Companies Rules Volume V

Securities and Exchange
Commission of Pakistan
Companies Rules
Volume V
Guidelines, Orders, Directives & Guide Series
(Updated up to 5 December 2013)
Companies Rules
Volume V
Guidelines, Orders, Directives & Guide Series
(Updated up to 5 December 2013)

VOLUME I
STATUTES
Insurance Act, 1938 (Repealed)
Securities and Exchange Ordinance, 1969
Companies (Appointment of Trustees) Act, 1972 (Repealed)
Companies (Appointment of Legal Advisors) Act, 1974
Foreign Private Investment (Promotion & Protection) Act, 1976 (Repealed)
Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980
Companies Ordinance, 1984
Central Depositories Act, 1997
Securities and Exchange Commission of Pakistan Act, 1997
Insurance Ordinance, 2000
Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Ordinance, 2002
Anti-Money Laundering Act 2010
Stock Exchanges (Corporatisation, Demutualisation and Integration) Act, 2012

VOLUME II
RULES
Securities and Exchange Rules, 1971
Investment Companies and Investment Advisors Rules, 1971 (Repealed)
Companies Profits (Workers Participation) Rules, 1971
Economic Reforms (Acquisition and Compensation) Rules, 1973 (Repealed)
Companies (Appointment of Trustees) Rules, 1973
Companies (Appointment of Legal Advisors) Rules, 1975
Modaraba Companies and Modaraba Rules, 1981
Corporate Law Authority Rules, 1984 (Repealed)
Companies (General Provisions and Forms) Rules, 1985
Forms
Companies (Invitation and Acceptance of Deposits) Rules, 1987
Companies (Management by Administrator) Rules, 1993
Credit Rating Companies Rules, 1995
Asset Management Companies Rules, 1995 (Repealed)
Companies (Issue of Share Capital) Rules, 1996
Venture Capital Companies and Fund Managers Rules, 1995 (Repealed)
Employees Provident Fund (Investment in Listed Securities) Rules, 1996
Companies (Issue of Capital) Rules, 1996
Central Depository Companies (Establishment and Regulation) Rules, 1996
Companies (Court) Rules, 1997
Companies (Audit of Cost Accounts) Rules, 1998
Companies (Rehabilitation of Sick Industrial Units) Rules, 1999
Companies (Buy-back of Shares) Rules, 1999
Companies (Asset-Backed Securitization) Rules, 1999

VOLUME III
Companies' Share Capital (Variation in Rights and Privileges) Rules, 2000
Leasing Companies (Establishment and Regulation) Rules, 2000 (Repealed)
Members' Agents and Traders (Eligibility Standards) Rules, 2001
Stock Exchange Members (Inspection of Books and Record) Rules, 2001
Public Companies (Employees Stock Option Scheme) Rules, 2001
Brokers and Agents Registration Rules, 2001
Balloters Transfer Agents and Underwriters Rules, 2001
Insurance Rules, 2002
Non-Banking Financial Companies (Establishment and Regulation) Rules, 2003
SECP (Appellate Bench Procedure) Rules, 2003
Single Member Companies Rules, 2003
Margin Trading Rules, 2004 (Repealed)
Commodity Exchange and Futures Contract Rules, 2005
Voluntary Pension System Rules, 2005
Clearing Houses (Registration and Regulation) Rules, 2005
Takaful Rules, 2005 (Repealed)
Anti Money Laundering Rules, 2008
Securities (Leveraged Markets and Pledging) Rules, 2011
Takaful Rules, 2012
Public Sector Companies (Corporate Governance) Rules, 2013
Microinsurance Rules, 2013

VOLUME IV
REGULATIONS
Securities and Exchange Policy Board (Conduct of Business) Regulations, 2000
Regulations for the Karachi Stock Exchange, 2001
Code of Corporate Governance, 2002
Companies (Registration Offices) Regulations, 2003
Prudential Regulations for Modarabas, 2004
Regulations Governing System Audit of Brokers of Exchanges, 2004
Real Estate Investment Trust Regulations, 2008
Private Equity and Venture Capital Fund Regulations, 2008
Private Equity & Venture Capital Fund Regulations, 2008 - Forms and Schedules
Group Companies Registration Regulations, 2008
Anti-Money Laundering Regulations, 2008
NBFCs and Notified Entities Regulations, 2008
Prudential Regulations for NBFCs undertaking the Business of Leasing only
Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2008
Code of Corporate Governance, 2012
Debt Securities Trustee Regulations, 2012
Insurance Accounting Regulations, 2012
Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2012
Third Party Administrators for Health Insurance Regulations, 2013
Centralised Information Sharing Solution for Life Insurance Industry Regulations, 2013

VOLUME V
GUIDELINES
Guidelines for Issue of Certificates of Musharika for Modarabas, 1994
Listed Companies (Prohibition of Insider Trading) Guidelines, 2001
Guidelines for Preparation of Prospectus, 2002
Equity Issues (Checklist of Documents for Approval of Prospectus or Offer for Sale Document), 2002
Guidelines for Appointment on the Board of Directors of the Stock Exchanges, 2002
Term Finance Certificates (TFCs) Issues (Checklist of Documents for Approval of Prospectus, 2002
Guidelines for the Issue of TFCs to General Public, 2002
Guidelines on Issue of Shares at Discount, 2004
Internet Trading Guidelines, 2005
Guidelines for Issue of Commercial Paper, 2006
Guidelines for Bancassurance, 2010
Corporate Social Responsibility Voluntary Guidelines, 2013
Guidelines on Quarterly Accounts

ORDERS
Vegetable Ghee and Cooking Oil Companies (Cost Accounting Records) Order, 1990
Cement Industry (Cost Accounting Records) Order, 1994
Sugar Industry (Cost Accounting Records) Order, 2001
Companies Cost Accounting Records (General Order), 2008
Companies (Corporate Social Responsibility) General Order, 2009
Fertilizer Industry (Cost Accounting Records) Order, 2011
Chemical Fertilizer Industry (Cost Accounting Records) Order, 2012
Synthetic and Rayon Companies (Cost Accounting Records) Order, 2012
Electric Power Generation Industry (Cost Accounting Records) Order, 2012
Pharmaceutical Industry (Cost Accounting Records) Order, 2013

DIRECTIVES
Feb 17, 2005 - Directive under the Credit Rating Companies Rules, 1995
Feb 7, 2003 - Directive to Brokers on Conduct of Business 2003
Jul 18, 2002 - Directive to Brokers or Brokerage Firms or Incorporated Brokerage House Regd.
under the Broker & Agents Registration Rules 2001

GUIDE SERIES
A Guide on Accounts and Accounting Reference Dates
Change in Company Objects
Change of Company Name
Availability of Name Guide
Conversion of Status of Companies
Directors and Secretaries Guide
Filing of Statutory Returns
Foreign Companies Guide
Appointment of Statutory Auditors and Ancillary Matters
Listing of Companies through Initial Public Offerings
Obtaining license by an Association not for profit
Further Issue of Shares otherwise than Rights
Issue of Preference Shares
Making Alteration in Memorandum of Association under Section 21 of Companies Ordinance, 1984
Incorporation of Company Information and Procedures
Investigation into the Affairs of a Company
Company Mortgages and Charges
List of sensitive/prohibited words
Promoters Guide
Modaraba Promoters Guide
Shareholders Rights
Single Member Company Guide (in Urdu)
Winding up / Dissolution of Companies

VOLUME VI
FORMS AND APPLICATIONS
Forms [See under Companies (General Provisions and Forms) Rules, 1985]
Applications
Application for Availability of Name
Application for File Inspection
Application for Refund of Fee
Application for Issuance of Certified To Be True Copy
Application for Availability of Name
Application for File Inspection
Application for Refund of Fee
Application for Issuance of Certified To Be True Copy

NOTIFICATIONS (selected)
S.R.O. 282(I)/1986 Company Names Abbreviations and Urdu Equivalents
S.R.O. 865(I)/2005 IFAS 1 Murabaha
S.R.O. 431(I)/2007 IFAS 2 Ijarah
S.R.O. 640(I)/2011 Maintenance of Website
S.R.O. 289(I)/2011 Form of Statement in Lieu of Prospectus
S.R.O. 23(I)/2012 Accounting and Financial Reporting Standards for Medium Sized Enterprises
and Small Sized Enterprises
S.R.O. 25(I)/2012 Maintenance of Website by Listed Companies
S.R.O. 320(I)/2012 Amendments in Sixth Schedule to the Companies Ordinance, 1984
S.R.O. 753(I)/2012 Amendments in First Schedule Table A to the Companies Ordinance, 1984
S.R.O. 1354(I)/2012 Delegation of Powers of Commission
S.R.O. 130(I)/2013 Recovery of Gain
S.R.O. 182(I)/2013 Amendments in Fifth Schedule to the Companies Ordinance, 1984
S.R.O. 183(I)/2013 Amendments in Fourth Schedule to the Companies Ordinance, 1984
S.R.O. 194(I)/2013 Amendments in First Schedule Table A and C to Companies Ordinance, 1984
S.R.O. 210(I)/2013 Amendments in Companies (Registration Offices) Regulations, 2003
S.R.O. 211(I)/2013 eService of SECP
S.R.O. 387(I)/2013 Delegation of Powers of Commission
S.R.O. 479(I)/2013 Amendments in Public Sector Companies (Corporate Governance) Rules, 2013
S.R.O. 571(I)/2013 IFAS 3 Profit and Loss Sharing on Deposits
S.R.O. 677(I)/2013 Amendments Public Sector Companies (Corporate Governance) Rules, 2013

CIRCULARS (selected)
Circular 8/2001 Companies Regularisation Scheme
Circular 1/2002 Adoption of International Accounting Standards 22, 36 and 39
Circular 2/2002 Companies Regularisation Scheme
Circular 3/2002 Adoption of International Accounting Standards 40
Circular 4/2002 Adoption of International Accounting Standards 22, 36 and 39
Circular 15/2002 Transfer off Regulatory Supervision of Non-Banking Financial Institutions and
Submission of Periodical Returns/Statements
Circular 16/2002 Submission of Quarterly Accounts by Listed Companies
Circular 17/2002 Information on Current Credit Rating and COIs/CODs being maintained by
NBFCs
Circular 18/2002 Submission of Quarterly Accounts by Listed Companies
Circular 19/2002 - Appointment of External Auditors by the Listed Companies
Circular 1/2003 Appointment of Sole Proprietor Chartered Accountants as Auditor by Business
Name
Circular 2/2003 International Accounting Standard 40 Investment Property
Circular 7/2003 Appointment of Directors/Chief Executive in the Modaraba Companies
Circular 8/2003 Checklist for Appointment of Directors
Circular 9/2003 Preparation and Transmission of Second Quarterly Accounts by the Listed
Companies
Circular 10/2003 Fresh License(s) to be obtained by Existing Companies in terms of Section 282C
of the Companies Ordinance, 1984 for Business(es) being carried out by existing NBFCs
Circular 12/2003 Fresh License(s) to be obtained by Existing Companies In terms of Section 282C
of the Companies Ordinance, 1984
Circular 13/2003 Maintenance of Website by the Listed Companies
Circular 15/2003 Appointment of Whole Time Company Secretary
Circular 18/2003 Rules of Business for NBFIs and Submission of Periodic Returns/Statements
Circular 19/2003 Applicability of IAS 39 and IAS 40 to NBFCs providing investment finance
services (Investment Banks), discounting services and housing finance services
Circular 24/2003 Assets provided on Lease/loan basis to the Employees (Excluding CEO and
Directors)
Circular 25/2003 Use of word Bank or any of its derivatives
Circular 26/2003 Circular No. 26 of 2003
Circular 29/2003 Corporate Agriculture Farming (CAF) Policy
Circular 30/2003 Attendance of Directors in the Board Meetings through Video Conferencing
Circular 6/2004 Appointment of Sole Proprietor Chartered Accountants as Auditors by Business
Name
Circular 7/2004 Authentication of Statutory Returns
Circular 8/2004 Compliance with IAS 12 (Revised)
Circular 3/2005 Holding of Election of Directors Pursuant to Companies (Amendment) Ordinance
2002
Circular 6/2005 Conditions for Issuance of Foreign Currency Certificate of Deposits (CODs) and
Certificate of Investment (COIs)
Circular 8/2005 Investment Policy under Rule 24(3) and Prescribed Allocation Policy for
Selection by the Individual Participants under Rule 14(3) & 14(4) of the Voluntary Pension System
Rules 2005
Circular 10/2005 Application(s) made under the NBFCs (Establishment and Regulation) Rules,
2003 and the Prudential Regulations for NBFCs
Circular 11/2005 Rating of NBFCs and Collective Investment Scheme(s) managed by NBFCs
Circular 12/2005 Appointment as a Director on the Board of an NBFC
Circular 13/2005 Exemption from Requirements of Clause 3C of Part II of Fourth Schedule to the
Circular 15/2005 Sale of Assets by NBFCs to its Employees
Circular 17/2005 Violation of Section 143 of the Companies Ordinance, 1984 by mentioning
Incomplete Name
Circular 18/2005 Attendance of Directors in the Board Meetings through Tele-Video Conferencing
Circular 19/2005 Regulation for Housing Finance Applicable to Individual Borrowers
Circular 24/2005 Rotation of External Auditors by Insurance Organizations
Circular 3/2006 Holding of Election of Directors
Circular 1/2008 Publication of Notices etc in Urdu Newspaper
Circular 11/2008 Revision of Fourth and Fifth Schedules to the Companies Ordinance, 1984
Circular 16/2008 Submission of Daily Statement of Assets and Liabilities
Circular 3/2009 Available for Sale Investment
Circular 14/2010 United Nations 1267 Committee's Consolidated List of Individuals and Entities
regarding Freezing of Funds and Other Resources
Circular 14/2010 Amendments dated September 8, 2010
Circular 14/2010 Amendments dated November 2, 2010
Circular 14/2010 Amendments dated December 22, 2010
Circular 15/2010 Related Party Assets
Circular 16/2010 Categorization of Open-End Collective Investment Schemes
Circular 17/2010 Notice Period for Holding Extraordinary General Meeting to pass Resolution for
Filing Application under Companies Easy Exit System (CEES)
Circular 18/2010 Additional Condition to the Modaraba Authorization Certificate
Circular 21/2010 Clarification on Clause 3(ii) of Part II of the Third Schedule to the Modaraba
Companies and Modaraba Rules, 1981
Circular 22/2010 Revised Second Schedule to Modaraba Companies and Modaraba Rules, 1981
Circular 26/2010 Application for Refund of Fees received under Sixth Schedule to the Companies
Ordinance, 1984
Circular 28/2010 Application for Refund of Fees received under Sixth Schedule to the Companies
Ordinance, 1984
Circular 3/2011 Amendments in Circular 36 of 2009 dated December 10, 2009 Investment and
Allocation Policies for Pension Funds Authorized under the VPS Rules, 2005
Circular 5/2011 Appointment of a Member of the Religious Board by the Federal Government
under Section 9 of Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980
Circular 6/2011 Withdrawal of Circular 20/2010 dated 30 July 2010
Circular 7/2011 Maximum Management Expense Limits for Life Insurers under Sections 22(9)
and 23(9) of the Insurance Ordinance, 2000
Circular 10/2011 Constitution of Modaraba Tribunal-II, Karachi under the Modaraba Companies
and Modaraba (Floatation and Control) Ordinance, 1980
Circular 11/2011 Sharing of Costs of Insurance Ombudsman's Secretariat by Insurance/Takaful
Companies
Circular 12/2011 Conditions for Grant of License to Associations not for Profit under Section 42
of the Companies Ordinance, 1984
Circular 14/2011 Meetings of the Board of Directors (Abroad)
Circular 15/2011 Additional Condition to the Modaraba Authorization Certificate
Circular 17/2011 Annual Supervision Fee for 2012
Circular 18/2011 Product Information on websites
Circular 19/2011 Legal Duties of Agents
Circular 1/2012 Reporting of Suspicious Transaction Reports (STR) Currency Transaction
Reports (CTR) to FMU under Anti Money Laundering (AML) Act, 2010
Circular 2/2012 Conditions for Grant of License to Associations not for Profit under Section 42 of
the Companies Ordinance, 1984
Circular 3/2012 Product Publicity Information
Circular 4/2012 S.R.O. 16(I)/2012 dated 9 January, 2012 Amendments in the Securities and
Exchange Commission [Insurance) Rules, 2002
Circular 5/2012 S.R.O. 29(I)/2012 dated 13 January 2012 Takaful Rules, 2012
Circular 7/2012 Enlistment/Categorisation of Auditors on the Approved List pursuant to Section
48(1) of the Insurance Ordinance, 2000
Circular 08/2012 Shariah Compliance and Shariah Audit Mechanism (SCSAM) for Modarabas
Circular 9/2012 Term of Office of Directors
Circular 10/2012 Transmission of Notice of Annual General Meetings (AGM) and Extra-Ordinary
General Meetings (EOGM) through Electronic Medium
Circular 11/2012 Enlistment/Categorisation of Auditors on the Approved List pursuant to Section
48(1) of the Insurance Ordinance, 2000
Circular 12/2012 Launching of Fast Track Registration Services (FTRS)
Circular 13/2012 Approval of Short Term Ijarah (Lease) Agreement
Circular 14/2012 Launch of Inter-CRO Electronic Inspection Service
Circular 15/2012 Minimum Requirement for Exchange Traded Funds to be managed by Asset
Management Companies
Circular 17/2012 Additional Disclosures for Workers Welfare Fund (WWF) Liability for
Collective Investment Schemes
Circular 18/2012 Dividend Mandate under Section 250 of the Companies Ordinance, 1984
Circular 19/2012 Procedure for Convening Meeting of the Unitholders of Open-End and Close-
End Collective Investment Schemes
Circular 20/2012 Reporting of STRs/CTRs to FMU under the AML Act, 2010
Circular Restriction on sharing of management fee by Asset Management Companies with
Unitholders
Circular 21/2012 Filing of Returns through Insurance Companies Return Submission (ICRS)
System
Circular 22/2012 Relaunching of Companies Regularisation Scheme (CRS)
Circular 23/2012 Relaunching of CEES
Circular 31/2012 Extension in time period of CRS and CEES
Circular 37/2012 New Insurance Accounting Regulations 2012; and Amendments in the SEC
(Insurance) Rules, 2002
Circular 39/2012 Clarification on Circular 14/2011 regarding Meetings of Board of Directors
(Abroad)
Circular 40/2012 Extension in Time Period of CRS and CEES
Circular 41/2012 Annual Supervision Fee for the year 2013
Circular 42/2012 Filing of Monthly Returns through Specialised Companies Return System (SCRS)
Circular SECP registered 274 companies in August 2012
Circular 1/2013 Rate of Return Assumptions for Life Insurance and Family Takaful Illustrations
Circular 2/2013 Training of Insurance Agents
Circular 2 of 2/2013 Clarification on the Circular No.2 of 2013 on Training of Insurance Agents
Circular 3/2013 Launching eSInsuranceSurveyors: Online Surveyors Licensing and Registration
System
Circular 5/2013 Examination or Test for Grant of Registration as Authorized Surveying Officer
Circular 6/2013 Amendments in Circular No. 36 of 2009 dated December 10, 2009 Investment
and Allocation Polices for the Pension Funds Authorized under the VPS Rules, 2005
Circular 7/2013 Clarification on Filing of Revised Annual Audited Accounts by Non-Listed
Companies
Circular 11/2013 Amendment to Circular No. 9 of 2005 on Group Insurance Premium Rates
Circular 12/2013 Publication of Public Announcements
Circular 13/2013 Clarification regarding Circular No. 36 of 2009 dated December 10, 2009
Circular 17/2013 Mortality Rates as a Part of the Minimum Valuation Basis for the Determination
of Minimum Actuarial Reserves for Policyholders Liabilities
Circular 18/2013 Draft Bancassurance Regulations, 2013
Circular 19/2013 Appointment of Qualified Auditors
Circular 20/2013 Maximum Management Expense Limits for Life Insurers
Circular 21/2013 Life Insurance Product Submission Requirements

CSR Guidelines, 2013 Securities and Exchange Commission of Pakistan


1. Introduction and Scope
1.1 In order to promote responsible business conduct that supports community growth for
public interest, eliminates adverse practices impacting the public sphere and ensures
corporate accountability, the Securities and Exchange Commission of Pakistan (SECP) is
pleased to issue the Guidelines for Corporate Social Responsibility (the Guidelines).
1.2 These Guidelines are voluntary in nature and businesses are encouraged to move beyond the
recommended minimum provisions articulated in this document.
1.1 The Guidelines are being published for all companies that have initiated or intend to initiate
corporate social responsibility (CSR) activities. Further, it is expected that all companies
may endeavor to adopt working models that complement the recommended guidelines with
a focus on fair, transparent and responsible business practices.
1.2 For the purpose of facilitation, companies are encouraged to use (self-assessment) CSR
governance benchmark and terms of reference of CSR committee, annexed to the guidelines.
1.3 The Guidelines are being issued in exercise of powers under section 506B of the Companies
Ordinance, 1984.

2. Objective

The objective of these Guidelines is to promote the development of a framework for CSR
initiatives by all companies. Companies are encouraged to strive and work in cooperation with
stakeholders for implementing a transparent and socially responsible strategy.

3. CSR governance

Companies are encouraged to have a CSR policy endorsed by the board of directors (board)
of the company, reflecting their understanding and commitment to CSR, thereby ensuring that:
a) CSR policy is incorporated into the vision, code of ethics and business plan/strategy of the
company.
b) CSR commitment statement is agreed through meetings/session by Board of Directors w.r.t
CSR definition, business value of CSR, vision and commitment (resources, time,
personnel).
c) Output of the CSR commitment is integrated into a board level CSR policy.


d) CSR mandate is executed either through a pre-existing committee or by forming a new CSR
committee.
e) Hold education/orientation sessions to ensure that board members have adequate
understanding and expertise of CSR for making informed decisions.
f) Include CSR activities as part of agenda of the board meetings and incorporate CSR as part
of annual board evaluation.
g) Periodically review operations of the board to identify and implement measures to align the
board operations with CSR strategy of the company.
h) Ensure that CSR goals, objectives and targets are incorporated into business plans/strategy.
i) Board members determine CSR risks, opportunities and impact prior to any major business
decisions (acquisition, mergers, product variation, capital expenditures).
j) Review and approve CSR related communications to internal and external stakeholders
ensuring compliance with relevant reporting framework.

4. Consultative Committee

The Company is expected to adopt a focused approach towards CSR through formation of a CSR
Consultative Committee ideally led by a CSR expert. The committee members are expected to have
an understanding and experience of implementing CSR activities/projects. The committee may be
entrusted to ensure transparent, specialized supervision of CSR activities and periodic reporting to
Board of Directors in adoption of CSR policy and reporting its progress.

A sample term of reference of CSR Committee is annexed to these Guidelines.

5. CSR Management Systems

CSR policy of a company is expected to be formulated in a manner that serves as a guide to its
strategic plans, paves way for a systematic CSR management system and projects the roadmap
of CSR initiatives. The systems are expected to reflect following broad indicators:
a) Express commitment of the board and the top management to formulate and implement
CSR Policy
b) Ensure that policies, processes and systems exist and support the CSR policy. This is
measured by:
(i) Specifying the organizational approach towards CSR
(ii) Incorporating the CSR approach into code of ethics of company


(iii) Defining objectives for carrying out CSR activities
(iv) Setting targets for achievement of CSR objectives
(v) Determining the working model and devising action plan (time, resources,
budget)
(vi) Delegating responsibility and management of resources with respect to CSR
policy
c) Sensitization and training of the board, senior management and employees for
implementation of CSR targets
d) Mechanism for stakeholder engagement prior, during and on conclusion of CSR plans
e) Periodic monitoring and evaluation of CSR activities
f) Disclosure and reporting of CSR achievements
g) Recognizing and documenting the shortfalls/failures
h) Incorporating improvement in future CSR policy/plans

6. Areas of Interest
CSR policy is expected to clearly determine the priority areas wherein the CSR projects are
currently being managed (ongoing projects) and are planned to be initiated (upcoming
projects). The areas may broadly cover:
a) Community investment (skill development, livelihood, health, education, infrastructure,
social enterprise development, safe drinking water, poverty alleviation, youth
development and environment conservation)
b) Governance (human rights, transparency, anti-corruption, business practices,
stakeholder relations, responsible marketing)
c) Product responsibility
d) Work life balance
e) Safety (risk management, disaster management)
f) Climate Change

7. Implementation Structure

7.1 The CSR policy is expected to be implemented through a systemized structure that
measures and reflects progress of CSR goals/targets. It is imperative that the system must
be able to identify the role of the company and the extent of involvement of internal and
external stakeholders for carrying out CSR plans.

7.2 The implementation system may indicate the following:
a) Specific goals, business plan and working model to be implemented
b) Resources aligned for implementation of CSR goals
c) Extent of implementation and completion of CSR activities


d) Incorporating changes in its working model to changes in business/social needs
e) Specifying the role and resources of partnering agencies
f) Systemized periodic assessment of impact of CSR policy/goals
g) Define systematic reporting of implementation status to internal and external
stakeholders

8. Allocation of Resources
The company is expected to earmark specified resources (quantifiable), specific criteria (for e.g.
hours of service at partnering agency) or a proportion of their profit (preferably 1-2%) for selected
CSR initiatives. The method of allocation of resources or identified criteria must ideally be
predetermined, duly endorsed by the board and form part of CSR Policy.

9. External Assurance
9.1 The company may undertake arrangement for obtaining assurance by an external party.
The external assurance is expected to be implemented in a manner that is systematic,
documented, evidence-based, and characterized by defined procedures.
9.2 External assurance
1
:

Be conducted by entities, groups or individuals external to the reporting organization,
who are demonstrably competent in the subject matter and assurance practices;
Should utilize groups or individuals who are not unduly limited by their relationship
with the organization or its stakeholders to reach and publish an independent and
impartial conclusion on the report;
Is implemented in a manner that is systematic, documented, evidence-based, and
characterized by defined procedures;
Assesses whether the CSR report of the company provides a reasonable and balanced
presentation of performance, taking into consideration the veracity of report data and
the overall selection of content;
Assesses the extent to which the report preparer has applied any Reporting Framework;
and
Results in an opinion or set of conclusions that is publicly available in written form, and
a statement from the assurance provider on their relationship to the report preparer.

9.3 The assurance report may form part of its CSR Report.

1
Derived from GRIs key qualities for external assurance


10. Disclosure and Reporting

10.1 Companies are expected to report concise and material information regarding their CSR
policy and activities that may be consolidated and reported in the form of a separate CSR
Report.
10.2 CSR report may prominently disclose the CSR objectives, working model, implementation
status, impact/achievements, risks, opportunities, challenges and working partners. This
may also include comparison drawn from previous year.
10.3 CSR reporting is expected to state the goals that the board has planned to set forth for the
next year. This may be descriptive narration of the areas of concentration or any specific
projects along with brief overview of source of generation of funds for said goals.
10.4 Companies are expected to prominently disclose CSR report (summarized or detailed
format). The said reports may be disseminated on its website (if any), annual reports,
separate report and other communication media.
10.5 Notwithstanding the preparation of CSR Report, the company shall provide descriptive as
well as monetary disclosures of the CSR activities undertaken by it during each financial
year in line with the requirements of Companies (Corporate Social Responsibility) Order,
2009. This may also include disclosure to the effect of compliance by companies with
relevant industry/regulator guidelines or standards.


CSR Committee
Terms of Reference

a) Strategy and Policies:
Review and recommend to the board of the company in forming or refining the CSR vision,
strategy and policy of the company. This includes ensuring that appropriate management
systems, implementation model and regulatory compliance are in place.

b) Assessing indicators:
Monitor and recommend changes in working model of CSR in line with best practices,
economic indicators, social implications and stakeholder trends that may impact the
company.

c) Stakeholder Engagement:
Review and monitor stakeholder relations and devise mechanism to incorporate input of
partnering agencies/stakeholders into CSR plans/policies

d) Management of Risk:
Monitor, periodically review and document the major CSR risks, opportunities and impact
of CSR policy. It may also recommend to the board the appropriate changes in CSR
policy/management systems.

e) CSR Assessment:
Review and report impact of CSR plans/activities on business. Further review and
recommend impact of CSR policy on major business decisions.

f) CSR Report:
Determine the overall extent of reporting of CSR activities, provide input on CSR reports
and recommend to the board for adoption of CSR report. This includes ensuring CSR
reports are in accordance to relevant CSR reporting framework.


Corporate Social Responsibility
Governance Benchmark

Board of Directors is expected to develop and evaluate their governance framework w.r.t corporate
social responsibility initiatives. Following is a self-assessment table that shall complement Board of
Directors in the evaluation process:

S.N.
Direction Assessment (please tick) Comments
Yes No Partial Dont
Know
Not
relevant
1. Has Board developed a CSR
vision and strategy?

2. Have Board and management
expressly declared its
commitment to CSR?

3. Has board communicated the
companys business case for CSR
to management?

4. Do Board and management
share common CSR aspirations?

5. Does CSR vision coincide with
the vision and Code of Ethics of
the Company?

6. Does the Board have clear
understanding of CSR and
industry practices?

7. Are CSR goals incorporated in
the business plans of the
business?

8. Is there a specific CSR
committee?

9. Does the CSR Committee
comprise of one or more CSR
experts? (Indicate the number in
comments section)

10. Is there a designated CSR
committee member reporting to
Board?

11. Does CSR committee seek
guidance with board approved
CSR policy?

12. Does the CSR committee
periodically report the progress
of company on CSR goals,
objectives and targets?


13. Does the CSR committee review
and make recommendations in
the implementation model of the
Company?

14. Is the CSR committee involved
in preparing implementation
model for CSR plans?

15. Is managements incentives
linked to CSR goals/ targets?

16. Is CSR progress included as a
factor in remuneration/
recruitment of CEO?

17. Does the CSR committee review
and recommend suggestion for
incorporating CSR risk in
Companys risk management
policy?

18. Is CSR committee entrusted
with the role of recommending
major CSR risk and its impact
prior to major business
decisions?

19. Are CSR risk, opportunities,
impact and issues are considered
by Board and management in
approving major business
decisions?

20. Is there a system of
implementation of CSR goals?

21. Are there adequate measures in
place to determine the impact of
CSR policies by Board and
senior management?

22. Does the internal audit process
include assessment of CSR
commitments?

23. Does the board hold CSR
orientation session and
periodically review progress on
CSR commitment/goals?

24. Does the CSR committee provide
its input in preparation of CSR
reports?

25. Does the Board give its input in
extent of disclosure in the CSR
reports?

26. Does the board review and
approve external reporting of
CSR issues in compliance of
relevant regulatory
requirements?

27. Does the board consider CSR


report as a record of companys
performance on CSR goals for
disclosure to its stakeholders?
28. Does the Board approve external
assurance of CSR activities?

29. Does the Board approve the
external assurance report to be
made part of CSR report of the
Company?

30. Does the Board approve of
placing the CSR report on
website of the Company?

_____________________________________________________________________________________________
Page 1 of 10
Guidelines for Issue of Commercial Paper
SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

GUIDELINES FOR ISSUE OF COMMERCIAL PAPER

1. Introduction and Scope: -

1.1 In order to develop and broaden the money market and also provide an
additional financial instrument to investors, it is considered desirable to allow
highly rated companies to diversify their sources of short-term financing by
issue of commercial paper (CP) as an instrument of redeemable capital under
section 120 of the Companies Ordinance, 1984.

1.2 These guidelines are made pursuant to Section 22 of the Securities and
Exchange Commission of Pakistan Act, 1997 in order to provide the regulatory
framework and procedure for issuing commercial paper.

2. Definitions.
__
(1) In these Guidelines unless there is any thing repugnant in the
subject or context,-

(a) advisor means a Scheduled Bank, Registered Corporate Broker or an
Investment Finance Company appointed by the issuer to provide
advice on the structuring, placement and issue of the commercial paper

(b) Banking Company means a banking company as defined in the
Banking Companies Ordinance, 1962

(c) commercial paper means an unsecured promissory note with a
maturity of not less than 30 days and not more than one year
_____________________________________________________________________________________________
Page 2 of 10
(d) Commission means the Securities and Exchange Commission of
Pakistan

(e) company means a company as defined in the Companies Ordinance,
1984

(f) dealers means Investment Finance Companies, Registered Corporate
Broker or Banking Companies who buys commercial paper and resell
to investors

(g) DFIs means any institution as defined in State Bank of Pakistans
(SBPs) Guidelines on Commercial Paper or as subsequently defined
by SBP from time to time

(h) financial institution means a financial institution as defined in the
Financial Institutions (Recovery of Finances) Ordinance, 2001 and the

(i) Guidelines means the Guidelines for Issue of Commercial Paper

(j) Investment Finance Company means a company as defined under
The Non-Banking Finance Companies (Establishment and Regulation)
Rules, 2003

(k) investors means the initial investors or subsequent buyers of
commercial paper in the secondary market

(l) issuer means a company that intends to raise short-term finance by
issuing commercial paper

_____________________________________________________________________________________________
Page 3 of 10
(m) Issuing and Paying Agent (IPA) means a Scheduled Bank, an
Investment Finance Company or a DFI having a minimum Credit
Rating Grade of A- (medium to long term) and A2 (short term)
from any rating agency

(n) rating agency means a Credit Rating Agency (CRA) registered with
the Commission under the Credit Rating Companies Rules, 1995

(o) Registered Corporate Broker means a company engaged in the
business of effecting transactions in securities for the account of others
and registered with the Commission under Brokers and Agents
Registration Rules, 2001

(p) Scheduled Bank means a scheduled bank as defined in the State Bank
of Pakistan Act 1956

(q) working capital limit means the aggregate fund-based limits
including those by way of purchase/discount of bills sanctioned by one
or more financial institutions to a company for meeting its working
capital requirements, and also includes any working capital term
finance limits.

(2) All other words and expressions used but not defined in these Guidelines shall
have the same meanings as are assigned to them in the Companies Ordinance, 1984
(XLVII of 1984), the Securities and Exchange Ordinance, 1969 (XVII of 1969) and
the Securities and Exchange Commission of Pakistan Act, 1997.

3. Eligibility for issue of commercial paper
A company, which satisfies the following requirements, shall be eligible to
issue commercial paper subject to the terms and conditions contained in these
Guidelines:
_____________________________________________________________________________________________
Page 4 of 10
(a) The equity of the company is not less than Rs. 100 million as per the
latest audited balance sheet;

(b) The company has obtained the credit rating from a rating agency. The
minimum credit rating of the issuer shall be A- (medium to long-
term) and A2 (short-term). At the time of issue of commercial paper,
the company shall ensure that the rating is current and not more than
two months old;

(c) The company should have no overdue loan or defaults in the report
obtained from the Credit Information Bureau (CIB) of the State Bank of
Pakistan (SBP), and the said report should not be more than two months
old; and

(d) As per the latest audited balance sheet, the company maintains a
minimum current ratio of 1: 1 and debt/equity ratio of 60: 40.

Explanation For the purpose of this paragraph, equity shall mean the
paid-up capital plus free reserves as defined in rule 5 of the Companies (Issue
of Capital) Rules, 1996 minus accumulated losses as per the latest audited
balance sheet of the company.

4. Minimum and maximum period of commercial paper
(a) The commercial paper shall be issued for maturities between 30 days
and one year from the date of subscription.

(b) If the maturity date happens to be a holiday, the company shall be
liable to make payment on the immediate following working day.

(c) Commercial paper may be rolled over at maturity subject to the written
consent of the investor(s) provided a clause to this effect is mentioned
_____________________________________________________________________________________________
Page 5 of 10
on the commercial paper and in the terms and conditions of the
agreement under which the commercial paper has been issued and the
issuer fulfills the requirement of clause 3 of the Guidelines at the time
of roll over. Further, the issuer may redeem the commercial paper
before maturity under the call option, if any, and the investor may ask
the issuer for early redemption under the put option, if any.

5. Minimum size and Denomination of commercial paper
(a) The minimum size of the issue of commercial paper shall not be less than
Rs.10 million.

(b) The commercial paper, in case of private placement, may be denominated
in Rs. 100,000 (face value) or in multiples thereof and in case of offer to
general public, may be denominated in Rs. 5,000 or in multiples thereof.

6. Ceiling on amount of issue of commercial paper
The aggregate amount of commercial paper raised by an issuer shall be within
the limit as provided by its Board of Directors in accordance with the
prudential regulations or the quantum indicated by the rating agency for the
specified rating, whichever is lower.

7. Mode of issue and discount rate
The commercial paper shall be in the form of a promissory note and be issued
at such discount to face value as may be determined by the issuer keeping in
view the prevailing T-Bill rates, KIBOR and its Credit Rating.

8. Issuer expenses:
A company issuing commercial paper shall bear the expenses of issue
including the fees payable to the advisor, the issuing and paying agent, the
dealers, the rating agency, and any other relevant charges connected with such
issue
_____________________________________________________________________________________________
Page 6 of 10
9. Investors in commercial paper
Commercial paper may be issued by way of Public offer and/or to Scheduled
Banks, Financial Institutions, and/or such other persons as are specified for
this purpose by the Commission by notification in the official gazette under
Section 120 of the Companies Ordinance, 1984.

10. Procedure for issue of commercial paper
(a) The issuer may appoint an adviser for assistance on the structure and
placement of the commercial paper issue.

(b) The issuer, shall thereafter appoint an IPA and, dealers if so desired,
for private placement/sale of the issue.

(c) The commercial paper issue in case of private placement must be
completed within a period of two weeks from the date on which the
issuer opens the issue for subscription. Any unsold portion of the issue
after two weeks of its opening for subscription shall not be issued. In
case of public offer it should be completed within the period as
specified in the Companies Ordinance, 1984.

(d) The initial investors in commercial paper shall pay through the issuing
and paying agent, the discounted value of the commercial paper by
means of crossed account payee cheque to the account of the issuing
company.

(e) The issuer shall intimate in writing to all initial investors and all
financial institutions, who have provided working capital limits to the
company, about the amount and tenure of the commercial paper issue,
and copies of such intimation should be provided to the issuing and
paying agent.

_____________________________________________________________________________________________
Page 7 of 10
(f) The issuer shall intimate to the Commission, the amount of
commercial paper actually issued, within three days of the closing of
subscription list.

11. Role and Responsibilities
The role and responsibilities of issuer, IPA and CRA are set out below:

(a) Issuer
The issuer shall ensure that the Guidelines and procedures laid down for
commercial paper issuance are strictly adhered to.

(b) Issuing and Paying Agent (IPA)
(i) IPA shall ensure that issuer has the minimum credit rating as
stipulated by the Commission and the quantum of amount raised
through issuance of commercial paper is within the limit as disclosed
in clause 3(b) and clause 6 respectively.

(ii) IPA shall ensure that the issuer has met all the regulatory
requirements as prescribed by the Commission and SBP before the
issue of commercial paper and shall communicate the same to the
Commission.

(iii) IPA has to verify all the documents submitted by the issuer viz.,
copy of Boards resolution, signatures of authorized executants (if
commercial paper is in physical form) and issue a certificate that
documents are in order. It should also certify that it has a valid
agreement with the issuer.

(iv) Certified copies of original documents verified by the IPA should be
held in the custody of IPA.

_____________________________________________________________________________________________
Page 8 of 10
(v) On the issue date, the issuing and paying agent would deliver the
commercial paper to investors against proof of payment and, at
maturity, having received funds from the issuer; it will effect
repayment on receipt of the commercial paper back from the
investors.

(vi) IPA shall make it clear to the investors in the offering document that
investors investment is subject to credit and other risks inherent in
such instruments and payment will be made to them only if the issuer
has made the funds available to IPA.

(vii) IPA shall inform the prospective investors that in case of any default
by the issuer IPA will not be in a position to seek recovery from the
issuer or initiate any action against the issuer either on its own or on
behalf of the investors.

(viii) In case of any default by the issuer, it will be the responsibility of the
IPA to promptly notify such default to the investors and the
Commission within five (5) working days of occurrence of such
default. For the purpose of these Guidelines, payment of only partial
amount shall also be considered default.

(ix) In case of partial payment by the issuer, IPA shall distribute the
received funds, among all the investors, on pro-rata basis. However,
while doing so, they shall take all necessary measures to safeguard
their position against any adverse consequences including
incorporation of this provision in the agreement executed between
the issuer and the IPA.

(c) Credit Rating Agency (CRA)
_____________________________________________________________________________________________
Page 9 of 10
(i) All eligible issuers shall obtain credit rating for issuance of
commercial paper from the credit rating agencies duly registered
with the Commission under the Credit Rating Companies Rules,
1995.

(ii) The CRA would ensure that the impact of the additional amount of
funding raised through commercial paper has been taken into
consideration while assigning the rating. Accordingly, CRA shall at
the time of rating, clearly indicate the circumstances in which the
rating shall be due for review. Such circumstances may include
amongst others roll over of commercial paper at maturity, fresh issue
of securities by the issuer, any other activity undertaken by the issuer
which would further reduce the minimum current ratio, debt-equity
ratio required to be maintained by the issuer under these Guidelines.

12. Payment of commercial paper
On maturity of commercial paper, the holder of the commercial paper shall
present the instrument for payment to the issuing and paying agent who,
having received funds from the issuer, shall effect payment through crossed
cheques.

13. Miscellaneous
(a) Commercial paper shall be transferable by endorsement and delivery.
However, the issuer at its absolute discretion may decline to accept
any purchaser or transferee of the commercial paper, unless a transfer
memo which records such transfer is submitted to the issuer. Upon
receipt of the duly completed transfer memo, the issuer shall record
such transfer in its books.

(b) The issuer will regard the last named endorsee(s) of the commercial
paper as the absolute owner(s) thereof and the issuer shall not be
_____________________________________________________________________________________________
Page 10 of 10
bound to take notice of any trust whether, expressed, implied or
constructive to which the commercial paper may be subject, save by an
order of a court of competent jurisdiction to recognize any trust or
equity affecting the title of the commercial paper or the monies
secured thereby.

(c) If any commercial paper issued pursuant to these Guidelines be worn
out or defaced, then upon production to the issuer, it may issue a fresh
commercial paper in lieu thereof, and if any commercial paper is lost
or destroyed then upon proof to the satisfaction of the issuer and on
such indemnity and/or such other requirements as the issuer may deem
adequate being given, a new commercial paper in lieu thereof may be
given to the person entitled to such lost or destroyed instrument. The
cost involved in issue of fresh Instrument will be payable by the
person entitled thereto.

14. Relaxation of the Guidelines
Where the Commission is satisfied that it is not practicable to comply with any
requirement of these Guidelines in a particular case or class of cases, the
Commission may, for reason to be recorded, relax such requirement subject to
such conditions as it may deem fit.

******

IN THE NAME OF ALLAH THE MOST BENEFICIENT, THE MOST
COMPASSIONATE

GUIDELINES FOR ISSUE OF CERTIFICATES OF MUSHARAKA FOR MODARABAS

The following guidelines are issued dated 7
th
Sept., 94 with the approval of the Religious
Board, constituted under section 9 of the Modaraba Ordinance, 1980, for allowing the
Modarabas to issue Certificates of Musharaka.

1. DEFINITION
(1) In these Guidelines, unless any thing is repugnant to the subject or context:

(a) Certificate means a certificate of definite denomination issued by the
Modaraba to the contributory acknowledging the receipt of money contributed by
him under these guidelines on the basis for arrangement described herein:

(b) Contributory means the holder of a valid Certificate.
( c ) Contributories Fund means the amount contributed by the Contributories
through the Certificates issued under these Guidelines.
(d)Modaraba means a legal entity established and floated under the Ordinance.
(e) Modaraba Fund means the daily product of the following, based on the
books of account of a Modaraba:
i) paid up fund of the Modaraba;
ii) revenue and capital reserves;
iii) un-appropriated profit; and
iv) accumulated losses, if any, which shall be deducted from the
aggregate of (i) , (ii) and (iii) above.
(f)Ordinance means the Modaraba Companies and Modaraba (Floatation and
Control) Ordinance, 1980.

(g)Principles of Sharia means the pertinent principles of Sharia as interpreted
by the Religious Board;
(h)Total Fund means the aggregate of Contributories Fund and Modaraba Fund
as defined in ( c ) and (e) above.

2. All the definitions, terms and expression used but not defined in these Guidelines
shall have the same meanings as in the Modaraba Companies and Modaraba
(Floatation & Control), Ordinance, 1980 and the Modaraba Companies and
Modaraba Rules, 1981.

3. SUPREMACY OF SHARIA

(1) In all matters relating to application of these Guidelines, Sharia shall be
absolutely supreme and over-riding in all respects.

(2) The management of a Modaraba authorized through these Guidelines to raise
capital through Certificates of Musharaka shall ensure that all the business
transactions and dealings undertaking by the Modaraba and its conduct in all
respects shall conform with Sharia. All the business arrangements and
agreements shall be in accordance with those approved by the Religious Board.

(3) None of the business undertaken by the Modaraba, financing arrangements
and transactions shall involve directly or indirectly any element of Riba.

(4) These Guidelines have been approved by the Religious Board in its meeting
held on September 07, 1994 and any change in these Guidelines shall be made
with the approval of Religious Board.

4. MUSHARAKA ARRANGEMENT

(1) The amount received by a Modaraba from the Contributories shall be invested
in the overall business activity of the Modaraba on the basis of full
participation in the profit and loss of the Modaraba;

(2) The profit and loss of the Modaraba shall be shared on following basis;
(i) Losses shall be shared by the Contributories and the Modaraba in
proportion of their fund in the total fund;
(ii) Upto 90% of the total profit shall be shared by the Contributories and
the Modaraba certificate holders in accordance with ratio declared by
the Modaraba and accepted by the contributory, and in the absence of
any such declaration in proportion of their respective contribution to
the total fund.

(3) Unless otherwise provided the profit and loss of the Modaraba shall be
determined at quarterly intervals. The quarterly profit and loss account of the
Modaraba shall be published in at least two national newspapers for the
information of this Musharaka Certificate holders.

(4) In case of loss resulting into winding up of the Modaraba, the payments out of
the realizable assets shall be made after discharging liability of creditors, to
the Musharaka Certificate holders and Modaraba Certificate holders.

(5) The Musharaka arrangements specified by the Modaraba shall clearly indicate
the frequency of distribution of profit or adjustment of losses to the
Musharaka Certificate holders i.e. quarterly, half yearly, annually or at
maturity. In all cases the concept of final determination and adjustment of
profit and loss at maturity against the total sum repayable to the Musharaka
Certificate holders must be clearly stated in all schemes of Musharaka
Certificate under these Guidelines.

5. APPROVAL BY THE RELIGIOUS BOARD

The Musharaka agreement as well as the certificate of Musharaka and any document
providing the terms and conditions of Certificate of Musharaka or pertaining to
mobilization of finances by the Modaraba shall be got approved by the Religious
Board.

6. FEATURES OF CERTIFICATE OF MUSHARAKA

(1) A certificate of Musharaka issued under these Rules shall be registered in the
name of Contributory/Contributories to who it is issued.

(2) The maturity period of Certificate of Musharaka shall not be less than three
months. However, the term of certificate must be specified at the time of
issue and shall be indicated in the certificate of Musharaka.

(3) The return on Certificate of Musharaka shall be determined and payable in
accordance with the Musharaka arrangements stated herein.

(4) The Certificates of Musharaka may be listed on the Stock Exchange or traded
over the counter.

(5) Any public notice or offer issued in connection with sale of Certificate of
Musharaka shall specify that the certificates are not guaranteed by the
Government and shall also include other conditions that the Registrar may
prescribe.

(6) The Certificates of Musharaka shall be transferable in the manner and upon
such conditions as are applicable to the Modaraba Certificates under the
Ordinance.

7. PURCHASE OF CERTIFICATES OF MUSHARAKA BEFORE MATURITY
BY THE MODARABA.

7.1 The Modaraba shall not redeem or encash certificates of Musharaka before its
maturity; however, in the case of certificates of Musharaka traded over the
counter the Modaraba may provide a facility of purchase of such certificates
of Musharaka on the basis of the guidelines specified hereunder:

7.2 Every Modaraba permitted by the Registrar to issue Musharaka Certificate
over the counter under these guidelines shall:
a) Appoint a Trustee to oversee the Musharaka Certificates redemption
reserve fund and use of fund for the purchase of Musharaka Certificates by
the Modaraba before maturity, and
b) Establish a Redemption Reserve Fund to provide for the scheme for
purchase of Certificates of Musharaka from such reserve fund, before
maturity.

8. THE TRUSTEES

8.1 The Trustee for the purposes of these guidelines shall be appointed from the
practicing members or firms of Chartered Accountants or the practicing members of
Cost and Management Accountants, Investment Banks, Commercial Banks and
DFIs.

8.2 The Trustee shall report any discrepancy or lack of compliance of these guidelines in
respect of the Musharaka Certificates redemption reserve fund or its usage for
purchase of Musharaka Certificates before maturity.

8.3 Any dispute between the Trustee and the Modaraba shall be referred to the Registrar
and his decision in such matter shall be final.

8.4 Any dispute pertaining to encashment of Musharaka Certificates before or after
maturity or arising between Modaraba and contributory shall be referred for decision
of Trustee and any party aggrieved of the said decision shall have the right of
representation before the Registrar whose decision on the representation shall be
final.

8.5 The maximum remuneration of trustee shall be 0.05% per annum of the total
Musharaka fund and may be paid quarterly.

9. MUSHARAKA CERTIFICATE REDEMPTION RESERVE FUND

9.1 The purchase of Musharaka Certificates out of Redemption Reserve Fund price
approved by the Trustee and posted by the Modaraba.

9.2 The minimum contribution to the Musharaka Certificates redemption reserve fund
shall be 5% of the amount of Musharaka Certificates outstanding.

9.3 The certificates purchased from the Redemption fund may be sold over the counter or
retained till maturity.

9.4 The Modaraba shall not exceed the purchase of certificates of Musharaka
commitment beyond the amount of the reserve fund.

10. SAFEQUARDS

10.1 State Bank of Pakistans Rules of Business for NBFIs including the exposure
limits will also apply to the Musharaka Certificates issued by the Modaraba.
10.2 Subject to Rule 3 of these Guidelines, in all cases International Accounting
Standards as adopted by the Government of Pakistan shall be followed.
10.3 A quarterly report on the Certificates of Musharaka issued by a Modaraba shall be
furnished to the Registrar within 10 days fro the close olf each quarter, as
prescribed by the Registrar.

11. CONDITIONS OF ELIGIBILITY

11.1 The following conditions of eligibility shall be fulfilled by the Modaraba for
the grant of consent by the Registrar to issue of Certificates of Musharaka.
(i) The prospectus of Modaraba as approved by the Religious Board
contains provisions for resource mobilization on Musharaka basis.

(ii) The paid up fund of the Modaraba is not less than fifty million rupees;

(iii) The Modaraba is actively engaged in business for a period of two
years and has obtained credit rating of minimum investment grade
from a credit rating agency registered with the Commission and such
credit rating shall be updated at least once every year during the
currency of the issue.

(iv) The corporate and fiduciary conduct of the Modaraba and the directors
of the Modaraba Company has been found to be satisfactory.

12. PERMISSION TO ISSUE MUSHARAKA CERTIFICATES

If the Registrar is satisfied that the Modaraba fulfills the conditions of eligibility as
published and the Modaraba has complied with the Modaraba Ordinance, Rules made
thereunder, these guidelines and requirements of its prospectus, he may consent to the
issuance of Certificates of Musharaka by the Modaraba.

FORMAT OF CERTIFICATE OF MUSHARAKA

ISSUED BY

_______________________________MODARABA

Managed by_________________________________(Co.)

Folio Number

Certificate Number

Distinctive Numbers (inclusive)

From To

Number of Musharaka Certificates

OPTIONAL TERMS (TO BE PRINTED AS APPLIED)
These certificates will be listed on the Stock Exchange.
These Certificates will be sold and purchased over the
Counter at _______________________________
Upto ______________% of total profit shall be shared
By the contributories and the Modaraba

Given under the common Seal of the Company

This __________________day_________________19_____________

__________ _______________________
DIRECTOR DIRECTOR/SECRETARY
This is to certify that

is/are the Registered Holders of fully paid
Musharaka Shares of Rupees_______ each as
mentioned and numbered in the appropriate
boxes on the left in _______Modaraba subject to
the term and conditions as specified in the
Guidelines for issue of Certificate of
Musharaka/Redeemable Capital Certificates for
Modaraba.

Memorandum of Transfers

Date of
Transfer
No. of
Transfer
Name of Transferee Register
Folio
Authorized
Signature
For

Director/Secretary
For

Director/Secretary
For

Director/Secretary
For

Director/Secretary
For

Director/Secretary
For

Director/Secretary
For

Director/Secretary
For

Director/Secretary
For

Director/Secretary

IN THE NAME OF ALLAH THE MOST BENEFICIENT, THE MOST
COMPASSIONATE

GUIDELINES FOR ISSUE OF CERTIFICATES OF MUSHARAKA FOR MODARABAS

The following guidelines are issued dated 7
th
Sept., 94 with the approval of the Religious
Board, constituted under section 9 of the Modaraba Ordinance, 1980, for allowing the
Modarabas to issue Certificates of Musharaka.

1. DEFINITION
(1) In these Guidelines, unless any thing is repugnant to the subject or context:

(a) Certificate means a certificate of definite denomination issued by the
Modaraba to the contributory acknowledging the receipt of money contributed by
him under these guidelines on the basis for arrangement described herein:

(b) Contributory means the holder of a valid Certificate.
( c ) Contributories Fund means the amount contributed by the Contributories
through the Certificates issued under these Guidelines.
(d)Modaraba means a legal entity established and floated under the Ordinance.
(e) Modaraba Fund means the daily product of the following, based on the
books of account of a Modaraba:
i) paid up fund of the Modaraba;
ii) revenue and capital reserves;
iii) un-appropriated profit; and
iv) accumulated losses, if any, which shall be deducted from the
aggregate of (i) , (ii) and (iii) above.
(f)Ordinance means the Modaraba Companies and Modaraba (Floatation and
Control) Ordinance, 1980.

(g)Principles of Sharia means the pertinent principles of Sharia as interpreted
by the Religious Board;
(h)Total Fund means the aggregate of Contributories Fund and Modaraba Fund
as defined in ( c ) and (e) above.

2. All the definitions, terms and expression used but not defined in these Guidelines
shall have the same meanings as in the Modaraba Companies and Modaraba
(Floatation & Control), Ordinance, 1980 and the Modaraba Companies and
Modaraba Rules, 1981.

3. SUPREMACY OF SHARIA

(1) In all matters relating to application of these Guidelines, Sharia shall be
absolutely supreme and over-riding in all respects.

(2) The management of a Modaraba authorized through these Guidelines to raise
capital through Certificates of Musharaka shall ensure that all the business
transactions and dealings undertaking by the Modaraba and its conduct in all
respects shall conform with Sharia. All the business arrangements and
agreements shall be in accordance with those approved by the Religious Board.

(3) None of the business undertaken by the Modaraba, financing arrangements
and transactions shall involve directly or indirectly any element of Riba.

(4) These Guidelines have been approved by the Religious Board in its meeting
held on September 07, 1994 and any change in these Guidelines shall be made
with the approval of Religious Board.

4. MUSHARAKA ARRANGEMENT

(1) The amount received by a Modaraba from the Contributories shall be invested
in the overall business activity of the Modaraba on the basis of full
participation in the profit and loss of the Modaraba;

(2) The profit and loss of the Modaraba shall be shared on following basis;
(i) Losses shall be shared by the Contributories and the Modaraba in
proportion of their fund in the total fund;
(ii) Upto 90% of the total profit shall be shared by the Contributories and
the Modaraba certificate holders in accordance with ratio declared by
the Modaraba and accepted by the contributory, and in the absence of
any such declaration in proportion of their respective contribution to
the total fund.

(3) Unless otherwise provided the profit and loss of the Modaraba shall be
determined at quarterly intervals. The quarterly profit and loss account of the
Modaraba shall be published in at least two national newspapers for the
information of this Musharaka Certificate holders.

(4) In case of loss resulting into winding up of the Modaraba, the payments out of
the realizable assets shall be made after discharging liability of creditors, to
the Musharaka Certificate holders and Modaraba Certificate holders.

(5) The Musharaka arrangements specified by the Modaraba shall clearly indicate
the frequency of distribution of profit or adjustment of losses to the
Musharaka Certificate holders i.e. quarterly, half yearly, annually or at
maturity. In all cases the concept of final determination and adjustment of
profit and loss at maturity against the total sum repayable to the Musharaka
Certificate holders must be clearly stated in all schemes of Musharaka
Certificate under these Guidelines.

5. APPROVAL BY THE RELIGIOUS BOARD

The Musharaka agreement as well as the certificate of Musharaka and any document
providing the terms and conditions of Certificate of Musharaka or pertaining to
mobilization of finances by the Modaraba shall be got approved by the Religious
Board.

6. FEATURES OF CERTIFICATE OF MUSHARAKA

(1) A certificate of Musharaka issued under these Rules shall be registered in the
name of Contributory/Contributories to who it is issued.

(2) The maturity period of Certificate of Musharaka shall not be less than three
months. However, the term of certificate must be specified at the time of
issue and shall be indicated in the certificate of Musharaka.

(3) The return on Certificate of Musharaka shall be determined and payable in
accordance with the Musharaka arrangements stated herein.

(4) The Certificates of Musharaka may be listed on the Stock Exchange or traded
over the counter.

(5) Any public notice or offer issued in connection with sale of Certificate of
Musharaka shall specify that the certificates are not guaranteed by the
Government and shall also include other conditions that the Registrar may
prescribe.

(6) The Certificates of Musharaka shall be transferable in the manner and upon
such conditions as are applicable to the Modaraba Certificates under the
Ordinance.

7. PURCHASE OF CERTIFICATES OF MUSHARAKA BEFORE MATURITY
BY THE MODARABA.

7.1 The Modaraba shall not redeem or encash certificates of Musharaka before its
maturity; however, in the case of certificates of Musharaka traded over the
counter the Modaraba may provide a facility of purchase of such certificates
of Musharaka on the basis of the guidelines specified hereunder:

7.2 Every Modaraba permitted by the Registrar to issue Musharaka Certificate
over the counter under these guidelines shall:
a) Appoint a Trustee to oversee the Musharaka Certificates redemption
reserve fund and use of fund for the purchase of Musharaka Certificates by
the Modaraba before maturity, and
b) Establish a Redemption Reserve Fund to provide for the scheme for
purchase of Certificates of Musharaka from such reserve fund, before
maturity.

8. THE TRUSTEES

8.1 The Trustee for the purposes of these guidelines shall be appointed from the
practicing members or firms of Chartered Accountants or the practicing members of
Cost and Management Accountants, Investment Banks, Commercial Banks and
DFIs.

8.2 The Trustee shall report any discrepancy or lack of compliance of these guidelines in
respect of the Musharaka Certificates redemption reserve fund or its usage for
purchase of Musharaka Certificates before maturity.

8.3 Any dispute between the Trustee and the Modaraba shall be referred to the Registrar
and his decision in such matter shall be final.

8.4 Any dispute pertaining to encashment of Musharaka Certificates before or after
maturity or arising between Modaraba and contributory shall be referred for decision
of Trustee and any party aggrieved of the said decision shall have the right of
representation before the Registrar whose decision on the representation shall be
final.

8.5 The maximum remuneration of trustee shall be 0.05% per annum of the total
Musharaka fund and may be paid quarterly.

9. MUSHARAKA CERTIFICATE REDEMPTION RESERVE FUND

9.1 The purchase of Musharaka Certificates out of Redemption Reserve Fund price
approved by the Trustee and posted by the Modaraba.

9.2 The minimum contribution to the Musharaka Certificates redemption reserve fund
shall be 5% of the amount of Musharaka Certificates outstanding.

9.3 The certificates purchased from the Redemption fund may be sold over the counter or
retained till maturity.

9.4 The Modaraba shall not exceed the purchase of certificates of Musharaka
commitment beyond the amount of the reserve fund.

10. SAFEQUARDS

10.1 State Bank of Pakistans Rules of Business for NBFIs including the exposure
limits will also apply to the Musharaka Certificates issued by the Modaraba.
10.2 Subject to Rule 3 of these Guidelines, in all cases International Accounting
Standards as adopted by the Government of Pakistan shall be followed.
10.3 A quarterly report on the Certificates of Musharaka issued by a Modaraba shall be
furnished to the Registrar within 10 days fro the close olf each quarter, as
prescribed by the Registrar.

11. CONDITIONS OF ELIGIBILITY

11.1 The following conditions of eligibility shall be fulfilled by the Modaraba for
the grant of consent by the Registrar to issue of Certificates of Musharaka.
(i) The prospectus of Modaraba as approved by the Religious Board
contains provisions for resource mobilization on Musharaka basis.

(ii) The paid up fund of the Modaraba is not less than fifty million rupees;

(iii) The Modaraba is actively engaged in business for a period of two
years and has obtained credit rating of minimum investment grade
from a credit rating agency registered with the Commission and such
credit rating shall be updated at least once every year during the
currency of the issue.

(iv) The corporate and fiduciary conduct of the Modaraba and the directors
of the Modaraba Company has been found to be satisfactory.

12. PERMISSION TO ISSUE MUSHARAKA CERTIFICATES

If the Registrar is satisfied that the Modaraba fulfills the conditions of eligibility as
published and the Modaraba has complied with the Modaraba Ordinance, Rules made
thereunder, these guidelines and requirements of its prospectus, he may consent to the
issuance of Certificates of Musharaka by the Modaraba.

FORMAT OF CERTIFICATE OF MUSHARAKA

ISSUED BY

_______________________________MODARABA

Managed by_________________________________(Co.)

Folio Number

Certificate Number

Distinctive Numbers (inclusive)

From To

Number of Musharaka Certificates

OPTIONAL TERMS (TO BE PRINTED AS APPLIED)
These certificates will be listed on the Stock Exchange.
These Certificates will be sold and purchased over the
Counter at _______________________________
Upto ______________% of total profit shall be shared
By the contributories and the Modaraba

Given under the common Seal of the Company

This __________________day_________________19_____________

__________ _______________________
DIRECTOR DIRECTOR/SECRETARY
This is to certify that

is/are the Registered Holders of fully paid
Musharaka Shares of Rupees_______ each as
mentioned and numbered in the appropriate
boxes on the left in _______Modaraba subject to
the term and conditions as specified in the
Guidelines for issue of Certificate of
Musharaka/Redeemable Capital Certificates for
Modaraba.

Memorandum of Transfers

Date of
Transfer
No. of
Transfer
Name of Transferee Register
Folio
Authorized
Signature
For

Director/Secretary
For

Director/Secretary
For

Director/Secretary
For

Director/Secretary
For

Director/Secretary
For

Director/Secretary
For

Director/Secretary
For

Director/Secretary
For

Director/Secretary


Islamabad, March 27, 2001.

LISTED COMPANIES (PROHIBITION OF INSIDERS TRADING) GUIDELINES

CHAPTER I
Preliminary

1. Short title and commencement.- (1) These guidelines may be called the
Listed Companies (Prohibition Of Insiders Trading) Guidelines.

(2) These shall come into force at once.

2. Definitions.- In these guidelines, unless the context otherwise requires:-

(a) "Act" means the Securities and Exchange Commissi on of Pakistan
Act, 1997;

(b) "associate" means an associate as defined in clause (ab) of sub-
section (1) of section 2 of the Ordinance;

(c) "Company" means a company as defined in clause (7) of sub-
section (1) of section 2 of the Companies Ordinance, 1984.

(d) "Commission" means the Securities and Exchange Commission of
Pakistan.

(e) "connected person" means any person who-

(i) is a director, as defined in clause (13) of sub-section (1) of
section 2 of the Companies Ordinance, 1984; or

(ii) occupies the position as an officer or an employee of the
company or holds a position involving a professional or
2
business relationship between himself and the company
and who may reasonably be expected to have an access to
unpublished price sensitive information in relation to that
company;

(f) "dealing in securities" means an act of buying, selling or agreeing
to buy, sell or deal in any securities by any person either as
principal or agent;

(g) "insider" means-

(i) a person who is a director, chief executive, managing agent,
chief accountant, secretary or auditor of a listed company or
the beneficial owner holding directly or indirectly not less
than 10% of the shares of a listed company; or

(ii) a person who, is or was connected with the company or is
deemed to have been connected with the company, and who
is reasonably expected to have access, by virtue of such
connection, to unpublished price sensitive information in
respect of securities of the company who has received or has
had access to such unpublished price sensitive information;

(h) "Listed" in relation to securities, means securities which have been
allowed to be traded on a stock exchange.
(i) "officer" means a person as defined in clause (24) of sub-section (1)
of section 2 of the Companies Ordinance, 1984 and includes an
auditor of the company;

(j) "Ordinance" means the Securities and Exchange Ordinance, 1969;

(k) "person is deemed to be a connected person" if such person-

3
(i) is a company under the same management or group or
any subsidiary company;

(ii) is an official or a member of a stock exchange or of a
clearing house of that stock exchange, or any employee
of a member of a stock exchange;

(iii) is an investment bank, share transfer agent, registrar to
an issue, Trustee of Term Finance Certificates,
Investment Advisor, Investment Company (closed end
mutual fund) or an employee thereof, or, is a member of
the Board of Directors of an investment company or a
member of the Board of Directors of the Asset
Management of an Investment Scheme (open-end
mutual fund) or is an employee having fiduciary
relationship with the company;

(iv) is a member of the Board of Directors, or an employee,
of a financial institution as defined in clause (15A) of
sub-section (1) of section 2 of the companies Ordinance
1984;

(v) is an official or an employee of a self-regulatory
organisation recognised by the Commission;

(vi) is a relative of any of the aforementioned persons; or

(vii) is a banker of the company.

(l) "stock exchange" means a stock exchange which is registered with
the Commission under section 5 of the Ordinance, 1969;

(m) "unpublished price sensitive information" in relation to a listed
security means any information which relates to the following
matters or is of concern, directly or indirectly, to a company, and
4
is not generally known or published by such company for general
information, but which if published or known, is likely to
materially affect the price, of securities of that company in the
market:-

(i) financial results (both half-yearly and annual) of the
company;

(ii) intended declaration of dividends (both interim and
final);

(iii) issue of shares by way of rights, bonus, etc.;

(iv) any major expansion plans or execution of new projects;

(v) amalgamation, mergers and takeovers;

(vi) disposal of the whole or substantially the whole of the
undertaking;

(vii) such other information as may affect the earnings of the
company; and

(viii) any changes in policies, plans or operations of the
company.

CHAPTER II
Prohibition on dealing, communicating or counseling

3. Prohibition on dealing, communicating or counseling by insiders.- No
person who is or has been, at any time during the preceding six months
associated with a company shall:

(i) either on his own behalf or on behalf of any other person,
deal in securities of a company listed on a stock exchange
5
on the basis of any unpublished price sensitive information;
or

(ii) communicate any unpublished price sensitive information to
any person, with or without his request for such
information, except as required in the ordinary course of
business or under any law; or

(iii) counsel or procure any other person to deal in securities of
any company on the basis of unpublished price sensitive
information.

4. Violation of provisions relating to insider trading.- A person who deals
in securities or communicates any information or counsels any person dealing
in securities in contravention of the provisions of paragraph 3 shall be guilty of
insider trading and shall be liable to penal action under section 15B of the
Ordinance.

CHAPTER III
Liability, Action by Commission on behalf of Issuer

5. Liability.- (1) Every connected person who purchases, sells or
otherwise deals in and with securities of an issuer with the knowledge of
unpublished price sensitive information with respect to the issuer that has not
been generally disclosed is liable to compensate the seller or purchaser of the
securities, as the case may be, for damages as a result of the trade unless,

(a) the connected person proves that the person reasonably believed
that the unpublished price sensitive information had been
generally disclosed; or

(b) the unpublished price sensitive information was known or ought
reasonably to have been known to the seller or purchaser, as the
case may be.
6

(2) Every insider who informs another person of unpublished price sensitive
information with respect to the issuer that has not been generally disclosed,
shall be liable to compensate for damages any person that thereafter sells
securities of the issuer to or purchases securities of the issuer from the person
that received the Information unless;-

(i) the person who informed the other person proves that the
informing person reasonably believed the unpublished price
sensitive information had been generally disclosed;

(ii) the unpublished price sensitive information was known or
ought reasonably to have been known to the seller or
purchaser, as the case may be; or

(iii) in the case of an action against an issuer or a person in
special relationship with the issuer, the information was
given in the necessary course of business;

(3) Any person who has access to information concerning the investment
program of a mutual fund in Pakistan or in the investment portfolio managed
for a client by an investment adviser and uses that information for his, her or
its direct benefit or advantage to purchase, sell or otherwise deal in and with
securities of an issuer for his, her or its account where the portfolio securities
of the mutual fund or the investment portfolio managed for the client by the
investment adviser includes securities of that issuer is accountable to the
mutual fund or the client of the investment adviser, as the case may be, for
any benefit or advantage received or receivable as a result of such purchase or
sale.

(4) Every person who is an insider or associate of an issuer that,-

7
(a) sells or purchases the securities of the issuer with knowledge of a
unpublished price sensitive information with respect to the issuer
that has not been generally disclosed; or
(b) communicates to another person, other than in the necessary
course of business, knowledge of unpublished price sensitive
information with respect to the issuer that has not been generally
disclosed.

(5) Where more than one person in a special relationship with an issuer is
liable under sub-paragraph (I) or (2) of this paragraph as to the same
transaction or series of transactions, their liability is joint and several.

(6) In assessing damages under sub-paragraph (1) or (2) of this paragraph,
the Court may consider,

(a) if the plaintiff is a purchaser, the price paid by the plaintiff for the
security less the average market price of the security in the twenty
trading days following general disclosure of the unpublished price
sensitive information; or

(b) if the plaintiff is a vendor, the average market price of the security
in the twenty trading days following general disclosure of the
unpublished price sensitive information less the price received by
the plaintiff for the security,

In addition to the above, the Court may consider such other measures of
damages as may be relevant in the circumstances.
8
6. Action by Commission on behalf of issuer

(1) Upon application by the Commission or by any person who was at the
time of a transaction referred to in sub-paragraph (1) or (2) of paragraph 5 or is
at the time of the application a security holder of the issuer, the Court may, if
satisfied that,

(a) the Commission or the person has reasonable grounds for
believing that the issuer has a cause of action under sub-
paragraph (4) of paragraph 5; and

(b) the issuer has failed to obtain prosecution of an action
commenced by it under paragraph 5,

make an order, upon such terms as to security for costs and otherwise as to
the Court seems fit, requiring the Commission or authorizing such person or
the Commission to commence or continue an action in the name of and on
behalf of the issuer to enforce the liability created by sub- paragraph (4) of
paragraph 5.

(2) Where an action under sub-regulations (3) or (4) of regulation 5 is,

(a) commenced;
(b) commenced and prosecuted; or
(c) continued,

by a board of directors of an issuer or the Court may order that the costs
properly incurred by the Board in commencing, commencing and prosecuting
or continuing the action, as the case may be, shall be paid by the issuer, if the
Court is satisfied that there were apparent grounds for believing the action was
in the best interest of the issuer and the security holders thereof.
9

(3) Where an action under sub-paragraph (3) or (4) of paragraph 5 is,

(a) commenced;
(b) commenced and prosecuted; or
(c) continued,

by a person who is a security holder of the issuer or the Court may order that
the costs properly incurred by such person in commencing, commencing and
prosecuting or continuing the action, as the case may be, shall be paid by the
issuer, if the Court is satisfied that,

(i) the issuer failed to commence the action or had commenced
it but had failed to prosecute it diligently; and

(ii) there are apparent grounds for believing that the
continuance of the action is in the best interest of the issuer
and the security holders thereof.

(4) In determining whether there are apparent grounds for believing that an
action or its continuance is in the best interest of an issuer and the
security holders thereof, the Court shall consider the relationship
between the potential benefit to be derived from the action by the issuer
and the security holders thereof and the cost involved in the prosecution
of the action.

(5) Notice of every application under sub-paragraph (I) or (2) of paragraph 5
shall be given to the Commission, the issuer or the mutual fund as the
case may be, and each of them may appear and be heard thereon.

10
(6) Every order made under sub-paragraph (I) or (2) of this paragraph,
requiring or authorizing the Commission to commence and prosecute or
continue an action, shall provide that the issuer or mutual fund, as the
case may be, shall co-operate fully with the Commissi on in the
commencement and prosecution or continuation of the action, and shall
make available to the Commission all books, records, documents and
other material or information known to the issuer or mutual fund or
reasonably ascertainable by the issuer or mutual fund relevant to such
action.

CHAPTER IV
Investigation

7. Investigation by the Commission.- (1) Where the Commission, on the
basis of the information available with it, is of the opinion that it is necessary
to investigate and inspect the books of account, other records and documents
of an insider and that of the member of a stock exchange for such a purpose, it
may appoint an enquiry officer for the said purpose.

(2) The purpose referred to in sub-paragraph (1) may include:-

(a) to investigate into the complaint received from an investor, market
intermediary or any other person on any matter having a bearing
on the allegations of insider trading; and

(b) to investigate suo-moto on the basis of its own knowledge or
information in its possession to protect the interest of investors
and the securities market.

11
8. Procedure for investigation.- (1) Before undertaking any investigation
under paragraph 7, the Commission shall provide an opportunity of being
heard with a reasonable notice to the insider for that purpose.

(2) Notwithstanding anything contained in sub-paragraph (1), where the
Commission is satisfied that in the interest of investors or in public interest no
such notice should be given, it may by an order in writing direct that the
investigation be taken up without such notice.

(3) On being empowered by the Commission, the enquiry officer shall
undertake the investigation and inspection of books of accounts, records and
documents of the insider. Such a person shall be bound to discharge his
obligations as provided in paragraph 9.

9. Obligations of insider on investigation by the Commission.- (1) It
shall be the duty of every insider, who is being investigated, to produce to the
enquiry officer such books of account and other documents in his custody or
control and furnish the statements and information relating to the
transactions in securities market within such time as the enquiry officer may
require.

(2) The insider shall allow the enquiry officer to have reasonable access to
the premises occupied by such insider and also extend reasonable facility for
examining any books, records, documents and computer data in the
possession of the stock broker or any other person and also provide copies of
documents or other materials which, in the opinion of the enquiry officer are
relevant.

(3) The enquiry officer, in the course of enquiry, shall be entitled to
examine or record statements of any member, director, partner, proprietor and
employee of the insider.

(4) It shall be the duty of every director, proprietor, partner, officer and
employee of the insider to give the enquiry officer all assistance in connection
with the investigation, which the insider may be reasonably expected to give.
12

10. Submission of Report to the Commission.- The enquiry officer shall
furnish enquiry report to the Commission within such time as may be
specified by the Commission.

11. Communication of findings, etc.- (1) The Commission shall after
consideration of the enquiry report communicate the findings to the insider
and he shall be given an opportunity of being heard before any action is taken
by the Commission on the findings of the enquiry report.

(2) On receipt of the explanation, if any, from the insider, the Commission
may call upon the insider to take such measures as the Commission may
deem fit to protect the interest of investors and in the interest of the securities
market and for due compliance with the provisions of the Act, the Ordinance
and the guidelines.

12. Appointment of Auditor.- Notwithstanding anything contained in
paragraph 6, the Commission may appoint an auditor who shall be a
practicing Chartered Accountant to investigate into the books of account or the
affairs of the insider:

Provided that, the auditor so appointed shall have the same powers of the
enquiry officer as stated in paragraph 6 and the insider shall have the
obligations specified in paragraph 9.

13. Directions by the Commission.- On receipt of the explanation, if any,
from the insider under sub-paragraph (2) of paragraph 11, the Commission
may without prejudice to its right to initiate criminal prosecution under
section 15B of the Ordinance, give such directions to protect the interest of
investors and in the interest of the securities market and for due compliance
with the provisions of the Act, the Ordinance and the guidelines, as it deems
fit for all or any of the following purposes, namely:-

13
(a) directing the insider not to deal in securities in any particular
manner;

(b) prohibiting the insider from disposing of any of the securities
acquired in violation of these regulations;

(c) restraining the insider to communicate or counsel any person to
deal in securities.

Securities and Exchange Commission of Pakistan
Securities Market Division
June 27, 2002
Guidelines for Preparation of Prospectus
The Securities Market Division of the Securities and Exchange Commission of
Pakistan had initiated a review of the prospectus and supporting documents to
improve the level of quality of disclosure and rationalize the supporting documents
that are submitted to the Commission. After consultation with the stakeholders viz.
issuers of securities, advisers & arrangers, and stock exchanges, the Commission has
made the following guidelines to help the issuers in providing a full, true, and fair
disclosure of all material information to a common investor.
1. Language & Sequencing
The language of the prospectus should be simple, clear, and brief. Relative emphasis
on and sequencing of different information in a prospectus should be from the
perspective of a common investor.
2. Risk Factors
The risk factors and management perception of these factors should be adequately
disclosed. Risk factors should include macro-economic risks, industry risks, company
specific risks, security specific risks etc. In addition, the issuer should make a clear
statement that all material risk factors have been disclosed. Where a security is
credit rated, the credit rating report shall be reported in full including the disclaimer,
if any.
3. Primary Purpose
The primary purpose of the issue should be explained in appropriate detail specifying
the use of the subscription proceeds.
4. Dividend Policy
The disclosure of dividend policy should be meaningful. It should be made explicit
whether the company intends to follow a consistent dividend payout policy or policy
of retention of profit etc.
5. Material and Immaterial Information
All material information such as change in key personnel, statement on capital
structure before and after the issue, management profile, etc. should be reported.
Immaterial information such as voting rights of TFCs, dividend policy of other
associated companies in which there is cross-directorship etc should not be
reported.
6. Publication of Prospectus in Urdu Language.
In order to further facilitate the investors, broaden the circulation and readability,
SEC would encourage publication of the abridged prospectus in Urdu language in
addition to English. The translation should be functional and words from English may
be borrowed, where necessary.
7. Use of Photos and Formatting
The prospectus being a legal document should not be used as a marketing tool. Its
layout should be simple and plain. Photos and fancy formatting are not to be used.
8. Expenses to the Issue
All material expenses to the issue should be disclosed in full including advisory &
arrangement fees, trustee fee, stamp duties, listing fee, SEC fee etc.
9. Elimination or Substitution of Supporting Documents
The list of supporting documents for approval of the Prospectus has been revised.
Therefore, the Issuers/Advisors need to provide only those documents, given in the
prescribed checklists, now available at www.secp.gov.pk.


No.SMD/CIW/Misc./08/20009 August 26, 2010

LISTOFDOCUMENTSTOBESUBMITTEDTOTHECOMMISSIONBYCOMPANIES
ALONGWITHAPPLICATIONFORAPPROVALTOISSUE,CIRCULATEANDPUBLISH
PROSPECTUS/OFFERFORSALEDOCUMENT

(For Equity Issues)

The following documents shall be submitted to the Commission alongwith application for
approvaltoissue,circulateandpublishprospectus/Offerforsaledocument.

S.No.
Document
Documentsrequiredtobesubmittedalongwithapplication:
1
ApplicationunderSection57(1)or62(1)oftheCompaniesOrdinance,1984(the
Ordinance)asthecasemaybe.
2 ApplicationmadetoStockExchange(s)alongwithcopyofenclosures.
3 Clearanceletterfromtheconcernedstockexchange(s).
4
Copy, both in hard and soft form of theProspectus/Offer for Sale Document duly
cleared by the stock exchange both in full and abridged with last page signed in
original by directors of the Company and duly witnessed and that of the
advertisement,ifany.
Affidavit,onNonJudicialStampPaper,fromtheChiefExecutive(CEO)&theChief
Financial Officer (CFO) of the Company and Offerer (where applicable) on
accuracy of the disclosures made in the prospectus, certified by the Oath
Commissioner.
6
Nonrefundableapplicationprocessingfeeinthefollowingmanner:
(i) In case size of the total issue including all types of securities is up to Rs.250
million,afeeofRs.25,000/
(ii) In case size of the total issue including all types of securities is more than
Rs.250millionanduptoRs.1,000million,afeeofRs.50,000/
(iii) Incasesizeofthetotalissueincludingalltypesofsecuritiesismorethan
Rs.1,000million,afeeofRs.100,000/
7
Undertaking on NonJudicial Stamp Paper from the Balloter, Transfer Agent
(Share Transfer Agent) and Underwriter(s) that they fulfill all the conditions of
rule4oftheBalloters,TransferAgents,andUnderwritersRules,2001.
8
Copiesofthecommitmentletter(s)/willingness/consent(s)of PreIPOInvestors
(whereapplicable).
9
Undertaking on NonJudicial Stamp Paper regarding no buyback/repurchase
agreementfromtheUnderwriters.
10 Form29dulycertifiedfromconcernedCompanyRegistrationOffice.
11
Confirmationthatissuedcapitalofthecompanydoesnotconsistofsharesissued
againstintangibleassets.
12
Affidavit,onNonJudicialStampPaper,fromCEO,Directors,CompanySecretary&
CFOoftheCompanyandOfferer(whereapplicable)thattheyhavefullydisclosed
alllegalproceedingspendingincourtoflawwhichmayhaveanadversematerial
impactonthebusinessoftheCompany,certifiedbytheOathCommissioner.
Any other document/information as may be required by the Commission for its

ownrecordorforinclusionintheprospectus.
DocumentsrequiredafterApprovalandbeforePublicSubscription:
13
Fiveprintedcopiesoftheprospectusalongwithcopiesofallthosenewspapersin
whichtheprospectushasbeenpublishedwithintwodaysofsuchpublication.
DocumentsrequiredafterApprovalandafterSubscription:
14
Report containing information about the public issue, advertisement of the
prospectus, subscription received, basis of allotment, refund made and related
matters,within30daysofthepublicoffer.

Note: The documents submitted in the form of photocopy, must be certified by the
Company Secretary or the CEO.

***

June 29, 2002
TERM FINANCE CERTIFICATES (TFCs) ISSUES
CHECKLIST OF DOCUMENTS FOR APPROVAL OF PROSPECTUS
S. No Name of Document

For All Companies

1. Application under Section 57(1) of Companies Ordinance, 1984
2. Application(s) made to Stock Exchange (s)
3. Clearance Letter(s) from concerned Stock Exchange (s)
4. Affidavit, on Non-Judicial Stamp Paper, from Chief Executive & Chief
Financial Officer on accuracy of disclosure, certified by Oath Commissioner
5. In case of subsequent tranches, an undertaking/affidavit, on Non-Judicial
Stamp Paper, from Chief Executive to the effect that basic
structure/features of the issue and/or instrument is/are in consonance with
the Prospectus approved by the Commission. If there is any
change/deviation, it should be clearly indicated in the said
undertaking/affidavit
6. Power of Attorney, on Non-Judicial Stamp Paper, in favor of consultants to
the issue, certified by Notary Public
7. Application filing and processing fee amounting to Rs.25,000/-
8. Draft full Prospectus (alongwith abridged prospectus, if any) with the last
page signed in original by all directors of the company and duly witnessed
9. Certificate from auditors under Section 53(1) of the Companies Ordinance,
1984 and statement on break-up value per share
10. Consent from Experts/Auditors under Section 55 of the Companies
Ordinance, 1984
11. Consents from Bankers to the issue
12. Consent from Balloter to the issue
13. Consent from Legal Advisor to the issue
14. Consents from Chief Executive and Directors
15. Consent from Company Secretary
16. Form-28 duly certified from concerned Company Registration Office (CRO)
17. Form-29 duly certified from concerned CRO
18. Feasibility Report and/or Information Memorandum
19. Copy of only one Investor Agreement in full, if the terms and conditions of
all the Agreements are same, along with key pages of others
20. Copies of Underwriting Agreements (if underwritten)
21. Certificate(s) on non-judicial stamp paper regarding no-buy-back / re-
purchase agreement from sponsors/sponsoring directors
purchase agreement from underwriters (if underwritten)
23. Audited Annual Accounts for the last five years
24. Full Credit Rating Report
25. Trust Deed
26. Letter of Hypothecation along with details of assets hypothecated
27. Full credit rating report from another Rating Agency, in case of issues of
one billion rupees or above and/or with lowest investment rating grade viz
BBB- (triple B minus), if so desired by the Commission
28. Undertaking from the Balloter, Transfer Agent (Registrar to the Issue) and
Underwriter(s) that they fulfill all the conditions of rule-4 of the Balloters,
Transfer Agents and Underwriters Rules, 2001
29. Copy of Memorandum and Articles of Association duly certified from the
concerned Company Registration office (CRO)
Additional Documents For Un-listed Public Companies
30. Copy of Certificate of Incorporation duly Certified from concerned CRO
31. Copy of Certificate of Commencement of Business duly Certified from
concerned CRO
32. Certificate from Auditors testifying subscription of sponsors money
33. Form-3 certified from concerned CRO
Documents required after Approval, before Subscription
35.
Auditors certificate confirming receipt of proceeds of subscription of TFCs
under Pre-IPO placement three days prior to the subscription date
36.
Application for clearance, of any advertisement in the press and/or
electronic media, inviting public subscription for TFC
37.
Ten printed copies of the Prospectus along with copies of all newspapers in
which the prospectus has been published within two days of the publication
Documents required after Approval, after Subscription
38. Supplemental Trust Deed and Letter of Hypothecation, where necessary
39.
Report containing information about the public issue, advertisement of the
Prospectus, subscription received, basis of allotment, refund made and
related matters, within 30 days of the public offer
40.
Statement regarding the payment of profit/interest on TFCs and
redemption of the principle amount, regularly on semiannual basis
Note: Copies of all the documents should be truly certified by the Company
Secretary.

NIC Building, Jinnah Avenue, Islamabad
Islamabad, November 20, 2002.
GUIDELINES FOR THE ISSUE OF TERM FINANCE CERTIFICATES (TFCs) TO
GENERAL PUBLIC
CHAPTER I
Preliminary
1. Short title and commencement.- (1) These guidelines may be called
GUIDELINES FOR THE ISSUE OF TERM FINANCE CERTIFICATES (TFCs) TO GENERAL
PUBLIC.
(2) These shall come into force at once.
2. Introduction and Scope: -
2.1 These guidelines set out the minimum information required to be disclosed in a
Prospectus (including full prospectus, abridged prospectus and supplement to the
prospectus) for offer of TFCs to general public (hereinafter referred to as issue, offer
or invitation) under Section 57 read with Section 120 of the Companies Ordinance,
1984 (the Ordinance).
2.2 These guidelines are made pursuant to sub-section (4) of Section 20 of the
Securities and Exchange Commission of Pakistan Act, 1997 in order to facilitate the
Issuers to disclose all such information and facts in the prospectus as are required
under Section 53 of the Ordinance and 2nd schedule to the Ordinance.
2.3 These guidelines are general in nature and should not be construed as the sole
criteria for disclosure. Directors, promoters and advisers to the issue shall have the
primary obligation and responsibility in relation to the contents of the Prospectus and
they should ensure that all such information and facts that are necessary for
assessment of the instrument, offered through the Prospectus, are disclosed.
3. Definitions.- (1) In these guidelines unless there is any thing repugnant in the
subject or context,-
(a) Abridged Prospectus, means the condensed form of the full
Prospectus.
(b) Commission means the Securities and Exchange Commission of
Pakistan.
(c) Green Shoe Option (GSO) means a pre-determined amount of TFCs
to be retained in case of over-subscription of the issue.
(d) Instrument means the Term Finance Certificate (TFC).
(e) Shelf Registration means the sanctioned amount of TFCs to be
issued in tranches over a period of time as specified in the Prospectus.
(f) Supplement to the prospectus means an updated condensed form of
the full prospectus for inviting public subscription through subsequent tranche(s).
(g) Term Finance Certificate means a debt instrument issued for the
purpose to raise fund in the form of redeemable capital.
(h) Tranche means an offer of a certain portion out of the total amount
of TFCs approved by the Commission.
(2) All other words and expressions used but not defined in these guidelines
shall have the same meanings as are assigned to them in the Companies Ordinance,
1984 (XLVII of 1984) and Securities and Exchange Ordinance,1969 (XVII of 1969)
CHAPTER II
Eligibility, Procedure and Contents of the Prospectus
4. Eligibility
A Public Limited Company is eligible to offer TFCs to the general public through
issue, publication and circulation of prospectus under section 57 read with section
120 of the Ordinance. The entity as well as the instrument should have a minimum
credit rating grade of Triple B Minus (BBB-) assigned by a credit rating agency
registered with the Commission under the Credit Rating Companies Rules, 1995.
5. Procedure
The issuer will be required to file an application with the Commission under Section
57 of the Ordinance for approval to issue, circulate and publish prospectus for offer
of TFCs to the general public. Before filing the application the issuer will be required
to fulfill the following requirements: -
i) In case of a new project, Expansion or Balancing, Modernization & Replacement
(BMR), a feasibility study should be conducted and a report should be prepared.
ii) Pre-IPO placement of TFCs should be finalized.
iii) Underwriting arrangements, if any, should be completed.
iv) Credit rating of the entity as well as the instrument from any rating agency
should be carried out.
v) Trustee, Bankers to the Issue, Balloters, Registrar (Transfer Agent) and Legal
Adviser to the Issue should be appointed.
vi) Clearance of the prospectus from the concerned stock exchange(s) should be
obtained.
vii) Auditors certificates as required under Section 53 of the Ordinance read with
clause 28(1) of Section 2 of Part-I of the 2nd schedule to the Ordinance should be
obtained.
6. Contents of the Prospectus
The prospectus should contain all material facts, information and disclosures as
required under Section 53 of the Ordinance, and 2nd schedule to the Ordinance.
However in order to facilitate the issuers the contents of the Prospectus have been
provided for guidance as per Annexure-I, Annexure-II and Annexure-III for full
Prospectus, abridged Prospectus and supplement to the Prospectus respectively. In
addition to these, the Commission may ask for disclosure of any material
information.
CHAPTER III
Risk Analysis, Categorization, Filing of Documents and Issuance of TFCs in
Tranches
7. Risk Analysis
7.1 The Prospectus should contain information about all material risks, contingent
or otherwise, associated with the lending to the issuer. Any risk disclosed in the
Prospectus should be accompanied by a statement indicating the likely impact that
the risk factors might have on the issuer and the instrument. If possible, the effects
should be quantified. The disclosure should include risks relating to the issuers
financial performance. Any subsequent material change must be reflected in the
supplement to the Prospectus, in case of subsequent tranche(s).
7.2 The material risks set out below are only a guide to some of the types of risks
that may apply to the issuer and the instrument. The issuer has an obligation to
disclose all material risks, contingent or other wise, in addition to those mentioned
below: -
(i) Risks associated with the nature of business of the issuer;
(ii) If the issuer has no operating history or its history is limited, the risks of
investing in a new or relatively new venture;
(iii) Risks arising from economic conditions and cycles that are significant or
peculiar to the issuer s business;
(iv) Risks relating to any form of government control or regulation that, when
changed, have financial consequences on the issuer;
(v) Risks relating to legal uncertainties concerning the issuers business or
operations or contractual agreements;
(vi) Risks relating to financial performance, like covenants under borrowing
facility, which limits the issuer/groups operating and financial flexibilities,
foreseeable capital commitments and indebtedness.
(vii) General Risks associated with the issue, instrument, Law & Order situation,
etc.
7.3 The risk factors should include a note at the end in bold letters stating the
following:- IT IS AFFIRMED THAT ALL MATERIAL RISK FACTORS HAVE BEEN
DISCLOSED TO THE BEST OF OUR KNOWLEDGE AND BELIEF AND THAT NOTHING
HAS BEEN CONCEALED IN THIS RESPECT.
8. Categorization of TFCs
The application for subscription of TFCs should be categorized as for Rs. 5,000/-, Rs.
25,000/-, Rs. 50,000/-, Rs. 100,000/- and in multiples of the highest category. The
TFCs offered to the general public should be allocated among different categories of
applications in the following manner:-
In case of Public Offer Up to Rs. 50 Million
Category of Application Reserve Allocation of TFCs
For and in multiple of Rs. 5,000/- 100% of the public offer
In case of Public Offer above Rs. 50 Million and up to Rs. 100 Million
1 For Rs. 5,000/- Minimum Rs. 50 million.
2 For Rs. 25,000/
3
For and in multiple of Rs.
50,000/-
The balance should be equally allocated
to each category .

In case of Public Offer above Rs. 100 Million
1 For Rs. 5,000/-
25% of the public offer, Minimum Rs.
50 million.
2 For Rs. 25,000/-
3 For Rs. 50,000/-
4
For and in multiple of Rs.
100,000/-
The balance should be equally
allocated to each category.

9 Filing of Documents
The issuer will be required to provide all necessary documents alongwith the
application for approval of the Commission. These documents have been listed at
Annexure-IV
10 TFC Issues under Shelf Registration
10.1 TFCs can be offered in tranches, however, in case of each subsequent
tranche, the issuer will not be permitted to alter the basic features/structure of the
issue and the instrument.
10.2 In a supplement to the prospectus for subsequent tranche(s) the issuer
cannot make any change except the followings;
i. The rate of return.
ii. List of institutional investors.
iii. Updation of the clauses of Income Tax, Withholding Tax, Wealth Tax, Zakat,
Capital Gain where necessary.
iv. Security & Trustee clauses.
v. Expenses of the issue.
vi. Advisors & Arranger
vii. Underwriters.
viii. Bankers to the Issue.
ix. Risk Factors.
x. Material Contracts.
xi. The information about companys progress and strategy may be up-dated.
xii. Financials may be up-dated.
xiii. Change in the percentage of Green Shoe Option
CHAPTER IV
Approval and General Requirements
11. Approval of Prospectus
The approval of Commission for issue, circulation and publication of prospectus shall
be valid for a period of 60 days from the date of sanction. The approval of
prospectus under Shelf Registration will be valid for a period mentioned therein,
however, the company shall submit supplement for approval of the Commission
before going public, for subsequent tranches.
12. General Requirement
I. Language & Sequencing
The language of the prospectus should be simple, clear, and brief. Relative emphasis
and sequencing of different information in a prospectus should be from the
perspective of a common investor.
II. Signatories to the Prospectus
The full Prospectus should be signed by every director of the company as required
under sub-section (3) of Section 57 of the Ordinance. The abridged prospectus as
well as the supplement should be signed by at least one director authorized by the
Board of Directors, Chief Financial Officer and the Company Secretary.
III. Availability of Application forms
Under the existing Laws, application form for subscription of TFCs are required to be
available with the stock exchanges at which the TFCs are to be listed and with its
members, the Bankers to the Issue and at the Registered Office of the Company. It
is advised that the said forms be made available to other stock exchange(s) as well
where the instrument is not listed.
IV. Refund of Subscription Money
Although under the law subscription money is required to be refunded within ten
days of the decision regarding acceptance of applications whereas the said decision is
required to be taken within ten days of the closing of the subscription list. It is
advised that the decision be made within seven days of the closure of the
subscription list and the subscription money is refunded to unaccepted or
unsuccessful applicants within five days of the said decision.
V. Underwriting
In case of Green Field Projects, Expansion or BMR, the issues are required to be fully
underwritten.
VI. Primary Purpose
The primary purpose of the issue should be explained in appropriate detail specifying
the use of the subscription proceeds.
VII. Publication of Prospectus in Urdu Language.
In order to further facilitate the investors, broaden the circulation and readability,
the Commission would encourage publication of the abridged prospectus and/or
supplement in Urdu language in addition to English. The translation should be
functional and words from English may be borrowed, where necessary.
VIII. Use of Pictures and Formatting
The prospectus being a legal document should not be used as a marketing tool. Its
layout should be simple and plain. Pictures and fancy formatting are not to be used.
IX. Expenses of the Issue
All material expenses of the issue should be disclosed in full including advisory &
arrangement fees, trustee fee, stamp duties, listing fee, SEC fee etc.
X. Listing of TFCs.
TFCs to be offered to general public should be listed at least on any one Stock
Exchange of the country.
XI. Credit Rating
a) The company shall have the instrument rated on continuous basis till its life
period and provide the rating to the Stock Exchange(s) where it is listed, the
Trustee, TFC holders and the Commission. The TFCs rating should also be disclosed
in the accounts of the company.
b) The issuer shall not change the Rating Agency without prior approval of the
Commission during the tenure of the TFC.
XII Creation of Redemption Fund
In order to protect interest of small investors, redemption reserve shall be created in
case of unsecured TFCs or bullet payment (repayment of principal in a single chunk
at maturity). Only small investors holding TFCs of the value of two hundred thousand
rupees or below will be eligible to be compensated, if found necessary, from this
fund.
XIII Market Maker
In order to make the TFCs more liquid, the issuers are encouraged to appoint a
Market Maker. The Market Maker shall give the offer and bid prices of TFCs daily in
the secondary market. A market maker may be a Brokerage House or an Investment
Bank.
XIV Trustee
Trustee shall be appointed by the issuer in all cases irrespective of the fact whether
the instrument is secured or not. The power, role, liabilities and responsibilities of
the Trustee shall be defined in the Security Trust Deed, as required under Section
119 of the Ordinance.
XV Features Of TFCs
The TFCs may have different features that should be disclosed in the prospectus.
These may include: -
i. Secured or un-secured
ii. Short Term (Maturity/ life upto 12 months)
iii. Long Term (Maturity/ life beyond 12 months)
iv. Role-over at maturity (containing call and put option)
v. Bullet payment i.e repayment of principle amount in one chunk
XVI Glossary of Defined Terms
Prospectus should provide a glossary of the abbreviations and technical terms, if any
used therein.

ANNEXURE-I
CONTENTS OF FULL PROSPECTUS FOR TFCS
1. Cover Page: -
The cover page of the prospectus should contains the following:-
i The words PROSPECTUS FOR PUBLIC OFFER OF TERM FINANCE CERTIFICATES
should be written on the top.
ii The following statement should appear near bottom; THE INVESTORS ARE
ADVISED IN THEIR OWN INTEREST TO READ THE CONTENTS OF THE
PROSPECTUS ESPECIALLY THE RISK FACTORS CAREFULLY BEFORE MAKING
ANY INVESTMENT DECISION
iii Credit Rating Grade alongwith name of Credit rating agency.
iv Total amount of TFCs, amount of respective tranche, if any, and amount to be
retained under Green Shoe Option, if any.
v Full name of the issuer. Logo/monogram, if any (optional).
vi Date of Publication of the prospectus;
vii Date of Subscription in bold letters.
viii Full name(s) of the underwriters;
ix Full name of the Adviser/Arranger/Lead manager
2. Table of Contents.
The contents of the prospectus should appear in the following order.
3. Part I
Approvals, Consents, & Listing
i. Approval of SECP
ii. Clearance of Prospectus by Stock Exchange
iii. Filing of documents with Registrar
iv. Listing on the Stock Exchange
4. Part II
TFCs and Related Matters
i. TFC Issue
ii. Opening & Closing of Subscription
iii. Investor Eligibility
iv. Minimum Amount of Application
v. Basis of Allotment of TFCs
vi. Refund of Money to Unsuccessful Applicants
vii. Minimum Subscription
viii. Issue and Dispatch of TFCs
ix. Transfer of TFCs in case of Physical Scrip and Transfer under book entry system
x. TFC Issued in Preceding Two Years
xi. Principal Purpose of the Subscription Money
xii. Instrument Registration
xiii. Redemption of TFCs
xiv. Call and put Options, if any
xv. Redemption Reserve
xvi. Zakat
xvii. Wealth Tax
xviii. Income Tax
xix. Withholding Tax
xx. Capital Gains Tax
xxi. Market Maker/Market Liquidity
xxii. Deferred Taxation
5. Part III
Underwriting, Commission, Brokerage & Other Expenses of the Issue
i. Underwriting
ii. No buyback/repurchase Agreement
iii. Underwriting Commission
iv. Commission to Banker to the Issue
v. Brokerage
vi. Expenses of the Issue
6. Part IV
History & Prospects
i. History
ii. Prospects
7. Part V
Risk
Factors
Regulatory, Liquidity, Reinvestment, Business Specific, Industry related,
Competitors, Suppliers, Consumers risk etc. Risks related to changes in Govt.
policies, Law and Order situation etc.
9. Part VI
Financial Information & Credit Rating Report
i. Auditor's Certificate under Section 53(1) read with clause 28(1) of Section 2 of
Part-I of the 2nd schedule to the Ordinance containing a statement on Break-up
Value per share of the issuer
ii. Auditor's Certificate on Issued, Subscribed, & Paid-up Capital
iii. Full Credit Rating Report
10. Part-VII

Trustee & Security
i. Security
ii. Trustee
iii. Trust Deed
11. Part VIII
Management of the Company
i. Management Information
ii. Number of Directors
iii. BOD (Name, Address, Designation, Other Directorships)
iv. Information in respect of dividend payments by group companies in which
directors of the issuers holding directorship.
v. Overdue Loans
vi. Power of Directors
vii. Profiles of Chairman, Chief Executive, MD, CFO, COO and Secretary of the
Company
viii. Qualification of Directors
ix. Remuneration of Directors
x. Benefits to Promoters & Officers during last two years
xi. Interest of the Directors
xii. Interest of the Director in Property acquired by the Company
xiii. Election of Directors
xiv. Borrowing Power
12. Part IX
Miscellaneous Information
a. Addresses of the Registered Office, Head office and Factory
b. Bankers to the Company
c. Bankers to the Issue
d. Auditors
e. Legal Advisor to the Issue
f. Advisors & Arrangers to the Issue
g. Balloter to the Issue
h. Material Contracts (Nature, amount and dates of different agreements
executed with respect to the issue and that of Trust Deed, Letter of Hypo; L.Cs
etc.)
i. Inspection of Documents & Contracts
j. Legal Proceedings
k. Indemnity
l. Capitalization of Reserves
m. Revaluation of Fixed Assets
n. Memorandum of Association
o. Vendors
p. Subsidiary Companies
q. Associated Companies and investment therein, if any, and latest market
value of the this investment
r. Registrar (Transfer Agent)
s. Tax Adviser
13. Part X
Application & Allotment Instructions
i. Allotment instructions
ii. Basis of Allotment
iii. List of Bankers to the issue and their Bank Code
iv. Code of Occupation
14. Part XI
Signatories to the Prospectus
List of the signatories to the prospectus and their signatures in original duly dated
and witnessed
15. Part XII
Memorandum of Association
16. Application Form
The Application Form should contains allotment instructions, basis of allotment, list
of bankers to the issue & their bank code and code of different occupations

17. Any other material information directed by the Commission should be
disclosed

ANNEXURE-II
CONTENTS OF ABRDIGED PROSPECTUS
Caption:
Contains word "Abridged Prospectus, name of issuer, total issue size, subscription
date(s), lead advisors and arranger; credit rating, and rating agency and approvals.
Part 1
Issuer - History including profile of management & sponsors
Part 2
i. Description of Issue, including rate of return
ii. Primary purpose of issue
iii. Break-up of the issue in Private Placement & Public Offer
iv. Options, if any - Call, Put, Green Shoe, Minimum Subscription
v. Return & Redemption Schedule(s) for smallest denomination
vi. Zakat & Taxes
vii. Listing(s)
viii. Market Maker(s)
Part 3
i. Risk Factors
ii. Underwriters
iii. Trustee & Responsibility
iv. Security & Negative Pledge
v. Redemption Reserve
vi. Overdue debt servicing liabilities
vii. Legal Cases
viii. Total Expenses to the issue
Part 4
a. Investor Eligibility
b. Denomination(s)
c. Bankers to the Issue
d. Issue, Dispatch & Transfer of TFCs
e. Address of the issuer

ANNEXURE-III
CONTENTS OF SUPPLEMENT TO THE PROSPECTUS
1. Cover Page: - The cover page of the supplement should contains the
following: -
i. The words SUPPLEMENT FOR THE SECOND/THIRD/(whichever is
applicable) TRANCHE OF THE FIRST/SECOND/THIRD/(whichever is
applicable) PUBLIC OFFER OF TERM FINANCE CERTIFICATES should be
written on the top.
ii. The following statement should appear near bottom;
THE INVESTORS ARE ADVISED IN THEIR OWN INTEREST TO READ THE
CONTENTS OF THE SUPPLEMENT ESPECIALLY THE RISK FACTORS
CAREFULLY BEFORE MAKING ANY INVESTMENT DECISION
iii. Credit Rating Grade alongwith name of credit rating agency
iv. Total amount of TFCs, amount of respective tranche, and amount to be
retained under Green Shoe Option, if any
v. Full name of the issuer, logo/monogram, if any (optional)
vi. Date of publication of the Supplement
vii. Date of subscription in bold letters
viii. Full name(s) of the underwriters
ix. Full name of the Adviser/Arranger/Lead manager

2. Table of Contents.
The contents of the Supplement should appear in the following order.
1. Approvals and list of documents filed with Registrar Joint Stock Companies
2. The Issuer
3. The Tranche
4. Principal purpose of the subscription money
5. Application Procedure
6. Underwriting and expenses of the issue
7. Contracts and Legal Cases
8. Summary of the financial statements
9. Summarized credit rating report
10. Security & Trustee
11. Application and allotment instructions
3. Approval and list of documents filed with Registrar Joint Stock
Companies
i. Approval of SECP and clearance from the stock exchange(s).
ii. List of documents filed with Registrar Joint Stock Companies.
iii. Total amount of the Issue and the amount and date(s) of previous tranche(s)
4. The Issuer
i. History/Background
ii. Project Information
5. The Tranche
i. The Total amount of TFC under shelf registration, the amount of previous
tranche(s), and the break-up of the amount of current tranche in to Pre-IPO and IPO.
ii. Green Shoe Option, if any.
iii. Denomination of TFCs
iv. Redemption of TFCs
v. Call and put Options, if any
vi. Zakat
vii. Wealth Tax
viii. Income Tax
ix. Withholding Tax
x. Capital Gains Tax
xi. Market Maker/Market Liquidity
xii. Deferred Taxation
xiii. Basis of Allotment of TFCs
xiv. Refund of Money to Unsuccessful Applicants
xv. TFC Issued in Preceding Two Years
xvi. Risk Factors
6. Principal purpose of the subscription Money
7. Application Procedure
i. Investor eligibility
ii. Opening & closing of subscription
iii. Bankers to the Issue
iv. Minimum amount of application
v. Availability of application forms
8. Underwriting and expenses of the issue
9. Contracts and Legal Cases
i. Legal Cases
ii. Material Contracts
iii. Inspection of Documents and Contracts
10. Summary of the financial statements
11. Summarized Credit Rating Report
12. Trustee & Security
i. Security
ii. Trustee
13. Application and Allotment Instructions
The Application Form should contain allotment instructions, basis of allotment, list of
bankers to the issue & their bank code and code of different Occupations
14. Any other material information as directed by the Commission should be
disclosed

ANNEXURE-IV
CHECKLIST OF DOCUMENTS FOR APPROVAL OF PROSPECTUS OF TERM
FINANCE CERTIFICATES
S. No. Name of Document
1. Application under Section 57(1) of Companies Ordinance, 1984
2. Application(s) made to Stock Exchange (s)
3. Clearance Letter(s) from concerned Stock Exchange (s)
4. Affidavit, on Non-Judicial Stamp Paper, from Chief Executive & Chief
Financial Officer on accuracy of disclosure, certified by Oath Commissioner
5. Power of Attorney, on Non-Judicial Stamp Paper, in favor of consultants to
the issue, certified by Notary Public
6. Application filing and processing fee of Rs. 25,000/-
7. Draft full Prospectus (alongwith abridged prospectus, if any) with the last
page signed in original by all directors of the company and duly witnessed
8. Certificate from auditors under Section 53(1) of the Companies Ordinance,
1984 and statement on break-up value per share
9. Consent from Experts/Auditors under Section 55 of the Companies
Ordinance, 1984
10. Consents from Bankers to the issue
11. Consent from Balloter to the issue
12. Consent from Legal Advisor to the issue
13. Consents from Chief Executive and Directors
14. Consent from Company Secretary
15. Form-28 duly certified from concerned Company Registration Office (CRO)
17. Feasibility Report and/or Information Memorandum
18. Copy of only one Investor Agreement in full, if the terms and conditions of
all the Agreements are same, along with key pages of others
19. Copies of Underwriting Agreements (if underwritten)
purchase agreement from sponsors/sponsoring directors
purchase agreement from underwriters (if underwritten)
22. Audited Annual Accounts for the last five years
23. Full Credit Rating Report
24. Trust Deed
25. Letter of Hypothecation along with details of assets hypothecated
26. Undertaking from the Balloter, Transfer Agent (Registrar to the Issue) and
Underwriter(s) that they fulfill all the conditions of rule-4 of the Balloters,
Transfer Agents and Underwriters Rules, 2001
27. Copy of Memorandum and Articles of Association duly certified from the
concerned Company Registration office (CRO)
28. Undertaking on non-judicial stamp paper from the directors of the company
that all legal proceedings other than ordinary routine litigations incidental to
the business of the company as described in clause 27 of the part-I of 2nd
schedule to the Companies Ordinance, 1984, have been disclosed in the
prospectus
29. Application for clearance, of any advertisement in the press and/or
electronic media, inviting public subscription for TFCs

Additional Documents For Un-listed Public Companies

30. Copy of Certificate of Incorporation duly Certified from concerned CRO
31. Copy of Certificate of Commencement of Business duly Certified from
concerned CRO
32. Certificate from Auditors testifying subscription of sponsors money
33. Form-3 Certified from concerned CRO
34. Form-27 duly Certified from concerned CRO

Documents required after Approval, before Subscription

35. Auditors certificate confirming receipt of proceeds of subscription of TFCs
under Pre-IPO placement three days prior to the subscription date
36. Ten printed copies of the Prospectus along with copies of all newspapers in
which the prospectus has been published within two days of the publication

Documents required after Approval, after Subscription
37. Supplemental Trust Deed and Letter of Hypothecation, where necessary
38. Report containing information about the public issue, advertisement of the
Prospectus, subscription received, basis of allotment, refund made and
related matters, within 30 days of the public offer
The Report to be submitted to the Commission within 30 days of the Public
Subscription should include information on the following:
1. Brief History and Financial Highlights of the Issuer;
2. Summary of the TFC Issue including; Amount (Pre-IPO and IPO),
Tenor, Return, green shoe option, Credit Rating, Listing etc.;
3. Sector-wise breakup of Private Placement Investors (Amounts and
percentage of total Pre-IPO);
4. Total number and amount of Applications received in response to the
Public Offer;
5. Odd Amounts or Multiple Applications received if any;
6. Refunds or Confiscation (of multiple applications if any);
7. Exercise of green shoe option; and
Sector-wise breakup of successful applicants in the public offer (Amount and
percentage of total public offer & Green shoe Option, if any).
39. Statement regarding the payment of profit/interest on TFCs and redemption
of the principle amount, regularly on semiannual basis

Note: Copies of all the documents should be truly certified by the Company
Secretary.

Guidelines on issueof shares discount
Dated: 18-3-2004.
1

PROFESSIONAL SERVICES & POLICY DIVISION

GUIDELINES ON ISSUE OF SHARES AT A DISCOUNT

These Guidelines will apply to issue of shares at a discount by any
company to whom the Companies (Issue of Capital) Rules, 1996 apply.

2. The following policy would be followed by the Commission while
considering the applications for issue of shares at a discount: -

(a) Discount shall be allowed only if the financial projections establish
that injection of the fresh capital will result in enough profits
enabling the company to amortize the discount within a period of
not more than 5 years.

(b) Issue of shares at a discount shall not be allowed to companies in
the financial sector where capital is proposed to be issued to meet
any prescribed equity/paid up capital requirements.

(c) Commission may impose such conditions as it may deem fit while
granting sanction under section 84 of the Companies Ordinance.
Such conditions may include the following:-

(i) that shares allotted to sponsors and directors at a discount
shall not be disposed off by allotees for a period of three
years.

(ii) that the percentage of shares held by the directors shall not
increase as a consequence of allotment made otherwise than
by way of right offer.
Dated: 18-3-2004.
2
3. The issuers desirous of issuing shares at a discount shall accordingly
submit adequate information/documents requisite, as below, for an early
decision by the Commission whether to grant or not to grant the sanction applied
for under sub-section (2) of section 84 of the Companies Ordinance 1984: -

A. Issue at discount to existing shareholders as a right issue.

(i) A statement signed by all the directors of the company (except
the nominee directors), who were present at the board meeting
in which the issue of shares at a discount was decided upon
stating that the funds in question are essentially required and
they have explored all other avenues of funding available and
shares at a discount are being issued as a last resort.

(ii) The details of issue of shares at par or at a discount in the last
five years stating purpose, utilization of funds and benefit arisen
to the company and its shareholders. The amount of capital
injected thereby and the increase in profit before tax in
consequence thereof shall be stated.

(iii) A certified copy of the notice of general meeting published and
circulated among the shareholders.

(iv) A copy of the statement annexed to the said notice in pursuance
of section 160 (1)(b) ibid; setting out information required under
that section and containing all the material facts concerning the
issue of shares at discount, including the matters listed in these
guidelines.

(v) A certified copy of Resolution passed in the general meeting
authorizing issue of shares at discount.

(vi) A certified copy of minutes of the respective general meeting
indicating the number of shareholders present in person or
through proxies.

Dated: 18-3-2004.
3
(vii) A certified copy of the underwriting agreement which shall inter
alia contain a clause that the underwriter shall subscribe or
arrange to subscribe any unsubscribed portion of the offer
within fifteen days of being called upon to do so by the company
alongwith a copy of due diligence report by underwriters. It
should be mandatory on the issuer to make available at its
registered office for inspection, the due diligence report of the
underwriters.

(viii) A copy of financial plan, projections and other information as
listed in rule 5(ii) of the Companies (Issue of Capital) Rules,
1996 alongwith the schedule of discount amortization.

(ix) In case of discount more than 10 percent, a copy of the project
appraisal report by a Development Financial Institution, a
commercial bank or an investment bank.

(x) Break-up value of the Companys share at the end of last
financial year as determined by the auditor. In case of discount
exceeding 10 percent, breakup value of shares based on
valuation of assets by a consulting engineer registered with
Pakistan Engineering Council may also be provided.

(xi) Audited annual accounts for the last three years along with
latest half yearly and quarterly accounts.

(xii) Turnover details and market share price of Companys share
during preceding 6 months.

(xiii) Details of advances/loans to the associated companies and
directors during preceding three years and justification thereof.

(xiv) Latest pattern of shareholding and variation in shareholding of
the shareholders, having 10% or more shares in the company in
the last six months and after the proposed issue.

Dated: 18-3-2004.
4
B. Issue of shares at discount by way of other than right
offer.

In addition to requirements laid in foregoing paragraph A above,
companies will be required to submit: -

(i) Significance of the project and its national importance, if
that forms the basis for the application.

(ii) If an arrangement has been made with a person to whom
shares are proposed to be allotted, a copy of the agreement/
consent of that person.

Dated: 18-3-2004.
1


GUIDELINES ON ISSUE OF SHARES AT A DISCOUNT

These Guidelines will apply to issue of shares at a discount by any
company to whom the Companies (Issue of Capital) Rules, 1996 apply.

2. The following policy would be followed by the Commission while
considering the applications for issue of shares at a discount: -

(a) Discount shall be allowed only if the financial projections establish
that injection of the fresh capital will result in enough profits
enabling the company to amortize the discount within a period of
not more than 5 years.

(b) Issue of shares at a discount shall not be allowed to companies in
the financial sector where capital is proposed to be issued to meet
any prescribed equity/paid up capital requirements.

(c) Commission may impose such conditions as it may deem fit while
granting sanction under section 84 of the Companies Ordinance.
Such conditions may include the following:-

(i) that shares allotted to sponsors and directors at a discount
shall not be disposed off by allotees for a period of three
years.

(ii) that the percentage of shares held by the directors shall not
increase as a consequence of allotment made otherwise than
by way of right offer.
Dated: 18-3-2004.
2
3. The issuers desirous of issuing shares at a discount shall accordingly
submit adequate information/documents requisite, as below, for an early
decision by the Commission whether to grant or not to grant the sanction applied
for under sub-section (2) of section 84 of the Companies Ordinance 1984: -

A. Issue at discount to existing shareholders as a right issue.

(i) A statement signed by all the directors of the company (except
the nominee directors), who were present at the board meeting
in which the issue of shares at a discount was decided upon
stating that the funds in question are essentially required and
they have explored all other avenues of funding available and
shares at a discount are being issued as a last resort.

(ii) The details of issue of shares at par or at a discount in the last
five years stating purpose, utilization of funds and benefit arisen
to the company and its shareholders. The amount of capital
injected thereby and the increase in profit before tax in
consequence thereof shall be stated.

(iii) A certified copy of the notice of general meeting published and
circulated among the shareholders.

(iv) A copy of the statement annexed to the said notice in pursuance
of section 160 (1)(b) ibid; setting out information required under
that section and containing all the material facts concerning the
issue of shares at discount, including the matters listed in these
guidelines.

(v) A certified copy of Resolution passed in the general meeting
authorizing issue of shares at discount.

(vi) A certified copy of minutes of the respective general meeting
indicating the number of shareholders present in person or
through proxies.

Dated: 18-3-2004.
3
(vii) A certified copy of the underwriting agreement which shall inter
alia contain a clause that the underwriter shall subscribe or
arrange to subscribe any unsubscribed portion of the offer
within fifteen days of being called upon to do so by the company
alongwith a copy of due diligence report by underwriters. It
should be mandatory on the issuer to make available at its
registered office for inspection, the due diligence report of the
underwriters.

(viii) A copy of financial plan, projections and other information as
listed in rule 5(ii) of the Companies (Issue of Capital) Rules,
1996 alongwith the schedule of discount amortization.

(ix) In case of discount more than 10 percent, a copy of the project
appraisal report by a Development Financial Institution, a

(x) Break-up value of the Companys share at the end of last
financial year as determined by the auditor. In case of discount
exceeding 10 percent, breakup value of shares based on
valuation of assets by a consulting engineer registered with
Pakistan Engineering Council may also be provided.

(xi) Audited annual accounts for the last three years along with
latest half yearly and quarterly accounts.

(xii) Turnover details and market share price of Companys share
during preceding 6 months.

(xiii) Details of advances/loans to the associated companies and
directors during preceding three years and justification thereof.

(xiv) Latest pattern of shareholding and variation in shareholding of
the shareholders, having 10% or more shares in the company in
the last six months and after the proposed issue.

Dated: 18-3-2004.
4
B. Issue of shares at discount by way of other than right
offer.

In addition to requirements laid in foregoing paragraph A above,
companies will be required to submit: -

(i) Significance of the project and its national importance, if
that forms the basis for the application.

(ii) If an arrangement has been made with a person to whom
shares are proposed to be allotted, a copy of the agreement/
consent of that person.

(1) Recognized body of professional accountants for the purpose of
appointment of CFO

(i) (a) The body of professional accountants has been
established in Pakistan under a special enactment of
the Federal Government and is fully operational
within the framework of the enactment.

(b) For entitlement of membership of the body, there
must be a basic condition of passing all parts of the
examination unless some exemptions are allowed
with restriction on passing some other examination
of equal or higher standard.

(c) The body is a self regulatory organization managed
by a representative National Council.

(ii) Bodies of professional accountants established in foreign
countries shall also be recognized subject to the following
conditions:-

(a) The body has been established under a special
enactment in the country of its origin.

(b) It is a member of International Federation of
Accountants (IFAC).

(2) Recognized Body of corporate/chartered secretaries for the
purpose of appointment of secretary in a listed company

(i) (a) It has been established in Pakistan under a special
enactment of the Federal Government and is fully
operational within the framework of the enactment.

(b) The body, not having been established in Pakistan
under a special enactment as per (a) above, has
come into existence through another legal
instrument, and has a detailed syllabus including the
subjects relevant to the job of secretary of a listed
company, like (i) accountancy; (ii) corporate laws;
(iii) mercantile laws; (iv) tax laws; (v) financial
management; (vi) information technology; and (vii)
corporate secretarial practices, etc. of the level of
post-graduate syllabi prescribed by recognized
universities of Pakistan.

(c) For entitlement of membership of the body, there
must be a basic condition of passing all parts of the
examination unless some exemptions are allowed
with restriction on passing some other examination
of equal or higher standard.

(ii) A body of corporate/chartered secretaries established in a
foreign country, provided such a body has been established
under a special enactment of the country of origin.

Internet Trading Guidelines
March 2005


1

1) Short Title and Scope: - (1) These Guidelines are called the Internet Trading
Guidelines, 2005.

(2) The scope of the Guidelines extends to all internet trading service
providers. The Guidelines shall not apply to proprietary trade
networks or private trading networks operated between a Stock
or Commodity Exchange and its members.

2) Definitions :- (1) In these Guidelines, unless there is anything repugnant in the
subject or context,
(a) Advanced Electronic Signature has the same meaning as given in
section 2(1)(e) of the Electronic Transactions Ordinance, 2002;
(b) broker means any broker registered with the Commission under
Broker and Agents Registration Rules, 2001 or under the
Commodity Exchange and Future Contracts Rules, 2004;
(c) Commission has the same meaning as given in section 2(2)(g) of
the Securities and Exchange Commission of Pakistan Act, 1997;
(d) Commodity Exchange has the same meaning as given in section
2(1)(cc) of the Securities & Exchange Ordinance, 1969;
(e) Electronic Signature has the same meaning as given in section
2(1)(n) of the Electronic Transactions Ordinance, 2002;
(f) Internet trading service provider means any person offering
trading service in securities through the internet under these
Guidelines ;
(g) person has the same meaning as given in section 2(1) (j) of the
Securities and Exchange Ordinance, 1969;
(h) Securities or Security has the same meaning as given in section
2(1)(l) of the Securities and Exchange Ordinance, 1969; and
(i) Stock or Commodity Exchange means :
(i) any Stock Exchange defined under section 2(1)(m) of the
Securities and Exchange Ordinance, 1969
(ii) any Commodity Exchange defined under clause 2(1) (cc) of
the Securities and Exchange Ordinance, 1969; and

(2) All other words and expressions used but not defined in these
Guidelines shall have the same meanings as are assigned to them in

2
the Companies Ordinance, 1984 (XLVII of 1984), the Securities
and Exchange Ordinance, 1969 (XVII of 1969) and the Securities
and Exchange Commission of Pakistan Act, 1997(XLII of 1997).

3) Commencement of Service : - (1) Prior to commencement of service every
internet trading service provider shall submit details to the Commission of the
service to be provided.

(2) Prior to commencement of service every internet trading service provider
shall demonstrate its ability to provide the service under these
Guidelines.

(3) Prior to commencement every internet trading service provider shall have
the systems, controls and procedures of the internet trading service
audited independently by an audit firm approved by the Commission.

(4) All existing internet trading service providers shall comply with these
Guidelines within six weeks of the date of issue of these Guidelines.

4) Service Requirements:- Every internet trading service provider shall ensure
that satisfactory arrangements are in place to:

(1) ensure confidentiality of information in such a way that information is
only accessible to an authorized person or system; and in particular
that satisfactory measures are in place to prevent:
(a) unwanted disclosure of inter alia persona l data, transactions,
activity and presence on the internet;
(b) misappropriation of IDs;
(c) impersonation, leading to unauthorised (illegal) transactions;
(d) unauthorised usage and inability to detect such malpractices in a
timely fashion and/or identify the perpetrator;
(e) attacks from third parties designed to interrupt the service or aimed
at the service becoming an agent for an attack against another web-
site ;
(f) analysis of data by unauthorized third parties.

(2) safeguard the integrity of the service including controls to prevent:
(a) non-compliance with laws, rules, regulations and Guidelines issued
by the Commission, leading to illegal transactions, fraud or
malpractice;

3
(b) presentation of incorrect data, whether unintentionally or
malevolently;
(c) false presentation, or the use of incomplete information for
transactions ;
(d) manipulation of data;
(e) viruses, leading to inter alia loss of data, unauthorized access to or
manipulation of data, unavailability or threat of unavailability of
systems;
(f) cyber extortion, selling or provision of data stolen from (or
illegally obtained from) service providers.

(3) ensure the availability of the service in the event that:
(a) the site is not reachable, and that there is no possibility to trade, or
to get or give information; or
(b) that parts of the site are not reachable either through a denial of
service attack or lack of capacity; or
(c) that the provider of the service is unable to give timely access to
the site or parts of the site.

(4) ensure that satisfactory alternative arrangements and contingency plans
are in place to ensure that business can continue in the event of a large-
scale disruption (Disaster Recovery Planning/Business Continuity
Planning);

(5) ensure that the identity of the person or system accessing the service is
properly verified by the use of PINs, passwords, electronic signatures
or such other approved mechanism so as to exclude unauthorized
access;

(6) ensure that satisfactory arrangements are in place so that a broker can
at all times uniquely identify each and every order during the different
stages of processing;

(7) ensure that orders placed through its systems are fairly allocated in
accordance with the rules of the relevant Stock or Commodity
Exchange;

(8) ensure that there is an effective audit trail to address risks arising from:
(a) the opening, modification or closing of a client account ;
(b) any transaction with significant financial consequences;
(c) any authorisation granted to a customer to exceed a limit;

4
(d) any granting, modification or revocation of systems access rights
or privileges.

5) Service Agreement/Arrangement:- Every internet trading service provider
shall :

(a) have an agreement with clients to whom it offers an internet
trading service that contains appropriate and prominent risk
disclosures highlighting the risks associated with internet
transactions ;

(b) have appropriate arrangements in place to assess a clients
suitability to undertake securities transactions via the
internet;

(c) have appropriate arrangements in place to approve a
clients account for day trading;

(d) have adequate risk management systems for controlling
exposure to internet clients and in particular for monitoring
margin trading;

(e) have an adequate number of suitably qualified staff to
control and monitor transactions and render clients services
in accordance with the rules and Guidelines;

(f) either have suitably qualified staff to operate and maintain
the systems used for internet trading services or have an
irrevocable agreement with a suitably qualified third party
service provider for the operation and maintenance of those
systems;

(g) be responsible for settlement of each and every trade
executed through the internet trading service.

6) Requirements by the Exchanges: - A Stock or Commodity Exchange may
specify its own requirements, in addition to these Guidelines , for allowing an
internet trading service provider to continue its business.

7) Client Identity: - Every internet trading service provider shall submit to the
Commission the details as to how it will satisfy itself as to the true identity of
a person opening an account and what measures it intends to take to ensure
that the account will be maintained and operated by the person opening the
account.

8) Security of Data:-. (1) To reduce the risk of third party interception of
information sent between a client's computer and the system of an internet
trading service provider , every internet trading service provider is required to
use some form of encryption.

5

(a) The encryption shall apply not only to orders being entered
but to any communication with clients that contains
confidential information.

(b) Every internet trading service provider is also required to
use a firewall to prevent intrusions by unauthorized persons
(e.g., a cracker or hacker, who may obtain unauthorized
access to a computer system by bypassing passwords or
otherwise breaching computer security).

(c) Every internet trading service provider shall ensure that its
system shall be configurable to allow auto-logoff in case of
inactivity of the trading terminal and the trading website.

(d) Every internet trading service provider shall demonstrate
that they have in place a written security policy based on or
containing these Guidelines as part of the ir security policy.

9) Operational Capacity: - Every internet trading service provider shall ensure
that its operational capacity is re-evaluated at regular intervals and every
internet trading service provider shall give the Commission details of the
procedures for undertaking such an evaluation, the time at which such an
evaluation will be undertaken, and a copy of the results of such evaluation.

10) Systems Modification: - Every internet trading service provider is required to
submit to the Commission, in advance, with information relating to any
significant changes to its systems or any changes to the functionality of its
systems identifying the areas and the reasons for the change.

11) Periodic Audit: - (1) Everyinternet trading service provider shall ensure that
its systems, controls and procedures are audited independently by an audit
firm approved by the Commission once every financial year.

(2) Every internet trading service provider shall submit report of the
auditor to the Commission within four months of the date of the close
of its financial year.

12) Customer Information:- (1) Every internet trading service provider shall
ensure that its system shall provide the following information in plain English
or Urdu language and in an easily accessible form:

(a) a basic explanation of securities trading; including
definitions of common terms used on the trading screen;

(b) a general statement and information regarding the manner
in which orders are accepted, processed, settled and cleared
via the internet;


6
(c) disclosure about the risks of securities trading, including
the risk of systems outages and failures and any alternative
means of placing orders;

(d) disclosure about the risks involved in trading securities in a
margin account;

(e) procedures to cancel pending orders during a system
failure;

(f) a glossary explaining key investment terms and concepts
such as;

(i) the differences between the various types of orders
that may be placed (e.g., a market order, a limit
order);

(ii) notice that a market order may be executed at a
price higher or lower than the quote displayed on
the website at the time of order entry;

(iii) an explanation of how the customer's orders are
executed;

(iv) any situations in which customers may not receive
an execution;

(v) any restrictions on the types of orders that
customers can place; and

(vi) how market volatility can affect customers' orders.

(g) the rules and Guidelines affecting inter alia client broker
relationship, arbitration rules , investor protection rules.

(h) a hyper link to the website/page on the website of the
relevant Stock or Commodity Exchange displaying
rules/Guidelines/circulars ; and

(i) a Terms of Use policy document which includes proper
and fair disclaimers.

(2) Every internet trading service provider shall ensure that its
ticker/quote/order book displayed will display the time stamp as well
as the source of such information against the given information.

13) Duplicate orders: - Every internet trading service provider is required to
ensure that its system has mechanisms to prevent executions of unintended
duplicate orders.


7
14) Independent assessment: - The Commission may employ technical experts
to undertake an independent assessment of the operational capacity and
security of a system.

15) Order/Trade Confirmation: - (1) Every internet trading service provider
shall ensure the trade confirmations and contract notes are sent to the client.
Subject to the rules and regulations of the Stock or Commodity Exchange,
these may be sent by email on condition that the broker:

(a) notifies the Stock or Commodity Exchange concerned of
the intention to use of electronic trade confirmations and/or
contract notes one month in advance; and
(b) obtains prior written consent from the clients concerned.
(2) Every internet trading service provider shall ensure that any trade
confirmations and/or contract notes sent by email shall be digitally
signed by Electronic Signature or Advanced Electronic Signature.

16) Outsourcing: - (1) Every internet trading service provider considering
entering into outsourcing arrangements with a third party supplier of internet
trading services shall ensure that they cannot contract out of their core
functions and regulatory obligations.
(2) Every internet trading service provider when negotiating an
outsourcing arrangement may, inter alia, consider the following:
(a) notification and reporting requirements;
(b) intellectual property and information ownership rights,
confidentialit y agreements and Chinese Walls ;
(c) the need for, and adequacy of, any guarantees or
indemnities;
(d) compliance with the internet trading service providers own
policies, for example on information security;
(e) arrangements to ensure business continuity and the extent
to which facilities that provide the outsourcing are or are
not available to provide business continuity for third
parties;
(f) approval process for changes to outsourcing arrangements;
and
(g) agreed conditions for terminating outsourcing
arrangements.

8
(3) Every internet trading service provider entering into outsourcing
arrangements with a supplier of internet trading services shall enter
into a service level agreement that includes:
(h) qualitative and quantitative performance targets;
(i) evaluation of performance, for example by third parties,
internal audits, self certification; and
(j) remedial action and escalation processes for dealing with
inadequate performance.
(4) Every internet trading service provider that enters into an
outsourcing arrangement with a supplier of internet trading
services shall have appropriate contingency arrangements in
place in the event that the supplier of the service is unable to
continue to provide a service.

17) Monthly reporting: - Every internet trading service provider shall provide
monthly reports to the Commission on the reliability of the service. These
reports must show:

(a) number of users of the system as at the end of the month:

(i) for Stock or Commodity Exchanges this is number
of brokers;

(ii) for brokers this is the number of clients.

(b) daily average number of transactions (of all types)
processed by the system during the month and the highest
number of transactions processed by the system on a single
day during the month;

(c) percentage of the scheduled time for availability for which
the service was not available; and

(d) reason for non-availability.

18) Dispute Resolution: - In case of any dispute arising between Broker and
Broker, and Broker and Client, the matter will be resolved in accordance with
the existing procedures of arbitration and dispute resolution of the Stock or
Commodity Exchange.

19) Cooperation with Commission: - (1) To assist the Commission in
investigating instances of suspected market abuses such as insider trading and
market manipulation, internet trading service providers shall provide full and
prompt responses to all requests for information by the Commission.


9
(2) Every internet trading service provider shall ensure that information
displayed on its website is kept in an accessible form for a minimum
of twelve months.


10
Guidance Notes

Clause Guidance Note
1 Scope The scope of the Guidelines extends to trading
through the Internet. The Guidelines do not apply
to proprietary trading networks or private trading
networks operated between an exchange and its
members. However, the Guidelines do apply if
that trading service is Internet based and extends
beyond the member to clients of the member. If
in doubt, exchanges and/or their members should
consult with the Commission.
3(1) Prior to commencement of
service every internet trading
service provider shall submit
details to the Commission of the
service to be provided.

Internet trading service providers are required to
provide details of the service to be offered and
must demonstrate compliance with the
Guidelines. The Commission will not prescribe
what systems should be implemented for internet
trading as this would tend to stifle innovation.
Instead, the Commission will satisfy itself that the
systems to be used have adequate controls and
procedures in place to ensure confidentiality of
information, integrity and availability of the
service; together with contingency plans in the
event of a loss of service.

Internet trading service providers should state
details and/or examples of how the internet
trading service provider is ensuring
confidentialit y of information; how the internet
trading service provider is safeguarding the
integrity of the service; what plans the internet
trading service provider has for enabling clients
to continue to trade in the event of a temporary
loss of service; what plans the internet trading
service provider has for coping with a disaster
scenario such as loss of premises hosting the
service etc.
3(3) Prior to commencement every
internet trading service provider
shall have the systems, controls
and procedures of the internet
trading service audited
independently by an audit firm
approved by the Commission.

The audit of internet trading service providers
systems, controls and procedures must be
conducted by a firm drawnfrom a panel selected
by the Commission.
4(2) (a) presentation of incorrect
data, whether unintentionally or
malevolently;
(b) false presentation, or the
use of incomplete information
Concern has been expressed that delayed data
might be interpreted as inaccurate or false data.
The Commission will not take this view where
data has been delayed due to exceptional
circumstances. However, the Commission will

11
for transactions;

expect internet trading service providers to be
responsible for timeliness of distribution of data
from its central systems and the Commission will
in particular want internet trading service
providers demonstrate that all clients accessing
the systems are treated fairly and equally
depending upon their method of access.
4(2) (e) viruses, leading to inter alia
loss of data, unauthorized access
to or manipulation of data,
unavailability or threat of
unavailability of systems;
The Commission will expect internet trading
service providers to have effective anti-virus
software in place and that this will be updated in
accordance with the manufacturers
recommendations.
4(3) ensure the availability of the
service in the event that:
(a) the site is not reachable, and
that there is no possibility to
trade, or to get or give
information; or
(b) that parts of the site are not
reachable either through a
denial of service attack or
lack of capacity; or
(c) that the provider of the
service is unable to give
timely access to the site or
parts of the site.

The Commission will wish to see from the
internet trading service provider what
arrangements are in place for the temporary
interruption in the service either because the site
cannot be reached or that parts of the site cannot
be reached or that there is a degradation in
timeliness of access to the site or parts of the site.

This could be a dedicated telephone help desk or
other means of accepting orders from clients.

What is not acceptable is that the internet trading
service provider does not have alternative
arrangements in place.

The Commission will want to be satisfied that
alternative arrangements are in place and that
these have been notified to clients in advance.
5(a)

and

5(b)
have an agreement with clients
to whom it offers an internet
trading service that contains
appropriate and prominent risk
disclosures highlighting the
risks associated with internet
transactions;

have appropriate arrangements
in place to assess a clients
suitability to undertake
securities transactions via the
internet;

Brokers will be expected to have separate client
agreement letters for those clients to whom it
offers an internet trading service.

With online trading comes the increased
popularity of day trading which can pose unique
investor protection concerns. Individuals
engaging in day trading activities often trade their
accounts aggressively. However, the ability to
engage effectively in day trading requires not
only sufficient capital but also a sophisticated
understanding of securities markets and trading
techniques. Such investors should be made aware
that the risk of loss of capital can be very high.
5(e) have an adequate number of
suitably qualified staff to
control and monitor transactions
and render clients services in
The number and qualifications of the staff will
vary according to the service being offered but
clearly there must be staff employed or contracted
on a permanent basis who have the business and

12
accordance with the rules and
Guidelines ;

technical skills to be able to operate the service
on behalf of the internet trading service provider.
This would include staff who will provide
emergency cover and assistance in the event of a
temporary interruption in the normal service.
8(1) (a)The encryption should apply
not only to orders being entered
but to any communication with
clients that contains confidential
information.
Encryption should be such that it is designed to
prevent unauthorised interception of the
information by a third party during transmission
using an encryption and electronic signature
system that ensures the authenticity, integrity and
confidentiality of the information sent.
9 Every internet trading service
provider shall ensure that its
operational capacity is re-
evaluated at regular intervals and
every internet trading service
provider shall give the
Commission details of the
procedures for undertaking such
an evaluation, the time at which
such an evaluation will be
undertaken, and a copy of the
results of such evaluation.
The frequency of evaluation of operational
capacity will depend upon a number of factors
including the growth rate of the service being
provided by the internet trading service provider.
If growth is rising faster than all expectations,
operational capacity must the re-evaluated more
frequently to ensure that the service can meet
future growth. At minimum however, operational
capacity should be reviewed on at least an annual
basis.
provider is required to submit to
the Commission, in advance,
with information relating to any
significant changes to its systems
or any changes to the
functionality of its systems
identifying the areas and the
reasons for the change.

Rectification of software defects or minor
modifications to systems and software need not
be notified but any major upgrades to systems and
changes to the functionality of a system should be
notified to the Commission in advance.
provider is required to ensure
that its system has mechanisms
to prevent executions of
unintended duplicate orders.

Duplicate orders can happen when reports of fills
or order cancellations are significantly delayed
(by hours or even days) so that a customer may
assume that his/her initial order was not executed.
Duplicate orders have resulted in customers
placing unintended short sales or buying beyond
their available funds. Mechanisms to eliminate
duplicate orders may include (but are not limited
to):
i) the provision of trading status screens that
provide information as to whether an order
has been filled or is still pending;
ii) a "lock" on the securities, funds, or buying
power subject to a sell or buy request, which
is not removed until confirmation of the
cancellation is received from the
marketplace;

13
iii) automatic notification to investors of an
order pending in the same security whenever
they enter a new buy or sell order.

1
GUIDELINES FOR BANCASSURANCE - 2010

2
1. PREAMBLE

1.1 The advantages of a potential customer-base of banks and the trust their customers repose in
them has led to the phenomenal success of selling insurance products via banks, wherever
introduced.

1.2 Bancassurance the selling of insurance products by banks as distribution channels (on
behalf of the insurance companies) is yet to be defined in Insurance Ordinance 2000 (the
Ordinance).

1.3 Section 95 (2) of the Ordinance defines an insurance agent and Section 96(1) of the Ordinance
allows a corporate body to act as an insurance agent. These provisions of the laws are being
used by insurance companies to employ banks as their distribution channels in the role and
style of corporate insurance agents.

1.4 For ensuring the protection of the policyholders interest in respect of any insurance product
being offered to them through the banks, it is pertinent that Bancassurance be developed in an
orderly manner to efficiently deliver and distribute the insurance products and services to the
consumers.

1.5 It is envisaged to ensure, through these Guidelines, that the insurance products distributed
through the banks benefit the consumers by not only being cost-effective, but also facilitating
the consumer to compare the products being offered through Bancassurance arrangements
with similar products available in the market from other distribution channels. Further, the
consumers traditional trust and confidence in their banks demand enhanced product
transparency.

1.6 In these Guidelines, the word Takaful may be used interchangeably with the word
Insurance, Family Takaful with Life Insurance, General Takaful with Non-Life
Insurance, contribution with premium and Company & Insurer with Operator

2. Definitions
In these Guidelines, unless there is anything repugnant in the subject or context;

(a). Bancassur ance Agency Agr eement, called by whatever name or title, means a legal
contract between the Bank and the Insurer under which the former acts as the corporate
insurance agent of the latter, meeting all the requirements of the relevant provisions of the
Ordinance and relevant rules;

(b). Bancassur ance means the selling, marketing and distribution of insurance products
by Banks on behalf of an insurer under an agreement. This includes, but is not limited to,
insurance products which are (i) bundled with banking products, (ii) actively sold as
independent products through the branch banking network, (iii) actively sold through other
channels such as direct sales personnel of the Bank or Insurer, telemarketing, direct mail
shots, newspaper, ATM screens, website, email, SMS or (iv) sold through any other channel
that is recognized as an acceptable sales channel for banks by the State Bank of Pakistan;

(c). Bank, for the purpose of these guidelines, means:
i. a banking company as defined in Clause (vii) of Section 2 of the Ordinance; or
ii. a scheduled bank as defined in Clause (lvii) of Section 2 of the Ordinance; or
iii. any other institution or organisation directly or indirectly regulated by the State
Bank of Pakistan.

(d). Bank I nsur ance Executi ve means an employee of the Bank, called by whatever
name, title or designation, holding a responsible position with the delegated authority to be
directly responsible for managing the Bancassurance arrangement with the Insurer, for the
Bank, and who complies with the provisions of Section 96 (1) of the Ordinance. Such an
individual shall also be deemed to be complying with the provision of Section 97 of the
Ordinance.

(e). "Cer ti fi cati on" means the process by which a Specified Person is issued a certificate
jointly by the Bank and the Insurance Company entitling him to solicit and procure insurance
business on behalf of the Insurance Company under the Bancassurance Agency Agreement;

(f). Desi gnated I nsur ance Executi ve means an employee of the Insurer, called by
whatever name, title or designation, holding a responsible position with the delegated
authority to be directly responsible for managing the Bancassurance arrangement with the
Bank for the Insurer;

3

(g). I nsur ance Company or I nsur er means a company registered as an insurer
under the Ordinance;

(h) I nsurance Consultant means a Specified Person who is an employee of the
Insurance Company and is responsible for soliciting and procuring insurance business under
the Bancassurance Agency Agreement;

(i). Or di nance means the Insurance Ordinance, 2000 (XXXIX of 2000).

(j) Per si stency means the ratio of renewal premiums collected/paid in a policy year to the
premiums due in the same policy year (the premiums due being inclusive of any increase as a
result of a policy provision). This terminology applies from 2
nd
policy year and onwards of a
regular premium individual life policy, excluding annuity plans.

(k). Poli cyholder shall have the same meaning as given in Section 2(xlvi) of the
Ordinance.

(l). Pr acti cal tr ai ni ng includes orientation, particularly in the area of insurance sales,
service and marketing, as per the relevant provisions of the Ordinance, the Rules and the
directives issued by Securities and Exchange Commission of Pakistan (the Commission)
from time to time.

(m). Rules mean the Securities and Exchange Commission (Insurance) Rules 2002,
Insurance Rules 2002; and/or Takaful Rules 2005 or any other rule(s) issued under the
Ordinance.

(n). "Speci fi ed Person" means either an employee of the Bank or an employee of the
Insurance Company, who has undergone the required practical training, examination,
certification in respect of Bancassurance arrangement/product, and who is responsible for
soliciting and procuring insurance business for the Insurance Company under the
Bancassurance Agency Agreement;

All words and expressions used herein and not defined but defined in the Ordinance, or in
any of the subservient rules and regulations notified by the Commission shall have the
meanings respectively assigned to them therein.

3. Basis of Contract

3.1 An insurance contract is based on offer and acceptance.

3.2 The sale of all insurance products by any Bank (on behalf of an Insurer) must be done in such
a manner which demonstrates that the prospective purchaser makes an offer (either by
signing a proposal form or recording verbal consent) to enter into the insurance contract, and
either the Bank (being a corporate insurance agent) on behalf of the Insurer signifies
acceptance or the Insurer directly signifies acceptance.

3.3 Without the evidence of Offer and Acceptance, no insurance sale shall be deemed to be
completed and the insurance contract shall be considered null and void.

4. Bancassurance Arrangement between Insurer and Bank

4.1 Any Bancassurance arrangement shall not be valid unless it incorporates the following
components and is entered into in writing in the form of a Bancassurance Agency Agreement
which shall:

(a) not contain any provisions which reduce, in any way, the liability or responsibility of the
Insurer towards the Policy Holder under the Ordinance and Rules;
(b) specify any functions which the Insurer, as a part of such an arrangement, intends to
delegate to the Bank;
(c) clearly define the Certification process which shall include a definition of the training
required prior to certification; and
(d) contain a provision which clearly states the termination of agreement clause and
responsibilities of the Bank and Insurance Company subsequent to such termination.
This clause shall also state the treatment to be given to existing policyholders and
remuneration to the bank subsequent to the termination.

4
(e) contain a provision whereby the Bank explicitly agrees to adhere to the provisions of
these Guidelines and also the provisions of the Ordinance and Rules in its capacity as a
corporate insurance agent.

4.2. Premium Collection:

4.2.1 The Insurer may transfer the responsibility of collecting premiums due on policies,
once issued, to the Bank. Before it does this, however, the Insurer shall ensure that
the Bank has the necessary premium collection system, such as an automated direct
debit system, debit on credit cards, or any other system, in place. Should the Insurer
not be satisfied with the Banks capability to collect regular premiums and to
effectively follow up on premiums due but not paid, the premium collection function
shall be controlled by the Insurer.

4.2.2 The Insurer shall also ensure that the Banks premium collection system is effectively
working and, if it is not, shall take such action as is required to ensure that it is
effective in the future, including the withdrawal of the premium collection function
from the Bank.

4.2.3 The premium collection function shall be deemed to be ineffective if the premium
collection ratio, i.e. the ratio of premiums collected to premiums due, is less than
85% or any figure which the Commission may subsequently prescribe. The
terminology of Premium collection ratio in this paragraph is not intended to
address the aspect of persistency in the case of Life Insurance.

4.2.4 Every Bank shall, with a view to conserve the insurance business already procured
through it, make every attempt to ensure remittance of the premiums by the
policyholders within the stipulated time, by giving notice to the policyholder orally
and in writing, or through other means such as call centre, email or SMS. The Insurer
shall advise the Bank of its desired level of business persistency from time to time.
The Bank shall make all reasonable efforts to ensure that its systems and processes
are in place to meet these levels.

4.2.5 In the case of Life Insurance, the Insurer shall also ensure that notices under
Section 93 of the Ordinance are sent to the Policy Holder.

4.3. Marketing Brochures and Sales material

4.3.1 The content and layout of all marketing and sales related materials used to solicit
Bancassurance business shall be approved both by the Bank and the Insurer.

4.3.2 In all such material the relative roles of the Bank and the Insurer shall clearly be
stated at a prominent place. Such statement must particularly contain the fact that
the Banks role is that of a corporate insurance agent and that the Insurer is
responsible for all liabilities under the Policy.

4.3.3 Also, in all such material the name, address and contact details of the Insurer shall be
mentioned at a prominent place.

4.3.4 The market conduct rules and guidelines issued in respect of the insurance agent by
the Commission shall be observed by the Bank.

4.3.5 For Life Insurance, wherever applicable, Illustration of Benefits, based on the
prescribed format provided by the Insurer shall be signed by the Specified Person
and the intending Policyholder. Any insurance proposal, where the Illustration of
Benefits is missing, unsigned or is not based on the product parameters mentioned
in the proposal form, shall not be accepted by the Insurer.

4.4. Claims Handling

4.4.1 Under the arrangement claim adjudication and settlement shall be the responsibility
of the Insurer.

4.4.2 The Bank shall play a facilitating role by assisting the policyholder or nominee(s), as
the case may be, in claim processing. The contact details of the Insurer for claim
settlement shall be prominently displayed on the insurance contract and also be

5
made available by the Insurer to the Bank so that the information can be cascaded to
the policyholder or nominee(s) at the time of claim intimation.

4.4.3 The Bank shall facilitate the Insurer in all possible manner in collecting the necessary
documents and information related to claims, as requested by the Insurer. The Bank
shall not question the information requested by the Insurer for claim adjudication
and settlement, and shall not interfere with or influence the decision of the Insurer
regarding the payment or repudiation of a claim.

4.4.4 The Insurer shall make the claim settlement directly in the name of the policyholder
or his nominee, as the case may be.

4.5 Code of Conduct

4.5.1 Every Bank shall abide by the code of conduct, specified below:

(a). to ensure that the Bank Insurance Executive and all Specified Persons are
properly trained, as per the relevant provisions of the Ordinance and possess
sound knowledge of the insurance products they would market, and have
undergone the process of the Certification;
(b). to ensure that the Bank Insurance Executive and the Specified Person do not
make any misrepresentation or make misleading statement to the prospect on
policy benefits and returns available under the policy which may tantamount
to misleading or being deceptive under the relevant provisions of the
Ordinance in respect of the market conduct;
(c). to ensure that no prospect is coerced by the Bank Insurance Executive or
Specified Person to buy an insurance product;
(d). to give adequate pre-sale and post-sale advices to the prospective insured in
respect of the insurance product;
(e). to extend all possible assistance and cooperation to an insured/nominee in
completion of all formalities and documentation in the event of a claim; and
(f). to give due publicity to the fact that the Bank does not underwrite the risk or
act as an Insurer;

4.5.2 Every Bank Insurance Executive or a Specified Person shall also follow the code of
conduct specified below:

(a) to identify that the Bank is acting as an agent of the Insurer at every meet with
the prospect and shall always ensure mentioning the name of the Insurer to the
prospect;
(b) to disseminate the requisite information in respect of the insurance products
offered for sale by the Insurer and take into account the needs of the prospect
while recommending/tailoring a specific insurance plan;
(c) to indicate the premium to be charged by the Insurer for the insurance product
offered for sale;
(d) for an insurance product which is bundled with a bank product, mention the
cost of the insurance product and the bank product separately.
(e) to guide the prospect in completing the proposal form and also explain to him
the importance of disclosure of material information required under the
relevant insurance contract;
(f) to obtain the requisite documents at the time of completion of the proposal
form by the prospect and other documents subsequently asked by the Insurer
in connection therewith; and
(g) to render such assistance to the policyholder or claimant or nominee, as may
be required, in complying with the requirements for settlement of claims by
the insurer;

4.5.3 No Specified Person shall:

(a) solicit or procure insurance business without undergoing the Certification
process;
(b) give information to the prospect which deviates from the information provided
by the Insurer with regard to the insurance product;

6
(c) induce or misguide the prospect to avoid disclosing any material information
in the proposal form;
(d) induce or misguide the prospect to submit wrong information in the proposal
form or documents submitted to the Insurer for acceptance of the proposal;
(e) behave in a discourteous manner with the prospect;
(f) interfere with any proposal introduced by any other Specified Person or any
insurance agent of the Insurer;
(g) offer different rates, benefits, terms and conditions other than those agreed by
the Insurer;
(h) demand or receive a share of proceeds from the nominee under an insurance
contract;
(i) force a policyholder to terminate the existing policy and to effect a new
proposal from him within three years from the date of such termination; and
(j) become or remain a director of any insurance company;

5. Remuneration of Bank

5.1 The level of remuneration payable to the Bank for its role of soliciting and procuring
insurance business as corporate insurance agent may vary based on any performance criteria
which the Insurer and Bank may agree. The rates and structure of the remuneration shall be
clearly mentioned in the Bancassurance Agency Agreement.

5.2 Any remuneration paid by the Insurer to the Bank must be on premiums received by the
Insurer. Under no circumstances will remuneration, on premiums to be received in future, be
paid.

5.3 The Bank shall not charge, to the Policyholder, any service fee, processing fee, administration
charge or any other charge unless such a charge is required to be included by the Insurer in
the premium to be payable by the policyholder.

5.4 Nothing in 5.1 shall prevent the Insurer from sharing any third party costs incurred by the
Bank related to advertising or development of marketing material

5.5. The insurer shall always quote the gross premium rate to the policyholder and shall ensure
that no further charges are levied by the Bank. The insurer shall also, at the time of quoting
the gross premium rate, clearly specify the commission rate payable to the Bank as a corporate
insurance agent.

5.6 The following shall be applicable for Life Insurers, in addition to those stated above:

(a) The remuneration payable to the Bank shall be in the form as set out in these
Guidelines and shall not exceed the limits set out in section 7 of these Guidelines.

(b) Any sharing of third party costs incurred by the Bank related to advertising or
development of marketing material shall be subject to any limits prescribed in
section 7 of these Guidelines.

6. Pricing/Risk Assessment/Insurance Related Documents

6.1. Pricing of insurance products shall be the sole domain of the Insurer and the Bank
shall not interfere in this process.

6.2. Risk assessment and insurance underwriting shall also be the responsibility of the
Insurer and the Bank shall not interfere in this process.

6.3. If the Insurer has provided an automated underwriting software to the Bank to accept and
underwrite insurance proposals, the Bank may use the system based on the exact guidelines
provided by the Insurer. For insurance proposals underwritten through such a system, and
where the policy can be issued immediately without referring the proposal to the Insurer, the
Bank, based on the guidelines provided by the Insurer, may issue policy/certificate/document
to the policyholder.

7
6.4. The Bank shall abide by the guidelines provided by the Insurer for usage of the automated
underwriting computer system. Use of the system by any sales channel of the Bank does not
imply in any way, or entitle the Bank to pose or act as the insurance underwriter.

6.5 The Banks name shall not appear in the policy document as this could mislead or
deceive the buyer of the insurance product.

6.6 All requirements for new products (for life insurance), as mentioned in the Ordinance, shall
be complied with by the Insurer.

6.7 The Insurer shall submit a copy of the Bancassurance Agency Agreement that it has entered
into with the Bank for the record of the Commission. This requirement shall apply to both Life
and Non-Life Insurers.

7. Limits on Acquisition costs in respect of Life insurance products for
Bancassurance business

7.1. This section covers direct costs incurred by Life Insurers to procure Bancassurance business
such as commissions on premiums, sales and marketing incentives to banks, production
bonuses linked to premium, persistency bonus, and salaries and incentives to Insurance
Consultants

7.2. Savings Products refer to regular premium individual life insurance products which have a
savings or investment portion for the policyholder. This includes Investment Linked Unit
Linked policies, Investment Linked Account Value policies, Universal Life policies, and
With/without profits conventional endowment and whole life plans.

7.3. Protection Products refer to regular premium individual insurance products with no element
of savings or investments for the policyholder, such as term life policies.

7.4. Group Term Life Policies exclude Individual Life policies which may be sold to a group of
individuals.

7.5. Direct Sales Model
If a Bank uses its own sales force to market and distribute insurance products through its own
distribution channel then such a model shall be referred to henceforth as the Direct Sales
Model

7.5.1 Regular Premium Individual Life Plans (Savings Products and Protection Products)

(a) First year Commission to Bank (as % of first year collected premium):
Maximum 55% (The Insurer may, based on the product structure, link the
commission rate to the premium paying term of the policy, subject to the
condition that the maximum commission at any premium paying term shall
not exceed the above maximum limit).

(b) For the Banks efforts in collecting renewal premium, second year
Commission to Bank (as a % of the second year collected premium):
Maximum 5%

(c) For the Banks efforts in collecting renewal premium, third year onwards
commission to the Bank (as a % of the third year and onwards collected
premium): Maximum 2.5%

(d) Share in Investment Management Charge (as an alternative to second year
and onwards commission rate):
Starting from the second policy year onwards, for Investment Linked Unit
Linked and Investment Linked Account Value products, the insurer shall be
allowed to share with the bank, a part of the Investment Management Fee
as a % of the net asset value (NAV) of the underlying unit linked fund, or the
investment fund up to the extent of the fund attributable to the policies
procured through the Bank. The maximum share of the bank in the NAV
shall at any time not exceed 50% of the total Investment Management Fee
charged by the insurer on the fund to the extent of the policies procured
through the Bank, up to a maximum of 0.75% per annum of the NAV.

8
(e) Production Bonus:
An Insurer shall be allowed to pay Production Bonus to the Bank linked to
achievement of mutually agreed new business targets. This Production
Bonus shall be over and above the maximum commission rate mentioned in
7.5.1(a) above. The Production Bonus in aggregate as a % of the first policy
year collected premium shall not exceed 5%.

(f) Persistency Bonus:
For the Banks efforts in collecting renewal premium, and improving and
maintaining persistency, an Insurer shall be allowed to pay Persistency
Bonus to the Bank based on second policy year persistency rates over and
above the maximum commission rate mentioned in 7.5.1(b) above. The
Persistency Bonus in aggregate as % of the second policy year collected
premium shall not exceed 5%.

(g) The maximum commission payable, i.e. cumulative First year, Second year
and Third year onwards commission, as stated above, over the entire
premium paying term of a policy shall not exceed 105% of the average
annual premium collected over the policy period for a policy with premium
payment term of 20 years and more. For a policy with premium paying term
of 10 years, this limit shall be 80%. For policies with premium paying terms
between 10 and 20 years, or terms less than 10 years, these limits shall be
prorated according to premium paying term.

7.5.2 Single Premium Savings products:
Commission as % of single premium: Maximum 2%

7.5.3 Single Premium Term Life products, including mortgage plans

7.5.4 Single Premium immediate and deferred annuities:

7.5.5 Regular Premium annuities:
First year Commission to Bank (as % of first year collected premium): Maximum 10%
Second year onwards Commission to Bank (as % of 2
nd
year onwards collected
premium): Maximum 2.5%

7.5.6 Regular premium personal accident type policies
Commission as % of premium: Maximum 50%

7.5.7 Group Term Life Policies for retail customers of Bank, including yearly renewable
term policies, personal accident policies, credit life policies
Commission as % of collected premium to Bank: Maximum 50%

7.6. Sales and Marketing Incentives to Banks
To promote Bancassurance business, an insurer shall be allowed to share with the bank in the
costs of sales and marketing incentives. The share of the insurer in such activities shall not
exceed 5% of the first policy year collected premium.

7.7 Referral Model
If an Insurer uses its own Insurance Consultants to market and distribute insurance
products through the Banks distribution channel based on sales leads generated by the Bank,
such a model shall be referred to henceforth as the Referral Model.

7.7.1 The total direct acquisition expenses incurred by the Insurer in the first policy year
as commission to the Bank, salaries and commission to its Insurance Consultants,
sales and marketing incentives to the Bank or its Insurance Consultants and
Production Bonuses shall be within the aggregate of all first year limits prescribed in
7.5 and 7.6 above for each type of product.

7.7.2 The total second and third year onwards direct acquisition cost incurred by the
Insurer such as commission to the Bank and/or its Insurance Consultants, and
Persistency Bonus shall be within the aggregate of all second and third year onwards
limits prescribed in 7.5 and 7.6 above for each type of product.

7.7.3 The following shall apply to Regular Premium Individual Life Plans (Savings
Products and Protection Products), in addition to 7.7.1 and 7.7.2, where relevant:

9
(a) First year Commission to Bank (as % of first year collected premium):
Maximum 40%
(The Insurer may, based on the product structure, link the commission rate
to the premium paying term of the policy, subject to the condition that the
maximum commission at any premium paying term shall not exceed the
above maximum limit).

(b) For the Banks efforts in collecting renewal premium, second year
Commission to Bank (as a % of the second year collected premium):
Maximum 5%

(c) Persistency Bonus:
For the Banks efforts in collecting renewal premium, and improving and
maintaining persistency, an Insurer shall be allowed to pay Persistency
Bonus to the Bank based on second policy year persistency rates over and
above the maximum commission rate mentioned in 7.7.3(b) above. The
Persistency Bonus in aggregate as % of the second policy year collected
premium shall not exceed 2.5%.

7.8 An Insurer shall not give remuneration to a Bank in any manner other than as described
above in this section.

7.9. Regular reporting of Bancassurance business for Life Insurers
To enable the Commission to effectively monitor the implementation of this section of these
Guidelines, the Insurer shall once a year, along with the Statement of Maximum Management
Expenses as required under Sections 22(9) and 23(9) of the Ordinance, file an itemized
computation for each Bank and product based on the format prescribed in Annexure A. This
statement shall be certified by the external auditor and Appointed Actuary.

8. Applicability

8.1. These Guidelines shall apply on all new Bancassurance Agency Agreements signed on or after
February 1, 2010 and on existing Bancassurance Agency Agreements in force as on February 1,
2010

8.2. For existing Bancassurance Agency Agreements, the Bank and the Insurer shall make
amendments in the existing relationship, wherever necessary, to comply with these
Guidelines. Such amendments shall be completed no later than 30th April, 2010. The Insurer
shall send a written confirmation, signed by the Designated Insurance Executive, to the
Commission mentioning that the necessary changes have been completed and that the
relationship with the Bank complies with the guidelines.

8.3. In the case of Life Insurers, for the year 2010, the reporting, under 7.9, above shall be for
the period 1 May 2010 to 31 December 2010. For subsequent years, the reporting shall be
based on full calendar year starting on 1 January and ending on 31 December every year.

Gu i d el i n es

On

Qu a r t er l y Ac c o u n t s


Table of Contents

Chapter Page
No.
Introduction 1
1 Requirements of the Companies Ordinance, 1984 2
2 Requirements of the International Accounting Standards 4
3 Requirements of the Code of Corporate Governance 7
Illustration 8
General Information 12

This booklet is a guide only and should be read in conjunction
with the relevant legislation and pronouncements
1

INTRODUCTION

Timely and reliable financial reporting helps investors, creditors and other stakeholders
to understand an enterprises capacity to generate earnings and cash flows and its financial
condition and liquidity. This booklet is a guide to the laws and rules governing preparation of
quarterly accounts (interim financial statements) by all listed companies as required under the
Companies Ordinance, 1984 (the Ordinance). These guidelines shall also be followed by all
listed commercial banks, investment banks, insurance companies, modarba companies,
leasing companies etc. besides complying with the other requirements stipulated in the
relevant laws governing these companies.

The booklet highlights the topic under the following three laws:

1. The Companies Ordinance, 1984

Section 245 of the Ordinance lays down the provisions for the preparation and
transmission of quarterly accounts to the Members, Stock Exchanges, Registrar and the
Commission. Non-compliance with this statutory requirement attracts imposition of
heavy penalties. As such, it is important that the directors, CEO, CFO, Company
Secretary and any other persons responsible for preparation, approval and filing of
quarterly accounts are aware of the filing deadlines and other related legal
requirements.

2. International Accounting Standard 34 (Interim Financial Reporting)

International Accounting Standard (IAS)-34 (the Standard) prescribes the contents of
an interim financial report, including minimum disclosure requirements. It also
identifies the accounting recognition and measurement principles that should be
applied in an interim financial report.

3. Code of Corporate Governance

Code of Corporate Governance (the Code) enforced through the stock exchange
regulations also lays down provisions to be followed by the listed companies while
preparing quarterly accounts.

The following topics relating to quarterly accounts may be referred from the SECs Guide on
Accounts and Accounting Reference Dates:-

i). Preparing and filing quarterly accounts; and
ii). Contents of quarterly accounts.

2
CHAPTER 1

PROVISIONS OF THE COMPANIES ORDINANCE, 1984

Section 245 of the Ordinance sets out the provisions relating to transmission of
quarterly accounts by listed companies. According to the said Section:

Every listed company shall:

(a) Within one month of the close of first, second and third quarter of its year
of account, prepare and transmit to the members and the stock exchange in
which shares of the company are listed, a profit and loss account and a
balance-sheet as at the end of that quarter, whether audited or otherwise;
and

(b) Simultaneously with the transmission of the quarterly profit and loss
account and balance-sheet to the members and the stock exchange, file with
the Registrar and the Commission at least three copies of the same.

1.2 The cumulative figures for the half- year, presented in the second quarter accounts are
subject to a limited scope review by the statutory auditors. Such a review is not required for
the first and third quarter accounts. (Commissions Circular 16 dated December 11, 2002).

1.3 As regards authentication and contents of quarterly accounts, the provisions of sub-
section (1) and (2) of Section 241 of the Ordinance and IAS-34 as notified vide SRO.33
(I)/2000 dated January 27, 2000 shall apply to the quarterly accounts. (Commissions Circular
16 dated December 11, 2002).

1.4 The Commission, considering the practical difficulties faced by the companys
management, has granted a general relaxation of one month to the listed companies,
permitting them to circulate second quarter accounts with limited scope review by their
statutory auditors within a period of two months of the close of second quarter.
(Commissions Circular 9 dated March 19, 2003)

I .5 The listed companies finding it difficult to circulate quarterly accounts to their
shareholders, may in lieu thereof, publish quarterly accounts in two leading morning
newspapers, one in English and the other in Urdu language, having circulation in the
Province in which stock exchange on which the company is listed, is situate. Such
publication of quarterly accounts would be considered sufficient compliance with law as
regards transmission of quarterly accounts to the shareholders. Notwithstanding this option,
the listed companies must file quarterly accounts with the Commission, the Registrar and
transmit the same to the concerned stock exchange (s) as required under Section 245 of the
Ordinance. Further, they will also provide a copy of quarterly accounts free of cost, to
shareholders on demand. (Commissions Circular 16 dated December 11, 2002).

3
1.6 The listed companies have been allowed to place quarterly accounts on their website
subject to fulfillment of certain conditions, which will be treated compliance of the
provisions of Section 245 of the Ordinance. (Commissions Circular 19 dated April 14,
2004).

1.7 Sub-section (7) of Section 237 of the Ordinance requires that provisions of Section
245 of the Ordinance shall apply to a holding company for preparing interim consolidated
financial statements.

1.8 The quarterly accounts may be submitted through registered post or by delivery either
in person or through an agent, against an acknowledgement of receipt. However, they would
be deemed to have been received or delivered on the date, they are received by the
Commission. [Rules 8, 9 and 10 of the Companies (General Provisions and Forms) Rules,
1985].

1.9 Directors are encouraged to give directors review on the interim financial
statements which besides information about the affairs of the company and significant
events, specifically include reasons for incurring losses, if any, during the period and the
prospects of the company for the next quarter.

1.10 Who is competent to authenticate? The interim financial statements are required to
be approved by the Board of Directors (the Board"). The CEO and the CFO shall present the
financial statements, duly endorsed under their respective signatures, for consideration and
approval of the Board and the Board, after consideration and approval, authorize the signing
of financial statements for issuance and circulation. The interim financial statement s shall be
signed by the chief executive and at least one director. If the chief executive for the time
being is not in Pakistan, then the financial statements are to be signed by at least two
directors present in Pakistan. However, in the aforesaid case, a statement signed by such
directors explaining the reasons for non-authentication by the chief executive has to be
subjoined to the balance-sheet and the profit and loss account or income and expenditure
account. [Clause (xxiv) of the Code of Corporate Governance and Sections 241 & 245 of the
Ordinance].

1.11 What is the result of non-filing? If a company fails to comply with any of the
requirements of Section 245 of the Ordinance, every director, including chief executive and
chief accountant of the company would be liable to a fine not exceeding one hundred
thousand rupees and to a further fine of one thousand rupees for every day during which the
default continues.
4
CHAPTER 2

REQUIREMENTS OF THE INTERNATIONAL ACCOUNTING STANDARDS

It is mandatory for the listed companies, in terms of Sub-section (3) of Section
234 of the Ordinance, to follow the requirements of the Standard for the preparation of
quarterly accounts.

2.2 IAS-34 permits the companies to either publish a complete set of financial
statements in conformity with lAS-I or a set of condensed financial statements with
selected explanatory notes. Minimum contents of an interim financial report as per Para
8 of the Standard are as under:

a) condensed balance sheet;
b) condensed income statement/profit and loss account;
c) condensed statement showing either (i) all changes in equity, or (ii) changes in
equity other than those arising from capital transactions with owners and
distributions to owners;
d) condensed cash flow statement;
e) selected explanatory notes.

2.3 Where an entity publishes a set of condensed financial statements, it should
include at a minimum, each of the headings and sub totals that were included in the most
recent annual financial statements and selected explanatory notes. Additional line items
may be included if their omission would make the condensed financial statements
misleading to the users.

2.4 Basic and diluted earnings per share are to be presented on the face of the interim
income statement.

2.5 Following information should be included, as a minimum, in the notes to the
interim financial statements:

a) A statement that the same accounting policies and methods of computation are
followed as per the last annual financial statements, or in case of deviation the
nature and effect of the change;
b) Explanatory comments about the seasonality or cyclicality of interim operations;
c) Nature and amount of unusual items;
d) Nature and amount of changes in estimates;
e) Issuance, repurchase and repayment etc of debt and equity securities;
f) Dividend paid be separately reported for ordinary and other shares;
g) Segment results of primary basis of segment reporting;
h) Material events subsequent to interim period;
i) Changes in composition of enterprise during the period; and
j) Changes in contingent assets/liabilities since last annual balance sheet date

2.6 If an enterprises interim financial report is in compliance with this Standard, that
fact shall be disclosed. An interim financial report should not be described as complying
with the IAS unless it complies with all of the requirements of each applicable standard
and each applicable Interpretation of the Standing Interpretation Committee. Specific
5
disclosures of each IAS are not required in interim report where it includes condensed
financial statements.

2.7 Appendix A of the Standard illustrates the periods for which the interim
financial report is required to be presented:

(a) balance sheet as of the end of the current interim period and a comparative
balance sheet as of the end of the immediately preceding financial year;
(b) income statements for the current interim period and cumulatively for the current
financial year to date, with comparative income statements for the comparable
interim periods (current and year-to-date) of the immediately preceding financial
year;
(c) statement showing changes in equity cumulatively for the current financial year
to date, with a comparative statement for the comparable year-to-date period of
the immediately preceding financial year; and
(d) cash flow statement cumulatively for the current financial year to date, with a
comparative statement for the comparable year-to-date period of the immediately
preceding financialyear.

Illustration at the end of this booklet gives the guidance as to how the current and
comparative figures are to be reflected in the quarterly accounts.

2.8 Appendix B of the Standard provides examples of applying the general
recognition and measurement principles on certain specific items such as:

a) Employees payroll taxes and insurance contributions
b) Major planned periodic maintenance or overhaul
c) Provisions
d) Year-end bonuses
e) Contingent lease payments
f) Intangible assets
g) Pensions
h) Vacations, holidays and other short term compensated absences
i) Other planned but irregularly occurring costs
j) Measuring interim income tax
k) Difference in financial reporting year and tax year
l) Tax credits
m) Tax loss and tax credit carry backs and carry forwards
n) Contractual or anticipated purchase price changes
o) Depreciation and amortization
p) Inventories
q) Net realizable value of inventories
r) Interim period manufacturing cost variances
s) Foreign currency translation gains and losses
t) Impairment of assets

6
2.9 Appendix C of the Standard provides example of the following items where the
use of estimates can be made in preparation of interim financial statements:

a) Inventories
b) Classifications of current and non-current assets and liabilities
c) Provisions
d) Pensions
e) Income taxes
f) Contingencies
g) Revaluations and fair value accounting
h) Inter-company reconciliations
i) Specialized industries

7
CHAPTER 3

REQUIREMENTS OF THE CODE OF CORPORATE GOVERNANCE

Clause (xx) of the Code requires that the quarterly financial statements of listed
companies shall be published and circulated along with Directors review on the affairs
of the listed company for the quarter.

3.2 All listed companies shall ensure that half- yearly (second quarter) financial
statements are subjected to a limited scope review by the statutory auditors in such
manner and according to such terms and conditions as may be determined by the Institute
of Chartered Accountants of Pakistan and approved by the Securities and Exchange
Commission of Pakistan.

3.3 Only statutory auditors appointed to conduct the annual audit of a listed company
can carry out a limited scope review of the company's half- yearly (second quarter)
accounts (FAQ 25 of the Code).

3.4 As per Clause (xxxiii) of the Code, Audit Committee shall review the quarterly
financial statements of the listed company, prior to their approval by the Board, focusing
on:

major judgmental areas;
significant adjustments resulting from the review;
the going-concern assumption;
any changes in accounting policies and practices;
compliance with applicable accounting standards; and
compliance with listing regulations and other statutory and regulatory requirements
8
I LLUSTRATI ON

A. Listed Companies whose financial year-end is J une 30 will need to reflect the
current and comparative figures in their interim financial statements as under:

Balance Sheet As At ---------------

Quarter Current figures as at Comparative figures as at
1
st
Quarter September 30, Xl June 30, X1
2
nd
Quarter December 31, Xl June 30, Xl
3 Quarter March 31, X2 June 30, Xl

Profit and Loss Account for the Period Ended -------------

Current figures Comparative figures
Quarter
For the quarter ended Cumulatively up to
period ended
For the quarter ended Cumulatively up to
period ended

1
st
Quarter September 30, Xl - September 30, X0
2
nd
Quarter December 31, Xl December 31, Xl
(6 months)
December 31, X0 December 31, X0
(6 months)
3 Quarter March 31, X2 March 3l, X2
(9 months)
March 3l, Xl March 3l, X1
(9 months)

Cash Flow Statement for the Period Ended --------------

Statement of Changes in Equity for the Period Ended --------------

Quarter
Current cumulative figures up to
period ended
Comparative figures cumulatively
up to period ended
1
st
Quarter September 30, Xl
(3 months)
September 30, X0
(3 months)
2
nd
Quarter December 31, XI
(6 months)
December 31, X0
(6 months)
3 Quarter March 31, X2
(9 months)
March 31, XI
(9 months)

Quarter
Current cumulative figures up
to period ended
Comparative figures cumulati vely up to
period ended
1
st
Quarter September 30, Xl
(3 months)
September 30, X0
(3 months)
2
nd
Quarter December 31, XI
(6 months)
December 31, X0
(6 months)
3 Quarter March 31, X2
(9 months)
March 31, XI
(9 months)
9
Presentation of Statement of Changes in Equity (A Specimen):

A specimen for Statement of Changes in Equity for the period of nine months is given
below. Similar specimen may be used for other periods.

Statement of Changes in Equity
For the period of nine months ended on March 31, 2005

Amount in Rs. -------
Share
Capital
Capital
Reserve
Surplus on
revaluation
of fixed
assets
Unrealized
gain on
available for
sale
investment
General
Reserve
Accumulated
Profit / loss
Total
Balance as at July 1, 2003

Profit for the nine months
ended on March 31, 2004

Unrealized gain on available
for sale investment

Incremental depreciation for
the period nine months from
1.7.2003 to 31.3.2004

Interim Dividend

Bonus

Transferred to reserves

Balance as at March 31, 2004

Balance as at July 01, 2004

Profit for the nine months
ended on March 31, 2005

Incremental depreciation for
the period on nine months
1.7.2004 to 31.3.2005

Interim Dividend

Bonus during the period

Transferred to reserves

Balance as at March 31, 2005

10
B. Listed Companies whose financial year-end is September 30 will need to reflect
the current and comparative figures in their interim financial statements as under:

Balance Sheet As At --------------------

Profit and Loss Account for the Period Ended

Quarter
For the quarter
ended
Cumulatively up to
period ended
For the quarter
ended
Cumulatively up to
period ended

1
st
Quarter December 31, Xl - December 31, X0 --
2
nd
Quarter March 31, X2 March 31, X2
(6 months)
March 3l, Xl March 3l, X1
(9 months)
3
rd
Quarter June 30, X2 June 30, X2
(9 months)
June 30, X1 June 30, XI
(9 Months)

Cash Flow Statement for the Period Ended

Statement of Changes in Equity for the Period Ended------------

1
st
Quarter
December 31, Xl September 30, XI
2
nd
Quarter
March 31, X2 September 30, Xl
3
rd
Quarter
June 30, X2 September 30, Xl
Quarter
period ended
up to period ended
1
st
Quarter December 31, Xl
(3 months)
December 31, X0
(3 months)
2
nd
Quarter March 31, XI
(6 months)
March 31, X1
(6 months)
3
rd
Quarter June 30, X2
(9 months)
June 30, XI
(9 months)
Quarter
Current cumulative figures
up to period ended
Compar ative figures cumulatively
up to period ended
1
st
Quarter December 31, Xl
(3 months)
December 31, X0
(3 months)
2
nd
Quarter March 31, X2
(6 months)
March 31, X1
(6 months)
3
rd
Quarter June 30, X2
(9 months)
June 30, XI
(9 months)
11
C. Listed Companies whose financial year-end is December 31 will need to reflect
the current and comparative figures in the interim financial statements as under:

Balance Sheet As At ----------------

Profit and Loss Account for the Period Ended

Quarter
For the quarter
ended
Cumulatively up to
period ended
For the quarter
ended
Cumulatively up to
period ended

1
st
Quarter March 31, X2 - March 31, XI --
2
nd
Quarter June 30, X2 June 30, X2
(6 months)
June 30, X1 June 30, XI
(9 Months)
3
rd
Quarter September 30, X2

September 30, X2
(9 months)

September 30, X1

September 30, X1
(9months)

Cash Flow Statement for the Period Ended ---------------

Statement of Changes in Equity for the Period Ended ---------------

1
st
Quarter
March 31, X2 December 31, X1
2
nd
Quarter
June 30, X2 December 31, Xl
3
rd
Quarter
September 30, X2 December 31, Xl
Quarter
Current cumulative
figures up to period ended
up to period ended
1
st
(3 months)
March 31, Xl
(3 months)
2
nd
Quarter June 30, X2
(6 months)
June 30, Xl
(6 months)
3
rd
(9 months)
September 30, Xl
(9 months)
Quarter
period ended
up to period ended
1
st
(3 months)
March 31, Xl
(3 months)
2
nd
Quarter June 30, X2
(6 months)
June 30, Xl
(6 months)
3
rd
(9 months)
September 30, Xl
(9 months)
12
General Information

The companies are encouraged to disclose addresses of their Registered Office and
Factory along with telephone numbers and the names of following persons in their
corporate profile attached to the interim report:

Chief Executive
Directors
Auditors
Members of Audit Committee
Company Secretary
Chief Financial Officer
Share Registrar
Bankers

The quarterly accounts may be titled as:
Quarterly Accounts for the Period Ended--------------------

13

N.I.C BUILDING, JINNAH AVENUE, ISLAMABAD PAKISTAN
Ph: 051- 9207091-4 Fax: 051-9204915
E-mail: headquarters@secp.gov.pk
URL; www.secp.gov.pk

NIC BUILDING, BLUE AREA, ISLAMABAD
(Securities Market Division)
********

GUI DELI NES FOR APPOI NTMENT ON THE BOARD OF DI RECTORS OF
THE STOCK EXCHANGES

The composition of the Board of Directors (the Board) of the stock exchanges has
been reconstituted, in pursuance of the Securities and Exchange Commission of
Pakistans (SEC) directives dated August 13, and August 30, 2002 whereby the Board
shall now consist of 5 elected directors and four non-member directors to be appointed
by the SEC. Consequently it is felt expedient to issue the following guidelines for the
appointment of the four non-member directors on the Boards of the exchanges.

A. CRI TERI A FOR I NVI TI NG NAME(S) AND APPROVAL OF A PANEL BY
THE COMMI SSI ON

i) The Securities Market Division (SMD) of the SEC may request various
professional bodies to recommend a minimum of fifteen candidates for
consideration of their name for inclusion in the panel of professionals
from where nomination on the Boards of the exchanges would be made.
These bodies include, but are not limited to, the Management Association
of Pakistan, the Institute of Chartered Accountants of Pakistan (ICAP), the
Institute of Cost and Management Accountants of Pakistan (ICMAP),
Pakistan Banks Association, Investment Banks Association of Pakistan,
Modaraba Association of Pakistan, Leasing Association of Pakistan,
Mutual Funds Association of Pakistan and Pakistan Chapter of Investment
Professionals.

ii) The SMD may, itself recommend the names of reputable professionals to
the respective associations and with their consultation may draw a list of
candidates who could be considered for inclusion in the panel.

iii) The SMD Division may follow either procedure given in (i) & (ii) above,
or both, to select candidates for inclusion in the panel. However, the
Commission shall have the absolute power to place a suitable person
on the panel of persons to be considered for appointment as non-
members directors on the Board of the Exchanges.

iv) The existing non-member directors who are presently serving on the
Boards of respective stock exchanges shall stand included in the panel.

v) The SMD will, review the names of professionals received by it and
finalize a panel of minimum sixty persons from the nominations received
including those who are presently serving in the Board of the exchanges.

vi) The panel so constituted by the SMD shall be forwarded to the
Commission for approval. The Commission may, for reasons recorded in
writing, refer back name(s) to the SMD for review and submission of
other name(s) to the Commission for approval.

B. ELI GI BI LI TY CRI TERI A FOR NOMI NATI ON ON THE PANEL

A person shall be eligible for inclusion in the panel if he/she:

i. is a graduate from a recognized university or equivalent;
ii. has a professional qualification/University degree or diploma in
business, finance and management or a closely related discipline; and
iii. has at least 5 years of experience in matters relating to stock exchanges,
accounting, banking, investment advisory, management, economics,
fund management and IT etc;
No person shall be eligible for inclusion in the panel if he/she:
i. has been associated with any illegal banking business, deposit taking or
financial dealings;
ii. has been convicted of fraud or breach of trust or of an offence involving
moral turpitude or removed from service for misconduct;
iii. has been adjudged as insolvent or suspended payment of debts or has
compounded with his creditors;
iv. has betrayed lack of fiduciary behaviour and a declaration to this effect
has been made by the Court under section 217 of the Companies
Ordinance, 1984 at any time during the preceding five years; and

v. has been convicted by a court of competent jurisdiction as a defaulter in
payment of any loan to a banking company, a Development Financial
Institution or a Non-Banking Financial Institution.

C. PROCEDURE FOR SELECTI ON OF DI RECTORS FROM THE PANEL

The SMD shall select a list of four persons from the panel approved by the Commission,
after reviewing their eligibility as per the criteria outlined above for each stock exchange,
and forward the same to the Chairman SEC for his approval along with the list of panel.
If the Chairman SEC does not approve of any of the proposed names from the list
submitted by the SMD, he shall, for reasons to be recorded in writing, refer the matter
back to the SMD for review and submission of another suitable name for approval
thereof.

THE GAZETTE OF PAKISTAN

PART II

Statutory Notifications (S.R.O)

GOVERNMENT OF PAKISTAN

CORPORATE LAW AUTHORITY

(Corporate Regulation Wing)

NOTIFICATIONS

Islamabad, the Ist November, 1990

VEGETABLE GHEE AND COOKING OIL COMPANIES
(COST ACCOUNTING RECORDS) ORDER, 1990

S.R.O. 1131 (1) 90, - In exercise of the powers conferred by sections 230 and 506 of the
Companies Ordinance, 1984 (XIVII of 1984) read with the Finance Division Notification No.
S.R.O 698 (1) dated the 2
nd
July, 1980, the Corporate Law Authority is pleased to make the
following Order, the same having been previously published as required by the said section 506,
namely:-

VEGETABLE GHEE AND COOKING OIL COMPANIES
(COST ACCOUNTING RECORDS) ORDER, 1990

1. Short title, extent and commencement, (1) This Order may be called the
Vegetable Ghee and Cooking Oil Companies (Cost Accounting Records Order 1990.

(2) It extends to the whole of Pakistan.

(3) It shall come into force on such date as the Corporate Law Authority may by
notification in the official Gazette, appoint.

2. Application, - This Order shall apply to every company engaged in production,
processing or manufacturing of:-

(a) Vegetable ghee, cooking oil, margarine bakery shortening and allied products;
and

(b) In addition for vegetable ghee and cooking oil, any other product such as refined
hard oil, margarine or any such product using the same plant or machinery, partly
or fully.

3. Maintenance or records, - (1) Every company to which this Order applies shall
in respect of each financial year commencing on or after the commencement of this Order, keep
cost accounting records, containing inter the particulars in Schedule I and II to this Order.

(2) Where a company is manufacturing any other product in addition to those
referred to in paragraph 2, the particulars relating to the utilised on of materials, labour and other
items of cost insofar as they are applicable to such other product shall not be included in the cost
of the products referred to in that paragraph.

(3) The cost accounting records referred to in sub-paragraph (1) shall be kept in such
a way as to make it possible in calculate from the particular therein the cost of production and
cost of sales of each of the products referred to in paragraph 2 during a financialyear.

(4) It shall be the duty of every person referred to in sub-section (7) of section 230 of
the Companies Ordinance, 1984 (XLVII of 1984), to company with the providing of sub-
paragraphs (1) and (3) in the same manner as they are liable to maintain financial accounts
required under section 233 of the said Ordinance.

4. Penalty, - If a company contravenes the provisions of paragraph 3, the company
and every officer there of who is in default, including the person referred to in sub-paragraph (4)
of paragraph 3, shall be punishable under sub-section (7) of section 230 of the Companies
Ordinance - 1984.

MUHAMMAD HAYAT JASRA
Joint Registrar (H.Q)

SCHEDULE 1
(See paragraph 3)

1. Production material

(Raw edible oils, chemicals and vitamins)

(a) Record of each item of production material in stock, required or actually used for
producing, processing or manufacturing any of the products referred to in
paragraph 2 shall be maintained. It shall show the quantity and cost of every
receipt and issue made from the stock. All issues of production materials shall be
reconciled with the figure shown in Performa B of Schedule II, or in any form
as near thereto as possible. Any losses surpluses arising as a result of physical
verification of inventories and adjustment thereof shall be clearly indicated in the
cost records.

(b) Record of purchase/supply contracts entered into with local and foreign suppliers
will be maintained showing the rate at which the various quantities of materials
are to be purchased. The record shall indicate principal features of each contract,
particularly, conditions relating to the quality, price and period of delivery,
discount for transit loss and terms of payment including cash discounts, if any,
and compensation, the supply shall pay for delay in delivery and non-delivery.
The records shall also show the deliveries received against each contract of
material supply. The supply contracts shall also indicate the conditions relating
to rebate for quality variations in FFA (free fatty acids), colour and moisture in
case of raw edible oils: and in case of other materials usual quality standards
shall be specified in the supply contracts for the purpose of rebates.

(c) Where arrangements exist for production of any of the production materials by
the facilities owned by the company, separate records showing the cost of
manufacture of such materials indicating the break-up of raw materials consumed
and conversion cost shall be maintained. The records shall also indicate the basic
on which such materials are priced for transfer to the manufacture or processing
of vegetable ghee cooking oil.

(d) The cost, in addition to the basic price of the materials shown in the records shall
also include all other direct charges incidental to the procurement of production
materials up to the works.

(e) Any abnormal wastage of material whether in transit, storage or for the other
reason, shall be recorded separately indicating the stagy at which such losses
occur. Method of dealing with such losses in the calculation of cost shall be
indicated in the records. Normal wastages will be absorbed by the remaining
material itself.

(f) Difference between the quantities of the edible oils introduced the process and
yield obtained commonly referred to as the process loss or refining loss, includes
waste materials (by produce) called invisible loss which is part of TFM (total
fatty matter) and a small quantity of invisible loss. Realisable value of the by-
products, extracted from the oil, shall be credited to the cost of oil.

(g) Realisable value of the used chemicals recovered shall be credited to the cost of
such materials to arrive at the net cost of chemicals consumption.

(h) By products, such as oxygen or carbon dioxide and the oxygen as the case may
be obtained from the generation of hydrogen, by different products shall also be
credited to the respective process cost centres to determine the net cost of
hydrogen available for use.

(i) The records shall be maintained in such detail as may enable the company to
compile the cost data in Annexure A-1 of Performa A of Schedule II or in any
form as near thereto as practicable.

II. Direct Labour

(a) Adequate record shall be maintained to show the attendance of workers
employed by the company whether on regular, temporary, or price-rate basis or
on contractual basis. Proper record shall also be maintained in respect or
payment made for overtime work and other production incentives given to the
workers and payments to any contract for the work performed.

(b) Fair and reasonable allocation shall be made for wages, paid to such direct labour
as has been utilised in more than one department, between the various
manufacturing departments or cost centres and the basis of such allocation shall
be consistently followed. Idle time or lay-off payments shall be recorded
separately indicating the reasons and the method of treatment in the calculation
of the cost of the items referred to in paragraph 2. Any wages being expenditure
on additions to plant, machinery or other fixed assets shall be allocated to the
relevant capital heads in the accounts.

(c) In case of wages and salaries being allocated on a basis other than actual,
reconciliation of wages and salaries to the actual and the treatments of variances,
if nay, in determining the cost of the products shall also be indicated in the cost
records.

III. Steam

(a) Adequate records shall be maintained to ascertain the cost of steam produced and
charged to different produces. The cost of steam may be determined on an
estimated basis if it is not possible to determine the actual cost. In case the cost
of steam is allocated to different processes on any basis other than actual cost,
reconciliation of the actual cost of steam produced and the treatment of
variances, if any, in determining the cost of items referred to in Paragraph 2, shall
be indicated in the cost records.

(b) The record shall be maintained in such details as may enable the company to
compile the cost data in Annexure A 3 of Performa A of Schedule II or in any
form as near thereto as practicable.

IV. Hydrogen

Adequate records shall be maintained to ascertain the cost of hydrogen produced and
charged to vegetable ghee and cooking oil production as well as that sold.

V. Water

Appropriate record shall be maintained to determine the cost of water used by the
company. The expenditure on water shall be allocated to boiler house and oil processing
on estimated basis, which shall be used consistently from year to year and indicated in the
cost records.

VI. Electric Power

(a) Adequate records, showing quantity and cost of electric power purchased, with
fixed charges and duties incurred thereon, shall be maintained. The cost of
electric power shall be kept separately for each item. The consumption shall be
calculated on a reasonable basis and applied consistently.

(b) Where electric power is generated by the company itself or by its wholly owned
subsidiary, separate records, shall be maintained in such details as may enable the
company to compile; cost data in Annexure A-4 or proforma A of Schedule II
or in any form as near thereto as practicable.

(c) The records shall be so maintained as to enable the assessment of consumption
of power by the different departments or manufacturing units or cost centres.
Allocation of the cost of electric power shall be on the basis of actual
consumption, if separate meters are installed or on the basis of technical estimates
in the absence of meters. In the case of fixed charges or fuel adjustment
surcharge claimed by KESC or WAPDA, irrespective of the actual power
consumed and if the amount payable as per actual consumption falls below the
contractual minimum, the difference between the contractual minimum and the
acutal amount consumed in and chargeable to non-manufacturing departments. If
significant shall be , shown separately.

VII. Consumable Stores

(a) Record of each item of consumable stores shall be maintained to show the
receipts, issues and balances, both in quantities and values, required or actually
used for the manufacture of items referred to in paragraph 2.

(b) Cost of consumable stores shall include all direct charges incidental to
procurement of each item up to works. The cost of such stores consumed shall
be charged to relevant cost centres on the basis of actual consumption. The items
issued for capital expenditure, such as addition to plant and machinery, shall be
shown under relevant heads.

(c) Wastage of consumable stores, whether in transit, storage or at any point, shall be
quantified and shown separately. Method of dealing with such losses in costing
shall also be indicated in the cost records.

VIII. Repairs and maintenance

Adequate records showing expenditure incurred on workshop facilities for repairs and
maintenance of plant and machinery shall be maintained. Details of cost determination
and their basis of allocation of repairs and maintenance expenditure to different
departments or manufacturing units or cost centres shall be indicated. Cost of work of
capital nature of heavy repairs and maintenance cost, benefit of which is likely to be
spread over a period longer than one financial year, shall be shown separately.

IX. Packing

(a) Adequate records shall be maintained showing the cost of packing materials and
direct wages and other expenses incurred in respect of different items packed.
Where such expenses are not capable of being charged directly against individual
items, basis of apportioning the expenses shall be clearly indicated in the cost
records and applied consistently.

(b) Where the tin containers are fabricated by the company itself or wholly or partly
fabricated by the outside in fabricators for the company or wholly or partly
manufactured tin containers are purchased from the market, separate record shall
be maintained for each lot of the containers under each category.

(c) In case of the tin containers are wholly or partly manufactured fabricated by the
company itself the records shall be maintained in such details as may enable the
company to compile the cost data in the form of Annexure A 5 of proforma A
of Schedule II.

X. Chilling

Appropriate record of cost incurred in connection with refrigeration facilities
provided for chilling of items referred to in paragraph 2 shall be maintained in
sufficient details as may enable the company to compile the cost data in Annexure A-
6 of proforma A of Schedule II.

XI. Depreciation

(a) Adequate records shall be maintained showing values and other particulars of the
fixed assets in respect of which depreciation is to be provided. The records shall
inter alia indicate the cost of each item of assets the data of its acquisition and the
rate of depreciation.

(b) Basis on which depreciation is calculated and allocated to the various
departments and products shall be clearly indicated in the records.

(c) Amount of depreciation chargeable to the different departments, manufacturing
units or cost centres, for the financial year shall be in accordance with the
provisions of clause F of part II of the Fourth Schedule to the Companies
Ordinance, 1984 and than relate to the plant and machinery and other fixed
assets utilised in such departments or units or cost centres. The method once
adopted shall be applied consistently.

XII. Insurance

(a) Record shall be maintained showing the insurance premia paid for the various
risks covered on the assets and other interests of the company.

(b) Method of allocating insurance can to the various cost centres shall be indicated
in the cost records and followed consistently.

XIII. Other fixed overheads

Adequate records showing the amounts comprising the manufacturing overhead
expense and details of apportionment thereof to the various departments or
manufacturing units or cost centres shall be maintained. The factory over heads shall
include among other items, indirect labour cost alongwith its share of labour related
costs such as fringe benefits, other labour and staff welfare expenses, and
establishment expenses of manufacturing of items referred to in paragraph 2.

XIV. Administration, selling and distribution

Adequate records shall be maintained showing the items comprising administration,
selling and distribution expenses and apportionment thereof to the different products
and the basis of allocation of overhead cost shall be indicated in the records.

XV. By-product

Adequate records shall be maintained showing the quantity of by-products obtained
and the basis of pricing adopted for giving credit thereof to the main product. Any
subsequent use of the by-product, such as soap stock being converted into laundry
soap, and other products like glycerene etc., shall also be recorded and reconciled.

XVI. Work-in-process and finished goods inventories

Record of work-in-process inventories, at each material stage of process and finished
goods, inventories, physically checked and verified at the close of the financial
period, duly reconciled with the books of accounts, shall be maintained. Method of
valuation of work-in-process and the finished goods inventories shall be indicated in
the cost records so as to reveal the cost elements which have been taken into account
in such computation. The cost elements shall be related to the items referred to in the
proforma A of Schedule II. The method adopted shall be consistently followed.
Treatment of differences, if any, on physical verification of stocks with book
balances, shall also be indicated in the records.

XVII. Statistical statements and other records

(a) Statistical statements and other records such as yield statement. TFM (total fatty
matter), recovery and other by-products statement details relating to chemical
and energy consumption, tinplate yield and scrap records and relevant data shall
be maintained in such details as may enable the company to comply with the
requirements of this Schedule and Schedule II and to enable the cost auditor to
report and perform his duties under section 258 of the Companies Ordinance
1984.

(b) Companies may develop appropriate standards for use as a basis to evaluate
performance properly.

XVIII. Reconciliation of cost and financial accounts

(a) The cost records shall be periodically reconciled with the financial accounts to
ensure accuracy. Variations, if any, shall be clearly indicated and explained.

(b) The reconciliation shall be done in such a manner that the profitability of the
product, as per cost statements, is correctly judged and reconciled with the
overall profits of the company from all its activities.

(c) Adequate cost records shall be maintained in a manner so that the cost statements
as required in Schedule II (proforma A and annexures) can be compiled and the
cost auditor is able to verify the statements with the records.

Schedule II

(see paragraph 3)

PROFORMA A

Name and address of the company

STATEMENT SHOWING COST OF VEGETABLE GHEE
COOKING OIL MANUFACTURED AND SOLD DURING THE
PERIOD FROM __________ TO ____________.

1- Capacity

Current period : previous period

(a) Number of days worked:
(b) Installed capacity (Tonnes):
(c) Utilised capacity (Tonnes):

(i) Vegetable ghee:
16 kg pack
5 kg pack
2.5 kg pack

(ii) Cooking oil
17 litre pack
5 litre pack
2.5 litre pack

(iii) Margarine
(iv) Bakery shortening
(v) Others if any (specify)

II- Costs:

Current period Previous period

Particulars
Total cost Cost per
tonns
Total cost Cost per
tonns

1- Direct materials

(i) Raw edible oils

(as per Annexure A-1)
(ii) Chemicals:
Production materials

2- Direct Labour

3- Variable factory Overheads

(i) Steam :

(a) Used in neutraliser and other process:
(b) Used in deodoriser:

(ii) Hyderogen:

(a) By gas Cracking process
(b) By electrolysis process

(iii) Water:
(iv) Electric power cost

(a) Purchased from WAPDA/KESC
(b) Own generation

(v) Consumable stores:

(vi) repairs and maintenance;

(vii) Other overheads (specify) Variable
factory overheads

4- Total Variable cost

(Item 1+2+3)

5- Packing cost

6- Chilling cost

7- Total variable cost including packing
and chilling cost.


Particulars
Total cost Cost per
tonns
Total cost Cost per
tonns

8- Adjustment of work in process inventory

(I) Add: Opening stock
(a) At packing stage
(b) At chilling stage

(II) Less: Closing stock:
(a) At packing stage
(b) At chilling stage

9- Total variable cost of packed and chilled
vegetable ghee/choking oil
(Item 7+8)

10- Fixed Overheads

11- Total cost of goods manufactured
(Item 9+10)
12- Adjustment of finished goods inventories.
(i) Add: Opening stock
(ii) Less: Closing stock

13- Net ex-works cost of sales.
(Item 11+12)

III. Sales.

(i) Gross sales
(ii) Less commission and discount
(iii) Sales [(item (i) and (ii)]
(iv) Less: Excise duty
(v) Net sales

Annexure A-1

Name and address of the Company

STATEMENT SHOWING THE RAW EDIBLE OILS CONSUMED
DURING THE PERIOD FROM:__________ TO _________

CURRENT PERIOD

PREVIOUS PERIOD

PARTICULARS
Oil
blend
%
Qty.
tonne
Rate Total
cost
Oil
blend
%
Qty.
tonne
Rate Total
cost
1- Oil in Put
Imported
(a) Palm oil
(b) Soyabean oil
(c) Others (specify)
Local
(a) Cottonseed oil
(b) Rapeseed oil
(c) Sunflower oil
(d) Others (specify)
Total:

2- Adjustment of oil in process
inventories
(i) Add: Opening stock
(ii) Less: closing stock

3- Total oil consumed
(Item 1+2)

4- Yield (Net production)

5- Process Loss:
(Item 3-4)
(a) By-products:-
Visible loss (actual quantity)
at realisable value credited to
cost of oil).
(b) Invisible loss (quantity
only)Sub-total of process
loss.

6- Net cost of oil charged to
production value at item 4 less
5(a).

100%

100%

Annexure A-2


STATEMENT SHOWING THE COST OF CHEMICAL CONSUMED

CURRENT PERIOD PREVIOUS PERIOD
CONSUME
Per M.T. Yield
CONSUME
Per M.T. Yield

CHEMICAL
Qty. Rate Total
cost
Cost
per
tonne
Qty.
per
tonne
Qty. Rate Total
cost
Cost
per
tonne
Qty.
per
tonne

(a) Bleaching earth
(b) Activated carbon
(c) Nickle catalyst
(d) Caustic soda
(e) Citric acid
(f) Phospheric acid
(g) Anti oxidant
(h) Common salt
(i) Ghee flavour
(j) Filter aids
(k) Vitamins A and D
(l) Other (specify
Total chemicals
Less: Credit for used chemical
waste.
(Realisable value)

(a) Used fullers earth
(b) Used nickle catalyst.
(c) Others (specify)
Net cost of chemical

Annexure A-3


STATEMENT SHOWING THE COST OF STEAM PRODUCED
FOR THE PERIOD FROM:__________ TO _________

I- Capacity:

Type of steam boilers Current period Previous period

(a) Number of days worked
(b) Installed capacity
(steam in cubit meters)
(c) Capacity utilisation
(Steam in cubic meters)

II- Cost:

Boiler houses expenses Current period Previous period
Total cost Cost per M
3

of steam
Total cost Cost per M
3

of steam
(i) Fuel (coal/gas/furnace oil)
(i) Fuel(coal/gas/furnace oil)
(ii) Water
(iii) Electricity
(iv) Chemicals
(v) Consumable stores
(vi) Salaries and wages
(vii) Repair and maintenance
(viii) Depreciation
(ix) Insurance
(x) Other

Total cost of steam produced

III- Sales and Transfers:

(a) Vegetable ghee/cooking oil production
(i) Neutilizers and other process
(ii) Deodorizer
(b) To gas cracking
(c) To any other section (specify)
Total

Annexure A-4


STATEMENT SHOWING THE COST OF ELECTRIC POWER GENERATION
FOR THE PERIOD FROM:__________ TO _________

I- Capacity:


(i) Number of hours worked
(ii) Installed capacity (KWH).
(iii) Unutilised capacity (KWH).

II- Cost:

Particulars Current period Previous period
Total cost Cost per
KWH

Total cost Cost per
KWH

1- Fuel and oil
2- Salaries and wages
3- Consumable Store
4- Repair and maintenance
5- Depreciation
6- Insurance
7- Other overheads

Total cost :

III- Sales and Transfers:


Particulars
Total cost Cost per
KWH

Total cost Cost per
KWH

(i) Sales to outsiders
(ii) charged to production
(iii) charged to general uses
(iv) Any other department (specify)

Total sales/allocation

Annexure A-5


STATEMENT SHOWING THE COST OF TIN MANUFACTURED

I- Capacity:


(i) Number of days worked
(ii) Installed capacity
16 Kg/17 litre
5 Kg/5 litre
2.5 Kg/2.5 litre

Tin plate
consumed
(Tonnes)
Total tins
produced
(Nos.)
Yield
tins
Tonne
(Nos.)
Tin plate
consumed
(Tonnes)
Total tins
produced
(Nos.)
Yield
per
tonne
(Nos.)
(iii) Capacity utilisation
16 Kg/17 litre
5 Kg/5 litre
2.5 Kg/2.5 litre

II- Cost:
Particular Qty. Rate Total cost
per tin
Qty. Rate Total cost
per tin
1 2 3 4 5 6 7 8 9
1- Materials

Tinplate (M. Tons)

Less: (i) Tinplate scrap
(ii) Ticklies

Net credit for tinplate scrap

Net cost of tinplate be forward consumed

2- G.I. Wire hangers

3- Chemicals:

(i) Soldering materials

(ii) Zinc
(iii) Hydrochloric acid

1 2 3 4 5 6 7 8 9
4- Labels/printing of tins
5- Electricity, Power and/fuel
6- Consumable stores
8- Repairs and maintenance
9- Depreciation
10- Insurance
11- Other overheads (specify)

Total:

12- Adjustment of work in process inventories
(i) Add: (Opening stock)
(ii) Less: (Closing stock)

13- Total cost of tins manufactured

14- Adjustment of finished tins inventories
(i) Add: (Opening stock)
(ii) Less: (Closing stock)

15- Cost of tins consumed

Annexure A-6

STATEMENT SHOWING THE COST OF CHILING FOR
THE PERIOD FROM:__________ TO _________

I- Capacity:

Current period

Previous period

1- Number of days worked
2- Chilling capacity (Tonne)
3- Capacity utilisation (Tonne)

II- Cost:

total Cost per
tonne/output
total Cost per
tonne/output
(a) Freon/amonia
(b) Power
(c) Wages and salaries
(d) Consumable stores
(e) Repairs and maintenance
(f) Depreciation
(g) Insurance
(h) Other overheads

Total chiling cost

Proforma B


STATEMENT SHOWING INVENTORIES OF FINISHED GOODS, RAW & PACKING
MATERIALS AND OTHER ITEMS FOR THE PERIOD FROM:__________ TO _________

Particular
Opening
stock (Qty.)
Received
during the
period (Qty.)
Issued during
the period
(Qty.)
Physical stock
adjustments if
any (Qty.)
Closing
stock
(Qty.)
1 2 3 4 5 6
1- Finished goods (M. tons)

(a) Vegetable ghee:
16 Kg. Pack
5 Kg. Pack
2.5 Kg. Pack

(b) Cooking Oil:
17 litre pack
5 litre pack
2.5 litre pack

(c) Margarine

(d) Bakery shortening

(e) Others (specify)

Total:

2- Empty finished tins (Numbers)
16 Kg. 17 Litre
5 Kg./5 Litre
2.5 Kg./2.5 litre

Total:

3- By-products (sepcify)

1 2 3 4 5 6

4- Raw edible Oil (tonnes)

Imported:

i- Palm Oil
ii- Soybean Oil
iii- Others (sepcify)

Local:

i- Cottonseed Oil
ii- Rapeseed Oil
iii- Sunflower Oil
iv- Others (specify)

Total:

5- Chemical (KG):

i- Bleaching earch
ii- Activated carbon
iii- Caustic soda
iv- Nickle catalyst
v- Citric acid
vi- Phospheric acid
vii- Anti oxidant
viii- Common salt
ix- Filter acids
x- Ghee flavour
xi- Vitamins A and D
xii- Others (specify)

Total:

6- Others materials:

i- Ti plant (Tonne).
ii- G.A. wire (Tonne).
iii- Soldering materials (K.G.)
iv- Others (specify)

7- Small tools

8- Any others stores (specify)

Total:

PART-II

Statutory Notifications (S.R.O.)
GOVERNMENT OF PAKISTAN
CORPORATE LAW AUTORITY
(Corporate Regulation Wing)
NOFITIFCATION

Islamabad, the 14
th
may, 1994

S.R.O. 386 (I)/94.- In exercise of powers conferred by section 230 and 506 of the
Companies Ordinance, 1984 (XLVII of 1984), read with the Finance Division Notification No.
S.R.O. 698 (I)/86, dated the 2
nd
July, 1986, the Corporate Law Authority is pleased to make the
following Order, the same having been previously published as required by sub-section (I) of
section 506 of the said Ordinance, namely:-

CEMENT INDUSTRY (COST ACCOUNTING RECORDS) ORDER 1994

1. Short title, application and commencement. (1) This Order may be called the
Cement Industry (Cost Accounting Records), Order 1994.

(2) This Order shall apply to every company engaged in production, processing and
manufacturing of clinker or cement or both.

(3) It shall come into force on such date as the Corporate Law Authority may, by
Notification in the official Gazette, appoint.

2. Maintenance of records. (1) Every company shall, in respect of each financial
year commencing on or after the commencement of this Order, keep cost accounting records,
containing inter-alia the particulars specified in the Schedule to this Order.

(2) The records referred to in sub-paragraph (1) shall be kept in such a way as to
make it possible to calculate from the particulars entered therein the cost of production and cost
of sales of each of the products referred to in sub-paragraph (2) of paragraph (1) separately,
during a financial year.

(3) Where a company is manufacturing any other product in addition to clinker or
cement or both, the particulars relating to the utilisation of materials, labour and other items of
cost in so far as they are applicable to such other product shall not be included in the cost of
clinker or cement or both.

(4) It shall be the duty of every person referred to in sub-section (7) of section 230 of
the Companies Ordinance, 1984 (XLVII of 1984), to comply with the provisions of sub-
paragraphs (1), (2) and (3) in the same manner as they are liable to maintain financial accounts
required under section 233 of the said Ordinance.

3. Penalty.- If a company contravenes any of the provisions of this Order, such
company and every officer thereof referred to in sub-paragraph (4) of paragraph 2 shall be
punishable under sub-section (7) of section 230 of the Companies Ordinance (XLVII of 1984),
1984.

SCHEDULE

[(See paragraph 2 (1)]

Subject to the provisions of paragraph 1 (c) of this Schedule, cost records on quantitative
and money value basis shall be maintained in respect of each of the following departments as
applicable to each company:-

1. Quarry .. .. .. .. Annexure I
2. Transportation .. .. Annexure II
3. Crusher .. .. .. .. Annexure III
4. Stock hall (where applicable) .. .. Annexure IV
5. Raw mill .. .. .. Annexure V
6. Kiln .. .. .. .. Annexure VI
7. Grinding .. .. .. Annexure VII
8. Packing and storage .. .. Annexure VIII

Note:

(a) The cost record regarding cement stored in silos shall be covered in record of the
grinding department; and

(ii) The cost record regarding packed cement shall be covered in record of the
packing and storage department.

Cost of these departments are to be classified as direct departmental cost and indirect
departmental cost so as to conform to or as near thereto as possible to such detailed headings as
described in the various annexures. Indirect departmental cost represent cost of service
departments such as those producing compressed air (Annexure IX), power (Annexure X) and
other general expenses (Annexure XI). The indirect departmental cost shall be transferred to the
above production departments.

Cost of each production department i.e. total of direct and indirect departmental cost,
shall be transferred to the next production department on the basis of quantity of output
transferred out to next department.

Annexure XII represents a Summary of all production costs for a cement factory as
derived from Annexure I to XI.

Important items of costs have been described in the following paragraphs:

1. Raw Materials:

(1) Adequate records shall be maintained showing receipts issues and balances, both
in quantities and values of each of raw material required for manufacture of
clinker or cement. The basis on which the value of receipts and issues have been
calculated shall be clearly indicated in the cost records maintained or, if so
desired by the company, in a separate manual of procedure, if any, maintained by
the company or in foot notes or separate explanatory notes to the cost statements
for the relevant period. Such basis shall be paid consistently throughout the
relevant period. The values shall include all direct charges upto works such as
royalty, excise duty, haulage, transport, freight, handling and insurance:

(a) All issues of production materials shall be reconciled in Annexures I to
VIII, or in any form as near thereto as possible. Any losses or surpluses
arising as a result of physical verification of inventories and adjustment
thereof shall be clearly indicated in the cost records. Statutory records
liable to be maintained under Mining and Explosive Acts and rules may
be considered adequate if they meet the requirements specified here.

(b) Record of quarrying contracts, purchases and supply entered into with
lessors and suppliers will be maintained showing the rate at which the
various quantities of materials are to be supplied. The record shall
indicate principal features of each contract, particularly conditions
relating to the quality, price and period of delivery, discount for any
transit losses and terms of payment including cash discounts, if any, and
compensation the supplier shall pay for delay in delivery or non-delivery.
The records shall also show the deliveries received against each contract
of supply of materials till the contracted quantities are received in full.
The lease and supply contracts shall also indicate the conditions relating
to rebate for quality variations in chemical composition, colour and
moisture content in case of limestone of particular quality, clay, shale
and gypsum in case of white cement, iron slag in case of slag cement and
in case of other materials usual quality standards shall be specified in the
supply contracts for the purpose of rebates.

(c) Where some items of the raw materials are raised form mines owned or
leased by the companies or are produced or manufactured by them,
separate records showing the cost of raising, producing and
manufacturing such raw materials shall be maintained in such detail as
may enable the company to fill up the necessary particulars in the
annexurs or in proformae as near thereto as possible. Where such items
of raw materials are obtained on the basis of supply contracts Anenxures
I, II or III and not required otherwise, need not be maintained.

(d) The cost, in addition to the basic price of the materials shown in the
records, shall also include all other direct charges incidental to the
procurement of production materials and transporting the same up to the
factory. In case of own quarry of limestone, records of overburden
raised shall be kept in terms of cost incurred. The basis of distributing
the case of removal of overburden over the entire period of quarry
working in the particular area shall be determined and consistently
applied.

(e) Any wastage, whether in handling, transit, storage or in any other stage,
shall be shown separately. The method of dealing with such losses in the
calculation of cost shall also be indicated in the cost records. Realisable
value of any waste material or by-product recovered or sale proceeds of
any process material such as clinker shall be credited to the cost of such
process to arrive at the net cost of cement.

(f) The records shall be maintained in such detail as may enable the
company to compile the cost in the various annexures.

2. Labour:

(a) Adequate record shall be maintained to show the attendance of workers
employed by the company whether on regular, temporary or piece-rate basis or
on contract basis, as the case may be. Proper record shall also be maintained in
respect of payments made for overtime work and production incentives given to
the workers. This will be done in a manner that labour cost is available for each
cost centre.

(b) Fair and reasonable allocation shall be made for wages paid to such labour as has
been utilised in more than one department, between the various departments or
cost centres and the basis of such allocation shall be consistently followed.
Reasons for idle time or lay off payments shall be recorded alongwith the method
of treatment in the calculation of the cost of the items referred to in sub-
paragraph (2) of paragraph 1. Any wages paid for additions to plant and
machinery or other fixed assets, shall be excluded form the cost of production.

(c) Benefits paid to the employees other than covered in (a) above shall be worked
out separately and shown in the cost statement department-wise.

3. Furnace Oil/Gas:

(a) Adequate records shall be maintained to ascertain the cost of furnace oil/gas
purchased and furnace oil/gas charged to different departments. In case the cost
of furnace oil/gas is allocated to different departments on any basis other than the
actual cost, reconciliation with the actual cost and the treatment of variances,
shall be indicated in the cost records.

(b) Adequate record shall be maintained showing measurement of furnace oil before
and after each filling in such a manner that quantity purchased is reconciled with
the addition is stock on each filling.

(c) The records shall be maintained in such details as may enable the company to
compile the cost data in the annexures.

4. Electric Power:

(a) Adequate records, showing quality and cost of electric power generated and
purchased with fixed charges and duties incurred thereon, shall be maintained.

(b) Where electric power is generated by the company itself or by its wholly owned
subsidiary or a sister concern, separate records shall be maintained in such details
as may enable the company to compile cost data in Annexure X.

(c) The records shall be so maintained as to enable assessment of consumption of
power by different departments or manufacturing units or cost centres.
Allocation of cost of electric power shall be on the basis of actual consumption if
separate meters are installed: or on the basis of technical estimates in the absence
of separate meters. In the case of fixed charges or fuel adjustment surcharge
claimed by KESC, WAPDA or any other supplier of electricity, irrespective of
the actual power consumed and if the amount payable as per actual consumption
falls below the contractual minimum, the difference between the contractual
minimum and the actual amount shall be treated as fixed or period cost and
transferred to Annexure XI. Cost of power consumed in and chargeable to non-
manufacturing departments, if significant, shall be shown separately.

5. Consumable Stores:

(a) Record of each item of consumable stores shall be maintained to show receipts,
issue and balances, both in quantities and values, required or actually used.

(b) Cost of consumable stores shall include all direct charges incidental to
procurement of each item up to the factory. The cost of such stores consumed
shall be charged to relevant departments on the basis of actual consumption. The
items issued for capital expenditure, such as additions to plant and machinery,
shall be shown under relevant capital expenditure heads and not in the cost
statements.

(c) The requirements of Mining Act 1923 with relevant rules made thereunder, shall
be fully compiled with. In the same manner, requirements of Explosives Act,
1884, and Explosive Rules, 1940, shall also be compiled with as required in this
behalf as far as acquisition, storage and consumption of explosives for quarrying
purposes is concerned.

(d) Wastage of consumable stores, whether in transit, storage or at any point, shall be
quantified and shown separately. Method of dealing with such losses in costing

6. Repairs and maintenance:

Adequate records showing expenditure incurred on in-house repair and
maintenance, and repair and maintenance through outside agencies shall be maintained.
Records of workshop for quarrying of lime stone and clay shall be kept separately and
costs charged to quarrying operation. Details of cost determination and their basis of
allocation of repairs and maintenance expenditure to different departments or
manufacturing units or cost centres shall be inducted. Cost of work of capital nature, of
heavy repairs, maintenance and overhaul cost, benefit of which is likely to spread over a
period longer than one financial year shall be shown separately.

7. Compressed Air:

Appropriate record of cost of compressed air incurred in connection with the
generation of compressed air, if centralised and provided for the consuming departments,
shall be maintained in sufficient details as may enable the company to compile the cost
data to be charged as part of other manufacturing over heads in Annexure IX.

8. Depreciation:

(a) Adequate records preferably in the form of an annexure shall be maintained
showing values and other particulars of fixed assets in respect of which
depreciation is to be provided. The records shall inter alia indicate the cost of
each item of asset, the date of its acquisition, its economic life and the rate of
depreciation.

(b) Basis on which depreciation is calculated and allocated to the various
departments and products shall be clearly indicated in the records.

(c) Amount of depreciation chargeable to different departments, manufacturing units
or cost centres for the financial year shall be in accordance with the provisions of
clause (F) of Part II of the Fourth Schedule to the Companies Ordinance 1984,
and shall relate to the plant and machinery and other fixed assets utilised in such
departments or units or cost centres. The method once adopted shall be applied
consistently.

9. Insurance:

(a) Record shall be maintained showing the insurance premia paid for the various
risks covered on the assets and other interests of the company.

(b) Method of allocating insurance cost to the various departments shall be indicated
in the cost records and followed consistently.

10. Other Overheads:

Overheads items which cannot conveniently be identified or apportioned over
individual departments may be accumulated in Annexure XI and prorated over various
departments on such basis or such one or more bases as may be deemed necessary. The
basis or bases of apportionment shall be stated in the said Annexure.

11. Administration, Selling and Distribution Expenses:

Adequate records shall be maintained showing the items comprising
administration, selling and distribution expenses and apportionment thereof to the
different grades of cement if produced in the same factory. It clinker is being sold in
addition to cement, the basis of allocation of these expenses shall be indicated records. If
only one grade of cement is being sold, the entire amount of administration, selling and
distribution expenses may be allocated to that grade.

12. Work-in-process and Finished Goods Inventories:

Record of work-in-process inventories at each stage of process, quarrying,
transpiration, raw material crushing, stock hall, raw material mixing and grinding,
clinking, clinker grinding cement in soils and packing and storage shall be maintained
and inventories will be physically checked and verified at the close of the financial period
and duly reconciled with the books of accounts. Automatic data recording devices built
into the crushing, mixing, clinkering and other plants, if available, may be utilised for
reconciling in-put and out-put. Measurement of furnace oil will be done before and after
each filling. Method of valuation of work-in-process and the finished goods inventories
shall be indicated in the cost records so as to reveal the cost elements which have been
taken into account in such computation. The cost elements shall be related to the items
referred to the Annexures. The costing method adopted shall be consistently followed.
Treatment of differences, if any, on physical verification of stocks with book balances,
shall also be indicated in the records. Special care shall be thane or moisture absorption
and drying of limestone and clay because of weather conditions.

13. Packing

(a) Adequate records as required for the purposes of Annexure VIII shall be
maintained showing the cost of packing materials used and direct wages and
other expenses incurred in respect of different types and weights of packages. In
case of bulk supplies, necessary cost adjustments will be made.

(b) Adequate records shall be maintained showing quality, rate and value of packing
material charged to the cost of sale.

(c) Where packing material is produced in-house by the company, the record shall
reflect the method of its valuation. In case packing material is purchased form a
subsidiary or an associated company, the record shall disclose the name of such
company and the purchase agreement with such company. The record shall the
purchase agreement with the supplier even if it is an outside company/party.

14. Statistical Statements and other Records:

Companies shall develop appropriate standards for use as a basis to evaluate
performance. Quality reports based on standards of strength as per B.S.S. or other
standards adopted by the industry may be maintained. Consumption ratios such as yield
of explosives, furnace oil per ton of clinker, usage of clinker per ton of cement,
percentage of gypsum, slag in cement, power consumption in terms of kwh for per ton of
cement produced, etc., are also recommended to be worked out and compared with last
year.

15. Reconciliation of Cost and Financial Accounts:

(a) If integrated accounts are not maintained, the cost records shall be periodically
reconciled with the financial accounts to ensure accuracy. Variations, if any,
shall be clearly indicated and explained.

(b) The reconciliation shall be done in such a manner that the profitability of each
product produced and sold is correctly judged and reconciled with the overall
profits of the company from all of its activities.

(c) Adequate cost records shall be maintained in a manner so that the cost statements
may be compiled.

Annexure - I

DEPARTMENTAL COST STATEMENT
(One sheet for each quarry item)

Name of Department: LIMESTONE, CLAY GYPSUM, QUARRY FOR THE YEAR
ENDED:____

A. Quantitative data

Opening stock at quarry, Quantity quarried
Total:
Quantity transported to crusher
Stock adjustment (if any)
Closing stock at quarry

For the
Year:______
tonnes
Last year
tones
Increase/decrease
Over last year tonnes
Reason for adjustment
B. Cost Statement

Cost

For the year

Last year

Rs.
in 000
Rs. Per
tonne
Rs. In 000 Rs. Per
tonne
Direct Departmental Cost:
Explosives (if any)
Royalty and duties
Labour cost.
Salaries
Employees other benefits
Indirect materials
Insurance
Repair & maintenance
Fuel oil
Gas
Depreciation (Annex..)
Other overheads

Sub-total:
I ndirect Departmental Cost:
Compressed Air (Annexure IX)
Power (Annexure X).
Other factory expenses (Annexure XI).

Sub-total:
Total cost of the period
Add: cost of opening stock

Total cost of available stock:
C. Cost Distribution
Cost transferred to crusher
Cost of closing stock
Total cost accounted for

Annexure - II


Name of Department: TRANSPORTATION FOR THE YEAR ENDED:________


Quantity transported from quarry
i- Clay/shale
ii- Lime Stone
iii- Gypsum.

For the
Year:______
tonnes
Last year
tonnes
Increase/decrease
tonnes
B. Cost Statement

Cost

For the year

Last year

Increase/
decrease

Rs.
in
000
Rs.
Per
tonne
Rs.
In
000
Rs.
Per
tonne
Rs. In
000
Rs.
Per
tonne
(a) Outside contract cost of transpiration:

i- Clay/Shale
ii- Lime Stone
iii- Gypsum

Sub-total:
(b) Own Transportation Cost:

Duties (if any)
Labour costs
Salaries
Indirect material
Insurance
Repair and maintenance
Fuel oil
Greases
Gas
Tyres and tubes
Depreciation (Annex)
Other Overheads

Sub-total:
Power (Annexure IX)
Other Factory Expenses

Sub-Total:

Total own transportation cost.
(c) Total transportation cost.

C. Cost Distribution
Appointed to:
i- Clay/Shale
ii- Lime Stone
iii- Gypsum

Total:

Annexure - III


Name of Department: RUSHING FOR THE YEAR ENDED:________


Clay/Shale
tonnes
Lime Stone
tones
Gypsum tonnes
Opening Stock (uncrushed material).
Add: Received from quarry/purchase.

For
the
year
Last
year
For
the
year
Last
year
For the
year
Last
year
Total available for crushing:
Less: closing stock (uncrushed material). Crushed
during the period.
Add: Opening stock (Crushed material)

Total crushed material:
Less: Closing stock (crushed material)
Stock reconciliation:
Transferred to raw mill
Stock adjustment

Total:

For the year

Last year

Rs.
in 000
Rs. Per
tonne
Rs. In
000
Rs. Per
tonne

Direct material (if any)
Labour Cost
Salaries
Indirect material
Insurance
Fuel oil
Greases
Gas
Other Overheads

Sub-total (a):
Power (Annexure IX)

Sub-total (b):
Total Cost (a+b):

C- Cost Distribution
(On time or other appropriate basis)

For the year

Last year

Rs.
in 000
Rs. Per
tonne
Rs. In
000
Rs. Per
tonne
Clay/Shale
Lime Stone
Gypsum.

D- Cost Transferred and Cost of Closing
Stock cost summary

Clay/Shale Lime Stone Gypsum

a- Opening Stock (Uncrushed).
b- Cost received (during the year)
c- Total cost for uncrushed material (a+b)
d- Cost applicable to closing stock (uncrushed)
e- Cost applicable to crushed material (c-d).
f- Cost of crushing process (from above).
g- Opening stock (crushed material).
h- Total cost applicable to crushed material (e+f+g)
i- Closing stock (crushed material)
j- Cost transferred to stock hall (Raw material storage) (h-I)

Annexure - IV


Name of Department: STOCK HALL STORAGE/ISSUAGE OF RAW MATERIAL FOR
THE YEAR ENDED:________


Clay/Shale
tonnes
Lime Stone
tones
Gypsum tonnes
Opening Stock
Received from crusher
Purchased.
Total
Issued to mix/slurry
Stock adjustment
Closing stock.

For
the
year
Last
year
For
the
year
Last
year
For the
year
Last
year
B- Cost Statement:
For the year
Rs. 000 per tonnes
Last year
Rs. 000 per tonnes
Labour cost:
Salaries
Indirect material
Insurance
Fuel-oil
Gas
Other Overheads (Annex)

Sub-Total (a):
Power (Annexure IX)

Sub-total (b):
Total Cost (a+b):

Quality issued
to Raw Mill
(Tonnes)
Cost of Stock
Hall Applicable
to issues

Cost Applicable
to closing stock

Rs.
in
000
Rs.
Per
tonne
Rs. In
000
Rs. Per
tonne

Clay/Shale.
Lime Stone
Gypsum
Total

D- Cost Summary (Upto Stock Hall Stage)
Cost transferred and cost of closing stock:

Quantity Received (Tonnes) Clay Shale Lime Stone Gypsum Total

Quantity Issued (Tonnes)
Rs.
000
Per
tonne
Rs.
000
Per
tonne
Rs.
000
Per
tonne

Opening Stock
Add: Received from Crusher/purchases.
Stock Hall
Cost

Total:
Less:
Cost of
Closing stock
Cost
Applicable to
Quantities
Issued to
Raw Mill.

Annexure - V

(Separate sheet for wet/dry process)

Name of Department: RAW MILL (FOR MIX/SLURRY) FOR THE YEAR
ENDED:________


Clay/Shale
tonnes
Lime Stone
tones
Mix/Slurry
tonnes
Opening Stock
Received from stock.

For
the
year
Last
year
For
the
year
Last
year
For the
year
Last
year
Total:
Issued for Mix/Slurry
Total Mix/Slurry made
Mix/Slurry transferred to clinkering
Stock adjustment
Closing stock

B- Cost Statement:
For the year
Rs. 000 per tonnes
Last year
Rs. 000 per tonnes
Direct Material:
1- Opening stock
2- Received from stock hall
3- Total
4- Closing stock

Cost of raw materials processed (3)-(4)
Cost of opening stock
Direct Departmental Costs
Materials added eg. Laterite
Labour
Salaries
Grinding material
Lining plates
Indirect material
Water
Fuel-oil
Gas
Other Overheads

Sub-Total (a):
Power (Annexure IX)
Other Factory Expenses (Annexure IX)

Sub-total (b):
Total Cost (a+b):


For the year
Last year

Rs.
in 000
Rs. Per
tonne
Rs. In
000
Rs. Per
tonne
Transferred to Kiln
Closing stock of mix/slurry

Total:

Annexure - VI

(Separate sheet for wet/dry process Clinker)

Name of Department: KILN FOR THE YEAR ENDED:___________


For the year
tonnes

Last year
tonnes
Opening Stock
Quantity received from Raw Mill.

Total:
Quantity fed into (the) Kiln.
Stock adjustment
Closing stock

Clinker produced
Opening stock clinker
Total:
Clinker transferred to Grinding
Clinker sold
Stock adjustment
Closing stock of clinker.

Total:
B- Cost Statement:
For the year

Last year

Rs.
in 000
Rs. Per
tonne
Rs. In 000 Rs. Per
tonne
Cost received from Raw Mill:
1- Opening stock
2- Received during the year
3- Total
4- Closing stock

Cost to be charged to the process (3)-(4).

Direct Departmental cost:
Material added (if any).
Labour
Salaries

Indirect materials.
Fuel-oil
Gas
Depreciation (AnnexX)
Other Overheads

Sub-Total (a):

Power (Annexure IX)
Other Factory Expenses (Annexure IX)

Sub-total (b):
Total Cost (a+b):

Less: value of clinker sold (if any)


For the year
Last year

Rs.
in 000
Rs. Per
tonne
Rs. In
000
Rs. Per
tonne
Cost transferred to Grinding
Cost of Closing stock of Clinker

Total:

Annexure - VII


Name of Department: GRINDING (CEMENT) FOR THE YEAR ENDED:___________


For the year
tonnes

Last year
tonnes
Opening Stock (Clinker)
Clinker received from kiln.
Total:
Clinker fed into grinding
Stock adjustment.
Closing stock of clinker.

Tonnes Tonnes
Opening stock of cement
Cement produced.
Cement produced as % of input
Cement transferred to silos.
Stock adjustment
Closing stock of cement.

B- Cost Statement:
For the year

Last year

Rs.
in 000
Rs. Per
tonne
Rs. In 000 Rs. Per
tonne
Cost received from Kiln:
1- Opening stock
2- Received during the year for clinker
3- Total cost of clinker.
4- Cost of Closing stock of (Clinker)

Cost of clinker fed to Grinding
process (3)-(4).

Direct Departmental cost:
Material added

Gypsum
Slag
Others
Royalty/duties
Labour
Salaries
Indirect materials.
Grinding materials
Lining plates
Fuel-oil
Gas
Other Overheads
Sub-Total (a):
Indirect Departmental costs:
Compressed air (Annex IX)
Power (Annex X)
Other factory expenses (Annex XI)

Sub-Total (b)
Total cost (a+b)
Cost transferred to silos
Cost of closing stock of cement.

Total

Annexure - VIII

Name of Department: PACKING & STORAGE FOR THE YEAR ENDED:___________


For the year
tonnes
Last year
tones
Last year
tonnes
Opening Stock of cement (un-packed)
Add: Cement received from Grinding Deptt.
Total:
Less: Closing stock of cement (unpacked) Cement packed
during the period (No. of bags)
Less: Quantity sold (No. bags).
Closing stock of cement (packed) No. of bags)
Stock adjustment (if any) (No. of bags)

B- Cost Statement:
For the year

Last year

Rs.
in 000
Rs. Per
tonne
Rs. In 000 Rs. Per
tonne
Cost opening stock un-packed:
Cost transferred in from cement grinding department.
Direct Departmental cost
Packing material
Other materials
Labour
Salaries
Indirect materials.
Fuel-oil
Gas
Other Overheads

Sub-Total (a):
Compressed air (Annex IX)
Power (Annex X)
Sub-Total (b)
Total cost (a+b)
Less: Cost applicable to un-packed closing stock
Cost applicable to packed closing stock
Balance: Cost of packed cement sold:_______
Cost of loose cement sold
Sold. (if any): _______

Cost transferred to silos
Cost of total cement sold.

Annexure - IX


Name of Department: AIR COMPRESSING FOR THE YEAR ENDED:___________


For the year
tonnes

Last year
tonnes
Compressed Air Produced

B- Cost Statement:
For the year

Last year

Labour
Salaries
Insurance
Indirect materials.
Fuel-oil
Gas
Purchased Power
Other Overheads

Sub-Total (a):
Power (Annex X)

Sub-Total (b)

Total cost (a+b)


Departments using compressed air:

Quantity Cost

Annexure - X


STATEMENT SHOWING THE COST OF POWER GENERATED/PURCHASED AND
CONSUMED DURING THE YEAR ENDED:___________


For the year
Last year

Installed capacity KWH.
No. of Units generated
No. of units purchased
Total:
Self-consumption in power house
Losses:
Net units consumed by various other department:
1- Percentage of loss to total power generated and purchased.
2- % of power generated to installed capacity.

B- Cost Statement:

S. No. Particular

Qty.
Units
Rate
Rs.
Amount
Rs.
Cost per unit of power
generated and
purchased

Current
year
Previous
year
1- Fuel oil/steam consumed
2- Other material (specify)
3- Consumable stores
4- Other direct charges

6- Repairs and maintenance
7- Other overheads
8- Depreciation.

Total
Less: (1) Supplies to other units of the company
(Not engaged in the manufacture of cement)

Net cost of Power generated.
Purchased power (on actual consumption basis)

Total cost of power:

Cost per unit (average).


Consumed in:-
- Lime stone, clay, gypsum Quarry
- Transportation
- Crushing
- Stock hall
- Raw mills
- Kilns
- Cement grinding
- Storage and packing
- Air compressing
- Others.

Total cost distribution:

Annexure - XI

OTHER FACTORY EXPENSES-FACTORY
GENERAL FOR THE YEAR ENDED: ___________

A. Cost Statement

For the year
Last year

Labour cost
Salaries
Employees other benefit
Contractors labour
Depreciation
Stores and spares
Electricity
Power (Annexure X).
Miscellaneous Expenses.
(Tele printing stationery, T.A./D.A., rates and taxes, insurance
and fixed charges paid to WAPDA Flowers, seeds, plants,
cleanliness materials, uniform of security staff etc.)

B- Cost Distribution:

S. No. Particular

For the year Last year

Basis Rs. In
000
Basis Rs. In
000
Lime stone, Clay, Gypsum, Quarry
Transpiration
Crushing
Stock hall
Raw Mill
Cement Grinding
Packing and Storage
Air Compressing (if any)
Power generation (if any)

Total


EXTRAORDINARY
PUBLISHED BY AUTHORITY
-------------------------------------------------------------------------------------------------------------------------
ISLAMABAD, WEDNESDAY, FEBRUARY 14, 2001

PART II

NOTIFICATION

Islamabad, the 13
th
February, 2001

S.R.O. 97(1)/2001.- In exercise of powers conferred by clause (c) of sub-section (1) of section 230
of the Companies Ordinance, 1984 (XLVII of 1984), and clause (o) of sub-section (4) of section 20 of the
Securities and Exchange Commission Act, 1997 (XLII of 1997), the Securities and Exchange Commission
of Pakistan is pleased to make the following Order, namely:-

SUGAR INDUSTRY (COST ACCOUNTING RECODS) ORDER, 2001

1. Short title, application and commencement.- (1) This order may be called the Sugar Industry
(Cost Accounting Records) Order, 2001.

(2) This Order shall apply to every company engaged in production of sugar in any form
excepting liquid sugar.

(3) It shall come into force at once.

2. Maintenance of Records.- (1) Every company to which this order applies shall, in respect of each
financial year commencing on or after the commencement of this order, keep cost accounting records,
containing, inter-alia, the particulars specified in Schedules I, II and III to this Order.

(2) The cost accounting records referred to sub-paragraph (1) shall be kept in such a way as to
make it possible to calculate from the particulars entered therein, the cost of production and
cost of sales of white sugar separately, during a financial year.

(3) Where a company is manufacturing any other product in addition to sugar, the particulars
relating to the utilization of materials, labour and other items of cost in so far as they are
applicable to such other product, shall not be included in the cost of sugar.

(4) It shall be the duty of every person referred to in sub-section (7) of Section 230 of the
Companies Ordinance, 1984 (XLVII of 1984), to comply with the provisions of sub-

paragraph (1), (2), (3), in the same manner as they are liable to maintain books of financial
accounts required under Section 230 of the said Ordinance.

3, Penalty. -- If a Company contravenes the provisions of this order, such Company and every officer
thereof referred to in sub-paragraph (4) of paragraph 2 shall be punishable under sub-section (7) of section
230 of the Companies Ordinance, 1984 (XLVII of 1984).

SCHEDULE I
[See paragraph 2(1)])

I. MATERIALS:

(i) Direct Materials:

(a) Adequate records shall be maintained showing separately the quantity and cost of sugar-cane procured at the
factory gate or other collection centers. Where sugar cane is grown in farms owned or taken on lease by the
company, detailed records shall be maintained in a mill suitable proforma so as to enable computation of the
cost of such sugar cane. The rate fixed by the Government from year to year adopted for pricing the sugar cane
supplied by the sugar cane grower (growers) to the sugar shall be indicated in the cost records.

(b) Where beet is used as raw material for the production of sugar, separate records shall be
maintained on the lines similar to sugar-cane.

(c) A separate proforma must be maintained to record sugar-cane and beet procurement expenses
along with other related expenses. These expenses shall be separately determined.

(d) All issues of materials shall be reconciled with figures shown in Annexure to Schedule III, or
in any other form as near thereto as possible. Any losses or surpluses arising as a result of
physical verification of inventories and adjustments thereof shall be clearly indicated in the
cost records.

(e) Record of purchase/supply through Indent by suppliers shall be maintained showing the rates
at which the various quantities of materials are to be acquired. The records shall indicate
principal features of each Indent particularly conditions relating to quantity, quality, price,
period of delivery and discounts.

(f) If the quantity and value of materials consumed in a company are determined on any basis other than actuals for
example at standards, the method adopted shall be mentioned in cost records and followed consistently. The
overall reconciliation of such quantities and values of materials with the actuals shall be made at the end of the
financial year explaining the reasons for variances. The treatment of such variances in determining the cost of
items referred to in Para 2 shall be indicated in the cost records.

(g) The records shall be maintained in such detail as ma enable the company to readily provide data required in the
various Annexures to Schedule III to this order in a verifiable state.

(ii) Process material:

Adequate records shall be maintained to show the receipts, issues and balances, both in quantities and costs of each item
of the process material such as lime, sulphur, super phosphate, caustic soda, filter cloth and other chemicals. The cost shall
include all direct charges up to works, wherever specifically incurred. The issues of material shall properly be identified with the
departments or cost centers.

(iii) Consumable stores, small tools, machinery spares etc.

(a) Adequate records shall be maintained to show the receipts, issues and balances, both in quantities and cost of
each item of consumable stores, small tools and machinery spares. The costs shown shall include the direct
charges up to works, wherever specifically incurred.

(b) In case of small tools, the costs of which are insignificant, the company may maintain such
records for the main groups of such items.

(c) The cost of issues of consumable stores, small tools and machinery spares, shall be charged
to the relevant heads of accounts such as repairs to plant and machinery, or repairs to
building. Material consumed on capital works such as addition to buildings, plant and
machinery and other assets shall be shown under the relevant capital heads.

(iv) Wastages, spoilages, rejections or losses etc.:

Adequate records shall be maintained showing the quantity and cost of wastages, spoilages,
rejections and losses of sugar-cane and other raw materials, process materials, consumable stores, small
tools and machinery spares, whether in transit, storage, or for any other reason. The method followed for
adjusting the above losses as well as the income derived from the disposal of scrap, if any, in determining
the cost of the product shall be disclosed in such details as may enable the company to arrive at the net cost
of white sugar produced.

II. EXCISE DUTY AND SALES TAX

Adequate record of excise duty and Sales Tax paid and the rebate claimed or earned in case of allowance for
excess production or export of sugar shall be maintained along with the record of white sugar manufactured.
Calculation for rebate shall be worked out through formula prescribed by the government. The working of
the adjustment or claim, if any, shall also be shown.

III. SALARIES AND WAGES:

(a) Adequate record shall be maintained to show the attendance of workers employed by the
company whether on regular, seasonal, temporary, or on contract basis, as the case may be. Proper record
shall also be maintained in respect of payment made for overtime work and production incentives whether
in the shape of production bonus or incentives based on output given to the workers. Payment of any
retirement benefits including pension, provident fund, gratuity , old age benefits, contribution and any
welfare expenses shall also be included in the labour or factory overhead cost of beneficiary cost center/

department. This will be done in a manner that labour cost is available for each cost center or department
and for each product whether by-product or main product so that different Annexures of Schedule III to this
order, are filled properly and easily.

(b) Fair and reasonable allocation shall be made for wages paid to such direct labour as has been
utilized in more than one departments, between the various departments or cost centers and the basis of such
allocation shall be consistently followed. Idle time or lay-off payments shall be recorded separately
indicating the reasons and the method of treatment in the calculation of the cost of the items referred to in
Paragraph 2. Any wages paid for additions to plant a machinery or other capitalised assets, shall be
capitalized and excluded from the cost statements of white sugar produced.

(c) Benefits paid to the employees other than covered in (a) above shall be worked out separately
and shown in the cost statement department wise.

IV. SERVICE /DEPARTMENTS

Adequate records shall be maintained to indicate the expenses incurred for each services department or cost center. In the case of
multi-product companies these expenses shall be apportioned to other service and production departments on an equitable basis.
Where these service departments serve products other than white bagged sugar suitable bases shall be worked out so that the share
apportioned to white bagged sugar is worked out and applied consistently.

V. UTIITIES

(i) Steam.- Adequate records showing the quantity and cost of steam raised and consumed shall be maintained in
such detail as may enable the company to fill up the necessary particulars in Annexure 7 to schedule II to this Order. The cost of
steam consumed by the Sugar mill and other units of the company shall be calculated on a reasonable basis and applied
consistently. The cost of steam should be allocated to electric power house, white bagged sugar and other users including staff
colony and office building etc. Basis adopted for valuation of steam at different pressures shall also be indicated in the records.

(ii) Electric Power.- Adequate record of cost of electric power generated by the company and
purchased shall be kept in such details as may enable the company to furnish the necessary cost data as in
Annexure 8 to Schedule III to this Order. The records shall be so maintained as to enable assessment of
consumption of power by different departments or production units or cost centers. Allocation of cost of
electric power shall be on the basis of actual consumption, if separate meters are installed; or on the basis of
technical estimates in the absence of separate meters. In the case of fixed charges or fuel adjustment
surcharge claimed by the utility company, irrespective of the actual power consumed and if the amount
payable as per actual consumptions fall below the contractual minimum, the difference between the
contractual minimum and the actual amount shall be treated as fixed or period cost and transferred to other
factory expenses statement [Annexure 9 of Schedule III]. Cost of power consumed in and chargeable to
non-production departments, if significant, shall be shown separately. Record shall also be kept for any
electric power sold to out-side agencies.

Note: In case of self- generation quantity and reasons for under utilization shall be specified and
the relevant cost shall be treated as fixed or period cost.

VI. REPAIRS AND MAINTENANCE

Adequate records showing the expenditure incurred on workshop facilities for repairs and
maintenance of buildings, civil works, offices and plant and machinery in different departments and cost
centers shall be maintained on regular basis. Details of costs incurred and the basis of allocation of repairs
and maintenance expenditure to different departments or production units shall be indicated. Cost of work
of capital nature, heavy repairs, and overhaul cost, benefit of which is likely to be spread over a period
longer than the financial year, shall be shown separately.

If a separate maintenance team is working for a particular department, the salaries, wages, cost of
consumables, spars and tools shall be charged as direct expense of that department.

If the maintenance services are utilized for other products, the portion utilized for them shall be segregated
and charged thereto.

VII. DEPRECIATION

(a) Adequate records shall be maintained showing values and other particulars of fixed assets in respect of which
depreciation is to be provided. The records shall, inter alia, indicate the cost of each item of asset, the date of its acquisition,
accumulated depreciation, the rate of depreciation and the depreciation charge, for the relevant period.

(b) Basis on which depreciation is calculated and allocated to the various departments and
products shall be clearly indicated in the records.

(c) Amount of depreciation chargeable to different departments, production units or cost centers,
for the financial year shall be in accordance with the provisions of clause (F) of Part II of the Fourth
Schedule to the Companies Ordinance, 1984, and shall relate to the plant and machinery and other fixed
assets utilized in such departments or units or cost centers. The method once adopted shall be applied
consistently.

VIII. INSURANCE

(a) The record shall be maintained showing the insurance premia paid for the various risks
covered on the assets and other interests of the company.

(b) Method of allocating insurance cost to the various departments shall be indicated in the cost
records and followed consistently.

IX. OTHER OVERHEADS

Adequate records showing the amounts comprising the manufacturing overhead expenses other than
those already mentioned and details of apportionment thereof to the various departments or processes shall
be maintained.

If products other than white bagged sugar are also being produced in the factory, adequate bases
should be developed to apportion the overhead cost equitably.

X. BY-PRODUCTS

Detailed records shall be maintained for each item of by-product showing the production, disposal
and balance both in quantity and value. The basis adopted for valuation of the by-products shall be
equitable and consistent. Records indicating the actual sales realisation of by-products shall also be
maintained.

XI. WHITE SUGAR TRANSFERRED FOR SELF USE

Adequate records shall be maintained showing the quantity and cost of white sugar transferred to
other units of the company for self consumption. The rate at which such transfers are affected shall be
disclosed in the cost records.

XII. WORK-IN-PROCESS AND FINSIHED GOODS STOCK

The method of valuation of work-in-process and finished goods stock shall be indicated in the cost
records so as to reveal the cost elements that have been taken into account in such computation. The cost
element shall be related to the items referred to in the relevant Annexures to Schedule III to this Order. The
costing method adopted shall be consistently followed. Treatment of differences, if any, on physical
verification of stocks with book balances, shall also be indicated in the cost records.

XIII. ADJUSTMENT OF COST VARIANCE

Where the company maintains cost records on any basis other than actuals, such as standard costing, the records shall
indicate the procedures followed by the company in working out the actual cost of the product under such systems. The method
followed for adjusting the cost variances in determining the actual cost of the product shall be indicated clearly in the cost
records. The reasons for the variances shall b e in d icated in d etail in th e co st reco rd s.

XIV. INTER-COMPANY TRANSACTIONS

In respect of supplies made or services rendered by the company to its holding company or a
subsidiary of a company in the same group or company in which a Director of the Company is also a
Director in such companies and vice versa, records shall be maintained showing contracts entered into,
agreements or understanding reached, in respect of:-

(a) Purchase and sale of raw materials and process materials;
(b) Utilisation of plant facilities;
(c) Supply of utilities; and
(d) Administrative, technical, managerial and other consultancy services.

These records shall indicate the basis followed to arrive at the rates charged between them so as to
enable determination of the reasonableness of the rate charged or paid for such services.

XV. RECONCILIATION OF COST AND FINANCIAL ACCOUNTS

(a) If integrated accounts are not maintained, the cost records shall be periodically reconciled
with the financial accounts to ensure accuracy. Variations, if any, shall be clearly indicated and explained.

(b) The reconciliation shall be done in such a manner that the profitability of each product
produced and sold is correctly judged and reconciled with the overall profits of the company from all of its
activities.

(c) Adequate cost records shall be maintained in a manner so that the cost statements may be
properly compiled.

XVI. STATISTICAL RECORDS

(a) Data such as the duration of crushing period, the quantity of each grade of white sugar
produced, mill stoppages during the season indicating the reasons, quantity of by-products obtained,
percentage of sugar balance, bagasse, press- mud, molasses and sugars shall be kept in detail.

(b) The data maintained in the cost records shall be reconciled with the periodical returns
submitted by the company to excise and other authorities.

(c) Companies may develop an appropriate standard for use as a basis to evaluate performance
properly.

A. COMPANY INFORMATION

1. Name of the Company.
2. Date of Incorporation.
3. Location of Registered Office.
4. Location of Factory/Factories.
5. Products other than sugar being manufactured.
6. Installed Cane Crushing Capacity in tones.

B. PRODUCTION DATA

S.No
(1)
Particulars
(2)
Current
Year
(3)
Previous
Year
(4)
1 (a)

(b)

CANE CRUSHED
Date of start
Date of Finish
Duration of run days
Total number of hours in duration
Total number of hours of actual crushing
Total numbers of hour lost
Total cane milled (tonnes)
Converted maunds
Total mixed juice obtained (tonnes)

GUR MELTED

2

3

4

5

6

7

J UICE & ADDED WATER
Average mixed juice % cane
Average added water % cane

SAGAR MADE
Total sugar bagged of all grade (100 kg)
( 50 kg)
Sugar bagged (tonnes)

Sugar in process (tonnes)

MOLASSES EXTRACTED
Total molasses sent out (tonnes)
Molasses in process (tonnes)

RECOVERY %
Laboratory test percentage recovery of sugar cane
Average recovery of marketable white sugar % cane
Average production of final molasses % cane

BY- PRODUCTS
Bagasses % cane (calculated) (tonnes)
V.F. Cake % cane (tonnes)

CLARIFICATION PROCESS
Specify the process used by the mill

Annexure 1.

SCHEDULE III
[see para 2(1)]

STATEMENT SHOWING COST OF PRODUCTION & SALE OF
WHITE BAGGED SUGAR FOR THE YEAR ENDED ________

Quantitative Data Bagged Sugar
Opening Stock (M.Ton)
Production (M.Ton)
Closing Stock (M.Ton)
Sales (M.Ton)

Current Year Previous Year S.No
(1)
Particulars
(2) Amount
Rs
Cost per Ton
of Sugar
Amount
Rs.
Cost per Ton
of Sugar
1

2

3

4

5

6
7
8
9
10
11
12
13
14
15

16
17
18
19
20
21
22
23
24
25
26
Raw Materials
a) Sugar Cane (Annex 3)
b) Beet (Annex 4)
c) Gur
d) Raw Sugar
e) Process Material (Annex 5)

Salaries/Wages and benefits (Annex 6)

Consumable Stores

Repairs and maintenance

Utilities
Steam (Annex 7)
Electric Power (Annex 8)
Water & Gas
Insurance
Depreciation
Other Factory Overheads (Annex 9)
Total Cost
ADD : Opening Stock of W.I.P.
LESS : Closing Stock of W.I.P.
Total Cost of goodsManufacturing
Less: Realisable value of By-Products
Molasses
Bagasse
Others
Net Cost of goods Manufacturing:
Add: Packing Material & Handling
Net Cost of Bagged Sugar
Add: Excise Duty / sales tax
Total Cost of Bagged Sugar:
Add: Opening Stock of Sugar
Less: Closing Stock of Sugar
Cost of Sales
Administrative Expenses (Annex 10)
Selling & Distrib. Expenses (Annex 11)
Financial Expenses
Other Charges

Total Cost to Make and Sell

Annexure 2

STATEMENT SHOWING COST OF SUGARCANE PRODUCED
FOR THE YEAR ENDED ______

Current Year Previous Year

S.No
(1)

Particulars
(2)
Quantity
Rs
(3)
Amount
Rs
(4)
Quantity
Rs.
(5)
Amount
Rs
(6)

1

2

Seeds and Other inputs
Seed
Fertilizers, herbicides etc.
Insecticides
Abiana/Water Charges
Total Cost of Inputs

Labour Cost
Land preparation
Plantation
Maintenance of cane crop/ratoons
Operation of Tractors
Harvesting
Total Labour Cost

Other Cost
Fuel for Tractors operation
Maintenance and over haul of Tractors
Insurance
Interest expenses
Depreciation of equipments
Rent of agriculture equipments (if any)
Total Other Costs

Total Cost of own production (1+2+3)
Sales value at controlled price
Profit/Loss on own production

Note: 1. This Annexure will be prepared by those enterprises which cultivate sugarcane on their own farms.
2. Similar Annexure will be prepared by those enterprises which cultivate beet on their own farms.

Annexure 3

STATEMENT SHOWING COST OF SUGARCANE CRUSHED FOR THE YEAR ENDED ______

S.
No.

(1)

Particulars

(2)
Quantity
M. Ton

(3)
Rate
Rs./M.
Ton
(4)

Amount
Rs.
(5)
Quantit
y M.
Ton
(6)
Rate
Rs./M.
Ton
(7)

Amount
Rs.
(8)
1.

2.
3.
4.
5.

6.

7.

8.

Total sugarcane purchased at Government fixed rate
Sugarcane produced from own farm (Annex 2)
Less: Loss in transit
Sugarcane received at factory gate
Commission
Quality premium
Loading/unloading charges
Cane development expenses:
a) Salaries and Wages of Supply and Development Staff
b) Sugarcane Development Research
c) Supply staff and transportation expenses
d) Other expenditure

Taxes and Levies:
a) Cane cess/ purchase tax
b) Market committee fee
c) Road cess
d) Octroi
e) Other levies

Transportation Charges
a) Delivery expenses
b) Transport subsidy
c) Others

Other Expenditures at Cane Collection Centers
a) Salaries and Wages
b) Stores
c) Repairs and Maintenance
d) Others

9 Total cost of SUGARCANE Transferred to production
processes (Annex 1)

Notes: 1. Cane supplied from own farm shall be charged at controlled rate & the profit/loss on farm shall be taken to profit
&loss account directly.
2. All expenses relating to own farm shall be excluded from this Annexure.
3. Where beet is used in addition to sugarcane, separate Annexures shall be maintained on similar lines for beet also.

Annexure4
STATEMENT SHOWING COST OF BEET CONSUMED FOR THE YEAR ENDED ______

S.
No.

(1)

Particulars

(2)
Quantity
M. Ton

(3)
Rate
Rs./M.
Ton
(4)
Amount
Rs.

(5)
Quantity
M. Ton

(6)
Rate
Rs./M.
Ton
(7)

Amount
Rs.
(8)
1.

2.
3.
4.

5.

6
.

7.

Total beet purchased at Government fixed rate
Less: Loss in transit
Beet received at factory gate
Commission paid
Loading unloading
Beet development expenses:
a) Salaries and Wages of Supply and Development Staff
b) Sugar Development Research
c) Supply staff and transportation expenses
d) Other expenditure

Taxes and Levies (if any)
a) Purchase tax
b) Market committee fee
c) Road cess
d) Octroi
e) Other levies

Transportation Charges
a) Delivery expenses/travelling from purchases centre to
mill gate
b) Transport subsidy
c) Others

Other Expenditures at Beet Collection Centers
a) Salaries and Wages
b) Stores
c) Repairs and Maintenance
d) Others

8 Total cost of BEET Transferred to production processes
(Annex 1)

Notes: 1 Beet supplied from own farm shall be charged at controlled rate & the profit/loss on farm shall be taken to profit
&loss account directly.
2, All expenses relating to own farm shall be excluded from this Annexure.
3. Where sugarcane is used in addition to beet, separate Annexures shall be maintained on similar lines for
sugarcane also.

Annexure 5

STATEMENT SHOWING COST OF PROCESS MATERIAL CONSUMED
FOR THE YEAR ENDED ________________

Current Season Previous Season S.No
(1)
Particulars
(2) Amount
Rs
Cost per
Ton of
Sugar
Amount
Rs.
Cost per
Ton of
Sugar

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.

Total Sugar Produced (M-Tons)

Unslaked Lime
Phosphoric Acid
Filter Acid
Sulphur
Caustic Soda
Soda Ash
Tri sodium Phosphate
Bleaching Powder
Anti Foam
Formaline
Laboratory Chemicals
Filter Cloth
Sewing Thread
Cleaning Brushes
Lubricant and Grease
Other (Specify)
Total
Less allocated to
(a) Electricity generation
(b) Steam Generation
(c) Raw Material
(d) Admin Expenses
(e) Selling and Distribution Expenditure
(f) Any Other Specify

Balance transferred to production process
Annexure 1.

Annexure 6

STATEMENT SHOWING COST OF SALARIES, WAGES AND BENEFITS
FOR THE YEAR ENDED ____________________

Current Year Previous Year S.No

(1)
Particulars

(2)
Amount
Rs

(3)
Cost per
Ton of
Sugar
(4)
Amount
Rs.

(5)
Cost per
Ton of
Sugar
(6)

1.

(i)
(ii)
(iii)
(iv)

2.

(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)

(viii)
(ix)
(x)

(xi)


Cost

Salaries/ Wages:

Officers and Permanent Staff
Seasonal Staff
Daily rated and Contract Labour
Bonuses

Benefits:

Medical Expenses
Canteen Expenses
Welfare, Recreation
Transport and Travelling
Education Cess/Expenses
Group Insurance/Workmen
Comp. Insurance
Prov. Fund (Employers Contribution)
Gratuity/Pension
Other Benefits (if any)

Total
Less allocated to-
(a). Electricity Generation
(b). Steam Generation
(c). Raw Material
(d). Admin Expenses
(e). Selling & Distribution Expenses
(f). Any Other Specify

Balance transferred to production
process (Annexure)

Annexure 7

STATEMENT SHOWING COST OF STEAM/GENERATED CONSUMED
S.No

(1)
Particulars

(2)
Unit

(3)
Current
year
(4)
Previous
Year
(5)
Variance

(6)

1.
2.
3.
4.

5.
Types of steam boilers used
No. of days worked
Installed Capacity (steam in tonnes)
Utilised capacity (steam in tonnes)
Production:
a) High pressure steam
b) Medium pressure steam
c) Low pressure steam
d) Less: transit losses
e) Total
Percentage of capacity utilization (3/2 * 100)


S.
No.
(1)

Particulars
(2)

Quantity
(3)
Rate per
Unit
Rs.
(4)

Amount
Rs.
(5)

Quantity
(6)
Rate per
Unit
Rs.
(7)

Amount
Rs.
(8)
1.
2.

3.
4.
5.
6.
7.

8.
9.

10.

11.
12.

Water
Fuels:
a) Bagasse
(i) Own
(ii) Purchased
b) Pith
c) Coal purchased
d) Furnace Oil
e) Fire Wood
f) Gas
g) Other fuels, if any (to be specified)
Quantity of waste heat from the plant, if any
Consumable stores
Direct salaries, Wagws and benefits
Repairs and Maintenance
Other direct expenses (e.g. Boiler inspect ion fee etc.)
Insurance
Depreciation
Total Cost of Steam Raised
Less : Outside sale
Total Cost of Steam for Self Consumption
Add: Cost of steam purchased
Total Cost of Steam Consumed
ALLOCATION
Total of item 12 allocated to
i) White bagged sugar
ii) Electric power house
iii) Others:
a) Staff colony

b) Office building etc.
Total
Notes: 1. The rate at which waste heat is evaluated vide item 3 of this annex should be indicated giving details of cost centre from which transferred.
2 Basis adopted for valuation of steam at different pressures be also indicated in the records.
3. Realisations, if any, by sale of steam to outside parties and waste products such as boiler ash shall be shown separately against item 10.
4. Where meters are not installed, consumption of steam shall be assessed on a reasonable basis and applied consistently.

Annexure 8

STATEMENT OF COST OF ELECTRIC POWER PURCHASED / GENERATED & CONSUMED

Current Year Previous
Year
Variance
2.
3.
4.
5.
6.
7.
8.
Installed Capacity (KWH)
No. of units generated (KWH)
No. of units purchased (KWH)
Total (2+3)
Consumption in Power House including other losses
Net units consumed (4-5)
Percentage of Consumption and losses to total units
Available =5/4* 100
Percentage of power generated to installed capacity 2/1 * 100


S.
No
.
(1)

Particulars
(2)

Quantity
M. Ton
(3)

Rate
Rs./M. Ton
(4)

Amount
Rs.
(5)

Quantity
M. Ton
(6)
Rate
Rs./M.
Ton
(7)

Amou
nt
Rs.
(8)
1.
2.
3.
4.
5.
6.
7.

8.

9.
10.
11.
12.
13.

Steam (Annex 7)
Consumable Stores
Salaries and Wages
Other direct expenses
Repairs and maintenance
Duty on electricity
Depreciation
Total
Less: a) Credit for exhaust steam used in process etc.
b) Other credits, if any
Cost of power generated
Less: Cost of power sold
Add: Cost of power purchased
Total net cost of power consumed
Cost per unit average
ALLOCATIONS
Total at item 12 allocated to:
e) White bagged sugar
ii) Self consumption
iii) Others:
a) Staff colony
b) Office building
c) Other (specify)

9 Total

Notes: .1. Credit for the cost of exhaust steam supplied to the sugar factory and for other units shall be determined on a reasonable basis and
shown against item 8(a).
2. Realisation, if any, by sale of steam to outside parties, etc. shall be shown separately against item 8(b).
3. Cost per unit shall be worked out with reference to the net units of power available for use after deducting consumption in the power
house and other losses.

Annexure 9

STATEMENT SHOWING OTHER FACTORY OVERHEADS
FOR THE YEAR ENDED _________

Amount in Rupees
S. No

Description
Amount
Rs
Cost per
Ton of
Sugar
Amount
Rs.
Cost per
Ton of
Sugar

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

12.


Cost
Rent, Rate and Taxes
Printing & Stationery
Postage & Telegram
Telephone Fax & Telex
Travelling & Conveyance
Subscriptions, Books & Periodicals
Entertainment
Vehicle Running Expenses
Security
Fire Fighting
Other Expenses

Total

Allocated to
i)White bagged sugar
ii) Electric Power House
iii)Steam Generation
iv) Others:
a) Staff colony
b) Office building etc

Total as per item 12 above

Note: 1. Bases of allocation should be disclosed.
2. Expenses are illustrative only. Companies should provide in detail all items of general overheads.

Annexure 10

STATEMENT SHOWING ADMINISTRATIVE EXPENSES
FOR THE YEAR ENDED _________

S. No

Particulars Amount
Rs
Cost per
Ton of
Sugar
Amount
Rs.
Cost per
Ton of
Sugar

1.

2.

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Total Sugar Sold (M-Tons)

Cost

Salaries, Wages & Benefits (Annex 6)

Rent, Rate and Taxes
Insurance
Water, Gas & Electricity
Printing & Stationery
Postage & Telegram
Telephone Fax & Telex
Repair & Maintenance
Subscriptions, Books & Periodicals
Entertainment
Advertising
Legal & Professional Exp
Auditors remuneration
Charity & Donation
Others

- Total

Annexure 11.

STATEMENT SHOWING SELLING EXPENSES
DURING THE YEAR ENDED _________

S.No.

Particulars Amount
Rs
Cost per
Ton of
Sugar
Amount
Rs.
Cost per
Ton of
Sugar

1.

2.

-
-
-
-
-
-
-
-
-
-

Total Sugar Sold (M-Tons)

Cost

Salaries, Wages & Benefits (Annex 6)
Commission
Freight Outwards
Stacking/Restacking
Loading/Unloading
Export Expenses
Advertising for Sales Promotion
Other Expenses

- Total

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. ("0"' ai ['n).. :'tm i, i' k " " d ltl Ill"'. t',c 1()II"wingOrder, I1<lllldy:-
Chcmlcnl Fertilize r Indusl '1' (Cost Records) Order, 21112
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'ale< "f ell<:h cf the formulation r,"""U,I' referred I" in <un !""a (JI or p"m I, during a fina'l(ial veer
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mamu",,,J '" the or '" f(\<lt"ote. '" e'rllnatol) no: Ie' 10
Ihe ,'" 1 , late""nl, fOf ,h, rd.,ant !,"r",d , ' "d , ba.,\ 'hall be arrll,-d
e,"'" th" rcln ant r>eriod. 1ho 'alue!wll ;""lud" all <\""'"
"""go P 10 ""h a. n.i", dut>. haulase. ' Bn'P""". Ii-e,g'\!, IImdhnll and
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,1Iart;e>. mland and in.........e dlafl':C'" I... ca., and ...
",!ItT I.:- c> the lime <>( import ;hall be .no..lI "'pr.llel> and Induded
I., "orl; "lit landed '" 1
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1"'" ""1!llWnb U' 410q ''')4' 01 eq
""rd< """'1' JO U'''l' JO 1U0:>;>' "lml0Jpy Ie)
:on ..,.",I",""J01" 314r wn<",,;) ) "'4'0 '", '1' 'l P. ;) II I
e LJI
' !'11 <It p:>q1J""-"\Jd r.;oJ <[I,,,,"., "1\ '" '" nlr.r "P!.,u,d
01 ,u"J LlJ O' "41 , mu ," l!tPI' 4'''< U! p'l'!"IUl"lU oq [!"4' <P"';I;>1
" ,
I' " '' -' PP" 4'" ' o "'"'1-; 'llO!PUI""d 01""'tt l"'
'1'" ' '1' '>, " ,,,!,e,I"!"''''P" J" " "'I' PU" \" 1<0:) 'Old",] IXl,.{ I
'l'O.) Ir"' I"I\ i,,'pnpu, 1"'-" 1" P'III"' "'" '1""'l"W P""'l'ql1 U"'" ,II"S (I)
1" !'' I"UJ JII lJOO 'U"'.! IOUII'"
Jo> U!l '11U '" HJ, nb..<'1I1< 'U" -U"!p\.",,rJ\ "4'
10 ,""r "11 \' " "1'" "' 11jf p.'lJJ ' '' 0' '! p.,po,lulI JO IU.'U<Xl"'M ' OJ"J ())
'''11110' .\ <n ,<0, J:'4'" '''Id 1" 1" ,,,,oJ
<" ,."'-" 10 10 "", '41, n <' p;'IJ'''O' " IIT".'l""'.Io 1""
'1"'!lddu, '0 JOJ U! -t'U" lnw f .'1'''1.\\ ('II
' 1"0'""" "4' U! 1''1"" 1""

''' 111"4' LJI "1 ""OJ! j() 1S" , "! <." ""!'"' 4" "
jU 1".> Ll ll""l 'OJ "'" :)lIlJ"P
'1"11"110 1<""1 1" "'l11"4' IUI\)' " 4"" \ 1'''" " !I!ll1\'''b
,10 <1<"1"'1"""':" "41 "4 11"'1< I' 1'''"
"! 11 "1(' 'llmlJt sueq e uo pJltlllll.,pr J' .,,,t't.l,,,,,,
e '" 1" """U(l' 'IRU_ltUi J" pi'" 'l! IUP. t1 t> JOJ p'lll"l'p. 1''''(1 '''' l ' )
II. SALAIUrs xvn WAGES
I I) shall h,' maintained I" , h"" \h<: 1M
"hether ,," "r l>n C""lr""l ba, i,. a<Ihe en", ma, be. Pmper ",,,ord , hall "I",
be ma"lIaincd ;11 rC'llcl or pa:ment m;lde Ii" "or'.. and 1'""l lIclion i",:c11l iYe< \\""Ii1,,, ," the'
,hal'" of prod"Clion ho", ,, <or incent ;\6 based on ow-p"t 10 the w",h r>. of an: "'lir,mcnt
henel'l' ;nduJ illtt pemi<' ll . pr,\\ iden) fLlnd. ,,1..1 bOllefil, and " e1 f, rc ,hall at",
b<: Lndu,kd ;n thc labour '" O\erl,,'ad cost of hcndi"iar) eo,l cenle, 'dcp,,,,mcnL Thi, will I",
d" ,,,: in a m"una that labour ,"" I., "",ilable f,'r e0<.1 or dcpanmem '111 ..1 for each product
\\hClher bJptodoCI <)r ,,,,, in I',",,,h... , "', Ihat differcm (0, 1 Sta\emem; are ti llcd
_, n,1e",il:_
(:f rai, and rc"-""",blc all<><:31i"n ,hall he made f,.... paiJ 10>ueh ,l i,\:cI lab-'ur as I""
!>ccu Ul ili,,'<1 In more Ihall Clne dCl'anme nt. OC",,-.:n Ihc ' ' '' ClUSdel"'nltl<nts ()f CO>, .cnle" all" Ihe hasis
<.>! ,ueh ,dl<lcal iM ,hall!'C r"lIc"' ed. "ages paid fOf addui"n, to pla"l and m:lchi:Kr;- ,"
,'I h", assc\> shall be ;::IPil.1 1if"...! and luJed from lile co, t , I:I\emenl, or che mi,-al fenil izor
111. r-m.rru s
( I) ."" lc'I""tc r""""is . hall I>c maintai "cd sho" inll thc and c,,,t " r \'ariou< u)Iii, i"
and ' "''''''n bc>lil "nd prooLl c<d a" l>e lo,,' and and Ulilo",d bv dlili: rcm <0"
eear.,<.
(a) I',,,,;,
(bi
(el Pe-m;ncrali",d W;,le'
(d) Comp ressed Air
Ie) Ot!,cr; (to be
(.1 I Thc re""rds ,hall I>c >0 a' t" enabl. a, ,,, ,,menl of "On5Ul11pU"" or ut ili,at;o"
of s"" ices ,iiffe, o'" "ost cenlCrs or """' Ufa<: lu, in\: unit>. ,\ !IOC21;01\ "r CD>! "r util i,a ' lOll
,hall he "" baslS "f ""'ual ,on' Ll l1l rt ion. ,f p"",iblc. Or "n ''Ie OO. i< of lechni<al ", t;matc, in lile
abse"co " r aClUal In ,he of charge, 0' fuel .dju"c menl ,o"harg. for e
dJlmed b:- the IItilil: IrTc , pc<li'e power C<ln, "", ed and ir Ihe a"'''un! pa}.1\>10 U'
p'," aotual COn"J111pt i"n fall. oclo" the con lr.tetual minimllm. tile bCl" ecn the eO"lra,tual
minimum and tltc a, llIal "mclInl .hal l be trealed a< li w d '" period '''''' and transferred III role"anl COS!
"lalomcnt. C,,,l of "''' i, e il''''or .wI ""S con,,, mcd in and to
depo,...p'etlt;, ;r , i!(1ifi, ,,"' _sh" II ho , ho" " <cpa rateIy.
\" ",": - l1f ,c:f gener-at i,,,, and rea""" for undermililat ",,, ,hall .'" , pec;fic-J and
(he ",k,al1l co,l ,h,'u\J \>. treated a, Iiwd period co<1 In "a<e of ,wural ga. ' opumte records , hall he
tllaintJII'cJ f"r of \1-3' a, d;ro,'1 makrial and use of !", in "t ility <e rv; . or hx ' UPl' ly 10
""i""ie, . if 3'1y' _\ 1", " cr. Co,t of "Iilili. , general ed r", ,ale to <"'lside partIC' i, arr;' cd a, r ",1 of _",If
g..ne'ated ut Iil:,c> 1'1,,> dist r;b,,\ ,on ,0:\1 plo' ' hare of <\drnini,t rati, e mcrhead<pi", <l' erhea(!>
-\ de'lU3\C reo,>rds ; I"", ;n!, incurred on wnr'..,J",p lacilitic> for rcpair< and
n,,,inlen.a nsc of plam 3".1 mad ll".') in diffc rcnt and cost , ha ll hc maintJi"eJ " "
b.hi<_ [)clail< of eMt detern, inal;on and the ba, i. of all ,,,,a(i<>n of "'pai" a,,,i main' cnance
1U or manulacluring unils <>r co<l ecnlCr, ,hall "" indical .'d. ("" sl "r
"ork ,,1' capilal nalme. of nea') rcpa,r;. and "" "' baLJ I CO'I. benef'l " f " n;en i' 10 be <pread o,cr a
l'Criod th'\I ' one financial year, <h,1I l.>e slit", ,, ,eparalely. If a ' cparate maim'nanee tea'" i,
" ('rkinl/. lor a f';"li, ular dcpanmcm Ille , ,,b r;e, . .... age,. eml of cO"'"ma l>k ,. 'pares and 1001< <h""I <I k
eharl:ed a; di"'Cl nrcn," " I' th'1\ <lcpar1mcm, Ir Ihe mainlenane" 'cn'ico<are mili...,j 1<" othe' produ<t,.
Ihc poni'Hl \lliI; , cd for thcm <hall be and char.wd lhcrclo
v ll H IU("1 '\ T10 :\
(11 ,e""rd" ,11011be main\aio"d , I", ,,i,,),\ "IUCi an,1" Iher panicul. " "r """'''
III rc,p'''''1 of dcp.rcd ali,' n " I" be prmided. 1h" r""",d, ,hall illle,-alia mdical" Ihe ",.1 0 1' c, ell
iMt\ "I' a,sel- dc:ails of re, alualion of a""t, . ;I' any. the d. le nr i1> . Cllui, ilion_aOe Lt111u latc-d del',ce '"lion,
the 'ak "I dcprc<;alion Md 'h c ,kprcd alion charge, for the rele"am period
1:1 Ba, i' <"1 "beh deprccial i<>I\ i< calculaleJ and allocated 10 lb,' ,"r;ou< del"mmenh "Old
p""d"c\, 'hall k dearly ind'caled "ll)'e
,-,j "' hcre \', ILlc ,Iem< arc ,,,;\1en off lill l\ at the t1lnc "f I'"reha , e 1i". "ei,,1
" n' e may hoe gcnnal l, ad"p,eJ for eM1
\1. l''il R\:\ Cr.
,I>
om o'ed on
K"cord >hall be mai ntai,1Cd 'ho" ing in, urance premium paid for Ill< ""rin,,, ".k>
',.:' and olher intero'l< " f the
(2) \ k :OOd "r allO<:at ing i",u.--:mce CI""1 10 the 'ariou, e",t ecmc,,; <hall be indi"at"" in Ihe
"",I rNord, "",j t" I1,,,,,,d eon'i'tentl).
\ceq"" t, re, Nd ;m;luding tcdmi('al ag,eeme nt' ' hall be mait\laitlCd in ' "'1""<:1 of fcc paid t" ilK
collabora'or< or lcchnol".fI.:' .upplier> on or n",,_reeurring. lxI,i.... parly-" The ba, i, 01
"ha'ci ng "",h lhe benef'ciating funn Ll laliom <halll:>c indicallXl in Ihe er,,' ,"c",d"
\ 11 1. OTlII: R OHJUI L\IlS
Adc,!Ual" record' ' I"' .... ;ng lhe am"unl' c"", prising ", "" ufaelu" n!! "xpcn>c' mher
lh"", alr<ady rnemi""w a"d de,. il, of apponi"" "' ""1 10 II", \ a, i" u, depallmcnt, or 1"<>0:;,.""".
," ",,,I ""nle,>.h. ' 1he mainlained, I he faelOl) ,hall include, among. olhc, item ;ndi cl
c,'" "h'ng "i\ h of labour cost ' ''''h a, rringe benefit"- other labour statf \\. 11"' 0
c,rabli,hmcnt ex,,,,,n,,,,, of of il"mS refer red 10 in 2. Ir pm.1u"l.
"Iher tha" ehe"",,,.1 fcnihle" .alable b, pr"d"e" arc ,,1 <0 bei,,;; produced i" thc fael"').
"deq""le .h,' " ':1 d.."z'<'pd apl"'nioo lhe ,,,,.,he, d cost equil,bly
IX. QI-' \ Ll TY , OYlIHlI ,
In caw ce"o ", ,'h<;mi,al f,," iIi' cT> require po:r iodi" check> the 'Ill' ]it} ""!!Iml del'"nment. '" I"
the ch"", ;,' al 'lrcogtl1 ,,,ronni,,),\ 10 'ta"d "rJ., !aid dO'''l by lhe Go, em",""t or ind" . I') _
,<"""rd. ,hftll be mainla;ned ", \ll ;u Ihe nl'en,c> inemred on Ihe <l 1", lily eonl,ol depa rt""'''l arc ,ollede,J
and d'",gcd to ,he d;fr,,,'r.: r' r" du"t' \deq"al" ' ecord;, shall be mai"'ained or rejeded fen ih, crs.
imennediaf) proo""t> and by_pn-,d"" I", Fxpen"" iU'; LJ rr"d on qualily' c" "lml buill_in "ithin a certain
'hall be charj:ed A, direct n rcnse
s
:\ . JOI:"T l ' IUl I)l:CfS
WheT than 01'" JIf\>dUC! arises. from I process. the $hall be alocatoo ro the dille",nl
,,,,duel' <' n .""me ba'" "h"'h 'hall be Coo, t.Ienlly ;ll'plied during n-c reto" "'I p",- iOO n,..
",,,i, on II hi. h ,,,, h join! C"'IS are allo,:nled h, tho diff"r"Llt [lIwl,,"t, ari;;inll tinm a l'rnce" ,h.n Ix'
in If C","I ree" rd, .
I he c\J' h ilK ," 'Ill ;Iltcrlll<diar: I"'''''''' II iII bo tmn;f,rr..<! pro[x",i",,,,,, ,n ,Ill' ' I ,,,t";')
rall;f"rr..d 10111.. IWV ,,"';';e;,
XII. WORK-I:\.I' RO( [SS ,\:" 11 H 'i ISli U I ( , OI IIlS I ' Y L NTt HlI I S
I h" In"th"d of , 'tlLaliun"f ll and Ihe flni, he<1 8"",1, ' hall i'Hk al"d
" Ihe ""'I rc,-,,", , d, sn 10' In reveal Ih< "''-'I " hich ha'" been laKcn i"lo ace"",,. in ,,,d,
' mpUlall,' '' , 'fh" ,,0,1 ek,.,cn:> ,hall be ",Imed 10 th. ilCmS ",rem,llo in III.. rde,alll ("o;;t
I he e" ' 1i,,!'- ,n'clh,><! ",h' pld ' ha!I he cm , i, teml) ed. 'I ' ."lEnent Ir ;lll' . ,," ph, 'ieal
',e":'cal i"" p" ' l' .... k.- WIth o.)ok bala<l ""', 'hall . 1", be in Ire c," 1,-""",,1,.
XIII . I'.-\("KI:\( ;
\de'pate rec<>n1, ,1,,,11 be m"inta;ned ,how"g all tl'" ,-"""i r l>. i,,,,e, and hal"ncc, both in
LllIa nl;:ic, and C,1>I of pad,ing lnaleri"I, ' ''cll a' ,Ir;p, . "'npoutes, "'ial" boltle" carll"'. bow, .
"'ds. ""d lil,,'"I''''' f", :Or." \d"'l.<al. ' ""ord .t..11 at.o be "",in\dillc<l for and
>ther incur,,'" in rcSpo.-'::1 nf ,i fe "r packs for """"etin!! or forll ,,,!ali,,,,,
The d<:tail, or "ari",,, m"Ic, ial, ."wall) u",d ami ,pu;led , hall 1", mairt a,n"d i'l
,<:,t><:el ",f ca,h f",mulati",,- \\ here rorm"lalinn i! repacked due 10 detcctive packing. dctai , nf ,,,,'II
'"p"ckirlg for pack ,h"l1l", delermi""d if ,, pad, i"!.! , 0' 1 i, , ignilic""l. In c",e an} packing ", ateri, l,
bv Ihe ccmp'n), 1'''' [''-'' lho and "f >ud, it"mt be
llainUlI""d. Ie u"" of npun p""kin\,- 'eparale re"ord, and addl[i"nal """ki"g. co,t <Judi be
:\1\' . r-oxr ST,>;I t:\IE:" 'IS
Delailcd ,m!! "de,!""t " "o>! , Iate"' ""I, ' h"11 p"l'",cd fL H ""cll type of lerll liL<:r prcd",I,
r1lem,,,,lian a, ""l,i red "ide. Ill.
X\' , AlJ .JlSD l f!'i T m' COST VARIA.'SCf
III \\'h"n lite ,... "',,, "''' al:'" b"' i, "Ihe' til"" acIu"l. ,"ch a'
""n,brJ Ihe indic" uc the pr<><:"cure [ollo" cu by Ih" comp.ny ;11 mOl 110"
C",1 0" prod""l under '"ell 1'h" method f"lIo" ed 10. adj".[ing Ihe ,{l>! III
,Ic:e':"" ill ;r.g Ihe (lo w,,1 ,,(\Sl of the pm,h, el , h,l l hoc ;ndi,alcd c1earh in Ihe cost records. t he ""'I 'll ri"n"",
.hall be ,holl n 'h I Ihe rol,,' a-u head.. til Ihe "" peCI eml Slale11enl.
(:) ro' \ in re' p""t of "' "t<:r ial' ,I",II "" cr-31ia be r",nished "' 1'3'''1.: 1\
"or 'lLal",iak Va, i"r". ,ball hoc ma,1e qua""rly durinS th" 1""'3n" ia l year and a<o al th"
I'<;a""o, or variances ,hall be s,wn in the cost record,
6
n pcn"" l11 a, k ,pht on ba,i< of "",t of >alahle 1,,"J uCl

a",l/ol cp" "r if ",Id h) tbe comp"t1 ) or ha, i, il) thc
'>uch b",;, , hall be ... rly indicalcd III the c",t
X\l I. "'ICU . I'\(; ,-\'\ Il msuum TIO'\ f:XPr.:"SL'"
( I ) Sci and di,tr ibuli<>n in of fcrtili7er shall be "ppO<1 i"ned I" <l inerem
Ti nal ;,r<>d UC\' ",lab', t-;. ,,,1, and UI1 the ba,i, of sal<:> , evenue or ""ne
,,, her <qUllabk 00," "Illeh shall he in lhe 00"1 reomd, lind , nail he r"I\,mC<l ,,,,,,, iSleml).
\2) If ,mP<" lcd !i;n Hi,cr, ore al., w lJ ny the '"", pany. ,.;Iling expe l" e, ,hall be
"" lh,' 1>"", of , ale, or "n) b",,, lhat lhc e""' pany may adnr l llo"e,e. the
ba. i, nf , k ' i t -c c ' n,;, rollo" <:<1.
\ \111. xrt.r.tx c ,\ vnmsuaut-nox [ XI' 1" ' S[S
(I ) -\ e"mn' On "lhe ""q of opcMing. a C<' lllmnn facility, <)< ",,,ice or Ihal
I"" or m.' re e"'1 obi,d ' .
Ie) ",'n,," <.> n co<1 i, lo"c. lh,,,, lhe 'land-a.l<, ne i"di, 'idual eo,t 10 e""b coM
obi", I. had til, r",ility n<>1
( 3) ("(' 1111ll 0'l i. \he. eh,,.., allocJted 10 (0'1 objoc\ b.1>e<! on the indi\ idual c[><.l' "r
lhe cost object
XI \: . ST,\T!"'TIC,\L vr.vr "' '' II OTHUt RF.COIUlS

C""'I' ;'n,o, .,,, , t\1r ,,, e a, a basis l<l e>aluale perrornw""c,
.-\lleMatd) f" n MI> b) the indmlry in gene,al ,hQuld l>c maintai11 cd,
xx. R, ECO"iC"l UAr to x OF COST A"In " .\'\ C1AI. A(" (" OI "' '1S
(1 ) Th" rcc" , d, ,hall lJ,.. lI'ith the financ ial I" en" ,,',
","uru<:) if imegmwJ .ecmmt, r.o: mainl:lincd, Varial;(lIl, . if at1) . , hall be dearl) ",JicalC<l.lld
e" ,'Rined,
( =) The ,h, n be d<>ne in " ",b a ",anne. lh. t lbe rr"li l.bilil , orlhe dinc,ent
prodLLct>. p<:r is eo"ccllyjudg<-,j and .econcilC<l "ilh the ,,' (,.11 l'",f'l< or lhe
lro", all "f 'I> "oli>ili<;,
(.1)
e,' mr ,icd
Cl"1 shall be mai"tained in a man"e. tuat lhe ""I ' !atom"n:, call t><
7
SCII Ell liLE II
l:\fOR:\IATlO'\"
'arne 01 the
() te of Ik=J .. here COl>! " t3lem.:n L<".m: appfU,,:d
10 Per
M.Tonno:s
PCI ,".:;U
\1
lnstallcd Capac.tv
l ::. '/..d
'\0. in the
II \ hin produch:

Capacity
l "lili.,.. 'd
" ."
, .....,c 0 th", Process Inventor Paten{ holder,
III
.1"'k'\I"-" I
[..:e para 1(1)]
I.... ' i:R\lnH.\J t\ I'IHl m c-r r -ovr nm Til E \ L\R ...... !lUI
1',('<1".,
'arne
\ _
Till' n .A}!; 1. " ' 1 \ I \!l;
..J!!!' '''''I
,
;
Of>c" '>h,,;k
PT Our II; :hc P..,.:od
1,all'Icm.'<.I ,....., ...'<.1 from (l(I\a" PIa t "\11'1'1".. ,
l .
I 1', 'l!\I<' T C'fTC'd I" lbe ,
",,'n to I \It'i
,
-pl RRJ"1.' I \11,_
10 1.\ l ""'1 nR
' ,1'>1R, 10"'1R.
, .
rill' In( , \I oil
IllTU. " rrR
( 1.... . ,1. fl It>

\la:<'..
<
"
,
"'"'" ... Ito
T "'......
-,-
Il.-...t \la,",......"."
<,,>:, \\a,
........
R _ <'

O_'>cr ()o rfI>noj,
l""" _t<>F"", Ill" ....... "
l T1UTl F!>
J'<_o"k...h) ,,,,,.,,,"'.4)
" . Cub,; 'I.,.) ('"",,,or,;"
....." ((ub" \ktn) l.""",,,,,,q,
11cm...",1.l't<!\\ ...... O ' .. ...... lOl
\ l ll K' ... Ill) ( '0"1
Plan, I ,.on<OfI"S llq>oortmc-n, C...l
P "'" I""h"",.1 C
r.... \liUlOlm.'" lkp.-lrntnl (
'ct,1 t"""," <"
r..n, ,n I,om1'",,,,,,,, I'T"""
P,,,,hU<;d (!'Om '" '"Wli""
I., r,a""" 'n"",.,&1<1. R).p'O<!U"1
Cloo:l ',."k I
( "" of In''''"",J 1',,, ,1""1 I ,,, " "x: I""""""c;:;-;; -L
1\,111 be P'''P"",<l for """h i"tcrn",<l ial) prodOCI.
,
-,
.-
.,
,
>.;, .,'
Annexlln' ]
1
I \\'1 vr I R
I '
II \ ) I
Cm t of I"lonor d l'r" n,terrc' d'"i,C.- - -
co-r I'\ ('l IlIU'IlIl' nn,
!low \btor,,,,,
\,ll " TlBT) "
' T AR
lon0'O! )
I
,\ lAI " PROllllCT ST,\TDI EY" SHOW l " C COST TO ;l.l.-\hT .-\"'-1) SELL FOR 'nn:
n :.\R ["nEn _
\Iain I'rOO,," ,
'a"," ,.
I )
"
,.
s
to
"
,
'ak abl:
,
(i;l
(lll J
r "eo' ica'>_R_,,;-;
";'C":
Ilai me''' '''cc "nOT.'
R<pai" "oJ \1ai",.,,,,,,,
WaF ' () , j" r Ren'[1'
Ren,. Kalo> & T.,..

D:preei" ","
Other (hTrhn d.
", ent, hgi"",e" <t T" hn;c;a",
l T1Ll l'l FS ALLOC I TEll
(An""",,,..!)
\Leom (Cu\>,c \ I. l . n IAt'l''''u,,-, )
Con' prc<,cd (Cubi,- \I 't"," (Ann.\urt-6)
l): ",;rleral:,o. l\'a,c' (:"i",', (A"".XLL'O 7)
I I.LOcnHl (0'1
_0: o.:p'''m<1' ("""
Plar.' Thr ical lk ra rt",enl (;""
PaClO':' DorM ",.TIl e""
23 I Swm. o('""
:-1 Total C" ,ofPrOC,,",,"
\(Id:
10 I \-, ,,1<,: ofCl,,",,ng
TOlal for \ ;,10
Ado:: ['1'<"'"'
firal'<ial f,p,", ",
& D "ibuLL'''' hP<""O';;::;;:;
I Co<, to sen
-' tah:r"orn 'ha,i, for cadI m"in P' OOLl<; 1 and

Annexur.' J
! ' .\[Hln
,
-
,
,
,
lh " \ ' .'m31, PeTch., ..
(u
iii)
(1111
I oal!lnf 6:. of F'"ih'''''
\
,01.,;" , \\ ,&.
tkO''' i'' '''''

'J r.ru.n II>. \l. t o(..-n r n
10 Po,,",
O' hor
"'. :"0
,
ll \l-'.OC \ n :ll r osr
I" Pl' n' Fnl\IIW<T iog [)<p0l'1 moIl1C""
1'3""" ("""
u
1\ I T",. Il '". ,
I
,\ d,J; R. : ',")' Sliding C""
,'
b
"
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I ,Ie " \10 [)." I '01 I
ECURITIES AND EXCHANGE COMMISSION OF PAKISTAN
NOTIFICATION
Islamabad, the December 21, 2012
S
In exercise of powers conferred by clause (e) of sub-section (1) of
section 30 and clause (o) of sub section (4) of section 20 of the Securities and Exchange
Commis ion of Pakistan Act, 1997 (XLII of 1997), the Securities and Exchange Commission
of Pakist n is pleased to make the following Order, namely:-
SYNT ETIC AND RAYON COMPANIES (COST ACCOUNTING RECORDS) ORDER
2012.
1.`port title, extent and commencement- (1) This Order shall be called the Synthetic
and Rayon Companies (Cost Accounting Records) Order, 2012.
( )It shall come into force with effect from July 1, 2013.
( )This Order shall apply to every company engaged in production, processing
and man facturing of following products:-
(a) Synthetic fibre and yarn in all forms including but not limited to ;
Polyester Fibre.
Polyester Filament Yarn.
iii. Polyester chips

(b) Rayon
(c) Viscose tyre yarn/cord.
aintenance of Records:-(l) Every company to which this order applies shall, in
f each financial year commencing on or after the commencement of this Order, keep
unting records, containing, inter alia, the particulars referred in Schedules I, II and
xure A to K) annexed to this Order.
2.
respect
cost ace
III (Ann
( )Where a company is manufacturing any other product in addition to those
referred to in sub paragraph (3) of paragraph 1, the particulars relating to utilization of
material , labour and other items of cost in so far as they are applicable to such other product
shall not be included in the cost of products referred in that product.
( )
The cost accounting records referred to in sub-paragraph (I) shall be kept in
such a ay as to make it possible to calculate from the particulars entered therein the total
and unit wise cost of production and cost of sales of each of the products referred to
paragrap 1 during a financial year.
( )
It shall be the duty of every person referred to in sub-section (7) of Section
230 of ompanies Ordinance, 1984 (XLVII of 1984) to comply with the provisions of sub-
paragrap s (1) and (3) of this Order.
nalty.
If a company contravenes the provisions of rule 2, the company and
including chief executive and chief accountant who is in default including the
eferred in sub-rule (4), shall be punishable under sub-section (7) of section 230 of
es Ordinance, 1984 (XLVII of i 984).
3.
directors
persons
Compan
SCHEDULE I
(See Paragraph 2)
I. Materials:
Raw Material.
Proper records shall be maintained showing separately the quantity
and cost of each raw material used for manufacture of synthetic fibre
and yarn in all forins.
Proper records shall be maintained showing separately the quantity
and cost of Rayon Grade Pulp. Caustic Soda and other materials used
in the manufacture of Tyre Yarn. Where Rayon Grade Pulp is
obtained from different sources, the records shall be maintained in
such a manner that the cost of Rayon Grade Pulp obtained from
imported and indigenous sources are available. If Rayon Grade Pulp is
manufactured by the company, detailed records indicating the breakup
of raw materials consumed for its production and conversion cost
shall be maintained in such details as to enable ascertainment of the
cost of the Rayon Grade Pulp including charges incurred upto the
rayon factory.
The records shall also indicate the proportion of different kinds of
pulp used from different sources for the manufacture of the different
rayon'products.
Proper records shall also be maintained showing the quantity and cost
of packing and other items received along with different raw
materials, which are either re-used or sold. Credits for such items shall
be afforded to the respective raw materials as far as possible.
Otherwise the credits should be allocated to different products on an
equitable basis.
(e)Proper records shall be maintained to arrive at the cost of Rayon
Grade Pulp purchased by the company inclusive of all direct charges
such as freight, insurance, octroi, etc., incurred unto works. The
records shall show the receipts, issues and balances both in quantity
and cost of Rayon Grade Pulp separately by sources of purchase and
for different qualities.
Similar records as detailed in pans (i) to (iv) above shall be
maintained in respect of cotton linters of different grades used in the
manufacture of acetate yarn/fibre. These records shall show the
receipts, issues and balances both in quantity and cost of cotton linters
of different grades like second cut linters, defibrated linters and mill
run linters.
Process Materials. - Proper records shall be maintained to show the receipts,
issues an' balance both in quantities and cost of each item of process materials used for the
manufact e of product mentioned in paragraph (1) of the Order. In case of certain chemicals
used as atalysts having longer life of more than a year, the costs of such items should be
deferred on appropriate basis. The costs shall include all direct charges upto and including
the wor wherever specially incurred. The issues shall be properly identified with the
departme ts, cost centers and products manufactured. Where these process materials are
produced by the company, separate records showing the cost of manufacture of each such
materials indicating the breakup of raw materials consumed for their production and
conversion cost shall be maintained in such details as may enable the company to determine
the cost of such process materials produced. In case caustic soda is manufactured proper
(0
records of he same shall be maintained. Where any of the plants for process chemicals are
used for rocessing such chemicals on behalf of outsiders, proper records about the
quantities o processed, the details of the costs incurred therefore and the amounts recovered
as convers on charges shall also be maintained.
Consumable Stores, Small Tools, Machinery Spares, etc.
Proper records shall be maintained to show the receipts, issues and
balances both in quantities and cost of each item of consumable
stores, small tools and machinery spares. The costs shown shall
include all direct charges unto works, wherever specifically incurred.
In the case of consumable stores and small tools, the cost of which are
insignificant, the company may, if it so desires, maintain such records
for the main groups of such items,
(c)The cost of consumable stores, small stools and machinery spares,
issued shall be charged to the relevant heads of account such as
production, repairs to plant and machinery, repairs to buildings.
Materials consumed on capital works such as addition to buildings,
plant and machinery and other assets shall be shown under the
relevant capital leads.
Wastages, Spoilages, Rejections, Losses, etc. of Materials.
Proper records shall be maintained showing the quantity and cost of
wastages, spoilages, rejections and losses of raw materials, process
materials, consumable stores, small tools and machinery spares,
whether in transit; storage, manufacture of for any other reasons.
Threshold for recording abnormal losses is 5% and above.
The total waste in terms of cellulosic content of pulp made up from
wastes in different department like viscose, spinning, bleaching,
coning and reeling shall also be recorded separately to enable control
of such losses and identifying the realization therefore. Separate
records of different types of wastes like clean, oily and other waste
fibres obtained in the process of conversion of viscose staple into tops
either through own unit or through outside combing units shall also be
kept indicating the respective quantities and sales realization. The
method followed for adjusting the above losses as well as the income
derived from the disposal of rejected and waste materials including
scrap, if any, shall be indicated in the cost records.
II. Salaries and Wages:
( )Proper records shall be maintained to show the attendance and earnings of all
employe s and the departments or units or cost centers and the work on which they are
employe. The records shall also indicate separately: -
Overtime wages earned.
Piece-rate wages earned.
Incentive wages earned, either individually or collectively as production
bonus or under any other scheme based on output.
Earnings of casual labour.
(P)Any wages and salaries allocable to capital works such as addition or heavy
repairrks to plant and machinery, buildings or other fixed assets shall be accounted for
under re evant capital heads.
(3)
III. Service Department Expenses:
D tailed records shall be maintained to indicate expenses incurred for each service
Departme t or cost center like water supply, laboratory, air-conditioning, welfare etc. These
expenses all be apportioned to other service and production departments on an equitable
basis and pplied consistently.
IV. Utilities:
Water. Proper records showing the quantity and cost of water treated
for the manufacture of synthetic & rayon in different departments/cost centers etc.
aintained in such details as may enable the company to furnish the necessary
in Annexure Ito this Schedule. The cost of water allocated shall be on reasonable
pplied consistently.
Steam. Where steam is raised by the company proper records showing the
d cost of steam raised and consumed for the production of Rayon in different
is or cost centers shall be maintained in such detail as may enable the company to
necessary particulars in Annexure (ii) to this Schedule. Adequate records shall be
to show the quantity and cost of steam purchased, if any. The cost of the steam
by the Rayon factory and other units of the company shall be calculated on
basis and applied consistently.
Power and Gas
When power is generated by the company, proper records showing the
quantity and cost of power generated and consumed for the production
of product mentioned at Sub Paragraph (3) of paragraph I of the
Order in different departments or cost centers as the case may be shall
be maintained in such details as may enable the company to furnish
the necessary particulars in Annexure E to this Schedule. Adequate
records shall also be maintained to show the quantity and cost of
power purchased.
Where power is generated and supplied by another unit of the
company to the factory, adequate records shall be maintained to assess
the quantity and cost of power so supplied. The rate charged by that
unit shall be on a reasonable basis. Necessary records shall also be
maintained to show the consumption of power by various departments
or cost centers, as the case may be . The cost of power allocated to
production shall be on a reasonable basis and applied consistently.
V. Workshop Repairs and Maintenance:
r records showing the expenditure incurred by the workshop under different basis
irs and maintenance by the various departments and cost centers shall be
The records shall also indicate the basis of charging the workshop expenses to
artments, cost centers and units. Expenditure on major works from which benefit is
e for more than one financial year shall be shown separately in the cost records
method of its accounting in determining the cost of Rayon manufactured during
period. Expenditure incurred on works of capital nature shall be capitalized. The
obs shall include the expenditure on material, labour and a share of the overheads.
'ed out by the workshop of any other unit of the company to the Rayon Factory
/ created on a reasonable basis and applied consistently.
consume
shall be
particular
basis and
(2
quantity
departme
furnish th
maintain
consume
reasonabl
(3
Prop
and on rep
maintained.
different de
likely to acc
indicating t
the relevant
cost of such
The jobs ca
and vice ver
(2)
indicated in
comprising
administrati
manufactur
indicate the
expenses o
records. Th
to the prod
of the over
above cate
expenses s
and therea
be allocate'
VI. Depreciation:
Adequate records shall be maintained showing values and other particulars of
the fixed assets in respect of which depreciation is to be provided. The records shall inter alia
indicate the cost of each item of asset, the date of its acquisition and the rate of depreciation.
Basis on which depreciation is calculated and allocated to the various
departments rind products shall be clearly indicated in the records.
(3)Amount of depreciation chargeable to the different departments, manufacturing
units or cost 'centers, for the financial year shall be in accordance with the provisions of Clause
`F' of Part II of the Fourth Schedule of the Companies Ordinance, 1984 and shall relate to the
plant and machinery and other fixed assets utilized in such departments or units or cost centers.
The method once adopted shall be applied consistently.
VII. Insurance:
(1)Records shall be maintained showing the Insurance premium paid for various
risks covered on the assets and other Interests of the Company.
Method of allocating insurance cost to the various cost centers shall be
he cost records and followed consistently.
VIII. Other Overheads:
Proper records shall be maintained showing the various items of expenses
verheads. These expenses shall be analyzed, classified and grouped in the works,
n and selling and distribution overheads. Where the company is engaged in the
of any other products in addition to rayon products, the records shall clearly
basis followed for apportionment of the common overheads including head-office
the company to different rayon activities and other activities.
Overheads allocable to capital works shall be indicated separately in the cost
methods followed for the levy and absorption of the above categories of overheads
ct,
s shall be indicated in the cost records. The basis followed for levy and absorption
eads shall be equitable and applied consistently. In case any expense included in the
ories of overheads can be identified with a particular activity/product, such
11 be segregated and charged to the relevant activity/product at the first instance
er the remaining common expenses under the above categories of overheads shall
on a reasonable and equitable basis and applied consistently.
IX. Expense on Export:
Re ords showing expenses incurred on export of Rayon products if any, shall be
separately aintained, so that the cost of export sales can be determined correctly. The
expenses i curred on export, as well as any export incentive earned shall be reflected in the cost
statements elating to export sales.
X. By-Products:
per records shall be maintained for each item of by-product derived showing the
ues and balances both in quantity and value. The basis adopted for valuation of the
shall be equitable and consistent. Records indicating the expenses incurred on
essing of by-products like glauber salt into sodium sulphate as well as the actual
tion of the ultimate by-product i.e. sodium sulphate shall be maintained. Credit
the quantity of glauber salt got converted into sodium sulphate shall be reasonable.
Pr
receipts, is
by-product
further pro
sales reali
afforded fo
XI. Research and Development Expense:
Adequate records showing the details of expenses incurred by the company
for the development of existing products or new products or processes, if any, shall be
maintained separately. Such records shall indicate the expenses incurred on genenic research
and brand prOmotion separately. Expenses incurred on brand promotion shall be excluded from
costs and charged to profit directly. If the research and development department is also engaged
in the design and development of plant facilities, the appropriate share thereof shall be
capitalized. The method of charging research and development expenses to the cost of
production shall be indicated in the cost records and such expenses shall be charged to viscose
staple fibre of 'different enduses, viscose filament yarn and viscose tyre yarn on a reasonable
basis. Howe er, the research and development cost must be measured and disclosed in line with
the Intematic nal Financial reporting Standards as applicable in Pakistan.
Expenses incurred by the Research & Development Department for
furnishing technical know-how to outsiders shall be recorded separately and excluded from the
cost of pro ucts referred to in paragraph (3) of paragraph 1 of this Order. The amounts
recovered fo providing technical know-how to outsiders shall also be indicated separately.
XII. Products for self-consumption:
Proer records shall be maintained showing the quantity and cost of each item of rayon
products tra4iisferred to another department/unit of the company for self-consumption. The rates
at which such transfers are affected shall be disclosed in the cost statement.
XIII.Packing:
(1)
various pac
steel wires,
of package
common th
shall be equ
Proper records shall be maintained showing the quantities and cost of
ing materials such as polythene sheets, !craft paper. jute packing sheets, hoofs, mild
ones and wages and other expenses incurred in respect of different types and sizes
adopted for marketing of Rayon products. Where the expenses are incurred in
basis of apportioning such expenses amongst different types of Rayon products
table and clearly indicated in the records and applied consistently.
The quantity and cost of packing materials recovered from purchased raw
materials a d that re-used in packing shall be maintained. The basis of valuation adopted for
such materi Is shall be reasonable.
kept separat
Detailed records of the expenses incurred on export packing shall also be
ly and exhibited in the relevant cost statements for exports.
XIV.Work-in-process and finished goods:
The method followed for determining the cost of work-in-process and finished goods
stock shalle indicated in the cost records so as to reveal the cost elements that have been taken 1{
into accoun in such computation. The method adopted shall be followed consistently.
XV. Cost Statement:
Co
in sub para
t statement showing the cost of production and cost of sales of products mentioned
of para 1 of this Order shall be prepared by the management.
XVI.Reconciliation of Cost and Financial Accounts:
(1)The cost records shall be reconciled periodically with the financial books of
account so as the ensure accuracy. Variations, if any, shall be clearly indicated and explained.
The period for which such reconciliation is effected shall not exceed the period of the financial
year of the Company. The reconciliation shall be done in such
a manner that the profitability of
the product under reference can be correctly adjudged and reconciled with the overall profits of
the company.
(2)A statement showing the total expenses incurred and the income received by
the company and the share applicable to Rayon products shall be maintained in Annexure 'G'
duly reconci d with the financial accounts.
XVIIAdjustment of Cost Variances:
Where the company maintains cost records on any basis other than actual, such as
standard cost, the records shall indicate the procedures followed by the company in working out
the cost of the products under such a system. The method followed for adjusting the cost
variances in determining the actual cost of the product shall be indicated clearly in the cost
records. The cost variances shall be shown against the relevant heads in the respective
Annexure of Schedule II. The reasons for the variances shall be detailed in the cost records.
XVIII. Records of Physical Verification:
*cords of physical verification shall be maintained in respect of all items held in
stock such as raw materials, process materials, packing materials, consumable stores,
machinery spares, chemicals, fuels, finished goods and fixed assets Reasons for
shortage/su luses arising out of such verification and method followed for adjusting the same
in the cost of the products shall be indicated in the records.
XIX.Statistical Records:
atistical and other records maintained in accordance with the provisions of this
e such as to enable the company to exercise, as far as possible, control over the
tions and costs with a view to achieve optimum economies in costs and to provide
data required by the cost auditor to suitably report on all
the points referred to in
Order shall
various ope
the necess
the Compan es (Audit of Cost Accounts) Rules, 1998,
SCHEDULE II
GENERAL INFORMATION
Name of the Company.
2Date of Incorporation.
3Place of Registered Office or other office where Books of Account are maintained.
6 Ltication of Factory/Factories.
7
Type/Types of products (All products as mentioned above) being produced.
84y salable by-products.
9I4ermediary products: Per Day
Per Year
M. Tonnes
M. Tonnes
(aInstalled / Normal Capacity
(bb Capacity Utilized
No. of Days in the year on which capacity is calculated
10?vain products:
Installed /Normal Capacity
Capacity Utilized
(cb
No. of Days in the year on which capacity is calculated

Foreign Technical Collaboration
N e of the Process/Inventor/Patent holder.
Schedule ID
(See paragraph 2)ANNEXURE A
Name of d1ompany
Name & address of Rayon/Polyester Factory
S tatem ent shpw ing the Cost of Product m anuf actured during the y ear ending ----------
Processing
Type
Description
Quality
Denier
P r o d u c t i o n
Total dry cellulose content of wood pulp consumed
Total d r y c e l l u l o s e c o n t e n t o f o u t p u t
W a s t e p e r c e n t a g e
Processing
Steeping/Slurry/other process
Staple length of Fibre
Current y e a r P r e v i o u s y e a r
T o n n e s
Tonnes
T o n n e s
1
P a r t i c u l a r s
,
Q u a n t i t y
(U n i t s )
R a t e p e r u n i t
(R s )
T o t a l C o s t C o s t s e r K g
(R s ) C u r r e n t y e a r P r e v i o u s y e a r
( t )
(2)
(3 )
(4)
(5)
(6)
1.Raw Materials purdhased/
p r e v i o u s d e p a r t m e r
transferred in f r o m
t
-----1--
2,Process Chemicals

---- -----
-
(c )-
(1 )
4
(8)
D i r e c t S a l a r i e s & W a g e s (A n n e x u r e G )
U t i l i t i e s
v:
(a)P o w e r (A n n e x u r e E )
' ' ' - '(b )N i t r o g e n (A n n e x u r e C )
S t e a m (A r i n e x u r e D )
A i r -C o n d i t i o n i n g (A n n e x u r e F )
R e p a i r s & M a i n t e n a n c e .
S t o r e s a n d s p a r e s I
I n s u r a n c e
M a n u f a c t u r i n g O v r l r h e a d s (A n n e x u r e I )
O t h e r w o r k s o v e r h $ a d s
P a c k i n g c o s t
----- --------
----
(e )
I I . R e s e a r c h & D e v e l o p m e n t e x p e n s e s
D e p r e c i a t i o n /
S h a r e o f a d m i n i s t r a t i v e O v e r h e a d s (A n n e x u r c H )
T o t a l
1 4 . L e s s c r e d i t f o r
(c )
Adjustment for opening and closing balance of
Work-in-processI
Stock adjustment
Add opening stock
Less closing stock
17. Total cost of product
IS. Transferred to the ether department
Selling & Distribution expenses (Annexurel)
Net sales realization
1
ANNEXURE B
Name of Company
Name & gddress of Rayon/Polyester Factory
Statement howing the Cost of Goods sold during the year ending
Product Total Cost
of Goods
+ i.cld
Opening
WIP
nventory
Less Closing
WIP Inventory
Less
-calizable
value of by
product
'Cost of Goods
manufactured
Add Opening'Less
Finished goods
Closing
Finished goods
Add packing
material and
Federal excise
and sales tax
Cost of
sales
A
B
C
D
Annexure C
Name of company
Statement showing the Cost of Nitrogen produced and consumed during the year
ending
No of units produced
No of units purchased,'
Consumption including other losses
Net units consumed
ParticularsI
i
I
(Units) Rate
(Rs)
Quantity (Amount)
( I )I
(2)
(3)
(4)
(5)
I. (a) Ammonia
(b) activated aluminum
(c ) Molecular sieves
N-. - (d) others
Consumable stores
Other services
Power (Annexure
Compressed air
(c) Water
E)
Salaries & Wages (Annexure G)
Repair & maintenance
Sub total
Overheads
Deprecation
Total
Nitrogen purchase
Total
Less recoveiies if, any
Net Total(purchasld and produced)
Apportionment:
I
-
r- ,
Polymerization )lant
Polyester fibre plant
iii) Polyester filamttnt yarn plant
No of units
Amount (Rs)
l
i
Annexure D
Name of Company
Statement si howing the Cost of Steam raised/consumed during the year ending
I n s t a l l e d s t e a m g e n e r a t i o n c a p a c i t y K g /h r a t K g /C m g
Q u a n t i t y o f s t e a m r a i s e d , T o n n e s P r e s s u r e -K g /C m g
C o s t p e r t o n n e o f s t e a m r a i s e d
P a r t i c u l a r s Q u a n t i t y
(u n i t s )
R a t e
(R s )
(A m o u n t )
(R s )
(3 )
(2) (4 )
W a t e r
F u e l s :
C o a l
F u e l O i l
E l e c t r i c i t y
O t h e r f u e l s , i f a n y (t o b e s p e c i f i e d )
3 . O t h e r D i r e c t E x p e s e s
(s u c h a s Bo i e r i n s p e c t i o n f e e s )
C o n s u m a b l e s S t o r
S a l a r i e s a n d w a g e s (A n n e x u r e G )
R e p a i r & m a i n t e n a n c e
O t h e r o v e r h e a d s
D e p r e c a t i o n
T o t a l
L e s s c r e d i t s f o r c o a l A s h , C o n d e n s a t e a n d o t h e r c r e d i t s ,
i f a n y
L e s s (a ) c o s o f s t e a m u s e d b y p o w e r h o u s e
(b ) o t h r u n i t s o f t h e c o m p a n y
Q u a n t i t y a n d c o s t o f Ba l a n c e s t e a m
A pportionm ent:
P o l y m e r i S t i o n
P o l y e s t e r O l a m e n t
iv) O t h e r u n i t
[
i i i ) P o l y e s t e r f i b r e
p l a n t
y a r n
s p i n n i n g p l a n t
o f t h e c o m p a n y
U n i t s P r e s s u r e
K g /C m g
A m o u n t
N o t e s :
I f s t e a m i s s u p p l i e d a n y o t h e r o u t s i d e p a r t y , n e c e s s a r y c r e d i t f o r r e c o v e r i e s m a d e s h a l l b e g i v e n
a g a i n s t i t e m 1 0.
W h e r e m e t r e s a r e n t i n s t a l l e d , c o n s u m p t i o n o f s t e a m s h a l l b e a s s e s s e d o n a r e a s o n a b l e b a s i s a n d a p p l i e d c o n s i s t e n t l y .
Annexure E
Name of Company
Name & address of Rayon Factory
Statement siiowing the Cost of Power generated/purchased and consumed
during the year ending
I n s t a l l e d g e n e r a t i o n C a p a c i t y M W
N o o f U n i t s g e n e r a t e 0K W H :
N o o f U n i t s P u r c h a s e p K W H
C o n s u m p t i o n i n p o w e r h o u s e K W H
N e t u n i t s c o n s u m e d 1 K W H :
P a r t i c u l a r s Q u a n t i t y R a t e (A m o u n t )
(u n i t s ) (R s ) (R s )
1
( 1 )
(2)
(3 )
(4 )
1 (a ) s t e a m (a s p e r A n n e x u r e D /p u r c h a s e d ) ' 1 .
(b ) o t h e r m a t e r i a l s i f a n y , (t o b e s p e c i f i e d )
C o n s u m a b l e s S t o r e . ,
O t h e r d i r e c t c h a r g e s (s u c h a s E l e c t r i c i t y d u t y e t c )
R e p a i r & m a i n t e n a n c e
O t h e r o v e r h e a d s
D e p r e c a t i o n
S u b t o t a l
P o w e r p u r c h a s e d
G r o s s T o t a l
L e s s r e c o v e r i e s i f a n y
T o t a l
C o s t p e r u n i t (p u r c h a k d a n d g e n e r a t e d )
A pportionm ent :
I
Q u a n t i t y R a t e
A m o u n t
N i t r o g e n p l a i n t
(R s )
(R s )
S t e a m g e n e t i a t i o n
A i r C o n d i t i O n i n g
P o l y e s t e r c h i p p l a n t
P o l y e s t e r f i b r e /f i l a m e n t y a r n p l a n t
O t h e r u n i t s b f t h e c o m p a n y
N o t e s :
C o s t p e r u n i t s s h a l l b e w o r k e d o u t w i t h r e f e r e n c e t o t h e N e t u n i t s o f p o w e r a v a i l a b l e f o r u s e a f t e r d e d u c t i n g
c o n s u m p t i O n i n t h e p o w e r h o u s e a n d o t h e r l o s s e s .
W h e r e m e t e r s a r e n o t i n s t a l l e d , c o n s u m p t i o n o f p o w e r s h a l l b e a s s e s s e d o n a r e a s o n a b l e b a s i s a n d a p p l i e d
c o n s i s t e n 4 .
3 . Bo n u s t o e m p l o y e e s o t h e r t h a n i n c e n t i v e b o n u s , p r o v i s i o n s f o r s t a t u t o r y g r a t u i t y a n d i n t e r e s t c h a r g e s s h a l l b e s h o w n
i n A n n e x u r e ' 1 3 ' a n d ' F ' o n l y a n d n o t i n a n y o t h e r a n n e x u r e .
Annexure F
Name of Company
Name &address of Rayon/Polyester Factory
Statement showing the Cost of Air-Conditioning
during the year ending
I n s t a l l e d c a p a c i t y
A v e r a g e o p e r a t i n g l o a d
N o o f h o u r s o p e r a t i o n ; d u r i n g t h e y e a r
T h e r m a l u n i t s t h r
4 4
P i r t i c u l a r s Q u a n t i t y
(U n i t s )
R a t e
(R s )
(A m o u n t )
(R s )
(I )
(2)
(3 )
(4 )
C h e m i c a l s
(3 ) P o w e r a n d o t h e r s e r v i c e s
. . . , ,
p o w e r
W a t e r
(4 ) C o n s u m a b l e S t o r e s
R e p a i r & M a i n t e n a n c e
W o r k s o v e r h e a d
(7 )
D e p r e c i a t i o n
T o t a l c o s t
A pportionm ent R a t e
(R s )
A m o u n t
(R s )
I . P o l y e s t e r f i b r e
(a ) P o l y m e i l za t i o n
(5) S p i n n i t f g
F i n i s h i n g
1
I _
r
O t h e r s
2. P o l y e s t e r f i l a m e n t y a r n
P o l y m e r i za t i o n
1
S p i n n i n g
C o n i n g
1
1
o t h e r s
N o t e :
I . . T h e a p p o r t i o n m e n t o f A i r -
C o n d i t i o n i n g c o s t t o t h e d i f f e r e n t d e p a r t m e n t s a n d c o s t c e n t e r s s h a l l
b e d o n e o n s c i e n t i f i c a n d r e a s o n a b l e
m a n n e r a n d a p p l i e d c o n s i s t e n t l y .
2. Bo n u s t o e m p l o y e e s o t h e r t h a n i n c e n t i v e b o n u s , p r o v i s i o n f o r s t a t u t o r y g r a t u i t y a n d i n t e r e s t c h a r g e s s h a l l b e s h o w n i n
A n n e x u r e ' D ' a n d
' F ' o n l y a n d n o t i n a n y o t h e r P r o f o r m a .
Annexure G
Name of Company
Statemdnt showing the Cost of salaries, Wages and other benefits for the Year
Ended
S.No
n
ParticularsCurrent YearPrevious Year
Salaries and Wages:
(1)
O f f i C e r s a n d P e r m a n e n t S t a f f
L a b O u r o n C o n t r a c t a n d D a i l y b a s i s
Bo n U s e s
2Benefits:
M e d i c a l E x p e n s e s
.
C a n t e e n E x p e n s e s
W e l f a r e , R e c r e a t i o n
T r a n s p o r t a n d T r a v e l i n g
E d u c a t i o n a l C e s s / E x p e n s e s
G r o u p I n s u r a n c e /W o r k m e n C o m p e n s a t i o n
P r o v i d e n t F u n d (E m p l o y e r ' s C o n t r i b u t i o n )
G l i t t u i t y /P e n s i o n /R e t i r i n g Be n e f i t s
(i x )O t h e r Be n e f i t s (i f a n y )
T o t a l
3
Apportionment
N i t r o g e n (A n n e x u r e C )
P o w e r (A n n e x u r e E )
S t e a m g e n e r a t i o n (A n n e x u r e D )
A i r C o n d i t i o n i n g (A n n e x u r e F )
P r o d u c t A
P r o d u c t B
v i i . P r o d u c t C
Annexure H
Name of ompany
Statement showing the Cost of Administrative overheads for the Year Ended
/
I. Salaries Wages & Other Benefits (Annexure G)
DirectPrs Remuneration
Directprs Traveling
Staff Traveling
6, Communication Expenses
7. Repair & Maintenance
Office Equipments
Fbmiture & Fixtures
8. Building others (to be specified)
Adv isement
Util ties
Ren , Rates & Taxes
Prinking & Stationary
Legal & Professional Expenses
/
Entertainment
Insurance Costs
Cha)lty & Donation
others to be specified
Depreciation
'Total
Apportignment
1
t v .
Nitrogen (Annexure C)
Power (Annexure E)
di.
Steam generation
(Annexure I))
iv,Air Conditioning
(Annexure F)
Product A
Product B
Product C
.
Annexure I
Name of Company
Statement showing the Cost of manufacturing overheads for the Year Ended
PARTICULARS
CURRENT
YEAR
PREVIOUS YEAR
1
C o n s u m a b l e s t o r e s a n d s p a r e p a r t s
2 Repair a n d m a i n t e n a n c e
1
3 I t h i l i t i e s
4 i n s u r a n c e
5
L u b r i c a t i o n o i l
6 R e n t
7 i R a t e s & T a x e s
8
O f f i c e S u p p l i e s
9 O t h e r O v e r h e a d s (t o b e s p e c i f i e d )
1 0 D e p r e c i a t i o n
A pportionm ent
Nitrogen (Annexure C)
Power (Annexure E)
S t e a m g e n e r a t i o n (Annexure D)
A i r C o n d i t i o n i n g (A n n e x u r e F )
P r o d u c t A
P r o d u c t B
v i i . P r o d u c t C -----
Annexure J
Name of Company
Statement shoving the Cost of Selling, Distribution for the Year Ended
Current Year
(Rs.)
Previous Year
(Rs.)
Salaries, Wages & Other Benefits (Annexure G)
I
Commission to Selling agents
Freight and transport
customers
charges less recoveries from
1
Loading and unloading charges
Godown renti
Retail sales office expenses such as . rent etc., if any
Other expensed.,
Share of Administration Overheads
I
Stores & Spates
Loose Tools
1
I
Depreciation!
Insurance
1
Other Overlfeads
Total
Apportionmeip
vii.
Nitrogen (Annex= C)
Power (Annexure E)
Steam generation (Annexure D)
Air Conditioning (Annexure F)
Product A
Product B
Product C
Name of Company
Name address of Rayon/Polyester Factory
Annexure K
Statement of Fixed Assets and allocation of Depreciation for the Year Ended
Cost De a reeiation
Written
Down
Value
Total
Depreciation
I
Cost
Opening
Additions/
Deletions
Cost
Closing
Rate
%
Ace. Dep
Opening
Charge
for the
Year
Ace. Dep
Closing
S r #
1 .
Electrical Departm ent
n
Building
Plant & Machinery
Electrical Installations
Furniture & Fixtures
I
TO'T'AL
W ork sho
Building
Tools & Equipment'
TOTAL.
Stores & Allied Facilities
--- Building
Storage Tanks'
TOTAL
Administrative
1
Building
J
Office Equipment
Vehicles'
Electrical Appliances
707;11.
(Bushra Aslam)
Secretary to the Commission
No. CLD NO 230(8) RCP/ 2002
1
EXTRAORDINARY

PART II

Statutory Notifications (S.R.O)


NOTIFICATION

Islamabad, the November 16, 2009

S.R.O. 983(I)/2009.- In exercise of powers conferred by sub-section (1) of section 246 of the
Companies Ordinance, 1984 (XLVII of 1984) delegated vide S.R.O 659(I)/2009 dated J uly
14, 2009, the Commissioner (Company Law Division) is pleased to issue the following
General Order, namely:-

COMPANIES (CORPORATE SOCIAL RESPONSIBILITY)
GENERAL ORDER, 2009

1. Short title, application and commencement.- (1) This General Order shall be called
the Companies (Corporate Social Responsibility) General Order, 2009.

(2) It shall be applicable on all the public companies from the financial year beginning on
or after J uly 1, 2009.

(3) Words and expressions used but not defined in this General Order shall have the same
meaning as are assigned to them in the Companies Ordinance, 1984 (the Ordinance).

2. Obligations under the law- (1) Every company shall provide descriptive as well as
monetary disclosures of the Corporate Social Responsibility activities undertaken by it
during each financial year.

2
(2) Such disclosures shall be made in the directors report to the shareholders annexed to
the annual audited accounts. The disclosure of such activities will be in addition to the
disclosure requirements already mentioned in the Ordinance.

(3) The disclosures, wherever required, shall include, but shall not be limited to the
following:

(i) corporate philanthropy
(ii) energy conservation
(iii) environmental protection measures
(iv) community investment and welfare schemes
(v) consumer protection measures
(vi) welfare spending for under-privileged classes
(vii) industrial relations
(viii) employment of special persons
(ix) occupational safety and health
(x) business ethics and anti-corruption measures
(xi) national-cause donations
(xii) contribution to national exchequer
(xiii) rural development programmes.

(4) It shall be the duty of every person referred to in sub-section (2) of section 246 of the
Ordinance to comply with the provisions of this General Order.

No. CLD/RD/602(34)/2009

(Salman Ali Shaikh)
Commissioner (CLD)
1
EXTRAORDINARY
----------------------------------------------------------------------------------------------------------------

PART II



NOTIFICATION

Islamabad, the 26
th
September, 2008

S.R.O. /I/2008.- In exercise of powers conferred by clause (e) of sub-section (1) of
section 230 read with section 246 of the Companies Ordinance, 1984 (XLVII of 1984), and
section 43 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLVII of
1997), the Securities and Exchange Commission of Pakistan is pleased to make the following
Order; namely:-

1. Short title, application and commencement.- (1) This order may be called the
Companies Cost Accounting Records (General Order), 2008.

(2) This Order shall apply to companies engaged in production, processing,
manufacturing or mining activities as specified in sub-paragraph (3) below. However, those
classes of companies for which special orders have been issued as at the date of this
notification shall continue to be governed under their respective orders, except as provided
otherwise in paragraph 4 below.

(3) This order shall be applicable to all companies engaged in the following industries
from the financial year commencing on or after October 1, 2008,-
1. fertilizer,
2. thermal energy,
3. petroleum refining,
2
4. natural gas, and
5. polyester fiber.
2. Maintenance of Records. - Every company to which this Order applies shall keep
such cost accounting records including all particulars relating to utilization of material,
labour or other inputs or items of cost as would be necessary to comply with the requirements
in Appendix III of the Companies (Audit of Cost Accounts) Rules, 1998. The cost accounting
records shall be kept in such a manner and in such detail as to make it possible for the auditor
to audit the same and to produce his report as required under the law.

3. Obligations under the law.- Each company to which this order applies will be required to
(a) have a cost audit conducted as at the end of each year, through an independent firm of
cost or chartered accountants; and
(b) produce a reconciliation of the cost accounts with the audited financial accounts, to
comply with the requirements of paragraph 15 of Appendix III of the Companies (Audit of
Cost Accounts) Rules, 1998.

4. Circulation and distribution of reports.- (1) Each company which falls within the
industries specified in paragraph 1(3) above, shall be required to circulate the cost auditors
report to Directors prescribed in sub-rule (3) of rule 4 of the Companies (Audit of Cost
Accounts) Rules, 1998 together with the Reconciliation stipulated in 3 (b) above within 6
months of the close of the financial year to members, directors and shareholders of the
company, the Commission and the Registrar concerned. Such reports may be disseminated to
its shareholders by posting the same on the companys website within six months of the
close of the financial year. The cost audit report shall not be required to be printed and it
shall be permissible to circulate photo-copies thereof.
(2) Every company in respect of which a special order has been issued by the
Commission prior to this notification that is to say companies engaged in production of
cement, vegetable ghee and sugar industries shall be required to comply with the
requirements of this paragraph and paragraph 2 and 3 above.

3
(3) It shall be the duty of every person referred to in sub-section (7) of Section 230 or
sub-section (2) of section 246 of the Companies Ordinance, 1984 (XLVII of 1984), to
comply with the provisions of this Order in the same manner as they are liable to maintain
books of financial accounts required under section 230 of the said Ordinance.

F.No. DCS/24/SECP/2008

Abdul Rehman Qureshi
Advisor/Secretary

ELECTRIC POWER GENERATION INDUSTRY
(COST ACCOUNTING RECORDS)
ORDER, 2012

1

NOTIFICATION
Islamabad, the 26
th
March, 2012
S.R.O. 302-(I)/2012.- The following draft of Electric Power Generation Industry (Cost Accounting
Records) Order, 2012 which is proposed to be made in exercise of powers conferred by clause (e) of sub-
section (1) of section 230 read with section 246 of the Companies Ordinance, 1984 (XLVII of 1984), and
section 40B of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997) is hereby
published for the information of all persons 1ike1y to be affected thereby and notice is hereby given that the
draft will be taken into consideration after thirty days of its publication in the Official Gazette.

Any objection or suggestion which may be received from any person in respect of the said draft before
the expiry of the said date will be considered by the Securities and Exchange Commission of Pakistan.

ELECTRIC POWER GENERATION INDUSTRY (COST ACCOUNTING RECORDS)
ORDER, 2012

1. Short title, extent, commencement and application.- (1) This Order shall be called the
Electric Power Generation Industry (Cost Accounting Records) Order, 2012.
(2) It shall come into force with effect from July 1, 2012.
(3) This Order shall apply to every company engaged wholly or partially in Generation of Electric
Power Energy in Pakistan under the license(s) granted by the National Electric Power Regulatory Authority
(NEPRA) of Pakistan.

2. Maintenance of records and independent auditors assurance.- (1) Every company to
which this Order applies shall, in respect of each financial year commencing on or after the commencement of
this Order, keep cost accounting records, containing, inter-alia, the particulars specified in Schedule I, II and III
to this Order.

(2) The cost accounting records referred to in sub-paragraph (1) shall be kept in such a way as to
make it possible to calculate from the particulars entered therein the cost of generation and cost of sales of each
of the generation facility licensed by NEPRA referred to in sub-para (3) of para (1), during a financial year.

(3) Where a company is engaged in any other business(es) in addition to those referred to in sub-
para (3) of para (1), the particulars relating to the utilization of materials, labour and other items of cost in so
far as they are applicable to such other product shall not be included in the cost of product referred to in that
para.

(4) It shall be the duty of every person referred to in sub-section (7) of section 230 of the
Companies Ordinance, 1984 (XL VII of 1984), to comply with the provisions of sub-paragraph (1) to (3) in
the same manner as they are liable to maintain financial accounts required under section 230 of the said
Ordinance.

3. Penalty.- If a company contravenes the provisions of para 2 of this Order, every director,
including chief executive and chief accountant, of the company who has knowingly by his act or omission been
the cause of such default shall be punishable under sub-section (7) of section 230 of the companies Ordinance,
1984 (XL VII of 1984)

(Nazir Ahmed Shaheen)
Executive Director (C&C)

2

SCHEDULE 1
(See paragraph2)

I. MATERIAL
(1) Direct Material.-
(a) Following raw/direct materials are considered as prime sources of energy in
their respective Electric Power Generation process:
(i) Furnace Oil;
(ii) Diesel Oil;
(iii) Gas;
(iv) Coal;
(v) Water;
(vi) Wind;
(vii) Steam; and
(viii) Others (to be specified)
(b) Adequate records shall be maintained for above material where applicable for
receipt, issue and balances both in quantities and values. The basis on which
the value of receipt and issue has been calculated shall be indicated clearly in
the cost records maintained or if so desired by the company in a separate
manual of procedures, if any maintained by the company or in foot-notes or
separate explanatory notes to the cost statements for the relevant period. Such
basis shall be applied consistently, throughout the relevant period.
(c) The values shall include all direct charges upto plant site such as excise duty,
haulage charges, transport, freight, handling and transit insurance premium
incurred for local procurement.
(d) In case of imported materials/sources of energy such as oils or coal, all import
charges, custom duty, port dues, ocean/air freight, inland freight, marine
insurance and all other charges leviable and payable at the time of import, shall
be shown separately and included to work out the landed cost of oils or coal.

(e) Where coal is raised from mines owned or taken on lease by the company,
separate record showing the cost of raising shall be maintained in such detail as
may enable the company to establish proper cost of the above referred material
in cost records.
(f) Adequate records shall be maintained to establish the correct quantities or
volume of gas used. For ascertainment of value of gas, all the expenses
incurred (all Government dues local or central, and all other expenses
necessary to fetch the gas to plant site) for the procurement of gas at plant site,

3

shall be shown separately and included to work out the cost of gas actually
consumed during the process.
(g) Proper records shall be maintained showing the quantity and value of wastage,
spoilage, rejection and losses of input material/fuels and consumables stores
whether in transit, storage, operations or at any other stage. The method
followed for adjusting the above losses as well as income derived from disposal
of rejected and waste material including spoilage, if any, in determining the
cost of activities shall be indicated in cost records.
(h) Realizable value of waste or by-product, if any, shall be credited to arrive at the
net cost of power produced
(i) Records shall be maintained in such detail to enable the company to readily
provide data required in the various Cost Statements prescribed in this Order in
a verifiable state.

(2) Lubrication oil consumption in engines and turbines.- Adequate records shall be
maintained in respect of all receipts, issues and balances, both in quantities and values. Separate
record for regular consumption and routine oil change at standard hours of run shall be maintained in
the cost statement as prescribed in this Order so that cost and quantities may be verified with
standards.

(3) Consumable stores, small tools, machinery spare parts, etc

(a) Adequate records shall be maintained to show the receipts, issues and balances,
both in quantities and cost of each item of consumable stores, small tools,
machinery spares.

(b) The cost of issue of consumable stores, small tools and machinery spares shall
be charged to the relevant heads of accounts such as repairs to plant and
machinery or repairs to building. Material consumed on capital works such as
addition to buildings, plant and machinery and other assets shall be shown
under the relevant capital heads and not in the cost statements of electric power
generating companies.
(c) Wastage of any consumable stores whether in transit, storage or in any other
plant activity shall be quantified and shown separately. Method of dealing with
such losses in costing shall also be indicated in the cost records.

4

II. INVENTORY

(1) The inventories shall be measured at the lower of cost and net realisable value. Net
realizable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale. The cost of inventories shall
comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories
to their present location and condition.

(2) It shall also be disclosed that the cost of inventories shall be assigned by using the
first-in, first-out (FIFO) or weighted average cost formula. An entity shall use the same cost formula
for all inventories having a similar nature and use to the entity. For inventories with a different nature
or use, different cost formulas may be justified. However, the cost of inventories of items that are not
ordinarily interchangeable and goods or services produced and segregated for specific projects shall
be assigned by using specific identification of their individual costs.
III. SALARIES AND WAGES

(1) Adequate records shall be maintained to show the attendance of workers employed by
the company whether on regular, temporary or on contract basis, as the case may be.

(2) Adequate record shall be maintained in respect of payments made for over time in such
manner that labour cost is available for each cost center.

(3) Proper record shall be maintained in respect of earnings of all the employees, function
or activity-wise, and the works on which they are employed. The record shall also indicate the
following separately for each such function or activity.-

(a) Direct wages and salaries
(i) Regular salaries/wages
(ii) Contract salaries/wages
(iii) Piece rate wages

(b) Indirect salaries and wages

(i) Incentives
(ii) Bonuses
(iii) Scheme based earnings
(iv) Overtime
(v) Gratuity or statutory dues

5

(4) Fair and reasonable allocation shall be made for wages paid to such labour as has
been utilized in various departments or cost centers and the basis of such allocation shall be followed
constantly.

(5) Reasons for idle time or layoff payments shall be recorded separately and their
treatment in the calculations of cost of power produced/generated shall be indicated in the cost
statements.

(6) Any wages paid for addition to plant and machinery or other fixed assets shall be
capitalized and excluded from the cost of power produced/generated.

(7) Benefits paid to the employees other than covered in above paragraphs shall be
worked out separately and shown in cost statements, department-wise or cost center wise.

IV. SERVICE DEPARTMENT
Adequate records shall be maintained showing expenses incurred for each service department
e.g. workshop, laboratory, transport and testing house etc. These expenses shall be apportioned to
other cost centers including service departments on an equitable basis. Where these service
departments serve other departments such as steam department or furnace oil handling department,
suitable basis shall be worked out so that the apportionment to other departments or to saleable
products, is duly worked out and applied consistently.

V. UTILITIES
(1) Adequate records shall be maintained showing the quantity and cost of various utilities
consumed and utilized by different departments and cost centers.

(2) Records shall be maintained to enable the assessment of consumption or utilization by service
departments. Allocation of cost shall be made on the basis of actual consumption or on basis of
technical estimates in the absence of actual measurement.

(3) Details shall be available to determine the actual consumption by the power house. The
cost of power consumed by the company shall be shown separately in cost statements.

(4) Appropriate records shall be maintained of pumping, storage and distribution of water
to determine the actual cost of water used by the different cost centers e.g. cooling towers, purifiers
and by other service departments. Basis of allocating the cost of water amongst the different cost
centers shall also be indicated in the records.

6

(5) Adequate records of cost of compressed air shall be maintained. The allocation of cost
of compressed air to different departments shall be indicated in the cost records.

VI. REPAIR AND MAINTENANCE / WORKSHOP CHARGES

(1) Adequate records of expenditure incurred on workshop facilities provided for repair
and maintenance of plant and machinery in cost centers shall be maintained.

(2) Record of repair and maintenance contracts shall be maintained separately. The basis
of allocation of repairs and maintenance to different cost centers shall be indicated in the cost records.
Cost of work of capital nature and/or of heavy repairs and overhauls, benefits of which are likely to
spread over a longer period, shall be capitalized.

(3) If a separate team is working for the maintenance of a particular cost centre, the
salaries/wages and cost of consumables, spare parts and tools shall be charged as direct expense of
that cost centre.

(4) If maintenance services are utilized by other saleable items like waste, heat energy, the
portion utilized for them should be segregated and charged thereto.

VII. DEPRECIATION

(1) Adequate records shall be maintained showing values and other particulars of fixed
assets in respect of which depreciation is to be provided. The record shall inter-alia indicate the cost
of, accumulated depreciation, rate of depreciation and the amount of depreciation charged for the
relevant period.

(2) The basis on which the depreciation is calculated and allocated to various cost centers
and product(s) shall be indicated in the records.

VIII. INSURANCE

(1) Adequate records shall be maintained showing the insurance premium paid for the
various risks covered for the assets and other interests of the company.

(2) Insurance costs shall be allocated to different cost centers and methods allocating such
cost shall be indicated in the cost records.

7

IX. ROYALTY OR TECHNICAL KNOW HOW/SERVICE FEE

Adequate records including technical agreements shall be maintained party wise in respect of
fee paid to the collaborators or technology suppliers on recurring or nonrecurring basis.

X. OTHER OVERHEADS

(1) Adequate records showing the expenditure incurred as power generation overheads,
other than those specified, shall be maintained and method of allocation to different cost centers shall
be stated in the cost records/ statements for the relevant period.

(2) If other saleable products like steam are produced, suitable basis shall be adopted to
apportion the cost equitably.

XI. DISTRIBUTION EXPENSES

(1) Power distribution shall be considered a separate line of activity in power sector.
Adequate record shall be maintained for the expenditure incurred on distribution lines, gauging
installations, repair and maintenance and extension of distribution network.

(2) Record shall be maintained for all those expenses which are incurred on activities that
can be reasonably and fairly be attributed to distribution services.

XII. ENERGY LOSSES
Adequate record shall be maintained to evaluate the cost of energy losses as expenses and it
would be clearly indicated whether these are normal or abnormal losses, in case allocated to different
cost centers, adequate justification for the allocation shall be given. In case of abnormal losses these
shall be separately disclosed. Where energy losses exceed the normal limits, the reasons shall also be
disclosed in the cost records.

XIII. RESEARCH AND DEVELOPMENT EXPENDITURE
Adequate record shall be maintained and kept for research and development separately and
proper basis shall be established for charging to different cost centers and saleable products.

8

XIV. ADMINISTRATION OVERHEADS
Administration overheads shall be recorded separately and proper basis shall be established
for charging to different cost centers and saleable products.

XV. ADJUSTMENT OF COST VARIANCE
(1) Where a company maintains records on the basis other than actual cost, such as
standard costing, the record shall indicate the procedure followed by the company to work out the
actual cost of power produced under such system. The method followed for adjusting the cost
variances in determining the actual cost of the power produced as well as the reasons for variances

(2) The reasons for variances in material, labour, overheads cost and sales should be
disclosed separately while preparing the reconciliation of profit arrived.

XVI. COST STATEMENTS
Cost statements shall be prepared as prescribed in this Order, by the power generating
companies regularly on periodic basis and on the basis of reviews made on those cost statements,
corrective action taken shall be stated along with reasons.

XVII. STATISTICAL STATEMENTS AND OTHER RECORDS
(1) The companies shall develop appropriate internal Key Performance Indicators (KPIs)
for use as basis to evaluate actual performance with the standards/benchmarks prescribed by the
NEPRA and other Government and Regulatory Authorities.

(2) Adequate record of generation and hours run shall be maintained engine wise and
generation shall be recorded so as to make available information for the compilation of the cost
records.

XVIII. RECONCILIATION OF COST AND FINANCIAL ACCOUNTS

(1) The cost records shall be reconciled with the audited financial accounts of the
corresponding period to ensure accuracy if integrated accounts are not maintained. Variations, if any,
shall be clearly indicated and explained.

9

(2) The reconciliation shall be done in such a manner that the profitability of the
different products, as per cost statements, is correctly judged and reconciled with the overall profits of
the company from all of its activities.

(3) Adequate cost records shall be maintained in a manner that the cost statements can be
compiled.

XIX. COMPARATIVE FIGURES
Wherever possible corresponding figures for the previous year shall be arranged, grouped and
provided in cost statements.

10

SCHEDULE II

GENERAL INFORMATION

1. General Information

(a) Name of the company
(b) Registered office address of the company

2. Corporate Information
(a) Status of the company whether public limited (listed or non-listed),
private limited or Single Member Company.
(b) Companys financial year for which audit is being conducted.
(c) Date of Board of Directors meeting where Cost Statements were
approved.
(d) Name, qualification and designation of the officer heading the cost
accounting section

3. Technical Information
(a) Location of plant Site
(i) Location of plant site
(ii) Location of mines, if any

(b) Capacity of Power Generation
(i) Installed capacity.
(ii) Licensed capacity.
(iii) Utilized capacity
(iv) Normal capacity

(c) Date of commencement of commercial operation
(d) Type of Project. (IPP/WAPDA subsidiary/other)
(e) Type of raw/direct material used for producing power

11

4. Detail of distribution network
(a) Local arrangements
(b) Export
(c) Sale to WAPDA and other distribution companies
(d) Sale at bulk to other customers (to be specified)

5. Tariff

(a) Period of application
(b) Notification No. and date approving the tariff
(c) Other important features of tariff approved

6. Applicability of Tax laws

(a) Application of tax laws
(b) Any exemption available from excise and other levies.

7. Cost Accounting System

(a) Brief description of the system
(b) Major accounting policies

12

SCHEDULE III
Annexure 1
[see para 2(1)]
STATEMENT OF CAPACITY FOR THE YEAR ENDED__________

No. of Generators Installed ***
Capacity of Each Generator**

Nature of Capacity
Mega Watts
(MW)
Percentage Mega Watts
(MW)
Percentage
A Licensed Capacity 100 100
B Installed Capacity % of Licensed
Capacity ( A)
% of Licensed
Capacity ( A)
C Normal Capacity % of Installed
Capacity ( B)
% of Installed
Capacity ( B)
D Standby Capacity (if any) % of Normal
Capacity ( C)
% of Normal
Capacity ( C)
E Planned Capacity = (C-D) % of Normal
Capacity ( C)
% of Normal
Capacity ( C)
F Utilized Capacity % of Normal
Capacity ( C)
% of Normal
Capacity ( C)
*G Over or Under Utilized of Capacity % of Normal
Capacity ( C)
% of Normal
Capacity ( C)

* Reasons for over/under utilization of capacity to be disclosed
** Make or Model of generation facilities along with new or old description
*** Type of generation

13

Annexure -2
STATEMENT OF QUANTITY OF POWER PRODUCED AND SOLD FOR THE YEAR
ENDED____________
Qty Percentage Qty Percentage
Mega
Watts
(MW)
Mega Watts
(MW)

A Units Generated (MW)

(i) By furnace/diesel oil
(ii) By Coal
(iii) By Gas
(iv) By any other (to be
specified)

B Less: Losses during generation of
power
% of total units
generated ( A)
%of total units
generated ( A)
C Units Delivered = (A-B) %of total units
generated ( A)
%of total units
generated ( A)
D Line Losses %of units Delivered
( C)
%of units
Delivered ( C)
E Consumption in Power House %of units Delivered
( C)
%of units
Delivered ( C)
F Units available for sale [C-(D+E)] %of units Delivered
( C)
%of units
Delivered ( C)
G Sales Made %of units generated
( A)
%of units
generated ( A)

14

Annexure -3
STATEMENT SHOWING COST OF POWER PRODUCED AND SOLD FOR THE
YEAR ENDED _______

Particulars
S.No Amount
(Rs.)
Cost Per Unit
(Rs.)
Amount
(Rs.)
Cost Per Unit
(Rs.)
A No. of units generated Mega Watts (MW)
B
Raw Direct Materials

(i) Furnace Oil/Diesel Oil Consumed
(Annexure-4)

(ii) Coal Consumed (Annexure-5)
(iii) Gas Consumed
(Annexure-6)

(iv) Any other material consumed (to be
specified)

C Transportation charges
D Lubrication of Lube oil (Annexure-7)
E Salaries, Wages ,.other Benefits (Annexure-8)
F Manufacturing Overheads (Annexure-9)
G Total Cost of Electric Power Generated
=B+C+D+E+F

H Administrative Overheads (Annexure-10)
I Selling & Distribution Overheads
(Annexure-11)

J Financial Overheads
K Total Cost to Make = G+H+I+J
L Abnormal Losses
M Total Cost to Sell = K+L

15

Annexure -4
STATEMENT OF CONSUMPTION OF FURNACE OIL/ DIESEL OIL AND VARIANCE IN
CONSUMPTION FOR YEAR ENDED _______
CURRENT YEAR PREVOIUS YEAR VARIANCE
Qty
(tons)
Price

Value Qty
(tons)
Price

Value Qty
(tons)
Price
(Rs.)
Value
A Opening Furnace/Diesel
Oil

B Furnace Oil/Diesel Oil
Purchased

C Total Furnace Oil/Diesel
Oil Available (A+B)

D Closing Balance
E Gross Consumption (C-D)
F Shortage/Wastage
G Sludge Extracted
H Net Consumption (E-F-G)
I Electric Power Generated
(KW) : (Annexure-2)

J Grammage / unit (Gm per
kwh) (H/I)

K Cost / Unit (Rs. per kwh)
(H/I)
(Annexure-3)

Reasons for variances, if any, to be explained separately

16

Annexure -5

STATEMENT SHOWING CONSUMPTION OF COAL AND VARIANCE IN CONSUMPTION FOR THE
YEAR ENDED _______

CURENT YEAR
PREVIOUS YEAR Variance
Qty
(tons)
Price
Rs.)
Value Qty
(tons)
Price
(Rs)
Value Qty
(tons)
Price
(Rs.)

Total
A Opening Stock

B Purchased during the year

C In case of coal mines owned or taken
on lease by the company:
Amortization (Nature to be
specified)
Total cost

D Total Available for consumption
(A+B+C)

E Wastage
F Closing Balance
G Total Coal combusted (D-E-F)
H Electric Power Generated (KWH) :
(Annexure-2)

I Cost/Unit (G/H)
(Annexure-3)

17

Annexure -6

STATEMENT SHOWING CONSUMPTION OF GAS FOR THE YEAR ENDED
_______
A Total Gas combusted (MMBTU)

B Total Heat Equivalent of Gas Combusted

C Price

D Value of Gas Combusted (A x C)

E Electric Power Generated (KWH) :

F Heat Rate (E / B)

G Cost/Unit (D / E)
(Annexure -3)

18

Annexure -7
STATEMENT SHOWING CONSUMPTION OF LUBE OIL AND VARIANCE IN CONSUMPTION FOR
THE YEAR ENDED _______

Current Month
For the Year Variance
Qty
(Liters)
Price

Value Qty
(Liters)
Price

Value Qty
(Liters)
Price
(Rs.)
Total
A Opening Stock

B Lube Oil Purchased

C Total Oil Available (A+B)

D Wastage

E Closing Balance
F Gross Consumption (C-D-E)

G Routine Oil Change

H Net Consumption (F+G)

I Electric Power Generated
(KWH) :

J Grammage / Unit (H/I)

K Cost/Unit (H/I) (Annexure-3)

19

Annexure -8

STATEMENT SHOWING SALARIES, WAGES AND OTHER
BENEFITS FOR THE YEAR ENDED______________
S.No Particulars Current Year Previous Year

Total Power Generated (Watts)
1 Salaries and Wages:
(i) Officers and Permanent Staff
(ii) Labour on Contract and Daily basis
(iii) Bonuses
2 Benefits:
(i) Medical Expenses
(ii) Canteen Expenses
(iii) Welfare, Recreation
(iv) Transport and Traveling
(v) Educational Cess/ Expenses
(vi) Group Insurance/Workmen Compensation
(vii) Provident Fund (Employers Contribution)
(viii) Gratuity/Pension/Retiring Benefits
(ix) Other Benefits (if any)
3
Total (1+2)

4
Less allocated to-

(a) Admin Overheads

(b) Selling & Distribution Overheads.

(c) Any Other (Specify)

5 Balance Transferred to Generation Process
(3-4) (Annexure-3)

20

Annexure-9
STATEMENT OF MANUFACTURING OVERHEADS FOR THE
YEAR ENDED _______
PARTICULARS CURRENT
YEAR
PREVIOUS
YEAR
1 Consumable stores and spare parts
2 Repair and maintenance
3 Utilities
4 Insurance
5 Lubrication oil
6 Rent
7 Rates & Taxes
8 Office Supplies
9 Other Overheads (to be specified)
10 Depreciation
Total (Annexure-3)

21

Annexure -10
STATEMENT OF ADMINISTRATIVE OVERHEADS FOR THE YEAR ENDED _______

1. Salaries Wages & Other Benefits (Annexure-8)
2. Directors Remuneration
3. Directors Traveling
4. Staff Traveling
5. Vehicle Running Expenses
6. Communication Expenses
7. Repair & Maintenance
i) Office Equipments
ii) Furniture & Fixtures
8. Building others (to be specified)
9. Advertisement
10. Utilities
11. Rent, Rates & Taxes
12. Printing & Stationary
13. Legal & Professional Expenses
14. Entertainment
15. Insurance Costs
16. Charity & Donation
17. Others to be specified
18. Depreciation
Total- (Annexure-3)

22

Annexure-11

STATEMENT OF SELLING, DISTRIBUTION AND TRANSMISSION EXPENSES FOR THE YEAR ENDED
_________
Current Year
(Rs.)
Previous Year
(Rs.)
Salaries, Wages & Other Benefits (Annexure-8)
Stores & Spares
Loose Tools
Depreciation
Insurance
Line Losses (normal)
Other Overheads (to be specified)
Total - (Annexure-3)

23

Annexure-12
STATEMENT OF FIXED ASSETS AND ALLOCATION OF DEPRECIATION FOR
THE YEAR ENDED ______
Cost Depreciation
Written
Down
Value

Total
Depreciatio
n
Cost
Opening
Additions
/
Deletions
Cost
Closing
Rate
%
Acc.
Dep
Openi
ng
Charge
for the
Year
Acc.
Dep
Closing
Sr. #
Generation
Generation System
(Engine Room)

Building
Plant & Machinery
Transferred from other
Departments

TOTAL (Annexure-9)
Electrical Department

Building
Plant & Machinery
TOTAL (Annexure-9)
Workshop

Building
Tools & Equipment
TOTAL (Annexure-9)

24

Stores & Allied
Facilities

Building
Storage Tanks
TOTAL (Annexure 9)
Distribution System

Meters
Distribution Lines
Grids & Transformers
TOTAL
(Annexure -11)

Administrative

Building
Office Equipment
Vehicles
Electrical Appliances
TOTAL (Annexure-10)

..
-
.
EXTRAORDINARY
PUBLISHED BYCOMMISSION
ISLAMABAD
Part II
2013
SECURITIES ANDEXCHANGE COMMISSION OF PAKISTAN
NOTIFICAnON
Islamabad, the April 23, 2013
s.R.o.31.3 /2013.- The following draft of Pharmaceuticals Industry (Cost Accounting
Records) Order, 2013 which is proposed to be made in exercise of powers conferred by clause (e) of
sub-section (1) of section 230 and clause (0) of sub section (4) of section 20 of the Securities and
Exchange Commission of Pakistan Act, 1997 (XLII of 1997) is hereby published for the information
of all persons likely to be affected thereby and notice is hereby given that the draft will be taken into
consideration after thirty days of its publication in the Official Gazette.
Any objection or suggestion which may be received from any person in respect of the said
draft before the expiry of the said date shall be considered by the Securities and Exchange
Commission of Pakistan.
PHARMACEUTICALS INDUSTRY (COST ACCOUNTING RECORDS) ORDER, 2013
1. Short title, application and commencement. - (1) This Order shall be called the
Pharmaceutical Industry (Cost Accounting Records) Order, 2013.
(2) This Order shall apply to every company, including a foreign company as defined under
section 450 of the Companies Ordinance, 1984, which is engaged in the production, processing and
manufacturing of pharmaceuticals products.
(3) It shall come into force with effect from July 1st 2013.
2. Maintenance of records> (l) Every company to which this Order applies shall, in respect of
each financial year commencing on or after the commencement of this Order, keep cost accounting
records, containing, inter-alia, the particulars specified in Schedule I, II and III to this Order.
Page 1 of17
1

Islamabad, the 17
th
February, 2005

SUBJECT: Directive under the Credit Rating Companies Rules, 1995

For establishing a procedural framework for credit rating companies and in the interest
of public and the capital market, the Commission, in exercise of the powers conferred by rule
7 of the Credit Rating Companies Rules 1995 is pleased to direct that the Credit Rating
Companies shall follow and comply with the following Code of Conduct with immediate
effect.

1. CREDIT RATING PROCESS:- The credit rating company (hereinafter
referred to as CRC) shall

(a) lay down rating methodology for each product and, shall file a copy of the
same and any subsequent modification thereof with the Commission for
record;

(b) establish adequate infrastructure and employ persons having required
professional and other relevant experience to enable it to provide rating
services in accordance with the Rules;

(c) form professional rating committees, comprising members who are adequately
qualified and knowledgeable to assign a rating;

(d) ensure that only the rating committee takes all the rating decisions, including
the decisions regarding changes in rating, without any let or hindrance from
other officers or forces within or outside the CRC;

(e) use a rigorous and systematic assessment methodology based both on
qualitative and quantitative techniques consistent with the prevalent
international best practices;

(f) not change the rating definition, symbols, and/or rating process without prior
intimation to the Commission and the public atleast fifteen days prior to such a
change. While informing the public, the existing ratings shall be harmonized
through newspapers/websites etc.;

(g) inform the Commission about its new rating product/service; and

2
(h) continuously monitor all its ratings and carry out periodical reviews of all its
current outstanding ratings.

2. DISCLOSURE REQUIREMENT:- The credit rating company shall
(a) make public the rating definition and the symbol related thereto;

(b) ensure that detailed credit rating report and the rating notification contains the
names and contact information of the rating analysts and provides the rationale
and basic principles/assertions underlying the rating issued and risk factors
considered in the assessment;

(c) also state that the rating does not constitute recommendations to buy, hold or
sell any securities;

(d) publicly disseminate all ratings assigned by them, whether solicited by their
clients or unsolicited, through press release in at least one English and one
Urdu national daily, within two working days of the notification of such
ratings. In cases where rating is unsolicited, the rating report shall clearly state
this fact and whether the rated entity was a part of this process and also the
source of information on which it is based. The disseminated ratings shall
contain the rationale of the ratings, covering an analysis of the various factors
justifying the assessment, as well as factors constituting a risk:
Provided that solicited ratings which are not required to be published by virtue
of any statutory requirement and the rated entity is not engaged in soliciting
public deposits in any way, may be kept confidential if the client wishes to do
so;

(e) develop and maintain a web site on which press releases in respect of solicited
ratings and rating reports in respect of unsolicited ratings shall be kept
available for not less than three years from the date of the report. The website
shall also contain information relating to:

(i) actual default rates experienced in each rating category; and
(ii) rating transitions of client over time (i.e. AAA credit rating transiting to
AA etc. over time).
For the purposes of items (i) and (ii), the time period would be five years.

3. AGREEMENT WITH CLIENTS:- The CRC shall enter into a written
agreement with each client for solicited ratings and every such agreement shall inter-
alia include the following provisions, namely:-

(a) The rights and liabilities of each party shall be clearly defined;

3
(b) The fee to be charged by the CRC shall be specified for specified period;

(c) The client shall agree to co-operate with the CRC in order to enable the latter
to arrive at and maintain a true and accurate rating of the client/clients security
and shall in particular provide to the latter a true, complete and timely
information for the purpose;

(d) The client shall agree to a periodic review of the ratings by the CRC during the
tenure of the rating and the periodicity of review shall not be less than once a
year;

(e) If the client does not co-operate with the CRC to enable the CRC to comply
with its obligations, the CRC shall suspend the rating/withdraw from the
engagement and in case of existing/outstanding rating, the CRC shall promptly
notify this fact to the Commission and the public.

4. OTHER OBLIGATIONS OF CRCs:- The CRC shall abide by the
following:

(a) It shall not accept a rating assignment where a client has prematurely
terminated a rating contract with another credit rating company, unless it
obtains a written no-objection from the previously engaged credit rating
company stating the reasons for cancellation of its rating contract.

(b) It shall not rate securities issued by it.

(c) It shall not rate a client nor rate securities issued by such client, which is an
associated company or undertaking as defined in the Companies Ordinance,
1984.

(d) It shall not provide consultancy/advisory services to any client or to any of its
associated company that is being rated or has been rated by it during the
preceding three years.

(e) It shall exercise due diligence and observe high standards of integrity,
transparency and fairness in all its professional dealings.

(f) It shall establish, document, and ensure implementation and compliance of,
policies and procedures to protect against potential conflicts of interest and
disclose to the client all possible sources of conflict of interests including that
of its directors, management, rating committee and employees.

(g) It shall not get involved in unfair competitive practices nor shall solicit the
clients of any other rating company on implicit or explicit assurance of higher
rating or any other undue benefit.

4
(h) It shall not make unsubstantiated claims, in order to solicit clients, about
qualifications of its professional staff or its capability to render certain services
or its achievements concerning services rendered to other clients.

(i) It shall not, without obtaining prior written approval of the rated client,
disclose to other clients, press or any other party any confidential information
about its client, which has come to its knowledge in the course of the rating
process, except when such disclosure is required in terms of a legal obligation.

(j) It shall document and ensure implementation and compliance of policies and
procedures to prevent the disclosure of non-public information to outside
parties that may benefit from this information. In cases where a CRC is a
parent, subsidiary, joint venture partner or affiliate of any organization that
might benefit from non-public information, the CRC shall ensure strong
firewalls that prevent the disclosure to or use of non-public information by
these related or affiliated businesses or their personnel.

(k) It shall require its employees to sign a non-disclosure agreement that prohibits
them from using their access to such information for their own personal
benefit.

(l) It shall appropriately record, and ensure confidentiality of, the
information/documents provided by the issuer during the rating process.

(m) It shall not make untrue statement or suppress any material fact in any
documents, reports, papers or information furnished to the Commission or to
public or to stock exchange.

(n) It shall not generally and in particular situations in relation to its rating, be
party to

(i) creation of false market;

(ii) passing of price sensitive information to brokers, members of the stock
exchanges, other players in the capital market or to any other person or
take any other action which is unethical or unfair to the investors.

(o) It shall create firewalls to restrict any information flow between its credit
rating activity and any other activity that it may undertake.

(p) A CRC or any of its employees shall not provide, directly or indirectly, any
investment advice or opinion about any security in the publicly accessible
media, whether real - time or non- real time, unless a disclosure of its interest
in the said security has been made, while rendering such advice.

5
(q) It shall acquire and maintain membership of the Association of Credit Rating
Agencies in Asia (ACRAA) and follow the best practices guidelines issued by
ACRAA from time to time.

5. FILING OF REPORTS BY THE CRCs:
The CRC shall file a yearly report containing a clause-wise compliance status
of this code. The first such report shall be filed within one month of the
issuance of this code.
Provided that the Commission may extend the time period for the filing of this
report if it considers it to be in the interest of the capital market and the general
public.

(Etrat H. Rizvi)
Commissioner


July18, 2002
Broker(s)/Brokerage Firm(s)/Incorporated Brokerage House(s) registered
with the Commission.
Subject: - DIRECTIVE TO BROKERS / BROKERAGE FIRMS/
INCORPORATED BROKERAGE HOUSES REGISTERED UNDER THE
BROKER AND AGENTS REGISTRATION RULES 2001
Dear Sirs,
In order to prohibit unfair trade practices, to ensure a level playing field, to inculcate
good governance in business conduct and to promote transparency in the Securities
Market, the competent authority is pleased to direct that the following shall not be
eligible to become a Director or a Nominee Director of a listed company: -
i. Any Broker or Brokerage Firm registered with the Commission or the Chief
Executive Officer, Chief Financial Officer, Head of Internal Audit, Research Analysts,
Traders, Agents or Nominees thereof.
ii. Anyone holding a controlling interest in, or a Director, Chief Executive Officer,
Chief Financial Officer, Head of Internal Audit, Research Analysts, Traders, Agents or
Nominee of an Incorporated Brokerage House registered with the Commission.
iii. Firms/Companies owned or controlled by any of those mentioned at (i) to (ii)
above.
Notwithstanding anything stated above, anyone can become a Director of a listed
company if he has a minimum shareholding of 10% or above, in the company where
he intends to become a Director/Nominee Director.
2. Subject to what is stated above: -
i. A Broker/Brokerage Firm or an Incorporated Brokerage House whose directors or
nominee directors are represented on the Board of Directors of a listed company
shall not trade in the securities of such a listed company.
ii. No Broker shall act as a Consultant / Adviser to a listed company of which he/his
Nominee is a Director.
3. The above directive shall not be applicable to a Non-Executive Director on the
Board of an Incorporated Brokerage House, provided, however, that the
Incorporated Brokerage House shall neither trade nor act as a Consultant / Advisor
to such listed company of which the Non-Executive Director is a Director.
4. The above directive shall be applicable to such Director of a listed company who
is elected as a Director, as a result of an election held after 31st August, 2002.
5. The Securities and Exchange Commission of Pakistan (SEC) may relax all or any
of the above conditions on a case-to-case basis.

Yours truly,
(Abbas Hasan Kizilbash)
Joint Director (SE)
C.C:
1. The Managing Director,
Karachi Stock Exchange (Guarantee) Ltd.
Karachi.
Lahore Stock Exchange (Guarantee) Ltd.
Lahore.
3. The Secretary
Islamabad Stock Exchange (Guarantee) Ltd.
Islamabad.

(Securities Market Division)

SMD/SEC/2(40) 2002 February 07, 2003

Subject: - DIRECTIVE TO BROKERS ON CONDUCT OF BUSINESS
Dear Sirs,
I am hereby directed by the Executive Director (SM) to notify that in order to
safeguard public interest, prohibit unfair trade practices, inculcate good governance
in business conduct and to ensure that a broker does not engage in certain types of
conduct in the Securities Market that are against the interest of an investor, the
Commission in exercise of powers conferred upon it under clause (d) of sub-section
(4) and of section 20 and clause (g) of sub-section (4) of section 20 of the Securities
and Exchange Commission of Pakistan Act, 1997 read with sub-section (1) of section
20 of the Securities and Exchange Ordinance, 1969 hereby directs as under:
i. A broker shall provide brokerage services to an investor only after ensuring
that an account has been opened in the investors name using an account opening
form that is to be developed by the stock exchanges in consultation with the
Securities and Exchange Commission of Pakistan.
ii. A broker shall not recommend to an investor the purchase or sale of a
security that is unsuitable given the investor's age, financial situation, investment
objective and investment experience. Without limitation, investment in a particular
type of security may be considered unsuitable or the amount or frequency of
transactions may be excessive and therefore unsuitable for a given investor.
iii. A broker shall not guarantee investors that they will not lose money on
particular securities transaction, making specific price predictions, or agreeing to
share in any losses in the investor 's account.
iv. A broker shall not purchase or sell securities in an investor's account
without the investors approval, unless the investor has given written discretionary
authority to effect transactions in the account.
v. A broker shall not trade on his own behalf or on behalf of his brokerage
firm in preference to an investor by trading ahead of a limit order from an investor.
vi. A broker shall not remove funds or securities from an investor 's account
without the investors prior authorization.
vii. A broker shall not purchase or sell a security while in possession of
material, non-public information regarding an issuer.
viii. A broker shall not misrepresent material facts concerning an investment.
Examples of information that may be considered material and that should be
accurately presented to an investor inter alia include: the risks of investing in a
particular security; the charges or fees involved; companys financial information or
any other material information.
The aforesaid directive shall be effective as of 31st March 2003. Please acknowledge
receipt.
Yours Faithfully,
(Jahanara Sajjad Ahmad)
Joint Director (Policy and Regulation)
C.C.
Karachi Stock Exchange (Guarantee) Ltd.
Karachi.
Lahore Stock Exchange (Guarantee) Ltd.
Lahore.
Islamabad Stock Exchange (Guarantee) Ltd.
Islamabad.

A Guide
Accounts and Accounting
Reference Dates
A Guide
Accounts and Accounting
Reference Dates
Table of Contents
Chapter # Page

1
2
3
a 8
10

Introduction
1 Accounting reference dates
2 Preparing and filing of annual and quarterly accounts
3 Contents of nnual and quarterly accounts
4 Filing exemption for private companies
5 Further information, advice and guidance 11
This booklet is a guide only and should be read in conjunction
with the relevant legislation.
Introduction
1. Accounting referencedates (ARD)
2. Preparingandfilingof annual andquarterlyaccounts
3. Content of the annual and quarterly accounts
This booklet is a guide to the law and rules governing public disclosure of
accounts by limited companies incorporated under the Companies
Ordinance, 1984 (the Ordinance).
The booklet covers three main topics:

The ARD is the financial year-end. It is also the date that determines
when the annual and quarterly accounts of listed companies are due
for delivery to the shareholders, concerned stock exchanges, the
Company Registration Office (CRO) and the Securities and
Exchange Commission of Pakistan (the Commission). Every
company has an ARD and its accounts are prepared and finalized in
light of the same.

There are deadlines by which annual and quarterly accounts must be
prepared and delivered to the shareholders, the concerned stock
exchange, the CRO and the Commission. When you fail to meet with
the requirements, penalty will be levied as provided under the
Companies Ordinance. So, it is important that you, your accountants,
auditors and consultants are aware of the filing/transmission
deadlines.

This booklet also provides guidance as to the contents of the annual
and quarterly accounts and will also tell you as to what documents /
information make up the annual and quarterly accounts.
1
CHAPTER1
Accounting reference dates
1. What is afinancial year?
2. Howis the ARDfixed?
3. What period must a company's first accounts cover?
4. Canthe ARDbe changed?
5. Arethereany restrictions onchanging the ARD?

Every company must prepare annual accounts that report on the
performance and activities of the company during the year. The period
reported on in the accounts is called the financial year. This starts on
the day after the previous financial year ended or, in the case of a new
company, on the day of incorporation.
A more precise term for a financial year is an accounting reference
period.
The accounting reference period ends on the accounting reference date
(ARD).

For a new company, the ARD is set using its date of incorporation -see
question 3. You can change the first accounting reference period and
subsequent accounting reference periods by changing the ARD-see
questions 4 and 5.

For all new companies, the first accounting reference period must be
set by the Board of Directors keeping in view the requirements of tax
laws. The period to which first accounts relates may exceed twelve
months.

Yes, by making an application to the Registrar under Rule 30 of the
Companies (General Provisions and Forms) Rules, 1985.

You may change an ARD by shortening an accounting reference
period by as many months as you like. Likewise, an ARD can be
changed by extending an accounting reference period, however, the
accounts must be made up to a date not earlier than the date of the
meeting by more than four months.
2
CHAPTER2
Preparing and filing of annual and quarterly accounts
1. Doall companies have tokeepaccountingrecords?
2. For howlong the prior accounting records are requiredto be kept
bya company?
3. Wherethe accountingrecords of acompanyis tobe kept?
4. Can the accounting records be kept at a place other than the
registeredoffice of the company?
5. What periodmust the accounts cover?
Annual accounts

This chapter explains the basic rules on preparing and filing of annual and
quarterly accounts.

Yes. All companies must keep proper accounting records.

The books of account of every company relating to a period of not less
than ten years immediately preceding the current year should be
preserved in good order. However, in the case of a company
incorporated less than ten years before the current year, the books of
account for the entire period preceding the current year must be
preserved.

The accounting record are to be kept at the registered office of the
company.

Yes, all or any of the books of account can be kept at such other place in
Pakistan as the directors may decide, and when the directors have so
decided, the company has to file with the registrar, within seven days
of the decision, a notice in writing on Form 33 of the Companies
(General Provisions and Forms) Rules, 1985 (the Rules).

The period to which the annual accounts relate shall not exceed twelve
months. This period can, however, be extended with the special
permission by the registrar. For this purpose, an application is required
to be made to the Registrar under Rule 30 of the Rules.
3
A company's first annual accounts cover the period starting on the date
of incorporation, not the first day of commencement of trading or
business. They end on the accounting reference date (ARD).
Subsequent accounts start on the day after the previous accounts
ended.

The period to which the quarterly accounts relate shall not exceed
three months.

Every company is required to send a set of annual accounts to the
registered address of every member of the company at least twenty-
one days before the annual general meeting at which it is to be laid
before the members of the company and also keep a copy at the
registered office of the company for the inspection of the members of
the company during a period of at least twenty-one days before that
meeting. A listed company is also required to send five copies each of
such balance-sheet and profit and loss account and other documents
(auditors' report, directors' report etc) to the Commission, the stock
exchange and the registrar at least twenty-one days before the date of
annual general meeting.
Stock exchanges also require the listed companies to submit additional
copies of annual accounts for which the listing regulations of the stock
exchange where the company is listed, may be referred.
After the balance-sheet and profit and loss account or the income and
expenditure account, have been laid before the company at the annual
general meeting, every listed company is required to file with the
Registrar at least three copies duly signed by the chief executive,
directors, chairman of directors or the auditors of the company, as the
case may be along with the reports and other documents whereas in
case of a public company, which is not a listed company at least two
copies, within thirty days from the date of such meeting.
Quarterlyaccounts
6. When and howmany copies of annual accounts are requiredto be
sent to the Members, Commission, Stock Exchange and the
Registrar?
4
If the general meeting before which a balance-sheet is laid, does not
adopt the balance-sheet and profit and loss account or the income and
expenditure account or defers its consideration or is adjourned, a
statement of that fact and of the reasons thereof are required to be
annexed to the aforesaid documents and also to the copies thereof
required to be filed with the Registrar.

Every listed company is required to prepare and circulate its quarterly
accounts within one month of the close of first and third quarter of its
year of account, to the members and the stock exchange in which the
shares of the company are listed a profit and loss account and a
balance-sheet as at the end of that quarter, whether audited or
otherwise. For the second quarter, the period within which the
quarterly accounts shall be submitted with limited scope review is two
months. Moreover, three copies of the quarterly accounts are also
required to be transmitted to the Stock exchanges, the Registrar and
the Commission within the aforesaid period. Stock exchanges also
require the listed companies to submit additional copies of quarterly
accounts for which the listing regulations of the stock exchange where
the company is listed, may be referred.
Yes, the period for delivering accounts can be extended by a maximum
period of two months. For this purpose, an application is required to be
made to the Commission to extend the time for laying and delivering
annual accounts if there is a special reason for doing so. For example,
if there has been an unforeseen event which was outside the control of
the company and its auditors. The application must be made under
Rule 14 and 30 of the Rules to the Commission in the case of a listed
company and to the Registrar in the case of other companies not less
than thirty days before the last date on which the annual accounts are to
be laid before the annual general meetings.
However, in the case of a listed company, the Commission, and in any
7. When must I deliver my quarterly accounts to the shareholders,
stockexchange andthe Commission?
8. Canthe time allowed for laying accounts be extended?
Annual accounts

5
other case, the registrar, may, for any special reason, extend the period
for delivering accounts for a term not exceeding two months from the
due date of holding of annual general meeting and presentation of
accounts therein.
If a company fails to deliver accounts on time then every director,
including chief executive and chief accountant of the company who
has knowingly by his act or omission, caused such default shall be
liable for punishment in respect of a listed company, with
imprisonment for a term which may extend to one year and with fine
which would not be less than twenty thousand rupees nor more than
fifty thousand rupees, and with a further fine which may extend to five
thousand rupees for every day after the first during which the default
continues; and in respect of any other company, be punishable with
imprisonment for a term which may extend to six months and with fine
which may extend to ten thousand rupees.

Similarly, if a company fails to deliver its quarterly accounts on time
then every director, including chief executive and chief accountant of
the company who has knowingly by his act or omission caused such
default would be liable to a fine not exceeding one hundred thousand
rupees and to a further fine of one thousand rupees for every day during
which the default continues.

The annual and quarterly accounts are required to be approved by the
directors and signed by the chief executive and at least one director.
Where the chief executive is for the time being not present in Pakistan,
then the balance-sheet and profit and loss account or income and

In the case of quarterly accounts, the period cannot be extended.

Quarterlyaccounts
9. What if the accounts aredeliveredlate?
Annual Accounts
QuarterlyAccounts
10. Who canapproveandsignthe annual andquarterlyaccounts?
6
expenditure account of the company should be signed by at least two
directors present for the time being in Pakistan however, in such a case
there shall be subjoined to the balance-sheet and profit and loss
account or income and expenditure account a statement signed by such
directors explaining the reasons for non-compliance with the aforesaid
procedure.

Consolidated financial statements are to be signed by the same persons
by whom the individual balance sheet and the profit and loss account
or income and expenditure account of the holding company are
required to be signed.

Yes, if any copy of a balance-sheet is issued, circulated or published
without there being annexed thereto a copy each of (i) the profit and
loss account or income and expenditure account, (ii) any accounts,
reports, notes or statements referred therein, (iii) the auditor's report,
and (iv) the directors report, the company and every officer of the
company who is knowingly and willfully in default is to be punished
with fine which may extend to five thousand rupees.

Yes, the directors of every company have to lay the annual accounts
within eighteen months after the incorporation of the company and
subsequently once at least in every calendar year, before the company
in annual general meeting in the case of the first account for the period
since the incorporation of the company and in any other case since the
preceding account, made up to a date not earlier than the date of the
meeting by more than four months.
11. Who cansignthe consolidatedfinancial statements?
12. Are there any penalties for improper issue, circulation or
publicationof Accounts?
13. Do the companies have to present their accounts in Annual
General Meeting?
7
CHAPTER3
Contents of annual and quarterly accounts
1. What does an annual report include?

2. What does a set of interimaccounts include?

3. To which laws shall the annual accounts comply with?

Generally, annual report must include:
Balance Sheet;
Profit and loss account or income and expenditure account;
Notes to the accounts;
Auditors' report;
Directors' report; and
Consolidated accounts and directors' report (if applicable).
The set of annual report of listed companies shall also
include the following documents:
Cash Flow Statement;
Statement of Changes in Equity;
Compliance statement on Code of Corporate Governance; and
Auditors' Review Report on Compliance of Code of
Corporate Governance

General quarterly accounts must include the following?
Condensed balance sheet;
Condensed income statement;
Condensed cash flow statements;
Condensed statement of changes in equity;
Selected explanatory notes; and
Directors report;
Further guidance on the contents of quarterly accounts can be found in
International Accounting Standard 34 (Interim Financial Reporting).
The annual accounts of a listed company shall comply with the
8
provisions of the Ordinance including the Fourth Schedule,
International Accounting Standards and the Code of Corporate
Governance.

l
The quarterly accounts shall be prepared in accordance with the
provisions of Section 245 of the Ordinance, International Accounting
Standard 34 and the requirements of Code of Corporate Governance.

Yes, the listed companies are required to prepare and circulate the
consolidated quarterly accounts as per requirements of Section 237.
4. To which aws the quarterly accounts comply with?
5. Whether the listed companies are required to prepare
consolidatedquarterlyaccounts?
9
CHAPTER4
Filing exemptionfor private companies

Single member companies and other private companies are not
required to file their annual and quarterly accounts with the
Commission or the Registrar.
10
CHAPTER5
Further information, advice and guidance
1. Fromwheredo I get forms andguidance booklets?
2. Howdo I sendinformationtothe Commission/Registrar?
HeadOffice
Company LawDivision

This is one of a series of the Commission booklets that provide a
simple guide to the Companies Ordinance, 1984 in respect of accounts
and accounting reference dates. For further guidance, you should seek
professional advice from a legal expert.
The quickest way to get them is through our web site
www.secp.gov.pk.
Various forms can be downloaded from aforesaid website and can also
be obtained from the stationers, accountants, legal advisers and
corporate practitioners.

You may deliver documents to the Commission/Registrar by post,
courier or by hand to one of the following relevant addresses.

NIC Building, 63 Jinnah Avenue
Islamabad
Phone: 051-9207091-4
Fax: 051-9218592

Mr. Abdul Rehman Qureshi
Commissioner
th
11 Floor, NIC Building,
63 Jinnah Avenue Islamabad.
Phone: 051-9202692
E-mail: rehman.qureshi@secp.gov.pk
11
Mr. Rashid Sadiq
Executive Director (Enforcement)
th
7 Floor, NIC Building,
63 Jinnah Avenue, Islamabad.
Phone: 051-9212084
E-mail: rashid.sadiq@secp.gov.pk

The Joint Registrar of Companies
Company Registration Office
State Life Building, 7-Blue Area, Islamabad.
Phone: 051-9208740, Fax: 051-9208740
Email: croisb@isb.paknet.com.pk

The Additional Registrar of Companies
4th Floor, SLIC Building No.2, Karachi.
Phone: 021-2415855, 2416778, Fax: 021-2416788
Email: crokhi@khi.paknet.com.pk

The Additional Registrar of Companies
3rd & 4th Floors, Associated House,
7-Egerton Road, Lahore.
Phone: 042- 9200274, Fax 042-9202044
Email: crolhr@lhr.paknet.com.pk

The Deputy Registrar of Companies
63-A, Nawa-i-Waqt Building, Abdali Road, Multan.
Phone: 061-9200920, Fax: 061-9200920
Email: cromul@mul.paknet.com.pk
CRO Islamabad
CRO Karachi
CRO Lahore
CRO Multan
12
CRO Faisalabad
CRO Peshawar
CRO Quetta
CRO Sukkur

356-A, Al-Jamil PIaza,
1st Floor, Peoples Colony, Small D Ground,
Faisalabad.
Phone: 041-9220284 Fax: 9220284
Email: crofsb@fsd.paknet.com.pk

1st Floor, State Life Building, The Mall, Peshawar Cantt.
Phone: 091-9213178
Fax: 091-9213178
Email: cropsh@psh.paknet.com.pk

The Deputy Registrar of Companies
382/3, (IDBP House), Shahrah-e-Hali,
Quetta Cantt.
Phone:081-844136
Email: croqta@qta.paknet.com.pk

The Assistant Registrar of Companies
B-30, Sindhi Muslim Housing Society,
Airport Road, Sukkur.
Phone: 071-30517
13
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SECP
Guide SERIES


GUIDE

FOR

CHANGE IN COMPANY OBJECTS

Published by Registration Department

N.I.C BUILDING, JINNAH AVENUE,
ISLAMABAD - PAKISTAN
Ph: 051-9207091- 4 Fax: 051-9204915
Website: www.secp.gov.pk
E-mail: enquiries@secp.gov.pk

INTRODUCTION

The business proposed to be undertaken by a company is mentioned in clause III of
its Memorandum of Association, which relates to objects of a company. The
Companies Ordinance, 1984 (the Ordinance) allows a company to alter the object
clause of its Memorandum of Association with the approval of the Securities &
Exchange Commission of Pakistan (SECP), on the petition filed by a company
within 60 days of the passing of Special Resolution, for the reasons provided under
section 21 of the Ordinance and the procedure laid down under rule 3 read with
rules 28, 30 and 32 of the Companies (General Provisions and Forms) Rules, 1985
(the Rules).

ABOUT THIS GUIDE

This Guide is intended to provide basic information about the alteration in the
object clause of the Memorandum of Association of a company and making a
petition to the SECP for confirmation of the alteration; so as to facilitate the
companies from the point of view of practical approach to law and corporate
procedure. This is a guide only and must be read with the relevant provisions of
law.

CHAPTER 1

APPROVING AUTHORITY

An alteration takes effect only if and to the extent confirmed by SECP. However, in order to
facilitate the corporate sector, the powers of SECP have been delegated to the registrars
concerned i.e. the Incharges of the Company Registration Offices (CROs) of SECP situated
in different cities all over the country i.e. Karachi, Lahore, Islamabad, Peshawar,
Faisalabad, Multan, Sukkur and Quetta. The addresses of the CROs are given at the end of
this Guide.

REASONS/GROUNDS FOR MAKING ALTERATION IN
OBJECT CLAUSE OF THE MEMORANDUM OF
ASSOCIATION

Clause III of the Memorandum of Association of a company may be altered on any of the
following grounds:

to carry on some business, not being a business specified in its memorandum,
which may conveniently or advantageously be combined with the business of
the company; or

to enlarge or change the local area of its operations; or

to carry on its business more economically or more efficiently; or

to attain its main business purpose by new or improved means; or

to restrict or abandon any of the objects specified in the memorandum; or

to sell or dispose of the whole or any part of the undertaking of the company;
or

to amalgamate with any other company or body of persons.

CHAPTER 2

PROCEDURE FOR CHANGE IN COMPANY OBJECTS

INTERNAL PROCEDURE

Step-wise internal procedure for change in objects of a company

1. Seek the approval of the board of directors for placing special resolution before the
company in general meeting for alteration in Memorandum of Association (change
in objects). The reasons for making alteration fall within the broad categories as
mentioned in chapter 1 of this Guide.

2. Send at least 21 days notice, to the members for convening of the general meeting - Annual
General Meeting (AGM) or Extraordinary General Meeting (EOGM). However, an EOGM
may be held at a shorter notice with the approval of registrar in case of an emergency
affecting the business under proviso to section 159(7) of Companies Ordinance, 1984. The
draft special resolution for change in objects and statement of material facts is also sent
alongwith the said notice to members. In case of a listed company, notice is also required to
be published at least in one issue each of a daily newspaper in English and Urdu languages
having circulation in the Province in which the stock exchange(s) on which the company is
listed is/are situated.

3. Pass special resolution with a majority of not less than 3/4
th
of the members entitled to vote
as are present in person or through proxy in the general meeting.

4. File copy of the special resolution on prescribed Form 26 (format available on SECP
website) along with paid challan of prescribed filing fee within 15 days of passing of
Special Resolution with the Registrar concerned (in case of submission in physical form).
The fee as specified in Annex-A is to be deposited; in the designated branches of MCB Bank
Limited. For submission in physical form, preprinted Challans are available at all the
designated branches of MCB Bank Limited. In case of online submission, challan is auto
generated by the system as explained in the procedure for online submission.

5. Submit application to SECP (the registrar concerned) in the manner provided in chapter 3.

CHAPTER 3
PROCEDURE FOR SUBMISSION OF APPLICATION FOR
CHANGE IN COMPANY OBJECTS

This part of this guide explains the procedure for the submission of application and
relevant documents to be submitted with offline application and stepwise procedure to file
online application.

Modes of Submission

There are two modes of submission of Form 26 as well the application for alteration in the
Memorandum of Association of a company namely;

i. Offline - submission of application in physical form.
ii. Online - submission of application by using eServices of SECP.

The details about both the modes of submissions are given below:

Procedure for offline submission

The petition alongwith relevant documents shall be filed with the Registrar concerned within 60
days of passing of Special Resolution. There is no specific format of the petition, however, the
application must contain the information and accompanied with the documents, as provide
under rule 3 of the Rules, as mentioned in the specimen application hereunder:

The Securities & Exchange commission of Pakistan
Companies Registration Office,
______________________

______________________
Name of City (Karachi/Lahore/Islamabad/Peshawar/Quetta/Faisalabad/Multan/Sukkur)

Subject: APPLICATION U/S. 21 FOR ALTERATION IN THE OBJECT CLAUSE
OF THE MEMORANDUM OF ASSOCIATION OF THE COMPANY

Dear Sir,

We submit the following information/documents for seeking your approval for alteration in
the object clause of Memorandum of Association of the company in accordance with the
Special Resolution adopted by the members of the company in their meeting held on
_________, subject to approval of the SECP:

1 Name and Address of the
company
A B C (Private) Limited having its registered
office at ______________________
_________________________________________
Karachi.

2 Number and
date of
Incorporation
No. 0000000/0000 dated
000000

3 Subscribed and
paid up capital
Rs. 00,000/- divided into 000 shares of Rs. 10/-
each)

4 Redeemable
capital
Rs. 00,000/- divided into 000 shares of Rs. 10/-
each) OR Nil (as the case may be)

5 Business actually being
carried on and the clause in
the memorandum justifying
it
The company is presently engaged in the business
of providing consultancy services, conducting of
feasibility studies and preparation of feasibility
reports for setting up of petroleum industries
including but not limited to crude oil refining and
processing of , LPG, CNG, LNG,
Bitumen and other hydrocarbons in terms of sub
clause 1 of clause III of the Memorandum of the
Association.

6 Reasons for the proposed
alteration
To increase the scope of the business in the
inflationary period for the Financial Strength of
the Company.

7 Names and addresses of each
of companys creditors to
whom an amount exceeding
fifty thousand rupees is
due with the amount
mentioned against each

S. No. Names and
addresses of
creditors
Amount due
1
2
3
8 Consent of creditors to the
proposed alteration
As per Annexure A-1 to A-3.
9 Copy of Special Resolution As per Annexure B

10 Minutes of the meeting As per Annexure C

11 Statement in a comparative
form showing the existing
provisions of the
memorandum as are
proposed to be altered and
the provisions as would
appear after the proposed
alterations indicating the
clause of sub-section (1) of
section 21 under which each
alteration is considered
permissible by the company
along with brief reasons
explaining how it considers
it permissible
As per Annexure D

12. Existing memorandum and
articles of association
As per Annexure E
13. Amended Memorandum
and articles of association
As per Annexure F

14. Pattern of holding of shares
on form 34
As per Annexure G

15. Names and addresses of the
persons likely to be affected
along with their consent to
the alteration

S.
No.
Names an
addresses
Copy of consent
1 Annex H-1
2 Annex H-2
3 Annex H-3

16. Particulars of dissenting
shareholders or Creditors
together with their
objections:

S.
No.
Names
and
addresses
Copy of
consent
(If any):

1 Annex I-1
2 Annex I-2
3 Annex I-3

17. Copy of latest audited
accounts:
As per Annexure J

18. Affidavit by the Secretary
verifying the correctness of
the contents and enclosures
As per Annexure K

19. Original Bank Challan
evidencing the deposit of Rs.
10,000/- in the any of the
designated branches of
MCB, being application fee.
As per Annexure L

It is requested that the approval to the alteration in the Object Clause of Memorandum of
Association of the Company may please be granted.

Yours truly,

Chief Executive/ Director/Secretary
ABC (Private) Limited

Step Wise Procedure for Online Submission:

Like many of our online services, online change in company objects process requires no
paper work and enables the company to submit application without visiting offices of
SECP. The application can be submitted by using eServices portal of SECP. The process for
online submission is very simple and easy.

Step 1: Log on to eServices

In case the company has eServices Login name and Password:

Connect to eServices https://eservices.secp.gov.pk/eServices and log on to your account
using your eServices Login name and Password provided by SECP.

Important Note: PLEASE NOTE THAT SIGN UP LINK ON eServices WEBPAGE, IS
FOR NEW INCORPORATION PROCESS ONLY AND NOT FOR ALREADY
INCORPORATED COMPANIES.

In case the company has not obtained eServices Login name and Password,
please follow the procedure as under:

1. Apply for an eServices Login name and Password by writing a letter, on the company
letterhead, duly signed by the Chief Executive Officer and the Company Secretary, or
Chief Financial Officer, or one of the Directors of the company, along with a copy of
their CNIC.

2. Mention the email address on which the eServices Login name and Password will be
dispatched. Please, only provide POP3 email address such as abc@comsats.com, free
email address such as hotmail, gmail, or yahoo is not acceptable.

3. SECP will confirm the validity of the email address; after validation, the eServices
Login name and Password will be emailed to the specified email address.

4. All letters requesting an eServices User Identification and Password to be addressed to
Director (MIS), SECP at one of the following addresses:
Director (MIS)
SECP,
NIC Building, Registration Department, Jinnah Avenue
Islamabad, Pakistan
email: ibtesam.moatisim@secp.gov.pk Phone: +92-51-9207091-3 (Ext: 280)
Deputy Director (MIS)
SECP,
Islamabad, Pakistan
email: salman.lodhi@secp.gov.pk Phone: +92-51-9207091-3 (Ext: 286)
Note
The request for User ID and password may also be sent to SECP by
email. The scanned image of the signed application shall be sent at
the address given above.
Step 2: Enter information
Click the relevant process available on the process listing webpage Change in Company
Objects". An input page is displayed wherein the following information will be entered by
the user.
i. Company information:

Details of Company Name, Incorporation Number and date will be automatically
generated from the system.

ii. Payment Details:

Select Bank Branch from the list, where fee will be deposited.

iii. Resolution Details:

Fill the details of the resolution as a result of which the decision for alteration in the
object clause of memorandum of association took place. These include date of
dispatch of notice, date of passing of Special Resolution and the reason for
alteration.

iv. Members Details :

Fill details of total number of members, members present in the meeting, members
voted for and against the motion and their share representation in the company

v. Meeting Address:

Fill details of address, City, Province and Postal Code of the venue where the
general meeting took place at which the resolution for change of company name was
passed.

vi. Signatory:
Enter details of signatory. Signatory could be Chief Executive or one of the Directors
or Company Secretary.
vii. Press Continue Link:
By pressing Continue Link, Process Document Listing Page will be displayed,
containing the following links:

a. Update Form Data:

Click link if you want to update the data. After updating data, press
Continue link again. Process Document Listing Page will be displayed again.

b. View Form 26:

System automatically fills out the Form using the data entered by you. You
can view the Form by clicking on this link.

c. Fill New Attachment Form:

In this link, you can attach the required documents in PDF format. The size
of the attachment should be of less than 2 MB. Attach the required document
and click Save Form. The following documents are to be attached with the
application:

(1) Justification/reasons for the proposed alteration;
(2) Copy of Special resolution on Form-26;
(3) Copy of Minutes of Meeting
(4) Copy of Existing Memorandum of Association
(5) Comparative statement showing the existing provision and the provision as
would appear after the proposed alteration
(6) Amended Memorandum and Articles of Association
(7) Patter of holding of shares on prescribed form 34
(8) Copy(ies) of NOC(s) from creditor(s)
(9) NOC of the respective regulatory authority (in case of special nature
business company)
(10) Objections of dissenting shareholders/creditors
(11) Names and addresses of interested parties likely to be affected by proposed
amendment
(12) A copy of the latest balance sheet
(13) Authority Letter in favour of the consultant, if any.
(14) Clippings of Urdu and English newspapers (in case of a Listed Company
only)

d. Fill Bank Challan Form:

Click link and Bank Challan will be displayed. Bank Challan is automatically
populated with prescribed fee and other information by the eServices
application.

Press Save Form button to save challan.

e. Sign Form:

By clicking Sign Form, the digital Signature Pad window will appear. Form
is signed using the digital certificates. Digital Certificates are obtained from
the NIFT (www.niftetrust.com). Select all the options available Under Select
for Signature Column. Now, select the correct Digital Signature from the
dropdown menu. Press Sign button.

Persons competent to sign the application

The Chief Executive or director or secretary of the company, if
authorized by the board, may sign or digitally sign in case of online
submission, the application and all its enclosures, with the affidavit
that the contents of the application and its enclosures are true and
correct.

After you press Sign button, click Submit to SECP button. All the documents will
be submitted to the SECP and a process reference number will be generated and
displayed.
Step 3 - Printing of challan and deposit of fee
i. Click submitted process button on the left hand side of the screen.
ii. Click challan form link for printing the challan.
iii. Click print form button. Four copies namely original, bank copy, SECP copy
and depositor copy shall be automatically printed. The fee shall be deposited
in the Bank branch selected by the applicant from the branches of MCB Bank
Limited. The bank shall retain the SECP and bank copies and return original
and depositor copy to the depositor.

The process will be initiated as soon as the SECP receives the verification of deposit
of fee from the Bank.

User will get the response by receiving an email notifying approval, rejection or
seeking compliance.

CHAPTER 4
Post Submission procedure
This part of guide explains the post submission procedure i.e issuance of order by the
competent authority, filing of certified copy of order by the company and the issuance of
filing certificate by the registrar.
Confirmation of alteration by the Commission ( powers now
delegated to the registrar concerned)
The Commission (powers now delegated to the registrar concerned) may make an order
confirming the alteration either wholly or in part, and on such terms and conditions as it
thinks fit.

Procedure on confirmation of the alteration.- (only for Offline submission)
A certified copy of the order confirming the alteration, together with a printed copy of the
memorandum as altered shall be filed by the company with the registrar within ninety
days from the date of the order. This requirement is applicable only if the documents have
been submitted in the physical form (Offline). The registrar shall register the same, and
issue an Acknowledge of filing, which shall be conclusive evidence that all the
requirements of this Ordinance with respect to the alteration and the confirmation thereof
have been complied with and thenceforth the memorandum so altered shall be the
memorandum of the company.
The Commission may by order at any time extend the time for the filing of the aforesaid
documents with the registrar section for such period as it thinks proper.

Effect of failure to register within ninety days.- (always for offline
submission)
If the certified copy of order and other relevant documents are not filed with the registrar
within 90 days from the date of order or within such further time, as may be allowed by the
Commission (powers now delegated to the registrar concerned), as aforesaid the order
becomes null and void.

Provided that the Commission (powers now delegated to the registrar concerned) may, on
sufficient cause shown, revive the order or alteration, as the case may be, on application
made within a further period of ninety days.

ANNEXURE A

CHECK LIST

S. No. Documents No. Yes

1. Have you filed Form 26 (only in case of physical
submission).

2. Have you given all the information as required by
Rule 3 of the Companies (General Provisions and
Forms) Rules, 1985?

3. Have you enclosed copy of special Resolution on

ANNEXURE B

SCHEDULE OF FEE

Item Fee for online
submission
Fee for submission in
physical form
Form-26?
4. Have you enclosed copy of Minutes of Meeting?
5. Have you enclosed Copy of Existing Memorandum
of Association?

6. Have you enclosed Copy of Amended
Memorandum of Association

7. Have you enclosed statement in comparative form
showing existing and proposed provisions of
Memorandum of Association?

8. Have you enclosed a copy of latest audited balance
sheet?

9. Have you enclosed copy(ies) of NOC(s) from
creditor(s)?

10. Have you enclosed pattern of holding of shares?
11. Have you enclosed Affidavit from the Chief
Executive or Secretary?

12. Have you enclosed copy of Authority Letter in favor
of consultant?

13. Have you enclosed Original paid Bank Challan of
Rs. 10,000/- being application fee, in case of physical
submission?

14. Have you deposited the fee Rs. 5,000/- being
application fee, in case of online submission?

15. Have you enclosed Clippings of Urdu and English
newspapers if you are a Listed Company?

16. Have you enclosed objections of dissenting
shareholders/creditors?

17. Have you enclosed names and addresses of the
persons whose interests likely to be affected by
proposed amendment?

18. Are you filing petition within 60 days of passing of
special resolution?

Filing of Form 26 600 1,500
Application fee 5,000 10,000
Filing of copy of Order
confirming alteration
and amended copy of
memorandum
600 1,500

Further information

Statutory forms and guidance booklets are available, on SECPs website,
http://www.secp.gov.pk. These Guides briefly describe procedures of important matters
relating to the Ordinance and the rules and regulations made thereunder. For further
details please consult relevant law, rules or contact with any of the Company Registration
offices (CROs) of SECP as per addresses given hereunder:

1. Company Registration Office,
4th Floor, State Life
Building No.2, Karachi.
Phone: 021-99213272, Fax
021-99213279
Email: crokarachi@secp.gov.pk

63-A, Nawa-i-Waqt Building,
Abdali Road, Multan. Phone:
061-9200530 Fax 061-9200530
Email: cromultan@secp.gov.pk

3rd & 4th Floors, Associated
House,
Phone: 042- 99200274, Fax
042-99202044
Email:
crolahore@secp.gov.pk

356-A, Al-Jamil PIaza, 1st Floor,
Peoples Colony, Small D
Ground, Faisalabad.
Phone: 041-9220284 Fax: 041-
2899134
Email: crofsb@secp.gov.pk

State Life Building, 7-Blue Area,
Islamabad
Phone: 051-9208740, Fax
051-9206893
Email:
croislamabad@secp.gov.pk

382/3, (IDBP House), Shahrah-e-
Hali,
Quetta Cantt. Ph: 081-
2844136 Fax: 081-
Email:
croqta@qta.paknet.com
.pk

1st Floor, State Life Building,
The Mall, Peshawar Cantt.
House # 28, Hamdard
Housing Society,
Phone: 091-9213178, Fax 091-9213686
Email: cropeshawar@secp.gov.pk

Ph: 071-5633757 Fax:
071-5630517
Email:
croskr@hotmail.com

PUBLIC CONSULTATION

If you have any suggestions for the development in the legal framework or otherwise,
please let us know about your opinion/comments on the following address:
Executive Director (Registration) of Companies,
Securities and Exchange Commission of Pakistan,
NIC building, Jinnah Avenue, Blue Area,
Islamabad, Pakistan.

Comments can also be sent via electronic mail at the following address:
headquarters@secp.gov.pk

DISCLAIMER

The booklet has been published with the intention to create an awareness of the concept of
the relevant matters. However, the booklet does not tell everything and the opinions or
legal interpretations, contained in the booklet are circumstantial and may vary under
different situations. If the reader is in doubt or dealing with any specific condition, it is
recommended to refer to the Ordinance and allied laws and consult an adviser for seeking
professional advice.

SECP GUIDE SERIES (till the preparation of this Guide)

1. Company Name Availability Guide
2. Promoters Guide (in English, Urdu, Arabic, Chinese & Persian)
3. Single Member Company Guide (in Urdu)
4. Modaraba Promoters Guide
5. Insurance Guide
6. Directors and Secretaries Guide
7. Company Mortgages and Charges
8. Investors Guide (Vol.-I)
9 Investors Guide (Vol.-II)
10 Investors Guide for Lodging Complaints
11 Guide on Accounts and Accounting Reference Dates
12 Guidebook on Further Issue of Shares otherwise than Rights
13 Guidebook on Issue of Preference Shares
14 Conversion of Status of Companies
15 Shareholders Rights
16 Winding up and Dissolution of Companies
17 Investigation into the affairs of a company
18 Foreign Companies Guide
19 Licensing & Registration of Associations Not-For-Profit
20 Guide for Appointment of Statutory Auditors and Ancillary Matters
21 Filing of Statutory Returns (note: it has been prepared, but its name is missing)

1

SECP
Guide
SERIES

SECURITIES AND EXCHANGE
COMMISSION OF PAKISTAN
(SECP)

Change of Company
Name Guide

NIC Building, Jinnah Avenue, Islamabad, Pakistan
Ph. No.: 051-9207091-4, Fax: 051-9204915
Website: www.secp.gov.pk e-mail: enquiries@secp.gov.pk

2
Introduction
Almost every country has its own unique laws/rules and
requirements for change of company name; however, basic
procedures regarding change in company name across the
jurisdictions are almost the same and commonly understood.
In Pakistan, a company name can be changed in terms of
section 38 or 39 of the Companies Ordinance, 1984.
A company may either change its name on its own, with the
approval of Registrar or on the direction of the Registrar.
In case of company seeking to change its name on its own, it
may change its name due to any valid reason including the
following:
A company may change its name, if the company,
through inadvertence or otherwise, is registered by a
name in contravention of the provisions of Section 37 of
the Companies Ordinance 1984 (the Ordinance).
Many companies adopt new names to express their
new identity due to their business development in the
national and international arena.
If one company is taken over by another company, the
members may choose the name of the acquiring
company, combine the two old company names, or
think up altogether a new name.
A change of management may be another reason.
If the company intends to carry out some other
appropriate/ suitable business.
If the existing company name does not match, with the
business specified in its memorandum of association.
Sometimes the name of a company does not remain
attractive in the market, so company seeks to change its
name according to new market trends and conditions.
3
Any other given reason/ reasons.
The Registrar may direct a company to change its name if the
company, through inadvertence or otherwise, is registered by
a name in contravention of the provisions of Section 37 of the
Ordinance.
This Guide has been developed to provide overall guidance
and also to describe the stepwise procedure for change of
name of a company. This is a guide only and must be read
with the relevant legislation. You will find the relevant law in
Section 39 of the Ordinance.
This guide has been divided in 3 parts for the convenience of
users:
(i) Companys Internal Procedure
(ii) Application procedure
(iii) Post Submission
Part 1: Companys Internal Procedure
This part of guide booklet explains the circumstances leading
to company name change and companys internal procedure
for changing its name.
A. Circumstances of Changing a Company name:

1. Change of name by a company under section 39 of the
Ordinance

A company may, if it so desires, change its name with the
approval of registrar by adopting procedure as laid down
under the law and fulfilling requirements.

4

2. Change of name by a company on the direction of the
Registrar of Companies under section 38 of the
Ordinance

A company which, through inadvertence or otherwise, is
registered by a name in contravention of the provisions of
Section 37 of the Ordinance,

(i) may change its name on its own, and
(ii) shall change its name on the direction of Registrar.

For both the situations, the approval of the Registrar is
mandatory.

Other details and stepwise procedure/requirements are given
in this guidebook.

B. Where approval of registrar is not required for change
in a companys name:

Any change in name of a company involving the deletion or
addition as the case may be, of the parenthesis and word
(Private), as a result of its conversion from a private limited
company into a public company or vice versa, shall not be
deemed as a change of name. In such cases, approval of
registrar is not required.

C. Step Wise internal procedure for changing name of
company:

Two Processes:

5
An application for change of name of a company can be
submitted through any of the following two processes.

i. Offline - Manual submission of application.
ii. Online - by using eServices of SECP.

Like many of our online services, online change of name
process requires no paper work and enables the company to
submit application without visiting SECP. The process
involves simple and easy steps for company name change
application submission, by using eServices portal.

Common Procedure:

1. Initial discussion and decision to seek availability of
name from the registrar concerned. For offline
submission, availability of name application is submitted
with challan of Rs. 500/-. For Online submission, fees for
seeking availability of name is Rs. 200/-, detailed
procedure of which is given at Para E.

2. Approval by the board of directors for change of name
of the company.

4. Send at least 21 days notice, to the members for
convening of the general meeting - Annual General
Meeting (AGM) or Extraordinary General Meeting
(EOGM). However, an EOGM may be held at a shorter
notice with the approval of registrar in case of an
emergency affecting the business. The draft special
resolution for change of name and statement of material
facts shall also be sent along with the said notice to
members. In case of a listed company, notice is also
required to be published at least in one issue each of a
daily newspaper in English language and a daily
newspaper in Urdu language having circulation in the
6
Province in which the stock exchange on which the
company is listed is situate.

5. Pass special resolution with a majority not less than 3/4
th

of the members entitled to vote as are present in person
or through proxy in the general meeting.

6. File copy of the special resolution on prescribed Form 26
(Format available on SECP website) along with paid
challan of prescribed filing fee.

7. Submit application to the registrar concerned through
online/off-line.

Part 2: Application Procedure
This part of guide booklet explains the application procedure,
relevant documents to be submitted with offline application
and stepwise procedure to file online application.
D. Documents to be Submitted with the Offline
Application for Change of Company Name:

No specific format of the application is prescribed. However,
the application must be accompanied with the documents, as
mentioned in the specimen application attached as under:

7

The Registrar of Companies,
Company Registration Office,
________________

Subject: Application for change of name

Dear Sir,

It is submitted that M/S ABC (Private) Limited
has passed a special resolution on 00.00.0000 to change its
name to XYZ (Private) Limited subject to approval of the
registrar. Requisite information/ documents are provided as
under:
(1) Justification/reasons for the proposed
change;
(2) Copy of Special resolution on Form-26;
(3) Amended Memorandum and Articles of
Association(showing the changed name);
(4) NOC of the respective regulatory authority
(in case of special nature business
company)
(5) Bank challan for Rs. 5,000/(deposited in
any of the designated branches of MCB
Bank Limited) being application fee;
(6) Affidavit on stamp paper of appropriate
value;
(7) Copy of availability of name letter.

It is requested that approval for change of name
may please be granted at the earliest.

Yours truly,

(ABC)
Chief Executive/
Director/Secretary

8

E. Step Wise Procedure for Online Submission of
application for Change of Company Name:

Step 1: Log on to eServices

In case the company has eServices Login name and
Password:

Connect to eServices
https://eservices.secp.gov.pk/eServices and log on to
your account using your eServices Login name and
Password provided by SECP.

Important Note: PLEASE NOTE THAT SIGN UP LINK
ON eServices WEBPAGE, IS FOR NEW INCORPORATION
PROCESS ONLY AND NOT FOR ALREADY
INCORPORATED COMPANIES.

In case the company has not been provided eServices
Login name and Password, please follow the
procedure as under:

1. Apply for an eServices Login name and Password
by writing a letter, on the company letterhead, duly
signed by the Chief Executive Officer and the
Company Secretary, or Chief Financial Officer, or
one of the Directors of the company, along with a
copy of their CNIC.

2. Mention the email address on which the eServices
Login name and Password will be dispatched.
Please, only provide POP3 email address such as
abc@comsats.com, free email address such as
hotmail, gmail, or yahoo is not acceptable.

9
3. SECP will confirm the validity of the email address,
after validation the eServices Login name and
Password will be emailed to the specified email
address.

4. All letters requesting an eServices User
Identification and Password to be addressed to
Director (MIS), SECP at one of the following
addresses:
Director (MIS)
SECP,
Islamabad,
Pakistan

email: ibtesam.moatisim@secp.gov.pk
Phone: +92-51-9207091-3 (Ext: 280)
Deputy Director (MIS)
SECP,
Islamabad,
Pakistan

email: salman.lodhi@secp.gov.pk
Phone: +92-51-9207091-3 (Ext: 286)

Step 2: Enter Information
A successful logon to eServices by entering Login name and
password will display a list of available and unavailable
processes.
10
For online processing of change of name of the company, it is
necessary that the reservation of a new company name is
obtained first.
Step 2 (a): Click on Company name reservation process.
An input page is displayed wherein the following information
will be entered by the user.
Enter companys proposed name and select company kind
from the drop down list.

Select Bank Branch from the list, where fee will be
deposited.

iii. Applicant information:

Enter applicant name, C.N.I.C number, telephone number,
address, email address and main object.

iv. Press Continue Link:
By pressing Continue Link, Process Document Listing Page
will be displayed, containing the following links:

Click link if you want to update the data. After updating
data, press Continue link again. Process Document Listing
Page will be displayed again.

11

b. View Company Name Reservation Form:

System automatically fills out the required form using the
data entered by you. You can view this form by clicking on
this link.


In this link, you can attach the required documents (if any)
in PDF format and click Save Form. Please note that file
size must not exceed 2 MB.

d. Fill new Bank Challan Form:

Click link and Bank Challan will be displayed. Bank
Challan is automatically populated with prescribed fee and
other information by the eServices application.

Press print form button and then save Form. Four copies
will automatically be printed as original copy, bank copy,
SECP copy and depositor copy. The fee shall be deposited
in the Bank branch selected by the applicant from the
branches of MCB Bank Limited. The bank shall retain the
SECP and bank copies and return remaining two copies
(original and depositor copy) to the depositor.

e. Start Process

Click Start Process to submit Company name reservation
request. An acknowledgment will be displayed after
submitting company name reservation request, stating:
Your application has been successfully submitted to
SECP. The documents will be processed only after
verification that the prescribed fee has been deposited in
any of designated bank branches.
12

User will get the response by receiving an email notifying
approval, rejection or seeking compliance.
Step 2 (b): After receiving approval of company name
reservation, connect to eServices and log on to your account
by entering login name and password.
Click the "Change of Company Name" process available on
the process listing webpage. An input page is displayed
wherein the following information will be entered by the user.

Details of Company Name, Incorporation Number, and
date will be automatically generated from the system.


Select Bank Branch from the list, where fee will be
deposited.

iii. Resolution Details:

Fill the details of the resolution as a result of which the
decision of change of company name took place. These
include date of dispatch of notice, date of passing of
Special Resolution, proposed name for the company and
the reason for name change.

iv. Member Details :

Fill details of total number of members, members present
in the meeting, members voted for and against the motion
and their share representation in the company.
13

v. Meeting Address:

Fill details of address, City, Province and Postal Code of
the venue where the general meeting took place at which
the resolution for change of company name was passed.

vi. Signatory:
Enter details of signatory. Signatory could be Chief
Executive or one of the Directors or Company Secretary.
vii. Press Continue Link:
By pressing Continue Link, Process Document Listing Page
will be displayed, containing the following links:


Click link if you want to update the data. After updating
data, press Continue link again. Process Document Listing
Page will be displayed again.

b. View Form 26:

System automatically fills out the Form 26 using the data
entered by you. You can view this form by clicking on this
link.


In this link, you can attach the required documents in PDF
format e.g., Amended Memorandum and Articles of
Association (less than 2 MB), Affidavit etc. Attach the
required document and click Save Form.
14

d. Fill Bank Challan Form:

Click link and Bank Challan will be displayed. Bank
Challan is automatically populated with prescribed fee and
other information by the eServices application.

Press Print Form button and then Save Form. Four copies
will automatically be printed as original copy, bank copy,
SECP copy and depositor copy. The fee shall be deposited
in the Bank branch selected by the applicant from the
branches of MCB Bank Limited. The bank shall retain the
SECP and bank copies and return remaining two copies
(original and depositor copy) to the depositor.

e. Sign Form:

By clicking Sign Form, the digital Signature Pad window
will appear. Form is signed using the digital certificates.
Digital Certificates are obtained from the NIFT. Select the
eForm available Under Select for Signature Column.
Now, select the correct Digital Signature from the drop
down menu. Press Sign button.

After you press Sign button, click Submit to SECP
button. All the documents will be submitted to the SECP
and a process reference number will be generated and
displayed.

The process will be initiated as soon as the SECP receives
the verification of deposit of fee from the Bank.

User will get the response by receiving an email notifying
approval, rejection or seeking compliance.
15
F. Persons competent to make an application:

The Chief Executive or director or secretary of the company, if
authorized by the board, may sign or digitally sign in case of
online application, the application and all its enclosures, with
the affidavit that the contents of the application and its
enclosures are true and correct.
Part 3: Post Submission
This part of guide booklet explains the post submission
procedure, issuance of certificate of change of company name
and effect of change of company name.
G. Issuance of Certificate of Change of Company Name:

After the approval by the registrar concerned, he issues
certificate for change of name of the company and the same is
dispatched through Courier.

H. Effect of Change of Company Name:

The change must be noted in the memorandum and articles of
association and all documents, invoices, letterheads, bills,
signboards, seal, etc.

In addition, the company which changes its name, shall for a
period of one year from the date of the change, continue to
mention its former name along with its new name in the
manner XYZ (Pvt.) Limited (formerly ABC (Pvt.) Limited), on
the outside of every office or place in which its business is
carried on, in bill heads, letter papers, documents, notices,
official publications, invoices, etc.

16
The change of name shall not affect any rights or obligations
of the company or any legal proceedings by or against the
company. Any legal proceeding commenced against the
company by its former name shall continue against the
company by its new name.

Further Information

The SECP is publishing a series of its Guides. These Guides
briefly describe procedures of important matters relating to
the Ordinance, and the rules and regulations made
thereunder.

Statutory forms and guidance booklets are available, on our
website, http://www.secp.gov.pk.

List of Company Registration Offices

4th Floor, State Life Building No.2, Karachi.
Phone: 021-99213272, Fax 021-99213279

Phone: 042- 99200274, Fax 042-99202044
Email: crolahore@secp.gov.pk

State Life Building, 7-Blue Area, Islamabad
Phone: 051-9208740, Fax 051-9206893
Email: croislamabad@secp.gov.pk

17
Phone: 091-9213178, Fax 091-9213686

63-A, Nawa-i-Waqt Building, Abdali Road,
Multan.
Phone: 061-9200530 Fax 061-9200530

Faisalabad.
Phone: 041-9220284 Fax: 041-2899134

382/3, (IDBP House), Shahrah-e-Hali, Quetta
Cantt.
Ph: 081-2844136 Fax: 081-

House # 28, Hamdard Housing Society,
Ph: 071-5633757 Fax: 071-5630517
Email: croskr@hotmail.com

18

PUBLIC CONSULTATION

If you have any suggestions for the development in the legal
framework or otherwise, please let us know about your
opinion/comments on the following address:
Registrar of Companies,

Comments can also be sent via electronic mail at the following
address:

DISCLAIMER

The booklet has been published with the intention to create
an awareness of the concept of the relevant matters.
However, the booklet does not tell everything and the
opinions or legal interpretations, contained in the booklet
are circumstantial and may vary under different situations.
If the reader is in doubt or dealing with any specific
condition, it is recommended to refer to the Ordinance and
allied laws and consult an adviser for seeking professional
advice.

19

SECP GUIDE SERIES

2. Promoters Guide (in English, Urdu, Arabic, Chinese &
Persian)
5. Insurance Guide
Investors Guide (Vol.-II)
9. Investors Guide for Lodging Complaints
10. Guide on Accounts and Accounting Reference Dates
11. Guidebook on Further Issue of Shares otherwise than Rights
12. Guidebook on Issue of Preference Shares
13. Conversion of Status of Companies
14. Shareholders Rights
15. Winding up and Dissolution of Companies
16. Investigation into the affairs of a company
17. Foreign Companies Guide
18. Licencing & Registration of Associations Not-For-Profit
19. Guide for Appointment of Statutory Auditors and Ancillary
Matters
1

2
Table of Contents

Page #

Introduction 3

Chapters

1. Guidelines for selection of a name 4 - 5

2. Prior approval of Commission required 5-12
for certain company names

3. Name Search Facility on web-site 12

4. Application Procedure and Fee 12-16

5. Application against refusal of a name 16

6. Further Information 16-19

3

Introduction

Company is a legal entity formed by a person or association of
persons for lawful business activities registered under the
Companies Ordinance, 1984 (the Ordinance).

The first step towards incorporation of a company is to seek
the availability of name for the proposed company from the
concerned registrar of companies. Although, it sounds simple
enough, but there are certain prohibitions and restrictions, the
applicant has to look into while choosing a name for a
company. In this regard, it must be ensured that the name
chosen for the proposed company is neither inappropriate,
deceptive or designed to exploit or offend the religious
susceptibilities of the people, nor identical or closely
resembling with the name of an existing company.

This guide is intended for those persons who are desirous of
forming a company and to help them in understanding the
process of choosing an appropriate name for their company in
order to save time and efforts for registering a company. (To
know about the procedure of incorporation of a company,
please read Promoters Guide available in English, Urdu,
Arabic and Chinese languages).

4
Chapter 1

Guidelines for selection of a name

Section 37 of the Ordinance provides that:

the proposed name should not be inappropriate,
deceptive, or designed to exploit or offend the religious
susceptibilities of the people;

the proposed company name shall not be identical or
have close resemblance. It must be distinguishable from
the names of existing companies, and any name that
has already been reserved by the Registrar for
registration of a company.

Following guideline must be kept in mind to avoid
applying for identical names:

o A name is not distinguishable by differences in
punctuation or capital words, or the presence or
absence of articles, conjunctions or prepositions as
symbols or words (including the, THE, a,
A, and, of, in, at, Al, New,
Modern).

o A word in the plural form will be regarded as being
identical to a word in the singular form and vice
versa. For example 'industry' and 'industries' would
be regarded as being identical;

o Also, names which have close phonic resemblance
with the name of existing companies are not
distinguishable.
5

It is in the interest of promoters of a company to ensure that
the name selected for their company should portray true
inculcate of their business and have difference with any other
name on the register. This will reduce the risk of confusion
and the following potential difficulties like:

o Objections to the company name.
o Confusion with other companies with a poor trading
record.
o Litigation in civil law.

Important Note Regarding Spellings of Proposed Names

It is pertinent to mention here that the application for
availability of name will be considered only if the spelling of
proposed name is according to dictionary. Any deviation in
dictionary spellings will not be accepted and the name will be
rejected. e.g., Imerica for America, carachi for Karachi, etc.

Chapter 2

Prior approval of Commission required for
certain company names

There are certain words and expressions which if used in a
company name may imply business pre-eminence, a particular
status or specific function. These words are generally allowed
on producing sufficient justification by the promoters so as to
ensure that public may not mislead with the name. These
include names which contain any words suggesting or
calculated to suggest:

6
patronage of any past or present Pakistani or Foreign
Head of State.
any connection with the Federal Government or
Provincial Government or any department or authority
of any such Government.
any connection with any corporation setup by or under
any Federal or Provincial law; or
patronage of or any connection with any Foreign
Government or any International organization.

Guideline on prohibitions of certain types of words in a
company name, are given below:

Association

This word may be included in the name of companies to be
established on grant of license by the Commission under
section 42 of Ordinance or which are established as a Trade
Organization under Trade Organizations Ordinance, 2007.

Benevolent/ Foundation

These words may be included in the name of companies to be
section 42 of Ordinance.

Society

This word may be included in the name of companies if
proper justification is provided

7
Fund

This word may be allowed in the name of company if the
company will function as Non-Banking Financial Company
under the license of Specialized Companies Division of the
Commission or to public sector company on grant of license
by the Commission under section 42 of the Ordinance.

Council

section 42 of Ordinance. Moreover, this expression is also
allowed to Sports Association and Professional Bodies.

Chamber of Commerce

This word may be included in the name of entities which are
being formed as Trade Bodies under license under Trade
Organization Ordinance, 2007, from Director General Trade
Organization, Ministry of Commerce Government of Pakistan.

Authority/ Register/ Registered/ Co-operative/ Bureau/
Division

These words are not allowed

Trust

This word may be included in the name of REITs to be
established on grant of license by the Specialized Companies
Division of the Commission.

8
Assurance/ Assurer/ Insurance/ Insurer/ Re-Assurance/
Re-Assurer/ Re-Insurance/ Re-Insurer

These words may be included in the name of companies
involved in Insurance, Assurance, Re-insurance and Re-
assurance business. Prior permission of Insurance Division of
the Commission would be required at the time of
Incorporation.

Board

This word may be included in the name of companies
desirous to engage in the business of Paper &/or Board or to
public sector companies.

Bahria/ Askari/ Fouji/ Fazaiya/ Cadet

established by the relevant agency.

Banks/Banking Company

These words may be included in the name of companies on
the basis of permission from State Bank of Pakistan under
section 8 of the Banking Companies Ordinance, 1962 and
section 5(1) of Microfinance Institutions Ordinance, 2001.

Charter/Chartered

having charter from the sovereign authority of the Federation
and the Province

9
Exchange/Bourse

These words are only allowed in the name of Stock Exchange,
Commodity Exchange and Exchange Companies subject to
NOC from relevant authority.

Familiar Trade Names

These words may be included in the name of companies only
if NOC of familiar trade name user is provided or proper
documentary evidence of ownership/use of trade name is
furnished by the applicant

Famous/ Distinct Personalities

These words may be included in the name of companies if
proper justification and approval of relevant authority is
provided.

Federation

This word may be included in the name of Sports Federations
licensed under section 42 of Ordinance or trade bodies under
Trade Organizations Ordinance, 2007.

Federal

This word is allowed in the name of company with the
approval of the Commission, if the proposed company has a
connection or any patronage with Federal Government.

Group

This word may be included in the name of companies if use of
this word implies several companies under single corporate
ownership and applicants have to provide evidence of
10
subsidiary/associate relationship with two or more other
Pakistani Companies.

Holding

This word may be included in the name of company which
establishes that it qualifies to be a holding company as defined
in Section 3 of the Ordinance i.e. the company has object
clause showing its intention to act as holding company after
incorporation.

Institution

This word may be included in the name of the public sector
companies

Investment

This word may be included in the name of Non-Banking
Finance Companies, REITs and brokerage houses or any
public sector financial institution or investment company.

Investment Finance, Investment Advisory, Leasing, Asset
Management, Housing Finance

This word may be included in the name of Non-Banking
Finance Companies.

Name of Company containing country name or nationality
other than Pakistan

These names are not allowed unless sufficient justification is
provided.

11
Name of Company containing name of two countries i.e.
Pakistan/Pak and any other foreign company

where documentary evidence is provided in support of the
fact that the company is a Joint Venture of two Governments
or companies of two countries.

New/Modern/The/Al

These words may be included in the name of companies.
However, these expressions will not be acceptable if used to
make proposed company as distinctive from already existing
companies.

Patronage of past or present, Pakistani or Foreign, Head
of State/ any connection with Federal or Provincial
Government, Department or authority/any connection with
corporation set up by or under Federal/Provisional Law/
the patronage of, or any connection with, any Foreign
Government or any International Organization

These words may be included in the name of companies with
the approval of the Commission provided sufficient
justification is furnished.

State

This word may be included in the name of companies formed
by the Federal Government

University
This word may be allowed only in the name of University
Management Company for the management of University in
terms of guidelines of Higher Education Commission.
12

UNO, World BANK, IMF, Red Cross, Red Crescent
These words are not allowed

Chapter 3

Name Search Facility on web-site

For the facilitation of general public and promoters desirous of
forming a company, the Commission has provided a name
search facility on eServices portal at
https://eservices.secp.gov.pk/eServices/NameSearch.jsp.

Any person can check the availability of a proposed company
name i.e., whether the company name is available for
registration or otherwise by simply searching the desired
name through the facility, before actually applying for a
company name.

It may be noted that a company name search for checking the
availability of a proposed company name on the website does
not necessarily mean that the proposed name is available for
registration. Registrar examines and dispose off each request
in accordance with law and may reject such a proposed name,
if found in violation of Section 37 of the Ordinance

Chapter 4

Application Procedure and Fee

There are two methods for the submission of application for
seeking confirmation of availability of name:-
13

1. THROUGH ELECTRONIC MODE/ ONLINE:

eServices by Securities and Exchange Commission of Pakistan
(the Commission) has enabled the promoters of a company to
seek company name availability online, using the eServices
Portal, without visiting the Company Registration Office
(CRO). Application fee for the availability of name through
online is Rs. 200/- only, cheaper than through offline, which is
Rs.500/-.

For this purpose, an applicant has to follow certain steps in
order to reserve a desired name for the proposed company.
The steps are;
Log on to eServices:

The client will connect to,
https://eservices.secp.gov.pk/eServices, for signup. Click on
sign up button to open the Form. Fill in the required
information and click on sign up button to submit the Form.

User will receive an e-mail containing the user activation link.
By clicking on the link, user account will be activated.

Enter Information

A successful logon to eServices by entering user ID and
password, and clicking login button, will make available
Company Name Reservation process. User will click on the
Company Name Reservation process. An input page is
displayed, wherein the information will be entered by the
user. After clicking the Continue button, the process
14
document listing page is displayed, containing the following
links:

a. Update Form(s) Data:

Click link if you want to update the data.

b. View Company Name Reservation Form:

Click link and view the automatically filled eForm based on
your input.


Click link and an attachment form window will be displayed.
Attach document, if any, and click Save Form Button. Please
note that only PDF files are allowed for attachment. Process
document listing page will be displayed.

d. Fill New Bank Challan Form:

Click link and auto filled bank challan will be displayed. Click
Print Form Button. Four copies will automatically be printed
as original copy, bank copy, SECP copy and depositor copy.
After printing, Click Save Form Button. The fee shall be
deposited in the Bank branch selected by the applicant from
the designated branches of MCB Bank Limited. The bank shall
retain the SECP and bank copies and return remaining two
copies (original and depositor copy) to the depositor.
Submit the process:
After saving the Bank Challan, Process document listing page
will be displayed. Click on Start Process link. All the
documents will be automatically submitted to the SECP. The
15
process of the SECP will be initiated as soon as the SECP
receives the verification of deposit of fee from the Bank.

For more information about the eServices, please visit the
website at https://eservices.secp.gov.pk/eServices/

2. MANUAL SUBMISSION OF APPLICATION

For this purpose, application can be made on a plain paper
addressed to the registrar concerned. A specimen of
application for seeking availability of name is appended
below.

The application fee for the availability of name is Rs. 500/- for
each proposed name. The fee can be paid in the designated
branches of MCB Bank Limited through Challan Form which
is available Free of Cost at the Facilitation Counters of the
CROs and branches of MCB Bank Limited.

16

On acceptance of application (for a companys name
reservation), the name is reserved for a period of 90 days,
further extendable upto the same period on receipt of fresh
application.

Confirmation of availability or non-availability of name is
instantly sent on the e-mail address (if provided by the
company). Simultaneously, letter is also dispatched on the
postal address.

The _____ Registrar of Companies
___________

Subject: Application seeking confirmation of Availability of a Name
(Proposed).
Dear Sir,
It is submitted that we want to incorporate a company with the name and
style as ____Name of the company (Proposed). under the Companies Ordinance,
1984. A copy of the Original Challan of Rs.------ deposited in MCB Bank Limited,
___Name of City___ on account of necessary fee for Availability of the proposed name
is enclosed.

It is requested that the requisite availability of name certificate may be
issued at the earliest.
Yours truly,
Name & Complete Address
17

Chapter 5

Application against refusal of a name

If application for the availability of a proposed company name
is refused by the concerned registrar for any reason and the
applicant feel aggrieved by his decision, he can file an
application for review of the said decision with the
Registration Department.

The application for review must be supported by reasons for
review of the decision and should be accompanied by the
following documents:

Deposited bank Challan for application fee of Rs. 500/-
Copy of decision letter by concerned Registrar.
Affidavit.
Chapter 6

Further Information

The Commission is publishing a series of its Guides. These
Guides briefly describe procedures of important matters
relating to the Ordinance and the rules and regulations made
thereunder.

Statutory forms and guidance booklets are available, free of
charge from the Commission Headquarters and the following
Companies Registration Offices. The quickest way to get these
is through our website, http://www.secp.gov.pk/.
18
Phone: 051-9208740, Fax 051-9208740

Phone: 021-99213272, Fax 021-9213278

Phone: 042- 9200274, Fax 042-9202044

Phone: 061-9200530 Fax 061-9200530

1st Floor, Peoples Colony, Small D Ground, Faisalabad.
Phone: 041-9220284 Fax: 9220284

Phone: 091-9213178, Fax 091-9213178

382/3, (IDBP House), Shahrah-e-Hali, Quetta Cantt.
Ph: 081-2844136

19

Ph: 071-5630517

PUBLIC CONSULTATION

If you have any suggestions for the development in the legal
framework or otherwise, please let us know about your
opinion/comments on the following address:
Executive Director (Registration),

Comments can also be sent via electronic mail at the following
address:


20

DISCLAIMER

The booklet has been published with the intention to
create an awareness of the concept of the relevant
matters. However, the booklet does not tell everything
and the opinions or legal interpretations, contained in
the booklet are circumstantial and may vary under
different situations. If the reader is in doubt or dealing
with any specific condition, it is recommended to refer
to the Ordinance and allied laws and consult an adviser
for seeking professional advice.

`
SECP Guide
SERIES

SECURITIES AND EXCHANGE COMMISSION
OF PAKISTAN

Guide on
Conversion of Status of
Companies

Ph. No. : 051-9207091-4, Fax: 051-9204915 / 9218591
Website: www.secp.gov.pk E-mail: secphq@secp.gov.pk

.
----------------------------------------------------------------------------------------------------------------
Guide on Conversion of Companies (www.secp.gov.pk )
1
AIMS AND OBJECTIVES

1. AIMS AND OBJECTIVES

This is simply a guide to understand the procedures involved in conversion of
status of a public company into a private company and vice versa; as well as a
single member company into a multi-members private company and vice versa.
It must be read in conjunction with the relevant provisions of the Companies
Ordinance, 1984 (Ordinance) and the rules framed there-under such as the
Companies (General Provisions and Forms) Rules, 1985 (the Rules), the Single
Member Companies Rules, 2003 (the SMC Rules) etc.

2. TYPES OF CONVERSION OF STATUS OF COMPANIES

Generally, following are the types of conversion of companies:-

a) Private Company into Public Company;
b) Public Company into Private Company;
c) Private (Multi-members) Company into Single Member Company;
and
d) Single Member Company into Private (Multi-members) Company.

3. CONVERSION FROM PRIVATE COMPANY INTO PUBLIC
COMPANY
Section 45 of the Ordinance provides that a private company may convert its
status into a public company by altering its articles of association in such a
manner that they no longer include the provisions which, under clause (28) of
sub-section (1) of section 2 of the Ordinance, are required to be included in the
articles of association of a company to constitute it as a private company. The
company shall:-

a) on the date of the alteration, cease to be a private company; and
.
----------------------------------------------------------------------------------------------------------------
2
b) within a period of fourteen days after the said date, file with the
registrar either a prospectus or a statement in lieu of prospectus.

No approval of any authority for the conversion of status from a private
company into public company is required. However the company has to adopt
below mentioned stepwise procedure for such conversion:-

3.1 PROCEDURE FOR THE CONVERSION OF STATUS OF COMPANY
FROM PRIVATE COMPANY INTO PUBLIC COMPANY

Following procedure is required for conversion of private company into
public company:-

Step 1: The proposal for conversion of status of private company into public
company is firstly discussed and approved by the Board of Directors.

Step 2: 21 days notice accompanied with the proposed special resolution is
issued for convening the general meeting of shareholders of the
company.

Step 3: Resolution for conversion of the status from Private Company into
Public Company and alteration in Articles of Association is placed
before the members which is carried as special resolution. A special
resolution is to be passed by the majority of not less than three-
fourth, of such members entitled to vote as are present in person or
by proxy at a general meeting.

There is significant difference in the Articles of both the types of
companies. Therefore; the Articles are required to be amended on
.
----------------------------------------------------------------------------------------------------------------
3
change of the status, especially restrictive clauses applicable on a
private company are to be deleted.

Step 4: The Company shall increase its directors and shareholders if they are
less than the minimum number which are required for a public
company.

Step 5: The company shall file the under-mentioned documents with the
registrar concerned:-
a) Form - 26 within 15 days of passing of special resolution.
b) Amended copy of the Memorandum and Articles of
Association.
c) Prospectus or Statement in Lieu of Prospectus within 14 days of
passing of special resolution.
Prospectus is required to be filed by the company which invites
subscription from the general public; otherwise a Statement in
Lieu of Prospectus is to be filed. Prospectus is prescribed in Part
I of the Second Schedule to the Ordinance and also requires
prior approval by the Commission. The Statement in Lieu of
Prospectus as prescribed in Part III of the Second Schedule to
the Ordinance is to be filed.
d) Form 3 (allotment of shares to new members / directors in
case, the new directors are not members of company)
e) Form 27 i.e. list of persons consenting to act as directors.
f) Form 28 Consent to act as directors.
g) Form - 29 (in case of increase of directors, if the company does
not already have three directors required for a public company)
.
----------------------------------------------------------------------------------------------------------------
4
h) Bank challan evidencing the deposit of filing fee of the
documents in any of the designated branches of MCB as per
schedule given in annexure-A.
Step 6: The registrar concerned shall issues a certificate regarding conversion of
status of private company into public company and a filing certificate.

Step 7: The Company may obtain a certified copy of Memorandum and Articles
of Association on payment of copying fee of Rs. 500/- for the application
submitted online and Rs. 1,000/- for the application submitted in the
physical form.

Step 8: The name of the company with the changed status i.e. without the word
private shall be mentioned in all letterheads, bills, invoices, seal etc.
Copies of Memorandum and Articles of Association are also recorded
with the alteration.

4. CONVERSION FROM PUBLIC COMPANY INTO PRIVATE
COMPANY

A public company can be converted into a private company with the prior approval in
writing, and subject to such conditions as may be imposed by the Securities and
Exchange Commission of Pakistan (Commission) in terms of section 44 read with section
28 of the Ordinance and in compliance with rules 7, 28, 30, 32 and 34 of the Rules.
Under rule 7 of the Rules, where the articles of association of a public company
have been amended having the effect of converting its status from public
company into a private company, the company is required to make an
application not later than sixty days from the date on which the special
resolution seeking such alteration was passed, on Form 2 to the Commission for
its approval under section 44 of the Ordinance.

.
----------------------------------------------------------------------------------------------------------------
5
FROM PUBLIC COMPANY INTO PRIVATE COMPANY

Following procedure is required for conversion of public company into
private company:-

Step 1: The proposal for the conversion of status of a public company into
private company is firstly discussed and approved by the Board of
Directors.

issued for convening the general meeting of the shareholders of the
company.

Step 3: Resolution for the conversion of status from Public Company into
Private Company and alteration in Articles of Association is placed
before the members, which is carried as special resolution.

change of the status; therefore the same must be amended to change the
status especially the imposition of restrictions meant for a private
company.

Step 4: Special Resolution on Form 26 along with Bank challan evidencing the
deposit of fee in any of the designated branches of MCB (as per schedule
given in Annexure A), shall be filed with the registrar concerned within
15 days passing thereof.

.
----------------------------------------------------------------------------------------------------------------
6
Step 5: Application shall be sent to the Commission within 60 days of the date
of passing of the special resolution. Such application shall be
accompanied with the following documents:-

i. Form 2. (prescribed under the Rules)
ii. Copy of Form 26 (Special Resolution).
iii. Copy of the Memorandum and Articles of Association duly
amended.
iv. Certified copy of the existing Memorandum and Articles of
Association.
v. Copy of latest audited Balance Sheet and Profit and Loss Account.
vi. Copy of minutes of the General Meeting.
vii. Bank challan evidencing the deposit of fee in any of the
designated branches of MCB, as per schedule given in Annexure-
A, on account of application fee (Form-2)
viii. Affidavit that the contents of the application are true.
ix. Application must be in duplicate and a copy is required to be sent
to the registrar concerned under Rule 32 of the Rules.

Step 6: The Commission gives approval for conversion of public company into
private company through an Order.

Step 7: Certified copy of the order of the Commission is obtained by depositing
the fee as per schedule given in Annexure A for each copy and the
requisite court fee stamps.

Step 8: Certified copy of the order along with amended copy of the
Memorandum and Articles of Association are filed with the registrar
concerned with bank challan evidencing the deposit of filing fee in any
of the designated branches of MCB (as per schedule given in Annexure
A).
.
----------------------------------------------------------------------------------------------------------------
7

Step 9: The registrar shall issue certificate on conversion of status of a public
company into a private company and the filing certificate in respect of
Special Resolution and Order of the Commission.

The company may obtain a certified copy of the Memorandum and
Articles of Association on payment of copying fee of Rs. 250/- for the
application submitted online and 500/- in physical form, and the

5. CONVERSION FROM PRIVATE COMPANY TO SINGLE MEMBER
COMPANY

A private company (Multi-members Company) can be converted into a single
member company in terms of Rule 9 of SMC Rules and for this purpose, the
company has to pass a special resolution for change of its status, make necessary
alteration in its articles and obtain approval of the Commission.

In terms of rule 10 of the SMC Rules, the parenthesis, letters, hyphen and the
words (SMC-Private) Limited, shall form part of the name of every single
member company and XYZ (SMC-Private) Limited shall be the pattern and
style of the name of a single member company.

5.1 PROCEDURE FOR THE CONVERSION OF STATUS OF A PRIVATE
COMPANY (MULTI-MEMBERS) INTO SINGLE MEMBER
COMPANY

Following procedure is required to be adopted for conversion of private
company (multi-members) into single member company:-

Step 1: Approval of the Board of Directors for change of status of private
company into single member company is sought.
.
----------------------------------------------------------------------------------------------------------------
8

issued for convening the general meeting of the shareholders of the
company.

Step 3: Resolution for conversion of the status from Private Company into
Single Member Company and alteration in Articles of Association is
placed before the members which is carried as special resolution.

change of the status; therefore the same must be amended to change the
status especially the imposition of restrictions meant for single member
private companies. The regulations in S-8 of the SMC Rules may be
adopted for this purpose.

Step 4: Special Resolution on Form - 26 along with bank challan evidencing the
deposit of filing fee in any of the designated branches of MCB (as per
schedule given in Annexure-A), is filed with the registrar concerned
within 15 days of passing of the special resolution. A special resolution
is to be passed by the majority of not less than three-fourth, of such
members entitled to vote as are present in person or by proxy at a
general meeting.

Step 5: Application is sent to the Commission within 30 days of the date of
passing of the special resolution. Such application is accompanied with
the following documents:-

i. Form S - 4 prescribed under the SMC Rules.
ii. Copy of Form - 26 (Special Resolution) see section 172.
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9
iii. Copy of the Memorandum and Articles of Association, duly
amended.
iv. Certified copy of the existing Memorandum and Articles of
Association.
v. Minutes of the General Meeting.
vi. Bank challan evidencing the deposit of fee in any of the
designated branches of MCB, as per schedule given in Annexure-
A, on account of application fee (Form S-4).
vii. Affidavit that the contents of the application are true.
viii. Application must be in duplicate and a copy is required to be sent
to the registrar concerned under Rule 32 of the Rules.

Step 6: The Commission gives approval for conversion of private company into
single member company through an Order.

Step 7: Certified copy of the order along with Form S-1, Form S-5 and amended
copy of the Memorandum and Articles of Association are filed with the
registrar concerned with bank challan evidencing the deposit of filing
fee of all the aforesaid documents in any of the designated branches of
MCB, as per schedule given in Annexure-A.

Step 8: The registrar issues filing certificate of Special Resolution and Order of
the Commission.

Step 9: The Company shall transfer the shares to Single Member within 15 days
of the order of conversion by the Commission.

Step 10: The Company shall also file the particulars of out going directors (being
more than one Director) on Form 29 within 14 days of the change, to
the registrar concerned.

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10
Step 11: In terms of section 204-A of the Ordinance and rule 6 of SMC Rules, a
single member company is required to appoint a company secretary
within fifteen days of incorporation or of becoming a single member
company. The appointment of company secretary is to be reported to
the registrar concerned on prescribed Form-29 within 14 days from the
date of appointment.

Step 12: In terms of 7 of SMC Rules, the single member shall nominate two
individuals; one of whom shall be the nominee director to work in case
of death of single member. The other shall be alternate nominee director
to act as nominee director in case of non-availability of nominee director.

The nominee director is required to:
(a) manage the affairs of the company in case of death of single
member till the transfer of shares to legal heirs of the single
member;
(b) inform the registrar concerned of the death of single member,
provide particulars of the legal heirs and in case of any
impediment, report the circumstances, if any, seeking the
directions, in the form as set out in Form S-3 within seven days of
the death of the single member;

(c) transfer the shares to legal heirs of the single member; and

(d) call the general meeting of the members to elect directors.

6. CONVERSION FROM SINGLE MEMBER COMPANY INTO PRIVATE
COMPANY
A single member company (originally incorporated as Single Member Company
or converted from private company as such) may convert into private company
in accordance with rule 4 of the SMC rules. The persons becoming members due
.
----------------------------------------------------------------------------------------------------------------
11
to transfer or transmission or further allotment of shares, as the case may be,
shall pass a special resolution to make alteration in articles and appoint one or
more additional directors. Where a single member company converts into a
private company pursuant to sub-rule (1), it shall file a notice of the fact in
writing in the form as set out in Form S-2 with the registrar within 30 days from
the date of passing of special resolution.
A single member company may be converted into a private company on increase
of the number of its members to more than one due to transfer of shares or
further allotment of shares or death of the single member or operation of law as
provided in rule 4 of SMC Rules.
No approval of any authority for the conversion of status from a Single Member
Company into Private Company is required. However, the company has to
adopt the below mentioned procedure for conversion.
FROM SINGLE MEMBER COMPANY INTO PRIVATE COMPANY

Step 1: The proposal for conversion of status of single member company into
private company is firstly discussed and approved by the Board of
Directors.

issued for convening the general meeting of shareholders of the
company.

Step 3: Resolution for conversion of the status from Single Member Company
into Private Company and alteration in Articles of Association is
placed before the members which is carried as special resolution.

.
----------------------------------------------------------------------------------------------------------------
12
companies. Therefore; the resolution not only meant for removal of
word (SMC) from the name of the company, but would also to
substitute new articles for a private company.

Step 4: The company has to increase its directors and shareholders to
minimum number i.e. 2 required for private company within 15 days
of the passing of special resolution under section 174 (i) (b) of the
Ordinance.

Step 5: The company has to file the under-mentioned documents with the
registrar concerned:-

a) Form 26 within 15 days of passing of special resolution.
b) Amended copy of Memorandum and Articles of Association.
c) Circular u/s 86(3) (if further shares are offered to the existing
members)
d) Form - 3 (in case if further allotment of shares is made).
e) Form - 29 (for the appointment of additional director, within 14
days of the date of appointment).
f) Bank challan evidencing the deposit of filing fee of all the
aforesaid documents in any of the designated branches of MCB,
as per schedule given in Annexure-A.

Step 6: The registrar concerned issues a filing certificate regarding conversion
of single member company into private company and a filing
certificate.

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----------------------------------------------------------------------------------------------------------------
13
Step 7: The Company may obtain a certified copy of the Memorandum and
Articles of Association on payment of copying fee of Rs. 250/- for the
application submitted online and 500/- in physical form, and the

Step 8: Change of status is recorded in all letterheads, bills, invoices, seal etc.
Copies of the Memorandum and Articles of Association are also
recorded with the alteration.

PUBLIC CONSULTATION

If you have any suggestions for the development in the legal framework or
otherwise, lease let us know about your opinion/comments on the following
address.
NIC Building, Jinnah Avenue, Blue Area,
Islamabad, Pakistan
Telephone No. (051)-9206306



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----------------------------------------------------------------------------------------------------------------
14

ANNEXURE A

SCHEDULE OF FEE

Item Fee for online
submission
Fee for
submission in
physical form

Form 3 600 1,500
Form 26 600 1,500
Form 27 600 1,500
Form 28 600 1,500
Form 29 600 1,500
Form S-1 600 1,500
Form S-2 600 1,500
Form S-3 600 1,500
Form S-5 600 1,500
Copy of SECPs Order 100 200
Application fee (Form 2 or
Form S-4 as the case may be

2,500 5,000

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15

DISCLAIMER
The booklet has been published with the intention to create an awareness of the
concept of the relevant matters. However, the booklet does not tell everything
and the opinions or legal interpretations, contained in the booklet are
circumstantial and may vary under different situations. If the reader is in doubt
while dealing with any specific condition, it is recommended to refer to the
Companies Ordinance, 1984 and allied laws and consult a professional for
seeking advice.

NIC Building, Jinnah Avenue, Blue Area
Islamabad, Pakistan
Ph. No.: 051 9207091 4, Fax: 051 9204915
OF PAKISTAN

Directors and Secretaries Guide

NIC Building, Jinnah Avenue,
Ph. No.: 051-9207091-4, Fax: 051-9204915
SECP Guide
SERIES
Table of Contents
Page
Introduction 2

1. Limited companies: the basic 4

2. Role of a company director 6

3. Role and duties of a company secretary 10

4. What documents are to be provided to the

Commission and the registrars? 14

5. Quality of documents 17

6. Further information 20
2
The Law recognizes a company, as a legal person which in its own
rights, is capable of owning property, making contracts, conducting
litigations and also responsible for doing wrongs. When we look at
these matters from practical angle, and at the way in which this
artificial legal person functions; its corporate will is manifested, its
decisions taken and its acts performed, we see that a company cannot
do any thing at all except through the human beings.

The business of a company is run and managed by its board of
directors; which is headed by a Chief Executive. The companies
appoint these officers as required by the Companies Ordinance, 1984
(hereinafter referred to as the Ordinance). The Ordinance necessitates
the appointment of at least one director and a company secretary for a
single member company, two directors for a private limited company,
three directors for an unlisted public company and seven directors and a
company secretary for a public listed company. The director, or
directors, must manage the companys affairs in accordance with its
memorandum and articles of association and the law. Certain
responsibilities apply to all directors, whether executive or non-
executive.

This booklet:
explains some of the main responsibilities of a company's
officers; and
deals with some of the key requirements of the Ordinance in
relation to the filing of documents with the Securities and
Exchange Commission of Pakistan (the Commission) and
the Company Registration Offices (CROs). The booklet will
not tell you everything about being a director or secretary,
but it will give you a good idea of your responsibilities as
they relate to the Commission and CROs.
Introduction
3
If, after reading this booklet, you are in doubt about your responsibilities, you
should seek professional advice from a legal adviser or a professional
accountant.
4
Limited companies: the basics
1. Do I really need to incorporate a limited company?

The basic features and advantages to carry out the business through a
company are as under:-

DISTINCT LEGAL ENTITY
Separate from its shareholders/directors. It has its own rights
and liabilities. It can borrow money and invests funds, own
property, sue and be sued, enter into contracts etc.

LIMITED LIABILITY - PROTECTION OF PERSONAL
ASSETS
Incorporation gives the privilege of limited liability to its
members up to a maximum of their investment or share in the
entity or undertaken by them in event of winding up.

Debts of company are the debts of this artificial legal person
and not of the people running the company or owning shares in
it.
Personal property of the shareholders can not be attached for
the recovery of debts
Chapter
1
5

EASY MEASUREMENT OF INVESTMENT OF EVERY
PERSON
The investment of every person is known / determined

EASY TRANSFERABILITY OF OWNERSHIP OF
SHARES
Clear and convenient legal framework for the transferability of
interest (shares) -

PERPETUAL SUCCESSION
In distinction to partnership, the death of one or more or even
of all the members does not affect its legal status and do not
end the company

EASY TO RAISE FUNDS
Preference by the financial sector in extending the financial
assistance to documented and organized form of incorporated
business

PART OF REGULATED AND DOCUMENTED SECTOR

ACCOUNTABILITY AND RESPONSIBILITY
Preparation and audit of accounts

ELEVATION OF BUSINESS STATUS
Incorporation gives a status higher than partnership and
Proprietor-ship in the organizational hierarchy.

ESTABLISH CREDIBILITY
Having an incorporated business would give any business more
credibility among potential customers, vendors, partners and
employees

COMPACT LEGAL AND ORGANIZATIONAL
FRAMEWORK
6
The entity must function within the limits prescribed through
its charter and regulates its existence through a set of bylaws.

2. What does limited liability mean?

This means that if a company is put into liquidation, the people who own the
company will only be required to pay what they have already paid or agreed
to pay towards settling its debts. Limited liability gives the owners of the
company (its members) protection if the company fails.

3. How do I set up a limited company?

If you decide, may be after taking professional advice, that a limited company
is the best thing for your business, you can incorporate a company with the
CRO under the provisions of the provisions of the Ordinance - for details see
our booklet Promoters Guide and guidelines for Company Name
Selection also available on the Commissions web-site
http://www.secp.gov.pk/CLD/cld_guides.asp .

4. What can I do with an unwanted company?

If you decide that you do not need a company that you have set up,
you should consider putting it into winding up. For detailed procedure
with regard to winding up of the company, please see our guide
booklet titled with Winding up and Dissolution of Companies

4. What happens if accounts and other statutory returns are
filed late and other statutory returns?

As a director of a public limited company or a private limited company
having the paid up capital of Rs. 7.5 million or more you normally
have a maximum of 5 months from the close of accounting year for
filing your companys audited accounts.

7
If the accounts or other return(s) is / are received late, the
company will not only pay additional filing fee but the company
and its officers can also be punished with fine. In addition to
normal the additional fee will be payable as under:-

5. What is the query of non-presentation of annual account
in the annual general meeting?

If accounts or copy(ies) of other return(s) is/are received late, the
company will not only pay additional filing fee but the company and its
officers can also be punished with fine.

8
Rol e of a c ompany di r ec t or

1. Who can be appointed as a director?

Generally it is up to the members to appoint the people they believe will run
the company well on their behalf. The ineligibilities that prevent anyone
becoming a director are;

If he:
is a minor;
is of unsound mind;
has applied to be adjudicated as an insolvent and his application is
pending;
is an undischarged insolvent;
has been convicted by a court of law for an offence involving moral
turpitude;
has been debarred from holding such office under any provision of
this Ordinance;
has lacked fiduciary behaviour and a declaration to this effect has
been made by the Court under section 217 of the Ordinance at any
time during the preceding five years;
is not a member ; This disqualification shall not apply in the case of a
person representing the Government or an institution or authority
which is a member, a whole-time director who is an employee of
the company, a chief executive or a person representing a creditor;
Chapter
2
9
has been declared by a Court of competent jurisdiction as defaulter in
repayment of loan to a financial institution, exceeding Rs. 1,000,000*
and
is a member of a Stock Exchange engaged in the business of
brokerage, or is a spouse of such member*.
(* The restrictions are applicable only in case of listed companies).

2. What responsibilities does a director have towards
Commission and the registrar?

Every company director has a personal responsibility to ensure that all the
statutory documents are filed with the Registrar and the Commission as and
when required under the Ordinance. In particular:
audited accounts (only for public limited companies including
association not for profit); and private limited companies
having paid up capital of Rs. 7.5 million or more);
annual returns (Form A/B);
particulars of directors or other officers (Form 29); and
notice of change of registered office (Form 21).
Chapter 4 summarizes what documents a limited company has to file with the
Commission and the Registrar.

3. What happens if accounts or annual returns are not filed?

Failure to deliver documents on time is an offence under the Ordinance. On
conviction, a director could be penalized with a fine and also debarred from
becoming director.

4. Are directors really prosecuted?

Yes. On average of more than 2,000 directors are adjudicated / prosecuted
each year for failing to file accounts and other statutory returns with the
Registrar within the prescribed time. Persistent failure to comply with the
statutory requirements on time may also lead to a director being disqualified
and the company may also be wound up under certain circumstances.
10

5. What happens if accounts are filed late?

As a director of a public limited company, or a private limited company
having the paid up capital of Rs. 7.5 million or more you normally have a
maximum of 5 months from the close of accounting year for filing your
companys audited accounts.

If the accounts or other return(s) is/are received late, the company will not
only pay additional filing fee but the company and its officers can also be
punished with fine. In addition to normal the additional fee will be payable as
under:-

Period of delay Additional Filing Fee

(a) If a document is filed with a delay
of not more than fifteen days.

Additional fee equal to the usual
fee specified for the document in
the Sixth Schedule.
(b) If a document is filed with a delay
of more than fifteen days but not
more than forty-five days.

Additional fee equal to two times
of the usual fee specified for the
document in the Sixth Schedule.
(c) If a document is filed with a delay
of more than forty-five days.

Additional fee equal to three times
of the usual fee specified for the
document in the Sixth Schedule.

6. What are the consequences of non-presentation of Annual
Accounts in the Annual General Meeting?

It is the responsibility of the Board of Directors of a company to maintain
proper books of accounts get the annual accounts audited by the auditor of the
company, present the audited accounts before the Annual General Meeting for
approval of the members within the prescribed period as provided under the
law. In case of non-compliance, in filing the statutory returns within
prescribed period and apart from the other penalties for violating the specific
provisions of the Ordinance, which include heavy amounts of fines and
prosecution of the management leading to imprisonment of the defaulting
directors/officers are liable to pay additional fee (as discussed at para-5 of the
guide.
11
7. How can prosecution and penalties/fines be avoided?

Make sure your company complies within the prescribed time, with all its
statutory obligation not only pertaining to filing of its accounts and other
statutory returns as required to be filed under the provisions of the Ordinance
and the rules frame there-under but also with respect to:-

Issuance of shares certificates to the shareholders. (S.74 to 75)
Transfer of shares. (S. 76 to 81)
Registration of Charges (S. 121 to 136)
Maintenance of Registered Office Address (S. 143)
Holding of statutory meetings by a public company (S. 157)
Maintenance of Minutes Book (S. 173)
Election of Directors (S. 178 to 180)
Appointment of Chief Executive (S. 198 to 203)
Appointment of Company Secretary (where applicable) (S. 204A)
Maintenance of books of accounts and other statutory register (S.
230)
Preparation, audit and presentation of accounts in the AGM (S. 233)
Preparation of quarterly accounts by a listed company S. 245)
Payment of Dividends within the prescribed period (S. 248 to 251)
Appointment of Auditor (S. 252 to 254)
Appointment of Legal Adviser (Companies Appointment of Legal
Advisors Act, 1974).

8. Why does the Company Registration Office need this
information?

In exchange for the benefits of trading with limited liability, companies must
deliver certain information about themselves to the Registrar, who makes this
information available for inspection by the public so that they can make
informed decisions about companies that they may wish to invest in or do
business with.

12
9. Isnt my legal/corporate consultant supposed to do all this?

Your legal/corporate consultants responsibilities to you depend on the
agreement between you and him or her. However, the responsibility to file
accounts and other statutory documents rests entirely with the directors.

Ensure that your legal/corporate consultants have all the necessary
information/document to prepare and file the statutory returns on time.
If necessary, change your consultants. Dont just assume that they are
getting on with the job.

Accountants, legal, corporate and financial advisers do not get
adjudicated / prosecuted or penalized for late filing under the
Ordinance.
You do!

10. Why does the Company Registration Office need this
information?

Documents / informations maintained by the registrar is the public record and
available for inspection by the rest of the world i.e. the creditors, venders and
general public for the purpose of making investment in the company, enter
into contract and for other useful purposes.

Remember, filing of documents does not take place until they reach the
Registrar.

13
Rol e and dut i es of a c ompany
sec r et ar y

1. Does every company need a secretary?

No. Companies Ordinance requires only a listed company to have a whole
time secretary and a single member company to have a secretary.

2. Does a company secretary need any qualifications?

The secretary to be appointed by a listed company shall be a member of a
recognized body of professional accountants, or a member of a recognized
body of corporate / chartered secretaries or a person holding a masters degree
in Business Administration or Commerce or is a Law graduate from a
university recognized by Higher Education Commission and having at least
two years relevant experience. Further, a person being engaged by a public
listed company as secretary before the 26
th
October, 2002 is permitted to
continue as such if he has practical experience of five years in that position.
However, the company secretary of a single member company shall be a
person holding a bachelor degree from a university recognized by the Higher
Education Commission.

3. What are the duties of a company secretary?

These are not specified by the Ordinance, but are usually contained in an
employment contract. However, the company secretary generally performs
the following functions:-

Chapter
3
14
Functions of secretary:

A. Secretarial functions:

To ensure compliance of the provisions of Ordnance and rules
made there-under and other statutes and bye-laws of the
company.

To ensure that business of the company is conducted in
accordance with its objects as contained in its memorandum
of association.

To ensure that affairs of the company are managed in
accordance with its objects contained in the articles of
association and the provisions of the Ordnance.

To prepare the agenda in consultation with the Chairman and
the other documents for all the meetings of the board of
directors.

To arrange with and to call and hold meetings of the board
and to prepare a correct record of proceedings.

To attend the broad meetings in order to ensure that the legal
requirements are fulfilled, and provide such information as are
necessary.

15
To prepare, in consultation with the chairman, the agenda and
other documents for the general meetings.

To arrange with the consultation of chairman the annual and
extraordinary general meetings of the company and to attend
such meetings in order to ensure compliance with the legal
requirements and to make correct record thereof.

To carry out all matters concerned with the allotment of
shares, and issuance of share certificates including
maintenance of statutory Share Register and conducting the
appropriate activities connected with share transfers.

To prepare, approve, sign and seal agreements leases, legal
forms, and other official documents on the companys behalf,
when authorised by the broad of the directors or the executive
responsible.

To advise, in conjunctions with the companys solicitors, the
chief executive or other executive, in respect of the legal
matters, as required.

To engage legal advisors and defend the rights of the
company in Courts of Law.

To have custody of the seal of the company.

B. Legal obligations of secretary:

16
Filling of various documents/returns with the Registrar /
Commission as required under the provisions of the
Ordinance. .

Proper maintenance of books and registers of the company as
required under the provisions of the Ordinance.

To see whether legal requirements of the allotment, issuance
and transfer of share certificates, mortgages and charges, have
been complied with.

To convene/arrange the meetings of directors, on their advise.

To issue notice and agenda of board meetings to every
director of the company.

To carry on correspondence with the directors of the company
on various matters.

To record the minutes of the proceedings of the meetings of
the directors.

To implement the policies formulated by the directors.

To deal with all correspondence between the company and the
shareholders.

17
To issues notice and agenda of the general meetings to the
shareholders.

To keep the record of the proceedings of all general meetings.

To make arrangement for the payment of the dividend within
prescribed period as provided under the provisions of the
Ordinance.
C. To maintain the following statutory books

the register of transfer of shares (section 76);
the register of buy-backed shares by a company (section 95A);
the register of mortgages, charges etc. (section 135);
the register of members and index thereof (section 147);
the register of debenture-holders (section 149);
the register of directors and other officers (section 205);
the register of contracts (section 219);
the register of directors' shareholdings and debentures (section
220);
the register of Pakistani members, directors and officers, in case
of a foreign company (section 454);
Minute books;
Proxy register;
Register of beneficial ownership;
18
Register of deposits;
Register of directors share holding; and
Register of contracts, arrangements and appointments in
which directors etc are interested
.
D. Other duties

The company secretary usually undertakes the following duties:

(a) Ensuring that statutory forms are filed promptly. You
cannot simply send a letter to notify the Registrar that you
wish to change the situation of the company's registered
office or that change has occurred among directors or
secretaries or auditors or particulars. You should normally
use forms 21 and 29 as appropriate. You may also use the
Form A/B for filing the annual return if the return is due at
the current time. Changes in directors and secretaries or in
time particulars must be notified to the Registrar within 14
days. There are many other forms that need to be delivered to
the Registrar. See Chapter 4, 'What you have to send to the
Commission and the Registrar for more information.

(b) Providing members and auditors with notice of meeting.
You must give them 21 days written notice for holding of
annual and other general meetings.

(c) Sending the Registrar copy of special resolutions. You must
file with the Registrar special resolution on Form-26 within
15 days of its being passed.

E. Supplying a copy of the accounts to every member of the company,
every debenture holder and every person who is entitled to receive
notice of general meetings. You must send annual audited accounts at D.
19
eneral Meeting at which they are to be laid - see section 233 of the
Ordinance.

F.Keeping or arranging for the having of minutes of directors' meetings and
general meetings. Apart from monitoring the Directors and Members
minutes books, copies of the minutes of board meetings should also be
provided to every director within 15 days of the meeting.

G.Ensuring that people entitled to do so, can inspect company records. For
example, members of the company are entitled to a copy of the company's
register of members, and to inspect the minutes of its general meetings
and to have copies of these minutes.

H. Custody and use of the common seal. Companies are required to have a
common seal and the secretary is usually responsible for its custody and
use. (Common seals can be bought from seal makers)
4. Does a company secretary has any powers?
The Ordinance allows him to sign the statutory returns and applications to be
furnished to the Registrar and the Commission.
5. What are the rights of a company secretary?

The rights of a company secretary depend on the terms of his or her contract
with the company. The secretary has no special rights under the Ordinance.
20
What doc ument s ar e t o be pr ovi ded t o t he
Commi ssi on and t he Company Regi st r at i on
Of f i c e?

Company directors and secretaries are responsible for filing various returns
containing information to the Commission and the Registrar. There are over
46 forms that companies could file. The following information deals only
with the most common forms and documents that companies will use.

1. Accounts.-

All limited companies, whether trading or not, must keep accounting records
but only public companies (including associations not for profit, and by
guarantees) are required to file annual audited accounts with the Registrar.
Listed companies are also required to send quarterly accounts to the
Commission and the Registrar.
The accounts will include:
directors' report signed by the chief executive and a director;
a balance sheet signed by the chief executive and a director;
a profit and loss account (or income and expenditure account if
the company is not trading for profit);
an auditors' report signed by the auditor;
notes to the accounts; and
consolidated accounts (if applicable).
Accounts must be produced to a standard that we can scan to reproduce
electronically - see chapter 5.
Chapter
4
21
Directors are personally responsible for ensuring that accounts are prepared
and delivered to the Commission and the Registrar. Failure to do so may
result in a criminal conviction for the director(s) and financial penalties as
well.

2. Annual returns (Form A/B)

An annual return is a snapshot of general information about a company giving
details of its chief executive, directors, chief accountant, secretary, legal
adviser and auditors, registered office address, shareholders and share capital.

If you file the annual return late or not at all, the company and its director(s)
and secretary can be prosecuted under the Ordinance.
Please note that annual returns are quite separate from annual accounts.

3. Change of registered office - Form 21

Every company must have a registered office: it is the 'home' of the company
to which all official documents, notices and court papers have to be sent by
law. The address must be a physical location, not just a post office box. This
is because people have the right to visit your office to inspect certain registers
and documents, and to deliver documents. It is vital that you keep us informed
of the location of your registered office to send all formal communications.

You can change your registered office address by filing a notice for change on
Form 21 with the Registrar within 28 days of such change. E-mail address
must also be mentioned in all of your communications so that relevant
information and communications are sent to you through E-mail.

4. Particulars of directors and other officers Form 29

Form 29 is used for:-

the appointment of an officer (Chief Executive, Director, Company
Secretary, Chief Accountant, Chief Financial Officer, Auditor, Legal
Adviser)

an officer ceasing to act (resignation, removal, death etc.)
22

a change in particulars of an officer, for example, a change of name
or new residential address.

a change in particulars of an officer, for example, a change of name
or new residential address.

All changes in particulars of directors and other officers must be sent to the
registrar within 14-days of the change.

5. Allotments of shares - Form 3.

This form should be sent to Registrar within 30 days of the shares being
allotted.

6. Mortgages and charges Forms 10, 11, 13, 14, 16 and 17.

Particulars of any mortgage or charge created by the company, modification
or satisfaction thereof must be sent to Registrar within 21 days of its creation
or satisfaction.

7. Special Resolutions Form 26

The Special Resolution passed by a company is to be filed with the
registrar within 15 days from the date of passing.

23
Qual i t y of doc ument s

What happens to documents sent to the registrar?

1. Electronic Documents

The documents filed electronically i.e. through eServices are examined and if
found in order, are accepted by the concerned registrar and saved in the
system in the electronic form

2. Physical documents

The documents and forms you file with the registrar in the physical form are
scanned to produce an electronic image. The original documents are then kept
in files and the electronic image would be used as working documents.
When your business contacts would view and get copies of your company
record, they would see the electronic image, copy it or simply make
inspection. So it is important that not only the original is legible, but a clear
copy can also be made of it.
This chapter lays down a few quality guidelines to follow when preparing a
document for filing with the registrar.

3. What happens if your documents do not meet the guidelines?

Section 468 of the Ordinance allows the registrar to reject document that is
insufficiently legible or is written upon paper, which is not durable, giving a
notice to file a revised document. An acceptable document must be delivered
within the time mentioned in the notice (otherwise the registrar treats the
original as not having been filed).
Chapter
5
24
4. How should documents be set out?

Every document delivered to the registrar must state in a prominent position
the registration number of the company, and must comply with any
requirement specified by the registrar relating to the legibility of that
document.

Briefly, documents should be on A4 size, plain white paper between 80 grams
and 100grams in weight with a matt finish. Text should be black, clear,
legible, and of uniform density. Letters and numbers must not be less than
1.8mm high, with a line width of not less than 0.25mm.

When you fill in a form:
use black ink or black type;
use bold lettering ;
don't send a carbon copy;
don't use a dot matrix printer; and
remember - photocopies can result in a grey shade that will not
scan well.
When you complete other documents, please remember:
the points already made relating to completing forms;
to use A4 size paper with a good margin;
to supply them in portrait format (that is with the shorter edge
across the top);
to include the company registration number in the top right-hand
corner of the first page.
25
Important: colored ink can drop out (disappear) when a document is
scanned to produce an image. To prevent this - always use black ink to
complete and sign all documents.

5. What are the most common mistakes to avoid?

Glossy accounts

If you are producing colour-printed glossy accounts, please save them for
your members and others who will appreciate them. We still need black ink
on white paper with a matt finish. A typed unbound version or printer's proof
is ideal, provided it has the necessary signatures.

Members lists

Our requirements on document quality apply equally to the lists of members /
shareholders that accompany annual returns and allotment forms.

If these are computer prints, it is essential that the print quality is good. We
have particular problems with lists printed on green-lined computer paper. It
would be better if the members list is provided on A4 size paper.

Listed companies are required to send to the Commission their Annual Return
(Form A) containing list of members on floppy diskette.

5. How to get further guidance on quality of documents?

For further guidance, contact 051-9206306 and 051-9205869.
For guidance on acceptable floppy diskette and formats,
contact 051-9207091-4/ext304.

26
Further information

1. Can I obtain information about a company from
Commission and the registrar?

Yes. Company information is vital for informed decision-making.

In the concerned Company Registration Office, you'll find information on
every company registered with the CRO, from names and addresses to annual
returns and accounts. But note that private companies do not have to file their
accounts.

You can also get information about foreign companies that establish a place
of business in this country or open a branch here.
You can order a company search by visiting any of our CRO.

2. Where do I get forms and guidance booklets?

This is one of a series of the Commissions booklets which provide a simple
guide to the Ordinance.

The quickest way to get the statutory forms and guide-booklets is through
SECPs website i.e. www.secp.gov.pk

Forms can also be obtained from stationers, accountants, legal advisers and
corporate practitioners.

If in doubt about your responsibilities, seek professional advice.
Chapter
6
27
NOTE: For filing of returns on Form-29, i.e. notifying the
particulars of directors and secretary to the registrar
please see our guide-booklets titled with Filing of
Return Guide.

3. How information can be sent to the registrar?

You may file documents to the registrar concerned through eServices.
The detailed procedure for filing the documents is provided in the
filing of statutory returns guide. Alternatively, the documents may
be filed to the registrar concerned in physical form (personally or by
sending by post or by courier service).

If documents are sent by post or courier it should be addressed to any
one of the following Company Registration Offices (CROs), having
territory/ jurisdiction on your company:-

Phone No.: 051-9208740 Fax No: 051-9208740

4
th
Floor, SLIC Building No.2,
Wallace Road, Karachi.
Phone No: 021-99213272 Fax No. 021-99213278
Email: crokarachi@secp.gpv.pk

3
rd
& 4
th
Floor, Associated House,
7-Egerton Road, Lahore
Phone No. 042-99204962 6 Fax No: 042-99202044
28

63-A, 2
nd
Floor,
Nawa-e-Waqt Building,
Adbali Road, Multan.
Phone No: 061-9200530/9200920 Fax No: 061-9200920
Email: cromul@mul.paknet.com.pk

356-A, Akram Plaza, Small D ground.
Peoples Colony No. 1, Faisalabad.
Phone No: 041-9220284 Fax No: 041-9220152
Email: crofsb@fsd.paknet.com.pk

1
st
Floor, State Life Building, The Mall,
Peshawar Cantt.
Phone No: 091-9212178 , Fax No: 091-9213178
Email: cropsh@psh.paknet.com.pk

Quetta Cantt.
Phone No: 081-2844136 Fax No: 081-2899134

28-D, Hamdard Housing Society,
Airport Road, Sukkur,
Phone No: 071-5630517 Fax No: 071-5633757

SECP
Guide
SERIES

SECURITIES AND EXCHANGE COMMISSION OF
PAKISTAN
(SECP)

GUIDE ON

FILING OF STATUTORY RETURNS


NIC Building, J innah Avenue, Islamabad, Pakistan
Ph. No.: 051-9207091-4, Fax: 051-9204915

1

Table of Contents

Page

Introduction 2 - 3

Chapter 1
Procedure for filing of Statutory Return 4 -10

Chapter 2
Points to Remember before Submission 11- 12

Chapter 3
Procedure if returns/ forms are filed late 13 -14

Chapter 4
Regular Statutory Returns 15 -18

2

Introduction

1. What is a Statutory Return?

All the Forms/returns or documents required to be filed with concerned
authorities i.e., registrar concerned, Commission and Stock Exchanges (where
required) under various provisions of the Companies Ordinance, 1984 (the
Ordinance), or rules/regulations made thereunder are termed as Statutory
Returns. Statutory return contains information which are filed with the registrar
concerned of the Company Registration Office (CRO) where they are made
publicly available, so that anyone can verify the details about any company. All
the returns/Forms are to be filed with prescribed fee and within the prescribed
timeframe. Format can be downloaded from the link,
http://www.secp.gov.pk/forms.asp Statutory Returns are filed under any of the
following three situations:

Immediately after incorporation of company
Periodical (annual, half yearly, quarterly)
On the occurrence of any particular event.

The Securities and Exchange Commission of Pakistan (the SECP) has
prescribed the formats of the Statutory Returns in the Companies (General
Provisions and Forms) Rules, 1985 (the Rules). Specific forms for Single
member Companies are prescribed under the Single Member Companies Rules,
2003 (the SMC Rules). Formats of Annual returns i.e., Form A/B are prescribed
under Third Schedule to the Ordinance. Format of the Circular to be sent to
members alongwith the notice offering new shares is prescribed through S.R.O
No. 192(I)/86 dated Feb. 05,1986, under Section 86(3) of the Ordinance.

2. What is the utility of statutory returns for stakeholders?

The returns/forms filed by the Company become part of the Companys record
maintained by the registrar concerned. Regulation 18 and 19 of the Companies
(Registration Offices) Regulations, 2003, ( the Regulations) read with sub- section
6 of section 466 of the Ordinance authorizes the registrar concerned to permit
member of the public, to inspect or obtain copy of documents on payment of the
fee prescribed under the Sixth Schedule to the Ordinance. The Company record

3
is open for inspection by the general public so that the stakeholders e.g., banks,
investors, vendors, suppliers, creditors, importers , exporters etc, may be well
informed with state of affairs of the Company, make decisions about their
investment and to deal business with the Company. These stakeholders and any
member of public can also obtain certified true copies of the relevant corporate
record of the companies, when needed or asked by any institution as part of
documentation. Therefore, it is important to file statutory returns so that updated
record of the Company could be maintained/made available by the registrar
concerned.

4

Filing of Statutory Returns

This guide has been divided in 4 parts for the convenience of users:
(i) Procedure for filing Statutory Return
(ii) Points to Remember before Submission
(iii) Procedure if returns/ forms are filed late
(iv) Regular Statutory returns

CHAPTER 1

Procedure for filing of Statutory Return

This part of guide booklet explains the modes and procedure for submission of
statutory returns.

3. What are the modes of submission of statutory returns?

There are two modes of filing statutory returns with the registrar concerned:

i. e-Filing: You may file returns online through eServices.

ii. Physical

Personally: You may visit the CRO and file the return by
hand.

By post: You may post the return through registered mail or
courier at the postal addresses of CROs (as given at the end
of this guide booklet).

5

4. Can information given by the Company in simple letter, without
prescribed form /return and fee, be considered as submitted return with the
registrar concerned?

No. Any information which is required to be notified by the Company should be
filed on the prescribed form with the applicable fee. For example, if the Company
changes its registered office address, the company cannot simply send a letter to
notify Registrar that company had changed its registered office address from one
place to another. The company should report the same on prescribed Form 21.

5. From where format of returns/forms be obtained?

Online:

In case of online submission, the statutory returns/ forms on the prescribed
format containing the existing information shall automatically appear in the
eServices portal. Detailed procedure is explained at Q. No. 8 of this guide below.

In case of physical submission, there are three sources of getting statutory
returns/Forms:

You may refer to the Rules and find the relevant statutory form.

You may download these formats from the Commissions website at
the link http://www.secp.gov.pk/forms.asp which is the quickest and
easiest way to get the forms. By using the downloaded forms,
additional space can also be created in the fields available for
information, according to your requirements.

You may visit the regional offices of the Commission (Company
Registration Offices) personally and get forms free of cost.

6. What is filing fee of forms/returns?

The filing fee of various returns/forms is prescribed in 6th Schedule to the
Ordinance, which may be accessed at Commissions website. For detailed
information regarding fees schedule, (both online/physical) kindly visit the link
http://www.secp.gov.pk/notification/pdf/2010/SixthSchedule26102010.pdf

6

7. Who is competent to sign/authenticate the return/forms?

As required, under the Law, Chief Executive, Director or Company Secretary are
authorized to sign the returns/forms.

8. How statutory returns can be filed through eServices?

Below is the procedure for filing statutory returns through eServices:
(1) Log on to eServices
In case the company has obtained eServices Login name and Password:

Connect to eServices https://eservices.secp.gov.pk/eServices, and log on
to your account using your eServices Login name and Password provided
by SECP. Procedure for obtaining Login name and Password has been
provided in subsequent process.

Important Note: PLEASE NOTE THAT SIGN UP LINK ON eServices
WEBPAGE, IS FOR NEW INCORPORATION PROCESS ONLY AND NOT
FOR ALREADY INCORPORATED COMPANIES.

In case the company has not obtained eServices Login name and
Password, please follow the procedure as under:

a. Apply for an eServices Login name and Password by writing a letter,
on the company letterhead, duly signed by the Chief Executive
alongwith the either of the Company Secretary, Chief Financial Officer,
or one of the Directors of the company, with a copy of their CNIC, to
be addressed to the following address:

Director (MIS),
Registration Department,
Islamabad,
Pakistan
Phone: +92-51-9207091-3 (Ext: 280)

7
b. Mention the email address on which the eServices Login name and
Password will be dispatched. Please, only provide POP3 email address
such as abc@comsats.com; free email address such as hotmail, gmail,
or yahoo is not acceptable.

c. SECP will confirm the validity of the email address. After validation
the eServices Login name and Password will be emailed to the
specified email address.
(2) Enter Information
password will display a list of available processes
For filing Annual Returns (Form A/B and Form 29)
simultaneously, click Filing of Statutory Return (Multiple
Forms)
For filing forms separately or filing all other forms, click Filing
of Statutory Return.
List of forms containing all the statutory returns will appear
Click the relevant form which is to be filed.
Enter required information on the page
Click the Continue button, the process document listing page
shall be displayed, containing the following links:
a. Update Form
Click link if you want to update the data.
After updating data, click continue button
Process document listing page will be displayed

b. View Form
Click link.
The form on the prescribed format shall be
automatically generated based on your input.
View Form.

8
If data displayed in the form is correct, click the back
button on the screen

c. Fill New Attachment Form
Click link and an attachment form window will be
displayed.
Attach document, if any.
Click Save Form button.

Please note that only PDF format is allowed for attachment.
Size of the file must not exceed 2 MB.

Process document listing page will be displayed.

d. Fill New Bank Challan
Click link auto filled bank challan will be displayed.
Click Print Form button at the bottom of the page and
four copies namely original, bank copy, SECP copy
and depositor copy will be printed.
After printing, click Save Form button at the bottom of
the page.

e. Sign Forms
Procedure for obtaining Digital Signatures:
Any return/form filed through e-services shall be
authenticated by companies by affixing electronic
signatures. Detailed procedure for obtaining digital

9
signatures from National Institutional of Facilitation
Technologies (NIFT) for SECP eServices is available at the
following link of NIFT website:
https://secp.niftetrust.com/.

Click on Sign Forms link.
Digital signature pad window will appear.
Select all the form(s)/Attachment(s) available for
signature by clicking the check boxes.
Select the required signature from the drop down
menu
Click Sign button (After signing, submit to SECP
button will be enabled.)
Click Submit to SECP button.
All the documents will be automatically submitted to
the SECP.
Please note down the Tracking Number, appearing on
the screen.
Deposit fee through the challan printed during the
process, in the selected branch of MCB
The bank shall retain the SECP and bank copies and
return remaining two copies (original and customer
copy) to the customer

10
9. How to pay filing fee?

The filing fee can be paid /deposited through challans in any of the designated
branches of MCB Bank Limited.

Online:

In case of online submission, challans are auto generated. Procedure is explained
above at Q. No. 8 of this guide.

Physical:

In case of physical submission, challans in the physical form are available at all
the designated branches of MCB Bank Limited.

11
CHAPTER 2

Points to Remember before Submission
This part of guide booklet explains points that must be remembered by the
companies while submitting returns/ forms.
10. What points to remember while submitting/completing printed filled
return/form?

In case of physical submission, companies should ensure the following
standardized criteria while submitting the documents, statutory forms and other
returns to the Registrar or the Commission:

Use A4 size paper with good margin;
Use only black typing to complete and sign the documents;
Use bold letters;
Do not send carbon copies;
Do not use a dot matrix printer; and
Do not send colored printed documents.

11. What points to remember while submitting/ completing hand written
filled return/form:

In case of physical submission, if a company wants to submit hand written filled
returns, it is necessary that it should not be filled with ink, as writing may be
erased if it becomes wet/moist, resulting into loss of information. It should be
therefore, filled in by using ball point. Since all the returns filed by the
Companies are scanned to create electronic data base of the Companies,
therefore, it should also be ensured that writings are clear and easily
recognized/readable by the scanners.

12. When return will be considered filed with the Registrar in the
prescribed period?

Filing of returns/forms does not take place until these reach with the Registrar
office with in the prescribed period as laid down under the law/rules. For
example, Form-29 is required to be filed within 14 days of the date of reporting
change. It means Form-29 should be received by the Registrar within 14 days of
the change, otherwise it will be considered late filing of Form/return.

12

13. What will be the status of the return/ form filed without payment of
filing fee?

Any return filed without filing fee will be considered in the same way as if no
such return had been filed by the Company. Therefore, ensure that the payment
of prescribed fees has been made in the manner as provided above at Q. No. 9 of
this guide.

14. Are there any attachments required to be submitted with the return/
Form?

In case of physical submission, bank challan in original is required to be
submitted as an attachment.

In case of both physical and online submission, company must ensure that
necessary attachments as specified on the form, are attached. Any other
necessary document related to the form may also be attached.

15. Who is responsible to file returns/ forms with the
Registrar/Commission?

Management of the Company is responsible for filing of the forms/returns
within statutory time period. Legal/corporate consultants services may be hired
for this purpose, but responsibility to file statutory returns within due time rests
entirely with Chief Executive and directors. Therefore, ensure that your
legal/corporate consultants have all the necessary information to prepare your
returns. It is advisable to follow up your consultant and dont assume they are
getting the job done.

13
CHAPTER 3

Procedure if returns/ forms are filed late
This part of guide booklet explains the procedure for late filing of returns and
additional fee for late filing.
16. What if form/ return could not be filed within statutory time period?

A form/return is considered to be late filed, if it is filed beyond statutory period
as prescribed under the law. In terms of Section 469 of the Ordinance and
Regulation 10 of Companies (Registration Offices) Regulations, 2003, such return
can be filed late with the Registrar by depositing additional filing fee in addition
to normal filing fee of the returns/forms. Slabs for payment of additional fee for
late filing of document are as under:

Sr. NO. Period of delay Additional filing fee
1. If a document is filed
with a delay of not more
than 15 days
Additional fee equal to
the usual fee specified for
the document in the 6th
Schedule.
with a delay of more than
15 days but not more
than 45 days
two times of the usual fee
specified for the
document in 6th
Schedule.
with a delay of more than
45 days
three times of the usual
fee specified for the
document in 6th
Schedule.

If returns/forms are filed late by the companies, apart from the additional fee as
mentioned above, the companies and its management shall be liable for
committing default of the specific provisions of the Ordinance, which include
heavy amount of fines to the defaulting director/officer of the company.

17. How to pay filing/additional filing fee/penalty?

The filing/additional filing fee/penalty can be paid/deposited through challans
in designated branch of MCB Bank Limited. In case of online submission,
challans are auto generated. Procedure is explained above at Q. No.8 of this

14
guide. Challans in the physical form are also available at all the branches of MCB
Bank Limited. Deposit of filing/additional filing fee/penalty through bank
drafts and pay orders is also acceptable mode of payment.

15
CHAPTER 4

Regular Statutory Returns
This part of guide booklet gives description of regular statutory returns, i.e.,
Forms A/B, Form-29 and annual audited accounts.

ANNUAL RETURNS (FORMS A/B)

Introduction:

Annual return on Form A/B is required to be filed by the companies, in terms of
Section-156 of the Ordinance. An annual return is a snapshot of general
information about a Company giving details of its chief executive, directors, chief
accountant, secretary, legal adviser and auditors, registered office address,
shareholders and share capital.

A company having a share capital files annual return on Form-A

A company not having a share capital files annual return on Form-B

When it is required to be filed:

There may be two situations while filing annual returns:

1. In case Annual General Meeting is held:

If Annual General Meeting is held by the Company, then annual return should
be filed within:

45 days from the date of Annual General Meeting in case of listed
company.

30 days from the date of Annual General Meeting in case of any other
company.

2. In case Annual General Meeting is not held:

If no Annual General Meeting is held in a year, the annual return is filed within:

16

45 days from the 31
st
December of that year in case of listed company i.e.,
on or before 15th Feb. of the following year.

30 days from the 31
st
December of that year in case of any other company
i.e., 30th Jan. of the following year

Listed company may file application to the Registrar to seek extension and the
Registrar may for special reasons extend the period of filing of such return by a
period not exceeding 15 days.

It may be noted that every company is required to file annual return with the
Registrar once in a year whether it has held its Annual General Meeting or not;
whether it is functioning or not.

Note: All listed companies are required to file Form A on a floppy diskette, with the
Commission vide Circular No. 6, Reference No. 1(7) Misc.B.O/2001.

Where to download annual return:

Annual returns are prescribed in 3
rd
Schedule to the Ordinance. It may also be
downloaded from link
http://www.secp.gov.pk/notification/doc/3rdScheduleFormA.doc

What if annual return is late filed/not filed?
If any Company files annual return late or not at all, the Company and its officers
may be fined as under:

In case of listed company: fine upto Rs.10,000/- and further upto
Rs.200/- for every day during which default continues

In case of any other Company: fine up to Rs.2,000/- and further fine up
to Rs.50/- for every day during which default continues

PARTICULARS OF DIRECTORS AND OTHER OFFICERS FORM 29

Introduction:

In terms of Section-205 of the Ordinance, Form 29 is used to report:-

17
Appointment of officers of the company i.e. director, chief executive,
managing agent, secretary, chief accountant; auditors and legal
advisor.
Ceasing of officers of the company (resignation, removal, death etc.).
Any change in particulars/details of officers of the company, for
example, a change of name or new residential address.

When it is required to be filed?

The company has to notify the particulars of officers, as well as change therein,
on prescribed form 29 (in duplicate) within 14 days from happening thereof and
file with register in duplicate.

What if Form-29 is late filed/not filed?

If any Company files Form-29 late or not at all, the Company and its officers may
be fined upto Rs. 500/- and further upto Rs. 50/- for every day during which
default continues

ANNUAL AUDITED ACCOUNTS

Introduction:

In terms of Section-230 to 233 of the Ordinance, all the companies registered
under the Ordinance, are required to keep proper accounting records and
prepare, circulate and approve the Annual audited Accounts in the Annual
General Meeting.

Which companies are required to file Annual Audited Accounts?

Following companies are required to file annual audited accounts with Registrar:

all public companies (including associations not for profit and companies
limited by guarantees); and
private companies having share capital of Rs. 7.5 Million or more.

Filing of Annual Audited Accounts: In terms of Section-242 of the Ordinance,
every listed company is required to file with the Registrar at least three copies
duly signed/authenticated, whereas in case of other companies, at least two
copies, within 30 days from the date of Annual General Meeting. Moreover, in

18
terms of Section-233 of the Ordinance, every listed company is required to file 5
copies of annual accounts with the Registrar and the Commission at least 21 days
before Annual General Meeting.

Filing of Quarterly Accounts: In term of Section-245 of the Ordinance, every
listed company is required to file 1
st,
, 2
nd
and 3
rd
quarter accounts within one
month of end of the quarter.

Who can authenticate/sign the annual and quarterly accounts?

The annual and quarterly accounts are required to be approved by the directors
and signed by the chief executive and at least one director. Where the chief
executive is for the time being not present in Pakistan, then the balance-sheet and
profit and loss account or income and expenditure account of the company
should be signed by at least two directors present for the time being in Pakistan.

What are, the amount of fine and other consequences for non-filing / late filing
of important returns?

Six forms namely Form A, 29, 3, 7, 10 and 29 are very frequently filed by the
companies. The amount of fine of the said returns is as under:

Name of
Form

Maximum initial fine
Fine for
continuing
default

Other
consequences

A

Listed company
Rs. 10,000/-

Other than listed
company
Rs. 2,000/-

Rs. 200/-
per day

Rs. 50/- per
day

29

Rs. 500/-

Rs. 50/- per
day

3 Rs. 500/- per day

------

19
7

Rs. 100/- per day ------

10

Rs. 500/- per day

-------- The charge can
only be
registered with
the leave of
SECP u.s.131 of
the Companies
Ordinance, 1984
21 Rs. 200/- per day

-------

OTHER STATUTORY RETURNS

For detailed information regarding other forms/returns and fees schedule,
kindly visit the link http://www.secp.gov.pk/

List of Company Registration Offices:

Karachi

Phone: 021-99213272, Fax 021-99213279
Lahore

Phone: 042- 99200274, Fax 042-99202044

Islamabad

Phone: 051-9208740, Fax 051-9206893

Peshawar

20

Phone: 091-9213178, Fax 091-9213686
Multan

Multan.
Phone: 061-9200530 Fax 061-9200530

Faisalabad

Faisalabad.
Phone: 041-9220284 Fax: 041-9220152

Quetta

Cantt.
Ph: 081-2844136 Fax: 081-2899134

Sukkur

Ph: 071-5633757 Fax: 071-5630517

21
PUBLIC CONSULTATION

otherwise, please let us know about your opinion/comments on the following
address:



DISCLAIMER

The Guide has been published with the intention to create an awareness of the concept of
the relevant matters. However, the Guide does not tell everything and the opinions or
different situations. If the reader is in doubt while dealing with any specific condition, it
is recommended to refer to the Companies Ordinance, 1984 and allied laws and consult
an adviser for seeking professional advice.

1

SECP
Guide
SERIES

OF PAKISTAN
(SECP)

Foreign Companies Guide


Ph. No.: 051-9207091-4, Fax: 051-9204915

2

Table of Contents
Page

Introduction

Chapter 1 Registration of foreign company 4 - 7

Chapter 2 Filing of Returns/ Accounts 8 - 10
and disclosure requirements
of a foreign company

Chapter 3 Ceasing to have place of business 11
in Pakistan/ Liquidation
of a foreign company

Chapter 4 Further Information 12 -14

3

Introduction

This booklet outlines the statutory requirements under the Companies
Ordinance, 1984 for a Foreign Company. A company which is incorporated or
formed outside Pakistan which establishes its place of business within Pakistan is
called a Foreign Company.

The booklet is intended as an introductory guide only. You can obtain, on
request, further information from the Company Registration Offices. However, it
is advisable to consult a professional for detailed guidance.

The relevant provisions of law are contained in Part XIV of the Companies
Ordinance, 1984 (the Ordinance) and Rules 22 & 23 of the Companies (General
Provisions and Forms) Rules, 1985 (the Rules)

(This is a guide only and should be read with the relevant legislation).

4
CHAPTER 1

REGISTRATION OF A FOREIGN COMPANY

1.1 Who needs to deliver the requisite documents?

Every foreign company which establishes a place of business in Pakistan has to
deliver the requisite documents to the registrar concerned within 30 days of
establishment of a place of business in Pakistan.

1.2 What is a Place of Business?

A place of business includes branch, management, share transfer or registration
office, factory, mine or fixed place of business but does not include an agency
unless the agent exercises a general authority to negotiate and conclude contract
or maintains stock of merchandise on behalf of the company.

Following are the exceptions:

1. Company shall not be deemed to have an established place of business in
Pakistan merely because it carries on business dealings in Pakistan
through a bona fide broker or general commission agent acting in the
ordinary course of his business.

2. The fact that a company has a subsidiary which is incorporated, resident,
or carrying on business in Pakistan, shall not of itself constitute the place
of business of that subsidiary an established place of business of the
company.

1.3 What are the steps for registration of a foreign company?

Registration of a Foreign Company comprises of following two steps:

1. Seek Availability of Company Name
2. Documentation

Step 1. Seek Availability of Company Name:

The first step in the process of registration of a Foreign Company is to seek
availability of name of the proposed company from the registrar. The name of
the proposed company should not be:

Inappropriate
5
Deceptive.
Designed to exploit or offend the religious susceptibilities of the people.
Identical or having close resemblance with already existing company.
Suggesting connection with any Government or its organization or any
international organization.

Fees for seeking availability of company name through online processing is
Rs. 200 and for offline processing is Rs. 500. For detailed procedure for
seeking availability of company name, please see the Company Name
Availability Guide available at the link,
http://www.secp.gov.pk/GuideSeries.asp

Step 2. Documentation

After seeking company name availability, next step is documentation. A
foreign company is required to file the following documents, under the
provisions of the Ordinance, within thirty days of establishing a place of
business in Pakistan, to the registrar concerned:

I. Forms (38-43) as prescribed under the Rules

Form 38: Certified copy of the charter, statute or Memorandum
and Articles of the company.

Form 39: Address of registered office or principal office of the
company.

Form 40: Particulars of directors, Chief Executive and Secretary, if
any, of the company.

Form 41: Particulars of principal officer of the company in Pakistan.

Form 42: Particulars of person(s) resident in Pakistan authorized
to accept service on behalf of the foreign company alongwith the
certified copy of the appointment order, authority letter of board of
directors resolution and consent of the principle officer.

Form 43: Address of principal place(s) of business in Pakistan of
the foreign company.

II. Authority letter in the name of authorized representative of the
foreign company.

III. Fee Challan
6
1.4 What type of certification is required for the documents constituting or
defining the constitution of a foreign company?

A copy of the charter, statute, memorandum and articles of association, or other
instrument, constituting or defining the constitution of a foreign company is
required to be duly certified by:-

(a) the public officer in the country where the company is incorporated in whose
custody the original is committed; or

(b) a notary public of the country where the company is incorporated; or

(c) an affidavit of a responsible officer of the company in the country where the
company is incorporated.

In first two situations, at (a) and (b), certification is required to be authenticated
by a Pakistan diplomatic consular or consulate officer, while in third situation at
(c) above, affidavit shall be signed before a Pakistan diplomatic consular or
consulate officer. [Rule 22 of Companies (General Provisions and Forms) Rules,
1985]

1.5 What are the requirements, if charter, statute, memorandum and articles
of association, or other instrument, constituting or defining the constitution of
a foreign company, is in language other than English?

If the document constituting or defining the constitution of a foreign company,
charter, statute or memorandum and articles of association is not in English or
Urdu, duly certified translation in English or Urdu language is required to be
provided. Translation of document constituting charter in English or Urdu, is
required to be certified to be correct translation of the original. [Rule 23 of
Companies (General Provisions and Forms) Rules, 1985]

Where translation is made outside Pakistan, it shall be authenticated by the
signature and seal of:

the public officer in the country where the company is incorporated; or
a notary public of the country where the company is incorporated.

Signature and seal of the person so certifying shall be authenticated by a Pakistan
diplomatic consular or consulate officer.

Where translation is made within Pakistan, it shall be authenticated by an
affidavit of any person having in the opinion of the registrar, an adequate
7
knowledge of the language of the original and of English or Urdu, as the case
may be.

1.6 What are the fees for registration of a foreign company?

Fees Offline (Rs.) Online (Rs.)
Registration of a Foreign
Company
50,000 25,000
Filing of each Statutory Return/
Form
1,500 600

Fees for online submission have been set lower as compared to manual
submission, to encourage online services.

1.7 Is a foreign company required to obtain any other permission from any
other organization for opening and maintaining of its branch/ liaison office in
Pakistan?

A foreign company is required to obtain a permission letter from the Board of
Investment with a specific validity period for opening and maintaining of its
branch/liaison office in Pakistan. Copy of such permission letter is required to be
furnished with the documents meant for registration.

Renewal/ extension of the permission to open/maintain a branch/liaison office
is also required to be obtained from the Board of Investment on the expiry of the
validity period of the permission originally granted. Whenever such
renewal/extension is granted, a copy must be furnished to the registrar
concerned.

8
CHAPTER 2

FILING OF RETURNS/ ACCOUNTS AND OTHER
REQUIREMENTS OF A FOREIGN COMPANY

2.1 Which provisions of the Ordinance are applicable regarding the change
of name of the foreign company?

The provisions of Section 37 to 41 of the Ordinance relating to the name and any
change in such name are also applicable to a foreign company. A foreign
company becomes subject to the same restrictions on its name as applicable to
other companies which are incorporated in Pakistan.

2.2 Whether a foreign company is required to file any statutory return or
deliver any document to the registrar concerned on change or alteration
therein?

Any change or alteration in particulars of the documents and returns filed at the
time of registration (as specified under section 451 and discussed at 1.3) is
required to be notified within 30 days of such change or alteration (Section 452),
in the following manner:

Form 44: Any change or alteration in the Memorandum of Association,
Charter and Statute etc., previously filed on Form 38, is required to be
filed on Form 44 within 30 days of such change or alteration.

Forms 39, 40, 41, 42 and 43: Any alteration in the information filed on any
of these Forms, is required to file on the same Form.

2.3 Are there any statutory obligations for the foreign companies under the
Companies Ordinance, 1984?

A foreign company is required to comply under Section 454 of the Ordinance
with the following statutory obligations:-

To maintain registers of Pakistani members and debenture-holders,
directors and officers at its principal place of business and keeping it open
to inspection.

To state the country of origin in every prospectus inviting subscriptions
for its shares or debentures in Pakistan.

To exhibit the name of the company and the country of its incorporation
on the outside of every place of business in Pakistan, in letters easily
9
legible in English or Urdu characters and also if the place of business is
beyond the local limits of the ordinary original civil jurisdiction of a High
Court, in the characters of one of the vernacular language used in that
place.

To mention the company's name and country of incorporation in English
or Urdu characters on all letter paper, bill heads, notices, advertisements,
documents and other official publications of the company.

To state the fact that the liability of the members of the company is limited
in legible English or Urdu characters in every prospectus inviting
subscription for its shares, all letter papers, bill heads, notices,
advertisements, and other official publications of the company.

2.4 Is a foreign company obliged to register a mortgage/ charge under the
Companies Ordinance, 1984?

Under the Section 463 of the Ordinance, the provisions of Section 121 to 136 as
applicable to other companies, relating to the registration of mortgage and
charges are also applicable to a foreign company. A foreign company at the time
of creation of a mortgage or charge on their property in Pakistan, is required to
file particulars of the mortgage or charge, together with a copy of the instrument
creating or evidencing thereof, with the concerned registrar. The documents
must be filed within 21 days after the creation of the mortgage/charge, as
required under Section 121 of the Ordinance.

Section 121 of the Ordinance enlists the mortgages and charges to be registered.
If a foreign company has already created a charge on a property in Pakistan,
otherwise registerable under the Ordinance, it is required to file the documents
within thirty days of the establishment of a place of business in Pakistan. All
details about registration of mortgage and charge are available in the SECPs
Guide of Company Mortgages and Charges.

2.5 Does a foreign company maintain books of accounts?

The provisions of Section 230 of the Ordinance, relating to the maintenance of
books of account by companies, apply to the foreign companies to the extent of
requiring them to keep at their principal place of business in Pakistan the books
of account with respect to money received and expended, sales and purchases
made, and assets and liabilities of its business in Pakistan.

10
2.6 Which financial statements are required to be filed with the Registrar
by a foreign company registered in Pakistan?

Under the provisions of Section 453 of the Ordinance, A foreign company is
required to file with the registrar concerned the following accounts/ documents
every year within 45 days of filing of the accounts to the public authority of the
country of origin, or within six months of the date upto which the relevant
accounts are made up, whichever is earlier:

(a) Form 45 - containing places of business of the company in Pakistan,
alongwith Annual audited accounts in respect of its operations within
Pakistan.

(b) Global audited accounts.

(c) List of Pakistani members and debenture holders.

Note: All foreign companies must deliver accounts - there is no exception. The accounts
for its operations in Pakistan would be prepared and audited just like a public company.

Global accounts are the accounts which a foreign company files with the
authorities in country of origin. If a foreign company is not required to file the
Accounts in country of origin, it shall prepare Global Accounts and get the same
audited for purpose of filing of such accounts under the Ordinance like a public
company.

2.7 What are the consequences of failure to comply with the requirements
of registration or reporting any change/ alteration in any return/ document?

According to the provision of Section 456 of the Ordinance, failure by a foreign
company to comply with any of the requirements of registration or reporting any
change/ alteration in returns/ documents shall not affect the validity of any
contract, dealing or transaction entered into by the company or the companys
liability to be sued in respect thereof; but the company shall not be entitled to
bring any suit, claim any set off, make any counter claim or institute any legal
proceedings in respect of any such contract, dealing or transaction.

11
CHAPTER 3

CEASING TO HAVE PLACE OF BUSINESS IN PAKISTAN/ LIQUIDATION
OF A FOREIGN COMPANY

3.1 How does a foreign company cease its activities in Pakistan?

Under the Section 458 of the Ordinance, if a foreign company ceases to have
place of business in Pakistan, it is required to give notice to the registrar
concerned at least 30 days before it intends to cease to have any place of business
in Pakistan on prescribed Form 46 and to publish a notice of such intention at
least in two daily newspapers circulating in the Province(s) in which such
place(s) of business is situated.

All obligations of the company to deliver documents to the registrar concerned
ceases from the date of such intention to cease to have any place of business in
Pakistan, except that such foreign company does not have any other place of
business in Pakistan.

3.2 What are the requirements if a foreign company goes into liquidation in
the country of its incorporation?

If a foreign company having an established place of business in Pakistan goes
into liquidation in the country of its incorporation, it is required to:

a) give notice to the registrar concerned within 30 days;

b) simultaneously publish a notice at least in two daily newspapers
circulating in the Province or Provinces or the part of Pakistan not
forming part of a Province, as the case may be, in which its place or
places of business are situated

c) furnish to the registrar concerned all returns relating to the
liquidation and the liquidation account in respect of such portion of
the companys affairs as relates to its business in Pakistan, within
thirty days of the conclusion of the liquidation proceedings; and

d) publish a statement on every invoice, order, letter paper, bill head,
notice of other publications in Pakistan that the company is being
wound up in the country of its incorporation.

12
CHAPTER 4

FURTHER INFORMATION

4.1 Where can you obtain the Forms and SECP Guide series?

The Commission has published a series of its Guides. These Guides briefly
describe procedures of important matters relating to the Companies Ordinance,
1984, and the rules and regulations made thereunder.

Statutory forms and guidance booklets are available, free of charge from our
website,http://www.secp.gov.pk/.

4.2 How does a company send information to the registrar concerned?

You may file documents to the concerned Registrar, by hand, personally or by
post or through courier to the Company Registration Offices concerning your
company: Documents can also be submitted online through eServices.

List of Company Registration Offices:

Karachi

Phone: 021-99213272, Fax 021-99213279
Lahore

Phone: 042- 99200274, Fax 042-99202044

Islamabad

Phone: 051-9208740, Fax 051-9206893
13

Peshawar

Phone: 091-9213178, Fax 091-9213686
Multan

Multan.
Phone: 061-9200530 Fax 061-9200530

Faisalabad

Faisalabad.
Phone: 041-9220284 Fax: 041-9220152

Quetta

Cantt.
Ph: 081-2844136 Fax: 081-2899134

Sukkur

Ph: 071-5633757 Fax: 071-5630517

14
PUBLIC CONSULTATION

address:



DISCLAIMER

The Guide has been published with the intention to create an awareness of the concept of
the relevant matters. However, the Guide does not tell everything and the opinions or
different situations. If the reader is in doubt while dealing with any specific condition, it
is recommended to refer to the Companies Ordinance, 1984 and allied laws and consult
an adviser for seeking professional advice.

SECP
Guide
SERIES

SECURITIES AND EXCHANGE COMMISSION OF
PAKISTAN

A Guide for
Appointment of Statutory Auditors
and Ancillary Matters

NIC Building, J innah Avenue, Islamabad, Pakistan
Ph. No.: 051-9207091-4, Fax: 051-9204915

2

Table of Contents
Page #

Introduction 3

Chapters

1. Appointment of Auditors 4 - 7

2. Qualification and Disqualification of Auditors 8 - 9

3. Powers and Duties of Auditors 10 - 12

4. Removal of Auditors 12 - 13

5. Penalty for Non-Compliance with Audit related provisions 13

6. Further Information 14 - 16

3

Introduction

An auditor is a person who is assigned the job to audit the financial statements of
a company in accordance with the provisions of law and auditing standards as
applicable in Pakistan. Appointment of an auditor is mandatory by every
company, as required under the provisions of Section 252 of the Companies
Ordinance (the Ordinance).

This guide outlines the procedure for appointment, removal of company
auditors, and other ancillary matters related to the auditor of a company as laid
down under relevant provisions of the Ordinance. It also explains the rights and
duties of a company auditor.

This is a guide only and should be read with the relevant legislation. You will
find the relevant provisions of law in Sections 252 to 260 of the Ordinance.

Some of the other relevant legislations may include:

SECP Rules, Notifications and Circulars etc; and
Listing Regulations/ Code of Corporate Governance

4

CHAPTER 1

Appointment of Auditor

1. What is Audit?

An audit is an unbiased examination and valuation of the financial statements of
an organization to form an independent opinion.

The objective of audit of financial statements is to enable the auditor to express
an opinion whether the financial statements are prepared, in all material
respects, in accordance with an applicable financial reporting framework.

An audit under the Ordinance is conducted in accordance with the provisions of
auditing standards as applicable in Pakistan and based on the audit, the
company auditor expresses an opinion on such financial statements in
accordance with requirements of Section 253(3) of the Ordinance.

Further, the company auditor of a holding company is also required to report on
consolidated financial statements in accordance with Section 237 of the
Ordinance.

2. Who is an Auditor?
An auditor is a person who is assigned the job to audit the financial statements of
a company. He is appointed under section 252 of the Ordinance by a company to
audit its financial statements. The preparation and presentation of financial
statements is the responsibility of management of the company and auditor is
only responsible for audit of financial statements and giving an opinion on the
fairness of the financial statements.

5

3. How is an Auditor of a company appointed?

First Auditor

The directors appoint the first auditor of the company within sixty days of
the date of incorporation of the company under section 252 (3) of the
Ordinance. The first auditor holds office until the conclusion of the first
annual general meeting of the company.

If the directors fail to appoint first auditor, the members in general
meeting of the company may appoint the first auditor.

In case, the first auditor is not appointed within one hundred and twenty
days of the date of incorporation of the company, the Commission may
appoint the auditor to fill the vacancy.

Subsequent Auditor

On the conclusion of first annual general meeting, first auditor stands
retired. Thereafter, the auditor is appointed by the members at an annual
general meeting and such auditor holds the office until the conclusion of
the next annual general meeting. The retiring auditor of the company is,
however, eligible for re-appointment.

A notice shall be required for a resolution at a companys annual general
meeting appointing as auditor a person other than a retiring auditor, in
accordance with the provisions of Section 253 of the Ordinance.

A company is required to send intimation thereof to the registrar concerned, on
Form-29 under section 205 of the Ordinance, within fourteen days from the date
of appointment of an auditor, along with the consent in writing of the auditor
concerned as per requirement of section 253 (5) of the Ordinance.

The Form- 29 to be submitted to the Commission shall include particulars of
auditor as required in Section 205 of the Ordinance and Rule 14 C of the
Companies (General Provisions and Forms) Rules, 1985 (the Rules).

6

4. Who fixes remuneration of an Auditor?

In case an auditor is appointed by the company directors or the Commission, the
directors or the Commission, as the case may be, shall fix the remuneration.

In all other cases, by the company members in general meeting or in such
manner as the general meeting may determine.

5. How is an Auditor appointed in case of casual vacancy?

Casual vacancy of the auditor is filled by the directors but the surviving auditor
may continue to hold office till vacancy is filled. Auditor appointed to fill up the
casual vacancy holds office till the conclusion of the next annual general meeting.

A company is required to send intimation thereof to the registrar concerned, on
Form-29 under section 205 of the Ordinance, within fourteen days from the date
of appointment of an auditor, along with the consent in writing of the auditor
concerned.

In case, a casual vacancy in the office of an auditor is not filled within thirty days
after the occurrence of the vacancy, the Commission may appoint the auditor.

6. When does the Commission appoint Auditor?

The Commission has the power to appoint auditor under the following
circumstances: -

(1) If first auditor is not appointed within one hundred and twenty days of
the date of incorporation of a company.

(2) Auditor is not appointed at an annual general meeting and directors also
fail in filling the vacancy within thirty days thereafter.

(3) Auditor appointed is unwilling to act as auditor of the company.

(4) A casual vacancy in the office of an auditor is not filled within thirty days
after the occurrence of the vacancy.

(5) Auditor is removed by the members through special resolution in a
general meeting.
7

(6) Where a company appoints an unqualified person as auditor or a person
who is subject to any disqualifications to act as an auditor.

7. What is the company required to do when the Commissions power
becomes exercisable for the appointment of auditor?

The company is required to give notice of the fact to the Commission, within one
week from the date on which the Commissions power to appoint auditors
becomes exercisable.

As soon as the auditor is appointed by the Commission, the company is required
to send intimation thereof to the registrar concerned on Form 29 within fourteen
days from the date of the appointment of auditor alongwith copy of order by the
Commission.

Which documents are required to be submitted to the SECP for appointment
of auditors?

Following documents are required to be submitted by a company to the
Commission for appointment of auditor:

Notice to the Commission under Section 252(6) of the Ordinance,
Reasons as to how the Commissions power to appoint auditors becomes
exercisable,
Period of audit for which auditor is to be appointed; and
Consent letter from the proposed auditor.

In case of removal of an auditor, the following additional documents are
required to be submitted:

Justification for removal of existing auditor,
Copy of the notice of the general meeting sent to the members and
outgoing auditors, mentioning the agenda to remove the auditor,
Minutes of the general meeting in which resolution to remove the existing
auditor is passed,
Copy of special resolution on Form-26, certified by the registrar
concerned; and
Copy of the Form 29 notifying the removal of auditor, duly certified by
the registrar concerned.
8

CHAPTER 2
Qualification and Disqualification of Auditor

1. Who is qualified for appointment as auditor?

A chartered accountant is qualified to become the auditor of a public company or
a private company which is a subsidiary of a public company or a private
company having paid up capital three million rupees or more.

An association not for profit under section 42 of the Ordinance and companies
limited by guarantee under section 43 of the Ordinance, are also required to
appoint an auditor, qualified as chartered accountant.

2. Who is disqualified for appointment as auditor?

Following persons are ineligible for appointment as auditor of a company:-

(1) Present or past director, officer or employee of the company during the
preceding three years.

(2) A partner or person in the employment of a director, officer or employee of
the company.

(3) Spouse of a director of the company.

(4) A person who is indebted to the company. A person who owes a sum of
money not exceeding five hundred thousand rupees to a credit card issuer or
a sum to a utility company in form of unpaid dues for a period not exceeding
ninety days, shall not be deemed to be indebted to the company.

(5) A body corporate.

(6) A person or his spouse or minor children, or in case of a firm, all partners of
such firm who holds any shares of an audit client or any of its associated
companies provided that if such a person holds shares prior to his
appointment as auditor, whether as an individual or a partner in a firm, the
fact shall be disclosed on his appointment as auditor and such person shall
disinvest such shares within ninety days of such appointment. Such listed
9
company shall take measures to ensure that the auditor disclose the interest
in listed company within fourteen days of appointment.

(7) A person who is disqualified for appointment as auditor of the companys
subsidiary or holding company or a subsidiary of that holding company.

(8) Cost auditor, if appointed by the company.

Requirements of Listing Regulations

(9) No listed company shall appoint or continue to retain any person as an
auditor, who has been found guilty of professional misconduct, by the
Commission or by Court of Law for a period of three years unless a lesser
period is determined by the Commission.

Requirements of Code of Corporate Governance

(10) No listed company shall appoint as external auditors a firm of auditors
which has not been given a satisfactory rating under the Quality Control
Review programme of the Institute of Chartered Accountants of Pakistan.

(11) No listed company shall appoint as external auditors a firm of auditors
which firm or a partner of which firm is non-compliant with the
International Federation of Accountants' (IFAC) Guidelines on Code of
Ethics, as adopted by the Institute of Chartered Accountants of Pakistan.

(12) All listed companies in the financial sector shall change their external
auditors every five years.

All listed companies other than those in financial sector shall, at a
minimum, rotate the engagement partner after every five years.

The appointment as auditor of a company of an unqualified person, or of a
person who is subject to any disqualifications to act as such, shall be void. An
auditor shall deem to have vacated his office as an auditor with effect from the
date on which he becomes so disqualified.

10

CHAPTER 3
Powers and Duties of Auditor

1. What are the rights of an auditor?

An auditor has right of access to the books, papers, accounts and vouchers of the
company, whether kept at registered office of the company or elsewhere. He is
entitled to require from the company and the directors and other officers of the
company such information and explanation as he thinks necessary for the
performance of the duties of the auditor.
In the case of a company having a branch office outside Pakistan, it shall be
sufficient if the auditor is allowed access to such copies of, and extracts from, the
books and papers of the branch as have been transmitted to the principal office of
the company in Pakistan.
The auditor of a company is entitled to attend any general meeting of the
company and to receive all notices and any communications relating to any
general meeting which any member of the company is entitled to receive. He is
entitled to be heard at any general meeting which he attends, on any part of the
business concerning him as auditor.
2. What are the major duties of an auditor?

The auditor is required to make a report to the members of the company on the
financial statements and books of account of the company and on every balance-
sheet and profit and loss account or income and expenditure account. His report
covers all other documents forming part of the balance-sheet and profit and loss
account or income and expenditure account, including notes, statements or
schedules annexed with the financial statements and which are laid before the
members of company in general meeting during his tenure of office.
The auditors report to the members covers the following matters:-
(a) Confirmation as to whether all information and explanations necessary for
the purposes of the audit have been obtained or not

(b) Confirmation as to whether proper books of account are being maintained
by the company as required by Ordinance or not.

(c) Confirmation ads to whether that preparation of the balance sheet and the
profit and loss account or the income and expenditure account are in
11
conformity with the Ordinance and in agreement with the books of
accounts;

(d) Opinion regarding true and fair view of the following:

o The balance sheet as at the end of its financial year
o the profit and loss account or the income and expenditure account
and of the profit or loss or surplus or deficit for its financial year
and
o statement of changes in financial position or sources and
application of funds of a listed company, of the changes in the
financial position or the sources and application of funds for its
financial year.

(e) Opinion regarding the following:

o incurring of expenditure during the year for the purposes of the
companys business and
o conducting the business, making investments and incurring of
expenditure during the year in accordance with the objects of the
company.

(f) Opinion regarding:

o deduction of Zakat deductible at source under the Zakat and
Usher Ordinance, 1980; and

o deposit thereof in the Central Zakat Fund, if applicable.

3. What is qualified auditors report and how is it dealt with?

If the auditor answers any of the matters given above in the negative or with a
qualification, the reasons for such an answer shall be provided in the auditors
report. An auditor is also required to state the factual position to the best of his
information.

4. What is the prescribed format of an auditors report?

The auditors report on the financial statements of a company (other than a
banking company) is required to be given on Form 35 A, as prescribed under the
Rule 17 A of the Companies (General Provisions and Forms) Rules, 1985 (the
Rules). For a banking company, the prescribed form is Form 35 B, as prescribed
under 17 B of the Rules. An auditor of the holding company is also required to
12
report on consolidated financial statements, on Form 35 C and review report on
the subsidiary accounts on Form 35 D, as prescribed under 17 C of the Rules.

The forms are downloadable at the link available at SECPs web-site,
http://www.secp.gov.pk./divisions/Portal_RD/Forms.htm

5. Is it mandatory for the auditors to attend the AGM?

In the case of a listed company, the auditor (partner of the firm) or his authorized
representative (authorized by him in writing) is required to be present in the
general meeting in which the balance-sheet and profit and loss account and the
auditors report are to be considered. They have to reply to the questions of
members. In case of other companies, the auditors are given the notices and they
may attend the AGM, but their presence is not mandatory.

6. What are the requirements regarding reading and inspection of the
auditors report?

The auditors report is read before the company in the general meeting. This
report will remain open for inspection by any member of the company.
7. How is the auditors report signed?

The person, appointed as auditor, or in case where a firm is appointed, a partner
practicing in Pakistan, shall sign the auditors report or authenticate any other
document, required to be authenticated by the auditor(s).
The report shall be dated and shall indicate the place at which it is signed by the
auditor.

CHAPTER 4
Removal of auditor

1. How can an auditor be removed?

Members may remove an auditor from office during their tenure through
passing special resolution in a general meeting. There should be a proper
justification for removing the auditor in compliance with Section 253(3) of the
Ordinance.

13
A company is also required to send intimation thereof to the registrar concerned,
on Form-29, under section 205 of the Ordinance within fourteen days from the
date of removal.

CHAPTER 5
Penalty for non compliance with the audit related provisions
1. What is the penalty for non-compliance with the provisions by
companies?
Section 259 of the Ordinance deals with the penal provisions, i.e., if default is
made by a company in complying with any of the provisions of Sections 252 to
254 or 256 to 258, the company and every officer of the company who is
knowingly and willfully a party to the default shall be punishable with a fine
which may extend to fifty thousand rupees and in case of continuing default to a
further fine which may extend to two thousand rupees for every day after the
first during which the default continues.
2. What is the penalty for non-compliance with the provisions by
auditors?
Section 260 of the Ordinance deals with the penal provisions, i.e., if any auditors
report is made, or any document of the company is signed or authenticated
otherwise than in conformity with the requirements of section 157, Section 255 or
Section 257 or is otherwise untrue or fails to bring out material facts about the
affairs of the company or matters to which it purports to relate, the auditor
concerned and the person, if any, other than the auditor who signs the report or
signs or authenticates the document, and in the case of a firm all partners of the
firm, shall, if the default is willful , be punishable with fine which may extend to
one hundred thousand rupees.
If the auditors report to which sub-section 260 (1) applies is made with the intent
to profit such auditor or any other person or to put another person to a
disadvantage or loss or for a material consideration, the auditor shall, in addition
to the penalty provided by that sub-section, be punishable with imprisonment
for a term which may extend to one year and with fine which may extend to one
hundred thousand rupees.

A person who, not being qualified to be an auditor of a company, or being or
having become subject to any disqualification to act as such, acts as auditor of a
company shall be liable to fine which may extend to twenty five thousand
rupees.
14

CHAPTER 6

Further information
1. Where does a company get forms and guidance booklets?

This is one of a series of the Commissions guidance booklets, which provide a
simple guide to the Ordinance, and the rules and regulations made thereunder.
Statutory forms and guidance booklets are available, free of charge from the
SECP Headquarters and the Companies Registration Offices (CROs). The
quickest way to get them is through our website, http://www.secp.gov.pk.

2. How does a company send information to the Registrar?

You may file documents to the concerned Registrar electronically by following
the link https://eservices.secp.gov.pk/eServices, or in manual form by hand
(personally or by post or through courier).

Phone: 051-9208740, Fax 051-9208740

Phone: 021-99213272, Fax 021-9213278

Phone: 042- 9200274, Fax 042-9202044

Phone: 061-9200530 Fax 061-9200530

1st Floor, Peoples Colony, Small D Ground, Faisalabad.
Phone: 041-9220284 Fax: 9220284
15

Phone: 091-9213178, Fax 091-9213178

382/3, (IDBP House), Shahrah-e-Hali, Quetta Cantt.
Ph: 081-2844136

Ph: 071-5630517
croskr@hotmail.com

PUBLIC CONSULTATION

address:
NIC Building, Jinnah Avenue, Blue Area,



DISCLAIMER

The booklet has been published with the intention to create an awareness of
the concept of the relevant matters. However, the booklet does not tell
everything and the opinions or legal interpretations, contained in the
booklet are circumstantial and may vary under different situations. If the
reader is in doubt or dealing with any specific condition, it is recommended
to refer to the Companies Ordinance, 1984 and allied laws and consult an
adviser for seeking professional advice.

16

SECP GUIDE SERIES

1. Promoters Guide
4. Insurance Guide
Investors Guide (Vol.-II)
8. Investors Guide for Lodging Complaints
9. Guide on Accounts and Accounting Reference Dates
10. Guidebook on Further Issue of Shares otherwise than Rights
11. Guidebook on Issue of Preference Shares
12. Conversion of Status of Companies
13. Shareholders Rights
14. Winding up and Dissolution of Companies
15. Investigation into the affairs of a company
16. Foreign Companies Guide
18. Licencing & Registration of Associations Not-For-Profit

NIC Building, 63 Jinnah Avenue, Islamabad, Pakistan
Tel: 051-9207091-4, UAN: 111 117 327
Fax: 051-9204915
Guide
for Listing of
Companies
through
Initial
Public
Offerings
ISE
Guide for Listing of Companies
through Initial Public
Offerings
NIC Building, 63 Jinnah Avenue, Islamabad, Pakistan
Tel: 051-9207091-4, UAN: 111 117 327
Fax: 051-9204915
DISCLAIMER
This Guidebook has been prepared with the intention to create
awareness of the process of Initial Public Offerings (IPOs) for the
general public and in particular to facilitate the Issuers/Offerers.
However, the Guidebook does not tell each and everything and the
opinions or legal interpretations, contained in it are circumstantial and
may vary under different situations. The information contained herein is
subject to change without prior notice. The Securities and Exchange
Commission of Pakistan makes no guarantee and assumes no liability
for any errors or omissions of the information. No one can use the
information for any claim, demand or cause action.
If the reader is in a doubt while dealing with any specific condition, it is
recommended to refer to the Companies Ordinance, 1984 and allied
laws and consult professionals of the relevant field for seeking advice.
1
1
2
5
9
10
10
11
11
12
TABLE OF CONTENTS
Introduction
Purpose of Listing
Benefits of Listing
Major Legal Requirements applicable to IPO's and Listing
Criteria for Listing
Companies' Readiness for Listing
Listing Incentives by the Government
Intermediaries to IPO's
Method of Offering of Shares
Cost involved in Listing
INTRODUCTION
Listing of a company or a security on a stock exchange is all about
raising money to enable businesses to meet their funding needs. When
you need money on a large scale or you are a small business looking to
expand, you might need more money than your close acquaintances
can provide. At this stage some people look to borrow money from the
banks or venture capitalists. Others decide to try and raise money from
a wider group of investors through stock market in the form of equity,
quasi equity or debt.
Listing means registration of a company or a security on a stock
exchange for trading and display of its name and quotation on the
official list of the stock exchange. The securities may be of any public
limited company, corporation or Government.
This Guidebook may be helpful to understand the purpose of listing, its
benefits, minimal requirements and procedure of listing. The
Guidebook refer various provisions of the applicable laws, rules and
regulations, the checklist of the contents of an equity prospectus, the
format of applications for seeking approval of a stock exchange and the
Securities and Exchange Commission of Pakistan (SECP or the
Commission) and checklist of documents required to be provided to the
stock exchange and SECP along with the application. The Guidebook
can assist the Issuers and their Lead Manager/Consultants/Advisors,
the Book Runners and the Underwriters to make their Initial Public
Offering (IPOs) smoothly and efficiently.
PURPOSE OF LISTING:
The primary purpose of listing of a company on a stock exchange is to
raise funds for meeting financial needs, however, listing may be done
for other reasons like realization of the investment by the existing
shareholders and raising profile of the company etc.
For all the glamour associated with going public, the fact remains that
the decision to do so should be based on hard business realities. As an
owner or major shareholder, you must weigh the advantages and
disadvantages of going public in light of the plans and goals you have
set for your company.
1
suppliers, investors and the media. As a result more
business opportunities become available.
(b) A listed company is included in the stock exchange's
Index Series, thus creating additional exposure for the
company both locally and internationally and,
therefore, may be covered by the analyst in their
reports.
(c) A listed company may also be considered for awards
like stock exchange top 25 companies awards that
bring credibility and investors' confidence in the
company.
(d) Listed companies are benefitted of the general
perception that after listing financial and business
strength of the companies is improved.
(e) A listed company can use its shares to fund
acquisitions through mergers as shareholders of the
merged entity might be more interested in listed
shares.
(iii) Listing creates value and liquidity for shareholders,
because listed shares are independently assessed
and valued. Listing boosts liquidity and help in
broadening the shareholders base. Shareholders of
listed companies can realize their investment easily.
(iv) Shares of listed companies can be sold easily at a fair
price through secondary offering by the company or by
the sponsors/promoters through divestment.
The decision to list your company needs to be made once you have
realistically assessed your company, its management, resources,
stage of development, long term strategy, goals and future prospects.
You would also need to consider the timing of a listing in terms of market
conditions and where your business is at that point in time.
Listing is accompanied by benefits as well as responsibilities and public
scrutiny. There are many specific requirements that you need to comply
with as a listed entity. It would be a good idea to familiarize yourself with
these requirements to assess whether your company will be able to
fully comply.
You may want to list your company for various reasons. Perhaps you
need access to capital to further your growth, raise your profile or the
shareholders may want to realize their investment in the company.
BENEFITS OF LISTING:
Some of the benefits of listing of a company on a stock exchange are
given as under:
(1) For the Issuing Company:
(i) Additional avenue for fund raising:
Listed companies have the incentive to tap capital market as an
additional avenue for fund raising through IPOs, secondary
offerings and right issues for financing Green Field
Projects/new projects, BMR and expansions. It is often
cheaper to raise equity capital rather than to rely on debt
finance, to fund the expansion of a company's business. It is
easier for a listed company to raise equity from the capital
market any time.
(ii) Improvement in the company's credentials:
(a) Listing raises company's public profile with customers,
3 2
(vi) Increased disclosure/reporting requirements enhance
transparency and curtails risks of the investors.
(vii) Attract international investors who can easily trade in
listed shares without any restrictions which helps in
image building of the country's capital market in the
eyes of foreign investors.
(4) For Government:
(i) A source of revenue generation through privatization
of State Owned Organizations.
MAJOR LEGAL REQUIREMENTS APPLICABLE TO
IPO's AND LISTING:
(1) Application for Listing to the Stock Exchange:
An issuer that intends to list any of its security on a stock exchange shall
make an application to such stock exchange under section 9 of the
Securities and Exchange Ordinance, 1969. The application under
section 9 shall be made on the format given at Annexure-I and shall be
accompanied by such documents and information as mentioned
therein. Any security offered and issued to the general public needs to
be listed on a stock exchange so that the holders of such security is
provided an exit route.
(2) Issue of shares by a company or a body corporate
through IPO:
A company may raise fund for meeting its financing needs through
issue of securities i.e. shares, bonds etc. to various classes of investors
including the general public. Whenever a company decides to raise
fund from the general public, it is required under section 57 of the
Companies Ordinance, 1984 (the Ordinance) to issue, circulate and
publish, after approval of SECP, prospectus i.e. a document inviting the
general public for subscription of securities of the company. In case of a
(v) Listing helps in offering of Employees Stock Option
Schemes to retain hardworking professionals and gain
their loyalties.
(vi) Listing helps in attracting institutional and professional
investors as business partners.
(2) For economy of the country:
(i) Increase in revenue in the form of income tax paid by
the Stock Exchanges, Depository Company, Clearing
Company and members of the Stock Exchanges.
(ii) Capital Gain Tax (CGT) paid by the investors on gain
on sale of shares.
(iii) Listing provides investment opportunities to the
investors and so savings of individuals are mobilized.
(iv) Decrease in dependence on the banking sector and so
resources of the banking sector can be utilized for the
development of the under-developed sectors of the
economy.
(v) Increase in employment opportunities.
(3) For capital market:
(i) Market capitalization increases.
(ii) Investor base increases.
(iii) Inflow of foreign portfolio investment increases.
(iv) Revenue of stock exchange and related inter-
mediaries increases.
(v) Recognition of the local stock exchange globally due
to increase in listed companies, market capitalization
and investor base.
5 4
the Contents of the prospectus provided at Annexure-IV attached
herewith.
The signatories to the prospectus, the promoters, the existing directors,
the persons agreed to become director and other persons named in the
prospectus as expert in their respective areas for which they have given
consent in writing to act as and be named therein have to make sure
that no misstatement has been given in the prospectus and that no
material fact or information which was required to be disclosed has
been concealed.
(6) Issue size and Allocation of Capital:
Keeping in view the minimum bench mark of Rs.200 million paid-up
capital, the size of issue and allocation to various categories of
investors has been set as under:
(i) In case post issue paid-up capital of the issuing company
is up to Rs.500 million, at least 50% of such capital shall
be offered to the general public; and
(ii) In case capital of the issuing company is beyond Rs.500
million, public offer shall be at least Rs.250 million or
25% of the post issue paid-up capital, whichever is
higher.
(iii) In case of offer for sale of shares by an existing
shareholder, the offer size shall be atleast Rs. 100 million
or 25% of the paid up capital of the company whichever is
lower.
(iv) Upto 5% of the issue size can be allocated to employees
of the issuing company.
(v) Upto 20% of the issue size can be allocated to overseas
Pakistanis.
(vi) In case of Modarabas at least 70% of the issue size shall
be allocated to general public/retail investors.
foreign company having place of business in Pakistan, section 461
read with section 57 of the Ordinance is relevant. The application
under section 57 shall be made on the format given at Annexure-II and
shall be accompanied by such documents and information as
mentioned therein.
(3) Offer for sale of shares to the public by an existing
shareholder:
A person who holds more than ten percent shares in a company or a
body corporate may offer for sale such shares in totality or a part thereof
to the general public through an offer for sale document i.e. prospectus
published, issued and circulated after approval of the Commission
under section 62 read with section 57 of the Ordinance. In case of offer
for sale of shares of a foreign company having place of business in
Pakistan, section 461 read with section 62 and 57 of the Ordinance are
relevant. The application under section 62 shall be made on the format
given at Annexure-III and shall be accompanied by such documents
and information as mentioned therein.
(4) Eligibility for Listing:
Any public limited company or body corporate having minimum paid up
capital of two hundred million rupees (Rs.200 million) may apply for
listing on a stock exchange in Pakistan. Section 2 of the Ordinance
prohibits private limited companies to invite general public for
subscription of their securities including shares. A foreign company
having place of business in Pakistan can also apply for listing on a stock
exchange in Pakistan.
(5) Disclosures requirements:
The prospectus to be issued, circulated and published for information of
the general public should contain atleast all those information, reports
and material as required under section 53 read with part-I of the Second
Schedule of the Ordinance. The prospectus should contain all such
other material and information which in the opinion of its signatories are
necessary for decision making by the prospective investors. While
drafting the prospectus, the issuers and their Lead Manager/Advisors/
Consultants to the Issue, the Book Runner, Legal Advisors, Auditors
and other related parties are advised to also consult the Checklist on
7 6
said rules are available at the link
http://www.secp.gov.pk/corporatelaws/pdf/Feb_02_1
996.pdf
(iv) The Securities and Exchange Rules, 1971: The said
rules are available at the link
http://www.secp.gov.pk/Services/laws_policies.asp#r
ules
(v) Guidelines for the preparation of Prospectus: The
said Guidelines are available at the link
http://www.secp.gov.pk/otherlinks/GuidelinesCheckli
st/Guidelines.pdf
(vi) Listing Regulations of the Stock Exchanges: The
said regulations are available at the link
http://www.kse.net.pk http://www.lahorestock.com
and http://www.ise.com.pk
CRITERIA FOR LISTING
For listing of a company on a stock exchange, the following criterion
shall be followed:
(i) Application to the stock exchange under section 9 of
the Securities and Exchange Ordinance, 1969 read
with the Listing Regulations and copy thereof to SECP.
(ii) In case of issue of new shares by a company,
application to SECP under section 57 of the
Companies Ordinance, 1984 read with the Companies
(Issue of Capital) Rules, 1996.
(iii) In case of divestment by any shareholder of the
issuing company, application to SECP under section
Keeping in view the appetite for IPOs, the offer price, nature of business
of the issuer and issuer's pattern of shareholding, the requirement of
minimum allocation to retail investors can be relaxed as deemed
appropriate by SECP.
(7) Circulation and Publication of Prospectus in Abridged
Form:
The prospectus is required to be circulated to the stock exchange at
which the company is listed or proposed to be listed and all the bankers
to the issue in addition to make it available at the registered office of the
issuer. The prospectus is required to be published at least in one Urdu
and one English daily Newspaper. In order to make the publication cost
minimal, the law allows publication of the prospectus in abridged form in
terms of Section 53 of the Ordinance.

(8) Laws, Rules, Regulations and Guidelines applicable on
IPOs and Listing:
Some of the major laws applicable on public offering of securities and
listing of a company or a security on a Pakistani stock exchange are
referred to as under:
(i) Part V of the Ordinance namely, Prospectus,
Allotment, Issue and Transfer of shares and
debentures, Deposits etc. mainly section 53, 57 and
62 and second Schedule. Section 461 of part XIV of
the Ordinance, in case the issuer is a foreign
company. The said Ordinance is available at the link:
http://www.secp.gov.pk/corporatelaws/pdf/Companie
sOrdinance984-17-03-2011.pdf
(ii) Section 9 of the Securities and Exchange
Ordinance, 1969 which is available at link
http://www.secp.gov.pk/corporatelaws/pdf/secord196
9_sep08.pdf
(iii) The Companies (Issue of Capital) Rules, 1996: The
9 8
LISTING INCENTIVES BY THE GOVERNMENT:
Government of Pakistan through the Finance Act, 2011 has announced
a tax holiday for five years for newly established industrial
undertakings, BMR and expansion provided such projects are financed
entirely through equity. For detail Sections 65D and 65E of the Income
Tax Ordinance, 2001 may be consulted. To be benefitted of this
incentive, the companies may raise equity through the capital market
for financing their projects.
INTERMEDIARIES TO IPO:
In order to make the IPOs smooth and efficient, the issuing company
before publication of the prospectus shall appoint the following
intermediaries:
Book Runner to the Issue, in case of book building.
Lead Managers/Advisor/Arranger/Consultant to the
Issue, if so required by the Issuer.
Underwriters, where required.
Independent Share Registrars and Transfer Agents/
The Balloter.
Bankers to the Issue.
Legal Advisor to the Issue.
METHODS OF OFFERING OF SHARES:
The most popular methods used for offering of shares include the Fixed
Price Method and the Book Building Process. The method that is used
in most of the jurisdictions is the Book Building Process. Salient
features of these methods are given as under:
(i) Fixed Price Method:
Under this method the offer price is set by the issuer or the
Offerer, as the case may be. The issue is underwritten through
62 read with section 57 of the Companies Ordinance,
1984 read with the Companies (Issue of Capital)
Rules, 1996.
(iv) After approval of SECP under section 57 or 62, as the
case may be, approval of the stock exchange for
allocation of dates for publication of prospectus,
commencement of bidding period (in case the offer is
made through Book Building mechanism) and
commencement of period for public subscription shall
be sought. The period for public subscription shall not
be earlier than seven days and later than thirty days
from publication of the prospectus.
(v) For acceptance of bids, display of order book and
basis of allotment of shares etc, the procedure
provided in the prospectus read with the relevant laws
shall be followed.
COMPANIES' READINESS FOR LISTING:
Companies that are ready to go public, generally have certain specific
characteristics. Most of such companies have progressed beyond the
start-up phase to a certain size and have become profitable; with
prospects of further significant growth.
The market readily accepts companies that have achieved the
followings:
(i) A track record of revenue growth
(ii) Capable leadership
(iii) An experienced and credible management team
(iv) Operations in a strong industry with potential for high
performance
11 10
This Guidebook, the Profarma
applications and checklists mentioned
herein can be downloaded from the
following Website
Http://www.secp.gov.pk
13 12
independent institutions which provide comfort to the
prospective investors as far as the offer price is concerned. The
basis of issue price is disclosed in the prospectus where the
issuer gives detail about the qualitative and quantitative factors
justifying the issue price. In the Fixed Price Method, the
investors subscribe for the shares at the price already decided
by the issuer.
(ii) Book Building Process:
Book-Building is a mechanism of price determination through
which indication of interest for investment in the shares offered
by an issuer/Offerer is collected from Institutional Investors and
High Net worth Individual Investors through making of bids and
a book is built which gives a picture of demand for the shares at
different price levels. Floor Price is decided by the Issuer/
Offerer in consultation with the Book Runner whereas Strike
Price is determined at the end of the bidding period on the basis
of bids received through the Dutch Auction Method. Under the
Dutch Auction Method, Strike Price is the price at which bids for
the entire shares offered for sale are made. Book Building
portion of the offer is underwritten by the Book Runner.
Detail procedure of issue/offer of shares through Book Building
is given in the Appendix-4 of the Listing Regulations of the
Stock Exchanges.
COST OF LISTING:
The cost of listing of a company on a stock exchange includes the initial
listing fee of the stock exchange, SECP fee, underwriting fee, advisory
fee of the Lead Manager and Book Runner, commission to the Bankers
to the issue, the Ballotters and Share Registrars, prospectus' printing
and publication cost. Amount of fees paid to the Commission, the stock
exchanges and the brokers are nominal and may be seen at
Annexure-V attached herewith.
Annexure-I
FORM OF APPLICATION UNDER SECTION 9 OF THE
SECURITIES AND EXCHANGE ORDINANCE, 1969
FOR LISTING A SECURITY ON A STOCK EXCHANGE
To:
The General Manager,
Karachi Stock Exchange (Guarantee) Limited,
Karachi
Dear Sir,
1. We hereby apply for the listing of our .. (Name of
Company..) on your Stock Exchange.
2. Necessary information and documents as required in the
annexure to this form are enclosed herewith.
Yours faithfully,
________________
Signature & Address
c.c. To: The SECP, Islamabad as required under Sub-Section (1) of
Section 9 of the Securities and Exchange Ordinance, 1969.
Documents to be submitted with listing
Application to the Exchange
1. An application for Listing on Form I and copy thereof to the
Commission along with all the documents.
2. An undertaking on Form-II as required under regulation 5(1).
3. An undertaking, on Form-III, pertaining to issue of share
certificates, computerized transfer deeds and verification of
signatures on transfer deeds;
15
of Section 2 of Part-I of the Second Schedule to the Companies
Ordinance, 1984. The certificate shall also state Earning Per
Share of the company for the last five years or for a shorter
period if five years of the commencement of business are not
completed.
The audited accounts disclosed in the Prospectus / Offer For
Sale shall not be older than six months from the date of
publication of the Prospectus / Offer For Sale Document.
18. Auditor's certificate on the Break-up value of shares on the
basis of the latest audited accounts along with its calculation.
19. Copy of Information Memorandum prepared for placement of
shares to local and foreign investors;
20. Names of Directors/shareholders common to the company
and the institutions/funds, which have subscribed the shares
under private placement.
21. No Objection Certificates from the Underwriter(s) to the
Issue/Offer, if any, on Form-IV.
22. Copies of all material contracts and agreements relating to the
public issue/offer of shares and project, if any.
23. Copies of the Consent Letters from Bankers to the issue/offer.
The letter shall state that;
(i) the Bank has given its consent to act as one of the
Bankers to Issue/Offer;
(ii) this consent has not been withdrawn;
(iii) it has no objection on publication of its name in the
prospectus/offer for sale document;
(iv) the bank has undertaken that the subscription money
shall be kept in a separate bank account and shall not
be released to the company/the offerer without prior
written approval of the Exchange and/or until the
company is formally listed.
24. Copies of the title deeds of land duly attested by a gazetted
officer;
25. Copy of the consent from the auditor, expert/legal advisors to
the Issue/Offer, if any, under Sub-section (5) of Section 57 of
the Companies Ordinance, 1984;
26. Copy of letter jointly signed by the Chief Executive Officer and
4. Copy of the certificate of incorporation.
5. Copy of the conversion certificate from private to public
company; if applicable.
6. Copy of the certificate of commencement of business.
7. Copy of the certificate for change of name of the company, if
applicable.
8. Copy of the Feasibility Report, in case of a new project. The
report shall contain a letter from the Chief Executive Officer
(CEO) of the institution who has prepared the report, brief
profile of such institution, scope of work of the institution for
conducting feasibility study and preparing the report. The
report shall be dated and each page of it shall carry signature or
initial of CEO or any other officer authorized to do so by the
Board of Directors of such institution by way of a Resolution.
9. Copy of the resolution passed by the Board of Directors of the
company with respect to listing and issue of shares to the
general public.
10. Copy of the certificate of registration of Modaraba
Management Company, if required.
11. Copy of authorization for flotation of Modaraba by the Registrar
of Modarabas.
12. Copy of the license, consent, approval, NOC etc. from the
concerned regulatory authority for undertaking / carrying on
the business.
13. Pay Order/Bank Draft/Cheque in favour of the Exchange for
payment of initial listing fee at the rate as mentioned in
regulation 32.
payment of annual listing fee at the rate as mentioned in
regulation 32.
payment of service charges at the rate as mentioned in
regulation 32.
16. Auditor's Certificate, separately indicating the amount
subscribed by the sponsors/promoters/ directors/ associates/
friends/relatives and shares subscribed by the foreign/local
investors under private placement. The certificate shall be
supported by copies of Form-3 i.e., return of allotment of
shares.
17. Auditors' Certificates under Section 53 read with Clause 28(1)
17 16
their individual capacity or in the capacity of Directors of other
companies. (This will not apply to nominee Directors of the
Government and Financial Institutions).
35. Report of State Bank of Pakistan that the name of the company
as well as the names of other companies in which directors of
the company are holding directorship are not in the defaulter's
list of State Bank of Pakistan.
36. Printed copy of share certificate duly cancelled.
37. Documents as prescribed under Annexure-A, in relation to the
requirements of Annexure to Form III of the Securities and
Exchange Rules, 1971.
38. Documents as prescribed under Annexure-B, in relation to the
requirements mentioned in the Companies (Issue of Capital)
Rules, 1996.
39. Any other document/material/information as may be required
by the Exchange for its own record or for inclusion in the
prospectus/offer for sale document.
Notes:
i) Please note that copies of all the documents are certified
by the Company Secretary/CEO.
ii) Please note that all documents relating to regulatory
authority are duly certified from the concerned Company
Registration Office or concerned Regulatory Authority.
iii) Please note that in addition to the above-mentioned
documents, the following shall be also be submitted:
a) Soft copy of the draft prospectus / offer for sale document;
b) Scanned copy of the Memorandum & Articles of
Association; and
c) Scanned copy of the audited annual accounts of the
company for the last 5 years or for a shorter period if five
years of the commencement of business are not
completed and its latest half yearly and quarterly accounts.
Chief Financial Officer of the company confirming that they
have reviewed the contents of the draft prospectus / offer for
sale and to the best of their knowledge and belief these have
been stated/disclosed correctly and fairly.
27. Copies of individual consent letters from all Directors, Chief
Executive and Secretary of the Company for publishing their
names as Directors, Chief Executive and Secretary
respectively in the Prospectus/Offer For Sale Document. The
consent letter shall be dated and contain full name, father's
name, CNIC Number & latest postal address of the Directors,
Chief Executive and the Company Secretary.
28. Copy of consent from the Ballotters to the Issue/Offer. The
Ballotters to the Issue/Offer shall not be associated company
or associated undertaking of the issuing company/the offerer.
29. 25 copies of draft full Prospectus / Offer for Sale draft abridged
prospectus and advertisement, if any, with last page signed in
original by directors of the Company or the offerer, as the case
may be.
30. 25 copies of audited annual accounts of the company for the
last 5 years and its latest half yearly and quarterly accounts, if
any or for a shorter period if five years of the commencement of
business are not completed.
31. A List of employees, who have been allocated shares out of the
present issue along with their full particulars i.e., names,
addresses and number of shares offered to each of them;
32. In issues where premium is to be charged from public, the
shares allocated to any person on account of preferential
allocation at par shall not be saleable for a period of two years
from the date of public subscription. Such shares shall be
deposited in a Blocked Account with a depository company and
their deposit shall be certified by the depository company. The
particulars of these shares shall be furnished to the Stock
Exchange. Provided that charges of opening and operating of
the said Blocked Account with the depository company shall be
borne by the holder of such shares.
33. Copy of application submitted with CDC for declaration of such
company as CDC eligible security.
34. Report of State Bank of Pakistan that the names of
promoters/sponsors/controlling directors of the company are
not in the Defaulter's List of State Bank of Pakistan either in
19 18
Annexure-A
1. Memorandum and Articles of Association and, in case of
debentures, a copy of the trust deed
2. Copies of prospectus issued by the Company in respect of any
security already listed on the Stock Exchange;
3. A brief history of the company since incorporation giving details of
its activities including any re-organization, changes in its capital
structure and borrowings
4. A statement showing:
(a) cash dividends and bonuses paid during the last 10 years
or such shorter period as the company may have been in
existence;
(b) dividends or interest in arrears, if any.
5. Certified copies of agreements or other documents relating to
arrangements with or between:
(a) vendors and/or promoters
(b) underwriters
(c) brokers
6. Certified copies of agreements with:
(a) managing agents.
(b) selling agents.
(c) Managing Director and technical directors.
7. Certified copies of the agreements with the NIT, ICP, PICIC, IDBP
and any other financial institution.
8. A statement containing particulars, dates of and parties to all
material contracts, agreements (including agreements for
technical advice and collaboration), concessions and similar other
documents except those entered into in the normal course of the
company's business or intended business together with a brief
description of the terms of such agreements.
21 20
9. Names and addresses of the directors and persons holding ten per
cent or more of any class of equity security as on the date of
application together with the number of share or debentures held
by each of them.
10. Particulars of the security listing of which is sought.
Annexure-B
In case of Equity-based Project:
1. Certificate from the auditors that the fixed capital expenditure is
entirely financed by equity and that the capital allocated to
sponsors, foreign and local investors, if any, has been fully
paid.
2. Project appraisal report from a financial institution or a
3. Certificate from the auditors that the land for the project has
been acquired, transferred/registered in the name of company,
letters of credit have been established and shipment schedule
of plant and machinery has been finalized by the suppliers.
4. Undertaking on Non-Judicial Stamp Paper from the Sponsors
that they shall retain at least twenty-five per cent of the capital
of the company for a period of five years from the date of public
subscription.
5. Underwriting arrangement in the manner as prescribed in sub
rule (II)(iv) of rule 3 of the Companies (Issue of Capital) Rules,
1996.
In case of Loan-based Project:
1. Certificate from auditors that sponsors' subscription has been
received in full and at least 80% thereof has been utilized in the
project.
2. Certificate from the concerned Stock Exchange that at least
30% of the plant and machinery has been installed and last
consignment of plant and machinery, where required has been
shipped to the company.
3. Undertaking on Non-Judicial Stamp Paper from the Sponsors
that they shall at all times retain at least 25% of the capital of the
company.
Annexure-II
APPLICATION UNDER SECTION 57(1) OF THE
COMPANIES ORDINANCE, 1984
(ON THE COMPANY'S LETTERHEAD)
No Date.
The Commissioner,
Securities Market Division,
Islamabad.
Subject: Application under Section 57(1) of the Companies
Ordinance, 1984 for approval to issue, circulate and
publish the Prospectus for offer of .million
[name of the securities] by [name of Company].
Dear Sir,
I ..., the Company Secretary/the Chief
Fi nanci al Off i cer/ t he Chi ef Execut i ve Off i cer of
..(name of the company).. duly authorized by the
Board of Directors to do so hereby apply under Section 57(1) of
the Companies Ordinance, 1984 for seeking approval to issue
circulate and publish the prospectus for issue of million
[name of securities].. to the general public.
2. I have gone through the draft prospectus attached to this
application and ensure that all material facts, information and
risk factors related to the offer are disclosed in a simple and
plain language and in a proper manner, that nothing has been
concealed and that the attached draft prospectus illustrates
full, true and fair picture of the issue and the issuing company.
3. Salient features of the issue are attached herewith.
23 22
Yours truly,
Signatures:
Name:..
CNIC No..
Designation....
Date.....
Place....
Official Stamp......
Note:- This application should be signed by the company secretary, the
chief financial officer or the chief executive officer of the issuing
company duly authorized by the board of directors to do so.
A. Information about the issuing company and
the proposed Issue:
1. Name of the issuing company.
2. Nature of the security proposed to be offered to the
public.(e.g. ordinary shares, preference shares, TFCs,
PTCs, Sukuks etc.).
3. Number and amount of securities alongwith percentage
proposed to be offered to the public.
4. Purpose of the issue and break-up of the utilization of
the proceed of the issue.
5. Offer mechanism [tick v the relevant box please]
6. Offer Price /Floor Price (in case of book building)
7. Capital Structure i.e. authorized capital and break up of
Paid-up Capital of the Company before and after the
proposed offer alongwith price per share comprising
face vale and premium, if any.
8. Latest Credit rating of the issuing company and the
instrument alongwith name of the rating agency, where
applicable.
9. Name of the stock exchange where the security will be
listed.
Fixed Price Book Building
10. Registered Office address, phone & fax number
alongwith website & email address, of the issuing
company.
11. Number and date of registration of the issuing
company, date of commencement of business and
nature of business of the issuing company.
12. Name of the advisor/consultant/lead manager to the
issue, if any, alongwith its address, phone & fax number
and website & email addresses.
13. Name of the contact person(s) alongwith his address,
phone & fax number and email address, to be contacted
for seeking information /documents related to the issue.
14. Brief financial position of the issuing company for the
last three years.
15. Detail of the undergoing projects, if any, alongwith their
implementation schedule.
B. General information:
1. Whether the prospectus is cleared by the stock
exchange. [tick v the relevant box please]
2. Whether the application accompanied by all the
documents mentioned in the Commission's checklist of
documents for approval of prospectus.
3. If the answer to above is No' then please indicate
documents yet to be submitted to the Commission
alongwith expected date of submission.
4. Whether soft copy of the full and abridged prospectus
alongwith advertisement, if any, has been provided to
the concerned officer of the Commission.
5. Whether approval under Section 86(1) of the
Companies Ordinance, 1984 has been obtained for
further issue of share capital, where required.
6. Whether approval for the proposed offer from any other
regulatory authority is also required? If so, then please
indicate whether such approval has been obtained.
7. Whether the company intends to seek any relaxation
from the requirement of any of the law/rule/regulation
relating to the proposed offer? If so, then please
indicate relevant provision of the law.
Yes No
Yes No
Yes No
Yes No
25 24
C. Payment details
1. Amount of application processing fee paid:
2. Nature of payment instrument (i.e. bank draft, pay
order, bank challan, cheque):
3. Number and date of the payment instrument:
4. Drawn on (name of the bank and the relevant branch)
Rs.
LIST OF DOCUMENTS TO BE SUBMITTED TO THE
COMMISSION BY COMPANIES ALONG WITH
APPLICATION FOR APPROVAL TO ISSUE,
CIRCULATE AND PUBLISH
PROSPECTUS/OFFER FOR SALE DOCUMENT
1. Application under Section 57(1) or 62(1) of the Companies
Ordinance, 1984 (the Ordinance) as the case may be.
2. Application made to Stock Exchange (s) along-with copy of
enclosures.
3. Clearance letter from the concerned stock exchange(s).
4. Copy, both in hard and soft form of the Prospectus/Offer for Sale
Document duly cleared by the stock exchange both in full and
abridged with last page signed in original by directors of the
Company and duly witnessed and that of the advertisement, if any.
5. Affidavit, on Non-Judicial Stamp Paper, from the Chief Executive
(CEO) & the Chief Financial Officer (CFO) of the Company and
Offerer (where applicable) on accuracy of the disclosures made in
the prospectus, certified by the Oath Commissioner.
6. Non-refundable application processing fee in the following
manner:-
a. In case size of the total issue including all types of securities is
up to Rs.250 million, a fee of Rs.25,000/-
b. In case size of the total issue including all types of securities is
more than Rs.250 million and up to Rs.1,000 million, a fee of
Rs.50,000/-
c. In case size of the total issue including all types of securities is
more than Rs.1,000 million, a fee of Rs.100,000/-
7. Undertaking on Non-Judicial Stamp Paper from the Balloter,
Transfer Agent (Share Transfer Agent) and Underwriter(s) that they
fulfill all the conditions of rule-4 of the Balloters, Transfer Agents,
and Underwriters Rules, 2001.
8. Copies of the commitment letter(s)/willingness/consent(s) of Pre-
IPO Investors (where applicable).
9. Undertaking on Non-Judicial Stamp Paper regarding no buy-
back/re-purchase agreement from the Underwriters.
10. Form 29 duly certified from concerned Company Registration
Office.
11. Confirmation that issued capital of the company does not consist of
shares issued against intangible assets.
12. Affidavit, on Non-Judicial Stamp Paper, from CEO, Directors,
Company Secretary & CFO of the Company and Offerer (where
applicable) that they have fully disclosed all legal proceedings
pending in court of law which may have an adverse material impact
on the business of the Company, certified by the Oath
Commissioner
Any other document/information as may be required by the
Commission for its own record or for inclusion in the prospectus.
Documents required after Approval and before Public
Subscription:
13. Five printed copies of the prospectus along with copies of all those
newspapers in which the prospectus has been published within two
days of such publication.
Documents required after Approval and after
Subscription:
14. Report containing information about the public issue,
advertisement of the prospectus, subscription received, basis of
allotment, refund made and related matters, within 30 days of the
public offer.
Note: The documents submitted in the form of photocopy, must be
certified by the Company Secretary or the CEO.
27 26
Annexure-III
APPLICATION UNDER SECTION 62(1) OF THE
COMPANIES ORDINANCE, 1984
(on the Company's letterhead, where the offerer is a Company)
No Date.
The Commissioner,
Securities Market Division,
Islamabad.
Subject: Application under Section 62(1) of the Companies
Ordinance, 1984 for approval to issue, circulate and
publish the Offer for Sale Document for offer of
.million [name of the securities] of
[name of the issuing company] by [name of
Offerer].
Dear Sir,
I ..., duly authorized by [name of the
Offerer].. To do so hereby apply under Section 62(1) read with
Section 57 of the Companies Ordinance, 1984 for seeking approval to
issue circulate and publish the Offer For Sale Document for offer of
million [name of securities].. to the general public.
2. I have gone through the draft Offer for Sale Document attached
to this application and ensure that all material facts, information and risk
factors related to the offer are disclosed in a simple and plain language
and in a proper manner, that nothing has been concealed and that the
attached draft Offer for Sale Document illustrates full, true and fair
picture of the issue and the issuing company
3. Salient features of the issue are attached herewith.
Yours truly,
Signatures:
Name:..
CNIC No..
Designation..
Date..
Place
Official Stamp.
Note: This application should be signed by the company secretary, the
chief financial officer or the chief executive officer of the Offerer, in case
the Offerer is a company, duly authorized by the board of directors of the
Offerer to do so. In case the Offerer is individual then this application
should be signed by him/her or by the person authorized by him/her in
writing to do so.
A. INFORMATION ABOUT THE ISSUING COMPANY AND
THE PROPOSED ISSUE:
1. Name of the Offerer(s).
2. Name of the issuing company.
3. Nature of the security proposed to be offered to the
public.(e.g. ordinary shares, preference shares, TFCs,
PTCs, Sukuks etc.).
4. Number and amount of securities alongwith percentage
proposed to be offered to the public.
5. Purpose of the offer and break-up of the utilization of
proceed of the offer.
6. Offer mechanism [tick v the relevant box please]
7. Offer Price /Floor Price (in case of book building)
8. Capital Structure i.e. authorized capital and break up of
Paid-up Capital of the company before and after the
proposed offer alongwith price per share comprising
face vale and premium, if any.
9. Latest Credit rating of the issuing company and the
instrument alongwith name of the rating agency, where
applicable.
Fixed Price Book Building
29 28
B. General information:
1. Whether Offer for Sale Document is cleared by the
stock exchange. [tick v the relevant box please]
2. Whether the application accompanied by all the
documents mentioned in the Commission's checklist of
documents for approval of the Offer for Sale
Document/prospectus.
3. If the answer to above is No' then please indicate
documents yet to be submitted to the Commission
alongwith expected date of submission.
4. Whether soft copy of the full and abridged Offer for Sale
Document/prospectus alongwith advertisement, if any,
has been provided to the concerned officer of the
Commission.
5. Whether approval of the board of directors of the
Offerer, in case the Offerer is a company, has been
obtained for divestment of securities through the
proposed public offer.
Yes No
Yes No
Yes No
Yes No
10. Name of the stock exchange where the security will be
listed.
11. Registered Office address, phone & fax number
alongwith website & email address, of the Offerer and
the issuing company.
12. Number and date of registration of the company, date of
commencement of business and nature of business of
the issuing company.
13. Name of the advisor/consultant/lead manager to the
issue, if any, alongwith its address, phone & fax number
and website & email addresses.
14. Name of the contact person(s) alongwith his address,
phone & fax number and email address, to be contacted
for seeking information /documents related to the offer.
15. Brief financial position of the issuing company for the
last three years.
16. Detail of the undergoing projects, if any, of the issuing
company alongwith their implementation schedule.
C. Payment details
1. Amount of application processing fee paid:
2. Nature of payment instrument (i.e. bank draft, pay
order, bank challan, cheque):
3. Number and date of the payment instrument:
4. Drawn on (name of the bank and the relevant branch)
Rs.
Note: The documents to be submitted with this application are
same as listed down in the checklist of documents mentioned above.
6. Whether approval for the proposed divestment from
any regulatory authority is also required? If so, then
please indicate whether such approval has been
obtained.
7. Whether the Offerer intends to seek any relaxation from
the requirement of any of the law/rule/regulation
relating to the proposed offer? If so, then please
indicate relevant provision of the law.
31 30
Annexure-IV
STANDARD DISCLOSURE IN FULL
PROSPECTUS FOR ISSUE OF SHARES
33 32
35 34
For and on behalf of
(Name of the Company)
Chief Financial Officer
37 36
39 38
41 40
Annexure-V
FEE CHARGED BY THE SECP, THE STOCK
EXCHANGES AND THE BROKERS
SECP Fee:
o In case size of the total issue including all types of
securities is up to Rs.250 million, a fee of
Rs.25,000/-
securities is more than Rs.250 million and up to
Rs.1,000 million, a fee of Rs.50,000/-
securities is more than Rs.1,000 million, a fee of
Rs.100,000/-
Initial Listing Fee of the Stock Exchanges:
Initial Listing Fee of the exchanges is one tenth of one percent
of the Paid-Up-Capital of the issuing company subject to a
maximum of rupees two million and five hundred thousand.
Brokerage Commission:
Brokerage Commission1% of the amount of the successful
applications.
Note: Commission to the underwriters, Lead Manager / Advisor /
Consultant / Arranger, Book Runner, Bankers to the issue,
Balloter / share registrar to the issue and Legal advisor to the
issue are deregulated and may be agreed between the
concerned intermediaries.
43 42
01
03
05
07
09
07
09

PROCEDURE

FOR OBTAINING LICENCE BY

AN

ASSOCIATION
NOT FOR PROFIT
UNDER SECTION 42 OF
THE COMPANIES ORDINANCE, 1984

ITS INCORPORATION
AS A COMPANY
LIMITED BY GUARANTEE

&
RENEWAL OF ITS LICENCE
2

A not-for-profit association (more commonly
called an NGO) may be registered as company
under the provisions of the Companies
Ordinance, 1984 (the Ordinance). Any such
association is required to obtain licence under
Section 42 of the Ordinance read with rule 6 of
the Companies (General Provisions and Forms)
Rules, 1985 (the Rules) from the Securities and
Exchange Commission of Pakistan (the
Commission) prior to its registration as a
company limited by guarantee. The licence is
issued for a period of five (5) years, renewable for
further term (s) of five (5) years each. The
procedure for obtaining licence, subsequent
registration of such Association as company,
and thereafter renewal of the licence when due,
is provided hereinafter.

3

SS STEP TEP TEP 1: A 1: A 1: AVAILABILITY VAILABILITY VAILABILITY OF OF OF NN NAME AME AME

The first step is to seek availability of the
proposed name for the company. The application
for availability of name can be made online
through eServices OR offline through physical
filing to any one of the Company Registration
Offices (CROs) of the Commission.

For online submission of application, the fee is
Rs. 200/ -, which is much cheaper than the
manual submission of application. Al l i nformati on of
eServi ces are avai l abl e at the web portal of the Commi ssi on at
http:/ / www.secp.gov.pk/ eServices/ index.asp

For offline, an application is to be made to the
Company Registration Office alongwith the
original Bank challan of Rs. 500/ -, paid as
application fee, in the authorized branches of
MCB Bank Limited or alongwith a Bank Draft/
Pay Order of the same amount, drawn in favour
of the Securities and Exchange Commission of
Pakistan. Addresses of CROs are provi ded i n the Promoters
guide placed at the Commissions website at
http:/ / www.secp.gov.pk/ Guides/ PromotersGuideEnglish-new.pdf
4

STEP 2: APPLICATION FOR GRANT OF LICENCE

An application by the promoters or members of an
association desirous of obtaining a licence under
section 42, is submitted through duly authorized
representative with the subject: Application for
Grant of Licence under section 42 to M/s
<Association> (Proposed), is addressed to:

The Chairman,
63-J innah Avenue,
NIC Building, Blue Area,
Islamabad

The following information/ documents are required
to be submitted alongwith the application:

1 Original Bank challan of Rs. 25,000/ -, paid as
application fee, in the authorized branches of
MCB Bank Limited or a Bank Draft/ Pay Order of
the same amount, drawn in favour of the
Securities and Exchange Commission of Pakistan.
2 Copy of letter showing that the proposed name is
available. (Please see Step-1 above for reference)

3 Three (3) printed copies of Memorandum and
Articles of Association. Specimen of Memorandum and
Articles of Association is provided at the end of this booklet and
also placed on the Commissions website at: http:/ /
w w w . s e c p . g o v . p k / M e m o A n d A r t i c l e / d o c s /
Spec_MemArticles42_16_01_2012.doc

4 A list of promoters of the association with their
occupations and addresses;
[Format at Annex-I]

5 Attested photocopies of CNICs (Passport, in case
of foreigner) of each of the promoter.
5

6 A statement the names of companies, associations
and other institutions in which the promoters of
the proposed association holds any office stating
the office held (position/ designation) in each case;
[Format at Annex-II]

7 A declaration by a person of the effect that he has
scrutinized the application and the accompanying
documents, and that he is satisfied that the same
are drawn up in conformity with the provisions of
the Ordinance and fulfill the conditions for the
grant of licence laid therein and the rules;
[Format at Annex-III]

8 An undertaking on the stamp paper of appropriate
value from each promoter to the effect that they
have sufficient skills, expertise and resources for
the attainment of object of the proposed
association. Moreover, the said undertaking
should indicate that each promoter shall
contribute a reasonable amount (e.g.,
Rs.200,000/ -) as start up donation having regard
to the circumstances of the case. The amount
shall be deposited in the companys account
within a period of six months of the date of its
incorporation which shall be used for the
attainment of the object and should not be
refundable to the promoters, directly or indirectly
through any means;
[Format at Annex-IV]

9 An estimate of the future annual income and
expenditure of the proposed company, specifying
the sources of income and objects of expenditure.
The statement should also reflect the aforesaid
startup donation of the each subscriber. [Format at
Annex-V]
6

10 A brief statement of work already done (if any) and
the work proposed to be done after incorporation
as a company specifying salient features of the
project(s) e.g., their location, size, duration, etc.,
to be undertaken in pursuance of object of the
company.
[Format at Annex-VI]

11 Power of Attorney (Authority Letter) on Stamp
Paper of appropriate value made by all the
promoters in favour of a person to present the
application before the Commission on their behalf,
and to make other amendments, additions,
corrections etc., in the documents and also to
collect licence. [Format at Annex-VII]

12 Resume of all promoters. [Format at Annex-VIII]

13 Affidavit on Stamp Paper of appropriate value duly
attested by an Oath Commissioner made by all the
promoters affirming that they are not defaulter of
loans, etc. [Format at Annex-IX]

14 Affidavit on Stamp Paper of appropriate value duly
attested by an Oath Commissioner affirming
correctness of contents of the Application. [Format at
Annex-X]

15 The application needs to indicate whether the
association is already in existence or not. If the
association is already in existence, the following
information/ documents relating to the existing
entity also to be furnished :

A In case, the existing entity is a society, trust, etc., (i.e.,
other than a company registered in Pakistan):
7

a. A copy each of the audited balance-sheet, income and
expenditure account and the annual report on the
working of the existing entity for the financial year
immediately preceding the date of the application;
b. Attested copy of Certificate of Registration (if it has any
legal status);
c. Copy of resolution regarding dissolution and taking
over of the assets and liabilities of the existing entity by
the proposed company within three months of its
incorporation;
d. Attested copy of List of members of Board of Directors/
Governors/ Trustees of the existing entity;
e. Attested copy of Memorandum and Articles of
Association, Charter, or Statute by which it was
registered.

B- In case, the existing entity is already registered as a
company in Pakistan:
a. A copy each of the audited balance-sheet, income and
expenditure account and the annual report on the
working of the existing entity for the financial year
immediately preceding the date of the application; and
b. A copy of special resolution proposing to seek licence
under section 42 of the Ordinance and amendments in
its memorandum and articles of association to bring it
in conformity with the licencing requirements.

Pl ease Note:
A copy of application alongwith its enclosures are also required to be
forwarded by the applicant to the Company Registration Office
concerned.
(Addresses of CROs are provi ded i n the Promoters gui de pl aced
at the Commissions website at
http://www.secp.gov.pk/Gui des/PromotersGui dei nEngl i shdec022010.pdf
8

The Commission on being satisfied, after such
enquiry and obtaining such further information,
as it may consider necessary, that it shall be in
the public interest so to do, may grant the
licence applied for, subject to such conditions as
it may deem fit to impose.
9

STEP 3:
REGISTRATION OF ASSOCIATION
AS A COMPANY LIMITED BY GUARANTEE

After obtaining licence from the Commission, the
Association must be incorporated under provisions
of the Ordinance, within a period of three months
from the date of the licence.

The procedure for the incorporation of
Associations is provided in the Promoters Guide
placed at the Commissions website at:
http:/ / www.secp.gov.pk/ Guides/ PromotersGuideinEnglishdec022010.pdf
10

RENEWAL OF LICENCE

The licence is issued for a definite period of five (5)
years, renewable for further term(s) of five (5)
years, each, on an application to be submitted to
the Commission, three months before the
expiration of period of licence by the association
alongwith the following documents:
a. Copies of annual audited accounts for the
last five (5) years.
b. Certificate from concerned registrar
regarding compliance with provisions of the
Ordinance and the Rules.
c. Attested copy of latest annual return/ Form-
B filed with the concerned registrar.
d. List and complete profile of existing Chief
Executive and Directors of the company.
e. Affidavit by Chief Executive and all directors
affirming that they are not defaulters of
loans, etc.
f. List of existing members with their
occupations, residential addresses, contact
numbers and copies of their CNICs.

11

g. Brief statement of the work done by the
association during the last three years;
h. Details of the amount of donations and
grants received during last five (5) years duly
certified by the Chartered Accountants that
funds/ donations was/ were received through
banking channel, and details of the donors.
i. A detailed report with regard to the
performance of the association for achieving
its aims and objects during the preceding
four years, preceding the date on which
application is made, duly evaluated and
certified by Pakistan Centre for Philanthropy
(a company set up under section 42 of the
Ordinance).

The Commission on being satisfied of the past
corporate behaviour of the company, after such
enquiry and obtaining such further information,
as it may consider necessary, that it shall be in
the public interest so to do, may renew the
licence for further period of five years, subject to
such conditions as it may deem fit to impose.

DI SCLAI MER

The aforesaid procedure has been provided with the intention to create an
awareness of the concept of the relevant matters. However, the procedure does not
tell everything and the opinions or legal interpretations referred therein are
circumstantial and may vary under different situations. If the reader is in doubt or
dealing with any specific condition, it is recommended to refer to the Companies
Ordinance, 1984 and allied laws or consult an adviser for seeking professional
advice.

12

Important

There must be at least 3 subscribers/
members/ promoters of the company and
who must have sufficient skills, expertise
and resources for the attainment of object of
the proposed company.

Each promoter shall contribute a reasonable
amount as start up donation having regard
to the circumstances of the case.

All conditions of licence shall be mentioned
in the Memorandum of Association of the
company.
{Please see Clauses IV to IX of the specimen of Memorandum and
Articles of Association which is placed on the Commissions
website and downloadable at: http:/ / www.secp.gov.pk/
MemoAndArticle/ docs/ Spec_MemArticles42_16_01_2012.doc

13

ANNEX-I
LIST OF PROMOTERS
OF M/ S (PROPOSED)
[Section 42 and rule 6(2)(b)]

Signatures: ________________________
Name: ________________________
[To be signed by the person presenting documents]

Name of Promoter Occupation Address

14

ANNEX-II

OFFICES HELD BY PROMOTERS OF
M/ S (PROPOSED)
IN OTHER COMPANIES, ASSOCIATIONS, AND INSTITUTIONS, ETC.
[Section 42 and rule 6(2)(d)]

Signatures: ________________________
Name: ________________________

Name of Promoter Office (s) Held
(position/
designation)
Name (s) of other
companies / associations/
institutions

15

ANNEX-III

DECLARATION OF COMPLIANCE
WITH THE REQUIREMENTS OF THE COMPANIES ORDINANCE, 1984
AND THE COMPANIES (GENERAL PROVISIONS AND FORMS) RULES, 1985
[Section 42 and rule 6(2)(c)]

I, son/daughter/widow of .
.... do solemnly and sincerely declare:-

i) that I [am an Advocate entitled to appear before a High Court / Supreme Court /
a Chartered Accountant / a Cost and Management Accountant practicing in
Pakistan and am engaged in the formation of the proposed association, namely,
/] am a person named in the
Articles of Association as a director/ officer of the proposed association, namely,
..; and

ii) that I have scrutinized the application and the accompanying documents, and
that I am satisfied that the same are drawn up in conformity with the provisions
of the Ordinance and fulfill the conditions for the grant of licence laid therein
and the Companies (General Provisions and Forms) Rules, 1985.

Signature:

Full Name (in Block Letters),
Designation, NIC Number,
and Full Address
Date: .
Place:

Witness to the signature:

Signature:
Full Name, Fathers/ Husbands
Name (in Block Letters)
NIC Number, Occupation and Full Address

[To be made on stamp paper duly verified by an Oath Commissioner]
Attested by an
Oath Commis-
sioner
[Under his
Stamp]
16

ANNEX-IV
UNDERTAKING

I, __________________________, Son of _________________________,
resident of _______________________________________________, subscriber of
M/ s. _____________________________________________ (Proposed), do hereby
undertake on oath that:
(i) I have sufficient skills, expertise and resources for
attainment of the object(s) of M/ s. __________________________
(Proposed); and
(ii) I shall contribute an amount of Rs. / - as start
up donation to Ms. ___________________________ (Proposed),
and the said amount shall be deposited in the companys
account within a period of six months of the date of its
incorporation which shall be used for the attainment of
companys object(s) and shall not be refundable to the
promoter, directly or indirectly through any means.

Signature:

Full Name (in Block Letters),
Designation, NIC Number,
and Full Address
Date: .
Place:

Witness to the signature:

Signature:
Full Name, Fathers/ Husbands
Name (in Block Letters)
NIC Number, Occupation
Full Address

Attested by an
Oath Commis-
sioner
[Under his
Stamp]
17

ANNEX-V
Statement of Estimated Future Annual Income and Expenditure
of M/ s. (Proposed)
[Section 42 and rule 6(2)(f)]
(Amounts in Pak Rupees)
Note: Above referred Notes attached herewith give details about the above estimates with
year wise break-ups and where needed, alongwith sufficiently descriptive explanations.

Signatures: ________________________
Name: ________________________

INCOME Notes Year 1 Year 2 Year 3
Donations and Grants - Local 1
0,000,000 0,000,000 0,000,000
Donations and Grants - Foreign 2
0,000,000 0,000,000 0,000,000
Members donations Start-up 0,000,000 0 0
Members donations Other 3 0,000,000 0,000,000 0,000,000
Other sources, specify, if any 4 0,000,000 0,000,000 0,000,000
Previous years surplus (deficit) B/F 0 0000,000 0,000,000
Total Income
0,000,000 0,000,000 0,000,000
EXPENDITURE Year 1 Year 2 Year 3
Registration and Legal fee 000,000 0 0
Object related projects:
Specify (name of) project 1

5

000,000

000,000

000,000
Specify (name of) project 2, if any 6 0,000,000 0,000,000 0,000,000
Specify (name of) project 3, if any, etc. 7 000,000 0,000,000 0,000,000
Administrative and operational expendi-
tures
8 000,000 000,000 000,000

Total Expenditures
0,000,000 0,000,000 0,000,000

Income over Expenditures/ Surplus
(Deficit), if any

0,000,000 0,000,000 0,000,000
18

ANNEX-VI

BRIEF STATEMENT OF THE WORK ALREADY DONE BY THE
ASSOCIATION OR PROPOSED TO BE DONE AFTER ITS BEING
GRANTED THE LICENCE AND REGISTRATION UNDER SECTION 42
OF THE COMPANIES ORDINANCE, 1984
[As required under Rule 6(2)(g) of the Companies (General Provisions
and Forms) Rules, 1985]

M/ s. (Proposed).

Work already done (salient features of work/projects, etc), if any:

1.

2.

3.

Work Proposed to be done (salient features of work/projects, etc) after grant of licence:

1.

2.

3.

Signatures: ________________________
Name: ________________________

19

ANNEX-VII

Power of Attorney / Authority Letter
We, the following persons, being promoters / subscribers of M/ s.
.. (proposed), do hereby appoint
and authorize Mr. / Ms . Son/Daughter/Wife of
....resident of .
, whose signatures appear below, to present us before
the Securities and Exchange Commission of Pakistan to submit application/
documents for grant of license under section 42 of the Companies
Ordinance, 1984, and to make necessary amendments therein as required
by the SECP, to collect license, and to sign and give necessary explanation
on our behalf in relation to the above and the allied matters.

Signature:
[Authorized Representative]
Full Name with NIC Number

Witness to the signatures:

Signature:
Full Name, NIC Number,
Fathers/ Husbands Name,
Occupation and Full Address

Date: . Place:

[To be made on Stamp Paper of appropriate value duly attested by Notary Public]
Sr. Name of Promoter Signature

Attested by
Notary Public
[Under his
Stamp]
20

ANNEX-VIII
RESUME

Promoter/Subscri ber of
M/ s. (Proposed).

Educati onal Qual i fi cati ons: ____________________________________________

Experi ence Detai l s (with dates, period, organizations, nature of projects/ work responsibilities):

A. Now working as (describing offices held at the moment and related work responsibilities):
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________

B. Previous Experience relating to Object of the proposed Association now being formed:
1. _________________________________________________________________
_________________________________________________________________
2. _________________________________________________________________
_________________________________________________________________

C. Other Experience:
1. _________________________________________________________________
_________________________________________________________________
2. _________________________________________________________________

Signature: ________________________
Name: ________________________
[To be signed by the promoter himself / herself or the authorized person presenting documents]

Note: If needed, the space for experience details may be expanded or extra pages may be annexed.
Promoters Name: ________________________________________________
Nationality: ________________________________________________
CNIC No./ Passport No. (in
case of foreigner)
________________________________________________
Old NIC No. ________________________________________________
National Tax Number: ________________________________________________
Date of Birth / Age: ________________________________________________
Fathers/Husbands Name: ________________________________________________
Postal Address: ________________________________________________

________________________________________________

Permanent Address: ________________________________________________

________________________________________________

Email / Telephone / Fax No. ________________________________________________
________________________________________________
21

ANNEX-IX

AFFIDAVIT

I, Mr. _________________________ son of ____________________ resident of
_______________________ and promoter of _________________________, do hereby, solemnly
affirm and testify that the contents of the application for grant of licence under section 42
of the Companies Ordinance, 1984 to the proposed Association are true and correct to the
best of my knowledge and belief and declare that:

(a) I have not been associated with any illegal banking business, deposit taking or
financial dealings;
(b) I and the companies in which I am director or major shareholder have no over-
due loans or installments exceeding Rs.300,000/ - outstanding towards banks or
other financial institutions;
(c) neither I nor companies in which I am a director or major shareholder have
defaulted in paying taxes as on the date of application;
(d) I have not been a sponsor, director or chief executive of a defaulting cooperative
finance society or finance company;
(e) I have never been convicted of fraud or breach of trust or of an offence involving
moral turpitude or removed from services for misconduct;
(f) I have neither been adjudged an insolvent nor have defaulted in making
payments to my creditors; and
(g) the funds raised shall be spent for objects of the proposed Association and for
other lawful purposes.

DEPONENT
________________
(Signature)

Dated: ___________

Attested by an
Oath Commis-
sioner
[Under his
Stamp]
22

ANNEX-X

AFFIDAVIT

I, Mr. _________________________ son of __________________, NIC number
_________________ resident of _______________________ and do hereby, solemnly
affirm and testify that the contents of the application under section 42 of the
Companies Ordinance, 1984 and annexed documents are true and correct to the
best of my knowledge and belief and declare that:

1. I am promoter / subscriber / proposed director of M/ s.
_________________________ and fully aware of the affairs of the proposed
company particularly the application under section 42 of the Companies
Ordinance, 1984.

2. Whatsoever stated in the application and accompanied documents is
true and nothing has been concealed in the application.

DEPONENT

(Signature)

Dated: ___________


Attested by an
Oath Commis-
sioner
[Under his
Stamp]
23

STANDARD SPECIMEN
A company set up under Section 42 of the Companies Ordinance, 1984

MEMORANDUM OF ASSOCIATION

OF
XYZ ASSOCIATION / FOUNDATION

I. The name of the Company is XYZ ASSOCIATION / FOUNDATION.
II. The Registered Office of the Company will be situated in Islamabad Capital Territory / the
Province of -------------------
III. The object for which the Company is established is as follows:

If an association proposes to engage in Education activities, it may adopt the object stated
below:-

(1) To establish, manage, maintain, own, administer, promote and subsidize educational
institutions, computer literacy centres, schools, colleges, institutions for study and
research, centres of learning, reading rooms, and other institutions for basic
education, adult literacy, advanced studies and other educational fora with the
permission of competent authority but not to act as a degree awarding institute.

(2) To provide scholarships to students and grant aid including supply of books,
stipends, medals, prizes, grants, awards, medicines, educational career support,
bursaries and other incentives for purposes of advancement of knowledge, education
and literacy.

OR in Research activities:

(3) To provide a platform for research and development relating to object of the company
and in this regard:-

(a) to make available key knowledge tools such as :-
(i) a well equipped library;
(ii) database and electronic connectivity; and
(iii) website for research publications and interaction.
(b) to undertake steps for promotion of research such as :-
(i) to define and support research;
(ii) to encourage members to conduct research; and
(iii) to participate in regional and international research initiatives;
(c) to undertake any activity for development such as;
(i) to arrange funding for supporting research; and
(ii) to organize and set up of a think tank related to the objects of the
company; and
24

(d) to provide a forum for participation of all concerned and to:
(i) solicit views vis--vis the objects of the company; and
(ii) enable discussion/dialogue for promoting quality research.

OR

If an association proposes to engage in Special Education activities, it may adopt the object
stated below:-

To establish, own, maintain, erect, construct, furnish, equip, promote, organize, manage and run
institutions for special education and to provide grants and facilities for education and training to the
persons who are mute, deaf, dumb or blind, crippled or otherwise physically or mentally
handicapped and to provide books, proper medical attendance, nursing, food, medicine, drugs and
special appliances of educational, surgical, or other nature.

OR

If an association proposes to engage in Professional Institutions activities, it may adopt the
object stated below:-

To establish an institute for advancement and raising standards of professional education in the
field of accountancy, cost accounting, financial management, secretarial practice and cognate
subjects as applied to all or any of the professional services provided by accountants in general and
to provide a platform for members and to facilitate dissemination of information, making available
the course materials and holding of examinations and to protect and preserve their professional
independence and to exercise professional supervision over them.

OR

If an association proposes to engage in Religious activities, it may adopt the object stated
below:-

To promote the real values of Islam and in view thereof to initiate research, analytical study,
seminars, talks and discussions and to promote public awareness, education and understanding of
Islamic ideology, economic system and philosophy and provide forum for research scholars,
specialists, experts, writers, speakers, thinkers for free intellectual interaction and to develop
consensus and understanding in vital Islamic issues.

OR

If an association proposes to engage in Social Infrastructure and Human Resource
Development activities, it may adopt the object stated below:-

To work for development of human resources, promotion of social and economic well being of the
masses, improvement of social status, social mobilization for prosperous society, and elimination of
gender discrimination particularly in the rural areas of Pakistan.
OR
If an association proposes to engage in Rural Support Programme activities, it may adopt
the object stated below:-

To develop the rural areas and the resources of land, undertake, support and subsidize measures,
programmes, plans and schemes for rural development including development and improvement of
townships, settlements and villages, houses, buildings, roads, water courses, play grounds, and
other civic amenities and to undertake measures for improvement of conditions of housing, work,
25

health, hygiene, sanitation and the quality of life.

OR

If an association proposes to engage in Health Services activities, it may adopt the object
stated below:-

To aid, assist, set up, maintain, administer and run hospitals, nursing homes, mother and child care
centres, clinics, dispensaries, immunization and vaccination centres and places of medical aid,
convalescent homes, family planning centres, X-ray clinics, radio therapy centres, pathological and
clinical laboratories, blood banks, eye banks or other centres connected with the care of the human
body, both in urban and rural areas.

OR

If an association proposes to engage in Arts, Sciences and Literature activities, it may adopt
the object stated below:-

To promote and foster study in arts, sciences, literature and to give literary, arts and sciences
awards, scholarships and prizes for its encouragement.

OR
If an association proposes to engage in Culture and heritage activities, it may adopt the
object stated below:-

To undertake, aid, support, assist, promote, manage, research and encourage projects or
programmes concerned or dealing with the restoration, conservation, revitalization, preservation
and reuse of architectural structures, buildings, forts, palaces, mausoleums, monuments, mosques,
places of historical or cultural significance, archaeological sites, town squares, markets, gardens
and parks in Pakistan.
OR

If an association proposes to engage in Charity activities, it may adopt the object stated
below:-

To establish, maintain, run, manage and administer aid programmes providing relief and help to the
needy, the poor and the destitute, undertake charitable and philanthropic activities for benefit of the
mankind and work for alleviation of human sufferings from catastrophes.

OR

If an association proposes to engage in Sports activities, it may adopt the object stated
below:-

To promote and develop centres for sports and sporting activities and encourage talent thereto and
through them endeavour to bring about national integration and provide fields, grounds and other
facilities and amenities including coaching and training facilities in developed and developing areas
of the country and to promote and organize activities such as bird watching, trekking,
mountaineering, hunting, archery, camping, fishing, rock climbing and all other outdoor sports.

26

IV. In order to achieve its object, the Company shall exercise the following powers:

1. To appeal, solicit or accept contributions, donations, grants and gifts, in cash or in kind,
from lawful sources and to apply the same or income thereof for the objects of the
Company.
2. To open and operate bank accounts in the name of the Company and to draw, make,
accept, endorse, execute and issue promissory notes, bills, cheques and other
instruments.
3. To acquire, alter, improve, charge, take on lease, exchange, hire, sell, let or otherwise
dispose of any movable or immovable property and any rights and privileges whatsoever
for any of the objects or purposes specified herein above. Provided that the Company
shall not undertake the business of real estate or housing schemes.
4. To borrow or raise money, with or without security, required for the purposes of the
company upon such terms and in such manner as may be determined by the company
for the promotion of its objects.
5. To mortgage the assets of the company and / or render guarantee for the performance of
any contract made, discharge of any obligation incurred or repayment of any moneys
borrowed by the Company.
6. To purchase, sell, exchange, take on lease, hire or otherwise acquire lands, construct,
maintain or alter any building and any other moveable or immovable properties or any
right or privileges necessary or convenient for the use and purposes of the company.
7. To nominate delegates and advisors to represent the Company at conferences,
government bodies and other gatherings.
8. To co-operate with other charitable trusts, societies, associations, institutions or
companies formed for all or any of these objects and statutory authorities operating for
similar purposes and to exchange information and advice with them.
9. To pay out of the funds of the company the costs, charges and expenses of and
incidental to the formation and registration of the Company.
10. To invest the surplus moneys of the company not immediately required in such a manner
as may from time to time be determined by the company.
11. To create, establish, administer and manage funds including endowment fund conducive
for the promotion of the objects of the company.
12. To enter into agreements, contracts and arrangements with organizations, institutions,
bodies and individuals for the purpose of carrying out the functions and activities of the
Company.
13. To take such actions as are considered necessary to raise the status or to promote the
efficiency of the company.
14. To conduct, hold and arrange symposia, seminars, conferences, lectures, workshops and
dialogue and to print, publish and prepare journals, magazines, books, circulars, reports,
catalogues and other works relating to any of the objects of or to the work done by the
Company, subject to the permission, if required of the relevant authorities.
15. To do all other such lawful acts and things as are incidental or conducive to the
attainment of the above objects or any one of them.

27

V. The Company shall achieve the above said objects subject to the following conditions:-

1. The company is formed as a public company limited by guarantee and not having a
share capital.
2. Payment of remuneration for services or otherwise to its members, or their family
members whether holding an office in the company or not, shall be prohibited.
3. No change in the Memorandum and Articles of Association shall be made except with the
prior approval of the Securities and Exchange Commission of Pakistan.
4. Patronage of any government or authority, express or implied, shall not be claimed
unless such government or authority has signified its consent thereto in writing.
5. The company shall not itself set up or otherwise engage in industrial and commercial
activities or in any manner function as a trade organization.
6. The company shall not exploit or offend the religious susceptibilities of the people.
7. The subscribers to the Memorandum and Articles of Association of the Company shall
continue to be the members of the Company unless allowed by the Commission on
application to quit as members and will be held responsible and accountable.
8. The company in all its letterheads, documents, sign boards, and other modes of
communication, shall with its name, state the phrase A company set up under section 42
of the Companies Ordinance, 1984.
9. The income and any profits of the company, shall be applied solely towards the
promotion of objects of the company and no portion thereof shall be distributed, paid or
transferred directly or indirectly by way of dividend, bonus or otherwise by way of profit to
the members of the company or their family members.
10. The Company shall not appeal, solicit, receive or accept funds, grants, contributions,
donations or gifts, in cash or in kind, from foreign sources except with the prior
permission, clearance or approval from the relevant public authorities as may be required
under any relevant statutory regulations and laws. No funds shall be received otherwise
than through proper banking channels i.e., through crossed cheque, pay-order, bank
draft, etc.
11. The Association shall close its accounts on 30th of June each year.
12. The Association shall make no investment, whatsoever, in its associated companies
except with the prior approval of the Commission and subject to such conditions as it
may deem fit to impose.
13. The company shall not undertake any trading activities and shall conform to relevant
statutory regulations and laws.
14. Notwithstanding anything stated in any object clause, the company shall obtain such
other licenses, permissions, or approvals of the relevant public authorities as may be
required under any relevant statutory regulations and laws for the time being in force, to
carry out its specific object.
15. The company shall comply with such conditions as may be imposed by the Securities
and Exchange Commission of Pakistan from time to time.

VI. The territories to which the object of the company shall extend are declared to include whole of
Pakistan.
28

VII. The liability of the members is limited.

VIII. Every member of the company undertakes that he shall contribute to the assets of the
Company in the event of its being wound up while he is a member or within one year
afterwards, for payment of the debts or liabilities of the Company contracted before he
ceases to be a member and the costs, charges and expenses of winding up and for
adjustment of the rights of the contributories among themselves such amount as may be
required but not exceeding Rs. 100,000/- (Rupees One Hundred Thousand Only).

IX. In the case of winding up or dissolution of the Company, any surplus assets or property,
after the satisfaction of all debts and liabilities, shall not be paid or disbursed among the
members, but shall be given or transferred to some other company established under
section 42 of the Companies Ordinance, 1984, having similar or identical objects to those of
the Company to be decided by the members of the Company in their general meeting by a
special resolution, and with the approval of Commissioner of Income Tax under section 61
read with section 2(36) of the Income Tax Ordinance, 2001, under intimation to the
Securities and Exchange Commission of Pakistan, within three months.

29

We, the several, persons whose names and addresses are subscribed below are desirous of
being formed into a Company in pursuance of this Memorandum of Association:-

Dated the. day of, 201

Name and surname
(present & former) in full
(in Block Letters)
NIC No. (in
case of
foreigner,
Passport
No)
Father's/
Hus-
band's
Name in
full
Nationality
(ies) with any
former Na-
tionality
Occupa-
tion
Residen-
tial Ad-
dress in
full
Signature
1. AB nnnnn-
nnnnnnn-n
GH Pakistani Resident
Director,
Household
Appliances
Ltd., La-
hore
14-A,
Street
No.2, Sa-
daf Colony,
Quetta.

2. CD nnnnn-
nnnnnnn-n
IJ Pakistani Advocate -do-

3. XYZ Limited

through

EF

nnnnn-
nnnnnnn-n

KL

Pakistani

Company

Director,
ABC Ltd

House No
176, Street
No.204, F-
10/1, Is-
lamabad

14-A,
Street
No.2, Sa-
daf Colo-
ny, Quetta.

Witness to above signatures

Signature

Full Name (in Block Letters)

Fathers/ Husbands name

Nationality

Occupation

CNIC NO

Full Address

30

A company set up under Section 42 of the Companies Ordinance, 1984

ARTICLES OF ASSOCIATION

OF
XYZ ASSOCIATION / FOUNDATION
PRELIMINARY

1. In these Articles, unless the context or the subject matter otherwise requires:

(a) The Company means XYZ ASSOCIATION / FOUNDATION.
(b) The Office means the Registered Office for the time being of the company.
(c) The Directors mean the Directors for the time being of the company.
(d) The Seal means the Common Seal of the company.
(e) The Ordinance means the Companies Ordinance, 1984.
(f) The Commission means the Securities and Exchange Commission of Pakistan.
(g) The Registrar means the Registrar of Companies.
(h) The Register means the Register of the members to be kept in pursuant to Section
147 of the Ordinance.
(i) Chief Executive means the Chief Executive of the company.
(j) Secretary means the Company Secretary of the company.
(k) Memorandum means the memorandum of association of the company.
(l) Person includes an individual, company, corporation and body corporate.
(m) Articles means the articles of association of the company.
(n) Board means the board of directors of the company.
(o) Year used in the context of financial matters shall mean financial year of the
company.
(p) Expressions referring to writing shall be construed as including references to
typewriting, printing, lithography, photography and other modes of representing or
reproducing words in visible form.
(q) Words importing the singular number include the plural number and vice versa and
words importing the masculine gender include the feminine gender.
(r) Unless the context otherwise requires words or expressions contained in these
Articles shall be of the same meaning as in the Ordinance or any statutory
modification thereof in force at the date at which these Articles become binding on
the company.

31

MEMBERSHIP

2. The number of members with which the Company proposes to be registered is --------
(number of members with which the Company is going to be incorporated is to be
given) but the minimum number of members shall not be, at any time, less than three (3).
However, the directors may, from time to time, whenever the company or the business of the
company requires, increase the number of members.

3. The company in General Meeting may from time to time lay down the qualifications and
conditions subject to which any person or class of persons shall be admitted to membership
of the company.

4. The rights and privileges of a member shall not be transferable and shall cease on his death
or otherwise ceasing to be a member.

5. The subscribers to the memorandum and such other persons as the directors shall admit to
membership shall be members of the company.

6. One person shall have the right to hold one membership.

ADMISSION TO MEMBERSHIP

7. The application for seeking membership of the company shall be required to be seconded by
an existing member whereupon the board of directors shall decide the matter of his
admission as member or otherwise within three months of making of such application. No
minor or lunatic shall be admitted as a member of the company.

8. Every person, upon applying for admission to membership, shall sign an undertaking that he
will, if admitted, so long as he is a member, duly observe the Articles of the company for the
time being in force.

9. The Board shall subject to the Articles, accept or reject any application for admission to
membership. The Boards decision shall be final and it shall not be liable to give any reasons
thereof.

CESSATION / EXPULSION FROM MEMBERSHIP

10. A member renders himself liable to expulsion or suspension by the Board if:
(a) he refuses or neglects to give effect to any decision of the Board; or
(b) he infringes any of the regulations of the Articles; or
(c) he is declared by a court of competent jurisdiction to have committed a fraud, or to be
bankrupt, or to be insane or otherwise incompetent; or
(d) he is held by the Committee of the company to have been guilty of any act
discreditable to a member of the company; or
(e) he is acting or is threatening to act in a manner prejudicial to the interest or
functioning of the company or any other institute, body corporate, society, association
or institution in which the company has an interest.

11. The company in general meeting may, on an appeal of the aggrieved member and after
giving an opportunity of hearing, annul or modify the decision of the board with regard to
expulsion of the member by resolution supported by two-thirds majority. The person expelled
shall be reinstated as a member from the date of the resolution of the general meeting
annulling the decision of the Board.
32

12. Termination of membership shall occur automatically:

(a) in the event of the death of a member; and

(b) in the event a member fails to pay any amount due by him to the company within
three (3) months after such obligation has become due.
GENERAL MEETINGS AND PROCEEDINGS

13. ANNUAL GENERAL MEETING:

A general meeting to be called annual general meeting, shall be held, in accordance with the
provisions of Section 158, within eighteen (18) months from the date of incorporation of the
company and thereafter once at least in every calendar year within a period of four (4) months
following the close of its financial year and not more than fifteen (15) months after the holding of
its preceding annual general meeting as may be determined by the directors.

14. OTHER GENERAL MEETINGS:

All other meetings of the members of the company other than an annual general meeting shall
be called Extraordinary General Meetings.

15. EXTRAORDINARY GENERAL MEETINGS:

The directors may, whenever they think fit, call an Extraordinary General Meeting, and
Extraordinary General Meetings shall also be called on such requisition(s), as is provided by
Section 159 of the Ordinance.

16. NOTICE OF GENERAL MEETINGS:

Twenty-one (21) days notice at least (exclusive of the day on which the notice is served or
deemed to be served, but inclusive of the day for which notice is given) specifying the place, the
day and the hour of meeting and, in case of special business, the general nature of that
business, shall be given in the manner provided by the Ordinance for the general meeting, to
such persons as are, under the Ordinance or the Articles of the company, entitled to receive
such notices from the company but the accidental omission to give notice to or the non-receipt
of notice by any member shall not invalidate the proceedings at any general meeting.

17. SPECIAL BUSINESS:

All business that is transacted at an extra ordinary general meeting and that is transacted at an
annual general meeting with the exception of the consideration of the accounts, balance sheet
and the reports of the director and auditors, the election of directors, the appointment of and the
fixing of remuneration of the auditors shall be deemed special business.

18. QUORUM:

No business shall be transacted at any general meeting unless a quorum of members
representing not less than twenty five percent (25%) of the total voting power present in person
but being not less than two (2) members, is present at that time when the meeting proceeds to
business.

33

19. EFFECT OF QUORUM NOT BEING PRESENT:

If within half an hour from the time appointed for the meeting a quorum is not present, the
meeting, if called upon the requisition of members, shall be dissolved and in any other case, it
shall stand adjourned to the same day in the next week at the same time and place and if at the
adjourned meeting a quorum is not present within half an hour from the time appointed for the
meeting, the members present, shall be a quorum.

20. CHAIRMAN OF MEETING:

The chairman of the Board of directors, shall preside as chairman at every general meeting of
the company, but if he is not present within fifteen minutes after the time appointed for the
meeting, or is unwilling to act as chairman, any of the directors present may be elected to be the
chairman and if none of the directors present is willing to act as chairman, the members present
shall choose one of their number to be the chairman.

21. ADJOURNMENT:

The chairman may, with the consent of any meeting at which a quorum is present (and shall if
so directed by the meeting), adjourn the meeting from time to time but no business shall be
transacted at any adjourned meeting other than the business left unfinished at the meeting from
which the adjournment took place. When a meeting is adjourned for thirty (30) days or more,
notice of the adjourned meeting shall be given as in the case of an original meeting. Save as
aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.

22. VOTING:

At any general meeting a resolution put to the vote to the meeting shall be decided on a show of
hands unless a poll is (before or on the declaration of the result of the show of hands)
demanded. Unless a poll is so demanded, a declaration by the chairman that a resolution has,
on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost,
and an entry to that effect in the book of the proceedings of the company shall be conclusive
evidence of the fact, without proof of the number or proportion of the votes recorded in favour of
or against that resolution.

23. DEMAND FOR POLL:

A poll may be demanded in accordance with the provisions of Section 167 of the Ordinance.

24. MANNER OF TAKING POLL:

If a poll is duly demanded, it shall be taken in accordance with the manner laid down in Section
168 of the Ordinance and the result of the poll shall be deemed to be the resolution of the
meeting at which the poll was demanded.

25. TIME OF TAKING POLL:

A poll demanded on the election of chairman or on a question of adjournment shall be taken at
once.

26. CASTING VOTE:

34

In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the
meeting at which the show of hands takes place or at which the poll takes place, shall have and
exercise a second or casting vote.

27. VOTES OF MEMBERS:

On a show of hands every member present in person shall have one vote and upon a poll every
member present in person shall have one vote.

28. OBJECTION TO VOTE:

No objection shall be raised to the qualification of any voter except at the meeting or adjourned
meeting at which the vote objected to is given and tendered, and every vote not disallowed at
such meeting shall be valid for all purposes. Any such objection made in due time shall be
referred to the chairman of the meeting, whose decision shall be final and conclusive.
MANAGEMENT AND ADMINISTRATION

29. There shall be, for the overall management of the companys affairs, a Board of directors, which
will be elected from amongst the members.

30. One term of the Board of directors would be for three years.

31. No person shall be appointed as a director if he is ineligible to hold office of director of a
company under section 187 of the Ordinance.

32. No member / person shall hold more than one office in the company, such as those of Chief
Executive / director or company secretary.

33. FIRST DIRECTORS:

The subscribers to the Memorandum of Association shall be the first directors of the company
whose names are given below and they shall hold office until the election of directors in the first
Annual General Meeting, subject to the provisions of Sections 174 and 176 of the Ordinance.

-------------------------
-------------------------
-------------------------

34. NUMBER OF DIRECTORS:

The number of directors shall not be less than three (3) and not more than ( ). The
company may, however, determine through Special Resolution, such other number not being
less than three (3), before the election of the directors. A retiring director shall be eligible for re-
election.

35. PROCEDURE FOR ELECTION OF DIRECTORS:

(i) The directors of the company shall be elected in accordance with provisions of sub
sections (1) to (4) of section 178 of the Ordinance, in the following manner:
(a) The directors of the company shall be elected by the members of the
company in general meeting;
(b) The directors of the company shall be elected on the basis of one member
one vote;
35

(c) The candidate who gets the highest number of votes shall be declared
elected as director and then the candidate who gets the next highest number
of votes shall be so declared and so on until the total number of directors to
be elected has been so elected.
(ii) If the number of persons who offer themselves to be elected is not more than the
number of directors fixed by the directors under sub-section (1) of section 178, all
persons who offered themselves shall be deemed to have been elected as directors.

36. CASUAL VACANCY AND ALTERNATE OR SUBSTITUTE DIRECTORS:

(a) Any casual vacancy occurring among the directors may be filled up by the directors
within thirty days of the vacancy and the person so appointed shall hold office for the
remainder of the term of director in whose place he is appointed.
(b) An existing director may, with the approval of the board of directors, appoint an
alternate director to act for him during his absence from Pakistan of not less than
three months. The alternate director so appointed shall ipso facto vacate office if and
when the director appointing him returns to Pakistan.

37. REMOVAL OF DIRECTOR:

The company may remove a director through a resolution passed in a general meeting of
members in accordance with Section 181 of the Ordinance.

38. CHAIRMAN OF THE BOARD:

The directors may elect one of their members as the Chairman of the Board. The Chairman
of the Board shall preside at all meetings of the Board but, if at any meeting the chairman is
not present within ten minutes after the time appointed for holding the same or is unwilling to
act as chairman, the directors present may choose one of their member to be chairman of
the meeting.

DUTIES AND POWERS OF THE BOARD

39. The Board shall conduct and manage all the business affairs of the company, exercise all
the powers, authorities and discretion of the company, obtain or oppose the application by
others for all concessions, grants, charters and legislative acts and authorization from any
government or authority, enter into such contracts and do all such other things as may be
necessary for carrying on the business of the company, except only such of them as under
the statutes and Articles are expressly directed to be exercised by general meetings and
(without in any way prejudicing or limiting the extent of such general powers) shall have the
following special powers and duties:

(a) To present to the general meeting of the company any matters which the directors
feel are material to the company, its objects or interests or affecting the interests of
members and make suitable recommendations regarding such matters.
(b) To regulate, through articles, the admission of members.
(c) To appoint, remove or suspend the legal advisors, bankers, or other officers on such
terms and conditions as they shall think fit and as may be agreed upon.
(d) To appoint any qualified person as a first auditor(s) subject to provisions of the
Ordinance;
(e) To determine the remuneration, terms and conditions and powers of such
36

appointees and from time to time, revoke such appointments and name another
person of similar status to such office except for the auditor in which case the
relevant provisions of the Ordinance shall be followed.
(f) To delegate, from time to time, to any such appointee all or any of the powers and
authority of the Board and to reconstitute, restrict or vary such delegations.
(g) To agree upon and pay any expenses in connection with the companys objects and
undertakings and pay all the expenses incidental to the formation and regulation of
the company.
(h) To constitute from time to time committee(s) from among themselves or co-opt other
persons for the purpose and delegate to them such functions and powers as the
Board may see fit to carry out the objects of the company.
(i) Subject to the provisions of Section 196 of the Ordinance, the directors may
exercise all the powers of the company to borrow and mortgage or charge its
undertaking, property and assets (both present and future) or issue securities,
whether outright security for any debt, liability or obligation of the company.

PROCEEDINGS OF THE BOARD

40. The Board shall meet at least once in each quarter of every year, subject thereto meetings of
the Board shall be held at such time as the directors shall think fit. All meetings of the Board
shall be held at the registered office of the Company or at such other place as the Board
shall from time to time determine. The meetings of the Board shall be called by the chairman
on his own accord or at the request of the Chief Executive (or any three directors) by giving
at least seven (7) days notice to the members of the Board.

41. At least twenty five percent of the total number of directors or two (2) directors whichever is
higher, for the time being of the company, shall constitute a quorum.

Note : If the number of directors as mentioned in clause 33 are more than three, then
the following standard clause is proposed in place of above which will fulfill the
requirements of income tax rules for tax exemption.

At least one-third (1/3
rd
) of the total number of directors or four (4) directors whichever is
higher, for the time being of the company, shall constitute a quorum.

42. Except as otherwise provided by these Articles, every question at meetings of the Board shall
be determined by a majority of votes of the directors present, each director having one vote.
In case of an equality of votes or tie, the chairman shall have a casting vote in addition to his
original vote as a director.

43. Minutes of the proceedings of every meeting of the Board and a record of attendance of the
directors thereat shall be recorded by the Secretary in a book kept for that purpose. These
shall be signed by the chairman of the meeting at which they are read.

RESOLUTION THROUGH CIRCULATION

44. A resolution in writing signed by all directors for the time being entitled to receive notice of the
meeting of directors or affirmed by them in writing shall be as valid and effectual as if it had
been passed at a meeting of the directors duly convened and held.

45. CHIEF EXECUTIVE:

The directors may appoint a person to be the Chief Executive of the company and vest in him
such powers and functions as they deem fit in relation to the management and administration of
37

the affairs of the company subject to their general supervision and control. The Chief Executive,
if not already a director, shall be deemed to be a director of the company and be entitled to all
the rights and privileges and subject to all the liabilities of that office.

46. QUALIFICATION OF THE CHIEF EXECUTIVE:

No person who is not eligible to become a director of the company under section 187 of the
Ordinance, shall be appointed or continue as the Chief Executive of the company.

47. REMOVAL OF CHIEF EXECUTIVE:

The directors by passing resolution by not less than three-fourths of the total number of directors
for the time being or the company may by a Special Resolution passed in a general meeting
remove a Chief Executive before the expiry of his term in office.

48. MINUTE BOOKS:

The directors shall cause minutes to be duly entered in a book or books provided for the
purpose of:
(a) all resolutions and proceedings of General Meeting(s) and the meeting(s) of directors
and Committee(s) of directors, and every member present at any General Meeting and
every director present at any meeting of directors or Committee of directors shall put
his signature in a book to be kept for that purpose;
(b) recording the names of the persons present at each meeting of the directors and of
any committee of the directors, and the general meeting; and
(c) all orders made by the directors and Committee(s) of directors.

SECRETARY

49. The Secretary shall be appointed (or removed) by the Chairman of the company with the
approval of the Board.

50. The Secretary shall be responsible for all secretarial functions and shall ensure compliance
with respect to requirements of the Ordinance concerning the meetings and record of
proceedings of the Board, committees and the general meeting of members, review the
applications for admission to membership and the recommendations accompanying the
same to ensure that they are in the form prescribed, ensure that all notices required by these
Articles or under the Ordinance are duly sent and that all returns required under the
Ordinance are duly filed with concerned Company Registration Office.

51. COMMITTEES:

The directors may delegate any of their powers to committees consisting of such member or
members of their body as they think fit and they may from time to time revoke such delegation.
Any committee so formed shall, in the exercise of the powers so delegated, conform to any
regulations that may from time to time be imposed on it by the directors.

52. CHAIRMAN OF COMMITTEE MEETINGS:

A committee may elect a chairman of its meetings, but, if no such chairman is elected, or if at
any meeting the chairman is not present within ten (10) minutes after the time appointed for
38

holding the same or is unwilling to act as chairman, the members present may choose one of
them to be the chairman of the meeting.

53. PROCEEDINGS OF COMMITTEE MEMBERS:

A committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall
be determined by a majority of votes of the members present. In case of an equality of votes,
the chairman shall have and exercise a second or casting vote.

54. VALIDITY OF DIRECTORS ACTS:

All acts done by any meeting of the directors or of a committee of directors, or by any person
acting as a director, shall, notwithstanding that it be afterwards discovered that there was some
defect in the appointment of such directors or persons acting as aforesaid, or that they or any of
them were disqualified, be as valid as if every such person had been duly appointed and was
qualified to be a director.

55. THE SEAL:

The directors shall provide for the safe custody of the seal, which shall not be affixed to any
instrument except by the authority of a resolution of the Board or by a committee of directors
authorized in that behalf by the directors, and two directors or one director and the Secretary of
the company shall sign every instrument to which the seal shall be affixed.

FINANCES

56. The funds of the Company shall be applied in defraying the expenses and shall be applicable in
or towards the acquisition by purchase, lease or otherwise and furnishing and maintenance of
suitable premises and assets for the use of the Company and shall be subject to the general
control and direction of the Board.

57. No person, except persons duly authorized by the Board and acting within the limits of the
authority as conferred, shall have authority to sign any cheque or to enter into any contract so
as thereby to impose any liability on the Company or to pledge the assets of the Company.

ACCOUNTS

58. BOOKS OF ACCOUNT:

The directors shall cause to be kept proper books of account as required under Section 230 of
the Ordinance so that such books of account shall be kept at the registered office or at such
other place as the directors think fit as provided in the said section 230 and shall be open to
inspection by the directors during business hours.

59. INSPECTION BY MEMBERS:

The directors shall from time to time determine the time and places for inspection of the
accounts and books of the company by the members not being directors, and no member (not
being a director) shall have any right to inspect any account and book or papers of the company
except as conferred by law or authorized by the directors or by the company in general meeting.

60. ANNUAL ACCOUNTS:

The directors shall as required by section 233 of the Ordinance cause to be prepared and to be
laid before the company in Annual General Meeting such Balance Sheet and Income and
39

Expenditure Account and Cash Flow Statement duly audited and reports as are required in the
Ordinance.

61. COPY OF ACCOUNTS TO BE SENT TO MEMBERS:

A copy of balance sheet and profit and loss account and the Cash flow statement alongwith the
reports of directors and Auditors of the company shall, at least twenty-one (21) clear days before
the holding of the General Meeting, be sent to all the members and the persons entitled to
receive notices of general meetings, in the manners in which notices are to be given as provided
in section 50 of the Ordinance.

62. AUDIT:

Auditors shall be appointed and their duties regulated in accordance with Sections 252- 254 or
256-258 of the Ordinance.

63. NOTICE TO MEMBERS:

Notice shall be given by the company to members and auditors of the company and other
persons entitled to receive notice in accordance with section 50 of the Ordinance.

64. INDEMNITY:

Every officer or agent for the time being of the company may be indemnified out of the assets of
the company against any liability incurred by him in defending any proceedings, whether civil or
criminal, arising out of his dealings in relation to the affairs of the company, except those
brought by the company against him in which judgment is given in his favour or in which he is
acquitted, or in connection with any application under section 488 in which relief is granted to
him by the Court.

65. SECRECY

Every director, secretary, auditor, trustee, member of a committee, officer, servant, agent,
accountant, or other person employed in the business of the Company shall observe strict
secrecy representing all transactions of the Company, and the state of account with individuals
and in matters relating thereto and shall not reveal any of the matters which may come to his
knowledge in the discharge of his duties except when required so to do by the directors or the
Company in general meeting or by a court of law, and except so far as may be necessary in
order to comply with any of the provisions herein contained.

WINDING UP

66. In the case of winding up or dissolution of the Company, any surplus assets or property, after
the satisfaction of all debts and liabilities, shall not be paid or disbursed among the members,
but shall be given or transferred to some other company established under section 42 of the
Companies Ordinance, 1984, having similar or identical objects to those of the Company to be
decided by the members of the Company in their general meeting by a special resolution, and
with the approval of Commissioner of Income Tax under section 61 read with section 2(36) of
the Income Tax Ordinance, 2001, under intimation to the Securities and Exchange Commission
of Pakistan, within three months.

40

67. SUPPLEMENTARY PROVISIONS RELATING TO TAX:
The company shall abide by and adhere to the following rules:
(i) The company shall get its annual accounts audited from a firm of Chartered
Accountants.
(ii) The company shall, in the event of its dissolution, after meeting all liabilities, transfer
all its assets to an Institution, fund, trust, society or organization, which is an
approved non-profit organization, and intimation of such transfer will be given to
Commissioner, Federal Board of Revenue, within three months of the dissolution.
(iii) The company shall utilize its money, property or income or any part thereof, solely for
promoting its objects.
(iv) The company shall not pay or transfer any portion of its money, property or income,
directly by way of dividend, bonus or profit, to any of its members(s) or the relative or
relatives of member or members.
(v) The company shall maintain its banks accounts with a scheduled bank or in a post
office or national saving organization, National Bank of Pakistan or national
commercialized banks.
(vi) The company shall regularly maintain its books of accounts in accordance with
generally accepted accounting principles and permit their inspection to the interested
members of the public, without any hindrance, at all reasonable times.
(vii) Without prejudice to the powers conferred on the Commission under section 42 of
the Companies Ordinance, 1984, the association shall not change its memorandum
and articles of association without approval of Commissioner, Income Tax, if it has
been approved by him as a non-profit organization.
(viii) The company shall restrict the surpluses or monies validly set apart, excluding
restricted funds, upto twenty five percent (25%) of the total income of the year.
Provided that such surpluses or monies set apart are invested in Government
Securities, a collective investment scheme authorized or registered under the Non-
Banking Finance Companies (Establishment and Regulation) Rules, 2003, mutual
funds, a real estate investment trust approved and authorized under Real Estates
Investment Trust Regulations, 2008 or scheduled banks.
41

We, the several, persons whose names and addresses are subscribed below are desirous of
being formed into a Company in pursuance of these Articles of Association:-

Dated the. day of, 201

Name and surname
(present &former)
in full (in Block
Letters)
NIC No. (in
case of for-
eigner, Pass-
port No)
Father's/
Husband's
Name in
full
Nationality(ies)
with any former
Nationality
Occupation Residential
Address in
full
Signature
1. AB nnnnn-nnnnnnn-
n
GH
Pakistani Resident
Director,
Household
Appliances
Ltd., Lahore
14-A, Street
No.2, Sadaf
Colony, Quet-
ta.

2. CD nnnnn-nnnnnnn-
n
IJ
Pakistani Advocate -do-

3. XYZ Limited

through

EF

nnnnn-nnnnnnn-
n

KL

Pakistani

Company

Director,
ABC Ltd

House No
176, Street
No.204, F-
10/1, Islama-
bad

14-A, Street
No.2, Sadaf
Colony, Quet-
ta.

Witness to above signatures
Signature

Full Name (in Block Letters)

Fathers/ Husbands name

Nationality

Occupation

CNIC NO

Full Address

Guidebook

On

Further Issue of Shares
Otherwise Than Rights


Phone No. : 051-9207091-4, Fax: 051-9204915

1
Table of Contents

Chapter

Page No.
1. Introduction 2
2.
Specific Requirements of Law:
2. Companies (General Provisions and Forms) Rules, 1985
3. Sixth Schedule of the Companies Ordinance, 1984

3 - 4
3 General Requirements of the Ordinance 5 - 6
4.
1. Noticeof General Meeting
2. Statement of Material Facts
3. Minimum disclosure of information to shareholders

7 - 8
5. Application to the Commission 9

2
Chapter No. 1

INTRODUCTION

This booklet is a guide to the laws and rules governing further issue of shares
otherwise than rights, by a company limited by shares. This guide is designed to explain
and clarify the procedure of obtaining approval from the existing shareholders and
filing an application with the Securities and Exchange Commission of Pakistan (the
Commission) under the provisions of the Companies Ordinance, 1984 (the
Ordinance) and Companies (General Provisions and Forms) Rules, 1985 (the Rules).

Every company is required to comply with following requirements of the law
before filing an application with the Commission:-

i). Alter Memorandum of Association to give effect to increase in authorized
capital of the Company through a special resolution, where existing
authorized capital of a company is fully subscribed, or the un-issued
capital is insufficient for the new issue;
ii). Approval of shareholders through a special resolution for further issue of
shares otherwise than rights passed by a majority of not less than three-
fourths of such members entitled to vote, as are present in person or by
proxy at the general meeting;
iii). Application to be submitted in a manner prescribed under Rule 30 of the
Rules.

The guide highlights the topic under the Companies Ordinance, 1984 and Companies
(General Provisions and Forms) Rules, 1985.

3
Chapter No. 2

Relevant provisions of the Ordinance and Rules, in brief, stipulating various
conditions regarding further issue of shares by a company are narrated hereunder
however detailed provisions may be referred to from the Ordinance and the Rules:-

2.1. The Companies Ordinance, 1984

Specific Requirements

Provisions of Section 28 of the Ordinance require that a company may alter or
add to its Articles of Association by passing a special resolution and any
alteration or addition so made shall be as valid as if originally contained in the
articles, and be subject in like manner to alteration by special resolution. The
Company needs to pass a special resolution to alter its Memorandum of
Association, to give effect to the increased authorized capital of the Company, if
required.

Proviso to Sub-section (1) of Section 86 of the Ordinance regarding further
issue of capital provides that the Federal Government may, on an application
made by any public company on the basis of special resolution passed by it,
allow such company to raise its capital without issue of right shares.

While issuing notice of general meeting, to be held for taking approval of the
shareholders for issuance of shares otherwise than rights, following provisions of the
Ordinance stipulating certain conditions may be kept in mind:

Provisions of Clause (b) of Sub-section (1) of Section 160 of the Ordinance, as to
meetings and votes, requires that:
where any special business, that is to say business other than consideration
of the accounts, balance-sheets and the reports of the directors and auditors,
the declaration of a dividend, the appointment and fixation of remuneration
of auditors, and the election or appointment of directors, is to be transacted
at a general meeting, there shall be annexed to the notice of the meeting a
statement setting out all material facts concerning such business, including,
in particular, the nature and extent of the interest, if any, therein of every
director, whether directly or indirectly, and, where any item of business
consists of the according of an approval to any document by the meeting, the
time when and the place where the document may be inspected shall be
specified in the statement;

2.2. Companies (General Provisions and Forms) Rules, 1985

Rule 30 of the Rules explains the mode of submission of application to the
Commission. It is provided therein that the application shall, in addition to
complying with any other requirement of the Ordinance or the rules, be

4
(i) duly signed and verified by an affidavit by the applicant indicating
complete name and address and, in the case of a company, signed and
verified by an affidavit by a responsible officer of the company;

(ii) neatly and legibly written, typed or printed, setting out precisely the
facts, grounds and claims or relief applied for in serially numbered
paragraphs and specifying the relevant provisions of the Ordinance
under which action or relief is applied for;

(iii) accompanied by documents referred to in the application or relied
upon and, in case of an appeal against any order or decision, by a
certified copy of such order or decision;

(iv) accompanied by one spare copy, duly signed, dated and verified and
accompanied by copies of the documents as aforesaid; and

(v) accompanied by the original bank challan or draft for the fee paid for
the application.

2.3. Sixth schedule of the Ordinance

Para VII of the Sixth Schedule of the Ordinance provides that filing fee, by or on behalf
of a company, for application with the Commission or the Registrar shall be Rs.500.

5
Chapter No. 3

General Requirements of the Ordinance

The Company shall also take care of the following provisions of the law while
considering issue of shares otherwise than rights:-

Provisions of Section 91 of the Ordinance stipulate that only fully paid shares
should be issued and no company shall issue partly paid shares.

Section 92 of the Ordinance provides that a Company limited by shares, if so
authorized by its articles, may alter the conditions of its memorandum so as to
increase its share capital by such amount as it thinks expedient. Sub-section (2)
of the aforesaid provision of the Ordinance explains that new shares issued by
the company shall rank pari passu with the existing shares of the class to which
the new shares belong in all matters, including the right to such bonus or right
issue and dividend as may be declared by the company subsequent to the date
of issue of such new shares. Provisions of Sub-section (3A) provide that
notwithstanding anything contained in this Ordinance or any other law for the
time being in force or the memorandum and articles, where the authorized
capital of a company is fully subscribed, or the un-subscribed capital is
insufficient, the same shall be deemed to have been increased to the extent
necessary for issue of shares to a scheduled bank or financial institution in
pursuance of any obligation of the company to issue shares to such scheduled
bank or financial institution.

Provisions of Sub-section (1) of Section 94of the Ordinance state that where a
company having a share capital has resolved to increase its share capital beyond
the authorized capital or such capital is increased under Sub-section (3A) of
Section 92 of the Ordinance it shall file with the registrar, within fifteen days
after passing of the resolution, a notice of the increase of capital and the registrar
shall record the increase.

Provided that where default is made by a company in filing a notice of
increase in the authorized capital under Sub-section (3A) of Section 92, the
scheduled bank or the financial institution to whom shares have been issued
may file notice of such increase with the registrar and such notice shall be
deemed to have been filed by the company itself and the scheduled bank or
financial institution shall be entitled to recover from the company the
amount of any fee properly paid by it to the registrar in respect of such
increase.

Sub-section (2) of the aforesaid provisions of the Ordinance provides that the
notice to be given under Sub-section (1) shall include particulars of the shares to
be affected and the conditions, if any, subject to which the new shares are to be
issued.

6
Provisions of Section 95of the Ordinance require that :

(1) No company shall have power to buy its own shares or the shares of its
holding company.

(2) No company limited by shares, other than a private company, not being
a subsidiary of a public company, shall give, whether directly or indirectly and
whether by means of a loan, guarantee, the provision of security or otherwise,
any financial assistance for the purpose of or in connection with purchase made
or to be made by any person of any shares in the company or, where the
company is a subsidiary, in its holding company:

Provided that nothing in this Sub-section shall prevent the company
from advancing or securing an advance to any of its salaried employees,
including a chief executive who, before his appointment as such, was not a
director of the company, but excluding all directors of the company, for
purchase of shares of the company or of its subsidiary or holding company, if
making or securing of such advance is a part of the contract of service of such
employee.

7
Chapter No. 4

4.1 Notice of General Meeting

The notice of general meeting shall be sent to the members at least twenty-one
days before the date of the meeting and, in the case of a listed company, such notice, in
addition to its being dispatched in the normal course, shall also be published at least in
one issue each of a daily newspaper in English language and a daily newspaper in Urdu
language having circulation in the Province in which the stock exchange on which the
company is listed is situate. [Section 158 & 159 of the Ordinance]

Notice of general meeting must be faxed to the Commission along with
statement under Section 160 of the Ordinance on the same date on which it is sent to the
shareholders and copies of the newspapers in which the notices of general meeting are
published may be sent to the Commission within 07-days of their publication. [Circular
No. 5 dated March 14, 2002]

Notice of the general meeting at which business for issuance of further capital,
otherwise than rights, is placed before the shareholders for approval, must specifically
indicate:

1. the proposed resolution is a special resolution;
2. provision of the Ordinance under which the resolution is proposed;
3. total number of shares to be issued;
4. price per share;
5. total amount of capital to be issued;
6. the fact that the shares are to be issued otherwise than rights;
7. to whom these shares are proposed to be issued.

Illustration

Agenda item 3: to pass a special resolution under the provisions of Section 86(1)
of the Companies Ordinance, 1984, for issuance of 1,000 ordinary shares of the
Company at Rs.10 each, total amounting to Rs.10,000.00 (rupees ten thousand only), by
way of otherwise than rights, to ABC.

4.2 Statement of Material Facts

Clause (b) of Sub-section (1) of Section 160 of the Ordinance requires that where
any special business is to be transacted at a general meeting, there shall be annexed to
the notice of the meeting a statement setting out all material facts concerning such
business.

As provisions of Section 86 of the Ordinance require that where a public
Company intends to issue shares otherwise than rights it may file an application with
the Commission, on the basis of special resolution passed by it.

8
In view of the above a Company is required to circulate statement of material
facts along with the notice of general meeting at which the issuance of further shares,
otherwise than rights, by the Company is placed before the shareholders of the
Company for approval.

4.3 Information to be disclosed to the shareholders

Section 160 of the Ordinance states that the statement annexed to the notice of
the general meeting with regards to special business provides all material facts
concerning such business. Therefore the aforesaid statement, at minimum may include
the following information with regards to issue of further shares without rights to the
existing shareholders:-

Justification as to why proposed shares are to be issued otherwise than rights
and not as rights shares;

Name of the person(s) / organization(s) / company(s) etc. to whom shares will
be issued;

Price at which the proposed shares will be issued. Justification, with details of
the latest available market price and break up value per share, if such price
differs from par value;

Detail of asset(s), if proposed shares are to be issued for consideration otherwise
than cash;

Purpose of the issue, utilization of the proceeds of the issue and benefits to the
Company and its shareholders with necessary details;

Existing shareholding of the person(s) / organization(s) / company(s) etc. to
whom the proposed shares will be issued (in number as well as percentage vis--
vis to existing paid up capital of the Company);

Total shareholding of the person(s) / organization(s) / company(s) etc. after the
proposed issue of shares (in number as well as percentage vis--vis to increased
paid up capital of the Company);

Whether the person(s) / organization(s) / company(s) etc. has provided written
consent to the Company for purchase of such shares;

The fact that these shares will rank pari passu in all respects with the existing
shares of the Company. Details if there is any change.

The fact that this issue of shares is subject to approval of the Commission;

If proposed shares are preference shares then the Commissions Guidebook on Issue
of preference shares may be consulted.

9
Chapter No. 5

Application to the Commission

The Company after passing the special resolution has to file duly filled form 26 with the
concerned Registrar and obtain a certified copy of the same. The application to be filed
with the Commission, for its approval, under proviso to Sub-section (1) of Section 86 of
the Ordinance shall be submitted in a manner provided in Rule 30 of the Rules together
with the following information / documents:-

The application must narrate in detail the specific purpose for which the
proceeds of the issue will be utilized;

The application must be signed by the officer/ director of the Company who has
been authorized by the shareholder to accomplish the transaction;

Financial projections for next three years reflecting implementation of the plan
and its benefits;

If the Memorandum and Articles of Association of the Company have been
amended then a certified copy of the same may also be provided;

Certified copy of form 26 with detailed text of special resolution;

Justification as to why shares are proposed to be issued otherwise than rights;

Relevant detail of the shares issued within past two years;

Minutes of the board of directors meeting, along with attendance sheet, in
which decision for issuance of further shares otherwise than rights was made;

Attendance sheet of shareholders, who attended the general meeting either in
person or through proxies;

Affidavit as required under Rule 30 of the Rules;

Copy of voucher evidencing deposit of application fee.

10

Ph: 051- 9207091-4 Fax: 051-9204915
Web: www.secp.gov.pk

Guidebook

On

Issue of Preference Shares


Phone No. : 051-9207091-4, Fax: 051-9204915

1
Table of Contents

Chapter

Page No.
1. Introduction 2
2. Basic Concepts 3-4
3.
Specific Requirements of Law:
2. Companies Share Capital (Variation in Rights and
Privileges) Rules, 2000
3. Companies (Issue of Capital) Rules, 1996
4. Companies (General Provisions and Forms) Rules, 1985
5. Sixth Schedule of the Companies Ordinance, 1984

5 - 8
4. General Requirements of the Ordinance 9
5.
1. Notice
2. Statement of Material Facts
3. Minimum disclosure of information to shareholders

10 - 12
6. Application to the Commission 13

2
Chapter No. 1

INTRODUCTION

This booklet is a guide to the laws and rules governing issue of preference shares by a
company limited by shares. This guide is designed to understand the procedure of obtaining
approval from the shareholders and filing an application with the Securities and Exchange
Commission of Pakistan (the Commission) under the provisions of the Companies Ordinance,
1984 (the Ordinance), Companies Share Capital (Variation in Rights and Privileges) Rules,
2000 (the Share Capital Rules), Companies (Issue of Capital) Rules, 1996 (the Capital Issue
Rules) and Companies (General Provisions and Forms) Rules, 1985 (the Companies Rules).

The guidebook summarizes the provisions of the Ordinance and the Rules relating to
preference shares and steps to be taken by companies for issuance of these shares.

The provision of Section 90 of the Ordinance was substituted through Finance Act, 1999
in the year 1999, through which limited companies were allowed to have different kinds of
share capital and classes therein as provided in their memorandum and article of associations.
Further, under Section 90 of the Ordinance, the Share Capital Rules were prescribed in the year
2000. Rule 3 (1) of the Share Capital Rules provide that a company limited by shares may have
more than one kind of share capital and may have different classes of shares under each kind.

Earlier to this provision of the Ordinance, companies could have only one class of share
capital i.e. Ordinary shares having same kind of rights and privileges, attached thereto.
However, now under the provisions of Section 90 of the Ordinance and under Rule 4 of the
Share Capital Rules, different rights and privileges in relation to the different classes of shares
have been conferred in a manner as prescribed in the aforesaid rule.

The guidebook highlights the important provisions of the following laws:

The Companies Ordinance, 1984;
The Companies Share Capital (Variation in Rights and Privileges) Rules, 2000;
The Companies (Issue of Capital) Rules, 1996; and
The Companies (General Provisions and Forms) Rules, 1985.

3
Chapter No. 2

Basic concepts:

Preference shares:

Generally the preference shares means shares which fulfills the following conditions:

1. During the continuance of the company it must have assured preferential dividend. The
preferential dividend may consist of a specified amount payable to preference
shareholders before any thing is paid to ordinary shareholders, or the amount payable
as preferential dividend may be calculated at a fixed rate / percentage.
2. On the winding up of the company it usually carry a preferential right to be paid, that
is, the amount paid up on preference shares must be paid back before any thing is paid
to the ordinary shareholders.
3. Generally such shares do not carry voting rights.

Cumulative preference shares:

If the Company is not able to pay preference dividend in one year, the arrears of dividend are
to be carried forward and paid out of the profits of the subsequent years, such preference shares
are known as cumulative Preference shares.

Non cumulative preference shares:

If unpaid dividend is not carried forward but lapses then such shares are known as non-
cumulative preference shares.

Participatory preference shares:

Preference shares which are entitled to participate in surplus profits, i.e. profit proposed to be
distributed among the shareholders after dividend to preference and ordinary shareholders, are
termed as participatory preference shares.

Similarly in the winding up of a company, if, after paying back both the preference and
ordinary shareholders, there is surplus, and the preference shareholders are entitled to share in
the distribution of available surplus, then such preference shares are also known as
participatory preference shares.

Convertible preference shares:

Preference shares which are convertible into any other shares of the Company after a specified
period of time or on occurrence of a defined event are termed as convertible preference shares.

Redeemable preference shares:

Preference shares which are issued for a definite time period after the expiry of which the
preference shares will be redeemed in cash are termed as redeemable preference shares.

4
Irredeemable preference shares:

If preference shares are not redeemable / convertible after a specific period of time are called
irredeemable preference shares.

Stepped preference shares:

Preference shares with dividend which increases annually by a specified amount and with a
predetermined capital return.

Zero dividend preference shares:

Preference shares which receive no dividend through out their lives and instead a fixed known
amount is paid at maturity.

5
Chapter No. 3

Relevant provisions of the Ordinance, in brief, stipulating various conditions regarding
further issue of capital by a Company are narrated hereunder however detailed provisions may
be read from the Ordinance and the Rules:-

2.1. The Companies Ordinance, 1984

Specific Requirements

Section 28 of the Ordinanceregarding alteration of articles requires that a company may
alter its Articles of Association by passing a special resolution and any alteration or
addition so made shall be as valid as if originally contained in the articles, and be subject
in like manner to alteration by special resolution. The Company needs to pass a special
resolution to alter its Articles of Association, to give effect to the increased authorized
and paid up capital of the Company and different kinds and classes therein.

Section 86 of the Ordinance regarding further issue of capital requires that where the
directors decide to increase the capital of the company by issue of further shares, such
shares shall be offered to the members in proportion to the existing shares held by each
member, irrespective of class, and such offer shall be made by notice specifying the
number of shares to which the member is entitled and limiting a time, within which the
offer, if not accepted, will be deemed to be declined:

Provided that the Federal Government may, on an application made by any
public company on the basis of special resolution passed by it, allow such
company to raise its further capital without issue of right shares.

Section 90 of the Ordinance regarding Classes and kinds of share capital states that a
company limited by shares may have different kinds of share capital and classes therein
as provided by its memorandum and articles:

Provided that different rights and privileges in relation to the different classes of
shares may only be conferred in such manner as may be prescribed

Section 85 of the Ordinance regarding the redemption of preference shares states that:
(1) Subject to the provisions of this section, a company limited by shares may
redeem the preference shares issued by it:

Provided that

(a) no such shares shall be redeemed except out of profits of the company
which would otherwise be available for dividend or from out of a sinking
fund created for this purpose or out of the proceeds of a fresh issue of shares
made for the purposes of the redemption or out of sale proceeds of any
property of the company;
(b) no such shares shall be redeemed unless they are fully paid;

6
(c) where any such shares are redeemed otherwise than out of the proceeds
of the fresh issue, there shall be out of profits which would otherwise have
been available for dividend be transferred to a reserve fund, to be called the
capital redemption reserve fund, a sum equal to the amount applied in
redeeming the shares, and the provisions of this Ordinance relating to the
reduction of the share capital of a company shall, except as provided in this
section, apply as if the capital redemption reserve fund were paid-up share
capital of the company;

(d) where any such shares are redeemed out of the proceeds of a fresh issue,
the premium, if any, payable on redemption must have been provided for
out of the profits of the company before the shares are redeemed or out of the
share premium account.

(2) If a company fails to comply with the provisions of sub-section (1), the
company and every officer of the company who knowingly and willfully is in
default shall be liable to a fine not exceeding five thousand rupees.

(3) The redemption of preference shares under this section by a company
shall not be taken as reducing the amount of its authorized share capital.

(4) Subject to the provisions of this section, the redemption of preference
shares there under may be effected on such terms and in such manner as may be
provided by the articles of the company.

Provisions of Sub-section (b) of Section 160 of the Ordinance, as to meetings and votes,
requires that:

where any special business, that is to say business other than consideration of the
accounts, balance-sheets and the reports of the directors and auditors, the
declaration of a dividend, the appointment and fixation of remuneration of auditors,
and the election or appointment of directors, is to be transacted at a general meeting,
there shall be annexed to the notice of the meeting a statement setting out all
material facts concerning such business, including, in particular, the nature and
extent of the interest, if any, therein of every director, whether directly or indirectly,
and, where any item of business consists of the according of an approval to any
document by the meeting, the time when and the place where the document may be
inspected shall be specified in the statement;

2.2 The Companies Share Capital (Variation in Rights and Privileges) Rules, 2000

Relevant Rules of the Share Capital Rules are as under:

3. Kinds and classes of share capital

1. A company limited by shares may have more than one kind of share capital
and may have different classes of shares under each kind;

7
2. Where a company intends to have different kinds of share capital and classes
of shares therein, it shall specifically so provide in its memorandum and
articles.

4. Nature of rights and privileges

Each kind of share capital of a company and class or classes of its shares, if any, as
specified in the memorandum and articles may have different rights and privileges,
which shall be provided in the articles. The variation in the rights and privileges of
the shareholders in a kind of share capital or class or classes therein may be of the
nature, including the following, namely:

1. different voting rights; voting rights disproportionate to the paid up value of
shares held; voting rights for specific purposes only; or no voting rights at all;

2. different rights for entitlement of dividend, right shares or bonus shares or
entitlement to receive the notices and to attend the general meetings; and

3. rights and privileges for indefinite period, for a limited specified period or
for such periods as may from time to time be determined by the members
through special resolution.

5. Conditions.

1. No company shall issue further share capital of any kind or class carrying
different rights and privileges except with prior approval of the Commission
to be obtained on the basis of a special resolution.

2. Subject to the provisions of section 86 of the Ordinance, offer of further share
capital of any kind or class carrying different rights and privileges shall be
made to each existing shareholder proportionately without any
discrimination.

3. If any of the existing shareholders declines to accept the offer made under
sub-rule (2) of Rule 5, the shares so declined shall be disposed of by the
directors in such manner as may be provided in the articles or in accordance
with the special resolution passed by shareholders.

4. In case share capital of a company has different classes having different
rights and privileges and the same is to be offered to the general public, the
fact shall be distinctly mentioned in the offering document and the difference
in the rights and privileges of any class of share capital shall be
conspicuously mentioned in the offering document or prospectus, etc.

2.3 Companies (Issue of Capital) Rules, 1996

Relevant extracts of Rule 5 of the Capital Issue Rules regarding issue of right shares by listed
company requires that a listed company may issue right shares subject to following conditions,
namely:-

8
i. the company shall not make a right issue within one year of the first issue of
capital to the public or further issue of capital through right issue;

ii. the company while announcing right issue, shall clearly state the purpose of
the right issue, benefits to the company, use of funds and financial
projections for three years. The financial plan and projections shall be signed
by all the directors who were present in the meeting in which the right issue
was approved.

iii. the decision of the company to issue right shares shall be communicated to
the Authority and the respective stock exchange on the day of the decision;

iv. book closure shall be made within forty-five days of the announcement of the
right issue and the payment and renunciation date once announced for the
letter of right shall not be extended except with the permission of the
respective stock exchange under special circumstances; and

v. if the announcement of bonus and right issue is made simultaneously,
resolution of the board of directors shall specify whether the bonus shares
covered by the announcement qualify for right entitlement

2.3. Companies (General Provisions and Forms) Rules, 1985

Rule 30 of the Companies Rules explain the mode of submission of application to the
Commission for its approval allowing the Company to issue preference shares. It has
been stated that the application shall, in addition to complying with the any other
requirement of the Ordinance or the rules, be

(i) duly singed and verified by an affidavit by the applicant indicating complete name
and address and, in the case of a company, signed and verified by an affidavit by a
responsible officer of the company;

(ii) neatly and legibly written, typed or printed, setting out precisely the facts, grounds
and claims or relief applied for in serially numbered paragraphs and specifying the
relevant provisions of the Ordinance under which action or relief is applied for;

(iii) accompanied by documents referred to in the application or relied upon and, in
the case of an appeal against any order or decision, by a certified copy of such order or
decision;

(iv) accompanied by one spare copy ,duly signed ,dated and verified and accompanied
by copies of the documents as aforesaid; and

(v) accompanied by original bank challan or draft for the fee paid for the application.

2.3. Sixth schedule of the Ordinance:-

Para VII of the Sixth Schedule of the Ordinance provides that filing fee, by or on behalf of a
company, for application with the Commission or the Registrar shall be Rs.500.

9
Chapter No. 4

General Requirements of the Ordinance:

Only relevant extracts are reproduced hereunder:

Provisions of Section 91 of the Ordinance stipulate that only fully paid shares should be issued
and no company shall issue partly paid shares.

Section 92 of the Ordinance states that a Company limited by shares, if so authorized by its
articles, may alter the conditions of its memorandum so as to increase its share capital by such
amount as it thinks expedient. Sub-section (2) of the aforesaid provision of the Ordinance
explains that the new shares issued by the company shall rank pari passu with the existing shares
of the class to which the new shares belong in all matters, including the right to such bonus or
right issue and dividend as may be declared by the company subsequent to the date of issue of
such new shares. Provisions of Sub-section (3A) provides that notwithstanding anything
contained in this Ordinance or any other law for the time being in force or the memorandum and
articles, where the authorized capital of a company is fully subscribed, or the un-subscribed
capital is insufficient, the same shall be deemed to have been increased to the extent necessary for
issue of shares to a scheduled bank or financial institution in pursuance of any obligation of the
company to issue shares to such scheduled bank or financial institution

Provisions of Sub-section (1) of Section 94 of the Ordinance states that where a company having
a share capital has resolved to increase its share capital beyond the authorized capital or such
capital is increased under sub-section (3-A) of section 92 of the Ordinance it shall file with the
registrar, within fifteen days after the passing of the resolution, a notice of the increase of capital
and the registrar shall record the increase.

Provided that where default is made by a company in filing a notice of increase in the
authorized capital under sub-section (3-A) of section 92, the scheduled bank or the financial
institution to whom shares have been issued may file notice of such increase with the
registrar and such notice shall be deemed to have been filed by the company itself and the
scheduled bank or financial institution shall be entitled to recover from the company the
amount of any fee properly paid by it to the registrar in respect of such increase.

Sub-section (2)of the aforesaid provisions of the Ordinance provides that the notice to be given
under sub-section (1) shall include particulars of the shares to be affected and the conditions, if
any, subject to which the new shares are to be issued.

Provisions of Section 95 of the Ordinance require that (1) No company shall have power to
buy its own shares or the shares of its holding company.

(2) No company limited by shares, other than a private company, not being a subsidiary of a
public company, shall give, whether directly or indirectly and whether by means of a loan,
guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in
connection with purchase made or to be made by any person of any shares in the company or,
where the company is a subsidiary, in its holding company:
Provided that nothing in this sub-section shall prevent the company from advancing or
securing an advance to any of its salaried employees, including a chief executive who, before his
appointment as such, was not a director of the company, but excluding all directors of the
company, for purchase of shares of the company or of its subsidiary or holding company, if
making or securing of such advance is a part of the contract of service of such employee.

10
Chapter No. 5

4.1 Notice of General Meeting

The notice of general meeting shall be sent to the members at least twenty-one days
before the date of the meeting and, in the case of a listed company, such notice, in addition to its
being dispatched in the normal course, shall also be published at least in one issue each of a
daily newspaper in English language and a daily newspaper in Urdu language having
circulation in the Province in which the stock exchange on which the company is listed is situate
[Section 158 & 159 of the Ordinance].

Notice of general meeting must be faxed to the Commission along with statement under
Section 160 of the Ordinance on the same date on which it is sent to the shareholders and copies
of the newspaper in which the notices of general meeting are published may be sent to the
Commission within 07-days of their publication. [Circular No. 5 dated March 14, 2002]

The notice of the general meeting in which business for issuance of preference shares is
placed before the shareholders for approval, must specifically indicate:

1. the proposed resolution is a special resolution;
2. the fact that this issue of shares is subject to approval of the Commission;
3. provision of the Ordinance under which the resolution is proposed;
4. provision of the Share Capital Rules;
5. amendments to be made in the Memorandum and Articles of Association with regards
to:
i). give effect to the increased authorized capital, if necessary;
ii). specify the various kinds and classes of shares i.e. ordinary and preference shares;
iii). specify the rights and privileges attached to each kind and class of shares;

6. total number of preference shares to be issued;
7. price per such share;
8. total amount of capital to be issued;
9. rate of preference dividend;
10. preference shares to be issued as rights or otherwise than rights;
11. In case the preference shares are to be issued otherwise than right then to whom these
shares are to be issued.

11
4.2 Statement of Material Facts

Clause (b) of Sub-section (1) of Section 160 of the Ordinance requires that where any
special business is to be transacted at a general meeting, there shall be annexed to the notice of
the meeting a statement setting out all material facts concerning such business.

As the provisions of Rule 5(1) of the share Capital no company shall issue further share
capital of any kind or class carrying different rights and privileges except with prior approval of
the Commission to be obtained on the basis of a special resolution.

In view of the above a Company is required to circulate statement of material facts along
with the notice of general meeting in which the agenda for issuance of preference shares has
been placed before the shareholders of the Company for approval.

4.3 Information to be disclosed to the shareholders

The provisions of Section 160 of the Ordinance clearly states that the statement annexed
with the notice of the general meeting with regards to special business provide all material facts
concerning such business. Therefore the aforesaid statement at minimum may include the
following information with regards to issue of preference shares:-

Justification for issuance of preference shares and for not issuing ordinary shares;

Price at which the proposed shares will be issued. Justification, with details of the latest
available market price, if any of the previous issue of preference shares is already listed
on the Stock Exchange;

Purpose of the issue, utilization of the proceeds and benefits to the Company and its
shareholders with necessary details;

Rate of preference dividend;

Specific Rights and privileges attached to the proposed preference shares such as voting
rights, participation in future issue of rights shares and bonus shares etc.;

Whether the preference shares will be listed on Stock Exchange(s);

Nature of preference shares i.e. redeemable or otherwise, cumulative or otherwise,
participatory, convertible etc.

If Redeemable:
Maximum number of preference shares which will be redeemed;
Maximum period after which preference shares will be redeemed;

12
Mechanism / scheme for redemption clearly describing the modus operandi
for both call and put options whichever is applicable;
Specific time period during which redemption of preference shares will be
made;
What remedy is available to either party i.e. Company or the preference
shareholder, if the shares could not be redeemed within the specified period;
Whether the preference shareholders will be entitled to participate in the
surplus available for shareholders in the event of winding up of the
Company;

If Irredeemable:
What precise exit is available to Irredeemable preference shareholders;
Whether the preference shareholders will be entitled to participate in the
surplus available for shareholders in the event of winding up of the
Company.

If Cumulative:
The circumstances in which the Company will be authorized to cumulate the
preference dividend;
Revised rate of preference dividend in case of accumulation;
Scope / limit of maximum accumulations;
Whether at the time of redemption / conversion the accumulated preference
dividend will also be redeemed or converted;
If the Company fails to redeem or convert the preference shares on specified
date, whether preference dividend will be accrued till the final redemption /
conversion.

If convertible:
Maximum number, along with percentage, of preference shares which will be
converted into other kinds and classes of shares of the Company;
Present status of the kinds and classes of the shares (total issued capital,
listing status, market price etc.) in which conversion of preference shares is
proposed;
Period after which the preference shares will be eligible for conversion;
Event on the occurrence of which conversion option can be exercised by any
of the two parties i.e. the Company or the preference shareholders;

If preference shares are proposed to be issued otherwise than rights then the Commissions
Guidebook for Further issue of shares otherwise than rights may be consulted.

13
Chapter No. 6

Application to the Commission:

The Company after passing of the special resolution has to file duly filled form 26 with the
concerned Registrar and obtain a certified copy of the same. The application to be filed with the
Commission, for its approval, under Rule 5 of the Share Capital Rules read with Section 90 of
the Ordinance (and under proviso to Sub-section (1) of Section 86 of the Ordinance, if issued
otherwise than rights) may be submitted in a following manner accompanying with the
following documents:-

The application must narrate detailed information of BMR / expansion plan or any
other purpose for which the proceeds of the issue will be utilized;

The application must be signed by the officer/ director of the Company who have been
authorized by the shareholder to accomplish the transaction;

Financial projections for next three years reflecting the implementation of the plan and
its benefits;

Amended certified copy of the Memorandum and Articles of Association of the
Company;

Certified copy of form 26 along with special resolution;

Minutes of the board of directors meeting, along with attendance sheet, in which
decision for issuance of further shares otherwise than rights was made;

Attendance sheet of shareholders, who attended the general meeting either in person or
through proxies;

Affidavit as required under Rule 30 of the Rules;

Copy of voucher evidencing deposit of application fee.

14

Ph: 051- 9207091-4 Fax: 051-9204915
Web: www.secp.gov.pk

Guidelines for making alteration in Memorandum of Association Page 01 of 03 .

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About this Guide

This Guide is intended to provide basic information about
alteration in Memorandum of Association and making a petition to SEC for
confirmation of the alteration so as to facilitate the Management of the
Companies from the point of view of practical approach to law and corporate
procedure.

1. Ensure that reasons for making alteration fall within one of
the permissible
2. Ensure that Procedure is followed.
3. Ensure that documents required to accompany the
application are submitted. See Check List
4. Filing Time of Petition is within 60 days of passing of
Special Resolution.
5. Filing Time of Form 26 with Company Registration Office
within 15 days of passing of Special Resolution.
6. Application Fee @ Rs. 5000/= for Commission and
Rs.200/- for Company Registration Office as filing fee of Form
26
7. Ensure that a copy of petition has been filed with
concerned Company Registration Office.

q to carry on some business, not being a business specified in
its memorandum, which may conveniently or advantageously
be combined with the business of the company; or
q to enlarge or change the local area of its operations; or
q to carry on its business more economically or more
efficiently; or
q to attain its main business purpose by new or improved
means; or
q to restrict or abandon any of the objects specified in the
memorandum; or
q to sell or dispose of the whole or any part of the undertaking
of the company; or
q to amalgamate with any other company or body of persons.
______________________________________________
Note: An alteration aforesaid takes effect only if and to the extent
confirmed by SEC.
GUIDELINES ON MAKING ALTERATION IN MEMORANDUM OF
ASSOCIATION UNDER SECTION 21 OF THE COMPANIES ORDINANCE, 1984.
REASONS FOR MAKING ALTERATION IN MEMORANDUM
OF ASSOCIATION.
GENERAL REQUIREMENTS

Compliance of section 21 of the Companies Ordinance, 1984 and Rule 3
of the Companies (General Provisions and Forms) Rules, 1985 is required to
be made by companies which are desirous of making amendments in
Memorandum of Association.

PROCEDURE OF AMENDMENT IN MEMORANDUM OF
ASSOCIATION.

"Cut / Copy and file...."

No Yes

X
a

Have you given all the information required by application format?
Have you included Additional information required under Rule 3
sub rule (3) of the Companies (General Provisions and Forms)
Rules, 1985?

Have you enclosed copy of Special Resolution on Form 26?
Have you enclosed copy of Notice of Meeting?
Have you enclosed copy of Minutes of Meeting?
Have you enclosed Copy of Existing Memorandum of Association?
Have you enclosed Copy of Amended Memorandum of Association
(pasting of new clauses)?

Have you enclosed Copy of NOCs from creditors?
Have you enclosed Pattern of holding of shares?
Have you enclosed Affidavit from applicant Chief Executive or
Secretary?

Have you enclosed copy of Authority Letter in favour of
consultant?

Have you enclosed Original paid Bank Challan of Rs.5000/- being
application fee?

Have you enclosed Clippings of Urdu and English newspapers if
you are a Listed Company?

Have you filed a copy of the petition with Company Registration
Office where the company is registered?

Have you enclosed objections of dissenting shareholders /
creditors?

Have you enclosed names and addresses of interests likely to be
affected by proposed amendment?

"Cut / Copy and file...."

Check List of Documents required to be
submitted with the application.

1
SECP
GUIDE SERIES


COMPANY
MORTGAGES
AND CHARGES


Ph. No.: 051-9207091-4, Fax: 051-9204915
2
Table of Contents

S .No. Chapters Page No.

1. Introduction 3

2. Registration of Mortgages and charges 4 9

3. Modification of mortgages and charges 10

4. Satisfaction of mortgages and charges

11

5. Rectification of mortgages and charges 12 13

6. Further Information 14 20

This is a guide only and should be read with the relevant legislation

3
Introduction

Whenever, a company obtains a loan and provides its assets to the lender as a
security for the repayment of loan or other obligations, this activity is called the
creation of the mortgage/charge on the assets of the company. The particulars of
the charge are required to be reported to the Registrar concerned in the manner
provided under the Companies Ordinance, 1984 (the Ordinance) and the rules
framed there-under. Part 7 (sections 121 to 136) of the Ordinance deals with the
matters relating to the registration of a charge, any modification therein and
satisfaction thereof.

The particulars of mortgage/charge are required to be reported to the Registrar
concerned within 21 days from the date of its creation alongwith relevant
documents. Similarly any modification in the particulars of the mortgage/charge
is also required to be reported to the Registrar within the said period.

As soon as the loan is repaid, it is the responsibility of the company to get the
mortgage/charge vacated. This process is called the satisfaction of
mortgage/charge. Again, the time frame for reporting the satisfaction of
mortgage/charge to the registrar is 21 days from the date of its satisfaction.

In case of omission in filing the particulars of mortgage/charge or any
modification therein or satisfaction thereof within the prescribed period of 21 days,
the company is required to seek leave of the Commission for getting the
particulars recorded beyond the prescribed period of 21 days.

This booklet is a guide to help companies or any interested parties to file
particulars of a mortgage or charge correctly and timely. For further details and
legal advice, please approach your legal advisor.

4
CHAPTER 1

Registration of Mortgages and Charges

1. What are mortgages and charges?

As defined in section 58 of the Transfer of Property Act 1882, a mortgage is
the transfer of an interest in specific immovable property for the purpose of
securing the payment of money advanced or to be advanced by way of loan,
an existing or future debt or the performance of an engagement which may
give rise to a pecuniary liability.

A charge is security for the payment of a debt or other obligation that does
not pass title of the property or any right to its possession to the person to
whom the charge is given.

2. What mortgages and charges must be registered?

Section 121 of the Companies Ordinance lists the following mortgages and
charges to be registered under the Companies Ordinance, 1984:-

(a) a mortgage or charge for the purpose of securing any issue of
debentures; or

(A debenture is an instrument issued by a company as evidence of a debt or
other obligation. It includes debenture stock, bonds and any other securities
of a company, whether or not it forms a charge on the assets of the
company.)

(b) A mortgage or charge on uncalled share capital of the company; or

(Uncalled share capital is the balance owing for shares that are issued partly
paid.)

(c) a mortgage or charge on any immovable property wherever situate,
or any interest therein; or

(d) a mortgage or charge on any book debts of the company; or

(Book debts are debts that in the ordinary course of a companys business are
commonly entered in its books.)
5
(e) A mortgage or charge, not being a pledge, on any movable property
of the company; or

(f) A floating charge on the undertaking or property of the company,
including stock-in-trade; or
(A floating charge is a charge that does not affect the assets charged until
some event crystallizes the charge fixing it to a certain point in time.

3. Which documents are required to be filed for registration of mortgage or
charge?

The following documents are required to be filed for registration of a
mortgage or charge:

Form 10 containing particulars of mortgage/charges etc.

Copy of instrument(s) creating the mortgage or charge.

An Affidavit to the effect that the copy(ies) of the instrument(s)
is/are the true copy(ies).

Bank challan evidencing the payment of Rs. 7,500 being filing fee for
submission in physical form or Rs. 5,000 for submission through
eServices as the case may be.

4. How much does each registration cost?

There is a fee of Rs. 7,500 for filing each Form 10, 11, 13 and 14 with the
Registrar concerned for submission in physical form or Rs. 5,000 for
submission through eServices, as the case may be.

Same fee is applicable for filing of Modification in the Particulars of
Mortgage or charge on Form 16 or Memorandum of satisfaction of
mortgage or charge on form 17. These forms are available on SECPs web
site: www.secp.gov.pk

5. What do instrument and evidence mean in this chapter?

An instrument is usually a document evidencing creation of mortgage or
charge which should be in legible form but it can also exist in electronic
form.

Evidence means to provide proof of the existence of something.
6
6. Which form should be used?

Different forms are required to be used for different purposes as per details
given hereunder. The form numbers in this table correspond to the relevant
sections of the Companies Ordinance, 1984 and rules contained in the
Companies (General Provisions and Forms) Rules, 1985:-

Form Description Section
Form No. 10 Particulars of mortgages, charges,
etc.
121, 129 and 463
Form No. 11 Particulars of mortgage or charge
subject to which property has been
acquired
122 and 463
Form No. 13 Registration of entire series of
debentures / redeemable capital
123, 124 and 463
Form No. 14 Particulars of an issue of
redeemable capital / debentures in
a series when more than one issue
in the series is made.
123 and 463
Form No. 16 Particulars of modification of
mortgage, charge, etc.
129(3) and 463
Form No. 17 Memorandum of complete
satisfaction of mortgage, charge,
etc.
132 and 463

Select the correct form, fill it and send to the concerned Registration
office. Act as quickly as possible, you have only 21 days from the
date of creation of the mortgage or charge to get the correct
particulars of the Mortgage/Charge registered.

Attach the copy(ies) of the instrument(s) creating or evidencing the
mortgage/charge with the form, if there is an instrument, as there
usually will be.

Copy(ies) of the instrument(s) shall be verified by an Affidavit to the
effect that the same are true copies of the original.

Make sure the details on the form are correct and match the
instrument. If the registrar finds errors, he will convey the
deficiencies to the company. The company has to make good the
deficiencies within the 21-days time limit.

7
Please ensure this information is complete and accurate.

Make sure that the company name and number are correct.

Make sure that the creation date and description of the charge agree
with the instrument.

Make sure that the amount secured accurately reflects what is stated
in the instrument.

Make sure that the name of the mortgagee/chargee matches with the
instrument, (Mortgagee/Chargee means the person to whom
property is mortgaged/charged).

Make sure that the short particulars of the property
mortgaged/charged in Form 10 accurately reflect what is stated in
the instrument.

For mortgaged land it is desirable that you give the complete address
of the Property.

Ensure that charging clauses are always inserted, including reference
to fixed and floating charges.

Sign and date the form.

Complete the forms legibly using black ink or, preferably, type the
form.

The forms are scanned and reproduced electronically by the
Registrar so that the public can inspect them. The Registrar may
refuse documents that are not suitable for scanning and
reproduction.

Please note if you omit or mis-state any detail in the documents
registered, then you should apply to the Commission to correct it under
section 131 of the Ordinance.

8
7. What happens when the documents for registration reaches registrar
concerned?

If the document is acceptable, the registrar concerned takes details from it
and records the particulars in the register and issue the certificate of
registration of mortgage or charge,.

8. What if registrar concerned has any query on the documents?

Registrar will communicate queries to the company. If the documents need
to be corrected, it must be done within 21 days from the date of creation,
modification or satisfaction etc. of charge, as the case may be.

9. What if the charge is not registered in time?

If a charge is not registered in time, then it is void against the liquidator or
administrator and any creditor of the company. This means that the debt for
which the charge was given will remain payable, but it will be unsecured.

If a company fails to deliver a charge, and no interested party has registered
it, then the company and every officer of the company who is in default are
liable to a fine. If the default continues, they are liable to a daily default fine.

10. Can a charge be registered after the expiry of 21 days from the date of its
creation?
Only the Commission can grant an extension of time for registration of a
charge that was not received in time. The normal time limit is 21 days
from the date of creation of the charge.

11. What must I do if my company acquires property that is already charged?

If the charge is of a type which the company would have had to register if it
had created the charge itself, then it must notify the fact that it has acquired
this property. To do this the company must complete and send Form 11
with the registrar concerned, with a certified copy of any instrument that
created or evidenced the charge.

This must be done within 21 days after the company completed the
acquisition of the property. If the charged property is outside Pakistan and
the charge was created outside Pakistan, the 21 days runs from date when
the copy instrument could have been received in Pakistan in the normal
course of post, assuming that it had been dispatched with due Diligence.

9
12. What are the rights of the mortgagee/charge?

If the company does not send the particulars of charge for registration, then
the chargee (the person to whom property is charged) or some other
interested person may file the required documents. In certain circumstance
a chargee can appoint a receiver or manager, or ask the court to appoint a
receiver or manager, over the property charged for example, if the
company defaults in payment of the debt secured by the charge. The
chargee must notify the appointment with the registrar concerned within 15
days using form 18. Registrar will then enter this in the register of charges.

On ceasing to act, a receiver or manager must notify the registrar concerned
within 30 days using Form 19. Registrar will then enter the fact in the
register of charges.

10
CHAPTER 2

Modification of Mortgages and Charges

1. What is modification in a mortgage or a charge?

Modification is change in the mortgage or charges i.e. change in:-

Amount of mortgage / charge (enhancement or reduction in
amount).

Change in particulars of property (excluding or including certain
property or asset).

Variation in the rate of markup or interest.

Extension of time for repayment on period of maturity
(Rescheduling) or change in other terms and conditions.

2. Which documents are required to be filed for modification in a mortgage
or charge?

The following documents are required to be filed for modification in a
mortgage or charge:-

Form 16 containing particulars of modification in mortgage/charge etc.

Copy of instrument modifying the mortgage or charge.

Affidavit that the copy(ies) of the instrument is/are true copy(ies).

Bank challan evidencing the payment of Rs. 7,500 being filing fee for
submission in physical form or Rs. 5,000 for submission through
eServices, as the case may be.

3. Whether partial payment is treated as partial satisfaction or modification
of a mortgage or charge?

Partial payment is modification of a mortgage or charge and cannot be
treated as satisfaction.

11
CHAPTER 3
Satisfaction of Mortgages and Charges

1. What should the company do when the charge is paid off (or satisfied)?

On the one hand it is in the companys own interest and on the other hand it
is the requirement of law that the company should inform the registrar
concerned that the charge has been fully satisfied so that the stake holders
i.e. investors and lenders should know that all of the debt has been paid off.
The particulars of satisfaction of mortgage/charge shall be submitted to the
registrar concerned on prescribed form 17 within 21 days from the date of
satisfaction/repayment.

2. What if charged property ceases to be charged or to belong to the
company?

As stated above, the company needs to inform registrar concerned as soon
the property has been released from a mortgage/charge. If the charge
property is acquired by a company, it is the responsibility of the company
to report the particulars on prescribed form 11.

3. Is there a fee for registering Form 17?

Yes, a fee of Rs. 7,500 being the filing fee for submission in physical form or
Rs. 5,000 for submission through eServices, as the case may be, shall be
deposited. In case of submission in physical form, the original challan
evidencing the payment of fee is to be annexed with Form 17.

12
CHAPTER 4
Rectification of Mortgages and Charges

1. What are the grounds of rectification of register of mortgages or
charges?

The following are grounds of rectification of register of mortgages or
charges:-

Omission to file particulars of charge within 21 days from the
date of creation of charge.

Failure to file particulars of modification of charge within 21
days from the date of modification.

Omission to intimate payment or satisfaction within 21 days.

Omission in compliance with observation within 21 days from
the date of creation, modification, satisfaction etc. of charge.

Omission or misstatement in the particulars.

2. Who is empowered to order for rectification of register of mortgages
or charges?

The Commission is empowered to order for rectification of register of
mortgages or charges.

3. Which documents should be enclosed with the application for
rectification to be filed before the Commission?

The following documents should be enclosed with the petition for
rectification to be filed before the Commission.

Copy of Form 10, 11, 13, 16 or 17; as case may be.

Copy of instrument for creating, modifying, satisfying charge
etc.

13
Observation memorandum, if any, issued by the registrar
concerned.

Affidavit verifying that the contents of application are true.

Bank challan evidencing the payment of Rs. 7,500 being the
application fee.

4. Which documents should be filed with the registrar concerned after
passing of order by the Commission?

The following documents should be filed with the registrar concerned
after passing of order by the Commission.

Form 10, 11, 13, 16 or 17, as the case may be.
Copy(s) of the instrument(s) relating to creation, modification, or
a confirmation letter from the Bank for the satisfaction of charge.
Copy of order of the Commission.
Affidavit that the copies of the instruments are true copies.
Bank challan evidencing the payment of Rs. 7,500 being filing fee
for submission in physical form or Rs. 5,000 for submission
through eServices, as the case may be.

Please note that particulars of mortgages or charges
or modification or satisfaction thereof are required to
be registered within 21 days. Mere filing within 21
days may cause certain difficulties leading to filing
petition before the Commission for extension in time.
It would be advisable if the documents are filed
much earlier so that these may be registered.
14
CHAPTER 5

Further information:

1. Who should respond to the query made by the company about the
registration?

The officers sitting in the CROs shall willingly answer general queries
regarding the procedure but note legal points, which should be referred
to your legal advisor.

The telephone number of all the Company Registration Office concerned
given in the list at the end of this booklet.

2. What are the modes of submission of statutory returns?

There are two modes of filing statutory returns with the registrar
concerned:

i. In physical form

Personally: You may visit the CRO and deliver the documents
by hand. The authorized staff of the Registrar concerned shall
acknowledge the receipt of documents if delivered to him by
hand.

By post: You may post the return through registered mail or
courier at the postal addresses of CROs (as given at the end of
this guide booklet).

ii. Electronically using e.Services portal of SECP

3. From where format of returns/forms be obtained?

For submission in physical form

In case of physical submission, there are three sources of getting
statutory returns/Forms:

You may refer to the Rules and find the relevant statutory
form.
15

You may download these formats from the Commissions
website at the link http://www.secp.gov.pk/forms.asp which
is the quickest and easiest way to get the forms. By using the
downloaded forms, additional space can also be created in the
fields available for information, according to your
requirements.

You may visit the regional offices of the Commission
(Company Registration Offices) personally and get the forms.

For Online submission:

In case of online submission, the statutory returns/ forms on the
prescribed format containing the existing information shall
automatically appear in the eServices portal. Detailed procedure is
explained at Q. No. 7 of this guide below.

4. What is filing fee of forms/returns?

The filing fee of various returns/forms is prescribed in 6th Schedule to
the Ordinance, which may be accessed at Commissions website. For
detailed information regarding fees schedule, (both online/physical)
kindly visit the link
http://www.secp.gov.pk/notification/pdf/2010/SixthSchedule26-10-
2010.pdf

5. Who is competent to sign/authenticate the return/forms?

As provided under the Companies Ordinance, 1984, Chief Executive,
Director and the Company Secretary are authorized to sign the
returns/forms.

6. How to pay filing fee?

The filing fee can be paid /deposited through challans in any of the
designated branches of MCB Bank Limited.

Online:

In case of online submission, challans are auto generated. Procedure is
explained above at Q. No. 7 of this guide.

16
Physical:

In case of physical submission, challans in the physical form are
available at all the designated branches of MCB Bank Limited.

7. How statutory returns can be filed through eServices?

Below is the procedure for filing statutory returns through eServices:
(1) Log on to eServices
In case the company has obtained eServices Login name and
Password:

Connect to eServices https://eservices.secp.gov.pk/eServices, and log
on to your account using your eServices Login name and Password
provided by SECP. Procedure for obtaining Login name and Password
has been provided in subsequent process.

Important Note: PLEASE NOTE THAT SIGN UP LINK ON
eServices WEBPAGE, IS FOR NEW INCORPORATION
PROCESS ONLY AND NOT FOR ALREADY INCORPORATED
COMPANIES.

In case the company has not obtained eServices Login name and
Password, please follow the procedure as under:

a. Apply for an eServices Login name and Password by writing a letter,
on the company letterhead, duly signed by the Chief Executive
alongwith the either of the Company Secretary, Chief Financial
Officer, or one of the Directors of the company, with a copy of their
CNIC, to be addressed to the following address:

Director (MIS),
Registration Department,
Islamabad,
Pakistan
Phone: +92-51-9207091-3 (Ext: 280)

17
b. Mention the email address on which the eServices Login name and
Password will be dispatched. Please, only provide POP3 email
address such as abc@comsats.com; free email address such as
hotmail, gmail, or yahoo is not acceptable.

c. SECP will confirm the validity of the email address. After validation
the eServices Login name and Password will be emailed to the
specified email address.
(2) Enter Information
password will display a list of available processes
Click Filing of Statutory Returns
List of forms containing all the statutory returns will appear
Click the relevant form (Form 10 to 17, as the case may be)
Enter required information on the page
Click the Continue button, the process document listing page shall
be displayed, containing the following links:

a. Update Form
o Click link if you want to update the data.
o After updating data, click continue button
o Process document listing page will be displayed

b. View Form
Click link.
The form on the prescribed format shall be
automatically generated based on your input.
View Form.
If data displayed in the form is correct, click the back
button on the screen
18

c. Fill New Attachment Form
Click link and an attachment form window will be
displayed.
Attach document, if any.
Click Save Form button.

Please note that only PDF format is allowed for attachment. Size of
the file must not exceed 2 MB.


d. Fill New Bank Challan
Click link auto filled bank challan will be displayed.
Click Print Form button at the bottom of the page and
four copies namely original, bank copy, SECP copy and
depositor copy will be printed.
After printing, click Save Form button at the bottom of
the page.

e. Sign Forms
Procedure for obtaining Digital Signatures:
Any return/form filed through e-services shall be
authenticated by companies by affixing electronic signatures.
Detailed procedure for obtaining digital signatures from
National Institutional of Facilitation Technologies (NIFT)
for SECP eServices is available at the following link of NIFT
website: https://secp.niftetrust.com/.
19
Click on Sign Forms link.
Digital signature pad window will appear.
Select all the form(s)/Attachment(s) available for
signature by clicking the check boxes.
Select the required signature from the drop down menu
Click Sign button (After signing, submit to SECP button
will be enabled.)
Click Submit to SECP button.
All the documents will be automatically submitted to
the SECP.
Please note down the Tracking Number, appearing on
the screen.
Deposit fee through the challan printed during the
process, in the selected branch of MCB.
The bank shall retain the SECP and bank copies and
return remaining two copies (original and customer
copy) to the customer

If the documents are sent by post or courier, the same can be addressed to one
of the following Company Registration Offices (CROs), having jurisdiction on
your company.

Phone No.: 051-9208740 Fax No: 051-9208740

4
th
Phone No: 021-99213272 Fax No. 021-99213278

20
3
rd
& 4
th
Phone No. 042-99204962 6 Fax No: 042-99202044

63-A, 2
nd
Floor,
Phone No: 061-9200530/9200920 Fax No: 061-9200920
Email: cromultan.eservices@secp.govpk

356-A, Ikram Plaza, Small D ground.
Phone No: 041-9220284 Fax No: 041-9220152
Email: crofaisalabad@secp.gov.pk

1
st
Peshawar Cantt.
Phone No: 091-9213178, Fax No: 091-9213686
Email: cropeshawar@secp.gov.pk /
saeedullah.khan@secp.gov.pk

Quetta Cantt.
Phone No: 081-2844136 Fax No: 081-2899134
Email: croquette@secp.gov.pk

28 D , Hamdard Housing Society,
Phone No: 071-5630517 Fax No: 071-5633757

LIST OF SENSITIVE/PROHIBITED WORDS

Sensitive/Prohibited Words
Association

This word may be included in the name of companies to be established on grant of license by the
Commission under section 42 of Companies Ordinance 1984 or which are established as a Trade
Organization under Trade Organizations Ordinance, 2007.

Benevolent/ Foundation

These words may be included in the name of companies to be established on grant of license by the
Commission under section 42 of Companies Ordinance 1984.

Society

This word may be included in the name of companies if proper justification is provided.

Fund

This word may be allowed in the name of company if the company will function as Non-Banking
Financial Company under the license of Specialized Companies Division of the Commission or to
public sector company on grant of license by the Commission under section 42 of the Companies
Ordinance, 1984.

Council

This word may be included in the name of companies to be established on grant of license by the
Commission under section 42 of Companies Ordinance 1984. Moreover, this expression is also
allowed to Sports Association and Professional Bodies.

Chamber of Commerce

This word may be included in the name of entities which are being formed as Trade Bodies under
license from Director General Trade Organization, Ministry of Commerce Government of Pakistan.

Authority/ Register/ Registered/ Co-operative/ Bureau/Division

These words are not allowed.

Trust

This word may be included in the name of REITs to be established on grant of license by the
Specialized Companies Division.

Assurance/Assurer/ Insurance/Insurer/ Re-Assurance/ Re-Assurer/ Re-Insurance/
Re-Insurer

These words may be included in the name of companies involved in Insurance, Assurance, Re-
insurance and Re-assurance business. Prior permission of Insurance Division of the Commission
would be required at the time of Incorporation.

Board

This word may be included in the name of companies desirous to engage in the business of Paper &/or
Board or to public sector companies.

Bahria/Askari/Fouji/ Fazaiya/Cadet

This word may be included in the name of companies to be established by the relevant agency.

Banks/Banking Company

These words may be included in the name of companies on the basis of permission from State Bank of
Pakistan under section 8 of the Banking Companies Ordinance, 1962 and section 5(1) of Microfinance
Institutions Ordinance, 2001.

Charter/Chartered

These words may be included in the name of companies having charter from the sovereign authority
of the Federation and the Province.

Exchange/Bourse

These words are only allowed in the name of Stock Exchange, Commodity Exchange and Exchange
Companies subject to NOC from relevant authority.

Familiar Trade Names

These words may be included in the name of companies only if NOC of familiar trade name user is
provided or proper documentary evidence of ownership/use of trade name is furnished by the
applicant.

Famous/Distinct Personalities

These words may be included in the name of companies if proper justification and approval of
relevant authority is provided.

Federation

This word may be included in the name of Sports Federations licensed under section 42 of Companies
Ordinance, 1984 or trade bodies under Trade Organizations Ordinance, 2007.

Federal

This word is allowed in the name of company with the approval of the Commission, if the proposed
company has a connection or any patronage with Federal Government.

Group

This word may be included in the name of companies if use of this word implies several companies
under single corporate ownership and applicants have to provide evidence of subsidiary/associate
relationship with two or more other Pakistani Companies.

Holding

This word may be included in the name of company which establishes that it qualifies to be a holding
company as defined in Section 3 of the Companies Ordinance, 1984 i.e. the company has object
clause showing its intention to act as holding company after incorporation.

Institution

This word may be included in the name of the public sector companies.

Investment

This word may be included in the name of Non-Banking Finance Companies, REITs and brokerage
houses or any public sector financial institution or investment company.

Investment Finance, Investment Advisory, Leasing, Asset Management, Housing Finance

This word may be included in the name of Non-Banking Finance Companies.

Name of Company containing country name or nationality other than Pakistan

These names are not allowed unless sufficient justification is provided.

Name of Company containing name of two countries i.e. Pakistan/Pak and any other foreign
company

These words may be included in the name of companies where documentary evidence is provided in
support of the fact that the company is a J oint Venture of two Governments or companies of two
countries.

New/Modern/The/Al

These words may be included in the name of companies. However, these expressions will not be
acceptable if used to make proposed company as distinctive from already existing companies.

Patronage of past or present, Pakistani or Foreign, Head of State/ any connection with Federal
or Provincial Government, Department or authority/any connection with corporation set up by
or under Federal/Provisional Law/ the patronage of, or any connection with, any Foreign
Government or any International Organization

These words may be included in the name of companies with the approval of the Commission
provided sufficient justification is furnished.
State

This word may be included in the name of companies formed by Government.

University

This word may be allowed only in the name of University Management Company for the management
of University in terms of guidelines of Higher Education Commission.

UNO, WORLD BANK, IMF, RED CROSS, RED CRESCENT

These words are not allowed.

Important Note Regarding Spellings of Proposed Names

It is pertinent to mention here that the application for availability of name will be considered only if
the spelling of proposed name is according to dictionary. Any deviation in dictionary spellings will
not be accepted and the name will be rejected.

1
SECP
GUIDE SERIES

OF PAKISTAN

PROMOTERS GUIDE

FORMATION AND INCORPORATION OF COMPANIES
UNDER THE COMPANIES ORDINANCE 1984


N.I.C BUILDING, JINNAH AVENUE,
ISLAMABAD - PAKISTAN
Ph: 051-9207091- 4 Fax: 051-9204915

2
SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN (SECP)
Organization
Securities and Exchange Commission of Pakistan (SECP) established under the
Securities and Exchange Commission of Pakistan Act 1997 was operationalized as a
body Corporate on 1st January 1999. SECP replaced Corporate Law Authority, the
former corporate regulatory body. It has been vested with adequate operational,
administrative and financial autonomy.
The SECPs head office is at the Federal Capital, Islamabad and it has eight regional
offices (Company Registration Offices), one at Federal Capital, four at provincial
capitals and three in other major cities i.e. Multan, Faisalabad and Sukkur. The SECP
has been organized into following Divisions:
Company Law Division;
Securities Market Division;
Specialized Companies Division;
Insurance Division
Finance & Admin Division;
HR& Training Division;
Information System & Technology Division.
Functions

SECPs main functions include; regulation of securities market and related
institutions like Central Depository Company (CDC), Credit Rating Companies and
Modarabas (funds operating on the basis of Islamic economic principles);
administration of the company law; regulation of non-banking finance companies
like leasing companies, investment banks and mutual funds, regulation of insurance
business and private pensions.

One of the important functions of the SECP is the incorporation/registration of
companies. This task has been entrusted to the Registration Department,
Company Law Division which has its field offices known as Company
Registration Offices (CROs) for the purpose of incorporation / registration of
different type of companies.

Since the inception of SECP, a number of operational changes have been introduced
and a friendly environment has been created at the CROs. Incorporation of
companies has been made much easier, smooth and swift ensuring completion of
this process within three days. Other public services like availability of name,
providing of certified copies etc., are rendered within one day. e.Services has been
launched by the SECP in Sep. 2008, which facilitates online availability of name,
online incorporation of companies and e-filing of statutory returns. It enables the
3
promoters and management of the company to interact online using the eServices
portal, without visiting the SECP offices. Online services save time and resources,
increase efficiency, create a paperless environment, promote confidence and
strengthen the countrys economy.

INCORPORATION OF A COMPANY

For the convenience of general public, promoters and directors of companies, SECP
has established its eight CROs at Islamabad, Karachi, Lahore, Peshawar, Faisalabad,
Multan, Sukkur and Quetta. Online facilities for incorporation of companies and
filing of returns have been made available. Besides registration of companies and
monitoring of their working according to law, functions of CROs include providing
services and guidance and also to ensure that the companies and their directors
comply with the statutory requirements as provided under the Companies
Ordinance, 1984 (the Ordinance). The record of companies maintained by the CROs
is public record and the investors, shareholders, creditors and general public, may
inspect the record of any company whenever they need and they may also obtain
certified copy of any specific document on payment of nominal amount of fee.

Any three or more persons associated for lawful purpose may, by subscribing their
names to the Memorandum of Association and complying with the requirements of
the Ordinance form a public company and any one or more persons so associated
may, in like manner, form a private company. If only one member forms a private
company, it is called a single member company and if it is formed by more than one
member, it is termed as a private company.

Prior approval of the Ministries/Departments etc. noted against each category of the
following companies is required to be obtained before incorporation of companies: -

(a) A banking company
I) Ministry of Finance.
II) State Bank of Pakistan.
(b) A non-banking finance
company (NBFC)
(c) A security service
providing company
Interior Division
(d) A corporate brokerage
house
Stock Exchange (for transfer of
member ship card in favour of
proposed company)
(e) A money exchange
company
State Bank of Pakistan
(f) An Association not for
profit u/s 42 of the
Licence from Securities and
Exchange Commission of
4
Companies Ordinance,
1984
Pakistan
(g) A trade organization u/s
42 of the Companies
Ordinance, 1984
Licence from Ministry of
Commerce

Following are the requirements for registration of a new company under the
Companies Ordinance, 1984:-
a. Availability of Name
The first step with regard to incorporation of a company is to seek the
availability of the proposed name for the company from the registrar.
For this purpose, an application is to be made and Rs.200/- for online
application and Rs. 500/- for offline application is required to be paid
for seeking availability certificate for each name. The promoters desirous
of forming a company should make sure that the name chosen is not
otherwise inappropriate, deceptive or designed to exploit or offend the
religious susceptibilities of the people and neither is identical nor closely
resembling with the name of an existing company. To facilitate the
promoters, a list of prohibited/sensitive names has also been provided
at the link: https://www.secp.gov.pk/ns/pdf/Prohibited_words.pdf
b. Documents for registration of a limited company
The following documents are required to be filed with the registrar
concerned for registration of a private limited company:-
I. Copy of national identity card or passport, in case of
foreigner, of each subscriber and witness to the memorandum
and article of association.
II. Memorandum and articles of association
Four printed copes of Memorandum and Articles of Association
in case of offline submission and one copy for online
submission, duly signed by each subscriber in the presence of
one witness. In order to facilitate the general public, the
standardized specimen of Memorandum of Association of
various sectors has been provided on the Commissions
Website.

5
III. Form - 1
Declaration of compliance with the pre-requisites for the
formation of a company
IV. Form 21
Notice of situation of registered office of the company
V. Form 29
Particulars of first directors of the company
VI. Registration/filing fee
Original paid Challan evidencing the payment of fee as
prescribed in Table II, in any of the authorized branches of
MCB Bank Limited.
VII. Authorization by sponsors
The authorization of sponsors in favour of a person to make
good the deficiencies, if any, in the memorandum and articles of
association and other documents as may be pointed out by the
registrar concerned and to collect the certificate of
incorporation.
c. Additional Requirements for the Incorporation of a public Company
In addition to the requirements for incorporation of a private limited
company as stated above, the public companies are required to file the
following documents at the time of incorporation:
i. Form 27 (List of persons consenting to act as director
ii. Form 28 (Consent of Directors)
d. Additional Requirements for incorporation of a Single Member
Company
Any person may form a single member company and would file with
the registrar at the time of incorporation a nomination in the form as set
out in Form S1 indicating at least two individuals to act as nominee
director and alternate nominee director, of the company in the event of
his death. All the other requirements for incorporation of a private
6
limited company shall mutatis mutandis apply to a single member
company.
e. Additional Requirements for Incorporation of a Company having
objects of providing Security Services
In case of company intending to provide the services of security guard,
nine additional sets of each of the documents at I and II above alongwith
the bio-data, four attested photographs of each subscriber and financial
position/bank statement of the subscribers (Aggregate wealth should
not be less than 1.5 million) are also required to be provided. Ministry of
Interior grants NOC for a security object company.
f. Transfer of membership of Single Member Company to a new
member.
If the membership of a single member company is transferred to a new
member, the company shall, within fifteen days from such transfer, also
file with the registrar, a nomination in the form as set out in Form S1.
g. Change in status of a single member company.- A single member
company can be converted into a private company on increase of the
number of its members to more than one. The company shall pass a
special resolution for change of status and alter its articles accordingly
within thirty days and transfer the shares within seven days. The
company shall appoint and elect one or more additional directors within
fifteen days of passing the special resolution and notify the appointment
on Form 29 prescribed under the Companies (General Provisions and
Forms) Rules, 1985 (the Rules) within fourteen days. Further, the
company is required to file a notice of the fact in writing in the form as
set out in Form S2, with the registrar within sixty days from the date of
passing of special resolution.
h. Company becoming a single member company.- A private company
having two or more members shall convert its status into single member
company by passing a special resolution for change of its status, making
necessary alteration in its articles and obtaining the approval of the
Commission. An application for seeking Commissions approval shall be
submitted by the company in the form as set out in Form S4 within
thirty days of passing the special resolution for change of status to single
member company.

The company shall transfer shares in the name of single member within
fifteen days of the approval of the Commission and notify change in the
7
board of directors on Form 29 within fourteen days from date of transfer
of shares.

A certified copy of the order containing the approval together with a
notice in the form as set out in Form S5 and a nomination of nominee
directors in the form as set out in Form S1 shall be filed with the
registrar concerned within fifteen days.

i. Obtaining Certified Copies of Memorandum & Articles of Association
and Certificate of Incorporation.

In order to obtain certified copies of memorandum of Association,
articles of association and certificate of incorporation, challan of the
requisite copying fee and Court stamps fee of the requisite value should
be furnished alongwith registration documents.
j. Documents for incorporation of an association not for profit
All the documents meant for incorporation of a limited company
alongwith a licence issued by the SECP. In case of a trade body, a licence
issued by Ministry of Commerce would also be submitted to the
registrar concerned. The application for obtaining the requisite licence
from the Commission should be accompanied by draft memorandum
and Articles of Association, list of promoters, bio-data of each promoter,
declaration, names of companies in which the promoters of the
proposed association hold any office, estimates of annual income and
expenditure and brief statement of work already done or to be done.
(Section 42 & Rule 6). Detailed guidance is provided on the link:
http://www.secp.gov.pk/divisions/Portal_RD/registration_promoters.
asp

STEP WISE PROCEDURE FOR ONLINE SUBMISSION

Log on to eServices:

The client will connect to https://eservices.secp.gov.pk/eServices, to log on to
his/her account or signup, in case of a new user. User will receive an e-mail
containing the user activation link. By clicking on the link, user account will be
activated.

8
Enter Information:

A successful logon to eServices by entering user ID and password, will display a list
of available and unavailable processes. If the Company name has been reserved
successfully, the Company Incorporation facility will be available at this stage.

User will click on the company incorporation process. An input page is displayed,
wherein the following information will be entered by the user.
(i) Application Details:

Fill in the details of the proposed company in terms of its complete name, kind, and
designated bank branch to be selected, in the first section.
(ii) Declarant:

In this section, enter the compulsory information about the declarant/company
representative. A declarant can be any person authorized to represent the proposed
company by the Owners/Board of Directors. Any employee or even the director
could be chosen for this responsibility.
(iii) Director/ Subscriber:
Enter detailed data regarding the Board of Directors and Subscribers in this section.
Add and Delete buttons will create and remove rows for data entry.
(iv) Company information:
Enter company information e.g., registered office address, sector-wise classification,
share capital, objects, in this section.
(v) Signatory:
Enter details of a signatory in this section.
(vi) Press Continue Link:
By pressing Continue Link, Process Document Listing Page will be displayed,
containing the following links:

a. Update Form(s) Data:

9
Click link if you want to update the data. After updating data, press Continue link
again. Process Document Listing Page will be displayed again.

b. View Forms:

System automatically fills out the required forms using the data entered by
you. You can view these forms by clicking on the given link.

c. View Company Profile Form:

To see company profile, click this link.

d. Fill New Attachment Form:

In this link, you can attach the required documents in PDF format e.g., copy
of CNIC, power of attorney, etc. Press Save Form button after attaching the
required documents.

e. Fill New Attachment Form Articles of Association:

Click this link and attach the Articles of Association in PDF format. Press
Save Form button after attaching the said file.

f. Fill New Attachment Form Memorandum of Association:

Click this link and attach the Memorandum of Association in PDF format.
Attachment size should be less than 2 MB. Press Save Form button after
attaching the said file.

g. Fill New Bank Challan:

Click link and bank challan will be displayed. Bank Challan is automatically
populated with prescribed fee and other information by the eServices
application.

Press print form button and then save form. Four copies will automatically be
printed as original copy, bank copy, SECP copy and depositor copy. The fee
shall be deposited in the Bank branch selected by the applicant from the
designated branches of MCB Bank Limited. The bank shall retain the SECP
and bank copies and return remaining two copies (original and depositor
copy) to the client.

h. Sign Forms:

10
Sign Forms will be enabled. Click on Sign Forms link. Forms are signed using
the digital certificates. Digital Certificates are obtained from the NIFT. Select
all the eForms available Under Select for Signature Column. Now, select
the correct Digital Signature from the drop down menu. Press Sign button.
After you press Sign button, Submit to SECP button will become active.

Click this button. All the documents will be submitted to the SECP and a
process reference number will be displayed.

The process will be initiated as soon as the SECP receives the verification of deposit
of fee from the Bank.

User will receive response from the SECP via email, with any of the response,
acceptance (Incorporation Certificate Dispatched through Courier), rejection or issue
resolution.

For more information about eServices, please visit the website at
https://eservices.secp.gov.pk/eServices

REQUIREMENTS AFTER INCORPORATION
a. Private companies
i. Directors of every company are required to appoint the first
chief executive not later than fifteen days from the date of
incorporation and thereafter within fourteen days from the date
of election.
ii. The first auditor is required to be appointed by the directors
within sixty days from the date of incorporation and thereafter
in each AGM of the company.
iii. A single member company is also required to appoint a company
secretary within fifteen days of incorporation or of becoming a
single member company or of the office of company secretary
falling vacant and notify such appointment on Form 29 within
fourteen days of the date of such appointment.
iv. First directors i.e. the directors appointed at the time of
incorporation of the company shall hold office till the election of
directors in the first annual general meeting. The directors so
elected shall hold office for a period of three years. However,
casual vacancy occurring on account of death, resignation or
11
removal of any director may be filled up by the other directors
for the remainder period of the term.
v. Any appointment, election or change in the Directors, Chief
Executive, Auditors, Chief Accountant, legal adviser etc is
required to be notified to the registrar concerned on Form '29'
within 14 days of the said election, appointment or change
(Section 205).
vi. A company is required to notify the change in its registered
office on Form-21 within 28 days from the date of change.
(Section 142)
vii. First Annual General Meeting (AGM) of the company is
required to be held within eighteen months from the date of
incorporation and subsequent Annual General Meetings are
required to be held once at least in every calendar year, within a
period of four months following the close of its financial year
and not more than fifteen months after holding of its last
preceding AGM (Section 158).
viii. Directors of every company are required to lay before the
company in its AGM audited balance sheet and profit and loss
accounts in case of first accounts since the incorporation of the
company and in any other case since the preceding account,
made up to a date not earlier than the date of the meeting by
more than four months (Section 233).
ix. Annual return on prescribed Form A is required to be filed
with the registrar concerned once in each year made as on the
date of Annual General Meeting, where no such meeting is
held, on the last day of the calendar year (Section 156).
x. In case of increase in paid-up capital, the company is required
to offer new shares to the existing shareholders and the offer is
required to be accompanied by a circular issued under section
86(3) to all the shareholders strictly in proportion to the shares
held by them and, on the allotment of shares, return of
allotment on Form '3' is required to be filed with registrar
concerned within 30 days from the date of allotment of shares.
Partly paid shares are not allowed to be issued at all. (Sections
73 & 86).
xi. The company is required to issue share certificates to its
shareholders within 90 days from the date of allotment or
12
within 45 days after the date of filing of application for
registration of transfer of shares (Section 74).
xii Particulars of every mortgage or charge created by the company
on its property or undertaking and every modification therein
or satisfaction thereof are required to be filed and registered
with the registrar concerned within 21 days after the date of its
creation, modification or satisfaction (Sections 121, 129 & 132).
xiii. In case of death of single member of a Single Member
Company, the nominee director of SMC is required to inform
the registrar concerned of death of the single member, provide
particulars of the legal heirs and in case of any impediment
report the circumstances seeking the directions in the form as
set out in Form S3 within seven days of the death of the single
member.
xiv. The decisions taken by the single member or sole director in the
meeting of director and member of a Single Member Company
are required to be drawn up in writing and recorded in the
minutes book by the company secretary.
b. Public companies
i. All the requirements meant for private companies given at
serial Nos. (i) to (xii) above are also applicable to public
companies. However, the listed companies are also required to
file list of members on floppy diskette to the Commission and
the associations are required to file with the registrar concerned
annual return on Form B instead of Form A.
ii. List of Directors and consent of Directors and Chief Executive
are required to be filed within 14 days of after the election of
Directors and appointment of Chief Executive on Forms 27 &
28.
iii. A private company may commence its business immediately
after its incorporation. However, a public Company shall be
entitled to commence its business after obtaining
commencement of business certificate from the registrar
concerned (Section 146).
iv. Statutory meeting is required to be held within a period of not
less than three months but not more than six months from the
date at which the company is entitled to commence business. A
13
statutory report is required to be circulated to the members and
five copies thereof certified in the prescribed manner are
required to be filed with the registrar concerned, at least 21 days
before the date of Statutory Meeting. A private company which
converts itself to public company after one year of incorporation
is not required to hold such statutory meeting and issue such
statutory report (Section 157).
v. Two copies of the audited balance sheet and profit and loss
accounts signed in the prescribed manner are required to be
filed by public companies with the registrar concerned within
30 days from the date of their AGM (Sections 233 & 242).
vi. Every listed company is required to file three copies of audited
balance sheet and profit and loss accounts to the SECP, Stock
Exchange and the registrar at the time of sending the notice of
AGM to the members as well as within 30 days of holding the
Annual General Meeting.
vii. Return containing beneficial ownership of listed securities and
change therein on Form 31 and Form 32 are required to be filed
with the Registrar concerned and the SECP.
viii. A listed company is also required to appoint a company
secretary.
c. Requirements for establishment of place of business by foreign
companies
A Foreign Company incorporated outside Pakistan, is required to file
the following documents to the registrar concerned within 30 days
from the establishment of its place of business in Pakistan (Sections 450
to 458 of the Companies Ordinance, 1984):
i. A certified copy of the charter, statute or Memorandum and
Articles of the company accompanied by Form 38. The
certification is to be given by:-

(a) the public officer in the country where the company is
incorporated to whose custody the original is committed
or

(b) a notary public of the country where the company is
incorporated; or
14

(c) an affidavit of a responsible officer of the company in the
country where the company is incorporated.
The signature or seal of the person so certifying shall be
authenticated by a Pakistani diplomatic consular or consulate
officer.
If the document is not in English, duly certified translation in
English or Urdu language is provided (Rule 23 of Companies
(General Provisions and Forms) Rules, 1985.
ii. Address of registered office or principal office of the company,
on Form 39;
iii. Particulars of directors, Chief Executive and secretary (if any) of
the company, on Form 40;
iv. Particulars of principal officer of the company in Pakistan, on
Form 41;
v. Particulars of person(s) resident in Pakistan authorized to
accept service on behalf of the foreign company, on Form 42
alongwith the certified copy of the appointment order, authority
letter of board of directors resolution and consent of the
principle officer;
vi. Address of principal place of business in Pakistan of the foreign
company, on Form 43 (Section 451).
vi. Permission letter from the Board of Investment with a specific
validity period for opening and maintaining of a branch/liaison
office by a foreign company.
SUBSEQUENT REQUIREMENTS FOR A FOREIGN COMPANY
Any change or alteration in particulars stated in the documents and
returns filed at the time of registration u/s 451 is required to be
filed on form 44 with the registrar concerned within 30 days of such
change or alteration (Section 452).
Foreign company is required to file annually with the registrar
concerned annual accounts in respect of its operations within
Pakistan as well as its global accounts together with the list of
Pakistani members and debenture holders and of places of business
15
of the company in Pakistan within the prescribed period (Section
453).
Foreign company is required to submit the renewal/extension of
the permission to open/maintain a branch/liaison office from the
Board of Investment on the expiry of the validity period of the
permission, originally granted.
Foreign company is required to give notice on form 46 to the
registrar concerned at least 30 days before it intends to cease to
have a place of business in Pakistan and to publish a notice of such
intention at least in two daily newspapers circulating in the
Province or Provinces in which such place or places of business are
situated
INFORMATION FOR THE COMPANIES HAVING FOREIGN
INVESTMENT/ COLLABORATION

Foreign Investors are permitted to hold 100% equity of industrial projects
without any permission of the Government. No Government sanction is
required for setting up any industry, in terms of field of activity, location and
size except for the following:

A. Arms and ammunitions.
B. High explosives
C. Radio-active substances
D. Security printing, currency and mint.

No new units for the manufacture of alcoholic beverages or liquors will be
allowed. There is no requirement for obtaining No Objection Certificates
(NOC) from the provincial governments for locating the project anywhere in
the country except in areas that are notified as negative areas. With the
announcement of Investment Policy, 1997 by Government of Pakistan, the
foreign investment has since been allowed on repatriate able basis in
agriculture, service, infrastructure and social sectors subject to conditions
indicated against each. They will have to simply register a company with the
SEC under the Ordinance and to inform the State Bank of Pakistan provided
the relevant conditionality is fulfilled.
(a) Service Sector:
Activities
"Foreign Direct Investment (FDI) in Service Sector is allowed for any
activity subject to any condition that services which require prior
16
permission/NOC or licence from the concerned agencies will continue
to get the same treatment until and unless de-regulated by such
agencies and will be subject to provisions of respective sectoral
policies. The list of deregulated services in telecommunications is as
under; -
a) E-mail/Internet/Electronic Information services (EIS)
b) Data Communication Network services
c) Trunk Radio services
d) Cellular Mobile telephone Services
e) Audiotex Services
e) Audiotex Services
f) Voice Mail Services
g) Card Pay Phone Services
h) Close User Group for Banking Operations
i) International Satellite Operations for Domestic Data
Communication
j) Paging Services
k) Vehicle Tracking System (VTS)
l) Burglar Alarm System (BAS)
m) Global Mobile Personal Communication System (GMPCS)
n) Any other telecommunication service, which is deregulated in
future, will become part of this list.
Note: - Those sectors which have not been deregulated, and are with
Pakistan Telecommunication Corporation Limited (PTCL), are open to
foreign investors in collaboration with PTCL
Conditions
i. The amount of foreign equity investment in the company
/project shall be at least US $ 0.3 million.
17
ii. Foreign investors are allowed to hold 100 % of the equity subject
to the condition that the repatriation of profit shall be restricted
to a maximum of 60 % of the total equity or profits and that a
minimum of 40 % of equity is held by Pakistani investor
(including sale of shares in stock exchange) within five years.
(b) Infrastructure sector:
Activities
"Infrastructure projects including development of industrial zones
Conditions
i. The amount of foreign equity investment in the company/
project shall be at least US $ 0.3 million.
ii. 100% foreign equity is allowed on repatriate able basis.
(c) Social sector:
Activities
"Education, Technical/Vocational Training, Human Resource
Development (HRD), Hospitals, Medical and Diagnostic Services."
Conditions
i. The amount of foreign equity investment in the
company/project shall be at least US $ 0.3 million.
ii. 100% foreign equity is allowed.
(d) Corporate Agriculture Farming (CAF) sector :
The Cabinet decision dated June 19th, 2002 on Corporate Agriculture
Farming (CAF) policy enunciates that such local and foreign
companies would be entitled CAF legal entity that are locally
incorporated under the Companies Ordinance, 1984. In this
connection, in case of foreign collaboration, 60% foreign equity is
allowed with minimum investment of US$ 0.3 million. Beside the
following agriculture related activities are included in CAF under the
approved policy package, -
i. Land development/reclamation of batter land, desert and hilly
areas for agriculture purpose and Crop farming
18

ii Reclamation of water Front Areas/Creeks.

iii. Crops. Fruits, Vegetables, Flowers Farming/ Integrated
Agriculture (Cultivation and processing of Crops)

iv. Modernization and Development of Irrigation Facilities and
Water Management.

v. On farm construction of wheat/grain storage and construction
of cold storage for captive use (not on commercial basis)
(e) Others.-
i) Tourism: Tourism has been given the status of industry and
placed under priority industries i.e. category C of the
Investment Policy.
ii) Housing and Construction: The Housing and Construction
sector has also been declared as Industry and placed under
priority Industries i.e. category C of the Investment Policy.
iii) Local and Foreign Companies involved in real estate projects
will not market these projects unless the title of the property is
transferred in the name of a locally incorporated company and
the Commencement of Business certificate is issued by the
Securities and Exchange Commission of Pakistan (SECP) to the
company.
iv) Information Technology: Computer Software and Information
Technology (IT) have been declared as Industry.

Table I
RATES OF STAMP DUTY

Stamp duty, previously levied on Memorandum and Articles of Association of a
company, has been abolished by all the provincial governments. It now remains
applicable in I.C.T. only, the rates of which are Rs. 60/- on Memorandum of
Association and Rs. 200/- on Articles of Association. However, no stamp duty is
required to be levied in case of applications submitted through eServices.

19
Table II
TABLE OF FEE

SCHEDULE OF FEE EFFECTIVE FROM 26.10.2010

SRO.996 (I)/2010 dated 26.10.2010

Fee Calculator

In order to facilitate the corporate sector and the general public, Fee Calculator has
been provided on the SECP website (www.secp.gov.pk) for instant calculation of the
registration fee as well as fee for enhancement of authorized capital.

The Registration Fee payable by a company having share capital at different levels of
capital and the other fee payable under the Ordinance are given in the chart as
under:

ON LINE PHYSICAL (OFF-LINE)
Authorized
Capital
In case of
online
submission
of
documents
* Fling Fee
of
Documents
(In case of
online
submission
of
documents)
Total
In case of
physical
submission
of
documents
* Fling Fee
of
Documents
(In case of
physical
submission
of
documents)
Total

100,000

2,500

2,400

4,900

5,000

6,000

11,000

200,000

3,000

2,400

5,400

6,000

6,000

12,000

300,000

3,500

2,400

5,900

7,000

6,000

13,000

400,000

4,000

2,400

6,400

8,000

6,000

14,000

500,000

4,500

2,400

6,900

9,000

6,000

15,000

600,000

5,000

2,400

7,400

10,000

6,000

16,000

700,000

5,500

2,400

7,900

11,000

6,000

17,000

800,000

6,000

2,400

8,400

12,000

6,000

18,000

900,000

6,500

2,400

8,900

13,000

6,000

19,000

20
1,000,000 7,000 2,400 9,400 14,000 6,000 20,000

2,000,000

12,000

2,400

14,400

24,000

6,000

30,000

3,000,000

17,000

2,400

19,400

34,000

6,000

40,000

4,000,000

22,000

2,400

24,400

44,000

6,000

50,000

5,000,000

27,000

2,400

29,400

54,000

6,000

60,000

6,000,000

32,000

2,400

34,400

64,000

6,000

70,000

7,000,000

37,000

2,400

39,400

74,000

6,000

80,000

8,000,000

42,000

2,400

44,400

84,000

6,000

90,000

9,000,000

47,000

2,400

49,400

94,000

6,000

100,000

10,000,000

52,000

2,400

54,400

104,000

6,000

110,000

20,000,000

82,000

2,400

84,400

179,000

6,000

185,000

30,000,000

112,000

2,400

114,400

254,000

6,000

260,000

40,000,000

142,000

2,400

144,400

329,000

6,000

335,000

50,000,000

172,000

2,400

174,400

404,000

6,000

410,000

100,000,000

322,000

2,400

324,400

779,000

6,000

785,000

5,000,000,000

15,022,000

2,400

15,024,400

37,529,000

6,000

37,535,000

6,000,000,000

16,272,000

2,400

16,274,400

40,029,000

6,000

40,035,000

8,000,000,000

18,772,000

2,400

18,774,400

45,029,000

6,000

45,035,000

10,000,000,000

21,272,000

2,400

21,274,400

50,029,000

6,000

50,035,000

11,000,000,000

22,522,000

2,400

22,524,400

52,529,000

6,000

52,535,000

12,000,000,000

23,772,000

2,400

23,774,400

55,029,000

6,000

55,035,000

15,000,000,000

27,522,000

2,400

27,524,400

62,529,000

6,000

62,535,000

20,000,000,000

33,772,000

2,400

33,774,400

75,029,000

6,000

75,035,000

21
I. By a company having a share capital
In case of
online
submission of
documents
In case of
physical
submission of
documents
For filing, registering or recording any document other than the
documents listed below.
600 1,500
Documents notifying particulars of relating mortgage/Charge. 5,000 7,500
II. By a company not having a share capital, other than a company
registered under a license granted under section 42:-
For registration of a new company, a fee of 20,000 30,000
documents relating mortgage/Charge.
600 1,500
Documents notifying particulars relating mortgage/Charge. 5,000 7,500
III. By a company registered under a license granted under section
42:-
Application seeking grant of license or its renewal. 15,000 25,000
For Registration, a fee of 25,000 50,000
500 1,000
Documents notifying particulars of relating mortgage/Charge. 5,000 7,500
IV. By a company established outside Pakistan which has
a place of business in Pakistan:- (Foreign Company)
For filing, registering or recording a document containing
charter/statute/memorandum and articles, etc
25,000 50,000
Documents notifying particulars relating mortgage/Charge. 5,000 7,500
For filing, registering or recording any documents other than the
600 1,500
V. Inspection of File:
For inspecting documents kept by the registrar in respect of a
company or inspecting any register kept by him in relation to a
company
200 500
VI. Certified copy
Certificate of Incorporation
100 200
Certificate of Commencement of Business.
22
Certificate of registration of mortgage or charge.
(For private limited company)
Certified Copy of the M/A/A 250 500
Certified Copy of any return 100 200
(Other than private limited company)
Certified Copy of the M/A/A 500 1,000
Certified Copy of any return 200 300
Certified Copy or extract of any other document or register,
calculated at the rate, per page or fractional part thereof required
to be copied, subject to a minimum fee of one hundred rupees, a
fee of ..
20 20
For providing list of companies, a fee calculated at the rate per
data field, subject to a minimum fee of five hundred rupees, a fee
of
Rs. 2 per data
field
Rs. 2 per data
field
For a Corporate Registration and Compliance System generated
company profile, per company, a fee of
200 200
VII: For any application/appeal/complaint submitted to the
Registrar or the Commission under the Ordinance.
Application under section 21 for Alteration in the Memorandum
of Association
5,000 10,000
Application confirming Availability of Name 200 500
Application for Change of Name 2,500 5,000
Conversion of status of company from public to private 2,500 5,000
Conversion of status of company from private to single member
company 2,500 5,000
Approval to issue prospectus
Size of total issue including all types of securities up to Rs.
250 million, a fee of
N/A 25,000
Size of total issue including all types of securities more than
Rs. 250 million and up to Rs. 1,000 million, a fee of
N/A 50,000
Size of total issue including all types of securities more than
Rs. 1000 million, a fee of..
N/A 100,000
Issuance of shares at discount under section 84
10,000
23
Application to issue shares, otherwise than right under first
proviso of section 86(1) a fee of
(the aforesaid fee shall not apply to applications for issuance of
shares under section 86 for the purpose of the Employee Stock
Option Scheme)
N/A
Rs.50,000 or
0.1% of the
proposed
capital
increase,
whichever is
higher
Application for relaxation from the requirements of the
Companies (Issue of Capital) Rules, 1996 under Rule 10 thereof:

Share Capital upto Rs. 50 million
N/A Rs.25,000/-
Share capital above R.s.50m to Rs.100m
N/A Rs.37,500/-
Share capital above 100m
N/A Rs.50,000/-
Issuance of shares with different rights and privileges under
section 90 read share capital rules, 2000
Rs.50,000 or
0.1% of the
proposed
capital
increase,
whichever is
higher
Rectification in particulars of mortgages 5,000 7,500
Extension in the prescribed period for holding annual general
meeting;

By a public company, a fee of
15,000 15,000
By a private company, a fee of .
5,000 5,000
Permission to hold annual general meeting by listed company at a
place other then the town in which the registered office of the
company is situated.

2,500 5,000
Permission to hold extra ordinary general meeting at a shorter
notice 2,500 5,000
Direction for holding annual general meeting/extra ordinary
meeting under section 170
By a public company, a fee of 15,000 15,000
By a private company, a fee of . 5,000 5,000
Election of directors by a listed company under section 178 5,000 10,000
Approval of loan to director under section 195 5,000 10,000
Exemption from the applicability of provisions under clause (b) of
sub section (3) of section 206 10,000 20,000
24
Approval for the appointment of any sole purchase, sale or
distribution agent under sub-section (3) of section 206, a fee of 10,000 20,000
Preparation of accounts of more than twelve months under
section 233, a fee of 2,500 5,000
Special audit under section 234A, a fee of 10,000 20,000
Exemption from the applicability of fourth schedule or 5
th

schedule under sub-section (5) of section 234, a fee of 2,500 5,000
Exemption from the applicability of section 237 under sub-section
(8) thereof, a fee of... 2,500 5,000
Appointment of auditor under sub-section (7) of section 252 2,500 5,000
Appointment of cost audit under section 258, a fee of 1,000 2,000
Investigation into the affairs of a company under the second
proviso of section 263, a fee of 10,000 20,000
Restoration of a company struck off by the Registrar under
sub-section (9) of section 439 5,000 10,000
Application under the Companies Easy Exit Scheme launched
by the Commission, a fee of... 5,000 10,000
For an application to the Commission seeking approval to issue
securities outside Pakistan, a fee of 200,000
For an application other than those specified in part VII above or
an appeal submitted to the registrar or the Commission under the
Ordinance by or on behalf of a company, a fee of 500 1,000
For an application/appeal /complaint submitted to the registrar
or the Commission under the Ordinance:-
By a member of the company or any other person having
dealing with the company, a fee of 500 500
By any creditor of the company, a fee of 500 1,000

Abbreviations/References:

CRO: Company Registration Office.
SECP: Securities & Exchange Commission of Pakistan.
25
Forms: Different Specimen forms available at the SECP HQ, CROs and SECP
Website.
Rules: Companies General Provisions & Forms Rules.
Sections: Sections of the Companies Ordinance, 1984.

Fee can be paid through Bank draft, Pay Order or challan in all branches of Muslim
Commercial Bank Limited (MCB)

Location and contract details of Company Registration Offices

Phone No.: 051-9208740 Fax No: 051-9208740

4
th
Phone No: 021-99213272 Fax No. 021-99213278
3
rd
& 4
th
Phone No. 042-99204962 6 Fax No: 042-99202044

63-A, 2
nd
Floor,
Phone No: 061-9200530/9200920 Fax No: 061-9200920
Email: cromultan.eservices@secp.govpk

356-A, Ikram Plaza, Small D ground.
Phone No: 041-9220284 Fax No: 041-9220152
Email: crofaisalabad@secp.gov.pk

26
1
st
Peshawar Cantt.
Phone No: 091-9213178, Fax No: 091-9213686
Email: cropeshawar@secp.gov.pk / saeedullah.khan@secp.gov.pk

Quetta Cantt.
Phone No: 081-2844136 Fax No: 081-2899134
Email: croquette@secp.gov.pk

28 D , Hamdard Housing Society,
Phone No: 071-5630517 Fax No: 071-5633757

1

(SPECIALIZED COMPANIES DIVISION)

MODARABA PROMOTERS GUIDE

FORMATION OF MODARABA MANAGEMENT
COMPANY AND FLOATATION OF MODARABAS
UNDER THE MODARABA COMPANIES AND
MODARABA (FLOATATION AND CONTROL)
ORDINANCE, 1980
2

REQUIREMENTS FOR REGISTRATION AS
MODARABA COMPANY

In order to be eligible for registration as Modaraba
Company, the following conditions have to be
fulfilled:

(a) The Company should be registered under the Companies
Ordinance, 1984 or be a body corporate formed under any law in
force and owned or controlled whether directly or through a
company or Corporation by the Federal Government or a Provincial
Government.

(b) If a Company is to be engaged solely in the floatation and
management of modaraba, it has to have a paid-up capital not less
than Rs.2.5 million but if it is engaged in other business as well
then its paid up capital should be minimum Rs.7.5 million.

(c) None of its directors, officers or employees has been convicted of
fraud or breach of trust or of an offence involving moral turpitude.

(d) None of its above quoted persons should have been adjudged an
insolvent or have suspended payment or compounded with their
creditors.

(e) The promoters should, in the opinion of Registrar, be persons of
means and integrity and have knowledge of matters, which the
company may have to deal with as Modaraba Company.

APPLICATION FOR REGISTRATION

A company which is eligible for registration as Modaraba Company may
make an application to the Registrar duly signed by all directors and verified by
an Oath Commissioner with:

(i) 5 copies of Memorandum and Articles of Association of the
Company; (One copy which should be certified by the Registrar of
respective Company Registration Office).

3
(ii) 5 copies of Certificate of Incorporation of the company (one copy
of which should be certified by the Registrar of respective Company
Registration Office).

(iii) Original depositors Challan of Rs. 250,000/- on account of
registration and filing fee (non-refundable) deposited in the head of
account of the Securities and Exchange Commission of Pakistan
maintained in the designated branches of MCB Bank Limited.

(iv) Latest audited accounts, if the company is already in business.

(v) Precise description of the business being done, if the company is
already engaged in business other than floatation of modaraba or if
it proposes to undertake such business in addition to floatation and
management of Modaraba.

After an application has been made for registration, the Registrar, may after
being satisfied grant registration to such companies on such conditions as he
may deem fit.

OTHER IMPORTANT REQUIREMENTS AFTER REGISTRATION

(i) No Modaraba Company shall engage in any business which is of the
same nature and competes with the business carried on by a
Modaraba floated or controlled by it [Section 17(1)].

(ii) No Modaraba Company or any of its directors or their relatives shall
obtain loan, advance or credit from the funds of the Modaraba or
on the security of the assets of the Modaraba [Section 17 (2)].

(iii) The Modaraba Company shall subscribe at least 10% of the total
amount of subscription in each Modaraba floated by it. In order to
compensate it, it has been laid down that the Modaraba Company
will get as remuneration a fixed percentage of the net annual profit
of the Modaraba which shall not exceed 10% of such net annual
profit [Section 17 (3), 18].

(iv) A fee of Rs. 25, 000/- shall be remitted by Modaraba Company
through Challan as annual renewal fee in the month of January
every year.

4
(v) Annual audited accounts, directors report and auditors report of
the company are required to be filed with the Registrar
simultaneously with its circulation to share holders.

(vi) No change, in the Memorandum and Articles of Association or in
the majority shareholders and directors, shall be made without
prior written authorization of the Registrar.

PERMISSION TO FLOAT A MODARABA

A duly registered Modaraba Company can apply for floatation of a
Modaraba (section 8).

Documents to be furnished to the Registrar for the grant of permission to
float a Modaraba.

Five copies each of:

(i) Application for the grant of permission to float Modaraba on
Form No. 1 with other necessary information required in the
annexure to the Form.

(ii) Duly certified copies of registration certificate, one copy
thereof being certified by the Registrar.

(iii) Prospectus and feasibility report duly signed by all directors.

(iv) Latest audited balance sheet and profit and loss account of
Modaraba Company and existing Modaraba, if any.

(v) Original depositors challan on account of authorization fee
to float Modaraba, deposited in the head of account of the
Securities and Exchange Commission of Pakistan maintained
in the designated branches of MCB Bank Limited.

RELIGIOUS BOARD

The Registrar scrutinizes the application and after he is satisfied, submits it to
the Religious Board for issue of a certificate on the prescribed Form.

FLOATATION OF MODARABA
5

The Registrar can grant authorization certificate to float a modaraba only after
clearance of the proposal by the Religious Board.

DECLARATION BEFORE COMMENCING
BUSINESS

The Modaraba cannot commence business till the minimum amount stated in the
prospectus for business operation has been raised, the Modaraba certificates
thereof have been allotted and a declaration as prescribed in this regard signed
by Chief Executive has been filed with the Registrar.

IMPORTANT REQUIREMENTS AFTER FLOATATION OF
MODARABA

(i) Five copies of its annual audited accounts signed by the chief
executive and two directors of the Modaraba Company are required
to be filed with the Registrar and circulated amongst certificate
holders within six months from the close of the accounting year
(section 14, Rule 12).

(ii) Terms of an auditor appointed by the Modaraba Company as
auditors of Modaraba shall be approved by Registrar (Section 15,
Rule-19).

(iii) Every modaraba company shall, within one month of the close of
first, second and third quarters of the financial year of each
modaraba, prepare in accordance with such International
Accounting Standards and other standards, as may be specified
from time to time by notification in the official Gazette for the
purpose by the Securities and Exchange Commission of Pakistan
under sub-section (3) of section 234 of the Companies Ordinance,
1984, (XLVII of 1984), and transmit by registered post to the
Registrar and under postal certificate to its certificate holders a
profit and loss account, a cash flow statement and a statement of
changes in equity for, and a balance sheet as at the end of, that
quarter , whether audited or otherwise (Rule 10).

(iv) Annual list of certificate holders and a summary shall be prepared
within eighteen months from the floatation of the Modaraba and
filed with the Registrar within 30 days from the date of the
6
reopening of the Register of the certificate holders relative to
declaration of dividend, otherwise as on 31
st
December of the year
[Rule-23].

(v) Return as to allotment of Modaraba Certificates shall be filed with
the Registrar within one month from the floatation of Modaraba.
(Rule-26).

(vi) The Modaraba shall be floated within twelve months from the date
of authorization.

(vii) The Modaraba shall not undertake any business other than those
specified in the prospectus.

(viii) The Modaraba Company shall not disinvest or create encumbrance
in favour of any person on any part of the investment in the
Modaraba.

(ix) The Modaraba certificates shall be listed for trading on stock
exchange. If the application for listing of the Modaraba is refused
by the Stock Exchange, the company shall forthwith repay the
money received by it from the applicants.

(x) The Modaraba certificates to be subscribed by the Management
Company and/or sponsors, of the Modaraba Company shall not be
transferred except with the prior written authorization of the
Registrar.

(xi) No change shall be made in the chief executive officer, directors of
the Modaraba Company or management of the modaraba except
with the prior written consent of the Registrar.

(xii) A report about the public offer and subscription, allotment basis,
fulfillment of underwriting obligations and related matters shall be
furnished to the Registrar within two months of the date of
publication of the prospectus.

(xiii) Dates of opening and closing of subscription list as agreed by the
stock exchange shall be incorporated in the prospectus. If these
dates go beyond three months of the date of authorization
certificate, then the prospectus shall be cleared afresh before
publication.

7
(xiv) Underwriting arrangement shall be finalized with the approval of
the Registrar.

(xv) The Modaraba Company shall comply with the conditions, if any,
imposed by the SEC.

(xvi) The prospectus shall be published in the press not less than seven
days and not more than thirty days before the date on which the
subscription list will open.

(xvii) The Modaraba Company shall take a decision within ten days of the
closure of subscription list as to what applications have been
accepted, and shall refund, within ten days of decision, the
application money to the applicants whose applications have not
been accepted.

(xviii) Dates of execution of material contracts shall be incorporated in the
prospectus and verified photo copies thereof submitted to the
Registrar before issue/publication of the prospectus.

(xix) A duly signed final copy of the prospectus containing original
certificate of the Auditors shall be filed with the Registrar before
issue/publication of the prospectus.

(xx) The company shall set aside for each Modaraba, free from any
encumbrance, a portion of its paid-up capital not less then two and
a half million rupees.

(xxi) The objects outlined in the prospectus shall be achieved and the
business operation conducted on the basis of business
arrangements and agreements as already approved by Religious
Board. In case any new arrangement is to be entered into,
approval of the Religious Board shall be obtained.

(xxii) The scheme for further issue (Right or Bonus) of Modaraba
Certificates shall be approved from Registrar after the decision
made by the Board of Directors.

(xxiii) The contents of the prospectus shall not be altered without prior
written approval of the Registrar.

(xxiv) Five published copies of the prospectus along with copies of all
newspapers in which prospectus has been advertised shall be filed
with the Registrar within seven days of its publication.
8

REQUIREMENT UNDER PRUDENTIAL REGULATIONS

i) All business transactions undertaken by the Modarabas shall be in
conformity with the Prudential Regulations for Modarabas, issued
under Circular No.4 of 2004 dated January 28, 2004 amended from
time to time.

ii) The affairs of the Modarabas shall be monitored under the
Prudential Regulations for Modarabas through various periodical
statements through the Specialized Companies Return System
(SCRS) by the 10th of every month.

GUIDELINES FOR EXISTING AS WELL AS PERSPECTIVE
APPLICANTS AS DETERMINED BY REGISTRAR MODARABA
FROM TIME TO TIME

a) The appointment of key Executives including the chief executive officer,
chief financial officer, chief accounting officer, chief operating officer, company
secretary, internal auditor or the compliance officer irrespective of their
designation shall be subject to Fit & Proper Criteria prescribed by the Registrar
Modaraba.

b) Chief Executive Officer shall not be removed without the permission of
the Registrar Modaraba.

c) The reputation of the applicants proposed chief executive will be given
due weightage.

d) The sponsor/director must have clean records (if connected with
corporate bodies) in respect of transactions with the Banks and DFIs and
payment of income tax, excise and custom duties and sales tax. More particularly
they should not:

i) have been associated with any illegal activity especially banking
business, deposit taking, financial dealing and other business.

ii) have failed to meet their obligation to banks and other financial
institutions. They shall furnish names of the banks/DFIs along
9
with names of the branches with which they have had dealing.
Bank reports are also required to be submitted.

iii) have defaulted in payment of taxes. They shall indicate their
National Tax Numbers.

iv) be or have been associated as director/chief executive with the
corporate bodies whose corporate and tax record including
custom duties, central excise and sales tax has been
unsatisfactory. They shall name the corporate bodies, their
bankers and disclose their tax numbers and dividend record.
Those not so associated with corporate bodies would be
required to indicate their occupation/profession/trade and
highlight their achievements.

v) have been sponsor, director, major shareholder or chief
executive of a cooperative society, which has failed to meet its
obligations.

vi) in the opinion of the sanctioning authority, having adverse
reputation regarding integrity and performance and do not fulfill
the Fit & Proper Criteria circulated vide circular No.10 of 2008
dated 2.6.2008.

(f) Sponsors/directors should have personal net worth not less than
the amount to be subscribed by them personally supported by a
duly authenticated copy of the latest wealth statement filed with
the taxation department.

(g) Persons with directorship of listed companies paying dividend
regularly will be preferred against those having directorship of non-
listed public or private limited companies. Similarly, business
groups who have gone in public will be preferred.

(h) A chairman, chief cxecutive officer or director shall represent only
one modaraba company so as to avoid conflict of interest.
Exceptional cases can be considered on merit.

(i) More than 50% of sponsors/directors shall not be from the same
family.

(j) For both general and specific Modarabas at least 50% of the
directors should have either experience of funds management or
that of directorship of listed companies.
10

(k) The promoters and sponsors of the modaraba company and
modaraba shall not dispose of their shares and modaraba
certificates without the prior written approval of the registrar
modaraba.

(l) Existing as well as future management companies are required to
have a Chartered Accountant or an FCMA as their chief accountant.

(m) Applicant Companys past financial track record, tax track record,
corporate behavior and professional reputation of proposed
sponsors will be given weightage.

(n) No second Modaraba will be allowed unless accounting results of
three years of the previous modaraba are available.

(o) Applications for registration as a Modaraba Company sponsored by
people not related to each other will be given preference over
application sponsored by people belonging to the same family.

Note: the criteria desired is the minimum and can be reviewed and
changed to encourage growth of modaraba sector.

11

SCALE OF FEES UNDER THE MODARABA COMPANIES
AND MODARABA RULES, 1981

1. For registration of a modaraba
company (non-refundable fee):

(i) at the time of registration.

Rs.250,000/-
(ii) renewal annually in the month of
January.

Rs.25,000/-
2. Application for:

(a) authorization to float modaraba
(non-refundable fee):

Where the nominal amount does not
exceed Rs.2.5 million

Where the nominal amount exceeds
Rs.2.5 million but does not exceed Rs.
5 million

Where the nominal amount exceeds
Rs.5 million
Perpetual More than Up to five
________ five years years
(1) (2) (3)

Rs.50,000/- Rs.40,000/- Rs.30,000/-

Rs.100,000/- Rs.60,000/- Rs.40,000/-

Rs.100,000/- Rs.60,000/- Rs.40,000/-
plus plus plus
Rs.10,000/- Rs.6,000/- Rs.4,000/-
for every for every for every
additional additional additional
Rs.1 million. Rs. 1 million. Rs. 1 million

(b) renewal annually in the month of
January (to be charged to the
Modaraba)
Rs. 100,000/-

3. For filing, recording or registering any
fact or document or fact required to be
filed with, recorded by or registered
with Registrar.

Rs.1,000/- for each document
4. For filing, registering and recording
document relating to a mortgage or
charge required under the Ordinance.

Rs.7,500/-
5. For application for enquiry.

Rs.2,000/-
6. For claim against modaraba company
by modaraba certificate holders
referred to the Tribunal.

Rs.2,000/-
7. For any other application before the
Tribunal, other than an application by
Registrar, or before the Registrar by
any person.

Rs.2,000/-
8. For inspection of records.

Rs.200/-
9. For certified copy of any document or
extract thereof.

At the rate of Rs.20/- per page or part thereof subject to
a minimum of Rs.100/- .

.
---------------------------------------------------------------------------------------------------------
Guide on Winding up / Dissolution of Companies Page 1 of 10
SEC Guide
SERIES

OF PAKISTAN

Guide on
Winding up / Dissolution
of Companies

Ph. No. : 051-9207091-4, Fax: 051-9204915
Website:
www.secp.gov.pk

E-mail:
secphq@secp.gov.pk

.
---------------------------------------------------------------------------------------------------------
AIMS AND OBJECTIVES

This booklet is a simple guide to winding up procedures and should be read with the
relevant legislation i.e. the Companies Ordinance, 1984 (as amended) (hereinafter
called the Ordinance) and the Companies (Court) Rules, 1997 (hereinafter called
the Rules). It summarises steps and provides information and procedure that
apply to all types of winding up.

Please remembe r that if your company is considering for winding up, you should
seek appropriate professional advice.

INTRODUCTORY REMARKS

The term winding up of a company may be defined as the proceedings by which a
company is dissolved (i.e. the life of a company is put to an end). Thus, the winding
up is the process of putting an end to the life of the company. And during this
process, the assets of the company are disposed of, the debts of the company are
paid off out of the realized assets or from the contributories and if any surplus is
left, it is distributed among the members in proportion to their shareholding in the
company. The winding up of the company is also called the liquidation of the
company. The process of winding up begins after the Court passes the order for
winding up or a resolution is passed for voluntary winding up. The company is
dissolved after completion of the winding up proceedings. On the dissolution, the
company ceases to exist. So, the legal procedure by which the existence of an
incorporated company is brought to an end is known as winding up.

1. LIQUIDATOR

A person appointed to carry out the winding up of a company is called liquidator. If
the winding up is through Court, the term used for such person is official liquidator .
The duties of liquidator include to get in and realise the property of the company, to
pay its debts, and to distribute the surplus (if any) among the members. The official
liquidator acts under the supervision of the Court, through a recognized reporting
system.

The following are the general powers of liquidator(s):-

1. To institute or defend any suit, action, prosecution or other legal
proceeding, civil or criminal on behalf of the company.

2. To carry on the business of the company so far as may be necessary for
the beneficial to it.

3. To pay to the creditors.

4. To make any compromise or arrangement with creditors.

5. To compromise all calls and liabilities to calls, debts and liabilities capable
of resulting in debts.

6. To sell the movable and immovable property and things in action of the
company by public auction or private contract, with power to transfer to
any person or to sell the same in parcels.

.
---------------------------------------------------------------------------------------------------------
7. To do all acts and to execute all deeds, receipts and other documents in the
name and on behalf of the company and for that purpose to use in the
companys seal when necessary.

8. To prove, rank and claim in the bankruptcy, insolvency or sequestration of
any contributory for any balance against his estate and to receive
dividends as a separate debt due from the bankrupt or insolvent in the
bankruptcy.

9. To draw, accept, make and endorse any bill of exchange or promissory
note in the name and on behalf of the company.

10. To raise on the security of the assets of the company any money.

2. Consequences of winding up
Some important consequences of winding up of company are:
2.1 As regards the company itself: winding up does not mean that the
company has ceased to exist. The company exists as a corporate entity with all
the rights of such entity, with only change that its management and
administration is to be carried on through liquidator / liquidators till the final
dissolution of the company.
2.2 As regards the shareholders : A new statutory liability as
contributories comes into existence. Every transfer of shares or alteration in the
status of a shareholder, after the winding up has commencedby the order of the
Court , shall unless approved by the liquidator , be void.
2.3 As regards the creditors:

i. They cannot file or continue suits against the company, except with
the leave of the Court.
ii. They cannot proceed with the execution, if they have obtained
decrees already.
iii. They must lodge their claim and prove their debt before the
liquidator.

2.4 As regards the management, on appointment of liquidator, all the
powers of the directors, chief executive and other officers, shall cease, except
for the purpose of giving notice of resolution to wind up and appointment of
liquidator and filing of consent of liquidator etc.

2.5 As regards the disposition of companys property, all such
dispositions are void unless with the leave of the Court or the liquidator.

3. Modes of winding up:

The winding up of a company may be either-

(i) by the Court; or

(ii) voluntary; or

(iii) subject to the supervision of the Court.

.
---------------------------------------------------------------------------------------------------------
3.1 Winding up of the company by the Court: (i)

The winding up of a company by an order of the Court is called the compulsory
winding up.

Section 305 of the Ordinance envisages the following circumstances, under
which a company may be wound up by the Court on the petition submitted to
it:-

(a) if the company has, by special resolution, resolved that the company
be wound up by the Court;

(b) if default is made in delivering the statutory report to the registrar or
in holding the statutory meeting or any two consecutive annual
general meetings;

(c) if the company does not commence its business within a year from
its incorporation, or suspends its business for a whole year;

(d) if the number of members is reduced, in the case of private company,
below two or, below three in case of public company and below
seven in case of listed company.;

(e) if the company is unable to pay its debts;

(f) if the company is-

(i) conceived or brought forth for, or is or has been carrying on,
unlawful or fraudulent activities;
(ii) carrying on business not authorised by the memorandum;
(iii) conducting its business in a manner oppressive to any of its
members or persons concerned with the formation or
promotion of the company or the minority shareholders;
(iv) run and managed by persons who fail to maintain proper and
true accounts, or commit fraud, misfeasance or malfeasance
in relation to the company; or
(v) managed by persons who refuse to act according to the
requirements of the memorandum or articles or the
provisions of this Ordinance or fail to carry out the directions
or decisions of the Court or the registrar or the Commission
given in the exercise of powers under this Ordinance;

(g) if, being a listed company, it ceases to be such company;
(h) if the Court is of opinion that it is just and equitable that the
company should be wound up; or

(i) Complete deadlock in the management of the company.
(ii) Failure of companys main object.
(iii) Recurring losses.
(iv) Aggressive or oppressive policy of majority shareholders.
(v) Incorporation of company for fraudulent or illegal purpose.
(vi) Public interest.
(i) if the company ceases to have a member.
.
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3.1.1 Procedure for winding up of company and filing of petition before
respective High Court:

1. To pass Special Res olution by 3/4
th
majority of the members of the company
that the company be wound up by the Court in case if the company itself intend
to file a petition and to file the Special Resolution on Form 26 with the
registrar.
2. To prepare a list of the assets to ascertain that the company is unable to pay its
debts.
3. To prepare a list of the creditors
4. In case of defaults in payments the creditor or creditors to make a decision for
the filing of the winding up petition.
5. In case if the Commission or Registrar or a person authorised by the
Commission intend to file a petition, they should not file a petition, for winding
up of the company, unless an investigation into the affairs of the company has
revealed that it was formed for any fraudulent or unlawful purpose or that it is
carrying on a business not authorised by its memorandum or that its business is
being conducted in a manner oppressive to any of its management has been
guilty of fraud, misfeasance or other misconduct towards the company or
towar ds any of its members.
6. To engage advocates for the preparation and filing of the petition.

3.1.2 Who is competent to file petition for winding up in the Court?

Petition may be presented by any one of the following:
1. The company may itself by passing a special resolution
2. Creditor or Creditors.
3. Any contributory or contributories
4. Registrar of Companies
5. Securities and Exchange Commission of Pakistan or by a person authorised
by the Commission

3.1.3 Check List filing of petition before respective High Court :

1. Have you gone through General Heading provided under
rules.
Rule 4 of the Rules
2. Whether the petition is prepared / drafted on and in accordance
with the Rules.
Rule 75 of the
Rules
3. Have the petitions / written statements / affidavits and other
proceedings are being presented to the Court is fairly and
legibly written, type written, cyclostyled etc. and in accordance
with the format described under the Rules.
Rule 5 of the Rules
4. Have the language of the said documents stated at column 3 are
in language of the Court?
Rule 6 of the Rules

3.1.4 Documents to be annexed with the petition

1. Petition for winding up to be filed on form prescribed under the
Companies Rules, (On Form 24 (General Form) (Form 25
(petition by creditor) Form 26 (petition by company)
Rule 75 read with
rule 4 of the Rules
2. Affidavit verifying the petition on Form 1 Rule 16 read with
rule 4 of the Rules
.
---------------------------------------------------------------------------------------------------------
3. Copy of special resolution in case if the company itself intend to
file petition
Section 172 of the
Ordinance
4. Copies of the agreements and other documents on the basis of
which creditors intend to file a winding up petition will be
annexed with the petition

5. All other supporting documents on the basis of which the
petitioner rely as an evidence

3.2. Voluntary winding up of members of the company (ii (a))
A company can be wound up voluntary (a) on expiration of the period fixed for the
duration of the company by its Articles of Association or on occurrence of event
leading to dissolution of the company as provided in the Memorandum and Articles
of Association and company has to pass a special resolution in general meeting for
its wound up voluntarily within five weeks of filing of declaration of solvency, and
(b) on passing of the special resolution that the company be wound up voluntarily.
A voluntary winding up is deemed to commence at the time of passing of the
resolution for voluntary winding up.

The company ceases to carry out business just on commencement of winding up.
However, it can carry on its activities and business for beneficial winding up of the
company.

3.2.1 PROCEDURE FOR VOLUNTARY WINDING UP
The following steps are to be taken for Members voluntary winding up under the
Provisions of the Ordinance, and the Companies Rules.

Step 1. Where it is proposed to wind up a company voluntarily, its directors
make a declaration of solvency on Form 107 prescribed under Rule 269 of the
Rules duly supported by an auditors report and make a decision in their meeting
that the proposal to this effect may be submitted to the shareholders. They, then,
call a general meeting (Annual or Extra Ordinary) of the members (Section 362 of
the Ordinance)

Step 2. The company, on the recommendations of directors, decides that the
company be wound up voluntarily and passes a Special Resolution, in general
meeting (Annual or Extra Ordinary) appoints a liquidator and fixes his
remuneration. On the appointment of liquidator, the Board of directors ceases to
exist. (Sections 358 and 364 of the Ordinance)

Step 3. Notice of resolution shall be notified in official Gazette within 10
days and also published in the newspapers simultaneously. A copy of it is to be
filed with registrar also. (Section 361 of the Ordinance)

Step 4. Notice of appointment or change of liquidator is to be given to
registrar by the company alongwith his consent within 10 days of the event.
(Section 366 of the Ordinance)

Step 5. Every liquidator shall, within fourteen days of his appointment,
publish in the official Gazette, and deliver to the registrar for registration, a notice
of his appointment under section 389 of the Ordinance on Form 110 prescribed
under Rule 271 of the Rules.

.
---------------------------------------------------------------------------------------------------------
Step 6. If liquidator feels that full claims of the creditors cannot be met, he
must call a meeting of creditors and place before them a statement of assets and
liabilities. (Section 368 of the Ordinance)

Step 7. A return of convening the creditors meeting together with the notice
of meeting etc. shall be filed by the liquidator with the registrar, within 10 days of
the date of meeting. (Section 368 of the Ordinance)

Step 8. If the winding up continues beyond one year, the liquidator should
summon a general meeting at the end of each year and make an application to the
Court seeking extension of time. (Section 387(5) of the Ordinance)

Step 9. A return of convening of each general meeting together with a copy
of the notice, accounts statement and minutes of meeting should be filed with the
registrar within 10 days of the date of meeting. (Section 369 of the Ordinance)

Step 10. As soon as affairs of the company are fully wound up, the liquidator
shall make a report and account of winding up, call a final meeting of members,
notice of convening of final meeting on Form 111 prescribed under Rule 279 of the
Rules before which the report / accounts shall be placed. (Section 370 of the
Ordinance)

Step 11. A notice of such meeting shall be published in the Gazette and
newspapers at least10 days before the date of meeting. (Section 370 of the
Ordinance).

Step 12. Within a week after the meeting, the liquidator shall send to the
registrar a copy of the report and accounts on Form 112 prescribed under Rule 279
of the Rules. (Section 370 of the Ordinance)

3.2.2. DOCUMENTS REQUIRED FOR VOLUNTARILY
WINDING UP BY MEMBERS

Special Resolution on Form-26 (prescribed under the Companies
(General Provisions and Forms) Rules, 1985 for voluntary winding up.

Declaration of Solvency on Form 107 under the Rules.

Affidavit by Directors of the company including Chief Executive
verifying the attached auditors report, profit and loss account, balance
sheet, statement of assets and liabilities prepared from the date of
closing of last accounts till the latest practicable date, immediately
before the making of declaration.

Consent of liquidator.

A copy of Notice of resolution passed for winding up the company
voluntarily and published in the Official Gazette.

A copy of Notice for appointment of liquidator and published in the
Official Gazette.

A copy of Preliminary report prepared by the liquidator.

Final report and accounts of the company prepared by liquidator
presented in General meeting of shareholders after finalization of
winding up.

.
---------------------------------------------------------------------------------------------------------
Notice of final meeting.

Return containing final repor t and accounts alongwith minutes of
meeting to be filed with the concerned Company Registration Office.

3.3. CREDITORS VOLUNTARY WINDING UP OF THE COMPANY (ii
(b)

A procedure has been laid down under the provisions of the Ordinance whereby the
company can also be voluntary wound up by creditors. For this purpose, the
company shall call a meeting of the creditors of the company to be summoned for
the day, or the day next following the day, on which there is to be held a general
meeting of the company at which the resolution of voluntary winding up to be
proposed.

3.3.1. PROCEDURE FOR CREDITORS VOLUNTARY WINDING UP

Step 1. First of all, the company passes a special resolution in the general
meeting of the members of the company for which following steps are to taken:

Board of Directors approves the agenda of the general meeting
especially the draft special resolution for winding up of the
company.

Notice of the general meeting alongwith copy of the draft special
resolution is given to the members at least 21 days before the general
meeting.

Special resolution is passed by 3/4
th
majority of the members of the
company and the members appoint a person to be liquidator of the
company.

Special resolution on Form 26 is filed with the registrar.

Step 2. Meeting of creditors is called at 21 days notice, (simultaneously with
sending of the notices of the general meeting of the company) the notice of the
meeting of the creditors to be send by post to the creditors, besides, the notice of the
said meeting to be advertised in the official Gazette and the newspaper circulated in
the Province and the creditors pass a resolution of voluntary winding up of the
company. The creditors also appoint liquidator in that meeting. If the creditors and
the company nomina te different persons, than person nominated by the creditors
shall be liquidator.

Step 3. Notice of the resolution passed at the creditors meeting shall be
given by the company to the registrar alongwith consent of the liquidator within ten
days of the passing of the resolution.

The company may either at the meeting at which resolution for voluntary winding
up is passed or at any subsequent meeting may, if they think fit, appoint a
committee of inspection consisting of not more than five persons. Provided that the
creditors may, if they think fit, resolve that all or any of the person so appointed by
the company ought not to be member of the committee of inspection.

Step 4. The liquidator should, with all convenient speed, realise the assets,
prepare lists of creditors, admit proof, settle list of contributories, make such calls
as may be necessary, etc. accordingly as the nature of the case may require, pay
secured creditors, pay the costs including the liquidators own remuneration, pay
preferential claims, and after meeting all the claims of creditors, and after adjusting
all claims and rights, distribute the surplus on pro rata basis.

.
---------------------------------------------------------------------------------------------------------
Step 5. In the event of the winding up continuing for more than one year, the
liquidator shall summon a general meeting of the company and a meeting of
creditors at the end of the first year from the commencement of the winding up and
lay before the meetings an audited account of receipts and payments and acts and
dealings and of the conduct of winding up during the preceding year together with a
statement in the prescribed form and containing the prescribed particulars with
respect to the proceedings and position of liquidation and forward by post to every
creditor and contributory a copy of the account and statement together with the
auditors' report and notice of the meeting at least ten days before the meeting
required to be held.

Step 6. The liquidator prepares the accounts, gets them audited and also
presents a final report to the creditors. The steps at this stage are as under:

The liquidator prepares a final report and accounts of the winding
up, showing how the winding up has been conducted and the
property of the company have been disposed of.

Accounts are duly audited by the auditor appointed for the purpose.

The notice of meeting is sent by post to each contributory of the
company and creditor at least ten days before the meeting. The
account with a copy of the auditors report is also enclosed with the
notice.

The notice of the meeting specifying the time, place and object of the
meeting is published at least ten days before the date of the meeting
in the official Gazette and in at least one newspaper.

Within one week after the meeting, the liquidator is required to send
to the registrar a copy of his report and account, and make a return to
him of the holding of the meeting alongwith the minutes of the
meeting.

If a quorum is not present at the meeting, the liquidator makes a
return stating that the meeting was duly summoned and that no
quorum was present thereat. The return is filed with the registrar and
considered as presented in the meeting.

The registrar, on receiving the report, account and the return, is
required to register them after their scrutiny.

On the expiration of three months from the registration of final
report, accounts and minutes, the company is deemed to be
dissolved.

3.4. Winding up of the company subject to the supervision of the Court. (iii)

When a company has passed a resolution for voluntary winding up, the Court may
of its own motion or on the application of any person entitled to apply to the Court
for winding up a company, make an order that the voluntary winding up shall
continue, but subject to such supervision of the Court, and with such liberty for
creditors, contributories or others to apply to the Court, and generally on such terms
and conditions, as the Court thinks just.

A petition for the continuance of a voluntary winding up subject to the supervision
of the Court shall, for the purpose of giving jurisdiction to the Court over suits and
other legal proceedings, be deemed to be a petition for winding up by the Court.

.
---------------------------------------------------------------------------------------------------------
The Court may, in deciding between a winding up by the Court and a winding up
subject to supervision, in the appointment of liquidators, and in all other matters
relating to the winding up subject to supervision, have regard to the wishes of the
creditors or contributories as proved to it by any sufficient evidence, but subject to
the provisions which would have been applicable had the company been wound up
by the Court.

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