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Term Report Non-Banking Finance Companies Submitted by: Dawood Khan (7830) Faizan Baig Course Code: Submitted

to: Sir Mohammad Zia Kiyani

Non-Banking Finance Companies Non-Banking Finance Companies are companies which are licensed by the commission to carry out any one or more of the following forms of business namely; Investment Finance Services Leasing Housing Finance Services Venture Capital Investment Discounting Services Investment Advisory Services Asset Management Services Any other form of business which the Federal Government may, by notification in the official Gazette specify from time to time. Also any company or class of companies or corporate body as the Federal Government may, by notification in the official Gazette , specify for the purpos e. Power to make rules: The Federal Government may make rules for establishment and regulation of NBFCs and such rules may, inter alia, in addition to anything already provided i n this Ordinance, provide for conditions relating to qualifications of directors, chief executive, chairman, auditors, for licensing, capital and audit requirements; and any other matter which the Commission may deem fit for the effective regulation of NBFCs and companies established under the rules here under. Incorporation of NBFC: 1. An NBFC shall not be incorporated with out prior approval of the commission. 2. Notwithstanding anything contained in any other provision of this Ordinance, a NBFC shall not carry on business unless it holds a license issued in that behalf by the Commission; and any such license may be issued subject to such conditions, as the Commission may deem fit to impose. 3. Every company in existence which is engaged in any one or more forms of business as specified in Section 282-A, before the expiry of six months from coming into force of this section and every other company before commencing any form of business as specified in Section 282-A, shall apply in writing to the Commission for grant of a license under this section. The Commission, if it is satisfied that the company has fulfilled the conditions prescribed by the Commission in respect of the business for

which the license is being sought, may grant license to such company for one or more of the forms of business specified in Section 282-A.

4. An NBFC shall not commence or carry on business unless it has such minimum paid up capital as may be prescribed by the Commission from time to time in respect of each form of business are specified in Section 282-A. Licensing of NBFCs Permission to form a NBFC (1) A person desirous of forming a NBFC shall make an application to the SECP as set out in Form-I providing information along with all the relevant documents and re ceipt evidencing the payment of non-refundable processing fee amounting to one hundred thousand rupees. (2) The SECP may, if it is satisfied that the person seeking permission to form the NBFC has fulfilled the terms and conditions specified in Non-banking Finance Companie s (Establishment and Regulation) Rules, 2003, permit by an order in writing such p erson to establish a NBFC. (3) The permission granted shall be valid for a period of six months unless exte nded for a maximum period of three months under special circumstances, on the application o f the promoters made before the expiry of said six months. During the validity of this permission, the promoters of the NBFC shall get the NBFC incorporated as a publi c limited company under the Ordinance. Conditions for grant of license (1) A NBFC shall make separate applications to the SECP for grant of licenses fo r carrying on different forms of business, as specified in section 282 A of the Co mpanies Ordinance. The said application shall be submitted to the SECP in Form-II along with a non-refundable processing fee amounting to one hundred thousand rupees for each such license: Provided however that the SECP if satisfied may issue a single license for both investment advisory and asset management services. (2) The SECP, if it is satisfied that the company has fulfilled the conditions s pecified in Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003, the promoters thereof are persons of means and integrity having knowledge of matters which the company may have to deal with, in respect of the business for which the lice nse is being sought, shall grant license to such company in Form-III for one or more of the functions or activities subject to compliance of the following conditions, namel y:( a) the company is incorporated as a public limited company under the Ordinance;

(b) the company has separate tiers of minimum equity in respect of the following forms of business as mentioned against each activity, namely:i) Investment finance services Rs. three hundred million; (ii) Leasing Rs. two hundred million; (iii) Venture capital investment Rs. five million (for a venture capital company); (iv) Discounting services Rs. two hundred million; (v) Investment advisory and assets Rs. thirty million; Management services (vi) Housing finance services Rs. one hundred million. (c) The company has allotted at least fifteen per cent of the paid-up share capi tal to the promoters; (d) The company s promoters and directors have given undertaking that they shall not dispose of their shares for a minimum period of three years from the date of commencement of business except with the prior approval of the SECP; (e) The company appoints its chief executive who does not hold such office in an y other company except for a fund being managed by the said company, provided that prior approval of the SECP has been obtained in this regard; (f) The company has given an undertaking that no change in the Memorandum of Association and in the Board of directors shall be made without prior approval o f the SECP and that all conditions of Non-banking Finance Companies (Establishment and Regulation) Rules, 2003 shall be complied with; (g) The company has given an undertaking that the conditions of operation as set out in these rules or regulations or specified by special order of SECP or any direction given by the SECP shall be duly complied with; and (h) The company has furnished an undertaking that within ninety days of the grant of certificate of registration it shall furnish evidence to the satisfacti on of the SECP that the personnel employed by it for executive positions, research or othe r related functions possess sufficient educational qualifications and professional experience to undertake the proposed form of business of the NBFC. (3) Without prejudice to the conditions prescribed, the SECP may, while granting license, impose such conditions, as it may deem necessary.

(4) The license granted to the NBFC under these rules shall be valid for one yea r and each license shall be renewable annually on an application as set out in Form IV along with payment of a fee of rupees twenty five thousand . (5) The SECP may, after making such inquiry and after obtaining such further information, as it may consider necessary, renew the license of such NBFC, for o ne year in Form V on such conditions, as it may deem necessary. (6) Every company in existence which is engaged in one or more forms of business as specified in section 282A of the Ordinance shall apply in writing to the SECP, a s provided by sub-section (3) of section 282C of the Companies Ordinance, for gran t of a license along with a non-refundable processing fee of rupees fifty thousand: Pro vided that till such time that a new license is issued, the existing licenses or registrati ons shall be deemed to be valid for the purposes of these rules unless the company fails to a pply for license as specified in sub rule(6) of Non-banking Finance Companies (Establishm ent and Regulation) Rules, 2003or the SECP declines to grant such license for reason s to be recorded in writing.

FORM-I [see rule 4(1)] APPLICATION FOR PERMISSION TO FORM A NON FINANCE COMPANY Dated: _______________ To The Securities and Exchange Commission of Pakistan, Islamabad. Dear Sir, We hereby apply for grant of permission under rule 4 of the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003, to form a Non-Banking Finance Company under the name and style of * ------------------------------------------The information and documents as required in the Annexure to this form duly veri fied and signed by all promoters and proposed directors along with five spare copies of this application and an affidavit by them as to the correctness of the details, is su bmitted. We undertake to keep this information up to date by communicating changes or modifications therein within fourteen days of such changes or modifications. A receipt of rupees one hundred thousand (Rs. 100,000/-) being the processing fe e, deposited in-------------- on ------------------------is enclosed. Yours faithfully, Verification by Oath Commissioner. Name of the company BANKING

ANNEXURE TO FORM-I [see rule 4] INFORMATION TO BE SUPPLIED FOR OBTAINING PERMISSION TO FORM A NON BANKING FINANCE COMPANY AND SUBSEQUENT CHANGE IN DIRECTORSHIP AND CHIEF EXECUTIVE 1. Full name, former name if any, father s or husband s name, nationality, residenti al and business address, national tax number, present occupation of each sponsor, propo sed director, proposed chief executive and proposed chairman of the Board. (Institutional sponsors shall mention their names and addresses only instead of giving all these particulars of their nominee directors). 2. Names and addresses of companies, firms and other organizations of which the aforesaid sponsors, proposed chief executive and proposed chairman are or have b een directors, partners or office holders during the last ten years. Copies of annua l accounts of such companies and firms for the last three years along with summary of their pa id-up share capital, free reserves, profit after tax and dividend payment to be provid ed. 3. Financial standing, educational as well as professional qualifications and ex perience of persons mentioned in paragraph 1 above, supported by documentary evidence. 4. Percentage of capital, each sponsor proposes to contribute in the proposed co mpany. 5. Feasibility report of the proposed company. 6. Evidence of payment of income tax and wealth tax by the sponsors in individua l capacity as well as by the companies, firms, etc., wherein they are or have been directors during the preceding five years. 7. Net-worth certificate of each sponsor supported by a duly authenticated copy of the latest wealth statement filed with the taxation department. In the case of spons ors or directors residing in countries where filing of wealth statement is not the requ irement of law, a certificate of personal net-worth and general reputation issued by a bank of international repute shall be acceptable. 8. Names of the bankers of the sponsors alongwith their account numbers. 9. Draft of the Memorandum and Articles of Association. 10. Affidavit from each person mentioned in paragraph 1 above, stating that( a) He has not been associated with any illegal banking business, deposit taking or financial dealings;

(b) He and companies in which he is a director or major shareholder have no over-due loans or installments outstanding towards banks or other financial institutions; (c) Neither he nor companies in which he is a director or major shareholder has defaulted in paying taxes as on the date of application; (d) He has not been sponsor, director or chief executive of a defaulting cooperative finance society or finance company; (e) He has never been convicted of fraud or breach of trust or of an offence involving moral turpitude or removed from service for misconduct; (f) He has neither been adjudged an insolvent nor has defaulted in making payments, to his creditors; and (g) His net-worth is not less than twice the amount to be subscribed by him personally (not applicable to a nominee director).

FORM-II [see rule 5(1)] APPLICATION FOR OBTAINING LICENCE TO UNDERTAKE OR CARRY OUT *_________________ AS NON BANKING FINANCE COMPANY Dated, the------------To, The Securities and Exchange Commission of Pakistan, Islamabad. Dear Sir, We hereby apply for grant of license under rule 5 of the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003, to undertake __________* a s a Non-Banking Finance Company. 2. We hereby furnish the following information,__ (a) date of incorporation as a limited company; (b) authorized, subscribed and paid-up share capital of the company (sponsors' e quity indicated separately); (c) names and addresses of directors and number of shares held by each of them; (d) directors' interest, direct or indirect, in any other company with details o f such interest; (e) details of persons or group controlling the company including major sharehol ders with number and value of shares held; (f) names of holding, subsidiary and associated undertaking, if any; (g) details of qualified staff engaged; (h) reasons for selecting the proposed place of business with statistical data; and (i) additional facts in support of this application. 3. Certified copies of the memorandum and articles of association and certificat e of incorporation are enclosed.

4. An affidavit as to the correctness of the above information by the chief exec utive and two directors is also furnished herewith. We undertake to keep this information up to date by communicating changes or modifications therein within fourteen days of such c hange or modifications. 5. A receipt of rupees one hundred thousand (Rs. 100,000/-) being the processing fee, deposited in __________ on ________ is enclosed. Yours faithfully, Signature----------------( To be signed by all the directors) *Any one of the activities or functions as mentioned under section 282 (A) of th e Companies Ordinance, 1984.

FORM -III [see rule 5(2)] SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN Islamabad, Dated, the __________ Registration No. _________ LICENCE TO CARRY OUT OR UNDERTAKE *_________AS NONBANKING FINANCE COMPANY The Securities and Exchange Commission of Pakistan having considered the applica tion for grant of license under rule 5 of the Non-Banking Finance Company (Establishm ent and Regulation) Rules, 2003, by **_______________________________ and being satisfied that the said **_______________________________________ is eligible for the license, hereby grants, in exercise of the powers conferred by sub-rule (2) of rule 5 of the Non Banking Finance Company (Establishment and Regulation) Rules, 2003, license to **______________________________________ to undertake or carry out *__________ subject to the conditions stated herein below or as may be prescribe d or imposed hereafter. Signature of the Officer (Official Seal and Stamp) *Any one of the activities or functions as mentioned under section 282 A of the Companies Ordinance, 1984 ** Name of the Company

Power to issue directions: 1) Notwithstanding anything contained in any other provision of this Ordinance, where the Commission is satisfied that it is necessary and expedient so to do a) in public interest; or b) to prevent the affairs of any NBFC being conducted in a manner detrimental to the interests of shareholders or persons whose interest are likely to be affecte d or in a manner prejudicial to the interests of the NBFC; or c) to secure proper management of any NBFC generally, issue directions to NBFCs generally or to any NBFC in particular to carry out such changes as are necessar y to rectify the situation and the NBFCs shall be bound to comply with such directions. 2) The Commission may, on representation made to it or on its own motion, modify or cancel any direction issued under Sub-Section (1); and in so modifying or cancel ing any direction may impose such conditions as it thinks fit. Power to remove: 1) Notwithstanding anything contained in any other provision of this Ordinance, where the Commission is satisfied that: a) Continued association of any chairman or director or chief executive or any o ther officer of a NBFC, is or is likely to be detrimental to the interests of NBFC or its shareholders or persons whose interest is likely to be affected; or b) the public interest so demands; or c) to prevent the affairs of NBFC being conducted in a manner detrimental to the interest of its shareholders or in a manner prejudicial to the interests of NBFC ; or d) to secure a proper management of the NBFC, it is necessary so to do, the Commission may, for reasons to be recorded in writ ing, by order, remove from office, with effect from such date as may be specified in the order, any chairman or director or chief executive or other officer of the NBFC. Power to Supersede Board of Directors: 1) Notwithstanding anything contained in any other provision of this Ordinance, whe re the commission is satisfied that the association of the Board of Directors of an y NBFC is or is likely to be detrimental to the interest of the NBFC or its shareh olders or is otherwise undesirable; or for all or any of the reasons specified in Secti on 282E;

it is necessary so to do, the commission may for reason to be recorded, in writi ng, by order, supersede the Board of Directors of a NBFC with effect from such date and for such period as may be specified in the order. 2) The period of supersession specified in an order under sub-section (1) may from time to time be extended by the Commission so, however, that the total period of supersession does not exceed three years.

3) All powers and duties of the Board of Directors; shall, during the period of supersession, be exercised and performed by such person as the Commission may from time to time appoint in this behalf. 4) The provisions of sub-sections (2), (3), (4) and (5) of Section 282E shall, with necessary modifications apply to an order made under sub-section (1) or (3) of t his section. Special Audit: 1) Notwithstanding anything contained in other provision of this Ordinance, the Commission shall monitor the general financial condition of a NBFC, and, at its discretion, may order special audit and appoint an auditor to carry out detailed scrutiny of the affairs of NBFC, provided that the Commission may, during the pendency of the scrutiny, pass such interim orders and directors as may be deeme d appropriate by the Comission. 2) On receipt of the special audit report, the Commission may direct a NBFC to do o r abstain from doing certain acts and issue directives for immediate compliance wh ich shall forthwith be complied with, or take such other action under this ordinance as it deems fit. Penalty for making false statement: 1) Notwithstanding anything contained in any other provision of this Ordinance, if any person, being the chairman, director, chief executive, by whatever name called or official liquidator or any officer of a NBFC in any document, prospectus, report, return, accounts, information or explanation required to be furnished in pursuance of this Ordinance or the rules made there under, willfull y makes a statement which is false in any material particular knowing it to be fal se, or willfully omits to make a material statement, mismanages the affairs of the NBFC or misuses his position for gaining direct or indirect benefit for himself or any of hi family members, he shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to a fine which shall n ot be less than one hundred thousand rupees, and shall be ordered by the court tryi ng the offence, to deliver up or refund within a time to be fixed by the court any property acquired or gained by him in his own name or in the name of his family members by so mismanaging the affairs of the NBFC or misusing his position or, in default, to suffer imprisonment for a term which may extend to three years. 2) Any officer, director or chief executive of a NBFC who is either directly or

indirectly owned, controlled or managed by the Federal Government or a Provincial Government who extends, or aids in extending, a load, advance, or any financial facility to a borrower or customer on the verbal instruction of a hold er of public office without reducing the terms of the instruction into writing and drawing them to the attention of his superior officer, or the Board of Directors , shall be guilty of an offence punishable with imprisonment of either description

which may extend to one year, or with fine, or with both, in addition to such ot her action which may taken against him in accordance with law. 3) If any company which is not a NBFC, or a company which does not hold a license under Section 282C or the license granted to which has been cancelled, or any individual or association or body of individuals, transacts the business specifi ed in Section 282A, the chief executive, by whatever name called, of the company and every director, manager and any other officer of the company, and the individual and every member of the association or body of individuals, shall be deemed to b e guilty of such contravention and shall be punishable with imprisonment of either description for a term which may extend to seven years and with fine the amount of which shall not exceed one million and shall be ordered by the Court trying t he offence to pay the fine with in a time to be fixed by the Court or in default to suffer further imprisonment for a term which may extend to five years. Some NBFCs Functioning in Pakistan:

Venture Capital Investment NBFCs Leasing Investment Housing Finance Discounting Investment Advisory Services Asset Management Services Finance Services Services Services ABAMCO Limited o o P P P Asian Housing Finance Limited o Askari Leasing Limited o o o Atlas Investment Bank Limited o o Crescent Leasing Corporation Limited o o Crescent Standard Investment Bank Limited o o Escorts Investment Bank Limited o o First Credit and Discount Corporation Limited o First Dawood Investment Bank Limited o o o First International Investment Bank Ltd o o Grays Leasing Limited o International Housing Finance Limited o Jehangir Siddiqui Investment Bank o Natover Lease and Refinance Limited o NBP Capital Limited o o P P Network Leasing Corporation Limited o Orix Investment Bank Limited o Orix Leasing Pakistan Limited o Pak Gulf Leasing Company Limited o Saudi Pak Leasing Company Limited o Security Investment Bank Limited o Security Leasing Corporation Limited o o Sigma Leasing Corporation Limited o SME Leasing Limited o Trust Leasing and Investment Bank Ltd o o Union Leasing Company Limited o Al-Meezan Investment Management Ltd o o Arif Habib Investment Management Ltd o o Atlas Asset Management Company Ltd o o Crosby Asset Management (Pakistan) Limited o o Faysal Asset Management Limited o o Dawood Capital Management Limited o o United Asset Management Company Ltd o o

AlFalah GHP Investment Management Limited P P BMA Asset Management Limited P P National Investment Trust Limited o KASB Funds Limited P P AKD Investment Management Limited P P PICIC Asset Management Company Ltd P P Intersecurities Management Limited o First Capital Investment Limited o Asian Capital Management Limited o Safeway Fund Limited o AMZ Asset Management Limited P P Noman Abid Investment Management Limited P TRG Pakistan Limited o TMT Ventures Limited o AMZ Venture Limited o Askari Investment Management Limited P P SISL Financial Services Limited P National Asset Management Limited P P National Fullerton Asset Management Limited P MCB Asset Management Limited Dominion Finance Services (Pvt) P P Limited Investec Securities Limited Prudential Fund Management Limited Tri-Star Investments (Pvt) Limited Pak Kuwait Asset Management Company Total 20 11 6 2 25 20 4

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