Management and administration

1. Management and administration Directors

2. Directors: • Directors are the persons responsible for the management of a company. A person can become a director in any of the following three manners: • Through election in a general meeting of the company, • Through nomination made by holders of special interest (PICIC), Statutory corporates, corporation directly or indirectly owned by the federal or a Provincial government or foreign equity holders of PICIC or any other corporation formed under any corporation arrangement. (Specified in section 183), and

3. (continued..) • By appointment as first director, chief executive a full time employee of the company, and a director appointed to fill the casual vacancy.

4. Minimum number of directors [sec 174]

5. Only Natural Persons To Be Directors: (section 175) • Only a natural person shall be a director and no director shall be a variable representative of a body corporate

6. First Directors And Their Term (section 176) • The subscribers of the memorandum shall determine the Number and Names of the first directors. • Until the number and names of first directors are determined, all the subscribers of the memorandum shall be deemed to be the directors • The first directors shall hold office until the election of directors in the first AGM..

7. Retirement of Directors: (Sec 177) • All the first directors shall retire on the date of the first annual general meeting. • Subsequent directors shall retire after completing a term of 3 years. • Retiring directors shall continue to perform their duties till their successors are elected.

8. Election of Directors Procedure for election of Directors: (Sec 178) • The directors of the company shall fix number of elected directors at least 35 days before the general meeting in which election of directors is to be held. • The number of directors so fixed cannot be changed except with the prior approval of a general meeting of the company • Notice for election of directors should be given to the members by the company stating: • The number of directors to be elected, and • Names of the retiring directors.

9. (cont..) • A notice should be filed by the person contesting election with the company, at least 14 days before the meeting. The notice can be withdrawn any time before the holding of election. • All notices received by the company shall be communicated to the members at least 7 days before the date of the meeting. In case of unlisted company such notice must be published at least in an English and an Urdu daily newspaper having circulation in the province in which the stock exchange where its securities are listed, is situated.

10. Election of Directors • If number of persons contesting the election exceed the fixed number of directors to be elected, the directors of a company shall be elected by the members in the following manner. • Each member will have total votes equal to the voting shares multiplied by the number of directors to be elected. • A member may give all his votes to one or more candidates. • The candidate securing highest number of votes

11. Election of Directors • The candidate securing highest number of votes will be declared and then the candidate securing next highest votes will be so declared and so on until the total number of directors to be elected have been so elected.

12. Declaration of Oath: [sec 148(1)] • Any person who is nominated or seek to contest an election to the office of director of a public company, whose shares are quoted on stock exchange or of a financial institution or a banking company shall file along with the consent required under section-148(1) a declaration on oath, duly signed by an oath commissioner, as specified below: • A declaration that no loan obtained from any bank, financial institution, cooperative society or a corporate body in his own name or in the name of his spouse or dependent children or dependent parents remains unpaid for more than one year from the due date.

13. (Cont..) • A declaration that he, his spouse, or dependent children or dependent parents have not made default in payment of taxes for over six months. • A declaration that he, his spouse, or dependent children or dependent parents have not made default in payment of government dues and utility expenses, including telephone, electricity, gas and water charges for over six months.. • A declaration specifying his educational qualification, occupation, National Identity Card number and National tax number, if any • A declaration of assets and liabilities of his own, wealth tax paid by him during last three assessment years and, where applicable, land revenues paid by him during last two financial years.

14. Fresh Election of Directors on request of Substantial acquirer (section 178A) • where a person acquires 12.5% of or more voting shares in a listed company in his own name, he may apply to the commission for requiring the company to hold fresh elections of directors in accordance with the procedure laid down in section 178 in the forthcoming annual general meeting of the company. • The commission may, if it deems appropriate in the interest of the company, its minority shareholders or the capital markets generally, direct the company to hold election of directors in the manner provided under section 178 and the company shall comply with such direction

15. (Continued..) • The person on whose request fresh election of directors is held shall not sell or otherwise dispose of the shares acquired by him for at least one year from the date of election of directors..

16. Procedure for election of directors Not having Share Capital: • A company not having share capital shall elect its directors in General Meeting in manner as provided in its articles of association. Section 178(6)

17. Circumstances in which election of directors may be declared Invalid (Sec 179) • On the application of members holding not less than twenty percent of the voting power made within thirty days from the date of election, the court may declare the election of all the directors or any of them invalid if it satisfied that there has been material irregularity in the holding of the elections and matters relating thereto.

18. Term and casual vacancy (section 180) • An elected director shall hold office for three years unless he resigns or becomes disqualified from being a director. • Casual vacancy may be filled by the directors and the person so appointed shall hold office for the remainder of the term.. • Where directors were elected unopposed, they can be removed by passing a special resolution through a simple majority. • Nominee directors cannot be removed by the company (section 183)

19. Removal of Directors (section 181) • A company, by passing resolution in a general meeting, remove a director, if number of votes cast against it is equal to or exceeds: • The minimum number of votes that were cast, for the election of a director in the last election of directors, if removal relates to an elected director.

20. (continued..) • Where directors were elected unopposed they can be removed by passing a resolution through a simple majority. • Nominee directors cannot be removed by the company. (section 183)

21. Creditors may nominate the Directors (section 182) • A company may have directors nominated by its creditors or other persons having special interest by virtue of a contractual arrangement..

22. Consent to act as Director to be filed with Registrar (section 184) • No person shall be appointed or nominated as director or chief executive of a company unless he has filed his consent in writing for such appointment or nomination to the company.. • Within fourteen days from date of appointment or nomination, the company shall file with the registrar a list of persons who have consented to act as directors or chief executives of the company • This section shall not apply to a private company, not being a private company which is subsidiary of a public company.

23. Validity of acts of directors (section 185) • Even if a defect is discovered in the appointment of a director, all his previous acts or acts of a meeting of directors attended by him shall be considered as valid, however the moment any such defect comes to notice, the director shall not exercise the right of his office till the defect has been rectified.

24. Ineligibility to become a Director (section 187) • No person shall be appointed or elected as directors of a company if he: • Is a minor, • Is of unsound mind • Has applied to be declared as insolvent • Is an undischarged insolvent, • Has been convicted for an offense involving moral turpitude, • Has been deberred from holding office under any provisions of the companies ordinance 1984, • Has betrayed lack of fiduciary behaviour, • Is not a member of a company

25. Continued… • Is a defaulter in payments of loans, taxes, and/or utility bills as against the declaration given by him, which is found to be false.. • Is engaged in the business of brokerage or is a spouse of such a person or is a sponser, director or officer of a corporate brokerage house. This clause shall apply only to listed company..

26. Vacation of office by the directors of the company (section 188) • The office of director shall be vacated if: • He absents himself without leave from three consecutive meetings or from all the meetings held within three consecutive months, whichever is longer, or • He accepts loan or guarantee from the company in contravention of the provision of the ordinance (only applicable to public company) • He holds any office of profit without sanction of the company in general meeting except the office of chief executive or legal or technical director, • He becomes ineligible as provided in section 187.