Capital Issues (Exemption) Order 1967

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THE CAPITAL ISSUES (EXEMPTION) ORDER, 1967

[Gazette of Pakistan, Extraordinary, 13th March 1967]

No. F.2 (2)‑CCI/67. ‑‑In exercise of the powers conferred by subsection (1) of section 6 of the Capital Issues (Continuance of Control) Act, 1947 (XXXIX of 1947), and in supersession of the Exemption Order No. F 2 (1)‑CCI/51; dated the 30th October 1951, the [Subs by P.O. 4 of 1975][Federal Government] is pleased to make the following Order, namely:‑‑

  1. (1) This Order may be called the Capital Issues (Exemption) Order, 1967.

(2) It shall come into force at once,

  1. In this Order, unless there is anything repugnant in the subject or context,‑‑

(a) "banking company" has the same meaning as in the Banking Companies Ordinance, 1962 (LVII of 1962);

[Added by S.RO. 571 (1)/82, dated 14‑6‑1982.][(aa) [Added by S.R.O. 710 (1)/80, dated 26‑6‑1980.]["free reserves+" includes any amount which, having been set aside out of revenue of other surpluses after adjustment of all intangible or fictitious assets, is free in that it is not retained to meet any diminution in value of assets, specific liability, contingency or commitment known to exist at the date of the balance‑sheet, but does not include‑‑

(i) reserves created as a result of revaluation of fixed assets;

(ii) goodwill reserve;

(iii) depreciation reserve to the extent of ordinary depreciation including allowance for extra shifts admissible under the Income -Tax Ordinance, 1979 (XXXI of 1979);

(iv) development allowance reserve created under the provision of the Income Tax Ordinance, 1979 (XXXI of 1979).

(v) Workers Welfare Fund;

(vi) [Subs by S.RO.1217 (1)/89, dated 19‑12‑1989.][provisions for taxation to the extent of the deferred or current liability of the company; and

(vii) capital redemption reserve].

(b) "insurance company" and "provident society" have the same meanings as in the Insurance Act, 1938 (IV of 1938);

(c) "section" means a section of the Capital Issues (Continuance of Control) Act, 1947 (XXIX of 1947).

  1. The following shall be exempt from the provisions of subsection (1) and clause (a) of subsection (2) of section 3 and subsection (1) of section 5, namely:‑

(1) the issue and acceptance of securities (other than debentures [Subs by S.RO. 1217 (1)/89 dated 19‑12‑1989.][or Participation Term Certificates] stock and shares) being an issue made by a person in the ordinary course of business and solely for the purpose of that business to another person carrying on the business of banking or to such other person's nominee in respect of advances or overdrafts from time to time granted or to be granted by such other person;

(2) charges made under mining lease by the lessee in favour of the lessor charging assets of a company for the due payment of rents and royalties reserved by the instrument of lease;

(3) debentures [Insested by S.RO. 571 (1)/82, dated 14‑6‑1982.][or Participation Term Certificates] taken up by the Pakistan Industrial Credit and Investment Corporation and the Industrial Development Bank of Pakistan against loans:

(4) debentures [or Participation Term Certificates] issued by companies to favour of Collectors of Customs against payment of custom duties on imported machinery.][ Semi‑colon subs. and sub‑paragraphs (5) and (6) added by S.RO. 710 (I)/80, dated 26‑6‑1980.]

(5) debentures issued by the companies to the Investment Corporation of Pakistan or to any member of the consortium led by the Investment Corporation of Pakistan, against the commitment made by the consortium;

(6) issue of bonus shares by companies whose securities are listed on any of the Stock Exchanges subject to the fulfilment of the following conditions, namely:‑

(i) the free reserves of the company are sufficient to permit issue of the bonus shares after retaining in the reserves 25 per cent of the capital as it will be increased by the proposed bonus shares;

(ii) a certificate from the auditors is obtained before the issue of the bonus shares to the effect that the free reserves and surpluses retained after the issue of the bonus shares will not be less than 25 per cent of the increased Capital;

(iii) all contingent liabilities disclosed in the audited accounts shall be take into account in the calculation of minimum residual reserves of 25 per cent.

(iv) all the existing shares are fully paid up; .

(v) observance of such other guidelines as may, from time to time, be issued by the Controller of Capital Issues;

(vi) simultaneously, with the issue of the bonus shares, a return shall be filed with the Controller of Capital Issues together with a copy of the auditors' certificate and relevant Balance‑Sheet.]

  1. (1) Issue of securities at par, and all transactions relating to securities so issued, by company, not being‑‑

(a) a banking company,

(b) an insurance company,

(c) a provident society incorporated as a company,

(d) an investment company [The word "or" omitted by S.RO. 318 (I)/88, dated 2‑5‑1988.][xx]

[Subs. by Notification No. S.R.O. 418(I)/91 dated 2nd May,1991.][(e) a company in which foreign capital is associated (in any form and whether in total or in part) and has established or proposes to establish any of the following industries namely: [The word "or" added by ibid.][or]

(i) arms and ammunition;

(ii) security printing, currency and mint;

(iii) high explosives;

(iv) radioactive substances;]

[Cl. (f) added by ibid.][(f) a leasing Company];

[Cls. (g) and (h) added by S.R.O. 166 (I)/93 dated 23rd February, 1993.][(g) an Investment Finance Company;

(h) a Housing Finance Company).

if the value of the consideration involved in such issues [Ins. by ibid.]["except companies with foreign equity of more than 50%] does not exceed [Subs. by S.RO. 571 (I)/82, dated 14‑6‑1982, further subs. for the words "ten million rupees" by S.RO. 603 (I)/88, dated 10‑7‑1988. and further subs. for the words "fifty million rupees" by S.R.O. 418(I)/91 dated 2nd May, 1991.][one hundred million rupees] shall, subject to compliance with the conditions set forth in Schedule to this Order, be exempt from the provisions of sections 3, 4 and 5.

(2) Exemptions under sub‑paragraph (1) shall not apply to a company which neglects or fails to comply with such direction not inconsistent with the provisions of this Order, as the Controller of Capital Issues may, by order in the official Gazette, give either in respect of companies generally or any class or group of companies or any particular company as may be specified in the order.

SCHEDULE

PART 1

Applicable to all companies

  1. All the shares or debentures [Subs. by S.RO. 571 (I)/82, dated 14‑6-1982.][or Participation Term Certificates] shall be of the same denomination and shall confer equal rights on all the shareholders or debenture‑holders.

  2. [Omitted by ibid.][xxxxx]

  3. Borrowings against mortgage of assets including finished goods, raw materials and promissory notes shall not at any stage exceed fifty per cent of the capital.

  4. Where assets are taken over from any person other than a regular dealer, no consideration shall be paid‑‑

(a) which exceeds the cost of assets to the vendor as reduced by a normal depreciation;

(b) which includes, in any form, any payment for goodwill or other intangible asset; and

(c) without obtaining a certificate from a Chartered Accountant to the effect that the amount of consideration does not exceed the limit specified in clause (a) and does not include any payment mentioned in clause (b).

  1. No [Omitted by S.R.O. 710 (I)/80, dated 26‑6‑1980.][x x x] agency including purchase or sales agency shall be created except with the approval of the Controller of Capital Issues.

[Paras (6) and (7) subs by S.R.O. 571 (I)/82, dated 14‑6‑1982.]6. The Chief Executive, by whatever name called, and other directors who are sponsors or promoters and any directors who are rendering extra services may be paid such remuneration as the company in general meeting may determine:

Provided that if a company incurs a loss for a continuous period of three years, or its directors are receiving remuneration or perquisites disproportionate to the profits that are shared with outside share‑holders, the Controller of Capital Issues may, for, such period as he may specify from time to time, fix the remuneration and perquisites of the Chief Executive, the directors who are sponsors or promoters and any directors rendering extra services who are relatives of any of the former.

Explanation. ‑‑"Relatives" in relation to a sponsor or promoter, includes the spouse or a brother or sister or any of the lineal ascendants or descendants of the sponsor or promoter; and

(iii) for paragraph (7) the following shall be substituted, namely:‑

"7. Remuneration paid for attending meetings of the Board to persons other than the regularly paid Chief Executive and full‑time working directors shall not exceed five hundred rupees per meeting

  1. No remuneration shall be paid to any Director‑‑

(a) for attending the meetings of the Board, which exceeds‑‑

(i) Rs.25 per diem in the case of companies having a paid‑up capital not exceeding five lakh rupees,

(ii) Rs.50 per diem in the case of companies having a paid‑up capital exceeding five lakh rupees but not exceeding ten lakh rupees, and

(iii) Rs.100 per diem in the case of companies having a paid‑up capital exceeding ten lakh rupees; and

(b) for other services, without the approval of the share‑holders in the general meeting and the consent of the Controller of Capital Issues.

  1. The minimum qualification of a .Director shall be the holding of shares of such amount calculated at the rate of one thousand rupees for each one lakh rupees of capital or part thereof and no person who holds shares or represents interests holding shares of such amount shall be disqualified from being a Director.

  2. Brokerage shall not exceed one per cent of the paid‑up value of the shares sold through a broker.

[Subs. by S.RO. 710 (I)/80, dated 26‑6‑1980.][10. No bonus shares shall be issued by any company other than a company whose securities are listed on a Stock Exchange unless a certificate had been obtained from a Chartered Accountant to the effect that the free reserves and surpluses retained after the issue and surpluses retained after the issue of bonus shares will not be less than 25 per cent of the increased capital.]

  1. Simultaneously, with the issue of capital without the consent required by section 3 as permitted by the Capital Issues (Exemption) Order, 1967, a report along with a copy of the Memorandum and Articles of Association shall be submitted to the Controller of Capital Issues showing therein the amount of capital raised and certifying that all the requirements of the said Order were complied with before the issue of the capital.

  2. Directors' report and audited accounts of each year shall be furnished to the Controller of Capital Issues for information

PART II

Applicable to public companies only

  1. Underwriting commission shall not exceed two and a half per cent of the amount actually underwritten out of the shares offered for subscription to the general public.

  2. Before the issue of further shares under section 105‑C of the Companies Act, 1913 (VII of 1913), a certificate shall be obtained from a Chartered Accountant to the effect that at the time of such issue the company was listed on the Stock Exchange and that it satisfied the requirement of section 23‑A of the Income tax Act, 1922 (XI of 1922).

  3. If it is desired to raise any‑ part of the capital from the general public, 50 per cent of the capital at par shall be offered to the general public and the National Investment Trust and prior approval of the Controller of Capital Issues be obtained to the proposed issue and to the prospectus which may be subjected to such conditions as he may consider appropriate.

  4. The qualification of a director shall be his holding shares to the value of not less than five thousand rupees in his own name, relaxable in the case of a director representing interest holding shares of the requisite value.

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