Chapter 4: CEO and other officers Flashcards
Definition: Chief executive (4)
- an individual who, subject to the control and directions of the directors
- is entrusted with the whole/substantially whole of the powers of management of the affairs of the company
- and includes a director or any other person occupying the position of a chief executive
- by whatever name called, and whether under a contract of service or otherwise.
Restriction on appointment (ineligibility)
A person who is ineligible to become a director of a company shall not be appointed or continue as the chief executive of any company
Appointment of first chief executive (4)
- The name of first chief executive shall be determined by subscribers of memorandum
- His specified particulars shall be submitted along with the documents of incorporation.
- The first chief executive shall hold office up to the first AGM unless shorter period is fixed by the subscribers
- He may resign earlier or be removed from his office.
Government shall have the power to nominate chief executive of a public sector company in such manner as may be specified.
Appointment of subsequent chief executive: time limit [2]
- within 14 days of the director election
- or occurring of casual vacancy of CEO.
Term of office of subsequence chief executive (3)
- Maximum period = 3 Years
- The chief executive appointed against a casual vacancy shall hold office till the directors elected in the next election appoint a chief executive.
- The retiring chief executive can be re-appointed.
CONTINUED term of office of retiring chief executive and its exceptions (3)
Retiring chief executive shall continue to perform his services until his successor is appointed unless:
* his office was expressly terminated; or
* non-appointment of his successor is due to any fault on his part.
When can a CEO be appointed by the Federal governemnt ?
The Government shall have the power to nominate chief executive of a company, where majority of directors are nominated by the Government.
Terms and conditions of appointment of CEO (2)
- determined by the directors or the company in general meeting in accordance with the provisions in the articles
- If nominated by government, shall be determined by the Government
Removal of chief executive (4)
- by passing a special resolution in general meeting of the company; or
- by passing a resolution in the board of directors meeting supported by at least three-fourth of the number of directors;
- by Government/ authority/ person authorised by it, where more than 75% of the voting rights are held by the Government.
Restriction on CEOof public co. (COMPETING BUSINESS) [3]
- a chief executive, his spouse and minor children are prohibited
- to engage in a business which competes with the business of the company or of any of its subsidiary company.
- if he is engaged in any business at time of appointment in public co., he shall disclose the details of such business
Chairman (for listed company) (6)
- Board shall appoint a chairman W14D of election of directors
- chairman shall be from non-executive directors
- responsible for leadership of board and ensure that board plays an effective role in fulfilling its responsibilities.
- Annual F/S shall contain a review report by the chairman on overall performance of board and its effectiveness.
- Chairman shall hold office for 3 years unless he earlier resigns, becomes ineligible, disqualified or removed by the directors.
- Board shall clearly define the respective roles and responsibilities of chairman and Chief Executive.
SECP may specify classes of companies for which the chairman and chief executive shall not be the same individual
Share registrar (for listed companies) (3)
- Listed company should also appoint independent share registrars (to handle transfer of shares and all other obligations)
- Name of share registrar is also mentioned in notice of meetings
- All applications for transfer of shares are directed to share registrar instead of company
Company secretary [3]
- Any individual appointed to perform secretarial and other duties customarily performed by a company secretary and declared as such, having such qualifications and experience, as may be specified
- Public company must have company secretary, possessing qualification as may be specified
- He is responsible for advising board on compliance of corporate laws and for maintenance of relevant records and registers.
Sole purchase, sale or distribution agent (2)
- No company (incorporated in Pakistan or outside) which is carrying on business in Pakistan shall, without approval of SECP, appoint any sole purchase, sale or distribution agent
Exception to this rule
Company incorporated, or person ordinarily residing, outside Pakistan are not required to obtain approval of SECP.
(unless the major portion of business of such company or person is conducted in Pakistan)
General characteristics of a chief executive [3]
- CE (if already not a director) shall also be deemed to be a director
- Person ineligible to be a director is also ineligible to be a CE.
- He reports to board and can’t exceed his authority granted by BOD.
