Companies Rules Volume IV

Securities and Exchange
Commission of Pakistan
Companies Rules
Volume IV
Regulations
(Updated up to 5 December 2013)
Companies Rules
Volume IV
Regulations
(Updated up to 5 December 2013)

Securities and Exchange
Commission of Pakistan
VOLUME I
STATUTES
Insurance Act, 1938 (Repealed)
Securities and Exchange Ordinance, 1969
Companies (Appointment of Trustees) Act, 1972 (Repealed)
Companies (Appointment of Legal Advisors) Act, 1974
Foreign Private Investment (Promotion & Protection) Act, 1976 (Repealed)
Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980
Companies Ordinance, 1984
Central Depositories Act, 1997
Securities and Exchange Commission of Pakistan Act, 1997
Insurance Ordinance, 2000
Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Ordinance, 2002
Anti-Money Laundering Act 2010
Stock Exchanges (Corporatisation, Demutualisation and Integration) Act, 2012

VOLUME II
RULES
Securities and Exchange Rules, 1971
Investment Companies and Investment Advisors Rules, 1971 (Repealed)
Companies Profits (Workers Participation) Rules, 1971
Economic Reforms (Acquisition and Compensation) Rules, 1973 (Repealed)
Companies (Appointment of Trustees) Rules, 1973
Companies (Appointment of Legal Advisors) Rules, 1975
Modaraba Companies and Modaraba Rules, 1981
Corporate Law Authority Rules, 1984 (Repealed)
Companies (General Provisions and Forms) Rules, 1985
Forms
Companies (Invitation and Acceptance of Deposits) Rules, 1987
Companies (Management by Administrator) Rules, 1993
Credit Rating Companies Rules, 1995
Asset Management Companies Rules, 1995 (Repealed)
Companies (Issue of Share Capital) Rules, 1996
Venture Capital Companies and Fund Managers Rules, 1995 (Repealed)
Employees Provident Fund (Investment in Listed Securities) Rules, 1996
Companies (Issue of Capital) Rules, 1996
Central Depository Companies (Establishment and Regulation) Rules, 1996
Companies (Court) Rules, 1997
Companies (Audit of Cost Accounts) Rules, 1998
Companies (Rehabilitation of Sick Industrial Units) Rules, 1999
Companies (Buy-back of Shares) Rules, 1999
Companies (Asset-Backed Securitization) Rules, 1999

VOLUME III
Companies' Share Capital (Variation in Rights and Privileges) Rules, 2000
Leasing Companies (Establishment and Regulation) Rules, 2000 (Repealed)
Members' Agents and Traders (Eligibility Standards) Rules, 2001
Stock Exchange Members (Inspection of Books and Record) Rules, 2001
Public Companies (Employees Stock Option Scheme) Rules, 2001
Brokers and Agents Registration Rules, 2001
Balloters Transfer Agents and Underwriters Rules, 2001
Insurance Rules, 2002
Non-Banking Financial Companies (Establishment and Regulation) Rules, 2003
SECP (Appellate Bench Procedure) Rules, 2003
Single Member Companies Rules, 2003
Margin Trading Rules, 2004 (Repealed)
Commodity Exchange and Futures Contract Rules, 2005
Voluntary Pension System Rules, 2005
Clearing Houses (Registration and Regulation) Rules, 2005
Takaful Rules, 2005 (Repealed)
Anti Money Laundering Rules, 2008
Securities (Leveraged Markets and Pledging) Rules, 2011
Takaful Rules, 2012
Public Sector Companies (Corporate Governance) Rules, 2013
Microinsurance Rules, 2013

VOLUME IV
REGULATIONS
Securities and Exchange Policy Board (Conduct of Business) Regulations, 2000
Regulations for the Karachi Stock Exchange, 2001
Code of Corporate Governance, 2002
Companies (Registration Offices) Regulations, 2003
Prudential Regulations for Modarabas, 2004
Regulations Governing System Audit of Brokers of Exchanges, 2004
Real Estate Investment Trust Regulations, 2008
Private Equity and Venture Capital Fund Regulations, 2008
Private Equity & Venture Capital Fund Regulations, 2008 - Forms and Schedules
Group Companies Registration Regulations, 2008
Anti-Money Laundering Regulations, 2008
NBFCs and Notified Entities Regulations, 2008
Prudential Regulations for NBFCs undertaking the Business of Leasing only
Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2008
Code of Corporate Governance, 2012
Debt Securities Trustee Regulations, 2012
Insurance Accounting Regulations, 2012
Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2012
Third Party Administrators for Health Insurance Regulations, 2013
Centralised Information Sharing Solution for Life Insurance Industry Regulations, 2013

VOLUME V
GUIDELINES
Guidelines for Issue of Certificates of Musharika for Modarabas, 1994
Listed Companies (Prohibition of Insider Trading) Guidelines, 2001
Guidelines for Preparation of Prospectus, 2002
Equity Issues (Checklist of Documents for Approval of Prospectus or Offer for Sale Document), 2002
Guidelines for Appointment on the Board of Directors of the Stock Exchanges, 2002
Term Finance Certificates (TFCs) Issues (Checklist of Documents for Approval of Prospectus, 2002
Guidelines for the Issue of TFCs to General Public, 2002
Guidelines on Issue of Shares at Discount, 2004
Internet Trading Guidelines, 2005
Guidelines for Issue of Commercial Paper, 2006
Guidelines for Bancassurance, 2010
Corporate Social Responsibility Voluntary Guidelines, 2013
Guidelines on Quarterly Accounts

ORDERS
Vegetable Ghee and Cooking Oil Companies (Cost Accounting Records) Order, 1990
Cement Industry (Cost Accounting Records) Order, 1994
Sugar Industry (Cost Accounting Records) Order, 2001
Companies Cost Accounting Records (General Order), 2008
Companies (Corporate Social Responsibility) General Order, 2009
Fertilizer Industry (Cost Accounting Records) Order, 2011
Chemical Fertilizer Industry (Cost Accounting Records) Order, 2012
Synthetic and Rayon Companies (Cost Accounting Records) Order, 2012
Electric Power Generation Industry (Cost Accounting Records) Order, 2012
Pharmaceutical Industry (Cost Accounting Records) Order, 2013

DIRECTIVES
Feb 17, 2005 - Directive under the Credit Rating Companies Rules, 1995
Feb 7, 2003 - Directive to Brokers on Conduct of Business 2003
Jul 18, 2002 - Directive to Brokers or Brokerage Firms or Incorporated Brokerage House Regd.
under the Broker & Agents Registration Rules 2001

GUIDE SERIES
A Guide on Accounts and Accounting Reference Dates
Change in Company Objects
Change of Company Name
Availability of Name Guide
Conversion of Status of Companies
Directors and Secretaries Guide
Filing of Statutory Returns
Foreign Companies Guide
Appointment of Statutory Auditors and Ancillary Matters
Listing of Companies through Initial Public Offerings
Obtaining license by an Association not for profit
Further Issue of Shares otherwise than Rights
Issue of Preference Shares
Making Alteration in Memorandum of Association under Section 21 of Companies Ordinance, 1984
Incorporation of Company Information and Procedures
Investigation into the Affairs of a Company
Company Mortgages and Charges
List of sensitive/prohibited words
Promoters Guide
Modaraba Promoters Guide
Shareholders Rights
Single Member Company Guide (in Urdu)
Winding up / Dissolution of Companies

VOLUME VI
FORMS AND APPLICATIONS
Forms [See under Companies (General Provisions and Forms) Rules, 1985]
Applications
Application for Availability of Name
Application for File Inspection
Application for Refund of Fee
Application for Issuance of Certified To Be True Copy
Application for Availability of Name
Application for File Inspection
Application for Refund of Fee
Application for Issuance of Certified To Be True Copy

NOTIFICATIONS (selected)
S.R.O. 282(I)/1986 Company Names Abbreviations and Urdu Equivalents
S.R.O. 865(I)/2005 IFAS 1 Murabaha
S.R.O. 431(I)/2007 IFAS 2 Ijarah
S.R.O. 640(I)/2011 Maintenance of Website
S.R.O. 289(I)/2011 Form of Statement in Lieu of Prospectus
S.R.O. 23(I)/2012 Accounting and Financial Reporting Standards for Medium Sized Enterprises
and Small Sized Enterprises
S.R.O. 25(I)/2012 Maintenance of Website by Listed Companies
S.R.O. 320(I)/2012 Amendments in Sixth Schedule to the Companies Ordinance, 1984
S.R.O. 753(I)/2012 Amendments in First Schedule Table A to the Companies Ordinance, 1984
S.R.O. 1354(I)/2012 Delegation of Powers of Commission
S.R.O. 130(I)/2013 Recovery of Gain
S.R.O. 182(I)/2013 Amendments in Fifth Schedule to the Companies Ordinance, 1984
S.R.O. 183(I)/2013 Amendments in Fourth Schedule to the Companies Ordinance, 1984
S.R.O. 194(I)/2013 Amendments in First Schedule Table A and C to Companies Ordinance, 1984
S.R.O. 210(I)/2013 Amendments in Companies (Registration Offices) Regulations, 2003
S.R.O. 211(I)/2013 eService of SECP
S.R.O. 387(I)/2013 Delegation of Powers of Commission
S.R.O. 479(I)/2013 Amendments in Public Sector Companies (Corporate Governance) Rules, 2013
S.R.O. 571(I)/2013 IFAS 3 Profit and Loss Sharing on Deposits
S.R.O. 677(I)/2013 Amendments Public Sector Companies (Corporate Governance) Rules, 2013

CIRCULARS (selected)
Circular 8/2001 Companies Regularisation Scheme
Circular 1/2002 Adoption of International Accounting Standards 22, 36 and 39
Circular 2/2002 Companies Regularisation Scheme
Circular 3/2002 Adoption of International Accounting Standards 40
Circular 4/2002 Adoption of International Accounting Standards 22, 36 and 39
Circular 15/2002 Transfer off Regulatory Supervision of Non-Banking Financial Institutions and
Submission of Periodical Returns/Statements
Circular 16/2002 Submission of Quarterly Accounts by Listed Companies
Circular 17/2002 Information on Current Credit Rating and COIs/CODs being maintained by
NBFCs
Circular 18/2002 Submission of Quarterly Accounts by Listed Companies
Circular 19/2002 - Appointment of External Auditors by the Listed Companies
Circular 1/2003 Appointment of Sole Proprietor Chartered Accountants as Auditor by Business
Name
Circular 2/2003 International Accounting Standard 40 Investment Property
Circular 7/2003 Appointment of Directors/Chief Executive in the Modaraba Companies
Circular 8/2003 Checklist for Appointment of Directors
Circular 9/2003 Preparation and Transmission of Second Quarterly Accounts by the Listed
Companies
Circular 10/2003 Fresh License(s) to be obtained by Existing Companies in terms of Section 282C
of the Companies Ordinance, 1984 for Business(es) being carried out by existing NBFCs
Circular 12/2003 Fresh License(s) to be obtained by Existing Companies In terms of Section 282C
of the Companies Ordinance, 1984
Circular 13/2003 Maintenance of Website by the Listed Companies
Circular 15/2003 Appointment of Whole Time Company Secretary
Circular 18/2003 Rules of Business for NBFIs and Submission of Periodic Returns/Statements
Circular 19/2003 Applicability of IAS 39 and IAS 40 to NBFCs providing investment finance
services (Investment Banks), discounting services and housing finance services
Circular 24/2003 Assets provided on Lease/loan basis to the Employees (Excluding CEO and
Directors)
Circular 25/2003 Use of word Bank or any of its derivatives
Circular 26/2003 Circular No. 26 of 2003
Circular 29/2003 Corporate Agriculture Farming (CAF) Policy
Circular 30/2003 Attendance of Directors in the Board Meetings through Video Conferencing
Circular 6/2004 Appointment of Sole Proprietor Chartered Accountants as Auditors by Business
Name
Circular 7/2004 Authentication of Statutory Returns
Circular 8/2004 Compliance with IAS 12 (Revised)
Circular 3/2005 Holding of Election of Directors Pursuant to Companies (Amendment) Ordinance
2002
Circular 6/2005 Conditions for Issuance of Foreign Currency Certificate of Deposits (CODs) and
Certificate of Investment (COIs)
Circular 8/2005 Investment Policy under Rule 24(3) and Prescribed Allocation Policy for
Selection by the Individual Participants under Rule 14(3) & 14(4) of the Voluntary Pension System
Rules 2005
Circular 10/2005 Application(s) made under the NBFCs (Establishment and Regulation) Rules,
2003 and the Prudential Regulations for NBFCs
Circular 11/2005 Rating of NBFCs and Collective Investment Scheme(s) managed by NBFCs
Circular 12/2005 Appointment as a Director on the Board of an NBFC
Circular 13/2005 Exemption from Requirements of Clause 3C of Part II of Fourth Schedule to the
Companies Ordinance, 1984
Circular 15/2005 Sale of Assets by NBFCs to its Employees
Circular 17/2005 Violation of Section 143 of the Companies Ordinance, 1984 by mentioning
Incomplete Name
Circular 18/2005 Attendance of Directors in the Board Meetings through Tele-Video Conferencing
Circular 19/2005 Regulation for Housing Finance Applicable to Individual Borrowers
Circular 24/2005 Rotation of External Auditors by Insurance Organizations
Circular 3/2006 Holding of Election of Directors
Circular 1/2008 Publication of Notices etc in Urdu Newspaper
Circular 11/2008 Revision of Fourth and Fifth Schedules to the Companies Ordinance, 1984
Circular 16/2008 Submission of Daily Statement of Assets and Liabilities
Circular 3/2009 Available for Sale Investment
Circular 14/2010 United Nations 1267 Committee's Consolidated List of Individuals and Entities
regarding Freezing of Funds and Other Resources
Circular 14/2010 Amendments dated September 8, 2010
Circular 14/2010 Amendments dated November 2, 2010
Circular 14/2010 Amendments dated December 22, 2010
Circular 15/2010 Related Party Assets
Circular 16/2010 Categorization of Open-End Collective Investment Schemes
Circular 17/2010 Notice Period for Holding Extraordinary General Meeting to pass Resolution for
Filing Application under Companies Easy Exit System (CEES)
Circular 18/2010 Additional Condition to the Modaraba Authorization Certificate
Circular 21/2010 Clarification on Clause 3(ii) of Part II of the Third Schedule to the Modaraba
Companies and Modaraba Rules, 1981
Circular 22/2010 Revised Second Schedule to Modaraba Companies and Modaraba Rules, 1981
Circular 26/2010 Application for Refund of Fees received under Sixth Schedule to the Companies
Ordinance, 1984
Circular 28/2010 Application for Refund of Fees received under Sixth Schedule to the Companies
Ordinance, 1984
Circular 3/2011 Amendments in Circular 36 of 2009 dated December 10, 2009 Investment and
Allocation Policies for Pension Funds Authorized under the VPS Rules, 2005
Circular 5/2011 Appointment of a Member of the Religious Board by the Federal Government
under Section 9 of Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980
Circular 6/2011 Withdrawal of Circular 20/2010 dated 30 July 2010
Circular 7/2011 Maximum Management Expense Limits for Life Insurers under Sections 22(9)
and 23(9) of the Insurance Ordinance, 2000
Circular 10/2011 Constitution of Modaraba Tribunal-II, Karachi under the Modaraba Companies
and Modaraba (Floatation and Control) Ordinance, 1980
Circular 11/2011 Sharing of Costs of Insurance Ombudsman's Secretariat by Insurance/Takaful
Companies
Circular 12/2011 Conditions for Grant of License to Associations not for Profit under Section 42
of the Companies Ordinance, 1984
Circular 14/2011 Meetings of the Board of Directors (Abroad)
Circular 15/2011 Additional Condition to the Modaraba Authorization Certificate
Circular 17/2011 Annual Supervision Fee for 2012
Circular 18/2011 Product Information on websites
Circular 19/2011 Legal Duties of Agents
Circular 1/2012 Reporting of Suspicious Transaction Reports (STR) Currency Transaction
Reports (CTR) to FMU under Anti Money Laundering (AML) Act, 2010
Circular 2/2012 Conditions for Grant of License to Associations not for Profit under Section 42 of
the Companies Ordinance, 1984
Circular 3/2012 Product Publicity Information
Circular 4/2012 S.R.O. 16(I)/2012 dated 9 January, 2012 Amendments in the Securities and
Exchange Commission [Insurance) Rules, 2002
Circular 5/2012 S.R.O. 29(I)/2012 dated 13 January 2012 Takaful Rules, 2012
Circular 7/2012 Enlistment/Categorisation of Auditors on the Approved List pursuant to Section
48(1) of the Insurance Ordinance, 2000
Circular 08/2012 Shariah Compliance and Shariah Audit Mechanism (SCSAM) for Modarabas
Circular 9/2012 Term of Office of Directors
Circular 10/2012 Transmission of Notice of Annual General Meetings (AGM) and Extra-Ordinary
General Meetings (EOGM) through Electronic Medium
Circular 11/2012 Enlistment/Categorisation of Auditors on the Approved List pursuant to Section
48(1) of the Insurance Ordinance, 2000
Circular 12/2012 Launching of Fast Track Registration Services (FTRS)
Circular 13/2012 Approval of Short Term Ijarah (Lease) Agreement
Circular 14/2012 Launch of Inter-CRO Electronic Inspection Service
Circular 15/2012 Minimum Requirement for Exchange Traded Funds to be managed by Asset
Management Companies
Circular 17/2012 Additional Disclosures for Workers Welfare Fund (WWF) Liability for
Collective Investment Schemes
Circular 18/2012 Dividend Mandate under Section 250 of the Companies Ordinance, 1984
Circular 19/2012 Procedure for Convening Meeting of the Unitholders of Open-End and Close-
End Collective Investment Schemes
Circular 20/2012 Reporting of STRs/CTRs to FMU under the AML Act, 2010
Circular Restriction on sharing of management fee by Asset Management Companies with
Unitholders
Circular 21/2012 Filing of Returns through Insurance Companies Return Submission (ICRS)
System
Circular 22/2012 Relaunching of Companies Regularisation Scheme (CRS)
Circular 23/2012 Relaunching of CEES
Circular 31/2012 Extension in time period of CRS and CEES
Circular 37/2012 New Insurance Accounting Regulations 2012; and Amendments in the SEC
(Insurance) Rules, 2002
Circular 39/2012 Clarification on Circular 14/2011 regarding Meetings of Board of Directors
(Abroad)
Circular 40/2012 Extension in Time Period of CRS and CEES
Circular 41/2012 Annual Supervision Fee for the year 2013
Circular 42/2012 Filing of Monthly Returns through Specialised Companies Return System (SCRS)
Circular SECP registered 274 companies in August 2012
Circular 1/2013 Rate of Return Assumptions for Life Insurance and Family Takaful Illustrations
Circular 2/2013 Training of Insurance Agents
Circular 2 of 2/2013 Clarification on the Circular No.2 of 2013 on Training of Insurance Agents
Circular 3/2013 Launching eSInsuranceSurveyors: Online Surveyors Licensing and Registration
System
Circular 5/2013 Examination or Test for Grant of Registration as Authorized Surveying Officer
Circular 6/2013 Amendments in Circular No. 36 of 2009 dated December 10, 2009 Investment
and Allocation Polices for the Pension Funds Authorized under the VPS Rules, 2005
Circular 7/2013 Clarification on Filing of Revised Annual Audited Accounts by Non-Listed
Companies
Circular 11/2013 Amendment to Circular No. 9 of 2005 on Group Insurance Premium Rates
Circular 12/2013 Publication of Public Announcements
Circular 13/2013 Clarification regarding Circular No. 36 of 2009 dated December 10, 2009
Circular 17/2013 Mortality Rates as a Part of the Minimum Valuation Basis for the Determination
of Minimum Actuarial Reserves for Policyholders Liabilities
Circular 18/2013 Draft Bancassurance Regulations, 2013
Circular 19/2013 Appointment of Qualified Auditors
Circular 20/2013 Maximum Management Expense Limits for Life Insurers
Circular 21/2013 Life Insurance Product Submission Requirements

The Gazette of Pakistan
ISLAMABAD, TUESDAY, DECEMBER 12, 2000
Part II
Statutory Notifications (S.R.O.)
Government of Pakistan
Securities and Exchange Commission of Pakistan
Notification
Islamabad, the 7th December, 2000
S.R.O. 884(I)/2000.-- In exercise of the powers conferred by section 40 of the
Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997), the
Securities and Exchange Policy Board, on the recommendation of the Securities and
Exchange Commission of Pakistan and in consultation with the Federal Government,
hereby makes the following regulations, the same having been published previously
as required by the said section, namely:--

THE SECURITIES AND EXCHANGE POLICY BOARD (CONDUCT OF BUSINESS)
REGULATIONS, 2000

1. Short title and commencement.-- (1) These regulations may be called the
Securities and Exchange Policy Board (Conduct of Business) Regulations, 2000.

(2) They shall come into force at once.

2. Definitions.-- In these regulations, unless there is anything repugnant in the
subject or context,--

(a) "Act" means the Securities and Exchange Commission of Pakistan Act, 1997 (XLII
of 1997);
(b) "Board" means the Securities and Exchange Policy Board;
(c) "Chairman" means the Chairman of the Board;
(d) "Commission" means the Securities and Exchange Commission of Pakistan;
(e) "Member" means a member of the Board; and
(f) "Section" means a section of the Act.

3. Procedure and conduct of business of the Board.-- (1) The Board may meet
at such times and places, for conduct of its business, as it may think fit;

Provided that in the absence of a decision of the Board to the contrary, the Chairman
shall decide the time and place for the meetings of the Board.

(2) The Chairman shall, on the requisition of not less than three Members, proceed
to call a meeting of the Board within seven days of the receipt of the requisition.

(3) The requisition shall, stating the objects of the meeting, be signed by the
requisitions and shall be deposited at the head office of the Commission.

(4) The Chairman shall also call a meeting of the Board on the request of the
Commission forthwith or within a reasonable period depending upto the urgency of
the proposed business of the meeting to be called.

(5) At least seven clear days notice shall be given to all the Members, for a meeting
of the Board and such notice shall set forth the purpose or purposes for calling the
meeting;

Provided that, in the case of urgency, Chairman may call a meeting at such shorter
notice and with such arrangements as he may deem fit.

(6) The Chairman shall preside as chairman at a meeting of the Board, but if at any
meeting he is not present, the Members present shall choose one of their number to
be the chairman.

(7) In the case of difference of opinion among the Members, the opinion of the
majority of the Members present at the meeting shall prevail and orders of the Board
shall be expressed in terms of the views of the majority. Any Member dissenting
from the majority view may record his reasons separately. If the Members are
evenly divided in their opinions, the Chairman shall have a second or casting vote.

(8) A fair and accurate summary of the minutes of all proceedings of the meetings of
the Board, alongwith the name of those participating in such meetings shall be
entered in properly maintained books.

(9) The books containing the minutes of the meetings shall have a subject index of
all the proceedings.

(10) The draft minutes of the meetings of the Board shall be circulated for
confirmation, to all the Members within seven days of the conclusion of the
proceedings.

(11) The minutes of the meeting as finalized after taking into account the
observations of the Members, if any, shall be placed before the next meeting of the
Board of confirmation.

(12) The proceedings of each meeting of the Board shall be signed and dated by the
Chairman, or in his absence, by the Member presiding over the meeting as soon as
may be, after the confirmation of the minutes and the proceedings so signed shall be
conclusive evidence of the proceedings recorded therein.

(13) The decisions taken in the Board meeting shall be circulated to the Commission
and others concerned for necessary action.

(14) The Chairman may, on a proposal in writing by the chairman of the Commission
with full justification, authorize an emergent matter to be disposed of through a
resolution by circulation, instead of at a meeting of the Board;

Provided that the resolution by circulation shall be signed by all the Members and, in
case of absence from Pakistan of any of the Members by at least five Members.

(15) Subject to the provisions of sub-section (4) of section 15 of the Act, Members
and any other persons invited to attend a meeting of the Board shall be entitled to
travel by air in executive class and reimbursement of actual expenses including
travelling, boarding and lodging expenses and the Members other than ex-officio
Members shall also be entitled to compensation for performing extra services, as
determined by the Board from time to time.

4. Committees of the Board.-- (1) The Board may constitute committees
consisting of its Members and may co-opt other persons on the committee where
considered necessary.

(2) The Board may, subject to the provisions of the Act, delegate any of its powers
to a committee as it thinks fit and any committee so formed shall, in exercise of the
powers so delegated, conform to the terms of reference that may be given to it by
the Board.

(3) The Board may appoint a Member as convener of the committee who will chair its
meetings.

(4) The committee may meet and adjourn as it thinks proper.

(5) Questions arising at any meeting of the committee shall be determined by a
majority of votes of its members present, and in case of an equality of votes, the
convener of the Committee shall have a second or casting vote.

(6) Subject to the provisions of sub-section (4) of section 15 of the Act, members
and any other persons invited to attend a meeting of a committee shall be entitled to
travel by air in executive class and reimbursement of actual expenses including
travelling, boarding and lodging expenses, and the Members other than ex-officio
Members shall be entitled to compensation for performing extra services as the
Board may, from time to time, determine.

5. Authentication of the decisions of the Board.-- (1) All orders and decisions of
the Board shall be authenticated by the signatures of the Chairman or any other
Member authorised in this behalf by the Chairman and bear the official seal of the
Board.

(2) All orders and decisions of the Board shall be communicated under the signatures
of a person authorized by the Board in this behalf.

(3) Such of the orders and decisions of the Board and guidelines given by it, as are
deemed fit for publication in any authoritative report or the official Gazette, may be
released for such publication on such terms and conditions as the Chairman may
specify.

6. Submission of references, letters, etc.-- All references, letters, replies,
documents or papers required to be submitted to the Board shall be written, typed,
or printed neatly and legibly on one side of the paper, in double space, annexing
thereto true copies of the documents in support of the material contained therein.

7. Power of the Board to require submission of addition information.-- The
Board may call for such additional information as it considers necessary in
connection with any matter relating to its functions and power under the Act.

8. Assistance to the Board.-- The Board may, in consultation with the
Commission, at any time avail the assistance of other institutions, consultants,
experts, accountants, surveyors or such other technical and professional persons as
it may consider necessary and ask them to submit report to it. The institutions and
other persons so engaged, shall be entitled to compensation for providing assistance,
as the Board may, from time to time, determine.

[No. ED/SECP-14/2000.]
MOHAMMAD HAYAT JASRA,
Executive Director (Law)

The Gazette of Pakistan
ISLAMABAD, THURSDAY, FEBRUARY 15, 2001
PART II
GOVERNMENT OF PAKISTAN
SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN
NOTIFICATION
Islamabad, the 15th February, 2001
S.R.O. 101(I)/2001.--In exercise of the powers conferred by sub-section (5) of
section 34 of the Securities and Exchange Ordinance, 1969, the Securities and
Exchange Commission of Pakistan (the Commission) hereby makes the following
regulations for the Karachi Stock Exchange (Guarantee) Ltd., (the Exchange)
namely:-

1) There shall be seven outside directors to be appointed by the Commission in
consultation with the Exchange from amongst non-member securities market
experts, lawyers, chartered accountants, investment bankers, etc.

2) The Chairman shall be elected by the Board of Directors, from amongst the
elected directors.

3) The position of Vice Chairman shall be abolished.

4) The directors shall not delegate their authority relating to operational matters to
any directors except the managing director.

5) The managing director shall be appointed, removed and terminated with the prior
approval of the Commission.

Consequent upon the effect of aforesaid regulations, revised article clauses of the
Exchange shall stand amended as under, namely:-

Article 1(b)(iii)
"The Chairman" means "Chairman of the Board of the Exchange."

Article 12(i)
Where a member resigns from his individual membership in favour of and for
nominating a Corporate Body of which he simultaneously becomes a nominee to
represent such Corporate Body as a member of the Exchange, his resignation and his
consequent nomination by the Corporate Body shall not affect his office of the
Chairman and/or Director which he may be holding at the time of his resignation in
favour of such Corporate Body. Additionally, the tenure of such individuals
membership will be taken into account for determining the security of such
Corporate Member for the purpose of election or co-option to the office of the
Chairman and/or the Board under Article 33 hereinbelow.

Article 14(b)
A Corporate Body which becomes a Member of the Exchange may nominate one of
its Directors as a Nominee Director to represent its Membership on the Exchange and
such nominee shall become eligible for being elected as the Chairman and/or a
member of the Governing Board of Directors under Article22(b) hereinbelow.

Article 22(a)(i)
Ten(10) directors to be elected from amongst the members by the General Body;

Article 22(a)(ii)
Deleted.

Article 2(a)(iii)
Seven outside directors to be appointed by the Commission in consultation with the
Exchange from among non-member securities market experts, lawyers, chartered
accountants, investment bankers, etc.

Article 22(a)(iv)
Deleted.

Article 22(b)
The Chairman shall be elected by the Board of Directors from amongst the elected
member directors after the Board has been fully constituted including the nomination
of non-member directors.

Article 22(d)
All the elected, nominated, appointed and co-opted Directors including the Chairman
shall retire on 31st December every year.

Article 22(e)
A Member who has been elected for a consecutive period of two years as Director
shall not be eligible to contest elections for a third consecutive term to the same
office. However he shall be eligible to contest election for another office for a period
of one year.

Article 28
The Exchange from 1951 onward, shall in the month of December every year in the
manner hereinafter provided elect by ballot 10 (ten) directors of the Governing
Board.

Article 29
Twenty-one days (21) previous notice of the ballot for election of the Directors shall
be given by the Board.

Article 32
At least fourteen (14) days previous notice of the intention to propose any person
eligible for election to the board must be given to the Secretary in writing signed by
2 members of the Exchange.

Article 34(a)
No member shall be elected or co-opted to the Office of the Chairman and the Board
who has not been an individual Member or a Nominee Director of a Corporate
Member of the Exchange for one year or more immediately preceding the date of his
election or co-option.

Article 34(b)
Deleted.

Article 34(c)
Deleted.

Article 35
No member shall be entitled to give more than one vote to any particular candidate,
nor shall be entitled to give more than ten (10) votes for the election for the
Directors. A member shall, however, be entitled to give a smaller number of votes
than the prescribed maximum. In case of an equality of votes, the election shall be
decided by drawing lots.

Article 42
The Chairman shall preside at all meetings of the Board. If the Chairman is not
present within fifteen minutes of the time appointed for holding a meeting or if he
decline to preside, the Directors present shall elect any one of themselves to be
Chairman of such meeting.

Article 50
A previous shall be added at the end to the following effect, namely:-

Provided that the Board shall not delegate its authority relating to operational
matters to any director except the Managing Director.

Article 54(a)
The Board shall appoint a qualified and experienced person as a whole time paid
Managing Director who shall function as the Chief Executive of the Exchange. The
appointment of Managing Director shall be made for such period, not exceeding
three years at a time, and on such terms and conditions as the Board may
determine. The person so appointed shall not engage himself in any business,
profession or vocation directly or indirectly including trading or dealing in shares and
securities during the period he holds office. The Managing Director shall be liable to
dismissal or removal from his office with three fourth of the total number of Directors
or by special resolution passed in a General Meeting:

Provided that the appointment, removal and termination of the Managing Director
shall be made with the prior approval of the Securities and Exchange Commission of
Pakistan and for this purpose the term "removal and/or termination" shall include
non-renewal of his contract.

Article 55(b)
The General Manager under the general control and direction of the Managing
Director shall perform such functions and duties as may be entrusted or delegated to
him by the Managing Director. He shall maintain and have charge over the books,
records and papers of the Exchange and conduct all correspondence on behalf of the
Exchange and the Board and shall countersign all cheques or the payments of
money. The General Manager and Secretary shall report to the Managing Director on
all day to day matters concerning the management of the affairs of the Exchange.

Article 68
The Chairman shall be entitled to take the chair at every Annual or Extraordinary
General Meeting. If at any meeting the Chairman is not present within fifteen
minutes of the time appointed for such meeting of if present, he declines to act as
Chairman, the members present shall choose a member of the Board as Chairman ad
if no member of the said Board be present or if all the members of the said Board
present decline to take the chair, the members present shall choose one of the
members to preside over the meeting.

Article 77
Every Chairman, Managing Director, Director, General Manager, Member of
Committee, Arbitrator, Secretary, Auditor and other Executive and staff of the
Exchange shall, if so required by the Directors, before entering upon duties, sign a
declaration pledging himself to observe a strict secrecy respecting all transactions of
the Exchange and in all matters relating thereto, and such declaration shall pledge
himself not to reveal any of the matters except when required so to do by the
Directors or by a Court of Law and except so far as may be necessary in order to
comply with any of the provisions in these presents contained.

Article 80
Every Chairman, Managing Director, Director, General Manager, Member of
Committee, Arbitrator, Secretary, Auditor and other Executives and staff of the
Exchange shall be indemnified by the Exchange against and it shall be the duty of
the Directors, out of the funds of the Exchange, to pay all costs, losses, penalties
and expenses which any such officer or servant may incur or become liable to by
reason of any contract entered into or act or deed done by, or omitted by him as
such officer or servant or in any way in the discharge of his duties and no directors
or other officers of the Exchange shall be liable for the acts, receipts, neglects or
defaults of any other Director or officer for joining in any receipt or other act for
conformity or for any loss or expenses happening to the Exchange through the
insufficiency or deficiency of title to any property acquired by order of the Directors
for or on behalf of the Exchange or for the insufficiency or deficiency or depreciation
of any security in or upon which any of the moneys of the Exchange shall be invested
or for any loss or damage arising form the Bankruptcy or insolvency or tortuous act
of any person with whom any moneys, securities or effects of the Exchange shall be
deposited or for any loss occasioned by any error of judgment, omission, default or
oversight on his part or for any loss, damage or misfortune whatever which shall
happen in relation to the execution of the duties of his office or in relation thereto
unless the same happens through his own dishonesty.

The decision of the Commission regarding the above mentioned regulations was
communicated to the Exchange through a directive bearing No.2(46)CF/SE/97/04
dated 16th January, 2001 as per annexure.
ANNEXURE
SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN NIC BUILDING,
JINNAH AVENUE
No.2(46)CF/SE/97
Islamabad, the 16th January, 2001

Mr. Muhammad Yacoob Memon,
Acting Managing Director,
Karachi Stock Exchange (Guarantee) Ltd.
Stock Exchange Building, Karachi.
Subject:
DIRECTIVE UNDER SECTION 34(4) OF THE SECURITIES AND EXCHANGE
ORDINANCE, 1969
Dear Sir,
Please refer to this Commissions letter No.2(46)CF/SE/97 dated 7.12.2000 followed
by the letter No.2(46)CF/SE/97 dated 18.12.2000, whereby the Commission had, in
exercise of its powers conferred by sub-section (4) of section 34 of the Securities
and Exchange Ordinance, 1969, issued the following directions in the interest of
capital market and had directed that the Articles of Association of the Karachi Stock
Exchange may be amended to them in conformity with the directions:-
(i) That there shall be seven outside directors to be appointed by the Commission in
consultation with the Exchange from amongst non-member securities market
experts, lawyers, chartered accountants, investment bankers, etc.

(ii) That the Chairman shall be elected by the Board of Directors, from amongst the
elected directors.

(iii) That the position of Vice Chairman shall be abolished.

(iv) That the directors shall not delegate their authority relating to operational
matters to any director except the managing director.

(v) That the managing director shall be appointed, removed and terminated with the
prior approval of the Commission.

2. The above directives which were issued by the Commission after providing an
opportunity of hearing in the Exchange on December 15, 2000, were made effective
w.e.f. December 31, 2000.

3. It has been noticed with concern that the Exchange has neglected to comply with
the above mentioned directions within the specified period and has violated the
specified provisions of the Securities and Exchange Ordinance, 1969. Therefore, the
Commission, in exercise of the powers conferred by sub-section (5) of the said
section 34 and in the interest of capital market and investors, has decided that the
above mentioned five directives as specified in the previous references of the
Commission shall be the regulations deemed to have been made by the Karachi
Stock Exchange and Articles of the Exchange shall be deemed to have been amended
accordingly. Any provisions in the Articles which may be repugnant to the above
mentioned directives, would be void and ineffective after 31st December, 2000.

Yours faithfully,
Sd/-
(SHAHID GHAFFAR)
Executive Director (SM)
No. 2(46)/CF/SE/97/04
Sd
(MOHAMMAD HAYAT JASRA)
Executive Director (Law)

Page 1 of 18
Code of Corporate Governance

March 28, 2002

BOARD OF DIRECTORS

(i) All listed companies shall encourage effective representation of
independent non-executive directors, including those representing
minority interests, on their Boards of Directors so that the Board as a
group includes core competencies considered relevant in the context of
each listed company. For the purpose, listed companies may take
necessary steps such that:

(a) minority shareholders as a class are facilitated to contest election of
directors by proxy solicitation, for which purpose the listed
companies may:

annex to the notice of general meeting at which directors are to
be elected, a statement by a candidate(s) from among the
minority shareholders who seeks to contest election to the
Board of Directors, which statement may include a profile of the
candidate(s);
provide information regarding shareholding structure and copies
of register of members to the candidate(s) representing
minority shareholders; and
on a request by the candidate(s) representing minority
shareholders and at the cost of the company, annex to the
notice of general meeting at which directors are to be elected
an additional copy of proxy form duly filled in by such
candidate(s) and transmit the same to all shareholders in terms
of section 178 (4) of the Companies Ordinance, 1984;

(b) the Board of Directors of each listed company includes at least one
independent director representing institutional equity interest of a
banking company, Development Financial Institution, Non-Banking
Financial Institution (including a modaraba, leasing company or
investment bank), mutual fund or insurance company; and

Explanation: For the purpose of this clause, the expression
"independent director" means a director who is not connected with
the listed 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 listed 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.

Page 2 of 18
Any person nominated as a director under sections 182 and 183 of
the Companies Ordinance, 1984 shall not be taken to be an
"independent director" for the above-said purposes.

The independent director representing an institutional investor shall
be selected by such investor through a resolution of its Board of
Directors and the policy with regard to selection of such person for
election on the Board of Directors of the investee company shall be
disclosed in the Directors' Report of the investor company.

(c) executive directors, i.e. working or whole time directors, are not
more than 75% of the elected directors including the Chief Executive:

Provided that in special circumstances, this condition may be relaxed
by the Securities and Exchange Commission of Pakistan.

Provided further that nothing contained in this clause shall apply to
banking companies, which are required by Prudential Regulation No.9
for Banks to have not more than 25% of the directors as paid
executives of the banks.

(ii) The directors of listed companies shall, at the time of filing their consent
to act as such, give a declaration in such consent that they are aware of
their duties and powers under the relevant law(s) and the listed
companies Memorandum and Articles of Association and the listing
regulations of stock exchanges in Pakistan.

QUALIFICATION AND ELIGIBILITY TO ACT AS A DIRECTOR

(iii) No listed company shall have as a director, a person who is serving as a
director of ten other listed companies.

(iv) No person shall be elected or nominated as a director of a listed company
if:

(a) his name is not borne on the register of National Tax Payers except
where such person is a non-resident; and

(b) he has been convicted by a court of competent jurisdiction as a
defaulter in payment of any loan to a banking company, a
Development Financial Institution or a Non-Banking Financial
Institution or he, being a member of a stock exchange, has been
declared as a defaulter by such the stock exchange; and

(v) A listed company shall endeavour that no person is elected or nominated as
a director if he or his spouse is engaged in the business of stock brokerage
(unless specifically exempted by the Securities and Exchange Commission of
Pakistan).

Page 3 of 18
TENURE OF OFFICE OF DIRECTORS

(vi) The tenure of office of Directors shall be three years. Any casual vacancy
in the Board of Directors of a listed company shall be filled up by the
directors within 30 days thereof.

RESPONSIBILITIES, POWERS AND FUNCTIONS OF BOARD OF DIRECTORS

(vii) The directors of listed companies shall exercise their powers and carry
out their fiduciary duties with a sense of objective judgment and
independence in the best interests of the listed company.

(viii) Every listed company shall ensure that:

(a) a Statement of Ethics and Business Practices is prepared and
circulated annually by its Board of Directors to establish a standard of
conduct for directors and employees, which Statement shall be
signed by each director and employee in acknowledgement of his
understanding and acceptance of the standard of conduct;

(b) the Board of Directors adopt a vision/ mission statement and overall
corporate strategy for the listed company and also formulate
significant policies, having regard to the level of materiality, as may
be determined it;

Explanation: Significant policies for this purpose may include:

risk management;
human resource management including preparation of a
succession plan;
procurement of goods and services;
marketing;
determination of terms of credit and discount to customers;
write-off of bad/ doubtful debts, advances and receivables;
acquisition/ disposal of fixed assets;
investments;
borrowing of moneys and the amount in excess of which
borrowings shall be sanctioned/ ratified by a general meeting of
shareholders;
donations, charities, contributions and other payments of a
similar nature;
determination and delegation of financial powers;
transactions or contracts with associated companies and related
parties; and
health, safety and environment

A complete record of particulars of the significant policies, as may be
determined, along with the dates on which they were approved or
amended by the Board of Directors shall be maintained.

The Board of Directors shall define the level of materiality, keeping in
view the specific circumstances of the listed company and the
Page 4 of 18
recommendations of any technical or executive sub-committee of the
Board that may be set up for the purpose;

(c) the Board of Directors establish a system of sound internal control,
which is effectively implemented at all levels within the listed
company;

(d) the following powers are exercised by the Board of Directors on
behalf of the listed company and decisions on material transactions
or significant matters are documented by a resolution passed at a
meeting of the Board:

investment and disinvestment of funds where the maturity
period of such investments is six months or more, except in the
case of banking companies, Non-Banking Financial Institutions,
trusts and insurance companies;
determination of the nature of loans and advances made by the
listed comp any and fixing a monetary limit thereof;
write-off of bad debts, advances and receivables and
determination of a reasonable provision for doubtful debts;
write-off of inventories and other assets; and
determination of the terms of and the circumstances in which a
law suit may be compromised and a claim/ right in favour of the
listed company may be waived, released, extinguished or
relinquished;

(e) appointment, remuneration and terms and conditions of employment
of the Chief Executive Officer (CEO) and other executive directors of
the listed company are determined and approved by the Board of
Directors; and

(f) in the case of a modaraba or a Non-Banking Financial Institution,
whose main business is investment in listed securities, the Board of
Directors approve and adopt an investment policy, which is stated in
each annual report of the modaraba/ Non-Banking Financial
Institution.

Explanation: The investment policy shall inter alia state:

that the modaraba/ Non-Banking Financial Institution shall not
invest in a connected person, as defined in the Asset
Management Companies Rules, 1995, and shall provide a list of
all such connected persons;
that the modaraba/ Non-Banking Financial Institution shall not
invest in shares of unlisted companies; and
the criteria for investment in listed securities.

The Net Asset Value of each modaraba/ Non-Banking Financial
Institution shall be provided for publication on a monthly basis to the
stock exchange on which its shares/ certificates are listed.

(ix) The Chairman of a listed company shall preferably be elected from among
the non-executive directors of the listed company. The Board of Directors
Page 5 of 18
shall clearly define the respective roles and responsibilities of the
Chairman and Chief Executive, whether or not these offices are held by
separate individuals or the same individual.

MEETINGS OF THE BOARD

(x) The Chairman of a listed company, if present, shall preside over meetings
of the Board of Directors.

(xi) The Board of Directors of a listed company shall meet at least once in
every quarter of the financial year. Written notices (including agenda) of
meetings shall be circulated not less than seven days before the
meetings, except in the case of emergency meetings, where the notice
period may be reduced or waived.

(xii) The Chairman of a listed company shall ensure that minutes of meetings
of the Board of Directors are appropriately recorded. The minutes of
meetings shall be circulated to directors and officers entitled to attend
Board meetings not later than 30 days thereof, unless a shorter period is
provided in the listed companys Articles of Association.

In the event that a director of a listed company is of the view that his
dissenting note has not been satisfactorily recorded in the minutes of a
meeting of the Board of Directors, he may refer the matter to the
Company Secretary. The director may require the note to be appended to
the minutes, failing which he may file an objection with the Securities and
Exchange Commission of Pakistan in the form of a statement to that
effect.

SIGNIFICANT ISSUES TO BE PLACED FOR DECISION BY THE BOARD OF
DIRECTORS

(xiii) In order to strengthen and formalize corporate decision-making process,
significant issues shall be placed for the information, consideration and
decision of the Boards of Directors of listed companies.

Significant issues for this purpose may include:

annual business plans, cash flow projections, forecasts and long term
plans;
budgets including capital, manpower and overhead budgets, along
with variance analyses;
quarterly operating results of the listed company as a whole and in
terms of its operating divisions or business segments;
internal audit reports, including cases of fraud or irregularities of a
material nature;
management letter issued by the external auditors;
details of joint venture or collaboration agreements or agreements
with distributors, agents, etc;
promulgation or amendment of a law, rule or regulation, enforcement
of an accounting standard and such other matters as may affect the
listed company;
Page 6 of 18
status and implications of any law suit or proceedings of material
nature, filed by or against the listed company;
any show cause, demand or prosecution notice received from
revenue or regulatory authorities, which may be material;
default in payment of principal and/or interest, including penalties on
late payments and other dues, to a creditor, bank or financial
institution or default in payment of public deposit;
failure to recover material amounts of loans, advances, and deposits
made by the listed company, including trade debts and inter-
corporate finances;
any significant accidents, dangerous occurrences and instances of
pollution and environmental problems involving the listed company;
significant public or product liability claims likely to be made against
the lis ted company, including any adverse judgment or order made
on the conduct of the listed company or of another company that
may bear negatively on the listed company;
disputes with labour and their proposed solutions, any agreement
with the labour union or Collective Bargaining Agent and any charter
of demands on the listed company; and
payment for goodwill, brand equity or intellectual property.

ORIENTATION COURSES

(xiv) All listed companies shall make appropriate arrangements to carry out
orientation courses for their directors to acquaint them with their duties
and responsibilities and enable them to manage the affairs of the listed
companies on behalf of shareholders.

CHIEF FINANCIAL OFFICER (CFO) AND COMPANY SECRETARY

APPOINTMENT AND APPROVAL

(xv) The appointment, remuneration and terms and conditions of employment
of the Chief Financial Officer (CFO), the Company Secretary and the head
of internal audit of listed companies shall be determined by the CEO with
the approval of the Board of Directors.

The CFO or the Company Secretary of listed companies shall not be
removed except by the CEO with the approval of the Board of Directors.

QUALIFICATION OF CFO AND COMPANY SECRETARY

(xvi) No person shall be appointed as the CFO of a listed company unless:

(a) he is a member of a recognized body of professional accountants; or

(b) he is a graduate from a recognized university or equivalent, having
at least five years experience in handling financial or corporate affairs
of a listed public company or a bank or a financial institution.

(xvii) No person shall be appointed as the Company Secretary of a listed
company unless he is:

Page 7 of 18
(a) a member of a recognized body of professional accountants; or

(b) a member of a recognized body of corporate/ chartered secretaries;
or

(c)
1
a person holding masters degree in Business Administration or
Commerce or being a Law Graduate from a University recognized by
Higher Education Commission and having at least five years relevant
experience.

Provided that a person already engaged by a company as Secretary
before the 26
th
October, 2002 may continue in that capacity if he has
an experience of not less than five years in that position.

REQUIREMENT TO ATTEND BOARD MEETINGS

(xviii) The CFO and the Company Secretary of a listed company shall attend
meetings of the Board of Directors.

Provided that unless elected as a director, the CFO or the Company
Secretary shall not be deemed to be a director or entitled to cast a vote
at meetings of the Board of Directors for the purpose of this clause.
Provided further that the CFO and/ or the Company Secretary shall not
attend such part of a meeting of the Board of Directors, which involves
consideration of an agenda item relating to the CFO, Company Secretary,
CEO or any director.

CORPORATE AND FINANCIAL REPORTING FRAMEWORK

THE DIRECTORS REPORT TO SHAREHOLDERS

(xix) The directors of listed companies shall include statements to the following
effect in the Directors Report, prepared under section 236 of the
Companies Ordinance, 1984:

(a) The financial statements, prepared by the management of the listed
company, present fairly its state of affairs, the result of its
operations, cash flows and changes in equity.

(b) Proper books of account of the listed company have been
maintained.

(c) Appropriate accounting policies have been consistently applied in
preparation of financial statements and accounting estimates are
based on reasonable and prudent judgment.

1
Previous clause (xvii) (c) a lawyer; or and clause (xvii) (d) a graduate from a
recognized university or equivalent, having at least five years experience in handling
corporate affairs of a listed public company or corporation amended vide directive dated
October 6, 2005.
Page 8 of 18
(d) International Accounting Standards, as applicable in Pakistan, have
been followed in preparation of financial statements and any
departure therefrom has been adequately disclosed.

(e) The system of internal control is sound in design and has been
effectively implemented and monitored.

(f) There are no significant doubts upon the listed companys ability to
continue as a going concern.

(g) There has been no material departure from the best practices of
corporate governance, as detailed in the listing regulations.

The Directors Reports of listed companies shall also include the following,
where necessary:

(a) If the listed company is not considered to be a going concern, the
fact along with reasons shall be disclosed.

(b) Significant deviations from last year in operating results of the listed
company shall be highlighted and reasons thereof shall be explained.

(c) Key operating and financial data of last six years shall be
summarized.

(d) If the listed company has not declared dividend or issued bonus
shares for any year, the reasons thereof shall be given.

(e) Where any statutory payment on account of taxes, duties, levies and
charges is outstanding, the amount together with a brief description
and reasons for the same shall be disclosed.

(f) Significant plans and decisions, such as corporate restructuring,
business expansion and discontinuance of operations, shall be
outlined along with future prospects, risks and uncertainties
surrounding the listed company.

(g) A statement as to the value of investments of provident, gratuity and
pension funds, based on their respective audited accounts, shall be
included.

(h) The number of Board meetings held during the year and attendance
by each director shall be disclosed.

(i) The pattern of shareholding shall be reported to disclose the
aggregate number of shares (along with name wise details where
stated below) held by:

associated companies, undertakings and related parties (name
wise details);
NIT and ICP (name wise details);
directors, CEO and their spouse and minor children (name wise
details);
Page 9 of 18
executives;
public sector companies and corporations;
banks, Development Finance Institutions, Non-Banking Finance
Institutions, insurance companies, modarabas and mutual
funds; and
shareholders holding ten percent or more voting interest in the
listed company (name wise details).

Explanation: For the purpose of this clause, clause (b) of direction
(i) and direction (xxiii), the expression executive means an
employee of a listed company other than the CEO and directors
whose basic salary exceeds five hundred thousand rupees in a
financial year.

(j) All trades in the shares of the listed company, carried out by its
directors, CEO, CFO, Company Secretary and their spouses and
minor children shall also be disclosed.

FREQUENCY OF FINANCIAL REPORTING

(xx) The quarterly unaudited financial statements of listed companies shall be
published and circulated along with directors review on the affairs of the
listed company for the quarter.

(xxi) All listed companies shall ensure that half -yearly financial statements are
subjected to a limited scope review by the statutory auditors in such
manner and according to such terms and conditions as may be
determined by the Institute of Chartered Accountants of Pakistan and
approved by the Securities and Exchange Commission of Pakistan.

(xxii) All listed companies shall ensure that the annual audited financial
statements are circulated not later than four months from the close of the
financial year.

(xxiii) Every listed company shall immediately disseminate to the Securities and
Exchange Commission of Pakistan and the stock exchange on which its
shares are listed all material information relating to the business and
other affairs of the listed company that will affect the market price of its
shares. Mode of dissemination of information shall be prescribed by the
stock exchange on which shares of the company are listed.

This information may include but shall not be restricted to information
regarding a joint venture, merger or acquisition or loss of any material
contract; purchase or sale of significant assets; any unforeseen or
undisclosed impairment of assets due to technological obsolescence, etc.;
delay/ loss of production due to strike, fire, natural calamities, major
breakdown, etc.; issue or redemption of any securities; a major change
in borrowings including any default in repayment or rescheduling of
loans; and change in directors, Chairman or CEO of the listed company.

Page 10 of 18
RESPONSIBILITY FOR FINANCIAL REPORTING AND CORPORATE
COMPLIANCE

(xxiv) No listed company shall circulate its financial statements unless the CEO
and the CFO present the financial statements, duly endorsed under their
respective signatures, for consideration and approval of the Board of
Directors and the Board, after consideration and approval, authorize the
signing of financial statements for issuance and circulation.

(xxv) The Company Secretary of a listed company shall furnish a Secretarial
Compliance Certificate, in the prescribed form, as part of the annual
return filed with the Registrar of Companies to certify that the secretarial
and corporate requirements of the Companies Ordinance, 1984 have
been duly complied with.

DISCLOSURE OF INTEREST BY A DIRECTOR HOLDING COMPANYS SHARES

(xxvi) Where any director, CEO or executive of a listed company or their
spouses sell, buy or take any position, whether directly or indirectly, in
shares of the listed company of which he is a director, CEO or executive,
as the case may be, he shall immediately notify in writing the Company
Secretary of his intentions. Such director, CEO or executive, as the case
may be, shall also deliver a written record of the price, number of shares,
form of share certificates (i.e. whether physical or electronic within the
Central Depository System) and nature of transaction to the Company
Secretary within four days of effecting the transaction. The notice of the
director, CEO or executive, as the case may be, shall be presented by the
Company Secretary at the meeting of the Board of Directors immediately
subsequent to such transaction. In the event of default by a director, CEO
or executive to give a written notice or deliver a written record, the
Company Secretary shall place the matter before the Board of Directors
in its immediate next meeting:

Provided that each listed company shall determine a closed period prior
to the announcement of interim/ final results and any business decision,
which may materially affect the market price of its shares. No director,
CEO or executive shall, directly or indirectly, deal in the shares of the
listed company in any manner during the closed period.

AUDITORS NOT TO HOLD SHARES

(xxvii) All listed companies shall ensure that the firm of external auditors or any
partner in the firm of external auditors and his spouse and minor children
do not at any time hold, purchase, sell or take any position in shares of
the listed company or any of its associated companies or undertakings:

Provided that where a firm or a partner or his spouse o r minor child owns
shares in a listed company, being the audit client, prior to the
appointment as auditors, such listed company shall take measures to
ensure that the auditors disclose the interest to the listed company within
14 days of appointment and divest themselves of such interest not later
than 90 days thereof.

Page 11 of 18
CORPORATE OWNERSHIP STRUCTURE

(xxviii)
2
Every company which is proposed to be listed shall, at the time of public
offering, comply with the requirements of offer of shares to the general
public as contained in the related Listing Regulations, unless the limit is
relaxed by the stock exchange with the approval of Securities and
Exchange Commission of Pakistan.

DIVESTITURE OF SHARES BY SPONSORS/CONTROLLING INTEREST

(xxix) In the event of divestiture of not less than 75% of the total shareholding
of a listed company, other than a divestiture by non-resident
shareholder(s) in favour of other non-resident shareholder(s) or a
disinvestment through the process of privatization by the Federal or
Provincial Government, at a price higher than the market value ruling at
the time of divestiture, it shall be desirable and expected of the directors
of the listed company to allow the transfer of shares after it has been
ascertained that an offer in writing has been made to the minority
shareholders for acquisition of their shares at the same price at which the
divestiture of majority shares was contemplated. Where the offer price to
minority shareholders is lower than the price offered for acquisition of
controlling interest, such offer price shall be subject to the approval of
the Securities and Exchange Commission of Pakistan.

AUDIT COMMITTEE

COMPOSITION

(xxx) The Board of Directors of every listed company shall establish an Audit
Committee, which shall comprise not less than three members, including
the chairman. Majority of the members of the Committee shall be from
among the non-executive directors of the listed company and the
chairman of the Audit Committee shall preferably be a non-executive
director. The names of members of the Audit Committee shall be
disclosed in each annual report of the listed company.

FREQUENCY OF MEETINGS

(xxxi) The Audit Committee of a listed company shall meet at least once every
quarter of the financial year. These meetings shall be held prior to the
approval of interim results of the listed company by its Board of Directors
and before and after completion of external audit. A meeting of the Audit
Committee shall also be held, if requested by the external auditors or the
head of internal audit.

2
Previous clause (xxviii) Every company which is proposed to be listed shall, at the time of
public offering, offer not less than Rs. 100 million or 20% of the share capital of the
company, whichever is higher, to the general public unless the limit is relaxed by the stock
exchange with the approval of the Securities and Exchange Commission of Pakistan.
amended vide directive dated October 6, 2005
.

Page 12 of 18
ATTENDANCE AT MEETINGS

(xxxii) The CFO, the head of internal audit and a representative of the external
auditors shall attend meetings of the Audit Committee at which issues
relating to accounts and audit are discussed.

Provided that at least once a year, the Audit Committee shall meet the
external auditors without the CFO and the head of internal audit being
present.

Provided further that at least once a year, the Audit Committee shall
meet the head of internal audit and other members of the internal audit
function without the CFO and the external auditors being present.

TERMS OF REFERENCE

(xxxiii) The Board of Directors of every listed company shall determine the terms
of reference of the Audit Committee. The Audit Committee shall, among
other things, be responsible for recommending to the Board of Directors
the appointment of external auditors by the listed companys
shareholders and shall consider any questions of resignation or removal
of external auditors, audit fees and provision by external auditors of any
service to the listed company in addition to audit of its financial
statements. In the absence of strong grounds to proceed otherwise, the
Board of Directors shall act in accordance with the recommendations of
the Audit Committee in all these matters.

The terms of reference of the Audit Committee shall also include the
following:

(a) determination of appropriate measures to safeguard the listed
companys assets;

(b) review of preliminary announcements of results prior to publication;

(c) review of quarterly, half-yearly and annual financial statements of
the listed company, prior to their approval by the Board of Directors,
focusing on:

major judgmental areas;
significant adjustments resulting from the audit;
the going-concern assumption;
any changes in accounting policies and practices;
compliance with applicable accounting standards; and
compliance with listing regulations and other statutory and
regulatory requirements.

(d) facilitating the external audit and discussion with external auditors of
major observations arising from interim and final audits and any
matter that the auditors may wish to highlight (in the absence of
management, where necessary);

Page 13 of 18
(e) review of management letter issued by external auditors and
managements response thereto;

(f) ensuring coordination between the internal and external auditors of
the listed company;

(g) review of the scope and extent of internal audit and ensuring that the
internal audit function has adequate resources and is appropriately
placed within the listed company;

(h) consideration of major findings of internal investigations and
management's response thereto;

(i) ascertaining that the internal control system including financial and
operational controls, accounting system and reporting structure are
adequate and effective;

(j) review of the listed companys statement on internal control systems
prior to endorsement by the Board of Directors;

(k) instituting special projects, value for money studies or other
investigations on any matter specified by the Board of Directors, in
consultation with the Chief Executive and to consider remittance of
any matter to the external auditors or to any other external body;

(l) determination of compliance with relevant statutory requirements;

(m) monitoring compliance with the best practices of corporate
governance and identification of significant violations thereof; and

(n) consideration of any other issue or matter as may be assigned by the
Board of Directors.

REPORTING PROCEDURE

(xxxiv) The Audit Committee of a listed company shall appoint a secretary of the
Committee. The secretary shall circulate minutes of meetings of the Audit
Committee to all members, directors and the CFO within a fortnight.

INTERNAL AUDIT

(xxxv) There shall be an internal audit function in every listed company. The
head of internal audit shall have access to the chair of the Audit
Committee.

(xxxvi) All listed companies shall ensure that internal audit reports are provided
for the review of external auditors. The auditors shall discuss any major
findings in relation to the reports with the Audit Committee, which shall
report matters of significance to the Board of Directors.

Page 14 of 18
EXTERNAL AUDITORS

(xxxvii) No listed company shall appoint as external auditors a firm of auditors
which has not been given a satisfactory rating under the Quality Control
Review programme of the Institute of Chartered Accountants of Pakistan.

(xxxviii) No listed company shall appoint as external auditors a firm of auditors
which firm or a partner of which firm is non-compliant with the
International Federation of Accountants' (IFAC) Guidelines on Code of
Ethics, as adopted by the Institute of Chartered Accountants of Pakistan.

(xxxix) The Board of Directors of a listed company shall recommend appointment
of external auditors for a year, as suggested by the Audit Committee. The
recommendations of the Audit Committee for appointment of retiring
auditors or otherwise shall be included in the Directors Report. In case of
a recommendation for change of external auditors before the elapse of
three consecutive financial years, the reasons for the same shall be
included in the Directors Report.

(xl) No listed company shall appoint its auditors to provide services in
addition to audit except in accordance with the regulations and shall
require the auditors to observe applicable IFAC guidelines in this regard
and shall ensure that the auditors do not perform management functions
or make management decisions, responsibility for which remains with the
Board of Directors and management of the listed company.

(xli)
3
(a) All listed companies in the financial sector shall change their
external auditors every five years. Financial sector, for this purpose,
means Banks, Non-Banking Finance Companies (NBFCs), Modarabas and
Insurance Companies; and

(b) All listed companies other than those in the financial sector shall, at a
minimum, rotate the engagement partner after every five years.

(xlii) No listed company shall appoint a person as the CEO, the CFO, an
internal auditor or a director of the listed company who was a partner of
the firm of its external auditors (or an employee involved in the audit of
the listed company) at any time during the two years preceding such
appointment or is a close relative, i.e. spouse, parents, dependents and
non-dependent children, of such partner (or employee).

(xliii) Every listed company shall require external auditors to furnish a
Management Letter to its Board of Directors not later than 30 days from
the date of audit report.

3
Previous clause (xli) All listed companies are required to change their external auditors
every five years. If for any reason this is impractical, a listed company may at a minimum,
rotate the partner in charge of its audit engagement after obtaining the consent of the
Securities and Exchange Commission of Pakistan. amended vide directive dated March 16,
2005
Page 15 of 18
(xliv) Every listed company shall require a partner of the firm of its external
auditors to attend the Annual General Meeting at which audited accounts
are placed for consideration and approval of shareholders.

COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE

(xlv) All listed companies shall publish and circulate a statement along with
their annual reports to set out the status of their compliance with the
best practices of corporate governance set out above.

(xlvi) All listed companies shall ensure that the statement of compliance with
the best practices of corporate governance is reviewed and certified by
statutory auditors, where such compliance can be objectively verified,
before publication by listed companies.

(xlvii) Where the Securities and Exchange Commission of Pakistan is satisfied
that it is not practicable to comply with any of the best practices of
corporate governance in a particular case, the Commission may, for
reasons to be recorded, relax the same subject to such conditions as it
may deem fit.
Page 16 of 18
Appendix

Clause Reference Brief Description
Manner of
Enforcement
Effective Date
(i)
Representation of
independent non-executive
directors, including those
representing minority
interests, on the Board of
Directors of listed
companies
Voluntary When next election is due
(ii)
Filing of consent by
directors
Mandatory When next election is due
(iii) and (iv)
Qualification and eligibility
to act as a director
Mandatory When next election is due
(v)
Election/ nomination of a
broker on the Board of
Directors
Voluntary When next election is due
(vi) Tenure of office of directors Mandatory Immediate
(vii), (viii) and (ix)
Responsibilities, powers and
functions of the Board of
Directors
Mandatory July 1, 2002
(x), (xi) and (xii)
Meetings of the Board of
Directors
Mandatory Immediate
(xiii)
Significant issues to be
placed for decision by the
Board of Directors
(xiv) Orientation courses Mandatory July 1, 2002
(xv)
Appointment and removal
of CFO and Company
Secretary
(xvi) and (xvii)
Qualification of CFO and
Company Secretary
Mandatory
Immediately for new
appointments
(xviii)
Requirement for CFO and
Company Secretary to
attend Board meetings
Mandatory Immediate
Page 17 of 18
(xix)
The directors' report to
shareholders
Mandatory
For accounting periods
ending on or after June 30,
2002
(xx), (xxi), (xxii)
and (xxiii)
Frequency of financial
reporting
Mandatory
2002
(xxiv) and (xxv)
Responsibility for financial
reporting and corporate
compliance
Mandatory
2002
(xxvi)
Disclosure of interest by a
director holding company's
shares
Mandatory Immediate
(xxvii) Auditors not to hold shares Mandatory Immediate
(xxviii)
Corporat e ownership
structure
(xxix)
Divestiture of shares by
sponsors/ controlling
interest
(xxx), (xxxi),
(xxxii), (xxxiii) and
(xxxiv)
Audit Committee Mandatory July 1, 2002
(xxxv) and (xxxvi) Internal Audit Mandatory July 1, 2002
(xxxvii), (xxxviii),
(xxxix) and (xl)
Appointment of external
auditors
Mandatory
When next appointment of
auditors is due
(xli)
Rotation of external
auditors
Mandatory
When next appointment of
auditors is due
(xlii)
Appointment of a partner or
employee of the external
auditors in a key position
within the listed company
Mandatory
Immediately for new
appointments
(xliii)
Management letter issued
by external auditors
Mandatory
2002
Page 18 of 18
(xliv)
Attendance of external
auditors at Annual General
Meeting
Mandatory
2002
(xlv) and (xlvi)
Compliance with the Code
of Corporate Governance
Mandatory
2002

Companies (Registration Offices)
Regulations, 2003
S.R.O. 891(1)/2003, Islamabad, the 5
th
September, 2003.- In
exercise of the powers conferred by sub-section (2) of section 466 of the
Companies Ordinance, 1984 (XLVII of 1984), read with clause (c) of section
43 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of
1997), and in supersession of the Notification No. S.R.O. dated the
30th December, 1986, the Securities and Exchange Commission of Pakistan is
pleased to make the following regulations, namely:-

1. Short title and commencement.- (1) These regulations may be
called the Companies (Registration Offices) Regulations, 2003.

2. Definitions.- (1) In these Regulations, unless there is anything
repugnant in the subject or' context,-
(a) "Annex" means an annexure to these regulations;
(b) "Company Registration Office" means an office established by the
Commission under sub-section (1) of section 466;
l[(ba) "CUIN" means. a corporate universal identification number which is a
sequential computer generated number assigned to every "company;]
(c) "electronic database" means the system for maintaining a database
2
[electronically in respect of all the record of companies]and includes the
Corporate Registration System, Corporate Compliance and Facilitation System,
and Diary System;
,
l
[(ca) "eServices" means any service or means provided by the Commission
for the submission, filing, processing, recording or\ registration of documents
electronically;]
(d) "Ordinance" means the Companies Ordinance, 1984 (XLVII of 1984);
(e) "registrar concerned" means additional registrar, joint registrar, deputy
registrar or assistant registrar who is incharge of a Company Registration Office
in which a company is registered or in whose territorial jurisdiction its
registered office is situated;

*
Superseding "Companies (Registration Offices) Regulations, 1986".
1
Clauses "(ba) & (ca) inserted by SRO dated June 13,
2011.
2Substituted for "relating to company information" by SRO dated June 13, 2011.

3.
1
[ ]

(g) "Schedule" means a Schedule to the Ordinance; and
(h) "section" means a section of the Ordinance.
(2) The words and expressions used but not defined herein shall have
the same meaning as are assigned to them in the Ordinance.

3. Establishment of Company Registration Offices.- (1)
For registration of companies and performing other duties under the
Ordinance, the Commission shall establish Company Registration Offices
at the places specified in column (2) of the Table below, with jurisdiction
extending to companies, not being companies to which section 5 applies,
having registered offices in the territories specified in column (3) of the
said table.

TABLE

S. No.

Place. Territory.
(1) (2) (3)
1. Faisalabad. The Civil Divisions of Faisalabad and Sargodha
except district of Bhakkar in the Province of
Punjab.
2. Islamabad. The Civil Division of Rawalpindi in the Province
of Punjab 'and the Islamabad Capital Territory.
3. Karachi. The Civil Divisions of Karachi, Hyderabad and
Mir Pur Khas in the Province of Sindh
4. Lahore. The Civil Divisions of Lahore and Gujranwala,
districts of Sahiwal and Pakpatan except tehsil of
Chichawatni in the Province of Punjab.
5. Multan. The Civil Divisions of Multan, Bahawalpur and
Dera Ghazi Khan, district of Bhakkar and tehsil
of Chichawatni in the Province of Punjab.

6. Peshawar. The Province of the 2[Khyber Pakhtunkhawa],
the Federally Administered Tribal Areas and the
Provincially Administered Tribal Areas to which
the executive' authority of the Province of the
2
[Khyber Pakhtunkhawa] extends.

7. Quetta. The Province of Baluchistan and theProvincially
Administered Tribal Areas to which the executive
authority of the Province of Baluchistan extends.
8. Sukkur. The Civil Divisions of Sukkur and Larkana in the
Province of Sindh.

l
Clause (f) omitted by SRO dated June 13; 201l.
2
Substituted for "North-West Frontier" by SRO dated June 13, 2011.
Cl. (f) omission.- Before omission it read as follows:-
"(f)"Registrar of Companies" means the Registrar posted at headquarters of
the Commission and includes an additional registrar;"

l
[(1A) Notwithstanding the provisions of Regulation 3(1), Company
Registration Offices may function beyond their territorial jurisdiction to the
extent and manner as may be specified by the Commission from time to
time.]
2
[(2) The Company Registration Offices shall observe such working
hours as may, from time to time, be approved by the Commission, and shall,
with the exception of public holidays, be open for transaction of business
with the public, for Monday to Thursday, from 09:00 A.M. to 1:00 P.M. and
2:00 P.M. to 3:00 P.M.; and for Friday, from 09:00 A.M. to 1:00 P.M. and
from 2:30 P.M. to 3:30 P.M.]
(3) Every Company Registration Office shall have a seal for
authentication of documents required for or in connection with registration
of companies:
Provided that the design of the seal shall require approval of the
Registrar of Companies.
4. Suggestions and complaint box.- In every Company
Registration Office, there shall be placed a "suggestions and complaint
box" at a conspicuous place to receive feedback from the public regarding
the working of Company Registration Office or for any other difficulty or
complaint and the box shall be opened by the person authorized by the
Registrar of Companies.
5. Incorporation of companies.- (1) The certificate of
incorporation, issued in pursuance of section 32, shall be in the form as
set out in Annex A.
3
[(2) Every company which is incorporated shall be assigned a CUIN
and the company registration number assigned previously to a company
shall be replaced with a CUIN.]

l
Sub-regulation (lA) inserted by SRO dated June 13, 2011.
2
Sub-regulation 3(2) substituted by SRO dated June 13, 2011.
3Sub-regulation 5(2) substituted SRO dated June 13, 2011.

Sub-regulation 3(2), Substitution.- Before substitution it read as
follows:-
"(2) The Company Registration Offices shall observe such working hours as
may, from time to time, be approved by the Commission for those offices, and
shall, with the exception of public holidays, be open, between the hours of 10:00
A.M. and 2:00 P.M. from Monday to Friday, for transaction of business with the
public."
Sub-regulation 5(2), Substitution.- Before substitution it read as
follows:-
"(2) Every company which is incorporated shall be assigned a company
registration number which shall be a consecutive number generated by electronic
database to be used as an identification number for that company and shall be stated
on the certificate of incorporation and all relevant documents or papers relating to
the company."

l
[ ]
(4) Every company formed or incorporated outside Pakistan which has
2
[established] a place of business in Pakistan and
3
[delivers] documents pursuant to
the provisions contained in
4
[section 451] of the Ordinance shall
5
[ ] be assigned a
6
[CUIN and be issued a certificate of registration of documents in the form as set
out in Annexure AA].
7
[(5) The registrar. concerned shall before issuing any certificate under this
regulation, register the documents required to be registered under the Ordinance
and upload the copy of the certificate duly signed by him in the electronic database
through eServices.].
8
[ ]
9
[5A. Transfer of documents.- In case a company changes its place of
registered office from the territorial jurisdiction of a Company
Registration Office to another, the registrar of such Company Registration Office
shall, send within seven days, all the physical record relating to that company to the
registrar in whose territorial jurisdiction the registered office of the company is
shifted.]
l
Sub-regulation 5(3) omitted by S dated June 13, 2011.
2
Word inserted by SRO dated June 13, 2011.
3
Substituted for "files" by SRO dated June 13, 2011.
4
Substituted for "Part XIV' by SRO dated June 13, 2011.
5
Word "also" omitted by SRO dated June 13, 2011.
6
Substituted for "company registration number in the same manner as provided in clause (2)" by SRO
dated June 13, 2011.
7
8
Sub-regulation 5(6) omitted by SRO dated June 13, 2011.
9
Regulation 5A-inserted by SRO dated June 13, 2011.

Sub-regulation 5(3), Omission.- Before omission it read as follows:-
"(3) Where a company transfers its registered office from the territorial jurisdiction of one
Company Registration Office to another, the company identification number of such company
shall be changed by the Company Registration Office in whose territorial jurisdiction its
registered office is transferred, to the extent It is necessary to reflect the
change of the Company Registration Office."
Sub-regulation 5(5), Substitution.- Before substitution it read as follows:-
"(5) The registrar concerned shall cause the fact of certificate of incorporation having
been granted, the date of incorporation and the company registration number to be entered on
the stamped memorandum and articles of association under' the dated signature of the registrar
concerned issuing the certificate of incorporation and also cause a copy of the certificate of
incorporation to be attached to the memorandum and articles of association of the company."
Sub-regulation 5(6) Omission.- Before omission it read as follows:-
"(6) The company registration number and the name and designation of the registrar
concerned with his dated signature shall be 'affixed on all certificates and other documents and
papers issued by the Company Registration Office with which the company is for the time
being registered."

6. Issuance of certificates.-
1
[(1)] The registrar concerned shall cause the
issue of following certificates, namely:-
(a) The certificate of incorporation for effecting the change of name of a
company for the purpose of section 40 in the form as set out in Annexure
B;
(b) the certificate for conversion of a public company into a private company
for the purpose of sub-section (2) of section 41 in the form as set out in
Annexure C;
(c) the certificate for conversion of a private company into a public company
for the purpose of sub-section (3) of section 41 in the form as set out in
Annexure D;
(d) certificate of registration of mortgage or charge, etc., for the purposes of
section 127 in the form as set out in Annex E; and
(e) certificate for commencement of business for the purposes of sub-section
(2) of section 146 in the form as set out in Annex F.
2
[(2)The registrar concerned shall before issuing any certificate under this
regulation, register the documents required to be registered under the Ordinance and
upload a copy of the certificate duly singed by him in eServices.]
3
[7. Uploading physical documents into eServices.- The registrar
concerned shall upload or cause to be uploaded the scanned images of all documents
filed in physical form in relation to every company and enter or cause to be entered
all the relevant information in the electronic database through eServices.].
3
[8. Maintenance of information in the electronic database.- It shall be
the responsibility of the registrar concerned to maintain correct information in the
electronic database and in case of any discrepancy he shall immediately report the
same to the Registrar of Companies for rectification thereof who shall ensure its
immediate correction and communicate to the registrar concerned accordingly.]
1
Rule 6 renumbered as 6(1) by SRO dated June 13, 201l.
2
S
u
b.regulation 6(2) inserted by SRO dated June 13, 2011.
3
Regulations 7 & 8 substituted by SRO dated June 13, 2011:
Regulations 7 8 Substitution.- Before substitution it read as follows:-
"7. Data entry.- The registrar concerned shall cause all incoming documents filed by, or
on behalf, of companies registered with a Company Registration Office to be entered in the
electronic database on the day it is received."
"8. Document Management System.-. The documents identified by the Commission for
storage of image in the Document Management System shall, before being entered in the
computer system, be scanned and image stored in the Document Management System on the
day on which such documents are received:"

1
[9. Examination of documents, etc.- (1) The registrar concerned shall
examine or cause to be examined, every document received by him which is
required or authorized by or under the. Ordinance to be filed, recorded or registered,
with the registrar.
l
Regulation 9 substituted by SRO dated June 13, 2011.
Regulation 9 Substitution.- Before substitution it read as follows:-
"9. Time period for examination of documents, applications, etc.- The
registrar concerned shall examine, or cause to be examined, every document received
in a Company Registration Office which is required or authorized by or under the
Ordinance to be registered, recorded or filed with the registrar concerned within the
period as specified in column (3) of the Table below against each document,
application, etc., as specified in column (2) of the said table, and in case of delay,
reasons and circumstances causing the delay shall be recorded.

TABLE
S.
No
Description Period
(1) (2) (3)
1.
Application for availability of name (Section 39).
1 day
2. Application for the approval of change of name (Section 39). 2 days
3.
Issuance of certificate for change of name after the receipt of the
approval (Section 41).
1 day
4.
Documents for conversion of the status of a private company to a
public company (Section 45).
2 days
5.
Issuance of filing certificate after the receipt of certified copy of
Court order (Section 102).
2 days
6. Registration of mortgage or charge (Section 121). 1 day
7.
Registration of satisfaction of mortgage or charge (Section 132).
1 day
8.
Application for issuance of commencement of business certificate
(Section 146).
2 days
9.
Application for grant of extension in holding AGM - a public
unlisted company (where powers delegated) or a private company
(Sections 158 and 233).
2 days
10.
Issuance of filing certificate on the receipt of certified copy of
Court order under sections 284 and 290.
3 days
11.
Application for the certified copy of documents filed, registered
or recorded [Section 466(6)].
1 day
12.
Inspection of documents kept by the Registrar [Section 466(6)]
1 day
13. Issuance of filing certificates of any return or document. 2 days
14.
Issuance of registration certificate in respect of the documents
filed under sections 370 and 382.
3 days
15. Issuance of the filing certificates of documents filed by a foreign
company under sections 451, 452 and 453.
2 days
16. Making minute of an order filed under sections 315, 319 and
350(2) in the books relating to a company."
3 days

(2) The registrar concerned shall observe the time frame as specified in column (3)
of the Table below for the disposal of matters specified in column (2) of the said
table.
TABLE
S.
No
Description Period
(1) (2) (3)
1.
Application of name (Section 37).
1 day
2. Alteration in the memorandum of association (Section 21) 7 days
3.
Approval for change of name (Section 39).
2 days
4.
Issuance of certificate for change of name after the receipt of the
approval (Section 41).
1 day
5.
Conversion of the status of a private company to a public company
(Section 45)
2 days
6.
Issuance of filing certificate after the receipt of certified copy of
Court order (Section 102)
2 days
7.
Registration of mortgage of charge (Section 121)
1 day
8.
Satisfaction of mortgage or charge (Section132)
2 days
9.
Issuance of Certificate for commencement of business (Section 146)
2 days
10.
Grant of extension in holding AGM - a public unlisted company
(which powers delegated) or a private company (Sections 158 and
233)
2 days
11.
Issuance of filing certificate on the receipt of certified copy of Court
order under sections 284 and 290
3 days
12.
Issuance of Certified copy of documents filed, registered or
recorded [(Section 466(6)]
1 day
13.
Inspection of documents kept by the Registrar [Section 466(6)
1 hour
14.
Issuance of filing certificates of any return or document.
2 days
15. Registration of documents filed under sections 370 and 382 3 days
16.
Issuance of certificate of registration of documents filed by a foreign
company under section 451
2 days
17
Making minute of an order filed under sections 315, 319 and 350(2)
in the books relating to a company.]
3 days
10. Payment of additional fee for late filing of documents.- If any
document is filed with or presented to a Company Registration Office after the
expiry of the period within which it was required or authorized to be filed or
registered, not being particulars or documents requiring registration under section
121, 122, 123, 124, 129, 131 or 132, the registrar concerned may, without absolving
the defaulting company or person of any liability arising out of the default, delay or
failure to comply, accept the document for record on payment of an additional fee,
in addition to normal filing fee, as specified in column (3) of the Table below
against the period of delay specified in' column (2) thereof.

TABLE
S. No. Period of delay Additional fee
(1) (2) (3)
(1) If a document is filed with a delay
of not more than fifteen days.

Additional fee equal to the usual fee
specified for the document in the
Sixth Schedule.
of more than fifteen days but not
more than forty-five days.
Additional fee equal to two times of
the usual fee specified for the
document in the Sixth Schedule.
of more than forty-five days.
Additional fee equal to three times
of the usual fee specified for the

l
[Provided that where a scheme is announced by the Commission for allowing
companies or any class thereof to file the documents after the expiry of the
prescribed period, . the registrar concerned may on such conditions as may be
specified by the Commission, -accept the document for record on payment of a
additional-fee, in addition to normal filing fee, as prescribed in column (3) of the
Table below against the period specified in column (2) thereof.
TABLE

S. No. Period of delay Additional fee
(1) (2) (3)
(1) If a document is filed with the
first month of the scheme.
Additional fee equal to one-half of
the usual fee specified for the
(2) If a document is filed within the
second month of the scheme.
Additional fee equal to the usual fee
specified for the document in the
Sixth Schedule.

(3) If a document is filed within the
remaining period of the scheme.
Additional fee equal to two times
of the usual fee specified for the
document in the Sixth Schedule.]

11. Registrar not to accept defective documents.- (1) No document
shall be accepted, for registration, filing or record by the registrar concerned, an
additional registrar, a joint registrar, a deputy registrar or an assistant registrar if in
is opinion, such document- h

(a) contains any matter contrary to the law, or does not otherwise
comply with the requirements of the law;
1
Proviso inserted by SRO.609 (1)/2010 dated July 07, 2010.

(b) is not complete owing to any defect, error or omission;
(c) is insufficiently legible or is written upon paper which IS not
durable; or
(d) is not properly authenticated.

1
[(2) If a document is found defective as specified in sub-regulation (1), the
registrar concerned may require the company to rectify the defect or file a revised
document within the period specified by him, failing which the registrar may refuse to
accept such document for registration or recording.]
(3) If a document has been accepted for record and
2
[the information contained
therein is found to be false, incorrect], forged or suffering from a defect which is not
possible of rectification, the registrar concerned may for
3
[ ] reasons to be recorded in
writing,
4
[cancel the recording thereof, after providing an opportunity of being heard to
the company].
12. Non-payment of fee.- The registrar concerned shall not register, file or
record any document or make a record of any fact in respect of which a fee is payable
under the Sixth Schedule until such fee has been paid and shall, pending the payment of
such fee, act in the same way as if no such document had been tendered for registration,
filing or record.
13. Acceptance of documents.- (1) When a document is accepted for being
registered, filed or recorded, the registrar concerned shall issue an acknowledgement in
the form as set out in Anne G.
5
[(2) There shall be maintained a log generated by eServices in respect of every
registered, filed or recorded document.]
l
2
Substituted for "its data is detected to be defective" by SRO dated June 13, 201l.
3
Word "special" omitted by SRO dated June 13, 2011.
4
Substituted for "ask the company to rectify the document and may cancel the recording thereof, as may be
necessary" by SRO dated June 13, 2011.
5
Sub-regulation 11(2) Substitution.- Before substitution it read as follows:-
"(2) If a document is found defective or incomplete as specified in clause (1), the registrar
concerned may require the company to rectify the defect and file a revised document in the form
and within the period to be specified by him or refuse to accept or register such document until the
defect has been rectified" or, as the case may be, the document has been completed."
"(2) Every registered, filed or recorded document shall carry dated initial of the registrar
concerned, stamp showing his name and designation and the seal of the Company Registration
Office."

1
[14. Register of companies.- (1) There shall be maintained in the electronic
database, a register of companies incorporated in Pakistan in the form as set out in
Annex H.
(2) There shall be maintained in the electronic database, a register of foreign
ompa es in the form as set out in Annex A. c ni H
. .
(3) A list of all the documents filed, registered or recorded relating to each
company shall be maintained in the respective register of companies.] .
15. Register of mortgages and charges.-
2
[(1) The register of mortgages and
charges to be kept by the registrar as provided in section 125 of the Ordinance shall
.be maintained in electronic database in the form as set out in Annexure-I.]
(2)
3
[There shall be maintained] in the electronic database, a chronological
index of the mortgages and charges registered with the Company Registration Office
4[ ] under the Ordinance in the form as set out in Annexure J.
5
[15A. Issuance of duplicate certificate.-The registrar concerned may after
making such inquiry as to the loss, destruction, defacement or mutilation of the
original certificate as he may 'deem fit to make and subject to such terms and
conditions as he may impose, issue a duplicate of any certificate issued under the
provisions of the Ordinance 'or the regulations on application of the company, and
every such duplicate certificate shall bear the mark of "DUPLICATE" on it.]
16. Record keeping.- The documents relating to 6[a] company shall be kept together,
distinct and separate from those of other companies.
l
Regulation 14 substituted by SRO dated June 13, 2011.
2
3
Substituted for "Every Company Registration Office" by S dated June 13, 2011.
4
Words ", modification therein and satisfaction thereof' omitted by SRO dated June 13, 2011.
5
Regulations 15A inserted by SRO dated June 13, 2011.
6
Substituted for "any one" by SRO dated June 13, 2011.
Regulation 14 Substitution.- Before substitution it read as follows:- .
"14. Register of companies.- (1) In every Company Registration Office there shall be
maintained in the electronic database, a register of companies in the form as set out in Annex H,
in which the names of the companies shall be entered in the order in which they are registered
along with the company registration, number, date of incorporation and other particulars specified
in the said form.
(2) A note shall be made in the register of companies of every document or fact relating to
the company, which is registered, recorded or filed with a Company Registration Office."
Sub regulation 15 (1) substitution.- Before it read as follows:.
"(1) Every Company Registration Office shall maintain, in the electronic database, with
respect to each company, a register of mortgages and charges, registered by the company,
modification therein and. satisfaction thereof and requiring registration under section 121, 122,
123, 124, 131, 132, 133 or 134 in the form as set out in Annexure 1."

1
[ ]
17. Submission of periodical statements.- The Registrar of Companies
may, by general or special instruction, require any Company Registration Office to
prepare and send to him, other Company Registration Offices and any other person,
such periodical statements in such form and manner and within such time, as may be
specified in the instruction.
18. Inspection of documents.- (1) The registrar concerned shall permit
members of the public to inspect such registers and records of documents as under
the Ordinance they are entitled to inspect provided that, before such permission is
granted, the inspection fee prescribed in the Sixth Schedule
2
[has been] paid.
3
[(2)The inspection of documents permitted under; sub-regulation (1) shall be
carried out in the presence of the registrar concerned or an official authorized by him
in this behalf and shall be completed by the applicant during the time specified for
the transaction of business with the public.]
(3) The registrar concerned or other authorized official supervising the
inspection, may permit notes of the inspected documents to be taken, but verbatim
copy of the document inspected may not be allowed to be taken.
19. Issuance of copies of documents.- The registrar concerned shall, on
the application of a person, cause copies of documents to be granted as authorized
under the Ordinance on payment of fee prescribed in the Sixth Schedule.
4
[20. Authentication of certificates, etc.- Every certificate or copy
granted under the provisions of the Ordinance shall be signed, stamped and dated by
the registrar concerned or an officer authorized for the purpose, bearing his name and
designation, and shall also bear the official seal of the Company Registration Office
and the CUIN of the Company.
l
Sub-regulation 16(2) omitted by SRO dated June 13, 2011.
2
Substituted for "shall be" by SRO dated June 13, 201l.
3
Sub-regulations 18(2) substituted by SRO dated June 13, 201l.
4
Regulations 20 substituted by SRO dated June 13, 2011.
Sub-regulation 16(2) Omission.- Before omission it read as follows:-
"(2) The documents relating to each company shall, be kept in chronological order, that is to
say, in the order of the dates on which they are received by the Company Registration Office."
Sub-regulation 18(2) substitution.- Before substitution it read as follows.-
. "(2) The inspection of the documents shall be allowed during the time specified for
transaction of business with the public in the presence of the registrar concerned or an official
authorized in each individual case by the registrar concerned in this behalf."
Regulation 20 substitution.- Before substitution it read as follows:-
"20. Authentication of certificates, etc.- Every certificate or copy granted under the
provisions of the Ordinance shall be signed and dated by the registrar concerned or an officer
authorized for the purpose and shall bear, a stamp showing his name and also official seal of the
Company Registration Office."

Provided that the requirement of signature and stamp of the registrar concerned
or the authorized officer and the official seal of the Company Registration Office
shall not apply in case the certificate or copy issued is
computer generated.]
21. Notice of any omission to file or register documents.- The registrar
concerned shall take notice of any omission to file or register documents on due date
or any other infraction of the law.
22. Enquires.- The registrar concerned shall institute or cause to be instituted
such enquires in respect of any matter as may be necessary to obtain information or
evidence respecting defaults or any infraction of the law.
23. Legal proceedings.- The Commission or the Registrar of Companies may
authorize the registrar concerned or any other person to institute or cause to be
instituted any legal proceedings or defend or conduct or cause to be defended or
conducted any. prosecution or other legal proceedings under the Ordinance.
24. Assignment of duties.- (1) The Commission or the Registrar of
Companies may assign any of the duties under the Ordinance, the rules made
thereunder or these regulations and generally regulate performance of duties and
issue directions to the registrar concerned or officials subordinate to the registrar
concerned in such manner as it or he may think fit and they shall follow and observe
the orders and instructions of the Commission or the Registrar of Companies, as the
case may be.
(2) Subject to the directions of the Commission or the Registrar of Companies,
the registrar concerned may assign any duties under the Ordinance, the rules made
thereunder or these regulations and generally regulate performance of duties and
issue directions to any additional registrar, joint registrar, deputy registrar or assistant
registrar, where such officers have been appointed in a particular Company
Registration Office, and other officials of the Company Registration Offices as he
may think fit and they shall follow and observe the orders and instructions of the
registrar concerned and all references in these regulations to the registrar concerned
shall be construed as references to any assistant, deputy, joint or additional registrar
to whom the particular duty has been assigned by the registrar concerned by a
general or special-order.
25. Comments on applications.- Where a copy of an application addressed
to the Commission or the Registrar of Companies, is received in a Company
Registration Office in pursuance of rule 32 of the Companies (General Provisions and
Forms) Rules, 1985, the registrar concerned hall, as soon as may be possible but not
later than the second working day after the receipt of the application in his office,
forward to the Commission or the Registrar of Companies, as the case may be, his
parawise comments on the application together with other information and documents
which in his opinion, need to be taken into consideration while disposing of the
application:

Provided that the Commission or, as the case may be, the Registrar of Companies
may dispose of an application without waiting for comments of the registrar concerned,
if so deemed fit.
26. Destruction of documents.- Subject to the previous approval of the
Registrar of Companies, the company records kept in a Company Registration Office
under the Ordinance may be destroyed, after the expiration of the period of their
preservation as specified in Annexure K, if the same are not of sufficient public value
to justify their further preservation, or have not been ordered by the Commission or any
Court to be preserved for a longer period, or are not likely to be needed in connection
with any pending proceedings, before any Court or authority, of which the Company
Registration Office has notice.
Explanation.- A company shall be deemed to be in existence unless its name
has been struck off the register under sub-section (5) of section 439 or unless it has
been fully wound up and finally dissolved.
27. Material for annual report.- (1) Every registrar concerned shall furnish
to the Registrar of Companies, annually, by the 31st July each year, a report on the
working and administration of the Ordinance and other related matters, concerning the
activities of the relevant Company Registration Office in such form and in such manner
as may, from time to time, be specified by the Registrar of Companies.
(2) The Registrar of Companies shall furnish his annual report to the
Commission, by the 31st August each year, in such form and in such
manner as may, from time to time, be specified by the Commission.
Annexure A
[See regulation 5(1)]

CERTIFICATE OF INCORPORATION
[Under section 32 of the Companies Ordinance, 1984 (XLVII of 1984)]
1
[Corporate
Universal Identification Number].____________________________
I hereby certify that____________________________________________ is this day
incorporated under the Companies Ordinance, 1984 (XLVII of 1984) and that the
company is limited by____________________________________________
Given under my hand at _____________________ this _______________ day of
_____________ two thousand and _______________________________
Fee Rs. ______________.
REGISTRAR OF COMPANIES*
*
Designation of the officer signing the certificate.
__________________

l
Substituted for "Company Registration No" by SRO dated June 13, 2011.
l
[Annexure AA

Company Registration Office
_______________
CERTIFICATE OF REGISTRATION OF DOCUMENTS FILED BY A FOREIGN COMPANY
Corporate Universal Identification Number ________________________
I, hereby, certify that _____________________________________, a company
incorporated in *, has complied with
all the requirements under section 451 of the Companies Ordinance, 1984
(XLVII of 1984) for establishing a place of business in Pakistan.
Given under my hand at _______this _______day of _________ Two Thousand and
_______________.
Fee Rs. ____________.
REGISTRAR OF COMPANIES**
*Country of origin
**Designation of the officer signing the certificate.]

l
Inserted by SRO dated June 13, 2011.

Annexure B
[See regulation 6(a)]

CERTIFICATE OF INCORPORATION ON CHANGE OF NAME
1
Corporate Universal Identification No ________________

I hereby certify that pursuant to the provisions of section 38 or section 39 of the Companies
Ordinance, 1984 (XLVII of 1984), the name of ________________________________ has been changed to
________________________and that the said company has been duly incorporated as a company limited by
________________under the provisions of the said Ordinance.
This change is subject to the condition that for period of one year from the date of issue of this certificate, the
company shall continue to mention its former name along with its new name on the outside of every office or place in
which its business is carried on and in every document or notice referred to in clauses (a) and (c) of section 143.
Given under my hand at ____________________ this _________day of_______________________ two thousand
and_________.
Fee Rs.____________________.
REGISTRAR OF COMPANIES
* Designation of the officer signing the certificate.
Annexure C
[See regulation 6(b)]

CERTIFICATE OF CONVERSION OF A PUBLIC COMPANY INTO PRIVATE COMPANY
[Under Section 41(2) of the Companies Ordinance, 1984 (XLVII of 1984)]
1
Corporate Universal Identification No ________________

I hereby certify that pursuant to the provisions of section 44 read with sub- section (2) of section 41 of the Companies
Ordinance, 1984 (XLVII of 1984),__________________________________________ has complied with the
requirements precedent and incidental to the conversion of a public company into private company. The said company
stands converted into a private company with effect from _______________.
Given under my hand at _______________ this _________ day of ___________________two
thousand and _______________.
Fee Rs.________________________.
*Designation of the officer signing the certificate.
l
Annexure D
[See regulation 6(c)]

CERTIFICATE ON CONVERSION OF PRIVATE COMPANY INTO PUBLIC COMPANY
[Under Section 41 (3) of the Companies Ordinance, 1984 (XLVII of 1984)]
1
[Corporate Universal Identification No] _______________
I hereby certify that pursuant to the provisions of section 45 read with sub- section (3) of
section 41 of the Companies Ordinance, 1984 XLVII of 1984),
_____________________________________has complied with the requirements precedent and incidental
to the conversion of a private company into a public company. The said company stands converted into a
public company with effect from _______________.
Given under my hand at _______________ this _____________ day of
___________________two thousand and ____________________.
Fee Rs.________________________.
Annexure E
[See regulation 6(d)]

CERTIFICATE ON CONVERSION OF PRIVATE COMPANY INTO PUBLIC COMPANY
2
Mortgage or Charge dated _________________ made
between_________________________________________ of the one part and______ _____________
__________________ of the other part:
Pursuant to the provisions contained in section 127 of the Companies Ordinance, 1984 (XLVII of 1984), I
hereby certify that the above mortgage or charge for Rs. ____________________ has been registered in this
office in accordance with the provisions of sections 121 to 124 of the said Ordinance.
Given under my hand at_____________ this day of __________________two thousand and
_________________________
Fee Rs.___________________.
REGISTRAR OF OMPANIES
l
2
Inserted by SRO 599(I)/2011.dated June 13, 2011
Annexure F
[See regulation 6(e)]

CERTIFICATE FOR COMMENCEMENT OF BUSINESS
[Under section 146(2) of the Companies Ordinance, 1984 (XLVII of 1984)]
1
I hereby certify that the ________________________________________________
___________which was incorporated under the Companies Ordinance, 1984 (XLVII of 1984), on
the ________________ day of ___________________________________ and which has filed a
duly verified declaration in the prescribed form that the conditions of clauses (a) to (e) of sub-
section (1) of section 146 of the said Ordinance have been complied with, is entitled to commence
business.
Given under my hand at ______________________this ________________ day of
_______________ two thousand and________________________.
Fee Rs. ________________.
Annexure G

ACKNOWLEDGEMENT OF FILING
2
[CUIN]______________________________. Dated ______________________________
In the matter ________________________________________________________.
The receipt of the under mentioned document (s) filed, registered and recorded pursuant to the
provisions of the Companies Ordinance, 1984 (XLVII of 1984), is hereby acknowledged:
1. _______________________________________________________
2. _______________________________________________________
3. _______________________________________________________
4. _______________________________________________________
5. _______________________________________________________
6. _______________________________________________________
Fee Rs. _________________
REGISTRAR OF COMPANIES*
* Designation of the officer signing the certificate.
l
Inserted by SRO dated June 13, 201l.
2
Subsiituted for "No." by SRO dated June 13, 2011.
1
[Annexure H
OFFICE OF THE ___________
REGISTER OF COMPANIES
(a) Name of company: __________________________________
(b) Corporate Universal Identification No: _______________
(c) Date of incorporation: ________________________________
(d) Sectoral classification: ________________________________
(e) Company kind: ______________________________________
(f) Registered office address
(g) Capital Structure:
Classes of shares Face value Number of shares paid up shares Paid up capital:
Rating : ________________________
LIST OF DOCUMENTS FILED
S. No. Description and
date of
document
Date of receipt of
document.

Registered /
Recorded on

Name of dealing officer.

(1) (2) (3) (4) (5)]

2
[Annexure HA
OFFICE OF THE _____________________
REGISTER OF FOREIGN COMPANIES
(a) Name of company: _________________________________________________________
(b) Corporate Universal Identification No: _______________________________________
(c) (Date of registration in Pakistan: ____________________________________________
(d) Address of principal place of business in Pakistan:_______________________________
(e) Name of country of origin: ___________________________________________________
(f) Date of registration in the country of origin:_____________________________________
(g) Sectoral classification: _______________________________________________________
(h) Company kind: _____________________________________________________________
(i) Rating Value : _______________________________________________________________
LIST OF DOCUMENTS FILED
S. No. Description and date
of documents.
Date of receipt of
document.

Registered /
Recorded on

Name of dealing
officer.

(1) (2) (3) (4) (5)]

1
Substituted by SRO dated June 13, 2011.
2
Inserted by SRO dated June 13, 2011.

Annexure I
Register of Mortgages/ charges, etc
Name of company
1[
Corporate Universal Identification Number]

Particulars of modification of mortgage
charge, etc.
Memorandum
of satisfaction
Name
of
dealing
officer
S.
No.

Date of
registration
of mortgage/
charge.
Date of
creation
of
mortgage/
charge.

Documents
creating
mortgage
/charge.

Amount of
mortgage/
charge.
Short
particulars
of the
Property
mortgaged.
Gist of
Mortgagee
name.
terms and
conditions.
Date of
registration
of
modification
.
Date of
modification.
Nature and
gist of
modification
.
Date and
amount of
satisfaction.

(1) (2) (3) ( 4) (5) ( 6) ( 7) ( 8) ( 9) (10) (11) (12) (13)

Annexure J
OFFICE OF THE --------------------------------------

CHRONOLOGICAL INDEX OF MORTGAGES, CHARGES, ETC.,
ENTERED IN REGISTER.
Serial number of
charge, etc., in the
Index.
Date of registration
of charge, etc.
Name of
company.
Amount of mortgage or
charge or value of
redeemable capital.
Name of
registrar
concerned.
(1) (2) (3) (4) (5)

..
.
1
Substituted for Company Registration No by SRO dated June 13, 2011

Annexure K
[See regulation 26]

DOCUMENTS OF COMPANIES IN EXISTENCE
TO BE PRESERVED PERMANENTLY

1. Certified copy of order of the Commission confirming alteration of memorandum
and a printed copy of the memorandum so altered (section 24).
2. Memorandum and articles for registration of a new company [section 30 (1)].
3. Declaration of compliance with requirements - of the Ordinance [section 30 (2)].
4. Prospectus or statement in lieu of prospectus by a private company altering the
articles of association for converting itself into a public company (section 45).
5. Prospectus by a public company (section 57).
6. Statement in lieu of prospectus by a company which does not issue prospectus
(section 69).
7. Notice of consolidation or division of share capital (sections 92 and 93).
8. Notice of increase of share capital (section 94).
9. Notice of increase in members (section 94).
10. Order of Court confirming reduction of share capital and certified copy of the order
and minute (section 102).
11. Copy of order of Court regarding cancellation of variation of shareholders rights
(section 108).
12. Statement showing particulars of mortgages, etc. (sections 121, 129 and 463).
13. Statement showing particular of charge on property acquired subject to charge
(sections 122 and 463).
14. Statement showing particulars of modification of charge [sections 129 (3) and 463].
15. Notice of appointment of receiver or manager (section 137).
16. Abstract of receivers accounts (section 138).
17. Memorandum of satisfaction redemption, etc., of charge (sections 132 and 133).
18. Notice of situation of registered office and any change therein (section142).
19. Notice and Court order of rectification of register of members (section152)
20.
Statutory report (section 157).
21. Special resolutions, etc., filed under section 172.
22. Resolution regarding investment in associated companies (section 208).
23. One copy of annual balance sheet, profit and loss accounts and other related reports
filed under section 242. -
24. Report of Inspectors and other papers relating to matters connected therewith
(section 269).
25. Copy of order of court regarding compromises and, arrangements with creditors and
members and copy of orders in appeal [section 284 (3)].
26. Copy of order of Court relating to reconstruction and amalgamation of companies
[section 287 (3)].
27. Notice to dissenting shareholders (section 289).
28. Copy of orders of Court on application for prevention of mismanagement, minority
oppression, etc., under section 290 or 291
29. Statement of unclaimed dividends and undistributed assets (section 432).

MINIMUM PERIOD OF PRESERVATION OF EXISTING OR
DISSOLVED COMPANIIES RECORDS WHICH MAY BE
DESTROYED

S.
No
Name of Document Period of
preservation
(1) (2) (3)
1. Return of allotment of shares [section 73 (1) (a)] 10 years.

2. Contract of allotment of shares fully or partly paid otherwise than in
cash and verified copies of such contract [section 73 (1) (b)l
10 years.

3. Prescribed particulars of contracts not reduced to writing [section
73(2).1
10 years.

4. Statement disclosing amount or rate per cent of the commission of
subscribing for shares where they are not offered to the public for
subscription (section 82).
10 years.

5. Registration of entire series of debentures~ I redeemable capital
(sections 123, 124 and 463).
Five year after
redemption.

6. Particulars of an issue of redeemable capital / debentures in a series
when more than one issue in the series is made.
Do.

7.
Particulars of commission on debentures (section124).
Do.
8.
Declaration before commencing business by a company issuing a
prospectus (section 146).

Five years
after issue of
certificate by
the registrar
9.
Declaration before commencing business by a
company issuing a statement in lieu of prospectus (section 146).

Do
10.
Annual return of members of a company having share capital
(section 156).
10 years.
11.
Annual return of members of a company not having a share capital
(section 156).
10 years.
12.
Annual Balance Sheet and Profit and Loss Accounts (sections 233
and 242) except one copy required to be retained permanently.
10 years.
13.
List of persons consenting to be Director (section 184).
10 years.
14.
Consent of directors (section 184).
10 years.
15.
Statement showing particulars of Directors, etc. (section 205).
10 years.
16.
Alterations in particulars of Directors, etc. (section 205)
10 years.
17.
Copy of winding up order by Court (section 305).
10 years
from the
date of the
dissolution
or two years
after an
application
is rejected
under
section
429
18
Audited accounts of official liquidator [section 337(4)] 10 years.
19.
Copy of order of Court staying winding up (section 319). Do
20
Copy of the order of dissolution of company by Court (section 350). Do.
21
Declaration of solvency in the case of voluntary winding up (section
362).
Do.
22
Notice of appointment of liquidator in voluntary winding up (section
366).
Do.
23
Return of final meeting and dissolution in the case of members
winding up (section 370).
Do.
24
Winding up notice of creditors resolution (section 374). Do.
25
Return of final meeting and dissolution in the case of creditors
winding up (section 382).
Do.
26.
Notice by liquidator of his appointment (section 388).
Do.
27.
Liquidators statement of accounts, etc. (section 430).
Do.
28.
Certified copy of Commission order declaring dissolution to be
void [(section 439 (9)].
Permanent
29.
Documents relating to legal proceedings.
15 years.
30.
Any other registered document not otherwise specified
5 years
31. Registered documents, correspondence, notifications, etc., relating
to companies declared defunct (section439).
10 years.
32 Correspondence with companies 10 years.
33 Registered documents and files of companies which have been fully
wound up and finally dissolved.
10 years from
the date of
final winding
up or
dissolution.
34 Registered documents and files of foreign companies, which have
ceased to have a place of business in Pakistan.

5 years from
the date of
closure of
places of
business in
Pakistan.

SPECIALIZED COMPANIES DIVISION

No. SC/M/RS/PR/2004- January 28, 2004

CIRCULAR NO. 4 OF 2004

Subject: Prudential Regulations for Modarabas

The Securities and Exchange Commission of Pakistan (SEC) has revised the existing Prudential
Regulations for Modarabas issued vide Circular No. 5/2000 dated April 20, 2000 and subsequent
amendments made therein vide Circular No. 20 of 2000 dated December 21, 2000 and Circular
No. 4 of 2001 dated June 14, 2001.

All the Modaraba Companies are hereby directed to conduct all business transactions undertaken
by the modarabas in conformity with the revised Prudential Regulations enclosed herewith as
Prudential Regulations for Modarabas (the Regulations). These Regulations shall come into
force with immediate effect.

These Regulations are being issued in supercession of this office Circular No. 5/2000 dated April
20, 2000, Circular No. 20 of 2000 dated December 21, 2000 and Circular No. 4 of 2001 dated
June 14, 2001. However, it is clarified that the modaraba companies shall continue to submit all
the information, returns and statements etc. in the same manner and format as previously
prescribed vide circular No.10/2000 dated August 10, 2000.

Modaraba Companies are advised to ensure circulation of Regulations among all their officers/
branches for meticulous compliance in letter and spirit. Any violations or circumvention of these
Regulations shall be dealt with under the provisions of the Modaraba Companies and Modaraba
(Floatation and Control) Ordinance, 1980.

The new set of Regulations has also been placed on SEC Website www.secp.gov.pk for
information of the concerned quarters and general public.

Please acknowledge receipt.

(Akbar Shah)
Registrar
Modaraba Companies and Modarabas

Distribution:

1. Chief Executives of all Modaraba Companies.
2. Managing Directors of all Stock Exchanges
3. The Chairman, Modaraba Association of Pakistan
4. The Institute of Chartered Accountants of Pakistan, Karachi.
5. The Institute of Cost and Management Accountants of Pakistan, Karachi.
6. Office copy.

Page 1 of 28
PRUDENTIAL REGULATIONS FOR MODARABAS

1. Short title and commencement: - (1) These additional conditions shall be deemed to be
part of the conditions of the certificate granted for authorization to float a modaraba in terms of
powers conferred by Section 11 of the Modaraba Companies and Modaraba (Floatation &
Control) Ordinance, 1980 read with rule 3 (2) (e) of Modaraba Companies and Modaraba Rules,
1981 and may be called as Prudential Regulations for Modarabas.

(2) These regulations shall be applicable at once.

Part - I

2. Definitions.
__
(1) In these Regulations, unless there is anything repugnant in the subject
or context:-

( a) Borrower includes a person on whom a modaraba has taken any exposure during
the course of business.

(b) Contingent liability means:

(i) a possible obligation that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the enterprise; or

(ii) a present obligation that arises from past events but is not recognized because:

(a) it is not probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; or

(b) the amount of the obligation cannot be measured with sufficient
reliability;

and includes letters of credit, letters of guarantee, bid bonds / performance bonds,
advance payment guarantees and underwriting commitments.

( c) Documents include vouchers, cheques, bills, pay-orders, promissory notes,
securities for leases / advances and claims by or against the modaraba or any other
record / papers supporting entries in the books of a modaraba.

(d) Equity includes paid up fund, reserves, balance of premium account and un-
appropriated profits/accumulated losses excluding deferred tax reserves, surplus
on revaluation of fixed assets accounts as described in section 235 of the
Companies Ordinance, 1984 and treasury stocks.

( e) Equity of the Borrower includes paid-up capital, general reserves, balance in
share premium account, reserve for issue of bonus shares and retained earnings /
accumulated losses, revaluation reserves on account of fixed assets and
subordinated loans.

Page 2 of 28
Explanation: Revaluation reserves will remain part of the equity for first three
years only, from the date of asset revaluation, during which time the borrower will
strengthen its equity base to enable it to avail facilities without the benefit of
revaluation reserves.

(f) Exposure includes facilities and subscription to or investment in shares.

Explanation: Secure d exposure means exposure backed by tangible security and
any other form of security with appropriate margins (in cases where margin has
been prescribed by SEC, appropriate margin shall at least be equal to the
prescribed margin). Clean exposure me a n s exposure without any security or
collateral.

(g) 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, guarantees, indemnities,
letters of credit and any other obligation, whether fund based or non-fund based;

(h) Financial Institutions includes,
(a) a company or an institution whether established under any special
enactment and operating within or outside Pakistan which transacts the
business of banking or any associated or ancillary business through its
branches;
(b) a modaraba, leasing company, investment bank, venture capital company,
financing company, housing finance company, a non-banking finance
company and bank or any institution duly licensed by State Bank of
Pakistan; and
(c) such other institution or companies authorised by law to undertake any
similar business, as the Federal Government may, by notification in the
official Gazette, specify for the purpose;.

(j) Forced Sale Value (FSV) means the value which fully reflects the possibility of
price fluctuations and can currently be obtained by selling the mortgaged / pledged/
leased/collaterally held assets in a forced / distressed sale conditions.

(j) Government Securities include monetary obligations of the Federal Government
or a Provincial Government or of a Corporation wholly owned or controlled,
directly or indirectly, by the Federal Government or a Provincial Government and
guaranteed by the Federal Government and any other security as the Federal
Government may, by notification in the Official Gazette, declare, to the extent
determined from time to time, to be Government Securities.

(k) Group means persons, whether natural or juridical, if one of them or his family
members including spouse, lineal ascendants and descendants and brothers and

Page 3 of 28
sisters or its subsidiary, have control or hold substantial ownership interest or
have power to exercise significant influence over the other. For the purpose of this:

(i) Subsidiary will have the same meaning as defined in sub-section 3(2) of the
Companies Ordinance, 1984 i.e. a company or a body corporate shall deemed to
be a subsidiary of another company if that other company or body corporate
directly or indirectly controls, beneficially owns or holds more than 50% of its
voting securities or otherwise has power to elect and appoint more than 50%
of its directors.

(ii) Control refers to an ownership directly or indirectly through subsidiaries, of
more than one half of voting power of an enterprise.

(iii)Substantial ownership / affiliation means beneficial share holding of 10%
by a person and/or by his family members including spouse, lineal ascendants
and descendants and brothers and sisters.

Significant influence refers to the management control of the company, to
participate in financial and operating policies, either exercised by representation
in the Board of Directors, partnership or by statute / agreement in the policy
making process or affiliation or material inter- company transactions.

(l) Liquid Assets are the assets which are readily convertible into cash without
recourse to a court of law and mean encashment / realizable value of government
securities, bank deposits, shares of listed companies which are actively traded on
the stock exchange, NIT Units, certificates of mutual funds, Certificates of
Investment (COIs)/Certificates of Deposits (CODs) issued by DFIs / modarabas
and Certificates of Musharika (COMs) issued by modarabas rated at least A by
a credit rating agency registered with the SEC, listed TFCs and Commercial
Papers rated at least A by a credit rating agency registered with the SEC,
National Saving Scheme securities and units of open ended schemes for which a
duly licensed asset management company quotes daily offer and bid rates. These
assets with appropriate margins should be in possession of the modarabas with
perfected lien.

(m) Lease Key Money includes lease security deposit.

(n) Major Shareholder of a modaraba means any person holding 10% or more of
the share capital of a modaraba either individually or in concert with family
members.

(o) Medium and Long Term Facilities mean facilities with maturities of more than
one year.

(p) Other Form of Security means hypothecation of stock (inventory), assignment of
receivables, lease rentals, contract receivables, etc.

(q) Readily Realizable Assets include liquid assets and stocks pledged with the
modarabas and are in their possession, with perfected lien duly supported with
complete documentation.

Page 4 of 28

(r) Rentals include lease rentals, rentals in respect of housing finance facilities, hire
purchase installments or any other amount received by modaraba from borrower
against the grant of facility.

(s) Short Term Facilities mean facilities with maturities up to one year

(t) Subordinated Loan means an unsecured loan extended to the borrower by its
sponsors, subordinate to the claim of the modaraba taking exposure on the
borrower and documented by a formal sub-ordination agreement between provider
of the loan and the borrower. The loan shall be disclosed in the annual audited
financial statements of the borrower as subordinated loan.

(u) Tangible Security means readily realizable assets, mortgage of land, plant,
building, machinery and any other fixed assets.

(v) Underwriting Commitments mean commitments given by modarabas to the
limited companies at the time of new issue of equity / debt instrument, that in case
the proposed issue of equity/debt instrument is not fully subscribed, the un-
subscribed portion will be taken up by them (modarabas).

(2) All terms and expressions used but not defined in these regulations shall have the same
meanings as in the Modaraba Companies and Modaraba (Floatation and Control) Ordinance,
1980 (Ordinance XXXI of 1980) and the Companies Ordinance 1984 (XLVII of 1984).

PART II

(A) Corporate Borrowers

1. Limit on modarabas exposure to a single person. -(1) The total outstanding exposure
by a modaraba to any single person shall not at any point in time exceed 30% of the modarabas
equity (as disclosed in the latest audited financial statements), subject to the condition that the
maximum outstanding against fund based exposure does not exceed 20% of the modarabas
equity.

(2) The total outstanding exposure by a modaraba to any group shall not exceed 50% of the
modarabas equity (as disclosed in the latest audited financial statements), subject to the
condition that the maximum outstanding against fund-based exposure does not exceed 35% of the
modarabas equity.

(3) In arriving at exposure under this Regulation:

a) 100% of the deposits placed with lending modaraba and TFCs, having investment
grade credit rating by a rating agency registered with the SEC, of the lending
modaraba shall be excluded.

b) 90% of the following shall be deducted;

(i) deposits with another financial institution under perfected lien;

Page 5 of 28
(ii) encashment value of Government Securities and National Saving Scheme
securities, lodged by the borrower as collateral; and

(iii) Pak. Rupee equivalent of face value of Special US Dollar Bonds converted at
inter-bank rate, lodged by the borrower as collateral.

c) 85% of the unconditional financial guarantees, payable on demand, issued by a
financial institution rated at least A by a credit rating agency registered with the
SEC, accepted as collateral by modarabas shall be deducted.

d) 75% of listed Term Finance Certificates held as security with duly marked lien shall
be deducted. The TFCs to qualify for this purpose should have been rated at least A
or equivalent by a credit rating agency registered with the SEC.

e) Weightage of 50% shall be given to;

(i) guarantees / bonds other than financial guarantees;
(ii) underwriting commitments.

f) The following different weightages will be applicable to exposure taken against
financial institutions in respect of placements:

(i) 10% weightage on exposure to financial institutions with AAA rating.

(ii) 25% weightage on exposure to financial institutions rated A and above.

(iii) 50% weightage on exposure to financial institutions rated BBB and above.

(4) For the purpose of this regulation, exposure shall not include the following:

(i) Obligations under letters of credit and letters of guarantee to the extent of cash
margin held by the modarabas.

(ii) Letters of credit, which do not create any obligation on the part of the modarabas
(no liability L/C) to make payments on account of imports.

(iii) Facilities provided to financial institutions through REPO transactions with
underlying SLR eligible securities

(iv) Pre-shipment / post-shipment credit provided to finance exports of goods covered
by letter of credit/firm contracts including financing provided from the
Modarabas own resources.

(v) Letters of credit established for the import of plant and machinery.

2. Minimum conditions for grant of financing facilities. - (1) When considering
proposals for fund/non- fund based facility exceeding one million rupees, modarabas should give
due weightage to credit report relating to the borrower and his group obtained from Credit
Information Bureau of the State Bank of Pakistan. If the credit report indicates over-
exposure/default, the facilities shall be extended only after recording reasons to do so.

(2) While granting any facility to the customers other than individuals, modaraba shall obtain
copy of accounts relating to the business of each of its borrower for analysis and record in the
following manner, namely:-

Page 6 of 28

(a) where the exposure does not
exceed one million rupees.
Such documentary evidence of the means and
investment of the borrower as may be determined by
the management of the modaraba.
(b) where the exposure exceeds one
million rupees but does not exceed
two million rupees
Accounts duly signed by the borrower
(c) where exposure exceeds two
million rupees but does not exceed ten
million rupees.
Accounts duly signed by the borrower and counter
signed by:
(i) a chartered accountant; or
(ii) a cost and management accountant in case of a
borrower other than a public company or a private
company which is a subsidiary of a public company.

(d) where the exposure exceeds ten
million rupees
Accounts duly audited by:
(i) a practicing chartered accountant; or
(ii) a practicing cost and management accountant in
case of a borrower other than a public company or a
private company which is a subsidiary of a public
company.
Explanation: In case of individuals, modaraba shall obtain such documentary evidence of the
means and investment of the borrower such as wealth statement, statement of assets and
liabilities or any other statement as may be considered appropriate by the management of the
modaraba.

(3) Every modaraba shall, before providing any facility (including renewal, enhancement and
rescheduling/restructuring), ensure that the Loan Application Form prescribed/devised by a
modaraba is accompanied with a Borrowers Basic Fact Sheet as per Annexure-I. Modaraba
shall also ensure that the information requested in the Basic Fact Sheet is provided by the
borrower under his seal and signature.

3. Linkage between a borrowers equity and total exposure from financial
institutions. (1) While taking any exposure, modarabas shall ensure that the total exposure
availed by any borrower from financial institutions does not exceed 10 times of borrowers
equity as disclosed in its financial statements.

(2) For the purpose of this regulation, subordinated loans shall be counted as equity of the
borrower. Modarabas should specifically include the condition of subordinated loan in their
Offer Letter. The subordination agreement to be signed by the provider of the subordinated loan,
should confirm that the subordinated loan will be repaid after that modarabas prior approval.

4. Financial indicators of the borrowers: - (1) It is expected that at the time of allowing
fresh exposure / enhancement / renewal, the debt-equity ratio of the borrower does not exceed
60:40 and current assets to current liabilities ratio is not lower than 1:1 or any other ratios as may
be prescribed by the Registrar Modaraba from time to time. Current maturities of long term debt
not yet due for payment may be excluded from the current liabilities and lease rentals receivable
within the next twelve months as disclosed in the annual audited accounts shall be treated as
current assets for the purpose of calculating current assets to current liabilities ratio. However, in
exceptional cases, modarabas may relax these ratios in case of facilities upto three million
rupees, if they are satisfied that appropriate risk mitigants have been put in place. Where the
modarabas have taken exposure on exceptional basis as provided above, they shall record in
writing the reasons and justifications for doing so in the approval form and maintain a file in

Page 7 of 28
their central credit office containing all such approvals. The Exceptions Approval file shall be
made available to the inspection team of the SEC during the inspection.

(2) This regulation shall not apply to the facilities granted to financial institutions with
investment grade rating by a credit rating agency registered with SEC or in case of exposure fully
secured against liquid assets held as collateral. Export finance and finance provided to ginning and
rice husking factories shall also be excluded from the borrowings (exposure) for the purpose of
this regulation.

5. Margin against facilities. - (1) Following minimum margins shall be maintained against
various facilities and all guarantees will be backed by 100% realizable securities:

(a) In case of performance bonds, the condition of 100% cover of realizable securities
may be relaxed subject to minimum compulsory realizable security cover equivalent
to 20% of the amount of the performance bond;

(b) In case of guarantees issued against mobilization advance, the condition of 100%
cover of realizable securities may be relaxed subject to the following conditions,
namely:

(i) Guarantees issued shall contain a clause that the mobilization advance shall be
released by the beneficiary through the guarantor modaraba only; and

(ii) At the time of issuing such a guarantee the beneficiary shall sign an agreement
with the modaraba that releases out of mobilization advance would be covered by
realizable assets; and

(c) In case of bid bonds issued on behalf of domestic consultancy firms bidding for
international contracts where the consultancy fees are to be received in foreign
exchange, the requirement of 100% cover by realizable securities may be waived off,
and this relaxation would also be available to all suppliers of goods and services
bidding against international tenders.

(2) Modarabas shall adhere to the following margin requirements:

i. Shares of listed Companies /TFCs

As at Regulation
6 of Part-II
ii. Bank deposits and Certificates of Investment / Certificates of Deposit of NBFCs/DFIs
and Certificates of Musharaka of modarabas with investment grade credit rating by a credit
rating agency registered with SEC.
25% margin is applicable to all forms of certificates including certificates issued
under National Saving Scheme such as (a) Special Saving Certificate (b) Khas
Deposits Certificates(c) Defense Saving Certificates (d) Foreign Exchange Bearer
Certificates (e) Any other Government backed securities.
Value of such certificates shall be taken as the sum payable on the date when facility is
being granted by the modarabas.
Prize Bonds being issued by Government needs to be given same treatment as that of
other securities issued by Government. As such modarabas can provide facilities
against Prize Bonds at 25% margin or a margin of 1.5 times of accrued markup on
annual basis which ever is higher. Facilities provided against Prize Bonds should be for
one year.
20%
(iii) Pledge of trading stocks 25%
(iv) Hypothecation of trading stocks 50%

Page 8 of 28

6. Facilities against Shares/TFCs and acquisition of shares. (1) Modarabas shall not:

a) take exposure against the security of shares / TFCs issued by them.

b) provide unsecured credit to finance subscription towards floatation of share
capital and issue of TFCs.
c) take exposure against the non- listed TFCs or the shares of
companies not listed on the Stock Exchange(s).
d) take exposure on any limited company against the shares/TFCs of that company
or its group companies.
e) take exposure against sponsor directors shares (issued in their own name or in
the name of their family members) of banks.
f) take exposure agains t the shares/TFCs of listed companies that are not members
of the Central Depository System.
g) take exposure against unsecured TFCs or non-rated TFCs or TFCs rated below
investment grade by a credit rating agency registered with the SEC.

2. Modarabas shall not hold shares in any company whether as pledgee, mortgagee, of an
amount exceeding 30% of the paid- up share capital of that company or 30% of their own paid-up
fund and reserves, whichever is less.

3. Exposure against the shares of listed companies shall be subject to minimum margin of
30% of their current market value, though the modarabas may, if they wish, set higher margin
requirements keeping in view other factors. The modarabas will monitor the margin on at least
weekly basis and will take appropriate action for top-up and sell-out on the basis of their Board
of Directors approved credit policy and pre- fact written authorization from the borrower
enabling the modarabas to do this.

4. Exposure against TFCs rated A (or equivalent) and above by a credit rating agency
registered with the SEC shall be subject to a minimum margin of 10% while the exposure against
TFCs rated A- and BBB shall be subject to a minimum margin of 20%.

7. Restrictions on certain types of transactions. (1) No modaraba shall make investment
in the shares of a listed company of an amount exceeding 5% of its own equity or 10% of paid up
capital of that company whichever is less:

Provided that these limits may be exceeded on an application made to the Registrar.

(2) No investment in stock market shall be made by a modaraba except in its own name.

(3) No modaraba shall allow facilities of any kind to its modaraba company or to any of its
directors or to individuals, firms or companies in which it or any of its directors is interested as
partner, director or guarantor, as the case may be, its chief executive and its major shareholders,
including their spouses, parents, and children or to firms and companies in which they are
interested as partners, directors or major shareholders of that concern.

(4) No modaraba shall allow unsecured facilities or facilities that are not backed by bank
guarantees. Provided that the bank providing the guarantee shall have a minimum investment
grade credit rating.

Page 9 of 28
(5) No modaraba shall allow facilities on the guarantee of its chief executive, directors and
major shareholders including their spouses, parents and children or to firms and companies in
which they are interested as partners, directors or major shareholders of that concern.

(6) No modaraba shall allow facilities for speculative purposes.

(7) Modarabas may make investment in shares of unlisted companies subject to fulfillment
of the following conditions: -.

i) total exposure in such companies does not exceed 5% of the modaraba's equity;
ii) the directors of the modaraba company have no direct or indirect interest in the
investee company; and
iii) the investee company must have operational track record of three profitable
consecutive years preceding the decision:

Provided that where a modaraba is engaged in Venture Capital Financing as set out in its
prospectus, this regulation may be waived on an application made to the Registrar.

(8) The investment of modaraba fund in listed securities shall not be more than 20% of the
equity of the modaraba. However, this restriction shall not apply where the modaraba has taken
up the shares as consequence of underwriting obligation, or the modaraba became the absolute
owner due to default of its borrowers.

Provided that in exceptional cases the Registrar may relax this condition.

(B) Individuals Borrowers

8. Regulations for Housing Finance for individuals

(1) The maximum per party limit in respect of housing finance by the modarabas will be
Rs.7.5 million.

(2) Modarabas are free to extend mortgage loans for housing, for a period not exceeding
twenty years. Modarabas should be mindful of t hei r adequate asset liability matching.

(3) The house financed by the modarabas shall be mortgaged in modarabas favour by way of
equitable or registered mortgage.

(4) Modarabas shall either engage professional expertise or arrange sufficient training for
their concerned officials to evaluate the property, assess the genuineness and integrity of the title
documents, etc.

(5) The housing finance facility shall be provided at a maximum Loan to Value ratio of
85:100 (85%).

(6) The housing finance facility shall be provided at a maximum of Income to installment
ratio of 3:1.

Page 10 of 28
Part-III

1. Limit on modarabas exposure against liabilities. - (1) Liabilities, excluding
contingent liabilities and security deposits, of modaraba shall not exceed seven times of its
equity for the first two years of its operations. In the subsequent years, the liabilities shall not
exceed ten times of the equity of the modaraba.

(2) Contingent liabilities of a modaraba shall not exceed seven times of its equity for the first
two years of its operations. In the subsequent years, the contingent liabilities shall not exceed ten
times of the equity of modaraba.

2. Creation and building up of reserve. - Every modaraba shall create reserve fund to
which shall be credited:

(a) an amount not less than 20% and not more than 30% of its after tax profits till
such time the reserve fund equals the amount of the paid up capital; and

(b) thereafter a sum not less than 5% of its after tax profits.

Explanation. - Issuance of bonus shares may be made from the above- mentioned reserves or the
reserves available after appropriation made under clause (a) or (b) whichever may be the case
and since such bonus shares will increase the paid up capital, the modaraba shall transfer further
amounts to the reserves in order to comply with condition of clause (a);

3. Return on deposits. - Every Modaraba shall provide return on deposits which may be
different for different volumes and maturities of deposits provided that uniformity is observed
within each category but deposits of listed companies, financial institutions, recognized
charitable trusts and statutory bodies shall, however, be exempt.

4. Deposit Insurance. When deposit insurance arrangements are in place, every
modaraba shall arrange full insurance cover for its deposits/COM etc. upto Rs. 100,000/-.

5. Classification and Provisioning for non-performing assets. - (1) Every modaraba
shall observe the following prudential guidelines in the matter of classification of its assets and
provisioning there against:

(A) SHORT TERM FINANCING FACILITIES

CLASSIFICATION DETERMINANT TREATMENT OF
INCOME
PROVISIONS TO
BE MADE
(1) (2) (3) (4)

OAEM (Other Assets
Especially Mentioned).
Where rental, mark-up/
profit or principal is
overdue (past due) by 90
days from the due date.

Unrealized mark-up/ profit to
be put in Suspense Account
and not to be credited to
Income Account except when
realized in cash.
No Provision is required.
Substandard. Where rental, mark-up/
overdue by 180 days or
more from the due date.

As above. Provision of 20% of the
difference resulting from
the outstanding balance
of principal against the
facility less the amount

Page 11 of 28
of liquid assets realizable
without recourse to a
Court of Law and forced
sale value of mortgaged/
pledged/ leased/
collaterally held assets as
valued by valuers
fulfilling prescribed
eligibility criteria, in
accordance with the
guidelines provided in
this regulation.

Doubtful. Where rental, mark-up/
overdue by one year or

As above.

Provision of 50% of the
pledged/ leased/
valued by valuers
accordance with the
this regulation.

Loss. (a) Where rental, mark-
up/ interest/profit or
principal is overdue
beyond two years or

(b) Where Trade Bills
(Import/Export or Inland
Bills) are not
paid/adjusted within 180
days of the due date.

As above.

As above.
pledged/ leased/
valued by valuers
accordance with the
this regulation.

As above.

Page 12 of 28
(B) MEDIUM AND LONG TERM FINANCING FACILITIES

CLASSIFICATION DETERMINANT TREATMENT OF
INCOME
PROVISIONS TO
BE MADE
(1) (2) (3) (4)
OAEM (Other Assets
Especially Mentioned).
Where rental, mark-up/
overdue (past due) by 90
days from the due date.
Unrealized mark-up/
profit to be put in
Suspense Account and
not to be credited to
Income Account except
when realized in cash.

No Provision is required.
Substandard. Where installment of
principal/ rental or mark-
up/profit is overdue by one
year or more.

difference resulting from the
outstanding balance of
principal against the facility
less the amount of liquid
assets realizable without
recourse to a Court of Law
and forced sale value of
mortgaged/ pledged/ leased/
valued by valuers fulfilling
prescribed eligibility criteria,
in accordance with the
guidelines provided in this
regulation.

Doubtful. Where installment of
up/profit is overdue by two
years or more.

As above.

mortgaged / pledged / leased /
regulation.

Loss. Where installment of
up/profit is overdue by
three years or more.
mortgaged/ pledged / leased /
regulation.

Page 13 of 28
Notes:

(a) Classified facilities/loans/advances that have been guaranteed by the Government would not require
provisioning, however, markup / profit on such accounts shall be taken to suspense account instead of income
account.

(2) In addition to the above time based criteria, subjective evaluation of performing and non-
performing advances / loans / lease port-folio shall be made for risk assessment and where
considered necessary the category of classification determined on the basis of time based criteria
shall be further downgraded. Such evaluation shall be carried out on the basis of adequacy of
security inclusive of its realizable value, cash flow of borrower / lessee, his operation in the
account, documentation covering advances and credit worthiness of the borrower / lessee etc.

(3) The rescheduling / restructuring of non-performing facilities shall not change the status
of classification of a facility unless the terms and conditions of rescheduling / restructuring are
fully met for a period of at least one year (excluding grace period, if any) from the date of such
rescheduling / restructuring and at least 25% of the outstanding amount is recovered in cash.
Accordingly, modarabas are directed to ensure that status of classification, as well as
provisioning, is not changed in relevant reports to the Registrar Modaraba merely because a
facility has been rescheduled or restructured. However, while reporting to the Credit Information
Bureau (CIB) of State Bank of Pakistan, such loans / advances may be shown as rescheduled /
restructured instead of default.

(4) Where a borrower subsequently defaults (either principal or mark- up) after the
rescheduled / restructured loan has been declassified by the modarabas as per above guidelines,
the loan will again be classified in the same category it was in at the time of rescheduling /
restructuring. However, modarabas at their discretion may further downgrade the classification,
taking into account the subjective criteria.

(5) At the time of rescheduling / restructuring, modarabas shall consider and examine strictly
on merit the viability of the project / business and shall appropriately secure their interest etc.

(6) Modarabas shall classify their loans / advances / lease portfolio and make provision
thereagainst in accordance with the time-based criteria prescribed above. However, where a
modaraba wishes to avail the benefit of leased assets owned by the modaraba; or additional
collaterals held against lease facilities; or collaterals held against advances / loans facilities, they
can consider the realizable value of mortgaged or pledged or leased or collaterally held assets for
deduction from the outstanding principal amount of loans/advances/lease facilities against which
such assets are leased/mortgaged/pledged/ collaterally held, before making any provisions. The
value of the mortgaged / pledged assets, other than liquid assets, to be considered for this
purpose shall be the forced sale value. Further, Forced Sale Value (FSV) once determined, shall
remain valid for three years from the date of valuation during which period the underlying
collateral/leased assets will not be revalued for provisioning purpose. The adjustment factors of
80%, 70% and 50% shall be applied on the value so determined for the purpose of determining
provisioning requirement in 1
st
, 2
nd
and 3
rd
year of valuation, respectively. Thereafter, the assets
shall be revalued and the adjustment factor of 50% shall be applied for all subsequent years.
However, the FSV of the collateral shall be restricted to fresh revaluation or previous value,
whichever is less. In case of modaraba authorized/eligible to undertake housing finance services,
FSV once determined, shall remain valid for a period of ten years from the date of valuation and

Page 14 of 28
an adjustment factor of 70% shall be applied on the value so determined for the purpose of
determining provisioning requirement in respect of housing finance for the said period.

(7) Facilities against which securities or incase of lease facilities, additional securities are not
available, or where mortgaged or pledged or leased assets have not been valued according to
these guidelines and verified by the external auditors, shall continue to be classified and provided
for according to the time-based criteria. Modarabas shall observe the following uniform criteria,
for determining the realizable value of mortgaged / pledged / leased/ collaterally held assets,
namely:-

(i) Only assets having registered mortgage, equitable mortgage (where NOC for creating
further charge has not been issued by modaraba and pledged /collaterally held assets
shall be considered. Assets having pari-passu charge shall be considered on
proportionate basis.

(ii) Hypothecated assets and assets with second charge and floating charge shall not be
considered.

(iii)Valuations shall be carried out by an independent professional valuer who should be
listed on the panel of valuers maintained by the Pakistan Banks Association /
Modaraba Association of Pakistan. The valuers while assigning any values to the
mortgaged / pledged / leased / collaterally held assets, shall take into account all
relevant factors affecting the salability of such assets including any difficulty in
obtaining their possession, their location and condition and the prevailing economic
conditions in the relevant sector, business or industry. The realizable values of
mortgaged / pledged / leased /collaterally held assets so determined by the valuers
must have to be a reasonably good estimate of the amount that could currently be
obtained by selling such assets in a forced / distressed sale condition. The valuers
should also mention in their report the assumptions made, the calculations / formulae
/ basis used and the method adopted in determination of the realizable values.

(iv) Valuation shall be done at least once in three years. If valuation is older than three
years, a fresh revaluation should be done; otherwise the valuation shall be taken as
nil. This requirement shall not be applicable to the modarabas engaged in housing
finance services.

The categories of mortgaged/pledged/leased /collaterally held assets to be considered for
valuation alongwith discounting factors to be applied would be as under (no other assets shall be
taken into consideration):

(a) Liquid Assets:

Valuation of Liquid Assets, excluding pledged stocks, which are dealt with at (b) below, shall be
determined by the modaraba itself and verified by the external auditors. However, in the case of
pledged shares of listed companies values should be taken at market value as per active list of
Stock Exchange(s) on the balance sheet date and as per guidelines given in the Technical Release
(TR) - 23 issued by the Institute of Chartered Accountants of Pakistan (ICAP). Moreover,
valuation of shares pledged against loans/advances/lease facilities shall be considered only if
these have been routed through Central Depository Company of Pakistan (CDC), otherwise these
will not be admissible for deduction as liquid assets while determining required provisions.

Page 15 of 28

(b) Pledged Stocks:

In case of pledged stocks of perishable and non-perishable goods, forced sale value should be
provided by valuers, which should not be more than six months old, at each balance sheet date.
The goods should be perfectly pledged, the operation of the godowns should be in control of the
modaraba and regular valid insurance and other documents should be available. In case of
perishable goods the valuers should also give the approximate date when these are expected to be
of no value.

The values of mortgaged / pledged / leased / collaterally held assets determined by the valuers
shall be subject to verification by the external auditors, who may reject cases of valuation, which
in their opinion, do not appear to have been professionally carried out and values determined are
unreasonable, or in the case of which valid documentation of mortgage / pledge / leased /
collaterally held asset, supported by legal opinion wherever required, is not available on record.

(1) Subjective evaluation of investment portfolio and other assets shall be carried out by the
modaraba. Classification of such assets and provision required there-against should be
determined keeping in view the risk involved and the requirements of the International
Accounting Standards as notified by the SEC under sub-section (3) of Section 234 of the
Companies Ordinance, 1984 and Technical Releases issued by the ICAP, from time to time.

(2) Modarabas shall review, at least on a quarterly basis, the collectibility of their loans /
advances / lease portfolio and shall properly document the evaluations so made. Shortfall in
provisioning, if any, determined as a result of quarterly assessment, shall be provided for
immediately in their books of accounts by the modarabas.

(3) The external auditors as a part of their annual audits of modarabas shall verify that all
requirements under these regulations for classification of assets and determination of provisions
required there-against have been complied with. The Commission or an officer designated by
him may also check the adequacy of provisioning during on-site inspection.

7. Reversal of Provision: The provision held against classified assets will only be reversed
when cash realization starts exceeding:

(i) in case of loss category, the net book value of the assets;

(ii) in case of doubtful category, 50% of the net book value of the assets; and

(iii)in case of sub-standard category, 20% of the net book value of the assets.

8. Overdue, default and recovery thereof. - (1) Every modaraba shall furnish the
Registrar Modaraba a list of defaulters on prescribed format, on quarterly basis. A list of
rescheduled and restructured facilities shall also be submitted to the Registrar Modaraba in the
similar manner on prescribed format. A person, whether natural or juristic, shall be deemed to
be defaulter if he (or his dependent family members or concerns owned or controlled by him or
concerns in which he or his dependent family members are major shareholders) has failed to pay
off or liquidate any fiduciary obligation towards any modaraba in Pakistan as was agreed upon or
required under the terms and conditions of availment of the financing facility or to do or perform
an act agreed to or undertaken in writing to be done or performed by him and such failure has

Page 16 of 28
continued for a period of one year from the date on which he was required to make the payment
or to do or perform the act.

(2) Every modaraba shall nominate an officer as recovery officer or constitute a section as
recovery section depending upon the magnitude of defaults.

(3) Besides the measures presently instituted by each modaraba, the modaraba shall set
quarterly recovery targets as a percentage of the overdue obligations and communicate the same
on quarterly basis to the Registrar Modaraba.

(4) A progress report on the recovery in relation to the targets shall be submitted to the
Registrar Modaraba on quarterly basis. Modaraba shall also be required to explain deficiency if
any, in meeting the targets and the strategies evolved with a view to ensuring achievement of
subsequent targets.

(5) Wherever considered legally appropriate by the modaraba, cases of default may be
referred to the Courts. The list of such cases and progress of recovery shall also be sent to the
Registrar Modaraba on a quarterly basis.

Part IV

1. Internal audit. - Every modaraba shall have an Internal Audit Department whose head
shall report to the board of directors directly and shall, inter-alia, be responsible for compliance
with these guidelines and for establishing an effective means of testing, checking and compliance
with the policy and procedures established by it.

2. Submission of statistical returns. - Every modaraba shall submit such periodical
statements, information or reports in such forms and manner and within such time as may be
prescribed by the Registrar Modaraba from time to time.

3. Code of conduct. - Every modaraba shall acquire and maintain membership of an
association constituted in consultation with the Registrar Modaraba and modarabas shall follow
the code of conduct prescribed by the said association(s).

4. Prevention of criminal use of modarabas for the purpose of money laundering and
other unlawful trades. - Modarabas shall follow guidelines issued to safeguard themselves
against their involvement in money laundering activities and other unlawful trades. These will
add to or reinforce the following precautions, modarabas may have been taking in this regard;

a) Modarabas shall accept deposits from an investor only after ensuring that an account has
been opened in the investors name using an account opening form, which will be
developed by the respective industry associations in cons ultation with the Registrar
Modaraba.

b) Modarabas shall make reasonable efforts to determine the true identity of the customer
before extending their services and particular care shall be taken to identify ownership of
all accounts and those using safe custody facilities, effective procedures shall be
instituted for obtaining identification from new customers and an explicit policy shall be
devised to ensure that significant business transactions are not conducted with customers
who fail to provide evidence of their identity;

Page 17 of 28

c) Modarabas shall ensure that business is conducted in conformity with high ethical
standards and that rules and regulations are adhered to. It is accepted that a modaraba
normally does not have effective means of knowing whether a transaction stems from or
forms part of wrongful activity. Similarly, in an international context, it may be difficult
to ensure that cross border transactions on behalf of customers are in compliance with the
regulations of another country. Nevertheless, modarabas shall not set out to offer
services or provide active assistance in transactions which in their opinion are associated
with money derived from illegal activities; and

d) Modarabas shall establish specific procedures for ascertaining customer status and his
sources of earning for monitoring of accounts on a regular basis for checking identities
and bonafides of remitters and beneficiaries, for retaining internal record of transactions
for future reference. The transactions, which are out of character with the normal
operation of the account involving high deposits, withdrawals and transfers, shall be
viewed with suspicion and property investigated.

e) Every modaraba shall ensure that no payment or receipt exceeding Rs. 50,000/- shall be
made in cash.

5. Procedure for prior approval for appointment of directors and chief executives.

Modarabas shall, for obtaining prior approval of the Registrar Modaraba for making any change
in the directors/chief executive, follow the following procedure:

a) The application for approval of the appointment or any change in the directors/Chief
Executive shall be submitted by the modaraba company to Registrar Modaraba not later
than 14 days before the election/appointment or any change in the Directors/Chief
Executive;

b) The above-referred application shall not be treated complete unless the
information/documents as required under Forms and affidavit attached as Annexure-II
and III respectively are furnished.

c) The information or deficiency or shortcoming as pointed out by Registrar Modaraba shall
be supplied by the modaraba company, within 14 (fourteen) days of the issue of the letter
by the office of Registrar Modaraba, otherwise the matter shall be treated as having been
closed.

6. Removal of records:_ No modaraba shall remove from Pakistan to a place outside
Pakistan, any of its records or documents relating to its business without the prior permission of
the Registrar.

7. Appointment of Special Auditors:__The Registrar may require special audit of any
modaraba in addition to statutory audit, inquiry/ inspection by the Registrar, at any time and may
appoint special auditors, the cost of which shall be borne by the modaraba.

8. Appointment of Chief Executive:__Except with the approval of the Registrar no person
can represent more than one modaraba company as Chief Executive.

Page 18 of 28

9. Places of business.__ (1) A modaraba may open further places of business and it shall
intimate the same to the Registrar within 15 days.

(2) The modaraba shall intimate to the Registrar the closure of any of its branches within 15
days.

(3) The management company shall provide office space for the modaraba free of any
charges.

10. Distribution of profit.___ The modarabas shall distribute 90% of their net annual profits
after appropriation to reserve, if any, as stipulated in regulation 2 of Part-III:

Provided that dividend for any year may be omitted or passed on if the distribution of
dividend is un-economical and hence is not in the interest of certificate holders.

Explanation: Un-economical distribution of dividend here means such percentage of dividend
declared by the modaraba company which is not likely to be in the benefit of certificate holders
after certain deductions of tax, zakat and bank charges etc.

11. Annual Review Meeting.__ (1) Each modaraba shall hold an annual review meeting of
its certificate holders in the town where the registered office of the modaraba company is
situated, to review performance of the modaraba.

(2) There will be no voting right of the certificate holders in the annual review meeting.

(3) For the purpose of notice for the meeting, the provisions relating to notice of the meeting
as provided in the Companies Ordinance, 1984 shall mutatis- mutandis apply to the notice issued
by the modarabas to the certificate holders for the annual review meeting.

Page 19 of 28

ANNEXURE-I

BORROWERS BASIC FACT SHEET FOR CORPORATE
PRESCRIBED UNDER REGULATION 2 OF PART - II

Date of Request __________

(TO BE COMPLETED IN CAPITAL LETTERS OR TYPEWRITTEN)

1. BORROWERS PROFILE:
Name Address

Phone# Fax # Email Address
Office Res.
National Identity Card # National Tax # Sales Tax #

Import Registration # Export Registration # Date of Establishment Date of opening of A/C

2. DETAILS OF DIRECTORS/OWNERS/PARTNERS:
Name Address

Office Res.
National Identity Card # National Tax #

Shareholding Amount % of Shareholding

3. MANAGEMENT:
A) EXECUTIVE DIRECTORS/PARTNERS:
Name Address NIC # Phone #
1.
2.
B) NON-EXECUTIVE DIRECTORS/PARTNERS:
Name Address NIC # Phone #
1.
2.

4. CORPORATE STATUS:
Sole Proprietorship Partnership Public/Private Company

5. NATURE OF BUSINESS:
Industrial Commercial Agricultural Services Any other

6. REQUESTED LIMITS:
Amount Tenor
Fund Based
Non-Fund Based

7. BUSINESS HANDLED/EFFECTED WITH ALL FINANCIAL INSTITUTIONS DURING THE LAST
ACCOUNTING YEAR
Imports Exports Remittances effected (if any)

Page 20 of 28

8. EXISTING LIMITS AND STATUS:
Status
Amount Expiry date
Regular Amount over-due (if any)
Fund Based
Non-Fund Based

9. ANY WRITE-OFF, RESCHEDULING/RESTRUCTURING AVAILED DURING THE LAST THREE
YEARS:
Amount during 1
st
year Amount during 2
nd
year Amount during 3
rd
year Name of
Financial
Institution
Write-off Rescheduled/
restructured
restructured
restructured

10. DETAILS OF PRIME SECURITIES MORTGAGED/PLEDGED:
A) AGAINST EXISTING FACILITIES:
Name of Financial
Institution
Nature of Security Total Amount Rank of Charge Net Realizable Value
1.
2.
B) AGAINST REQUESTED/FRESH/ADDITIONAL FACILITIES:
Name of Financial
Institution
Nature of Security Total Amount Net Realizable Value
1.
2.

11. DETAILS OF SECONDARY COLLATERAL MORTGAGED/PLEDGED:
A) AGAINST EXISTING FACILITIES:
Name of Financial
Institution
Nature of Security Total Amount Rank of Charge Net Realizable Value
1.
2.
B) AGAINST REQUESTED/FRESH/ADDITIONAL FACILITIES:
Name of Financial
Institution
Nature of Security Total Amount Net Realizable Value
1.
2.

12. CREDIT RATING (WHERE APPLICABLE):
Name Of Rating Agency Rating

13. DETAILS OF ASSOCIATED CONCERNS
(AS DEFINED IN COMPANIES ORDINANCE, 1984):
Name of Concern Name of Directors Shareholding % of Total shares capital

14. FACILITIES TO ASSOCIATED CONCERNS BY THE CONCERNED FI:
Name of concern Nature &
Amount of limit
Outstanding as
on --------
Nature & Value
of Securities
Overdues Defaults

Page 21 of 28
15. DETAILS OF PERSONAL GUARANTEES PROVIDED BY THE DIRECTORS/PARTNERS etc. TO FIs
TO SECURE CREDIT:

Names of the
Guarantors
Institutions/
persons to to whom
Guarantee given
Amount of
Guarantee
Validity
Period
NIC # NTN Net-worth

16. DIVIDEND DECLARED (AMOUNT) DURING THE LAST THREE YEARS:
During 1
st
Year During 2
nd
Year During 3
rd
Year

17. SHARE PRICES OF THE BORROWING ENTITY:
Listed Companies
Current Price Preceding 12 Months Average
Break-up value of the Shares in case
of Private Limited Company

18. NET-WORTH (PARTICULARS OF ASSETS OWNED IN THEIR
OWN NAMES BY THE DIRECTORS/PARTNERS/PROPRIETORS):
Owners Name Particulars of Assets Market Value Particulars of Liabilities

19. DETAILS OF ALL OVER DUES (IF OVER 90 DAYS):
Name Of Financial Institution Amount

20. Details of payment schedule if term loan sought.

21. Latest Audited Financial Statements as per requirement of Regulation 2 to be submitted
with the LAF (Loan Application Form).

22. Memorandum and Articles of Association, By-laws etc. to be submitted by the borrower along with the
request.

I certify and undertake that the information furnished above is true to the best of my knowledge.

CHIEF EXECUTIVES/BORROWERS
SIGNATURE & STAMP

COUNTER SIGNED BY:

AUTHORIZED SIGNATURE & STAMP
(MODARABA OFFICIAL)

Page 22 of 28

BORROWERS BASIC FACT SHEET FOR INDIVIDUALS
PRESCRIBED UNDER PRUDENTIAL REGULATION 2 of PART-II

Date of Request. __________


1. BORROWERS PROFILE:
Name Address

Office Res.

Fathers Name Fathers National Identity Card #

2. PREFERENCES (AT LEAST TWO):
Name Address

Office Res.

3. NATURE OF BUSINESS/PROFESSION:

Status Amount Expiry date
Regular Amount over-
due (if any)
Amount rescheduled/
restructured (if any)
Fund Based
Non-Fund Based
Amount Tenor
Fund Based
Non-Fund Based
7. Latest Income Tax Form / Wealth Statement to be submitted by the borrower.

I certify and undertake that the information furnished above is true to be best of my knowledge

APPLICANTS SIGNATURE & STAMP

COUNTER SIGNED BY:

(MODARABA OFFICIAL)

Page 23 of 28

ANNEXURE-II

FORM-I

APPLICATION FORM FOR SEEKING APPROVAL OF
APPOINTMENT OF DIRECTOR/CHIEF EXECUTIVE

S.No. Details

1. a. Name:
(former name if any):

b. N.I.C #(Attach copy) Attached as
Annexure No
c. Father's/Husband Name:
d. Nationality:
e. Age:
f. Address:
i) Residential:
ii) Business:
g. National Tax #:
h. Present Occupation
i. Qualification
(Attach copies)
Attached as
Annexure No
i) Educational
ii) Professional
j. Experience:
k. Photograph Attached as
Annexure No
2. Net-worth (Attach copy of the wealth statement) Attached as
Annexure No
3. Amount and percent of capital to be contributed/shares acquired
4. a. Names of companies, firms and other organization of which you have
been a director, partner or office holder during last 3-years.

b. Summary of paid-up capital free reserves, profit after tax and dividend
payment for last three years of companies and firms as mentioned in (a)
above. (Attach copies of the annual accounts)
Attached as
Annexure No
5. Tax paid during last 3-years (Attach copies of the tax returns attested by
Income tax authorities).
Attached as
Annexure No
a. In individual capacity.
i) Income Tax: Year-1 Year-2 Year-3

Total: ______ ______ ______

ii) Wealth Tax Year-1 Year-2 Year-3

Total: _______ ______ ______

6. Names of bankers with account numbers.
a. Individual Bankers
Banking behavior and credit worthiness (Attach banker's certificate) Attached as
Annexure No
b. Bankers of companies/firms etc. wherein you have been a director for
the preceding 3-years

Page 24 of 28
Banking behavior and credit worthiness (Attach original bank
certificate)
Attached as
Annexure No
7. Position regarding over due loans and defaults (C.I.B. report) (Attach
CIB reports)
Attached as
Annexure No
a. Individual capacity
b. Companies/firms etc., wherein you have been a director for the
preceding 3-years

8. Date of Board of Director's meeting in which appointment of proposed
director was approved (Attach copy of minutes)
Attached as
Annexure No
9. Affidavit duly verified by Oath Commissioner Attached as
Annexure No
10.

a.

b.

In case of out- going Directors/ Chief Executive:

Attach copies of resignation or Minutes of General Meeting in case of
removal.

Copy of Board Resolution in case of Chief Executive.
Attached as
Annexure No
11. Bank challan # ____ dated _____ (Attach in original). Attached as
Annexure No
12. A copy of Checklist as circulated by the SEC vide circular No.7 of
2003 dated 27.2.2003.
Attached as
Annexure No
13. Names of persons related to the proposed director/Chief Executive who
are already on the Board of the modaraba or proposed to be appointed
as such and their relationship

Signatures of Chief Executive and all the existing directors (if available in Pakistan) and proposed
directors.

Page 25 of 28
FORM-II

APPLICATION FORM FOR SEEKING APPROVAL OF
APPOINTMENT OF NOMINEE DIRECTOR/CHIEF EXECUTIVE

1. a. Name:
(Former name if any):

b. N.I.C #(Attach copy) Attached as Annexure
No
c. Father's/Husband Name:
d. Nationality:
e. Age:
f. Address:
i) Residential:
ii) Business:

g. Present Occupation
Name of the institution nominating the
director alongwith nomination letter

Attached as Annexure
No
2. Affidavit duly attested by Oath Commissioner
(attach original)
No
3. Bank challan # ___ dated _____ (Attach
original)
No

Signatures of Chief Executive/
Company Secretary

Page 26 of 28
ANNEXURE-III

AFFI DAVI T BY SPONSORI NG
DI RECTOR
AFFI DAVI T

I ____________________________son of ______________________________ a director of
_______________________ and presently residing at ____________________________________________
do hereby solemnly affirms:

i) that I have never been convicted of any fraud or breach of trust or an offence involving moral
turpitude.

ii) that I have never been removed from service compulsorily on account of charges of any corruption
or on account of any disciplinary action.

iii) that I have never been compounded with my creditors or suspended payment or defaulted in
arranging in payments or got any loans of banks or development financial institutions or non-banking
financial institutions written off or re-scheduled or re-structured.

iv) that any firm or any company with which I have been associated in the past has never suspended
payment or defaulted in arranging payments or compounded with any of its creditors or gone into
liquidation or insolvency.

v) that I have never been associated with any unauthorized banking business, or deposit taking, or
any financial dealing.

vi) that neither I nor my spouse have ever been a sponsor or a director or a majority shareholder or a
Chief Executive of a co-operative society or any other financial institution/company which has failed to
meet its legal obligations.

vii) that I have never defaulted in the payment of any taxes and have never indulged, whether
deliberately or willfully, in evasion of taxes, dues, levies or fees or any other obligations imposed under
any Federal or Provincial or local bodies law.

viii) that I or my spouse have never been associated with or involved, directly or indirectly, in any
undertaking whose tax record has not been satisfactory.

ix) that I or my spouse is not a director, Chief Executive, Chairman, in any other modaraba
management company.

x) I have read and fully understood the Modaraba Companies and modaraba (Floatation and Control)
Ordinance, 1980, and the Rules and Guidelines made thereunder, and have also read and understood the
Prudential Regulations for Modaraba issued by the Registrar Modaraba, Securities and Exchange
Commission of Pakistan. I undertake to abide by all the Regulations and Rules contained therein, specially
as regards managing this Modaraba at arms length from my personal and business matters and directly or
indirectly ensuring that Modaraba financing is not obtained by me or any of the business and persons
associated with me.

That I hereby affirm and verify that the contents in the accompanying application dated
__________ addressed to the Registrar Modaraba are true and correct to the best of my knowledge and belief.

DEPONENT

Page 27 of 28
AFFIDAVIT BY
SPONSORING INSTITUTION

AFFI DAVI T

On behalf of ____________________________________ (hereinafter referred to as the
institution) whose registered office is situated at
________________________________________________________I, ________________________________son
of _____________________________________, being the Chief Executive, do solemnly affirms:

i) that the institution has never compounded with any of its creditors or suspended payment
or defaulted in meeting any financial obligations nor any of its financial obligations have been
written off by any financial institution;

ii) that the institution or any of its associated undertakings have never been involved in any
unauthorized business of banking, or deposit taking or any financial dealing;

iii) that the institution has never defaulted in payment of any taxes nor it has ever indulged
in willful evasion of taxes;

iv) that the declaration made by the directors nominated by the institution have been verified
by me and they have been found to be correct;

v) that the institution, through its nominee directors, undertake to abide by the provisions of
the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980, and the rules
and guidelines made thereunder, as well as the NBFI Prudential regulations issued by the State
Bank of Pakistan;

vi) that the institution, through its nominee directors, also undertakes to ensure the modaraba
company and the modarabas managed by the modaraba company are managed professionally and
at arms length from the business and interest of its directors, sponsoring institutions and any
shareholder of the company who owns, directly or indirectly, 5% or more shares of the modaraba
company; and

viii) that the institution, through its nominee directors, will ensure that the modaraba managed
by the modaraba company will not directly or indirectly, finance any of the business of the
persons associated with the directors, or sponsoring institutions or any shareholders who own 5%
or more shares of modaraba company.

Page 28 of 28
AFFIDAVIT BY NOMINEE
DIRECTOR

AFFI DAVI T

I ________________________ son of _____________________________ a director of
__________________________presently residing at _________________________________________________
____________________________________ do solemnly affirms:

i) that I have never been convicted of any fraud or breach of trust or any offence involving
moral turpitude.

ii) that I have never been removed from service compulsorily on charges of corruption or on
account of disciplinary action.

iii) that I have never been adjudicated an insolvent or suspended payment or deafaulted in
arranging payments or compounded with any of my creditors.

iv) that any firm or any company with which I have been associated in the past has never
been suspended payment or defaulted in arranging payments or compounded with any of
its creditors or gone into liquidation.

v) that I have never been associated with any illegal activities particularly in banking
business, or deposit taking, or financial dealing or any other business or activities of
unlawful nature.

vi) that neither myself nor my spouse have ever been a sponsor or a director or a majority
shareholder or a Chief Executive of a co-operative society which has failed to meet its
legal obligations.

vii) that I have never defaulted in the payment of taxes and have never indulged whether
deliberately or unwittingly in the evasion in taxes, dues, levies or fees imposed under any
federal or provincial or local bodies law.

viii) that I or my spouse have never been associated or involved directly or indirectly with any
undertaking whose tax record has not been satisfactory.

ix) that I or my spouse have never defaulted in the discharge any obligation towards any
bank or any financial institution.

x) that I or my spouse is not a director, Chief executive, chairman, in any other modaraba
management company.

xi) that whatever has been stated above is true to the best of my knowledge and belief and in
the event of affirmations made above proving contrary to what has been stated above, I
shall be personally liable to action including penalties and prosecution as provided under
the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980.

DEPONENT

SPECIALIZED COMPANIES DIVISION
(MODARABA WING)

No. SC/M/RW/PRM/2008- J une 2, 2008

CIRCULAR NO. 10 OF 2008

Subject: Amendments in the Prudential Regulations for Modarabas

The Securities and Exchange Commission of Pakistan has amended the existing
Prudential Regulations for Modarabas issued vide Circular No. 4 of 2004 dated J anuary 28,
2004 as under:

1. Regulation 2 of Part-I

In sub-regulation (1) of Regulation 2, after clause (h), the following new clauses (hh)
and (hhh) are inserted:

(hh) Fit and Proper Criteria means the criteria specified in Part IV of these
Regulations;

(hhh) Key Executives includes the chief executive officer, chief financial
officer, chief accounting officer, chief operating officer, company
secretary, internal auditor or the compliance officer irrespective of
their designation;

2. Regulation 5 of Part-IV

The existing Regulation 5 of Part-IV is substituted as under:

5. Fit and Proper Criteria.

Application and scope:

(1) The Fit and Proper Criteria in relation to a Modaraba
Company/Modarabais applicable to the following persons:

(i) Promoters of the Modaraba Company/Modaraba;
(ii) Director of the Modaraba Company;
(iii) Chief Executive of the Modaraba Company;
(iv) Key Executives of the Modaraba Company.

(2) A proposed director or chief executive of the Modaraba Company
shall not assume the charge of their respective office until their appointments
have been approved by the Registrar (Modarabas).

(3) The application for seeking approval of the Registrar (Modarabas)
under clause (2) shall be submitted by the Modaraba Company along with the
requisite information required under Annexure-A and the Affidavit as
specified in Annexure-B.

(4) The appointment of Key Executives of the Modaraba Company does
not require the approval of the Registrar (Modarabas), however the Modaraba
Company shall ensure at the time of appointing a Key Executive that such
person qualifies the Fit and Proper Criteria.

(5) The fitness and propriety of any person shall be assessed by taking
into account all the relevant factors including but not limited to the following:

(a) Integrity and track record of such person.
(b) Financial soundness of such a person.
(c) Competence and capability of the person.
(d) Conflict of interest of such person with the business of the
Modaraba Company.

ASSESSMENT OF FITNESS AND PROPRIETY

(1) Integrity and Track Record

A person shall not be considered Fit and Proper if he:

(i) has been convicted of an offence involving moral turpitude;

(ii) has been involved in the mismanagement of investments,
financial/business;
misconduct, fraud, etc;

(iii) has been the subject to adverse findings, after conducting an
inquiry, by the Commission/Registrar (Modarabas) or any
other regulatory or professional body or government agency;

(iv) has been actively involved in the management of a
company/firm whose registration/ license has been revoked or
cancelled or which has gone into liquidation or other similar
proceedings due to mismanagement of affairs, financial
misconduct or malpractices;

(v) is ineligible, under the Companies Ordinance, 1984 the
Modaraba Companies and Modaraba (Floatation and Control)
Ordinance, 1980 or any other legislation or regulation, from
acting as a director or serving in a managerial capacity of a
Modaraba Company, NBFC or a company;

(vi) has entered into a plea bargain arrangement with the National
Accountability Bureau;

(vii) does not have the requisite disclosed and verifiable financial
resources in case of a promoter of the Modaraba
Company/Modaraba; or

(viii) does not have an established and proven track record of
successfully running a business enterprise for 3 to 5 years,
preferably a public listed company.

(2) Financial soundness

In determining a persons financial soundness, the following shall be
considered:

(i) whether such persons financial statements/record including
wealth statements/income tax returns/ assessment orders are
available;

(ii) whether the person has been declared by a court of competent
jurisdiction as defaulter in repayment of loan to a financial
institution exceeding Rupees one million;

(ii) whether the person has applied to be adjudicated as an
insolvent and his application is pending;

(iv) whether the person is an un-discharged insolvent; and

(v) whether the person has been declared a defaulter by a stock
exchange.

(3) Competence and Capability

In determining a persons competence and capability the following
shall be considered:

(i) the directors should be individuals having
management/business experience of at least five years at a
senior level;

(ii) the directors shall have experience and knowledge in any
profession such as financial services, accounting, law etc;

(iii) the chief executive should have a minimum experience of
seven to ten years in a senior management position, preferably
in the regulated financial services sector;

(iv) the chief executive should have the capacity to successfully
undertake the responsibilities of the position; and

(v) the Key Executives must be qualified professionals possessing
relevant experience and certification relating to the job/
assignment.

(4) Conflict of interest

The proposed directors or chief executive of Modaraba Company
shall not:

(i) be a director in any other Modaraba Company engaged in a
similar business in Pakistan.

Provided that this condition shall not apply to nominees of the
Commission, Federal or Provincial Governments on the board
of any Modaraba Company;

(ii) be a director, chief executive, chief financial officer, chief
internal auditor, research analyst or a trader (by whatever
name/designation called) in a stock brokerage house or in any
company/entity owned and controlled by a member of a stock
exchange; and

(iii) be a member of a stock exchange engaged in the business of
brokerage or is a spouse of such member.

(5) The Fit and Proper Criteria is perpetual in nature and a Modaraba
Company shall ensure compliance with the provisions of Fit and Proper
Criteria.

(6) All persons subject to Fit and Proper Criteria must submit any change
in the submitted information through the Chief Executive/Company Secretary
of the Modaraba Company to the Registrar (Modarabas).

(7) Any violations or circumvention of the Fit and Proper Criteria shall
be dealt with under Section 32 of the provisions of the Modaraba Companies
and Modaraba (Floatation and Control) Ordinance, 1980.

Annexure A

Information to be provided by Promoters, proposed director and proposed chief
executive of the Modaraba Company

1. Curriculum Vitae/Resume containing:
a Name: (former name if any):
b Fathers/Husband Name:
c C.N.I.C #(attach copy)
d Latest photograph
e Nationality:
f Age:
g Contact details:
i) Residential address:
ii) Business address:
iii) Tel:
iv) Mobile:
v) Fax:
vi) E-mail:
h National Tax Number:
i Present occupation:
j Qualification(s):
i) Academic:
ii) Professional:
k Experience:
(Positions held during the last 10 years along with name and address of
company/institution)
2. Nature of directorship:
Executive
Non-executive

Status of directorship
Nominee director
Nominated by ___________(name of shareholder along with nomination letter)

Number of shares subscribed/held__________________________

Personal net worth (copy of wealth statement) ______________

3. Names of companies, firms and other organizations of which the proposed
person is a director, partner, office holder or major shareholder.

4. CIB report issued by SBP for each company of which he has been a director
(attach original CIB report for the last 10 years)

5. In the case of appointment of directors the date of board of directors meeting
in which the appointment of proposed director was approved. (Attach copy of
the minutes of the meeting of the board of directors. If the director is elected,
then attach a copy of the minutes of the general meeting of the company.)

6. Names of persons on the Board of the Modaraba Company who are related to the
applicant.
NE
SS
PROPRIETARY OF KEY EXECUTIVES
Signature_________________________________________________________
*use additional sheets if required
Annexure B
(On Stamp Paper of appropriate value)
AFFIDAVIT

Before the Registrar (Modarabas), Securities and Exchange Commission of Pakistan:

I, ________________ son/daughter/wife of _______________________ adult, resident of
___________________________________________________________ and holding CNIC/Passport
No. ______________________________ do hereby state on solemn affirmation as under:-

1. That I am eligible for the position of ___________according to the Fit and Proper
Criteria for the position of _________, as prescribed under the Prudential Regulations
for Modarabas.

2. That I hereby confirm that the statements made and the information given by me is
correct and that there are no facts which have been concealed.

3. That I have no objection if the Registrar (Modarabas) or Securities and Exchange
Commission of Pakistan requests or obtains information about me from any third
party.

4. That I undertake to bring to the attention of the Registrar (Modarabas)/Securities
Exchange Commission of Pakistan any matter which may potentially affect my status
for the position of ____________ as per the Fit and Proper Criteria as prescribed
under the Prudential Regulations for Modarabas.

5. That all the documents provided to the Registrar (Modarabas)/ Securities Exchange
Commission of Pakistan are true copies of the originals and I have compared the
copies with their respective originals and certify them to be true copies thereof.

2. That I do hereby verify that the statements made above are correct to the best of my
knowledge and belief and nothing has been concealed therein.

DEPONENT
The Deponent is identified by me

Signature ____________

_____________________
ADVOCATE
(Name and Seal)

Solemnly affirmed before me on this ______ day of _____________ at ______________ by the
Deponent above named who is identified to me by ________________, Advocate.

Signature________________________
OATH COMMISSIONER FOR TAKING
AFFIDAVIT
(Name and Seal)

3. Part-IV

In Part-IV, Annexure-II (Form-I & II), Annexure-III (Affidavits from
Sponsoring Director/Sponsoring Institution/Nominee Director) are
deleted/removed.

The aforesaid amendments in the Prudential Regulations for Modarabas are applicable
with immediate effect.

(Bilal Rasul)
Registrar (Modarabas)

Distribution:

1. The Chief Executives of all Modaraba Companies.
2. The Chairman, Modaraba Association of Pakistan.
3. The Institute of Chartered Accountants of Pakistan, Karachi.
4. The Institute of Cost and Management Accountants of Pakistan, Karachi.
5. Media Consultant, SEC
6. Executive Director IS & T.
7. Office copy.

REGULATIONS GOVERNING SYSTEMAUDIT OF THE
BROKERS OF THE EXCHANGES, 2004

OF

THE KARACHI STOCK EXCHANGE
(GUARANTEE) LIMITED

(Amended as on October 26, 2004)

Page 1 of 10
PREAMBLE

Whereas, it is considered expedient to have Regulations for conducting the System Audit of brokers in order to
ensure compliance with the requirements of the Securities and Exchange Ordinance, 1969, Securities and Exchange
Rules, 1971, Code of Conduct for Brokers as enshrined in the Third Schedule of the Brokers and Agents Registration
Rules, 2001, the Articles, Rules and Regulations of the Exchange and the directives issued by the Commission from
time to time and thereby promote investor confidence in fair dealings at the Exchange which is one of the key
ingredients in the development of the securities markets.

NOW THEREFORE, the Securities and Exchange Commission of Pakistan in exercise of the powers conferred under
section 34 (1) of the Securities and Exchange Ordinance, 1969, hereby approves the following Regulations with
certain amendments:

1. SHORT TITLE AND COMMENCEMENT

a) These regulations may be called the "Regulations governing System Audit of the Brokers of the
Exchanges, 2004".

b) They shall come into force with immediate effect.

2. (1) DEFINITIONS

The terms used in these Regulations shall have the following meanings:-

a) "Articles" means the Articles of Association of the Exchange.

b) "Audit" means the System Audit of brokers conducted as per these Regulations.

c) "Auditor(s)" means the auditor(s) selected, every year, by the Board to be on the panel of auditors as
per Regulations 4 (a) hereof.

d) "Board" means tile governing board of directors of the Exchange.

e) "Branch office" means an office, or branch thereof, opened and maintained by a broker within or
outside the premises of a stock exchange for conducting the business and trading of securities.

f) "Broker" means any person engaged in the business of effecting transactions in securities for the
account of others and is registered with the Commission.

g) "Director" means a director of the Board.

h) "Exchange" means a stock exchange formed and registered under the Securities and Exchange
Ordinance, 1969.

i) "HOIA" means the Head of the Internal Audit of the Exchange.
Page 2 of 10

j) "Audit Committee" means the Audit Committee of the Board.

(II) All other words and expressions used but not defined in these Regulations shall have the same meaning
as assigned to them in the Securities and Exchange Ordinance, 1969 (XVII of 1969) and the Companies
Ordinance, 1984 ((XLVII of 1984).

3. PANEL OF AUDITORS

(a) The Audit Committee shall, every year, recommend to the Board for its approval, a panel of auditors not
being less than ten (10) in number, to be on the panel of auditors of the Exchange. The Auditors shall
fulfill the following criteria:-

i. The Auditors are a firm and all of its partners practicing in Pakistan are Chartered Accountants
within the meaning of the Chartered Accountants Ordinance, 1961; and

ii. The firm has been given a satisfactory rating under the Quality Control Review Program of the
Institute of Chartered Accountants of Pakistan.

iii. No broker shall appoint as auditors a firm of auditors which firm or a partner of which firm is non-
compliant with the International Federation of Accountants (IFAC) Guidelines on Code of Ethics, as
adopted by the Institute of Chartered Accountants of Pakistan.

iv. No broker shall appoint or continue to retain any person as an auditor, who has been found guilty
of professional misconduct by the Commission or by a Court of Law, for a period of three years
unless a lesser period is determined by the Commission.

(b) No Auditor shall be appointed to conduct the System Audit of a broker, if that Auditor has conducted the
audit or other assignment of that broker or his associated undertakings, at any time during the past two
years. The broker shall appoint an auditor within two weeks of the selection of brokers as specified in
clause 4 to conduct the System Audit of a broker from the panel approved by the Board of Directors. In
case the concerned broker fails to appoint an auditor within the time specified, the Managing Director
shall appoint the auditor.

(c) The HOIA shall liaise between the broker(s) and Auditor(s) conducting the audit of the said broker(s).

4. TYPES OF SYSTEMAUDIT

The System Audit of the brokers shall be of two types:

(a) Compulsory SystemAudit
The Managing Director shall, after every six months in a calendar year, select a minimum of 25%of
the brokers of the Exchange, through random balloting. The selection for the first half of the calendar
year shall be made at a date not later than January 31 in each calendar year and the selection for the
second half of the calendar year shall be made by a date not later than July 31 in each calendar year.
Page 3 of 10
The results of the ballots shall be intimated to the broker(s) by the Managing Director. The brokers
selected and placed under Audit, shall be excluded from future ballotings until such time, all the
brokers of the Exchange have been selected.

(b) Voluntary SystemAudit
A broker(s) may volunteer before the Managing. Director to be audited. Such a broker(s) shall not be
included in the future balloting until such time, all the brokers of the Exchange have been selected.

5. SCOPE OF AUDIT

The system audit will be carried out in a manner as specified in Schedule A hereof, to ensure compliance
with the requirements of the Securities and Exchange Ordinance, 1969, the Securities and Exchange
Rules, 1971, Code of Conduct for Brokers as enshrined in the Third Schedule of the Brokers and Agents
Registration Rules, 2001, the Articles, Rules and Regulations of the Exchange and the directives issued by
the Commission from time to time.

6. AUDIT REPORT

a) The Auditor(s) shall within two months from the date of assignment of the System Audit of a broker(s),
for the preceding financial year by the Managing Director, complete the System Audit and prepare a
report to be submitted to the Managing Director. The Managing Director of the exchange shall
immediately forward a copy of the Audit Report to the Securities and Exchange Commission of
Pakistan.

b) After the Auditor(s) have filed a report, in respect of a broker, with the Managing Director and there are
no material violations appearing therein, the Auditor shall issue a Certificate of Compliance to the
broker.

7. FINES

If the Audit Report identifies any default(s) / non-compliance(s) on the part of the broker with the provisions
of the Articles, Rules and Regulations of the Exchange, the Exchange may, after giving him an opportunity
of hearing, by order direct the broker to:

a) pay a fine amounting to not less than Rs.10,000/- per default but not exceeding Rs. 25,000/- per
default. However, in case a broker has volunteered to have a System Audit, then in case of any
violations of the Articles, Rules and Regulations of the Exchange, committed by him, the fine to be
imposed hereunder shall be reduced to half of the aforesaid amount.

b) If a broker fails to co-operate with the Auditor(s), the Managing Director shall upon receiving a written
complaint from the Auditor, call a hearing of the broker and the Auditor and may impose a fine of not
less than Rs. 25,000/- but not exceeding Rs. 100,000/- on the said broker. If the broker, subsequent to
the imposition of the said fine fails to cooperate with the auditor or fails to pay the fine, the Managing
Director shall refer the matter to the Board for initiation of disciplinary proceedings under the Articles of
the Exchange.
Page 4 of 10

c) Where the Exchange neglects or otherwise fails to take action under clause 7 of these Regulations, the
Commission may suo moto or on receiving any complaint after giving due opportunity of hearing
impose such penalty as provided under clause 7 and take such other necessary action as deemed fit
by the Commission.

8. COSTS

The broker who is being audited shall pay all the fees, charges and costs of the Auditors. The said fees,
charges and costs shall be deposited with the Exchange, by the said broker, for onward payment to the
Auditor.
Page 5 of 10

Schedule "A"

SCOPE OF AUDIT

Without limiting the scope of the Audit in any way, the system audit will be carried out to review compliance with the
requirements of the Securities and Exchange Ordinance, 1969, the Securities and Exchange Rules, 1971, Code of
Conduct for Brokers as enshrined in the Third Schedule of the Brokers and Agents Registration Rules, 2001, the
Articles, Rules and Regulations of the Exchange and the directives issued by the Commission from time to time.

Standardized Account Opening Form(SAOF)

1. Review compliance with the SAOF as per the directives of the Commission dated November 19, 2003
and January 20, 2004.

Manner of Transaction of Member's Business

1. Review compliance of Rule 4 of Securities and Exchange Rules 1971 that stipulates following requirements
regarding manner of transaction of member's business:

a) Rule 4(1) requires that brokerage house should enter all orders in the chronological order, in a register
maintained in a form which should identify the person who placed the order, name and number of the
securities, nature of transaction and the limitation, if any, as to the price of the securities or the period
for which the order is to be valid.

b) Rule 4{2(a)} and 4{2(b)} restricts members to buy and sell security on their own account where client's
"best order" to buy and sell the same security respectively, remains unexecuted.

c) Rule 4{2(c)} restricts members to buy security at or below the limit price on their own account where
client's "limited order" to buy the same security remains unexecuted.

d) Rule 4{2(d)} restricts members to sell security at or above the limit price on their own account where
client's "limited order" to sell the same security remains unexecuted.

Confirmation of Client Order

1. Review that the brokerage house transmits a confirmation within twenty-four hours of execution of an order
and contains following information:

a) Date on which order is executed:

b) Name and number of securities;

c) Nature of transaction (spot, ready, future and also whether bought or sold);

Page 6 of 10
d) Prices/rates;

e) Commission if the member is acting as broker;

f) Whether the order is executed for the member's own account or from the market.
{Rule 4(4) of Securities and Exchange Rules, 1971}

Maintenance of Accounts

1. Review that the following requirements are being fulfilled:

a) A balance sheet and a statement of income and expense account are being prepared once in a year;
{U/S 233(1) of Companies Ordinance 1984 and U/R 5(l) of Securities and Exchange Rules 1971}.

b) In case of a corporate brokerage house, accounts are audited by an auditor who must be a Chartered
Accountant {U/S 233(3) of Companies Ordinance 1984}.

Maintenance of Books of Accounts

1. Review that all the books of account and other related documents mentioned below are being maintained:
{Rule 8(1) of Securities and Exchange Rules, 1971}

a) Journals (or other comparable records), cash books and any other records of original entry forming the
basis of entries into any ledger, the books of original entry being such as contain a daily record of all
orders for purchase or sale of securities, all purchases and sales of securities, all receipts and
deliveries of securities and all other debits and credits;

b) Ledger (or other comparable records), reflecting asset, liability, reserve, capital, income and expense
account;

c) Ledger (or other comparable records), reflecting securities in transfer, borrowed and lent and securities
bought or sold of which the delivery is delayed;

d) Record of all balance of all ledger accounts in the form trial balance to be prepared at least at the end
of six month;

e) Record of transactions with banks;

f) Duplicates or counterfoils of memos, of confirmation issued to customers.
{Rule 5(2) of Stock Exchange Members (Inspection of Books and Records) Rules, 2001)}

g) margin deposit book;

h) registers of accounts of agents;

Page 7 of 10
i) an agreement with an agent specifying the scope of authority and responsibilities of the member and
his agent;

j) record of pledging or arranging for the pledging of any security carried for the account of any customer,
whether physically held or in the Central Depository System with a commercial bank;

k) record of extension or maintenance of credit or arranging for the extension or maintenance of credit to
the customers for the purpose of purchasing or carrying any security;

l) record of borrowing on any security or lending or arranging for the lending of any security carried for
the account of the customer;

m) record of dealing in foreign currencies as a dealer duly authorized by the State Bank of Pakistan within
the brokerage house at the stock exchange premises.

2. Further review that above referred books of accounts and documents are preserved for a period of not less
than five years.
{Rule 8(2) of Securities and Exchange Rules 1971 and Rule 5(6) of Stock Exchange Members (Inspection
of Books and Records) Rules, 2001}.

Reporting by Corporate Brokerage Houses

1. Review that the brokerage house (Corporate member) communicates the following to the Exchange:

a) Annual Accounts (Audited) and Half Yearly Accounts of the company are being submitted within the
specified time;

b) List of Directors containing names, addresses and number of shares held by each as at 30
th
June and
31
st
December is being submitted within thirty days;

c) List of shareholders containing names, addresses and number of shares held by each as at 30
th
June
and 31
st
December is being submitted;

d) All changes in the management of the company including directorship are being submitted
immediately.
{As per the Memorandum&Articles of Association of the Exchanges}

Details to be Printed on Member's Correspondence and Contracts

1. Review that the Members correspondence/contract notes relating to the transactions of business contain
the clause "subject to Rules of the Exchange" and bear the name of the member along with address of
principal place of business.
{As per the Memorandum&Articles of Association of the Exchanges}

Page 8 of 10
Registration of Brokers

1. Review that the brokerage house has obtained a certificate of Registration from SECP to act as a Broker
and such certificate is being renewed every year.
{Rule 5 &7 of Broker and Agents Rules, 2001}

Registration of Agents

1. Review that the persons working as an agent of the brokerage house have obtained certificate of
Registration from SECP and Such Certificate of Registration is being renewed every year.
{Rule 14 &16 of Broker and Agents Rules, 2001}

Agent Dealings

1. Obtain representation that the agent does not deal with his clients in his own name. Dealing with clients
includes receiving cash or cheque from the client in the agent's own name and issuing cash memos,
receipts, delivery notes or any other document in his name. All the transactions are made in the name of his
member or broker and settled with broker or member only.
{Rule 17(1) of Broker and Agents Rules, 2001}

Regulations Governing Future Contracts

1. In respect of trading under Future Contract, Review that the brokerage house:

a) takes margin from its clients in accordance with the rates prescribed by the Exchange. {Regulation
14(a)}.

b) has proper procedures for identification of clients for effective risk management by the Clearing House.
{Regulation 14(b)}.

Regulations Governing Short Selling under Ready Market

1. Review that member has not made short sale unless:

Prior contractual borrowing arrangement has been made;

The sale is made at an up tick; and

The trade is identified as a short sale at the time of placement of order (Regulation 5)

a) Further review following:

No short sale has been carried over (Regulation 9);

No COT financed securities has been lent to a short seller (Regulation 10);
Page 9 of 10

Short sale has been made only in eligible securities identified for short sale (Regulation 8).

Regulations Governing Members Branch Offices

I. In case the brokerage house has its any branch office for conducting the business and trading of shares
and securities within and outside premises of the Exchange, review that:

a) brokerage house has obtained a Certificate of Registration from the Exchange;

b) maintained all client related record/information at the Head Office;

c) confirmation/contract/cash memo/other documents are issued on only printed stationery on which
addresses of all branches are clearly stated;

d) name of Stock Exchange Member is prominently displayed outside the branch;

e) Registration Certificate is prominently displayed at the branch;

f) status of the person authorized to manage the branch office whether as an authorized agent or an
employee as per the Stock Exchange Regulations.
(Rule 5 {1(iii)}of Stock Exchange Members (Inspection of Books and Record) Rules, 2001);

g) authority given to the agent or employee to perform all acts on behalf of the member.
{Rule 5[1(v) of Stock Exchange Members (Inspection of Books and Record) Rules, 2001};

h) Proof of following:

- business being done at the branch office in the name of the member;

- maintenance of the branch offices bank accounts in the name of the member; proper
maintenance of accounts of the customers at the branch offices.

i) any other documents and records required to be maintained under regulations made by the stock
exchange.

Capital Adequacy Requirement

1. Review that the Certificate of Net Capital Balance as per the prescribed format certified by any practicing
Chartered Accountant is being submitted with the Exchange on biannually basis.

2. Review that the Net Capital Balance have been computed in accordance with Rule 2(d) of, and third
schedule to, the Securities and Exchange Rules, 1971.

Page 10 of 10
Margin Deposits

1. Review the following:

a) Margin Deposits with the Exchange, NCCPL etc.

b) Margin Deposits with the Exchange with respect to trading in Future Contracts.

c) Margin Deposits of Investors with Members along with written consent of Investors.

Segregation of Client Funds and Securities

1. Review the following as required in the regulations:

a) Clear segregation and maintenance of separate bank account of clients and the brokers
money.

b) Maintenance of necessary records and books of accounts to distinguish clients cash and
securities from brokers cash and securities.

***

Islamabad 31
st
January, 2008

NOTIFICATION

S.R.O.94(I)/2008.- In exercise of the powers conferred by sub-section (2) of section 282B
of the Companies Ordinance, 1984 (XLVII of 1984), the Securities and Exchange Commission of
Pakistan hereby makes the following Real Estate Investment Trust Regulations, 2008, for the
regulation of REIT Management Company and the registration and regulation of REIT Scheme
and for matters connected therewith and incidental thereto, namely:

CHAPTER - I
Preliminary

1. Short title and commencement.- (1) These Regulations shall be called the Real Estate
Investment Trust Regulations, 2008.


2. Definitions.-(1) In these Regulations, unless there is anything repugnant in the subject or
context,-
(i) Commission means the Securities and Exchange Commission of Pakistan established
under the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997);
(ii) Connected Person includes,-
(a) any person who directly or indirectly controls, beneficially owns or holds ten (10)
percent or more of the paid up capital of the RMC, Trustee, Valuer or the Quality
Assurance Manager as the case may be;
(b) any member of a group of which persons specified in sub-clauses (a) forms part of;
or
(c) any director or Key Executives of the RMC, Trustee, Valuer or the Quality
Assurance Manager as the case may be, or any of their Connected Person as
specified in sub-clauses (a) and (b):
(Explanation):- In this definition the term control shall have the same meaning as
assigned to the term control under the Listed Companies (Substantial Acquisition of
Voting Shares and Takeovers) Ordinance, 2002;

Page 2 of 43
(iii) Customer Advances mean the monies received by the Trustee as advance from
customers against the sale of the Project or a part of it;
(iv) Developmental REIT Scheme means a REIT Scheme established for investment in Real
Estate with the object of development of such Real Estate for industrial, commercial or
residential purposes, through construction or refurbishment, and its subsequent sale;
(v) Fee Schedule means the schedule of fees annexed to these Regulations as Schedule V;
(vi) Fit and Proper Criteria means the criteria specified by the Commission and annexed to
these Regulations as Schedule I;
(vii) Form means any of the forms annexed to these Regulations or any other forms as may
be specified by the Commission for the purposes of these Regulations;
(viii) "Independent Director" means a director who is not a Connected Person of the RMC or its
promoters or directors or connected with promoters or directors of the RMC on the basis
of family relationship and who does not have any other relationship with the RMC, its
associated companies, directors, executives or related parties;
(ix) IPO means the first public offering of the Units of the REIT Scheme or the shares of the
RMC;
(x) Key Executives includes the chief executive officer, chief financial officer, chief
accounting officer, chief operating officer, company secretary, internal auditor or the
compliance officer irrespective of their designation;
(xi) Listed in relation to securities or Units means securities or Units which have been
allowed to be traded on a stock exchange;
(xii) NBFC means a non-banking finance company incorporated and licensed by the
Commission;
(xiii) Net Assets means the difference between the value of the assets and the liabilities of the
REIT Scheme as given in the balance sheet at any given date;
(xiv) NAV of a Unit means the Net Assets divided by the number of Units outstanding at any
given date;
(xv) Offering Document means a document containing information specified in Schedule III
in order to invite the public to buy Units;
(xvi) Ordinance means the Companies Ordinance, 1984 (XLVII of 1984);
(xvii) Project means a project of the REIT Scheme on a contiguous site in the case of a
Developmental REIT scheme and a portfolio of buildings in the case of a Rental REIT
Scheme, managed by the RMC as per the business plan approved by the Commission;
(xviii) Property Manager means a person appointed by the RMC to manage the Real Estate for
a Rental REIT Scheme;

Page 3 of 43
(xix) Quality Assurance Manager means a company appointed by the RMC, which can
provide architectural or engineering design services, construction supervision and quantity
surveying services;
(xx) Real Estate means land and includes; (i) all attachments above and below the land; (ii) all
things that form a natural part of the land; (iii) all things that are developed or installed,
including buildings and site improvements; and (iv) all permanent building attachments
such as plumbing, heating and cooling systems, electrical wiring and built-in items such as
elevators, etc. and all rights and interests therein, whether the interest is freehold or
leasehold, and whether the purpose or use thereof is residential, commercial or industrial;
(xxi) Register means the register of the Unit Holders;
(xxii) Regulations means the Real Estate Investment Trust Regulations, 2008;
(xxiii) REIT Scheme means a real estate investment trust which is a closed-end scheme
launched by the RMC and registered under these Regulations, and includes
Developmental REIT Scheme and Rental RIET Scheme;
(xxiv) REIT Assets means all Real Estate and other assets of the REIT Scheme acquired in the
name of the Trustee;
(xxv) REIT Fund means the fund raised through the issuance of Units;
(xxvi) RMC means a REIT management company licensed by the Commission as a NBFC to
launch REIT Scheme and provide REIT Management Services;
(xxvii) REIT Management Services means the real estate investment trust management services
provided by a RMC for the management of a REIT Scheme in accordance with these
Regulations;
(xxviii)Rental REIT Scheme means a REIT Scheme established for the object of making
investments in commercial or residential Real Estate with the purpose of generating rental
income from it;
(xxix) Rules means the Non-Banking Finance Companies (Establishment and Regulation)
Rules, 2003;
(xxx) Schedule means the Schedules annexed to these Regulations;
(xxxi) Trust Deed means the deed of trust executed between a RMC and a Trustee with respect
to a REIT Scheme;
(xxxii) Trustee means a trustee in respect of a REIT Scheme appointed in accordance with
Regulation 12;
(xxxiii)Units means units of the REIT Scheme;
(xxxiv) Unit Holder means a person who is the legal owner of one or more Units and whose
name appears in the Register of Unit Holders;

Page 4 of 43
(xxxv) Valuation Report means the report prepared by the Valuer in accordance with Schedule
IV; and
(xxxvi) Valuer means a person appointed in accordance with Regulation 18 to value the Real
Estate;

(2) Words and expressions used but not defined in these Regulations shall have the same
meaning as assigned to them in the Ordinance, the Securities and Exchange Ordinance, 1969
(XVII of 1969), the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997)
and the rules and regulations made under them.

CHAPTER II. REIT Management Company

3. Conditions applicable to RMC.-(1) In addition to the conditions and requirements of the
Rules, a RMC shall:
(a) at the time of applying for a licence as a NBFC, have a paid up capital of at least
fifty (50) million rupees;
(b) within 30 working days of the registration of the REIT Scheme, increase its paid
up capital to at least five hundred (500) million rupees;
Provided that the Commission may, on a reasoned request of the RMC, extend the
period by a further thirty (30) days.
(c) clearly state in its memorandum of association that its exclusive object is to launch
the REIT Scheme and provide REIT Management Services;
(d) ensure that each of its promoters, proposed directors and Key Executives satisfy
the Fit and Proper Criteria specified in Schedule I;
(e) have:
(i) at least two directors who are also its promoters; and
(ii) at least one director who has at least five (5) years experience of developing or
managing Real Estate projects;
(f) maintain adequate financial, technical, organizational and human resources, and
employ appropriate systems, procedures, processes and personnel to provide REIT
Management Services in a proper and efficient manner on an ongoing basis;
(g) maintain satisfactory internal controls and written compliance procedures which
address all applicable regulatory requirements; and
(h) pay such non-refundable application fees as specified in Schedule V.

Page 5 of 43
(2) A RMC shall not:
(a) unless otherwise permitted by the Commission, hold less than twenty (20) percent
of the Units of the REIT Scheme managed by it for the life of the REIT Scheme,
and such Units shall be held in an account marked as blocked and shall not be sold,
transferred or encumbered without the prior written approval of the Commission;
(b) hold more than fifty (50) percent of the Units of the REIT Scheme;
(c) except for an Independent Director, appoint a person as a director who is a director
of any other RMC;
(d) appoint a person as a director if he is serving as a director on the board of ten or
more companies at that time;
(e) obtain, acquire or takeover the management of another REIT Scheme, without the
prior written approval of the Commission; and
(f) offer Units for consideration other than cash except for those Units that are issued
to the RMC in lieu of the Real Estate and are transferred to the RMC at the value
approved by the Commission.

4. Obligations of the RMC.- A RMC shall:
(a) ensure that the REIT Assets are vested in the Trustee, pursuant to the provisions of
the Trust Deed, for the benefit of the Unit Holders;
(b) appoint a Quality Assurance Manager or a Property Manager, as the case may be;
(c) appoint a Valuer;
(d) ensure that the Valuer prepares a Valuation Report of the Real Estate as and when
required under these Regulations;
(e) ensure that a REIT Scheme shall not undertake more than one Project and that the
constitutive documents provides for this restriction;
(f) ensure that after the disposal of the Project, the proceeds are distributed amongst
the Unit Holders and the REIT Scheme is dissolved;
(g) ensure, in the case of the registration of a Developmental REIT Scheme, that the
approved value of Real Estate forming part of the REIT Scheme is not more than
fifty (50) percent of the REIT Fund;
(h) ensure that the Trust Deed is in accordance with Schedule II and provides for the
time and modality of the extinguishment of the REIT Scheme and the manner in
which the proportionate shares of the sale proceeds shall be transferred to its Unit
Holders;
(i) ensure that not less than ninety (90) percent of the profits arising out of the REIT

Page 6 of 43
Scheme shall be distributed to the Unit Holders as dividends in each financial year,
and that the constitutive documents provide for the same;
(j) ensure that the REIT Fund shall have a minimum fund size of five (5) billion
rupees and the Trust Deed provides for the same;
(k) ensure that the Units are listed in accordance with the listing regulations of the
stock exchange and shall be freely tradable subject to Regulation 3(2)(a), and the
Trust Deed provides for the same;
(l) ensure that the running bills in respect of Project payments are countersigned by
the Quality Assurance Manager or the Property Manager, as the case may be;
(m) manage the REIT Scheme, in accordance with the constitutive documents and all
applicable laws including notifications, circulars, guidelines and directives issued
thereunder;
(n) carry out all transactions involving the REIT Scheme managed by it on an arms
length basis;
(o) ensure, without prejudice to the generality of clause (n), that the financial and
business aspects of the REIT Scheme are professionally managed;
(p) maintain proper record of Customer Advances received and borrowings from
financial institutions and capital markets for purposes of the REIT Scheme;
(q) ensure that the Customer Advances are received in the name of the REIT Scheme
and that the borrowings are repaid on their due dates;
(r) ensure that the title to the Real Estate to be acquired for the purposes of the REIT
Scheme is free from all defects and encumbrances and conduct due diligence to
certify the same;
(s) acquire the Real Estate approved under Regulation 6 in the name of the Trustee;
(t) ensure that all material contracts, including Real Estate purchase agreements and
rental agreements, entered in furtherance of the objects of the REIT Scheme are
legal, valid, binding and enforceable by or on behalf of the Trustee in accordance
with the stipulated terms of such contracts and agreements;
(u) arrange insurance coverage in relation to the Real Estate and comply with any and
all requirements of the Commission in this behalf;
(v) have the business plan for the REIT Scheme approved by the Commission;
(w) in case of a Developmental REIT Scheme, be responsible for the development or
refurbishment and subsequent sale of the Real Estate according to the approved
business plan;
(x) in case of a Rental REIT Scheme, be responsible for the refurbishment and/or

Page 7 of 43
subsequent rental of the Real Estate according to the approved business plan;
(y) obtain the written approval of the Commission before making a public offer of the
Units;
(z) issue Units to the subscribers against the payment of the subscription amount into
the REIT Fund;
(aa) issue Units to itself after the REIT Scheme is registered under these Regulations;
(bb) issue Units in dematerialized form which shall be deposited with a depository
registered with the Commission pursuant to the Central Depository Companies
(Establishment and Regulation) Rules 1996;
(cc) ensure that the issue and transfer of the Units by it is carried out, after the
registration of the REIT Scheme, in accordance with provisions of the constitutive
documents and any directions, guidelines and circulars issued by the Commission;
(dd) ensure that the Offering Document inviting the public to buy Units has the
Valuation Report of the Real Estate and the approved business plan of the REIT
scheme attached to it;
(ee) maintain the Register of Unit Holders or appoint an agent for the purpose;
(ff) obtain the written approval of the Commission before delegating one or more of its
functions in relation to the REIT Scheme, and
(i) ensure that its delegates have sufficient experience and financial resources
to enable them to conduct the delegated function;
(ii) demonstrate that proper due diligence procedures and management or
administrative structures are in place for the selection and on-going
monitoring of the delegates;
(iii) ensure that the agreement between the RMC and each of the delegate
clearly documents (I) the demarcation of functions between the RMC and
the delegate and (II) the consideration payable by the RMC for the
performance of the delegated functions;
(iv) make payments to the delegate from its own account;
(v) if it delegates its power to maintain the Register to an agent approved by
the Commission, inform the Commission, within two (2) working days of
such delegation
(gg) be responsible for the acts or omissions of all persons, to whom it delegates any of
its functions as RMC and account to the Trustee for any loss in value of the REIT
Assets where such loss is attributable to the RMC or any delegate of the RMC due
to their negligence or wilful default;

Page 8 of 43
(hh) maintain at its registered office proper books of account and record of the activities
undertaken in connection with the REIT Scheme in order to enable a true and fair
view to be formed of the (i) REIT Assets and liabilities; (ii) the profit and loss
accruing out of the operation of the REIT Scheme; (iii) transactions undertaken
with respect to the REIT Scheme; (iv) amounts received by the RMC in respect of
issue of Units; and (v) pay-outs, if any, by way of distributions to the Unit Holders;
(ii) within three (3) months of close of the financial year prepare and transmit to the
Unit Holders, the Trustee, the Commission and the stock exchange(s) on which the
Units are listed, the balance sheet, profit and loss statement, cash flow statement
and statement of the movement in NAV of the REIT Scheme along with the report
of the Trustee, the report of the auditor of the REIT Scheme the Valuation Report
of the Real Estate and any other document as specified by the Commission;
(jj) prepare and transmit to the Unit Holders, the Trustee, the Commission and the
stock exchange(s) on which the Units are listed, within one (1) month of the close
of the first and third quarter and two (2) months of the close of second quarter of
the financial year of the REIT Scheme, the balance sheet of the REIT Scheme as at
the end of that quarter along with profit and loss statement, a cash flow statement
and a statement of changes in NAV for that quarter:
Provided that the Commission may, subject to such conditions as it considers
necessary, allow the RMC to transmit the said quarterly accounts to the Unit
Holders by placing them on its website;
(kk) preserve the books of account of the REIT Scheme for at least five years after the
extinguishment or revocation of the REIT Scheme;
(ll) after the consent of the Trustee, appoint an auditor for the REIT Scheme for a
period of one (1) year upon its establishment, and upon occurrence of any vacancy:
Provided that such auditor shall be from amongst the list of auditors approved by
the Commission and shall not be the auditor of the RMC or the Valuer and has not
been the auditor of the REIT Scheme for more than three consecutive years;
(mm) obtain rating for the REIT Scheme as per the rating criteria of a rating company
and such rating shall be updated annually, or at such other time as may be specified
by the Commission;
(nn) publish the rating of the REIT Scheme in the annual and quarterly accounts and all
advertising and marketing materials of the REIT Scheme;
(oo) furnish in respect of the REIT Scheme, to the Commission and the stock
exchange(s) on which the Units are listed, such information within such time as the

Page 9 of 43
Commission may specify in exercise of powers under the Ordinance;
(pp) ensure that a director immediately vacates his position if he becomes disqualified
as per the Fit and Proper Criteria and inform the Commission of such compliance;
(qq) before making any major change in the approved business plan of the REIT
Scheme ensure that it has obtained;
(i) the written approval of the Commission; and
(ii) where the Units have been issued to the public obtain the approval of the
Unit Holders through a special resolution, if directed by the Commission:
Provided that for the purpose of clause (ii) the RMC and its promoters shall not
vote at such meetings and their presence shall not be counted towards requisite
voting for special resolution;
(rr) cause to happen a determination of the NAV of the REIT Assets on a quarterly
basis;
(ss) ensure that it conforms to the provisions of the Code of Corporate Governance; and
(tt) ensure that the NAV of the REIT Scheme is published in the annual and quarterly
accounts of the REIT Scheme.

5. Request for transfer of REIT Scheme and cancellation of licence of RMC.
(1) A RMC may transfer the management of a REIT Scheme managed by it to another licensed
RMC, after the approval of the Unit Holders through a special resolution:
Provided that in such case the RMC and its promoters shall not vote at such meetings and their
presence shall not be counted towards requisite voting for special resolution.
(2) A RMC may apply to the Commission for the cancellation of its licence after it has
transferred the management and the Units of the REIT Scheme to another RMC.

CHAPTER III. Establishment of a Real Estate Investment Trust Scheme

6. Approval of the Real Estate.- (1) A RMC shall, prior to making an application for the
registration of the REIT Scheme, obtain a written approval from the Commission of the Real
Estate which is to be transferred to the proposed REIT Scheme.

(2) The Commission shall not accept any application where, in its opinion there may be
impediments to sale, partial sale, transfer or renewal of the lease period of the proposed Real
Estate or for any other reason.

Page 10 of 43

(3) For the purpose of Regulation 6(1);
(a) the RMC shall submit to the Commission, documents which show the exact
location of the Real Estate;
(b) the Real Estate shall be within the limits and surrounding areas of Islamabad,
Rawalpindi, Karachi, Lahore, Peshawar, or Quetta; and
(c) the RMC shall submit to the Commission, such other documents as required by the
Commission on a case to case basis.

7. Conditions for registration of a REIT Scheme.- A RMC, prior to making an
application for the registration of the REIT Scheme shall:
(a) submit a Valuation Report of the Real Estate for the approval of the Commission;
(b) obtain approval of the name of the REIT Scheme from the Commission;
(c) obtain from the Commission approval for the appointment of Trustee;
(d) submit the business plan of the REIT Scheme for the approval of the Commission;
(e) submit the draft Trust Deed for approval of the Commission;
(f) in the case of a Developmental REIT Scheme:
i. acquire the Real Estate in the name of Trustee and make full payment and
pay all fees for the Real Estate acquired; and
ii. obtain all requisite approvals from the concerned authorities for the
construction of the Project:
Provided that subject to the provisions of the business plan, the RMC may after the
registration of the REIT Scheme, receive cash for Units over and above twenty
(20) percent Units, against the remaining value of Real Estate transferred to the
Trustee.
(g) in the case of registration of a Rental REIT Scheme:
i. ensure that, in the case of leasehold the minimum remaining lease period of
the Real Estate is thirty (30) years; and
ii. ensure that a binding purchase agreement for the Real Estate to be acquired
upon payment of a minimum twenty five (25) percent down payment for
such Real Estate has been executed in the name of the Trustee after the
approval of the Commission;
(h) obtain a due diligence certificate from a lawyer that the Real Estate is vested in the
Trustee free from defects and encumbrances.

Page 11 of 43

8. Application for registration.- Subject to the fulfilment of the requirements of
Regulation 7, an application for the registration of a proposed REIT Scheme shall be submitted by
the RMC to the Commission and such application shall be accompanied by the following
information and documents:
(a) copy of approvals granted under Regulation 7;
(b) copy of the registered Trust Deed as approved by the Commission;
(c) latest audited balance sheet and profit and loss statement of the RMC:
Provided that if the financial statements are older than six months, then a
certificate from the auditor evidencing the net worth of the company shall be
submitted and such certificate shall not be earlier than thirty (30) days of the date
of the application;
(d) list of the directors of RMC, their profile and consent to act as directors;
(e) names of shareholders of the RMC along with their percentage of shareholding;
(f) latest audited balance sheet, profit and loss account, cash flow statement and
statement of change in equity of the Trustee and the names of its shareholders
along with their percentage of shareholding;
(g) consent of the Valuer to act as Valuer;
(h) Valuation Report of the Real Estate approved by the Commission under Regulation
7;
(i) copy of the approval of the Real Estate under Regulation 6;
(j) photographs and drawings of the Real Estate along with the accessibility and
location map;
(k) copy of the title documents of the Real Estate;
(l) certificate from the auditor of the REIT Scheme that:
i. in the case of a Developmental REIT scheme the Real Estate has been
acquired in the name of the Trustee;
ii. all requisite approvals for the Project have been obtained by the RMC; and
iii. the Real Estate is free of all encumbrances and all necessary approvals/
permissions/ NOCs of the concerned local authorities required prior to start
of project as per local byelaws has been obtained;
(m) in case of a Rental REIT Scheme, a certificate from an independent auditor that the
RMC has entered into a binding purchase agreement on twenty five (25) percent
down payment to the owner of the Real Estate;
(n) in case of a Developmental REIT Scheme, preliminary engineering design for the

Page 12 of 43
development Project to be undertaken in execution of the REIT Scheme as
approved by the Commission;
(o) the names and registered addresses of the following parties, where applicable:
(i) Valuer;
(ii) Auditor of the REIT Scheme;
(iii) Unit Registrar of the REIT Scheme;
(iv) Legal Adviser of the REIT Scheme; and
(v) Concerned Regulatory authorities;
(p) non-refundable application fee as specified in Schedule V;
(q) an affidavit by the chief Executive of the RMC that it accepts responsibility for the
information contained in the application as being accurate at the date of
submission; and
(r) any other document required by the Commission.

9. Registration of the REIT Scheme. The Commission may register the proposed REIT
Scheme if it is satisfied that the conditions specified in these Regulations have been fulfilled:
Provided that the Commission may direct the RMC to make such amendments to the
REIT Scheme as it considers appropriate and re-submit the application.

Provided further that the Commission may while registering the REIT Scheme impose
such conditions as it deems appropriate.

10. Cancellation of registration of the REIT Scheme.- The Commission may cancel the
registration of a REIT Scheme after informing the Trustee and providing the RMC an opportunity
of being heard if:
(a) the Commission determines that such action shall be in the best interest of the Unit
Holders;
(b) the Unit Holders, through a special resolution, request the Commission on
reasonable grounds to cancel the registration of the REIT Scheme; or
(c) the Trustee satisfies the Commission, on reasonable grounds, that continuation of
the REIT Scheme is not in the best interest of the Unit Holders.

11. Effect of cancellation of registration of the REIT Scheme.- (1) Where the Commission
cancels the registration of the REIT Scheme the Commission may move for the revocation of the
trust in terms of the Trust Deed.

Page 13 of 43
(2) The distribution of REIT Assets, upon the revocation of the trust, shall be made by the
Trustee in accordance with the terms of the Trust Deed.

(3) The trust shall stand extinguished after disposal of all REIT Assets.

(4) The provisions of these Regulations shall not preclude the authority of the Commission to
exercise any other powers under the Ordinance or any other law administered by the Commission.

CHAPTER IV. Trustee

12. Appointment of Trustee.- (1) The Trusteefor the REIT Scheme shall be appointed by the
RMC subject to the provisions of these Regulations.

(2) The RMC shall apply to the Commission for the approval of appointment of Trustee before it
applies for the registration of the REIT Scheme under Regulation 8.

(3) The Commission shall, before giving approval for appointment of Trustee, consider the
availability of appropriate systems, personnel, management of the Trustee and such other criteria,
as may be specified by the Commission through circulars issued under the Ordinance.

13. Trustee and the RMC to be independent. A Trustee of the REIT Scheme shall not be a
Connected Person, associated company or associated undertaking of the RMC.

14. Qualifications to act as Trustee. (1) The Trustee of a REIT Scheme shall be:
(a) a scheduled bank licensed under the Banking Companies Ordinance, 1962 (LVII of
1962), or a Development Financial Institution (DFI) which has been assigned a
long term minimum rating of AA by a credit rating company, and has been in
operation for at least five (5) years;
(b) a trust company which is a subsidiary of a scheduled bank referred to in clause (a);
(c) a foreign bank operating as a scheduled bank in Pakistan for at least five (5) years
which has been assigned a minimum investment grade rating by a credit rating
company or operating as a trustee internationally for at least five (5) years;
(d) a depository registered with the Commission pursuant to the Central Depository
Companies (Establishment and Regulation) Rules, 1996; or
(e) such other person as the Commission may specify through circular issued under

Page 14 of 43
the Ordinance;

15. Obligations of Trustee.- The Trustee shall:
(a) exercise due diligence and vigilance in carrying out its functions and duties under
the constitutive documents, these Regulations and all other applicable laws;
(b) ensure that the REIT Assets are properly held by it on behalf of the Unit Holders in
accordance with the provisions of the constitutive documents, these Regulations
and all other applicable laws;
(c) not legally or beneficially own any Units of the REIT Scheme in relation to which
it is acting as a Trustee;
(d) ensure that the title to all REIT Assets is lawfully vested in it;
(e) deposit the money received by it in a scheduled bank which has a minimum A
rating in the long term;
(f) confirm to the Commission that the RMC has appointed a Valuer and a Quality
Assurance Manager or a Property Manager;
(g) confirm to the Commission that all insurance premiums have been paid by the
RMC and the insurance policies are upto date;
(h) not delegate any of its duties unless the Trust Deed allows for the delegation of the
Trustees duties;
(i) make payments to the delegate from its own account, if it has delegated any of its
functions;
(j) be liable for any negligent act or omission, on its part or on the part of any of its
delegates;
(k) carry out the instructions of the RMC in respect of investments and execution of
the REIT Scheme, unless such instructions are in conflict with the constitutive
documents, these Regulations, directions, guidelines, circulars or any other
applicable laws;
(l) carry out instructions of the RMC with respect to the Project payments after the
bills are counter-signed by the Quality Assurance Manager in case of a
Developmental REIT Scheme or by the Property Manager in case of a Rental REIT
Scheme;
(m) ensure that the borrowing and Customer Advance limits set out in these
Regulations, the constitutive documents and the conditions of registration of the
REIT Scheme are complied with;
(n) issue a report to be included in the quarterly and the annual accounts of the REIT

Page 15 of 43
Scheme;
(o) send the Commission a biannual report about the REIT Assets; and
(p) immediately inform the Commission of any action of the RMC that contravenes
the Ordinance, the Rules these Regulations, guidelines, codes, circulars, directives
or any other applicable laws.

16. Retirement of Trustee.- (1) The Trustee may, subject to the prior written approval of the
Commission, retire from its office on the appointment of another Trustee proposed by the RMC
and approved by the Commission, and the retirement shall take effect from the date of transfer of
all REIT Assets to the newly appointed Trustee at the cost of the retiring Trustee.

(2) For the purpose of the appointment of a new Trustee under Regulation 16(1), the Trust Deed
may be amended in accordance with provisions of the Trusts Act, 1882 (II of 1882).

17. Removal of the Trustee.- (1) The Trustee may be removed by the Commission after
serving a written notice to the RMC and the Trustee in any of the following circumstances:
(a) the Trustee goes into liquidation, becomes bankrupt or has a receiver or administrator
appointed over its assets;
(b) the Commission itself, or on an application by the RMC, after recording reasons in
writing decides that a change of the Trustee is desirable in the interests of the Unit
Holders; or
(c) a special resolution is passed by the Unit Holders resolving that the Trustee should
be removed.

Provided that no order shall be made under Regulation 17(b) or (c) unless the Trustee has
been given an opportunity of being heard by the Commission.

(2) For purposes of Regulation 17(c) the Commission may call a meeting of the Unit Holders
on the request of Unit Holders holding not less than twenty (20) percent of the Units, and the
Connected Persons of the Trustee shall not vote at such meetings and their presence shall not be
counted towards requisite voting for the special resolution.

(3) Where a Trustee has been removed under Regulation 17(1) the RMC shall, in accordance
with the provisions of these Regulations, appoint another Trustee.

Page 16 of 43
(4) All costs with respect to the change of Trustee will be borne by the REIT Scheme unless
directed by the Commission otherwise.

CHAPTER V. Valuer

18. Appointment and term of Valuer.- (1) The RMC shall, before making an application
under Regulation 8 for the registration of the REIT Scheme, appoint a Valuer for the REIT
Scheme after the terms of reference for the Valuer have been approved by the Commission.

(2) The Valuer shall be appointed for a period of two (2) years and may not be re-appointed as
a Valuer for the REIT Scheme until the lapse of two years from its last retirement.

(3) The RMC shall appoint a separate Valuer for every REIT Scheme managed by it.

(4) The RMC shall within two (2) working days of the appointment of the Valuer inform the
Commission of such appointment and provide a copy of the contract entered into with the Valuer.

19. Conditions applicable to a Valuer.- (1) No person shall be appointed as a Valuer unless
it fulfils the following criteria:
(a) it is incorporated as a company limited by shares under the Ordinance or gives the
Commission an undertaking to convert into a company limited by share within six
months of its appointment as a Valuer;
(b) it is a member of the Pakistan Engineering Council or the Pakistan Council of
Architects and Town Planners or has a minimum of three engineers or architects as
full time employees registered with the Pakistan Engineering Council or the
Pakistan Council of Architects and Town Planners;
(c) it is on the list of approved valuers of Panel-I and Panel-II within the unlimited
valuations category maintained by Pakistan Banks Association;
(d) it has on its payroll a minimum of ten permanent employees comprising of
surveyors, engineers and other professionals who are qualified to conduct the
valuation of the Real Estate; and
(e) the Valuer is independent and satisfies the following requirements:
i. the RMC or the Trustee or any of their directors or Key Executives are not
Connected Persons of the Valuer;
ii. the Valuer does not have any financial, professional or other interests that

Page 17 of 43
could affect its ability to render unbiased professional services to the REIT
Scheme; and
iii. its promoters, directors, members or partners, as the case may be, have
never been convicted of any offence involving moral turpitude.
(2) Notwithstanding anything contained in these Regulations a foreign Valuer of established
international repute may be appointed by the RMC after the approval of the Commission and
upon such conditions as the Commission may specify.

20. Obligations of the Valuer.- The Valuer shall:
(a) not hold Units of the REIT Scheme for which it has been appointed as a Valuer;
(b) before the registration of the REIT Scheme and thereafter at least once every
quarter value the Real Estate in accordance with Schedule IV and produce a
Valuation Report on all Real Estate acquired or intended to be acquired, developed
or sold by the RMC for the REIT Scheme;
(c) ensure that the valuation methodology adopted by it is in line with the global best
practices prevalent in the real estate industry;
(d) ensure that its opinion and valuation is objective and independent of its business or
commercial relationships; and
(e) immediately inform the RMC and the Trustee of any circumstances or factors that
come into the knowledge of the Valuer which can reasonably affect the accuracy of
the last Valuation Report submitted by the Valuer.

21. Declaration by the Valuer.- The Valuer, at the time of appointment and at the end of
each quarter, shall furnish a declaration to the RMC and the Trustee, stating that it meets the
requirements specified in Regulation 19.

22. Basis of valuation.- (1) The Valuer shall value the Real Estate on the basis of market
value.

(2) Any assumptions used in the valuation shall be clearly stated in the Valuation Report, and
must be realistic, relevant and adequately substantiated by reference to physical, functional and
market factors.

23. Annual fee of the Valuer. - The Valuer shall be paid a predetermined amount of annual
fee and such fee shall not be contingent upon the value of the Real Estate as determined by the

Page 18 of 43
Valuer.

24. Limitation of Approved valuation.- (1) Acceptance by the Commission of any
documents enumerating the valuation of Real Estate or REIT Assets or issuance of any approvals
or permissions based on such documents shall not be construed as an endorsement of accuracy of
such valuation by the Commission.

(2) The Valuer shall at all times perform its obligation with competence, honesty, integrity and
professionalism, and shall remain impartial while rendering professional services.

25. Removal of the Valuer.- (1) The Commission may remove the Valuer if:
(a) the Valuer goes into liquidation, becomes bankrupt or if a receiver or administrator
is appointed over its assets;
(b) for reasonable cause, the RMC or the Trustee states in writing that a change in the
Valuer is desirable in the interest of the Unit Holders;
(c) the Unit Holders pass a resolution requiring the removal of the Valuer; or
(d) the Valuer contravenes any provision of the Ordinance, the Rules, these
Regulations, or any directives, code or guidelines issued by the Commission.

(2) For purposes of clause (c),
(i) the Commission may call a meeting of the Unit Holders on a petition of twenty
(20) percent Unit Holders; and
(ii) the Valuer shall be given the opportunity to be present in the meeting and defend
himself.

(3) The Commission shall not remove the Valuer under Regulation 25 (b) or (d) unless it
has provided the Valuer an opportunity of being heard.

(4) Upon retirement or removal of the Valuer, the RMC shall appoint a new Valuer that meets
the criteria under these Regulations and inform the Commission of the appointment as required
under Regulation 18(4).

26. Power of the Commission to cause valuation.- (1) The Commission, if it deems
necessary, may cause another valuation of Real Estate or any REIT Assets by a Valuer appointed
by the Commission.

Page 19 of 43

(2) The valuation carried out under Regulation 26(1) shall be final and binding.

(3) Any fees and costs incurred in this respect shall at first instance be paid by the Commission
and then may be claimed by the Commission from the REIT Scheme.

CHAPTER VI. Investments, Borrowing and Dividend Policy

27. Investment policy.- (1) The investment policy of a REIT Scheme shall be clearly stated
by the RMC in the business plan.

(2) Notwithstanding Regulation 27(1), the REIT Scheme shall not invest in such assets which
arespecified by the Commission through a notification in the Official Gazette.

28. Policy for Customer Advances and borrowing.- (1) In case of a Developmental REIT
Scheme, the aggregate of (i) borrowings from financial institutions and capital markets and (ii)
Customer Advances, shall not, at any time, exceed sixty (60) percent of the REIT Fund and shall
be in accordance with the policy stated for this purpose in the constitutive documents.

(2) In case of a Rental REIT Scheme, an RMC may borrow from financial institutions and
capital markets provided that the aggregate borrowing shall not at any time exceed thirty (30)
percent of the REIT Fund.

(3) The policy for Customer Advances and borrowings by the RMC and maximum limits
thereof, shall be disclosed by the RMC in the constitutive documents.

(4) All borrowing by the RMC shall be conducted on an arms length basis.

(5) Disclosure about Customer Advances, borrowings and liabilities of the REIT Scheme shall
be made in the quarterly and the annual accounts of the REIT Scheme and shall include:
(a) The total borrowing as a percentage of the REIT Fund, the terms of such
borrowings and the collateral provided against such borrowing; and
(b) Customer Advances as a percentage of REIT Fund and the terms of the agreement
for receipt of Customer Advances.

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29. Dividend policy.- (1) The dividend policy of the REIT Scheme shall be clearly stated in
its constitutive documents in consonance with the requirement that not less than ninety (90)
percent of the profits arising out of the REIT Scheme shall be distributed to the Unit Holders as
dividends in each financial year.
(2) Dividends shall be paid in cash, or through issuance of bonus Units if allowed by the
Commission, on a reasonable request made by the RMC..

CHAPTER VII. Related Party Transactions

30. Related parties and related party transactions.- (1) Subject to Regulation 30(2) the
persons to be considered related party for the purpose of any transaction pertaining to the REIT
Scheme shall include the following:
(a) the RMC;
(b) the Trustee;
(c) the Valuer;
(e) a Connected Person, associated company or associated undertaking, director or
Key Executive of any of the entities in (a) to (c);
(f) close relative(s) of the persons in (e); and
(g) a Quality Assurance Manager or a Property Manager in relation to a Developmental
REIT Scheme or a Rental REIT Scheme, as the case may be.
(2) The services provided by the RMC, the Trustee, Valuer, Quality Assurance Manager or
Property Manager under these Regulations or the constitutive documents shall not be deemed
related party transactions.

31. Disclosure of related party transactions.- (1) The Offering Document, quarterly
and annual accounts of the REIT Scheme, in relation to related party transactions, shall disclose
the following:
(a) beneficial interest of the related party with respect to the REIT Scheme and any
changes therein;
(b) potential conflicts of interest of the related party with respect to the REIT Scheme
and the measures taken to address such conflicts; and
(c) the amount involved in transactions in respect of each related party for the relevant
period.

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(2) Where the business of related party is in competition with the activities of the REIT Scheme,
the Offering Document, quarterly and annual accounts of the REIT Scheme shall disclose the
following description of the business of the related party and its management so as to enable the
Unit Holders to assess the nature, scope and size of their business and the reasons why their
business may adversely impact the business of the REIT Scheme;

(3) Where the REIT Scheme acquires Real Estate from or sells it to a related party, the Offering
Document shall disclose the following:
(a) Valuation Report for the Real Estate that the related party has agreed to sell or buy;
and
(b) the price to be deposited in or paid out of the REIT Assets and other terms of the
transaction.

32. Prerequisites with regard to related party transactions.- (1) All related party
transactions in relation to a REIT Scheme shall be:
(a) carried out on an arms length basis;
(b) consistent with the investment objectives and strategy of the REIT Scheme;
(c) in the interests of the Unit Holders; and
(d) properly disclosed to the Unit Holders by the RMC.

(2) If cash is deposited with the Trustee or any other related party being an institution licensed
to accept deposits, the return shall be paid on the deposit at a rate not lower than the prevalent
market rate.

(3) All borrowing from a related party shall be done on strictly commercial terms and the
interest or mark-up rate for such borrowing shall not exceed the rate payable in similar
commercial transactions.

(4) The RMC, its delegates, the Valuer or any other related party shall not receive any benefit,
monetary or otherwise, from a property agent, real estate developer or real estate builder in
consideration for referring transactions involving the execution of the REIT Scheme to such
property agent, real estate developer or real estate builder.

(5) Where a related party transaction has been undertaken a disclosure of the total value of
such transactions and the nature and identity of the related party shall be made in the annual

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accounts of the REIT Scheme and where no such transaction is conducted during the financial
year, an appropriate statement to that effect shall be made in the annual accounts.

CHAPTER VIII. Miscellaneous

33. Application of the Ordinance to the activities of the REIT Scheme.- (1) The provisions
of the Ordinance governing matters relating to general meetings of a company, issue of right
shares, allotment and transfer of shares, prospectus, accounts and audit of listed companies,
declaration of dividend, shall as far as may be, mutatis mutandis apply to the general meetings of
the Unit Holders, issue of right Units, allotment and transfer of Units, prospectus, accounts and
audit of the REIT Scheme and declaration of dividend:
Provided that any Unit Holder who has a conflict of interest in the matter put up for
approval shall abstain from voting at the general meeting of the REIT Scheme:
Provided further that the RMC on the requisition of not less than twenty (20) percent
Unit Holders, shall call for a meeting of the Unit Holders.

(2) For the purpose of meetings of the Unit Holders the company secretary of the RMC shall
act as if he is the company secretary of the REIT Scheme.

(3) The International Accounting Standards notified for listed companies shall apply to the
REIT Scheme

34. Offer of Units.- (1) No Units shall be offered to the public by the RMC unless the
Offering Document, as cleared by the stock exchange, has been approved by the Commission.

(2) The RMC shall, prior to making an application for approval of the Offering Document by
the Commission, increase its paid up capital to at least Rupees 500 million or such other higher
amount as specified in the business plan.

(3) The Offering Document submitted for the approval of the Commission shall have the
approved Valuation Report of the Real Estate, approved business plan of the REIT Scheme,
detailed engineering design along with the construction schedule indicating Project timelines.

(4) All material information regarding the acquisition of Real Estate in the case of a

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Developmental REIT Scheme, or execution of a purchase agreement in the case of a Rental REIT
Scheme shall be disclosed in the Offering Document.

(5) The RMC shall make a public offering of at least twenty five (25) percent Units of the REIT
Scheme.

(6) The maximum number of Units to be subscribed by an investor through IPO shall not
exceed five (5) percent of the REIT Fund.

(7) The Units shall be offered to the public after the issue has been underwritten by a minimum of
three underwriters appointed by the RMC, not being Connected Persons of the RMC, Trustee,
Valuer, Quality Assurance Manager or one another:
Provided that where underwriting arrangements have been entered into, no single
underwriter shall hold more than twenty (20) percent of the total Units of the REIT Scheme.

(8) The RMC shall not issue more than fifty five (55) percent Units of the proposed REIT Fund to
pre-IPO investors and any such investor shall not hold more than ten (10) percent Units of the
REIT Fund.

(9) The par value of theUnits shall be Rupees ten (10).

35. Issuance of Units and expenses incurred.- (1) All expenses incurred in connection
with the establishment and registration of the REIT Scheme as well as the offer for sale, allotment
and issuance of the Units, including commission payable to the underwriter, shall be borne by the
RMC and reimbursed after the first annual audit of the RMC and REIT Scheme to the RMC out
of the REIT Fund in equal amounts paid annually over a period of five (5) years or the life of the
REIT Scheme, whichever is shorter, and the same shall be clearly stated in the constitutive
documents.

(2) Notwithstanding the generality of Regulation 35(1) the fees and charges payable from the
REIT Scheme are specified in Schedule V.

36. Advertisements and invitations to invest.- (1) Advertisements, marketing materials and
other invitations to the public to invest in a REIT Scheme through sale of Units including public
announcement, shall be submitted to the Commission for approval before issuance.

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(2) All advertisements, marketing materials, invitations and announcements shall have proper
risk warning statements, including a reference to the Offering Document for a detailed discussion
of the risk factors of the REIT Scheme, and shall be in accordance with such guidelines as the
Commission may specify.
37. Management fee payable to RMC.- (1) The RMC, in case of a Developmental REIT
Scheme, shall be entitled to an annual management fee not exceeding one (1) percent of the initial
REIT Fund for the life of the REIT Scheme and the same shall be stated in the Offering
Document.

(2) The RMC, in case of a Rental REIT Scheme, shall be entitled to an annual management fee
not exceeding three (3) percent of the annual operating income of the REIT Scheme.

Explanation: Annual operating income means annual revenue minus operating cost.

(3) The annual fee payable under Regulation 37(1) or (2) shall be payable in arrears after the
close of accounting year of the REIT Scheme and shall be chargeable as an expense to the said
accounting year of the REIT Scheme.

38. Annual monitoring fee.- (1) The monitoring fee, in case of a Developmental REIT
Scheme shall be 0.20 percent and in the case of Rental REIT Scheme shall be 0.10 percent of the
initial REIT Fund and paid annually to the Commission for the life of the REIT Scheme.

(2) The monitoring fee shall be paid as arrears within three months of the close of accounting
year of REIT Scheme and shall be chargeable as an expense to the REIT Scheme.

39. Fee payable to Trustee.- (1) A Trustee, in case of a Developmental REIT Scheme, shall
be entitled to an annual fee not exceeding 0.20 percent of the initial REIT Fund.
(2) A Trustee, in case of a Rental REIT Scheme, shall be entitled to an annual fee not exceeding
one-fifth of the fee charged by the RMC, payable in arrears on annual basis.

(3) The annual fee shall be paid as arrears after the close of accounting year of REIT Scheme
and shall be chargeable as an expense to the REIT Scheme.

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40. Fee payable to the Quality Assurance Manager or Property Manager.- (1) The
Quality Assurance Manager and Property Manager shall be entitled to a fee as negotiated by the
RMC and the same shall be disclosed in the Offering Document.
(2) The fee payable to the Quality Assurance Manager and Property Manager shall be charged
as an expense to the REIT Scheme.

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SCHEDULE I

FIT AND PROPER CRITERIA

APPLICATION AND SCOPE

(1) The Fit and Proper Criteria in relation to RMC is applicable to the following persons:

(i) Promoters of the RMC;
(ii) Director of the RMC;
(iii) Chief Executive of the RMC;
(iv) Key Executives of the RMC.

(2) A proposed director or chief executive of the RMC shall not assume the charge of their
respective office until their appointments have been approved by the Commission.

(3) The application for seeking approval of the Commission under clause (2) shall be
submitted by the RMC along with the requisite information required under Annex A and the
Affidavit as specified in Annex B.

(4) The appointment of Key Executives of the RMC does not require the approval of the
Commission, however the RMC shall ensure at the time of appointing a Key Executive that such
person qualifies the Fit and Proper Criteria.

(5) The fitness and propriety of any person shall be assessed by taking into account all the
relevant factors including but not limited to the following:

(d) Conflict of interest of such person with the business of the RMC.

Provided that 5(c) and (d) may not be considered while assessing the fitness & propriety of
promoters of the RMC.





(ii) has been involved in the mismanagement of investments, financial/business

(iii) has been the subject to adverse findings, after conducting an inquiry, by the
Commission or any other regulatory or professional body or government agency;

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(iv) has been actively involved in the management of a company/ firm whose
registration/ license has been revoked or cancelled or which has gone into
liquidation or other similar proceedings due to mismanagement of affairs, financial
misconduct or malpractices;

(v) is ineligible, under the Companies Ordinance, 1984 or any other legislation or
regulation, from acting as a director or serving in a managerial capacity of an
NBFC or a company;

(vi) has entered into a plea bargain arrangement with the National Accountability
Bureau;

(vii) does not have the requisite disclosed and verifiable financial resources in case of a
promoter of the RMC; and

(viii) does not have an established and proven track record of successfully running a
business enterprise for 3 to 5 years, preferably a public listed company.


In determining a persons financial soundness, the following shall be considered:

(i) whether such persons financial statements/record including wealth statements/
income tax returns/ assessment orders are available;

(ii) whether the person has been declared by a court of competent jurisdiction as
defaulter in repayment of loan to a financial institution exceeding Rupees one
million;

(iii) whether the person has applied to be adjudicated as an insolvent and his
application is pending;


(v) whether the person has been declared a defaulter by a stock exchange.


In determining a persons competence and capability the following shall be considered:

(i) the directors should be individuals having management/business experience of at
least five years at a senior level;

(ii) the directors shall have experience and knowledge in any profession such as
banking, mutual funds, accounting, law, real estate, engineering, valuation or
information technology, etc;

(iii) the chief executive should have a minimum experience of seven to ten years in a
senior management position, preferably in the regulated financial services sector;

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(iv) the chief executive should have the capacity to successfully undertake the
responsibilities of the position; and

(v) the Key Executives must be qualified professionals possessing relevant experience
and certification relating to the job/ assignment.

(4) Conflict of interest

The proposed directors or chief executive of RMC shall not:

(i) be a director in any other RMC engaged in a similar business in Pakistan.

Provided that this condition shall not apply to nominees of the Commission,
Federal or Provincial Governments on the board of any RMC;

(ii) be a director, chief executive, chief financial officer, chief internal auditor,
research analyst or a trader (by whatever name/designation called) in a stock
brokerage house or in any company/entity owned and controlled by a member of a
stock exchange; and

(iii) be a member of a stock exchange engaged in the business of brokerage or is a
spouse of such member.

(5) The Fit and Proper Criteria is perpetual in nature and a RMC shall ensure compliance with
the provisions of Fit and Proper Criteria.

(6) All persons subject to Fit and Proper Criteria must submit any change in the submitted
information through the company secretary of the RMC to Specialized Companies Division of the
Commission.

(7) Any violations or circumvention of the Fit and Proper Criteria shall be dealt with under the
provisions of the Ordinance.

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Annexure A

Information to be provided by Promoters,
proposed director and proposed chief executive of the RMC

B Fathers/Husband Name:
b C.N.I.C #(attach copy)
c Latest photograph
d Nationality:
e Age:
f Contact details:
iii) Tel:
iv) Mobile:
v) Fax:
vi) E-mail:
g National Tax Number:
h Present occupation:
i Qualification(s):
i) Academic:
ii) Professional:
j Experience:
(Positions held during the last 10 years along with name and address of
company/ institution)

2. Nature of directorship Executive Non-executive
Status of directorship Nominee director

Number of shares subscribed/held
_____________________________nominated by _____(name of
shareholder)___________________________




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6.
Names of persons on the board of the RMC who are related to the applicant.

FITNESS PROPRIETARY OF KEY EXECUTIVES

Signature_________________________________________________________

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Annexure B

AFFIDAVIT
Before the Securities and Exchange Commission of Pakistan

I, ________________ son/daughter/wife of _______________________ adult, resident of
_______________________________________________________________________ and holding
CNIC/Passport No. ______________________________ do hereby state on solemn affirmation as under:-
1. That I am eligible for the position of ___________according to the Fit and Proper Criteria for the
position of _________, annexed to the Real Estate Investment Trust Regulations, 2008.
2. That I hereby confirm that the statements made and the information given by me is correct and that
there are no facts which have been concealed.
3. That I have no objection if the Securities and Exchange Commission of Pakistan requests or
obtains information about me from any third party.
4. That I undertake to bring to the attention of the Securities Exchange Commission of Pakistan any
matter which may potentially affect my status for the position of ____________ as per the Fit and
Proper Criteria annexed to the Real Estate Investment Trust Regulations, 2008.
5. That all the documents provided to Securities Exchange Commission of Pakistan are true copies of
the originals and I have compared the copies with their respective originals and certify them to be
true copies thereof.

That I do hereby verify that the statements made above are correct to the best of my knowledge and belief
and nothing has been concealed therein.

DEPONENT


Signature _______________________
ADVOCATE
(Name and Seal)

Solemnly affirmed before me on this ______ day of _____________ at ______________ by the Deponent
above named who is identified to me by ________________, Advocate.

Signature______________________________
OATH COMMISSIONER FOR TAKING AFFIDAVIT
(Name and Seal)

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SCHEDULE II
CONTENTS OF THE TRUST DEED OF REIT SCHEME

The Trust Deed must inter alia contain the following not necessarily in the sequence given:

(i) Name of Trust.
(ii) Creation of Trust.
(iii) Transfer and grant of REIT Assets.
(iv) Object of the Trust.
(v) Authorization/approval of the Commission to constitute the Trust.
(vi) Parties to the Trust Deed identifying the Trustee as well as the beneficiaries.
(vii) Registered address of the Trustee along with place and date of creation of Trust.
(viii) Governing law and jurisdiction.
(ix) Duration and date of extinction of Trust.
(x) Circumstances for the revocation of the Trust along with the mechanism
specifically stating the power of the Commission to revoke the trust.
(xi) Duties, powers and rights of the RMC in relation to the trust.
(xii) Rights of the beneficiaries of the Trust.
(xiii) Duties, powers, rights and obligations of Trustee.
(xiv) Retirement or removal of Trustee, specifically giving the Commission the power to
remove the Trustee.
(xv) Mechanism for rectification of Trust Deed.
(xvi) Duties of the Trustee which may be delegated to third parties.
(xvii) Appointment of the auditor.
(xviii) Circumstances and procedure for the change of RMC upon the request of the Unit
Holders.
(xix) Procedure for change of Trustee.
(xx) Policies for borrowings and issuance of Units.
(xxi) Provisions that Units shall be listed in accordance with the listing regulations of the
stock exchange and shall be freely tradable subject to Regulation 3(2)(a) of the
Regulations.
(xxii) Specification of the size of REIT Fund.
(xxiii) Investment policy, specifically authorizing the Trustee to invest the REIT Fund.
(xxiv) Dividend policy.
(xxv) Accounting period and audit;
(xxvi) Mechanism for the distribution of REIT Assets, upon the extinction or revocation
of the Trust and the manner in which the beneficiaries shall be transferred their
proportionate shares of the sale proceeds specifically stating that creditors will have
the first right at the time of distribution of REIT Assets.
(xxvii) Utilization of REIT Fund, which may include the following:
Management fee of RMC.
Reimbursements of expenses to RMC which have been borne by the RMC
for setting up the REIT Scheme.
Fee to be paid to Trustee.
Fee payable to Commission.
Auditors fees.

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Listing fee for the REIT Scheme, including renewals payable to stock
exchange;
Legal fee and other relating expenses of the REIT Scheme.
Underwriting commission and take-up commission.
Commissions to the banker to the issue.
Remuneration of service providers e.g. letting agents, security etc.
Fees and charges of the Valuer for valuing REIT Assets.
Fees and charges of the civil works contractor.
Quality Assurance Manager / Property Manager fees.
Taxes, fees, duties and other charges applicable to the REIT Scheme.
Bank charges & financial cost with respect to the REIT Scheme.
Any printing costs and related expenses for issuing the REIT Schemes
quarterly, half-yearly and annual accounts, etc.
(xxviii) Arbitration.

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SCHEDULE III

INFORMATION TO BE DISCLOSED IN THE
OFFERING DOCUMENT BY THE REIT SCHEME

ote: - No offering document shall be issued to the public unless summarised versions of
Valuation Report of the Real Estate and the approved business plan of the REIT Scheme is
attached to it.

The Offering Document shall in addition to the requirements contained in the Ordinance and
guidelines made thereunder also contain the following information:

1. Date of publication of the Offering Document.

2. Stock Exchanges clearance for the Offering Document.

3. Commissions approval for the Offering Document.

4. REIT Scheme
(a) Name and registered address of the REIT Scheme.
(b) Date and registration number of REIT Scheme.
(c) Name and registered address of Trustee.
(d) Abridged version of the latest audited accounts of the Trustee not older than six
months failing which a certificate from the auditor evidencing the net worth of the
company;
(e) Summary of the entire REIT Scheme highlighting potential benefits and risks
involved.
(f) Name of the directors of Trustee.
(g) Duration and date of termination of the REIT Scheme.
(h) Summary of the substantive provisions of the Trust Deed.
(i) Commissions approval of the Real Estate under Regulation 6.
(j) Beneficial interest of the related parties, if any, with respect to the REIT Scheme.
(k) Potential conflicts of interest of the related party, if any, with respect to the REIT
Scheme.
(l) A description of the business of the related party and its management so as to
enable the Unit Holders to assess the nature, scope and size of their business and
the reasons as to how their business may be in competition with the Project and
activities of the REIT Scheme.
(m) Costs of advertisements relating to the REIT Scheme.
(n) Fee negotiated with the Quality Assurance Manager or Property Manager.

5. RMC
(a) Name and Registered address of the RMC.

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(b) Incorporation certificate of the RMC.
(c) Abridged version of audited balance sheet and profit and loss statement of the
RMC not older than six months failing which a certificate from the auditor
evidencing the net worth of the company.
(d) Board of directors, chief executive and company secretary of the RMC and their
profile/particulars.
(e) Names of shareholders along with their shareholding in the RMC.
(f) Duties and power of the RMC.
(g) Certificate from the RMC that the related party is capable of performing its duty in
relation to the REIT Scheme independent of its other business, if any.

6. Corporate Directory
The names, registered addresses and contact numbers of the following parties, where
applicable:

(a) Valuer;
(b) Quality Assurance Manager;
(c) Property Manager;
(d) Consulting engineer/design firm or architect;
(e) Civil works contractor;
(f) Auditor of the REIT Scheme;
(g) Underwriter;
(h) Bankers to the issue;
(i) Registrar of the REIT Scheme;
(j) Legal adviser of the REIT Scheme; and
(k) Regulatory authorities.

7. REIT Assets

(a) Location map with address of Real Estate along with name of concerned
authority/jurisdiction.
(b) Photographs and drawings of the Real Estate along with accessibility map.
(c) Type of Real Estate, whether lease hold or free hold.
(d) Approval for the Project from the concerned regulatory authorities
(e) Date and value at which the Real Estate has been transferred to Trustee.
(f) Valuation Report of the Real Estate.
(g) Copy of the certificate from the auditor of REIT Scheme that Real Estate has been
transferred in the name of Trustee.
(h) A due diligence certificate from a lawyer that the title of the Real Estate is free of all
defects and encumbrances and all necessary approvals/ permissions/ NOCs of the
concerned local authorities required prior to start of project as per local byelaws has
been obtained.
(i) In case of Rental REIT Scheme, certificate from auditor of the REIT Scheme that
RMC has entered into a binding purchase agreement on 25 percent down payment to

Page 36 of 43
the seller of the Real Estate.
(j) Copy of the approved business plan and the engineering design.
(k) Investments proposed to be made from the REIT Fund.
(l) Material information regarding the acquisition of Real Estate in the case of a
Developmental REIT Scheme or execution of a purchase agreement in the case of a
Rental REIT Scheme.

8. Fund size
(a) Total size of the REIT Fund.
(b) Units taken up by the RMC and pre-IPO investors, if any.
(c) Names and addresses of pre-IPO investors along with their percentage held.
(d) Certificate from the auditor of REIT Scheme that Units equivalent to the value of Real
Estate transferred in the name of Trustee, has been taken up by RMC.
(e) Certificate from auditor of the REIT Scheme stating whether the subscription money
from pre-IPO investors has been received or not.
(f) Number of Units offered to the public

9. Units
(a) Face value of Units.
(b) Lot size of Units.
(c) Opening and closing date of subscription.
(d) Condition that no investor shall subscribe for more that 5 percent of the Units.

10. Detail of Expenses to be born by the REIT Scheme
(a) Management fee of RMC.
(b) Amount of expenses which have been borne by the RMC for setting up the Trust.
(c) Fee to be paid to the Trustee.
(d) Fee payable to the Commission.
(e) Fee payable to CDC.
(f) Auditor fees of the REIT Scheme.
(g) Listing fee, including renewals payable to stock exchange for the listing of Units of
the REIT Scheme.
(h) Legal fee and other relating expenses of the REIT Scheme.
(i) Underwriting commission and take-up commission.
(j) Distribution charges, if any.
(k) Commissions to the banker to the issue.
(l) Fees and charges of the Valuer for valuing REIT Assets.
(m) Fees and charges of the civil works contractor.
(n) Remuneration of service providers e.g. letting agents, security etc.
(o) Fee to be paid to the Quality Assurance Manager /Property Manager.
(p) Taxes, fees, duties and other charges applicable to the REIT Scheme on its income
or its properties.
(q) Bank charges & financial cost with respect to the REIT Scheme.
(r) Any printing costs and related expenses for issuing the REIT Schemes quarterly,

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half-yearly and annual accounts, etc.

11. Distribution policy

The distribution policy, indicating the time period for distribution of dividend.

12. Financial Reports and accounts

(a) The accounting year of the REIT Scheme.
(b) Particulars and frequency of the financial reports to be sent to the Unit Holders.
(c) Policy on valuation of the REIT Schemes assets and determination of the NAV.
(d) Financial projections including projected balance sheet, profit and loss and cash
flow statements.
(e) Borrowing policy including the financial close from financial institutions, if any.
(f) Policy for Customer Advances.

13. Extinction of REIT Scheme

(a) A summary of the circumstances in which the REIT Scheme may be extinguished
and the manner in which the beneficiaries shall be transferred their proportionate
shares.
(b) Rights of creditors.

14. Risks
A statement that investment in the REIT Scheme is subject to risks and an exhaustive
description of the risks involved.

15. General information
(a) A list of documents concerning the REIT Scheme such as Trust Deed, business
plan, Valuation Report, audited accounts of the RMC and Trustee,
NOCs/approvals etc, shall be placed on the website of the RMC and provided free
of cost to the prospective investors.
(b) A statement that the RMC accepts responsibility for the information contained in
the Offering Document as being accurate at the date of publication.
(c) Construction schedule for the Project indicating deadlines and milestones.
(d) The

****

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SCHEDULE IV

VALUATION REPORT

The valuation shall conform to the applicable standards specified by International
Valuation Standards Committee (IVSC).
(1) Date of valuation

The Valuation Report shall be issued within one month of the valuation.

(2) The Valuation Report shall inter alia contain the following information.

(i) General Information

(a) The Real Estate being valued and the client.
(b) The assumptions used.
(c) Scope of assignment.
(d) Easements associated with the Real Estate.
(e) The following information provided by the RMC to the Valuer:
(i) Construction schedule along with milestones and deadlines.
(ii) Construction specifications.
(iii)Construction drawings.
(f) Date of the valuation.

(ii) Inspection of the Real Estate

(a) The date of inspection, name of the inspector and the site inspected.
(b) Details, where inspection of any part of the Real Estate was not possible.

(iii) Description and Details of Real Estate

(a) Location map and the address of the Real Estate along with the name of concerned
authority/jurisdiction.
(b) Photographs and drawings of the Real Estate along with accessibility map.
(c) Custodian of the title record e.g. LDA, CDA etc.
(d) Permissions/ NOCs from the concerned local authorities as per local byelaws. (Attach
copies of NOCs /permissions obtained).
(e) Any breach or violation of the local byelaws and regulations and its impact on the Project.
(f) In the case of Rental REITs, description of improvements and the present condition of the
Real Estate.
(g) Floor plan, maps, photos, and other visual aid.
(h) Sale/transfer history of the Real Estate.
(i) For properties generating rental income e.g. shopping complex, office building etc, details
of occupancy rate, tenancy schedule, types of income and operating costs etc.

(iv) Market and Neighborhood

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(a) A description of the surrounding area and developments, if any.
(b) Availability of communications, amenities and utilities in the surrounding area.
(c) The supply and demand situations affecting the Real Estate.
(v) Approach of valuation

A determination of the fair market value of the Real Estate based upon the following:

Type of REIT
Scheme
Approach (as defined by IVSC)
Developmental
REIT
Cost Approach

Rental REIT
(Use at least 2
methods)
1. Income Capitalization Approach
2. Sales Comparison Approach
3. Cost Approach

(vi) Valuation Analysis

(a) Highest and Best Use (considering land as vacant)

Explain and identify physically possible uses.
Explain and identify legally permitted uses.
Explain and identify financially feasible uses.
Explain and identify maximal productive use
State a conclusion of highest and best use as if site were vacant.

(b) Cost Approach
Explanation of the methodology and procedure of the Cost Approach.
Source and data used in estimating component costs.
Explanation of the replacement cost calculation and depreciation.
Mention value of land and value of construction separately and sum to reach the
opinion of value.

(c) Income Capitalization Approach
Explanation of the methodology and procedure of the Income Capitalization
Approach.
Present Real Estate historical operating data, current leases, etc.
Present comparable rental data in detail.
Project potential gross income based on comparables and actual.
Vacancy rates of similar properties and their actual occupancy rate.
Projected vacancy rate for the Real Estate.
Projected effective gross income for the subject Real Estate.
Present comparable expense data in detail.
Explanation of computation of discount rates appropriate to the Real Estate.

(d) Direct Sales Comparison
Explanation of the methodology of the Sales Comparison Approach.

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Specify the market unit of comparison such as area per square foot, number of
rooms, covered area, etc along with the maps, photographs and data of comparable
properties.
Factual comparable sales data in detail which inter alia includes the address of the
Real Estate, selling price, date of sale, data source and physical description of
comparable sales.
The relevant adjustments for age, location, time, and area.

(e) Opinion of value
Values determined by applying different valuation approaches.

Explanation of the relative strengths and weaknesses of various approaches and a
disclosure of the final value.

(vii) Declaration by the Valuer
A declaration according to the format attached as Annexure A.

Page 41 of 43
Annexure A
DECLARATION
I,...........(Name of the person
conducting the valuation)
of................(name of the Valuer company)
carried out a valuation of..........................................(Name and address
of the subject Real Estate)
and do solemnly and sincerely, to the best of my knowledge and belief declare:
1. That after an inspection of the Real Estate and a study of pertinent factors, including
valuation trends and an analysis of neighbourhood data the market value of the subject
Real Estate as on ...(date of valuation) is Rupees
..(amount in Rupee in both words and numbers).
2. That the statements of fact contained in this report are true and correct.
3. That I have not withheld any information.
4. That I have no interest in the Real Estate that is the subject of this report, and I have no
personal interest or bias with respect to the parties involved.
5. That I have not been instructed either by my company or the client to report a
predetermined value for the subject Real Estate.
6. That I am neither a director nor an employee of the RMC and do not have any financial
interest, direct or indirect, in the RMC.
7. That I have personally inspected the Real Estate that is the subject of this report.

Declared by:

..........................................
Name and signature:
Designation:
Date:

Witnessed by:

..........................................
Name and signature:
CEO of the Valuer Company
Date:

Page 42 of 43
SCHEDULE V

SCHEDULE OF FEES

[Rules 4, 5, 7A of the Rules and Regulations 8, 38 and 39 of the Regulations]

A) Application fees under the Rules:

FORM SUBJECT OF APPLICATION AMOUNT
(RS.)
Form I Application for permission to form an RMC. 500,000
Form II Application for licence to undertake or carry out an activity
or function.
250,000
Form IV Application for renewal of licence to carry out an activity
or function.
250,000

B) Application Fees under the Regulation 8:

SUBJECT OF APPLICATION AMOUNT
(RS.)
Regulation 8 Application for registration of a REIT Scheme 1,000,000

C) Other Fees under Regulations 38 and 39:

Fee payable by
REIT Scheme
Developmental REIT

Rental REIT

Regulation 38 Annual Fee payable
to RMC
Up to 1 % of initial REIT Fund

Up to 3 % of the annual operating
income

Regulation 39 Annual Monitoring
Fee payable to the
Commission
Equal to 0.20% of initial REIT Fund

Equal to 0.10% of initial REIT
Fund

Regulation 40 Annual Fee payable
to Trustee
Up to 0.20% of initial REIT Fund Up to (1/5
th
) of annual fee
charged by RMC
Regulation 41 Fee payable to
Quality Assurance
Manager/ Property
Manager Fee
Negotiable

Negotiable

Regulation 23 Fee payable to
Valuer
Negotiable

Negotiable

Fee payable to
Valuer
Negotiable Negotiable

*****

Page 43 of 43

No. SEC/SCD/NBFCD- ED/52/2008

(Abdul- Rehman Qureshi)
Advisor/Secretary

Page 1 of 11

SECURITIES AND ECHANGE COMMISSION OF PAKISTAN

Islamabad, J une 16
th
, 2010

NOTIFICATION

S.R.O. 516 (I) /2010.- In exercise of the powers conferred by sub-section (2) of
section 282B of the Companies Ordinance, 1984 (XLVII of 1984), the Securities and
Exchange Commission of Pakistan is pleased to make the following amendments in the
Real Estate Investment Trust Regulations, 2008, namely,-

In the aforesaid Regulations,-

(1) in regulation 2, sub-regulation 1,-

(a) in clause (iii), after the word sale the words or rent shall
be inserted;

(b) in clause (iv), the comma and words , and its subsequent sale at
the end shall be omitted;

(c) after clause (iv), amended as aforesaid, the following new clauses
shall be added, namely,-

(iva) Developmental Component of Hybrid REIT Scheme
means that part of the Hybrid REIT Scheme which is for the
development of Real Estate for industrial, commercial or
residential purposes, through construction or refurbishment;

(ivb) Hybrid REIT Scheme means a REIT Scheme which has a
Developmental Component of Hybrid REIT Scheme and a Rental
Portfolio of Hybrid REIT Scheme; ;

(d) in clause (ix), for the word first the word initial shall be
substituted;

(e) for clause (xvii), the following shall be substituted, namely,-

Page 2 of 11

(xvii) Project means a project consisting of a single or multiple
sites of a Developmental REIT Scheme, a single building or
multiple buildings in the case of a Rental REIT Scheme, or a
combination of both in case of a Hybrid REIT Scheme, managed
by the RMC as per the business plan approved by the
Commission; ;
(f) in clause (xviii), after the word Scheme at the end the words or
the rental portfolio of a Hybrid REIT Scheme shall be inserted;
(g) in clause (xxiii),-
(i) for the word and appearing for the third time a comma
shall be substituted; and
(ii) after the word Scheme appearing at the end the words or a
Hybrid REIT Scheme shall be inserted; and

(h) after clause (xxviii), the following new clause shall be inserted,
namely,-
(xxviiia) Rental Portfolio of Hybrid REIT Scheme means that
part of the Hybrid REIT Scheme which is for making investments
in commercial or residential Real Estate with the purpose of
generating rental income from it; ;

(2) in regulation 3,
(a) in sub-regulation (1),-

(i) in clause (a), after the word rupees appearing at the
end the words and its equity shall not be less than its paid
up capital shall be inserted;

(ii) for clause (b), the following new clauses shall be
substituted, namely,-

(b) before applying for the approval of the Offering
Document increase its paid up capital to at least two
hundred (200) million rupees;
Page 3 of 11

(ba) after the approval of the Offering Document
maintain equity of at least two hundred (200) million ; ;

(b) in sub-regulation (2),-

(i) in clause (b), for the word, brackets and numbers fifty
(50) the word, brackets and numbers sixty (60) shall be
substituted;

(ii) in clause (d), after the word more the word public shall
be inserted;

(iii) in clause (f), -

(I) for the word offer the word issue shall be
substituted; and

(II) the words and are transferred to RMC shall be
omitted;

(3) in regulation 4,-

(a) in clause (g), for the word, brackets and numbers fifty (50) the
word, brackets and numbers sixty (60) shall be substituted;

(b) for clause (f), the following clauses shall be substituted namely, -

(f) ensure that proceeds from the Project are distributed
amongst the Unit Holders;

(fa) ensure that after the disposal of the Project the REIT
Scheme is dissolved; ;

(c) in clause (i),-

(i) for the words shall be the word are shall be substituted;
and

(i) the words and comma in each financial year, shall be
omitted;

(d) for clause (j), the following new clause shall be substituted,
namely,-

(j) ensure that the REIT Fund has a minimum fund size of
Page 4 of 11

rupees two (2) billion for Rental REIT Scheme or a
Developmental REIT Scheme and rupees three (3) billion
for a Hybrid REIT Scheme and the Trust Deed provides for
the same; ;

(d) in clause (p), the words and borrowings from financial institutions
and capital markets shall be omitted;

(e) in clause (q),-

(i) after the word received the words by the Trustee shall
be added; and
(ii) the words and that the borrowings are repaid on their due
dates shall be omitted;

(f) in clause (w), the words and subsequent sale shall be omitted;

(g) after clause (x), the following new clause shall be added, namely,-

(xa) in case of a Hybrid REIT Scheme, be responsible for the
development or refurbishment and/or subsequent sale or rental of
the Real Estate according to the approved business plan;;

(h) in clause (z), in the beginning the words, brackets, numbers and
comma notwithstanding anything contained in regulation
(3)(2)(f), shall be inserted; and

(h) in clause (mm), after the word rating appearing for the first time
the word for itself and shall be inserted;


(a) in clause (f), after the word Scheme appearing for the first time
the words or Developmental Component of Hybrid REIT
Scheme shall be added;

(b) in clause (g),-

(i) the words of registration shall be omitted;

(ii) after the word Scheme the words or Rental Portfolio of
Hybrid REIT Scheme shall be inserted;
Page 5 of 11

(iii) in sub-clause (i) the word and appearing at the end shall
be omitted;

(iv) for sub-clause (ii), the following new sub-clauses shall be

(ii) ensure that a binding purchase agreement for the
Real Estate has been executed in the name of the
Trustee after the approval of the Commission and
the purchase has been entered into upon payment of
ten (10) percent of the total value of the Real Estate
which may be in cash or Units of the REIT Scheme;
and

(iii) ensure that the Real Estate has been granted
completion certificate by the concerned authorities
and is clear from any defect which may render it
ineligible for rent; and;


(a) in clause (l), sub-clause (i), for the word scheme the words
Scheme or Developmental Component of Hybrid REIT
Scheme shall be substituted;

(b) in clause (m),-

(i) after the word Scheme the words or Rental Portfolio of
Hybrid REIT Scheme shall be added; and

(ii) for the words, brackets and numbers RMC has entered
into a binding purchase agreement on twenty five (25)
percent down payment to the owner of the Real Estate the
words requirements of Regulation 7(g) have been
fulfilled shall be substituted; and

(c) in clause (n), after the word Scheme appearing for the first time
the words or Developmental Component of Hybrid REIT
Scheme shall be added;

(6) in regulation 15, in clause (l), -

(a) after the word or the words and comma Developmental
component of Hybrid REIT Scheme, or shall be inserted;

Page 6 of 11

(b) after the word Scheme appearing at the end the words or
Rental component of Hybrid REIT Scheme shall be inserted; and

(c) in clause (m), the words borrowing and shall be omitted;

(7) in regulation 17, in sub-regulation (1),

in proviso to clause (c), for the numbers, brackets and words 17(b) or
(c) the number, brackets and words 17(1)(b) or 17(1)(c) shall be
substituted;


(a) for sub-regulation (3), the following new sub-regulation shall be

(3) Any fees and costs incurred on valuation, before the launch
of a REIT Scheme, shall be paid by the Commission and then may
be claimed by the Commission from the respective RMC if the
REIT Scheme is not approved for registration. and

(b) after sub-regulation (3) amended as aforesaid the following new
sub-regulations shall be inserted, namely,-

(4) Where fees and costs is incurred by the Commission on
valuation, before the launch of a REIT Scheme and the REIT
Scheme is subsequently registered, the Commission may claim the
incurred cost from the REIT Scheme.

(5) Fees and costs incurred on valuation after the launch of a
REIT Scheme shall be paid by the REIT Scheme.;

(9) in CHAPTERT VI, in the heading, the comma and word , Borrowing
shall be omitted;


(a) in sub-regulation (1), after the word plan at the end the words
and constitutive documents shall be added; and

(b) in sub-regulation (2), the word not shall be omitted;

(11) for regulation 28, the following new regulation shall be substituted,
namely,-
Page 7 of 11

28. Policy for Customer Advances. - (1) The policy for Customer
Advances and maximum limits thereof, shall be disclosed by the RMC in
the constitutive documents.

(2) The REIT Scheme may utilize up to thirty (30) per cent of Customer
Advances on the Project.

(3) An RMC shall not borrow money for the purposes of a REIT Scheme
and no borrowing is allowed against any assets of a REIT Scheme.

(4) A Developmental REIT Scheme or the Developmental Component of
Hybrid REIT Scheme may collect up to ninety (90) per cent of the sale
value as Customer Advances.

(5) Disclosure about Customer Advances and liabilities of the REIT
Scheme shall be made in the quarterly and the annual accounts of the
REIT Scheme and shall include Customer Advances as a percentage of
REIT Fund and the terms of the agreement for receipt of Customer
Advances. ;

(12) in regulation 29, in sub-regulation (1), the words in each financial year
at the end shall be omitted;

(13) in regulation 30, in sub-regulation (1), for clause (f), the following new
clause shall be substituted, namely,-

(f) a Quality Assurance Manager or a Property Manager in relation to
a Developmental REIT Scheme or Developmental Component of
Hybrid REIT Scheme or a Rental REIT Scheme or Rental
portfolio of Hybrid REIT Scheme as the case may be. ;

(14) in regulation 32, sub-regulation (3) shall be omitted;


(a) sub-regulation (2) shall be omitted;

(b) for sub-regulation (4), the following new sub-regulation shall be

(4) All material information regarding the acquisition of Real
Estate in the case of a Developmental REIT Scheme or
Developmental Component of Hybrid REIT Scheme, or execution
of a purchase agreement in the case of a Rental REIT Scheme or
Page 8 of 11

Rental Portfolio of Hybrid REIT Scheme shall be disclosed in the
Offering Document. ;

(c) in sub-regulation (8), for the full stop at the end full colon
shall be substituted and thereafter at the end a new proviso shall be
added, namely,-

Provided that an institution owned or controlled by Federal
Government may hold Units of a RIET Scheme up to fifty five
(55) per cent against the Real Estate being sold/transferred to
the REIT Scheme.


(a) after sub-regulation (2), the following new sub-regulation shall be
added, namely,-

(2A) The RMC, in case of a Hybrid REIT Scheme shall, for the
Developmental Component of Hybrid REIT Scheme be entitled to
an annual management fee not exceeding one (1) percent of the
developmental component forming part of the initial REIT Fund,
and for the Rental Portfolio of Hybrid REIT Scheme, the annual
management fee shall not exceed three (3) percent of the annual
operating income from the Rental Portfolio of Hybrid REIT
Scheme.;

(b) in sub-regulation (3), for the word or a comma shall be
substituted;

(c) after the number and bracket (2) the word, brackets and numbers
or (2A) shall be added; and

(d) after the word of appearing for the first time the words each
quarter of an shall be inserted;

(17) in regulation 38, sub-regulation (1) the following new sub-regulation shall
be substituted, namely,-

(1) The monitoring fee paid annually to the Commission for the life of
the REIT Scheme,

(i) in case of a Developmental REIT Scheme shall be 0.20
percent of the initial REIT Fund,

Page 9 of 11

(ii) in the case of a Rental REIT Scheme shall be 0.10 percent
of the initial REIT Fund, and

(iii) in the case of a Hybrid REIT Scheme, for the
Developmental Component of Hybrid REIT Scheme, shall
be 0.20 percent of the developmental component forming
part of the initial REIT Fund, and for the Rental Portfolio
of Hybrid REIT Scheme shall be 0.1 percent of rental
component forming part of the initial REIT Fund. ;

(18) in regulation 39, after sub-regulation (2), the following new sub-regulation
shall be inserted, namely,-

(2A) A Trustee, in case of a Hybrid REIT Scheme, shall for the
Developmental Component of Hybrid REIT Scheme be entitled to an
annual fee not exceeding 0.20 percent of the developmental component
forming part of the initial REIT Fund, and for the Rental Portfolio of
Hybrid REIT Scheme the fee shall not exceed one-fifth of the fee charged
by the RMC on the rental component forming part of the REIT Fund.

Explanation: - For the purpose of Regulations 37, 38 and 39 the
developmental component forming part of the initial REIT Fund means
the part of the REIT Fund which will be utilized for funding the
Developmental Component of Hybrid REIT Scheme and the rental
component forming part of the REIT Fund means the part of the REIT
Fund which will be utilized for the Rental Portfolio of Hybrid REIT
Scheme. ;

(19) in Schedule I,-

(a) in clause (1), sub-clause (viii), before the word does the words and
comma in case of promoters, shall be inserted;

(b) in clause (4),-
(i) in sub-clause (ii), for the words member of a stock
exchange the words stock brokerage house shall be
substituted; and

(ii) in sub-clause (iii), after the word spouse the words or
dependent shall be added;

(20) in Schedule III, in clause (7), in sub-clause (i), for the numbers 25 the
numbers 10 shall be substituted;
Page 10 of 11

(21) in Schedule IV,-

(a) in clause (2), in sub-clause (v), for the words based upon the
words by using either two of shall be substituted; and the table
shall be substituted with the following new table, namely,-

Type of REIT
scheme
Approach (as defined by IVSC)
REIT Scheme
1. Income Capitalization Approach
2. Sales Comparison Approach
3. Cost Approach

and

(22) in Schedule V,-

(a) for table (C), the following new table shall be substituted, namely,-

Fee payable
by REIT
Scheme
Developmental
REIT

Rental REIT

Hybrid REIT
Regulation
37
Annual Fee
payable to
RMC
Up to 1 % of
initial REIT Fund

Up to 3 % of the
annual operating
income

for the
Developmental
Component of
Hybrid REIT
Scheme, not
exceeding one (1)
percent of the
developmental
component
forming part of
the initial REIT
Fund, and for the
Rental Portfolio
of Hybrid REIT
Scheme, not
exceed three (3)
percent of the
annual operating
income from the
Rental Portfolio
of Hybrid REIT
Scheme.
Regulation
38
Annual
Monitoring
Equal to 0.20% of
initial REIT Fund
Equal to 0.10%
of initial REIT
for the
Developmental
Page 11 of 11

Fee payable
to the
Commission
Fund

Component of
Hybrid REIT
Scheme, 0.20
percent of the
developmental
component
forming part of
the initial REIT
Fund, and for the
Rental Portfolio
of Hybrid REIT
Scheme, 0.1
percent of rental
component
forming part of
the initial REIT
Fund
Regulation
39
Annual Fee
payable to
Trustee
Up to 0.20% of
initial REIT Fund
Up to (1/5
th
) of
annual fee
charged by
RMC
for the
Developmental
Component of
Hybrid REIT
Scheme not
exceeding 0.20
percent of the
developmental
component
forming part of
the initial REIT
Fund, and for the
Rental Portfolio
of Hybrid REIT
Scheme shall not
exceed one-fifth
of the fee charged
by the RMC on
the rental
component
forming part of
the REIT Fund
Regulation
40
Fee payable
to Quality
Assurance
Manager/
Property
Manager
Fee
Negotiable

Negotiable

Negotiable

Regulation
23
Fee payable
to Valuer
Negotiable

Negotiable

Negotiable

________________________________________________________________________
No. SEC/SCD/REITs/Reg/2010/32/________
Advisor/Secretary
********
Islamabad, July 27, 2010

NOTIFICATION

S.RO. 686 (I) /2010.- In exercise of the powers conferred by sub-section (2) of section 282B of
the Companies Ordinance , 1984 (XLVII of 1984), the Securities and Exchange Commission of
Pakistan is pleased to make the following amendment in the Real Estate Investment Trust
Regulations 2008, namely,-

In the aforesaid Regulations,-
(a) In Regulation 3, sub-regulation 2, clause (f), the words to the RMC shall be omitted.

[No: SEC/ SCD/REIT/REG/2010]
(Abdul-Rehman Qureshi)
Advisor/Secretary

- -
1

NOTIFICATION

slaaad ugust

S.R.O. 867(I)/2008.- In exercise of the powers conferred by sub-section (2) of section 282B
of the Companies Ordinance, 1984 (XLVII of 1984), the Securities and Exchange
Commission of Pakistan hereby makes the following Private Equity and Venture Capital
Fund Regulations, 2008 for the regulation of the Fund Management Companies and the
registration and regulation of the Private Equity and Venture Capital Funds and for matters
connected therewith and incidental thereto.

THE PRIVATE EUITY AND VENTURE CAPITAL FUND REGULATIONS, 2008
CHAPTER I
Preliminary

1. Short title and commencement. (1) These Regulations shall be called the Private Equity
and Venture Capital Fund Regulations, 2008.


2. Definitions. (1) In these Regulations, unless the context otherwise requires:-

(i) Capital Call means the demand made by the FMC for all or part of the
remaining amount of the subscription committed by the Holder;
(ii) Connected Person includes:-
(a) any person who directly or indirectly controls, beneficially owns or
holds ten (10) percent or more paid up capital of the FMC or the
Trustee;
(b) any member of a group of which persons specified in sub-clause (a)
forms part of; or
(c) any director or Key Executives of the FMC or the Trustee as the case
may be, or any of their Connected Person as specified in sub-clauses

- -
2
(a) and (b):
Explanation:- In this definition the term controls shall have the same
meaning as assigned to the term control under the Listed Companies
(Substantial Acquisition of Voting Shares and Takeovers) Ordinance, 2002;

(iii) Constitutive Documents means the principal documents governing the
formation of the Fund established by an FMC and includes the Trust Deed,
Placement Memorandum, Subscription Agreement and all related material
documents;

(iv) Credit Rating Company means a Credit Rating Company registered under the
Credit Rating Companies Rules, 1995 or any foreign credit rating company
whose rating is acceptable to the Commission;

(v) Eligible Investor means a person who intends to invest in the Fund established
by an FMC and executes a declaration, in the form specified in Schedule V;

(vi) Exchange shall have the same meaning as defined in section 2(1)(da) of
Securities and Exchange Ordinance, 1969 (XVII of 1969);

(vii) Fit and Proper Criteria means the criteria specified by the Commission and
annexed to these Regulations as Schedule II;

(viii) Foreign Entity means an entity or association established or formed outside
Pakistan and engaged in the business of private equity or venture capital;

(ix) Foreign Money means the money raised by a Foreign Entity from outside
Pakistan and transferred to Pakistan through banking channels for investment in
Investee;

(x) Form means any of the forms annexed to these Regulations or any other forms
as may be specified by the Commission for the purposes of these Regulations;

(xi) FMC means the Fund Management Company licensed by the Commission as

- -
3
a NBFC to launch the Fund and provide PE & VC Fund Management Services
with respect to it;

(xii) Fund means the Private Equity and Venture Capital Fund which is:-
(a) in the form of a closed-end trust structure established by a FMC and registered
with the Commission; or
(b) a Foreign Entity which has established a place of business in Pakistan and is
investing only Foreign Money in Pakistan and is registered with the
Commission;

(xiii) Holders means one or more Eligible Investor who is the legal owner of one or
more Units of the Fund established by an FMC and whose name appears in the
Register;

(xiv) Investee means a company incorporated in Pakistan in which Investible Funds
are invested;

(xv) Investible Funds means the capital raised through the issuance of Units and the
retained earnings;

(xvi) Key Executives includes the chief executive officer, chief financial officer,
chief accounting officer, chief operating officer, company secretary, internal
auditor and the compliance officer irrespective of their designation;

(xvii) NBFC means a non-banking finance company incorporated and licensed by
the Commission;

(xviii) Net Assets means the difference between the market value of assets and
liabilities of the Fund established by an FMC on any given date;

(xix) NAV per Unit means the Net Assets divided by the number of Units
outstanding at any given date;

(xx) Ordinance means the Companies Ordinance, 1984 (XLVII of 1984);

- -
4

(xxi) Placement Memorandum means a document, containing information specified
in Schedule IV, inviting Eligible Investors to invest in Units;

(xxii) PE & VC Fund Management Services mean the Private Equity and Venture
Capital Fund Management Services provided by the FMC or the Foreign Entity
as the case may be for the management and administration of the Fund in
accordance with these Regulations;

(xxiii) Private Placement means the sale of Units without a public advertisement for
offer to sell;

(xxiv) Register means the Register recording the details of the Units held by each
Holder;

(xxv) Regulations means the Private Equity and Venture Capital Fund Regulations,
2008 and their annexed Forms and Schedules;

(xxvi) Rules mean the Non-Banking Finance Companies (Establishment and
Regulation) Rules, 2003;

(xxvii) Schedule means the Schedule annexed to these Regulations;

(xxviii) Subscription Agreement means an agreement, between the FMC and the
Eligible Investor for subscribing to the Units, containing information specified in
Schedule VI;

(xxix) Trust Deed means the deed executed between the FMC and the Trustee with
respect to the Fund;

(xxx) Trustee means a trustee, appointed in respect of the Fund established by an
FMC in accordance with Regulation 15;

(xxxi) Units mean the instrument of ownership of the Fund established by an FMC

- -
5
signifying the beneficial interest of the Holders in the Fund.

(2) Words and expressions used in these Regulations in singular shall include plural and vice
versa and words importing masculine gender shall be taken to include the female gender.

meaning as assigned to them in the Ordinance and the Securities and Exchange Commission
of Pakistan Act (XLII of 1997), and the rules and regulations made under them.

CHAPTER II
Fund Management Company and Foreign Entities

3. Conditions applicable to FMC.- In addition to the conditions and requirements of the
Rules, a FMC shall:-
(a) have a minimum paid up capital of Rupees thirty (30) million;
(b) state in its memorandum of association that its exclusive object is to establish
the Fund and provide PE & VC Fund Management Services;
(c) ensure that each of its promoters, proposed directors and Key Executives
satisfy the Fit and Proper Criteria;
(d) appoint at least two of its promoters as directors;
(e) maintain adequate financial, technical, organizational and human resources,
and employ appropriate systems, procedures, processes and personnel to
provide PE & VC Fund Management Services in a proper and efficient
manner on an ongoing basis;
(f) not takeover the management of another Fund unless prior written approval
has been obtained from the Commission;
(g) maintain satisfactory internal controls and written compliance procedures
which address all applicable regulatory requirements; and
(h) pay to the Commission, such non-refundable fees as specified in Schedule I.

4. Obligations of the FMC.- A FMC shall:-
(a) manage the Fund, in accordance with the Constitutive Documents and all
applicable laws including notifications, circulars, guidelines and directives
issued under them in the interest of Holders, without gaining any undue

- -
6
advantage for itself or any of its Connected Persons;
(b) ensure that the Fund has minimum Investible Funds of Rupees two hundred
and fifty million and the initial subscription is not less then 10 percent of the
Investible Funds and the remaining balance is paid up within 36 months of the
registration of the Fund;
(c) ensure that in case of a Capital Call the Holders are given at least two weeks
time period in writing after a Capital Call is made;
(d) along with its Connected Persons, not hold more than 30 percent of the Units
of the Fund;
(e) carry out all transactions involving the Fund on an arms length basis;
(f) ensure that the investments made out of the Investible Funds are properly
identified and are held for the benefit of the Holders in accordance with the
provisions of the Constitutive Documents, the Rules, these Regulations and all
other applicable laws;
(g) issue Units to Eligible Investors after full payment for such Units has been
received by the Trustee;
(h) ensure that the issuance of Units is carried out in accordance with the
provisions of these Regulations, the Constitutive Documents and any
directions, guidelines and circulars issued by the Commission;
(i) maintain the Register of Holders or appoint an agent for the purpose;
(j) obtain the written approval of the Commission before delegating one or more
of its functions, and:
(i) ensure that its delegates have sufficient experience and financial
resources to enable them to conduct the delegated function;
(ii) demonstrate that proper due diligence procedures and management or
administrative structures are in place for the selection and on-going
monitoring of the delegates;
(iii) ensure that the agreement between the FMC and each of the delegate
clearly documents:
a. the demarcation of functions; and
b. the consideration payable by the FMC for the
performance of the delegated functions;
(iv) if it delegates its power to maintain the Register to an agent approved
by the Commission, inform the Commission, within two (2) working

- -
7
days of such delegation; and
(v) make payments to the delegate from its own account:
Provided that the FMC shall not delegate its function of performing PE
& VC Fund Management Services;
(k) be responsible for the acts or omissions of all persons, to whom it delegates
any of its functions as FMC and account for any loss in value of the Fund
where such loss is attributable to the FMC or any delegate of the FMC due to
their negligence or willful default;
(l) maintain at its registered office, proper books and record of account and
activities undertaken in connection with the Fund in order to enable a true and
fair view to be formed of the:
(i) assets and liabilities of the Fund;
(ii) the profit and loss accruing out of the operation of the Fund;
(iii) transactions undertaken with respect to the Fund;
(iv) amounts received in respect of issue of Units; and
(v) pay-outs, if any, by way of distributions to the Holders;
(m) maintain the books and record of the Fund till five years after the life of the
Fund;
(n) within three (3) months of close of the financial year of the Fund, prepare as
per the approved and applicable International Accounting Standards and
International Financial Reporting Standards, and transmit to the Holders and
the Commission, with respect to the Fund:
(i) the annual report;
(ii) the balance sheet stating details of investments depicting cost
and realizable value of such investments;
(iii) profit and loss statement;
(iv) cash flow statement;
(v) auditors report; and
(vi) statement of movement in NAV per Unit of the Fund;
(o) prepare, as per the approved and applicable International Accounting
Standards and International Financial Reporting Standards, and transmit to the
Holders and the Commission, within one month of the close of the first and
third quarter and two months of the close of the second quarter of the financial
year of the Fund, with respect to the Fund:

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8
(i) the balance sheet stating details of investments ;
(ii) profit and loss statement;
(iii) cash flow statement;
(iv) auditors report for the half yearly accounts;
Provided that the Commission may, subject to such conditions as it
considers necessary, allow the FMC to transmit the said quarterly accounts
electronically to the Holders;
(p) after the consent of the Trustee, appoint an auditor of the Fund upon its
establishment or the occurrence of any vacancy:
Provided that the auditor so appointed shall be from amongst the list of
auditors approved by the Commission and shall not be the auditor of the FMC
or the Fund for more than five consecutive years;
(q) ensure that no material change in the investment policy or objectives of the
Fund is made without the approval of the Holders through a special resolution;
(r) cause a determination of the NAV per Unit of the Fund to take place on an
annual basis;
(s) ensure that the latest NAV per Unit of the Fund along with the valuation
methodology employed is published in the annual accounts of the Fund;
(t) ensure that the Trust Deed is in accordance with Schedule III and provides for
the time and modality of the extinguishment of the Fund and the manner in
which the proportionate shares of the sale proceeds shall be transferred to its
Holders;
(u) immediately inform the Commission of any special resolution passed by the
Holders;
(v) ensure that after the extinguishment of the trust, the proceeds are distributed
amongst the Holders and the Fund is dissolved;
(w) provide a copy of the Constitutive Documents to the Eligible Investors; and
(x) immediately inform the Commission in writing if any information or
particulars previously submitted to the Commission are later found to be false
or misleading in any material particular or if there is any change in the
information already submitted.

5. Request for transfer of management of the Fund and cancellation of license of
FMC. (1) A FMC may transfer the management of a Fund managed by it to another

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9
licensed FMC, after the approval of the Holders of both the Funds is obtained through a
special resolution:
Provided that in such case the FMC and its promoters shall not vote at such meetings
and their presence shall not be counted towards the requisite voting for such special
resolution.

(2) A FMC shall apply to the Commission for the cancellation of its license, after it has
transferred the management and the Units to another FMC provided that it is not managing
another Fund.

6. Foreign Entity investing only Foreign Money.- (1) Notwithstanding the provisions of
these Regulations a Foreign Entity which is investing only Foreign Money in Pakistan shall
fulfill the following conditions:
(a) establish its office in Pakistan;
(b) immediately inform the Commission in writing of any change in the
information submitted to the Commission; and
(c) submit its application with a non-refundable application fee as specified in
Schedule I.

(2) In case only Foreign Money is to be invested in Investees, the Foreign Entity shall make
an application to the Commission in Form III for the registration of the Fund.

(3) If the Commission is satisfied with the application made under Regulation 6(2), it may
register the Foreign Entity in Pakistan as a Fund in Form IV:
Provided that the Commission may while registering the Fund impose such
conditions as it deems appropriate.

(4) A Foreign Entity which is investing only Foreign Money in Investees shall be exempted
from compliance with these Regulations except Regulations 6.

(5) The registration granted through Form IV may be cancelled by the Commission after
providing the Foreign Entity a reasonable opportunity of being heard.

7. Foreign Entity seeking local subscription.- Where in addition to the Foreign Money

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10
participation of local Eligible Investors is sought by the Foreign Entity or the Foreign Entity
wants to raise money exclusively from local Eligible Investors, the Foreign Entity shall form
an FMC and such FMC shall thereafter make an application for the registration of a Fund
under Regulation 10.

CHAPTER III
Registration of the Fund to be established by FMC

8. No Fund to operate without Registration.- No Fund established by an FMC shall operate
or be established unless it is registered with the Commission and no Units shall be offered
unless the Constitutive Documents have been approved by the Commission.

9. Conditions for registration of a Fund.- The Commission may register a Fund established
by an FMC if it fulfils the following conditions:
(a) the approval of the Trustee has been obtained from the Commission;
(b) the Trust Deed is in accordance with the provisions of Schedule III and
approved by the Commission and thereafter duly registered;
(c) the sole object of the Fund is to carry out activities in furtherance of the
interest of the Holders, in accordance with the strategy stated in the
Constitutive Documents;
(d) the Fund, including all investments out of the Investible Funds, shall be
managed in compliance with the provisions of the Ordinance, these
Regulations and any other applicable laws;
(e) the Fund shall only invest in Investees;
(f) Units of the Fund shall at all times be held by at least five (5) Holders;
(g) the Holders that are close relatives shall not hold more than thirty percent of
the Units;
(h) the Fund shall undertake only those activities that are in accordance with these
Regulations and such activities shall be disclosed in the Placement
Memorandum; and
(i) any other condition specified by the Commission.

10. Application for registration.- Subject to the fulfillment of conditions specified under

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11
Regulation 9, an application for registration of a Fund shall be submitted by the FMC in
Form I and shall be accompanied by the following:
(a) Constitutive Documents of the Fund in accordance with the
requirements of these Regulations;
(b) copy of the registered Trust Deed as approved by the Commission;
(c) latest audited balance sheet and profit and loss statement of the FMC:
Provided that if the financial statements are earlier than six
months of the date of the application, then in addition to such financial
statements a certificate from the auditor evidencing the net worth of
the company shall also be submitted and such certificate shall not be
earlier than thirty (30) days of the date of the application;
(d) list of the directors of FMC, their profile and consent to act as directors
of the FMC;
(e) list of shareholders of the FMC along with their percentage of
shareholding;
(f) the latest audited balance sheet, profit and loss account, cash flow
statement and statement of change in equity of the Trustee and the
names of their shareholders along with their percentage of
shareholding;
(g) copy of approval of the Commission approving the appointment of
Trustee under Regulation 15;
(h) an affidavit by the chief executive of the FMC that it accepts
responsibility for the information contained in the application for
registration of the Fund as being accurate at the date of submission;
(i) an undertaking by the FMC that the FMC and the Trustee are not
Connected Persons;
(j) consent letter of the Trustee to act as a Trustee under these
Regulations;
(k) non-refundable application fee as specified in Schedule I; and
(l) any other documents required by the Commission.

11. Registration of the Fund.- (1) The Commission may register the Fund in Form II if it is
satisfied that the applicable conditions have been satisfied.

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12
(2) The Commission may while registering the Fund impose such conditions as it deems
appropriate.

12. Procedure where registration is not granted.- (1) The Commission may reject an
application for the registration of a Fund, made under Regulation 10, after recording its
reasons in writing.

(2) The Commission shall not reject an application made under Regulation 10 unless it has
given the FMC a reasonable opportunity of being heard.

(3) The decision of the Commission to reject an application shall be final and communicated
to the FMC within three (3) working days of the rejection.

13. Cancellation of registration of the Fund.- The Commission may cancel the registration
of a Fund established by an FMC after informing the Trustee and providing the FMC an
opportunity of being heard if:
(a) the Commission determines that such action is in the best interest of the
Holders;
(b) the Holders, through a special resolution, request the Commission on
reasonable grounds to cancel the registration of the Fund; or
(c) the Trustee satisfies the Commission, on reasonable grounds that continuation
of the Fund is not in the interest of its Holders.

14. Effect of cancellation of registration of a Fund.- (1) Where the Commission cancels
the registration of a Fund, the Commission may move for the revocation of the trust in terms
of the Trust Deed.

(2) The distribution of the Fund established by an FMC and liquidation of assets, upon the
revocation of the trust, shall be made by the Trustee in accordance with the terms of the Trust
Deed.

(3) The trust shall stand extinguished after disposal of all assets and distribution of proceeds
of such disposal to Holders.

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13
(4) The provisions of these Regulations shall not preclude the authority of the Commission
to exercise any other powers under the Ordinance or any other law administered by the
Commission.

CHAPTER IV
Trustee

15. Appointment of Trustee.- (1) The Trusteefor the Fund established by an FMC shall be
appointed by the FMC subject to the provisions of these Regulations.

(2) The FMC shall apply to the Commission for the approval of appointment of Trustee
before it applies for the registration of the Fund under Regulation 10.

(3) The Commission shall, before giving approval for appointment of Trustee, consider the
availability of appropriate systems, personnel, management of the Trustee and such other
criteria, as may be specified by the Commission through circulars issued under the
Ordinance.

16. Trustee and the FMC to be independent.- The Trustee shall not be a Connected Person,
associated company or associated undertaking of the FMC.

17. ualifications to act as Trustee.- The Trustee shall be:
(a) a scheduled bank licensed under the Banking Companies Ordinance, 1962
(LVII of 1962) or a Development Financial Institution (DFI) which has been
assigned a long term minimum rating of AA by a Credit Rating Company,
and has been in operation for at least five (5) years;
(b) a trust company which is a subsidiary of a scheduled bank referred to in clause
17 (a);
(c) a foreign bank operating as a scheduled bank in Pakistan for at least five (5)
years which has been assigned a minimum investment grade rating by a Credit
Rating Company;
(d) a depository registered with the Commission pursuant to the Central
Depository Companies (Establishment and Regulation) Rules, 1996; or
(e) such other entity as the Commission may specify through circular issued under

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14
the Ordinance.

18. Retirement of Trustee.- (1) The Trustee may, subject to the prior written approval of the
Commission, retire from its office on the appointment of another Trustee proposed by the
FMC and approved by the Commission.

(2) The retirement of a Trustee shall take effect from the date of transfer of the Fund to the
newly appointed Trustee:
Provided that the cost of transfer of the Fund to the new Trustee shall be borne by
the retiring Trustee unless directed otherwise by the Commission.

(3) For the purpose of appointment of a Trustee under Regulation 18(1), the Trust Deed may
be amended in accordance with provisions of the Trusts Act, 1882 (II of 1882).

19. Removal of the Trustee.- (1) The Trustee may be removed by the Commission after
serving a written notice to the FMC and the Trustee in any one or more of the following
circumstances:
(a) the Trustee goes into liquidation, becomes bankrupt or has a receiver or
administrator appointed; or
(b) the Commission itself or on an application by the FMC, after recording reasons
in writing, decides that a change of the Trustee is desirable in the interests of
Holders; or
(c) in the case of a Fund registered under Regulation 11, by a special resolution is
passed by Holders resolving that the Trustee should be removed:
Provided that no order shall be made under Regulation 19(1) (b) or (c) unless
the Trustee has been given a reasonable opportunity of being heard by the
Commission.

(2) For purposes of Regulation 19(1)(c), the Commission may call a meeting of the Holders
on the request of Holders holding not less than twenty (20) percent of the Units, and the
Connected Persons of the Trustee shall not vote at such meetings and their presence shall not
be counted towards requisite voting for the special resolution.

(3) Where a Trustee has been removed under Regulation 19(1) the FMC shall, in

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15
accordance with the provisions of these Regulations, appoint another Trustee.

(4) All costs with respect to the change of Trustee will be borne by the Fund unless directed
otherwise by the Commission.
20. Obligations of the Trustee.- The Trustee shall:
(a) exercise due diligence and vigilance in carrying out its functions and duties
under the Constitutive Documents, these Regulations and all other applicable
laws;
(b) ensure that the title to all assets of the Fund is lawfully vested in it;
(c) ensure that the assets of the Fund are properly held on behalf of the Holders
and managed for the benefit of the Holders in accordance with the provisions
of the Constitutive Documents, these Regulations and all other applicable
laws;
(d) not delegate any of its duties unless the Trust Deed allows for such delegation;
(e) make payments to delegate from its own account, if it has delegated any of its
functions;
(f) be liable for any negligent act or omission, on its part or on the part of any of
its delegates;
(g) not legally or beneficially own Units;
(h) receive the payments from Eligible Investors or the Foreign Entity for the
subscription of Units;
(i) deposit the money received by the Fund in a scheduled bank which has a
minimum long term A rating;
(j) carry out the instructions of the FMC in respect of investments out of the
Investible Fund unless such instructions are in conflict with the Constitutive
Documents, these Regulations, directions, guidelines, circulars or any other
applicable law; and
(k) immediately inform the Commission of any action of the FMC that
contravenes the Ordinance, the Rules these Regulations, guidelines, codes,
circulars, directives or any other applicable laws.

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16
CHAPTER VI
Investment Conditions and Restrictions

21. Minimum investment in a Fund.- The FMC may raise capital for a Fund from an
Eligible Investor through issue of Units in accordance with the following conditions:
(a) the FMC shall neither make nor accept any offer for subscription to the Units
of a Fund of an amount less than Rupees ten (10) million:
Provided that the restriction contained in this clause shall not apply to
employees, officers or directors of the FMC; and
(b) every Eligible Investor approached for raising capital for a Fund shall be
provided the Placement Memorandum and a copy of the declaration required
under Schedule V.

22. Investment conditions and restrictions. - (1) All investments from the Investible Funds
shall be made in Investee subject to the following conditions:-
(a) the FMC shall make investments which are in conformity with its investment
strategy as disclosed in its Placement Memorandum;
(b) the Investible Funds may be invested with a Connected Person of the FMC or
the Trustee only if adequate disclosure to this effect has been made in the
investment strategy stated in the Placement Memorandum;

(2) In the event that any of the conditions specified in Regulation 22(1) is breached:
(a) the FMC or the Trustee shall promptly inform the Holders and the
Commission of the breach, the reasons for the breach, and the proposed steps
for rectification; and
(b) the FMC shall rectify the breach within such period as the Commission may
specify.

23. Prohibition on listing.- The Units of a Fund shall not be listed on any Exchange.

24. Life of the Fund.- (1) A Fund established by an FMC shall be established for a specific
period of time not exceeding fifteen (15) years and such period shall be stated in the
Constitutive Documents.

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17
(2) The Fund established by an FMC shall be dissolved and assets liquidated when the life
of the Fund as stated in the Constitutive Documents comes to an end:
Provided that, if allowed by the Constitutive Documents and the request is approved
by the Commission, the life of the Fund may be extended for a period of upto two years
beyond its initial life as stated in the Constitutive Documents.

(3) The distribution of the assets of the Fund established by an FMC, upon dissolution of the
Fund, shall be made by the Trustee in accordance with the terms of the Trust Deed.

Chapter VII
General Obligations and Responsibilities

25. Prohibition on inviting subscription from the public.- No person or the FMC shall
issue any document or advertisement inviting offers from the public for subscription or
purchase of Units of a Fund.

26. Private Placement.- Subscription to the Units shall be received only through Private
Placement of the Units.

27. Placement Memorandum and Subscription Agreement.- (1) The FMC shall for the
purpose of all Private Placement of Units issue a Placement Memorandum and a Subscription
Agreement.
(2) All Eligible Investors of a Fund shall be issued the same Placement Memorandum and
Subscription Agreement, as submitted to the Commission.

28. Contents of the Placement Memorandum.- The Placement Memorandum shall contain
the information specified in Schedule IV.

29. Contents of the Subscription Agreement.- The Subscription Agreement shall contain
the information specified in Schedule VI.

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18
Chapter VIII
Miscellaneous

30. Application of the Ordinance to the Fund.- The provisions of the Ordinance governing
matters relating to general meetings of a company, allotment and transfer of shares and
declaration of dividend, shall as far as may be mutatis mutandis apply to the meetings of the
Holders required under these Regulations, allotment and transfer of Units under these
Regulations and declaration of dividend of the Fund:
Provided that any Holder who has a conflict of interest in the matter put up for
approval in a meeting shall abstain from voting at the meeting of the Fund and such holders
presence shall not be counted for the purposes of such meeting:
Provided further that the FMC, upon the request of not less than twenty (20) percent
Holders, shall call for a meeting of the Holders.

(2) For the purpose of meetings of the Holders, the company secretary of the FMC shall
act as if he is the company secretary of the Fund.

31. Management fee payable to the FMC.- (1) The FMC shall be entitled to an annual
management fee as specified in the Constitutive Document and such remuneration shall be
chargeable to the Fund as an expense.

(2) The FMC shall be entitled to a carried interest as specified in the Constitutive Document
provided the Fund meets the bench mark of return as stated in the Placement Memorandum.

32. Fee payable to Trustee. - The Trustee shall be entitled to such fee as may be agreed
between the FMC and the Trustee and such fee shall be disclosed by the FMC in the Trust
Deed and the Placement Memorandum and chargeable to the Fund as an expense.

33. Monitoring fee payable to the Commission.- A supervisory fee shall be payable by the
FMC to the Commission on an annual basis at such rate as may be specified from time to
time by the Commission in Schedule I, and such fee shall be chargeable to the Fund as an
expense.

34. Transitional Provisions.- (1) Existing NBFCs licensed to undertake the business of

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19
venture capital investment shall, within a period of eighteen (18) months from the coming
into force of these Regulations ensure that they comply with the requirements of these
Regulations and apply to the Commission for the issuance of a license to act as a FMC.

(2) The Commission shall, after receiving a request under Regulation 34(1), and upon
being satisfied that the applicant has fulfilled the requirements of the Rules and these
Regulations, issue the NBFC a license to act as a FMC, and cancel the existing license of the
NBFC to undertake the business of venture capital investment.

(3) All NBFCs licensed to undertake venture capital investment which are managing funds
in company structure shall, within a period of eighteen (18) months from the coming into
force of these Regulations, make an application to the Commission for the registration of a
Fund and the existing fund shall upon the registration of the Fund transfer its assets and
liabilities to such Fund.

(4) The shareholders of a fund which is in company structure shall upon the transfer of the
assets and liabilities of such fund to the newly registered Fund be deemed to be the Holders
of the Fund to the extent of their shareholding in the company and shall be issued Units in
proportion to their shareholding.

(5) The company which has transferred its assets and liabilities to the Fund in terms of
Regulation 34(3) shall after the transfer of its assets and liabilities cease to carry out
operations and proceed towards the dissolution of the company or may approach the
Commission to alter its memorandum to perform any other business.

35. Repeal.- (1) The provisions of the Non-Banking Finance Companies and Notified
Entities Regulations, 2007 listed in Schedule VII shall stand repealed upon the expiry of
eighteen (18) months from the commencement of these Regulations.

(2) Notwithstanding Regulation 35(1), no person shall after the commencement of these
Regulations file an application for registration of a venture capital fund under the Non-
Banking Finance Companies and Notified Entities Regulations, 2007.

(3) Every action instituted by the Commission with respect to a venture capital company or

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20
a venture capital fund under the Non-Banking Finance Companies and Notified Entities
Regulations, 2007 on expiry of eighteen (18) months of the time of coming into operation of
these Regulations shall be deemed to be action instituted by the Commission under these
Regulations.

(4) Every order or directive issued by the Commission with respect to a venture capital
company or a venture capital fund under the Non-Banking Finance Companies and Notified
Entities Regulations, 2007 on expiry of eighteen (18) months of the time of coming into
operation of these Regulations shall be deemed action under these Regulations.

FORM I
[See Regulation 10]

APPLICATION FOR REGISTRATION AS A
PRIVATE EQUITY AND VENTURE CAPITAL FUND

INSTRUCTIONS:

(i) This form is meant for use by a FMC (hereinafter referred to as the applicant)
for making an application for the grant of a certificate of registration as Private
Equity and Venture Capital Fund proposed to be established and managed by it.

(ii) The applicant shall complete this form, and submit it, along with the documents
required under these Regulations to the Commission at its head office at
Islamabad.

(iii) The application Form shall be filled in accordance with these Regulations.

(iv) The application shall be considered by the Commission when it is complete in
all respects.

(v) All answers must be legible.

(vi) Information which needs to be supplied in more detail may be given on
separate sheets and attached to the application form.

(vii) The application must be signed and all signatures must be original.

(viii)The application must be accompanied by a receipt of Rs. 1,000,000/- being the
application fee (non-refundable), deposited in
____________________________________________ on ________________.
(Name of Bank with branch) (Date)

Details of the Fund:
(a) Name of the proposed Fund.
(b) Investment objectives.
(c) Proposed amount of Investible Funds.
(d) Details of commitments by Eligible Investors, if any and names and addresses of
such Eligible Investors.
(e) Name and address of the auditor of the Fund.
Details of the FMC
(a) Registered office address.
(b) Names of directors of the FMC and their profile.
(c) Names of the shareholders of the FMC along with their percentage of
shareholding.
(d) Previous approval, if any, by the Commission to manage a Private Equity and
Venture Capital Fund.

Details of the Trustee:
(a) Name and contact details of the Trustee.
(b) Registered office address.
(c) Name of the directors of Trustee and their profile.

1. Any additional information/ document in support of this application that may be
important or required by the Commission.

2. The application shall be accompanied by the documents required under Regulation 10,
documents supporting the information requested under this Form and any other
document required under these Regulations.

3. Declaration statement as under:
(a) We hereby declare and certify that the information provided in this application,
including that provided in the attachment sheets and documents attached, is
complete and true in all respects.

(b) We further certify that we shall inform the Securities and Exchange Commission
of Pakistan immediately of any change in the information provided in the
application and the documents attached with them.

(c) We warrant that we shall comply with and be bound by the Securities and
Exchange Ordinance, 1969, the Securities and Exchange Commission of
Pakistan Act, 1997, the Companies Ordinance, 1984, Non-Banking Finance
Companies (Establishment and Regulation) Rules, 2003 the Private Equity and
Venture Capital Fund Regulations, 2008, and the regulations, guidelines,
circulars, orders and directions that may be issued by the Securities and
Exchange Commission of Pakistan from time to time.

For and on behalf of...................................
(Name of the applicant)
Authorized signatory .............................. ................
(Name) (Signatures)
Date:
Place:

FORM II
[See Regulation 11]


CERTIFICATE OF REGISTRATION AS A

In exercise of the powers conferred by Section 282CA of the Companies Ordinance, 1984
(Act XLVII of 1984) the Commission hereby grants a certificate of registration to
________________________________________, as a Private Equity and Venture Capital
Fund subject to the conditions prescribed under the Private Equity and Venture Capital
Fund Regulations, 2008 or as may be prescribed or imposed hereafter.

The registration number of the Private Equity and Venture Capital Fund is
______________________.

Dated: _________________

Place: ISLAMABAD

By order

Sd/-
For and on behalf of
THE SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

FORM III
[See Regulation 6(2)]

APPLICATION FOR REGISTRATION BY A
FOREIGN ENTITY WHEN ONLY FOREIGN MONEY IS TO BE INVESTED

INSTRUCTIONS:

(i) This form is meant for use by a Foreign Entity (hereinafter referred to as the
applicant) for making an application for the grant of a certificate of
registration as Private Equity and Venture Capital Fund when only Foreign
Money is to be invested by the Foreign Entity in Private Equity Entities;

(ii) The applicant shall complete this form, and submit it along with the required
documents to the Commission at its head office at Islamabad.

(iii) The application form shall be filled in accordance with these Regulations.

(iv) The application shall be considered by the Commission when it is complete
in all respects.

(v) All answers must be legible.

(vi) Information which needs to be supplied in more detail may be given on
separate sheets and attached to the application form.

(vii) The application must be signed and all signatures must be original.

(viii) The application must be accompanied by a receipt of Rs. 1,000,000/- being
the application fee (non-refundable), deposited in
__________________________________________ on ________________.
(Name of Bank with branch) (Date)

Details of the Foreign Entity

1. Name and contact details of the Foreign Entity.
2. Contact details of the Foreign Entitys office in Pakistan.
3. Names of the directors or partners of the Foreign Entity and their profile.
4. Legal structure of the Foreign Entity along with:
(a) date and place of establishment;
(b) date of commencement of business and current business activities (enclose a
copy of the formation documents of the entity along with the brief introduction
of relevant law and jurisdiction).
5. Total Foreign Money to be invested in Pakistan.
6. Mode of investment in Pakistan.
7. Details of the scheduled bank in Pakistan through which business will be transacted.
8. Investment objectives and details about the proposed Investee.
9. Any additional information in support of this application that the Foreign Entity may
wish to disclose.

10. The application shall be accompanied by the following documents:
(a) An undertaking that the Foreign Entity has never been involved in any illegal
activities.
(b) Details of the foreign regulatory authority under which the Foreign Entity is
being regulated.
(c) An affidavit by the Foreign Entity that it accepts responsibility for the
information contained in the application and is accurate at the date of
submission.
(d) Documents supporting the information requested under this Form and any other
document required under these Regulations.
(e) Any other documents required by the Commission.
(f) Declaration statement:

(i) We hereby declare and certify that the information supplied in the
application, including the attachment sheets and documents attached, is
complete and true in all respects.

(ii) We further certify that we shall inform the Securities and Exchange
Commission of Pakistan immediately of any change in the information
provided in the application and the documents attached with them.

(iii) We warrant that we shall for the purposes of investments in Pakistan be
bound by the laws of Pakistan and directions that may be issued by the
Securities and Exchange Commission of Pakistan from time to time.

For and on behalf of...................................

(Name of the applicant)
Authorized signatory .............................. ................
(Name) (Signatures)
Date:
Place:

FORM IV
[See Regulation 6(3)]


CERTIFICATE OF REGISTRATION AS A

In exercise of the powers conferred by Section 282CA of the Companies Ordinance, 1984
(Act XLVII of 1984) the Commission hereby grants a certificate of registration to
_______________________________________, as a Private Equity and Venture Capital
Fund subject to the conditions prescribed under the Private Equity and Venture Capital
Fund Regulations, 2008 or as may be prescribed or imposed hereafter.

The registration number of the Private Equity and Venture Capital Fund is
______________________.

Dated: _________________

Place: ISLAMABAD

By order

Sd/-
THE SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

SCHEDULE I
[See Rules 4, 5, 7A and Regulations 6, 10 & 32]

Amount of Fees

A) Application Fees under the Rules: (Rules 4, 5, 7A)

FORM SUBJECT OF APPLICATION AMOUNT
(RS.)
Form I Application for permission to form an FMC 500,000
Form II Application for license to provide PE & VC Fund
Management Services
250,000
Form IV Application for renewal of license to provide PE & VC
Fund Management Services
250,000

B) Application Fee under these Regulations: (Regulations 6 and 10)

Form SUBJECT OF APPLICATION AMOUNT
(RS.)
Form III Application for registration as a Fund 1,000,000
Form I Application for registration of a Fund 1,000,000

C) Other Fees: (Regulation 33)

HEAD OF FEE AMOUNT
(RS.)
Supervisory Fee for
the FMC
250,000

SCHEDULE II
[See Regulation 3(c)]

FIT AND PROPER CRITERIA

APPLICATION AND SCOPE

(1) The Fit and Proper Criteria in relation to FMC is applicable to the following persons:

(i) Promoters of the FMC;
(ii) Director of the FMC;
(iii) Key Executives of the FMC.

(2) The Commission may upon the request of the Foreign Entity which intends to establish
a FMC under these Regulations exempt the foreign directors, foreign promoters and foreign
key executives of such FMC from the Fit and Proper Criteria or part thereof.

(3) A proposed director or chief executive of the FMC shall not assume the charge of their
respective office until their appointments have been approved by the Commission.

(4) The application for seeking approval of the Commission under clause (2) shall be
submitted by the FMC along with the requisite information required under Annex A and the
Affidavit as specified in Annex B.

(5) The fitness and propriety of any person shall be assessed by taking into account all
the relevant factors including but not limited to the following:






(ii) has been involved in the mismanagement of investments, financial/business

(iii) has been the subject to adverse findings, after conducting an inquiry, by the
Commission or any other regulatory or professional body or Government
agency;

(iv) has been actively involved in the management of a company/ firm whose
registration/ license has been revoked or cancelled or which has gone into
liquidation or other similar proceedings due to mismanagement of affairs,

financial misconduct or malpractices;

(v) is ineligible, under the Companies Ordinance, 1984 or any other legislation
or regulation, from acting as a director or serving in a managerial capacity of
an NBFC or a company;

(vi) has entered into a plea bargain arrangement with the National Accountability
Bureau;

(vii) does not have an established and proven track record of successfully running
a business enterprise for 3 to 5 years.


In determining a persons financial soundness, the following shall be considered:

(i) whether such persons financial statements/record including wealth
statements/ income tax returns/ assessment orders are available;

(ii) whether the person has been declared by a court of competent jurisdiction as
defaulter in repayment of loan;

(iii) whether the person has applied to be adjudicated as an insolvent and his
application is pending;


(v) whether the person has been declared a defaulter by a stock exchange.


In determining a persons competence and capability the following shall be considered:

(i) the directors must be individuals having management/business experience of
at least five years at a senior level;

(ii) the chief executive must have a minimum experience of three to five years in
a senior management position;

(iv) the chief executive must have the capacity to successfully undertake the
responsibilities of the position; and

(6) The Fit and Proper Criteria is perpetual in nature and a FMC shall ensure
compliance with the provisions of Fit and Proper Criteria.

(7) All persons subject to Fit and Proper Criteria must submit any change in the
submitted information through the company secretary of the FMC to e Commission.

Annexure A

Information to be provided by Promoters,
proposed director and proposed chief executive of the FMC

b Fathers/Husband Name:
c C.N.I.C #(attach copy)
d Latest photograph
e Nationality:
f Age:
g Contact details:
iii) Tel:
iv) Mobile:
v) Fax:
vi) E-mail:
h National Tax Number:
i Present occupation:
j Qualification(s):
i) Academic:
ii) Professional:
k Experience:
2. Nature of directorship Executive Non-executive
Status of directorship Nominee director

Number of shares subscribed/held
_____________________________nominated by _____(name of
shareholder)___________________________




6. Names of persons on the board of the FMC who are related to the applicant.

FITNESS PROPRIETARY OF KEY EXECUTIVES

Signature_________________________________________________________

Annexure B

AFFIDAVIT
Before the Securities and Exchange Commission of Pakistan

I, ________________ son/daughter/wife of _______________________ born on
____________________ and resident of
_______________________________________________________________________ holding
CNIC/Passport No. ______________________________ do hereby state on solemn affirmation as
under:-
1. That I am eligible for the position of ___________according to the Fit and Proper Criteria
for the position of _________ annexed to the Private Equity and Venture Capital Fund
Regulations, 2008.
2. That I hereby confirm that the statements made and the information given by me is correct
and that there are no facts which have been concealed.
3. That I have no objection if the Securities and Exchange Commission of Pakistan requests or
obtains information about me from any party.
4. That I undertake to bring to the attention of the Securities Exchange Commission of
Pakistan any matter which may potentially affect my status for the position of
____________ as per the Fit and Proper Criteria annexed to the Private Equity and Venture
Capital Fund Regulations, 2008.
5. That all the documents provided to the Securities Exchange Commission of Pakistan are
true copies of the originals and I have compared the copies with their respective originals
and certify them to be true copies thereof.

I do hereby verify that the statements made above are correct to the best of my knowledge and belief
and nothing has been concealed therein.

DEPONENT


Signature _______________________
ADVOCATE
(Name and Seal)

Deponent above named who is identified to me by ________________, Advocate.

Signature______________________________
(Name and Seal)

SCHEDULE III
[See Regulation 9(b)]

Contents of the Trust Deed of the Fund

The Trust Deed must inter alia contain the following not necessarily in the sequence given:

1) Name and Registered address of the Trustee along with place and date of creation of
Trust;
2) Object of the Trust;
3) Duration and date of extinction of Trust;
4) Authorization/approval of the Commission to constitute the Trust;
5) Parties to the Trust Deed identifying the Trustee as well as the beneficiaries;
6) Governing law and jurisdiction;
7) Rights of the beneficiaries of the Trust;
8) Duties, powers and rights of the FMC in relation to the trust;
9) Duties, powers, rights and obligations of Trustee;
10) Mechanism for rectification of Trust Deed;
11) Duties of the Trustee which may be delegated to third parties;
12) Accounting period and appointment of the auditor;
13) Retirement or removal of Trustee, specifically giving the Commission the power to
remove the Trustee;
14) Circumstances and procedure for the change of FMC upon the request of the Holders;
15) Proposed amount of Investible Funds;
16) Investment policy and authorized Investment;
17) Fees and charges to be paid out of the Fund;
18) Dividend policy;
19) Circumstances for the revocation of the Trust along with the mechanism specifically
stating the power of the Commission to revoke the trust;
20) Mechanism for the distribution of assets of Fund, upon the extinction or revocation of
the Trust and the manner in which the beneficiaries shall be transferred their
proportionate shares of the sale proceeds;
21) Procedure for change of Trustee;
22) Utilization of Investible Fund; and
23) Arbitration.

SCHEDULE IV
[See Regulation 28]

Contents of Placement Memorandum

otice - his is not an ehaustie list he is oliged to disclose an inoration that a e necessar
or ligile nestors to ae an inored udgent

1) Details of the FMC and the investment committee.
2) Details of the Trustee.
3) Details of Fund.
4) Summary of the substantive provisions of the Trust Deed.
5) Investment opportunities and Investment Strategy of the Fund.
6) Risk factors.
7) Minimum amount to be contributed by each investor and manner of subscription to
the units of the fund.
8) Obligations and rights of the Trustee, FMC and Eligible Investors.
9) Distribution policy.
10) Fees and charges to be paid by the Fund.
11) Details of tax exemptions available to the Fund and deductions, if any, on
distribution to Holders.
12) Details of Auditors of the Fund.
13) The accounting year of the Fund.
14) Particulars and frequency of the financial reports to be sent to the Holders.
15) An overview of the applicable regulatory and legal framework.
16) Circumstances for the revocation of the Trust.
17) Mechanism for the distribution of assets of Fund, upon the extinction or revocation
of the Trust and the manner in which the beneficiaries shall be transferred their
proportionate shares of the sale proceeds.
18) Retirement or removal of Trustee, specifically giving the Commission the power to
remove the Trustee.
19) Circumstances and procedure for the change of FMC upon the request of the
Holders.
20) A statement that the FMC accepts responsibility for the information contained in the
placement memorandum as being accurate at the date of publication
21) Exit method for Eligible Investors.
22) Disclosures required under these Regulations.
23) Any other information that the Commission may specify.

SCHEDULE V
[See Regulation 21(b)]

DECLARATION BY ELIGIBLE INVESTOR

All Eligible Investors are advised that completion of this declaration form is
mandatory as per the Private Equity and Venture Capital Fund Regulations, 2008 of
Securities Exchange Commission of Pakistan (SECP) in order to invest in a Private
Equity and Venture Capital Fund.

1. I hereby acknowledge that:
a. I have examined the Constitutive Documents carefully and I understand that
investment in this Private Equity and Venture Capital Fund (i.e. STATE NAME OF
THE FUND) may involve risks which I am willing to undertake;

b. the Units of the Fund have not been recommended by the SECP and in
making an investment decision, I will rely on my own judgement of the
Private Equity and Venture Capital Fund and the terms of the offer including
the merits and risks involved.

________________________________
Name, if individual

________________________________
Signature, if individual

________________________________
Name, if entity

By: _____________________________

Title: ____________________________

________________________________
Seal, if entity

SCHEDULE VI
[See Regulation 29]

Contents of Subscription Agreement

otice - his list is not intended to e ehaustie he is oliged to disclose an inoration that a e
necessar or inestors to ae an inored udgent

1) Information about the Eligible Investor.
2) Subscription by the Eligible Investor.
3) Payment of commitment / Capital calls.
4) Distribution / dividends.
5) Privacy policy.
6) Rights and obligations of the Eligible Investor and FMC.
7) Governing law.
8) Arbitration.
9) Exit Mechanism for the Holder.

SCHEDULE VII
[See Regulation 34]

Repeals and Amendments

ENACTMENT

REPEAL
The words and comma and venture capital
investment, in the Preamble shall be
omitted.
Regulation 2(1)(xl) to (xliii) shall be deleted.
The words Venture Capital Investment,
and words as figure Rs. 50 million in the
last row of the table under regulation 3(1)
shall be omitted.
The words and comma private equity
funds, venture capital funds, in regulation
27(d)(x) shall be omitted.
Regulations 34 to 44 and narration of Part III
shall be deleted.
Form I along with its annexure shall be
deleted.
and Form II shall be deleted.
In Schedule 1, part B the words Form 1
shall be deleted.
In Schedule 1, part B the words Application
for registration as a Venture Capital Fund
shall be deleted.
Non-Banking Finance Companies and
Notified Entities Regulations, 2007.
In Schedule 1, part B the letter and figure
Rs. 500,000 shall be deleted.

***

Islamabad, January 19, 2012

NOTIFICATION
S.R.O. 49 (I)/2012.- In exercise of powers conferred by sub-section (2) of
section 282B read with section 506A of the Companies Ordinance, 1984, (XLVII of
1984) and having being previously published in the official Gazette vide Notification
No. S.R.O.825(I)/2011, dated September 8, 2011 as required by sub-section (1) of
section 506A of the said Ordinance XLVII of 1984 the Securities and Exchange
Commission of Pakistan hereby makes the following amendments in the Private
Equity and Venture Capital Fund Regulations, 2008, namely:-

In the aforesaid Regulations, in Schedule I, in table A, for the existing row No. 2
and row No. 3 the following shall be substituted, -

Form II Application for license to provide PE & VC Fund 750,000
Management Services

Form IV Application for renewal of license to provide 750,000
PE & VC Fund Management Services

[No: SCD/117/PR&D]

(Abdul Rehman Qureshi)
Advisor/Secretary

1


Islamabad, the 31
st
December, 2008
NOTIFICATION

S.R.O. 1307(I)/2008. In exercise of powers conferred by section 506A of the
Companies Ordinance, 1984 (XLVII of 1984), the Securities and Exchange Commission of
Pakistan hereby makes the following Regulations.

GROUP COMPANIES REGISTRATION REGULATIONS, 2008

1. Short title and commencement.- (1) These Regulations shall be called the Group
Companies Registration Regulations, 2008.


2. Definitions.- (1) In these Regulations, unless there is anything repugnant in the subject
or context,-
(i) Group means a holding company and its subsidiaries registered with the
Commission under Regulation 4 of these Regulations;
(ii) Ordinance means the Companies Ordinance, 1984 (XLVII of 1984); and
(iii) Regulations mean the Group Companies Registration Regulations, 2008.

meaning as assigned to them in the Ordinance.

2
3. Application for registration as a Group. - A company which is desirous of forming a
group with its subsidiary companies shall furnish an application for registration as a Group to
the Commission along with the following documents namely, -
(i) statement showing details of the holding company and its subsidiaries, their
sponsors, directors and pattern of shareholding in the form attached as
Annexure A;
(ii) affidavit by the directors of the holding company in the form attached as
Annexure B;
(iii) the memorandum and articles of association of the holding company and its
subsidiaries;
(iv) resolution of the board of directors of the holding company and its subsidiaries
for formation of a Group;
(v) original bank receipt evidencing the payment of application fee of [two hundred
thousand] rupees; and
(vi) any other information required by the Commission.

4. Registration of a Group.- Where the Commission is satisfied with the application
made under Regulation 3, it may register the holding company and its subsidiary companies as
a Group in Form 1.

5. Alteration of composition of a Group. (1) Where the composition of a Group
changes, the holding company shall inform the Commission immediately by making an
application for altering the details of registration granted in Form I and submit the following
documents to the Commission, -
(i) a revised statement showing details of the holding company and its subsidiaries,
their sponsors, directors and pattern of shareholding in the form attached as
Annexure A;
(ii) in case a company is joining the Group, a copy of its memorandum and articles
of association;
3
(iii) original bank receipt evidencing the payment of alteration fee of [fifty thousand]
rupees; and
(iv) any other information required by the Commission.

(2) The Commission shall, upon receipt of application and documents under Regulation
5(1), alter its record and issue a certificate of change in the composition of a Group in Form II.

(3) Where the holding company does not inform the Commission of the change in the
composition of the Group, the Commission shall, after imposing a penalty on the holding
company under Regulation 9, change the composition of the Group and issue a certificate of
change in the composition of a Group in Form II.

6. Cancellation of registration of a Group.- (1) The registration granted to a Group
may be cancelled by the Commission if any company within the Group fails to comply with
the requirements of these Regulations or any direction given by the Commission:

Provided that the Commission shall provide the holding company an opportunity of
hearing before cancellation of registration of a Group.

(2) The holding company may apply to the Commission for cancellation of its registration
by stating the reasons for the request and the Commission, if satisfied with the reasons given
by the holding company, may, through an order in writing, cancel the registration of the Group.

7. Obligations of the holding company within a Group. - The holding company shall
ensure that,-
(i) the Group [companies are]
1
in compliance with the requirements of the Code of
Corporate Governance[, wherever applicable]
2
;
(ii) the Group is in compliance with the requirements of International Accounting
Standards and International Financial Reporting Standards, as applicable in
Pakistan;

1
Substituted for the word is by S.R.O. 780(I)/2009 dated September 7, 2009
2
Inserted by S.R.O. 780(I)/2009 dated September 7, 2009
4
(iii) transactions by any company within the Group with its associated companies
and associated undertakings are carried out and recorded on an arms length
basis; and
(iv) any other requirements specified by the Commission are complied with.

8. Application for designation as a Group.- (1) The holding company within a Group
may apply to the Commission for designation of the [companies within the]
3
Group for the
purpose of availing tax relief under sections 59AA and 59B of the Income Tax Ordinance,
2001.

(2) The holding company applying for designation of the [companies within the]
4
Group
shall, along with the application required under Regulation 8(1), provide the Commission, -
(i) in the case of a designation letter for Group taxation where the holding company
has 100% owned subsidiaries,-
(a) a copy of the certificate of registration as a Group:
(b) a copy of the certificate of change in the composition of the Group, if
any;
(c) the national tax numbers of the Group companies and their directors[ ]
5
;
(d) a certificate from a firm of Chartered Accountants that the Group is in
compliance with the requirements of these Regulations; and
(e) any other document or record which the Commission deems appropriate;

(ii) in the case of a designation letter for Group Relief,-
(a) a copy of the certificate of registration as a Group:
(b) a copy of the certificate of change in the composition of the Group, if
any;
(c) the national tax numbers of the Group companies and their directors[ ]
6
;

3
4
5
Omitted the words and a certificate that no tax demand is outstanding against any company within the Group
by S.R.O. 780(I)/2009 dated September 7, 2009
6
Omitted the words and a certificate that no tax demand is outstanding against any company within the Group
by S.R.O. 780(I)/2009 dated September 7, 2009
5
(d) evidence that there [is]
7
ownership of the share capital of the subsidiary
companies to the extent of 55% in the case of a listed company and 75%
in the case of other companies[ ]
8
;
(e) [.]
9
;
(f) approval of the board of directors of the Group companies to the
surrendering and claiming of loss;
(g) a certificate from a firm of Chartered Accountants that the Group is in
compliance with the requirements of these Regulations; and
(h) any other document or record which the Commission deems appropriate.

(3) The Commission shall on being satisfied that,-
(i) the Group is in compliance with these Regulations;
(ii) all companies within the Group are locally incorporated; and
(iii) the accounting period of the companies within the Group is the same;

issue a designation letter for Group taxation or Group relief, as the case may be.

(4) Where the Commission has issued a designation letter to a Group and it subsequently
cancels the registration of a Group or issues a certificate of change in the composition of the
Group, the Commission shall immediately inform the tax authorities of such action.

9. Penalty for contravention of the Regulations.- Whoever contravenes or fails to
comply with any provision of these Regulations shall, in addition to any other liability under
the Ordinance or the rules or regulations made thereunder, be punishable with fine which may
extend to five hundred thousand rupees and, in the case of continuing failure, to a further fine,
which may extend to ten thousand rupees for every day after the first during which the
contravention continues.

-.-.-.-.-

7
Substituted for the words has been continued by S.R.O. 780(I)/2009 dated September 7, 2009
8
Omitted the words for a period of at least five years by S.R.O. 780(I)/2009 dated September 7, 2009
9
The following sub-clause (e) omitted by S.R.O. 780(I)/2009 dated September 7, 2009:
a certificate that no company within the Group is engaged in the business of trading;
6
FORM I
[see Regulation 4]

CERTIFICATE OF REGISTRATION
OF A GROUP

Islamabad, the________20__.

The Securities and Exchange Commission of Pakistan having considered the application for
registration as a Group by............................................. (Name of the holding company) and
being satisfied with the said application, hereby registers (Name of the
holding company) and its subsidiaries, namely .(Name of all
subsidiaries) as a Group under serial number in exercise of its powers under
Regulation 4 of the Group Companies Registration Regulations, 2008.

Signature of the officer.
Seal

7
FORM II
[see Regulation 5(2)]

CERTIFICATE OF CHANGE
IN THE COMPOSITION OF A GROUP

Islamabad, the________20__.

The Securities and Exchange Commission of Pakistan having considered the application for
change in the composition of Group registered under serial number hereby change
the composition of the Group which now comprises of (Name of the
holding company) and its subsidiaries, namely .(Name of all
subsidiaries).

Signature of the officer.
Seal
8
Annexure A
See Regulation 3(i)

STATEMENT OF SHAREHOLDING

AS ON _____________

Particulars of the Holding company
Name
CUIN

No. of
shares
Par
value
Amount
(Rs.) Held by
Percentage of
shareholding

(Names of the
sponsors/directors)*

Total Paid-up Capital

No. of
shares
Par
value
Amount
(Rs.)
Investment made
in subsidiaries
and associates
Percentage of
total
investment

Total Long-term
Investments

Particulars of the Subsidiaries
i. Name
CUIN

No. of
shares
Par
value
Amount
(Rs.) Held by
Percentage of
shareholding

(Name of the
holding company)


9

No. of
shares
Par
value
Amount
(Rs.)
Investment in other
companies
Percentage of
total
investment

Total Long-term
Investments

ii. Name
CUIN

No. of
shares
Par
value
Amount
(Rs.) Held by
Percentage of
shareholding

(Name of the
holding company)


No. of
shares
Par
value
Amount
(Rs.)
Investment in other
companies
Percentage of
total
investment

Total Long-term
Investments
* If shares have been owned, held or controlled by the spouse or minor children of the sponsor/shareholder, the fact
shall be disclosed separately.

Signature of Chief Executive/Company Secretary of the holding company

10
Annexure B
See Regulation 3(ii)

AFFIDAVIT
We, the directors of.. [Name of the holding company] do hereby,
solemnly affirm and testify that the contents of the application and the documents
submitted to the Securities and Exchange Commission of Pakistan for grant of approval to
form a Group under the Group Companies Registration Regulations, 2008 are true and
correct to the best of our knowledge and belief and nothing has been concealed therein.

DEPONENTS
(Signature)

The Deponent(s) is/are identified by me

Signature _______________________
ADVOCATE
(Name and Seal)

Deponent(s) above named who is/are identified to me by ________________, Advocate.

Signature______________________________
(Name and Seal)

No. RD/602(21)/2007

(Nazir Ahmed Shaheen)
Executive Director (Registration)
NON BANKING FINANCE COMPANIES
AND NOTIFIED ENTITIES REGULATIONS, 2008
1
***
Islamabad the 21st November, 2008
NOTIFICATION
S.R.O. 1203(1)/2008.- In exercise of the powers conferred by sub-section (2) of section
282B of the Companies Ordinance, 1984 (XLVII of 1984), the Securities and Exchange
Commission of Pakistan hereby notifies the following Non-Banking Finance Companies and
Notified Entities Regulations, 2008 for the regulation ofNBFCs carrying out leasing, investment
finance services, housing finance services, asset management services and investment advisory
services and their business activities and notified entities being managed by the aforementioned
NBFCs.
CHAPTER-I
General
1. Short title and commencement.- (1) These Regulations shall be called the Non-Banking
Finance Companies and Notified Entities Regulations, 2008.
2. Defmitions.- (1) In these Regulations, unless there is anything repugnant in the subject or
context,-
(i) "Asset Management Company" means an NBFC licensed by the Commission to
provide asset management services;
(ii) "Bankers' Acceptance" means an instrument drawn on a scheduled bank by a
person ordering and accepted by the drawee bank to pay to the order of a person a
2
specified sum of money, either on demand or at a future specified date;
(iii) "Borrower" includes a person on whom an NBFC has taken an Exposure during
the course of its business;
(iv) "Certificate of Deposit" means a certificate of investment or a certificate of
deposit issued for raising funds for a specified time by a Leasing Company,
Investment Finance Company or a Housing Finance Company;
(v) "Collective Investment Scheme" means a Closed End Fund and an Open End
Scheme;
(vi) "Closed End Fund" means an Investment Company or a Closed End Scheme;
(vii) "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 defmite or indefinite period which does not
continuously offer certificates entitling the holder of such certificates, to receive,
on demand, proportionate share of the net assets of the Closed End Scheme;
(viii) "Constitutive Documents" means the trust deed, Offering Document and other
principal documents governing the formation of a Closed End Scheme or an Open
End Scheme, including all related material agreements;
(ix) "Consumer Financing" means the financing allowed to individuals for meeting
their personal, family or household needs and includes :
(a) credit cards mean cards which allow a customer to make payments
on credit and supplementary credit cards shall be considered part
of the principal borrower; and
3
(b) personal loans obtained by individuals for the payment of goods,
services and expenses;
(x) "Consumer Leasing" means any leasing allowed to individuals for meeting their
personal, family or household needs;
(xi) "Contingent Liabilities" mean, -
(a) a possible obligation that arises from past events, the existence of
which will be confirmed only by the occurrence or non-occurrence
of one or more uncertain future events not wholly within the
control of the entity; or
(b) a present obligation that arises from past events but is not
recognized on the books of the NBFC and Collective Investment
Scheme because:
(I) it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation;
or
(II) the amount of the obligation cannot be measured with
sufficient reliability and includes letters of credit, letters of
guarantee, bid bonds or performance bonds, advance
payment guarantees and Underwriting Commitments;
(xii) "Discretionary Portfolio" means a portfolio of securities managed by an NBFC
under an agreement entered into with a client on a duly notarised stamp paper of
applicable value and whereby investment decisions are made and executed by the
4
NBFC on behalf of its client;
(xiii) "Eligible Investor" means a person offering minimum of five million rupees for
investment and who furnishes an undertaking to the NBFC that such investor
understands the risks involved in the management of portfolio on discretionary or
non-discretionary basis:
Provided that in the case of an entity such an undertaking shall be made by
the board of directors or trustees as the case may be;
(xiv) "Equity of the Borrower" includes paid-up capital, general reserves, balance in
share premium account, reserve for issue of bonus shares and retained earnings or
accumulated losses, revaluation reserves on account of fixed assets and
Subordinated Loans:
Explanation: Revaluation reserves will remain part of the equity for first
three years only, from the date of asset revaluation, during which time the
Borrower will strengthen its equity base to enable it to avail Facility without the
benefit of revaluation reserves;
(xv) "Exposure" includes Facility and subscription to or investment in equity
securities, debt instruments or securities, units or certificates or shares of a
Collective Investment Scheme, money-market placements, deposits, Certificate of
Deposits, CFS, forward contracts, derivatives and credit cards, but does not
include:
(a) obligations under letters of credit and letters of guarantee to the extent of
cash margin held by an NBFC;
(b) a Facility provided to fmancial institutions through REPO transactions
with underlying statutory liquidity requirement eligible securities;
5
(c) letters of credit established for the import of plant and machinery; and
(d) deposits of less than ninety days.
(xvi) "Facility" includes 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, guarantees, indemnities,
letters of guarantee, indemnity, letter of credit and any other obligation, whether
fund based or non-fund based;
(xvii) "Fit and Proper Criteria" means the criteria specified in Schedule IX;
(xviii) "Form" means the Forms annexed to these Regulations;
(xix) "FSV" means the forced sale value which reflects the possibility of price
fluctuations and can be realized by selling the mortgaged, pledged, leased or
collaterally held assets in forced or distressed sale conditions;
(xx) "Government Securities" include monetary obligations of the Federal
Government or a Provincial Government or of a corporation wholly owned or
contralied, directly or indirectly, by the Federal Government or a Provincial
Government and guaranteed by the Federal Government and any other security as
the Federal Government may, by notification in the Official Gazette, declare, to
the extent determined from time to time, to be a Government Securities;
(xxi) "Housing Finance Company" means an NBFC licensed by the Commission to
provide housing finance services;
(xxii) "Investment Advisor" means an NBFC licensed by the Commission to provide
6
investment advisory services;
(xxiii) "Investment Company" means a company registered with the Commission in
accordance with these Regnlations;
(xxiv) "Investment Finance Company" means an NBFC licensed by the Commission to
provide investment finance services;
(xxv) "Leasing Company" means an NBFC licensed by the Commission to provide
leasing;
(xxvi) "Liquid Assets" means the assets which are readily convertible into cash and
includes encashment or realizable value of Government Securities, bank deposits,
shares of listed companies which are actively traded on the stock exchange, NIT
units, certificates or shares of a Closed End Fund, Certificate of Deposit issued
by DFIs or NBFCs and Certificates of Musharika issued by Modarabas rated at
least' A' by a credit rating agency registered with the Commission, listed TFCs,
Sukuks and commercial papers rated at least 'A' by a credit rating agency
registered with the Commission, National Saving Scheme securities and units of
Open End Scheme for which a duly licensed Asset Management Company quotes
daily offer and redemption price;
(xxvii) "Margin Loan" means a loan made by an Investment Finance Company to partly
finance investment by the client in marketable securities, which shall be held by
the Investment Finance Company as collateral, the amount invested by the client
being the "margin" against the loan;
(xxviii) "Medium and Long Term Facilities" means a Facility with maturities of more
than one year;
7
(xxix) "Non-Discretionary Portfolio" means a portfolio of securities managed by an
NBFC under an agreement entered into with the client on a duly notarised stamp
paper of applicable value whereby investment decisions are executed by the
NBFC on written instructions ofthe client;
(xxx) "Notified Entity" means a company or class of companies or corporate body or
trust or any other entity or person notified by the Federal Government in the
official Gazette;
(xxxi) "Offering Document" means a published document containing information on a
Collective Investment Scheme to invite the public for purchase of certificates or
units in that scheme;
(xxxii) "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;
(xxxiii) "Ordinance" means the Companies Ordinance, 1984 (XLVII of 1984);
(xxxiv) "Other Form of Security" includes hypothecation of stock (inventory), assignment
of receivables, lease Rentals, contract receivables;
(xxxv) "Readily Realizable Assets" include Liquid Assets and stocks pledged with the
NBFCs and are in their possession, with 'perfected lien' duly supported with
complete documentation;
(xxxvi) "Regulations" means the Non-Banking Finance Companies and Notified Entities
Regulations, 2008 and the Schedules and Forms attached to it;
(xxxvii) "Rental" include lease Rentals, Rentals in respect of housing finance facilities,
8
hire purchase installments or any other amount received by NBFC from Borrower
against the grant of a Facility;
(xxxviii) "Rules" mean the Non-Banking Finance Companies (Establishment and
Regulation) Rules, 2003;
(xxxix) "Schedule" means the Schedule to these Regulations;
(xl) "Secured" means Exposure backed by Tangible Security and any Other Form of
Security with appropriate margins (in cases where margin has been specified by
the Commission appropriate margin shall at least be equal to the specified
margin) ;
(xli) "Short Term Facilities" mean a Facility with maturities up to one year;
(xlii) "Subordinated Loan" means an unsecured loan extended by the sponsors to the
Borrower which is subordinate to the claim of an NBFC taking Exposure on the
Borrower and documented by a formal subordination agreement between the
provider of the loan and the Borrower;
(xliii) "Tangible Security" means Readily Realizable Assets, mortgage of land, plant,
building, machinery and any other fixed assets;
(xliv) "TFC" means debt instrument issued for the purpose of raising funds in the form
of redeemable capital;
(xlv) "Underwriting Commitments" mean commitments given by NBFCs to the limited
companies at the time of new issue of equity or debt instrument, that in case the
proposed issue of equity or debt instrument is not fully subscribed, the un-
subscribed portion will be taken up by them (NBFCs);
9
(xlvi) "Unlisted Debt Security" means a debt security not listed or quoted on a stock
exchange; and
(xlvii) "Unlisted Equity Security" means an equity security not listed or quoted on a
stock exchange.
meaning unless contrary to the context as assigned to them in the Ordinance, Rules and the
Securities and Exchange Ordinance, 1969 (XVII of 1969) and the Rules and Regulations made
thereunder.
Chapter II
Part-I
General
30 Application of this parto- The provisions of this part shall apply to the forms of business
provided in clause (i) to (vii) of Section 282A (a) ofthe Ordinance
40 Minimum eqnity requiremento- An NBFC licensed by the Commission to undertake any
form of business as specified under section 282A shall, at all the times, meet the minimum equity
requirement in respect of that form of business as provided in Schedule 1:
Provided that where an application is made by an NBFC for an extension of the time
schedule prescribed in Schedule 1, the Commission may, after being satisfied and recording
reasons in writing, extend the timeline for up to a maximum period of six months.
50 Limit on aggregate liabilities of an NBFC.- (l) Aggregate liabilities, excluding Contingent
Liabilities and security deposits, of an NBFC shall not exceed seven times of its equity for the
first two years of its operation and ten times of its equity in the subsequent years.
10
(2) Contingent Liabilities of an NBFC shall not exceed seven times of its equity for the first
two years of its operation and ten times of its equity in the subsequent years.
6. Internal audit function.- (1) An NBFC shall have an internal audit function, reporting
directly to the audit committee of the board of the NBFC.
(2) The internal audit function may either be performed by creating an internal audit
department or by outsourcing the function.
(3) The internal audit function shall be responsible for monitoring compliance with the
Ordinance, Rules and these Regulations by establishing effective means oftesting, checking and
compliance of the policies and procedures framed by the board of the NBFC.
7. Submission of infonnation by the NBFC.- An NBFC shall submit such information
including periodical statements, reports, statistics and data in such forms and manner and within
such time as may be required by the Commission from time to time.
8. Code of conduct- An NBFC shall acquire and maintain membership of such association(s)
which have been constituted in consultation with the Commission and abide by the code of
conduct prescribed by the said association(s).
9. Prevention of NBFCs involvement in money laundering and other illegal trades.- (1)
All NBFC shall ensure prevention of money laundering and other illegal trades and abide
by such directives and circulars as may be issued by the Commission to safeguard the NBFC
against involvement in money laundering activities and other illegal trades.
(2) Notwithstanding the generality of Regulation 9(1) an NBFC shall comply with the
following conditions, -
(a) it shall accept deposits from an investor only after ensuring that an account has
been opened in the name of the investor using the account opening form
11
developed by the respective industry associations in consultation with the
Commission;
(b) it shall determine the true identity of the prospective customer before extending
its services and care shall be taken to identify ownership of all accounts and those
using safe custody;
(c) it shall establish effective procedures for obtaining identification from new
customers and devise a policy to ensure that business transactions are not
conducted with persons who fail to provide evidence oftheir identity;
(d) it shall conduct its business in conformity with the Rules and these Regulations
and shall not offer services or provide any assistance in transactions which, in the
opinion of the NBFC, are associated with money derived from illegal activities;
(e) it shall establish effective procedures for monitoring of Borrower accounts on a
regular basis, checking identities and bonafide of remitters and beneficiaries of
transactions and retain record of transactions; and
(f) it shall not make payment or receive amounts in cash exceeding Rs. 50,000/-.
(3) All transactions into or from the account maintained with the NBFC which are not usual
transactions shall be thoroughly scrutinized and properly investigated by the NBFC.
10. Procedure for prior approval for appointment of directors and chief executives.- An
NBFC shall follow the following procedure for obtaining approval of appointment or any change
of its directors or chief executive, -
(a) in the case of removal of its chief executive before the expiration of his term or
where the chief executive decided to tender his resignation, the NBFC shall
inform the Commission at least one month before the change:
12
Provided that in the case of removal of the chief executive before the
expiration of his term the NBFC shall the furnish reasons to the Commission;
(b) not later than 10 days before the notice of meeting called for the election of
directors or within 10 days of the occurrence of any casual vacancy submit an
application for the appointment or change to the Commission;
(c) the application shall be submitted in compliance with the requirements of
Schedule IX and be accompanied by information and documents required therein;
and
(d) any deficiency or shortcoming in the information or documents submitted by the
NBFC to the Commission shall be rectified by the NBFC within 14 days of the
issue of the letter by the Commission informing the NBFC of the deficiency or
shortcoming:
Provided that where the NBFC does not remove the deficiency or
shortcoming, the Commission may close the matter.
11. Fees applicable to an NBFC.- All fees which an NBFC or a Notified Entity is required to
pay to the Commission are prescribed in Schedule - II.
13
PART-II
Leasing, Investment Finance Services and Housing Finance Services
12. Application of this Part.- The provisions of this part shall apply to Leasing Companies,
Investment Finance Companies and Housing Finance Companies.
13. Allocation of assets in case of multiple iicensing.- An NBFC engaged in leasing,
investment finance services or housing finance services or any combination thereof, shall invest
at least twenty percent of its assets in each such form of business :
Provided that cash, bank balances and cash equivalent instruments of a maximum of
thirty day term, investments made under Regulation 14(4)(i) and investments made in unquoted
shares of any company in terms of Rule 7(2)(h) shall be excluded from calculating the
percentage of allocation of assets ofNBFC engaged in multiple forms of business :
Provided further that an NBFC shall comply with the requirement of this Regulation by
30
th
June 2009.
14. Permlsslon to issue of Certificates of Deposit by an NBFC licenced to provide leasing or
investment fmance services or housing finance services.- (l) A Leasing Company, Investment
Finance Company or a Housing Finance Company may apply to the Commission for permission
to issue Certificates of Deposit, after complying with the following conditions, namely:-
(a) that the NBFC is listed on a stock exchange and has been, as per the audited
accounts, making profits for a period of at least two years :
Provided that an unlisted NBFC engaged in deposit raising shall get itself
listed on a stock exchange by 30
th
June 2009:
14
Provided further that the requirement to list the NBFC on a stock
exchange shall not apply to an NBFC which, -
(i) is raising deposits from financial institutions only;
(ii) is preparing its accounts in conformity with the provisions of the
Ordinance, the Rules, these Regulations and making them
available to the public;
(b) the operations of the NBFC and the conduct of its directors with respect to the
NBFC has been in accordance with law;
(c) the NBFC has been assigned a credit rating of minimum investment grade from a
credit rating agency registered with the Commission; and
(d) a disclosure statement setting out information about the product shall be
submitted to the Commission along with application and a copy of such statement
shall be made available free of cost at the registered and every other office of the
NBFC:
Provided that an NBFC which is currently allowed to issue Certificate of
Deposit shall develop and submit the statement to the Commission setting out the
information within sixty days of the notification of these Regulations;
(2) An NBFC which is in compliance with the provisions of Regulation 14(1) shall make an
application to the Commission along with the evidence of compliance with Regulation 14( 1).
(3) If the Commission is satisfied that the NBFC fulfils the conditions prescribed in
Regulation 14(1), it may give permission to such NBFC to issue Certificates of Deposit.
(4) An NBFC which has been given permission to issue Certificates of Deposit shall comply
15
with the following conditions, namely:-
(a) the NBFC shall maintain the muumum investment grade rating and have it
updated at least once every year during the term ofthe issue:
Provided that if the credit rating of the NBFC falls below the investment
grade, the permission to issue Certificate of Deposit shall automatically stand
cancelled with immediate effect and the NBFC shall immediately cease to issue
further Certificate of Deposit or roll-over the existing certificates and the existing
Certificate of Deposit shall be encashed as and when they become due:
Provided further that if the credit rating of the NBFC is subsequently
upgraded to investment grade, it may apply to the Commission for a fresh
permission for issuance of Certificates of Deposit;
(b) the NBFC shall publish its investment grade rating in financial statements,
advertisements and brochures published in relation to the promotion of its
business;
(c) the Certificate of Deposit issued by the NBFC shall be registered in the name of
the person to whom it is issued;
(d) the maturity period of Certificate of Deposit shall not be less than thirty days :
Provided that a certificate shall be redeemable before its maturity period
subject to the terms and conditions laid out in the deposit agreement or product
disclosure statement;
(e) a Certificate of Deposit may be issued at fixed or floating rate of interest as
specified in the product disclosure statement wherein the mechanism for
determining the rate of interest shall also be disclosed;
16
(f) all amendments to the disclosure statement setting out information about the
product shall be made with the prior written approval of the Commission;
(g) all advertisements for inviting general public for making investment in
Certificates of Deposit shall contain the credit rating of the NBFC, the name of
the rating agency, the date on which the credit rating was issued, expected rate of
profit and tenor of the Certificate of Deposit and a copy of such advertisement
shall be submitted to the Commission within three days from the date of issue;
(h) the deposits raised by the NBFC, from individual depositors including sole-
proprietorships shall not exceed three times ofthe equity of the NBFC;
(i) at least 15 per cent of the 1[outstanding] funds raised through issue of Certificates
of Deposit by the NBFC, excluding the Certificates of Deposit held by fmancial
institutions, shall be invested in Government Securities \ or instruments or
investments as notified by the Commission and such investments or instruments
shall be valued at cost or market value whichever is lower and any shortfall in the
value of such investments or instruments shall be immediately made-up and the
instruments or investments shall be] kept un-encumbered and disclosed separately
in the annual and quarterly accounts of the NBFC; and
(j) the NBFC shall provide a return on the Certificate of Deposits which may be
different for different volumes and maturities of deposits provided that uniformity
is observed within each category:
I Inserted vide S.R.G. 764 (1)/2009 dated September 2, 2009.
2 Substituted for "and such investments shall be" vide S.R.G. 764 (1)/2009 dated September 2, 2009.
17
Provided that deposits of listed

compames, fmancial institutions,
recognized charitable trusts and statutory bodies shall be exempted from
compliance with the provision of Regulation l4(4)(j).
15. Other Sources of raising Funds: An NBFC licensed to provide leasing, investment fmance
services or housing fmance services may raise funds through, -
(a) commercial paper, any security or deposit of not less than thirty days
maturity;
(b) foreign debentures whether short or long term;
(c) issuance ofredeemable capital;
(d) lines of credit; and
(e) re-discount facility.
16. Creation of reserve fund.- An NBFC shall create a reserve fund wherein at least 20% of
the after tax profits of the NBFC shall be credited till the time that the reserve fund equals the
amount of the paid up capital of the NBFC and thereafter a sum not less than 5% of its after tax
profits shall be credited to the reserve fund.
Explanation. - Issuance of bonus shares may be made from the reserve fund after
appropriation made under Regulation 16 however the NBFC shall transfer further amounts to the
reserve fund in order to comply with the requirements of Regulation (16).
17. Maximum Exposure of NBFC to a single person or Group. - (I) The total outstanding
Exposure (fund based and non fund based) by an NBFC to a person shall not at any time exceed
30% ofthe equity of an NBFC (as disclosed in the latest fmancial statements):
18
Provided that the maximum outstanding fund based Exposure does not exceed 20% of the
equity of an NBFC.
(2) The total outstanding Exposure (fund based and non fund based) by a NBFC to any
group shall not exceed 50% of the equity of an NBFC (as disclosed in the latest fmancial
statements):
Provided that the maximum outstanding fund-based Exposure does not exceed 35% of
the equity of an NBFC.
(3) Exposure under this Regulation shall be calculated as under, -
(a) 100% of the deposits placed with the lending NBFC shall be deducted
from Exposure;
(b) 90% ofthe following shall be deducted from Exposure, -
(i) deposits with another financial institution under perfected
lien;
(ii) encashment value of Government Securities and National
Saving Scheme securities deposited by the Borrower as
collateral; and
(iii) face value of Special US Dollar Bonds converted at inter-
bank rate into Pak Rupee equivalent, deposited by the
Borrower as collateral;
(c) 85% of the unconditional financial guarantees, payable on demand, issued
by commercial banks rated at least 'A' or equivalent by a credit rating
19
agency registered with the Commission, accepted as collateral by NBFCs
shall be deducted from the Exposure;
(d) 50% of listed Term Finance Certificates held as security with duly marked
lien shall be deducted:
Explanation.- The TFCs to qualify for this purpose should have been
rated at least 'A' or equivalent by a credit rating agency registered with
the Commission; and
(e) the following weightage will be applicable in respect of placements with
financial institutions, -
(i) 25% weightage on Exposure to fmancial institutions with' AAA'
Rating.
(ii) 75% weightage on Exposure to fmancial institutions rated at least
,A'.
18. Limit on money market placements.- An NBFC shall make clean money market placement
only with financial institutions and its aggregate Exposure shall not exceed its equity:
Explanation. For the purpose of this Regulation "clean money market placement" means
Exposure without taking any security or collateral.
19. Restrictions on certain types of transactions. - An NBFC shall not, -
(a) provide a Facility against shares and TFCs issued by it;
(b) provide a Facility against Unlisted Debt Security and Unlisted Equity
Security;
20
(c) provide a Facility to any company against shares and TFCs of that
company or group companies of that company;
(d) provide a Facility against shares in physical form of a listed company;
(e) provide a Facility against unsecured TFCs, non-rated TFCs and TFCs
rated below investment grade by a credit rating agency registered with the
Commission;
(f) provide a Facility against shares of the sponsor directors (issued in their
own name or in the name of their close relative) of banks and NBFCs;
(g) hold shares on aggregate basis, whether as pledgee, mortgagee or absolute
owner, of an amount exceeding 20% of the paid-up share capital of that
company or 20% of its own equity, whichever is less:
Provided that this restriction shall not be applicable to the
investments made by an NBFC in its own subsidiaries.
(h) provide a Facility to its chief executive, directors, individuals or firms or
companies in which it or any of its directors is interested as a partner or
director or guarantor, major shareholders and their close relatives, firms or
companies without the approval by the majority of the directors of that
NBFC:
Provided that the director interested in seeking such approval shall
not take part in the proceeding ofthe approval ofthe Facility:
Provided further that where the board of the NBFC grants approval
under Regulation 19(h) the Facility extended shall be at arms length basis
21
and on such terms and conditions as are applicable to other customers of
the NBFC:
Provided further that an NBFC shall ensure that the appraisal
standards are not compromised and market rates are used and a Facility
extended to employees of an NBFC as a part of their compensation
package under Employees Service Rules shall not fall in this category;
(i) allow Facility on the guarantee of its chief executive, directors or major
shareholders including their close relatives; and
(j) allow a Facility to any person for speculative purposes.
20. Consumer Financing by an NBFC licenced to provide leasing or investment finance
services.- A Leasing Company or Investment Finance Company may undertake Consumer
Financing provided that such NBFC carries out Consumer Finance business in accordance with
the requirements specified by the Commission.
21. Minimum conditions for providing Facility. - (l) An NBFC shall while providing a
Facility to a Borrower which exceeds one million rupees, give due weight to the credit report
relating to the Borrower or its group obtained from a Credit Information Bureau.
(2) If the credit report of Credit Information Bureau indicates overdue or default by a
Borrower, the NBFC shall not extend any Facility:
Provided that where a Credit Information Bureau report indicates minor overdue of credit
card or default due to disputed amounts an NBFC may grant a Facility to the Borrower after
recording proper justification for granting the Facility and all such approvals shall be reviewed
by the board of directors on a quarterly basis.
(3) While granting a Facility to a Borrower who is not an individuals the NBFC shall obtain
22
copy of accounts relating to the business of such Borrower for analysis and record in the
following manner, namely:-
(a) where the Exposure does not exceed Documentary evidence of net worth of the
one million rupees. Borrower.
(b) where the Exposure exceeds Accounts duly signed by the Borrower.
one million rupees but does not
exceed two million rupees
(c) where Exposure exceeds two Accounts duly signed by the Borrower and
million rupees but does not counter signed by:
exceed ten million rupees. (i) a chartered accountant; or
(ii) a cost and management accountant in
case of a Borrower other than a public
company or a private company which is a
subsidiary of a public company.
(d) where the Exposure exceeds Accounts duly audited by:
ten million rupees. (i) a practicing chartered accountant; or
(ii) a practicing cost and management
accountant in case of a Borrower other than
a public company or a private company
which is a subsidiary of a public company.
(4) In case the Borrower is an individual the NBFC shall obtain documentary evidence ofthe
means of the Borrower such as wealth statement, statement of assets and liabilities or any other
document as may be considered appropriate by the management of the NBFC.
(5) An NBFC shall, before providing any Facility (including renewal, enhancement and
rescheduling or restructuring), ensure that the application for loan is accompanied with a
23
"Borrower's Basic Fact Sheet" as prescribed in Schedule XII.
(6) An NBFC shall ensure that the information requested in the basic fact sheet is provided
by the Borrower under his seal and signature.
22. Margin against Facility. - (I) Save as otherwise provided in Regulation 22(2), an NBFC
shall apply such margin requirements on Facility as approved by their board of directors.
(2) An NBFC shall comply with to the following margin requirements:
Shares oflisted companies
Listed TFCs
24
Exposure against the shares of listed
companies shall be subject to minimum
margin of 30% of their current market
value. However, an NBFC may set higher
margin requirements keeping in view other
factors.
An NBFC shall monitor the margin on at
least weekly basis and shall take appropriate
action for top-up and sell-out on the basis of
the credit policy approved by their board
and prior written authorization from the
Borrower.
Exposure against listed TFCs which are
rated 'A' (or equivalent) or above by a
credit rating agency registered with the
Commission shall be subject to a minimum
margin of 10%
Exposure against listed TFCs rated 'A-'
and 'BBB' shall be subject to

a mmnnum
margin of20%.
Bank deposits and Certificate of Deposit 15%
of NBFCs or DFls and Certificates of
Musharaka issued by Modarabas with
investment grade credit rating by a
credit rating agency registered with the
Commission.
Government backed securities 10%
Pledge oftrading stocks 25%
Hypothecation oftrading stocks 50%
(3) All guarantees provided shall be for a specific amount and expiry date and shall contain
claim lodgment date and shall be backed by 100% realizable securities except that in the case of
performance bonds, bid bonds and mobilisation advance where the condition of 100% cover of
realizable securities may be relaxed upto 50% provided that NBFCs hold at least 20% of the
guaranteed amount in the form of Liquid Assets as security.
23. Linkage between Equity of the Borrower and total Exposure from flnancial
institutions.- (1) An NBFC while taking an Exposure shall ensure that the total Exposure
availed by the Borrower from financial institutions does not exceed 10 times the Equity of the
Borrower as disclosed in the financial statements ofthe Borrower.
Explanation.- For the purpose of Regulation 23(1) Subordinated Loans shall be counted
as Equity of the Borrower and an NBFC shall state the conditions of the Subordinated Loan in
the Offer Letter.
(2) The agreement for providing a Subordinate Loan shall state that the repayment of the
Subordinated Loan will be subject to the prior approval ofthe NBFC.
25
(3) The Subordinated Loan shall be disclosed in the annual audited financial statements of
the Borrower.
24. Financial indicators of the Borrowers.- (1) Subject to Regulation 24(2), an NBFC shall at
the time of allowing fresh Exposure, enhancement or renewal ensure that the current assets to
current liabilities ratio ofthe Borrower is not lower than I: I :
Provided that an NBFC in exceptional cases may relax the aforementioned ratio up to
0.75:1 if it is satisfied that appropriate risk control measures have been put in place and
recording its reasons on the approval form and the exception approval file to be maintained at its
central credit office containing all such approvals.
(2) Regulation 24(1) shall not apply to, -
(a) Facility granted to financial institutions with minimum investment grade rating by
a credit rating agency registered with the Commission;
(b) fully secured Exposure against Liquid Assets held as collateral;
(c) export finance; and
(d) finance provided to ginning and rice husking factories .
25. Classification and Provisioning for non-performing assets. - (1) A Leasing Company,
Investment Finance Company and Housing Finance Company shall observe the criteria for
classification of its assets and provisioning as provided in Schedule X till June 30, [2012] and
Schedule XI with effect from [July 01, 2012(
(2) In addition to time based criteria provided in Schedule X and Schedule XI subjective
evaluation of performing and non-performing advances, loans and lease port-folio shall be made
1 Year "2010" substituted with "2012" vide S.R.O 591 (1)/2010 dated June 29,2010.
26
for risk assessment and where considered necessary the category of classification determined on
the basis of the aforementioned time based criteria shall be further downgraded:
Provided that such evaluation shall be carried out on the basis of adequacy of security
inclusive of its realizable value, cash flow of the Borrower or lessee, operations in the account
and records covering advances and credit worthiness of the Borrower or lessee.
(3) The status of classification of a rescheduled or restructured non-performing Facility shall
be changed only when the terms and conditions of the rescheduled or restructured Facility are
fully met for a period of at least six months (excluding grace period, if any) from the date
of such rescheduling or restructuring and when at least 20% of the outstanding amount is
recovered in cash:
Provided that the above condition of six months retention period shall not apply if the
Borrower repays or adjusts at least 50% of the restructured or rescheduled loan amount in cash.
(4) An NBFC shall ensure that the status of classification and provisioning of a rescheduled
or restructured non-performing Facility is not changed in its reports to the Commission merely
due to rescheduling or restructuring of a Facility and rescheduled or restructured loans shall be
reported to the Credit Information Bureau as such and not as default.
(5) Where the Borrower subsequently defaults (either on principal or mark-up) after the
rescheduling or restructuring of the non-performing Facility the NBFC shall classify the loan or
lease in the same category as it was in at the time of rescheduling or restructuring and NBFC
may further downgrade the classification after taking into account the applicable criteria stated in
Schedule X or XI.
(6) At the time of rescheduling or restructuring an NBFC shall reconsider and re-examine the
viability ofthe project or business and shall accordingly secure its interests.
(7) An NBFC shall classify its loans, advances or lease portfolio and make provisions in
accordance with the time-based criteria prescribed in Schedule X till June 30, [2012] and
27
Schedule XI with effect from July 01, [2012(
Provided that before making any provision an NBFC may avail the benefit of leased
assets, or additional collaterals held against lease, or collaterals held against advances or loans, it
can consider the realizable value of mortgaged or pledged or leased or collaterally held assets for
deduction from the outstanding principal amount of loans or advances or lease against which
such assets are leased, mortgaged, pledged or collaterally held:
Explanation:- The value of the mortgaged, pledged assets, other than Liquid Assets, to
be considered for this purpose shall be the FSV and the FSV once determined, shall remain valid
for three years from the date of the valuation during which period the underlying collateral or
leased assets will not be revalued for provisioning purpose. Also the adjustment factors of 80%,
70% and 50% shall be applied on the value so determined for the purpose of determining
provisioning requirement in 1st, 2nd and 3rd year of valuation, respectively. Thereafter, the assets
shall be revalued and the adjustment factor of 50% shall be applied for all subsequent years.
The FSV of the collateral shall be restricted to fresh revaluation or previous value, whichever is
less. In case ofNBFCs, licensed by the Commission to undertake housing finance services, FSV
once determined, shall remain valid for a period of ten years from the date of valuation and an
adjustment factor of 70% shall be applied on the value so determined for the purpose of
determining provisioning requirement in respect of housing finance for the said period.
(8) Non-performing Facility against which security or incase of lease, additional security is
not available, or where mortgaged, pledged or leased assets have not been valued and verified by
external auditors, such Facility shall continue to be classified and provided for according to the
time-based criteria prescribed in Schedule X till June 30, [2012f and Schedule XI with effect
from July 01, [2012t
(9) NBFCs shall observe the following criteria for determining the realizable value of
mortgaged, pledged, leased or collaterally held assets, namely:-
1,2,3 Year "2010" substituted with "2012" vide S.R.O 591 (1)/2010 dated June 29, 2010.
28
(a) only assets having registered mortgage, equitable mortgage (where NOC for
creating further charge has not been issued by NBFC) and pledged or collaterally
held assets shall be considered;
(b) assets having pari-passu charge shall be considered on proportionate basis;
(c) hypothecated assets and assets with second charge or floating charge shall not be
considered;
(d) valuations shall be carried out by an independent professional valuer listed on the
panel of valuers maintained by the Pakistan Banks Association or the Leasing
Association of Pakistan;
(e) the valuers while assigning any values to the mortgaged, pledged, leased or
collaterally held assets, shall take into account all relevant factors affecting the
salability of such assets including any difficulty in obtaining their possession, their
location, their condition and the prevailing economic conditions in the relevant
sector, business or industry;
(f) the realizable value of mortgaged, pledged, leased or collaterally held assets
determined by the valuers must take into account the amount that can be realized
from the asset if sold in a forced or distressed sale condition;
(g) the valuers shall in their report explain the assumptions, calculations, formula and
method adopted in determination ofthe realizable values;
(h) valuations shall be conducted at least once in three years :
Provided that, except for a Housing Finance Company, if a valuation is
older than three years, a fresh re-valuation shall be done failing which the
valuation shall be taken as nil.
29
(l0) The categories of mortgaged, pledged, leased or collaterally held assets which are
considered for valuation and the discounting factors to be applied shall be as under and no other
assets shall be taken into consideration:
(a) Liquid Assets: Valuation of Liquid Assets shall be determined by the
NBFC and verified by the external auditors.
Explanation:- Values of pledged shares ofa listed company shall be taken
at their market value on the balance sheet date and as per method, if any,
specified by Institute of Chartered Accountants of Pakistan.
(b) Pledged Stocks: In the case of pledged stocks of perishable and non-
perishable goods,-
(i) the FSV provided by valuers shall not be more than six months
old, at each balance sheet date;
(ii) the goods shall be perfectly pledged;
(iii) the operation ofthe godowns shall be in control of the NBFC;
(iv) regular and valid insurance and other records should be available;
and
(v) in case of perishable goods, the valuers should also give the
approximate date when these are expected to be of no value.
(ll) The values of mortgaged, pledged, leased or collaterally held assets determined by the
valuers shall be subject to verification by the external auditors, who may reject cases of
valuation, which in their opinion -
(a) do not appear to have been professionally carried out and values determined are
unreasonable, or
(b) are not backed by valid documentation of mortgage, pledge, leased or collaterally
30
held asset, and are not supported by legal opinion wherever required.
(12) Subjective evaluation of investment portfolio and other assets shall be carried out by the
NBFC. Classification of such assets and provisioning required against them shall be determined
keeping in view the risk involved and the requirements of the International Accounting
Standards as notified by the Commission under Section 234(3) of the Ordinance and the
Technical Releases issued by the ICAP, from time to time.
(13) An NBFC shall review, at least on a quarterly basis, the recovery oftheir loans, advances
and lease portfolio and shall properly document the evaluations so made:
Provided that shortfall in provisioning, if any, determined as a result of quarterly
assessment, shall immediately be provided in the books of accounts by the NBFC.
(14) The external auditors as a part of the annual audit of the NBFC shall verify that all
requirements under these Regulations or any other circular issued by the Commission for
classification of assets and determination of provisions required against them have been
complied with.
26. Reversal of Provisioning.- Where there is a cash recovery, other than rescheduling or
restructuring, an NBFC may reverse specific provisioning held against classified assets to the
extent that the remaining outstanding amount of the classified asset is covered by the minimum
provisioning required under that particular classified category of assets.
27. Overdue, default and recovery thereof. - (I) An NBFC shall provide the Commission, -
(a) a list of its defaulters on the prescribed format on quarterly basis; and
(b) a list of rescheduled and restructured Facility on prescribed format.
Explanation:- For the purpose of Regulation 27(1) a person shall be declared a defaulter
31
by an NBFC if such person fails to pay of or liquidate any written obligation towards any
NBFC and such failure has continued for a period of twelve months from the date on
which the person was required to make the payment or to do or perform the act.
(2) An NBFC shall nominate an officer as recovery officer or create a department for
recoveries, depending upon the number of defaults.
(3) An NBFC shall set quarterly recovery targets as a percentage of the overdue obligations
and shall be monitored by the board.
Leasing
28. Tenus and conditions applicable to Leasing Companies.- A Leasing Company shall in
addition to the conditions specified in the Rules, these Regulations and any other conditions that
may be specified by the Commission operate in accordance with the following conditions,
namely: -
(a) a Leasing Company, if undertaking the business of leasing only, shall invest at
least seventy per cent of its assets in the business of leasing:
Provided that cash, bank balances and cash equivalent instruments of a
maximum of thirty day term, investments made under Regulation 14(4)(i) and
investments made in unquoted shares of any company in terms of Rule 7(2)(h)
shall be excluded to calculate investment in leasing business for purposes of this
Regulation;
(b) a Leasing Company shall not engage in the following leasing operations, -
(i) land; and
(ii) residential buildings and apartments;
32
Commission;
(ii) discount or trade in commercial paper issued by its client, Government
Securities, promissory notes, bills, Bankers' Acceptances and other money
market instruments, acting either as a broker or acting on its own account;
and
(iii) assist in the issue of commercial paper, including introduction of
companies to the money market, preparation of documentation,
distribution and market making; and
(b) in case of capital market activities, -
(i) invest in listed securities, both equity and non-equity instruments;
(ii) provide professional analysis to institutional and individual investors, for
remuneration, on investing in, purchasing or selling of securities either
directly in writing or through publications;
(iii) underwrite stocks and shares, instruments of redeemable capital and other
negotiable term obligations of corporations and financial institutions,
acting singly or jointly as manager, underwriter or distributor for issues;
(iv) take an active part in all stages of preparation for public issues or private
placement;
(v) manage portfolios of securities including stocks, shares, pension fund,
provident fund, participation term certificates and other negotiable and
debt instruments for Eligible Investor both individual and institutional
clients on a discretionary as well as non-discretionary basis as specified in
34
(iii) act as adviser to companies in corporate or fmancial restructuring as well
as in the preparation of resource mobilization plans;
(iv) act as adviser to companies in mergers, acquisition and divestitures;
(v) assist companies with cash management systems;
(vi) prepare feasibility, market or industry studies for companies, both
domestic and overseas;
(vii) assist to raise equity for new and existing companies, by acting as
financial agent;
(viii) act as custodian for securities owned or held by clients pursuant to their
instructions and provide each or any of the following services;
(I) custody of securities;
(II) placing or execution of orders for purchase or sale of securities;
(III) receipt of dividends and other income on securities;
(IV) execution of voting and other rights in connection with securities;
(V) holding securities on behalf of their clients; and
(VI) transacting aforesaid activities through nominees, agents, or
attorneys;
(ix) act as nominees, agent, attorney, administrator, executor or trustee for
clients;
(x) act as trustee for Collective Investment Schemes, private equity and
venture capital funds, real estate investment trusts and debt instruments, if
so approved by the Commission; and
36
(e) in case of general activities, -
(i) raise funds through equity, foreign and local debentures both short and
long term, commercial paper issued locally or overseas, sale of short and
long term participation certificates and term finance certificates;
(ii) act as authorized seller for securities and certificates, denominated in local
or foreign currency, issued by Federal or Provincial Governments,
statutory bodies, and state-owned corporations, including instruments of
National Savings Schemes;
(iii) provide safe deposit vaults to clients;
(iv) handle payments and collections for clients;
(v) extend Secured loans and advances; and
(vi) provide discounting services.
30. Limits for investment in equities.- (l) An Investment Finance Company shall not make
aggregate investment in listed equity securities, both in the ready as well as in futures market,
exceeding fifty percent of its own equity:
Provided that investment in equity securities of any company shall not
exceed ten percent of the paid-up capital of the investee company or ten per cent of its own
equity, whichever is less and the shares acquired in excess of ten per cent limit, due to the
Underwriting Commitments, will be sold off within a period of seven months from the date of
acquisition of such shares :
Provided further that this restriction shall not be applicable to investments made
by a Investment Finance Company in its own subsidiaries and long term strategic investments
37
17 SHARE PRICES OF THE BORROWING ENTITY

Listed Companies Break-up value ofthe Shares
Current Price Preceding 12 Months Average in case of Private Limited
Companv
18. NET-WORTH (PARTICULARS OF ASSETS OWNED
IN THEIR OWN NAMES BY THE
DIRECTORS/PARTNERS/PROPRIETORS)
Owner's Name Particulars of Assets Market Value Particulars of

Liabilities
19. DETAILS OF ALL OVER DUES (IF OVER 90 DAYS):
Name Of Financial Institution Amount
20. Details of payment schedule ifterm loan sought.
21. Latest Audited Financial Statements as per requirement of Regulation 21(3) to be
submitted with the LAF (Loan Application Form).
22. Memorandum and Articles of Association, By-laws etc. to be submitted by the Borrower
along with the request.
I certify and undertake that the information furnished above
is true to the best of my knowledge.
CHIEF EXECUTIVE'S/BORROWER'S
SIGNATURE & STAMP
COUNTER SIGNED BY:
(NBFC OFFICIAL)
147
BORROWER'S BASIC FACT SHEET - FOR INDIVIDUALS
Date of Request. _
1 BORROWER'S PROFILE

Name Address
Office Res.
Father's Name Father's National Identity Card #
2. PREFERENCES (AT LEAST TWO) :
Name Address
Office Res.
3 NATURE OF BUSINESS/PROFESSION

Amount Expiry date Status
Regular Amount Amount
over-due (if rescheduled/
any) restructured (if
any)
Fund Based
Non-Fund
Based
7. Latest Income Tax Form or Wealth Statement to be submitted by the Borrower.
I certify and undertake that the information furnished above
is true to be best of my knowledge
Amount Tenor
Fund Based
Non-Fund Based

APPLICANT'S SIGNATURE & STAMP
COUNTER SIGNED BY:
AUTHORIZED SIGNATURE & STAMP (NBFC OFFICIAL)
Signature & Stamp of concerned official
148
use additional sheet if required
149
Schedule XIII
[see Regulatiou 68]
Savings
ENACTMENT Savin
Non-Banking Finance Companies and Preamble, except for the words and commas
Notified Entities Regulations, 2007. "leasing, investment finance

services,
housing finance services, asset management
discounting

investment services, services,
advisory services and"
Regulation l.
Regulation 2(l)(xl) to (xliii).
Regulation 3, except for rows 2 to 7 of the
table.
Regulations 34 to 44 and narration of Part
III.
No. SCD/NBFC/NBFCRl2008
Advisor/Secretary
150
Page 1 of 8
ANNEXURE-I

PRUDENTIAL REGULATIONS FOR NON-BANKING FINANCE COMPANIES
UNDERTAKING THE BUSINESS OF LEASING ONLY.

For the purposes of these guidelines, a Non-Banking Finance Company (NBFC) means a
NBFC engaged in the business of leasing only.

1. Creation and building up of reserve: A NBFC shall create reserve fund to which
shall be credited:

a) an amount not less than twenty per cent of its after tax profits till such time the
reserve fund equals the amount of the paid up capital; and

b) thereafter, a sum not less than five per cent of its after tax profits:

Explanation.- Issuance of bonus shares shall only be made from the reserves
available after appropriation created under clause (b) and since such bonus shares will
increase the paid up capital, the NBFC shall transfer further amounts to the reserves
in order to comply with condition of clause (a);

2. Linkage between a borrowers equity and total borrowing from NBFC: A NBFC
shall ensure, while granting any facilities, that total facilities availed by any borrower or
lessee from Non-Bank Financial Institutions and Banks does not exceed ten times of the
equity of the borrower or lessee and obtain copy of accounts relating to the business of each
of its borrower/lessee for analysis and record in the following manner, namely: -

(a) where the exposure exceeds ten
million rupees
Accounts duly audited by:
(i) a practicing chartered accountant;
(b) where exposure exceeds two
million rupees but does not exceed
ten million rupees.
Accounts duly signed by the borrower or lessee
and counter signed by:
(i) the internal auditor of the NBFC; or
(ii) a chartered accountant; or
(iii) a cost and management accountant in case of
a borrower or lessee other than a public company
or a private company which is a subsidiary of a
public company.

(c) where the exposure exceeds
one million rupees but does not
exceed two million rupees
Accounts duly signed by the borrower or lessee.
(d) where the exposure does not
exceed one million rupees.
Such documentary evidence of the means and
investment of the borrower or lessee as may be
determined by the management of the NBFC.

Explanation .- Surplus arising on revaluation of assets determined in accordance with
International Accounting Standards by a firm of Chartered Accountants approved by
the Commission for this purpose may be considered for the purpose of calculating the
Page 2 of 8
exposure limit under this regulation. The surplus on revaluation of assets so
determined is required to be reflected in the balance sheet of the borrower or lessee.

3. Minimum conditions for grant of facilities: A NBFC shall ensure, while granting
any facility exceeding one million rupees, that -

(a) current asset to current liabilities ratio of the borrower/lessee does not fall below 1:1:
or any ratio as prescribed from time to time, however, this condition may be relaxed
in case of facilities upto two million rupees by recording reasons there of.

Provided that current maturities of long term debt not yet due for payment may be
excluded from the current liabilities for the purpose of calculating this ratio;

(b) long term debt equity ratio does not exceed 60:40 or any other ratio as prescribed; and

(c) due weightage is given to credit report relating to the borrower or lessee and his
group obtained from Credit Information Bureau of the State Bank of Pakistan. If the
credit reports indicate default, the further facilities shall be extended only after
recording reasons to do so;

Explanation.- "Group" means a set of business companies or concerns under joint
control or associated together or subsidiaries of a holding company.

4. Limit on exposure to a single person and grant of certain facilities: A NBFC shall
not :-

(a) make exposure to a single group for more than twenty per cent of the net investment
in leasing finance, however, in arriving at exposure per person under this rule, the
following shall be excluded, namely :-

(i) ninety per cent of certificates of deposit and certificates of investment of the
lessee under lien with the NBFC;

(ii) face value of FIBs lodged by the lessee as collateral; and

(iii) Pak rupee equivalent of the face value of Special US Dollar Bonds converted
at official rate, lodged by the lessee as collateral.

(b) allow facilities to any of its directors or to individuals, firms or companies in which it
or any of its director is interested as partner, director or guarantor, as the case may be,
its chief executive and its major shareholders, including their spouses, parents and
children or to firms and companies in which they are interested as partners, directors
or major shareholders of that concern without the approval by the directors of that
NBFC:

Provided that the director interested in seeking such approval shall not take part in the
proceedings of the approval of the facility;

Page 3 of 8
(c) allow unsecured facilities or facilities secured only by guarantees except the facilities
provided against bank guarantees, the end use of which will be verified by the NBFC
to be productive;

Provided that the bank providing guarantee shall have rating grade not lower than
BBB;

(d) grant unsecured facilities to or allow facilities on the guarantees of its chief executive,
directors and major shareholders including their spouses, parents, and children or to
firms and companies in which they are interested as partners, directors or major
shareholders of that concern;

(e) allow facilities for speculative purposes.

5. Limit on NBFCs exposure against liabilities:

(a) Liabilities, excluding contingent liabilities, of a NBFC shall not exceed seven times
of its equity during first two years of its operations and ten times of the equity in the
subsequent years.

(b) Contingent liabilities of a NBFC shall also not exceed seven times of its equity during
the first two years of its operations and ten times of the equity in the subsequent
years.

6. Margin against facilities: (1) Following minimum margins shall be maintained
against various facilities and all guarantees will be backed by 100% realizable securities:

(a) in case of performance bonds, the condition of 100% cover of realizable securities
may be relaxed subject to minimum compulsory realizable security cover equivalent
to 20% of the amount of the performance bond;

(b) in case of guarantees issued against mobilisation advance, the condition of 100%
cover of realizable securities may be relaxed subject to the following conditions,
namely :-

(i) guarantees issued should contain a clause that the mobilisation advance shall
be released by the beneficiary through the guarantor NBFC only; and
(ii) at the time of issuing such a guarantee the beneficiary should sign an
agreement with the NBFCs that releases out of mobilisation advance would be
covered by realizable assets;

(c) in case of bid bonds issued on behalf of domestic consultancy firms bidding for
international contracts where the consultancy fees are to be received in foreign
exchange, the requirement of 100% cover by realizable securities may be waived off,
and this relaxation would also be available to all suppliers of goods and services
bidding against international tenders.

Page 4 of 8
(2) No NBFC shall provide unsecured facilities to finance subscription towards floatation
of share capital of public limited companies or allow facilities against its own shares
or shares of its associated undertaking and subsidiaries thereof or shares of companies
not listed on the Stock Exchange and shares of listed companies obtained as collateral
shall be subject to the following minimum margins, namely :-

(a) where the current market value does not exceed the preceding twelve months
average market value, 20% of the current market value;

(b) where current market value exceeds the preceding twelve months average
market value but does not exceed twice the preceding twelve months average
market value, 40% of the current market value; and

(c) Where the current market value exceeds twice the preceding twelve months
average current market value, 50% of the current market value.

Provided that no NBFC shall hold shares in any company as pledgee or
mortgagee, of an amount exceeding thirty percent of its own equity or thirty
per cent of the paid-up capital of that company whichever is less.

(3) Certificates of deposit of banks with investment grade will be subject to a margin of
15% and COIs/COMs, TFCs with investment grade rating but not lower than BBB
will be subject to a margin of 25% of face value or market value whichever is less.

(4) Facilities against pledge of trading stocks shall be subject to a margin of 25%.

(5) Facilities against hypothecation shall be subject to a margin of 50%.

7. Provisioning for non-performing assets:
Every NBFC shall follow prudential guidelines in the matter of classification of its assets and
provisioning there against as specified below:

A. Short Term Facilities:-
Nature Of
Classification
For Finance Lease, Operating
Lease and Term Loans
Provisions to be made
1. Overdue Where rentals, profit or mark
up or principal are overdue
(past due) by 180 days from the
due date.
No provision is to be made.
2. Substandard Where rentals, profit or mark
(past due) by 181 days but less
than one year from the due date.
Provision of 20% of the difference resulting from the outstanding balance
of net investment in lease finance and principal less the amount of liquid
assets realizable without recourse to a Court of Law and forced sale value
of leased assets as valued by valuers fulfilling prescribed eligibility
criteria, in accordance with the guidelines provided in this regulation.
3. Doubtful Where rentals, profit or mark
(past due) more than one year
but less than two years from
due date.
4. Loss Where rentals, profit or mark Provision of 100% of the difference resulting from the outstanding
Page 5 of 8
(past due) beyond two years
from the due date.
balance of net investment in lease finance and principal less the amount
of liquid assets realisable without recourse to a Court of Law and forced
sale value of leased assets as valued by valuers fulfilling prescribed
eligibility criteria, in accordance with the guidelines provided in this
regulation.

B- Long Term Facilities:-
Nature Of
Classification
For Finance Lease,
Operating Lease and Term
Loans
Provisions to be made
1. Overdue Where rentals, profit or mark
(past due) for one year from
the due date.
No provision is to be made.
2. Substandard Where rentals, profit or mark
(past due) by one year but less
than two years from the due
date.
3. Doubtful Where rentals, profit or mark
(past due) by more than two
years but less than three years.
assets realisable without recourse to a Court of Law and forced sale value
4. Loss Where rentals, profit or mark
(past due) beyond three years
from the due date.
Provision of 100% of the difference resulting from the outstanding
balance of net investment in lease finance and principal less the amount of
liquid assets realisable without recourse to a Court of Law and forced sale
value of leased assets as valued by valuers fulfilling prescribed eligibility

Notes.-

1. Where profit is overdue (past due) by one hundred and eighty days or more from the
due date, unrealised profit shall be put in a Suspense Account and shall not be credited to
Income Account.

2. Liquid assets mean realizable amount of bank deposits, certificates of deposit,
government securities, shares of listed companies, NIT units, certificates of mutual funds,
gold ornaments, inventories pledged to NBFCs with possession with 'perfected lien' duly
supported with flawless documentation.

3. Subjective evaluation of performing and non-performing lease portfolio shall be made
for risk assessment and where considered necessary the category of classification determined
on the basis of time based criteria shall be further downgraded. Such evaluation shall be
carried out on the basis of adequacy of security inclusive of its realizable value, cash flow of
lessee, his operation in the account, documentation covering advances and credit worthiness
of the lessee, etc.

4. The rescheduling or restructuring of non-performing lease facilities shall not change
the status classification of lease facilities etc, unless the terms and conditions of
Page 6 of 8
rescheduling/restructuring are fully met for a period of at least one year (excluding grace
period, if any) from the date of such rescheduling / restructuring. Accordingly, NBFCs are
directed to ensure that status of classification as well as provisioning is not changed in
relevant reports merely because of the fact that a lease facility has been restructured or
rescheduled. However, while reporting to the CIB, such lease facilities may be shown as
"rescheduled/restructured" instead of "default".

5. NBFCs shall continue to classify their lease facilities portfolio and make provision
there against in accordance with the time based criteria prescribed above. However, where a
NBFC wishes to avail of the benefit of collaterals held against lease facilities, they can
consider the realizable value of mortgaged or pledged assets for deduction from the
outstanding principal amount of lease rentals against which such assets are
mortgaged/pledged, before making any provisions. The realizable value shall be the value
that could currently be obtained by selling the mortgaged or pledged assets in a
forced/distressed sale conditions. Accordingly, NBFCs shall take into account only forced
sale value into consideration while determining the required provisions. Lease rentals
against which securities are not available, or which have not been valued according to these
guidelines and verified by the external auditors, shall continue to be classified and provided
for according to the time-based criteria. NBFCs shall follow the following uniform criteria,
for determining the realizable value of mortgaged, pledged or leased assets, namely:-

(i) Only leased assets having registered mortgage, equitable mortgage (where
NOC for creating further charge has not been issued by NBFC) and
pledged/leased assets shall be considered. Assets having pari passu charge
shall be considered on proportionate basis;

(ii) hypothecated assets and assets with second charge and floating charge shall
not be considered;

(iii) valuations shall be carried out by an independent professional valuer who
should be listed on the panel of valuers maintained by the Leasing Association
of Pakistan (LAP) for this purpose. LAP shall lay down the minimum
eligibility criteria with the prior approval of the Securities & Exchange
Commission of Pakistan for placement of valuers on the panel to be
maintained by it. The valuer while assigning any values to the mortgaged,
pledged or leased assets, shall take into account all relevant factors affecting
the saleability of such assets including any difficulty in obtaining their
possession, their location and condition and the prevailing economic
conditions in the relevant sector, business or industry. The realizable values
of mortgaged, pledged or leased assets so determined by the valuers must
have to be a reasonably good estimate of the amount that could currently be
obtained by selling such assets in a forced/distressed sale condition. The
valuers should also mention in their report the assumptions made, the
calculations/formulae/basis used and the method adopted in determination of
the realizable values;

Page 7 of 8
(iv) valuation shall be done at least once in three years. If valuation is older than
three years, a revaluation should be done, otherwise the valuation shall be
taken as nil;

(v) the categories of mortgaged, pledged or leased assets to be considered for
valuation along with discounting factors to be applied would be as under (no
other assets shall be taken into consideration) :-

(a) Liquid assets : Valuation of Liquid Assets, excluding pledged stocks,
which are dealt with at (d) below, shall be determined by the NBFC itself
and verified by the external auditors. However, in the case of pledged
shares of listed companies values should be taken at market value as per
active list of Stock Exchange on the balance sheet date and as per
guidelines given in the TR-23 issued by the Institute of Chartered
Accountants of Pakistan. Moreover, valuation of shares pledged against
lease rentals shall be considered only if these have been routed through
Central Depository Company of Pakistan (CDC), otherwise these will not
be admissible for deduction as liquid assets while determining required
provisions;

(b) Land and Building: Valuation of land and buildings would be accepted
as determined by the valuers in accordance with the criteria given at point
5(iii) above and no further discounting factor would be applied on forced
sale value determined by them; and

(c) Plant and machinery : Entries of classified lessees shall be divided into
following categories at the balance sheet date and discounting factors shall
be applied to forced sale value as specified below :

Category
Discounting factors to be applied
to forced sale value

A. In operation
No discussing factors to be applied

B. In operation at the time of valuation but now
closed/in liquidation
15% of forced sale value on the date
of closure.
1st year after closure - 25% of forced
sale value.
2nd year - 50% of forced sale value.
C. Closed / in liquidation at the time of valuation and
no change in situation.
After valuation - 1st year 25% of
forced sale value.
2nd year - 50% of forced sale value.

Page 8 of 8
(d) Pledged stocks : In case of pledged stocks of perishable and non-
perishable goods, forced sale value should be provided by valuers, which
should not be more than six months old, at each balance sheet date. The
goods should be perfectly pledged, the operation of the godowns should be
in the control of the NBFC and regular valid insurance and other
documents should be available. In case of perishable goods, the valuer
should also give the approximate date when these are expected to be of no
value.

(vi) the values of mortgaged/pledged/leased assets determined by the valuers shall
be subject to verification by the external auditors, who may reject cases of
valuation, which in their opinion, do not appear to have been professionally
carried out and values determined are unreasonable, or in the case of which
valid documentation of mortgage, pledge or lease, supported by legal opinion
wherever required, is not available on record.

6. Investments and other assets.- Subjective evaluation of lease portfolio and other
assets shall be carried out by the NBFC. Classification of such assets and provision required
thereagainst shall be determined keeping in view the risk involved and the requirements of
the International Accounting Standards.

7. Timing of creating provisions.- NBFCs shall review, at least on a quarterly basis, the
collectibility of their lease rentals portfolio and shall properly document the evaluation so
made. Shortfall in provisioning, if any, determined as a result of the quarterly assessment
shall be provided for immediately in their books of accounts by the NBFCs.

8. Verification by the Auditors.- The external auditors as a part of their annual audits of
NBFCs shall verify that all requirements of this rule in classification of assets and
determination of provisions required thereagainst have been complied with. The Securities
and Exchange Commission of Pakistan shall also check the adequacy of provisioning during
on-site inspection.

1
S SE EC CU UR RI IT TI IE ES S A AN ND D E EXC CH HA AN NG GE E C CO OM MM MI IS SS SI IO ON N O OF F P PA AK KI IS ST TA AN N

NOTIFICATION

slaaad
th
ugust

S. R. O. No.906(I)/2008. - *** In exercise of powers conferred by Section 29A of the Listed
Companies (Substantial Acquisition of Voting Shares and Take-Overs) Ordinance, 2002
(CIII of 2002), the Securities and Exchange Commission of Pakistan in order to carry out the
purposes of the Listed Companies (Substantial Acquisition of Voting Shares and Take-Overs)
Ordinance, 2002 and incidental and connected matters, hereby makes the following
Regulations.

Chapter I
Preliminary

1. Short title and commencement. (1) These Regulations shall be called the Listed
Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2008.


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

(a) acceptable security means shares of KSE 30 index companies, government
securities and minimum AA rated TFCs of listed companies;

(b) acceptance period means the period commencing on the fifty-fourth day of the
public announcement of offer and closing with the close of the public offer which
shall not be later than the sixtieth day from the date of the public announcement of
offer;

2
(c) date of public announcement means the date on which the public
announcement is published in accordance with section 9 of the Ordinance;

(d) offer letter means the letter to be issued by the acquirer to the shareholders
whose names appear on the register of members of the target company as on the
date of book closure, the custodians of Global Depository Receipts, the custodians
of American Depository Receipt and holders of convertible securities (where the
period of conversion falls within the offer period) in pursuance of section 13 of
the Ordinance and in accordance with the specifications provided in schedule I;

(e) Ordinance means the Listed Companies (Substantial Acquisition of Voting
Shares and Take-Overs) Ordinance, 2002;

(f) schedule means the schedules attached to these Regulations; and

(g) securities shall have the same meaning as assigned to the term security under
the Securities and Exchange Ordinance, 1969 (XVII of 1969);

meaning as assigned to them in the Ordinance, the Securities and Exchange Ordinance, 1969
(XVII of 1969), the Companies Ordinance, 1984 (XLVII of 1984), Central Depositories Act,
1997 (XXIX of 1997) or the Securities and Exchange Commission of Pakistan Act, 1997
(XLII of 1997).

3. Eligibility. (1) A person who is a shareholder of the target company as on the date
of closure of public offer shall be eligible to participate in the public offer.

(2) All Global Depository Receipts holders, American Depositary Receipts holders
entitled to participate in the public offer as on the date of closure of public offer and
convertible security holders (where the period of conversion falls within the offer period)
shall be eligible to participate in the public offer.

3
Chapter II
Exempted transactions

4. Mandatory disclosure for exempted transactions (1) An acquirer who acquires
voting shares pursuant to clauses (a), (b), (c), (d), (e), (g), (i), (j), (m), and (o) of sub-section
(1) of Section 3 of the Ordinance beyond the thresholds prescribed under the Ordinance, shall
within two working days of the acquisition of shares make a disclosure of the acquisition to
the target company, the stock exchanges on which the voting shares of the target company are
listed and the Commission.

(2) The disclosure required to be made under Regulation 4(1) shall contain the
information as prescribed in schedule II.

Chapter III
Disclosures and Public Announcements

5. Disclosure by the target company. (1) The target company shall immediately, in
writing, inform the stock exchange and the Commission, -

(a) when a firm intention to acquire control or voting shares of the target
company, beyond the thresholds prescribed under section 5 or section 6 of the
Ordinance, is notified to the board of directors of the target company;
(b) when the target company is the subject of rumor and speculation or there is
undue movement in its share price and there are reasonable grounds for
concluding that it is the potential acquirers actions which has led to the
situation; or
(c) when negotiations or discussions are about to commence to induct people for
acquiring control of the target company.

(2) The stock exchange upon being informed by the target company under Regulation
5(1) shall make the information available on the same day to the shareholders of the target
company and prospective investors by placing the information on its website, posting it on its
notice board, notification on the automated information system and making an announcement
on the house of the exchange.

4
(3) If any information given by the target company under this Regulation is found to be
false and the target company gains a benefit from the false information, the target company
shall be liable to a fine of upto Rupees thirty million.

6. Public announcement of intention. (1) Any person intending to acquire voting
shares of the target company which will attract the provisions of section 5 or section 6 of the
Ordinance shall, after careful and responsible consideration, make a public announcement of
intention.

(2) The public announcement of intention to purchase voting shares or control of the
target company shall be published in accordance with section 9(1) of the Ordinance and a
copy thereof shall be submitted, through the manager to the offer, to the Commission, the
target company and the stock exchanges on which the voting shares of the target company are
listed at least two working days before its issuance in newspapers.

(3) Before an acquirer, -

(a) enters into negotiations for a share purchase agreement;
(b) in the case of a company, passes a board resolution;
(c) starts raising funds; or
(d) commences a due diligence process to evaluate the share price of the target
company or assess the viability of the acquisition, whether through a
consultant or otherwise;

for the purpose of the acquisition of voting shares beyond the thresholds prescribed
under section 5 or section 6 of the Ordinance or control of the target company, the
acquirer shall make a public announcement of intention.

(4) The public announcement of intention to acquire the shares of the target company
shall contain the information as prescribed in schedule III.

(5) Where a person makes a public announcement of intention to acquire voting shares or
control of a target company in order to deceive another person, or to induce or influence
another person to act in a particular manner or withdraws the public announcement of
intention without reasonable cause or reason, such person shall be liable to a fine of upto
Rupees thirty million.

5

(6) Where any person makes a public announcement of intention and does not
subsequently make the public announcement of offer as required under Regulation 8 or
public announcement of withdrawal such person may be debarred by the Commission from
making any further public offers for the acquisition of voting shares of that particular listed
company or any listed company.

7. Restrictions on the target company after the public announcement of intentions
is made. (1) Where a public announcement of intention has been made by the acquirer, the
board of directors of the target company shall not till the acquirer withdraws the public
announcement of intention under Regulation 17 or the commencement of the offer period, -

(a) sell, transfer, or otherwise dispose of or enter into an agreement for sale,
transfer, or for disposal of the undertaking or a sizeable part thereof, not being
sale or disposal of assets in the ordinary course of business of the target
company or its subsidiaries;
(b) encumber any asset of the company or its subsidiary unless otherwise in the
ordinary course of business;
(c) issue any right or bonus voting shares;
(d) enter into any material contract; and
(e) appoint an additional director or fill in any casual vacancy on its board of
directors occurring during the period.

8. Public announcement of offer. (1) A public announcement of offer shall be made
by the acquirer within one hundred and eighty days of making the public announcement of
intention to acquire voting shares or control of a target company:

Provided that the Commission may upon the request of the acquirer and after being
satisfied that the request is reasonable, extend the aforementioned time period by a maximum
of ninety days.

(2) The public announcement of offer shall contain the information as prescribed in
schedule IV.

(3) The stock exchange shall make the information about the public announcement of
offer available, on the same day, to the shareholders of the target company and prospective

6
investors by placing the information on its website, posting it on it notice board, notification
on the automated information system and making an announcement on the house of the
exchange.

(4) The public announcement of offer shall be submitted to the Commission along with
the document prescribed in schedule VII and a non-refundable processing fee of
Rs.500,000/-.

Chapter IV
Public Offer

9. Book closure. (1) The target company shall announce its book closure on the thirty-
sixth day of the public announcement of offer, to determine the eligibility of persons to
receive the offer letter.

(2) The books of the target company shall remain closed for a period of seven days after
the date of book closure.

10. Spot trading of shares of the target company. The shares of the target company
shall be traded on spot basis from the twenty-ninth day till the thirty-fifth day of the public
announcement of offer.

11. List of Members. (1) The target company shall provide an updated and certified
list of its members to the acquirer on the next day of the expiry of the book closure to enable
the acquirer to send the offer letters, through courier, as required under sub-section (2) of
section 13 of the Ordinance.

(2) The acquirer shall, within two working days of the receipt of list of members from the
target company, issue offer letters to the members of the target company.

12. Date of closure of public offer. The date of closure of public offer for the
acquisition of voting shares of the target company by the acquirer shall be sixtieth day from
the date of public announcement of offer:
Provided that where an addendum or corrigendum to the public announcement of
offer is published by the acquirer, whether on the acquirers own motion or on the direction

7
of the Commission, the offer period shall re-commence from the date of the publication of the
addendum or the corrigendum as the case may be.

Chapter V
Offer pricing, number of shares to be acquired and payments

13. Minimum offer price. (1) If the shares are frequently traded the public
announcement of offer to acquire shares under section 5 or section 6 of the Ordinance shall
be at the price which is not lower than, -

(a) the negotiated weighted average price under a share purchase agreement for
the acquisition of voting shares of the target company;
(b) the highest price paid by the acquirer or persons acting in concert with the
acquirer for acquiring the voting shares of target company during six months
prior to the date of public announcement of offer;
(c) the average share price of target company as quoted on the stock exchange
during the last six months;
(d) the average share price of target company as quoted on the stock exchange
during four weeks preceding the date of public announcement of intention; or
(e) the price per share calculated on the basis of net assets valued by a valuer
whose name appears on the list of SBP approved list of valuers.

(2) If the shares are not frequently traded, the public announcement of offer to acquire
shares under section 5 or section 6 of the Ordinance shall be at the price which is not lower
than, -

(a) the negotiated weighted average price under a share purchase agreement for
the acquisition of voting shares of the target company;
(b) the highest price paid by the acquirer or persons acting in concert with the
acquirer for acquiring the voting shares of target company during six months
prior to the date of public announcement of offer; or
(c) the price per share calculated on the basis of net assets valued, not earlier than
six months before the date of such valuation, by a valuer whose name appears
on the list of SBP approved list of valuers.

8
Explanation:- For the purpose of this Regulation, shares shall be deemed to be frequently
traded if they have been traded for at least 80 percent of the trading days during six months
prior to the date of public announcement of offer and their average daily trading volume in
the ready market is not less than 0.5 percent of its free float or 100,000 shares which ever is
higher.

14. Number of voting shares to be acquired. (1) The acquirer may acquire any
number of voting shares through an agreement but where the acquisition attracts the
provisions of section 5 or section 6 of the Ordinance the acquirer shall make a public
announcement of offer to acquire such number of voting shares, which together with the
existing voting shares held by the acquirer will oblige the acquirer to acquire at least ninety
percent of the total voting shares of the target company.

(2) Where the public offer is made conditional upon minimum level of acceptances, such
minimum level shall not be more than forty percent of the public offer made by the acquirer.

Illustration:- Where the acquirer holds 15 percent voting shares of the target
company and enters into an agreement to acquire another 15 percent voting shares, then such
acquirer shall make a public announcement for the remaining 60 percent voting shares of the
target company. In such a case the minimum level of acceptances for the public offer cannot
be more than 24 percent which is 40 percent of the 60 percent offered to be acquired through
the public offer.

15. The mode of payment. - The consideration for the voting shares to be acquired by
the acquirer shall be payable,

(a) in cash through a bank account;
(b) if the acquirer is a listed company, by issue, exchange or transfer of shares of
the acquirer, in dematerialized form;
(c) by issue, exchange, or transfer of any debt security of the acquirer with a
minimum A grade rating from a credit rating agency registered with the
Commission; or
(d) a combination of any of the above.

16. Procedure for payment. (1) Where the consideration for the voting shares to be
acquired is in the form of cash, the acquirer shall open a special bank account in terms of

9
section 20(1) of the Ordinance and deposit therein the entire sum due and payable to the
shareholders who have tendered their shares in acceptance of the public offer.

(2) Where the consideration for the voting shares to be acquired is in the form of
securities,-

(a) the value of such securities shall be determined by a firm of chartered
accountants having satisfactory quality control review rating or an investment
bank having a minimum credit rating of A;
(b) if the issuance of securities offered as consideration require the approval of the
board of directors or the shareholders of the acquirer company, such approval
shall be obtained by the acquirer prior to the date of making the public
announcement of offer along with any other approvals required under the law;
(c) the manager to the offer shall open a separate CDC account for the deposit of
the consideration by the acquirer; and
(d) such consideration shall be transferred to the shareholders of the target
company through the central depository system.

Chapter VI
Withdrawals

17. Withdrawal of public announcement of intention. (1) A public announcement of
intention may be withdrawn, -

(a) where the sole acquirer is a natural person, he has died or has been declared
bankrupt or of unsound mind;
(b) if negotiations to acquire voting shares of the target company have failed;
(c) where the due diligence conducted for the acquisition of shares of the target
company by the acquirer is unfavourable;
(d) where the acquirer is a company, -

(i) it has gone into liquidation;
(ii) its board of directors passes a resolution not to acquire the
voting shares of the target company; or

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(e) the time period for making the public announcement of offer and extension
thereof, if granted, has lapsed.

(2) In the event of withdrawal of the public announcement of intention under any of the
circumstances specified under Regulation 17(1), the acquirer or the manager to the offer,
shall immediately, -

(a) make a public announcement of withdrawal in all the newspapers in which the
public announcement of intention was made and disclose reasons for
withdrawal; and
(b) along with reasons inform the Commission, the stock exchange on which the
voting shares of the target company are listed and the target company at its
registered office simultaneous with the issue of such public announcement of
withdrawal.

18. Withdrawal of public offer.- (1) Notwithstanding the provisions of section 18 of
the Ordinance, a public offer once made, may be withdrawn, -

(a) in case where the acquirer is a company upon its insolvency; or
(b) in case where the sole acquirer is a natural person, he has been declared
bankrupt or of unsound mind; or
(c) where the minimum level, if any, indicated in the public offer has not been
reached and the acquirer intends to withdraw the public offer.

(2) Where there is a withdrawal of public offer and the acquirer has, -

(a) crossed the twenty-five percent threshold as a consequence of acquiring voting
shares pursuant to an agreement, such acquirer shall immediately reduce the
number of voting shares held by the acquirer to less than twenty-five percent;
(b) gained control of the target company as a consequence of acquiring voting
shares pursuant to an agreement, such acquirer shall immediately sell his
shareholding in order to give up the control of the target company; or
(c) made a transaction which attracts the provision of section 6 of the Ordinance,
the acquirer shall reduce shareholding to the position held by the acquirer
before such transaction.

(3) Where there is a withdrawal of public offer, the manager to the offer shall, -

11

(a) return the shares, if any, tendered by the shareholders of the target company to
the respective shareholders of the target company within a period of three
working days from the date of the public announcement of withdrawal in the
newspapers; and
(b) thereafter release the security deposited by the acquirer to the acquirer or the
Court in case of insolvency or bankruptcy of the acquirer or as the case may
be.

Chapter VII
Security

19. Provision of security. - (1) The acquirer shall by way of security, for performance of
obligations under the public offer, provide such form of acceptable security in the name of
manager to the offer as prescribed in Regulation19(2).
(2) The security referred in Regulation 19(1) shall be provided by the acquirer on or
before the date of issue of public announcement of offer and shall be in either of the
following forms, -
(a) cash, deposited with a commercial bank with a minimum credit rating of A;

Explanation: Where the security is in the form of a cash deposit with a
commercial bank, the acquirer shall open an escrow account operated by the
manager to the offer;
(b) bank guarantee, which in case the public announcement of offer is upto rupees
one billion shall be in favor of the manager to the offer from a commercial
bank with a minimum short term credit rating of A and valid till all
obligations of the acquirer are fulfilled as certified by the manager to the offer;
(c) bank guarantee, which in case the public announcement of offer is exceeding
rupees one billion shall be in favor of the manager to the offer from a
commercial bank with a minimum short termcredit rating of AA and valid
till all obligations of the acquirer are fulfilled as certified by the manager to
the offer; or

12
(d) deposit of acceptable securities in a CDC account in the name of the manager
to the offer:
Provided that where the acceptable securities are in the form of TFCs
or government securities, a twenty-five percent additional margin shall be
deposited as security and where the acceptable securities are in the form of
shares of KSE 30 index companies they shall have a thirty percent hair cut
based on their market value during the offer period. The manager to the offer
shall mark to market the securities deposited by the acquirer on a weekly basis
and any shortfall after mark to market shall be notified by the manager to offer
to the acquirer in the form of margin call and the acquirer shall deposit the
shortfall on the same day of the receipt of the margin call from the manager to
the offer.
Explanation: The acquirer shall empower the manager to the offer to realize
the value of such security by sale or otherwise and if there is any deficit in
realization of the value of the security the acquirer shall be liable to make
good any such deficit.
(3) In case there is any upward revision of offer the security deposited shall be increased
in the same proportion.
20 Release of security. - (1) The security deposited by the acquirer shall be released
by the manger to the offer, within a period of seven working days, -
(a) after all payments to the shareholders have been made and completion of all
obligations of the acquirer under the Ordinance and these Regulations; and
(b) in the case of withdrawal of public offer, upon certification by the manager to
the offer that the offer has been validly withdrawn.
(2) In the event of non-fulfillment of obligations by the acquirer the manager to the offer
shall realize the security amount by way of withdrawal of cash, foreclosure of deposit,
invocation of bank guarantee or sale of the acceptable securities and the proceeds so obtained
shall be utilized by the manager to offer to meet all obligations under the Ordinance and these
Regulations.

(3) Where the security is not released by the manager to the offer with seven days the
manager to the offer shall pay a surcharge at the rate of 6 months KIBOR +4 percent.

13
Chapter VIII
Miscellaneous

21. Acceptance of public offer (1) The acquirer through an advertisement in the
newspapers in which the public announcement of offer or competitive bid, as the case may
be, was published, shall inform the shareholders of the target company of the commencement
of the acceptance period.

(2) The advertisement referred to in Regulation 21(1) shall be in the form prescribed
under scheduled VI.

(3) The shareholders of the target company may accept the public offer during the
acceptance period by tendering their shares to the manager to the offer in a designated CDC
account specified for the purpose in the public announcement of offer.

(4) Convertible security holder intending to accept the public offer shall convert their
securities into shares and tender the same to the manager to the offer during the acceptance
period in the designated CDC account.

(5) The custodians of Global Depository Receipts holders or American Depositary
Receipts holders shall upon the request of the respective holders convert the Global
Depository Receipts or American Depositary Receipts, as the case may be, into shares and
tender the same to the manager to the offer during the acceptance period in the designated
CDC account.

(6) The manager to the offer shall send a written confirmation of receipt to the custodians
of Global Depository Receipts holders or American Depositary Receipts holders, the
shareholders of the target company and convertible security holders who have tendered their
shares to the manager to the offer as acceptance of the public announcement of offer.

22. Competitive Bid.- (1) The first and subsequent competitive bids, if any, have to be
made within twenty-one days of the public announcement of the first offer.

(2) The public announcement of competitive bid shall be made in accordance with the
provisions of section 9 of the Ordinance and in the same newspapers in which the first public
announcement of offer was published.

14
(3) The public announcement of a competitive bid shall contain the information as
prescribed in schedule IV.

(4) Where competitive bid(s) has been made, the manager to the offer of the competitive
bidder(s) and the manager to the offer of the person who made the first public announcement
of offer shall jointly, one day before the commencement of the acceptance period for the
public offer, publish a comparative statement containing details of the first public
announcement of the offer and subsequent competitive bid(s) in the same newspapers in
which the first public announcement of offer and the competitive bid(s) was published.

23. Offer Timetable The acquirer, manager to the offer, target company or any person
making a competitive bid shall comply with the offer timetable as prescribed under schedule
VIII.

24. Penalty - If any person contravenes or otherwise fails to comply with any of the
provisions of these Regulations, the Commission may, if satisfied, after giving the person an
opportunity of being heard, that the contravention or failure was willful, impose a penalty
which may extend to thirty million rupees and, in the case of a continuing default, a further
sum calculated at the rate of one hundred thousand rupees for every day, after the first day
during which the failure or contravention continues.

(2) Any penalty imposed under this Regulation may be recoverable as arrears of land
revenue.

No.2(143)LD/SMD/08

Abdul Rehman Qureshi )
Advisor / Secretary

15
Schedule _I
OFFER LETTER

[To be sent by the acquirer under section 13(2) of the Ordinance]

[Date]

To: [Name of the eligible shareholder]

Subject: Purchase of shares of .. name of the target company)

Dear Sir,

In pursuance of the public announcement of offer made by us and published in the
daily ..[name of Urdu Newspaper(s)] and[name of English Newspaper(s)]
on..[date of publication of the public announcement of offer] this is to inform
you that we intend to acquire [___% voting shares of the target company] or [control of the
target company _____]. Therefore, we are making an offer to you for the acquisition of your
[number of shares] of the .[name of the target company].

2. In pursuance of our obligations under the Listed Companies (Substantial Acquisition
of Voting Shares and Take-Overs) Ordinance, 2002 and the Listed Companies (Substantial
Acquisition of Voting Shares and Takeovers) Regulations, 2008 you are hereby, being made
an offer to sell your [number of shares] of [name of the target company] at
Rs.________ per share to [name of the Acquirer] (the Acquirer). The public
announcement of offer containing detailed information can be viewed at our website i.e.
.

3. The offer is valid until _____. You may accept the offer between ______ to ____ by
tendering your shares to the manager to the offer in .[details of the CDC account
specified for the purpose].

4. All payments through [mode of payment] against shares accepted by the acquirer will
be made within a period of not more than 30 days from date of closure of the acceptance
period.

5. In case of any query regarding the public announcement of offer, you may contact the
acquirer or the manager to the offer at the following Address:

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[Address along with phone, fax and E-
mail address of the Acquirer]
--------------------------------------------------
--------------------------------------------------
[Address along with phone, fax and E-
mail address of the Manager to the Offer]
--------------------------------------------------
--------------------------------------------------

[Where the acquirer is a company]
The directors of the acquirer accept all responsibility for the information contained in this
offer letter.

Yours truly,

.
[name of the acquirer]

****

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Schedule II

Disclosure required under Regulation 4

[This list is not intended to be exhaustive. The acquirer must disclose any information
which is important to the shareholders of the company of which the shares have been
acquired]

If acquirer(s) is a company
Name and registered address of the acquirer.
CUIN or in the case of a foreign company its registration number.
Date and jurisdiction of incorporation.
The authorized and issued share capital.
If there is more than one acquirer, their relationship.
Total number of voting shares of the target company held by the acquirer after
acquisition, along with a breakup of what was held and what has been acquired.
Financial advisors of the acquirer.
Brief history and major areas of operations of the acquirer.
Names and addresses of sponsors or persons having control over the acquirer.
Names and addresses of board of directors of acquirer(s).
Mode of acquisition.
Price per share paid for the acquisition, where paid.

If acquirer(s) is an individual
Name(s) and address(es) of each acquirer.
CNIC number(s) or Passport or NICOP number.
Total number of voting shares of the target company held by the acquirer after
acquisition, along with a breakup of what was held and what has been acquired.
Mode of acquisition.
Price per share paid for the acquisition, where paid.

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Schedule _III
[Regulation 6 (4)]

Public announcement of intention to acquire shares or control of
the (Name of Target Company)
By
(Name of the Acquirer)
Under
Listed Companies (Substantial Acquisitions of Voting Shares and Take-overs)
Ordinance, 2002

1) Information about the acquirer

(a) Name(s) and Address(s) of acquirer along with persons acting in concert, if
any.
(b) The Name(s) and Address(s) of financial advisors of the acquirer, if any.
(c) In case the acquirer is a company(s):
(i) Names of the chief executive and directors of the company(s); and
(ii) Names of major shareholders of the company.

2) Information about the target company

a) Name of the target company, its directors and major shareholders.
b) Total number of issued shares of the company.

3) Number of shares already held by the acquirer, if any.

4) Number of shares along with the percentage intended to be acquired by the
acquirer through public offer or agreement.

******

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Schedule _IV
[Regulations 8 (2) and 22 (3)]
Standard document for public announcement of offer or competitive bid
[This list is not intended to be exhaustive. The acquirer is obliged to disclose any
information which may be necessary for the shareholders of the target company to
make an informed decision. Care shall be taken by the manager to the offer that the
document is simply worded and technical, legal or financial jargons are not used
unnecessarily.]
The following information shall be disclosed:
1. THE ACQUIRER
1.1. If acquirer(s) is a company
Name and registered address of the acquirer.
Date and jurisdiction of incorporation.
The authorized and issued share capital.
If there is more than one acquirer, their relationship.
Total number of voting shares of the target company already held by the acquirer,
including any shares purchased through an agreement and relevant details of such
agreement, including the share price agreed.
The number of shares issued since the end of the last financial year of the
company.
Details of any re-organization of the acquirer during the two financial years
preceding the public announcement of offer.
Details of any bank overdrafts or loans, or other similar indebtedness, mortgages,
charges or other material contingent liabilities of the acquirer and subsidiaries if
any, and if there are no such liabilities a statement to that effect.
Financial advisors of the acquirer.
Brief history and major areas of operations of the acquirer.
Names and addresses of sponsors or persons having control over the acquirer.
Names and addresses of board of directors of acquirer(s).

20
Brief audited financial details of the acquirer(s) for a period of at least last five
years including income, expenditure, profit before depreciation, interest and tax,
depreciation, profit before and after tax, provision for tax, dividends, earnings per
share, return on net worth and book value per share.
Details of any agreement or arrangement between the acquirer and the directors
of the target company about any benefit which will be given to any director of the
target company as compensation for loss of office or otherwise in connection with
the acquisition.
Details of every material contract entered into not more than two years before the
date of the public announcement of offer, not being a contract entered into in the
ordinary course of business carried on or intended to be carried on by the
company.

1.2 If acquirer(s) is an individual
Name(s) and address(es) of each individual along with the persons acting in
concert.
CNIC number(s).
If there are more than one acquirer their relationship, if any.
Total number of voting shares of the target company already held by the acquirer,
including any shares purchased through an agreement and relevant details of such
agreement including the share price agreed.
Financial advisors of the acquirer, if any.
Principal areas of business of the acquirer and relevant experience.
Details of any bank overdrafts or loans, or other similar indebtedness, mortgages,
charges or other material contingent liabilities of the acquirer.
Details if the acquirer is a director on the board of directors of any listed
company(s).
Details of any agreement or arrangement between the acquirer and the directors of
the target company about any benefit which will be given to any director of the
target company as compensation for loss of office or otherwise in connection with
the acquisition.
2. DETAILS OF THE PUBLIC OFFER

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The names, dates and editions of the newspapers where the public announcement
of intention was published.
The number and percentage of shares proposed to be acquired by the acquirer(s)
from the shareholders through agreement, if any, the offer price per share and the
mode of payment of consideration for the shares to be acquired.
Reasons for acquiring shares or control of the target company.
Details regarding the future plan for the target company, including whether after
acquisition the target company would continue as a listed company or not.
In case of conditional offer, specify the minimum level of acceptance i.e. number
and percentage shares.
In case there is any agreement with the present management, promoters or
existing shareholders of the target company, an overview of the important features
of the agreement(s) including acquisition price per share, number and percentage
of shares to be acquired under the agreement(s), name of the seller(s), complete
addresses of sellers, names of parties to the agreement(s), date of agreement(s),
manner of payment of consideration, additional important information, if any.
Number of shares already held by the acquirer along with the date(s) of
acquisition. Also state whether it was purchased through open market or acquired
through a negotiated deal.
Minimum level of acceptance, if any.

3. OFFER PRICE AND FINANCIAL ARRANGEMENTS
3. 1 Justification for the offer price
Disclosure about the form of consideration for the shares to be acquired
through the public offer.
Disclosure of the total amount of consideration to be paid for the shares to be
tendered during the public offer (assuming full acceptances).
Whether the shares of the target company are frequently traded or infrequently
traded in the light of criteria prescribed in Regulation 13 of these Regulations.
J ustification for the offer price for the shares of the target company, in the
light of criteria contained in Regulation 13 of these Regulations.

22
3.2 Financial arrangements
Disclosure about the security arrangement made in pursuance of Section 19 of the
Ordinance.
Disclosure about the adequate and firm financial resources to fulfill the
obligations under the public offer.
A statement by the manager to the offer that the manager to the offer is satisfied
about the ability of the acquirer to implement the public offer in accordance with
the requirements of the Ordinance and these Regulations.

4. PROCEDURE FOR ACCEPTANCE AND SETTLEMENT
Detailed procedure for acceptance of offer by shareholder of the target company.
Details of the CDC account in which shares are required to be tendered by eligible
shareholders on acceptance during the acceptance period.

5. STATEMENTS BY THE ACQUIRERS
Statement by the acquirer for assuming responsibility for the information
contained in the document (in the case where the acquirer is a company such a
statement shall be made by the directors of the company).
A statement by the acquirer to the effect that each of the acquirers including
persons in concert, if any, will be severally and jointly responsible for ensuring
compliance with the Ordinance and the Regulations.
A statement by the acquirer that the public offer is being made to all the
shareholders who have voting shares of the target company and (except the
persons acting in concert with acquirers) whose names appear in the register of
shareholders as on the date of book closure.
A statement by the acquirer that all statutory approvals for the public offer have
been obtained.
Disclosure as to whether relevant provisions of the Ordinance and the Regulations
have been complied with.
A statement to the fact if any director(s) of the acquirer is also a director on the
board of directors of target company.
A statement by the acquirer as to whether or not any voting shares acquired in
pursuance to the public offer shall be transferred to another person and if that is
the case the names of such persons shall be disclosed.

23
6. DISCLAIMER CLAUSE
The following disclaimer clause shall be given on the first page:
IT IS TO BE DISTINCTLY UNDERSTOOD THAT FILING OF DOCUMENT OF
PUBLIC OFFER WITH THE SECURITIES AND EXCHANGE COMMISSION OF
PAKISTAN SHOULD NOT IN ANY WAY BE DEEMED OR CONSTRUED THAT
THE SAME HAS BEEN CLEARED, VETTED OR APPROVED BY THE
COMMISSION. THIS DOCUMENT HAS BEEN SUBMITTED TO THE
COMMISSION FOR A LIMITED PURPOSE OF OVERSEEING WHETHER THE
DISCLOSURES CONTAINED THEREIN ARE GENERALLY ADEQUATE AND
ARE IN CONFORMITY WITH THE LAW/REGULATIONS. THIS REQUIREMENT
IS TO FACILITATE THE SHAREHOLDERS OF [NAME OF THE TARGET CO.] TO
TAKE AN INFORMED DECISION WITH REGARD TO THE OFFER. THE
COMMISSION DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR
FINANCIAL SOUNDNESS OF THE ACQUIRER(S) OR THE COMPANY WHOSE
SHARES/CONTROL IS PROPOSED TO BE ACQUIRED OR FOR THE
CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN
THE DOCUMENT. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT THE
ACQUIRER(S) IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS,
ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THIS
DOCUMENT. THE MANAGER TO THE OFFER (INDICATE NAME) IS EXPECTED
TO EXERCISE DUE DILIGENCE TO ENSURE THAT ACQUIRER(S) DULY
DISCHARGES THEIR RESPONSIBILITY ADEQUATELY. FOR THIS PURPOSE,
THE MANAGER TO THE OFFER HAS SUBMITTED A DUE DILIGENCE
CERTIFICATE DATED ......................... TO THE COMMISSION IN ACCORDANCE
WITH THE LISTED COMPANIES(SUBSTANTIAL ACQUISITION OF VOTING
SHARES AND TAKE-OVERS) ORDINANCE, 2002 (THE ORDINANCE).
Signature
With name Designation and stamp
Date --------------------------
Place ---------------------
Note:
This document shall be signed by the acquirer(s).

*****

24
Schedule V
[Section 15(1)(e) of the Ordinance]

DUE DILIGENCE CERTIFICATE

Sub: Public Offer to Acquire (Number of Shares) shares ( %) of (Name of the target
company) at an Offer price of Rs. ______per share by (Name of the acquirer)

he acuirer ide letter dated has appointed us as anager to the oer in
ters o Section o the isted opanies Sustantial cuisition o oting
Shares and ae-Oer Ordinance the Ordinance

he Pulic announceent or the captioned oer in ters o Section or o the
Ordinance ill e ade on

In this regard, we, the manager to the offer, have examined various relevant documents and
confirm the following.
a. The acquirer is able to implement the offer.
b. The acquirer has created security on.in accordance with Section 19 of
the Ordinance and the Regulations framed thereunder.
c. The acquirer has authorized us to realize the value of security in terms of the
Ordinance and the Regulations.
d. Firm financial arrangements are in place to fulfill the obligation of the acquirer
under the public offer.
e. Contents of the public announcement of offer as well as the offer letter are
correct, fair and adequate and are based on reliable sources.

We also confirm that -
a. We are a Bank or Financial Institution or a Member of a stock exchange in
terms of Section 7(1) of the Ordinance;
b. We are not an associate, or group of the acquirer or the target company;
c. The public announcement and the draft offer letter forwarded to the
Commission are in conformity with the Ordinance and Regulations.

he disclosures ade in the pulic announceent o oer and in the oer letter are
true air and adeuate to enale the inestors to ae a ell inored decision

25
s a anager to the oer it shall e our dut to ensure copliance ith the
Ordinance egulations and an other las or egulations as a e applicale in
this regard

o aterial inoration hich is necessar or the shareholders o the target
copan to ae an inored decision has een concealed or ithheld in the pulic
announceent o oer or the oer letter

Manager to the offer
Date
Place
with his/ their seal.

****

26
Schedule _VI
[Under Regulation 21 (2)]

[Should be published in the manner stated in
section 9 (1) of the Ordinance one day before commencement of the acceptance period]

Public announcement informing
the shareholders of the target company of the commencement of acceptance period

Reference public announcement of offer made by .[the Acquirer] in
daily.&. on..[date]

It is hereby informed that the acceptance period for the acquisition of shares of
.[ the name Target company] will commence from .. and will end
on..

All shareholders who intend to tender their shares of .[ the name Target
company] are invited to tender their shares to the manager to the offer in
.[details of the CDC account] on or before.. [time] on ..[date]

[Name, Address and phone numbers of the Acquirer]

******

27
Schedule VII
[Regulation 8(4)]

Documents to be submitted along with public announcement of offer

S. No. Document
i. Copy of the agreement, if any, for the acquisition of shares and/or control of the target
company.

ii. Undertaking on a non-judicial stamp paper by the manager to the offer confirming
that it fulfills the requirements of Section 7 of the Listed Companies (Substantial
Acquisition of Voting Shares and Take-Overs) Ordinance, 2002 and the Regulations
made thereunder.

iii. Undertaking on a non-judicial stamp paper by the manager to the offer confirming
that it shall comply with all its obligations under the Listed Companies (Substantial
Acquisition of Voting Shares and Take-Overs) Ordinance, 2002 and the Regulations
made thereunder.
iv. Undertaking on a non-judicial stamp paper by the acquirer that the acquirer shall
comply with all the obligations of the acquirer under the Listed Companies
(Substantial Acquisition of Voting Shares and Take-Overs) Ordinance, 2002 and
Regulations made thereunder.

v. Evidence that security has been created as required under Section 19 of the Listed
Companies (Substantial Acquisition of Voting Shares and Take-Overs) Ordinance,
2002 and Regulation 16 of the Listed Companies (Substantial Acquisition of Voting
Shares and Takeovers) Regulations, 2008.
vi. Copy of latest pattern of shareholding of the target company.
vii. Documentary evidence for the information disclosed under Schedule III.
****

28

Schedule VIII
[Regulation 23]
Offer Timetable
T - 180 to T
Appointment of the manager to the offer before making any public
announcement. (see section 7 of the Ordinance)
Notice of public announcement of intention to the Commission as
required under sections 8(1) read with sections 9(3) and 9(4) of the
Ordinance.
Public announcement of intention in accordance with section 9(1) of
the Ordinance.
Sign agreement, if any, to acquire shares.
Disclosures, if any, by the target company required under Regulation
5.
Compliance by the manager to the offer with the provisions of section
15(1) of the Ordinance.
Disclosures in the manner specified in section 4 of the Ordinance.

T - 2 Compliance with the provisions of sections 9(3) and 9(4) of the
Ordinance.

T
Public announcement of offer in accordance with the Ordinance and
the Regulations.
Final date for the creation of security for the public offer. (see section
13(8) of the Ordinance)

T to T+2 Compliance with the provision of section 13(1) of the Ordinance.

T + 21 Last date for making a competing bid. Competing bids may be made
anytime from T to T+21 (21-days). If there is a competitive bid see
section 16(4) of the Ordinance.

T + 22 Notice to stock exchange(s) for book closure dates.

29
T + 29 Spot trading commences for 7 days.

T + 36 Book closure for seven days.

T + 43 Final date for thetarget company to provide the list of members to the
acquirers for sending offer letters.

Final date for sending the list of custodians of Global Depository
Receipts or American Depository Receipts to the target company.

Final date for providing the list of convertible security holders to the
acquirer under section 14(2) of the Ordinance.

T+ 44 and T+ 45 Acquirer or manager to the offer on the acquirers behalf to issue offer
letters to all registered shareholders entitled to accept the offer. Also
acquirer to send a copy of the offer letter to the custodians of Global
Depository Receipts or American Depository Receipts and convertible
security holders, where the conversion period falls within the offer
period. (see sections 13(2) and 13(3) of the Ordinance.)

T + 52 Advertisement in the newspapers by the acquirer for submission of
acceptances. (see Regulation 21)

T+ 53 Final date for acquirer to make an upward revision in earlier offer
price.
The managers to the offer to publish a comparative analysis in
accordance with Regulation 22(4).

T+ 54 Acceptance period for the public offer commences.

T+ 60 Public offer expires.
Last date for acceptance of offer by shareholders and convertible
security holders.

T+81 Final date for theopening of account in accordance with section 20(1)
of the Ordinance.

30

T+ 90 Subject to the proviso of section 13(1) thefinal date for completion of
all procedures relating to public offer by the acquirer including
payment of consideration to shareholders who have accepted the public
offer. (see section 13(10) of the Ordinance)

T+ 91 Final date for the manager to the offer to certify that the acquirer has
fulfilled all obligations of the acquirer under the Ordinance and the
Regulations.

T + 92 Final date for the BOD of the target company to transfer securities
acquired by the acquirer whether through agreement or open market
purchases. (see section 14(6) of the Ordinance)

T+ 93 Final date for the acquirer to serve a notice on the BOD of the target
company, under section 14(9) of the Ordinance. Copy to be sent to the
Commission.

T+104 Final date for the meeting of the BOD of the target company to be
held. [This date may vary a few days depending upon the receipt of
notice under. See section 14(10) of the Ordinance]

T+ 105 Final date for the manager to the offer to send a report to the
Commission under section 15(2)(c) of the Ordinance.

The acquirer may serve a notice upon the target company under section
14(12) of the Ordinance.

T+135 Final date for holding the election of directors of the target company as
a consequence of the notice served under section 14(12) of the
Ordinance. [This date may vary a few days depending upon the receipt
of notice under. See section 14(13) of the Ordinance]

31
T+ election of The acquirer may bring irregularities, if any, to the notice of the
directors until 7 Commission.
days thereafter

T + 263 Final date for the refund of balance under section 20(2) of the
Ordinance. [This date may vary a few days depending upon opening of
account under section 20(1) of the Ordinance.]

1

Table of Contents

1 Message from the Chairman SECP

3
2 The Code of Corporate Governance 2012 5

3 Criteria for Institutions desirous of offering Directors Training Program 22

4 Frequently Asked Questions (FAQs) 26

5 Appendix A Sample Secretarial Compliance Certificate 37

6 Appendix B Sample Statement of Compliance with the Code of Corporate
Governance
38

7 Annexure C Comparison of 2002 and 2012 Codes 41

2

3

MESSAGE
from Muhammad Ali
Chairman, Securities and Exchange Commission of Pakistan

Good governance instills investor confidence. The investment decisions taken by the local and
international investors are impacted by the governance practices. As markets compete to
attract the capital from world over, companies are gauged by the investors using various
factors that demonstrate sustainable track record. In order for our companies to compete
globally, they have to follow enhanced corporate governance standards. This is a major factor
towards making capital markets transparent, protecting rights of minority shareholders and
attracting and retaining foreign investment.
The importance of corporate governance lies in its contribution both to business prosperity
and to accountability. The Securities and Exchange Commission of Pakistan (SECP) thus
endeavors to raise the corporate governance standards in the country. The first major effort
was made in March 2002, when the Code of Corporate Governance (Code) was issued by
SECP. It was subsequently made part of the listing regulations of the three stock exchanges
and became applicable to all public listed companies.
The revisions in the Code are indicative of the fact that governance standards are dynamic and
need to be reviewed to keep the governance framework relevant and effective. Therefore, in
order to keep pace with the constantly evolving corporate sector and financial markets and the
resultant governance benchmarks, the process of revising the Code was initiated. The objective
was to further improve and raise the standards of corporate governance in the country while
at the same time taking into consideration the global developments in corporate governance.

Key to corporate governance lies in the change in mindset. It is the joint responsibility of all
concerned and not just the regulators prerogative. It should be viewed as a means towards
achieving value creation and sustainability and only then can one reap the benefits of
sustained economic growth and development at a macro level.

A comparison of the 2002 and 2012 Codes is placed at Annexure-C. I am grateful to the
members of the Pakistan Institute of Corporate Governance (PICG) Task Force as well as market
participants who eagerly participated in the roundtables and assisted us in finalizing the Code
2012. I would also like to acknowledge with gratitude the contribution of all the stakeholders
for their invaluable comments and suggestions on the revisions proposed in the Code. While
all suggestions were taken into consideration, the Code has been finalized keeping in view the
global developments in corporate governance and the overall objective of raising the
standards of corporate governance in the country.

I am confident that with commitment from all concerned, the corporate compliance,
transparency, disclosure and accountability standards will improve significantly in the capital
markets and I am certain that together we will attain excellence in corporate governance
standards.

4

NOTE:

The Code of Corporate Governance (Code) is the part of Listing Regulations of the Stock
Exchanges; the numbering of clauses has therefore been kept accordingly.

For any queries on the Code please refer to ccg@secp.gov.pk
5

XI. Code of Corporate Governance 2012
35. All listed companies shall ensure compliance with the following Code of Corporate
Governance (CCG). All provisions except where explicitly stated otherwise are mandatory.
Composition of the Board
i. The board of directors is encouraged to have a balance of executive and non-executive
directors, including independent directors and those representing minority interests with
the requisite skills, competence, knowledge and experience so that the board as a group
includes core competencies and diversity, including gender, considered relevant in the
context of the companys operations.
For this purpose listed companies shall take the following steps:
(a) the minority shareholders as a class are facilitated to contest election of
directors by proxy solicitation, for which purpose the listed companies shall:
annex with the notice issued under Section 178 (4) of the Ordinance, a
statement by a candidate from among the minority shareholders who
seeks to contest election to the board of directors, such statement shall
include a profile of the candidate(s);
provide information regarding members and shareholding structure to the
candidate(s) representing minority shareholders; and
on a request by the candidate(s) representing minority shareholders and at
the cost of the company, annex to the notice issued under Section 178 (4)
of the Ordinance an additional copy of proxy form duly filled in by such
candidate(s);
(b) the board of directors of each listed company shall have at least one and
preferably

one third of the total members of the board as independent
directors. The board shall state in the annual report the names of the non-
executive, executive and independent director(s).

Explanation: For the purpose of this clause, the expression "independent
director" means a director who is not connected or does not have any other
relationship, whether pecuniary or otherwise, with the listed company, its
associated companies, subsidiaries, holding company or directors. 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 form of conflict of interest.

Provided that without prejudice to the generality of this explanation no
director shall be considered independent if one or more of the following
circumstances exist:
He/she has been an employee of the company, any of its subsidiaries or
6

holding company within the last three years;
He/she is or has been the CEO of subsidiaries, associated company,
associated undertaking or holding company in the last three years;

He/she has, or has had within the last three years, a material business
relationship with the company either directly, or indirectly as a partner,
major shareholder or director of a body that has such a relationship with
the company:

Explanation: The major shareholder means a person who, individually or in
concert with his family or as part of a group, holds 10% or more shares
having voting rights in the paid-up capital of the company;

He/she has received remuneration in the three years preceding his/her
appointment as a director or receives additional remuneration, excluding
retirement benefits from the company apart from a directors fee or has
participated in the companys share option or a performance-related pay
scheme;

He/she is a close relative of the companys promoters, directors or major
shareholders:

Explanation: close relative means spouse(s), lineal ascendants and
descendants and siblings;

He/she holds cross-directorships or has significant links with other directors
through involvement in other companies or bodies;

He/she has served on the board for more than three consecutive terms
from the date of his first appointment provided that such person shall be
deemed independent director after a lapse of one term.
Any person nominated as a director under Sections 182 and 183 of the
Ordinance, shall not be taken to be an "independent director" for the above-
mentioned purposes.
The director representing an institutional investor shall be selected by such
investor through a resolution of its board of directors, either specifically or
generally, and the policy with regard to selection of such person for election
on the board of directors of the investee company shall be annexed to the
Directors' Report of the investor company.
(c) professional indemnity insurance cover in respect of independent directors
shall be encouraged.
(d) executive directors, i.e., paid executives of the company from among senior
7

management, shall not be more than one third of the elected directors,
including the Chief Executive:
Provided that nothing contained in this clause shall supersede any law for the
time being in force or regulation made by any regulator regarding the
composition of the board.
Maximum number of directorships to be held by a director

ii. No person shall be elected or nominated as a director of more than seven listed
companies simultaneously:

Provided that this limit shall not include the directorships in the listed subsidiaries of a listed
holding company
1
.
Filling up a casual vacancy
iii. Any casual vacancy on the board of directors of a listed company shall be filled up by
the directors at the earliest but not later than 90 days thereof.
Responsibilities, powers and functions of board of directors
iv. The board of directors of a listed company shall exercise its powers and carry out its
fiduciary duties with a sense of objective judgment and independence in the best interests
of the listed company.
v. The board of directors of a listed company shall ensure that:

(a) professional standards and corporate values are put in place that promote
integrity for the board, senior management and other employees in the form
of a Code of Conduct, defining therein acceptable and unacceptable
behaviors. The board shall take appropriate steps to disseminate Code of
Conduct throughout the company along with supporting policies and
procedures and these shall be put on the companys website;
(b) adequate systems and controls are in place for identification and redress of
grievances arising from unethical practices.
(c) a vision and/or mission statement and overall corporate strategy for the listed
company is prepared and adopted. It shall further ensure that significant
policies have been formulated;
Explanation:
The significant policies for this purpose may include:

governance, risk management and compliance issues;

1
"Holding company" means a holding company as defined in Section 3 of the Companies Ordinance, 1984.

8

human resource management including preparation of a succession plan;
procurement of goods and services;
investors relations including but not limited to general investor awareness,
complaints and communication, etc.;
marketing;
determination of terms of credit and discount to customers;
write-off of bad/doubtful debts, advances and receivables;
capital expenditure, planning and control;
investments and disinvestment of funds;
borrowing of moneys;
determination and delegation of financial powers;
transactions or contracts with associated companies and related parties;
the corporate social responsibility (CSR) initiatives and other philanthropic
activities including donations, charities, contributions and other payments
of a similar nature;
health, safety and environment; and
the whistleblower policy.

A complete record of particulars of the significant policies along with the dates
on which they were approved or amended by the board of directors shall be
maintained.
(d) a system of sound internal control is established, which is effectively
implemented and maintained at all levels within the company;

(e) within two years of coming into force of this Code, a mechanism is put in place
for an annual evaluation of the boards own performance;

(f) the decisions on the following material transactions or significant matters are
documented by a resolution passed at a meeting of the board:
investment and disinvestment of funds where the maturity period of such
investments is six months or more, except in the case of banking
companies, non-banking finance companies and insurance companies;
determination of the nature of loans and advances made by the listed
company and fixing a monetary limit thereof.

(g) the board of directors shall define the level of materiality, keeping in view the
specific circumstances of the company and the recommendations of any
technical or executive subcommittee of the board that may be set up for the
purpose.

vi. The Chairman and the Chief Executive Officer (CEO), by whatever name called, shall not
be the same person except where provided for under any other law. The Chairman shall
be elected from among the non-executive directors of the listed company. The Chairman
shall be responsible for leadership of the board and shall ensure that the board plays an
9

effective role in fulfilling all its responsibilities. The Board of Directors shall clearly define the
respective roles and responsibilities of the Chairman and CEO.

Provided that the provisions of this clause, clauses (i)(b), (i)(d) and (ii) shall take effect when
the board is reconstituted on the expiry of its current term after coming into force of this
Code.

Meetings of the board

vii. All written notices, including the agenda, of meetings shall be circulated at least seven days
prior to the meetings, except in the case of emergency meetings, where the notice period
may be reduced or waived.

viii. The Chairman shall ensure that the minutes of meetings of the board of directors are
appropriately recorded. The Company Secretary shall be secretary to the board.
In the event that a director of a listed company is of the view that his dissenting note has
not been satisfactorily recorded in the minutes of a meeting of the Board of Directors, he
may refer the matter to the Company Secretary. The director may require the note to be
appended to the minutes, failing which he may file an objection with the Securities and
Exchange Commission of Pakistan (SECP) in the form of a statement to that effect. The
objection may be filed with the SECP within 30 days of the date of confirmation of the
minutes of the meeting.
Significant issues to be placed for decision of Board of Directors
ix. In order to strengthen and formalize corporate decision-making process, significant issues
shall be placed for the information, consideration and decision of the board of directors of
listed companies and/or its committees.

The significant issues for this purpose may include:
the CEO shall immediately bring before the board, as soon as it is foreseen that the
company will not be in a position of meeting its obligations on any loans
(including penalties on late payments and other dues, to a creditor, bank or
financial institution or default in payment of public deposit), TFCs, Sukuks or any
other debt instrument. Full details of the companys failure to meet obligations shall
be provided in the companys quarterly and annual financial statements.
annual business plan, cash flow projections, forecasts and strategic plan;
budgets including capital, manpower and overhead budgets, along with variance
analyses;
matters recommended and/or reported by the committees of the board;
quarterly operating results of the listed company as a whole and in terms of its
operating divisions or business segments;
internal audit reports, including cases of fraud, bribery, corruption, or irregularities
of a material nature;
management letter issued by the external auditors;
10

details of joint venture or collaboration agreements or agreements with
distributors, agents, etc.;
promulgation or amendment to a law, rule or regulation, enforcement of an
accounting standard and such other matters as may affect the listed company;
status and implications of any law suit or proceedings of material nature, filed by or
against the listed company;
any show cause, demand or prosecution notice received from revenue or
regulatory authorities;
failure to recover material amounts of loans, advances, and deposits made by the
listed company, including trade debts and inter-corporate finances;
any significant accidents, dangerous occurrences and instances of pollution and
environmental problems involving the listed company;
significant public or product liability claims made or likely to be made against the
listed company, including any adverse judgment or order made on the conduct of
the listed company or of another company that may bear negatively on the listed
company;
report on governance, risk management and compliance issues. Risks considered
shall include reputational risk and shall address risk analysis, risk management and
risk communication;
disputes with labor and their proposed solutions, any agreement with the labor
union or collective bargaining agent and any charter of demands on the listed
company;
whistleblower protection mechanism;
report on CSR activities; and
payment for goodwill, brand equity or intellectual property.

(x) Related party transactions

a) The details of all related party transactions shall be placed before the Audit
Committee of the company and upon recommendations of the Audit
Committee the same shall be placed before the board for review and approval.
b) The related party transactions which are not executed at arm's length price shall
also be placed separately at each board meeting along with necessary
justification for consideration and approval of the board on recommendation of
the Audit Committee of the listed company.
c) The board of directors of a company shall approve the pricing methods for
related party transactions that were made on the terms equivalent to those
that prevail in arms length transaction, only if such terms can be substantiated.
d) Every company shall maintain a party wise record of transactions, in each
financial year, entered into with related parties in that year along with all relevant
documents and explanations. The record of related party transactions shall
include the following particulars in respect of each transaction:
i) Name of related party;
11

ii) Nature of relationship with related party;
iii) Nature of transaction;
iv) Amount of transaction; and
v) Terms and conditions of transaction, including the amount of
consideration received or given.
Directors Training Program
(xi) All listed companies shall make appropriate arrangements to carry out orientation courses
for their directors to acquaint them with this code, applicable laws, their duties and
responsibilities to enable them to effectively manage the affairs of the listed companies for
and on behalf of shareholders.
It shall be mandatory for all the directors of the listed companies to have certification under
any directors training program offered by institutionslocal or foreignthat meet the
criteria specified by the SECP:
Provided that from June 30, 2012 to June 30, 2016 every year, a minimum of one director
on the board shall acquire the said certification under this program each year and
thereafter all directors shall obtain it:

Provided further that individuals with a minimum of 14 years of education and 15 years of
experience on the board of a listed companylocal and/or foreignshall be exempted
from the directors training program.
Chief Financial Officer (CFO), Company Secretary and Head of Internal Audit
Appointment and removal

(xii) The appointment, remuneration and terms and conditions of employment of the Chief
Financial Officer (CFO), the Company Secretary and the Head of Internal Audit of listed
companies shall be determined by the board of directors.
The removal of the CFO and Company Secretary of listed companies shall be made with
the approval of the board of directors.
The removal of Head of Internal Audit shall be made with the approval of the board only
upon recommendation of the Chairman of the Audit Committee:

Explanation: For this purpose the term removal shall include non renewal of contracts of
the CFO, Company Secretary and Head of Internal Audit.
Qualifications of CFO and Head of Internal Audit
(xiii) No person shall be appointed as the CFO of a listed company unless he/she has at least
five years of experience of handling financial or corporate affairs of a listed company or a
bank or a financial institution and is:
12

(b) has a postgraduate degree in finance from a recognized university or
equivalent.
Provided that individuals serving as CFO of a listed company for the last five years at the
time of coming into effect of this Code shall be exempted from the above qualification
requirement.
(xiv) No person shall be appointed as the Head of Internal Audit of a listed company unless
he/she has 5 years of relevant audit experience and is:
(b) a Certified Internal Auditor; or
(c) a Certified Fraud Examiner; or
(d) a Certified Internal Control Auditor

Provided that individuals serving as Head of Internal Audit of a listed company for the last
five years at the time of coming into effect of this Code shall be exempted from the above
qualification requirement.

Requirement to attend board meetings
(xv) The CFO and Company Secretary of a listed company or in their absence, the nominee,
appointed by the board, shall attend all meetings of the Board of Directors. Provided that
the CFO and Company Secretary shall not attend such part of a meeting of the Board of
Directors, which involves consideration of an agenda item relating to the CFO and
Company Secretary respectively.
Corporate and financial reporting framework
(xvi)The directors of listed companies shall annex statements to the following effect with the
Directors Report, prepared under Section 236 of the Ordinance:
(a) The financial statements, prepared by the management of the listed company,
present its state of affairs fairly, the result of its operations, cash flows and
changes in equity;
(b) Proper books of account of the listed company have been maintained;
(c) Appropriate accounting policies have been consistently applied in preparation
of financial statements and accounting estimates are based on reasonable and
prudent judgment;
(d) International Financial Reporting Standards, as applicable in Pakistan, have
been followed in preparation of financial statements and any departures
therefrom has been adequately disclosed and explained;

13

(e) The system of internal control is sound in design and has been effectively
implemented and monitored; and
(f) There are no significant doubts upon the listed companys ability to continue
as a going concern:
Provided that where necessary the following information shall also be annexed to the
Directors Reports of listed companies:

a) If the listed company is not considered to be a going concern, the fact along
with the reasons shall be disclosed;

b) Significant deviations from last year in operating results of the listed company
shall be highlighted and reasons thereof shall be explained;
c) Key operating and financial data of last six years shall be summarized;
d) If the listed company has neither declared dividend nor issued bonus shares
for any year, the reasons thereof shall be given;
e) Where any statutory payment on account of taxes, duties, levies and charges is
outstanding, the amount together with a brief description and reasons for the
same shall be disclosed;
f) Significant plans and decisions, such as corporate restructuring, business
expansion and discontinuance of operations, shall be outlined along with
future prospects, risks and uncertainties surrounding the listed company;
g) A statement as to the value of investments of provident, gratuity and pension
funds, based on their respective audited accounts, shall be included;
h) The number of board and committees meetings held during the year and
attendance by each director shall be disclosed;
i) The details of training programs attended by directors;
j) The pattern of shareholding shall be reported to disclose the aggregate
number of shares (along with name wise details where stated below) held by:
I. associated companies, undertakings and related parties (name wise
details);
II. mutual funds (name wise details);
III. directors and their spouse(s) and minor children (name wise details);
IV. executives;
V. public sector companies and corporations;
VI. banks, development finance institutions, non-banking finance
companies, insurance companies, takaful, modarabas and pension
funds; and
14

VII. shareholders holding five percent or more voting rights in the listed
company (name wise details).

Explanation: For the purpose of this sub-clause, the expression executive
means an employee of a listed company other than the CEO and directors.

k) The directors report shall cover, loans, TFCs, sukuks or any other debt
instruments in which the company is in default or likely to default. There shall
be a clear presentation with details as to the aggregate amount of the debt
overdue or likely to become overdue and the reasons for the default/emerging
default situation and the measures taken by the company to address and settle
such default situation.
l) All trades in the shares of the listed company, carried out by its directors,
executives and their spouses and minor children shall also be disclosed.

Explanation: For the purpose of this sub-clause and clause xxiii the expression
executive means the CEO, COO, CFO, Head of Internal Audit and Company
Secretary by whatever name called, and other employees of the company for
whom the board of directors will set the threshold to be reviewed on an
annual basis and disclosed in the annual report.
Directors remuneration
(xvii) There shall be a formal and transparent procedure for fixing the remuneration packages
of individual directors. No director shall be involved in deciding his/her own
remuneration.
a) Directors remuneration packages shall encourage value creation within the
company. These shall be subject to prior approval of shareholders/board as
required by companys Articles of Association. Levels of remuneration shall be
appropriate to attract and retain the directors needed to govern the company
successfully.

Subject to the provisions of the Ordinance and the companys Articles of
Association, the shareholders/board shall determine the remuneration for non-
executive directors. However, it shall not be at a level that could be perceived
to compromise their independence.

(b) The company's Annual Report shall contain details of the aggregate
remuneration separately of executive and non-executive directors, including
salary/fee, benefits and performance-linked incentives etc.
Frequency of financial reporting
(xviii)The quarterly unaudited financial statements of listed companies shall be published and
circulated along with directors review on the affairs of the listed company.
15

(xix) All listed companies shall ensure that second quarterly financial statements are subjected
to a limited scope review by the statutory auditors in such manner and according to
such terms and conditions as may be determined by the Institute of Chartered
Accountants of Pakistan (ICAP) and approved by the SECP.
(xx) Every listed company shall immediately disseminate to the SECP and the stock exchange
on which its shares are listed all material information relating to the business and other
affairs of the listed company that will affect the market price of its shares. The mode of
dissemination of information shall be prescribed by the stock exchange on which shares
of the company are listed.
This information may include but shall not be restricted to any material change in the
nature of business of the company; information regarding any joint ventures, merger or
acquisition or any material contract entered into or lost; purchase or sale of significant
assets; franchise, brand name, goodwill, royalty, financial plan, etc.; any unforeseen or
undisclosed impairment of assets due to technological obsolescence, etc; delay or loss of
production due to strike, fire, natural calamities, major breakdown, etc; issue or
redemption of any securities; a major change in borrowings including projected gains to
accrue to the company; any default in repayment or rescheduling of loans; and change
in directors, Chairman or CEO of the listed company:
Explanation:
Such information shall be disseminated to the above-mentioned entities as soon as any
decision about above referred matters or any other significant issue is taken by the board
or a significant matter requiring disclosure has come into the knowledge of companys
management.

Responsibility for financial reporting and corporate compliance
(xxi) No listed company shall circulate its financial statements unless the CEO and the CFO
present the financial statements, duly endorsed under their respective signatures, for
consideration and approval of the Board of Directors.
It shall be mandatory for the CEO and CFO to have the second quarterly and annual
accounts (both separate and consolidated where applicable) initialed by the external
auditors before presenting it to the audit committee and the Board of Directors for
approval.
(xxii) The Company Secretary of a listed company shall furnish a Secretarial Compliance
Certificate, on the prescribed form (Appendix A), along with annual return filed with the
registrar concerned certifying that the secretarial and corporate requirements of the
Ordinance have been complied with.
Disclosure of interest by a director holding companys shares
(xxiii) Where any director, CEO or executive of a listed company or their spouses sell, buy or
transact, whether directly or indirectly, in shares of the listed company of which he is a
director, CEO or executive, as the case may be, he shall immediately notify in writing to
16

the Company Secretary of such transaction. Such director, CEO or executive, as the case
may be, shall also deliver a written record of the price, number of shares, form of share
certificates, i.e., whether physical or electronic within the Central Depository System, and
nature of transaction to the Company Secretary within four days of effecting the
transaction. The notice of the director, CEO or executive, as the case may be, shall be
presented by the Company Secretary at the meeting of the board of directors
immediately subsequent to such transaction. In the event of default by a director, CEO or
executive to give a written notice or deliver a written record, the Company Secretary
shall place the matter before the board of directors in its immediate next meeting:
Provided that each listed company shall determine a closed period prior to the
announcement of interim/ final results and any business decision, which may materially
affect the market price of its shares. No director, CEO or executive shall, directly or
indirectly, deal in the shares of the listed company in any manner during the closed
period.

The closed period shall start from the day when any document/statement, which forms
the basis of price sensitive information, is sent to the board of directors and terminate
after the information is made public.
Every listed company shall advise its directors about the closed period at the time of
circulating agenda and working papers for the board meetings, along with sending
intimation of the same to the stock exchanges.
Committees of the board
Composition
(xxiv) The board of directors of every listed company shall establish an Audit Committee, at
least of three members comprising of non-executive directors. The chairman of the
committee shall be an independent director, who shall not be the chairman of the
board. The board shall satisfy itself such that at least one member of the audit committee
has relevant financial skills/expertise and experience.

(xxv) There shall also be a Human Resource and Remuneration (HR&R) Committee at least of
three members comprising a majority of non-executive directors, including preferably an
independent director. The CEO may be included as a member of the committee but not
as the chairman of committee. The CEO if member of HR&R Committee shall not
participate in the proceedings of the committee on matters that directly relate to his
performance and compensation.

The committee shall be responsible for:

i) recommending human resource management policies to the board;
ii) recommending to the board the selection, evaluation, compensation
(including retirement benefits) and succession planning of the CEO;
iii) recommending to the board the selection, evaluation, compensation
(including retirement benefits) of COO, CFO, Company Secretary and Head of
17

Internal Audit; and
iv) consideration and approval on recommendations of CEO on such matters for
key management positions who report directly to CEO or COO.
(xxvi) The names of members of the committees of the board shall be disclosed in each Annual
Report of the listed company.
Audit Committee
Frequency of meetings, attendance, terms of reference and reporting procedures

(xxvii) The Audit Committee of a listed company shall meet at least once every quarter of the
financial year. These meetings shall be held prior to the approval of interim results of the
listed company by its Board of Directors and before and after completion of external
audit. A meeting of the Audit Committee shall also be held, if requested by the external
auditors or the Head of Internal Audit.
Attendance at meetings

(xxviii)The CFO, the Head of Internal Audit and external auditors represented by engagement
partner or in his absence any other partner designated by the audit firm shall attend
meetings of the Audit Committee at which issues relating to accounts and audit are
discussed:
Provided that at least once a year, the Audit Committee shall meet the external auditors
without the CFO and the Head of Internal Audit being present:
Provided further that at least once a year, the Audit Committee shall meet the head of
internal audit and other members of the internal audit function without the CFO and the
external auditors being present:
Provided further that the chairman of the Audit Committee and engagement partner of
external auditor or in his absence any other partner designated by the audit firm shall be
present at the AGM for necessary feedback to the shareholders.
Terms of reference
(xxix) The Board of Directors of every listed company shall determine the terms of reference of
the Audit Committee. The Board shall provide adequate resources and authority to
enable the Audit Committee carry out its responsibilities effectively. The Audit Committee
shall, inter alia, recommend to the Board of Directors the appointment of external
auditors, their removal, audit fees, the provision by the external auditors of any service to
the listed company in addition to audit of its financial statements. The Board of Directors
shall give due consideration to the recommendations of the Audit Committee in all these
matters and where it acts otherwise, it shall record the reasons thereof.
The terms of reference of the Audit Committee shall also include the following:
(a) determination of appropriate measures to safeguard the listed companys
assets;
(b) review of quarterly, half-yearly and annual financial statements of the listed
18

company, prior to their approval by the Board of Directors, focusing on:
major judgmental areas;
significant adjustments resulting from the audit;
the going concern assumption;
any changes in accounting policies and practices;
compliance with applicable accounting standards;
compliance with listing regulations and other statutory and regulatory
requirements; and
significant related party transactions.

(c) review of preliminary announcements of results prior to publication;
(d) facilitating the external audit and discussion with external auditors of major
observations arising from interim and final audits and any matter that the
auditors may wish to highlight (in the absence of management, where
necessary);
(e) review of management letter issued by external auditors and
managements response thereto;
(f) ensuring coordination between the internal and external auditors of the
listed company;
(g) review of the scope and extent of internal audit and ensuring that the
internal audit function has adequate resources and is appropriately placed
within the listed company;
(h) consideration of major findings of internal investigations of activities
characterized by fraud, corruption and abuse of power and
management's response thereto;
(i) ascertaining that the internal control systems including financial and
operational controls, accounting systems for timely and appropriate
recording of purchases and sales, receipts and payments, assets and
liabilities and the reporting structure are adequate and effective;
(j) review of the listed companys statement on internal control systems prior to
endorsement by the Board of Directors and internal audit reports;
(k) instituting special projects, value for money studies or other investigations
on any matter specified by the Board of Directors, in consultation with the
CEO and to consider remittance of any matter to the external auditors or
to any other external body;
(l) determination of compliance with relevant statutory requirements;
(m) monitoring compliance with the best practices of corporate governance
and identification of significant violations thereof; and
(n) consideration of any other issue or matter as may be assigned by the Board
of Directors.
Reporting procedure

(xxx) The Audit Committee of a listed company shall appoint a secretary of the committee who
shall either be the Company Secretary or Head of Internal Audit. However, CFO shall
not be appointed as the secretary to the Audit Committee. The secretary shall circulate
minutes of meetings of the Audit Committee to all members, directors, Head of internal
19

Audit and the CFO prior to the next meeting of the board and where this is not
practicable, the Chairman of the Audit Committee shall communicate a synopsis of the
proceedings to the board and the minutes shall be circulated immediately after the
meeting of the board.
Internal audit
(xxxi)There shall be an internal audit function in every listed company. The Head of internal
Audit shall functionally report to the Audit Committee and administratively to the CEO.
A director cannot be appointed, in any capacity, in the internal audit function, to
ensure independence of the internal audit function.
The internal audit function may be outsourced by a listed company to a professional
services firm or be performed by the internal audit staff of holding company. However,
due care shall be exercised to ensure that suitably qualified and experienced persons,
who are conversant with the company's policies and procedures, are engaged in the
internal audit. In the event of outsourcing the internal audit function, company shall
appoint or designate a fulltime employee other than CFO, as Head of Internal Audit, to
act as coordinator between firm providing internal audit services and the board:
Provided that while outsourcing the function, the company must not appoint its
existing external auditors as internal auditors.

(xxxii) All listed companies shall ensure that internal audit reports are provided for the review
of external auditors. The auditors shall discuss any major findings in relation to the
reports with the Audit Committee, which shall report matters of significance to the
Board of Directors.
External auditors
(xxxiii) No listed company shall appoint as external auditors a firm of auditors which has not
been given a satisfactory rating under the Quality Control Review program of the
Institute of Chartered Accountants of Pakistan.
(xxxiv) No listed company shall appoint as external auditors a firm of auditors which or a
partner of which is non-compliant with the International Federation of Accountants'
(IFAC) Guidelines on Code of Ethics, as adopted by the Institute of Chartered
Accountants of Pakistan.
(xxxv) The Board of Directors of a listed company shall recommend appointment of external
auditors for a year, as suggested by the Audit Committee. The recommendations of
the Audit Committee for appointment of an auditor or otherwise shall be included in
the Directors Report. In case of a recommendation
for appointment of an auditor other than the retiring auditor the reasons for the same
shall be included in the Directors Report.
20

(xxxvi) No listed company shall appoint its auditors to provide services in addition to audit
except in accordance with the regulations and shall require the auditors to observe
applicable IFAC guidelines in this regard and shall ensure that the auditors do not
perform management functions or make management decisions, responsibility for
which remains with the Board of Directors and management of the listed company.
(xxxvii) (a) All listed companies in the financial sector shall change their external auditors every
five years. Financial sector, for this purpose, means banks, non-banking financial
companies (NBFCs), modarabas and insurance/takaful companies; provided that all
inter related companies/ institutions, engaged in business of providing financial
services shall appoint the same firm of auditors to conduct the audit of their accounts
2

and
(b) All listed companies other than those in the financial sector shall, at a minimum,
rotate the engagement partner after every five years.
(xxxviii) No listed company shall appoint a person as an external auditor or a person involved in
the audit of a listed company who is a close relative, i.e., spouse, parents, dependents
and non-dependent children, of the CEO, the CFO, an internal auditor or a director of
the listed company.
(xxxix) Every listed company shall require external auditors to furnish a Management Letter to
its board of directors within 45 days of the date of audit report:

Provided that any matter deemed significant by the external auditor shall be
communicated in writing to the board prior to the approval of the audited accounts
by the board.
COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE
(xl) All listed companies shall publish and circulate a statement (in the form as specified in
Appendix B) along with their annual reports to set out the status of their compliance
with the requirements set out above. The statement shall be specific and deemed to
be supported by the necessary evidence held by the company making the said
statement.
(xli) All listed companies shall ensure that the statement of compliance with the best
practices of corporate governance is reviewed and certified by statutory auditors,
where such compliance can be objectively verified, before its publication. Statutory
auditors of listed company shall ensure that any non-compliance with the CCG
requirements is highlighted in their review report.
(xlii) Where the SECP is satisfied that it is not practicable to comply with any of the best
practices of corporate governance in a particular case, it may, for reasons to be
recorded, relax the same subject to such conditions as it may deem fit.

2
Joint Notification by SBP & SECP dated February 25, 2004
21

22

Criteria for Institutions desirous of offering Directors Training Program

Background

The Code of Corporate Governance (Code) 2002, required all listed companies to make
appropriate arrangements to conduct orientation and training courses for their directors to
acquaint them with their duties and responsibilities and enable them to effectively manage the
affairs of listed companies on behalf of the shareholders.
Clause (xiv) of the Code 2002 (clause xi of the Code 2012) requires the directors of the listed
companies to have certification under directors training program offered by any institution
local and/or foreign that meet the criteria specified by the SECP.

This document lays down the minimum criteria for the eligibility of institutions and the areas that
have to be covered in the Directors Training Program (DTP) offered by them. While the SECP
will give initial approval of an institution that can offer DTP, the stock exchanges will formalize an
on-going compliance mechanism to ensure that the criteria is met at all times.

This document provides a formal set of criteria to assess and evaluate the programs as well as the
institutions offering these programs. The minimum eligibility criteria will help to ensure that only
institutions equipped with the necessary infrastructure and resources, offer these programs. The
list of areas covered in the said program shall serve to standardize the DTPs in their content and
coverage of the subject.

For the aforesaid certification required under the Code, foreign directors who have already
participated in a training program that broadly covers the areas listed under para 6 below shall
be exempt from the requirement of DTP.

Criteria for Institutions

DTP may be offered by an institution, after seeking prior approval of the SECP and subject to any
conditions imposed by the SECP. An application received by the SECP from any of the
institutions, will be judged on the following minimum parameters:

permanent training set up;
infrastructure and facilities;
track record of the institution for the last five years;
program content and structure as given in this document; and
key resource (faculty) profile (permanent and adjunct).

The institutions approved by the SECP, will seek its prior approval, if any material change is to be
brought to the DTP. The names of the institutions that are approved by the SECP to offer DTP will
be placed on the website of the SECP as well as the stock exchanges.

Program outline

The following minimum criteria shall be met by the institutions who intend to offer DTP:

1. The DTP shall be designed to impart knowledge and develop skills of the board of
directors of listed company that are essential for successful achievement of the
companys objectives;

23

2. The course of study shall include both theory and case studies;

3. All faculty members shall have both practical experience as well as an appropriate
academic background, suitable for carrying out DTP effectively;

4. The DTP must be spread over a span of at least 40 hours (divided into modules);

5. To increase the knowledge base, it is recommended that pre-training material based on
the key elements of corporate governance should be developed and distributed
amongst the trainees. The institution shall also provide latest research to the trainees as
post-training material to keep them updated with the latest developments taking place
around the globe in the areas including following:

Good board practices;
Control environment and processes;
Disclosure and transparency; and
Protection of shareholders rights.

6. The program must cover, inter alia, an overview of the principles and the key pillars of
corporate governance, its benefits and objectives, the roles and responsibilities of the
board and executive management in light of relevant regulatory requirements and latest
trends in corporate governance. This will assist the participants to be better equipped to
understand and evaluate different approaches to structuring the ownership, control and
regulation of companies. The following topics at a minimum shall be included in the
course contents:

Legal overview
An overview of relevant laws that have to be adhered to, including the Code of
Corporate Governance and the Companies Ordinance 1984;
The key principles and elements of good corporate governance;
Significance of directors report in the annual report;
Directors fiduciary duties to shareholders under the law; and
Procedure of appointment, election, retirement and removal of directors.

Role and responsibility of the Board of Directors
Development of code of conduct and other policies, and internal control system;
Conduct of meetings of board of directors;
Disclosures of shareholding and trading of securities by directors and their families;
Ethical obligations;
Determining closed period;
The boards role in shaping the companys dividend policy;
Board composition, roles and responsibilities, powers and functions, duties and
liabilities & procedures and practices;
The right mix of skills and board diversity;
The institution and importance of independent directors;
Executive and non-executive remuneration how to attract, retain and motivate
directors and officers;
Board committees and their roles;
Succession planning;
24

Appointing the CEO, determining terms of appointment of the CEO and evaluating
performance of the CEO;
Defining the roles and responsibilities of the Chairman and the CEO;
Board performance evaluation;
Avoiding a box-ticking approach to corporate governance, and stressing the
importance of substance over form; and
Control environment.

Financial overview
Analysis of related party transactions;
Disclosures and financial reporting framework;
The benefits of corporate governance including its impact on profitability and
shareholder value; and
How to read, understand and interpret financial statements.

Risk management
Governance, risk management and compliance (GRC) issues; and
Measures to assess risk

International trends and practices
Global best practices including OECD Guidelines on Corporate Governance;
The importance of integrity and ethical obligations in exercising business decisions;
Corporate Social Responsibility (CSR) and Sustainability reporting; and
Corporate governance framework concerns and challenges.

7. An assessment at the end of each module/section and/or the whole course is
mandatory to qualify for the certification.

Additional general requirements

1. The institutions offering DTP shall place the names of the certified directors on their
websites and also disseminate their names amongst industry and business associations,
chambers of commerce and industry, etc. through an appropriate mechanism, so that
their names are readily available to the companies who wish to appoint trained directors
on their boards. The names of certified directors shall also be sent through email to the
stock exchanges and the SECP within 15 days of the conclusion of a DTP.

2. The institutions shall strive to meet or exceed all established standards, both domestically
as well as internationally. The institution shall clearly lay down the objectives of the DTP.

3. The availability and proper utilization of high quality instructional material is essential for
conducting effective DTP. The institutions shall ensure that adequate material including:
relevant laws; case studies; syllabus; multimedia; reference texts; etc. are made available
for instructional purposes. Special focus should be on developing case studies, which are
relevant to the business environment of Pakistan and these should be included in the
curriculum.

4. The institutions are encouraged to arrange research programs, seminars, conferences,
workshops, etc. for promoting good corporate governance practices in Pakistan.

25

5. The potential of undertaking continuing professional development of the trainees
through the institutions websites in the form of on-line, self-study courses may be
considered by the institutions.

26

Frequently Asked Questions

General

1. What is the effective date for compliance with the Code of Corporate Governance 2012
(Code 2012)?
All provisions, unless provided otherwise in the Code 2012, shall be effective at the date
of issuance.
2. Is the Code 2012 applicable to modarabas and mutual funds?

The Code 2012, being part of the listing regulations of the stock exchanges, is applicable
to all entities listed on the exchanges. The listed entities include not only companies but
also funds, such as modarabas and mutual funds. The requirements of the Code 2012
are, therefore, applicable to modarabas and mutual funds. Furthermore, the
requirements of the Code 2012 pertaining to the Board of Directors are also applicable
to management companies of such funds, even if these companies are themselves not
listed on the stock exchanges.
3. Does the Code 2012 conflict with the Companies Ordinance, 1984?

The SECP considers the Code 2012 to be an extension of the requirements of the
Companies Ordinance, 1984 (Ordinance) rather than being in conflict with it. A number
of amendments have been made over the years to the Ordinance for greater
harmonization between the provisions of the Code and the Ordinance. Furthermore,
the SECP draws support from the decision of the Karachi High Court in the matter of
Messrs Data Textiles Limited vs. Karachi Stock Exchange and another, 1999MLD 108. The
Honorable High Court held, inter alia, that provisions contained in (Section 249) the
Ordinance do not override and cannot be interpreted to be in derogation with the
listing regulations framed under the Securities and Exchange Ordinance, 1969, as both
the enactments cover separate and distinct spheres.
4. What are the penalties for non-compliance with the Code 2012?

Since the Code 2012 has been incorporated in the listing regulations of the stock
exchanges, penalties for noncompliance of various requirements are specified in the
listing regulations and will be applicable accordingly.

5. Which companies are referred to by the term "Non-Banking Financial Institutions" in the
Code 2012?

For the purpose of the Code 2012, non-banking financial institutions include modarabas,
leasing companies, housing finance companies, investment banks, discount houses,
venture capital companies, insurance companies and mutual funds.
6. Is there a standard format for the statement of compliance with best practices that has to
be published in the annual reports of listed companies?

27

A standard format for the compliance statement to be published in the annual reports of
listed companies is provided in Appendix B of the Code 2012.

Board Composition

7. What are the implications if a listed company fails to nominate an independent director
on its board?

Clause (i)(b) of the Code 2012 requires at least one independent director on the board.
This is now a mandatory provision and any non-compliance will be penalized under
listing regulations.

8. If an independent director is serving as the chairman of the board at the time of issuance
of the Code 2012, can he also act as the chairman of the audit committee as required by
the Code 2012? Now the Code 2012 requires chairman of audit committee to be an
independent director who is not the chairman of board. Can the existing independent
chairman also act as chairman of committee till the next election of the board?

It is mandatory as per Clause (xxiv) of the Code 2012 that the independent director is the
chairman of the audit committee. In order to fulfill this requirement, the board shall elect
another director as the chairman of the board.
9. What is the minimum amount of investment that would qualify a company to nominate
a director for appointment on the board of its investee company?
No minimum amount of investment has been prescribed in the Code 2012.

10. What is the difference between an executive and a non-executive director?

Executive directors are the working, whole-time directors of a company. Non-executive
directors, on the other hand are those who are not from among the executive
management team and may or may not be independent. They are expected to lend an
outside viewpoint to the board of directors of a company and do not undertake to
devote their whole working time to the company. The guiding factor in distinguishing
between executive and non-executive directors of a company is the extent of their
involvement in managing the affairs of the company.

An executive director cannot be categorically defined as a "paid director" and a non-
executive director as one who is "not a paid director". While the fact that a company may
not pay remuneration to its non-executive directors may facilitate their classification as
such, this rule cannot be applied uniformly to all companies since payment of any
remuneration to its directors is at the discretion of each company.

11. Can a broker be appointed as a director of a listed company?

The Code 2012 does not restrict election/nomination of brokers on the boards of listed
companies. However, the Ordinance states that no person shall be appointed as a
28

director of a listed company if he/she is engaged in the business of brokerage, or is a
spouse of such person or is a sponsor, director or officer of a corporate brokerage house.
Therefore a broker cannot be appointed as a director on the board of a listed company.

12. Is professional indemnity insurance required for all board of directors?

Professional indemnity insurance is not mandatory but is encouraged for independent
directors only.

13. In a board of seven, what will be the composition as per the criteria laid down in the
Code 2012?

If there are seven directors on the board of a listed company, the composition as per the
Code 2012 will be: one independent director, two executive directors (including the
CEO) and four non-executive directors.

14. Is the 'Statement of Ethics and Business Practices' still required to be signed by all
directors and employees of listed companies?

No, the Statement of Ethics and Business Practices is no longer required. However, a
Code of Conduct has to be prepared and communicated throughout the company
apart from placing it on the companys website.

15. Who will evaluate the performance of the board and when?

The board has to put in place a mechanism for its evaluation within two years of the
introduction of Code 2012.

16. A director is serving on the board of 10 listed companies including three listed subsidiary
companies of a holding company. Is he compliant with the requirement of maximum
number of directorships of the revised code?

Yes, maximum number of directorships of seven does not include listed subsidiaries of a
listed holding company.
17. Does the board of directors of a listed company need to specify by a resolution the limits
of materiality for the policies to be presented to the board?

The level of materiality should be determined by a resolution in the board meeting.
18. Do the matters required to be decided by the board through a resolution under the
Code 2012 have to be decided by the board in a board meeting as under Section 196
(2) of the Companies Ordinance, 1984?

Only such matters as are considered to be material/significant to a listed company
should be decided by its board of directors in a meeting in a manner similar to Section
196 of the Ordinance.

29

Board Meetings
19. What information should be circulated among the directors of a listed company along
with the notice of a board meeting?

The agenda of the board meeting and complete details of agenda items, including
working papers, should be circulated among the directors of a listed company along
with the notice of the board meeting. These documents should be circulated at least
seven days before the meeting of the board of directors, except in case of emergency
meetings, where the notice period may be reduced or waived.
Related Party Transactions

20. Does the Code 2012 apply to private/unlisted companies in addition to the listed
companies? Is Clause (x) of the Code 2012 applicable to private companies and unlisted
public companies?

The Code 2012 is part of the listing regulations of the stock exchanges and is applicable
only to listed companies and not private/unlisted public companies. Private/unlisted
companies are thus not required to furnish Statement of Compliance with the Code,
unless they have opted to adopt the Code 2012 voluntarily. However, all companies -
private, listed or unlisted, must ensure compliance with all such provisions (provisions on
related party transactions etc.) applicable to them under the relevant international
financial reporting standards.

Directors Training Program

21. If a foreign director on the board of a listed company has already participated in a
director training program abroad, then will it still be mandatory for him to attend the
orientation and director training program as required by the Code 2012?
It is mandatory for the company to provide orientation to all directors - local and foreign.
An orientation should cover the relevant information about the company as well as the
relevant governing laws, rules and regulations.

Foreign directors who have received training aboard shall be exempt from Directors
Training Program (DTP) requirement of the Code 2012 if the program they attended
broadly covered the areas stated in the criteria specified by the SECP for the purpose.
Chief Financial Officer (CFO), Company Secretary (CS) and Head of Internal Audit
22. Do the qualifications prescribed for the CFO and head of internal audit apply to
employees who are already in service of a listed company?
The qualification criteria for the CFO and head of internal audit of a listed company shall
not be applicable to individuals serving as the CFO and head of internal audit of a listed
company, respectively, for the last five years at the time of coming into effect of Code
2012.
30

23. Would the terms of employment of existing employees of a listed company, working in
the positions of the CFO, the CS and head of internal audit, need to be ratified in the
manner laid down in clauses (xii) to (xiv) of the Code 2012?
The relevant clauses of the Code 2012 are applicable to the existing employees serving in
the above mentioned positions. Therefore, the terms and conditions of existing
employees need to be ratified in terms of the Code 2012.
24. Can the same person be appointed as the CFO and the CS of a listed company?

The terms of reference of the two positions are distinct. It is, therefore, preferred that
separate persons handle the functions of the CFO and company secretary within a listed
company. The SECP Circular No 15 of July 8, 2003 also requires listed companies to have
full time employee designated to perform specific assignments of company secretary.
25. Can the positions of company secretary and internal auditor be given to one person
within a listed company?

No. The two positions carry minimal synergy and, therefore, should be performed by
separate persons.

26. Can a full time employee (including the CFO and company secretary) of a listed
company hold a similar position in a group company?

The Code 2012 does not restrict any full time employee in a listed company from
working in a similar position in a group company. However, appropriate steps should be
taken by the board of directors of the companies concerned to ensure that additional
workload would not affect the quality of work performed by such employee and no
conflict of interest would arise as a result of holding similar positions in two group
companies.

27. Can a director of a listed company be appointed as the head of internal audit of the
company?

The internal audit function of a listed company must be independent from the
management/directors of a listed company. Therefore, a director cannot be appointed,
in any capacity, in the internal audit function.

28. Can the offices of company secretary and legal advisor be held by one person, since
both of them are required to be lawyers under the Code 2012 and the Companies
(Appointment of Legal Advisors) Act, 1974, respectively?

The position of legal advisor in a company is a key appointment and is of executive
nature, duties of which should not be expected to be fulfilled by a person who is also
engaged in other responsibilities. As per the 1974 Rules a legal advisor must be an
Advocate and not merely a lawyer. Therefore qualification for the two positions in not
the same.
31

Also, the SECP vide its Circular No 15 of July 8, 2003, reinforces that companies should
engage full-time employees to perform functions of a "whole time secretary".

29. Can a foreign national be appointed as the head of internal audit of a listed
company in Pakistan?
There is no particular provision in the Code 2012 that restricts an individual of foreign
nationality to assume the position of an officer/head of internal audit of a company listed
in Pakistan.

30. (a) Can an individual who has graduated from a foreign university with an
equivalent degree be considered as a postgraduate or equivalent for appointment as a
CFO?
(b) If such person has experience in handling accounts and finance in a listed
company outside Pakistan, would it be regarded as experience for the purposes of his
qualifications to become a CFO, as laid down in the Code 2012?
(c) If a person has no practical experience in Pakistan in handling finance and
accounts, would such a person be considered an appropriate choice for appointment as
the CFO of a listed company in Pakistan?

The educational qualifications requirement for the CFO of a listed company in the Code
2012 is either postgraduate in finance from a recognized university or equivalent. The
equivalence of educational qualification is granted by the Higher Education Commission
("HEC") under Section 10(1)(o) of the Higher Education Commission Ordinance, 2002,
and the applicant may, therefore, be asked to provide an equivalence certificate from the
HEC. The educational qualifications, once verified by the HEC, are sufficient requirement
for the purposes of the Code 2012.

With regard to professional experience, the requirement is at least five years in handling
financial or corporate affairs of a public listed company or a bank or a financial institution.
If the applicant has served at least five years in a listed company or a bank or a financial
institution and has handled financial or corporate affairs, inside or outside Pakistan, he
shall be deemed as eligible for the purpose.

Foreign education and qualifications do not bar any person from pursuing his career as
a CFO in Pakistan. The requirement of Sub-clause (b) of Clause (xiii) of the Code 2012
should be read as a whole and, therefore, a person cannot be appointed as a CFO
unless he has both the required qualification and the experience.

Corporate and financial reporting and compliance
31. Does the directors' report, containing the information specified in clause (xvi) of the Code
2012, have to be published along with quarterly accounts?

32

Clause (xvi) of the Code 2012 deals with the directors' report to be attached to the
annual accounts of a listed company. The quarterly accounts should be circulated along
with the directors' review on the affairs of the company which need not include the
information required by clause (xvi) of the Code 2012.
32. Should the disclosure in the directors' report regarding the number of board meetings
held during a year include the number of resolutions passed by the board by
circulation?

The number of resolutions passed by the board of directors of a listed company through
circulation should not be considered in determining the number of board meetings held
during a year for the purpose of the Code 2012.
33. Does the Code 2012 require quarterly accounts to be filed by listed companies for each
quarter?

The listed companies are required to comply with Section 245 of the Companies
Ordinance, 1984, and circulars of the SECP in determining the period for and the
manner in which the quarterly accounts should be published. The only requirement
imposed by the Code 2012 is that these quarterly accounts should be circulated along
with the directors' review on the affairs of the company for the relevant quarter.
34. Who can perform limited scope review of the half-yearly accounts of listed companies?

Only statutory auditors appointed to conduct the annual audit of a listed company can
carry out a limited scope review of the company's half-yearly accounts.

35. Is there a standard format for Secretarial Compliance Certificate?

The Secretarial Compliance Certificate to be filed by Company Secretary of a listed
company is annexed as Appendix A of the Code 2012.

36. If the CEO and the CFO of a company are out of country/on leave, who will endorse the
financial statements in their place?

In view of Sub-section (1) and (2) of Section 241 of the Companies Ordinance, 1984,
depending upon the company policy, if there is an alternative executive officiating in the
capacity of the CEO or the CFO, then he would be competent to endorse and present
the financial statements before the board of directors of the company.

37. Should listed companies be updating their websites to disseminate financial information?

Through its directives, the SECP from time to time directs the listed companies to circulate
their quarterly accounts in addition to half-yearly and annual accounts (as required in the
Companies Ordinance, 1984), and in case of difficulties in circulation of the same to all
shareholders, at least ensure publication of the same in two daily leading newspapers
(one English, one Urdu).
33

Also the Corporate and Financial Reporting Framework of the Code 2012 (clause (xvi)(c))
provides for directors of listed companies to include summarized statements of key
operating and financial data of last six years in the directors' report.

Further, the SECP vide SRO no. 25(I)/2012 dated 16.01.2012 has mandated the
maintenance of functional websites and placement of certain material information
(financial as well as non-financial) thereon.

Disclosure
38. What is meant by closed period?

The closed period is a period during which no director, CEO or executive shall, directly or
indirectly, deal in the shares of the listed company in any manner.
The closed period shall start from the day when any document/statement, which forms
the basis of price sensitive information, is sent to the board of directors and terminate
after the information is made public. It is expected that such a restriction would help
minimize the risk of insider trading by key management/directors of the company.
39. Does regulation 14(1) of the Listing Regulations of the Karachi Stock Exchange apply to
closed period?

Clause (xxiii) of the Code 2012 does not require closure of share transfer books of listed
companies for all shareholders in terms of regulation 14(1) of the Listing Regulations.
While Clause (xxiii) seeks to reduce insider trading, regulation 14(1) provides that listed
companies should give sufficient notice of closure of share transfer books to the stock
exchanges so that the same can be notified to shareholders in advance.
40. Should the closed period be intimated to directors and stock exchanges?
Every listed company should advise its directors about the closed period at the time of
circulating agenda and working papers for Board meetings. Furthermore, the closed
period should be intimated to the stock exchanges to enable them to effectively regulate
the enforcement of the Code 2012.

41. Does the signing of memorandum of understanding (MOU) by a listed company with
the banks to borrow huge amounts of money, fall under the term "material information"
for the purposes of disclosure?

The decision to disclose such an MOU is left to the board of directors of the company,
since an MOU does not create enforceable obligations and undertakings therein might
remain unfulfilled. So, no blanket ruling may be laid down in this context, and each case
needs to be treated on its own merits. Also, Clause (xx) of the Code 2012 provides a
suggested list of material information that also includes "a major change in borrowing",
so such MOUs are covered there.

34

In terms of the Clause (xx) of the Code 2012, every listed company shall immediately
disseminate to the stock exchange on which its shares are listed and to the SECP, all
material information relating to business and other affairs of the listed company that will
affect the market price of its shares, including information regarding a joint venture,
merger or acquisition etc.
42. (a) What does the word "immediately" used in the abovementioned clause mean?
(b) At what point of time does a company need to disseminate information to the
relevant stock exchange and the SECP in case of acquisition of shares by it of another
company whether a listed or non-listed company?
The requirement of the Code 2012 to immediately disseminate any material information
relating to the business and other affairs of a listed company has been laid down in the
interest of the general public and to ensure that any such information is communicated
to all the market participants so as to provide a level-playing field to them. A listed
company is required to disseminate any material information, likely to affect the price of
its shares, to the relevant stock exchanges and the SECP, as soon as any such decision is
taken/finalized by its board of directors in a meeting of the board held for the purpose,
immediately after such board meeting has taken place or as soon as a significant matter
requiring disclosure has come to the knowledge of the companys management.
In case of any decision relating to acquisition of shares of a listed/unlisted company, the
Listed Companies (Substantial Acquisition of Voting Shares and Take-overs) Ordinance,
2002 may be referred to, for information on the timelines for dissemination of such
decisions.
Board Committees
43. Can a Human Resource and Remuneration Committee of the board of directors decide
the terms of employment of the CEO and executive directors of a listed company?
Human Resource and Remuneration Committee shall only 'recommend' to the board of
directors the human resource management policies; succession planning of the CEO;
the selection, evaluation, compensation (including retirement benefits) of the COO, the
CFO, company secretary and head of internal audit.
44. Who can be members of the Audit Committee?
The Audit Committee should comprise of not less than three members from among the
directors of a listed company. The Code 2012 requires that the members of the Audit
Committee should be from the non-executive directors of the company. The chairman of
the Audit Committee must be an independent director who is not the chairman of the
board. The board shall satisfy itself that at least one member of the audit committee has
relevant financial skills/expertise and experience.

45. Who can be appointed as the secretary of the Audit Committee?

35

The secretary of the Audit Committee shall either be the Company Secretary or Head of
Internal Audit. However, the CFO shall not be appointed as the secretary to the Audit
Committee.

46. (a) Are consolidated accounts for the second quarter required to be reviewed by
the statutory auditors?

(b) Is the requirement for the external auditors to initial the financial statements
before these are considered/approved by the Audit Committee and the board of
directors, inconsistent with the provisions of the Section 233 of the Companies
Ordinance, 1984, which states that responsibility for preparation of financial statements
lies with the directors of the company, and that the auditors express their opinion after
these have been prepared and approved by the directors?

Consolidated accounts for the second quarter are not required to be reviewed by the
statutory auditors.

The requirement for the auditors to initial the financial statements has been introduced
to ensure that only the accounts duly reviewed or audited are presented for the
approval of the Audit Committee and the board. The CEO and the CFO are mandated
to present to the Audit Committee and the board, annual accounts (both separate and
consolidated) and second-quarter (only separate/stand-alone) reviewed and initialed by
external auditor, for the purposes of identification, and as such, the responsibility of
preparation of financial statements rests with the management in accordance with
provisions of the Companies Ordinance, 1984.

Internal Audit

47. Can the internal audit function be outsourced to a professional firm?

The internal audit function may be outsourced by a listed company to a professional
services firm or can be performed by the internal audit staff of the holding company.
However, it is essential that suitably qualified and experienced persons, who are
conversant with the company's policies and procedures, are engaged in internal audit. In
addition, these persons must be involved in the internal audit function on a full time basis
so as to achieve the objectives of the Code 2012. In the event of outsourcing the internal
audit function, the company shall appoint or designate a fulltime employee other than
the CFO, as head of internal audit, to act as coordinator between firm providing internal
audit services and the board. While outsourcing the function, the company must not
appoint its statutory auditors as internal auditors.

48. Can the head of internal audit be appointed as secretary of the Audit Committee of a
listed company?

Clause (xxx) of the Code 2012 states that the secretary of the Audit Committee shall
either be the company secretary or head of internal audit.

36

49. If a company has outsourced internal audit function to an independent audit firm, does
it still need to appoint the head of internal audit?

Yes. Given the crucial role of internal audit function and reporting of internal audit to the
board, in the event of outsourcing the internal audit function, it is necessary that the
company should appoint or designate a fulltime employee other than the CFO, as head
of internal audit, to act as coordinator between firm providing internal audit services and
the board. The employee appointed as head of internal audit in this case must fulfill the
criteria of appointment of head of internal audit as prescribed in the Code 2012.

External Auditors

50. In case of a holding company and a subsidiary (not wholly owned), both
being listed companies, can the holding company for the purpose of handling
operational and financial activities, provide professional services to the
subsidiary through a service contract?

The holding company may provide professional services to its subsidiary. However, due
care should be exercised to comply with the directives of the SECP in appointing external
auditors to provide other professional services.

51. Whether the restrictions laid down in Clause (xxxvi) of the Code 2012 are also applicable
to companies applying for listing at the exchange through IPOs?
According to Section 1(2) of Listing Regulations, all listing regulations will be applicable to
all companies, whether they are applying for listing or are already listed. Hence, the said
restrictions also apply to companies applying for listing at the exchange through IPOs.
52. Whether the pre-audited accounts or audited accounts are required to be initialed by
the external auditors before presenting to the Audit Committee?
In terms of the requirements of the Code 2012, the Audit Committee or the board of
directors can only approve the duly reviewed or audited accounts in case of second
quarter and annual accounts respectively. The said requirement was put in place to
ensure that only accounts duly reviewed or audited, as the case may be, are presented
for approval of the Audit Committee and the board of directors before circulation.

53. How can I resolve my queries pertinent to the Code 2012?
Any queries on the Code 2012 should be referred to the following email address:
ccg@secp.gov.pk

37

Appendix A
Secretarial Compliance Certificate
[See clause (xxii)]
Name of company
To
Company Registration Office
I being the Secretary of [1] certify, to the best of my knowledge
and belief, that I am qualified to be appointed as the Company Secretary of a listed company
and that the secretarial and corporate compliance requirements of the Companies Ordinance,
1984, memorandum and articles of association of[1] .. and the listing regulations
of[2] .. have been duly complied with for the year ending .. *, and
that nothing has been concealed or withheld in this regard.
Date: Place:
Signature (s)
(Name (s) in block letters)
CNIC number
* State exceptions in case of non-compliance.
[1] Insert name of the company
[2] Insert names of the stock exchanges on which shares of the company are listed
Note: The declaration need not be
(a) signed before a magistrate or an officer competent to administer oaths; or
(b) stamped as an affidavit
38

Appendix B
Statement of Compliance with the Code of
Corporate Governance
[See clause (xl)]
Name of company Year
ending.
This statement is being presented to comply with the Code of Corporate Governance
contained in Regulation No. . of listing regulations of for the purpose of
establishing a framework of good governance, whereby a listed company is managed in
compliance with the best practices of corporate governance.
The company has applied the principles contained in the CCG in the following manner:
1. The company encourages representation of independent non-executive directors and
directors representing minority interests on its board of directors. At present the board includes:

Category Names
Independent Directors
Executive Directors
Non-Executive Directors
The independent directors meets the criteria of independence under clause i (b) of the CCG.
2. The directors have confirmed that none of them is serving as a director on more than seven
listed companies, including this company (excluding the listed subsidiaries of listed holding
companies where applicable).
3. All the resident directors of the company are registered as taxpayers and none of them has
defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member
of a stock exchange, has been declared as a defaulter by that stock exchange.
4. A casual vacancy occurring on the board on .. was filled up by the directors within
.. days.
5. The company has prepared a Code of Conduct and has ensured that appropriate steps
have been taken to disseminate it throughout the company along with its supporting policies
and procedures.
6. The board has developed a vision/mission statement, overall corporate strategy and
significant policies of the company. A complete record of particulars of significant policies
along with the dates on which they were approved or amended has been maintained.
7. All the powers of the board have been duly exercised and decisions on material
39

transactions, including appointment and determination of remuneration and terms and
conditions of employment of the CEO, other executive and non-executive directors, have been
taken by the board/shareholders.
8. The meetings of the board were presided over by the Chairman and, in his absence, by a
director elected by the board for this purpose and the board met at least once in every
quarter. Written notices of the board meetings, along with agenda and working papers, were
circulated at least seven days before the meetings. The minutes of the meetings were
appropriately recorded and circulated.
9. The board arranged . training programs for its directors during the year.
10. The board has approved [1] appointment of CFO, Company Secretary and Head of
Internal Audit, including their remuneration and terms and conditions of employment.
11. The directors report for this year has been prepared in compliance with the requirements
of the CCG and fully describes the salient matters required to be disclosed.
12. The financial statements of the company were duly endorsed by CEO and CFO before
approval of the board.
13. The directors, CEO and executives do not hold any interest in the shares of the company
other than that disclosed in the pattern of shareholding.
14. The company has complied with all the corporate and financial reporting requirements of
the CCG.
15. The board has formed an Audit Committee. It comprises . members, of whom are
non-executive directors and the chairman of the committee is an independent director.
16. The meetings of the audit committee were held at least once every quarter prior to
approval of interim and final results of the company and as required by the CCG. The terms of
reference of the committee have been formed and advised to the committee for compliance.
17. The board has formed an HR and Remuneration Committee. It comprises..members, of
whomare non-executive directors and the chairman of the committee is a/an
...director.
18. The board has set up an effective internal audit function/ or has outsourced the internal
audit function to .. who are considered suitably qualified and experienced for the purpose
and are conversant with the policies and procedures of the company.
19. The statutory auditors of the company have confirmed that they have been given a
satisfactory rating under the quality control review program of the ICAP, that they or any of the
partners of the firm, their spouses and minor children do not hold shares of the company and
that the firm and all its partners are in compliance with International Federation of Accountants
(IFAC) guidelines on code of ethics as adopted by the ICAP.
20. The statutory auditors or the persons associated with them have not been appointed to
provide other services except in accordance with the listing regulations and the auditors have
40

confirmed that they have observed IFAC guidelines in this regard.
21. The closed period, prior to the announcement of interim/final results, and business
decisions, which may materially affect the market price of companys securities, was
determined and intimated to directors, employees and stock exchange(s).
22. Material/price sensitive information has been disseminated among all market participants
at once through stock exchange(s).
23. We confirm that all other material principles enshrined in the CCG have been complied
with [2] except for the following, toward which reasonable progress is being made by the
company to seek compliance by the end of next accounting year.
Signature (s)
(Name (s) in block letters)
Chairman /CEO
Note: Any exception to the above shall be adequately noted with reasons.
_____________________
[1] in case of new appointments made after the the CCG has taken effect
[2] Delete if not applicable

41

Annexure C
COMPARISON OF 2002 AND 2012 CODES

S.No. Issue Code 2002 Code 2012
1. Independent Director Encouraged a minimum of one
independent director on the
board of a listed company.

One independent director is
mandatory while preference is for
1/3rd of the total members of the
board to be independent directors.
2. Criteria for assessment of
independence
Very scanty criteria provided Criteria has been substantially
expanded
3. Executive Directors Number of Executive Directors
not to be more than 75% of
elected directors including CEO
Maximum number of Executive
Directors cannot be more than
1/3rd of elected directors including
CEO.
4. Number of directorships A director can be on the board
of no more than 10 listed
companies at any one time.
A director can be on the board of 7
listed companies at the most at any
one time. However, the limit does
not include directorship in listed
subsidiaries of a listed holding
company.
5. Board evaluation - Within two years of the
implementation of the Code 2012,
the Board has to put in place a
mechanism for undertaking annual
evaluation of the performance of the
Board.
6. Office of Chairman and
CEO
The Chairman of a listed
company shall preferably be
elected form among the non-
executive directors of the listed
company.
The Chairman and CEO shall not be
the same person, unless specifically
provided in any other law.

The Chairman shall be elected from
amongst the non-executive directors
of the listed company.
7. Training of the Board of
Directors
It is mandatory for directors of
listed companies to attain
certification. Initially, the PICG
was to provide the training but
later it was opened to other
institutions, provided they met
the criteria specified by the SECP.

It will be mandatory for directors of
listed companies to attain
certification under any director
training program (DTP) offered by
any institution (local or foreign),
which meets the criteria specified by
the SECP. The criteria are available at
the websites of the stock exchanges
and the SECP.
8. Appointment and
removal and qualification
criteria for Chief Financial
Officer (CFO) and
Company Secretary (CS)
Appointment, remuneration and
terms and conditions of
employment of CFO and CS
determined by CEO and
approved by Board. The same
mechanism followed for
removal.
The appointment, remuneration and
terms and conditions of employment
of the CFO, CS and the Head of
Internal Audit (IA) of listed
companies shall be determined by
the Board. The removal will also be
by the Board for CS and CFO.
9. The Head of Internal
Audit (IA)
- Qualification introduced for Head of
IA. The removal of Head of IA is with
the approval of the Board only upon
42

recommendation of the Chairman of
the Audit Committee.
10. Remuneration of
Directors
- A formal and transparent procedure
to be followed and disclosure of
aggregate remuneration in the
annual report.
11. Board Committees Audit Committee: The Chairman
of the audit committee shall
preferably be a non-executive
director.

Reporting Procedure:
The Audit Committee of a listed
company shall appoint a
secretary of the Committee.
Audit Committee: The Chairman of
the audit committee shall be an
independent director, who shall not
be the chairman of the board. Audit
Committee shall comprise of non-
executive directors.

The secretary of Audit Committee
shall either be the Company
Secretary or Head of Internal Audit.
However, the CFO shall not be
appointed as the secretary to the
Audit Committee.

Human Resources and
Remuneration Committee
introduced.
12. Internal Audit There shall be an internal audit
function in every listed company.
The head of internal audit shall
have access to the chair of the
Audit Committee
The internal audit function may be
outsourced by a listed company to a
professional services firm or be
performed by the internal audit staff
of the holding company. In the
event of outsourcing the internal
audit function, the company shall
appoint or designate a fulltime
employee other than the CFO, as
Head of Internal Audit, to act as
coordinator between the firm
providing internal audit services and
the board.

Implementation deadlines of Code of Corporate Governance 2012

Clause
Reference
Brief Description Effective Date
i (b) One independent director At the time of next election of
directors
i (d) Number of executive directors At the time of next election of
directors
ii Maximum number of directorships to be
held by a director
At the time of next election of
directors
iii Filling up a casual vacancy Immediate

iv & v except
v(e)
Responsibilities, powers and functions of
board of directors
Immediate
v (e) Annual evaluation of the boards own
performance
April ,2014
vi Separation of CEO and Chairman and
election of Chairman from non-executive
directors
At the time of next election of
directors
vii & viii Meetings of the board Immediate

ix Significant issues to be placed for
decision of Board of Directors
Immediate
x Related party transactions Immediate

xi Directors Training Program Minimum one director to obtain
certification each year from June
30, 2012. All directors to be
compliant by June 30, 2016.
xii Appointment and removal of Chief
Financial Officer ,Company Secretary
and Head of Internal Audit
Immediate
xiii & xiv Qualifications of CFO and Head of
Internal Audit
Immediate. Report compliance
in Annual Report for accounting
period ending on or after June,
2012
xv Requirement to attend board meetings Immediate

xvi Directors Report Annual Report for accounting
2012
xvii Directors remuneration Immediate

Xviii, xix & xx Frequency of financial reporting For accounting period ending on
or after June 30, 2012
Clause
Reference
Brief Description Effective Date
xxi & xxii Responsibility for financial reporting
and corporate compliance
For accounting period ending on
xxiii Disclosure of interest by a director
holding companys shares
Immediate
xxiv Composition of Audit Committee At the time of next election of
directors
xxv Composition of Human Resource and
Remuneration Committee
Immediate
xxvi Disclosure of Names of Members of
Committees
Annual Report for accounting
period ending on or after June
30, 2012
xxvii, xxviii,
xxix, xxx
Frequency of meetings, attendance,
terms of reference and reporting
procedures of Audit Committee
Immediate
xxxi & xxxii Internal audit Immediate

xxxiii, xxxiv,
xxxv, xxxvi,
xxxvii & xxxviii
Appointment of External Auditors When next appointment is due
xxxix Management Letter by External Auditor For accounting period ending on
xl & xli Compliance with Code of Corporate
Governance
Annual report for accounting
2012

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PART-II


Government of Pakistan


NOTIFICATION

Islamabad, the 30
th
March, 2012

S.R.O. 339(I)/2012.
__
In exercise of the powers conferred by Section 506A of the
Companies Ordinance, 1984 (XLVII of 1984) and having being previously published in the
official Gazette vide Notification No. SRO 712(I)/2011 dated July 18, 2011 as required by sub-
section (1) of section 506-A of the said Ordinance the Securities and Exchange Commission of
Pakistan hereby makes the following Regulations, namely:-

CHAPTER I
PRELIMINARY

1. Short title and commencement.
__
(1) These Regulations shall be called the Debt
Securities Trustee Regulations, 2012.


2. Definitions.
__
(1) In these Regulations, unless there is anything repugnant in the subject
or context,
_
(a) Act means the Securities and Exchange Commission of Pakistan Act, 1997 (XLII
of 1997);
(b) Constitutive Documents includes the memorandum and articles of association and
any document governing the formation of a company or a body corporate;
(c) Commission means the Securities and Exchange Commission of Pakistan
established under Section 3 of the Act;
(d) Debt Security means any security which creates or acknowledges indebtedness and
includes;
(i) Corporate debt securities such as Term Finance Certificates (TFCs), Sukuk
Certificates, Participation Term Certificates (PTCs), Commercial Papers, and all
kinds of debt instruments issued by any Pakistani or foreign company or
corporation registered in Pakistan; and
(ii) Government debt securities such as Treasury Bills (T-bills), Federal Investment
Bonds (FIBs), Pakistan Investment Bonds (PIBs), Foreign Currency Bonds,
Government Papers, Municipal Bonds, Infrastructure Bonds and all kind of debt

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instruments issued by Federal Government, Provincial Governments, Local
Authorities and other statutory bodies.
(e) Debt Securities Trustee means a person appointed as a Debt Securities Trustee by
virtue of a Trust Deed and registered under these Regulations;
(f) Form means a form specified through these Regulations;
(g) Issue includes issue of debt securities through,-
(i) initial public offering by an issuer;
(ii) secondary public offering by an issuer;
(iii) an offer to the existing shareholders or debt securities holders by an issuer;
(iv) private placement to persons referred to and notified under Section 120 of the
Ordinance; or
(v) offer for sale to the public by an offeror.

(h) Investment Finance Company means a company as defined in clause (xxiv) of sub-
regulation (1) of regulation 2 of Non-Banking Finance Companies and Notified
Entities Regulations, 2008;
(i) Offeror means any person who directly or indirectly holds ten percent or more debt
securities and offers for sale such debt securities in full or in part to the general
public;
(j) Ordinance means the Companies Ordinance, 1984 (XLVII of 1984);
(k) Regulations means these regulations along with all Schedules, Forms and
Annexures attached to it;
(l) Schedule means a schedule specified in these Regulations;
(m) Scheduled Bank has the same meaning as defined in clause (m) of Section 2 of the
State Bank of Pakistan Act, 1956 (XXXII of 1956); and
(n) Trust Deed means a trust deed executed by an issuer or an Offerer, as the case may
be, in accordance with the provisions of the Trust Act, 1882 (II of 1882).
2) Words and expressions used but not defined in these Regulations shall, unless there is
anything repugnant in the subject or context, have the same meaning as are assigned to them in
the Act, the Ordinance or the Securities and Exchange Ordinance, 1969 (XVII of 1969).

3) Headings and sub-headings given in these Regulations are given for ease of reference and
shall not change meaning of the terms expressed in these Regulations.

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CHAPTER II
REGISTRATION OF DEBT SECURITIES TRUSTEE
3. Prohibitions.
__
(1) No person shall act as or perform the functions of a Debt Securities
Trustee unless such person is registered with the Commission under these Regulations.

(2) Any person providing services as Debt Securities Trustee at the time of coming into force
of these Regulations shall get itself registered under these Regulations within a period of three
months from the date of notification of these Regulations in the official Gazette.

(3) A Debt Securities Trustee shall not be eligible to act as a Debt Securities Trustee to any
Issue,-
(a) of its associated company or associated undertaking;
(b) where the Debt Securities Trustee or any of its associated company or
associated undertaking holds or has taken steps to acquire any shares or debt
securities of the issuer;
(c) where the Debt Securities Trustee has underwritten or intends to underwrite
the Issue;
(d) where the Debt Securities Trustee or any of its associated company or
associated undertaking has provided any guarantee with respect to the amount
payable under such Issue.

4. Eligibility requirements for registration.
__
Any person may apply to the Commission
for registration as a Debt Securities Trustee under these Regulations if such person is authorized
by its Constitutive Document to act as a Debt Securities Trustee and is,-

(a) a Scheduled Bank;
(b) a Development Finance Institution as notified by the State Bank of Pakistan;
(c) an Investment Finance Company;
(d) a wholly owned subsidiary set up by a Scheduled Bank, Development Finance
Institution or a depository company for carrying out the activities of Debt
Securities Trustee; or
(e) any other company or entity or class of companies/entities allowed by the
Commission.

5. Application procedure for registration.
__
(1) An application for registration as a Debt
Securities Trustee shall be made to the Commission in Form A along with all the documents
specified in Annexure-I and receipt evidencing payment of non-refundable fee of rupees one
hundred thousand.

(2) The Commission, while considering the application for grant of certificate of registration,

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may require the applicant to furnish such further information or clarification regarding its
activities and businesses as it deems appropriate.

(3) Any subsequent change in the information provided to the Commission at the time of
filing of application under sub-regulation (1) shall be intimated to the Commission within a
period of seven working days from the date of such change.

6. Grant of registration.
__
(1) The Commission while considering the application for grant
of certificate of registration made under sub-regulation(1) of Regulation 5 shall inter-alia take
into account the following matters, namely,-

(a) the ability of the applicant to safeguard the interest of debt securities holders;

(b) the capability of the applicant to efficiently handle its functions as Debt
Securities Trustee and its obligations under these regulations;

(c) the availability of necessary infrastructure including but not limited to adequate
office space, equipment, experienced manpower and financial and technical
aspects to effectively discharge its activities as Debt Securities Trustee;

(d) earlier refusal, if any, by the Commission for registration of the applicant as a
Debt Securities Trustee;

(e) conviction or adverse findings in investigation of directors or employees in the
senior management level of the applicant in an offence involving, fraud or breach
of trust;

(f) penal action against the applicant or its director(s) including initiation of any kind
of prosecution for an offence under the Ordinance, Act or the Securities and
Exchange Ordinance 1969 (XVII of 1969);

(g) track record as a Debt Securities Trustee, if any; and

(h) any other matter as deemed necessary by the Commission.

(2) The Commission on being satisfied that the applicant is eligible for registration may grant
a certificate of registration to the applicant in Form B and impose such conditions as it may
deem necessary.

(3) The certificate of registration shall remain valid for a period of three years from the date
of registration unless it is restricted, suspended or cancelled earlier by the Commission.

7. Renewal of Registration.
__
(1) A Debt Securities Trustee shall, three months prior to
the date of expiry of its registration, apply to the Commission in Form C for renewal of its
registration along with all the documents specified in Annexure III and receipt evidencing
payment of non-refundable renewal fee of rupees one hundred thousand.

(2) The Commission upon being satisfied that the applicant continues to meet the minimum
requirement for registration and is eligible for renewal of registration shall renew the registration

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of Debt Securities Trustee and issue a certificate of renewal of registration to the applicant in
Form D. Where the Debt Securities Trustee fails to meet the requirements as mentioned in
regulation 4 and 6 above, its application for renewal may be refused subject to the provisions of
regulation 8.

(3) Where the application for renewal of registration is made within such time as specified in
sub-regulation (1) but has not been decided by the Commission the registration shall continue to
be valid until the application for renewal is decided by the Commission.

8. Procedure where registration is not granted or renewed.
__
(1) The Commission, after
giving a reasonable opportunity of hearing to the applicant, may refuse to grant or renew a
certificate of registration if in the opinion of the Commission such applicant does not fulfill the
requirements prescribed in these Regulations or where the Commission after taking in to account
the facts, is of the view that it is not in the public interest or in the interest of the securities
market to grant or renew such certificate of registration.

(2) The decision of refusal to grant a certificate of registration or refusal of renewal of
registration shall be communicated to the applicant stating therein the grounds on which the
application has been rejected.

(3) The applicant, if aggrieved by the decision of the Commission under sub-regulation (1)
may, within a period of thirty days from the date of receipt of such refusal, apply to the
Commission for review of its decision.

(4) On receipt of the application made under sub-regulation (3), the Commission may review
its decision and communicate its findings, in writing, to the applicant within sixty days and the
decision of the Commission in this regard shall be final.

(5) An applicant whose application for renewal of certificate of registration is refused by the
Commission under sub-regulation (1) shall, from the date of receipt of the final decision of the
Commission, not act as Debt Securities Trustee for any new Issue.

(6) A Debt Securities Trustee whose application for renewal is refused shall, on the day of
the receipt of the final decision of the Commission, intimate to all the concerned parties
including the issuers, the debt securities holders, the concerned credit rating company and the
stock exchange(s) in case of listed debt securities about its inability to act as a Debt Securities
Trustee.

(7) Debt Securities Trustee whose application for renewal of certificate of registration is
refused by the Commission shall continue to act as such in all previous Issues in which it is
acting as Debt Securities Trustee till the appointment of any other Debt Securities Trustee by the
issuer or complete redemption of such Issues, whichever is earlier. Provided that the appointment
of any other Debt Securities Trustee should be made within such time period as mentioned in the
refusal order but not exceeding 60 days from the date of such refusal.

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CHAPTER III

DUTIES AND RESPONSIBILITIES OF DEBT SECURITIES TRUSTEE

9. Obligations of Debt Securities Trustee.
__
A Debt Securities Trustee shall,-
(i) sign a Trust Deed with the issuer before commencement of the subscription
period which inter- alia contain that the Debt Securities Trustee has agreed to act
as a trustee under the Trust Deed for securing the interest of the Debt securities
holders;
(ii) ensure that the Trust Deed contains all terms and conditions specified in
Schedule-I and required under the Trust Act, 1882 (II of 1882);
(iii) ensure compliance with the provisions of the Trust Deed;
(iv) put in place a mechanism to resolve any conflict of interest situation that may
arise in the conduct of its business as Debt Securities Trustee and where any
conflict of interest arises it shall take reasonable steps to resolve the same in an
equitable manner;
(v) ensure that in case of secured debt securities, appropriate security has been
arranged and based on the information obtained from the issuer, the assets
backing the debt security are maintained throughout the tenure of the Issue;
(vi) enforce security, where necessary, in the interest of the debt securities holders
according to the terms of the Trust Deed;
(vii) efficiently do such acts as are necessary in the event the security becomes
enforceable;
(viii) regularly monitor compliance of the issuer with all the covenants of the Trust
Deed and in case of listed debt securities, report the same on semi-annual basis to
the concerned stock exchange and non-compliance, if any, of the covenants of the
Trust Deed shall upon its occurrence and coming into its notice or knowledge be
immediately reported to the concerned stock exchange and the Commission;
(ix) monitor the status of the redemption reserve, if any, established by the issuer for
the redemption of debt securities and furnish, on semi-annual basis an update on
the same to the Commission and in case of listed debt securities to the concerned
stock exchange as well;
(x) regularly monitor payment of profits to the debt security holders and redemption
of the debt security and inform the Commission and the concerned stock
exchange, in case of listed debt securities of any default in payment of profit or
redemption of debt securities;
(xi) maintain proper record of the complaints received and a report on the number and
nature of the complaints received and the manner in which such complaints have
been redressed shall be provided to the Commission and in case of listed debt
securities to the concerned stock exchange also , on annual basis;
(xii) ascertain that the debt securities have been converted, where required, in
accordance with the provisions and conditions under which they were issued;

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(xiii) inform the Commission immediately of any breach by the issuer of the Trust
Deed or provision of the Ordinance or any other law applicable to the Issue which
comes to its knowledge;
(xiv) ensure that the Commission is promptly informed about any action, legal
proceeding etc, initiated against it in respect of any material breach or non-
compliance by it of any law, rules or regulations;
(xv) file yearly report with the Commission within sixty days of the end of its financial
year containing clause-wise status of the compliance with the provisions of this
regulation;
(xvi) comply with the code of conduct prescribed in Schedule II;
(xvii) call a meeting of all debt securities holders, within such time period as provided
in the Trust Deed, on, -
(a) a requisition in writing signed by at least one-tenth of the debt securities
holders in value for the time being outstanding; and
(b) the happening of any event, which pursuant to the Trust Deed constitutes a
default by the issuer or which in the opinion of the Debt Securities Trustee
adversely affects the interest of the debt securities holders.
(xviii) not relinquish duties as Debt Securities Trustee to an Issue until another Debt
Securities Trustee is appointed in its place;
(xix) file its audited annual accounts with the Commission within thirty days of its
issuance;
(xx) submit any document or information as and when required by the Commission;
and
(xxi) provide, on request in writing, copy of certified Trust Deed to the debt security
holders as and when required by them.

10. Maintenance of books and records by Debt Securities Trustee.
__
(1) A Debt Securities
Trustee shall properly maintain at least the following record in respect of each Issue:
(a) all contracts relating to the Issue to which it is acting as a Debt Securities Trustee
including but not limited to the Trust Deed, letter of hypothecation, memorandum
of deposit of title deed and the charge registration certificate, where applicable etc;
(b) statements relating to profit payment and principal redemption;
(c) all documents relating to compliance with the covenants of the Trust Deed and
enforcement of security, where applicable;
(d) Debt Security holders complaints and subsequent correspondence; and
(e) such other records as may be specified by the Commission from time to time.
(2) The Debt Securities Trustee shall ensure that the record referred to in sub-regulation (1)

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is maintained and preserved in good order for a period of at least five years from the date of
complete redemption of the Issue.
(3) The Debt Securities Trustee shall,-
(a) ensure that the record is kept at such a place and maintained in such a manner that
the Commission or any person appointed by it has easy access to it; and

(b) establish and follow record retention policies which shall ensure that all relevant
legal and regulatory requirements are complied with.

11. Appointment of Compliance Officer.
__
Every Debt Securities Trustee shall designate
any of its officers as a compliance officer possessing relevant qualification and experience and
certification as may be specified by the Commission. The Compliance Officer shall be
responsible for, -
(a) monitoring compliance with the terms of the Trust Deed;
(b) redressal of investors grievances and complaints; and
(c) reporting to the Commission immediately if the Debt Securities Trustee ceases to
maintain any of the requirements referred to in regulation 4 of these Regulations.

CHAPTER IV

DISCIPLINARY PROCEEDINGS

12. Restrictions, Suspension of Registration.
__
(1) Where a Debt Securities Trustee
contravenes or fails to comply with any provision of these Regulations or fails to fulfill its
obligations under the Trust Deed or is not in compliance with conditions of registration or any
directive, circular or order issued by the Commission, the Commission, after providing a
reasonable opportunity of representation to the Debt Securities Trustee may:
(a) impose a restriction on its activities as Debt Securities Trustee;
(b) suspend its registration; and/or
(c) impose a penalty provided under sub-section (2) of Section 506A of the
Ordinance.
(2) Notwithstanding anything contained in sub-regulation (1), where the Commission is
satisfied that a delay in suspension of registration of the Debt Securities Trustee will be
detrimental to the interest of investors or the public in general or the capital market, the
Commission may immediately suspend the registration of the Debt Securities Trustee till the
time an opportunity of hearing is provided to the Debt Securities Trustee and a final order is
passed under sub-regulation (1):

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Provided that where the Commission suspends the registration under sub-regulation (2),
the opportunity of hearing and final order must be passed within sixty days of the order under
sub-regulation (2).

(3) A Debt Securities Trustee whose registration has been suspended shall not act as a Debt
Securities Trustee for any new Issue during the period of suspension and remove the cause of
suspension as specified in the suspension order within a period of one hundred and twenty days
from the receipt of the suspension order or such earlier period as provided in the said order.
(4) The Commission while suspending the registration of a Debt Securities Trustee may
impose such conditions as it deems appropriate.
13. Cancellation of Registration.
__
(1) The Commission, after providing a reasonable
opportunity of representation to the Debt Securities Trustee, may cancel the registration of a
Debt Securities Trustee if,-
(i) in the opinion of the Commission the Debt Securities Trustee has been in
violation of these Regulations or the Trust Deed or restriction imposed under sub-
regulation (1) of Regulation 12;
(ii) it is found guilty of fraud; or
(iii) its registration has been suspended and the cause of suspension has not been
removed within one hundred and twenty days from the receipt of the suspension
order or such earlier period as provided through the order of suspension .

(2) The registration of a Debt Securities Trustee shall stand automatically cancelled if such
Debt Securities Trustee,-
(i) is declared insolvent by a Court;
(ii) is wound up by an order passed by a Court, or
(iii) ceases to hold valid license/registration as a Schedule Bank, Development
Finance Institution or Investment Finance Company.

(3) Upon the cancellation of the registration, the Debt Securities Trustee shall with
immediate effect cease to solicit or enter into further business as a Debt Securities Trustee and
transfer all necessary record to another Debt Securities Trustee appointed by the issuer, within
thirty days of its appointment and the appointment of the new Debt Securities Trustee, shall be
immediately communicated to the Commission, Debt security holders and the stock exchanges
concerned in case of listed debt securities.

14. Dissemination of information regarding cancellation of registration.
__
The Issuer
upon cancelation of registration of the Debt Security Trustee by the Commission shall
immediately notify such cancelation for information of the stakeholders, through press release in
at least two newspapers, one English and one Urdu language, having wide circulation in the
country.

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15. Relaxation: Where the Commission is satisfied that it is not practicable to comply with
any of the requirements of these regulations in a particular case or class of cases, the
Commission may for reasons to be recorded, relax such requirement(s) subject to such
condition(s) as it may deem fit.

***

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FORM A
[see regulation 5(1)]

APPLICATION FOR GRANT OF
CERTIFICATE OF REGISTRATION AS DEBT SECURITIES TRUSTEE

(Please carefully read the instructions annexed to this Form)
To,
The Securities and Exchange Commission of Pakistan

Pursuant to the decision of the Board of Directors of . [Name of the applicant]..... taken in its
meeting held on [Date of Meeting].., we hereby apply for registration under Regulation
5(1) of the Debt Securities Trustee Regulations, 2012.

The information and documents mentioned in Annexure-I are attached herewith.

Date: ___________________________

Signature: __________________

Place: ___________________________

___________________________
Name of the Chief Executive Officer, the Company
Secretary or the Chief Financial Officer duly
authorized by the Board of Directors through a
resolution for signing and submission of this
application.

***

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Annexure-I
(see Form A)
1. General and business Information:

1.1 Brief history of the applicant containing the name of the applicant; date and place of its
incorporation; date of commencement of business; length of experience as Debt Securities
Trustee, if any; names of its sponsors/promoters/major shareholders; group structure, if any
and status of the applicant whether Scheduled Bank, Development Finance Institution as
notified by the State Bank of Pakistan, Investment Finance Company or other.
1.2 Address of the Registered Office of the applicant (postal address, postal code, telephone &
fax numbers).
1.3 Name and designation of the compliance officer along with contact detail i.e. postal address,
postal code, telephone number, fax number and e-mail address.
1.4 Detail of ongoing legal or regulatory proceedings, if any, initiated against the applicant or
any of its directors, Chief Executive Officer, Chief Financial Officer or Company Secretary
by the Commission or any other regulatory authority.
1.5 Detail of penal or regulatory action(s), if any, taken against the applicant during the last
three years by the Commission or any other regulatory authority.
1.6 In case any associated company of the applicant is already registered under these
Regulations, the following details shall be provided:
i) Name of such associated company;
ii) Detail of warning notices, if any, issued to such associated company by the
Commission during the last three years;
iii) Detail of ongoing legal proceedings, if any initiated against such associated company
or any of its directors, Chief Executive Officer, Chief Financial Officer or Company
Secretary , by the Commission; or any other regulatory authority; and
iv) Penal action, if any, taken against such associated company by the Commission
during the last three years.

2. Other Information:

2.1 Detail of pending disputes:

Nature of
dispute
relating to the
Trusteeship
business of
the Applicant
Name of
the party
Name & Place of
Court / Tribunal
where dispute is
pending
Amount
Involved
Date of last
hearing
Decision
taken in the
last hearing

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2.2 List of financial or criminal offenses which have been alleged against the applicant or any of
its sponsors, directors or employees during the last three years.
2.3 Procedures for redressal of complaints, if any, lodged by the Debt securities holders.
2.4 Any other information considered relevant to the business of the applicant as Debt
Securities Trustee.
2.5 Any significant awards or recognition.
3. List of documents to be provided along with application:
3.1 copy of Memorandum & Articles of Association of the applicant, certificate of
incorporation and certificate of commencement of business
3.2 copy of Form 3, 27, 28 and 29 of the applicant duly certified from the Company
Registration Office (CRO) concerned.
3.3 audited accounts of the applicant for the last three years and latest half yearly and quarterly
accounts.
3.4 profile of Chief Executive Officer, Chief Financial Officer, Company Secretary,
Compliance Officer and Directors, of the applicant [Name, Qualification, Experience and
Date of Appointment, Directorship in other companies and Date of Appointment as director
in such other companies].
3.5 date wise breakup of Issues, if any, in which the applicant acted as Debt Securities Trustee
during the last three years. The statement should also contain size of each Issue.
3.6 list of Issues, if any, in which the applicant has enforced security or taken any other
remedial action for safeguarding the interest of its debt securities holders.
3.7 an Affidavit as specified in Annexure-II signed by the Chief Executive or any director of
the applicant authorized by the Board of Directors to do so through resolution passed in its
meeting.
3.8 confirmation that the quantum of minimum capital or equity, as the case may be, required
under the respective statute is maintained.
3.9 any other information/document as required by the Commission.
*I nstructions:
(i) The applicant must submit application for registration under regulation 5 on this form duly
filled in and signed, together with supporting documents to the Commission.
(ii) All columns of the application form should be filled in. In case a column is not relevant or
not applicable, the same should also be filled in as Not Applicable or Not Relevant.
(iii) Information, which needs to be supplied in more details may be provided on separate
sheet(s) and attached to the application.
***

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Annexure-II
(see clause 3.7 of Annexure-I)

AFFIDAVIT

I,_______son/daughter/wife of ____________ adult, resident of _________and holding
CNIC/Passport No. _______ do hereby state on solemn affirmation as under:-
1. That I am the chief executive/director of ..name of the applicant). and as such I am
well conversant with the facts deposed to below.
2. That the statements made and the information and documents provided along with the
application for registration as a Debt Securities Trustee under the Debt Securities Trustee
Regulations, 2012 are correct and there are no facts which have been concealed.
3. That the Securities Exchange Commission of Pakistan (the Commission) will be notified
of any change in the information provided to it along with the application for registration
under regulation 5 of the Debt Securities Trustee Regulations, 2012 during the period the
applications for registration is being considered and after the grant of registration.
4. That all the documents provided to the Commission are true copies of the originals.

That I do hereby verify that the statements made above are correct to the best of my knowledge
and belief and nothing has been concealed therein.

DEPONENT

Signature_____________

The Deponent is identified by me.

ADVOCATE
(Name & Seal)

Solemnly affirmed before me on this ____ day of ____ at ____ by the Deponent above named
who is identified to me by _______, Advocate.

Signature ___________
OATH COMMISSIONER
FOR TAKING AFFIDAVIT
(Name & Seal)
***

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FORM B

***

CERTIFICATE OF REGISTRATION TO ACT AS DEBT SECURITIES TRUSTEE

Islamabad, the .. (date)
Registration No. .

1. The Securities and Exchange Commission of Pakistan having considered the application
for registration as a Debt Securities Trustee under Regulation 5(1) of the Debt Securities
Trustee Regulations, 2012 (the Regulations) by [Name of the applicant] . and being
satisfied that the said ......[Name of the applicant] is eligible for registration and that it
would be in the interest of the securities market so to do hereby grants Certificate of
Registration, in exercise of the powers conferred under regulation 6(2) of the Regulations to
.[Name of the applicant]. as a Debt Securities Trustee to carry out the activities as specified
in the Regulations subject to the condition that .[Name of the applicant]. shall comply with
all the provisions of the Regulations and to any other condition that may be imposed hereafter.

2. Unless cancelled or suspended this certificate of registration is valid for a period of three
years from the date of its issuance or the existence of ..[Name of the applicant].., whichever
is earlier provided that it remains eligible under the Regulations for registration as a Debt
Securities Trustee.

For and on behalf of the
Authorized Signatory
***

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FORM C

APPLICATION FOR GRANT OF
RENEWAL OF CERTIFICATE OF REGISTRATION AS DEBT SECURITIES
TRUSTEE

(Please carefully read the instructions annexed to this Form)
To,

Pursuant to the decision of the Board of Directors of . [Name of the applicant]..... taken in its
meeting held on [Date of Meeting].., we hereby apply for renewal of registration as Debt
Securities Trustee under regulation 7(1) of the Debt Securities Trustee Regulations, 2012. The
information and documents mentioned in Annexure-III are attached herewith.

Date: ___________________________

Signature: __________________

Place: ___________________________

___________________________
Name of the Chief Executive Officer, the
Company Secretary or the Chief Financial
Officer duly authorized by the BoD through a
application..

***

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Annexure-III
(see Form C)
The following details shall be provided by a Debt Securities Trustee along with the relevant
supporting documents: -
1. Detail of non-compliance, if any, by the Debt Securities Trustee with any provision of the
Debt Securities Trustee Regulations, 2012 and reasons thereof.
2. Detail of non-compliance, if any by the Debt Securities Trustee with any provision of any
Trust Deed to which it is a party and reasons thereof.
3. Detail of the Issue(s) of securities for which the Debt Securities Trustee remained
engaged during the last one year.
4. Detail of legal proceedings initiated against the Debt Securities Trustee and penal actions
taken against it by the Securities and Exchange Commission of Pakistan or any other
regulatory authority during the last one year.
5. Detail of changes, if any, in the status of the Debt Securities Trustee.
6. Detail of complaints relating to the Issue of Debt Securities received in the capacity as
Debt Securities Trustee during the last one year and their status.
7. Detail of default, or delay in profit payment or redemption, if any, by the issuers
including the following:
a) the action taken by the Debt Securities Trustee to safeguard the interest of debt
securities holders;
b) mode of enforcement of security, if any; and
c) compensation provided to debt securities holders.

For and on behalf of .. (Name of the applicant).

Date: ___________________________

Signature: __________________

Place: ___________________________

___________________________
Name of the Chief Executive Officer or any
director of the applicant authorized by BoD to
submit the above-mentioned information.

*I nstructions:
(i) The applicant must submit application for registration under regulation 7 on this form duly
(ii) All columns of the application form should be filled in. In case a column is not relevant or
***

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FORM D

*****

CERTIFICATE OF RENEWAL OF
REGISTRATION AS DEBT SECURITIES TRUSTEE

Islamabad, the .. (date)
Registration No. .

1. The Securities and Exchange Commission of Pakistan having considered the application
of the Debt Securities Trustee for renewal of its registration under regulations 7(1) of the Debt
Securities Trustee Regulations, 2012 by [Name of the applicant] . and being satisfied
that the said ......[Name of the applicant] is eligible for renewal of registration and that it
would be in the interest of the securities market so to do hereby grants renewal of Certificate of
Registration, in exercise of the powers conferred under regulation 7(2) of the Regulations to
.[Name of the applicant]. as a Debt Securities Trustee to carry out the activities as specified
in the Regulations subject to the condition that .[Name of the applicant]. shall comply with
all the provisions of the Regulations and to any other condition that may be imposed hereafter.

2. Unless cancelled or suspended this renewal of the certificate of registration is valid for a
period of one year from the date of the issuance of this certificate of renewal or the existence of
..[Name of the applicant].., whichever is earlier provided that it remains eligible under the
Regulations for registration as a Debt Securities Trustee.

For and on behalf of the
Authorized Signatory
***

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SCHEDULE I
CONTENTS OF TRUST DEED
[see regulation 9(ii)]

The Trust Deed should contain all the necessary terms and conditions including the following:

1. The Issuer
All obligations and responsibilities of the issuer under the Regulations, the Ordinance, the Act,
the Trust Act and any other applicable law or directions by the Commission including the
following:
(i) its obligation for maintaining proper record of its books of accounts and keeping
it open for inspection by the Debt Securities Trustee;
(ii) its obligations for maintaining proper register of debt securities holders with
their addresses, record of subsequent transfers and changes of ownership;
(iii) its obligations for facilitating the Debt Securities Trustee to enter its premises
and inspection of the charged assets, if any;
(iv) its obligations for intimating the Debt Securities Trustee of all orders,
directions, notices of the courts of law affecting or likely to affect the charged
assets or interest of the debt securities holders;
v) its obligations for submitting any document or information including copies of
financial reports; auditors certificate on maintaining minimum redemption
reserve fund, if required; report on redemption of debt securities; report on
conversion of debt securities, if they are convertible; report on dividend
payment, contracts relating to the Issue and detail of the assets backing the debt
security etc. as and when required by the Debt Securities Trustee;
vi) its obligations for keeping the charged assets, if any, in proper condition;
vii) its obligation to pay the profit and the principal amount;
viii) its obligation to seek prior consent of the Debt Securities Trustee for declaration
of any dividend, if so required by the Trustee;
ix) its obligations for reporting to Debt Securities Trustee before any change in the
nature and conduct of business of the issuer;
x) its obligations for submitting periodical report on semi-annual basis to the Debt
Securities Trustee containing at least the following:
a) register of debt securities holders;
b) number and nature of grievances received by the issuer from debt
securities holders and status of resolution thereof;
c) amount of markup due but unpaid and reasons for non-payment thereof
and detail of unclaimed/undelivered payments, if any;
d) a declaration confirming that its assets which are available by way of
security are sufficient to discharge the claims of the debt securities holders
as and when they become due.

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(xi) its obligations for submission of its annual audited accounts to the Debt
Securities Trustee within thirty (30) days from the date of the general meeting in
which such accounts are approved;
(xii) its obligations to conduct and manage its business affairs with due diligence and
efficiency in accordance with sound financial practices;
(xiii) its obligations to inform the Debt Securities Trustee about the material change
in its shareholding structure and the Board of Directors;
(xiv) its obligations to provide the Debt Securities Trustee information about its
financial condition, business and operations as and when requested by the Debt
Securities Trustee;
(xv) its obligation to inform the Debt Securities Trustee regarding any change in the
utilization of proceeds of the Issue where the offering document sets out
specific purpose for the utilization of the proceeds of the issue;
(xvi) its obligations to furnish to the Debt Securities Trustee copies of all documents,
reports, notices, circulars and particulars which the issuer provides to its
creditors;
(xvii) its obligations to immediately inform the Debt Securities Trustee of the
occurrence of any event of default;
(xviii) its obligations that until all the amounts payable by the issuer in relation to the
debt security have been paid in full to the satisfaction of the Debt Securities
Trustee, the issuer shall not without prior written consent of the Trustee;
(a) sell, transfer or otherwise dispose of, except in the ordinary course of
business, any of the charged assets or more than 20 per cent of its
undertaking or assets or permit any merger, consolidation, dismantling or
reorganization;
(b) create or permit to subsist any pari passu or superior security interest over
the charged assets or any portion thereof except in accordance with inter-
creditor agreement if any, to which the Debt Securities Trustee is a party;
(c) demolish or remove any part of the buildings which are part of the secured
assets or the fixtures and fittings annexed thereto except in the ordinary
course of repair, maintenance, replacement or improvement;
(d) change its memorandum or articles of association, in a manner that may
adversely affect its ability to perform its obligations in respect of the debt
security Issue;
(e) take any action which is likely to result in a material adverse change in the
Issue; and
(f) declare or pay any dividends after the occurrence of any event of defaults.
(xix) its obligation to ensure that the assets of the Issuer backing the debt security are
maintained and sufficient to discharge its obligations as the issuer

Page 21 of 26

(xx) its obligation to ensure that all information provided to the Debt Securities
Trustee relating to the issue is accurate and that it has not concealed any
material facts/information.

2. Purpose and salient features of the Issue

Complete detail and information regarding the following:
(a) Purpose of the Issue, utilization of the proceeds thereof and Issue size.
(b) tenure of the Issue.
(c) markup/coupon rate.
(d) redemption schedule.
(e) options like call option, put option and conversion option, if any, and in case of
conversion option, the conversion procedure.
(f) debt equity ratio( the companys long term debt/equity ratio and the companys
total debt/equity ratio both before and after the issuance of the debt security).
(g) debt service coverage ratio, if applicable.

3. Details of the assets backing the debt security if applicable;
(a) Nature of the assets.
(b) Book value of the assets as per the latest audited accounts of the issuer.
(c) Nature of the existing charge(s) viz floating, exclusive, pari passu, ranking etc. on
the charged assets and total amount of such charges.
(d) Nature of charge(s) established in favor of the Debt Securities Trustee.
(e) Circumstances under which security becomes enforceable.
(f) Restriction on the issuer with respect to creation of further charges or
encumbrances of the assets without the consent of Debt Securities Trustee.
(g) Minimum amount of the security to be maintained at all times during the tenure of
the debt security.
(h) Procedure for successive valuation of the assets backing the debt security.
(i) Procedure for inspection of the charged assets and books of account by the Debt
Securities Trustee or any person or persons authorized by it.
(j) Mechanism for preservation of the assets backing the debt security.
(k) Circumstances under which the security may be disposed off or leased out with
the approval of the Debt Securities Trustee.

Page 22 of 26

4. Procedure for Enforcement of Security and related risk factors

The procedure for enforcement of security in case of default by the issuer and risk factors
connected to the enforcement of security should be provided in detail.

5. Representation and Warranties

Details regarding the issuer representation and warranties regarding any issue or creation of trust
or the clause that execution of this declaration shall not contravene the memorandum and articles
of association of the Issuer, any agreement which constitute legal and binding obligation of the
issuer etc.

6. Details of the agreements executed by the issuers with its creditors and covenants thereof.

7. Events of Default

All the events, which if occurred shall require the Debt Securities Trustee to initiate the actions,
proceedings including enforceability of the security for safeguarding interest of the debt
securities holders, should be defined

8. Rights of Debt Securities Trustee in case of issuers default:

(i) right of the Debt Securities Trustee to inspect any document of the issuer relating
to the Issue including the books of accounts, contracts relating to assets backing
the debt security, the register of debt securities holders and shareholders etc. and
to take copies and extracts thereof.

(ii) a statement whether, in case of default, the Debt Securities Trustee has the right to
appoint nominee director(s) on the board of the issuer or not.

(iii) right of the Debt Securities Trustee to call meeting of the debt securities holders,
the events under which such meeting may be called and minimum quorum for the
meeting of debt securities holders.

(iv) right of the Debt Securities Trustee to approach a court of competent jurisdiction
in the event of any default by the issuer and its failure to comply with the
covenants of the Trust Deed.

9. Rights of the debt securities holders
(i) right of the debt securities holders to call meetings;
(ii) to vote at the meetings of the debt securities holders;
(iii) in the event the Debt Securities Trustee, upon receiving instructions from the debt
securities holders in accordance with the provisions of the Trust Deed, refuses or
fails to act in accordance with such instructions, then any of the debt securities
holders, holding such number of debt securities as specified in the Trust Deed,
may, on giving the Trustee a notice in writing of its intention to initiate
proceedings against the issuer;

Page 23 of 26

(iv) to replace the Debt Securities Trustee if it contravenes any of its obligations under
the Trust Deed and procedure for such replacement.
(v) to replace the Debt Securities Trustee if it contravenes any provision of the
Regulations or the Ordinance or the Act.

10. Duties of Debt Securities Trustee

All obligations and duties of the Debt Securities Trustee under the Regulations, the Ordinance,
the Act, the Trust Act, 1882 and any other applicable law including the following:
(i) its obligation to regularly monitor payment of profit to the debt securities holders
and redemption of the debt security and ensure that it is according to the
redemption schedule provided to the debt securities holders.
(ii) its obligation to monitor delay or default in payment of profit and redemption of
principal amount to the debt securities holders.
(iii) its obligations towards regularly monitoring compliance by the issuer with all the
covenants of the Trust Deed.
(iv) its obligations of reporting to the debt securities holders about actual or potential
breaches of its own or the issuers obligations along with remedial steps taken or
to be taken and the manner and time period during which the debt securities
holders shall be informed of such breaches.
(v) its obligations to initiate legal proceedings against the issuer where the issuer
refuses or fails to fulfill its obligations under the Trust Deed.
(vi) its obligation to monitor on semi annual basis the quantum of security, where the
Issue is secured, and to ascertain whether the security of the issuer backing the
debt security is sufficient to discharge the claims of debt securities holders as and
when they become due.
(vii) its obligation incase of impairment of the security; and
(viii) its obligation to enforce security, where necessary, in the interest of the debt
securities holders.
11. Removal and Resignation of the Debt Securities Trustee
(i) Provide in details the instances and procedure for the retirement, removal and
resignation of the Debt Securities Trustee including appointment of new Debt
Securities Trustee.
(ii) Procedure for modifications/rectification in the Trust Deed.
(iii) clause prohibiting any unilateral modification/ amendment by either party to the
Trust Deed.

12. Miscellaneous
(a) Provisions for redressal of grievances of debt securities holders.

Page 24 of 26

(b) Provision that the Debt Securities Trustee shall not relinquish from its assignment
unless another Debt Securities Trustee is appointed.
(c) fee or commission of the Debt Securities Trustee.
(d) Provisions relating to the quorum, voting, whether meeting of the debt securities
holders may be convened by the issuer, the Debt Securities Trustee and/or by the
debt securities holders, minimum holding for convening meeting by debt
securities holders etc.
(e) Conditions under which the provisions of Trust Deed or the terms and conditions
of the issue may be changed.
(f) Provisions relating to the creation and maintenance of redemption reserve fund, if
any.
(g) Indemnification of the Debt Securities Trustee.

Note:

(i) The arrangement for rendering services as Debt Securities Trustee does not absolve
the issuer of the obligations and responsibilities placed on it under the Ordinance, the
Act, the Securities and Exchange Ordinance, 1969 and these Regulations.

(ii) The Debt Securities Trustee may incorporate additional clauses, provided that the
additional clauses do not dilute or contravene the provisions of the Regulations
particularly of the above clauses.

***

Page 25 of 26

SCHEDULE II
CODE OF CONDUCT
[see regulation 9]
The Debt Securities Trustee shall follow the following code of conduct:
1. A Debt Securities Trustee shall protect the interest and rights of the debt security holders
in accordance with the Trust Deed.
2. The Debt Securities Trustee shall ensure that:
(i) any change in registration status which may adversely affect the interest of the
debt securities holders is promptly notified to the issuer, the Commission and in
case of listed debt securities to the stock exchange concerned; and
(ii) where the Debt Securities Trustee cease to act as a Debt Securities Trustee for the
Issue, its business relating to the Issue is transferred to another trustee in
consultation with the issuer.
3. A Debt Securities Trustee shall take all reasonable steps to establish the true and full
identity of the issuers and maintain proper record of the charged assets, if any, and the
financial and operating position of the issuer.
4. A Debt Securities Trustee shall not discriminate among the issuers.
5. A Debt Securities Trustee shall share information regarding the Issue available to it with
the concerned credit rating company, if so desired by such credit rating company.
6. A Debt Securities Trustee shall provide the issuer and debt securities holders with
adequate and appropriate information about its trusteeship business, including contact
details, services available to issuers, and the identity and status of employees and other
persons acting on its behalf with whom the issuer may have to interact.
7. A Debt Securities Trustee shall not indulge in any unfair competition, which is likely to
harm the interests of other Debt Securities Trustee.
8. A Debt Securities Trustee shall ensure that the information shared with the debt security
holders through correspondences or other means is correct, adequate, comprehensive and
not misleading to the best of his knowledge and belief and is shared on timely basis.
9. A Debt Securities Trustee shall ensure that its directors or managers having the
management of the whole or substantially the whole of affairs of the trusteeship business,
shall not either through its account or their respective accounts or through their associates
or family members, relatives or friends indulge in any insider trading.
10. A Debt Securities Trustee or any of its directors, employees, officers, etc. shall not
divulge to anybody either orally or in writing, directly or indirectly, any confidential
information about its clients which has come to its knowledge, without taking prior
permission of its clients, except where such disclosures are required to be made in
compliance with any law.
11. A Debt Securities Trustee shall ensure that:
(i) inquiries from debt securities holders are adequately dealt with; and

Page 26 of 26

(ii) grievances of debt securities holders are redressed in a timely and appropriate
manner.
12. A Debt Securities Trustee or any of its directors, employees, officers, etc. dealing with
trusteeship business shall not render, directly or indirectly, any investment advice about
any security in the media, whether real-time or non-real-time unless a disclosure of
interest including long or short position in the said security has been made, while
rendering such advice.
13. A Debt Securities Trustee shall be responsible for the acts or omissions of its employees
and agents in respect to the conduct of its business.
14. Debt Securities Trustee shall provide adequate freedom and powers to its compliance
officer for the effective discharge of its duties under these Regulations.
15. A Debt Securities Trustee shall ensure that good corporate policies and corporate
governance is in place.
16. A Debt Securities Trustee shall not disclose the non-public price sensitive information it
has due to its position as a trustee to any person.
17. Debt Securities Trustee shall call for periodical reports regarding profit payment and
redemption of the debt security from the issuer.
18. A Debt Securities Trustee shall inspect books of accounts, records, registers of the issuer
and the security to the extent necessary for discharging its obligations under the issue of
debt security.
19. Debt Securities Trustee shall maintain high standard of integrity and fairness in
performing its functions and discharging all its obligations under these Regulations in a
fair, efficient, transparent and ethical manner.
20. A Debt Securities Trustee shall make every possible effort to avoid any conflict of
interest relating to its trusteeship business with the issuer and in case conflict of interest
exists, the Debt Securities Trustee shall immediately make a disclosure of the same to the
debt securities holders, the stock exchange concerned in case of listed debt security and
the Commission and shall try to resolve that conflict in an equitable manner.
______________________________________________________________________________
[No.SMD/Misc./(Prosp)/19/2003]

ABDUL REHMAN QURESHI,
Advisor/Secretary.
FORM-A

FORM OF APPLICATION FOR SEEKING
REGISTRATION AS DEBT SECURITIES TRUSTEE
see regulation o the et Securities rustee egulations

Please careull read the instructions anneed to this or
To,


Pursuant to the decision of the Board of Directors of . ae o the applicant.....
taken in its meeting held on ate o eeting.., we hereby apply for registration under
Regulation 5(1) of the Debt Securities Trustee Regulations, 2012.

The information and documents mentioned in Annexure-I are attached herewith.

Date: ___________________________

Signature: __________________

Place: ___________________________

___________________________
Name of the Chief Executive Officer, the Company
Secretary or the Chief Financial Officer duly
authorized by the Board of Directors through a
application.

***

Annexure-I
see Form A)
1. General and business Information:

1.1 Brief history of the applicant containing the name of the applicant; date and place of its
incorporation; date of commencement of business; length of experience as Debt Securities
Trustee, if any; names of its sponsors/promoters/major shareholders; group structure, if any
and status of the applicant whether Scheduled Bank, Development Finance Institution as
notified by the State Bank of Pakistan, Investment Finance Company or other.
1.2 Address of the Registered Office of the applicant (postal address, postal code, telephone &
fax numbers).
1.3 Name and designation of the compliance officer along with contact detail i.e. postal address,
postal code, telephone number, fax number and e-mail address.
1.4 Detail of ongoing legal or regulatory proceedings, if any, initiated against the applicant or
any of its directors, Chief Executive Officer, Chief Financial Officer or Company Secretary
by the Commission or any other regulatory authority.
1.5 Detail of penal or regulatory action(s), if any, taken against the applicant during the last
three years by the Commission or any other regulatory authority.
1.6 In case any associated company of the applicant is already registered under these
Regulations, the following details shall be provided:
i) Name of such associated company;
ii) Detail of warning notices, if any, issued to such associated company by the
Commission during the last three years;
iii) Detail of ongoing legal proceedings, if any initiated against such associated company
or any of its directors, Chief Executive Officer, Chief Financial Officer or Company
Secretary , by the Commission; or any other regulatory authority; and
iv) Penal action, if any, taken against such associated company by the Commission
during the last three years.

2. Other Information:

2.1 Detail of pending disputes:

Nature of
dispute
relating to the
Trusteeship
business of
the Applicant
Name of
the party
Name & Place of
Court / Tribunal
where dispute is
pending
Amount
Involved
Date of last
hearing
Decision
taken in the
last hearing

2.2 List of financial or criminal offenses which have been alleged against the applicant or any of
its sponsors, directors or employees during the last three years.
2.3 Procedures for redressal of complaints, if any, lodged by the Debt securities holders.
2.4 Any other information considered relevant to the business of the applicant as Debt
Securities Trustee.
2.5 Any significant awards or recognition.
3. List of documents to be provided along with application:
3.1 copy of Memorandum & Articles of Association of the applicant, certificate of
incorporation and certificate of commencement of business
3.2 copy of Form 3, 27, 28 and 29 of the applicant duly certified from the Company
Registration Office (CRO) concerned.
3.3 audited accounts of the applicant for the last three years and latest half yearly and quarterly
accounts.
3.4 profile of Chief Executive Officer, Chief Financial Officer, Company Secretary,
Compliance Officer and Directors, of the applicant [Name, Qualification, Experience and
Date of Appointment, Directorship in other companies and Date of Appointment as director
in such other companies].
3.5 date wise breakup of Issues, if any, in which the applicant acted as Debt Securities Trustee
during the last three years. The statement should also contain size of each Issue.
3.6 list of Issues, if any, in which the applicant has enforced security or taken any other
remedial action for safeguarding the interest of its debt securities holders.
3.7 an Affidavit as specified in Annexure-II signed by the Chief Executive or any director of
the applicant authorized by the Board of Directors to do so through resolution passed in its
meeting.
3.8 confirmation that the quantum of minimum capital or equity, as the case may be, required
under the respective statute is maintained.
3.9 receipt evidencing payment of non-refundable fee of Rs.100,000/- (Rupees One Hundred
Thousand Only) in favor of the Securities and Exchange Commission of Pakistan.
*Instructions:
(i) The applicant must submit application for registration under regulation 5 on this Form duly
(ii) All columns of the application Form should be filled in. In case a column is not relevant or
***
Annexure-II
see clause o nneure-

AFFIDAVIT

I,_______son/daughter/wife of ____________ adult, resident of _________and holding
CNIC/Passport No. _______ do hereby state on solemn affirmation as under:-
1. That I am the chief executive/director of ..(name of the applicant). and as such I am
well conversant with the facts deposed to below.
2. That the statements made and the information and documents provided along with the
application for registration as a Debt Securities Trustee under the Debt Securities Trustee
Regulations, 2012 are correct and there are no facts which have been concealed.
3. That the Securities Exchange Commission of Pakistan (the Commission) will be notified
of any change in the information provided to it along with the application for registration
under regulation 5 of the Debt Securities Trustee Regulations, 2012 during the period the
applications for registration is being considered and after the grant of registration.
4. That all the documents provided to the Commission are true copies of the originals.

That I do hereby verify that the statements made above are correct to the best of my knowledge
and belief and nothing has been concealed therein.

DEPONENT


The Deponent is identified by me.

ADVOCATE
(Name Seal)

Solemnly affirmed before me on this ____ day of ____ at ____ by the Deponent above named
who is identified to me by _______, Advocate.

Signature ___________
OATH COMMISSIONER
FOR TAKING AFFIDAVIT
(Name Seal)
***

1

THE GAZETTE OF PAKISTAN
EXTRAORDINARY
PUBLISHED BY AUTHORITY


Islamabad, 16 January, 2012

NOTIFICATION

S. R. O. 27(I)/2012. - In exercise of powers conferred by clause (b) of sub-section (2A) of
section 208 read with section 506A of the Companies Ordinance, 1984, (XLVII of 1984) and
having being previously published in the official Gazette vide Notification No. S.R.O.82(1)/2010
dated February 9, 2011 as required by sub-section (1) of section 506A of the said Ordinance
XLVII of 1984 the Securities and Exchange Commission of Pakistan hereby makes the
following Regulations, namely:-

CHAPTER I

PRELIMINARY

1. Short title, commencement and application. (1) These Regulations shall be
called the Companies (Investment in Associated Companies or Associated Undertakings)
Regulations, 2012.
(2) These Regulations shall come into force at once.
(3) These Regulations shall apply to all companies seeking to invest in their associated
companies or associated undertakings except and to the extent they are specifically exempted by
the Commission under clause (a) of sub-section (2A) of section 208 of the Companies
Ordinance, 1984, (XLVII of 1984).

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

(a) Equity Investment includes investment by way of subscription of shares directly
from the Company and/or acquisition of shares from a person or through stock
market;

(b) Loans and Advances include,-

(i) Loan or advance given by the Company;
(ii) a guarantee, indemnity or any other financial engagement which a company
may give, issue or undertake on behalf of a borrower; and
(iii) transfer of liabilities from associated company or associated undertaking;

(c) Ordinance means the Companies Ordinance, 1984, (XLVII of 1984).

(2) Words and expressions used but not defined in these Regulations shall, unless
these is anything repugnant in the subject or context, have the same meaning assigned to them
in the Companies Ordinance, 1984, the Securities and Exchange Ordinance, 1969 (XVII of 1969)
or the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997).

3

CHAPTER II

NOTICE OF MEETING AND INFORMATION TO MEMBERS

3. Information to be disclosed to members. (1) A company shall, while
issuing notice of its general meeting where a special business related to investments in any of its
associated companies or associated undertakings is to be transacted under section 208 of the
Ordinance, annex a statement pursuant to clause (b) of sub-section (1) of section 160 of the
Ordinance, setting out, among other, the following information, namely,-

(a) In case of investment in securities of its associated companies or
associated undertakings,-

(i) name of the associated company or associated undertaking along
with criteria based on which the associated relationship is
established;
(ii) purpose, benefits and period of investment;
(iii) maximum amount of investment;
(iv) maximum price at which securities will be acquired;
(v) maximum number of securities to be acquired;
(vi) number of securities and percentage thereof held before and after
the proposed investment;
(vii) in case of investment in listed securities, average of the preceding
twelve weekly average price of the security intended to be
acquired;
(viii) in case of investment in unlisted securities, fair market value of
such securities determined in terms of regulation 6(1);
(ix) break-up value of securities intended to be acquired on the basis of
the latest audited financial statements;
(x) earning per share of the associated company or associated
undertaking for the last three years;
(xi) sources of fund from which securities will be acquired;

4
(xii) where the securities are intended to be acquired using borrowed
funds,-
(I) justification for investment through borrowings; and
(II) detail of guarantees and assets pledged for obtaining such
funds;

(xiii) salient features of the agreement(s), if any, entered into with its
associated company or associated undertaking with regards to the
proposed investment;
(xiv) direct or indirect interest of directors, sponsors, majority
shareholders and their relatives, if any, in the associated company
or associated undertaking or the transaction under consideration;
(xv) any other important details necessary for the members to
understand the transaction; and
(xvi) In case of investment in securities of a project of an associated
company or associated undertaking that has not commenced
operations, in addition to the information referred to above, the
following further information, is required, namely,-

(I) description of the project and its history since
conceptualization;
(II) starting and expected dated of completion of work;
(III) time by which such project shall become commercially
operational; and
(IV) expected time by which the project shall start paying return
on investment;

(b) In case of loans and advances,-

established;
(ii) amount of loans or advances;

5
(iii) purpose of loans or advances and benefits likely to accrue to the
investing company and its members from such loans or advances;
(iv) in case any loan has already been granted to the said associated
company or associated undertaking, the complete details thereof;
(v) financial position, including main items of balance sheet and profit
and loss account of the associated company or associated
undertaking on the basis of its latest financial statements;
(vi) average borrowing cost of the investing company or in case of
absence of borrowing the Karachi Inter Bank Offered Rate for the
relevant period;
(vii) rate of interest, mark up, profit, fees or commission etc. to be
charged;
(viii) sources of funds from where loans or advances will be given;
(ix) where loans or advances are being granted using borrowed
funds,-
(I) justification for granting loan or advance out of borrowed
funds;
(II) detail of guarantees / assets pledged for obtaining such funds,
if any; and
(III) repayment schedules of borrowing of the investing company;

(x) particulars of collateral security to be obtained against loan to the
borrowing company or undertaking, if any;
(xi) if the loans or advances carry conversion feature i.e. it is
convertible into securities, this fact along with complete detail
including conversion formula, circumstances in which the
conversion may take place and the time when the conversion may
be exercisable;
(xii) repayment schedule and terms of loans or advances to be given to
the investee company;

6
(xiii) salient feature of all agreements entered or to be entered with its
associated company or associated undertaking with regards to
proposed investment;
(xiv) direct or indirect interest of directors, sponsors, majority
shareholders and their relatives, if any, in the associated company
or associated undertaking or the transaction under consideration;
(xv) any other important details necessary for the members to
understand the transaction; and
(xvi) in case of investment in a project of an associated company or
associated undertaking that has not commenced operations, in
addition to the information referred to above, the following further
information is required, namely,-

(I) a description of the project and its history since
conceptualization;
(II) starting date and expected date of completion;
(III) time by which such project shall become commercially
operational;
(IV) expected return on total capital employed in the project;
and
(V) funds invested or to be invested by the promoters
distinguishing between cash and non-cash amounts;

(c) In case of investment through transfer of liabilities from associated company or
associated undertaking,-

established;

7
(ii) description of liabilities to be transferred and consideration to be
received by the company for assuming liabilities of associated
company/undertaking;
(iii) book value of liabilities to be transferred;
(iv) purpose of such transfer of liabilities;
(v) period, if any, for which such transfer of liabilities is to be made;
(vi) salient features of all agreements entered into with the associated
company or associated undertaking or with the financial
institution(s) with regards to proposed transfer of liabilities;
(vii) direct or indirect interest of directors, sponsors, majority
shareholders and their relatives in the associated company or
associated undertaking or the transaction under consideration; and
(viii) any other important details necessary for the members to
understand the transaction.
(2) A listed company shall simultaneously dispatch a copy of aforesaid notice and the
statement of material facts to the head office of the Securities and Exchange Commission of
Pakistan, through fax/email and courier service.

(3) The directors of the investing company while presenting the special resolution for
making investment in its associated company or associated undertaking shall submit an
undertaking to the members of the investing company that they have carried out necessary due
diligence for the proposed investment.

(4) The duly signed recommendations of the due diligence report referred to in sub-
regulation (3) shall be made available to the members for inspection in the general meeting
called for approval of the special resolution.

4. Other information to be disclosed to the members.- (1) If the associated
company or associated undertaking in which the investment is being made or any of its sponsors

8
or directors is also a member of the investing company, the information about interest of the
associated company or associated undertaking and its sponsors and directors in the investing
company shall be disclosed in the notice of general meeting called for seeking members
approval pursuant to section 208 of the Ordinance.

(2) In case any decision to make investment under the authority of a resolution passed
pursuant to provisions of section 208 of the Ordinance is not implemented either fully or
partially till the holding of subsequent general meeting(s), the status of the decision must be
explained to the members through a statement having the following details namely ,-

a) total investment approved;
b) amount of investment made to date;
c) reasons for not having made complete investment so far where resolution required it
to be implemented in specified time; and
d) material change in financial statements of associated company or associated
undertaking since date of the resolution passed for approval of investment in such
company.

5. Audited Financial Statements.- Duly audited latest annual financial
statements of the associated company or associated undertaking along with the latest reviewed
financial statements, if any, shall be made available for inspection of the members in the general
meeting called for considering investment decisions pursuant to section 208 of the Ordinance.

9
CHAPTER III
RESTRICTIONS & CONDITIONS

6. Conditions applicable to a company making investment in securities of its
associated companies or associated undertakings.- (1) In case of investment in unlisted equity
securities of an associated company or associated undertaking, the fair value for such securities
shall be determined based on generally accepted valuation techniques and latest audited financial
statements of the associated company or associated undertaking, by,-

(i) a chartered accountant firm, which must have been given a satisfactory rating under
the Quality Control Review Program of Institute of Chartered Accountants of Pakistan; or

(ii) a Non-banking finance company licensed by the Commission to carry out the
business of investment finance services which has been assigned a minimum rating of A+ or
equivalent by a credit rating company registered with the Commission, and has been in operation
for at least five years.

(2) In case the price to be paid for unlisted equity securities of an associated company
or associated undertaking is different from the fair value as determined in terms of sub-regulation
(1) above, an explanation along with justification, reasons and basis of determination of price
shall be disclosed to the members.

(3) Where approval is granted by the members for investment in securities of an
associated company or associated undertaking up to a certain limit, such approved limit shall
stand exhausted upon the investment reaching that limit on a cumulative basis, whether such
investment is made as a whole or on a piecemeal basis and such approval shall not be valid for
any recurring investment even after divestment of the securities acquired by it in pursuance of
the aforesaid approval.

(4) Share deposit money shall be transferred for equity investment only after
announcement of the offer for issue of shares by the associated company or associated
undertaking and in case shares are not issued within ninety days of transfer of share deposit
money such share deposit money shall be treated as loan and interest/mark up thereon shall be
charged from the date of transfer of funds in accordance with the provisions of section 208 of the
Ordinance.

10

7. Conditions & restrictions applicable to companies making investment by way
of loans and advances in its associated companies or associated undertakings.- A company
intending to make investment in its associated company or associated undertaking shall comply
with the following conditions and restrictions, namely-

(a) If the investing company has no borrowings, the rate of return on loans / advances
shall not be less than Karachi Inter Bank Offered Rate for the relevant period:

Provided that where a company uses Shariah compliant mode of financing, the
transactions shall be structured in such a way that the rate of return on such facilities is not less
than that earned by Islamic Financial Institutions in Pakistan on similar facilities during the
corresponding time period;

(b) In case of unfunded facilities (for example a guarantee, letter of indemnity, etc.)
the rate of return shall be determined based on the rate of interest, mark up, profit, fees or
commission etc., as the case may be, charged by commercial banks or Islamic Financial
Institutions on similar unfunded facilities;

(c) Interest, mark up, profit, fees or commission etc., as the case may be, shall be
recovered periodically by the investing company in line with the standard terms normally applied
by the commercial banks or the Islamic Financial Institutions on similar facilities extended to the
borrowers;

(d) The company shall not invest in its associated company or associated undertaking
by way of loans or advances except in accordance with an agreement in writing and such
agreement shall inter-alia include the terms and conditions specifying the nature, purpose, period
of the loan, rate of interest, mark up, profit, fees or commission, repayment schedule for
principal and interest, mark up, profit, fees or commission, penalty clauses in case of default or
late repayments and security for the loan in accordance with the approval of the members in the
general meeting; and

11
(e) The company shall not extend to its associated company or associated
undertaking any loan or advance as running finance, revolving line of credit or any other similar
facility for a period beyond one year provided that members may approve renewal of such loan
or advance.

8. Other conditions and restriction.- (1) Unless otherwise specifically
authorised by the members in the general meeting the special resolution authorising investment
in associated companies or associated undertakings shall be valid for a period of twelve months
and shall stand lapsed after such period; and

(2) A company shall not make any further investment in its associated company or
associated undertaking in which previous investment has been written off by the investing
company, or which is already indebted to the company and such associated company or
associated undertaking has failed to repay the loan or advance including interest, mark up, profit,
fees or commission etc. thereon as per schedule or has failed to comply with any of the terms and
conditions of the agreement in this regard, unless such loan has been rescheduled under approval
of special resolution of the members of the investing company.

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CHAPTER IV
MAINTENANCE OF RECORD

9. Register of Investments in associated companies or associated undertaking.-
(1) In addition to any records maintained by an investing company under the provisions of any
law, rules or regulations, such company shall also maintain at all times at its registered office, a
register showing separately investment in each associated company or associated undertaking
including but not limited to investment in securities, loans and advances, guarantee or security
given, investment through transfer of liabilities etc., containing at least the following
information,-

(a) the name of the associated company or associated undertaking;
(b) amount, terms and purpose of the investment, loan, security or guarantee;
(c) date on which the investment has been made;
(d) the date on which the guarantee has been given or security has been provided in
connection with a loan; and
(e) particulars relating to repayment of principal, mark up, other monetary receipts,
disposal of investment, redemptions etc.

(2) The particulars of all the investments referred to in sub-regulation (1) shall be
entered chronologically in the register immediately after making of such investment or
effectuating any subsequent transactions relating to such investments, as the case may be.

(3) The provisions applicable to inspection of register under the Ordinance shall
apply to the inspection of the register maintained under sub-regulation (1).

10. Repeal.- The notification S.R.O 865(I)/2000, is hereby repealed.

PART II
Statutory Notification (S. R. O)

NOTIFICATION

Islamabad, the------June, 2013

S.R.O 14(I)/2013: In exercise of the powers conferred by section 40 of the Securities and
Exchange Commission of Pakistan Act, 1997 (XLII of 1997) read with clause (u) of sub-
Section (4) of Section 20 thereof are hereby published for the information of all the person
likely to be effected thereby and notice is hereby given that the draft will be taken into
consideration after thirty days of its publication in the Official Gazette.
Any objections or suggestion which may be received from any person in respect of the said draft,
before the expiry of the aforesaid period shall be taken into consideration by the Securities and

CHAPTER 1
PRELIMINARY

1. Short Title and Commencement.
(1) These regulations may be called the Third Party Administrators for Health Insurance
Regulations, 2013.
(2) These regulations shall come into force at once.

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

(a) Act means Securities and Exchange Commission of Pakistan Act, 1997 (XLII of
1997);

(b) Agreement means an agreement entered into between a TPA and an insurer as
prescribed in Annexure II specifying the conditions of health services rendered to
and /or received by each of the parties thereto;
(c) Annexure means annexure appended to these regulations;
(d) Commission means the Securities & Exchange Commission of Pakistan
constituted under Section 3 of the SECP, Act 1997.
(e) "Health Related Service", means all the services to be performed by a TPA under
an agreement with an insurer in relation with health insurance business but does not
include the business of underwriting health insurance either directly or through
acceptance of inward cession of health insurance.
(f) "Health Service Provider" means a hospital duly authorized by relevant health
authorities to render health services.
(g) "TPA means Third Party Administrator who is registered with the Commission
under these Regulations, who is engaged for a fee or remuneration in accordance
with agreement with an insurer for carrying out functions as defined in regulation 8
of this regulation.
(h) TPA Business means business of administration of health related services for the
insurer, insured in accordance with an agreement between the Insurer and TPA in
compliance with these Regulations.
(i) "Insurer" means an insurance company registered under the Ordinance to carry on
insurance business; and
(j) "Ordinance" means the Insurance Ordinance, 2000;
(k) Self-Funded Pool includes a legal entity such as a company, body corporate,
corporation, government entity, professional association, partnership, recognized
provident fund , gratuity fund, superannuation fund who decided to manage a health
insurance scheme or policy for its employees or members on self-insurance basis and
hires a TPA for the administration of health /medical insurance.

(2) All words and expressions used but not defined in these regulations shall have the same
meaning as assigned to it in the Ordinance and the Act .

(3) In these Regulations, the word "Takaful may be used interchangeably with the word
`insurance', 'Family Takaful' with Life Insurance, 'General Takaful with General
Insurance, 'contribution' with "premium', insurer with insurance company, insured
with policyholder and 'Company' & "Insurer'' with 'Takaful Operator. Similarly other
terms used in the Takaful Rules, 2005 associated with the Takaful business may be used
interchangeably with their conventional counterpart words/terms.

CHAPTER II
REGISTRATION
3. Registration of TPA.- (1) No person shall carry on a business as a TPA or hold himself
out as carrying on such a business unless registered with the Commission as a TPA under
these regulations.

(2) All existing TPAs by whatever name called shall be bound to get themselves registered
and these regulations within three months of publication in official gazette.

4. Eligibility criteria for registration.- Any private or public limited company registered
under the Companies Ordinance, 1984 (XLVII of 1984) may apply to the Commission for
registration as TPA after fulfilling following pre conditions if ;

(a) authorized by its Memorandum of Association to carry on the business of TPA with clear
prohibition that it shall not engage in any other business other than TPA;
(b) It has a share capital having a paid-up capital of not less than 50 million rupees
provided that the Commission may revise this minimum amount from time to time; and
(c) It has a shareholders equity of not less than rupees 30 million provided that the
Commission may revise this minimum amount from time to time.

5. Application and procedure for Registration. - (1) An application for registration as a TPA
shall be made to the Commission in Form I along with all the documents specified in
Annexure I and receipt evidencing payment of non-refundable fee of Rs. 50,000/- .
(2) The application for registration shall contain the following information:
(a) memorandum of Association and articles of association;
(b) amount of paid-up capital;
(c) names of promoters/sponsors, their addresses, contribution or number of shares
proposed to be held by each one of them, the proposed positions they occupy, their
educational qualifications, their nationalities and working experience.
(d) proposed business Plan for the initial three financial years including description of
the services and facilities proposed to be provided;
(e) copies of the draft agreement to be entered in to between the TPA and the
Insurer/self-funded pools and the medical service providers; and
(f) an undertaking that all the data and documents submitted according to the
provisions of the regulations are correct;

(3) The Commission, while considering the application for registration, may require the
applicant to furnish such further information or clarification regarding its activities and
businesses as it deems appropriate.
(4) Any subsequent change in the information provided to the Commission at the time of
filing of application under sub-regulation (1) shall be intimated to the Commission within
five working days from the date of such change.

6. Grant of registration.__ (1) The Commission , while considering the application for
granting a certificate of registration made under sub-regulation (1) of regulation 5, shall
inter-alia take into account the following matters, namely,-
(a) the ability of the applicant to efficiently handle its functions under these
regulations;
(b) that the applicant has the capacity to put in place necessary technology, systems,
internal procedures, security arrangements and infrastructure including but not
limited to adequate office space, equipments, experienced man power and technical
aspects to effectively and efficiently discharge its responsibilities as a TPA;
(c) earlier refusal, if any, with reasons to be recorded in writing by the Commission for
registration of the applicant as a TPA;
(d) conviction or involvement of its sponsors, directors or employees in the senior
management level in an offence involving, fraud or breach of trust;
(e) penal action against the applicant or its director(s) for an offence under the
Ordinance, Securities and Exchange Ordinance, 1969 (XVII of 1969), the Act and
Companies Ordinance, 1984(XLVII of 1984); and
(f) any other matter as deemed necessary by the Commission.

(2) The Commission on being satisfied that the applicant is,-
(a) eligible for registration; and
(b) it would be in the interest of insurance sector so to do;
may grant a certificate of registration to the applicant in Form II.

(3) The certificate of registration shall remain valid for a period of three year from the date of
registration unless it is suspended or cancelled earlier by the Commission.
(4) The Commission may, while granting the certificate of registration, impose such
conditions on the applicant as it may deem appropriate.
7. Renewal of registration. (1) TPA shall, three months prior to the date of expiry of its
registration, apply to the Commission in Form III for renewal of its registration along with
receipt of non-refundable renewal fee of rupees 25,000/- and submit such documents as
specified in Annexure II.
(2) The Commission upon being satisfied, after making such inquiries and obtaining further
information as it deems necessary, that TPA continues to meet the requirements for
registration and is eligible for renewal of registration shall renew the registration of TPA
and issue a certificate of renewal of registration in Form-IV.
(3) Where the application for renewal of registration is made within such time as specified in
sub-regulation (1) but has not been decided by the Commission, the registration shall
continue to be valid until the application for renewal is decided by the Commission.
(4) While granting renewal of registration to TPA the Commission may, in addition to the
criterion laid down for grant of registration, also take into account the past performance
of the TPA and impose such conditions as it deems appropriate.
8. Procedure where registration is not granted or renewed.__ (1) The Commission, after
giving a reasonable opportunity of hearing to the applicant, may refuse to grant or renew a
certificate of registration if in the opinion of the Commission such applicant does not fulfill
the requirements prescribed in these regulations or where the Commission after taking into
account the facts, is of the view that it is not in the public interest or in the interest of the
insurance sector to grant or renew such certificate of registration.
(2) The applicant, if aggrieved by the decision of the Commission under sub-regulation (1),
may, within a period of thirty days from the date of receipt of such refusal, prefer an
appeal under section 34 of the Act.

(3) A TPA whose application for renewal of certificate of registration is refused under sub-
regulation (1) shall, from the date of receipt of the decision of the Commission, shall
immediately cease its business as TPA.
(4) The Commission while refusing to grant renewal of registration to a TPA under these
regulations may take such measures and issue such directions as it deems necessary or
expedient so to do in the public interest or in the interest of the insurance sector.
(5) A TPA whose application for renewal of certificate of registration is refused by the
Commission shall continue to complete its pending assignments, if any,
(a) Such application shall be accompanied by the following:
(i) List of name of the CEO or the Director in charge, as the case may be, the key
Officer(s) therein and the authorized signatories;
(ii) List of business conducted during the year;
(iii) List of insurance companies, self-funded pools and medical service providers,
which are dealt with when submitting the renewal application and the date of
termination of each agreement
(iv) A written declaration that sates that all data and documents submitted according
to the provisions of the regulations are correct.

CHAPTER III
DUTIES AND OBLIGATIONS OF TPA
9. Duties of TPA.- (1) Every TPA shall,-
(a) at all times comply with the conditions for registration under regulation 4, any
conditions imposed by the Commission in the certificate of registration or the
certificate of renewal of registration, these Regulations and any directives issued by
the Commission;
(b) prepare computerized systems to administrate health (medical) insurance, control
medical expenses, implement, promote and develop them including accounting
systems and settlements;
(c) paying claims on behalf of the Insurer or the self-funded Pools;
(d) administrat and implement medical insurance programs accredited by the Insurer;

(e) suggest, design, present and develop health (medical) insurance programs which
shall only be promoted directly by the Insurer or the Self-Funded pools;
(f) conclude agreements with the medical services providers on behalf of the Insurer or
the self-funded pools;
(g) provide a network of general physicians/consultants/labs for medical examination
facility to life insurance companies for their prospective policyholders in relation
with their underwriting requirements;
(h) maintain a database of policyholders;
(i) Issue identity cards;
(j) handle all the policy- related issues, including claim settlements;
(k) manage medical management- case management/utilization management;
(l) Value Added Services: The following value added services may also be provided by
a TPA:
(i) arranging ambulance services, medicines and supplies;
(ii) Guiding policyholders for specialized consultation;
(iii) 24-hour helpline services;
(iv) Arranging different plans of coverage to insurers;
(v) Providing relevant data for valuation/statistics, incidence rate of different
ailment.
(3) A TPA shall not perform the following functions:
(a) Underwrite any insurance risk directly or indirectly through inward cession of
insurance risk;
(b) Impose or collect any additional sums from the insured or the beneficiary to
whom it provides services, other than what has been agreed on with the
insurance company/self-fund pool;
(c) Keep any sums left after settling claims. TPA shall reimburse the same to the
insurance company.
(d) Collect any commission or interest for any sums deposited in banks for Insurer /
self-funded pool, unless otherwise agreed;

(e) Offer / advertise to sell health insurance or other insurance products;
(f) Corporate agency / brokerage services to any insurer or any other person,
association, company, bank or body corporate;

10. Compensation to the TPA.- It will be unlawful for the insurer / self-funded pool and the
TPA to enter into such agreement in which the TPAs remuneration is linked to the loss
ratio in a particular period. However this rule does not restrict the insurer / self-funded pool
to pay a performance bonus to the TPA.

11. Agreement between TPA and Insurer / Self-funded Pool.- A copy of the agreement
entered into between the TPA and the Insurer/self-funded pool or any modification thereof,
shall be filed, within 15 days of its execution or any modification thereof, as the case may
be, with the Commission.

12. Minimum Content of the Agreement: The agreement shall determine the rights and
obligations of both parties including, as a minimum, the following:-

(a) Description of the nature of services agreed upon which shall be provided by TPA to
the Insurer/self-funded pool;
(b) A list of the rights and obligations of both the TPA and the Insurer
(c) Duration of the agreements and possible causes of termination;
(d) Duration of settling and paying claims;
(e) The agreement shall be accompanied by Standard Operating Procedures agreed
between the TPA and Insurer.
(f) Authorization from the Insurer to the TPA in order to conclude agreements with
medical services providers on behalf of the Insurer/self-funded pool;
(g) The remuneration that may be payable to the TPA by the insurer /self-funded pool.
The remuneration of TPA cannot be linked to the loss ratio of the group insured.

13. Operational Model of the TPA:- TPA shall have sophisticated computerized information
system setup that allows insurance companies, health service providers and policyholders

to reduce the turnaround time for insurance claims processing, better management of key
resources and improves the policyholders satisfaction. The TPAs are highly encouraged to
have amongst other the following service,-

(a) Call Centre Services: TPAs are encouraged to have well trained call center staff to
answer all queries from policyholders relating to policy details, enrolment status,
coverage details and general insurance related questions. Prior-Authorization calls from
health service providers should be answered by doctors / physicians. TPAs should take
measures to control the routing of calls to doctors / physicians.
(b) Online Prior-Authorization: TPAs should have online system available to accurately
assess the eligibility of policy holders for benefits including health benefits coverage,
claims history, disease history etc. Health service providers should also be able to
submit the prior-authorization requests online to TPA. Network providers should be
able to view the status of prior-authorization request online and TPA should receive
instant notification of such requests.
(c) Digitization of Paper Claims: To enhance the policyholders convenience, the use of
electronic claims instead of paper is highly encouraged enabling the Insurers quickly
retrieving the claims data thus reducing claims processing turnaround time.
(d) Online Claims Submission and Monitoring: TPA is encouraged to provide
facilitation to health service providers to submit the claims online for processing. This
should include easy to use submission of scanned claims documents as well as ability to
upload claims data in text format to TPA.
(e) Electronic Data Interchange (EDI) with Insurers: TPA is encouraged to setup
electronic data interchange with Insurers to send and receive data of health benefits,
eligibility, policy administration and claims. Establishing EDI will ensure smooth data
transfer between the parties.
(f) Online Portal for Insurers: TPA is encouraged to set up online access to insurance
companies for monitoring their policy holders information and claims data for quality
control purposes.

14. Maintenance of Records: The TPA shall maintain records and original books including
supporting evidence related to its business and the agreements it concludes with the Insurer
and the medical service providers on behalf of the Insurer, which may be organized and
kept electronically , at all times, for a period not less than five years as of the date of the
termination of the agreement.

15. Insurers Access to the Records of the TPA: The insurer shall have access to the
documents, evidence, books etc. relating to the business of TPA that pertains to the insurer
and the information contained. The TPA shall not deny insurers access on any grounds.

16. Confidentiality: Every TPA shall maintain the professional confidentiality in strict
manners between different insurers, health service provider and other parties as required
especially for the database of policyholders in its access; but this does not prevent the TPA
from parting with the relevant information to any competent Court of Law/Tribunal, the
Government or Commission in the case of any investigation carried on or proposed to be
carried out against the Insurer, TPA or any other person or for any other reason.

17. Fit and Proper Criteria-

(1) Applicability: These requirements shall be applicable to the following persons of
all the TPAs as well as the applicants for registration as TPA:

(a) Chief Executive, by whatever name called;
(b) Directors; and
(c) Key Officers, as defined in Rule 4(5);
(2) Requirement of Prior Approval: A proposed Director or Chief Executive or
Principal Officer of the TPA shall not assume the charge of the office until their
appointment has been approved by the Commission. The appointment of Key
Officers of a TPA does not require the approval of the Commission. However, a
TPA shall ensure at the time of appointing a Key Officer that such person meets all
the requirements.

(3) TPA to ensure compliance at all times: A TPA will ensure that its Directors,
CEO, and Key Officers are in compliance with the Fit & Proper Criteria at all time.
In case any of its said Officers subsequently becomes ineligible to perform his
duties due to non-compliance with this rule, the TPA will immediately inform the
Commission and seek to appoint another person in accordance with this rule.
(4) Inclusion of Doctor: At least one of the Directors or Key Officers of the TPA shall
be a qualified medical doctor registered with Pakistan Medical & Dental Council.
(5) Key Officer: For the purposes of these Regulations, the "Key Officer" includes,
the persons discharging the following functional responsibilities:

(a) Chief Operating Officer, head of operation, by whatever name called;
(b) Chief Financial Officer, head of accounts, by whatever name called;
(c) Head of law, company secretary or compliance officer;
(d) Chief investment officer, head of investment, by whatever name called;
(e) Head of internal audit;
(f) Head of research and development;
(g) Head of any other department;
(h) Any other officer, the Commission may include

(6) Assessment of Fitness and Propriety: The fitness and propriety of a person shall
be assessed by taking into account all the relevant factors including but not limited
to the following:

(a) Integrity and Track Record: A person shall not be considered a Fit and Proper
person if he:

(i) Has been convicted in criminal act, breach of trust, fraud etc;
(ii) Has been convicted of an offence involving moral turpitude;
(iii) Has been subject to adverse findings, after conducting an inquiry, by
Commission or any other regulatory or professional body or government
agency;

(iv) Has been involved in financial irregularities or malpractices in a Company due
to which the registration or license of the Company has been revoked,
suspended or cancelled or which has gone into liquidation or other similar
proceedings;
(v) Is ineligible, under the Companies Ordinance, 1984 or any other legislation
from acting as a Director; or
(vi) Has entered into a plea bargain arrangement with the National Accountability
Bureau or any other public body;

(b) Financial Soundness: In determining a person's financial soundness, the following
shall be considered;
(i) Whether the person has been defaulter in repayment of loan to a financial
institution, exceeding Rupees one million or defaulter of a stock exchange;
(ii) Whether the person has applied to be adjudicated as an insolvent and
application is pending; or
(iii) Whether the person is an un-discharged insolvent of such a person;
(iv) Competence and capability of the person; and
(v) Conflict of interest of such person with the business of TPA.

(c) Competence and Capability: In determining a persons competence and
capability the following shall be considered:
(i) The Chief Executive or Principal Officer must have a minimum educational
qualification of a bachelors degree or equivalent from an institution
recognized by the Higher Education Commission of Pakistan or foreign
qualification of equivalent level recognized by the Higher Education
Commission of Pakistan, with at least 5 years experience of Insurance
Industry / TPA business;
(ii) The Directors should be individuals having management or business
experience of at least 5 years at senior level;

(iii) The Key Officers must be qualified experienced professionals possessing
relevant qualification/certification and relevant experience relating to the job
or assignment.

(d) Conflict of Interest: The Chief Executive, Principal Officer or Director or Key
Officers of TPA shall not:
(i) Be a Director in any health service provider;
(ii) Have any direct or indirect ownership or management interest or employment
in any insurance surveyor or loss adjuster or any other insurance broker; and
(iii) In case of Key Officers, the TPA must ensure that the cross functional
activities of such personnel should not give rise to conflict of interest;

18. Handover of data in case of cancelation of Registration: If the registration granted to the
TPA is either revoked or cancelled under these Regulations, the TPA shall hand over the
data and all the books, records or documents etc. relating to the business carried on by it,
with regard to an Insurer, to the respective Insurer, complete in all respects.

19. Commissions Access to the Records of the TPA: The Commission may assign to its own
employee(s) from within its organization or appoint an external party to inspect at
appropriate times the books, records and documents of the TPA who shall have all such
information available to the inspecting authorities and cooperate with them or the external
party so that they can fully perform their duties. The expenses of external parties shall be
borne by the TPA as decided by Commission, unless Commission deems otherwise

20. Code of Conduct for TPA:- The TPA shall follow the following code of conduct:

(i) To conduct its dealings with high proficiency, good faith, equity and efficiency;
(ii) To comply with the provisions of the agreements concluded with the Insurer and the
medical service providers;

(iii) To mandate its employees and representatives to present the TPA, the Insurer and
the medical service providers when dealing with others, as well as presenting the
services it is permitted to provide;
(iv) To notify the Insurer with the names of the medical services providers with whom
the agreements were concluded on its behalf;
(v) To keep all the necessary documents concerning the administration of insurance
claims arising from the insurance policy;
(vi) Not to act in any way that might have a direct or indirect influence on the decision
of the insured to deal with a certain Insurer /health service provider rather than the
other one or to stop dealing with another;
(vii) Not to trade with personal information concerning any of its clients;
(viii) To notify the Insurer in case of contracting or refraining from contracting with any
of the medical service providers, or in case of making any amendment to the
agreement concluded with any of them;
(ix) To treat all the data and information as completely confidential to itself and take
appropriate measures to maintain the security of confidential documents in its
possession;
(x) Not to advertise its services and duties on behalf of the Insurer without obtaining its
prior written approval, provided that information stipulated therein are correct,
accurate, in simple language, clear and reflects the nature of the business it
conducts;
(xi) To provide an efficient system for receiving complaints and remarks submitted by
the insured, beneficiaries, medical service providers and the Insurer;
(xii) To settle claims with accuracy, objectivity and neutrality, and treat the contracting
insurance companies and the medial service providers without discrimination;
(xiii) To maintain the services provided for the insured or the beneficiary during the
validation of the insurance policy according to the agreement concluded with the
Insurer;
(xiv) To provide assistance to the insured or the beneficiary according to the agreement
concluded with the Insurer;
(xv) To disclose its registration to the insured/policyholder/prospect upon request;

(xvi) To disclose to insured/policyholder/prospect details of the services it is authorized
to render in respect of health insurance products under an agreement with an
Insurer;
(xvii) To follow the guidelines/directions that may be issued by the Commission from
time to time;
(xviii) To document its registration number on all its papers, letters and documents
concerning its business with insurance companies/self-funded pools and medical
service providers;
(xix) To keep accounting books concerning each Insurer in order to document the sum
collected for the purpose of paying claims.

21. Internal Controls: Every TPA shall ensure that it has proper system of internal control and
audit being practiced in business and that his internal controls and systems are adequate for
the size, nature and complexity of his business.

22. Accounting and Reporting:-
(1) Every TPA shall at the expiration of each year i.e. at the preceding 31st December,
prepare and deliver to Commission with reference to that year annual statutory
accounts comprising the following statements duly audited by an approved auditor:

(a) Financial Returns: The following returns will be filed under this category:
(i) Balance Sheet;
(ii) Revenue Account;
(iii) A statement of cash flow;
(iv) A statement of claims;
(v) A statement of the admin fees charged on insurance and self-funded
business administered;
(vi) Such other statements as may be prescribed by the Commission.

(b) Operational Returns: The following returns will be filed under this category:
(i) A statement related to claims lag;
(ii) A statement of utilization management performance;
(iii) Complaint Handling Reporting;
(iv) Such other statements as may prescribed by the Commission

23. Audit:-

(1) Every TPA shall appoint an auditor who shall be approved by Commission as
qualified to perform audits of TPA;

(2) The auditor shall express an opinion as to whether:
(i) The statements accurately reflected the books and records of the company;
(ii) The company has maintained proper books and records;
(iii) The statements present fairly the state of affairs of the company as at the balance
sheet date and the result of the company for the financial year ended on the date;
and
(iv) The statements have been prepared in accordance with the prevalent accounting
standards and regulatory requirements as applicable in Pakistan;

(3) The opinion required to be expressed by an auditor shall be expressed in writing and a
copy of the opinion shall be attached by the TPA to the statements to which it relates,
when those statements are delivered to the Commission.

(4) The auditor shall in the audit of all such accounts and statements have the powers of,
exercise the functions vested in, and discharge the duties and be subject to the
liabilities and penalties imposed on, auditors of companies by sections 255, 256, 257
and 260 of the Companies Ordinance, 1984.

CHAPTER IV
DISCIPLINARY PROCEEDINGS

24. Suspension of registration, etc. - (1) Where TPA fails to discharge its functions in
accordance with these Regulations or fails to comply with or contravenes any provisions of
these Regulations or any directive issued or order passed by the Commission or otherwise
fails to carry on its business in the interest of the Insurance sector, the Commission, after
providing opportunity of hearing to TPA, may suspend its registration.
(2) A TPA whose registration has been suspended shall not carry on a business of TPA or
hold himself out as carrying out such business during the period of suspension and
remove thecause(s) of suspension within a period of ninety days from the receipt of the
suspension order or such earlier period as provided through the order of suspension.
(3) Notwithstanding anything contained in sub-regulation (1), where the Commission is
satisfied that delay in the suspension of registration of TPA will be detrimental to the
interest of policy holders or the public in general, the Commission may immediately
suspend the registration till the time an opportunity of hearing is provided to the TPA
and final order is passed:
Provided that where the Commission suspends the registration under sub-regulation (3),
the opportunity of hearing and final order must be passed within sixty days of such
suspension.
(4) The Commission while suspending the registration of the TPA may impose such
conditions, as it deems appropriate.
25. Cancellation of Registration, (1) The Commission, after providing a reasonable
opportunity of hearing through issuance of show case, may cancel the registration of TPA if,-
(a) the Commission, on the basis of information in its possession, is of the opinion that
the financial condition of the TPA has deteriorated and that the TPA cannot function
effectively or that the TPA has committed a breach the standing rules and regulations;

(b) its registration has been suspended and the cause(s) of suspension has not been
removed within ninety days from the receipt of suspension order or such earlier period
as provided through the order of suspension; or
(c) it refuses or fails to pay the penalty, if any, imposed by the Commission; or
(d) it refuses or fails to apply for renewal of its registration with in time provided in these
regulation.
(2) The Commission while cancelling the registration of TPA may take such measures and
issue such directions as it deems appropriate not inconsistent with the Act and the
Ordinance.
(3) The registration of TPA shall stand automatically cancelled if such TPA,-
(a) voluntarily surrenders its registration to the Commission; or
(b) is declared insolvent by a court; or
(c) is wound up by an order passed by a Court;

(4) Upon cancellation of the registration, the TPA shall with immediate effect cease to
perform its functions as a TPA.

26. Dissemination of information of cancellation of Registration.
__
The Commission may, for
information of stakeholders, publish press release of its order of cancellation of registration
of a TPA in newspapers of wide circulation in Pakistan.
27. Power to Inspect:
(1) The Commission may undertake onsite inspections/investigations of a Third Party
Administrator (TPA) to ensure that the requirements of sound and prudent
management are being fulfilled by the TPA and the TPA is complying with the
requirements of the relevant Laws.
(2) On-site inspections shall be conducted with such frequency as the commission may
deem appropriate.
(3) All officers and agents of TPA, including CEO, Directors, Key Officers, lawyers,
auditors and actuaries shall supply all information, documents and assistance that may
be required by the Commission in the course of the inspection.
(4) The inspectors shall have the right to enter office(s) premises of TPA during conduct
of the inspections, and may search, seize, take possession of any record, object,

article, material whether electronic or otherwise, account books or other documents,
including any travel or other personal documents which may be used as evidence.
(5) Except where the Commission believes that the record may be destroyed by the TPA,
the Commission shall give two week written notice to the TPA before undertaking an
on-site inspection.
28. Primary Liability for act or omissions of TPA.- Notwithstanding anything contained in
these regulations hereinabove the insurer shall remain primary responsible to the policy
holder in relation to insurance health policy for any act or omissions on the party of TPA
with regards to its functions or any other actions shall be liable to indemnity the policy
holders.
Insurance Division

FORM - I
Application for Registration of Third Party Administrator
Under Regulation 5 of TPA Regulation, 2013
1. Particulars of the Applicant
i. Name of the Applicant: ___________________________________________________________
ii. Address Registered Office of the Company:__________________________________________
______________________________________________________________________________
iii. Telephone No.:__________________________________________________________________
iv. E-mail:_________________________________ Fax No.:_________________________________
2. Details of the Applicant Company
i. Date of incorporation as a company:_________________________________________________
ii. Registration No.:_________________________________________________________________
iii. Capital structure which includes Authorized Share Capital, Paid-up Capital, Distinctive No.,
number of shares issued and to whom:______________________________________________
______________________________________________________________________________
iv. Extent of shareholding by foreign promoter, if any:_____________________________________
v. Certified copies of Memorandum and Article of Association:
vi. Name and activities of the promoters :
Name
Address with telephone no. fax,
e-mail
Qualifications Experience
Present
Occupation
Remarks

3. Details of Directors: (Name and Addresses)
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

4. Details of the Chief Executive Officer

i. Name :_________________________________________________________________________
ii. Date and Place of Birth:___________________________________________________________
iii. Address:_______________________________________________________________________
iv. Passport / Identity Card No.:_______________________________________________________
v. Employment Details:_____________________________________________________________
Insurance Division

FORM - I
vi. Details of Academic Qualifications:
Name of the
Institution
Registration
Particulars
Programme
Details
Name of course
undergone
Duration of
the course
Year of
Passing
Marks
Obtained

vii. Details of Professional Qualification(s) :
Name of the
Institution
Registration
Particulars
Programme
Details
Name of course
undergone
Duration of
the course
Year of
Passing
Marks
Obtained

viii. Details of practical training undergone in the field of Health Administration:
Name of the
Institution
Registration
Particulars
Duration of
the Training
Year of undergoing
Training
Certificate issued

5. Details of Medical person to whom the TPA has access to :
i. Name of the Medical Person:______________________________________________________
ii. Address of the Medical Person:_____________________________________________________
iii. Medical Qualifications :

Name of the
Course
Name of the
Institution
Registration
Particulars
Duration of the
Course
Year of
Passing
Degree
Certificate No.

6. Schedule of proposed fees and costs to be charged by the applicant company for the various
services offered (Please furnish details).

Insurance Division

FORM - I
7. Details of fees paid to Securities & Exchange Commission of Pakistan
i. Amount: _______________________________________________________________________
ii. Voucher No.: ___________________________________________________________________
iii. Dated: ________________________________________________________________________

8. Declaration
I hereby declare that:
i. I am not a minor.
ii. I have not been found to be of unsound mind by a court of competent jurisdiction.
iii. I have not been found guilty of criminal misappropriation or criminal breach of trust or cheating
or forgery or an abetment of or attempt to commit any offence by a court of competent
jurisdiction.
iv. I have not been found guilty of or knowingly participated in or connived at any fraud dishonestly
or misrepresentation against an insured or an insurer.
v. I possess the requisite qualifications and practical training as specified by Securities & Exchange
Commission of Pakistan.
vi. I have passed such examinations as specified by Securities & Exchange Commission of Pakistan.
vii. I have not violated the code of conduct specified by Securities & Exchange Commission of
Pakistan.
viii. I warrant that I have truthfully and fully answered the questions above and provided all the
information which might reasonably be considered relevant for the purposes of my license.
ix. I declare that the information supplied in the application form is complete and correct.

(Signature of the person in-charge)
Seal of the Company
Date:

Insurance Division

FORM - II
Certificate of Registration of Third Party Administrator

1. In exercise of the powers conferred by ____________ _______of the Section 40 of the Securities
and Exchange Commission of Pakistan Act, 1997(XLII of 1997) the authority hereby grants the
registration to ________________________________to continue to act as Third Party
Administrator under that act.

2. Registration No. for the Third Party Administrator is _____________________________.

3. This registration shall be valid from _________________ to _________________.

4. This registration is subject to the Securities & Exchange Commission of Pakistan Act, 1997 (XLII
of 1997) and Securities & Exchange Commission of Pakistan (Third Party Administration)
Regulation, 2013.

Place:
Date:


Insurance Division

FORM - III
Application for Renewal of Registration of Third Party Administrator
1. Particulars of the Applicant
i. Name of the Applicant: ___________________________________________________________
ii. Address Registered Office of the Company:__________________________________________
______________________________________________________________________________
iii. Telephone No.:__________________________________________________________________
iv. E-mail:_________________________________ Fax No.:_________________________________
2. Details of renewal of the Third Party Administrator
i. TPA Registration No. _____________________________________________________________
ii. Date of Registration.______________________________________________________________
iii. Date of expiry.__________________________________________________________________
iv. Capital structure which includes Authorized Share Capital, Paid-up Capital, Distinctive No.,
number of shares issued and to whom:______________________________________________
______________________________________________________________________________
v. Extent of shareholding by foreign promoter, if any:_____________________________________
vi. Name and activities of the promoters :
Name
Address with telephone no. fax,
e-mail
Qualifications Experience
Present
Occupation
Remarks

3. Details of Directors: (Name and Addresses)
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

4. Details of the Chief Executive Officer

i. Name :_________________________________________________________________________
ii. Date and Place of Birth:___________________________________________________________
iii. Address:_______________________________________________________________________
iv. Passport / Identity Card No.:_______________________________________________________
v. Employment Details:_____________________________________________________________

Insurance Division

FORM - III
vi. Details of Academic Qualifications:
Name of the
Institution
Registration
Particulars
Programme
Details
Name of course
undergone
Duration of
the course
Year of
Passing
Marks
Obtained

vii. Details of Professional Qualification(s) :
Name of the
Institution
Registration
Particulars
Programme
Details
Name of course
undergone
Duration of
the course
Year of
Passing
Marks
Obtained

viii. Details of practical training undergone in the field of Health Administration:
Name of the
Institution
Registration
Particulars
Duration of
the Training
Year of undergoing
Training
Certificate issued

5. Details of Medical person to whom the TPA has access to :
i. Name of the Medical Person:______________________________________________________
ii. Address of the Medical Person:_____________________________________________________
iii. Medical Qualifications :

Name of the
Course
Name of the
Institution
Registration
Particulars
Duration of the
Course
Year of
Passing
Degree
Certificate No.

6. Schedule of proposed fees and costs to be charged by the applicant company for the various
services offered (Please furnish details).

Insurance Division

FORM - III
7. In case of late submission please mention the reasons of delay:
_________________________________________________________________________________
_________________________________________________________________________________
8. Details of fees paid to Securities & Exchange Commission of Pakistan
i. Amount: _______________________________________________________________________
ii. Voucher No.: ___________________________________________________________________
iii. Dated: ________________________________________________________________________

9. Declaration
I hereby declare that:
i. I am not a minor.
ii. I have not been found to be of unsound mind by a court of competent jurisdiction.
iii. I have not been found guilty of criminal misappropriation or criminal breach of trust or cheating
or forgery or an abetment of or attempt to commit any offence by a court of competent
jurisdiction.
iv. I have not been found guilty of or knowingly participated in or connived at any fraud dishonestly
or misrepresentation against an insured or an insurer.
v. I possess the requisite qualifications and practical training as specified by Securities & Exchange
Commission of Pakistan.
vi. I have passed such examinations as specified by Securities & Exchange Commission of Pakistan.
vii. I have not violated the code of conduct specified by Securities & Exchange Commission of
Pakistan.
viii. I warrant that I have truthfully and fully answered the questions above and provided all the
information which might reasonably be considered relevant for the purposes of my license.
ix. I declare that the information supplied in the application form is complete and correct.

(Signature of the person in-charge)
Seal of the Company
Date:

Insurance Division

FORM - IV
Certificate of Renewal of Registration of Third Party Administrator

1. In exercise of the powers conferred by ____________ _______of the Section 40 of the Securities
and Exchange Commission of Pakistan Act, 1997(XLII of 1997) the authority hereby grants the
certificate to ________________________________to continue to act as Third Party
Administrator under that act.

2. Certificate No. for the Third Party Administrator is _____________________________.

3. This certificate shall be valid from _________________ to _________________.

4. This certificate is subject to the Securities & Exchange Commission of Pakistan Act, 1997 (XLII of
1997) and Securities & Exchange Commission of Pakistan (Third Party Administration)
Regulation, 2013.

Place:
Date:


Page 1 of 1
PART II
Statutory Notification (S. R. O)

NOTIFICATION

Islamabad, the------July, 2013

S.R.O 14(I)/2013: In exercise of the powers conferred by section 40 of the Securities and
Exchange Commission of Pakistan Act, 1997 (XLII of 1997) read with clause (u) of sub-
Section (4) of Section 20 thereof are hereby published for the information of all the person
likely to be effected thereby and notice is hereby given that the draft will be taken into
consideration after thirty days of its publication in the Official Gazette.
Any objections or suggestion which may be received from any person in respect of the said draft,
before the expiry of the aforesaid period shall be taken into consideration by the Securities and

CHAPTER I

PRELIMINARY

1. Short Title and Commencement.
(1) These regulations may be called the CISSII Regulations, 2013.
(2) These regulations shall come into force at once.

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

(a) Act means Securities and Exchange Commission of Pakistan Act, 1997 (XLII of
1997);
(b) CISSII Participant Agreement means the written agreement between a life insurer
and the CDC for the purpose of CISSII;

Page 2 of 2
(c) "CDC" means the Central Depository Company of Pakistan Limited, established
under Central Depositories Act 1997(XIX of 1997 );
(d) "CISSII means the Centralized Information Sharing Solution for Life Insurance
Industry developed and maintained by the CDC for the Commission for effective
development of life insurance industry;
(e) Commission means the Securities & Exchange Commission of Pakistan constituted
under Section 3 of the SECP, Act 1997 (XLII of 1997);
(f) Authorized Access means the extent of authorization allowed to life insurer to the
information under any register of the CISSII;
(g) Register/component means set of inter-related information maintained by CDC on
CISSII including but not limited to Centralized Agent Register including S-Register,
Centralized Register for Postponed / Declined Life Risks, Centralized Claim Register
and Centralized Group Life Claim Experience Register;
(h) "Ordinance means the Insurance Ordinance, 2000 ( XXXIX of 2000 );
(i) "Insurer" means an insurance company registered under the Ordinance to carryon
insurance business;
(j) Postponed Life Risk means the individual life risk in respect of which a life insurer
has taken an underwriting decision to defer issuance/ reinstatement/alteration of an
individual life insurance proposal/ policy for a defined period;.
(k) Declined Life Risk means the individual life risk in respect of which a life insurer
has taken an underwriting decision to reject issuance/reinstatement/alteration of an
individual life insurance policy for an indefinite period;
(l) Group Life Insurance means a life insurance contract, excluding health insurance,
having a term not exceeding one year, offered on yearly renewable term and group
underwriting basis through a master policy document. The policyholder is a company,
body corporate, bank, registered association or any enterprise having a separate legal
entity. A natural person cannot be a policyholder under a group life insurance
contract;
(m) Non-Declinature (ND) Policies means the individual life insurance policies issued
by a life insurer to the customers who are either unwilling to go through detailed
medical examination process or are unable to fulfill due to their present health status
or after underwriting assessment by the insurer, present an uninsurable risk due to
Page 3 of 3
their health/ occupational status. Such policies are generally characterized by a
deferment of natural death benefit during early policy years;
(n) Gross Claim Liability means the amount to be paid by an insurer in accordance
with the provisions of a life insurance policy arising on the incidence of the covered
event and such amount is to be calculated as sum of any lump sum benefit plus the
present value of any regular income benefit calculated in accordance with the
applicable reinsurance arrangement of the insurer;

(2) All words and expressions used but not defined shall have the same meaning as
assigned to it in the Ordinance and the Act.

(3) In these regulations, the word Takaful may be used interchangeably with the word
`insurance', 'Family Takaful' with Life Insurance, 'General Takaful with General
Insurance, 'contribution' with premium' and 'Company' & "Insurer'' with 'Takaful
Operator. Similarly other terms used in the Takaful Rules, 2012 associated with the
Takaful business may be used interchangeably with their conventional counterpart
words/terms.

CHAPTER II
SCOPE AND OBJECTIVE OF CISSII

3. SCOPE.- (1) These regulations shall apply to the functioning of the CISSII and the issues
connected therewith and the detailed rights and obligations of the life insurers and the CDC
shall be defined by the CISSII Participant Agreement:

Provided that in case of any conflict between these regulations and the CISSII Participant
Agreement the regulations shall prevail.
(2) The primary objective of the CISSII is to enhance the policy holders protection and
sound development of the life insurance industry through promotion of a formal
information sharing mechanism among the life insurer to reduce systematic risk in life
insurance industry.

Page 4 of 4
4. COMPULSORY PARTICIPATION IN CISSII.- (1) All life insurers (including
family takaful operators) are required to share information in respect of their individual life
and group life business through any distribution channel with the CDC in accordance with
the CISSII participation Agreement:

Provided that all life insurance companies carrying out only health insurance business are
not required to participate in CISSII:

Provided further that Commission may extend the scope of these regulations to include
health and/or non-life insurance business in future.

(2) Any life insurer registered after the final publication of these regulations in official
Gazette shall participate in CISSII as per the terms of the CISSII Participation Agreement.

5. CDC to assist the Commission in CISSII.- (1) The CDC will assist the
Commission in developing and functioning of CISSII as and when required by the
Commission in accordance with section 23 of the CDC Act.

CHAPTER III
FUNCTIONING OF CISSII

6. CISSII PARTICIPATION AGREEMENT.- The CISSII Participation Agreement shall,
at the minimum, includes the following aspects,-

(a) The authorized access of a life insurer to the information contained under various
Register/components of CISSII;

(b) Each life insurers responsibility to:
(i) cooperate with the CDC and other life insurers during the development and
maintenance of the system;
(ii) update various registers in accordance with the agreed frequency;
(iii) ensure the truthfulness, completeness and accuracy of the information uploaded;
(iv) ensure the protection of user rights from unauthorized use;
(v) use the system in accordance with the objectives of CISSII;
Page 5 of 5
(vi) use the system in a manner enabling the other participants to use the system
objectively; and
(vii) pay the agreed remuneration to the CDC within agreed time.

(c) Each life insurers right to:
(i) have uninterrupted access to the system in accordance with authorized access;
(ii) use the information for its insurance business; and

(d) The responsibility of the CDC to:
(i) cooperate with life insurers during the development and maintenance of the
system;
(ii) inform the life insurer in case of a delay has been occurred in updating any
information;
(iii) develop and maintain the system in accordance with the objectives of CISSII;
(iv) ensure the confidentiality of the information from unauthorized access;
(v) not to use the information for any other purpose except for the development and
maintenance of the system;
(vi) ensure that the information accessed by any life insurer is in accordance with the
authorized access;
(vii) take utmost effort ensuring the availability of the system to users in an
uninterrupted manner; and
(viii) ensure that information uploaded is updated on real-time basis.

(e) The CDC shall have a right to receive its agreed remuneration within agreed time; and

(f) The standard operating procedures between a life insurer and the CDC.

7. Register or components of CISSII and its Objectives.- CISSII will comprises of
following types of Registers/components,

(a) Centralized Agent Register including S-Register to facilitate the insurance industry
and the Commission for effective monitoring and regulation of agents. It will facilitate
each life insurer to control the misconduct of agents through ensuring the availability of
history of agents market conduct to each insurer and the record of regulatory criteria
Page 6 of 6
relating to eligibility, qualification, and training of agents etc. are being observed;

(b) Centralized Register for Postponed / Declined Life Risks to minimize an operational
risk for the insurer that a prospective customer rejected by an insurer might be able to
purchase a life insurance policy from another insurer by willfully withholding material
medical/non-medical information;

(c) Centralized Claim Register to minimize the possibility of exploitation by an individual
from making multiple fraudulent claims within the life insurance industry;

(d) Centralized Group Life Claim Experience Register to minimize the pricing risk for a
life insurer that a prospective group life policyholder might be able to purchase a group
life insurance policy on lower than justifiable premium rates by manipulation of its own
claim experience;

(e) Any other component or Register a may be agreed by mutual consent of the life
insurance industry and the CDC with the prior approval of the Commission.

8. Minimum information requirement for various Register or components of CISSII.-All
insurers shall, at the minimum, are required to provide information for the various
components of the CISSII as described below for the purpose of meeting the objectives of
CISSII:
Provided that the life insurers and the CDC, with the prior approval of the Commission,
may mutually agree to enhance the scope and extent of information to be shared or add
another Register/component in CISSII.

(a) Centralized Agent Register including S-Register: This register shall contain the
minimum information described below in respect of all codified agents in the direct
sales force of the insurer and the sales force distributing products through
bancassurance under referral model;

(i) Information required as per Rule 11 of Insurance Rules 2002;
(ii) For banks working as corporate agents, under the referral model, details relating
to the staff whose compensation is significantly linked with sales volume; and
Page 7 of 7
(iii) The S-Register which is a sub-component of the Centralized Agent Register
shall contain codified adverse information relating to the misconduct of agents
and the details relating to the administrative decision taken by the Company and
such Register shall contain the details relating to each agent under direct sales
model of the bancassurance business at a later stage to be mutually agreed by
the insurers and the CDC;

(b) The centralized agent register shall be updated on monthly basis. The S-Component
will be updated on weekly basis. The life insurers and CDC may mutually agree to
update these registers more frequently.

(c) The S-Register shall contain the information under (iii) above with effect from such
date as the Commission deems appropriate.

(d) Centralized Register for Postponed / Declined Life Risks: This register shall contain the
minimum information described below in respects of all risks declined or postponed by a
life insurer.

(i) Name and CNIC of the individual life customer;
(ii) Proposal date;
(iii) Codified medical / non-medical information;
(iv) Source of the medical information;
(v) effective date of underwriting decision.

(e) The centralized register for postponed/ declined risk shall be updated on the next day of
the effective date of the underwriting decision. However, due to unusual operational
issues, an insurer may update this register on weekly basis. This register will also be
updated if a risk is subsequently accepted by a life insurer based on a change in
underwriting decision.

(f) The register under (6) above shall not contain information relating to non-declinature
(ND) policies. However, the life insurers and CDC may mutually agree to include such
policies in CISSII with prior approval of the Commission.

Page 8 of 8
(g) Centralized Claim Register: This Register shall contain the minimum information
described below in respect of all early claims incurred during the first 3 policy years and
having a gross claim liability exceeding Rs 1,000,000.

(i) Name and CNIC of the policyholder;
(ii) Date of incidence;
(iii) Cause of incidence;
(iv) Date of reporting;
(v) Gross claim liability;
(vi) Claim status.

(h) The centralized claim register shall be updated on weekly basis. However, the insurers
are encouraged to update this register more frequently.

(i) Centralized Group Life Claim Experience Register: This Register shall contain the
minimum information described below in respect of all group life policyholders having a
loss ratio of 80% or more in a policy year and number of covered lives of at least 1,000.

(i) Identification details of the corporate client;
(ii) Policy year;
(iii) Effective date of inception of coverage; and
(iv) Claim Loss Ratio.

Explanation:- for the purposes of clause (iv) the claim loss ratio shall be calculated as a
ratio of gross incurred claims to the gross earned premium for a minimum period of latest 11
months and such claim loss ratio shall be calculated at the end of a calendar month in respect
of policies whose renewal date falls in the immediately following month.

CHAPTER IV
OBLIGATION OF CDC AND INSURER

9. Obligations of Insurer,-

(1) All life insurers are required to update each register of CISSII in a timely manner in
accordance with the minimum information requirement prescribed in regulation 8.
Page 9 of 9
(2) If a new component/ register is added to CISSII then all life insurers shall update that
register in a timely manner in accordance with minimum information requirement that
may be prescribed by the Commission.
(3) All life insurers are required to follow the CISSII Participant Agreement in letter and
spirit.

10. Obligations of the CDC,-

(1) The CDC is required to ensure the availability of the system to users in an uninterrupted
manner enabling the life insurers to update and access the information on real-time
basis.
(2) The CDC is required to maintain the confidentiality of the information contained under
various registers of CISSII and protect it from unauthorized use.
(3) The CDC is required to follow the CISSII Participant Agreement in letter and spirit.

11. Relaxation of Regulations.- If any difficulty arises in giving effect to any of the
provisions of these regulations in a particular cases, or class of cases, or if it would be in the
interest of insurance sector so to do, the Commission may, for reason to be recorded in
writing relax such requirements subject to such conditions as it may deem fit.

12. Penalty.- whoever fails or refuses to comply with, or contravenes any provisions of these
regulations, or knowingly and willfully authorizes or permits such failure, refusal or
contravention, shall be shall be punishable with a fine not exceeding ten million rupees and
where the contravention is continuing one with a further fine which may extend to one
hundred thousand rupees for every day after the first during which such contravention
continues.

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