PART VIII
MANAGEMENT AND ADMINISTRATION
REGISTERED OFFICE, PUBLICATION OF NAME, ETC. 

When it makes an order for rectification of the register of members in respect of a company which is required by this Ordinance to file a list of its members with the register, the Court shall cause a copy of the order to be forwarded to the company and shall, by its order, direct the company to file notice of the rectification with the registrar within fifteen days from the receipt of the order.

155. Register to be evidence:-

The registers referred to in sections 76, 147, 149 and 156 shall be prima facie evidence of any matter which by this Ordinance is directed or authorised to be inserted therein.

156. Annual list of members, etc:-

(1) Every company having a share capital shall, once in each year, prepare and file with the registrar a return containing the particulars specified in Form A of the Third Schedule as on the date of the annual general meeting or, where no such meeting is held or if held is not concluded, on the last day of the calendar year.

(2) A company not having a share capital shall in each year prepare and file with the registrar a return containing the particulars specified in Form B of the Third Schedule as on the date of the annual general meeting or, where no such meeting is held or if held is not concluded, on the last day of the calendar year.

(3) The return referred to in sub-section (1) or sub-section (2) shall be filed with the registrar:-

(a) in the case of a listed company, within forty-five days; and

(b) in the case of any other company, within thirty days:

from the date of the annual general meeting held in the year or, when no such meeting is held or if held is not concluded, from the last day of the calendar year to which it relates:

Provided that, in the case of a listed company, the registrar may for special reasons extend the period of filing of such return by a period not exceeding fifteen days.

(4) All the particulars required to be submitted under sub-section (1) and sub-section (2) shall have been previously have been previously entered in one or more registers kept by the company for the purpose.

(5) If a company makes default in complying with any requirement of this section, the company and every officer of the company who knowingly and wilfully authorises or permits the default shall be liable:-

(a) in the case of a listed company, 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; and

(b) in the case of any other company, 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.

MEETINGS AND PROCEEDINGS

157. Statutory meeting of company:-

(1) Every company limited by shares and every company limited by guarantee and having a share capital shall, within a period of not less than three moneys, nor more than six months, from the date at which the company is entitled to commence business, hold a general meeting of the members of the company, which shall be called "the statutory meeting".

(2) The directions shall, at least twenty-one days before the date on which the meeting is held, forward a report, in this Ordinance referred as "the statutory report", to every member.

(3) The statutory report shall be certified by not less than three directors, one of whom shall be the chief executive of the company, and shall state:-

(a) the total number of shares allotted, distinguishing shares allotted otherwise than in cash, and stating the consideration for which they have been allotted.

(b) the total amount of cash received by the company in respect of all the shares allotted.

(c) an abstract of the receipts of the company and of the payments made there out up to a date within seven days of the date of the report, exhibiting under distinctive headings the receipts of the company from shares and debentures and other sources, the payment made thereout, and particulars concerning the balance remaining in hand, and an account or estimate of the preliminary expenses of the company showing separately and commission or discount paid or to be paid on the issue or sale of shares of debentures;

(d) the names, addresses and occupations of the directions, chief executive, secretary, auditors and legal advisors of the company and the changes, if any, which have occurred since the date of the incorporation;

(e) the particulars of any contract the modification of which is to be submitted to the meeting for its approval, together with the particulars of the modification or proposed modification;

(f) the extent to which underwriting contracts, if any, have been carried out and the extent to which such contracts have been carried out, together with the reasons for their not having been carried out; and

(g) the particulars of any commission or brokerage paid or to be paid in connection with the issue or sale of shares to any director, chief executive secretary or officer or to a private company of which he is a director.

(4) The statutory report shall also contain a brief account of the state of the company's affairs since its incorporation and the business plan, including any change or proposed change affecting the interest of shareholders and business prospects of the company.

(5) The statutory report shall, so far as it relates to the shares allotted by the company, the cash received in respect of such shares and to the receipts and payments of the company, be accompanied by a certificate of the auditors of the company as to the correctness of such allotment, receipt of cash, receipts and payments.

(6) The directors shall cause at least five copies of the statutory report, certified as aforesaid, to be delivered to the registrar for registration forthwith after sending the report to the members of the company.

(7) The directors shall cause a list showing the names, occupations, nationality and addresses of the members of the company, and the number of shares held by them respectively, to be produced at the commencement of the meeting and to remain open and accessible to any member of the company during the continuance of the meeting.

(8) The members of the company present at the meeting shall be at liberty to discuss any matter relating to the formation of the company or arising out of the statutory report, whether previous notice has been given or not, but no resolution of which notice has not been given in accordance with the articles may be passed.

(9) The meeting may adjourn from time to time, and at any adjourned meeting any resolution of which notice has been given in accordance with the articles, either before or after the original meeting, may be passed, and an adjourn meeting shall have the same powers as an original meeting.

(10) If a petition is presented to the Court in matter provided by Part XI for winding up the company on the ground of default in filing the statutory report or in holding the statutory meeting, the Court may, instead or directing that the company be wound up, give directions for the statutory report to be filed or a meeting to be held, or make such other order as may be just.

(11) In the event of any default in complying with the provisions of any of the preceding sub-section, the company and every officer of the company who knowingly and wilfully authorises or permit such default shall be liable:-

(a) if the default relates to a listed company, to a fine not less than ten thousand rupees and not exceeding twenty thousand rupees and in the case of a continuing default to a further fine not exceeding two thousand rupees for every day after the first during which the default continues; and

(b) if the default relates to any other company, to a fine not exceeding five thousand rupees and in the case of a continuing default to a further fine not exceeding two hundred rupees for every day after the first during which the default continues.

(12) This section shall not apply to a private company but if any such private company is converted into a company of either of the classes mentioned in sub-section (1), this section shall become applicable thereto and a reference in that sub-section to the date of commencement of business shall be construed as a reference to the date of such conversion.

158. Annual general meeting:-

(1) Every company shall hold, in addition to any other meeting, a general meeting as its annual general meeting, within eighteen months from the date of its incorporation and thereafter once at least in every calendar year within a period of six months following the close of its financial year and not more than fifteen months after the holding of its last preceding annual general meeting:

Provided that, in the case of a listed company, the Authority, and, in any other case, the registrar, may for any special reason extend the time within which any annual general meeting, not being the first such meeting, shall be held by a period not exceeding ninety days.

(2) An annual general meeting shall, in the case of a listed company, be held in the town in which the registered office of the company is situate:

Provided that the Authority, for any special reason, may, on the application of such company, allow the company to hold a particular meeting at any other place.

(3) The notice of an annual general meeting shall be sent to the shareholders at least twenty-one days before the date fixed for the meeting and, in the case of a listed company, such notice, in addition to its being despatched in the normal course, shall also be 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) If default is made in complying with any provision of this section, the company and every officer of the company who is knowingly and wilfully a party to the default shall be liable:-

(a) if the default relates to a listed company, to a fine not less than ten thousand rupees and not exceeding twenty thousand rupees and to a further fine not exceeding two thousand rupees for every day after the first during which the default continues; and

(b)  if the default relates to any other company, to a fine not exceeding five thousand rupees and to a further fine not exceeding two hundred rupees for every day after the first during which the default continues.

159. Calling of extraordinary general meeting:-

(1) All general meetings of a company, other than the annual general meeting referred to in section 158 and the statutory meeting mentioned in section 157, shall be called extraordinary general meetings.

(2) The directors may at any time call an extraordinary general meeting of the company to consider any matter which requires the approval of the company in a general meeting, and shall, on the requisition of members representing not less than one-tenth of the voting power on the date of the deposit of the requisition, forthwith proceed to call an extraordinary general meeting.

(3) The requisition shall state the objects of the meeting, be signed by the equisitionists and deposited at the registered office of the company, and may consist of several documents in like form, each signed by one or more requisitionists.

(4) If the directors do not proceed within twenty-one days from the date of the requisition being so deposited to cause a meeting to be called, the requisitionists, or a majority of them in value, may themselves call the meeting, but in either case any meeting so called shall be held within three months from the date of the deposit of the requisition.

(5) Any meeting called under sub-section (4) by the requisitionists shall be called in the same manner, as nearly as possible, as that in which meetings are to be called by directors.

(6) Any reasonable expense incurred by the requisitionists by reason of the failure of the directors duly to convene a meeting shall be repaid to the requisitionists by the company, and any sum so repaid shall be retained by the company out of any sum due or to became due from the company by way of fees or other remuneration for their services to such of the directors as were in default.

(7) Notice of an extraordinary general meeting shall be sent to the members at least twenty-one days before the date of the meeting, and in the case of a listed company shall also be published in the manner provided for in sub-section (3) of section 158:

Provided that, in the case of an emergency affecting the business of the company, the registrar may, on the application of the directors, authorise such meeting to be held at such shorter notice as he may specify.

(8) Every officer of the company who knowingly or wilfully fails to comply with any of the provisions of this section shall be liable:-

(a) if the default relates to a listed company, to a fine not less than ten thousand rupees and not exceeding twenty thousand rupees and in the case of a continuing default to a further fine which may extend to two thousand rupees for every day after the first during which the default continues; and

(b) if the default relates to any other company, to a fine which may extend to two thousand rupees and in the case of a continuing default to a further fine which may extend to two hundred rupees for every day after the first during which the default continues.

160. Provisions as to meeting and votes:-

(1) The following provisions shall apply to the general meetings of a company or meetings of a class of members of the company, namely::-

(a) notice of the meeting specifying the place and the day and hour of the meeting alongwith a statement of the business to be transacted at the meeting shall be given:-

(i)   to every member of the company;

(ii)  the any person entitled to a share in consequence of death of a member if the interest of such person is known to the company; and

(iii)  to the auditor or auditors of the company;

in the manner in which notices are required to be served by section 50, but the accidental omission to give notice to, or the non-receipt of notice by, any member shall not invalidated the proceedings at any meeting;

(b) where any special business, that is to say business other than consideration of the accounts, balance-sheets and the reports of the directors and auditors, the declaration of a dividend, the appointment and fixation of remuneration of auditors, and the election or appointment of directors, is to be transacted at a general meeting, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning such business, including in particular, the nature and extend of the interest, if any, therein of every director, whether directly or indirectly, and, where any item of business consists of the according of an approval to any document by the meeting, the time when and the place where the document may be inspected shall be specified in the statement;

(c) subject to the provisions of this Ordinance so far as they relate to the election and appointment of directors, the provisions of clause (b) shall apply mutatis mutandis to a meeting where ordinary business, being business other than special business, is to be transacted;

(d) all the members may participate in the meeting either personally or through proxy.

(2) The quorum of a general meeting shall be:-

(a) in the case of a public company, unless the articles provide for a larger number, not less than three members present personally who represent not less than twenty-five per cent of the total voting power, either of their own account or as proxies; and

(b) in the case of a private company, unless the articles provide for a larger number, two members present personally who represent not less than twenty-five per cent of the total voting power, either of their own account or as proxies:

Provided that, if within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if called upon the requisition of members, shall be dissolved; in any other case, it shall stand adjourned to the same day in the next week at the same time and place, and, if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the members present, being not less than two, shall be a quorum, unless the articles provide otherwise.

(3) The chairman of the board of directors, if any, shall preside as chairman at every general meeting of the company, but if there is no such chairman, or if at any meeting he is not present within fifteen minutes after the time appointed for holding the meeting, or is unwilling to act as chairman, any one of the directors present may be elected to be chairman, and if none of the directors is present or is unwilling to act as chairman the members present shall choose one of their number to be the chairman.

(4) In the case of a company having a share capital, every member shall have votes proportionate to the paid-up of the shares or other securities carrying voting rights held by him according to the entitlement of the class of such shares or securities, as the case may be:

Provided that at the time of voting, fractional votes shall not be taken into account.

(5) No member holding shares or other securities carrying voting rights shall be debarred from casting his vote, nor shall anything contained in the articles have the effect of so debarring him.

(6) In the case of a company limited by guarantee and having no share capital, every member thereof have one vote.

(7) On a poll, votes may be given either personally or by proxy.

(8) Every officer of the company who knowingly or wilfully fails to comply with any of the provisions of this section shall liable:-

(a) if the default relates to a listed company, to a fine which may extend to twenty thousand rupees and in the case of a continuing default to a further fine which may extend to two thousand rupees for every day after the first during which the default continues; and

(b) if the default relates to any other company, to a fine not exceeding five thousand rupees and in the case of a continuing default to a further fine which may extend to two hundred rupees for every day after the first during which the default continues.

161. Proxies:-

(1) Any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person, as his proxy to attend and vote instead of him, and a proxy so appointed shall have such rights as respects speaking and voting at the meeting as are available to a member:

Provided that:-

(a) this sub-section shall not apply in the case of a company not having a share capital:

(b) a member shall not be entitled to appoint more than one proxy to attend any one meeting;

(c) if any member appoints more than one proxy for any one meeting and more than one instruments of proxy are deposited with the company, all such instruments of proxy shall be rendered invalid; and

(d) a proxy must be a member unless the articles of the company permit appointment of a non-member as proxy.

(2) Every notice of a meeting of a company shall prominently set out the member's right to appoint a proxy and the right of such proxy to attend, speak and vote in the place of the member at the meeting and every such notice shall be accompanied by a proxy form.

(3) The instrument appointing a proxy shall:-

(a) be in writing; and

(b) be signed by the appointer or his attorney duly authorised in writing, or if the appointer is a body corporate, be under its seal or be signed by an officer or an attorney duly authorised by it.

(4) An instrument appointing a proxy, if in the form set out in Regulation 39 of Table A in the FIRST SCHEDULE shall not be questioned on the ground that it fails to comply with any special requirements specified for such instruments by the articles.

(5) The proxies shall be lodged with the company not later than forty-eight hours before the time of the meeting and any provision to the contrary in the company's articles shall be void.

(6) The members or their proxies shall be entitled to do any or all the following things in general meeting, namely:-

(a) subject to the provisions of section 167, demand a poll on any uestion; and

(b) on a question before the meeting in which poll is demanded, to abstain from voting or nor to exercise their full voting rights;

and any provision to the contrary in the company's articles shall be void.

(7) Every member entitled to vote at a meeting of the company shall be entitled to inspect during the business hours of the company all proxies lodged with the company.

(8) The Court may, on a petition by members having not less than ten per cent, of the voting power in the company that the proceedings of a general meeting be declared invalid by reason of a material defect or omission in the notice or irregularity in the proceedings of the meeting, which prevented members from using effectively their rights, declare such proceedings or part thereof invalid and direct holding of a fresh general meeting:

Provided that the petition must be made within thirty days of the impugned meeting.

(9) The provisions of this section shall apply mutatis mutandis to the meeting of a particular class of members as they apply to a general meeting of all the members.

(10) Failure to issue notices in time to issuing notice with material defect or omission or any other contravention of this section which has the effect or preventing participation or use of full rights by a member or his proxy shall make the company and every officer of the company who knowingly and wilfully is a party to the default or contravention liable to a fine which may extend to five thousand rupees if the default relates to a listed company and to a fine which may extend to two thousand rupees if the default relates to any other company.

162. Representation of corporations at meetings of companies and of creditors:-

(1) A company which is a member of another company may, by resolution of the directors, authorise any of its officials or any other person to act as its representative at any meeting of that other company, and the person so authorised shall be entitled to exercise the same powers on behalf of the company which he represents as if he were an individual shareholder of that other company.

(2) A company which is a creditor of another company may authorise any of its officials or any other person to act as its representative at any meeting of the creditors of that other company held in pursuance of this Ordinance or any other meeting to which it is entitled to attend in pursuance of the provisions contained in any debenture or trust deed or any other document and the person so authorised shall be entitled to exercise the same powers as are available to the company which he represents.

163. Representations of Federal Government, etc., at meeting of companies:-

(1) The Federal Government, or a Provisional Government, as the case may be, if a member of a company, may appoint such person as it thinks fit to act as its representative at any meeting of the company or at any meeting of any calls of members of the company.

(2) A person appointed to act as aforesaid shall, for the purpose of this Ordinance, be deemed to be a member of such a company and shall be entitled to exercise the same rights and powers, including the right to appoint proxy, as the Federal Government or the Provincial Government, as the case may be, may exercise as a member of the company.

164. Notice of resolution:-

(1) With the notice for a meeting, the company shall send to the members copies of draft resolutions, other than routine or procedural resolutions, which are proposed for consideration in the meeting.

(2) The members having not less than ten per cent, voting power in the company may give notice of a resolution and such resolution together with the supporting statement, if any, which they propose to be considered at the meeting, shall be forwarded so as to reach the company:-

(a) in the case of a meeting requisitioned by the members, together with the requisition for the meeting;

(b) in any other case, at least fifteen days before the meeting;

and the company shall forthwith circulate such resolution to all the members.

(3) In the event of any default in complying with any of the provisions of this section, the company and every officer of the company who is knowingly or wilfully a party to such default shall be liable to a fine which may extend to five thousand rupees if the default relates to a listed company and to a fine which may extend to two thousand rupees if the default relates to any other company.

165. Voting to be show of hands in first instance:-

At any general meeting, a resolution put to the vote of the meeting shall, unless a poll is demanded, be decided on a show of hands.

166. Chairman's declaration of result of voting by show of hands to be evidence:-

At any general meeting, a declaration by the chairman that on a show of hands, a resolution has or has not been carried, or has or has not been either unanimously or by a particular majority, and an entry to that effect in the books containing the minutes of the proceedings of the company shall, until the contrary is proved, be evidence of the fact, without proof of the number or proportion of the votes cast in favour of or against such resolution.

167. Demand for poll:-

(1) before or on the declaration of the result of the voting on any resolution on a show of hands, a poll may be ordered to be taken by the chairman of the chairman of the meeting of his own motion, and shall be ordered to be taken by him on a demand made in that behalf by the persons or person specified below, that is to say:-

(a) in the case of a public company, by a least five members having the right to vote on the resolution and present in person or by proxy;

(b) in the case of a private company, by one member having the right to vote on the resolution and present in person or by proxy if not more than seven such members are personally present, and by two such members present in person or by proxy if more than seven such members are personally present;

(c) by any member or members present in person or by proxy and having not less than one-tenth of the total voting power in respect of the resolution; or

(d) by any member or members present in person or by proxy and holding shares in the company conferring a right to vote on the resolution, being shares on which an aggregate sum has been paid up which is not less than one-tenth of the total sum paid up on all the shares conferring that right.

(2) The demand for a poll may be withdrawn at any time by the person or persons who made the demand.

168. Time of taking poll:-

(1) A poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith and a poll demanded on any other question shall be taken at such time, not more than fourteen days from the day on which it is demanded, as the chairman of the meeting may direct.

(2) When a poll is taken, the chairman of his nominee and a representative of the members demanding the poll shall scrutinize the votes given on the poll and the result shall be announced by the chairman.

(3) Subject to the provisions of this Ordinance, the chairman shall have power to regulate the manner in which a poll shall be taken.

(4) The result of the poll shall be deemed to be the decision of the meeting on the resolution on which the poll was taken.

169. Resolution passed at adjourned meeting:-

Where a resolution is passed at an adjourned meeting of:-

(a) a company;

(b) the holders of any class of shares in a company;

(c) the directors of a company; or

(d) the creditors of a company;

the resolution shall, for all purposes be treated as having been passed on the date on which it was in fact passed, and shall not be deemed to have been passed on any earlier date.

170. Power of registrar to call meetings:-

(1) If default is made in holding the statutory meeting, annual general meeting or any extraordinary general meeting on the requisition of members in accordance with section 157, section 158 or section 159, as the case may be, the registrar may, notwithstanding anything contained in this Ordinance or in the articles of the company, either of his own motion or on the application of any director or member of the company, call, or direct the calling of, the said meeting of the company in such manner as the registrar may thinks fit, and given such ancillary or consequential directions as the registrar thinks expedient in relation to the calling, holding and conducting of the meeting and preparation of any document required with respect to the meeting.

Explanation.:-The directions that may be given under sub-section (1) may include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.

(2) Any meeting called, held and conducted in accordance with any such direction shall, for all purposes, be deemed to be a meeting of the company duly called, held and conducted, held and conducted, and all expenses incurred in connection thereto shall be paid by the company unless the registrar directs the same to the recovered from any officer of the company which he is hereby authorised to do.

171. Penalty for default in complying with the directions of the registrar for holding the meeting:-

If default is made in complying with any directions of the registrar under section 170, the company and every officer of the company who is in default shall be liable to a fine which may extend to ten thousand rupees and in the case of continuing default to a further fine which may extend to two hundred rupees for  every day after the first during which the default continues.

172. Filing or resolution, etc:-

(1) A printed or typed copy of every special resolution shall, within fifteen days from the passing thereof, be filed with the registrar duly authenticated by the chief executive or secretary, of the company.

(2) Where articles have been registered, a copy of every special resolution for the time being in force shall be embodied in or annexed to every copy of the articles issued after the date of the resolution.

(3) A copy of every special resolution shall be forwarded to any member at his request on payment of such fee not exceeding the prescribed amount as the company may determine.

(4) In the event of any default in complying with the provisions of sub-section (1), the company and every officer who is knowingly and wilfully in default shall be liable to a fine which may extend to one hundred rupees for every day during which the default continues.

(5) In the event of any default in complying with the provisions of sub-section (2) or (3), the company and every officer who is knowingly and wilfully in default shall be liable to a fine which may extend to one thousand rupees for each default.

173. Minutes of proceedings of general meetings and directors:-

(1) Every company shall cause a fair and accurate summary of the minutes of all proceedings of general meetings and meetings of its directors and committee of directors, alongwith the names of those participating in such meetings, to be entered in properly maintained books.

(2) Any such minute, if purporting to be signed by the chairman of the meeting at which the proceedings were had, or by the chairman of the next succeeding meeting, shall be evidence of the proceedings.

(3) Until the contrary is proved, every general meeting of the company or meeting of directors or committee of directors in respect of the proceedings whereof minutes have been so made shall be deemed to have been duly called and held, and all proceedings had thereat to have been duly had, and all appointments of directors or liquidators shall be deemed to be valid.

(4) The books containing the minutes of proceedings of the general meetings of a company and those of the meetings of the directors and committee of directors shall be kept at the registered office of the company.

(5) In the event of failure to company with the provisions of sub-section (1) or sub-section (4), the company and every officer of the company who is knowingly is default shall be liable to a fine which may extend to five thousand rupees and to a further fine which may extend to one hundred rupees for every day after the first day during which the failure continues.

(6) The books containing the minutes of proceedings of the general meetings shall be open to inspection by members without charge during business hours, subject to such reasonable restrictions as the company may be its articles or in general meeting impose so that not less than two hours in each day be allowed for inspection.

(7) Any member shall at any time after seven days from the meeting be entitled to be furnished, within seven days after he has made a request in that behalf to the company, with a certified copy of the minutes of any general meeting at such charge not exceeding the prescribed amount as may be fixed by the company.

(8) If any inspection required under sub-section (6) is refused or if any copy required under sub-section (7) is not furnished within the time specified therein, the company and every officer of the company who is knowingly and wilfully in default shall be liable in respect of each offence to a fine which may extend to one thousand rupees and to a further fine which may extend to fifty rupees for every day after the first day during which the default continues, and the registrar may direct immediate inspection or supply of copy, as the case may be.

DIRECTORS

174. Minimum number of directors:-

Notwithstanding anything contained in any other law for the time being in force, every private company shall have not less than two irectors and every public company not less than seven directors appointed and elected in the manner provided in this Ordinance.

175. Only natural persons to be directors:-

Only a natural person shall be a director and no director shall be the variable representative of a body corporate.

176. First directors and their term:-

(1) In default of and subject to any provisions in the articles of a company and section 174, the number of directors and the names of the first directors shall be determined in writing by a majority of the subscribers of the memorandum, and until so determined, all the subscribers of the memorandum who are natural persons shall be deemed to be the directors of the company.

(2) The first directors shall hold office until the electors in the first annual general meeting.

177. Retirement of directors:-

On the date of the first annual general meeting of a company all directors of the company for the time being who are subject to election shall stand retired from office and thereafter all such directors shall retire on the expiry of the term laid down in section 180:

Provided that the directors so retiring shall continue to perform their functions until their successors are elected:

Provided further that the directors so continuing to perform their functions shall take immediate steps to hold the election of directors and in case of any impediment report the circumstances of the case of the registrar within fifteen days of the expiry of the term laid down in section 180.

178. Procedure for election of directors:-

(1) The directors of a company shall, subject to section 174, fix the number of elected directors of the company not later than thirty-five days before the convening of the general meeting at which directors are to be elected, and the number so fixed shall not be changed except with the prior approval of a general meeting of the company.

(2) The notice of the meeting at which directors are proposed to be elected shall among other matters, expressly state:-

(a) the number of elected directors fixed under sub-section (1); and

(b) the names of the retiring directors.

(3) Any person who seeks to contest an election to the office of director shall, whether he is a retiring director or otherwise, file with the company, not later than fourteen days before the date of the meeting at which elections are to be held, a notice of his intention to offer himself for election as a director:

Provided that any such person may, at any time before the holding of election, withdraw such notice.

(4) All notices received by the company in pursuance of sub-section (3) shall be transmitted to the members not later than seven days before the date of the meeting, in the manner or in the case of a listed company by publication 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 its securities are listed is situate.

(5) The directors of a company having a share capital shall, unless the number of persons who offer themselves to be elected is not more than the number of directors fixed under sub-section (1), be elected by the members of the company in general meeting in the following manner, namely::-

(a) a member shall have such number of votes as is equal to the product of the number of voting shares or securities held by him and the number of directors to be elected;

(b) a member may give all his cotes to a single candidate or divide them between more than one of the candidates in such manner as he may choose; and

(c) the candidate who gets the highest number of votes shall be declared elected as director and then the candidate who gets the next highest number of votes shall be so declared and so on until the total number of directors to be elected has been so elected.

179. Circumstances in which election of directors may be declared invalid:-

The Court may, on the application of members holding not less than twenty per cent, of the voting power in the company, made within thirty days of the date of election, declare election of all directors or any one or more of them invalid if it is satisfied that there has been material irregularity in the holding of the elections and matters incidental or relating thereto.

180. Term of office directors:-

(1) A director elected under section 178 shall hold office for a period of three years unless he earlier resigns, becomes disqualified from being a director or otherwise ceases to hold office.

(2) Any casual vacancy occurring among the directors may be filled up by the directors and the person so appointed shall hold office for the remainder of the term of the director in whose place he is appointed.

181. Removal of director:-

A company may by resolution in general meeting remove a director appointed under section 176 or section, 180 or elected in the manner provided for in section 178:

Provided that a resolution for removing a director shall not be deemed to have been passed unless the number of votes cast in favour of such a resolution is not less than:-

(i) the minimum number of votes that were cast for the election of a director at the immediately preceding election of directors, if the resolution relates to removal of a director elected in the manner provided in sub-section (5) of section 178; or

(ii) the total number of votes for the time being computed in the manner laid down in sub-section (5) of section 178 divided by the number of directors for the time being, if the resolution relates to removal of a director appointed under section 179 or section 180.

182. Creditors may nominate directors:-

In addition to the directors elected or deemed to have been elected by shareholders, a company may have directors nominated by the company's creditors or other special interests by virtue of contractual arrangements.

183. Certain provisions not to apply to directors representing special interests:-

Nothing in section 178, section 180 or section 181 shall apply to:-

(a) directors nominated by the Pakistan Industrial Credit and Investment Corporation Limited or by a corporation or company formed under any law in force and owned or controlled, whether directly or indirectly, by the Federal Government or a Provincial Government on the board of directors of a company in or to which the said corporation or such corporation or company has made or otherwise extended credit facilities;

(b) directors nominated by the Federal Government or a Provincial Government on the board of directors of the company; or

(c) directors nominated by foreign equity holders on the board of the Pakistan Industrial Credit and Investment Corporation Limited, or of any other company set up under a regional co-operation or other co-operation arrangement approved by the Federal Government:

Provided that, where a director referred to in clause (a), (b) and (c) is nominated, such number of the votes computed in the manner laid down in sub-section (5) of section 178 as is equal to the minimum number of votes which would have been sufficient to elect such director if he had offered himself for election shall stand excluded from the total number of votes otherwise available at an election of the directors to the authority or person nominating him:

Provided further that a director nominated under this section shall hold office during the pleasure of the corporation, company, Government or authority which nominates him.

184. Consent to act as director to be filed with registrar:-

(1) No person shall be appointed or nominated a director or chief executive of company or represent as holding such office, nor shall any person describe or name any other person a director or proposes director or chief executive or proposed chief executive of any company, unless such person or such other person has given his consent in writing to such appointment or nomination and that consent has been filed by the company with the registrar before such appointment or nomination or being described or named as a director or proposed director or chief executive or proposed chief executive of the company, as the case may be.

(2) Within seven days of the issue of certificate of incorporation of a company, the subscribers to be memorandum of association shall file with the registrar a list of persons who have consented to act as directors of the company alongwith their consent to do so.

(3) This section not apply to a private company, not being a private company which is a subsidiary to such office.

185. Validity of acts of directors:-

No act of a director, or of a meeting of directors attended by him, shall be invalid merely on the ground of any defect subsequently discovered in his appointment to such office:

Provided that, as soon as any such defect has come to notice, the director shall not exercise the right of his office till the defect has been rectified.

186. Penalties:-

Whoever knowingly and wilfully contravenes or fails to comply with any of the provisions of sections 174 to 185 or is a party to the contravention of the said provisions shall be liable to a fine which may extend to ten thousand rupees and may also be debarred by the authority which imposes the fine from becoming or continuing a director of the company for a period not exceeding three years.

187. Ineligibility of certain persons to become director:-

No person shall be appointed as a director of a company if he:-

(a) is a minor;

(b) is of unsound mind;

(c) has applied to be adjudicated as in insolvent and his application is pending;

(d) is an undischarged insolvent;

(e) has been convicted by a Court of law for an offence involving moral turpitude;

(f) has been debarred from holding such office under any provision of this Ordinance;

(g) has betrayed lack of fiduciary behavior and a declaration to this effect has been made by the Court under section 217 at any time during the preceding five years;

(h) is not a member:

Provided that clause (h) shall not apply in the case of:-

(i)   a person representing the Government or an institution or authority which is a member;

(ii)  a whole-time director who is a employee of the company;

(iii) a chief executive; or

(iv) a person representing a creditor; and

(i) is a defaulter in repayment of loan amounting to one million rupees or more as adjudicated by a Court of competent jurisdiction or Tribunal:

Provided that this clause shall not apply to a person representing the Government, a bank or financial institution.

188. Vacation of office by the directors:-

(1) A director shall ipso facto cease to hold office if:-

(a) he becomes ineligible to be appointed a director on any one or more of the grounds enumerated in clauses (a) to (h) of section 187;

(b) he absents himself from three consecutive meetings of the directors or from all the meetings of the directors for a continuous period of three months, whichever is the longer, without leave of absence from the directors;

(c) he or any firm of which he is a partner or any private company of which he is a director:-

(i) without the sanction of the company in general meeting accepts or holds any office of profit under the company other than that of chief executive or a legal or technical adviser or a bank; or

(ii) accepts a loan or guarantee from the company in contravention of section 195.

(2) Nothing contained in sub-section (1) shall be deemed to preclude a company from providing by its articles that the office of director shall be vacated on any grounds additional to those specified in that sub-section.

189. Penalty for unqualified person acting as director, etc:-

If a person who is not qualified to be a director or chief executive or who has otherwise vacated the office of director or chief executive describes or represents himself or acts as a director or chief executive, or allows or cause himself to be described as such, he shall be liable in respect of each day during which he so describes or represents or acts, or allows or clauses himself to be described, as such, to fine which may extend to two hundred rupees.

190. Ineligibility of bankrupt to act as director, etc:-

If any person being an undischarged insolvent acts as chief executive, direction or managing agent of a company, he shall be liable to imprisonment for a term not exceeding two years, or to a fine not exceeding ten thousand rupees, or to both.

(2) In this section the expression "company" includes a company incorporated outside Pakistan which has a place of business in Pakistan.

191. Restriction on director's remuneration, etc:-

(1) The remuneration of a director for performing extra services, including the holding of the office of chairman, shall be determined by the directors or the company in general meeting in accordance with the provisions in the company's articles.

(2) The remuneration to be paid to any director for attending the meetings of the directors or a committee of directors shall not exceed the scale approved by the company or the directors, as the case may be, in accordance with the provisions of the articles.

192. Restriction on assignment of office by directors:-

(1) If in the case of any company provision is made by the articles or by any agreement entered into between any person and the company for empowering a director of the company to assign his office as such to another person, any assignment of office made in pursuance of the said provision shall, notwithstanding anything contained in the said provision, be of no effect unless and until it is approved by a special resolution of the company.

(2) Notwithstanding anything contained in sub-section (1), the appointment by a director, with the approval of the directors, of an alternate of substitute director to act for him during his absence from Pakistan of not less than three months, shall not be deemed to be an assignment of office.

(3) The alternate director appointed under sub-section (2) shall ipso facto vacata office if and when the director appointing him returns to Pakistan.

193. Proceedings of directors:-

(1) The quorum for a meeting of directors of a listed company shall not be less than one-third of their number or four, whichever is greater.

(2) The directors of a public company shall meet at least twice in a year.

(3) If a meeting of directors is conducted in the absence of a quorum specified in sub-section (1), or a meeting of directors is not held as required by sub-section (2), the chairman of the directors and the directors shall be liable:-

(a) to a fine not exceeding ten thousand rupees and in the case of a continuing default to a further fine not exceeding one hundred rupees for every day alter the first during which the default continues, if the contravention relates to a listed company; or

(b) to a fine not exceeding two thousand rupees and in the case of a continuing default to a further fine not exceeding fifty rupees for every day after the first during which the default continues, if the contravention relates to a non-listed company.

194. Liabilities, etc., of directors and officers:-

Save as provided in this section, any provision, whether contained in the articles of a company or in any contract with a company or otherwise, for exempting any director, chief executive or officer of the company or any person, whether an officer of the company or not, employed by the company as auditor, from, or indemnifying him against, any liability which by virtue of any law wound otherwise attach to him in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to the company, shall be void:

Provided that, notwithstanding anything contained in this section, a company may, in pursuance of any such provisions as aforesaid, indemnify any such director, chief executive, officer of auditory against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted, or in connection with any application under section 488 in which relief is granted to him.

195. Loans to directors, etc:-

(1) Save as otherwise provided in sub-section (2), no company, hereafter in this section referred to as "the lending company" shall, directly or indirectly, make any loan to, or give any guarantee or provided and security in connection with a loan made by any there person, to, or to any other person by,:-

(a) any director of the lending company or of a company which is its holding company or any partner or relative of any such director;

(b) any firm in which any such director or relative is a partner;(c) any private company of which any such director is a  director or member;

(d) any body corporate of a general meeting of which not less than twenty-five per cent of the total voting power may be exercised or controlled by any such director or his relative, or by two or more such directors together or by their relatives; or

(e) any body corporate, the directors or chief executive whereof are or is accustomed to act in accordance with the directions or instructions of the chief executive, or of any director or directors, of the lending company:

Provided that a company may, with the approval of the Authority, make a loan or give any guarantee or provide any security in connection with a loan made by any other person to a director who is in the whole-time employment of the company for the purpose of acquisition or construction of a dwelling house or land therefor or for defraying the cost of any conveyance for personal use or household effects or for defraying any expense on his medical treatment or the medical treatment of any relative as are ordinary made or provided by the company to its employees.

Explanation.:-

"Relative" ion relation to a director means his spouse and minor children.

(2) Sub-section (1) shall not apply to:-

(a) any loan made, guarantee given or security provided:-

(i)  by a private company, unless it is a subsidiary of a public company; or

(ii) by a banking company;

(b) any loan made by a holding company to its subsidiary; or

(c) any guarantee given or security provided by a holding company in respect of any loan made to its subsidiary.

(3) Where any loan made, guarantee given or security provided by a lending company and outstanding at the commencement of this Ordinance could not have been made, given or provided, if this section had then been in force, the lending company shall within six months from the commencement of this Ordinance enforce the repayment of the loan made or, as the case may be, of the loan in connection with which the guarantee was given or the security was provided, notwithstanding any agreement to the contrary.

Provided that this sub-section shall not apply where the loan made, guarantee given or security provided to a whole-time director is approved by the Authority as provided in the proviso to sub-section (1).

(4) Every person shall within fourteen days of his appointment as director or thief executive of a company file with the registrar the particulars of any loan taken, or guarantee or security obtained, prior to his becoming director or chief executive of the lending company which could not have been taken or obtained without the prior approval of the Authority had he at the time of taking the loan or obtaining, the guarantee or security been the director or chief executive of the lending company.

(5) Every person who is knowingly a party to any contravention of this section, including in particular any person to whom the loan is made or who has taken the loan in respect of which the guarantee is given or the security is provided, shall be punishable with fine which may extend to five thousand rupees or with simple imprisonment for a term which may extend to six months:

Provided that where any such loans, or any loan in connection with which any such guarantee or security has been given or provided by the lending company, has been repaid in full, no punishment by way or imprisonment shall be imposed under this sub-section by way or imprisonment shall be proportionately reduced.

(6) All persons who are knowingly parties to any contravention of sub-section (1) or (3) shall be liable, jointly and severally, to the lending company for the repayment of the loan or for making good the sum which the lending company may have been called upon to pay by virtue of the guarantee given or the security provided by such company.

(7) Sub-section (1) shall apply to any transaction represented by a book-debt which was from its incorporation in the nature of a loan or an advance.

(8) No officer of the lending company or of the borrowing body corporate shall be punishable under sub-section (5) or shall incur the liability referred to in sub-section (6) in respect of any loan made, guarantee given or security provided after the commencement of this Ordinance in contravention of clause (d) or (e) of sub-section (1), unless at the time when the loan was made, the guarantee was given or the security was provided by the lending company, he know had express notice that clause was being contravened thereby.

196. Powers of directors:-

(1) The business of a company shall be managed by the directors, who may pay all expenses incurred in promoting and registering the company, and may exercise all such powers of the company as are not by this Ordinance, or by the articles, or by a special resolution, required to be exercised by the company in general meeting.

(2) The directors of a company shall exercise the following powers on behalf of the company, and shall do so by means of a resolution passed at their meeting, namely::-

(a) to make calls on shareholders in respect of money unpaid on their shares;

(b) to issue shares;

(c) to issue debentures or 3[participation term certificate, any instrument in the nature of redeemable capital;

(d) to borrow moneys otherwise than on debentures;

(e) to invest the funds of the company;

(f) to make loans;

(g) to authorise a director or the firm of which he is partner or any partner of such firm or a private company of which he is a member or director to enter into any contract with the company for making sale, purchase or supply of goods or rendering services with the company;

(h) to a approve annual or half-yearly or other periodical accounts as are required to be circulated to the members;

(i) to approve bonus to employees; and

(j) to incur capital expenditure two hundred thousand rupees on any single item or dispose of a fixed asset of the value exceeding one hundred thousand rupees.

Provided that the acceptance by a banking company in the ordinary course of its business of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise, or the placing of moneys on deposit by a banking company with another banking company on such conditions as the directors may prescribe, shall not be deemed to be a borrowing of moneys or, as the case may be, a making of loans by a banking company within the meaning of this section.

(3) The directors of a public company or of a subsidiary of a public company shall not except with the consent of the general meeting either specifically or by way of an authorisation, do any of the following things, namely::-

(a) sell, lease or otherwise dispose of the undertakings or a sizable part thereof, unless the main business of the company comprises of such selling or leasing; and

(b) remit, give any relief or give extension of time for the payment of any debt outstanding against any person specified in sub-section (1) of section 195.

(4) Whosoever contravenes any provision of this section shall be punishable with a fine which may extend to five thousand rupees and shall be individually and severally liable for losses or damages arising out of such action.

197. Prohibition regarding making of political contribution:-

(1) Notwithstanding anything contained in this Ordinance, a company shall not contribute any amount:-

(a) to any political party; or

(b) for any political purpose to any individual or body.

(2) If a company contravenes the provisions of sub-section (1), then:-

(i)  the company shall be liable to a fine which may extend to ten thousand rupees; and

(ii) every director and officer of the company who is knowingly and wilfully in default shall be punishable with imprisonment of wither description for a term which may extend to two years and shall also be liable to fine.

197A. Prohibition regarding distribution of gifts:-

(1) Notwithstanding anything contained in this Ordinance, a company shall not distribute gifts in any form to its members in its meetings.

(2) If default is made in complying with 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 five hundred thousand rupees.

CHIEF EXECUTIVE

198. Appointment of first chief executive:-

(1) Every company, other than a company managed by a managing agent, shall have a chief executive appointed in the manner provided in this section and section 199.

(2) The directors of every company shall as from the date which it commences business or as from a date not later than the fifteenth day after the date of its incorporation, whichever is earlier, appoint any individual to be the chief executive of the company.

(3) The chief executive appointed as aforesaid shall, unless he earlier resigns or otherwise ceases to hold office, hold office up to the first annual general meeting of the company or, if a shorter period is fixed by the directors at the time of his appointment, for such period.

199. Appointment of subsequent chief executive:-

(1) Within fourteen days from the date of election of directors under section 178 or the office of the chief executive falling vacant, as the case may be, the directors of a company shall appoint any person, including an elected director, to be the chief executive, bus such appointment shall not be for a period exceeding three years from the date of appointment.

(2) On the expiry of his term of office under section 198 or sub-section (1), a chief executive shall be eligible for reappointment.

(3) The chief executive retiring under section 198 or this section shall continue to perform his functions until his successor is appointed unless non-appointment of his successor is due to any fault on his part or his office is expressly terminated.

200. Terms of appointment of chief executive and filling up of casual vacancy:-

(1) The terms and conditions of appointment of a chief executive shall be determined by the directors or the company in general meeting in accordance with the provisions in the company's articles.

(2) The chief executive shall, if he is not already a director of the company, be deemed to be its director and be entitled to all the rights and privileges, and subject to all the liabilities, of that office.

201. Restriction on appointment of chief executive:-

No person who is ineligible to become a director of a company under section 187 shall be appointed or continues as the chief executive of any company.

202. Removal of chief executive:-

The directors of a company by resolution passed by not less than three-fourth of the total number of directors for the time being, or the company by a special resolution, may remove a chief executive before the expiration of his term of office notwithstanding anything contained in the articles or in any agreement between the company and such chief executive.

203. Chief executive not to engage in business competing with company's business:-

(1) A chief executive of a public company shall not directly on indirectly engage in any business which is of the same nature as and directly competes with the business carried on by the company of which he is the chief executive or by a subsidiary of such company.

Explanation.:-

A business shall be deemed to be carried on indirectly by the chief executive if the same is carried on by his spouse or any of his parents, children, brothers or sisters.

(2) Every person who is appointed as chief executive of a public company shall forthwith on such appointment disclose to the company in writing the nature of such business and his interest therein.

204. Penalty:-

Whoever contravenes or fails to comply with any of the provisions of sections 198 to 203 or is a party to the contravention of the said provisions shall be liable to a fine which may extend to ten thousand rupees and may also be debarred by the authority which imposes the fine from becoming a director or chief executive of a company for a period not exceeding three years.

REGISTRAR OF DIRECTORS AND OTHER OFFICERS

205. Register of directors, officers, etc:-

(1) Every company shall keep at its registered office a register of its directors and officers, including the chief executive, managing agent, secretary, chief accountant, auditors, and legal adviser, containing with respect to each of them the following particulars, that is to say:-

(a) in the case of an individual, his present name in full, any former name, or surname in full, his father's name, in the case of a married woman or a widow, the name of her husband or deceased husband, his usual residential address, nationality and, if that nationality is not the nationality of origin, his nationality of origin and his business occupation, if any, and if he holds any other directorship or other office the particulars of such directorship or office;

(b) in the case of a corporation, its corporate name and registered or principal office, and full name, address and nationality of each of its directors; and

(c) in the case of a firm, the full name, address, and nationality of each partner, and the date on which each became a partner.

(2) Every person referred to in sub-section (1) shall, within a period of ten days of his appointment or any change therein, as the case may be, furnish to the company the particulars specified in sub-section (1) and, within the periods respectively mentioned in this section, the company shall file with the registrar a return in duplicate in the prescribed form containing the particulars specified in the said register and notification in the prescribed form of any change among the directors, the chief executive, managing agent, chief accountant, secretary, auditor or legal adviser on in any of the particulars contained in the register.

(3) The period within which the said return is to be filed with the registrar shall be a period of fourteen days from the date of incorporation of the company and the period within which the said notification of a change is to be sent shall be fourteen days from the happening thereof.

(4) The register to be kept under this section shall during business hours, subject to such reasonable restrictions as the company may by its articles or in general meeting impose so that not less than two hours in each day be allowed for inspection, be open to the inspection of any member of the company without charge and of any other person on payment of the prescribed fee or such lesser as the company may specify for each inspection.

(5) If any inspection required under this section is refused or if default is made in complying with sub-section (1) or sub-section (2) or sub-section (3), the company and every officer or the company or other person who is knowingly and wilfully in default shall be liable to a fine which my extend to five hundred rupees and to a further fine which may extend to fifty rupees for every day after the first during which the default continues.

(6) In the case of any such refusal, the registrar on application made by the person to whom inspection has been refused and upon notice to the company, may by order direct an immediate inspection of the register.

BAR ON APPOINTMENT OF MANAGING AGENTS, SOLE PURCHASE AND SALES AGENTS, ETC.

206. Bar on appointment of managing agents, sole purchase, sales agents, etc:-

(1) No company whether incorporated in Pakistan or outside Pakistan shall appoint any managing agent, by whatever name called, that is to say, a person, firm or company entitled to the management of the affairs of a company, by virtue of an agreement or contract with the company:

Provided that this sub-section shall not apply to a company which is managed by a managing agent wholly owned or controlled by the Federal Government or a Provincial Government.

(2) The Federal Government may, by notification in the official Gazette, exempt any of the following classes of agreement or contracts from the operation of sub-section (1), namely::-

(a) an agreement or contract with an investment adviser in relation to an investment company registered under the rules made under the Securities and Exchange Ordinance, 1969 (XVII of 1969);

(b) an agreement or contract, approved by the Federal Government, with a foreign collaborator in relation to a company which owns a hotel in Pakistan; and

(c) an agreement or contract approved by the Federal Government in relation to a company formed for setting up, in collaboration with one or more public sectors financial institution, an industrial undertaking which in the opinion of the said Government, it likely to contribute to the economic development of Pakistan.

(3) No company whether incorporated in Pakistan or outside Pakistan which is carrying on business in Pakistan shall, without the approval of the Authority, appoint any sole purchase, sale or distribution agent:

Provided that this sub-section shall not apply to a sole purchase, sale or distribution agent appointed by a company incorporated, or person ordinarily residing, outside Pakistan, unless the major portion of the business of such company or person is conducted in Pakistan.

(4) Whoever contravenes any of the provisions of this section shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one hundred thousand rupees, or with both; and, if the person guilty of the offence is a company or other body corporate, every director, chief executive, or other officer, agent or partner thereof shall, unless he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent its commission, be deemed to be guilty of the offence.

TERMS OF APPOINTMENT OF MANAGING AGENT

207. Terms and conditions of appointment of managing agent.:-(1) Where a managing agent is appointed in pursuance of any exemption available under section 206, such appointment be subject to such terms and conditions as the Federal Government may deem fit to impose.

(2) In the event of contravention of the terms and conditions imposed by the Federal Government under sub-section (1), the company and every officer thereof who is knowingly and wilfully in default, shall be liable to a fine which may extend to twenty thousand rupees and such officer shall, in the event of the company incurring a loss on account of such contravention, be jointly and severally liable for the loss.

MISCELLANEOUS PROVISIONS REGARDING INVESTMENTS, CONTRACTS,
OFFICERS AND SHAREHOLDERS, TRADING AND INTERESTS

208. Investments in Associated Companies and undertakings.:-(1) A company shall not make any investment in any of its associated companies or associated undertakings except under the authority of a special resolution which shall indicate the nature and amount or investment and terms and conditions attaching thereto:

Provided that:-

(a) the aggregate investment in associated companies, except a wholly owned subsidiary company, shall not exceed thirty per cent, of a paid-up capital plus free reserves of the investing company at any point of time;

(b) the return on investment in the form of loan shall not be less than the borrowing cost of the investing company;

Provided further that Federal Government may, in respect of any company having foreign investment, relax the application of clause (a) of the first proviso.

Explanation.:-The expression "investment" shall include loans, advances equity, by whatever name called, or any amount which is not in the nature of normal trade credit.

(2) No change in the nature of an investment or the terms and conditions attaching thereto shall be made except under the authority of a 4[special] resolution.

(3) Omitted.

(4) Omitted.

(5) If default is made in employing with the requirements of this section, every director of the company who is knowingly and wilfully in default shall be liable to a fine which may extend to one million rupees and, in addition, the directors shall jointly and severally reimburse to the company any loss sustained by the company in consequence of an investment which was made without complying with the requirements of this section.

(6) This section shall not apply to:-

(a) a banking company;

(b) a financial institution approved by the Federal Government; and

(c) a private company which is not a subsidiary of a public company.

209. Investments of company to be held in its own name:-

(1) Save as otherwise provided in sub-sections (2) to (5) or another law for the time being in force, and subject to the provisions of sub-sections (6) to (8):-

(a) all investments made by a company on its own behalf shall be made and held by it in its own name; and

(b) where any such investments are not so held immediately before the commencement of this Ordinance the company shall, within a period of one year from such commencement, either cause them to be transferred to its own name, or disposed of them.

(2) Where the company has a right to appoint or get elected any person as a director of any other company and a nominee of the company in the exercise of such right has been so appointed or elected, the shares in such other company of an amount not exceeding the nominal value of the qualification shares which are required to be held by a director thereof, may be registered or held by such company jointly in its own name and in the name of such person or nominee, or in the name of such person or nominee alone.

(3) A holding company may hold any shares in its subsidiary company in the name of its nominee or nominees if and insofar as it is necessary so to do for ensuring that the number of members of the subsidiary company is not reduced below seven in case it is a public company, or below two in case it is private company.

(4) Sub-section (1) shall not apply to investment made by an investment company, that is to say, a company whose principal business is the purchase and sale of securities.

(5) Nothing in this section be deemed to prevent a company:-

(a) from depositing with a bank, being the banker of the company, and shares or securities for the collection of any dividend or interest payable thereon; or

(b) from depositing with or transferring to or holding in the name of a scheduled bank or a financial institution approved by the Authority shares or securities in order to facilitate the transfer thereof:

Provided that, if, within a period of six months from the date on which shares or securities are so deposited, transferred or held, no transfer of such shares or securities takes place, the company shall as soon as practicable after the expiry of such period have the shares or securities retransferred to itself from the scheduled bank or, as the case may be, the financial institution, and again hold the shares or securities in its own name; xxx.

(c) from depositing with, or transferring to any person any shares or securities, by way of security for the repayment of any loan advanced to the company or the performance of any obligation undertaken by it, or.

(d) from depositing with, or transferring to, or holding, or registering in the name of a central depository any shares or securities.

(6) The certificate or the letter of allotment relating to the shares or securities in which investments have been made by a company shall, except in the cases referred to in sub-sections (4) and (5), be in the custody of the company or of such scheduled bank or financial institution as may be approved by the Authority.

(7) Where, in pursuance of sub-sections (2), (3), (4) and (5), any shares or securities in which investments have been made by a company are not held by it in its name, the company shall forthwith enter in a register maintained by it for the purpose at its registered office:-

(a) the nature, value and such other particulars as may be necessary fully to identify such shares or securities; and

(b) the bank or person in whose name or custody such shares or securities are held.

(8) The register kept under sub-section (7) shall be open to the inspection of any member or debenture-holder or creditor of the company without charge, during business hours, subject to such reasonable restrictions as the company may, by its articles or in general meeting, impose so that not less than two hours in each day are allowed for such inspection.

(9) If default is made in complying with any of the requirements of sub-sections (1) to (8), 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 five thousand rupees and to a further fine not exceeding two hundred rupees for every day after the first during which the default continues.

(10) Without prejudice to the provisions of sub-section (9), if any inspection required under sub-section (8) is refused, the registrar may on an application direct an immediate inspection of the register.

210. Form of contract:-

(1) Contracts on behalf of a company may be made as follows, that is to say:-

(i) any contract which, if made between private persons, would be by law required to be in writing, signed by the parties to be charged therewith, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied, and may in the same manner be varied or discharged;

(ii) any contract which, if made between private persons, would by law be valid although made by parol only, and not reduced into writing, may be made by parol on behalf of the company by any person acting under its authority, express or implied, and may in the same manner be varied or discharged.

(2) All contracts made according to sub-section (1) shall be effectual in law and shall being the company and its successors and all other parties thereto, their heirs or legal representatives as the case may be.

211. Bills of exchange and promissory notes:-

A bill of exchange, hundi or promissory note shall be deemed to have been made, drawn, accepted or endorsed on behalf of a company if made, drawn, accepted or enforced in the name of, or by or on behalf or on account of, the company by any person acting under its authority, express or implied.

212. Execution of deeds:-

A company may, by writing under its common seal, empower any person, either generally or in respect of any specified matters, as its attorney, to execute deeds on of the company, and under his seal, where sealing is required, shall bind the company, and have the same effect as if it were under its common seal.

213. Power for company to have official seal for use abroad:-

(1) A company whose objects require or comprise the transaction of business beyond the limits of Pakistan may, if authorised by its article, have for use in any territory not situate in Pakistan, an official seal which shall be a facsimile of the common seal of the company, with the addition on its face of the name of every territory where it is to be used.

(2) A company having such an official seal may, by writing under its common seal, authorise any person appointed for the purpose in any territory not situate in Pakistan to affix the same to any deed or other document to which the company is party in that territory.

(3) The authority of any such agent shall, as between the company and any person dealing with the agent, continue during the period, if any, mentioned in the instrument conferring the authority, or if no period is mentioned therein, then until notice of the revocation or determination of the agent's authority has been given to the person dealing with him.

(4) The person affixing any such official seal shall, by writing under his hand, on the deed or other document to which the seal is affixed, certify the date and place of affixing the same.

(5) A deed or othe