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
(a) if a person who is 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 percent 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 percent of the
voting power in that company or undertaking; or
(b) if the companies or undertakings are under common management or control or
one is the subsidiary of another; or
(c) if the undertaking is a modaraba managed by the company
Associated Person
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 percent 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.
Investments in associated companies and undertaking Sec 199
o A company may make investment in any of its associated companies or
associated undertakings after getting the authority of a special resolution.
o The special resolution shall indicate
a) the nature
b) Period
c) amount of investment and
d) terms and conditions attached thereto.
 Investment shall include equity, loans, advances, guarantees, by whatever
name called.

Investment does not include

a) the amount due as normal trade credit,
b) where the terms and conditions of trade transaction(s) carried out on arms-
length and
c) in accordance with the trade policy of the company.

o The company shall not invest in its associated company or associated

undertaking by way of loans or advances except in accordance with an
agreement in writing
o such agreement shall include the terms and conditions specifying
a) the nature
b) Purpose
c) period of the loan
d) rate of return
e) fees or commission
f) repayment schedule for principal and return
g) penalty clause in case of default or late repayments and
h) security, if any, for the loan in accordance with the approval of the members in
the general meeting.
o The return on such investment shall not be less than
a) the borrowing cost of the investing company or
b) the rate as may be specified by the Commission
whichever is higher and shall be recovered on regular basis in accordance with the
terms of the agreement, failing which the directors shall be personally liable to
make the payment.

o The directors of the investing company shall certify that the investment is made
after due diligence and financial health of the borrowing company is such that it
has the ability to repay the loan as per the agreement.
o An increase in the amount or any change in the nature of investment or the terms
and conditions attached thereto shall be made only under the authority of a special
resolution.
o Every company shall maintain and keep at its registered office a register of
investments in associated companies and undertakings containing such particulars
as may be specified.
o Any contravention or default in complying with requirements of this section shall be
an offence liable to a penalty of level 3 on the standard scale and in addition, 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
Investments of company to be held in its own name Sec 200
o All investments made by a company on its own behalf shall be made and held by it
in its own name.
o The company may hold any shares in its subsidiary company in the name of any
nominee of the company.
o Company can do so to ensure that the number of members of the subsidiary
company is not reduced below the statutory limit.
o Where the company has a right to appoint or get elected any person as a director
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.
o 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,
b) value and
c) such other particulars as may be necessary fully to identify such shares or
securities.
o The register shall, be open to the inspection of members without charge, and to
any other person on payment of such fees as the company may specify in this
behalf during business hours, subject to such reasonable restrictions, as the
company may impose, so that not less than two hours in each day be allowed.
o Any member may require a certified copy of register or any part thereof, on
payment of such fee as may be fixed by the company.
o The certified copies requested under this section shall be issued within a period of
05 working days.
o A member seeking to exercise either of the rights must make a request to the
company to that effect.
o If a company contravenes the company shall be punishable with fine which may
extend to 05 million rupees and every officer of the company who is in default shall
be punishable with imprisonment for a term which may extend to two years or with
fine which may extend to one million rupees, or with both.
o Any contravention or default in complying with requirements of maintenance of
registered and issuance of its copies shall be an offence liable to a penalty of level 1
on the standard scale; and the registrar may by an order compel an immediate
inspection of the register or direct that copies required shall be sent to the persons
requiring them.
Method of contracting Sec 201
 A contract or other enforceable obligation may be entered into by a company as
follows
(a) an obligation which, if entered into by a natural person, will, by law, be required to
be by deed or otherwise in writing,
o may be entered into on behalf of the company
o in writing
o signed under the name of the company
o by a director, attorney or any other person duly authorised by the board and
o may affix common seal of the company;
(b) an obligation which, if entered into by a natural person, is not, by law, required to be
in writing,
may be entered into on behalf of the company
in writing or orally
by a person acting under the company‘s express or implied authority.
 All contracts made 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.
Execution of bills of exchange, promissory notes and deeds.- (1) A bill of exchange 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 on behalf
of or on account of, the company by any person acting under its authority, express or
implied.
Company to have official seal for use abroad Sec 203
o A company that has a common seal may have an official seal for use outside
Pakistan.
o The official seal must be a facsimile of the company‘s common seal, with the
addition on its face of the name of every territory where it is to be used.
o The official seal when duly affixed to a document has the same effect as the
company‘s common seal.
o 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.
o 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.
o 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.
o 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.
Contracts by agents of company in which company is undisclosed principal Sec 214
 Every officer or other agent of a 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.
 The company shall be, other than a private company, not being the subsidiary company of a public company.
 Every such officer or other agent shall forthwith deliver the memorandum aforesaid to the company and its
directors which shall be laid before next meeting of the board.
 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 penalty of level 1 on the standard scale.
Liability for undesired activities of the shareholders 215
 A member of a company shall act in good faith while exercising its powers as a shareholder at the general meetings
and shall consider the benefit of all the members.
 Without prejudice to his rights, a member of the company shall not exert influence or approach the management
directly for decisions which may lead to create hurdle in the smooth functioning of management.
 Any shareholder who fails to conduct in the manner provided in this section and as specified by the Commission
shall be guilty of an offence under this section and shall be liable to a penalty not exceeding of level 1 on the
standard scale.
Securities and deposits Sec 217
 A company or any of its officers or agents shall not receive or utilise any money received as security or deposit,
except in accordance with a contract in writing.
 The money so received shall be kept in a special account maintained by a company with a scheduled bank.
 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.