Shares Area

Introduction to Share Capital

Companies Act, 2017
1. 25. Publication of authorized as well as paid-up capital
i. If a company publicly mentions its authorized capital (maximum capital it can issue) in any advertisement,
notice, or official document, it must also mention its paid-up capital (the actual amount shareholders have
paid for shares).
ii. Both amounts must be displayed equally clearly — no hiding one in small print!
iii. If they don't follow this rule, the company and any responsible officer can be fined (small fine, called Level 1
penalty).
2. 60. Numbering of shares
i. Every share issued by a company must have a unique number to distinguish it.
ii. Exception: If the shares are held through a central depository system (like CDC in Pakistan where shares are
electronic), they don't need a distinctive number.
iii. 60A. Prohibition on issuance of bearer shares or bearer share warrants
a. No company can issue bearer shares — these are shares where whoever physically holds the paper
owns the share (like cash; no name attached).
b. Any such bearer shares or similar instruments are illegal and void now.
c. Existing bearer shares must either be registered properly (linked to someone's name) or cancelled
as per the rules.
d. Penalties for breaking this law:
1. Directors or officers involved can be fined up to 1 million rupees.
2. The company itself can be fined up to 10 million rupees.
3. 61. Nature of shares or other securities
i. Shares or other securities (like bonds) are considered movable property (like cars or jewelry — you can
transfer ownership easily).
ii. The company’s rules (its Articles) decide how they can be transferred.
4. 62. Shares certificate to be evidence
i. If a company issues a physical certificate or records shares electronically (book-entry), that certificate or
record is proof that the person owns those shares.
ii. The format and method of issuing the certificate will be specified by rules, even if the company’s own rules
say otherwise.
5. 71. Limitation of time for issue of certificates
i. When someone is allotted shares, the company must issue and send the share certificate within 30 days.
ii. If the company doesn’t follow this rule, it’s an offence and it can be fined (again, Level 1 penalty).
6. 72. Issuance of shares in book-entry form
i. From a date decided by SECP (Securities & Exchange Commission of Pakistan), new companies must issue
only electronic shares (no paper shares).
ii. Old companies will also have to replace paper shares with electronic shares within four years, though SECP
can allow up to six years total if needed.
iii. SECP can exempt certain companies if it thinks it's appropriate.
7. 73. Issue of duplicate certificates
i. If a share certificate is lost, destroyed, or damaged, the company must issue a duplicate certificate within
30 days after receiving an application.
ii. Before issuing, the company may inquire to make sure the claim is genuine and may charge fees to cover
costs.
iii. If the company cannot issue the duplicate for a valid reason, it must inform the applicant within 20 days.
 iv. Violating these rules can lead to a Level 1 penalty.
v. If the company fraudulently issues a duplicate (e.g., to someone pretending to be the real owner):
a. The company can be fined up to 100,000 rupees.
b. Any officer involved can be jailed for up to 180 days, fined up to 50,000 rupees, or both.
8. 74. Transfer of shares and other securities
i. If someone wants to transfer shares or securities, they (or the buyer) must apply to the company with a
proper transfer document.
ii. The company must process this within 15 days and:
a. Send the share certificates to the new owner’s address.
b. Update their register to show the new owner’s name.
iii. If shares are being converted to electronic form, the company must register the transfer within 10 days.
iv. If the transfer happens through a stock exchange, these rules don't apply.
v. If the transfer document is lost/damaged before submission, the buyer can still request transfer by proving
the situation and offering indemnity (a formal promise to cover any future losses).
vi. These rules also apply to companies without share capital (like clubs, etc.).
vii. Every company must keep a record of all share transfers at its office, available for members to see or get a
copy.
viii. If someone gets shares by law (like through inheritance), the company must still register the transfer.
ix. Breaking these rules can lead to a Level 2 fine.
9. 75. Board not to refuse transfer of shares
i. The board cannot refuse a share transfer unless the transfer form is faulty or invalid.
ii. If there’s a problem, the company must notify the buyer within 15 days (or 5 days if it's a transfer to a
central depository).
iii. Once the buyer fixes the issue, they can resubmit.
iv. For private companies, there can be extra restrictions based on their internal rules (articles of association).
10. 76. Restriction on transfer of shares by the members of a private company
i. A private company member wanting to sell shares must first inform the board.
ii. The board must then offer these shares to other members, in proportion to their existing ownership, within
10 days.
iii. Details of the offer (number of shares, price, deadline) must be sent properly (by post, courier, or electronic
means).
iv. If members refuse or don't respond, the seller can offer the shares to outside buyers.
v. The company may have rules (in articles or agreements) for share sales, but those agreements must have
been registered within 90 days of the law starting.
vi. The price setting method for shares will follow officially specified rules.
11. 77. Notice of refusal to transfer
i. If the company refuses to transfer shares, it must inform the buyer within 15 days, with reasons.
ii. If no notice is given after 15 days, it is considered a refusal.
iii. Not following this process can result in a Level 2 fine.
12. 78. Transfer to successor-in-interest
i. When a shareholder dies, their shares can be transferred to their heirs if they provide a succession
certificate or legal proof, and the heirs' names must be added to the company register.
13. 79. Transfer to nominee of a deceased member
i. A shareholder can nominate a close relative (spouse, parent, sibling, child) to act as a trustee if they die.
ii. This nominee will temporarily hold the shares and even act as a director (if needed) until the shares are fully
transferred to the legal heirs under Islamic law (or other religion-specific laws).
iii. The shareholder can still freely sell or transfer their shares while alive.
14. 80. Appeal against refusal for registration of transfer
 i. If a transfer is refused, the buyer or seller can appeal to the SECP (Securities & Exchange Commission of
Pakistan) within 60 days.
ii. SECP will hear both sides and can order the company to register the transfer within 15 days of the order.
iii. SECP may also order cost reimbursements or other directions.
iv. If the company doesn’t follow SECP’s order, its directors and officers can be fined a Level 3 penalty.
15. 85. Power of company to alter its share capital
i. If allowed by its internal rules (articles), a company can, by special resolution:
a. Increase its authorized capital.
b. Merge shares to create bigger shares.
c. Split shares into smaller ones.
d. Cancel shares that no one has bought yet.
ii. After merging or splitting, shareholder rights must stay proportional.
iii. New shares will have the same rights as older shares.
iv. Cancelling shares under this section is not treated as reducing capital formally.
v. The company must inform the registrar within 15 days after making these changes.
vi. Breaking these rules leads to a Level 1 fine.
16. 86. Prohibition of purchase by company or giving of loans by it for purchase of its shares
i. Public companies and private companies owned by public companies cannot give loans or help anyone buy
their own shares.
ii. Exceptions:
a. Banks’ lending in their usual business.
b. Companies helping employees buy shares through an approved scheme.
c. Giving loans to employees (not directors) to buy shares.
iii. Breaking these rules leads to a Level 1 fine.
17. 87. Subsidiary company not to hold shares in its holding company
i. A subsidiary company cannot own shares of its parent company.
ii. Any such ownership or transfer is invalid.
iii. Exceptions:
a. Acting as a trustee (but not if the parent company benefits).
b. Buying/selling shares for clients in brokerage business (but cannot use voting rights attached to
those shares).
c. Shares held by operation of law (e.g., through a legal case) are allowed.
iv. Breaking these rules results in a Level 2 fine.
18. 89. Reduction of share capital
i. A company can reduce (cut down) its share capital if its internal rules (articles) allow it and if the Court
approves.
ii. It can do this by:
a. Cancelling shares that have already been paid for but are now worthless or not backed by any real
assets.
b. Paying back extra capital to shareholders if the company has more money than it needs.
19. 90. Objection by creditors and settlement of list of objecting creditors
i. If reducing share capital means paying back money to shareholders, then creditors (people the company
owes) can object.
ii. Even if no money is being paid back, the Court can still allow creditors to object.
iii. The Court will create a list of these creditors and figure out how much they are owed.
iv. Creditors who don't come forward in time may lose the right to object.
20. 91. Power to dispense with consent of creditor on security being given for his debt
i. If a creditor doesn’t agree to the capital reduction, the Court can still allow it as long as the company sets
aside enough money to pay that creditor later.
 ii. How much money needs to be set aside depends on:
a. If the company agrees on the amount, it sets aside the full amount.
b. If there's a dispute or the amount is uncertain, the Court decides how much should be reserved, as if
the company was shutting down.
21. 92. Order confirming reduction
i. The Court will only approve the reduction if:
a. Every creditor who could object has either agreed, been paid, settled or has secured payment.
b. The Court can approve it on any terms and conditions it feels are necessary.
22. 93. Registration of order of reduction
i. Once the Court approves the reduction:
a. A certified copy of the Court order must be filed with the registrar.
b. The reduction will only become effective after registration, not before.
c. The registrar will issue a certificate, and this will serve as proof that everything was done legally.
23. 94. Liability of members in respect of reduced shares
i. After reduction:
a. Members (shareholders) are only responsible for paying any remaining unpaid amount on their
shares, nothing more.
b. However, if a creditor wasn’t listed (due to mistake or concealment) and the company cannot pay
him later:
1. Anyone who was a shareholder at the time of registration may have to contribute to pay
that debt, as if the company was closing down.
2. The Court can create a list of these people and force them to pay.
ii. This rule only affects the creditor and members involved, not the relations between members themselves.
24. 95. Penalty on concealment of name of creditor
i. If a company officer:
a. Hides the name of a creditor,
b. Lies about the debt,
c. Helps someone else do so,
ii. They can be jailed for up to 1 year, fined up to 5 million rupees, or both.
25. 96. Publication of reasons for reduction
i. The Court may require the company to publicly explain:
a. Why it reduced its share capital,
b. Any other information necessary for the public's understanding,
c. Including the causes leading to the reduction.
26. 97. Increase and reduction of share capital in case of a company limited by guarantee having a share capital
i. A company limited by guarantee (a special type of company) with share capital can also:
a. Increase or reduce its share capital, just like a regular company limited by shares,
b. If its articles allow it, and by following the same rules under this law.

Companies Regulations, 2024

1. 40. Transfer of shares by member of a private company
i. If a member of a private company (except a single-member company) wants to sell their shares, they must
first inform the company's board by giving a notice.
ii. The member (seller) must offer the shares at a specific price, or negotiate a price with the board.
iii. If no current member wants to buy the shares, or if some shares remain unsold, then the member can sell
the shares to an outsider:
a. But the price offered to outsiders cannot be lower than what was originally offered to the existing
members.
iv. This rule does not apply in three cases:
a. When shares are held by directors as required by law (called qualification shares).
 b. When shares have to be transferred because of legal reasons (like inheritance, court orders, etc.).
c. When shares are gifted to family members (family includes spouse, children, siblings, parents, and
descendants).
2. 42. Issue of certificate of shares
i. When a company issues a physical share certificate, it must follow these steps:
a. The Board of Directors must approve it through a formal decision (a resolution).
b. The person getting the certificate must submit the letter of allotment (proof that they were
allotted the shares), unless it’s a bonus share or certain other exceptions.
ii. A new certificate cannot be issued (for cases like split shares, combined shares, damaged certificates, or
full transfer pages) unless the old certificate is surrendered.
iii. Duplicate certificates (in case of loss) must be issued according to special rules under section 73 of the
Act.
iv. Each share certificate must clearly mention:
a. Certificate number,
b. Folio number (record number),
c. Company name,
d. Authorized and paid-up capital at that time,
e. Date of issue,
f. Name(s) of the shareholder(s),
g. Type of share,
h. Face value (par value),
i. Name of transferee and date of transfer (if applicable),
j. Signature of authorized company officer.
v. If a duplicate certificate is issued, it must clearly state "DUPLICATE" along with the original issue date.
vi. Normally, share certificates must be signed by two directors unless it's a single-member company,
where one director can sign.
3. 44. Issuance of shares in book-entry form
i. Once a government notification under section 72 is issued:
a. Companies must replace physical share certificates with electronic (book-entry) shares.
b. They have to apply to a Central Depository (like CDC in Pakistan) to declare their shares as
eligible for electronic transfer.
ii. Companies must comply with the Depository’s rules to complete this process.

Practice Questions (Study Text)

 Shares shall be transferred on application duly supported by succession certificate or by lawful award, as the
case may be, in favour of the successors to the extent of their interests and their names shall be entered in the
register of members.
 Shahbaz can be a nominee of Fahad only if he is father, brother or son of Fahad.
 o Nominee shall be responsible to facilitate the transfer of shares to the legal heirs of the deceased
subject to Islamic law of inheritance and in case of non-Muslim member, as per their respective laws.
o Shahbaz shall, after Fahad’s death, be deemed as ZL’s member and shall act as director (as ZL is not
listed company) of ZL till the shares are transferred to the legal heirs.

 Jameel must offer the shares to existing members (i.e. Naveed and Saeed) in proportion of their existing
shareholding as per the Companies Act 2017. It means Naveed and Saeed can buy 7,500 shares each at Rs. 470
per share.
 As Naveed and Saeed would only take up 5,000 shares each, Jameel may offer remaining (left-over) 5,000 shares
to Saleem. However, the shares shall not be offered to Saleem (being outsider) at a price lower than the offered
price of Rs. 470 per share.

 Pass Special resolution

 Apply to court for sanctioning order
 Court shall fix a date to settle a list of objecting creditors
 All creditors, who are entitled to any debt or claim on date fixed by court, must be entered in that list till that
date and their consent must be taken by the company
 Court shall dispense with the requirement of consent of creditor, where company agrees to secure payment of
his debt or claim
o Full amount or
o Amount fixed by court (where company doesn’t admit his debt or claim).
 Court may make an order confirming the reduction, If satisfied that either consent of entitled creditor obtained
or his debt / claim been discharged / determined / secured
 Court may (if Court thinks fit) require the company to publish in manner specified by Court;
o Reasons for reduction, or
o Such other information as Court may think expedient, and
o Causes which led to reduction
 Certified copy of order of court confirming reduction filed with registrar.
 o Resolution for reducing share capital only effective if registered by registrar.
o Registrar shall issue certificate of registration of order

Debentures
Companies Act, 2017
1. 30. Borrowing powers to be part of memorandum
i. Even if it is not specifically written in the company's founding documents (memorandum or articles), every
company is automatically allowed to:
a. Take loans, advances, or credit (as defined under banking laws),
b. Issue securities (like bonds) that do not charge interest (for example, Islamic finance instruments),
c. Borrow money from banks, financial institutions, or even from the general public.
ii. This permission is built-in, whether or not it is mentioned.
2. 63. Issue of debentures
i. A company can issue debentures (a type of long-term loan instrument) in different types, giving different:
a. Rights (like repayment terms),
b. Privileges (like priority during bankruptcy),
c. Conditions (like interest rates).
ii. The details like:
a. How debentures are protected,
b. What the debenture trust deed will look like,
iii. How debenture holders can inspect or get a copy of the trust deed, — will all be specified through rules.
3. 65. Powers and liabilities of trustee
i. When a company issues secured debentures, a trustee is appointed to protect the rights of debenture
holders.
ii. The trustee can sue the company to recover money in cases like:
a. If the company fails to repay the loan or interest on the due date.
b. If the security (property/assets pledged) is destroyed or becomes insufficient, and the company
does not provide replacement security.
c. If the company does something wrong and the trustee loses the security.
d. If the trustee is supposed to take possession of the security, but the company does not hand it
over.
iii. If a case is filed under (a) or (b), the court may pause the case until the trustee tries all other ways to
recover from the property first—unless the trustee gives up the security.
iv. If allowed under the trust deed, the trustee can sell the mortgaged property directly, without going to
court, if the company defaults.
v. The law protects debenture holders by saying:
a. Trustees cannot escape responsibility for negligence (carelessness).
b. However, if debenture holders (by a strong majority) agree, they can forgive a trustee for past
mistakes.
c. Some old agreements that existed before this law are protected and will continue according to their
terms.
4. 66. Issue of securities and redeemable capital not based on interest
i. A company can raise money by issuing redeemable capital instruments (special investment certificates)
without involving interest. These can be given to:
a. Banks,
b. Financial institutions,
c. Other persons notified by the government.
ii. The redeemable capital may be based on:
a. A fixed plan on how and when the company will pay the money back.
 b. Profit and loss sharing instead of fixed interest (like Islamic finance models).
c. A special "participation reserve" where investors' returns are adjusted based on actual business
results.
d. If the company suffers losses, investors may have the right to convert their investment into shares
of the company at a set price.
iii. Once issued properly, the company or its shareholders cannot challenge the terms of these instruments
unless they violate the law or the company's main documents.
iv. Usual laws about creating or changing share capital do not apply to these types of redeemable capital.
5. 100. Requirement to register a mortgage or charge
i. If a company borrows money and gives its property as security (like a house mortgage), it must inform the
registrar and submit necessary documents within 30 days.
ii. If the property is outside Pakistan, the 30-day period starts when the documents could have reached
Pakistan by post.
iii. If the property is outside but charge is made in Pakistan, the company can still register it even if more steps
are needed in the foreign country.
iv. Late registration won't affect people who gained rights over the property before the charge was actually
registered.
v. Types of charges that must be registered include mortgages over property, charges for securing debentures,
floating charges over company assets, charges on goodwill, intellectual property, ships, aircraft, equipment
through leases or hire-purchase, etc.
vi. Registrar will issue a certificate of registration after proper filing.
vii. If a company buys property with a mortgage already on it, it must still register it.
viii. If a mortgage/charge isn't registered, it won’t be recognized when the company goes into liquidation.
ix. Anyone buying company assets after registration is assumed to know about the mortgage or charge.
6. 101. Particulars in case of series of debentures entitling holders pari passu
i. If a company issues a series of debentures (like bonds) that all have equal rights to security, it can file just
basic details with the registrar within 30 days.
ii. These details include: total amount secured, authorizing resolutions, description of the property charged,
and names of trustees (if any).
iii. If the debentures are issued in parts, only date and amount of each part need filing later.
iv. Missing to file part-issuances won't make already issued debentures invalid.
7. 102. Register of charges to be kept by registrar
i. The registrar must maintain a register for every company showing all registered charges in a specified
format.
ii. This register can be inspected by anyone after paying a fee.
8. 103. Index to register of mortgages and charges
i. The registrar must also keep an index, in date order, of all charges registered.
9. 104. Endorsement of certificate of registration on debenture or certificate of debenture stock
i. Every debenture or stock certificate secured by a mortgage must have an endorsement (a note) mentioning
the charge registration.
ii. For electronic ("book-entry") certificates, a proper disclosure will be made instead.
iii. No need to update old debentures that were issued before the mortgage was created.
10. 105. Duty of company and right of interested party as regards registration
i. It’s mainly the company's duty to register a mortgage or charge.
ii. However, if the company fails, any interested person (like a lender) can do it and recover the registration
fee from the company.
11. 106. Modification in the particulars of mortgage or charge
i. If terms of the mortgage/charge change (like increased loan amount), the company must inform the
registrar with supporting documents.
12. 107. Copy of instrument creating mortgage or charge to be kept at registered office
i. The company must keep a copy of every mortgage/charge document at its registered office for record-
keeping.
13. 108. Rectification of register of mortgages
i. If the company makes a mistake or misses a deadline to file a charge, the SECP (Commission) can allow it to
correct the mistake, provided it doesn’t harm creditors or shareholders.
14. 109. Company to report satisfaction of charge
i. When a loan is repaid, the company must inform the registrar within 30 days.
ii. Registrar will confirm this with the lender; if no objections are raised, it will mark the charge as satisfied.
iii. If delayed, the company must pay a penalty and late fees.
15. 110. Power of registrar to make entries of satisfaction and release in absence of intimation from company
i. Even if the company fails to inform, the registrar can update the records if he gets proof that the loan has
been repaid or the asset is released from charge.
16. 111. Punishment for contravention
i. If the company violates any rule about registration of charges, it has to pay a penalty (Level 1 penalty, i.e.,
usually a modest fine).
17. 112. Company’s register of mortgages and charges
i. Each company must maintain its own register of charges at its registered office.
ii. Company members and creditors can inspect it for free; others can pay a fee to inspect.
iii. Refusing inspection or making wrong entries can result in penalties.
18. 113. Registration of appointment of receiver or manager
i. If someone (like a bank) appoints a receiver/manager to take control of the company’s property, they must
inform the registrar within 7 days.
ii. When the receiver/manager steps down, they must again inform the registrar.
19. 114. Filing of accounts of receiver or manager
i. A receiver who takes possession of company assets must file an account of receipts and payments every 6
months and again when they stop acting.
ii. Every invoice or letter issued must clearly state that a receiver has been appointed.
iii. Failure to comply attracts a penalty.
20. 115. Disqualification for appointment as receiver or manager
i. The following people cannot be appointed as a receiver/manager:
a. Minors (underage persons)
b. Mentally unstable persons
c. Companies (only individuals allowed)
d. Company’s own directors
e. Undischarged bankrupts unless court permits
f. People barred by court from managing companies.
21. 116. Application to Court
i. If a receiver or manager (someone handling a company's assets on behalf of others) is appointed through
any private agreement, they can ask the Court for guidance on how to handle specific situations.
ii. The Court can give instructions, declare the rights of people involved, or make any order it thinks is fair.
iii. The receiver or manager will be personally responsible for any contracts they make while doing their job
(just like if the Court had appointed them), unless the contract says otherwise.
iv. They are allowed to get paid back for any personal responsibility they take on using the company's assets.
v. However, if they act outside their authority, they can still be personally liable, and they might not get
reimbursed.
22. 117. Power of Court to fix remuneration of receiver or manager
i. The Court can be asked to set the amount of salary (remuneration) to be paid to a receiver or manager
appointed privately through a document.
 ii. The amount cannot exceed a certain limit specified by rules.
iii. Even if the receiver or manager is no longer working or has passed away, the Court can still fix their pay for
earlier periods.
iv. If the receiver or manager took more money than what the Court later fixes, the Court can order them (or
their representatives) to return the extra amount.
v. However, the Court will only do this for past payments if there are special reasons.
vi. The Court can change its earlier orders about the receiver's duties or instructions, but cannot increase the
pay once it’s been fixed.

Companies Regulations, 2024

1. 43. Procedure for registration or cancellation of securities of bearer nature
i. If a company has issued bearer securities (i.e., ownership documents that don't have a name on them), it
must:
a. Publish a notice (in English and Urdu newspapers) within three months asking the holders to submit
(surrender) their securities so their names can be recorded.
b. Holders must surrender their bearer securities within three months of that notice.
c. Once surrendered, the company will register the holder's name after checking things properly.
ii. If someone does not surrender the bearer security:
a. The company must go to Court within three months after the deadline and ask the Court to cancel
the security.
b. It must also inform the public by publishing another notice in newspapers.
iii. After registration or cancellation, the company must mention the details in their next annual return (yearly
filing).
iv. Companies that had issued bearer securities earlier must keep a special register listing:
a. Who held them,
b. When they were issued,
c. When they were surrendered or cancelled.
2. 45. Verification of copies for purposes of sections 100, 101 and 106
i. When a company files copies of documents (like mortgages, pledges, or charges) with the Registrar:
a. If the property is in Pakistan:
1. The copy must either be verified by an authorized officer's affidavit (sworn statement) or
certified by a public official who has the original.
b. If the property is outside Pakistan:
1. The copy must be verified by an authorized officer of the company or someone with an
interest in the property, saying it’s a true copy.
3. 46. Maximum limit of remuneration for the purpose of section 117
i. The maximum salary payable to a receiver or manager under section 117 will be the amount fixed by the
Court at the time of their appointment.

Practice Questions (Study Text)

Section 109 and 100 of Companies Act, 2017.

 The following procedures will be followed for release of charge over KL’s Multan factory:
 o KL shall give intimation to the registrar, of payment or satisfaction of loan in full in the manner specified
within a period of thirty days from the date of such payment or satisfaction.
o the registrar shall, on receipt of intimation, cause a notice to be sent to the local bank calling upon it to
show cause as to why payment or satisfaction in full shall not be recorded within such time not
exceeding 14 days. If no cause is shown, the registrar shall accept the memorandum of satisfaction and
make an entry in the register of charges kept by him. However, if KL wants to expedite the matter it shall
submit a no objection certificate on behalf of the local bank, then no such notice shall be sent to the
local bank.
 KL should follow the following requirement for registration of charge over its Multan and Sharjah factories:
 For both factories:
o KL shall file the specified particulars of the mortgage or charge, together with the copy of the
instrument, if any, verified in the specified manner, by which the mortgage or charge is created or
evidenced, with the registrar for registration within a period of thirty days beginning with the day after
the date of its creation;
 Additional procedure for Sharjah factory:
o Since the charge is created in Pakistan but comprises property outside Pakistan, a copy of the
instrument creating or purporting to create the mortgage or charge verified in the specified manner may
be filed for registration with the registrar. However, further proceedings may be necessary to make the
mortgage or charge valid or effectual according to UAE’s law.
o The registrar shall, on registration of a mortgage or charge as above, issue a certificate of registration.

Section 109 of Companies Act, 2017.

 Saad Textile Mills Limited (STML) should have intimated, about the partial re-payment of Rs. 250 million, to the
registrar, who would enter, in the register of mortgages and charges, a memorandum of satisfaction that a part
of the fixed assets of the company has been released from the charge.
 Despite the fact that confirmation has not been received from Apex Bank Limited, Saad Textile Mills Limited
(STML) should have intimated to the registrar within 30 days of the date of the re-payment of the loan. The
Registrar shall issue a notice to Apex Bank Limited to show cause within a time limit not exceeding 14 days to be
fixed in such notice why the re-payment or satisfaction of the charge or mortgage should not be recorded. If no
cause is shown by Apex Bank Ltd, the Registrar shall order that a Memorandum of Satisfaction be entered in the
register.
 Section 100 and 108 of Companies Act, 2017.

 No mortgage or charge created by a company shall be taken into account by the liquidator or any other creditor
unless it is duly registered and a certificate of registration of such charge is given by the registrar. However, the
amount of obligation will remain payable by the company, though unsecured.
o The prescribed particulars of the mortgage or charge, together with a copy of the instrument, if any, are
filed with the registrar for registration in the required manner within 30 days after the date of its
creation, but without prejudice to any contract or obligation for repayment of the money thereby
secured.
o Based on the above, although the charge creating documents were signed by AHEL and submitted to
legal advisor of Alpha Bank Limited, however, the charge in favour of ABL is void. The bank can not avail
the security purported to be created through this hypothecation charge and is in the position of an
unsecured creditor.
o In view of the above provision of law, the amount borrowed by AHEL has become payable immediately
to ABL although ABL would stand in the position of an unsecured creditor. On the other hand, charge of
Beta Bank Limited is duly registered and hence it enjoys the position of a secured creditor.
 The Commission may on the application of ABL and on being satisfied that the omission to register a mortgage
or charge within the stipulated time as required by Companies Act, 2017 was accidental or due to inadvertence
or to some other sufficient cause, or is not of a nature to prejudice the position of creditors or that on other
grounds it is just and equitable to grant relief, and, on such terms and conditions as seem to the Commission just
and expedient, order that the time for registration be extended and the charge be registered.
o However, even if the charge is registered, Beta Bank Limited would have the first charge on the assets.

Section 65 and 101 of Companies Act, 2017

  The company would need to go with the process to issue and register the security for a series of debenture in
accordance with Section 101 of the Companies Act 2017. For this they would be needing to have an agreement
with a trustee acting on behalf of general public. The company shall cause a copy of every certificate of
registration to be endorsed on every certificate of debenture stock which is issued by company to general public
and is secured through that trustee.
 Following particulars shall be filed with registrar within 30 days after execution of deed containing charge or
execution of any debentures of the series (if there is no such deed):
o Total amount secured by whole series;
o Dates of resolutions authorizing issue of the series and date of the covering deed, if any, by which the
security is created or defined;
o A general description of the property charged; and
o Names of the trustees, if any, for the debenture-holders; together with a copy of the deed verified in the
specified manner containing the charge
 Where more than one issue is made of debentures in series, there shall be filed with registrar for entry in
register particulars of date and amount of each issue.
 Trustee nominated or appointed under trust-deed (if empowered by deed) shall have right to sue for all
redemption monies and interest in following cases:
o Company as mortgagor binds itself to repay debenture loan or pay accrued interest, or both, in the
manner provided on the due date;
o Mortgaged property is wholly or partially destroyed or security is rendered insufficient (other than
wrongful act or default of issuer) and trustee has given company a reasonable opportunity of providing
further security adequate to render whole security sufficient and company has failed to do so;
o Trustee is deprived of whole or part of security by wrongful act / default of company
o Trustee entitled to take possession of property and same not provided by company

Further Issue of Share Capital

Companies Act, 2017
1. 58. Classes and kinds of share capital
i. A company that has shares can only issue fully paid shares (shares for which full payment is made).
ii. It can issue different types and classes of shares (like ordinary shares, preference shares) if its memorandum
and articles of association allow it.
iii. Different types of shares can have different rights (like voting rights, dividend rights), but these must be set
up in the proper, legal way.
2. 59. Variation of shareholders' rights
i. If a company wants to change the rights attached to a certain class of shares (for example, reduce dividend
rights for preference shares), it must follow the procedure in Section 38.
ii. If at least 10% of the shareholders of that class feel harmed by the change, they can apply to the Court
within 30 days to cancel the decision.
iii. The Court will cancel the decision only if it finds that important information was hidden or that the change
is unfair to that group of shareholders.
iv. A group of shareholders can authorize someone among them to file the application.
v. If the Court makes an order, the company must send a copy to the registrar within 15 days. Failing to do so
is an offence and can lead to a small penalty.
vi. "Variation" here means any kind of change, including cancelling or increasing rights.
3. 70. Return as to allotments
i. Whenever a company issues new shares, it must, within 45 days, send details to the registrar, including:
a. How many shares were issued,
b. Who got them, and
c. How much money was paid for each share?
 d. If the shares are paid in cash, the company must attach an auditor's report confirming that it
actually received the money.
e. If the shares are given for something other than cash (like property or services), the company must
attach:
1. Proof of what was given in return (like a property transfer document), and
2. A valuation report showing the value of what was received.
ii. Bonus shares (free shares issued to existing shareholders) must also be reported with the copy of the
resolution that approved it.
iii. Discounted shares (shares issued below face value) need special documents, including Commission approval
if discount is above 10%.
iv. "Paid in cash" means actual cash must have been received — no tricks like cheques that bounce or setting
off debts.
v. The registrar can give more time if needed.
vi. No need to file a return for the shares first taken when the company was created.
vii. Failure to comply results in a small penalty.
viii. If a company issues shares to a bank or financial institution and fails to file the return, the bank or
institution can file it themselves and recover the filing cost from the company.
4. 81. Application of premium received on issue of shares
i. If a company sells shares for more than their face value (this extra is called "premium"), the extra money
must be kept in a special account called the share premium account.
ii. This premium money can be used to:
a. Pay startup (preliminary) expenses,
b. Pay expenses or commissions for issuing shares, or
c. Pay for redeeming (buying back) preference shares.
iii. It can also be used to issue bonus shares (free shares) to shareholders.
5. 82. Power to issue shares at a discount
i. A company can issue shares cheaper than their face value, but only if:
a. It passes a special resolution at a general meeting,
b. It mentions how many shares will be issued, at what discount rate and price,
ii. For listed companies, discount is allowed only if the market price has stayed below face value for the last 90
trading days.
iii. The Commission must approve the discount (unless the discounted price is still at least 90% of the face
value).
iv. The discount issue must happen within 60 days after approval.
v. Issuing shares at discount does not count as reducing the company’s capital.
vi. The discount details must be mentioned in all future prospectuses and balance sheets.
vii. Violations can lead to a medium-level penalty.
6. 83. Further issue of capital
i. If a company wants to issue more shares, it must first offer them to existing shareholders in proportion to
their current shareholding. (Right issue)
ii. Shareholders must be given at least 15 days and no more than 30 days to accept the offer.
iii. In listed companies, shareholders can also transfer (renounce) their right to someone else.
iv. If shareholders don’t fully subscribe, directors can allot the remaining shares however they see fit within 30
days.
v. A public company (with Commission approval) can issue shares directly to any person (even for non-cash
items like property or services) if approved by special resolution.
vi. A private company can also do the same, depending on its Articles of Association and a special resolution.
vii. The offer letter must be signed by at least two directors and sent properly (by post, courier, or electronic
means).
 viii. A circular (a document explaining company’s finances and why new shares are needed) must be sent with
the offer letter and filed with the registrar.
ix. If a government loan to a public sector company needs to be converted into shares, the government can
order it, even if the original loan terms didn’t mention this.
x. If the company's authorized capital is too small to issue such shares, it is considered automatically
increased without amending documents first.
xi. Any default (like not filing notices) can be corrected by the government or bank, and costs can be recovered
from the company.
xii. Violation leads to a small-to-medium level penalty.
7. 83A. Employees' Stock Options
i. A company can offer shares to its employees as a benefit or incentive through an employees' stock option
scheme.
ii. This can be done either:
a. By passing a special resolution (approved by shareholders); OR
b. By following any regulations made by the SECP (Securities and Exchange Commission of Pakistan).
iii. Listed companies must also follow SECP’s specific regulations for employee stock options.
iv. Key points about such schemes:
a. Shares can be offered to employees directly or through a trust created by the company.
b. The rules and conditions (such as who is eligible, how many shares, when they can be bought, at
what price, etc.) must be clearly set out.
c. It must be ensured that the option scheme is fair and transparent.
d. Once the employees get the right to buy shares under the scheme (called “vesting”), the company
must allot the shares properly and make necessary filings with the registrar.
v. The SECP has the power to:
a. Make regulations controlling how companies issue stock options.
b. Ask for disclosures or extra reporting about these schemes if needed.
vi. If the company does not follow these rules or regulations:
a. It can face penalties.

Companies Regulations, 2024

1. 39. Return of Allotments of Shares

i. Filing Requirement:
a. If a company has issued shares, it must submit a return of allotment (a report) to the registrar (the
official authority) within 45 days after the shares are allotted.
b. This report should be in Form-3.
ii. Allotment against Non-Cash Consideration:
a. If the shares are not sold for cash (e.g., in exchange for property, services, etc.), the company must
also submit certain documents along with the return:
1. Affidavit: An authorized officer must verify that the documents are true copies.
2. Certification: A public officer (if applicable) who holds the original documents must certify
them.
iii. Shares Allotted to Foreign Nationals or Foreign Companies:
a. If shares are given to a foreign person or foreign company, the company must submit extra
documents and information as per Regulation 19.
iv. Non-compliance by Company:
a. If the company fails to file the return of allotment for shares issued to a bank or financial institution,
then the bank or financial institution can file the return themselves.
b. They must also submit supporting documents; such as contracts or court orders showing that the
company was obligated to issue the shares.
v. Issuing Further Shares:
 a. A company can issue more shares, either for cash or something other than cash, by passing a special
resolution (a type of company approval). This is subject to certain conditions.
b. Public companies must get approval from the Commission before issuing shares for non-cash
consideration.
vi. Letter of Offer:
a. When offering new shares, the company must send a circular (a formal notice) to all shareholders.
b. The circular must give at least 15 to 30 days for shareholders to accept or decline the offer. If not
accepted, the offer is considered declined.
c. The company must file a copy of this circular with the registrar when it is sent out.

Private Placement of Securities Rules, 2017

1. 4. Conditions for Issue of Further Share Capital through Private Placement
i. Approval: A company must get approval under section 86 before issuing more shares.
ii. Limited Offer:
a. Shares can only be offered to fifty or fewer people.
b. There’s an exception for offers to qualified institutional buyers or employees under a stock option
scheme.
iii. No Public Advertising: The company cannot advertise the offer to the public. It cannot use media or agents
to promote it.
iv. Limited Placements: A company can make no more than two private placements in a year.
v. Information Memorandum: The company must give an information memorandum (a detailed document
about the offer) to potential buyers, containing the required details.
vi. Payment Method: Payments for shares must be made by cheque, demand draft, or other non-cash
methods. Cash payments are not allowed.
2. 5. Conditions for Issue of Debt Securities through Private Placement
i. Compliant with Debt Rules: The company must follow the rules about issuing debt securities (like bonds)
under section 120 of the Ordinance.
ii. Eligible Buyers: Debt securities can only be issued to certain eligible buyers as specified in the rules.
iii. Convertible Securities: If the debt security can be converted into shares, the company must meet the
conditions under section 86 of the Ordinance.
iv. Transfer Restrictions: Debt securities can only be traded among specific people, as listed in the rules.
v. Security and Trust: The company must arrange security (like collateral) if required, and there must be a trust
deed containing necessary information.
vi. Sukuks and Asset-Backed Securities: If the debt securities are Sukuks (Islamic bonds) or asset-backed
(secured by specific assets), the company must comply with additional rules specific to these types of
securities.
3. 6. Reporting
i. Debt Securities:
a. The company must report the debt securities issue to the Commission within 30 days after the
subscription period ends. A filing fee will be required.
b. It must also report the redemption status (whether the debt securities are paid back) as per the
Commission’s requirements.
ii. Shares: The company must report the allotment of shares in the manner required under section 73 of the
Ordinance. This also requires a filing fee.

Companies (Further Issue of Shares) Regulation, 2020

1. Short title & Commencement
2. Definitions
3. Conditions for Right Issue
 i. The board of directors must approve the decision to increase share capital, and this decision must be shared
with the securities commission and stock exchange on the same day.
ii. If there are any fractional shares (less than one share), they will not be offered to shareholders but will be
grouped together, and the proceeds will be given to those shareholders who accepted the offer.
iii. The board's decision must clearly outline:
a. The percentage of the increase in share capital.
b. The total number of shares being offered.
c. The price at which the shares are being offered.
d. The purpose for offering these shares.
e. How the money raised will be used?
f. The benefits of the share offer to both the company and its shareholders.
g. Any risks involved in the offer.
h. Whether the shares are offered at a premium or discount (and reasons for this).
i. The minimum amount of shares to be subscribed.
j. Whether an ASBA (Application Supported by Blocked Amount) facility will be provided (optional).
iv. If bonus shares are announced alongside the right issue, the board must clarify whether bonus shares
qualify for the right to purchase these shares.
v. A formal offer letter must be sent to all shareholders, along with the board's resolution for the right issue.
vi. The company may offer shares at face value or at a premium, with a written commitment from major
shareholders and directors that they will subscribe to their shares.
vii. The offer letter must be sent within the specified timeline.
viii. A company can’t offer rights if it is in default with the stock exchange unless the rights are for paying off
those debts.
ix. Companies under investigation or non-cooperative with the Commission cannot issue rights.
x. If some shares are not subscribed to, the directors can allocate them to other parties within 30 days.
xi. Right shares must be paid for in cash.
xii. Right shares cannot be paid for with any previous funds injected into the company by the subscriber (like
loans).
xiii. If the shares are not allotted in the given time frame, they will be canceled.
xiv. A company can issue shares at a discount to face value, but it must be fully underwritten and disclosed
properly.
xv. The company must use the raised funds only for the purpose stated when the rights were offered. If this
changes, shareholders must be informed, and a special resolution must be passed.
xvi. If the company changes the use of funds, shareholders who disagree must be given an exit opportunity (i.e.,
they can sell their shares back).
[Link] exit offer mechanism will include:
a. A special meeting notice explaining the change.
b. An opportunity for dissenting shareholders to sell their shares at the average market price.
4. Conditions for Bonus Issue
i. The board must approve the issue of bonus shares.
ii. The board's decision must be communicated to the Commission and stock exchange on the same day.
iii. Once the decision to issue bonus shares is announced, it cannot be changed, canceled, or postponed.
5. Conditions for Issue of Shares Other Than Right Offer
i. The board must propose the issue of shares.
ii. The proposal must include:
a. The need for approval from shareholders and the Commission.
b. The number and percentage of shares being issued.
c. The price of the shares and justification for it.
d. Whether the shares will be paid for in cash or another asset.
 e. The name and profile of anyone receiving the shares, including their existing holdings.
f. The purpose of the issue and its benefits.
g. The value of each share.
h. Consent from those receiving the shares.
i. Whether the new shares will have the same rights as existing ones.
j. The average market price of shares in the past three months.
iii. If shares are offered for something other than cash (e.g., services or assets), an independent valuation must
be provided.
iv. The company must advertise the offer of non-cash assets and accept claims from interested parties.
v. The company must report details of any claims received to the Commission.
vi. Non-cash assets must be transferred to the company’s name within 60 days after Commission approval.
vii. Shares must be issued in book entry form within the time limit set by the Commission.
6. Conditions for issuance of shares with different rights
i. Board recommendation: The company’s board of directors must recommend issuing shares with different
rights through a formal resolution.
ii. Detailed information: The decision must include detailed descriptions, such as:
a. The types of shares being issued (e.g., ordinary or preference shares).
b. The rights and privileges attached to each type of share.
c. Whether the shares are offered as a right or in another way.
d. Whether shareholders will receive profits or surplus funds.
e. Whether shareholders will get a share of the company’s assets or profits when it is liquidated, after
ordinary shareholders are paid.
f. Whether dividends on preference shares are cumulative (added up if not paid in previous periods)
or non-cumulative.
g. If shares can be converted into ordinary shares, how the conversion will happen.
h. The rights of preference shareholders regarding dividends, general meetings, and voting, before and
after conversion to ordinary shares.
i. If shares can be redeemed (bought back), how that will occur.
j. Any other features that the board deems important.
iii. Special resolution: The issue must be approved by the shareholders through a special resolution (a vote
requiring more than a simple majority).
iv. Approval requirements: If the shares are offered in a way other than a right issue, the company must seek
approval from the regulatory body and meet all other applicable regulations.
v. Changes in terms: The company cannot change the terms of the share issue without the approval of the
shareholders who hold shares with different rights.
vi. Violation consequences: If the company goes against the terms of the issue, the regulator can order the
company to:
a. Redeem all the shares immediately and compensate shareholders with interest.
b. Convert all the shares to ordinary shares immediately.
c. Take any other appropriate action after hearing from the company.
vii. Conversion of shares: The company may convert ordinary shares into preference shares or move shares
from one class to another through a special resolution. However, shares that are not redeemable preference
shares cannot be converted into redeemable preference shares.
viii. Approval for non-right offers: For shares offered in ways other than rights, the company must submit
certain documents to the regulator, such as consent from the shareholders and details of any agreements
with them.
7. Condition for issue of Employee Stock Option Scheme (ESOS)
i. Authorization: The company's articles of association must allow for an employee stock option scheme
(ESOS).
 ii. Compensation committee: The board must set up a compensation committee to manage the scheme, and
the committee’s chairperson must be an independent director.
iii. Board decision: The board must approve the scheme and provide necessary information about it.
iv. Special resolution: The scheme must be authorized by a special resolution from the shareholders. Separate
resolutions are required for granting options to employees of the parent or subsidiary companies and for
granting options to employees who will receive over 1% of the company’s issued capital.
v. Disclosure of issues: If shares are issued at a discount, the company must get approval from shareholders
and the regulator.
vi. No conflict of interest: Executives and senior employees should not be involved in deciding their own stock
options.
vii. No harmful changes: The company cannot change the scheme in a way that harms employees’ interests.
However, changes can be made through a special resolution if they are beneficial to the employees.
viii. Vesting period: There must be at least one year between granting options and when they can be exercised
(vested).
ix. Mergers and acquisitions: If an employee’s options are from a company that merged with or acquired the
current company, the options should count towards the vesting period.
x. Lock-in period: The company can set a lock-in period for the shares issued through the stock option scheme.
xi. No voting or dividends: Employees do not have voting rights or the right to dividends until the options are
exercised and shares are issued.
xii. Lapse of options: If options are not exercised, they expire. The company can offer these lapsed options to
other employees.
xiii. Non-transferable options: Employees cannot transfer their options to others, except in certain cases (e.g., in
case of death or permanent disability, options may be transferred to the employee’s heirs).
xiv. No pledging or selling: Options cannot be pledged, mortgaged, or transferred in any other way.
xv. Entitlement pool: There is a limit on the number of shares that can be issued under the stock option
scheme. The pool cannot exceed 10% of the company’s enhanced paid-up capital in one year and 25% of the
enhanced paid-up capital at any time.
xvi. Approval for capital increase: The company can raise capital through the stock option scheme, but
shareholders must approve this in a general meeting.
8. Scheme offered at the time of public offering.
i. If any options granted to employees in pursuance of a scheme are outstanding at the time of IPO, the
offering document shall disclose number of such outstanding options, exercise price, exercise period and
impact on shareholding of the members in case all the outstanding options are exercised.
ii. 8A. Registered Valuer
a. Eligibility for valuation: Certain professionals are allowed to conduct valuations, including:
1. Consulting engineers registered with the Pakistan Engineering Council.
2. Chartered accountants with a satisfactory quality review from the Institute of Chartered
Accountants of Pakistan.
3. Other professionals as specified by the regulator.
b. Regulation and compliance: These valuers must comply with the relevant regulations and rules from
the regulator and their own registering entities.
c. Not applicable to banking valuations: These rules do not apply to valuers working on banking
transactions, as they follow separate regulations.
iii. 8B. Qualification and Experience for Valuation
a. Types of valuers:
1. For valuing physical assets like buildings or machinery, the valuer must be a registered
consulting engineer with experience in the field.
2. For valuing stocks, shares, goodwill, and intangible assets, the valuer must be a practicing
chartered accountant with a satisfactory quality review.
 3. For all other assets, a registered engineer with at least five years of experience can conduct
valuations.
b. Impartiality: Valuers must remain independent and not have any interest in the assets they are
valuing. They must not engage in valuations where they have a conflict of interest.
c. Valuation validity: The valuation must be recent, not older than six months, or within a time frame
set by the regulator.
d. Monitoring and penalties: If valuers fail to perform properly, their registration may be canceled,
and they may be prohibited from conducting valuations.
iv. 8C. Contents of valuation report
a. Detailed asset valuation: If shares are being issued against assets like land, buildings, or machinery,
each asset must be separately valued, and the report must include:
1. An affidavit from the valuer confirming ownership and physical existence of the asset.
2. Details like the purchase date, transfer history, and comparisons to similar assets.
3. For machinery, information about its useful life, repairs, and original purchase details.
4. For intangible assets, details about the title, valuation method, and justification.
9. General conditions
i. Increase in capital: The company can't decide to increase its capital (by issuing more shares) beyond what is
allowed in its official documents (like the memorandum and articles of association). If they want to do this, a
resolution (a formal decision) must be passed by the company's members (owners/shareholders) before
they can make this increase.
ii. Different classes of shares: If the company has shares that are grouped into different classes (e.g., ordinary
shares, preferred shares), the company needs to clearly mention this in the offer letter when they issue new
shares. They also need to explain the differences in rights and privileges for each class of shares in the
directors’ report.
10. Reporting
i. Utilization of proceeds from the right issue: After a company issues new shares (right issue), it must report
how the money raised from the sale is being used in its financial statements. This includes:
a. A detailed breakdown of how much money went to each specific purpose and the percentage of
total funds allocated to each.
b. If the money is used for a different purpose than originally planned, the company must explain why.
ii. The company needs to include this progress report in its financial statements until all the money raised has
been used or the purpose it was meant for is achieved.
iii. The company’s auditor will review and report on the use of the money twice a year. This auditor's report will
also be included in the company’s financial statements.
11. Penalty for contravention of Regulations
i. Penalty for not following regulations: If a company fails to follow these regulations, they could face a
penalty. The penalty is specified under section 512 of the relevant law.
12. Repeal and Savings
i. Repeal of previous regulations: The old regulations from 2018 (about issuing further shares) are no longer
in effect. However, this repeal doesn’t:
a. Bring back anything that wasn’t in force when the new regulations were introduced.
b. Affect anything that happened under the old regulations (like actions or penalties).
c. Change any rights or obligations that were acquired under the old regulations.
d. Affect any ongoing inspections, investigations, or legal proceedings related to the old regulations.
ii. Continued effect of previous actions: Anything that was done under the old regulations, which is still in
effect at the time the new regulations come in, will continue to be valid unless it conflicts with the new
regulations.
Practice Questions (Study Text)

Section 58 and 59 of Companies Act, 2017.

 The directors may issue more than one kind of share capital which may have different classes of shares under
each kind. However, the decision of the directors would only be valid if such issuance is specifically provided in
PSL’s memorandum and articles of association.
o The variation in the rights and privileges attached to different classes of shares may be of the following
nature:
 different voting rights; voting rights disproportionate to the paid up value of share held; voting
rights for specific purposes only; or no voting rights at all;
 different rights for entitlement of dividend, right shares or bonus shares or entitlement to
receive the notices and to attend the general meetings; and
 rights and privileges for indefinite period, for a limited specified period.
 Since Ahmed and Faraz hold more than 10% of the Class A shares, they can apply for cancellation of resolution
to the Court within 30 days of the date of resolution. However, in order to get a favourable decision, they shall
have to satisfy the Court that:
o some facts which would have had a bearing on the decision of the shareholders were withheld by PSL in
getting the aforesaid resolution passed; or
o having regard to all the circumstances of the case, the variation would unfairly prejudice the Class A
shareholders.

Regulation 7 and 5(1)(ii)(a) to (f) of Companies

(Further issue of shares) Regulations, 2020

 Hamza Limited (HL) may issue shares to employees pursuant to a Scheme subject to the following conditions:
o the articles of association of HL expressly provides and authorizes the offer of scheme;
o the board of HL has already formed compensation committee for administration and superintendence of the scheme. As HL is
listed company, the chairman of the compensation committee shall be an independent director;
o board shall consider and resolve to offer the scheme;
o the aforesaid decision of the board shall provide information required under the regulations;
o the offer of scheme is authorized by a special resolution. Provided that separate special resolution shall be required for the
following, where a scheme provides so:
 grant of option to employees of a subsidiary or holding company; and
 grant of option to identified employees, during any one year, equal to or exceeding one per cent of the issued capital
(excluding outstanding conversions) of the company at the time of grant of option;
 o In case shares are to be issued at discount to the face value, the company shall also obtain approval of shareholders and the
Commission;
o HL and compensation committee shall ensure that its executive directors and employees in senior management shall not
participate in the deliberation or discussion of their own allocation of options under the scheme;
o HL shall not vary the terms of a scheme in any manner which may be detrimental to the interests of its employees.
 The aforesaid decision of the board of HL shall clearly state the following-
o proposal of the board to issue shares without right offer is subject to approval of the shareholders and the Commission;
o quantum of the issue both in terms of the number of shares and percentage of paid up capital before and after the issue;
o issue price per share and justification for the same;
o consideration against which shares are proposed to be issued i.e. cash or other than cash;
o name of person(s), their brief profile, existing shareholding, if any, in the company, to whom the shares are proposed to be
issued;
o purpose of the issue.

Regulation 39 of Companies Regulations, 2024

and Section 70 of Companies Act, 2017.
 GML shall be required to file a return of allotment (Form 3) by 8th April 20X4 (i.e. within 45 days after the date
of allotment).
 The return of allotment shall state the number and nominal amount of the shares comprised in the allotment
and such particulars as may be specified, of the allottee, and the amount paid on each share.
 A copy of the document evidencing the transfer of manufacturing plant to GML, along with copy of the valuation
report for registration in respect of which that allotment was made shall also be submitted.
 The above documents shall be verified by an affidavit of an authorized officer that these are true copies.

Rule 4 and 6(3) of Private Placement of

Securities Rules, 2017 and Section 83(1) and 70(1) of Companies Act, 2017.

 Before the issue

o The issue must be proposed by the board of directors of QBL.
o The issue is approved by special resolutions passed by the members of QBL.
o An approval for the issue is obtained from the Commission.
o The offer or invitation to subscribe to shares shall not be made to more than fifty persons, QBL is offering to just 17 individuals
(22 including qualified institutional buyers).
o QBL must not release any public advertisements or utilise any media, marketing or distribution channels or agents to inform the
public at large about such an offer.
o QBL shall offer shares through ‘information memorandum’ which contain minimum information as specified in Schedule I of
Private Placement of Securities Rules, 2017.
 o QBL must comply with all the requirements of Companies Act, 2017 and related rules and regulations for issuance of further
shares.
o All monies payable towards subscription of share capital shall be paid through cheque or demand draft or other banking
channels but not by cash.
 After the issue
o QBL must ensure that proceeds of the issue are utilised in the form and manner as disclosed in the information memorandum.
o QBL shall report the allotment of shares within 45 days by filing the return of allotment along with a filing fee.
o QBL must ensure that more than two private placements are not made in one financial year.

Rule 5 and 6 of Private Placement of

Securities Rules, 2017 and Section 66 of Companies Act, 2017.

 The following conditions must be met:

o The placement is in accordance with the provisions of section 66 of the Companies Act, 2017 (e.g. upon
terms and conditions contained in an agreement in writing).
o The placement is made to one or more scheduled banks, financial institutions or such other persons as
are notified for the purpose by the Commission either severally, jointly or through their syndicate. This
condition seems to be fulfilled by ELL already.
o The debentures shall be tradable and transferable only among the persons mentioned above.
o ELL must arrange appropriate security, where required, in the form and manner acceptable to debt
security holders.
o The trust deed contain such information as my be specified by the Commission.
o ELL shall be required to report the issue to the Commission (Schedule II of the Rules) along with filing
fee, within 30 days of the closing of subscription period.
o ELL shall also be required to report to the Commission, redemption status in the form and manner
specified by the Commission.

Buy-back of Shares
Companies Act, 2017
1. 86. Prohibition of purchase by company or giving of loans by it for purchase of its shares
i. No financial help for buying company shares: A public company (or a private company that is owned by a
public company) is not allowed to give money or loans to anyone to help them buy shares in the company or
its parent company.
ii. Exceptions: There are a few exceptions to this:
a. A banking company can lend money as part of its regular business.
b. A company can lend money under an approved employee share scheme, where the money is used
to buy shares in the company or its parent, for the benefit of employees (like through a trust or
directly to employees).
c. A company can provide loans to employees (except directors) for buying shares in the company or
its parent.
iii. Penalty: If these rules are broken, the company or individual can face a penalty (level 1 on the standard
scale).
2. 87. Subsidiary company not to hold shares in its holding company
 i. No subsidiary holding shares in parent company: A subsidiary company (a company owned by another
company) is not allowed to hold shares in its parent company, and the parent cannot give its shares to its
subsidiary. If this happens, the shares are considered invalid.
ii. Exceptions: There are a few situations where this rule doesn’t apply:
a. A subsidiary can act as a trustee if the parent company benefits from the trust.
b. A subsidiary can buy shares of the parent company as part of its regular brokerage business (buying
and selling shares for clients), but it cannot vote on those shares.
c. If the law requires, a subsidiary may hold shares in its parent company.
iii. Penalty: If this rule is violated, there will be a penalty (level 2 on the standard scale).
3. 88. Power of a company to purchase its own shares
i. Company can buy its own shares: A company can buy back its own shares, but it must follow specific rules
and regulations.
ii. How the shares can be handled: After buying the shares, the company has two choices:
a. It can cancel the shares, reducing the total number of shares in circulation.
b. It can hold the shares as treasury shares, meaning the company keeps them but they don't count
for voting or dividends.
iii. For unlisted public or private companies, the shares must be cancelled, not kept as treasury shares.
iv. Rules for treasury shares: If the company keeps treasury shares:
a. Voting rights on these shares are suspended.
b. No cash dividends or distributions can be made to the company on these shares.
c. However, the company can still issue bonus shares (additional shares given for free) for treasury
shares or redeem (buy back) them if they are redeemable.
v. How to buy back shares: The board of the company must recommend the buyback to the members,
providing details like how many shares to buy, the price, the purpose (whether to cancel or keep), and the
financial impact of the buyback.
vi. Approval needed: The buyback can only happen if the members approve it by a special resolution (a formal
vote by shareholders).
vii. Time limit: The buyback must be done within a specified period.
viii. Reporting: After deciding to buy back shares, the company must inform the Securities Commission and the
stock exchange where it is listed.
ix. Funding the buyback: The company must use profits or reserves specifically set aside for this purpose and
buy the shares with cash.
x. Sale of treasury shares: The company can later sell or dispose of the treasury shares as per specified rules.
xi. Record-keeping: The company must keep a register with details of the shares bought back, including:
a. How many shares were bought.
b. The amount paid for them.
c. How they were purchased.
d. When the shares were cancelled or reissued.
e. Any bonus shares issued for treasury shares.
f. Details of any redeemed treasury shares.
xii. Penalty: If the company doesn't follow these rules, it faces a serious penalty (level 3 on the standard scale),
and individuals can be personally liable for any losses caused by breaking these rules.

Listed Companies (Buy-Back of Shares) Regulations, 2019

1. Short title, commencement and applicability
2. Definitions
3. Eligibility Requirements for the Purchase
i. For a company to be eligible to buy back its own shares, it must meet these conditions:
a. Listed for 3 years: The company must have been listed on a securities exchange for at least 3 years.
 b. Meet capital requirements: The company must meet the minimum capital or free float
requirements of the exchange even after buying back shares.
c. Approval from shareholders: The shareholders must approve the purchase through a special
resolution (formal vote).
d. Funds available: The board of directors must confirm that the company has the necessary funds to
make the purchase and will still be able to meet its financial obligations for the next 12 months.
e. Not a defaulter: The company should not be on a "defaulter counter" (meaning it must not have
unpaid obligations or debts).
f. No ongoing legal processes: The company cannot propose a share buyback if:
1. It is in the process of winding up (closing down).
2. It is undergoing a merger, demerger, or other restructuring plans unless the buyback is part
of that process.
3. There is a public offer for the company’s shares.
g. Six-month restriction: A buyback cannot be proposed within six months after the shareholders have
rejected a previous buyback proposal.
4. Procedure for Purchase
i. When a company buys back its shares, these steps must be followed:
a. General meeting: The company must hold a general meeting within 30 days after the board of
directors recommends the purchase to shareholders.
b. Public announcement: The company must announce the buyback within 2 days of getting
shareholder approval.
c. Appoint a manager: The company must appoint an officer to ensure the buyback follows legal
requirements.
d. Sending information to shareholders: Within 5 days of the announcement, the company must send
all relevant documents (offer letter, public announcement, share tender form) to its shareholders.
e. Final report: After the buyback period ends, the company must submit a final report about the
purchase to the Securities Commission and the stock exchange.
5. Purchase Procedure for Tender Offer
i. If the buyback is done through a tender offer (where shareholders offer their shares to the company), the
process involves:
a. Escrow account: The company must open an escrow account (a special bank account) to hold
money for the buyback.
b. Deposit requirements: At least 25% of the purchase amount must be in the escrow account during
the buyback period.
c. Accepting tendered shares: Shares can only be offered in a specific format and must be received
before the end of the buyback period.
d. Balloting procedure: If more shares are offered than the company wants to buy, the company will
use a specific balloting system to select which shares to purchase.
e. Payment: The company must pay for accepted shares within 7 days using a bank draft or pay order.
f. Return unaccepted shares: Shares that are not accepted must be returned within 7 days.
6. Purchase through Securities Exchange
i. When the company buys back shares through a securities exchange (like a stock market), it must follow
these rules:
a. Automated system: The buyback must be done through the automated trading system of the
exchange.
b. Trading restrictions: The company cannot make bids for shares during the first and last half hour of
trading each day.
7. Purchase Period
 i. Tender offer period: The buyback period through a tender offer lasts for 30 days, starting from when the
offer letter is sent.
ii. Securities exchange period: For a buyback through the exchange, the period starts within 7 days of the
public announcement and ends within 90 days of shareholder approval (or earlier if the buyback is
completed).
8. Purchase Price
i. Tender offer price: The price for shares in a tender offer must be approved by the board of directors and
shareholders and should not be less than the average share price over the past 5 trading days.
ii. Securities exchange price: The price for shares bought through the exchange is the current market price at
the time of purchase.
9. Maximum Holding of Treasury Shares
i. A company cannot hold too many of its own shares in its treasury (as unissued shares):
a. Limit on treasury shares: The company cannot hold more than 20% of its total shares as treasury
shares, provided that the company’s free float (shares held by the public) does not drop below 25%.
b. Different share classes: If the company has different types of shares, the limit of 20% applies to each
class separately.
c. Freezing treasury shares: Treasury shares must be held in a blocked account and cannot be used as
collateral or for loans.
d. Bonus shares: Any new shares given as a bonus (for free) on treasury shares must also be treated as
treasury shares.
10. Obligations of the Purchasing Company
i. Communication to the Commission and Securities Exchange:
a. The company must inform the Commission and the securities exchange about the board's decision
to recommend the share purchase on the same day the decision is made.
ii. Public Announcement:
a. The company must publicly announce the purchase using a specified format and publish it in at least
two daily newspapers (one in Urdu and one in English) that have national circulation, at least 7 days
before the purchase period begins.
iii. Deposit of Funds:
a. The company must deposit the money it will pay for the shares in the designated bank account at
least one day before the settlement date.
iv. Share Cancellation (if applicable):
a. If the purpose of the purchase is to cancel the shares, the company must cancel the shares within 10
days of the purchase period ending.
v. Submission of Special Resolution:
a. The company must submit a copy of the special resolution (approved by shareholders) that allows
the share purchase to the Commission, securities exchange, and CDC the day after the general
meeting where it was passed. This should include details like the number of shares to be bought, the
purchase method, the funds allocated, and the purchase period.
vi. Submit Copies of Public Announcement:
a. After publishing the public announcement, the company must submit the published copies to the
Commission and the securities exchange within two days.
vii. Intimation of Purchase Completion:
a. The company must notify the Commission and securities exchange of the number of shares
purchased on the day the purchase period ends. The same information must be advertised in the
same newspapers where the public announcement was published within two days.
viii. Annual Report Disclosure:
a. In the company’s annual report, it must disclose details about the shares purchased and any
treasury shares sold, including the number of shares and the price.
 ix. File Documents with Registrar:
a. Within 30 days of closing the purchase period, the company must file the following documents with
the registrar: the board resolution, special resolution, meeting notice, and the public
announcement.
x. Daily Report of Shares Purchased (if done through the securities exchange):
a. If shares are bought through the securities exchange, the company must report the number of
shares bought on a daily basis for public knowledge.
xi. Open Investor Account Service (IAS):
a. The company must open an Investor Account Service at CDC to facilitate the purchase.
xii. Ensure Shares Stay Blocked:
a. The shares purchased should stay in a blocked account at the CDC until the company decides to sell
them.
11. Restriction on the Purchasing Company
i. No Voluntary Delisting or Winding Up:
a. The company cannot apply for voluntary delisting or voluntary winding up within 12 months after
the purchase period ends.
ii. No Sale of Treasury Shares:
a. The company cannot sell its treasury shares (shares it has already bought back) during the purchase
period and for six months after the purchase period ends, nor during the time it has price-sensitive
information.
iii. No Withdrawal, Cancellation, or Postponement:
a. The company cannot withdraw, cancel, or delay the share purchase once it has been announced,
unless there is an exception mentioned in regulation 12.
iv. No Purchase Before Certain Timeframes:
a. The company cannot make a new share purchase before six months after shareholders subscribed
to the latest capital issue or at least one year after submitting the final report on the previous
purchase to the Commission.
12. General Restrictions
i. No Withdrawal of Recommendation:
a. The recommendation for the purchase by the board of directors cannot be withdrawn, unless the
shareholders reject it in the general meeting.
ii. Restrictions on Shareholders, Directors, and Officers:
a. Key individuals such as the sponsors, directors, officers, and major shareholders (those holding more
than 10% of voting shares) cannot trade in the company’s shares during:
1. The period from the board meeting where the purchase is recommended until the purchase
is completed.
2. The period from the board meeting where the sale of treasury shares is recommended until
the sale is completed.
13. Disposal of the Treasury Shares and Procedure
i. Restriction on Disposal:
a. The company cannot sell, transfer, or dispose of the treasury shares within 6 months of the
purchase period’s closure.
ii. Board Approval for Sale:
a. The company must get approval from its board of directors before selling any treasury shares.
iii. Public Announcement of Sale:
a. The company must announce the decision to sell treasury shares within two working days of the
board’s decision.
iv. Designation of Authorized Officer:
 a. Before making the announcement, the company’s board must designate an authorized officer to
oversee the sale process.
v. No Issuance of New Capital Until Disposal:
a. The company cannot issue new capital (except for bonus shares) until it has disposed of its treasury
shares.
vi. Methods of Disposal:
a. The company can dispose of treasury shares in the following ways:
1. Sell them through the securities exchange’s automated trading system.
2. Sell them to employees under specific regulations, with prior approval from the
Commission.
vii. Sale Procedure:
a. The company must communicate the sale decision to the Commission and securities exchange on
the same day as the decision.
b. The sale must start within 7 days of the public announcement and complete within 45 days, or
sooner if the sale finishes earlier.
viii. Restriction During Acquisition Process:
a. The company cannot dispose of treasury shares after announcing an offer for the acquisition of its
shares until the acquisition is completed.
ix. Filing Information on Disposal:
a. The company must file detailed information about the disposal, including how the shares were
disposed of, the number sold, the price, and the total amount received.
x. Report on Daily Basis:
a. The company must report the number of shares sold to the securities exchange on a daily basis for
public dissemination.
14. Power to Give Directions
i. The Commission has the authority to step in if it believes it is necessary for the following reasons:
a. To protect the interests of shareholders.
b. To protect investors or the market.
c. To prevent the misuse of the laws and regulations.
ii. The Commission can issue directions to the purchasing company or any relevant parties to:
a. Stop the purchase or sale process.
b. Take or avoid certain actions to rectify any issues.
15. Repeal and Saving
i. The previous set of regulations, the Listed Companies (Buy-back of shares) Regulations, 2016, is now
repealed, but:
a. The repeal does not undo actions or rights that were already in effect before the repeal.
b. Any ongoing processes like investigations or legal actions under the old regulations will continue as
if the old regulations were still in place.
c. The new regulations will validate and carry forward any actions taken under the old ones.

Practice Questions (Study Text)

Regulation 3 of Listed Companies (Buy-Back of Shares)

Regulations, 2019.

 MEL shall be eligible to purchase if it fulfils the following conditions:

o MEL is listed on the securities exchange for a period of not less than three years;
 o MEL is compliant with the minimum capital or equity requirements or minimum free float requirement
of the securities exchange, as set out in listing regulations or licensing requirements, if any, after the
purchase;
o MEL has obtained approval of its members for purchase through special resolution;
o Board has undertaken that the funds specified for the purchase by the board of directors of the
purchasing company are available with the company and after the purchase, the purchasing company is
capable of meeting its obligations on time during the period up to the end of the immediately
succeeding twelve months;
o The purchasing company should not be on the defaulter counter (now redesigated in PSX Rule book as
Non-compliant segment);
o The board of directors of a purchasing company shall not propose or recommend a purchase in any of
the following namely:
 winding up proceedings has commenced;
 a scheme of arrangement, compromise, reconstruction, merger or demerger is approved by the
board of directors unless the Purchase is a part of such arrangement, compromise,
reconstruction, merger or demerger;
 a public offer for acquisition of shares of the purchasing company under the Securities Act has
been announced; and
o The board of directors shall not recommend before the expiry of six months from the date of an earlier
general meeting in which the purchase was disapproved by the members.

Regulation 10 of Listed Companies (Buy-Back of Shares)

Regulations, 2019.

 Special resolution passed in a general meeting of the shareholders HAQ Limited.

o “RESOLVED THAT the company be and is hereby authorized, under and pursuant to the provisions of
Section 88 of the Companies Act 2017 and the Listed Companies (Buy-Back of Shares) Regulations 2019,
to buy back / purchase, in accordance with the provisions of the said Section and Rules, upto maximum
of 20,000,000 its own issued ordinary shares of the nominal value of Rs. 10/- each at a purchase price of
Rs. 20/- per share within a period of sixty days from the date on which this resolution is passed.”
o “FUTHER RESOLVED THAT the ordinary shares purchased pursuant to the above resolution will be
cancelled and issued share capital will be reduced by an amount equal to the aggregate nominal value of
the cancelled shares.”
o FUTHER RESOVLED THAT the proposed purchase herein above by the Company of its own issued
ordinary share shall be through the automated trading system of the securities exchange.
o “FUTHER RESOLVED THAT the Mr. A, an officer of the Company be and is hereby authorized to act as
manager to the offer in order to open a sub account with any licensed brokerage house and investor
account with CDC and to ensure compliance with the legal requirements pertaining to purchase of
shares.”
 HL would be required to:
o Submit to the Commission, the securities exchange and CDC, a copy of the special resolution authorizing
the purchasing company to purchase on next working day of the general meeting in which it is passed
 and such resolution shall specify the indicative number and percentage of shares to be purchased, mode
of the purchase, allocated funds and the purchase period;
o Submit to the Commission and the securities exchange, the published copies of the public
announcement within two days of its publication;
o intimate to the Commission and the securities exchange on the day of the closing of the purchase
period, the number of shares purchased, and advertise the same within two days of the closure of
purchase period in same newspapers in which the public announcement was published;
o Disclose in its annual report, detail of shares purchased and detail of treasury shares disposed of and
such disclosures shall contain at least number of shares purchased or sold and price of purchase or sale;
and
o File with registrar within 30 days of closing of purchase period the copy of following documents:
 Board of directors’ resolution regarding the purchase;
 Special resolution authorizing the purchase;
 Notice of the general meeting in which the special resolution was passed; and
 Public announcement.
o Report to SE the number of shares purchased on daily basis for public dissemination.

Regulation 4 of Listed Companies (Buy-Back of Shares) Regulations,

2019.

 FM Textiles Limited needs to ensure the following:

o The general meeting in which the special resolution is to be passed shall be held not later than forty five
days of the date of the meeting of the board of directors in which the purchase is recommended.
o The purchasing company shall make a public announcement as per the format specified within two
working days of passing of the special resolution.
o The board of directors of purchasing company shall, before making the public announcement, authorize
an officer of the company to act as manager to the offer who shall ensure compliance with the legal
requirements pertaining to purchase of shares.
o The authorized officer shall, within fifteen days of the closing of the purchase period, submit a final
report on the purchase to the Commission and the securities exchange on the format specified.

Regulation 9 and 13 of Listed Companies (Buy-Back of Shares)

Regulations, 2019.

 FL can acquire and dispose the treasury shares subject to the following:
o Treasury shares shall not at any time exceed 20% of the total paid up share capital of the purchasing
company. Therefore, FL can now buy 7 million shares (50 x 20% = 10 - 3 = 7).
o The treasury shares shall be held in the name of the purchasing company in a CDC blocked account in
freeze form.
o The treasury shares shall not be placed under collateral either directly or indirectly.
 o Treasury shares shall not be sold by the purchasing company within a period of six months from the
closure of the purchase period. Therefore, FL can sell its 3 million shares acquired in August 2017, in
March 2018 but will not be able to sell the shares to be acquired in December 2017 in March 2018.
o Shares may be disposed of in full or in part in any of the following manners or combination thereof:
 against consideration in the market through the securities exchange’s automated trading system
in a transparent manner as approved by board of directors;
 sold to its employees under the Companies (Further issue of shares) Regulations, 2020 under
the authority of a special resolution and with prior approval of the Commission.
 The procedure for disposal/sale of treasury shares through securities exchange shall be as follows:
o Treasury shares shall not be sold without approval of Board
o Company shall make a public announcement within 2 working days of decision of board.
o Board shall designate an authorized officer for completion of sale of treasury shares before making the
public announcement.
o the decision of board shall be communicated to the Commission and the securities exchange on the day
the decision is made;
o Sale of Treasury Shares shall start not later than seven days from the date of public announcement and
shall close within forty-five days from the date of decision of board or till such date that the sale is
completed, whichever is later.
o Company shall file following information with the registrar concerned within thirty days of the disposal
of the treasury shares:
 mode of disposal;
 maximum number of treasury shares available for sale;
 total number of shares sold;
 date-wise and price-wise breakup of shares sold;
 total consideration received;
 cumulative number of treasury shares sold to date;
 number of balance treasury shares if any; and
 cumulative number of shares cancelled to date.
o The purchasing company shall report to the securities exchange the number of shares sold on daily basis
for public dissemination.

Regulation 3, 9 and 13 and of Listed Companies (Buy-Back of

Shares) Regulations, 2019.

 According to the relevant regulations, a company shall be eligible to purchase its own shares when it is listed on the securities exchange
for a period of at least 3 years. Therefore, Nabil Earth Limited cannot buy back its own shares as the period of 3 years has not been
completed as it was listed on 1 August 2015.
 According to the relevant regulations, a company shall be eligible to purchase its own shares when it has a paid up capital of not less than
Rs. 200 million after the purchase. Therefore, Nabil Sun Limited cannot buy back its own shares as its paid up capital would be reduced
below two hundred million rupees after the purchase.
 Nabil Moon Limited (NML) can buy back shares provided that:
o Shares held as treasury shares shall not exceed 20% of the total paid up capital of NML
 o Treasury shares shall not be sold, transferred or otherwise disposed of within a period of 6 months from closure of purchase
period. Therefore, NML cannot re-sell the share in the market.

Insider Trading & Other Areas of Securities Act 2015

Securities Act 2015
1. 63. Scope of regulated securities activities
i. A person is considered to be doing "regulated securities activities" if they are working as:
a. A securities broker (helping people buy and sell shares),
b. A securities adviser (giving advice about investments),
c. A securities manager (managing people's investments),
d. A share registrar (keeping records of shareholders),
e. A credit rating company (giving ratings to companies’ financial health),
f. A balloter (managing shareholder voting processes),
g. An underwriter (helping companies sell new shares to investors),
h. A debt securities trustee (looking after the rights of bondholders),
ii. Or doing any other similar activity the government officially notifies.
2. 64. Licensing requirement
i. You cannot do any of the regulated securities activities unless you get a license from the SECP (the
Securities and Exchange Commission of Pakistan).
ii. Your license will clearly mention what activities you are allowed to do, and you cannot do anything outside
of those.
iii. Sometimes, the government may exempt certain financial institutions from needing a license, under certain
conditions.
iv. "Financial institution" means banks and similar businesses, as defined in older company laws.
3. 65. Eligibility for licensing
i. Only companies (public or private) can normally get a license for securities activities.
ii. Exception 1: A securities adviser can be an individual (a single person).
iii. Exception 2: A representative (someone acting on behalf of a company) must be an individual.
iv. If you are licensed, you must only do that particular regulated activity — nothing else.
v. If a bank wants to do regulated securities activities (other than underwriting or special cases), it must set up
a separate subsidiary (a company fully owned by the bank) just for that purpose.
4. 96. Disclosure of price sensitive information
i. A listed company (one whose shares are traded publicly) must immediately tell the public any important
information that could impact its stock price.
ii. This includes information:
a. Helping the public understand the company's situation,
b. Avoiding rumors or a false market based on half-truths,
c. Likely to affect the share price or market activity.
iii. When announcing important news, the company must make sure all investors get it at the same time and
effectively.
iv. If needed, a company can delay announcing sensitive information if:
a. The delay won't mislead investors,
b. Everyone who knows the information is legally required to keep it secret,
c. The company can actually maintain that secrecy.
v. If the company's shares are also traded outside Pakistan, the information must be released at the same
time in Pakistan.
vi. Companies must also follow any additional rules set by the regulator.
5. 97. Notification of required disclosure by the Commission or a securities exchange
 i. If there is unusual activity in a company’s shares (like a sudden jump or drop in price), and the SECP or stock
exchange asks about it, the company must quickly:
a. Tell the public what's going on, if they know, or
b. Say clearly if they don't know of any reason.
ii. Companies must also respond to any news in media that could impact investors' views.
iii. Again, companies must follow any extra reporting rules that are notified.
6. 98. Power of the Commission to require production of records and documents concerning listed companies
i. If SECP suspects wrongdoing — like fraud, illegal acts, or hiding important facts — in a listed company, it
can:
a. Order the company's directors or managers to provide documents and records,
b. Also ask subsidiaries or associated companies to provide records,
c. Even ask companies that own or control the listed company for records.
ii. SECP can send authorized officers to collect documents and:
a. Take copies,
b. Ask questions from current or former employees,
c. If records aren't produced, ask where they are.
iii. Basically, SECP has strong powers to investigate if it smells trouble.
7. 99. Remedy in cases of unfair prejudice by listed companies
i. If SECP finds that a listed company’s management is acting unfairly towards some or all shareholders:
a. It can go to Court to fix the situation.
ii. The Court can:
a. Stop the company from continuing unfair actions,
b. Order the company to take legal action against wrongdoers,
c. Appoint a receiver to manage the company or its assets,
d. Make any other order to fix the situation, like forcing the company to buy out affected shareholders.
iii. If the Court changes the company's setup through its order, the company cannot change it again without
the Court's permission.
8. 100. Power of the Commission to issue directives to listed companies
i. If the SECP (Securities and Exchange Commission of Pakistan) thinks it is needed to protect investors, the
public, or if a company breaks any law or rules, or gives wrong/misleading information:
a. The SECP can order the company to stop breaking the law.
ii. It can tell the company to do something specific or avoid doing something, according to the law.
iii. It can issue any other order that it finds necessary under the law.
iv. The company must follow whatever the SECP orders.
9. 101. Duty of directors and others to disclose shareholding in listed company
i. Anyone who becomes a director, executive officer (like CEO, CFO, Secretary, Auditor, etc.), or a big
shareholder of a listed company must:
a. Inform the company in writing about:
1. What shares or securities they own in the company.
2. How much they own and when they acquired them.
b. They must also inform the company if there are any changes like:
1. Buying or selling more shares.
2. Making any profit that needs to be reported under section 104.
3. They must do this within 7 days from when the change happens.
ii. "Beneficial ownership" includes shares owned by:
a. The person themselves.
b. Their husband or wife (if not also a director).
c. Their minor children (including step-children).
d. Any private company where they hold shares (but only their portion of shares).
10. 102. Register of directors’ interests notified under section 101
i. Every listed company must keep a special register (record book) to log the information from directors,
executive officers, and major shareholders.
ii. When the company gets information from them, it must record it immediately with the person's name and
details.
iii. The company must also inform SECP within 7 days about:
a. The names.
b. When they were appointed or bought shares.
c. How many shares they hold.
11. 103. Notification to the Commission of directors and others’ interest
i. Every director, executive officer, or major shareholder must directly inform SECP by filling a set form about:
a. What shares or securities they own.
b. Any changes to their shareholding.
c. Any changes in their position (for example, if they resign or get promoted).
ii. This must be done within 7 days after the change happens.
iii. "Equity security" means any type of shares that show ownership in a company (like ordinary shares,
preference shares, or rights to buy them).
12. 104. Trading by directors and others
i. If a director, executive officer, or major shareholder buys and sells or sells and buys company shares within
six months and makes a profit (no matter if they meant to or not):
a. They must report it to the SECP within 7 days after the profit is made.
ii. Some types of acquisitions may be exempted as the SECP may define.
13. 105. Tender of gain to be credited to Federal Consolidated Fund
i. If they made a profit by buying and selling shares within six months:
a. They must pay the amount of that profit to the SECP.
b. The SECP will then deposit the money into the Federal Consolidated Fund (government treasury).
c. They must pay it within 6 months of making the profit.
14. 106. Directive by the Commission
i. If the person fails to pay the profit within six months:
a. The SECP can order them to pay it for deposit into the government's treasury.
ii. If anyone breaks or ignores any of the sections (101–107):
a. Individuals can be fined up to Rs. 500,000, plus Rs. 1,000 per day until they comply.
b. Companies (and their directors/officers involved) can also face the same fines.
iii. If someone obstructs or ignores the SECP’s orders:
a. They can be fined up to Rs. 5 million or three times the illegal gain, whichever is bigger.
15. 128. Prohibition of insider trading
i. No one is allowed to do insider trading (using secret company info to trade shares). It's a crime.
ii. What counts as insider trading:
a. If an insider (like a director) uses secret information to trade shares, or gets someone else to do it.
b. If anyone who got secret info from an insider uses it to trade shares.
c. If anyone uses secret info to trade, even if they "should have known" it was secret.
d. If an insider passes secret info to someone else or tells them to trade shares based on it.
iii. Exceptions:
a. Deals made under an agreement that existed before the insider got the secret info.
b. If the law requires the insider to share the information.
iv. Important: Even if insider trading happens, it doesn't make a contract automatically invalid.
16. 129. Inside information
i. Inside information means secret info that could affect a company’s share price if made public.
ii. It includes:
 a. Non-public information about a company or its shares.
b. Non-public info about commodities traded on markets.
c. Info given by a client to someone handling share orders.
d. Info about someone's plans or decisions to trade shares.
17. 130. Insiders
i. Insiders are people who are expected to know secret information about a company, like:
a. A company's major shareholders (sponsors), directors, or executives.
b. Senior people at companies where the listed company owns 25% or more.
c. Senior people at companies that own 20% or more of the listed company.
d. People involved in selling or marketing the company's shares (like underwriters).
e. Anyone who owns enough shares to appoint directors or owns 10% or more of shares.
f. Senior people at banks where the listed company has an account.
g. Employees or contractors who get inside information during their work.
h. Anyone who gets secret info illegally.
i. Close family members (spouse, children, parents) and nominees of these insiders.
j. Anyone who trades based on tips from the people above.
18. 131. Listed companies’ responsibilities to disclose inside information
i. If a listed company (or someone working for it) shares inside information with a third party (like a lawyer or
consultant) during normal work:
a. The company must publicly announce the same information immediately, unless the third party is
legally bound to keep it secret.
ii. Companies must also:
a. Keep a list of everyone who has access to secret (inside) information.
b. Update this list regularly and provide it to SECP (Securities and Exchange Commission of Pakistan)
when asked.
c. Ensure the people listed know they must not trade using the secret information.
d. If they don't follow these rules, they are committing an offence.

Rule Book of PSX

1. 5.6 DISCLOSURE OF PRICE-SENSITIVE INFORMATION:
1.1. 5.6.1 Companies listed on the stock exchange must share important, market-changing information with both
the Commission and the Exchange as soon as they have it. They must do this before releasing the information
to the media or others. This could include:
[Link] major changes in the company's business.
[Link] like mergers, acquisitions, or selling important assets.
[Link] decisions on dividends or share buybacks.
[Link] losses or changes in the company’s financial position.
[Link] on fraud, defaults, or legal actions against the company.

Practice Questions (Study Text)

 Responsibilities of Sabiha:
o Shares held by Jamal will be deemed to be beneficially owned by Sabiha and she is required to give
notice in writing to the company about;
o her beneficial ownership in the shares of the company; and
o the amount and description of the shares of the company and date of acquisition of beneficial
ownership
o Further, she shall also give notice in writing to the company about:
o purchase and sale of shares along with the number and amount of securities/(shares).
o any gain on purchase and sale of shares or sale and purchase of shares made within a period of six
months.
o Such notice shall be given within 7 days of occurrence of above events.
 Treatment of gain earned by Jamal
o If any gain has been made on the purchase and sale or sale and purchase of such shares within a period
of less than six months. She shall make a report to the Commission in the prescribed form before the
expiration of a period of seven days beginning with the day on which the gain accrues. Moreover, such
gain shall be tendered to the Commission within the period of six months of the accrual of gain.
o Therefore, the gain made on transaction occurring on 2 March 2018 will not be tendered to the
Commission.
o However, the gain made on transaction occurring on 1 April 2018 and 6 June 2018 will be tendered to
the Commission.

Section 101, 103, 104, 105 and 110 of Securities Act, 2015.

 In the case of Moosa

o Moosa, on becoming director of WDL, on 10 April 2019, was required to give notice in writing to WDL of his beneficial
ownership in shares of WDL, stating the amount and description of the WDL’s shares and date of acquisition of beneficial
ownership. The notice was required to be issued on or before 16 April 2019.
o On or before 17 September 2019, Moosa was required to give notice in writing to WDL about change in beneficial ownership
because of shares acquired through inheritance and the notification should state the number, description and amount of
securities involved.
o On or before 16 April 2019 and 17 September 2019, Moosa was also required to submit the following information, to the
Commission in the prescribed form:
 a statement of beneficial ownership.
 particulars of any change in the interest aforesaid; and
 any change in his position.
 In the case of Faisal
 o Since Faisal is neither a director nor a substantial shareholder of the company, he does not have any responsibility regarding
reporting of his transactions to WDL or the Commission under the Securities Act.
 In the case of Noor
o With the acquisition of 2.0 million shares by Noor on 25 July 2019, his aggregate shareholding exceeds 10% of WDL’s paid up
capital. Therefore, he was required to disclose his shareholding to WDL, Pakistan Stock Exchange and the Commission within
two working days of the acquisition of voting shares.
o On or before 31 July 2019, Noor was also required to give notice in writing to WDL of his beneficial ownership in shares of WDL,
stating the amount and description of shares and date of acquisition of beneficial ownership. The same information shall also
be submitted by Noor to WDL on 7 October 2019 and 14 November 2019.
o On or before 31 July 2019, 7 October 2019 and 14 November 2019, Noor shall give notice to Commission in the manner as
stated above in the last para in case of Moosa.
o In addition to the above, since Noor made the following gain by purchase/sale and sale/purchase of beneficially owned listed
shares within a period of less than six months, he was required to make a report to the Commission in the prescribed form
before the expiration of a period of seven days beginning with the day on which the gain accrues:

Section 96 of Securities Act, 2015.

 According to the Securities Act, 2015, a listed company shall disclose to the public forthwith any price sensitive information relating to the
company or its subsidiaries which has come to the company’s knowledge and which would be material to an investor’s investment
decision.
 Further, an information is required to be disclosed if it:
o is necessary to enable the public to appraise the position of the company and its subsidiaries;
o is necessary to avoid the creation or continuation of a false market in the securities of the company (false market being defined
as an uninformed market or one which is based on incomplete information); or
o might reasonably be expected to materially affect the market activity and the price of its securities.
o However, a listed company may, under its own responsibility, delay the public disclosure of price sensitive information such as
not to prejudice its legitimate interests, provided that
 such delay would not be like to mislead public investors;
 any person receiving information owes the listed company a duty of confidentiality, regardless of whether such duty
is based on law, regulations articles of association or contract; and
 the listed company is able to ensure the confidentiality of that information.
 In order to fulfil their responsibility relating to publishing the information, the directors of BSL must ensure that:
o when disclosing the above information, the means they use for disseminating information are such that they equally, timely
and effectively provide access to such information by the holders of the securities of the company and investors.
o the information that affects the market or a sector of the market generally is made public in a manner that would be likely to
bring it to the attention of persons who commonly invest in securities of a kind whose price or value might be affected by the
information.
 Section 101, 104, 105 and 106 of Securities Act, 2015.

 May 31, 2015

o Mr. Faisal was not required to file any return with the registrar as his holding was less than 10% of the shares of the company
even after taking opening balance of one million shares.
 July 15, 2015
o Since the shareholding of Mr. Faisal had crossed the level of 10% shares of the company, he had to inform the company and file
a return, within 7 days from the date of the transaction, containing particulars of his shareholdings in Delton Chemicals Limited
(DCL) with the Registrar and the Commission.
 August 30, 2015
o Since Mr. Faisal had made a gain by purchase and sale within a period of less than six months, he was required to make a report
and tender the amount of such gain to the SECP and simultaneously send intimation to this effect to the Registrar and the
Commission within 7days from the date of the transaction.
 November 20, 2015
o On receipt of bonus shares, there is a change in his beneficial ownership of DCL, he would therefore be required to inform the
company and file a return with the Registrar and the Commission within 7 days from the date of the receipt of bonus shares.
 Where within the period provided, Mr. Faisal fails or neglects to tender the gain, the Commission may by order in writing direct him to
tender the gain to the Commission for onward credit to the Federal Consolidated Fund.
 Where Mr. Faisal contravenes or fails to comply with any provision, the Commission may by order in writing direct to pay by way of
penalty to the Commission such sum which may extend to five hundred thousand rupees and to a further sum which may extend to
one thousand rupees per day for every day during which the default continues.
 In respect of contravention with any order or direction given by SECP shall be liable to a penalty of an amount which may extend to
higher of
• 5 million rupees; or
• 3 times the tenderable gain made

Initial Public Offer – IPO

Companies Act 2017
1. 19. Commencement of business by a public company
i. A public company can't start business or borrow money unless:
a. It has received enough cash from shareholders to meet the minimum subscription (minimum
amount of money needed to start).
b. Every director has paid the full amount for the shares they agreed to buy.
c. There is no situation where the company has to return money to anyone who applied for shares.
d. The chief executive, a director, and the company secretary must file a verified declaration with the
registrar saying all these conditions are met.
e. If the company didn't invite the public to buy shares (no prospectus issued), it must file a statement
in place of a prospectus.
ii. Minimum subscription means either:
 a. The minimum amount set in company documents, or
b. If not specified, then the entire cash share capital.
iii. Registrar’s Role: Once the registrar checks and accepts the declaration, it officially confirms that the
company can start business and borrow money.
iv. Exceptions: These rules don't apply if:
a. A private company becomes a public company.
b. It's a company with no share capital (like charities).
2. 20. Consequences of non-compliance of section 19
i. If a company starts business or borrows money without fulfilling Section 19, then:
a. Every responsible officer can be fined (up to level 2 penalty).
b. Contracts made before the company is officially allowed to start business:
1. Are temporary (provisional) and only become fully binding once the company is legally
allowed to operate.
3. 57. Prospectus
i. A company must not issue a prospectus (document inviting people to buy shares) unless:
a. A signed copy by every named director or proposed director is filed with the registrar on or before
its publication date.
ii. If this rule is broken:
a. The company and all involved parties can be fined up to a level 2 penalty.
4. 67. Application for, and allotment of, shares and debentures
i. Share or debenture applications through a prospectus must:
a. Be for at least the minimum amount set by SECP (Securities and Exchange Commission of Pakistan).
ii. SECP can also:
a. Specify a special form for applying, which may include declarations or verifications for public safety.
iii. Important Points:
a. Any statement made in the application is binding (you can’t back out).
b. Applications for shares or debentures cannot be canceled once submitted.
c. Penalty for violations: Up to level 2 fine.
5. 68. Repayment of money received for shares not allotted
i. If a company invites people to buy shares or securities:
a. It must refund the money quickly if the application is unsuccessful.
ii. If the refund is delayed:
a. Directors are jointly responsible to repay the amount.
b. A surcharge of 2% per month applies after the 15th day.
c. Also, a level 3 penalty can be imposed.
6. 69. Allotment of shares and other securities to be dealt in on securities exchange
i. If a prospectus says that the company's shares will be traded on a stock exchange:
a. The company must apply for permission within 7 days of issuing the prospectus.
b. Permission must be granted within 21 days (or slightly longer if extended up to 42 days).
ii. If permission isn’t applied for or granted:
a. Any share allotments based on that prospectus are void.
b. The company must refund the money immediately.
iii. If not refunded within 8 days:
a. Directors are jointly responsible.
b. 2% monthly surcharge and a level 3 penalty apply.
iv. Extra Points:
a. Money collected must be kept in a separate bank account until refunds are settled.
b. These rules also apply to people like underwriters (who guarantee share sales) and sale offers, with
slight wording changes.
Securities Act 2015
1. 87. Offer of securities
i. These rules are for offers of securities, except for Government bonds.
ii. You can't publicly offer securities unless you first submit a prospectus to SECP (Securities and Exchange
Commission of Pakistan) and get it approved.
iii. If you or your company's top people (directors, sponsors, major shareholders) were involved in a
company that defaulted, lost its trading license, or got delisted by the stock exchange, you cannot
make a public offer—unless SECP grants permission after the issues have been fixed.
iv. Approval of a prospectus is not needed if:
a. State Bank of Pakistan is offering the securities,
b. It's a private placement (offering to a limited group),
c. It's shares given as dividends by a holding company to its members,
d. Securities are given to employees, their families, or
e. Bonus shares are being issued to current shareholders.
v. Once SECP approves a prospectus, it's valid for 60 days (can be extended for longer offerings like "shelf
registration").
vi. SECP won't be responsible for any problems caused by a prospectus they approve.
vii. Making a fake application for public offer is a crime.
viii. SECP can confiscate the money related to fake applications after giving you a chance to explain.
2. 88. Approval, issue, circulation and publication of prospectus
i. You can't publish or circulate a prospectus (or a similar document) without SECP's approval.
ii. The prospectus must be submitted to SECP at least 21 days before you plan to publish it.
iii. When offering securities to the public, you must publish the full or summarized prospectus in one Urdu
and one English newspaper.
iv. It must be published between 7 to 30 days before the subscription opens.
v. Copies of the approved prospectus must be made freely available at key places like the company’s
office, stock exchanges, banks handling the offer, share registrar, etc.
vi. The full prospectus and application forms must also be uploaded on the company’s website until the
offer closes.
vii. You can't advertise a public offer without SECP's approval unless you have already published a
prospectus and mention where it can be obtained.
viii. You can't change the terms of the prospectus later unless SECP allows it.
ix. If using a "shelf prospectus" (where you issue securities in parts), you must:
a. Get SECP approval before publishing each supplement,
b. Issue the final supplement within the SECP’s prescribed time,
c. Not exceed the total amount stated in the original shelf-prospectus.
d. Every supplement must be filed with the registrar and published in the same newspapers.
e. If a supplement misses important information or has mistakes, criminal sections 92 and 93 will
apply.
3. 89. Contents of prospectus
i. SECP will only approve a prospectus if it includes all the necessary information and reports that are
legally required.
4. 90. Expert to be independent
i. If a prospectus mentions a professional opinion (like a valuation report), that expert must not be
someone involved in starting, promoting, or running the company.
5. 91. Expert’s consent to issue of prospectus containing statement made by him
i. If a prospectus quotes an expert, two things must happen:
a. The expert must give written permission to use their statement,
b. The prospectus must clearly mention that the expert gave permission and hasn't withdrawn it.
6. 92. Criminal liability for defective prospectus
i. You commit a crime if you:
a. Make a misleading, wrong, or fake statement in the prospectus,
b. Leave out important information that must be included under the law.
7. 93. Compensation for false or misleading prospectus
i. If someone buys securities based on your false or incomplete prospectus and loses money, they can sue
and claim compensation from:
a. The offeror,
b. The issuer,
c. Any director,
d. Or anyone who signed the prospectus.
8. 94. Abridged prospectus
i. Instead of publishing the full prospectus, you can publish a short version (called an abridged
prospectus) if:
a. A full prospectus is also prepared as per Section 89,
b. Both full and abridged versions are approved by SECP,
c. Enough copies of the full prospectus are made available for people to collect,
d. Other legal requirements are followed.
9. 95. Issue of securities outside Pakistan
i. Pakistani company cannot issue or list securities abroad without SECP’s prior approval.

Public Offering Regulations, 2017

1. Short title, commencement and applicability
2. Definitions
3. General Conditions for Public Offer of Securities
i. A company (Issuer) can offer its shares to the public only if:
a. The company's Board of Directors has officially approved the decision to offer shares publicly.
b. The company has made profits from its main business for the last two years.
1. If the company hasn’t made profits:
a. The original owners must keep at least 51% of their shares until the company earns
profits for two straight years.
b. The company must submit a business plan showing how it will become profitable.
c. A warning must be printed boldly on the front page of the Prospectus saying:
d. "This is a loss-making company. Investing in such companies carries higher risks.
Please do your homework and consult an investment advisor before investing."
c. At least 51% of the company's shares must have been held by the same people for the last two
years.
1. Exceptions:
a. This rule doesn’t apply if new shares are being issued.
b. Rules (ii) and (iii) don’t apply to new projects (Green Field Projects) or debt
securities backed by the government, multilateral agencies, or strong-rated state-
owned enterprises.
2. SECP may also relax these rules in case of privatization of a government company.
d. Special Rules for Green Field Projects (new projects):
1. The original owners must invest at least 51% equity and keep it until the project starts
production.
2. If the project also needs loans, it must secure complete financing ("financial close").
3. Owners must have a good track record (preferably by running successful businesses).
4. The management team must have the skills to run the project.
5. Construction contracts (EPC) must be in place if needed.
 6. Land for the project must be bought and owned by the company.
7. Owners must keep at least 51% shares until the project makes profits for two years.
8. A bold warning must be added on the Prospectus saying:
a. "This is a green field project. Investing in such projects is riskier than investing in
already running businesses."
e. All securities must be issued electronically (no physical certificates).
ii. A company CANNOT offer shares to the public if:
a. The company, its owners, directors, or major shareholders have unpaid loans or overdue payments
showing in credit reports.
1. Exceptions: This rule doesn’t apply to government-nominated directors, financial
institutions' nominees, or independent directors.
b. The company, its owners, or directors have been involved in a company that:
1. Was declared a defaulter by the stock exchange.
2. Had its trading license (TRE Certificate) canceled.
3. Was delisted by the stock exchange for breaking rules.
a. (SECP can allow exceptions if the problems have been fixed.)
iii. The company must hire several parties through separate contracts:
a. Consultant to the Issue
b. Book Runner
c. Underwriter
d. Balloter
e. Share Registrar
f. Banker to an Issue
g. Exceptions:
1. A listed company offering new classes of shares may skip hiring a Consultant to the Issue.
2. SECP can relax this condition for privatization cases.
3. If no Consultant is hired, it must be clearly stated on the Prospectus cover page.
4. (For debt securities, only banks, investment services companies, and development finance
institutions can act as Consultants.)
iv. Consultants, Book Runners, and Underwriters cannot publish any research report about the company
during the offer period.
a. (They can still share private marketing materials with potential investors.)
v. The Underwriter can make deals with other licensed underwriters with the company’s permission. This must
be disclosed properly.
vi. The Consultant can hire experts for help but still remains fully responsible.
vii. The company must ensure that the Centralized E-PO System (CES) is available for public investors.
viii. The company (or its Consultant) must submit an application and draft Prospectus to the stock exchange for
listing and send a copy to SECP.
ix. When submitting the draft Prospectus, the company must:
a. Prepare it in both English and Urdu in the required format.
b. Prepare an abridged version (summary prospectus) if needed.
c. Prepare advertisements if needed.
d. Prepare a supplement if they plan multiple offerings (shelf registration).
e. (9a) They must ensure all required disclosures are made.
(9b) If any disclosure doesn’t apply, they must explain why.
x. The draft Prospectus must be simple, clear, and easy to understand.
xi. The stock exchange will put the draft Prospectus on its website for 7 working days to collect public feedback.
The company and Consultant must also post it on their websites.
xii. The stock exchange will make sure all public feedback is properly addressed.
 a. (If no Consultant is hired, the company must handle the feedback itself.)
xiii. When reviewing the application, the stock exchange will check:
a. If the company is eligible and suitable for public listing.
b. If disclosures are complete and in public interest.
xiv. The stock exchange must inform the company (and SECP) whether the application is approved or rejected,
with reasons.
xv. After approval by the stock exchange, the company (or its Consultant) must apply to SECP for final approval,
paying the necessary fee.
a. (15a) & (15b) Changes to the Prospectus:
b. Before publication: Changes need written approval from both the stock exchange and SECP.
c. After publication: Any changes must be announced publicly through an "Addendum."
xvi. If the stock exchange refuses to list the company, the company (or its Consultant) can appeal to SECP within
30 days.
[Link] wanting to issue shares outside Pakistan must get SECP’s approval and pay a fee of Rs. 1 million.
xviii. Foreign companies can also offer shares to the public in Pakistan if they meet local listing requirements.
xix. The standard share subscription form must be part of the Prospectus.
xx. The company and all key parties (Consultant, Underwriter, Book Runner) must keep records of the issue for
at least 10 years.
xxi. The size of the offering and how much is offered to the general public must meet stock exchange rules.
4. Methods for Public Offer of Shares:
i. Fixed Price Method:
a. The company sets a fixed price for its shares with the help of a financial advisor (Consultant to the
Issue). Investors simply buy the shares at this set price.
ii. Book Building Method:
a. Here, the price isn't fixed upfront. Instead, investors suggest the price they are willing to pay within
a given range (Floor Price to Price Band). All offers (bids) are sorted from highest to lowest, and the
final price where all shares get sold is called the "Strike Price," using something called a Dutch
Auction.
5. Conditions for Public Offer of Shares:
i. Sponsor Shareholding Lock-in:
a. The company's founders (sponsors) must keep all their shares for at least 12 months after the public
sale — or if the company is a new project (greenfield project), until after it starts operations.
ii. 25% Minimum Holding for 3 Years:
a. Sponsors must continue holding at least 25% of the company's total shares for three years after the
public offer or start of operations (whichever comes later).
iii. Blocking of Shares:
a. The shares that sponsors are required to hold must be kept "blocked" (can't be sold or mortgaged)
in a special depository account.
iv. Transfer of Shares Allowed:
a. Sponsors can sell their blocked shares to someone else, but only after regulatory approvals. The new
owner will have the same obligations as the original sponsors.
v. Shares for Employees:
a. The company can give its employees shares at the same price as offered to the public.
vi. Public Offer for Green Field Projects, etc.:
a. If the company is raising funds for new projects or expansions, it must follow a financial plan
approved by its Board of Directors, and explain any differences in the prospectus.
6. Conditions for Public Offer of Shares through Fixed Price Method:
i. Price Setting: The company, with its advisor, decides the share price and explains how they calculated it in a
"Valuation Section" of the prospectus.
 ii. Full Underwriting: An insurance-like guarantee (underwriting) must be taken to ensure all shares are sold.
iii. No Price Increase: The price for the public must not be higher than what private investors paid in the last six
months.
iv. Exchange Approval: After approval, the company must coordinate with the stock exchange to set
publication and subscription dates.
v. Rule Compliance: If the company doesn’t follow any exchange or regulatory condition, it is considered a
legal violation.
vi. Online Availability: The prospectus must be put on the websites of the company, exchange, and advisor.
vii. Prospectus Timing: The prospectus must be published between 7 to 30 days before share subscription
starts.
viii. Newspaper Publication: Prospectus must be published in at least one English and one Urdu newspaper.
ix. Application Method: Public can apply for shares physically or electronically, and payment must be properly
made through cheque, pay order, or direct debit.
x. Share Allotment: Shares must be allotted within 10 working days after the subscription closes, and
unsuccessful applicants should get their money back.
xi. No Provisional Listing: The company will only be fully listed after the completion of the offer (no temporary
listing allowed).
7. Conditions for Offer of Shares through Book Building:
i. Minimum Size: At least 25 million shares and worth at least Rs. 250 million must be offered, or more if the
regulator asks.
ii. No Provisional Listing: No temporary listing of the company allowed after the book building.
iii. Share Allocation: A maximum of 75% of shares are reserved for big investors (institutions), and minimum
25% for retail (small) investors. Retail portion must be fully underwritten unless simultaneous offer allowed.
iv. 100% Bidding Allowed: Big investors can bid for the entire offering but will only get up to 75%. If retail
investors don't buy their part, the big investors must pick up the slack.
v. Underwriting Book Building: The 75% portion for big investors must be credit underwritten (guaranteed to
be bought).
vi. Disclosure of Associates: Company and advisor must submit lists of their related parties (associates) to the
Book Runner before bidding starts.
vii. Associate Bidding Limit - Issuer: Related parties of the company can't bid more than 10% of the Book
Building shares.
viii. Associate Bidding Limit - Consultant & Book Runner: Related parties of the advisor and Book Runner also
can't bid more than 10%, except banks, mutual funds, and insurance companies.
ix. Tripartite Agreement: The company, book runner, and a designated institution must sign a three-way
agreement explaining everyone's duties and dispute resolutions.
x. Record Keeping: Everyone involved must keep records for at least 10 years.
8. Procedure for Public Offer of Shares through Book Building:
i. Floor Price and Price Band: Company, with its advisor, sets a minimum price (floor price) and a maximum
band (not more than 40% above floor price). Details must be given in the prospectus.
ii. Exchange Approval: After prospectus approval, company or advisor must coordinate with stock exchange
for publishing dates and bidding dates.
iii. Rule Compliance: Not following exchange or regulatory instructions is a legal violation.
iv. Newspaper Publication: Prospectus must appear in at least one Urdu and one English newspaper.
v. Prospectus Timing: Prospectus must be issued between 7 and 30 days before subscription.
vi. Website Posting: Prospectus must be posted on websites of company, book runner, designated institution,
exchange, and advisor.
a. One Day Before Registration: Prospectus must be published at least one day before investors start
registering for bidding.
vii. Electronic Bidding: Bidding will be conducted online through a secure system.
 viii. No Price Change: Floor price cannot be changed once the prospectus is approved (except in rare regulatory
cases).
ix. Bidder Registration: Registration of investors must start at least three days before bidding and end by 3:00
PM on the last bidding day.
x. Bid Collection Centers: Book runner must have centers for bid submission in all major cities and regions.
xi. Registration at Centers: Bidders can register at these centers or collection agents.
xii. Payment Handling: Book runner must properly collect bid money.
xiii. Data Entry: Details of bidders must be entered into the bidding system.
xiv. Password for Bidding: Registered bidders will get a password and user ID to place or revise bids.
xv. Bidding Duration: Bidding must remain open for at least one working day.
xvi. Book Building Failure: If not enough bids are received, the offer is canceled and all bid money must be
refunded.
[Link] Book Building process shall be considered as cancelled if the total number of bids received is less than
40; and
xviii. The Book-Runner shall ensure that subscription money received against the bids accepted shall not be
released to the Issuer by the Banker to the Book Building Portion until:
a. credit of all shares allocated under the retail portion of the issue; and
b. issuance of NOC by the securities exchange in case the company is already listed or formal trading of
the company in case of new listing.
9. Procedure for bidding
i. You can submit bids either online or at specific centers, using a "Limit Bid" (fixed price) or a "Step Bid" (offers
different prices at different levels).
a. Minimum bid amount must be at least Rs. 1 million.
ii. The Book Runner (the agent handling the sale) will check your bid. It must be complete and backed by proof
that your payment is either:
a. Paid via cheque, demand draft, or pay order, or
b. Blocked/debited directly from your bank account.
iii. For institutional investors (like banks, insurance companies), the Book Runner can accept a bid with only
25% of the money upfront.
a. The Book Runner can even waive off this requirement if it wants.
iv. Once your bid is accepted, you’ll get an electronic receipt showing:
a. Book Runner’s name
b. Bidding center’s name
c. Date and time of the bid
v. Bidding is open from 9:00 AM to 5:00 PM every day during the bidding period.
a. No bids accepted after 5:00 PM on the last day.
vi. You can increase your bid price (but not decrease) until 5:00 PM on the final day.
vii. The Book Runner can reject any bid but must record the reason and inform the bidder.
a. You cannot challenge their decision.
viii. A live "Order Book" will be displayed during bidding:
a. Shows how many shares are demanded at what prices
b. Updated continuously
c. Available on websites of Book Runner, Designated Institution, Stock Exchange, etc.
ix. After bidding closes, the final price (called Strike Price) will be decided using the Dutch Auction Method
(highest price where all shares are sold).
x. If you bid above the Strike Price, you will get shares at the Strike Price (not your higher bid).
xi. If the total shares are fully booked:
a. Shares go first to the highest bidder.
b. Then to the next highest, and so on.
 xii. If shares are left after allocating to highest bidders:
a. Remaining shares are divided among those who bid exactly at the Strike Price, proportionally.
xiii. If you bid below the Strike Price:
a. You won't get any shares.
b. Your blocked money will be released within one working day.
xiv. Successful bidders will be notified within one day about:
a. Strike Price
b. Number of shares they got
xv. If you agreed to buy any leftover shares (if the public doesn’t buy them):
a. Your money will stay blocked until allotment happens.
xvi. Shares will be issued after public subscription ends in electronic form (credited to your account).
a. You must give your account number when you place a bid.
[Link] final data about bidding and Strike Price will remain on the Designated Institution's website for at least 3
working days after bidding closes.
10. Restrictions
i. Bidding period cannot be extended unless something major happens (like a bank holiday or system failure).
a. If extension is needed, the Book Runner must get approval from SECP and stock exchange.
b. News about extension will be published in the newspapers and on websites.
ii. Bidders are not allowed to:
a. Bid below the Floor Price (minimum price) or above the upper limit of the price band.
b. Bid for more than 10% of the shares being offered through book building.
c. Place bids with price changes of more than 10% compared to the indicated Strike Price (unless SECP
allows more).
d. Place consolidated bids (combining bids from different people).
e. Place more than one bid, whether alone or with someone else.
f. Decrease both bid price and volume after bidding.
1. You can only increase the price.
g. Withdraw a bid once it is placed.
iii. No one should manipulate the bidding process:
a. No fake bids.
b. No tricks to show false demand and artificially raise or lower the price.
11. Procedure for allocation of shares to retail investors
i. Within three working days after bidding ends:
a. The company (or its consultant) will publish a supplement to the original prospectus in newspapers.
b. This supplement will explain the bidding results and key information for small investors.
c. (1a) The supplement will contain:
1. Final Strike Price
2. Final Offer Price
3. List of underwriters (those who guaranteed sale of shares)
4. Details of underwriting fees
5. Commitments by big bidders (if retail portion isn’t fully subscribed)
6. Category-wise list of successful bidders
7. Dates when public can apply for shares
8. Any other information SECP wants included
ii. The company can offer shares to the public at a discount compared to the Strike Price.
iii. Public investors can apply for shares:
a. Physically (paper application) or electronically
b. Must attach payment (cheque, demand draft, pay order, or bank account blocking proof)
iv. Within 10 working days after public subscription closes:
 a. Shares will be allotted.
b. Refunds will be issued to those whose applications were unsuccessful.
v. If shares remain unsold to the public:
a. They will either be bought by the underwriters or
b. Allocated to the successful bidders of the book building at the Strike Price on pro-rata basis.
12. Offer for Sale of Shares by the Offeror
i. A person or group of people who own more than 10% of shares in a listed company can sell those shares to
the public.
ii. The total value of the sale (calculated by multiplying the price of the shares by the number of shares being
sold) must be at least 100 million rupees.
iii. If the shares are from an unlisted company, the sale size must meet certain rules and regulations set by the
securities exchange.
iv. However, shareholders of a company cannot sell shares for a greenfield project (a project that is in the early
stages of development).
v. 12a. Eligibility to Commence Business as SPAC
a. A Special Purpose Acquisition Company (SPAC) must be registered as a public company with the
main goal of acquiring or merging with other businesses.
b. It must have at least 10 million rupees in capital and should not be involved in any business other
than being a SPAC.
c. The people involved (promoters, sponsors, directors, and CEO) must meet certain ethical and
competency standards.
vi. 12b. Functions of SPAC
a. The main job of a SPAC is to raise and use funds for merging or acquiring another company within a
specified time.
b. SPACs must set up an escrow account and manage the funds in it carefully, ensuring they act in the
best interest of investors.
c. After a merger, SPAC sponsors must hold at least 15% of the merged company's shares for at least
one year.
d. SPACs cannot own more than 30% of the target company before the merger.
e. SPACs need to create a draft prospectus outlining their plans and submit it for approval.
vii. 12c. Listing
a. Any SPAC that offers securities to the public must be listed on a securities exchange (like a stock
market).
viii. 12d. Modes of Fund Raising
a. SPACs can raise funds by issuing shares or warrants through:
1. Initial Public Offer (IPO), or
2. Private placements.
ix. 12e. Minimum Fund Raised
a. A SPAC must raise at least 200 million rupees to carry out a merger or acquisition.
b. The prospectus (document issued to investors) must show that the funds raised are enough to
create a viable business.
x. 12f. Time Frame for Completion of Qualifying Acquisition
a. SPACs must complete their merger or acquisition within 36 months of being listed.
b. If necessary, the Securities Commission may extend the time by up to 6 months.
xi. 12g. Shareholders' Approval
a. A SPAC must get approval from its shareholders before proceeding with a merger or acquisition.
b. Shareholders must be given at least 21 days' notice before the meeting.
c. E-voting (online voting) is required for this approval.
xii. 12h. Rights of Holders of Voting Securities
 a. If the SPAC can't complete the merger or acquisition in time, or if shareholders reject the deal, they
can get a refund.
b. If shareholders vote against the deal, they can get back 90% of their initial investment.
c. The refund process and calculation must be clearly stated in the prospectus.
xiii. 12i. Management of Escrow Account
a. SPACs must put at least 90% of the funds raised in an escrow account (a special account used for
holding funds safely).
b. This money can only be used for the merger or acquisition.
c. The funds can be invested, and any income earned must stay in the escrow account.
d. The management team can't take any money from the escrow account except for shares they
bought.
xiv. 12j. Fair Market Value of Acquisition
a. The value of the company being acquired must be at least 80% of the money in the escrow account
(after taxes and investment losses).
b. A professional valuer must verify this value.
xv. 12k. Additional Financing
a. If a SPAC needs more funds to complete the merger, it can raise money through a rights issue or
other methods, but 90% of the new funds must go into the escrow account.
b. SPACs can also take on debt, but they need approval from shareholders before using credit.
xvi. 12l. Majority Ownership and Management Control
a. After the merger or acquisition, the SPAC must have majority ownership or control of the merged
company.
xvii. 12m. Change in Board of Directors and Management Team
a. Any changes in the SPAC's board of directors must be done according to the rules in the Companies
Act, 2017.
b. Directors must always meet the "fit and proper" standards.
xviii. 12n. The Custodian - Its Roles and Responsibilities
a. The custodian is responsible for holding the funds in the escrow account.
b. The custodian must follow the rules in the custodian agreement and ensure the funds are safe.
c. The custodian can invest the funds in permitted investments, but the initial capital must be
protected.
xix. 12o. Failure to Complete Merger or Acquisition Transaction
a. If the SPAC fails to complete the merger within the set time, it must inform the Commission and
securities exchange within 7 days.
b. If the failure is due to unforeseen circumstances, the SPAC must notify the same parties
immediately.
xx. 12p. Power of the Commission to Issue Directions
a. The Securities Commission can issue orders to the SPAC, like asking for reports or documents, and
the SPAC must comply.
xxi. 12q. Relaxation
a. The Commission can relax some of these requirements if the SPAC provides valid reasons, but it
must record the reasons in writing.
13. 13. General Conditions for Public Offer of Debt Securities
i. Authorized to Issue Debt Securities
a. The company's founding documents (Memorandum and Articles of Association) must allow it to
issue debt securities.
ii. Appointment of Key Agents
a. For issuing debt securities (except for commercial papers), the issuer must appoint certain agents,
such as:
 1. Debt Securities Trustee (to represent investors' interests),
2. Investment Agent (to manage investments),
3. Shariah Advisor (for Shariah-compliant issuances).
iii. Credit Rating
a. The company must have its debt securities rated by a licensed credit rating agency. The rating must
be no older than six months.
b. Short-term securities: Must have a rating of at least "A2".
c. Long-term securities: Must have a rating of at least "BBB+" or "A2".
d. Exception: If the company has a rating of "A-" or higher, the rating requirement may be waived for
short-term debt.
iv. Underwriting of Public Offer
a. Generally, the debt securities offer must be fully underwritten (guaranteed by a third party to
ensure funds are raised). However, for Sukuk (Islamic bonds):
1. No underwriting is required if:
a. The money raised is to pay off existing debts,
b. The money is needed for working capital,
c. The company has other backup funding if the offer doesn't meet its target.
v. Approval for Restructuring Debt
a. The company cannot restructure or delay payments on long-term debt securities (including Sukuk)
without approval from two-thirds of the debt holders.
vi. Reporting on Profit Payments and Redemption
a. The company must report the status of profit payments and redemption (return of invested money)
every six months to the relevant authorities until the debt is fully paid off.
vii. Conditions for Shariah-Compliant Debt Securities
a. For Islamic debt securities like Sukuk, additional requirements include:
1. Appointment of an Investment Agent with a clear agreement,
2. Ensuring assets are transferred to Sukuk holders through a Special Purpose Vehicle (SPV),
3. Shariah Advisor's approval for Sukuk issuance and compliance with Islamic law (Shariah),
4. Ensuring that the proceeds from the Sukuk are used for Shariah-compliant purposes,
5. If Sukuk are convertible into shares, the conversion option must be available to investors.
viii. Shariah Compliance Requirements
a. The company must meet additional Shariah compliance checks, such as:
1. Annual Shariah audit to ensure compliance,
2. A detailed explanation of the Sukuk structure, whether it’s asset-backed or not, and any
risks involved,
3. Full disclosure of Shariah-related fees in the financial documents.
ix. Timely Issuance and Refund of Subscription Money
a. Within 10 working days after the public subscription period ends, the company must allot the debt
securities to successful applicants and refund unsuccessful ones.
14. Conditions for Public Offering of Short-Term Debt Securities
i. Equity Requirement: The company must have at least Rs. 50 million in equity based on their latest audited
financial statement.
ii. Maturity of Commercial Paper: These debt securities (Commercial Papers) must mature between 30 days
and one year. If the maturity date falls on a holiday, payment is made on the next working day.
iii. Denomination: The Commercial Paper must be issued in amounts of Rs. 10,000 or multiples of Rs. 10,000.
iv. Liability Limit: The total liabilities of the company after issuing the Commercial Paper cannot exceed four
times the company’s equity.
v. Discounted Price: The Commercial Paper is sold at a price lower than its face value (a discount).
vi. No Rollovers: The Commercial Paper cannot be rolled over, restructured, or rescheduled once issued.
 vii. Issuing and Paying Agent: The company must appoint an agent to handle the issue and payment, with a
clear written agreement detailing the roles and responsibilities of both parties.
viii. Independent Agent: The appointed agent cannot be related to the company.
ix. Payment Process: At maturity, the holder will present the Commercial Paper to the agent for payment,
which will be made via cheque, pay order, demand draft, or direct credit to the holder’s bank account.
x. Early Redemption: The Commercial Paper can be redeemed before maturity under specific options,
provided those options are mentioned in the offering document.
15. Conditions for Issue of Convertible Debt Securities
i. Authorization: The company must be allowed by its corporate documents (Memorandum and Articles of
Association) to issue convertible debt securities.
ii. Approval: The company must get approval from the relevant regulatory body (the Commission).
iii. Conversion Terms: The company must clearly disclose how and at what ratio the debt will be converted into
equity (shares) in the offering document.
iv. Dispute Resolution: The offering document must include a way to resolve any disputes related to the
conversion process.
v. 15a. Book Building Mechanism for Debt Securities
a. Purpose: The Book Building process helps to determine the profit rate for fixed-rate debt securities
and the spread (+/-) for floating-rate debt securities.
b. Offer Size: The total number of debt securities will be offered to the public, split into a "book-
building" portion and a "retail" portion.
c. Allocation: 75% of the issue is for book-building, and 25% for retail investors, although the retail
portion may be adjusted by the Commission.
d. Agreement: A written agreement must be made between the company, the designated institution,
and the book runner (the party responsible for managing the book building process), outlining each
party's roles and dispute resolution methods.
e. Publication: The company must publish the prospectus at least one day before the bidding process
starts.
f. Bidder’s Actions: For floating-rate instruments, bidders can suggest a spread (the difference from a
base rate like KIBOR).
g. Cancellation: If there are no bids, the book building process will be canceled.
h. Bidding Rules: Similar rules for book building and bidding of shares apply to debt securities.
i. Margin Money: The book runner collects margin money (initial payment) from individual investors,
and 10% from institutional investors, who can also have the margin reduced at the book runner’s
discretion.
j. Underwriting: The book-building portion must be underwritten (guaranteed) by one or more book
runners.
k. Bidding Process: The cut-off profit rate/spread will be determined using a reverse Dutch Auction
method, where bids are arranged in ascending order, and the lowest rates are prioritized.
l. Intimation to Bidders: Successful bidders will be informed of the cut-off profit rate/spread and the
number of securities allotted to them.
m. Payment Deadline: Successful bidders must pay the remaining balance within three working days,
or their margin money will be forfeited.
n. Issuance: Debt securities are issued only after the subscription ends, credited to the successful
bidders' accounts.
vi. 15b. Restrictions
a. Bidding Period: The bidding period can only be extended in extraordinary situations (e.g., bank
closure or system failure). Any extension must be approved by the Commission and announced
publicly.
b. Bidding Rules: Bidders cannot:
 1. Place consolidated bids (group bids).
2. Increase their bid profit rate/spread.
3. Decrease the bid amount.
4. Withdraw their bid.
c. Manipulation Prohibited: No one can manipulate the bidding process to create a false appearance
of active bidding or to influence the cut-off profit rate/spread.
vii. 15c. Procedure for Allocation of Debt Securities to Retail Investors
a. Supplement to Prospectus: After the book-building process, the company must publish a
supplement to the prospectus with details of the cut-off profit rate/spread, underwriting, and
allocations.
b. Retail Applications: Retail investors submit their applications for debt securities along with payment
or proof of payment.
c. Allocation of Securities: Within 10 working days, the company will allocate securities to successful
applicants, and return funds to those who were unsuccessful.
16. Post Issue Reporting and Disclosures
i. When a company finishes its public securities offering (like stocks or bonds), it has to provide detailed
reports on how the money from the sale is being spent:
a. Quarterly, Half-Yearly, and Annual Reports: The company must show where the money raised is
being used, as stated in their prospectus (the official offering document) until all commitments are
met.
b. Progress Reports: The company must send two types of reports to the securities exchange:
1. Half-Yearly Report: Describes the status of the project and any delays with reasons.
2. Annual Report: Gives a detailed breakdown of how the funds raised are being spent.
c. Final Report: Once all commitments have been met, the company must submit a final report,
reviewed by an auditor.
d. For Sukuk (Islamic Bonds): The company must comply with Islamic financial reporting standards
when preparing reports.
ii. 16a. Offering an Exit Opportunity in case of Change in Principal Purpose of Issue
a. If a company wants to change the main goal it stated in the prospectus (the reason for raising
money), it must:
1. Special Resolution: Get approval from shareholders through a special meeting and offer
those who disagree an "exit opportunity" to sell their shares.
2. Exit Price: The company must offer a price for the shares being sold that is the highest of:
a. The company’s current value from the latest financial statement.
b. The average share price over the last 6 months.
c. The price at which shares were originally sold in the public offering.
3. Time to Exit: The company must complete this exit offer within 30 days of the special
resolution passing.
4. Mandatory Exit Offer: If funds are misused and the original goal is not achieved on time, the
company must also offer an exit to shareholders.
iii. 16b. Relaxation
a. In cases where a government-owned company is being privatized through the capital market, the
regulations may be relaxed.
17. General Responsibilities of the Consultant to the Issue, Book Runner, Underwriter, Banker to an Issue, and Issuing
and Paying Agent
i. These parties play key roles in managing the public offering. Their responsibilities include:
a. Protect Investors: They must look out for the interests of the investors.
b. Act Ethically: They should always act with integrity, fairness, and professionalism.
c. Due Diligence: They need to check everything thoroughly and exercise independent judgment.
 d. Address Complaints: They should handle investor complaints promptly.
e. Avoid Conflicts of Interest: They must disclose any potential conflicts of interest to customers.
f. Keep Information Confidential: Communications with the securities exchange and commission
should remain private unless necessary.
g. Comply with Regulations: They must follow all laws and regulations, ensuring their employees do
the same.
h. Ensure Transparency: They should maintain a website with public information about the issue and a
process for handling complaints.
18. Functions of the Consultant to the Issue
i. The Consultant to the Issue is responsible for:
a. Preparing the Prospectus: The official document that explains the offer must meet all legal
requirements.
b. Support the Issuer: They help the company get approvals and assist with the agreements involved in
the issue.
c. Ensure Legal Compliance: They ensure the offering is carried out in line with the law.
d. Public Communication: They prepare advertisements and notices related to the offering.
e. Reporting: After the offering, the Consultant submits final reports to the securities commission.
19. Responsibilities of the Consultants to the Issue
i. Ensure Accuracy: They must verify that the application and prospectus meet all legal requirements and are
not misleading.
ii. Provide Adequate Disclosures: Investors should receive all necessary information in time to make informed
decisions.
iii. Avoid Misrepresentation: The Consultant must ensure no exaggerated or false claims are made.
iv. Participate in the Process: They must stay involved until the issue is complete, including dealing with any
complaints or regulatory actions.
v. Educate the Issuer: The Consultant must make sure the company understands its obligations and
responsibilities.
vi. Withdraw if Necessary: If the company doesn't address concerns, the Consultant can withdraw from the
assignment.
vii. The Consultant cannot:
a. Mislead or Make False Claims: They must not make false claims about their qualifications or
capabilities.
b. Submit False Information: They should not submit false or incomplete documents.
c. Engage in Market Manipulation: They must not be involved in any illegal practices, like creating
false markets or manipulating prices.
20. Responsibilities of the Book Runner
i. The Book Runner is in charge of making sure the whole bidding process for the issue is handled properly:
a. Infrastructure & Electronic System: Ensures that there are the right tools and online systems in
place to accept bids and run the process smoothly and fairly.
b. Blocking of Funds: Makes sure that the money from bidders is blocked in their bank accounts, so it’s
secure until the process is done.
c. Financial Capability: The Book Runner must have enough financial resources to cover any potential
defaults from bidders.
d. Software Use: Must use specific software for the bidding process, following an agreed-upon deal
with the institution in charge.
e. Dutch Auction Method: Ensures that the software used will display bids in a way that follows the
Dutch Auction method, which helps decide the price of shares.
f. Bid Access: Makes sure that bidders can log in and change their bids using secure login details.
g. Underwriting: Takes responsibility for underwriting part of the shares if needed.
 h. Associates Information: Gathers and records the unique ID numbers and names of anyone
connected to the company or the issue.
i. Block Related Parties: Blocks employees and related parties from participating in the bidding
process to avoid conflicts of interest.
21. Responsibilities of the Banker to an Issue
i. The Banker plays a vital role in managing the money and communication during the issue:
a. Provide Information: Ensures that the issuer gets timely information about the subscription process,
as mentioned in the official documents.
b. Blocking Money: When an application is received, the Banker immediately blocks the bid or
subscription money in the bidder’s account.
c. Unblocking Funds: After the bidding is done, the Banker releases the funds for those who weren’t
successful.
d. Legal Issues: Immediately informs the relevant authorities if any legal or penal action is taken
against them by the State Bank of Pakistan.
e. No Applications After Deadline: Does not accept any subscriptions after the closing date of the
issue.
22. Responsibilities of the Underwriter
i. An Underwriter takes on responsibility for securing shares that remain unsubscribed:
a. Confidentiality: Employees must agree not to misuse confidential information about the issue for
personal gain.
b. Check Regulatory Limits: Before entering into agreements, ensures they don’t exceed legal limits on
investment in the securities they are underwriting.
c. Subscribe to Unsubscribed Shares: If necessary, must buy any remaining shares within a certain
timeframe.
d. Sell Shares: The Underwriter must sell the subscribed shares on the market, not to insiders like the
directors or associates of the issuer.
e. Credit Rating: Publishes its credit rating in its financial reports and any promotional materials.
f. Prohibited Actions: Cannot enter into buy-back deals, misrepresent the issue, or give investment
advice without disclosing its interest in the securities.
23. Responsibilities of the Issuing and Paying Agent
i. The Issuing and Paying Agent ensures everything is done legally and correctly in terms of issuing and paying
for debt securities:
a. Agreement with Issuer: Must sign a contract with the issuer to handle the issue.
b. Conditions Met: Ensures the issuer follows all required regulations for issuing debt securities.
c. Collect Agreements: Collects and verifies agreements between the issuer and initial investors.
d. Verification of Documents: Makes sure the issuer’s documents, like the board’s resolution, are in
order and properly certified.
e. Debt Delivery: Delivers the debt securities to investors after receiving payment and handles
repayments when they come due.
f. Credit & Risk Disclosure: Must clearly inform investors of the risks involved and that they cannot
recover money from the issuer if there’s a default.
g. Default Notifications: In case of default by the issuer, the agent must notify investors and the
authorities.
24. Responsibilities of the Designated Institution in Case of Book Building
i. The Designated Institution is responsible for managing the technical side of the bidding process:
a. Record Information: Collects detailed information about the bidders, including contact details and
account numbers.
b. Bid Registration: Ensures that bidders are properly registered before the bidding starts and that
they provide necessary details.
 c. Track Bids: Keeps track of the bids, including the number of shares bid for, bid price, and the type of
bid.
d. Bid Restrictions: Ensures that bids below a certain price or outside the allowed price range are not
accepted.
e. Order Book Display: Displays information about the bids and prices to bidders, helping them decide
what price to offer.
f. Strike Price Discovery: Determines the final price (strike price) after the bidding ends.
g. Alerts: Sends out updates to bidders via SMS and email when bids are placed or revised.
h. Bid Revisions: Allows bidders to revise their bids within the allowed time.
25. Repeal and Savings
i. This section explains the transition from old rules to new ones:
a. Repeal of Old Regulations: The old Book Building Regulations (2015) and other related guidelines
are now repealed.
b. Continuity of Actions Under Old Regulations: Any actions that were done under the old rules (like
registrations or investigations) will still be valid as long as they don't conflict with the new
regulations.

Practice Questions (Study Text)

6(7), 7(8), 8(15) and First Schedule(1)(ii) of Public

Offering Regulations, 2017.

 Upon analysing following violations are revealed:

o As per Public Offering Regulations 2017; the prospectus has to be issued, circulated and published not
less than seven (7) days and more than thirty (30) days before the commencement of the subscription
period for the retail portion of the issue and in the given case it was published six (6) days before instead
of seven (7).
o As per Public Offering Regulations 2017; the eligible investors shall not place consolidated bids. A bid
application which is fully or partially beneficially owned by persons other than the one named therein is
considered as a consolidated bid and it appeared that Mr. Ahsan had placed a consolidated bid on
behalf of himself and his friend.
o According to the Public Offering Regulations 2017; the associates of the Issuer as disclosed in the
Prospectus shall not in aggregate make bids for shares in excess of ten (10) percent of the Book Building
Portion but Sukoon Ltd, the associated undertaking of Aman Ltd made a bid for twelve (12) percent.
o Since bids can be made at floor price or within the price band with an upper limit of 40% above floor the
floor price, therefore the strike price of Rs.95 against the floor price of Rs.43 is not possible.
 Regulation 2(xxi), 9(11) and 9(12) of Public Offering
Regulations, 2017.

 On the basis of the figures provided in the question, according to the Dutch Auction Method, the strike price
would be determined at Rs.18.0 per share to sell the required quantity of 42.7 million ordinary shares.
o At Rs.22 per share, investors are willing to buy only 20 million shares, since 22.7 million shares are still
available, therefore the price will set lower.
o At Rs.20 per share, investors are willing to buy 5 million shares, since 17.7 million shares are still
available, therefore, the price will set lower.
o At Rs. 19 per share, investors are willing to buy 5 million shares, since 12.7 million shares are still
available, therefore, the price will set lower.
o At Rs. 18.0 per share, investors are willing to buy 30 million shares and the cumulative number exceeds
the offer quantity of 42.7 million shares therefore Rs.18 becomes the Strike Price.
 The bidders, who have submitted bids at prices above the Strike Price i.e. Institution A and Institution B, will be
issued shares at the Strike Price and the differential would be refunded. In case the bids received are sufficient
to allot the total number of shares offered for sale under the Book Building Portion, the allotment shall be made
on the basis of highest bid priority that is the bid made at the highest price shall be considered first for the
purpose of allotment of shares.
 Institution C has also made a Bid at the Strike Price and in case all the bids made above the Strike Price are
accommodated and shares are still available for allotment, such available shares will be allotted against the bids
made at the Strike Price strictly on proportionate basis.
 The bidders who have submitted bids at prices below the Strike Price i.e. Institution D and Institution E do not
qualify for allotment and their money would be refunded.
 Regulation 3(1), 4, 5(1), 5(2) and 5(4) of Public Offering
Regulations, 2017.

 BL, as issuer of the shares, should satisfy the following financial and operational conditions:
o the Issuer i.e. BL has obtained approval from its Board of Directors relating to Public Offering.
o Issuer has profitable track record for at least 2 preceding financial years from its core business activities.
BL has profitable track record of preceding 6 years.
o Certain other criteria are applicable in case of green field project. Since BL is expanding its business,
those criteria are not applicable.
o Conclusion: Based on the above, BL is eligible to make public offer of its shares.
 Nasim family as BL’s sponsors shall have to retain entire shareholding of 72 million shares [90x80%] for at least
12 months from the last date of subscription. Further, at least 30 million shares [(90+30)x25%] being 25% of BL’s
paid up capital shall be retained for at least 3 financial years from the last date for public subscription.
o BL’s sponsors may sell their shareholding through block sale to any other person, with the approval of
the securities exchange. The person to whom the shares are sold shall be deemed sponsor for the
purpose of the Regulations.
 Fixed Price Method where offer price is set by the issuer in consultation with the consultant to the issue.
 Book Building Method where bids received are listed in descending order of price evidencing demand at
different price levels at floor price or within the price band. A strike price is arrived at through Dutch Auction
Method.

Rule Book of PSX

Chapter 5
2. Chapter not in syllabus
3. Chapter not in syllabus
4. Chapter not in syllabus
5. LISTING OF COMPANIES AND SECURITIES REGULATIONS
5.1. Definitions
5.2. LISTING OF COMPANIES AND SECURITIES:
[Link] IN THE SECURITIES OF A COMPANY AT THE EXCHANGE:
a. Companies or their securities must be listed and approved by the Exchange before trading can take
place on the stock market.
 b. The company applying for listing must submit an application with required documents to the
Exchange. A copy of the application is also sent to the Commission.
c. The Exchange may ask for extra documents or information if needed.
d. The listing application won’t be accepted until all necessary requirements are met by the company
and its consultants.
e. The draft prospectus (company's financial details) will be published on the Exchange's website for
five working days to allow public feedback. The company must address all comments satisfactorily.
f. The Exchange will approve or reject the listing within 12 working days after receiving all required
documents. If the application is rejected, reasons will be provided within two weeks.
g. The company must provide honest and complete information when applying for listing.
h. If a company already has ordinary shares listed, it can apply to list other types of shares without
needing a public offering.
[Link] EXCHANGE SHALL NOT ENTERTAIN LISTING APPLICATION OF A COMPANY:
a. The Exchange will not accept a listing application if the company or its key people have unpaid debts
or defaults as shown in their credit report.
b. The Exchange won’t approve the listing if the company’s directors, sponsors, or significant
shareholders have been involved in a company that:
1. Has defaulted according to the Exchange.
2. Had its trading certificate canceled or forfeited by the Exchange.
3. Was delisted due to failing to follow regulations.
c. However, the Commission may allow a listing under specific circumstances if the issues are corrected.
[Link] Write-Off Disclosure:
a. Companies must disclose in their prospectus if they had a loan of Rs. 500,000 or more written off by a
bank in the last five years.
5.3. UNDERTAKING:
5.3.1.A company applying for listing must provide a written promise on Form-II as part of the application
process.
5.4. PUBLIC OFFER BY COMPANIES/ MODARABAS/ SPAC:
[Link] of Shares to the Public:
a. For Companies Seeking Listing:
1. If the company's capital after issuing shares is up to Rs. 2.5 billion, at least 10% must be offered
to the public, and the company must increase public shareholding to 25% within three years.
2. If the capital is between Rs. 2.5 billion and Rs. 5 billion, at least 10% must be offered, with an
increase to 15% within three years.
3. If the capital is between Rs. 5 billion and Rs. 10 billion, at least 10% must be offered.
4. If the capital is over Rs. 10 billion, at least 5% must be offered.
b. For Already Listed Companies:
1. A listed company offering more shares must offer at least Rs. 100 million worth of shares.
[Link] Pakistanis Allocation:
a. Companies can allocate up to 20% of the shares to overseas Pakistanis. If there is undersubscription,
the remaining shares will be allocated to the other group (resident or non-resident Pakistanis).
[Link] Allocation:
a. The company can allocate up to 5% of shares to its employees as part of the public offer.
[Link] Listing:
a. For Modarabas (Islamic investment companies), 30% of the shares must be purchased by sponsors or
their related parties, while the remaining 70% must be offered to the public. The Exchange may relax
these rules in certain cases.
[Link] Allocation Terms:
a. Shares must be allotted according to the rules set out in the Public Offering Regulations.
 [Link] Building Process:
a. If shares are sold through the Book Building process, the company must follow the relevant
regulations.
5.5. PROSPECTUS, ALLOTMENT, ISSUE AND TRANSFER OF SHARES:
[Link] Requirements: A company must be a registered public limited company and have a minimum paid-
up capital of Rs. 200 million to be listed.
[Link] in Gilgit Baltistan and Azad Jammu & Kashmir: Companies from these regions are eligible to
be listed and treated equally as companies from Pakistan.
[Link] Issue Requirement: A company cannot be listed unless it has made a public offering with at least
500 applicants subscribing to its shares.
[Link]: The regulations above do not apply to securities other than shares, unless specified by law or
government directive.
[Link] for CDS: Companies must ensure that the securities they offer to the public are eligible to be
held in the Central Depository System (CDS).
[Link] Requirements: The company must use recent audited accounts (no older than 8 months) in its
prospectus. The prospectus should also disclose if a financial institution has written off a loan of Rs.
500,000 or more in the last five years.
[Link] Approval: The prospectus must be approved by the Exchange before being submitted to the
Commission. If the company doesn’t comply with Exchange requirements, approval can be denied.
[Link] Process:
a. The company must inform the Exchange of the subscription details within 3 working days of the
subscription period closing.
b. Shares should be allotted to successful applicants within 5 working days. Unsuccessful applicants will
receive refunds.
c. If the listing application is rejected, the company must refund all money to applicants within 8 days,
or its directors will be personally liable to pay back with a penalty.
d. In case of oversubscription, the company must submit a ballot register to the Exchange.
e. The company must credit the shares to the successful applicants' CDS accounts within 5 working
days.
[Link] Payment:
a. The company must pay a brokerage fee of no more than 1% of the value of shares sold through
brokers.
5.5.10. Split/Consolidation of Shares:
a. The company must split shares into marketable lots within 7 days of receiving a request.
b. The company must consolidate or split shares as requested by shareholders within 30 days. They can
charge up to Rs. 100 for each certificate that is split or consolidated.
5.5.11. Closure of Share Transfer Books:
a. The company can close its share transfer books, but must notify the Exchange at least 7 days in
advance. The closure period cannot exceed what’s allowed by law.
b. The company must treat the posting date as the date when shares are lodged for transfer, provided
documents are received before action is taken.
c. The company must immediately issue transfer receipts upon receiving shares for transfer.
d. No fees can be charged for transferring fully paid shares.
5.5.12. Lien on Fully Paid Shares:
a. A company cannot place any lien (claim) on fully paid shares, and there should be no restrictions on
transferring them. This rule applies to all listed securities.
5.6. DISCLOSURE OF INFORMATION, TRADING HALTS AND CREDIT OF DIVIDENDS:
5.6.1. DISCLOSURE OF PRICE-SENSITIVE INFORMATION:
 a. Companies listed on the stock exchange must share important, market-changing information with
both the Commission and the Exchange as soon as they have it. They must do this before releasing
the information to the media or others. This could include:
1. Any major changes in the company's business.
2. Deals like mergers, acquisitions, or selling important assets.
3. Board decisions on dividends or share buybacks.
4. Any losses or changes in the company’s financial position.
5. Information on fraud, defaults, or legal actions against the company.
5.6.2. DISCLOSURE IN RESPONSE TO A RUMOR OR A REPORT CONTAINING SENSITIVE INFORMATION:
a. If a company hears a rumor or sees a report that could impact its share price, it must confirm or deny
the information and provide clear facts to the stock exchange within one day.
5.6.3. DISCLOSURE IN CASE OF UNUSUAL MOVEMENTS IN PRICE AND/OR VOLUME OF A SECURITY:
a. If a company’s stock price or trading volume changes unusually, the stock exchange will ask the
company for an explanation. The company must respond quickly, either explaining what caused the
change or stating that they don’t know the cause.
5.6.4. DISCLOSURE OF INTEREST BY RELEVANT PERSONS HOLDING COMPANY'S SHARES:
a. Directors, CEOs, and other major shareholders of a company must inform the company secretary if
they buy or sell shares in the company. They must provide details like the number of shares, price,
and type of transaction. The company secretary then sends this information to the exchange for
public knowledge. There is also a "closed period" during which no director or executive can trade
shares, usually before announcing company results.
5.6.5. DISCLOSURE OF INFORMATION RELATING TO ACQUISITION OF MORE THAN TEN PERCENT VOTING
SHARES OF A COMPANY:
a. If someone buys more than 10% of a company's shares, the exchange must immediately share that
information with the public.
5.6.6. DISCLOSURE OF SIGNIFICANT RELATED PARTY TRANSACTIONS:
a. If a listed company does any big transactions (worth more than 10% of its assets or turnover) with
parties connected to the company (like family members of directors or other businesses they own), it
must disclose details of these transactions. This includes the names of people involved, the nature of
the transaction, and why it’s beneficial to the company.
b. 5.6.6A. DISCLOSURE OF INFORMATION RELATING TO STAY OBTAINED FROM THE COURT AGAINST
INSPECTION OR INVESTIGATION PROCEEDINGS:
1. If a company is involved in any legal investigations or inspections by authorities, and the court
stops those actions, the company must immediately inform the exchange.
5.6.7. NON COMPLIANCE WITH DISCLOSURE OF PRICE SENSITIVE INFORMATION:
a. If a company fails to disclose important financial or market-sensitive information on time, it faces
penalties. The fine could range from PKR 100,000 to PKR 1 million, and the CEO or CFO could also be
penalized. If the company continues to fail, additional daily fines could apply.
5.6.8. Quarterly and Annual Financial Results:
a. Every listed company must send its financial results (quarterly and annually) to the exchange
according to the rules set by the exchange.
5.6.9. PROVISION OF STATUTORY REPORTS, AUDITED ACCOUNTS, NOTICE, RESOLUTION AND QUARTERLY
REPORTS TO THE EXCHANGE:
a. Companies must send certain reports (like their annual and quarterly financial reports, and notices to
shareholders) to the exchange before they share them with their shareholders. This includes detailed
reports from auditors and directors.
5.6.10. PAYMENT OF DIVIDEND:
a. A company must pay dividends (the share of profits given to shareholders) to its shareholders on
time and inform the exchange as soon as the payment is made.
 5.6.11. SUSPENSION OF TRADING IN THE SHARES/WARRANTS OF A LISTED COMPANY PURSUANT TO SCHEME
OF MERGER/AMALGAMATION/RECONSTRUCTION:
a. If a company is merging with or acquiring another company, or undergoing major changes, trading in
its shares may be suspended during the process. Once the changes are complete, the stock exchange
will provide information about the company's delisting or re-listing.
5.7. ANNUAL GENERAL MEETINGS/ANNUAL REVIEW MEETINGS, ETC.
5.7.1. HOLDING OF MEETING:
a. Date and Time Notice: Listed companies must inform the stock exchange about when their annual
general meetings (AGMs) will be held. They should try not to schedule them at the same time as
other companies and should offer an online link for shareholders to join the meeting.
b. Timing of Meeting: A listed company must hold its AGM or annual review meeting and present its
financial statements within 120 days after the end of its financial year. If it needs extra time, it must
inform the exchange within 48 hours, along with proof of approval for the extension.
5.7.2. FURNISHING OF MINUTES OF MEETING AND FREE FLOAT RELATED INFORMATION:
a. Meeting Minutes: The company must send certified copies of the AGM and any special meetings'
minutes to the exchange within 60 days.
b. Free-Float Details: The company must regularly update the exchange on the number of shares
available for public trading (free float) every quarter. It must also submit an annual report, verified by
an auditor, about these free float details within 120 days after the financial year ends.
c. Penalties for Mistakes: If a company doesn’t provide the correct free float information, it will be
fined Rs. 5,000 per day until the correct details are submitted.
5.7.3. 5.7.3. HOLDING OF CORPORATE BRIEFING SESSION:
a. Corporate Briefing: Each listed company must hold at least one briefing session each year to inform
the public about its performance. They need to notify the exchange about the details in advance.
5.8. INCREASE OF CAPITAL AND ALLIED ISSUES:
Capital Changes: If a listed company decides to change its capital (e.g., issuing more shares or reducing capital),
it must inform the exchange right away.
5.8.1. THROUGH ISSUING OF ENTITLEMENT LETTERS OR RIGHT OFFERS:
a. Entitlement Letters/Right Offers: The company must send out entitlement letters or offers to buy
more shares to its current shareholders within 30 days after reopening the share transfer register.
The company may ask the exchange for an extension of up to 30 days, but this will cost extra fees.
5.8.2. THROUGH ISSUING OF BONUS SHARES:
a. Bonus Shares: The company must distribute bonus share certificates to shareholders within 30 days
after reopening the share register. These shares will be either sent directly to shareholders or
credited to their accounts with the Central Depository Company (CDC).
5.9. OTHER MATTERS:
5.9.1. UPDATED COMPANY DOCUMENTS:
a. Company’s Legal Documents: A company must submit its updated legal documents (memorandum
and articles of association) to the exchange once the Commission approves any changes.
5.9.2. BOARD MEETING NOTIFICATION:
a. Board Meetings: The company must notify the exchange at least one week in advance about any
board meeting held to discuss quarterly or annual accounts or declare entitlements (like dividends).
5.9.3. NO TRADING FOR 180 DAYS:
a. Inactive Shares: If there has been no trading in a company’s shares for 180 days, the exchange may
list the shares at their nominal (par) value, with approval from the Commission, even if their previous
price was below this value.
5.10. QUALITY OF AUDIT
5.10.1. FACILITATING AUDIT REVIEW:
 a. Audit Review: Listed companies must allow the Institute of Chartered Accountants of Pakistan (ICAP)
to review their auditors' working papers to ensure the audit quality.
5.10.2. RESTRICTIONS ON AUDITOR APPOINTMENT:
a. Professional Misconduct: A company cannot hire or keep an auditor who has been found guilty of
professional misconduct for the past 5 years (or less if decided by the Commission).
b. Misconduct Examples: This includes failing to report financial errors, misleading statements, or
engaging in criminal acts.
5.10.3. PROHIBITED AUDIT SERVICES:
a. Services Auditors Can't Provide: Auditors cannot offer certain services to a listed company, such as
preparing financial statements, performing internal audits, or providing financial advice that could
conflict with their role as auditors.
5.10.4. AUDITOR’S RELATIONSHIPS:
a. Conflicts of Interest: A company cannot hire an auditor who has a close relationship (e.g., family ties
or ownership) with the company's CEO, CFO, or key personnel.
5.10.5. AUDITOR'S FAMILY TIES:
a. Family Connections: No company can hire an auditor whose close relatives (spouse, children, etc.)
work as key company executives.
5.10.6. MANAGEMENT LETTER:
a. Audit Findings: The company’s external auditors must provide a letter to the Board of Directors
within 45 days of the audit report, highlighting any significant issues or concerns.
5.11. NON-COMPLIANT SEGMENT, WINDING-UP SEGMENT, RISK WARNING ALERT, SUSPENSION AND DE-
LISTING:
5.11.1. A Listed Company may be placed in the Non-Compliant Segment if:
a. Suspended Operations for One Year: A company that has stopped its main business operations for a
whole year can be moved to the "Non-Compliant" list.
b. Failure to Hold AGM/ARM: If the company does not hold its required Annual General Meeting
(AGM) or Annual Review Meeting (ARM) as per the law, it could be placed in this category. If this
happens, the company has six months to fix this before a risk warning is issued.
c. Failure to Submit Audited Financial Statements: If the company fails to submit its annual audited
financial statements for the previous year, it will be placed in this segment. If the company still hasn't
submitted them after six months, a risk warning will be issued.
d. Failure to Pay Dues: If a company hasn't paid listing fees, penalties, or other required payments for
two years, it may be placed here.
e. Failure to Join CDS: If the company hasn’t joined the Central Depository System (CDS) after its
security has been approved, it will be suspended from trading until this is fixed.
f. CDS Eligibility Revoked: If its CDS eligibility is revoked, trading will be suspended immediately.
g. Audit Disclaimer or Adverse Opinion: If the company's auditor issues a disclaimer or adverse opinion
on the audit report, it can be moved to this segment.
h. License Revocation: If the company’s license is revoked by the authorities, it will be immediately
suspended from trading.
i. General Non-Compliance: If the company doesn’t follow any other regulations or the Exchange feels
it is necessary to protect investors, it may be placed in this segment.
5.11.2. A Listed Company may be placed in the Winding-up Segment:
a. Winding-up Order: If the company is ordered to be shut down by the relevant authority, it will be
placed in this segment.
b. Winding-up Petition: If a petition is filed in court to shut down the company, it will be placed here.
c. Creditor or Shareholder Petition: If a creditor or shareholder files a petition to wind up the company,
and their claims are significant, it will be placed in this segment.
 d. Voluntary Winding-up: If the company decides to wind up voluntarily by passing a special resolution,
it will be placed in this segment.
5.11.3. Actions the Exchange Will Take:
a. Notice to Public: The Exchange will notify the public about the company’s non-compliance or
winding-up status.
b. Freezing Shares: The Exchange will instruct the Central Depository (CDS) or Registrar to freeze shares
of the company and key individuals.
c. Rectify Non-Compliance: The company will be told to fix its issues within a set time frame (usually 90
days).
d. Risk Warning: If the company doesn't fix its issues within the time frame, a Risk Warning Alert will be
issued and the company will get another 90 days to fix things.
e. Buy-back Order: If the issues aren’t fixed, the company’s majority shareholders will be ordered to
buy back shares from other investors.
f. Delisting: If the buy-back isn’t completed on time, the company will be removed from the Exchange.
g. Winding-up Proceeding: If the buy-back doesn’t happen, the Exchange may forward the case to the
Commission to start winding-up procedures.
5.11.4. Market Notifications:
a. The Exchange will inform the market about the company’s status or if it is restored to regular trading.
5.11.5. Suspension of Trading:
a. The Exchange can suspend trading in a company’s shares if it hasn’t fixed its issues. The company will
get 14 days to explain why trading shouldn’t be suspended. If nothing is fixed after 7 more days, the
shares will be suspended.
5.11.6. Delisting upon Liquidation:
a. A company will be delisted if it is liquidated (shut down and assets sold), either through court
appointment of a liquidator or a shareholder resolution.
5.11.7. Delisting Procedure:
a. Before delisting a company, the Exchange must offer the company a chance to explain its side. If the
company doesn’t respond, it may be delisted without hearing from them.
5.11.8. Multiple Grounds for Suspension:
a. If a company has more than one issue leading to suspension or delisting, the Exchange will follow the
procedure for the issue that causes the suspension or delisting first.
5.11.9. Relaxing Actions for Non-Compliance:
a. If a company is showing improvement and it’s in the best interest of its shareholders, the Exchange
may relax the actions (like the buy-back order or delisting), but only for up to 60 days at a time.
5.11.10. Default and Violation:
a. The Exchange has the authority to place a company in the Non-Compliant Segment, suspend its
trading, or delist it if the company has violated the rules.
5.11.11. Separate Trading for Suspended Companies:
a. If a company is in the Non-Compliant or Winding-Up Segment, its shares will be traded separately,
and the prices will be shown separately in market reports until the company returns to normal
trading.
5.11.12. Communication of Placement:
a. Any placement in the Non-Compliant or Winding-Up Segment, suspension, or delisting will be
communicated to the Commission, the company, and the public.
5.12. EFFECTS OF SUSPENSION OF TRADING IN THE SECURITIES OF A SUSPENDED COMPANY:
5.12.1. Restrictions on Physical Share Transfers:
a. Transfer Restrictions: Physical share transfers (paper-based) will be restricted during the suspension
period. However, if shares were bought before the suspension, they can still be transferred if proper
documents are provided.
 5.12.2. Company’s Responsibility:
a. The company must make sure that no new share transfers happen during the suspension, except for
the cases mentioned above. The company must report any transfers to the Exchange within 48
hours.
5.13. 5.13. Restoration of Trading in the Shares of Suspended Company:
a. If a company’s stock is suspended from trading, it can be reinstated if the reason for suspension is
resolved to the satisfaction of the Exchange.
b. If the suspension lasts for 180 days or more, the company must meet certain conditions, such as:
1. Presenting a plan for resuming trading, with specific steps and timelines.
2. Publicly announcing how the issue causing the suspension was fixed.
3. Holding a meeting for shareholders and analysts to explain what happened.
4. Publishing updated financial reports or other relevant documents.
5. Meeting any other conditions specified by the Exchange.
5.14. Voluntary De-listing:
5.14.1. 5.14.1. Intimation of VD: When a company decides to buy back shares and delist itself from the
Exchange, it must inform the Exchange right away. This notice should include the proposed purchase price
and reasons for delisting.
5.14.2. Buyback Price Criteria: The price the company offers to buy back shares must meet at least one of these
conditions:
a. The average price of shares from the last 5 days before the board meeting.
b. The average price over the last 3 years.
c. The intrinsic value of shares, based on a recent independent valuation.
d. The P/E (Price-to-Earnings) ratio if the company made a profit.
e. The highest price at which the company bought back shares in the last year.
5.14.3. Formal Application for VD:
a. The company must submit a formal request for delisting within 45 days. This request must include:
1. A non-refundable fee.
2. Any unpaid fees to the Exchange.
3. A valuation report and certificate from auditors.
4. A commitment from the sponsors to buy back shares from minority shareholders for at least 60
days and up to a year.
5.14.4. Minimum Purchase Price:
a. The Exchange will set the minimum price for buying back shares based on the criteria in 5.14.2, but
they may consider other factors too.
5.14.5. Quantum to Qualify for Delisting:
a. If the sponsors own less than 90% of the shares, they must buy enough shares to own at least 90% to
qualify for delisting.
b. If they already own 90% or more, they do not have to buy more shares but must still follow buyback
rules.
5.14.6. Condition for Voluntary Delisting:
a. The company must follow all procedures, guidelines, and conditions set by the Exchange for
voluntary delisting. The Exchange can refuse the delisting request for any reason.
5.14.7. Sponsors’ Acceptance/Appeal:
a. The sponsors must accept the price and amount set by the Exchange within 10 days.
b. If they disagree, they can appeal the decision to the Commission.
c. If no acceptance or appeal is made within the time limit, the delisting request is withdrawn.
5.14.8. General Meeting of Shareholders:
a. The company must call a meeting within 30 days to get shareholders' approval for delisting at the
price and terms set by the Exchange.
 5.14.9. Post-General Meeting:
a. After shareholders approve the delisting, the company must:
b. Provide a bank guarantee to secure the buyback.
c. Publish the buyback details in newspapers.
d. Notify minority shareholders about the decision.
5.14.10. Initial Buyback Period:
a. For 60 days, the sponsors must buy back shares from minority shareholders at the price approved by
shareholders. All transactions must go through the Exchange.
5.14.11. Post-Initial Buyback Period:
a. After the 60-day period, the company must report the number of shares bought back by the sponsors
and the percentage of shares held by both sponsors and minority shareholders.

b.
5.14.12. Successful Buyback:
a. If the sponsors successfully buy the required amount of shares, the company is officially delisted
from the Exchange.
5.14.13. Public Notice Post-Successful Buyback:
a. After the buyback period ends, the company must inform minority shareholders that they can still
sell their shares for up to a year by contacting the Purchase Agent.
5.14.14. Sponsors’ Ongoing Obligation:
a. The sponsors must continue to buy shares from minority shareholders for up to a year after the initial
buyback period ends, as per the agreed terms.
5.15. Not in syllabus
5.16. Not in syllabus
5.17. Not in syllabus
5.18. 5.18. Relaxation:
5.18.1. If the Exchange finds it impractical for a company to meet certain voluntary delisting requirements, it
can relax those rules, but must provide reasons and set conditions for the relaxation.
5.19. LISTING AND ANNUAL FEES:
5.19.1. LISTING FEE SCHEDULE:
a. Initial Listing Fee: A company applying to list on the stock exchange must pay a one-time fee of 0.1%
of its total paid-up capital, with a maximum of PKR 2.2 million.
For open-ended mutual funds, the fee is 0.05% of the total fund size, capped at PKR 500,000.
b. Fee for Increased Capital: If a company increases its paid-up capital after listing, it must pay 0.2% of
the increase in capital.
c. Annual Listing Fee: Every year, a company pays a fee based on its market value (calculated using the
average price of its shares from the previous year and the number of shares). The fee increases with
the company's market capitalization, but there’s a cap of PKR 5 million. For mutual funds, the fee is
0.025% of the total fund size, capped at PKR 50,000.
Companies don’t have to pay this fee for the first 12 months after listing.
d. Payment Deadline: Fees must be paid in advance by September 30th for each financial year.
e. Late Payment Surcharge: If a company fails to pay by September 30th, it will face a 1.5% monthly
surcharge until the fee is paid.
f. Withdrawal or Refusal of Listing: If a company withdraws or is refused listing, the exchange may
charge a service fee, up to PKR 500,000, which may be deducted from the initial listing fee.
 g. Revalidation Fee: If the approval for issuing a prospectus expires, the company must pay a
revalidation fee of 0.05% of its paid-up capital, up to a maximum of PKR 1 million.
5.19.2. LISTING FEE PAYMENT PROCESS:
a. Payment Methods: Fees should be paid by cheque, pay order, bank draft, or electronic transfer at
any branch of the bank in Karachi.
b. Non-payment Actions: If a company doesn’t pay, the exchange can list its name publicly on the
website or take legal action to recover the dues.
5.19.3. DISCIPLINARY ACTIONS AGAINST NON-PAYMENT OF PENALTIES:
a. Action for Penalties: This section is omitted in this version.
5.20. COMPLIANCE WITH ACCESS TO INSIDE INFORMATION REGULATIONS, 2016:
a. Maintaining a Register: Listed companies must keep a list of employees with access to inside
information and update it regularly.
b. Designated Officer: A senior manager must be appointed to manage and update this list and ensure
the reasons for including or excluding someone are properly recorded.
5.21. DISCIPLINARY ACTIONS:
5.21.1. Disciplinary Actions for Non-compliance:
a. Potential Actions: If a company doesn’t follow the regulations, the exchange can take actions like:
1. Issuing advice, warnings, or reprimands.
2. Imposing conditions or restrictions on the company.
3. Requiring the company to fix its non-compliance.
4. Imposing fines for each violation, which can increase daily if the issue continues.
b. Penalty Details: Penalties can range from PKR 5,000 to up to PKR 200,000 for different violations.
Fines can also increase for ongoing issues. However, companies can appeal for lower fines based on
their situation.
5.21.2. Actions for Non-compliance: If a company fails to comply or provides false information, the exchange
can fine up to PKR 500,000 per violation, with additional fines for continuing non-compliance. The
company must be given a chance to explain before penalties are imposed.
5.21.3. Payment of Penalty: All fines must be paid to the exchange.
5.21.4. Suspension or Delisting: If a company doesn’t comply, the exchange can suspend or even delist it. The
company must pay any penalties before being restored to listing.
5.21.5. Legal Action: Any action taken by the exchange is separate from other actions that may be taken by
regulatory authorities or legal bodies.
5.21.6. 5.21.6. Hearing for Violations: A senior official may hold a hearing if a company is found violating
regulations. The company’s CEO or a senior representative must attend and provide proof of their
authority to act on behalf of the company. After the hearing, a decision will be made within 30 days, with a
possible 15-day extension if needed.
5.21.7. 5.21A. APPEAL PROCEDURES:
a. 5.21A.1. Appeal Against Disciplinary Action: If a company is unhappy with the penalty imposed, it
can file an appeal to the Appellant Committee.
b. 5.21A.2. Appeal Committee: The appeal will be reviewed by a committee made up of industry
experts and senior exchange staff. The committee’s decision is final.
c. 5.21A.3. Filing the Appeal: The appeal must be filed within 30 days of receiving the enforcement
order. An appeal fee of PKR 5,000 must be paid, and if the appeal is successful, the fee will be
refunded.
1. The appeal should include the reasons for the appeal and any new evidence that was not
considered in the initial decision.
d. 5.21A.4. Appeal Decision Time: The appeal must be decided within 45 days of filing. If this isn’t
possible, the exchange must provide reasons and extend the time by up to 15 days.
 e. 5.21A.5. No Further Appeals: The decision of the Appellant Committee is final, and no further
appeals will be allowed.
5.22. 5.22. REVERSE MERGER REGULATIONS:
5.22.1. Applicability to Listed Company: These rules apply to companies that are listed on the stock exchange
when they consider a Reverse Merger transaction. They are intended to ensure that these companies
provide timely and transparent information.
5.22.2. Intimation to the Exchange: When a listed company’s board of directors approves the idea of merging
with an unlisted company, the listed company must inform the stock exchange right away.
a. Additionally, the listed company must get confirmation from the unlisted company that it also has
board approval to start merger discussions.
5.22.3. Exchange's Review:
a. The exchange may ask for more information to decide if the proposed transaction qualifies as a
Reverse Merger.
b. The exchange will inform the company in writing within 15 days whether the transaction is
considered a Reverse Merger or not.
c. If it is, the listed company (also called a "Listed Shell Company") must follow all relevant regulations.
5.22.4. Information to be Submitted:
a. The listed company must submit detailed documents to the exchange and confirm in writing that the
company resulting from the merger (called the "Surviving Company") will meet certain conditions,
including:
1. A minimum paid-up capital of Rs. 200 million.
2. The amount of shares that are freely available for public trading (called "Free Float") must meet
certain requirements based on the size of the company:
i. For companies with a share capital up to PKR 2.5 billion: At least 10% of shares must be
freely traded, and this must increase to 25% within three years.
ii. For companies with a share capital between PKR 2.5 billion and PKR 5 billion: 10% of
shares must be freely traded, with the requirement to increase to 15% within three years.
iii. For companies with a share capital between PKR 5 billion and PKR 10 billion: 10% of
shares must be freely traded.
iv. For companies with a share capital above PKR 10 billion: At least 5% of shares must be
freely traded.
v. The promoters and major shareholders should not have been involved in certain types of
financial mismanagement or violations in other companies in the past five years.

vi.
3. The company should not owe overdue loans to any financial institution or government
agencies.
4. The company and its promoters should not have been involved in fraudulent activities.
5. Sponsors’ shares should be locked for at least one year and they should retain 25% of the
company’s shares for at least three years.
5.22.5. Confirmation from the Exchange: Before seeking shareholder approval for the merger, the listed
company must get confirmation from the exchange that it has followed all the necessary steps for a
Reverse Merger.
 5.22.6. Consequences for Non-Compliance: If the listed company proceeds with the merger without following
the necessary rules, the exchange can put the company in a special "Non-Compliant" segment, suspend
trading of its shares, or even remove the company from the stock exchange.
5.22.7. Relaxation of Requirements: In special cases, if it is difficult for the company to meet certain
requirements, the exchange may relax some of the rules, but it will do so with conditions to ensure
fairness.
5.23. DISSEMINATION OF INFORMATION RELATING TO STATEMENT OF COMPLIANCE WITH THE LISTED
COMPANIES (CODE OF CORPORATE GOVERNANCE) REGULATIONS, 2019:
a. The stock exchange will publish information on its website about how listed companies are
complying with the Code of Corporate Governance Regulations (2019), including an auditor's review
of the company's compliance. This helps the public stay informed about how well companies are
following good corporate practices.
5.24. POWER TO OBTAIN DOCUMENTS:
a. The stock exchange has the authority to request documents and information from a listed company,
its management, or any related individuals or advisors. This is done to investigate potential violations
of the regulations. The exchange may require this information in written or electronic form to ensure
the company is complying with the rules.

Practice Questions (Study Text)

Regulation 5.6.1, 5.6.9, 5.9.2, 5.7.2 and 5.5.11 of

Pakistan Stock Exchange Rule Book.

 The company would be required to provide the following information to the Stock Exchange:
o Date, time and place of its board meeting at least one week in advance.
o Decision of the Board about cash dividend and approval of the audited accounts immediately after the
meeting. The information is required to be communicated to the Exchange prior to its release to any
other person or print/ electronic media.
o DL shall send to the Exchange such number of copies of its annual report and audited accounts as may
be prescribed by the Exchange not later than 21 days before a meeting of shareholders is held to
consider the same.
o DL shall furnish certified true copies of minutes of its annual general meeting within 60 days of such
meeting.
 As DL plan to hold its AGM by 15 July 2015, the notice of AGM should be sent at least 21, days before the
meeting i.e. latest by 24 June 2015.
o It can close its books for a period of 7-15 days and that period should fall between 30 June 2015 to 14
July 2015.
o Further, DL is also required to give minimum of 7 days’ notice to the PSX prior to closure of share
transfer books, therefore, this aspect should also be considered by the directors in deciding the dates of
book closure.
 Regulation 5.14.2 & 5.14.7of the Pakistan Stock
Exchange Rule Book.

 The Exchange shall determine the minimum percentage of shares to be purchased by sponsors (Malik and
Family) to qualify for voluntary de-listing. In case of disagreement of sponsors on minimum percentage of
securities to be purchased as determined by the Exchange, Malik and Family can file an appeal with the
Commission within 10 days of receipt of communication of such determination under intimation to the
Exchange. The decision taken by the Commission will be final and binding.
 Minimum purchase price proposed by the sponsors will be the highest of the benchmark price based on any of
the following:
o Weighted Average Closing Market Price of the last 5 days preceding the date of the board meeting in
which the company resolves to delist from the Exchange; (b) 3-year Weighted Average Market Price one
day preceding the date of the board meeting in which the company resolves to delist from the Exchange
(using Closing Market Prices);
o Intrinsic value per share on the basis of the revaluation of assets of the company, conducted by an
Independent Valuator shortlisted by the Exchange, and shall not be older than 3 months from the date
of complete submission of all documentation which shall accompany the formal application for
voluntary delisting.;
o P/E multiplier approach (for profitable companies reporting a Profit after tax atleast in the year
preceding the intimation of delisting);
o The maximum price at which Malik and Family had purchased these shares from the open market in the
preceding one year.
 The final minimum purchase price of the securities to be de-listed shall be fixed with the approval of the
Exchange.

Regulation 5.6.1 of Pakistan Stock Exchange Rule

Book.

 Examples of price sensitive information which should be communicated to PSX are as follows:
o Any material change in the nature of business of company due to technical, strategic, manufacturing, or
marketing related changes, opening of new line of business or closure of any existing line of business,
either partly or fully;
o Information regarding any joint ventures, merger, demerger, restructuring, acquisition or any material
contract entered into or lost;
o All decisions of the board of directors of the company relating to cash dividend, bonus issue, right issue
or any other entitlement or corporate action, buy back of securities or voluntary delisting;
o Purchase or sale of significant assets, franchise, brand name, goodwill, royalty, financial plan, etc.;
 o Any undisclosed revaluation of assets including impairment of assets due to any reason;
o Delay or loss of production due to strike, fire, natural calamities, major breakdown;
o A major change in borrowings including projected gains to accrue to the company;
o Issue or redemption of securities or any change in terms of issued securities;
o Material change in ownership of the company;
o Any default in repayment, rescheduling or restructuring of loans or breach of loan agreement by the
company;
o Change in directors, chairman, CEO or auditors of the company;
o Fraud/default by the company or fraud/default/arrest of its directors, CEO or executives;
o Initiation of winding up proceedings against the company or any of its associated/subsidiary company;
o Non-renewal of license by the Commission or any other relevant licensing authority along with reason(s)
of the non-renewal;
o Default, delay, rescheduling or restructuring in payment of markup, profit, interest or rent etc., as the
case may be and in redemption of principal amount in respect of debt securities issued by a listed
company along with reasons thereof.

Regulation 5.11.1 and 5.11.3 of Pakistan Stock

Exchange Rule Book.

 If a company does not pay listing fees for a period of two years, the Exchange can place the company on Non-
compliant segment. However, a period of ninety days is given to the company to rectify the default before
taking any further action.
o Hence the action taken by the Exchange is valid if the time period of two years has lapsed.
 If FFL fails to pay listing fees within the period of ninety days, the Exchange shall immediately suspend trading in
shares of the company and provide it further period not exceeding 90 days to rectify the non-compliance(s).
 In case FFL still fails to rectify the non-compliance(s) within the timeframe the Exchange shall issue compulsory
buy-back directions to the majority shareholders/sponsors having control of FFL within the time specified by the
Exchange, not exceeding 90 days from the date of such direction or rectify the non-compliance(s) within such
period;
 The price for such buy-back of shares shall be fixed by the Exchange.
 Upon completion of the compulsory buy-back of shares by majority shareholder or failure of the company to
comply with the compulsory buy-back directions within such reasonable time as may be specified by the
Exchange in its notice, but not exceeding 90 days in total from the date of such directions, the name of FFL shall
be delisted through a notice in writing by the Exchange under intimation to the Commission.

Regulation 5.6.1, 5.6.9, 5.9.2, 5.7.2 and 5.5.11 of

Pakistan Stock Exchange Rule Book.

 Following are the provisions of the PSX Regulations with regard to convening the meeting of the Board of Directors and
Annual General Meeting for approval of Final Cash Dividend:
o AMZ shall notify to the Exchange at least one week in advance the date, time and place of its board meeting.
 o AMZ would advise to the Exchange, decision of the Board relating to the cash dividend and approval of the audited
accounts immediately after the meeting. The information is required to be communicated to the Exchange prior to
its release to any other person or print/ electronic media.
o AMZ shall send to the Exchange such number of copies of its annual report and audited accounts as may be
prescribed by the Exchange not later than 21 days before a meeting of shareholders is held to consider the same.
o AMZ shall intimate to the Exchange the date and time of holding of their annual general meetings. AMZ Limited is
encouraged to avoid overlap with other Listed Companies in holding their annual general meetings and provide
video-link facility to shareholders to enable them to participate in the annual general meetings.
o AMZ shall furnish certified true copies of minutes of its annual general meeting within 60 days of such meeting.

Substantial Acquisition
Securities Act 2015
1. 107. Notification to the Commission of prescribed information
i. Every listed company must prepare and submit a return (annual report) to the Commission once every year.
ii. The return must be filed within 45 days after the company’s annual general meeting or, if no meeting
happens, by the end of the year the report pertains to.
2. 108. Interpretation
i. Acquirer: A person or group aiming to buy or gain control of a company through voting shares.
ii. Manager to the offer: A licensed entity (like a bank or securities broker) that helps facilitate the acquisition
offer.
iii. Offer period: The time from the public announcement of an offer to acquire shares until the offer ends.
iv. Persons acting in concert: People or groups working together to buy shares or control a company, usually
under a formal or informal agreement.
v. Public announcement: The official statement of an acquirer's intention to buy shares in a company.
vi. Public offer: An offer made to the public to buy shares of a company.
vii. Relative: Close family members (spouse, siblings, children).
viii. Voting shares: Shares that give the holder voting rights in the company.
ix. Target company: The company being acquired or where voting shares are being bought.
3. 109. This Part not to apply to certain transactions
i. This rule doesn't apply to situations like issuing shares to current shareholders, acquiring shares in the
normal course of business by banks, or when shares are inherited.
ii. Certain company restructures, mergers, or acquisitions aren't affected by these rules.
iii. If the acquirer exceeds the set shareholding limit, they must disclose it.
4. 110. Acquisition of more than ten per cent voting shares of a company
i. If someone buys more than 10% of a company's shares, they must disclose their total holdings to the
company, stock exchange, and the Commission within two days of the purchase or allotment.
ii. The disclosure includes buying shares confirmed through official exchange certificates.
iii. If additional shares are bought within 12 months, and the total doesn't exceed 30%, no new disclosure is
required.
5. 111. Acquisition of voting shares beyond prescribed limits or control of a company
i. No one can acquire more than 30% of a company’s voting shares or gain control unless they make a public
offer.
ii. If the acquirer already holds over 30% but less than 51%, they don't need to make a new public offer within
12 months.
iii. Similarly, they can't gain control of the company without making a public offer.
6. 112. Number of voting shares and offer price
i. The acquirer must specify the minimum number of shares they plan to buy and the offer price.
ii. If more shares are offered for sale than needed, the acquirer must buy them proportionally, but at least the
minimum marketable lot (the smallest shareholding amount).
7. 113. Appointment of manager to the offer
i. The acquirer must appoint a neutral manager (e.g., a bank or securities broker) to handle the offer. This
manager must not be connected to the acquirer or the company being acquired.
8. 114. Timing of the public announcement of intention
i. Anyone who plans to acquire control or voting shares in a company must publicly announce their intention
in the prescribed way.
9. 115. Public announcement of intention and public offer not to contain misleading material
i. The public announcement, the offer, and any related publicity materials must be accurate and not
misleading.
10. 116. Conditional offer
i. The acquirer may make a public offer that depends on receiving a minimum level of acceptances from
shareholders.
ii. If the minimum isn't met, they can reject all acceptances, but can still accept the ones they get.
11. 117. Persons to whom public offer shall be made
i. The acquirer must send the offer letter to all shareholders listed in the company’s register, except those
involved in the agreement to acquire shares.
12. 118. Prohibition for acquirer
i. If the acquirer intends to buy control of the target company, they can't sell or dispose of significant parts of
the company for two years unless it’s part of the normal business.
13. 119. Prohibitions on board of directors of the target company
i. The board of the target company cannot make significant changes (like selling assets, issuing new shares, or
entering new contracts) during the offer period.
ii. They can't appoint a director who has connections to the acquirer until the acquisition is complete.
iii. The acquirer is allowed to change the board of directors once the acquisition is finished and must ensure
proportional representation.
iv. If the acquirer doesn't get enough board representation, they can call for new elections.
14. 120. Competitive Bid
i. If someone other than the original buyer (the acquirer) wants to make a competing offer to buy shares of
the target company, they must announce their offer within 21 days of the first public offer.
ii. To qualify as a competitive bid, the offer must offer a higher price than the first offer.
iii. The competing bid must be for at least the same number of shares that were included in the first public
offer.
iv. All the rules that apply to the original bid will also apply to the competitive bid.
15. 121. Upward Revision of Offer
i. The acquirer can increase the offer price or the number of shares they want to buy at any time up until 7
working days before the public offer closes.
ii. This can happen even if no one else has made a competitive bid.
16. 122. Withdrawal of Public Offer
i. Once a public offer is made, it cannot be withdrawn, except under certain conditions.
ii. An offer can be withdrawn if:
a. A competing bid has been made.
b. The original acquirer dies or is declared mentally unfit before completing the acquisition.
c. Other specific situations defined by rules.
d. If the original acquirer doesn’t withdraw or revise their offer after a competitive bid, their original
offer remains valid, but the closing date will be extended.
17. 123. Security to Be Furnished by the Acquirer
i. The acquirer must provide a security deposit to guarantee they will follow through with the offer.
ii. The total amount for the public offer is calculated based on the assumption that all shareholders will accept
the offer.
 iii. If the offer price increases due to a competing bid, the security amount will also increase.
iv. The security deposit will be returned when the obligations are fulfilled.
18. 124. Conduct of Takeovers
i. The Commission will make rules about how takeovers should be conducted, including:
a. How offers should be made and when.
b. Public announcements of the intention and the offer.
c. Independent advice for shareholders.
d. Responsibilities of directors during the process.
e. The timing of documents and offers.
f. Asset valuation and offer pricing.
g. Restrictions on trading during the offer.
h. Ensuring that the offer is completed properly.
19. 125. Powers of Commission to Issue Directions under This Part
i. The Commission has the authority to issue orders to ensure the proper conduct of the takeover, such as:
a. Stopping the person involved from dealing in shares.
b. Forcing them to sell shares if acquired in violation of the rules.
c. Taking any other action to correct violations.
20. 126. Penalties for Non-Compliance
i. If the acquirer wrongly withdraws their offer or breaks any of the takeover rules, the Commission can ban
them from acquiring shares of a listed company for three years after a hearing.
ii. If someone on the target company’s board breaks the rules, they can be disqualified from being a director,
CEO, CFO, or company secretary for two years.
iii. Penalties can also be imposed if someone:
a. Refuses to provide documents or information required by the rules.
b. Disobeys orders from the Commission.
c. Breaks the rules intentionally.
iv. Fines can be as high as 100 million rupees.

Listed Companies (Substantial Acquisition of voting shares and Takeovers)

Regulations, 2017
1. Short title and commencement
2. Definitions
3. Eligibility
i. If you own shares of the company at the time when the company’s books are closed, you can take part in
the public offer.
ii. People who hold Global Depository Receipts (GDRs) or American Depository Receipts (ADRs) (special types
of certificates for shares traded globally) or people who hold convertible securities (which can turn into
shares) — if their conversion period falls within the offer time — can also participate.
4. Mandatory disclosure for transactions under section 109 and 110 of the Act
i. If you buy voting shares under Section 109, you must inform the company, the stock exchange, and the
regulator (SECP) within two working days, giving full details (as per Schedule II).
ii. If you buy more than the allowed limit under Section 110(1), you must also disclose the purchase within
two working days, as per Schedule III.
iii. If you buy more shares after 12 months under Section 110(3), you must again disclose within two working
days with details as per Schedule IV.
5. Disclosure by the target company
i. The company must immediately inform the stock exchange and SECP if:
a. Someone has shown a firm intention to buy a large shareholding (above the legal limit).
 b. There are rumors or unusual share price movements because of someone trying to acquire the
company.
c. Negotiations are about to start for buying large control in the company.
d. Key people like directors, the CEO, or big shareholders plan to sell their shares in a major way.
ii. The company must give detailed information as specified in Schedule V.
iii. The stock exchange must share this information publicly the same day.
iv. If the company gives false information and benefits from it, they can be fined.
6. Public announcement of intention
i. Before publicly announcing plans to buy a big part of a company, the buyer must hire a licensed Consultant
to the Issue to manage the deal.
ii. A public announcement must be made before:
a. Signing a purchase deal.
b. Raising funds.
c. Starting to check (due diligence) the company’s financials.
iii. If the buyer is a company, it must announce right after the board approves the decision.
iv. The announcement must be published in major newspapers (in English and Urdu) and sent to SECP, the
target company, and the stock exchange.
v. Misleading announcements or false withdrawal of announcements without valid reasons can lead to
penalties.
vi. Everyone must ensure truthful, full, and fast disclosure of information.
7. Public announcement of public offer
i. After announcing their intention, the buyer must make the official public offer within 180 days (or within
270 days if extended).
ii. Notices of the offer must be submitted to the target company, SECP, and the stock exchange.
iii. The stock exchange must immediately make this public.
iv. The public offer must contain the information required in Schedule VII.
v. A Rs. 500,000 fee must be paid to SECP along with the notice.
vi. The public offer must also be published in Urdu and English newspapers and submitted to SECP, the target
company, and the stock exchange.
8. Offer Timetable
i. Everyone involved (buyer, company, competing bidders) must stick to a set timeline given in Schedule IX.
(“T” stands for the date of public announcement of public offer.)
9. Book Closure
i. On the 22nd day after the public offer announcement, the company will announce a book closure starting
from the 36th day.
ii. During the book closure (36th to 42nd day), the company's shareholder register is frozen to identify eligible
shareholders for the offer.
10. Determination of entitlement
i. After book closure, the list of eligible shareholders will be finalized as per Pakistan Stock Exchange rules.
11. Provision of list of shareholders and issuance of offer letters
i. On the 43rd day after the public offer, the company must give an updated, certified list of shareholders to
the buyer.
ii. On the 44th and 45th days, the buyer must send offer letters to shareholders, GDR/ADR holders, and
holders of convertible securities.
12. Date of closure of public offer
i. The public offer must close within 54 days from the announcement date.
ii. If the buyer makes changes (addendum/corrigendum) during the offer, the time resets and starts again
from the publication date of the changes.
13. 13. Minimum offer price
 i. If the company's shares are frequently traded, the offer price must be the highest of:
a. The negotiated weighted average price in the share purchase deal (including cash, liabilities, and
non-cash consideration).
b. The highest price paid by the buyer in the past 180 days.
c. The average market price over the last 180 days.
d. The average market price over the last 28 trading days before announcing the intention.
ii. If the shares are not frequently traded, the highest of:
a. Negotiated weighted average price.
b. Highest price paid in past 180 days.
c. Net asset value (company's assets minus liabilities), assessed by a chartered accountant.
14. Number of voting shares to be acquired
i. A buyer can acquire any number of shares by agreement.
ii. If it triggers Section 111, the buyer must publicly offer to buy at least 50% of the remaining voting shares.
iii. If the offer is conditional (e.g., minimum acceptance needed), that minimum cannot be more than 35% of
the remaining voting shares.
iv. Example:
a. Buyer has 10% shares and plans to buy 20% more.
b. Remaining shares = 70%.
c. Public offer must be for at least 35% of 70% (i.e., 24.5%).
15. Security to be furnished by the acquirer
i. To show seriousness and guarantee performance, the buyer must give security to the manager, either by:
a. Cash in a special bank account (escrow) at a bank rated at least “A”; or
b. Treasury bills or short-term sukuks (Islamic bonds) with maturity of up to 12 months.
16. Release of Security
i. Normal Release:
a. The manager to the offer must release the security within 7 days when:
1. All shareholder payments are completed and all obligations under the law are fulfilled by
the acquirer.
2. If the public offer is withdrawn, once the manager certifies that the withdrawal was valid.
ii. If Obligations Are Not Fulfilled:
a. The manager must enforce (realize) the security by:
1. Withdrawing cash.
2. Foreclosing deposits.
3. Calling in the bank guarantee.
4. Selling government securities or shares.
b. The money obtained will be used to settle the acquirer’s obligations under the law.
iii. Late Release Penalty:
a. If the manager does not release the security within 7 days, they must pay a surcharge of:
1. 6-month KIBOR + 4%.
17. Procedure for making competitive bid
i. If someone else wants to make a better offer to buy shares after the first offer, they must announce it
publicly within 21 days of the first offer's announcement.
ii. The new (competitive) offer must be published in the same newspapers as the first offer.
iii. Copies of this new offer must be sent to the SECP (the regulator), the original buyer, the target company,
and the stock exchange at least 4 days before it’s published.
iv. The new offer must include certain mandatory details listed in a specific schedule (Schedule VII).
v. A comparative statement must be published, showing the details of the original and new offers, so investors
can compare them easily.
 vi. After a new offer is made, the first buyer can either revise their offer (increase price or number of shares) or
withdraw it altogether.
vii. If the first buyer does not update or cancel their offer within the allowed time, their original offer stays valid,
but the closing date will be extended to match the last competitive offer's closing date.
viii. All offers will close on the same day, based on when the last competitive bid closes.
18. Acceptance of public offer
i. On the 46th day after the first public announcement, the buyer must run an ad in the same newspapers to
start the acceptance period.
ii. The ad must follow a specific format (Schedule X).
iii. Shareholders who want to accept the offer can physically hand over their shares or transfer them through a
designated CDC account.
iv. If someone holds securities that can be converted into shares, they must first convert them and then tender
(submit) them.
v. People holding Global Depository Receipts (GDRs) or American Depository Receipts (ADRs) can request
their custodians to convert them into shares and submit them too.
vi. The manager to the offer must confirm in writing that they received the shares.
19. Mode of payment
i. Payment for the shares bought under the offer can be made:
a. Fully in cash, or
b. Securities (like shares or bonds) plus a cash option.
ii. If securities are used:
a. Shares offered must be from a company listed for at least 2 years, actively traded, and frequently
traded.
b. Regulatory approvals must be obtained if new shares are issued.
iii. Government bonds (like treasury bills or sukuks) can also be used if they mature in less than 364 days.
iv. The value of the offered securities will be based on:
a. 180-day average share price for shares,
b. PKRV rates for government bonds,
c. Standard valuation methods for listed debt instruments.
20. Procedure for payment
i. Within 2 days after closing the offer, the buyer must open a special bank account and deposit all the money
required to pay shareholders.
ii. If payment is made in securities, they must be credited to shareholders' accounts within 2 days after the
offer closes.
21. Withdrawal of public announcement of intention
i. A buyer can withdraw their intention to buy shares if:
a. The buyer (if a person) dies, goes bankrupt, or is declared mentally unfit.
b. Negotiations fail.
c. Due diligence reveals problems.
d. The buying company goes into liquidation or decides not to proceed.
e. Time limit expires without making a full offer.
f. Regulatory approval is not granted.
ii. If withdrawn, the buyer must:
a. Make a public announcement explaining why.
b. Inform the SECP, stock exchange, and the target company with reasons.
22. Withdrawal of public announcement of offer
i. Once a full offer is made, it can only be withdrawn if:
a. The buying company goes bankrupt or liquidates before completing the acquisition.
b. The buyer (if a person) is declared insolvent.
 c. The buyer is declared a loan defaulter by a court.
ii. If withdrawal happens:
a. Any shares already submitted must be returned to shareholders within 3 days.
b. Any security money deposited will be returned to the buyer.
23. Conditions for upward revision of public offer
i. If the buyer wants to increase their offer (like offering a higher price):
a. They must make a new public announcement in the same newspapers.
b. Inform the SECP, stock exchange, and the target company.
c. Increase the security deposit accordingly.
24. General obligations of the acquirer
i. The buyer must carefully plan before making an offer and must be capable of completing the deal.
ii. The public must be told who all are behind the buyer and who is funding the acquisition.
iii. If any director has a conflict of interest, an independent committee must assess the deal.
iv. Within 2 working days after the offer, a copy must be sent to the target company, stock exchange, and
SECP.
v. Public announcements must state that the directors accept responsibility for the contents.
vi. Insiders (people holding more than 10% shares or management) cannot influence the offer process.
vii. The buyer must arrange for the security deposit by the offer date.
viii. The buyer must show that they have firm financial arrangements to complete the deal.
ix. The buyer must pay shareholders within 10 days of the offer closing.
x. The buyer must comply with all laws, act in good faith, and prioritize the long-term health of the target
company.
25. General Obligations of the Board of Directors of the target company
i. The target company must, within 7 days:
a. Provide the buyer with a list of eligible convertible security holders.
b. The target company must give the buyer and manager all relevant information needed for due
diligence.
c. The board must send unbiased comments on the offer to shareholders if asked.
d. The board must help in verifying the shares submitted for acceptance.
26. General Obligations of the Manager to the Offer
i. Agent of Acquirer: The manager to the offer is considered an agent of the acquirer.
ii. Before Public Offer Announcement, the manager must:
a. Check that acquirer, its sponsors, directors, etc., have no overdue payments in Credit Information
Bureau reports.
b. Confirm acquirer and its people aren't connected to:
c. Companies declared defaulters by stock/futures exchanges.
d. Companies whose TRE Certificate (Trading Rights) was canceled.
e. Companies delisted for non-compliance (unless SECP allows exceptions after fixing the problem).
f. Make sure the acquirer can actually carry out the public offer.
g. Confirm that enough money/funds are arranged for the public offer.
h. Ensure public announcement follows the law and regulations.
i. Submit a due diligence certificate (as per Schedule XI) to SECP along with a copy of the offer letter.
j. Make sure all information in the public announcement and offer letter is true, fair, adequate, and
based on reliable sources.
iii. On Public Announcement Day:
a. File the announcement with SECP, the target company, and the relevant securities exchange.
iv. After Completion:
a. Release any balance security to the acquirer once obligations are fulfilled.
b. Send a final report to SECP within 20 days of the offer closing or being withdrawn.
27. Changes in the Manager to the Offer
i. If there's a change in the manager to the offer, it must be immediately reported to SECP, the securities
exchange, and the target company.
ii. The outgoing manager is responsible for compliance during the time they were appointed.
28. Equality of Treatment
i. All shareholders must be treated equally.
ii. Shareholders of the same class must be treated similarly.
29. Oppression of Minority
i. Control rights must be exercised in good faith.
ii. Oppressing minority shareholders or non-controlling shareholders is not acceptable.
30. Repeal and Saving
i. The new regulations repeal the earlier Listed Companies (Substantial Acquisition of Voting Shares and
Takeover) Regulations, 2008.
ii. Past actions, proceedings, and documents under the 2008 regulations remain valid if they don’t conflict
with the 2024 regulations.

Practice Questions (Study Text)

Regulation 6, 21 and 22 of Listed Companies

(Substantial Acquisition of voting shares and Takeovers) Regulations, 2017 and Section 119 of Securities Act, 2015.

 Before making any public announcement of intention, SFL shall appoint a “Consultant to the issue” duly licensed
by the Commission, as manager to the offer to assist SFL in acquisition of the shareholding.
o SFL shall make a public announcement of intention in newspapers after careful and responsible
consideration through the manager to the offer before it:
 Enters into negotiations for a share purchase agreement;
 Passes a board resolution;
 Starts raising funds; or
 Commences a due diligence process to evaluate the share price of ML.
o Notice of the public announcement of intention shall be submitted to the ML (at its registered office for
placement before the board of directors), the securities exchange and the Commission.
o Within two working days of submission of notice as above, the public announcement of intention shall
be published in English and Urdu language, in at least two daily newspapers having circulation in all
provinces. Published copy of public announcement of intention shall be submitted to the Commission,
ML (at its registered office) and the securities exchange on the same day of its publication.
o The public announcement of intention shall contain such information as prescribed in Schedule VI.
o A public announcement of offer shall be made by the SFL through the manager to the offer within 180
days of making the public announcement of intention in the newspapers.
 Once a public announcement of intention has been made by SFL and till SFL withdraws the public
announcement of intention or the commencement of the offer period, the board of directors of ML, shall not:
 o 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.
o encumber any asset of the company or its subsidiary unless otherwise in the ordinary course of
business.
o issue any right or bonus voting shares.
o enter into any material contract.
o appoint any person who represents or has an interest in the acquirer as an additional director or against
a casual vacancy on the board of directors.
 The possible consequences if SFL makes the public announcement but subsequently wants to withdraw it are as
follows:
o If SFL makes a public announcement of intention in order to deceive any other person, or to induce or
influence any other person to act in a particular manner or withdraws the public announcement of
intention without any reasonable cause or reason, than it shall be liable to a penalty under the Securities
Act.
o The regulations allow SFL to withdraw the public announcement of intention under various conditions.
Hence, there are no consequences if it withdraws the offer as allowed.

 Yes it is necessary for RPL to appoint ‘manager to the offer’ as its acquisition would make it a holder of 35%
voting shares in listed company. Securities Act, 2015 makes it mandatory for acquirer who after acquiring such
shares would be entitle to more than thirty percent voting shares in a listed company to make public offer for
such acquisition of shares and such public offer can only be made through a manager to the offer.
o Manager to the offer means a bank, securities broker or an investment bank licensed by the Commission
who shall not be an associate or a group company, of the acquirer or the target company.
 Since the shares of Bolan Limited (BL) are frequently traded, the public announcement of offer shall be at the
price which is highest amongst the following:
o The negotiated weighted average price under share purchase agreement(s) for the acquisition of voting
shares of BL;
o The highest price paid by RPL for acquiring the voting shares of BL during 180 days prior to the date of
public announcement of offer;
o The weighted average share price of BL as quoted on the securities exchange during the last 180 days
preceding the date of announcement of public offer; and
o The weighted average share price of target company on the securities exchange during 28 trading days
preceding the date of public announcement of intention and only those days shall be taken in to account
on which the shares of the target company have been traded.
 KL shall make first public announcement within twenty-one days of public announcement made by RPL i.e., 21
December 2018. Such offer shall be made for at least same number of voting shares of Bolan Limited and shall
offer higher purchase price against the offer made by RPL.
o The provisions of Securities Act, 2015 which are applicable for public announcement for takeover of
shares shall apply mutatis-mutandis to the competitive bid.
 The following options are available to RPL in case of competitive bid by another acquirer i.e. KL:
o RPL may make upward revision in its offer in respect to the price or the number of voting shares to be
acquired, at any time up to seven working days prior to the date of the closure of public offer.
o RPL may withdraw its public offer within seven working days of public announcement of the competitive
bid by KL.
o If RPL does not withdraw or does not make an upward revision of its offer, its earlier offer on the original
terms shall continue to be valid and binding on RPL, except that the closing date of such public offer
shall stand extended to the date of closure of public offer under the last subsisting competitive bid.

Section 120, 121 and 122 of Securities Act, 2015.

 Mr. Arshad has to comply with the following conditions while making a competitive bid:
o He shall make a public announcement of his offer (competitive bid) for acquisition of the same voting
shares of SIL within twenty-one days of the public announcement of the offer made by Mr. Naveed.
o He must offer a higher purchase price in order to make a valid competitive bid.
o A competitive bid shall not be for less than the number of voting shares for which the earlier public offer
has been made.
o All other provisions of the Act related to a public announcement apply to the competitive bid.
 The status of the offer earlier made by Mr. Naveed and the rights available to him are as follows:
o Upon the public announcement of a competitive bid, Mr. Naveed would have the option to make
another announcement:
 Revising his earlier public offer; or
 Withdrawing the public offer with the prior approval of the Commission:
o Provided that if no such announcement is made within seven days of the public announcement of the
competitive bid, the earlier offer on the original terms shall continue to be valid and binding on Mr.
Naveed except that the closing date as such of public offer shall stand extended to the date of closure of
public offer under the last subsisting competitive bid.
o Having made a public announcement and provided he has not withdrawn his public offer as above, Mr.
Naveed shall have the option to make an upward revision of his offer in respect of the price and the
number of voting shares to be acquired at any time within seven working days prior to the date of
closure of public offer.
  15th June 2015
o Haris would not be required to meet any condition at the time of purchase of 5 % shares on 15 June
2015, as his total voting shares on this date would not exceed 10%.
 15th July 2015
o On the purchases of 5% more shares, Haris’s total shareholding would be 13% i.e. in excess of 10 % and
he would be required to disclose the aggregate of his shareholding to BYZ Limited and to the Pakistan
Stock Exchange within two working days of the acquisition of voting shares.
 30th June 2016
o On the purchase of 10% more shares, his total shareholding would be 23% and he would not be required
to make any disclosure as the Law does not require any further disclosure/communication on
acquisition of additional voting shares in a period of twelve months after crossing the FIRST threshold of
10% unless his total shareholding in aggregate exceeds thirty per cent.
 15th August 2016
o On purchases of 10% more shares, his total shareholding would be 33% that crosses the SECOND
threshold of 30% and before acquiring such shares Haris should:
 Make a public announcement of offer to acquire these voting shares.
 Before making the public announcement, Haris would also be required to make disclosure.

Practice Questions (Past Papers)

Winter 2020

a. Number of voting shares to be acquired:

 a. Upon acquisition of additional 100 million voting share capital through agreement, TPL’s shareholdings
will be 40% (60+100) ÷ 400 × 100) which means it crosses the threshold limit of 30% given under the
Securities Act, 2015.
b. Consequently, TPL have made a public announcement of offer. TPL has to acquire at least 50% of the
remaining voting shares of VGL i.e. 120 million [(400 – 160) = 240 × 50%].
b. Since Yasir intends to make public offer of acquiring further shares within 21 days of TPL's offer, Yasir shall
have to make a competitive bid and shall have to ensure that:
a. the minimum number of shares that he has to acquire mandatorily through public announcement of
offer, shall at least be the same number of voting shares that TPL will acquire i.e. 120 million voting
shares.
b. The offer price shall be at higher purchase price i.e. more than Rs. 45 per share that is offered by TPL.
c. Considering the above, Yasir’s intention to acquire 60 million shares through Public Offer is against the
provisions of law and he shall have to revisit his intention in light of aforesaid requirements.
c. TPL cannot reject the acceptance made on the basis of public offer unless TPL has made public offer conditional
upon minimum level of acceptance and the acceptance didn’t reach the minimum level specified by TPL in the
public offer.
a. In the given scenario, TPL has received acceptances for 90 million shares. As per regulations, the
minimum level shall not be more than thirty-five percent of the remaining voting shares of VGL that is
84 million (400 – 160 = 240 × 35÷100 ) voting shares.
d. After acquisition of further voting shares, TPL cannot dispose the sizeable part of VGL for a period of two years
from the date of acquisition of the control, unless such intention was stated in the public announcement or in
the offer letter or disposal was made in the ordinary course of VGL’s business.

Winter 2020

a. As suspension of DSL operations will directly impact the profitability of the company and may be improved when
the management will resume its operations after implementing all Standard Operating Procedures. Hence, both
the situations will be considered as material information for investors and falls under price sensitive information
under Securities Act, 2015.
a. Further, as per Pakistan Stock Exchange (PSX) Rules Book, the price sensitive information includes delay
or loss of production due to strike, fire, natural calamities, major breakdown, etc. Therefore, DSL should
disclose the following in the light of Securities Act, 2015 and PSX Rules Book:
i. Inform forthwith to the Commission and the Exchange prior to its release to any other person or
print/electronic media.
ii. Inform to the public about these facts both at the time of suspension of operations and also
when resumes the operations.
iii. Ensure that information should be disseminated in such way that it equally, timely and
effectively provides access to DSL’s securities holders and investors.
b. Sikander Niaz being Operation Manager is an executive officer of DSL and according to Securities Act, 2015 falls
under the definition of Insiders. Accordingly, the shares sold by him two days before the suspension of operation
will fall under the definition of insider trading as he did the same before the dissemination of information to the
 general public by DSL, hence this will be considered as an offense.
Further, if Sikander Niaz repurchase the shares within a period of six months he shall:
a. make a report to the Commission in the prescribed form before the expiration of a period of 7 days
beginning with the day on which the gain accrues and
b. tender the amount of such gain to the Commission within the period of six months of the accrual of gain

Winter 2020

a. In order to buy back its own shares, BCL should take into account following requirements of the Companies Act,
2017:
a. There are following two possibilities for maximum number of shares to be purchased by BCL, if it wants to:
i. Possibility No. 1: cancel its shares BCL could buy-back shares up to maximum amount of
distributable profit as per the provisions of the Companies Act, 2017 i.e. Rs. 300 million as shown in
the financial statements as on 30 September 2020. Since the buyback is required to be made at the
spot / current share price, the number of shares to be bought back would be 15 million (Rs. 300/20).
ii. Possibility No. 2: hold it as treasury shares Under the Listed Companies (Buy-Back of Shares)
Regulations, 2019 the treasury shares shall not at any time exceed 20% of the total paid up share
capital of the company.
Hence, BCL can buy-back up to Rs. 100 million (Rs. 500×20%). Since the buyback is required to be
made at current market price, the number of shares that could be bought back are 5 million (Rs.
100/20).
iii. Purchase of shares shall always be made in cash. As the purchase requires more than Rs. 55 million,
BCL may generate the differential cash either by disposing its assets or through obtaining loan etc.
b. Draft special resolutions for buy back of shares by BCL:
a. Possibility No. 1: cancel its shares
“RESOLVED THAT subject to compliance with the provisions of applicable laws, regulations and permission
required, if any, approval of the members of Bari Chemicals Limited (the company) be and is hereby
accorded, under Section 88 of the Companies Act, 2017 read with Listed Companies (Buy-Back of Shares)
Regulations, 2019, to buy-back up to a maximum of 8.33 million issued ordinary shares of the company
having paid up / face value of Rs. 10 each i.e. 16.67% of the total outstanding shares of the company) at the
spot / current share price through Pakistan Stock Exchange Limited.”
b. Possibility No. 2: hold it as treasury shares
“RESOLVED THAT subject to compliance with the provisions of applicable laws, regulations and permission
required, if any, approval of the members of Bari Chemicals Limited (the company) be and is hereby
accorded, under Section 88 of the Companies Act, 2017 read with Listed Companies (Buy-Back of Shares)
Regulations, 2019, to buy-back up to a maximum of 5 million issued ordinary shares of the company having
paid up / face value of Rs. 10 each i.e. 10% of the total outstanding shares of the company) at the spot /
current share price through Pakistan Stock Exchange Limited.”
c. “FURTHER RESOLVED THAT the ordinary shares buy-backed pursuant to these special resolution(s) shall be:
i. Possibility No. 1 cancelled and issued share capital shall accordingly be reduced by the aggregate
paid up / face value of the cancelled shares.
ii. Possibility No. 2 held as treasury shares.”
d. “FURTHER RESOLVED THAT buy-back shall be made through Pakistan Stock Exchange Limited and the
purchase period shall start from 12 January 2021 (this is the last date) to 3 April 2021 (both days inclusive).”
c. The requirements that need to be complied with by BCL after the closing of the purchase period are as follows:
a. intimate to the Commission and the securities exchange on the day of the closing of the purchase period the
number of shares purchased.
b. advertise the number of shares purchased within two days of the closure of purchase period in the same
newspapers in which the public announcement was published.
c. cancel the shares purchased within ten days of the closing of the purchase period under possibility no. 1
above.
d. submit a final report on the purchase to the Commission and the securities exchange on the specified
format within fifteen days of the closing of the purchase period.

Winter 2020

1. The book runner shall vet the bid applications and accept only such bid applications that are duly filled in and
supported by a crossed cheque or demand draft or pay order or confirmation from the Banker to an Issue that
Bid Money has been electronically debited from the bidder account or is blocked in the bidder account.
The book runner shall have to verify while vetting each bid application that the bidder has not:
a. made bid below the Floor Price and above the upper limit of the Price Band;
b. made bid for more than 10% of the shares allocated under the Book Building Portion;
c. made bid with price variation of more than 10% of the prevailing indicative strike price or such other
percentage as may be specified by the Commission;
d. made consolidated bid;
e. made more than one bid either severally or jointly;
f. made downward revision both in terms of Bid Price and Bid Volume;
g. Withdraw bid
1. In light of the Public Offering regulations
a. At the close of bidding period, strike price is determined by the designated institutions which includes
securities exchange, central depository and clearing company on the basis of Dutch Auction Method
through which strike price is determined by arranging all the Bids in descending order based on the bids
prices along with the number of shares, by lowering the bid price to the extent that the total number of
securities offered under the Book Building Portion are subscribed.
Accordingly, the strike price in case of FCL is Rs. 55 where 100% of offer size i.e. 200 million shares are
subscribed.
2. The bids received from the associates i.e. G, I and K were rightly accepted as the aggregate bids received from G
and I is 14 million share i.e. 10% of the book building which is according to the law.
The bid received from K will not be taken in the aggregate of associates being an insurance company.
3. The shares shall be allotted to the bidders as follows:
a. On the highest bid priority i.e. the bids made at the highest price by ‘Bidder U’ to ‘Bidder E’ shall be
considered first for allotment of shares. This would accommodate 189 million shares above the strike
price.
 b. 11 million shares are still available for allotment shall be allotted to ‘Bidder C and D’ on proportionate
basis as they have made the bids at the Strike Price hence they will get 5.08 million and 5.92 million
shares respectively.
c. However, successful bidders would be allotted and issued only seventy percent of the offer size i.e. 70%
of 200 (189+5+6) = 140 million shares.
4. As the Consultant to the Issue has allowed bidders to place bids for hundred percent of the offer size, and the
bidders must have given an undertaking along with the application (equivalent to the retail portion i.e. for 60
million ordinary shares) then unsubscribed shares of retail portion would also be allotted to them on pro-rata
basis.
a. Requirement in respect of the leftover/excess amount received through book building The treatment of
the leftover/excess amount of bid money shall be as follows:
i. The bidders i.e. A & B who have made bids below the strike price shall not qualify for allotment
of shares and the book runner shall intimate their respective banks for unblocking their bid
money within one working day of the close of the bidding period.
ii. The bid money of bidders who have undertaken to subscribe the unsubscribed retail portion
shall remain deposited or blocked till allotment of unsubscribed retail portion, if any, to them on
pro rata basis.

 According to the aforesaid Regulations maximum seventy-five percent of the offer size could be allocated to
book building portion and the remaining minimum twenty-five percent shall have to be allocated to the retail
investors.
 Hence if FCL in the offer size have allowed the book building portion up to maximum of 75% and the retail
portion to the minimum level i.e. 25%, then it could have avoided the undersubscribed situation.

Summer 2021

a. Conditions for Green Field Project before IPO Announcement

Since OCL is setting up a new car manufacturing plant, it qualifies as a Green Field Project, and the following
special IPO rules apply
 a. OCL must get its Board of Directors’ official approval to offer shares to the public, based on a financial
plan.
b. After the IPO, the owners (sponsors) of OCL must still own at least 51% of the total shares. If they
currently own less (e.g. 45.45%), they must either increase their investment or reduce the size of IPO.
c. If OCL is borrowing money (e.g., a Rs. 200 million loan), it must finalize and document the loan
agreement before announcing the IPO.
d. The sponsors (e.g. Arif and Atif Aslam) must show that they’ve successfully run a company—preferably
a listed one—with good profits, cash flows, and dividends.
e. The team running the new business must have relevant skills and experience.
f. OCL must sign a contract with an engineering firm to build and install the plant (e.g. with Xano Tanino
Engineers).
g. OCL must own the land for the plant; renting it is not acceptable under IPO rules.
h. OCL must file its IPO and listing application with PSX, along with an undertaking (formal promise).
i. OCL must arrange an online application system for the public to subscribe to shares.
j. Physical share certificates are not allowed. All shares must be credited to investors' CDC accounts.
k. Neither OCL nor its sponsors, directors, or major shareholders should:
i. Have loan defaults showing in the credit bureau.
ii. Be involved with companies that are defaulters, had their PSX licenses cancelled, or were
delisted.
b. Allocation of IPO Shares – Errors in OCL’s Intended Plan
a. OCL plans to allocate:
i. 30% to non-resident Pakistanis – Not allowed (limit is 20%)
ii. 10% to employees – Not allowed (limit is 5%)
b. No minimum allocation is required for employees of TL or financial institutions. They can apply under
the general public quota.

c.
a. Transaction dated 1 July 2021
a. Becoming a Substantial Shareholder: When NH’s shareholding in GCL crossed 10%, he officially became
a “substantial shareholder”.

b.
c. His Responsibilities
d. Notify GCL in writing (by 7 July 2021) about:
i. His beneficial ownership
ii. Amount and type of securities held
iii. Date of acquisition
iv. Any changes in ownership
v. Any gains made on buying or selling GCL’s shares
e. Submit a statement to SECP (also by 7 July 2021) with the same information in the prescribed form.
f. Insider Trading Restrictions Apply:
i. He must not trade using inside information after becoming a substantial shareholder.
b. Transaction dated 30 August 2021
a. NH sold 250,000 class A shares, including the 110,000 bought on 1 July — within 6 months — and made
a profit.
b. His Responsibilities
i. Report to SECP within 7 days of earning the gain (i.e. by 6 September 2021).
 ii. Pay the gain (Rs. 2,750,000) to SECP within 6 months, which will be deposited into the Federal
Consolidated Fund.
iii. Give notice to GCL (as per earlier rules) of:
1. Change in ownership
2. Gain made
iv. Ceased to be a substantial shareholder: His holding fell below 10%, so he no longer holds this
status.
c. Transaction dated 30 September 2021

a.
b. Acquiring Voting Power >10%
c. NH bought 70,000 class B shares (with 4 votes per share), giving him 10.3% voting rights even though he
holds less than 10% of total shares.
d. Takeover Rules Apply
e. Because of his significant control, he must notify:
i. GCL
ii. PSX
iii. SECP
iv. Within 2 working days (i.e. by 4 October 2021)
d. Transaction dated 20 October 2021
a. Selling More Shares: NH sold 20,000 class A shares purchased more than 6 months ago → no gain
reporting needed.
b. He must notify:
i. GCL
ii. SECP
iii. About the change in ownership, within 7 days.
a. The proposals submitted by Noman Shahid for raising funds have shortcomings that need to be addressed in the
light of the provisions of relevant corporate laws. Following changes are mandatorily required to be considered in
the said proposals:
a. Minimum Capital Requirement
i. GAL wants to list on the Pakistan Stock Exchange (PSX), but its proposed capital after issuing new
shares (17.5 million shares) falls short of the minimum required by PSX.
ii. PSX rules require a company to have at least Rs. 200 million post-issue paid-up capital, which
means 20 million shares of Rs. 10 each.
iii. Additionally, PSX requires that at least 10% of this total post-issue capital (i.e., 2 million shares)
must be offered to the general public.
iv. GAL is currently planning to offer only 1 million shares to the public, which is insufficient.
v. To meet the rules, GAL must:
1. Increase total issued shares from 17.5 million to 20 million
2. Increase public offering from 1 million to at least 2 million shares
vi. Since PSX also requires listed companies to raise public shareholding to 25% within 3 years, GAL
might consider offering 3.5 million shares upfront instead.
b. Limit on Charging Premium
i. GAL wants to issue shares privately at Rs. 175 and then offer the same shares to the public at Rs.
195, both within a short gap (less than 6 months).
ii. This violates the Public Offering Regulations, 2017.
iii. The law says: you cannot issue shares to the public at a price higher than what you charged others
in the 6 months before the IPO.
iv. So GAL has two options:
1. Raise the private placement price to Rs. 195 to match the IPO price, or
2. Lower the IPO price to Rs. 175 to match the private placement.
v. This ensures fairness to public investors and prevents giving earlier investors a better deal right
before the IPO.
c. Requirement with reference to Board The proposal that all brothers would continue to work on their
existing positions with additional charge to CEO needs to be considered in the light of the requirements of
Listed Companies (Code of Corporate Governance) Regulations, 2019 (CCG):
 i. Limit on number of executive directors: By virtue of CCG, they (all brothers) will fall under the
definition of executive directors whereas CCG requires that executive directors should not be more
than one third of the board.
ii. Hence, if GAL opts to have minimum number of directors on their board i.e. seven then it could have
maximum two executive directors or three executive directors with necessary explanation in the
statement of compliance for rounding up of one third of seven directors. Alternatively, GAL’s board
shall have to fix higher number of directors to meet the said requirement.
iii. Composition of board: CCG also requires that the board shall comprise of at least two or one third of
the board, whichever is higher, as independent directors and at least one female director.

d. With accordance to the PSX Rule book 20% is the limit of shares that is allowed to be allocated to non-
resident Pakistanis. However, GAL may, with prior approval of the Commission and subject to compliance of
Foreign Exchange Manual, issue shares to person resident outside Pakistan including foreign entities.

Summer 2022

a. Farhan Ali’s intention to transfer part of his shareholdings in MPL to various persons shall have to be in accordance
with the provisions of the Companies Act, 2017 and Companies (General Provisions and Forms) Regulations, 2018.
The requirements under each case for transfer of shares are as follows:
a. Saima Ali, being the daughter of Farhan Ali, is included in the definition of family as provided in the
Companies (General Provisions and Forms) Regulations, 2018. Therefore, 4 million (20 million×20%) shares
can be gifted to her.
b. Mohsin Malik, being the son-in-law of Farhan Ali, is not included in the definition of family as provided in the
Companies (General Provisions and Forms) Regulations, 2018. Therefore, shares cannot be gifted to him.
However, Farhan Ali may sell/transfer his shares to Mohsin Malik by following the procedure specified under
the Companies Act, 2017 discussed below.
 c. Maria Sultan is an existing member whereas Amir Abbas is a non-member. The Companies Act, 2017 has
specified few requirements that need to be complied with, which are as follows:
i. Farhan Ali shall send a notice to MPL’s board intimating his intention to sell 12 million shares [i.e. 20
million shares × 60% (40%+20%)].
ii. On receipt of such notice, MPL’s board shall, within a period of ten days, offer those shares for sale
to other members of MPL in proportion to their existing shareholdings as follows:

1.
iii. The said offer should be made through letter of offer specifying the number of shares to which the
member is entitled, price per share and specifying the time limit, within which the offer, if not
accepted, be deemed as declined. The letter of offer shall be dispatched to the members through
registered post or courier or through electronic mode.
b. As Zia Karim is brother of Bilal Karim, he shall be entitled for following rights after the death of Bilal Karim:
a. Zia will be deemed to be the member of MPL till the shares are transferred to the legal heirs of Bilal Karim.
b. Zia shall also act as director of MPL for protecting the interest of the legal heirs of Bilal Karim.
c. Zia will be responsible to facilitate the transfer of shares to the legal heirs of the deceased subject to
succession to be determined under the Islamic law of inheritance.

Summer 2022

a. Change in Principal Purpose of the Issue

a. FL wants to change how it will use the funds raised from investors (as originally stated in its IPO
prospectus).
b. To do this, FL must:
i. Pass a special resolution (i.e. get approval from shareholders in a formal meeting).
ii. Offer an exit option to those shareholders who vote against the change. These dissenting
shareholders must be allowed to sell their shares back at the highest of:
1. The intrinsic value based on audited accounts,
2. The average market price from the past 6 months,
3. The IPO price (Rs. 10 per share).
 c. Key Compliance Steps:
i. Hold an EGM and share the draft resolution beforehand.
ii. Offer exit to dissenting shareholders within 30 days of approval.
iii. Close share transfer books, giving 7 days’ notice to PSX.
iv. If listed on Futures Market, notify PSX by 20th of the month about the upcoming book closure
with at least 21 days’ advance notice before the actual closure date.
v. Issue transfer receipts as soon as shares are received for transfer.
vi. Send certified minutes of EGM to PSX within 60 days.
b. PL’s Agreement with SBA for Underwriting Sukuk
a. PL plans to issue Sukuk (Islamic bonds) and had planned to sign an underwriting agreement with SBA.
This agreement would have meant SBA would guarantee to buy any Sukuk that isn’t subscribed by
investors.
b. If SBA backs out, PL can still go ahead without any impact if:
i. The Sukuk is being issued to repay debt or for working capital (i.e., general business needs).
ii. PL already has other arrangements in place to cover any shortfall if not all Sukuk are sold.

Winter 2023

 VPL holds 70.83% (850 ÷ 1,200) shares in SFL; therefore, VPL is holding company of SFL. Further, VPL and SFL
together holds 51.33% shares [30% (450 ÷ 1,500) + 21.33% (320 ÷ 1,500)] in WFL which make WFL a subsidiary
of VPL.
 As per the decisions taken in the board meetings of VPL and its subsidiary SFL, it is established that VPL wants to
dispose of its subsidiary company i.e. WFL which is listed on PSX.
 Steps required to be taken by VPL:
o In order to dispose of the subsidiary, VPL shall have to obtain consent of the general meeting under an
ordinary resolution either specifically or by way of an authorization.
o Notice of general meeting should be sent 21 days before the date of general meeting along with proxy
form and a statement setting out all material facts concerning such business.
o VPL being a private company may pass the resolution through circulation that need to be signed by all
the members for the time being entitled to receive notice of meeting.
 Steps required to be taken by SFL:
o Since SFL holds 21.33% shares of WFL, there are no additional steps required under any corporate laws
that need to be taken for executing its board’s decision. Nevertheless, since VPL has to obtain the
consent of general meeting, being a subsidiary, SFL may wait for the outcome of VPL general meeting’s
decision.
 Steps required to be taken by TPL:
 o Board of TPL shall recommend to the members purchase of the shares. The decision of the board shall
clearly specify the number of shares proposed to be purchased, the purchase price, period within which
the purchase shall be made, source of funds, justification for the purchase and effect on TPL’s financial
position.
o Purchase of shares shall be made under authority of a special resolution for which a general meeting
shall be held; and after purchase of shares it shall be cancelled.
o TPL being a private company may pass the resolution through circulation that need to be signed by all
the members for the time being entitled to receive notice of meeting.
o TPL shall make the purchase within such period and have to comply with such requirements as may be
specified in the regulations.
o TPL shall purchase the shares against cash consideration and out of the distributable profits or reserves
specifically maintained for the purpose.

Winter 2023 Q.7

 GL’s Required Compliances Before Issuing Shares at Discount to PL

o Hold Board Meeting: First, the board of GL must approve the decision to issue shares to PL at a
discount.
o Notify and Hold General Meeting: A notice (including draft special resolution and proxy form) must be
sent to shareholders at least 21 days before the meeting.
o Pass Special Resolution: The shareholders must pass a special resolution approving the discount issue. It
must clearly mention:
 Total number of shares (12.5 million),
 Rate of discount (20%),
 Price per share (Rs. 8).
o Alternative to Meeting (for small companies): If GL has 50 or fewer shareholders, it can pass the
resolution through circulation signed by all members instead of holding a meeting.
o Apply to SECP: After passing the resolution, GL must get SECP’s approval for the discounted issue.
o File Resolution: File the special resolution with the Registrar within 15 days and update articles of
association if necessary.
o Valuation Certification: Get the auditors to certify that the fair value per share (either via revalued
assets or discounted cash flow) is not higher than Rs. 8.
o Timeline for Issue: Complete the share issuance within 60 days after SECP’s approval (or within
extended time if allowed).
 o Share Certificate Issuance: Within 30 days after allotment, GL must issue physical share certificates
through a board resolution and after collecting allotment letters.
o Other SECP Conditions: Any additional conditions imposed by SECP must also be complied with.
 Private Placement Requirements (if applicable)
o If GL offers shares via private placement, it must ensure:
 Not more than two private placements are made in the financial year.
 Shares are offered through an information memorandum (with required details).
 Funds must be received through banking channels only (no cash).
 Compliances After Share Issuance
o File Return of Allotment: File within 45 days of allotment, disclosing:
 Number of shares (12.5 million),
 Nominal value (Rs. 125 million),
 Amount paid per share (Rs. 8),
 Details of PL.
o Attach Supporting Documents:
 Auditor’s report confirming Rs. 100 million received,
 Copy of shareholders’ resolution,
 SECP’s approval if discount exceeds 10%.
o Meeting Record: If resolution was passed via circulation, note it in the next general meeting’s minutes.
o Disclose Discount: Mention the discount in:
 Prospectus (if applicable), and
 Any future financial statements.
o Utilize Proceeds Appropriately: Ensure the use of funds is as described in the private placement
memorandum.

Summer 2023

Situation I
 Evaluation of actions
o Selling Treasury Shares After Buy-Back:
Since KTL’s buy-back of shares ended on 30 November 2022, the 6-month restriction period for selling
treasury shares has passed (ended 31 May 2023). This means KTL can now legally sell the shares. The
fact that the buy-back was originally approved till March 2023 doesn't matter here.
o Setting Share Prices Above Market Value:
KTL is allowed to set a higher price than the market or book value when offering the shares. However,
this may make it harder to find buyers quickly through the PSX trading system.
o Sale to Employees Under ESOS:
If KTL wants to sell 3 million treasury shares to its employees, it must:
 Be allowed to do so in its Articles of Association.
 Follow an Employee Stock Option Scheme (ESOS).
 Get special resolution from shareholders if shares exceed 1% of capital.
 Procedures for Selling Treasury Shares
o For all sales (both public and ESOS):
 Get board approval for selling 30 million treasury shares.
 Notify the Commission and PSX immediately after board decision.
 Appoint an authorized officer.
 Publicly announce sale within 2 working days.
o If selling via PSX:
 Sell through PSX system for cash only.
 Start within 7 days of announcement and finish in 45 days or earlier.
o If selling to employees (ESOS):
 Get shareholder and Commission approval via special resolution.
 Form a Compensation Committee led by an independent director.
 Disclose details like number of shares, price, recipients, and purpose.
 Launch ESOS within 6 months of resolution.
 Summer 2023

i. Shortcomings in the proposal of the right issue

a. Issuing Right Shares at a Premium
i. STL can issue right shares at Rs. 10 premium only if major shareholders (holding 10% or more) like
the Ahmed Family, Ghani Family, and HPL give written commitments to subscribe to their
entitlement or arrange buyers.
ii. Even if the Ghani Family doesn’t want to invest, they must find someone else to buy their portion.
b. Underwriting Unsubscribed Shares
i. STL must get at least two underwriters (who are not associated with STL) to cover any shares that
the public doesn’t buy.
ii. STL cannot use long-term debt instead of underwriting.
c. Loan Conversion Not Allowed in Right Issue: ATL cannot convert its loan into shares via right issue; right
shares must be paid for in cash only.
d. Minimum Subscription Amount
i. STL can set a minimum subscription amount but it must be at least 90% of the total right issue (i.e.,
Rs. 720 million).
ii. STL’s proposed Rs. 600 million (75%) is too low.
iii. Major shareholders must commit to cover their share of this minimum subscription, and the public
part must be underwritten.
ii. Shortcomings in the proposal for issuance of term finance certificates (TFCs)
a. Allocation Between Book Building and Retail
i. Only 75% of the TFCs can be allocated through book building (institutional bidding). STL wants to
allocate 87.5%, which exceeds the allowed limit.
ii. STL must get permission from SECP for this.
 Summer 2023

i. Cut-off Profit Rate and Allotment via Reverse Dutch Auction

a. Reverse Dutch Auction Process
i. TFC bids are arranged from lowest to highest profit rates.
ii. Bids below or equal to the final cut-off rate (11%) are accepted. Bids above are rejected.
iii. Those who bid below 11% are allotted TFCs at 11%.
iv. If any TFCs remain after lower bids are filled, the remaining are proportionally distributed
among bids at 11%.
ii. Key Features Required in Investor Agreements
a. TFC Subscription Agreements Must Disclose:
i. Key features of the issue (covenants, terms, risks).
ii. No legal claims on STL or intermediaries by investors.
iii. No guarantees from any banks or financial institutions.
iv. Any past defaults by STL.
v. That investment is at investor’s own risk and depends on STL making funds available.
 Summer 2024

a. Why EL is a Subsidiary of CL
a. CL controls more than 50% of EL's voting shares through its two subsidiaries:
b. BL owns 29% of EL (174 out of 600 shares).
c. DL owns 36% of EL (216 out of 600 shares).
d. Combined, CL indirectly owns 65% of EL, making EL its subsidiary.
e. Since a subsidiary cannot hold shares in its parent company, EL is not allowed to participate in CL's share
offering.
f. Note-1 & Note-2: How BL and DL are CL’s Subsidiaries
i. BL is CL's subsidiary because CL can appoint 60% of BL’s board.
ii. DL is also CL’s subsidiary due to indirect control via:
1. Direct holding in DL: 12% (84/700 shares),
2. Holding via BL: 25% (175/700 shares),
3. Holding via GL: 35% (245/700 shares),
4. Total control in DL: 72%.

5.
iii. Similarly, GL is a subsidiary of CL due to:
1. 8% direct holding and 50.5% holding via BL (total 58.5%).

2.
b. FL’s Public Offer as a Valid Competitive Bid
a. FL’s bid for 22 million shares of EL at Rs. 430 per share is valid because:
i. The quantity meets the minimum required.
ii. The price is higher than Rs. 400.
 iii. It was made within 21 days after DL's public announcement.
b. DL’s Options After FL’s Competitive Bid:
i. Revise its offer by increasing price or quantity within 7 working days before FL’s offer closes.
ii. Withdraw its offer within 7 working days of FL’s announcement.
iii. If DL does neither, its original offer stays valid, but the closing date is extended to match FL’s
offer closing date.

Winter 2024

 Mustafa Ali’s shareholding in ASL

o Although Mustafa Ali owns shares worth more than the minimum value (Rs. 600 million), these shares
represent less than 10% of ASL’s total capital. According to the law, he must own at least 10% of the
company to sell shares through the book-building process. So, he cannot offer ASL’s shares publicly.
 Sale of CSL shares
o Mustafa Ali’s stake in CSL is only worth Rs. 230 million, which is below the minimum required Rs. 250 million
for a public offer via book building. Hence, this sale also does not qualify.
 DSL shares (post reverse merger)
o Mustafa Ali owns 32% of DSL. But because the company got listed through a reverse merger, and he is a
sponsor, his shares are locked (not tradable) for 1 year. He also must keep 25% of the capital locked for 3
years. So, even after the lock-in ends in March 2025, he can only sell a portion of his shares—which is less
than the 25 million shares needed for a public offer. Therefore, he cannot sell them publicly through book
building.
 ESL shares (recently listed)
o ESL was listed in March 2023, and Mustafa Ali is a sponsor with 25% shareholding. Regulations require that
such shares must be held unencumbered (i.e., cannot be sold) for 3 financial years from listing. So, until
March 2026, he cannot sell ESL shares through public offering.
 Winter 2024

Winter 2024

 Both incidents highlighted in the Chairman’s email are cases of insider trading, as the individuals involved fall
under the definition of “insider” under the Securities Act, 2015. To prevent similar occurrences at ML and ensure
compliance with applicable legal provisions, the following steps are recommended:
  Maintain a list of individuals (employees, contractors, etc.) who have access to inside information, and regularly
update this list and send it to the Commission upon request.
 Designate a senior management officer responsible for:
- Making timely updates to the insider list, and maintaining records justifying the inclusion or exclusion of
names of persons in the list contained in the register; and
- Ensure the register is available to the Commission as required.
 Ensure all individuals on the insider list acknowledge compliance with relevant provisions of the Securities Act,
2015, including the prohibition against using inside information for transactions. Require insiders to inform
anyone they share inside information with, about these obligations.
 Closed period determination
- Establish a closed period before announcing ML’s interim/final results or any decision that could
materially affect the market price of its shares.
- Advise the directors of ML about the closed period at the time of circulating agenda and working papers
for the board meeting, along with sending intimation of the closed period to the PSX.
 If inside information is disclosed to a third party in the course of employment, profession, or duties, ensure
simultaneous public disclosure, unless the recipient has a duty of confidentiality based on law, regulation, ML’s
articles of association, or contract.
 If any director, CEO, substantial shareholder, or executive of ML or their spouses fails to provide the required
written notice of trades in shares of ML, the Company Secretary must bring the matter to the board at the
immediate next board meeting.

Winter 2024

 Critical review of Plan I

 o Offer of right shares
 Companies must offer right shares strictly in the same proportion as shareholders’ existing
ownership.
 In your case, offering unequal proportions (14M, 21M, 10M shares) to ESL, OIL, and others violates
this rule.
 The correct allocation should be based on the percentage of shares each currently owns.
o Issue price of right shares
 The price per share must be uniform for all shareholders.
 Your proposed total funds raised (Rs. 889 million) divided by 45 million shares gives an average issue
price of Rs. 19.76.
 Charging different prices to different shareholders is not allowed.
o Issue for consideration other than cash
 Right shares must only be issued for cash.
 Proposing to issue shares to OIL for a software division (non-cash) violates this.
 Even issuing for cash first and then offsetting it via acquisition also fails to comply if actual cash
wasn’t received.
o Unsubscribed portion
 You cannot just raise a loan to cover unsubscribed shares.
 If BCL (a substantial shareholder) won’t subscribe to their portion, they must arrange a subscriber.
 Remaining unsubscribed shares must be underwritten by at least two non-associated underwriters.
 If you declare a minimum subscription, it must be 90% of the issue i.e., Rs. 800.1 million (90% of
889M).
 Additional compliances for issuing shares for non-cash consideration
o Board proposal
 The board’s proposal must explicitly state that shares are being issued for non-cash.
 The assets being received (like software or vehicle prototypes) must be valued by a SECP-registered
valuer, and valuation must not be older than six months.
o Valuation of assets from KTL
 Valuation must be conducted by:
 Consulting Engineers (registered with PEC), or
 Practicing Chartered Accountants (with ICAP Quality Control Review certificate).
o Notification and claims
 ASL must advertise in leading Urdu and English newspapers, inviting claims related to the non-cash
assets.
 Any claims must be submitted to the auditors within 7 days.
o Intimation to the Commission
 ASL must submit:
 A list of any claims received and settled,
 Verified by statutory auditors, and
 An affidavit confirming accuracy.
o Transfer of assets
 The non-cash assets must be transferred to ASL within 60 days of SECP’s approval.
 An extension of up to 30 days can be granted.