22._Investment_in_Associated_Companies.pdf

Investment in Associated companies

1. Associatedcompaniesandassociatedundertakingsmean
anytwoormorecompaniesorundertakings,oracompanyandanundertaking,
interconnectedwitheachotherinthefollowingmanner,namely
(a)ifapersonwhoisownerorapartnerordirectorofacompanyorundertaking,
orwho,directlyorindirectly,holdsorcontrolssharescarryingnotlessthan
twentypercentofthevotingpowerinsuchcompanyorundertaking,isalsothe
ownerorpartnerordirectorofanothercompanyorundertaking,ordirectlyor
indirectly,holdsorcontrolssharescarryingnotlessthantwentypercentofthe
votingpowerinthatcompanyorundertaking;or
(b)ifthecompaniesorundertakingsareundercommonmanagementorcontrolor
oneisthesubsidiaryofanother;or
(c)iftheundertakingisamodarabamanagedbythecompany

2. AssociatedPerson
apersonwhoistheowneroforapartnerordirectorinacompanyorundertaking
or,whosoholdsorcontrolssharescarryingnotlessthantenpercentofthevoting
powerinacompanyorundertaking,shallbedeemedtobean"associatedperson"
ofeverysuchotherpersonandofthepersonwhoistheowneroforapartneror
directorinsuchothercompanyorundertaking,orwhosoholdsorcontrolssuch
sharesinsuchcompanyorundertaking.

3. InvestmentsinassociatedcompaniesandundertakingSec199
oAcompanymaymakeinvestmentinanyofitsassociatedcompaniesor
associatedundertakingsaftergettingtheauthorityofaspecialresolution.
oThespecialresolutionshallindicate
a)thenature
b)Period
c)amountofinvestmentand
d)termsandconditionsattachedthereto.
Investmentshallincludeequity,loans,advances,guarantees,bywhatever
namecalled.
Investmentdoesnotinclude
a)theamountdueasnormaltradecredit,
b)wherethetermsandconditionsoftradetransaction(s)carriedoutonarms-
lengthand
c)inaccordancewiththetradepolicyofthecompany.
oThecompanyshallnotinvestinitsassociatedcompanyorassociated
undertakingbywayofloansoradvancesexceptinaccordancewithan
agreementinwriting

4. osuchagreementshallincludethetermsandconditionsspecifying
a)thenature
b)Purpose
c)periodoftheloan
d)rateofreturn
e)feesorcommission
f)repaymentscheduleforprincipalandreturn
g)penaltyclauseincaseofdefaultorlaterepaymentsand
h)security,ifany,fortheloaninaccordancewiththeapprovalofthemembersin
thegeneralmeeting.
oThereturnonsuchinvestmentshallnotbelessthan
a)theborrowingcostoftheinvestingcompanyor
b)therateasmaybespecifiedbytheCommission
whicheverishigherandshallberecoveredonregularbasisinaccordancewiththe
termsoftheagreement,failingwhichthedirectorsshallbepersonallyliableto
makethepayment.
oThedirectorsoftheinvestingcompanyshallcertifythattheinvestmentismade
afterduediligenceandfinancialhealthoftheborrowingcompanyissuchthatit
hastheabilitytorepaytheloanaspertheagreement.

5. oAnincreaseintheamountoranychangeinthenatureofinvestmentortheterms
andconditionsattachedtheretoshallbemadeonlyundertheauthorityofaspecial
resolution.
oEverycompanyshallmaintainandkeepatitsregisteredofficearegisterof
investmentsinassociatedcompaniesandundertakingscontainingsuchparticulars
asmaybespecified.
oAnycontraventionordefaultincomplyingwithrequirementsofthissectionshallbe
anoffenceliabletoapenaltyoflevel3onthestandardscaleandinaddition,shall
jointlyandseverallyreimbursetothecompanyanylosssustainedbythecompanyin
consequenceofaninvestmentwhichwasmadewithoutcomplyingwiththe
requirementsofthissection

6. InvestmentsofcompanytobeheldinitsownnameSec200
oAllinvestmentsmadebyacompanyonitsownbehalfshallbemadeandheldbyit
initsownname.
oThecompanymayholdanysharesinitssubsidiarycompanyinthenameofany
nomineeofthecompany.
oCompanycandosotoensurethatthenumberofmembersofthesubsidiary
companyisnotreducedbelowthestatutorylimit.
oWherethecompanyhasarighttoappointorgetelectedanypersonasadirector
shareswhicharerequiredtobeheldbyadirectorthereof,mayberegisteredor
heldbysuchcompanyjointlyinitsownnameandinthenameofsuchpersonor
nominee,orinthenameofsuchpersonornomineealone.
oAnysharesorsecuritiesinwhichinvestmentshavebeenmadebyacompanyare
notheldbyitinitsownname,thecompanyshallforthwithenterinaregister
maintainedbyitforthepurposeatitsregisteredoffice
a)thenature,
b)valueand
c)suchotherparticularsasmaybenecessaryfullytoidentifysuchsharesor
securities.
oTheregistershall,beopentotheinspectionofmemberswithoutcharge,andto
anyotherpersononpaymentofsuchfeesasthecompanymayspecifyinthis
behalfduringbusinesshours,subjecttosuchreasonablerestrictions,asthe
companymayimpose,sothatnotlessthantwohoursineachdaybeallowed.

7. oAnymembermayrequireacertifiedcopyofregisteroranypartthereof,on
paymentofsuchfeeasmaybefixedbythecompany.
oThecertifiedcopiesrequestedunderthissectionshallbeissuedwithinaperiodof
05workingdays.
oAmemberseekingtoexerciseeitheroftherightsmustmakearequesttothe
companytothateffect.
oIfacompanycontravenesthecompanyshallbepunishablewithfinewhichmay
extendto05millionrupeesandeveryofficerofthecompanywhoisindefaultshall
bepunishablewithimprisonmentforatermwhichmayextendtotwoyearsorwith
finewhichmayextendtoonemillionrupees,orwithboth.
oAnycontraventionordefaultincomplyingwithrequirementsofmaintenanceof
registeredandissuanceofitscopiesshallbeanoffenceliabletoapenaltyoflevel1
onthestandardscale;andtheregistrarmaybyanordercompelanimmediate
inspectionoftheregisterordirectthatcopiesrequiredshallbesenttothepersons
requiringthem.

8. MethodofcontractingSec201
Acontractorotherenforceableobligationmaybeenteredintobyacompanyas
follows
(a)anobligationwhich,ifenteredintobyanaturalperson,will,bylaw,berequiredto
bebydeedorotherwiseinwriting,
omaybeenteredintoonbehalfofthecompany
oinwriting
osignedunderthenameofthecompany
obyadirector,attorneyoranyotherpersondulyauthorisedbytheboardand
omayaffixcommonsealofthecompany;
(b)anobligationwhich,ifenteredintobyanaturalperson,isnot,bylaw,requiredtobe
inwriting,
maybeenteredintoonbehalfofthecompany
inwritingororally
byapersonactingunderthecompany‘sexpressorimpliedauthority.
Allcontractsmadeshallbeeffectualinlawandshallbindthecompanyandits
successorsandallotherpartiesthereto,theirheirs,orlegalrepresentativesasthe
casemaybe.
Executionofbillsofexchange,promissorynotesanddeeds.-(1)Abillofexchangeor
promissorynoteshallbedeemedtohavebeenmade,drawn,acceptedorendorsedon
behalfofacompanyifmade,drawn,acceptedorendorsedinthenameof,oronbehalf
oforonaccountof,thecompanybyanypersonactingunderitsauthority,expressor
implied.

9. CompanytohaveofficialsealforuseabroadSec203
oAcompanythathasacommonsealmayhaveanofficialsealforuseoutside
Pakistan.
oTheofficialsealmustbeafacsimileofthecompany‘scommonseal,withthe
additiononitsfaceofthenameofeveryterritorywhereitistobeused.
oTheofficialsealwhendulyaffixedtoadocumenthasthesameeffectasthe
company‘scommonseal.
oAcompanyhavingsuchanofficialsealmay,bywritingunderitscommonseal,
authoriseanypersonappointedforthepurposeinanyterritorynotsituatein
Pakistantoaffixthesametoanydeedorotherdocumenttowhichthe
companyispartyinthatterritory.
oTheauthorityofanysuchagentshall,asbetweenthecompanyandanyperson
dealingwiththeagent,continueduringtheperiod,ifany,mentionedinthe
instrumentconferringtheauthority,orifnoperiodismentionedtherein,then
untilnoticeoftherevocationordeterminationoftheagent‘sauthorityhas
beengiventothepersondealingwithhim.
oThepersonaffixinganysuchofficialsealshall,bywritingunderhishand,on
thedeedorotherdocumenttowhichthesealisaffixed,certifythedateand
placeofaffixingthesame.
oAdeedorotherdocumenttowhichanofficialsealisdulyaffixedshallbind
thecompanyasifithadbeensealedwiththecommonsealofthecompany.

10. Contracts by agents of company in which company is undisclosed principal Sec 214
Every officer or other agent of a company who enters into a contract for or on behalf of the company in which
contract the company is an undisclosed principal shall, at the time of entering into the contract, make a
memorandum in writing of the terms of contract, and specify therein the person with whom it has been made.
The company shall be, other than a private company, not being the subsidiary company of a public company.
Every such officer or other agent shall forthwith deliver the memorandum aforesaid to the company and its
directors which shall be laid before next meeting of the board.
If any such officer or other agent makes default in complying with the requirements of this section
(a)the contract shall, at the option of the company, be void as against the company; and
(b) such officer or other agent shall be liable to a penalty of level 1 on the standard scale.
Liability for undesired activities of the shareholders 215
A member of a company shall act in good faith while exercising its powers as a shareholder at the general meetings
and shall consider the benefit of all the members.
Without prejudice to his rights, a member of the company shall not exert influence or approach the management
directly for decisions which may lead to create hurdle in the smooth functioning of management.
Any shareholder who fails to conduct in the manner provided in this section and as specified by the Commission
shall be guilty of an offence under this section and shall be liable to a penalty not exceeding of level 1 on the
standard scale.

11. Securities and deposits Sec 217
A company or any of its officers or agents shall not receive or utiliseany money received as security or deposit,
except in accordance with a contract in writing.
The money so received shall be kept in a special account maintained by a company with a scheduled bank.
This section shall not apply where the money received is in the nature of an advance payment for goods to be
delivered or sold to an agent, dealer or sub-agent in accordance with a contract in writing.