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EY Ford Rhodes

EY Ford Rhodes

New CompaniesOrdinance, 2016

in Pakistan

Significant Legislative Changes & new concepts

This Memorandum is correct to the best of our knowledgeand belief. It is intended to provide only a general outlineof the subjects covered. It should neither be regarded ascomprehensive nor sufficient for making decisions, norshould it be used in place of professional advice. Firm andErnst & Young do not accept any responsibility for anyloss arising from any action taken or not taken by anyoneusing this publication.

This Memorandum may be accessed on our websitehttp://www.ey.com

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SECTION CONTENTS PAGES

A Brief containing significant legislative changes 05Definitions 06

KEY CHANGES AND NEW CONCEPTS

05 Jurisdiction of Court 0906 Procedure of the Court 0910 Prohibition of certain names 0916 Registration of memorandum and articles of association 1026 & 27 Concept of principal line of business 1053 to 55 Service of documents 1076 Restriction on transfer of shares by the members of a private 10

company79 Transfer to nominee of a deceased member 1082 Power to issue shares at a discount 1183 Further issue of capital 11153 Directors and the Board 11

208 Related Party Transaction 13223 Financial Statements 14224 Classification of Companies 14225 Contents of Financial Statements 14226 Duty to prepare directors’ report and statement of compliance 15227 Contents of directors’ report and statement of compliance 15228 Consolidated financial statements 15229 Financial year of holding company and subsidiary 15232 Approval and authentication of Financial Statements 15233 Copy of Financial Statements to be forwarded to the registrar 15234 Filing of unaudited financial statements 15235 Treatment of surplus arising out of revaluation of fixed assets 16241 Dividends to be paid only out of profits 16

244 Unclaimed shares, modaraba certificates and dividend to vest with the Federal Government 16 245 Establishment of Investor Education and Awareness Fund 16

246 Appointment, removal and fee of auditors 17247 Qualification and disqualification of auditors 18248 Auditors’ right to information 18249 Duties of Auditor 18250 Audit of Cost Accounts 19251 Signature of auditor’s report 19255 Seizure of documents by registrar, inspector or investigation officer 19258 Serious Fraud Investigation 19279 Compromise with creditors and members 20280 Powers of Commission to enforce compromises and arrangements 20

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282 Powers of Commission to facilitate reconstruction or amalgamation of companies 20284 Amalgamation of wholly owned subsidiaries in holding company 20286 Application to Court 21291 Management by Administrator 21424 Inactive Companies 21425 Easy exit of a defunct company 22439 Power of the Commission to require information of

beneficial owners of a foreign company 22451 Certification of Shariah compliant companies and Shariah

compliant securities 22452 Companies Global Register of Beneficial Ownership 22453 Prevention of offences relating to fraud, money laundering

and terrorist financing 22453 Free Zone Company 22456 Acceptance of advance by real estate companies 23457 Agriculture Promotion Companies 23

460 Valuation by registered valuers 24 461 Security and Clearance of Shareholders and Directors 24 467 Approval of transfer of shares by the agents licenced by

the Commission 24 476 Offences to be cognizable 25

479 Adjudication of offences and standard scale of penalty 25507 Power to alter Schedules 25509 Repeal and savings 25514 Validation of laws 26

Salient features of the THIRD SCHEDULE to the Companies Ordinance, 2016 26

Key changes in the FOURTH SCHEDULE to the Companies Ordinance, 2016 26

Key changes in the FIFTH SCHEDULE to the Companies Ordinance, 2016 27

Briefing on New Companies Ordinance 2016

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A brief containingsignificant legislative

changesThe major focus of the new company law is thefacilitation to the corporate sector and otherstakeholders as well as strengthening of theregulatory framework, maximum emphasis on theuse of technology, abolish unnecessaryrequirements, protection of the interest ofshareholders, a softer regime for companieswithout public stakes.

The new law also facilitates regulation of publicsector companies and protection of interest ofcreditors. Other features include the introductionof use of technological advancements by allowingcommunication between company and itsmembers and the company and the registrarthrough electronic means, passing of resolutionby members through circulation, minimumregulatory requirements for single membercompanies, added responsibilities for thedirectors and auditors, additional safeguards forthe creditors and investors and improved regimefor winding up proceedings.

One of the most significant changes, in line withthe other jurisdictions, is that except for theprohibited and specialized businesses, companiesare allowed to engage in all the lawful businesses.A simple one-page memorandum having principalline of business and prohibitory clauses has beenintroduced. Under the repealed Ordinance therewas no provision to allow the appointment ofadditional director in mid-term to enlarge theBoard, this lacuna has been removed in the newlaw.

Keeping in view the importance of IslamicFinance, the concepts of "Shariah-compliantCompany" and "Shariah-compliant security" havealso been introduced.

Further in an increasingly global world, newconcepts have been adopted such as speciedividend, mediation and reconciliation, completeregime for the valuation of assets, shifting ofjurisdiction to approve the amalgamation ofcompanies, compromises and arrangements fromCourt to SECP, no approval requirement foramalgamation of wholly owned subsidiaries, e-intermediaries for filing the returns of thecompanies having no IT infrastructure,qualification requirement for the auditor ofcompanies having paid up capital of less than Rs.3million and removing redundant and unnecessaryobligations contained in the repealed CompaniesOrdinance, 1984.

The new Companies Ordinance, 2016 has beenpromulgated on 11 November 2016 and it isapplicable from the date of its promulgation.

The New Ordinance has been placed as “TheCompanies Bill 2016” before the NationalAssembly of Pakistan for their consideration andapproval to promulgate as an Act of Parliament.The National Assembly Standing Committee onFinance considered the Bill and constituted a sub-committee for further deliberations on the saidBill.


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DEFINITIONS

1. Associate Companies and AssociatedUndertakings

The definition of associated companies andassociated undertakings has beenamended to exclude companiesinterconnected by virtue of directorship ofa person appointed as an independentdirector. The change will help bring thedefinition in line with the definition ofrelated party as per International FinancialReporting Standards.

2. Beneficial Ownership of Shareholders orOfficer of a company

The term means ownership of securitiesbeneficially owned, held or controlled byany officer or substantial shareholderdirectly or indirectly, either by:

- him or her;

- the wife or husband of an officer of acompany, not being herself or himselfan officer of the company;

- the minor son or daughter of an officerwhere “son” includes step-son and“daughter” includes step-daughter; and“minor” means a person under the ageof eighteen years;

- in case of a company, where suchofficer or substantial shareholder is ashareholder, but to the extent of hisproportionate shareholding in thecompany:

Provided that “control” in relation tosecurities means the power to exercise acontrolling influence over the voting powerattached thereto:Provided further that in case thesubstantial shareholder is a non-naturalperson, only those securities will be

treated beneficially owned by it, which areheld in its name.

‘substantial shareholder’ in relation to acompany means a person who has interestin shares of a company:

- the nominal value of which is equal toor more than 10% of the issued sharecapital of the company; or

- which enables the person to exercise orcontrol the existence of 10% or more ofthe voting power at a general meetingof the company.

3. Body Corporate

‘Body corporate’ or ‘corporation’ includes:

- a company incorporated under thisOrdinance or company law; or

- a company incorporated outsidePakistan; or

- a statutory body declared as bodycorporate in the relevant statute,

but does not include:

- a co-operative society registered underany law relating to cooperativesocieties; or

- any other entity, not being a companyas defined in this Ordinance or anyother law for the time being inforce,which the concerned Minister-in-Charge of the Federal Governmentmay, by notification, specify in thisbehalf.

4. Chief Financial Officer

Chief Financial Officer means an individualappointed to perform such functions andduties as are customarily performed by achief financial officer.


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5. Financial Period

“financial period” in relation to a companyor any other body corporate, means theperiod (other than financial year) inrespect of which any financial statementsthereof are required to be made pursuantto this Ordinance.

6. Financial Statements

Financial statements in relation to acompany, includes:

a) a statement of financial position asat the end of the period;

b) a statement of profit loss and othercomprehensive income or in thecase of a company carrying on anyactivity not for profit, an incomeand expenditure statement for theperiod;

c) a statement of changes in equityfor the period;

d) a statement of cash flows for theperiod;

e) notes, comprising a summary ofsignificant accounting policies andother explanatory information;

f) comparative information in respectof the preceding period;

g) any other statement as may beprescribed.

7. Financial Year

“financial year” in relation to a company orany other body corporate, means theperiod in respect of which any financialstatement of the company or the bodycorporate, as the case may be, laid beforeit in general meeting, is made up, whetherthat period is a year or not.

8. Government

“government” includes FederalGovernment or, as the case may be,Provincial governments unless otherwiseexpressly provided in this Ordinance.

9. Officer"officer" includes any director, chieffinancial officer, company secretary orother authorised officer of a company.

10. Public Sector Company

“public sector company” means acompany, whether public or private, whichis directly or indirectly controlled,beneficially owned or not less than fifty-one percent of the voting securities orvoting power of which are held by theGovernment or any agency of theGovernment or a statutory body, or inrespect of which the Government or anyagency of the Government or a statutorybody, has otherwise power to elect,nominate or appoint majority of itsdirectors and includes a public sectorassociation not for profit, licenced undersection 42:

Provided that nomination of directors bythe Commission on the board of thesecurities exchange or any other entity oroperation of any other law shall not makeit a public sector company.

11. Shariah Compliant Company

“Shariah compliant company” means acompany which is conducting its businessaccording to the principles of Shariah.

12. Subsidiary Company or Subsidiary

“subsidiary company” or “subsidiary”, inrelation to any other company (that is tosay the holding company), means acompany in which the holding company:


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a) controls the composition of theboard; or

b) exercises or controls more thanone-half of its voting securitieseither by itself or together with oneor more of its subsidiarycompanies.

Provided that such class or classes ofholding companies shall not have layers ofsubsidiaries beyond such numbers, as maybe notified.

For the purpose of this clause:

a) a company shall be deemed to be asubsidiary company of the holdingcompany even if the controlreferred to in sub-clause (a) or sub-clause (b) is of another subsidiarycompany of the holding company;

b) the composition of a company’sboard shall be deemed to becontrolled by another company ifthat other company by exercise ofpower exercisable by it at itsdiscretion can appoint or remove allor a majority of the directors;

c) the expression “company” includesany body corporate;

d) layer” in relation to a holdingcompany means its subsidiary orsubsidiaries.

13. Turnover

“turnover” means the aggregate value of sale, supply or distribution of goods or on

account of services rendered, or both,net of discounts, if any, held by thecompany during a financial year.


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KEY CHANGES AND NEW CONCEPTS

1. Jurisdiction of Court Section 5

Earlier, Federal Government mightempower any civil Court to exercise powerof High Court. Now this provision isexplicitly eliminated vide section 5(2) bywhich no civil court or any other court shallhave jurisdiction to entertain any suit orproceeding in respect of any matter whichthe Court is empowered to determine by orunder this Ordinance.

There shall be, in each High Court, one ormore benches on permanent basis, each tobe known as the Company Bench and allexisting benches established under therepealed Ordinance shall continue tofunction.

In addition, a new “Registrar of theCompany Bench” shall also be established.

The registrar of the company bench shallperform all the function assigned underthe Ordinance and all ministerial andadministrative of the Company bench.The court may refer to the registrar of theCompany bench for recording of crossexamination who shall complete theexamination within thirty days of theorder.

The registrar of the company bench shallhave the power of the civil court for thepurpose of summoning of deponents andcross examination. Section 6(10)(iii)

2. Procedure of the Court Section 6

Any petition or application to court shall besubmitted to the Registrar of the Companybench. The detailed contents andprocedure of filing application is defined insection 6 (2).

The time period of deciding any petition isextended from 90 days to 120 days.

The Court shall treat affidavits, counteraffidavits and other documents filed by theparties to the proceedings as evidence anddecide the matter on the basis of thedocuments and affidavits placed before theCourt, in a summary manner and pass finalorders within the time stipulated. Section 6 (9)

In exceptional circumstances where theCourt is of the view that any issue of factsrequires cross examination, the Court mayorder attendance of the relevant deponentor deponents for the purposes of crossexamination.

Any person aggrieved by any judgment orfinal order of the Court passed in itsoriginal jurisdiction may file an appeal tothe Supreme Court of Pakistan within sixtydays.

The provision of Qanun-e-Shahadat, 1984and the Code of Civil procedure, 1908shall not apply to the proceedings exceptto such extent as the Court may determineits direction.

3. Prohibition of certain names Section 10

Commission may restrict the use of anyword in the name of company as may benotified. In addition Registrar may rejectthe name of company if it is identical orresemble with a company or inappropriate,undesirable, deceptive, exploit religioussusceptibilities or any other ground as maybe specified.

A name of the company shall be deemeddeceptive if it does not commensurate withits principal line of business.


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Two new items are added to the list ofwords / circumstances which requires priorCommission approval namely establishmodarba management company or tofloat a modarba or any other businessrequiring license from the Commission.

A person may make an application to theregistrar for reservation of name for aperiod of not exceeding 60 days.

The time period for rectification of namewith the approval of registrar is reducedform 30 days to 21 days.

The companies are required to mentiontheir old name with new names for aperiod of 3 months only.

4. Registration of Memorandum and Articlesof Association

Section 16

All the requirements related to thememorandum, article of association andcertificate of incorporation are combinedin the section.

All money payable by a subscriber inpursuance of undertaking in thememorandum of association against theshare subscribed shall be payable in cashwithin 30 days from the date ofincorporation of the company. The sameshall be informed to the registrar within 45days from the date if incorporationaccompanied by a certificate by apracticing Chartered Accountant or Costand Management Accountant verifying thereceipt of money so subscribed.

5. Concept of principal line of businessSection 26 & 27

Companies may carry on any lawfulbusiness or do any act or enter into anytransaction which is necessary in attainingits business activities. A new concept ofPrincipal line of business is introduced.

“principal line of business” means thebusiness in which substantial assets areheld or substantial revenue is earned by acompany, whichever is higher.

Existing companies shall continue withtheir existing memorandum of associationand the object stated at serial number of 1of the object clause shall be treated as theprincipal line of business. if the objectstated at serial number 1 of the objectclause is not the principal line of businessof the company, it shall be required tointimate to the registrar their principal lineof business within such time from thecommencement of this Ordinance and inthe form as may be specified.

6. Service of documents Section 53 to 55

Documents and information may beserved to the Commission, company, or tomembers through electronic means.

7. Restriction on transfer of shares by themembers of a private company Section 76

In case of private companies, under thisOrdinance, it has become mandatory tothe seller of shares to first offer theseshares to the existing members inproportion of their shareholding throughthe board of directors of the company. Theseller shall only be able to sell to any otherperson if the existing members refuse toaccept the offer or to the extent theexisting members do not exercise theirright. The pricing of the offer shall besubject to the rules to be formulated bythe commission in this respect.

8. Transfer to nominee of a deceasedmember Section 79

The new law provides for the role ofnominee of a shareholder in case of hisdeath. He will act as trustee and shall beresponsible to transfer the shares to the


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legal heirs under the Islamic law ofinheritance and in case of a non-Muslimmembers, as per their respective law.

In the past, a member could nominate aperson in whose name shares were to betransferred on the death of the member. Ithas now been required that such nomineein whose name shares shall be transferredat death of the member shall be trustee ofthese shares as to facilitate the transfer ofshares to the legal heirs of the deceased inaccordance with the applicable personallaw. Also, if the deceased was a director ofthe company (in case of unlistedcompanies), the nominee acquiring theshares as trustee shall act as director ofthe company to protect the interest of thelegal heirs.

9. Power to issue shares at a discountSection 82

When Issuing shares at a discount,Commission’s approval is not required incase of listed companies where discount isup to 10% of the face value and 90 daysclosing volume weighted price remainedbelow the proposed issue price.

10. Further issue of capital Section 83

The commission has been empowered toprescribe procedures and terms andconditions of “Employees Stock OptionScheme”. Employees Stock Option Schemehas been defined through which shares ofholding company or subsidiary companyare eligible to form part of the Scheme.

Further, in this section, in case of publicsector companies having obtained loanfrom a Government, the Government hasbeen given overriding power, where itconsiders it necessary in the publicinterest so to do, to direct that such loanor any part thereof be converted intoshares in that company, on such terms andconditions as appear to the Government to

be just and reasonable in thecircumstances of the case, even if theterms of such loan do not include theoption for such conversion. In suchcircumstances, the other provisions offurther issue shall not apply.

This section now also allows to issueshares either for cash or for any otherconsideration on the basis of a specialresolution provided approval fromCommission is obtained.

Earlier permission of Federal Governmentfor issue without right shares was requiredwhich is now removed. This means thatnow issue of right shares is mandatory.

11. Directors and the Board

Section 153- A person not holding National Tax Number

(NTN) is not eligible to become director ofa company.

(Subsequently SECP has grantedexemption for a period of two years to allSmall Size Companies and AgriculturePromotion Companies from therequirements of NTN as applicable inSection 153(h) of the new Ordinance)

Section 155- No person shall hold the office of director

in more than seven listed companiesincluding an alternate director.

- Any casual vacancy on the board of a listedcompany shall be filled up by the directorsat the earliest but not later than ninetydays from the date, the vacancy occurred.

Section 156- The Commission may provide for

framework to ensure good corporategovernance practices, compliance andmatters incidental and auxiliary forcompanies or class of companies in amanner as may be specified.


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Section 160- The voting power is reduced to 10% in

order to apply to court to render theelection of directors invalid.

Section 162- A member having acquired, after the

election of directors, the requisiteshareholding may require the company tohold fresh election of directors of unlistedcompany. The Board shall proceed to holdfresh election within one month of therequest.

Section 164- Body corporate or corporation owned or

controlled by Federal or ProvincialGovernment may nominate directors, inaddition to elected directors, on the boardof a company to which such bodyCorporate or Corporation has extendedcredit facility.

Section 166- Independent director shall be selected

from a data bank (containing names,addresses and qualifications of personswho are eligible and willing to act asindependent directors) The data bank willbe maintained by an institute, body orassociation as notified by the Commission.The responsibility of exercising duediligence before selecting a person fromthe data bank shall lie with the company.No person shall be selected for data bankwithout his consent in writing.

Section 172- A new section is inserted whereby the

Commission has power to disqualify anydirector to hold office in any public interestcompany for a period up to five yearsbeginning from the date of order.

- A person is personally responsible for allthe relevant debts of company, if he isinvolved in the management of the publicinterest company in contravention ofdisqualification order.

Section 174- Director of a company is no more allowed

to assign his office to any other person andany such appointment shall be void ab-initio.

Section 176- Directors attending board meeting through

video conferencing or by other audio visualmeans shall also be counted for thepurposes of quorum. However, if there arenot enough directors to form a quorum tofill a casual vacancy, all the remainingdirectors shall be deemed to constitute aquorum for this limited purpose.

Section 181- A new section is inserted whereby an

independent director and executivedirector shall be held liable, only in respectof such acts of omission or commission bya listed company or a public sectorcompany which had occurred with hisknowledge, attributable through boardprocesses, and with his consent orconnivance or where he had not acteddiligently.

Section 182- Relaxation on giving loan by a public

company (or a subsidiary of a publiccompany) to certain organizationsintroduced. A company shall not make aloan to a director of the company or itsholding company; or to any of his relatives;give a guarantee or provide security inconnection with a loan made by any personto such a director or to any of his relatives,unless the transaction has been approvedby a resolution of the members of thecompany. Provided that in case of a listedcompany, approval of the Commissionshall also be required before sanctioning ofany such loan.

Section 183- The powers of the Board which can be

exercised by means of resolution passed attheir meeting have been extended toinclude takeover of a company or acquirea controlling or substantial stake inanother company. In addition terms‘sizeable part’ and ‘undertaking’ is alsodefined under the section.

Section 192- Provision of Code of Corporate

Governance related to chief executive isnow part of the Ordinance. Chairman of a


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listed company should be a non- executivedirector and chief executive and chairmanshall not be same person.

Section 204- A section related to roles and

responsibilities of the directors isintroduced enumerating details such asdirector has to act in in accordance withthe articles of the company, act in goodfaith and discharge his duties with duereasonable care, not involved in a situationwhich he may have direct or indirectinterest, not achieve any undue advantageand not to assign his office.

Section 205- The definition of director’s relative

including step children for the purpose ofdisclosing his interest in any transaction.

12. Related Party Transaction Section 208

A new Section has been introduced,whereby a company may enter into anycontract or arrangement with a relatedparty only in accordance with the policyapproved by the board, subject to suchconditions as may be specified, withrespect to:

(a) sale, purchase or supply of anygoods or materials;

(b) selling or otherwise disposing of, orbuying, property of any kind;

(c) leasing of property of any kind;

(d) availing or rendering of any services;

(e) appointment of any agent forpurchase or sale of goods, materials,services or property; and

(f) such related party's appointment toany office or place of profit in thecompany, its subsidiary company orassociated company.

In case of the majority of directors to beinterested in any of the abovetransactions, the matter shall be placedbefore the general meeting for approval asa special resolution.

This section is not applicable in respect ofany transactions entered into by thecompany in its ordinary course of businesson an arm’s length basis.

The expression ‘related party’ has beendefined to include:

- a director or his relative;

- a key managerial personnel or hisrelative;

- a firm, in which a director, manager orhis relative is a partner;

- a private company in which a director ora manager is a member or director;

- a public company in which a director ormanager is a director or holds alongwith his relatives, any shares of its paidup share capital;

- any body corporate whose Board, chiefexecutive or manager is accustomed toact in accordance with the advice,directions or instructions of a directoror manager (other than given in aprofessional capacity);

- any person on whose advice, directionsor instructions (other than given in aprofessional capacity) a director or amanager is accustomed to act;

- any company which is a holding,subsidiary or an associated company ofsuch company to which it is also asubsidiary;

- such other person as may be specifiedby the SECP.


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For the purpose of this section “relative”means spouse, siblings and linealascendants and descendants of a person.

The commission may specify the record tobe maintained by the company withregards to transactions undertaken withthe related party.

Where any contract or arrangement isentered into by a director or any otheremployee, without obtaining the consentof the board or approval by a specialresolution in the general meeting and if itis not ratified by the board or, as the casemay be, by the shareholders at a meetingwithin three months from the date onwhich such contract or arrangement wasentered into, such contract orarrangement shall be voidable at theoption of the board and if the contract orarrangement is with a related party to anydirector, or is authorised by any otherdirector, the directors concerned shallindemnify the company against any lossincurred by it.

It shall be open to the company to proceedagainst a director or any other employeewho had entered into such contract orarrangement in contravention of theprovisions of this section for recovery ofany loss sustained by it as a result of suchcontract or arrangement.

Any director or any other employee of acompany, who had entered into orauthorised the contract or arrangement inviolation of the provisions of this sectionshall be liable to:

- in case of listed company, bepunishable with imprisonment for aterm which may extend to three yearsor with fine which shall not be less thanfive million rupees, or both; and

- in case of any other company, to apenalty of level 2 on the standardscale.

13. Financial Statements Section 223

The Ordinance has aligned the definition of“Financial Statements” as defined in IFRS.

Under this Ordinance, the first financialstatements of the Company must be laid inthe AGM within a period not later than 16months from the date of incorporation.Previously the requirement was 18months. However, there is no change inthe period of subsequent periods financialstatements.

Further, this Ordinance has givenexemption from audit requirements forprivate companies having paid up capitalnot exceeding Rs.1 million. Previouslyaudit was mandatory for all companies.

In the case of a listed company, there is anadditional requirement of Chairman’sreview report.

14. Classification of Companies Section 224

The companies may be classified in suchcategories as may be specified in the ThirdSchedule for the purpose of preparing theFinancial Statements.

15. Contents of Financial StatementsSection 225

The financial statements shall give a trueand fair view of the state of affairs of thecompany, comply with the financialreporting standards notified by theCommission and shall be prepared inaccordance with the requirementscontained in the Third Schedule fordifferent class or classes of companies.


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Further, the Commission has been givenpower to grant exemption to any companyor any class of companies if it is in thepublic interest so to do, from compliancewith all or any of the requirements of therelevant Schedule.

The Companies are now allowed to makeunreserved compliance with IFRS issued byIASB for financial statements.

16. Duty to prepare directors’ report andstatement of compliance Section 226

The requirement to prepare directors’report for a private company having paidup capital not exceeding Rupees 3 millionhas been removed.

The Commission may by general or specialorder, direct such class or classes ofcompanies to prepare a statement ofcompliance.

17. Contents of directors’ report andstatement of compliance Section 227

The directors report shall now also include:

- fair review of a company’s business;and

- matter of adequacy of internalfinancial controls

The directors’ report is now to be signedby the CEO and a director of the company.Previously it was either Chairman or CEO.

18. Consolidated financial statementsSection 228

The requirement to prepare consolidatedfinancial statements for holding companieshas been retained in this Ordinance,however, in respect of a private companyand its subsidiary, where neither theholding company nor the subsidiary haspaid up capital not exceeding one million

rupees, the consolidated financialstatements are not required.

19. Financial year of holding company andsubsidiary Section 229

The financial year for the parent and itssubsidiaries should be same unless wherethere are good reasons against it.However, the Commission may, onapplication of a holding company or asubsidiary of the holding company, extendthe financial year.Under the repealed Ordinance, all interimfinancial statements of a subsidiaryprepared for consolidation purposes wherethere was different financial year ofholding company and subsidiaries were tobe reviewed by the auditors of thesubsidiaries has been deleted.

20. Approval and authentication of FinancialStatements Section 232

For listed companies chief financial officerof the company is also required to sign thefinancial statements in addition to thechief executive officer and one director. Incase of any other company only chiefexecutive and one director is required tosign.

21. Copy of Financial Statements to beforwarded to the registrar Section 233

The requirement to file financialstatements with the registrar for privatecompanies having paid up capital to Rs.7.5million has been increased to Rs.10million.

22. Filing of unaudited financial statementsSection 234

Private companies having paid up capitalup to Rs.1 million are required to filewhether audited or unaudited financialstatements within 30 days of suchmeeting.


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23.Treatment of surplus arising out ofrevaluation of fixed assets Section 235

Section related to surplus on revaluation offixed assets has been deleted in thisOrdinance. Therefore, relevant accountingtreatment as per the applicable accountingstandards to be now followed. The newfourth and fifth schedules requiredisclosure of the surplus as separate lineitem on the face of the financialstatements.

24. Dividends to be paid only out of profitsSection 241

A new provision has been added wherebyany dividend may be paid by a companyeither in cash or in kind only out of profits.‘Explanation’ the payment of dividend inkind shall only be in the shape of shares oflisted company held by the distributingcompany.

(Subsequently the payment of cashdividend through electronic mode by listedcompanies has been kept in abeyance till31 March 2017 by the SECP)

25. Unclaimed shares, modaraba certificatesand dividend to vest with FederalGovernment Section 244

An overriding provision has beenintroduced to specify that unclaimedshares, modaraba certificates and dividendto vest with Federal Government.The section states that:

- where shares of a company ormodaraba certificates of a modarabahave been issued; or

- where dividend has been declared by acompany or modaraba;

which remain unclaimed or unpaid for aperiod of three years from the date it isdue and payable, or

- any other instrument or amount whichremain unclaimed or unpaid, havingsuch nature and for such period as maybe specified;

the company shall give three monthsnotices to the shareholders or certificateholders or the owner, as the case may be,to file claim, in the following manner;

- by a registered post acknowledgementdue on his last known address; and

- after expiry of notice period, finalnotice in the specified form shall bepublished in two daily newspapers ofwhich one will be in Urdu and one inEnglish having wide circulation.

The unclaimed or unpaid amount, shall bemaintained in a profit bearing account withthe State Bank of Pakistan or NationalBank of Pakistan to be called ‘CompaniesUnclaimed Instruments and Dividend andInsurance Benefits and Investors EducationAccount’ as may be notified by the FederalGovernment and shall be deemed to bepart of public accounts and interest/profitaccumulated thereon shall be credited onquarterly basis to the Fund.

The companies are required to preserveand continue to preserve all original recordpertaining to the deposited unclaimed orunpaid amount and the shares ormodaraba certificates or other instrumentand provide copies of the relevant recordto the Commission until it is informed bythe Commission in writing that they neednot to be preserved any longer.

26. Establishment of Investor Education andAwareness Fund Section 245

An Investor Education and AwarenessFund (the Fund) to be managed andcontrolled by the Commission as may beprescribed through rules has been created.


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The Fund shall be credited with:

- the interest/profit earned on the“Companies Unclaimed Instrumentsand Dividend and Insurance Benefitsand Investors Education Account”;

- forfeited amounts under sub-section(7) of section 87 of the Securities Act,2015;

- grants or donations given by theFederal Government, ProvincialGovernments, companies, or any otherinstitution or person for the purposesof the Fund;

- the interest or other income receivedout of the investments made from theFund;

- the amount realised in terms of fourthproviso of section 341 or fourthproviso of sub-section (4) of section372; and

- such other amounts as may beprescribed.

The Fund shall be utilized for:

- promotion of investor education andawareness in such a manner as may beprescribed;

- educational activities includingseminars, training, research andpublications aimed at investors;

- awareness programs through media,print, electronic, social media, aimed atinvestors;

- funding investor education andawareness activities approved by theCommission; and

- to meet the administrative expenses ofthe Fund.

The accounts of the Fund shall be auditedby auditors appointed by the Commissionwho shall be a firm of charteredaccountants. The Commission shall ensuremaintenance of proper and separateaccounts and other relevant records inrelation to the Fund giving therein detailsof all receipts to, and expenditure from,the Fund and other relevant particulars.The Commission may invest the moneys ofthe Fund in such manner as set out insection 20 of the Trusts Act, 1882 (II of1882).

27. Appointment, removal and fee of auditors

Section 246Under this Ordinance, period within whichfirst auditor of a company shall beappointed by the Board is increased from60 days to 3 months of the date ofincorporation of the company.

Appointment of subsequent auditor is tobe made based on the recommendation ofthe Board. However, a new provision isintroduced that provides a minimumthreshold for a member or membersholding not less than 10 percent ofshareholding of the company is entitled topropose any auditor whose consent hasbeen obtained by him or them and a noticein this regard has been given to thecompany not less than 7 days before thedate of the annual general meeting. Thecompany is forthwith required to send acopy of such notice to the retiring auditorand shall also be posted on its website.Previously notice period was 14 days andthere was no requirement to post this onthe website of the company.

The remuneration of auditors’ to be fixedby the company in the general meeting orthe Board or Commission if the auditors’are appointed by the Board or Commissionas the case may be. Previously the generalmeeting could also fix the remuneration ofthe auditors’ in such manner as the


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general meeting may determine. This hasbeen removed in this Ordinance.

28. Qualification and disqualification ofauditors Section 247

Under this Ordinance, audit in case of apublic company or a private companywhich a subsidiary of a public company ora private company having paid up capitalof three million rupees or more, theauditors must be a chartered accountanthaving valid certificate of practice from theInstitute of Chartered Accountants.However, companies having paid up capitalof less than three million can appoint achartered accountant or cost andmanagement accountant having validcertificate of practice from the respectiveinstitute or a firm of charteredaccountants or cost and managementaccountants.

Further, with regard to the disqualificationof auditors, a new phrase ‘other than in theordinary course of business of suchentities’ has been introduced for followingsituations:

- A person who is indebted to thecompany;

- A person who has given guarantee; and

- A person or firm has direct or indirectbusiness relationship with the company.

New disqualifications include the following:

- A body corporate;

- A person who has been convicted bycourt of an offence involving fraud; and

- A person who is not eligible to act asauditor under the code of ethics asadopted by ICAP or ICMAP.

29. Auditors’ right to information Section 248

Under this Ordinance, additional rightshave been given to the auditors to obtaininformation from employees of thecompany as well as from the subsidiarycompanies and its employees. Previously itwas covered as powers of the auditors.

Level 3 penalty introduced in the newOrdinance for any non-compliance whichincludes providing false or incorrectinformation to the auditor.

30. Duties of Auditor Section 249

The Auditor is required to file his consentto act as auditor given to the company ofthe company with the registrar within 14days of his appointment.

Further, this Ordinance has specificallyincluded the provision in relation toauditors’ report to be in compliance withthe requirements of InternationalStandards on Auditing (ISAs) as adoptedby the Institute of Chartered Accountant ofPakistan. (New forms in this regard arebeing finalized by the Commission)

Furthermore, certain modifications havebeen made in the auditors’ report and it isnow required to include opinion in respectof whether investments made, expenditureincurred and guarantees extended, duringthe year, were for the purpose ofcompany’s business. Previously this wasonly to the extent of expenditure. Therequirement to include opinion in respectof whether the business conducted,investments made and expenditureincurred during the year were inaccordance with the objects of thecompany has been deleted.

The Ordinance included a provision thatempowers the Commission to direct bygeneral or special order such class or


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classes of companies to prepare astatement of compliance as containedsection 227 of this Ordinance. The boardof directors shall make out and attach tothe financial statements such statement ofcompliance as may be specified. Thecontents of the statement of compliancehave not yet been prescribed. Thestatement of compliance shall be subjectto review of the auditor of the company.

31. Audit of Cost Accounts Section 250

Under this Ordinance, cost audit is notmandatory unless otherwise directed bythe Commission to conduct the cost audit.

32.Signature of auditor’s report Section 251

The auditor’s report must state the nameof the auditor, engagement partner, besigned, dated and indicate the place atwhich it is signed.

33.Seizure of documents by registrar,inspector or investigation officer Section 255

The power of Commission is extended withreference to seizure of documents andenter into any place for the purpose ofsearching. Now the registrar, inspector orinvestigation officer with the priorapproval of one Commissioner may enterinto any such place without warrants andcause a search to be made at any timefreeze, seize or take possession of andretain any document, object, article,material, thing, account books, movable orimmovable property or cause any account,property or thing to be maintained inspecific manner.

34. Serious Fraud Investigation Section 258

A new section is added in the Ordinance toinitiate investigation proceedings wherethe Commission is of the opinion that any

fraud or activity is undertaken by acompany having serious implications.The Commission may authorize any one ormore of its officers or appoint suchnumber of professionals from amongst thepersons of ability, integrity and havingexperience in the fields of corporateaffairs, accountancy, taxation, forensicaudit, capital market, banking, informationtechnology, law or such other fields as maybe notified, as an inspector orinvestigation officer to investigate suchserious nature of offences relating to acompany as provided in Sixth Schedule.

The persons appointed as inspectors orinvestigation officer under sub-section (1)shall have all powers of investigationofficer under this Ordinance, the Securitiesand Exchange Commission of Pakistan Act,1997 (XLII of 1997) and Code of CriminalProcedure, 1898 (Act V of 1898), mutatismutandis and shall report in such manneras the Commission may direct.

The Commission may, if it is satisfied thata matter is of public importance or it is inthe interest of public at large, request theconcerned Minister-in-Charge of theFederal Government to form a JointInvestigation Team to be headed by asenior level officer of the Commission andmay include Gazetted officer of anyFederal law enforcement agency, bureauor authority for providing assistance ininvestigating the offence under thissection and the direction of the Minister-in-Charge of the Federal Government underthis section shall be binding.

Upon completion of investigation, theJoint Investigation Team shall, through theSpecial Public Prosecutor, submit a reportbefore the Court


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35. Compromise with creditors and membersSection 279

Jurisdiction to approve compromises,arrangements, reconstruction andamalgamation has been shifted from theCourt to the Commission

Filling requirements of order by thecompany has been eliminated and theresponsibility has been given to the orderissuing authority.

36. Powers of Commission to enforcecompromises and arrangements Section 280

Where the Commission makes an orderunder section 279 sanctioning acompromise or an arrangement in respectof a company, it may, at the time ofmaking such order or at any timethereafter, give such directions in regardto any matter or make such modificationsin the compromise or arrangement as itmay consider necessary for the properworking of the compromise orarrangement.

If the Commission is satisfied that acompromise or arrangement sanctionedunder section 279 cannot be workedsatisfactorily with or without modification,it may, initiate proceedings for the windingup of the company.

37. Powers of Commission to facilitatereconstruction or amalgamation ofcompanies Section 282

Considering the expertise of Commissionand the time ordinarily taken in the casesof amalgamations by the Court, thejurisdiction with respect to amalgamationshas been shifted to the Commission forswift disposal of the matters.

Where an order has been made by theCommission, merging companies or thecompany in respect of which a division is

proposed, shall also be required tocirculate the following for the meeting soordered by the Commission, namely

- the draft of the proposed terms of thescheme drawn up and adopted by theboard of each of the applicantcompanies;

- confirmation that a copy of the draftscheme has been filed with theregistrar;

- a report adopted by the board of theapplicant companies explaining effectof compromise on each class ofmembers, laying out in particular theshare swap ratio, specifying any specialvaluation difficulties;

- the report of the expert with regard tovaluation, if any;

- a supplementary accounting statementif the last annual accounts of any of theapplicant company relate to a financialyear ending more than six monthsbefore the first meeting of thecompany summoned for the purposesof approving the scheme.

38. Amalgamation of wholly ownedsubsidiaries in holding company Section 284

A company and one or more othercompanies that is or that are directly orindirectly wholly owned by it mayamalgamate and continue as one companywithout complying with sections 279 to282, if:

- the scheme of amalgamation isapproved by the board of eachamalgamating company; and

- each resolution provides that-

i. the shares of each transferorcompany, other than the


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transferee company, will becancelled without payment orother consideration; and

ii. the board is satisfied that thetransferee company will be ableto pay its debts as they fall dueduring the period of twelvemonths immediately after thedate on which theamalgamation is to becomeeffective and a declarationverified by an affidavit to theeffect will be filed with theregistrar; and

iii. the person or persons named inthe resolution will be thedirector or directors of thetransferee company.

39.Application to Court Section 286

Under this Ordinance, the right to apply tothe Commission has now also been givento the shareholders of the Company inaddition to the creditors with the samethreshold as for the creditors.

40.Management by Administrator Section 291

Under this Ordinance, the prescribethreshold has decreased for member ormembers holding and creditor or creditorsinterest from not less than 20 percent tonot less than 10 percent of the issuedshare capital and paid up capitalrespectively.

41. Inactive Companies Section 424

A new concept has been added whereby acompany, other than a listed company, isformed for a future project or to hold anasset or intellectual property and has nosignificant accounting transaction, such acompany or an inactive company maymake an application to the registrar in

such manner as may be specified forobtaining the status of an inactivecompany.

‘Explanation’ – ‘inactive company’ meansa company, other than a listed company,which has not been carrying on anybusiness or operation, or has not made anysignificant accounting transaction duringthe last two financial years.

‘Significant accounting transaction’means any transaction other than:

- payments made by it to fulfill therequirements of this Ordinance or anyother law;

- allotment of shares to fulfill therequirements of this Ordinance; and

- payment for maintenance of its officeand records.

The registrar after considering theapplication shall allow the status ofinactive company to the applicant andissue a certificate in such form as may bespecified to that effect. The registrar shallalso maintain a register of inactivecompanies in such form as may bespecified.

In case of a company which has not filedfinancial statements or annual returns fortwo financial years consecutively, theregistrar shall issue a notice to thatcompany and enter the name of suchcompany in the register maintained forinactive companies.

An inactive company shall be required tohave lesser filings and proceduralrequirements, to be prescribed by theCommission.


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42. Easy exit of a defunct company Section 426

A company which ceases to operate andhas no known assets and liabilities, mayapply to the registrar in the specifiedmanner, seeking to strike its name off theregister of companies on payment of suchfee as prescribed in Seventh Schedule ofthe Ordinance.

43.Power of the Commission to requireinformation of beneficial owners of aforeign company Section 439

Under this section, the Commission mayat any time by a written notice, call uponthe foreign company and any of its presentor past directors, officers or auditors or aperson who is directly or indirectly thebeneficial owner of its equity securities tofurnish the information about theshareholding in the company at any pointin time and such other information anddocument as may be directed.

44.Certification of Shariah compliantcompanies and Shariah compliantsecurities Section 451

In order to promote the Islamic finance inthe country, the concept of Shariah modelbusiness for companies has been providedin the new law along with the certificationof Shariah compliant securities.No company shall be called a Shariahcompliant company unless it is conductingits business according to the principles ofShariah and has obtained a certificate ofShariah compliance from the Commission.

No security shall be called a Shariahcompliant security unless the proceedsfrom the security are utilized for Shariahpermissible business and it has obtained acertificate of Shariah compliance from theCommission.

45. Companies Global Register of BeneficialOwnership Section 452

Every substantial shareholder or officer ofa company incorporated under theOrdinance, having 10% or more shares in aforeign company or a body corporate arerequired to inform the company regardingbeneficial ownership or any other interestor percentage as may be notified by theCommission.

Company shall file the same with theCommission through annual return.

Concept of beneficial ownership andsubstantial shareholder have been definedin the Ordinance.

46. Prevention of offences relating to fraud,money laundering and terrorist financing

Section 453

Every officer of a company shall endeavorto prevent the commission of any fraud,offences of money laundering includingpredicated offences as provided in theAnti-Money Laundering Act, 2010 withrespect to affairs of the company and shalltake adequate measures for the purpose.

In case of failure to comply with theprovisions of this section, such person(s)shall be liable to punishment ofimprisonment for a term which may extendto three years and with fine which mayextend to one hundred million rupees.

47. Free Zone Company Section 454

The concept of Free Zone Company hasbeen introduced in the new law whereby acompany incorporated for the purpose ofcarrying on business in the exportprocessing zone or an area notified by theconcerned Minister-in-Charge of theFederal Government as free zone shall beeligible to such exemptions from the


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requirements of this Ordinance as may benotified in terms of section 459.

The Commission may, for the protection offoreign investors and to secure foreigninvestment, restrict the disclosure ofinformation maintained by the registrarregarding promoters, shareholders anddirectors of the company who are foreignnationals unless such disclosure ofinformation is authorized by the companyin writing.

Such company will be dispensed with thewords “Private Limited” or “Limited” asthe case may be, and called as the “FreeZone Company” having the parenthesisand alphabets "FZC" at the end of itsname.

48.Acceptance of advance by real estatecompanies Section 456

Companies are now restricted to engage inthe business of real estate project unlessits principal line of business is developmentof real estate projects

A company undertaking a real estateproject shall at all times comply with thefollowing terms and conditions, namely:

- a real estate company shall not:

i. announce any real estate project;

ii. make any publication oradvertisement of real estateprojects; and

iii. accept any advances or depositsin any form whatsoever againstany booking to sell, or offer forsale, or invite persons topurchase any land, apartment orbuilding, as the case may be, inany real estate project or part ofit;

unless it has obtained approval of theCommission and all other necessaryapprovals.

- it shall not accept a sum againstpurchase of the apartment, plot, orbuilding, as the case may be, as anadvance payment from a personwithout first entering into a writtenagreement for sale with such personexcept nominal fee for application;

- it shall maintain and preserve suchbooks of account, records anddocuments in the manner as may bespecified;

- it shall deposit any sum obtained fromthe allottees, from time to time, in aseparate escrow account opened in thename of the project as may bespecified;

- it shall comply with any directionsnotified by the Commission andaccounting framework as may benotified; and

- any other term and condition as maybe specified.

Minister-in-Charge of the FederalGovernment has been empowered toexempt such companies from anyprovisions which relate to the legislativecompetence of the Parliament.

49. Agriculture Promotion Companies Section 457

An enabling provision has been added tofacilitate the agricultural sector. Anyperson, having its principle line of businessrelated to produce for agriculturepromotion or managing produce ascollateral or engaged in any activityconnected with or related to any produceor other related activities may establish


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Agriculture Promotion Company. Suchcompany shall be formed by the farmersand in any of the two classes of companiesnamely; (i) Producer Company and (ii)Collateral Management company. TheProducer company shall primarily, dealwith the produce of its members. Certainexemptions shall be available to suchcompanies. The Collateral ManagementCompany shall be engaged in the activityof managing produce as collateral,including warehousing and facilitation ofcommodity financing. The detail shall beprovided through regulations.

Minister-in-Charge of the FederalGovernment has been empowered toexempt such companies from anyprovisions which relate to the legislativecompetence of the Parliament.

50. Valuation by registered valuers Section 460

Where a valuation is required to be madein respect of any property, stocks, shares,debentures, securities or goodwill or anyother assets (herein referred to as theassets) or net worth of a company or itsliabilities under the provision of thisOrdinance, it shall be valued by a personhaving such qualifications and experienceand registered as a valuer in such manner,on such terms and conditions as may bespecified.

The valuer appointed shall:

- make an impartial, true and fairvaluation of any assets which may berequired to be valued;

- exercise due diligence while performingthe functions as valuer; and

- not undertake valuation of any assetsin which he has a direct or indirectinterest or becomes so interested at

any time before submission of thereport.

Valuer will be required to prepare report insuch manner and by applying suchapproaches as may be prescribed.

If the valuer contravenes the provisions ofthis section or the regulations madethereunder, the valuer shall be liable to apenalty of level 2 (see paragraph 54) onthe standard scale. However, if the valuerhas contravened such provisions with theintention to defraud the company, itsmembers or creditors, he shall bepunishable with imprisonment for a termwhich may extend to one year and withfine which may extend to five hundredthousand rupees. He shall also be liable torefund the remuneration received from thecompany; and pay for the damages to thecompany and to any person for loss arisingout of incorrect or misleading statementsmade in the report.

51. Security and Clearance of Shareholdersand Directors Section 461

The Commission has been empowered torequire security clearance of anyshareholder or director or other officebearer of a company from any local andforeign agency in such manner as may bedeemed appropriate.

52. Approval of transfer of shares by theagents licenced by the Commission

Section 467

Under this Ordinance, companies to benotified for the purpose, before makingany application for registration of thetransfer of shares to the board of directorsof the company, the transferor and thetransferee shall appear before the agentlicenced by the Commission under thissection; who shall record the statement ofboth the parties and forward a certifiedcopy of the statement so recorded to the


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company for further necessary action insuch form and manner and subject to suchconditions as may be specified.

The aforesaid provision of the section shallnot apply to transfer or transmission ofshares by operation of law.

Section 473The supply of documents, information andnotices to the members shall only beprovided electronically on the emailaddress provided by the members after thedate as may be notified by theCommission.

53.Offences to be cognizable Section 476

All offences in which punishment ofimprisonment is provided under theOrdinance (except few as detailed in theEight Schedule) have been madecognizable by the Commission only, to beproceeded in accordance with section 38of Securities and Exchange Commission ofPakistan Act, 1997 and this Ordinance,nothing contained in the Code of CriminalProcedure, 1898 or any other law shallapply in this case.

54.Adjudication of offences and standardscale of penalty Section 479

Standard scale of penalty for offences hasbeen introduced replacing the amount offine the end of each section / provision.

LevelLimit ofpenalty

Per day penaltyduring which

default continues1 Upto

Rs. 25,000Upto Rs. 500

2 UptoRs. 500,000

Upto Rs. 1,000

3 UptoRs. 100million

UptoRs. 500,000

55. Power to alter schedules Section 507

A new concept of “Minister-In-Charge” hasbeen introduced whereby “Minister-In-Charge” of the Federal Governmentauthorized to alter or add to any extent inthe Sixth and Eighth Schedules to theCompanies Ordinance, 2016. Similarly, theCommission is now authorized to alter oradd to any of the tables, regulations,requirements, forms and other provisionscontained in any other schedules, exceptfor sixth and eighth schedules of theOrdinance. Previously only FederalGovernment was authorized to alter or addto any extent in the repealed Ordinance1984 including all Schedules attachedtherewith.

56. Repeal and savings Section 509

The Companies Ordinance, 1984,hereinafter referred as repealedOrdinance, shall stand repealed, exceptPart VIIIA consisting of sections 282A to282N from the date of coming into force ofthis Ordinance (11 November 2016 by thePresidential Order) and the provisions ofthe said Part VIIIA along with all related orconnected provisions of the repealedOrdinance shall be applicable mutatismutandis to Non-banking FinanceCompanies in a manner as if the repealedOrdinance has not been repealed.

After the commencement of thisOrdinance, all rules, regulations,notification, guideline, circular, directive,order (special or general) or exemptionissued, made or granted under theCompanies Ordinance, 1984 shall haveeffect as if they had been issued, made orgranted under the corresponding provisionof this Ordinance.


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57. Validation of laws Section 514

All amendments made to the CompaniesOrdinance, 1984 or any administeredlegislation through various Finance Actsshall be deemed to have been validly madefrom the date of commencement of suchActs.

58. Salient features of the THIRD SCHEDULEto the Companies Ordinance, 2016

The third schedule to this Ordinanceprovides classification criteria ofcompanies, the applicable accountingframework and also specifies whichcompanies are required to followrequirements of fourth and fifth schedule tothe Ordinance. The requirements arelargely in line with the repealed CompaniesOrdinance, 1984 and SECP S.R.O929/2015. However, there are fewrequirements which differ from the repealedOrdinance.

The companies have been mainly classifiedas follows:

- Public Interest Company & Large SizedCompany (PILSC)

- Medium Sized Company (MSC)

- Small Sized Company (SSC)

These classification have been mademainly based on the turnover, paid upcapital and number of employees of therespective company.

59.Key changes in the FOURTH SCHEDULEto the Companies Ordinance, 2016

The key changes in the fourth scheduleare as follows:

- Duplication in disclosures alreadycovered in IFRS has been eliminated.

Now the Schedule focuses on additionaldisclosures;

- Various Circulars on disclosures havenow been incorporated in the Schedule;

- Executive criteria of annual salary hasbeen increased from Rs.500,000/- toRs.1,200,000/-;

- New disclosure added for generalinformation of the following:

- Geographical location andaddress of mill/plant units;

- Particulars of immovable assetsincluding location and area ofland; and

- Number of employees separatelydisclosing factory employees.

- Summary of significant transactions andevents affecting the performance andfinancial performance of the Company;

- Disclosure of plans for proceedsobtained through shares issue or debtinstruments;

- Additional disclosures for foreigncompanies and foreign shareholdershave been introduced;

- Certain additional disclosures for exportsales have been introduced;

- Certain disclosures for Shariahcompliant companies have beenintroduced;

- Disclosure of property or asset acquiredby company but nor held in the name ofcompany or not in possession or controlof the company;

- Forced Sale Value to be disclosed incase of revaluation of property, plantand equipment;


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- Details of disposal of asset to be givenin case of book value exceedingRs.500,000/-, previously it wasRs.50,000/-;

- Loans and advances to other thansuppliers exceeding Rs.1 million todisclose name of borrower, terms ofrepayment and particulars of collateral;

- In case of loans or advances obtained/provided at terms other than arm’slength, reasons to be disclosed;

- Certain additional disclosures relating toshare capital has been introduced;

- Disclosure of security deposit payablealong with particulars of amountreceived against goods/services to bedelivered and amount utilizable by thecompany and amount kept in separatebank account.

60. Key changes in the FIFTH SCHEDULE tothe Companies Ordinance, 2016

The key changes in the fifth schedule aresame as that in the fourth schedule exceptfor the following:

- No change in the Executive criteria ofannual salary;

- No disclosure of significant transactionsand events affecting the performanceand financial performance of theCompany;

- No disclosure of plans for proceedsobtained through shares issue;

- No additional disclosures required forexport sales;

- No disclosure required for Shariahcompliant companies;

- No disclosure required for property orasset acquired by the company but notheld in the name of the company or notin possession or control of the company;

- No disclosure for forced sale valuerequired in case of revaluation ofproperty, plant and equipment;

- No disclosure required for Loans andAdvances to other than suppliersexceeding Rs.1 million.