Chapter 10: Investments and Disclosure of Interest Flashcards
Associated company/Associated undertaking definition (4)
in exam, definition shall also include exceptions
Two or more companies or undertakings interconnected with each other in the following manner:
1. If companies or undertakings are under common management/control
2. If one is subsidiary of another
3. If undertaking is a modaraba managed by the company
4. If a person is owner or partner or director of company/undertaking, or who, directly or indirectly (spouse/minor child), holds or controls shares carrying not less than 20% of voting power:
OF BOTH COMPANIES/UNDERTAKINGS
Associated company/Associated undertaking Exceptions [4]
Following directorships or shareholdings shall not be considered while ascertaining status of companies to be associated:
1. Directorship by virtue of nomination by concerned Minister of govt. (fed+prov) or a financial institution owned or controlled by such Government
2. Directorship of a person appointed as “Independent Director”
3. Shares owned by NIC, ICP, Financial Institute owned controlled by govt.(fed+prov)
4. Shared registered in thename of a central depository.
Condition for investment in associate [2]
- Making investment = special resolution
- Variation in nature and terms and condition of investment or an increase in amount = Special Resolution
First special resolution shall indicate nature, period, amount, terms and conditions of such investment
Investment as a loan [3]
-
Written agreement specifying:
* nature
* purpose
* period
* rate
* fee/commission
* repayment
* penalty
* security - Return on investment shall not be less than borrowing cost of investor or a rate as specified by SECP
- Director shall certify that investment of loan is made with due dilligence and that the borrower has ability to repay the loan.
Exceptions of rule of all investments to be held in company’s own name [3]
- If Investor Company has power to appoint its directors (nominee) in investee, it is allowed to hold such qualification shares in nominee’s name
2.** Holding company** may hold any shares in its subsidiary company in name of its nominees if number of members of subsidiary company has reduced below required minimum member - Company may also place its investment in the name of CDC
Register for investments of company not held in its own name [1]
Register shall contain nature, value and such other particulars as may be necessary fully to identify such shares or securities.
Inspection of Register of investments not in company’s name [5]
- Members: open inspection daily for at least 2 hours
- Other person: inspect by paying prescribed fee
- Member could demand a certified copy of such register by paying a prescribed fee and shall receive it within 7 days of request
- Co. could impose restrictions on such inspection
- If inspection is refused, registrar can direct immediate inspection via application
Timing of disclosure of interest by director [2+2+1]
- If transaction requires directors’ approval before start up of contract:
- **at first meeting **in which it is discussed
- at first meeting after he becomes interested - If transaction does not require directors’ approval
- at first meeting held AFTER such transaction has been entered
General notice of ownerships and directorships [3]
- director may give a general notice regarding his directorships in other body corporate or partnership in firms
- Such notice should be given at directors’ meeting or director may take proper steps to ensure that notice is read by other directors.
- General notice shall expire at end of financial year in which it is given and may be renewed by fresh notice in last month of expiry.
Restriction on voting by director who is interested [2]
- Over the approval of matter where he is interested; director cannot take part in discussion, or vote. (Nor to be counted in quorum.)
- For listed company, he shall not be present at BOD meeting in which matter involving his material personal interest, is being considered.
Exception of interested director not being able to vote/attend meeting [2]
- Private Company (neither subsidiary nor holding of Public)
- If director has acted as surety of company and the resolution relates to indemnification
Interest of other officers, etc [3]
An officer who is in any way, directly or indirectly, concerned or interested in any proposed contract or arrangement with company is required to:
1. Disclose nature and extent of his interest in the transaction;
2. Obtain the prior approval of the directors.
Related party [9]
- A director or his relative
- A key managerial personnel or his relative
- A firm, in which a director, manager or his relative is a partner
- A private company in which a director or manager is a member or director
- A public company in which a director or manager is a director or holds alongwith his relatives, any shares of its paid up share capital;
- Any body corporate whose chief executive or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager
- Any person on whose advice, directions or instructions a director or manager is accustomed to act
- Holding, subsidiary, associate, subsidiary of same holding
- such other person as may be specified
Office of profit
When a director or other officer: - Receives anything by way of remuneration over and above his remuneration as director
Requirement of approved policy for related party transactions [6]
A company may enter into any contract or arrangement with a related party only in accordance with the policy approved by the board, subject to such conditions as may be specified, with respect to:
1. sale, purchase or supply of any goods or materials;
2. selling or disposing of, or buying, property of any kind;
3. leasing of property of any kind;
4. availing or rendering of any services;
5. appointment of any agent for purchase or sale of goods, materials, services or property; and
6. such related party’s appointment to any office or place of profit in the company, its subsidiary company
or associated company.
Directors if interested abt above can place matter in Special Resolution
