Companies Rules Volume II

8/13/2019 Companies Rules Volume II

1/584

Securities and ExchangeCommission of Pakistan

Companies RulesVolume IIRules (From 1971 to 1999)(Updated up to 5 December 2013)


2/584

Companies RulesVolume IIRules(Updated up to 5 December 2013)

Securities and ExchangeCommission of Pakistan


3/584

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Insurance Act, 1938 (Repealed)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Companies (Appointment of Trustees) Act, 1972 (Repealed)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Foreign Private Investment (Promotion & Protection) Act, 1976 (Repealed)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Investment Companies and Investment Advisors Rules, 1971 (Repealed)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Economic Reforms (Acquisition and Compensation) Rules, 1973 (Repealed)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


4/584

Corporate Law Authority Rules, 1984 (Repealed)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Asset Management Companies Rules, 1995 (Repealed)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 , 199 5

Venture Capital Companies and Fund Managers Rules, 1995 (Repealed)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Leasing Companies (Establishment and Regulation) Rules, 2000 (Repealed)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


5/584

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

REGULATIONSSecurities 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


6/584

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, 2012Debt 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), 2002Guidelines 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


7/584

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


8/584

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 RightsIssue 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


9/584

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 Enterprisesand 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


10/584

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 39Circular 15/2002 Transfer off Regulatory Supervision of Non-Banking Financial Institutions andSubmission 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 byNBFCs

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 BusinessName

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 ListedCompanies

Circular 10/2003 Fresh License(s) to be obtained by Existing Companies in terms of Section 282Cof 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 282Cof 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 financeservices (Investment Banks), discounting services and housing finance services

Circular 24/2003 Assets provided on Lease/loan basis to the Employees (Excluding CEO andDirectors)

Circular 25/2003 Use of w ord Bank or any of its derivatives

Circular 26/2003 Circular No. 26 of 2003


11/584

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 BusinessName

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) Ordinance2002

Circular 6/2005 Conditions for Issuance of Foreign Currency Certificate of Deposits (CODs) andCertificate of Investment (COIs)

Circular 8/2005 Investment Policy under Rule 24(3) and Prescribed Allocation Policy forSelection by the Individual Participants under Rule 14(3) & 14(4) of the Voluntary Pension SystemRules 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 theCompanies Ordinance, 1984

Circular 15/2005 Sale of Assets by NBFCs to its Employees

Circular 17/2005 Violation of Section 143 of the Companies Ordinance, 1984 by mentioningIncomplete 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


12/584

Circular 14/2010 United Nations 1267 Committee's Consolidated List of Individuals and Entitiesregarding 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 forFiling 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 ModarabaCompanies 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 CompaniesOrdinance, 1984

Circular 28/2010 Application for Refund of Fees received under Sixth Schedule to the CompaniesOrdinance, 1984

Circular 3/2011 Amendments in Circular 36 of 2009 dated December 10, 2009 Investment andAllocation Policies for Pension Funds Authorized under the VPS Rules, 2005


Circular 5/2011 Appointment of a Member of the Religious Board by the Federal Governmentunder 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 Companiesand Modaraba (Floatation and Control) Ordinance, 1980

Circular 11/2011 Sharing of Costs of Insurance Ombudsman's Secretariat by Insurance/TakafulCompanies

Circular 12/2011 Conditions for Grant of License to Associations not for Profit under Section 42of the Companies Ordinance, 1984

Circular 14/2011 Meetings of the Board of Directors (Abroad)


13/584

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 AgentsCircular 1/2012 Reporting of Suspicious Transaction Reports (STR) Currency TransactionReports (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 ofthe 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 andExchange 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 Section48(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-OrdinaryGeneral Meetings (EOGM) through Electronic Medium

Circular 11/2012 Enlistment/Categorisation of Auditors on the Approved List pursuant to Section48(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 AssetManagement Companies


Circular 17/2012 Additional Disclosures for Workers Welfare Fund ( WWF) Liability forCollective 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


14/584

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 withUnitholders

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 RegistrationSystem

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 Investmentand 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-ListedCompanies


Circular 11/2013 Amendment to Circular No. 9 of 2005 on Group Insurance Premium Rates

Circular 12/2013 Publication of Public Announcements


15/584

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 Determinationof 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


16/584


17/584

membership of, and admission into, a stock exchange, shall be as follows] 4:

(a) No person shall be eligible to be a member of a stock exchange if

(i) he is less than twenty-one years of age;

(ii) he is not a citizen of Pakistan;

(iii) he is a lunatic or a person of unsound mind;

(iv) he has been convicted of an offence involving fraud or breach of trust;

(v) he has been adjudicated as insolvent or has suspended payment or hascompounded with his creditors;

(vi) he has not had experience in the business of securities for a period of not lessthan two years:

Provided that the regulations of a stock exchange may authorise the governing body thereof to waive compliance with the foregoing condition relating to experience inthe business of securities if such person is, in respect of means, integrity and

background, considered by the governing body to be otherwise qualified formembership;

[(b) A member shall, at all times, maintain a net capital balance of an amount which is,-

(i) in the case of a stock exchange which in the previous calendar year had on thecash counter a turn over of securities exceeding fifteen billion, Rs.2.5 million;

(ii) in the case of a stock exchange which in the previous calendar year had on thecash counter a turn over of securities exceeding 7.5 billion rupees but notexceeding fifteen billion, Rs. 1.5 million; and

(iii) in the case of a stock exchange which in the previous calendar year had on thecash counter a turn over of securities not exceeding 7.5 billion, Rs. 0.75 million;

Provided that a member who is also the member of other stock exchangeshall maintain a net capital balance upto aggregate net capital balancerequirement of all such exchanges put together:

Provided further that, in the case of partnership firm, the amount of netcapital balance to be maintained shall be the amount obtained by multiplying thenet capital balance required for each member of the stock exchange orexchanges, as the case may be, by the number of such partners of the firm as aremembers of the stock exchange;] 5

4 Substituted for The regulation of a stock exchange relating to the qualification for membership of, and admission into, thestock exchange shall, among other matters, provide that- by SRO-1032(I)/85, dated 22-10-19855 Clause (b) substituted by Notification No. SRO 87(I)/2001, dated February 8, 2001. Before substitution clause (b) read asfollows:


18/584

(c) A member shall cease to be a member if, at any time,

(i) he ceases to be a citizen of Pakistan:Provided that, in the case of a stock exchange functioning immediately before

the commencement of these rules, the membership of a member thereof who is not acitizen of Pakistan shall become suspended on such commencement and shall remain sosuspended until he becomes a citizen of Pakistan; or

(ii) he is declared a lunatic or a person of unsound mind; or

(iii) he is convicted of an offence involving fraud or breach of trust; or

(iv) he has been adjudicated as insolvent or has suspended payment or has

compounded with his creditors;

(d) the membership of a member or members who are

partners in a firm and who are in active business shall become suspended as soon as the net capital balance falls short of the amount specified in clause(b) and shall remain so suspended until the net capital balance is increased so as not to fall short of theamount;

(e) Every member shall report to the stock exchange weekly that he or the firm of which he is a partner had, at all times during the week to which the report relates, a net capital balance of anamount not less than that specified in clause (b) and shall forthwith inform the stock exchangeif, at any time, such balance falls short of that amount.

4. Manner of transaction of members business.- (1) All orders to buy or sell securities whicha member may receive shall be entered, in the chronological order, in a register to be maintained byhim in a form which shows the name and address of the person who placed the order, the name andnumber of the securities to be bought or sold, the nature of the transaction and the limitation, if any, as

(b) A member shall at all times maintain a net capital balance in the capital account of an amount which is-

(i) in the case of a stock exchange which in the previous calendar year had on the cash counter a turnover ofsecurities, other than bonus vouchers, exceeding one crore in number-not less than two hundred fiftythousand rupees; and

(ii) in any other case - not less than seventy five thousand rupees:

Provided that a member who is also the member of any other stock exchange shall maintain a net capital balance of not less than fifty thousand rupees:

Provided further that, in the case of firm, the amount of the net capital balance to be maintained shall bethe amount obtained by multiplying fifteen thousand rupees or fifty thousand rupees, as the case may be, by anumber of such partners of the firm as are members of the stock exchange;


19/584

to the price of the securities or the period for which the order is to be valid.

(2) (a) A member who has an at best order from acustomer to buy a security shall not, while suchorder remains unexecuted, buy the same securityon the stock exchange for his own account or for

the account of the firm of which he is a partner orfor the account of any of the partners therein orfor any account in which he, such firm or partner,directly or indirectly, has an interest.

(b) A member who has an at best order from acustomer to sell a security shall not, while suchorder remains unexecuted, sell the same securityon the stock exchange for his own account or forthe account or the firm of which he is partner orfor the account of any of the partners therein orfor any account in which he, such firm or partner,directly or indirectly, has an interest.

(c) A member who has a limit order from a customer to buy a security shall not while suchorder remains unexecuted, buy the same security at or below the limit price on the stock exchange forhis own account or for the account of the firm of which he is partner or for the account of any of the

partners, therein or for any account in which he, such firm or partner, directly or indirectly, has aninterest.

(d) A member who has a limit order from a customer to sell a security shall not, while suchorder remains unexecuted, sell the same security at or above the limit price on the stock exchange forhis own account or for the account of the firm of which he is a partner or for the account of any of the

partners therein or for any account in which he, such firm or partner, directly or indirectly, has aninterest.

(3) A member who has an order to buy or to sell a security shall not fill such order by selling or buying for his own account or for the account of the firm of which he is a partner or for the account ofany of the partners therein or for any account in which he, such firm or partner, directly or indirectly,has an interest, except when-

(a) the order is limit order; or

(b) (i) he sells the security at a price not exceeding the price at which the transaction immediately preceding the receipt of the order by himactually took place; or

(ii) he buys the security at a price which is not lessthan the price at which the transaction


20/584

immediately preceding the receipt of the order

by him actually took place.

(4) A member executing an order of a customer shall, within twenty four hours of the executionof the order, transmit to the customer a confirmation which shall include the following information,namely:-

(a) date on which the order is executed;(b) name and number of the securities;(c) nature of transaction (spot, ready or forward and also whether bought or sold);(d) price;(e) commission, if the member is acting as a broker;(f) whether the order is executed for the members own account or from the market.

5. Maintenance of accounts and audit.- (1) Every member shall prepare once every year a balance sheet and a statement of income and expenditure.

(2) A member shall have his accounts audited by an auditor who is a chartered accountant to beappointed by the Authority whenever such audit is required by the Authority in the public interest.

(3) The auditor shall furnish his report to the Authority within such time as the Authority mayspecify.

6. Form of application for registration.- An application for the registration of a stockexchange under section 5 shall be made to the [Commssion] 6 in Form I.

7.Maintenance of books of account and other documents by the stock exchanges.- (1)Every stock exchange shall prepare and maintain, as required by sub-section (1) of section 6, such

books of account and other documents as will accurately disclose a true and fair picture of the state ofaffairs of the exchange at any point of time.

(2) The books of account and other documents referred to in sub-rule (1) shall include:

(a) journals (or other comparable record), cash book and any other records of original entry,forming the basis of entries into any ledger;

(b) ledgers (or other comparable record) reflecting asset, liability, reserve, capital, incomeand expense;

(c) ledgers (or other comparable record) showing the position in respect of each member ason the settlement day of the securities which the member had bought or sold since thelast preceding settlement day and which had been transferred through a Clearing Housemaintained by the stock exchange;

(d) daily record of quotations and transactions on the stock exchange showing the time at

which each transaction took place;(e) record of transactions with banks;(f) record of security deposits;(g) register of members;(h) register of authorised clerks; and(i) minute books of the meetings of-

(i) members;

6 Substituted for Authority by Notification No. SRO 87(I)/2001, dated February 8, 2001.


21/584

(ii) governing body;(iii) any committee of the general body of members or of the governing body.

(3) The books of accounts and documents referred to in sub-rule (1) shall be preserved for a periodof not less than five years.

8. Maintenance of books of account, etc. by members.- (1) Every member shall prepare andmaintain, as required by sub-section (1) of section 6, the following books of account and otherdocuments in a manner that will disclose a true, accurate and up-to-date position of his business,namely:-

(a) journal (or other comparable record), cash book and any other books of original entry, formingthe basis of entries into any ledger, the books of original entry being such as contain a dailyrecord of all orders for purchase or sale of securities, all purchases and sales of securities, allreceipts and deliveries of securities and all other debits and credits;

(b) ledgers (or other comparable records) reflecting asset, liability, reserve, capital, income andexpense accounts;

(c) ledgers (or other comparable records) reflecting securities in transfer, securities borrowed andsecurities loaned and securities bought or sold, of which the delivery is delayed;

(d) record of all balance of all ledger accounts in the form of trial balances to be prepared at leastonce at the end of the six months of every year of account;

(e) record of transactions with the banks;

(f) contact books showing details of all contracts entered into by a member with other members ofthe exchange or counterfoils or duplicates of memos of confirmation issued to such othermembers;

(g) duplicates or counterfoils of memos of confirmation issued to customers.

(2) The books of accounts and other documents referred to in sub-rule (1) shall be preserved for a period of not less than five years.

9. Submission of periodical returns by stock exchange .- The periodical return relating to theaffairs of a stock exchange, as required by sub-section(2) of section 6, shall be submitted to the[Commission] 7 monthly in Form II within fifteen days of the close of the month to which it relates.

10. Submission of annual report by stock exchange. -(1) The annual report relating to theaffairs of a stock exchange, as required by sub-section (2) of section 6, shall be submitted to the[Commission] 8 not less than fourteen days before the meeting of the shareholders of the stock exchange

before which it is to be laid.

(2) Every such report shall be accompanied by a copy of the balance sheet and profit and loss accountof such year audited by an auditor who is a chartered accountant.

11. [Listing of security on stock exchange, etc.-An application under sub-section (1) of

7 Substituted for Authority by Notification No. SRO 87(I)/2001, dated February 8, 2001.8 Substituted for Authority by Notification No. SRO 87(I)/2001, dated February 8, 2001.


22/584

section 9 for listing of a security on a stock exchange shall be made in Form-III;] 9

[11-A. Limitation for petitions to Federal Government under section 9.- A petition to theFederal Government under sub-section (3) or sub-section (6) of section 9 shall be made within thirtydays of the stock exchange refusing to list or, as the case may be, delist the security.] 10

[]11

[]12

[]13

[]14

9 Inserted by Notification SRO No. 1274(I)/80, dated 20th December, 1980.10 Inserted by Notification SRO No. 1274(I)/80, dated 20th December, 1980.11 Rule 12 omitted by Notification No. SRO 1234(I)/85 dated December 12, 1985. Before omission it read as12. Submission of annual report by issuers. (1) The annual report required by section 11 to be furnished by an issuer of alisted security shall include a balance shaeet and profit and loss account.

(2)The balance sheet and profit and loss account included in the annual report shall, except in the case of an issuer which isrequired to prepare a balance sheet and profit and loss account in form prescribed by the Banking Companies Ordinance,1962 (LVII of 1962), or the Insurance Act, 1938 (IV of 1938), be prepared in accordance with the requirements laid down inthe Second Schedule and the Balance Sheet so prepared shall be be in form A annexed to that Schedule or as near theretoas circumstances may admit.

(3) The balance sheet and profit and loss account shall be audited by an auditor who is a chartered accountant and the reportof the auditor shall be in Form B annexed to the Second Schedule.(4) Every issuer shall furnish the annual report, together with the balance sheet and profit and loss account referred to inSub-rile (1) to the security holder at least fourteen days before the general meeting of the shareholders of the issuer at whichthe report is to be laid before them and shall simataneously furnish a copy of such report to the Stock Exchange orexchanges on which its securities are listed and to the Authority.

(5) Notwithstanding anything contained in Sub-rule (4), the first annual report to be furnished by an issuer shall be inrespect of the year of account of the issuer ending after the commencement of these rules.

(6) An issuer shall, within three months of the genral meeting referred to in Sub-rule (4), submit to the Authority a list of themembers of the issuer stating the facts as they stood on the date of that general meeting.

(7) The list required to be submitted under sub-rule (6) shall be the list required by Section 2 of the Companies Act, 1913(VII of 1913), to be submitted to the Registrar.12 Rule 13 omitted by Notification No. SRO 1234(I)/85 dated December 12, 1985. Before omission it read as follows:

13. Submission of periodical report by issuers.- Every issuer shall, within two months of the close of the first half of itsyear of account, prepare and submit to the Stock Exchange or exchanges on which its securities are listed and to its security-holders and the Authority a profit and loss account for, a balance sheet as at the end of, that half year, whether audited orotherwise.

13 Rule 14 omitted by Notification No. SRO 1234(I)/85 dated December 12, 1985. Before omission it read as follows:

14. Submission of return by certain beneficial owners, etc.- (1) The return required by Section 12 to be submitted by adirector, officer of beneficial owner shall be submitted to the Authority in Form IV every month within ten days of the closeof the month to which it relates.

(2) The first retun under this rule shall be for the month of March, 1971, and shall be submitted to the Authority withinthirty days of the commencement of these rules.


23/584

16. Mode of filing or submission of returns, etc.- Any person required by the Ordinance or any ofthese rules to furnish any document, statement, return or report to the [Commission] 15 shall furnish it,either in person or through an agent, to the [Commission] 16 at its head quarters at Islamabad or send itto the [Commission] 17 by registered post.

14 Rule 15 omitted by Notification No. SRO 1234(I)/85 dated December 12, 1985. Before omission it read as follows:

15. Calculation of amount to be tendered to an issuer by certain beneficial owner, etc.- (1) For calculating the amountrequired by Section 14 to be reported and tendered to an issuer, the person by whom the amount is to be so reported andtendered may deduct from the amount of gain referred to in that section the amount of brokerage, stamp duty and otherexpenditure actually paid or incurred in making that gain.

(2) Any deduction made under Sub-rule (1) shall be supported by documentary evidence acceptable to the issuer as proof ofthe brokerage, stamp duty and other expenditure having been actually paid or incurred.

(3) Any loss arising out of any transaction in any security shall not, for the purposes of Sub-rule (1), be deemed to beexpenditure to be paid or incurred in making gain out od a transaction in that security.

15 Substituted for Authority by Notification No. SRO 87(I)/2001, dated February 8, 200116 Substituted for Authority by Notification No. SRO 87(I)/2001, dated February 8, 200117 Substituted for Authority by Notification No. SRO 87(I)/2001, dated February 8, 2001


24/584

INVESTMENT COMPANIES AND INVESTMENT ADVISERSRULES, 1971

(Published in the Gazette of Pakistan Extraordinary, dated 12th March, 1972)

(As amended upto 1st May, 1999)

S.R.O. 78(I)/71.- In exercise of the powers conferred bysection 32 of the Securities and Exchange Ordinance, 1969 (XVII of1969), the Federal Government is pleased to make the followingrules to regulate the business of investment advisers andinvestment companies, namely:-

CHAPTER I

PRELIMINARY

1 . Short title and commencement.- (1) These rules may becalled the Investment Companies and Investment Advisers Rules,1971.

(2) They shall come into force at once.

2. Definitions.- In the rules, unless there is anythingrepugnant in the subject or context,--

(a) Authority means the 1[1][Corporate Law Authority];

(b) closed-end company, in relation to an investmentcompany, means a company which does notcontinuously offer for sale a security which entitle theholder of such security on demand to receive hisproportionate share of the net assets of the company;

2

[(ba) "connected person" in relation to an investmentcompany means, __

(i) any person or company beneficially owning, directlyor indirectly, ten per cent or more of ordinary sharecapital of investment company or investment advisoror the company, or able to exercise, directly or

1[1]Substituted by Notification No. SRO 176(I)/82, dated 20-2-1982.

2 [2]

Inserted by SRO No.46(1)/2001 dated 25th January 2001


25/584

indirectly, ten per cent or more of the total votes inthat company or the investment advisor;

(ii) any person or company controlled by a person whoor which meets one, or both, of the descriptions givenin sub-clause (i);

(iii) any member of the group of which that companyforms part; or

(iv) any director or officer of that company, or thatcompany's investment advisor or of any of theirconnected persons specified In sub-clauses (i), (ii) and(iii); and]

(c) custodian means a banking company within themeaning of the Banking Companies Ordinance, 1962(LVII of 1962) 3[or a central depository companyapproved by the Commission], which is appointed tobe a custodian under these rules;

(d) Form means a form set out in the 4[2][First] Schedule;

(e) net assets , in relation to an investment company,means the excess of assets over liabilities of thecompany, such excess being computed in the mannerspecified hereunder:-

(i) A security listed on a stock exchange shall bevalued at its last sale price on such exchange onthe date as of which it is valued, or if suchexchange is not open on such date, then at its

last sale price on the next preceding date onwhich such exchange was open and if no sale isreported for such date, the security shall bevalued at an amount not higher than the closingasked price nor lower than the closing bid price.

(ii) An investment purchased and awaiting payment

3 Inserted by SRO No.46(1)/2001 dated 25th January 2001

4[2]Inserted by Notification SRO 29(I)/99 dated 14-1-1999


26/584

against delivery shall be included for valuationpurposes as a security held, and the cashaccount of the company shall be adjusted toreflect the purchase price, including brokerscommission and other expenses incurred in thepurchase thereof but not disbursed as of the

valuation date.

(iii) An investment sold but not delivered pendingreceipt of proceeds shall be valued at the net saleprice.

(iv) The value of any dividends, bonus shares, orrights which may have been declared onsecurities in the portfolio but not received by thecompany as of the close of business on thevaluation date shall be included as assets of thecompany, if the security upon which suchdividends, bonuses or rights were declared isincluded in the assets and is valued ex-dividend,ex-bonus or ex-rights as the case may be.

(v) Interest accrued on any interest-bearing securityin the portfolio shall be included as an asset ofthe company if such accrued interest is nototherwise included in the valuation of thesecurity.

(vi) Any other income accrued upto the date on whichcomputation was made shall also be included inthe assets.

(vii) All liabilities, expenses, taxes and other chargesdue or accrued up to the date of computation

which are chargeable under these rules, otherthan the paid-up capital of the company, shall bededucted from the value of the assets.

(viii) The remuneration accrued upto the date ofcomputation payable to the investment adviserfor providing management and other servicesshall be included as an expense.


27/584

(f) net capital, in relation to an investment adviser,means an amount by which the current assets,namely, cash in hand or in bank, money receivablewithin a period of twelve months from the date of thebalance sheet and such other assets, not being thevalue of securities referred to in sub-rule (2) of rule 5,

as are so classified under generally acceptedaccounting principles, exceed the current liabilities,namely, money payable within a period of twelvemonths from the date of the balance sheet and suchother liabilities as are so classified under generallyaccepted accounting principles;

(g) Ordinance means the Securities and ExchangeOrdinance, 1969 (XVII of 1969); 5[3]and

6[4](h) "Schedule" means a schedule to these rules.




28/584

CHAPTER II

REGULATION OF THE BUSINESS OF INVESTMENT COMPANIES

3. No investment company to commence businesswithout registration.- No company shall commence business as

an investment company unless it is registered with the Authorityunder these rules.

4. Eligibility for registration .- A company proposing tocommence business as an investment company shall be eligible forregistration under these rules if it fulfils or complies with thefollowing conditions or requirements, namely:-

(a) that such company is registered as a public limitedcompany under the 7[5][Companies Ordinance, 1984(XLVII of 1984)];

(b) that it is to function as a closed-end investmentcompany with a capital of not less than 8[6][one hundredmillion rupees:]

9[7 ][Provided that an existing investment company shallraise its capital to one hundred million rupees within a

period of three years;"];

(c) that no director, officer or employee of such companyhas been convicted of fraud or breach of trust;

(d) that no director, officer or employee of such companyhas been adjudicated as insolvent or has suspendedpayment or has compounded with his creditors;

(e) that the promoters of such company are, in the

opinion of the Authority, persons of means andintegrity and have special knowledge of matters whichthe company may have to deal with as an investmentcompany.

5. Registration.- (1) Any company which is eligible for

7[5]Substituted by Notification SRO 29(I)/99 dated 14-1-1999




29/584

registration under rule 4 as an investment company may make anapplication in Form I to the Authority for registration under theserules.

(2) An application under sub-rule (1) shall, besides the otherdocuments referred to in Form I, be accompanied by 10[a receipt

evidencing a payment of an application processing fee of twenty-fivethousand rupees and] an undertaking by the investment adviser ofthe company that the investment adviser will at all times hold orbeneficially own equity securities of the company of an amountwhich is neither less than ten per cent nor 11[8]more than twentypercent of the paid-up value of such securities 12[9][:]

13[10][Provided that in case an investment adviser is anadviser to more than one investment company, theapplication shall be accompanied by an undertakingthat the investment adviser shall invest or arrange theinvestment for a minimum period of two years."];

(3) The Authority, if it is satisfied after such enquiry and afterobtaining such further information as it may consider necessary:--

(i) that the applicant is eligible for registration; and(ii) that it would be in the interest of the capital

market so to do, may grant a certificate ofregistration to such company in Form II.

6. Investment policy and diversification.- (1) Theinvestment policy of an investment company shall be clearly andconcisely stated in its Memorandum and Articles of Association andthe public offer for the sale of its securities:

(2) An investment company shall not enter into any

transaction in any security other than a security which is listed ona stock exchange or for the listing of which an application has beenmade to a stock exchange 14[11][:]

10 10

Inserted by SRO No.46(1)/2001 dated 25th January 2001 11[8]Amended by Notification No. SRO No. 553(I)/84, dat ed 13.06.198412[9]

Inserted by Notification SRO 29(I)/99 dated 14-1-1999 13[10]

Inserted by Notification SRO 29(I)/99 dated 14-1-1999 14[11]

Inserted by Notification SRO 29(I)/99 dated 14-1-1999


30/584

15[12][Provided that an investment company may invest inthe unlisted securities upto ten per cent in the govermentsecurities and rated fixed income securities having minimuminvestment grade rating upto twent per cent of its totalinvestment portfolio subject to such conditions as theAuthority may notify in the official Gazette.];

(3) The investment of an investment company in any othercompany shall not, at any time, exceed an amount equal to 16[13]tenpercent of paid-up capital of the investment company or an amountsufficient to acquire ten per cent of 17[issued capital] of that othercompany 18[:

Provided that the Commission may, on application ofinvestment company, relax any or all conditions incase of an investment company established for aspecific investment objective where the intention tothat effect was expressed in the prospectus ].

7. Sale of securities and cost thereof.- (1) Securitiesrepresenting the capital of an investment company shall be offeredto the public at par; but no such offer shall be made-

(a) until the investment adviser of the investmentcompany has made 19[14][or has arranged to make] aninvestment of the amount referred to in sub-rule (2) ofrules 5; and

(b) unless the offer has been underwritten by anunderwriter appointed by the investment companywith the prior approval in writing of the Authority.

(2) An investment company shall not sell any securities for anyconsideration other than cash.

(3) All expenses incurred in connection with the incorporation ofan investment company and the offer for sale of the securities ofthe company and the distribution of such securities, includingcommission payable to the underwriters, shall be borne by the


16[13]Amended and omit ted by Notification No. SRO 1032(I)/92, dated 24.10.199217 17 Substituted by SRO No.46(1)/2001 dated 25th January 2001 18 Inserted by SRO No.46(1)/2001 dated 25th January 2001 19[14]

Amended and inserted by Notification SRO 29(I)/99 dated 14-1-1999


31/584

investment adviser and shall be reimbursable by the company inequal amounts paid annually over a period of not less than five

years.

(4) 20[15][Interest at the prevailing bank rate] shall be payable by thecompany in respect of the expenses referred to in sub-rule (3).

(5) The expenses referred to in sub-rule (3) shall be reported tothe Authority, giving their break-up under separate heads, as soonas the distribution of the securities is completed.

8. Prohibitions.- No investment company shall-

(a) merge with, acquire or takeover any other investmentcompany, unless it has obtained the prior approval ofthe Authority in writing to the scheme of such merger,acquisition or takeover;

(b) 21[16]pledge any of the securities held or beneficiallyowned by it;

(c) make a loan or advance of money to any person exceptin connection with the normal business of theinvestment company;

(d) effect a short sale in any security;

(e) purchase any security in a forward contract;

(f) purchase any security on margin;

(g) participate in a joint account with others in anytransaction;

(h) apply any part of its assets to real estate, commodities

or commodities contracts;

(i) acquire any security of which another investmentcompany is the issuer 22[but this clause shall not applyin case of floatation of an investment companyestablished with a specific investment objective of

20[15]Amended by Notification No. SRO-553(I)/84, dated 13.06.1984 21[16]Substit uted by Notifica tion SRO -749(i)/75 dated 4.7.197522 Inserted by SRO No.46(1)/2001 dated 25th January 2001


32/584


33/584

E x p l a n a t i o n .- Where the expired period is a fraction of a yearor includes a fraction of a year, the remuneration for the fraction ofthe year shall be converted pro rata into full years remunerationand then the average annual remuneration shall be worked out todetermine the compensation payable for the unexpired period of thecontract; and

(3) The contract shall, among other things, provide that theinvestment adviser shall bear all expenditure in respect of thesecretariat and office space of the company and professionalmanagement, including all administrative, accounting and legalservices, and that the fee payable to the auditors and the custodian,taxes on income of the company , brokerage, stamp duty and anyother duties or taxes connected with the sale or purchase ofsecurities shall be payable by the investment company.

11. Remuneration payable to investment adviser.- Theinvestment adviser of an investment company shall be entitled to bepaid annually, after the accounts of the investment company havebeen audited, a remuneration:-

(a) 26[19]during the first five years of companys existence, ofan amount not exceeding 27[three] per cent of the netassets of the company as at the end of its year ofaccount and thereafter of an amount equal to 28[two]per cent of such assets; and

(b) 29[20][of an] amount not exceeding one-half of the amountby which the dividend distributed by the companyexceeds **twenty per cent.

12. Power of Authority to give certain directions.- TheAuthority, if it is satisfied that it is necessary or expedient so to doin the public interest or of the capital market in Pakistan, may, by

order in writing , direct an investment company, within such timeas may be specified in the order,-

(a) to disinvest the whole or such part of the investmentportfolio as may be so specified;

26[19]Substituted by Notification No. SRO 749(I), Dated 04-07-197527 Substituted by SRO No.46(1)/2001 dated 25th January 2001 28

Substituted by SRO No.46(1)/2001 dated 25th January 2001 29[20]Substituted by Notification No. SRO 72(I)/95 dated 18-01-1995


34/584

(b) to refrain from investing or disinvesting suchsecurities as may be so specified;

(c) to co-opt one or more persons nominated by theAuthority as members of the board of directors of thecompany with the same status, powers and rights asthe other members of the board.

13. Amount distributable to shareholders.- An investmentcompany shall distribute by way of dividend to its shareholders notless than ninety per cent of its income derived from interest,dividends received and capital gains arising from the acquisitionand disposal of securities as reduced by such expenses as arechargeable to company under these rules, including theremuneration payable to the investment adviser.

14. Publication of portfolio securities.- Every investmentcompany shall cause to be published, in the Bulletin or other suchpublication of the stock exchange on which its securities are listed,the names and the value of its portfolio securities as at the end ofeach half-year.

15. Custody of securities.- (1) Every investment companyshall place and maintain the securities owned or held by thecompany with a custodian appointed by it with the prior approval inwriting of the Authority.

(2) The investment company shall settle with the custodian ascheme for the custody of securities which shall, among othermatters, provide for the circumstances in which the securities maybe released from custody.

(3) The custodian shall, if it feels that the nature of anyrelease of a security from custody is contrary to the provisions ofthese rules, report the matter to the Authority forthwith.

16. Maintenance of books of accounts and otherdocuments.- (1) Every investment company shall maintain suchbooks of accounts and other records as shall depict a true and fairpicture of its state of affairs, including--

(a) journals, cash book and other records of original entryforming the basis of entry in any ledger;

(b) ledgers (or other comparable record) reflecting asset,


35/584

liability, income and expense;

(c) ledgers (or other comparable record) showing at anytime securities which are receivable or deliverable;

(d) record of transactions with the bank;(e) register of transaction in securities; and

(f) record of the meetings of the board of directors.

(2) The books of account and other records to be maintainedunder sub-rule (1) shall be preserved for a period of not less thanfive years.

17. Periodical reports to shareholders, etc.- (1) Everyinvestment company shall transmit to its shareholders.-

(a) an annual report, together with a copy of the balancesheet and income and expenditure account and theauditors report, not less than 30[21](twenty one) daysbefore the date of the general meeting at which it is tobe laid before the shareholders; and

(b) a six-month report, within 31[22](sixty days) of the end ofeach half-year.

(2) Such report, so far as may be applicable, shall be inaccordance with 32[23](requirements set out in the second schedule tothe these rules), and shall contain a statement showing thesecurities owned at the beginning of the relevant period, securitiespurchased or sold during such period, and the securities held at theend of such period together with the value (at cost and at market), 33 [24] and the percentage in relation to its own assets and the paid -upcapital of the company whose securities are owned.

(3) The statement of income and expenditure of the

investment company shall include a statement of income andexpenditure of the investment adviser in relation to the investmentcompany.

(4) A copy of the annual report referred to in sub-rule (1)

30[21]Amended by Notification SRO 29(I)/99 dated 14-1-1999


32[23]Amended by Notif ication SRO 29(I)/99 dated 14-1-1999

33[24]Omitted by Notification No. SRO 553(I)/84, dated 13-06-1984


36/584

shall, within the time specified therein, be furnished to theAuthority together with a statement containing the followinginformation in respect of the investment company as at the end ofthe year:-

(a) Total number of security holders.(b) Particulars of persons holding five per cent or more ofthe securities of the company at any time during the

year.(c) Names and number of securities held by directors and

officers of the company.(d) Any security of any other issuer sold and then bought

during any six-month period.(e) Particulars of the personnel (executive, research and

other) of the investment company.(f) Remuneration paid to the investment adviser.(g) Particulars of the personnel (executive, research and

others) of the investment adviser.(h) Fee paid to the auditors.(i) The date, names of persons attending and minutes of

each meeting of the board of directors.*(j) Omitted.*(k) Omitted.

34[25](5) Every investment company shall, as and when requiredby the Authority by order in writing and within such time as may bespecified therein, furnish to the Authority the information regardingthe sale price and the capital gain or loss in respect of each securitypurchased and sold.

35[(6) Every investment company shall furnish to thestock exchange, where the securities of the company are listed, theCommission and any association of self-regulatory organization, or

as directed by the Commission, within fourteen days of the last dayof the preceding month, information, as on last date of thepreceding month, on the net asset value of securities issued by it,the net assets have been computed in the manner prescribed inclause (e) of rule (2).]

34[25]Added by Notification SRO 635(i)/84, dated 11.7.8435 Inserted by SRO No.46(1)/2001 dated 25th January 2001


37/584

CHAPTER III

REGULATION OF THE BUSINESS OF INVESTMENT ADVISERS

18. No person to commence business withoutregistration.- No person shall commence business as an

investment adviser unless such person is registered with theAuthority under these rules.

19. Eligibility for registration.- Any person proposing tocommence business as an investment adviser shall be eligible forregistration under these rules if it fulfils or complies with followingconditions or requirements, namely:-

(a) that such person is registered as a company underthe Companies Ordinance, 1984 (XLVII of 1984)36[26]and has capital of not less than twenty millionrupees:Provided that an existing investment adviser shallraise its capital to a minimum level of twenty millionrupees within a period of three years.";

(b) that no director, officer or employee of suchcompany has been convicted of fraud or breach oftrust.

(c) that no director, officer or employee of suchcompany has been adjudicated as insolvent or hassuspended payment or has compounded with hiscreditors;

(d) that the directors of such company are, to thesatisfaction of the Authority, persons of means andintegrity and have special knowledge of the matterswhich the company may have to deal with as aninvestment adviser; *and

37[27](e) that such a person furnishes an undertaking,within ninety days of the grant of a certificate ofregistration, that the investment adviser shallfurnish evidence to the satisfaction of the Authoritythat the personnel employed by it for executive,




38/584


39/584

(c) ledgers (or other comparable record) showingsecurities in the portfolio;

(d) record of transactions with banks;(e) record of the meetings of the board of directors; and(f) original record of all reports, analysis and memoranda

containing investment advice distributed.

(2) Such books of accounts and other records shall bepreserved for period of not less than five years.

22. Submission of annual report to Authority.- Everyinvestment adviser shall submit to the Authority an Annual report,together with a balance-sheet and income and expenditure accountand the auditors report, within six months of the close of its year ofaccount.

23. Enquiry.- (1) The Authority may cause an enquiry to bemade by any person appointed in this behalf into the affairs of anyinvestment adviser registered under these rules or any of itsdirectors, managers or other officers.

(2) Where an enquiry under sub-rule (1) has been undertakenevery director, manager or other officer of the investment adviser towhich or to whose director, manager or other officer the enquiryrelates and every other person who has had any dealing with suchinvestment company, investment adviser, director, partner,manager or officer shall furnish such information in his custody orpower or within his knowledge relating to, or having bearing on thesubject-matter of the enquiry as the person conducting the enquirymay by notice in writing require.

(3) The person conducting an enquiry under sub-rule (1) may callfor, inspect and seize books of account and documents inpossession of any such investment adviser or person.

24. Cancellation of registration.- (1) Where the Authority is ofthe opinion that an investment adviser has contravened anyprovision, or has otherwise failed to comply with any requirement,of the Ordinance or of any rule or direction made or giventhereunder, the Authority may, if it considers necessary in thepublic interest so to do by order in writing,-

(a) cancel the registration of the investment adviser; or


40/584

(b) remove the investment adviser from the office ofinvestment adviser of an investment company:

Provided that no such order shall be made except after giving theinvestment adviser an opportunity of being heard.

(2) An investment adviser removed from office under clause (b) ofsub-rule (1), shall not be entitled to or be paid any compensation ordamages for loss of termination of office.

(3) An investment adviser of an investment company who isremoved from office under clause (b) of sub-rule (1) shall not beappointed to such office of that company until after the expirationof a period of five years from the date of such removal.

(4) Where the investment adviser of an investment company isremoved from that office under clause (b) of sub-rule (1) no directoror officer of the investment adviser shall hold the office of director ofthe investment company or any other office connected with theconduct or management of the affairs of the investment company,until after the expiration of a period of five years from the date ofsuch removal.

(5) Where the investment adviser is removed from office underclause (b) of sub-rule (1) the Authority may, by order in writing,appoint a person, hereinafter referred to as the Administrator, tomanage the affairs of the investment company subject to suchterms and conditions as may be specified in the order.

(6) The Administrator shall receive such remuneration from theinvestment company as the Authority may determine.

(7) The management of the affairs of the investment companyshall, on and from the date of appointment of the Administrator,

vest in him.

(8) If at any time if appears to the Authority that the purpose ofthe order appointing the Administrator has been fulfilled, it maypermit the investment company to appoint another person to theoffice of investment adviser; and , on the appointment of suchinvestment adviser, the Administrator shall cease to hold office.


41/584

THE **FIRST SCHEDULEFORM I

[See rule 5 (1)]

FORM OF APPLICATION FOR REGISTRATION AS ANINVESTMENT COMPANY

TO* The Corporate Law Authority,Government of Pakistan,Islamabad.

Dear Sir,

We hereby apply for the registration of ...........................(Name of Investment Company)

under rule 5 of the Investment Companies and Investment AdvisersRules, 1971.

2. An undertaking (in original) from the investment adviser interms of rule 5(2) of the aforesaid Rules and four copies of each ofthe following documents are enclosed:-

(i) Memorandum and Articles of Association.(ii) Investment Advisory Contract.(iii) Custodian Agreement.(iv) Underwriting Agreement.

3. We hereby undertake to take all steps necessary to have thesecurities issued by us listed on a stock exchange.

4. Necessary information required in the annex to this form isfurnished. We undertake to keep the information up-to-date at alltimes.

Yours faithfully,

Signature of the Secretary ora director of the applicant company.

* Substituted by Notif ication No. 1196( I)/83, dated 20-12-1983** Substituted by Notification SRO 29(I)/99 dated 14-1-1999


42/584

"THE SECOND SCHEDULE [See rule 17(2)]

DISCLOSURE REQUIREMENTS FOR INVESTMENT COMPANIES

1. General

(l) Annual report must contain all the information requiredin this Schedule. Interim reports must at least containthe statement of assets and liabilities and the investmentportfolio. Where the investment company has paid orproposes to pay an interim dividend, the amount ofdividend should be disclosed.

(2) All reports must contain comparative figures for theprevious period except for the investment portfolio.

(3) The items listed under the statement of assets andliabilities, income statement, distribution statement,statement of movements in reserves and the notes to theaccounts, where applicable, must be disclosed. It is,however, not mandatory to adopt the format as shown orto disclose the items in the same order.

2. Statement of assets and liabilities.

The following must be separately disclosed, namely:-

(i) total value of investments;

(ii) bank balances;

(iii) preliminary and floatation costs;

(iv) dividends and other receivable;

(v) bank loan and overdrafts or other forms of borrowings;

(vi) dividend payable;

(vii) total value of all assets;


43/584

(viii) total value of all liabilities; and

(ix) net asset value.

3. Income statement.

(l) Total investment income net of withholding tax, brokendown by category.

(2) Total other income, broken down by category.

(3) Element of income and capital gains.

(4) An itemized list of various costs which have been debitedto the scheme including,--

(a) fees paid to the investment adviser;(b) remuneration of the custodian;(c) amortization of formation costs; director's fee and

remuneration;(d) safe custody and bank charges; auditor's

remuneration;(e) borrowing expenses; legal and other professional

fees; and(f) any other expense borne by the company.

(5) Taxes.

(6) Amounts transferred to and from reserves.

(7) Net income to be carried forward for distribution.

4. Distribution statement.

(l) Amount brought forward at the beginning of the period.(2) Net income for the period.(3) Interim dividend and date of distribution.(4) Final dividend per share.(5) Undistributed income carried forward.

5. Statement of movements in reserves.

(l) Net asset value per share as at the beginning of the


44/584

period.(2) Net asset value per share as at the end of the period.(3) Any item resulting in an increase or decrease in net asset

value of the share including, -

(i) surplus or loss on sale of investments;

(ii) exchange gain or loss;(iii) unrealized appreciation or diminution in value ofinvestments; and

(iv) net income for the period less distribution.

(4) Amounts transferred to and from the revenue account.

6. Notes to the accounts.

The following matters shall be set out in the notes to theaccounts.

(1) Principal accounting policies:

(a) The basis of valuation of the assets of the companyincluding the basis of valuation of unquoted andunlisted securities;

(b) the revenue recognition policy regarding dividendincome and other income;

(c) foreign currency translation, if any;(d) the basis of amortization of formation costs;(e) taxation; and(f) any other accounting policy adopted to deal with

items which are judged material or critical indetermining the transactions and in stating thedisposition of the investment company.

Note.- Any changes to the above accounting policies

and their financial effects upon the accounts shouldalso be disclosed.

(2) Transactions with connected persons:

The following transactions should be disclosed, namely:-

(l) Details of all transactions entered into during theperiod between the company and the investment


45/584

adviser, or any entity in which these parties or theirconnected persons have a material interest; and

(2) name of any director of the investment adviser orany connected person if such a person becomesentitled to profits from transactions in shares or

from management of the company and the amountof profits to which such person becomes entitled.

(3) Borrowings:

(l) State whether the borrowings are secured orunsecured and the duration of the borrowings.

(2) Contingent liabilities and commitments of thecompany.

(3) If the free negotiability of any asset is restricted bystatutory or contractual requirements, this must bestated.

7. Contents of the auditors' report.

The report of the auditor should state --

(l) whether in the auditor's opinion, the accounts preparedfor that period have been properly prepared inaccordance with the relevant provisions of the rules;

(2) without prejudice to the foregoing, whether in theauditor's opinion, a true and fair view is given of thedisposition of the company at the end of the period and ofthe transactions of the scheme of the period then ended;

(3) if the auditor is of the opinion that proper books andrecords have not been kept by the company or theaccounts prepared are not in agreement with thecompany's books and records, that fact; and

(4) if the auditor has failed to obtain all the information andexplanations which, to the best of his knowledge andbelief, are necessary for the purpose of the audit, thatfact.


46/584

8. Investment portfolio.

(l) Number or quantity of each holding together with thedescription and market value.

(2) The total investment stated at cost.

(3) The value of each holding as a percentage of the totalinvestments.

(4) Statement of movements in portfolio holdings since theend of the preceding accounting period.

9. Performance table.

(l) A comparative table covering the last three financial years and including, for each financial year, at the end of thefinancial year.--

(a) total net asset value; and(b) net asset value per share.

(2) A performance record over the last ten financial years; orif the company has not been in existence during the whole of thatperiod in which it has been in existence, showing the earnings pershare and dividend distribution during each of those years."

(Syed Samsamul Haq) Joint Secretary


47/584

Annex to Form I

1. Name, address and telephone number(s)of the Company ....................................................

2. Date and place of incorporation...................................................

3. Names and addresses of directors,distinguishing between promoterdirectors and other directors ....................................................

4. Whether any director has beenconvicted of fraud or breach of trust.

...................................................5. Whether any director has been

adjudicated as insolvent or hassuspended payment or has compoundedwith his creditors. ...................................................

6. Names and addresses of officers andemployees. ...................................................

7. Whether any officer or employee has been convicted for fraud or breach oftrust. ...................................................

8. Whether any officer or employee has been adjudicated as insolvent or hassuspended payment or has compoundedwith his creditors. ...................................................

9. Names of the directors, officers andemployees of the investment companyand those of the investment adviserthereof who are members of a stockexchange. ...................................................

10. Directors interest, direct or indirect inany other investment company.

...................................................11. Previous experience of the

promoters/directors in the investmentfield. ...................................................

12. The financial standing of the promoters/directors (Attach proof, ifany). ...................................................

13. (a) Authorised capital of thecompany.

(b) Part of such capital proposed to be raised through public offer.

....................................................

....................................................


48/584

14. Name, address and telephone number ofthe investment adviser.

...................................................15. Name and address of the custodian.

...................................................16. Name and address of the underwriter.

...................................................17. Financial standing and resources of theunderwriter. ...................................................


49/584

FORM II

[See rule 5(3)]

CERTIFICATE OF REGISTRATION AS IN INVESTMENTCOMPANY

*

CORPORATE LAW AUTHORITYIslamabad, the________19__

The *Corporate Law Authority having considered theapplication for registration under rule 5 of the InvestmentCompanies and Investment Advisers Rules, 1971,by.................................................(Name of the InvestmentCompany)and being satisfied that thesaid................................................................................................................(Name of the InvestmentCompany)is eligible for registration and that it would be in the interest of thecapital market so to do, hereby grants, in exercise of the powersconferred by rule 5 of the Investment Companies and InvestmentAdvisers Rules, 1971, registrationto........................................................................................................... (Name of the investmentcompany)subject to the conditions stated herein below or as may beprescribed or imposed hereafter.

2. The draft agreement between.................................................................................................... (Name of the investmentcompany) and ................................................... (Name of theinvestment Adviser) is approved subject to the following conditions:--

3. The appointment of...............................................................

(Name of custodian)is hereby approved subject to the following conditions:-

4. The appointment of

* Substituted by Notification No. 1196(I)/83, dated 20-12-1983


50/584

...............................................................(Name of the investment adviser)

is hereby approved subject to the following conditions:-

Signature of the officer.


51/584

FORM III

[See rule 20 (1)]

FORM OF APPLICATION FOR REGISTRATION AS INVESTMENTADVISER

TO

* The Corporate Law Authority,Government of Pakistan,Islamabad.

Dear Sir,We hereby apply for the grant of registration of

..................................................................(Name of Investmentadviser)under rule 20 of the Investment Companies and InvestmentAdvisers Rules, 1971.

2. Four copies of the Memorandum and Articles ofAssociation are enclosed.

3. We hereby undertake to maintain at all times a netcapital balance in the capital account of an amount which is notless than one lac rupees.

4. Necessary information required in the annex to this formis furnished. We undertake to keep this information up-to-date atall times.

Yours faithfully,

Signature of the Secretary ora director of the applicant.



52/584

Annex to Form III 1. Name, address and telephone

number(s) of applicant. ............................................................2. Names and addresses of directors.

............................................................3. Whether any director has been

convicted of fraud or breach of trust. ............................................................4. Whether any director has been

adjudicated as insolvent or hassuspended payment or hascompounded with his creditors.

............................................................5. Names and addresses of officers and

employees. ............................................................6. Whether any officer or employee

has been convicted of fraud or breach of trust. ...........................................................

7. Whether any officer or employeehas been adjudicated as insolvent orhas suspended payment or hascompounded with his creditors.

............................................................8. Whether any director or officer has

any interest in any investmentcompany. ............................................................9. What is the financial standing of the

directors. ............................................................10. Give a brief description of the kind

of investment advisory services proposed to be provided, theorganizational se up, previous

professional experience of directors/ officers, etc.

...........................................................


53/584

FORM IV

[see rule 20 (3)]

CERTIFICATE OF REGISTRATION AS ANINVESTMENT ADVISER

*CORPORATE LAW AUTHORITY

Islamabad, the 19

The *Corporate Law Authority having considered theapplication for registration under rule 20 of the InvestmentCompanies and Investment Advisers Rules 1971/-by................................................................................(Name of

adviser) and being satisfied that the said.................................................................................... (Name ofadviser) is eligible for registration and that it would be in theinterest of the capital market so to do, hereby grants, in exercise ofthe powers conferred by rule 20 of the Investment Companies andInvestment Advisers Rules, 1971, registration to.....................................................................................(Name ofadviser) subject to the condition stated herein below or as may be

prescribed or imposed hereafter.

...............................Signature of the officer



54/584


55/584


56/584


57/584


58/584


59/584


60/584


61/584

ECONOMIC REFORMS(ACQUISITION AND COMPENSATION)

RULES, 1973[Gazette or Pakistan, Extraordinary, Part II 24 th October, 1973]

S.R.O. 1516(1)/73.---In exercise of the powers conferred by Article 12 of the

Economic Reforms Orders. 1972 (PO No. 1 of 1972), the Federal Government ispleased to make the following rules. namely:

1. Short title and commencement.--- (1) These rules may be called the EconomicReforms (Acquisition and Compensation) Rules, 1973.

(2) They shall come into force at once.

2. Definitions.--- In these rules, unless. there is anything repugnant in the subjector context.--

(a) Article means the Article of the Order;

(b) Board means the Board of Industrial Management established under theDevelopment of Industries (Federal Control) Act, 1972 (XVI of 1972); and

(c) Order means the Economic Reforms Order, 1972 (PO No. 1 of 1972).

3. Preparation of list of Shareholders.--- (1) The Managing Director of anestablishment shall after giving effect to changes, if any, permitted in pursuance of anotification under Article 7A prepare and submit to the Federal Government a list ofshareholders indicating the shares held by such shareholders and such list shall formthe basis for determining extent of acquisition of shares.

(2) Where shares held by a shareholder are registered under more than one folio inthe registers of a company. all such shares will be consolidated to determineholdings of a shareholder

4. Order of acquisition.--- The order of acquisition of shares of an establishmentpassed by the Federal Government shall be communicated to the Managing Directorwho shall inform the shareholders. whose shares stand acquired, either partly orwholly, by registered post acknowledgment due at the address given in the shareregister and he shall also furnish a copy of such order if the shares of suchestablishment are quoted on a stock exchange, to the recognised stock exchanges.

5. Procedure on acquisition... (1) Where orders for acquisition of shares of anestablishment are passed by the Federal Government, the Managing Director shall

make arrangements to issue new share certificates which will be different in designand distinguishable from the existing share certificates of the establishment, and toexchange the existing certificates with the new ones or with the certificates ofentitlement for compensation for acquired shares, as the case may be.

(2) For the purpose of issuing new share certificates and certificates of entitlementfor compensation, the Managing Director shall issue a public notice giving a date,which shall not be less than ten days from the date of publication of such notice, bywhich date the shares should be lodged with the establishment.


62/584

(3) Where only a portion of shares of a shareholder whose shares have beenacquired has been lodged with the company under sub-rule (2), the shares shallstand acquired in the order in which they were lodged with the company tilt thenumber of shares ordered to be acquired have been so acquired.

(4) Where the shares to be acquired arc not lodged with the company, or where thenumber of shares lodged is less than the number to be acquired, the ManagingDirector shall, subject to such directions as the Federal Government may given,determine as to which of the shares should be acquired.

(5) A list of the shares acquired shall be furnished by the Managing Director to therecognised stock exchanges.

(6) Where a share is liable to acquisition, no exemption from such acquisition may beclaimed on the ground that it is held or owned by another person:

Provided that where a share is lodged with the company before the date fixed undersub-rule (2) accompanied by a valid transfer deed, the Managing Director shallendorse the certificate of entitlement for compensation in the name of transferee andthe compensation shall in such case be payable to such transferee.

(7) The certificates of entitlement for compensation and the now share certificatesshall be issued only in exchange for the existing share cer

Companies Rules Volume II

Documents

Transcript of Companies Rules Volume II