CA
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CORPORATE LAWS
Suggested Answers
Final Examination ‐ Summer 2013
A.1
(a)
(i)
Under the Code of Corporate Governance, 2012, the board of directors is
encouraged to have a balance of executive and non-executive directors, including
independent directors and those representing minority interests with the requisite
skills, competence, knowledge and experience so that the board as a group
includes core competencies and diversity, including gender, considered relevant
in the context of the company’s operations.
Being a listed company AVZL should have:
at least one and preferably one third of the total members of the board as
independent directors.
Executive directors, i.e., paid executives of the company from among senior
management, which shall not be more than one third of the elected directors,
including the Chief Executive
Representation of minority shareholders is encouraged
(ii)
The minority shareholders as a class are required to be facilitated to contest the
election of directors by proxy solicitation. Therefore, with regard to the request
submitted by Mr. Haq representing minority shareholders, AVZ Limited shall:
Annex with the notice issued in respect of election of directors, a statement by
Mr. Haq including his profile.
Provide information regarding members and shareholding structure to Mr.
Haq ; and
On a request by Mr. Haq, annex to the notice issued in respect of election of
directors, an additional copy of proxy form duly filled by Mr. Haq, at the
company’s cost.
(b)
A director shall not be considered as independent, if one or more of the following
circumstances exist:
(i)
He/she has been an employee of the company, any of its subsidiaries or holding
company within the last three years;
(ii) He/she is or has been the CEO of subsidiaries, associated company, associated
undertaking or holding company in the last three years;
(iii) He/she has, or has had within the last three years, a material business
relationship with the company either directly or indirectly as a partner, major
shareholder or director of a body that has such a relationship with the company.
The major shareholder means a person who, individually or in connection with
his family or as part of a group, holds 10% or more shares having voting rights
in the paid up capital of the company.
(iv) He/she has received remuneration in the three years preceding his/her
appointment as a director or receives additional remuneration, excluding
retirement benefits from the company apart from a director’s fee or has
participated in the company’s share option or a performance-related pay
scheme;
(v)
He/she is a close relative of the company’s promoters, directors or major
shareholders:
Close relative means spouse(s) , lineal ascendants and descendants and siblings;
(vi) He/she holds cross-directorships or has significant links with other directors
through involvement in other companies or bodies;
(vii) He/she has served on the board for more than three consecutive terms from the
date of his first appointment provided that such person shall be deemed
“independent director” after a lapse of one term.
(viii) He/she is nominated as director by the company’s creditors or other special
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CORPORATE LAWS
Suggested Answers
Final Examination ‐ Summer 2013
(ix)
(x)
A.2
(a)
interest by virtue of contractual agreements.
He/she is nominated as a director by the corporation/company who has made
investment or otherwise extended facilities.
He/she is nominated as a director by Federal Government, Provincial
Government, Commission, foreign equity holders on the board of PICIC or any
other company set up under a regional co-operation.
The Commission may remove the chief executive of ASIL on any one of the following
grounds:
(i)
continued association of the chief executive is or is likely to be detrimental to the
interests of NBFC or its shareholders or persons whose interest is likely to be
affected; or
(ii) the public interest so demands; or
(iii) to prevent the affairs of NBFC being conducted in a manner detrimental to the
interest of its shareholders or in a manner prejudicial to the interests of NBFC;
or
(iv) If it is necessary to secure a proper management of the NBFC.
(b)
If in the opinion of the Commission, any delay in the removal of CEO would be
detrimental to the public interest or the interest of its shareholders, the Commission
may, at the time of giving the opportunity aforesaid or as any time thereafter and
pending the consideration of the representation aforesaid , if any, by order direct that:
(i)
the chief executive shall not, with effect from the date of the order:
act as chief executive of the NBFC; or
in any way, whether directly, or indirectly, be concerned with, or take part in
the management of the NBFC;
(ii)
any person authorized by the Commission in this behalf shall act as such chief
executive of the NBFC till another person is elected in a general meeting or a
board meeting, as may be directed by the Commission, to fill in the vacancy.
Any person appointed as chief executive shall
(i)
(ii)
A.3
(a)
hold office during the pleasure of the Commission subject to such conditions as
may be specified in the order of his appointment and, subject thereto, for such
period, not exceeding three years as the Commission may specify; and
not incur any obligation or liability for anything which is done or intended to be
done in his capacity as chief executive.
"Book Building Process", means a mechanism of price determination through which
indication of interest for investment in the shares offered by an issuer/offeror is
collected from Institutional Investors and High Net Worth Individual Investor
(HNWI) and a book is built which gives a picture of demand for the shares at different
price levels. The strike price is determined based on the price at which demand for the
share at the end of book building period is sufficient to raise the minimum capital
required;
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CORPORATE LAWS
Suggested Answers
Final Examination ‐ Summer 2013
“Free-float” means the proportion of total shares issued by a company that are readily
available for trading at the Stock Exchange. It generally excludes the shares held by
controlling directors / sponsors / promoters, government and other locked-in shares
not available for trading in the normal course.
(b)
(i)
A listed company shall immediately advice the stock exchanges regarding the
issuance of bonus shares.
A listed company shall issue bonus shares certificates within a period of 30 days
from the date of re-opening of the share transfer register closed for the purpose.
The bonus shares shall be credited into the respective CDS Accounts of
shareholders maintained with the CDC or dispatched to the shareholders
concerned by registered post unless those entitled to receive the bonus share
certificates require otherwise in writing;
The exchange shall be immediately intimated as soon as the bonus shares are
credited / dispatched to the shareholders;
A company which makes a default in complying with the requirements of this
Regulation shall be liable to pay penalty @Rs.5000 per day until the default
continues and the Exchange may also take action of suspension of trading or delisting of the company;
Provided that in case of eligible securities deposited into the CDS, in
addition to the above, procedure as prescribed by the CDC shall also be
complied with.
(ii)
Where any chief executive officer sells, buys or takes any beneficial position,
whether directly or indirectly, in shares of the listed company of which he is the
chief executive officer, he
shall immediately notify in writing to the company secretary;
shall also deliver a written record of the price, number of shares, form of
share certificate, (i.e., whether physical or electronic within the Central
Depository System) and nature of transaction to the company secretary
within four days of effecting the transaction ;
The company secretary shall immediately forward the same to the exchange
for its dissemination to all concerned.
A.4
(a)
Mr. Arshad has to comply with the following conditions while making a competitive
bid:
(i)
He shall make a public announcement of his offer (competitive bid) for
acquisition of the same voting shares of SIL within twenty-one days of the public
announcement of the offer made by Mr. Naveed.
(ii) He must offer a higher purchase price in order to make a valid competitive bid.
(iii) A competitive bid shall not be for less than the number of voting shares for which
the earlier public offer has been made.
(iv) All other provisions of the Ordinance related to a public announcement apply to
the competitive bid.
(b)
The status of the offer earlier made by Mr. Naveed and the rights available to him are
as follows:
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CORPORATE LAWS
Suggested Answers
Final Examination ‐ Summer 2013
(i)
Upon the public announcement of a competitive bid, Mr. Naveed would have
the option to make another announcement:
Revising his earlier public offer; or
Withdrawing the public offer with the prior approval of the Commission:
Provided that if no such announcement is made within ten days of the public
announcement of the competitive bid, the earlier offer on the original terms shall
continue to be valid and binding on Mr. Naveed except as regards the date of
closing of such public offer.
(ii)
A.5
(a)
Having made a public announcement and provided he has not withdrawn his
public offer as above, Mr. Naveed shall have the option to make an upward
revision of his offer in respect of the price and the number of voting shares to be
acquired at any time within seven working days prior to the date of closure of the
last subsisting public offer without changing any other terms and conditions of
the said public offer.
Purchase or sale transaction with a director.
A NBFC shall not purchase anything from, or sell anything to any director of the
NBFC.
This restriction shall not apply to such NBFCs that have a policy to this effect duly
approved by their board of directors:
In case of any sale and purchase to the directors the prior approval in writing of the
board, excluding the participation of the beneficiary directors, is required;
A.6
(b)
Sell or transfer of ownership of shares in subsidiary or associated company.
A NBFC shall not sell or transfer ownership of shares in subsidiary or associated
company, unless it has obtained prior approval of the Commission in writing to such
sale or takeover.
(c)
Investment in subsidiary
A NBFC shall not make investment in its subsidiary except out of its surplus equity
(i.e. over and above the specified minimum equity requirement for the licences held by
such NBFC;)
(d)
Transaction with a broker
A NBFC shall not enter into transactions with any broker which exceed ten percent of
the total brokerage expense of the NBFC in any one accounting year.
NBFC shall not have a common director or officer or employee with the broker.
(a)
Planet International is eligible to buy back its shares as it complies with the relevant
conditions as discussed below:
(i)
PI is a listed company.
(ii)
The company shall have sufficient cash available with it for the purchase.
PI has excess liquidity and it is confirmed from its current ratio which has
improved from 1.04:1 in 2012 to 1.23:1 in 2013.
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CORPORATE LAWS
Suggested Answers
Final Examination ‐ Summer 2013
(iii) The buy-back of shares shall be out of distributable profits.
PI is planning to buy-back 10% of its shares i.e. 115 million shares which would
require an expected outflow of Rs. 5,060 million. PI’s distributable profit is
sufficient to meet this outflow.
(iv) The company which is buying back its shares, shall have debt equity ratio of
75:25 and current ratio of 1:1 or better.
PI meets this requirement as its debt equity ratio is 48:52 and current ratio is
1.23:1.
(b)
PI shall require auditor’s certificate relating to the following matter on a date not
earlier than thirty days immediately preceding the date of passing the special
resolution for the buy-back:
debt equity ratio is (within the limit) of 75:25.
The current ratio is 1:1 (or better)
The company has sufficient cash for buying back of its shares.
A.7
Under the following circumstances, ANF Limited would be deemed unable to pay its debts:
(i)
if a creditor, by assignment or otherwise, to whom the company is to pay a sum
exceeding one per cent of its paid-up capital or fifty thousand rupees, whichever is
less, has served a demand under his hand, delivered by registered post or otherwise, at
ANFL’s registered office, requiring ANFL to pay the sum and the company has for
thirty days thereafter neglected to pay the sum, or to secure or compound for it to the
reasonable satisfaction of the creditor.
(ii) if a decree or order of any court or any other competent authority in favour of a
creditor of the company is returned unsatisfied in whole or in part.
(iii) if it is proved to the satisfaction of the Court that the company is unable to pay its
debts, and while determining this fact, the Court shall take into account the contingent
and prospective liabilities of the company.
A.8
(a)
(i)
SECP may appoint one or more competent person as inspectors to investigate the
affairs of a company, in the following cases:
In the case of company having a share capital, on the application of members
holding not less than one-tenth of the total voting powers therein;
In the case of any company not having a share capital, on the application of
not less than one-tenth in number of the persons entered on the company’s
register of members;
In the case of any company, on receipt of a report from:
− An inspector who has carried out an inspection of the books of account of
the company on the instruction from SECP.
− A Registrar as regards that any information, explanation or document
required by the registrar has not been furnished within the specified time.
Where a resolution is passed in the general meeting of the company., or
By order of the Court.
(ii) SECP may appoint an Inspector if in its opinion there are circumstances
suggesting that:
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CORPORATE LAWS
Suggested Answers
Final Examination ‐ Summer 2013
The business of the company is being or has been conducted with an intent to
defraud its creditors, members or any other person or for a fraudulent or
unlawful purpose, or in a manner oppressive of any of its members or that the
company was formed for any fraudulent or unlawful purpose.
The sponsors or management have been guilty of fraud, misfeasance, breach
of trust or other misconduct towards the company or its members or have
been carrying on unauthorized business.
The affairs of the company have been conducted so as to deprive the
shareholders of a reasonable return.
The shareholders have not been given all the information with respect to its
affairs which they might reasonably expect.
Any shares of the company have been allotted for inadequate consideration.
The affairs of the company have not been managed in accordance with sound
business principles or prudent commercial practices.
The financial position of the company is such as to endanger its solvency.
(b)
Mr. Jameel can bring the following entities or the persons into his investigation:
Any other body corporate which is, or has at any relevant time been, the
company’s associated company or its subsidiary or holding company, or a
subsidiary of its holding company, or a holding company of its subsidiary;
Any other body corporate which is, or has at any relevant time been,
managed as chief executive by any person who is or was at the relevant time
the chief executive of the company;
Any person who is or has at any relevant time been the company’s chief
executive or managing agent or an associate of such chief executive or
managing agent;
In order to widen his investigation to the above companies, Mr. Jameel would be
required to obtain permission from the Commission through a duly verified
application containing the facts in detail and the grounds for seeking such approval.
A.9
(a)
The chairman is required to hold a poll in case the same is demanded by
(i)
at least five members having the right to vote on the resolution and present in
person or by proxy; or
(ii) any member or members present in persons or by proxy and having not less than
one-tenth of the total voting power in respect of the resolution; or
(iii) any member or members present in person or by proxy and holding shares in the
company conferring a right to vote on the resolution, being shares on which an
aggregate sum has been paid up which is not less than one-tenth of the total sum
paid up on all the shares conferring that right.
If the shareholder who demanded the poll meets any one of the condition as
mentioned above, the decision of the Chairman of not holding the poll would be
invalid.
(b)
The Chairman can delay the poll up to fourteen days from the day on which it is
demanded for all matters except the following:
(i)
On the election of a chairman, the poll shall be taken forthwith.
(ii) On a question of adjournment, the poll shall be taken forthwith.
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CORPORATE LAWS
Suggested Answers
Final Examination ‐ Summer 2013
A.10 Since the e-mail was received after the meeting and Mr. Nihal had obtained sixth highest
number of votes in the election, the status of Mr. Nihal would depend on whether the
results of the election had been declared before his expiry or not.
If Mr. Nihal had expired prior to the declaration of the result of election of directors, the
candidate who had secured the highest votes at the 8th position in order will be declared as
elected, being the 7th Director.
If Mr. Nihal had expired after the declaration of the election results, Mr. Nihal would have
become a part of the board of directors. In this situation, a casual vacancy would have
arisen, on the death of Mr. Nihal. The directors of NML would be required to fill up this
casual vacancy at the earliest but not later than 90 days from the date of the occurrence of
the vacancy. The person so appointed shall hold office for the remainder of the term of Mr.
Nihal.
A.11 (a)
Competence and Capability
In determining a person’s competence and capability the following shall be
considered:
(i)
the directors should be individuals having management or business experience of
at least five years at a senior level;
(ii) the directors shall have experience and knowledge in any profession such as
banking, Collective Investment Schemes, accounting, law, internal audit or
information technology etc;
(iii) the chief executive should have a minimum experience of seven to ten years in a
senior management position, preferably in the regulated financial services sector;
(iv) the chief executive should have demonstrated, through his qualification and
experience, the capacity to successfully undertake the cognate responsibilities of
the position; and
(v) the key executives must be qualified professionals possessing relevant experience
and certification relating to the job or assignment.
(b)
Conflict of interest
The directors or chief executive of NBFC shall not
(i)
(ii)
be a director in any other NBFC engaged in a similar business in Pakistan.
Provided that the condition shall not apply to nominees of the Federal or
Provincial Governments on the board of any NBFC;
be a director, chief executive, chief financial officer, chief internal auditor,
research analyst or a trader (by whatever name or designation called) in a stock
brokerage house or in any company or entity owned and controlled by a member
of a stock exchange; and
(iii) be a member of a stock exchange engaged in the business of brokerage or a
spouse of such member or in control of more than 20% shareholding, directly or
indirectly through his close relatives. In case of Key Executives, the NBFCs must
ensure that no Key Executives shall head more than one functional area that
gives rise to conflict of interest within the organization.
(iv) hold directorship in his or her personal capacity:
in a business concern which is also a client of the NBFC, and
in any other financial institution.
(THE END)
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Suggested Answers
Final Examination ‐ Summer 2013
A.1
(a)
(i)
Under the Code of Corporate Governance, 2012, the board of directors is
encouraged to have a balance of executive and non-executive directors, including
independent directors and those representing minority interests with the requisite
skills, competence, knowledge and experience so that the board as a group
includes core competencies and diversity, including gender, considered relevant
in the context of the company’s operations.
Being a listed company AVZL should have:
at least one and preferably one third of the total members of the board as
independent directors.
Executive directors, i.e., paid executives of the company from among senior
management, which shall not be more than one third of the elected directors,
including the Chief Executive
Representation of minority shareholders is encouraged
(ii)
The minority shareholders as a class are required to be facilitated to contest the
election of directors by proxy solicitation. Therefore, with regard to the request
submitted by Mr. Haq representing minority shareholders, AVZ Limited shall:
Annex with the notice issued in respect of election of directors, a statement by
Mr. Haq including his profile.
Provide information regarding members and shareholding structure to Mr.
Haq ; and
On a request by Mr. Haq, annex to the notice issued in respect of election of
directors, an additional copy of proxy form duly filled by Mr. Haq, at the
company’s cost.
(b)
A director shall not be considered as independent, if one or more of the following
circumstances exist:
(i)
He/she has been an employee of the company, any of its subsidiaries or holding
company within the last three years;
(ii) He/she is or has been the CEO of subsidiaries, associated company, associated
undertaking or holding company in the last three years;
(iii) He/she has, or has had within the last three years, a material business
relationship with the company either directly or indirectly as a partner, major
shareholder or director of a body that has such a relationship with the company.
The major shareholder means a person who, individually or in connection with
his family or as part of a group, holds 10% or more shares having voting rights
in the paid up capital of the company.
(iv) He/she has received remuneration in the three years preceding his/her
appointment as a director or receives additional remuneration, excluding
retirement benefits from the company apart from a director’s fee or has
participated in the company’s share option or a performance-related pay
scheme;
(v)
He/she is a close relative of the company’s promoters, directors or major
shareholders:
Close relative means spouse(s) , lineal ascendants and descendants and siblings;
(vi) He/she holds cross-directorships or has significant links with other directors
through involvement in other companies or bodies;
(vii) He/she has served on the board for more than three consecutive terms from the
date of his first appointment provided that such person shall be deemed
“independent director” after a lapse of one term.
(viii) He/she is nominated as director by the company’s creditors or other special
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CORPORATE LAWS
Suggested Answers
Final Examination ‐ Summer 2013
(ix)
(x)
A.2
(a)
interest by virtue of contractual agreements.
He/she is nominated as a director by the corporation/company who has made
investment or otherwise extended facilities.
He/she is nominated as a director by Federal Government, Provincial
Government, Commission, foreign equity holders on the board of PICIC or any
other company set up under a regional co-operation.
The Commission may remove the chief executive of ASIL on any one of the following
grounds:
(i)
continued association of the chief executive is or is likely to be detrimental to the
interests of NBFC or its shareholders or persons whose interest is likely to be
affected; or
(ii) the public interest so demands; or
(iii) to prevent the affairs of NBFC being conducted in a manner detrimental to the
interest of its shareholders or in a manner prejudicial to the interests of NBFC;
or
(iv) If it is necessary to secure a proper management of the NBFC.
(b)
If in the opinion of the Commission, any delay in the removal of CEO would be
detrimental to the public interest or the interest of its shareholders, the Commission
may, at the time of giving the opportunity aforesaid or as any time thereafter and
pending the consideration of the representation aforesaid , if any, by order direct that:
(i)
the chief executive shall not, with effect from the date of the order:
act as chief executive of the NBFC; or
in any way, whether directly, or indirectly, be concerned with, or take part in
the management of the NBFC;
(ii)
any person authorized by the Commission in this behalf shall act as such chief
executive of the NBFC till another person is elected in a general meeting or a
board meeting, as may be directed by the Commission, to fill in the vacancy.
Any person appointed as chief executive shall
(i)
(ii)
A.3
(a)
hold office during the pleasure of the Commission subject to such conditions as
may be specified in the order of his appointment and, subject thereto, for such
period, not exceeding three years as the Commission may specify; and
not incur any obligation or liability for anything which is done or intended to be
done in his capacity as chief executive.
"Book Building Process", means a mechanism of price determination through which
indication of interest for investment in the shares offered by an issuer/offeror is
collected from Institutional Investors and High Net Worth Individual Investor
(HNWI) and a book is built which gives a picture of demand for the shares at different
price levels. The strike price is determined based on the price at which demand for the
share at the end of book building period is sufficient to raise the minimum capital
required;
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CORPORATE LAWS
Suggested Answers
Final Examination ‐ Summer 2013
“Free-float” means the proportion of total shares issued by a company that are readily
available for trading at the Stock Exchange. It generally excludes the shares held by
controlling directors / sponsors / promoters, government and other locked-in shares
not available for trading in the normal course.
(b)
(i)
A listed company shall immediately advice the stock exchanges regarding the
issuance of bonus shares.
A listed company shall issue bonus shares certificates within a period of 30 days
from the date of re-opening of the share transfer register closed for the purpose.
The bonus shares shall be credited into the respective CDS Accounts of
shareholders maintained with the CDC or dispatched to the shareholders
concerned by registered post unless those entitled to receive the bonus share
certificates require otherwise in writing;
The exchange shall be immediately intimated as soon as the bonus shares are
credited / dispatched to the shareholders;
A company which makes a default in complying with the requirements of this
Regulation shall be liable to pay penalty @Rs.5000 per day until the default
continues and the Exchange may also take action of suspension of trading or delisting of the company;
Provided that in case of eligible securities deposited into the CDS, in
addition to the above, procedure as prescribed by the CDC shall also be
complied with.
(ii)
Where any chief executive officer sells, buys or takes any beneficial position,
whether directly or indirectly, in shares of the listed company of which he is the
chief executive officer, he
shall immediately notify in writing to the company secretary;
shall also deliver a written record of the price, number of shares, form of
share certificate, (i.e., whether physical or electronic within the Central
Depository System) and nature of transaction to the company secretary
within four days of effecting the transaction ;
The company secretary shall immediately forward the same to the exchange
for its dissemination to all concerned.
A.4
(a)
Mr. Arshad has to comply with the following conditions while making a competitive
bid:
(i)
He shall make a public announcement of his offer (competitive bid) for
acquisition of the same voting shares of SIL within twenty-one days of the public
announcement of the offer made by Mr. Naveed.
(ii) He must offer a higher purchase price in order to make a valid competitive bid.
(iii) A competitive bid shall not be for less than the number of voting shares for which
the earlier public offer has been made.
(iv) All other provisions of the Ordinance related to a public announcement apply to
the competitive bid.
(b)
The status of the offer earlier made by Mr. Naveed and the rights available to him are
as follows:
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CORPORATE LAWS
Suggested Answers
Final Examination ‐ Summer 2013
(i)
Upon the public announcement of a competitive bid, Mr. Naveed would have
the option to make another announcement:
Revising his earlier public offer; or
Withdrawing the public offer with the prior approval of the Commission:
Provided that if no such announcement is made within ten days of the public
announcement of the competitive bid, the earlier offer on the original terms shall
continue to be valid and binding on Mr. Naveed except as regards the date of
closing of such public offer.
(ii)
A.5
(a)
Having made a public announcement and provided he has not withdrawn his
public offer as above, Mr. Naveed shall have the option to make an upward
revision of his offer in respect of the price and the number of voting shares to be
acquired at any time within seven working days prior to the date of closure of the
last subsisting public offer without changing any other terms and conditions of
the said public offer.
Purchase or sale transaction with a director.
A NBFC shall not purchase anything from, or sell anything to any director of the
NBFC.
This restriction shall not apply to such NBFCs that have a policy to this effect duly
approved by their board of directors:
In case of any sale and purchase to the directors the prior approval in writing of the
board, excluding the participation of the beneficiary directors, is required;
A.6
(b)
Sell or transfer of ownership of shares in subsidiary or associated company.
A NBFC shall not sell or transfer ownership of shares in subsidiary or associated
company, unless it has obtained prior approval of the Commission in writing to such
sale or takeover.
(c)
Investment in subsidiary
A NBFC shall not make investment in its subsidiary except out of its surplus equity
(i.e. over and above the specified minimum equity requirement for the licences held by
such NBFC;)
(d)
Transaction with a broker
A NBFC shall not enter into transactions with any broker which exceed ten percent of
the total brokerage expense of the NBFC in any one accounting year.
NBFC shall not have a common director or officer or employee with the broker.
(a)
Planet International is eligible to buy back its shares as it complies with the relevant
conditions as discussed below:
(i)
PI is a listed company.
(ii)
The company shall have sufficient cash available with it for the purchase.
PI has excess liquidity and it is confirmed from its current ratio which has
improved from 1.04:1 in 2012 to 1.23:1 in 2013.
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CORPORATE LAWS
Suggested Answers
Final Examination ‐ Summer 2013
(iii) The buy-back of shares shall be out of distributable profits.
PI is planning to buy-back 10% of its shares i.e. 115 million shares which would
require an expected outflow of Rs. 5,060 million. PI’s distributable profit is
sufficient to meet this outflow.
(iv) The company which is buying back its shares, shall have debt equity ratio of
75:25 and current ratio of 1:1 or better.
PI meets this requirement as its debt equity ratio is 48:52 and current ratio is
1.23:1.
(b)
PI shall require auditor’s certificate relating to the following matter on a date not
earlier than thirty days immediately preceding the date of passing the special
resolution for the buy-back:
debt equity ratio is (within the limit) of 75:25.
The current ratio is 1:1 (or better)
The company has sufficient cash for buying back of its shares.
A.7
Under the following circumstances, ANF Limited would be deemed unable to pay its debts:
(i)
if a creditor, by assignment or otherwise, to whom the company is to pay a sum
exceeding one per cent of its paid-up capital or fifty thousand rupees, whichever is
less, has served a demand under his hand, delivered by registered post or otherwise, at
ANFL’s registered office, requiring ANFL to pay the sum and the company has for
thirty days thereafter neglected to pay the sum, or to secure or compound for it to the
reasonable satisfaction of the creditor.
(ii) if a decree or order of any court or any other competent authority in favour of a
creditor of the company is returned unsatisfied in whole or in part.
(iii) if it is proved to the satisfaction of the Court that the company is unable to pay its
debts, and while determining this fact, the Court shall take into account the contingent
and prospective liabilities of the company.
A.8
(a)
(i)
SECP may appoint one or more competent person as inspectors to investigate the
affairs of a company, in the following cases:
In the case of company having a share capital, on the application of members
holding not less than one-tenth of the total voting powers therein;
In the case of any company not having a share capital, on the application of
not less than one-tenth in number of the persons entered on the company’s
register of members;
In the case of any company, on receipt of a report from:
− An inspector who has carried out an inspection of the books of account of
the company on the instruction from SECP.
− A Registrar as regards that any information, explanation or document
required by the registrar has not been furnished within the specified time.
Where a resolution is passed in the general meeting of the company., or
By order of the Court.
(ii) SECP may appoint an Inspector if in its opinion there are circumstances
suggesting that:
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CORPORATE LAWS
Suggested Answers
Final Examination ‐ Summer 2013
The business of the company is being or has been conducted with an intent to
defraud its creditors, members or any other person or for a fraudulent or
unlawful purpose, or in a manner oppressive of any of its members or that the
company was formed for any fraudulent or unlawful purpose.
The sponsors or management have been guilty of fraud, misfeasance, breach
of trust or other misconduct towards the company or its members or have
been carrying on unauthorized business.
The affairs of the company have been conducted so as to deprive the
shareholders of a reasonable return.
The shareholders have not been given all the information with respect to its
affairs which they might reasonably expect.
Any shares of the company have been allotted for inadequate consideration.
The affairs of the company have not been managed in accordance with sound
business principles or prudent commercial practices.
The financial position of the company is such as to endanger its solvency.
(b)
Mr. Jameel can bring the following entities or the persons into his investigation:
Any other body corporate which is, or has at any relevant time been, the
company’s associated company or its subsidiary or holding company, or a
subsidiary of its holding company, or a holding company of its subsidiary;
Any other body corporate which is, or has at any relevant time been,
managed as chief executive by any person who is or was at the relevant time
the chief executive of the company;
Any person who is or has at any relevant time been the company’s chief
executive or managing agent or an associate of such chief executive or
managing agent;
In order to widen his investigation to the above companies, Mr. Jameel would be
required to obtain permission from the Commission through a duly verified
application containing the facts in detail and the grounds for seeking such approval.
A.9
(a)
The chairman is required to hold a poll in case the same is demanded by
(i)
at least five members having the right to vote on the resolution and present in
person or by proxy; or
(ii) any member or members present in persons or by proxy and having not less than
one-tenth of the total voting power in respect of the resolution; or
(iii) any member or members present in person or by proxy and holding shares in the
company conferring a right to vote on the resolution, being shares on which an
aggregate sum has been paid up which is not less than one-tenth of the total sum
paid up on all the shares conferring that right.
If the shareholder who demanded the poll meets any one of the condition as
mentioned above, the decision of the Chairman of not holding the poll would be
invalid.
(b)
The Chairman can delay the poll up to fourteen days from the day on which it is
demanded for all matters except the following:
(i)
On the election of a chairman, the poll shall be taken forthwith.
(ii) On a question of adjournment, the poll shall be taken forthwith.
Page 6 of 7
CORPORATE LAWS
Suggested Answers
Final Examination ‐ Summer 2013
A.10 Since the e-mail was received after the meeting and Mr. Nihal had obtained sixth highest
number of votes in the election, the status of Mr. Nihal would depend on whether the
results of the election had been declared before his expiry or not.
If Mr. Nihal had expired prior to the declaration of the result of election of directors, the
candidate who had secured the highest votes at the 8th position in order will be declared as
elected, being the 7th Director.
If Mr. Nihal had expired after the declaration of the election results, Mr. Nihal would have
become a part of the board of directors. In this situation, a casual vacancy would have
arisen, on the death of Mr. Nihal. The directors of NML would be required to fill up this
casual vacancy at the earliest but not later than 90 days from the date of the occurrence of
the vacancy. The person so appointed shall hold office for the remainder of the term of Mr.
Nihal.
A.11 (a)
Competence and Capability
In determining a person’s competence and capability the following shall be
considered:
(i)
the directors should be individuals having management or business experience of
at least five years at a senior level;
(ii) the directors shall have experience and knowledge in any profession such as
banking, Collective Investment Schemes, accounting, law, internal audit or
information technology etc;
(iii) the chief executive should have a minimum experience of seven to ten years in a
senior management position, preferably in the regulated financial services sector;
(iv) the chief executive should have demonstrated, through his qualification and
experience, the capacity to successfully undertake the cognate responsibilities of
the position; and
(v) the key executives must be qualified professionals possessing relevant experience
and certification relating to the job or assignment.
(b)
Conflict of interest
The directors or chief executive of NBFC shall not
(i)
(ii)
be a director in any other NBFC engaged in a similar business in Pakistan.
Provided that the condition shall not apply to nominees of the Federal or
Provincial Governments on the board of any NBFC;
be a director, chief executive, chief financial officer, chief internal auditor,
research analyst or a trader (by whatever name or designation called) in a stock
brokerage house or in any company or entity owned and controlled by a member
of a stock exchange; and
(iii) be a member of a stock exchange engaged in the business of brokerage or a
spouse of such member or in control of more than 20% shareholding, directly or
indirectly through his close relatives. In case of Key Executives, the NBFCs must
ensure that no Key Executives shall head more than one functional area that
gives rise to conflict of interest within the organization.
(iv) hold directorship in his or her personal capacity:
in a business concern which is also a client of the NBFC, and
in any other financial institution.
(THE END)
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