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REGULATIONS, 2012

COMPANIES (INVESTMENT IN ASSOCIATED COMPANIES OR ASSOCIATED UNDERTAKINGS) REGULATIONS, 2012

[Gazette of Pakistan, Extraordinary, Part-II, 17th January, 2012]

S.R.O. 27(I)/2012, dated 16.1.2012.—In exercise of powers conferred by clause (b) of sub-section (2A) of Section 208 read with Section 506A of the Companies Ordinance, 1984, (XLVII of 1984) and having being previously published in the official Gazette vide Notification No. S.R.O.82(1)/2010 dated February 9, 2011 as required by subsection (1) of Section 506Aof the said Ordinance XLVII of 1984 the Securities and Exchange Commission of Pakistan hereby makes the following Regulations, namely:—

CHAPTER I

PRELIMINARY

1.       Short title, commencement and application.—(1) These Regulations shall be called the Companies (investment in Associated Companies or Associated Undertakings) Regulations, 2012.

(2)     These Regulations shall come into force at once.

(3)     These Regulations shall apply to all companies seeking to invest in their associated companies or associated undertakings except and to the extent they are specifically exempted by the Commission under clause (a) of sub-section (2A) of Section 208 of the Companies Ordinance, 1984, (XLVII of 1984).

2.       Definitions.—(1) In these Regulations, unless there is anything repugnant in the subject or context,—

(a)     "Equity Investment" includes investment by way of subscription of shares directly from the Company and/or acquisition of shares from a person or through stock market;

(b)     "Loans and Advances" include,–

          (i)      Loan or advance given by the Company;

          (ii)     a guarantee, indemnity or any other financial engagement which a company may give, issue or undertake on behalf of a borrower; and

          (iii)    transfer of liabilities from associated company or associated undertaking;

(c)     "Ordinance" means the Companies Ordinance, 1984, (XLVII of 1984).

(2)  Words and expressions used but not defined in these Regulations shall, unless these is anything repugnant in the subject or context, have the same meaning assigned to them in the Companies Ordinance, 1984, the Securities and Exchange Ordinance, 1969 (XVII of 1969) or the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997).

CHAPTER II 

NOTICE OF MEETING AND INFORMATION TO MEMBERS

3.       Information to be disclosed to members.—(1) A company shall, while issuing notice of its general meeting where a special business related to investments in any of its associated companies or associated undertakings is to be transacted under Section 208 of the Ordinance, annex a statement pursuant to clause (b) of sub-section (1) of Section 160 of the Ordinance, setting out, among other, the following information, namely,—

(a)     In case of investment in securities of its associated companies or associated undertakings,-—

          (i)      name of the associated company or associated undertaking along with criteria based on which the associated relationship is established;

          (ii)     purpose, benefits and period of investment;

          (iii)    maximum amount of investment;

          (iv)    maximum price at which securities will be acquired;

          (v)     maximum number of securities to be acquired;

          (vi)    number of securities and percentage thereof held before and after the proposed investment;

          (vii)   in case of investment in listed securities, average of the preceding twelve weekly average price of the security intended to be acquired;

          (viii)  in case of investment in unlisted securities, fair market value of such securities determined in terms of Regulation 6(1);

          (ix)    break-up value of securities intended to be acquired on the basis of the latest audited financial statements;

          (x)     earning per share of the associated company or associated undertaking for the last three years;

          (xi)    sources of fund from which securities will be acquired;

          (xii)   where the securities are intended to be acquired using borrowed funds,—

                   (I) justification for investment through borrowings; and

                   (II) detail of guarantees and assets pledged for obtaining such funds;

          (xiii)  salient features of the agreement(s), if any, entered into with its associated company or associated undertaking with regards to the proposed investment;

          (xiv)  direct or indirect interest of directors, sponsors, majority shareholders and their relatives, if any, in the associated company or associated undertaking or the transaction under consideration;

          (xv)   any other important details necessary for the members to understand the transaction; and

          (xvi)  In case of investment in securities of a project of an associated company or associated undertaking that has not commenced operations, in addition to the information referred to above, the following further information, is required, namely,—

                   (i) description of the project and its history since conceptualization;

                   (ii)            starting and expected dated of completion of work;

                   (iii) time by which such project shall become commercially operational; and

                   (iv) expected time by which the project shall start paying return on investment;

(b)     In case of loans and advances,—

          (i)      name of the associated company or associated undertaking along with criteria based on which the associated relationship is established;

          (ii)     amount of loans or advances;

          (iii)    purpose of loans or advances and benefits likely to accrue to the investing company and its members from such loans or advances;

          (iv)    in case any loan has already been granted to the said associated company or associated undertaking, the complete details thereof;

          (v)     financial position, including main items of balance sheet and profit and loss account of the associated company or associated undertaking on the basis of its latest financial statements;

          (vi)    average borrowing cost of the investing company or in case of absence of borrowing the Karachi Inter Bank Offered Rate for the relevant period;

          (vii)   rate of interest, mark up, profit, fees or commission etc. to be charged;

          (viii)  sources of funds from where loans or advances will be given;

          (ix)    where loans or advances are being granted using borrowed funds,—

                   (i) justification for granting loan or advance out of borrowed funds;

                   (ii)            detail of guarantees / assets pledged for obtaining such funds, if any; and

                   (iii) repayment schedules of borrowing of the investing company;

          (x)     particulars of collateral security to be obtained against loan to the borrowing company or undertaking, if any;

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