Corporate Laws

CORPORATE LAWS & CODE OF
CORPORATE GOVERNANCE
BY
ADNAN ADIL HUSSAIN.
CORPORATE ENTITY
ARTIFICIAL PERSON
• A company is an artificial person created by its members

under the Companies Act 2017 to perform in accordance
with its articles to fulfill certain restricted acts as allowed
by Memorandum.
• The Company walks on the paths provided by the
Memorandum and takes steps according to the articles.
• The company thinks through its general meeting. It acts
through its directors.
• The Board of Directors is the shoulders and the arms of the
company.
• The acts of the company are evidenced through its
resolutions.
• The brain of the company is its resolutions of general
meetings.
ARTIFICIAL PERSON
• The hands of the company are its board of directors or officers (duly
authorized).
• The contractual rights and obligations are the body and the flesh of a
company, each and every thread of the body is recorded in the register
of the company.
• The company is baptized by the registrar of Security and Exchange
Commission (SECP) and it starts taking its last breaths with a winding
up order and finally dies with an order of dissolution of a company
under relevant provision of Companies Act 2017.
• A company’s nationality is determined by the place of its registration,
and it retains that nationality throughout its existence.
• A company’s “residence” is where it “really keeps house and does its
real business” and its “real business” is carried on where the central
management and control actually abides.
• The articles of association cannot modify the memorandum. If there is
any inconsistency the terms of memorandum shall prevail.
SHARE IN COMPANY
• The Share in a company is a fraction of capital, denoting the

holder’s financial stake in the company and defining his
liability to contribute to its funding.
• The share is a measure of the holder’s interest in the company
as an association and the basis of his rights to become a
member and to enjoy the rights of voting so conferred.
• The share is also a species of property in its own right, a
rather complex form of chose in action, which the holder can
buy, sell, charge etc and in which there can be both legal and
beneficial interests.
ARTIFICIAL PERSON RIGHTS & LIABILITIES
• A limited company is a juristic person with a right to sue and

with a liability to be sued.
• The creation of a company is evidenced by the issuance of a
certificate of incorporation by the registrar of the companies.
• A company is a distinct legal entity separate from shareholders
and directors and liability of a company cannot be passed to its
directors personally.
• Company’s shareholders do not own anything owned by the
company. They receive profit/dividend on their contributions
towards the capital of the company to work.
• In a limited company, the liability of its members is restricted
by law to an amount fixed by the terms of issue of the shares or
by the company’s constitutional documents.
ARTIFICIAL PERSON RIGHTS & LIABILITIES
• In a limited company, a member is not liable to

the company’s debts beyond the amount
remaining unpaid on his/her shares.
• Law allows a company to have “authorized
capital”. The company issues paid up shares to
its members. The share subscribed by the
members (the amount pooled in by members
for company) is categorized as “Paid up capital”.
CORPORATE VEIL
• The “veil of incorporation” may be lifted to prevent the
deliberate evasion of a contractual obligation.
• The “veil of incorporation” may sometimes be lifted to allow a
group of associated companies to be treated as one. (One
group may comprise of many limited companies).
• A corporate veil may be disregarded if the company is used as
a means to perpetuate fraud.
• A company is capable of having intent to deceive. A company
is liable in tort.
BRIEF ON
COMPANIES ACT 2017

TYPE OF COMPANIES &
DEFINITIONS
TYPES OF COMPANIES
• Single member company –SMC-PVT Ltd. (A
proprietorship)
• Private limited company (2-50 members)
• Public company –unlisted (3-n)
• Public company –listed (3-n)
• Guarantee limited company –with and
without share capital
• Guarantee limited company –licensed under
section 42 (with charitable purposes)
CLASSIFICATION OF COMPANIES
( Section 224)
(details in the Third Schedule)
• Different categories of companies have been

prescribed for the purpose of Act pertaining to
preparation and audit of financial statements:
➢ Small Sized Company (SSC)
➢ Medium Sized Company (MSC)
➢ Public Interest & Large Sized Company (PI&LSC)

TYPES OF COMPANIES
• Company limited by shares means a company; having the liability of its
members limited by the memorandum to the extent of amount, if any,
remaining unpaid on the shares respectively held by them;
• Unlimited company‖ means a company not having any limit on the
liability of its members;
• 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 being wound up;
• Private company‖ means a company which, by its articles-
(a) restricts the right to transfer its shares;
(b) limits the number of its members to fifty not including persons
who are in the employment of the company; and
(c) prohibits any invitation to the public to subscribe for the shares, if
any, or debentures or redeemable capital 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;
• Listed company means a public company, body corporate or any other
entity whose securities are listed on securities exchange;
TYPES OF COMPANIES
• Public company means a company which is not a private company;
• (53) public interest company means a company which falls under the
criteria as laid down in the Third Schedule to this Act or deemed to be
such company under section 216;
• (54) public sector company means a company, whether public or private,

which is directly or indirectly controlled, beneficially owned or not less
than fifty-one percent of the voting securities or voting power of which
are held by the Government or any agency of the Government or a
statutory body, or in respect of which the Government or any agency of
the Government or a statutory body, has otherwise power to elect,
nominate or appoint majority of its directors and includes a public sector
association not for profit, licenced under section 42:
• Provided that nomination of directors by the Commission on the board of
the securities exchange or any other entity or operation of any other law
shall not make it a public sector company;
TYPES OF COMPANIES
• Shariah compliant company” means a
company which is conducting its business
according to the principles of Shariah;
• Single member company‖ means a company
which has only one member;
BODY CORPORATE/ CORPORATION
• Section 2 (9)
– (a) a company incorporated under this Act or company
law; or
– (b) a company incorporated outside Pakistan, or
– (c) a statutory body declared as body corporate in the
relevant statute,
but does not include—
(i) a co-operative society registered under any law
relating to cooperative societies; or
(ii) any other entity, not being a company as defined in
this Act or any other law for the time being inforce, which
the concerned Minister-in-Charge of the Federal
Government may, by notification, specify in this behalf;
INACTIVE COMPANIES
(Section 424)
• A company formed for a future project or to hold an asset
or intellectual property; or has no significant accounting
transaction, or which is not in operation during the last
two years may apply for obtaining the status of a inactive
company
EASY EXIT OF A DEFUNCT COMPANY

(Section 426)
• Enabling provision added to provide a soft regime for the
easy exit of a company which has ceased to operate and
having no assets and liabilities
17
AGRICULTURE PROMOTION COMPANY
(Section 457 )
• An enabling provision added to facilitate the agriculture sector.
• It should be formed by the farmers.
Classification
(i) Producer Company - to primarily, deal with the produce of its
members
(ii) Collateral Management company – to engage in the activity of
managing produce as collateral, including warehousing and
facilitation of commodity financing.
• Detailed parameters for such companies shall be provided through

regulations.
• Exemptions from the applicability of different provisions of the Act to be

notified.
18
FREE ZONE COMPANY (FZC) (Section 454)
New concept of Free Zone Company – some relaxations and exemptions of

the Companies Act, 2017 as may be notified to be given
The information about the shareholding of foreigners in companies

operating in EPZ and other free zones declared by the Federal Government
shall not be publicly available
Exceptions:
• revenue authorities collecting tax, duties and levies or
• requirement or obligation under international law, treaty or

commitment of the Government
It may be dispensed with from the use of the words “Private Limited” or
“Limited” - its name shall signify FZC at the end
19
REAL ESTATE COMPANY
(Section 456)
➢ To regulate the matters relating to advances and deposit

collected buy such companies
➢ Restriction on accepting any advances or monies in any form

whatsoever, against any booking to sell or offer to sell unless
the company has obtained necessary permission / approval
/ NOC from the concerned authority (CDA/LDA etc.)
➢ Written agreement with the customer mandatory before

accepting any money against sale/purchase of any
apartment, plot or building as an advance payment
20
REAL ESTATE COMPANY
➢ Restriction on advertisement for any real estate project
without the approval of the Commission and NOC of the
concerned authority;
➢ All the monies received from the allottees’ shall be

deposited in a separate ESCROW account to be opened in
the name of the project;
➢ The ESCROW account shall be dedicated exclusively for

carrying out the project;
➢ No attachment shall be imposed on the payment of such

ESCROW account for the benefit of creditors of the
company.
21
FOREIGN COMPANY
• Foreign company means any company or
body corporate incorporated outside Pakistan,
which
(a) has a place of business or liaison office
in Pakistan whether by itself or through an
agent, physically or through electronic
mode; or
(b) conducts any business activity in
Pakistan in any other manner as may be
specified;
HOLDING & SUBSIDIARY
• Holding company, means a company which is
another company‘s holding company if, but
only if, that other company is its subsidiary;
• Layer in relation to a holding company means
its subsidiary or subsidiaries
• Wholly owned subsidiary a company shall be
deemed to be a wholly owned subsidiary of
another company or the statutory body if all
its shares are owned by that other company
or the statutory body.
DEFINITION OF SUBSIDIARY
Subsidiary company or “subsidiary”, in relation to
any other company (that is to say the holding
company), means a company in which the holding
company
• (a) controls the composition of the board; or
• (b) exercises or controls more than one-half of its
voting securities either by itself or together with
one or more of its subsidiary companies:
• Provided that such class or classes of holding
companies shall not have layers of subsidiaries
beyond such numbers, as may be notified,
SUBSIDIARY & LAYER
Explanation. For the purposes of this clause
• (i) a company shall be deemed to be a subsidiary company
of the holding company even if the control referred to in
sub-clause (a) or sub-clause (b) is of another subsidiary
company of the holding company;
• (ii) the composition of a company‘s board shall be deemed
to be controlled by another company if that other company
by exercise of power exercisable by it at its discretion can
appoint or remove all or a majority of the directors;
• (iii) the expression ―company includes any body corporate
• layer in relation to a holding company means its subsidiary

or subsidiaries
ASSOCIATED COMPANY
• 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) a person holds or controls shares carrying not less
than twenty percent of the voting power in a
company also holding twenty percent of the voting
power in another 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 and holds or controls
shares carrying not less than ten percent of the voting
power shall be deemed to be an associated person of
every such other person holding same 10% voting
rights through shares in another company or holding.
• Provided that;
– Shares in the name of spouse or minor children of the
person shall be deemed to be in his name.
– Nominated Directors in PSCs, Independent Directors shall
not be taken to form Association
– Shares of Government/financial institution in two of its
concern will not fall under this definition.
BENEFICIAL OWNERSHIP
“beneficial ownership of shareholders or officer of a company” means ownership of
securities beneficially owned, held or controlled by any officer or substantial
shareholder directly or indirectly, either by—
• (a) him or her
• (b) the wife or husband of an officer of a company, not being herself or himself an
officer of the company;
• (c) the minor son or daughter of an officer where ―son‖ includes step-son and
daughter includes step-daughter; and minor means a person under the age of
eighteen years;
• (d) in case of a company, where such officer or substantial shareholder is a
shareholder, but to the extent of his proportionate shareholding in the company:
• Provided that ―control in relation to securities means the power to exercise a
controlling influence over the voting power attached thereto:
• Provided further that in case the substantial shareholder is a non-natural person,
only those securities will be treated beneficially owned by it, which are held in its
name.
Explanation.—For the purpose of this Act “substantial shareholder”, in relation to a
company, means a person who has an interest in shares of a company-
• (a) the nominal value of which is equal to or more
• (a) the nominal value of which is equal to or more than ten per cent of the issued
share capital of the company; or
• (b) which enables the person to exercise or control the exercise of ten per cent or
more of the voting power at a general meeting of the company;
PROMOTER
Promoter means a person—
• (a) who is named as a subscriber to the memorandum of
association of a company; or
• (b) who has been named as such in a prospectus; or
• (c) who has control over affairs of the company, directly or
indirectly whether as a shareholder, director or otherwise; or
• (d) in accordance with whose advice, directions or instructions the
board of the company is accustomed to act:
• Provided that—
• (i) nothing in sub-clause (d) shall apply to a person who is acting
merely in a professional capacity; and
• (ii) nothing contained in sub-clause (d) shall apply to the
Commission, registrar or any authorised officer by virtue of
enforcement or regulation of the provisions of this Act or any rules,
regulations, instructions, directions, orders thereof;
QUOTA FOR PERSONS WITH DISABILITIES IN THE
PUBLIC INTEREST COMPANIES
[Section 459]
➢Applicable on every public interest company

having at least 100 employees
➢2% quota for employment of disable persons
➢Disabilities to be specified through

regulations or as provided under any Federal
or Provincial law
30
OBLIGATION TO REGISTER CERTAIN ASSOCIATIONS,
PARTNERSHIPS AS COMPANIES
• No association, partnership or entity
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
entity, or by the individual members thereof,
unless it is registered as a company under this
Act and any violation of this section shall be
an offence punishable under this section.
• (saving public money-Section 9)
EXCEPTIONS
Nothing in this section shall apply to—
• any society, body or association, other than a
partnership, formed or incorporated under any law for
the time being in force in Pakistan; or
• a joint family carrying on joint family business; or
• 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
• 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.
WHAT IS NEW
(Section 2)
NEW DEFINITIONS
Following new definitions have been provided :-
• Advocate (clause 1)
• Alter or alteration (clause 2)
• authorized capital (clause 5)
• Banking company (clause 6)
• Beneficial ownership of shareholders or officer of the company (clause 7)
• Board (clause 8)
• Book of account (clause 11)
• Chartered accountant (clause 13)
33
(Section 2)
NEW DEFINITIONS
• Chief financial officer (clause 15)
• Company law (clause 18)
• Cost and Management Accounts ( clause 22)
• Document ( clause 26)
• E-service ( clause 27)
• Electronic document ( clause 28)
• Employees stock option ( clause 29)
• Expert ( clause 30)
• Financial institution ( clause 31)
34
NEW DEFINITIONS
(Section 2)
• Financial Period ( clause 32 )
• Financial statement (clause 33)
• Foreign company (clause 35)
• Government (clause 36)
• Holding company (clause 37)
• Mortgage or charge (clause 42)
• Net worth (clause 43)
• Notification (clause 44)
• Officer (clause 45)
• Ordinary resolution (clause 46)
35
NEW DEFINITIONS
(Section 2)
• Postal ballot (clause 47)
• Promoter (clause 50)
• Public interest company (clause 53)
• Public sector company (clause 54)
• Regulations (clause 58)
• Rules (clause 59)
• Securities (clause 61)
• Securities exchange (clause 62)
• Shariah compliant company (clause 64)
• Single member company (clause 65)

36
NEW DEFINITIONS
(Section 2)
• Specified (clause 67)
• Turnover (clause 69)
• Unlimited company (clause 71)
• Valuer (clause 72)
• Voting right (clause 73); and
• Wholly owned subsidiary (clause 74)
37
INCORPORATION, CAPITAL &
FUNCTIONING
INCORPORATION OF THE COMPANY
• Registration of companies by filing one form with model
memorandum and articles of association
• The memorandum should state principle line of business and any
change subsequently to be notified within 30 days.
• The company can engage in any lawful business as per section 26
• Directors and chief executive to be appointed at the time of
incorporation and no separate filing required subsequently.
• Registered address not required at the time of incorporation and
application can be filed only with correspondence address
• Share money to be deposited within 30 days of incorporation of
company
• Receipt of subscription money to be certified by a chartered
accountant or a cost and management accountant within 45 days of
incorporation failing which shares shall be deemed to be cancelled.
• Registered office to be intimated within 30 days of incorporation.
• No certificate to be issued for commencement of business by a
public company acceptance of documents by the registrar shall be
conclusive evidence for a public company to start a business
NAME OF COMPANY & PROHIBITION OF CERTAIN NAMES
[Sections 10, 11 and 12]
▪ Reservation of a name for 60 days
▪ Identical, inappropriate, undesirable, deceptive or design to exploit

or offend the religious susceptibilities of people prohibited
▪ Use of word “modaraba” and any other words which is permissible

for any other special business requiring license from SECP like
NBFC’s, stock brokerage shall not be allowed by the registrar
without prior approval of the Commission. The companies having or
using such names shall be compelled to change the name suitably
[section 10(2)]
▪ Cancellation of name if obtained on the basis of false or incorrect
information and change of name if the company is incorporated
▪ Suo motu power of the Registrar to change the name of the
company in case of non-compliance of directions by the company
[section 11(2)]
40
LIABILITY FOR CARRYING ON BUSINESS WITH
LESS THAN REQUIRED NUMBER Sec 15
• Liability for carrying on business with less than 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 other than a single member
company, below two or in the case of any other company,
below three and the company carries on business for more
than one hundred and eighty days 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
one hundred and eighty days and is cognizant of the fact
that it is carrying on business with fewer than two
members or three members, as the case may be, shall be
severally liable for payment of whole debts of the company
contracted during that time and may be sued therefor
without joinder in the suit of any other member.
Share & Debenture
• Share means a share in the share capital of a

company;
• Debenture includes debenture stock, bonds,
term finance certificate or any other
instrument of a company evidencing a debt,
whether constituting a mortgage or charge on
the assets of the company or not;
TYPES OF CAPITAL
• Authorized capital or nominal capital means such capital as
is authorised by the memorandum of a company to be the
maximum amount of share capital of the company;
• Redeemable capital includes sukuk and other forms of
finances obtained on the basis of participation term
certificate (PTC), musharika certificate, term finance
certificate (TFC) or any other security or obligation not
based on interest, 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 other than share capital, on
terms and conditions of the agreement for the issue of such
instrument or certificate or such other certificate or
instrument as the concerned Minister-in-Charge of the
Federal Government may, by notification in the official
Gazette, specify for the purpose;
TRANSFER OF SHARES
(Section 76)
• Mandatory requirement by the seller to offer the shares to
the existing members in case of private company
Impact: Further strengthen the original scheme of law relating to

private company
• Failure to transfer within 15 days shall be deemed as

refusal and right of appeal shall accrue
• Role of nominee clarified- He will be the trustee and

responsible to transfer the shares to the legal heirs under
the Islamic law of inheritance and in case of a non-Muslim
members, as per their respective law (section 79)
44
FURTHER ISSUE OF CAPITAL
(Section 83)
• Min. and max. time frame of 15 to 30 days for the
acceptance of offer prescribed
• Company to ensure the service of letter of offer on the

shareholder before the commencement of period of
offer
• Right of renunciation in case of listed company provided
• Requirement of special resolution for allotment other

than cash in case of public co prescribed
45
UTILITZATION OF PREMIUM FOR
ISSUANCE OF BONUS SHARES
• Provision added with clarity that premium can be utilized for issue bonus
shares (Section 81)
ISSUANCE OF SHARES AT DISCOUNT

(Section 82)
• Conditions for allowing discount by the Commission stated for listed

company – if market price is lower than par value for continuous 90 days
• Procedure - approval by special resolution
• Approval of the Commission
• For a discount of less than 10% - no approval of the SECP would be

required
46
DIVIDEND
• Specie dividend – only in the shape of shares of listed company [section
241]
• Enabling provision to withhold the dividend in case of incomplete
documentation [section 243 (3)]
• In case of a listed company, dividend payable in cash shall only be paid
through electronic mode directly into the bank account shareholders.
[section 242 (2nd proviso]
Unclaimed dividend to vest with Federal Government [section 244]
• dividend unclaimed for 3 years to be deposited in a separate account with
NBP or SBP for the credit of the Federal government – income generated
from such account to be transferred / used for investors’ education
program of the Commission. The account may also be used as a collateral
by a clearing house
Establishment of Investor Education and Awareness Fund [section 245]
• Enabling provision added to create a Fund which shall provide for investor
education and awareness measures.
47
EXEMPTION FROM FILING OF ANNUAL RETURN
[Section 130(5)]
• No annual return to be filed if there is no change from the last annual

return
• A company other than SMC or a private company having paid up capital of

more than Rs. 3 million shall report that there is no change
FILING OF ACCOUNTS
• Capital up to 1.0 M – unaudited accounts to be filed [Section 234]
• Capital exceeding 1.0 M but not exceeding 10.0 M or such higher amount
as may be notified by the Commission – no need to file [Section 233]
• Filing time for listed – 30 days after AGM and for others 15 days after AGM
[Section 233]
48
SPECIAL RESOLUTION
Special resolution means a resolution which has been
passed by a majority of not less than three-fourths of
such members of the company entitled to vote as are
present in person or by proxy or vote through postal
ballot 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 less than twenty-one days notice has been
given;
MORTGAGE- TURNOVER
• Mortgage or charge means an interest or lien created on
the property or assets of a company or any of its
undertakings or both as security;
REGISTRATION OF CHARGES
(Section 448)
• Time frame for registration of charge has been increased
from 21 to 30 days
• Pledge also made registerable
• The procedure for satisfaction of charge simplified. If the
mortgagee confirms repayment of loan and issues NOC to
that effect, condonation of delay through a petition shall
not be required
• Turnover means the aggregate value of sale, supply or
distribution of goods or on account of services rendered, or
both, net of discounts, if any, held by the company during a
financial year;
PROHIBITION ON INVITATION OF
DEPOSITS
(Section 84)
• Except for specialized companies, no company shall be
allowed to invite and accept any deposit
• “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.
51
REHABILITATION,
RECONSTRUCTION,
AMALGAMATION AND
WINDING UP
ACTIONS & HANDLING
ACTION Act/ Mechanism
Rehabilitation of Public Sector Sick Company • Identification/ Approval by Federal Minister
in Charge.
(AUTHORITY –FEDERAL MINISTER) • Section 292 of Companies Act 2017
Reconstruction & Amalgamation of the • Application under Section 279 of

Company Companies Act 2017.
• Power transferred to SECP instead of
(AUTHORITY-SECP, BOD) Companies bench under Section 282.
• Wholly owned Companies, BOD can itself
approve amalgamation as per Section 284
of Companies Act 2017.
Rehabilitation of Limited Company having • Application by Debtor to the Court (High
more than Rs 100 M NPL Court Company bench) for mediation.
(AUTHORITY-COMPANY BENCH-HIGH COURT) • As per functions prescribed in section 7 of
Corporate Rehabilitation Act 2018
Restructuring, Rehabilitation, of NPA of any • Corporate Restructuring Act 2016 with July
entity 2020 amendments
• Public Limited Company (Private or Public
(FI FOR RECOVERY ORDINANCE) AND Sector)
INDEPENDENT RECOVERY AGENT/ SELF • Special Bench in High Court
CORPORATE REHABILITATION ACT 2018
• Sec 6. Debtor.-A debtor shall be a company incorporated or registered under the
Ordinance or previous companies legislation and shall not include-
• (a) a financial institution;
• (b) a company engaged in the business of insurance as defined in clause (xxvii) of
section of the Insurance Ordinance, 2000 (XXXIX of 2000);
• (c) a company which has debts of less than hundred million Rupees or such other
sums the federal Government may, by notification in the official Gazette, specify
from time to time;
• (d) a company against which an order of dismissal under section 17 has been
passed within the past five years;
• (e) a company with respect to which a plan of rehabilitation has been confirmed
under this Act within the past seven years:
• (f) a company against which a winding up order has already been passed;
• (g) a company which has resolved by special resolution that such company be
wound up voluntarily;
• (h) a company against which execution proceedings are pending for satisfaction
of one or more decrees for an aggregate sum not less than twenty-five percent of
the value of assets, or
• (i) a company which has availed relief under the BPD Circular No. 29 of 2002
issued by the State Bank.
• Sec 7. Plan of Rehabilitation:

• (1) A plan of rehabilitation shall specify the following
matters in relation to Debtor,-
– (a) claims and classes of claims against the debtor
– (b) interests and classes of interests in the debtor;
– (c) claims and interests belonging to the debtor;
– (d) claims or interests that will not be impaired under the
plan of rehabilitation;
– (e) claims or interests that will be impaired under the plan
of rehabilitation;
– (f) places of business of the debtor, details of its assets and
any security interests created over such assets;
– (g) particulars of shareholders. directors and key
management of the debtor.
– (h) scheme of implementation of the plan of rehabilitation
of the debtor
• (2) Subject to subsection (l),

• a plan of rehabilitation may provide for the following
matters in relation to a debtor,
– (a) the settlement, restructuring or rescheduling of any
claims or interests or class of claims or interests;
– (b) the change of ownership and management of the
debtor:
– (c) the sale of all or any of the assets of the debtor and the
distribution of proceeds of such sale among holder of
claims or interests;
– (d) the assumption, rejection or assignment of any
executory contract of unexpired lease of the debtor;
– (e) the enforcement of any claims or interests belonging to
the debtor and
– (f) any other matter concerning rehabilitation of the
debtor or distribution of proceeds of sale of properly of
the debtor
SCHEME OF AMALGAMATION ETC
SECTION 282 OF COMPANIES ACT 2017
• Powers of Commission to facilitate reconstruction or

amalgamation of companies.—(1) Where an application is
made to the Commission under section 279 to sanction a
compromise or arrangement and it is shown that;
– (a) the compromise or arrangement is proposed for the purposes of,
or in connection with, a scheme for the reconstruction of any
company or companies, or the amalgamation of any two or more
companies or division of a company into one or more companies;
– (b) under the scheme the whole or any part of the undertaking or
property or liabilities of any company concerned in the scheme (“a
transferor company”) is to be transferred to another company (“the
transferee company”) or is proposed to be divided among and
transferred to two or more companies; and
– (c) a copy of the scheme drawn up by the applicants has been filed
with the registrar;
– (d) the Commission may order a meeting of the creditors or class of
creditors or the members or class of members, as the case may be, to
be called, held and conducted in such manner as the Commission may
direct.
SCHEME OF AMALGAMATION ETC
SECTION 282 OF COMPANIES ACT 2017
• (3) The Commission may, either by an order, sanction the compromise or

arrangement or by a subsequent order, make provision for all or any of the
following matters;
– (a) the transfer to the transferee company of the whole or any part of the undertaking
and of the property or liabilities of any transferor company;
– (b) the allotment or appropriation by the transferee company of any shares,
debentures, policies or other like interests in that company which under the
compromise or arrangement are to be allotted or appropriated by that company to or
for any person;
– (c) the continuation by or against the transferee company of any legal proceedings
pending by or against any transferor company;
– (d) the dissolution, without winding up, of any transferor company;
– (e) the provision to be made for any persons who, within such time and in such
manner as the Commission directs, dissent from the compromise or arrangement;
– (f) such incidental, consequential and supplemental matters as are necessary to secure
that the reconstruction, amalgamation or bifurcation is fully and effectively carried out.
• (4) If an order under this section provides for the transfer of property or liabilities;
– (a) the property, by virtue of the order stands transferred to, and vests in, the
transferee company, and
– (b) the liabilities, by virtue of the order, stand transferred to and become liabilities of
that company.
– No Stamp fee.
SECTION 292. REHABILITATION OF SICK PUBLIC SECTOR COMPANIES
• (1) The provisions of this section shall apply to a public
sector company which is facing financial or operational
problems and is declared as a sick company by the
concerned Minister-in-Charge of the Federal Government.
• (2) After a company is declared as a sick company under
sub-section (1), any institution, authority, committee or
person authorized by the concerned Minister-in-Charge of
the Federal Government in this behalf may draw up a plan
for the rehabilitation, reconstruction and reorganization of
such company, hereafter in this section referred to as the
rehabilitation plan.
• The rehabilitation plan approved by the concerned
Minister-in-Charge of the Federal Government and any
modification thereof shall, unless otherwise directed by it,
be published in the official Gazette and a copy thereof shall
be forwarded by the concerned Minister-in-Charge of the
Federal Government to the registrar who shall register and
keep the same with the documents of the company.
REHABILITATION PLAN OF PSC
• reduction of capital so as to provide for all or any of the matters referred to in
section 89 or reconstruction, compromise, amalgamation and other
arrangements so as to provide for all or any of the matters referred to in section
279 or section 282 or section 285;
• alteration of share capital and variation in the rights and obligations of
shareholders or any class of shareholders;
• alteration of loan structure, debt rescheduling or conversion into shares carrying
special rights or other relief and modification in the terms and conditions in
respect of outstanding debts and liabilities of the company or any part of such
loan, debts or liabilities or variation in the rights of the creditors or any class of
them including any security pertaining thereto;
• acquisition or transfer of shares of the company on the specified terms and
conditions;
• issue of further capital including shares carrying special rights and obligations
relating to voting powers, dividend, redemption or treatment on winding up;
• removal and appointment of directors (including the chief executive) or other
officers of the company;
• amendment, modification or cancellation of any existing contract; or
• alteration of the memorandum or articles or changes in the accounting policy
and procedure.
WINDING UP (Section 301)
• additional grounds for winding up by court added
• default by a company in filing its financial statements

or annual returns for 2 financial years
• conduct of business by a company in a manner

oppressive to the minority members or persons
concerned with the formation or promotion of the
company
• revocation of a license
• any other ground notified by the Commission

61
PANEL OF PROVISIONAL MANAGER AND OFFICIAL
LIQUIDATORS
(Section 315 )
Panel to be maintained by the Commission, consisting of
individuals from disciplines including chartered accountancy,
law, company secretary, cost and management accountancy
and retired public servant etc.
VALUATION REGIME
(Section 460 )
Valuation of assets/services mandatory by the qualified

valuer registered with the Commission for allotment of shares
for consideration other than cash
62
MEDIATION (Section 276, 277)
• Option to resolve disputes through mediation provided
• The Commission has been empowered to maintain a panel of

experts to be called the “mediation and conciliation panel”
• Disputing parties may before; or after entering into a formal

dispute resolution process, pending before the Commission or
the Appellate Bench may approach the Mediation and
Conciliation Panel
CODE OF CORPORATE GOVERNANCE

(Section 156 )
• Enabling provision added to frame the Code for corporate

governance.
63
OFFICE OF THE COMPANY- FOR
WINDING UP JURISDICTION
• 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
one hundred and eighty days immediately
preceding the presentation of the petition for
winding up.
LEGAL PARAMETERS
LITIGATION & PUNITIVE ACTIONS
Formation of Joint Investigation Team (JIT)
[Section. 258 (4)] ( Serious fraud investigation )
• If the matter of public importance or it is in the interest of

public at large
• concerned Minister-in-Charge of the FG to form a JIT
• to be headed by the senior level officer of the Commission,

not below the rank of additional director, and may include
any professional under sub-section (1) along with Gazette
officer of any Federal law enforcement agency, bureau or
authority for providing assistance in investigation
66
SERIOUS FRAUD INVESTIGATION (Section 258)
➢ Investigation in cases which are of serious nature and has
impact on the public at large- joint investigation team to be
headed by SECP- members includes FIA, NAB etc.
➢ to be ordered by the Commission in particular circumstances.
UNIFORMITY IN THRESHOLD FOR LEGAL ACTION

( Section 286)
➢ A uniform threshold of 10% of the voting rights for filing of
applications or taking legal actions against the company by
the shareholders
67
Adjudication of offences and standard
scale of penalty (Sec 479)
• There shall be a standard scale of penalty for
offences under this Act, which shall be known
as ―the standard scale.
Level Number of instances Limit of Penalty Per day penalty
where this level of during which
penalty is cited in default continues
Companies Act 2017
1 87 Up to Rs 25,000 Up to Rs 500
2 43 Up to Rs 500,000 Up to Rs 1,000
3 27 Up to Rs 100 M Up to Rs 500,000
ADJUDICATION OF OFFENCES
• Three modes of cognizance of any offences by the Court have been provided:
a) All Offences provided in the Act are to be taken cognizance by the court
on the complaint filed by the Commission only with the exception of 8th
schedule or otherwise provided in the Act
b) Offences in the 8th schedule shall continue to be filed as a private
complaint and in addition to the Commission or registrar , 5 % of issued
capital share holders or creditors having equivalent interest may also file
complaint and process of investigation as provided in section 38 of the
SECP Act, 1997 may not be required.
c) The Company Bench having passed judgment as to prima facie question
raised in a petition in the relevant sections, the Court may, in addition, also
send a reference for adjudication of offences to the court ( Court of
Sessions) as provided under section 482 under sections 126 (rectification of
register of members ), 197 ( rectification of register of directors & officers
)and 400 ( penalty for fraud for company under liquidation)
69
NEW OFFENCES
( Section 453)
• Duty of every officer to take reasonable measures for prevention of offences
relating to fraud, money laundering and terrorist financing
• Punishment of imprisonment for a term which may extend to three years and with
fine which may extend to one hundred million rupees
(Section 498)
• Penalty for false statement, falsification, forgery, fraud, deception: Whoever in
relations to affairs of the company or body corporate—
(a) makes a statement or submit any document in any form, which is false
or incorrect in any material particular, or omits any material fact,
knowing it to be material, in any return, report, certificate, statement of
financial position, profit and loss account, income and expenditure
account, offer of shares, books of account, application, information or
explanation required by or for the purposes of any of the provisions of
this Act or pursuant to an order or direction given under this Act with an
intention to defraud, or cheat the Commission or to obtain
incorporation or to avoid any penal action for an offence under this Act
or administered legislation;
70
NEW OFFENCES
(b) makes any false entry or omits or alter any material particular from
books, paper or accounts with an intent to defraud, destroy, alter or
falsifies any books of account belonging to or in his possession shall
commit an offence of falsification of account;
(c) submit, present or produce any forged or fabricated document,

knowingly to be forged or fabricated, to the Commission for the
purposes of cheating or cheating by personation or to obtain any
wrongful gain or wrongful loss or to avoid any penal action for an
offence under this Act or administered legislation; or
(d) employ any scheme, artifice or practice in the course of business of

the company to defraud or deceive general public; shall be
punishable with imprisonment which shall not be less than one
year but which may extend to seven years and shall also be liable
to fine which shall not be less than the amount involved in the
fraud but may extend to three times the amount involved in the
offence: 71
JURISDICTION OF THE COURT AND
CREATION OF BENCHES
[Section 5 & 6]
• No Court shall have jurisdiction save as is or may be conferred on it by the

Constitution or by or under any law ( Article 175 (2) of the Constitution of
Islamic Republic of Pakistan)
• The Court having jurisdiction under the Companies Act, 2017 ( the
“Companies Act”) shall be the High Court having jurisdiction at place in
which the registered office of the company is situated.
• Non-obstante clause has been introduced in the Companies Act whereby

civil courts or any other courts shall not have jurisdiction to entertain
any suit in respect of any matter in which the Company Bench has
jurisdiction. This provision will clarify the ambiguity of forum.
72
JURISDICTION OF THE COURT AND CREATION OF BENCHES
[Section 5 & 6]
• The benches of the High Court are envisaged to be

functioning on permanent basis subject to the exercise of
authority by the Chief Justice of the respective High Court.
• Registrar of the Company Bench assisted by such other

officers shall perform all ministerial and administrative
business of the Company Bench including receipt of
petitions, applications, written replies, issuance of notices,
etc.
• A separate secretariat for this purpose may also be set up

by the Chief Justice if deemed appropriate.
73
PROCEDURE OF COURT
SECTION 6
1. Petition or application setting out a concise statement
of facts, grounds and the relief claimed;
2. A written reply with particulars of set off, if any;
3. An affidavit of facts by the petitioner or applicant, or
respondent, as the case may be, including affidavits, if
required, of other persons in support of the case, duly
attested by the oath commissioner, or as may be
provided under the rules;
4. Any application for discovery of documents or interim
injunction, if required;
5. A list of any case law along with a summary of the
same on which the petitioner or applicant is placing
reliance
PROCEDURE OF COURT
• Petition or application and the documents annexed
therewith and the same shall be served on the
respondent through the bailiff or process-server of the
Court, through registered post, acknowledgement due,
by courier and by publication in one English language
and one Urdu language daily newspaper and, in
addition, if so directed by the Court through electronic
modes such as, facsimile, email, or in such other form
or mode as may be notified by the Court.
• Written reply and particulars of set-off, if any, as set
out in sub-section (2) of this section with the
concerned Registrar of the Company Bench within
thirty days from the date of first service
PROCEDURE OF COURT
• Where the respondent fails to file the written reply
within the time prescribed in sub-section (4), a report
shall be submitted by the Registrar of the Company
Bench before the Court and the Court may pass
necessary orders to proceed exparte and announce the
final order on the basis of the documents available on
record.
• Office of the Court, shall present the case file to the
Court on a day fixed under notice to the parties, within
forty-five days of the first service of notices or such
extended time as may be granted by the Court
• Then 2 adjournments allowed only.
PROCEDURE OF COURT
• The Court may refer the matter to the Registrar of
the Company Bench or any other person for
recording of cross examination of the deponent
who shall complete recording of cross
examination within thirty days from the date of
the order of the Court, or such extended time as
may be allowed by the Court which shall not be
more than fifteen days on payment of rupees ten
thousand or such higher amount as may be
determined by the Court as costs payable to the
Court and to submit a report accordingly
PROCEDURE OF COURT
• The petition presented before the Court shall
be decided within a period of one hundred
and twenty days from the date of
presentation of the case and for this purpose
the Court may, if it is in the interest of justice,
conduct the proceedings on a day to day basis
and if the Court deems fit it may impose costs
which may extend to one hundred thousand
rupees per day or such higher amount as the
Court may determine against any party to the
proceeding causing the delay.
APPEAL
• Any person aggrieved by any judgment or final order of
the Court passed in its original jurisdiction under this
Act may, within sixty days, file a petition for leave to
appeal in the Supreme Court of Pakistan:
• Provided that no appeal or petition shall lie against any
interlocutory order of the Court.
• Save as otherwise expressly provided under this Act,
the provisions of the Qanun-e-Shahadat (Order)1984
(P.O. No. X of 1984) and the Code of Civil Procedure,
1908 (Act V of 1908) shall not apply to the proceedings
under this section except to such extent as the Court
may determine in its discretion
GOVERNANCE & MANAGEMENT GENERAL
Companies Act 2017
Code of Corporate Governance Regulations 2019 for Listed Companies
Public Sector Companies Rules 2013
Public Sector Companies (Corporate Governance Compliance) Guidelines,
2018
Public Sector Enterprises (Appointment of Chief Executive) Regulation 2015
Principles of Corporate Governance for Non-Listed Companies
GOVERNANCE
&
MANAGEMENT
Companies Act 2017
GENERAL MEETINGS
(Section 134 - 149)
• Passing of members’ resolution through circulation in case of
unlisted companies
• Softer regime for SMC – no requirement of holding AGM,
EOGM and election of directors
• Voting through postal ballot allowed and postal ballot
includes e-ballot
• Facility for attending the meetings through video link allowed
• Requirement of seeking approval from Registrar for holding
EOGM by unlisted companies at a shorter notice abolished
Mandatory postal ballot [134 (10)]
• Certain agenda items as notified by the Commission shall be
transacted only through postal ballot
82
GENERAL MEETINGS
Poll through secret ballot [Section 144]
• On the direction of the chairman or
• On demand by the members having not less than 10% voting power
Statutory Meeting [Section 131]
• No statutory meeting would be required if the first AGM is held before the
due date of statutory meeting
Annual General Meeting [Section 132]
• First AGM within 16 months, subsequent within 120 days after the close of
financial year
• Extension of 30 days allowable even in case of first AGM
• Arrangement of video-link facility by listed company mandatory on the
request of shareholders residing in a city holding at least 10% shares
• In case of listed company notice of AGM shall also be sent to the
Commission
83
DIRECTORS (Section 153)
Ineligibility of directors
• Stock broker, his spouse or a sponsor director or officer of a
brokerage house
• A person who does not hold an NTN, Commission may
grant exemption [clause (h) of Section 153]
Appointment of woman director
Mandatory in case of public interest company [Section
154]
First Directors [Section 157]
• Must be appointed at the time of incorporation
Appointment of additional director in mid-term
• Before first AGM – through general meeting [Section
157(2)]
• After the election - the person acquiring, sufficient shares
to get him elected may require the fresh election [Section
162] 84
DIRECTORS (Section 153)
• Procedure for election in case of listed company
is to be specified through regulations
Rectification of list of directors on the pattern of
Register of Members [Section 197]
Selection of independent directors [Section 166]
From the data bank maintained by any institute,
body or association as may be notified by the
Commission
Protection to independent and non-executive
directors (listed company) [Section 181]
• Immunity provided to such directors unless
active involvement or negligence is proved
85
DIRECTORS(Section 153)
Disqualification of directors [Section 172]
• The Commission empowered (on its own motion or upon

a complaint) to disqualify the delinquent director from
holding such position in a company for a period of five
years on a number of grounds as stated in this section –
in addition to the grounds already covered in section 187
and 188 (existing law)
Cap on directorships in such number of companies as may
be specified [Section 155]
• Compliance in 1 year
• Exemption – directorship in listed subsidiary
86
DIRECTORS
Maximum time frame for filling the casual vacancy in case of listed company
• 90 days [Section 155(3)]
• Election of directors – impediments to be reported 45 days before the due
date of election [Section 158] – election not to be delayed beyond 90 days
or such extended time as may be allowed by the registrar
• Power of the registrar to issue direction on the expiry of the given period
to issue direction on its own motion or on requisition of members holding
10% capital / member [Section 158]
Proceedings of the directors [Section 176]

• No quorum requirement – if there are not enough directors to form a
quorum for filling the casual vacancy
• Passing of board resolution by circulation allowed
87
DIRECTORS
Proceedings of the directors [section 176]
• No quorum requirement – if there are not enough directors to form a
quorum for filling the casual vacancy
• Passing of board resolution by circulation allowed
Powers of director [section 183]
• Enabling provision added to:
– specify the limit for incurring capital expenditure on any single item or to
dispose of a fixed assets
– notify the limit for undertaking obligations under leasing contracts
– specify any other item in the power of the board
• restriction on a listed company to sale or dispose of the undertaking which
may lead to closure of business operation unless there is a viable alternate
business plan
• directors to act in good faith to promote the objects of the company and the
benefits of its members.
88
Independent Director
• •166 (2) For the purpose of this section, an
independent director means a director who is not
connected or does not have any other
relationship, whether pecuniary or otherwise,
with the company, its associated companies,
subsidiaries, holding company or directors; and
he can be reasonably perceived as being able to
exercise independent business judgment without
being subservient to any form of conflict of
interest:
Executive Director
Executive director means a director who devotes
the whole or substantially the whole of his time
(whether paid or not) to the operations of the
company.
Non-Executive Director
A director who is not an executive director
Protection to independent and non-
executive directors(Section 181)
Notwithstanding anything contained in this Act
(a) an independent director; and
(b) a non-executive director;
shall be held liable, only in respect of such acts
of omission or commission by a listed company
or a public sector company which had occurred
with his knowledge, attributable through board
processes, and with his consent or connivance
or where he had not acted diligently.
CHIEF EXECUTIVE
[Section 186]
• First chief executive must be appointed at the time of incorporation
• Government shall have the power to nominate its chief executive in case of
public sector companies [Section 186(4)] as well as the companies where
majority of the directors are nominated by Government [Section 187(4)]
• The person appointed against the casual vacancy shall hold office till the next
election
92
CHAIRMAN IN A LISTED COMPANY
[Section 192]
• To be appointed within 14 days from the date of election, from amongst non-
executive directors
• Chairman and CEO shall not be the same person in case of classes of companies
specified by the Commission [Section 192(2) Proviso]
• Board shall define respective role and responsibilities of chairman and CEO
• Chairman to be the leader and ensure the board to play an effective role
• Every financial statement shall contain a review report by the chairman on overall
performance of the company and effectiveness of the board.
93
LOANS TO DIRECTORS ( Section 182)
Except for listed companies, no approval of Commission for loan to directors and
the directors of its holding company.
INVESTMENTS IN ASSOCIATED COMPANIES AND UNDERTAKING [Section 199]
• “Guarantees” have also been included to the description of “loan to

associated companies”
• Agreement mandatory specifying the nature, purpose, period of the loan, rate
of return, fees or commission, repayment schedule for principal and return,
penalty clause in case of default or late repayments and security for the loan
(if any)
• Parameters for return on investment stated - shall not be less than the
borrowing cost or the rate as may be specified by the Commission
• Directors to certify that investment made after due diligence and financial
health of the borrowing company for the repayment of loan
• Provision for amendment to the investment or nature thereof stated

94
DIRECTORS’ REPORT
( Section 226)
• Exemption to the private companies -

capital up to Rs.3 million
• A listed company to provide additional

information in the directors’ report having
impact on the future performance and on
environment. And action taken for CSR etc.
[section 227(3)]
95
AUDIT
(Section 246, 247, 248)
• Time frame for appointment of first auditor increased to 90 days
• No audit requirement for a private company having capital up to Rs.1.0 M
• Qualification – CA / ICMA – for private company having capital between Rs.

1.0 M to 3.0 M
• Additional rights given to the auditors:
– requiring information from the employees of the company; and

– access to the accounts of subsidiary companies and its employees
Cost audit to be conducted on the recommendation of relevant regulatory

authority
96
QUARTERLY ACCOUNTS
[Section 237]
• Extension up to 30 days in filing of first quarterly accounts of listed
companies allowed
• Time period of 2 months given for the preparation of quarterly accounts

of second quarter
• Quarterly Financial Statements of listed companies only to be posted on

the website for such period as specified by the Commission and filed to
SECP electronically
• No need to send in physical form to the members
• A copy of these statements in paper form shall be dispatched if so

requested by any member without fee
97
RESTRICTION ON NON-CASH TRANSACTIONS
INVOLVING DIRECTORS
[Section 211]
➢ a director of the company or
➢ its holding
➢ subsidiary or
➢ associated company or
➢ a person connected with him
not allowed to acquire any assets from the company and vice
versa for consideration other than cash without the approval of
general meeting
➢ all cash transactions only through banking channels

98
LIABILITY FOR UNDESIRED ACTIVITIES OF THE
SHAREHOLDERS
[Section 215]
A member of a company shall
• act in good faith
• not conduct themselves in a manner that is considered

disruptive to proceedings of the meeting
• not exert influence or approach the management directly for

decisions which may lead to create hurdle in the smooth
functioning of management
• penal action for the violation
99
WHAT IS CORPORATE GOVERNANCE
The framework of rules and practices by which a

board of directors ensures accountability,
fairness, and transparency in a company's
relationship with its all stakeholders
(shareholders, financiers, customers,
management, employees, government, and the
community).
WHY CORPORATE GOVERNANCE
Corporate Corruption
The classic cases of corporate fraud e.g. Enron and Worldcom
(MCI) and the fall of Arther Anderson, one of the top audit
firms, triggered the need of a stringent mechanism for
corporate governance. 2001-02.
Sarbanes-Oxley Act (SOX Act) 2002

The Sarbanes-Oxley Act (or SOX Act) is a U.S. federal law that
aims to protect investors by making corporate disclosures
more reliable and accurate. The Act was spurred by major
accounting scandals, such as Enron and WorldCom (today
called MCI Inc.), that tricked investors and inflated stock
prices. Spearheaded by Senator Paul Sarbanes and
Representative Michael Oxley, the Act was signed into law
with a majority of 423-3, on July 30, 2002.
PRINCIPLES OF GOVERNANCE BY SOX
Public Company Accounting Oversight Board (PCAOB)
• Title I consists of nine sections and establishes the Public Company
Accounting Oversight Board, to provide independent oversight of
public accounting firms providing audit services ("auditors"). It also
creates a central oversight board tasked with registering auditors,
defining the specific processes and procedures for compliance
audits, inspecting and policing conduct and quality control, and
enforcing compliance with the specific mandates of SOX.
Auditor Independence
• Title II consists of nine sections and establishes standards for
external auditor independence, to limit conflicts of interest. It also
addresses new auditor approval requirements, audit partner
rotation, and auditor reporting requirements. It restricts auditing
companies from providing non-audit services (e.g., consulting) for
the same clients.
Corporate Responsibility
• Title III consists of eight sections and mandates that senior executives take
individual responsibility for the accuracy and completeness of corporate
financial reports. It defines the interaction of external auditors and
corporate audit committees, and specifies the responsibility of corporate
officers for the accuracy and validity of corporate financial reports. It
enumerates specific limits on the behaviors of corporate officers and
describes specific forfeitures of benefits and civil penalties for non-
compliance. For example, Section 302 requires that the company's
"principal officers" (typically the Chief Executive Officer and Chief Financial
Officer) certify and approve the integrity of their company financial
reports quarterly.
Enhanced Financial Disclosures
• Title IV consists of nine sections. It describes enhanced reporting
requirements for financial transactions, including off-balance-
sheet transactions, pro-forma figures and stock transactions of corporate
officers. It requires internal controls for assuring the accuracy of financial
reports and disclosures, and mandates both audits and reports on those
controls. It also requires timely reporting of material changes in financial
condition and specific enhanced reviews by the SEC or its agents of
corporate reports.
Analyst Conflicts of Interest
• Title V consists of only one section, which includes measures
designed to help restore investor confidence in the reporting of
securities analysts. It defines the codes of conduct for securities
analysts and requires disclosure of knowable conflicts of interest.
Commission Resources and Authority
• Title VI consists of four sections and defines practices to restore
investor confidence in securities analysts. It also defines the SEC's
authority to censure or bar securities professionals from practice
and defines conditions under which a person can be barred from
practicing as a broker, advisor, or dealer.
Studies and Reports
• Title VII consists of five sections and requires the Comptroller
General and the SEC to perform various studies and report their
findings. Studies and reports include the effects of consolidation of
public accounting firms, the role of credit rating agencies in the
operation of securities markets, securities violations, and
enforcement actions, and whether investment banks
assisted Enron, Global Crossing, and others to manipulate earnings
and obfuscate true financial conditions.
Corporate and Criminal Fraud Accountability
• Title VIII consists of seven sections and is also referred
to as the "Corporate and Criminal Fraud Accountability
Act of 2002". It describes specific criminal penalties for
manipulation, destruction or alteration of financial
records or other interference with investigations, while
providing certain protections for whistle-blowers.
White Collar Crime Penalty Enhancement
• Title IX consists of six sections. This section is also
called the "White Collar Crime Penalty Enhancement
Act of 2002". This section increases the criminal
penalties associated with white-collar crimes and
conspiracies. It recommends stronger sentencing
guidelines and specifically adds failure to certify
corporate financial reports as a criminal offense.
Corporate Tax Returns
• Title X consists of one section. Section 1001 states that
the Chief Executive Officer should sign the company tax
return.
Corporate Fraud Accountability
• Title XI consists of seven sections. Section 1101
recommends a name for this title as "Corporate Fraud
Accountability Act of 2002". It identifies corporate
fraud and records tampering as criminal offenses and
joins those offenses to specific penalties. It also revises
sentencing guidelines and strengthens their penalties.
This enables the SEC to resort to temporarily freezing
transactions or payments that have been deemed
"large" or "unusual".
SOX ACT MAJOR PROVISIONS
Section 302
• Financial reports and statements must certify that:
• The documents have been reviewed by signing officers
and passed internal controls within the last 90 days.
• The documents are free of untrue statements or
misleading omissions.
• The documents truthfully represent the company’s
financial health and position.
• The documents must be accompanied by a list of all
deficiencies or changes in internal controls and
information on any fraud involving company
employees.
Section 401
• Financial statements are required to be accurate. Financial
statements should also represent any off-balance liabilities,
transactions, or obligations.
Section 404
• Companies must publish a detailed statement in their
annual reports explaining the structure of internal controls
used. The information must also be made available
regarding the procedures used for financial reporting. The
statement should also assess the effectiveness of the
internal controls and reporting procedures.
• The accounting firm auditing the statements must also
assess the internal controls and reporting procedures as
part of the audit process.
Section 409
• Companies are required to urgently disclose drastic
changes in their financial position or operations, including
acquisitions, divestments, and major personnel departures.
The changes are to be presented in clear, unambiguous
terms.
Section 802
• Section 802 outlines the following penalties:
• Any company official found guilty of concealing, destroying,
or altering documents, with the intent to disrupt an
investigation, could face up to 20 years in prison and
applicable fines.
• Any accountant who knowingly aids company officials in
destroying, altering, or falsifying financial statements could
face up to 10 years in prison.
IN PAKISTAN
Owner manager separation
• Companies are run by “Directors” who are
elected by shareholders in the general
meeting
• Directors are generally involved in day to day
business operations and are aware of the state
of affairs of the company
• Shareholders on the other hand only get
information upon publication of information
by the Directors (quarterly and annual)
WHY CORPORATE GOVERNANCE IN
PAKISTAN
Safeguarding of public money
• Companies having public money in the shape
of capital (e.g. listed companies)
• Companies having public money in the shape
of deposits, investments (e.g. banks,
insurance, mutual funds)
LISTED COMPANIES
Code of Corporate Governance
Regulations 2019
(applicable on all stock exchanges and other companies whose shares are listed on
stock exchanges)
COMPLIANCE WITH THE CODE OF
“The Commission may provide for framework to
ensure good corporate governance practices,
compliance and matters incidental and axillary for
companies or class of companies in a manner as
may be specified”
(Section 156 of Companies Act 2017)
Contents of directors’ report and statement of
compliance.-
The directors shall make out and attach to the
financial statements, a report with respect to the
state of the company‘s affairs and a fair review of its
business
(Section 227 of Companies Act 2017)
Corporate Governance Structure
HIGHLIGHTS
• Mandatory regulations mean such regulations that MUST be complied
with by a listed Company.
• Non-compliance will attract penalty. 'Comply or explain approach’ has
been defined to make an assessment by the listed Company itself as to
whether a non-mandatory provision is to be complied with or explained
due to any impediment.
• No person shall be the Director of more than 7 listed companies at a time.
The mandatory condition of Directors’ training has been relaxed.
• The answer to one-third numbers of members of the Board may come out
as a fraction. In case of independent directors, it shall be explained as to
why such fraction is not rounded up as one.
• The answer to one-third numbers of members of the Board may come out
as a fraction. In case of executive directors, it shall be explained as to why
such fraction is rounded up as one.
• Human Resource Committee is no more mandatory.
• External auditors and its associated companies and undertakings can not be
appointed as internal auditor.
• External auditors' associated company and associated undertaking can not
be outsourced internal audit function
MANDATORY REGULATIONS
• No person shall be elected or nominated or hold office as a
Director of a listed Company including as an alternate
Director of more than seven listed Companies
simultaneously. (Regulation 3)
• Each listed Company shall have at least two or one third
members of the Board, whichever is higher, as independent
Directors. (Regulation 6(1))
• Independent Director shall submit his consent to act as
Director, along with declaration to the Company that he
qualifies the criteria of independence notified under the
Act and such declaration shall be submitted to chairman of
the Board at first meeting which is held after election of
Directors as well as on an event of any change affecting his
independence. (Regulation 6(3))
• The Board shall have at least one female Director when it is
reconstituted after the expiry of its current term.
Regulation 7
• Executive Directors, including the chief executive officer, shall not be more than
one third of the Board. (Regulation 8)
• The Board shall constitute audit committee keeping in view the following
requirements: The committee shall have at least three members comprising of
Non- Executive Directors and at least one Independent Director Chairman of the
Audit committee shall be an Independent Director At least one member of the
audit committee shall be “financially literate Audit committee shall appoint a
secretary of the Committee (Regulation 27(1))
• Requirements to hold Audit committee meetings: One Audit committee meeting in
each quarter Meeting of the Audit committee shall be held if requested by
external auditors, head of internal audit and Chairman of the audit committee The
head of internal audit and external auditors represented by engagement partner
or in his absence any other partner designated by the firm shall attend all
meetings of audit committee at which issues related to accounts and audit are
discussed. 27(2)
• The Board shall determine terms of reference of the audit committee (Regulation
27(3)
• The Board shall provide adequate resources and authority to enable the audit
committee to carry out its responsibilities effectively and the terms of reference of
the audit committee shall be explicitly documented. (Regulation 27(4)
• The Secretary of audit committee shall circulate
minutes of meetings of the audit committee to all
members, Directors, head of internal audit and where
required to chief financial officer prior to the next
meeting of the Board. 27(5)
• The Company shall not appoint an external auditor, a
firm of auditors, which has not been given a
satisfactory rating under the Quality Control Review
program of the Institute of Chartered Accountants of
Pakistan and registered with Audit Oversight Board of
Pakistan. 32(1)
• The Company shall not appoint as external auditors, a
firm of auditors which or a partner of which is non-
compliant with the International Federation of
Accountants' Guidelines on Code of Ethics, as adopted
by the Institute of Chartered Accountants of Pakistan.
32(2)
• The Board of a Company shall recommend

appointment of external auditors for a year and its
remuneration, as suggested by the audit committee
and such recommendations shall be included in the
Directors’ Report and in case a recommendation for
appointment of an auditor is other than the retiring
auditor, the reasons for the same shall be included in
the Directors’ Report. (Regulation 32(3)
• Auditors shall not be appointed to provide services in
addition to audit, except in accordance of Regulations.
32(4)
• The Company shall ensure that the auditors do not
perform management functions or make management
decisions, for which Board and management of the
Company is responsible. (Regulation 32(5)
• The person who is close relative (spouse, parents, dependents and

non-dependent children) of the chief executive officer, the chief
financial officer, the head of internal audit, the Company secretary
or a Director of the Company shall not be appointed as external
auditors. (Regulation 32(7)
• Every Company shall require the external auditors to furnish a
management letter to its Board within 45 days of the date of audit
report. (Regulation 32(8)
• All listed companies in the financial sector shall change their
external auditors every five years. (Regulation 33(1)
• All listed companies other than those in the financial sector shall,
at the minimum, rotate the engagement partner after every five
years. (Regulation 33(2).
• The Company shall publish and circulate a statement, as given
under Annexure A to these Regulations, along with their annual
reports to set out the status of their compliance. (Regulation 36(1)
NON-MANDATORY REGULATIONS
• Chairman of the Board & CEO: Code requires that
Chairman and CEO shall not be same person. Code has not
made this regulation Mandatory. Companies Act 2017
specifies under section 192 that Board shall elect its
chairman from non - executive directors. Although the
Code has made this regulation non-mandatory but
effectively this is mandatory regulation in the light of
section 192 of the Companies Act 2017.
• Annual Review of Business Risk: Now the Board is
encouraged to carry out annual review of business. Earlier,
it was mandatory for Board to undertake at least annually
an overall review of business risk.
• Code of Conduct Every company is to ensure that formal
code of conduct is in place that promotes ethical culture
and prevents conflict of interest in the company. The
company may place it on website. Earlier company was to
have either code of ethics or code of conduct and this was
to be placed on website.
• Related Party Transactions: The details of related party
transactions shall be placed before Audit committee. Upon
recommendation of audit committee, the same shall be
placed before the Board for its review and approval. Earlier,
there was additional requirement to place separately the
related party transactions, which are not executed at arm’s
length price, before Board.
• Director’s Remuneration: There is no change regarding
having a formal policy and determination of director’s
remuneration. Still the guiding principle is laid down that
level of remuneration shall be appropriate and
commensurate with the level of responsibility and
expertise, to attract and retain directors needed to govern
affairs of the company successfully and to encourage value
addition. But remuneration shall not be at a level that could
be perceived to compromise their independence
• Directors Training Program: There is no change
regarding directors’ orientation requirement. Directors
participation in Directors Training Program dates have
been changed as under: i. by June 30, 2020, at least
50% of the Directors on the Board ii. by June 30, 2021,
75% of the Directors on the Board iii. by June 30, 2022,
all the Directors on the Board A newly appointed
director on the Board may acquire, the directors
training program certification within a period of one
year from the date of appointment as a director on the
Board. Directors having a minimum of 14 years of
education and 15 years of experience on the Board of a
listed company shall be exempt from the directors
training program
• Appointment of CFO, Company Secretary & Head of
Internal Audit: The Board shall appoint, determine
remuneration, renew contracts and terms and
conditions of employment of CFO, company secretary
and head of internal audit of the company.
• Removal of CFO, Company Secretary & Head of
Internal Audit: Earlier non-renewal of contract of CFO,
company secretary and head of internal audit was
considered as REMOVAL. CCG 2019 is silent on that, as
it has no governance impact. The removal decision of
CFO, company secretary and head of internal audit
remains with Board. Head of internal audit may be
removed only upon recommendation of the audit
committee. No change is introduced by CCG 2019 with
regard to qualification to appoint CFO, company
secretary and head of internal audit.
• Financial Statements Endorsement:
Endorsement of quarterly, half yearly and annual
financial statements by CEO and CFO prior to
placing and circulating the same for consideration
and approval of the Board. Financial Statements
initiated by External Auditor Non-Mandatory
There is no change regarding annual and interim
financial statements that CEO and CFO shall get
these initialed by external auditor before
presenting it to the audit committee and the
Board for approval.
PUBLIC SECTOR COMPANIES
(CORPORATE GOVERNANCE)
RULES 2013 WITH AMENDMENTS
PUBLIC SECTOR COMPANY
(section 2 (54) of Companies Act 2017 & Rule 2(1)(g)
• “Public Sector Company” means a company, whether
public or private, which is directly or indirectly controlled,
beneficially owned or not less than fifty one percent of the
voting securities or voting power of which are held by the
Government or any instrumentality or agency of the
Government or a statutory body, or in respect of which the
Government or any instrumentality or agency of the
Government or a statutory body, has otherwise power to
elect, nominate or appoint majority of its directors, and
includes a public sector association not for profit, licensed
under section 42 of the Ordinance.
Section 2 (9)
• Body Corporate
– (a) a company incorporated under this Act or company law; or
– (b) a company incorporated outside Pakistan, or
– (c) a statutory body declared as body corporate in the relevant statute,
APPLICABILITY OF COMPANIES ACT ON CORPORATIONS FORMED
UNDER SPECIAL ENACTMENTS
Section 505. Application of Act to companies governed by special

enactments.—
The provisions of this Act shall apply—

• (a) to insurance companies, except in so far as the said provisions
are inconsistent with the provisions of the Insurance Ordinance,
2000 (XXXIX of 2000);
• (b) to banking companies, except in so far as the said provisions
are inconsistent with the provisions of the Banking Companies
Ordinance, 1962 (LVII of 1962);
• (c) to modaraba companies and modarabas, except in so far as the
said provisions are inconsistent with the provisions of the
Modaraba Companies and Modaraba (Floatation and Control )
Ordinance, 1980 (XXXI of 1980);
• (d) to any other company governed by any special enactment for
the time being in force, except in so far as the said provisions are
inconsistent with the provisions of such special enactments
INDEPENDENT DIRECTOR
• “Independent Director” means a Non-Executive
Director who is not in the service of Pakistan or of
any statutory body or any body or institution
owned or controlled by the Government and who
is not connected or does not have any other
relationship, whether pecuniary or otherwise,
with the Public Sector Company, its associated
companies, subsidiaries, holding company or
directors.
• The test of independence principally emanates
from the fact whether such person can be
reasonably perceived as being able to exercise
independent judgment without being subservient
to any form of conflict of interest.
A director shall not be considered independent if one or more
of the following circumstances exist,-
• (i) he has been an employee of the Public Sector Company,
any of its subsidiaries, or holding company during the last
two years;
• (ii) he has, or has had within the last two years, a material
business relationship with the Public Sector Company
either directly or indirectly, or director of a body that has
such a relationship with the Public Sector Company;
• (iii) he has received remuneration in the two years
preceding his appointment as a director or has received
additional remuneration excluding retirement benefits
from the Public Sector Company apart from director’s fee
or has participated in the Public Sector Company’s share
option or a performance-related pay scheme;
A director shall not be considered independent if one or
more of the following circumstances exist
• he is a close relative (spouse, lineal ascendants and
descendants and brothers and sisters) of the
company’s promoters, directors or major shareholders;
• (v) he holds cross-directorships or has significant links
with other directors through involvement in other
companies or bodies; or
• (vi) he has served on the Board for more than two
consecutive terms from the date of his first
appointment provided that such person shall be
deemed independent director after a lapse of one
term;
EXECUTIVE &NON-EXECUTIVE DIRECTOR
• “Non-Executive Director” means a director of
a Public Sector Company who is not entrusted
with responsibilities of an administrative or
managerial nature;
• “Executive” means an employee of a Public
Sector Company, who is entrusted with
responsibilities of an administrative or
managerial nature, including the Chief
Executive and Executive Director;
PRUDENT MANAGEMENT
• In the case of listed Public Sector Companies, where there
is any inconsistency with the Code of Corporate
Governance, the provisions of these rules shall prevail.
criteria for sound and prudent management of a Public
• Public Sector Company shall be bound to comply with these
provisions at all times.
• Every public sector company shall publish and circulate a
statement of compliance with the Public Sector Companies
(Corporate Governance) Rules, 2013 along with its annual
report to set out the status of its compliance therewith.
• The statement of compliance shall be signed either by the
chief executive jointly with the chairman of the Board or in
case of his absence, with any of the independent non-
executive directors.
PRUDENT MANAGEMENT
• the Public Sector Company is directed and managed by a
sufficient number of persons who are fit and proper
persons to hold the positions which they hold; and
• (d) the Public Sector Company maintains adequate
accounting and other records of its business.
Accounting and other records shall not be regarded as
adequate for the purposes of these rules unless they are such
as
• (a) to enable the business of the Public Sector Company to
be prudently managed;
• (b) to enable the Public Sector Company to comply with the
obligations imposed on it by or under the Companies Act
and these rules; and
• (c) comply with all professional standards and
pronouncements of relevant professional bodies as
applicable in Pakistan.
BOARD OF DIRECTOR
• The directors of a Board shall be persons who, in opinion of
the Government, shall assist the Public Sector Company to
achieve its principal objective and the Board shall
accordingly exercise its powers and carry out its fiduciary
duties with a sense of objective judgment and in the best
interest of the company. This provision shall apply to all
directors, including ex officio directors
• The Board shall have at least one-third of its total members
as independent directors. The Public Sector Company shall
disclose in the annual report non-executive, executive and
independent directors.
• No Independent Director shall participate in share options
or any similar schemes of the Public Sector Company which
entitle him to acquire any interest in the Public Sector
Company.
BOARD OF DIRECTORS
• No person shall be elected or nominated as a director
of more than five Public Sector Companies and listed
companies simultaneously, except their subsidiaries.
• Director, once appointed or elected under section 180
or section 178 of the Ordinance, shall hold office for a
period of three years, unless he resigns or is removed
in accordance with the provisions of the Act.
• A director nominated by the Government shall hold
office in accordance with the Act.
• Removal, filling of Casual Vacancy as per Companies
Act. For removal of director of PSC elaborated details
including harassment/abuses to staff, unauthorized
public statement etc also added.
OFFICE OF THE CHAIRMAN
The office of the chairman shall be separate, and his responsibilities
distinct, from those of the chief executive.
The chairman of the Board shall,-
• (a) ensure that the Board is properly working and all matters
relevant to the governance of the Public Sector Company are placed
on the agenda of Board meetings;
• (b) conduct the Board meeting including fixing the agenda; and
• (c) ensure that all the directors are enabled and encouraged to fully
participate in the deliberations and decisions of the Board.
• The chairman has a responsibility to lead the Board and ensure its
effective functioning and continuous development, he shall not be
involved in day to day operations of the Public Sector Company.
• The chairman of the Board shall be elected by the Board of
Directors of the Public Sector Company. However, this provision
shall not apply where chairman of the Board is appointed by the
Government.
CHIEF EXECUTIVE
• The Chief Executive shall be appointed through process
narrated by Public Sector Companies (Appointment of Chief
Executive) Regulation 2015, (the detailed criteria of
appointment is affixed on coming slide).
• The chief executive is responsible for
– the management of the Public Sector Company
– for its procedures in financial and other matters, subject to the
oversight and directions of the Board.
– implementation of strategies and policies approved by the
Board
– making appropriate arrangements to ensure that funds and
resources are properly safeguarded and are used economically,
efficiently and effectively and in accordance with all statutory
obligations
SR. No Steps Requirements
1 Development of Developing a job description in light of the requirements and the
Job profile 'fit and proper' criteria for PSC
2 Advertisement for Publishing an advertisement in print media and posting the same
the position on the website
3 Short-listing Board is to shortlist applicants from three sources:
process a. Those shortlisted through database
b. Those who have applied against the advertisement.
• Those derived through succession plan
4 Evaluation of The Board is required to Evaluate the candidates on the fit and
Candidates proper test and arrange due diligence from all the concerned govt.
departments/agencies for e.g. SECP, FBR, NADRA, SBP, HEC etc
5 Interviewing The Board shall conduct preliminary interview of the candidates

Process taking into account numerous factors as enumerated in Rule 5 of
the 1st Schedule
6 Recommendations Three candidates are then to be recommended by the Board to the
by the Board to the Line Ministry and if the Ministry is not in concurrence with any of
Competent the candidates, reasons should be assigned thereof and the Board
Authority may either re-evaluate the candidates from the pool of available
applicants or reinitiate the appointment process
7 Appointment After concurrence of the competent authority the Board shall

appoint the Chief Executive
RESPONSIBILITIES OF BOARD
• The Board shall ensure that obligations to all shareholders
are fulfilled and they are duly informed in a timely
manner of all material events through shareholder
meetings and other communications as are considered
necessary.
• The Board shall ensure that professional standards and
corporate values are in place that promotes integrity for
the Board, senior management and other employees in the
form of a “Code of Conduct”. The code of conduct shall
articulate acceptable and unacceptable behaviors.
• The Board shall ensure that appropriate steps are taken to
communicate throughout the company the code of
conduct it sets together with supporting policies and
procedures, including posting the same on the company’s
website. The Board shall also ensure that adequate systems
and controls are in place for the identification and
redressal of grievances arising from unethical practices.
• The Board shall establish a system of sound internal
control, which shall be effectively implemented at all
levels within the Company, to ensure compliance with
the fundamental principles of probity and propriety;
objectivity, integrity and honesty and relationship with
the stakeholders.
• The directors and executives of Company shall not
allow a conflict of interest to undermine their
objectivity in any of their activities, both professional
and private and that they do not use their position in
the Company to further their private gains in a social
or business relationship outside the Company. If a
situation arise where an actual or potential conflict of
interest exists, there shall be appropriate identification,
disclosure and management of such conflict of interest;
• Board shall ensure that an appropriate conflict of interest
policy is developed and duly enforced. Such a policy shall
clearly lay down circumstances or considerations when a
person may be deemed to have actual or potential conflict
of interest, and the procedure for disclosing such interest.
• Where a director, executive or other employee has a
conflict of interest in a particular matter, such person shall
play no part in the relevant discussion, decision or action;
• A “register of interests” is maintained to record all relevant
personal, financial and business interests, of directors and
executives who have any decision making role in the
company, and the same shall be made publicly available.
Such interests may include, for instance, any significant
political activity, including office holding, elected positions,
public appearances and candidature for election,
undertaken in the last five years;
• Declaration by the directors and executives that they shall
not offer or accept any payment, bribe, favor or
inducement which might influence, or appear to influence,
their decisions and actions;
• Board shall also develop and implement a policy on
“anticorruption” to minimize actual or perceived
corruption in the company; ensuring that the directors and
executives uphold the reputation of the company by
treating the general public, institutional investors and other
stakeholders with courtesy, integrity and efficiency, and
ensuring service quality
• Directors shall ensure equality of opportunity by
establishing open and fair procedures for making
appointments and for determining terms and conditions of
service. The Board may nominate a committee consisting of
one of its members or senior Executives for investigating,
where necessary on a confidential basis, any deviation from
the company’s code of conduct
21 POLICIES TO BE FORMULATED BY BOARD
• (a) formal approval and adoption of the annual report
of the Company, including the financial statements;
• (b) the implementation of an effective communication
policy with all the stakeholders of the Company;
• (c) the identification and monitoring of the principal
risks and opportunities of the Company and ensuring
that appropriate systems are in place to manage these
risks and opportunities, including, safeguarding the
public reputation of the Company;
• (d) procurement of goods and services so as to
enhance transparency in procurement transactions;
• (e) marketing of goods to be sold or services to be
rendered by the Company;
• (f) determination of terms of credit and discount to
customers
21 POLICIES TO BE FORMULATED BY BOARD
• (g) write-off of bad or doubtful debts, advances and receivables;
• (h) acquisition or disposal of fixed assets and investments;
• (i) borrowing of moneys up to a specified limit, exceeding which
the amounts shall be sanctioned or ratified by a general meeting of
shareholders;
• (j) Corporate social responsibility initiatives including, donations,
charities, contributions and other payments of a similar nature;
• (k) determination and delegation of financial powers to Executives
and employees;
• (l) transactions or contracts with associated companies and related
• parties;
• (m) health, safety and environment;
• (n) development of whistle-blowing policy and protection
mechanism;
• (o) capital expenditure planning and control;
• (p) protection of public interests;
• (q) human resource policy including succession planning.
MEETINGS OF THE BOARD
• The Board shall meet at least once, each quarter of a year,
• Written notices of meetings, including the agenda, duly
approved by the Chairman, shall be circulated not less than
seven days before the meetings, except in the case of
emergency meetings, where the notice period may be
reduced or waived by the Board.
• The chairman of the Board shall ensure that minutes of
meetings of the Board are appropriately recorded by
approving them under his signature and circulated within
14 days.
• Dissenting note of any director to be recorded in minutes
or he may refer to Company Secretary then Chairman then
Commission
PERFORMANCE EVALUATION
• The performance evaluation of members of the Board
including the chairman and the chief executive shall be
undertaken annually by the Government for which the
Government shall enter into performance contract
with each member of the Board at the time of his
appointment.
• The Board shall monitor and assess the performance
of senior management on a periodic basis, at least
once a year, and hold them accountable for
accomplishing objectives, goals and key performance
indicators set for this purpose
RELATED PARTY TRANSACTIONS
• The details of all related party transactions
shall be placed before the audit committee of
the Public Sector Company and upon
recommendations of the audit committee, the
same shall be placed before the Board for
review and approval.
MANDATORY BOARD COMMITTEES
• Audit committee, for an efficient and effective internal
and external financial reporting mechanism;
• Risk management committee, in case of Public Sector
Companies either in the financial sector or those
having assets of five billion rupees or more, to
effectively review the risk function;
• Human resources committee,
• Procurement committee,
• Nomination committee, to identify, evaluate and
recommend candidates for vacant positions, within
thirty days of a vacancy arising or on a
recommendation made by the Government as the case
may be.
KEY OFFICERS
• Chief Financial Officer(CFO):
– a member of a recognized body of professional accountants with at
least five years relevant experience, in case of PSC having total assets
of five billion rupees or more.
– a person holding a master degree in finance from a university
recognized by the Higher Education Commission with at least ten years
relevant experience, in case of other PSCs.
• Company Secretary: Where the company secretary is not
separately appointed, the role of company secretary may be
combined with chief financial officer or any other member of senior
management.
– Must be a member of body of professional accountants,
– Or a member of recognized body of corporate or chartered secretaries
– Or holding a master degree in business administration or commerce or
being a law graduate from a university recognized by the Higher
Education Commission with at least five years relevant experience.
• The chief financial officer and the company secretary of a Public
Sector Company shall attend all meetings of the Board:
DISCLOSURES
Financial Reporting Framework.-
• Every Public Sector Company shall adopt International Financial Reporting Standards,
as are notified by the Commission under Companies Act.
• The Board shall submit an annual report to the shareholders confirming that
– the Board has complied with the relevant principles of corporate governance
– financial statements, present fairly its state of affairs, the result of its operations,
cash flows and changes in equity
– proper books of account have been maintained
– appropriate accounting policies have been consistently applied in preparation of
financial statements and accounting estimates are based on reasonable and
prudent judgment
– they recognize their responsibility to establish and maintain sound system of
internal control, which is regularly reviewed and monitored
– the appointment of chairman and other members of Board and the terms of their
appointment along with the remuneration policy adopted are in the best interests
of the Company as well as in line with the best practices
– Disclosure and details of the remuneration of members of the Board. Separate
figures need to be shown for salary, fees, other benefits and other performance-
related elements
STRICT FINANCIAL CONTROL
• The Board has set up an effective internal audit function, which has an
audit charter, duly approved by the audit committee.
• The chief executive and chairman of the Board are not members of the
audit committee
• The audit committee met the external auditors, at least once a year,
without the presence of the chief financial officer, the chief internal
auditor and other executives.
• The audit committee met the chief internal auditor and other members of
the internal audit function, at least once a year, without the presence of
chief financial officer and the external auditors.
• The chief internal auditor has requisite qualification and experience
prescribed in the Rules.
• The internal audit reports have been provided to the external auditors for
their review.
• The external auditors of the company have confirmed that the firm and all
its partners are in compliance with International Federation of
Accountants (IFAC) guidelines on Code of Ethics as applicable in Pakistan.
• The auditors have confirmed that they have observed applicable
guidelines issued by IFAC with regard to provision of non-audit services
PRINCIPLES OF CORPORATE
GOVERNANCE FOR NON-LISTED
COMPANIES
August 2016
PREAMBLE
• Principles are applicable on voluntary basis on for over
60,000 Non-Listed Companies (NLCs) operating in Pakistan.
• Thirteen principles of good governance were given on the
basis of a dynamic phased approach, which takes into
account the size of individual company. A key step in the
development of governance of NLCs is the decision to invite
external directors onto the board for Public Interest and
Large Sized Companies/companies formed for not for profit
having gross revenues exceeding Rs. 500 million (excluding
companies on which Public Sector Companies (Corporate
Governance) Rules 2013 are applicable) and its effect on
behavior of the board of directors.
• The principles provide a governance roadmap for NLCs.
These principles may be relevant for subsidiary companies,
companies formed and licensed for not for profit and joint
ventures as well.
PHASED APPROACH
• Two categories of corporate governance principles are
proposed.
• Phase 1 Principles are viewed as broadly universal in
their application, and do not necessarily require the
creation of bureaucratic or costly governance
procedures. These represent a core framework of basic
governance principles that can be implemented in
some form by aforementioned NLCs.
• Phase 2 Principles (8-13) are more sophisticated
corporate governance measures that are relevant to
Public Interest and Large Sized Companies. These may
also be considered by NLCs that are seeking to prepare
themselves for future public listings.
VOLUNTARY APPLICATION
Phase & Principles Classes of Companies
Phase 1 Principles – (1-7) are All Non-Listed Companies except
applicable. Ø Small Sized Companies,
Ø Not for Profit Companies having
annual gross revenue
(grants/subsidies/donations) not
exceeding Rs. 100 million and
Ø Public Sector Companies
Phase 2 Principles (8-13) are Public Interest Companies, Large

applicable Sized Companies and Not for Profit
Companies having annual gross
revenue (grants/subsidies/donations)
exceeding Rs. 500 million except
Public Sector Companies
Principle No. 1 GENERAL Shareholders may establish an appropriate governance framework
for the company, which may preferably be contained in their
constitutive document.
Principle No. 2 Board of Directors Every company may strive to establish an effective board, which is
collectively responsible for the long-term success of the company.
The size and composition of the board may reflect the scale and
complexity of the company’s activities.
Principle No. 3 Meeting of the The board may meet regularly to discharge its duties, and the board
Board of Directors may be supplied with appropriate information in a timely manner.
Principle No. 4 Remuneration of Structure of remuneration may be sufficient and appropriate to
Board of Directors attract, retain, and motivate executives and nonexecutives of the
quality required to run the company successfully.
Principle No. 5 Internal Control The board is responsible for risk oversight and may maintain a sound
system of internal control to safeguard shareholders’ investment and
the company’s assets.
Principle No. 6 Training of Board All directors may receive training on joining the board and may
of Directors regularly update and refresh their skills and knowledge.
Principle No. 7 General Meetings There may be a dialogue between the board and the shareholders
based on the mutual understanding of objectives.
The board as a whole has responsibility for ensuring that a

satisfactory dialogue with shareholders takes place. The board may
not forget that all shareholders have to be treated equally.
Principle 8 Role of There may be a clear division of responsibilities at the head of the
Chairman company between the running of the board and the running of the
and company’s business
Chief
Executive
Principle 9 Independent/ Board structures may contain directors with a sufficient mix of
Non competencies and experiences.
Executive
Director
Principle 10 Board The board may establish appropriate board committees in order to
Committees allow a more effective discharge of its duties.
Principle 11 Appraisal of The board may undertake a periodic appraisal of its own
Board of performance and that of each individual director.
Directors
Principle 12 Annual The board may present a balanced and understandable assessment
Report of the company’s position and prospects for external stakeholders,
and establish a suitable program of stakeholder engagement
Principle 13 Compliance The non-listed companies falling in this phase-2 shall circulate
or compliance with principles of good governance along with their
Disclosure of annual report as given in Annexure A.
Deviation
ANNEX A-MANDATORY FILING
.
THANK YOU
& REMEMBER
FACILITATOR`S CONTACT
DETAILS
adnanadilhussain@gmail.com
https://www.youtube.com/c/EverydayLawbyAdnanAdilHussain
Please Subscribe to receive regular training videos
www.linkedin.com/in/adnanadilhussain

Corporate Laws

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Corporate Laws

Uploaded by

Copyright:

Available Formats

CORPORATE LAWS & CODE OF

• A company is an artificial person created by its members

• The Share in a company is a fraction of capital, denoting the

• A limited company is a juristic person with a right to sue and

• In a limited company, a member is not liable to

COMPANIES ACT 2017

• Different categories of companies have been

➢ Small Sized Company (SSC)

➢ Medium Sized Company (MSC)

➢ Public Interest & Large Sized Company (PI&LSC)

• (54) public sector company means a company, whether public or private,

EASY EXIT OF A DEFUNCT COMPANY

• It should be formed by the farmers.

• Detailed parameters for such companies shall be provided through

• Exemptions from the applicability of different provisions of the Act to be

New concept of Free Zone Company – some relaxations and exemptions of

The information about the shareholding of foreigners in companies

• requirement or obligation under international law, treaty or

➢ To regulate the matters relating to advances and deposit

➢ Restriction on accepting any advances or monies in any form

➢ Written agreement with the customer mandatory before

➢ All the monies received from the allottees’ shall be

➢ The ESCROW account shall be dedicated exclusively for

➢ No attachment shall be imposed on the payment of such

• layer in relation to a holding company means its subsidiary

➢Applicable on every public interest company

➢2% quota for employment of disable persons

➢Disabilities to be specified through

• Alter or alteration (clause 2)

• authorized capital (clause 5)

• Banking company (clause 6)

• Beneficial ownership of shareholders or officer of the company (clause 7)

• Book of account (clause 11)

• Chartered accountant (clause 13)

• Company law (clause 18)

• Cost and Management Accounts ( clause 22)

• Document ( clause 26)

• E-service ( clause 27)

• Electronic document ( clause 28)

• Employees stock option ( clause 29)

• Expert ( clause 30)

• Financial institution ( clause 31)

• Financial statement (clause 33)

• Foreign company (clause 35)

• Government (clause 36)

• Holding company (clause 37)

• Mortgage or charge (clause 42)

• Net worth (clause 43)

• Notification (clause 44)

• Officer (clause 45)

• Ordinary resolution (clause 46)

• Promoter (clause 50)

• Public interest company (clause 53)

• Public sector company (clause 54)

• Regulations (clause 58)

• Rules (clause 59)

• Securities (clause 61)

• Securities exchange (clause 62)

• Shariah compliant company (clause 64)

• Single member company (clause 65)

• Specified (clause 67)

• Turnover (clause 69)

• Unlimited company (clause 71)