Certified Finance and Accounting Professional Stage Examination

The Institute of 6 June 2018

Chartered Accountants 3 hours – 100 marks
of Pakistan Additional reading time – 15 minutes

Corporate Laws
Q.1 CF (Pvt.) Limited (CF) has been incurring losses for past few years. The Board which
comprises of 4 directors, is considering members’ voluntary winding up which requires a
declaration of solvency that CF would be able to pay all its debts in full within one year
from the commencement of winding up. The board of directors plans to appoint Agha Rafiq
who is presently working as chief accountant of CF as the liquidator on the ground that he
knows the entire affairs of the company.

(a) Under the provisions of the Companies Act, 2017:

(i) advise the directors of the company about the requirements of filing of
declaration of solvency. (06)
(ii) discuss whether Agha Rafiq can be appointed as the liquidator and who has the
final authority to make the appointment. (02)

(b) On 5 March 2018, CF submitted declaration of solvency to the Registrar and

appointed a liquidator in accordance with the requirements of the
Companies Act, 2017. On 5 May 2018, the liquidator came to know that it would not
be possible to pay the company’s debts.

Under the provisions of Companies Act, 2017 you are required to explain:
(i) the responsibilities of the liquidator in the above situation. (03)
(ii) whether the present liquidator can continue to act as liquidator in such a
situation. (02)

(c) Assume that all affairs of CF are fully wound up and a final meeting has been called
but the required quorum is not present in the final meeting.

Under the provisions of Companies Act, 2017 explain how the liquidator should
proceed to fulfil his responsibilities. (02)

Q.2 The directors of Pioneer Shipping Limited have decided to issue Class B ordinary shares
which would have different rights and would be issued to a group of investors. The existing
paid up capital will be classified as Class A shares.

(a) In the light of Companies’ Share Capital (Variation in Rights and Privileges)
Rules, 2000 explain the following:
(i) Validity of directors’ resolution regarding the issuance of Class B shares. (02)
(ii) The nature of variation in the rights and privileges that may be attached to
different classes of shares. (05)

(b) Ahmed and Faraz holding 9% and 10% shareholdings respectively, do not agree with
the issuance of class B shares as in their opinion this would adversely affect their
interest, though a majority of the members are in favour of the resolution.

In the light of the provisions of the Companies Act, 2017 advise the course of action
which Ahmed and Faraz should take in respect of the above. (04)
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Q.3 (a) Discuss the restrictions imposed by the Companies (Issue of Capital) Rules, 1996 on
the sponsors of issuing company when they intend to raise capital through issue of
shares to the general public. (05)

(b) Pan Industries Limited (PIL), a public unlisted company, has been operating in
Pakistan for last 30 years. There are seven shareholders who are also directors of the
company.

Directors are presently considering to list the company on Pakistan Stock Exchange
by issuing shares to the public as well as to its employees. Considering PIL’s
established brand and profitable operations, they intend to issue these shares at
premium. The proposed details of the offer are as follows:

Number of shares to
Shares to be offered to Target price
be issued
General public 1,000,000 Rs. 25
Employees 50,000 Rs. 23

PIL expects to issue shares to its employees on 15 August 2018 and to general public
on 30 November 2018.

Under the provisions of Companies (Issue of Capital) Rules, 1996 advise PIL about
the conditions which are required to be fulfilled for issuance of shares at premium. (08)

Q.4 (a) Kalaam Limited (KL) is negotiating a syndicate loan with a consortium of banks for
expansion of its business. KL intends to offer its factories, land and building located
in Multan and Sharjah as security. However, the consortium would approve the loan
only if the present charge on Multan factory, in favour of a local bank, is released.

As the Corporate Consultant of KL, the management has sought your advice on
various matters related to the loan. As part of your advice, you are required to discuss
the following matters under the provisions of Companies Act, 2017:

(i) the procedure that may be followed for the release of charge over the Multan
factory. (03)
(ii) requirement that KL should follow for registration of charge over its Multan
and Sharjah factories. (05)

(b) Bravo (Pvt.) Limited (BPL) has two shareholders. All the directors of the company
are nominees of these two shareholders. The details are as follows:

Nominee
Name of shareholders No. of shares
directors
Tiara Limited (TL) – listed company 6,030,000 5
Junaid 2,970,000 *3
9,000,000 8
* including chief executive

TL wants to change the chief executive officer and appoint one of its directors as the
chief executive of BPL before the expiry of the term of the office of the existing chief
executive.

In the light of the provisions of Companies Act, 2017 advise TL in the above
situation. (03)
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Q.5 Assume that the date today is 31 May 2018.

The following information pertains to receivables of United Leasing Limited (ULL):
(a) On 30 September 2017, total exposure to Star Car Rental (SCR) was Rs. 30 million.
Instalments were overdue by one year and SCR was classified as ‘doubtful’. ULL
restructured the exposure in October 2017. SCR has been repaying the instalments
regularly since then and has repaid Rs. 5 million till today. (02)

(b) On 31 January 2016, total exposure of Rs. 70 million to Yahya Chemicals Limited
(YCL) was rescheduled. In August 2017, on compliance with the conditions of
rescheduling, YCL was reclassified from ‘doubtful’ to ‘regular’. In November 2017,
YCL defaulted in repayment of instalments. (03)
Under the provisions of NBFCs and Notified Entities Regulations, 2008 advise the
management about the classification of the above receivables.

Q.6 (a) Giants Limited, a listed company, has reconstituted its board. Details of board
members are as follows:
S. No. Name of director Qualification Type of directorship
1 Dawood (Chairman) M. Com Non-Executive
2 Ebad MBA – Marketing Non-Executive
3 Faheem MA – International Relations Non-Executive
4 Abid Bachelor of Engineering Executive
5 Bilal Chartered Accountant Executive
6 Karim MBA – Human Resource Executive
7 Ghafoor Chartered Accountant Independent
8 Haris LLB Independent
9 Ibrahim Chartered Accountant Independent

The board is in process of finalizing the members of audit committee and following
options are under consideration:
(i) Ibrahim (Chairman), Dawood and Abid
(ii) Dawood (Chairman), Ebad and Faheem
(iii) Haris (Chairman), Ebad and Faheem

Discuss appropriateness of the above options under the Listed Companies (Code of
Corporate Governance) Regulations, 2017. (05)
(b) On 1 April 2018, Dynamics Limited, a listed company, held its board meeting.
Aslam being an independent director disagreed with certain approvals and recorded
his dissent. Subsequently, on reviewing the minutes of the meeting he noticed that his
dissent has not been properly recorded.

Under the provisions of the Listed Companies (Code of Corporate Governance)

Regulations, 2017 advise Aslam with respect to the above situation. (02)

Q.7 On 1 July 2017, Sabiha was appointed as a director of New Chemicals Limited (NCL), a
listed company. Jamal, husband of Sabiha, is a retail investor and actively trades in
securities listed on Pakistan Stock Exchange. He did not hold any shares of NCL on the
date of Sabiha’s appointment but undertook the following transactions subsequently in the
shares of NCL:
(i) Bought 10,000 shares at Rs. 175 per share on 1 August 2017
(ii) Sold 8,000 shares at Rs. 240 per share on 2 March 2018
(iii) Bought 18,500 shares at Rs. 225 per share on 1 April 2018
(iv) Sold 6,500 shares at Rs. 285 per share on 6 June 2018

In the light of the Securities Act, 2015 discuss the responsibilities of Sabiha in respect of the
above transactions and the gain thereon. (09)
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Q.8 (a) Under the provisions of the Anti-Money Laundering Act, 2010 describe when a
person would be considered as guilty of offence for money laundering. (04)

(b) Sunshine Limited (SL) is a listed company whose entire shares are registered in the
name of Central Depository Company (CDC). SL has announced 20% bonus issue.

Under the provisions of Central Depositories Act, 1997 discuss the responsibilities of
SL and CDC in the above situation. (04)

(c) Under the provisions of Competition Act, 2010, identify the marketing practices
which shall be deemed to fall under the ambit of deceptive market practices. (03)

Q.9 Under the Single Member Companies Rules, 2003 briefly comment on the following
statements:

(a) Only the single member may be the director of a single member company. (02)
(b) There is no need to appoint a company secretary if the sole director is willing to take
the responsibility of company secretary. (02)
(c) A single member company cannot enter into contract with the single member. (02)

Q.10 (a) Under the provisions of Companies Act, 2017 describe who manages and controls
Investor Education and Awareness Fund (Fund) and specify the amounts which are
credited to this Fund. (05)

(b) Mujtaba Engineering Limited (MEL) is listed on Pakistan Stock Exchange. It intends
to buy-back 10% of its paid up capital.

In the light of Listed Companies Buy Back of Shares Regulations, 2016 advise the
board of directors regarding eligibility conditions to be fulfilled by MEL, for buy-back
of its own shares. (07)

(THE END)