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Final Examination

Module E
3 December 2014
3 hours 100 marks
Additional reading time 15 minutes

The Institute of
Chartered Accountants
of Pakistan

Corporate Laws
Q.1

Rex Global Corporation (RGC), a foreign company, has branch offices in Islamabad and
Lahore. In November 2014, the entire shareholdings of RGC were acquired by Markers
Global Corporation (MGC). MGC has decided to appoint Qamar as the new Principal
Officer/authorised representative for the Islamabad office and close the Lahore office
within few weeks.
In the light of the provisions of the Companies Ordinance, 1984 you are required to list the
requirements to be complied with by Rex Global Corporation.
(08)

Q.2

In May 2014, Metro Limited (ML) acquired majority shareholding in Metro Securities
(Private) Limited (MSPL). ML and MSPL close their books of account on 31 December
and 30 June respectively. The financial statements of ML for the year ending
31 December 2014 will be presented to the shareholders in upcoming annual general
meeting of the company.
State the responsibilities of ML as a holding company and MSPL as its subsidiary, under
the provisions of the Companies Ordinance, 1984 in respect of preparation of consolidated
financial statements.
(09)

Q.3

Bubble Textiles Limited, a listed company, is examining a proposal to issue right shares to
finance the acquisition of a plant. Since the company has incurred losses during the past
two years, the directors are apprehensive about the response from the existing shareholders.
They are therefore considering the following options for issuance of shares:




To ABC Limited against supply of plant and machinery. The plant would be supplied
within three months after signing the agreement.
To Faraz, an existing shareholder, who has expressed his willingness to purchase
shares amounting to Rs. 90 million which is equivalent to 90% of the value of the
plant.
To employees of the company.

In the light of provisions of the Companies Ordinance, 1984 and Companies (Issue of
Capital) Rules, 1996, explain the matters that the company would be required to consider
in the above situation and briefly describe the conditions that are required to be complied
with under each of the above options.
(10)

Q.4

(a)

Draft a special resolution, regarding voluntary winding up of a listed company for


approval in the general meeting of the company. You may assume any necessary
information.
(03)

(b)

Explain the important characteristics of a fixed charge and floating charge and their
registration requirements.

(05)

Corporate Laws

Q.5

Page 2 of 3

Carrot Limited (CL) was formed for a period of three years. The period of three years is
due to complete on 31 December 2014. However, the project which the company had
undertaken is still in progress.
You are required to discuss the following:
(a) Legal status of CL on completion of three years while work on the project is not yet
complete.
(b) Contents of declaration of solvency and its filing requirements for CL.

Q.6

(a)
(b)

(c)

Q.7

(07)
(03)

Explain the meaning of the term Fit and Proper Criteria under the provisions
contained in the NBFC and Notified Entities Regulations, 2008.

(06)

Saleem has expressed his intention to be appointed as director of an NBFC. Identify


the conditions which may render him incompetent for such an appointment due to
conflict of interest under the provisions of NBFC and Notified Entities
Regulations, 2008.

(06)

Describe the provisions contained in the NBFC Rules, 2003 in respect of the
Appointment of Chief Operating Officer and Internal Auditor.

(03)

The directors of Abacus Limited (AL) intend to issue ordinary shares amounting to
Rs. 200 million to a local investor. However, since the directors would prefer not to dilute
their shareholdings, they are considering issuance of shares with restricted rights.
Advise the directors as regards the following, based on the provisions contained in the
Companies Share Capital (Variation in Rights and Privileges) Rules, 2000:
(a) The kind and classes of shares that AL can issue.
(b) The rights and privileges that may be attached with different classes of shares.

Q.8

Faizan Associates is an association of persons and is engaged in activities involving welfare


of the general public. Faizan Associates intends to register itself as a limited company and
would prefer that the word Limited is not included in its name.
In view of the provisions of the Companies Ordinance, 1984 and the related rules there
under, you are required to identify the conditions that Faizan Associates would need to
comply with in order to get the required permission from the Securities and Exchange
Commission of Pakistan.

Q.9

(02)
(05)

(a)

Chief Executive of Fast Food Limited (FFL) has received a notice from Karachi
Stock Exchange (KSE) stating that the name of the company has been placed on
defaulter segment due to non-payment of listing fees. It was further stated in the
notice that in the event the default is not rectified action would be taken against the
company in accordance with the listing regulations of the KSE.
The Chief Executive of FFL has sought your advice regarding validity of the action
taken by KSE and the possible action(s) that KSE can take if the default is not
rectified.

(b)

(08)

(10)

The Karachi Stock Exchange has recently outperformed several regional stock
exchanges and yielded consistently high rates of returns on the investments by the
domestic and international investors. John Secada, a US citizen, has shown interest
in share trading activities in Pakistan.
In the context of the provisions of Foreign Exchange Regulations, advise John
Secada the procedure to be followed for purchase/sale of shares of listed companies
by foreign investors in Pakistan.

(07)

Corporate Laws

Q.10

Page 3 of 3

Mr. Wahid has acquired 3 million ordinary shares of Wheel Limited, a listed company,
whose paid up share capital consists of 20 million ordinary shares of Rs. 10 each. The
election of directors of the company has recently been concluded. Mr. Wahid, being
confident of holding a sufficient number of shares to be elected as a director, has requested
the management to arrange a fresh election.
Based on the provisions contained in the Companies Ordinance, 1984 explain whether and
under what conditions a fresh election of the directors may be held.
(THE END)

(08)