COMPANIES ORDINANCE 1984

(ORDINANCE NO. XLVII OF 1984)

[8^th^ October, 1984]

An Ordinance to consolidate and amend the law relating to companies and certain other associations.

WHEREAS it is expedient to consolidate and amend the law relating to companies and certain other associations for the purpose of healthy growth of the corporate enterprises, protection of investors and creditors, promotion of investment and development of economy and matters arising out of or connected therewith;

AND WHEREAS the President is satisfied that circumstances exist which render it necessary to take immediate action;

Now, THEREFORE , in pursuance of the Proclamation of the fifth day of July, 1977, and in exercise of all powers enabling him in that behalf , the president is pleased to make and promulgate the following Ordinance:-

PART I. ---PRELIMINARY

1. Short title, extent and commencement.-(1) This Ordinance may be called the Companies Ordinance, 1984.

(2) It extends to the whole of Pakistan.

(3) This section shall come into force at once and the remaining provisions of this Ordinance shall come into force on such date as the Federal Government may, by notification in the official Gazette, appoint, and different dates may be so appointed for different provisions.

2. Definitions. - (1) In this Ordinance, unless there is anything repugnant in the subject or context,--

(1) "articles" means the articles of association of a company as originally framed or as altered in accordance with the provisions of any previous Companies Act, or of this Ordinance, including, so far as they apply to the company, the regulations contained in Table A in the First Schedule;

(2) "associated companies" and "associated undertakings" mean any two or more companies or undertakings, or a company and an undertaking, interconnected with each other in the following manner, namely:-

(i) If a person who is the owner or a partner or director of a company or undertaking, or who, directly or indirectly, holds or controls shares carrying not less than twenty per cent of the voting power in such company or undertaking, is also the owner or partner or director of another company or undertaking, or, directly or indirectly, holds or controls shares carrying not less than twenty per cent of the voting power in that company or undertaking; or

(ii) if the companies or undertakings are under common management or control or one is the subsidiary of another; or

(iii) if the undertaking is modaraba managed by the company;

and a person who is the owner of or a partner or director in a company or undertaking or, who so holds or controls shares carrying not less than ten per cent of the voting power in a company or undertaking, shall be deemed to be an "associated person" of every such other person and of the person who is the owner of or a partner or director in such other company or undertaking, or who so holds or controls such shares in such other company or undertaking:

Provided that shares shall be deemed to be owned, held or controlled by a person if they are owned, held or controlled by that person or by the spouse or minor children of the person:

Provided further that --

(i) directorship of a person or persons by virtue of nomination by the Federal Government or a Provincial Government or a financial institution directly or indirectly owned or controlled by such Government; or

(ii) shares owned by the National Investment Trust or the Investment Corporation of Pakistan or a financial institution directly or indirectly owned or contro1led by the Federal Government or a Provincial Government or shares registered in the name of a central depository, where such shares are beneficially owned by the central depository.

shall not be taken into account for determining the status of a company, undertaking or person as an associated company, associated undertaking or associated person;

(3) "Authority" means the Corporate Law Authority constituted under section 11;

(4) "body corporate" or "corporation" includes a company incorporated outside Pakistan, but does not include --

(i) a corporation sole; or

(ii) a co-operative society registered under any law relating to the registration of co-operative societies: or

(iii) any other body corporate, not being a company as defined in this Ordinance, which the Federal Government may by notification in the official Gazette specify in this behalf.

(5) "book" and paper", "book or paper" or "books of accounts" include accounts, deeds, vouchers, registers, writings and documents;

(5A) "central depository" means a central depository as defined in clause (cc) of section 2 of the Securities and Exchange Ordinance, 1969 (XVII of 1969), and registered with the Authority under section 32A of that Ordinance.

(6) "chief executive", in relation to a company means an individual who, subject to the control and directions of the directors, is entrusted with the whole, or substantially the whole, of the powers of management of the affairs of the company, and includes a director or any other person occupying the position of a chief executive, by whatever name called, and whether under a contract of service or otherwise;

"(6A) "Commission" means the Securities and Exchange Commission of Pakistan established under section 3 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997);" and

* Inserted by Companies Amendment Ordinance 2002

(7) "company" means a company formed and registered under this Ordinance or an existing company;

(8) "company limited by shares" means a company having the liability of its members limited by the memorandum to the amount, if any unpaid on the shares respectively held by them;

(9) "company limited by guarantee" means a company having the liability of its members limited by the memorandum to such amount as the members may respectively thereby undertake to contribute to the assets of the company in the event of its winding up;

(10) Omitted by Banking & Financial Services (Amendment of Laws) Ordinance, 1984, (LVII OF 1984) dated 31.12.1984.

(11) "the Court" means the Court having jurisdiction under this Ordinance;

(12) "debenture" includes debenture stock, bonds, term finance certificates and any other securities, other than a share, of a company, whether constituting a charge on the assets of the company or not;

(13) "director" includes any person occupying the position of a director, by whatever name called;

(14) "document" includes summons, notice, requisition, order, other legal process, voucher and register;

(15) "existing company" means a company formed and registered under the previous Companies Act;

"(15A) "financial institution" includes,‑

(a) a company or an institution whether established under any special enactment and operating within or outside Pakistan which transacts the business of banking or any associated or ancillary business through its branches;

(b) a modaraba, leasing company, investment bank, venture capital company, financing company, housing finance company, a non?-banking finance company: and

(c) such other institution or companies authorised by law to undertake any similar business, as the Federal Government may, by notification in the official Gazette, specify for the purpose;"

* Substituted by Companies Amendment Ordinance 2002

Previous section 15-A

(15-A) "financial institution" means an institution not less than fifty per cent of the share capital of which is held by the Federal Government or a Provincial Government, whether directly or through a company or corporation set up or controlled by such Government, and includes such other institutions or companies as the Federal Government may by notification in the official Gazette, specify for the purpose;

(16) "financial year" in relation to any body corporate, means the period in respect of which any profit and loss account or the income and expenditure account, as the case may be, of the body corporate, laid before it in general meeting, is made up, whether that period is a year or not;

(17) "form" means a form set out in any of the schedules or prescribed;

(18) "holding company" means a holding company as defined in section 3;

(19) "listed", in relation to securities, means securities which have been allowed to be traded on a stock exchange;

(20) "listed company" means a company or a body corporate or other body whose securities are listed;

(21) "member" means, in relation to a company having share capital, a subscriber to the memorandum of the company and every person to whom is allotted, or who becomes the holder of any share, scrip or other security which gives him a voting right in the company and whose name is entered in the register of members, and, in relation to a company not having a share capital, any person who has agreed to become a member of the company and whose name is so entered;

(22) "memorandum" means the memorandum of association of a company as originally framed or as altered from time to time in pursuance of the provisions of any previous Companies Act or of this Ordinance;

(23) "modaraba" and "modaraba company" have the same meaning as in the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 (XXXI of 1980);

(24) "officer" includes any director chief executive, managing agent, secretary or other executive of the company, howsoever designated, but, save in sections 205, 220 to 224, 260, 261, 268, 351, 352, 412, 417, 418, 474 and 482, does not include an auditor;

(25) "participatory redeemable capital" means such redeemable capital as is entitled to participate in the profit and loss of a company;

(26) "prescribed" means, -

(a) as respects the provisions of this Ordinance relating to the winding up of companies and other matters requiring to be determined or decided by the Court, prescribed by rules made by the Supreme Court in consultation with the High Court or, where the Supreme Court advises the Federal Government to do so, by the Federal Government in consultation with the High Courts; and

(b) as respects the other provisions of this Ordinance, prescribed by rules or regulations made by the Federal Government after previous publication in the official Gazette;

(27) "previous Companies Act: includes any Act or Acts relating to companies in force before the Indian Companies Act, 1866 (X of 1866), or the Acts repealed thereby, the Indian Companies Act, 1866 (X of 1866), the Indian Companies Act, 1882 (VI of 1882), the Indian Companies Act, 1913 (VII of 1913), or any law corresponding to any of those Acts and in force in any of the territories now constituting Pakistan before the extension of the Companies Act, 1913 (VII of 1913), to such territories;

(28) "private company" means a company which, by its articles,-

(i) restricts the right to transfer its shares, if any;

(ii) limits the number of its members to fifty not including persons who are in the employment of the company; and

(iii) prohibits any invitation to the public to subscribe for the-shares, if any or debentures of the company;

Provided that, where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member;

(29) "prospectus" means any document described or issued as prospectus, and includes any notice, circular, advertisement, or other communication, inviting offers from the public for the subscription or purchase of any shares in, or debentures of a body corporate, or inviting deposits from the public, other than deposits invited by a banking company or a financial institution approved by the Federal Government, whether described as prospectus or otherwise;

(30) "public company" means a company which is not a private company;

(30-A) "redeemable capital" includes finance obtained on the basis of Participation Term Certificate (PTC), Musharika Certificate, Term Finance Certificate (TFC), or any other security or obligation not based on interest, other than an ordinary share of a company, representing an instrument or a certificate of specified denomination, called the face value or nominal value, evidencing investment of the holder in the capital of the company on terms and conditions of the agreement for the issue of such instrument or certificate or such other certificate or instrument as the Federal Government may, by notification in the official Gazette, specify for the purpose;

(31) "registrar" means a registrar, an additional registrar, a joint registrar, a deputy registrar or an assistant registrar, performing under this Ordinance the duty of registration of companies;

(32) "scheduled bank" has the same meaning as in the State Bank of Pakistan Act, 1956 (XXXIII of 1956);

(33) "secretary" means any individual appointed to perform the secretarial, administrative or other duties ordinarily performed by the secretary of a company;

(34) "security" means any share, scrip, debenture, participation term certificate, modaraba certificate, musharika certificate, term finance certificate, bond, pre-organization certificate or such other instrument as the Federal Government may, by notification in the official Gazette, specify for the purpose;

(35) "share" means share in the share capital of a company;

(36) "special resolution" means a resolution which has been passed by a majority of not less than three-fourths of such members entitled to vote as are present in person or by proxy at a general meeting of which not less than twenty-one days notice specifying the intention to propose the resolution as a special resolution has been duly given;

Provided that, if all the members entitled to attend and vote at any such meeting so agree, a resolution may be proposed and passed as a special resolution at a meeting of which less than twenty-one days notice has been given;

(37) "stock exchange" means a stock exchange registered under the Securities and Exchange Ordinance, 1969 (XVII of 1969);

(38) "subsidiary company" or "subsidiary" means a subsidiary company as defined in section 3;

(39) "Table A" means Table A in the First Schedule 2.

(2) the expression "commencement of this Ordinance" in any provision of this Ordinance means the coming into force of that provision by virtue of a notification under sub-section (3) of Section 1.

(40) Omitted by the Banking & Financial Services (Amendment of Laws) Ordinance, LVII of 1984.

Provided further that--

(ii) shares owned by the National Investment Trust or the Investment Corporation of Pakistan or a financial institution directly or indirectly owned or controlled by the Federal Government or a Provincial Government ( Ins. by Central Depositories Ordinance (XIII of 1977). Sched. (a)(i) dated 28-1-1997.)[or shares registered in the name of a central depository, where such shares are beneficially owned by the central depository];

(4) "body corporate" or "corporation" includes a company incorporated outside Pakistan, but does not include-

?(i) a corporation sole; or

(ii) a cooperative society registered under any law relating to the registration of co?operative societies; or

(iii) any other body corporate, not being a company as defined in this Ordinance, which the Federal Government may, by notification in the official Gazette, specify in this behalf;

(5) "book and paper", "book or paper" or "books of accounts" include accounts, deeds, vouchers, registers, writings and documents;

( Cl. (5A) ins. by ibid Sched. (a)(ii).) [(5-A) central depository' means a central depository as defined in clause (cc) of section 2 of the Securities and Exchange Ordinance, 1969 (XVII of 1969), and registered with the Authority under section 32-A of that Ordinance;]

(8) "company limited by shares" means a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them;

( Clause (10) omitted by the Banking and Financial Services (Amendment of Laws) Ordinance (LVII of 1984), S. 7, which reads: "convertible share" means an ordinary share issued by a company in conversion of participation term certificate in the event of loss or losses pursuant to the terms and conditions of issue of the participation term certificate or the regulations in Table F in the First Schedule and liable to be reconverted into participation term certificate in the event of profit in the succeeding year or years;)(10) [Omitted]; .

(11) "the Court" means the court having jurisdiction under this Ordinance;

(12) "debenture" includes debenture stock, bonds, ( Substituted for "participation term certificates" by the Banking and Financial Service (Amendment of Laws) Ordinance (LVII of 1984), S.7.) [term Finance Certificate] and any other securities, other than a share, of a company, whether constituting a charge on the assets of the company or not;

(15) "existing company" means a company formed and registered under any previous Company Act;

( Clause (15-A) substituted by Companies (Amendment) Act (XVII of 1991), S.2 and shall be deemed always have been so substituted.) (15-A) "financial institution" means an institution not less than fifty per cent of the share capital of which is held by the Federal Government or a Provincial Government, whether directly or through a company or corporation set up or controlled by such Government, and includes such other institutions or companies as the Federal Government may, by notification in the official Gazette, specify for the purpose;

(16) "financial year", in relation to any body corporate, means the period in respect of which any profit and loss account or the income and expenditure account, as the case may be, of the body corporate, laid before it in general meeting, is made up, whether that period is a year or not;

(21) "member" means, in relation to a company having share capital, a subscriber to the memorandum of the company and every person to whom is allotted, or who becomes the holder of, any share, scrip or other security which gives him a voting right in the company and whose name is entered in the register of members, and, in relation to a company not having a share capital, any person who has agreed to become a member of the company and whose name is so entered;

(23) "modaraba" and "modaraba company" have the same meaning as in the Modaraba Companies and M9daraba (Floatation and Control) Ordinance, 1980 (XXXI of 1980);

(24) "officer" includes any director, chief executive, managing agent, secretary or other executive of the company, howsoever designated, but, save in sections 205, 220 to 224, 260, 261, 268, 351, 352, 412, 417, 418, 474 and 482, does not include an auditor;

( Clause (25) substituted by the Banking and Financial Services (Amendment of Laws) Ordinance (LVII of 1984), S. 7, for.

(25) "Participation term certificate" (abbreviatively called "PTC") means an instrument or a certificate of specified denomination, called the face value or nominal value, evidencing participation of the holder in the "term capital" of the company on the terms and conditions of issue of such instrument or certificate;)[(25) "participatory redeemable capital" means such redeemable capital as is entitled to participate in the profit and loss of a company;) "prescribed" means,---

(a) as respects the provisions of this Ordinance relating to the winding up of companies and other matters requiring to be determined or decided by the Court, prescribed by rules made by the Supreme Court in consultation with the High Courts or, where the Supreme Court advises the Federal Government to do so, by the Federal Government in consultation with the High Courts; and

(27) "previous Companies Act" includes any Act or Acts relating to companies in force before the Indian Companies Act, 1866 (X of 1866), or the Acts repealed thereby, the Indian Companies Act, 1866 (X of 1866), the Indian Companies Act, 1882 (VI of 1882), the Indian Companies Act, 1913 (VII of 1913), or any law corresponding to any of those Acts and in force in any of the territories now constituting Pakistan before the extension of the Companies Act, 1913 (VII of 1913), to such territories;

(28) "private company" means a company which, by its articles,--

(i) restricts the right to transfer its shares,, if any;

(iii) prohibits any invitation to the public to subscribe for the shares, if any, or debentures of the company:

Provided that, where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member:

"prospectus" means any document described or issued as prospectus, and includes any notice, circular, advertisement, or other communication, inviting offers from the public for the subscription or purchase of any shares in, or debentures of, a body corporate, or inviting deposits from the public, other than deposits invited by a banking company or a financial institution approved by the Federal Government, whether described as prospectus or otherwise;

( Clause (30-A) inserted by the Banking and Financial Services (Amendment of Laws) Ordinance (LVII of 1984), S. 7.)[(30-A) "redeemable capital" includes finance obtained on the basis of participation term certificate (PTC), musharika certificate, term finance certificate (TFC), or any other security or obligation not based on interest, other than an ordinary share of a company, representing an instrument or a certificate of specified denomination called the face value or nominal value, evidencing investment of the holder in the capital of the company on terms and conditions of the agreement for the issue of such instrument or certificate or such other certificate or instrument as the Federal Government may by notification in the official Gazette, specify for the purpose];

( Clause (34) substituted by the Banking and Financial Services (Amendment of Laws) Ordinance (LVII of 1984), S. 7 for.

(34) "security" means airy share; scrip, bebenture, participation term certificate, Modaraba Certificate, bond, pre?organization certificate or instrument commonly known as security.) [(34)????? "security" means any share, scrip, debenture, participation term certificate, modaraba certificate, musharika certificate, term finance certificate, bond, pre-organization certificate or such other instrument as the Federal Government may, by notification in the official Gazette, specify for the purpose];

(36) "special resolution" means a resolution which has been passed by a majority of not less than three-fourths of such members entitled to vote as are present in person or by proxy at a general meeting of which not less than twenty-one days' notice specifying the intention to propose the resolution as a special resolution has been duly given:

Provided that, if all the members entitled to attend and vote at any such meeting so agree, a resolution may be proposed and passed as a special resolution at a meeting of which less than twenty-one days' notice has been given;

(39) "Table A" means Table A in the First Schedule ( Substituted for semi-colon by the Banking and Financial Services (Amendment of Laws) Ordinance (LVII of 1987), S.7.)[.] ,

( Clause (40) omitted by the Banking and Financial Services (Amendment of Laws) Ordinance (LVI of 1984), S.7. Clause (40) read: "term capital" means a capital, wholly distinguished' from the ordinary, preference or any other class or category of the capital of a company, raised by issue of participation term certificates, to participate in the profit as also loss over a specified period, in the manner, to the extent as on the terms and conditions of issue of such certificates.) [(40) [Omitted].

(2) The expression "commencement of this Ordinance" in any provision of this Ordinance means the coming into force of that provision by virtue of a notification under subsection (3) of section 1.

3. Meaning of "subsidiary" and "holding company".---(1) For purposes of this Ordinance, a company or body corporate shall be deemed to be a subsidiary of another if--

(a) that other company or body corporate directly or indirectly controls, beneficially owns or holds more than fifty percent. of its voting securities or otherwise has power to elect and appoint more than fifty percent. of its directors; or

(b) the first mentioned company or body corporate is a subsidiary of any company or body corporate which is that other's subsidiary:

( Proviso added by Central Depositories Ordinance (XIII of 1997), Sched (b) dated 28-1-1997.)[Provided that, where a central depository holds more than fifty percent. of the voting seucrities of a company, such company shall not be deemed to be a subsidiary of the central depository save where such voting securities are held beneficially by the central depository in its own behalf.]

(2) For the purpose of this Ordinance, a company shall be deemed to be another's holding company if, but only if, that other is its subsidiary.

4. Ordinance not to apply to certain corporations.---Nothing in this Ordinance shall apply to--

(i) a trading corporation onwed or controlled by a Province and carrying on business only within that Province; or

(ii) a co-operative society; or

(iii) a university.

**5. Application of Ordinance to non-trading companies with purely provincial objects.--**The powers conferred by this Ordinance on the Federal Government or the Authority shall, in relation to companies which are not trading corporations and the objects of which are confined to a single Province, be the powers of the Provincial Government.

6. Ordinance to override memorandum, articles, etc.--Save as otherwise expressly provided herein,--

(a) the provisions of this Ordinance which come into force by virtue of a notification under subsection (3) of section 1 shall have effect not withstanding anything contained in the memorandum or articles of a company, or in any contract or agreement executed by it, or in any resolution passed by the company in general meeting or by its directors, whether the same be registered, executed or passed, as the case may be, before or after the coming into force of the said provisions; and

(b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the aforesaid provisions of this Ordinance, become or be void, as the case may be.

PART II.--JURISDICTION OF COURTS

7. Jurisdiction of the Courts.--(1) The Court having jurisdiction under this Ordinance shall be the High Court having jurisdiction in the place at which the registered office of the company is situate:

Provided that the Federal Government may, by notification in the official Gazette and subject to such restrictions and conditions as it thinks fit, empower any Civil Court to exercise. all or any of the jurisdictions by this Ordinance conferred upon the Court, and in that case such Court shall, as regards the jurisdiction so conferred, be the Court in respect of companies having their registered office within the territorial jurisdiction of such Court.

(2) For the purposes of jurisdiction to wind up companies, the expression "registered office" means the place which has longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding up.

(3) Nothing in this section shall invalidate a proceeding by reason of its being taken in a Court other than the High Court or a Court empowered under subsection (1).

8. Constitution of Company Benches.--There shall in each High Court be one or more Benches, each to be known as -the Company Bench, to be constituted by the Chief Justice of the High Court to exercise the jurisdiction vested in the High Court under section 7.

9. Procedure of the Court.--(1) Notwithstanding anything contained in any other law, all matters coming before the Court under this Ordinance shall be disposed of, and the judgment pronounced, as expeditiously as possible but not later than ninety days from the date of presentation of the petition or application to the Court and, except in extraordinary circumstances and on grounds to be recorded, the Court shall hear the case from day to day.

Explanation:-In this subsection, "judgment" means a final judgment recorded in writing.

(2) The hearing of the matters referred to in subsection (1) shall not be adjourned except for sufficient cause to be recorded or for more than fourteen days at any one time or for more than thirty days in all.

(3) In the exercise of its jurisdiction as aforesaid, the Court shall, in all matters before it, follow the summary procedure.

10. Appeals against Court orders.--(1) Notwithstanding anything contained in any other law, an appeal against any order, decision or judgment of the Court under this Ordinance shall lie to the Supreme Court where the company ordered to be wound up has a paid-up share capital of not less than one million rupees; and, where the company ordered to be wound up has a paid-up capital of less than one million rupees, or has no share capital, such appeal shall lie only if the Supreme Court grants leave to appeal.

(2) Save as provided in subsection (1), an appeal from any order made or decision given by the Court shall lie in the same manner in which and subject to the same conditions under which appeals lie from any order or decision of the Court.

(3) An appeal preferred under subsection (2) shall be finally disposed of by the Court hearing the appeal within ninety days of the submission of the appeal.

PART III.--CORPORATE LAW AUTHORITY

11. Constitution of Corporate Law Authority.--(1) The Federal Government shall, by notification in the official Gazette, constitute a Corporate Law Authority.

(2) The Authority shall consist of such number of members, not being less than three, as the Federal Government deems fit, to be appointed by that Government by notification in the official Gazette.

(3) One of the members shall be appointed by the Federal Government to be the Chairman of the Authority.

(4) No act or proceeding of the Authority shall be invalid by reason only of the existence of a vacancy in, or defect in the constitution of, the Authority.

12. Powers and functions of the Authority.--(1) The Authority shall exercise and perform such powers and functions as are conferred on it by or under this Ordinance or any other law.

(2) Notwithstanding anything contained in any other law, and without prejudice to the generality of the foregoing provisions, the Federal Government may, by notification in the official Gazette, direct that all or any of the powers and functions conferred on the Federal Government or any officer of the Federal Government under any law shall, subject to such limitations, restrictions or conditions, if any, as it may from time to time impose, be exercised or performed by the Authority.

(3) The Authority may, by order in writing, direct that any power or function of the Authority referred to in subsection (1) or subsection (2) shall, subject to such conditions and limitations, if any, as may be specified in the order, be exercised or performed by the Chairman of the Authority or by such other member or officer of the Authority as may be so specified.

(4) The Authority, and the member or officer referred in subsection (3) may, for the purposes of a proceeding or enquiry, require anyone--

(a) to produce before, and to allow to be examined and kept by, an officer of the Authority specified in this behalf, any books, accounts or other documents in the custody or under the control of the person so required, being documents relating to any matter the examination of which may be considered necessary by the Authority or such member or officer; and

(b) to furnish to an officer of the Authority specified in this behalf such information and documents in his possession relating to any matter as may be necessary for the purposes of the proceeding or enquiry.

(5) The procedure of the Authority shall be such as may be prescribed.

(6) The Federal Government may appoint such officers as it thinks necessary to assist the Authority in the performance of its duties and functions under this Ordinance and may make regulations with respect to their duties.

(7) All officers and persons employed in the execution of this Ordinance shall observe and follow the orders, instructions and directions of the Authority.

13. Reference by the Federal Government or Authority to the Court.--(1) Without prejudice to the powers, jurisdiction and authority exercisable by the Federal Government or the Authority under this Ordinance, the Federal Government or the Authority, as the case may be, $nay make a reference to the Court on any question or matter which the Government or the Authority considers to be of special significance requiring orders, determination or action concerning the affairs of a company or any action of any officer thereof.

Explanation.--In this subsection "officer" includes an auditor, liquidator or agent of the company.

(2) Where a reference is made to the Court under subsection (1), the Court may make such order as it may deem just and equitable under the circumstances.

PART IV.---INCORPORATION OF COMPANIES AND MATTERS INCIDENTAL THERETO

14. Obligation to register certain associations, partnerships, etc., as companies. ---(1) No association, partnership or company consisting of more than twenty persons shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the association, partnership or company, or by the individual members thereof, unless it is registered as a company under this Ordinance.

(2) Every person who is a member of any association, partnership or company carrying on business in contravention of the provisions of this section shall be punishable with fine which may extend to five thousand rupees and also be personally liable for all the liabilities incurred in such business.

(3) Nothing in this section shall apply to-

(a) any society, body or association, other than a partnership, formed or incorporated under any other Pakistan law; or

(b) a joint family carrying on joint family business; or

(c) a partnership of two or more joint families where the total number of members of such families, excluding the minor members, does not exceed twenty ( Semi-colon and the word "or" substituted by Companies (Amendment) Act (V of 1999), S.2 dated 27-7-1999.)[; or]

( Cl. (d) added by ibid.) [(d) a partnership formed to carry on practice as lawyers, accountants or any other profession where practice as a limited liability company is not permitted under the relevant laws or regulations for such practice.]

PART IV.---INCORPORATION OF COMPANIES AND MATTERS

MEMORANDUM OF ASSOCIATION

15. Mode of forming a Company. ---(1) Any *three (seven) or more persons associated for any lawful purpose may, by subscribing their names to a memorandum of association and complying with the requirements of this Ordinance in respect of registration, form a public company and any *one (two) or more persons so associated may, in like manner, form a private company.

Words seven and two substituted by three and one by Companies Amendment Ordinance 2002

(2) A company formed under subsection (1) may be a company with or without limited liability, that is to say,--

(a) a company limited by shares; or

(b) a company limited by guarantee; or

(c) an unlimited company

16. Memorandum of company limited by shares.---In the case of a company limited by shares,--

(a) the memorandum shall state--

(i) the name of the company with the word "limited" as the last word of the name in the case of a public limited company, and the parenthesis and words "(Private) Limited" as the last words of the name in the case of a private limited company;

(ii) the Province or the part of Pakistan not forming part of a Province, as the case may be, in which the registered office of the company is to be situate;

(iii) the objects of the company, and except in the case of a trading corporation, the territories to which they extend;

(iv)that the liability of the members is limited; and

(v) the amount of share capital with which the company proposes to be registered, and the division thereof into shares of a fixed amount;

(b) no subscriber of the memorandum shall take less than one share; and

(c) each subscriber of the memorandum shall write opposite to his name the number of shares he takes.

17. Memorandum of company limited by guarantee.--In the case of a company limited by guarantee,--

(a) whether or not the company has a share capital, the memorandum shall state--

(i) the name of the company with the parenthesis and words "(Guarantee) Limited" as the last words of its name;

(iii) the objects of the company, and, except in the case of a trading corporation, the territories to which they extend;

(iv) that the liability of the members is limited; and

(v) that each member undertakes to contribute to the assets of the company in the event of its being wound up while he is a member, or within one year afterwards, for payment of the debts and liabilities of the company contracted before he ceases to be a member, and of the costs, charges and expenses of winding up, and for adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding a specified amount; and

(b) if the company has a share capital,--

(i) the memorandum shall also state the amount of share capital with which the company proposes to be registered and the division thereof into shares of a fixed amount;

(ii) no subscriber of the memorandum shall take less than one share; and

(iii) each subscriber shall write opposite to his name the number of shares he takes.

18. Memorandum of unlimited company.--In the case of an unlimited company,--

(i) the name of the company;

(ii) the Province or the part of Pakistan not forming part of a Province, as the case may be, in which the registered office of the company is to be situate; and

(iii) the objects of the company, and, except in the case of a trading corporation, the territories to which they extend; and

(i) no subscriber of the memorandum shall take less than one share; and

(ii) each subscriber shall write opposite to his name the number of shares he takes.

19. Printing, signature, etc., of memorandum. ( Section 19 renumbered as subsection (1) and subsection (2) added by the Banking and Financial Services (Amendment of Laws) Ordinance (LXVII of 1984), S.7.

(a) printed;

(b) divided into paragraphs numbered consecutively;

(c) signed by each subscriber who shall add his present name and surname in full, any former name or surname in full, his occupation and father's name or, in the case of a, married woman or widow, her husband's or deceased husband's name, in full, his nationality and, if that nationality is not the nationality or origin, also the nationality of origin, and his usual residential address in full, in the presence of at least one witness who shall attest the signature and shall likewise add his father's name or, in the case of a married woman or widow her husband's or deceased husband's name, in full, as the case may be, address and occupation; and

(d) dated.)--(1) The memorandum shall be--

(a) printed:

(c) signed by each subscriber who shall add his present name and surname in full, any former name or surname in full, his occupation and father's name or, in the case of a married woman or widow, her husband's or deceased husband's name, in full, his nationality and, if that nationality is not the nationality of origin, also the nationality of origin, and his usual residential address in full, in the presence of at least one witness who shall attest the signature and shall likewise add his father's name or, in the case of a married woman or widow her husband's or deceased husband's name, in full, as the case may be, address and occupation; and

"(c) signed by each subscriber, who shall add his present name in full, his occupation and father's name or, in the case of a married woman or widow, her husband's or deceased husband's name in full, his nationality and his usual residential address and such other particulars as may be prescribed, in the presence of a witness who shall attest the signature and shall likewise add his particulars; and"

* Clause has amendment by the Companies amendment ordinance 2002

(d) dated.

(2) Notwithstanding anything contained in this Ordinance or in any other law for the time being in force or the memorandum and articles, the memorandum and articles of a company shall be deemed to include, and always to have included, the power to enter into any arrangement for obtaining loans, advances or credit, as defined in the Banking Companies Ordinance, 1962 (LVII of 1962), and to issue other securities not based on interest for raising resources from a scheduled bank or a financial institution.

20. Restriction on alteration of memorandum.--A company shall not alter the conditions contained in its memorandum except in the cases and in the mode and to the extent specified in this Ordinance.

21. Alteration of memorandum.--(1) Subject to the provisions of this Ordinance, a company may, by special resolution, alter the provisions of its memorandum so as to change the place of its registered office from one Province to another, or from one city or town in a Province to another, or from a part of Pakistan not forming part of a Province to a Province or from a Province to a part of Pakistan not forming part of a Province, or with respect to the objects of the company, so far as may be required to enable it--

(a) to carry on its business more economically or more efficiently; or

(b) to attain its main purpose by new or improved means; or

(c) to enlarge or change the local area of its operations; or

(d) to carry on some business, not being a business specified in its memorandum, which may conveniently or advantageously be combined with the business of the company; or

(e) to restrict or abandon any of the objects specified in the memorandum; or

(f) to sell or dispose of the whole or any part of the undertaking of the company; or

(g) to amalgamate with any other company or body of persons.

(2) The alteration shall not take effect until and except in so far as it is confirmed by the Authority on petition:

Provided that an alteration so as to change the place of registered office of a company from a place in the Province of the Punjab to the Islamabad Capital Territory or from the latter to a place in the Province of the Punjab, or from one city in a Province to another, shall not require confirmation by the Authority.

(3) Before confirming the alteration, the Authority must be satisfied--

(a) that sufficient notice has been given to every holder of debentures of the company, and to any person or class of persons whose interest will, in the opinion of the Authority, be affected by the alteration; and

(b) that, with respect to every creditor who in the opinion of the Authority is entitled to object, and who signifies his objection in manner directed by the Authority, either his consent to the alteration has been obtained or his debt or claim has been discharged or determined, or has been secured to the satisfaction of the Authority:

Provided that the Authority may, in the case of any person or class of persons, for special reasons, dispense with the notice required by clause (a). .

22. Power of Authority when confirming alteration.--The Authority may make an order confirming the alteration either wholly or in part, and on such terms and conditions as it thinks fit, and may make such order as to costs as it thinks proper.

23. Exercise of discretion by Authority.--The Authority shall in exercising its discretion under sections 21 and 22 have regard to the rights and interests of the members of the company or of any class of them, as well as to the rights and interests of the creditors, and may, if it thinks fit, adjourn the proceedings in order that an arrangement may be made to the satisfaction of the Authority for the purchase of the interests of dissident members; and may give such directions and make such orders as it may think expedient for facilitating or carrying into effect any such arrangement:

Provided that no part of the capital of the company may be expended in any such purchase.

24. Procedure on confirmation of the alteration.--(1) A certified copy of the order confirming the alteration, together with a printed copy of the memorandum as altered, shall, within ninety days from the date of the order, be filed by the company with the registrar, and he shall register the same, and shall certify the registration under his hand, and the certificate shall be conclusive evidence that all the requirements of this Ordinance with respect to the alteration and the confirmation thereof have been complied with, and thenceforth the memorandum so altered shall be the memorandum of the company.

(2) Where the alteration involves a transfer of the registered office from one Province to another, or from the Islamabad Capital Territory to a Province or from a Province to Islamabad Capital Territory, a certified copy of the order confirming such alteration shall be filed by the company with the registrar in each of such provinces or the Islamabad Capital Territory, as the case may be, and each such registrar shall register the same, and shall certify under his hand the registration thereof, and the registrar for the Province or the Territory from which such office is transferred shall send to the registrar for the other Province or Territory all documents relating to the company registered or filed in his office.

(3) The Authority may by order at any time extend the time for the filing of documents with the registrar under this section for such period as it thinks proper.

25. Effect of failure to register within ninety days.--No such alteration shall have any operation until registration thereof has been duly effected in accordance with the provisions of section 24, and if such registration is not effected within ninety days next after the date of the order of the Authority confirming the alteration, or within such further time, as may be allowed by the Authority, in accordance with the provisions of section 24, such alteration and order, if any, and all proceedings connected therewith shall, at the expiration of such period of ninety days or such further time, as the case may be, become null and void:

Provided that the Authority may, on sufficient cause shown, revive the order or alteration, as the case may be, on application made within a further period of ninety days.

ARTICLES OF ASSOCIATION

26. Registration of articles.--(1) There may, in the case of a company limited by shares, and there shall, in the case of a company limited by guarantee or an unlimited company, be registered with the memorandum, articles of association signed by the subscribers to the memorandum and setting out regulations for the company.

(2) Articles of association may adopt all or any of the regulations contained in Table A in the First Schedule.

(3) In the case of an unlimited company or a company limited by guarantee, the articles, if the company has a share capital, shall state the amount of share capital with which the company proposes to be registered.

(4) In the case of an unlimited company or a company limited by guarantee, if the company has not a share capital, the articles shall state the number of members with which the company proposes to be registered.

(5) In the case of a company limited by shares and registered after the commencement of this Ordinance, if articles are not registered, or, if articles are registered, in so far as the articles do not exclude or modify the regulations in Table A in the First Schedule, those regulations shall, so far as applicable, be the regulations of the company in the same manner and to the same extent as if they were contained in duly registered articles.

(6) The articles of every company shall be explicit and without ambiguity and, without prejudice to the generality of the foregoing, shall list and enumerate the voting and other rights attached to the different classes of shares and other securities, if any, issued or to be issued by it.

27. Printing, signature, etc. of articles.--The articles shall be--

(b) divided into paragaphs numbered consecutively;

(c) signed by each subscriber who shall add his present name and surname in full, any former name or surname in full, his occupation and father's name or, in the case of a married woman or widow, her husband's or deceased husband's name, in full, his nationality and, if that nationality is not the nationality of origin, also the nationality of origin, and his usual residential address in full, in the presence of at least one witness who shall attest the signature and shall likewise add his father's name or, in the case of a married woman or widow, her husband's or deceased husband's name, in full, as the case may be, address and occupation;

"(c) signed by each subscriber, who shall add his present name in full, his occupation and father's name or, in the case of a married woman or widow, her husband's or deceased husband's name in full, his nationality and his usual residential address and such other particulars as may be prescribed, if the presence of a witness who shall attest the signature and shall likewise add his particulars; and"

* Clause Amend by the Companies Amendment Ordinance 2002

28. Alteration of articles.--Subject to the provisions of this Ordinance and to the conditions contained in its memorandum, a company may by special resolution alter or add to its articles, and any alteration or addition so made shall be as valid as if originally contained in the articles, and be subject in like manner to alteration by special resolution:

Provided that, where such alteration affects the substantive rights or liabilities of members or of a class of members, it shall be carried out only if a majority of at least three-fourth of the members or of the class of members affected by such alteration, as the case may be, personally or through proxy vote for such alteration.

FORMS OF MEMORANDUM AND ARTICLES

29. Form of memorandum and articles.--The form of--

(a) the memorandum of association of a company limited by shares;

(b) the memorandum and articles of association of a company limited by guarantee and not having a share capital;

(c) the memorandum and articles of association of a company limited by guarantee and having a share capital;

(d) the memorandum and articles of association of an unlimited company having a share capital;

shall be respectively in accordance with the forms set out in Tables B, C, D and E in the First Schedule or as near thereto as circumstances admit.

GENERAL PROVISIONS WITH RESPECT TO REGISTRATION OF MEMORANDUM AND ARTICLES

30. Registration of memorandum and articles, etc.-(1) The memorandum and the articles, if any, shall be filed with the registrar in the Province or the part of Pakistan not forming part of a Province, as the case may be, in which the registered office of the company is stated by the memorandum to be situate.

(2) A declaration by such person as may be prescribed in this behalf, or by a person named in the articles as a director, or other officer of the company, of compliance with all or any of the requirements of this Ordinance and the rules made thereunder shall be filed with the registrar; and the registrar may accept such a declaration as sufficient evidence of such compliance.

(3) If the registrar is satisfied that the company is being formed for lawful purposes, that none of its objects stated in the memorandum is inappropriate or deceptive or insufficiently expressive and that all the requirements of this Ordinance and the rules made thereunder have been complied with in respect of registration and matters precedent and incidental thereto, he shall retain and register the memorandum and articles, if any.

(4) If registration of the memorandum is refused, the subscribers of the memorandum or any one of them authorised by them in writing may either supply the deficiency and remove the defect pointed out, or within thirty days of the order of refusal prefer an appeal--

(a) where the order of refusal has been passed by an additional registrar, a joint registrar, a deputy registrar or an assistant registrar, to the registrar; and

(b) where the order of refusal has been passed, or upheld in appeal, by the registrar, to the Authority.

(5)An order of the Authority under subsection (4) shall be final and shall not be called in question before any Court or other authority.

31. Effect of memorandum and articles.--(1) The memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by each member and contained a covenant on the part of each member, his heirs, and legal representatives, to observe and be bound by all the provisions of the memorandum and of the articles, subject to the provisions of this Ordinance.

(2) All moneys payable by any member to the company under the memorandum or articles shall be a debt due from him to the company.

32. Effect of registration.--(1) On the registration of the memorandum of a company, the registrar shall certify under his hand that the company is incorporated and, in the case of a limited company, that the company is limited by shares or guarantee, as the case may be.

(2) From the date of incorporation mentioned in the certificate of incorporation, the subscribers of the memorandum, together with such other persons as may from time to time become members of the company, shall be a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functioning of an incorporated company, and having perpetual succession and a common seal, but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Ordinance.

33. Conclusiveness of certificate of incorporation.--A certificate of incorporation given by the registrar in respect of any association shall be conclusive evidence that all the requirements of this Ordinance in respect of registration and of matters precedent and incidental thereto have been complied with, and that the association is a company authorised to be registered and duly registered under this Ordinance.

34. Effect of alteration in memorandum or articles.-Notwithstanding anything contained in the memorandum or articles of a company, no member of the company shall be bound by an alteration made in the memorandum or articles after the date on which he became a member if and so far as the alteration requires him to take or subscribe for more shares than the number held by him at the date on which the alteration is made, or in any way increases his liability as at that date to contribute to the share capital of, or otherwise to pay money to, the company:

Provided that this section shall not apply in any case where the member agrees in writing either before or after the alteration is made to be bound thereby.

35. Copies of memorandum and articles to be given to members.--(1) Every company shall send to every member, at his request and within fourteen days thereof, on payment of such sum, not exceeding the prescribed amount, as the company may fix, a copy of the memorandum and the articles, if any.

(2) If a company makes default in complying with the requirements of subsection (1), it shall be liable for each offence to a fine not exceeding one hundred rupees.

36. Alteration of memorandum or articles to be noted in every copy.--(1) Where an alteration is made in the memorandum or articles of a company, every copy of the memorandum or articles issued after the date of the alteration shall conform to the memorandum or articles as so altered.

(2) If, where any such alteration has been made, the company at any time after the date of the alteration issues any copies of the memorandum 'or articles which do not conform to the memorandum or articles as so altered, it shall be liable to a fine which may extend to one thousand rupees for each copy so issued and every officer of the company who is knowingly and wilfully in default shall be liable to the like penalty.

PROVISIONS WITH RESPECT TO NAMES OF COMPANIES

37. Prohibition of certain names.--(1) No company shall be registered by a name which in the opinion of the Authority is inappropriate or deceptive or is designed to exploit or office the religious susceptibilities of the people.

(2) A company shall not be registered by a name identical with that by which a company in existence is already registered, or so nearly resembling that name as to be calculated to deceive, except where the company in existence is in the course of being dissolved and signifies its consent in such manner as the registrar requires.

(3) Except with the prior approval in writing of the Authority, no company shall be registered by a name which contains any words suggesting or calculated to suggest--

(a) the patronage of any, past or present, Pakistani or foreign, Head of State;

(b) any connection with the Federal Government or a Provincial Government or any department or authority of any such Government;

(c) any connection with any corporation set up by or under any Federal or Provincial law; or

(d) the patronage of, or any connection with, any foreign Government or any international organization.

(4) Whenever a question arises as to whether or not the name of a company is in violation of the foregoing provisions of this section, the decision of the Authority shall be final.

38. Rectification of name of a company.--A company which, through inadvertence or otherwise, is registered by a name in contravention of the provisions of section 37; -

(a) may, with the approval of the registrar, change its name; and

(b) shall, if the registrar so directs, within thirty days of the receipt of such direction, change its name with the approval of the registrar:

Provided that the registrar shall, before issuing a direction for the change of name, afford the company an opportunity to make representation against the proposed direction:

Provided further that no direction under clause (b) shall be issued after the expiration of three years from the date of registration of the company or registration by its new name, as the case may be.

39. Change of name by a company.--A company may, by special resolution and with the approval of the registrar signified in writing, change its name:

Provided that no such approval shall be required where the only change in the name of a company is the addition thereto or, as the case may be, the deletion therefrom, of the parenthesis and word "(Private)" consequent on the conversion in accordance with the provisions of this Ordinance of a public company into a private company or of a private company into a public company.

40. Registration of change of name and effect thereof.--(1) Where a company changes its name, the registrar shall enter the new name on the register in place of the former name, and shall issue a certificate of incorporation altered to meet the circumstances of the case; and, on the issue of such a certificate, the change of name shall be complete.

(2) Where a company changes its name it shall, for a period of one year from the date of issue of a certificate by the registrar under subsection (1), continue to mention its former name alongwith its new name on the outside of every office or place in which its business is carried on and in every document or notice referred to in clauses (a) and (c) of section 143:

Provided that the addition or deletion, as the case may be, of the parenthesis and word "(Private)" from the name of a company consequent on the conversion in accordance with the provisions of this Ordinance of a public company into a private company or of a private company into a public company shall not be deemed to be a change of name for the purpose of this subsection.

(3) The change of name shall not affect any rights or obligations of the company, or render defective any legal proceedings by or against the company; and any legal proceedings by or against the company; and any legal proceedings that might have been continued or commenced against the company by its former name may be continued by or commenced against the company by its new name.

41. Alteration of names on commencement of Ordinance and change of status of company.--(1) As from the date of commencement of this Ordinance, the name of every existing company shall be deemed to include, before the last word "Limited", the parenthesis and word "(Private)" in the case of a private company and the parenthesis and word "(Guarantee)" in the case of a company limited by guarantee, and the memorandum of association, the certificate of incorporation and other books and papers shall be deemed to be altered accordingly from that date.

(2) On conversion of a public company into a private company in accordance with the provisions of this Ordinance, the registrar shall add the parenthesis and word "(Private)". before the word "Limited" in the name of the company in the register and shall also issue a certificate to meet the circumstances of the case.

(3) On conversion of a private company into a public company in accordance with the provisions of this Ordinance, the registrar shall omit the parenthesis and word "(Private)" in the name of the company in the register and shall also issue a certificate to meet the circumstances of the case.

(4) If default is made in complying with a direction issued by the registrar under section 38, or with the requirements of subsection (2) of section 40, or in giving effect to the provisions of subsection (1) of this section, the company, and every director or officer of the company who is knowingly and wilfully in default, shall be liable to a fine not exceeding ten thousand rupees and to a further fine not exceeding two hundred rupees for every day after the first during which the default continues.

ASSOCIATIONS NOT FOR PROFIT

42. Power to dispense with "Limited" in the name of charitable and other companies.(1) Where it is proved to the satisfaction of the Authority that an association capable of being formed as a limited company has been or is about to be formed for promoting commerce, art, science, religion, sports, social services, charity or any other useful object, and applies or intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members; the Authority may grant a licence and direct that the association be registered as a company with limited liability, without the addition of the words "Limited", "(Private) Limited" or "(Guarantee) Limited", as the case may be, to its name, and the association may be registered accordingly.

(2) A licence under subsection (1) may be granted on such conditions, and subject to such regulations as the Authority thinks fit and those conditions and regulations shall be binding on the association and shall, if the Authority so directs, be inserted in the memorandum and articles, or in one of those documents.

(3) The association shall on registration enjoy all the privileges of a limited company and be subject to all its obligations, except those of using the word or words "Limited", "(Private) Limited" or "(Guarantee) Limited", as the case may be; as part of its name.

(4) A licence under this section may at any time be revoked by the Authority, and upon its revocation the registrar shall enter the word or words "Limited", "(Private) Limited" or "(Guarantee) Limited", as the case may be, at the end of the name of the association upon the register, and the association shall cease to enjoy the exemptions and privileges granted by the preceding subsections:

Provided that, before a licence is so revoked, the Authority shall give to the association notice in writing of its intention, and shall afford the association an opportunity of submitting a representation in opposition to the revocation.

COMPANIES LIMITED BY GUARANTEE

43. Provision as to companies limited by guarantee.--(1) In the case of a company limited by guarantee and not having a share capital, every provision in the memorandum or articles or is any resolution of the company purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member shall be void.

(2) For the purpose of the provisions of this Ordinance relating to the memorandum of a company limited by guarantee and of subsection (1), every provision in the memorandum or articles, or in any resolution, of a company limited by guarantee purporting to divide the undertaking of the company into shares or interests shall be treated as a provision for a share capital, notwithstanding that the nominal amount or number of the shares or interests is not specified thereby.

PROVISIONS RELATING TO CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY AND VICE VERSA, AND OTHER MATTERS

44. Conversion of public company into private company.--No public company shall, except with the prior approval of the Authority in writing, and subject to such conditions as may be imposed by the Authority in this behalf, convert itself into a private company.

45. Prospectus or statement in lieu of prospectus to be filed by private company on ceasing to be private company.--(1) If a company, being a private company, alters its articles in such a manner that they no longer include the provisions which, under clause (28) of subsection (1) of section 2, are required to be included in the articles of a company in order to constitute it a private company, the company--

(a) shall, as on the date of the alteration, cease to be a private company; and

(b) shall, within a period of fourteen days after the said date, file with the registrar either a prospectus or a statement in lieu of prospectus as specified in subsection (2) or subsection (3).

(2) Every prospectus filed under subsection (1) shall state the matters specified in section 1 of Part I of the Second Schedule and set out the reports specified in section 2 of that Part, and the said sections 1 and 2 shall have effect subject to the provisions contained in section 3 of that Part.

(3) Every statement in lieu of prospectus filed under subsection (1) shall be in the form and contain the particulars set out in section 1 of Part III of the Second Schedule and, in the cases mentioned in section 2 of that Part, set out the reports specified therein, and the said sections 1 and 2 shrill have effect subject to the provisions contained in section 3 of that part.

(4) Where the persons making any such report as is referred to in subsection (2) or subsection (3) have made therein, or have, without giving the reasons indicated therein, made any such adjustments as are mentioned in clause 36 of Part I of the Second Schedule or clause 5 of section 3 of Part III of the Second Schedule, as the case may be, the prospectus or statement in lieu of prospectus filed as aforesaid shall have endorsed thereon or attached thereto a written statement, signed by those persons, setting out the adjustments and giving the reasons therefore.

(5) If default is made in complying with the provisions of any of the preceding subsections, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees and to a further fine not exceeding one hundred rupees for every day after the first during which the default continues.

(6) Where any prospectus or statement in lieu of prospectus filed under subsection (1) includes any untrue statement, any person who authorised the filing of such prospectus or statement shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to ten thousand rupees, or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did, up to the time of the filing of the prospectus or statement, believe, that the statement was true.

(7)For the purposes of subsection (6)--

(a) a statement included in a prospectus or a statement in lieu of prospectus shall be deemed to be untrue if it is misleading id the form and context in which it is included; and

(b) where the omission from a prospectus or a statement in lieu of prospectus of any matter is calculated to mislead, the prospectus or statement in lieu of prospectus shall be deemed, in respect of such omission, to be a prospectus or a statement in lieu of prospectus in which an untrue statement is included.

(8) For the purposes of subsection (6) and clause (a) of subsection (7), the expression "included" when used with reference to a prospectus or statement in lieu of prospectus, means included in the prospectus or statement in lieu of prospectus itself or contained in any report or memorandum appearing on the face thereof, or by reference incorporated therein.

46. Consequence of default in complying with conditions constituting a company a private company.--Where the articles of a company include the provisions which, under clause (28) of subsection (1) of section 2, are required to be included in the articles of a company in order to constitute it a private company, but default is made in complying with any of those provisions, the company shall cease to be entitled to the privileges and exemptions conferred on private companies by or under this Ordinance, and this Ordinance shall apply to the company as if it were not a private company:

Provided that the Authority, on being satisfied that the failure to comply with the conditions was accidental or due to inadvertence or to some other sufficient cause, or that on other ground it is just and equitable to grant relief, may, on the application of the company or any other person interested and on such terms and conditions as seem to the Authority just and expedient, order that the company be relieved from such consequences as aforesaid.

CARRYING ON BUSINESS WITH LESS THAN THE LEGAL MINIMUM OF MEMBERS

47. Liability for carrying on business with less than seven or, in the case of a private company, two members.--If at any time the number of members of a company is reduced, in the case of a private company, below two, or in the case of any other company, below seven, and the company carries on business for more than six months while the number is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognisant of the fact that it is carrying on business with fewer than two members or seven members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be sued therefor without joinder in the suit of any other member.

(a) In the marginal heading for the word "seven" the word "three" shall be substituted;

(b) after the word "company" occurring for the second time, the words "other than a single member company" shall be inserted; and

(c) for the word "seven" occurring twice, the word "three" shall be substituted.

* Amendment has been made in the Companies Amendment Ordinance 2002

SERVICE AND AUTHENTICATION OF DOCUMENTS

48. Service of documents on company.--A document may be served on a company or an officer thereof by sending it to the company or officer at the registered office of the company by post under a certificate of posting or by registered post, or by leaving it at the registered office of the company.

49. Service of documents on registrar.--A document may be served on the registrar by sending it to him at his office by registered post, or by delivering it to him, or leaving it for him at his office, against an acknowledgement of receipt.

50. Service of notice on members, etc.--(1) A notice may be given by a company to any member either personally or by sending it by post to him to his registered address or, if he has no registered address in Pakistan, to the address, if any, within Pakistan supplied by him to the company for the giving of notices to him.

(2) Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the notice and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.

(3) If a member has no registered address in Pakistan, and has not supplied to the company an address within Pakistan for the giving of notices to him, a notice addressed to him or to the shareholders generally and advertised in a newspaper circulating in the Province or the part of Pakistan not forming part of a Province in which the registered office of the company is situate shall be deemed to be duly given to him on the day on which the advertisement appears:

Provided that in the case of a listed company such notice shall in addition to its being published as aforesaid be also published at least in one issue each of a daily newspaper in English language and a daily newspaper in Urdu language having circulation in the Province in which the stock exchange on which the company is listed is situate.

(4) A notice may be given by the company to the joint-holders of a share by giving the notice to the joint-holders named first in the register in respect of the share.

(5) A notice may be given by the company to the persons entitled to a share in consequence of the death or insolvency of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title or representatives of the deceased, or assignees of the insolvent, or by any like description, at the address, if any, in Pakistan supplied for the purpose by the person claiming to be so entitled, or until such an address has been so supplied by giving the notice in any manner in which the same might have been given if the death or insolvency had not occurred.

(6) In addition to any other mode provided by this Ordinance for notice of any general meeting, notice of every general meting shall be given in some manner hereinbefore authorised to--

(a) every member of the company except those members who, having no registered address within Pakistan, have not supplied to the company an address within Pakistan for the giving of notice to them;

(b) every person entitled to a share in consequence of the death or insolvency of a member who, but for his death or insolvency, would be entitled to receive, notice of the meeting; and

(c) the auditors of the company.

51. Authentication of documents and proceedings.--Save as expressly provided in this Ordinance, a document or proceeding requiring authentication by a company may be signed by the chief executive or a director, secretary or other authorised officer of the company, and need not be under its common seal.

PART V.---PROSPECTUS, ALLOTMENT, ISSUE AND TRANSFER OF SHARES AND DEBENTURES, DEPOSITS, ETC. PROSPECTUS

52. Prospectus to be dated.---A prospectus issued by or on behalf of a company shall be dated, and that date shall, unless the contrary is proved, be taken as the date of publication of the prospectus.

53. Matters to be stated and reports to be set out in prospectus.---(1) Every prospectus issued--

(a) by or on behalf of a company, or ,

(b) by or on behalf of any person who has been engaged or interested in the formation of a company,

shall state the matters specified in section 1 of Part I of the Second Schedule and set out the reports specified in section 2 of that Part and the said sections 1 and 2 shall have effect subject to the provisions contained in section 3 of that Part.

( Subsection (1A) inserted by Companies (Amendment) Act (V of 1999), S.3, dated 27-7-1999.)[(1A) A sufficient number of copies of the prospectus issued under subsection (1) shall be made available at the registered office of the company, with the stock exchange at which the company is listed or is proposed to be listed and with the bankers to the issue, and the prospectus in its full text or in such abridged form as may be prescribed, shall be published at least in one Urdu and one English daily newspaper.]

(2) No prospectus . shall be issued or an advertisement of a prospectus published in a newspaper less than seven days or more than thirty days before the subscription list, as specified in the prospectus, is due to open:

Provided that the Authority may for special reasons allow a prospectus to be issued or an advertisement of a prospectus to be published more than thirty days before the subscription list is due to open.

(3) If a prospectus is issued which does not comply with the provisions of subsection (1) or subsection (2), every person who is knowingly responsible for the issue of such prospectus shall be liable to a fine not exceeding ten thousand rupees and in the case of a continuing default to a further fine not exceeding two hundred rupees for every day from the day of the issue of the prospectus until a prospectus complying with the requirements aforesaid is issued and a copy thereof is filed with the registrar.

(4) A condition requiring or binding an applicant for shares in or debentures of a company to waive compliance with any of the requirements of this section, or purporting to affect him with notice of any contract, document or matter not specifically referred to in the prospectus, shall be void.

(5) No one shall issue any form of application for shares in or debentures of a company, unless the form is accompanied by a prospectus which complies with the requirements of this section:

Provided that this subsection shall not apply if it is shown that the form of application was issued either-

(i) In connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to the shares or debentures; or

(ii) in relation to shares or debentures which were not offered to the public.

(6) If any person acts in contravention of the provisions of subsection (5) he shall be liable to a fine not exceeding two thousand rupees.

(7) A director or other person responsible for the prospectus shall not incur any liability by reason of any non-compliance with, or contravention of, any of the requirements of this section, if--

(a) as regards any matter not disclosed, he proves that he had no knowledge thereof; or

(b) he proves that the non-compliance or contravention arose from an honest mistake of fact on his part; or

(c) that non-compliance or contravention was in respect of matters which, in the opinion of the registrar or officer dealing with the case, were immaterial, or was otherwise such as ought, in the opinion of the registrar or officer, as the case may be, having regard to all the circumstances of the case, reasonably to be excused:

Provided that no director or other person shall incur any liability in respect of the failure to include in a prospectus a statement with respect to the matters specified in clause 18 of Part I of the Second Schedule, unless it is proved that he had knowledge of the matters not disclosed.

(8) This section shall not apply--

(a) to the issue to existing members or debenture-holders of a company of a prospectus or form of application relating to shares in or debentures of the company, whether an applicant for shares or debentures will or will not have the right to renounce in favour of other persons; or

(b) to the issue of a prospectus or form of application relating to shares or debentures which are, or are to be, in all respects uniform with shares or debentures previously issued and for the time being dealt in or quoted on a stock exchange;

but, subject as aforesaid, this section shall apply to a prospectus or a form of application, whether issued on or with reference to the formation of a company or subsequently.

(9) Nothing in this section shall limit or diminish any liability which any person may incur under the general law or under any other provision of this Ordinance.

54. Expert to be unconnected with formation or management of company.--A prospectus inviting persons to subscribe for shares in or debentures of a company shall not include a statement purporting to be made by an expert, unless the expert is a person who is not, and has not been, engaged or interested in the formation or promotion, or in the management, of the company.

55. Expert's consent to issue of prospectus containing statement by him.--A prospectus inviting persons to subscribe for shares in or debentures of a company and including a statement purporting to be made by an expert shall not be issued, unless--

(a) he has given his written consent to the issue thereof with the statement include in the form and context in which it is included, and has not withdrawn consent before the delivery of a copy of the prospectus for registration; and

(b) a statement that he has given and has not withdrawn his consent as aforesaid appears in the prospectus.

56. Penalty and interpretation.--(1) If any prospectus is issued in contravention of section 54 or 55, the company, and every person who is knowingly a party to the issue thereof, shall be punishable with fine not exceeding five thousand rupees.

(2) In sections 54 and 55, the expression "expert" includes an engineer, a valuer, an accountant and every other person whose profession gives authority to a statement made by him.

57. Approval, issue and registration of prospectus.- -(1) No listed company, and no company which proposes to make an application to a stock exchange for listing of its ( Subs. for the word "securities" by Finance Act (I of 1995), S. 10 (1) (a) dated 2-7-1995.)[securities and no other person] shall issue, circulate or publish any prospectus or other document offering for subscription or publicly offering for sale any security unless approval of the Authority to its issue, circulation or publication has been obtained within the period of sixty days preceding the date of its issue.

( Subs. for subsection (2) by ibid., S.10 (1) (b) dated 2-7-1995.) [(2) The Authority may, while according approval under subsection impose such conditions as it may deem necessary].

(3) No prospectus shall be issued by or on behalf of a company unless, on or before the date of its publication, there has been delivered to the registrar a copy thereof signed by every person who is named therein as a director or proposed director of the company or by his agent authorised in writing, and having endorsed thereon or attached thereto--

(a) any consent to the issue of the prospectus required by section 55 from a person as an expert; and

(b) in the case of a prospectus issued generally, also

(i) a copy of every contract required by clause 16 of Part I of the Second Schedule to be specified in the prospectus, or, in the case of a contract not reduced into writing, a memorandum giving full particulars thereof; and

(ii) where the persons making any report required by Part II. of that Schedule have made therein, or have without giving the reasons, indicated therein, any such adjustments as are mentioned in clause 36 of Part I of that Schedule, a written statement signed by those persons setting out the adjustments and giving the reasons therefor.

(4) Every prospectus to which this section applies shall, on the face of it,--

(a) state that a copy has been delivered to the registrar as required by subsection (3);

(b) specify any documents required by this section to be endorsed on or attached to the copy so delivered, or refer to statements included in the prospectus which specify those documents; and

(c) where application has been made, or is proposed to be made, to a stock exchange for the listing of the security, state that such an application has been made or is proposed to be made.

(5) The registrar shall not register a prospectus unless the requirements of sections 52, 53, 54 and 55 and this section have been complied with and the prospectus is accompanied by the consent in writing of the person, if any, named therein as the auditor, legal adviser, attorney, solicitor, banker or broker, being a member of a stock exchange, of the company, to act in that capacity.

(6) If a prospectus is issued, published or circulated without complying with, or in contravention of any provision of this section, the company, and every person who is knowingly a party to the issue, publication or circulation of the prospectus, shall be liable to a fine not exceeding ten thousand rupees and in the case of a continuing default to a further fine not exceeding two hundred rupees for every day from the date of issue, publication or circulation, as the case may be, of the prospectus, until a copy thereof complying with all the requirements of this section has been delivered to the registrar.

58. Terms of contract mentioned in prospectus or statement in lieu of prospectus not to be varied.--A company shall not, at any time, vary the terms of contract referred to in the prospectus or a statement in lieu of prospectus except subject to the approval of, or except on authority given by, the company in general meeting.

59. Civil liability for misstatements in prospectus.-(1) Subject to the provisions of this section, where a prospectus invites persons to subscribe for shares in or debentures of a company; the following persons shall be liable to pay compensation to every person who subscribes for or purchases any share or debentures on the faith of the prospectus for any loss or damage he may have sustained by reason of any untrue statement included therein, namely,--

(a) every person who is a director of the company at the time of the issue of the prospectus;

(b) every person who has authorised himself to be named and is named in the prospectus either as a director, or as having agreed to become a director, either immediately or after an interval of time;

(c) every person who is a promotor of the company; and

(d) every person who has given consent to the issue of the prospectus under section 55 or subsection (5) of section 57:

Provided that where, under section 55, the consent of a person is required to the issue of a prospectus and he has given that consent, or where, under subsection (5) of section 57, the consent of a person named in a prospectus is required and he has given that consent, he shall not, by reason of having given such consent, be liable under this subsection as a person who has authorised the issue of the prospectus except in respect of an untrue statement, if any, purporting to be made by him as an expert.

(2) No person shall be liable under subsection (1), if he proves--

(a) that, having consented to become a director of the company, he withdrew his consent before the issue of the prospectus, and that it was issued without his authority or consent;

(b) that the prospectus was issued without his knowledge or consent, and that on becoming aware of its issue, he forthwith gave reasonsable public notice that it was issued without his knowledge or consent;

(c) that, after the issue of the prospectus and before allotment thereunder, he, on becoming aware of any untrue statement therein, withdrew his consent to the prospectus and gave reasonable public notice of the withdrawal and of the reason therefore or:

(d) that--

(i) as regards every untrue statement not purporting to be made on the authority of an expert or of a public official document or statement, he had reasonable ground to believe, and did up to the time of the allotment of the shares or debentures, as the case may be, believe, that the statement was true; and

(ii) as regards every untrue statement purporting to be a statement by an expert or contained in what purports to be a copy of or an extract from a report or valuation of an expert, it was a correct and fair representation of the statement, or a correct copy of, or a correct and fair extract from, the report or valuation; and he had reasonable ground to believe, and did up to the time of the issue of the prospectus believe, that the person making the statement was competent to make it and that that person had given the consent required by section 55 to the issue of the prospectus and had not withdrawn that consent before delivery of a copy of the prospectus for registration or, to the defendant's knowledge, before allotment thereunder; and

(iii) as regards every untrue statement purporting to be a statement made by an official person or contained in what purports to be a copy of or extract from a public official document, it was a correct and fair representation of the statement, or a correct copy of, or a correct and fair extract from, the document:

Provided that this subsection shall not apply in the case of a person liable, by reason of his having given a consent required of him by section 55, as a person who has authorised the issue of the prospectus in respect of an untrue statement purporting to be made by him as an expert.

(3) A person who, apart from this subsection would, under subsection (1), be liable by reason of his having given a consent required of him by section 55, as a person who has authorised the issue of the prospectus in respect of an untrue statement purporting to be made by him as an expert, shall not be so liable, if he proves--

(a) that, having given his consent under section 55 to the issue of the prospectus, he withdrew it in writing before delivery of a copy of the prospectus for registration;

(b) that, after delivery of a copy of the prospectus for registration and before allotment thereunder, he, on becoming aware of the untrue statement, withdrew his consent in writing and gave reasonable public notice of the withdrawal and of the reason therefor; or

(c) that he was competent to make the statement and that he had reasonable ground to believe, and did up to the time of the allotment of shares or debentures believe, that the statement was true.

(4) Where-?

(a) the prospectus specifies the name of a person as a director of the company, or as having agreed to become a director thereof, and he has not consented to become a director, or has withdrawn his consent before the issue of the prospectus, and has not authorised or consented to the issue thereof; or

(b) the consent of a person is required under section 55 to the issue of the prospectus and he either has not given that consent or has withdrawn it before the issue of the prospectus;

the directors of the company, excluding those without whose knowledge or consent the prospectus was issued, and every other person who authorised the issue thereof; shall be liable to indemnify the person referred to in clause (a) or clause (b), as the case may be; against all damages, costs and expenses to which he may be made liable by reason of his name having been inserted in the prospectus or of the inclusion therein of a statement purporting to be made by him as an expert, as the case may be, or in defending himself against any suit or legal proceeding brought against him in respect thereof:

Provided that a person shall not be deemed for the purposes of this subsection to have authorised the issue of a prospectus by reason only of his having given the consent required by section 55 to the inclusion therein of a statement purporting to be made by him as an expert.

(5) Every person who becomes liable to make any payment by virtue of this section may recover contribution, as in cases of contract, from any other person who, if sued separately, would have been liable to make the same payment, unless the former person was, and the latter person was not, guilty of fraudulent misrepresentation.

(6) For the purposes of this section--

(a) the expression "promoter" means a promoter who was a party to the preparation of prospectus or a portion thereof containing the untrue statement, but does not include any person by reason of his acting in a professional capacity for persons engaged in procuring the formation of the company; and

(b) the expression "expert" has the same meaning as in section 55.

60. Criminal liability for misstatements in prospectus.--(1) Where a prospectus includes any untrue statement, every person who signed or authorised the issue of the prospectus shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to ten thousand rupees, or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did up to the time of the issue of the prospectus believe, that the statement was true. .

(2) A person shall not be deemed for the purposes of this section to have authorised the issue of a prospectus by reason only of his having given--

(a) the consent required by section 55 to the inclusion therein of a statement purporting to be made by him as an expert, or

(b) the consent required by subsection (5) of section 57.

61. Document containing offer of shares or debentures for sale to be deemed prospectus.--(1) Where a company allots or agrees to allot any shares in or debentures of the company with a view to all or any of those shares or debentures being offered for sale to the public, any document to which the offer for sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company; and all enactments and rules of law as to the contents, filing and registration of a prospectus and as to liability in respect of statements in and omissions from a prospectus, or otherwise relating to a prospectus, shall apply with the modifications, specified in subsections (3), (4) and (5), and have effect accordingly, as if the shares or debentures had been offered to the public for subscription and as if persons accepting the offer in respect of any shares or debentures, were subscribers for those shares or debentures, but without prejudice to the liability, if any, of the persons by whom the offer is made in respect of misstatement contained in the document or otherwise in respect thereof.

(2) For the purposes of this Ordinance, it shall, unless the contrary is proved, be evidence that an allotment of, or an agreement to allot, shares or debentures was made with a view to the shares or debentures being offered for sale to the public if it is shown--

(a) that an offer of the shares or debentures or of any of them for sale to the public was made within one year after the allotment or agreement to allot;

(b) that at the date when the offer was made; the whole of the consideration to be received by the company in respect of the shares or debentures had not been received by it; or

(c) that an offer of the shares or debentures or of any of them for sale to the public was made in pursuance of an understanding to which the company was directly or indirectly a party or a condition imposed by any authority in relation to the position, business or privileges of the company.

(3) For the purposes of this section, section 53 shall have effect as if it required a prospectus to state, in addition to the .matters required by that section to be stated in a prospectus,--

(a) the net amount of the consideration received or to be received by the company in respect of the shares or debentures to which the offer relates; and

(b) the place and time at which the contract under which the said shares or debentures have been or are to be allotted may be inspected.

(4) For the purposes of this section, section 57 shall have effect as if the persons making the offer were persons named in a prospectus as directors of a company.

(5) Where a person making an offer to which this section relates is a company or a firm, it shall be sufficient if the document referred to in subsection (1) is signed on behalf of the company or firm by two directors of the company or by not less than one-half of the partners in the firm, as the case may be, and any such director or partner may sign by his agent authorised in writing.

62. Offer of shares or debentures for sale by certain persons.--(1) No person who holds more than ten percent. of the shares or debentures of a company shall offer for sale to the public any share or debenture of the company held by him except with the approval of the Authority.

(2) Any document by which an offer for sale to the public is made by any such person as is referred to in subsection (1) shall, for all purposes, be deemed to be a prospectus issued by a company, and all enactments and rules of law as to the contents, filing and registration of a prospectus and as to the liability in respect of statements in -and omissions from a prospectus, or otherwise relating to a prospectus, shall apply with the modifications specified in subsections (3) and (4), and have effect accordingly, but without prejudice to the liability, if any, of the persons by whom the offer is made in respect of misstatements contained in the document or otherwise in respect thereof.

(3) For the purposes of this section, section 57 shall have effect as if the person making the offer were a person named in a prospectus as director of a company.

(4) Where a person making an offer to which this section relates is a company or a firm, it shall be sufficient if the document referred to in subsection (2) is signed on behalf of the company or firm by two directors of the company or not less than one-half of the partners in the firm, as the case may be, and any such director or partner may sign by his agent authorised in writing.

( Subsection (5) added by the Banking and Financial Services (Amendment of Laws) Ordinance (LVII of 1984). S.7.)[(5) A notice, circular, advertisement or other document soliciting bids, offers, proposals or tenders for sale of shares or other securities acquired in the course of normal business or for negotiating sale thereof or expressing an intention to disinvest such shares or other securities issued by a scheduled bank or a financial institution shall not be deemed to be a prospectus or an offer for sale to the public for the purposes of sections 61 and 62].

63. Interpretation of provisions relating to prospectus.--(1) For the purposes of the foregoing provisions relating to a prospectus,--

(a) a statement included in a prospectus shall be deemed to be untrue, if the statement is misleading in the form and context in which it is included; and

(b) where the omission from a prospectus of any matter is calculated to mislead, the prospectus shall be deemed, in respect of such omission, to be a prospectus in which an untrue statement is included.

(2) For the purposes of sections 59 and 60 and clause (a) of subsection (1) of this section, the expression "included", when used in reference to a prospectus, means included in the prospectus itself or contained in any report or memorandum appearing on the face thereof or by reference incorporated therein or issued herewith.

**64. Newspaper advertisement of prospectus.--**Where any prospectus is published as a newspaper advertisement, it shall not be necessary in the advertisement to comply with the requirement of sub-clause (1) of clause (1) of section 1 of Part I of the Second Schedule in so far as the said provisions require the contents of the memorandum or the signatories thereto, or the number of shares subscribed for by them, to be specified.

65. Construction of references to offering shares or debentures to the public, etc. --(1) Any reference in this Ordinance or in the articles of a company to offering of shares or debentures to the public, or to invitation to the public to subscribe for shares or debentures, shall, unless otherwise expressly provided in this Ordinance, include a reference to offering of shares or debentures to any section of the public or to invitation to any section of public to subscribe for shares or debentures, as the case may be.

Explanation:--The term "section of the public" includes existing members or debenture holders of the company or clients of the person issuing the prospectus.

(2) No offer or invitation shall be treated as made to the public by virtue of subsection (1) if the offer or invitation can properly be regarded, in all the circumstances--

(a) as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation; or

(b) otherwise as being a domestic concern of the persons making and receiving the offer or invitation.

(3) Without prejudice to the generality of subsection (2), a provision in a company's articles prohibiting invitations to the-public to subscribe for shares or debentures shall not be taken as prohibiting the making to members or debenture holders of an invitation which can properly be regarded in the manner set forth in that subsection.

(4) The provisions of this Ordinance relating to private companies shall be construed in accordance with the provisions contained in subsections (1) to (3).

**66. Penalty for fraudulently inducing persons to invest money.--**Any person who, either by knowingly or recklessly making any statement, promise or forecast which is false, deceptive or misleading or by any dishonest concealment of material facts, induces or attempts to induce another person to enter into, or to offer to enter into,--

(a) any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting shares or debentures; or

(b) any agreement the purpose or pretended purpose of which is to secure a profit to any of the parties from the yield of shares or debentures, or by reference to fluctuations in the value of shares or debentures;

shall be punishable with imprisonment of either description .for a terns which may extend to three years, or with fine which may extend to twenty thousand rupees, or with both.

PART V.---

ALLOTMENT

67. Application for, and allotment of, shares and debentures.--(1) No application for allotment of shares in and debentures of a company in pursuance of a prospectus shall be made for shares or debentures of less than such nominal amount as the Authority may, from time to time, specify, either generally or in a particular case.

(2) The Authority may specify the form of an application for subscription to shares in or debentures of a company which may, among other matters, contain such declarations or verifications as it may, in the public interest, deem necessary; and such form then shall form part of the prospectus.

(3) All certificates, statements and declarations made by the applicant shall be binding on him.

(4) An application for shares in or debentures of a company which is made in pursuance of a prospectus shall be irrevocable.

(5) Whoever contravenes the provisions of subsection (1) or subsection (2), or makes an incorrect statement, declaration or verification in the application for allotment of shares, shall be liable to a fine which may extend to ten thousand rupees.

68. Restriction as to allotment.--(1) No allotment shall be made of any share capital of a company offered to the public for subscription unless the amount stated in the prospectus as the minimum amount which in the opinion of the directors must be raised by the issue of share capital in order to provide for the matters specified in clause (5) of section 1 of Part I of the Second Schedule has been subscribed, and the full amount thereof has been paid to and received in cash by the company.

(2) The amount referred to in subsection (1) as the amount stated in the prospectus shall be reckoned exclusively of any amount payable otherwise than in cash and is in this Ordinance referred to as the minimum subscription.

(3) All moneys received from applicants for shares shall be deposited and kept in a separate bank account in a scheduled bank until returned in accordance with the provisions of subsection (5) or until the certificate to commence business is obtained under section 146.

(4) The amount payable on application on each share shall be the full nominal amount of the share.

(5) If the conditions aforesaid have not been complied with on the expiration of forty days after the first issue of the prospectus, all moneys received from applicants for shares shall be forthwith repaid to them without surcharge, and, if any such money is not so repaid within fifty days after the issue of the prospectus, the directors of the company shall be jointly and severally liable to repay that money with surcharge at the rate of one and a half percent. for every month or part thereof from the expiration of the fiftieth day:

Provided that a director shall not be liable if he proves that the default in repayment of the money' was not due to any misconduct or negligence on his part.

(6) Any condition purporting to require or bind any applicant for shares to waive compliance with any requirement of this section shall be void.

(7) This section, except subsection (4) thereof, shall not apply to any allotment of shares subsequent to the first allotment of shares offered to the public for subscription.

(8) In the case of the first allotment of share capital payable in cash of a company which does not issue any invitation to the public to subscribe for its shares, no allotment shall be made unless the minimum subscription, that is to say,--

(a) the amount, a any, fixed by the memorandum or articles and specified in the statement in lieu of prospectus as the minimum subscription referred to in subsection (1) upon which the directors may proceed to allotment; or

(b)if no amount is so fixed and specified, the whole amount of the share capital other than that issued or agreed to be issued as paid up otherwise than in cash;.

has been subscribed and the full nominal amount of each share payable in cash has been paid to and received by the company.

(9) Subsection (8) shall not apply to a private company.

(10) In the event of any contravention of any provisions of this section, every promoter, director or other person knowingly responsible for such contravention shall be liable to a fine not exceeding ten thousand rupees and in the case of a continuing contravention to a further fine not exceeding two hundred rupees for every day after the first during which the contravention continues.

(11) For the purpose of this section, the expression "promoter" has the same meaning as in section 59.

69. Statement en lieu of prospectus.--(1) A company having a share capital, which does not issue a prospectus on or with reference to. its formation, or which has issued such a prospectus but has not proceeded to allot any of the shares offered to the public for subscription, shall not allot any of its shares or debentures unless, at least three days before the first allotment of either share or debenture, there has been delivered to the registrar for registration a statement in lieu of prospectus signed by every person who is named therein as a director or proposed director of the company or by his agent authorised in writing, in the form and containing the particulars set out in section 1 of Part II of the Second Schedule and, in the cases mentioned in section 2 of that Part, setting out the reports specified therein, and the said sections 1 and 2 shall have effect subject to the provisions contained in section 3 of that Part.

(2) Every statement in lieu of prospectus delivered under subsection (1), where the persons making any such report as aforesaid have made therein, or have without giving the reasons indicated therein, made any such adjustments as are mentioned in clause (5) of Part 11 of the Second Schedule, shall have endorsed thereon or attached thereto a written statement signed by those persons, setting out the adjustments and giving the reasons thereof.

(3) This section shall not apply to a private company.

(4) If a company acts in contravention of subsection (1) or subsection (2), the company, and every officer of the company who wilfully authorises or permits the contravention, shall be liable to a fine not exceeding five thousand rupees and in the case of a continuing contravention with a further fine not exceeding one hundred rupees for every day after the first during which the contravention continues.

(5) Where a statement in lieu of prospectus delivered to the registrar under sub section (1) includes any untrue statement, any person who signed or authorised the delivery of the statement in lieu of prospectus for registration shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to ten thousand rupees, or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did up to the time of the delivery for registration of the statement in lieu of prospectus believe, that the statement was true.

(6) For the purposes of this action,--

(a) a statement included in a statement in lieu of prospectus shall be deemed to be untrue if it is misleading in the form and context in which it is included; and

(b) where the omission from a statement in lieu of prospectus of any matter is calculated to mislead, the statement in lieu of prospectus shall be deemed, in respect of such omission, to be a statement in lieu of prospectus in which an untrue statement is included.

(7) For the purposes of subsection (5) and clause (a) of subsection (6), the expression "included", when used with reference to a statement in lieu of prospectus, means included in the statement in lieu of prospectus itself or contained in any report or memorandum appearing on the face thereof, or by reference incorporated therein, or issued therewith.

70. Effect of irregular allotment.--(1) An allotment made by a company to an applicant in contravention of the provisions of section 68 or 69 shall be voidable at the instance of the applicant within thirty days after the holding of the statutory meeting of the company and not later, or in any case where the company is not required to hold a statutory meeting or where the allotment is made after the holding of the statutory meeting, within thirty days after the date of the allotment, and not later, and shall be so voidable notwithstanding that the company is in course of being wound up.

(2) If any officer of a company knowingly contravenes or permits or authorises the contravention of any of the provisions of section 68 or 69 with respect to allotment, he shall, without prejudice to any other liability, be liable to compensate the company and the allottee respectively for any loss, damages or costs which the company or the allottee may have sustained or incurred thereby:

Provided that proceedings to recover any such loss, damages or costs shall not be commenced after the expiration of two years from the date of the allotment.

71. Repayment of money received for shares not allotted.--(1) Where a company issues any invitation to the public to subscribe for its shares or other securities, the company shall take a decision within ten days of the closure of the subscription lists as to what applications have been accepted or are successful and refund the money in the case of the unaccepted or unsuccessful applications within ten days of the date of such decision.

(2) If the refund required by subsection (1) is not made within the time specified therein, the directors of the company shall be jointly and severally liable to repay that money with surcharge at the rate of one and a half percent. for every month or part thereof from the expiration of the fifteenth day and, in addition, to a fine not exceeding five thousand rupees and in the case of a continuing offence to a further fine not exceeding one hundred rupees for every day after the said fifteenth day on which the default continues:

Provided that a director shall not be liable if he proves that the default in making the refund was not due to any misconduct or negligence on his part.

(3) Any condition purporting to require or bind any applicant for shares or other securities to waive any requirement of this section shall be void.

72. Allotment of shares and debentures to be dealt in on stock exchange.--(1) Where a prospectus, whether issued generally or not, states that application has been or will be made for permission for the shares or debentures offered thereby to be dealt in on any stock exchange, any allotment made on an application in pursuance of the prospectus shall, whenever made, be void if the permission has not been applied for before the seventh day after the first issue of the prospectus or if the permission has not been granted before the expiration of twenty-one days from the date of the closing of the subscription lists or such longer period not exceeding forty-two days as may, within the said twenty-one days, be notified to the applicant for permission by or on behalf of the stock exchange.

(2) Where the permission has not been applied for as aforesaid, or has not been granted as aforesaid, the company shall forthwith repay without surcharge all money received from applicants in pursuance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay it, the directors of the company shall be jointly and severally liable to repay that money from the expiration of the eighth day together with surcharge at the rate of one and a half percent. for every month or part thereof from the expiration of the eighth day and, in addition, to a fine not exceeding five thousand rupees and in the case of a continuing offence to a further fine of one hundred rupees for every day after the said eighth day on which the default continues:

Provided that a director shall not be liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

(3) All moneys received as aforesaid shall be deposited and kept in a separate bank account in a scheduled bank so long as the company may become liable to repay it under subsection (2); and, if default is made in complying with this subsection, the company and every officer of the company who knowingly and wilfully authorises or permits the default shall be liable to a fine not exceeding five thousand rupees.

(4) Any condition purporting to require or bind any applicant for shares or debentures to waive compliance with any requirement of this section shall be void.

(5) For the purposes of this section, permission shall not be deemed to be refused if it is intimated that the application for it, though not at present granted, will be given further consideration.

(6) This section shall have effect--

(a) in relation to any shares or debentures agreed to be taken by a person underwriting an offer thereof by a prospectus as if he had applied therefore in pursuance of the prospectus; and

(b) in relation to a prospectus offering shares for sale with the following modifications, that is to say,--

(i) reference to sale shall be substituted for reference to allotment;

(ii) the person by whom the offer is made and not the company, shall be liable under subsection (2) to repay the money received from applicant, and reference to the company's liability under that subsection shall be construed accordingly; and

(iii) for the reference in subsection (3) to the company and every officer of the company there shall be substituted a reference to any person by or through whom the offer is made and who knowingly and wilfully authorises or permits the default.

73. Return as to allotments.--(1) Whenever a company having a share capital makes allotment of its shares, the company shall, within thirty days thereafter,--

(a) file with the registrar a return of the allotment, stating the number and nominal amount of the shares comprised in the allotment, the name, father's name or in the case of a married woman, her husband's or deceased husband's name, address and occupation of each allottee, and the amount paid on each share; and

[(a) in clause (a), for the commas and words ", the name, father's name or in the case of a married woman, her husband's or deceased husband's name, address and occupation" the words "and such particulars as may be prescribed" shall be substituted; and]

*Clause has been amendment in the Companies Amendment Ordinance 2002 ]

(b) in the case of shares allotted as paid-up otherwise than in cash, produce for the inspection and examination of the registrar 8 contract in writing constituting the title of the allottee to the allotment together with any contract of sale., or for senlices or other consideration in respect of which that allotment was made, such contracts being duly stamped, and file with the registrar copies verified in the prescribed manner of all such contracts and a return stating the number and nominal amount of shares so allotted, the amount to be treated as paid-up, and the consideration for which they have been allotted; and

[(b) in clause (c), in sub‑clause (i), for the words and commas "the name, father's name and in the case of a married woman, her husband's or deceased husband's name, address and occupation" the words "such particulars as may be prescribed" shall be substituted.]

(c) file with the registrar

(i) in the case of bonus shares, a return stating the number and nominal amount of such shares comprised in the allotment and the name, father's name and in the case of a married woman, her husband's or deceased husband's name, address and occupation of each allottee together with a copy of the resolution authorising the issue of such shares;

(ii) in the case of issue at shares at a discount, a copy of the resolution passed by the company authorising such issue together with a copy of the order of the Authority sanctioning the issue, and where the maximum rate of discount exceeds ten percent. copy of the order of the Authority permitting the issue at the higher percentage.

Explanation.---Shares shall not be deemed to have been paid for in cash except to the extent that the company shall actually have received cash therefor at the time of, or subsequent to,, the agreement to issue the shares, and where shares are issued to a person who has sold or agreed to sell property or rendered or agreed to render service to the company, or to persons nominated by him, the amount of any payment made for the property or services shall be deducted from the amount of' any cash payment made for the shares and only the balance if any, shall be treated as having been paid in cash for such shares, notwithstanding any bill of exchange or cheques or other securities for money.

(2) Where such a contract as is mentioned in clause (b) of subsection (1) is not reduced to writing, the company shall, within thirty days after, the allotment, file with the registrar the prescribed particulars of the contract stamped with the same stamp duty as would have been payable if the contract had been reduced to writing, and these particulars shall be deemed to be an instrument within the meaning of the Stamp Act, 1899 (II of 1899), and the registrar may as a condition of filing the particulars, require that the duty payable thereon be adjudicated under section 31 of that Act.

(3) If the registrar is satisfied that in the circumstances of any particular case the period of thirty days specified in subsections (1) and (2) for compliance with the requirements of this section is inadequate, he may extend that period as he thinks fit, and, if he does so, the provisions of subsections (1) and (2) shall have effect in that particular case as if for the said period of thirty days the extended period allowed by the registrar were substituted.

(4) If default is made in complying with any requirement of this section, the company and every officer of the company who is knowingly a party to the default shall be laible to a fine not exceeding five hundred rupees for every day during which the default continues.

( Subsection (5) added by Banking and Financial Services (Amendment of Laws) Ordinance (XLVII of 1984), S.7.)[(5) This section shall apply mutatis mutandis, to shares which are allotted or issued or deemed to have been issued to a scheduled bank or a financial institution in pursuance of any obligation of company to issue shares to such scheduled bank or financial institution:

Provided that where default is made by a company in filing a return of allotment in respect of the shares referred to in this subsection, the scheduled bank or the financial institution to whom shares have been allotted or issued or deemed to have been issued may file a return of allotment in respect of such shares with the registrar together with such documents as may be specified by the Authority in this behalf, and such return of allotment shall be deemed to have been filed by the company itself and the scheduled bank the financial institution shall be entitled to recover from the company the amount of any fee properly paid by it to the registrar in respect of the return.]

CERTIFICATE OF SHARES AND DEBENTURES

74. Limitation of time for issue of certificates. ---(1) Every company shall, within ninety days after the allotment of any of its shares, debentures or debenture stock, and within forty-five days after the application for the registration of the transfer of any such shares, debentures or debenture stock, complete and have ready for delivery the certificates of all shares, the debentures, and the certificates of all debenture stock allotted or transferred, and unless sent by post or delivered to the person entitled thereto, within that period, shall give notice of this fact to the shareholders or debenture-holders, as the case may be, immediately thereafter in the manner prescribed, unless the conditions of issue-of the shares, debenture or debenture stock otherwise provide:

( Proviso added by Central Depositories Ordinance (XIII of 1997), Sched. (c) dated 28-1-1997.)[Provided that, the company shall, within five days after an application is made for the registration of the transfer of any shares, debentures or debenture stock to a central depository, register such transfer in the name of the central depository.]

Explanation. ---The expression "transfer", for the purposes of this subsection, means a transfer duly stamped and otherwise valid, and does not include such a transfer as the company is for any reason entitled to refuse to register and does not register.

(2) if default is made in complying with the requirements of subsection (1) the company, and every officer of the company who is knowingly a party to the default, shall be liable to a fine not exceeding one hundred rupees for every day during which the default continues.

75. Issue of duplicate certificates.---(1) A duplicate of a certificate of shares, debentures or debenture stock issued under section 74 shall be issued by the company within forty-five days from the date of application if the original---

(a) is proved to have been lost or destroyed, or

(b) having been defaced or mutilated or torn is surrendered to the company.

(2) The company, after making such inquiry as to the loss, destruction, defacement or mutilation of the original, as it may deem fit to make, shall, subject to such terms and conditions, if any, as it may consider necessary, issue the duplicate:

Provided that the company shall not charge fee exceeding the sum prescribed and the actual expenses incurred on such inquiry.

(3) If the company for any reasonable cause is unable to issue duplicate certificate, it shall notify this fact, alongwith the reasons within thirty days from the date of the application, to the applicant.

(4) If default is made in complying with the requirements of this section, the company and every officer of the company who is knowingly a party to the default shall be liable to a fine not exceeding five hundred rupees.

(5) If a company with intent to defraud, renews a certificate or issues a duplicate thereof, the company shall be punishable with fine which may extend to twenty thousand rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees, or with both.

TRANSFER OF SHARES AND DEBENTURES

76. Transfer of shares and debentures.---(1) An-application for registration of the transfer of shares and debentures in a company may be made either by the transferor or the transferee, and subject to the provisions of this section, the company shall enter in its register of members the name of the transferee in the same manner and subject to the same conditions as if the application was made by the transferee:

Provided that the company shall not register a transfer of shares or debentures unless proper instrument of transfer duly stamped and executed by the transferor and the transferee has been delivered to the company alongwith the scrip.

(2) Where a transfer-deed is lost, destroyed or mutilated before its lodgement, the company may on an application made by the transferee and bearing the stamp required by an instrument of transfer; register the transfer of shares or debentures if the transferee proves to the satisfaction of the directors of the company that the transfer-deed duly executed has been lost, destroyed or mutilated:

Provided that before registering the transfer of shares or debentures the company may demand such indemnity as it may think fit.

(3) All references to the shares or debentures in this section, shall in case of a company not having share capital, be deemed to be references to interest of the members in the company.

(4) Every company shall maintain at its registered office a register of transfers of shares and debentures made from time to-time and such register shall be open to inspection by the members and supply of copy thereof in the manner stated in section 150.

(5) Nothing in subsection (1) shall prevent a company from registering as shareholder or debenture-holder a person to whom the right to any share or debenture of the company has been transmitted by operation of law.

(6) In the case of a public company, a financial institution duly approved by the Authority may be appointed as the transfer agent on behalf of the company.

(7) If a company makes default in complying with any of the provisions of subsections (1) to (4), it shall be liable to a fine not exceeding five thousand rupees and every officer of the company who is knowingly or wilfully a party to such default shall be liable to a like penalty.

77. Directors not to refuse transfer of shares. ---The directors of a company shall not refuse to transfer any fully paid shares or debentures unless the transfer-deed is, for any reason, defective or invalid:

Provided that the company shall within thirty days ()[or, where the transferee is a central depository, within five days] from the date on which the instrument of transfer was lodged with in notify the defect or invalidity to the transferee who shall, after the removal of such defect or invalidity, be entitled to relodge the transfer-deed with the company:

Provided further that the provisions of this section shall, in relation to a private company. be subject to such limitations and restrictions as may have been imposed by the articles of such company.

78. Notice of refusal to transfer.---(1) If a company refuses to register a transfer of any shares or debentures, the company shall, within thirty days after the date on which the instrument of transfer was lodged with the company, send to the transferee notice of the refusal indicating reasons for such refusal.

(2) If default is made in complying with section 77 or this section, the company and every officer of the company who is a party to the default shall be liable to a fine not exceeding two thousand rupees and to a further fine not exceeding fifty rupees for every day after the first during which the default continues.

In subsection (2), for the words "two" and "fifty", the words "twenty" and "one thousand" shall, respectively, be substituted.

* Amendment has been made in the Companies amendment Ordinance 2002

79. Transfer to successor-in-interest.---The transfer of shares or debentures from a deceased member or holder to his lawful nominee successor-in-interest shall be made on application by such nominee successor duly supported by a document evidencing nomination or lawful award of the relevant property to such nominee or successor and thereupon the nominee -or successor shall be entered as a member:

Provided that the company may, on furnishing of a suitable indemnity by such nominee or successor, proceed to transfer the security in his name and enter him in the register of members.

80. Transfer to nominee of a deceased member.--(1) Notwithstanding anything contained in any other law for the time being in force or in any disposition by a member of a company of his interest represented by the shares held by him as a member of the company, a person may on acquiring interest in a company as member, represented by shares, at any time after acquisition of such interest deposit with the company a nomination conferring on one or more persons the right to acquire the interest in the shares therein specified in the event of his death:

Provided that, where a member nominates more than one person, he shall specify in the nomination the extent of right conferred upon each of the nominees, so however that the number of shares therein specified are possible of ascertainment in whole numbers.

(2) Where any nomination, duly made and deposited with the company as aforesaid, purports to confer upon any person the right to receive the whole or any divisible part of the interest therein mentioned, the said person shall, on the death of the member, become entitled, to the exclusion of all other persons, to become the holder of the shares or the part thereof, as the case may be, and on receipt of proof of the death of the member alongwith the relative scrips, the transmission of the said shares shall be registered in favour of the nominee to the extent of his interests unless--

(a) such nomination is at any time varied by another nomination made and deposited before the death of the member in like manner or expressly cancelled by notice in writing to the company; or

(b) such nomination at any time becomes invalid by reason of the happening of some contingency specified therein;

and if the said person predeceases the member, the nomination shall, so far as it relates to the right conferred upon the said person, become void and of no effect:

Provided that where provision has been duly made in the nomination conferring upon some other person such right in the stead of the person deceased, such right shall, upon the deceased as aforesaid of the said person, pass to such other person.

(3) The person to be nominated as aforesaid shall not be a person other than the following relatives of the member, namely, a spouse, father, mother, brother, sister and son or daughter, including a step or adopted child.

(4) The nomination as aforesaid shall in no way prejudice the right of the member making the nomination to transfer, dispose of or otherwise deal in the shares owned by him during his lifetime and shall have effect in respect of the shares owned by the said member on the day of his death.

**81. Transfer by nominee or legal representative.--**A transfer of the shares or debentures or other interest of a deceased member of a company made by his nominee or legal representative shall, although the nominee or legal representative is not himself a member, be valid as if he had been a member at the time of execution of the instrument of transfer.

COMMISSION, DISCOUNT, PREMIUM AND REDEEMABLE PREFERENCE SHARES

82. Power to pay certain commissions, and prohibition of payment of other commissions, discounts, etc.--(1) It shall be lawful for a company to pay a commission to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares in or debentures of the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional for any shares in or debentures of the company if--

(a) the payment of the commission is authorised by the articles;

(b) the commission paid or agreed to be paid does not exceed such rate percent. of, amount as may generally or in a particular case be fixed by the Authority; and

(c) the amount or rate percent. of the commission paid or agreed to be paid is--

(i) in the case of shares or debentures offered to the public for subscription, disclosed in the prospectus; or

(ii) in the case of shares or debentures not offered to the public for subscription, disclosed in the statement in lieu of prospectus, or in a statement in the prescribed form signed in like manner as a statement in lieu of prospectus and delivered before the payment of the commission to the registrar for registration and, where a circular or notice, not being a prospectus, inviting subscription for the shares or debentures, is issued, also disclosed in that circular or notice; and

(d) the number of shares or debentures which persons have agreed for a commission to subscribe absolutely is disclosed in the manner aforesaid.

(2) Save as aforesaid and save as provided in section 84, no company shall allot any of its shares or debentures, or apply any of its moneys, either directly or indirectly, in payment of any commission, discount or allowance, to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares in or debentures of the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any shares in or debentures of the company, whether the shares, debentures or money be so allotted or applied by being added to the purchase money of any property acquired by the company or to the contract price of any work to be executed for the company, or the money be paid out of the nominal purchase money or contract price, or otherwise.

(3) Nothing in this section shall affect the power of any company to pay such brokerage as it has heretofore been lawful for a company to pay, but brokerage shall not in any case exceed one percent. of the price at which shares or debentures issued have been actually and not merely sold through the broker or shall be paid at not more than such other rate percent. as may from time to time be specified by the Authority, generally or in a particular case.

(4) A vendor, promoter, or other person who receives payment in shares, debentures or money from a company shall have and shall be deemed always to have had power to apply any part of the shares, debentures or money so received in payment of any commission the payment of which, if made directly by the company, would have been legal under this section.

(5) If default is made in complying with the provisions of this section, the company and every officer of the company who knowingly and wilfully is in default shall--

(a) for non-compliance with the provisions of clause (b) of subsection (1), be liable to a fine not exceeding two thousand rupees;

(b) for non-compliance with the provisions of clause (c) or clause (d) of that subsection, be liable to a fine not exceeding one thousand rupees; and

(c) for non-compliance with any other provisions of this section, be liable to a fine not exceeding five hundred rupees.

83. Application of premium received on issue of shares.--(1) Where a company issues shares at a premium, whether in cash or otherwise, a sum equal to the aggregate amount or the value of the premiums on those shares shall be transferred to an account, to be called "the share premium account"; and the provisions of this Ordinance relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the share premium account were paid-up capital of the company.

(2) The share premium account may, notwithstanding anything contained in subsection (1), be applied by the company--

(a) in writing off the preliminary expenses of the company;

(b) in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company;

(c) in providing for the premium payable on the redemption of any redeemable preference shares or debentures of the company; or

(d) in paying up un-issued shares of the company to be issued to members of the company as fully paid bonus shares.

(3) Where a company has, before the commencement of this Ordinance, issued any shares at a premium, this section shall apply as if the shares had been issued after such commencement:

Provided that any part of the premium which has been so applied that it does not at the commencement of this Ordinance form an identifiable part of the company's reserves within the meaning of the Fourth Schedule or the Fifth Schedule shall be disregarded in determining the sum to be included in the share premium account.

84. Power to issue shares at a discount.-(1) Subject to the provisions of this section, it shall be lawful for a company to issue shares in the company at a discount:

In subsection (1), in the proviso, in clause (b), the commas and words", not exceeding ten percent., or a higher rate fixed by the Authority," shall be omitted.

Provided that--

(a) the issue of the shares at a discount must be authorised by resolution passed in general meeting of the company and must be sanctioned by the Authority;

(b) the resolution must specify the maximum rate of discount, not exceeding ten percent. or a higher rate fixed by the Authority, at which shares are to be issued;

(c) not less than one year must at the date of issue have elapsed since the date on which the company was entitled to commence business; and

(d) the shares to be issued at a discount must be issued within sixty days after the date on which the issue is sanctioned by the Authority or within such extended time as the Authority may allow.

(2) Where a company has passed a resolution authorising the issue of shares at a discount, it may apply to the Authority for an order sanctioning the issue; and on such application the Authority may, if, having regard to all the circumstances of the case, it thinks proper so to do, make an order sanctioning the issue on such terms and conditions as it thinks fit.

(3) Issue of shares at a discount shall not be deemed to be reduction of capital.

(4) Every prospectus relating to the issue of shares, and every balance-sheet issued by the company subsequent to the issue of shares, shall contain particulars of the discount allowed on the issue of the shares or of so much of that discount as has not been written off at the date of the issue of the prospectus or balance-sheet.

(5) If default is made in complying with subsection (4), the company and every officer of the company who is in default shall be liable to a fine not exceeding two thousand rupees.

85. Redemption of preference shares. ---(1) Subject to the provisions of this section, a company limited by shares may redeem the preference shares issued by it:

(a) no such shares shall be redeemed except out of profits of the company which would otherwise be available for dividend or from out of a sinking fund created for this purpose or out of the proceeds of a fresh issue of shares made for the purposes of the redemption or out of sale proceeds of any property of the company;

(b) no such shares shall be redeemed unless they are fully paid;

(c) where any such shares are redeemed otherwise than out of the proceeds of afresh issue, there shall out of profits which would otherwise have been available for dividned be transferred to a reserve fund, to be called "the capital redemption reserve fund", a sum equal to the amount applied in redeeming the shares, and the provisions of this Ordinance relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the capital redemption reserve fund were paid-up share capital of the company;

(d) where any such shares are redeemed out of the proceeds of afresh issue, the premium, if any payable on redemption must have been provided for out of the profits of the company before the shares we redeemed or out of the share premium account.

(2) If a company fails to comply with the provisions of subsection (1), the company and every officer of the company who knowingly and wilfully is in default shall be liable to a fine not exceeding five thousand rupees.

(3) The redemption of preference shares under this section by a company shall not be taken as reducing the amount of its authorised share capital.

(4) Subject to the provisions of this section, the redemption of preference shares thereunder may be effected on such terms and in such manner as may be provided by the articles of the company.

FURTHER ISSUE OF CAPITAL

86. Further issue of capital.---(1) Where the directors decided to increase the capital of the company by the issue of further shares, such shares shall be offered to the members in proportion to the existing shares held by each member, irrespective of class, and such offer shall be made by notice specifying the number of shares to which the member is entitled, and limiting a time within which the offer, if not accepted, will be deemed to be declined:

( At the end of subsection (1) of S.86 for the full-stop colon has been substituted and proviso added thereafter by Finance Act (I of 1995), S.10(3)(a) dated 2-7-1995.) [Provided that the Federal Government may, on an application made by any public company on the basis of a special resolution passed by it, allow such company to raise its further capital without issue of right shares] ( At the end of proviso to S.86 for the full-stop a colon has been substituted and thereafter new proviso added by Finance Act (IV of 1999); S.14(1), dated 30-6-1999.) [ : ]

( At the end of proviso to S.86 for the full-stop a colon has been substituted and thereafter new proviso added by Finance Act (IV of 1999); S.14(1), dated 30-6-1999.) [Provided further that a public company may reserve a certain percentage of further issue of its employees under "Employees Stock Option Scheme" to be approved by the Commission in accordance with the rules made under this Ordinance].

(2) The offer of new shares shall be strictly in proportion to the number of existing shares held:

Provided that fractional shares shall not be offered and all fractions less than a share shall be consolidated and disposed of by the company and the proceeds from such disposition shall be paid to such of the entitled shareholders as may have accepted such offer.

(3) The offer of new shares shall be accompanied by a circular duly signed by the directors or an officer of the company authorised by them in this behalf in the form prescribed by the Authority containing material information about the affairs of the company, latest statement of the accounts and setting forth the necessity for issue of further capital.

(4) A copy of the circular referred to in subsection (3) duly signed by the directors or an officer authorised as aforesaid shall be filed with the registrar before the circular is sent to the shareholders.

(5) The circular referred to in subsection (3) shall specify a date by which the offer, if not accepted, will be deemed to be declined.

(6) [Omitted by Finance Act (1 of 1995), S.10(3)(b) dated 2-7-1995].

( Subsection (7) substituted by Finance Act (1 of 1995), S.10(3)(c) dated 2-7-1995.) [(7) if the whole or any part of the shares offered under subsection (1) is declined or is pot subscribed, the directors may allot and issue such shares in such manner as they may deem fit.]

[87. Issue of shares in lieu of outstanding balance of any loans, etc. ( Section 87 substituted by the Banking and Financial Services (Amendment of Laws) Ordinance (LVII of 1984),

S.7. Section 87 reads:

"Notwithstanding anything contained in section 86, a company may, if so authorised by the Articles and a special resolution, have convertible debentures entitling the holders to exercise option to convert a part thereof, not exceeding twenty-five percent. into ordinary shares in the manner provided in the contract for issue of debenutres.")---Notwithstanding anything contained in section 86 or the Memorandum and Articles, a company may issue ordinary shares or grant option to convert into ordinary shares the outstanding balance of any loans, advances or credit, as defined in the Banking Companies Ordinance, 1962 (LVII of 1962), or other non-interest bearing securities and obligations outstanding or having a term of not less than three years in the manner provided in any contract with any scheduled bank or a financial institution to the extent of twenty percent. of such balance:

Provided that such shares shall not be issued or option to convert the outstanding balance exercised unless in any two of the preceding three years after expiry of two years from the date of commencement of commercial production, the return on such non-interest bearing securities, obligations, loans, advances or credit has fallen below the minimum rate of return laid down by the State Bank of Pakistan for the said years].

REGULATION OF DEPOSITS

88. Deposits not to be invited without issuing an advertisement. ---(1) The Federal Government may prescribe the limits up to which, the manner in which and the conditions subject to which deposits may be invited, accepted or retained by a company.

(2) No company shall invite, or allow any other person to invite or cause to be invited on its behalf, any deposit unless--

(a) such deposit is invited or is caused to be invited in accordance with the rules made under subsection (1); and

(b) an advertisement, including therein a statement showing the financial position of the company, has been issued by the company in such form and in such manner as may be prescribed.

(3) The provisions of this Ordinance relating to a prospectus shall, so far as may be, apply to an advertisement referred to in subsection (2).

(4) Where a company accepts or invites, or allows or causes any other person to accept or invite on its behalf, any deposit in excess of the limits prescribed under subsection (1) or in contravention of the manner or conditions prescribed under that subsection or in contravention of the provisions of subsection (2), as the case may be,--

(a) the company shall be punishable--

(i) where such contravention relates to the acceptance of any deposit, with fine which shall not be less than the amount of the deposit so accepted; and

(ii) where such contravention relates to the invitation for any deposit, with fine which may extend to twenty thousand rupees; and

(b) every officer of the company which is in default shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine.

Explanation.---For the purposes of this section, "deposit" means any deposit of money with, and includes any amount borrowed by, a company, but shall not include a loan raised by issue of debentures or a loan obtained from a banking company or financial institution.

(5) Nothing contained in this section shall apply to--

(i) a banking company, or

(ii) such other class of companies as the Authority may specify in this behalf:

PART VI.---SHARE CAPITAL AND DEBENTURES NATURE, NUMBERING AND CERTIFICATE OF SHARES

89. Nature of shares and certificate of shares. ---(1) The shares or other interest of any member in a company shall be movable property, transferable in the manner provided by the articles of the company.

(2) Each share in a company shall have a distinctive number.

(3) A certificate under the common seal of the company specifying any shares held by any member shall be prima facie evidence of the title of the member to the shares therein specified.

PART VI.---SHARE CAPITAL AND DEBENTURES NATURE, NUMBERING

CLASSES AND KINDS OF SHARES

[90. Classes and kinds of share capital.-( S.90 subs. by Finance Act (IV of 1999), S.14(2), dated 30-6-1999.)--A company limited by shares tray have different kinds of share capital and classes therein as provided by its memorandum and articles:

Provided that different rights and privileges in relation to the different classes of shares may only be conferred in such manner as may be prescribed.]

GENERAL PROVISIONS AS TO SHARE CAPITAL

91. Only fully paid shares to be issued. ---No company shall issue partly paid shares:

Provided that where a company has partly paid shares on the commencement of this Ordinance, it--

(i) shall not issue any further share capital until all the shares previously issued have become fully paid-up; and

(ii) shall pay dividend only in proportion to the amount paid up on each share.

92. Power of company limited by shares to alter its share capital. ---(1) A company limited by shares, if so authorised by its articles, may alter the conditions of its memorandum so as to--

(a) increase its share capital by such amount as it thinks expedient;

(b) consolidate and divide the whole or any part of its share capital into shares of larger amount than its existing shares;

(c) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum; or

(d) cancel shares which, at the date of the passing of the resolution in. that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled:

Provided that, in the event of consolidated or sub-division of shares, the rights attaching to the new shares shall be strictly proportional to the rights attaching to the previous shares so consolidated or sub-divided:

Provided further that, where any shares issued are of a class which is the same as that of shares previously issued, the rights attaching to the new shares shall be the same as those attaching to the shares previously held.

(2) The new shares issued by a company shall rank pari passu with the existing shares of the class to which the new shares belong in all matters, including the right to such bonus or right issue and dividend as may be declared by the company subsequent to the date of issue of such new shares.

(3) The powers conferred by subsection (1) shall be exercisable by the company only in a general meeting.

( Subsection (3-A) ins. by the Banking and Financial Services (Amendment of Laws) Ordinance (LVII of 1984).)[(3-A) Notwithstanding anything contained in this Ordinance or any other law for the time being in force or the memorandum and articles, where the authorised capital of a company is fully subscribed, or the unsubscribed capital is insufficient, the same shall be deemed to have been increased to the extent necessary for issue of shares to a scheduled bank or financial institution in pursuance of any obligation of the company to issue shares to such scheduled bank or financial institution.]

(4) A cancellation of shares in pursuance of subsection (1) shall not be deemed to be a reduction of share capital within the meaning of this Ordinance.

(5) The company shall file with the registrar notice of the exercise of any power referred to in subsection (1) within fifteen days from the exercise thereof.

93. Notice to registrar of consolidation of share capital, etc. ---(1) Where a company having a share capital has consolidated and divided its share capital into shares of larger amount than its existing shares, it shall, within fifteen days of the consolidation and division, file notice with the registrar of the same, specifying the shares consolidated and divided.

(2) If a company makes default in complying with the requirements of subsection (5) of section 92 or subsection (1) of this section, it shall be liable to a fine which may extend to one hundred rupees for every day during which the default continues, and every officer of the company who knowingly and wilfully authorises or permits the default shall be liable to the like penalty.

94. Notice of increase of share capital or of members. ---(1) Where a company having a share capital has resolved to increase its share capital beyond the authorised capital ( Words "or such capital is increased under subsection (3-A) of section 92" added by the Banking and Financial Services (Amendment of Laws) Ordinance (LVII of1984), S.7.) [(or such capital is increased under subsection (3-A) of section 92] and where a company not having a share capital has resolved to increase the number of its members beyond the number previously registered, it shall file with the registrar, within fifteen days after the passing of the resolution, a notice of the increase of capital or members, as the case may be, and the registrar shall record the increase:

( Proviso added by the Banking and Financial Services (Amendment of Laws) Ordinance (LVII of 1984). S.7.) [Provided that where default is made by a company in filing a notice of increase in the authorised capital under subsection (3-A) of section 92, the scheduled bank or the financial institution to whom shares have been issued may file notice of such increase with the registrar and such notice shall be deemed to have been filed by the company itself and the scheduled bank or financial institution shall be entitled to recover from the company the amount of any fee properly paid by it to the registrar in respect of such increase.]

(2) The notice to be given under subsection (1) shall include particulars of the shares to be affected and the conditions, if any, subject to which the new shares are to be issued.

(3) If a company makes default in complying with the requirements of subsection (1), it shall be liable to a fine which may extend to one hundred rupees for every day during which the default continues, and every officer of the company who knowingly and wilfully authorises or permits the default shall be liable to the like penalty.

(4) No resolution referred to in subsection (1) shall take effect unless the notice required by that subsection to be filed with the registrar is duly sent to him.

95. Prohibition of purchase or grant of financial assistance by a company for purchase of its own or its holding company's shares. ---(1) No company shall have power to buy its own shares or the shares of its holding company.

(2) No company limited by shares, other than a private company, not being a subsidiary of a public company, shall give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial - assistance for the purpose of or in connection with purchase made or to be made by any person of any shares in the company or, where the company is a subsidiary, in its holding company:

Provided that nothing in this subsection shall prevent the company from advancing or securing an advance to any of its salaried employees, including a chief executive who, before his appointment as such, was not a director of the company, but excluding all directors of the company, for purchase of shares of the company or of its subsidiary or holding company, if making or securing of such advance is a part of the contract of service of such employee.

(3) If a company acts in contravention of subsection (1) or subsection (2), the company and every officer of the company who is knowingly and wilfully in default shall be liable to a fine which may extend to ten thousand rupees if the default relates to a listed company and to two thousand rupees if the default relates to any other company.

( Subsection (4) substituted by Finance Act (IV of 1999), S.14(3), dated 30-6-1999.)[(4) Nothing in this section shall prevent--

(a) a company from redeeming any shares or any other redeemable security issued in accordance with the provisions of this Ordinance, and

(b) a listed company from purchasing its own shares in accordance with the provisions of this Ordinance],

REDUCTION OF SHARE CAPITAL

96. Reduction of share capital.---(1) Subject to confirmation by the Court, a company limited by shares, if so authorised by its articles, may by special resolution reduce its share capital in any way, and in particular and with prejudice to the generality of the foregoing powers may--

(i)extinguish or reduce the liability on any of its shares in respect of share capital not paid up; or

(ii) either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost or unrepresented by available assets; or

(iii) either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the needs of the company;

and may, if and so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly.

(2) A special resolution under subsection (1) is in this Ordinance referred to as a resolution for reducing share capital.

97. Application to Court for confirming order.--Where a company has passed a resolution for reducing share capital, it may apply by a petition to the Court for an order confirming the reduction.

**98. Addition to name of company of 'and reduced".--**On and from the passing by a company of a resolution for reducing share capital, or where the reduction does not involve either the diminution of any liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, then on and from the making of the order confirming the reduction, the company shall, unless otherwise directed by the Court for any special reasons, add to its name until such date as the Court may fix, the words "and reduced" as the last words thereof, and those words shall, until that date, be deemed to be part of the name of the company:

Provided that, where the reduction does not involve either the diminution of any liability in respect of unpaid share capital, or payment to any shareholder of any paid-up share capital, the Court may, if it thinks expedient, dispense with the addition of the words "and reduced".

99. Objection by creditors and settlement of list of objecting creditors.--(1) Where the proposed reduction of share capital involves either diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, and in any other case if the Court so directs, every creditor of the company who, on the date fixed by the Court, is entitled to any debt or claim which, if that date were the date of commencement of the winding up of the company, would be admissible in proof against the company, shall be entitled to object to the reduction.

(2) The Court shall settle a list of creditors so entitled to object, and for that purpose shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims, and may publish notices fixing a day or days within which creditors not entered on the list are to claim to be so entered or are to be excluded from the right of objecting to the reduction.

100. Power to dispense with consent of creditor on security being given for his debt.- Where a creditor entered on the list of creditors whose debt or claim is not discharged or determined does not consent to the reduction, the Court may, if it thinks fit, dispense with the consent of that creditor, on the company securing payment of his debt or claim by appropriating, as the Court May direct, the following amount, that is to say,--

(i) if the company admits the full amount of his debt or claim, or, though not admitting it, is willing to provide for it, then the full amount of the debt or claim; and

(ii) if the company does not admit or is not willing to provide for the full amount of the debt or claim, or if the amount is contingent or not ascertained, then an amount fixed by the Court after the like inquiry and adjudication as if the company were being wound up by the Court.

101. Order confirming reduction.--If the Court is satisfied with respect to every creditor of the company who under this Ordinance is entitled to object to the reduction that either his consent to the reduction has been obtained or his debt or claim has been discharged or has been determined or has been secured, the Court may make an order confirming the reduction on such terms and conditions as it thinks fit.

102. Registration of order and minute of reduction.--(1) The registrar on production to him of an order of the Court confirming the reduction of the share capital of a company, and on the filing with him of a certified copy of the order and of a minute approved by the Court and showing, with respect to the share capital of the company as altered by the order, the amount of the share capital, the number of shares into which it is to be divided and the amount of each share, and the amount, if any, at the date of the registration deemed to be paid-up on each share, shall register the order and minute.

(2) A resolution for reducing' share capital as confirmed by an order of the Court registered under subsection (1) shall take effect on such registration and not before.

(3) Notice of the registration shall be published in such manner as the Court may direct.

(4) The registrar shall certify under his hand the registration of the order and minute, and his certificate shall be conclusive evidence that all the requirements of this Ordinance with respect to reduction of share capital have been complied with, and that the share capital of the company is such as is stated in the minute.

103. Minute to form part of memorandum.--(1) The minute when registered shall be deemed to be substituted for the corresponding part of the memorandum of the company, and shall be valid and alterable as if it had been originally incorporated therein, and shall be embodied in every copy of the memorandum issued after its registration.

(2) If a company makes default in complying with the requirements of subsection (1), it shall be liable to a fine which may extend to fifty rupees for each copy in respect of which default is made, and every officer of the company who knowingly and wilfully authorises or permits the default shall be liable to the like penalty.

104. Liability of members in respect of reduced shares.--(1) A member of the company, past or present, shall, not be liable in respect of any share to any call or contribution exceeding in amount the difference, if any, between the amount paid, or, as the case may be, the reduced amount, if any, which is to be deemed to have been paid, on the share and the amount of the share as fixed by the minute:

Provided that, if any creditor, entitled in respect of any debt or claim to object to the reduction of share capital, is, by reason of his ignorance of the proceedings for reduction, or of their nature and effect with respect to his claim not entered on the list of creditors, and, after the reduction, the company is unable, within the meaning of the provisions of this Ordinance with respect to winding up by the Court, to pay the amount of his debt or claim, then--

(i) every person who was a member of the company at the date of the registration of the order for reduction and minute shall be liable to contribute for the payment of that debt, or claim an amount not exceeding the amount which he would have been liable to contribute if the company had commenced to be wound up on the day before that registration; and

(ii) if the company is wound up, the Court, on the application of any such creditor and proof of his ignorance as aforesaid, may, if it thinks fit, settle accordingly a list of persons so liable to contribute, and make and enforce calls and orders on the contributories settled on the list as if they were ordinary contributories in a winding up.

(2) Nothing in this section shall affect the rights of- the contributories among themselves.

105. Penalty on concealment of name of creditor.--If any officer of the company wilfully conceals the name of any creditor entitled to object to the reduction, or wilfully misrepresents the nature or amount of the debt or claim of any creditor, or if any officer of the company abets any such concealment or misrepresentation as aforesaid, every such officer shall be punishable with imprisonment for a term which may extend to one year, or with fine, or with both.

106. Publication of reasons for reduction.--In the case of reduction of share capital, the Court may require the company to publish in the manner specified by the Court the reasons for reduction, or such other information in regard thereto as the Court may think expedient with a view to giving proper information to the public, and, if the Court thinks fit, the causes which led to the reduction.

107. Increase and reduction of share capital in case of a company limited by guarantee having a share capital.--A company limited by guarantee may, if it has a share capital and is so authorised by its articles, increase or reduce its share capital in the same manner and subject to the same conditions in and subject to which a company limited by shares may increase or reduce its share capital under the provisions of this Ordinance.

VARIATION OF SHAREHOLDERS' RIGHTS

108. Variation of shareholders' rights.--(1) The variation of the rights of shareholders of any class shall be effected only in the manner laid down in section 28.

(2) Not less than ten percent. of the class of shareholders who are aggrieved by the variation of their rights under subsection (1) may, within thirty days of the date of the resolution varying their rights, apply to the Court for an order cancelling the resolution:

Provided that the Court shall not pass such an order unless it is shown to its satisfaction that some facts which would have had a bearing on the decision of the shareholders were withheld by the company in getting the aforesaid resolution passed or, having regard to all the circumstances of the case, that the variation would unfairly prejudice the shareholders of the class represented by the applicant.

(3) An application under subsection (2) may be made on behalf of the shareholders entitled to make it by such one or more of their number as they may authorise in writing in this behalf.

(4) The decision of the Court on any such application shall be final.

(5) The company shall, within fifteen days after the service on the company of any order made on any such application, forward a copy of the order to the registrar and, if default is made in complying with this provision, the company and every officer of the company who is knowingly and wilfully in default shall be liable to a fine which may extend to two hundred rupees for-each day during which the default continues.

(6) The expression "variation" includes abrogation, revocation or enhancement.

(7) Section 5 of the Limitation Act, 1908 (IX of 1908), shall apply to an application made under subsection (2).

REGISTRATION OF UNLIMITED COMPANY AS LIMITED

109. Registration of unlimited company as limited.--(1) Subject to the provisions of this section, any company registered as unlimited may register under this Ordinance as limited or any. company already registered as a limited company may re-register under this Ordinance, but the registration of an unlimited company as a limited company shall not affect the rights, debts, liabilities, obligations or contracts acquired, incurred or entered into by, to, with or on behalf of, the company before the registration.

(2) On registration in pursuance of subsection (1), the registrar shall close the former registration of the company, and may dispense with the delivery to him of copies of any documents with copies of which he was furnished on the occasion of the original registration of the company; but, save as aforesaid, the registration shall take place in the same manner and shall have effect as if it were the first registration of the company under this Ordinance.

**110. Power of unlimited company to provide for reserve share capital on re-registration.--**An unlimited company having a share capital may, by its resolution for registration as a limited company in pursuance of this Ordinance, increase the nominal amount of its share capital by increasing the nominal amount of each of its shares, but subject to the condition that no part of the amount by which its capital is so increased shall be capable of being called up except in the event and for the purpose of the company being wound up.

UNLIMITED LIABILITY OF DIRECTORS

111. Limited company may have directors with unlimited liability.--(1) In a limited company, the liability of the directors or of any director may, if so provided by the memorandum, be unlimited.

(2) In a limited company in which the liability of any director is unlimited, the directors of the company, if any, and the member who proposes a person for election or appointment to the office of director, shall add to that proposal a statement that the liability of the person holding that office will be unlimited and the promoters and officers of the company, or one of them shall, before that person accepts the office or acts therein, give him notice in writing that his liability will be unlimited.

(3) If any director or proposer makes default in adding such a statement, or if any promoter or officer of the company makes default in giving such a notice, he shall be liable to a fine which may extend to two thousand rupees and shall also be liable for any damage which the person so elected or appointed may sustain from the default, but the liability of the person elected or appointed shall not be affected by the default.

112. Special resolution of limited company making liability of directors unlimited.--(1) A limited company, if so authorised by its articles, may, by special resolution, alter its memorandum so as to render unlimited the liability of its directors or of any director.

(2) Upon the passing of any such special resolution, the provisions thereof shall be as valid as if they had been originally contained in the memorandum:

Provided that an alteration of the memorandum making the liability of any of the directors unlimited shall not apply, without his consent, to a director who was holding the office from before the date of the alteration, until the expiry of the term for which he was holding office on that date.

SPECIAL PROVISIONS AS TO DEBENTURES

113. Right of debenture-holder and shareholder to have copies of trust-deed--(1) A copy of any trust-deed for securing any issue of debentures shall be forwarded to every holder of any such debentures or holder of shares in the company, at his request on payment of such fee as the company may fix not exceeding the amount prescribed.

(2) If a copy is refused or not forwarded as required under subsection (1), the company shall be liable to a fine not exceeding five hundred rupees, and to a further fine not exceeding fifty rupees for every day after the first during which the refusal continues, and every officer of the company who knowingly authorises or permits the refusal shall be liable to the like penalty, and the registrar may by order compel immediate supply of a copy.

114. Debentures not to carry voting rights.--(i) Except as otherwise provided in this Ordinance, no company shall, after the commencement of this Ordinance, issue any debentures carrying voting rights at any meeting of the company:

Provided that debentures convertible into ordinary shares may, at the option of the company, carry voting rights:

Provided further that such voting rights shall not be in excess of the voting rights attaching to ordinary shares of equal paid-up value.

Explanation.--Debentures convertible into ordinary shares include debentures with subscription warrants.

(2) Notwithstanding anything contained in this Ordinance, or in the memorandum or articles of any company, no debenture-holder having immediately before the commencement of this Ordinance voting rights shall, after such commencement, exercise any such rights at any meeting of the company, except a meeting of debenture-holders themselves.

115. Perpetual debentures.--A condition contained in any debenture or any deed for securing any debentures whether issued or executed before or after the promulgation of this Ordinance, shall not be invalid by reason only that thereby the debentures are made irredeemable or redeemable only on the happening of a .contingency, however remote, or on the expiration of a period however long.

116. Power to re-issue redeemed debentures in certain cases.--(1) Where either before or after the commencement of this Ordinance a company has redeemed any debentures previously issued, the company, unless the articles or the conditions of issue expressly otherwise provide, or unless the debentures have been redeemed in pursuance of any obligation on the company so to do, not being an obligation enforceable only by the person to whom the redeemed debentures were issued or his assigns, shall have power, and shall be deemed always to have had power, to keep the debentures alive for the purposes of reissue, and where a company has purported to exercise such a power the company shall have power, and shall be deemed always to have had power, to reissue the debentures either by reissuing the same debentures or by issuing other debentures in their place, and upon such reissue the person entitled to the debentures shall have, and shall be deemed always to have had, the same rights and priorities as if the debentures had not previously been issued.

(2) Where with the object of keeping debentures alive for the purpose of reissue they have, either before or after the commencement of this Ordinance, been transferred to a nominee of the company, a transfer from that nominee shall be deemed to be a reissue for the purposes of this section.

(3) Where a company has, either before or after the commencement of this Ordinance, deposited any of its debentures to secure advances from time to time on current account or otherwise, the debentures shall not be deemed to have been redeemed by reason only of the account of the company having ceased to be in debit while the debentures remained so deposited.

(4) The re-issue of a debenture or the issue of another debenture in its place under the power by this section given to, or deemed to have been possessed by, a company, whether the re issue or issue was made before or after the commencement of this Ordinance, shall be treated as the issue of a new debenture for the purposes of stamp-duty and registration, but it shall not be so treated for the purposes of any provision limiting the amount or number of debentures to be issued:

Provided that any person lending money on the security of a debenture re-issued under this section which appears to be duly stamped may give the debenture in evidence in any proceedings for enforcing his security without payment of the stamp-duty or any penalty in respect thereof, unless he had notice or, but for his negligence, might have discovered, that the debenture was not duly stamped, but in any such case the company shall be liable to pay the proper stamp-duty and penalty.

(5) Nothing in this section shall prejudice any power to issue debentures in the place of any debentures paid off or otherwise satisfied or extinguished, reserved, to a company by its debentures or the securities for the same.

117. Specific performance of contract to subscribe for debentures.--A contract with a company to take up and pay for any debentures of the company may be enforced by a decree for specific performance.

118. Payment of certain debts out of assets subject to floating charge in priority to claims under the charge.--(1) Where either a receiver is appointed on behalf of the holders of any debentures of a company secured by a floating charge, or possession is taken by or on behalf of these debenture-holders of any property comprised in or subject to the charge, then, if the company is not at the time in course of being wound up, the debts which in every winding up are under the provisions of Part XI relating to preferential payments to be paid in priority to all other debts, shall be paid forthwith out of any assets coming to the hands of the receiver or other person taking possession as aforesaid in priority to any claim for principal or interest in respect of the debentures.

(2) The periods of time mentioned in the said provisions of Part XI shall be reckoned from the date of the appointment of the receiver or of possession being taken as aforesaid, as the case may be.

(3) Any payments made under subsection (1) shall be recouped, as far as fray be, out of the assets of the company available for payment of general creditors.

119. Powers and liabilities of trustee.--(1.) The trustee nominated or appointed under the trust-deed for securing an issue of debentures shall, if so empowered by such deed, have the right to sue for all redemption monies and interest in the following cases, namely:--

(a) where the issuer of the debentures as mortgagor binds himself to repay the debenture loan or pay the accrued interest thereon, or both to repay the loan and pay the interest thereon, in the manner provided on the due date;

(b) where by any cause other than the wrongful act or default of the issuer the mortgaged property is wholly or partially destroyed or the security is rendered insufficient within the meaning of section 66 of the Transfer of Property Act, 1882 (Act IV of 1882), and the trustee has given the issuer a reasonable opportunity of providing further security adequate to render the whole security sufficient and the issuer has failed to do so;

(c) where the trustee is deprived of the whole or part of the security by or in consequence of any wrongful act or default on the part of the issuer; and

(d) where the trustee is entitled to take possession of the mortgaged property and the issuer fails to deliver the same to him or to secure the possession thereof without disturbance by the issuer or any person claiming under a title superior to that of the issuer.

(2) Where a suit is brought under clause (a) or clause (b) of subsection (1) the Court may at its discretion stay the suit and all proceedings therein notwithstanding any contract to the contrary, until the trustee has exhausted all his available remedies against the mortgaged property or what remains of it unless the trustee abandons his security and, if necessary, retransfers the mortgaged property.

(3) Notwithstanding anything contained in subsections (1) and (2) or any other law, for the time being in force, the trustee or any person acting on his behalf shall, if so authorised by the trust-deed, sell or concur in selling, without intervention of the Court, the mortgaged property or any part thereof in default of payment according to re-payment schedule of any redemption amount or in the payment of any accrued interest on the due date by the issuer.

Explanation.--"Issuer", in subsections (1), (2) and (3), shall mean the company issuing debentures and securing the same by mortgage of its properties or assets, or both its properties and assets, and appointing a trustee under a trust-deed.

(4) Subject to the provisions of this section, any provision contained in a trust deed for securing an issue of debentures, or in any contract with the holders of debentures secured by a trust-deed, shall be void in so far as it would have the effect of exempting a trustee thereof from, or indemnifying him against, liability for breach of trust, where he fails to show the degree of care and diligence required of him as trustee, having regard to the provisions of the trust-deed conferring on him any power, authority or discretion.

(5) Subsection (4) shall not invalidate--

(a) any release otherwise validly given in respect of anything done or omitted to be done by a trustee before the giving of the release; or

(b) any provision enabling such a release to be given--

(i) on the agreement thereto of a majority of not less than three-fourths in value of the debenture-holders present and voting in person or, where proxies are permitted, by proxy, at a meeting summoned for the purpose; and

(ii) either with respect to specific acts or omissions or on the trustee dying or ceasing to act.

(6) Subsection (4) shall not operate--

(a) to invalidate any provision in force immediately before the commencement of this Ordinance, so long as any person then entitled to the benefit of that provision or afterwards given the benefit thereof under subsection (7) remains as trustee of the deed in question; or

(b) to deprive any person of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while any such provision was in force.

(7) While any trustee of a trust-deed remains entitled to the benefit or provision save by subsection (6), the benefits of that provision may be given either--

(a) to all trustees of the deed, present and future; or

(b) to any named trustees or proposed trustees thereof;

by a resolution passed by a majority of not less than three-fourth in value of the debenture-holders present in person or, where proxies are permitted, by proxy, at meeting called for the purpose in accordance with the provisions of the deed or, if the deed makes no provisions for calling meetings, at a meeting called for the purpose in any manner approved by the Court.

[120. Issue of securities and redeemable capital not based on interest.-( Section 120 substituted by the Banking and Financial Services (Amendment of Laws.) Ordinance (LIV7I of 1484), S. 7. Section 120 read:

(1) Notwithstanding anything contained in 'his Ordinance or any other law or the memorandum or articles or any agreement, resolution or any other document, a company may, upon terms and conditions contained in an agreement in writing, issue to one or more scheduled banks, financial institutions or such other persons as are specified for the purpose by the Federal Government by notification in the official Gazette either severally jointly or through a syndicate, Participation Term Certificates in consideration of any funds, moneys accommodations received or to be received by the company, whether in cash or in specie or against any promise, guarantee undertaking or indemnity Issued to or in favour or benefit of the company.

Explanation. `Financial institution' means a financial institution set up and controlled by the Federal Government and includes such other institutions or bodies corporate as the Federal Government may, from time to time, by notification in the official Gazette, specify for the purpose.

(2) The agreement referred to in subsection (1) may adopt and include all or any of the regulations terms and conditions contained in Table F in the First Schedule, and all such regulations, terms and conditions shall be valid, binding and enforceable notwithstanding anything contained in this Ordinance or any other law or the memorandum or articles or any agreement or resolution of the company or any other document.

(3) In particular and without prejudice to the generality of the foregoing provision the agreement referred to in subsection (1) may provide for adopt or include, in addition to others, all or any of the regulations, terms and conditions contained in Table F of the First Schedule, in respect of any of the following matters:

(a) the PTCs, shall be subject to the holders' option to convert them into ordinary shares or to be entitled to or obtain convertible ordinary shares of the company in the contingency provided in the regulations in Table F of the First Schedule;

(b) mode and basis of repayment by the company of the amount invested in the PTCs within a certain period of time;

(c) the holders of the PTCs shall participate in the profits as well as in the losses in each financial year of the company,

(d) the holders of the PTCs. in respect of the losses suffered in any financial year, shall be issued convertible ordinary shares of the company to the extent of such loss, from and under Term Capital created for such issue which shall, for all purposes, after being so issued, be deemed to be the ordinary capital of the company though separately maintained or treated in the accounts and books of the company, and such Tern Capital shall increase, in the event of further or continued losses corresponding to the issued convertible shares;

(e) the Term Capital, for its creation, increase or decrease, shall not be subject to the provisions of the Capital Issues (Continuance and Control) Act, 1947 (XXIX of 1947), and shall be created and increased by the first and then further issue of the convertible shares of the company in lieu of PTCs being surrendered against losses of the company, such convertible shares may be redeemed from profits of the company in the next following or other subsequent year or years in the manner and to the extent provided in the agreement;

(f) the holders of PTCs, in the events and contingencies mentioned in the following sub-clauses shall have the option to exercise voting rights to the extent of the total votes arrived at by dividing the face value of the certificates by the nominal value of the ordinary share of the company, as an ordinary share-holder may exercise his right to vote: Provided always that the holder of the certificate shall exercise the right to vote, part paws with the ordinary shareholders in the following events and contingencies-

(i) if the company undergoes loses for two consecutive years;

(ii) if the company cams inadequate profits for two consecutive yearn or three out of any four years;

(iii) if the net worth of the company is reduced by fifty per cent, or more from the date of the original issue of the PFCs; or

(iv) if the company fails to repay two consecutive instalments of the principal amount of the PTCs or three out of five such repayment instilments;

(g) the holders of convertible shares shall have the same rights as the ordinary shareholders of the company in all matters and to the same extent, in particular in the shareholders' powers, voting rights, participation in alt company meetings and in every other company matter, and

(h) the holders of the PTCs may agree to amend, vary, alter any terms and conditions originally agreed.

(4) The ordinary shareholders of the Company, shall not challenge the rights of the holders of the PTCs which are for consideration and for such period as the PM are paid off or their terms exist tar otherwise till such time a the Term Capital shares in the event of the persistent losses of the company are finally written, off or otherwise redeemed.

(5) The terms and conditions for issue of the PTCs and the rights of their holders shall not be challenged or questioned by the company or any of its shareholders as repugnant to any provision of this Ordinance or any other law or the memorandum or articles or any resolution of the general meeting or directors of the company or any other document and the agreement shall be deemed to be for benefit of the company and its shareholders as also for sufficient consideration.)-(1)

( Subs. for the words notwithinstanding anything contained in this Ordinance or any other law or Article or any agreement, resolution or oilier document a company may.' by Finance Act (XII of 1994). S.9(1) dated 30-7 -1994.)[A company may by public offer or] upon terms and conditions contained in an agreement in writing, issue to one or more scheduled banks, financial institutions or such other persons as are specified for the purpose by the Federal Government by notification in the official Gazette, either severally, jointly or through their syndicate, any instrument in the nature of redeemable capital in any of several forms in consideration of any funds, moneys or accommodations received or to be received by the company, whether in cash or in specie or against any promise, guarantee, undertaking or indemnity issued to or in favour of or for the benefit of the company.

(2) In particular and without prejudice to the generality of the foregoing provisions, the agreement referred to in subsection (1) for redeemable capital may provide for, adopt or include, in addition to others, all or any of the following manners, namely:--

(a) mode and basis of repayment by the company of the amount invested in redeemable capital within a certain period of time;

(b) arrangement for sharing of profit and loss;

(c) creation of a special reserve called the "participation reserve" by the company in the manner provided in the agreement for the issue of participatory redeemable capital in which all providers of such capital shall participate for interim and final adjustment on the maturity date in accordance with the terms and conditions of such agreements; and

(d) in case of net loss on participatory redeemable capital on the date of maturity the right of holders to convert the outstanding balance of such capital or part thereof as provided in the agreement into ordinary shares of the company at the break-up price calculated in the prescribed manner.

(3) The terms and conditions for the issue of instruments or certificates of redeemable capital and the rights of their holders shall not be challenged or questioned by the company or any of its shareholders as repugnant to any provision of this Ordinance or any other law or the memorandum or articles or any resolution of the general meeting or directors of the company or any other document.

(4) The provisions of the this Ordinance ( The words brackets, commas, figures and letters or the Capital Issues (Continuance of Control) Act, 1947 (XXIX of 1947) omitted by Finance Act (I of 1995), S. 10 (4) dated. 2-7-1995.)[* * * *] relating to the creation issue. increase or decrease of the capital shall not apply to the redeemable capital].

PART VII.--REGISTRATION OF MORTGAGES, CHARGES, ETC.

121. Certain mortgages and charges to be void if not registered.--(1) Every mortgage, charge or other interest created after the commencement of this Ordinance by a company and being either--

(a) a mortgage or charge for the purpose of securing any issue of debentures; or

(b) a mortgage or charge on uncalled share capital of the company; or

(e) a mortgage or charge on any immovable property wherever situate, or any interest therein; or

(d) a mortgage or charge on any book debts of the company; or

(e) a mortgage or Charge, not being a pledge, on any movable property of the company: or

(f) a floating charge on the undertaking or property of the company, including stock-in-trade; or

(g) a mortgage or charge can a ship or any share in a ship; or

(h) a mortgage or charge on goodwill, on a patent or licence under a patent, on a trade mark, or on a copyright or a licence under a copyright; or

(i) a mortgage or charge or other interest based on agreement for the issue of ( Substituted for words "participation term certificates by the Banking and Financial Services (Amendment of Laws) Ordinance (LVII of 1984). S. 7.)[any instrument in the nature of redeemable capital]; or

(j) a mortgage or charge or other interest based on a musharika agreement; or

(k) a mortgage or charge or other interest based on a hire-purchase or leasing agreement for acquisition of fixed assets;

shall, so far as any security on the company's property or undertaking is thereby conferred, be void against the liquidator and any creditor of the company, unless the prescribed particulars of the mortgage or charge, together with a copy of the instrument, if any, verified in the prescribed manner, by which the mortgage or charge is created or evidenced are filed with the registrar for registration in the manner required by this Ordinance within twenty-one days after the date of its creation; but without prejudice to any contract or obligation for repayment of the money thereby secured, and when a mortgage or charge becomes void under this section the money secured thereby shall immediately become payable:

(i) in the case of a mortgage or charge created out of Pakistan comprising solely property situate outside Pakistan, twenty-one days after the date on which the instrument or copy could, in due course of post, and if despatched with due diligence, have been received in Pakistan shall be substituted for twenty-one days after the date of the creation of the mortgage or charge as the time within which the particulars and instrument or copy are to be filed with the registrar; and

(ii) where the mortgage or charge is created in Pakistan but comprises property outside Pakistan, the instrument creating or purporting to create the mortgage or charge and a copy thereof verified in the prescribed manner may be filed for registration notwithstanding that further proceedings may be necessary to make the mortgage or charge valid or effectual according to the law of the country in which the property is situate; and

(iii) where a negotiable instrument has been given to secure the payment of any book debts of a company, the deposit of the instrument for the purpose of securing an advance to the company shall not for the purpose of this subsection be treated as a mortgage or charge on those book debts; and

(iv) the holding of debentures entitling the holder to a charge on immovable property shall not be deemed to be an interest in immovable property.

(2) Where any mortgage or charge on any property of a company required to be registered under subsection (1) has been so registered, any person acquiring such property or any part thereof, or any share or interest therein, shall be deemed to have notice of the said mortgage or charge as from the date of such registration.

122. Registration of charges on properties acquired subject to charge.--(1) Where a company registered in Pakistan acquires any property which is subject to a charge of any such kind as would, if it had been created by the company after the acquisition of the property, have been required to be registered under this Part, the company shall cause the prescribed particulars of the charge, together with a copy, certified in the prescribed manner to be a correct copy of the instrument, if any, by which the charge was created or is evidenced, to be delivered to the registrar for registration in the manner required by this Ordinance within twenty-one days after the date on which the acquisition is completed:

Provided that, if the property is situate and the charge was created outside Pakistan, twenty- one days after the date on which the copy of the instrument could in due course of post, and if despatched with due diligence, have been received in Pakistan shall be substituted for twenty-one days after the completion of the acquisition as the time within which the particulars and the copy of the instrument are to be delivered to the registrar.

(2) If default is made in complying with this section, the company and every officer of the company who is knowingly and wilfully in default shall be liable to a fine of two thousand rupees.

123. Particulars in case of series of debentures entitling holders pari passu.--Where a series of debentures containing, or giving by reference to any other instrument, any charge to the benefit of which the debenture-holders of that series are entitled pari passu is created by a company, it shall be sufficient for the purposes of section 121 if these are filed with the registrar within twenty-one days after the execution of the deed containing the charge or, if there is no such deed, after the execution of any debentures of the series, the following particulars, namely-

(a) the total amount secured by the whole series;

(b) the dates of the resolutions authorizing the issue of the series and the date of the covering deed, if any, by which the security is created or defined;

(c) a general description of the property charged; and

(d) the names of the trustees, if any, for the debenture-holders;

together with a copy of the deed verified in the prescribed manner containing the charge, or if there is no such deed, one of the debentures of the series, and the registrar shall, on payment of the prescribed fee, enter those particulars in the register:

Provided that, where more than one issue is made of debentures in the series, there shall be filed with the registrar for entry in the register particulars of the date and amount of each issue, but an omission to do this shall not affect the validity of the debentures issued.

124. Particulars in case of commission, etc. on debentures.--Where any commission, allowance or discount has been paid or made either directly or indirectly by the company to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any debentures of the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any such debentures, the particulars required to be filed for registration under sections 121 and 123 shall include particulars as to the amount or rate percent. of the commission, discount or allowance so paid or made, but an omission to do this shall not affect the validity of the debentures issued:

Provided that the deposit of any debentures as security for any debt of the company shall not for the purposes of this section be treated as issue of the debentures at a discount.

125. Register of mortgages and charges.--(1) The registrar shall keep, with respect to each company, a register in the prescribed form of all mortgages and charges created by the company and requiring registration under section 121 or section 122 and shall, on payment of the prescribed fee, enter in the register, with respect to every such mortgage, or charge, the date of creation, the amount secured by it, short particulars of the property mortgaged or charged, and the names of the mortgagees or persons entitled to the charge.

(2) A register kept in pursuance of subsection (1) shall be open to inspection by any person on payment of the prescribed fee.

126. Index to register of mortgages and charges.--The registrar shall keep a chronological index, in the prescribed form and with the prescribed particulars, of the mortgages or charges registered with him under this Ordinance.

**127. Certificate of registration.--**The registrar shall give a certificate under his hand of the registration of any mortgage or charge registered in pursuance of section 121, stating the amount thereby secured, and the certificate shall be conclusive evidence that the requirements of sections 121 to 125 as to registration have been complied with.

128. Endorsement of certificate. of registration on debenture or certificate of debenture stock.--The company shall cause a copy of every certificate of registration given under section 127 to be endorsed on every debenture or certificate of debenture stock which is issued by the comply, and the payment of which is secured by the mortgage or charge so registered:

Provided that nothing in this section shall be construed as requiring a company to cause a certificate of registration of any mortgage or charge so given to be endorsed on any debenture or certificate of debenture stock which has been issued by the company before the mortgage or charge was created.

129. Duty of company and right of interested party as regards registration : --(1) It shall be the duty of a company to file with the registrar for registration the prescribed particulars of every mortgage or charge created by the company and of the issue of debentures of a series, requiring registration under section 121, but registration of any such mortgage or charge may be effected on the application of any person interested therein.

(2) Where the registration is effected on the application of some person other than the company, that person shall be entitled to recover from the company the amount of any fees properly paid by him to the registrar on the registration.

(3) Whenever the terms or conditions or extent or operation of any mortgage or charge registered under subsection (1) are modified, it shall be the duty of the company to send to the registrar the particulars of such modification together with a copy of the instrument evidencing such modification verified in the prescribed manner, and the provisions of subsection (1) as to registration of mortgage or charge shall apply to such modification of the mortgage or charge as aforesaid.

130. Copy of instrument creating mortgage or charge to 6e kept at registered office.--Every company shall cause a copy of every instrument creating any mortgage or charge requiring registration under section 121 and of every instrument evidencing modification of the terms or conditions thereof, to be kept at the registered office of the company:

Provided that, in the case of a series of uniform debentures, a copy of one such debenture shall be sufficient.

**131. Rectification of register of

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