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COMPANIES ORDINANCE, 1984

(XLVII OF 1984)

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CONTENTS

…………

PART I – PRELIMINARY

Sections                                                                                                                                                 Pages

                                                                                                                                 

                Preamble                                                                                                                                   1

1.             Short title, extent and commencement                                                                                 1

2.             Definitions                                                                                                                               2

3.             Meaning of “subsidiary” and “holding company”                                                           9

4.             Ordinance not to apply to certain corporations                                                                 9

5.                    Application of Ordinance to non-trading companies with purely provincial              10

objects

6.             Ordinance to override memorandum, articles, etc.                                                          10

 

PART II-JURISDICTION OF COURTS

7.             Jurisdiction of the Courts                                                                                                   11

8.             Constitution of Company Benches                                                                                   11

9.             Procedure of the Court                                                                                                        11

10.           Appeals against Court orders                                                                                            12

 

PART III-SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

11.           Deleted

12.           Powers and functions of the Commission                                                                       13

13.           Reference by the Federal Government or Commission to the Court                            13

 

PART IV-INCORPORATION OF COMPANIES AND

MATTERS INCIDENTAL THERETO

14.           Obligation to register certain associations, partnerships, etc. as companies.           14

 

MEMORANDUM OF ASSOCIATION

15.           Mode of forming a company                                                                                              14

16.           Memorandum of company limited by shares                                                                  15

17.           Memorandum of company limited by guarantee                                                            16

18.           Memorandum of unlimited company                                                                                17

19.           Printing, signature, etc., of memorandum                                                                         17

20.           Restriction on alteration of memorandum                                                                        18

21.           Alteration of memorandum                                                                                 18

22.           Powers of Commission when confirming alteration                                                       19

23.           Exercise of discretion by Commission                                                                              20

24.           Procedure on confirmation of the alteration                                                                    20

25.           Effect of failure to register within ninety days                                                                20

 

ARTICLES OF ASSOCIATION

26.           Registration of articles                                                                                                        21

27.           Printing, signature, etc. of articles                                                                                     21

28.           Alteration of articles                                                                                                            22

 

FORMS OF MEMORANDUM AND ARTICLES

29.           Forms of memorandum and articles                                                                                  22

 

GENERAL PROVISIONS WITH RESPECT TO REGISTRATION OF

MEMORANDUM AND ARTICLES

30.           Registration of memorandum and articles, etc.                                                               23

31.           Effect of memorandum and articles                                                                                   24

32.           Effect of registration                                                                                                            24

33.           Conclusiveness of certificate of incorporation                                                               24

34.           Effect of alteration in memorandum or articles                                                                24

35.           Copies of memorandum and articles to be given to members                                       25

36.           Alteration of memorandum or articles to be noted in every copy                                25

 

PROVISIONS WITH RESPECT TO NAMES OF COMPANIES

37.           Prohibition of certain names                                                                                              25

38.           Rectification of name of a company                                                                                  26

39.           Change of name by a company                                                                                         26

40.           Registration of change of name and effect thereof                                                        27

41.                 Alteration of names on commencement of Ordinance and change of status             27

of company

 

ASSOCIATIONS NOT FOR PROFIT

42.                 Power to dispense will “Limited” in the name of charitable and other                        28

Companies

 

COMPANIES LIMITED BY GUARANTEE

43.           Provision as to companies limited by guarantee                                                            29

 

PROVISIONS RELATING TO CONVERSION OF PUBLIC COMPANY INTO

PRIVATE COMPANY AND VICE VERSA AND OTHER MATTERS

44.           Conversion of public company into private company                                                   29

45.           Prospectus or statement in lieu of prospectus to be filed by private company

on ceasing to be private company                                                                                    29

46.           Consequence of default in complying with conditions constituting a

company a private company                                                                                              31                                                                          

CARRYING ON BUSINESS WITH LESS THAN

THE LEGAL MINIMUM OF MEMBERS

47.           Liability for carrying on business with less than three or, in the case

of a private company, two members                                                                                 31

 

 

 

 

SERVICE AND AUTHENTICATION OF DOCUMENTS

48.           Service of documents on company                                                                                     32

49.           Service of documents on registrar                                                                                      32

50.           Service of notice on members, etc.                                                                                      32

51.           Authentication of documents and proceedings                                                               33

 

PART V- PROSPECTUS, ALLOTMENT, ISSUE AND TRANSFER OF

SHARES AND DEBENTURES, DEPOSITS, ETC.

 

PROSPECTUS

52.           Prospectus to be dated                                                                                                         33

53.           Matters to be stated and reports to be set out in prospectus                                        33

54.           Expert to be unconnected with formation or management of company                        36

55.           Expert’s consent to issue of prospectus containing statement by him                         36

56.           Penalty and interpretation                                                                                                    36

57.           Approval, issue and registration of prospectus                                                               37

58.           Terms of contract mentioned in prospectus or statement in lieu of prospectus

not to be varied                                                                                                                      38         

59.           Civil liability for misstatements in prospectus                                                                  38

60.           Criminal liability for misstatements in prospectus                                                            42

61.           Document containing offer of shares or debentures for sale to be deemed

                prospectus                                                                                                                              42

62.           Offer of shares or debentures for sale by certain persons                                              44

62-A.      Issue of securities outside Pakistan                                                                                   44

63.           Interpretation of provisions relating to prospectus                                                         44

64.           Newspaper advertisement of prospectus                                                                          45

65.           Construction of references to offering shares or debentures to the public etc.          45

66.           Penalty for fraudulently inducing persons to invest money                                          46

                                                                                                                                                                               

ALLOTMENT

67.           Application for, and allotment of, shares and debentures                                              46

68.           Restriction as to allotment                                                                                                    46

69.           Statement in lieu of prospectus                                                                                           49

70.           Effect of irregular allotment                                                                                                  50

71.           Repayment of money received for shares not allotted                                                    50

72.           Allotment of shares and debentures to be dealt in on stock exchange                        51

73.           Return as to allotments                                                                                                         52

 

 

CERTIFICATE OF SHARES AND DEBENTURES

74.           Limitation of time for issue of certificates                                                                          54

75.           Issue of duplicate certificates                                                                                              55

 

TRANSFER OF SHARES AND DEBENTURES

76.           Transfer of shares and debentures                                                                                     56

77.           Directors not to refuse transfer of shares                                                                          57

78.           Notice of refusal to transfer                                                                                                 57

78A.        Appeal against refusal for registration of transfer                                                  57

79.           Transfer to successor-in-interest                                                                                        58

80.           Transfer to nominee of a deceased member                                                                      58

81.           Transfer by nominee or legal representative                                                                     60

 

COMMISSION, DISCOUNT, PREMIUM AND REDEEMABLE

PREFERENCES SHARES

82.                 Power to pay certain commissions, and prohibition of payment of other

commissions, discounts, etc.                                                                                               60

83.           Application of premium received on issue of shares                                                       62

84.           Power to issue shares at a discount                                                                                   63

85.           Redemption of preference shares                                                                                        64

 

FURTHER ISSUE OF CAPITAL

86.           Further issue of capital                                                                                                         65

87.           Issue of shares in lieu of outstanding balance of any loans, etc.                                                  66

 

REGULATION OF DEPOSITS

88.           Deposits not to be invited without issuing an advertisement                                        66

 

PART IV- SHARE CAPITAL AND DEBENTURES NATURE,

NUMBERING AND CERTIFICATE OF SHARES

89.           Nature of shares and certificate of shares                                                                         68

 

CLASSES AND KINDS OF SHARES

90.           Classes and kinds of shares capital                                                                                    68

 

GENERAL PROVISIONS AS TO SHARE CAPITAL

91.           Only fully paid shares to be issued                                                                                    68

92.           Power of company limited by shares to alter its share capital                                        69

93.           Notice to register of consolidation of share capital, etc.                                                 70

94.           Notice of increase of share capital or of members                                                            70

95.                 Prohibition of purchase or grant of financial assistance by a company for

purchase of its own or its holding company’s shares                                                     71

95A         Power of company to purchase its own shares                                                                72

 

REDUCTION OF SHARE CAPITAL

96.           Reduction of share capital                                                                                                    74

97.           Application to Court for confirming order                                                                         75

98.           Addition to name of company of ‘and reduce’                                                                  75

99.           Objection by creditors and settlement of list of objecting creditors                             75

100.         Power to dispense with consent of creditor on security being given for his debt      76

101.         Order confirming reduction                                                                                                  76

102.         Registration of order and minute of reduction                                                                  76

103.         Minute to form part of memorandum                                                                                  77

104.         Liability of members in respect of reduced shares                                                           77

105.         Penalty on concealment of name of creditor                                                                     78

106.         Publication of reasons for reduction                                                                                                78

107.              Increase and reduction of share capital in case of company limited by

guarantee having share capital                                                                                            78

 

VARIATION OF SHAREHOLDER’S RIGHTS

108.         Variation of shareholders’ rights                                                                                         78

 

REGISTRATION OF UNLIMITED COMPANY AS LIMITED

109.         Registration of unlimited company as limited                                                                   79

110.         Power of unlimited company to provide for reserve share capital on                        

 re-registration                                                                                                                        79

 

UNLIMITED LIABILITY OF DIRECTORS

111.         Limited company may have directors with unlimited liability                                         69

112.         Special resolution of limited company making liability of directors unlimited             69

 

SPECIAL PROVISIONS AS TO DEBENTURES

113.         Right of debenture-holder and shareholder to have copies of trust-deed                   80

114.         Debentures not to carry voting rights                                                                                81

115.         Perpetual debentures                                                                                                            81

116.         Power to re-issue redeemed debentures in certain cases                                                81

117.         Specific performance of contract to subscribe for debentures                                       81

118.              Payment of certain debts out of assets subject to floating charge in priority

to claims under the charge                                                                                                   83

119.         Powers and liabilities of trustee                                                                                           83

120.         Issue of securities and redeemable capital not based on interest                                                  85

 

PART VII- REGISTRATION OF MORTGAGES, CHARGES, ETC.

121.         Certain mortgages and charges to be void if not registered                                           87

122.         Registration of charges on properties acquired subject to charge                                89

123.         Particulars in case of series of debentures entitling holders pari passu                      89

124.         Particulars in case of commission, etc. on debentures                                                    90

125.         Register of mortgages and charges                                                                                    90

126.         Index to register of mortgages and charges                                                                      90

127.         Certificate of registration                                                                                                      91

128.         Endorsement of certificate of registration on debenture or certificate of

debenture stock                                                                                                                     91

129.         Duty of company and right of interested party as regards registration                        91

130.         Copy of instrument creating mortgage or charge to be kept at registered office        91

131.         Rectification of register of mortgages                                                                                92

132.         Registration of payment or satisfaction of mortgages and charges                              92

133.              Power of Registrar to make entries of satisfaction and release in absence of

intimation from company                                                                                                      93

134.         Penalties                                                                                                                                  93

135.         Company’s register of mortgages                                                                                        94

136.              Right to inspect copies of instruments creating mortgages and charges and

company’s register of mortgages                                                                                        95

 

RECEIVERS AND MANAGERS

137.         Registration of appointment of receiver or manager                                                        95

138.         Filing of accounts of receiver or manager                                                                          95

139.         Disqualification for appointment as receiver or manager                                                96

140.         Application to Court                                                                                                             97

141.         Powers of Court to fix remuneration, etc., of receiver or manager                                  97

 

PART VIII-MANAGEMENT AND ADMINISTRATION

REGISTERED OFFICE, PUBLICATION OF NAMES, ETC

142.         Registered office of company                                                                                              98

143.         Publication of name by a limited company                                                                        98

144.         Penalties of non-publication of name                                                                                 99

145.         Publication of authorised as well as paid-up-capital                                                        99

 

COMMENCEMENT OF BUSINESS BY A PUBLIC COMPANY

146.         Restrictions on commencement of business                                                                   100

 

REGISTER OF MEMBERS AND DEBENTURE-HOLDERS

147.         Register of members and index                                                                                          101

148.         Trusts not to be entered on register                                                                                 102

149.         Register and index of debenture-holders                                                                         102

150.         Inspection of registers                                                                                                        103

151.         Power to close register                                                                                                        104

152.         Power of Court to rectify register                                                                                      104

153.         Punishment for fraudulent entries in and omission from register                                105

154.         Notice to register of rectification of register                                                                    105

155.         Register to be evidence                                                                                                      105

156.         Annual list of members, etc.                                                                                               106

 

MEETINGS AND PROCEEDINGS

157.         Statutory meeting of company                                                                                          107

158.         Annual general meeting                                                                                                      109

159.         Calling of extra ordinary general meeting                                                                         111        

160.         Provisions as to meetings and votes                                                                                                112

160A.      Circumstances in which proceedings of a General Meeting may be declared

                invalid.                                                                                                                                   115

161.         Proxies                                                                                                                                   115

162.         Representation of corporations at meetings of companies and of creditors              117

163.         Representation of Federal Government, etc., at meetings of companies                    117

164.         Notice of resolution                                                                                                             118

165.         Voting to be by show of hands in first instance                                                             118

166.         Chairman’s declaration of result of voting by show of hands to be evidence           118

167.         Demand for poll                                                                                                                    118

168.         Time of taking poll                                                                                                               119

169.         Resolution passed at adjourned meeting                                                                         120

170.         Power of registrar to call meetings                                                                                    120

171.              Penalty for default in complying with the directions of the registrar for

holding the meeting                                                                                                             121

172.         Filing of resolution, etc.                                                                                                      121

173.         Minutes of proceedings of general meetings and directors                                         121

 

DIRECTORS

174.         Minimum number of directors                                                                                            123

175.         Only natural persons to be directors                                                                                                123

176.         First directors and their term                                                                                              123

177.         Retirement of directors                                                                                                        124

178.         Procedure for election of directors                                                                                    124

179.         Circumstances in which election of directors may be declared invalid                       125

180.         Term of office of directors                                                                                                  125

181.         Removal of director                                                                                                             126

182.         Creditors may nominate directors                                                                                     126

183.         Certain provisions not to apply to directors representing special interests              126

184.         Consent to act as director to be filed with registrar                                                       127

185.         Validity of acts of directors                                                                                                127

186.         Penalties                                                                                                                                128

187.         Ineligibility of certain persons to become director                                                         128

188.         Vacation of office by the directors                                                                                    129

189.         Penalty for unqualified person acting as director, etc.                                                  130

190.         Ineligibility of bankrupt to act as director, etc.                                                               130

191.         Restriction on director’s remuneration, etc.                                                                     130

192.         Restriction on assignment of office by directors                                                            130

193.         Proceedings of directors                                                                                                     131

194.         Liabilities, etc., of directors and officers                                                                          131

195.         Loans to directors, etc.                                                                                                       132

196.         Powers of directors                                                                                                              134

197.         Prohibition regarding making of political contributions                                                137

197-A     Prohibition regarding distribution of gifts                                                                       137

 

CHIEF EXECUTIVE

198.         Appointment of first chief executive                                                                                137

199.         Appointment of subsequent chief executive                                                                  138

200.         Terms of appointment of chief executive and filling up of casual vacancy                138

201.         Restriction on appointment of chief executive                                                                138

202.         Removal of chief executive                                                                                 138

203.         Chief executive not to engage in business competing with company’s business     139

204.         Penalty                                                                                                                                   139

204A.      Certain companies to have Secretaries                                                                             139

 

REGISTER OF DIRECTORS AND OTHER OFFICERS

205.         Register of directors, officers, etc.                                                                                    139

 

BAR ON APPOINTMENT OF MANAGING AGENTS,

SOLE PURCHASE AND SALES AGENTS, ETC.

206.         Bar on appointment of managing agents, sole purchase, sales agents, etc.              140

 

TERMS OF APPOINTMENT OF MANAGING AGENT

207.         Terms and conditions of appointment of managing agent                                           142

 

MISCELLANEOUS PROVISIONS REGARDING INVESTMENTS,

CONTRACTS, OFFICERS AND SHAREHOLDINGS,

TRADING AND INTERESTS

208.         Investments in associated companies and undertakings                                              142

209.         Investments of company to be held in its own name                                                     143

210.         Form of contract                                                                                                                   145

211.         Bills of exchange and promissory notes                                                                          145

212.         Execution of deeds                                                                                                              145

213.         Power for company to have official seal for use abroad                                                145

214.         Disclosure of interest by director                                                                                      146

215.         Interest of other officers, etc.                                                                                             147

216.         Interested director not to participate or vote in proceedings of directors                  147

217.         Declaring a director to be lacking fiduciary behaviour                                                  148

218.              Disclosure to members of directors interest in contract appointing chief

executive, managing agent or secretary                                                                           148

219.              Register of contracts, arrangements and appointments in which

directors, etc., are interested                                                                                              149

220.         Register of directors’ shareholdings, etc.                                                                         151

221.         Duty of directors, etc. to make disclosure of shareholdings, etc.                                152

222.         Submission of statements of beneficial owners of listed securities                            152

223.         Prohibition of short-selling                                                                                                153

224.         Trading by directors, officers and principal shareholders                                            153

225.         Contracts by agents of company in which company is undisclosed principal          154

226.         Securities and deposits, etc.                                                                                              154

227.         Employees’ provident funds and securities                                                                     155

228.         Right to see bank receipts for money or securities                                                        156

229.         Penalty for contravention of section 226, 227 or 228                                                     156

 

ACCOUNTS

 

230.         Books of accounts to be kept by the company                                                              156

231.         Inspection of books of account by registrar, etc.                                                           158

232.         Default in compliance with provisions of section 231                                                   159

233.         Annual accounts and balance-sheet                                                                                                159

234.         Contents of balance-sheet                                                                                                 160

235.         Treatment of surplus arising out of revaluation of fixed assets                                   162

236.         Directors’ report                                                                                                                   162

237.         Consolidated financial statements.                                                                                   164

238.         Financial year of holding company and subsidiary                                                       165

239.         Rights of holding company’s representatives and members                                        166

240.         Balance-sheet of modaraba company to include modaraba accounts, etc.                166

241.         Authentication of balance-sheet                                                                                       166

242.         Copy of balance-sheet to be forwarded to the registrar                                                167

243.              Right of member of company to copies of the balance-sheet, etc. and the

auditor’s report                                                                                                                     167

244.              Penalty for improper issue, circulation or publication of balance-sheet or

profit and loss account                                                                                                       168

245.         Quarterly accounts of listed companies                                                                           168

246.              Power of Commission to require submission of additional statements of

accounts and reports                                                                                                          168

247.         Rights of debenture-holders, etc., as to receipt and inspection of report, etc.          169

 

DIVIDEND AND MANNER AND TIME OF PAYMENT THEREOF

 

248.         Certain restrictions on declaration of dividends                                                             169

249.         Dividend to be paid only out of profits                                                                            169

250.            Dividend not to be paid except to registered shareholders or to their order

or to their bankers                                                                                                                             169

251.         Period for payments of dividend                                                                                       170

 

 

 

AUDIT

252.         Appointment and remuneration of auditors                                                                    171

253.         Provisions as to resolutions relating to appointment and removal of auditors         172

254.         Qualification and disqualification of auditors                                                                 173

255.         Powers and duties of auditors                                                                                           174

256.         Reading and inspection of auditor’s report                                                                     177

257.         Signature on audit report, etc.                                                                                           177

258.         Audit of cost accounts                                                                                                       177

259.         Penalty for non-compliance with provisions by companies                                         177

260.         Penalty for non-compliance with provisions by auditors                                             177

 

POWER OF REGISTRAR TO CALL FOR INFORMATION, ETC.

261.         Power of registrar to call for information or explanation                                                178

262.         Seizure of documents by registrar                                                                                     179

 

INVESTIGATION AND RELATED MATTERS

 

263.              Investigation of affairs of company on application by members or report by           180

registrar.

264.              Application by members to be supported by evidence and power to call

for security                                                                                                                            180

265.         Investigation of company’s affairs in other cases                                                          180

266.         Inspector to be a Court for certain purposes                                                                  182

267.         Power of inspectors to carry investigation into affairs of associated companies     182

268.         Duty of officers, etc., to assist the inspector                                                                  183

269.         Inspector’s report                                                                                                                 183

270.         Prosecution                                                                                                                           184

271.         Power of Commission to initiate action against management                                       184

272.         Effect of Court’s order                                                                                                         186

273.         No compensation to be payable for annulment or modification of contract              186

274.         No right to compensation for loss of office                                                                     186

275.         Application for winding up of company or an order under section 290                     186

276.         Proceedings for recovery of damages of property                                                         187

277.         Expenses of investigation                                                                                                  187

278.         Inspector’s report to be evidence                                                                                      188

279.              Imposition of restrictions on shares and debentures and prohibition of transfer

of shares or debentures in certain cases                                                                          189

280.         Saving for legal advisers and bankers                                                                              191

281.         Enquiries and investigations not to be affected by winding up, etc.                          191

282.         Application of sections 261 to 281 to liquidators and foreign companies                  192

 

PART VIII A. — NON-BANKING FINANCE COMPANIES

PROVISIONS AS TO ESTABLISHMENT AND REGULATION OF NON-BANKING FINANCE COMPANIES

282A.   Application of this Part.                                                                                                      192

282B.   Power to make Rules                                                                                                           192

282C.   Incorporation of NBFCs                                                                                    193

282D.   Power to issue directions                                                                                                   193

282E.    Power to remove                                                                                                                  194

282F.    Power to supersede Board of Directors                                                                           195

282G.   Power to require to furnish information, etc.                                                                   195

282H.      Special Audit.                                                                                                                       196

282I.        Inquiry by the Commission.                                                                                               196

282J.       Penalty for failure, refusal to comply with, or contravention of any provision

                of this Part.                                                                                                                            196

282K.      Penalty for making false statement, etc.                                                                           197

282L.       Procedure for amalgamation of NBFCs.                                                                           198

282M.     Punishment and adjudication of fine or penalty.                                                            199

 

PART IX

ARBITRATION, ARRANGEMENTS AND RECONSTRUCTION

ARBITRATION

 

283.         Powers of companies to refer matters to arbitration                                                       200

 

COMPROMISES, ARRANGEMENTS AND RECONSTRUCTION

284.         Power to compromise with creditors and members                                                        200

285.         Power of Court to enforce compromises and arrangements                                         201

286.         Information as to compromises or arrangements with creditors and members          202

287.         Provisions for facilitating reconstruction and amalgamation of companies               203

288.         Notice to be given to registrar for applications under section 284 to 287  204

289.         Power and duty to acquire shares of shareholders dissenting from scheme or

contract                                                                                                                                 204

 

PART X

PREVENTION OF OPPRESSION AND MISMANAGEMENT

290.         Application to Court                                                                                                           207

291.         Powers of Court under section 290                                                                                   208

292.         Interim order                                                                                                                         208

293.         Claim for damages inadmissible                                                                                         208

294.         Application of certain sections to proceedings under this Part                                   208

295.         Management by Administrator                                                                                         209

296.         Rehabilitation of companies owing sick industrial units                                               211

 

PART XI

WINDING UP

PRELIMINARY

297.         Modes of winding up                                                                                                          213

298.         Liability as contributors of present and past members                                                  214

299.         Liability of directors whose liability is unlimited                                                            215

300.         Definition of “contributory”                                                                                              215

301.         Nature of liability of contributory                                                                                     215

302.         Contributories in case of death of member                                                                      216

303.         Contributory in case of insolvency of member                                                               216

304.         Contributories in case of winding up of a body corporate which is a member          216

 

WINDING UP BY COURT

CASES IN WHICH COMPANIES MAY BE WOUND UP BY COURT

305.         Circumstances in which company may be wound up by Court                                   216

306.         Company when deemed unable to pay its debts                                                            218

 

TRANSFER OF PROCEEDINGS

307.         Transfer of proceedings to other Courts                                                                         218

308.         Withdrawal and transfer of winding up from one Court to another                            219

 

PETITION FOR WINDING UP

309.         Provisions as to applications for winding up                                                                  219

310.              Right to present winding up petition where company is being wound up

voluntarily or subject to Court’s supervision                                                                  220

 

COMMENCEMENT OF WINDING UP

311.         Commencement of winding up by Court                                                                          220

 

POWERS OF COURT HEARING APPLICATION

312.         Hearing of winding up petition by the Court                                                                  221

313.         Court may grant injunction                                                                                                221

314.         Powers of Court on hearing petition                                                                                 221

315          Copy of winding up order to be filed with registrar                                                       221

316.         Suits stayed on winding up order                                                                                     222

317.         Court may require expeditious disposal of suits, etc.                                                    222

318.         Effect of winding up order                                                                                                  223

319.         Power of Court to stay winding up, etc.                                                                           223

320.         Court to have regard to wishes of creditors or Contributories                                     223

 

OFFICIAL LIQUIDATORS

321.         Appointment of official liquidator                                                                                     223

322.         Resignation, removal, filling up vacancies, etc., of official liquidator                         224

323.         Remuneration of official liquidator                                                                                    224

324.         Style of official liquidator                                                                                                   225

325.         Appointment and powers of provisional manager                                                         225

326.         General provisions as to liquidators                                                                                 225

327.         Receiver not to be appointed of assets with liquidator                                                 226

328.         Statement of affairs to be made to official liquidator                                                      226

329.         Report by official liquidator                                                                                               228

330.         Custody of company’s property                                                                                        229

331.         Committee of inspection in compulsory winding up                                                      230

332.         Constitution and proceedings of committee of inspection                                           230

333.         Powers of official liquidator                                                                                               231

334.         Discretion of official liquidator                                                                                          233

335.         Provision for assistance to official liquidator                                                                  233

336.         Liquidator to keep books containing proceedings of meetings, etc.                           233

337.         Liquidator’s account                                                                                                            233

338.         Exercise and control of liquidator’s powers                                                                     234

339.         Settlement of list of Contributors and application of assets                                         235

340.         Power to require delivery of property                                                                               235

341.         Power to order payment of debts by contributory                                                         235

342.         Power of Court to make calls                                                                                              236

343.         Power to order payment into bank                                                                                    236

344.         Regulation of account with Court                                                                                     236

345.         Order on contributory conclusive evidence                                                                    236

346.         Power to exclude creditors not proving in time                                                               236

347.         Adjustment of rights of Contributors                                                                               236

348.         Power to order costs                                                                                                           237

349.         Distribution by official liquidator                                                                                      237

350.         Dissolution of company                                                                                                     237

351.         Power to summon persons suspected of having property of company                     237

352.         Power to order public examination of promoters, directors, etc.                                  238

353.         Power to arrest absconding contributory                                                                        240

354.         Saving of other proceedings                                                                                              240

 

ENFORCEMENT OF ORDERS

355.         Power to enforce orders                                                                                                      240

356.         Order made by any Court to be enforced by other Courts                                            240

357.         Mode of dealing with orders to be enforced by other Courts                                      240

 

VOLUNTARY WINDING UP

RESOLUTION FOR, AND COMMENCEMENT OF VOLUNTARY

WINDING UP

358.         Circumstances in which company may be wound up voluntarily                                241

359.         Commencement of voluntary winding up                                                                        241

               

CONSEQUENCES OF VOLUNTARY WINDING UP

360.         Effect of voluntary winding up on status of company                                                  241

361.         Notice of resolution to wind up voluntarily                                                                    241

 

DECLARATION OF SOLVENCY

362.         Declaration of solvency in case of proposal to wind up voluntarily                           242

 

PROVISIONS APPLICABLE TO MEMBERS’ VOLUNTARY

WINDING UP

363.         Provisions applicable to members’ voluntary winding up                                             243

364.         Appointment of liquidators                                                                                                243

365.         Power to fill vacancy in office of liquidator                                                                     244

366.         Notice of appointment of liquidator to be given to registrar alongwith his

consent                                                                                                                                  244

367.              Power of liquidator to accept shares, etc., as consideration for sale of

property of company                                                                                                           245

368.         Duty of liquidator to call creditors’ meeting in case of insolvency                              246

369.         Duty of liquidator to call general meeting at the end of each year                              246

370.         Final meeting and dissolution                                                                                            247

371.         Alternative provisions as to annual and final meetings in case of insolvency         248

 

PROVISIONS APPLICABLE TO CREDITORS’ VOLUNTARY

WINDING UP

372.         Provisions applicable to creditors’ voluntary winding up                                             249

373.         Meeting of creditors                                                                                                            249

374.         Notice of resolution passed by creditors’ meeting to be given to registrar                250

375.         Appointment of liquidator                                                                                                  250

376.         Appointment of committee of inspection                                                                        252

377.         Fixing of liquidator’s remuneration                                                                                    251

378.         Directors’ powers to cease on appointment of liquidator                                              252

379.         Power to fill vacancy in office of liquidator                                                                     252

380.         Application of section 367 to a creditor’s voluntary winding up                                 252

381.         Duty of liquidator to call meeting of company and of creditors at the end of

every year                                                                                                                             252

382.         Final meeting and dissolution                                                                                            253

 

PROVISIONS APPLICABLE TO EVERY VOLUNTARY WINDING UP

383.         Provisions applicable to every voluntary winding up                                                   254

384.         Accounts and statements to be audited                                                                          254

385.         Distribution of property of company                                                                                255

386.         Application of Sections 328 and 329 to voluntary winding up                                    255

387.         Powers and duties of liquidator in voluntary winding up                                             255

388.         Power of Court to appoint and remove liquidator in voluntary winding up               257

389.         Notice by liquidator of his appointment                                                                          257

390.         Arrangement when binding on company and creditors                                                257

391.         Powers to apply to Court to have questions determined or powers exercised          257

392.              Applications of liquidator to Court for public examination of promoters,

directors, etc.                                                                                                                        258

393.         Costs of voluntary winding up                                                                                          258

394.         Saving for right of creditors and Contributors                                                                258

395.         Power of Court to adopt proceedings of voluntary winding up                                  259

 

WINDING UP SUBJECT TO SUPERVISION OF COURT

396.         Power to order winding up subject to supervision                                                        259

397.         Effect of petition for winding up subject to supervision                                               259

398.         Court may have regard to wishes of creditors and Contributors                                 259

399.         Power to replace liquidator                                                                                 259

400.         Effects of supervisions order                                                                                             259

401.         Appointment of voluntary liquidator as official liquidator in certain cases               260

 

PROVISIONS APPLICABLE TO EVERY MODE OF WINDING UP

STATUS OF COMPANIES BEING WOUND UP

402.         Status of companies being wound up, etc.                                                                      260

 

PROOF AND RANKING OF CLAIMS, ETC.

403.         Debts of all descriptions to be proved                                                                             260

404.         Application of insolvency rules in winding up of insolvent companies                    261

405.         Preferential payments                                                                                                          261

406.         Avoidance of transfers, etc.                                                                                               264

407.         Disclaimer of property                                                                                                         264

 

EFFECT OF WINDING UP ON ANTECEDENT AND OTHER TRANSACTIONS

408.         Fraudulent preference                                                                                                         266

409.         Liabilities and rights of certain fraudulently preferred persons                                   266

410.         Avoidance of certain attachments executions, etc.                                                        267

411.         Effect of floating charge                                                                                                     267

 

OFFENCES ANTECEDENT TO OR IN COURSE OF WINDING UP

412.         Power of Court to assess damages against delinquent directors, etc.                        267

413.         Liability for fraudulent conduct of business                                                                   268

414.              Liability under sections 412 and 413 to extend to partners or directors in

firm or body corporate                                                                                                        269

415.         Penalty for fraud by officers of companies which have gone into liquidation          269

416.         Liability where proper accounts not kept                                                                        269

417.         Penalty for falsification of books                                                                                      270

418.         Prosecution of delinquent directors                                                                                 270

419.         Penalty for false evidence                                                                                                  271

420.         Penal provisions                                                                                                                  272

 

SUPPLEMENTARY PROVISIONS AS TO WINDING UP

421.         Liquidator to exercise certain powers subject to sanction                                            274

422.         Meetings to ascertain wishes of creditors or contributories                                        274

423.         Documents of company to be evidence                                                                           275

424.         Summary disposal of certain suits by liquidators                                                           275

425.         Limitation                                                                                                                              275

426.         Court-fees                                                                                                                             275

427.         Inspection of documents                                                                                                    276

428.         Disposal of books and papers of company                                                                     276

429.         Power of Court to declare dissolution of company void                                               277

430.         Information as to pending liquidators                                                                              277

431.         Payments by liquidator into bank                                                                                     278

432.              Unclaimed dividends and undistributed assets to be paid by Companies

Liquidation Account                                                                                                           278

433.         Books of accounts and other proceedings to be kept by liquidators                         279

434.         Application of provisions relating to audit                                                                     280

435.         Enforcement of duty of liquidator to make return, etc.                                                  280

436.         Notification that a company is in liquidation                                                                  281

437.         Court or person before whom affidavit may be sworn                                                   281

COURT RULES

 

438.         Power to make rules                                                                                                             281

 

REMOVAL OF DEFUNCT COMPANIES FROM REGISTER

439.         Registrar may strike defunct company off register                                                         282

 

PART XII

APPLICATION OF ORDINANCE TO COMPANIES FORMED AND

REGISTERED UNDER PREVIOUS COMPANIES ACTS

440.              Applications of Ordinance to companies formed and registered

under previous Companies Acts                                                                                       284

441.              Applications of Ordinance to companies registered but not formed

under previous Companies Acts                                                                                       284

442.              Applications of Ordinance to unlimited companies registered under

previous Companies Acts                                                                                                  285

 

PART XIII

WINDING UP OF UNREGISTERED COMPANIES

443.         Meaning of “unregistered company”                                                                               285 

444.         Winding up of unregistered companies                                                                           285

445.         Contributories in winding up of unregistered companies                                             287

446.         Power to stay or restrain proceedings                                                                              287

447.         Suits stayed on winding up order                                                                                     287

448.         Directions as to property in certain cases                                                                       288

449.         Provisions of this part cumulative                                                                                    288

 

PART XIV

COMPANIES ESTABLISHED OUTSIDE PAKISTAN PROVISIONS AS TO ESTABLISHMENT OF PLACES OF BUSINESS OF PAKISTAN

450.         Application of this Part to foreign companies                                                                288

451.         Documents to be delivered to registrar by foreign companies                                     288

452.              Return to be delivered to registrar by foreign companies whose documents,           290

etc., altered

453.         Accounts of foreign companies                                                                                        290

454.         Certain obligations of foreign companies                                                                        291

455.         Service on foreign company                                                                                              292

456.              Company’s failure to comply with this Part not to affect its liability under

contracts, etc.                                                                                                                       292

457.         Provisions relating to names, enquiries, etc., to apply to foreign companies            293

458.         Intimation of ceasing to have place of business to be given                                       293

459.         Penalties                                                                                                                                293

460.         Interpretation of provisions of this Part                                                                           293

 

PROSPECTUS

461.         Issue of prospectus                                                                                                             294

462.         Restriction on canvassing for sale of securities                                                             294

 

REGISTRATION OF CHARGES, ETC.

463.         Registration of charges                                                                                                       295

464.         Notice of appointment of receiver                                                                                     295

 

NOTICE OF LIQUIDATION

465.         Notice of liquidation, etc.                                                                                                   296

 

PART XV

REGISTRATION OFFICERS AND FEES

466.         Registration offices                                                                                                             296

467.         Production of documents kept by registrar, etc.                                                             297

468.         Registrar not to accept defective documents                                                                  297

469.         Acceptance of documents presented after prescribed time                                          298

470.         Fees                                                                                                                                        299

471.         Power of the Federal Government to prescribe fees chargeable by companies         299         

472.         Enforcing compliance with provisions of Ordinance                                                     299

473.              Power of Court, etc., trying offences under Ordinance to direct compliance

with the provisions                                                                                                              299

 

PART XVI

GENERAL

LEGAL PROCEEDINGS, OFFENCES, ETC.

474.         Cognizance of offences, etc.                                                                                              300

475.         Offences to be non-cognizable                                                                                          301

476.         Punishment and adjudication of fine or penalty                                                             301

477.         Appeal and revision                                                                                                            302

478.         Powers of the Federal Government, etc., in relation to enquiries and proceedings 302

479.         Procedure for the trial of a corporate body                                                                      302

480.         Power of Federal Government to appoint company prosecutors                                 303

481.         Appeal against acquittal                                                                                                     303

482.         Payment of compensation in cases of frivolous or vexatious prosecuting                                304

483.         Application of fines                                                                                                             305

484.         Revision and review                                                                                                            305

485.         Appeals against orders, etc.                                                                                              306

486.         Production and inspection of books where offence suspected                                   306

487.         Power to require limited company to give security for costs                                        307

488.         Power of Court, etc., to grant relief in certain cases                                                       307

489.         Enforcement of orders of Court                                                                                         308

490.         Enforcement of order of Court by other Courts                                                              308

491.         Protection of acts done in good faith                                                                               308

492.         Penalty for false statement                                                                                                 308

493.         Penalty for wrongful withholding of property                                                                309

494.         Liability of directors for allotment of shares for inadequate consideration                309

495.         Punishment for non-compliance of directive of Court, etc.                                           309

496.         Penalty for carrying on ultra virus business                                                                   310

497.         Penalty for improper of word “Limited”                                                                           310

498.         Penalty where no specific penalty is provided elsewhere in the Ordinance              310

 

POWER TO ACCORD APPROVAL, ETC. SUBJECT TO CONDITIONS

499.         Power to accord approval subject to conditions                                                            311

 

ANNUAL REPORT ON ADMINISTRATION OF THE ORDINANCE

500.         Annual Report by Commission                                                                                         311

 

DELEGATION OF POWERS

 

501.         Delegation of powers                                                                                                          311

ADVISORY COMMITTEE

502.         Advisory Committee                                                                                                           312

 

APPLICATION OF ORDINANCE TO COMPANIES GOVERNED

BY SPECIAL ENACTMENTS

503.         Application of Ordinance to companies governed by special enactments                                312

 

SCHEDULES, TABLES, FORMS AND GENERAL RULES

504.         Forms                                                                                                                                     313

505.         Power of the Federal Government to alter schedules                                                     313

506.         Power of the Federal Government to make rules                                                             313

507.         Power of the Federal Government to permit use of Urdu words or abbreviations    313

 

REPEAL, SAVINGS, ETC.

508.         Repeal of laws and savings                                                                                                314

509.         Amendment of Ordinance, XVII of 1969                                                                          314

510.         Savings                                                                                                                                  314         

511.         Former registration offices, registers and registrars continued                                    315

512.         Construction of references to extraordinary resolution in articles, etc.                      315

513.         Traditional provisions                                                                                                         315

514.         Removal of difficulties                                                                                                        315

SCHEDULES

FIRST SCHEDULE

Table A  Regulation for Management of a Company Limited by Shares                                    316

Table B                                                                                                     Memorandum of association of company limited by shares                                                                                                                                                                                         329

Table C  Memorandum and articles of association of a company limited by

guarantee and not having a share capital                                                                        330

Table D Memorandum and articles of association of a company limited by

guarantee and having a share capital                                                                               337

Table E   Memorandum and articles of association of an unlimited

company having a share capital                                                                                        339

Table F   Repealed                                                                                                                                341

 

SECOND SCHEDULE

Part I       Matters to be specified in prospectus and reports to be set out                 therein                    342

Part II     Form of statement in lieu of prospectus to be delivered to registrar by a company

which does not issue a prospectus or which does not go to allotment on a

prospectus issued, and reports to be set out therein                                                    352

Part III    Form of statement in lieu of prospectus to be delivered to

                registrar by a private  company on becoming a public company and

reports to be set out therein                                                                                               358

 

THIRD SCHEDULE

Form A   Annual return of company having share capital                                                            365

Form B   Annual return of company not having share capital                                                     369

 

FOURTH SCHEDULE

Requirements as to balance sheet and profit and loss account of listed companies                                372

 

FIFTH SCHEDULE

Requirements as to balance sheet and profit and loss account of non-listed companies       398

 

SIXTH SCHEDULE

Table of fees to be paid to the registrar, the Commission and the Federal Government       417

 

SEVENTH SCHEDULE

Enactments repealed                                                                                                                           420

 

EIGHTH SCHEDULE

Amendment of Ordinance. XVII of 1969                                                                                          421

 


 

THE

COMPANIES ORDINANCE

(XLVII OF 1984)

 

An Ordinance to consolidate and amend the law relating to companies and certain other associations

            WHEREAS it is expedient to consolidate and amend the law relating to the companies and certain other associations for the purpose of healthy growth of the corporate enterprises, protection of investors and creditors, promotion of investment and development of economy and matters arising out of or connected therewith;

 

            And whereas the President is satisfied that circumstances exist which render it necessary to take immediate action;

 

            Now, therefore, in pursuance of the Proclamation of the fifth day of July, 1977, and in exercise of all powers enabling him in that behalf, the President is pleased to make and promulgate the following Ordinance: —

 

PART I – PRELIMINARY

 

            1.         Short title, extent and commencement.- (1) This Ordinance may be called the Companies Ordinance, 1984.

 

            (2)        It extends to the whole of Pakistan.

 

            (3)        This section shall come into force at once and the remaining provisions of this Ordinance shall come into force on such date as the Federal Government may, by notification in the official Gazette, appoint, and different dates may be so appointed for different provisions.

 

            2.         Definitions.-  (1) In this Ordinance, unless there is anything repugnant in the subject or context, —

 

(1)        “articles” means the articles of association of a company as originally framed or as altered in accordance with the provisions of any previous Companies Act, or of this Ordinance, including, so far as they apply to the company, the regulations contained in Table A in the First Schedule;

 

(2)        “associated companies” and “associated undertakings” mean any two or more companies or undertakings, or a company and an undertaking, interconnected with each other in the following manner, namely: —

 

(i)         if a person who is the owner or a partner or director of a company or undertaking, or who, directly or indirectly, holds or controls shares carrying not less than twenty per cent of the voting power in such company or undertaking, is also the owner or partner or director of another company or undertaking, or directly or indirectly, holds or controls shares carrying not less than twenty per cent of the voting power in that company or undertaking; or

 

(ii)        if the companies or undertakings are under common management or control or one is the subsidiary of another; or

 

(iii)       if the undertaking is a modaraba managed by the company; and a person who is the owner of or a partner or director in a company or undertaking or, who so holds or controls shares carrying not less than ten per cent of the voting power in a company or undertaking, shall be deemed to be an “associated person” of every such other person and of the person who is the owner of or a partner or director in such other company or undertaking, or who so holds or controls such shares in such company or undertaking:

 

Provided that shares shall be deemed to be owned, held or controlled by a person if they are owned, held or controlled by that person or by the spouse or minor children of the person:

 

                                    Provided further that—

 

(i)         directorship of a person or persons by virtue of nomination by the Federal Government or a Provincial Government or a financial institution directly or indirectly owned or controlled by such Government; or

(ii)        shares owned by the National Investment Trust or the Investment Corporation of Pakistan or a financial institution directly or indirectly owned or controlled by the Federal Government or a Provincial Government; 1[or shares registered in the name of a central depository, where such shares are beneficially owned by the central depository];

 

shall not be taken into account for determining the status of a company, undertaking or person as an associated company, associated undertaking or associated person;

 

2 [(3)    “Authority” means Corporate Law Authority constituted under section 11;]

 

(4)        “Body corporate” or “corporation” includes a company incorporated outside Pakistan, but does not include—

 

(i)         a corporation sole; or

 

(ii)        a co-operative society registered under any law relating to the registration of co-operative societies; or

 

(iii)       any other body corporate, not being a company as defined in this Ordinance, which the Federal Government may, by notification in the official Gazette, specify in this behalf;

 

(5)        “book and paper”, “book or paper” or “books of accounts” include accounts, deeds, vouchers, registers, writings and documents;

 

3 [(5A)  “central depository” means a central depository as defined in clause (cc) of section 2 of the Securities and Exchange Ordinance, 1969 (XVII of 1969), and registered with the 4[Commission] under section 32A of that Ordinance;]

 

(6)        “chief executive”, in relation to a company means an individual who, subject to the control and directions of the directors, is entrusted with the whole, or substantially the whole, of the powers of management of the affairs of the company, and includes a director or any other person occupying the position of a chief executive, by whatever name called, and whether under a contract of service or otherwise;

 

1[(6-A)“Commission” means the Securities and Exchange Commission of Pakistan established under section 3 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997);]

 

(7)        “company” means a company formed and registered under this Ordinance or an existing company;

 

(8)        “company limited by shares” means a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them;

 

(9)        “company limited by guarantee” means a company having the liability of its members limited by the memorandum to such amount as the members may respectively thereby undertake to contribute to the assets of the company in the event of its winding up;

 

(10)      Omitted by the Banking & Financial Services (Amendment of Laws) Ordinance, LVII of 1984;

 

(11)      “the Court” means the Court having jurisdiction under this Ordinance

 

(12)      “debenture” includes debenture stock, bonds, 2[term finance certificate] and any other securities, other than a share, of a company, whether constituting a charge of the assets of the company or not;

 

(13)      “director” includes any person occupying the position of a director, by whatever name  called:

 

(14)      “document” includes summons, notice, requisition, order, other legal process, voucher and register;

(15)      “existing company” means a company formed and registered under any previous Companies Act;

 

1[(15A)“financial institution” includes:–

 

(a)        a company or an institution whether established under any special enactment and operating within or outside Pakistan which transacts the business of banking or any associated or ancillary business through its branches;

 

(b)        a modaraba, leasing company, investment bank, venture capital company, financing company, housing finance company, a non-banking finance company; and

 

(c)        such other institution or company authorised by law to undertake any similar business, as the Federal Government may, by notification in the official Gazette, specify for the purpose;]

 

(16)      “financial year” in relation to any body corporate, means the period in respect of which any profit and loss account or the income and expenditure account, as the case may be, of the body corporate, laid before it in general meeting, is made up, whether that period is a year or not;

 

(17)      “form” means a form  set out in any of the schedules as prescribed;

 

(18)      “holding company” means a  holding company as  defined in section 3;

 

(19)      “listed” in relation to securities, means securities which have been allowed to be traded on a stock exchange;

 

(20)      “listed company”, means a company or a body corporate or other body whose securities are listed;

 

(21)      “member” means, in relation to a company having share capital, a subscriber to the memorandum of the company and every person to whom is allotted, or who becomes the holder of, any share, scrip or other security which gives him a voting right in the company and whose name is entered in the register of members, and, in relation to a company not having a share capital, any person who has agreed to become a member of the company and whose name is so entered;

 

(22)      “memorandum” means the memorandum of association of a company as originally framed or as altered from time to time in pursuance of the provision of any previous Companies Act or of this Ordinance;

 

(23)      “modaraba” and “modaraba company” have the same meaning as in the modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 (XXXI of 1980);

 

 (24)     “officer” includes any director, chief executive, managing agent, secretary or other executive of the company, howsoever designated, but, save in sections 205, 220 to 224, 260, 261, 268, 351, 352, 412, 417, 418, 474 and 482, does not include an auditor;

 

1 [(25)   “participatory redeemable capital” means such redeemable capital as is entitled to participate in the profit and loss of a company;]

 

(26)      “prescribed” means,—

 

(a)        as respects the provisions of this Ordinance relating to the winding up of companies and other matters requiring to be determined or decided by the Court, prescribed by rules made by the Supreme Court in consultation with the High Courts or, where the Supreme Court advises the Federal Government to do so, by the Federal Government in consultation with the High Courts; and

 

(b)        as respect the other provisions of this Ordinance, prescribed by rules or regulations made by the Federal Government after previous publication in the official Gazette;

 

(27)      “previous Companies Act” includes any Act or Acts relating to companies in force before the Indian Companies Act, 1866 (X of 1866), or the Acts repealed thereby, the Indian Companies Act. 1866 (X of 1866), the Indian Companies Act, 1882,  (VI of 1882) the Indian Companies Act 1913 (VII of 1913), or any law corresponding to any of those Acts and in force in any of the territories now constituting Pakistan before the extension of the Companies Act, 1913 (VII of 1913), to such territories;

 

(28)      “private company” means a company which, by its articles,—

 

(i)         restricts the right to transfer its shares, if any;

 

(ii)        limits the number of its members to fifty not including persons who are in the employment of the company; and

 

(iii)       prohibits any invitation to the public to subscribe for the shares, if any, or debentures of the company:

 

            Provided that, where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member;

 

(29)      “prospectus” means any document described or issued as prospectus, and includes any notice, circular, advertisement, or other communication, inviting offers from the public for the subscription or purchase of any shares in, or debentures of, a body corporate, or inviting deposits from the public, other than deposits invited by a banking company or a financial institution approved by the Federal Government, whether described as prospectus or otherwise;

 

 (30)     “public company” means a company which is not a private company;

 

1[(30A)”redeemable capital” includes finance obtained on the basis of participation terms certificate (PTC), musharika certificate, terms finance certificate (TFC), or any other security or obligation not based on interest, other than an ordinary share of a company, representing an instrument or a certificate of specified denomination, called the face value or nominal value, evidencing investment of the holder in the capital of the company on terms and conditions of the agreement for the issue of such instrument or certificate or such other certificate or instrument as the Federal Government may, by notification in the official Gazette, specify for the purpose;]

 

(31)      “registrar” means a registrar, an additional registrar, a joint registrar, a deputy registrar or an assistant registrar, performing under this Ordinance the duty of registration of companies;

 

(32)      “scheduled bank” has the same meaning as in the State Bank of Pakistan Act, 1956 (XXXIII of 1956);

 

(33)      “secretary” means any individual appointed to perform the secretarial, administrative or other duties ordinarily performed by the secretary of a company;

 

1[(34)         “security” means any share, scrip, debenture, participation term certificate, modaraba certificate, musharika certificate, term finance certificate bond, pre-organization certificate or such other instrument as the Federal Government may, by notification in the official Gazette, specify for the purpose;]

 

(35)      “share” means share in the share capital of a company;

 

(36)      “special resolution” means a resolution which has been 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 a general meeting of which not less than twenty-one days notice specifying the intention to propose the resolution as a special resolution has been duly given:

 

            Provided that, if all the members entitled to attend and vote at any such meeting so agree, a resolution may be proposed and passed as a special resolution at a meeting of which not less then twenty-one days notice has been given;

 

(37)      “stock exchange” means a stock exchange registered under the securities and Exchange Ordinance, 1969 (XVII of 1969);

 

(38)      “subsidiary company” or “subsidiary” means a subsidiary company as defined in section 3;

 

(39)      “Table A” means Table A in the First Schedule;

 

(40)      Omitted by the Banking & Financial Services (Amendment of Laws) Ordinance, LVII of 1984.

 

            (2)        The expression “commencement of this Ordinance” in any provisions of this Ordinance means the coming into force of that provision by virtue of a notification under sub-section (3) of section 1.

 

            3.         Meaning of “subsidiary” and “holding company”.- (1) For purposes of this Ordinance, a company or body corporate shall be deemed to be a subsidiary of another if—

(a)        that other company or body corporate directly or indirectly controls, beneficially owns or holds more than fifty per cent of its voting securities or otherwise has power to elect and appoint more than fifty per cent of its directors; or

 

(b)        the first mentioned company or body corporate is a subsidiary of any company or body corporate which is that other’s subsidiary;

 

1[Provided that where a central depository holds more than fifty percent of the voting securities of a company, such company shall not be deemed to be a subsidiary of the central depository save where such voting securities are held beneficially by the central depository in its own behalf.]

 

(2)                For the purpose of this Ordinance, a company shall be deemed to be another’s holding company if, but only if, that other is its subsidiary.

 

            4.         Ordinance not to apply to certain corporations.- Nothing in this Ordinance shall apply to—

 

(i)         a trading corporation owned or controlled by a Province and carrying on business only within that Province; or

 (ii)       a co-operative society; or

 

(iii)       a university.

           

5.         Application of Ordinance to non-trading companies with purely provincial objects.- The powers conferred by this Ordinance on the Federal Government or the Commission shall, in relation to companies which are not trading corporations and the objects of which are confined to a single Province, be the powers of the Provincial Government.

           

6.         Ordinance to override memorandum, articles, etc..- Save as otherwise expressly provided herein,—

(a)        the provisions of this Ordinance which come into force by virtue of a notification under sub-section (3) of section 1 shall have effect notwithstanding anything contained in the memorandum or articles of a company, or in any contract or agreement executed by it, or in any resolution passed by the company in general meeting or by its directors, whether the same be registered, executed or passed, as the case may be, before or after the coming into force or the said provisions; and

 

(b)                any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the aforesaid provisions of this Ordinance, become or be void, as the case may be.


 

PART II –  JURISDICTION OF COURTS

           

7.         Jurisdiction of the Court.-   (1) The Court having jurisdiction under this Ordinance shall be the High Court having jurisdiction in the place at which the registered office of the company is situate:

 

            Provided that the Federal Government may, by notification in the official Gazette and subject to such restrictions and conditions as it thinks fit, empower any civil Court to exercise all or any of the jurisdiction by this Ordinance conferred upon the Court, and in that case such Court shall, as regards the jurisdiction so conferred, be the Court in respect of companies having their registered office within the territorial jurisdiction of such Court.

 

            (2)        For the purposes of jurisdiction to wind up companies, the expression “registered office” means the place which has longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding up.

 

            (3)        Nothing in this section shall invalidate a proceeding by reason of its being taken in a Court other than the High Court or a Court empowered under sub-section (1).

           

8.         Constitution of Company Benches.- There shall in each High Court be one or more benches, each to be known as the company Bench, to be constituted by the Chief Justice of the High Court to exercise the jurisdiction vested in the High Court under section 7.

 

9.         Procedure of the Court.- (1) Notwithstanding anything contained in any other law, all matters coming before the Court under this Ordinance shall be disposed of, and the judgment pronounced, as expeditiously as possible but not later than ninety days from the date of presentation of the petition or application to the Court and, except in extraordinary circumstances and on grounds to be recorded, the Court shall hear the case from day-to-day.

 

            Explanation: In this sub-section, “judgment” means a final judgment recorded in writing.

            (2)        The hearing of the matters referred to in sub-section (1) shall not be adjourned except for sufficient cause to be recorded, or for more than fourteen days at any one time or for more than thirty days in all.

            (3)        In the exercise of its jurisdiction as aforesaid, the Court shall, in all matters before it, follow the summary procedure.

 

            10.       Appeals against Court orders.- (1) Notwithstanding anything contained in any other law, an appeal against any order, decision or judgment of the Court under this Ordinance shall lie to the Supreme Court where the company ordered to be wound up has a paid-up share capital of not less than one million rupees; and, where the company ordered to be wound up has paid-up capital of less than one million rupees, or has no share capital, such appeal shall lie only if the Supreme Court grants leave to appeal.

 

            (2)        Save as provided in sub-section (1), an appeal from any order made or decision given by the Court shall lie in the same manner in which and subject to the same conditions under which appeals lie from any order or decision of the Court.

 

            (3)        An appeal preferred under sub-section (2) shall be finally disposed of by the Court hearing the appeal within ninety days of the submission of the appeal.


 

PART III – 1[CORPORATE LAW AUTHORITY]

11.       2Deleted.

 

12.       Powers and functions of the Commission.- (1) The Commission shall exercise and perform such powers and functions as are conferred on it by or under this Ordinance or any other law.

 

(2)        Notwithstanding anything contained in any other law, and without prejudice to the generality of the foregoing provisions, the Federal Government may, by notification in the official Gazette, direct that all or any of the powers and functions conferred on the Federal Government or any of the officer of the Federal Government under any law shall, subject to such limitations, restrictions or conditions, if any, as it may from time to time impose, be exercised or performed by the Commission.

 

(3) to (7). 3Deleted.

 

            13.       Reference by the Federal Government or Commission to the Court.-   (1) Without prejudice to the powers, jurisdiction and authority exercisable by the Federal Government or the Commission under this ordinance, the Federal Government or the Commission, as the case may be, may make a reference to the Court, on any question or matter which the Government or the Commission considers to be of special significance requiring orders, determination or action concerning the affairs of a company or any action of any officer thereof.

 

            Explanation: In this sub-section “officer” includes an auditor, liquidator or agent of the company.

 

            (2)        Where a reference is made to the Court under sub-section (1), the Court may make such order as it may deem just and equitable under the circumstances.


 

PART IV – INCORPORATION OF COMPANIES AND MATTERS INCIDENTAL THERETO

 

            14.       Obligation to register certain associations, partnerships etc., as companies.-   (1) No association partnership or company, consisting of more than twenty persons shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the association, partnership or company, or by the individual members thereof, unless it is registered as a company under this Ordinance.

 

            (2)        Every person who is a member of any association, partnership of company carrying on business in contravention of the provisions of this section shall be punishable with fine which may extend to five thousand rupees and also be personally liable for all the liabilities incurred in such business.

 

            (3)        Nothing in this section shall apply to—

 

(a)        any society, body or association, other than a partnership, formed or incorporated under any other Pakistan law; or

 

(b)        a joint family carrying on joint family business; or

 

(c)                a partnership of two or more joint families where the total number of members of such families, excluding the minor members, does not exceed twenty; or

 

1[(d)      a partnership formed to carry on practice as lawyers, accountants or any other profession where practice as a limited liability company is not permitted under the relevant laws or regulations for such practice.]

 

MEMORANDUM OF ASSOCIATION

 

            15.       Mode of forming a company.-  (1) Any 2[three] or more persons associated for any lawful purpose may, by subscribing their names to a memorandum of association and complying with the requirements of this Ordinance in respect of registration, form a public company and any 1[one,] or more persons so associated may in like manner from a private company.

 

            (2)        A company formed under sub-section (1) may be a company with or without limited liability, that is to say,—

 

(a)        a company limited by shares; or

 

(b)        a company limited by guarantee; or

 

(c)        an unlimited company.

 

            16.       Memorandum of company limited by shares.- In the case of a company limited by shares,—

 

(a)        the memorandum shall state—

 

(i)         the name of the company with the word “limited” as the last word of the name in the case of a public limited company, and the parenthesis and words “(Private) Limited” as the last words of the name in the case of a private limited company;

 

(ii)        the Province or the part of Pakistan not forming part of a Province, as the case may be, in which the registered office of the company is to be situate:

 

(iii)       the objects of the company and, except in the case of a trading corporation the territories to which they extend;

 

(iv)       that the liability of the members is limited; and

 

(v)        the amount of share capital with which the company proposes to be registered, and the division thereof into shares of a fixed amount;

(b)                no subscriber of the memorandum shall take less than one share; and

(c)                each subscriber of the memorandum shall write opposite to his name the number of shares he takes.

 

            17.       Memorandum of company limited by guarantee.- In the case of a company limited by guarantee,—

 

(a)        whether or not the company has a share capital, the memorandum shall state—

 

(i)         the name of the company with the parenthesis and words “(Guarantee) Limited” as the last words of its name;

 

(ii)        the province or the part of Pakistan not forming part of a Province, as the case may be in which the registered office of the company is to be situate;

 

(iii)       the objects of the company and except in the case of a trading corporation, the territories to which they extend;

 

(iv)       that the liability of the members is limited; and

 

(v)        that each member undertakes to 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 and liabilities of the company contracted before he ceases to be a member, and of 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, not exceeding a specified amount; and

 

(b)        if the company has a share capital,—

 

(i)         the memorandum shall also state the amount of share capital with which the company proposes to be registered and the division thereof into shares of a fixed amount;

 

(ii)        no subscriber of the memorandum shall take less than one share; and

 

(iii)       each subscriber shall write opposite to his name the number of shares he takes.

 

            18.       Memorandum of unlimited company.-  In the case of an unlimited company,—

 

(a)        whether or not the company has a share capital, the memorandum shall state—

 

(i)         the name of the company;

 

(ii)        the Province or the part of Pakistan not forming part of a Province, as the case may be, in which the registered office of the company is to be situate; and

 

(iii)       the objects of the company, and, except in the case of a trading corporation, the territories to which they extend; and

 

(b)        if the company has a share capital,—

 

(i)         no subscriber of the memorandum shall take less than one share; and

 

(ii)                each subscriber shall write opposite to his name the number of shares he takes.

 

            19.       Printing, signature, etc., of memorandum.-  (1) The memorandum shall be—

 

(a)        Printed:

 

(b)        divided into paragraphs numbered consecutively;

1[(c)      signed by each subscriber, who shall add  his present name in full, his occupation and father’s name or, in the case of a married woman or widow, her husband’s or deceased husband’s name in full, his nationality and his usual residential address and such other particulars as may be prescribed, in the presence of a witness who shall attest the signature and shall likewise add his particulars; and]

 

(c)        dated.

 

            2 [(2) Notwithstanding anything contained in this Ordinance or in any other law for the time being in force or the memorandum and articles, the memorandum and articles of a company shall be deemed to include, and always to have included, the power to enter into any arrangement for obtaining loans, advances or credit, as defined in the Banking Companies Ordinance, 1962 (LVII of 1962), and to issue other securities not based on interest for raising resources from a scheduled bank or a financial institution.]

           

20.  Restriction on alteration of memorandum.- A company shall not alter the conditions contained in its memorandum except in the cases and in the mode and to the extent specified in this Ordinance.

           

21.       Alteration of Memorandum.- (1) Subject to the provisions of this Ordinance, a company may, by special resolution alter the provisions of its memorandum so as to change the place of its registered office from one Province to another, or from one city or town in a Province to another, or from a part of Pakistan not forming part of a Province to a Province or from a Province to a part of Pakistan not forming part of a Province, or with respect to the objects of the company, so far as may be required to enable it—

 

(a)        to carry on its business more economically or more efficiently; or

 

(b)        to attain its main purpose by new or improved means; or

 

(c)        to enlarge or change the local area of its operations; or

 

 (d)       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

 

(e)        to restrict or abandon any of the objects specified in the memorandum; or

 

(f)        to sell or dispose of the whole or any part of the undertaking of the company; or

 

(g)        to amalgamate with any other company or body of persons.

 

            (2)        The alteration shall not take effect until and except in so far as it is confirmed by the Commission on petition:

 

            Provided that an alteration so as to change the place of registered office of a company from a place in the Province of the Punjab to the Islamabad Capital Territory or from the latter to a place in the Province of the Punjab, or from one city in a Province to another shall not require confirmation by the Commission.

 

            (3)        Before confirming the alteration, the Commission must be satisfied—

 

(a)        that, sufficient notice has been given to every holder of debentures of the company and to any person or class of persons whose interest will, in the opinion of the Commission, be affected by the alteration; and

 

(b)        that with respect to every creditor who in the opinion of the Commission is entitled to object, and who signifies his objection in manner directed by the Commission, either his consent to the alteration has been obtained or his debt or claim has been discharged or determined, or has been secured to the satisfaction of the Commission:

 

            Provided that the Commission may in the case of any person or class of persons, for special reasons, dispense with the notice required by clause (a).

           

22.       Powers of Commission when conforming alteration.- The Commission may make an order confirming the alteration either wholly or in part, and on such terms and conditions as it thinks fit, and make such order as to costs as it thinks proper.

           

23.       Exercise of discretion by Commission.-  The Commission shall in exercising its discretion under section 21 and 22 have regard to the rights and interests of the members of the company or of any class of them, as well as to the right and interests of the creditors, and may, if it thinks fit, adjourn the proceedings in order that an arrangement may be made to the satisfaction of the Commission for the purchase of the interests of dissident members; and may give such directions and make such orders as it may think expedient for facilitating or carrying into effect any such arrangement:

 

            Provided that no part of the capital of the company may be expended in any such purchase.

 

24.       Procedure on confirmation of the alteration.- (1) A certified copy of the order confirming the alteration, together with a printed copy of the memorandum as altered shall within ninety days from the date of the order, be filed by the company with the registrar, and he shall register the same, and shall certify the registration under his hand, and the certificate 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.

 

 (2)       Where the alteration involves a transfer of the registered office from one Province to another, or from the Islamabad Capital Territory to a province or from a Province to Islamabad Capital Territory, a certified copy of the order confirming such alteration shall be filed by the company with the registrar in each of such provinces or the Islamabad Capital Territory, as the case may be, and each such registrar shall register the same, and shall certify under his hand the registration thereof, and the registrar for the Province or the Territory from which such office is transferred shall send to the registrar for the other Province or Territory all documents relating to the company registered or filed in his office.

 

(3)        The Commission may by order at any time extend the time for the filing of documents with the registrar under this section for such period as it thinks proper.

           

25.       Effect of failure to register within ninety days.-  No such alteration shall have any operation until registration thereof has been duly effected in accordance with the provision of section 24, and if such registration is not effected within ninety days next after the date of the order of the Commission confirming the alteration, or within such further time, as may be allowed by the Commission, in accordance with the provisions of section 24, such alteration and order, if any, and all proceedings connected therewith shall, at the expiration of such period of ninety days or such further time, as the case may be, become null and void:

 

            Provided that the Commission 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.

 

ARTICLES OF ASSOCIATION

 

            26.       Registration of articles.-  (1) There may, in the case of company limited by shares, and there shall, in the case of a company limited by guarantee or an unlimited company, be registered with the memorandum, articles of association signed by the subscribers to the memorandum and setting out regulations for the company.

 

            (2)        Articles of association may adopt all or any of the regulations contained in Table A in the First Schedule.

 

            (3)        In the case of an unlimited company or a company limited by guarantee, the articles, if the company has a share capital, shall state the amount of share capital with which the company proposes to be registered.

 

            (4)        In the case of an unlimited company or a company limited by guarantee, if the company has not a share capital, the articles shall state the number of members with which the company proposes to be registered.

 

            (5)        In the case of a company limited by shares and registered after the commencement of this Ordinance, if articles are not registered, or, if articles are registered, in so far as the articles do not exclude or modify the regulations in Table A in the First Schedule, those regulations shall, so far as applicable, be the regulations of the company in the same manner and to the same extent as if they were contained in duly registered articles.

 

(6)        The articles of every company shall be explicit and without ambiguity and, without prejudice to the generality of the foregoing, shall list and enumerate the voting and other rights attached to the different classes of shares and other securities, if any, issued or to be issued by it.

           

27.       Printing, signature, etc., of articles.- The articles shall be—

 

(a)        printed;

 

(b)        divided into paragraphs numbered consecutively;

 

1[(c)      signed by each subscriber, who shall add  his present name in full, his occupation and father’s name or, in the case of a married woman or widow, her husband’s or deceased husband’s name in full, his nationality and his usual residential address and such other particulars as may be prescribed, in the presence of a witness who shall attest the signature and shall likewise add his particulars; and]

 

(d)        dated.

           

            28.       Alteration of articles.- Subject to the provisions of this Ordinance and to the conditions contained in its memorandum, a company may by special resolution alter or add to its articles, 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:

 

            Provided that, where such alteration affects the substantive rights or liabilities of members or of a class of members, it shall be carried out only if a majority of at least three-fourths of the members or of the class of members affected by such alteration, as the case may be, personally or through proxy vote for such alteration.

 

FORMS OF MEMORANDUM AND ARTICLES

 

            29.       Form of memorandum and articles.- The form of—

 

(a)        the memorandum of association of a company limited by shares;

 

(b)        the memorandum and articles of association of a company limited by guarantee and not having a share capital;

 

(c)        the memorandum and articles of association of a company limited by guarantee and having a share capital;

 

(d)        the memorandum and articles of association of an unlimited company having a share capital;

 

shall be respectively in accordance with the forms set out in Tables B, C, D and E in the First Schedule or as near thereto as circumstances admit.

 

GENERAL PROVISIONS WITH RESPECT TO REGISTRATION OF MEMORANDUM AND ARTICLES

 

30.       Registration of memorandum and articles, etc..-(1) The memorandum and the articles, if any, shall be filed with the registrar in the Province or the part of Pakistan not forming part of a Province, as the case may be, in which the registered office of the company is stated by the memorandum to be situate.

 

(2)        A declaration by such person as may be prescribed in this behalf, or by a person named in the articles as a director, or other officer of the company, of compliance with all or any of the requirements of this Ordinance and the rules made thereunder shall be filed with the registrar; and the registrar may accept such a declaration as sufficient evidence of such compliance.

 

(3)        If the registrar is satisfied that the company is being formed for lawful purposes, that none of its objects stated in the memorandum is inappropriate or deceptive or insufficiently expressive and that all the requirements of this Ordinance and the rules made thereunder have been complied with in respect of registration and matters precedent and incidental thereto, he shall retain and register the memorandum and articles, if any.

 

            (4)        If registration of the memorandum is refused, the subscribers of the memorandum or any one of them authorised by them in writing may either supply the deficiency and remove the defect pointed out, or within thirty days of the order of refusal prefer an appeal—

 

(a)        where the order of refusal has been passed by an additional registrar, a joint registrar, a deputy registrar or an assistant registrar, to the registrar; and

 

(b)        where the order of refusal has been passed, or up-held in appeal, by the registrar, to the Commission.

 

            (5)        An order of the Commission under sub-section (4) shall be final and shall not be called in question before any Court or other authority.

 

31.       Effect of memorandum and articles.-  (1) The memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by each member and contained a covenant on the part of each member, his heirs, and legal representatives, to observe and be bound by all the provisions of the memorandum and of the articles, subject to the provisions of this Ordinance.

 

            (2)        All money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company.

           

32.       Effect of registration. –  (1) On the registration of the memorandum of a company, the registrar shall certify under his hand that the company is incorporated and, in the case of a limited company, that the company is limited by shares or guarantee, as the case may be.

 

            (2)        From the date of incorporation mentioned in the certificate of incorporation, the subscribers of the memorandum, together with such other persons as may form time to time become members of the company shall be a body corporate by the name contained in the memorandum, capable forth-with of exercising all the functions of an incorporated company, and having perpetual succession and a common seal, but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Ordinance.

 

33.       Conclusiveness of certificates of incorporation. – A certificate of incorporation given by the registrar in respect of any association shall be conclusive evidence that all the requirements of this Ordinance in respect of registration and of matters precedent and incidental thereto have been complied with, and that the association is a company authorised to be registered and duly registered under this Ordinance.

 

34.       Effect of alteration in memorandum or articles. – Notwithstanding anything contained in the memorandum or articles of a company, no member of the company shall be bound by an alteration made in the memorandum or articles after the date on which he became a member if and so far as the alteration requires him to take or subscribe for more shares than the number held by him at the date on which the alteration is made, or in any way increases his liability as at that date to contribute to the share capital of, or otherwise to pay money to, the company:

 

Provided that this section shall not apply in any case where the member agrees in writing either before or after the alteration is made to be bound thereby.

 

35.       Copies of memorandum and articles to be given to members. –  (1) Every company shall send to every member, at his request and within fourteen days thereof, on payment of such sum, not exceeding the prescribed amount, as the company may fix, a copy of the memorandum and the articles, if any.

 

 (2)       If a company makes default in complying with the requirements of sub-section (1), it shall be liable for each offence to a fine not exceeding one hundred rupees.

 

36.       Alteration of memorandum or articles to be noted in every copy. –   (1) Where an alteration is made in the memorandum or articles of a company, every copy of the memorandum or articles issued after the date of the alteration shall conform to the memorandum or articles as so altered.

 

            (2)        If, where any such alteration has been made, the company at any time after the date of the alteration issues any copies of the memorandum or articles which do not conform to the memorandum or articles as so altered it shall be liable to a fine which may extend to one thousand rupees for each copy so issued and every officer of the company who is knowingly and willfully in default shall be liable to the like penalty.

 

PROVISIONS WITH RESPECT TO NAMES OF COMPANIES

 

            37.       Prohibition of certain names.-  (1) No company shall be registered by a name which in the opinion of the Commission is inappropriate or deceptive or is designed to exploit or offend the religious susceptibilities of the people.

 

            (2)        A company shall not be registered by a name identical with that by which a company in existence is already registered, or so nearly resembling that name as to be calculated to deceive, except where the company in existence is in the course of being dissolved and signifies its consent in such manner as the registrar requires.

 

            (3)        Except with the prior approval in writing of the Commission, no company shall be registered by a name which contains any words suggesting or calculated to suggest—

(a)        the patronage of any, past or present, Pakistani or foreign, Head of State;

 

(b)        any connection with the Federal Government or a Provincial Government or any department or authority of any such Government;

 

(c)        any connection with any corporation set up by or under any Federal or Provincial law; or

 

(d)        the patronage of, or any connection with, any foreign Government or any international organisation.

 

(4)        Whenever a question arises as to whether or not the name of a company is in violation of the foregoing provisions of this section the decision of the Commission shall be final.

           

38.       Rectification of name of a company.-  A company which, through inadvertence or otherwise, is registered by a name in contravention of the provisions of section 37,—

 

(a)        may, with the approval of the registrar, change its name; and

 

(b)        shall, if the registrar so directs, within thirty days of the receipt of such direction, change its name with the approval of the registrar:

 

            Provided that the registrar shall, before issuing a direction for the change of name, afford the company an opportunity to make representation against the proposed direction:

 

            Provided further that no direction under clause (b) shall be issued after the expiration of three years from the date of registration of the company or registration by its new name, as the case may be.

           

39.       Change of name by a company.- A company may, by special resolution and with the approval of the registrar signified in writing, change its name:

 

            Provided that no such approval shall be required where the only change in the name of a company is the addition thereto or, as the case may be, the deletion therefrom, of the parenthesis and word “(Private)” consequent on the conversion in accordance with the provisions of this Ordinance of a public company into a private company or of a private company into a public company.

           

40.       Registration of change of name and effect thereof.- (1) Where a company changes its name, the registrar shall enter the new name on the register in place of the former name, and shall issue a certificate of incorporation altered to meet the circumstances of the case; and, on the issue of such a certificate, the change of name shall be complete.

 

            (2)        Where a company changes its name it shall, for a period of one year from the date of issue of a certificate by the registrar under sub-section (1), continue to mention its former name alongwith its new name on the outside of every office or place in which its business is carried on and in every document or notice referred to in clauses (a) and (c) of section 143:

 

            Provided that the addition or deletion, as the case may be, of the parenthesis and word “(Private)” from the name of a company consequent on the conversion in accordance with the provisions of this Ordinance of a public company into a private company or of a private company into a public company shall not be deemed to be a change of name for the purpose of this sub-section.

 

            (3)        The change of name shall not affect any rights or obligations of the company, or render defective any legal proceedings by or against the company; and any legal proceedings that might have been continued or commenced against the company by its former name may be continued by or commenced against the company by its new name.

 

41.       Alteration of names on commencement of Ordinance and change of status of company.-  (1) As from the date of commencement of this Ordinance, the name of every existing company shall be deemed to include, before the last word “Limited”, the parenthesis and word “(Private)” in the case of private company and the parenthesis and word “(Guarantee)” in the case of a company limited by guarantee, and the memorandum of association, the certificate of incorporation and other books and papers shall be deemed to be altered accordingly from that date.

 

            (2)        On conversion of a public company into a private company in accordance with the provisions of this Ordinance, the registrar shall add the parenthesis and word “(Private)” before the word “Limited” in the name of the company in the register and shall also issue a certificate to meet the circumstances of the case.

           

            (3)        On conversion of a private company into a public company in accordance with the provisions of this Ordinance, the registrar shall omit the parenthesis and word “(Private)” in the name of company in the register and shall also issue a certificate to meet the circumstances of the case.

 

            (4)        If default is made in complying with a direction issued by the registrar under section 38, or with the requirements of sub-section (2) of section 40, or in giving effect to the provisions of sub-section (1) of this section, the company, and every director or officer of the company who is knowingly and willfully in default, shall be liable to a fine not exceeding ten thousand rupees and to a further fine not exceeding two hundred rupees for every day after the first during which the default continues.

 

ASSOCIATIONS NOT FOR PROFIT

42.       Power to dispense with “Limited” in the name of charitable and other companies.-  (1) Where it is proved to the satisfaction of the Commission that an association capable of being formed as a limited company has been or is about to be formed for promoting commerce, art, science, religion, sports, social services, charity or any other useful object, and applies or intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members, the Commission may grant a licence and direct that the association be registered as a company with limited liability, without the addition of the words “Limited”, “(Private) Limited” or “(Guarantee) Limited”, as the case may be, to its name, and the association may be registered accordingly.

 

            (2)        A licence under sub-section (1) may be granted on such conditions and subject to such regulations as the Commission thinks fit and those conditions and regulations shall be binding on the association and shall, if the Commission so directs, be inserted in the memorandum and articles, or in one of those documents.

 

            (3)        The association shall on registration enjoy all the privileges of a limited company and be subject to all its obligations, except those of using the word or words “Limited”, “(Private) Limited” or “(Guarantee) Limited”, as the case may be, as part of its name.

 

            (4)        A licence under this section may at any time be revoked by the Commission and upon its revocation the registrar shall enter the word or words “Limited”, “(Private) Limited”, or “(Guarantee) Limited”, as the case may be, at the end of the name of the association upon the register, and the association shall cease to enjoy the exemptions and privileges granted by preceding sub-sections:

 

            Provided that, before a licence is so revoked, the Commission shall give to the association notice in writing of its intention, and shall afford the association an opportunity of submitting a representation in opposition to the revocation.

 

COMPANIES LIMITED BY GUARANTEE

 

            43.       Provision as to companies limited by guarantee.-  (1) In the case of a company limited by guarantee and not having a share capital, every provision in the memorandum or articles or in any resolution of the company purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member shall be void.

 

            (2)        For the purpose of the provisions of this Ordinance relating to the memorandum of a company limited by guarantee and of sub-section (1) every provision in the memorandum or articles, or in any resolution, of a company limited by guarantee purporting to divide the undertaking of the company into shares or interests shall be treated as a provision for a share capital, notwithstanding that the nominal amount or number of the shares or interests is not specified thereby.

 

PROVISIONS RELATING TO CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY AND VICE VERSA, AND OTHER MATTERS

 

            44.       Conversion of public company into private company.- No public company shall, except with the prior approval of the Commission in writing, and subject to such conditions as may be imposed by the Commission in this behalf, convert itself into a private company.

 

45.       Prospectus or statement in lieu of prospectus to be filed by private company on ceasing to be private company.-  (1) If a company, being a private company, alters its articles in such a manner that they no longer include the provisions which, under clause (28) of sub-section (1) of section 2, are required to be included in the articles of a company in order to constitute it a private company, the company—

 

(a)        shall, as on the date of the alteration, cease to be a private company; and

 

(b)        shall, within a period of fourteen days after the said date, file with the registrar either a prospectus or a statement in lieu of prospectus as specified in sub-section (2) or sub-section (3).

 

            (2)        Every prospectus filed under sub-section (1) shall state the matters specified in section 1 of Part I of the Second Schedule and set out the reports specified in section 2 of that Part, and the said sections 1 and 2 shall have effect subject to the provisions contained in section 3 of that Part.

 

            (3)        Every statement in lieu of prospectus filed under sub-section (1) shall be in the form and contain the particulars set out in section 1 of Part III of the Second Schedule and, in the cases mentioned in section 2 of that Part, set out the reports specified therein, and the said sections 1 and 2 shall have effect subject to the provisions contained in section 3 of that Part.

 

            (4)        Where the persons making any such report as is referred to in sub-section (2) or sub-section (3) have made therein, or have, without giving the reasons indicated therein, made any such adjustments as are mentioned in clause 36 of Part I of the Second Schedule or clause 5 of section 3 of Part III of the Second Schedule, as the case may be, the prospectus or statement in lieu of prospectus filed as aforesaid shall have endorsed thereon or attached thereto a written statement, signed by those persons, setting out the adjustments and giving the reasons therefor.

 

            (5)        If default is made in complying with the provisions of any of preceding sub-sections, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees and to a further fine not exceeding one hundred rupees for every day after the first during which the default continues.

 

            (6)        Where any prospectus or statement in lieu of prospectus filed under sub-section (1) includes any untrue statement, any person who authorised the filing of such prospectus or statement shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to ten thousand rupees, or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe and did, upto the time of the filing of the prospectus or statement, believe, that the statement was true.

 

            (7)        For the purposes of sub-section (6),—

 

(a)        a statement included in a prospectus or a statement in lieu of prospectus shall be deemed to be untrue if it is misleading in the form and context in which it is included; and

 

(b)        where the omission from a prospectus or a statement in lieu of prospectus of any matter is calculated to mislead, the prospectus or statement in lieu of prospectus shall be deemed, in respect of such omission, to be a prospectus or a statement in lieu of prospectus in which an untrue statement is included.

 

(8)        For the purposes of sub-section (6) and clause (a) of sub-section (7), the expression “included” when used with reference to a prospectus or statement in lieu of prospectus, means included in the prospectus or statement in lieu of prospectus itself or contained in any report or memorandum appearing on the face thereof, or by reference incorporated therein.

           

46. Consequence of default in complying with conditions constituting a company a private company.- Where the articles of a company include the provisions which, under clause (28) of sub-section (1) of section 2, are required to be included in the articles of a company in order to constitute it a private company, but default is made in complying with any of those provisions, the company shall cease to be entitled to the privileges and exemptions conferred on private companies by or under this Ordinance, and this Ordinance shall apply to the company as if it were not a private company:

 

            Provided that the Commission, on being satisfied that the failure to comply with the conditions was accidental or due to inadvertence or to some other sufficient cause, or that on other ground it is just and equitable to grant relief, may, on the application of the company or any other person interested and on such terms and conditions as seem to the Commission just and expedient, order that the company be relieved from such consequences as aforesaid.

 

CARRYING ON BUSINESS WITH LESS THAN THE LEGAL MINIMUM OF MEMBERS

 

47.       Liability for carrying on business with less than 1[three] or, in the case of a private company, two members.- If at any time the number of members of a company is reduced, in the case of a private company 2[other than a single member company], below two, or in the case of any other company, below 3[three], and the company carries on business for more than six months while the number is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognizant of the fact that it is carrying on business with fewer than two members or 4[three] members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be sued therefor without joinder in the suit of any other member.

 

SERVICE AND AUTHENTICATION OF DOCUMENTS

 

48.       Service of documents on a company.- A document may be served on a company or an officer thereof by sending it to the company or officer at the registered office of the company by post under a certificate of posting or by registered post, or by leaving it at the registered office of the company.

           

            49.       Service documents on registrar.- A document may be served on the registrar by sending it to him at his office by registered post, or by delivering it to him, or leaving it for him at his office, against an acknowledgment of receipt.

 

50.       Service of notice on members, etc.-  (1) A notice may be given by a company to any member either personally or by sending it by post to him to his registered address or, if he has no registered address in Pakistan to the address, if any, within Pakistan supplied by him to the company for the giving of notices to him.

 

            (2)        Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the notice and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in he ordinary course of post.

 

            (3)        If a member has no registered address in Pakistan, and has not supplied to the company an address within Pakistan for the giving of notices to him, a notice addressed to him or to the shareholder generally and advertised in a newspaper circulating in the Province or the part of Pakistan not forming part of a province in which the registered office of the company is situate shall be deemed to be duly given to him on the day on which the advertisement appears:

 

            Provided that in the case of a listed company such notice shall in addition to its being published as aforesaid be also published at least in one issue each of a daily newspaper in English language and a daily newspaper in a Urdu language having circulation in the Province in which the stock exchange on which the company is listed is situate.

           

            (4)        A notice may be given by the company to the joint-holders of a share by giving the notice to the joint-holder named first in the register in respect of the share.

            (5)        A notice may be given by the company to the person entitled to a share in consequence of the death or insolvency of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title or representatives of the deceased, or assignees of the insolvent, or by any like description, at the address, if any, in Pakistan supplied for the purpose by the person claiming to be so entitled, or until such an address has been so supplied by giving the notice in any manner in which the same might have been given if the death or insolvency had not occurred.

 

            (6)        In addition to any other mode provided by this Ordinance for notice of any general meeting, notice of every general meeting shall be given in some manner hereinbefore authorised to—

 

(a)        every member of the company except those members who, having no registered address within Pakistan, have not supplied to the company an address within Pakistan for the giving of notices to them;

 

(b)        every person entitled to a share in consequence of the death or insolvency of a member who, but for his death or insolvency, would be entitled to receive, notice of the meeting; and

 

(c)        the auditors of the company.

 

51.       Authentication of documents and proceedings.- Save as expressly provided in this Ordinance, a document or proceeding requiring authentication by a company may be signed by the chief executive or a director, secretary or other authorised officer of the company, and need not be under its common seal.

 

PART V – PROSPECTUS, ALLOTMENT, ISSUE AND TRANSFER OF SHARES AND DEBENTURES, DEPOSITS, ETC.

 

PROSPECTUS

            52.       Prospectus to be dated.- A prospectus issued by or on behalf of a company shall be dated, and that date shall, unless the contrary is proved, be taken as the date of publication of the prospectus.

 

            53.       Matters to be stated and reports to be set out in prospectus.-(1) Every prospectus issued—

 

(a)        by or on behalf of a company, or

 

(b)        by or on behalf of any person who has been engaged or interested in the formation of a company;

 

shall state the matters specified in section 1 of Part I of the Second Schedule and set out the reports specified in section 2 of that Part and the said sections 1 and 2 shall have effect subject to the provisions contained in section 3 of that part.

 

1[(1A) A sufficient number of copies of the prospectus issued under sub-section (1) shall be made available at the registered office of the company, with the stock exchange at which the company is listed or proposes to be listed and with the bankers to the issue, and the prospectus in its full text or in such abridged form as may be prescribed, shall be published at least in one Urdu and one English daily newspaper].

 

            (2)        No prospectus shall be issued or an advertisement of a prospectus published in a newspaper less than seven days or more than thirty days before the subscription list, as specified in the prospectus, is due to open:

 

            Provided that the Commission may for special reasons allow a prospectus to be issued or an advertisement of a prospectus to be published more than thirty days before the subscription list is due to open.

 

            (3)        If a prospectus is issued which does not comply with the provisions of sub-section (1) or sub-section (2), every person who is knowingly responsible for the issue of such prospectus shall be liable to a fine not exceeding ten thousand rupees and in the case of a containing default to a further fine not exceeding two hundred rupees for every day from the day of the issue of the prospectus until a prospectus complying with the requirements aforesaid is issued and a copy thereof is filed with the registrar.

 

            (4)        A condition requiring or binding an applicant for shares in or debentures of a company to waive compliance with any of the requirements of this section, or purporting to effect him with notice of any contract, document or matter not specifically referred to in the prospectus, shall be void.

 

            (5)        No one shall issue any form of application for shares in or debentures of a company, unless the form is accompanied by a prospectus which complies with the requirements of this section:

            Provided that this sub-section shall not apply if it is shown that the form of application was issued either–

 

(i)         in connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to the shares or debentures; or

 

(ii)        in relation to shares or debentures which were not offered to the public.

 

            (6)        If any person acts in contravention of the provisions of sub-section (5) he shall be liable to a fine not exceeding two thousand rupees.

 

            (7)        A director or other person responsible for the prospectus shall not incur liability by reason of any non-compliance with, or contravention of, any of the requirements of this section, if–

 

(a)        as regards any matter not disclosed, he proves that he had no knowledge thereof; or

 

(b)        he proves that the non-compliance or contravention arose from an honest mistake of fact on his part; or

 

(c)        that non-compliance or contravention was in respect of matters which, in the opinion of the registrar or officer dealing with the case, were immaterial, or was otherwise such as ought, in the opinion of that registrar or officer, as the case may be, having regard to all the circumstances of the case, reasonably to be excused:

 

                        Provided that no director or other person shall incur any liability in respect of the failure to include in a prospectus a statement with respect to the matters specified in clause 18 of Part I of the Second Schedule, unless it is proved that he had knowledge of the matters not disclosed.

 

            (8)        This section shall not apply–

 

(a)        to issue to the existing members or debenture-holders of a company of a prospectus or form of application relating to shares in or debentures of the company, whether an applicant for shares or debentures will or will not have the  right to renounce in favour of other persons; or

 

(b)        to the issue of a prospectus or form of application relating to shares or debenture which are, or are to be, in all respects uniform with shares or debentures previously issued and for the time being dealt in or quoted on a stock exchange;

 

but, subject as aforesaid, this section shall apply to a prospectus or a form of application, whether issued on or with reference to the formation of a company or subsequently.

 

            (9)        Nothing in this section shall limit or diminish any liability which any person may incur under the general law or under any other provision of this Ordinance.

 

54.       Expert to be unconnected with formation or management of company.- A prospectus inviting persons to subscribe for shares in or debentures of a company shall not include a statement purporting to be made by an expert, unless the expert is a person who is not, and has not been, engaged or interested in the formation or promotion, or in the management, of the company.

 

            55.       Expert’s consent to issue of prospectus containing statement by him.- A prospectus inviting persons to subscribe for shares in or debentures of a company and including a statement purporting to be made by an expert shall not be issued, unless–

 

(a)        he has given his written consent to the issue thereof with the statement included in the form and context in which it is included and has not withdrawn such consent before the delivery of a copy of the prospectus for registration; and

 

(b)        a statement that he has given and has not withdrawn his consent as aforesaid appears in the prospectus.

           

56.       Penalty and interpretation.- (1) If any prospectus is issued in contravention of section 54 or 55, the company, and every person who is knowingly a party to the issue thereof, shall be punishable with fine not exceeding five thousand rupees.

            (2)        In section 54 and 55, the expression “expert” includes an engineer, a valuer, an accountant and every other person whose profession gives authority to a statement made by him.

           

57.       Approval, issue and registration of prospectus.- (1) No listed company, and no company which proposes to make an application to a stock exchange for listing of its 211[securities, and no other person] shall issue, circulate or publish any prospectus or other document offering for subscription or publicly offering for sale any security unless approval of the Commission to its issue, circulation or publication has been obtained within the period of sixty days preceding the date of its issue.

 

            (2)        2[The Commission may, while according approval under sub-section (1), impose such condition as it may deem necessary];

 

            (3)        No prospectus shall be issued by or on behalf of a company unless on or before the date of its publication, there has been delivered to the registrar a copy thereof signed by every person who is named therein as a director or proposed director of the company or by his agent authorised in writing, and having endorsed thereon or attached thereto—

 

(a)        any consent to the issue of the prospectus required by section 55 from any person as an expert; and

 

(b)        in the case of a prospectus issued generally, also

 

(i)         a copy of every contract required by clause 16 of Part I of the Second Schedule to be specified in the prospectus, or, in the case of a contract not reduced into writing, a memorandum giving full particulars thereof; and

 

(ii)        where the persons making any report required by Part II of that Schedule have made therein, or have without giving the reasons, indicated therein, any such adjustments as are mentioned in clause 36 of Part I of that Schedule, a written statement signed by those persons setting out the adjustments and giving the reasons therefor.

 

            (4)        Every prospectus to which this section applies shall, on the face of it,—

 

(a)        state that a copy has been delivered to the registrar as required by sub-section (3);

 

(b)        specify any documents required by this section to be endorsed on or attached to the copy so delivered, or refer to statements included in the prospectus which specify those documents; and

 

(c)        where application has been made, or is proposed to be made, to a stock exchange for the listing of the security, state that such an application has been made or is proposed to be made.

 

            (5)        The registrar shall not register a prospectus unless the requirements of sections 52, 53, 54 and 55 and this section have been complied with and the prospectus is accompanied by the consent in writing of the person, if any, named therein as the auditor, legal adviser, attorney, solicitor, banker or broker, being a member of a stock exchange, of the company, to act in that capacity.

 

(6)                If a prospectus is issued, published or circulated without complying with, or in contravention of any provision of this section, the company, and every person who is knowingly a party to the issue, publication or circulation of the prospectus, shall be liable to a fine not exceeding ten thousand rupees and in the case of a continuing default to a further fine not exceeding two hundred rupees for every day from the date of issue, publication or circulation, as the case may be, of the prospectus, until a copy thereof complying with all the requirements of this section has been delivered to the registrar.

 

            58.       Terms of contract mentioned in prospectus or statement in lieu of prospectus not to be varied.- A company shall not, at any time, vary the terms of contract referred to in the prospectus or a statement in lieu of prospectus except subject to the approval of, or except on authority given by, the company in general meeting.

 

59.       Civil liability for mis-statements in prospectus.-  (1) Subject to the provisions of this section, where a prospectus invites persons to subscribe for shares in or debentures of a company, the following persons shall be liable to pay compensation to every person who subscribes for or purchases any share or debentures on the faith of the prospectus for any loss or damage he may have sustained by reason of any untrue statement included therein namely,—

(a)        every person who is a director of the company at the time of the issue of the prospectus;

 

(b)        every person who has authorised himself to be named and is named in the prospectus either as a director, or as having agreed to become a director, either immediately or after an interval of time;

 

(c)        every person who is a promoter of the company; and

 

(d)        every person who has given consent to the issue of the prospectus under section 55 or sub-section (5) of section 57:

 

                        Provided that where, under section 55, the consent of a person is required to the issue of a prospectus and he has given that consent, or where, under sub-section (5) of section 57, the consent of a person named in a prospectus is required and he has given that consent, he shall not, by reason of having given such consent, be liable under this sub-section as a person who has authorised the issue of the prospectus except in respect of an untrue statement, if any, purporting to be made by him as an expert.

 

(2)        No person shall be liable under sub-section (1), if he proves—

 

(a)        that, having consented to become a director of the company, he withdrew his consent before the issue of the prospectus, and that it was issued without his authority or consent;

 

(b)        that the prospectus was issued without his knowledge or consent, and that on becoming aware of its issue, he forthwith gave reasonable public notice that it was issued without his knowledge or consent;

 

(c)        that, after the issue of the prospectus and before allotment thereunder, he, on becoming aware of any untrue statement therein, withdrew his consent to the prospectus and gave reasonable public notice of the withdrawal and of the reason therefor; or

 

(d)        that—

 

(i)         as regards every untrue statement not purporting to be made on the authority of an expert or of a public official document or statement, he had reasonable ground to believe, and did up to the time of the allotment of the shares or debentures, as the case may be, believe, that the statement was true; and

 

(ii)        as regards every untrue statement purporting to be a statement by an expert or contained in what purports to be a copy of or an extract from a report or valuation of an expert, it was a correct and fair representation of the statement, or a correct copy of, or a correct and fair extract from, the report or valuation; and he had reasonable ground to believe, and did up to the time of the issue of the prospectus believe, that the person making the statement was competent to make it and that that person had given the consent required by section 55 to the issue of the prospectus and had not withdrawn that consent before delivery of a copy of the prospectus for registration or, to the defendant’s knowledge, before allotment thereunder; and

 

(iii)       as regard every untrue statement purporting to be a statement made by an official person or contained in what purports to be a copy of or extract from a public official document, it was a correct and fair representation of the statement, or a correct copy of, or a correct and fair extract from, the document:

 

                        Provided that this sub-section shall not apply in the case of a person liable, by reason of his having given consent required of him by section 55, as a person who has authorised the issue of the prospectus in respect of an untrue statement purporting to be made by him as an expert.

 

            (3)        A person who, apart from this sub-section would, under sub-section (1), be liable by reason of his having given a consent required of him by section 55, as a person who has authorised the issue of the prospectus in respect of an untrue statement purporting to be made by him as an expert, shall not be so liable, if he proves—

 

(a)        that, having given his consent under section 55 to the issue of the prospectus, he withdrew it in writing before delivery of a copy of the prospectus for registration;

 

(b)        that, after delivery of a copy of the prospectus for registration and before allotment thereunder, he, on becoming aware of the untrue statement withdrew his consent in writing and gave reasonable public notice of the withdrawal and of the reason therefor; or

 

(c)        that he was competent to make the statement and that he had reasonable ground to believe, and did up to the time of the allotment of shares or debentures believe, that the statement was true.

(4)        Where—

 

(a)        the prospectus specifies the name of a person as a director of the company, or as having agreed to become a director thereof, and he has not consented to become a director, or has withdrawn his consent before the issue of the prospectus, and has not authorised or consented to the issue thereof; or

 

(b)        the consent of a person is required under section 55 to the issue of the prospectus and he either has not given that  consent or has withdrawn it before the issue of the prospectus:

 

the directors of the company, excluding those without whose knowledge or consent the prospectus was issued, and every other person who authorised the issue thereof, shall be liable to indemnify the person referred to in clause (a) or clause (b), as the case may be, against all damages, costs and expenses to which he may be made liable by reason of his name having been inserted in the prospectus or of the inclusion therein of a statement purporting to be made by him as an expert, as the case may be,  or in defending himself against any suit or legal proceeding brought against him in respect thereof:

 

            Provided that a person shall not be deemed for the purposes of this sub-section to have authorised the issue of a prospectus by reason only of his having given the consent required by section 55 to the inclusion therein of a statement purporting to be made by him as an expert.

 

            (5)        Every person who becomes liable to make any payment by virtue of this section may recover contribution, as in cases of contract, from any other person who, if sued separately, would have been liable to make the same payment, unless the former person was, and the latter person was not, guilty of fraudulent misrepresentation.

 

(6)        For the purposes of this section—

 

(a)        the expression “promoter” means a promoter who was a party to the preparation of prospectus or a portion thereof containing the untrue statement, but does not include any person by reason of his acting in a professional capacity for persons engaged in procuring the formation of the company; and

 

(b)        the expression “expert” has the same meaning as in section 55.

           

60.       Criminal liability for mis-statements in prospectus.- (1) Where a prospectus includes any untrue statement, every person who signed or authorised the issue of the prospectus shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to ten thousand rupees, or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did up to the time of the issue of the prospectus believe, that the statement was true.

 

            (2)        A person shall not be deemed for the purposes of this section to have authorised the issue of a prospectus by reason only of his having given–

 

(a)        the consent required by section 55 to the inclusion therein of a statement purporting to be made by him as an expert, or

 

(b)        the consent required by sub-section (5) of section 57.

           

61.       Document containing offer of shares or debentures for sale to be deemed prospectus.-   (1) Where a company allots or agrees to allot any shares in or debentures of the company with a view to all or any of those shares or debentures being offered for sale to the public, any document by which the offer for sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company; and all enactments and rules of law as to the contents, filing and registration of a prospectus and as to liability in respect of statements in and omissions from a prospectus, or otherwise relating to prospectus, shall apply with the modifications, specified in sub-section (3), (4) and (5), and have effect accordingly, as if the shares or debentures had been offered to the public for subscription and as if persons accepting the offer in respect of any shares or debentures, were subscribers for those shares or debentures, but without prejudice to the liability, if any, of the person by whom the offer is made in respect of mis-statement contained in the document or otherwise in respect thereof.

 

            (2)        For the purposes of this Ordinance, it shall, unless the contrary is proved, be evidence that an allotment of, or an agreement to allot, shares or debentures was made with a view to the shares or debentures being offered for sale to the public if it is shown–

 

(a)        that an offer of the shares or debentures or of any of them for sale to the public was made within one year after the allotment or agreement to allot;

 

(b)        that at the date when the offer was made; the whole of the consideration to be received by the company in respect of the shares or debentures had not been received by it; or

 

(c)        that an offer of the shares or debentures or of any of them for sale to the public was made in pursuance of an understanding to which the company was directly or indirectly a party or a condition imposed by any authority in relation to the position, business or privileges of the company.

 

            (3)        For the purposes of this section, section 53 shall have effect as if it required a prospectus to state, in addition to the matters required by that section to be stated in a prospectus,–

 

(a)        the net amount of the consideration received or to be received by the company in respect of the shares or debentures to which the offer relates; and

 

(b)        the place and time at which the contract under which the said shares or debentures have been or are to be allotted may be inspected.

           

            (4)        For the purposes of this section, section 57 shall have effect as if the persons making the offer were persons named in a prospectus as directors of a company.

           

            (5)        Where a person making an offer to which this section relates is a company or a firm, it shall be sufficient if the document referred to in sub-section (1) is signed on behalf of the company or firm by two directors of the company or by not less than one-half of the partners in the firm, as the case may be; and any such director or partner may sign by his agent authorised in writing.

           

62.       Offer of shares or debentures for sale by certain persons.-   (1) No person who holds more than ten per cent of the shares or debentures of a company shall offer for sale to the public any shares or debenture of the company held by him except with the approval of the Commission.

 

            (2)        Any document by which an offer for sale to the public is made by any such person as is referred to in sub-section (1) shall, for all purposes, be deemed to be a prospectus issued by a company, and all enactments and rules of law as to the contents, filing and registration of a prospectus and as to the liability in respect of statements in and omissions from a prospectus, or otherwise relating to a prospectus, shall apply with the modifications specified in sub-sections (3) and (4), and have effect accordingly, but without prejudice to the liability, if any, of the persons by whom the offer is made in respect of mis-statements contained in the document or otherwise in respect thereof.

           

            (3)        For the purposes of this section, section 57 shall have effect as if the person making the offer were a person named in a prospectus as director of a company.

 

            (4)        Where a person making an offer to which this section relates is a company or a firm, it shall be sufficient if the document referred to in sub-section (2) is signed on behalf of the company or firm by two directors of the company or not less than one-half of the partners in the firm, as the case may be and any such director or partner may sign by his agent authorsied in writing.

 

            1[(5)       A notice, circular, advertisement or other document soliciting bids, offers, proposals or tenders for sale of shares or other securities acquired in the course of normal business or for negotiating sale thereof or expressing an intention to disinvest such shares or other securities issued by a scheduled bank or a financial institution shall not be deemed to be a prospectus or an offer for sale to the public for the purposes of sections 61 and 62.]

        

         1 [62A.    Issue of securities outside Pakistan.– No company shall, except with the prior approval of the Commission, issue any security outside Pakistan].

        

         63.          Interpretation of provisions relating to prospectus.- (1) For the purposes of the foregoing provisions relating to a prospectus, —

 

(a)        a statement included in a prospectus shall be deemed to be untrue, if the statement is misleading in the form and context in which it is included; and

 

(b)        where the omission from a prospectus of any matter is calculated to mislead, the prospectus shall be deemed, in respect of such omission, to be a prospectus in which an untrue statement is included.

 

            (2)        For the purposes of sections 59 and 60 and clause (a) of sub-section (1) of this section, the expression “included”, when used in reference to a prospectus, means included in the prospectus itself or contained in any report or memorandum appearing on the face thereof or by reference incorporated therein or issued herewith.

           

64.       Newspaper advertisement of prospectus.-  Where any prospectus is published as a newspaper advertisement, it shall not be necessary in the advertisement to comply with the requirements of sub-clause (1) of clause 1 of section 1 of Part I of the Second Schedule in so far as the said provisions require the contents of the memorandum or the signatories thereto, or the number of shares subscribed for by them, to be specified.

           

65.       Construction of references to offering shares or debentures to the public, etc..-  (1) Any reference in this Ordinance or in the articles of a company to offering of shares or debentures to the public, or to invitation to the public to subscribe for shares or debentures, shall, unless otherwise expressly provided in this Ordinance, include a reference to offering of shares or debentures to any section of the public or to invitation to any section of public to subscribe for shares or debentures, as the case may be.

 

            Explanation:    The term “section of the public” includes existing members or debenture-holders of the company or clients of the persons issuing the prospectus.

 

            (2)        No offer or invitation shall be treated as made to the public by virtue of sub-section (1) if the offer or invitation can properly be regarded, in all the circumstances–

 

(a)        as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation; or

 

(b)        otherwise as being a domestic concern of the persons making and receiving the offer or invitation.

 

            (3)        Without prejudice to the generality of sub-section (2), a provision in a company’s articles prohibiting invitations to the public to subscribe for shares or debentures shall not be taken as prohibiting the making to members or debenture-holders of an invitation which can properly be regarded in the manner set forth in that sub-section.

 

            (4)        The provisions of this Ordinance relating to private companies shall be construed in accordance with the provisions contained in sub-sections (1) to (3).

           

66.       Penalty for fraudulently inducing persons to invest money.-  Any person who, either by knowingly or recklessly making any statement, promise or forecast which is false, deceptive or misleading, or by any dishonest concealment of material facts, induces or attempts to induce another person to enter into, or to offer to enter  into,–

 

(a)        any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting shares or debentures; or

 

(b)        any agreement the purpose or pretended purpose of which is to secure a profit to any of the parties from the yield of shares or debentures, or by reference to fluctuations in the value of shares or debentures;

 

shall be punishable with imprisonment of either description for a term which may extend to three years, or with fine which may extend to twenty thousand rupees, or with both.

 

 

ALLOTMENT

 

            67.  Application for, and allotment of, shares and debentures.- (1) No application for allotment of shares in and debentures of a company in pursuance of a prospectus shall be made for shares or debentures of less than such nominal amount as the Commission may, form time to time, specify, either generally or in a particular case.

 

            (2)        The Commission may specify the form of an application for subscription to shares in or debentures of a company which may, among other matters, contain such declarations or verifications as it may, in the public interest, deem necessary; and such form then shall form part of the prospectus.

 

            (3)        All certificates, statements and declarations made by the applicant shall be binding on him.

 

            (4)        An application for shares in or debentures of a company which is made in pursuance of a prospectus shall be irrevocable.

 

            (5)        Whoever contravenes the provisions of sub-section (1) or sub-section (2), or makes an incorrect statement, declaration or verification in the application for allotment of shares, shall be liable to a fine which may extend to ten thousand rupees.

           

68.       Restriction as to allotment.-  (1) No allotment shall be made of any share capital of a company offered to the public for subscription unless the amount stated in the prospectus as the minimum amount which in the opinion of the directors must be raised by the issue of share capital in order to provide for the matters specified in clause 5 of section 1 of Part I of the Second Schedule has been subscribed, and the full amount thereof has been paid to and received in cash by the company.

 

            (2)        The amount referred to in sub-section (1) as the amount stated in the prospectus shall be reckoned exclusively of any amount payable otherwise than in cash and is in this Ordinance referred to as the minimum subscription.

 

            (3)        All moneys received from applicants for shares shall be deposited and kept in a separate bank account in a schedule bank until returned in accordance with the provisions of sub-section (5) or until the certificate to commence business is obtained under section 146.

 

            (4)        The amount payable on application on each share shall be the full nominal amount of the share.

 

            (5)        If the conditions aforesaid have not been complied with on the expiration of forty days after the first issue of the prospectus, all money received from applicants for share shall be forthwith repaid to them without surcharge, and, if any such money is not so repaid within fifty days after the issue of the prospectus, the directors of the company shall be jointly and severally liable to repay that money with surcharge at the rate of one and-a-half per cent for every month or part thereof from the expiration of the fiftieth day:

 

            Provided that a director shall not be liable if he proves that the default in repayment of the money was not due to any misconduct or negligence on his part.

 

            (6)        Any condition purporting to require or bind any applicant for shares to waive compliance with any requirement of this section shall be void.

 

            (7)        This section, except sub-section (4) thereof, shall not apply to any allotment of shares subsequent to the first allotment of shares offered to the public for subscription.

 

            (8)        In the case of the first allotment of shares capital payable in cash of a company which does not issue any invitation to the public to subscribe for its shares, no allotment shall be made unless the minimum subscription, that is to say,–

 

(a)        the amount, if any, fixed by the memorandum or articles and specified in the statement in lieu of prospectus as the minimum subscription referred to in sub-section (1) upon which the directors may proceed to allotment; or

 

(b)        if no amount is so fixed and specified, the whole amount of the share capital other than that issued or agreed to be issued as paid up otherwise than in cash;

 

has been subscribed and the full nominal amount of each share payable in cash has been paid to and received by the company.

 

            (9)        Sub-section (8) shall not apply to a private company.

 

            (10)      In the event of any contravention of any provisions of this section, every promoter, director or other person knowingly responsible for such contravention shall be liable to a fine not exceeding ten thousand rupees and in the case of a continuing contravention to a further fine not exceeding two hundred rupees for every day after the first during which the contravention continues.

 

            (11)      For the purpose of this section, the expression “promoter” has the same meaning as in section 59.

            69.       Statement in lieu of prospectus.– (1) A company having a share capital, which does not issue a prospectus on or with reference to its formation, or which has issued such a prospectus but has not proceeded to allot any of the shares offered to the public for subscription, shall not allot any of its shares or debentures unless, at least three days before the first allotment of either share or debenture, there has been delivered to the registrar for registration a statement in lieu of prospectus signed by every person who is named therein as a director or proposed director of the company or by his agent authorised in writing, in the form and containing the particulars set out in section 1 of Part II of the Second Schedule and, in the cases mentioned in section 2 of that Part, setting out the reports specified therein, and the said section 1 and 2 shall have effect subject to the provisions contained in section 3 of that Part.

 

            (2)        Every statement in lieu of prospectus delivered under sub-section (1), where the person making any such report as aforesaid have made therein, or have without giving the reason indicated therein, made any such adjustments as are mentioned in clause 5 of Part II of the Second Schedule, shall have endorsed thereon or attached thereto a written statement signed by those persons, setting out the adjustments and giving the reasons thereof.

 

            (3)        This section shall not apply to a private company.

 

            (4)        If a company acts in contravention of sub-section (1) or sub-section (2), the company, and every officer of the company who willfully authorises or permits the contravention, shall be liable to a fine not exceeding five thousand rupees and in the case of a continuing contravention with a further fine not exceeding one hundred rupees for every day after the first during which the contravention continues.

 

            (5)        Where a statement in lieu of prospectus delivered to the registrar under sub-section (1) includes any untrue statement, any person who signed or authorised the delivery of the statement in lieu of prospectus for registration shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to ten thousand rupees, or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did up to the time of delivery for registration of the statement in lieu of prospectus believe, that the statement was true.

 

            (6)        For the purposes of this section,–

 

(a)        a statement included in a statement in lieu of prospectus shall be deemed to be untrue if it is misleading in the form and  context in which it is included; and

 

(b)        where the omission from a statement in lieu of prospectus of any matter is calculated to mislead, the statement in lieu of prospectus shall be deemed, in respect of such omission, to be a statement in lieu of prospectus in which an untrue statement is included.

 

            (7)        For the purposes of sub-section (5) and clause (a) of sub-section (6), the expression  “included”, when used with reference to a statement in lieu of prospectus, means included in the statement in lieu of prospectus itself or contained in any report or memorandum appearing on the face thereof, or by reference incorporated therein, or issued therewith.

           

70.       Effect of irregular allotment.- (1) An allotment made by a company to an applicant in contravention of the provisions of section 68 or 69 shall be voidable at the instance of the applicant within thirty days after the holding of the statutory meeting of the company and not later, or in any case where the company is not required to hold a statutory meeting or where the allotment is made after the holding of the statutory meeting within thirty days after the date of the allotment, and not later, and shall be so voidable notwithstanding that the company is in course of being wound up.

 

            (2)        If any officer of a company knowingly contravenes or permits or authorises the contravention of any of the provisions of section 68 or 69 with respect to allotment, he shall, without prejudice to any other liability, be liable to compensate the company and the allottee respectively for any loss, damages or costs which the company or the allottee may have sustained or incurred thereby:

 

            Provided that proceedings to recover any such loss, damages or costs shall not be commenced after the expiration of two years from the date of the allotment.

           

71.       Repayment of money received for shares not allotted.–  (1) Where a company issues any invitation to the public to subscribe for its shares or other securities, the company shall take a decision within ten days of the closure of the subscription lists as to what applications have been accepted or are successful and refund the money in the case of the unaccepted or unsuccessful applications within ten days of the date of such decision.

 

            (2)        If the refund required by sub-section (1) is not made within the time specified therein, the directors of the company shall be jointly and severally liable to repay that money with surcharge at the rate of one and-a-half per cent. for every month or part thereof from the expiration of the fifteenth day and, in addition, to a fine not exceeding five thousand rupees and in the case of a continuing offence to a further fine not exceeding one hundred rupees for every day after the said fifteenth day on which the default continues:

 

            Provided that a director shall not be liable if he proves that the default in the repayment of money was not due to any misconduct or negligence on his part.

 

            (3)        Any condition purporting to require or bind any applicant for shares or other securities to waive any requirement of this section shall be void.

 

72.       Allotment of shares and debentures to be dealt in on stock exchange.–  (1) Where a prospectus, whether issued generally or not, states that application has been or will be made for permission for the shares or debentures offered thereby to be dealt in on any stock exchange, any allotment made on an application in pursuance of the prospectus shall, whenever made, be void if the permission has not been applied for before the seventh day after the first issue of the prospectus or if the permission has not been granted before the expiration  of twenty-one days from the date of the closing of the subscription lists or such longer period not exceeding forty-two days as may, within the said twenty-one days, be notified to the applicant for permission by or on behalf of the stock exchange.

 

            (2)        Where the permission has not been applied for as aforesaid, or has not been granted as aforesaid the company shall forthwith repay without surcharge all money received from applicants in pursuance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay it, the directors of the company shall be jointly and severally liable to repay that money from the expiration of the eight day together with surcharge at the rate of one and-a-half per cent. for every month or part thereof from the expiration of the eighth day and in addition, to a fine not exceeding five thousand rupees and in the case of a continuing offence to a further fine of one hundred rupees for every day after the said eight day on which the default continues:

 

            Provided that a director shall not be liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

 

            (3)        All moneys received as aforesaid shall be deposited and kept in a separate bank account in a scheduled bank so long as the company may become liable to repay it under sub-section (2); and, if default is made in complying with this sub-section, the company and every officer of the company who knowingly and willfully authorises or permits the default shall be liable to a fine not exceeding five thousand rupees.

            (4)        Any condition purporting to require or bind any applicant for shares or debentures to waive compliance with any requirement of this section shall be void.

 

            (5)        For the purposes of this section, permission shall not be deemed to be refused if it is intimated that the application for it, though not at present granted, will be given further consideration.

 

            (6)        This section shall have effect–

 

(a)        in relation to any shares or debentures agreed to be taken by a person underwriting an offer thereof by a prospectus as if he had applied therefor in pursuance of the prospectus; and

 

(b)        in relation to a prospectus offering shares for sale with the following modifications, that is to say,–

 

(i)         reference to sale shall be substituted for reference to allotment;

 

(ii)        the person by whom the offer is made and not the company, shall be liable  under sub-section (2) to repay the money received from applicant, and reference to the company’s liability under that sub-section shall be construed accordingly; and

 

(iii)       for the reference in sub-section (3) to the company and every officer of the company there shall be substituted a reference to any person by or through whom the offer is made and who knowingly and willfully  authorises or permits the default.

           

73.       Return as to allotments.–  (1) Whenever a company having a share capital makes any allotment of its shares, the company shall, within thirty days thereafter,–

 

(a)        file with the registrar a return of the allotment, stating the number and nominal amount of the shares comprised in the allotment 1[and such particulars as may be prescribed] of each allottee, and the amount paid on each share; and

(b)        in the case of shares allotted as paid up otherwise than in cash, produce for the inspection and examination of the registrar a contract in writing constituting the title of the allottee to the allotment together with any contract of sale, or for services or other consideration in respect of which that allotment was made, such contracts being duly stamped, and file with the registrar copies verified in the prescribed manner of all such contracts and a return stating the number and nominal amount of shares so allotted, the amount to be treated as paid-up, and the consideration for which  they have been allotted; and

 

(c)        file with the registrar–

 

(i)         in the case of bonus shares, a return stating the number and nominal amount of such shares comprised in the allotment and 2[such particulars which may be prescribed] of each allottee together with a copy of the resolution authorising the issue of such shares;

 

(ii)        in the case of issue of shares at a discount, a copy of the resolution passed by the company authorising such issue together with a copy of the order of the Commission sanctioning the issue, and where the maximum rate of discount exceeds ten per cent, a copy  of the order of the Commission permitting the issue at the higher percentage.

 

            Explanation:–  Shares shall not be deemed to have been paid for in cash except to the extent that the company shall actually have received cash therefor at the time of, or subsequent to, the agreement to issue the shares, and where shares are issued to a person who has sold or agreed to sell property or rendered or agreed to render services to the company, or to persons nominated by him, the amount of any payment made for the property or services shall be deducted from the amount of any cash payment made for the shares and only the balance, if any, shall be treated as having been paid in cash for such shares, notwithstanding  any bill of exchange or cheques or other securities for money.

 

            (2)        Where such a contract as is mentioned in clause (b) of sub-section (1) is not reduced to writing, the company shall, within thirty days after the allotment, file with the registrar the prescribed particulars of the contract stamped with the same stamp duly as would have been payable if the contract had been reduced to writing, and these particulars shall be deemed to be an instrument within the meaning of the Stamp Act, 1899 (II of 1899), and the registrar may, as a condition of filing the particulars, require that the duty payable thereon be adjudicated under section 31 of that Act.

 

            (3)        If the registrar is satisfied that in the circumstances of any particular case the period of thirty days specified in sub-sections (1) and (2) for compliance with the requirements of this section is inadequate, he may extend that period as he thinks fit, and, if he does so, the provisions of sub-sections (1) and (2) shall have effect in that particular case as if for the said period of thirty days the extended period allowed by the registrar were substituted.

 

            (4)        If default is made in complying with any requirement of this section, the company and every officer of the company who is knowingly a party to the default shall be liable to a fine not exceeding five hundred rupees for every day during which the default continues.

 

            (5)        This section shall apply mutatis mutandis to shares which are allotted or issued or deemed to have been issued to a scheduled bank or a financial institution in pursuance of any obligation of a company to issue shares to such scheduled Bank or financial institution:

 

            Provided that where default is made by a company in filing a return of allotment in respect of the shares referred to in this sub-section, the scheduled bank or the financial institution to whom shares have been allotted or issued or deemed to have been issued may file a return of allotment in respect of such shares with the registrar together with such documents as may be specified by the Commission in this behalf, and such return of allotment shall be deemed to have been filed by the company itself and the scheduled bank the 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 the return.

                 

 

CERTIFICATE OF SHARES AND DEBENTURES

 

            74.   Limitation of time for issue of certificates.– (1) Every company shall, within ninety days after the allotment of any of its shares, debentures or debenture stock, and within forty-five days after the application for the registration of the transfer of any such shares, debentures or debenture stock, complete and have ready for delivery the certificates of all shares, the debentures, and the certificates of all debenture stock allotted or transferred, and unless sent by post or delivered to the person entitled thereto, within that period, shall give notice of this fact to the shareholders or debenture-holders, as the case may be, immediately thereafter in the manner prescribed, unless the conditions  of issue of the shares, debentures or debenture stock otherwise provide.

            1[Provided that the company shall, within five days after an application is made for the registration of the transfer of any shares, debentures or debenture stock to a central depository, register such transfer in the name of the central depository.]

 

            Explanation–  The expression “transfer”, for the purposes of this sub-section, means a transfer duly stamped and otherwise valid, and does not include such a transfer as the company is for any reason entitled to refuse to register and does not register.

 

(2)       If default is made in complying with the requirements of sub-section (1) the company, and every officer of the company who is knowingly a party to the default, shall be liable to a fine not exceeding one hundred rupees for every day during which the default continues.

           

75.       Issue of duplicate certificates.- (1) A duplicate of a certificate of shares, debentures or debenture stock issued under section 74 shall be issued by the company within forty-five days from the date of application if the original–

 

(a)        is proved to have been lost or destroyed, or

 

(b)        having been defaced or  mutilated or torn  is surrendered to the company.

 

            (2)        The company, after making such inquiry as to the loss, destruction, defacement or mutilation of the original, as it may deem fit to make, shall, subject to such terms and conditions, if any, as it may consider necessary, issue the duplicate:

 

            Provided that the company shall not charge fee exceeding the sum prescribed and the actual expenses incurred on such inquiry.

 

            (3)        If the company for any reasonable cause is unable to issue duplicate certificate, it shall notify this fact, alongwith the reasons within thirty days from the date of the application, to the applicant.

 

            (4)        If default is made in complying with the requirements of this section, the company and every officer of the company who is knowingly a party to the default shall be liable to a fine not exceeding five hundred rupees.

            (5)        If a company with intent to defraud, renews a certificate or issues a duplicate thereof, the company shall be punishable with fine which may extend to twenty thousand rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees, or with both.

 

TRANSFER OF SHARES AND DEBENTURES

 

            76.       Transfer of shares and debentures.- (1) An application for registration of the transfer of shares and debentures in a company may be made either by the transferor or the transferee, and subject to the provisions of this section, the company shall enter in its register of members the name of the transferee in the same manner and subject to the same conditions as if the application was made by the transferee:

 

            Provided that the company shall not register a transfer of shares or debentures unless proper instrument of transfer duly stamped and executed by the transferor and the transferee has been delivered to the company alongwith the scrip.

 

            (2)        Where a transfer deed is lost, destroyed or mutilated before its lodgment, the company may on an application made by the transferee and bearing the stamp required by an instrument of transfer, register the transfer of shares or debentures if the transferee proves to the satisfaction of the directors of the company that the transfer deed duly executed has been lost, destroyed or mutilated:

 

            Provided that before registering the transfer of shares or debentures the company may demand such indemnity as it may think fit.

 

            (3)        All references to the shares or debentures in this section, shall in case of a company not having share capital, be deemed to be references to interest of the members in the company.

 

            (4)        Every company shall maintain at its registered office a register of transfers of shares and debentures made from time to time and such register shall be open to inspection by the members and supply of copy thereof in the manner stated in section 150.

 

            (5)        Nothing in sub-section (1) shall prevent a company from registering as shareholder or debenture-holder a person to whom the right to any share or debenture of the company has been transmitted by operation of law.

            (6)        In the case of a public company, a financial institution duly approved by the Commission may be appointed as the transfer agent on behalf of the company.

 

            (7)        If a company makes default in complying with any of the provisions of sub-sections (1) to (4), it shall be liable to a fine not exceeding five thousand rupees and every officer of the company who is knowingly or willfully a party to such default shall be liable to a like penalty.

 

            77.       Directors not to refuse transfer of shares.-  The directors of a company shall not refuse to transfer any fully paid shares or debentures unless the transfer deed is, for any reason, defective or invalid:

 

            Provided that the company shall within thirty days 1[or, where the transferee is a central depository, within five days] from the date on which the instrument of transfer was lodged with it notify the defect or invalidity to the transferee who shall, after the removal of such defect or invalidity, be entitled to relodge the transfer deed with the company:

 

            Provided further that the provisions of this section shall, in relation to a private company, be subject to such limitations and restrictions as may have been imposed by the articles of such company.

 

            78.       Notice of refusal to transfer.-  (1) If a company refuses to register a transfer of any shares or debentures, the company shall, within thirty days after the date on which the instrument of transfer was lodged with the company, send to the transferee notice of the refusal indicating reasons for such refusal.

 

            (2)        If default is made in complying with section 77 or this section, the company and every officer of the company who is a party to the default shall be liable to a fine not exceeding [twenty] thousand rupees and to a further fine not exceeding [one thousand] rupees for every day after the first during which the default continues.

 

[78-A. Appeal against refusal for registration of transfer. (1) The transferor or transferee, or the person who gave intimation of the transmission by operation of law, as the case may be, may appeal to the Commission against any refusal of the company to register the transfer or transmission, or against any failure on its part, within the period referred to in sub-section (1) of section 78 either to register the transfer or transmission or to send notice of its refusal to register the same.

 

 

           (2)        An appeal to the Commission under sub-section (1) may be preferred-

 

 

(a)               in case the appeal is against the refusal to register a transfer or transmission, within two months of the receipt by him of the notice of refusal; and

 

(b)               in case the appeal is against the failure referred to in sub-section (1) within two months from the expiry of the period referred to in sub-section (1) of section 78.

 

(3)       The Commission shall, after causing reasonable notice to be given to the company and also to the transferor and the transferee or, as the case may require, to the person giving intimation of the transmission by operation of law and the previous owner, if any, and giving them a reasonable opportunity to make their representation, may, by an order in writing, direct either that the transfer or transmission shall be registered by the company or that it need not be registered by it and in the former case, the company shall give effect to the decision within fifteen days of the receipt of the order.

 

(4)        Before making an order under sub-section (3) on an appeal against any refusal of the company to register any transfer or transmission the Commission may require the company to disclose to it the reasons for such refusal.

 

(5)        The Commission may, in its aforesaid order, give such incidental and consequential directions as to the payment of costs or otherwise as it deems fit.

 

(6)        If default is made in giving effect to the order of the Commission within the period specified in sub-section (3), every director and officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees, for every day after the first during which the default continues.]

 

            79.       Transfer to successor-in-interest.- The transfer of shares or debentures from a deceased member or holder to his lawful nominee successor-in-interest shall be made on application by such nominee successor duly supported by a document evidencing nomination or lawful award of the relevant property to such nominee or successor and thereupon the nominee or successor shall be entered as a member:

 

            Provided that the company may, on furnishing of a suitable indemnity by such nominee or successor, proceed to transfer the security in his name and enter him in the register of members.

 

80.       Transfer to nominee of a deceased member.- (1) Notwithstanding anything contained in any other law for the time being in force or in any disposition by a member of a company of his interest represented by the shares held by him as a member of the company, a person may on acquiring interest in a company as member, represented by shares, at any time after acquisition of such interest deposit with the company a nomination conferring on one or more persons the right to acquire the interest in the shares therein specified in the event of his death:

 

            Provided that, where a member nominates more than one person, he shall specify in the nomination the extent of right conferred upon each of the nominees, so however that the number of shares therein specified are possible of ascertainment in whole numbers.

 

            (2)        Where any nomination, duly made and deposited with the company as aforesaid, purports to confer upon any person the right to receive the whole or any divisible part of the interest therein mentioned, the said person shall, on the death of the member, become entitled to the exclusion of all other persons, to become the holder of the shares or the part thereof, as the case may be, and on receipt of proof of the death of the member alongwith the relative scrips, the transmission of the said shares shall be registered in favour of the nominee to the extent of his interests unless—

 

(a)        such nomination is at any time varied by another nomination made and deposited before the death of the member in like manner or expressly cancelled by notice in writing to the company; or

 

(b)        such nomination at any time becomes invalid by reason of the happening of some contingency specified therein;

 

and if the said person predeceases the member, the nomination  shall, so far as it relates to the right conferred upon the said person, become void and of no effect:

 

            Provided that where provision has been duly made in the nomination conferring upon some other person such right instead of the person deceased, such right shall, upon the deceased as aforesaid of the said person, pass to such other person.

 

            (3)        The person to be nominated as aforesaid shall not be a person other than the following relatives of the member, namely, a spouse, father, mother, brother, sister and son or daughter, including a step or adopted child.

 

            (4)        The nomination as aforesaid shall in no way prejudice the right of the member making the nomination to transfer, dispose of or otherwise deal in the shares owned by him during his lifetime and shall have effect in respect of the shares owned by the said member on the day of his death.

 

             81.  Transfer by nominee or legal representative.- A transfer of the shares or debentures or other interest of a deceased member of a company made by his nominee or legal representative shall, although the nominee or legal representative is not himself a member, be as valid if he had been a member at the time of execution of the instrument of transfer.

 

COMMISSION, DISCOUNT, PREMIUM AND REDEEMABLE PREFERENCE SHARES

 

            82.  Power to pay certain commission, and prohibition of payment of other commissions, discounts, etc.-  (1) It shall be lawful for a company to pay a commission to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares in or debentures of the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any shares in or debentures of the company if—

 

(a)        the payment of the commission is authorised by the articles;

 

(b)        the commission paid or agreed to be paid does not exceed such rate per cent of amount as may generally or in a particular case be fixed by the Commission; and

 

(c)        the amount or rate per cent of the commission paid or agreed to be paid is–

 

(i)         in the case of shares or debentures offered to the public for subscription, disclosed in the prospectus; or

 

(ii)        in the case of shares or debentures not offered to the public for subscription, disclosed in the statement in lieu of  prospectus, or in a statement in the prescribed form signed in like manner as a statement in lieu of  prospectus and delivered before the payment of the commission to the registrar for registration and, where a circular or notice, not being a prospectus, inviting subscription for the shares or debentures, is issued, also disclosed in that circular or notice; and

 

(d)        the number of shares or debentures which persons have agreed for a commission to subscribe absolutely is disclosed in the manner  aforesaid.

 

            (2)        Save as aforesaid and save as provided in section 84, no company shall allot any of its shares or debentures, or apply any of its moneys, either directly or indirectly, in payment of any commission, discount or allowance, to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares in or debentures of the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any shares in or debentures of the company, whether the shares, debentures or money be so allotted or applied by being added to the purchase money of any property acquired by the company or to the contract price of any work to be executed for the company, or the money be paid out of the nominal purchase money or contract price, or otherwise.

 

            (3)        Nothing in this section shall effect the power of any company to pay such brokerage as it has heretofore been lawful for a company to pay, but brokerage shall not in any case exceed one per cent of the price at which shares or debentures issued have been actually and not merely sold through the broker or shall be paid at not more than such other rate per cent as may from time to time be specified by the Commission, generally or in a particular case.

 

            (4)        A vendor, promoter, or other person who receives payment in shares, debentures or money from a company shall have and shall be deemed always to have had power to apply any part of the shares, debentures or money so received in payment of any commission the payment of which, if made directly by the company, would have been legal under this section.

 

            (5)        If default is made in complying with the provisions of this section, the company and every officer of the company who knowingly and willfully is in default shall–

 

(a)        for non-compliance with the provisions of clause (b) a sub-section (1), be liable to a fine not exceeding two thousand rupees;

 

(b)        for non-compliance with the provisions of clause (c) or clause (d) of that sub-section, be liable to a fine not exceeding one thousand rupees; and

 

(c)        for non-compliance with any other provision of this section, be liable to a fine not exceeding five hundred rupees.

 

            83.       Application of premium received on issue of shares.-  (1) Where a company issues shares at a premium, whether in cash or otherwise, a sum equal to the aggregate amount or the value of the premiums on those shares shall be transferred to an account, to be called “the share premium account”; 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 share premium account were paid-up capital of the company.

 

            (2)        The share premium account may, notwithstanding anything contained in sub-section (1), be applied by the company–

 

(a)        in writing off the preliminary expenses of the company;

 

(b)        in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company;

 

(c)        in providing for the premium payable on the redemption of any redeemable preference shares or debentures  of the company; or

 

(d)        in paying up un-issued shares of the company to be issued to members of the company as fully paid bonus shares.

 

            (3)        Where a company has before the commencement of this Ordinance, issued any shares at a premium, this section shall apply as if the shares had been issued after such commencement:

 

            Provided that any part of the premium which has been so applied that it does not at the commencement of this Ordinance form an identifiable part of the company’s reserves within the meaning of the Fourth Schedule or the Fifth Schedule shall be disregarded in determining the sum to be included in the share premium account.

 

            84.       Power to issue shares at a discount.-  (l) Subject to the provisions of this section, it shall be lawful for a company to issue shares in the company at a discount:

 

            Provided that–

 

(a)        the issue of the shares at a discount must be authorised by resolution passed in general meeting of the company and must be sanctioned by the Commission;

 

(b)        the resolution must specify the maximum rate of discount, 1[…], at which shares are to be issued;

 

(c)        not less than one year must at the date of issue have elapsed since the date on which the company was entitled to commence business; and

 

(d)        the share to be issued at a discount must be issued within sixty days after the date on which the issue is sanctioned by the Commission or within such extended time as the Commission may allow.

 

            (2)        Where a company has passed a resolution authorising the issue of shares at a discount, it may apply to the Commission for an order sanctioning the issue; and on such application the Commission may, if, having regard to all the circumstances of the case, it thinks proper so to do, make an order sanctioning the issue on such terms and conditions as it thinks fit.

 

            (3)        Issue of shares at a discount shall not be deemed to be reduction of capital.

 

            (4)        Every prospectus relating to the issue of shares, and every balance sheet issued by the company subsequent to the issue of shares, shall contain particulars of the discount allowed on the issue of the shares or of so much of that discount as has not been written off at the date of the issue of the prospectus or balance sheet.

 

            (5)        If default is made in complying with sub-section (4), the company and every officer of the company who is in default shall be liable to a fine not exceeding two thousand rupees.

 

            85.       Redemption of preference shares.- (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;

 

(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 authorised share capital.

            (4)        Subject to the provisions of this section, the redemption of preference shares thereunder may be effected on such terms and in such manner as may be provided by the articles of the company.

 

FURTHER ISSUE OF CAPITAL

 

86.       Further issue of capital.-  (1) Where the directors decide to increase the capital of the company by the 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:

 

1[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:]

 

2[Provided further that a public company may reserve a certain percentage of further issue of its employees under “Employees Stock Option Scheme” to be approved by the Commission in accordance with the rules made under this Ordinance.]

 

(2)          The offer of new shares shall be strictly in proportion to the number of existing shares held:

 

            Provided that fractional shares shall not be offered and all fractions less than a share shall be consolidated and disposed of by the company and the proceeds from such disposition shall be paid to such of the entitled shareholders as may have accepted such offer.

 

            (3)        The offer of new shares shall be accompanied by a circular duly signed by the directors or an officer of the company authorised by them in this behalf in the form prescribed by the Commission containing material information about the affairs of the company, latest statement of the accounts and setting forth the necessity for issue of further capital.

 

            (4)        A copy of the circular referred to in sub-section (3) duly signed by the directors or an officer authorised as aforesaid shall be filed with the registrar before the circular is sent to the shareholders.

 

(5)                The circular referred to in sub-section (3) shall specify a date by which the offer, if not accepted, will be deemed to be declined.

 

(6)                 [Omitted by the Finance Act, 1 of 1995].

 

1[(7)     If the whole or any part of the shares offered under sub-section (1) is declined or is not subscribed, the directors may allot and issue such shares in such manner as they may deem fit].

 

            2[87.  Issue of shares in lieu of outstanding balance of any loans, etc..-  Notwithstanding anything contained in section 86 or the memorandum and articles, a company may issue ordinary shares or grant option to convert into ordinary shares the outstanding balance of any loans, advances or credit, as defined in the Banking Companies Ordinance, 1962 (LVII of 1962), or other non-interest bearing securities and obligations out-standing or having a term of not less than three years in the manner provided in any contract with any scheduled bank or a financial institution to the extent of twenty per cent. of such balance:

 

            Provided that such shares shall not be issued or option to convert the outstanding balance exercised unless in any two of the preceding three years after expiry of two years from the date of commencement of commercial production, the return on such non-interest bearing securities, obligations, loans, advances or credit has fallen below the minimum rate of return laid down by the State Bank of Pakistan for the said years.]

 

REGULATION OF DEPOSITS

 

            88. Deposits not to be invited without issuing an advertisement.-  (1) The Federal Government may prescribe the limits up to which, the manner in which and the conditions subject to which deposits may be invited, accepted or retained by a company.

 

            (2)        No company shall invite, or allow any other person to invite or cause to be invited on its behalf, any deposit unless–

(a)        such deposit is invited or is caused to be invited in accordance with the rules made under sub-section (1); and

 

(b)        an advertisement, including therein a statement showing the financial position of the company, has been issued by the company in such form and in such manner as may be prescribed.

 

            (3)        The provisions of this Ordinance relating to a prospectus shall, so far as may be, apply to an advertisement referred to in sub-section (2).

 

            (4)        Where a company accepts or invites, or allows or causes any other person to accept or invite on its behalf, any deposit in excess of the limits prescribed under sub-section (1) or in contravention of the manner or conditions prescribed under that sub-section or in contravention of the provisions of sub-section (2), as the case may be,–

 

(a)        the company shall be punishable,–

 

(i)         where such contravention relates to the acceptance of any deposit, with fine which shall not be less than the amount of the deposits so accepted; and

 

(ii)        where such contravention relates to the invitation for any deposit, with fine which may extend to twenty thousand rupees; and

 

(b)        every officer of the company which is in default shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine.

 

            Explanation:– For the purposes of this section, “deposit” means any deposit of money with, and includes any amount borrowed by, a company, but shall not include a loan raised by issue of debentures or a loan obtained from a banking company or financial institution.

 

            (5)        Nothing contained in this section shall apply to–

 

(i)         a banking company, or

 

(ii)        such other class of companies as the Commission may specify in this behalf.

 

PART VI – SHARE CAPITAL AND DEBENTURES

 

NATURE, NUMBERING AND CERTIFICATE OF SHARES

 

            89.       Nature of shares and certificate of shares.-  (1) The shares or other interest of any member in a company shall be moveable property, transferable in the manner provided by the articles of the company.

 

            (2)        Each share in a company shall have a distinctive number.

 

(3)                A certificate under the common seal of the company specifying any shares held by any member shall be prima facie evidence of the title of the member to the shares therein specified.

 

CLASSES AND KINDS OF SHARES

 

            1[90.  Classes and kinds of share capital.-  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.]

 

GENERAL PROVISIONS AS TO SHARE CAPITAL

 

91.       Only fully paid shares to be issued.- No company shall issue partly paid shares:

 

            Provided that where a company has partly paid shares on the commencement of this Ordinance, it–

 

(i)         shall not issue any further share capital until all the shares previously issued has become fully paid up; and

 

(ii)        shall pay dividend only in proportion to the amount paid up on each share.

 

92.       Power of company limited by shares to alter its share capital.- (1) A company limited by shares, if so authorised by its articles, may alter the conditions of its memorandum so as to–

 

(a)        increase its share capital by such amount as it thinks expedient;

 

(b)        consolidate and divide the whole or any part of its share capital into shares of larger amount than its existing shares;

 

(c)        sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum; or

 

(d)        cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the share so cancelled:

 

            Provided that, in the event of consolidation or sub-division of shares, the rights attaching to the new shares shall be strictly proportional to the rights attaching to the previous shares so consolidated or sub-divided:

 

Provided further that, where any shares issued are of a class which is the same as that of shares previously issued, the rights attaching to the new shares shall be the same as those attaching to the shares previously held.

 

            (2)        The new shares issued by a 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.

 

            (3)        The powers conferred by sub-section (1) shall be exercisable by the company only in a general meeting.

 

            1 [(3A)  Notwithstanding anything contained in this Ordinance or any other law for the time being in force or the memorandum and articles, where the authorised 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.]

 

(4)                A cancellation of shares in pursuance of sub-section (1) shall not be deemed to be a reduction of share capital within the meaning of this Ordinance.

 

(5)                The company shall file with the registrar notice of the exercise of any power referred to in sub-section (1) within fifteen days from the exercise thereof.

 

93.       Notice to registrar of consolidation of share capital, etc..-  (1) Where a company having a share capital has consolidated and divided its share capital into shares of larger amount than its existing shares, it shall, within fifteen days of the consolidation and division, file notice with the registrar of the same, specifying the shares consolidated and divided.

 

(2)              If a company makes default in complying with the requirements of sub-section (5) of section 92 or sub-section (1) of this section, it shall be liable to a fine which may extend to one hundred rupees for every day during which the default continues, and every officer of the company who knowingly and willfully authorises or permits the default shall be liable to the like penalty.

 

            94.       Notice of increase of share capital or of members.-  (1) Where a company having a share capital has resolved to increase its share capital beyond the authorised capital 2[or such capital is increased under sub-section (3-A) of section 92] and where a company not having a share capital has resolved to increase the number of its members beyond the number previously registered, it shall file with the registrar, within fifteen days after the passing of the resolution, a notice of the increase of capital or members, as the case may be, and the registrar shall record the increase:

            1[Provided that where default is made by a company in filing a notice of increase in the authorised 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.]

 

            (2)        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.

 

            (3)        If a company makes default in complying with the requirements of sub-section (1), it shall be liable to a fine which may extend to one hundred rupees for every day during which the default continues, and every officer of the company who knowingly and willfully authorises or permits the default shall be liable to the like penalty.

 

            (4)        No resolution referred to in sub-section (1) shall take effect unless the notice required by that sub-section to be filed with the registrar is duly sent to him.

 

            95.       Prohibition of purchase or grant of financial assistance by a company for purchase of its own or its holding company’s shares.- (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.

 

            (3)        If a company acts in contravention of sub-section (1) or sub-section (2), the company and every officer of the company who is knowingly and willfully in default shall be liable to a fine which may extend to ten thousand rupees if the default relates to a listed company and to two thousand rupees if the default relates to any other company.

 

            1[(4)     Nothing in this section shall prevent —

 

(a)                a company from redeeming any shares or any other redeemable security issued in accordance with the provisions of this Ordinance; and

 

(b)                a listed company from purchasing its own shares in accordance with the provisions of this Ordinance.]

 

2[95A.  Power of company to purchase its own shares. (1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force or the memorandum and articles, a listed company may, subject to the provisions of this section and the rules framed by the Commission in this behalf, purchase its own shares (hereinafter in this section referred to as “purchase”).

 

(2)                The purchase shall be authorised by a special resolution which shall indicate maximum number of shares to be purchased, the maximum price at which the shares may be purchased; and the period within which the purchase is to be made.

 

(3)                The notice of the meeting in which the special resolution authorising the purchase of shares is proposed to be moved, shall be accompanied by an explanatory statement containing all material facts including the following:-

 

(a)                justification for the purchase;

 

(b)                source of funding;

 

(c)                effect on the financial position of the company; and

 

(d)                nature and extent of the interest, if any, of every director, whether directly or indirectly.

(4)        The purchase shall always be in cash and shall be out of the distributable profits.

 

(5)        Where shares are purchased by a company on premium, the account of premium shall be charged to Share Premium Account of the company or in the absence of any balance therein, to the distributable profits of the company.

 

(6)        Where purchase is made at a price lower than the nominal value of shares, the difference shall be credited to the reserve created under sub-section (10).

 

(7)        The company shall have such debt equity and current ratios as may be prescribed.

 

(8)        The majority of the directors including the chief executive, shall at a meeting make a declaration of solvency verified by an affidavit to the effect that they have made a full inquiry into the affairs of the company, and that after having done so, they have formed the opinion that the company shall continue to operate as a going concern and that it is capable of meeting its liabilities on time during the period upto the end of the immediately succeeding financial year.

 

(9)        The purchase shall be made through a tender system and the mode of tender shall be decided by the company in general meeting through a special resolution.

 

(10)      The shares purchased under this section shall not be resold and shall be cancelled forthwith.  The amount of the company’s paid up share capital shall be diminished by the nominal value of such shares accordingly.  The amount by which the company’s paid up share capital is thereby diminished on cancellation of the shares purchased shall, after accounting for the credit, if any, pursuant to sub-section (6) of this section, be transferred from the distributable profits to an account to be called “Capital Re-purchase Reserve Account”.

 

(11)      The provisions of this Ordinance relating to the reduction of a company’s share capital apply as if the Capital Re-purchase Reserve Account were paid-up share capital of the company, except that the reserve account may be applied by the company is paying up its un-issued shares to be allotted to members of the company as fully paid bonus shares.

 

(12)      Where a company has purchased its own shares under this section, it shall maintain a register of shares so purchased and enter therein the following particulars, namely:-

 

(i)         number of shares purchased;

 

(ii)        consideration paid for the shares purchased;

 

(iii)       mode of purchase; and

 

(iv)       the date of cancellation of such shares.

 

(13)      A return about the purchase of shares under this section containing such particulars relating to purchase as may be prescribed, along with the declaration of solvency made under sub-section (8) shall be filed with the Commission and the registrar within thirty days of the purchase.

 

(14)            If a company makes default in compliance with the provisions of this section, the company shall be liable to a fine which may extend to one million rupees and any officer of the company who is knowingly and wilfully in default shall also be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one million rupees, or with both.

 

REDUCTION OF SHARE CAPITAL

 

            96.       Reduction of share capital.-  (1) Subject to confirmation by the Court, a company limited by shares, if so authorised by its articles, may by special resolution reduce its share capital in any way, and in particular and without prejudice to the generality of the foregoing powers may–

 

(i)         extinguish or reduce the liability on any of its shares in respect of share capital not paid up; or

 

(ii)        either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost or un-represented by available assets; or

 

(iii)       either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the needs of the company;

 

and may, if and so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly.

 

            (2)        A special resolution under sub-section (1) is in this Ordinance referred to as a resolution for reducing share capital.

 

            97.       Application to Court for confirming order.-  Where a company has passed a resolution for reducing share capital, it may apply by a petition to the Court for an order confirming the reduction.

 

            98.       Addition to name of company of “and reduced”.-  On and from the passing by a company of a resolution for reducing share capital, or where the reduction does not involve either the diminution of any liability in respect of unpaid share capital or the payment to any share-holder of any paid-up share capital, then on and from the making of the order confirming the reduction, the company shall, unless otherwise directed by the Court for any special reasons, add to its name until such date as the Court may fix, the words “and reduced” as the last words thereof, and those words shall, until that date, be deemed to be part of the name of the company:

 

            Provided that, where the reduction does not involve either the diminution of any liability in respect of unpaid share capital, or payment to any shareholder of any paid-up share capital, the Court may, if it thinks expedient, dispense with the addition of the words ”and reduced”.

 

            99.       Objection by creditors and settlement of list of objecting creditors.-  (1) Where the proposed reduction of share capital involves either diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, and in any other case if the Court so directs, every creditor of the company who, on the date fixed by the Court, is entitled to any debt or claim which, if that date were the date of commencement of the winding up of the company, would be admissible in proof against the company, shall be entitled to object to the reduction.

 

            (2)        The Court shall settle a list of creditors so entitled to object, and for that purpose shall ascertain, as far as possible without requiring an application form any creditor, the names of those creditors and the nature and amount of their debts or claims, and may publish notices fixing a day or days within which creditors not entered on the list are to claim to be so entered or are to be excluded from the right of objecting to the reduction.

 

            100.     Power to dispense with consent of creditor on security being given for his debt.-  Where a creditor entered on the list of creditors whose debt or claim is not discharged or determined does not consent to the reduction, the Court may, if it thinks fit, dispense with the consent of that creditor, on the company securing payment of his debt or claim by appropriating as the Court may direct, the following amount, that is to say,—

 

(i)         if the company admits the full amount of his debt or claim, or, though not admitting it, is willing to provide for it, then the full amount of the debt or claim; and

 

(ii)        if the company does not admit or is not willing to provide for the full amount of the debt or claim, or if the amount is contingent or not ascertained, then an amount fixed by the Court after the like inquiry, and adjudication as if the company were being wound up by the Court.

 

            101.     Order confirming reduction.-  If the Court is satisfied with respect to every creditor of the company who under this Ordinance is entitled to object to the reduction that either his consent to the reduction has been obtained or his debt or claim has been discharged or has been determined or has been secured, the Court may make an order confirming the reduction on such terms and conditions as it thinks fit.

 

            102.     Registration of order and minute of reduction.-  (1) The registrar on production to him of an order of the Court confirming the reduction of the share capital of a company, and on the filing with him of a certified copy of the order and of a minute approved by the Court and showing with respect to the share capital of the company as altered by the order, the amount of the share capital, the number of shares into which it is to be divided and the amount of each share, and the amount, if any, at the date of the registration deemed to be paid-up on each share, shall register the order and minute.

 

            (2)        A resolution for reducing share capital as confirmed by an order of the Court registered under sub-section (1) shall take effect on such registration and not before.

 

            (3)        Notice of the registration shall be published in such manner as the Court may direct.

            (4)        The registrar shall certify under his hand the registration of the order and minute, and his certificate shall be conclusive evidence that all the requirements of this Ordinance with respect to reduction of share capital have been complied with, and that the share capital of the company is such as is stated in the minute.

 

            103.     Minute to form part of memorandum.–  (1) The minute when registered shall be deemed to be substituted for the corresponding part of the memorandum of the company, and shall be valid and alterable as if it had been originally incorporated therein, and shall be embodied in every copy of the memorandum issued after its registration.

 

(2)                If a company makes default in complying with the requirements of sub-section (1), it shall be liable to a fine which may extend to fifty rupees for each copy in respect of which default is made, and every officer of the company who knowingly and willfully authorises or permits the default shall be liable to the like penalty.

 

104.     Liability of members in respect of reduced shares.–  (1) A member of the company, past or present, shall not be liable in respect of any share to any call or contribution exceeding in amount the difference, if any, between the amount paid, or, as the case may be, the received amount, if any,  which is to be deemed to have been paid, on the share and the amount of the share as fixed by the minute:

 

            Provided that, if any creditor, entitled in respect of any debt or claim to object to the reduction of share capital, is, by reason of his ignorance of the proceedings for reduction, or of their nature and effect with respect to his claim not entered on the list of creditors, and, after the reduction, the company is unable, within the meaning of the provisions of this Ordinance with respect to winding up by the Court, to pay the amount of his debt or claim, then–

 

(i)         every person who was a member of the company at the date of the registration of the order for reduction and minute shall be liable to contribute for the payment of that debt, or claim an amount not exceeding the amount which he would have been liable to contribute if the company had commenced to be wound up on the day before that registration; and

 

(ii)        if the company is wound up, the Court, on the application of any such creditor and proof of his ignorance as aforesaid, may, if it thinks fit, settle accordingly a list of persons so liable to contribute, and make and enforce calls and orders on the contributories settled on the list as if they were ordinary contributories in a winding up.

 

            (2)        Noting in this section shall effect the rights of the contributories among themselves.

 

            105.     Penalty on concealment of name of creditor.–  If any officer of the company willfully conceals the name of any creditor entitled to object to the reduction, or willfully misrepresents the nature or amount of the debt or claim of any creditor, or if any officer of the company abets any such concealment or misrepresentation as aforesaid, every such officer shall be punishable with imprisonment for a term which may extend to one year, or with fine, or with both.

 

106.          Publication of reasons for reduction.-  In the case of reduction of share capital, the Court may require the company to publish in the manner specified by the Court the reasons for reduction, or such other information in regard thereto as the Court may think expedient with a view to giving proper information to the public, and, if the Court thinks fit, the causes which led to the reduction.

           

107.     Increase and reduction of share capital in case of a company limited by guarantee having a share capital.-  A company limited by guarantee may, if it has a share capital and is so authorised by its articles, increase or reduce its share capital in the same manner and subject to the same conditions in and subject to which a company limited by shares may increase or reduce its share capital under the provisions of this Ordinance.

 

VARIATION OF SHAREHOLDER’S RIGHTS

 

            108.  Variation of shareholder’s rights.– (1) The variation of the right of shareholders of any class shall be effected only in the manner laid down in section 28.

 

            (2)        Not less than ten per cent of the class of shareholders who are aggrieved by the variation of their rights under sub-section (1) may, within thirty days of the date of the resolution varying their rights, apply to the Court for an order canceling the resolution:

 

            Provided that the Court shall not pass such an order unless it is shown to its satisfaction that some facts which would have had a bearing on the decision of the shareholders where withheld by the company in getting the aforesaid resolution passed or, having regard to all the circumstances of the case, that the variation would unfairly prejudice the shareholders of the class represented by the applicant.

 

            (3)        An application under sub-section (2) may be made on behalf of the shareholders entitled to make it by such one or more of their number as they may authorise in writing in this behalf.

 

            (4)        The decision of the Court on any such application shall be final.

 

            (5)        The company shall, within fifteen days after the service on the company of any order made on any such application, forward a copy of the order to the registrar and, if default is made in complying with this provision, the company and every officer of the company who is knowingly and willfully in default shall be liable to a fine which may extend to two hundred rupees for each day during which the default continues.

 

            (6)        The expression “variation” includes abrogation, revocation or enhancement.

 

            (7)        section 5 of the Limitation Act 1908 (IX of 1908), shall apply to an application made under sub-section (2).

 

REGISTRATION OF UNLIMITED COMPANY AS LIMITED

 

            109.  Registration of unlimited company as limited.- (1) Subject to the provisions of this section, any company registered as unlimited may register under this Ordinance as limited or any company already registered as a limited company may re-register under this Ordinance, but the registration of an unlimited company as a limited company shall not affect the rights, debts, liabilities, obligations or contracts acquired, incurred or entered into by, to, with or on behalf of, the company before the registration.

 

            (2)        On registration in pursuance of sub-section (1), the registrar shall close the former registration of the company, and may dispense with the delivery to him of copies of any documents with copies of which he was furnished on the occasion of the original registration of the Company; but, save as aforesaid, the registration shall take place in the same manner and shall have effect as if it were the first registration of the company under this Ordinance.

 

            110.     Power of unlimited company to provide for reserve share capital on re-registration.–  An unlimited company having a share capital may, by its resolution for registration as a limited company in pursuance of this Ordinance, increase the nominal amount of its share capital by increasing the nominal amount of each of its shares, but subject to the condition that no part of the amount by which its capital is so increased shall be capable of being called up except in the event and for the purpose of the company being wound up.

 

UNLIMITED LIABILITY OF DIRECTORS

 

111.     Limited company may have directors with unlimited liability. – (1) In a limited company, the liability of the directors or of any director may, if so provided by the memorandum, be unlimited.

 

(2)            In a limited company in which the liability of any director is unlimited, the directors of the company, if any, and the member who proposes a person for election or appointment to the office of director, shall add to that proposal a statement that the liability of the person holding that office will be unlimited and the promoters and officers of the company, or one of them shall, before that person accepts the office or acts therein, give him notice in writing that his liability will be unlimited.

 

(3)            If any director or proposer makes default in adding such a statement, or if any promoter or officer of the company makes default in giving such a notice, he shall be liable to a fine which may extend to two thousand rupees and shall also be liable for any damage which the person so elected or appointed may sustain from the default, but the liability of the person elected or appointed shall not be affected by the default.

 

            112.     Special resolution of limited company making liability of directors unlimited.- (1) A limited company, if so authorised by its articles, may, by special resolution, alter its memorandum so as to render unlimited the liability of its directors or of any director.

 

            (2)        Upon the passing of any such special resolution, the provisions thereof shall be as valid as if they had been originally contained in the memorandum:

 

            Provided that an alteration of the memorandum making the liability of any of the directors unlimited shall not apply, without his consent, to a director who was holding the office from before the date of the alteration, until the expiry of the term for which he was holding office on that date.

SPECIAL PROVISIONS AS TO DEBENTURES

            113.     Right of debenture-holder and shareholder to have copies of trust-deed.- (1) A copy of any trust-deed for securing any issue of debentures shall be forwarded to every holder of any such debentures or holder of shares in the company, at his request on payment of such fee as the company may fix not exceeding the amount prescribed.

 

(2)            If a copy is refused or not forwarded as required under sub-section (1), the company shall be liable to a fine not exceeding five hundred rupees, and to a further fine not exceeding fifty rupees for every day after the first during which the refusal continues, and every officer of the company who knowingly authorises or permits the refusal shall be liable to the like penalty, and the registrar may by order compel immediate supply of a copy.

 

114.     Debentures not to carry voting rights.- (1) Except as otherwise provided in this Ordinance, no company shall, after the commencement of this Ordinance, issue any debentures carrying voting rights at any meeting of the company:

 

            Provided that debentures convertible into ordinary shares may, at the option of the company, carry voting rights:

 

            Provided further that such voting rights shall not be in excess of the voting rights attaching to ordinary shares of equal paid-up value.

 

            Explanation.-  Debentures convertible into ordinary shares include debentures with subscription warrants.

 

(2)            Notwithstanding any-thing contained in this Ordinance, or in the memorandum or articles of any company, no debenture-holder having immediately before the commencement of this Ordinance voting rights shall, after such commencement, exercise any such rights at any meeting of the company, except a meeting of debenture-holders themselves.

 

115.           Perpetual debentures.- A condition contained in any debenture or any deed for securing any debentures, whether issued or executed before or after the promulgation of this Ordinance, shall not be invalid by reason only that thereby the debentures are made irredeemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period however long.

           

            116.  Power to re-issue redeemed debentures in certain cases.- (1) Where either before or after the commencement of this Ordinance a company has redeemed any debentures previously issued, the company, unless the articles or the conditions of issue expressly otherwise provide, or unless the debentures have been redeemed in pursuance of any obligation on the company so to do, not being an obligation enforceable only by the person to whom the redeemed debentures were issued or his assigns, shall have power, and shall be deemed always to have had power, to keep the debentures alive for the purposes of reissue, and where a company has purported to exercise such a power the company shall have power, and shall be deemed always to have had power, to reissue the debentures either by reissuing the same debentures or by issuing other debentures in their place, and upon such reissue the person entitled to the debentures shall have, and shall be deemed always to have had, the same rights and priorities as if the debentures had not previously been issued.

 

            (2)        Where with the object of keeping debentures alive for the purpose of reissue they have, either before or after the commencement of this Ordinance, been transferred to a nominee of the company, a transfer from that nominee shall be deemed to be a reissue for the purposes of this section.

 

(3)        Where a company has, either before or after the commencement of this Ordinance, deposited any of its debentures to secure advances from time to time on current account or otherwise, the debentures shall not be deemed to have been redeemed by reason only of the account of the company having ceased to be in debit while the debentures remained so deposited.

 

            (4)        The re-issue of a debenture or the issue of another debenture in its place under the power by this section given to, or deemed to have been possessed by, a company, whether the re-issue or issue was made before or after the commencement of this Ordinance, shall be treated as the issue of a new debenture for the purposes of stamp-duty and registration but it shall not be so treated for the purposes of any provision limiting the amount or number of debentures to be issued:

 

            Provided that any person lending money on the security of a debenture re-issued under this section which appears to be duly stamped may give the debenture in evidence in any proceedings for enforcing his security without payment of the stamp-duty or any penalty in respect thereof, unless he had notice or, but for his negligence, might have discovered, that the debenture was not duly stamped, but in any such case the company shall be liable to pay the proper stamp-duty and penalty.

 

(5)        Nothing in this section shall prejudice any power to issue debentures in the place of any debentures paid off or otherwise satisfied or extinguished, reserved to a company by its debentures or the securities for the same.

 

117.     Specific performance of contract to subscribe for debentures. –  A contract with a company to take up and pay for any debentures of the company may be enforced by a decree for specific performance.

 

            118.     Payment of certain debts out of assets subject to floating charge in priority to claims under the charge. –  (1) Where either a receiver is appointed on behalf of the holders of any debentures of a company secured by a floating charge, or possession is taken by or on behalf of these debenture holders of any property comprised in or subject to the charge, then, if the company is not at the time in course of being wound up, the debts which in every winding up are under the provisions of Part XI relating to preferential payments to be paid in priority to all other debts, shall be paid forthwith out of any assets coming to the hands of the receiver or other person taking possession as aforesaid in priority to any claim for principal or interest in respect of the debentures.

 

            (2)        The periods of time mentioned in the said provisions of Part XI shall be reckoned from the date of the appointment of the receiver or of possession being taken as aforesaid, as the case may be.

(3)            Any payments made under sub-section (1) shall be recouped, as far as may be, out of the assets of the company available for payment of general creditors.

 

            119.     Powers and liabilities of trustee. – (1) The trustee nominated or appointed under the trust-deed for securing an issue of debentures shall, if so empowered by such deed, have the right to sue for all redemption monies and interest in the following cases, namely: –

 

(a)        where the issuer of the debentures as mortgagor binds himself to repay the debenture loan or pay the accrued interest thereon, or both to repay the loan and pay the interest thereon, in the manner provided on the due date;

 

(b)        where by any cause other than the wrongful act or default of the issuer the mortgaged property is wholly or partially destroyed or the security is rendered insufficient within the meaning of section 66 of the Transfer of Property Act, 1882 (Act IV of 1882), and the trustee has given the issuer a reasonable opportunity of providing further security adequate to render the whole security sufficient and the issuer has failed to do so;

 

(c)        where the trustee is deprived of the whole or part of the security by or in consequence of any wrongful act or default on the part of the issuer; and

 

(d)        where the trustee is entitled to take possession of the mortgaged property and the issuer fails to deliver the same to him or to secure the possession thereof without disturbance by the issuer or any person claiming under a title superior to that of the issuer.

 

            (2)        Where a suit is brought under clause (a) or clause (b) of sub-section (1) the Court may at its discretion stay the suit and all proceedings therein notwithstanding any contract to the contrary, until the trustee has exhausted all his available remedies against the mortgaged property or what remains of it unless the trustee abandons his security and, if necessary, retransfers the mortgaged property.

 

            (3)        Notwithstanding anything contained in sub-sections (1) and (2) or any other law for the time being in force, the trustee or any person acting on his behalf shall, if so authorised by the trust-deed, sell or concur in selling, without intervention of the Court, the mortgaged property or any part thereof in default of payment according to re-payment schedule of any redemption amount or in the payment of any accrued interest on the due date by the issuer.

 

            Explanation:  “Issuer”, in sub-sections (1), (2) and (3), shall mean the company issuing debentures and securing the same by mortgage of its properties or assets, or both its properties and assets, and appointing a trustee under a trust-deed.

 

            (4)        Subject to the provisions of this section, any provision contained in a trust deed for securing an issue of debentures, or in any contract with the holders of debentures secured by a trust-deed, shall be void in so far as it would have the effect of exempting a trustee thereof from, or indemnifying him against, liability for breach of trust, where he fails to show the degree of care and diligence required of him as trustee, having regard to the provisions of the trust-deed conferring on him any power, authority or discretion.

 

            (5)        Sub-section (4) shall not invalidate–

 

(a)        any release otherwise validly given in respect of anything done or omitted to be done by a trustee before the giving of the release; or

 

(b)        any provision enabling such a release to be given–

 

(i)         on the agreement thereto of a majority of not less than three-fourths in value of the debenture-holders present and voting in person or, where proxies are permitted, by proxy, at a meeting summoned for the purpose; and

 

(ii)        either with respect to specific acts or omissions or on the trustee dying or ceasing to act.

 

            (6)        Sub-section (4) shall not operate–

 

(a)        to invalidate any provision in force immediately before the commencement of this Ordinance, so long as any person then entitled to the benefit of that provision or afterwards given the benefit thereof under sub-section (7) remains as trustee of the deed in question ; or

 

(b)        to deprive any person of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while any such provision was in force.

 

            (7)        While any trustee of a trust-deed remains entitled to the benefit or provision saved by sub-section (6), the benefits of that provision may be given either–

 

(a)        to all trustees of the deed, present and future; or

 

(b)        to any named trustees or proposed trustees thereof;

 

by a resolution passed by a majority of not less than three-fourths in value of the debenture-holders present in person or, where proxies are permitted, by proxy, at a meeting called for the purpose in accordance with the provisions of the deed or, if the deed makes no provisions for calling meetings, at a meeting called for the purpose in any manner approved by the Court.

 

1 [120.  Issue of securities and redeemable capital not based on interest.-  (1) 2[A company may by public offer or], upon terms and conditions contained in an agreement in writing, issue to one or more scheduled banks, financial institutions or such other persons as are specified for the purpose by the Federal Government by notification in the official Gazette, either severally, jointly or through their syndicate, any instrument in the nature of redeemable capital in any or several forms in consideration of any funds, moneys or accommodations received or to be received by the company, whether in cash or in specie or against any promise, guarantee, undertaking or indemnity issued to or in favour of or for the benefit of the company.]

 

            (2)        In particular and without prejudice to the generality of the forgoing provisions, the agreement referred to in sub-section (1) for redeemable capital may provide for, adopt or include, in addition to others, all or any of the following matters, namely:–

 

(a)        mode and basis of repayment by the company of the amount invested in redeemable capital within a certain period of time;

 

(b)        arrangement for sharing of profit and loss;

 

(c)        creation of a special reserve called the “participation reserves by the company in the manner provided in the agreement for the issue of participatory redeemable capital in which all providers of such capital shall participate for interim and final adjustment on the maturity date in accordance with the terms and conditions of such agreements ; and

 

(d)        in case of net loss on participatory redeemable capital on the date of maturity, the right of holders to convert the outstanding, balance of such capital or part thereof as provided in the agreement into ordinary shares of the company at the break-up price calculated in the prescribed manner.

 

            (3)        The terms and conditions for the issue of instruments or certificates of redeemable capital and the rights of their holders shall not be challenged or questioned by the company or any of its shareholders as repugnant to any provision of this Ordinance or any other law or the memorandum or articles or any resolution of the general meeting or directors of the company or any other documents.

 

            (4)        The provision of this Ordinance 1[…..] relating to the creation, issue, increase or decrease of the capital shall not apply to the redeemable capital.]

________


 

PART VII – REGISTRATION OF MORTGAGES, CHARGES, ETC.

 

            121.     Certain mortgages and charges to be void if not registered.– (1) Every mortgage, charge or other interest created after the commencement of this Ordinance by a company and being either–

 

(a)        a mortgage or charge for the purpose of securing any issue of debentures; or

 

(b)        a mortgage or charge on uncalled share capital of the company; or

 

(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

 

(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

 

(g)        a mortgage or charge on a ship or any share in a ship; or

 

(h)        a mortgage or charge on goodwill, on a patent or licence under patent on, a trade mark, or on a copyright or a licence under a copyright; or

 

(i)         a mortgage or charge or other interest based on agreement for the issue of 1[any instrument in the nature of redeemable capital]; or

 

(j)         a mortgage or charge or other interest based on a mushrika agreement; or

 

(k)        a mortgage or charge or other interest based on hire-purchase or leasing agreement for acquisition of fixed assets;

 

shall, so far as any security on the company’s property or undertaking is thereby conferred, be void against the liquidator and any creditor of the company, unless the prescribed particulars of the mortgage or charge, together with a copy of the instrument, if any, verified in the prescribed manner, by which the mortgage or charge is created or evidenced are filed with the registrar for registration in the manner required by this Ordinance within twenty-one days after the date of its creation, but without prejudice to any contract or obligation for repayment of the money thereby secured, and when a mortgage or charge becomes void under this section the money secured thereby shall immediately become payable:

 

            Provided that–

 

(i)         in the case of a mortgage or charge created out of Pakistan comprising solely property situate outside Pakistan, twenty-one days after the date on which the instrument or copy could, in due course of post, and if dispatched with due diligence, have been received in Pakistan shall be substituted for twenty-one days after the date of the creation of the mortgage or charge as the time within which the particulars and instrument or copy are to be filed with the registrar; and

 

(ii)        where mortgage or charge is created in Pakistan but comprises property outside Pakistan, the instrument creating or purporting to create the mortgage or charge and a copy thereof verified in the prescribed manner may be filed for registration notwithstanding that further proceedings may be necessary to make the mortgage or charge valid or effectual according to the law of the country in which the property is situate ; and

 

(iii)       where a negotiable instrument has been given to secure the payment of any book debts of a company, the deposit of the instrument for the purpose of securing an advance to the company shall not for the purpose of this sub-section be treated as a mortgage or charge on those book debts; and

 

(iv)       the holding of debentures entitling the holder to a charge on immovable property shall not be deemed to be an interest in immovable property.

 

            (2)        Where any mortgage or charge on any property of a company required to be registered under sub-section (1) has been so registered, any person acquiring such property or any part thereof, or any share or interest therein, shall be deemed to have notice of the said mortgage or charge as from the date of such registration.

 

122.  Registration of charges on properties acquired subject to charge. – (1) Where a company registered in Pakistan acquires any property which is subject to a charge of any such kind as would, if it had been created by the company after the acquisition of the property have been required to be registered under this Part, the company shall cause the prescribed particulars of the charge, together with a copy, certified in the prescribed manner to be a correct copy of the instrument, if any, by which the charge was created or is evidenced, to be delivered to the registrar for registration in the manner required by this Ordinance within twenty-one days after the date on which the acquisition is completed:

 

            Provided that, if the property is situate and the charge was created outside Pakistan, twenty-one days after the date on which the copy of the instrument could in due course of post, and if dispatched with due diligence, have been received in Pakistan shall be substituted for twenty-one days after the completion of the acquisition as the time within which the particulars and the copy of the instrument are to be delivered to the registrar.

 

(2)        If default is made in complying with this section, the company and every officer of the company who is knowingly and willfully in default shall be liable to a fine of two thousand rupees.

 

123.     Particulars in case of series of debentures entitling holders pari passu.- Where a series of debentures containing, or giving by reference to any other instrument, any charge to the benefit of which the debenture-holders of that series are entitled pari passu is created by a company, it shall be sufficient for the purposes of section 121 if there are filed with the registrar within twenty-one days after the execution of the deed containing the charge or, if there is no such deed, after the execution of any debentures of the series, the following particulars, namely:–

 

(a)        the total amount secured by the whole series;

 

(b)        the dates of the resolutions authorizing the issue of the series and the date of the covering deed, if any, by which the security is created or defined;

 

(c)        a general description of the property charged; and

 

(d)        the names of the trustees, if any, for the debenture-holders;

 

together with a copy of the deed verified in the prescribed manner containing the charge, or if there is no such deed, one of the debentures of the series, and the registrar shall, on payment of the prescribed fee, enter those particulars in the register:

 

            Provided that, where more than one issue is made of debentures in the series, there shall be filed with the registrar for entry in the register particulars of the date and amount of each issue, but an omission to do this shall not affect the validity of the debentures issued.

 

            124.     Particulars in case of commission, etc., on debentures.-  Where any commission, allowance or discount has been paid or made either directly or indirectly by the company to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any debentures of the company, or procuring or agreeing to procure the particulars required to be filed for registration under section 121 and 123 shall include particulars as to the amount or rate per cent, of the commission, discount or allowance so paid or made, but an omission to do this shall not affect the validity of the debentures issued:

 

            Provided that the deposit of any debentures as security for any debt of the company shall not for the purposes of this section be treated as issue of the debentures at a discount.

 

            125.     Register of mortgages and charges.-  (1) The registrar shall keep, with respect to each company, a register in the prescribed form of all mortgages and charges created by the company and requiring registration under section 121 or section 122 and shall, on payment of the prescribed fee, enter in the register, with respect to every such mortgage, or charge, the date of creation, the amount secured by it, short particulars of the property mortgaged or charged, and the names of the mortgagees or persons entitled to the charge.

 

(2)          A register kept in pursuance of sub-section (1) shall be open to inspection by any person on payment of the prescribed fee.

 

126.           Index to register of mortgages and charges.-  The registrar shall keep a chronological index, in the prescribed form and with the prescribed particulars, of the mortgages or charges registered with him under this Ordinance.

 

127.           Certificate of registration.-  The registrar shall give a certificate under his hand of the registration of any mortgage or charge registered in pursuance of section 121, stating the amount thereby secured, and the certificate shall be conclusive evidence that the requirements of section 121 to 125 as to registration have been complied with.

 

128.     Endorsement of certificate of registration on debenture or certificate of debenture stock.-  The company shall cause a copy of every certificate of registration given under section 127 to be endorsed on every debenture or certificate of debenture stock which is issued by the company and the payment of which is secured by the mortgage or charge so registered:

 

            Provided that nothing in this section shall be construed as requiring a company to cause a certificate of registration of any mortgage or charge so given to be endorsed on any debenture or certificate of debenture stock which has been issued by the company before the mortgage or charge was created.

           

            129.     Duty of company and right of interested party as regards registration. –  (1) It shall be the duty of a company to file with the registrar for registration the prescribed particulars of every mortgage or charge created by the company and of the issue of debentures of a series, requiring registration under section 121, but registration of any such mortgage or charge may be effected on the application of any person interested therein.

 

            (2)        Where the registration is effected on the application of some person other than the company, that person shall be entitled to recover from the company the amount of any fees properly paid by him to the registrar on the registration.

 

(3)                Whenever the terms or conditions or extent or operation of any mortgage or charge registered under sub-section (1) are modified, it shall be the duty of the company to send to the registrar the particulars of such modification together with a copy of the instrument evidencing such modification verified in the prescribed manner, and the provisions of sub-section (1) as to registration of mortgage or charge shall apply to such modification of the mortgage or charge as aforesaid.

               

            130.     Copy of instrument creating mortgage or charge to be kept at registered office.–  Every company shall cause a copy of every instrument creating any mortgage or charge requiring registration under section 121 and of every instrument evidencing modification of the terms or conditions thereof, to be kept at the registered office of the company:

 

            Provided that, in the case of a series of uniform debentures, a copy of one such debenture shall be sufficient.

           

            131.     Rectification of register of mortgages.-  (1) The 1[Commission] on being satisfied that the omission to register a mortgage or charge within the time required by section 121, or that the omission or mis-statement of any particular with respect to any such mortgage or charge, or the omission to give intimation to the registrar of the payment or satisfaction of a debt for which a charge or mortgage was created, was accidental or due to inadvertence or to some other sufficient cause, or is not of a nature to prejudice the position of creditors or shareholders of the company, or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any person interested and, on such terms and conditions as seem to the 2[Commission] just and expedient, order that the time for registration be extended, or, as the case may be, that the omission or mis-statement be rectified, and may make such order as to the costs of the application as it thinks fit.

 

            (2)        A certified copy of the order of the 3[Commission] passed under sub-section (1) shall be filed with the registrar within twenty-one days of the date of such order by the company or the person on whose application it is passed.

 

            (3)        Where the 4[Commission] extends the time for the registration of a mortgage or charge, the order shall not prejudice any rights acquired in respect of the property concerned prior to the time when the mortgage or charge is actually registered.

           

            132.     Registration of payment or satisfaction of mortgages and charges.-   (1) It shall be the duty of a company to give intimation to the registrar of the payment or satisfaction, in full, of any charge or mortgage created by the company and requiring registration under section 121 and 122 within twenty-one days from the date of the payment or satisfaction, in full, thereof.

 

            (2)        The registrar shall on receipt of such intimation cause a notice to be sent to the holder of the charge or mortgage calling upon him to show cause, within a time, not exceeding fourteen days, to be fixed by such notice, why the payment or satisfaction of the charge or mortgage should not be recorded.

 

            (3)        The registrar shall, if no cause is shown, order that a memorandum of satisfaction be entered in the register and shall if required furnish the company with a copy thereof.

 

            (4)        Where cause is shown, the registrar shall record a note to that effect in the register, and shall inform the company that he has done so.

 

(5)        Nothing in this section shall be deemed to affect the powers of the registrar to make an entry in the register of charges under section 133 otherwise than on receipt of an intimation from the company.

           

            133.  Power of registrar to make entries of satisfaction and release in absence of intimation from company.-  The registrar may, on evidence being given to his satisfaction with respect to any registered charge–

 

(a)        that the debt for which the charge was given has been paid or satisfied in whole or in part, or

 

(b)        that part of the property or undertaking charged has been released from the charge or has ceased to form part of the company’s property or undertaking,

 

enter in the register of mortgages and charges a memorandum of satisfaction in whole or in part, or of the fact that part of the property or undertaking has been released from the charge or has ceased to form part of the company’s property or undertaking, as the case may be, notwithstanding the fact that no intimation has been received by him from the company.

 

            134.     Penalties. – (1) If any company makes default in filing with the registrar for registration the particulars–

 

(a)        of any mortgage or charge created by the company or any modification thereof; or

 

(b)        of the payment or satisfaction of a debt in respect of which a mortgage or charge has been registered under section 121 or section 122; or

 

(c)        of the issues of debentures of a series,

 

requiring registration with the registrar under the foregoing provisions of this Ordinance, then, unless the registration has been effected within the prescribed period on the application of some other person, the company, and every officer of the company or other person who is knowingly a party to the default, shall—

 

(i)         be liable to a fine not exceeding one hundred rupees for every day during which the default in filing of the particulars of satisfaction of a mortgage or charge continues; and

 

(ii)        be liable to a fine not exceeding five hundred rupees for every day during which the default in filing of the particulars of a mortgage or charge or of debentures continues.

 

            (2)        Subject as aforesaid, if any company makes a default in complying with any of the requirements of this Ordinance as to the registration with the registrar of any mortgage or charge created by the company, or any modification thereof, the company, and every officer of the company who knowingly and willfully authorises or permits the default, shall, without prejudice to any other liability, be liable to a fine not exceeding five hundred rupees to a further fine not exceeding one hundred rupees for every day after the first during which the default continues.

 

            (3)        If any person knowingly and willfully authorises or permits the delivery of any debenture or certificate of debenture stock requiring registration with the registrar under the foregoing provisions of this Ordinance without a copy of the certificate of registration being endorsed upon it, he shall, without prejudice to any other liability, be liable to a fine not exceeding two thousand rupees.

 

            135.     Company’s register of mortgages. –  (1) Every company shall keep a register of mortgages and enter therein all mortgages and charges specifically affecting property of the company and all floating charges on the undertaking or on any property of the company, giving in each case a short description of the property mortgaged or charged, the amount of the mortgage or charge and, except in the case of securities to bearer, the names of the mortgagees or persons entitled thereto.

 

            (2)        If any officer of the company knowingly and willfully authorises or permits the omission of any entry required to be made in pursuance of sub-section (1), he shall be liable to a fine not exceeding two thousand rupees.

 

136.     Right to inspect copies of instruments creating mortgages and charges and company’s register of mortgages.-  (1) The copies kept at the registered office of the company in pursuance of section 130 of instruments creating any mortgage or charge or modification of the terms and conditions thereof requiring registration under this Ordinance with the registrar, and the register of mortgages and charges kept in pursuance of section 135 shall be open at all reasonable times to the inspection of any creditor or member of the company without fee, and the register of mortgages shall also be open to the inspection of any other person on payment of such fee, not exceeding the amount prescribed for each inspection, as the company may fix.

 

            (2)        If inspection of the said copies or register is refused, the company shall be liable to a fine not exceeding five hundred rupees and a further fine not exceeding fifty rupees for every day after the first during which the refusal continues, and every officer of the company who knowingly authorises or permits the refusal shall incur the like penalty, and in addition to the above penalty, the registrar may by order compel an immediate inspection of the copies or register.

 

RECEIVERS AND MANAGERS

 

            137.     Registration of appointment of receiver or manager.-  (1) If any person obtains an order for the appointment of a receiver of, or a person to manage, the property of a company, or appoints such a receiver or person under any powers contained in any instrument, he shall, within fifteen days from the date of the order or of the appointment under the powers contained in the instrument, file notice of the fact with the registrar, and the registrar shall, on payment of the prescribed fee, enter the fact in the register of mortgages and charges.

 

            (2)        If any person makes default in complying with the requirements of sub-section (1), he shall be liable to a fine not exceeding two hundred rupees for every day during which the default continues.

 

            138.     Filing of accounts of receiver or manager. –  (1) Every receiver of the property of a company who has been appointed under the powers contained in any instrument, and who has taken possession, shall within thirty days of expiry of every six months while he remains in possession, and also within thirty days on ceasing to act as receiver, file with the registrar an abstract in the prescribed form of his receipts and payments during the period to which the abstract relates, and shall also, within fifteen days of ceasing to act as receiver, file with the registrar notice to that effect, and the registrar shall enter the notice in the register of mortgages and charges.

 

            (2)        Where a receiver of the property of a company has been appointed, every invoice, order for goods, or business letter issued by or on behalf of the company, or the receiver of the company, being a document on or in which the name of the company appears, shall contain a statement that a receiver has been appointed.

 

            (3)        If default is made in complying with the requirements of sub-section (1) or sub-section (2), the company and every director or other officer of the company and every receiver who knowingly and willfully authorises or permits the default, shall be liable to a fine not exceeding two thousand rupees and, in the case of a continuing default, to a further fine not exceeding one hundred rupees for every day after the first during which the default continues.

 

            (4)        The provisions of sub-sections (1), (2) and (3) shall apply to any person appointed to manage the property of a company under any powers contained in an instrument in the same manner as they apply to a receiver so appointed.

 

            139.     Disqualification for appointment as receiver or manager. –  The following shall not be appointed under any powers contained in an instrument as a receiver or manager of the property of a company, namely:–

 

(a)                a minor;

 

(b)                a person who is of unsound mind and stands so declared by a competent Court;

 

(c)                a body corporate;

 

(d)                a director of the company;

 

(e)                an un-discharged insolvent unless he is granted leave by the Court by which he has been adjudged an insolvent; or

 

(f)                 a person disqualified by a Court from being concerned with or taking part in the management of a company in any other way, unless he is granted leave by the Court.

 

            140.     Application to Court.-  (l) A receiver or manager of the property of a company appointed under the powers contained in any instrument may apply to the Court for directions in relation to any particular matter arising in connection with the performance of his functions, and on any such application the Court may give such direction, or may make such order declaring the rights of persons before the Court, or otherwise, as the Court thinks just.

 

            (2)        A receiver or manager of the property of a company appointed as aforesaid shall, to the same extent as if he had been appointed by order of a Court, be personally liable on any contract entered into by him in the performance of his functions, except in so far as the contract otherwise provides, and entitled in respect of that liability to indemnity out of the assets; but nothing in this sub-section shall be deemed to limit any right to indemnity which he would have apart from this sub-section, or to limit his liability on contracts entered into without authority or to confer any right to indemnity in respect of that liability.

           

            141.    Power of Court to fix remuneration, etc., of receiver or manager.-  (1) The Court may, on an application made to it by the receiver or manager of the property, by order fix the amount to be paid by way of remuneration to any person who, under the power contained in an instrument, has been appointed as receiver or manager of the property of the company:

 

            Provided that the amount of remuneration shall not exceed such limits as may be prescribed.

 

            (2)        The power of the Court under sub-section (1) shall, where no previous order has been made with respect thereto,–

 

(a)        extend to fixing the remuneration for any period before the making of the order or the application therefor;

 

(b)        be exercisable notwithstanding that the receiver or manager had died or ceased to act before the making of the order or the application therefor ; and

 

(c)        where the receiver or manager has been paid or has retained for his remuneration for any period before the making of the order any amount in excess of that so fixed for that period, extend to requiring him or his representative to account for the excess or such part thereof as may be specified in the order:

 

            Provided that the power conferred by clause (c) shall not be exercised as respects any period before the making of the application or the order unless in the opinion of the Court there are special circumstances making it proper for the power to be so exercised.

 

            (3)        The Court may from time to time, on an application made either by the liquidator or by the receiver or manager, or by the registrar, vary or amend an order made under sub-section (1) and issue directions to the receiver respecting his duties and functions or any other matter as it may deem expedient:

 

            Provided that an order made under sub-section (1) shall not be varied so as to increase the amount of remuneration payable to any person.

 

PART VIII – MANAGEMENT AND ADMINISTRATION

REGISTERED OFFICE, PUBLICATION OF NAME, ETC.

 

            142.     Registered office of company. –  (1) A company shall as from the day on which it begins to carry on business, or as from the twenty-eighth day after the date of its incorporation, whichever is the earlier, have a registered office to which all communications and notices may be addressed.

 

            (2)        Notice of the situation of the registered office and of any change therein shall be given within twenty-eight days after the date of the incorporation of the company or of the change, as the case may be, to the registrar who shall record the same.

 

            (3)        The inclusion in the annual return or any other document of a company of the statement as to the address of its registered office shall not be taken to meet the requirements of sub-section (2).

 

            (4)        If a company fails to comply with the requirements of sub-section (1 ) or (2), it shall be liable to a fine which may extend to two hundred rupees for every day during which such non-compliance continues, and every officer of the company who knowingly and willfully authorises or permits the default shall be liable to the like penalty.

           

            143.     Publication of name by a limited company.-  Every limited company—

 

(a)        shall paint or affix, and keep painted or affixed, its name on the outside of every office or place in which its business is carried on, in a conspicuous position, in letters easily legible and in English or Urdu characters, and also, if the registered office is situate in a place beyond the local limits of the ordinary original civil jurisdiction of a High Court, in the characters of one of the vernacular languages used in that place;

 

(b)        shall have its name engraven in legible English or Urdu characters on its seal;

 

(c)        shall have its name mentioned in legible English or Urdu characters, in all bill-heads and letter papers and in all documents, notices and other official publications of the company, and in all bills of exchange, hundis, promissory notes, endorsements, cheques and orders for money or goods purporting to be signed by or on behalf of the company, and in all bills of parcels, invoices, receipts and letters of credit of the company.

 

144.     Penalties for non-publication of name. –  (l) If a limited company does not paint or affix, and keep painted or affixed, its name in manner directed by this Ordinance, it shall be liable to a fine which may extend to two hundred rupees for every day during which its name is not so kept painted or affixed, and every officer of the company who knowingly and willfully authorises or permits the default shall be liable to the like penalty.

 

            (2)        If any officer of a limited company, or any person on its behalf, uses or authorises the use of any seal purporting to be a seal of the company wherein its name is not so engraven as aforesaid, or issues or authorises the issue of any bill-head, letter paper, document, notice or other official publication of the company, or signs or authorises to be signed on behalf of the company any bill of exchange, hundi, promissory note, endorsement, cheque or order for money or goods, or issues or authorises to be issued any bill of parcels, invoice, receipt or letter of credit of the company, wherein its name is not mentioned in manner aforesaid, he shall be liable to a fine which may extend to two thousand rupees, and shall further be personally liable to the holder of any such bill of exchange, hundi, promissory note, cheque or order for money or goods, for the amount thereof unless the same is duly paid by the company.

 

            145.     Publication of authorised as well as paid-up capital. –  (1) Where any notice, advertisement or other official publication of a company contains a statement of the amount of the authorised capital of the company, such notice, advertisement or other official publication shall also contain a statement in an equally prominent position and in equally conspicuous characters of the amount of the capital which has been subscribed and the amount paid up.

 

            (2)        Any company which makes default in complying with the requirements of sub-section (1) and every officer of the company who is knowingly a party to the default shall be liable to a fine which may extend to five thousand rupees.

 

COMMENCEMENT OF BUSINESS BY A PUBLIC COMPANY

 

            146.  Restrictions on commencement of business.- (1) A company shall not commence any business or exercise any borrowing powers unless–

 

(a)        shares held subject to the payment of the whole amount thereof in cash have been allotted to an amount not less in the whole than the minimum subscription;

 

(b)        every director of the company has paid to the company full amount on each of the shares taken or contracted to be taken by him and for which he is liable to pay in cash;

 

(c)        no money is or may become liable to be repaid to applicants for any shares or debentures which have been offered for public subscription by reason of any failure to apply for or to obtain permission for the shares or debentures to be dealt in on any stock exchange;

 

(d)        there has been filed with the registrar a duly verified declaration by the chief executive or one of the directors and the secretary in the prescribed form that the aforesaid conditions have been complied with and the registrar has issued a certificate referred to in subsection (2); and

 

(e)        in the case of a company which has not issued a prospectus inviting the public to subscribe for its shares, there has been filed with the registrar a statement in lieu of prospectus.

 

            (2)        The registrar shall, on the filing of a duly verified declaration in accordance with the provisions of sub-section (l) and after making such enquiries as he may deem fit to satisfy himself that all the requirements of this Ordinance have been complied with in respect of the commencement of business and matters precedent and incidental thereto, certify that the company is entitled to commence business, and that certificate shall be conclusive evidence that the company is so entitled:

 

            Provided that, in the case of a company which has not issued a prospectus inviting the public to subscribe for its shares, the registrar shall not give such a certificate unless a statement in lieu of prospectus has been filed with him.

 

            (3)        Any contract made by a company before the date at which it is entitled to commence business shall be provisional only, and shall not be binding on the company until that date, and on that date it shall become binding.

 

            (4)        Nothing in this section shall prevent the simultaneous offer for subscription or allotment of any shares and debentures or the receipt of any money payable on application for debentures.

 

(5)        If any company commences business or exercises borrowing powers in contravention of this section, every officer and other person who is responsible for the contravention shall, without prejudice to any other liability, be liable to a fine not exceeding one thousand rupees for every day during which the contravention continues.

 

            (6)        Nothing in this section shall apply to a private company, or to a company limited by guarantee and not having a share capital.

 

REGISTER OF MEMBERS AND DEBENTURE-HOLDERS

 

            147.     Register of members and index.-  (1) Every company shall keep in one or more books a register of its members and enter therein the following particulars, namely:-

 

(i)         the name in full, father’s name (in the case of a married woman or widow, the name of her husband or deceased husband), nationality, address, and the occupation, if any, of each member, and, in the case of a company having a share capital, a statement of the shares held by each member, distinguishing each share by its number, and of the amount paid or agreed to be considered as paid on the shares of each member;

 

 (ii)       the date at which each person was entered in the register as a member;

 

(iii)       the date at which any person ceased to be a member and the reason for ceasing to be a member.

 

            (2)        Every company having more than fifty members shall, unless the register of members is in such a form as to constitute in itself an index, keep an index of the names of the members of the company and shall, within fourteen days after the date at which any alteration is made in the register of members, make the necessary alteration in the index.

 

            (3)        The index shall, in respect of each member, contain a sufficient indication to enable the entries relating to that member in the register to be readily found.

 

            (4)        If default is made in complying with the requirements of sub-section (1) or unnecessary delay takes place in entering in the register of members the name and particulars of any person who has become or ceased to be a member of a company, as the case may be, the company shall be liable to a fine not exceeding two hundred rupees for every day during which the default continues and every officer of the company who knowingly and willfully authorises or permits the default or causes unnecessary delay in entering in the register the name and particulars of any person who has become or ceased to be a member of a company, as the case may be, shall be liable to the like penalty.

 

(5)        If default is made in complying with the requirements of sub-section (2) or sub-section (3), the company and every officer of the company who knowingly and willfully authorises or permits the default shall be liable to a fine not exceeding two thousand rupees.

 

148.     Trusts not to be entered on register.- No notice of any trust, expressed, implied or constructive, shall be entered on the register of members, or be receivable by the registrar.

           

            149.     Register and index of debenture-holders.-  (1) Every company shall keep in one or more books a register of the holders of its debentures and enter therein the following particulars, namely:–

 

(a)        the name in full, father’s name (in the case of a married woman or widow, the name of her husband or deceased husband), nationality, address and the occupation, if any, of each debenture-holder;

 

(b)        the debentures held by each holder, distinguishing each debenture by its number and the amount paid or agreed to be considered as paid on the debentures held by each holder;

 

(c)        the date at which each person was entered in the register as a debenture-holder; and

 

(d)        the date at which any person ceased to be a debenture-holder.

 

            (2)        Every company having more than fifty debenture-holders shall unless the register of debenture-holders is in such a form as to constitute in itself an index, keep an index of the names of the debenture-holders of the company and shall, within fourteen days after the date at which any alteration is made in the register of debenture-holders make the necessary alteration in the index.

 

            (3)        The index shall, in respect of each debenture-holder, contain a sufficient indication to enable the entries relating to that holder, in the register to be readily found.

 

            (4)        If default is made in complying with sub-sections (1), (2) or (3), the company and every officer of the company shall be liable to a fine as provided in sub-section (4) or sub-section (5), as the case may be, of section 147.

 

(5)                This section shall not apply with respect to debentures which, ex facie, are payable to the bearer thereof.

           

            150.     Inspection of registers.–  (1) The register of members commencing from the date of the registration of the company and the index referred to in section 147, the register of debenture-holders and the index referred to in section 149 and the registers referred to in sub-section (4) of section 156 shall be kept at the registered office of the company and, except when closed under the provisions of this Ordinance, shall during business hours, subject to such reasonable restrictions, as the company in general meeting may impose, so that not less than two hours in each day be allowed for inspection, be open to the inspection of members or debenture-holders gratis and to the inspection of any other person on payment of such amount not exceeding the prescribed amount as the company may fix; and any such member, debenture-holder or other person may make extracts therefrom.

 

            (2)        Any member or debenture-holder or other person may require a certified copy of the registers and index thereof mentioned in sub-section (1) or of any part thereof, on payment of such amount not exceeding the prescribed amount as the company may fix, and the company shall cause any copy so required by any person to be sent to that person within a period of ten days, exclusive of non-working days and days on which the transfer books of the company are closed, commencing on the day next after the day on which the requirement is received by the company.

 

(3)        If any inspection required under sub-section (1) is refused, or if any copy required under sub-section (2) is not sent within the specified period, the company and every officer of the company who is in default shall be liable, in respect of each offence, to a fine not exceeding five hundred rupees and to a further fine not exceeding fifty rupees for every day after the first during which the refusal or default continues; and the registrar may by an order compel an immediate inspection of the register and index or direct that copies required shall be sent to the persons requiring them.

 

151.                Power to close register.–  A company may, on giving not less than seven days’ previous notice by advertisement in some newspaper having circulation in the Province, or part of Pakistan not forming part of a Province, in which the registered office of the company is situate and, in the case of a listed company, also in a newspaper having circulation in the Province, or other part as aforesaid, in which the stock exchange on which the company is listed is situate, close the register of members or debenture-holders, as the case may be, for any time or times not exceeding in the whole forty five days in a year and not exceeding thirty days at a time.

 

            152.     Power of Court to rectify register. – (1) If–

 

(a)        the name of any person is fraudulently or without sufficient cause entered in or omitted from the register of members or register of debenture-holders of a company; or

 

(b)        default is made or unnecessary delay takes place in entering on the register of members or register of debenture-holders the fact of the person having become or ceased to be a member or debenture-holder;

 

the person aggrieved, or any member or debenture-holder of the company, or the company, may apply to the Court for rectification of the register.

 

            (2)        The Court may either refuse the application or may order rectification of the register on payment by the company of any damages sustained by any party aggrieved, and may make such order as to costs as it in its discretion thinks fit.

 

 (3)       On an application under sub-section (1) the Court may decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or debenture-holders or alleged members or debenture-holders, or between members or alleged members, or debenture-holders or alleged debenture-holders, on the one hand and the company on the other hand; and generally may decide any question which it is necessary or expedient to decide for rectification of the register.

 

            (4)        An appeal from a decision on an application under sub-section (1), or on an issue raised in any such application and tried separately, shall lie on the grounds mentioned in section 100 of the Code of Civil Procedure, 1908 (Act V of 1908),–

 

(a)                if the decision is that of a civil court subordinate to a High Court, to the High Court; and

 

(b)        if the decision is that of a Company Bench consisting of a single Judge, to a Bench consisting of two or more Judges of the High Court.

           

            153.     Punishment for fraudulent entries in and omission from register. –  Anyone who fraudulently or without sufficient cause enters in, or omits from the register of members or the register of debenture-holders the name or other particulars of any person shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to ten thousand rupees, or with both.

           

            154.     Notice to registrar of rectification of register. –  When it makes an order for rectification of the register of members in respect of a company which is required by this Ordinance to file a list of its members with the registrar, the Court shall cause a copy of the order to be forwarded to the company and shall, by its order, direct the company to file notice of the rectification with the registrar within fifteen days from the receipt of the order.

 

            155.     Register to be evidence. –  The registers referred to in sections 76,147, 149 and 156 shall be prima facie evidence of any matter which by this Ordinance is directed or authorised to be inserted therein.

            156.     Annual list of members, etc.. –  (1) Every company having a capital shall, once in each year, prepare and file with the registrar a return containing the particulars specified in Form A of the Third Schedule as on the date of the annual general meeting or, where no such meeting is held or if held is not concluded, on the last day of the calendar year.

 

            (2)        A company not having a share capital shall in each year prepare and file with the registrar a return containing the particulars specified in Form B of the Third Schedule as on the date of the annual general meeting or, where no such meeting is held or if held is not concluded, on the last day of the calendar year.

 

            (3)        The return referred to in sub-section (1) or sub-section (2) shall be filed with the registrar–

 

(a)        in the case of a listed company, within forty-five days; and

 

(b)        in the case of any other company, within thirty days;

 

from the date of the annual general meeting held in the year or, when no such meeting is held or if held is not concluded, from the last day of the calendar year to which it relates:

 

            Provided that, in the case of a listed company, the registrar may for special reasons extend the period of filing of such return by a period not exceeding fifteen days.

 

            (4)        All the particulars required to be submitted under sub-section (1) and sub-section (2) shall have been previously entered in one or more registers kept by the company for the purpose.

 

            (5)        If a company makes default in complying with any requirement of this section, the company and every officer of the company who knowingly and willfully authorises or permits the default shall be liable–

 

(a)        in the case of a listed company, to a fine not exceeding ten thousand rupees and to a further fine not exceeding two hundred rupees for every day after the first during which the default continues; and

 

(b)        in the case of any other company, to a fine not exceeding two thousand rupees and to a further fine not exceeding fifty rupees for every day after the first during which the default continues.

 

MEETINGS AND PROCEEDINGS

 

            157.     Statutory meeting of company. –  (1) Every company limited by shares and every company limited by guarantee and having a share capital shall, within a period of not less than three months, nor more than six months, from the date at which the company is entitled to commence business, hold a general meeting of the members of the company, which shall be called “the statutory meeting”.

 

            (2)        The directors shall, at least twenty-one days before the date on which the meeting is held, forward a report, in this Ordinance referred as “the statutory report”, to every member.

 

            (3)        The statutory report shall be certified by not less than three directors, one of whom shall be the chief executive of the company, and shall state–

 

(a)        the total number of shares allotted, distinguishing shares allotted otherwise than in cash, and stating the consideration for which they have been allotted;

 

(b)        the total amount of cash received by the company in respect of all the shares allotted;

 

(c)        an abstract of the receipts of the company and of the payments made thereout up to a date within seven days of the date of the report, exhibiting under distinctive headings the receipts of the company from shares and debentures and other sources, the payments made thereout, and particulars concerning the balance remaining in hand, and an account or estimate of the preliminary expenses of the company showing separately any commission or discount paid or to be paid on the issue or sale of shares or debentures;

 

(d)        the names, addresses and occupations of the directors, chief executive, secretary, auditors and legal advisers of the company and the changes, if any, which have occurred since the date of the incorporation;

(e)        the particulars of any contract the modification of which is to be submitted to the meeting for its approval, together with the particulars of the modification or proposed modification;

 

(f)        the extent to which underwriting contracts, if any, have been carried out and the extent to which such contracts have not been carried out, together with the reasons for their not having been carried out; and

 

(g)        the particulars of any commission or brokerage paid or to be paid in connection with the issue or sale of shares to any director, chief executive, secretary or officer or to a private company of which he is a director.

 

            (4)        The statutory report shall also contain a brief account of the state of the company’s affairs since its incorporation and the business plan, including any change or proposed change affecting the interest of shareholders and business prospects of the company.

 

            (5)        The statutory report shall, so far as it relates to the shares allotted by the company, the cash received in respect of such shares and to the receipts and payments of the company, be accompanied by a certificate of the auditors of the company as to the correctness of such allotment, receipts of cash, receipts and payments.

 

            (6)        The directors shall cause at least five copies of the statutory report, certified as aforesaid, to be delivered to the registrar for registration forthwith after sending the report to the members of the company.

 

            (7)        The directors shall cause a list showing the names, occupations, nationality and addresses of the members of the company, and the number of shares held by them respectively, to be produced at the commencement of the meeting and to remain open and accessible to any member of the company during the continuance of the meeting.

 

            (8)        The members of the company present at the meeting shall be at liberty to discuss any matter relating to the formation of the company or arising out of the statutory report, whether previous notice has been given or not, but no resolution of which notice has not been given in accordance with the articles may be passed.

 

            (9)        The meeting may adjourn from time to time, and at any adjourned meeting any resolution of which notice has been given in accordance with the articles, either before or after the original meeting, may be passed, and an adjourned meeting shall have the same powers as an original meeting.

 

            (10)      If a petition is presented to the Court in manner provided by part Xl for winding up the company on the ground of default in filing the statutory report or in holding the statutory meeting, the Court may, instead of directing that the company be wound up, give directions for the statutory report to be filed or a meeting to be held, or make such other order as may be just.

 

            (11)      In the event of any default in complying with the provisions of any of the preceding sub-sections, the company and every officer of the company who knowingly and willfully authorises or permits such default shall be liable–

 

(a)        if the default relates to a listed company, to a fine not less than ten thousand rupees and not exceeding twenty thousand rupees and in the case of a continuing default to a further fine not exceeding two thousand rupees for every day after the first during which the default continues; and

 

(b)        if the default relates to any other company, to a fine not exceeding five thousand rupees and in the case of a continuing default to a further fine not exceeding two hundred rupees for every day after the first during which the default continues.

 

            (12)      This section shall not apply to a private company but if any such private company is converted into a company of either of the classes mentioned in sub-section (1), this section shall become applicable thereto and a reference in that sub-section to the date of commencement of business shall be construed as a reference to the date of such conversion.

 

            1[(13)    The provisions of this section shall not apply to a public company which converts itself from a private company after one year of incorporation.]

 

158.     Annual general meeting. –(1) Every company shall hold, in addition to any other meeting, a general meeting, as its annual general meeting, within eighteen months from the date of its incorporation and thereafter once at least in every calendar year within a period of 1[four] months following the close of its financial year and not more than fifteen months after the holding of its last preceding annual general meeting:

 

            Provided that, in the case of a listed company, the Commission, and, in any other case, the registrar, may for any special reason extend the time within which any annual general meeting, not being the first such meeting, shall be held by a period not exceeding 2[sixty] days.

 

            (2)        An annual general meeting shall, in the case of a listed company, be held in the town in which the registered office of the company is situate:

 

            Provided that the Commission, for any special reason, may, on the application of such company, allow the company to hold a particular meeting at any other place.

 

            (3)        The notice of an annual general meeting shall be sent to the shareholders at least twenty-one days before the date fixed for 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.

 

            (4)        If default is made in complying with any provision of this section, the company and every officer of the company who is knowingly and willfully a party to the default shall be liable–

 

(a)        if the default relates to a listed company, to a fine not less than 3[twenty] thousand rupees and not exceeding 4[fifty] thousand rupees and to a further fine not exceeding two thousand rupees for every day after the first during which the default continues; and

 

(b)        if the default relates to any other company, to a fine not exceeding 5[ten] thousand rupees and to a further fine not exceeding 6[five] hundred rupees for every day after the first during which the default continues.

 

            159.     Calling of extraordinary general meeting. –  (1) All general meetings of a company, other than the annual general meeting referred to in section 158 and the statutory meeting mentioned in section 157, shall be called extraordinary general meetings.

 

            (2)        The directors may at any time call an extraordinary general meeting of the company to consider any matter which requires the approval of the company in a general meeting, and shall, on the requisition of members representing not less than one-tenth of the voting powers on the date of the deposit of the requisition, forthwith proceed to call an extraordinary general meeting.

 

            (3)        The requisition shall state the objects of the meeting, be signed by the requisitionists and deposited at the registered office of the company, and may consist of several documents in like form, each signed by one or more requisitionists.

 

            (4)        If the directors do not proceed within twenty-one days from the date of the requisition being so deposited to cause a meeting to be called, the requisitionists, or a majority of them in value, may themselves call the meeting, but in either case any meeting so called shall be held within three months from the date of the deposit of the requisition.

 

            (5)        Any meeting called under sub-section (4) by the requisitionists shall be called in the same manner, as nearly as possible, as that in which meetings are to be called by directors.

 

            (6)        Any reasonable expense incurred by the requisitionists by reason of the failure of the directors duly to convene a meeting shall be repaid to the requisitionists by the company, and any sum so repaid shall be retained by the company out of any sum due or to become due from the company by way of fees or other remuneration for their services to such of the directors as were in default.

 

            (7)        Notice of an extraordinary 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 shall also be published in the manner provided for in sub-section (3) of section 158:

 

            Provided that, in the case of an emergency affecting the business of the company, the registrar may, on the application of the directors, authorise such meeting to be held at such shorter notice as he may specify.

 

            (8)        Every officer of the company who knowingly or willfully fails to comply with any of the provisions of this section shall be liable–

 

(a)        if the default relates to a listed company, to a fine not less than ten thousand rupees and not exceeding twenty thousand rupees and in the case of a continuing default to a further fine which may extend to two thousand rupees for every day after the first during which the default continues; and

 

(b)        if the default relates to any other company, to a fine which may extend to two thousand rupees and in the case of a continuing default to a further fine which may extend to two hundred rupees for every day after the first during which the default continues.

 

160.     Provisions as to meetings and votes. –  (1) The following provisions shall apply to the general meetings of a company or meetings of a class of members of the company, namely:-

 

(a)        notice of the meeting specifying the place and the day and hour of the meeting alongwith a statement of the business to be transacted at the meeting shall be given–

 

(i)         to every member of the company;

 

(ii)        to any person entitled to a share in consequence of death of a member if the interest of such person is known to the company; and

 

(iii)       to the auditor or auditors of the company;

 

in the manner in which notices are required to be served by section 50, but the accidental omission to give notice to, or the non-receipt of notice by, any member shall not invalidate the proceedings at any meeting;

 

(b)        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;

 

(c)        subject to the provisions of this Ordinance so far as they relate to the election and appointment of directors, the provisions of clause (b) shall apply mutatis mutandis to a meeting where ordinary business, being business other than special business, is to be transacted;

 

(d)        all the members may participate in the meeting either personally or through proxy.

 

            (2)        The quorum of a general meeting shall be–

 

(a)        in the case of a public 1[listed] company, unless the articles provide for a larger number, not less than 2[ten] members present personally, who represent not less than twenty-five per cent. of the total voting power, either of their own account or as proxies;

 

(b)        in the case of 3[any other company], unless the articles provide for a larger number, two members present personally who represent not less than twenty-five per cent. of the total voting power, either of their own account or as proxies; and

 

4[(c)     In the case of a single member company, single member present in person or by proxy.]

 

                        Provided that, 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; 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, being not less than two, shall be a quorum, unless the articles provide otherwise.

 

            (3)        The chairman of the board of directors, if any, shall preside as chairman at every general meeting of the company, but if there is no such chairman, or if at any meeting he is not present within fifteen minutes after the time appointed for holding the meeting, or is unwilling to act as chairman, any one of the directors present may be elected to be chairman, and if none of the directors is present or is unwilling to act as chairman the members present shall choose one of their member to be the chairman.

 

            (4)        In the case of a company having a share capital, every member shall have votes proportionate to the paid-up value of the shares or other securities carrying voting rights held by him according to the entitlement of the class of such shares or securities, as the case may be:

 

            Provided that, at the time of voting, fractional votes shall not be taken into account.

 

            (5)        No member holding shares or other securities carrying voting rights shall be debarred from casting his vote, nor shall anything contained in the articles have the effect of so debarring him.

 

            (6)        In the case of a company limited by guarantee and having no share capital, every member thereof shall have one vote.

 

            (7)        On a poll, votes may be given either personally or by proxy.

 

            (8)        Every officer of the company who knowingly or willfully fails to comply with any of the provisions of this section shall be liable,–

 

(a)        if the default relates to a listed company, to a fine which may extend to 1[fifty] thousand rupees and in the case of a continuing default to a further fine which may extend to two thousand rupees for every day after the first during which the default continues; and

 

(b)        if the default relates to any other company, to a fine not exceeding 1[ten] thousand rupees and in the case of a continuing default to a further fine which may extend to two hundred rupees for every day after the first during which the default continues.

 

2[160-A. Circumstances in which proceedings of a General Meeting may be declared invalid. – The Court may, on a petition, by members having not less than ten per cent of the voting power in the company, that the proceedings of a general meeting be declared invalid by reason of a material defect or omission in the notice or irregularity in the proceedings of the meeting, which prevented members from using effectively their rights, declare such proceedings or part thereof invalid and direct holding of a fresh general meeting.

 

Provided that the petition shall be made within thirty days of the impugned meeting.]

 

            161.     Proxies. –  (1) Any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person, as his proxy to attend and vote instead of him, and a proxy so appointed shall have such rights as respects speaking and voting at the meeting as are available to a member:

 

            Provided that–

 

(a)        this sub-section shall not apply in the case of a company not having a share capital;

 

(b)        a member shall not be entitled to appoint more than one proxy to attend any one meeting;

 

(c)        if any member appoints more than one proxy for any one meeting and more than one instruments of proxy are deposited with the company, all such instruments of proxy shall be rendered invalid; and

 

(d)        a proxy must be a member unless the articles of the company permit appointment of a non-member as proxy.

            (2)        Every notice of a meeting of a company shall prominently set out the member’s right to appoint a proxy and the right of such proxy to attend, speak and vote in the place of the member at the meeting and every such notice shall be accompanied by a proxy form.

 

            (3)        The instrument appointing a proxy shall-

 

(a)        be in writing; and

 

(b)        be signed by the appointer or his attorney duly authorised in writing, or if the appointer is a body corporate, be under its seal or be signed by an officer or an attorney duly authorised by it.

 

            (4)        An instrument appointing a proxy, if in the form set out in Regulation 39 of Table A in the FIRST SCHEDULE shall not be questioned on the ground that it fails to comply with any special requirements specified for such instruments by the articles.

 

            (5)        The proxies shall be lodged with the company not later than forty-eight hours before the time of the meeting and any provision to the contrary in the company’s articles shall be void.

 

            (6)        The members or their proxies shall be entitled to do any or all the following things in a general meeting, namely.-

 

(a)        subject to the provisions of section 167, demand a poll on any question; and

 

(b)        on a question before the meeting in which poll is demanded, to abstain from voting or not to exercise their full voting rights;

 

and any provision to the contrary in the company’s articles shall be void.

 

            (7)        Every member entitled to vote at a meeting of the company shall be entitled to inspect during the business hours of the company all proxies lodged with the company.

 

            1[(8)         Deleted].

 

            (9)        The provisions of this section shall apply mutatis mutandis to the meeting of a particular class of members as they apply to a general meeting of all the members.

 

            (10)      Failure to issue notices in time or issuing notices with material defect or omission or any other contravention of this section which has the effect of preventing participation or use of full rights by a member or his proxy shall make the company and every officer of the company who knowingly and willfully is a party to the default or contravention liable to a fine which may extend to five thousand rupees if the default relates to a listed company and to a fine which may extend to two thousand rupees if the default relates to any other company.

 

            162.     Representation of corporations at meetings of companies and of creditors. –  (1) A company which is a member of another company may, by resolution of the directors, authorise any of its officials or any other person to act as its representative at any meeting of that other company, and the person so authorised shall be entitled to exercise the same powers on behalf of the company which he represents as if he were an individual shareholder of that other company.

 

            (2)        A company which is a creditor of another company may authorise any of its officials or any other person to act as its representative at any meeting of the creditors of that other company held in pursuance of this Ordinance or any other meeting to which it is entitled to attend in pursuance of the provisions contained in any debenture or trust deed or any other document and the person so authorised shall be entitled to exercise the same powers as are available to the company which he represents.

 

163.  Representation of Federal Government, etc., at meetings of Companies. –  (1) The Federal Government, or a Provincial Government, as the case may be, if a member of a company, may appoint such person as it thinks fit to act as its representative at any meeting of the company or at any meeting of any class of members of the company.

 

            (2)        A person appointed to act as aforesaid shall, for the purpose of this Ordinance, be deemed to be a member of such a company and shall be entitled to exercise the same rights and powers, including the right to appoint proxy, as the Federal Government or the Provincial Government, as the case may be, may exercise as a member of the company.

            164.     Notice of resolution. –  (1) With the notice for a meeting, the company shall send to the members copies of draft resolutions, other than routine or procedural resolutions, which are proposed for consideration in the meeting.

 

            (2)        The members having not less than ten per cent. voting power in the company may give notice of a resolution and such resolution together with the supporting statement, if any, which they propose to be considered at the meeting, shall be forwarded so as to reach the company,-

 

(a)        in the case of a meeting requisitioned by the members, together with the requisition for the meeting;

 

(b)        in any other case, at least fifteen days before the meeting;

 

and the company shall forthwith circulate such resolution to all the members.

 

            (3)        In the event of any default in complying with any of the provisions of this section, the company and every officer of the company who is knowingly or willfully a party to such default shall be liable to a fine which may extend to five thousand rupees if the default relates to a listed company and to a fine which may extend to two thousand rupees if the default relate to any other company.

 

            165.     Voting to be by show of hands in first instance.-  At any general meeting, a resolution put to the vote of the meeting shall, unless a poll is demanded, be decided on a show of hands.

 

166.     Chairman’s declaration of result of voting by show of hands to be evidence.-  At any general meeting, a declaration by the chairman that on a show of hands, a resolution has or has not been carried, or has or has not been carried either unanimously or by a particular majority, and an entry to that effect in the books containing the minutes of the proceedings of the company, shall, until the contrary is proved, be evidence of the fact, without proof of the number or proportion of the votes cast in favour of or against such resolution.

 

            167.     Demand for poll.-  (1) Before or on the declaration of the result of the voting on any resolution on a show of hands, a poll may be ordered to be taken by the chairman of the meeting of his own motion, and shall be ordered to be taken by him on a demand made in that behalf by the person or persons specified below, that is to say,-

(a)        in case of a public company, by at least five members having the right to vote on the resolution and present in person or by proxy;

 

(b)        in the case of a private company, by one member having the right to vote on the resolution and present in person or by proxy if not more than seven such members are personally present, and by two such members present in person or by proxy if more than seven such members are personally present;

 

(c)        by any member or members present in persons or by proxy and having not less than one-tenth of the total voting power in respect of the resolution; or

 

(d)        by any member or members present in person or by proxy and holding shares in the company conferring a right to vote on the resolution, being shares on which an aggregate sum has been paid up which is not less than one-tenth of the total sum paid up on all the shares conferring that right.

 

            (2)        The demand for a poll may be withdrawn at any time by the person or persons who made the demand.

 

            168.     Time of taking poll. –  (1) A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith and a poll demanded on any other question shall be taken at such time, not more than fourteen days from the day on which it is demanded, as the chairman of the meeting may direct.

 

            (2)        When a poll is taken, the chairman or his nominee and a representative of the members demanding the poll shall scrutinize the votes given on the poll and the result shall be announced by the chairman.

 

            (3)        Subject to the provisions of this Ordinance, the chairman shall have power to regulate the manner in which a poll shall be taken.

 

            (4)        The result of the poll shall be deemed to be the decision of the meeting on the resolution on which the poll was taken.

 

            169.     Resolution passed at adjourned meeting. –  Where a resolution is passed at an adjourned meeting of-

 

(a)        a company;

 

(b)        the holders of any class of shares in a company;

 

(c)        the directors of a company; or

 

(d)        the creditors of a company;

 

the resolution shall, for all purposes, be treated as having been passed on the date on which it was in fact passed, and shall not be deemed to have been passed on any earlier date.

           

            170.     Power of 1[Commission] to call meetings. –  (1) If default is made in holding the statutory meeting, annual general meeting or any extraordinary general meeting on the requisition of members in accordance with section 157, section 158 or section 159, as the case may be, the 2[Commission] may, notwithstanding anything contained in this Ordinance or in the article of the company, either of 3[its] own motion or on the application of any director or member of the company, call, or direct the calling of, the said meeting of the company in such manner as the 4[Commission] may think fit, and give such ancillary or consequential directions as the 5[Commission] thinks expedient in relation to the calling, holding and conducting of the meeting and preparation of any document required with respect to the meeting.

 

            Explanation.-  The directions that may be given under sub-section (1) may include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.

 

            (2)        Any meeting called, held and conducted in accordance with any such direction shall, for all purposes, be deemed to be a meeting of the company duly called, held and conducted, and all expenses incurred in connection thereto shall be paid by the company unless the 1[Commission] directs the same to be recovered from any officer of the company which he is hereby authorised to do.

 

            171.     Penalty for default in complying with the directions of the 2[Commission] for holding the meeting. –  If default is made in complying with any directions of the 3[Commission] under section 170, the company and every officer of the company who is in default shall be liable to a fine which may extend to ten thousand rupees and in the case of a continuing default to a further fine which may extend to two hundred rupees for every day after the first during which the default continues.

 

            172.     Filing of resolution, etc.- (1) A printed or typed copy of every special resolution shall, within fifteen days from the passing thereof, be filed with the registrar duly authenticated by the chief executive or secretary of the company.

 

            (2)        Where articles have been registered, a copy of every special resolution for the time being in force shall be embodied in or annexed to every copy of the articles issued after the date of the resolution.

 

(3)        A copy of every special resolution shall be forwarded to any member at his request on payment of such fee not exceeding the prescribed amount as the company may determine.

 

            (4)        In the event of any default in complying with the provisions of sub-section (1), the company and every officer who is knowingly and wilfully in default shall be liable to a fine which may extend to one hundred rupees for every day during which the default continues.

 

            (5)        In the event of any default in complying with the provisions of sub-section (2) or (3), the company and every officer who is knowingly and wilfully in default shall be liable to a fine which may extend to one thousand rupees for each default.

 

173.     Minutes of proceedings of general meetings and directors.-  (1) Every company shall cause a fair and accurate summary of the minutes of all proceedings of general meetings and meetings of its directors and committee of directors, along with the names of those participating in such meetings, to be entered in properly maintained books. 1[A copy of the minutes of meeting of board of directors shall be furnished to every director within fourteen days of the date of meeting.]

 

            (2)        Any such minute, if purporting to be signed by the chairman of the meeting at which the proceedings were had, or by the chairman of the next succeeding meeting, shall be evidence of the proceedings.

 

            (3)        Until the contrary is proved, every general meeting of the company or meeting of directors or committee of directors in respect of the proceedings whereof minutes have been so made shall be deemed to have been duly called and held, and all proceedings had thereat to have been duly had, and all appointments of directors or liquidators shall be deemed to be valid.

 

            (4)        The books containing the minutes of proceedings of the general meetings of the company and those of the meetings of the directors and committee of director shall be kept at the registered office of the company.

 

            (5)        In the event of failure to comply with the provisions of sub-section (1) or sub-section (4), the company and every officer of the company who is knowingly in default shall be liable to a fine which may extend to five thousand rupees and to a further fine which may extend to one hundred rupees for every day after the first day during which the failure continues.

 

            (6)        The books containing the minutes of proceedings of the general meetings shall be open to inspection by members without charge during business hours, subject to such reasonable restrictions as the company may by its articles or in general meeting impose so that not less than two hours in each day be allowed for inspection.

 

            (7)        Any member shall at any time after seven days from the meeting be entitled to be furnished, within seven days after he has made a request in that behalf to the company, with a certified copy of the minutes of any general meeting at such charge not exceeding the prescribed amount as may be fixed by the company.

 

            (8)        If any inspection required under sub-section (6) is refused, or if any copy required under sub-section (7) is not furnished within the time specified therein, the company and every officer of the company who is knowingly and willfully in default shall be liable in respect of each offence to a fine which may extend to one thousand rupees and to a further fine which may extend to fifty rupees for every day after the first day during which the default continues, and the registrar may direct immediate inspection or supply of copy, as the case may be.

 

DIRECTORS

 

            1[174.  Minimum number of directors.- (1) Notwithstanding anything contained in any other law for the time being in force,-

 

(a)        every single member company shall have at least one director;

 

(b)        every other private company shall have not less than two directors; and

 

(c)        every public company other than a listed company shall have not less than three directors,

 

appointed and elected in the manner provided in this Ordinance.

 

(2)        Every listed company shall have not less than seven directors to be elected in a general meeting in the manner provided in this Ordinance.]

 

175.     Only natural persons to be directors.-  Only a natural person shall be a director and no director shall be the variable representative of a body corporate.

 

176.     First directors and their term.-  (1) In default of and subject to any provisions in the articles of a company and section 174, the number of directors and the names of the first directors shall be determined in writing by a majority of the subscribers of the memorandum and until so determined, all the subscribers of the memorandum who are natural persons shall be deemed to be the directors of the company.

 

            (2)        The first directors shall hold office until the election of directors in the first annual general meeting.

 

            177.     Retirement of directors.-  On the date of the first annual general meeting of a company all directors of the company for the time being who are subject to election shall stand retired from office and thereafter all such director shall retire on the expiry of the term laid down in section 180:

 

            Provided that the directors so retiring shall continue to perform their functions until their successors are elected-

 

            Provided further that the directors so continuing to perform their functions shall take immediate step to hold the election of directors and in case of any impediment report the circumstances of the case to the registrar within fifteen days of the expiry of the term laid down in section 180.

 

178.     Procedure for election of directors. – (1) The directors of a company shall subject to section 174, fix the number of elected directors of the company not later than thirty-five days before the convening of the general meeting at which directors are to be elected, and the number so fixed shall not be changed except with the prior approval of a general meeting of the company.

 

            (2)        The notice of the meeting at which directors are proposed to be elected shall among other matters, expressly state-

 

(a)        the number of elected directors fixed under sub-section (1); and

 

(b)        the names of the retiring directors.

 

            (3)        Any person who seeks to contest an election to the office of director shall, whether he is a retiring director or otherwise, file with the company, not later than fourteen days before the date of the meeting at which elections are to be held, a notice of his intention to offer himself for election as a director:

 

            Provided that any such person may, at any time before the holding of election, withdraw such notice.

 

            (4)        All notices received by the company in pursuance of sub-section (3) shall be transmitted to the members not later than seven days before the date of the meeting, in the manner provided for sending of a notice of general meeting in the normal manner or in the case of a listed company by publication 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 its securities are listed is situate.

 

            (5)        The directors of a company having a share capital shall, unless the number of persons who offer themselves to be elected is not more than the number of directors fixed under sub-section (1), be elected by the members of the company in general meeting in the following manner, namely:-

 

(a)        a member shall have such number of votes as is equal to the product of the number of voting shares or securities held by him and the number of directors to be elected;

 

(b)        a member may give all his votes to a single candidate or divide them between more than one of the candidates in such manner as he may choose; and

 

(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.

 

1[(6)     The directors of a company not having share capital shall be elected by members of the company in general meeting in the manner as provided in articles of association of the company.]

 

            179.     Circumstances in which election of directors may be declared invalid. –  The Court may, on the application of members holding not less than twenty percent of the voting power in the company, made within thirty days of the date of election, declare election of all directors or any one or more of them invalid if it is satisfied that there has been material irregularity in the holding of the elections and matters incidental or relating thereto.

 

            180.     Term of office of directors. –  (1) A director elected under section 178 holding office for a period of three years unless he earlier resigns, becomes disqualified from being a director or otherwise ceases to hold office.

 

            (2)        Any casual vacancy occurring among the directors may be filled up by the directors and the person so appointed shall hold office for the remainder of the term of the director in whose place he is appointed.

 

            181.     Removal of director.- A company may by resolution in general meeting remove a director appointed under section 176 or section 180 or elected in the manner provided for in section 178:

 

            Provided that a resolution for removing a director shall not be deemed to have been passed unless the number of votes cast 1[against it is equal to, or exceeds].-

 

(i)         the minimum number of votes that were cast for the election of a director at the Immediately preceding election of directors, if the resolution relates to removal of a director elected in the manner provided in sub-section (5) of section 178; or

 

(ii)        the total number of votes for the time being computed in the manner laid down in sub-section (5) of section 178 divided by the number of directors for the time being, if the resolution relates to removal of a director appointed under section 176 or section 180.

 

182.     Creditors may nominate directors.- In addition to the directors elected or deemed to have been elected by shareholders, a company may have directors nominated by the company’s creditors or other special interests by virtue of contractual arrangements.

 

            183.     Certain provisions not to apply to directors representing special interests. –  Nothing in section 178, section 180 or section 181 shall apply to—

 

(a)                directors nominated 2[…] by a corporation or company formed under any law in force and owned or controlled, whether directly or indirectly, by the Federal Government or a Provincial Government on the board of directors of a company in or to which 3[…] such corporation or company has made investment or otherwise extended credit facilities;

 

(b)                directors nominated by the Federal Government or a Provincial Government on the board of directors of the company; or

 

(c)        directors nominated by foreign equity holders on the board of the Pakistan Industrial Credit and Investment Corporation Limited, or of any other company set up under a regional co-operation or other co-operation arrangement approved by the Federal Government:

 

            Provided that, where a director referred to in clause (a), (b) or (c) is nominated, such number of the votes computed in the manner laid down in sub-section (5) of section 178 as is equal to the minimum number of votes which would have been sufficient to elect such director if he had offered himself for election shall stand excluded from the total number of votes otherwise available at an election of the director to the authority or person nominating him:

 

            Provided further that a director nominated under this section shall hold office during the pleasure of the corporation, company, Government or authority which nominates him.

 

1[184.   Consent to act as director to be filed with registrar. –  (1) No person shall be appointed or nominated as a director or chief executive of a company or represent as holding such office, nor shall any person describe or name any other person as a director or proposed director or chief executive or proposed chief executive of any company, unless such person or such other person has given his consent in writing for such appointment or nomination.

 

(2)        Within fourteen days from the date of appointment or nomination, as the case may be, the company shall file with the registrar a list of persons who have consented to act as director or chief executive of the company alongwith their consent to do so in the prescribed form.]

 

            (3)        This section shall not apply to a private company, not being a private company which is a subsidiary of a public company.

           

            185.     Validity of acts of directors. –  No act of a director, or of a meeting of directors attended by him, shall be invalid merely on the ground of any defect subsequently discovered in his appointment to such office:

 

            Provided that, as soon as any such defect has come to notice, the director shall not exercise the right of his office till the defect has been rectified.

 

            186.     Penalties. –  Whoever knowingly and willfully contravenes or fails to comply with any of the provisions of sections 174 to 185 or is a party to the contravention of the said provisions shall be liable to a fine which may extend to ten thousand rupees and may also be debarred by the authority which imposes the fine from becoming or continuing a director of the company for a period not exceeding three years.

 

187.     Ineligibility of certain persons to become director. – No person shall be appointed as a director of a company if he-

 

(a)                is a minor;

 

(b)                is of unsound mind;

 

(c)                has applied to be adjudicated as an insolvent and his application is pending;

 

(d)                is an undischarged insolvent;

 

(e)                has been convicted by a court of law for an offence involving moral turpitude;

 

(f)                 has been debarred from holding such office under any provision of this Ordinance;

 

(g)                has betrayed lack of fiduciary behaviour and a declaration to this effect has been made by the Court under section 217 at any time during the preceding five years;

 

(h)                is not a member 1[;]

 

Provided that clause (h) shall not apply in the case of—

(i)         a person representing the Government or an institution or authority which is a member;

 

(ii)        a whole-time director who is an employee of the company;

 

(iii)       a chief executive; or

 

(iv)       a person representing a creditor;

 

1[(i)      has been declared by a Court of competent jurisdiction as  defaulter in repayment of loan to a financial institution, exceeding such amount as may be notified by the Commission from time to time; and

 

 

(j)         is a member of a Stock Exchange engaged in the business of brokerage, or is a spouse of such member:

 

 

            Provided that clauses (i) and (j) shall be applicable only in case of a listed company.]

 

 

188.     Vacation of office by the directors. –  (1) A director shall ipso facto cease to hold office if—

 

a)         he becomes ineligible to be appointed a director on any one or more of the grounds enumerated in clauses (a) to (h) of section 187;

 

(b)        he absents himself from three consecutive meetings of the directors or from all the meetings of the directors for a continuous period of three months, whichever is the longer, without leave of absence from the directors;

 

(c)        he or any firm of which he is a partner or any private company of which he is a director—

 

(i)         without the sanction of the company in general meeting accepts or holds any office of profit under the company other than that of chief executive or a legal or technical adviser or a bank; or

 

(ii)        accepts a loan or guarantee from the company in contravention of section 195.

 

            (2)        Nothing contained in sub-section (l) shall be deemed to preclude a company from providing by its articles that the office of director shall be vacated on any grounds additional to those specified in that subsection.

 

            189.     Penalty for unqualified person acting as director, etc.- If a person who is not qualified to be a director or chief executive or who has otherwise vacated the office of director or chief executive describes or represents himself or acts as a director or chief executive, or allows or causes himself to be described as such, he shall be liable in respect of each day during which he so describes or represents or acts, or allows or causes himself to be described, as such, to fine which may extend to two hundred rupees.

 

            190.     Ineligibility of bankrupt to act as director, etc.-  (1) If any person being an undischarged insolvent acts as chief executive, director or managing agent of a company, he shall be liable to imprisonment for a term not exceeding two years, or to a fine not exceeding ten thousand rupees, or to both.

 

            (2)        In this section the expression “company” includes a company incorporated outside Pakistan which has a place of business in Pakistan.

 

            191.     Restriction on director’s remuneration, etc.-  (l) The remuneration of a director for performing extra services, including the holding of the office of chairman, shall be determined by the directors or the company in general meeting in accordance with the provisions in the company’s articles.

 

            (2)        The remuneration to be paid to any director for attending the meetings of the directors or a committee of directors shall not exceed the scale approved by the company or the directors, as the case may be, in accordance with the provisions of the articles.

 

            192.     Restriction on assignment of office by directors. –  (1) If in the case of any company provision is made by the articles or by any agreement entered into between any person and the company for empowering a director of the company to assign his office as such to another person, any assignment of office made in pursuance of the said provision shall, notwithstanding anything contained in the said provision, be of no effect unless and until it is approved by a special resolution of the company.

 

            (2)        Notwithstanding anything contained in sub-section (1), the appointment by a director, with the approval of the directors, of an alternate or substitute director to act for him during his absence from Pakistan of not less than three months, shall not be deemed to be an assignment of office.

 

            (3)        The alternate director appointed under sub-section (2) shall ipso facto vacate office if and when the director appointing him returns to Pakistan.

 

            193.     Proceedings of directors.-  (1) The quorum for a meeting of directors of a listed company shall not be less than one-third of their number or four, whichever is greater.

 

            (2)        The directors of a public company shall meet at least 1[once in each quarter of a year.]

 

            (3)        If a meeting of directors is conducted in the absence of a quorum specified in sub-section (1), or a meeting of directors is not held as required by sub section (2), the chairman of the directors and the directors shall be liable—

 

(a)        to a fine not exceeding ten thousand rupees and in the case of a continuing default to a further fine not exceeding one hundred rupees for every day after the first during which the default continues, if the contravention relates to a listed company; or

 

(b)        to a fine not exceeding two thousand rupees and in the case of a continuing default to a further fine not exceeding fifty rupees for every day after the first during which the default continues, if the contravention relates to a non-listed company.

 

194.     Liabilities, etc., of directors and officers. –  Save as provided in this section, any provision, whether contained in the articles of a company or in any contract with a company or otherwise, for exempting any director, chief executive or officer of the company or any person, whether an officer of the company or not, employed by the company as auditor, from, or indemnifying him against, any liability which by virtue of any law would otherwise attach to him in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to the company, shall be void:

 

            Provided that, notwithstanding anything contained in this section, a company may, in pursuance of any such provision as aforesaid, indemnify any such director, chief executive, officer, or auditor against any liability incurred by him in defending any proceedings, whether civil or criminal, 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.

 

            195.     Loans to directors, etc.-  (l) Save as otherwise provided in sub-section (2), no company, hereafter in this section referred to as “the lending company”, shall, directly or indirectly, make any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other person by.—

 

(a)        any director of the lending company or of a company which is its holding company or any partner or relative of any such director;

 

(b)        any firm in which any such director or relative is a partner;

 

(c)        any private company of which any such director is a director or member;

 

(d)        any body corporate at a general meeting of which not less than twenty five per cent of the total voting power may be exercised or controlled by any such director or his relative, or by two or more such directors together or by their relatives; or

 

(e)        any body corporate, the directors or chief executive whereof are or is accustomed to act in accordance with the directions or instructions of the chief executive, or of any director or directors, of the lending company:

 

            Provided that a company may, with the approval of the Commission, make a loan or give any guarantee or provide any security in connection with a loan made by any other person to a director who is in the whole-time employment of the company for the purpose of acquisition or construction of a dwelling house or land therefor or for defraying the cost of any conveyance for personal use or household effects or for defraying any expense on his medical treatment or the medical treatment of any relative as are ordinarily made or provided by the company to its employees.

 

            Explanation.-  “Relative” in relation to a director means his spouse and minor children.

 

            (2)        Sub-section (1) shall not apply to—

 

(a)        any loan made, guarantee given or security provided—

 

(i)         by a private company, unless it is a subsidiary of a public company; or

 

(ii)        by a banking company;

 

(b)        any loan made by a holding company to its subsidiary; or

 

(c)        any guarantee given or security provided by a holding company in respect of any loan made to its subsidiary.

 

            (3)        Where any loan made, guarantee given or security provided by a lending company and outstanding at the commencement of this Ordinance could not have been made, given or provided, if this section had then been in force, the lending company shall within six months from the commencement of this Ordinance enforce the repayment of the loan made or, as the case may be, of the loan in connection with which the guarantee was given or the security was provided, notwithstanding any agreement to the contrary:

 

            Provided that this sub-section shall not apply where the loan made, guarantee given or security provided to a whole-time director is approved by the Commission as provided in the proviso to sub-section (1).

 

            (4)        Every person shall within fourteen days of his appointment as director or chief executive of a company file with the registrar the particular of any loan taken, or guarantee or security obtained, prior to his becoming director or chief executive of the lending company which could not have been taken or obtained without the prior approval of the Commission had he at the time of taking the loan or obtaining the guarantee or security been the director or chief executive of the lending company.

 

            (5)        Every person who is knowingly a party to any contravention of this section, including in particular any person to whom the loan is made or who has taken the loan in respect of which the guarantee is given or the security is provided, shall be punishable with fine which may extend to five thousand rupees or with simple imprisonment for a term which may extend to six months:

 

            Provided that where any such loan, or any loan in connection with which any such guarantee or security has been given or provided by the lending company, has been repaid in full, no punishment by way of imprisonment shall be imposed under this sub-section, and where the loan has been repaid in part, the maximum punishment which may be imposed under this sub-section by way of imprisonment shall be proportionately reduced.

 

            (6)        All persons who are knowingly parties to any contravention of sub-section (1) or (3) shall be liable, jointly and severally, to the lending company for the repayment of the loan or for making good the sum 1[with mark up not less than the borrowing cost of the lending company] which the lending company may have been called upon to pay by virtue of the guarantee given or the security provided by such company.

 

            (7)        Sub-section (1) shall apply to any transaction represented by a book-debt which was from its inception in the nature of a loan or an advance.

 

            (8)        No officer of the lending company or of the borrowing body corporate shall be punishable under sub-section (5) or shall incur the liability referred to in sub-section (6) in respect of any loan made, guarantee given or security provided after the commencement of this Ordinance in contravention of clause (d) or (e) of sub-section (1), unless at the time when the loan was made, the guarantee was given or the security was provided by the lending company, he knew or had express notice that clause was being contravened thereby.

 

            196.     Powers of directors.-  (l) The business of a company shall be managed by the directors, who may pay all expenses incurred in promoting and registering the company, and may exercise all such powers of the company as are not by this Ordinance, or by the articles, or by a special resolution, required to be exercised by the company in general meeting.

            (2)        The directors of a company shall exercise the following powers on behalf of the company, and shall do so by means of a resolution passed at their meeting, namely. —

 

(a)        to make calls on shareholders in respect of moneys unpaid on their shares;

 

(b)        to issue shares;

 

(c)        to issue debentures or 1[participation term certificate, any instrument in the nature of redeemable capital];

 

(d)        to borrow moneys otherwise than on debentures;

 

(e)        to invest the funds of the company;

 

(f )       to make loans;

 

(g)        to authorise a director or the firm of which he is a partner or any partner of such firm or a private company of which he is a member or director to enter into any contract with the company for making sale, purchase or supply of goods or rendering services with the company;

 

(h)        to approve annual or half-yearly or other periodical accounts as are required to be circulated to the members;

 

(i)         to approve bonus to employees; 2[…]

 

3[(j)      to incur capital expenditure on any single item or dispose of a fixed asset in accordance with the limits as prescribed by the Commission from time to time];

 

1[(k)     to undertake obligations under leasing contracts exceeding one million rupees;

 

(l)         to declare interim dividend; and

 

(m)       having regard to such amount as may be determined to be material  (as construed in Generally Accepted Accounting Principles) by the Board-

 

(i)         to write off bad debts, advances and receivables;

 

(ii)        to write off inventories and other assets of the company; and

 

(iii)       to determine the  terms of and the circumstances in which a law suit may be compromised and a claim or right in favour of a company may be released, extinguished or relinquished:]

 

            Provided that the acceptance by a banking company in the ordinary course of its business of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise, or the placing of moneys or deposit by a banking company with another banking company on such conditions as the directors may prescribe, shall not be deemed to be a borrowing of moneys or, as the case may be, a making of loan by a banking company within the meaning of this section.

 

            (3)        The directors of a public company or of a subsidiary of a public company shall not except with the consent of the general meeting either specifically or by way of an authorisation, do any of the following things, namely.-

 

(a)        sell, lease or otherwise dispose of the undertakings or a sizeable part thereof unless the main business of the company comprises of such selling or leasing; and

 

(b)        remit, give any relief or give extension of time for the repayment of any debt outstanding against any person specified in sub-section (1) of section 195.

 

            (4)        Whosoever contravenes any provision of this section shall be punishable with a fine which may extend to 1[one hundred thousand] rupees and shall be individually and severally liable for losses or damages arising out of such action.

 

197.  Prohibition regarding making of political contributions.- (1) Notwithstanding anything contained in this Ordinance, a company shall not contribute any amount—

 

(a)        to any political party; or

 

(b)        for any political purpose to any individual or body.

 

            (2)        If a company contravenes the provisions of sub-section (1), then-

 

(i)         the company shall be liable to a fine which may extend to ten thousand rupees; and

 

(ii)        every director and officer of the company who is knowingly and wilfully in default shall be punishable with imprisonment of either description for a term which may extend to two years and shall also be liable to fine.

 

2[197-A.   Prohibition regarding distribution of gifts. – (1) Notwithstanding anything contained in this Ordinance, a company shall not distribute gifts in any form to its members in its meeting.

 

(2)        If default is made in complying with this section, the company and every officer of the company who is a party to the default shall be liable to a fine not exceeding five hundred thousand rupees.]

 

CHIEF EXECUTIVE

 

            198.     Appointment of first chief executive. –  (1) Every company other than a company managed by a managing agent, shall have a chief executive appointed in the manner provided in this section and section 199.

 

            (2)        The directors of every company shall as from the date from which it commences business or as from a date not later than the fifteenth day after the date of its incorporation, whichever is earlier, appoint any individual to be the chief executive of the company.

 

            (3)        The chief executive appointed as aforesaid shall, unless he earlier resigns or otherwise ceases to hold office, hold office up to the first annual general meeting of the company or, if a shorter period is fixed by the directors as the time of his appointment, for such period.

 

            199.     Appointment of subsequent chief executive. –  (1) Within fourteen days from the date of election of directors under section 178 or the office of the chief executive falling vacant, as the case may be, the directors of a company shall appoint any person, including an elected director, to be the chief executive, but such appointment shall not be for a period exceeding three years from the date of appointment.

 

            (2)        On the expiry of his term of office under section 198 or sub-section (1), a chief executive shall be eligible for reappointment.

 

            (3)        The chief executive retiring under section 198 or this section shall continue to perform his functions until his successor is appointed unless non-appointment of his successor is due to any fault on his part or his office is expressly terminated.

 

            200.     Terms of appointment of chief executive and filling up of casual vacancy. –  (1) The terms and conditions of appointment of a chief executive shall be determined by the directors or the company in general meeting in accordance with the provisions in the company’s articles.

 

            (2)        The chief executive shall if he is not already a director of the company, be deemed to be its director and be entitled to all the rights and privileges, and subject to all the liabilities, of that office.

 

            201.     Restriction on appointment of chief executive. –  No person who is ineligible to become a director of a company under section 187 shall be appointed or continue as the chief executive of any company.

 

            202.     Removal of chief executive.-  The directors of a company by resolution passed by not less than three-fourths of the total number of directors for the time being, or the company by a special resolution, may remove a chief executive before the expiration of his term of office notwithstanding anything contained in the articles or in any agreement between the company and such chief executive.

 

            203.     Chief executive not to engage in business competing with company’s business.-  (1) A chief executive of a public company shall not directly or indirectly engage in any business which is of the same nature as and directly competes with the business carried on by the company of which he is the chief executive or by a subsidiary of such company.

 

            Explanation.-  A business shall be deemed to be carried on indirectly by the chief executive if the same is carried on by his spouse or any of his minor children.

 

            (2)        Every person who is appointed as chief executive of a public company shall forthwith on such appointment disclose to the company in writing the nature of such business and his interest therein.

 

204.     Penalty. – Whoever contravenes or fails to comply with any of the provisions of sections 198 to 203 or is a party to the contravention of the said provisions shall be liable to a fine which may extend to ten thousand rupees and may also be debarred by the authority which imposes the fine from becoming a director or chief executive of a company for a period not exceeding three years.

 

1[204-A.     Certain companies to have secretaries.- (1) A listed company shall have a whole time secretary and a single member company shall have a secretary possessing such qualification as may be prescribed.]

 

205.     Register of directors, officers, etc.—(1) Every company shall keep at its registered office a register of its directors and officers, including the chief executive, managing agent, secretary, chief accountant, auditors and legal adviser, containing with respect to each of them 2[such particulars as may be prescribed.]

(2)        Every person referred to in sub-section (1) shall, within a period of ten days of his appointment or any change therein, as the case maybe, furnish to the company the particulars specified in subsection (1) and, within the periods respectively mentioned in this section, the company shall file with the registrar a return in duplicate in the prescribed form containing the particulars specified in the said register and notification in the prescribed form of any change among the directors, the chief executive, managing agent, chief accountant, secretary, auditor or legal advisor or in any of the particulars contained in the register.

 

            (3)        The period within which the said return is to filed with the registrar shall be a period of fourteen days from the date of incorporation of the company and the period within which the said notification of a change is to be sent shall be fourteen days from the happening thereof.

 

            (4)        The register to be kept under this section shall during business hours, subject to such reasonable restrictions as the company may by its articles or in general meeting impose so that not less than two hours in each day be allowed for inspection, be open to the inspection of any member of the company without charge and of any other person on payment of the prescribed fee or such lesser sum as the company may specify for each inspection.

 

            (5)        If any inspection required under this section is refused or if default is made in complying with subsection (1) or subsection (2) or subsection (3), the company and every officer of the company or other person who is knowingly and wilfully in default shall be liable to a fine which may extend to five hundred rupees and to a further fine which may extend to fifty rupees for every day after the first during which the default continues.

 

(6)        In the case of any such refusal, the registrar on application made by the person to whom inspection has been refused and upon notice to the company, may by order direct an immediate inspection of the register.

 

BAR ON APPOINTMENT OF MANAGING AGENTS, SOLE PURCHASE AND SALE AGENTS, ETC.

 

            206.     Bar on appointment of managing agents, sole purchase, sales agents, etc. – (1) No company whether incorporated in Pakistan or outside Pakistan shall appoint any managing agent, by whatever name called, that is to say a person, firm or company entitled to the management of the affairs of a company, by virtue of an agreement or contract with the company:

 

 

            Provided that this sub-section shall not apply to a company which is managed by a managing agent wholly owned or controlled by the Federal Government or Provincial Government.

 

 

            (2)        The Federal Government may, by notification in the official Gazette, exempt any of the following classes of agreements or contracts from the operation of sub-section (1), namely: —

 

 

(a)        an agreement or contract with an investment adviser in relation to an investment company registered under the rules made under the Securities and Exchange Ordinance, 1969 (XVII of 1969);

 

 

(b)        an agreement or contract, approved by the Federal Government, with a Foreign Collaborator in relation to a company which owns a hotel in Pakistan; and

 

 

(c)        an agreement or contract approved by the Federal Government in relation to a company formed for setting up, in collaboration with one or more public sector financial institutions, an industrial undertaking which in the opinion of the said Government, is likely to contribute to the economic development of Pakistan.

 

 

            (3)        No company whether incorporated in Pakistan or outside Pakistan which is carrying on business in Pakistan shall, without the approval of the Commission, appoint any sole purchase, sale or distribution agent:

 

 

            Provided that this sub-section shall not apply to a sole purchase, sale or distribution agent appointed by a company incorporated, or person ordinarily residing, outside Pakistan, unless the major portion of the business of such company or person is conducted in Pakistan.

 

 

            (4)        Whoever contravenes any of the provisions of this section shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one hundred thousand rupees, or with both; and, if the person guilty of the offence is a company or other body corporate, every director, chief executive, or other officer, agent or partner thereof shall, unless he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent its commission be deemed to be guilty of the offence.

 

TERMS OF APPOINTMENT OF MANAGING AGENT

 

            207.     Terms and conditions of appointment of managing agent. – (1) Where a managing agent is appointed in pursuance of any exemption available under section 206, such appointment shall be subject to such terms and conditions as the Federal Government may deem fit to impose.

 

            (2)        In the event of any contravention of the terms and conditions imposed by the Federal Government under sub-section (1), the company and every officer thereof who is knowingly and wilfully in default shall be liable to a fine which may extend to twenty thousand rupees and such officer shall in the event of the company incurring a loss on account of such contravention be jointly and severally liable for the loss.

 

 

MISCELLANEOUS PROVISIONS REGARDING INVESTMENTS, CONTRACTS OFFICERS AND SHAREHOLDING, TRADING AND INTERESTS

 

1[208.   Investments in Associated companies and undertaking.- (1) A company shall not make any investment in any of its associated companies or associated undertakings except under the authority of a special resolution which shall indicate the nature period and amount of investment and terms and conditions attached thereto.

 

            Provided that the return on investment in the form of loan shall not be less than the borrowing cost of investing company.

 

Explanation: The expression ‘investment’ shall include loans, advances, equity, by whatever name called, or any amount, which is not in the nature of normal trade credit.

 

(2)        No change in the nature of an investment or the terms and conditions attached thereto shall be made except under the authority of a special resolution.

 

 (3)       If default is made in complying with the requirements of this section, every director of a company who is knowingly and wilfully in default shall be liable to fine which may extend to one million rupees and in addition, the directors shall jointly and severally reimburse to the company any loss sustained by the company in consequence of an investment which was made without complying with the requirements of this section.

 

(4)        This section shall not apply to: —

 

(a)        a banking company;

 

(b)        any other  financial institution approved by the Commission;

                       

(c)        a private company which is not a subsidiary of a public company; and

 

(d)        a company whose principal business is the acquisition  of shares, stock, debentures or other securities.]

 

209.     Investments of company to be held in its own name. – (1) Save as otherwise provided in sub-sections (2) to (5) or any other law for the time being in force, and subject to the provisions of sub-sections (6) to (8). —

 

(a)        all investments made by a company on its own behalf shall be made and held by it in its own name; and

 

(b)        where any such investments are not so held immediately before the commencement of this Ordinance the company shall within a period of one year from such commencement, either cause them to be transferred to its own name or dispose of them.

 

            (2)        Where the company has a right to appoint or get elected any person as a director of any other company and a nominee of the company in exercise of such right has been so appointed or elected, the shares in such other company of an amount not exceeding the nominal value of the qualification shares which are required to be held by a director thereof, may be registered or held by such company jointly in its own name and in the name of such person or nominee, or in the name of such person or nominee alone.

 

            (3)        A holding company may hold any shares in its subsidiary company in the name of its nominee or nominees if and in so far as it is necessary so to do for ensuring that the number of members of the subsidiary company is not reduced below seven in case it is a public company, or below two in case it is a private company.

 

 

            (4)        Sub-section (1) shall not apply to investments made by an investment company, that is to say, a company whose principal business is the purchase and sale of securities.

 

            (5)        Nothing in this section shall be deemed to prevent a company—

 

(a)                from depositing with a bank, being the banker of the company, any shares or securities for the collection of any dividend or interest payable thereon; or

 

(b)                from depositing with or transferring to or holding in the name of a scheduled bank or a financial institution approved by the Commission shares or securities in order to facilitate the transfer thereof:

 

Provided that, if, within a period of six months from the date on which shares or securities are so deposited, transferred or held, no transfer of such shares or securities takes place, the company shall as soon as practicable after the expiry of such period have the shares or securities retransferred to itself from the scheduled bank or, as the case may be, the financial institution, and again hold the shares or securities in its own name; 1[..]

 

(c)        from depositing with or transferring to any person any shares or securities, by way of security for the repayment of any loan advanced to the company or the performance of any obligation undertaken by it, 2[or]

 

(d)        3[from depositing with, or transferring to, or holding, or registering in the name of a central depository any shares or securities.]

 

            (6)        The certificates or the letter of allotment relating to the shares or securities in which investments have be made by a company shall, except in the cases referred to in sub-sections (4) and (5), be in the custody of the company or of such scheduled bank or financial institution as may be approved by the Commission.

 

            (7)        Where, in pursuance of sub-sections (2), (3), (4) or (5), any shares or securities in which investments have been made by a company are not held by it in its own name, the company shall forthwith enter in a register maintained by it for the purpose at its registered office—

 

(a)        the nature, value and such other particulars as may be necessary fully to identify such shares or securities; and

 

(b)        the bank or person in whose name or custody such shares or securities are held.

 

            (8)        The register kept under sub-section (7) shall be open to the inspection of any member or debenture-holder or creditor of the company without charge, during business hours, subject to such reasonable restrictions as the company may, by its articles or in general meeting, impose so that not less than two hours in each day are allowed for such inspection.

 

            (9)        If default is made in complying with any of the requirements of sub-sections (1) to (8), the company, and every officer of the company who is knowingly and wilfully in default, shall be liable to a fine which may extend to five thousand rupees and to a further fine not exceeding two hundred rupees for every day after the first during which the default continues.

 

            (10)      Without prejudice to the provisions of sub-section (9), if any inspection required under sub-section (8) is refused, the registrar may on an application direct an immediate inspection of the register.

 

210.     Form of contract. – (1) Contracts on behalf of a company may be made as follows, that is to say, —

 

(i)         any contract which, if made between private persons, would be by law required to be in writing, signed by the parties to be charged therewith, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied, and may in the same manner be varied or discharged;

 

(ii)        any contract which, if made between private persons, would by law be valid although made by parol only, and not reduced into writing, may be made by parol on behalf of the company by any person acting under its authority, express or implied, and may in the same manner be varied or discharged.

 

            (2)        All contracts made according to sub-section (1) shall be effectual in law and shall bind the company and its successors and all other parties thereto, their heirs, or legal representatives, as the case may be.

 

 

            211.     Bill of exchange and promissory notes. –  A bill of exchange, hundi or promissory note shall be deemed to have been made, drawn, accepted or endorsed on behalf of a company, if made, drawn, accepted or endorsed in the name of, or by or on behalf or on account of, the company by any person acting under its authority, express or implied.

 

            212.     Execution of deeds. –              A company may, by writing under its common seal, empower any person, either generally or in respect of any specified matter, as its attorney, to execute deeds on its behalf in any place either in or outside Pakistan, and every deed signed by such attorney, on behalf of the company, and under his seal, where sealing is required, shall bind the company, and have the same effect as if it were under its common seal.

 

            213.     Power for company to have official seal for use abroad. – (1) A company whose objects require or comprise the transaction of business beyond the limits of Pakistan may, if authorized by its articles, have for use in any territory not situate in Pakistan, an official seal which shall be a facsimile of the common seal of the company, with the addition on its face of the name of every territory where it is to be used.

 

            (2)        A company having such an official seal may by writing under its common seal, authorise any person appointed for the purpose in any territory not situate in Pakistan to affix the same to any deed or other document to which the company is party in that territory.

 

            (3)        The authority of any such agent shall, as between the company and any person dealing with the agent, continue during the period, if any, mentioned in the instrument conferring the authority, or if no period is mentioned therein, then until notice of the revocation or determination of the agent’s authority has been given to the person dealing with him.

 

            (4)        The person affixing any such official seal shall, by writing under his hand, on the deed or other document to which the seal is affixed, certify the date and place of affixing the same.

 

            (5)        A deed or other document to which an official seal is duly affixed shall bind the company as if it had been sealed with the common seal of the company.

 

214.     Disclosure of interest by director. – (1) Every director of a company who is in any way, whether directly or indirectly, concerned or interested in any contract or arrangement entered into, or to be entered into, by or on behalf of the company shall disclose the nature of his concern or interest at a meeting of the directors:

            Provided that a director shall be deemed also to be interested or concerned if any of his relatives, as defined in the Explanation to sub-section (1) of section 195, is so interested or concerned.

 

            (2)        The disclosure required to be made by a director under sub-section (1) shall be made,—

 

(a)        in the case of a contract or arrangement to be entered into, at the meeting of the directors at which the question of entering into the contract or arrangement is first taken into consideration or, if the director was not, on the date of that meeting, concerned or interested in the contract or arrangement , at the first meeting of the directors held after he becomes so concerned or interested; and

 

(b)        in the case of any other contract or arrangement, at the first meeting of the directors held after the director becomes concerned or interested in the contract or arrangement.

 

            (3)        For the purposes of sub-sections (1) and (2), a general notice given to the directors to the effect that a director is a director or a member of a specified body corporate or a member of a specified firm and is to be regarded as concerned or interested in any contract or arrangement which may, after the date of the notice, be entered into with that body corporate or firm, shall be deemed to be a sufficient disclosure of concern or interest in relation to any contract or arrangement so made.

 

            (4)        Any such general notice shall expire at the end of the financial year in which it is given, but may be renewed for further period of one financial year at a time, by a fresh notice given in the last month of the financial year in which it would otherwise expire.

 

            (5)        No such general notice, and no renewal thereof, shall be of effect unless either it is given at a meeting of the directors, or the director concerned takes reasonable steps to ensure that it is brought up and read at the first meeting of the directors after it is given.

 

            (6)        A director who fails to comply with sub-section (1) or sub-section (2) shall be liable to a fine which may extend to five thousand rupees.

 

            (7)        Nothing in this section shall be taken to prejudice the operation of any law restricting a director of a company from having any concern or interest in any contract or arrangement with the company.

 

            215.     Interest of other officers, etc. – (1) Save as provided in section 214 in respect of director, no other officer of a company who is in any way, directly or indirectly, concerned or interested in any proposed contract or arrangement with the company shall, unless he discloses the nature and extent of his interest in the transaction and obtains the prior approval of the directors, enter into any such contract or arrangement.

 

            (2)        An officer who contravenes sub-section (1) shall be liable to a fine which may extend   to five thousand rupees.

 

            216.     Interested director not to participate or vote in proceedings of directors. – (1) No director of a company shall, as a director, take any part in the discussion of, or vote on, any contract or arrangement entered into, or to be entered into, by or on behalf of the company, if he is in any way, whether directly or indirectly, concerned or interested in the contract or arrangement, nor shall his presence count for the purpose of forming a quorum at the time of any such discussion or vote; and if he does vote, his vote shall be void.

 

            (2)        Sub-section  (1) shall not apply to—

 

(a)        a private company which is neither  a subsidiary nor a holding company of a public company;

 

(b)        any contract of indemnity against any loss which the directors, or any one or more of them, may suffer by reason of becoming or being sureties or a surety for the company;

 

(c)        any contract or arrangement entered into or to be entered into with a public company, in which the interest of the director  aforesaid consists solely in his being a director of such company and the holder of not more than such shares therein as are requisite to qualify him for appointment as a director thereof, he having been nominated as such director by the company referred to in sub-section  (1).

 

            (3)        Every director who knowingly contravenes any of the provisions of sub-section  (1), or sub-section  (2) shall be liable to a fine which may extend to five thousand rupees.

 

            217.     Declaring a director to be lacking fiduciary behaviour.-  The Court may declare a director to be lacking fiduciary behaviour if he contravenes the provisions of section 214 or sub-section (1) of section 215 or section 216:

 

            Provided that before making a declaration the Court shall afford the director concerned an opportunity of showing cause against the proposed action.

           

            218.     Disclosure to members of directors’ interest in contract appointing chief executive, managing agent or secretary.- (1) Where a company—

 

(a)        appoints, or enters into a contract for the appointment of, a chief executive, managing agent, whole-time director or secretary of the company, in which appointment or contract any director of the company is in any way, whether directly or indirectly, concerned or interested :  or

 

(b)        varies any such contract already in existence;

 

the company shall make out and attach to the report referred to in section 236 an abstract of the terms of the appointment or contract or variation,  together with a memorandum clearly specifying the nature of the concern or interest of the director in such appointment  or contract or variation.

 

            (2)        Where a company appoints or enters into a contract for the appointment of a chief executive of the company,. or varies any such contract already in existence, the company shall send an abstract of the terms  of the appointment or contract or variation to every member of the company within twenty-one days from the date of the appointment or of entering into the contract or varying of the contract, as the case may be, and if any other director of the company is concerned or interested in the appointment or contract or variation, a memorandum clearly specifying the nature of the concern or interest of such other director in the appointment of contract or variation shall also be sent to every member of the company with the abstract.

 

            (3)        Where a director becomes concerned or interested as aforesaid in any such contract as is referred to in sub-section  (1) or sub-section (2) after it is made, the abstract and the memorandum, if any, referred to therein shall be sent to every member of the company within twenty-one days from the date of which the director becomes so concerned or interested.

 

            (4)        All contracts entered into by a company for the appointment of a managing agent, chief executive or secretary shall be kept at the registered office of the company; and shall be open to the inspection of any member of the company at such office; and extracts may be taken therefrom and certified copies thereof may be required by any such member, to the same extent, in the same manner and on payment of the same fee, as in the case of the register of members of the company; and the provisions of section 150 shall apply accordingly.

 

 

            (5)        The provisions of this section shall apply in relation to any resolution of the directors of a company appointing a managing agent, a secretary or a chief executive or other whole-time director, or varying any previous contract or resolution of the company relating to the appointment of a managing agent, a secretary or a chief executive or other whole-time director, as they apply in relation to any contract for the like purpose.

 

            (6)        If default is made in complying with any of the provisions of the section, the company and every officer of the company who is knowingly and wilfully in default shall be liable to a fine which may extend to five thousand rupees.

 

            219.     Register of contracts, arrangements and appointments in which directors, etc., are interested. – (1) Every company shall keep a register in which shall be entered separately particulars of all contracts, arrangements or appointments to which section 214 or section 215 or section 216, or section 218 applies, including the following particulars to the extent they are applicable in each case, namely: —

 

(a)        the date of the contract, arrangement or appointment;

 

(b)        the names of the parties thereto;

 

(c)        the principal terms and conditions thereof;

 

(d)        the date on which it was placed before the directors;

 

(e)        the names of the directors voting for and against  the contract, arrangement or appointment and the names of those remaining neutral;

 

(f)        the name of the director or officer concerned or interested in the contract, arrangement or appointment and the extent or nature of his interest therein.

 

            (2)        Particulars of every such contract, arrangement and appointment shall be entered in the relevant register aforesaid—

 

(a)        in the case of a contract, arrangement, or appointment requiring the directors’ approval, within seven days of the meeting of the directors at which the contract, arrangement or appointment is approved; and

 

(b)        in the case of any  other contract, arrangement or appointment, within seven days of the receipt at the registered office of the company of the particulars of such other contract, arrangement or appointment or within thirty days of the date of such other contract, arrangement  or appointment, whichever is later; and the register shall  be placed before the next meeting of the directors and shall then be signed by all the directors present at the meeting.

 

            (3)        The register aforesaid shall also specify, in relation to each director of the company, the names of the firms and bodies corporate of which notice has been given by him under sub-section (3) of section 214.

 

 

            (4)        Nothing in sub-section (1), sub-section (2) or sub-section (3) shall apply—

 

(a)        to any contract or arrangement for the sale, purchase or supply of any goods, materials or services, if the value of such goods and materials or the cost of such services does not exceed two thousand rupees in the aggregate in any year; or

 

(b)        to any contract or arrangement by a banking company for the collection of bills in the ordinary course of its business.

 

            (5)        The register referred to in sub-section (1) shall be kept at the registered office of the company and shall be open to inspection by and extracts may be taken therefrom and certified copies thereof required by any member of the company in the same manner and on payment of the same fee as in the case of register of members kept under section 150.

 

            (6)        If default is made in complying with the provisions of this section, the company and every director of the company who is knowingly and wilfully in default shall, in respect of each default, be liable to a fine which may extend to five thousand rupees and to a further fine which may extend to two hundred rupees for every day after the first during which the default continues.

 

220.     Register of directors’ shareholdings, etc. – (1) Every listed company shall keep a register showing as respects each director, chief executive, managing agent, chief accountant, secretary or auditor of the company, and every other person holding not less than ten per cent of the beneficial interest in the company, the number, description and amount of any shares in, or debentures of, the company or any other body corporate, being the company’s subsidiary or holding company, or a subsidiary of the company’s holding company, which are held by or in trust for him, or of which he has a right to become holder, whether on payment or not.

 

            (2)        Where any shares or debentures have to be recorded in the said register or to be omitted therefrom or any particulars changed in relation to any director or other person as aforesaid by reason of a transaction entered into after the commencement of this Ordinance and while he occupies that position or holds such interest, the register shall also show the date of, and the price or other consideration for, the transaction:

 

            Provided that, where there is an interval between the agreement for any such transaction and the completion thereof, the date so shown shall be that of the agreement.

 

            (3)        The nature and extent of any position or interest or right in or over any shares or debentures recorded in relation to a director or other person in the said register shall, if he so requires, be indicated in the register.

 

            (4)        The company shall not, by virtue of anything done for the purposes of this section, be affected with notice of, or put upon inquiry as to the rights of any person in relation to any shares or debentures.

 

            (5)        The said register shall, subject to the provisions of this section, be kept at the registered office of the company and shall be open to inspection during business hours as follows, subject to such reasonable restrictions as the company may by its articles or in general meeting impose, so that no less than two hours in each day are allowed for inspection, —

 

(a)        during the period beginning fourteen days before the date of the annual general meeting of the company and ending three days after the date of its conclusion, it shall be open to the inspection of any member or holder of debentures of the company; and

 

(b)        during that or any other period, it shall be open to the inspection of any person acting on behalf of the Commission.

 

            (6)        Without prejudice to the rights conferred by sub-section (5), the Commission and the registrar may at any time require a certified copy of the said register or any part thereof.

 

            (7)        The said register shall also be produced at the commencement of the annual general meeting of the company and remain open and accessible during the continuance of the meeting to any person attending the meeting.

 

            (8)        If defaults is made in complying with sub-section (7), the company and every officer of the company who is knowingly and wilfully in default shall be liable to a fine which may extend to one thousand rupees, and if default is made in complying with sub-section (1) or sub-section (2), or if any inspection required under this section is refused or and copy required thereunder is not sent within a reasonable time, the company and every officer of the company who is knowingly and wilfully in default shall be liable to a fine which may extend to ten thousand rupees.

           

            (9)        Without prejudice to the provisions of sub-section (8), the registrar may, in the case of any refusal to allow inspection of register or supply of a copy thereof under sub-section (5) or sub-section (6), direct immediate inspection of such register or supply of a copy thereof.

 

         221.     Duty of directors, etc., to make disclosure of shareholdings, etc. –  (1) Every director, officer and such other person as is referred to in sub-section (1) of section 220 shall give notice to the company of such matters relating to himself as may be necessary for the purpose of enabling the company to comply with the provisions of section 220.

 

(2)        The notice referred to in sub-section (1) shall be given in writing within fifteen days of each requisition or change of interest or right, as the case may be, referred to in sub-section (1) of section 220 or date of agreement referred to in sub-section (2) of that section.

 

            (3)        Any person who knowingly and wilfully fails to comply with sub-section (1) or sub-section (2) shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to five thousand rupees, or with both.

 

            222.     Submission of statements of beneficial owners of listed securities. – (1) Every director, chief executive, managing agent, chief accountant, secretary or auditor of a listed company who is or has been the beneficial owner of any of its equity securities, and every person who is directly or indirectly the beneficial owner of more than ten per cent of such securities, shall submit to the registrar and the Commission a return in the prescribed form containing the prescribed particulars pertaining to the beneficial ownership of such securities and notify in the prescribed form the particulars of any change in the interest aforesaid.

 

            (2)        The period within which the said return is to be submitted to the registrar and the Commission shall be —

 

(a)        where the person occupies the position or office specified in sub-section (1), or is a person whose interest as beneficial owner of securities requiring submission of the return as stated in the said sub-section subsists on the commencement of this Ordinance, within thirty days from such commencement;

 

(b)        in any other case, including a case where the company is listed on the stock exchange after the commencement of this Ordinance or after the person has occupied the position or office specified in sub-section (1) or has acquired interest as beneficial owner of securities as aforesaid, within thirty days of occupying the office in the company or acquisition of interest as beneficial owner requiring submission of the return aforesaid or listing of the company on the stock exchange, as the case may be;

 

(c)        where there is any change in the position or interest as aforesaid including a change in the beneficial ownership of any equity, security, within fifteen days  of such change; or

 

(d)        where the Commission by an order so requires, within such period as may be specified in such order.

 

            223.     Prohibition of short-selling. – No director, chief executive, managing agent, chief accountant, secretary or auditor of a listed company, and no person who is directly or indirectly the beneficial owner of not less than ten per cent of the listed equity securities of such company, shall practise directly or indirectly short-selling such securities.

 

224.          Trading by director, officers and principal shareholders. – (1) Where any director, chief executive, managing agent, chief accountant, secretary or auditor of a listed company or any person who is directly or indirectly the beneficial owner of more than ten per cent of its listed equity securities makes any gain by the purchase and sale, or the sale and purchase, of any such security, within a period of less than six months, such director, chief executive, managing agent, chief accountant, secretary or auditor or person who is beneficial owner shall make a report and tender the amount of such gain to the company and simultaneously send an intimation to this effect to the registrar and the Commission:

 

            Provided that nothing in this sub-section shall apply to a security acquired in good faith in satisfaction of debt previously contracted.

 

            (2)        Where a director, chief executive, managing agent, chief accountant, secretary, auditor or person who is beneficial owner as aforesaid fails or neglects to tender, or the company fails to recover, any such gain as is mentioned in sub-section (1) within a period of six months after its accrual, or within sixty days of a demand therefor, whichever is later, such gain shall vest in the 1[Commission] and unless such gain is deposited in the prescribed account, the Commission may direct recovery of the same as an arrear of land revenue.

 

            (3)        For the purposes of sections 220 to 224, the term “auditor of the company” shall, where such auditor is a firm, include all partners of such firm.

 

            Explanation: (a) For the purposes of this section and section 222, beneficial ownership of securities of any person shall be deemed to include the securities beneficially owned, held or controlled by him or his spouse or by any of his dependent lineal ascendants or descendants not being himself or herself a person who is required to furnish a return under section 222, and

 

(i)         in the case where such person is a partner in a firm, shall be deemed to include the securities beneficially held by such firm; and

 

(ii)        in the case where such person is a shareholder in a private company, shall be deemed to include the securities beneficially held by such company:

 

            Provided that for the purposes of sub-section (1) the gain which is required to be tendered to the company by such person shall be an amount bearing to the total amount of the gain made, as the case may be, by the firm or private company the same proportion as his relative interest bears to the total interest in such firm or private company.

 

(b)        For the purposes of this Explanation, “control”, in relation to securities means the power to exercise a controlling influence over the voting power attached thereto.

 

            (4)        Whoever knowingly and wilfully contravenes or otherwise fails to comply with any provision of section 222, section 223 or section 224 shall be liable to a fine which may extend to thirty thousand rupees and in the case of a continuing contravention, non-compliance or default to a further fine which may extend to one thousand rupees for every day after the first during which such contravention, non-compliance or default continues.

 

            225.     Contracts by agents of company in which company is undisclosed principal.- (1) Every officer or other agent of a company, other than a private company, not being the subsidiary company of a public company, who enters into a contract for or on behalf of the company in which contract the company is an undisclosed principal shall, at the time of entering into the contract, make a memorandum in writing of the terms of contract, and specify therein the person with whom it has been made.

 

            (2)        Every such officer or other agent shall forthwith deliver the memorandum aforesaid to the company and send copies to the directors and such memorandum shall be filed in the office of the company and laid before the directors at their next meeting.

 

            (3)        If any such officer or other agent makes default in complying with the requirements of this section —

 

(a)        the contract shall, at the option of the company be void as against the company; and

 

(b)        such officer or other agent shall be liable to a fine not exceeding two thousand rupees.

 

226.     Securities and deposits, etc.-  No company, and no officer or agent of a company, shall receive or utilise any money received as security or deposit, except in accordance with a contract in writing; and all moneys so received shall be kept or deposited by the company or the officer or agent concerned, as the case may be, in a special account with a scheduled bank:

 

            Provided that this section shall not apply where the money received is in the nature of an advance payment for goods to be delivered or sold to an agent, dealer or sub-agent in accordance with a contract in writing.

 

            227.     Employees’ provident funds and securities.- (1) All moneys or securities deposited with a company by its employees in pursuance of their contracts of service with the company shall be kept or deposited by the company within fifteen days from the date of deposit in a special account to be opened by the company for the purpose in a scheduled bank or in the National Saving Schemes, and no portion thereof shall be utilized by the company except for the breach of the contract of service on the part of the employee as provided in the contract and after notice to the employee concerned.

 

            (2)        Where a provident fund has been constituted by a company for its employees or any class of its employees, all moneys contributed to such funds, whether by the company or by the employees, or received or accruing by way of interest, profit or otherwise from the date of contribution, receipt or accrual, as the case may be, shall either—

 

(a)        be deposited—

 

(i)         in a National Savings Scheme;

 

(ii)        in a special account to be opened by the company for the purpose in a scheduled bank; or

 

(iii)       where the company itself is a scheduled bank, in a special account to be opened by the company for the purpose either in itself or in any other scheduled bank; or

 

(b)        be invested in Government securities; or

 

1[(c)     in bonds, redeemable capital, debt securities or instruments issued by Pakistan Water and Power Development Authority and in listed securities subject to the conditions as may be prescribed by the Commission].

 

            (3)        Where a trust has been created by a company with respect to any provident fund referred to in sub-section (2), the company shall be bound to collect the contributions of the employees concerned and pay such contributions as well as its own contributions, if any, to the trustees within fifteen days from the date of collection, and thereupon, the obligations laid on the company by that sub-section shall devolve on the trustees and shall be discharged by them instead of the company.

 

            228.     Right to see bank receipts for money or securities.- Any person depositing any money or security or making any contribution under section 227 shall be entitled, on request made in this behalf to the company or the person concerned or to the trustees referred to in sub-section (3) of section 227, as the case may, be, to see the receipt of the bank or other body for any such money, deposit or security as is referred to in that section.

 

            229.     Penalty for contravention of section 226, 227 or 228.- Whoever contravenes or authorises or permits the contravention of any of the provisions of section 226 or section 227 or section 228 shall be punished with a fine which may extend to five thousand rupees and shall also be liable to pay the loss suffered by the depositor of security or the employee on account of such contravention.

 

ACCOUNTS

 

            230.     Books of account to be kept by company. – (1) Every company shall keep at its registered office proper books of account with respect to—

 

(a)        all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place;

 

(b)        all sales and purchases of goods by the company;

 

(c)        all assets of the company;

 

(d)        all liabilities of the company; and

 

(e)        in the case of a company engaged in production, processing, manufacturing or mining activities, such particulars relating to utilisation of material or labour or the other inputs or items of cost as may be prescribed, if such class of companies is required by the Commission by a general or special order to include such particulars in the books of accounts:

 

            Provided that all or any of the books of account aforesaid may be kept at such other place in Pakistan as the directors may decide, and when the directors so decide, the company shall, within seven days of the decision, file with the registrar a notice in writing giving the full address of the other place.

 

            (2)        Where a company has a branch office, whether in or outside Pakistan, the company shall be deemed to have complied with the provisions of sub-section (1) if proper books of account relating to the transactions effected at the branch office are kept at the branch office and proper summarised returns, made up to date at intervals of not more than three months are sent by the branch office to the company at its registered office or the other place referred to in sub-section (1).

 

            (3)        For the purposes of sub-section (1) and (2), proper books of account shall not be deemed to be kept with respect to the matters specified therein if there are not kept such books as are necessary to give a true and fair view of the state of affairs of the company or the branch office, as the case may be, and to explain its transactions.

 

            (4)        The books of account and other books and papers of every company shall be open to inspection by the directors during business hours.

 

            (5)        The directors shall form time to time determine whether and to what extent and at what time and places and under what conditions or regulations the accounts and books or papers of the company or any of them shall be open to the inspection of members, not being directors, and no member, not being a director, shall have any right of inspecting any account and books or papers of the company except as conferred by the Ordinance or authorised by the directors or by the company in general meeting.

 

            (6)        The books of account of every company relating to a period of not less than ten years immediately preceding the current year shall be preserved in good order:

 

            Provided that, 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 shall be so preserved.

 

            (7)        If a company fails to comply with any of the requirements of this section, 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,—

 

(a)        in respect of a listed company, be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than 1[twenty] thousand rupees nor more than 2[fifty] thousand rupees, and with a further fine which may extend to 3[five] thousand rupees for every day after the first during which the default continues; and

 

(b)        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 4[ten thousand] rupees.

 

            Explanation: The term “chief accountant” shall include the chief accountant or any other person, by whatever name called, who is charged with the responsibility of maintenance of books of account of the company.

 

            (8)        The provisions of this section except those of sub-section (6), shall apply mutatis mutandis to the books of account which a liquidator is required to maintain and keep.

 

231.     Inspection of books of account by registrar, etc.- (1) The books of account and books and papers of every company shall be open to inspection by the registrar or by any officer authorised by the Commission in this behalf if, for reasons to be recorded in writing, the registrar or the Commission considers it necessary so to do.

 

            (2)        It shall be the duty of every director, officer or other employee of the company to produce to the person making inspection under sub-section (1) all such books of account and books and papers of the company in his custody or under his control, and to furnish him with any such statement, information or explanation relating to the affairs of the company, as the said person may require of him within such time and at such place as he may specify.

 

            (3)        It shall also be the duty of every director, officer or other employee of the company to give to the person making inspection under this section all assistance in connection with the inspection which the company may be reasonably expected to give.

 

            (4)        The person making the inspection under this section may, during the course of inspection —

 

(i)         make or cause to be made copies of books of account and other books and papers, or

 

(ii)        place or cause to be placed by marks of identification thereon in token of the inspection having been made.

 

            (5)        Where an inspection of the books of account and books and papers of the company has been made under this section by an officer authorised by the Commission, such officer shall make a report to the Commission.

 

            (6)        Any officer authorised to make an inspection under this section shall have all the powers that the registrar has under this Ordinance in relation to the making of inquiries.

 

            232.     Default in compliance with provisions of section 231.- (1) If default is made in complying with the provisions of section 231, every person who is in default shall be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than ten thousand rupees.

 

            (2)        Where a director or any other officer of a company has been convicted of an offence under this section, he shall, on and from the date on which he is so convicted, be deemed to have vacated his office as such and, on such vacation of office, shall be disqualified for holding such office in any company, for a period of five years.

 

 

            233.     Annual accounts and balance-sheet.- (1) The directors of every company shall at some date not later than eighteen months after the incorporation of the company and subsequently once at least in every calendar year lay before the company in annual general meeting a balance-sheet and profit and loss account or in the case of a company not trading for profit an income and expenditure account for the period, 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 1[four] months:

 

            Provided that, in the case of a listed company the Commission, and in any other case the registrar, may, for any special reason, extend the period for a term not exceeding 2[two] months.

 

            (2)        The period to which the accounts aforesaid relate shall not exceed twelve months except where special permission has been granted in that behalf by the registrar.

 

            (3)        The balance-sheet and the profit and loss account or income and expenditure account shall be audited by the auditor of the company, in the manner hereinafter provided, and the auditor’s report shall be attached thereto.

 

            (4)        Every company shall send a copy of such balance-sheet and profit and loss account or income and expenditure account so audited together with a copy of the auditor’s report and the director’s report to the registered address of every member of the company at least twenty-one days before the meeting at which it is to be laid before the members of the company, and shall 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.

 

            (5)        A listed company shall, simultaneously with the despatch of the balance-sheet and profit and loss account together with the reports referred to in sub-section (4), send five copies each of such balance-sheet and profit and loss account and other documents to the Commission, the stock exchange and the registrar.

 

            (6)        The provisions of sub-section (7) of section 230 shall apply to any person who is a party to the default in complying with any of the provisions of this section.

                       

            234.     Contents of balance-sheet. – (1) Every balance-sheet of a company shall give a true and fair view of the state of affairs of the company as at the end of its financial year, and every profit and loss account or income and expenditure account of a company shall give a true and fair view of the profit and loss of the company for the financial year so, however, that every item of expenditure fairly chargeable against the year’s income shall be brought into account and, in case where any item of expenditure which may in fairness be distributed over several years has been incurred in any one financial year, the whole amount of such item shall be stated, with the addition of the reasons why only a portion of such expenditure is charged against the income of the financial year.

 

            (2)        The balance-sheet and profit and loss account or the income and expenditure account shall —

 

(i)         in the case of a listed company, 1[and a private and non-listed public company which is subsidiary of a listed company] comply with the requirements of the Fourth Schedule so far as applicable thereto; and

 

(ii)        in the case of any other company, comply with the requirements of the Fifth Schedule so far as applicable thereto:

 

            Provided that, except to the extent, otherwise notified in the official Gazette by the Commission, this sub-section shall not apply to an insurance or banking company or to any other class of companies for which the requirements of balance-sheet and profit and loss account are specified in the law regulating such class of companies.

 

            (3)        Subject to the provisions of this Ordinance 1[…]—

 

(i)         such International Accounting Standards and other standards shall be followed in regard to the accounts and preparation of the balance-sheet and profit and loss account as are notified for the purpose in the official Gazette by the Commission; and

 

2[(ii)      in the case of a listed company—

 

(a)        a statement of changes in equity and cash flow statement shall form part of the balance-sheet and profit and loss account; and]

 

3[(b)]    accounting policies shall be stated and, where there is any change in such policies, the auditor shall report whether he agrees with the change.

 

            Explanation: “International Accounting Standards” shall be understood in the terms in which it is understood in the accounting circles.

            (4)        The Federal Government may, of its own motion or upon application by a company, modify, in relation to that company, the requirements of the Fourth Schedule or the Fifth Schedule for the purpose of adapting them to the circumstances of the company.

 

            (5)        The Federal Government shall have power from time to time to grant exemption to any company or any class of companies if it is in the public interest so to do, from compliance with all or any of the requirements of the Fourth Schedule or the Fifth Schedule.

 

            (6)        The provisions of sub-section (7) of section 230 shall apply to any person who is a party to the default in complying with any of the provisions of this section.

 

235.     Treatment of surplus arising out of revaluation of fixed assets.- (1) Where a company revalues its fixed assets, the increase in, or sums added by writing up of, the value of such assets as appearing in the books of accounts of the company shall be transferred to an account to be called “Surplus on Revaluation of Fixed Assets Accounts” and shown in the balance-sheet of the company after Capital and Reserves.

 

            (2)        Except and to the extent actually realised on disposal of the assets which are revalued, the surplus on revaluation of fixed assets shall not be applied to set-off or reduce any deficit or loss, whether past, current or future, or in any manner applies, adjusted or treated so as to add to the income, profit or surplus of the company, or utilised directly or indirectly by way of dividend or bonus:

 

            Provided that the surplus on revaluation of fixed assets may be applied by the company in setting-off or in diminution of any deficit arising from the revaluation of any other fixed assets of the company:

 

1[Provided further that incremental depreciation arising out of revaluation of fixed assets may be charged to Surplus on Revaluation of Fixed Assets Account.]

 

            (3)        The requirements of sub-sections (1) and (2) shall also apply to any account representing any increase in or addition to the value of any asset as a result of any revaluation of any fixed assets done before the commencement of this Ordinance, howsoever described, to the extent of the amount thereof appearing in the books of account of the company on such commencement.

 

            2[(4)     After revaluation as aforesaid, depreciation on the assets so revalued shall be provided with reference to the value assigned to such assets before revaluation and surplus on revaluation may be amortized according to life of the assets.]

 

            (5)        If default is made in complying with any requirements of this section, the directors of the company who are knowingly and wilfully in default shall be punishable with fine not exceeding twenty thousand rupees and shall also be jointly and severally liable to the company for any loss sustained by the company on account of such default.

 

            236.     Director’s report. – (1) The directors shall make out and attach to every balance-sheet a report with respect to the state of the company’s affairs, the amount, if any, which they recommend should be paid by way of dividend and the amount, if any, which they propose to carry to the Reserve Fund, General Reserve or Reserve Account shown specifically in the balance-sheet or to a Reserve Fund, General Reserve or Reserve Account to be shown specifically in a subsequent balance-sheet.

 

            (2)        In the case of a public company or a private company which is a subsidiary of a public company, the directors report shall, in addition to the matters specified in sub-section (1) –

 

(a)        disclose any material changes and commitments affecting the financial position of the company which have occurred between the end of the financial year of the company to which the balance-sheet relates and the date of the report;

 

(b)        so far as is material for the appreciation of the state of the company’s affairs by its members, deal with any changes that have occurred during the financial year concerning the nature of the business of the company or of its subsidiaries, or in the classes of business  in which the company has interest, whether as a member of another company or otherwise, unless the Commission exempts any company from making such disclosure on the ground that such disclosures would be prejudicial to the business of the company;

 

(c)        contain the fullest information and explanation in regard to any reservation, observation, qualification or adverse remarks contained in the auditor’s report;

 

(d)        circulate with it information about the pattern of holding of the shares in the form prescribed;

 

(e)                state the name and country of incorporation of its holding company, if any, where such holding company is established outside Pakistan;

 

1[(f)      state the earning per share;

 

 

 (g)       give reasons for incurring loss and a reasonable indication of future prospects of profit, if any;

 

(h)        contain information about defaults in payment of debts, if any, and reasons thereof.]

 

            (3)        The report referred to in sub-section (1) shall be signed by the chairman of the directors or the chief executive of the company on behalf of the directors if authorised in that behalf by the directors and, when not so authorised, shall be signed by the chief executive and such number of directors as are required to sign the balance-sheet and profit and loss account under section 241.

 

            (4)        If a company fails to comply with any of the requirements of this section, every director, including the chief executive, of the company who has knowingly by this act or omission been the cause of any default by the company in complying with the requirements of this section shall-

 

(a)        in respect of a listed company, be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than 1[twenty] thousand rupees nor more than 2[fifty] thousand rupees, and with a further fine which may extend to 3[five] thousand rupees for every day after the first during which the default continues; and

 

(b)        in respect of any other company, be punishable with imprisonment with imprisonment for a term which may extend to six months and with fine which may extend to 4[ten] thousand rupees.

 

5[(5)     The directors of a holding company required to prepare consolidated financial statements under section 237 shall make out and attach to consolidated financial statements, a report with respect to the state of group’s affairs and all provisions of sub-section (2), (3) and (4) shall apply to such report as if for the word “company” appearing in these sub-sections the word “holding company” were substituted.]

 

            6[237.   Consolidated financial statements. –  (1) There shall be attached to the financial statements of a holding company having a subsidiary or subsidiaries, at the end of the financial year at which the holding company’s financial statements are made out, consolidated financial statements of the group presented as those of a single enterprise and such consolidated financial statements shall comply with the disclosure requirement of the Fourth Schedule and an International Accounting Standards notified under sub-section (3) of section 234.

 

            (2)        Where the financial year of a subsidiary precedes the day on which the holding company’s financial year ends by more than three months, such subsidiary shall make an interim closing, on the day on which the holding company’s financial year ends, and prepare financial statements for consolidation purposes.

 

            (3)        Every auditor of a holding company appointed under section 252 shall also report on consolidated financial statements and exercise all such powers and duties as are vested in him under section 255.

 

            (4)        All interim financial statements of a subsidiary as required under sub-section (3) shall be reviewed by the auditors of that subsidiary appointed under section 252 who shall report on such financial statements in the prescribed form.

 

            (5)        There shall be disclosed in the consolidated financial statements-

 

(a)        any qualifications contained in the auditors’ reports on the accounts of subsidiaries for the financial year ending with or during the financial year of the holding company; and

 

(b)        any note or saving contained in such accounts to call attention to a matter which, apart from the note or saving, would properly have been referred to in such a qualification, in so far the matter which is the subject of the qualification or note is not covered by the holding company’s own accounts and is material from the point of view of its members.

 

            (6)        Every consolidated financial statements shall 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, under section 241.

 

            (7)        All provisions of sections 233, 242, 243, 244 and 245 shall apply to a holding company required to prepare consolidated financial statements under this section as if for the word “company” appearing in these sections, the words “holding company” were substituted.

 

            (8)        The Commission may, on an application or with the consent of the directors of a holding company, direct that in relation to any subsidiary, the provisions of this section shall not apply only to such extent as may be specified in the direction.

 

            (9)        If a holding company fails to comply with any requirement of this section, every officer of the holding company shall be punishable with fine which may extend to fifty thousand rupees in respect of each offense unless he shows that he took all reasonable steps for securing compliance by the holding company of such requirements and that the non-compliance or default on his part was not willful and intentional.]

 

238.                Financial year of holding company and subsidiary. – (1) The directors of a holding company shall ensure that, except where in their opinion there are good reasons against it, the financial year of each of its subsidiaries coincides with the company’s own financial year.

 

(2)           Where it appears to the Commission desirable for a holding company or a holding company’s subsidiary to extend its financial year so that the subsidiary’ financial year may and with that of the holding company, and for that purpose to postpone the submission of the relevant accounts to a general meeting from one calendar year to the next, the Commission may on the application or with the consent of the directors of the company whose financial year is to be extended direct that, in the case of that company, the submission of accounts to a general meeting, the holding of an annual general meeting are the making of an annual return shall not be required in the earlier of the said calendar years.

 

            239.     Rights of holding company’s representatives and members. – (1) A holding company may, by resolution, authorise representatives named in the resolution to inspect the books of account kept by any of its subsidiaries; and the books of account of any such subsidiary shall be open to inspection by those representatives at any time during business hours.

 

            (2)        The rights conferred by section 265 upon members of a company may be exercised, in respect of any subsidiary, by members of the holding company as if they also were members of the subsidiary.

 

240.     Balance sheet of modaraba company to include modaraba accounts, etc. – (1) There shall be attached to the balance-sheet of a modaraba company, the annual accounts and other reports circulated in pursuance of the provisions of section 14 of the Modaraba Companies and the Modaraba (Floatation and Control) Ordinance, 1980 (XXXI of 1980), made out-

 

(a)          as at the end of the financial year of the modaraba company  where such financial year coincides with the financial year of the modaraba company; and

 

(b)          as at the end of the financial year of the modaraba last before that of the modaraba company, where the financial year of the modaraba company does not coincide with that of the modaraba company.

 

(2)                The provisions of sub-section (12) of section 237 shall apply to any person who is a party to default in complying with any of the provisions of this section.

 

            241.     Authentication of balance-sheet. – (1) Save as provided by sub-section (2), the balance-sheet and profit and loss account or income and expenditure account shall be approved by the directors and shall be signed by the chief executive and at least one director.

 

            (2)        when the chief executive is for the time being not in Pakistan, then the balance-sheet and profit and loss account or income and expenditure account of the company shall be signed by not less than two directors for the time being in Pakistan, but 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 provisions of sub-section (1).

 

            (3)        If a company makes defau