The Gazette of Pakistan Extraordinary

PART II

Notification

SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

NOTIFICATION

Islamabad, April 01, 2003

S.R.O. 310(I)/2003. In exercise of the powers conferred by section 282 B of the Companies
Ordinance, 1984 (XLVII of 1984), the Federal Government is pleased to make the following
rules, namely:-

THE NON-BANKING FINANCE COMPANIES

(ESTABLISHMENT AND REGULATION) RULES, 2003

CHAPTER - I

General

1. Short title and commencement. (1) These rules may be called the Non-Banking Finance
Companies (Establishment and Regulation) Rules, 2003.

(2) They shall come into force at once.

2. Definitions. (1) In these Rules, unless there is anything repugnant in the subject or context,

(iii) “asset management services” mean the [business of providing services]1 for
management of collective investment schemes;

(iv) “assets” mean properties of all kinds tangible or intangible, including shares,
units, certificates, securities, deposits, right and bonus shares, cash, bank
balances, profits, dividends, fees, commissions, all receivables, claims,
derivatives contract, licences, privileges, accrued or accruing or contingent”;

(v) “associated companies” means associated companies and associated undertakings

as defined in sub-section (2) of section 2 of the Ordinance;

(vi) “brokerage business” means the services being provided by a broker registered
under the Brokers and Agents Registration Rules, 2001;
1 Substituted for “services provided” vide SRO 1002(I)/2015 dated October 15, 2015

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 (vii) “central depository company” means central depository as defined under the
Securities and Exchange Ordinance, 1969 (XVII of 1969);

(ix) “closed-end fund” means an investment company or a closed-end scheme;

[(x) “closed end scheme” means a collective investment scheme having a specified period
of maturity which does not continuously offer its certificates for sale to investors
and entitles the holder of certificates, to receive, proportionate share of the net
assets of the closed end scheme:

Provided that existing closed end scheme shall be classified as closed end
scheme until revoked or converted into open end scheme for the purpose of these
rules,”;]2

(xi) “close relative” includes spouse, lineal ascendants and descendants and brothers
and sisters;

[(xii) “collective investment scheme” means any arrangement whose sole purpose is the
collective investment of funds in a portfolio of securities, or other financial assets
for profits, income or other returns, and where the participants, who have pooled
in the funds, do not have any day to day control over the management of the
scheme, whether or not they have the right to be consulted or to give direction in
respect of such management:

Provided that the following shall not be considered as a Collective

Investment Scheme for the purpose of these rules:-

(i) employee welfare trusts or gratuity trusts or employees provident funds or

employees pension funds setup for the benefit of employees by
companies; and

(ii) any such pool of funds which is separately regulated by the Commission
or which is already established under any specific law;]3

(xiii) “Commission" means the Securities and Exchange Commission of Pakistan

established under the Securities and Exchange Commission of Pakistan Act,
1997(XLII of 1997);

(xiv) “company” means a company as defined under the Companies Ordinance, l984
(XLVII of l984);

2 Substituted for“(x) “closed-end scheme” means a scheme constituted by way of trust to raise funds through issue of certificates to the public for investing in securities including
money market instruments for a definite or indefinite period but which does not continuously offer certificates entitling the holder of such certificates, to receive, on demand, his
proportionate share of the net assets of the closed-end scheme;” vide SRO 1002(I)/2015 dated October 15, 2015
3 Substituted for “(xii) “collective investment scheme” means a closed-end fund and an open-end scheme; “vide SRO 1002(I)/2015 dated October 15, 2015

2
 (xv) “connected person" in relation to an NBFC or a [notified entity]4, means,-

(a) any person or trust beneficially owning, directly or indirectly, ten percent
or more of capital of the NBFC or the [notified entity]5;

(b) any person able to exercise, directly or indirectly, ten percent or more of
the total voting power in that NBFC or the [notified entity]6;

(c) a [notified entity]7 being managed by an NBFC;

(d) the NBFC managing a [notified entity]8;

[(da) notified entities being managed by the same NBFC;]9

(e) a trustee or custodian of the [notified entity]10;

(f) any person or trust controlled by a person who or which meets the
descriptions given in sub-clause (a) to (e);

(g) any member of the group of which that person, or trust forms part; and

(h) any director or officer of that NBFC or the investment company being
managed by that NBFC or of any of their connected persons as specified
in sub-clauses (a) to (g);
[ ]11

(xvii) “custodian” includes a bank licensed under the Banking Companies Ordinance,
1962 (LVII of 1962) or a trust company which is a subsidiary of such bank or a
central depository company approved by the Commission or an NBFC carrying
out investment finance services provided it has been approved by the Commission
to act as custodian or such other company as may be approved by the Commission
to act as custodian;

[(xviia) “discounting services” means the business of discounting of financial

instruments on conventional or Islamic basis;]12

4 Substituted for “collective investment scheme” vide SRO 1002(I)/2015 dated October 15, 2015
5 Substituted for “collective investment scheme” vide SRO 1002(I)/2015 dated October 15, 2015
6 Substituted for “collective investment scheme” vide SRO 1002(I)/2015 dated October 15, 2015
7 Substituted for “collective investment scheme” vide SRO 1002(I)/2015 dated October 15, 2015
8 Substituted for “collective investment scheme” vide SRO 1002(I)/2015 dated October 15, 2015
9 Inserted vide SRO 1002(I)/2015 dated October 15, 2015
10 Substituted for “collective investment scheme” vide SRO 1002(I)/2015 dated October 15, 2015
11 Deleted clause (xvi) “(xvi) “constitutive documents” means the trust deed, offering documents and other principal documents governing the formation of a closed-end scheme
or an open-end scheme including all related material agreements;” vide SRO 1002(I)/2015 dated October 15, 2015
12 Substituted for “(xviia) “discounting services” means the services relating to the discounting of financial instruments;” vide SRO 1002(I)/2015 dated October 15, 2015

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 [(xviib) “deposit” means any deposit of money with, or any money borrowed or raised by
an NBFC, but shall not include,-

(a) redeemable capital issued under section 120 of the Ordinance;

(b) finance obtained from a financial institution;

(c) advance, application or subscription money for shares in the NBFC;

(d) cash margin or security deposit received in respect of finance provided by

NBFC;

(e) subordinated loans; and

(f) finance obtained from major shareholders, sponsors, and associated

companies:

Provided that the Commission shall be the final authority to determine, by

an order in writing, whether any money deposited, raised or borrowed falls under
the definition of deposit or otherwise;]13

[(xix) “equity” includes paid up ordinary share capital, preference shares which are
compulsorily convertible into ordinary shares, general reserves, statutory reserves,
balance in share premium account, reserve for issue of bonus shares, subordinated
loans and unappropriated profits, excluding accumulated losses.

Explanation.-

(i) Surplus on revaluation of fixed assets as described in section 235 of the

Ordinance, treasury stocks, intangible assets, deferred tax reserves, and
surplus on revaluation of investments shall not be included in the equity.

(ii) A loan may be classified as subordinated loan if it complies with the

following conditions:-

(a) subordinated loan can be raised from any person, preferably from
the sponsors;
(b) rate of profit on subordinated loan, if any shall be decided by
NBFC subject to the clearance of the Commission;

(c) neither the interest nor the principal shall be paid even at maturity
if such payment would result in non-compliance with the equity or
capital adequacy requirements;

13 Inserted vide SRO 1002(I)/2015 dated October 15, 2015

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 (d) subordinated loan shall be un-secured and sub-ordinate to all other
indebtedness including deposits;

(e) subordinated loan shall be in the form of cash or liquid assets only;

(f) auditor certificate evidencing injection of funds into NBFC as

subordinated loan;

(g) minimum tenor of subordinated loan shall be specifically

mentioned; and

(h) prior approval of the Commission is required for repayment of

subordinated loan.

(iii) For the purpose of calculating minimum equity requirements for licensing
purposes, the exposure of an NBFC in its subsidiaries and strategic
investments shall be deducted from equity:

Provided that the equity investment in subsidiary and strategic

investment shall be taken at cost.;]14

[(xx) “finance" means provision of,-

(i) any accommodation or facility on the basis of participation in profit and loss,
musharika or modaraba basis, mark-up or mark-down in price, hire-
purchase, lease, rent-sharing, bills of exchange, promissory notes or other
instruments with or without buy-back arrangement by a seller, participation
term certificate, musharika or modaraba certificate, term finance certificate;

(ii) guarantees, indemnities, letters of credit or any other financial engagement,

issued or undertaken on behalf of a person, with a corresponding obligation
of that person;

(iii) a loan, advance, discounting services to any person;

(iv) micro financing including any form of finance such as leases advances,
consumer loans, housing finance;

(v) a financial facility or accommodation provided on the basis of Islamic mode

of financing; and

(vi) any other form of financial facility provided to a person;]15

14 Substituted for “(xix) “equity” includes paid up share capital, reserves, subordinated loans and unappropriated profits (minus accumulated losses) excluding deferred tax
reserves, Surplus on Revaluation of Fixed Assets Account as described in section 235 of the Ordinance, treasury stocks and redeemable preference shares:
Explanation.- For the purpose of this clause the expression “subordinated loans” means loans given or arranged by the sponsors, free of cost, to meet any short fall in the minimum
equity requirement specified under these rules;”

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 [(xxa) “financial services company” for the purposes of these rules, means a financial
institution incorporated in Pakistan or outside Pakistan, insurance company, broker
i.e. of stock market or money market or commodities market; a company which is
primarily involved in distribution of securities, insurance products and units or
certificates of a notified entity, and any other company as notified by the
Commission in the official Gazette;]16

(xxi) "form" means the forms annexed to the rules;

[(xxia) “forms of business” means following forms of business as notified in the official
Gazette by the Federal Government or any other form of business which the Federal
Government may, by notification in the official Gazette specify from time to time,
namely:-

(a) asset management services;

(b) discounting services;

(c) housing finance services;

(d) investment advisory services;

(e) investment finance services;

(f) leasing;

(g) pension fund scheme business;

(h) private equity and venture capital fund management services;

(i) REIT management services; and

(j) venture capital investment;]17

[(xxiaa)“fund management NBFC” means an NBFC licenced by the Commission to

undertake Asset Management Services or REIT Management Services or Pension
Fund Scheme Business or Private Equity and Venture Capital Fund Management
Services or Investment Advisory Services or any combination thereof;]18

15 Substituted for “(xx)“facility” includes a financing under a system which is based on participation in profit and loss, mark-up or mark-down in price, hire-purchase, lease, rent-
sharing, bills of exchange, promissory notes or other instruments with or without buy-back arrangement by a seller, participation term certificate, musharika or modaraba
certificate, term finance certificate or any other mode, guarantee, indemnity, letter of credit and any other obligation, whether fund based or non-fund based;”
16 Inserted vide SRO 1002(I)/2015 dated October 15, 2015
17 Substituted for “(xxia) “forms of business” means any of the forms of business specified in clause (a) of section 282A of the Ordinance;”
18 Inserted vide SRO 1002(I)/2015 dated October 15, 2015

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 (xxib) “group” means persons, whether natural or legal, if one of them or his close
relatives, in case of a natural person, or, its subsidiary or associated company, if it
is a legal person, have control or hold [direct or indirect]19 substantial ownership
interest or have power to exercise significant influence over the other. For the
purpose of this clause the expression-

(a) subsidiary shall have the same meaning as defined in sub-section (2) of
section 3 of the Ordinance;

(b) control shall have the same meaning as defined [Securities Act, 2015 (III
of 2015)]20;

(c) substantial ownership means beneficial shareholding of ten percent by a

person or by close relative; and

(d) “significant influence” refers to the management control of the company

or the ability to participate in financial [operational and risk
management]21 policies, either exercised by representation on the Board of
Directors, through partnership or by statute or by agreement in the policy
making process;

[(xxiii) “housing finance services” means the business of providing consumer or

commercial Finance on conventional or Islamic basis to a person for the purchase
or construction of house or apartment or for purchase of land and construction
thereupon including the facilities availed for the purpose of making improvements
in house or apartment;]22

[(xxiiia) “independent director” shall have the same meaning as assigned to it in

regulation 35 of the Listing Regulations of Karachi Stock Exchange;]23

(xxv) “investment advisory services” means the services provided for, managing
discretionary or non-discretionary portfolios for both individual and institutional
clients and include the business of advising others as to the value of securities or
as to the advisability of investing in, purchasing or selling of securities, for
remuneration;

(xxvi) “investment company” means a company registered with the Commission under
the Ordinance in accordance with such criteria as may be specified by the
Commission by notification in the official Gazette;

19 19 Inserted vide SRO 1002(I)/2015 dated October 15, 2015

20 Substituted for “in section 2 of the Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Ordinance, 2002 (CIII of 2002)” vide SRO 1002(I)/2015 dated
October 15, 2015
21 Substituted for “and operating” vide SRO 1002(I)/2015 dated October 15, 2015
22 Substituted for “(xxiii) “housing finance services” means the loan provided to individuals for the purchase of residential house or apartment or land including the facilities
availed for the purpose of making improvements in house or apartment or land;” vide SRO 1002(I)/2015 dated October 15, 2015
23 Inserted vide SRO 1002(I)/2015 dated October 15, 2015

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 [(xxviii) “investment finance services” means the business of providing finance on
conventional or Islamic basis;

(xxix) “leasing” means the business of providing finance on operating lease or finance
lease or Ijarah basis;]24

(xxxii) “major shareholder” means a person who, individually or in concert with his
family or as part of a group, holds ten percent or more shares having voting rights
of the paid-up capital of the company;

[(xxxiii) “lending NBFC” means an NBFC licenced by the Commission to undertake

leasing or housing finance services or investment finance services or discounting
services;

(xxxiiia) “NBFC” means a non-banking finance company which includes company

licenced by the Commission to carry out any one or more forms of business as
specified in clause (a) of section 282A of the Ordinance;]25

[(xxxiv) “non-bank micro finance company” means a non-deposit taking NBFC primarily
engaged in the business of Micro Financing as specified by the Commission from
time to time;]26

[(xxxvii) “Open End Scheme” means a collective Investment Scheme which offers units
for sale based on net asset value on continuous basis without specifying any
duration for redemption and which entitles the holder of such units on demand to
receive his proportionate share of the net assets of the scheme less any applicable
charges on redemption or revocation;]27

(xxxviii)“Ordinance” means the Companies Ordinance, l984 (XLVII of l984);

(xxxvix)"person" includes an individual, a Hindu undivided family, a firm, an association

or body of individuals whether incorporated or not, a company and every other
legal person;

24 Substituted for “(xxviii) “investment finance services” include money market activities, capital market activities, project finance activities, corporate finance services and
general services as specified by the Commission by notification in the official Gazette;
(xxix) “leasing” includes financial services provided on operating lease or finance lease basis, in accordance with (in accordance with applicable International Accounting
Standards) or any other admissible mode determined by the Commission from time to time;” vide SRO 1002(I)/2015 dated October 15, 2015
25 Substituted for “(xxxiii) “NBFC” means a non-banking finance company as defined in clause (a) of section 282A of the Ordinance;” vide SRO 1002(I)/2015 dated October 15,
2015
26 Substituted for (xxxiv) “net assets”, in relation to a collective investment scheme, means the excess of assets over liabilities of the collective investment scheme, such excess
being computed in the manner specified by the Commission by notification in the official Gazette;” vide SRO 1002(I)/2015 dated October 15, 2015
27Substituted for “(xxxvii) “open-end scheme” means a scheme constituted by way of a trust deed that continuously offers for sale its units as specified in the constitutive
document that entitle the holder of such units on demand to receive his proportionate share of the net assets of the scheme less any applicable charges;” vide SRO 1002(I)/2015
dated October 15, 2015

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 (xxxixa) “promoter or sponsor” means a person who has made an application to the
Commission to form an NBFC under rule 4 and has contributed initial capital in
the proposed company or a person who replaces him;”

[(xxxixb) “Private Fund” means an arrangement which has the purpose of pooling funds
from one or more Eligible Investors for investment in a portfolio of securities or
other financial assets for profit, income or other returns and where participants of
the funds, neither have day to day control over the management of fund property,
nor the right to give directions in respect of such management and which is
established and operated by private fund management company:

Provided that for the purpose of these rules following shall not classify as
a private fund:

(i) collective investment schemes regulated under the Non-Banking Finance

Companies and Notified Entities Regulations, 2008;

(ii) employee welfare trusts or gratuity trusts or employees provident fund or

employee pension fund setup for the benefit of employees by companies;
and

(iii) any such pool of funds which is separately regulated by the Commission
or which is already established under any other specific law.

(xxxixc) “private fund management company” means company licenced by the

Commission to provide private equity and venture capital fund management
services;

(xxxixd) “private equity and venture capital fund management services” means services
provided for management of private funds;]28

(xl) “records” mean all documentary and electronic materials created, generated, sent,
communicated, received or stored, regardless of physical form or characteristics;

(xli) “regulations” means the regulations made by the Commission in exercise of its
powers under Part VIIIA of the Ordinance;

(xlii) “Schedule” means the schedule to these rules;

[(xliia) “securities broker” means a trading right entitlement certificate holder or “TRE”
certificate holder who, by way of business,

(a) makes or offers to make with any person or induces or attempts to induce
any person to enter into or to offer to enter into, any agreement for or with
a view to buying, selling, exchanging or subscribing for, securities; or
28 Inserted vide SRO 1002(I)/2015 dated October 15, 2015

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 (b) solicits or accepts any order for or otherwise trading in, or effects
transactions in, securities for clients or on its own account;”;]29

[(xliib) “strategic investment” means an investment which an NBFC makes with the
intention to hold it for a period of minimum 5 years and is more than 10% of its
equity;]30

(xliv) “trust” means a trust established by a deed under the provisions of the Trusts Act,
1882 (II of 1882);

[(xlv) “trustee” means a company appointed as a trustee of a notified entity as per the
rules and regulations made under Part VIII A of the Ordinance;]31

(2) Words and expressions used but not defined in these rules shall have the same
meaning as assigned to them in the Ordinance or the [Securities Act, 2015 (III of 2015) or Rules
and Regulations made thereunder]32.

3. Eligibility criteria for the establishment of a NBFC. A NBFC may be established, if each
of its promoters, proposed directors, chief executive and chairman of the Board of Directors
fulfills the terms and conditions mentioned in the fit and proper criteria as may be specified by
the Commission by notification in the official Gazette and complies with the requirements of the
Ordinance, these rules and the regulations made under the Ordinance.

4. Permission to form a NBFC

(1) A person desirous of forming a NBFC [to undertake any form of business]33 shall
make an application to the Commission as set out in Form-1 providing information, as given in
Annexure thereto, along with all the relevant documents and receipt evidencing the payment of
non-refundable processing fee as may be specified by the Commission by notification in the
official Gazette.

(2) The Commission, if it is satisfied that the person seeking permission to form the
NBFC [to undertake any form of business]34 has fulfilled the criteria in terms of rule 3 and the
regulations, may permit by an order in writing [ ]35 to establish a NBFC.

[(3) The permission granted under sub-rule (2) shall be valid for a period of six
months unless extended for a maximum period of further three months under special
circumstances, on the application of the promoters made before the expiry of initial six months.

29 Inserted vide SRO 1002(I)/2015 dated October 15, 2015

30 Inserted vide SRO 1002(I)/2015 dated October 15, 2015
31 Substituted for “(xlv) “trustee” includes a bank licensed under the Banking Companies Ordinance, 1962 (LVII of 1962) or a trust company which is a subsidiary of such a
bank or a central depository company approved by the Commission or a NBFC carrying out investment finance services provided it has been approved by the Commission to act as
trustee or such other company or trust as may be approved by the Commission to act as trustee;” vide SRO 1002(I)/2015 dated October 15, 2015
32 Substituted for “Securities and Exchange Ordinance, 1969 (XVII of 1969)” vide SRO 1002(I)/2015 dated October 15, 2015
33 Inserted vide SRO 1002(I)/2015 dated October 15, 2015
34 Inserted vide SRO 1002(I)/2015 dated October 15, 2015
35 Deleted the words ‘such person”

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During the validity of this permission, the promoters shall get the NBFC incorporated and submit
an application to the Commission for grant of licence, after fulfilling all the conditions specified
in these rules.]36

5. Conditions for grant of licence.- [(1) An NBFC or any other company subject to eligibility in
terms of schedule I shall make separate applications to the Commission for grant of licence for
carrying out each form of business. The said application shall be submitted to the Commission in
Form-II along with a non-refundable processing fee as may be specified by the Commission by
notification in the official Gazette for each licence.

(2) A fund management NBFC shall not be eligible for seeking licence for any form
of business allowed to lending NBFC and a lending NBFC shall not be eligible for seeking
licence for any form of business allowed to fund management NBFC.

(3) An NBFC or any other company may apply to the Commission for grant of
licence subject to eligibility criteria given in Schedule I.

(4) The Commission may issue a licence for asset management services to manage
only closed end fund. Licence granted to an NBFC for investment finance services shall be valid
for undertaking leasing, housing finance services and discounting services and such an NBFC
shall not be required to obtain separate licences for each form of business i-e., leasing, housing
finance services and discounting services specified in these rules.

(5) Every other person engaged in any form of business shall within a period of six
months of coming into force of these rules apply in writing to the Commission, for grant of a
licence along with a non-refundable processing fee as specified by the Commission by
notification in the official Gazette.]37

36 Substituted for “(3) The permission granted under sub-rule (2) shall be valid for a period of six months unless extended for a maximum period of three months under special
circumstances, on the application of the promoters made before the expiry of said six months. During the validity of this permission, the promoters of the NBFC shall get the
NBFC incorporated as a public limited company or any other form of company as may be specified by the Commission by notification in the official Gazette.” Vide SRO
1002(I)/2015 dated October 15, 2015
37 Substituted for “(1) An NBFC shall make separate applications to the Commission for grant of licence for carrying out different forms of business. The said application shall be
submitted to the Commission in Form-II along with a non-refundable processing fee as may be specified by the Commission by notification in the official Gazette for each licence.
(2) An NBFC seeking licence for undertaking investment advisory or asset management services or both shall not be eligible for seeking licence for any other form of business.

Explanation.- (i) For the purpose of sub-rule (2), the Commission may issue a licence for asset management services to manage only closed-end funds.

(ii) All existing NBFCs licensed to provide investment advisory services that are managing closed-end funds shall, within six months of the coming into effect of this provision,
apply for an asset management services licence to manage closed-end funds.

(3) An NBFC licenced to carry out asset management services shall be eligible, subject to the criteria as may be specified by notification in the official Gazette, to undertake
pension fund scheme business as specified by the Federal Government to be a form of business in terms of section 282A of the Ordinance.

(4) An NBFC seeking licence for undertaking investment finance services or leasing or housing finance services or discounting services or all of the said forms of business shall
not be eligible for seeking licence for any other form of business

Explanation.- For the purpose of sub-rule (3), licence granted for investment finance services shall be valid for undertaking discounting services, and separate licence for
undertaking discounting services shall not be required.

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 [(6) The Commission shall, after making necessary inquiries and after obtaining such
further information, as it may consider necessary, and if it is satisfied that each of its promoters,
directors, chief executive and chairman of the Board of Directors fulfills the terms and
conditions mentioned in the fit and proper criteria, grant licence as per Form-III for one or more
forms of businesses subject to compliance of all or any of following conditions:-

(a) the company fulfills the eligibility criteria given in Schedule I;

(b) the company is not part of a group of companies already holding a licence, under
these rules, for the same form of business;

(c) the company meets minimum equity requirements or any other requirement in
lieu of minimum equity requirement as may be prescribed by the Commission for
specific form of business or class of companies by notification in the official
Gazette, in respect of each form of business;

(d) the company has allotted at least twenty five percent of the paid-up share capital
to the promoters;

(e) the company’s promoters or majority shareholders and directors have deposited
their shares with Central Depository Company of Pakistan Limited in an account
marked as blocked and such shares shall not be sold or transferred without prior
approval of the Commission and shall be kept unencumbered:

Provided that directors holding qualifying shares, maximum up to 2 per cent of

the total share capital shall be exempt from this requirement;

(f) the company’s promoters or majority shareholders and directors have given an
undertaking that they shall not enter into any agreement for sale or transfer of
their shares in any manner without prior approval of the Commission;

Provided that directors holding qualifying shares, up to maximum up to 2 per cent of the
total share capital shall be exempt from this requirement;

(g) the company appoints its chief executive who does not hold such office in any
other company except for an investment company being managed by the said
company, provided that prior approval of the Commission has been obtained in
this regard;

(h) the company shall not make any change in the Memorandum of Association,
other than increase in the authorized share capital, without prior approval of the
Commission;

(5) All existing NBFCs shall comply with the requirements set out in sub-rule (2) and (3) within a period of one year from the date of coming into effect of this provision or any
other time as may be specified by the Commission by notification in the official Gazette.” Vide SRO 1002(I)/2015 dated October 15, 2015

12
 (i) the company shall comply with the conditions as set out in these rules, the
regulations or any direction given by the Commission;

(j) the company shall furnish evidence to the satisfaction of the Commission that the
personnel employed by it for executive positions, research or other related
functions possess sufficient educational qualifications and professional experience
to undertake the proposed form of business:

Provided that a new company shall furnish the evidence within 90 days of
grant of licence;

(k) the company obtaining licences for multiple forms of business or any company
undertaking any form of business as an ancillary activity must have, other than
chief executive, at least one person responsible for heading each licenced form of
business;

(l) the company incorporated as NBFC in accordance with criteria mentioned in rule
4 shall not undertake any other activity except the licenced activity; and

(m) the company, its promoters and major shareholders, its chief executive and its
directors shall furnish separate undertakings to the Commission that they shall
comply in letter and spirit with the requirements of the Ordinance, these rules, the
regulations made under the Ordinance and the directions issued by the
Commission:

Provided that the Commission may, impose additional conditions or grant

time to the company for compliance with any of the above conditions as it deems
appropriate:

Provided further that the Commission may further extend the time granted
to the company for compliance.]38

38 Substituted for “(6) The Commission, after making necessary inquiries and after obtaining such further information, as it may consider necessary, and if it is satisfied that the
company has fulfilled the criteria in terms of rule 3 and the regulations, and that the promoters thereof are persons of means and integrity having knowledge of matters which the
company may have to deal with, in respect of the forms of businesses for which the licence is being sought, shall grant licence to such company in Form-III for one or more of the
forms of businesses subject to compliance of the following conditions, namely:-
(a) the company is incorporated as a public limited company or such other form of company as may be specified by the Commission by notification in the official
Gazette;
(b) the company is not part of a group of companies already holding a licence, under these rules, for the same form of business ;
(c) the company has minimum equity as may be specified by the Commission by notification in the official Gazette, in respect of each form of business;
(d) the company has allotted at least twenty five percent of the paid-up share capital to the promoters;
(e) the company’s promoters or majority shareholders and directors have deposited their shares with Central Depository Company of Pakistan Limited in an account
marked as blocked and such shares shall not be sold or transferred without prior approval of the Commission and shall be kept unencumbered. 38
(f) the company’s promoters or majority shareholders and directors have given an undertaking that they shall not enter into any agreement for sale or transfer of their
shares in any manner without prior approval of the Commission;
(g) the company appoints its chief executive who does not hold such office in any other company except for an investment company being managed by the said
company, provided that prior approval of the Commission has been obtained in this regard;
(h) the company has given an undertaking that no change in the Memorandum of Association, other than increase in the authorized share capital, shall be made without
prior approval of the Commission;

13
 (7) Without prejudice to the conditions prescribed under sub-rule (6) above, the
Commission may, while granting licence, impose such additional conditions, as it may deem
necessary.

[(7a) If a company fails to commence business within the period as specified by the
Commission while issuing licence, the licence shall be deemed to be cancelled unless the
specified period is extended by the Commission on the application made by the company.]39

(8) The licence granted [ ]40shall be valid for three years41 from the date of its
issuance and shall be renewable upon expiry of the said period by making an application at least
one month prior to the expiry as set out in Form IV along with payment of a fee as specified by
the Commission by notification in the official Gazette.

(9) The Commission may, after making such inquiry and after obtaining such further
information, as it may consider necessary, renew the licence[ ]42, for three years43 in Form V on
such conditions, as it may deem necessary:

Provided that till such time that the licence is renewed, the existing licence shall be
deemed valid for the purposes of these rules and the regulations unless the company fails to
apply as specified in sub-rule (8) and fulfill all the requirements to the satisfaction of the
Commission for the [renewal]44 of a licence:

Provided further that if the company fails to apply within the stipulated time period and
fulfills all the requirements to the satisfaction of the Commission its licence shall stand cancelled
and the Commission may initiate further proceedings to give effect to the cancellation.

[(10) Without prejudice to the terms and conditions prescribed in rule 7, the
Commission may, subsequent to the grant or renewal of licence, impose any other condition as it
may deem necessary in the public interest.]45

[ ]46

(i) the company has given an undertaking that the conditions as set out in these rules, the regulations or prudential regulations or any direction given by the Commission
shall be duly complied with; and
(j) the company has furnished an undertaking that within ninety days of the grant of certificate of registration it shall furnish evidence to the satisfaction of the
Commission that the personnel employed by it for executive positions, research or other related functions possess sufficient educational qualifications and
professional experience to undertake the proposed form of business of the NBFC.” Vide SRO 1002(I)/2015 dated October 15, 2015
39 Inserted vide SRO 1002(I)/2015 dated October 15, 2015
40 Deleted the words “to the NBFC” vide SRO 1002(I)/2015 dated October 15, 2015
41 Substituted for “one” vide S.R.O. 271 (I)/2010 dated April 21,2010
42 Deleted the words “of such NBFC” vide SRO 1002(I)/2015 dated October 15, 2015
43 Substituted for “one” vide S.R.O. 271 (I)/2010 dated April 21,2010
44 Substituted for “grant” vide SRO 1002(I)/2015 dated October 15, 2015
45 Substituted for “(10) Every company in existence which is engaged in one or more forms of businesses shall apply in writing to the Commission, as provided by sub-section (3)
of section 282C of the Ordinance, for grant of a licence along with a non-refundable processing fee as specified by the Commission:
Provided that till such time that a new licence is issued, the existing licences or registrations shall be deemed to be valid for the purposes of these rules unless the company fails to
apply for licence as specified in sub-rule (8) or the Commission declines to grant such licence for reasons to be recorded in writing.”.” vide SRO 1002(I)/2015 dated October 15,
2015

14
7. Conditions applicable to a NBFC.(1) A NBFC shall, ¾

(a) maintain such books of accounts and other records, as prescribed under the
Ordinance, as shall depict a true and fair view of its state of affairs, including,__

(i) journals, cash books and other records of original entry forming the basis
of entry in any ledger;

(ii) ledgers (or other comparable record) reflecting assets, liabilities, income
and expenses along with all supporting documents or records;

(iii) ledgers (or other comparable record) showing securities in the portfolio;

(iv) record of transactions with banks;

(v) record of the meetings of the board of directors and all relevant
committees including the audit committee, credit committee and
investment committee; and

(vi) original record of all reports, analysis and memoranda containing

investment advice distributed;

(b) maintain such books of accounts and other records, as prescribed under the
Ordinance, to depict a true and fair view of its state of affairs for a period of not
less than ten years;

(ba) ensure that its statutory auditors are from the approved list of auditors circulated
by the Commission;

(c) appoint an individual, having minimum three years experience, as its financial or
chief accounting officer who is-

(i) a chartered accountant; or

(ii) a cost and management accountant; or

(iii) a member of a recognized foreign accountancy organization; or

46 Deleted the words “6. Commencement of operations by NBFC. (1) An NBFC shall commence or continue its business and operations only after it has complied with the
requirements of these rules and the regulations and has been issued a licence to carry out a form of business.
(2) Without prejudice to the terms and conditions prescribed in rule 7, the Commission may, subsequent to the grant of licence to the NBFC, impose any other condition,
as it may deem necessary in the public interest.
(3) If an NBFC fails to commence business within one year of the issuance of licence, the licence shall be deemed to be cancelled or otherwise as specified by the
Commission by notification in the official Gazette.”

15
 (iv) a person having master’s degree in commerce or business administration
with specialization in finance,

[Provided that a non-deposit taking and unlisted lending NBFC

may designate another officer as its financial or chief accounting
officer;]47

(ca) appoint [as internal auditor]48;

[(i) a person having minimum three years relevant experience who is-]49

(a) a chartered accountant; or

(b) a cost and management accountant; or
(c) a certificated internal auditor; or
(d) a certified information system auditor; or
(e) a member of recognized foreign accountancy organization; or
(f) an individual having master degree in commerce or business
administration with specialization in finance; or

(ii) a chartered accountancy firm having satisfactory Quality Control Review

(QCR) and not being the statutory auditors to whom this function is
outsourced[.]50

[Provided that the internal auditor shall report directly to the board
of directors or the audit committee of the board of the NBFC.]51

(cb) appoint a person as compliance officer to ensure reporting to the Commission of

status of compliance with the existing regulatory framework by the NBFC[:

Provided that a non-deposit taking and unlisted Lending NBFC may

designate another officer as its compliance officer;]52

(cc) appoint such executives who shall fulfill the terms and conditions mentioned in
the fit and proper criteria specified by the Commission by notification in the
official Gazette;

[(cd) appoint the directors in accordance with Schedule I, provided that the
Commission shall be the final authority to determine the status of a director as
independent or otherwise;]53

47 Substituted for “;” vide SRO 1002(I)/2015 dated October 15, 2015
48 Inserted vide SRO 1002(I)/2015 dated October 15, 2015
49 Substituted for “(i) a person having minimum three years experience as internal auditor who is-“ vide SRO 1002(I)/2015 dated October 15, 2015
50 Substituted for “;” vide SRO 1002(I)/2015 dated October 15, 2015
51 Inserted vide SRO 1002(I)/2015 dated October 15, 2015
52 Substituted for “;” vide SRO 1002(I)/2015 dated October 15, 2015
53 Substituted for “(cd) appoint-
(i) at least one third of its directors who shall be independent directors; and

16
 (d) prepare its accounts in conformity with the International Accounting Standards
notified under sub-section (3) of section 234 of the Ordinance and technical
releases issued by Institute of Chartered Accountants of Pakistan from time to
time;

[(da) furnish to the Commission its quarterly and annual financial statements in
accordance with Schedule I;]54

[ ]55

(g) follow directions issued to protect NBFCs against their involvement in money
laundering activities[, terrorist financing]56 and other unlawful trades;

(h) [obtain rating in accordance with Schedule-I]57 as and when it becomes eligible
for rating as per the rating criteria of a rating agency registered with the
Commission, and such rating shall be updated at least once every financial year:

Provided that the NBFC shall within one year of the decrease in its rating
from the grade specified by the Commission by notification in the official
Gazette, obtain a fresh rating and during the period that its rating is below the
grade so specified, the NBFC may be allowed by the Commission to continue its
operations on such conditions as are deemed appropriate by the Commission;

[(i) publish the rating in its annual report and quarterly reports, annual and quarterly
reports of the collective investment schemes managed by it, if applicable, and any
advertisement and brochures in relation to promotion of its business;]58 and

(j) acquire and maintain membership of the relevant association and follow the code
of conduct specified by the said association approved by the Commission.”;
Provided that at least two of its directors, excluding the chief executive officer, shall have relevant experience of at least five years at a senior management level in the financial
sector;
Explanation.- For the purpose of this sub-clause, the expression "independent director" means a director who is not connected with the company or its promoters or directors on the
basis of family relationship and who does not have any other relationship, whether pecuniary or otherwise, with the company, its associated companies, directors, executives or
related parties. The test of independence principally emanates from the fact whether such person can be reasonably perceived as being able to exercise independent business
judgment without being subservient to any apparent form of interference.
Provided further that the Commission shall be the final authority to determine the status of a director as independent or otherwise;” vide SRO 1002(I)/2015 dated October 15, 2015
54 Substituted for “(da) furnish to the Commission within one month of the close of first and third quarter and within two months of the close of second quarter of the year of
account of its financial year, a balance sheet along with an income statement, cash flow statement and the statement of changes in equity for the respective quarters, whether
audited or otherwise;”
55 Deleted the words “(db) furnish a copy of its annual report together with copies of the balance sheet, income statement, cash flow statement and statement of changes in equity
along with the auditors report to the Commission or any other person as required by the Commission within three months of the close of the accounting period;
(e) separately disclose in relevant notes to its quarterly and annual accounts all those facilities and exposures whose carrying value exceeds twenty percent of its equity;”
vide SRO 1002(I)/2015 dated October 15, 2015
56 Inserted vide SRO 1002(I)/2015 dated October 15, 2015
57 Substituted for “obtain credit rating and, management quality rating, wherever applicable” vide SRO 1002(I)/2015 dated October 15, 2015
58 Substituted for “(i) publish the credit rating and management quality rating, as the case may be, in its annual report and quarterly reports, annual and quarterly reports of
the collective investment schemes managed by the NBFC, if applicable, and any advertisement and brochures in relation to promotion of its business;” vide SRO 1002(I)/2015
dated October 15, 2015

17
 [(k) seek registration of notified entities as per the regulations notified by the
Commission in the Official Gazette before offering of unit, certificates or shares
of notified entities:]59

(2) A NBFC shall not,

(a) appoint as directors [those]60 persons who hold such office in any other
NBFC licensed for the same form of business.

Provided that this clause shall not apply to the nominees of the Federal or
Provincial Governments on the board of any NBFC or, any exception specified by
the Commission;

(aa) appoint or change its chief executive or any of its directors subject to
fulfillment of the fit and proper criteria and prior approval of the
Commission provided that the Commission may refuse appointment of
any person[ ]61;

Explanation.- This clause shall not apply to a director nominated

by the Federal Government or Provincial Governments;

[(b) enter into premises leasing or renting, and sale or purchase of any kind
with their directors, officers, employees or their close relatives or any
person acting on their behalf or such persons who either individually or in
concert with family members beneficially own 10% or more of the equity
of the NBFC:

Provided that this restriction shall not apply to such NBFCs that
have a policy to this effect duly approved by their board of directors:

Provided further that in case of any sale and purchase to the

directors the prior approval in writing of the board, excluding the
participation of the beneficiary directors, is required;]62

[(ba) hold or make investment in a subsidiary other than that which is a

financial services company:

59 Inserted vide SRO 1002(I)/2015 dated October 15, 2015

60 Inserted vide SRO 1002(I)/2015 dated October 15, 2015
61 Deleted the words “without assigning any reason” vide SRO 1002(I)/2015 dated October 15, 2015
62 Substituted for “(b) purchase anything from, or sell anything to any director, officer, employee of the NBFC or to a person who either individually or in concert with close
relatives beneficially owns ten percent or more either of the equity or other securities with voting rights, if any, issued by such NBFC;
Provided that this restriction shall not apply to such NBFCs that have a policy to this effect duly approved by their board of directors:
Provided further that in case of any sale and purchase to the directors the prior approval in writing of the board, excluding the participation of the beneficiary directors, is
required;”vide SRO 1002(I)/2015 dated October 15, 2015

18
 Provided that an NBFC may make strategic investments in
financial services company with the approval of the Commission;]63

[(c) form, sell or transfer ownership of shares in subsidiary or associated

company, merge with, acquire or takeover any other company unless it has
obtained prior approval of the Commission in writing to such formation or
sale or transfer;]64

[(ca) sell strategic investment unless it has obtained prior approval of the
Commission in writing to such sale;

(cb) merge with, acquire or takeover any other company unless it has obtained
prior approval of the Commission in writing to such scheme of merger,
acquisition or takeover;]65

[ ]66

(f) remove any of its records or documents relating to its business from
Pakistan to a place outside Pakistan without the prior permission of the
Commission;

[(h) make aggregate investment in shares of unlisted company in excess of

twenty percent of its equity. Investment in unlisted company shall be
approved in a board meeting after carefully analyzing the merits and
financial impact of the investment and recording the decision in detail in
minutes of the meeting and such decisions shall be communicated to the
Commission within fourteen days of the board meeting along with copy of
the minutes:

Provided that the NBFC shall not own shares of any one unlisted
company in excess of ten per cent of its own equity or of the issued capital
of that company, whichever is less:

Provided further that investment by an NBFC out of its surplus

equity (i.e. over and above the required minimum equity requirements) in
unlisted shares of its subsidiaries or any other financial services company

63 Inserted vide SRO 1002(I)/2015 dated October 15, 2015

64 Substituted for “(c) sell or transfer ownership of shares in subsidiary or associated company, merge with, acquire or takeover any other company unless it has obtained
prior approval of the Commission in writing to such sale or transfer or scheme of merger, acquisition or takeover;” vide SRO 1002(I)/2015 dated October 15, 2015
65 Substituted for “(ca) make investment in its subsidiary except out of its surplus equity (i.e. over and above the specified minimum equity requirement for the licences held by
such NBFC);” vide SRO 1002(I)/2015 dated October 15, 2015
66 Deleted the words “(e) enter into transactions with any broker which exceed ten percent of the total brokerage expense of the NBFC in any one accounting year
Provided that the NBFC shall not have a common director or officer or employee with the broker;” vide SRO 1002(I)/2015 dated October 15, 2015

19
 in the group, shall not be taken into account for calculating the limit for
unquoted shares;]67

(i) offer any of its own or other securities for any consideration other than
cash [or liquid assets]68 nor make any loan or advance against these
securities. Unless otherwise specified by the Commission by notification
in the official Gazette;

(j) hold, deal or trade in real estate except for the use of NBFC itself or where
specified by the Commission by notification in the official Gazette[:

Provided that properties acquired by lending NBFC in satisfaction

of its claims shall be disposed of within a maximum period of seven years
from the date of acquisition;]69

[(k) raise deposits in any form by whatever name called except as specified by
the Commission in the Non-Banking Finance Companies and Notified
Entities Regulations, 2008;]70

(l) provide unsecured facilities or exposures except as specified by the

Commission by notification in the official Gazette; [and]71

(m) encumber or mortgage or pledge or transfer clients’ assets deposited as

security with the NBFC against any facility extended to the client, for
securing its own obligation[.]72

(n) undertake the brokerage business in capital market except by forming a

separate company for this purpose73.
[ ]74

67 Substituted for “(h) make an investment in unquoted shares of any company in excess of twenty percent of its equity. Unquoted investment shall be approved in a board
meeting after carefully analyzing the merits and financial impact of the investment and recording the decision in detail in minutes of the meeting and such decisions shall be
communicated to the Commission within fourteen days of the board meeting along with copy of the minutes;

Provided further that all existing NBFCs, who have investment in unquoted shares exceeding twenty percent of their equity , shall bring such investments down to twenty percent
within a period of six months from the date of this provision taking effect.
Provided also that an investment by an NBFC out of its surplus equity (i.e. over and above the minimum specified regulatory requirement for the licences held by the NBFC) in its
wholly owned subsidiaries, for undertaking a form of business, shall not be taken into account for calculating the limit for unquoted shares;” vide SRO 1002(I)/2015 dated October
15, 2015
68Inserted vide vide SRO 1002(I)/2015 dated October 15, 2015
69 Substituted for “;” vide SRO 1002(I)/2015 dated October 15, 2015
70 Substituted for “(k) raise funds in any form from individuals except as specified by the Commission by notification in the official Gazette;” vide SRO 1002(I)/2015 dated
October 15, 2015
71 Inserted vide SRO 1002(I)/2015 dated October 15, 2015
72 Substituted for “; and” vide SRO 1002(I)/2015 dated October 15, 2015
73 Substituted for “Provided that the NBFCs already engaged in brokerage business shall comply with this requirement within a period of one year of coming into effect of this
provision” vide S.R.O. 271 (I)/2010 dated April 21,2010
74 Deleted the words “Provided that this sub-rule shall not apply to NBFC which have a valid license to undertake investment finance services business and have been, to such
terms and conditions as Commission may impose, granted permission by the Commission to undertake brokerage business without forming a separate company: and” vide SRO
1002(I)/2015 dated October 15, 2015

20
 [(3) An NBFC shall comply with such minimum equity requirement or any other
requirement in lieu of minimum equity requirement as may be prescribed by the Commission
from time to time for specific form of business or class of companies by notification in the
official Gazette.]75

[7A. Payment of fee.- An NBFC shall pay such non-refundable fee as may be specified by the
Commission through notification in the official Gazette.]76

[8. Opening or closure of bank account, account with a broker or branch.- An NBFC shall
inform its board of director regarding opening or closure of any bank accounts, accounts with a
brokers or branches of an NBFC and the same must be recorded in the minutes of board
meeting.]77

[9. Insurance coverage.- An NBFC shall obtain sufficient insurance coverage from an insurance
company rated minimum A- by a credit rating agency registered with the Commission against
any losses that may be incurred as a result of employee’s fraud or gross negligence. The NBFC
shall make disclosure about the insurance coverage in its financial statements.]78

10. Exchange fluctuation risk. A NBFC shall make satisfactory arrangement to insulate itself
from exchange fluctuation risks associated with foreign currency obligations and transactions.

10A. Transitional provisions.- Within [six months]79 from the coming into force of these
provisions [or any amendments thereto]80, all NBFCs shall [ ]81 take such other actions as are
necessary to [comply]82 with the provisions of these rules:

Provided that, notwithstanding the fact that such actions have not been taken or
such changes have not been made, the NBFC shall comply with the provisions of these rules as if
they are licensed or registered under these rules.

[10B. Exemption from certain rules to specified Companies.- The companies specified in
Schedule II shall be exempt from certain rules specified in the said Schedule or as may be
prescribed by the Commission by notification in the official gazette.]83

75 Substituted for “(3) An NBFC shall comply with such minimum equity requirement in respect of each form of business specified by the Commission from time to time by
notification in the official Gazette.” Vide SRO 1002(I)/2015 dated October 15, 2015
76 Substituted for “7A. Monitoring fee.- An NBFC engaged in deposit taking shall, within three months of the close of its financial year, pay to the Commission an annual fee as
may be specified by the Commission by notification in the official Gazette.” Vide SRO 1002(I)/2015 dated October 15, 2015
77 Substituted for “8. Opening or closure of bank account, account with a broker or branch.- Opening or closure of any bank accounts, account with a broker or branches of an
NBFC shall be approved in a board meeting by the board of directors of the NBFC after carefully analyzing its merits and financial impact and the reasons must be recorded in the
minutes of board meeting. Such decisions and minutes of the board meeting shall be communicated to the Commission within fourteen days of the said meeting.” Vide SRO
1002(I)/2015 dated October 15, 2015
78 Substituted for “9. Insurance coverage. A NBFC shall obtain sufficient insurance coverage on its own or for its clients’ benefit against any losses that may be incurred as a
result of employee’s fraud or gross negligence” vide SRO 1002(I)/2015 dated October 15, 2015
79 Substituted for “one year” vide SRO 1002(I)/2015 dated October 15, 2015
80 Inserted vide SRO 1002(I)/2015 dated October 15, 2015
81 Deleted the words “alter their memoranda and articles of association or any existing contract or agreement and shall” vide SRO 1002(I)/2015 dated October 15, 2015
82 Substituted for the words “bring the memoranda and articles of association and working procedures of the NBFC in conformity” vide SRO 1002(I)/2015 dated October 15,
2015
83 Inserted vide SRO 1002(I)/2015 dated October 15, 2015

21
 FORM-I
[see rule 4(1)]
APPLICATION FOR PERMISSION TO FORM A NON – BANKING
FINANCE COMPANY
Dated: _______________
To
The Securities and Exchange
Commission of Pakistan,
Islamabad.

Dear Sir,

We hereby apply for grant of permission under rule 4 of the Non-Banking Finance Companies
(Establishment and Regulation) Rules, 2003, to form a Non-Banking Finance Company under
the name and style of * ---------------------------------------------

The information and documents as required in the Annexure to this form duly verified and
signed by all promoters and proposed directors along with five spare copies of this application
and an affidavit by them as to the correctness of the details is submitted.

We undertake to keep this information upto date by communicating changes or modifications

therein within fourteen days of such changes or modifications.

A receipt of rupees [(Rs._________)]84 being the processing fee, deposited in-------------- on -----
-------------------is enclosed.

Yours faithfully,
------------------------
Verification by
Oath Commissioner.

· Name of the company

84 Substituted for “five hundred thousand (Rs. 500,000/-)” vide S.R.O.570(I)/2012 dated May 25, 2012

22
 ANNEXURE TO FORM-I
[see rule 4]
INFORMATION TO BE SUPPLIED FOR OBTAINING
PERMISSION TO FORM A NON – BANKING FINANCE COMPANY
AND SUBSEQUENT CHANGE IN DIRECTORSHIP AND CHIEF
EXECUTIVE

1. Full name, former name if any, father’s or husband’s name, nationality, residential and
business address, national tax number, present occupation of each sponsor, proposed
director, proposed chief executive and proposed chairman of the Board. (Institutional
sponsors shall mention their names and addresses only instead of giving all these
particulars of their nominee directors).

2. Names and addresses of companies, firms and other organizations of which the aforesaid
sponsors, proposed chief executive and proposed chairman are or have been directors,
partners or office holders during the last ten years. Copies of annual accounts of such
companies and firms for the last three years alongwith summary of their paid-up share
capital, free reserves, profit after tax and dividend payment to be provided.

3. Financial standing, educational as well as professional qualifications and experience of

persons mentioned in paragraph 1 above, supported by documentary evidence.

4. Percentage of capital, each sponsor proposes to contribute in the proposed company.

5. Feasibility report of the proposed company.

6. Evidence of payment of income tax and wealth tax by the sponsors in individual capacity
as well as by the companies, firms, etc., wherein they are or have been directors during
the preceding one year.

7. Net-worth certificate of each sponsor supported by a duly authenticated copy of the latest
wealth statement filed with the taxation department. In the case of sponsors or directors
residing in countries where filing of wealth statement is not the requirement of law, a
certificate of personal net-worth and general reputation issued by a bank of international
repute shall be acceptable.

8. Names of the bankers of the sponsors alongwith their account numbers.

9. Draft of the Memorandum and Articles of Association.

10. Affidavit from each person mentioned in paragraph 1 above, stating that-

(a) he has not been associated with any illegal banking business, deposit taking or
financial dealings;

23
 (b) he and companies in which he is a director or major shareholder have no over-due
loans or installments outstanding towards banks or other financial institutions;

(c) neither he nor companies in which he is a director or major shareholder has

defaulted in paying taxes as on the date of application;

(d) he has not been sponsor, director or chief executive of a defaulting cooperative
finance society or finance company;

(e) he has never been convicted of fraud or breach of trust or of an offence involving
moral turpitude or removed from service for misconduct;

(f) he has neither been adjudged an insolvent nor has defaulted in making payments,
to his creditors; and

(g) his net-worth is not less than twice the amount to be subscribed by him personally
(not applicable to a nominee director).

11. Latest CIB report in respect of sponsors (individuals and institutions) as an evidence for
statement in clause (b) of paragraph 10

24
 FORM-II
[see rule 5(1)]
APPLICATION FOR OBTAINING LICENCE TO UNDERTAKE OR CARRY
OUT *_________________ AS NON – BANKING FINANCE COMPANY

Dated, the--------------
To,
The Securities and Exchange
Commission of Pakistan,
Islamabad.

Dear Sir,

We hereby apply for grant of licence under rule 5 of the Non-Banking Finance Companies
(Establishment and Regulation) Rules, 2003, to undertake __________* as a Non-Banking
Finance Company.

2. We hereby furnish the following information, __

(a) date of incorporation as a limited company;

(b) authorised, subscribed and paid-up share capital of the company (sponsors' equity
indicated separately);
(c) names and addresses of directors and number of shares held by each of them;
(d) directors' interest, direct or indirect, in any other company with details of such interest;
(e) details of persons or group controlling the company including major shareholders with
number and value of shares held;
(f) names of holding, subsidiary and associated undertaking, if any;
(g) details of qualified staff engaged;
(h) reasons for selecting the proposed place of business with statistical data; and
(i) additional facts in support of this application.

3. Certified copies of the memorandum and articles of association and certificate of incorporation
are enclosed.

4. An affidavit as to the correctness of the above information by the chief executive and two
directors is also furnished herewith. We undertake to keep this information upto date by
communicating changes or modifications therein within fourteen days of such change or
modifications.

5. A receipt of rupees [(Rs._________)]85 being the processing fee for each license, deposited in
__________ on ________ is enclosed.
Yours faithfully,

Signature-----------------
(To be signed by all the directors)
85 Substituted for “two hundred and fifty thousand (Rs. 250,000/-)” vide S.R.O.570(I)/2012 dated May 25, 2012

25
*Any one or more of the activities or functions as mentioned under section 282 (A) of the
Companies Ordinance, 1984.

26
 FORM -III
[see rule 5([6]86)]
SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

Islamabad, Dated, the __________

Registration No. _________

LICENCE TO CARRY OUT OR UNDERTAKE *_________AS NON-BANKING

FINANCE COMPANY

The Securities and Exchange Commission of Pakistan having considered the application for
grant of licence under rule 5 of the Non-Banking Finance Company (Establishment and
Regulation) Rules, 2003, by **_______________________________ and being satisfied that the
said **________________________________________ is eligible for the licence, hereby
grants, in exercise of the powers conferred by [sub-rule (6)]87 of rule 5 of the Non- Banking
Finance Company (Establishment and Regulation) Rules, 2003, licence to
**______________________________________ to undertake or carry out *__________ subject
to the conditions stated herein below or as may be prescribed or imposed hereafter.

The license is valid from __________________________to_____________________.

(date) (date)

Signature of the Officer

*Any one or more of the activities or functions as mentioned under section 282 A of the
Companies Ordinance, 1984

** Name of the Company

(Official Seal and Stamp)

86 Substituted for “2” vide S.R.O.570(I)/2012 dated May 25, 2012

87 Substituted for “sub-rule (2)” vide S.R.O.570(I)/2012 dated May 25, 2012

27
 FORM IV
[see rule 5(8)]
APPLICATION FOR RENEWAL OF LICENCE TO CARRY OUT
*_______________ AS NON-BANKING FINANCE COMPANY

Islamabad the ...................

Securities and Exchange Commission of Pakistan,
Government of Pakistan,
Islamabad

Dear Sir,

We hereby apply for renewal of the licence to carry out *...............................of by

**_____________ under rule 5 of the Non-Banking Finance Company (Establishment and
Regulation) Rules, 2003.

The licence issued or renewed earlier is due to expire on.......................

Original receipt of challan evidencing payment of renewal fee of rupees

[(Rs.__________)]88 is enclosed.

It is requested that the licence may be renewed w.e.f. ..................... for a period of three89
years.

Yours faithfully,

Name and Signature of the

Secretary or a director
of the company.

*Any one or more of the activities or functions as mentioned under section 282 A of the
Companies Ordinance, 1984.

** Name of the company.

88 Substituted for “two hundred and fifty thousand (Rs.250, 000/-)” vide S.R.O.570(I)/2012 dated May 25, 2012
89 Substituted for “one” vide S.R.O. 271 (I)/2010 dated April 21,2010

28
 FORM V
[see rule 5([9]90)]
SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN LICENCE TO
CARRY ON *_______________ AS NON-BANKING FINANCE COMPANY

Islamabad, the ............

The Securities and Exchange Commission of Pakistan, having considered the application for
renewal of licence to carry out *_________________submitted by **..............................under
rule 5 of the Non-Banking Finance Company (Establishment and Regulation) Rules, 2003, and
being satisfied that it would be in the public interest so to do, in exercise of powers conferred by
[sub-rule (9)]91 of rule 5 of the said rules, hereby renews the licence of**.......................... to
carry out *___________ subject to the conditions stated herein below or as may be prescribed or
imposed hereafter.

.........................................
(Signature of the officer)

* Any or more one of the activities or functions as mentioned under section 282 A of the
Companies Ordinance, 1984.
** Name of the company.

90 Substituted for “5” vide S.R.O.570(I)/2012 dated May 25, 2012

91 Substituted for “sub-rule 5” vide S.R.O.570(I)/2012 dated May 25, 2012

29
 [Schedule I
[See rules 5 (1),5(3), 5(6)(a), 7 (1) (cd), 7 (1) (da), 7 (1) (h)]

Conditions Applicable to an NBFC

Eligibility Criteria
Forms of Type of Minimum Number of Number of
business company number independent directors
of directors with
directors relevant
experience
Submission
of at least
Rating of financial
five years at
statements
a senior
management
level for a
particular
form of
business
1 2 3 4 5 6 7
Leasing i) Any form 2 or 1 or one (i) 1 director, N/A As per
Housing of minimum third, if number of requirements
Finance company number of whichever is directors of the
Services incorporat directors higher including Ordinance
iii) Investment ed as stipulated chief
Finance NBFC in in the executive is
Services accordanc Ordinance, less than or
iv) Discounting e with whichever equal to three
services criteria is higher
(Lending mentioned (ii) 2
NBFC without in rule 4. directors, if
deposit taking ii) Any number of
permission) existing directors
company including
engaged chief
in these executive is
forms of greater than 3
business.
iii) Any
other
company
as
approved
by the
Commissi

30
 on
i) Leasing Listed Minimum 2 or One 2 directors Credit As per
ii) Housing company number of third, excluding Rating requirements
Finance which was directors whichever is chief of the
Services incorporated as higher executive Ordinance
iii) Investment as an NBFC stipulated
Finance in accordance in the
Services with criteria Ordinance
iv) Discounting mentioned in
services rule 4 and
(Lending complies
NBFC with with the
deposit taking conditions
permission) mentioned in
the
Regulations
for raising
Deposit.
Investment i) A public Number of One third (i) 1 director, Management As per
advisory limited directors if number of quality requirements
services company stipulated directors rating of the
incorporat in the including Ordinance
ed as Ordinance, chief
NBFC as executive is
per the three
rule 4.
ii) An (ii) 2
existing directors, if
fund number of
managem director,
ent NBFC including
chief
executive is
greater than 3
Private Equity i) Any form Number of One third (i) 1 director, Management As per
and Venture of directors if number of quality requirements
Capital company stipulated directors rating of the
Management incorporat in the including Ordinance
Services ed as Ordinance, chief
NBFC as executive is
per the three
rule 4.
ii) An (ii) 2
existing directors, if
fund number of
managem director,

31
 ent NBFC including
chief
executive is
greater than 3
Asset i) A public Number of One third (i) 1 director, Management As per
management limited directors if number of quality requirements
services company stipulated directors rating of the
incorporat in the including Ordinance
ed as Ordinance, chief
NBFC as executive is
per the three
Rule 4.
ii) An (ii) 2
existing directors, if
fund number of
managem director,
ent NBFC including
with a chief
valid executive is
investmen greater than 3
t advisory
services
licence
and
minimum
5 years’
experienc
e

REIT i) A public Number of One third (i) 1 director, Management As per

management limited directors if number of quality requirements
services company stipulated directors rating of the
incorporat in the including Ordinance
ed as Ordinance, chief
NBFC as executive is
per the three
Rule 4
ii) An (ii) 2
existing directors, if
fund number of
managem director,
ent NBFC including
iii) A chief
public executive is
limited greater than 3
company

32
 which is
primarily
engaged
in the
business
of real
estate
developm
ent.
Pension fund i) A fund Minimum One third (i) 1 director, Management As per
scheme managem number of if number of quality requirements
business ent NBFC directors director, rating of the
with a as including Ordinance
valid stipulated chief
asset in the executive, is
managem Ordinance, 3
ent
services (ii) 2
licence director, If
and number of
minimum director,
3 years’ including
experienc chief
e of executive, is
managing greater than 3
multiple
types of
collective
investme
nt
schemes
ii) A life
insurance
company.
with a
valid
licence
and
minimum
3 years’
experienc
e
]92

92 Inserted vide SRO 1002(I)/2015 dated October 15, 2015

33
 Schedule II
[See rule 10 B]

Exemption from Certain Rules to specified Companies

Sr. No. Type of Company Exemption
1. Companies other than (i) Clauses (a), (b), (c), (d), (e), (f), (g) and (h) of sub-
Financial Institutions rule 6 of Rule 5
undertaking activities (ii) Clauses (a), (b), (ba), (c), (ca), (cc), (cd), (h), (i) and
of lending NBFCs as (j) of sub-rule 1 of Rule 7
an ancillary business (iii) Clauses (a), (aa), (b), (ba), (c), (ca), (cb), (h), (i), (j)
and (l) of sub-rule 2 of Rule 7
(iv) Sub-rule 3 of Rule 7
(v) Rule 8
(vi) Rule 9

]93

93 Inserted vide SRO 1002(I)/2015 dated October 15, 2015

34