CGBL&E DESCRIPTIVE Q&A

CGBLE DESCRIPTIVE Q/A

Chapter: ALL CHAPTERS INCLUDED

Question No: 1 INTRODUCTION TO COMPANIES P.G # 07

When search-warrants from the concerned Magistrate may be obtained by registrar

Write down those four conditions (SEC 255).

ANSWER:

1. He thinks that any person or occupants of any place to be searched may create
hindrance, resist search (Anees ka saala resist kr rha he)

2. Such document or thing is not known to be in the possession of any person.(pata hi

nahi he ke kis ke pas he documents)

3. Where general search is required for the purposes of any proceedings, inspection or
investigation under this Act (pura ghar search krna zrori ho)

4. Any person will not or would not produce any document or thing as required by the
registrar (jisky paas documents hn wo de nahi rha)

Question No: 2 INTRODUCTION TO COMPANIES P.G # 11

What are the effects of revocation of licence by commission (SEC 43).

ANSWER:

1. The company shall stop all its activities except the recovery of money owed to it, if any;

2. The company shall not solicit or receive donations from any source;

3. All the assets of the company after satisfaction of all debts and liabilities shall, in the
manner as may be specified, be transferred to another company, within ninety days
from the revocation of the licence or such extended period as may be allowed by the
Commission:

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4. After such transfer, the members and officers of the first company shall not be eligible
to hold any office in later company for next 5 years (omitted)

5. A reasonable amount to meet expneses of voluntary windup

Question No: 3 INCORPORATION OF COMPANIES P.G # 121

Who is Promoter SEC 2(50)

ANSWER:

1. Who is named as a subscriber to the memorandum of association of a company; or

2. Who has been named as such in a prospectus; or

3. who has control over affairs of the company, directly or indirectly whether as a
shareholder, director or otherwise; or

4. In accordance with whose advice, directions or instructions the board of the company
is accustomed to act:

Question No: 4 REGULATIONS 2017 PAGE # 05

When the name shall be considered undesirable? (SEC 4).

ANSWER:

1. It includes any word or words which are offensive to any section of the people

2. It is identical with or resemble or similar to name of Limited Liability Partnership

registered under the Limited Liability Partnership Act, 2017;

3. Any other word which in the opinion of registrar is undesirable.

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Question No: 5 REGULATIONS 2017 PAGE # 10

What are the Additional requirements for foreign subscribers? (SEC 15)

ANSWER:

Provided that the copy of any charter, statute, memorandum, articles or other
instrument, constituting or defining the constitution of a foreign company or a foreign
body corporate required to be filed with the registrar shall be duly certified to be a true
copy by

1. The public officer in the country where the foreign company or foreign body
corporate is incorporated to whose custody the original is committed; or

2. A Notary public of the country where the foreign company or foreign body
corporate is incorporated; or

3. An affidavit of a responsible officer of the foreign company or foreign body

corporate in the country where the company is incorporated

Question No: 6 REGULATIONS 2017 PAGE # 11-12

In which of the cases the Commission shall obtain security clearance from Ministry of
Interior (MoI)? (SEC 15)

ANSWER:

1. Companies having foreign (other than Afghan and Indian national or origin)
subscribers/officers will be incorporated on the basis of an undertaking of each foreign
subscriber /officer and case shall be forwarded for security clearance:

2. Companies having foreign subscribers/ officers who are Afghan or Indian national or
of Afghan or Indian Origin will be incorporated after receipt of security clearance;

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3. Security services provider companies will be incorporated after receipt of security

clearance from MoI.

Question No: 7 CERTIFICATE OF COMMENCEMENT OF BUSINESS P.G # 291

When a public company shall not start its operations or exercise any borrowing powers?
(SEC 19 & 20)

ANSWER:

(a) Shares held subject to payment of the whole amount thereof in cash have been allotted
to an amount not less in the whole than the minimum subscription and the money has
been received by the company (jab tak shares ke pury paisy na mil jae)

b) Every director of the company has paid to the company full amount on each of the
shares taken or contracted to be taken by him and for which he is liable to pay in cash

(c) No money is or may become liable to be repaid to applicants for any shares which have
been offered for public subscription;

(d) There has been filed with the registrar a duly verified declaration by the chief executive
or one of the directors and the secretary in the specified form that the aforesaid conditions
have been complied with; (compliance certificate CEO dega or first signature bhi wohi kry
ga)

(e) In the case of a company which has not issued a prospectus inviting the public to
subscribe for its shares, there has been filed with the registrar a statement in lieu of
prospectus (SILOP) as per the Second Schedule annexed to this Act.
(un companies keliye SILOP he jo shares public ko issue nahi krti blke wo log own
investment krty hn)

Question No: 8

When a person is ceased to be a member?

ANSWER:

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1. When he transfers his shares

2. His shares are forfeited, lien or surrender
3. His redeemable share has been redeemed
4. He is deceased or insane
5. He is insolvent

Question No: 9 AUDITOR P.G # 121

When Commission shall appoint auditors of the company? Write down those four
conditions. (sec 246)

ANSWER:

a. if the company, fails to appoint the first auditors within a period of 90 days of the
date of incorporation of the company
b. If the appointed auditors are unwilling to act as auditors of the company
c. Auditor not appointed in AGM
d. Casual vacancy not filled by directors within 30 days
e. Invalid appointment

Question No: 10

What is body corporate

ANSWER:

(a) a company incorporated under this Act or company law; or

(b) a company incorporated outside Pakistan, or
(c) a statutory body declared as body corporate in the relevant statute

Question No: 11 FURTHER ISSUE AND BUY BACK OF SHARE CAPITAL P.G # 42

Discuss important points of SEC 81: ISSUANCE OF SHARES ON PREMIUM

ANSWER:

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1) If a company issues shares at a premium, whether for cash or otherwise, a sum equal
to the aggregate amount or the value of the premiums on those shares must be
transferred to an account, called "the share premium account".
2) Where, on issuing shares, a company has transferred a sum to the share premium
account, it may use that sum to write off-
a) the preliminary expenses of the company;
b) the expenses of, or the commission paid or discount allowed on, any issue of
shares of the company; and
c) in providing for the premium payable on the redemption of any redeemable
preference shares of the company.
3) The company may also use the share premium account to issue bonus shares to its
members.

OR

1) Share premium account may be applied by Co in

1. Writing off the preliminary expenses
2. Writing off commission paid or discount allowed on, any issue of shares of the
company
3. Redemption of any redeemable preference shares or debentures on premium
4. Issuing fully paid bonus share to members of Co

Question No: 12 FURTHER ISSUE AND BUY BACK OF SHARE CAPITAL P.G # 42

Discuss important points of SEC 82: ISSANCE OF SHARES AT DISCOUNT.

ANSWER:

(a) The issue of shares at a discount must be authorised by special resolution passed in
the general meeting of the company;

(b) The resolution must specify the

1. Number of shares to be issued,
2. Rate of discount, not exceeding the limits permissible under this section
3. Price per share proposed to be issued;

(c) In case of listed companies discount shall only be allowed if the market price is
lower than the par value of the shares for a continuous period of past ninety
trading days immediately preceding the date of announcement by the board;

(d) The issue of shares at discount must be sanctioned by the commission: provided
further that approval of the commission shall not be required by a listed company
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for issuing shares at a discount if the discounted price is not less than ninety
percent of the par value;
(e) No such resolution for issuance of shares at discount shall be sanctioned by the
commission if the offer price per share, specified in the resolution, is less than-

2) In case of listed companies, ninety percent (90%) of volume weighted average daily closing
price of shares for 90 days prior to the announcement of discount issue; or

3) in case of other than listed companies, the breakup value per share based on assets
(revalued not later than 3 years) or per share value based on discounted cash flow:

Provided that the calculation arrived at, for the purpose of subclause
(i) or (ii) of clause (e) above, shall be certified by the statutory
Auditor;

(f) Directors and sponsors of listed companies shall be required to subscribe their
portion of proposed issue at volume weighted average daily closing price of shares
for 90 days prior to the announcement of discount issue;

(g) Not less than 3 years have elapsed since the date on which the company was
entitled to commence business;

(h) The share at a discount must be issued within 60 days after the date on which the
issue is sanctioned by the commission or within such extended time as the
commission may allow.
 Any violation of this section shall be an offence liable to a penalty of level 3 on the
standard scale

Question No: 13 INTRODUCTION TO SHARE CAPITAL P.G # 37

Discuss SEC 86: PROHIBITION OF PURCHASE BY COMPANY OR GIVING OF LOANS BY IT

FOR PURCHASE OF ITS SHARES.

ANSWER:

 No public company or a private company being subsidiary of a public company shall

give financial assistance whether directly or indirectly for the purpose of, or in
connection with, a purchase or subscription made or to be made, by any person of any
shares in the company or in its holding company
EXCEPTIONS
a) The lending of money by a banking company in the ordinary course of its business;
b) The provision by a company of money in accordance with any Scheme approved by
company through special resolution and in Accordance with such requirements as
may be specified, for the Purchase of, or subscription for shares in the company or
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its Holding company, if the purchase of, or the subscription for, the Shares held by
a trust for the benefit of the employees or such Shares held by the employee of the
company;
c) The provision or securing an advance to any of its employees, including a chief
executive who, before his appointment as Such, was not a director of the
company, but excluding all Directors of the company, for purchase of shares of the
Company or of its subsidiary or holding company.

 Any violation of this section shall be an offence liable to a penalty of

Level 1 on the standard scale.

Question No: 14 INTRODUCTION TO SHARE CAPITAL P.G # 37

When a subsidiary Co. can buy shares of its holding Co (SEC 87).

ANSWER:

1. If subsidiary Co. carries on a business of brokerage on behalf of its clients

(shall not exercise voting rights on shares of holding Co.)
2. Subsidiary Co. acting as a trustee
(unless holding Co. is beneficially interested in the trust)
3. If shares are held by a company by operation of law
(Qualification shares (sec 200) purchase krny pry to appoint own director in holding
Co.)

Question No: 15 BUY BACK REGULATIONS 2019 P.G # 2

What are the Eligibility Requirements for the Purchase (buy back) of the shares by
company? (REG # 03)

ANSWER:

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A company shall be eligible to purchase if it fulfils the following conditions, namely

1. It is listed on the securities exchange for a period of not less than 3 years

2. It is compliant with the minimum capital or equity requirements or minimum free float
(20%) requirement of the securities exchange, as set out in listing regulations or
licensing requirements, if any, after the purchase

3. It has obtained approval of its members for purchase through special resolution;

4. Board has undertaken that the

 Funds specified for the purchase by the board of directors of the purchasing
company are available with the company and
 After the purchase, the purchasing company is capable of meeting its obligations
on time during the period up to the end of the immediately succeeding 12 months
(liabilities meet honi chaiye)

5. The purchasing company should not be on the defaulter counter (liabilities not paid)

Question No: 16 BUY BACK REGULATIONS 2019 P.G # 2

In which conditions Board of directors of a purchasing company shall not propose or

recommend a purchase?

ANSWER:
Board of directors of a purchasing company shall not propose or recommend a
purchase in any of the following namely
 winding up proceedings has commenced
 a scheme of arrangement, compromise, reconstruction, merger or de-merger
is approved by the board of directors (unless the Purchase is a part of such
arrangement, compromise, reconstruction, merger or de-merger)
“arrangement means sale or purchase of shares”
 A public offer (IPO) for acquisition of shares of the purchasing company under
the Securities Act has been announced.
 Before the expiry of 6 months from the date of an earlier general meeting in
which the purchase was disapproved by the members.

Question No: 17 BUY BACK REGULATIONS 2019 P.G # 2

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Discuss important points of regulation # 09 (buy back regulation 2019) of Maximum

holding of Treasury Shares.

ANSWER:

1. Treasury shares shall not at any time exceed 20% of the total paid up share capital of
the purchasing company provided that the free float of company after the purchase
does not fall below 25% of the total paid up share capital of the purchasing company

2. Where the purchasing company has different classes of shares, the treasury shares for
any class of shares shall not exceed 20% of total issued at any time and paid up shares
of such class of shares.

3. The treasury shares shall be held in the name of the purchasing company in a CDC
blocked account in freeze form (for 6 months).

4. The treasury shares shall not be placed under collateral either directly or indirectly
(collateral means use for pledge or mortgage)

5. Any shares allotted as fully paid bonus shares in respect of the treasury shares, shall be
treated as treasury shares for the purposes of these regulations and shall be held in the
name of the company in CDC blocked account in freeze form.

Question No: 18 DEBENTURES P.G # 59

When floating charges become crystalized (fixed)

ANSWER:

1. When winding up the company begins.

2. When company ceases to carry on business.
3. When a receiver is appointed to take possession of the property charged.
4. When company commit default in paying interest for some time, entitling the
debenture holder to enforce security.

Question No: 19 DEBENTURES P.G # 59

Write down the powers and liabilities of trustee. (SEC 65)

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ANSWER:

The trustee nominated or appointed under the trust-deed for securing an issue of
debentures shall, if so empowered by such deed, have the right to sue for all redemption
monies and interest in the following cases

1. Where the issuer of the debentures as mortgagor binds himself to repay the
debenture loan or pay the accrued interest or both in the manner provided on the
due date. (due date tak dono me se koi aik pay nahi kia)

2. Where by any cause other than the wrongful act or default of the issuer the
mortgaged property is wholly or partially destroyed or the security is rendered
insufficient and the trustee has given the issuer a reasonable opportunity of
providing further security adequate to render the whole security sufficient and the
issuer has failed to do so. (gold ki value 500000 se 450000 pr agai, ab or gold lao
beta)

3. Where the trustee is deprived of the whole or part of the security by wrongful act or
default of Company. (fraud kia he company ne)

4. Trustee entitled to take possession of property and same not provided by company

 1 and 2 point me court wait kry ga (trustee khud recovery kry ga)
 3 and 4 point me court immediate action lega (trustee sell krdy ga mortgate
property due to default by co)

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“BLESSED IS HE WHOSE KNOWLEDGE & PRACTICE, LOVE & HATE,
ACCEPTANCE & REFUSAL, SPEECH & SILENCE, WORDS & ACTIONS ARE
SINCERELY FOR THE SAKE OF ALLAH”
IMAM HUSSAIN (A.S) SAID
“JISNY TUJHY (ALLAH) PA LIYA USNY KHOYA KIA
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NAME: SYED SHAHBAZ RAZA ZAIDI

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