Restrictions,Prohibition And Limitations

Question 1

Prohibition, restrictions and limitations

Answer 1

• Limit: The payment for attending board or committee meetings must not exceed the scale approved by the company or the board, as per the company’s articles.
• Example: If the company’s articles state that directors can receive up to $500 per meeting, this limit must be adhered to.

• Determination: Payment for extra services, like serving as chairman, is decided by the board or the company in a general meeting, following the company’s articles.
• Example: If a director takes on additional responsibilities, the board may decide to pay them extra, but this must be approved according to the company’s rules.

• Rule: Directors cannot assign their office to another person. Any such assignment is void from the beginning.
• Example: A director cannot transfer their role to a friend or family member.

• Exception: A director can appoint an alternate director during their absence from Pakistan for at least 90 days, with board approval.
• Example: If a director is traveling abroad for several months, they can appoint someone to act in their place, but this person must step down when the director returns.

• Rule: All cash transactions with directors must go through banking channels.
• Example: Any payments to directors should be made via bank transfer, not in cash.

• Approval Needed: The company needs prior approval from a general meeting to enter into non-cash transactions with directors or connected persons.
• Example: If a director wants to sell property to the company in exchange for shares, this must be approved by the shareholders in a general meeting.

• Director’s Remuneration: Must follow approved scales and be determined according to the company’s articles.
• Assignment of Office: Directors cannot assign their office, but can appoint an alternate director with board approval.
• Transactions with Directors: Cash transactions must go through banks, and non-cash transactions need shareholder approval.

If you have any more questions or need further details, feel free to ask!

• Approval Needed: A company cannot make a loan to a director or their relatives (spouse and minor children) or give a guarantee/security for a loan to them unless approved by members through a resolution.
• Additional Requirement for Listed Companies: Listed companies also need approval from the Commission for such loans.

Example: If a director of a listed company wants a loan, the company must get approval from both the shareholders and the Commission.

• Ordinary Course of Business: These restrictions do not apply if the company regularly provides loans or guarantees as part of its business.

• Prohibition: A company cannot contribute any amount or use its assets for political parties or purposes.

Example: A company cannot donate money to a political party or use its office space for political events.

• Prohibition: A company cannot distribute gifts to its members during meetings.

Example: During an annual general meeting, a company cannot give out gift hampers to shareholders.

• Loans to Directors: Require member approval and, for listed companies, Commission approval.
• Political Contributions: Not allowed.
• Distribution of Gifts: Not allowed during meetings.

If you have any more questions or need further details, feel free to ask!

Source: Conversation with Copilot, 12/30/2024
(1) 5 CFR Part 2635 Subpart B – Gifts From Outside Sources. https://www.ecfr.gov/current/title-5/chapter-XVI/subchapter-B/part-2635/subpart-B.
(2) 5 CFR 2635.206 – Proper disposition of prohibited gifts.. https://www.ecfr.gov/current/title-5/chapter-XVI/subchapter-B/part-2635/subpart-B/section-2635.206.
(3) A Guide On Corporate Gift Giving Laws To Stay Compliant - Giftpack Blog. https://blog.giftpack.ai/article/corporate-gift-giving-laws.
(4) Section 182. Prohibitions and restrictions regarding political …. https://ca2013.com/182-prohibitions-and-restrictions-regarding-political-contributions/.
(5) Political Contribution Under Companies Act, 2013 - Tax Guru. https://taxguru.in/company-law/political-contribution-companies-act-2013.html.
(6) FEC | Candidate | Who can and can’t contribute - FEC.gov. https://www.fec.gov/help-candidates-and-committees/candidate-taking-receipts/who-can-and-cant-contribute/.
(7) Section 185 of Companies Act: Loan Restrictions Explained. https://www.taxbuddy.com/blog/section-185-of-companies-act-2013.
(8) Section 185 Companies Act 2013: Prohibitions on Loans to Directors & Others. https://taxguru.in/company-law/section-185-companies-act-prohibitions-loans-directors-others.html.
(9) Loan to Directors– Provisions of Section 185 of Companies Act, 2013. https://www.complinova.com/post/loan-to-directors-companies-act.