registration certificate, one copy

thereof being certified by the Registrar.

(iii) Prospectus and feasibility report duly signed by all directors.

(iv) Latest audited balance sheet and profit and loss account of Modaraba Company and existing Modaraba, if any.

(v) Original depositor’s challan on account of authorization fee

to float Modaraba, deposited in the head of account of the Securities and Exchange Commission of Pakistan maintained in the designated branches of MCB Bank Limited.

RELIGIOUS BOARD

The Registrar scrutinizes the application and after he is satisfied, submits it to the Religious Board for issue of a certificate on the prescribed Form.

FLOATATION OF MODARABA

5

The Registrar can grant authorization certificate to float a modaraba only after clearance of the proposal by the Religious Board.

DECLARATION BEFORE COMMENCING BUSINESS

The Modaraba cannot commence business till the minimum amount stated in the prospectus for business operation has been raised, the Modaraba certificates thereof have been allotted and a declaration as prescribed in this regard signed by Chief Executive has been filed with the Registrar.

IMPORTANT REQUIREMENTS AFTER FLOATATION OF MODARABA

(i) Five copies of its annual audited accounts signed by the chief executive and two directors of the Modaraba Company are required to be filed with the Registrar and circulated amongst certificate holders within six months from the close of the accounting year (section 14, Rule 12).

(ii) Terms of an auditor appointed by the Modaraba Company as

auditors of Modaraba shall be approved by Registrar (Section 15, Rule-19).

(iii) Every modaraba company shall, within one month of the close of

first, second and third quarters of the financial year of each modaraba, prepare in accordance with such International Accounting Standards and other standards, as may be specified from time to time by notification in the official Gazette for the purpose by the Securities and Exchange Commission of Pakistan under sub-section (3) of section 234 of the Companies Ordinance, 1984, (XLVII of 1984), and transmit by registered post to the Registrar and under postal certificate to its certificate holders a profit and loss account, a cash flow statement and a statement of changes in equity for, and a balance sheet as at the end of, that quarter , whether audited or otherwise (Rule 10).

(iv) Annual list of certificate holders and a summary shall be prepared

within eighteen months from the floatation of the Modaraba and filed with the Registrar within 30 days from the date of the

6

reopening of the Register of the certificate holders relative to declaration of dividend, otherwise as on 31st December of the year [Rule-23].

(v) Return as to allotment of Modaraba Certificates shall be filed with

the Registrar within one month from the floatation of Modaraba. (Rule-26).

(vi) The Modaraba shall be floated within twelve months from the date

of authorization.

(vii) The Modaraba shall not undertake any business other than those specified in the prospectus.

(viii) The Modaraba Company shall not disinvest or create encumbrance

in favour of any person on any part of the investment in the Modaraba.

(ix) The Modaraba certificates shall be listed for trading on stock

exchange. If the application for listing of the Modaraba is refused by the Stock Exchange, the company shall forthwith repay the money received by it from the applicants.

(x) The Modaraba certificates to be subscribed by the Management

Company and/or sponsors, of the Modaraba Company shall not be transferred except with the prior written authorization of the Registrar.

(xi) No change shall be made in the chief executive officer, directors of

the Modaraba Company or management of the modaraba except with the prior written consent of the Registrar.

(xii) A report about the public offer and subscription, allotment basis,

fulfillment of underwriting obligations and related matters shall be furnished to the Registrar within two months of the date of publication of the prospectus.

(xiii) Dates of opening and closing of subscription list as agreed by the

stock exchange shall be incorporated in the prospectus. If these dates go beyond three months of the date of authorization certificate, then the prospectus shall be cleared afresh before publication.

7

(xiv) Underwriting arrangement shall be finalized with the approval of the Registrar.

(xv) The Modaraba Company shall comply with the conditions, if any,

imposed by the SEC.

(xvi) The prospectus shall be published in the press not less than seven days and not more than thirty days before the date on which the subscription list will open.

(xvii) The Modaraba Company shall take a decision within ten days of the

closure of subscription list as to what applications have been accepted, and shall refund, within ten days of decision, the application money to the applicants whose applications have not been accepted.

(xviii) Dates of execution of material contracts shall be incorporated in the

prospectus and verified photo copies thereof submitted to the Registrar before issue/publication of the prospectus.

(xix) A duly signed final copy of the prospectus containing original

certificate of the Auditors shall be filed with the Registrar before issue/publication of the prospectus.

(xx) The company shall set aside for each Modaraba, free from any

encumbrance, a portion of its paid-up capital not less then two and a half million rupees.

(xxi) The objects outlined in the prospectus shall be achieved and the

business operation conducted on the basis of business arrangements and agreements as already approved by Religious Board. In case any new arrangement is to be entered into, approval of the Religious Board shall be obtained.

(xxii) The scheme for further issue (Right or Bonus) of Modaraba

Certificates shall be approved from Registrar after the decision made by the Board of Directors.

(xxiii) The contents of the “prospectus” shall not be altered without prior

written approval of the Registrar.

(xxiv) Five published copies of the “prospectus” along with copies of all newspapers in which prospectus has been advertised shall be filed with the Registrar within seven days of its publication.

8

REQUIREMENT UNDER PRUDENTIAL REGULATIONS

i) All business transactions undertaken by the Modarabas shall be in

conformity with the Prudential Regulations for Modarabas, issued under Circular No.4 of 2004 dated January 28, 2004 amended from time to time.

ii) The affairs of the Modarabas shall be monitored under the

Prudential Regulations for Modarabas through various periodical statements through the Specialized Companies Return System (SCRS) by the 10th of every month.

GUIDELINES FOR EXISTING AS WELL AS PERSPECTIVE APPLICANTS AS DETERMINED BY REGISTRAR MODARABA

FROM TIME TO TIME a) The appointment of key Executives including the chief executive officer, chief financial officer, chief accounting officer, chief operating officer, company secretary, internal auditor or the compliance officer irrespective of their designation shall be subject to Fit & Proper Criteria prescribed by the Registrar Modaraba. b) Chief Executive Officer shall not be removed without the permission of the Registrar Modaraba. c) The reputation of the applicants’ proposed chief executive will be given due weightage. d) The sponsor/director must have clean records (if connected with corporate bodies) in respect of transactions with the Banks and DFIs and payment of income tax, excise and custom duties and sales tax. More particularly they should not:

i) have been associated with any illegal activity especially banking

business, deposit taking, financial dealing and other business. ii) have failed to meet their obligation to banks and other financial

institutions. They shall furnish names of the banks/DFIs along

9

with names of the branches with which they have had dealing. Bank reports are also required to be submitted.

iii) have defaulted in payment of taxes. They shall indicate their

National Tax Numbers. iv) be or have been associated as director/chief executive with the

corporate bodies whose corporate and tax record including custom duties, central excise and sales tax has been unsatisfactory. They shall name the corporate bodies, their bankers and disclose their tax numbers and dividend record. Those not so associated with corporate bodies would be required to indicate their occupation/profession/trade and highlight their achievements.

v) have been sponsor, director, major shareholder or chief

executive of a cooperative society, which has failed to meet its obligations.

vi) in the opinion of the sanctioning authority, having adverse

reputation regarding integrity and performance and do not fulfill the Fit & Proper Criteria circulated vide circular No.10 of 2008 dated 2.6.2008.

(f) Sponsors/directors should have personal net worth not less than

the amount to be subscribed by them personally supported by a duly authenticated copy of the latest wealth statement filed with the taxation department.

(g) Persons with directorship of listed companies paying dividend

regularly will be preferred against those having directorship of non-listed public or private limited companies. Similarly, business groups who have gone in public will be preferred.

(h) A chairman, chief cxecutive officer or director shall represent only

one modaraba company so as to avoid conflict of interest. Exceptional cases can be considered on merit.

(i) More than 50% of sponsors/directors shall not be from the same

family.

(j) For both general and specific Modarabas at least 50% of the directors should have either experience of funds management or that of directorship of listed companies.

10

(k) The promoters and sponsors of the modaraba company and

modaraba shall not dispose of their shares and modaraba certificates without the prior written approval of the registrar modaraba.

(l) Existing as well as future management companies are required to

have a Chartered Accountant or an FCMA as their chief accountant. (m) Applicant Company’s past financial track record, tax track record,

corporate behavior and professional reputation of proposed sponsors will be given weightage.

(n) No second Modaraba will be allowed unless accounting results of

three years of the previous modaraba are available. (o) Applications for registration as a Modaraba Company sponsored by

people not related to each other will be given preference over application sponsored by people belonging to the same family.

Note: the criteria desired is the minimum and can be reviewed and changed to encourage growth of modaraba sector.

11

SCALE OF FEES UNDER THE MODARABA COMPANIES AND MODARABA RULES, 1981

1. For registration of a modaraba company (non-refundable fee):

(i) at the time of registration.

Rs.250,000/-

(ii) renewal annually in the month of January.

Rs.25,000/-

2. Application for: (a) authorization to float modaraba (non-refundable fee): Where the nominal amount does not exceed Rs.2.5 million Where the nominal amount exceeds Rs.2.5 million but does not exceed Rs. 5 million Where the nominal amount exceeds Rs.5 million

Perpetual More than Up to five ________ five years years (1) (2) (3) Rs.50,000/- Rs.40,000/- Rs.30,000/- Rs.100,000/- Rs.60,000/- Rs.40,000/- Rs.100,000/- Rs.60,000/- Rs.40,000/- plus plus plus Rs.10,000/- Rs.6,000/- Rs.4,000/- for every for every for every additional additional additional Rs.1 million. Rs. 1 million. Rs. 1 million

(b) renewal annually in the month of January (to be charged to the Modaraba)

Rs. 100,000/-

3. For filing, recording or registering any fact or document or fact required to be filed with, recorded by or registered with Registrar.

Rs.1,000/- for each document

4. For filing, registering and recording document relating to a mortgage or charge required under the Ordinance.

Rs.7,500/-

5. For application for enquiry.

Rs.2,000/-

6. For claim against modaraba company by modaraba certificate holders referred to the Tribunal.

Rs.2,000/-

7. For any other application before the Tribunal, other than an application by Registrar, or before the Registrar by any person.

Rs.2,000/-

8. For inspection of records.

Rs.200/-

9. For certified copy of any document or extract thereof.

At the rate of Rs.20/- per page or part thereof subject to a minimum of Rs.100/- ”.

.

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

Guide on Winding up / Dissolution of Companies Page 1 of 10

SEC Guide

SERIES


Guide on

Winding up / Dissolution

of Companies

NIC Building, Jinnah Avenue, Islamabad, Pakistan Ph. No. : 051-9207091-4, Fax: 051-9204915

Website: www.secp.gov.pk


.

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


AIMS AND OBJECTIVES

This booklet is a simple guide to winding up procedures and should be read with the relevant legislation i.e. the Companies Ordinance, 1984 (as amended) (hereinafter called “the Ordinance”) and the Companies (Court) Rules, 1997 (hereinafter called “the Rules”). It summarises steps and provides information and procedure that apply to all types of winding up. Please remembe r that if your company is considering for winding up, you should seek appropriate professional advice .

INTRODUCTORY REMARKS

The term ‘winding up’ of a company may be defined as the proceedings by which a company is dissolved (i.e. the life of a company is put to an end). Thus, the winding up is the process of putting an end to the life of the company. And during this process, the assets of the company are disposed of, the debts of the company are paid off out of the realized assets or from the contributories and if any surplus is left, it is distributed among the members in proportion to their shareholding in the company. The winding up of the company is also called the ‘liquidation’ of the company. The process of winding up begins after the Court passes the order for winding up or a resolution is passed for voluntary winding up. The company is dissolved after completion of the winding up proceedings. On the dissolution, the company ceases to exist. So, the legal procedure by which the existence of an incorporated company is brought to an end is known as winding up. 1. LIQUIDATOR

A person appointed to carry out the winding up of a company is called liquidator. If the winding up is through Court, the term used for such person is official liquidator . The duties of liquidator include to get in and realise the property of the company, to pay its debts, and to distribute the surplus (if any) among the members. The official liquidator acts under the supervision of the Court, through a recognized reporting system.

The following are the general powers of liquidator(s):-

1. To institute or defend any suit, action, prosecution or other legal proceeding, civil or criminal on behalf of the company.

2. To carry on the business of the company so far as may be necessary for

the beneficial to it. 3. To pay to the creditors. 4. To make any compromise or arrangement with creditors. 5. To compromise all calls and liabilities to calls, debts and liabilities capable

of resulting in debts. 6. To sell the movable and immovable property and things in action of the

company by public auction or private contract, with power to transfer to any person or to sell the same in parcels.

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7. To do all acts and to execute all deeds, receipts and other documents in the name and on behalf of the company and for that purpose to use in the company’s seal when necessary.

8. To prove, rank and claim in the bankruptcy, insolvency or sequestration of

any contributory for any balance against his estate and to receive dividends as a separate debt due from the bankrupt or insolvent in the bankruptcy.

9. To draw, accept, make and endorse any bill of exchange or promissory

note in the name and on behalf of the company. 10. To raise on the security of the assets of the company any money.

2. Consequences of winding up Some important consequences of winding up of company are:

2.1 As regards the company itself: winding up does not mean that the company has ceased to exist. The company exists as a corporate entity with all the rights of such entity, with only change that its management and administration is to be carried on through liquidator / liquidators till the final dissolution of the company.

2.2 As regards the shareholders : A new statutory liability as contributories comes into existence. Every transfer of shares or alteration in the status of a shareholder, after the winding up has commenced by the order of the Court , shall unless approved by the liquidator , be void.

2.3 As regards the creditors:

i. They cannot file or continue suits against the company, except with the leave of the Court.

ii. They cannot proceed with the execution, if they have obtained decrees already.

iii. They must lodge their claim and prove their debt before the liquidator.

2.4 As regards the management, on appointment of liquidator, all the powers of the directors, chief executive and other officers, shall cease, except for the purpose of giving notice of resolution to wind up and appointment of liquidator and filing of consent of liquidator etc.

2.5 As regards the disposition of company’s property, all such dispositions are void unless with the leave of the Court or the liquidator.

3. Modes of winding up: The winding up of a company may be either-

(i) by the Court; or (ii) voluntary; or (iii) subject to the supervision of the Court.

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3.1 Winding up of the company by the Court: (i) The winding up of a company by an order of the Court is called the compulsory winding up. Section 305 of the Ordinance envisages the following circumstances, under which a company may be wound up by the Court on the petition submitted to it:-

(a) if the company has, by special resolution, resolved that the company be wound up by the Court;

(b) if default is made in delivering the statutory report to the registrar or in holding the statutory meeting or any two consecutive annual general meetings;

(c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year;

(d) if the number of members is reduced, in the case of private company, below two or, below three in case of public company and below seven in case of listed company.;

(e) if the company is unable to pay its debts;

(f) if the company is-

(i) conceived or brought forth for, or is or has been carrying on, unlawful or fraudulent activities;

(ii) carrying on business not authorised by the memorandum;

(iii) conducting its business in a manner oppressive to any of its members or persons concerned with the formation or promotion of the company or the minority shareholders;

(iv) run and managed by persons who fail to maintain proper and true accounts, or commit fraud, misfeasance or malfeasance in relation to the company; or

(v) managed by persons who refuse to act according to the requirements of the memorandum or articles or the provisions of this Ordinance or fail to carry out the directions or decisions of the Court or the registrar or the Commission given in the exercise of powers under this Ordinance;

(g) if, being a listed company, it ceases to be such company; (h) if the Court is of opinion that it is just and equitable that the

company should be wound up; or

(i) Complete deadlock in the management of the company.

(ii) Failure of company’s main object.

(iii) Recurring losses.

(iv) Aggressive or oppressive policy of majority shareholders.

(v) Incorporation of company for fraudulent or illegal purpose.

(vi) Public interest.

(i) if the company ceases to have a member.

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3.1.1 Procedure for winding up of company and filing of petition before respective High Court:

1. To pass Special Resolution by 3/4th majority of the members of the company that the company be wound up by the Court in case if the company itself intend to file a petition and to file the Special Resolution on Form 26 with the registrar.

2. To prepare a list of the assets to ascertain that the company is unable to pay its debts.

3. To prepare a list of the creditors 4. In case of defaults in payments the creditor or creditors to make a decision for

the filing of the winding up petition. 5. In case if the Commission or Registrar or a person authorised by the

Commission intend to file a petition, they should not file a petition, for winding up of the company, unless an investigation into the affairs of the company has revealed that it was formed for any fraudulent or unlawful purpose or that it is carrying on a business not authorised by its memorandum or that its business is being conducted in a manner oppressive to any of its management has been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members.

6. To engage advocates for the preparation and filing of the petition. 3.1.2 Who is competent to file petition for winding up in the Court?

Petition may be presented by any one of the following:

1. The company may itself by passing a special resolution

2. Creditor or Creditors.

3. Any contributory or contributories

4. Registrar of Companies

5. Securities and Exchange Commission of Pakistan or by a person authorised by the Commission

3.1.3 Check List filing of petition before respective High Court : 1. Have you gone through “General Heading” provided under

rules. Rule 4 of the Rules

2. Whether the petition is prepared / drafted on and in accordance with the Rules.

Rule 75 of the Rules

3. Have the petitions / written statem ents / affidavits and other proceedings are being presented to the Court is fairly and legibly written, type written, cyclostyled etc. and in accordance with the format described under the Rules.

Rule 5 of the Rules

4. Have the language of the said documents stated at column 3 are in language of the Court?

Rule 6 of the Rules

3.1.4 Documents to be annexed with the petition 1. Petition for winding up to be filed on form prescribed under the

Companies Rules, (On Form 24 (General Form) (Form 25 – (petition by creditor) Form 26 (petition by company)

Rule 75 read with rule 4 of the Rules

2. Affidavit verifying the petition on Form 1 Rule 16 read with rule 4 of the Rules

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3. Copy of special resolution in case if the company itself intend to file petition

Section 172 of the Ordinance

4. Copies of the agreements and other documents on the basis of which creditors intend to file a winding up petition will be annexed with the petition

5. All other supporting documents on the basis of which the petitioner rely as an evidence

3.2. Voluntary winding up of members of the company (ii (a))

A company can be wound up voluntary (a) on expiration of the period fixed for the duration of the company by its Articles of Association or on occurrence of event leading to dissolution of the company as provided in the Memorandum and Articles of Association and company has to pass a special resolution in general meeting for its wound up voluntarily within five weeks of filing of declaration of solvency, and (b) on passing of the special resolution that the company be wound up voluntarily. A voluntary winding up is deemed to commence at the time of passing of the resolution for voluntary winding up. The company ceases to carry out business just on commencement of winding up. However, it can carry on its activities and business for beneficial winding up of the company.

3.2.1 PROCEDURE FOR VOLUNTARY WINDING UP

The following steps are to be taken for Member’s voluntary winding up under the Provisions of the Ordinance, and the Companies Rules.

Step 1. Where it is proposed to wind up a company voluntarily, its directors make a declaration of solvency on Form 107 prescribed under Rule 269 of the Rules duly supported by an auditors report and make a decision in their meeting that the proposal to this effect may be submitted to the shareholders. They, then, call a general meeting (Annual or Extra Ordinary) of the members (Section 362 of the Ordinance) Step 2. The company, on the recommendations of directors, decides that the company be wound up voluntarily and passes a Special Resolution, in general meeting (Annual or Extra Ordinary) appoints a liquidator and fixes his remuneration. On the appointment of liquidator, the Board of directors ceases to exist. (Sections 358 and 364 of the Ordinance) Step 3. Notice of resolution shall be notified in official Gazette within 10 days and also published in the newspapers simultaneously. A copy of it is to be filed with registrar also. (Section 361 of the Ordinance) Step 4. Notice of appointment or change of liquidator is to be given to registrar by the company alongwith his consent within 10 days of the event. (Section 366 of the Ordinance) Step 5. Every liquidator shall, within fourteen days of his appointment, publish in the official Gazette, and deliver to the registrar for registration, a notice of his appointment under section 389 of the Ordinance on Form 110 prescribed under Rule 271 of the Rules.

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Step 6. If liquidator feels that full claims of the creditors cannot be met, he must call a meeting of creditors and place before them a statement of assets and liabilities. (Section 368 of the Ordinance) Step 7. A return of convening the creditors meeting together with the notice of meeting etc. shall be filed by the liquidator with the registrar, within 10 days of the date of meeting. (Section 368 of the Ordinance) Step 8. If the winding up continues beyond one year, the liquidator should summon a general meeting at the end of each year and make an application to the Court seeking extension of time. (Section 387(5) of the Ordinance) Step 9. A return of convening of each general meeting together with a copy of the notice, accounts statement and minutes of meeting should be filed with the registrar within 10 days of the date of meeting. (Section 369 of the Ordinance) Step 10. As soon as affairs of the company are fully wound up, the liquidator shall make a report and account of winding up, call a final meeting of members, notice of convening of final meeting on Form 111 prescribed under Rule 279 of the Rules before which the report / accounts shall be placed. (Section 370 of the Ordinance) Step 11. A notice of such meeting shall be published in the Gazette and newspapers at least10 days before the date of meeting. (Section 370 of the Ordinance). Step 12. Within a week after the meeting, the liquidator shall send to the registrar a copy of the report and accounts on Form 112 prescribed under Rule 279 of the Rules. (Section 370 of the Ordinance)

3.2.2. DOCUMENTS REQUIRED FOR VOLUNTARILY WINDING UP BY MEMBERS –

• Special Resolution on Form-26 (prescribed under the Companies (General Provisions and Forms) Rules, 1985 for voluntary winding up.

• Declaration of Solvency on Form 107 under the Rules.

• Affidavit by Directors of the company including Chief Executive verifying the attached auditor’s report, profit and loss account, balance sheet, statement of assets and liabilities prepared from the date of closing of last accounts till the latest practicable date, immediately before the making of declaration.

• Consent of liquidator.

• A copy of Notice of resolution passed for winding up the company voluntarily and published in the Official Gazette.

• A copy of Notice for appointment of liquidator and published in the Official Gazette.

• A copy of Preliminary report prepared by the liquidator.

• Final report and accounts of the company prepared by liquidator presented in General meeting of shareholders after finalization of winding up.

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• Notice of final meeting.

• Return containing fina l repor t and accounts alongwith minutes of meeting to be filed with the concerned Company Registration Office.

3.3. CREDITOR’S VOLUNTARY WINDING UP OF THE COMPANY (ii (b) A procedure has been laid down under the provisions of the Ordinance whereby the company can also be voluntary wound up by creditors. For this purpose, the company shall call a meeting of the creditors of the company to be summoned for the day, or the day next following the day, on which there is to be held a general meeting of the company at which the resolution of voluntary winding up to be proposed.

3.3.1. PROCEDURE FOR CREDITOR’S VOLUNTARY WINDING UP

Step 1. First of all, the company passes a special resolution in the general meeting of the members of the company for which following steps are to taken:

• Board of Directors approves the agenda of the general meeting especially the draft special resolution for winding up of the company.

• Notice of the general meeting alongwith copy of the draft special resolution is given to the members at least 21 days before the general meeting.

• Special resolution is passed by 3/4th majority of the members of the company and the members appoint a person to be liquidator of the company.

• Special resolution on Form 26 is filed with the registrar.

Step 2 . Meeting of creditors is called at 21 days notice, (simultaneously with sending of the notices of the general meeting of the company) the notice of the meeting of the creditors to be send by post to the creditors, besides, the notice of the said meeting to be advertised in the official Gazette and the newspaper circulated in the Province and the creditors pass a resolution of voluntary winding up of the company. The creditors also appoint liquidator in that meeting. If the creditors and the company nomina te different persons, than person nominated by the creditors shall be liquidator.

Step 3. Notice of the resolution passed at the creditor’s meeting shall be given by the company to the registrar alongwith consent of the liquidator within ten days of the passing of the resolution.

The company may either at the meeting at which resolution for voluntary winding up is passed or at any subsequent meeting may, if they think fit, appoint a committee of inspection consisting of not more than five persons. Provided that the creditors may, if they think fit, resolve that all or any of the person so appointed by the company ought not to be member of the committee of inspection.

Step 4. The liquidator should, with all convenient speed, realise the assets, prepare lists of creditors, admit proof, settle list of contributories, make such calls as may be necessary, etc. accordingly as the nature of the case may require, pay secured creditors, pay the costs including the liquidator’s own remuneration, pay preferential claims, and after meeting all the claims of creditors, and after adjusting all claims and rights, distribute the surplus on pro rata basis.

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Step 5. In the event of the winding up continuing for more than one year, the liquidator shall summon a general meeting of the company and a meeting of creditors at the end of the first year from the commencement of the winding up and lay before the meetings an audited account of receipts and payments and acts and dealings and of the conduct of winding up during the preceding year together with a statement in the prescribed form and containing the prescribed particulars with respect to the proceedings and position of liquidation and forward by post to every creditor and contributory a copy of the account and statement together with the auditors' report and notice of the meeting at least ten days before the meeting required to be held.

Step 6. The liquidator prepares the accounts, gets them audited and also presents a final report to the creditors. The steps at this stage are as under:

• The liquidator prepares a final report and accounts of the winding up, showing how the winding up has been conducted and the property of the company have been disposed of.

• Accounts are duly audited by the auditor appointed for the purpose.

• The notice of meeting is sent by post to each contributory of the company and creditor at least ten days before the meeting. The account with a copy of the auditor’s report is also enclosed with the notice.

• The notice of the meeting specifying the time, place and object of the meeting is published at least ten days before the date of the meeting in the official Gazette and in at least one newspaper.

• Within one week after the meeting, the liquidator is required to send to the registrar a copy of his report and account, and make a return to him of the holding of the meeting alongwith the minutes of the meeting.

• If a quorum is not present at the meeting, the liquidator makes a return stating that the meeting was duly summoned and that no quorum was present thereat. The return is filed with the registrar and considered as presented in the meeting.

• The registrar, on receiving the report, account and the return, is required to register them after their scrutiny.

• On the expiration of three months from the registration of final report, accounts and minutes, the company is deemed to be dissolved.

3.4. Winding up of the company subject to the supervision of the Court. (iii) When a company has passed a resolution for voluntary winding up, the Court may of its own motion or on the application of any person entitled to apply to the Court for winding up a company, make an order that the voluntary winding up shall continue, but subject to such supervision of the Court, and with such liberty for creditors, contributories or others to apply to the Court, and generally on such terms and conditions, as the Court thinks just. A petition for the continuance of a voluntary winding up subject to the supervision of the Court shall, for the purpose of giving jurisdiction to the Court over suits and other legal proceedings, be deemed to be a petition for winding up by the Court.

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The Court may, in deciding between a winding up by the Court and a winding up subject to supervision, in the appointment of liquidators, and in all other matters relating to the winding up subject to supervision, have regard to the wishes of the creditors or contributories as proved to it by any sufficient evidence, but subject to the provisions which would have been applicable had the company been wound up by the Court.

Companies Rules Volume V

Documents

Transcript of Companies Rules Volume V