CORPORATE LAWS

Suggested Answers
Final Examination - Winter 2012

A.1 ABC Limited shall disclose the substance of the contract or arrangement whereby option has
been given to the financial institutions to convert up to 20% of the outstanding balance of
loan into ordinary shares., giving the number, description and amount of such shares
including the following particulars of the option:

(a) the period during which the option is exercisable;

(b) the price to be paid for shares subscribed for under the option;
(c) the consideration, if any, given or to be given for the option;
(d) the names, addresses, descriptions and occupations of the persons (in this case the
financial institutions) to whom the option has been given.
(e) any other material fact or circumstances relevant to the grant of the option.

A.2 (a) (i) As per the Ordinance, a chief executive of a public company shall not directly or
indirectly engage in any business which is of the same nature as and directly
competes with, the business carried on by the company of which he is the chief
executive. Since Mr. Imran’s wife is the Chief Executive of FTMPL, he cannot
be appointed as CEO of HTML.

(ii) Moreover, no person shall be appointed as director of a listed company if

engaged in the business of stock brokerage and any person who cannot be a
director cannot become chief executive. Therefore, Mr. Imran is not eligible for
becoming the CEO of HTML.

(iii) A person can be appointed as chief executive even if he is not the member of the
company.

(b) XY Limited shall receive security deposits from distributors in accordance with a
contract in writing and all moneys so received shall be kept or deposited by the
company in a special account with a schedule bank.

A.3 Purchase of shares by Mr. Bilal’s cousin may be construed as an indirect purchase of shares
by Mr. Bilal, because part of the funds was provided by Mr. Bilal on fairly soft terms.

He shall take the following steps to comply with the relevant provisions of Companies
Ordinance, 1984 and the Code of Corporate Governance:

(i) Submit to the registrar and SECP a return in the prescribed form containing prescribed
particulars within 15 days of his cousin buying the shares.
(ii) Immediately notify in writing to the company secretary about the intended purchase as
soon as his cousin decides to purchase the shares.
(iii) Notify and deliver to the Secretary a written record of the price, number of shares, form
of share certificates and nature of transactions within four days of affecting the
transaction.

A.4 (a) (i) The liquidator shall be entitled to such remuneration by way of percentage of the
amount realized by him or by disposal of assets or otherwise, as TPL in general
meeting may fix having regard to the amount and nature of the work to be done and
subject to the prescribed limits. However, different percentage rates may be fixed for
different types of assets and items.

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 CORPORATE LAWS
Suggested Answers
Final Examination - Winter 2012

(ii) In addition to the remuneration, the TPL in general meeting may authorize payment
of a monthly allowance to the liquidator for meeting the expenses of the winding up
for a period not exceeding twelve months from the date of the commencement of
winding up.
(iii) The remuneration fixed as aforesaid shall not be enhanced subsequently but may be
reduced by the Court at any time.
(iv) If the liquidator resigns, or is removed from office or otherwise ceases to hold office
before conclusion of winding up, he shall not be entitled to any remuneration and
remuneration received by him, if any, shall be refunded by him to the company.

(b) (i) If a vacancy occurs, by reason of resignation, in the office of liquidator appointed by
the company, the company in general meeting may, subject to any arrangement with
its creditors, fill the vacancy by appointing a person who has given his written
consent to act as liquidator.
(ii) For that purpose a general meeting shall be convened by the outgoing liquidator
before he ceases to act as liquidator, failing that may be convened by any
contributory or by the Court on the application of the registrar or any person
interested in the winding up of the company.
(iii) The meeting shall be held in the manner provided by the Companies Ordinance,
1984 or by the articles or in such manner as may, on application by any contributory
or by the continuing liquidators, be determined by the Court.

A.5 (a) Since Nihal Limited is a listed company, if its director makes any gain by the purchase and
sale, or the sale and purchase, of its shares within a period of less than six months, such
director shall make a report and tender the amount of such gain to the company and
simultaneously send a intimation to this effect to the registrar and the Commission.

(b) Following persons other than the director’s are required to comply with the above
provisions
(i) Chief executive
(ii) Managing agent
(iii) Chief accountant/CFO/Director Finance
(iv) Secretary
(v) Auditor
(vi) Any other person, who is directly or indirectly, the beneficial owner of more than
10% securities.

A.6 (a) A resolution in writing signed by all the directors for the time being entitled to receive notice
of a meeting of the directors shall be as valid and effectual as if it had been passed at a
meeting of the directors duly convened and held. It shall not be necessary to give notice of a
meeting of directors to any director for the time being absent from Pakistan.

Therefore, since the matter is of urgent nature (or even otherwise) the required resolution
may be passed by way of a circular resolution, subject to the provisions of the articles of
association of the company.

(b) Since nothing is given in the Articles of Association, the matters described in Table A shall
become applicable. The steps required for passing the circulation resolution would be as
follows:

(i) The proposed resolution shall be circulated in draft along with all the other necessary
documents, if any, to all the directors entitled to receive the notice of the meeting.

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 CORPORATE LAWS
Suggested Answers
Final Examination - Winter 2012

(ii) The resolution will become valid if the same is approved by all the directors entitled
to vote on the resolution or such numbers of directors as may be specified in the
Articles of Association.

A.7 (a) (i) As per the Ordinance, if within half an hour from the time appointed for the
meeting, a quorum is not present, the meeting may either be dissolved or
adjourned. Since the quorum was present within 30 minutes, the meeting is
valid.

(ii) As per the ordinance, at any general meeting, a resolution put to the vote of the
meeting shall be decided on show of hands, unless a poll is demanded. The
concerned shareholders should have demanded a poll on or before the
declaration of the result of the voting by show of hands and not after the meeting
is concluded. Therefore the shareholder’s protest is not valid.

(iii) Sine 48 hours has not been completed, therefore proxy is not valid.

(iv) A member shall not be entitled to appoint more than one proxy to attend any one
meeting. In this case, Mr. G had appointed more than one proxy for the meeting
and more than one instrument of proxy was deposited with the company, all
such instruments of proxy would therefore be rendered invalid.

(v) As per the Ordinance, a company which is a member of another company may,
by resolution of the directors, authorize any of its officials or any other person to
act as its representative at any meeting of that other company.
Therefore, Mr. Waheed’s vote is valid.

(b) The court may, on a petition by members having not less than ten per cent of the voting
power in the company, that the proceedings of a general meeting be declared invalid by
reason of any material defect or omission in the notice or irregularity in the proceedings
of the meeting which prevented members from using effectively their rights, declare
such proceedings or part thereof invalid and direct holding of fresh general meeting:

However, the petition shall be made within thirty days of the impugned meeting.

A.8 (a) The condition required to be fulfilled under Companies (Appointment of Legal
Advisers) Act, 1974 as regards the appointment of legal advisers.

(i) Every company shall appoint at least one legal adviser on retainership.
(ii) No person other than an advocate or a registered firm shall be appointed as the
legal adviser.
(iii) The number of companies of which such advocate or firm is a Legal Adviser
(including the current appointment) shall not exceed:

 in the case of an advocate, three; or

 in the case of a firm, the product of three and the total number of partners of
the firm.

(b) Delta Cotton Mills Limited should comply with the following requirements of the Legal
Adviser Rules:

(i) Enter the particulars of the new legal adviser in the register of legal adviser
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 CORPORATE LAWS
Suggested Answers
Final Examination - Winter 2012

maintained at its registered office, in the form set out in Schedule I.

(ii) Obtain a certificate in the form set out in Schedule II from its newly appointed
legal adviser.

(iii) Submit full particulars of the previous and newly appointed legal adviser with the
Registrar on the prescribed form including their name (names of the partners in
case of a firm), address and remuneration, within 15 days of the appointment of
new legal adviser.

A.9 Since GIL is a company which is limited by shares, it can issue shares which do not contain
any voting rights. However, it has to comply with following other conditions:

(i) Such provision should be specified in the memorandum and articles of association.
(ii) Approval of the shareholders should be obtained by way of a Special Resolution.
(iii) Obtain approval of the SECP on the basis of the Special Resolution.
(iv) The fact that shares are issued with no voting rights should be specified in the offering
document.

GIL can issue shares for consideration otherwise than cash, subject to the following
conditions:

(i) Since the shares are not being offered to the existing shareholders, GIL should obtain
approval of the Federal Government to raise further share capital without issue of right
shares.
(ii) The value of the assets shall be determined by a consulting engineer registered with
Pakistan Engineering Council and borne on the panel of at least two financial
institutions as a valuers.
(iii) The value of assets taken over shall be reduced by depreciation charged on consistent
basis.
(iv) The goodwill and other intangible assets shall be excluded from the consideration.
(v) Certificate from practicing Chartered Accountant shall be obtained to the effect that
the above mentioned conditions have been complied with.

A.10 All companies mentioned in the question are non-banking finance companies [NBFCs], The
steps involved in the merger of these companies are as follows:

(i) A scheme of amalgamation shall be approved by a majority number representing two

thirds in value of the shareholders of each NBFC, by way of resolution, present either
in person or by proxy, at a meeting called for the purpose.
(ii) Notice of every such meeting shall be given to all shareholders of each NBFC
indicating the time, place and object of the meeting.
(iii) The notice shall be published at least once a week for three consecutive weeks in not
less than two newspapers which circulate in the localities where the registered offices of
the NBFCs are situated, one of such newspapers being in a language commonly
understood in the locality.
(iv) If the scheme is approved by the shareholders, it shall be submitted to the Securities
and Exchange Commission of Pakistan for sanction.
(v) When the scheme of amalgamation is sanctioned by the Commission, the merged
entity shall transmit a copy of such order to the registrar and registrar shall strike off the
names of amalgamated NBFCs.
(vi) The property and liabilities of the amalgamated NBFCs shall, by virtue of sanction
order, be transferred to the merged NBFC.
(vii) The Commission while sanctioning the scheme shall determine the value to be paid to
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 CORPORATE LAWS
Suggested Answers
Final Examination - Winter 2012

shareholders dissenting from the scheme.

A.11 The exception to the provision are as follows:

(a) where an account-holder has authorised the disclosures in writing to disclose;

(b) where an account-holder is declared bankrupt;
(c) where the account-holder is a body corporate and has been wound-up within or outside
Pakistan;
(d) In the case of any litigation or other legal proceedings;
(e) Any person duly authorized by a competent court, the Authority or the State Bank of
Pakistan to investigate into any offence under any law for the time being in force;
(f) The purpose of enabling or assisting the Authority to exercise any power conferred on it
by this Act or by any other law for the time being in force;
(g) The purpose of enabling or assisting the State Bank of Pakistan to exercise any power
conferred on it by any other law for the time being in force;
(h) The purpose of enabling or assisting a stock exchange or clearing house of a stock
exchange to discharge its functions;
(i) The purpose of enabling or assisting auditors of a central depository or participant to
discharge their functions; or
(j) The Authority if the disclosure is required in the interest of investors or in the public
interest.

A.12 Following are the provisions of the Listing Regulations with regard to convening the meeting
of the Board of Directors and Annual General Meeting for approval of Final Cash Dividend:

(a) AMZ shall notify to the Exchange at least one week in advance the date, time and place
of its board meeting.
(b) AMZ would advise to the Exchange, decision of the Board relating to the cash dividend
and approval of the audited accounts immediately after the meeting. The information is
required to be communicated to the Exchange prior to its release to any other person or
print/ electronic media.
(c) Intimation of dividend shall be sent to the Exchange not later than 14 days prior to the
commencement of the book closure.
(d) AMZ shall send to the Exchange such number of copies of its annual report and audited
accounts as may be prescribed by the Exchange not later than 21 days before a meeting
of shareholders is held to consider the same.
(e) AMZ shall obtain prior approval of the exchange in respect of the date and time of
holding of its annual general meeting.
(f) AMZ shall furnish certified true copies of minutes of its annual general meeting within
60 days of such meeting.

A.13 (i) The Audit Committee shall meet at least once in each quarter.
(ii) A meeting must be held prior to the approval of interim results of the listed company
by its Board of Directors and before and after completion of external audit.
(iii) A meeting of the Audit Committee shall also be held, if requested by the external
auditors or the head of internal audit.
(iv) CFO, the head of internal audit and the external auditors represented by the
engagement partner shall attend meetings of the Audit Committee at which issues
relating to accounts and audit are discussed.
(v) At least once a year, the Audit Committee shall meet the external auditors without the
CFO and the head of internal audit being present.
(vi) At least once a year, the Audit Committee shall meet the head of internal audit and
other members of the internal audit function without the CFO and the external
auditors being present.
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 CORPORATE LAWS
Suggested Answers
Final Examination - Winter 2012

(THE END)

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