PROCEDURE OF INCORPORATION OF COMPANIES, FILING OF STATUTORY RETURNS AND AMENDMENTS IN THE COMPANIES ORDINANCE, 1984*

LIST OF NOTIFICATIONS REPRODUCED IN THE <!--[if gte mso 9]> PROCEDURE OF INCORPORATION OF COMPANIES, FILING OF STATUTORY RETURNS AND AMENDMENTS IN THE COMPANIES ORDINANCE, 1984* By Zia-ul-Rasheed Abbasi, Deputy Registrar of Companies, Securities and Exchange Commission of Pakistan Mr. President, office-bearers and Respected Members of the Income Tax Bar Association. Before I proceed to deliver my paper on the subject assigned to me, I would like to extend my gratitude to the members of this august Bar to provide me an opportunity to address them on the topic of "Procedure of Incorporation of Companies, Filing of Statutory Returns and Amendments in the Companies Ordinance, 1984". Being a member of your Bar and a humble student of Law, I feel great pleasure to be here with you today. I am really thankful to my colleagues for giving me this honour. * Paper presented at the Seminar Organized by Income Tax Bar Association, Karachi on 20-10-2003. When I commenced my legal professional career, I had the honour to learn the theory and application of Mercantile, Taxation and Company Laws from my respectable seniors, who taught me the art of interpretation of statutes. I use to have threadbare discussions with my colleagues and try to have a grip of the subject. I had a very pleasant experience of the seniors always guiding and helping the juniors and the juniors extending courtesy and respect to all the Seniors alike, and thus have a family atmosphere in the association. I have also been very lucky in the sense that when I joined Securities and Exchange Commission of Pakistan (SECP) in August, 2000, I got the chance to work with highly qualified professionals under the dynamic leadership of successive Chairmen and Commissioners and other Executive Officers. At present, we are having a highly motivated team of officers at Company Registration Office (CRO), Karachi where we work in a very friendly and professional atmosphere. All of my colleagues and officers are extremely co-operative and always willing to discuss and guide on the legal and administrative issues. Gentlemen, as we all know that the first company was incorporated in the year 1600 when the Charter was granted to 240 merchants of England by Queen Elizabeth-I, under the name of EAST INDIA COMPANY, to carry on trade by sea with Asian and African Countries. Since then large scale production, a gift of Industrialization and large scale sea trade is carried on all over the world amongst all the trading countries under corporate sector. Thus the corporate sector has played the most vital tool in bringing the world together, in ensuring interaction between different nations lying scattered all over the globe, formerly unknown to each other. Never before the world was so short in distance and time as it is reduced to a village today through the blessings of corporate sector. It goes without saying that corporate sector has provided the platform and foundation stone for all economic developments all over the world. It has been through this largest participated mode of entrepreneur that formal enforcement of mercantile, taxation, and other incidental laws has been regulated. It is this form of business that, by its very nature, ensures proper recording of all business activities, open to inspection of all its shareholders. This pattern of business has significantly developed the corporate sector and provided discipline to all human business and financial activities during the course of time. It is owing to this nature and performance of this corporate sector that the Governments in our country or elsewhere in the world are obliged to rely upon it for framing their own policies and programs, more particularly, in the ambit of Public Finance and Taxation. Gentlemen, it is in this background that the Government of Pakistan repealed the old Companies Act of 1913 and replaced it by the Companies Ordinance of 1984, making the law more elaborate and easy to understand and comprehend. It is the intention of the Government to attract more and more business-units to this sector and bring more and more discipline in trade and commerce. To make this Ordinance more public-oriented, the Government has specially created Securities and Exchange Commission of Pakistan, as an autonomous body, to provide facilities and convenience to business-community. The Securities and Exchange Commission of Pakistan (SECP) has succeeded the Corporate Law Authority (CLA) which had been administering the corporate laws in the country since 1981. The Authority was a Government department attached to the Ministry of Finance and therefore lacked the financial and administrative autonomy required to build a regulatory structure conducive to the growth of the financial sector. Due to its typical bureaucratic structure, it was difficult for the CLA to effectively pursue transparency, disclosure and authenticity, and establish an upright financial sector. The rapid expansion of the market during the early 1990's further highlighted the need for the establishment of an independent regulatory body with full operational and administrative autonomy. The process of restructuring of the Authority was initiated in 1997 under the Capital Market Development Plan of the Asian Development Bank (ADB). A Securities and Exchange Commission of Pakistan Act was passed by the Parliament and promulgated in December, 1997. In pursuance of this Act, the Securities and Exchange Commission of Pakistan, having autonomous status, became operational from January 1st 1999. The establishment of the SECP is an important milestone in the evolution of the regulatory framework for the capital market in Pakistan. The policy decisions regarding the constitution and structure of the Commission were incorporated in the Act of 1997. Mission Statement "The mission of SECP is to promote an efficient and transparent capital market, develop the corporate sector and protect the investor through responsive policy measures, effective regulation and enforcement of best governance practices." Vision Statement "Likewise, the vision of SECP is to instal and sustain a dynamic, modern and proactive regulatory body that provides impetus for the development of a fair, efficient and transparent capital market and a robust corporate sector." Facilitations: Since inception of the SECP a number of operational changes have been introduced and a friendly environment has been created at the head office and the CROs. Incorporation of companies has been made much easier, smooth and swift ensuring completion of this process preferably on the same day 'and in any case within two days. To facilitate foreign investors and overseas Pakistanis and to encourage foreign investment in the country, the Commission has set up special counters with designated officers in its three Company Registration Offices, i.e. Karachi, Lahore and Islamabad. The designated officers provide special assistance to international investors for company incorporation and other related regulatory requirements as well as information pertaining to corporate laws and functioning of the Commission. Other public services like availability of name, providing of certified copies etc., are available on the same day. There is complete automation of the working of CROs with a view to providing facilities electronically, like availability of names and incorporation of new companies etc. Further upgradation of the facilities is also contemplated for the future. The CROs and SEC head office are linked through Local Area Network (LAN) and Wide Area Network (WAN) for quick exchange and updating of companies' data and electronic submission of returns by the Companies. As corporate and tax consultants, you may have realized that substantial amendments have been made in tax laws to cater the requirements of corporate sector and rely on its performance for gathering tax. Likewise, substantial amendments have also been made in Company Law to facilitate largest participation of businessmen in private sector to form and carry on their business under the status of `COMPANY' providing procedural facilities and guidance to them for corporate compliance by the Commission. Gentlemen, it will not be out of place for us to request you, in your capacity as Corporate and Tax Advisors to persuade your clients to divert their business-status to corporate sector by removing illusory fear of cumbersome rule and regulations or excessive burden of tax rate-structure from their minds. INCORPORATION OF A COMPANY For the convenience of general public, promoters and directors of companies, SECP has established eight CROs at Islamabad, Karachi, Lahore, Peshawar, Faisalabad, Multan, Sukkur and Quetta: Besides registration of new companies and monitoring of their working according to law, functions of CRO's include providing services and guidance and also to ensure that the companies and their directors comply with the statutory requirements as provided under the Companies Ordinance, 1984 (the Ordinance). The record of companies maintained by the CROs is public record and the investors, shareholders, creditors and others concerned, may inspect the record of any company whenever they need and they may also obtain certified copy of any specific document on payment of nominal amount of fee. Any three or more persons associated for any lawful purpose may, by subscribing their names to the Memorandum of Association and complying with the requirements of the Ordinance form a public company and any one or more persons so associated may, in like manner, form a private company. If a private company is formed by only one member, it is called a single member private company and if it formed by more than one, it is just termed as a private company. REQUIREMENTS FOR REGISTRATION OF A NEW COMPANY Following are the requirements for registration of a new company under the Companies Ordinance, 1984:-‑ A. Availability Of Name The first step with regard to incorporation of a company is to seek the availability of name, proposed for the Company. This is obtained from the CRO where the Company is intended to be registered. For this purpose, an application is to be made and a fee of Rs.200 is required to be paid for seeking availability certificate for each name. The promoters desirous of forming a company should make sure that the name chosen is not otherwise inappropriate, deceptive or designed to exploit or offend the religious susceptibilities of the people and neither identical nor resembles with the name of any existing company. B. Documents for registration of a limited company The following documents are required to be filed with the Registrar concerned for registration of a private limited company:‑ I. Copy of national identity card of each subscriber/promoter. II. Memorandum and Articles of Association Four printed copes of Memorandum and Articles of Association duly signed by each subscriber in the presence of one witness. One copy should be affixed with special adhesive stamps at the rates prescribed under the Stamp Act, 1899 (Table-1). Table-1 RATES OF STAMP DUTY Province/Territory Memorandum of Association Authorized Capital Rate Articles of Association Authorized Capital Rate Punjab One hundred rupee plus one rupee per rupee hundred or part thereof subject to the maximum of Rs.1,000. One hundred rupee plus ten paisa per hundred of the amount of share capital or nominal share capital subject to maximum of Rs.1,000. Sindh If accompanied by Articles of Association. Rs. 1,000 On capital up to Rs.500,000 Rs.1,000 If not accompanied by Articles of Association Rs.2,000 On capital exceeding Rs.500,000 Rs.2,000 N.-W.F.P. If accompanied by Articles of Association under section 81 of the Companies Ordinance, 1984. Two hundred rupees Where the company has no share capital of the nomina share capita does not exceed Rs.2,500. One hundred and twenty five rupees. If not so accompanied: Three hundred twenty rupees. Where the nominal share capital exceeds Rs.2,500 but does not exceed Rs.100,000. Two hundred and fifty rupees. EXEMPTION Memorandum Of any association not formed for profit and registered under section 42 of the Companies Ordinance, 1984. Where the nominal share capital exceeds Rs.100,000 but does not exceed Rs.1,000,000; Three hundred and seventy five rupees. Where the nominal share capital exceeds Rs.1,000,000 but does not exceed 50,000,000; One thousands two hundred and fifty rupees. Where the nominal share capital exceeds Rs.50,000,000. Three thousands one hundred and twenty five rupees. Balochistan If accompanied by Articles of Association Rs.75 Capital up to Rs.2,500 Rs.50 If not accom- paned by Articles of Association Rs.200 Capital exceeding Rs.2,500 but not exceeding Rs. 1,00,000 Rs.100 Capital exceeding Rs.1,00,900 but not exceeding Rs.10,00,000 Rs.200 Capital exceeding Rs.10,00,000 Rs.500 Islamabad Any amount of capital Rs.60 Any amount of capital Rs.200 III. (a) Form 1 Declaration of compliance with the pre-requisites for formation of the Company. Form-I is also required to be witnessed by one person. (b) Form-21 Notice of situation of registered office or any change therein. (c) Form-29 Particulars of directors and officers, including the chief executive, managing agent, company secretary, chief accountant, auditor and legal advisors or any change therein. IV. Registration/filing fee A copy of the original paid Challan in the authorized branches of Habib Bank Limited or a Bank Draft drawn in favour of the Securities and Exchange Commission of Pakistan of the prescribed amount. (Table-2) Table-2 TABLE OF FEE 1. Availability of name Rs.200 2. Fee for incorporation of a company whose nominal share capital does not exceed Rs.500,000, a fee of Rs.5,000 3. For registration of a company whose nominal Rs.500 share capital exceeds Rs.500,000 the above fee of five thousand rupees, with the following additional fees regulated according to the amount of nominal share capital (that is to say), (i) For every 100,000 rupees of nominal share Rs.250 capital or part of 100,000 rupees, after the first 500,000 rupees, up to 5,000,000 rupees, a fee of (ii) For every 100,000 rupees of nominal share capital or part of 100,000 rupees, after the first 5,000,000 a fee of Provided that where the fees, regulated according to the amount of nominal share capital of company, exceeds a sum of ten million rupees, the total amount of fees payable for registration of such company shall not, in any case, exceed ten million rupees. Note: I) Fee for incorporation of association not for profit Rs.25,000 under section 42 of the Ordinance II) Licence fee for association not for profit under section 42 of Rs.5,000 Ordinance 4. Filing fee per return Rs.200 5. Document relating to registration of mortgage/charge Rs.5,000 6. Copying fee Certificate of incorporation, Rs. 50 Certificate of commencement of business, per Certificate of mortgage/charge certificate (II) Other documents Rs.20 7. Inspection of file Rs.200 8. Application under section 21 for alteration Rs.5,000 9. Application under section 158 for extension in holding of A.G.M. Public Company Rs.15,000 Private Company Rs. 5,000 10. Application for change of name Rs. 1,000 11. Any other application from the company other than above. Rs. 500 Payment of additional fee for late filing of documents-- SECP has recently cut down the additional filing fee structure into different time-slabs through the Companies (Registration Offices) Regulations, 2003. If any document is filed with or presented to a Company Registration Office after the expiry of the period within which it was required or authorized to be filed or registered, not being particulars or documents requiring registration under sections 121, 122, 123, 124, 129, 131 or 132, the Registrar concerned may, without absolving the defaulting company or person of any liability arising out of the default, delay or failure to comply, accept the document for record on payment of an additional fee, in addition to normal filing fee, as specified in column (3) of the Table below against the period of delay specified in column (2) thereof. TABLE S. No. Period of Delay Additional Fee (1) (2) (3) 1. If a document is filed with a delay of not more than fifteen days. Additional fee equal to the usual fee specified for the document in the Sixth Schedule. 2. If a document is filed with a delay of more than fifteen days but not more than forty-five days Additional fee equal to two times of the usual fee specified for the document in the Sixth Schedule. 3. If a document is filed with a delay of more than forty-five days. Additional fee equal to three times of the usual fee specified for the document in the Sixth Schedule. Fee can be paid through Bank Draft, Pay Order or Challan in the following Branches of HABIB BANK LIMITED Islamabad Corporate Branch, Blue Area, Islamahad. Karachi/Hyderabad (i) Central Branch, Habib Bank Plaza, 1.1. Chundrigar Road, Karachi (ii) State Life Branch. Corporate Centre, Dr. Zia-uddin Ahmed Road, Karachi (iii) FTC Branch, Corporate Centre, Sharah-.e-Faisal, Karachi . (iv) P.N.S.C. Building Branch, Sub-Corporate Centre, M.T Khan Road, Karachi (v) K. P.T Branch. Sub Corporate Centre, Karachi. (vi) Club Road Branch, Sub-Corporate Centre, Karachi (vii) S.I.T.E Branch, Corporate Centre, Karachi (viii) Indus Gas Branch, Sub-Corporate Centre, 1-Hyderabad Lahore/Gujranwala (i) Centre Branch, 102/103, Upper Mall, Lahore (ii) WAPDA House Branch, Sub-Corporate Centre, Lahore (iii) Empress Road Branch, Sub-Corporate Centre, Lahore (iv) Paris Road Branch, Sub-Corporate Centre, Lahore (v) Climaxabad Branch, Sub-Corporate Centre, Gujranwala Multan Corporate Centre Branch, Old Bahawalpur Road, Multan Faisalabad Corporate Branch, Circle Road, Faisalabad Peshawar Corporate Centre Branch, Shaheen Foundation Building, The Mall, Peshawar Cantt. Quetta Jinnah Road Branch, Quetta Sukkur Military Road Branch, Sukkur V. Authorization by subscribers The authorization of all the subscribers on hundred rupees stamp paper, duly notarized favouring a person, to make good the deficiencies, if any, in memorandum and Articles of Association as may be pointed out by the Registrar concerned and to collect the certificate of incorporation. VI. Additional Requirements in case of a Public Company (a) Form-27 List of persons consenting to act as Directors. (b) Form-28 Consent to act as Director/ Chief Executive. C. Documents for incorporation of an association not for profit All the documents meant for incorporation of a public limited company alongwith a licence issued by the SEC. In case of trade body a licence issued by Ministry of Commerce are to be submitted to the Registrar concerned. The application for obtaining the requisite licence from the Commission should be accompanied by draft Memorandum and Articles of Association, list of promoters, declaration, names of companies in which the promoters of the proposed association hold any office, estimates of annual income and expenditure and brief statement of work already done and to be done. (Section 42 & Rule 6). D. Requirements for establishment of a place of business of a Foreign Company in Pakistan to be fulfilled within 30 days from the date of establishing the place of business (sections 450 To 460 of the Companies Ordinance, 1984). 1. FORM-38 Documents (charter/statute/Memorandum and Articles etc.) delivered for registration by a foreign company. CERTIFIED BY (a) the public officer in the country where the company is incorporated to whose custody the original is committed; OR (b) a notary public of the country where the company is incorporated; OR (c) an affidavit of a responsible officer of the Company in the country where the Company is incorporated: Provided that the signature or seal of the person so certifying shall be authenticated by a Pakistan Diplomatic Consular or Consulate Officer. IF THE CHARTER IS IN OTHER THAN ENGLISH LANGUAGE The translation into English or Urdu language certified by: 1. Where any such translation is made outside Pakistan, it shall be authenticated by the signature and seal, if any, of‑ (a) the public officer in the country where the Company is incorporated to whose custody the original is committed; OR (b) A notary public of the country where the Company is incorporated: Provided that the signature or seal of the person so certifying shall be authenticated by a Pakistan Diplomatic Consular or Consulate Officer. 2. Where such translation is made within Pakistan, it shall be authenticated by an affidavit of any person having, in the opinion of the Registrar, an adequate knowledge of the language of the original and of English or Urdu, as the case may be. 2. FORM-39 Return showing address of the registered or principal office of a foreign company or of any change therein. 3. FORM-40 Return showing particulars of directors, chief executive and secretaries (if any) of a foreign company or of any alteration therein. 4. FORM-41 Return showing particulars of principal officer of a foreign company in Pakistan or of any change therein. 5. FORM-42 Return showing particulars of person resident in Pakistan authorized to accept service on behalf of a foreign company or of any alteration therein alongwith his consent in writing. 6. FORM-43 Return showing address of the principal place of business in Pakistan of a foreign company or of any change therein. 7. Copy of permission from Board of Investment. 8. Power of attorney in English language in favour of Principal Officer/Authorized person to sign the documents duly notarized in the country of origin. 9. Copy of Passport of Principal Officer or in case of Pakistani, copy of NIC. 10. Original paid challan of Rs.1,200 on account of filing fee. E. Prior approval of the Ministry/Departments etc. For Special Purpose Companies Prior approval of the Ministries/Departments etc. noted against each category of the following companies is required to be obtained before incorporation of companies in the following cases: - I) Ministry of Finance (a) A Banking Company II) State Bank of Pakistan Securities and Exchange/Commission of Pakistan (b) A Non-Banking (under part viii-A and section 282 of the Finance Company (NBFC) Companies Ordinance, 1984 read with non-banking Finance Companies (Establishment and Regulations) Rules, 2003. Stock Exchange (c) A corporate stock broker/member (Under section-8 of the Securities and Exchange Ordinance, 1969). (d) A company having objects of a security guard company. Ministry of Interior Requirements For Incorporation of a Company having objects of Security Guards Business. * Memorandum and Articles of Association (15 sets). The memorandum clause should not contain any business other than related to security business. Specimen of Memorandum of Association can be obtained from CRO's. * Form-I, Form-21 (indicating complete address of the registered office of the company - 15 sets) and Form-29. * Authority letter on stamp paper of Rs.100. * Paid challan of prescribed registration fee as per Table-2. Photo copies of NICs/passports of each promoter of the company duly attested (15 sets). * Copy of letter for availability of name issued by this office. * Financial position/bank statements of the promoters/directors of the proposed company which should not be less than fifteen Lacs rupees. (Rs. 1.5 million). * Bio data of each promoter (15 sets). Ex-army personnel should clearly indicate P A and corps number. * Usual residential address of each promoter must be full and clearly identifiable. * The usual residential address given in the bio data of the promoters must be consonance with Memorandum and Articles of Association and other documents filed by the company. Requirements after Incorporation a. Private companies i. The number and names of first directors are required to be determined by the majority of subscribers of memorandum in writing and until so determined all the subscribers of the memorandum who are natural persons shall be deemed to be directors of the Company. The first election of directors is required to be held at the first Annual General Meeting of the company and subsequently after every three years. The directors so elected are to hold office for a period of three years. However, casual vacancy occurring on account of death, resignation or removal of any director may be filled up by the other directors for the remainder period of the term. ii. Directors of every company are required to appoint the first chief executive not latter than fifteen days from the date of incorporation and thereafter within fourteen days from the date of election. iii. The first auditor is required to be appointed by the directors within sixty days from the date of incorporation and thereafter in each AGM of the company. iv. A single member company is also required to appoint a company secretary. v. Any appointment, election or change in the Directors, Chief Executive, Auditors, Chief Accountant, legal adviser etc. is required to be notified to the Registrar concerned on Form '29' within 14 days of the said election, appointment or change (section 205). vi. A company is required to notify the registered office of the Company on Form-21 within 28 days from the date of its incorporation or change of its registered office. (Section 142). This form is normally submitted with the registration documents to facilitate communication. vii. A private company may commence its business immediately after its incorporation. viii. First Annual General Meeting (AGM) of the company is required to be held within eighteen months from the date of incorporation and subsequent Annual General Meetings are required to be held once at least in every calendar year, within a period of four months following the close of its financial year and not more than fifteen months after holding of its last preceding AGM (section 158). ix. Directors of every company are required to lay before the Company in its AGM audited balance-sheet and profit and loss accounts in case of first accounts since the incorporation of the company and in any other case since the preceding account, made up to a date not earlier than the date of the meeting by more than four months (section 233). x. Annual return on prescribed Form `A' is required to be filed with the Registrar concerned once in each year made as on the date of Annual General Meeting, where no such meeting is held, on the last day of the calendar year (section 156). xi. In case of increase in paid-up capital, the Company is required to offer new shares to the existing shareholders and the offer is required to be accompanied by a circular issued under section 86(3) to all the shareholders strictly in proportion to the shares held by them and, on the allotment of shares, return of allotment on Form '3' is required to be filed with Registrar concerned within 30 days from the date of allotment of shares. Partly paid shares are not allowed to be issued at all. (sections 73 and 86). xii. The Company is required to issue share certificates to its shareholders within 90 days from the date of allotment or within 45 days after the date of filing of application for registration of transfer of shares (section 74). xiii. Particulars of every mortgage or charge created by the Company on its property or undertaking and every modification therein or satisfaction thereof are required to be filed and registered with the Registrar concerned within 21 days after the date of its creation, modification or satisfaction (sections 121, 129 and 132). b. Public companies i. All the requirements meant for private companies given at serial Nos. (i) to (xiii) above are also applicable to public companies. However, the listed companies are also required to file list of members on floppy diskette to the Commission and the associations are required to file with the Registrar concerned annual return on Form B' instead of Form `A'. ii. Company is required to file a list of Directors and consent of Directors and Chief Executive within 14 days of the incorporation and thereafter within 14 days from the date of the election/appointment of Directors and Chief Executive on Forms 27 and 28. iii. Company may commence its business after obtaining commencement of business certificate from the Registrar concerned (section 146). iv. Statutory meeting is required to be held within a period of not less than three months but not more than six months from the date at which the Company is entitled to commence business. A statutory report is required to be circulated to the members and five copies thereof certified in the prescribed manner are required to be filed with the Registrar concerned, at least 21 days before the date of Statutory Meeting. A private company which converts itself to public company after one year of incorporation is not required to hold such statutory meeting and issue such statutory report. (section 157). v. Two copies of the audited balance-sheet and profit and loss accounts signed in the prescribed manner are required to be filed by public companies with the Registrar concerned within 30 days from the date of their AGM (sections 233 and 242). vi. Every listed company is required to file three copies of audited balance-sheet and profit and loss accounts to the SECP, Stock Exchange and the Registrar at the time of sending the notice of AGM to the members as well as within 30 days of holding the Annual General Meeting. vii. Return containing beneficial ownership of listed securities and change therein on Form 31 and Form 32 are required to be filed with the Registrar concerned and the SECP. viii. A listed company is also required to appoint a company secretary. c. Requirement after establishment of place of business by foreign companies * Any change or alteration in particulars stated in the documents and returns filed at the time of registration under section 451 is required to be filed on Form 44 with the Registrar concerned within 30 days of such change or alteration (section 452); and. * Foreign company is required to file annually with the Registrar concerned annual accounts in respect of its operations within Pakistan as well as its global accounts together with the list of Pakistani members and debenture holders and of places of business of the company-in Pakistan within the prescribed period (section 453). * Foreign company is required to submit the renewal/ extension of the permission to open/maintain a branch/liaison office from the Board of Investment on the expiry of the validity period of the permission, originally granted. * Foreign company is required to give notice on Form 46 to the Registrar concerned at least 30 days before it intends to cease to have a place of business in Pakistan and to publish a notice of such intention at least in two daily newspapers circulating in the Province or Provinces in which such place or places of business are situated. INFORMATION FOR THE COMPANIES HAVING FOREIGN INVESTMENT/COLLABORATION Foreign Investors are permitted to hold 100% equity of industrial projects without any permission of the Government. No Government sanction is required for setting up any industry, in terms of field of activity, location and size except for the following: A. Arms and ammunitions. B. High explosives C. Radio-active substances D. Security printing, currency and mint. No new units for the manufacture of alcoholic beverages or liquors will be allowed. There is no requirement for obtaining No Objection Certificates (NOC) from the Provincial Governments for locating the project anywhere in the country except in areas that are notified as negative areas. With the announcement of Investment Policy, 1997 by Government of Pakistan, the foreign investment has since been allowed on repatriable basis in agriculture, service, infrastructure and social sectors subject to conditions indicated against each. They will have to simply register a company with the SEC under the Ordinance and to inform the State Bank of Pakistan provided the relevant conditionalities are fulfilled. (a) Service Sector: Activities "FDI in Service Sector is allowed for any activity subject to any condition that services which require prior permission/NOC or licence from the concerned agencies will continue to get the same treatment until and unless deregulated by such agencies and will be subject to provisions of respective sectoral policies. The list of deregulated services in telecommunications is as under;-‑ (a) E-mail/Internet/Electronic Information Services (EIS) (b) Data Communication Network Services (c) Trunk Radio Services (d) Cellular Mobile Telephone Services (e) Audiotex Services (f) Voice Mail Services (g) Card Pay Phone Services (h) Close User Group for Banking Operations (i) International Satellite Operations for Domestic Data Communication (j) Paging Services (k) Vehicle Tracking System (VTS) (l) Burglar Alarm System (BAS) (m) Global Mobile Personal Communication System (GMPCS) (n) Any other telecommunication service, which is deregulated in future, will become part of this list. Note:---Those sectors which have not been deregulated due to monopoly available to Pakistan Telecommuni cation Corporation Limited (PTCL) till 31st December, 2002 are open to foreign investors in collaboration with PTCL". Conditions (i) The amount of foreign equity investment in the company/project shall be at least US $ 0.3 million. (ii) Foreign investors are allowed to hold 100 % of the equity subject to the condition that the repatriation of profit shall be restricted to a maximum of 60 % of the total equity or profits and that a maximum of 40 % of equity is held by Pakistani investor (including sale of shares in stock exchange) within five years. (b) infrastructure sector: Activities "Infrastructure projects including development of industrial zones" Conditions i. The amount of foreign equity investment in the company/project shall be at least US $ 0.3 million. ii. 100% foreign equity is allowed on repatriable basis. (c) social sector: Activities "Education, Technical/Vocational Training, Human Resource Development, (HRD) Hospitals, Medical and Diagnostic Services." Conditions i. The amount of foreign equity investment in the company/project shall be at least US $ 0.3 million. ii. 100% foreign equity is allowed. (c) agriculture sector: (Corporate Agriculture Farming) Activities "Land Development/Reclamation Barren pose and Deserts and Hilly Areas for Agriculture Crops Farming; Reclamation of Water Front Areas/ Crops, Fruits, Vegetables, Flowers, Farming/ Creeks; Integrated Agriculture (Cultivation And Processing of Irrigation Crops); Modernization and Development of Irrigation Facilities and Water Management; Plantation/ oats, Horticulture, Dairy, Small Ruminants (sheep and goats) and all other Livestock Farming and Breeding". Conditions i. The amount of foreign equity investment in the company/project shall be at least US $ 0.3 million. ii. The Pakistani corporation or individual in the Company shall hold a minimum 40% of the equity. iii. There is no upper ceiling on land holding for registered agricultural companies. However the income of these companies is taxable iv. The proposals related to foreign investment the in the Agriculture Sector are processed by Board of Investment in consultation with the respective Provincial Governments for approval by the Competent Authority. v. Land for agriculture purpose can be obtained on a lease basis for long periods i.e., initially up to 30 years, extendable for a further period of 20 years. vi. A foreign company permitted to invest in the agriculture sector is not allowed to transfer land to any other foreign company unless specifically approved by the Federal and the concerned Provincial Governments. Forms for Statutory Returns Following are the statutory forms/returns which are required to be filed under the Companies Ordinance, 1984. Title Description Filing Period Relevant Section/Rules Form 1 Declaration of applicant for incorporation 30(2)/4 Form 2 Application to the Securities and Exchange Commission of Pakistan for the approval of conversion of a public company into a private company - 44/7 Form 3 Return of allotments 30 days 73(1) Form 4 Particulars of oral contract relating to shares 30 days 73(2) Form 5 Statement of the amount or rate per cent of the commission payable in respect of shares/debentures and of the number of the shares/debentures for which persons have agreed to subscribe for absolutely or conditionally 82 Form 6 Notice of consolidation, division or sub-division of shares, specifying the shares so consolidated, divided or sub-divided or the cancellation of shares (otherwise than in connection with a reduction of share capital under section 96 of the Companies Ordinance, 1984) 15 days 92 93 Form 7 Notice of increase in nominal share capital 15 days 92-94 Form 8 Notice of increase in number of members 15 days 94 Form 9 Notice of the Court's order disallowing/confirming the variations of the rights of holders of/special class of shares 15 days 108(5) Form 10 Particulars of mortgages, charges, etc. 21 days 121-129-463 Form 11 Particulars of mortgage or charge subject to which property has been acquired 21 days 122-463 Form 12 Register of mortgages, etc. and of 125-129‑ memorandum of satisfaction thereof 132 - 133 -137 Form 13 Registration of entire series of debentures/redeemable capital 21 days 123-124‑463 Form 14 Particulars of an issue if redeemable capital/debentures in a series when more than one issue in the series is made 21 days 123 463 Form 15 Chronological index of mortgages, charges, etc. registered with Registrar 126 Form 16 Particulars of modification of mortgage, charge, etc. 21 days 129(3)-463 Form 17 Memorandum of complete satisfaction of mortgage, charge, etc. 21 days 132-463 Form 18 Notice of appointment of receiver or manager 15 days 137-464 Form 19 Notice to be given by receiver/manager on ceasing to act as such 30 days 138(1) - 464 Form 20 Receiver or manager's abstract of receipts and payments 30 days 138-464 Form 21 Notice of situation of registered office or any change therein 28 days 142 Form 22 Declaration with the compliance with the conditions of section 146 of the Companies Ordinance, 1984 before commencing business in case of a company issuing prospectus 146(1)(D) Form 23 Declaration before commencing business in case of a company filing statement in lieu of prospectus 146(1)(a) Form 24 Notice of rectification of register of members 15 days 154 Form 25 Statutory report 21 days 157 Form 26 Special resolution 15 days 172 Form 27 List of persons consenting to act as directors 14 days 184 Form 28 Consent to act as Director/Chief Executive 14 days 184 Form 29 Particulars of Directors and Officers, including the Chief Executive, Managing Agent, secretary, Chief Accountant, Auditors and Legal Advisers, or of any change therein 14 days 205 Form 30 Resolution passed by members pursuant to section 208 15 days 208/15 Form 31 Return containing particulars of beneficial ownership of listed securities as at 30/15 days 272 Form 32 Return of change of beneficial ownership of listed securities and making of gains 15 days 222-224 Form 33 Notice, of address at which books of accounts are maintained 7 days 230(1)-454 Form 34 Pattern of shareholding - 236(D) Form 35 Application for extention in period for payment of dividend 45 days 251 (2) Form 35(A) Auditors report to the member 255(3)/17(A) Form 35 (B) Auditors report for a banking company 255(3)/17(B) Form 36 Notice to dissenting shareholders 120 60 days 289 Form 37 Information to be furnished in relation to any offer of a scheme or contract involving the transfer of shares or any class of shares in the transferor company to the transferee company 289(5)/21 Form 38 Documents (charter/statute/ memorandum and articles, etc.) delivered for registration by a foreign company 30 days 451(1)(a)/ 22-23 Form 39 Return showing address of the registered or principal office of a foreign company or of any change therein 30 days 451(1)(b)‑452 (b) Form 40 Return showing particulars of directors, Chief Executive and secretaries (if any) of a foreign company or of any alteration therein 30 days 451(1)(c)-452(c) Form 41 Return showing particulars of principal officer of a foreign company or of any change therein 30 days 451(1)(d)- 452 (d) Form 42 Return showing particulars of persons resident in Pakistan authorized to accept service on behalf of a foreign company of any alteration therein 30 days 451(1)(e)- 452 (e) Form 43 Return showing address of the principal place of business in Pakistan of a foreign company or of any change therein 30 days 451(1)(f)- 452 (f) Form 44 Return of alteration in charter, etc of a foreign company 30 days 451(a)/22- 23 Form 45 List of places of business established by a foreign company in Pakistan and submission of accounts by foreign companies 45 days 453 (1) Form 46 Notice by a foreign company on ceasing to have any place of business in Pakistan 30 days 458 Form A Form a- Annual Return of 30 days company having share capital (Unlisted Cos.) 156 45 days (Listed Cos.) Form B Form 13- Annual return of 30 days 156 company not having share capital Annual Balance-sheet and profit and loss (i) 30 (i) 242(1) Accounts accounts or income and days expenditure accounts (ii) 233(5) (ii) 21 (i) By public companies days before (ii) By listed companies AGM. ADJUDICATION POWERS FOR LATE FILING OF VARIOUS RETURNS Section 476 of the Companies Ordinance, 1984 provides for punishment and adjudication of the fine or penalty. Authority Fine/penalty or punishment Incharge CRO (section 476(1)(a) Up to Rs.9,999 Registrar HQS. (section 476(1)(b) Rs.10,000 to Rs.99,999 and where only per day fine is provided. Commission (section 476(1)(c) Rs.1,00,000 and above Court (section 476(4) Where imprisonment is provided Form No. Maximum Fine /penalty Rupees Jurisdiction 1. 2. 3. 500 per. Day Registrar Hqs. 4 500 per day Registrar Hqs. 5 2,000 Incharge CRO. 6 100 per day Registrar Hqs. 7 100 per day Registrar Hqs. 8 100 per day Registrar Hqs. 9 200 per day Registrar Hqs. 10 500 per day Registrar Hqs. 11 2,000 per day Incharge CRO. 12 - - 13 500 per day Registrar Hqs. 14 500 per day Registrar Hqs. 15 - - 16 500 per day Registrar Hqs. 17 100 per day Registrar Hqs. 18 2,000 Incharge CRO. 19 2,000 Incharge CRO. 20 2,000 Incharge CRO. 21 200 per day Registrar Hqs. 22 1,000 per day Registrar Hqs. 23 1,000 per day Registrar Hqs. 24 50,000 Registrar Hqs. 25 20,000 (Listed) 5,000 (unlisted) Registrar Hqs. Incharge CRO. 26 100 per day Registrar Hqs. 27 10,000 Registrar Hqs. 28 10,000 Registrar Hqs. 29 500+50 Registrar Hqs. 30. 1.0 Million Commission 31. 30,000 Registrar Hqs. 32. 30,000 Registrar Hqs. 33. Imprisonments and Court penalty 34. Imprisonments and Court penalty 35. - - 35.A 100,000 (on Auditor) Commission 35.B 100,000 (on Auditor) Commission 36. 2,000 Incharge CRO. 37. 2,000 Incharge CRO. 38. 5,000 Incharge CRO. 39. 5,000 Incharge CRO. 40. 5,000 Incharge CRO. 41. 5,000 Incharge CRO. 42. 5,000 Incharge CRO. 43. 5,000 Incharge CRO. 44. 5,000 Incharge CRO. 45. 5,000 Incharge CRO. 46. 5,000 Incharge CRO. Circular 86(3) 498 50,000+500 Registrar Hqs. (i) 10,000 (Listed Companies) (i) Registrar Hqs. Form A (ii) 2,000 (unlisted Companies) (ii) Incharge CRO. Form-B 2,000 Incharge CRO. I feel pleasure to inform you that the powers of the Registrar, Headquarters for Adjudication of Fines under section 476(1) (b) have recently been delegated to the Incharges of CRO, Karachi and Lahore for convenience of Corporate Sector and quick disposal of the cases, vide Notification No. 975, dated 9-10-2003. AMENDMENTS IN COMPANIES ORDINANCE, 1984. Amendments have been made in the Companies Ordinance, 1984 through "The Companies (Amendment) Ordinance, 2002 (Ordinance No. C of 2002), promulgated on October 26, 2002. Following are the significant amendments in the Ordinance. (i) Section 2.---Clause 15-A. relating to definition of a Financial Institution has been amended. The definition is quite different from the previous one. Now a- company or an institution which transacts business of Banking or any associated or ancillary business or a Modaraba, Leasing Company, NBFC or any other similar company notified by the Government, are specified as Financial Institutions. (ii) Sections 15, 47, 160, 174 and 305.---A new concept of single member private company (SMC) has been introduced to admit the individual businessmen in the corporate sector as a company having limited liability. Consequential amendments have been made in sections 47, 160, 174 and 305 with respect to the SMC. (iii) Sections 15 and 174.---The minimum number of seven members and directors of a public company is reduced to three. However, the listed companies shall continue to have at least seven directors. (iv) Sections 19, 27, 73 and 205.---Instead of mentioning the particulars of subscribers, allotees and officers in the relevant sections, these shall be prescribed in the rules. (v) Section 78-A.---Amendment has been made by insertion of a new section to provide a right of appeal to the shareholder before the Commission against refusal of company or delay in registration of transfer or transmission of shares within prescribed period. (vi) Section 84.---The maximum limit of 10% or higher to be allowed by the Commission on issue of shares at discount has been omitted. Now the Commission can sanction the issuance of shares on discount at any rate. (vii) Section 131.---Power to rectify the register of mortgage or grant of extension for the delay in registration, modifications and satisfaction of a mortgage or charge created by companies has been entrusted to the Commission instead of the Courts. This amendment has been made to provide swift remedy to the aggrieved party. (viii) Section 157.---A public company that has been converted from a private company after one year of its incorporation has been exempted to hold statutory meeting. (ix) Sections 158 and 233.---Amendments have been made to hold the annual general meeting of the companies, for consideration and approval of audited accounts within a period of four months from the closure of accounts. The Commission gave a general extension of sixty days in holding of the annual general meeting to all the companies whose financial years have closed before October 26, 2002, the date of promulgation of the Amending Ordinance. (x) Section 160.---Quorum of a general meeting of a public listed company is increased from three members to ten members present in person representing not less than 25% of total voting power either of their own account or as proxies. In case of SMC the quorum shall be single member present in person or by proxy. Quorum of non-listed company and private company has been fixed as two members present in person having at least 25% voting power. (xi) Section 160-A.---Section 160-A relates to the powers of the Court to invalidate the proceedings of General Meeting. This section has been shifted from 161(8) which has been omitted for the reason that subsection 8 was misplaced in section 161 which relates to proxies. (xii) Section 170.---Now power to call meeting has been entrusted to the Commission instead of the Registrar. (xiii) Section 173.---Amendments has been made to circulate the minutes of the meetings to all members of the Board of Directors of companies within 14 days of the meeting. This amendment has been made to make the affairs of the companies more transparent. (xiv) Section 178.---Amendment provides for procedure of election of Directors of companies not having shares capital to be provided in the Articles of Association of the Company and provisions of section 178 shall not apply in such cases. This is a very significant amendment to promote -a transparent corporate culture. (xv) Section 184.---The period of filing of list of persons consenting to act as Directors of companies and their consent to do so has been fixed as 14 days from the date of their appointment. (xvi) Section 187.---Defaulters of financial institutions declared by the Court of competent jurisdiction and stock exchange members engaged in business of brokerage or spouse of such members have been made ineligible to be directors of listed companies. (xvii) Section 204.---Appointment of a whole time qualified company secretary is made mandatory both for a listed and a single member company. Qualifications of company secretary has been prescribed in the rules. (xviii) Section 208.---Members of a company shall now be able to make final decision for investment in associated companies through special resolution, after having full disclosure of the investments. The maximum limit of thirty per cent of the paid-up capital plus free reserves of the investing company has been removed and the role of the regulator to grant waiver to certain companies has been done away with. (xix) Section 234.---The private and non-listed public companies that are subsidiaries of the listed companies are also made liable to prepare their accounts in accordance with requirements of Fourth Schedule. The statutory provisions are made in conformity with the International Accounting Standards. All companies are now required to prepare their accounts in accordance with IAS. (xx) Section 245.---Listed companies are now required to prepare and furnish quarterly accounts. This has been done to keep the strict watch on the financial activities of listed companies, wherein huge investment from the general public is involved. (xxi) Section 252.---Ambiguity regarding removal of auditors has been done away. Now, a company can remove its auditors through special resolution. However, appointment of new auditor would require approval of the Commission. (xxii) Section 237.---Amendment has been made for preparation of consolidated financial statements for holding and subsidiary companies. (xxiii) Sections 321, 323 and 364.---Amendment has been made to restrict the appointment of any official liquidator up to three companies at a time and no remuneration to be paid if winding-up proceeding are not complete within the prescribed period. This amendment is also very important as prior to this Official Assignee used to be the Official Liquidator in a large number of companies and such cases could not be finalized for long period of time. (xxiv) Sections 78, 158, 160, 204, 230, 233, 236, 259 and 260.---Now the Penalties have been rationalized. Amendments in the Companies (General Provision and Forms) Rules, 1985 Amendments in the Companies (General Provision and Forms) Rules, 1985 have also been made and notified on 7th July, 2003, vide S.R.O. 687(I)/2003. -Amendments mainly comprise the following: (i) Reformulating the forms and returns: Forms and returns submitted by the companies with the Commission and its Company Registration Offices have been completely reformatted, eradicating redundant information. Format of the returns has been simplified with a view to increase corporate sector's compliance with the statutory requirements and to facilitate automated data capture and retrieval. (ii) Documents Submitted with application for alteration in memorandum The documents to be submitted with application for alteration in memorandum have been specified to avoid potential delays in obtaining SEC's approval. (iii) Mode of Servicing of Notice/Documents The companies have been permitted to service notice/ documents to its members etc., through courier service apart from sending through traditional postal mail. (iv) Company Representatives in proceeding before the Commission The Chief Executive, Company Secretary and such other person possessing the qualification prescribed by the Commission have been included in the list to represent the company in proceeding before the Commission. It is pertinent to mention that a Chartered Accountant, cost and management accountant and advocate practising at the level of High Court/Supreme Court can also appear on behalf of the company in proceeding before the Commission. (v) Signatories on the returns submitted with the Commission To fix the responsibility, the Chief Executive or the secretary of a company would be authorized to sign the returns submitted with the Commission.