Final Examinations

Module E
1 June 2015
3 hours 100 marks
Additional reading time 15 minutes

The Institute of
Chartered Accountants
of Pakistan

Corporate Laws
Q.1

(a)

The Board of Directors of HAQ Limited (HL), a listed company, has decided to buyback its ordinary shares through a tender process.
Draft a special resolution for the proposed buy-back of shares of HL. You may
assume any information you may consider necessary.

(b)

Assume that HL has received an overwhelming response against the tender. Zakir is
one of the respondents and has holdings of one million shares. He has expressed his
interest to sell these shares to HL.
Describe the provisions contained in the Companies (Buy-back of Shares) Rules, 1999
whose compliance would be necessary for HL prior to making payment to Zakir.

(c)

(04)

Assume that HL has accepted Zakirs offer and has purchased all the shares at the
price approved by the board of directors and the shareholders.
Advise HL about the information that it would be required to disclose in its financial
statements in respect of the above and the documents to be submitted to the
authorities as specified in the Companies (Buy-back of Shares) Rules, 1999.

Q.2

(04)

(04)

Jaffrey Pharma Limited is currently involved in creditors voluntary winding-up

proceedings. At a meeting of the creditors, seven creditors with aggregate outstanding
balance of Rs. 20 million, approved Wasif as the liquidator whereas twelve creditors with
aggregate outstanding balance of Rs. 8 million wanted to appoint Asim as the liquidator.
The members in their meeting also voted to appoint Asim as the liquidator.
In the context of the provisions contained in the Companies Ordinance, 1984 you are
required to explain the following:
(a)
(b)

Q.3

(a)

Who would be considered as the liquidator of the company and what course of action
is available to those who do not agree to such an appointment?
Powers of the duly appointed liquidator.

Save Foundry Limited (SFL) has recently obtained a certificate of incorporation from
SECP and has applied for certificate for the commencement of business. Meanwhile,
SFL has entered into an agreement with Feroz Engineering Limited (FEL) for the
supply and installation of machinery at its factory. SFL has also signed an agreement
with a commercial bank for a short-term finance facility for advance payment to FEL.
In the light of the Companies Ordinance, 1984 analyse above situation and comment
on its legality and the implications of entering into the above agreements.

(b)

(06)
(06)

(05)

Adnan is a director of Star Limited (SL), a listed company. During the preceding
quarter he had purchased and sold shares of SL.
Under the provisions of Companies Ordinance, 1984 narrate the conditions which
Adnan would be required to comply with in respect of the above transactions.

(03)

Corporate Laws

Q.4

In the light of the Companies Ordinance, 1984 describe the circumstances under which:
(a)
(b)

Q.5

Page 2 of 3

Auditors of a company may be appointed by person(s) other than the shareholders of

the company.
Investments by a company may not be made and held by it in its own name.

(06)
(06)

Saad holds 10% voting shares in Strong Machine Limited (SML), a company listed on
Karachi Stock Exchange. Saad intends to acquire 16% additional voting shares in SML. In
this respect he has made a public announcement of the offer to acquire voting shares in
SML and has also sent a copy of the public announcement to SML.
In the light of the provisions of the Listed Companies (Substantial Acquisition of Voting
Shares and Takeovers) Ordinance, 2002 you are required to explain:
(a)
(b)

Q.6

(07)
(02)

Based on the provisions of the Central Depository Act, 1997:

(a)
(b)

Q.7

The term offer period and the obligations of the board of directors of SML during
the offer period.
The condition(s) under which Saad would be entitiled to have a representation on the
Board of SML.

Briefly explain the term Participant and state the services performed by a
Participant.
Identify the circumstances in which Central Depository Company may disclose
information or documents to any person.

(03)
(06)

Hyper (Pvt.) Limited (HPL) has two shareholders. All the directors of the company are
nominees of these two shareholders. The details are as follows.
Name of shareholders
Western Cement Limited (WCL) - listed company
Furqan

No. of
shares
8,040,000
3,960,000
12,000,000

Nominee
directors
5
*3
8

* including chief executive

WCL is presently considering to appoint one of its directors as the chief executive of HPL
to replace the existing chief executive.
Comment on the above proposal in the light of the provisions contained in the Companies
Ordinance, 1984.
Q.8

(04)

The meeting of Board of Directors of Duck Limited (DL) would be held on 20 June 2015 to
consider declaration of 20% final cash dividend. The directors intend to close the share
transfer register from 2 July 2015 for determining shareholders entitlement for the purpose
of dividend, meeting, etc. The AGM is to be held on 15 July 2015.
In the light of the listing regulations you are required to advise the directors as regards the
following :
(a)
(b)

Q.9

(a)

The information which DL would be required to provide to the concerned stock

exchange(s) in Pakistan in respect of the above matter and the timing thereof.
Possible dates for commencement of book closure.

(05)
(02)

List the criteria which an NBFC should observe for determining the realizable value
of mortgaged, pledged, leased or collaterally held assets under the NBFC and Notified
Entities Regulations, 2008.
(04)

Corporate Laws

(b)

Page 3 of 3

Shams Housing Finance Company Limited (SHFCL) was incorporated on 1 January

2008 under the NBFC Rules, 2003 as a housing finance company.
A statement of account receivables (age-wise) and forced sale values of mortgaged
properties held by SHFCL as at 31 March 2015 is presented below:
Forced-sale value
of mortgaged
Principal Mark-up
Total
properties
---------------------- Rs. in million ---------------------596
169
765
328
203
57
260
112
113
51
164
62
50
90
49
139
56
38
94
31
45
34
79
25
23
25
48
13
1,126
423
1,549
Rental receivables

Ageing

Less than 30 days

30 days but less than 90 days
90 days but less than 180 days
180 days but less than 1 year (Note 1)
1 year but less than 2 years
2 years but less than 3 years
More than 3 years

Note 1: It includes principal amount of Rs. 20 million and mark-up thereon

amounting to Rs. 5 million which are secured by a guarantee furnished by
the Government of Sindh.
In accordance with the requirements of the NBFC and Notified Entities Regulations,
2008 you are required to:
(i) Classify the non-performing receivables in their defined categories.
(ii) Determine the required amount of provision against non-performing receivables
and explain the treatment of mark-up income in the books of SHFCL.

(02)
(08)

Q.10 Zahid, a recently appointed director on the board of Zodiac Limited, a listed company, has
sought your help in resolving the following issues which he observed while reviewing the
working papers of the board meeting:
(a)
(b)
(c)
(d)

The CEO is the chairman of Human Resource and Remuneration Committee which
includes two members, the CFO and the company secretary.
Certain transactions with related parties which were not executed on arms length
basis are not shown in the working papers.
The pattern of shareholdings presented in the note does not disclose the necessary
details.
After the death of the Chairman, the CEO has assumed the charge of the chairman of
the company.

As a consultant, you are required to write a letter advising Zahid about the requirements of
the Code of Corporate Governance, 2012, in respect of the above matters.
(THE END)

(03)
(03)
(04)
(03)