Capital Issue (Exemption) Order, 1967
In exercise of the powers conferred by sub-section (1) of Section 6 of the Capital Issues (Continuance of Control) Act, 1947 (XXIX of 1947), and in supersession of the Exemption Order No. F. 2(1)-CC1/51, dated the 30th October, 1951, the Federal Government is pleased to make the following Order, namely:–
1. (1) This Order may be called the Capital Issues (Exemption) Order, 1967.
(2) It shall come into force at once.
2. In this Order, unless there is anything repugnant in the subject or context,
(a) banking company’ has the same meaning as in the Banking Companies Ordinance, 1962 (LVII of 1962);
(aa) ‘free reserves’ includes any amount which, having been set aside out of revenue or other surpluses after adjustment of all intangible or fictitious assets, is free in that it is not retained to meet any diminution in value of assets, specific liability, contingency or commitment known to exist at the date of the balance sheet, but does not include-
(i) reserves created as a result of revolution of fixed assets;
(ii) goodwill reserves;
(iii) depreciation reserve to the extent of ordinary depreciation including allowance for extra shirts admissible under the Income Tax Ordinance, 1979 (XXXI of 1979);
(iv) development allowance reserve created under the provision of the Income-tax Ordinance, 1979 (XXXI of 1979);
(v) Workers Welfare Fund;
(vi) reserve for taxation to the extent of the current liability of the company; and
(vii) capital redemption reserve’.
(b) ‘insurance company’ and ‘provident society’ have the same meanings as in the Insurance Act, 1938 (IV of 1938);
(c) section’ means a section of the Capital Issues (Continuance of Control) Act, 1947 (XXIX of 1947).
3. The following shall be exempt from the provisions of sub-sec. (1) and clause (a) of sub-section
(2) of Section 3 and sub-section (1) of Sec. 5, namely:-
(1) the issue and acceptance of securities (other that debentures, [or participation term certificates] stock and shares) being an issue made by a person in the ordinary course of business and solely for the, purpose of that business to another person carrying on the business of banking or to such other person’s nominee in respect of advances or overdraft from time to time granted or to be granted by such other person;
(2) charges made under mining lease by the lessee in favour of the lessor charging assets of a company for the due payment of rents and royalties reserved by the instrument of lease;
(3) debentures [or Participation Term Certificates] taken up by the Pakistan Industrial Credit and Investment Corporation and the Industrial Development Bank of Pakistan against loans;
(4) debentures [or Participation Term Certificates] issued by companies in favour of Collectors of Custom against payment of custom duties on imported machinery;
(5) debentures [or Participation Term Certificates] issued by the companies to the Investment Corporation of Pakistan or to any member of the consortium led by the Investment Corporation of Pakistan, against the commitment made by the consortium;
(6) issue of bonus shares by companies whose securities are listed on any of the Stock Exchanges subject to the fulfillment of the following conditions, namely:–
(i) the free reserves of the company are sufficient to permit issue of the bonus shares after retaining in the reserves 25 per cent. of the capital as it will be increased by the proposed bonus shares;
(ii) a certificate from the auditors is obtained before the issue of the bonus shares to the effect that the free reserves and surpluses retained after the issue of the bonus shares will not be less than 25 per cent. of the increased capital;
(iii) all contingent liabilities disclosed in the audited accounts shall be taken into account in the calculation of minimum residual reserves of 25 per cent;
(iv) all the existing shares are fully paid up;
(v) observance of such other guidelines as may, from time to time, be issued by the Controller of Capital Issues;
(vi) simultaneously, with the issue of the bonus shares, a return shall be filed with the Controller of Capital Issues together with a copy of the auditors certificate and relevant Balance Sheet’.
4. (1) Issue of securities at par and all transactions relating to securities so issued, by a company, not being-
(a) a banking company,
(b) an insurance company,
(c) a provident society incorporated as a company,
(d) an investment company, or
(e) a company in which foreign capital is associated wholly or partly, if the value of the consideration involved in such issues does not exceed, [ten million Rupees] shall, subject to compliance with the conditions set forth in schedule to this Order, be exempt from the provisions of Sections 3, 4 and 5.
(2) Exemption under sub-paragraph (1) shall not apply to a company which n -gleets or fails to comply with such direction, not inconsistent with the provisions of this Order, as the Controller of Capital Issues may, by order in the official Gazette, give either in respect of companies generally or any class or group of companies or any particular company as may be specified in the order.
APPLICABLE TO ALL COMPANIES
1. All the shares or debentures [or Participation Term Certificates] shall be of the same denomination and shall confer equal rights on all the shareholders or debenture-holders.
2. No premium or entrance fee shall be charged on the securities nor shall any security be issued at a discount.
3. Borrowing against mortgage of assets including finished goods, raw materials and promissory notes shall not at any stage exceed fifty per cent. of the capital.
4. Where assets are taken over from any person other than a regular dealer, no consideration shall be paid-
(a) which exceeds the cost of assets to the vendor as reduced by normal depreciation,
(b) which includes, in any form, any payment for good will or other intangible asset, and
(c) without obtaining a certificate from a Chartered Accountant, to the effect that the amount of consideration does not exceed the limit in clause (b).
5. Omitted as per S.R.O. 10(1)/80 dated 26th June, 1980.
6. The Chief Executive by whatever name called, and other directors who are sponsors or promoters and air directors who are rendering extra service may be paid such remuneration as the company in general meeting may determine:
Provided that, if a company incurs a loss for a continuous period of three years, or its directors are receiving remuneration or perquisites disproportionate to he profits that are shared with outside shareholders, the Controller of Capital Issues may, for such period as he may specify from time to time, fix the remuneration and perquisites of the Chief Executive the directors who are sponsors or promoters and any directors rendering extra services who are relative of any of the former.
Explanation. ‘Relatives’ in relation to a sponsor or promoter, includes the spouse or a brother or sister or any of the lineal ascendants or descendants of the sponsor or promoter.
7. Remuneration paid for attending meeting of the Board to persons other than the regularity paid Chief Executive and full time working directors shall not exceed five hundred rupees per meeting.
8. The minimum qualification of a Director shall be the holding of shares of such amount: calculated at the rate of one thousand rupees for each one lakh rupees of capital or part thereof and no person who holds shares or represents interests holding shares of such amount shall be disqualified from being a Director.
9. Brokerage shall not exceed one per cent. of the paid up value of the shares sold through a broker.
10. No bonus share shall be issued by any company other than a company whose securities are listed on a Stock Exchange unless a certificate has been obtained from a Chartered Accountant to the effect that the free reserves and surpluses retained after the issue of bonus shares will not be less than 25 per cent. of the increased capital.
11. Simultaneously, with the issue of capital without the consent require; by Section 3 as permitted by the Capital Issues (Exemption) Order, 1967 a report alongwith a copy of the Memorandum and Articles of Association shall be submitted to the Controller of Capital Issues showing therein the amount of capital raised and certifying that all the requirements of the said Order were complied with before the issue of the capital.
12. Directors’ report and audited accounts of each year shall be furnished to the Controller of Capital Issues for information.
13. Depreciation stall be charged at not less than normal rates’ as provided under the Income-tax Act, 1922 (XI of 1922) and the rules made thereunder.
APPLICABLE TO PUBLIC COMPANIES ONLY
1. Underwriting commission shall not exceed two and-a-half per cent of the amount actually underwritten out of the shares offered for subscription to the general public.
2. Before the issue of further shares under Section 105-C of the Companies Act, 1913 (VII of 1913), a certificate shall be obtained from a Chartered Accountant to the effect that at the time of such issue the company was listed on the Stock Exchange and that it satisfied the requirement of Section 23-A of the Income-tax Act, 1922 (XI of 1922).
3. If it is desired to raise any part of the capital from the general public, 50 per cent. of the capital at par shall be offered to the general public and the National Investment Trust and prior approval of the Controller of Capital Issues be obtained to the proposed issue and to the prospectus which may be subjected to such conditions as he may consider appropriate.
4. The qualification of a director shall be his holding shares to the value of not less than five thousand rupees in his own name, relaxable in the case of a director representing interest holding shares of the requisite value.